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2.d. Park Dedication Fees
4 /ROSEMOUNT EXECUTIVE SUMMARY CITY COUNCIL City Council Work Session Meeting: April 13, 2011 ISSUE There has been discussion on the topic of parks dedication fees at several recent Parks and Recreation Commission meetings. After reviewing a wide variety of information regarding parks dedication fees, the Parks and Recreation Commission recently made a recommendation to the City Council to not change the parks dedication fees for residential development. The Commission indicated that the information presented to them did not lead them to feel that our fee of $3,400 per unit was out of line. They have focused mainly on the residential fees because of a recent request by a developer to lower the fee. The Commission looked at a number of different resources to assist them with developing a recommendation for 2011 parks dedication fees for residential development. Because of the limited amount of property being sold in the area, it has been difficult to identify typical (fair market) land values. Many of the transactions currently taking place are for bank distressed or less desirable properties. The information that was reviewed by the Commission includes the following items and are included in your packet: • Market Value Analysis - Typical Land Values (conducted by Dennis Kelsall, appraiser) • Land Appraisal provided by KJ Walk Development • City of Rosemount — Park Dedication Fees • Parks Dedication Survey — prepared by Hoisington Koegler Group Inc. • Per Unit - Residential Park Dedication Fee Survey — prepared by City staff • City Code Regarding Parks Dedication Market Value Analysis - Typical Land Values (conducted by Dennis Kelsall, appraiser) —This analysis compares sales in Rosemount and the surrounding area. It considered recessionary conditions and declining values for land to be developed. Parks Dedication Surrey — prepared by Hoisin,yon Koegler Group Inc. —This survey is completed and paid for by AGENDA SECTION: AGENDA ITEM: Parks Dedication Fees Discussion PREPARED BY: Dan Schultz, Director of Parks and AGENDA NO. Recreation ATTACHMENTS: A - Market Value Analysis B - Appraisal provided by KJ Walk Development C - City of Rosemount - Parks Dedication Fees APPROVED BY: D - HKgi Parks Dedication Survey E - Per Unit Parks Dedication Spreadsheet F - City Code regarding Parks Dedication RECOMMENDED ACTION: None, discussion only. ISSUE There has been discussion on the topic of parks dedication fees at several recent Parks and Recreation Commission meetings. After reviewing a wide variety of information regarding parks dedication fees, the Parks and Recreation Commission recently made a recommendation to the City Council to not change the parks dedication fees for residential development. The Commission indicated that the information presented to them did not lead them to feel that our fee of $3,400 per unit was out of line. They have focused mainly on the residential fees because of a recent request by a developer to lower the fee. The Commission looked at a number of different resources to assist them with developing a recommendation for 2011 parks dedication fees for residential development. Because of the limited amount of property being sold in the area, it has been difficult to identify typical (fair market) land values. Many of the transactions currently taking place are for bank distressed or less desirable properties. The information that was reviewed by the Commission includes the following items and are included in your packet: • Market Value Analysis - Typical Land Values (conducted by Dennis Kelsall, appraiser) • Land Appraisal provided by KJ Walk Development • City of Rosemount — Park Dedication Fees • Parks Dedication Survey — prepared by Hoisington Koegler Group Inc. • Per Unit - Residential Park Dedication Fee Survey — prepared by City staff • City Code Regarding Parks Dedication Market Value Analysis - Typical Land Values (conducted by Dennis Kelsall, appraiser) —This analysis compares sales in Rosemount and the surrounding area. It considered recessionary conditions and declining values for land to be developed. Parks Dedication Surrey — prepared by Hoisin,yon Koegler Group Inc. —This survey is completed and paid for by HKgi. The information from the survey is shared with others interested in receiving the data. The survey includes data that has been provided on a voluntary basis from any City who wishes to participate. The survey includes information for all forms of parks dedication fees. Many cities have commented that they use the HKgi survey as a benchmark for setting parks dedication fees. One of the challenges of using this survey for comparative purposes is that not all cities calculate their parks dedication requirements in the same manner. For example, in the area of commercial, industrial, and business park development, in Rosemount we collect 10% of the total land area, Cottage Grove collects 4 %, in Victoria it is 6% and in Savage they collect 7 %. A majority of other cities are using 10% for the calculation. In Woodbury, they have set a flat rate that they charge per acre. Although their ordinance indicates that they should base their collection on 10% of the total land area and base the fee on the land value, they have deliberately chosen to not set their fee in such a manner. For residential development, again not all cities collect their fees using the same method, and cities such as Lakeville and Woodbury have gone to calculating their per unit fees based on their CIP budgets divided by future residential lots. Staff has discussed this method of setting fees with City Attorney LeFevere and he feels the City would be justified in using such a method as long as we have an updated CIP budget and an updated park master plan. The City of Chanhassen has received similar support from their legal counsel but has yet to adopt the process. Per Unit - Residential Park Dedication Fee Survey — prepared by City staff— This survey was completed by staff at the request of the Parks and Recreation Commission. Because a number of the cities that responded to the HKgi survey do not calculate their residential parks dedication fees the same way as Rosemount, the Commission wanted to see a per unit fee comparison. Keep in mind that the way cities collect parks dedication fees is not always done the same and the process can be considered more of an art than a science. Some cities base their residential unit fees on a capital improvement budget, where as in Rosemount we base our residential unit fees on land value. The spreadsheet identifies that many cities have not recently made changes to their fees and many stated they last made an increase in 2006. Most cities responded that their fees have not changed because they have not had any substantial residential development in their communities and have not looked into updating their fees, or their capital improvement budgets have not changed. City Code Regarding Parks Dedication — This portion of the City Code details the method we use for collecting parks dedication. BACKGROUND In the spring of 2010, Warren and Luke Israelson, the developers of the Rosewood Village 3` Addition, asked the City to lower the park dedication fees for their development. The Israelsons indicated that the value of their land had dropped due to the poor economy and the collapse in the housing market. Staff indicated to the developer that the City would be doing a park dedication land value study. Staff recommended that they be allowed a reduction in the fees, should the study indicate a reduction was warranted. Staff indicated to the City Council that we planned to use the same process as in 2002, when we hired an appraiser to assist the City with evaluating land values. SUMMARY After reviewing all of this information, staff would like to discuss the following items with the City Council: How to address the request from KJ Walk Development for a partial refund of the park dedication fees that they have recently paid. At what levels should we set our residential park dedication fees for 2011? 2 • Should the City consider changing our method of calculating parks dedication fees for residential development from a land value based calculation to a capital improvement value based method or some other method? • How should we approach the commercial, business park and industrial park dedication fees that appear to be lower than what some of our data supports? 3 DENNIS D. KELSALL & CO. Real Estate Appraisers • Consultants 15000 Wildwood Road • Burnsville, Minnesota • 55306 Phone: (952) 892 -7099 • Fax: (952) 435 -4022 • E -mail: kelsall @frontiernet.net MAI TM DENNIS D. KELSALL, MAI July 1, 2010 City of Rosemount 2875145 1h St. W. Rosemount, MN 55068 Attn: Mr. Dan Schultz Re: Market Value Analysis Typical Land Values Cash Equivalents In Lieu Of Land For Parks Dedication Fees Rosemount, MN. Our Job No.: 1000110 Mr. Schultz: Following are estimated typical market values for land parcels intended for 5 general types of uses, as you requested. Intended Use Low Density Residential Medium Density Residential Commercial Industrial Business Park Typical Value Per Acre $70,000 $85,000 $180,000 $80,000 $150,000 These typical values are based upon the analysis of recent comparable sales in Rosemount and the surrounding area. They consider the current recessionary conditions that have resulted in: (1) a considerable reduction in the number of all types of land sales occurring during the period beginning in early 2008 and continuing to the present, and (2) declining values for all types of development land including residential, commercial and industrial parcels. Both trends are typical for the Minneapolis / St. Paul Area in general and can be directly attributed to the deteriorations in financial and economic conditions that have occured over this same time period. July 1, 2010 Mr. Dan Schultz Page 2 of 2 The comparable sales that were considered shared the following characteristics: • All sales prices were cash or cash equivalent transactions. • All sales had city utilities at or near the property line and assume that any balances of special assessments were paid by the seller. • All sales prices were of larger parcels that were (or could be) subdivided into smaller sites. Please note that these market value estimates are intended to reflect "typical' values for the selected zoning uses within the City of Rosemount and as such each is intended to represent a typical site and a typical value within a range of possible values for each intended use. The actual value of parcels within any given zoning district can vary significantly depending upon location, size, topography, soil conditions, trees and foliage, etc.. Please do not hesitate to contact me if you have any questions or comments. Sincerely, Dennis D. 