in accordance with your request, i submit my summary appraisal … · 2018. 8. 17. · manhattan,...
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Client File No. KEYBOARD (If Applicable) OG File No. KEYBOARD
QQ Building QQ Street Road Boulevard Highway QQ
Block QQ, Lot QQ QQ City Town Borough
QQ County, New Jersey New York Pennsylvania
PREPARED FOR
Mr. Jonathan Steingraber Ridgewood Ave Partners LLC
52 Spring Valley Rd Morristown, New Jersey 07960
APPRAISAL REPORT
OG File No. 18040071 29 Unit Condominium Subdivision
(6 Townhouses; 19 Flats; 4 COAH Flats) 68-74 Ridgedale Avenue
Block 702, Lots 8, 9, 10, & 11 Town of Morristown
Morris County, New Jersey
O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
800-458-7161 www.otteau.com
New Jersey Office (Mail) 100 Matawan Road, Suite 320 Matawan, NJ 07747
New York Office 112 W. 34th Street, 18th Floor Manhattan, NY 10120
Pennsylvania Office 325-41 Chestnut Street, Suite 800 Philadelphia, PA 19106
June 6, 2018 Mr. Jonathan Steingraber Ridgewood Ave Partners LLC 52 Spring Valley Rd Morristown, New Jersey 07960 RE: OG File No. 18040071
29 Unit Condominium Subdivision (6 Townhouses; 19 Flats; 4 COAH Flats) 68-74 Ridgedale Avenue Block 702, Lots 8, 9, 10, & 11 Town of Morristown Morris County, New Jersey
Dear Mr. Jonathan Steingraber: In accordance with your request, we submit our appraisal report of the above referenced property. We have carefully inspected the property and have made a thorough study, investigation and analysis of all matters important to the estimation of its market value. This appraisal has been developed and the report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) as adopted by the Appraisal Foundation, the 2010 Interagency Appraisal and Evaluation Guidelines and the requirements of the Title XI of the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) and revisions. The purpose of the appraisal is to estimate the prospective market value of the subject property subject to completion as per plans and specifications in fee simple estate, as follows:
1) The As Is market value to a single purchaser, of a 0.87 acre tract, approved for 29 units (6 Townhouses; 19 Condo Flats; 4 Affordable Rate Flats).
2) The As Complete market value to a single purchaser, of a 0.87 acre tract,
approved for 29 units (6 Townhouses; 19 Condo Flats; 4 Affordable Rate Flats), assuming that all construction improvements have been completed, but prior to any closings.
3) The Gross Sellout revenue of 29 units.
This report includes the pertinent data secured in my investigation, any assumptions and limiting conditions, as well as the exhibits and the details of the processes used to arrive at my conclusions of value.
O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Property Description: The subject consists of a 0.87 vacant land parcel that is approved for the development of a 29 unit condominium building. The building will be comprised of 6 Market Rate Townhouses with an average unit size of 1,572-square feet, and 19 Market Rate Flats with an average unit size of 1,238-square feet. The building will also include 4 Affordable Rate Flats with an average unit size of 1,276-square feet. Our appraisal has developed the following value conclusions regarding the subject property:
AS IS
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2018
Value Conclusion $4,225,000
Value Conclusion $11,900,000
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2019
AS COMPLETE
Revenue $13,400,000
GROSS SELLOUT
Value Type Revenue
Extraordinary Assumptions
An assumption, directly related to a specific assignment, as of the effective date of the
assignment results, which, if found to be false, could alter the appraiser’s opinions or
conclusions.
This appraisal is subject to the following Extraordinary Assumptions, which can have an effect
on the value conclusion of this report:
• That the subject property will be constructed according to plans and specification as
submitted to the appraisers.
• That the provided site costs are considered reasonable, as the appraiser is not a
licensed site engineer.
• AS COMPLETE - That the developer will complete construction on the entire project
prior to any sales occurring. This is not customary in subdivisions but is an assumption
in the report, as requested by the client.
O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Hypothetical Conditions
A condition, directly related to a specific assignment, which is contrary to what is known by the
appraiser to exist on the effective date of the assignment results, but is used for the purpose of
analysis.
This appraisal is not subject to any Hypothetical Conditions.
Respectfully submitted,
Christopher J. Otteau, MAI, AI-GRS Mario G. Carrico Principal Senior Appraiser New Jersey SCGREA #42RG00219400 New Jersey SCRREA #42RC00259200 New York SCGREA #46000049674 New York SCGREA #45000051312 Pennsylvania SCGREA #GA003794 CJO/MC/td
TABLE OF CONTENTS
PART I – INTRODUCTION ........................................................................................................ 1 Executive Summary .................................................................................................................... 1 Certification of the Appraisers .................................................................................................... 2
Subject Property Location Map .................................................................................................. 3 Subject Property Photos .............................................................................................................. 4 Date of Value Estimate ............................................................................................................... 9 Identification of Property ............................................................................................................ 9 Intended Users of the Appraisal .................................................................................................. 9
Intended Use of the Appraisal ..................................................................................................... 9
Real Property Interest Appraised .............................................................................................. 10 Definition of Market Value ....................................................................................................... 10
Scope of Work .......................................................................................................................... 11 Competency Provision .............................................................................................................. 13 Limiting Conditions, Assumptions and Hypothetical Conditions ............................................ 14
PART II – FACTUAL DESCRIPTIONS .....................................................................................18 Tax and Assessment Analysis ................................................................................................... 18 Ownership and History of Property .......................................................................................... 18 Area Analysis ............................................................................................................................ 19
Neighborhood Analysis ............................................................................................................ 25
Zoning & Land Use Regulations .............................................................................................. 28
Site Analysis ............................................................................................................................. 30 Proposed Improvement Analysis .............................................................................................. 36
Provided Plans .......................................................................................................................... 40 PART III – MARKET & VALUATION ANALYSIS .....................................................................47
Market Analysis ........................................................................................................................ 47 Highest and Best Use ................................................................................................................ 52
Scenario 1 - (As Is) ................................................................................................................... 54 Sales Comparison Approach ..................................................................................................... 54 Cost Approach .......................................................................................................................... 63
Income Approach ...................................................................................................................... 63
Scenario 2 – (As Complete) ...................................................................................................... 88
Sales Comparison Approach ..................................................................................................... 88 Cost Approach .......................................................................................................................... 88
Income Approach ...................................................................................................................... 89 Reconciliation of Scenario 2 (As Complete) ............................................................................ 91 Scenario 3 – (Gross Sellout Revenue) ...................................................................................... 92 Reasonable Marketing Time ..................................................................................................... 93 Reasonable Exposure Time....................................................................................................... 93
Final Value Summary ............................................................................................................... 94
PART IV – ADDENDUM ...........................................................................................................95 Professional Qualifications ....................................................................................................... 95 COAH Calculator.................................................................................................................... 102 Provided Construction Budget ................................................................................................ 103 Provided Approvals ................................................................................................................ 104 Subject Deed ........................................................................................................................... 117
Subject Tax Records ............................................................................................................... 124 Common Terminology ............................................................................................................ 128
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PART I – INTRODUCTION Executive Summary
Property Description: The subject consists of a 0.87 vacant land parcel that is approved for the development of a 29 unit condominium building. The building will be comprised of 6 Market Rate Townhouses with an average unit size of 1,572-square feet, and 19 Market Rate Flats with an average unit size of 1,238-square feet. The building will also include 4 Affordable Rate Flats with an average unit size of 1,276-square feet. Location: 68-74 Ridgedale Avenue
Town of Morristown Morris County New Jersey
Block/Lot: Block 702, Lots 8, 9, 10, & 11 Property Use as of Valuation Date: Vacant Land Land Area: 0.87 acres / 37,990 square feet Utilities: Public Water, Public Sewer, Natural Gas Zoning: RG-R, Medium Density Residential Highest and Best Use – As Vacant: Multifamily Development
Highest and Best Use – As Improved: Not Applicable – Vacant Land
Marketing Time: Ten to Twelve Months Exposure Time: Ten to Twelve Months Value Indications:
AS IS
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2018
Value Conclusion $4,225,000
Value Conclusion $11,900,000
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2019
AS COMPLETE
Revenue $13,400,000
GROSS SELLOUT
Value Type Revenue
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Certification of the Appraisers
We certify that, to the best of our knowledge and belief:
The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.
We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice as adopted by the Appraisal Foundation, Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and revisions and the 2010 Interagency Appraisal and Evaluation Guidelines. The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.
Mario G. Carrico has made a personal inspection of the property that is the subject of this report. Christopher J. Otteau, MAI, AI-GRS conducted an exterior inspection of the subject.
We have performed services as appraisers regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment Ashley Stasio has provided research and report writing assistance to the person(s) signing this report with regard to legal description, taxes and assessments, history of property, zoning, comparable sales analysis, cost analysis and income analysis. As of the date of this report, Christopher J. Otteau, MAI, AI-GRS has completed the continuing education requirements for designated Members of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. We have completed the continuing education requirements of our active appraisal licenses indicated in the addendum of this report.
Christopher J. Otteau, MAI, AI-GRS Mario G. Carrico Principal Senior Appraiser New Jersey SCGREA #42RG00219400 New Jersey SCRREA #42RC00259200 New York SCGREA #46000049674 New York SCGREA #45000051312 Pennsylvania SCGREA #GA003794
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Subject Property Location Map
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Subject Property Photos
Front Views
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Street Views
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Front Views (As Complete)
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Interior Views (As Complete)
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Interior Views (As Complete)
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Date of Value Estimate
The date of this report is June 6, 2018, which identifies when the appraisal valuation analysis
and report were prepared. The As Is effective valuation date of the subject property is based on
the date of physical inspection which occurred on April 25, 2018. The As Complete valuation
is based upon when all construction is anticipated to be completed on April 25, 2019.
Identification of Property
The subject property is commonly known as 68-74 Ridgedale Avenue, Town of Morristown,
Morris County, New Jersey. The subject property is located along Ridgedale Avenue, near the
intersection of Abbett Avenue. The current owner of record is Ridgewood Ave Partners LLC.
The subject will consist of 29 condominium units as summarized below:
Intended Users of the Appraisal
The intended user of the appraisal is the client, Mr. Jonathan Steingraber. Any reliance upon
this report by anyone other than the client is unintended.
Intended Use of the Appraisal
The intended use of the appraisal is to provide the client, Mr. Jonathan Steingraber, to
ascertain the As Is, and As Complete Market Value of the subject property for negotiating and
marketing purposes.
Unit
Square
Foot Bed / Bath Model Product Type Unit
Square
Foot Bed / Bath Model Product Type
101 1,585 2 BR / 3 BTH Type 1 Townhouse 302 1,200 2 BR / 2 BTH Type 7 Flat
102 1,565 2 BR / 3 BTH Type 2 Townhouse 303 1,245 2 BR / 2 BTH Type 8 Flat
103 1,565 2 BR / 3 BTH Type 2 Townhouse 304 1,245 2 BR / 2 BTH Type 8 Flat
104 1,565 2 BR / 3 BTH Type 2 Townhouse 305 1,317 2 BR / 2 BTH Type 4 Flat
105 1,565 2 BR / 3 BTH Type 2 Townhouse 306 1,325 2 BR / 2 BTH Type 6 Flat
106 1,585 2 BR / 3 BTH Type 1 Townhouse 307 1,110 2 BR / 2 BTH Type 5 Affordable Rate Flat
201 1,200 2 BR / 2 BTH Type 7 Flat 308 1,167 2 BR / 2 BTH Type 11 Flat
202 1,200 2 BR / 2 BTH Type 7 Flat 309 1,167 2 BR / 2 BTH Type 12 Flat
203 1,245 2 BR / 2 BTH Type 8 Flat 310 1,167 2 BR / 2 BTH Type 12 Flat
204 1,245 2 BR / 2 BTH Type 8 Flat 311 1,167 2 BR / 2 BTH Type 11 Flat
205 1,390 2 BR / 2 BTH Type 3 Flat 401 1,200 2 BR / 2 BTH Type 7 Flat
206 804 1 BR / 1 BTH Type 9 Affordable Rate Flat 402 1,200 2 BR / 2 BTH Type 7 Flat
207 1,110 2 BR / 2 BTH Type 5 Affordable Rate Flat 403 1,245 2 BR / 2 BTH Type 8 Flat
301 1,200 2 BR / 2 BTH Type 7 Flat 404 1,775 3 BR / 3 BTH Type 10 Affordable Rate Flat
405 1,392 2 BR / 2 BTH Type 3 Flat
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This report should not be relied upon for an unintended use or by any unintended users as it
may not contain sufficient information for adequate understanding by those unaccustomed to
reading appraisal reports, and thus, to rely upon this report may not serve the needs of other
intended uses not specifically listed.
Real Property Interest Appraised
The property rights appraised within this report consist of the fee simple estate within the
subject property.
The fee simple estate is defined as follows:
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat.
Source: The Dictionary of Real Estate Appraisal, Fifth Edition, published by the Appraisal Institute, page 78 Definition of Market Value
Market Value is defined for purposes of the report as:
“The most probable price which a property should bring in a competitive 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
conditions whereby:
▪ buyer and seller are typically motivated; ▪ both parties are well informed or well advised and each acting in what they
consider their best interests; ▪ a reasonable time is allowed for exposure in the open market; ▪ payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and ▪ 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."
Source: 12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994)
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Scope of Work
Mr. Jonathan Steingraber authorized an appraisal of the subject property. This appraisal
report has been prepared in conformity with the current edition of the Uniform Standards of
Professional Appraisal Practice (USPAP). An appraisal is an estimate of value. An orderly
procedure is followed so as to arrive at this value estimate by which the appraisal problem is
defined; the work necessary to solve the problem is planned and the data involved is acquired,
classified, analyzed, interpreted and translated into an estimate of value. This entire procedure
is referred to as the appraisal process. In determining the value estimate of a parcel of real
estate, the appraiser may consider three (3) separate but interrelated approaches to value.
These are commonly known as the Sales Comparison Approach, Cost Approach and Income
Approach.
• The Sales Comparison Approach is based upon the proposition an informed purchaser
would pay no more for a property than the cost of acquiring an existing property with the
same utility. In applying this approach the appraiser extracts information from the
market for similar properties that have sold, which are then adjusted to the subject
property. A final interpretation is then made in order to arrive at a value estimate for the
subject property. Since this approach is based upon the reaction of typically informed
buyers and sellers, it is considered the most reliable methodology for most property
types.
• The Cost Approach is based upon the proposition that an informed purchaser would pay
no more for a property than the cost of producing a substitute property with the same
utility. This approach is particularly applicable when the property being appraised
involves relatively new improvements which represent the highest and best use of the
land or when relatively unique or specialized improvements are located on the site and
for which there exist no comparable properties that have either sold or are on the
market.
• The Income Approach is based on the understanding that discounted future income is
the logical basis of value. Specifically, net cash flow before recapture and debt service
provides the basis for capitalization. In this regard, the rate of discount will depend on
the perceived risk associated with an investment in the subject property. The
Subdivision Development Method is a "method of estimating land value when
subdivision and development are the highest and best use of the parcel of land being
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appraised. An appraiser deducts all direct and indirect costs and entrepreneurial profit
from an estimate of the anticipated gross sales price of the finished lots; the resultant net
sales proceeds are then discounted to present value at a market-derived rate over the
development and absorption period to indicate the value of the raw land" (The Dictionary
of Real Estate Appraisal, Fifth Edition, published by the American Institute of Real Estate
Appraisers).
VALUATION METHODOLOGY OF THE APPRAISAL
Approach Applicability to Subject Use in Assignment
Sales Comparison Approach Applicable Yes Cost Approach Applicable Yes Income Capitalization Approach Applicable Yes
The scope of work in developing this appraisal included the following:
1. Identification of the Appraisal Problem: Identification of the property, type of value, and property rights appraised. The appraisal estimates market value of the fee simple interest of the property.
2. Inspection of the Property: A property inspection was conducted on April 25, 2018 by Mario G. Carrico. The appraiser was granted complete access to the property.
3. Research & Verification: Collection of relevant facts related to the subject property including but not limited to zoning, utilities, land areas, restrictions, economic factors, demographic factors, easements and other pertinent factors which are considered germane to the assignment. Ashley Stasio has provided research assistance to the person(s) signing this report.
4. Comparable Sales Data: Collection and verification of the comparable data with one or more of the parties who have knowledge of the transactions including but not limited to buyers, sellers, brokers, lawyers, lenders, appraisers and government transfer and property records.
5. Highest & Best Use: Consideration of the highest and best use of the subject and other factors affecting value.
6. Valuation Analysis: Consideration of the recognized and accepted approaches to value and other analytical techniques, and the explanation and application of those which are considered to be the most appropriate to utilize in estimating value as well as providing the rationale for not utilizing those considered the least appropriate. The subject property has been valued taking into consideration all forces influencing value.
7. Conclusion: Reconciliation of the value estimates resulting from the utilization of the various approaches into a final value conclusion.
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Effective January 1, 2014, the Appraisal Standards Board revised the Uniform Standards of
Professional Appraisal Practice to reflect two report options: Appraisal Report and Restricted
Appraisal Report. The essential difference among these options is the content and level of
information provided. The appropriate reporting option and the level of information necessary in
the report are dependent on the intended use and the intended users.
An Appraisal Report may have the client as the only intended user but may also have other
intended users; specified parts of the research and development must be summarized; must
summarize information analyzed and reasoning that supports analyses, opinions and
conclusion.
A Restricted Appraisal Report must have the client as the only intended user. Research and
development need only be stated. A restricted appraisal must include a prominent use
restriction that limits the use of the report to the client and warns that the rationale for how
opinions and conclusions set forth were arrived at may not be properly understood without
additional information.
This property valuation was prepared in accordance with the requirements of the Appraisal
Report option of USPAP Standards.
