Leeds Long Term Care appraisal as-is going concernAPPRAISAL OF AS -IS GOING CONCERN
<SUMMARY REPORT>
OF
222 River Rd, Leeds, MA
(aka HAMPSHIRE CARE)
Prepared for
Date of Appraisal
Date of Written Report
Pennington Geis
HAMPSHIRE CARE
222 River Rd
Leeds, MA
10/15/2008
11/15/2008
APPRAISED BY
Kitchell Lee MAI CCIM
BCI Appraisal /Berkshire Cascade
108 Main St
Shelburne, MA 01370
MA CERTIFIED-GENERAL REAL ESTATE APPRAISER: 4280
CT CERTIFIED GENERAL REAL ESTATE APPRAISER: RCG.0000884
This appraisal report is prepared for the sole and exclusive use of Hampshire Care to assist with the
divesture related decision. It is not to be relied upon by any third parties for any purpose whatsoever.
11/15/2008
Pennington Geis, Administrator
1 Care
222 River Rd
Leeds, MA
RE: Hampshire Care
222 River Rd
Leeds, Hampshire County, MA 01053
Dear Ms Geis:
I am transmitting the summary report of my appraisal of the estimated market value of
the As -Is Going Concern per hypothetical condition for the reference parcel of real
estate as of 10/15/2008. This report sets forth my value conclusion, along with supporting
data and reasoning.
The value opinion reported is qualified by certain definitions, limiting conditions, and
certifications which are set forth in this report. This appraisal was performed in
accordance with and subject to the requirements of the USPAP (Uniform Standards of
Professional Practice), the Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
This appraisal may not be distributed to or relied upon by other persons or entities
without my written permission.
The property was inspected by me, and the report was prepared by me, Kitchell Lee. If
you have any questions concerning the report, please contact me at (413) 625 -6287
Best Regards,
Kitchell Lee MAI CCIM
108 River Rd
Shelburne Falls, MA 01370
2
TABLE OF CONTENTS
INTRODUCTION
EXECUTIVE SUMMARY 4
CERTIIICATION OF VALUE 5
ASSUMPTIONS LIMITING CONDITIONS 6
SCOPE OF APPRAISAL 7
FACTUAL DESCRIPTIONS
IDENTIFICATION HISTORY OF THE PROPERTY 8
AREA ANALYSIS 8
TAX AND ZONING 12
SITE IMPROVEMENTS 13
ANALYSIS OF DATA VALUATION
HIGHEST BEST USE 15
COST APPROACH 16
SALES COMPARISON APPROACH 16
INCOME CAPITALIZATION APPROACH 26
RECONCILIATION 43
ADDENDA
QUALIFICATION OF THE APPRAISER 44
3
3
4
4
h;XECCPFIVE SUMMARY
OWNER Hampshire County Regional Council of Government
LOCATION 222 River Rd
Leeds, MA Hampshire County
PROPERTY TYPE
DATE OF VALUE
ESTIMATE
FINAL VALUE
Nursing home
10/15/2008
PROPERTY RIGHTS As -is going concern per hypothetical condition
APPRAISED
SITE: as -is 106.2 acres
per Hypothetical Condition 6 acre site nursing home
IMPROVEMENT Masonry structure
ZONING RR: rural residential, Legally Non conforming use
ASSESSED VALUE $2,716,200 (05- 001 -001) Taxable
(Map /Lot) $5,303,500 (05- 001 -304) Non taxable
REAL ESTATE TAX $30,421
(Tax rate) $11.20/1000
EPA HAZARD Not known, not an enviroiunental engineer.
FLOOD ZONE Above 100yr flood zone
CURRENT USE Nursing home
DEED (Book/Page) 0697/161 Hampshire County Reg of Deeds
HIGHEST BEST USE As -Is Skilled Nursing Facility
APPROACHES TO VALUE:
COST APPROACH NA
SALES COMPARISON $3,776,000
INCOME APPROACH $3,809,000
$3,776,000
CERTIFICATION OF V ,�11, t 11?
I certify that, to the hest of my knowledge and belief:
1. The statements of fact contained in this report arc true and correct.
2. The reported analysis, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, unbiased professional analyses,
opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report, and
I have no personal interest or bias with respect to the parties involved.
4. My compensation is not contingent upon the reporting of a predetermined value or direction
in value that favors the cause of client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event resulting from the analysis,
opinions, or conclusions in, or the use of this report.
5. My analysis, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the Uniform Standards of Professional Appraisal Practice.
6. I have made a personal inspection of the property that is the subject of this report.
7. No one provided significant professional assistance to the person signing this report.
Certify to the all of above
by
Kitchell ee IMIAI
l/
r
Date
5
ASSUMPTIONS AND LIMITING CONDITIONS
I. No responsibility is assumed for the legal description or for matters including legal or title considerations 'Title to
the property is assumed to be good and marketable unless otherwise stated.
2 The property is appraised free and clear of any and all liens or encumbrances unless otherwise staled.
3. Responsible ownership and competent property management are assumed.
I. The information furnished by others is believed to be reliable. I lowever, no warranty is given for its accuracy.
5. All engineering is assumed to be correct if relevant to this report. The plot plans and illustrative material is in this
report are included only to assist the reader in visualizing the property.
6. It is assumed that there are no hidden or unapparanl conditions of the property, subsoil, or structures that render
the property to be more or less valuable, No responsibility shall be assumed for such conditions or fur arranging
for engineering and /or architectural studies that may be required to discover them.
7. It is assumed that there is full compliance with all applicable federal, state, anci local
environmental regulations and laws unless noncompliance is stated, defined, and considered in this appraisal
report. Any discovery and subsequent notice to the appraiser of such non compliance is a sole responsibility of the
client.
8. It is assumed that all applicable zoning and use of regulations and restrictions have been complied with, unless a
nonconformity has been stated, defined, and considered in the appraisal report.
9. It is assumed that all required licenses, certificate of occupancy, consents, or 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. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the
property described and that there is no encroachment or trespass unless noted in the report.
I I. The distribution, if any, of the total valuation in this report between land and improvements applies only under the
stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with
any other appraisal and are invalid if so used.
12. The possession of this report, or a copy thereof, does not carry vvith it the right of publication.
13. The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in
attendance in court with reference to the property in question unless arrangements have been previously made.
14. 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.
15. Unless stated otherwise in this report, the existence of hazardous materials and toxic substances were not observed
by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The
appraiser is not qualified to detect such substance. No responsibility is assumed for any 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.
16. ADA Americans with Disabilities Act) became effective January 26, 1992. Although a visual survey has been
made, this appraiser is not qualified to determine whether it is in conformity with the various detailed
requirements of the ADA. Since 1 have no direct evidence relating to this issue, I did not consider possible non-
compliance with the requirements of ADA in estimating the value of the property.
17. Per agreement with the client, the subject shall be valued as -if the subject's site is 6 acres and this appraisal shall
not consider the remaining acreage.
18. Per agreement with the client, the subject shall be appraised as -is going concern value.
19. It is assumed the subject's water and sewage system are in compliance and acceptable per state and municipal
codes and standards.