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E C a C a C a = � O— O O O 1 4) O O N N N � 3 c � v • v m o d = .. n 3 1 LL O LU LL LL LL O co O ( LO M O 1 ( R N N t` v O f v in � � � E» ° LO ° _ 1 L O O C t ao N CC) 04 co O to O Cl � (0 m O EA to O _O O O Of C 1 O O O N N 1 Q a 1 Cl) o ° u) a U i O L6 (D (V to Cl) IL m U m m m c m Z � o i U Z p ( (n ) o U Z 04 O r 1 = Z y p Z 7 C V C O 7 m o E a) � E C C. co Y � ai m o' on o E E� L c (�� �E U=E s O Y r� U) m h (� J 0 o rn Cn o � o N O n O N O T� W O O � � rn N Q 0 L a N Ln Y � z 0 3 m c ° o E mo 3 0 ,� m i. a)¢ O_ Z c (p J � C O a a° 2009 41jpjj A REAL PROPERTYAPPRAISAL REPORT Vacant Residential Land Outlot B (13.74 Acres Gross, 5.28 Acres Useable), Outlot D (13.11 Acres Gross, 10.67 Acres Useable) & Outtot F (3.05 Acres), Rosewood Estates Rosemount, Minnesota Appraisal Report Date: June 29, 2009 Effective Dates of the Appraisal: January 1, 2008 January 1, 2009 Prepared For. Mr. Luke Israelson, President KJ Walk, Inc. 6001 Egan Drive Suite 100 Savage, Minnesota 55378 9521826 -9068 By. COMMERCIAL APPRAISAL & CONSULTING GROUP 8710 Central Avenue NE, Suite 200 Blaine, MN 55434 7631398 -3282 Jack Prill, MSA Jeremiah C. Johnson, Appraiser IIM Certified General Real Property Appraisers Jack Prill. MSA Ryan Herlofsky Jere Johnson Harvey Swenson, MAI June 29, 2009 Mr. Luke Israelson, President KJ Walk, Inc. 6001 Egan Drive Suite 100 Savage, Minnesota 55378 Re: Vacant Residential Land Outlot B (13.74 Acres Gross, 5.28 Acres Useable), Outlot D (13.11 Acres Gross, 10.67 Acres Useable) & Outlot F (3.05 Acres), Rosewood Estates Rosemount, Minnesota Dear Mr. Israelson: In accordance with your request, we have completed an appraisal of the above referenced property for the purpose of estimating the market value of the property's fee simple interest as of January 1, 2008 and January 1, 2009 for tax purposes. We have made an inspection of the subject property, as well as our comparable market sale properties. The following report describes our application of standard appraisal methods, contains data gathered in our investigation, and demonstrates our analysis in estimating the market value of the subject property. Care has been exercised in verifying the factual data presented in this report, and it is assumed to be reliable. This appraisal is made subject to certain assumptions and limiting conditions contained herein. The subject of this appraisal is two outlots of vacant land containing 13.74 and 3.05 acres zoned for single family residential use. They are located near the northwest comer of CSAH 42 & Biscayne Avenue in Rosemount. Outlot B has a very irregular shape and is encumbered by rail spurs from a nearby railroad track. Outlot B has a useable area of approximately 230,000 square feet, or 5.28 acres according to the developer. Outlot D has a useable area of approximately 465,000 square feet, or 10.67 acres according to the developer. Outlot D was valued as a bulk residential parcel as of the January 1, 2008 effective date only, since it was rezoned for commercial use effective for the 2009 assessment. It is our opinion that the value of the subject property "as is" as of January 1, 2009, the effective date of the appraisal, based on a marketing time of one year, is: OUTLOT B: $215,000 OUTLOT D: Not Applicable OUTLOT F: $130,000 8710 Central Avenue NE • Suite 200 • Blaine, Minnesota 55434 763.398.3282 • Fax 763.398.3282 • www.commercialappraisalmn.com Mr. Israelson June 29, 2009 Page two It is our opinion that the value of the subject property "as is" as of January 1, 2008, the other effective date of the appraisal, based on a marketing time of one year, is: OUTLOT B: $258,000 OUTLOT D: $538,000 OUTLOT F: $156,000 We are not aware of any environmental hazards affecting the subject property. We are not, however, trained in the discovery of environmental hazards and accept no responsibility for such discovery. We have no personal interest with respect to the subject matter of this appraisal report or the parties involved. This appraisal has been made in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Financial Institutions Reform, Recovery and Enforcement Act. The undersigned appraisers conform to all legal and educational requirements for the appraisal of real estate in the State of Minnesota. The undersigned have appraised many land parcels of all types in the Metro Twin Cities area and, therefore, are considered to be competent to complete this appraisal. Please contact us if you have any questions regarding this appraisal report. Respectfully submitted, COMMERCIAL APPRAISAL & CONSULTING GROUP Jack Prill, MSA Certified General Real Property Appraiser #4001494 National Association of Master Appraisers #8312 Jeremiah C. Johnson Registered Real Property Appraiser #20500887 8710 Central Avenue NE • Suite 200 • Blaine, Minnesota 55434 763.398.3282 • Fax 763.398.3282 • www.commercialappraisalmn.com Appraised Property Address/Location: Owner Use of Appraisal: Highest and Best Use: Description Site Size: Outlot B: Outlot D: Outlot F: Shape: Utilities: Topography. Environmental Factors: Le-gal Information Property Identification Numbers: 2009 Assessor's Market Value: 2008 Assessor's Market Value: Zoning: Highest & Best Use: Value by Sales Comparison Approach Outlot B: Outlot D: Outlot F. A_mr- aiser's Estimate of Value Outlot B. Outlot D. Outlot F. Appraisal Report Date: Effective Dates of the Appraisal: Appraisers: Vacant Land Outlots B, D & F, Rosewood Estates, NWC of CSAH 42 & Biscayne Avenue Rosemount, MN Warren & Kathleen Israelson Analysis for property tax purposes R1, Low Density Residential 13.74 Acres Gross 5.28 Acres Useable 13.11 Acres Gross 10.67 Acres Useable 3.05 Acres Gross 3.05 Acres Useable Irregular All municipal utilities are available. Level; Slightly above street grade. No Apparent Adverse Factors 34- 64900 -020 -00, 34- 64900 - 040 -00 & 34- 64900- 060 -00 $801,000, $1,495,200 & $196,100 $843,200, $806,300& $170,500 R1, Low Density Residential Low Density Single Family Residential 2009 13.74 Acres Gross 13.11 Acres Gross 3.05 Acres Gross 2008 5.28 Acres Useable 10.67 Acres Useable 3.05 Acres Useable 2009 $215,000 Not Applicable $130,000 June 29, 2009 2008 $258,000 $538,000 $156,000 January 1, 2009 & January 1, 2008 Jack Prill, MSA Jeremiah C. Johnson, Appraiser 1 PHOTOGRAPHS OF SUBJECT PROPERTY Looking Easterly Across Subject Outlot F Looking Northwesterly Across Subject Outlot F PHOTOGRAPHS OF SUBJECT PROPERTY Looking Westerly Across Subject Outlot B Looking Southwesterly Across Subject Outlot B METROPOLITAN LOCATION TABLE OF CONTENTS SUMMARY OF SALIENT FACTS AND CONCLUSIONS ........................................................... ..............................1 PHOTOGRAPHSOF SUBJECT PROPERTY .......................................................................... ............................... 2 THEVALUATION PROCESS .................................................................................................. ............................... 9 IDENTIFICATION OF PROPERTY RIGHTS TO BE VALUED ................................................... ..............................9 PURPOSE AND INTENDED USE OF APPRAISAL .................................................................. ............................... 9 DEFINITIONOF VALUE .......................................................................................................... ............................. MARKETVALUE DEFINED ..................................................................................................... ............................. HISTORY ................................................................................................................................ ............................. DESCRIPTION OF SCOPE OF APPRAISAL ......................................................................... ............................... 11 GENERAL ASSUMPTIONS AND LIMITING CONDITIONS ...................................................... .............................12 CITYDATA ........................................................................................................................... ............................... 15 NEIGHBORHOODDESCRIPTION ........................................................................................ ............................... 18 SITEDATA .............................................................................................................................. ............................. HIGHESTAND BEST USE ANALYSIS .................................................................................. ............................... 27 LAND VALUATION BY SALES COMPARISON APPROACH .................................................. ............................... 30 EXPOSURETIME /MARKETING TIME ................................................................................... ............................... 