Optima LLC filed a motion requesting the court lift the automatic stay in the Chapter 11 bankruptcy case of TAC Investments, LLC or alternatively dismiss the bankruptcy proceeding. Optima holds a deed of trust on real estate owned by TAC Investments securing a $125,000 loan that is now in default. The real estate was scheduled to be sold at a foreclosure sale before TAC filed for bankruptcy. Optima argues the automatic stay should be lifted because TAC Investments has failed to file a reorganization plan within 90 days or make adequate protection payments as required for single asset real estate bankruptcies under the code. An appraisal also shows the real estate is worth less than the amount owed, so T
Optima LLC filed a motion requesting the court lift the automatic stay in the Chapter 11 bankruptcy case of TAC Investments, LLC or alternatively dismiss the bankruptcy proceeding. Optima holds a deed of trust on real estate owned by TAC Investments securing a $125,000 loan that is now in default. The real estate was scheduled to be sold at a foreclosure sale before TAC filed for bankruptcy. Optima argues the automatic stay should be lifted because TAC Investments has failed to file a reorganization plan within 90 days or make adequate protection payments as required for single asset real estate bankruptcies under the code. An appraisal also shows the real estate is worth less than the amount owed, so T
Optima LLC filed a motion requesting the court lift the automatic stay in the Chapter 11 bankruptcy case of TAC Investments, LLC or alternatively dismiss the bankruptcy proceeding. Optima holds a deed of trust on real estate owned by TAC Investments securing a $125,000 loan that is now in default. The real estate was scheduled to be sold at a foreclosure sale before TAC filed for bankruptcy. Optima argues the automatic stay should be lifted because TAC Investments has failed to file a reorganization plan within 90 days or make adequate protection payments as required for single asset real estate bankruptcies under the code. An appraisal also shows the real estate is worth less than the amount owed, so T
UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF
MISSOURI WESTERN DIVISION ) ) In re: ) ) TAC INVESTMENTS, LLC ) Case No. 14-40253-11 ) ) Debtor. )
CREDITOR OPTIMA LLCS MOTION FOR AN ORDER LIFTING AUTOMATIC STAY TO PERMIT FORECLOSURE OF DEED OF TRUST ON REAL ESTATE OR, IN THE ALTERNATIVE, DISMISSING BANKRUPTCY PROCEEDING
INTRODUCTION
Creditor, Optima LLC, (Optima) hereby moves the court for its Order lifting the automatic stay in this case to permit Optima to proceed with the foreclosure of a Deed of Trust on certain real estate owned by the Debtor in Cass County, Missouri. Alternatively, Optima requests the Courts Order Dismissing this Chapter 11 proceeding.
The only asset of any significance listed in the schedules originally filed by the Debtor is this real estate located in Cass County Missouri. Optima holds a Deed of Trust on that real estate. The Deed of Trust was given to Optima as security for a $125,000.000 loan made by Optima to the Debtor pursuant to a Promissory Note dated October 17, 2012. True copies of the Promissory Note and Deed of Trust are attached as Exhibits 1 and 2 to this Motion. Under the terms of the Promissory Note the $125,000.00 principle balance of the loan and any unpaid interest was to be repaid in full on or before October 15, 2013. The Note provides that the annual interest payments are to be 12% of the principle balance of the loan, paid on a monthly basis. Those interest payments were current up to the October 15, 2013 deadline for full payment of the $125,000.00 principle of the loan.
The Debtor failed to repay the principle balance due on October 15, 2013 as required by the terms of the Promissory Note. From and after October 15, 2013 the only payments received Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 1 of 83 Page 2 of 9
by Optima from the Debtor have been a $1250.00 interest payment received in November of 2013 and a single check dated March 11, 2014 for $520.83. That March 11, 2014 check was mailed by counsel for the Debtor to counsel for Optima on April 7, 2014 and characterized as the monthly adequate protection payment.
As a result of the Debtors failure to remit a timely payment of the balance due on the Promissory Note by October 15, 2013, Optima proceeded to institute a Non-Judicial foreclosure of its Deed of Trust. After compliance with all notice and publication requirements established by Missouri law for Non-Judicial foreclosures, the sale of the Debtors Cass County real estate was scheduled to occur at 2:00 pm on January 28, 2014. The institution of this Bankruptcy proceeding on the morning of January 28, 2014 prevented the foreclosure sale from going forward.
This Chapter 11 proceeding presents a classic example of the reason Congress enacted special rules for disposition of single asset real estate bankruptcy cases. Under the circumstances Optima is convinced that the petition filed in this case serves no purpose other than as a tactic designed to stave off creditors when the debtors have no hope of reorganizing. Ad Hoc Group of Timber Noteholders v Pac Lumber Co. , 508 F.3d 214, 223 ( 5 th Cir 2007).
OPTIMAS GROUNDS FOR AN ORDER LIFTING THE AUTOMATIC STAY As its grounds for an Order lifting the automatic stay Optima relies on the following points. Any one of these points provides sufficient grounds for lifting the automatic stay. Cumulatively these points present an overwhelming case for lifting the stay in this proceeding.
Failure to Comply with Section 362 (d) (3)
This Chapter 11 proceeding is a Single Asset Real Estate Bankruptcy (hereinafter SARE). All three parts of the test for determining a proceeding to be a SARE bankruptcy are met in this case. (See, 11 U.S.C. Section 101(51b)) First, the Debtors real estate, located in Cass County Missouri is a single property consisting of three contiguous lots two vacant lots Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 2 of 83 Page 3 of 9
and one lot with a building leased to the operator of a commercial business. All of the Debtors property is described in the Deed of Trust, Exhibit 2 to this Motion. Second, all or substantially all of the Debtors gross income is derived from rent on the building owned by the Debtor. Third, the Debtor has no business operations of any significance other than the lease of its Cass County real estate. All these facts are verified by the Schedules filed by the Debtor in this case. Moreover the Debtors representative conceded these facts at the first meeting of creditors occurring on March 26, 2014.
Debtors Bankruptcy Petition was filed on January 28, 2014, the same day the real estate was scheduled to be sold on the Cass County Circuit Courthouse steps pursuant to Optimas Non-Judicial Foreclosure on the Deed of Trust. More than ninety days has passed since the filing of Debtors Bankruptcy Petition. To date, Debtor has not filed a reorganization plan, nor sought an extension of the ninety day deadline for filing a reorganization plan provided in 11 U.S.C. Section 362(d)(3) for SARE Bankruptcies.
Nor has the Debtor tendered any monthly payments to Optima equal to the interest owed on the balance due under the Promissory Note, calculated by using the 12% non-default interest rate provided in that Note. Disregarding foreclosure costs, attorneys fees and compounding interest amounts all of which are by the terms of the Note to be included in the balance now owed by the Debtor to Optima -- the balance owed under the terms of the Note is no less than $132,500.00. That figure is determined by the following calculation: six months of simple interest from 12/1/13 through 5/1/14 equals $1250.00 X 6 = $7500.00 + $125,000.00 = $132,500.00). Using the non-default contract rate set forth in the Note of 12%, monthly adequate protection payments can be no less than $1325.00. The sole post-bankruptcy payment of $520.83 tendered by the Debtor on April 7, 2014 can in no way be characterized as a good faith attempt to comply with section 362 (d) (3).
Absent compliance with section 362 (d) (3) the Debtor is not entitled to the protection provided by the automatic stay. Accordingly the automatic stay should be lifted to allow Optima to proceed with the foreclosure sale.
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The Debtor has no Significant Equity in the Real Estate and the Property is not Neccessary to an Effective Reorganization Section 362 (d) of the Code requires the Court to lift the automatic stay in a SARE bankruptcy if the following two matters are established: 1) the debtor does not have equity in the real estate and 2) the real estate is not necessary for an effective reorganization. Both of these factors are present in this case. Attached as Exhibit 3 to this Motion is a copy of an Appraisal of the Debtors real estate commissioned by counsel for Optima. That Appraisal was prepared by the State Certified, Licensed Appraisers Robin Marx and Matthew Woods, both associated with the Appraisal firm Bliss Associates LLC. As reflected in the Appraisal, as of May 6, 2014 the fair market value of the Debtors real estate is $125,000.00. This amount is, of course, well below the current balance owed under the terms of the Note.
Under the law Optima need not demonstrate the Debtors complete lack of equity in the real estate. A secured creditor such as Optima is also entitled to take into account prospective foreclosure costs in determining the amount of its lien against the real estate. In this case however the amount of Optimas lien already exceeds the fair market value of the real estate. This is true even before attorneys fees and foreclosure fees incurred to date and projected to be incurred in the future are added to the total. Accordingly, the first prong of the two part test of Section 362 (d) (2) is established.
Under Section 362 (g) once Optima establishes the lack of the Debtors equity in the real estate, the burden shifts to the Debtor to prove the real estate is necessary to an effective reorganization. Since the January 28, 2014 filing of this Chapter 11 proceeding, the Debtor has not provided any reorganization plan, or even a hint of how its financial affairs could be reorganized in anything close to an effective manner. As noted by the United States Supreme Court in United Savings Assn v Timbers of Inwood Forrest Assocs Ltd, 484 U.S. 365 (1988) a failure of the Debtor to come forward with a reorganization plan in the first several months of a Chapter 11 proceeding is a strong indicator that no such plan could be constructed.
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In this case there are simply no prospects for a successful reorganization of the Debtors business, with or without the real estate subject to Optimas deed of trust. This is not a situation in which a debtor is midway through the construction of some residential or commercial development with the prospect of substantial revenues to be generated upon completion of such a project. The Debtors schedules show the sole source of its revenue to be a monthly rental payment of $2,000.00. There is no work underway or planned for improvements to the other two lots. Read in their entirety the Debtors schedules -- and in particular Debtors Statement of Financial Affairs reveals that the Debtors only revenue is a monthly rental payment of $2,000.00 from a lease of the one improved lot owned by the Debtor. That rental payment is insufficient to fund any viable reorganization plan and there are apparently no viable option for generating additional revenues.