20. It is assumed no secondary detached building improvements shall be considered in this appraisal.
Bound by the all of the above assumptions and limiting condition
Kitc ell Lee MAI
/Al a
Date
6
6
SUBJECT:
FRONT VIEW
SOUTH WING: REAR
FRONT ENTRANCE
FRONT ENTRANCE: INTERIOR
WEST WING
REAR: CHILLER BOILER ROOM
MAINTENANCE GARAGE
EAST WING:REAR
INSTITUTIONAL KITCHEN
DNING ROOM/FUNCTION HALL
HALLWAY OF A WING
REHAB ROOM
NURSE STATION
SINGLE BED ROOM
2 BEDS /ROOM
OUTSIDE GROUND
SCOPE OF APPRAISAL
Appraisal is the process of estimating a value. First, the problem of the appraisal has to he
defined. Then the data related to the problem has to be collected and processed. These are then
analyzed and interpreted to derive a value.
PROPERTY RIGIITS APPRAISED
The property right being appraised in this report is the fee simple As -is Going Concern Value
per client's instruction. The subject shall be appraised as -if it is on 6 acre site per hypothctical
condition agreed by the client. (See #17 &18 Assumptions and Limiting Conditions). No
secondary improvements like an deteriorated nurse's residence or camp structures shall be
considered.
DATA COLLECTION& COMPETENCY:
The subject's data was obtained from site visits and interviews with the direct and indirect market
participants. Also the assessor's property cards and deeds at the Registries of Deeds were
examined. The data of comparable sales, leases and other significant facts were obtained from
Warren Group, MLS, RERC, assessors' property cards, brokers, the area building owners, and
the state government (DHCFP DHCQ) officials. This appraiser has previously done similar
type valuation research and has done extensive research into the industry journals and literatures.
DATA ANALYSIS AND VALUE ESTIMATION:
The above collected data was synthesized to conduct the appraisal of highest and hest use
analysis, client's request and three approaches to the value. The analysis was conducted with the
help of Microsoft Excel 2003 and verified with HP 19BII calculator.
PURPOSE AND USE OF THE APPRAISAL
The purpose of this appraisal is to arrive at a market value of the subject's property as As -is going
concern per hypothetical condition and the extraordinary assumption (17, 18, 19 20 of the
above). It will be used for the owner's divesture proceeding.
TYPE OF APPRAISAL AND REPORT
This appraisal report is a summary report in conformance with the USPAP standard. The
appraisal was conducted as a full appraisal. Additional supporting data and analysis relevant to
this appraisal is on file in this appraiser's office.
DATE OF VALUE ESTIMATION
The effective date of the valuation is 10/15/2008
DEFINITION OF VALUE
The value of this appraisal is a market value. This is defined in as:
the Market value means the most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit
in this definition is the consummation of a sale as of a specified date and the passing of title from
seller to buyer under the conditions whereby:
7
1. buyer nrld.seller area typically motivated;
2. bath parties 11r e well irl /armed or n('1/ uch i.src/ aril acting in what they c•ansic/er their cnrn hrsl
interests;
3. a reasonable time ts. al /owed far exposure al the open market;
4. payment is made in terms of cosh in US. dollars or in terms of /inanciol arrangements comparable
thereto; and
5. the price represents the normal con.sidercitiwn f r the property sold unaffected by .special or creative
financing or sales concessions granted by anyone associated with the .sale.
(USPAP 2005 P210)
This definition will be applicable for federally related transaction in reference to FIRREA of
1989.
EXPOSURE TIME THE MARKETING 1-IISTORY OF THE SUBJECT
The exposure time prior to this appraisal date is 1.0 year based on the market analysis.
According to the client, the property is not actively marketed by a broker, nor is it listed in MLS.
However it is to be considered for a divesture by the Hampshire Regional Council of
Government.
IDENTIFICATION OF PROPERTY
Same as listed in the Executive Summary
HISTORY OF PROPERTY
The subject was originally acquired by the county for a TB retreat center in early 1900s. The
present nursing home was built circa 1972. It was managed by the administrator under the
supervision of the Hampshire County government which has evolved as Hampshire County
Regional Council of Government (COG). The improvement has been maintained and no
significant modification or renovation have been done. At present COG plans to divest the
property.
AREA ANALYSIS
The subject is in the village of Leeds within the City of Northampton, Massachusetts, 2+ hours
west of Boston and 30 minutes north of Springfield. The town is one of the 23 towns of
Hampshire County which borders Franklin, Berkshire and Hamden County. The population of
the county is 152,251. (2000 Demographic USA). The largest towns are Northampton(28,978)
Amherst (34,874) and Easthampton (15,994). The rest are smaller towns and rural hilltowns.
(See the Map, Attached)
Below are some comparative economic data_for the surrounding towns. (2006 PVPC)
8
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MAPtVEST
0 1999 MapQuest.corn, Inc.
POWERSTREETS
flied (lousing /'rice Ailed Household Incw w
HAMPSHIRE COUN'T'Y 225,000 55,530
Northampton 247,500 51,258
Easthampton 225,000 53,711
Hatfield 250,000 49,835
Hadley 244,000 64,793
Amherst 270,500 46,293
S Hadley 225,000 56,141
The City of Northampton is located in the middle of the county along the Connecticut
River. I -91 provides north south traffic. MA Turnpike is 15 minutes away which provides
east -west traffic. There is an interstate bus system as well as regional PVTA system that
connects to other towns. Hartford Bradley airport is 45+ minutes away. (Sec the Map,
Attached)
The city has a population of 28,978 (PVPC 2006). The land area is 37.7 sq. miles. It is the
county seat. In 50s and 60s, the city had a strong industrial base. However by 70s it was
transformed to 'arts town in America." It has significant downtown retail mix with professional
offices. Smith College is located at the city and provides a cultural influence.
This service oriented economic base is reflected in the PVPC data:
O
EMPLOYMENT NUMBER %OF COMMUNITY TOTAL
Manufacturing 3112 8.6%
Arts, entertainment Rec 2244 6.2%
Whole sale retail 2,163 6.0%
Healthcare &Social Assist 4844 13.4%
Services 21,744 60.2%
According to PVPC, "Northampton maintains an attractive mix of industry, retail, culture,
service, education and quality of life which has contributed to its becoming a popular place to
live and work."
NEIGHBORHOOD MARKET ANALYSIS
The subject is in the Village of Leeds, located in the western part of Northampton in the rural
area. Primarily it is residential mixed with few light manufacturing. Other wise there are large
tracts of woods, farms, reservoir and streams.
River Road follows the Mill River on one side and a hillside on the other. There is a limited
potential for a commercial development in the immediate surrounding. It is in the isolated rural
neighborhood which was an ideal for the TB clinic of the past.
9
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LEEDS/NORTHAMPTON
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5
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POWEBSTREETS
There are two major hospitals nearby, VA I Iospilal in Florence and Cooley Dickenson l lospital
toward Northampton center. Valley Medical Group also has a facility in Florence. They do
provide the referral to the nursing honks.
Below are the nursing homes and the related facilities in Northampton:
Yr Built Reel traits Residents Occupancy Assessment
1 lampshire Care 1972 120 1 1 1 93% $8, I 1 I, 150
Calvin Coolidge 1971 125 114 91% $4,350,290
Linda Manor 1989 123 115 93% $5,615,000
Northampton Rehab 1971 166 140 84% $4,152,000
TOTAL 534
The subject and three others arc the major skilled nursing facilities in the Northampton areas.
