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APPRAISAL OF
THE COMMERCIAL PROPERTY
LOCATED AT
12-24 CRANDON BOULEVARD
KEY BISCAYNE, FLORIDA
PREPARED FOR
VILLAGE OF KEY BISCAYNE
c/o WEISS, SEROTA, HELFMAN, et al
200 EAST BROWARD BOULEVARD
FORT LAUDERDALE, FLORIDA 33301
DATE OF VALUE
April 30, 2013
PREPARED BY
Investors Research Associates, Inc.
5730 S.W. 74 Street, Suite 100
South Miami, Florida 33143
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May 15, 2013
Village of Key Biscayne
c/o Mitchell Burnstein
Weiss, Serota, Helfman et al
200 East Broward Boulevard
Fort Lauderdale, Florida 33301
Re: The commercial property located at 12 to 24 Crandon Boulevard, Key Biscayne,
Florida
Dear Mr. Burnstein:
The attached appraisal prepared in a self-contained report format of the above referenced
property is being submitted according to your request. This report contains the results of
investigations and analyses made in order to furnish an estimate of the market value of
the property described herein.
This appraisal is intended to comply with the following: The Uniform Standards of
Professional Appraisal Practice (USPAP), as adopted by the Appraisal Standards Board
of the Appraisal Foundation; the appraisal requirements of the Financial Institutions
Reform, Recovery, and Enforcement Act (FIRREA); requirements of the Real Estate
Appraisal Board of the Florida Department of Professional Regulation; and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal
Institute.
A Summary of Facts and Conclusions is provided in the front of the report and a
Certification of Value appears in the final section.
Respectfully submitted,
Edward N. Parker, MAI Geoffrey D. Heath, MAI
State Certified General State Certified General
Real Estate Appraiser #RZ144 Real Estate Appraiser #RZ1456
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TABLE OF CONTENTS
I. SUMMARY OF FACTS AND CONCLUSIONS ................................................... 5
II. THE ASSIGNMENT ............................................................................................... 7
A. Identification of the Property ............................................................................... 7
B. Purpose and Scope of the Assignment ................................................................. 7
C. Definition of Value .............................................................................................. 8
D. Property Rights Appraised ................................................................................... 9
E. Intended Use of the Appraisal .............................................................................. 9
F. Intended User of the Appraisal ............................................................................ 9
G. Effective Date of Appraisal ................................................................................. 9
H. Appraisers ............................................................................................................ 9
III. ECONOMIC PERSPECTIVE ................................................................................ 10
A. Miami-Dade County Overview .......................................................................... 10
B. The Neighborhood ............................................................................................. 13
C. The Local Retail Market .................................................................................... 14
IV. DESCRIPTION OF THE PROPERTY .................................................................. 21
A. Ownership and Recent History of the Property ................................................. 21
B. Location and Access .......................................................................................... 21
C. Description of the Site ....................................................................................... 23
D. Description of the Improvements ....................................................................... 25
E. Proposed Development Plan .............................................................................. 25
F. Zoning and Planning .......................................................................................... 27
G. Assessment and Real Estate Taxes .................................................................... 27
V. ANALYSIS OF DATA AND CONCLUSION ...................................................... 28
A. Highest and Best Use ......................................................................................... 28
B. Methodology ...................................................................................................... 28
C. Sales Comparison Approach .............................................................................. 29
D. Income Capitalization Approach ....................................................................... 49
E. Reconciliation and Final Value Conclusion ...................................................... 72
VI. ASSUMPTIONS AND LIMITING CONDITIONS .............................................. 73
VII. CERTIFICATION .................................................................................................. 75
VIII. QUALIFICATIONS .............................................................................................. 77
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APPRAISED
PROPERTY
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I. SUMMARY OF FACTS AND CONCLUSIONS
The Assignment: To estimate the market value of the fee simple
interest in the commercial property described
herein.
Location: The west side of Crandon Boulevard north of
Harbor Drive (12-24 Crandon Boulevard), Key
Biscayne, Florida.
Site Description: A trapazoidal shaped off-corner parcel containing
58,850 square feet and fronting for approximately
263 feet on the west side of Crandon Boulevard.
Improvement Description: Two one-story CBS retail buildings containing
14,561 square feet of building area and paved
parking areas for 48 vehicles. The buildings were
originally constructed in 1950-51 and are currently
vacant and in poor condition.
Current Owner: Key Biscayne Gateway Partners Ltd.