As explained above, the monthly interest currently owed to Optima on the unpaid balance of Promissory Note principle, plus accrued interest called for by the terms of the Promissory Note is now more than $1,325.00. That sum will increase again when May turns to June. Again, it should be remembered that the Note also entitles Optima to recover all attorneys fees and other costs of foreclosure or other efforts to collect amounts due under the terms of the Note. Adding monthly interest on the current balance of the Note, calculated by using the non-default contract rate to the costs Optima has incurred to date for the aborted foreclosure sale as well as the Appraisal attached to this Motion will increase the monthly adequate protection payments due to Optima by another hundred dollars or so. Once the costs of real estate taxes, insurance and the maintenance of the rental property are added to the monthly payments to which Optima is now entitled, it becomes clear that the debtor simply has no revenue on which a successful reorganization plan can be constructed. There will certainly be no funds remaining from the Debtors revenue stream from which any meaningful payments can be made against the current principle balance due under the Note. Finally the Debtors schedules reveal that the lease of the Debtors real estate is due to expire in July of 2014. Thus, there is a significant risk that after July of 2014 the Debtor will have No Revenue to fund a reorganization plan.
This bankruptcy proceeding appears to be a nothing more than a desperate attempt to delay foreclosure by filing a Chapter 11 petition hours before a scheduled foreclosure sale. Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 5 of 83 Page 6 of 9
There simply are no realistic, potential revenue streams available to this Debtor which could be utilized to create a viable reorganization plan. Optima should not be forced to continue waiting to exercise the rights it received in consideration of the funds it loaned the Debtor on October 17, 2012. OPTIMAS GROUNDS FOR DISMISSAL
Alternatively, the Debtors Failure to Account for the Proceeds of the Optima Loan in a timely manner, as Ordered by the Trustee, Justifies Dismissal of the Case
On March 26, 2014 the principle owner of the Debtor appeared at the first meeting of Creditors. In the course of his questioning the Trustee inquired about the Debtors use of the $125,000.00 loaned to the Debtor by Optima in October of 2012. These questions were prompted by the fact that there were no references to the proceeds of the Optima loan in any of the schedules filed by the Debtor. In response to the Trustees questions Mr. Covey testified that the proceeds of the Optima loan had been transferred to a different company controlled by Mr. Coveys mother. Mr. Covey failed to explain the terms under which those funds were transferred, the consideration received by the Debtor in return for the transfer of funds or whether the transfer created an account receivable that should have been listed as an asset on the Debtors schedules. In addition, Mr. Covey and his counsel noted that the schedules filed by the Debtor had mistakenly listed Mr. Covey as a co-debtor based on the mistaken impression that he had guaranteed the Optima loan. In response to these circumstances the Trustee ordered the Debtor to file amended schedules to delete references to Mr. Covey as a co-debtor reflecting and the transfer of the Optima loan funds and the consideration received by the Debtor in return for that transfer.
On May 5, 2014 the Debtors attorney filed an amended schedule deleting Mr. Covey as a co-debtor, but failed to include the Debtors verification of that amended schedule. As a result of that omission the amended schedule was stricken from the record. On May, 19, 2014 the Debtor filed the same amended schedule but included the required verification. However, the Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 6 of 83 Page 7 of 9
Debtor failed to comply with the Trustees directions in regard to amending the schedules to account for the undisclosed terms under which the debtor transferred the proceeds of the Optima loan until May 28, 2014. The amended schedule filed that day listed a $125,000.00 receivable form Energy Vox Corp apparently the company now owned by the mother of the principle owner of the Debtor, Troy Covey.
The Debtors handling of the proceeds of the Optima loan is emblematic of its approach to business in general and this bankruptcy proceeding in particular. All indications are that the Debtor simply wrote a $125,000.00 check to a company owned by the mother of the principle owner of the Debtor. Apparently, no loan agreement or other document calling for the repayment of those funds was ever prepared. Apparently no interest is being charged by the Debtor in connection with this transaction. Indeed, there is no indication that the Debtor ever contemplated the repayment of the $125,000.00 transferred to Energy Vox prior to being questioned about the transaction at the first meeting of creditors. It is difficult to accept that the debtor simply forgot about a $125,000.00 asset when its schedules were initially filed. All of this is indicative of the fact that this entire proceeding is an abuse of the bankruptcy process to frustrate Optima and prevent the exercise of rights the Debtor expressly agreed to give Optima in a fair arms-length transaction.
CONCLUSION
When Congress enacted the amendments to the Bankruptcy Code creating the rules governing SARE bankruptcies, those amendments were intended to address the unfair hardship on secured creditors occurring in this proceeding. The Debtor has effectively stymied Optima in the exercise of rights expressly granted by the terms of the Note and Deed of Trust. A total of $520.83 has been tendered to Optima since the filing of this bankruptcy and all the while the Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 7 of 83 Page 8 of 9
Debtor has continued to receive thousands of dollars in rental revenue from the tenant occupying the real estate in Cass County. The appraisal attached as Exhibit 3 to this motion makes it clear that the only impact of this bankruptcy proceeding has been to permit the debtor to collect rent from January 28, 2014 until the automatic stay is lifted or the case dismissed. The Debtor has no equity in its sole asset. With each passing day the amount by which the outstanding balance owed by the Debtor to Optima will exceed the amount realistically obtainable from a foreclosure sale grows. It is time to allow Optima to proceed with the foreclosure sale.
Respectfully submitted, ORRICK & ERSKINE, LLP By: /s/ Paul Schepers
Paul Schepers, MO #32550 Orrick & Erskine, LLP 11900 College Blvd. Overland Park, KS 66210 (913) 888-1777 (913) 888-1794 Fax pauls@orricklawgroup.com Attorney for Optima, LLC
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CERTIFICATE OF SERVICE
The undersigned hereby certifies that on the 29th day of May, 2014, the foregoing was electronically filed with the Clerk of Court using the CM/ECF system which will send notification of such filing to all counsel who are deemed to have consented to electronic service.
/s/ Paul Schepers Paul Schepers
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April 29, 2014
The New Jaudon Roadhouse 20300-04 Holmes Road (State Route D) Belton, Missouri 64012
An Appraisal Report
prepared for Orrick & Erskine, LLP
Job No. 5025366 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 25 of 83 Bliss Associates, LLC 1000 Walnut St Real Estate Valuation Suite 920 and Professional Services Kansas City, MO 64106 816-221-9100 816-221-9101 fax www.BlissAppraisal.com
May 16, 2014
Paul Schepers Orrick & Erskine, LLP 901 N. 8 th , Ste. 203 Kansas City, Kansas 66101
Dear Mr. Schepers:
The appraisal report you requested is enclosed. Its purpose is to estimate market value, subject to limiting conditions, of the
Bar/Restaurant The New Jaudon Roadhouse 20300 - 04 South Holmes Road (State Route D) Belton, Missouri 64012.
Real property interest valued is the fee simple estate. The restaurant equipment was not valued. Final value indication as of May 6, 2014 is
$125,000.
This appraisal is subject to special limiting conditions found on the following page. This appraisal is also subject to standard assumptions and general limiting conditions found in appraisal criteria.
Thank you for choosing Bliss Associates, LLC.
Sincerely, Bliss Associates, LLC By: Matthew R. Woods Robert E. Marx, MAI,SRA State Certified Appraiser State Certified Appraiser
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 26 of 83 The New Jaudon Roadhouse i PREFACE
SPECIAL LIMITING CONDITIONS
Special limiting conditions consist of extraordinary assumptions and hypothetical conditions. The Uniform Standards of Professional Appraisal Practice (USPAP) defines extraordinary assumption as an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraisers opinions or conclusions. A hypothetical condition is defined as that which is contrary to what exists, but is supposed for the purpose of analysis.
The following extraordinary assumptions and/or hypothetical conditions apply to this appraisal. The client is advised that their use might have affected the assignment results
Extraordinary Assumptions
1. The subject contains several items of FF&E in the form of kitchen and bar equipment and furnishings. These items are not valued in this report. 2. The land area appraised includes alley and street vacations that are not in the title commitment. The title company reported that the county has not recorded anything about the vacations.
Hypothetical Conditions
1. The subject has a total land area of approximately 111,513 SF. We attributed 50,000 SF to the improvements and the remaining 61,513 SF is considered excess land.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 27 of 83 The New Jaudon Roadhouse ii CERTIFICATION
I certify that, to the best of my knowledge and belief:
statements of fact contained in this report are true and correct; reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions; I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved; I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; I have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three- year period immediately preceding acceptance of this assignment. my engagement in this assignment was not contingent upon developing or reporting predetermined results; my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal; my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of The Appraisal Foundation and the Supplemental Standards of Professional Appraisal Practice and Code of Professional Ethics of The Appraisal Institute; I have made an inspection of the property that is the subject of this report; no one provided significant real property appraisal assistance to the person(s) signing this report; and the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
By: Matthew R. Woods Certified General Appraiser Missouri 2005090012
Effective date May 6, 2014 Date of the appraisal report: May 16, 2014
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 28 of 83 The New Jaudon Roadhouse iii CERTIFICATION
I certify that, to the best of my knowledge and belief:
statements of fact contained in this report are true and correct; reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions; I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved; I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; I have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three- year period immediately preceding acceptance of this assignment. my engagement in this assignment was not contingent upon developing or reporting predetermined results; my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal; my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of The Appraisal Foundation and the Supplemental Standards of Professional Appraisal Practice and Code of Professional Ethics of The Appraisal Institute; I have made a personal inspection of the exterior of the property that is the subject of this report; no one provided significant real property appraisal assistance to the person(s) signing this report; the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; and as of the date of this report, I have completed the requirements of the continuing education program of the Appraisal Institute.
