Roundhouse Parking Expansion #10563 jec 6-3-2019
REAL PROPERTY APPRAISAL
Roundhouse Parking Lot
OWNED BY:
City of Northampton
LOCATED AT:
Off south Street
City of Northampton, MA 01060
PREPARED FOR:
Wayne Feiden, Director of Planning & Sustainability
City of Northampton
210 Main Street, City Hall
Northampton, MA 01060
PREPARED BY:
Jay E. Closser, ASA
LandVest, Inc.
445 Tully Road
Orange, MA 01364-9641
REPORT DATE:
July 17, 2019
EFFECTIVE VALUATION DATE:
June 3, 2019
LV: #10563
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July 17, 2019
Wayne Feiden, Director of Planning & Sustainability
City of Northampton
210 Main Street, City Hall
Northampton, MA 01060
RE: Roundhouse Parking Lot
Dear Wayne:
At your request, I have investigated the above-referenced properties in the City of Northampton in
Hampshire County, MA, to develop an opinion of its market value of an individual parking space
in the Roundhouse Parking Lot owned by the City of Northampton.
You have asked for the current market value of an individual parking space in the Roundhouse
Lot.
The effective valuation date is June 3, 2019, the date of the property of my inspection of the
property.
The accompanying appraisal report, of which this letter of transmittal is an integral part, has been
completed in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP)
of the Appraisal Foundation. The appraisal has been completed for Wayne Feiden, Director of
Planning and Sustainability, City of Northampton, MA.
Based on the analysis contained in this report, it is my opinion that a parking space at the
Roundhouse Parking Lot, on the effective valuation date of this appraisal, was worth:
$19,000
If you have any questions, please do not hesitate to call.
Respectfully submitted,
Jay E. Closser, Senior Advisor and Appraiser
(MA Certified General License #730)
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CERTIFICATE OF VALUE
I hereby certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are believed to be true and correct.
The reported analyses, opinions, and conclusions are limited only by the reported
assumptions, limiting conditions and legal instructions, and are my personal,
impartial, and unbiased professional analyses, opinions, and conclusions.
I have no present or prospective interest in the property that is the subject of this
report, and no personal interest or bias with respect to the parties involved.
My engagement and compensation in this assignment were not contingent upon
developing or reporting predetermined results.
My compensation for completing this assignment is not contingent upon the
development or reporting of a predetermined value or direction in value that favors
the cause of the client, the amount of the value opinion, the attainment of a stipulated
result, or the occurrence of a subsequent event directly related to the intended use of
this appraisal.
The appraisal was made and the appraisal report prepared in conformity with the
requirements of the Uniform Standards of Professional Appraisal Practice (USPAP)
of the Appraisal Foundation.
I formally inspected the property on June 3, 2019 which involved a hiking the
property.
Jay Closser made a personal inspection of the appraised property that is the subject of
this report and all the comparable sales used in developing the estimate of value.
Jay Closser appraised the property that is the subject of this appraisal in the past three
years.
The use of this report is subject to the requirements of the Appraisal Institute relating
to review by its duly authorized representatives.
No one provided significant professional assistance to the persons signing this report.
The following represents my opinion of the subject property’s market value on the
effective valuation date:
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By: Date: July 17, 2019
Jay E. Closser, ASA
(MA General Appraiser’s License #730)
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ASSUMPTIONS AND LIMITING CONDITIONS
The certification of the appraiser(s) appearing in this appraisal report is (are) subject to the
following assumptions and conditions, and to such other specific and limiting conditions as are
set forth by the appraiser(s) in the report:
Extraordinary Assumptions
1. I have utilized the Extraordinary Assumption that the subject property does not have any
contamination or hazardous materials on site.
Hypothetical Condition
1. I have not used any Hypothetical Conditions in this appraisal.
Standard Limiting Conditions
1. The appraiser assumes no responsibility for matters of a legal nature affecting the
property appraised or the title thereto, nor does the appraiser render any opinion as to the
title, which is assumed to be good and marketable. The appraisal assumes the property is
under responsible ownership.
2. Sketches, maps, plans and exhibits in the report may show approximate dimensions, and
are included to assist the reader in visualizing the property. The appraiser has made no
survey of the property. Data relative to size and area were taken from sources considered
reliable. Except otherwise noted, it is assumed that no encroachments exist.
