HomeMy WebLinkAbout6. Review of AppraisalsMARKET VALUE APPRAISAL
Lot 6, Block 5 and
part of Lots 7 and 8,
Block 5, Village of Rosemount
Prepared for
Mr. John Miller.
Economic Development Coordinator
Rosemount, Minnesota
August 27, 1992
Tim TIEN COMPANY
2516 Fourth Avenue North Anoka, Minnesota 55303
Malcolm B. Allen (1923 - 1989) Real Estate Appraisal Service
Malcolm B. Allen, Jr. (612) 421.-4970
August 27, 1992
Mr. John Miller
Economic Development Coordinator
City of Rosemount
2875 145th Street West
Rosemount, MN 55068-0510
re: Redevelopment Authority
Vacant Land
Rosemount, Minnesota
Dear Mr. Miller:
As you requested, submitted herewith is our market value
appraisal report --of the above referenced property.
Based upon an inspection of the property and after
careful consideration of the many factors that influence
value, it is our opinion that the market value of the subject
as of the effective date hereof is :
Eighteen Thousand Six Hundred Dollars
($18,600.00)
We submit this appraisal report containing a description
of the property appraised, a summary of the definitions
relevant to the conclusions and a portion of the
calculations and analyses used in reaching the conclusions.
This report complies with the Uniform Standard of
Professional Practice of the Appraisal Foundation and is
subject to the assumptions and limiting conditions contained
herein. Information relied on in this report was gathered
from sources believed to be reliable, but it is not
guaranteed.
Yours truly,
THE ALLEN COMPANY
Malcolm B. Allen, Jr.
I
Redevelopment Authority
Rosemount, Minnesota
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the market
value of the subject property as of the effective date hereof
and subject to the conditions set out herein.
FUNCTION OF THE APPRAISAL
This appraisal is intended to assist the City of
Rosemount Port Authority in connection with the potential
disposition of the subject property, which is owned by the
Authorities predecessor in interest.
! DEFINITION OF.MARKET VALUE
I
Market Value, as used in this report, is defined as:
The most probable price in terms of dollars for which
the subject property would sell in a competitive market
under all conditions requisite for a fair, arms length
transaction, with the buyer and seller each acting
prudently, knowledgeable, and for self interest, and
assuming that neither is under undue duress.
Underlying this definition are the following
assumptions:
1. Both buyer and seller are acting in their own self
interest.
2. Both buyer and seller are fully informed about the
property and generally informed about the market
for that particular type of property.
3. The property has been exposed on the.open market for
a reasonable time.
Page 1
Redevelopment Authority
Rosemount, Minnesota
4. Payment is made in cash or by other financing
typically available in the market.
PROPERTY RIGHTS APPRAISED
This report estimates the value of the fee simple
interest in the subject property. A fee simple interest is
"an absolute fee, a fee without limitations to any particular
class or heirs or restrictions, but subject to the
limitations of eminent domain, escheat, police powers and
taxation. An inheritable estate."
A fee simple estate reflects complete ownership without
limitations and of potential infinite duration. It is the
largest estate.recognized by the law.
DATE OF VALUATION
The value of the subject property was estimated as of
August 18, 1992, base upon economic and market conditions
then prevailing.
LEGAL DESCRIPTION OF SUBJECT PROPERTY
The subject property is legally described as:
Lot 6, Block 5 and the South 4 feet of Lot 7, Block 5, and
that part of Lot 8, Block 5, lying south of the easterly
extension of the north line of Lot 7, Block 5, Village of
Rosemount, Dakota County, Minnesota.
Page 2
Redevelopment Authority
Rosemount, Minnesota
TAX DATA AND ASSESSOR'S ESTIMATE OF VALUE
Taxes payable 1992 exempt
Assessor's Estimate of Value
Land $16,200.00
ZONING
The subject property is currently zoned C-2, Community
Commercial District by the City of Rosemount zoning
ordinance. A copy of the relevant portion of the official
zoning map is included in the addenda.. The ordinance states
that the C-2 district relates to downtown only, and is
intended to be a "diversified commercial center which offers
the full range of comparison goods, sales and services,
cultural and civic, entertainment, financial and offices and
public uses." Uses specifically allowed within this district
include professional and business offices.
DESCRIPTION OF THE SUBJECT
The subject of this appraisal is a contiguous tract of
land situated near the intersection of Burnely Avenue and
145th Street West in the City of Rosemount, Minnesota.
The site is level and generally open. It has approximately
55 feet of frontage along the east side of Burnely Avenue.
Page 3
0
Redevelopment Authority
Rosemount, Minnesota
It borders the railroad tracts on the east. It is somewhat
irregularly shaped. Based upon calculations determined from
the dimensions indicated on the half section map, the subject
site contains approximately 10,635 square feet. the site is
undeveloped. All utilities necessary for its development in
accordance with its highest and best use are currently
available.
HIGHEST AND BEST USE
The highest and best use for a property is that
reasonable and probable use which will yield the highest
present value of the property. It is that use, selected from
other reasonable, probable and legal uses, that results in
the highest value for the property.
Criteria for determining highest and best use include:
1. The use must be legal and in compliance with zoning
and building restrictions.
2. The use must be within the realm of probability and
not merely speculative.
3. Demand for such use must exist.
4. The use must be profitable and provide the highest
net return from the property for the longest
possible time as compared to other likely uses.
In appraisal practice the concept of highest and best
use is the premise upon which value is based. Based upon the
Page 4
Redevelopment Authority
Rosemount, Minnesota
foregoing, it is our opinion that the ultimate highest and
best use for the subject is for development in accordance
with its current zoning, possibly as part of an assemblage.
THE APPRAISAL PROCESS
The estimate of value in the appraisal process is
generally derived through three basic approaches to value,
the Cost Approach, the Income Approach and the Market Data
or Direct Sales Comparison Approach.
The Cost Approach is an appraisal that is based upon the
proposition that an informed purchaser would pay no more for
the subject property than the cost of producing a substitute
property with the same utility as the subject property. The
indication of market value in the Cost Approach is obtained
by adding the estimated value of the land to the estimated
replacement cost of the improvements less any depreciation
accrued to the improvements.
The Income Approach yields an indication of value by
analyzing the subject property in terms of its ability to
produce a net annual income over its economic life. Value is
indicated by capitalizing the property's net annual income at
a rate commensurate with the risks of investing in the
property as compared with the rates of return available from
alternative investments.
N
Page 5
Redevelopment Authority
Rosemount, Minnesota
The Market Data Approach, or Direct Sales Comparison
Approach, is based upon the principle of substitution, which
states "when a property is replaceable in the market, its
value tends to be set by the cost 'of acquiring an equally
desirable substitute property assuming no significant delay
in making the substitution."
The final analysis in the appraisal process is the
correlation and reconciliation of the value indications
yielded from the different approaches to value. This step
results in a single estimate of value for the subject
property based upon the value indications and the weight
accorded to each, the purpose and function of the appraisal
i
and the appraiser's expert judgement. Because the subject
property is unimproved, the Replacement Cost Approach is not
applicable and will not be used in this analysis. Similarly,
vacant land such as the subject does not typically produce a
net income, in dollars, commensurate with its highest and
best use. therefore, the Income Approach will not be relied
on herein. this report will rely exclusively on the Direct
Sales Comparison Approach to indicate the value of the
subject.
THE DIRECT SALES COMPARISON APPROACH
The Market Data or Direct Sales Comparison Approach is
Page 6
Redevelopment Authority
Rosemount, Minnesota
essential in almost every real estate appraisal. The value
estimated by this analysis is defined as "the price at which
a willing seller would sell and a willing buyer would buy,
neither being under abnormal pressure to act." This assumes
that both buyer and seller are fully informed about the
property, and both have general knowledge of the market for
that type of property and assumes that the property has been
exposed for sale in the open market for a reasonable gime.
It is premised on the assumption that an informed buyer would
pay no more for the subject property than the cost of
acquiring an equally desirable and functional substitute.
Therefore, sales of properties with similar characteristics
and utility are usually good indicators of value for the
subject property.
We have conducted a survey of sales of property in the
vicinity of the subject. Details regarding the most
pertinent are included herein. These sales have been
adjusted for items of difference between the subject site and
the sale. These include variances for time of sale, size,
topography, general location, amenities, zoning, etc.
Descriptions of the adjustments made to the comparable sales
are listed below.
Page 7
Redevelopment Authority
Rosemount, Minnesota
Ad 1ustments
1. Financing. This adjustments eliminates the effects of
favorable/unfavorable financing arrangements as compared to
market conditions.
2. Date of Sale. This adjusts sales to current figures based
upon appraiser's judgement of the rate of appreciation of
land values in the vicinity.
3. Size. This adjusts for the general tendency of larger
parcels to sell for lower unit price than smaller prices.
4. Location. This adjustment accounts for differences in
the desirability of theareawhere the property is located.