By: Robert E. Marx, MAI, SRA Certified General Appraiser Missouri # RA001238
Effective date May 6, 2014 Date of the appraisal report: May 16, 2014
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 29 of 83 The New Jaudon Roadhouse iv TABLE OF CONTENTS
PREFACE ............................................................................................................................... i SPECIAL LIMITING CONDITIONS ................................................................................... i CERTIFICATION ............................................................................................................. ii TABLE OF CONTENTS .................................................................................................. iv INTRODUCTION ................................................................................................................ 1 EXECUTIVE SUMMARY .................................................................................................. 1 CONCLUSION ............................................................................................................... 2 SCOPE ............................................................................................................................ 3 CRITERIA ........................................................................................................................ 3 MARKET AREA ANALYSIS ................................................................................................... 6 AREA DEMOGRAPHICS ................................................................................................. 8 SUBJECT ............................................................................................................................ 11 IDENTIFICATION ......................................................................................................... 11 HISTORY ...................................................................................................................... 12 SITE DESCRIPTION ....................................................................................................... 13 IMPROVEMENTS DESCRIPTION .................................................................................. 16 BUILDING SKETCH ...................................................................................................... 16 IMPROVEMENTS ANALYSIS ......................................................................................... 17 SUBJECT PHOTOGRAPHS ........................................................................................... 18 REAL ESTATE TAXES ..................................................................................................... 21 USE .................................................................................................................................... 22 MARKET OVERVIEW .................................................................................................... 22 REASONABLE EXPOSURE AND MARKETING TIME ..................................................... 23 HIGHEST AND BEST USE ............................................................................................. 25 INCOME APPROACH ........................................................................................................ 26 RENT ............................................................................................................................ 26 COMPARABLE LEASE PHOTOGRAPHS ....................................................................... 28 VACANCY AND COLLECTION LOSS ........................................................................... 29 EXPENSES ..................................................................................................................... 29 STABILIZED STATEMENT ............................................................................................. 30 DIRECT CAPITALIZATION ........................................................................................... 31 SUMMARY AND CONCLUSION ................................................................................. 31 SALES COMPARISON APPROACH ................................................................................... 32 COMPARABLE SALES ................................................................................................... 32 EXPLANATION OF ADJUSTMENTS .............................................................................. 33 ADJUSTMENT GRID ..................................................................................................... 35 SUMMARY AND CONCLUSION ................................................................................. 35 EXCESS LAND VALUATION .............................................................................................. 36 IDENTIFICATION ......................................................................................................... 36 MARKET OVERVIEW .................................................................................................... 36 COMPARABLE LAND SALES ........................................................................................ 38 EXPLANATION OF ADJUSTMENTS .............................................................................. 39 ADJUSTMENT GRID ..................................................................................................... 40 SUMMARY AND CONCLUSION ................................................................................. 40
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 30 of 83 The New Jaudon Roadhouse v DOCUMENTS Comparable Land Sale write-ups Comparable Improved Sale write-ups Appraiser Resumes
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 31 of 83 The New Jaudon Roadhouse 1 INTRODUCTION
Building Area: Gross Building Area 2,407 SF Net Rentable Area 2,407 SF
Zoning: None
Year Built: 1935
Highest and Best Use: Continued use of the existing improvements
MARKET VALUE INDICATIONS:
Cost Approach: Not Applicable Income Approach: $90,000 Sales Comparison Approach: Improved Tract $110,000 Excess Land $ 15,000 Total $125,000
Final Value Indication: $125,000
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Reconciliation The subject is a 2,407 SF Bar/Restaurant. It consists of a one-story wood frame building that was originally constructed in 1935. There is a 400 SF loft office accessible from the rear of the property. The subject is currently 100% leased and utilized as a bar/restaurant.
Given the age of the improvements, the cost approach is not considered applicable. It is not developed in this report.
The subject is currently 100% leased to one tenant. The lease is set to expire in June 2014. We estimated market rent by comparison to current leases from the surrounding area. Vacancy allowance was then estimated and operating expenses were subtracted using expenses taken from similar properties. The net operating income is then capitalized at a market derived overall rate to estimate the value of the subject property by direct capitalization.
In the sales comparison approach, sales of small multi-purpose and restaurant buildings located in various locations throughout Kansas City, Missouri were directly compared to the subject based on physical differences. The basis for the comparison was the price per square foot of unit area. After adjustments, the comparable sales provide a reliable indication of value.
Both approaches are considered to offer a credible indication of value, given the quantity and quality of the data. The most likely buyer is an owner occupant and the sales comparison approach is considered the most reliable.
In addition to the improved parcel we considered 61,513 SF to be excess land. Only the sales comparison approach is utilized in the development of a market value estimate.
Improved Tract $110,000 Excess Land $ 15,000 $125,000
FINAL VALUE ESTIMATE: $125,000
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 33 of 83 The New Jaudon Roadhouse 3 SCOPE
Scope of work is defined by the Uniform Standards of Professional Appraisal Practice (USPAP) as the type and extent of research and analysis in an assignment. The scope of this assignment complies with USPAP and the specific reporting requirements of the client.
The specific scope of work for this appraisal assignment and report is outlined below. The resulting analysis is considered adequate to provide a credible result given the purpose, intended use and intended users of the assignment.
Property Inspection and Identification The subject property was personally inspected by Matthew R. Woods on May 6, 2014. Robert E. Marx inspected the exterior on May 16, 2014. The inspection included a walk- through of the building exterior and interior. Both the exterior and interior were photographed. An inspection of the surrounding neighborhood was also made from public thoroughfares. The property was further identified through county records.
Type and Extent of Data Researched Public records were relied upon for the site dimensions, site area, zoning, flood determination, ownership, legal description, and tax assessment data. The size of the building is based on on-site measurements. Improved and unimproved sales from the market were researched using the Bliss Associates proprietary database, the Heartland MLS, Costar and Loopnet databases, and other published sources.
Type and Extent of Analysis Applied In this analysis, the income and sales comparison approaches to value are developed. Given the age of the subject, the cost approach is not considered applicable. Appropriate methodology and techniques deemed pertinent and necessary to the analysis were utilized. The highest and best use of the property was determined to be continued use of the existing improvements.
Type of Appraisal Report This is an appraisal report which is intended to comply with the reporting requirements set forth under USPAP Standards Rule 2-2(a).
CRITERIA
Purpose The purpose of the appraisal is to estimate the market value.
Intended Use of the Appraisal The intended use of this report is for removing a stay of a bankruptcy for the mortgagee, Optima LLC.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 34 of 83 The New Jaudon Roadhouse 4 Client and Intended User Orrick & Erskine, LLP is the client. It and Optima, LLC are the intended users. The appraisers and Bliss Associates, LLC are not responsible for unauthorized use of this report by third parties.
Effective Date May 6, 2014
Type of Value Estimated The type of value estimated in this appraisal is market value.
Market Value Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1
Property Rights Real property interest valued is fee simple estate.
Assumptions and General Limiting Conditions
This report assumes the following: 1. That title to the property interest appraised is good and marketable, unless otherwise noted; the report assumes no responsibility for the legal description or for legal matters or those relating to title considerations. 2. That the property is free and clear of any and all liens or encumbrances unless stated otherwise. 3. That the property has responsible ownership and competent property management. 4. The information furnished by others is reliable; however, no warranty is given for the accuracy of such information. 5. That all engineering is correct; the intention of the report is that plot plans and illustrative materials are to assist the reader in visualizing the property. 6. That there are no hidden or unapparent conditions of the property, subsoil, or
1 Source: Code of Federal Regulations; Title 12--Banks And Banking; Chapter I--Comptroller Of The Currency, Department Of The Treasury; Part 34--Real Estate Lending And Appraisals--Subpart CAppraisals Sec. 34.42 Definitions; Revised as of January 1, 2000 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 35 of 83 The New Jaudon Roadhouse 5 structures that render it more or less valuable. No responsibility is assumed for such conditions or for procuring engineering services that may be necessary to discover them. 7. That the property complies fully with all applicable federal, state, and local environmental regulations and laws, unless noncompliance is specified in the report. 8. That the property complies with all zoning and use regulations and restrictions, unless the report acknowledges nonconformity. 9. That the owners and/or property managers either have or could procure or renew any licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government, or private entity or organization, upon which the value conclusion reported depends. 10. That the utilization of the land and improvements is within the boundaries or property lines and that there are no encroachments or trespasses by or upon the property, unless noted in the report.
Additional conditions bearing upon this report are as follows: 1. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization; any separate allocations must not be used in any other appraisal and are invalid if so used. 2. Possession of this report, or any copy hereof, does not imply the right of publication. 3. By reason of this appraisal, the appraiser is relieved of any obligation to give further consultation or testimony, or to attend court with reference to the property in question, unless prior arrangements have been made. 4. Neither all nor any part of this report--especially any conclusions regarding value, the identity of the appraiser or the firm with which the appraiser is associated--may be disseminated to the public through advertising, public relations, news, sales- promotion, or other media without the prior written consent and approval of the appraiser. 5. The value estimates in the report apply to the entire property interest as described in the report; any proration or division of the total into fractional interests would invalidate the value conclusions, unless such proration or division of interests has been set forth in the report. 6. Unless stated otherwise in this report, the appraiser has not been advised or become aware of the existence of any hazardous substances and/or toxic wastes that may or may not be present on the property; the appraiser has no knowledge of the existence of such materials on or in the property; the value estimated in the report is contingent upon the assumption that there is no hazardous condition on or in the property, or in such proximity to the property that it would cause a loss in value.
7. No compliance survey or analysis of the subject property relating to the requirements of the Americans with Disabilities Act of 1991 (ADA) exists. Such a survey could reveal that the property does not comply with one or more requirements of the Act, thus having a negative effect upon value. Unless stated otherwise in the report, there is no direct evidence relating to this issue. This report does not, therefore, consider possible noncompliance in estimating the value of the property.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 36 of 83 The New Jaudon Roadhouse 6 MARKET AREA ANALYSIS
LOCATION
The subject property is located at the southwest corner of 203 rd Street and Holmes Road (State Route D) in Unincorporated Cass County, Missouri. The following map shows the subjects location within the Kansas City Metropolitan Area.
Neighborhood MapMetropolitan Perspective
As the map illustrates, the neighborhood is in the southern portion of the Kansas City Metropolitan Area. Access to the neighborhood is primarily provided by Missouri Highway 150 and Missouri Highway 58. The subjects general neighborhood is considered to be bound by Missouri Highway 150/ 203rd Street to the north, Holmes Road to the east, 175 th
Street and 177 th Street to the south, and Kenneth Road to the west. The map on the following page shows the neighborhood in greater detail from a local perspective.
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Neighborhood MapLocal Perspective
Surrounding Land Uses & Development The subject propertys four tracts are located along the east, south, and west of the Village of Loch Lloyd, as illustrated by the aerial photograph on the following page. The subjects immediate neighborhood is comprised primarily of single-family and agricultural uses, as well as some special use properties. Residential uses include both moderate-density single- family residences and single-family residences on agricultural acreage. The most substantial residential development is located within the Village of Loch Lloyd development, which is comprised of a number of upscale single-family residences. A number of older, more moderately priced single-family residences are located in the Holmes Valley subdivision. The remainder of the neighborhood is largely comprised of agricultural uses, including residences on acreage. The only major land use in the area is the golf course within the Village of Loch Lloyd.
New development in the area is essentially limited to development within the Village of Loch Lloyd, as well as the previously discussed religious facility. Substantial development has not reached the subjects vicinity from any of the surrounding communities. Vacancy in the area was noted to be minimal in the neighborhood. The condition of properties in the neighborhood varies greatly. Properties in the Village of Loch Lloyd are generally in good condition, while other residences in the area range from poor to average-to-good in terms of condition.
The aerial photograph on the following page illustrates the general composition of the subjects neighborhood.