2012 Assessment:
Land: $5,529,250
Improvements: $ 620,705
Total Assessment: $6,149,955
2012 Taxes: $106,532
Zoning: C-1, Low Intensity Commercial District, permitting
low intensity uses providing goods and services to
residents of the Village
Land Plan Designation: Commercial
Highest & Best Use: Redevelopment with commercial uses consistent
with applicable zoning and planning criteria
Market Value Estimates:
Sales Comparison Approach: $ 9,750,000
Income Capitalization Approach: $10,250,000
Market Value Conclusion: $10,000,000
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Effective Date of Valuation: April 30, 2013
Date of Inspection: April 30, 2013
Appraisers: Edward N. Parker, MAI
Geoffrey Heath, MAI
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II. THE ASSIGNMENT
A. Identification of the Property
The appraised property is located on the west side of Crandon Boulevard to the
north of Harbor Drive (12-24 Crandon Boulevard) within the incorporated area of
Key Biscayne, Florida. It consists of two single story commercial buildings
containing 14,561 square feet of building area on a 58,845 square foot site. The
legal descriptions of the property presented below are taken from public records.
And
B. Purpose and Scope of the Assignment
The purpose of this appraisal is to estimate the market value of the fee simple
interest of the property described herein.
The function of this appraisal is to provide the client with valuation information in
conjunction with their consideration of a possible acquisition of the property.
The scope of the assignment encompasses the following steps performed within
the framework of commonly accepted appraisal procedures:
Inspected the property being appraised and the surrounding neighborhood
and marketplace.
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Met with Max Puyanic, an ownership representative, to discuss the
property.
Gathered and confirmed comparable market data including sale prices and
rental rates for similar properties.
Interviewed brokers, property owners, managers, and other participants
who are active in this marketplace.
Formulated reasonable opinions and judgments based on supply and
demand factors, as well as physical and functional considerations relative
to the highest and best use of the property and its market value.
Analyzed these data in order to formulate sound valuation judgments
within the framework and application of the appropriate approaches to
value.
C. Definition of Value
Market value is defined in the Uniform Standards of Professional Appraisal
Practice (USPAP), as adopted by the Appraisal Standards Board of the Appraisal
Foundation as:
“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, knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is 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 each acting in what he
considers his own best interest;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. 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.”
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D. Property Rights Appraised
This valuation of the appraised property is based on all the rights that may
lawfully be held by its owner under a fee simple estate.
E. Intended Use of the Appraisal
The intended use of this appraisal is to provide the client with valuation
information in conjunction with their consideration of a possible acquisition of the
property.
F. Intended User of the Appraisal
The intended user of this appraisal is the client, Village of Key Biscayne.
G. Effective Date of Appraisal
April 30, 2013
H. Appraisers
Edward N. Parker, MAI
Geoffrey D. Heath, MAI
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III. ECONOMIC PERSPECTIVE
A. Miami-Dade County Overview
Miami-Dade County is divided into 36 municipalities with the largest being the
cities of Miami, Hialeah, Miami Beach, North Miami and Coral Gables. It
encompasses approximately 1,973 square miles in southeastern Florida. The
eastern part of the county is intensely developed and much of the density is
concentrated within a few miles of the Atlantic Ocean and Biscayne Bay. Most of
the western part of the county is undeveloped or sparsely developed. The western
part of the county is mostly low-lying, level land. Much of it is subject to seasonal
flooding. These wetlands are part of the Everglades’ River of Grass, a delicate
ecosystem. The Everglades are the recharge area for South Florida’s sole source
aquifer. The aquifer supplies the drinking and agricultural water needs for more
than three million people in Southeast Florida.
Miami-Dade County appears to have a vast supply of open land for urban
expansion. However, the Everglades, the aquifer and other critical environmental
conditions effectively have limited the supply of developable land. In addition,
the 1985 Florida Growth Management Act made it much more difficult to change
zoning and land use patterns. It also prohibited approval of major new
developments until the roads, schools and other infrastructure improvements are
sufficient to support the increased population attracted by the new development.
Development now requires a much more costly and time-consuming approval
process with significantly more public scrutiny.
Beginning in 2003, Miami-Dade County experienced a period of unprecedented
housing construction in all developable areas of the county. From 13,520 new
housing units authorized in Miami-Dade County during 2003 activity peaked at
27,212 units authorized in 2005. Reflecting deteriorating economic conditions
and significant overbuilding, however, authorizations eased to 16,536 new units
in 2006 and plummeted to 4,026 units in 2008 and 2,657 units in 2011. Local
housing markets are only very recently showing some signs of recovery in the
form of declining unsold inventories, stabilizing prices levels, and modest
increases in new construction activity.