3. The appraiser, by reason of this appraisal, is not required to give further consultation,
testimony, or attend court with reference to the property that is the subject of this
appraisal, unless arrangements have otherwise been made.
4. The appraiser assumes there are no hidden or unapparent conditions of the property,
subsoil, or structures which would render it more or less valuable. The appraiser assumes
no responsibility for such conditions or for engineering which might be required to
discover such factors.
5. Information, estimates, and opinions furnished to the appraiser and contained in the
report, were obtained from sources considered reliable and believed to be true and
correct. However, no responsibility for the accuracy of such items furnished can be
assumed by the appraiser.
6. Neither all, nor any part of the content of the report, or copy thereof, including
conclusions as to the property value, the identity of the appraiser, professional
designations, reference to any professional appraisal organizations, or the firm with
which the appraiser is connected, shall be used for any purposes by anyone but the client
specified in the report, or professional appraisal organizations, without the previous
written consent of the appraiser; nor shall it be conveyed by anyone to the public through
advertising, public relations, news, sales, or other media, without the written consent and
approval of the appraiser. The report will be subject to the Freedom of Information Act.
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7. The date of value is expressed within this report. Any forecasts included in this report
are based on existing market conditions and expectations. The appraiser takes no
responsibility for any events, conditions, economic factors, physical factors, or other
circumstances occurring after the date of value that would affect the opinions expressed
in this report.
8. Except as otherwise noted, it is assumed that there are no encroachments, building
violations, code violations, or zoning violations affecting the subject property.
9. Responsible ownership and competent property management are assumed.
10. It is assumed that there is full compliance with all applicable federal, state, and
local environmental regulations and laws unless noncompliance is stated, defined, and
considered in the appraisal report.
11. It is assumed that all applicable zoning and use regulations and restrictions have been
complied with, unless a nonconformity has been stated, defined, and considered in the
appraisal report.
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SUMMARY OF SALIENT FACTS
Location: Old South Street, City of Northampton, Hampshire County,
Massachusetts
Owner of Record: City of Northampton
Subject Property: 157 parking spaces
Deed Reference: N/A
Effective Date of Value: June 3, 2019
Property Rights
Appraised: The “as is” rights, title, and interests in the above-
referenced properties
Highest and Best Use: Vacant land
Zoning: CB
Legal Access: Old South Street
Improvements: There are no improvements on the subject property
Topography: Moderately sloping
Waterbodies: None
DEP Wetlands: None
Floodplain: Not in 100-year floodplain
Amenities: Downtown location
Liabilities: None
Type of Property: Surface parking lot
Extraordinary Assumption: I have utilized an Extraordinary Assumption that the
subject property does not have any contamination or
hazardous materials on site.
Hypothetical Condition: I have not utilized Hypothetical Conditions in this
appraisal
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I. SCOPE OF APPRAISAL & DEFINITIONS
A. PURPOSE OF APPRAISAL
The purpose of this appraisal is to provide an opinion of the market value of the
Roundhouse Parking Lot on a per lot basis, as of June 3, 2019, the date of my inspection
of the premises.
B. CLIENT
The clients of this appraisal are Wayne Feiden of the City of Northampton Office of
Planning and Sustainability.
C. INTENDED USE & USER
The intended use is for to provide the market value of the premises for internal
disposition purposes.
The intended users are Wayne Feiden, the City of Northampton and its advisors.
D. EFFECTIVE DATE OF VALUATION
I inspected the property on June 3, 2019 which will serve as the effective valuation date
of this appraisal.
E. MARKET VALUE DEFINED
In this appraisal, “market value” is defined by Title XI of the Federal Financial
Institution Reform, Recovery, and Enforcement Act (FIRREA) of 1989, revised
June 7, 1994, and amendments thereto, as follows:
The most probable price which a property should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this
definition are the consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what they
consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
(5) The price represents the normal consideration for the property sold unaffected
by special or creative financing or sales concessions granted by anyone associated
with the sale.
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Source: Code of Federal Regulations, Vol. 55, No. 165, Page 34696, Aug. 24,
1990.
F. APPRAISAL PROBLEM AND SCOPE OF INVESTIGATION AND ANALYSES
APPRAISAL PROBLEM
The appraisal problem to be resolved is to determine the value of the subject property
based on highest and best use. The property is an operating surface, parking lot in the
City of Northampton.