5. Topography. This accounts for differences in land
contour, elevation and vegetation.
After an inspection of the site and careful consideration of
the many and varied uses to which it is adaptable, and
consideration of the factors that influence value, it is our
opinion, that the subject site, if vacant, has a market value
of $1.75 per square foot.
Indicated Value of Site if Vacant
10,635 square feet @ $1.75 = $18,611.25
rounded to $18,600.00
Page 8
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Sale No.: 1
Location: Carousel Way and 151st Street, Rosemount, MN
Legal: North 144.44 feet of the south 288.88 feet of Lot 2
Block 2 South Rose Park Addition
Date of Sale: August, 1987
Sale Price: $73,00.00
Zoning: commercial
Size of Tract: 44,054 s.f
Unit Price: $1.66/s.f.
Comments: level
Sale No. 2
Location: Carousel and 151st Street, Rosemount, Mn
Legal: Lot 2, Block 2, South rose Park Addition
Seller: Carlson Farms, et al
Buyer: Larry Ihle, et al
Date of Sale: March, 1987
Sales Price: $69,500.00
Zoning: commercial
Size of Tract: 31,799 s.f.
Unit Price: $2.19/s.f
I
Sale No. 3
Location. Co. Road 42 and Canada Ave., Rosemount, Minnesota
Legal: part of Lot 4, Block 1, South Rose Park
(replatted0
Seller: Carlson Farms, et al
Buyer: P. Fahey, et al
Date of Sale: April 1984
Sales Price: $98,000.00
Zoning: commercial
Size of Tract: 46,637 s.f.
Unit Price: $2.10/s.f.
Sale No. 4
Location: Chippendale Ave. W. and 151st St. Rosemount, MN
Legal: part of Lot 2, block 2, south Rose Park
Seller: Larry Ihle et al
Buyer: J. Boerner, et al
Date of Sale: March, 1985
Sales Price: $120,000.00
Zoning: commercial
Size of Tract: 45,000 s.f.
Unit Price: $2.67/s.f.
0
Sale No. 5
Location: Chippendale and Co. Road. 42, Rosemount, MN
Legal: part of Lot 1 Block 1, South Rose Park
Seller: Carlson Farms, et al
Buyer: Holiday Stores
Date of Sale: August, 1985
Sales Price: $148,228.85
zoning: commercial
Size of Tract: 47,984 s.f.
Unit Price: $3.09/s.f.
CERTIFICATE OF APPRAISAL
I do hereby certify that I have personally examined the
property described in this appraisal report.
I further certify that I have no present or contemplated
interest in the property appraised, and that neither my
employment nor the fee therefore was in any manner
contingent upon the estimate of value reported.
I have assumed the title of the property to be good and
merchantable and in the appraisal have disregarded any
liens, mortgages and all other matters legal in nature.
That my fee for ,this appraisal is in no way contingent
on a predetermined value, nor is there any obligation on
my part to testify in court on any matter pertaining
this property unless special arrangement is agreed upon
for such testimony.
The possession Iof this report or any copy thereof does
not imply the right of publication nor may the report be
used by anyone but the applicant without the consent of
the appraiser.
I have made the appraisal of the property in conformity
with the Uniform Standards of Professional Appraisal
Practice and Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 as I
understand them.
\� Malcolm B. Allen, Jr.
p T anCpNmINGENT COND
TTTONS
UNDERLYING ASSUM T pNS
Findings, estimates,
are made subject to
Coll
d
has neither present nor contemplate
the property appraised and his
contingent upon the conclusions
1. The Appraiser
future interest in
and conclusions in the appraisal
the following assumptions and
employment is not
re orted.
P
Appraiser is not responsible for legal matters.
2, The App good and marketable. All
The title is as g and proposed, are
structures and improvements existing Zoning
assumed to be in compliance
with co muntsy The
ni
ordinances and building ro erTh complies
Appraiser does not guarantee that
uihe prop
or building code req
with zoning -
3. Improvements described as "proposed" are considered
completed in substantial
as though satisfactorily specifications.
conformance with plans and
ort, though gathered from
4. Information in the rep is not guaranteed and is
sources believed reliable�Confidential market data
subject to conformation. raiser.
documentations is in the office of the app
uired to publish all
5. Consent of the appraiser is req Expert testimony may
or part of the appraisal report • ExP raiser
ecial arrangements with app
be obtained through sP
maintenance, and administration are
6, proper repairs, erty by competent management.
to be given the prop
�, Unless otherwise stated, the property is considered
free and clear of all indebtedness, except future
special assessment payments.
the
S. Except as may be otherwise noted herein,
theental
property is assumed to be free from any e
hazard, including asbestos and toxic waste. No
ranty
is made regarding the
representation or warproperty.
ert
f such materials on the y•
presence or absence 0
QUALIFICATIONS OF APPRAISER
THE ALLEN COMPANY
2516 Fourth Avenue North, Anoka, Minnesota, 55303
PROFESSIONAL ORGANIZATIONS
National Association of Real Estate Boards
Minnesota Association of Real Estate Boards Anoka
County Board of Realtors, Past President
Minneapolis Board of Realtors
Multiple Listing Service
National Association of Independent Fee Appraisers
Anoka County Chapter of Independent Development
Course Planning Committee Industrial Development
Course
Series 500 at Anoka Ramsey Community College
GOVERNMENT CLIENTS SERVED
Qualified and appeared as Expert Witnesses in
District Court
1. Anoka County
2. Sherburne County
3. Chisago County
4. Washington County
Served as Condemnation Commissioner for District
Court, Anoka County, Minnesota, on matters of
Highway Right-of-way, utility easements, drainage
ditches, parks, etc
APPRAISED FOR
Anoka Hennepin School District No. 11
Anoka County Park Department
Anoka County Highway Department
Anoka County Probate Court
City of Anoka
City of Coon Rapids
City of Fridley
City of Spring Lake Park
f
QUALIFICATIONS OF APPRAISER
Continued
PRIVATE CLIENTS SERVED
St. Paul Sand and Gravel Company
Honeywell, Inc.
Anoka Abstract Company
Princeton State Bank
First National Bank in Anoka
General Motors Corporation
Mercy Hospital
St. Stephens Catholic Church
Art Goebel Ford, Inc..
Greenberg Rambler
E. J. Baehr Oil Companies
Northern States Power Company
Murphy Service Insurance Company.
Rural Power and Electric CooperatiV4
Malcolm B. Allen, Jr.
Owner of THE ALLEN COMPANY, engaged in real estate
and appraisal business since 1953.
EDUCATION
Received Juris Doctorate degree from University of
Denver College of Law, Denver, Colorado, 1983.
Received B.S.B.A. in business administration
University of Denver, Denver, Colorado, 1980.
PRY SIONAL ASSOCIATIONS
Member, American Bar Association
Member, American Trial Lawyers Association
National Association of Independent Fee Appraisers
MARKET VALUE APPRAISAL
2810 145th St. West
Rosemount, Minnesota
Prepared for
Mr. John Miller
Economic Development Coordinator
Rosemount, Minnesota
August 27, 1992
1 ' • N' •
j 2516 Fourth Avenue North Anoka, Minnesota 55303
Malcolm B. Allen (1923 - 1989)
Malcolm B. Allen, Jr.
August 27, 1992
Mr. John Miller
Economic Development Coordinator
City of Rosemount
2875 145th Street West
Rosemount, MN 55068-0510
Real Estate Appraisal Service
(612) 421-4970
re: 2810 145th St. West
Rosemount, Minnesota
McMenomy/Nivala
Dear Mr. Miller:
As you requested, submitted herewith is our market value
appraisal report of the above referenced property.
Based upon an inspection of the property and after
careful consideration of the many factors that influence
value, it is our opinion that the market value of the subject
as of the effective date hereof is :
One Hundred Five Thousand Dollars
($105,000.00)
We submit this appraisal report containing a description
of the property appraised, a summary of the definitions
relevant to the conclusions and a portion of the
calculations and analyses used in reaching the conclusions.
This report complies with the Uniform Standard of
Professional Practice of the Appraisal Foundation and is
subject to the assumptions and limiting conditions contained
herein. Information relied on in this report was gathered
from -sources believed to be reliable, but it is not
guaranteed.
Yours truly,
THE ALLEN COMPANY
Malcolm B. Allen, Jr.
TABLE OF CONTENTS
Page
Purpose.............................................. 1
Function....... ............ 1
Definition of Market Value.... ............ .... 1
Just Compensation ................. 2
Property Rights Appraised............ ............... 3
Date of Valuation........... ... 3
Legal Description... 3
TaxData ...................................... 4
Zoning............ 4
Description of the Subject ........................... 4
Highest and Best Use........ .. . ..... 7
The Appraisal Process ............................... 7
Replacement Cost Approach ........................... 9
IncomeA -roach ....................................... 13
Direct Sales Comparison Approach....... ............. 15
Conclusion and Final Value Estimate ................... 17
Addenda
2810 145th St. West
Rosemount, Minnesota
PURPOSE • r
� s i..z _ :.w.