The total available beds are 534.
There are rest homes and a retirement community that has nursing beds. However they are not
full skilled nursing facilities where the patients are given continuous care. Below is the list.
Yr Built Bed units Residents Occupancy Assessment
River Valley Rest Horne 1829 24 NA NA $503,300
Lathrop Homes 1930 39 NA NA $1,491,800
Rockridge Retirement 1970
2004 39 NA NA
(Assessed value includes 12 cottages and 30 apartments) $8,431,900
TOTAL 102
DEMOGRAPHICS:
Due to the aging of the Baby Boom generation, US population of 65 or older is projected to
grow from 12.6% in 2007 to 14.55% in 2015 and to 18.2% in 2025.
Below is the past data of the population 65 years and over: (US Census Bureau)
1990 2000 change
US 31,241,831 34,991,753 12%
Northeast 6,995,156 7,372,282 5.4%
MA 819,284 860 5.0%
According to the Center for Studying Health System Change, "the impact of Baby Boomer
driven will not he immediate." They project the utilization of inpa.ticnt will bz on)y.0.7% /year
increase over the next decade. (4/3/06)
This is due to the shifts in new technology as well as the Boomers' relative goocl health. Alliance
for Aging Research stated that "reaching 65 these days is by no means what it was to reach 65 in
the 1950s. It's just a generally far healthier population."
10
10
However the increase demand for lung -term health care services arc inevitable. According to
Standard I'uui Industry analysis. 85 and older is the "fastest growing segment oldie 1.1S
population." Also the numbers of the nursing home beds per 1000 people aged 65 or older fell
from 45.5 in 2007 to /17.0 in 2006 while the occupancy rate rose slightly from 8=1.6% to 81.7°/,.
(Managed (.arc Digest /S &1' 2008)
MARKET SLGMEN'I':
In order to assess the demand potential for the subject type facilities, the age 67 and older
demographics are narrowed to the adjoining towns of Northampton. Below is the table: (US
Census 2000)
(Census 2000)
55yrs- 64rrs 6 yrs c.r'• over
Northampton 2209 3644
Easthampton 1261 2059
Hatfield 341 489
Southampton 515 473
Williamsburg 227 284
Whately 236 181
Worthington 147 123
Westhampton 147 110
Chesterfield 111 101
Cummington 89 96
Goshen 115 90
TOTAL 5398 7650
There are three methods to forecast the population of 65 older in 2010. First is to apply 5%
change stated in the above table (for MA) between 1990 -2000. If this is applied to 67 yrs
older, the population is projected to be 8032 in 2010.
Second is to apply 14.55% for the national long term forecast provided by the Census Bureau for
2010. The result is 8759.
The third is based on the Census 2000 Summary File I. The mortality ratio for the 65 -74 year
group in 1990 transitioning to 75 -84 age group in 2000 is 9.32 (75 -84 yr group to 85 -94 is
61
It is assumed that 7650 of 67 years older (Yr 2000) will be subjected to the similar ratio 10
years later in the year 2010. This resulted in 6937.
Also 5.5 -64 age -group (in 2000) will be 65 =74 age in 2010 assuming there is 00 significant
mortality rate.
Under this assumption, the total population for the 65 years and older is estimated at 12,335.
Based on the above analysis, the projection of 65 years and older in Northampton area in 2010
falls within 8032 to 12,335.
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hHayd'enville
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Unpaved or
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Meadow Brook
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er
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POWERSTREETS
ZONING
RR- Rural Residential
The subject is a pre- existing use and is therefore legally non- conforming.
CONCLUSION:
The total suppl or the subject type facility in the primary market is 534 beds. Considering the
increasing aging population in 2010, there should be adequate demands For nursing homes and
skilled nursing facility in near future. This is exemplified by the occupancy rate of the subject
nursing market higher than the 2007 national average of 84.7% (S &P Industry Survey) and the
median at 88.6% (ahca 2008)
TAX AND ASSESSMENT
FY 08 I'Y 07 FY 06
Tax Rote: 11.20 10.89 1 1 .73 (per 1000)
fl ssessmenu
taxed 2,716,200 2,716,200 2,716,200
exempt 5,394,950 5,394,950 5,394,950
Tax Amount 30,421 29,579 31,861
%Change 3%
According to the assessor, the subject is primarily taxed on the land. The building improvement
as a nursing facility is exempt like a hospital.
Permitted Use- residential, day care, municipal facilities, agriculture.
Not Permitted- lodging house, halfway house, fraternities, dormitories, townhouses, 3+ story
multi family, most community facilities (maybe special permit), most
commercial or industrial
Density Reg:
Min lot- 40,000 sf (nursing home- 70,000+ sf plus 1000 sf /bedroom)
Min frontage- 175 feet
Min depth- 200 feet
Set backs- 40' front/20' side /50' rear
Max Bld height- 35'
Max Bld coverage- 15%
Min open space- 80%
According to Northampton Planning official, a nursing home is allowed per Special Permit. Any
construction after a demolition, as an assisted living facility or a new nursing home, will require
a Special Permit.
12
PED
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SURROUNDING TOWNS
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SITE ANALYS
The topography of the subject is hilly but has a plateau tivhere the nursing home is located.
The access is from the two drive ways from the River Road and is steep but levels out at the
plateau.
PHYSICAL:
Frontage
Area
Shape
Topography.
Drainage
UTILTITES:
Water
Sewer
Electric
Telephone
Cable
1,550+ feet along the River Road
106.2 acres total (per assessor's record), 6 acres per hypothetical
condition
Irregular
1 -Iilly with flat area at the top, steep along River Road.
Adequate for the hypothetical subject of 6 acres
City water with water tower
City
WMECo
Verizon
Comcast
IMPROVEMENTS Paved parking and street.
FLOOD PLAIN FEMA Flood Insurance Rate Map: 250167 0001 4/3/1978
Not in the flood zone
CONCLUSION: The subject's site is secluded and has no retail potential. It is remote. The
poor access to major highway makes it undesirable as industrial use. Because of the topography,
there is a limited subdivision potential. The subject type use could be appropriate.
IMPROVEMENT
BUILDING:
Yr Built
GLA
1972
53,575 sf
Nursing wings- 26,730 sf Office, cafeteria support- 26,845sf
Bed Units 120 total, 2 beds /room- 15 rooms/ wing, 1 bed /room- 6 rooms /wing
Design Central hub- administration offices, dining, kitchen, mechanical, laundry,
maintenance garage.
East Win; short term nursing with nursing station and rehab unit
South and West Wing -long term nursing with nursing station
Construction Masonry and steel
Roof Rubber membrane, 201. yrs old
l;xtcrior Wall Brick, glass and concrete Hoek
interior Wall Dry wall, painted blocks,
Floor
Electric
Plumbing
IIVAC
Vinyl and resilient flooring
2500 amp 120/208 V, back -up generator, fire alarm system
Central baths per each wing, mostly half bath /room, some full bath /room.
Wet sprinklers, pressure boosted by 130,000 gallon water tower (120')
ft has the town sewer.
2 Weil McClain institutional boilers 36 years old, 6000 above ground tank
Central AC with a recent Carrier chiller.