Competency Provision
We are aware of the competency provision of the Uniform Standards of Professional
Appraisal Practice (USPAP). The author(s) of this report meets those standards. It is our opinion
that we are fully competent to perform this appraisal, because:
• We have full knowledge and experience in the nature of this assignment.
• All necessary and appropriate steps have been taken in order to complete the
assignment competently; and
• We do not lack any knowledge or experience that would prohibit this assignment from
being completed in a professional and competent manner, or where a biased or
misleading opinion of value would be rendered.
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Limiting Conditions, Assumptions and Hypothetical Conditions
The legal description furnished to us is assumed to be correct. We assume no responsibility for
the matters legal in character nor do we render any opinion as to the title, which is assumed to
be held in fee simple. All existing liens and encumbrances have been disregarded and the
property is appraised as though free and clear under responsible ownership and competent
management.
Title is assumed to be held in fee simple, unless otherwise noted, and no liens or
encumbrances, except those noted, were considered.
Possession of this appraisal report, or a copy thereof, does not carry with it the right of
publication, nor may it be used for any purpose by any but the applicant and then only with
proper qualification. Neither all nor any part of the contents of this report (especially
conclusions as to value, identity of the appraisers or the firm) shall be used for any purposes by
anyone but the client specified in the report nor shall it, or any part, be disseminated to the
public through advertising media, public relations consent or approval of the appraisers.
Further, the appraisers, or the firm, assume no obligation, liability, or accountability to any third
party. If this report is placed in the hands of anyone but the client, the client shall make such
party aware of all of the assumptions and limiting conditions of the assignment.
The appraisers have made no survey and the sketches in the report are for illustrative purposes
only.
We believe to be reliable the information which was furnished to us by others, but we assume
no responsibility for its accuracy.
Unless otherwise noted herein, it is assumed that there are no encroachments, easements,
zoning violations, use restrictions, or other conditions not evident upon surface inspection of the
property. Description of the physical condition of the improvements is based on a visual
inspection only. No liability is assumed for the soundness of structural members since no
engineering tests were made by the appraisers.
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Testimony and court appearances in connection with this appraisal are limited to those
situations for which prior arrangements have been made.
We reserve the right to recall this appraisal and make any amendments, corrections, or changes
that we may deem necessary.
This valuation must not be used in conjunction with any other appraisal.
On January 26, 1992, federal legislation entitled, The Americans with Disabilities Act (ADA)
became effective. The appraisers have not been provided with a compliance survey nor has
any analysis been made to determine whether or not the subject is in conformity with the
requirements of the ADA. It is possible that compliance with the act will require expenditures for
barrier removal construction. Such expense, if required, could have a negative impact on the
value of the subject. This appraisal is expressly made under the assumption that the subject is
in compliance with ADA, or that there are no significant measurable required expenditures for
compliance with ADA that would have a negative impact on the value or marketability of the
subject.
The appraisers are not qualified to test for the presence of Hazardous substances. The
presence of such hazardous substances or environmental conditions may affect the value of the
property. The valuation contained in this appraisal assumed that the property is not polluted or
otherwise contaminated and does not reflect any diminution of value as a result of
environmental conditions. This valuation is subject to change depending on the availability of
information concerning the environmental condition of the property in question.
The Freshwater Wetlands Protection Act restricts the use and development of freshwater
wetlands. Effective July 1, 1988 the DEP was established as the reviewing and approving
authority for all development within or adjacent to freshwater wetlands. This legislation
established certain development criteria including, but not limited to, variable buffers around
authorized development adjacent to freshwater wetlands.
The identification and delineation of freshwater wetlands on the subject property, if any, has not
been brought to our attention nor did we become aware of any such delineations during our
inspection of the subject nor during our investigations for this report; however, the appraisers
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are not qualified to render a professional opinion as to the presence or extent of freshwater
wetlands. The reader is advised to seek competent, professional advice in identifying any such
potential freshwater wetlands since identification and delineation of any freshwater wetlands
within the subject boundaries could have significant impact upon values thereby requiring
appraisal revision.
The subject site may have underground fuel storage tank(s). The underground tank(s) could be
a liability. Neither the composition not the condition of the tanks is known to the appraisers.
The typical life expectancy of an underground tank is 15 to 20 years, (federal guidelines suggest
a 10-year life span). Soil contamination could occur if a tank leaks and would be costly to clean
up. Without a detailed physical inspection of the tanks and the surrounding soil, it is impossible
to estimate potential clean-up costs. Therefore, this analysis does not cover such
contingencies.
The appraisers are not experts in such matters as soils, structural engineering, hazardous
waste, environmental assessment, etc., and no warranty is given as to these elements.
Similarly, the appraisers are not certified building inspectors or structural engineers and have
therefore assumed the electrical, mechanical, plumbing, roofing and HVAC systems to be
adequate and in normal operating order at the time of inspection. Further, the appraisers have
performed a surface inspection only and has not inspected any scuttle attic areas or crawl
basements as this exceeds the normal scope of work for appraisal purposes. Accordingly, this
appraisal has been developed based upon the assumption that problems do not exist in these
areas. The Intended User is advised to have qualified experts in these fields perform an
inspection of the subject property with the final estimate of value set forth herein being subject
to their findings.
Extraordinary Assumptions
An assumption, directly related to a specific assignment, as of the effective date of the
assignment results, which, if found to be false, could alter the appraiser’s opinions or
conclusions.
This appraisal is subject to the following Extraordinary Assumptions, which can have an effect
on the value conclusion of this report:
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• That the subject property will be constructed according to plans and specification as
submitted to the appraisers.
• That the provided site costs are considered reasonable, as the appraiser is not a
licensed site engineer.
• AS COMPLETE - That the developer will complete construction on the entire project
prior to any sales occurring. This is not customary in subdivisions but is an assumption
in the report, as requested by the client.
Hypothetical Conditions
A condition, directly related to a specific assignment, which is contrary to what is known by the
appraiser to exist on the effective date of the assignment results but is used for the purpose of
analysis.
This appraisal is not subject to any Hypothetical Conditions.
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PART II – FACTUAL DESCRIPTIONS
Tax and Assessment Analysis
According to the official records of the Morris County Board of Taxation, the subject property is legally described as Block 702, Lots 8, 9, 10, & 11, Town of Morristown, Morris County, New Jersey. 2017 Assessments:
Based on the value estimate contained within this appraisal analysis, current assessments
appear low. The appraisers have projected the taxes on the land once fully assessed as
follows:
Ownership and History of Property
The current owner of record is Ridgewood Ave Partners LLC.
Previous Sales
Last Transfer of Title: October 14, 2016 Grantor: Ridgedale Commons at Morristown, LLC Grantee: Ridgewood Ave Partners LLC Consideration: $ 2,200,000.00 Recording Information:
Date: October 24, 2016 Book: 23011 Page: 1637
Address Block Lot
Land
Value
Improvement
Value
Total
Value
Tax
Rate
2017
Taxes
EQ
Ratio EQ Tax Value
74 Ridgedale Avenue 702 8 $160,200 $0 $160,200 $2.760 $4,421.52 72.42% $221,209.61
72 Ridgedale Avenue 702 9 $160,100 $0 $160,100 $2.760 $4,418.76 72.42% $221,071.53
70 Ridgedale Avenue 702 10 $168,900 $0 $168,900 $2.760 $4,661.64 72.42% $233,222.87
68 Ridgedale Avenue 702 11 $147,000 $0 $147,000 $2.760 $4,057.20 72.42% $202,982.60
$636,200 $0 $636,200 $17,559.12 $878,486.61Total
Land Value $4,225,000
Equalization Ratio 72.42%
Equalized Value $3,059,745
Tax Rate 2.689%
Projected Taxes $82,277
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The subject property is not currently listed for sale in either the Garden State MLS, CoStar,
LoopNet or Zillow. Change in value since acquisition is attributed to partially completed site
improvements and improved market conditions. The appraisers discovered a Facebook page
(https://www.facebook.com/RidgedaleCommons/) that advertised flats starting at $435,000, and
townhouses starting at $525,000. The page further indicates all units are sold out as of
November 28, 2017. The appraisers contacted the client, Mr. Jonathan M. Steingraber,
regarding this page, who stated “Weichert falsely put out LOI's without legally being allowed to
do so since they were not registered with Department of Community Affairs and did not have
BYLAWS or MASTER DEED in place for HOA association. They got $1,000 refundable LOI's for
people to hold units at low prices and sold out in 2 weeks. None of those LOI's are currently in
place and are not a true reflection of the price on the condos.”
Our investigation of the property indicates no additional transfers of title, leases, options, listing
agreements or pending purchase contracts regarding the subject property within the past 5
years.
Area Analysis
The subject property is located within Morris
County, which is located just 35 miles west of
New York and 20 miles east of Pennsylvania.
Morris County, part of the Newark
Metropolitan Area, is one of the faster
growing counties in New Jersey. With a land
area of 469 square miles and an estimated
2018 population of 498,852, makes Morris
one of the northern region's less densely
populated counties. While the county has
become increasingly suburban with most residents living in the eastern portion, many parts
retain a rustic nature, enhanced by many lakes and wooded areas. Morris County has a
predominantly nonfarm economy, but some agriculture, such as dairy and livestock, fruit
orchards and field crops, is evident in the western portion of the county despite advancing
suburban development.
Major roadways in Morris County include I-287, I-80, Route 46, Route 206, Route 202 and
Route 24. New Jersey Transit serves thousands of county commuters while rail services are
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provided by the Norfolk Southern Railway, the Morristown & Erie Railroad and the New York,
Susquehanna and Western Railroad. Bus service is also available and the county hosts 2
airports.
The county’s skilled labor pool, extensive road network and available rail transportation all
contributed to its history of attracting employers. According to the Greater Raritan Workforce
Development Board, the largest employer in Morris County is Atlantic Health System, employing
approximately 7,900 people. Other major employers in the county with 2,000-5,000 employees
include Novartis, Bayer, and UPS. Also noteworthy, is that there are 2,650 state government
employees located in Morris County.
Population growth in Morris County has slowed down since 2010 to 1.34%, which is lower than
the state’s growth rate of 2.01%. The age of Morris County’s residents is higher than the state,
with a median age of 42.90 years compared to 40.13 statewide.
Population % %
2000 Estimate 470,297 8,414,361
2010 Census 492,276 8,791,894
2018 Census 498,852 8,968,348
Growth 2000 - 2010 4.67 4.49
Growth 2010 - 2018 1.34 2.01
2018 Est. Median Age 42.90 40.13
2018 Est. Average Age 41.30 40.10
POPULATION FACTS & TRENDS
Morris County New Jersey
Source: US Census Bureau; Environics Analytics; Otteau Group, Inc.
Household formation in Morris County is consistent with the state. With a 2.17% growth rate
over the past eight years, compared to the statewide increase of 2.15%. Also of importance is
that 64.43% of households in the county have no children under the age of 18 living at home,
which is consistent with statewide trends.
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Households % %
2000 Estimate 169,741 3,064,642
2010 Census 180,534 3,214,360
2018 Census 184,452 3,283,467
Growth 2000 - 2010 6.36 4.88
Growth 2010 - 2018 2.17 2.15
Households with 1 or More People under Age 18: 65,613 35.57 1,147,467 34.95
Households with No People under Age 18: 118,839 64.43 2,136,000 65.05
2018 Est. Households by Number of Vehicles 270,283 3,283,467
No Vehicles 9,046 4.90 369,693 11.26
2018 Est. Households by Household Size 184,452 3,283,467
1-person 44,509 24.13 840,588 25.60
2-person 56,132 30.43 969,133 29.52
3-person 32,154 17.43 574,259 17.49
4-person 31,422 17.04 504,518 15.37
5-person 13,695 7.42 238,090 7.25
6-person 4,440 2.41 92,912 2.83
7-or-more-person 2,100 1.14 63,967 1.95
2018 Est. Average Household Size 2.66 2.67
HOUSEHOLD FACTS & TRENDS
Morris County New Jersey
Source: US Census Bureau; Environics Analytics; Otteau Group, Inc.
In term of education attainment over half of county residents have a bachelor’s degree or
higher, which is much higher than statewide figures. On average residents in the county have a
33-minute commute, which is slightly less than the statewide average of 34 minutes.
% %
2018 Est. Pop Age 25+ by Edu. Attainment 348,400 6,198,293
Bachelor's Degree 104,085 29.88 1,435,321 23.16
Master's Degree 56,024 16.08 638,910 10.31
Professional School Degree 12,751 3.66 150,864 2.43
Doctorate Degree 7,284 2.09 92,496 1.49
2018 Est. Pop 16+ by Occupation Classification 263,894 4,366,606
White Collar 196,640 74.52 2,857,215 65.43
Blue Collar 32,696 12.39 769,006 17.61
Service and Farm 34,558 13.10 740,385 16.96
2018 Est. Workers Age 16+ by Transp. to Work 257,746 4,274,982
Drove Alone 203,989 79.14 3,071,466 71.85
Car Pooled 17,419 6.76 326,508 7.64
Public Transportation 13,689 5.31 488,241 11.42
Walked 5,036 1.95 135,928 3.18
Bicycle 422 0.16 13,930 0.33
Other Means 2,434 0.94 64,012 1.50
Worked at Home 14,757 5.72 174,897 4.09
2018 Est. Avg Travel Time to Work in Minutes 33.00 34.00
2018 Est. Average Number of Vehicles 1.90 1.70
EDUCATION & EMPLOYMENT
Morris County New Jersey
Source: US Census Bureau; Environics Analytics; Otteau Group, Inc.
Household income in Morris County is greater than statewide figures, with an average
household income of $156,028 and median of $110,518.
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% %
2018 Est. Households by HH Income 184,452 3,283,467
Income < $15,000 7,754 4.20 282,134 8.59
Income $15,000 - $24,999 8,678 4.71 247,013 7.52
Income $25,000 - $34,999 8,082 4.38 235,878 7.18
Income $35,000 - $49,999 13,664 7.41 334,600 10.19
Income $50,000 - $74,999 23,310 12.64 489,727 14.91
Income $75,000 - $99,999 22,106 11.98 394,820 12.02
Income $100,000 - $124,999 19,670 10.66 327,067 9.96
Income $125,000 - $149,999 16,142 8.75 247,394 7.54
Income $150,000 - $199,999 22,689 12.30 297,768 9.07
Income $200,000 - $249,999 12,326 6.68 145,948 4.45
Income $250,000 - $499,999 17,153 9.30 177,176 5.40
Income $500,000+ 12,878 6.98 103,942 3.17
2018 Est. Average Household Income $156,028 $112,273
2018 Est. Median Household Income $110,518 $78,026
2018 Est. Families by Poverty Status 131,498 2,268,374
2018 Families at or Above Poverty 127,506 96.96 2,084,580 91.90
2018 Families at or Above Poverty with Children 57,631 43.83 953,814 42.05
2018 Families Below Poverty 3,992 3.04 183,794 8.10
2018 Families Below Poverty with Children 2,716 2.06 139,468 6.15
INCOME
Morris County New Jersey
Source: US Census Bureau; Environics Analytics; Otteau Group, Inc.
The median home price in Morris County is $444,133 which is 33% greater than the statewide
median of $333,253. Most of the homes in Morris County are single family detached (65.94%),
with an average age of 47 years.
% %
2018 Est. Occupied Housing Units by Tenure 184,452 3,283,467
Owner Occupied 137,517 74.55 2,132,497 64.95
Renter Occupied 46,935 25.45 1,150,970 35.05
2018 Owner Occ. HUs: Avg. Length of Residence 18 18
2018 Renter Occ. HUs: Avg. Length of Residence 7 7
2018 Est. Median All Owner-Occupied Housing Value $444,133 $333,253
2018 Est. Housing Units by Units in Structure 195,304 3,654,659
1 Unit Attached 15,769 8.07 340,301 9.31
1 Unit Detached 128,792 65.94 1,946,394 53.26
2018 Est. Median Year Structure Built 1971 1968
HOUSING
Morris County New Jersey
Source: US Census Bureau; Environics Analytics; Otteau Group, Inc.
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The subject property is located within the Town
of Morristown, which is situated at the south
eastern portion of Morris County. Morristown is
a town and county seat of Morris County, New
Jersey, United States. Morristown has been
called "the military capital of the American
Revolution" because of its strategic role in the
war for independence from Great Britain. Today
this history is visible in a variety of locations
throughout the town that collectively make up
Morristown National Historical Park.
According to the United States Census Bureau, Morristown had a total area of 3.026 square
miles, including 2.929 square miles of land and 0.097 square miles of water (3.22%).
Morristown is completely surrounded by Morris Township, making it part of 21 pairs of
"doughnut towns" in the state, where one municipality entirely surrounds another.
As of the 2010 United States Census, there were 18,411 people, 7,417 households, and 3,649
families residing in the town. The population density was 6,284.9 per square mile. There were
8,172 housing units at an average density of 2,789.6 per square mile.
There were 7,417 households out of which 22.7% had children under the age of 18 living with
them, 31.1% were married couples living together, 12.0% had a female householder with no
husband present, and 50.8% were non-families. 38.8% of all households were made up of
individuals, and 9.5% had someone living alone who was 65 years of age or older. The average
household size was 2.40 and the average family size was 3.13.
The median household income was $64,279 and the median family income was $66,070. The
per capita income for the borough was $37,573. About 10.2% of families and 9.5% of the
population were below the poverty line, including 16.1% of those under age 18 and 8.8% of
those age 65 or over.
The Morris School District is a regional public-school district that serves students in pre-
kindergarten through twelfth grade from the communities of Morristown and Morris Township,
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and high school students (grades 9-12) from Morris Plains who attend the high school as part of
a sending/receiving relationship with the Morris Plains Schools. As of the 2014-15 school year,
the district and its 10 schools had an enrollment of 5,123 students and 426.7 classroom
teachers, for a student–teacher ratio of 12.0:1. Schools in the district are Lafayette Learning
Center (PreK), Hillcrest School (K-2), Alfred Vail School (K-2), Woodland School (K-2),
Alexander Hamilton School (3-5), Thomas Jefferson School (3-5), Sussex Avenue School (3-5),
Normandy Park School (K-5), Frelinghuysen Middle School (6-8) and Morristown High School
(9-12).