Population
From 1970 to 1980, Miami-Dade County was one of the fastest growing urban
regions in the United States. However, following the double impact of the
recession of the early 1990s and Hurricane Andrew in 1992, the county actually
lost population during 1992 and 1993. These losses were made up in the mid- and
late 1990s. The 2000 U.S. Census reported the county had a net gain of some
367,298 residents over the 1990 population, an increase of over 16 percent. The
2010 Census estimated the population of the county to be at 2,500,625. This is a
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more modest gain from the reported 2000 population of 2,253,362. Declines in
economic activity on a state - wide level have been blamed for this interruption.
An unusually high proportion of Miami-Dade’s growth results from births. Also,
the immigrant population is typically youthful. As a result, Miami-Dade has a
relatively young population, with about 30 percent of its residents under the age
of 25 (compared to 38 percent in Palm Beach County and 28 percent in Broward
County). A young and generally less-educated immigrant population contributes
to Miami-Dade County’s relatively low-income levels. At $43,957 in 2011, the
median county household income was below that of both the State of Florida
($47,827) and the United States ($52,762).
Employment
The general trend in employment within Miami-Dade County over the past five
years is illustrated below.
Non-Agricultural Employment Trends
Miami-Dade County
2008-2012
Industry 2008 2009 2010 2011 2012
Total Nonagricultural
Employment 1044,300 1,018,700 987,000 1,014,700 1,023,700
Construction 44,500 38,300 31,800 30,700 27,300
Manufacturing 43,500 40,600 34,000 33,800 34,900
Transportation and Public
Utilities 79,800 78,000 74,300 77,700 81,100
Trade 203,900 197,300 192,700 202,600 210,000
Finance, Insurance and Real
Estate 72,200 70,100 61,100 60,200 63,600
Service and Mining 444,300 442,100 438,700 456,500 463,400
Government 155,600 152,300 154,500 153,200 143,400
Civilian Labor Force 1,215,098 1,155,000 1,292,561 1,279,120 1,299,144
Unemployment 85,367 136,289 168,110 130,160 118,682
Unemployment Rate 7.0% 11.8% 13.0% 10.2% 9.1%
Source: Agency for Workforce Innovation
Total county nonagricultural employment in 2012 showed a second annual uptick
after declines that began in 2008. This is consistent with recent gradual
improvements reported in national economic conditions. The trade and service
sectors continue to dominate local employment, accounting for over 65 percent of
2012’s total employment of 1,024,000. Historically, growth in the trade sector
has helped to offset losses in the manufacturing sector.
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NEIGHBORHOOD LOCATION MAP
APPRAISED PROPERTY
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Consistent with national and state trends, Miami-Dade County’s unemployment
rate has shown recent improvement after peaking at 13.0 percent in 2010.
Countywide unemployment was 9.1 percent in December 2012, compared to the
state average of 8.0 percent and the national average of 7.8 percent.
Conclusion
Recent economic activity in the county has slowed and the population growth
which characterized all of Florida has at least temporarily ebbed. The source of
past population growth in Miami-Dade County is not especially conducive to
economic growth, at least for the short term. Miami-Dade County has a higher
than average birth rate and a large, low-income immigrant population.
Based on historic patterns, the long-term prognosis is more positive. In the past,
immigrants to Miami-Dade have proven to be energetic entrepreneurs and most
job creation comes from small businesses. The single most significant growth
industry in Miami-Dade is international trade, which generates demand for
warehouse and distribution space, transportation services, as well as legal and
banking services such as letters of credit. The strength of this industry is
attributable to Miami’s largely bilingual population in addition to the area’s
linkages to Latin America.
B. The Neighborhood
The appraised property is situated at the entrance to the incorporated area of the
Village of Key Biscayne. Located in the center of a four mile long barrier island
between the Atlantic Ocean and Biscayne Bay, the Village is bordered by the
beaches of Crandon Park on the north and Cape Florida Park on the south. The
island is connected via a toll causeway to the City of Miami mainland
approximately seven miles away.
Incorporated in 1991, Key Biscayne is well known for its quiet natural beauty and
small town character. Originally developed in the 1950s with modest single
family retirement and second homes, the Village is now a fully developed
bedroom community with an estimated 2011 population of 12,637. With a total
land area of approximately 850 acres, the incorporated area of Key Biscayne
comprises primarily residential uses. This is evidenced by its recent land use
distribution.