14
pR
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old Y-
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Name: EASTHAMPTON
Date: 11 /15/2008
Scale
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Location: 042° 21' 52.3" N 072° 42' 30.6" W
Caption: SUBJECT TOPOGRAPHY
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HIGH EST AND BEST USE
The market value ofa property must consider the most profitable and competitive use of the
subject. This is done in the Highest and Best Use Analysis. Basically Blur fundamental issues
arc examined: a property use being physically possible, legally permissible, financially feasible,
and maximally productive. The underlying economic principles of this analysis are supply and
demand, substitution, balance, and conformity.
The highest and best use of the subject per hypothetical condition and the extra ordinary
assumption is as -is on -going use on 6 acre lot.
15
15
HIGHEST AND BEST USE;
The subject is presently legally non- conforming Nursing home. Any change of use has to be done
through a special permit by the town zoning officials. Per hypothetical condition the site is large
enough for the present use as a nursing home. The building foot print is adequate for the present
use.
'HIE VALUATION PROCESS
S(:OI'F OF ANALYSIS
There arc three approaches in the valuation process: cost, sales comparison and income
capitalization. "Typically the Cost Approach is used first, then the Sales Comparison Approach,
and Finally Income Capitalization Approach. At the end Reconciliation is made to arrive. at the
final value of the subject.
"Ile subject is not a special use improvement nor a new construction. The building 96 years old.
Therefor the Cost Approach is not applicable and shall not be used
In this appraisal, Sales Comparison and Income Capitalization Approaches shall he used.
SALES COMPARISON APPROACH
The market value of the subject is derived by comparing the subject with properties that have
been sold. Ideally the best comparable sale should be identical to the subject. However no two
properties are completely alike. Therefor adjustments are made for their differences, compared to
the subject. This approach is primarily based on the economic principle of substitution which
states that no rational buyer will pay more for a property if he can buy a similar or equally
desirable unit at the same or lower price.
SCOPE OF THE APPROACH
In this analysis, the summary of the comparable sales shall be presented in a table form. This will
be analyzed in an Adjustment Grid. Each adjustment shall be discussed in the Narrative section.
The final value shall be made in the Conclusion.
16
t r,
SALES COMPARISON APPROACH
INTRODUCTION: COMPARABLE SALES
Two comparable sales are from Hampshire county and two are from Hamden County.
SALE 1
This is located away from the town center nearby Cooley Dick. Hospital.
It is two story structure and is operated as a for profit entity by Landmark Health
Solutions. It also has a pediatric care center.
SALE 2
This located in the rural town of Hampden, south of Springfield, MA.
It is away from a dense development and is easily accessible by the road.
It is for a profit entity and is managed by Wingate Health Care.
It has extensive Alzheimer care.
SALE 2
This is located on the secondary road in Palmer, MA. It is on a large track of
land but has extensive wetland. It is managed by the owner operator and is a for profit
nursing home.
SALE 3
This is located at the eastern edges of South Hadley near Granby town line.
It is on Rt 202 and is easily accessible. The building is in good condition with a good
design and quality. It is managed by Wingate Healthcare.
See the Map, Attached)
17
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COMPARABLE SALES
Orange
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SIAIC horde;
rrn Limited access
Hinsdale
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East
Feeding Hills. warn
Longmeadow
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POWERSTREETS
11
SUMMARY OF COMPARABLE SALES:
SALE PRICE
Subject Sale 1 Sale 2 Sale 3 Sale 4
Northampton Northampton Hampden Palmer So Hadley
2,752,000 3,265,000 2,200,000 8,170,660
PROPERTY RIGHTS Fee Simp Fee Simp Fee Simp Fee Simp Fee Simp
FINANCING Market Market Market Market Market
CONDITION OF SALE Arm's L Arm's L Arm's L Arm's L Arm's L
MARKET COND Current 4/4/2005 6/26/2006 3/15/2004 3/24/2006
LOCATION Good Similar Similar Similar Similar
IMPROVEMENT
Building GLA: 53,575 70,295 26,904 12,136 47,890
of Bed Units: 120 166 100 61 132
Yr BUILT 1972 1971 1965/1985 1963 1987
CONDITION Average Avg -Good Average Average Very Good
CONST TYPE Masonry Masonry Masonry Masonry&Wd Masonry
LOT: Acre
Total 6 6.2 3.11 12.34 5.97
Topogrph Hill &Lev Level Level Level Level
Wetland None None None Some None
18
ADJUSTMENT GRID: COMPARABLE SALES:
SALE PRICE
Adjusted Price
Subject Sale 1 Sale 2 Sale 3 Sale 4
Northampton Northampton Hampden Palmer So Hadley
2,752,000 3,265,000 2,200,000 8,170,660
4,666,000 3,265,000 2,200,000 8,170,660
PROPERTY RIGHTS Fee Simp Fee Simp Fee Simp Fee Simp Fee Simp
Adjustment 0 0 0 0
FINANCING Market Market Market Market Market
Adjustment 0 0 0 0
CONDITION OF SALE Arm's L Arm's L Arm's L Arm's L Arm's L
Adjustment 0 0 0 0
MARKET CONDITION Current 4/4/2005 6/26/2006 3/15/2004 3/24/2006
Adjustment 457,499 192,393 292,213 547,577
ADJUSTED PRICE 5,123,499 3,457,393 2,492,213 8,718,237
SITE: acres 6 6.2 3.11 12.34 5.97
Adjustment 0 43,350 0 0
LOCATION Average Similar Similar Similar Similar
Adjustment 0% 0% 0% 0%
Adjustment 0 0 0 0
Building Condition Average Avg -Good Average Average Very Good
Adjustment -10% 0% 0% -29%
Adjustment 487,952 0 0 2,490,925
ADJUSTED PRICE 4,635,547 3,500,743 2,492,213 6,227,312
of Bed Units:
/Bed
SUBJECT'S VALUE:
Comp Sale Avg:1 &2 Avg:2 &3 Avg:1,2, &3 Avg:1,2,3 &4
/Bed 31,466 37,932 34,596 41,013
of Bed 120 120 120 120
3,775,944 4,551,803 4,151,535 4,921,600
Value Range: 3,776,000 4,552,000 4,152,000 4,922,000.Rounded
CONCLUSION: 3,776,000
166 100 61 132
27,925 35,007 40,856 47,177
19
NARRATIVE: ADJUSTMENT GRID
SALE PRICE
Sale 1 did major renovation right after the purchase of the property. The buys purchased
the property at foreclosure with an intention of capital improvements. The amount was
$1,914,00 per HCF -1 and the administrator. This is added to the initial purchase price.
MARKET CONDITION
Time differential:
Adjustments:
Future value factor
(applied to initial price)
SITE:
Pair Data Analysis:
Sale 4 Very Good
Sale 1 Sale 2 Sale 3 Sale 4
4/4/2005 6/26/2006 3/15/2004 3/24/2006
SUBJECT 6/2/2008 6/2/2008 6/2/2008 6/2/2008
Adjust Yr 3.16 1.94 4.22 2.19
3% per year shall be used to reflect the CPI average which can be applied to the
revenue growth.