The purpose of this appraisal is to estimate the market
value of the subject property as of the effective date hereof
and subject to the conditions set out herein.
FUNCTION OF THE APPRAISAL
This appraisal is intended to assist the City of
Rosemount Port Authority in connection with the potential
acquisition of the subject property.
DEFINITION OF MARKET VALUE
Market Value, as used in this report, is defined as:
The most probable price in terms of dollars for which
the subject property would sell in a competitive market
under all conditions requisite for a fair, arms length
transaction, with the buyer and seller each acting
prudently, knowledgeable, and for self interest, and
assuming that neither is under undue duress.
Underlying this definition are the following
assumptions:
1. Both buyer and seller are acting in their own self
interest.
2. Both buyer and seller are fully informed about the
property and generally informed about the market
for that particular type of property.
3. The property has been exposed on the open market for
a reasonable time.
4. Payment is made in cash or by other financing
Page 1
2810 145th St. West
Rosemount, Minnesota
typically available in the market.
JUST COMPENSATION
It is our understanding that the Rosemount Port
Authority is intending to attempt to acquire the subject
property through negotiation. Given that the Authority is
endowed with the power of eminent domain, the following
discussion is included for informational purposes. The
constitutional concept of just compensation refers the amount
of remuneration that must be paid to a land owner when his
property is acquired or condemned for a public purpose. The
Minnesota Supreme Court has adopted the definition of the
United States Supreme Court in Olson v. United States, 292
U.S. 246, which defines "just compensation" as follows.
Just compensation includes all elements of value that
inhere in the property, but it does not exceed market value
fairly determined. The sum required to be paid the owner
does not depend upon the uses to which he has devoted his
land, but is to be arrived at upon just consideration of all
the uses for which it is suitable. The highest and most
profitable use for which the property is adaptable and needed
or likely to be needed in the reasonably near future is to be
considered, not necessarily as the measure of value, but to
the: full extent that the prospect of demand for such use
affects the market value while the property is privately
held.
In summary, the law adopts the concept that private land
owner are entitled to be paid the fair market value for their
property based upon its highest and best use when the
property is acquired for a public purpose. The concept of
Page 2
2810 145th St. West
Rosemount, Minnesota
highest and best use is discussed further below.
PROPERTY RIGHTS APPRAISED
This report estimates the value of the fee simple
interest in the subject property. A fee simple interest is
"an absolute fee, a fee without limitations to any particular
class or heirs or restrictions, but subject to the
limitations of eminent domain, escheat, police powersand
taxation. An inheritable estate."
A fee simple estate reflects complete ownership without
limitations and of potential infinite duration. Itis the
largest estate recognized by the law.
DATE OF VALUATION
The value of the subject property was estimated as of
August 18, 1992, base upon economic and market conditions
then prevailing.
LEGAL DESCRIPTION U SUBJECT PROPERTY
The subject property is legally described as:
Lot 7, Block 5, except the south 4 feet thereof, and
Lot 8 block 5, except that part thereof lying southerly of
the easterly extension of the north line of Lot 6, Block 5,
Village of Rosemount, Dakota County, Minnesota.
Page 3
2810 145th St. West
Rosemount, Minnesota
TAX DATA AND ASSESSOR'S ESTIMATE OF VALUE
Taxes payable 1992 $889.88
(based upon non -homestead residential classification)
Assessor's Estimate of Value
Land
Buildings
Total
$13,900.00
$32.400.00
$46,300.00
ONIN
The subject property is currently zoned C-2, Community
Commercial District by the City of Rosemount zoning
ordinance. A copy of the relevant portion of the official
zoning map is included in the addenda. The ordinance states
that the C-2 district relates to downtown only, and is
intended to be a "diversified commercial center which offers
the full range of comparison goods, sales and services,
cultural and civic, entertainment, financial and offices and
public uses." Uses specifically allowed within this district
include professional and business offices.
DESCRIPTION OF THE SUBJECT
The subject of this appraisal consists of an older two
story single family residence that has been converted into
a multiple tenant office building. It was reported that the
Page 4
2810 145th St. West
Rosemount, Minnesota
renovation of the structure was completed in February, 1990.
The main level consists of an older portion that has been
updated with new walls, flooring and ceilings. It was
reported that the wiring and heating system has-been
replaced. This area serves as a large reception area, a
conference room and a kitchen area. Adjacent is a newly
constructed addition built on a concrete slab. This level
contains approximately 1,102 square feet.
The upper level has also been renovated with new walls
and coverings, flooring and ceilings. It contains
approximately 660 square feet. This level exits to a deck
constructed on the flat roof of.the addition to the first
level.
The exterior of the building has vinyl clad siding and
aluminum soffits and fascia.
The subject is currently occupied by four separate
entities_ The following roll of rents and actual expenses
was reported to us.
Tenant
Basic Builders, Inc.
McMenomy Appraisal Service
Excel Credit Service
ERA McMenomy Associates
Total
Annual Rent
$3,600.00
3,600.00
3,600.00
6,000.00
$16,200.00
Page 5
Expenses:
Real Estate taxes
Insurance
Gas
Electric
Water
Trash removal
Interior cleaning
Lawn and Snow
Repairs
Supplies
Total Expenses
2810 145th St. West
Rosemount, Minnesota
$1,633.12
300.00
330.90
708.64
179.12
301.91
1,441.11
485.00
316.00
243.19
$5,938.99
Overall, the building is in like new condition and is
well suited to the use to which is has been adapted. It has
a bituminous paved parking lot for approximately 15 cars to
the east and rear of the structure.
The subject site is depicted on the copy of the relevant
half section map included in the addenda. It has
approximately 217 feet of frontage along the south side of
145th Street West and approximately 65 feet of frontage along
the east side of Burnely,Avenue. The site borders the
railroad tracks on the east. Based upon the dimensions of
the site, we have calculated its area to be approximately
13,230 square feet. No survey of the site was provided nor
reviewed by the appraiser.
Page 6
2810 145th St. West
Rosemount, Minnesota
HIGHEST AND BEST i:SE
The highest and best use for a property is that
reasonable and probable use which will yield the highest
present value of the property. It is that use, selected from
other reasonable, probable and legal uses, that results in
the highest value for the property.
Criteria for determining highest and best use include:
1. The use must be legal and in compliance with zoning
and building restrictions.
2. The use must be within the realm of probability and
not merely speculative.
3. Demand for such use must exist.
4. The use must be profitable and provide the highest
net return from the property for the longest
possible time as compared to other likely uses.
In appraisal practice the concept of highest and best
use is the premise upon which value is based. Based upon the
foregoing, it is our opinion that the ultimate highest and
best use for the subject is for commercial and professional
office purposes, as it is currently used.
THE APPRAISAL PROCESS
The estimate of value in the appraisal process is
generally derived through three basic approaches to value,
the Cost Approach, the Income Approach and the Market Data
i
Page 7
2810 145th St. West
Rosemount, Minnesota
or Direct Sales Comparison Approach.
The Cost Approach is an appraisal that is based upon the
proposition that an informed purchaser would pay no more for
the subject property than the cost of producing a substitute
property with the same utility as the subject property. The
indication of market value in the Cost Approach is obtained
by adding the estimated value of the land to the estimated
replacement cost of the improvements less any depreciation
accrued -to the improvements.
The Income Approach yields an indication of value by
analyzing the subject property in terms of its ability to
produce a net annual income over its economic life. Value is
indicated by capitalizing the property's net annual income at
a rate commensurate with the risks of investing in the
property as compared with the rates of return available from
alternative investments.
The Market Data Approach, or Direct Sales Comparison
Approach, is based upon the principle of substitution, which
states "when a property is replaceable in the market, its
value tends to be set by the cost of acquiring an equally
desirable substitute property assuming no significant delay
in making the substitution."
The final analysis in the appraisal process is the
correlation and reconciliation of the value indications
Page 8
2810 145th St. West
Rosemount, Minnesota
yielded from the different approaches to value. This step
results in a single estimate of value for the subject
property based upon the value indications and the weight
accorded to each, the purpose and function of the appraisal
and the appraiser's expert judgement. Each of the appraisal
methods as applied in this appraisal are discussed in detail
below.
COST APPROACH TO VALUE
The Cost Approach consists of four basic steps. First,
the value of the land is estimated as if it were vacant.
Second, the current replacement cost of the existing
improvements is estimated. Third, an estimate of accrued
depreciation to the improvements is made. Finally, the
summation of the land value and depreciated replacement cost
of the improvements yields the indication of value.
1. ESTIMATE OF LAND VALUE AS IF VACANT
The value of the subject site was estimated using the
market value approach. We have conducted a survey of land
sales which are comparable to the subject and as a result
have formed an opinion of market value for the site. While a
large, number of sales have been analyzed, only those
particularly relevant have been included herein.