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Aerial Photograph
AREA DEMOGRAPHICS
The following map shows a 1-mile, 3-mile and 5-mile radius from the location of 20300 S State Route D in unincorporated Cass County, Missouri:
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The following charts show population demographics, particularly household and median income demographics within a 1-mile, 3-mile and 5-mile radius from the location of 20300 S State Route D:
20300 S State Route D (1-Mile Radius) Census Trends 2010 % Change 10-13 2013 % Change 13-18 2018 Population 152 1.3% 154 2.6% 158 Number of Households 54 1.9% 55 3.6% 57 Median Household Income $60,413 8.6% $65,593 *Data from STDBOnline
The population within a 1-mile radius of the area has increased 1.3% since the previous census was taken in 2010 to reach 154 people. A further increase of 2.6% is expected within the next five years. There are currently estimated to be 55 households within the area, with a median household income of $60,413. This is expected to increase to $65,593 per household by 2018 for 57 households.
20300 S State Route D (3-Mile Radius) Census Trends 2010 % Change 10-13 2013 % Change 13-18 2018 Population 2,414 1.2% 2,442 3.0% 2,515 Number of Households 863 1.9% 879 3.4% 909 Median Household Income $64,172 16.1% $74,492 *Data from STDBOnline
The current population in the area within 3-miles of the subject property is estimated to be 2,442 people. Current estimates expect an increase of 3.0% over the next five years to reach 2,515 people by 2018. There are 879 households within 3-miles of the area, bearing a median household income of $64,172. This is expected to increase to $74,492 per household by 2018 for 909 households.
20300 S State Route D (5-Mile Radius) Census Trends 2010 % Change 10-13 2013 % Change 13-18 2018 Population 18,504 0.9% 18,674 2.2% 19,081 Number of Households 6,960 1.5% 7,067 2.6% 7,250 Median Household Income $58,209 14.7% $66,737 *Data from STDBOnline
The population within a 5-mile radius of the subject property has increased 0.9% since the previous census was taken in 2010 to reach 18,674 people. A further increase of 2.2% is expected over the next five years. There are currently estimated to be 7,067 households within the subject area, with a median household income of $58,209. This is expected to increase to $66,737 per household by 2018 for 7,250 households.
The following table shows the relative retail sales of the area compared to the relative retail expenditures of the areas population: Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 40 of 83 The New Jaudon Roadhouse 10
1-Mile 3-Mile 5-Mile Demand (Retail Potential) $1,851,272.00 $29,270,099.00 $219,495,952.00 Supply (Retail Sales) $278,613.00 $6,795,604.00 $74,050,895.00 Retail Gap $1,572,658.56 $22,474,494.84 $145,445,057.38 *Data from STDBOnline Area Market Profi l e 2013
The chart shows the total retail expenditures of the subject population and compares them to the actual retail sales within the subject area. If the retail sales are greater than the retail potential, it shows that neighboring communities are shopping within the subject area at a greater rate. If the retail sales are less than the retail potential, it shows that the subject areas population is doing a portion of its shopping in neighboring communities. We call this comparison the retail gap.
The table below shows the top ten retail consumer expenditures for households within each radius from the subject property:
1-Mile 3-Mile 5-Mile Food And Beverages $8,922.47 $9,397.25 $8,815.31 Food At Home $5,487.21 $5,742.26 $5,393.86 Food Away From Home $3,435.26 $3,654.99 $3,421.45 Entertainment $3,822.83 $4,027.28 $3,674.23 TV, Video and Audio $1,417.69 $1,487.61 $1,403.33 Apparel $1,624.99 $1,731.59 $1,620.25 Household Furnishings and Appliances $1,200.11 $1,265.28 $1,162.29 Furniture $540.89 $572.64 $530.93 Child Care $457.33 $502.42 $469.50 Lawn and Garden $523.19 $542.59 $476.04 Computer $270.36 $287.88 $266.41 Household Supplies $808.79 $841.77 $780.50 Transportation $8,774.89 $9,201.79 $8,611.70 Vehicle Purchases $4,117.76 $4,307.22 $4,008.84 Gasoline and Motor Oil $3,415.41 $3,588.04 $3,400.11 Maintenance and Repairs $1,241.72 $1,306.53 $1,202.75 *Data from STDBOnline Top Retai l Consumer Expendi tures 2013
The table takes the areas retail sales and breaks them down by the type of product being sold for selected categories. Top retail sectors for the subject areas include food and beverages, transportation, entertainment, and apparel.
Conclusion The neighborhood is located in a largely rural area in the southern portion of the Kansas City metropolitan area with average access via highways and main thoroughfares. Growth in the area has largely been limited to properties within the Village of Loch Lloyd, although some additional development of special use properties has occurred. Growth within the village has been steady. Given the areas demographics and historical trends, it is likely the neighborhood will remain in a stable phase for the foreseeable future, with additional growth possible as the economic and real estate markets improve.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 41 of 83 The New Jaudon Roadhouse 11 SUBJECT
IDENTIFICATION
Brief Property Description The subject property consists of a single-story wood frame bar building that was originally constructed in 1935. It is on a concrete slab. In addition there are two adjoining land tracts that are unimproved. There a total of three tracts with three separate parcel identification numbers. The individual parcels are summarized the table below. For purposes of this report 50,000 SF of land will be considered with the improvements while the remaining 61,513 SF is considered excess land.
Birds Eye View Taken to the West
Bar/Restaurant Unimproved Land Unimproved Land Property Location 20300 S Holmes Road No Address Assigned 20304 Holmes Road Parcel Identification 2514300 2514700 2514800 Number of Buildings 1 NA 1 Owner of Record TAC Investments LLC TAC Investments LLC TAC Investments LLC Land Area (SF) 24,829 32,234 54,450 Land Area (Ac) 0.57 0.74 1.25 No. of Stories 1 NA NA Design Freestanding NA NA Year Built 1935 NA NA Gross Building Area (SF) 2,407 NA NA Zoning NA NA C-2 Corner Yes No No Frontage 203rd/Holmes None Holmes Condition-Exterior Avg NA NA Condition-Interior Avg NA NA Unincorporated, Cass County, MO Unincorporated, Cass County, MO Unincorporated, Cass County, MO Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 42 of 83 The New Jaudon Roadhouse 12 Address 20300 - 04 South Holmes Road (State Route D) Belton, Cass County, Missouri 64012
Legal Descriptions
Parcel No.2514300 Lots 1-4, Block 1, Village of Jaudon, Cass County, Missouri.
Parcel No.2514700 Lots 23-28, Block 4, Village of Jaudon, Cass County, Missouri.
Parcel No.2514800 Lots 15-22, Block 3, Village of Jaudon, Cass County, Missouri.
Ownership TAC Investments, LLC
HISTORY
The ownership purchased the subject in October 2012 from Jerome A. Gable. According to the title commitment the loan amount was $125K. The actual sale amount is unknown. The sellers had owned the subject for approximately 8 years prior to the most recent sale.
To the best of our knowledge, no other transactions regarding the subject are known to have occurred within the past five years.
The subject is currently leased to the New Jaudon Roadhouse for $2,000 per month or $9.97/SF.
Unit Rental Annual Renewal Options/ Unit Tenant Size (sf) Rate ($/sf) Base Rent Begin End Concessions/ Comments 20300 New Jaudon Roadhouse 2,407 9.97 $ 24,000 Jul-12 Jun-14 tenant pays ins 2,407 Lease Term Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 43 of 83 The New Jaudon Roadhouse 13 SITE DESCRIPTION
Location/Access/Frontage The site is located at the southwest corner of 203rd Street and Holmes Road. The site has vehicular access via gravel drives from both frontage roads. The site has approximately 350 feet of frontage along the east side of Holmes Road and 165 feet along the north side of 203rd Street. An aerial map of the subject site is shown below.
Shape and Size The site is L shaped and contains 111,513 SF, or 2.56 acres according to the Cass County records. The plat map is located below.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 44 of 83 The New Jaudon Roadhouse 14 Topography and Flood Hazard The site is generally level and at street grade with the frontage roads. According to Flood Insurance Map 29037C0015F, dated January 2, 2013, the site is situated outside of federally identified flood hazard areas. The zone is defined as Zone C. An excerpt from the flood map is shown below.
Easements/Encroachments All easements appear to be of a local-service nature enhancing the utility and marketability of the property. No encroachments by or upon the property are evident, and no hazards or nuisances appear to affect the property.
Traffic Count The subject is located along Holmes Road (State Route D). The nearest traffic counts along Holmes Road are around 5,500 vehicles per day 4 miles to the north at Highway 58. Nine miles to the south the counts decrease to around 1,000 vehicles per day.
Zoning The site is not zoned according to Cass County. The subject has reportedly operated as a restaurant/bar since it was constructed and is presumed to be a legal use of the site.
Utilities All utilities except sewer are available and installed to the subject site. The subject uses propane gas. The subject is on a septic system.
Hazardous Materials/Toxic Wastes There were no hazardous materials observed during an inspection of the property. It is assumed that no toxic wastes were present within the soils. However, Bliss Associates, LLC is not qualified to detect the presence or absence of such materials. If further evidence is needed regarding the lack of danger from hazardous materials or toxic waste, authorities with expertise in detecting these conditions should be consulted (see Standard Assumptions and Limiting Conditions, Appraisal Section). Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 45 of 83 The New Jaudon Roadhouse 15 Conclusion The site has adequate physical characteristics for a variety of potential development. No significant adverse influences were noted. The site has a second tier commercial location.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 46 of 83 The New Jaudon Roadhouse 16 IMPROVEMENTS DESCRIPTION
The subject property consists of a one-story wood frame building with a pitched metal roof. The total GBA is 2,407 SF. It has a partial basement (864 SF) with a stone foundation and a loft office space with approximately 400 SF. Windows are double hung and fixed windows in metal and wood frames. The main entrance is a single-glass door in metal frame along the east elevation. There are metal doors along the west and south elevations.
The interior consists of a kitchen, prep area, bar, dining area and two lavatories. The finish consists of tile wood and concrete flooring, exposed duct work, wood side walls, suspended fluorescent light fixtures and wood partitioning.
The building is 100% heated and cooled with forced air gas heating and central air conditioning. The HVAC is ground mounted. Plumbing and electricity are adequate for restaurant use.
Site Improvements There are three pole lights, pole signage, canopy and an 800 SF patio.
BUILDING SKETCH
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 47 of 83 The New Jaudon Roadhouse 17 IMPROVEMENTS ANALYSIS
Deferred Maintenance (Curable) As of the date of inspection, the improvements are noted to be in generally average to fair condition. Reportedly the roof has a few leaks that the tenant has not been able locate. The tile flooring in the dining area is worn. The wood flooring is warped in places. We estimate deferred maintenance of $10,000.