SCOPE OF APPRAISAL AND ANALYSES
In developing opinions of value of the defined subject property rights, a review and
inspection of the subject property and the comparable sale properties have been made.
Sales and property information were obtained by reviewing information published by the
Massachusetts Multiple Listing Service (MLS-PIN); the Hampshire County Registry of
Deeds, The Warren Publishing Company, LandVest, Inc.'s internal files and information
provided by participants in the transactions. The City of Northampton provided income
and expense information for the subject property. Mapping was provided by LandVest’s
GIS Department utilizing public information and the survey of the property provided by
my client.
I have utilized the Income Approach to value the subject property.
G. HIGHEST NAD BEST USE
The highest and best use for the subject property is continued use as a surface parking lot.
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VI. VALUATION
A. VALUATION METHODOLOGY
In the appraisal of real estate there are three recognized approaches to value. These are:
(1) the Cost Approach; (2) the Income Approach; and (3) the Sales Comparison (Market)
Approach. The Cost of Development, or Subdivision Approach, is a subset of the sales
comparison or income approaches.
The Cost Approach is a method whereby the actual costs to build are considered,
with deductions for all forms of physical and functional obsolescence, arriving at
a depreciated building cost. This cost is added to the value of the land to arrive at
a value via the cost approach. This approach is based on the theory that an
informed buyer would not buy a property that it would cost less to build.
The Income Approach is based on the principle of anticipation which states that
value is the present worth of the anticipated future benefits, or income to the
property. The reliability of this approach is limited when it is applied to
properties that are not usually bought and sold for their rental potential.
The Market Approach or Sales Comparison Approach is in which recent sales
of comparable properties are analyzed and compared to the subject property with
adjustments for perceived differences. The Market Approach is based on the
theory of exchange which implies that a comparison of similar properties has been
made by the potential purchaser, and that the purchaser would not pay more than
the cost of acquiring a property with the same utility.
The Cost of Development Approach (or Subdivision Approach) is an income
valuation technique applicable to multiple unit property, or property demonstrably
capable of being divided into multiple retail units. This method seeks to simulate
the criteria and actions of the likely market buyers of such property, i.e.,
developers. Projections of revenues and costs over the assumed sellout or
absorption period are based on market indicated unit prices, costs and timing. An
allowance for developer’s profit must be made to derive a credible indication of
residual, “as-is” property value, which models the wholesale price of a property.
In this appraisal I have used the Income Approach.
(1) COST APPROACH TO VALUE
The Cost Approach is not used; it is not suitable as a self-sufficient technique to value
vacant land, nor relevant in this appraisal.
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(2) SALES COMPARISON APPROACH (MARKET APPROACH)
To use the market approach, sales must be found and verified that are comparable to the
subject property being appraised. These sales must have occurred under normal market
conditions and be relatively concurrent with the date of the appraisal. Adjustments are
made to the comparable sales to compensate for differences with the subject property.
Financing and time considerations are the first adjustments made as well as adjustments
for conditions of sale. After adjusting for time and financing, physical adjustments are
made for location, size, development potential or higher and better use, amenities and
liabilities, capital improvements, access and special conditions. In quantitative
adjustment, the final adjusted value is the product of the original unit price and the
percentage adjustment for time and financing, multiplied by the total of the physical
adjustments if applicable. In Qualitative analysis, plusses and minuses are applied for
characteristics of the property that cannot be specifically quantified.
Due to the absence of sales of comparable properties, I have not used the Market
Approach.
(3) INCOME APPROACH TO VALUE
I have considered the Income Approach in this analysis. The subject property is an
income producing property with 157 parking spaces in the Central Business District of
the City of Northampton. I have utilized income and expenses provided by the City of
Northampton.
B. VALUATION:
Income and Expense Summary:
The Roundhouse Parking Lot has 157 parking spaces off Old South Street. The City
currently charges $0.25 per hour per space (11 spaces currently are charged $0.75 per
hour). The rate is considered low and was intended to encourage downtown shoppers
and workers to utilize the space. The market rate for the lot is estimated to be $1.00 per
hour.
The parking lot generates about $500 per space per year in parking tickets, for a total of
about $78,500.
