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approaches, developed with the most reliable data is typically given the greatest <br />emphasis in concluding the final estimate of value. <br />r <br />} <br /> <br />Methodology Specific to this Appraisal <br />The property being appraised contains a total of 284.519 acres and is being <br />operated as the Kehn Pit. This is an unusual appraisal assignment since it is <br />partially mined. Furthermore, since the property before mining commenced <br />consisted of a significant amount of wetlands, the United States Department of <br />Army Corps of Engineers officials required the operator to obtain the proper 404 <br />permit that necessitated the reclamation to involve returning the land to wetlands <br />and open space. A copy of the 404 permit can be found in the Addendum as <br />Exhibit B. <br />The typical appraisal assignment would involve a vacant tract containing <br />sufficient sand and gravel reserves to jusfify mining it. Permitting costs would <br />typically be estimated; and after the property is mined, it would typically be <br />reclaimed for water storage or residential development. Under the typical <br />scenario, similaz types of comparable sales possessing adequate sand and gravel <br />reserves would be utilized; and the sales comparison approach would be the most <br />appropriate method of valuing the property. <br />Since the Kehn Pit is in operation and partially mined out, the necessary <br />permits from both the State of Colorado Division of Minerals and Geology and <br />Larimer County jurisdictions have already been obtained; and those costs have <br />ah•eady been incurred. The property owner is also the operator of the business <br />entity performing the mining operations. The purpose of this assignment is to <br />formulate an opinion of the market value of the real property, which currently <br />consists of the partially mined out gravel pit plus the office and shop buildings <br />occupied by Don Kehn Construction, Inc. <br />It order to separate the real property from the business enterprise, it is <br />necessary to analyze the Kehn Pit as though it were leased on a royalty basis, with <br />the operator having the burden of reclaiming the mined out pit in conformance <br />with the United States Department of Army Corps of Engineers 404 permit. <br />This approach mandates employing the income approach utilizing <br />discounted cash flow analysis. The present value of the cash flows from royalty <br />income and office and shop building rent will be estimated as will be the present <br />value of the residual at the end of the mining operations. <br />FOSTER VALUATION COMPANY LLC <br />-28- <br />