Sale 1 Sale 2 Sale 3 Sale 4
FV factor
Adjustmen
Adjustment
1.10
9.80%
457,499
1.06
5.89%
192,393
1.13
13.28%
292,213
1.07
6.70%
547,577
Sale 1 and 4 are similar in size. There are no adjustments. Sale 3 is larger but has
wetland. Its usable portion is similar to the subject. Sale 2 is smaller than the
subject. The upward adjustment is made based on the excess land prices in
Hampden.
LOCATION ADJUSTMENT
All the comparable sales are in smaller towns like the subject, away from
large cities. Therefore there are no adjustments.
BUILDING CONDITION
The subject has items of deferred maintenance and could use updated design.
The adjustments are based on the cost to repair and the pair data analysis
after the Location adjustments.
Sale 1 Sale 2 Sale 3 Sale 4
ADJUSTED PRICE after Location: 5,123,499 3,500,743 2,492,213 8,718,237
Building Size: SF 70,295 26,904 12,136 47,890
/SF 73 130 205 182
sale 2 Average 1
3
adjustment/grade
4 182
130
52 29%
10%
Grade
avg
avg -good
good
very good
1
2
3
4
20
The cost to upgrade the subject to average -good requires the upgrade to roof, healing
system and other minor upgrades. RCN (replacement cost new) was derived from
Marshall Valuation and the maintenance supervisor, From this a residual value was
subtracted which resulted in $505,000
This is close to the downward adjustment made for Sale 1:Avg -Good to Average and provides
the lest of reasonableness of the pair data analysis.
COMMON UNIT OF COMPARISON
The going concern value of the Nursing Home industry primarily use per Bed unit.
In this appraisal this will be used.
CONCLUSION: SALES COMPARISON APPROACH
Sale 4 is superior in condition and quality than the subject. Therefore it shall not be
relied on. Sale 3 is similar to the subject but its building size is much smaller
than the subject and shall not be relied on.
Sale 2 is larger than Sale 3, but is smaller than the subject.
Sale 1 was a foreclosure sale but the buyers did extensive renovation.
Also it is in the same town as the subject and the building is larger than
the subject. This and Sale 2 shall be averaged to derive the /bed unit for the subject
which is $34,596 USD.
To this subject total bed units are multiplied which is 120 beds.
The conclusion is $3,776,000 (rounded).
21
SALE 1
IDENTIFICATION NORTHAMPTON REHAB NURSING CENTER
Address 737 Bridge Rd Northampton MA
Assessor's Map Lot 18C/48/1
SALE'S DATA
Sale Price
Type of Sale
Financing
Verification
LEGAL
Book Page 8212/109 Hampshire County Reg of Deeds
Grantor /Grantee Nhamton Nursing Home inc /Northampton Health Care RE Landmark Health
Date of Sale 4/4/2005
IMPROVEMENT
Yr Built Type 1971 Masonry
Size:GLA -sf 70,295
Number of Bed Units 166
Occupancy 84%
Quality Condition Avg -Good
of Story 2
Sprinklers Sprinklers
Use Nursing home
SITE
Size: acre 6.2
Topography Wetland Level None
Zoning URB
REMARKS In Northampton. Managed by Landmark Health Solution Inc. It has pediatrics unit.
Extensive renovation after the purchase. Confirmed with administrator $1.914M record.
2,752,000
Foreclosure
Market
Administrator Assessor MLS Public Records
22
SALE 2
IDENTIFICATION
Address
Assessor's Map Lot
SALE'S DATA
Sale Price
Type of Sale
Financing
Verification
LEGAL
Mary Lyons Skilled Care Center
34 Main St Hampden
12/158
3,265,000
Arm's Length
Market
Administrator Assessor
DHCFP
Public Records
MA
Book Page 16004/227 Hamden County Reg of Deeds
Grantor /Grantee G &L Mary Lyons LLC/WHC Hampden Inc
Date of Sale 6/26/2006
IMPROVEMENT
Yr Built Type 1965/1985 Masonry
Size:GLA -sf 26,904
Number of Bed Units 100
Occupancy 96%
Quality Condition Average
#of Story 1
Sprinklers Sprinklers
Use Nursing home
SITE
Size: acre 3.11
Topography Wetland Level None
Zoning C
REMARKS In a rural community of Hampden. NE wing built in 1985. Managed by Wingate Healthcare.
23
SALE 3
IDENTIFICATION
Address
Assessor's Map Lot
SALE'S DATA
Sale Price
Type of Sale
Financing
Verification
LEGAL
Palmer Healthcare Center
250 Shearer St Palmer
Map12 Lot32
2,200,000
Arm's Length
Market
Manager Assessor Public Records
MA
Book Page 14016/359 Hamden County Reg of Deeds
Grantor /Grantee Arcidi Assoc/Wellman Realty Inc
Date of Sale 3/15/2004
IMPROVEMENT
Yr Built Type 1963 Masonry&Wd
Size:GLA -sf 12,136
Number of Bed Units 61
Occupancy 93%
Quality Condition Average
#of Story 1 &2
Sprinklers Sprinklers
Use Nursing home
SITE
Size: acre 12.34
Topography Wetland Level Some
Zoning GB
REMARKS In a rural community of Palmer. The and has we( land. Smaller building. Some rooms have
4 beds.
SALE 4
IDENTIFICATION
Address
Assessor's Map Lot
SALE'S DATA
Sale Price
Type of Sale
Financing
Verification
LEGAL
8,170,660
Arm's Length
NA
Employee Assessor
Public Records
WINGATE SO HADLEY REHAB SKILLED NURSING RESIDENCE
573 Granby Rd So Hadley MA
32/81
Book Page 8658/100 Hampshire County Reg of Deeds
Grantor /Grantee Senior Res Care S SRC-GP S Hadley lnc/NHP Prop Bus Trust
Date of Sale 3/24/2006
IMPROVEMENT
Yr Built Type 1987 Masonry
Size:GLA -sf 47,890
Number of Bed Units 132
Occupancy 89%
Quality Condition Very Good
of Story 2
Sprinklers' Sprinklers
Use. Nursing home
SITE
Size: acre 5.97
Topography Wetland Level
Zoning BA1
REMARKS In a rural section of S Hadley. Managed by Wingate Healthcare.
None
25
INCOME CAPITALIZATION APPROACH: [)IRI;C"I CAPITALIZATION
This approach is primarily based on the economic principles ufanticipalic and change where a
buyer anticipates future benefits and estimates their present value considering the changes in the
future. In l)ircct Capitalization, a single year's income (Year 1 forecast) is converted to a value
by dividing with appropriate capitalization rate or multiplied by a multiplier. In this analysis,
NOI (net operating income) shall be divided by Ro (overall capitalization rate).
SCOPE. OF THE APPROACH
First the subject's income and the market income shall be analyzed.
Second, the expense analysis shall be discussed.
Third, ROS reconstructed operating statement) shall be constructed.
Finally Ro overall capitalization rate) shall be discussed and will be applied to NO1 net
operating income) to derive a value estimate.
26
26
INCOME ANALYSIS
SUBJECT INCOME
Subject's primary income is from the charges made to the patients, ancillary services and other
income. The room and board rate per day as follows:
West South Wings Long term: $240 (dble bed /rm) $255 (private room)
East Wing short term: $295
The subject participates in Medicaid program and is reimbursed by the MA DHS(Human Service).