The lot is essentially full, with an estimated 85% occupancy rate (60% in the morning to
98%, afternoons and evenings). The lot operates from 8:00 AM through 6:00 PM (10
hours daily), 6 days a week. There is some potential to collect later into the evening.
Maintenance costs $245 per space per year (based on total parking structure maintenance
costs provided by the City of Northampton), for a total of about $38,465. Capital costs
for the Roundhouse Parking Lot were estimated at $10 per space per year, for a total of
$1,570 per year (paving replacement etc.).
Please refer to the following table which shows the estimated income at Current Rates:
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Current Rates
Item # of spaces
Current Rate
(hourly)
Potential Hours
(daily)
Potential
Gross Income
(daily)
Potential Gross
Income
(annual)
Occupancy
Rate
Actual Gross
Income
(@$0.25/hr)
Parking Spaces: 146.00 $ 0.25 10.00 $ 365 $ 114,318 85% $ 97,170
11.00 $ 0.75 10.00 $ 83 $ 25,839 85% $ 21,963
Total: 157.00
Parking Ticket
Income: $ 78,500 $ 78,500
Current
(approx.) 10.00 $ 448 $ 218,657 85% $ 197,633
Gross Income: $ 197,633
Management / Insurance:5% $ 9,882
Expenses/space:$245 $ 38,465
Reserves/space:$10 $ 1,570
Expense subtotal: $ 49,917 $ 318 per space
Net Income: $ 147,717
The rates at Roundhouse Parking Lot are below market and were intended to be that way
to encourage downtown activity. Market rates are significantly higher and estimated at
about $1.00 per hour, with upside potential. I have prepared the following pro-forma
income and expense table based on Market Rates.
Market Rates
Item # of spaces
Market Rate
(hourly)
Potential Hours
(daily)
Potential
Gross Income
(daily)
Potential Gross
Income
(annual)
Occupancy
Rate
Market Gross
Income
(@$1.00/hr)
Parking Spaces: 146.00 $ 1.00 10.00 $ 1,460 $ 457,272 85% $ 388,681
11.00 $ 1.00 10.00 $ 110 $ 34,452 85% $ 29,284
Total: 157.00
Parking Ticket
Income: $ - $ 78,500 $ 78,500
Market 10.00 $ 1,570 $ 570,224 85% $ 496,465
Gross Income: $ 496,465
Management / Insurance:5% $ 24,823
Expenses/space:$245 $ 38,465
Reserves/space:$10 $ 1,570
Expense subtotal: $ - $ 64,858 $ 413 per space
Net Income: $ 431,607
To value the income stream I will use a discounted cash flow analysis. I will remove
relevant expenses to arrive at net income. The net income will be discounted to the
present using a discount rate. The income value in year six will be converted into a
selling price using the appropriate capitalization rate for the property type. The selling
price and the annual net income will be discounted to the present. The sum of all the
discounted income will represent the current market value of the subject property by the
Income Approach.
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Discounted Cash Flow Analysis
(1) Current Rates
The current total estimated annual net income is $147,717, which is $941/space. This net
income is based on the current parking rate $0.25 per hour per space for 146 spaces, plus
$0.75 per hour for 11 spaces.
Discount Rate
The discount rate is that rate which, when applied to the projected periodic cash flows,
converts those cash flows to their present value. It is equivalent to the internal rate of
return (IRR) on either the equity or the entire property (free and clear of debt). The
Appraisal Institute defines the IRR or Yield Rate as:
The effective return on investment, as paid in dividends or interest.
To discount the proceeds to the present I have utilized a discount rate of 10%. The
discount rate is basically the rate of return that an investor must receive to justify the
investment. It is also referred to as the capitalization rate, the hurdle rate, cost of capital -
the discount rate is used in financial analysis as the interest rate for discounting expected
future cash flows to adjust for risk and the time value of money. The discount rate
reflects the risk of an investment: risky investments employ higher discount rates while
safe investments use lower rates.
For this report I have used an overall rate of 10% which includes risk and profit.
Appreciation
I have included an annual appreciation rate of 2.50% based on historic trends as well as
current and anticipated market conditions in the subject area.
Occupancy Rate
I have used an annual occupancy rate of 85%.
Property Management and Insurance Costs
Property management and insurance costs have been estimated at 5% of gross revenues.
I have deducted this from the effective gross income.