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EXISTING KEY BISCAYNE LAND USE
Land Use Percent of Acreage
Single Family Residential 38%
Multi Family Residential 26%
Retail/Office Commercial 4%
Public/Institution/Recreation 6%
Roads and Canals 25%
Vacant 1%
100%
Reflecting its limited population base, retail and commercial areas in Key
Biscayne comprise approximately 4 percent of its land area. All of these uses
front on Crandon Boulevard (the causeway entry road).
Demographics of Key Biscayne rate it as well above average. Over 75 percent of
the Village population is college educated compared to 26 percent statewide.
Recent census data indicated a median family income of $114,000 in the Village
compared to $47,000 statewide. And over 75 percent of the Village housing stock
is owner occupied with a median home value of $822,000. This compares to a
statewide average of 69 percent owner occupied and median value of $188,000.
With access to Key Biscayne limited to a single causeway, the majority of traffic
onto and off the island is resident related. An exception, however, are both local
and out of town visitors attracted to the beaches, parks and amenities on the
island. Now effectively built out, future population growth in Key Biscayne is
anticipated to be limited. Recent development activity in the Village has largely
been the replacement of older structures with typically higher density uses. The
one vacant site in the Village (former Sonesta Hotel) is now planned for a 145
unit luxury residential condominium on the ocean.
C. The Local Retail Market
The Miami retail market has fared relatively well in the face of the recent declines
in economic activity experienced both locally and nationally. A number of firms
survey the county retail market on a regular basis. In their 2012 reports, two of
these firms estimated the following countywide retail vacancy rates.
Miami-Dade County Retail Market
2010 - 2012
Source
Inventory – S.F.
Mid 2012
Vacancy Rate
Mid 2011
Vacancy Rate
Mid 2010
Vacancy Rate
Colliers International 59.9 million 4.6% 5.5% 6.4%
Marcus & Millichap 50.0 million 6.3% 6.2% 7.4%
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The general downward trend in retail vacancy rates in Miami-Dade County is
evident. Overall vacancy rates estimated by Collier International for 2011 and
2012 comprised the following components by retail property type.
Retail Property Type
Inventory
Surveyed - S.F.
Mid 2012
Vacancy Rate
Mid 2011
Vacancy Rate
Neighborhood Center 18.3 million 5.5% 6.5%
Community Center 14.1 million 4.8% 6.5%
Lifestyle Center 1.5 million 4.9% 9.2%
Outlet Center 0.3 million 0.0% 0.0%
Power Center 3.1 million 0.9% 4.0%
Regional Center 4.3 million 5.5% 2.8%
Strip Center 7.5 million 6.0% 10.3%
Super Regional Center 10.4 million 1.8% 0.3%
Entertainment Center 0.7 million 10.8% 15.2%
Miami-Dade Retail Total 59.9 million 4.6% 5.5%
Retail rents in Miami-Dade County have remained fairly stable over the last
couple of years with some recent but moderate increases. Marcus and Millichap
estimates county wide retail asking rents average $23.35 per square foot net, with
effective rents averaging $19.70 per square foot. And Collier International reports
retail rents within strip centers now average $22.33 per square foot net.
MIAMI-DADE RETAIL SUBMARKETS
Submarkets Recent Vacancy Rate Average Effective Rent/S.F.
Coral Gables/
Kendall/Richmond
6.6%
$21.56
Opa Locka/Hialeah 5.5% $17.25
South Dade 5.6% $15.05
West Dade 5.9% $18.02
Miami/Miami Beach 9.5% $23.11
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Regular surveys of the Key Biscayne retail market are not available. However,
research completed in preparing the Village’s Master Plan reported the following
inventory of commercial retail space in the Village.