38 MARKETINGTIME ................................................................................................................ ............................... 39 CERTIFICATION ................................................................................................................... ............................... 40 QUALIFICATIONS ................................................................................................................. ............................... 41 ADDENDA ............................................................................................................................. ............................... 45 5 THE VALUATION PROCESS Property: Property Address: Zoning: Site Size: Outlot B. Outlot D. Outlot F. Personal Property: Vacant Residential Land Northwest Corner of CSAH 42 & Biscayne Avenue Rosemount, Minnesota R1, Low Density Residential District. 13.74 Acres Gross 5.28 Acres Useable 3.05 Acres Gross 3.05 Acres Useable 13.11 Acres Gross 10.67 Acres Useable Not addressed in this appraisal. Property Identification Numbers: 34- 64900 - 020 -00 ( Outlot B) 34- 64900 - 040 -00 ( Outlot D) 34- 64900 - 060 -00 ( Outlot F) Leaal Descriptions: Outlots B, D & F, Rosewood Estates, Dakota County, Minnesota IDENTIFICATION OF PROPERTY RIGHTS TO BE VALUED Fee Simple: The subject real estate will be appraised in fee simple interest. Fee simple interest is defined as: absolute ownership unencumbered by any interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat' PURPOSE AND INTENDED USE OF APPRAISAL The purpose of the valuation process is to estimate the value of a real property interest. The use of an appraisal is the manner in which a client employs the information contained in the appraisal report. A value estimate may be used to determine price, amount of loan, basis for taxation, terms of a lease, eminent domain, etc. This appraisal is intended to be used by the client for tax purposes. 1 The Appraisal of Real Estate, Tenth Edition, pg. 122. 0 The Valuation Process - continued INTENDED USER OF APPRAISAL This appraisal is to be used by Mr. Luke Israelson, President of KJ Walk, Inc. to document asset value for internal analysis. DEFINITION OF VALUE Types of appraised value include market value, use value, going concern value, investment value, assessed value, and insurable value. The defined value of the subject property to be estimated in this report is the current market value. MARKET VALUE The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. APPRAISAL REPORT DATE: June 29, 2009 APPRAISAL EFFECTIVE DATES: January 1, 2009 & January 1, 2008 2 Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). This could be modified to provide for valuation with specified financing terms. The Valuation Process - continued COMPETENCY PROVISION: Jack Prill, a Member of the National Association of Master Appraisers with a Master Senior Appraiser (MSA) designation and licensed in Minnesota as a "Certified General Real Property Appraiser', has been a full -time commercial real estate professional since 1964, working as an appraiser for the Equitable Life Assurance Society of the United States for eight years, as a branch manager for Mortgage Associates, Inc., as a mortgage banker for the Rothschild Financial Corporation, and as a principal of Commercial Appraisal & Consulting Group for approximately 20 years. He has extensive experience in the appraisal and finance of a wide variety of commercial, industrial, and residential properties, and, therefore, has the experience and knowledge to complete this appraisal assignment. Jeremiah Johnson has been a full -time commercial real estate appraiser since March of 2003. He holds the designation /license of "Registered Real Property Appraiser' from the State of Minnesota, after completing all necessary education and appraisal experience requirements. He has experience appraising a wide range of property types including vacant residential parcels like the subject. HISTORY The subject of this appraisal is three outlots of vacant land containing 13.74, 13.11 and 3.05 acres zoned for single family residential use. They are located near the northwest comer of CSAH 42 & Biscayne Avenue in Rosemount. Outlot B has a very irregular shape and is encumbered by rail spurs from a nearby railroad track. According to the developer, outlot B has a useable area of approximately 230,000 square feet, or 5.28 acres. Outlot D has a useable area of approximately 465,000 square feet, or 10.67 acres according to the developer. Outlot D was valued as a bulk residential parcel as of the January 1, 2008 effective date only, since it was rezoned for commercial use effective for the 2009 assessment. The owners of record are Warren and Kathleen Israelson and no changes in ownership have been reported in the past three years. DESCRIPTION OF SCOPE OF APPRAISAL The subject property has been appraised utilizing one of the two recognized standard approaches to valuation for residential subdivisions, the Land Valuation by Sales Comparison Approach. In preparing this appraisal, the appraisers: 1. inspected the subject property on June 23, 2009. 2. gathered information on and spoke to a number of developers about comparable single family parcels in Rosemount and neighboring communities. 3. confirmed and analyzed the data and applied the Land Valuation By Sales Comparison Approach. 4. spoke with the city and county officials who provided information to assist us in the valuation of the subject property. 91 The Valuation Process - continued No equipment has been included in this appraisal. There were no Extraordinary Assumptions, Supplemental Standards or Jurisdictional Exceptions in this report. The information identified in this report as being furnished by others was believed to be reliable, but no responsibility for its accuracy is assumed. GENERAL ASSUMPTIONS AND LIMITING CONDITIONS The appraiser's certification presented in this appraisal report is subject to the following conditions and to such specific and limiting conditions as are set forth by the Appraiser in the report: 1. No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated. 2. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 3. Responsible ownership and competent property management are assumed. 4. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. 5. All engineering studies are assumed to be correct. Illustrative material in this report is included only to help the reader visualize the property. 6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. 7. It is assumed that the property is in full compliance with all applicable federal, state and local environmental regulations and laws unless the lack of compliance is stated, described and considered in the appraisal report. 8. It is assumed that the property conforms to all applicable zoning and use regulations and restrictions unless a nonconformity has been identified, described and considered in the appraisal report. 9. It is assumed that all required licenses, certificates of occupancy, consents, and other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 10. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The value estimated is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. 11. Possession of this report, or a copy thereof, does not carry with it the right of publication. The Valuation Process - continued 12. The appraiser, by reason of this appraisal, is not required to give further consultation or testimony or to be in attendance in court with reference to the property in question unless arrangements have been previously made. 13. 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, news, sales, or other media without the prior written consent and approval of the appraiser. 14. Any value estimates provided in the report apply to the entire property, and any proration or division of the total into fractional interests will invalidate the value estimate, unless such proration or division of interests has been set forth in the report. 15. Disclosure by the Appraiser of the contents of this appraisal report is subject to review in accordance with the by -laws and regulations of the professional appraisal organizations with which the Appraiser is affiliated. 16. This appraisal report and its contents must be regarded as a whole. Any excerpts from this appraisal cannot be used separately, and if used separately, this appraisal is not to be considered valid. 10 COMPLIANCE WITH USPAP # Requirement Page # Follow a reasonable valuation method that addresses the Sales Comparison, Income, and Cost 30 -37 Approaches to market value, reconciles those approaches, and explains the elimination of each approach not used. 2. Identify and separately value any personal property, fixtures, or intangible items that are not real 9 property but are included in the appraisal, and discuss the impact of their inclusion or exclusion on the estimate of market value. 3. There must be a sufficient documentation to support the appraiser's logic, reasoning, judgment, ALL and analysis to enable the client to determine the reasonableness of the final market value estimate. 4. The report must be written and in a narrative format descriptive enough to lead the client to a ALL determination of the estimated "Market Value" and an understanding of the basis upon which such an estimate is made, and detailed enough to reflect the complexity of the appraisal. 5. The reports must be based upon "Market Value" as defined by USPAP. 10 6. Disclosure of the manner in which the appraiser satisfies the "Competency Provision" of USPAP. 11 7. Conformance to the Uniform Standards of Professional Appraisal Practice (USPAP), "Scope of 11 Work." 8. There must be a statement in the certification that the appraisal assignment was not based upon 40 a requested minimum valuation, a specific valuation, or approval of any proposed financing. 