Page 9
2810 145th St. West
Rosemount, Minnesota
These sales have been adjusted for items of difference
between the subject site and the sale. These include
variances for time of sale, size, topography, general
location, amenities, zoning, etc. Descriptions of the
adjustments made to the comparable sales are listed below.
Adjustments
1. Financing. This adjustments eliminates the effects of
favorable/unfavorable financing arrangements as compared to
market conditions.
2. Date of Sale. This adjusts sales to current figures based
upon appraiser's judgement of the rate of appreciation of
land values in the vicinity.
3. Size. This adjusts for the general tendency of larger.
parcels to sell for lower unit price than smaller prices.
4. Location. This adjustment accounts for differences in
the desirability of the area where the property is located.
5. Topography. This accounts for differences in land
contour, elevation and vegetation.
After an inspection of the site and careful consideration of
the many and varied uses to which it is adaptable, and
consideration of the factors that influence value, it is our
opinion, that the subject site, if vacant, has a market value
x
Page 10
2810 145th St. West
Rosemount, Minnesota
of $2.00 per square foot.
Indicated Value of Site if Vacant
13,230 square feet @ $2.00 =
rounded to
$26,460.00
$26,500.00
2. REPLACEMENT COST OF THE IMPROVEMENTS
The new replacement cost of the subject building was
estimated using a national cost reporting service and by
comparison with actual local construction costs.
Units Unit Cost
Basic Structure 1,760 $42.95
Adjustments
story/height
.928
area/perimeter
1.040
Refined S.F. Cost
$41.45
Current cost multiplier
•99
Local cost factor
1.14
Final Square foot cost
$46.78
Estimated New Replacement Cost
$82,333.63
Additions
landscaping and paving
$ 3,000.00
Total New Replacement Cost
$85,333.63
3. Estimate of Accrued Depreciation
Depreciation is the reduction or lessening in value of
Page 11
2810 145th St. West
Rosemount, Minnesota
any depreciable asset from any source. Depreciation is
usually characterized as physical deterioration, functional
obsolescence or economic obsolescence. Physical
deterioration stems from and accounts for actual wear and
tear of the structure's components. It results from aging,
or deferred maintenance. Functional obsolescence accounts
for deficiencies in design, style or materials as compared to
new similar use structures. Economic obsolescence results
from factors outside the property itself such as changes in
the neighborhood or detrimental changes in regulatory
requirements.
We have used the economic age/estate life method to
calculate the physical deterioration accrued to the subject.
Buildings similar to the subject typically have a useful life
of approximately 50 years. We estimate that the renovation
of the structure added approximately 50% to the useful life
of the building. Therefore, assuming an economic life of 25
years and the age of the building to be 3 years, the
indicated physical deterioration attributable to the subject
is 12 of new replacement cost.
Based upon the structure's highest and best use and our
inspection, we are unable to conclude that any functional or
economic obsolescence is appropriately attributed to the
subject building.
Page 12
U
2810 145th St. West
Rosemount, Minnesota
Summary of Depreciation
physical 12
functional 0
economic 0
Total 12%
4. Summary
Estimated New Replacement Cost $ 85,333.63
Less Accrued Depreciation (12%) 10,240.04
Estimated Improvement Value $ 66,938.37
Land Value 26,500.00
Indicated Value by Cost $101,593.59
Rounded to $101,500.00
THE INCOME APPROACH
The Income Approach analyzes a property from the
perspective of a potential investor in the property desiring
a return on the investment commensurate with the risk of the
investment. Through a mathematical process known as
discounting, the net income the property is or is capable of
producing is capitalized at a rate derived from the market.
The result is the estimated present value of the future
stream of benefits that flow from owning the property.
Estimated Net Income
Gross Rent
$16,200.00
Page 13
2810 145th St. West
Rosemount, Minnesota
Vacancy and Credit Loss (5%)
Total expenses
Estimated Net Income
(810.00)
(5,938.99)
$9,451.01
The above net income was derived using the actual rental
income and expense figures from the subject property. We
have conducted a survey of rentals in the greater
metropolitan area and have ,concluded that the actual figures
provided to us by the property owners are consistent with
those generally found in the market.
Capitalization Rate
The Direct Capitalization Method utilizes an overall
capitalization rate and does not stipulate an economic life
nor does it differentiate between land and building values.
The overall rate is a direct ratio between the net operating
income and the value of the subject property. This method
capitalizes the net income into an estimate of value. No
residual is involved. The overall capitalization rate
represents an interest return on the investment and a return
on the capital investment. The selection of this rate comes
primarily from the market.
The capitalization rate is developed using the band of
investment method. this method recognizes that most property
Page 14
2810 145th St. West
Rosemount, Minnesota
is purchased using a combination of debt and equity capital.
The return on investment of each of these components is
weighted by their prorated share of the overall
capital structure to yield an overall rate. As of the
appraisal date, interest rates on commercial mortgages were
quoted in the range of 8.5 % to 11.5 %. Equity dividend
rates were in the range of 10% to 150. The formula for
developing the overall capitalization rate is:
Weight Rate
Mortgage .75 x .0850 = .06375
Equity .25 x .1000 = .02500
.0888 or 8.88%
Net Income L Capitalization Rate = Estimated Value
$9,451.01 .0888 = $106,430.29
rounded to $106,500.00
THE DIRECT SALES COMPARISON APPROACH
The Market Data or Direct Sales Comparison Approach is
essential in almost every real estate appraisal. The value
estimated by this analysis is defined as "the price at which
a willing seller would sell and a willing buyer would buy,
neither being under abnormal pressure to act." This assumes
Page 15
2810 145th St. West
Rosemount, Minnesota
that both buyer and seller are fully informed about the
property, and both have general knowledge of the market for
that type of property and assumes that the property has been
exposed for sale in the open market for a reasonable time.
It is premised on the assumption that an informed buyer would
pay no more for the subject property than the cost of
acquiring an equally desirable and functional substitute.
Therefore, sales of properties with similar characteristics
and utility are usually good indicators of value for the
subject property.
We have conducted a survey of sales of property in the
vicinity of the subject. Details regarding the most
pertinent are included herein. given the somewhat limited
nature of the market area of the subject, we have included
and relied upon sales of similar properties in what are
considered to be similar, although not the same, markets. We
have place primary reliance on those sales reported in the
City of Rosemount. We have made adjustments to the
comparable sales data to account for material differences
including time of sale, financing, location. size, condition,
amenities, perceived income potential and other factors that
influence value.
After adjustment, the market data indicates a range of
values for the subject of between $55.00 and $60.00 per
Page 16
2810 145th St. West
Rosemount, Minnesota
square foot of gross building area.
Estimated Value by Sales Comparison
1,760 square feet @ $58.50 = $102,960.00
rounded to $103,000.00
RECONCILIATION ANIS FINAL VALUE ESTIMATE
The final step a real estate appraisal is the
reconciliation of the value indications derived from the
various appraisal techniques applied to reach a single
estimated value for the subject property. In this appraisal
report, we have applied three generally accepted appraisal
methods. These techniques indicated the following values for
reconciliation:
Replacement Cost Approach $101,500.00
Direct Sales Comparison Approach $103,000.00
Income Approach $106,500.00
The Replacement Cost Approach indicates value by
estimating the cost to replace the subject improvements,
subtracting an appropriate amount of depreciation, and adding
the land value when considered as vacant. The replacement
cost of the subject was estimated using a national
Page 17
2810 145th St. West
Rosemount, Minnesota
construction cost reporting service, in conjunction with a
local cost estimating service. Depreciation was factored
based upon the age, condition and utility of the structure.
The land value was determined based upon analysis of land
sales of comparable tracts of land in the market place. In
analyzing commercial/office properties such as the subject,
buyers typically place the least reliance on the Replacement
Cost approach when making a purchase decision. In this case,
we have -relied on this method as a check on the value derived
from the other appraisal methods applied.
The Direct Sales Comparison Approach indicates value by
comparing the subject with other similar properties that have
sold under circumstances attendant an arms length sale. The
validity of this appraisal method is related directly to the
quality of the market data available for comparison. In this
appraisal we have relied on sales of similar use buildings
in the Rosemount area and in similar situations.. These
sales were adjusted for the many differences that influence
value. It is our opinion that the market data available is
sufficient to support the value conclusion indicated. Given
that the value indication is derived from actual market
transactions involving buyers and sellers in the market
place, this method is given great weight is arriving at the
final value estimate for the subject property.
Page 18
2810 145th St. West
Rosemount, Minnesota
The Income Approach is generally a reliable indicator of
value for a property such as the subject. The typical buyer
in the market places great reliance on this type of analysis
when making a decision on the investment of capital.
Therefore, we have given great credence to the value
indicated by this appraisal method in arriving at the final
value estimate for the subject property.