In addition to a public-school system, Morristown has several private schools. Primary and
elementary schools include The Red Oaks School, a Montessori school serving students from
pre-school through grade eight. Assumption Roman Catholic is a grade school (K-8) that
operates under the auspices of the Roman Catholic Diocese of Paterson and was one of 11
schools in the state recognized in 2014 by the United States Department of Education's
National Blue Ribbon Schools Program. The Peck School, a private day school which serves
students in kindergarten through grade eight, dates back to 1893. The Delbarton School is an
all-boys Roman Catholic school with students in grades seven through twelve. The Morristown-
Beard School, a private co-ed school formed from the merger of two previously existing
institutions, Morristown Preparatory School and Miss Beard's School, serves grades 6 through
12. In addition, Villa Walsh Academy, a private Catholic college preparatory school conducted
by the Religious Teachers Filippini, is located in Morristown.
NJ Transit local bus service is offered from the Morristown rail station, Morristown Medical
Center and Headquarters Plaza on the 871, 872, 873, 874, 875 and 880 bus routes, replacing
service that had been offered on the MCM1, MCM2, MCM3, MCM4, MCM8 and MCM10 routes
until 2010, when subsidies to the local provider were eliminated as part of budget cuts.
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Neighborhood Analysis
The neighborhood is bound by Morris Plains to the north, Madison to the east, Mendham to the
west and Randolph to the west. The subject property’s neighborhood area is given over to
commercial retail and office use, light industrial uses, small income properties, apartment
buildings such as Park Plaza and Morristown Court, condominium developments and single
family uses. Located to the rear of the subject site is a JCP&L transmission which will be
slightly visible from some of the subject’s units. Neighborhood appeal is enhanced by close
proximity to Morristown train station, Interstate 287 and Route 24. Morristown train station
offers commuters access to New York City, Interstate 287 connects to New York State to the
north, and Route 24 connects to Interstate 78 and New York City to the east. The subject’s
neighborhood area has the following market trend and characteristics:
The subject property’s proposed use is considered well suited for its neighborhood location.
The properties in this neighborhood area are serviced by the availability of electricity,
telephones, municipal water, municipal sewerage and natural gas lines. The costs to property
owners for these utilities are competitive with those of surrounding communities.
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The four stages of a neighborhood area’s life cycle when analyzing the growth rate are as
follows:
• Growth – period during which the market gains public favor and acceptance
• Stability – period of equilibrium without marked gains or losses
• Decline – period of diminishing demand
• Revitalization – period of renewal, redevelopment, modernization, and increasing demand
The subject property’s neighborhood is considered to be in the stability stage indicated by its
stable pricing.
Subject Neighborhood View
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Subject Neighborhood View
Subject Neighborhood View
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Zoning & Land Use Regulations
As depicted in the zoning map below the subject property is located within the RG-R, Medium
Density Residential zoning district of the subject municipality.
The following are principal permitted uses within this zoning district:
1. Garden Apartments 2. Multiple-family dwellings 3. All uses permitted in the RG District
a. Single-family detached dwelling, including the renting of not more than 1 room to not more than 1 paying guest, provided that no cooking is done in such room
b. One- and two-family detached or semi-detached dwelling having no common cooking or bathroom facilities, with no more than 2 dwelling units per floor
c. Residential use of a Carriage House
The following are the area and yard requirements for one and two family uses within this zoning
district:
Minimum Lot Size 21,780 square feet Minimum Lot Width 125 feet
Minimum Lot Depth 125 feet Minimum Front Yard 40 feet
Minimum Side Yard 20 feet each side Minimum Rear Yard 50 feet Maximum Lot Coverage 20% Maximum Bldg Coverage 30% Maximum Building Height 35 feet (3 Stories)
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The following are the area and yard requirements for three and four family uses within this
zoning district:
Minimum Lot Size 11,250 square feet Minimum Lot Width 90 feet
Minimum Lot Depth 100 feet Minimum Front Yard 35 feet
Minimum Side Yard 18 feet each side Minimum Rear Yard 35 feet Maximum Lot Coverage 25% Maximum Bldg Coverage 35% Maximum Building Height 35 feet (3 Stories) The following are the area and yard requirements for garden apartments within this zoning
district:
Minimum Lot Size 21,780 square feet Minimum Lot Width 150 feet
Minimum Lot Depth 100 feet Minimum Front Yard 40 feet
Minimum Side Yard 30 feet each side Minimum Rear Yard 60 feet Maximum Lot Coverage 50% Maximum Bldg Coverage 75% Maximum Building Height 45 feet (4 Stories)
For a detailed description of the requirements for this zoning district, the reader is referred to the
Zoning Ordinance of the subject municipality. The subject property is considered a permitted
use on a conforming lot.
On July 9, 2014, the applicant, Ridgedale Commons at Morristown, LLC, received Variance
Relief and Preliminary / Final Site Plan Approval via Application #2307 for the subject property.
The approvals are for the construction of a three-story residential condominium building. The
building shall contain a total of 29 for-sale condo units: 21 2-bedroom apartments, a 3-bedroom
apartment and a 1-bedroom apartment. Four units, consisting of two 2-bedroom units, the 3-
bedroom unit and the 1-bedroom unit, will be set aside as affordable housing units which will be
sold at approximately one-half their fair market value. A copy of these approvals is located
within the addendum section of this report.
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Site Analysis
The following site description is based on the physical inspection of the subject, tax map, flood
maps, survey and other public records.
General Data
MSA/Census Tract: MSA: 35084; Census Tract: 5640.0436.00 Block/Lot: Block 702, Lots 8, 9, 10, & 11
Physical Description
Site Area: 0.87 Acres / 37,990 Square Feet Frontage and Dimensions: 200.00’ along Ridgedale Avenue, 200’ x 176.62’ Shape: Irregular, Interior Parcels Topography: Level Vegetation: Minimal vegetation
Site Improvements
On Site Improvements: Proposed: Paved parking lot, curbing, sidewalks, irrigation system, signage, fencing, subject building
Off Site Improvements: Public paved roadway, curbing, sidewalks and street lighting. Utilities: Public Water, Public Sewer Parking: 49 Proposed Parking Spaces: 12 Tandem Spaces in Garage Area
of which 2 are assigned per Townhouse. 24 Surface Spaces will be assigned 1 per flat unit. 13 Garage Spaces will be unassigned and available for guest parking.
Parking Rating: Adequate for the subject’s proposed use
Flood Zone
Flood Zone Panel: Map #3403520002D, dated July 3, 1986 Flood Zone: C
Site Conditions
Easements: No Recorded Easements have been discovered Soils: Assumed adequate based on existing and surrounding
improvements. Environmental: An environmental assessment was not provided for review.
Therefore, this report assumes no environmental issues exist.
Site Ratings
Location: Average Access: Average Exposure: Average Site Improvements: Average
Comments
The site is considered well suited for its proposed use.
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Subject Property Tax Map
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Subject Property Site Plan
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Subject Property Flood Map
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Proposed Improvement Analysis
The following proposed improvement description is based on the physical inspection of the
subject, assessor records and information provided by the client.
General Data
Property Type 29 Unit Condominium Subdivision – Consisting of 6 Townhouses, 19 Flats, and 4 Affordable Rate Flats
Building Class: Class D Number of Stories: Townhouses: Two-Stories Per Unit / Flats: Single-Story Parking Spaces: 49 Proposed Parking Spaces: 12 Tandem Spaces in Garage Area
of which 2 are assigned per Townhouse. 24 Surface Spaces will be assigned 1 per flat unit. 13 Garage Spaces will be unassigned and available for guest parking.
Proposed Unit Break Down
Age
Year Built/Age Proposed Completion of 2019 / New
Exterior
Foundation: Concrete Slab Framing: Wood, Steel, Wood Frame over Concrete Garage Structure Exterior Walls: Assumed Mixed Brick, Vinyl, Clapboard Roofing: Assumed Flat Buildup Doors / Windows: Assumed Insulated Vinyl Windows, Metal Framed Doors
Product Type Bed / Bath Model Unit Count
Square
Foot
Townhouse 2 BR / 3 BTH Type 2 4 1,565
Townhouse 2 BR / 3 BTH Type 1 2 1,585
Flat 2 BR / 2 BTH Type 7 6 1,200
Flat 2 BR / 2 BTH Type 8 5 1,245
Flat 2 BR / 2 BTH Type 11 2 1,167
Flat 2 BR / 2 BTH Type 12 2 1,167
Flat 2 BR / 2 BTH Type 3 1 1,392
Flat 2 BR / 2 BTH Type 3 1 1,390
Flat 2 BR / 2 BTH Type 6 1 1,325
Flat 2 BR / 2 BTH Type 4 1 1,317
Affordable Rate Flat 3 BR / 3 BTH Type 10 1 1,775
Affordable Rate Flat 2 BR / 2 BTH Type 5 2 1,110
Affordable Rate Flat 1 BR / 1 BTH Type 9 1 804
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Interior
Floors: Vinyl, Tile, Carpeting, Wood, Concrete Walls: Gypsum Ceiling: Gypsum Ceiling Height: Typical Basement: No Basement
Mechanical
Heating: Gas Fired Forced Warm Air Separate system for each unit
Cooling: Central Air Conditioning Separate system for each unit
Plumbing: Public Water & Sewer Fire Protection: Assumed Smoke Detectors / Wet Sprinkler System in Common
Areas Electrical: Standard Amp Service Per Unit– Separate system for each unit -
Service is considered adequate the subjects proposed use. Elevators: One
Improvement Ratings
Quality: Average Condition: New Functional Utility: Average
Furniture, Fixtures and Equipment (FF&E)
This appraisal excludes any valuation of FF&E and only provided an appraisal of the real estate only.
Construction Costs
Completed site development costs have provided by the developer at $400,996. Additionally, the developer has provided a cost of $268,427 which is to be completed long with the vertical construction due to the design of the building which will therefore be incorporated into the construction costs. The developer has provided construction costs for these dwellings totaling $5,198,173, which equals to $137.71 per square foot of living area and appears on the following page.
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Based upon the appraisers’ knowledge and own cost estimation based upon Marshal and Swift, these provided costs appear reasonable. The appraisers have estimated the construction costs to be $5,536,979 which equates to $146.69 per square foot of livable area. The appraisers will therefore be reconciling at $5,284,44, or $140.00 per square foot of living area. These costs will be adjusted upwards slightly to including upgrades. See the appraiser Marshal and Swift Analysis below:
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Marshall & Swift Section 12, Page 16 Marshall & Swift Section 12, Page 16
Building Class D - Good Building Class D - Low Cost (COAH)
Building Type Multiple Residences Building Type Multiple Residences
Base Cost 99.91 Base Cost 54.13
Sprinkler System 2.06 Sprinkler System 2.06
101.97 56.19
Building Perimeter Multiplier 1.00 Building Perimeter Multiplier 1.00
101.97 56.19
Story Height Multiplier 1.00 Story Height Multiplier 1.00
101.97 56.19
Regional Multiplier 1.08 Regional Multiplier 1.03
110.13 57.88
Local Multiplier 1.30 Local Multiplier 1.30
Total Base Cost 143.17 Total Base Cost 75.24
Major Components
Description Square Feet Unit Cost Lump Sum
Multiple Residences 32,947 143.17 4,717,022
Multiple Residences 4,799 75.24 361,077
Total Building 5,078,099
Structured Parking for 25 Vehicles 8,500 35.00 297,500
Elevator 161,380
Total Building 5,536,979
Price Per SF of Livable Area 37,746 146.69$
Cost Analysis
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Provided Plans
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PART III – MARKET & VALUATION ANALYSIS
Market Analysis
The national economy has been
creating jobs at a faster rate this year
and is on pace to gain 2+-Million jobs
for the 8th consecutive year. Year-to-
date (January-March), the US added
605,000 non-farm jobs. Should this
pace continue, 2.5-Million jobs will be
added by year-end, the strongest year
for job growth since 2015. As a result
of the continued growth, the U-3
unemployment rate stands at 4.1% for the sixth consecutive month, its lowest reading in 18
years. Further evidence of economic progress can be seen in the U-6 unemployment rate,
which includes workers who have accepted part-time jobs because they could not find a full-
time job, as well as those who have given up on finding employment, which has now fallen
below its pre-recession level.
After disappointing job growth in 2017,
which had fallen by 30% from the prior
year, statewide job creation has been
extraordinary year-to-date. In the first
quarter, New Jersey added 33,500
non-farm jobs. Should this pace
continue, 148,400 jobs will be added
by year-end, the strongest year for job
growth on record, dating back to
1990. Despite increased job creation,
the U-3 unemployment rate remained at 4.6% for the second consecutive month. While this is
higher than the 4.1% national rate, this represents significant improvement over the trend from
2011 – 2013 when the State’s unemployment situation was significantly worse.
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After two consecutive
months of record-breaking
home sales in New
Jersey, the number of
purchase contracts
contracted by 6% in
March compared to the
prior year. As a result, the
number of year-to-date
purchase contracts
(January-March) in New
Jersey was down by 1%, or roughly 300 contracts. While misinformation about the newly
implemented tax reform is partially to blame, statewide housing inventory is under-supplied,
giving home-buyers fewer options.
While the number of year-
to-date home sales has
declined overall, that is
not the case for all price
ranges. Contract activity
for luxury priced homes
over $2.5-Million has
increased by 13% year-
on-year. This impressive
gain is somewhat
misleading, however,
given the smaller sample
size of sales within this price point. At the opposite end of the spectrum, contract activity for
homes priced under $400,000 saw the largest decline (-3%), which is largely due to the
shortage of supply within this range.
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Shifting to the supply side
of the equation, inventory
remains restricted, which
is limiting choices for
home buyers. The
number of homes being
offered for sale today in
New Jersey has fallen to
its lowest point since
2005, having declined by
4,500 (-11%) over the
past year. This is also
about half the amount of homes (36,000 fewer) on the market compared to the cyclical high in
2011. Today’s unsold inventory equates to just 3.5 months of sales (non-seasonally adjusted),
which is lower than one year ago, when it was 3.7 months.
Currently, all of New Jersey’s 21 counties
have less than 8.0 months of supply, which
is a balance point for home prices. Essex
and Middlesex counties have the strongest
market conditions in the state with 2.5
months of supply, followed by Union,
Monmouth, Hudson, Morris, Somerset,
Bergen, Burlington, Passaic and Camden
Counties, which all have 3.5 months of
supply or less. The counties with the largest
amount of unsold inventory (5 months or
greater) are concentrated in the southern
portion of the state including Salem (5.7),
Cape May (5.8), Atlantic (5.9) and Salem
(6.7), however, these counties have shown vast improvement and are exhibiting strengthening
conditions.
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Focusing next on housing market conditions in the Morris County submarket area, it had a 4-
month supply of unsold housing inventory in Q1 (non-seasonally adjusted), unchanged from 4
months one year earlier. This compares to 5 months of unsold inventory for the state overall
indicating that county market conditions slightly better than what’s occurring at the state level.
MORRIS COUNTY COMPOSITE 1st Quarter At-A-Glance
455
535
690637
726 737
606 591
529 535 525
375
1889
2044
2191
24092481 2454
2383 2359 2331
2108
1821
1604
0
500
1000
1500
2000
2500
3000
0
200
400
600
800
1000
1200
1400
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Un
so
ld I
nven
tory
Co
ntr
act
Sale
s
MORRIS COUNTY COMPOSITE2018
2017 Contract Sales 2018 Contract Sales 2017 Unsold Inventory 2018 Unsold Inventory
2014 2015 2016 2017 2018
Average # Of Offerings/Monthly 682.0 733.7 885.0 831.0 809.7
Average # Of Sales/Monthly 381.0 436.7 562.0 560.0 529.0
Supply & Demand Ratio 56% 60% 64% 67% 65%
Unsold Inventory 2339 2400 2721 2191 1906
Total Market 6 5 5 4 4
Less than $400k 6 5 4 3 2
$400k - $599,999 5 5 5 4 3
Less than $600k 6 5 4 3 3
$600k - $1 million 7 6 6 5 5
$1,000,001 - $2.5 mil. 9 10 10 10 9
Greater than $2.5 mil. 29 18 34 27 21Pro
ject
ed A
bso
rpti
on
(mon
ths)
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
At the local level, the Town of Morristown had a 3-month supply of unsold housing inventory at
the end of the 1st quarter, which was more from one year earlier when unsold inventory equated
to 2 months of supply and the lowest of the past 5 years. The pace of home sales in Morristown
during the 1st Quarter of 2018 also decreased compared to the pace of the prior year.
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Highest and Best Use
Highest and best is defined on page 333 in The Appraisal of Real Estate, Fourteenth Edition, published by the Appraisal Institute, as:
The reasonably probable use that produces the most benefits and highest land value at any given time.
A property's highest and best use must be analyzed as vacant and as improved, for several
reasons. The highest and best use analysis, as vacant, allows for the property selection of land
comparables to derive a property's land value and also used to measure a building's value
contribution. The highest and best analysis, as improved, determines whether the existing
improvement should continue to be used, or demolished, as well as analyzing how the property
as improved should be used.
The highest and best use of both land as though vacant and property as improved must meet
four criteria. The highest and best use must be 1) physically possible, 2) legally permissible, 3)
financially feasible, and 4) maximally productive (The Appraisal of Real Estate, Fourteenth
Edition, published by the Appraisal Institute, page 335, hereafter referred to as The Appraisal of
Real Estate). Each of these four criteria will be defined and explained based upon information
found on pages 340-350 of The Appraisal of Real Estate.