9. The appraisal must include an estimate of a reasonable marketing period for the property. 39 10. The report must discuss any appropriate deductions or discounts for any proposed construction, NA partial leases, below economic leases, or tract development with unsold units. 11. The report must include a legal description of the property in addition to the description required 9 by USPAP. 12. Analyze and report any prior sales of the property one (1) year prior for 1 - 4 family residential 11 properties, or three (3) prior years for all other properties. 13. (For income producing properties) an analysis of current or expected revenues, vacancies, and NA expenses (even though the property may be encumbered under a triple net lease). 14. The appraisal must include mention of current conditions and trends that may affect projected 38 absorption and income as they, in turn, affect the market value of the subject property COMPLIANCE WITH FIRREA Yes No 1. Conform to USPAP? x 2. Be written and contain sufficient information? x 3. Deductions/discounts to value "as is"? x 4. Correct value definition? x 5. Be performed by State - licenses or certified appraisers? x 11 CITY & NEIGHBORHOOD DATA Location of City in Area: The City of Rosemount is located 15 miles south of the Twin Cities. The city encompasses approximately 36 square miles. U.S. Highway 52 passes through the east side of the city and State Highway 3 passes through the west side. The Mississippi River serves as the northeastern border of the city. City Population & Demographics: According to the 2000 U.S. Census, Rosemount has a population of 14,619, which is a 69.6% increase over the 1990 estimate. 35 percent of the population is under 18 with a median age of 31.3. There are 4,188 single family housing units, 554 multiple family housing units and 197 mobile homes in Rosemount. Percentage of City Developed: Estimated at 50% Economic Base/ Employment Analysis: The major employers in Rosemount are: Growth Patterns/ Construction Starts: In 1995, Rosemount began the development of the first 80 acres of a new business park to the southeast of downtown. The 1,030 unit Evermoor residential development is under way. The Rosemount Port Authority is developing a strategy for the development of a downtown plan on Highway 3 between 143 and 150"' Street, which includes the subject property. A 68,018 square foot retail center with a Cub Foods opened a few years ago on County Road 42, and much new commercial development has been constructed in this area, known as Rosemount Village. 12 # of Me%rEmployers Prod ucts Services Empl. Rosemount School District #196 Elanentary and 'Secondary schools 2,900 Hint Hills Petroleum Refining 850 Dakota County Tech. College vocational School 7I5 Groff Brothers Corp. Bars: Uncoated Paper & Muftell- 160 Spectro A110}0 Carte ` secondary Smelling Nonferrous Metals -- 110 Rowe Enterprises Inc. ' Plastdc Products 100 Economic Trends/ Market Considerations: Rosemount is experiencing a great deal of growth. The population has grown exponentially as have the industrial and commercial sectors. Growth Patterns/ Construction Starts: In 1995, Rosemount began the development of the first 80 acres of a new business park to the southeast of downtown. The 1,030 unit Evermoor residential development is under way. The Rosemount Port Authority is developing a strategy for the development of a downtown plan on Highway 3 between 143 and 150"' Street, which includes the subject property. A 68,018 square foot retail center with a Cub Foods opened a few years ago on County Road 42, and much new commercial development has been constructed in this area, known as Rosemount Village. 12 City Data - continued Any Other Significant Factors: City Trends: Rosemount is a smaller city on the southeastern edge of the Twin City metropolitan area. Therefore it combines aspects of a rural and urban community. It is bordered by the Mississippi River. There are 18 parks that share 217 acres of land as well as 270 acres in the Spring Lake Regional Park Reserve. Rosemount is also the new regional home base for the National Guard. Rosemount is in a development phase of its life cycle and will continue in this phase for the foreseeable future due to available land. 13 CITY OF ROSEMOUNT 14 SITE DATA Owner. Warren & Kathleen Isrealson Current Zoning: The zoning designation currently applied by the City of Rosemount is R1, low density residential district. The purpose of the R1, single - family residential district is to provide an option for lower density single - family detached residential dwelling units and directly related, complementary uses in areas which lack environmental constraints and amenities. The uses permitted in this district are primarily single family residential uses. Real Estate Tax Information: The following tax information was obtained from Dakota County: 34- 64900 -020-00 (6) Assessor's Market Value 01/09 Land: $801,000 Building: 0 Total: $801,000 2009 Tax Data General Tax $11,791.76 Special Assessments: 0.00 Total: $11,791.76 34- 64900 - 040-00 (D) Assessor's Market Value 01109 Land: $1,495,200 Building: 0 Total: $1,495,200 2009 Tax Data General Tax $11,275.98 Special Assessments: 0.00 Total: $11,275.98 34- 64900 -060 -00 (F) Assessors Market Value 01/09 Land: $196,100 Building: 0 Total: $196,100 2009 Tax Data General Tax $2,384.14 Special Assessments: 0.00 Total: $2,384.14 Status of Tax Payments: Current. Balance of Special Assessments: None. 15 Site Data - continued Site Size: Outlot B: 13.74 Acres Gross 5.28 Acres Useable Outlot D: 3.05 Acres Gross 3.05 Acres Useable Outlot F. 13.11 Acres Gross 10.67 Acres Useable Shape: Outlot B has a highly irregular shape (see survey on a following page) that would limit the development possibilities. Outlot F has a slightly irregular shape but is effectively rectangular. Outlot D has a slightly irregular shape. Comer Influence: Outlot F is situated on the comer of Business Parkway and CSAH 42. Site Improvements: Paving: None. Curbs: None. Walks: None. Alley: None. Fences: None. Landscaping: Not. Easements: We were not provided with a surrey. However, we assume typical roadway and utility easements. Encroachments: None noted. Utilities: Electric: Xcel Energy Gas: Centerpoint Energy Sewer: Metropolitan Council Env. Services Water: Municipal Storm: Municipal Flood Data: This property is in Zone X, an area of minimal flooding. Access: Access to Outlot B is obtained from 148"' Street. Access to Outlots D & F is obtained from Business Parkway and CSAH 42. Visibility: Excellent from respective frontages. 16 Site Data - continued Soils: We do not have the benefit of a soils test, and, therefore, cannot comment on the capacity of the soils. We did not notice any unusual settling of the existing improvements at the time of our inspection. Topography: The site is generally level and slightly above street grades. Environmental Factors: An environmental assessment report on the site was not furnished to us. At the time of our inspection, we did not observe any environmental concerns that could affect the value of the subject site. However, we are not trained to investigate environmental problems and, therefore, assume no responsibility for discovery of environmental problems. 17 41 �t I "NA; \\ � \ \�. \� Prepared for: InterFlood I, Commercial Appraisal & Consulting www.interflood.com . 1 -800- 252 -6633 Rosemount, MN 55068 20 0 r . SIREEr wtsr f (t. fk r COWNTY D r r r { 4 C D 23 FLOODSCAPE Fk)od Hazards Map Map Humber 270MOOOS8 EffevWre [fate July 16, 13$0 tr 300(Y 6OOff 9OW 120W ra4w.!C b Fto6s rZ ST7.'".FL.`Vr, I .............. . . . . . . . . . . . . . . . . . . . . . . . . . u� ^x.r4aaC3rct:xm 1 20 HIGHEST AND BEST USE ANALYSIS DEFINITION: Highest and Best Use may be 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" s Highest and Best Use Analysis identifies the most profitable, competitive use to which a property can be put. PURPOSE OF HIGHEST AN BEST USE ANALYSIS Highest and Best Use of the subject property is examined on an "As Vacant" and an "As Improved" basis. The Highest and Best Use of land or a site "As Though Vacant ", assumes that a parcel of land is vacant or that it can be made vacant through the demolition of any improvement. The question to be answered in this analysis is, if the land is or were vacant, what use should be made of it? What type of improvements, if any, should be constructed on the land and when? The purpose of estimating Highest and Best Use for land or a site is to identify the potential uses of the land. "As Improved ", Highest and Best Use analysis identifies the property use that can be expected to produce the highest overall return for each dollar of capital invested and to identify comparable properties. As long as the value of the property "As Improved" is greater than the value of the site as unimproved, the Highest and Best Use is the use of the property "As Improved ". Once the value of the vacant land exceeds the value of the improved property, the Highest Best Use becomes use of the land as though vacant. CRITERIA IN HIGHEST AND BEST USE ANALYSIS The Highest and Best Use of both land "As Though Vacant" and property "As Improved" must meet four criteria. The Highest and Best Use must be legally permissible, physically possible, financially feasible, and maximally productive. In estimating the Highest and Best Use of a vacant parcel, there must be a profitable demand for such use, and it must return to the land the highest net return for the longest period of time. These criteria are discussed as follows: 3 Appraisal of Real Estate, Tenth Edition, Appraisal Institute, Chicago, Illinois; 1992, pg. 275. 