Based upon the foregoing and after careful consideration
of the many factors that influence value, it is our opinion
that the fair market value of the subject property as of the
effective date hereof is:
ONE HUNDRED FIVE THOUSAND DOLLARS
($105,000.00)
Page 19
2810 145th St. West
Rosemount, Minnesota
I
i
Page 20
Sale No.: 1
Location Carousel Way and 151st Street, Rosemount, MN
Legal: North 144.44 feet of the south 288.88 feet of Lot 2
Block 2 South Rose Park Addition
Date of Sale: August, 1987
Sale Price: $73,00.00
Zoning: commercial
Size of Tract: 44,054 s.f
Unit Price: $1.66/s.f.
Comments: level
Sale No. 2
Location: Carousel and 151st Street, Rosemount, Mn
Legal: Lot 2, Block 2, South rose Park Addition
Seller: Carlson Farms, et al
Buyer: Larry Ihle, et al
Date of Sale: March, 1987
Sales Price: $69,500.00
zoning: commercial
Size of Tract: 31,799 s.f.
Unit Price: $2.19/s.f
Sale No. 3
Location: Co. Road 42 and Canada Ave., Rosemount, Minnesota
Legal: part of Lot 4, Block 1, South Rose Park
(replatted0
Seller: Carlson Farms, et al
Buyer:%-- P. Fahey, et al
Date of Sale: April 1984
Sales Price: $98,000.00
Zoning: commercial
Size of Tract: 46,637 s.f.
Unit Price: $2.10/s.f.
Sale No. 4
Location: Chippendale Ave. W. and 151st St. Rosemount, MN
Legal: part of Lot 2, block 2, south Rose Park
Seller: Larry Ihle et al
Buyer: J. Boerner, et al
Date of Sale: March, 1985
Sales Price: $120,000.00
Zoning: commercial
Size of Tract: 45,000 s.f.
Unit Price: $2.67/s.f.
Sale No. 5
Location: Chippendale and Co. Road. 42, Rosemount, MN
Legal: part of Lot l Block 1, South Rose Park
Seller: Carlson Farms, et al
Buyer: Holiday Stores
Date of Sale: August, 1985
Sales Price: $148,228.85
zoning: commercial
Size of Tract: 47,984 s.f.
Unit Price: $3.09/s.f.
Sale No.: 1
Location: 1303 Eddy St., Hastings, MN
Legal: P.I.N.: 19-77300-102-05
Seller: IBI, Inc.
Buyer: E. Peterson
Date of Sale: November, 1991
Sale Price: $1,030,000
Zoning: commercial
Size of Tract: 55,651 s.f 35,183 s.f building
Unit Price: $40.90/s.f.
Comments: multi -tenant retail building, 1950's vintage
fl
Sale No.: 2
Location: 3020 145th Street West, rosemount, MN
Legal: P.I.N.: 34-03700-010-35
Seller: Bart Partners
" Buyer: D. Elling et al
Date of Sale: July, 1991
Sales Price: $112,000.00
Zoning: commercial
Size of Tract: 8,250 s.f. 2,239 s.f. building
Unit Price: $50.02/s.f.
Comments: concrete block building, one story, former
post office, renovated for use as real
estate office.
Sale No.: 3
Location: 14390-14410 S. Robert Trail, Rosemount, MN
Legal: P.I.N.: 34-03700-051-00
Seller: McRoberts
Buyer: Repairs Inc
Date of Sale: January 1989
Sales Price: $124,394.00
Zoning: commercial
Size of Tract: 17,930 s.f. 1,472 building
Unit Price: $84.51/s.f.
Comments: used as auto repair shop, wood and metal
constuction, reportedly acquired by City.
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CERTIFICATE OF APPRAISAL
ISAL
I do hereby certify that I have personally examined the
property described in this appraisal report.
I further certify that I have no present or contemplated
interest in the property appraised, and that neither my
employment nor the fee therefore was in any manner
contingent upon the estimate of value reported.
I have assumed the title of the property to be good and
merchantable and in the appraisal have disregarded any
liens, mortgages and all other matters legal in nature.
That my fee for this appraisal is in no way contingent
on a predetermined value, nor is there any obligation on
my part to testify in court on any matter pertaining
this property unless special arrangement is agreed upon
for such testimony.
The possession of this report or any copy thereof does
not imply the right of publication nor may the report be
used by anyone but the applicant without the consent of
the appraiser.
I have made the appraisal of the property in conformity
with the Uniform Standards of Professional Appraisal
Practice and Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 as I
understand them.
Malcolm B. Allen, Jr.
UNDERLYING ASSUMPTIONS AND CONTINGENT CONDITIONS
Findings, estimates, and conclusions in the appraisal
are made subject to the following assumptions and
conditions:
1. The Appraiser has neither present nor contemplated
future interest in the property appraised and his
employment is not contingent upon the conclusions
reported.
2. The Appraiser is not responsible for legal matters.
The title is assumed good and marketable. All
structures and improvements existing and proposed, are
assumed`to be in compliance with community zoning
ordinances and building code requirements. The
Appraiser does not guarantee that the property complies
with zoning or building code requirements.
3. Improvements described as "proposed" are considered
as though satisfactorily completed in substantial
conformance with plans and specifications.
4. Information in the report, though gathered from
sources believed reliable, is not guaranteed and is
subject to conformation. Confidential market data
documentations is in the office of the appraiser.
5. Consent of the appraiser is required to publish all
or part of the appraisal report. Expert testimony may
be obtained through special arrangements with appraiser.
6. Proper repairs, maintenance, and administration are
to be given the property by competent management.
7. Unless otherwise stated, the property is considered
free and clear of all indebtedness, except future
special assessment payments.
8. Except as may be otherwise noted herein, the
property is assumed to be free from any environmental
hazard, including asbestos and toxic waste. No
representation or warranty is made regarding the
presence or absence of such materials on the property.
QUALIFICATIONS OF APPRAISER
THE ALLEN COMPANY
2516 Fourth Avenue North, Anoka, Minnesota, 55303
PROFESSIONAL ORGANIZATIONS
National Association of Real Estate Boards
Minnesota Association of Real Estate Boards Anoka
County Board of Realtors, Past President
Minneapolis Board of Realtors
Multiple Listing Service
National Association of Independent Fee Appraisers
Anoka County Chapter of Independent Development
Course Planning Committee Industrial Development
Course
Series '500 at Anoka Ramsey Community College
GOVERNMENT CLIENTS _SERVED
Qualified and appeared as Expert Witnesses in
l District Court
1. Anoka County
2. Sherburne County
3. Chisago County
4. Washington County
Served as Condemnation Commissioner for District
Court, Anoka County, Minnesota, on matters of
Highway Right-of-way, utility easements, drainage
ditches, parks, etc.
APPRAISED FOR
Anoka Hennepin School District No. 11
Anoka County Park Department
Anoka County Highway Department
Anoka County Probate Court
City of Anoka
City of Coon Rapids
City of Fridley.
City of Spring Lake Park
QUALIFICATIONS OF APPRAISER
Continued
PRIVATE CLIENTS SERVED
St. Paul Sand and Gravel Company
Honeywell, Inc.
Anoka Abstract Company
Princeton State Bank
First National Bank in Anoka
General Motors Corporation
Mercy Hospital
St. Stephens Catholic Church
Art Goebel Ford, Inc
Greenberg Rambler
E. J. Baehr Oil Companies
Northern States Power Company
Murphy Service Insurance Company
Rural Power and Electric Cooperative
0
Malcolm B. Allen, Jr.
Owner of THE ALLEN COMPANY, engaged in real estate
and appraisal business since 1953.
EDUCATION
Received Juris Doctorate degree from University of
Denver College of Law, Denver, Colorado, 1983.
Received B.S.B.A. in business administration
University of Denver, Denver, Colorado, 1980.
PROFESSIONAL ASSOCIATIONS
Member, American Bar Association
Member, American Trial Lawyers Association
National Association of Independent Fee Appraisers
MARKET VALUE APPRAISAL
14540 Burnely Avenue
Rosemount, Minnesota
Prepared for
Mr. John Miller
Economic Development Coordinator
Rosemount, Minnesota
August 27, 1992
2516 Fourth Avenue North Anoka, Minnesota 55303
Malcolm B. Allen (1923 - 1989)
Malcolm B. Allen, Jr.
August 27, 1992
Mr. John Miller
Economic Development Coordinator
City of Rosemount
2875 145th Street West
Rosemount, MN 55068-0510
Dear Mr. Miller:
Real Estate Appraisal Service
(612) 421-4970
re: 14540 Burnely Avenue
Rosemount, Minnesota
Mrs. W. Klevator
As you requested, submitted herewith is our market value
appraisal report of the above referenced property.
Based upon an inspection of the property and after
careful consideration of the many factors that influence
value, it is our opinion that the market value of the subject
as of the effective date hereof is :
Fifty Five Thousand Dollars
($55,000.00)
We submit this appraisal report containing a description
of the property appraised, a summary of the definitions
relevant to the conclusions and a portion of the
calculations and analyses used in reaching the conclusions.