Condition/Physical Depreciation The original improvements were constructed in 1935. It has been rehabbed and updated over the years. Most recently (2012) the tenant reportedly replaced 3 air conditioning units and installed ductwork throughout the dining and bar area. The total cost was approximately $15K to $20K. The effective age is somewhat lower than the weighted age, estimated at 25 to 30 years. The total economic life of the improvements is estimated at 55 years.
Functional Obsolescence The buildings design as a single-tenant office or retail facility is easily convertible to service a variety of potential users. The improvements represent a mature commercial building that fits with the rural feel, but is not typical of contemporary restaurant or retail appeal. Though functional, the improvements likely have limited appeal. All things considered, the design is functional and typical of smaller multi-purpose properties in todays market and the subject does not appear to suffer from functional obsolescence.
External Obsolescence External obsolescence is attributed to factors from outside the subject property and is generally reflected in market rent levels that are inadequate to support new construction. In this case, rent levels do not support new construction and the subject is considered to suffer from external obsolescence. The second tier location makes it difficult to compete for tenants in all of the newer buildings that are in more populous areas.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 48 of 83 The New Jaudon Roadhouse 18 SUBJECT PHOTOGRAPHS
Front (East) Elevation Looking North along Holmes Road
Looking West along 203rd Street North Elevation
West Elevation South Elevation
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Bar/Dining AREA Gaming/Dance Area
Prep Area Kitchen
Walk-In Cooler Basement
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loft office Area Lavatory
Furnaces Buckets for Leaks
Unimproved Land Unimproved Land
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 51 of 83 The New Jaudon Roadhouse 21 REAL ESTATE TAXES
Real estate taxes in Missouri are calculated by applying the appropriate mill levy to the assessed value, which is based on the County Appraisers appraised value. The assessment ratio for commercial properties is 32%. The assessment ratio for vacant land tracts is 19%. The following table summarizes the subjects total tax and assessment history over the past two years.
Real estate taxes are forecast at approximately $2,300 or $0.96 per square foot.
HISTORICAL COUNTY APPRAISED VALUES, ASSESSED VALUES, AND REAL ESTATE TAXES Owner: TAC Investments, LLC Mailing Address: 8844 Hillcrest Road, Kansas City, MO Situs Address: 20300 S State Route D, Belton, MO 2012 Parcel # Appraised Value Assessed Value Real Estate Taxes 2514300 (improved) $80,125 $25,640 $1,861.73 2514700 (vacant) $16,650 $3,160 $212.39 2514800 (vacant) $21,380 $4,060 $272.88 Total $118,155 $32,860 $2,347.00 2013 Parcel # Appraised Value Assessed Value Real Estate Taxes 2514300 (improved) $75,870 $24,280 $1,774.47 * 2514700 (vacant) $16,650 $3,160 $213.89 * 2514800 (vacant) $21,380 $4,060 $274.80 * Total $113,900 $31,500 $2,263.16 *unpaid Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 52 of 83 The New Jaudon Roadhouse 22 USE
MARKET OVERVIEW
Retail Market Cass County Until recently, the retail market in the Kansas City Metropolitan area struggled because of the general poor economic conditions. There was downward pressure on rental rates, upward pressure on vacancy and more perceived risk in the retail sector in general. More specifically newly developed retail in the path of development, but which was not yet surrounded by supporting population suffered the most in the current cycle. Well located centers with established populations surrounding have been able to maintain the status quo, with landlords more willing to negotiate lease rate to maintain occupancy.
The subject development represents a second tier property located along a state route in a mainly rural and agricultural setting.
The following chart shows the metropolitan vacancy rate and the various individual submarkets throughout the MSA for all retail properties for the Year-end 2013.
The total KCMSA had a vacancy rate of 8.40% for all retail properties with a positive absorption of over 1,000,000 SF. Approximately 563,000 SF of retail was constructed in 2013. The chart above shows the larger submarkets in the KC metro area. The Cass County Market is not listed in the MSA chart above. CoStars retail statistics for Cass County are summarized in the following table.
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The chart above indicates a current vacancy rate of 7.8% and a five year average vacancy rate of approximately 8%. The survey included 524 existing buildings. Approximately 35,000 SF of new retail construction has taken place in the Cass County market in the past five year with none in 2013.
Marketability The subject property has a rural location with limited demand. Access and visibility is good via State Route D. The building is older than most retail or restaurant properties in the market area. Therefore, market appeal is rated below average. Market fundamentals are weak and more conservative underwriting standards exist compared to a few years ago.
REASONABLE EXPOSURE AND MARKETING TIME
The reasonable exposure time inherent in the market value concept is always presumed to precede the effective date of the appraisal {USPAP, SR-1-2(c), SMT-6}. By contrast, reasonable marketing time is an opinion of the amount of time it might take to sell a property interest at the concluded market value level during the period of time immediately after the effective date of an appraisal {USPAP, Advisory Opinion, AO-7}.
The subject is an average quality building with adequate access from Holmes Road. It has a functional layout for a bar or restaurant use and could easily be converted to an office use. Its relatively small size suggests single-tenant occupancy. Vacancy in this submarket is relatively low (7.8% for general retail). Considering the subjects physical and locational characteristics, a reasonable exposure time of approximately 12 to 18 months is considered reasonable given the value conclusion contained in this report.
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The graph above generated from Costar indicates marketing time for retail and office buildings ranged from 184 days to over 1,600 days over the past 9 quarters. The survey consisted of office buildings in Belton, Kansas City, Grandview, Pleasant Hill and Harrisonville.
Although the overall market appears to be improving somewhat, the market for retail and office properties (as well as other property types) continues to be uncertain. However, a relatively small building like subject should be competitive with other properties on the market. If the subject were placed on the market on the date of this appraisal, the value estimate contained in this report is intended to reflect a reasonable marketing time of 12 to 18 months. The estimate of marketing time assumes the property is adequately marketed and mortgage financing is readily available.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 55 of 83 The New Jaudon Roadhouse 25 HIGHEST AND BEST USE
Definition Highest and best use may be defined as, "the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest land value." (Appraisal Institute, 275)
Because the use of land can be limited by the presence of improvements, highest and best use is determined separately for the site as though vacant and available to be put to its highest and best use, and for the property as improved.
Highest and best use must meet four criteria. It must be:
physically possible legally permissible financially feasible maximally productive.
These criteria are usually considered sequentially; a use may be financially feasible, but this is irrelevant if it is physically impossible or legally prohibited.
Highest and Best Use As Vacant The subject sites physical characteristics are sufficient for development although it has size limitations. The surrounding properties along the main thoroughfares consist of mainly residential and agricultural uses with limited commercial development. The site is not zoned. Given the location of the site, as well as the surrounding uses, office, industrial or retail uses are likely. However, speculative development is not currently supported by rental rates, therefore holding for future development is the only feasible use. No other use would result in a higher land value and be physically possible, legally permissible, and financially feasible. Given these factors, the concluded highest and best use as vacant is more for light industrial uses similar to those in the immediate area as warranted by demand.
Highest and Best Use As Improved The site is improved with a restaurant/bar building. Continued use of the building is presumed to be legally permissible and the improvements are suitable to serve the needs of a number of users. Demolition and redevelopment is not feasible at this time. Therefore, the highest and best use as improved is continued use of the existing improvements.
Since the subject is on a septic system the land due south of the building is included in the primary parcel. The balance is considered excess land.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 56 of 83 The New Jaudon Roadhouse 26 INCOME APPROACH
RENT
Contract Rent The subject is currently 100% leased to the New Jaudon Roadhouse for $2,000 per month or $9.97 per sq. ft. The lease began in July 2012 and expires in June 2014. The landlord pays the real estate taxes only.
Market Rent Most properties in small suburban areas are owner occupied and there is limited lease information and therefore we have expanded the search area. The following rent comparables are included as indications of market rent. The comparables are located in the Belton and Harrisonville areas of Cass County.
The locations of the market lease comparables are illustrated in the map below.
Lease Comparables Location Map
Property ID Total NRA (SF) Street Address Yr Blt / Ren No. City/State Condition Exp. Basis Tenant SF Leased Lease Start Lease Exp. Rate psf Mod Gross Equiv 1 Smoke Shop 4,004 Smoke Shop 4,004 3/14 NA $9.44 $9.44 105 A & B N Scott 1965 Mod Gross Belton, MO Avg 2 Donnas Dance Studio 3,400 Donnas 3,400 1/14 NA $6.39 $6.39 540 N Scott Ave 1980 Mod Gross Belton, MO Avg 3 Commercial Bldg 4,077 NA 4,077 5/14 NA $8.24 $8.24 507 Main St 2002 Mod Gross Belton, MO Avg 4 Shooting Gallery 8,008 NA 8,008 6/13 NA $5.14 $5.14 1700 W Wall 1985 Mod Gross Harrisonville, MO Avg 5 Row-type bldg 2,500 NA 2,500 6/14 NA $5.00 $5.00 311-13 Main St 1900 Mod Gross Belton, MO Avg AVG $6.84 $6.84 Subject Property 2,407 20300 Holmes Rd 1935 New Jaudon Roadhouse 2,407 06/01/12 06/01/14 $9.97 $9.97 Belton, MO Avg-fair Tenant Detail or Summary Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 57 of 83 The New Jaudon Roadhouse 27 All of the comparables are on a modified gross basis. The locations are all considered second tier and comparable to the subject. The sizes range from 2,500 to 8,008 SF and are generally comparable. The rentals range from average to good condition.
Based on the comparables, we conclude a market rental rate of $7.00 per SF on a modified gross basis.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 58 of 83 The New Jaudon Roadhouse 28 COMPARABLE LEASE PHOTOGRAPHS
Lease No. 1 Lease No. 2
Lease No. 3 Lease No. 4
Lease No. 5
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Sources of Other Income No reimbursement income is anticipated. Thus, none is included in this analysis.
VACANCY AND COLLECTION LOSS
According to the 4th quarter 2013 CoStar Retail Report, the total vacancy for the South KC general retail market was 14.6%. The most recent vacancy rate of Cass County was approximately 8%. Given our observations of the market and the characteristics of the subject, the stabilized vacancy allowance is estimated at 12%.
EXPENSES
Operating Expenses The following operating expenses are deducted to arrive at an estimate of net operating income (NOI). The following expenses are the landlords responsibility under the subjects modified gross lease basis; other expenses are paid by the tenant.