21 Highest and Best Use Analysis - continued Legally Permissible — The effect of zoning, the uses allowed by current zoning and the reasonable probability that a change in zoning could or would be effective within a reasonably probable period of time must be considered. We have also considered the uses which are permitted by public and private restrictions on the site. The zoning designation currently applied by the City of Rosemount to the subject property is R1, Low Density Residential District. The purpose of this district is to provide an option for low density single - family detached residential dwelling units. The uses permitted in this district are primarily single family residential uses. Physically Possible - One of the constraints imposed on the possible use of a site, as if vacant, is dictated by its physical characteristics. Size, shape, area and terrain affect the uses for which a site may be developed, and its utility may depend on its frontage and depth. Consideration must also be made of its potential use rather than its actual use, and the maximum use of the land must be determined. The uses within the subject neighborhood are either single family residential or vacanttfarm land guided for single family use in the future. The subject site is suitable for and can physically accommodate single family residential development. It is a generally level and entirely buildable site that has access to all municipal utilities. Financially Feasible - After satisfying the above requirements and considering the subject property's potential uses, we are of the opinion that the subject property is suitable for residential use, and although the residential housing market is in a period of correction, demand appears to be sufficient to allow for an adequate return on investment if lots are aggressively marketed and appropriately priced to reflect current market conditions. Maximally Productive - Of the financially feasible uses, the use that produces the highest residual land value consistent with the rate of return warranted by the market is the Highest and Best Use. We are of the opinion that single family residential development will produce the highest value of the subject land and is, therefore, its Highest and Best Use. CONCLUSION Highest and Best Use, as Vacant - Based on the preceding analysis, it is our conclusion that the Highest and Best Use of the subject land "as though vacant ", is for single family residential development. 22 LAND VALUATION BY S ALES COMPARISON APPROACH The foundation for estimating the value of any property for individual ownership is the principle of substitution. The basis for estimating the value of a subdivision, therefore, is an analysis of recent sales of comparables lots within the subject's competitive area. The core of this compared analysis or market data approach includes a survey of existing, under construction or planned competitive subdivision projects within the defined market area. The results of the field investigation are collated and used as a reference point against which adjustments for similarities and dissimilarities to the subject are made. The resulting value indicators are then used to estimate the probable selling price of the individual lots and the project's "gross sellout" (the total of the individual unit sales prices). Under the subdivision concept, the project's upper limit to value cannot exceed the sum of the retail sales prices of the individual lots. This approach, therefore, assumes a dominant role when testing for the economic feasibility of any project since a differential must exist between retail sellout and all costs (direct and indirect). However, the gross sellout estimate may not be the most appropriate conclusion for specific appraisal problems and may not represent the market value of the whole. The first step in this approach is to define the subject's competitive area and then select the most comparable developments for analysis as value indicators. Delineation of the market area aids in the selection of the most comparable properties and tends to reduce the number of necessary adjustments since competitive projects catering to the same potential purchasers would tend to have similar characteristics. When data in the immediate area are not available, they should be obtained from a similar nearby area that is not competing for the same buyers, tempered by proper adjustments. COMPARABLE SALES We have researched Rosemount as well as the entire metro area for the sales or listings of larger parcels of vacant land to be used for low to medium density residential use with access to municipal water and sewer. Because of the current recession and the dramatic changes taking place in the market for properties like the subject, we have restricted our search to recent sales completed in 2008 and 2009. The market for bulk residential land has essentially stalled as a result of the recession, so very few transactions have occurred in the recent past. However, we were able to find four properties that we felt were comparable to the subject. They are all in outer ring suburban locations in the southern portion of the metro area. Because of the lack of comparables, we have also included a section following the analysis of the comparables that summarizes discussions we had with area developers regarding the market for properties like the subject. These discussions aided us in our estimate of market value for the subject property. 23 � @ C k / k CL � C CL E 3 / ■ n w § k > 3 cn g � � ca w 4 U) w � 2 n a 0 V \ ) 5� �\k 7 a =a «. m g cn c o ��� \§ J �# e c =■ o3c \k / Cl) k2M _ c 2§« wok ;� - \I2 o k�k E ($E m ¢�@ 0 \ CL �$ �Ef 22� 22 § � 2 k/ fQ}/ 2E Q 2 � § EL d o $ @ $ J _ _ _ kE +.S S B ■ 2 q 2 � « A 88� m § 7 7$$ g 7 c _ 7 \g n _ J �# o § k G 8 2 0 ® $ E § co cn 04 \ § � 2E Q EL d v M _2 §� 3k\ -C �f �k kE ocE �r2 c2/ c kf a E //a 222 I� <aR § 2 & �§ ? to -z$ f zo .z 2 / ■ 3$ §§8 0� §y9 C ©�$ ®® IL ~ §S S §k 2$ §29 S9 % e 2 �©© t& SR »�k �7 k 2 g # B ■ 2 q 2 � « A MAP OF COMPARABLE SALES 25 Site Valuation By Sales Comparison Approach - continued ADJUSTMENT ANALYSIS The Sales Comparison Approach requires adjusting and analyzing comparables to derive a value estimate for the subject. The various sale prices are adjusted after identifying relevant adjustment factors and after quantifying the effect of a difference between the comparable and subject. Before any adjustment can be identified or quantified, a sale must be sufficiently comparable to the subject. Even if sufficiently comparable, a determination must be made as to the adequacy of information collected concerning a sale. The elements of comparison include property rights, legal encumbrances, financing terms, conditions of sale (motivation), market conditions (sale date), location, physical characteristics, available utilities, zoning, and Highest and Best Use. The most variable elements of comparison are the physical characteristics of the site, which include its size and shape, frontage, topography, location and view. The difficulty in quantifying adjustments is a result of real estate being unique in nature, with no two properties being identical. Additionally, not all differences require an adjustment. This is true if the market does not pay a premium or lower the price for a difference between similar properties. The appraiser typically will have to rely on reason and experience to decide which differences should be adjusted, as well as the magnitude of any adjustment. No adjustments were necessary for "Property Rights Conveyed ", "Financing Terms ", or "Conditions of Sale ". The comparables were adjusted at a rate of 20% annually for changes in "Market Conditions" due to the current recession. The Case - Shiller Home Price Index indicates that the price of single family properties has declined 30.95% in the Twin Cities market in the one year period between January of 2008 (151.57) and as of January 2009 (120.62). Though this information relates to improved residential transactions, all indications are that the market for vacant residential land has decreased at a similar rate. An informal survey of developer's indicate a range of 20% to 70% change in market conditions in the past year. None of the comparables were adjusted for location. They are all in similar suburban locations in outer ring southern suburbs. An adjustment of 10% for shape was made to all of the comparables in comparison to the subject outlot B which has a highly irregular shape. No adjustments for shape or topography was necessary in the analysis of outlots D & F. All of the comparables were adjusted for size relative to the size of each outlot based on the economy of scale. None of the comparables were adjusted for municipal utilities because, like the subject, they all have access to those utilities. Comparable #2 was adjusted downward for zoning because it is zoned for medium density residential development which allows for a higher density than is allowed by the subject's zoning. The other comparables were all zoned or guided for a density similar to the subject. No other adjustments were deemed to be necessary. 26 A � W C p C U L U O 2 CL a Q c O 'C fQ Q Q E V N t3 CO .G C O cc m •d m Q CL ca c m m (D m t w C O E y 7 f0 N w O 3 E 7 U N t N 7 O d C C � fd Y C CD E y 7 (c d . <O m ai f0 N f�6 t U_ y E N .y to M N Cm C O CO 00 �— O O O O In e= C � 1 O O C C C M a 2 78 78 7 7 7 Q Q I N v N c C U e a Q C 8 C a Q E Q a� c9 CO .D C O co 7 IF m O J 4 a Z W y W 0 m r N a CL .. c6 m cc U N f0 L U N L 7 " EN N L N H . td 75 j 0 U U c� L m � o O s N d 0 C: N CO Q N C C N � E E 7 Q � �, N � E U L w � S N w w o r C y E E N w+ Q ci O Z LO 6 0 co � O t- CD LO N C C 78 78 3 3 � aaa co C o C U U R R Q a Q c O U) 'G a E O U w _v C O LL F- O J 4 0 rx F Z W I-- N y w 4 c a� CL CL m c a m m t y w C N E H 7 f9 N w to 7 E 7 U N t cc cc 7 O v O c w c m E y O N O N H ai v co m m U_ y E N w N 00 W It LO 69 O e- In LO V.