Legally Permissible: Private restrictions, zoning, building codes, historic zoning controls, and environmental regulations must be investigated because they may preclude many potential highest and best uses. In addition, a long-term lease on a property may place limits on the property's use.
• As Vacant - The subject is located in the RG-R, Medium Density Residential Zone of the Town of Morristown, which specifically permits multifamily uses. Additionally, the subject has municipal approvals for development. The site appears to be legally permissible for development under existing zoning conditions.
• As Improved –Not applicable as subject property consists of unimproved land. Physically Possible: The size, shape, area, and terrain of a parcel of land affect the uses to which it can be developed. The utility of the parcel may depend on its frontage and depth, while certain parcels only attain their highest and best use as part of a land assemblage. In addition, the capacity and availability of public utilities is also vital to its physically possible use.
• As Vacant –Per the provided site engineering plans, which appear in this report, the subject property is physically possible to use for multifamily development purposes
• As Improved –Not applicable as subject property consists of unimproved land.
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Financially Feasible: After determining which uses are physically possible and legally permissible, these uses are analyzed further to determine which are likely to produce an income, or return, equal to or greater than the amount needed to satisfy operating expenses, financial obligations, and capital amortization. In determining financial feasibility, estimates of future gross income, vacancy and collection losses, and operating expenses are estimated for each potential use, to obtain their likely net income. If the net revenue capable of being generated is enough to satisfy the required rate of return on an investment and provide a return to the land, the use is financially feasible within some price limit.
• As Vacant – The subject is located in a submarket with a healthy absorption and demand for multifamily use. Based upon the appraiser’s analysis of land plus construction costs, the subject site is considered financially feasible to develop for multifamily purposes.
• As Improved – Not applicable as subject property consists of unimproved land. Maximally Productive: Of the financially feasible uses, the use that produces the highest price, or value, consistent within the rate of return warranted by the market for that use is the highest and best use. In considering the property's highest and best use as improved, a comparison is made between the existing improvements and the ideal improvement to determine the contribution of the improvements to the overall value. The highest and best use analysis is applicable in estimating the property's market value, while in estimating its use value, the current use is deemed to be its highest and best use.
• As Vacant – An analysis of all potential uses for the subject property indicates that multifamily development yields the highest value and is most suitable to the surrounding neighborhood area and therefore maximally productive as if vacant.
• As Improved –Not applicable as subject property consists of unimproved land.
Highest & Best use Conclusion:
• As Vacant - The subject’s highest and best use as vacant is considered to be for multifamily development to the limits provided by the Town of Morristown based upon the tests of Physically Possible, legally Permissible, Financially Feasible and Maximally Productive.
• As Improved – Not applicable as subject property consists of unimproved land.
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Scenario 1 - (As Is)
Sales Comparison Approach
The Sales Comparison Approach is based upon the proposition that an informed purchaser
would pay no more for a property than the cost of acquiring an existing property with the same
utility. This approach is applicable when an active market provides sufficient quantities of
reliable data that can be verified from authoritative sources.
Land Value: The following vacant land sales have been carefully considered and compared to
the subject property so as to provide an indication of its land value as if vacant and available to
be put to its "highest and best use":
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Land Sale 1
Block / Lot
Sale Date
Deed Recording
Grantor
Grantee
Consideration
Financing
Rights Conveyed
Concessions
Site Area (Square Feet)
Site Area (Acres)
Units Approved
Unit Value Per Square Foot
Unit Value Per Acre
Unit Value Per Unit Approved
Verification Source
Site Area (Square Feet)
Site Area (Acres)
Utilities
Zoning
All Public Available
RA-5B, Residential-SFA, MF 2 Acres
Comments
This is the sale of 2 contiguous vacant land parcels totalling 1.59 acres, with approvals for 16 townhouses in place at the time of
sale. This sale is considered a good comparable to the subject property. There are no reported sales of this property within the
three years prior to this transfer. The broker confirmed the details of the sale including that of the 16 units approved, 3 were low-
income.
$1,261,743
$124,999
Costar, Realquest, Vital, NJACTB, BrokerSite
69,047
1.59
$29
26-Apr-16
Book 6118, Page 424 and Book 6118, Page 428
C W M & P, Inc.
Westfield Crossing LLC
$1,999,990
Not Available
Fee Simple
None Discovered
69,047
1.59
16
Block 4006, Lots 2 & 3
Land Comparable Sale
321 East Grove Street, Westfield Town
Union County, New Jersey
INSERT PHOTO
Transaction
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Land Sale 2
Block / Lot
Sale Date
Deed Recording
Grantor
Grantee
Consideration
Financing
Rights Conveyed
Concessions
Site Area (Square Feet)
Site Area (Acres)
Units Approved
Unit Value Per Square Foot
Unit Value Per Acre
Unit Value Per Unit Approved
Verification Source
Site Area (Square Feet)
Site Area (Acres)
Utilities
Zoning
All Public Available
R-10A, Single-Family Residential
Comments
This is the sale for a 5.89 acre vacant land parcel with approvals for 24 market rate townhouses in place at the time of sale. The
property is located in the R-10A, Single-Family Residential zoning district of Hanover Township. This sale is considered a good
comparable to the subject property. There are no reported sales of this property within the three years prior to this transfer.
$489,898
$120,232
Realquest, Vital, NJACTB, Internal Records, Contract of Sale, Buyer, Prior Appraisal Site
256,574
5.89
Fee Simple
None Discovered
256,574
5.89
24
$11
16-Aug-16
Book 22991, Page 908
Emmanuel Orthodox Presbyterian Church
Fleet Hanover, LLC
$2,885,560
Not Available
Land Comparable Sale
325 Whippany Road, Hanover Township
Morris County, New Jersey
INSERT PHOTO
Transaction
Block 4701, Lot 29
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Land Sale 3
Block / Lot
Sale Date
Deed Recording
Grantor
Grantee
Consideration
Financing
Rights Conveyed
Concessions
Site Area (Square Feet)
Site Area (Acres)
Units Approved
Unit Value Per Square Foot
Unit Value Per Acre
Unit Value Per Unit Approved
Verification Source
Site Area (Square Feet)
Site Area (Acres)
Utilities
Zoning
All Public Available
LR, Residential
Comments
This is the sale of a 2.30 acre vacant land parcel with approvals for 24 townhouses obtained by the buyer. The property is located in
the LR, Residential zoning district of Edison Township. This sale is considered a good comparable to the subject property. There are
no reported sales of this property within the three years prior to this transfer. This property was appraised by Otteau Group, Inc. for the
purchase and construction loan.
$1,306,800
$125,000
Realquest, Vital, NJACTB, Internal Records, Contract of Sale, Buyer, Prior Appraisal Site
100,000
2.30
Fee Simple
None discovered
100,000
2.30
24
$30
4-Jan-17
Book 6933, Page 800
LS Grant Properties Limited Partnership
MarKim Developers LLC and Mark Roshanski
$3,000,000
Loan of $5,428,100 with First Constitution Bank
Land Comparable Sale
32 Cinder Road, Edison Township
Middlesex County, New Jersey
INSERT PHOTO
Transaction
Block 643.DD, Lot 15.W
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Land Sale 4
Block / Lot
Sale Date
Deed Recording
Grantor
Grantee
Consideration
Financing
Rights Conveyed
Concessions
Site Area (Square Feet)
Site Area (Acres)
Units Approved
Unit Value Per Square Foot
Unit Value Per Acre
Unit Value Per Unit Approved
Verification Source
Site Area (Square Feet)
Site Area (Acres)
Utilities
Zoning
All Public Available
HB-2, Housing Business 2
Comments
This is the sale of a vacant land parcel with approvals for 7 townhouses in place at the time of sale. The property is located in
the HB-2, Housing Business 2 zoning district of Berkley Heights Township. This sale is considered a good comparable to the
subject property. There are no reported sales of this property within the three years prior to this transfer.
$1,915,301
$135,714
MLS, Realquest, Vital, NJACTB, Municipal Planning OfficeSite
21,606
0.50
Fee Simple
None Discovered
21,606
0.50
7
$44
16-Feb-17
Book 6173, Page 837
569 Springfield Avenue LLC
AKI LLC
$950,000
Not Available
Land Comparable Sale
569 Springfield Avenue, Berkley Heights Township
Union County, New Jersey
Transaction
Block 610 Lot 8
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Land Sale 5
Block / Lot
Sale Date
Deed Recording
Grantor
Grantee
Consideration
Financing
Rights Conveyed
Concessions
Site Area (Square Feet)
Site Area (Acres)
Units Approved
Unit Value Per Square Foot
Unit Value Per Acre
Unit Value Per Unit Approved
Verification Source
Site Area (Square Feet)
Site Area (Acres)
Utilities
Zoning
Block 403, Lot 2
Land Comparable Sale
99 Spring Valley Road, Montvale Borough
Bergen County, New Jersey
INSERT PHOTO
Transaction
$30
29-Mar-17
Book 2593, Page 23
Baldanza Constuction Co.
99 LLC
$1,400,000
None discovered
Fee Simple
None discovered
46,678
1.07
12
All Public Available
B-2, Business
Comments
This is the sale of a 1.07 acre vacant land parcel with approvals for 12 townhouses obtained by the buyer. There are 2
afforable housing units subject to municipal and state regulations in determining the sale price and will be governed by such
agencies. The property is located in the B-2, Business zoning district of Montvale Borough. This sale is considered a good
comparable to the subject property. There are no reported sales of this property within the three years prior to this transfer.
This property was appraised by Otteau Group, Inc. for the purchase and construction loan.
$1,306,480
$116,667
Realquest, Vital, NJACTB, Internal Records, Contract of Sale, Buyer, Prior Appraisal Site
46,678
1.07
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Comparable Land Sale Location Map
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Item Subject
Address 68-74 Ridgedale Avenue 325 Whippany Road 32 Cinder Road 569 Springfield Avenue
City / Township / Borough Morristown Town
County Morris County, NJ
Block/Lot Block 702, Lots 8, 9, 10, & 11
Sales Price Not Applicable $1,999,990 $2,885,560 $3,000,000 $950,000 $1,400,000
# of Units 29 16 24 24 7 12
Financing Concessions Not Applicable None Discovered 0% None Discovered 0% None Discovered 0% None Discovered 0% None Discovered 0%
Conditions of Sale Not Applicable Arms Length 0% Arms Length 0% Arms Length 0% Arms Length 0% Arms Length 0%
Property Rights Conveyed Fee Simple Fee Simple 0% Fee Simple 0% Fee Simple 0% Fee Simple 0% Fee Simple 0%
Sale Date / Time Adjustment 4/25/2018 4/26/2016 0% 8/16/2016 0% 1/4/2017 0% 2/16/2017 0% 3/29/2017 0%
Sale Price Per Unit Not Applicable $124,999 $120,232 $125,000 $135,714 $116,667
Locational Appeal Somewhat Walkable Somewhat Walkable Suburban 10% Suburban 10% Suburban 10% Suburban 10%
# of Units 29 16 -2% 24 0% 24 -1% 7 -4% 12 -3%
Site Improvements Partially Installed None Discovered 10% None Discovered 10% None Discovered 10% None Discovered 10% None Discovered 10%
Physical Attributes Level Level Level Level Level Level
Utilities All Public All Public All Public All Public All Public All Public
Zoning RG-R RA-5B R-10A LR HB-2 B-2
Approvals Approved Approved Approved Subject To Approved Subject To
Market Segment 4 Affordable Rate Units 3 Affordable Rate Units -1% All Market Rate -4% All Market Rate -4% All Market Rate -4% 2 Affordable Rate Units -2%
Net Adj. (Total) 7% 16% 15% 12% 15%
Indicated Unit Value $133,448 $139,469 $143,922 $152,281 $134,247
Comparable
3
Edison Township
Middlesex County, NJ
4701 / 29Block 4006, Lots 2 & 3 Block 4701, Lot 29 610 / 8 403 / 2
Pro
pert
y
Valu
eT
ran
sacti
on
Sit
e
Bergen County, NJUnion County, NJ
5
321 East Grove Street
Westfield Town Hanover Township Berkeley Heights Township
Land Sales Comparison AnalysisComparable Comparable Comparable Comparable
1
Montvale Borough
99 Spring Vallley Road
2
Union County, NJ Morris County, NJ
4
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Explanation of Adjustments
Transaction
Conditions of Sale: There were no reported special conditions that would have affected the sale price of the comparable sales, therefore no adjustment was warranted. Financing Conditions: All of the comparable sales were reported to have transacted with market rate financing, therefore no adjustment was warranted. Property Rights: All of the comparable sales were reported to have sold in fee simple estate, which is typical for this use and submarket, therefore no adjustment was warranted.
Market Change: Due to stable economic conditions in this submarket, the comparable sales did not require adjustments for market change.
Site
Comparable Sales Selection: Due to the lack of sales within this submarket the appraiser has utilized sales older than 12 months and from other counties. This is considered typical for this submarket and does not affect and reliability of this approach. Locational Appeal: Adjustments were applied comparable sales 2, 3, 4, and 5, due to their inferior suburban location compared to the subject property. Comparable sale 1 is located within the subject’s general market area and considered comparable locations compared to the subject property therefore no adjustments were warranted. Site Improvements: Adjustments were applied all comparable sales due to the subject property’s partially complete site improvements. Project Size: A negative adjustment has been applied to comparable sales 1, 4, and 5, due to their smaller project size which typically yields a higher per unit sales price due to economy of scale. Comparable sales 2 and 3 was considered similar enough that an adjustment was not warranted.
Zoning: Based upon a review of the subject’s and comparable sale zoning no adjustment was warranted.
Market Segment: A negative adjustment to all sales was applied to reflect the comparable sales’ inferior number of affordable rate units compared to the subject property.
Land Sales Comparison Conclusion
Careful consideration has been given to the above land sales with respect to their physical and
locational components, permitted uses and market conditions at the time of their sale. An
analysis of this data yields the following value ranges:
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Within this range, the appraiser has selected $140,000/Unit as the best indicator of value for the
subject property. In arriving at this conclusion, the appraiser placed equal weight upon all sales.
Therefore, the subject property’s land value can be expressed as follows:
Approved Units Unit Value Value
29 $140,000 $4,060,000
Land Sales Comparison Value Indication
Cost Approach
The Cost Approach has not been employed within Scenario 1 (AS IS) due to the subject
consists of land with no building improvements. The Cost Approach is applied later in this
report under scenario 2.
Income Approach
The Income Approach is based on the understanding that discounted future income is the
logical basis of value. Specifically, net cash flow before recapture and debt service provides the
basis for capitalization. In this regard, the rate of discount will depend on the perceived risk
associated with an investment in the subject property.
In applying the Income Approach, the appraiser will utilize the Subdivision Development
Technique for which the first step is to develop an estimate of Projected Net-Cash-Flow, on a
periodic and overall basis, to be derived from project development. This projection will be
based upon an analysis of projected income and expenses to be realized from project
development as follows:
▪ Sales Income – based upon analysis of competitive new construction project offerings in
the market area to develop projections of sales pace, base pricing and supplemental
revenues derived from options and location/view premiums.
▪ Site Development Cost – estimated cost to construct site infrastructure for the project to
Low High Average Median
Unadjusted $116,667 $135,714 $124,522 $124,999
Adjusted $133,448 $152,281 $140,889 $139,469
Land Comparison Value Indication Range
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
include clearing, grading, road construction and bringing utilities to the site.
▪ Construction Cost – estimated cost to construct the completed dwellings to be built on
the site including exterior and interior elements.
▪ Marketing Cost – estimated costs to market the project to include advertising, web site
creation, promotional events model fit-up and furnishing and real estate commissions.
▪ Administrative & Overhead Cost– estimated administrative costs for the developer’s
employee’s, set up costs for Homeowner’s Associations (where applicable), Mount
Laurel Contribution fees (where applicable), Real Estate Taxes, Insurance, Overhead,
and miscellaneous unbudgeted contingency expenses.
▪ Construction Management Cost– this relates to the charge for a General Contractor to
manage all facets of site development and construction and are therefore an expense
charge based upon site development and dwelling construction costs rather than a
charge against income. In situations where the developer will manage this responsibility
internally, this cost charge is still appropriate and reflects additional revenues earned by
the developer.
Each of these income and cost categories will next be discussed and developed in detail.
The next section of the report will analyze competing projects new construction developments
within the subject property's submarket area to develop projections of market price and sales
pace for the subject project. This analysis is based upon the Principle of Substitution which is
based upon the proposition that an informed home purchaser would pay no more for a property
than the cost of acquiring an alternative existing property offering the same utility.
In applying this approach, we have investigated and analyzed competing projects from within
the submarket area in order to develop an indication of market pricing and optimal mix for the
proposed subject project. These projects represent direct competition to the proposed subject
project but are not an all-inclusive comprehensive listing of competing projects. Rather they
reflect a subset of competing projects that are considered to be relevant to the projection of
market positioning for the subject project.
