1979-12-28_GENERAL DOCUMENTS - C1981017

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RECONCILIATION Four separate value indications have been developed. These are as follows : Cost Approach $2 ,057 ,116 Market Approach $1 ,984 ,071 Income Approach (Direct Capitalization) $1 , 764 ,187 Income Approach (Mortgage-Equity) $2 ,007 ,169 The cost analysis should be reasonably accurate due to the improvements being relatively new with little depreciation to apply. The lack of highly comparable land sales in the size category of the subject tends to weaken the land value estimate. However, when considered in light of the balance indicated by the other approaches , land value estimate has further reinforcement. Thus the cost approach is supported in terms of land values and the construction cost estimates seem reasonable. This method often indicates the upper limit of value since the concept of market value normally does not exceed the cost of creation. The market comparison approach for this type of property has minimal application. However, the gross rent multiple appears reasonable. The gross rent multiple falls within the experience range of gross rent multiples for other properties . In a small community where a great many highly comparable sales to various commercial enterprises are rarely available , the gross rent multi- ple allows and indicative comparison between otherwise non-compar- able properties . The GRM also tends to eliminate the time adjust- ment problem when the rent is fair market rent at the time of sale. Because rents also increase with inflation as do sale prices , the GPV indications tend to be fairly stable despite inflation. There is then little necessity to adjust the GRM to the subject for time. The one variable in applying this approach is the estimate of the gross rent for the subject property. In this case , the gross rent estimate appears reasonable. As expected, the income approach under direct capitalization , indicates the lowest of the value estimates . The income approach under the mortgage equity concept indicates the highest approach. The bulk of the improved property sales are or have been occupied by the owners and therefore the data to calculate a capitalization rate from the sales is not available . It has been the experience of the Appraiser in the Glenwood Springs/Carbondale areas that when the improvements are relatively new, the land is at highest and best use and the improvements are geared to a viable part of the economic pattern that the capitalization rates generally fall in the 9 . 250 to 10. 25% range. However, the specialized use of the subject pro- perty together with the current trend of increased mortgage rates tends to support a judgement at the higher side of the range. The income approach under mortgage-equity capitalization and the cost approach were given the most weight in making the final estimate of value. -17-