It also receives the payment from Medicare related services.
Below is the revenue account:(Statement of Activities 12/2007)
OPERATING REVENUE
Priv patients
Medicare patients
Pub -aided patients
Sub Total
bed days occupied
Ancillary Income
Other Income
TOTAL OPER REVENUE
2007
Amount per Diem
1,995,135
2,081,174
4,484,640
8,560,949
40,441
10,753
44,422
8,616,124 213
MARKET INCOME
The survey of income and the bed rate was done for the nursing home facilities in the subject area and the
comparable sales. This is based on the interview as well as MA DHCFP HCF -1 Cost reports.
Below is the summary:
COMPARABLE INCOMES
Bd Rate /Day
Total OpRev PatBdDays perDiem
Northampton Rehab Northampton
Mary Lyon- Hampden (4beds 2beds -1bed) /room
Palmer Healthcare Palmer (4beds 2beds) /room
Wingate -S Hadley
Linda Manor Northampton
Calvin Coolidge- Northampton
Center for Ext Care Amherst
$250 -$300
$200 $250 -$260
$240 -$250
$270 -$295
$260 -$280
278 -$311
295 -$305
14,367,700
7,093,957
4,358,408
10,828,397
10,352,607
10,149,727
11,403,538
CONCLUSION: INCOME ANALYSIS
Subject's board rate /day is within the market range.
The subject's per Diem revenue is higher than Sale 2 3 (Mary Lyon Palmer).
However for Northampton area, it is lower than other comparable facilities.
49,317
35,093
21,810
42,823
42,454
39,993
45,794
AVG
291
202
200
253
244
254
249
242
27
EXPENSE ANALYSIS:
SUBJECT EXPENSE
2006 Expense was based on HCF -1 provided by Lando Alsher's Nursing Home Fin Stat Profile.
2007 Expense was based on the Annual Financial Statements of 12/2007 of the subject.
2007 excludes all Hampshire COG related expenses.
2006 LANDA ALTSHER NURSING HOME FIN STAT PROFILE (modified)
OPERATING EXPENSE
Nursing
Adm General
Property Expense
Plant Operation
Dietary
Laundry linen
Housekeeping
Medical services*
Social services
Consultants*
Recreation
Ancillaries`
Non Nursing County'
2006
Amount
4,227,136
1,074,208
135,696
508,182
931,887
107,575
221,495
146,831
149,548
6,075
142,683
873,763
456,641
(HCF1)
per Diem
103.73
26.36
3.33
12.47
22.87
2.64
5.44
3.6
3.67
0.15
3.5
21.45
11.21
/Rev
51.5%
13.1%
1.7%
6.2%
11.4%
1.3%
2.7%
1.8%
1.8%
0.1%
1.7%
10.6%
5.6%
Total Operating Exp
8,981,720 220.42 109.5%
HCF -1 uses different line items than Annual Financial Statements of the subject. They are changed as below:
Medical services:
Consultants:
Ancillaries:
Non Nursing -Cty:
QA/Ward clerk +MDS
Physician
Other Variable +Legend drugs +Restorative
2006 (statement)- County related expenses.
2007 ANNUAL FINANCIAL STATEMENTS
OPERATING EXPENSE
Nursing
Adm General
Property Expense
Plant Operation
Dietary
Laundry linen
Housekeeping
Medical services
Social services
Consultants
Recreation
Ancillaries
(county expense excluded)
Total Operating Exp
2007
Amount per Diem
4,142,355 102.43
1 ,470,794 36.36
144,857 3.58
529,424 13.08
906,167 22.41
104,035 2.57
163,943 4.05
.92,254 2.27
125,868 3.11
13,950 0.34
118,106 2.93
587,360 14.51
/Rev
48.08%
17.07%
1.68%
6.14%
10.52%
1.21%
1.90%
1.07%
1.46%
0.16%
1.37%
6.82%
8,399,113 207.64 97.48%
28
MARKET EXPENSE
2006 MARKET EXPENSE:
2006 expense shall be compared based on the Landa Altsher Nursing Home Financial
and Statistical Profile which is based on HCF -1 reported to DHCFP.
It will compare the per Diem expense and %lper diem Revenue.
Below is the table:
Abbreviation:
NR -N: Northampton Rehab Northampton
ML -H: Mary Lyon- Hampden
PH -P Palmer Healthcare Palmer
W -SH: Wingate -S Hadley
LM -N: Linda Manor Northampton
CC -N: Calvin Coolidge- Northampton
CEx A: Center for Ext Care Amherst
SBR -H: Sunbridge Hadley
29
Nursing I 128.5
Adm General 1 29.7
r A i I NU: inspector DHCQ- CarePai
D e fi ci e n c y: 200712006 1 3 3 \5 6
LANUA&AL 1 SHER:2006
MARKET EXPENSE ANALYSIS: per
NR -N:
total beds 164
13.61
c 1
f0
W W
el W6
O
49
5.5
3.5
3.1
0.8
3.1
6.1
6.3
2.4
2.9
65.1
16.2'
10.41
N V
Mt^
A N
O
O W
A CO
0)
0)
W
UI
I 66 \15 \45
21810
22265
PH -P
61
15.5
12.2
N O]
co W
W
O CO
N
N
22 \6
42823
W -SH:
120
14.4
--,co A N
W 0)
W O-'
A A
A O
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N
W
15.4
11 A
CO O
U) N
-.4.03
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CJ W�
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W A
00 n
c0 O 2
W N N
W N N
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co
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I.
r
{a i0
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I
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j
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A
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II
I
w
S
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N
D
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W
m
Social Services
Restorative Therapy 1 4.1%
Recreation Therapy
Legend Drugs 3.8%
Other i 2.4%
Total:Variable 1 32.0%
Fixed Cost j 4.4%
Non Nursing 1 16.3%
1 1
TOTAL OP EXPENSE 1 114.8%
1
Nrs HNdy /Resid:2007 1 4.41
REVENUE I 254.51
1
OPERATING EXPENSE I
Nursing i 1 50.5%
Adm General i 11.7%
1Deficiency:200712006 33 \561
IRATING:Inspector DHCQ CarePathways 1
:Occp 82 %1 96 %1 98 %1 98%
1 Pat days 493171. 350931 218101 42823
;Capacity 598601 36500! 222651 43800
1 •total beds 1 1641 100j 611 1201
NR -N: I ML -H: 1 PH -P 1 W -SH:
OPERATING EXPENSE
'MARKET EXPENSE ANALYSIS: /Diem Revenue) 1 1
LANDA&ALTSH ER: 2006 1
N
Ca
O
A
W
cn
16 \01 66 \15 \451 22 \61
N•
O(
o
F
S
V
i
i
i
9))
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0
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CO
0
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-e:
N
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e
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0
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A
0
N
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0
A
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in
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a
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(a
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31 \21
95
42,450
44895
123
LM -N: i CC -N:
V
a
P
w
v
1 \111
88 %1
399931
45625,
125
V
a
D
p
A
N
0/241
93 %1
45,494
489101
1341
1 CEx -A:
1 1 1 1 31
50% 8 6.6 .;i11 ti 2 °i
f: 14s 4.6%
1 4.4% ti
0.8% o, v'4% 1.4 %iy :may ('3 0.0%
2.2% i j 4'i'r r m 2.0%(r +-r2 ✓b`.' 0.7%
o
1.5 +rU 1 8 "0 0!: 0.9%
1.4% '1 1.8%>>' d� 9°CY 0 9% 1 2.4%o o o
7.0 �z7- 54% 3+ 6 o -1.7/
2.0% 1 8°/ -0 -0.1%
Y �7::
1 2.8% t`?l 33/3,5J y 0. 2%
1 2.6%
2.6 i 0.9%
1 54 1
2006 MARKET EXPENSE: CONCLUSION
The subject have following items that are higher than the market based on per Diem Revenue.
