1979-12-28_GENERAL DOCUMENTS - C1981017

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with building_ rentals . This area is estimated to be four acres and the rent was estimated to be $ . 15 per sa_uare foot. The surplus land is not currently contributing income to the project, but does have value. The building rentals were estimated to include typical access and parking areas as well as typical landlord expenses. It is re- cognized in this analysis that some land, particularly the roadways , serve all of the various functions which the property presently supports. The breakdowns were estimated to reflect a rent contribu- tion of various functions . Vacancy In the application of the income approach, it is customary to make a charge for vacancy and collection loss . It is acknow- ledged that during the economic life of the buildings , there will be some periods of full occupancy and other periods when vacancy may exceed 10% . The expression of vacancy in capitalizing income reflects what is thought to be a "typical" operating year. At the time of my inspection, the warehouse was not fully occupied. Vacant space was being remodeled for a new tenant but the rental rate had not been determined. It is my opinion that because of the desirability of location, quality of construction and size , this development will be in a competitive position for many years to come. With these thoughts in mind, I have projected vacancy during an average operating year at 7 . 5% . Expenses The current tenants in the subject park are related corporations to the basic coal mining operation at Redstone. The present rents were judged by the writer not to 'be economic rent. Due to the re- lationship of the tenants to the landlord, considerations and moti- vations other than arms length rent may be present. In some of the individual unit rentals , utilities are included or partially included. Due to the foregoing circumstances , it is my judgement that the most objective method to estimate rent and expenses is to assume a more typical situation. For the purpose of this appraisal and consistency with estimated rents , the expenses were estimated on a typical ware- house pattern , that is the owner would pay taxes , insurance , exterior maintenance and management. The tax estimate is near that of the actual taxes , the insurance is the actual insurance expense , the maintenance was estimated on the basis of $ . 20 per square foot of building and management was estimated at 5% of effective gross income. These are consistent with operating expenses experienced by other properties in Garfield County. The total operating expenses are 18% of the effective gross income. Capitalization Rate The capitalization rate applied has been developed under a "band of investment" concept. It has been assumed by the Appraiser that a 75% ratio of first mortgage loan to value could be obtained. Loan terms have been projected assuming a 12% interest rate over a -14-