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Competing Condominium Flat Development #1
Proximity to Subject
Proximity to Public Transportation
Walk Score
Developer
Developer Web Site
Market Segment
Year Built
Product Type
Total Units
Net Sales
Unsold Units
Average Lot Size
Average House Size (SF)
Average Base Price
Average Price/SF
Marketing Period
Project Life (Months)Sales Velocity (Project Life)
Resales (Past 90 Days)
Resales Velocity (Past 90 Days)
Number of Active Listings
Incentives
Sources of Buyers
Upgrades (average)
Parking Type
Parking Fee
Basement
Site Premiums
PRICING MATRIX
Property Address
110 South
Street, Unit
108
110 South
Street, Unit
303
110 South
Street, Unit
306
110 South
Street, Unit
105
Sale Date 6/8/2017 8/24/2017 9/19/2017 11/30/2017
House Size (sf) 1,730 2,507 1,730 1,730
Sale Price $920,000 $1,220,000 $955,000 $929,000
$ Price / SF $531.79 $486.64 $552.02 $536.99
Days on Market 43 21 35 12
Average sale price: $1,006,000
Average house size: 1,924
Average price per sf: $522.80
Average DOM 28
72
SOLD
0
0.00
0
Not applicable
Not available
Not applicable / All-in pricing
Structured garage parking
Included in sale price
None
Built into pricing
AMENITIES: Full service concierge, fitness center with aerobics studio, multimedia theater, game rooms, banquet hall
Common Areas - Condominium Ownership
1,924
$1,006,000
$522.80
February 2007 - February 2013
COMPETITIVE FOR-SALE PROJECT
THE RESIDENCES AT VAIL MANSION
Town of Morristown - Morris County0.6 miles
0.5 miles to Morristown Train Station; 0.4 miles to Pine St @ Morris St Bus Station
94 - Walker's Paradise
Roseland & Lennar Urban
Not available
All-Age / Market-Rate
0.50
2008
Low-Rise Flats
36
36
0
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Competing Condominium Flat Development #2
Proximity to Subject
Proximity to Public Transportation
Walk Score
Developer
Developer Web Site
Market Segment
Year Built
Product Type
Total Units
Net Sales
Unsold Units
Average Lot Size
Average House Size (SF)
Average Base Price
Average Price/SF
Marketing Period
Project Life (Months)Sales Velocity (Project Life)
Resales (Past 90 Days)
Resales Velocity (Past 90 Days)
Number of Active Listings
Incentives
Sources of Buyers
Upgrades (average)
Parking Type
Parking Fee
Basement
Site Premiums
PRICING MATRIX
Property Address
7 Prospect
Street, Unit
406
7 Prospect
Street, Unit
305
7 Prospect
Street, Unit
807
7 Prospect
Street, Unit
403
7 Prospect
Street, Unit
302
Sale Date 5/17/2017 9/14/2017 10/23/2017 11/27/2017 Active
House Size (sf) 1,069 836 672 789 786
Sale Price $435,000 $331,000 $350,000 $344,000 $345,000
$ Price / SF $406.92 $395.93 $520.83 $435.99 $438.93
Days on Market 86 82 20 14 40
Average sale price: $365,000
Average house size: 842
Average price per sf: $433.75
Average DOM 51
72
SOLD
0
0.00
1
Not available
Not available
Not applicable / All-in pricing
Structured garage parking
Included in sale price
None
Built into pricing
AMENITIES: Fitness center, lounge & storage area
Common Areas - Condominium Ownership
842
$365,000
$433.75
March 2007 - February 2013
COMPETITIVE FOR-SALE PROJECT
VAIL COMMONS
Town of Morristown - Morris County0.7 miles
0.6 miles to Morristown Train Station; Adjacent to Speedwell Ave @ Cattano Ave Bus
Stop
78 - Very Walkable
Seven Prospect Street, LLC
None available
All-Age / Market-Rate
0.68
2008
Mid-Rise Flats
49
49
0
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Competing Condominium Flat Development #3
Proximity to Subject
Proximity to Public Transportation
Walk Score
Developer
Developer Web Site
Year Built
Market Segment
Product Type
Total Units
Net Sales
Unsold Units
Average Lot Size
Average House Size (SF)
Average Base Price
Average Price/SF
Marketing Period
Project Life (Months)
Sales Velocity (Project Life)
Net Sales (Past 90 Days)
Sales Velocity (Past 90 Days)
Standing Inventory
Incentives
Sources of Buyers
Upgrades (average)
Basement
Parking Type
Parking Fee
Site Premiums
PRICING MATRIX
Model Names E Model J Model C Model D Model B Model H Model L Model
House Size (SF) 1,242 1,649 1,734 1,688 1,725 1,937 2,510
Base Price $539,900 $629,900 $649,900 $684,900 $699,900 $904,500 $1,249,900
$ Price / SF $434.70 $381.99 $374.80 $405.75 $405.74 $466.96 $497.97
Average Base Price: $765,557
Average House Size: 1,784
Average Price per SF: $429.23
20
2
0.67
6
None
Not available - none have sold
Not available - none have sold
None
Structured garage parking
Included in sale price
None
AMENITIES: None
Common Area - Condominium Ownership
1,784
$765,557
$429.23
Since September 2016
COMPETING FOR-SALE PROJECT
25 MILL STREET
Bernardsville Borough - Somerset County7.66 miles
0.4 miles to Bernardsville Train Station; 0.4 miles to Rt. 202 N @
Across from Kings Bus Station
81 - Very Walkable
DCL Holdings LLC
www.25millstreet.com
New Construction
0.10
All-Age / Market-Rate
Low-Rise Flats
27
2
25
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Competing Condominium Flat Development Location Map
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Item
Project Name
Municipality
County
Total Units 4 4 27
Average Sale Price $1,006,000 $365,000 Avg. Base Price $765,557
Average Unit Size 1,924 842 1,784
Net Sales (90 Days) n/a n/a 2
Sales Velocity (90 Days) n/a n/a 0.67
Project Life (Months) n/a n/a 20
Net Sales (Project Life) n/a n/a 2
Sales Velocity (Project Life) Avg DOM of 4 sales 28 Avg DOM of 4 sales 51 0.10
Base Price Per Sq. Foot $522.87 $433.49 $429.12
Locational Appeal
Neighborhood Appeal -10% -10% -10%
Site Appeal
Construction Quality
Market Segment
Unit Design
Age of Dwellings (years) 5% 5%
Amenities
Parking
Car Storage Fee
Average Unit Size 6% -3% 4%
Net Adj. (Site) -10% -10% -10%
Net Adj. (Building) -9% -8% -1%
Net Adj. (Total) -19% -18% -11%
Adjusted Base Price $423.52 $355.46 $381.92
Valu
e
1,238 1,924 842 1,784
Structured Garage
Parking -5%
None Built into pricing Built into pricing Built into pricing
1 Assigned Surface
Parking
Structured Garage
Parking -5% -5%
All-Age / Market-Rate
Low-Rise Flats
New Construction
None
Pri
ce &
Pace
Sit
e
Bernardsville
Walkable Downtown
Average
Good
Walkable DowntownSomewhat Walkable Walkable Downtown
Average
Flat Project
Bu
ild
ing
Good Good Good
3
25 Mill Street
Bernardsville Borough
Somerset County, NJ
Structured Garage
Parking
Base Price Analysis
None
Full service
concierge, fitness
center, multi-media
theater, game rooms,
banquet hall
-15%Fitness center, lounge
& storage area-5%
All-Age / Market-Rate All-Age / Market-Rate All-Age / Market-Rate
New Construction 10 Years 10 Years
Mid-Rise Flats
1,238
Town of Morristown
Ridgedale Commons The Residences at Vail Mansion Vail Commons
Average Average
Morristown Morristown
19
2Subject Flat Project Flat Project
Town of Morristown
Morris County, NJMorris County, NJ
1
Low-Rise Flats Low-Rise Flats
Pro
pert
y
Morris County, NJ
Town of Morristown
Morristown
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Competing Townhouse Development #1
Proximity to Subject
Proximity to Public Transportation
Walk Score
Developer
Developer Web Site
Market Segment
Year Built
Product Type
Total Units
Net Sales
Unsold Units
Average Lot Size
Average House Size (SF)
Average Base Price
Average Price/SF
Marketing Period
Project Life (Months)Sales Velocity (Project Life)
Resales (Past 90 Days)
Resales Velocity (Past 90 Days)
Number of Active Listings
Incentives
Sources of Buyers
Upgrades (average)
Parking Type
Parking Fee
Basement
Site Premiums
PRICING MATRIX
Property Address
44
Ridgedale
Ave. Unit 6
44
Ridgedale
Ave. Unit 27
44
Ridgedale
Ave. Unit 30
44
Ridgedale
Ave. Unit 19
44
Ridgedale
Ave. Unit 14
44
Ridgedale
Ave. Unit 4
Sale Date 6/26/2017 6/30/2017 12/8/2017 4/13/2018 4/30/2018 Active
House Size (sf) 1,166 1,232 1,232 1,166 1,100 1,166
Sale Price / Listing Price $345,000 $348,000 $348,000 $350,000 $390,000 $399,900
$ Price / SF $295.88 $282.47 $282.47 $300.17 $354.55 $342.97
Days on Market 15 13 54 28 29 9
Average sale price: $356,200
Average house size: 1,179
Average price per sf: $302.07
Average DOM 28
SOLD
Attached one-car garage
Included in sale price
None
Built into pricing
AMENITIES: None
Not applicable / All-in pricing
1,179
$356,200
$302.07
August 1994 - August 1995
13
3.69
2
0.67
1
Not applicable
Not available
Common Areas - Condominium Ownership
COMPETITIVE FOR-SALE PROJECT
MORRISTOWN COURT
Town of Morristown - Morris County0.1 miles
0.22 miles to Morristown Train Station; 0.5 miles to Morris St @ E. Park Pl Bus Stop
81 - Very Walkable
All-Age / Market-Rate
1995
Townhouses
48
48
0
Baker Firestone Limited Partnership
None available
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Competing Townhouse Development #2
Proximity to Subject
Proximity to Public Transportation
Walk Score
Developer
Developer Web Site
Market Segment
Year Built
Product Type
Total Units
Net Sales
Unsold Units
Average Lot Size
Average House Size (SF)
Average Base Price
Average Price/SF
Marketing Period
Project Life (Months)
Sales Velocity (Project Life)
Resales (Past 90 Days)
Resales Velocity (Past 90 Days)
Number of Active Listings
Incentives
Sources of Buyers
Upgrades (average)
Parking Type
Parking Fee
Basement
Site Premiums
PRICING MATRIX
Property Address
7 Maple Ave
Unit 2
7 Maple Ave
Unit 6
Sale Date Active Active
House Size (sf) 2,223 2,223
List Price $899,000 $749,000
$ Price / SF $404.41 $336.93
Days on Market 4 32
Average list price: $824,000
Average house size: 2,223
Average price per sf: $370.67
Average DOM 18
Attached two-car garage & private driveway
Included in sale price
None
Built into pricing
AMENITIES: None
Not applicable / All-in pricing
2,223
$824,000
$370.67
May 2012 - June 2013
14
1.29
0
0.00
2
Not applicable
Not available
Common Areas - Condominium Ownership
COMPETITIVE FOR-SALE PROJECT
MORRISTOWN SQUARE
Town of Morristown - Morris County0.8 miles
0.5 miles to Morristown Train Station; 0.2 miles to Morris St @ E. Park Pl Bus Stop
95 - Walker's Paradise
All-Age / Market-Rate
2013
Townhouses
18
18
0
Pulte Homes
www.pulte.com
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Competing Townhouse Development #3
Proximity to Subject
Proximity to Public Transportation
Walk Score
Developer
Developer Web Site
Year Built
Market Segment
Product Type
Total Units
Net Sales
Unsold Units
Average Lot Size
Average House Size (SF)
Average Sale Price
Average Price/SF
Marketing Period
Project Life (Months)
Sales Velocity (Project Life)
Net Sales (Past 90 Days)
Sales Velocity (Past 90 Days)
Standing Inventory
Incentives
Sources of Buyers
Upgrades (average)
Basement
Parking Type
Parking Fee
Site Premiums
PRICING MATRIX
Model Names The Devon
House Size (SF) 2,477
Sale Price $799,000
$ Price / SF $342.75
Average Sale Price: $799,000
Average House Size: 2,477
Average Price per SF: $322.57
COMPETING FOR-SALE PROJECT
JAMES PLACE
Morris Township - Morris County2.00 miles
1.86 miles to Morristown Train Station; 1.79 miles to Morris St @ E. Park Place
Bus Stop
1 - Car-Department
Mark Built Homes
www.markbuilt.com
New Construction
2.04
All-Age / Market-Rate
Townhouses
92
92
0
Common Area - Condominium Ownership
2,477
$799,000
$322.57
September 2013 - June 2017
45
0
0.00
Not applicable - sold out 6/2017
Not applicable - sold out 6/2017
New York / Local
Not available
None
Attached two-car garage
Included in sale price
Built into pricing
AMENITIES: None
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Competing Townhouse Development Location Map
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Item
Project Name
Municipality
County
Total Units 5 2 92
Average Sale Price $356,200 Avg. List Price $824,000 $799,000
Average Unit Size 1,179 2,223 2,477
Net Sales (90 Days) n/a n/a n/a
Sales Velocity (90 Days) n/a n/a n/a
Project Life (Months) n/a n/a 45
Net Sales (Project Life) n/a n/a 92
Sales Velocity (Project Life) Avg DOM of 5 sales 28 Avg DOM of 2 sales 18 Sold-out 6/2017 2.04
Base Price Per Sq. Foot $302.12 $370.67 $322.57
Locational Appeal
Neighborhood Appeal -10% 10%
Site Appeal
Construction Quality
Market Segment
Unit Design
Age of Dwellings (years) 20% 5%
Amenities
Parking
Car Storage Fee
Average Unit Size -4% 6% 9%
Net Adj. (Site) 0% -10% 10%
Net Adj. (Building) 15% 9% 7%
Net Adj. (Total) 15% -1% 17%
Adjusted Base Price $347.44 $366.96 $377.40
2,477
Valu
e
1,572 1,179 2,223
-2%
None Built into pricing Built into pricing Built into pricing
Private Attached Two-Car
Garage
2 Assigned Structured
Garage Spaces
Private Attached One-
Car Garage -1%
Private Attached Two-
Car Garage -2%
NoneNone None None
Townhouses
New Construction 23 Years 5 Years New Construction
Townhouses Townhouses
Good
All-Age / Market-Rate All-Age / Market-Rate All-Age / Market-Rate All-Age / Market-Rate
Bu
ild
ing
Good Good Good
Townhouses
Morris Township
Average Average Average
Somewhat Walkable
Average
Somewhat Walkable Walkable Downtown Suburban
Sit
e
Morristown Morristown Morristown
Morris County, NJ
Pri
ce &
Pace
6
James Place
Town of Morristown Town of Morristown Town of Morristown Morris Township
Morris County, NJ Morris County, NJ
1,572
1 2 3
Pro
pert
y
Ridgedale Commons Morristown Court Morristown Square
Morris County, NJ
Base Price Analysis Subject Townhouse Project Townhouse Project Townhouse Project
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Explanation of Base Price Adjustments
Price & Pace
Market Change: No adjustment was warranted for market change was warranted as the projects are either being actively being marketing or sold within the last year.
Site
Location / Neighborhood: Negative adjustments were applied to the “flat” competing projects to reflect their superior location given their proximity to their downtown area which is closer to shopping and restaurants and associated with higher property values. A negative adjustment was applied to “townhouse” competing project 1 to reflect its superior location given its proximity to the downtown area which is closer to shopping and restaurants and associated with higher property values, and a positive adjustment to competing projects 3 and 4 given their inferior suburban location compared with the subject property. Competing “townhouse” project 1 was considered similar therefore no adjustment was warranted. Site Appeal: The completing projects are all similar concerning their site utility therefore, no adjustments were warranted.
Building
Condition: These categories address physical condition and quality of the competing projects compared to the subject property. Since superior condition and quality typically command higher pricing, this item of comparison can have a significant impact on value. In this case the competing projects were considered similar enough that an adjustment was not warranted. Market Segmentation: The subject property and all competing projects are targeting the same market segment therefore an adjustment was not warranted. Unit Design: This category addresses the physical design (use) and exterior appeal. In this case the competing projects were considered similar enough that an adjustment was not warranted. Age: An adjustment was applied to projects that are older to reflect the subject’s new construction age. Amenities: In this case “flat” competing projects 1 and 2 were adjusted for their superior amenities compared to the subject. The remainder of the competing projects were considered similar enough that an adjustment was not warranted. Parking: In this case the “flat” and “townhouse” competing projects were adjusted for their superior parking compared to the subject. Average Unit Size: The competing projects were adjusted for economy of scale based upon their average unit size compared to the subject.
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
Base Price Calculation
Based on the foregoing, the appraiser has selected $385 per square foot as the best value
indicator for the flat product type and $360 per square foot as the best value indicator for the
townhouse product type. The subject property also includes 4 income restricted flat styled
dwellings.
The Council on Affordable Housing (COAH), an agency of the state government within the
Department of Community Affairs (DCA) has historically been responsible for ensuring that all
565 New Jersey municipalities provide their fair share of low and moderate income housing.
The COAH was created by the New Jersey Legislature in response to the Fair Housing Act of
1985 and a series of New Jersey Supreme Court rulings known as the Mount Laurel decisions.
The council is made up of 12 members appointed by the Governor of New Jersey and approved
by the New Jersey Senate. COAH defines housing regions, estimates the needs for
low/moderate income housing, allocates fair share numbers by municipality and reviews plans
to fulfill these obligations.
A recent decision by the New Jersey Supreme Court in March of 2015 declared the state’s
affordable housing process ‘non-functioning’ and transferred jurisdiction over low-income and
moderate-income housing from the executive branch back to the courts. While the implications
from this decision are not yet fully understood, most development projects are continuing to
apply COAH guidelines in determining the allocation and rental rates for any affordable-rate
housing units that are set aside within a project.
Those COAH guidelines, where were designed to implement the New Jersey Fair Housing Act
(N.J.S.A. 52:27D-301 et seq.), were intended to assure that low- and moderate-income units
created under the Act were occupied by low- and moderate-income households for an
appropriate period of time. According to COAH guidelines, the inclusion of affordable rate for-
sale housing units in a project were required to adhere to the following requirements:
• Median income limits for qualifying households are determined by the New Jersey
Department of Community Affairs according to region. Morristown Town in Morris
County is located in DCA Region 2.
• In each affordable development, at least 50 percent of the restricted units within each
bedroom distribution shall be low-income units and the remainder may be moderate
income units.