Indirect Costs
Expenses have been estimated at $245 per parking space for a total of $38,465. Reserves
for replacement have been estimated at $10 per space.
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Reversion at end of holding period
The owner would sell the property at the end of the holding period. I will base the selling
price on the income stream in year 6 and a capitalization rate of 10%.
Final Value – Based on Current Income
As the spreadsheet on the next page shows, after removing the relevant expenses in each
year and discounting the proceeds of the harvests and the reversion of the remaining
timber value in year 2024, the present value of the property is calculated at $1,567,042 or
$1,570,000, rounded, which represents $10,000 per parking space.
Please refer to our Discounted Cash Flow Analysis on the next page.
Subject: Roundhouse Parking Lot - Current Rates18-Jul-19Property Address: Old South Road, Northampton, MA Effective Valuation Date: 03-Jun-19 Spaces $/SpaceMarket Value Estimate for: Parking Spaces 157.00 10,000$ Present Value of Land: $680,252 Reversion: $886,790Total Value Rounded: $1,570,000 Overall Rate of Return: 27.91% ASSUMPTIONS:# Units Income ItemTax Rate per $1,000 of Value @ Yr End -$ 157 @ $147,717 Total Annual Net IncomeMarket & Advertising Cost 0.00% @ $0 Appreciation 2.50% @ $0 Discount Rate 10.00% @ $0 @ $0 @ $0 YEAR:0 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 TOTALTotal Annual Net Income0 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 6.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00TOTAL SALES PER YEAR:0 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 6.00APPRECIATION:0.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%PROJECTED REVENUES ($000)Total Annual Net Income -$ 148$ 148$ 148$ 148$ 148$ 148$ -$ -$ -$ -$ 886$ Annual Appreciation-$ -$ 3.7 3.8 3.9 4.0 4.1 -$ -$ -$ -$ 19$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TOTAL ANNUAL GROSS REVENUES ($000)-$ 148$ 151$ 155$ 159$ 163$ 167$ -$ -$ -$ -$ 906$ Ann. Gross Rev w/Appreciation148$ 151$ 155$ 159$ 163$ 167$ -$ -$ -$ -$ 944$ Cummulative Gross Revenues148$ 299$ 454$ 613$ 776$ 944$ 944$ 944$ 944$ 944$ 944$ Remaining Gross Retail Value906$ 780$ 650$ 510$ 360$ 210$ 50$ 170$ -$ -$ -$ -$ DIRECT COSTSRoad Construction:LengthUnit CostSewer Line Extension0.00$0-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Roadway0.00$350-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Driveway0.00$9-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Street Improvements $0 LS-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Site Preparation/Demolition0.00 $25,000 LS-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ DIRECT SUBTOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ INDIRECT COSTSMarketing & Advertising0.00% -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Legal - Initial Approvals$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Legal - Lot Sales$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Land Use Change Tax- -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Property Survey & Engineering Expenses$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Wetland Surveying and Soil Testing$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Utility Company Fee #Poles:- $0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ R.E. Taxes (Per $1000 of Market Value)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Transfer Taxes0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest on Direct Costs0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Contingency(%Dir+Indir Costs)0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ SUB-TOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Profit from Net Lot Sales @0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ INDIRECT SUBTOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TOTAL EXPENSES ($000)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ NET INCOME ($000)-$ 148$ 151$ 155$ 159$ 163$ 167$ -$ -$ -$ -$ 944$ Discount Factor1.000 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 -$ 134$ 125$ 117$ 109$ 101$ 94$ -$ -$ -$ -$ >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>>>>>>>>>>> >>>>>>>>>>>>>>>>>>>>>>$680||||||||||||||||||||||||||||||||||||||||PRESENT VALUE OF INCOME STREAM
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(2) Market Rates
The Market based annual net income is $431,607, which is $2,749/space. This net
income is based on the market estimated parking rate $1.00 per hour per space for 157
spaces.
Discount Rate
The discount rate is that rate which, when applied to the projected periodic cash flows,
converts those cash flows to their present value. It is equivalent to the internal rate of
return (IRR) on either the equity or the entire property (free and clear of debt). The
Appraisal Institute defines the IRR or Yield Rate as:
The effective return on investment, as paid in dividends or interest.