Key Biscayne Commercial Retail Space
Property Address Year Built Square Feet
Stefanos 12-24 Crandon Boulevard 1950 14,500
Harbor Plaza 93 Harbor Drive 1958 18,700
Oasis 21 Harbor Drive 1965 2,000
Citicorp 84 Crandon Boulevard 1980 3,600
Arcade 180 Crandon Boulevard 1991 14,500
Key Colony Plaza 200 Crandon Boulevard 2007 12,200
Square 260 Crandon Boulevard 1981 32,000
Galleria 328 Crandon Boulevard 1990 60,000
Suntrust 520 Crandon Boulevard 2001 13,200
Winn Dixie 604 Crandon Boulevard 1951 51,500
CVS 700 Crandon Boulevard 1965 23,900
Esplanade 901 Crandon Boulevard 1980 48,500
Hardware 800 Crandon Boulevard 2002 12,800
307,400
Recent vacancy among the Village’s retail/commercial space is estimated to
average approximately 10 percent. However, most of this vacant space is in older
or functionally obsolete facilities such as the property being appraised or the
Esplanade Mall. With a current population of approximately 12,650, the Village
inventory of commercial retail space equates to 24.3 square feet per person. This
is consistent with a countywide ratio of approximately 24.0 square feet of retail
space per person and would suggest that supply and demand for retail space on
Key Biscayne are in relative balance. Future development of commercial retail
space in the Village is expected to be limited to replacement or redevelopment of
existing older facilities, such as that being planned for the appraised property.
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AERIAL VIEW OF THE APPRAISED PROPERTY
Source: Google Earth Aerial
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CRANDON BOULEVARD ELEVATION
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CRANDON BOULEVARD ELEVATION
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ADDITIONAL APPRAISED PROPERTY PHOTOS
Looking south along Crandon
Boulevard frontage
Rear elevation of 12 Crandon
Boulevard
Rear elevation of 22-24 Crandon
Boulevard
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IV. DESCRIPTION OF THE PROPERTY
A. Ownership and Recent History of the Property
According to the Miami-Dade County Property Appraiser’s records, the appraised
property is currently owned by Key Biscayne Gateway Partners, Ltd with a
mailing address of 30 West Mashta Drive, Key Biscayne, Florida. Gateway
Partners acquired the southerly and westerly portions of the property in August
2011 from Samoro, LLC (OR Book 27800, Page 3979) for an indicated
consideration of $4,750,000. Samoro in turn had purchased this portion of the
property for an indicated $9,250,000 in February 2007.
The northeasterly portion of the appraised property was acquired by Gateway
Partners from Kayjo, Inc. in June 2012 (OR Book 28150, Page 2747) in
consideration of a 22.55 percent limited partnership interest in Key Biscayne
Gateway Partners Ltd. The indicated value of this consideration on the recorded
deed was $1,084,300.
Current ownership recently listed the appraised property as being available for
ground lease either for the entire property or a portion. These listings suggest the
property as being most suitable for the site for a national pharmacy and a branch
bank with drive thru. A retail pad on approximately one half of the site was being
offered at a ground rent of $290,000 annually triple net. In March 2013
ownership submitted an application to the Village of Key Biscayne for site plan
approval of a 10,000 square foot pharmacy and a liquor store on the north portion
of the appraised property. This site plan indicates the south portion of the
property as being a future building area.
B. Location and Access
The appraised property is located on the west side of Crandon Boulevard at the
entrance to the incorporated area of Key Biscayne. Crandon Boulevard is a four
lane extension of the Rickenbacker Causeway, which serves as the sole access
route connecting Key Biscayne to mainland Miami. The six mile long
Rickenbacker Causeway provides a scenic and pastoral entryway to the Village as
it passes through public park and recreation areas. At its mainland entrance, the
Causeway interchanges with Brickell Avenue, U.S. Highway 1, and I-95. These
thoroughfares provide access to essentially all areas of metropolitan Miami-Dade
County.
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SITE SURVEY
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Direct vehicle access to the appraised property is available to southbound traffic
on Crandon Boulevard from driveways on the west side. A landscaped center
median requires northbound traffic on Crandon Boulevard to circle a rotary in
Crandon Park and return to Key Biscayne in the southbound lanes before entering
the appraised property.
Secondary vehicular access to the appraised property is also currently available
via two connecting driveways with the shopping center adjacent to the west.
These driveways provide indirect access through the shopping center to or from
Harbor Drive. However, as discussed further below, we understand that a recent
site plan application for the property incorporating these driveways has been
rejected by the Village on the basis that a site plan incorporating these driveways
must include both affected properties.
C. Description of the Site
A site survey and proposed site plan for the appraised property are presented
herein. As indicated the trapezoidal shaped off-corner site has approximately 263
feet of frontage along the west side of Crandon Boulevard and a depth of 250 feet.
The total area of the site is reported by the county property appraiser to be 62,075
square feet. However, the site plan prepared by Bohler Engineering and dated
January 15, 2013 indicates the total site area to be 58,845 square feet. And a
sketch of survey by J.F. Lopez and Associates dated September 8, 2012 indicates
a total site area of 58,878 square feet. We have assumed a total site area of
58,850 square feet for the purposes of this appraisal.