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
• Affordable developments that are not age-restricted shall be structured in conjunction
with realistic market demands such that:
o The combined number of efficiency and one-bedroom units is no greater than 20
percent of the total low- and moderate-income units;
o At least 30 percent of all low- and moderate-income units are two bedroom units;
o At least 20 percent of all low- and moderate-income units are three bedroom
units;
o And the remainder, if any, may be allocated at the discretion of the developer.
• The maximum sales price of restricted ownership units within each affordable
development shall be affordable to households earning no more than 70 percent of
median income. Each affordable development must achieve an affordability average of
55 percent for restricted ownership units. In achieving this affordability average,
moderate-income ownership units must be available for at least three different prices for
each bedroom type, and low-income ownership units must be available for at least two
different prices for each bedroom type.
• In determining the initial rents and initial sales prices for compliance with the affordability
average requirements for restricted units other than assisted living facilities, the following
standards shall be used:
o A studio shall be affordable to a one person household;
o A one bedroom unit shall be affordable to a one and one-half person household;
o A two bedroom unit shall be affordable to a three person household;
o A three bedroom unit shall be affordable to a four and one-half person
household;
o And a four bedroom unit shall be affordable to a six person household.
• Each restricted ownership unit shall remain subject to the requirements of this
subchapter until the municipality in which the unit is located elects to release the unit
from such requirements pursuant to action taken in compliance with (g) below. Prior to
such a municipal election, a restricted ownership unit must remain subject to the
requirements of this subchapter for a period of at least 30 years. Based upon the above
guidelines, the developer has calculated the required mix of Affordable-Rate units and
allowable for sale pricing as follows:
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
It is important to note that in utilizing the state’s calculator, due to the subject low 4 unit COAH
count, the calculator does not allow for any 1 bedroom units. It is mandated that the unit mix
include a minimum of 2 two bedroom units and a minimum of 1 three bedroom unit.
Additionally, we projected the highest yield possible for the subject by eliminating any monthly
HOA liability for the four units and utilizing a modest annual figure of $500 for homes owner’s
insurance. Further due to the low 4 unit yield the state only allows for 1 moderate income with
the 3 remaining mandatory low income units. The COAH calculator is located in the addendum
of this report.
Dwelling Type Model Name Unit Mix
COAH Unit 2-BR-Low 2 2
COAH Unit 2-BR-Mod 1 1
COAH Unit 3-BR-Low 2 1
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Summary: Based upon the above Base Price analysis and the previously discussed Market
Analysis, I have arrived at the following conclusions regarding the subject development:
The next step in our analysis is to develop a projection of sales pace for the subject project. To
accomplish this, we have begun by analyzing the historical sale pace for existing condominiums
over $400,000.00 within the Town of Morristown. Our analysis has indicated an average sale
pace in in the one-year period ending on May 1, 2018 of 2.9 home purchase contracts per
month and a current unsold inventory level of 11 homes. This performance indicates a monthly
absorption rate equivalent to 26.5% of available inventory. Applying this 26.5% monthly
absorption pace to the subject project’s 29 units, this indicates a sales-pace of 3.8 sales
monthly or 11.5 sales quarterly.
Dwelling Type Model Name
Projected Unit
MixLiving Area (square feet)
Living Area ( Median
Deviation)
Design
AdjustmentBase Sales Price
(per square foot)
Base Retail
Selling Price
Flat Type 7 6 1,200 3% 0% $391.00 $469,200
Flat Type 8 5 1,245 -1% 0% $384.00 $478,080
Flat Type 11 2 1,167 6% 0% $396.00 $462,132
Flat Type 12 2 1,167 6% 0% $396.00 $462,132
Flat Type 3-A 1 1,392 -12% 0% $361.00 $502,512
Flat Type 3-B 1 1,390 -12% 0% $361.00 $501,790
Flat Type 6 1 1,325 -7% 0% $371.00 $491,575
Flat Type 4 1 1,317 -6% 0% $373.00 $491,241
Townhouse Type 2 4 1,565 0% 0% $361.00 $564,965
Townhouse Type 1 2 1,585 -1% 0% $358.00 $567,430
COAH Flat 2 Bedroom-Low 2 2 1,110 11% 0% $120.58 $133,849
COAH Flat 2 Bedroom-Mod 1 1 1,110 11% 0% $170.94 $189,743
COAH Flat 3 Bedroom-Low 2 1 1,775 -32% 0% $87.65 $155,586
1,238
$475,855
$384.46
1,572
$565,787
$359.99
1,276
$153,257
$120.08
1,312
$449,965
$342.93
Average Base Price-Per-Square Foot (weighted)
TOTAL
Average House Size (weighted)
Average Base Price-Per-Square Foot (weighted)
Average Base Selling Price (weighted)
Average Base Price-Per-Square Foot (weighted)
Average House Size (weighted)
Average Base Selling Price (weighted)
Average Base Selling Price (weighted)
Townhouse
Average House Size (weighted)
Average Base Selling Price (weighted)
ANALYSIS OF BASE RETAIL SELLING PRICES
Flat
Average House Size (weighted)
COAH Flat
Average Base Price-Per-Square Foot (weighted)
monthly quarterly
1-Year Period Ending
May 1, 201811 2.9 3.8 26.5% 29 2 3.8 11.5
ABSORPTION ANALYSISTown of Morristown - Condominiums (Over $400k)
Current
Unsold
Inventory
Avg. Monthly
Purchase
Contracts
Months
Supply
Monthly
Absorption # of Subject Units
# of Subject
Phases
Projected Sales Pace
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Next, we will analyze the sales pace for competing projects in the local submarket area. As
shown in the table below, competing projects have experienced a historical sales pace over the
most recent 90-day period ranging from a low of 0.1 sales to a high of 2.0 sales per month with
an average of 1.05 sales per month for the new projects, and an average marketing time of 31
days for the resales in existing projects.
Given that the absorption rates indicated above are retrospective in nature, and considering the
continuing improvement in home purchase demand, forward looking projections of sales pace
will likely be greater than in the past. As evidenced below, home purchase demand in Morris
County has decreased by 6% in 2018 (YTD), this is largely due to a decrease by 13% in unsold
inventory.
Based on the preceding analysis of market conditions, the appraiser has reconciled at a Sales
Pace of 3 per sales per quarter for each of the market rate product types and 2 per quarter for
the COAH units. Given that the actual closing of sales will not occur until sometime after the
contract of sale, the appraiser projects a build-out for the 29-unit subject project of 8 Quarters.
COUNTY
Contract
Sales
Unsold
Inventory
Market
Swing
Total
Market <$400k$400k-
$599,999
$600k-
$1mil$1,000,001-
$2.5mil
>$2.5
mil
Morris -6% -13% 4% 3.1 2 3 4 7 12
Statewide -1% -11% 5% 3.5 3.1 3.3 4.3 7.8 19.9
MarketTRAC Monthly by OTTEAU.com
% change
2018 YTD
Months Supply
March
Item
Project Name
Municipality
County
Total Units 4 4 27 5 2 92
Average Sale Price 1,006,000 365,000 765,557 356,200 824,000 799,000
Average Unit Size 1,924 842 1,784 1,179 2,223 2,477
Net Sales (90 Days) n/a n/a 2 n/a n/a n/a
Sales Velocity (90 Days) n/a n/a 0.7 n/a n/a n/a
Project Life (Months) n/a n/a 20 n/a n/a 45
Net Sales (Project Life) n/a n/a 2 n/a n/a 92
Sales Velocity (Project Life) 28.0 51.0 0.1 28.0 18.0 2.0
Absorption AnalysisFlat Project
Avg DOM of 4 sales Avg DOM of 4 sales
Flat Project Townhouse Project1 2 3
Flat Project3
Morris Township
Pro
pert
y
The Residences at Vail Mansion Vail Commons 25 Mill Street
Morris County, NJ Somerset County, NJ Morris County, NJMorris County, NJ
James Place
Town of Morristown Town of Morristown Bernardsville Borough
Pri
ce &
Pace
Avg DOM of 5 sales Avg DOM of 2 sales
Townhouse Project Townhouse Project2
Morristown Square
Town of Morristown
Morris County, NJ
1
Morristown Court
Town of Morristown
Morris County, NJ
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O T T E A U G R O U P VALUATION | RESEARCH | CONSULTING | BROKERAGE
In addition to base retail selling prices, developers can achieve added income from a list of
available options, upgrades and site/location premiums. The total cost of options within this
submarket area typically range between 2% and 5% of the base house price. We project
options of 3% for the subject proposed subject project. There will be no options factored in for
the COAH units as these units are typically sold with base options. Therefore, overall retail
selling prices for the completed dwellings is projected as follows:
Site Development Cost Projection – as previously explained this cost is included in the over
construction costs as the site development and construction are typically completed
simultaneously in these types of projects.
Construction Cost Projection – the appraiser’s estimated cost of $140 per square foot for the
base house construction is considered reasonable, and will be adjusted to reflect the cost of
options and upgrades as follows:
Model Name Projected Unit MixLiving Area (square feet)
Base Price
(per s.f.)
Base Selling
Price Options @ 3%
Avg Site/Floor
Premium
Overall Selling
Price
Type 7 6 1,200 $391.00 $469,200 $14,076 $0 $483,276
Type 8 5 1,245 $384.00 $478,080 $14,342 $0 $492,422
Type 11 2 1,167 $396.00 $462,132 $13,864 $0 $475,996
Type 12 2 1,167 $396.00 $462,132 $13,864 $0 $475,996
Type 3-A 1 1,392 $361.00 $502,512 $15,075 $0 $517,587
Type 3-B 1 1,390 $361.00 $501,790 $15,054 $0 $516,844
Type 6 1 1,325 $371.00 $491,575 $14,747 $0 $506,322
Type 4 1 1,317 $373.00 $491,241 $14,737 $0 $505,978
Type 2 4 1,565 $361.00 $564,965 $16,949 $0 $581,914
Type 1 2 1,585 $358.00 $567,430 $17,023 $0 $584,453
2 Bedroom-Low 2 2 1,110 $120.58 $133,849 $0 $0 $133,849
2 Bedroom-Mod 1 1 1,110 $170.94 $189,743 $0 $0 $189,743
3 Bedroom-Low 2 1 1,775 $87.65 $155,586 $0 $0 $155,586
1,238
$490,131
$396
1,572
$582,760
$371
1,276
$153,257
$120
1,312
$462,830
$353
Average Overall Price-Per-Square Foot (weighted)
Average Overall Price-Per-Square Foot (weighted)
TOTAL
Average House Size (weighted)
Average Overall Selling Price (weighted)
Average Overall Price-Per-Square Foot (weighted)
COAH Flat
Average House Size (weighted)
Average Overall Selling Price (weighted)
ANALYSIS OF OVERALL RETAIL SELLING PRICES
Flat
Average House Size (weighted)
Average Overall Selling Price (weighted)
Average Overall Price-Per-Square Foot (weighted)
Townhouse
Average House Size (weighted)
Average Overall Selling Price (weighted)
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Marketing Cost Projection – estimated at 5% of Gross Sales Income plus additional costs for
home sale closings and model fit-up and furnishing as detailed in the Cash Flow Analysis.
Gross Sales Income is based upon the projected selling prices for the completed dwellings
inclusive of the base house price and options, upgrades and site/location premiums.
Administrative & Overhead Cost Projection – Administrative costs are projected at 2.0%, and
Miscellaneous contingency costs at 1.5% of Gross Sales Income plus additional costs for real
estate taxes and insurance as detailed in the Cash Flow Analysis.
Model Name Recommended
Unit Mix
House Size (square feet)
Base Cost (per square
foot)
Base Cost Options Overall Cost
Type 7 6 1,200 $140.00 $168,000 $5,040 $173,040
Type 8 5 1,245 $140.00 $174,300 $5,229 $179,529
Type 11 2 1,167 $140.00 $163,380 $4,901 $168,281
Type 12 2 1,167 $140.00 $163,380 $4,901 $168,281
Type 3-A 1 1,392 $140.00 $194,880 $5,846 $200,726
Type 3-B 1 1,390 $140.00 $194,600 $5,838 $200,438
Type 6 1 1,325 $140.00 $185,500 $5,565 $191,065
Type 4 1 1,317 $140.00 $184,380 $5,531 $189,911
Type 2 4 1,565 $140.00 $219,100 $6,573 $225,673
Type 1 2 1,585 $140.00 $221,900 $6,657 $228,557
2 Bedroom-Low 2 2 1,110 $140.00 $155,400 $0 $155,400
2 Bedroom-Mod 1 1 1,110 $140.00 $155,400 $0 $155,400
3 Bedroom-Low 2 1 1,775 $140.00 $248,500 $0 $248,500
19
1,238
$178,481.65
$144.20
6
1,572
$226,634.33
$144.20
4
1,276
$178,675.00
$140.00
29
1,312
$188,470.94
$143.64
Total Units
Average Unit Size (weighted)
Average Per-Unit Construction Cost (weighted)
Average Per-SF Construction Cost (weighted)
Average Per-Unit Construction Cost (weighted)
Average Per-SF Construction Cost (weighted)
Average Unit Size (weighted)
Average Per-Unit Construction Cost (weighted)
Average Per-SF Construction Cost (weighted)
Average Unit Size (weighted)
Total Units
Average Unit Size (weighted)
Average Per-Unit Construction Cost (weighted)
Average Per-SF Construction Cost (weighted)
ANALYSIS OF DWELLING CONSTRUCTION COSTS
Flat
Townhouse
COAH Flat
TOTAL
Total Units
Total Units
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Construction Management Cost Projection – These costs typically range between 8% - 10% of
actual site development and construction costs and are therefore an expense charge based
upon site development and dwelling construction costs rather than a charge against income. In
situations where the developer will manage this responsibility internally, this cost charge is still
appropriate and reflects additional revenues earned by the developer. The appraisers have
estimated a 9% charge for the subject project.
The next step in the Income Approach analysis is to estimate the market value of these cash
flows to a single purchaser. To accomplish this, the net-cash-flows must be discounted at an
appropriate capitalization rate to develop an estimate of market value. Market conditions in the
residential for-sale market are currently considered to be stable with healthy absorption rates,
and stable selling pricings. As previously detailed in the Neighborhood and Market Analysis
section of this report, these conditions combined with low financing costs have led to a
stabilized economy and recovery from the great recession.
There has been literature written and empirical evidence developed relating returns in the bond
market to real estate returns. The closest relationship with real estate has proven over time to
be long-term bonds.1 Returns being received in various segments of the capital markets are as
follows:
The return on investments vary due to factors like differing degrees of risk, term to maturity, and
the current level of interest rates. Current bond yields represent safe investments, and as such,
indicate the lower end of the range. Since funds for real estate investment are competing with
these alternative investments, real estate investors typically require a higher rate of return than
bond yields due to the higher risk and inferior liquidity of real estate investments. In some
1For a discussions and analysis of the correlation between these yields, see C.F. Sirmans and J.R. Webb, “Yields for Selected Types of Real Property vs. the Money and Capital Markets,” The Appraisal Journal, April 1982, p. 241.
Prior Year Prior Month Current Month
U.S. 5-Year Bonds – Taxable 1.82% 2.63% 2.70%
U.S. 10-Year Bonds – Taxable 2.30% 2.84% 2.87%
U.S. 30-Year Bonds – Taxable 2.94% 3.09% 3.07%
AVERAGE BOND YIELDS
April 2018
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instances, rates of return desired by lenders can provide a benchmark for desired yields in the
real estate market. However, it must be remembered that lenders have a different risk position
than the equity investor.
The best source of current yield expectations of typical equity investors is based on surveys of
these investors. A survey published by RealtyRates provides analysis of real estate investment
and development returns on both a national and regional level. A summary of their 1st Quarter
2018 report appears below indicating that national average discount rate for investment property
acquisitions by investors ranges from a low of 9.36% to a high of 10.75%:
Because new construction projects require more intensive management and carry greater risk, it
is necessary to consider the yield expectations for equity investors who are active in developing
residential real estate projects in the current real estate market. The survey below, which is
based upon actual developer returns for Condominium development projects in the New York /
New Jersey submarket area, indicates an average return rate for Garden/Suburban Townhouse
ranging from a low of 11.51% to a high of 21.42%, with an average of 15.81%.
Retail Office Industrial Apartment
2018.Q1 2018.Q1 2018.Q1 2018.Q1
Investors Acquisitions 10.69% 10.28% 9.79% 9.36%
Investors New Development 12.43% 11.82% 11.66% 10.75%
National Discount Rates
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In selecting an appropriate discount rate for the subject project, it is significant to note that the
recent improvement in the housing market as discussed previously serve to reduce risk and
improve liquidity for residential real estate development projects. Accordingly, it is the
appraiser’s considered opinion that a reasonable discount rate for the subject property is 15%.
Therefore, a discount rate of 15% will be applied to the projected development cash flows. The
final step in the Income Approach is to develop an estimate of Market Value for the previously
developed net-cash-flows using the discount rate developed above.
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Reconciliation of Scenario 1 (As Is)
The appraiser has applied the Sales Comparison Approach and the Income Approach to the
valuation of the subject property AS IS. In reconciling and selecting a final value indication for
the subject property the appraiser has made the following final observation regarding the three
approaches to value.
Sales Comparison Approach: Based upon the analyses contained in this report the Sales
Comparison Approach has determined a value indication of $4,060,000 AS IS. The sales
comparison approach has estimated the value of the subject property by use of comparable
properties in this local submarket area. The sales were adjusted in a series of adjustments
determined by market data. The weakness of this approach is the quantity of adjustments
applied to the sales. The strength of this approach was the data utilized was local and relevant
to the valuation of the subject. Overall, the Sales Comparison is a good method of valuation for
land. Further this is a common method for brokers, buyers, investors and sellers to determine
value.