Real Estate Taxes As discussed on page 21, we have estimated taxes to be $2,300 or $0.96 per square foot.
Insurance Insurance for small commercial buildings typically range from $0.15 to $0.35 per square foot. We have estimated the insurance to be $700 or $0.29 per square foot.
Maintenance & Repairs The landlords maintenance expense is primarily structural. Given the age and condition of the building repairs will be on-going. An allowance of $2,000 or $0.83 per square foot is included for structural maintenance.
Property Management Management fees are usually charged as a percentage of effective gross income. A range of 3% to 6% is common for commercial properties. Given the subjects characteristics, a management fee of 3% is concluded.
Miscellaneous An allowance of $500 is included for miscellaneous expenses not expressly considered in another category.
Replacement Reserves Market participants rarely include replacement reserves in their projections, and the overall capitalization rate applied in the next section is intended for net income before reserves. Since the replacement reserve is implicit in the capitalization rate, no deduction is applied for replacement reserves.
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The effective gross income is $14,827 and the expenses are $5,945 resulting in an NOI of $8,882.
Category INCOME $Amount PSF % EGI Rental Income $16,849 $7.00 113.6% Other Income 0 0.00 0.0% TOTAL INCOME 16,849 7.00 113.6% Vacancy est to be 12% (2,022) -0.84 -13.6% EFFECTIVE GROSS INCOME $14,827 $6.16 100.0%
OPERATING EXPENSES Taxes $2,300 $0.96 15.5% Insurance 700 0.29 4.7% Utilities 0 0.00 0.0% CAM 0 0.00 0.0% Maintenance & Repairs 2,000 0.83 13.5% Janitorial 0 0.00 0.0% Management & Administration 445 0.18 3.0% Miscellaneous 500 0.21 3.4% Total Expenses $5,945 $2.47 40.1% Net Operating Income $8,882 $3.69 59.9% Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 61 of 83 The New Jaudon Roadhouse 31 DIRECT CAPITALIZATION
As previously indicated, transaction volumes for all types of real estate have been down due to the Great Recession. The most recent retail capitalization rates that have occurred within the Kansas City Metropolitan area are summarized in the table below.
The rates range from 8.41% to 12.50% averaging 9.72%. The three most recent sales indicate rates from 8.9% to 11.6%. Sale No. 5 is located in the subjects South KC market area and is the closest in proximity.
The following is a summarized capitalization rate study performed for Johnson County. The subject property is considered most similar to a Class C/D single-tenant retail property. The recommended overall rate for this classification is 10-11.00%.
According to the PWC 4th Quarter 2013 market report, strip centers had capitalization rates ranging from 5 to 10%, averaging 6.98%. These are mainly institutional grade properties. The spread between institutional and non-institutional grade retail properties ranges from 25 to 500 basis points, averaging 156 basis points.
We concluded to a capitalization rate of 10%.
SUMMARY AND CONCLUSION
The stabilized NOI for the subject property is capitalized below.
VALUE INDICATION: INCOME APPROACH $90,000
Sale No. Address City State Property Name Event Date: Cap Rate: Net Rentable Area: 1 8350 N Church Rd Kansas City MO Applebee's Restaurant 1/8/2010 8.18 5,285 2 1461 E 151st St Olathe KS Indian Trails Shopping Center 12/15/2010 9.79 31,140 3 8300 Wornall Rd Kansas City MO Blue X Discount Smoke 2/10/2010 8.41 4,435 4 1000 W US-24 Hwy Independence MO 24 Hi-Way Shopping Center 8/15/2012 12.5 45,300 5 1507 Main St Grandview MO Storefronts 6/1/2012 9.36 5,270 6 5438 Johnson Dr Mission KS Pride Cleaners 1/5/2012 10 1,435 7 310 SW Main St Lees Summit MO Two Mixed Use Buildings 5/8/2013 11.6 12,906 8 10 SW 3rd St Lees Summit MO Retail Bldg 5/8/2013 8.19 2,024 9 4831 W 135th St Overland Park KS Strip Center 8/15/2013 9.44 8,366 AVG 9.72 Class-Retail A B C D E 2012 Single Tenant 7.75% 9.00% 10.00% 11.00% 12.00% Unanchored strip center 8.75% 10.00% 11.00% 12.00% 13.00% Neighborhood/Community center- anchored 7.75% 9.00% 10.00% 11.00% 12.00% Net Operating Income / Overall Rate = Estimated Value $8,882 / 10.00% = $88,823 $90,000 rounded Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 62 of 83 The New Jaudon Roadhouse 32 SALES COMPARISON APPROACH
COMPARABLE SALES
The sales comparison approach involves the comparison of the property being appraised with other properties that may have been sold, listed for sale, or are under contract. The underlying premise is that the market value of the property is related to the prices of comparable, substitute properties. Because of the unique character of each property, adjustments are made of differences between the subject property and those to which it is compared. Finally, the resulting adjusted sales prices of the comparables are reconciled into a value conclusion regarding the subject property.
The subject property is a bar/restaurant. It was originally constructed in 1935. The local neighborhood was researched for similar properties. Due to a lack of adequately comparable sales in the immediate area, the market radius was expanded to include other areas of Kanas City, Missouri. The primary criteria for selection were size, age/condition, and quality/construction type. More detailed descriptions of the sales with photographs are located prior to the DOCUMENTS section of the report.
Improved Sale Summary
The unit of comparison is the price per square foot.
Sale No. Property Name Address Date Price $/SF GBA Built Condition LB Ratio 1 former McDonald's 8411 Holmes Rd 7/10/2013 $220,000 $58.32 3,772 1968 Average 12.79 KCMO 2 Feuerborn Bar 21900 Branic Dr 4/18/2014 $255,000 $72.40 3,522 2007 Avg-G 7.92 Peculiar, MO 3 Kickstand Bar 10817 E. Truman Rd 4/1/2014 $118,000 $39.33 3,000 1940 Avg-F 5.81 Independence, MO 4 former Patrikios 9849 Holmes Rd 7/19/2011 $235,000 $55.95 4,200 1963 Avg-F 5.79 KCMO 5 Doughboys Pizza 1806 N Commercial St 7/15/2011 $118,750 $53.98 2,200 1947 Avg-F 7.73 Harrisonville, MO 6 Mandy's Cafe 5920 Winner Rd 1/7/2011 $230,000 $55.83 4,120 1969 Average 7.40 KCMO Average: $55.97 3,469 New Jaudon Roadhouse 20300 Holmes Rd Subject: 2,437 1935 Avg-F 20.52 Belton, MO Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 63 of 83 The New Jaudon Roadhouse 33 EXPLANATION OF ADJUSTMENTS
Buyer Expenditures There are no adjustments necessary for buyer expenditures.
Property Rights, Financing Terms, and Conditions of Sale The sales involved the fee simple estate or leased fee estate at market terms, so no property rights adjustments are applied. In addition, each sale involved cash or its equivalent, so no financing adjustments are necessary. It is adjusted upward. No other adjustments were required for conditions of sale.
Market Conditions Market conditions for retail and office properties peaked in mid-2006, but have largely remained stagnant since that time. The sales span a time range from January 2011 to April 2014, all well after the real estate crash was fully realized and as such, none of the sales are adjusted for market conditions.
Size Typically, smaller properties sell for a premium, in part because of the decreased risk involved in leasing or selling a smaller sized building due to the greater number potential users. Furthermore, there are more potential uses for a smaller property and as such, more potential buyers. Finally, there are fewer investment dollars needed to invest in a smaller building thus there are potentially more buyers. The sales range from 2,200 SF to 4,200 SF. Sale Nos. 1, 2, 4 and 6 are adjusted upward. Sale Nos. 3 and 5 are relatively similar in size and no further adjustments are made.
Location/Access The subject has average location and access at the southwest corner of 203 rd and Holmes Road in a sparsely populated area of Cass County. It is considered a secondary, semi-rural commercial location. All of the sales have superior locations. Sale Nos. 1 and 4 are located along the same frontage Road but within populous areas of Kansas City, MO. Sale Nos. 2 and 5 are located in Cass County in more densely developed areas. Sale Nos. 3 and 6 are located in more populous areas with declining growth. All are adjusted downward.
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Age/Condition The subject is approximately 80 years old. It is in average to fair condition and has some items of deferred maintenance. Sale Nos. 1, 2, 4 and 6 are all newer than the subject. Sale Nos. 3 and 5 are considered similar in age. Sale Nos. 1, 2 and 6 are superior condition. Sale Nos. 3, 4 and 5 are similar condition. Except for Sale Nos. 3 and 5 all of the sales are adjusted downward for age/condition.
Quality The subject is average quality class D wood frame building. The sales are al similar quality and no adjustments are necessary.
Land to Building Ratio The subject has a land to building ratio of 20.52 to 1. Larger land to building ratios allow for additional parking and possible expansion. Sale Nos. 3 and 4 have land to building ratios of less than 6 to 1 and are adjusted upward. No other adjustments are made.
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SUMMARY AND CONCLUSION
After adjustments, the sales provide an indicated unit value range of roughly $37 to $52 per square foot averaging $45 per square foot. Sale Nos. 2 and 3 are the most recent sales. Sale Nos. 2 and 5 are located in Cass County. Sale No. 5 is the most similar in size. We concluded at the average of the range at $45 per square foot. The calculation is as follows.