Subject Avg High Low
Nursing 51.5% 40.0% 50.5% 34.4%
Dietary 11.4% 6.6% 8.3% 5.0%
Plant Operation 6.2% 4.6% 5.3% 4.1
All other line items tend to reflect the market expenses.
32
2007 MARKET EXPENSE:
2007 analysis shall be based on MA DHCFP Forni HCF -1.
Some line items that were similar to the subject is not listed on this analysis.
Abbreviation:
NR -N: Northampton Rehab Northampton
ML -H: Mary Lyon- Hampden
PH -P Palmer Healthcare Palmer
W -SH: Wingate -S Hadley
LM -N: Linda Manor Northampton
CC -N: Calvin Coolidge Northampton
CEx -A: Center for Ext Care Amherst
33
A n 2 r- O z
q OO o C (p N a c
D Q, N 7 N p_ 3 �1
n m Ro m m
2 0
0 0 El
N N O
G.1 W N N p W
co O N W C71 J
0 0 0 0 0 0
W O) 4,„ O A
W Co m N J O J 1 r-
00 O) N A (n Cr.) CO
0 0 0 0 0 0 0 0
N OD U7 A O
(0 C71 O N co W v (71
0 0 01(0 (0 01 W (!1
0 0 0 0 0 0 0 0
W 1 d) Cn co
co Co N J O Ci0
0 0 0 0 0 0 0 0
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0 0 0 0 0 0
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P P O) O A N
co U7 J (n J 0
0 0 0 0 0 0
co
CO V1 W W O W
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co co 0 1 0
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CO o A 0 A
2007 MARKET EXPENSE: CONCLUSION
The subject have following items that are higher than the market (based on per Diem Revenue.)
Subject Avg High Low
Nursing 48.1% 40.5% 46.1% 34.9%
Adm General 17.1% 10.8% 14.7% 8.1%
Plant Operation 6.1% 4.4% 5.4% 2.9%
Dietary 10.5% 6.9% 8.39% 5.95%
These line items are like 2006 except Administration General expense. This item in 2007 was based
on the Annual Financial Statement and did not follow the DHCFP Schedules for HCF -1 report format.
However as a real expense in 2007, it accurately reflects the cost accrued by the subject.
Based on the above and the discussion with the administrator, the following findings were concluded.
Nursing: This item was high due to use of pool nurses than resident nurses.
Higher rates were paid which is reflected in the higher cost.
Adm General: This item was high due to the higher health care and benefit costs.
The subject has to be bounded by the state regulations since it is
under the Hampshire COG.
Plant Operation: Mechanicals are aged and needs extensive repair, especially the heating
and water system.
Dietary: Food service costs tend to be higher due to the contract service the subject
has employed.
35
CONCLUSION: EXPENSE ANALYSIS
There are four expense items that are higher than the market. Therefore they shall be adjusted
except the Plant Operation. This is based on the discussion with the administrator in an
attempt to normalize to reflect the market.
All other line item expenses shall be used as accrued by the subject since they are at market.
These shall be listed in the Narrative section of the Reconstructed Operating Statement: ROS.
36
RECONSTRUCTED OPERATING STATEMENT
PGI: Potential Gross Income
Vacancy Collection Loss
EGI: Effective Gross Income
EXPENSES
9,636,000
-954,520
8,681,480
2009
per Diem /EGI
Nursing 3,906,666 96.6 45.0%
Adm General 1,514,918 37.5 17.4%
Property Expense 153,679 3.8 1.8%
Plant Operation 545,307 13.5 6.3%
Dietary 737,926 18.2 8.5%
Laundry linen 107,156 2.6 1.2%
Housekeeping 168,861 4.2 1.9%
Medical services 95,022 2.3 1.1%
Social services 129,644 3.2 1.5%
Consultants 14,369 0.4 0.2%
Recreation 121,649 3.0 1.4%
Ancillaries 604,981 15.0 7.0%
SUB TOTAL 8,100,177 200.3 93.3%
Reserves 99,667 2.5 1.1%
TOTAL OP EXPENSES 8,199,843 202.8 94.5%
NOI: Net Operating Income 481,637
Ro: Overall Cap Rate 12.64%
VALUE: Capitalized NOI 3,809,033
3,809,000 rounded
37
NARRATIVE: RECONSTRUCTED OPERATING STATEMENT
PGI: Potential Gross Income:
2007 2008 2009
Market Income: per Diem 213.1 219.4 220.0
Potential bed days 43,800 43,800 43,800
PGI 9,331,773 9,611,726 9,636,000
EGI: Effective Gross Income:
PGI V &C Loss
2007 based on the subject since it is at market.
2008 increase based on CPI average and the survey of the area facilities.
2009 increase based on CPI average and the survey of the area facilities.
Vacancy Collection Loss:
Vacancy: Based on the subject which is at market 7% 674,520
Collection Loss (G06):
based on subject Fl cost 2007 account, modified. 280,000
Total: Vacancy Collection Loss 954,520
Vacancy is based on the subject and the area market occupancy which is higher than the national rate
of 85.5% (National Investment Center 2008).
EXPENSES
As previously discussed in the Expense section.
2007
/EGI Amount
Nursing 48.08% 4,142,355
Adm General 17.07% 1,470,794
Property Expense 1.68% 144,857
Plant Operation 6.14% 529,424
Dietary 10.52% 906,167
Laundry linen 1.21% 104,035
Housekeeping 1.90% 163,943
Medical services 1.07% 92,254
Social services 1.46% 125,868
Consultants 0.16% 13,950
Recreation 1.37% 118,106
Ancillaries 6.82% 587,360
SUB TOTAL 97.48% 8,399,113 8,651,086
Replacement Reserves
TOTAL
8,681,480
2008 a
Amount 3' f'n2l1
4,266,626
1,514,918
149,203`
545,307 «'1
933,352
107,1561
168,861
95,022'.,t'e
129,6444:'x"'2 °i6
14,3691 +jam.' pcE
121,649:yY F
„E
604,981
/EGI
45.0%
17.4%
1.8%
6.3%
8.5%
1.2%
1.9%
1.1%
1.5%
0.2%
1.4 %u
7.0%
93.3%
1.1
94.5%
38
*ADJUSTED ACCOUNTS: 2009 projection
Based on the previous years and the discussion with the administrator, the below items
have been normalized to reflect the market. Also the COG expense is removed as an
abnormal expense.
For other items, 3 %/Yr adjustments are applied, based on long term CPI average.