Income Approach: Based upon the analyses contained in this report the Income Approach has
determined a value indication of $4,380,000 AS IS. The income approach has determined the
subject’s Gross Sellout Revenue and deducted for construction, expenses and then applied a
discounted cash flow method to determine market value. The weakness of the approach is that
slight changes in selling prices, costs, and market perceived risk rates could have a significant
effect on the value indication. The strengths of this approach are the appraiser’s utilization of
relevant and local data along with market surveys. In conclusion the income approach is
considered a very reliable approach to the valuing the subject and commonly considered a
primary method for buyers in this submarket area.
Each of these approaches has yielded the following value indications:
Income Approach $4,380,000
Approach to Value AS IS
Sales Comparison $4,060,000
Cost Approach Not Applicable
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The above value indication shows all applicable methods of valuation of the subject property.
Based on the individual strengths and weaknesses of each method previously discussed, all
weight was placed on the Income Approach. Therefore, based upon the appraisers above
comments a final value can be expressed as follows:
AS IS
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2018
Value Conclusion $4,225,000
Scenario 2 – (As Complete)
This scenario will develop an estimate of market value for the subject property as complete,
prior to any sales have taken place.
Sales Comparison Approach
This approach calls for a comparison of condominium buildings that have been recently sold
which have comparability to the subject site. This valuation approach is not applicable to the
subject property in this Scenario due to the lack of Comparable Sales data for completed
condominium projects which no sales have occurred. Accordingly, this valuation approach will
be excluded.
Cost Approach
The Cost Approach is based upon the proposition that an informed purchaser would pay no
more for a property than the cost of producing a substitute property with the same utility. This
approach is particularly applicable when the property being appraised involves relatively new
improvements which represent the highest and best use of the land or when relatively unique or
specialized improvements are located on the site and for which there exist no comparable
properties that have either sold or are on the market.
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The Cost Approach, when applicable, is developed to provide a value indication for the subject
property consistent with the Intended Use previously identified in this report. Reliance upon this
approach or portions thereof for any other use, such as determining “insurable value” is not
anticipated by the appraiser, is not an intended use, and may be misleading.
In this approach, the value of the subject development will be estimated by adding the cost of
the proposed construction costs to the value of the approved subdivision previously developed
in Scenario I. The resulting indication will then be adjusted upward for to reflect charges for
construction management and entrepreneurial profit to yield an overall value indication for the
site ‘as if’ all construction has been completed:
Income Approach
In valuing the subject property’s development as approved and complete, I have applied the
same methodologies as used in the Subdivision Development Analysis in Scenario I. However,
there are three major differences:
1. Construction Costs have been eliminated as an expense,
2. The projected closings will occur quicker as the developer does not have to wait
for construction to be completed,
3. The expense items for Overhead and Misc. have been reduced and;
4. The discount rate attributable to entrepreneurial profit has been reduced from
15% to 10% to reflect the decrease in overall risk once all construction has been
completed.
In this manner, the value of the subject development as approved and as if all construction has
been completed have been completed can be estimated. In the following analysis we have
eliminated the 1st four quarters from the analysis therefore the AS IMPROVED value is as of
April 25, 2019.
$4,225,000.00
$5,465,082.85
$9,690,082.85
Construction Management @ 9% $491,857.46
Entreprenurial Profit @ 14% $765,111.60
$10,947,000.00
$377,000.00Indicated Value Per Unit
Cost Approach - As Complete
Scenario I Value Conclusion
Construction Costs
Pre-Profit Indication
Indicated Value by Cost Approach
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5 6 7
# Units Contracted 12 3 4 0 19
12 3 4 19
Quarterly Price Change 0.0% 0.0% 0.0%
490,131 490,131 490,131
5,881,568 1,470,392 1,960,523 9,312,483
# Units Contracted 6 0 0 0 6
6 0 0 6
Quarterly Price Change 0.0% 0.0% 0.0%
582,760 582,760 582,760
3,496,562 0 0 3,496,562
# Units Contracted 4 0 0 0 4
4 0 0 4
Quarterly Price Change 0.0% 0.0% 0.0%
154,000 154,000 154,000
616,000 0 0 616,000
0 0 0
0 0 0
0 0 0 0
0 0 0 0
1,312 1,312 1,312
Quarterly Price Change 0.0% 0.0% 0.0%
143.64 143.64 143.64
0 0 0 0
Closing Costs @ $2,000 44,000 6,000 8,000
0 0 0
Marketing Costs @ 5.0% 499,707 73,520 98,026
543,707 79,520 106,026 729,252
0 0 0
0 0 0
Real Estate Taxes $82,277 20,569 4,965 2,837
2,733 2,733 2,733
Overhead @ 1.0% 44,750 44,750 44,750
Miscellaneous @ 1.0% 44,750 44,750 44,750
112,802 97,198 95,070 305,070
656,508 176,717 201,096 1,034,322
Construction Management 9% 0 0 0 0
Total Cash Use (incl. Constr Mgmt) 656,508 176,717 201,096 1,034,322
9,337,622 1,293,675 1,759,427 11,774,723
Present Value @ 10% 9,109,875 1,231,338 1,633,803 $11,980,000
0.98 0.95 0.93
# Units Closed
Average Overall Retail Selling Price
Total Sales Income
Description Under Contract TOTAL
SUBDIVISION DEVELOPMENT ANALYSIS - AS IS as of April 25, 2019
Average Construction Cost ($/SF)
Total Construction Costs
Fla
t
SA
LE
S I
NC
OM
E
Tow
nhouse
SA
LE
S I
NC
OM
E
# Units Closed
Average Overall Retail Selling Price
Total Sales Income
CO
AH
Fla
t
SA
LE
S I
NC
OM
E
# Units Closed
Average Overall Retail Selling Price
Total Sales Income
Insurance
Total Administration Costs
SIT
E
DE
VE
LO
PM
EN
T
Recreational Amenities
Site Costs (including water & sewer)
Total Site Development Costs
CO
NS
TR
UC
TIO
N
# Units Built
Average Unit Size
VA
LU
AT
ION
Total Direct Cash Use
Net Cash Flow
Present Value Factor
MA
RK
ET
ING
Model Fitup & Furnishing
Total Marketing Costs
AD
MIN
IST
RA
TIO
N
HOA Set Up
Mount Laurel Contribution
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Reconciliation of Scenario 2 (As Complete)
The appraiser has applied the Cost Approach and the Income Approach to the valuation of the
subject property AS COMPLETE. In reconciling and selecting a final value indication for the
subject property the appraiser has made the following final observation regarding the three
approaches to value.
Cost Approach: Based upon the analyses contained in this report the Cost Approach has
determined a value indication of $10,947,000 AS COMPLETE. The cost approach has utilized
the developed site value and added for site and construction costs, construction management
and entrepreneurial profit. The strengths of this approach are the site value was determined
utilized relevant and local data. Overall, the cost approach is an adequate method of value as
the market value of the site and estimated site costs analyses are considered reliable. Buyers
generally focus less on this method and put more weight on the discount cash flow method.
Income Approach: Based upon the analyses contained in this report the Income Approach has
determined a value indication of $11,980,000 AS COMPLETE. The income approach has
determined the subject’s Gross Sellout Revenue and deducted for construction, expenses and
then applied a discounted cash flow method to determine market value. In this analysis the
construction costs and four quarters were eliminated. The weakness of the approach is that
slight changes in selling prices, costs, and market perceived risk rates could have a significant
effect on the value indication. The strengths of this approach are the appraiser’s utilization of
relevant and local data along with market surveys. In conclusion the income approach is
considered a very reliable approach to the valuing the subject and commonly considered a
primary method for buyers in this submarket area
Each of these approaches has yielded the following value indications:
Cost Approach $10,947,000
Income Approach $11,980,000
Approach to Value AS COMPLETE
Sales Comparison Not Applicable
The above value indication shows all applicable methods of valuation of the subject property.
Based on the individual strengths and weaknesses of each method previously discussed, most
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weight was placed on both the Income Approach. Therefore, based upon the appraisers above
comments a final value can be expressed as follows:
Property Rights Appraised Fee Simple
Value Type Market Value
AS COMPLETE
Effective Date of Valuation April 25, 2019
Value Conclusion $11,900,000
Scenario 3 – (Gross Sellout Revenue)
This value is representative of the gross non-discounted selling price for the 29 completed
dwelling units, which will comprise the subject development. The value will be based upon the
information contained in the Highest and Best Use and "As Is" Value Analysis section of this
report. This value is based upon the gross selling price of the individual dwellings without any
appreciation being calculated.
Model Name Projected Unit MixLiving Area (square feet)
Overall
Selling
Price Gross Sellout
Type 7 6 1,200 $483,276 $2,899,656
Type 8 5 1,245 $492,422 $2,462,112
Type 11 2 1,167 $475,996 $951,992
Type 12 2 1,167 $475,996 $951,992
Type 3-A 1 1,392 $517,587 $517,587
Type 3-B 1 1,390 $516,844 $516,844
Type 6 1 1,325 $506,322 $506,322
Type 4 1 1,317 $505,978 $505,978
Type 2 4 1,565 $581,914 $2,327,656
Type 1 2 1,585 $584,453 $1,168,906
2 Bedroom-Low 2 2 1,110 $133,849 $267,698
2 Bedroom-Mod 1 1 1,110 $189,743 $189,743
3 Bedroom-Low 2 1 1,775 $155,586 $155,586
19
$9,312,483
6
$3,496,562
4
$613,027
29
$13,400,000 Gross Sellout Revenue (Rounded)TOTAL
GROSS SELLOUT REVENUE
FlatTotal Units
Gross Sellout Revenue
TownhouseTotal Units
Gross Sellout Revenue
Total Units
COAH FlatTotal Units
Gross Sellout Revenue
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Reasonable Marketing Time
Marketing Time is defined as an opinion of the amount of time it might take to sell a real or
personal property interest at the concluded market value level during the period immediately
after the effective date of an appraisal. This definition has been quoted from the 2014 Uniform
Standards of Professional Appraisal Practice (USPAP).
Based upon my entire analysis, it is my considered opinion that a reasonable marketing time
estimate for the subject property is between ten to twelve months.
Reasonable Exposure Time
Reasonable exposure time is one of a series of conditions in most market value definitions.
Exposure time is always presumed to precede the effective date of the appraisal.
Exposure time is defined as “the estimated length of time the property interest being appraised
would have been offered on the market prior to the hypothetical consummation of a sale at
market value on the effective date of the appraisal; a retrospective opinion based on an analysis
of past events assuming a competitive and open market.” This definition has been quoted from
the 2014 Uniform Standards of Professional Appraisal Practice (USPAP).
Exposure time is different for various types of property and under various market conditions. It
is noted that the overall concept of reasonable exposure encompasses not only adequate,
sufficient, and reasonable time but also adequate, sufficient, and reasonable effort. The
estimate of exposure time focuses on time component.
Based upon my entire analysis, it is my considered opinion that a reasonable exposure time
estimate for the subject property is between ten to twelve months.
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Final Value Summary
AS IS
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2018
Value Conclusion $4,225,000
Value Conclusion $11,900,000
Value Type Market Value
Property Rights Appraised Fee Simple
Effective Date of Valuation April 25, 2019
AS COMPLETE
Revenue $13,400,000
GROSS SELLOUT
Value Type Revenue
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PART IV – ADDENDUM Professional Qualifications
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COAH Calculator
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Provided Construction Budget
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Provided Approvals
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Subject Deed
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Subject Tax Records
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Common Terminology
Please find the common appraisal terminology and their definitions as per The Dictionary of Real Estate Appraisals 6th Edition.
Absolute Net Lease A lease in which the tenant pays all expenses including structural maintenance, building reserves, and management; often a long-term lease to a credit tenant. (p. 1) Absorption
1. Broadly, the process whereby vacant space in a property, a group of properties, or a market becomes occupied, either by leasing or by sales to owner-users.
2. In subdivision analysis, the process whereby lots or units in a subdivision are sold off. 3. In market analysis, short-term capture. (p. 1)
Absorption Period The actual or expected period required from the time a property, group of properties, or commodity is initially offered for lease, purchase, or use by its eventual users until all portions have been sold or stabilized occupancy has been achieved. (p. 1) Adjustments
1. Mathematical changes made to market data to facilitate comparison or understanding. When dollar adjustments are used, individual differences between comparable properties and the subject property are expressed in terms of plus or minus dollar amounts. With percentage adjustments, individual differences are reflected in plus or minus percentage differentials.
2. Items that should be prorated or apportioned between the purchaser and the seller in a real property transaction, e.g., taxes, rents. (p. 4)
As Is Market Value The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (p. 13) Band of Investment A technique in which the capitalization rates attributable to components of an investment are weighted and combined to derive a weighted-average rate attributable to the total investment (i.e., debt and equity, land and improvements). (p. 19) Capitalization Rate A ratio of one year’s net operating income provided by an asset to the value of the asset; used to convert income into value in the application of the income capitalization. (p. 31) Certification A part of an appraisal report in which the appraiser certifies that work was complete according to applicable professional and ethical standards. (p. 36) Common Area
1. The total area within a property that is not designed for sale or rental but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities.
2. In a shopping center, the walkways and areas onto which the stores face and which conduct the flow of customer traffic. (p. 41)
Common Area Maintenance (CAM)
1. The expense of operating and maintaining common areas; may or may not include management charges and usually does not include capital expenditures on tenant improvements or other improvements to the property.
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2. The amount of money charged to tenants for their shares of maintaining a shopping center’s common area. The charge that a tenant pays for shared services and facilities such as electricity, security, and maintenance of parking lots. Items charged to common area maintenance may include cleaning services, parking lot sweeping and maintenance, snow removal, security and upkeep. (p. 41)
Concession
1. A financial payment, special benefit, or non-realty item included in a sale contract or rental agreement as an incentive to the sale or lease. Concessions occur when the seller or lessor agrees to pay an inducement or to give some special credit or property to a buyer or lessee, who agrees to pay a higher price than the seller or lessor would normally pay in return for the inducement or credit. Concessions usually result in artificially inflated sale prices or lease rates. Often concessions allow financing that would otherwise not be possible. Concessions may be disclosed as part of the sale or lease, but often they are not.
2. An inducement for a tenant to lease space, sometimes, but not always, observed in overbuilt markets, which can include above-standard tenant improvements, free rent, moving cost reimbursement or credit, and buyout of the tenant’s existing lease. Concessions are an integral part of the definition of market rent.
3. A franchise for the right to conduct a business, granted by a governmental body or other authority.
4. A lease that allows a tenant to conduct a business on the property of another. (p. 45) Condemnation The act or process of enforcing the right of eminent domain. (p. 45) Conditions of Sale An element of comparison in the sales comparison approach; comparable properties can by adjusted for differences in the motivations of either the buyer or a seller in a transaction. (p. 46) Condominium A multiunit structure, or a unit within such a structure, with a condominium form of ownership. (p. 46) Conservation Easement An interest in real property restricting future land use to preservation, conservation, wildlife habitat, or some combination of those uses. A conservation easement may permit farming, timber harvesting, or other uses of a rural nature as well as some types of conservation-oriented development to continue, subject to the easement. (p. 47) Consumer Price Index (CPI) A measurement of the cost of living determined by the US Bureau of Labor Statistics; the principal cost of living index and measure of inflation. (p. 48) Contributory Value
1. A type of value that reflects the amount a property or component of a property contributes to the value of another asset or to the property as a whole.
2. The change in the value of a property as a whole, whether positive or negative, resulting from the addition or deletion of a property component. Also called deprival value in some countries. (p. 50)
Curable Depreciation Items of physical deterioration or functional obsolescence that are economically feasible to cure. Curing an item of depreciation is economically feasible if the cost to cure is equal to or less than the anticipated increase in the value of the property that would result after curing the depreciation. (p. 57) Curable Functional Obsolescence An element of depreciation; a curable defect caused by a flaw in the structure, materials, or design, which can be practically and economically corrected. (p. 57)
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Curable Physical Deterioration A form of physical deterioration that can be practically and economically corrected as of the date of appraisal; excludes vandalism and damage, which are curable conditions but are not accounted for in an estimate of replacement cost or reproduction cost. (p. 57) Current Value
1. Value as of the current time period as compared to past or future value conclusions. 2. In accounting, synonymous with market value. (p. 57)
Debt Coverage Ratio (DCR) The ratio of net operating income to annual debt service (DCR = NOI/Im), which measures the relative ability of a property to meet its debt service out of net operating income; also called Debt Service Coverage Ratio (DSCR). A larger DCR indicates a greater ability for a property to withstand a reduction in income, providing an improved safety margin for a lender. (p. 60) Deed Restriction A provision written into a deed that limits the use of land. Deed restrictions usually remain in effect when title passes to subsequent owners. (p. 61) Deferred Maintenance Items of wear and tear on a property that should be fixed now to protect the value or income-producing ability of the property, such as a broken window, a dead tree, a leak in the roof, or a faulty roof that must be completely replaced. These items are almost always curable. (p. 61) Demand The desire and ability to purchase or lease goods and services; in real estate, the amounts of a type of property desired for purchase or rent at various prices in a given market for a given period of time. (p. 62) Depreciation
1. In appraisal, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.
2. In accounting, an allocation of the original cost of an asset, amortizing the cost over the asset’s life; calculated using a variety of standard techniques. (p. 63)
Direct Capitalization A method used to convert an estimate of a single year’s income expectancy into an indication of value in one direct step, either by dividing the net income estimate by an appropriate capitalization rate or by multiplying the income estimate by an appropriate factor. Direct capitalization employs capitalization rates and multipliers extracted or developed from market data. Only one year’s income is used. Yield and value changes are implied, but not explicitly identified. (p. 65) Discounted Cash Flow (DCF) Analysis The procedure in which a discount rate is applied to a set of projected income streams and a reversion. The analyst specifies the quantity, variability, timing, and duration of the income streams and the quantity and timing of the reversion, and discounts each to its present value at a specified yield rate. (p. 66) Disposition Value The most probable price that a specified interest in property should bring under the following conditions:
1. Consummation of a sale within a specified time, which is shorter than the typical exposure time for such a property in that market.