VALUE ESTIMATE: SALES COMPARISON APPROACH $110,000
20300 Holmes Rd 8411 Holmes Rd 21900 Branic Dr 10817 E. Truman Rd 9849 Holmes Rd 1806 N Commercial St 5920 Winner Rd Unincorporated Kansas City Peculiar Independence Kansas City Harrisonville Kansas City Cass JACKSON Cass JACKSON JACKSON Cass JACKSON MO MO MO MO MO MO MO 64012 64131 64078 64052 64131 64701 64125 Sale Number SUBJECT 1 2 3 4 5 6 Sales Date 7/10/2013 4/18/2014 4/1/2014 7/19/2011 7/15/2011 1/7/2011 Sales Price $220,000 $255,000 $118,000 $235,000 $118,750 $230,000 Price Per SF $58.32 $72.40 $39.33 $55.95 $53.98 $55.83 Sale Characteristics Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Adjustment % 0% 0% 0% 0% 0% 0% Adjusted Price $220,000 $255,000 $118,000 $235,000 $118,750 $230,000 Terms Cash to seller Cash to seller Cash to seller Cash to seller Cash to seller Cash to Seller Adjustment % 0% 0% 0% 0% 0% 0% Adjusted Price $220,000 $255,000 $118,000 $235,000 $118,750 $230,000 Conditions Arm's length REO Market REO Arm's length Arm's Length Adjustment % 0% 0% 0% 10% 0% 0% Adjusted Price $220,000 $255,000 $118,000 $258,500 $118,750 $230,000 Buyer Expenditures Adjustment % 0% 0% 0% 0% 0% 0% Adjusted Price $220,000 $255,000 $118,000 $258,500 $118,750 $230,000 Market Conditions - Adjustment % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Adjusted Price $220,000 $255,000 $118,000 $258,500 $118,750 $230,000 Adjusted Price PSF - $58.32 $72.40 $39.33 $61.55 $53.98 $55.83 Property Characteristics Building Size 2,437 3,772 3,522 3,000 4,200 2,200 4,120 Age 79 46 7 74 51 67 45 LBR 10.19 12.79 7.92 5.81 5.79 7.73 7.40 Features Building Size 5% 5% 0% 5% 0% 5% Location -20% -10% -10% -20% -10% -10% Age -5% -25% 0% -5% 0% -5% Condition/Quality 0% -10% 0% 0% 0% 0% Design 0% 0% 0% 0% 0% 0% L/B Ratio 0% 0% 5% 5% 0% 0% Total Net Adjustment - -20% -40% -5% -15% -10% -10% Total Gross Adjustment - 30% 50% 15% 35% 10% 20% Final Adjusted Price - $46.66 $43.44 $37.37 $52.32 $48.58 $50.24 Unit Indicated Subject SF Value Value Rounded 2,437 x 45.00 $ = 109,665 $ 110,000 $ Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 66 of 83 The New Jaudon Roadhouse 36 EXCESS LAND VALUATION
The following section pertains to the excess land component of this report. Other than size, frontage and zoning the site characteristics are essentially the same as the improved site previously described in this report.
IDENTIFICATION
Brief Description The subject consists of 61,513 SF or 1.41 acres of vacant land located along the north side of 204 th Street just west of Holmes Road in Unincorporated, Cass County, Missouri.
MARKET OVERVIEW
Reasonable Exposure/Marketing Time The reasonable exposure time inherent in the market value concept is always presumed to precede the effective date of the appraisal {USPAP, SR-1-2(c), SMT-6}. By contrast, reasonable marketing time is an opinion of the amount of time it might take to sell a property interest at the concluded market value level during the period of time immediately after the effective date of an appraisal {USPAP, Advisory Opinion, AO-7}.
The subject property is a residentially zoned site located along the west side of Cherry Street just north of 203rd Street. The subject consists of one tract containing a total of approximately 61,513 SF or 1.41 acres. The topography of the site is generally level and at street grade. The subject was along with the improved tract in 2004.
There are several vacant land listings of residential and commercial land within the Cass County KC market. The listing prices and days on the market several properties are summarized below. The average asking price is $81,570 per site, with an average number of days on the market being 794 days, or approximately 2.5 years of exposure to the market. The 64 sold lots averaged $46,055 per site or $9,211 per acre, with an average number of days on the market being 296 days.
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Most land tracts that have sold within the past two years did so at prices highly discounted from the original asking prices.
At this point, any development for the subject site is considered to be one to two years away. A reasonable exposure time of 18 to 36 months is estimated to have been necessary to achieve a sale at a price consistent with the final value conclusion contained in this appraisal.
Market conditions are beginning to improve somewhat in the market area and a modest increase in demand is anticipated in the foreseeable future. However, no significant changes are anticipated, therefore, if the subject were placed on the market today, it is believed a marketing time of 18 to 36 months would also be necessary to achieve a sale consistent with the market value estimated in this report.
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 68 of 83 The New Jaudon Roadhouse 38 COMPARABLE LAND SALES
Below is a summary of land sales utilized in estimating a market value for the property. The most applicable unit of comparison is considered to be the price per SF. Detailed descriptions of these sales are located at the end of this section of the report.
Land Sales Map
NO. LOCATION CITY/STATE SALE DATE SALE PRICE SIZE (SF) $/SF ZONING 1 17300 S 291 Hwy Pleasant Hill, MO 8/09 $60,000 130,690 $0.46 C-2 2 21712 N Main St Peculiar, MO 5/13 $58,500 375,487 $0.16 AG 3 30009 E 286th St Garden City, MO 3/13 $15,000 60,984 $0.25 AG MEAN 189,054 $0.29 MEDIAN 130,690 $0.25 LOW 60,984 $0.16 HIGH 375,487 $0.46 LAND SALES SUMMARY TABLE Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 69 of 83 The New Jaudon Roadhouse 39 EXPLANATION OF ADJUSTMENTS
Property Rights, Terms, Conditions of Sale All of the sales are considered to be arms length transactions of fee simple title. No adjustments are necessary.
Market Conditions (Time) The sales span a time frame from December August 2009 to May 2013. The market for rural land sales in Cass County has remained fairly static over the past 5 years and no adjustments are necessary.
Size Typically, larger sites sell at a lower unit price than smaller sites as there are fewer available buyers, more investment dollars required and greater risk associated with their development. Sale No. 2 is adjusted upward. Sale Nos. 1 and 3 are all relatively similar in size to the subject and no adjustments are necessary.
Location/Access The subject is in an average location with average access. It is a secondary location with limited commercial potential. The sales have similar rural locations and no adjustments are necessary.
Functional Utility/Zoning The subject property is zoned for commercial and AG. The sales have similar zoning and no adjustments are made.
In addition, the subject does not have sewer. Sale Nos. 1 and 3 do not have sewers and are comparable. Sale No. 2 has sewer and is adjusted downward.
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SUMMARY AND CONCLUSION
After adjustment, the sales provide an indicated unit value range for the subject of $0.21/SF to $0.46/SF. The average indication is $0.29/SF. An indicated unit value for the subject of $0.30/SF is considered reasonable and supported by the market. Applied to the subject:
61,513 SF x $0.25 = $15,378, rounded to $15,000.
VALUE INDICATION: SALES COMPARISON APPROACH (Excess land): $15,000
SUBJECT 1 2 3 Sales Date - 8/09 5/13 3/13 Sales Price - $60,000 $58,500 $15,000 Land SF 61,513 130,690 375,487 60,984 Sale Price per SF $0.46 $0.16 $0.25 Transaction Adjustments Property Rights Fee Simple 0% 0% 0% Financing Terms Cash to Seller 0% 0% 0% Conditions of Sale Normal 0% 0% 0% Market Conditions - 0% 0% 0% Adjusted Price PSF $0.46 $0.16 $0.25 Physical Charac. Adj's. Location/Access KCMO/Good 0% 0% 0% Size in SF 86,684 0% 45% 0% Functional Utility Avg 0% -10% 0% Zoning/Use C-2/Ag 0% 0% 0% Net Adjustment 0% 35% 0% Adjusted Price per SF $0.46 $0.21 $0.25 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 71 of 83 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 72 of 83 Aerial View 17300 S 291 Hwy Pleasant Hill, MO 64080 113607 BlissWorld No. Redford Construction Land Commercial COMPARABLE SALE NO. 1 Transaction Sale Price: $60,000 Seller: Mike O'Connor Buyer: Stanley W. and Johnna R. Redford, Trust Sale Date: 8/5/2009 Book: 3263 Page: 282 The land was owned by Mr. Mike OConnor. Mr. Stan Redford (Redford Construction) was hired to erect the building in 2006 for Mr. OConnors sod business. Mr. Redford paid for the building as a build-to-suit arrangement. When Mr. OConnor decided to move his business elsewhere he sold Mr. Redford the land for $60,000 in 2009. Analysis Price / SF Land: $0.46 Price / Acre Land: $20,000 Land SF: 130,690 Acres: 3.00 Zoning: C-2 Shape: Irregular Utilities - Water: Yes Utilities - Gas: Yes Utilities - Sewer: No Utilities - Electric Yes Tax ID: 0142401 Subdivision: Irish Acres Lot: 1 The site is located along the west side of South 291 Highway in rural Cass County, Missouri. The site is L shaped and has 162.79 ft. on the west side of South 291 Highway and a depth ranging from 550 ft. to 300 ft. The property is L shaped and contains 130,680 SF (3.00 acres). The property is zoned C-2, Commercial District, by Cass County, Missouri. Comparable Sale -
1 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 73 of 83 Looking West 21712 N Main St Peculiar, MO 64078 119375 BlissWorld No. Noble Refrigeration Land Industrial COMPARABLE SALE NO. 2 Transaction Sale Price: $58,500 Conditions of Sale: Arm's Length Interest Conveyed: Fee Simple Seller: LEAD Bank (FKA Garden City Bank) Buyer: Noble Refrigeration Terms: Cash to Seller Sale Date: 5/1/2013 Book: 3687 Page: 428 The sale is an REO that was listed for $100,000 for several years. The property was marketed ofr atotal of 157 days prior to the sale. Analysis Price / SF Land: $0.16 Price / Acre Land: $6,786 Land SF: 375,487 Acres: 8.62 Shape: Irregular Frontage: 415.00 Topography: Level Utilities - Water: Yes Utilities - Sewer: Yes Utilities - Electric Yes Tax ID: 070209000000084000 Legal: Lots 3 and 4, Flynn's Subdivision, in Cass County, MO. Subdivision: Flynn's Sub Lot: 3 & 4 It is an irregular shaped tract of commercially zoned land located along the west frontage (Main Street) road of I-49. It is about one quarter mile north of the interchange of I-49 and MO "C" highway. The property is between two platted industrial subdivisions. The north subdivision has 10 lots with no improvements while the south subdivision has 5 of 11 lots improved to date. Comparable Sale -