This report complies with the Uniform Standard of
Professional Practice of the Appraisal Foundation and is
subject to the assumptions and limiting, conditions contained
herein. Information relied on in this report was gathered
from sources believed to be reliable, but it is not
guaranteed.
Yours truly,
THE ALLEN COMPANY
Malcolm B. Allen, Jr.
TABLE OF CONTENTS
Page
Purpose .............................................. 1
Function ................. ..... .............. 1
Definition of Market Value ........................... 1
Just Compensation....... ...................... ... 2
Property Rights Appraised ............................. 3
Date of Valuation... ...... .................. 3
Legal Description .................... 3
Tax Data............ .... ............. .......... 4
Zoning ............................................... 4
Description of the Subject ........................... 4
Highest and Best Use ................................. 6
The Appraisal Process ................................ 7
Replacement Cost Approach ............................. 9
Income Approach.......... ........................... 13
Direct Sales Comparison Approach......... . 14
Conclusion and Final Value Estimate...... 18
Addenda
14540 Burnely Ave.
Rosemount, Minnesota
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the market
value of the subject property as of the effective date hereof
and subject to the conditions set out herein.
FUNCTION OF THE APPRAISAL
This appraisal is intended to assist the City of
Rosemount Port Authority in connection with the potential
acquisition of the subject property.
DEFINITION OF MARKET VALUE
Market Value, as used in this report, is defined as:
The most probable price in terms of dollars for which
the subject property would sell in a competitive market
under all conditions requisite for a fair, arms length
transaction, with the buyer and seller each acting
prudently, knowledgeable, and for self interest, and
assuming that neither is under undue duress.
Underlying this definition are the following
assumptions:
1. Both buyer and seller are acting in their own self
interest.
2. Both buyer and seller are fully informed about the
property and generally informed about the market
for that particular type of property.
3. The property has been exposed on the open market for
a reasonable time.
4. Payment is made in cash or by other financing
Page 1
14.540 Burnely Ave.
Rosemount, Minnesota
typically available in the market.
JUST COMPENSATION
It is our understanding that the Rosemount Port
Authority is intending to attempt to acquire the subject
property through negotiation. Given that the Authority is
endowed with the power of eminent domain, the following
discussion is included for informational purposes. The
constitutional concept of just compensation refers the amount
of remuneration that must be paid to a land owner when his
property is acquired or condemned for a public purpose. The
Minnesota Supreme Court has adopted the definition of the
United States Supreme Court in Olson v. United States, 292
U.S. 246, which defines "just compensation" as follows.
Just compensation includes all elements of value that
inhere in the property, but it does not exceed market value
fairly determined. The sum required to be paid the owner
does not depend upon the uses to which he has devoted his
land, but is to be arrived at upon just consideration of all
the uses for which it is suitable. The highest and most
profitable use for which the property is adaptable andneeded
or likely to be needed in the reasonably near future is to be
considered, not necessarily as the measure of value, but to
the full extent that the prospect of demand for such use
affects the market value while the property is privately
held.
In summary, the law adopts the concept that private land
owner are entitled to be paid the fair market value for their
property based upon its highest and best use when the
property is acquired for a public purpose. The concept of
Page 2
14540 Burnely Ave.
Rosemount, Minnesota
highest and best use is discussed further below.
PROPERTY RIGHTS APPRAISED
This report estimates the value of the fee simple
interest in the subject property. A fee simple interest is
"an absolute fee, -a fee without limitations to any particular
class or heirs or restrictions, but subject to the
limitations of eminent domain, escheat, police powers and
taxation. An inheritable estate."
A fee simple estate reflects complete ownership without
limitations and of potential infinite duration. It is the
largest estate recognized by the law.
DATE OF VALUATION
The value of the subject property was estimated as of
August 18, 1992, base upon economic and market conditions
then prevailing.
LEGAL DESCRIPTION OF SUBJECT PROPERTY
The subject property is legally described as:
Lot 4 and Lot 5, Block 5
Village of Rosemount
Dakota County, Minnesota
Page 3
14540 Burnely Ave.
Rosemount, Minnesota
TAX DATA AND ASSESSOR'S ESTIMATE OF VALUE
Taxes payable 1992 $651.44 (homestead)
Assessor's Estimate of Value
Land $18,000.00
Buildings $36,300.00
Total $54,300.00
ZONING
The subject property is currently zoned C-2, Community
Commercial District by the City of Rosemount zoning
ordinance. A copy of the relevant portion of the official
zoning map is included in the addenda. The ordinance states
that the C-2 district relates to downtown only, and is
intended to be a "diversified commercial center which offers
the full range of comparison goods, sales and services,
cultural and civic, entertainment, financial and offices and
public uses." Uses specifically allowed within this district
include professional and business offices.
DESCRIPTION OF THE SUBJECT
The subject of this appraisal consists of an older;
frame constructed single family residence situated on two
platted lots in the City of Rosemount, Minnesota. There is a
Page 4
14540 Burnely Ave.
Rosemount, Minnesota
newer detached two car garage to the rear of the home. The
primary structure is an older (approx. 1920 vintage) 1.5
story house. The house was reportedly moved to the site some
30 plus years age. The details of the structure are outlined
below.
The main floor contains approximately 576 square feet.
It has a living room with carpet and painted plaster walls.
This is the newest portion of the house as it has been
remodeled and a large picture window installed. The kitchen
has a vinyl floor, wallpaper, formica counter top, ceramic
back splash, double sink, electric range and oven, and a
refridgerator. The den is located in the rear of the first
level. It has a tile floor and a suspended accoustic tile
ceiling and panelling on four walls. The stairs leading to
the second level are located in this room.
The upper level has two bedrooms and a large bath. This
portion of the house is generally in poor condition and is
considered to be sub -standard as compared to current buyer
expectations. The bath is contained in what was previously a
bedroom. It has a tile floor, claw foot tub with no shower
and a stool and sink.
To the rear of the home is an enclosed entry portico.
The older portion of the home is constructed over a stone
foundation. It appears to be in sound condition. The gas
Page 5
14540 Burnely Ave.
Rosemount, Minnesota
fired forced air furnace and the electric water heater is
located in the cellar. The electric service and wiring have
been updated, but remains substandard as 60 amp fused
service.
The home has three tab shingles and the roof is in poor
condition. It has horizontal wood siding and combination
windows. Behind the house is a newer 24' x 24' detached
garage, with a smooth concrete floor, 4 panel overhead door
and hardboard siding. It is reportedly 3 years old.
The subject site has 110 feet of frontage along the east
side of Burnely Avenue and contains approximately 14,719
square feet as calculated from the half section map. Its
dimensions are depicted on the enclosed copy of the relevant
portions of the half section map in the addenda. No survey
of the site was provided nor examined.
HIGHEST AND BEST USE
The highest and best use for a property is that
reasonable and probable use which will yield the highest
present value of the property. It is that use, selected from
other reasonable, probable and legal uses, that results in
the highest value for the property.
Criteria for determining highest and best use include:
1. The use must be legal and in compliance with zoning
and building restrictions.
Page 6
14540 Burnely Ave.
Rosemount, Minnesota
2. The use must be within the realm of probability and
not merely speculative.
3. Demand for such use must exist.
4. The use must be profitable and provide the highest
net return from the property for the longest
possible time as compared to other likely uses.
In appraisal practice the concept of highest and best
use is the premise upon which value is based. Based upon the
foregoing, it is our opinion that the ultimate highest and
best use for the subject is for development in accordance
with its current zoning, possibly as part of an assemblage.
The current uses as a single family residence is considered
to be a viable interim use.
THE APPRAISAL PROCESS
The estimate of value in the appraisal process is
generally derived through three basic approaches to value,
the Cost Approach, the Income Approach and the Market Data
or Direct Sales Comparison Approach.
The Cost Approach is an appraisal that is based upon the
proposition that an informed purchaser would pay no more for
the subject property than the cost of producing a substitute
property with the same utility as the subject property. The
indication of market value in the Cost Approach is obtained
Page 7
14540 Burnely Ave.
Rosemount, Minnesota
by adding the estimated value of the land to the estimated
replacement cost of the improvements less any depreciation
accrued to the improvements.
The Income Approach yields an indication of value by
analyzing the subject property in terms of its ability to
produce a net annual income over its economic life. Value is
indicated by capitalizing the property's net annual income at
a rate commensurate with the risks of investing in the
property as compared with the rates of return available from
alternative investments.
The Market Data Approach, or Direct Sales Comparison
Approach, is based upon the principle of substitution, which
states "when a property is replaceable in the market, its
value tends to be set by the cost of acquiring an equally
desirable substitute property assuming no significant delay
in making the substitution."