2. The property is subjected to market conditions prevailing as of the date of valuation. 3. Both the buyer and seller are acting prudently and knowledgeably. 4. The seller is under compulsion to sell. 5. The buyer is typically motivated.
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6. Both parties are acting in what they consider to be their best interests. 7. An adequate marketing effort will be made during the exposure time. 8. Payment will be made in cash in US dollars (or the local currency) or in terms of financial
arrangements comparable thereto. 9. 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. This definition can also be modified to provide for valuation with specified financing terms. (p. 67) Easement The right to use another’s land for a stated purpose. (p. 71) Effective Date
1. The date on which the appraisal or review opinion applies. (SVP) 2. In a lease document, the date upon which the lease goes into effect. (p. 74)
Effective Gross Income (EGI) The anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income. (p. 74) Effective Rent Total base rent, or minimum rent stipulated in a lease, over the specified lease term minus rent concessions; the rent that is effectively paid by a tenant net of financial concessions provided by a landlord. (p. 74) Eminent Domain The right of government to take private property for public use upon the payment of just compensation. The Fifth Amendment of the US Constitution, also known as the takings clause, guarantees payment of just compensation upon appropriation of private property. (p. 75) Equity Dividend The portion of net operating income that remains after total mortgage debt service is paid but before ordinary income tax on operations is deducted; also called equity cash flow. (p. 78) Excess Rent The amount by which contract rent exceeds market rent at the time of the appraisal; created by a lease favorable to the landlord (lessor) and may reflect unusual management, unknowledgeable or unusually motivated parties, a lease execution in an earlier, stronger rental market, or an agreement of the parties. (p. 81) Expense Recovery The dollar amount a landlord receives from tenants as reimbursements for operating expenses such as maintenance and repair, utilities, security, insurance, and taxes; also known as pass-throughs, reimbursables, or billables. (p. 82) Exposure Time
1. The time a property remains on the market. 2. The estimated length of time that the property interest being appraised would have been offered
on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market. (p. 83)
Extraordinary Assumption An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or
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economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends or about the integrity of data used in an analysis. (p. 83) Fair Market Value
1. In nontechnical usage, a term that is equivalent to the contemporary usage of market value. 2. As used in condemnation, litigation, income tax, and property tax situations, a term that is similar
in concept to market value but may be defined explicitly by the relevant agency. For example, one definition of fair market value provided by the Internal Revenue Service for certain purposes is as follows: the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. (p. 85)
Feasibility Rent The rent necessary to justify new construction. This concept helps the analyst determine the timing of development, as well as the difference between the required rent and market rent based on known costs and expected returns to the investor. Feasibility rent may also be used to estimate the depreciation of an improved property. The capitalized difference between feasibility rent and market rent represents total depreciation of the existing improved property if market rent is less than feasibility rent. (p. 87) Fee Simple Estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. (p. 90) Functional Obsolescence The impairment of functional capacity of improvements according to market tastes and standards. (p. 97) Functional Utility The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards; the efficiency of a building’s use in terms of architectural style, design and layout, traffic patterns, and the size and type of rooms. (p. 97) Going Concern
1. An established and operating business having an indefinite future life.
2. An organization with an indefinite life that is sufficiently long that, over time, all currently incomplete transformations [transforming resources from one form to a different, more valuable form] will be competed. (p. 102)
Going-Concern Value An outdated label for the market value of all the tangible and intangible assets of an established and operating business with an indefinite life, as if sold in aggregate; more accurately termed the market value of the going concern or market value of the total assets of the business. (p. 102) Going-In Capitalization Rate (Ro) The overall capitalization rate obtained by dividing a property’s net operating income for the first year after purchase by the present value of the property. (p. 102) Goodwill
1. Unidentifiable intangible assets. 2. The amount by which the acquisition price exceeds the fair value of identified assets. 3. That intangible asset arising as a result of name, reputation, customer loyalty, location, products,
and similar factors not separately identified. (International Glossary of Business Valuation Terms)
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4. That intangible asset arising as a result of elements such as name, reputation, customer loyalty, location, products, and related factors not separately identified and quantified. (ASA Glossary) (p. 102)
Gross Building Area (GBA)
1. Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved.
2. Gross leasable area plus all common areas. 3. For residential space, the total area of all floor levels measured from the exterior of the walls and
including the super-structure and substructure basement; typically does not include garage space. (p. 104)
Gross Leasable Area (GLA) Total floor area designed for the occupancy and exclusive use of tenants, including basements and mezzanines; measured from the center of joint partitioning to the outside wall surfaces. (p. 105) Gross Lease A lease in which the landlord receives stipulated rent and is obligated to pay all of the property’s operating and fixed expenses; also called a full service lease. (p. 105) Gross Living Area (GLA) Total area of finished, above-grade residential space; calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. (Finished basements and attic areas are not generally included in total gross living area. Local practices, however, may differ.) (p. 105) Gross Rent Multiplier (GRM) The relationship or ratio between the sale price or value of a property and its periodic gross rental income. (p. 105) Ground Lease A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor at the end of the lease term. (p. 106) Ground Rent The rent paid for the right to use and occupy land according to the terms of a ground lease; the portion of the total rent allocated to the underlying land. (p. 106) Highest and Best Use
1. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
2. The use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset’s existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid. (IVS)
3. The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. (Uniform Appraisal Standards for Federal Land Acquisitions) (p. 109)
Hypothetical Condition
1. A condition that is presumed to be true when it is known to be false. (SVP) 2. A condition, directly related to a specific assignment, which is contrary to what is known by the
appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. Comment: Hypothetical conditions are contrary to known facts about physical, legal, or
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economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP, 2016-2017 ed.) (p. 113)
Income Capitalization Approach Specific appraisal techniques applied to develop a value indication for a property based on its earning capability and calculated by the capitalization of property income. (p. 115) Incurable Functional Obsolescence An element of depreciation; a defect caused by a deficiency or superadequacy in the structure, materials, or design that cannot be practically or economically corrected as of the effective date of the appraisal. (p. 116) Incurable Physical Deterioration A form of physical deterioration that cannot be practically or economically corrected as of the effective date of appraisal. (p. 116) Induced Demand A component of latent demand, stimulated by sources other than fundamental demand drivers; created by, for example, aggressive marketing efforts, the opening of a major demand generator, or the provision of new amenities. (p. 116) Ingress A means of entering; an entrance. (p. 117) In Lieu Tax A tax that substitutes for property taxes; also called in lieu payments or payments in lieu of taxes. (p. 117) Institutional-Grade Property A property of sufficient size and stature to merit attention by large national or international investors. These properties are of good design and construction, although they are rarely monumental in design or the use of construction materials. They are typically large. They may be located in secondary metropolitan areas, but invariably they will have a very stable tenant base. Investment properties usually contain state-of-the-art mechanical, electrical, life safety, elevator, and communications systems. Their finishes are of the highest standards, and they often provide the occupants with an exceptional mix of amenities in variety and quality. Often they house a lead tenant for whom the property is named, and usually they are located in a premier metropolitan area. Investment-grade properties need not be considered to be “trophy” material, but trophy properties are usually investment-grade. (BOMA) (p. 118) Insurable Value A type of value for insurance purposes. (p. 119) Interim Use The temporary use to which a site or improved property is put until a different use becomes maximally productive. (p. 120) Investment Value
1. The value of a property to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market.
2. The value of an asset to the owner or a prospective owner for individual investment or operational objectives. (IVS) (p. 121)
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Just Compensation In condemnation, the amount of loss for which a property owner is compensated when his or her property is taken. Just compensation should put the owner in as good a position pecuniarily as he or she would be if the property had not been taken. (p. 123) Leased Fee Interest The ownership interest held by the lessor, which includes the right to the contract rent specified in the lease plus the reversionary right when the lease expires. (p. 128) Leasehold Improvements Improvements or additions to leased property that have been made by the lessee. (p. 128) Leasehold Interest The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. (p. 128) Lessee One who has the right to occupancy and use of the property of another for a period of time according to a lease agreement. (p. 129) Lessor One who conveys the rights of occupancy and use to others under a lease agreement. (p. 129) Liquidation Value The most probable price that a specified interest in property should bring under the following conditions:
1. Consummation of a sale within a short time period.
2. The property is subjected to market conditions prevailing as of the date of valuation.
3. Both the buyer and seller are acting prudently and knowledgeably.
4. The seller is under extreme compulsion to sell.
5. The buyer is typically motivated.
6. Both parties are acting in what they consider to be their best interests.
7. A normal marketing effort is not possible due to the brief exposure time.
8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto.
9. 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.
This definition can also be modified to provide for valuation with specified financing terms. (p. 132) Loan-to-Value Ratio The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage; also called loan ratio or LTV. (p. 134) Marketability The relative desirability of a property (for sale or lease) in comparison with similar or competing properties in the area. (p. 138) Marketing Time An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time. (p. 140)
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Market Penetration A comparison of the sales or use of a product or service compared to the total theoretical market for that product or service. Examples include the proportion of seniors living in senior housing or the proportion of automobile owners who use car wash facilities. (p. 140) Market Rent The most probable rent that a property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement including the rental adjustment and revaluation, permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements. (p. 140) Market Study An analysis of the market conditions of supply, demand, and pricing for a specific property type in a specific area. (p. 140) Market Value A type of value that is the major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined, such as the following:
1. The most widely accepted components of market value are incorporated in the following definition: The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.
2. Market value is described, not defined, in the Uniform Standards of Professional Appraisal Practice (USPAP) as follows: A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal. (p. 141)
Master Lease
1. A lease in which the fee owner leases a part or the entire property to a single entity (the master lease) in return for a stipulated rent. The master lessee then leases the property to multiple tenants.
2. The first lease in a sandwich lease. (p. 143) Modified Gross Lease A lease in which the landlord receives stipulated rent and is obligated to pay some, but not all, of the property’s operating and fixed expenses. Since assignment of expenses varies among modified gross leases, expense responsibility must always be specified. In some markets, a modified gross lease may be called a double net lease, net net lease, partial net lease, or semi-gross lease. (p. 148) Net Lease A lease in which the landlord passes on all expenses to the tenant. (p. 157) Net Operating Income (NOI or Io) The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income but before mortgage debt service and book depreciation are deducted. Note: This definition mirrors that convention used in corporate finance and business valuation for EBITDA (earnings before interest, taxes, depreciation, and amortization). (p. 158) Net Present Value The difference between the present value of all expected investment benefits (PV) and the present value of the capital outlays (CO), i.e., NPV=PV-CO. (p. 158)
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Obsolescence One cause of depreciation; an impairment of desirability and usefulness caused by new invention, changes in design, improved processes for production, or external factors that make a property less desirable and valuable for a continued use; may be either functional or external. (p. 161) Occupancy Rate
1. The relationship or ratio between the potential income from the currently rented units in a property and the income that would be received if all the units were occupied.
2. The ratio of occupied space to total rentable space in a building. (p. 161) Operating Expenses The periodic expenditures necessary to maintain the real estate and continue production of the effective gross income, assuming prudent and competent management. (p. 163) Option A legal contract, typically purchased for a stated consideration, that permits but does not require the holder of the option (known as the optionee) to buy, sell, or lease real estate for a stipulated period of time in accordance with specified terms; a unilateral right to exercise a privilege. (p. 163) Partial Interest Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common, easement, or life interest. (p. 168) Pass-Through A tenant’s portion of operating expenses that may be composed of common area maintenance (CAM), real property taxes, property insurance, and any other expenses determined in the lease agreement to be paid by the tenant. (p. 168) Personal Property
1. The interests, benefits, and rights inherent in the ownership of tangible objects that are considered by the public as being personal; also called tangible personal property.
2. Identifiable tangible objects that are considered by the general public as being “personal” – for example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate. (p. 170)
Potential Gross Income (PGI) The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted. (p. 173) Property Rights Adjustment An adjustment made to the indicated property value if the value of the property is not at market occupancy or market rent. (p. 179) Prospective Market Value “As Completed” and “As Stabilized” A prospective market value may be appropriate for the valuation of a property interest related to a credit decision for a proposed development or renovation project. According to USPAP, an appraisal with a prospective market value reflects an effective date that is subsequent to the date of the appraisal report. Prospective value opinions are intended to reflect the current expectations and perceptions of market participants, based on available data. Two prospective value opinions may be required to reflect the time frame during which development, construction, and occupancy will occur. The prospective market value – as completed – reflects the property’s market value as of the time that development is expected to be completed. The prospective market value – as stabilized – reflects the property’s market value as of the time the property is projected to achieve stabilized occupancy. For an income-producing property, stabilized occupancy is the occupancy level that a property is expected to achieve after the property is exposed to the market for lease over a reasonable period of time and at comparable terms and conditions to other similar properties. (p. 179)
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Redevelopment 1. In an urban renewal area, the development or improvement of land that is undeveloped or has
been cleared; technically includes the erection of buildings and other development and improvement of the land by private or public redevelopers to whom the land has been made available.
2. In general, the demolition of a building or portion of a building and the subsequent development on the same site. (p. 192)
Remaining Economic Life The estimated period over which existing improvements are expected to contribute economically to a property; an estimate of the number of years remaining in the economic life of a structure or structural components as of the effective date of the appraisal; used in the economic age-life method of estimating depreciation. (p. 195) Renewal A new lease entered into by an existing tenant upon expiration of their original lease term. Not to be confused with renewal option. (p. 196) Renewal Option An agreement entered into at the time of the original lease providing the tenant with the right, but not the obligation, for the tenant to extend the lease term for a specified time at a rent specified in the option agreement or at the market rate at the time of renewal. (p. 196) Rentable Area For office or retail buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the building that penetrate through the floor to the areas below. The rentable area of a floor is computed by measuring to the inside finished surface of the dominant portion of the permanent building walls, excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to local practice. (p. 196) Rent Control A legal regulation that specifies the maximum rental payment for the use of property. (p. 196) Replacement Cost The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout. (p. 197) Replacement Cost for Insurance Purposes The estimated cost, at current prices as of the effective date of valuation, of a substitute for the building being valued, using modern materials and current standards, design, and layout for insurance coverage purposes guaranteeing that damaged property is replaced with new property (i.e., depreciation is not deducted). (p. 197) Reproduction Cost The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all of the deficiencies, super-adequacies, and obsolescence of the subject building. (p. 198) Retrospective Value Opinion A value opinion effective as of a specified historical date. The term retrospective does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., “retrospective market value opinion.” (p. 201)
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Riparian Rights A water right that, under common law, grants a landowner the ownership of waters that share a border with the parcel owned or that flow across the land. (p. 204) Sales Comparison Approach The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available. (p. 207) Sandwich Lease A lease in which an intermediate, or sandwich, leaseholder is the lessee of one party and the lessor of another. The owner of the sandwich lease is neither the fee owner nor the user of the property; he or she may be a leaseholder in a chain of leases, excluding the ultimate sublessee. (p. 207) Section 8 Housing A residential property occupied under a federal program that provides assistance for lower-income households. The difference between the HUD-established allowable rent for each unit and the household’s contribution is paid by HUD to the project owner or manager. (p. 210) Stigma An adverse public perception regarding a property, commonly the identification of a property with a condition such as environmental contamination or other detrimental condition, such as a violent crime, that penalizes the marketability of the property and may also result in a diminution in value. (p. 221) Subdivision Development Method A method of estimating land value when subdividing and developing a parcel of land is the highest and best use of that land. When all direct and indirect costs and entrepreneurial incentive are deducted from an estimate of the anticipated gross sales price of the finished lots (or the completed improvements on those lots), the resultant net sales proceeds are then discounted to present value at a market-derived rate over the development and absorption period to indicate the value of the land. (p. 223) Sublease An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another, the sublessee, for a specific period of time, which may or may not be coterminous with the underlying lease term. (p. 224) Superadequacy An excess in the capacity or quality of a structure or structural component; determined by market standards. (p. 226) Tax Abatement A reduction in the local taxes levied on a project for a specific period of time; may refer to a rebate of taxes previously paid due to overassessment of property. (p. 229) Temporary Easement An easement granted for a specific purpose and applicable for a specific time period. A construction easement, for example, is terminated after the construction of the improvement and the unencumbered fee interest in the land reverts to the owner. (p. 231) Tenant Improvements (TIs)
1. Fixed improvements to the land or structures installed for use by a lessee. 2. The original installations of finished tenant space in a construction project; subject to periodic
change for succeeding tenants. (p. 232)
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Transferable Development Right (TDR) A development right that cannot be used by the landowner, or that the owner chooses not to use, but can be conveyed to landowners in another location or leased for a period of years to then revert back to the original owner; TDRs are said to be transferred from a landowner in a sending district to the use of a landowner in a receiving district. (p. 235) Uniform Standards of Professional Appraisal Practice (USPAP) In the United States, professional standards, developed for appraisers and users of appraisal services by the Appraisal Standards Board of The Appraisal Foundation, that are required for use in federally related transactions. Compliance with USPAP is also required in certain appraisals by state certification and licensing boards. (p. 239) Use Variance A decision by a board of adjustment that grants a property owner the right to develop or use his or her property in a manner that violates the strict terms of the applicable zoning authority; granted on a property-by-property basis. (p. 241) Value-in-Use The value of a property assuming a specific use, which may or may not be the property’s highest and best use on the effective date of the appraisal. Value in use may or may not be equal to market value but is different conceptually. (p. 245) Zoning Variance A legally authorized modification in the use of property at a particular location that does not conform to the regulated use set forth in the zoning ordinance for the surrounding area; not an exception or change in the legally applicable zoning. A zoning variance is typically only granted if the property owner can prove a particular hardship due to unusual property characteristics. (p. 252)