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Mid-Continent Resources <br /> July 14, 1986 <br /> Page - 4 - <br /> REVISED INCOME APPROACH (7/14/86) <br /> (DIRECT CAPITALIZATION) <br /> The first modification in the income approach has been to adjust the rentals <br /> upward from $4.50 per square foot to $4.75 per square foot. The truck _ <br /> parking and fence storage areas were all estimated to have an average rent at <br /> the rate of 30 cents per square foot. The new truck wash building and <br /> equipment were estimated to have a rental contribution of, or rental <br /> equivalent of $20,000. <br /> The vacancy and collection loss estimate has been revised downward to five <br /> percent from seven and a half percent. <br /> The operating expenses were revised to reflect the current property taxes <br /> which indicate an 88 percent increase from the original report. The property <br /> insurance is up slightly by $150 from the previous report. Maintenance was <br /> increased from 20 cents per square foot to 30 cents per square foot. The <br /> management expense remains at the same five percent rate of effective gross <br /> income. The total operating expenses are equivalent to 22.5 percent of <br /> effective gross income, an increase from 18 percent in the previous report. <br /> The increase is mainly attributable to property taxes. <br /> In the capitalization rate development under the 'band of investment' concept, <br /> the mortgage loan rate was reduced to eleven percent from twelve percent. <br /> The mortgage loan ratio of 75 percent remains the same as does the 30 year <br /> amortization period. <br /> The return on equity investment, or cash flow, was reduced to nine percent <br /> from twelve percent in the original report. <br /> Applegate & CO_ Real Estate Appraisers <br />