The final analysis in the appraisal process is the
correlation and reconciliation of the value indications
yielded from the different approaches to value. This step
results in a single estimate of value for the subject
property based upon the value indications and the weight
accorded to each, the purpose and function of the appraisal
and the appraiser's expert judgement. Each of the appraisal
methods as applied in this appraisal are discussed in detail
Page 8
14540 Burnely Ave
Rosemount, Minnesota
below.
COST APPROACH To VALUE
The Cost Approach consists of four basic steps. First,
the value of the land is estimated as if it were vacant.
Second, the current replacement cost of the existing
improvements is estimated. Third, an estimate of accrued
depreciation to the improvements is made. Finally, the
summation of the land value and depreciated replacement cost
of the improvements yields the indication of value.
1. ESTIMATE OF LAND VALUE AS IF VACANT
The value of the subject site was estimated using the
market value approach. We have conducted a survey of land
sales which are comparable to the subject and as a result
have formed an opinion of market value for the site. While a
large, number of sales have been analyzed, only those
particularly relevant have been included herein.
These sales have been adjusted for items of difference
between the subject site and the sale. These include
variances for time of sale, size, topography, general
location, amenities, zoning, etc. Descriptions of the
adjustments made to the comparable sales are listed below.
Page 9
14540 Burnely Ave.
Rosemount, Minnesota
Adjustments
1. Financing. This adjustments eliminates the effects of
favorable/unfavorable financing arrangements as compared to
market conditions.
2. Date of Sale. This adjusts sales to current figures based
upon appraiser's judgement of the rate of appreciation of
land values in the vicinity.
3. Size. This adjusts for the general tendency of larger
parcels to sell for lower unit price than smaller prices.
4. Location. This adjustment accounts for differences in
the desirability of the area where the property is located.
5. Topography. This accounts for differences in land
contour, elevation and vegetation.
After an inspection of the site and careful consideration of
the many and varied uses to which it is adaptable, and
consideration of the factors that influence value, it is our
opinion, that the subject site, if vacant, has a market value
of $1.75 per square foot.
Indicated Value of Site if Vacant
14,719 s.f. @ $1.75/s.f. = $ 25,758.25
rounded to $ 26,000.00
Page 10
14540 Burnely Ave.
Rosemount, Minnesota
2. ESTIMATED REPLACEMENT COST OF IMPROVEMENTS
The cost to replace the existing improvements was
estimated in reliance on a national cost reporting service, a
local cost reporting system and comparison with actual local
construction costs.
Units Unit Cos Total
Basic Structure 1008 $62.28 $62,776
garage 576 11.82 6,808
Total estimated new cost $69,584
3. DEPRECIATION ANALYSIS
Depreciation is the diminution in value to any wasting
asset attributable to any cause. It accounts for the fact
that new structures typically enjoy certain advantages and
therefore value over older structures. Depreciation is
usually characterized as physical deterioration, functional
obsolescence or economic obsolescence. Physical
deterioration considers general wear of the structures
components and deferred maintenance. Functional obsolescence
accounts for deficiencies of style, design, or materials as
compared to new facilities. Economic obsolescence is caused
by factors outside the property such as changes in the
neighborhood or the present of off site undesirable
Page 11
14540 Burnely Ave.
Rosemount, Minnesota
influences.
In this case, the actual age of the structure is
approximately 70 years. Buildings of this type typically
enjoy a useful economic life of 50 years. Given the
maintenance and upgrading over the years, we have assigned an
effective age to the structure of 20 years. Based upon a
straight line analysis, it is indicated that the subject
improvements would have experienced 40 percent depreciation
attributable to physical causes.
Given the nature of the structure and its deficiencies
noted above, including the unusual bathroom arrangement,
cellar, it is our opinion that the subject suffers from some
obsolescence in terms of style and design as compared with
new similar use structures. We have attributed 20 percent of
new replacement cost to account for functional obsolescence.
Given the nature of the subject neighborhood, when considered
in conjunction with the highest and best use of the property,
we have concluded that it would be inappropriate to assign
any economic obsolescence to the subject.
summary of Depreciation
physical 60%
functional 20
economic
Is]
Page 12
14540 Burnely Ave.
Rosemount, Minnesota
Total
4. SUMMATION
Estimated New Replacement Cost
Total Estimated Depreciation (80%)
Depreciated cost of improvements
Plus Land Value
Indicated Value by Cost Approach
rounded to
80% ( $41,750 )
$69,584
(41,750)
$27,834
26,000
$53,834.00
$53,900.00
THE INCOME APPROACH
This appraisal technique indicates value by analyzing
the property's ability to generate income in terms of dollars
over a given economic life. Income producing property such
as shopping centers, motels and hotels, and apartment
buildings a typically purchased primarily for investment
purposes by investors desiring a return on their invested
capital. Therefore, the anticipated net income stream from
the property can be discounted at a given or determined rate
of return to indicate the value of the property.
In this instance, the subject property is used as a
owner occupied single family residence and is not therefore
producing an economic net income. In order to arrive a net
Page 13
14540 Burnely Ave.
Rosemount, Minnesota
income figure for the property, it would be necessary to
determine the current market rent for the subject. This
would be possible through a comparison of similar homes that
are rented in the market. However, given the highest and
best use of the subject as a commercial development property,
it is our opinion that the value indicated be such an
analysis would be of little or no value in arriving at a
final estimate of value. The second alternative would be to
calculate the cost of converting the subject into a facility
for use consistent with the highest and best use, estimate
its fair market rental value to determine its net annual
income and then capitalizing the income at an appropriate
rate of return. The procedure, while an accepted method of
indicating value, is somewhat contrived in this instance. In
this case, the likelihood of the subject improvements being
converted to a commercial/office use is remote at best. In
our opinion, this procedure -would not add to the validity or
certainty of the value conclusions reached herein. For the
reasons outlined herein, this report will not rely on the
Income Approach to estimate the value of the subject
property.
THE DIRECT SALES COMPARISON APPROACH
The Market Data or Direct Sales Comparison Approach is
Page 14
14540 Burnely Ave.
Rosemount, Minnesota
essential in almost every real estate appraisal. The value
estimated by this analysis is defined as "the price at which
a willing seller would sell and a willing buyer would buy,
neither being under abnormal pressure to act." This assumes
that both buyer and seller are fully informed about the
property, and both have general knowledge of the market for
that type of property and assumes that the property has been
exposed for sale in the open market for a reasonable time.
It is premised on the assumption that an informed buyer would
pay no more for the subject property than the cost of
acquiring an equally desirable and functional substitute.
Therefore, sales of properties with similar characteristics
and utility are usually good indicators of value for the
subject property.
We have conducted a survey of sales of property in the
vicinity of the subject. Details regarding the most
pertinent are included herein. The sales reported are of
transactions involving single family residences in the area
considered to be comparable to the subject. Our research
revealed no sales of single family homes situated on
commercial sites considered to be ripe for development such
as the subject. Therefore, in addition to making the typical
adjustments for material differences, we have adjusted the
comparable sales to account for the additional site value
Page 15
14540 Burnely Ave.
Rosemount, Minnesota
considered to exist in the subject. Additionally, we have
make adjustments to the comparable sales to account for
material differences in terms of time of sale, financing,
size, location, amenities and other factors that influence
value.
The adjustment grid included below outlines the
adjustments applied to the comparable market data to indicate
the value of the subject by this method. As can be seen, due
to the somewhat unique nature of the property in this market,
sever adjustments were necessary to the comparables. In a
typical residential appraisal, adjustments of this magnitude
would be unacceptable. Here, they are indicative of the
uniqueness of the property, while indicating that the other
appraisal techniques employed should be given greater weight
in the final reconciliation.
The comparable sales selected represent sales of single
family residences within what is considered to be the greater
downtown Rosemount area. They were selected for comparison
based upon their selling price, locations, and relatively
similar amenities. As can be seen, an adjustment has been
made to each sale to account for the value differential of
the subject's commercial site. The size adjustments are made
at the rate of 1/3 of the unit sale price for each comparable
sale. Adjustments for age and condition differential range
Page 16
14540 Burnely Ave.
Rosemount, Minnesota
from 18 to 25 percent of the sale price. This differential
is beyond what is normally desired. Again, this is
indicative of the unique situation presented by the subject
property.
ITEM
SUBJECT
COMPARABLE #1
COMPARABLE #2
COMPARABLE #3
Address14540 Burnely Ave.
Rosemount MN
14600 Cameo Ave.
Rosemount MN
14855 Dallara
Rosemount MN
14795 Cambrian Ave.
Rosemount, MN
Proximity to Subi.