To discount the proceeds to the present I have utilized a discount rate of 10%. The
discount rate is basically the rate of return that an investor must receive to justify the
investment. It is also referred to as the capitalization rate, the hurdle rate, cost of capital -
the discount rate is used in financial analysis as the interest rate for discounting expected
future cash flows to adjust for risk and the time value of money. The discount rate
reflects the risk of an investment: risky investments employ higher discount rates while
safe investments use lower rates.
For this report I have used an overall rate of 10% which includes risk and profit.
Appreciation
I have included an annual appreciation rate of 2.50% based on historic trends as well as
current and anticipated market conditions in the subject area.
Occupancy Rate
I have used an annual occupancy rate of 85%.
Property Management and Insurance Costs
Property management and insurance costs have been estimated at 5% of gross revenues.
I have deducted this from the effective gross income.
Indirect Costs
Expenses have been estimated at $245 per parking space for a total of $38,465. Reserves
for replacement have been estimated at $10 per space.
Reversion at end of holding period
The owner would sell the property at the end of the holding period. I will base the selling
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price on the income stream in year 6 and a capitalization rate of 10%.
Final Value – Based on Market Income
As the spreadsheet on the next page shows, after removing the relevant expenses in each
year and discounting the proceeds of the harvests and the reversion of the remaining
timber value in year 2024, the present value of the property is calculated at $4,471,672 or
$4,470,000, rounded, which represents $28,471 per parking space.
Please refer to our Discounted Cash Flow Analysis on the next page.
Subject: Roundhouse Parking Lot - Market Rates18-Jul-19Property Address: Old South Road, Northampton, MA Effective Valuation Date: 03-Jun-19 Spaces $/SpaceMarket Value Estimate for: Parking Spaces 157.00 28,471$ Present Value of Land: $1,880,599 Reversion: $2,591,073Total Value Rounded: $4,470,000 Overall Rate of Return: 26.37% ASSUMPTIONS:# Units Income ItemTax Rate per $1,000 of Value @ Yr End -$ 157 @ $431,607 Total Annual Net IncomeMarket & Advertising Cost 5.00% @ $0 Appreciation 2.50% @ $0 Discount Rate 10.00% @ $0 @ $0 @ $0 YEAR:0 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 TOTALTotal Annual Net Income0 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 6.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00TOTAL SALES PER YEAR:0 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 6.00APPRECIATION:0.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%PROJECTED REVENUES ($000)Total Annual Net Income -$ 432$ 432$ 432$ 432$ 432$ 432$ -$ -$ -$ -$ 2,590$ Annual Appreciation-$ -$ 11$ 11$ 11$ 12$ 12$ -$ -$ -$ -$ 57$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TOTAL ANNUAL GROSS REVENUES ($000)-$ 432$ 442$ 453$ 465$ 476$ 488$ -$ -$ -$ -$ 2,646$ Ann. Gross Rev w/Appreciation432$ 442$ 453$ 465$ 476$ 488$ -$ -$ -$ -$ 2,757$ Cummulative Gross Revenues432$ 874$ 1,327$ 1,792$ 2,269$ 2,757$ 2,757$ 2,757$ 2,757$ 2,757$ 2,757$ Remaining Gross Retail Value2,646$ 2,280$ 1,890$ 1,480$ 1,050$ 600$ 130$ 500$ -$ -$ -$ -$ DIRECT COSTSRoad Construction:LengthUnit CostSewer Line Extension0.00$0-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Roadway0.00$350-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Driveway0.00$9-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Street Improvements $0 LS-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Site Preparation/Demolition0.00 $25,000 LS-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ DIRECT SUBTOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ INDIRECT COSTSMarketing & Advertising5.00% -$ 22$ 22$ 23$ 23$ 24$ 24$ -$ -$ -$ -$ 138$ Legal - Initial Approvals$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Legal - Lot Sales$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Land Use Change Tax- -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Property Survey & Engineering Expenses$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Wetland Surveying and Soil Testing$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Utility Company Fee #Poles:- $0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ R.E. Taxes (Per $1000 of Market Value)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Transfer Taxes0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest on Direct Costs0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Contingency(%Dir+Indir Costs)0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ SUB-TOTAL-$ 22$ 22$ 23$ 23$ 24$ 24$ -$ -$ -$ -$ 138$ Profit from Net Lot Sales @0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ INDIRECT SUBTOTAL-$ 22$ 23$ 24$ 26$ 26$ 28$ -$ -$ -$ -$ 149$ TOTAL EXPENSES ($000)-$ 22$ 23$ 24$ 26$ 26$ 28$ -$ -$ -$ -$ 149$ NET INCOME ($000)-$ 410$ 419$ 429$ 439$ 450$ 460$ -$ -$ -$ -$ 2,607$ Discount Factor1.000 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 -$ 373$ 346$ 322$ 300$ 279$ 260$ -$ -$ -$ -$ >>>>>>>>>>>>>>>>>>>>>>>>>>>> >>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>> >>>>>>>>>>$1,881||||||||||||||||||||||||||||||||||||||||PRESENT VALUE OF INCOME STREAM
19
(3) Blended Rates
The Blended based annual net income starts at is $147,717, which is $941/space. This
net income is based on the current parking rate $0.25 per hour per space for 157 spaces. I
have increased this rate by 20% per year over the holding period. The net income in year
6 (2024) will be about $367,567, which is about $2,341 per space.