- M V- 00 r r CO M N C') Z& C � G C .La Q rn N Site Valuation by Sales Comparison Approach - continued CORRELATION OF ADJUSTED LAND SALES The subject site has been valued as if vacant. It was compared to the four land sales described previously. GENERAL MARKET DISCUS Due to the lack of recent sales of bulk residential land in the entire Twin Cities metro area market, we have discussed the market with developers familiar with the Rosemount and Dakota County areas. Mike Sewel is involved with land acquisition for D.R. Horton, a large national developer. He is familiar with the subject property. He indicated that developers will not be acquiring sites until the current supply of finished lots is absorbed. He estimated that this would not be until next year. However, he estimated that the current market for land like the subject would be at $35,000 to $50,000 per acre. He supported this estimate by arriving at a value via a basic reversion. He based this reversion on the fact that finished lots are currently priced up to $85,000 in Rosemount and nearby communities of Farmington and Lakeville and that lot improvements cost between $50,000 and $55,000 per lot. Jason Woodell works for Pulte Homes, a large national developer, buying and selling bulk parcels for residential development in the Twin Cities metro area. He indicated that considering the subject's zoning, a fair current market price would be near $50,000 per acre. He felt that the current value of finished lots is below $100,000 and the current cost for site improvements for finished lots is $50,000 each. Ron Dahlen handles land acquisition for Country Joe Homes. Country Joe Homes is a local developer that currently has two developments in Lakeville, one with 127 lots and one with 47 lots. He indicated that they would readily pay $50,000 per acre for a similar site but a number of factors are hindering any such transactions. These factors include the lack of available capital, the lack of available financing and the current supply of finished lots. He thought that developers would resume acquiring bulk land next year. Mr. Dahlen also mentioned as an example that a large developer currently has an option to purchase multiple sites of bulk residential land in Lakeville totaling 500 acres for $50,000 per acre from an area bank. This buyer reportedly allowed a previous option to purchase expire at that same price and is currently trying to renegotiate a lower price prior to the expiration of the current option in November of this year. The developers familiar with the current market for properties like the subject property all appear to agree that a fair market value estimate for the subject would be in the range of $35,000 to $50,000 per acre. 30 Site Valuation By Sales Comparison Approach - continued FINAL DETERMINATION OF VALUE — JANUARY 1, 2009 OUTLOT B The range in adjusted sale prices of the foregoing properties is from $35,006 to $48,923 per acre. The mean adjusted sale price is $41,018 per acre and the median adjusted sales price is $40,071 per acre. None of the properties was considered to be significantly more comparable to the subject than the others, so none was given any added emphasis. Based on the comparables and our discussions with area developers, the subject should have a value near $40,500 per acre. The current market value of the subject property is, therefore, estimated as follows: $ 40,500 Current Value per Acre x 5.28 Total Useable Acreage of the Subject Site $213,840 Total Value of the Subject Site $215,000 Total Value Rounded OUTLOT D The range in adjusted sale prices of the foregoing properties is from $35,728 to $51,478 per acre. The mean adjusted sale price is $42,659 per acre and the median adjusted sales price is $41,707 per acre. None of the properties was considered to be significantly more comparable to the subject than the others, so none was given any added emphasis. Based on the comparables and our discussions with area developers, the subject should have a value near $42,000 per acre. The current market value of the subject property is, therefore, estimated as follows: $ 42,000 Current Value per Acre x 10.67 Total Useable Acreage of the Subject Site $448,140 Total Value of the Subject Site $448,000 Total Value Rounded OUTLOT F The range in adjusted sale prices of the foregoing properties is from $36,811 to $51,498 per acre. The mean adjusted sale price is $43,135 per acre and the median adjusted sales price is $42,115 per acre. None of the properties was considered to be significantly more comparable to the subject than the others, so none was given any added emphasis. Based on the comparables and our discussions with area developers, the subject should have a value near $43,000 per acre. The current market value of the subject property is, therefore, estimated as follows: $ 43,000 Current Value per Acre x 3.05 Total Acreage of the Subject Site $131,150 Total Value of the Subject Site $130,000 Total Value Rounded 31 Site Valuation By Sales Comparison Approach - continued FINAL DETERMINATION OF VALUE — JANUARY 1, 2008 To estimate the value as of January 1, 2008 we have simply applied a one year adjustment for market conditions. The Case - Shiller Home Price Index indicates that the price of single family properties has declined 30.95% in the Twin Cities market in the one year period between January of 2008 (151.57) and as of January 2009 (120.62). Though this information relates to improved residential transactions, all indications are that the market for vacant residential land has decreased at a similar rate. An informal survey of developer's indicate a range of 20% to 70% change in market conditions in the past year. We have conservatively utilized a market adjustment of 20% to adjust the value of the subject outlots as of January 1, 2008. It is our opinion that the value of the subject property "as is" as of January 1, 2009, the effective date of the appraisal, based on a marketing time of one year, is: OUTLOT B: $215,000 OUTLOT D: Not Applicable OUTLOT F: $130,000 It is our opinion that the value of the subject property "as is" as of January 1, 2008, the other effective date of the appraisal, based on a marketing time of one year, is: OUTLOT B: $258,000 OUTLOT D: $538,000 OUTLOT F: $156,000 W EXPOSURE TIME When estimating market value, the appraiser should be specific as to the estimate of "Exposure Time" linked to the value estimate. Reasonable exposure time may be defined as follows: The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market.' The estimate of the time period for reasonable exposure may be expressed as a range and can be based on one or more of the following: 1. Statistical information about days on the market. 2. Information gathered through sales verification. 3. Interviews of market participants. Reasonable exposure time is different for various types of real estate and under various market conditions. It is noted that the overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. This statement focuses on the time component. The fact that exposure time is always presumed to occur prior to the effective date of the appraisal is substantiated by related facts in the appraisal process; supply /demand conditions as of the effective date of the appraisal; the use of current cost information; the analysis of historical sales information (sold after exposure and after completion of negotiations between the seller and buyer); and the analysis of future income expectancy estimated from the effective date of the appraisal. The subject property is located in a developing area of Rosemount. New construction has slowed due to the current recession. The demand for bulk residential land in Rosemount and the metro area is weak but is expected to rebound next year. According to area brokers, a vacant parcel for residential development that is priced properly and adequately marketed should have an exposure time of less than one year. ° USPAP Advisory Opinion G -7 33 MARKETING TIME Reasonable "Marketing Time" may be defined as follows: An estimate of the amount of time it might take to sell a property interest in real estate at the estimated market value during the period immediately after the effective date of an appraisal.' The estimate of the time period for reasonable marketing time may be expressed as a range and can be based upon one or more of the following: 1. Statistical information about days on the market. 2. Information gathered through sales verification. 3. Interviews of market participants. The estimate of a reasonable marketing time period may also be expressed as a range and can be based on the same criteria listed as items numbered 1, 2, and 3 above but with one additional item to be considered - anticipated changes in market conditions. In the case of the subject property, we anticipate that the market for bulk residential land in Rosemount will improve next year and estimate a marketing time of one year or less to coincide with the exposure times being experienced in the market. 