2 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 74 of 83 30009 E 286th St Garden City, MO 64747 122138 BlissWorld No. Smith Land Land Agricultural-Undeveloped COMPARABLE SALE NO. 3 Transaction Sale Price: $15,000 Analysis Price: $15,000 Conditions of Sale: Arm's length Interest Conveyed: Fee Simple Buyer: George Smith & Marcella Wright etal Terms: Cash to seller Sale Date: 3/7/2013 Book: 3699 Page: 824 Property had 3 green houses that were removed prior to the sale. Analysis Price / SF Land: $0.25 Price / Acre Land: $10,714 Land SF: 60,984 Acres: 1.40 Zoning: AG Shape: Irreg Topography: Level Tax ID: 372502 Section: 20 Range: 30 Township: 44 Subdivision: White Rock Park (lots 9-12) Lot: 10 Located along southboubnd SR 7 north of Garden City. Comparable Sale -
3 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 75 of 83 8411 Holmes Rd Kansas City, MO 64131 121318 BlissWorld No. former McDonald's Land Commercial COMPARABLE SALE NO. 1 Transaction Sale Price: $220,000 Analysis Price: $220,000 Conditions of Sale: Arm's length Interest Conveyed: Fee Simple Seller: James Montee Buyer: KC Holmes DG LLC Terms: Cash to seller Sale Date: 7/10/2013 Deed No.: 2013E0075225 Analysis Price / SF Land: $4.56 Land SF: 48,256 Acres: 1.11 Zoning: B1-1 Shape: L Topography: Gently Sloping Proposed Dev.: Dollar General Tax ID: 48-210-06-18 Legal: w/2 lot 10 and 11 ex w 11' Subdivision: Ernest Kellenstrass Lot: 10-11 Located one property north of the NEC of 85th and Holmes Road. Site was develpoed with a McDonald's restaurant in 1968. Converted to office use in the 2000's. Improvements were razed after this purchase for construction of a Dollar General. The subject was marketed as an improved site. The developer paid a sale price consitent with commercial buildings in the area. The price per GBA of the razed improvements equates to $58.32/SF. Comparable Sale -
1 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 76 of 83 21900 Branic Dr Peculiar, MO 64078 122117 BlissWorld No. former Restaurant Retail Tavern, Bar, Nightclub, Micro-Brewery COMPARABLE SALE NO. 2 Transaction Sale Price: $255,000 Analysis Price: $255,000 Conditions of Sale: REO Interest Conveyed: Fee Simple Seller: Hawthorn Bank Buyer: John Feuerborn Terms: Cash to seller Sale Date: 4/18/2014 Purchaser owns at least two bars in Cass County. Analysis Price / SF Building: $72.40 Building Building SF: 3,522 Year Built: 2007 Exterior Walls: Hard Board Quality: Average Condition: Average to Good Const. Class: Class D Land SF: 27,878 Zoning: C-1 Topography: Level Vacant restaurant building located at the SWC of State Hwy J and Branic Drive just east of the I-49 interchange. Comparable Sale -
2 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 77 of 83 10817 E Truman Rd Independence, MO 64052 122119 BlissWorld No. former Kickstand Bar Retail Tavern, Bar, Nightclub, Micro-Brewery COMPARABLE SALE NO. 3 Transaction Sale Price: $118,000 Analysis Price: $118,000 Conditions of Sale: Arm's length Interest Conveyed: Fee Simple Seller: Frances & Gary Tanahill Buyer: James & Jenelda Woolery Terms: Cash to seller Sale Date: 4/14/2014 Deed No.: 2014E0024903 Analysis Price / SF Building: $39.33 Building Building SF: 3,000 Year Built: 1940 Exterior Walls: Hard Board Quality: Average Condition: Average Const. Class: Class D Land SF: 17,424 Acres: 0.40 Shape: Rect Topography: Level Tax ID: 27-140-07-01 Subdivision: Maywood Lot: 1 & N 25' Block: 4 Comparable Sale -
3 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 78 of 83 9849 Holmes Rd Kansas City, MO 64131 120225 BlissWorld No. Former Patrikios Restaurant Retail Restaurant Sit Down COMPARABLE SALE NO. 4 Transaction Sale Price: $235,000 Analysis Price: $235,000 Conditions of Sale: REO Interest Conveyed: Fee Simple Seller: Patriots Bank Buyer: S&Z Corp Terms: Cash to seller Sale Date: 7/19/2011 Deed No.: 2011E0067876 Analysis Price / SF Building: $55.95 Price / SF Land: $9.66 Building Building SF: 4,200 Year Built: 1963 Exterior Walls: Stucco Quality: Average Condition: Fair to Average Land / Bldg. Ratio: 5.79 Const. Class: Class C Land SF: 24,316 Acres: 0.56 Zoning: B3-2 Shape: Irregular Topography: Level Tax ID: 48-540-01-59 Subdivision: Holmes Wood Lot: B Located at the NEC of 99th and Holmes Road. Former Patrikios restaurant building. Marketed as a restaurant building with fully equipped kitchen and dining room. Capacity for 125 people. Comparable Sale -
4 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 79 of 83 1806 N Commercial Dr Harrisonville, MO 64701 122124 BlissWorld No. Doughboy Pizza Retail Tavern, Bar, Nightclub, Micro-Brewery COMPARABLE SALE NO. 5 Transaction Sale Price: $118,750 Analysis Price: $118,750 Conditions of Sale: Arm's length Interest Conveyed: Fee Simple Seller: Pleasantview Enterprises LLC Buyer: Adam Portzen Terms: Cash to seller Sale Date: 7/15/2011 Deed No.: 480507 rehabbed for use as a pizza restaurant Analysis Price / SF Building: $53.98 Building Building SF: 2,200 Year Built: 1947 Exterior Walls: Hard Board Quality: Average Condition: Average Const. Class: Class S Land SF: 17,000 Zoning: C-2 Topography: Level Tax ID: 1771800 Property is located along the north side of Commercial St east of M-291. Single story wood frame building with a flat roof. Comparable Sale -
5 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 80 of 83 5920 Winner Rd Kansas City, MO 64125 56635 BlissWorld No. Mile High Grocery Supply - Mandy's Caf Retail Restaurant Sit Down COMPARABLE SALE NO. 6 Transaction Sale Price: $230,000 Conditions of Sale: Arm's Length Interest Conveyed: Fee Simple Seller: TJC Properties, LLC Buyer: Mile High Grocery Supply, Inc. Terms: Cash to Seller Sale Date: 1/7/2011 Deed No.: 2011E0007552 The property was formerly a Waid's Restaurant (Cafe) and Mandy's Cafe. Analysis Price / SF Building: $55.82 Building Building SF: 4,120 Year Built: 1969 Exterior Walls: Concrete Quality: Average Condition: Average Land SF: 0 Acres: 0.70 Zoning: M2a Shape: Quadrangle Frontage: 200.00 Depth: 231.00 Topography: Level Utilities - Water: Yes Utilities - Gas: Yes Utilities - Sewer: Yes Utilities - Electric Yes Tax ID: 28-120-06-08 Legal: Lengthy, see file Section: 1 Range: 33 Township: 49 Subdivision: Charlevoix Addition The property is a former Waid's Restaurant located on the northwest corner of Winner Road and White Avenue in a primarily industrial neighborhood area of in Kansas City, Missouri. The improvements were constructed in 1969 and contain 4,120 square feet of building area. The improvements are of wood frame construction with a brick and wood exterior, and is considered to be in overall average condition. The interior design is typical of a sit-down restaurant and includes a commercial-grade kitchen area. Comparable Sale -
6 Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 81 of 83 MATTHEW R. WOODS
Certifications
Missouri State Certified General Real Estate Appraiser No. 2005090012
Experience
20 years full-time real estate appraisal experience with Bliss Appraisals, Woods Appraisals, Hughes Development Corporation and Nunnink & Associates, Inc.
Formal Education
University of Virginia, Economics, Charlottesville, Virginia
Course Work & Seminars
2002 AI Course I320, Advanced Applications 2000 AI Course II430, Standards of Professional Practice, Part C 1995 AI Course II420, Standards of Professional Practice, Part B 1995 AI Course I410, Standards of Professional Practice, Part A 1994 AI Course I310, Basic Income Capitalization 1994 AI Course I120, Appraisal Procedures 1994 AI Course I110, Appraisal Principles Various Continuing Education Courses (14 hours per year))
Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 82 of 83 2014 ROBERT E. MARX, MAI, SRA
Certifications Appraisal Institutes Litigation Professional Development Program Member Appraisal Institute (MAI), No. M-9207 Senior Residential Appraiser (SRA) Institute of Residential Marketing Colorado State Certified General Real Estate Appraiser No. CG100048101 Kansas State Certified General Real Property Appraiser No. G-383 Kansas Licensed Real Estate Broker No. BR00052260 Missouri State Certified General Real Estate Appraiser No. RA001238 Missouri Licensed Real Estate Broker-Salesperson (inactive) 1999023167 Experience 38 years full-time real estate appraising with Bliss involving all types of properties Expert Valuation Witness District Courts in Kansas Counties: Geary, Johnson, Leavenworth, Riley, Sedgwick, Shawnee, and Wyandotte Circuit Courts in Missouri Counties: Cass, Clay, Jackson and Platte Federal Bankruptcy Courts: Western Missouri and Kansas Various local planning and zoning hearings Recent teaching and related experience March 2013, Co-presenter, CLE Seminar, National Business Institute, Eminent Domain from Start to Finish October 2009, Speaker, KC Regional Chapter of the International Association of Assessing Officers, Valuation and Appraisal in a Dysfunctional Market October 2009, Co-presenter, CLE Seminar, KC Metropolitan Bar Association, Handling Distressed Commercial Properties in 2009 2000, Approved instructor for appraiser continuing education in Idaho, Illinois, Indiana, Kansas, Missouri, Pennsylvania and Virginia 2000, co-author: manuscript Police Power Regulation of Highway Access and Traffic Flow in the State of Kansas Associations Member: Appraisal Institute Review Panel Member: Kansas City Regional Association of Realtors Member: Missouri Association of Realtors Member: National Association of Home Builders Member: Young Advisory Council of the Appraisal Institute Past President: KC Data Service, Inc. (1991) Formal Education BA Chemistry University of Kansas, 1973 Recent/Advanced Course Work 2012, Handling Eminent Domain Cases in Missouri and Kansas (CLE Seminar) 2012, Wind Energy Transaction (CLE Seminar) 2011, Condemnation Appraising: Principles and Application 2010, The Appraiser as an Expert Witness: Preparation & Testimony 2010, Hotel Appraisal 2010, Litigation Appraising: Specialized Topics and Applications 2008, Appraisal Review - General 2007, Finance, Statistics & Valuation Modeling 2006, New Markets Tax Credit Conference 2003, Separating Real and Personal Property from Intangible Business Assets 2000-2001, Regression Analysis and Special Topics in Statistics SAS (UMKC\Courses 590\6 credit hours) 2000, Regression Analysis (UMKC\ Course 590\3 credit hours) Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc Main Document Page 83 of 83
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United States of America On Behalf of Its Agency Internal Revenue Service v. William H. Norton, Carrie W. Norton, F/k/a Carrie A. Woodward, 717 F.2d 767, 3rd Cir. (1983)
Luis and Margaret Vega, Individually and On Behalf of Others Similarly Situated v. First Federal Savings & Loan Association of Detroit, 622 F.2d 918, 1st Cir. (1980)