2007 2008 2009
Nursing 4,142,355 4,266,626 3,906,666
Dietary 906,167 933,352 737,926
Replacement Reserves
RCN(replacement cost new) of short lived items have been annualized. This is based on the Marshall
Valuation Service manual, the maintenance supervisor, and the personal property list.
NOI: NET OPERATING INCOME
This is based on EGI minus the total Expenses.
39
Ro: OVERALL CAPITALIZATION RATE
There are two major methods to estimate the Over All Capitalization Rate (Ro):
The Sales Comparison method and the a Band of Investment.
Below is the Sales Comparison method:
Ro: SALES COMPARISON METHOD
Subject Sale 1 Sale 2 Sale 3 Sale 4
SALE PRICE
Adjusted Price
ADJUSTED PRICE 5,123,499 3,457,393 2,492,213 8,718,237
Market Adjusted
EXPENSES
/EGI
2,752,000 3,265,000 2,200,000 8,170,660
4,666,000 3,265,000 2,200,000 8,170,660
REVENUE 14,798,731 7,306,776 4,489,160 11,153,249
Adjusted for Market
14,058,794 6,868,369 4,174,919 10,372,521
95% 94% 93% 93%
NOI 739,937 438,407 314,241 780,727
Ro 14.44% 12.68% 12.61% 8.96%
12.64% (Avg of Sale 2 and 3)
CONCLUSION: SALES COMPARISON METHOD
To derive the rate for the subject, the prices are adjusted to reflect 2008 market. Expenses are based
on the extracted ratios and actual percentage. They are compared to RMA 2007 -2008 which is 93.5% and
provides the test of reasonableness. For the final rate Sale 2 and 3 rates are averaged.
40
The following is the Band of Investment method:
Ro: BAND OF INVESTMENT
Mortgage M x Rm
(add)
Equity (1 -M)x Ye
(less)
Equity in Mortgage M x P x 1 /Sn
Weighted Avg
70% 10.04% 7.03%
30% 14%
70% 0.11 15.13%
ASSUMPTIONS: BAND OF INVESTMENT
M: Mortgage based on 70% LTV
Rm: based on
Interest- 8.00%
Amort (Yrs) 20
Hold Pd(Ys) 5
Ye: Equity Yield Rate
P: Prin Paid off
1 /Sn: sinking fund at Ye
Projected rate:
based on actual liquidity
14% Equity investors equity return
S &P, Bus &Fin Ratios, RMA
0.11
15.13%
13r21%
8.00%
CONCLUSION: BAND OF INVESTMENT METHOD
Projected interest rate is based on the actual rates and the consideration for the credit problems in the
present financial market. Equity rate is based on the industry survey based on financial reports.
CONCLUSION: Ro OVERALL CAPITALIZATION RATE
The Sales Comparison method resulted in 12.64%
The Band of Investment result is: 12.39%
Due to the uncertainty of financial markets and the interest rate cuts, the Band of Investment shall not
be relied on. The conclusion will be based on the Sales Comparison method which is
12.64%
According to the nursing home consultant, the average for the subject's region is 12.3 NIC (National
Investment Center for the Seniors Housing and Care Industry) listed the range of 11.1%-14% with the
average of 12.8 This does provides the test of reasonableness of Ro conclusion.
41
CONCLUSION: INCOME CAPITALIZATION APPROACH
The Direct Capitalization was used.
Based on the market rent and expenses, NOI was derived. To this Ro was used to derive
the value of the subject. This approach estimates the subject's value at
3,809,000 USD
42
RECONCILIATION
AS -IS GOING CONCERN VALUE per HYPOTHETICAL CONDITION
COST APPROACH NA
SALES COMPARISON APPROACH 3,776,000
INCOME CAPITALIZATION APPROACH 3,809,000
COST APPROACH
This approach was not used.
SALES COMPARISON APPROACH
Four comparable sales were used from the region. Sale 3 was not relied on since it
is superior to the subject. Sale 2 is much smaller than the subject and was not relied on.
The average of Sale 1 -2 was used to derive the estimate for the subject.
INCOME CAPITALIZATION APPROACH
The Direct Capitalization method was used. First, subject's income and expenses were
compared with the market. Then ROS (Reconstructed Operating Statement) was, constructed
based on the market income and expense. To NOI (Net Operating Income), Ro (Overall
Capitalization Rate) was applied to derive the value estimate of the subject.
CONCLUSION
The difference between the results of the Sale Comparison Approach and the Income Approach is
minor and therefore supports the test of reasonableness. However the Income Approach
shall not be relied on since the subject's income and expense had to be adjusted to the market.
Therefore the value conclusion shall be based on the Sales Comparison Approach.
The As -Is Going Concern value per hypothetical condition of the subject is estimated at
$3,776,000 (Three million seven hundred seventy six thousand USD)
43
1984 -1979 FREE ENTERPRISE ASSOCIATE
International business consultants for industrial and commercial projects
EMPLOYMENT (ACADEMIC)
1984 (winter) GUEST LECTURER MASS COLLEGE OF LIB ARTS
1978 (spring) ADJUNCT FACULTY ASSOCIATE HAMPSHIRE COLLEGE
1977 INSTRUCTOR BROWN UNIVERSITY
APPRAISAL, FEASIBILITY, AND RESEARCH PROJECTS (SAMPLE)
Valuation of commercial, residential and industrial properties in MA and CT.
Review and forensic appraisals of commercial property valuations
Valuation consulting on a rail yard and rail right of way.
Valuation of environmental impacted properties for litigation proceedings.
Valuation of woodlands and farms.
Electric power plant valuations and New England electricity market analysis.
Property tax consulting and expert witness to Appellate Tax Board and
MA Superior Court.
Easement and eminent domain valuation for municipal and county governments.
Market and real estate impact analysis of tourism for commercial development
Investtnent analysis of restaurant chains in MA and CT
Real estate investment analysis of a high rise hotel development in NYC.
Real estate investment analysis of a shopping mall in CA.
Financial analysis of resort development.
Development and investment analysis of polymer -wood plant
Cost analysis of multi- tenant food service and canning facility,
Development JV consulting of a municipal incineration and cogeneration plant.
Development and project finance consulting of refinery project.
AFFILIATION (PAST PRESENT)
APPRAISAL INSTITUTE (President of WMASS Chapter, Member of CT &MA Chpt)
IAAO /MAAO CCIM INSTITUTE CCIM)
NAT ASSN OF REALTORS ASSOCIATION OF ENERGY ENGINEER
LICENSES, CERTIFICATION DESIGNATION
APPRAISAL INSTITUTE MAJ
MA CT Certified General Real Estate Appraiser
MASS Real estate Broker (inactive status) 533946
MASS SOMBWA MBE DBE
CCIM INSTITUTE CCIM
FAA ATP
APPROVED APPRAISER /or APPRAISED FOR (Samples)
Warburg Dillon Reed Mundy Associates
Banknorth Group Citizens Bank
Greenfield Coop [3ank United Coop Bank
Source One Mortgage Greenfield Savings
MBNA Consumer Services Apex Mortgage
Franklin County Engineers IvIHD(MA Hwy Dept)
Municipalities First Trade Union Bank
Kaiser Permanents Lenox Savings Bank
Legacy Bank Interbay Funding