5 USPAP Advisory Opinion G -7 34 CERTIFICATION We certify that, to the best of our 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 our personal, impartial and unbiased professional analyses, opinions, and conclusions. - we have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. - we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. - neither the engagement to make this appraisal (or any future appraisals for this client), nor any compensation therefore, are contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. - our engagement in this assignment was not contingent upon developing or reporting predetermined results. - our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. - our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics of the Appraisal Institute. the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. - Jeremiah C. Johnson made a personal inspection of the subject site on June 24, 2009. - no one provided significant professional assistance to the persons signing this report. - as of the date of this report, Jack Prill and Jeremiah C. Johnson have met the continuing education requirements of the State of Minnesota. It is our opinion that the value of the subject property "as is" as of January 1, 2009, the effective date of the appraisal, based on a marketing time of one year, is: OUTLOT B: $215,000 OUTLOT D: Not Applicable OUTLOT F: $130,000 It is our opinion that the value of the subject property "as is" as of January 1, 2008, the other effective date of the appraisal, based on a marketing time of one year, is: OUTLOT B: $258,000 OUTLOT D: $538,000 OUTLOT F: $156,000 Jack Prill, MSA Jeremiah C. Johnson Certified General Real Property Appraiser #4001494 Registered Real Property Appraiser #20500887 National Association of Master Appraisers #8312 QUALIFICATIONS Jack Prill, RASA Certified General Real Property Appraiser #4001494 National Association of Master Appraisers #8312 Types of Appraisals Experience includes appraising and financial analysis of many types of commercial real estate including: Warehouses Manufacturing Plants Shopping Centers Supermarkets Office Buildings Truck Terminals Apartments Retail Stores Medical Buildings Condominiums Churches Greenhouses Hotels Research and Development Buildings Restaurants Auto Washes Auto & Boat Dealerships Sub - Divisions Appraisals of Special Interest A small sample of specialized appraisals includes: IDS Center, Minneapolis, MN Brandon Mall, Brandon, Manitoba Kennedy Mall, Dubuque, IA Murphy Mart Center, Youngstown, OH Governor's Square, Columbus, OH Five Lakes Center, Fairmont, MN Hawthorne Suites Hotel, Duluth, MN Wingate Inn, Coon Rapids, MN American National Bank Building, St. Paul, MN Central National Bank Building, Des Moines, IA Glen Pond Estates (300 Unit Apartment) Eagan, MN Grant Park Plaza Shopping Center, Winnipeg, Manitoba Ridgedale Shopping Center, Minnetonka, MN Giants Ridge Hotel, Biwabik, MN Country Inn & Suites, Hastings, MN Hampton Inn & Suites, Lino Lakes, MN Business Experience • Commercial Appraisal & Consulting Group - Owner. • Senior Commercial Real Estate Appraiser, Forsythe Appraisals, Inc. • The Equitable Life Assurance Society of the United States, City Mortgage Department from 1964 to 1972. Completed Equitablds formal two -year training program in commercial real estate finance, construction, and appraisal; and subsequently headed the appraisal staff in the Minneapolis office. Educa ion University of Minnesota, B.A. English Specialized Education "Fundamentals of Real Estate Practice ", "Real Estate Law", and "Real Estate Appraisal ", 1965 University of Minnesota, "Real Estate Appraisal I" Indiana University, 1968 and "Real Estate Appraisal II ", University of Missouri, 1968, sponsored by the Appraisal Institute. Accredited Real Estate Schools, Minneapolis, Minnesota(Continuing Education): "Introduction to Small Business Sales," "Investment Cash Flow Analysis," "How to Put Together a Real Estate Exchange," 'Real Estate Investment and Taxation," "How to Put Together a Real Estate Syndicate," 'Business of Real Estate," 1990; "Condemnation and Tax Appeals," "Financing with Contract for Deed," and "The Power of Appraisals," 1991; 'Intro to Standards & Ethics," "Fair Housing," and "Advanced Yield Capitalization," 1992; "Obtaining Market Data by Abstraction," "Direct Capitalization," "Discounted Cash Flow Analysis," 'Retail and Shopping Center Trends," "Appraiser Licensing and Certification Issues," 1993; "Appraisal Standards & Regulations," "How to Avoid Environmental Hazards Liability," 1994; "Expert Testimony," "Contract for Deed ", and "Real Estate Closing," 1995; "Special Purpose Properties," and "Hotel /Motel Valuation," 1996; 'Real Estate Exchanges," "Real Estate Practice Update" 1997; "Minnesota Real Estate," 'The Farm Sale," 1998; "USPAP Update," Energy Efficient Housing," 1999; "Environmental Issues affecting Real Estate," 2000; "MN Building Codes," 2001; "Appraisal Standard and Ethics," 2002 and 2005; "Appraisal Investment and Financial Analysis," 2005; "Advanced Residential Construction," 2005; "National Uniform Standards of Professional Appraisal Practice(USPAP) Update," 2006; "2006 USPAP Update and Scope of Work," "Appraisal Liability: Are you Exposed ?," Houses from the Ground Up," and "F -AL -2007 Agency /Fair Housing: Culture, Custom and Communication," 2007; "USPAP Update," and Agency /Fair Housing: Culture, Custom and Communication," 2009. STATE OF MINNESOTA PRILL J014N M 12085 - 284TH ST CHI SAGO CITY, MN 55013 The Undersigned COMMISSIONER OF COMMERCE for the State of Minnesota hereby codifies that JOHN M PRILL 12085 - 284TH ST CHISAGO CFTY. MN 55013 has compiled with the rNs of the State of Minnesota and is hefeby licensed to Vansact the business of Resident Appraiser . Certified General License Number: 4001494 unless this autKo* is suspended, revoked. or otherMse I*pIly terminated This license shaN be in *ftCt until August 31, 2009. IN TESTIMONY WHEREOF. t have hereunto set my hared this October 12, 21147. Cie tlFSStGMERC3F Minnesota DOW"wil of CommWitilt Licensing Div.Won 65 7th Place East, Sude NO % Pawl MN 55101 Yislephone: (651)296.6319 &nsft: licenshigwrimerceastelemn.us Notes- - �. L i6 - sa ,' � _ - �" - x± 1. t Total otes- Total -Appraiset 30 USPAP 7 1,5 hotx I% rqj�iuwl in *,R firs, F4qrinil. Wt4rh r1iideS a � tx--W iYSPAP r XI t!nUM I r S .)4UTp r 'I I 'IIA ` Fitt' r rqpch SOSQ%Wit rpMWg rQr0j, irdIAWI , , , ir � wr-'a �Ir 4flg*M. YOU 4kP-1 r0ld a keflfi*d Rk' rib 4 wo aw'siIS86 tot N RAf1U11]*(1 A Se V"'Sit ouf w QUALIFICATIONS Jeremiah C. Johnson Registered Real Property Appraiser #20500887 Tunes of Appraisals Experience includes research, analysis and appraisal of many types of commercial real estate including: Retail Centers Condominiums Commercial Land Residential Land Subdivision Analysis Industrial Buildings Convenience Stores Restaurants / Bars Mixed -Use Buildings Auto Service Facilities Manufacturing Plants Truck Terminals Warehouses Office Buildings Religious Facilities Appraisals of Special Interest A small sample of specialized appraisals includes: • Territorial Springs Condominiums, Stillwater, Minnesota • Waterfront East PUD, Otsego, Minnesota • Seville Club, Minneapolis, MN • Edgewater Subdivision, Rogers, Minnesota • Crystal Pierz Marine, Rogers, Minnesota • Federal Plaza Business Condominiums, Minneapolis, Minnesota • Eagan Auto Mall, Eagan, MN Professional Experience Real Estate Appraiser & Analyst Commercial Appraisal & Consulting Group Skilled Construction Laborer (Local #563) Newmech Companies Education University of Wisconsin- Stout, B.A. Degree Specialized Trainina General Market Analysis and Highest & Best Use Basic Income Capitalization Analyzing Distressed Real Estate Subdivision Valuation Real Estate Appraiser License Series Effective Appraisal Writing March 2003 - Present June 1998 -March 2003 December 1998 April 2009 March 2007 October 2005 March 2005 November 2004 June 2003 STATE OF MINNESOTA JOHNSON, JEREMIAH C P.O. BOX 56 CHISAGO CITY, tds,'I 55013 Department Of Commerce The Undersigned COMMISSIONER OF COMMERCE for the State of Minnesota hereby certifies that JEREMIAH C JOHNSON P.O. BOX 56 CHISAGO CITY, WI 55013 has complied with the laws of the State of Minnesota and is hereby licensed to transact the business of Non - Resident Appraiser: Trainee License Number: 20500887 unless this authority is suspended, revoked, or otherwise legally terminated. This license shall be in effect until August 31, 2010. IN TESTIMONY WHEREOF,. I have hereunto set my hand this October 06, 2008. took COMMISSIONER OF COMMERCE Minnesota Department of Commerce Licensing Division 85 7th Place East, Suite 500 St. Paul, MN 55101 -3165 Telephone: (651) 296-6319 Email: licensirg.commerce@state. mn_us \Nebsite: commerce.state.mn.us Notes: Continuing Education: 15 hours is required in the first renewal penal, whldi includes a 7 hour USPAP course. 30 haws is required for each subsequent renewal period, which includes a 7 hour t13PAP course. Apppraisers: You must hold a licensed Residential, Certified Residential, or Certified General qualification in order to oertcxm appraisals for federalf- related transactions. Trainees do not qualify. For further detafts, please visit our website at commerce state.mn.us. June 22, 2009 Mr. Luke IsmIson, President KJ Wa k, lnr. O 01 Egan tie, Sulto 100 SavW WIN 663 Report Ti pe' Summary C4mpWbn tom: ASAP q, Ol Fw. $2, ►1k� a': :k'_ �� 'i. 'Yat :r y # i� a. 4tv^ - fC - i. •.f �S.: a> 3.. -a a 1 4bove a r t_ i ►f <R < , .- '• ! M: +M as '.Y'f "'r "M t� S? _► »='t a: s.. - `S' # ♦ ► ► <ii - i w as 4 • a #; a # z. # a ;a:.;..a # - a a+ ,- a.- ;...a a �.. s.... i s • 2 .,l � a T t k S a ._ *, = ?' ♦6 ±.`� .. • ( z ! b R ' f ,= b a. •+ If • a' :. il! a = atr� a -- a. aa �..'. ! R3'. a +a 'i' #'. d a '� a � • w � -. #'. a a. t °4� .a a ". ►a :"# t ��'.P of a':. i i' b �.. a »wM a•sa ba 1a a Pa Ea+ a an - .xt.t T::R 5 .., a(• -1 R Mr. tsrealson June 22, 009 Page h" ♦• > '.9 �aa "a. �..• is ,: ,�. ♦« r�• r f. e . +• • -. •- ..if : - -lie' •• i - �. 1 •: af# _.. ►. a ,; - f - - yam. c,: ,,. PW reskWoial developments, and rnany churches. ,. r wr_ �; • • ti 31 r • �s � +. ,., ." ro We: rf a w�. .[.a �'! 