1979-12-28_GENERAL DOCUMENTS - C1981017

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INCOME APPROACH (Direct Capitalization) Income approach to value converts net income attributable to the real estate into an indication of property value by the use of a capitalization rate . After establishing gross economic income (income the property is capable of producing) , deductions are made for vacancy and all operating expenses . The remaining net income is then capitalized with an overall capitalization rate which pro- vides for the requirements of the mortgaged portion of the invest- ment in addition to the return on the equity investment. Gross Income The subject 12 . 45 acre property presently serves four func- tions . They are , warehousing and sufficient land to support or- dinary typical employee and customer parking. There is also con- ducted on the property a busing operation for miners transportation to the mines at Redstone and the individual miners parking required for this service. Also included in this function is land to support Bus parking which is also used for limestone truck parking. The third function is fenced storage area used for mining equipment and a smaller fenced storage area near the railroad tract that is available for rental. The fourth function is surplus or inventory land. This surplus land presently does not produce income and is not necessary to support existing operations and therefore does not contribute income to the overall operation and must be considered as a separate item in order not to distort the income and market approaches . The subject property functional analysis indicates that four acres is used for fenced storage, 2 . 1 acres is used for parking including bus and truck and 4 . 5 acres of surplus land that is currently not used which renders a residual of 2 . 45 acres that supports the current building operations . This breakdown was made for the purpose of estimating rentals. The building rentals are based on floor area and are on an overall basis. It is recognized that smaller units will rent for more and larger units would rent for slightly less . The estimate of gross income is the current rental which the property is capable of generating , also known as economic rent. In this study, it has been assumed that typical lease terms would apply , that is , the landlord would pay the taxes , insurance and exterior maintenance. The tenants would pay for the utilities and interior maintenance. The rental summary found in the Addenda indicates to the writer rental of $4. 50 per square foot floor space on an overall basis . The property also supports a busing system for miners to Mid- Continent mines. The contribution of the land used for the busing system and parking are not related to buildings. A rental of $ . 35 per square foot was estimated for this useage. Additionally, there are fenced storage areas near both buildings that due to their size contribute more than could ordinarily be expected to be associated -13-