Sales Price
Closing Date
Data Source
3 blks
$ )9,0001$72,900
!/92
MLS
4 blks
MLS
3/92
4 blks
ML S
$ 74, 000
3/92
Market Change:
Coraaa to ►speeban Daw
DESCRIPTION
DESCRIPTION + I'> S
Adjustment
DESCRIPTION
+ I"� $
Adjustment
DESCRIPTION
+ I $
Adjustment
,
Sales or Financing
Concessions
1kation
commercial
residential ' +12000
residential ;+12000
residential
;+12000
'view
RR tracks
res./averes/
ave
res/ave
Ext. Design/Appeal
1.5 sty/wood
1.5 st /wood
s It/HBM
ramb./shake
Quality of Const
ave
ave
ave
ave
Ave
older
older/remod. I-6900
1980
1 -14580
1960
; -14800
Condition
fair
ave -4140
ave
-4374
ave
-4440
Int.Appeal/Decor
fair
ave -690
ave
-729
ave
t -740
Total Rooms
Above Grade
And Gross
Living Area (GLA)
Rms ; 5 B-rms ! 2
Rms 4 1 B -,ms: 2 i
Rms !} B-rms
2 i
Rms 5 B-rms 2
----------- ----------- ------------
Baths: 1 Baths: 1 i Baths: 1 i Baths: 1 i
1008 sq. ft 1400 sq. ft. — ------ ------- ------ ----------
I 6444 816 sq. ft. ;+5718 960: sq. ft.;+1233.
Basement Area
Finished Rooms
cellar
921 sf fin. ; -9210
full
; -7500
full/250s.f
f -3500
Functional Utility
fair
fair
fair
fair
Air Conditioning
n a
window
central
-2500
central
l-2500
Car Storage
2 det.
3 det. 1-1500
2 att
1 -1500
1 det.
1+1500
Decks, Patios
Pools, etc.
n/a
porch ; -500
;
patio
;-500
- Special Features (e.D.,
WWW
4epft%kacren
re.et
,
,
oak floors
amm
-3000
Other
Forecasting
Net Adj. (Total)
A*mW Sam ice
Describe other.
.; � m
x-` 38
$ 51,616
>., ;. �
X t _
$ 59 -41;
X
�.
$ 59,253
Page 17
14540 Burnely Ave.
Rosemount, Minnesota
We consider Comparable Sale Number One to be the best
indicator of value in this analysis. Therefore, it has been
given the greatest weight in reconciling the value
indications. Based upon the foregoing, its is our opinion
that the data presented here indicates the value of the
subject by direct sales comparison to be:
$55,900.00
RECONCILIATION AND FINAL VALUE ESTIMATE
The final step a real estate appraisal is the
reconciliation of the value indications derived from the
various appraisal techniques applied to reach a single
estimated value for the subject property. In this appraisal
report, we have applied two generally accepted appraisal
methods. These techniques indicated the following values for
reconciliation:
Replacement Cost Approach
Direct Sales Comparison Approach
Income Approach
$ 53,900.00
$ 55,900.00
not applicable
Page 18
14540 Burnely Ave.
Rosemount, Minnesota
The Replacement Cost Appraoch indicates value by
estimating the cost to replace the subject improvements,
subtracting an appropriate amount of depreciation, and adding
the land value when considered as vacant. The replacement
cost of the subject was estimated using a national
construction cost reporting service, in conjunction with a
local cost estimating service. Depreciation was factored
based upon the age, condition and utility of the structure.
The land value was determined based upon analysis of land
sales of comparable tracts of land in the market place.
Typically, the Cost Approach is given little if any
consideration when evaluating a single family residence. It
is our opinion that potential pruchasers of homes give little
consideration of this analysis when making a purchase
decision. In this instance, given the highest and best
use for the subject, the Cost aprroach becomes more relevant.
In this case, the depreciated value of the improvements
indicated can be considered as an added benefit to the
property, providing a built in, profitable, interm use for
the site pending utilization in accordance with the
commercial highest and best use. Therefore, this approach is
given more consdieration in the final analysis than it would
if the subject were a typical residential property.
Page 19
14540 Burnely Ave.
Rosemount, Minnesota
The Direct Sales Comparison Approach indicates value by
comparing the subject with other similar properties that have
sold under circumstances attendant an arms length sale. The
validity of this appraisal method is related directly to the
quality of the market data available for comparison. In this
appraisal we have relied on three sales of single family
residences in the greater downtowm Rosemount area., These
sales were adjusted for, inter alia, the perceived commercial
value of the subject site. No sales absolutely comparable to
the subject were discovered. given the large adjustments
necessitated by the unique nature of the subject, and its age
and condition, this approach was given less weight in
arriving at the final estimate of value for the subject.
Based upon the foregoing, and after careful
consideration of the many factors that influence value, it is
our opinion that the fair market value of the subject
proeprty as of the effective date hereof is:
FIFTY FIVE THOUSAND DOLLARS
($55,000.00)
Page 20
5
r i
'
I� T
r
14540 Burnely Ave.
Rosemount, Minnesota
Page 22
CERTIFICATE OF APPRAISAL
I do hereby certify that I have personally examined the
property described in this appraisal report.
I further certify that I have no present or contemplated
interest in the property appraised, and that neither my
employment nor the fee therefore was in any manner
contingent upon the estimate of value reported.
I have assumed the title of the property to be good and
merchantable and in the appraisal have disregarded any
liens, mortgages and all other matters legal in nature.
That my fee for this appraisal is in no way contingent
on a predetermined value, nor is there any obligation on
my part to testify in court on any matter pertaining
this property unless special arrangement is agreed upon
for such testimony.
The possession of this report or any copy thereof does
not imply the right of publication nor may the report be
used by anyone but the applicant without the consent of
the appraiser.
I have made the appraisal of the property in conformity
with the Uniform Standards of Professional Appraisal
Practice and Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 as I
understand them.
Malcolm B. Allen,Jr.
UNDERLYING ASSUMPTIONS AND CONTINGENT CONDITIONS
Findings, estimates, and conclusions in the appraisal
are made subject to the following assumptions and
conditions:
1. The Appraiser has neither present nor contemplated
future interest in the property appraised and his
employment is not contingent upon the conclusions
reported.
2. The Appraiser is not responsible for legal matters.
The title is assumed good and marketable. All
structures and improvements existing and proposed, are
assumed to be in compliance with community zoning
ordinances and building code requirements. The
Appraiser does not guarantee that the property complies
with zoning or building code requirements.
3. Improvements described as "proposed" are considered
as though satisfactorily completed in substantial
conformance with plans and specifications.
4. Information in the report, though gathered from
sources believed reliable, is not guaranteed and .is
subject to conformation. Confidential market data
documentations is in the office of the appraiser.
5. Consent of the appraiser is required to publish all
or part of the appraisal report. Expert testimony may
beobtainedthrough special arrangements with appraiser.
6. Proper repairs, maintenance, and administration are
to be given the property by competent management.
7. Unless otherwise stated, the property is considered
free and clear of all indebtedness, except future
special assessment payments.
8. Except as may be otherwise noted herein, the
property is assumed to be free from any environmental
hazard, including asbestos and toxic waste. No
representation or warranty is made regarding the
presence or absence of such materials on the property.
QUALIFICATIONS OF APPRAISER
THE ALLEN COMPANY
2516 Fourth Avenue North, Anoka, Minnesota, 55303
PROFESSIONAL ORGANIZATIONS
National Association of Real Estate Boards
Minnesota Association of Real Estate Boards Anoka
County Board of Realtors, Past President
Minneapolis Board of Realtors
Multiple Listing Service
National Association of Independent Fee Appraisers
Anoka County Chapter of Independent Development
Course Planning Committee Industrial Development
Course
Series 500 at Anoka Ramsey Community College
GOVERNMENT CLIENTS SERVED
Qualified and appeared as Expert Witnesses in
District Court
1. Anoka County
2. Sherburne County
3. Chisago County
4. Washington County
Served as Condemnation Commissioner for District
Court, Anoka County, Minnesota, on matters of
Highway Right-of-way, utility easements, drainage
ditches, parks, etc.
APPRAISED FOR
Anoka Hennepin School District No. 11
Anoka County Park Department
Anoka County Highway Department
Anoka County Probate Court
City of Anoka
City of Coon Rapids
City of Fridley
City of Spring Lake Park
QUALIFICATIONS OF APPRAISER
Continued
PRIVATE CLIENTS SERVED
St. Paul Sand and Gravel Company
Honeywell, Inc.
Anoka Abstract Company
Princeton State Bank
First National Bank in Anoka
General Motors Corporation
Mercy Hospital
St. Stephens Catholic Church
Art Goebel Ford, Inc..
Greenberg Rambler
E. J. Baehr Oil Companies
Northern States Power Company
Murphy Service Insurance Company
Rural Power and Electric Cooperative
Malcolm B. Allen, Jr.
Owner of THE ALLEN COMPANY, engaged in real estate
and appraisal business since 1953.
EDUCATION
Received Juris Doctorate degree from University of
Denver College of Law, Denver, Colorado, 1983.
Received B.S.B.A. in business administration
University of Denver, Denver, Colorado, 1980.
PROFESSIONAL ASSOCIATIONS
Member, American Bar Association
Member, American Trial Lawyers Association
National Association of Independent Fee Appraisers
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