4 E .,k•- : + +.:: a'. i '. • , () 3•- ,., � ,.lam engagement letter drafted by yow office kwWraling the temis and conditions Stated herein. We ra t moor d to wo rl dng with you NagorW AowcbOm of Madam Apptolors #8312 -+ ft c, s. , :., , h./ Z3 0J _ orate City of Rosemount New residential subdivision Commercial subdivision Industrial subdivision New residential subdivision Commercial subdivision Industrial subdivision Business Park (New) New residential subdivision Commercial subdivision Industrial subdivision Business Park (New in 2006) New residential subdivision Commercial subdivision Industrial subdivision Business Park Park Dedication Fees 2005 $75,000 /acre = $3,000 per unit $90,000 /acre = $9,000 per acre $50,000 /acre = $5,000 per acre 2006 (changed in July 06) $85,000 /acre = $3,400 per unit $90,000 /acre = $9,000 per acre $50,000 /acre = $5,000 per acre $85,000 /acre = $8,500 per acre 2007 (approved in Dec. of 06) $85,000 /acre = $3,400 per unit $90,000 /acre = $9,000 per acre $50,000 /acre = $5,000 per acre $85,000 /acre = $8,500 per acre 2008-2010 $85,000 /acre = $3,400 per unit $90,000 /acre = $9,000 per acre $50,000 /acre = $5,000 per acre $85,000 /acre = $8,500 per acre Of the 32 respondents, three municipalities have no residential park dedication requirements, and six have no commercial park dedication requirements. The survey asked communities to select the response that matched the current park dedication requirements for residential property. The potential responses were: • Cash or land equal to 10% of land value /area • Cash or land equal to _% of land value /area (fill in percentage) • Fixed rate per type of dwelling unit • Fixed rate per acre of land $_/acre • Other method of calculation The chart on the right summarizes the survey responses. The total number of responses is more than 32 because one survey checked more than one method. The category with the most checked responses was Cash or land equal to 10% of land value /area. Several cities also listed fixed amounts per dwelling unit in the next survey question. The average of these amounts are shown below. Fixed fee per unit. Many cities use a fixed fee per housing unit. The average park dedication fee by unit type is: Fixed Fee Cash Dedication - Residential Property (amounts shown are per unit) Single Family Duplex Townhouse /Quad Multi - Family $3,408 $3,036 $2,923 $2,643 2 01i'e ?ark r i I I i0 , `,tIfV WY RPS, P,3a ' ®® In July 2010, HKGi sent out Park Dedication Surveys to 120 Minnesota cities and counties. Thirty -two surveys were returned. This document summarizes the results of those surveys. Six of the survey respondents do not currently require park dedication for commercial property. The survey asked respondents to select the response that matched the current park dedication requirements for commercial - industrial property. The potential choices were: • Cash or land equal to 10% of land value /area • Cash or land equal to _% of land value /area (fill in percentage) • Fixed rate per building square footage • Fixed rate per acre of land $_/acre • Other method of calculation The chart on the right above summarizes the survey responses. Multiple cities selected cash or land as a percentage of the land value /area as well as listing fixed amounts for commercial and industrial property. Fixed amount per acre: Several communities use a set fee per acre of commercial - industrial development. The average commercial- industrial park dedication fees per acre are: Average Commercial- Industrial Fixed Fee Amounts Commercial Development per acre Industrial Development per acre $6,041 $5,607 Other Funding or Implementation Tools The last question on the survey asked cities and counties to list methods being used for alternative funding tools for parks and recreation in this time of budget cuts and market decline. The potential answers were: grants, general fund, referendum, volunteers, user fees /permits, park system planning and prioritization, cutbacks to planned improvements Other Funding and Implementation Tools and /or replacement and other tools. 30 _____._.._.. --------- _ The chart on the right shows the 25 25 frequency of checked answers. Other write -in answers included: delaying zo 17 15 15 15 projects, donations, sponsorships, 15 gifts, fundraising, reserves, cell tower ,° s revenues, liquor store proceeds, 5 s Park Infrastructure Fund levy each year, elimination of mowing , street ° Grants General Fund Referendum Volunteers User Park system Cutbacks to FeealPemits pion planring o planned reconstruction and stormwater prioritization improvements projects, creating a dedicated fund for ard/or replacement park improvements only funded by the selling of park land, and prayer. ®® ,_ ®® 20101 , ;r' Ded € €calior: .:r ev Res;IA"' . pao' -) HKGi would like to extend its thanks to the following municipalities for participating in the survey this year.: Andover Bloomington Chanhassen Chisago County City of Ramsey Cloquet Cottage Grove Duluth Eagan Fairmont Faribault Golden Valley Hastings Hugo Inver Grove Heights Lakeville Maplewood Mendota Heights Minneapolis New Brighton New Hope New Ulm Oakdale Owatonna Richfield Rosemount Roseville Shakopee St. Louis Park Stillwater Victoria Woodbury QIN Kin Residential Per Unit Parks Dedication Survey City /single family unit 2008 2009 2010 Shakopee $5,340 $5,340 $5,340 Lakeville $4,747 $4,747 $4,747 Apple Valley $4,584 $4,584 $4,584 Cottage Grove $4,200 $4,200 $4, 200 Inver Grove Heights $4,011 $4,011 $4,011 Eagan $3,558 $3,558 $3,558 Savage $3,355 $3,450 $3,591 Rosemount $3,400 $3,400 $3,400 Woodbury $3,000 $3,000 $3,500 Hastings $2,200 $2,200 $2,200 Farmington Based on appraisal Based on appraisal Based on appraisal Most cities last updated their parks dedication fees in 2006 (including Rosemount) Sterling Codifiers, Inc. Page 1 of 2 12 -3 -6: PARK DEDICATION: A. Comprehensive Plans: Where a proposed park, trailway, ponding, or open space area, shown on the city's comprehensive guide plan, park development guide, comprehensive storm sewer plan or official map, is located in the whole or in part in a subdivision, such area or areas shall be shown on the preliminary plat. Such area or areas shall also be dedicated to the city by the subdivider if the council requests such dedication under the provisions of the subsections below. B. Dedication: In all subdivisions, the city shall require that a reasonable portion of such land be set aside and dedicated to the public for parks, playgrounds or other public use exclusive of property dedicated for streets and other public ways. 1. In all residential subdivisions it shall be presumed that a reasonable amount of land has been dedicated for parks and playgrounds if the subdivider dedicates at least one twenty -fifth ( of an acre for each dwelling unit of the proposed subdivision (acres to be dedicated = 0.04 x number of dwelling units). The city shall determine whether a cash payment in lieu of land dedication is appropriate. The amount of cash dedication shall be determined by multiplying the number of dwelling units of the proposed subdivision times the designed fee per dwelling which may be set from time to time by resolution of the council. (Ord. B -91, 8 -5 -1997, eff. 8 -11 -1997) 2. In all commercial, industrial and other subdivisions, it shall be presumed that a reasonable amount of land has been dedicated to serve the needs of the resident and working population for parks and playgrounds if the subdivider dedicates at least ten percent (10 %) of the land in the subdivision for parks, recreation and usable open space. The city shall determine whether a cash payment in lieu of land dedication is appropriate. The amount of the cash dedication shall be determined by multiplying the number of acres (determined by application of the formula stated above) times the designated fee per acre which may be set from time to time by resolution of the council. 3. The dedication of a portion of land for parks or playgrounds, or the payment of cash in lieu thereof, provided for above shall be presumed to be reasonable. However, upon the request of the applicant, the recommendation of the park and recreation commission, or at the discretion of the council, the city may either increase or decrease such dedication or payment upon a determination by the council that such dedication or payment is unreasonable or insufficient given the specific characteristics of the proposed subdivision and its intended use. (Ord. XVI1.107, 7 -1 -2003) 4. Ponding areas, needed as part of the overall city storm drainage plan, shall be dedicated as land or easement at the option of the city and as accepted by the city. However, no credit shall be given for park dedication unless said area meets the criteria for public parks as stated in the city's park dedication resolution and is approved by the council. Said dedication of land or easement shall be in a form approved by the council. 5. In the case of subdivisions of land which have previously been subdivided and for which land has been dedicated for parks or playgrounds, or cash payments in lieu of such dedication have been made, the council shall make reasonable adjustments to recognize such previous dedication or payment. C. Timing Of Park Dedication: If a new subdivision is designed to be platted into more than one addition, all park and other public use lands contemplated under this section in the total subdivision area, shall be dedicated with the final plat of the first phase or addition of the subdivision unless otherwise approved by the council. http:// www. sterhngcodifiers. com/ codebook /getBookData.php ?section_id= 578993 4/5/2011 Sterling Codifiers, Inc. Page 2 of 2 D. Condition Of Land To Be Dedicated: Land to be dedicated for public park, trail, or ponding shall be brought to a suitable condition by the subdivider in accordance with city policy. All disturbed areas shall have topsoil restored, be regraded with turf established according to specifications provided by the city. E. Abstract: Such lands shall be free and clear of all liens and encumbrances including special assessments as evidenced by a recent abstract of title or registered property abstract to be submitted at developer's cost to the city for its examination. F. Dedicated Property: City must have received warranty deed or equivalent for dedicated park property by the city before final plat is approved. (Ord. B -91, 8 -5 -1997, eff. 8 -11 -1997) http:// www. sterlingcodifiers. com/ codebook /getBookData.php ?section_id= 578993 4/5/2011