Discount Rate
The discount rate is that rate which, when applied to the projected periodic cash flows,
converts those cash flows to their present value. It is equivalent to the internal rate of
return (IRR) on either the equity or the entire property (free and clear of debt). The
Appraisal Institute defines the IRR or Yield Rate as:
The effective return on investment, as paid in dividends or interest.
To discount the proceeds to the present I have utilized a discount rate of 10%. The
discount rate is basically the rate of return that an investor must receive to justify the
investment. It is also referred to as the capitalization rate, the hurdle rate, cost of capital -
the discount rate is used in financial analysis as the interest rate for discounting expected
future cash flows to adjust for risk and the time value of money. The discount rate
reflects the risk of an investment: risky investments employ higher discount rates while
safe investments use lower rates.
For this report I have used an overall rate of 10% which includes risk and profit.
Appreciation
I have included an annual appreciation rate of 20% which would bring the rate up to
market rates in six years.
Occupancy Rate
I have used an annual occupancy rate of 85%.
Property Management and Insurance Costs
Property management and insurance costs have been estimated at 5% of gross revenues.
I have deducted this from the effective gross income.
Indirect Costs
Expenses have been estimated at $245 per parking space for a total of $38,465. Reserves
for replacement have been estimated at $10 per space.
20
Reversion at end of holding period
The owner would sell the property at the end of the holding period. I will base the selling
price on the income stream in year 6 and a capitalization rate of 10%.
Final Value – Based on Market Income
As the spreadsheet on the next page shows, after removing the relevant expenses in each
year and discounting the proceeds of the harvests and the reversion of the remaining
timber value in year 2024, the present value of the property is calculated at $2,962,942 or
$2,960,000, rounded, which represents $18,854 per parking space.
Please refer to our Discounted Cash Flow Analysis on the next page.
Subject: Roundhouse Parking Lot - Blended Rates18-Jul-19Property Address: Old South Road, Northampton, MA Effective Valuation Date: 03-Jun-19 Spaces $/SpaceMarket Value Estimate for: Parking Spaces 157.00 18,854$ Present Value of Land: $1,012,613 Reversion: $1,950,329Total Value Rounded: $2,960,000 Overall Rate of Return: 30.97% ASSUMPTIONS:# Units Income ItemTax Rate per $1,000 of Value @ Yr End -$ 157 @ $147,717 Total Annual Net IncomeMarket & Advertising Cost 0.00% @ $0 Appreciation 20.00% @ $0 Discount Rate 10.00% @ $0 @ $0 @ $0 YEAR:0 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 TOTALTotal Annual Net Income0 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 6.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00TOTAL SALES PER YEAR:0 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00 0.00 6.00APPRECIATION:0.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%PROJECTED REVENUES ($000)Total Annual Net Income -$ 148$ 148$ 148$ 148$ 148$ 148$ -$ -$ -$ -$ 886$ Annual Appreciation-$ -$ 29.5 35.5 42.5 51.1 61.3 -$ -$ -$ -$ 220$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TOTAL ANNUAL GROSS REVENUES ($000)-$ 148$ 177$ 213$ 255$ 306$ 368$ -$ -$ -$ -$ 1,106$ Ann. Gross Rev w/Appreciation148$ 177$ 213$ 255$ 306$ 368$ -$ -$ -$ -$ 1,467$ Cummulative Gross Revenues148$ 325$ 538$ 793$ 1,099$ 1,467$ 1,467$ 1,467$ 1,467$ 1,467$ 1,467$ Remaining Gross Retail Value1,106$ 1,180$ 1,240$ 1,280$ 1,280$ 1,230$ 1,110$ 440$ -$ -$ -$ -$ DIRECT COSTSRoad Construction:LengthUnit CostSewer Line Extension0.00$0-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Roadway0.00$350-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Driveway0.00$9-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Street Improvements $0 LS-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Site Preparation/Demolition0.00 $25,000 LS-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ DIRECT SUBTOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ INDIRECT COSTSMarketing & Advertising0.00% -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Legal - Initial Approvals$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Legal - Lot Sales$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Land Use Change Tax- -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Property Survey & Engineering Expenses$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Wetland Surveying and Soil Testing$0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Utility Company Fee #Poles:- $0 -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ R.E. Taxes (Per $1000 of Market Value)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Transfer Taxes0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest on Direct Costs0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Contingency(%Dir+Indir Costs)0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ SUB-TOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Profit from Net Lot Sales @0.00%-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ INDIRECT SUBTOTAL-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TOTAL EXPENSES ($000)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ NET INCOME ($000)-$ 148$ 177$ 213$ 255$ 306$ 368$ -$ -$ -$ -$ 1,467$ Discount Factor1.000 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 -$ 134$ 146$ 160$ 174$ 190$ 207$ -$ -$ -$ -$ >>>>>>>>>>>>>>>>>>>>>>>>>>>> >>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>>> >>>>>>>>>> >>>>>>>>>>> >>>>>>>>>> >>>>>>>> >>>>>>>>>> >>>>>>>>>>$1,013||||||||||||||||||||||||||||||||||||||||PRESENT VALUE OF INCOME STREAM
22
C. CORRELATION OF SUBJECT MARKET VALUE
The Cost Approach was not considered applicable to the appraisal because the subject
land is vacant.
I did not utilize the Sales Comparison approach.
I utilized the Income Approach in this appraisal to value the subject property based on
current income and expenses, with consideration for market rates. I have developed
values under three scenarios: (1) Current Rates at $0.25 per hour - $10,000 per space; (2)
Market Rates at $1.00 per hour - $28,471 per space; and (3) Blended Rate starting at
$0.25 in year 1 and increasing by 20% per year through year 6 to $0.75 per hour -
$18,854 per space.
Given that the lot currently charges $0.25 per hour, it is my opinion that the rate would be
increased incrementally to get close to the market rate. This value is represented by the
Scenario #3, the Blended Rate, which is $18,854, or $19,000 per space, rounded.
In conclusion, it is my opinion that the market value a single parking space at
Roundhouse Parking Lot, as of June 3, 2019, the effective date of this valuation,
was:
$19,000 per space
23
APPENDICES
APPENDIX 1:
Qualifications of Jay E. Closser, Senior Advisor
24
QUALIFICATIONS OF THE APPRAISER
JAY E. CLOSSER, ASA
Senior Advisor, Real Estate Consulting Group, LandVest, Inc.
Jay E. Closser is a Senior Advisor with the Real Estate Consulting Group of LandVest,
Inc., a broad-based real estate company involved in all aspects of land planning, real
estate brokerage, consulting, development, and conservation planning. As Senior
Advisor, he is responsible for residential and commercial appraisals, development
feasibility studies, land use planning and design, and implementation of development
projects.
Prior to joining LandVest, Inc., Mr. Closser was the Principal of Temple Hill Associates,
an appraisal firm owned by Mr. Closser. He was the Town Appraiser in Concord, MA, a
position where he was responsible for the valuation of all real estate in the town for
taxation purposes. Mr. Closser has lectured and published articles on the Valuation of
Land under Conservation Restrictions.
Mr. Closser received a Bachelor of Arts degree in English from Princeton University in
1975. He is a Certified General Appraiser with Massachusetts General License CG #730;
Maine General License CG #1523; New Hampshire General License NHCG #779; and
Vermont License CG #80-232. He is an affiliate of the Appraisal Institute. He is a
Senior Member of the American Society of Appraisers.