The site is generally level and below the fronting street grade. It is likely that new
development on the site will require an elevated building pad. Utilities available
to the property include electrical service, telephone service and public water and
sewer service.
The appraised property is located within Flood Zone AE, which consists of areas
determined to be subject to 100 year flood with base elevations of 9 feet. This is
according to the Federal Emergency Management Flood Insurance Program map
number 12086C0483L, dated September 11, 2009. The immediate area does not
appear to have any unusual soil or subsoil conditions, although test borings would
be required to confirm this.
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PROPOSED SITE PLAN
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D. Description of the Improvements
Based on data available to us, the appraised property is currently improved with
two single story CBS retail buildings totaling 14,651 square feet. The northerly
portion of the site contains a 3,745 square foot sit down restaurant originally
constructed in 1951. While this building has undergone numerous additions and
alterations over the years, recent features include a barrel tile roof, take out
window, 96 seat dining area, kitchen and work areas and street front patio. The
building has been operated under many restaurant venues in the past and is
currently vacant in anticipation of redeveloping the site.
The southerly portion of the site is improved with a 10,816 square foot retail
building originally constructed in 1950 and operated as a restaurant/lounge for
many years. Most recently this building has been configured to accommodate
multiple tenants including a real estate office, liquor store and sandwich shop.
This property is also currently vacant in anticipation of redeveloping the site.
Overall condition of the building improvements on the appraised property is
considered to be poor and reflective of their age of over 60 years.
Site improvements at the appraised property primarily comprise asphalt paved
driveways and parking areas currently marked to accommodate 48 vehicles.
Other improvements include perimeter fencing sections and landscape islands on
the street frontage of the buildings.
E. Proposed Development Plan
Ownership has recently been marketing the appraised property as a prime
development site located at the entry to Key Biscayne. Marketing materials
suggest the site as being well suited for a national pharmacy, branch bank with
drive thru and a casual restaurant. In March 2013 an application was submitted to
the Village of Key Biscayne for approval of a site plan (see attached proposed site
plan) with a conditional use indicating a Walgreens pharmacy and liquor store on
the north portion of the property and a future building area on the south portion.
This site plan illustrates a pharmacy building comprising a 10,000 square foot
pharmacy store, a 2,628 square foot mezzanine and a 1,930 square foot liquor
store. Paved parking areas marked for 57 vehicles are located to the south and
west of the store.
The site plan application also includes a cross access agreement providing for two
connecting driveways to the shopping center adjacent to the appraised property on
the west. These driveways provide indirect access through the shopping center to
Harbor Drive. Although these driveways have reportedly been in place for some
time, we understand the site plan application as submitted has recently been
rejected by the Village on the basis that a site plan incorporating these driveways
must include both affected properties. In addition, the Village has indicated that
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ZONING MAP
APPRAISED PROPERTY
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the proposed Walgreens building size exceeds the zoning limit of 10,000 square
feet and requires modification. The resolution of these items is unknown at this
point in time.
F. Zoning and Planning
The appraised property site is zoned C-1, Low Intensity Commercial District by
the Village of Key Biscayne. The intent of this district is to provide for low
intensity uses providing goods and services to residents of the Village. Permitted
uses include bars, individual offices and retail stores of up to 10,000 square feet,
foodstores, personal services, and restaurants. General provisions of the C-1
district include:
Maximum Building Height: 3 stories and 35 feet
Minimum Setback:
Front 10 feet
Side 0-5 feet
Rear 0 typically
Maximum Lot Coverage 35 percent
Maximum Floor Area Ratio: .2-.55
Offstreet Parking: Offices – one space per 300 S.F.
Restaurant – one space per 60 S.F.
Retail – one space per 250 S.F.
Zoning of the appraised property is consistent with its designation of
“Commercial” on the Village of Key Biscayne Future Land Use Map.
G. Assessment and Real Estate Taxes
According to the Miami-Dade County Property Appraiser’s records, the appraised
property is assessed under three folio numbers. The 2012 assessment for the
property is summarized below:
Folio Nos. 24-4232-002-0020, 0021, and 0030
Land Assessment: $5,529,250
Building Assessment: $620,705
Total Assessment: $6,149,955
Based upon prevailing millage rates, the 2012 real estate taxes for the appraised
property were $106,532 prior to discount for early payment. The total assessed
value of $6,149,532 in 2012 reflects a 35 percent reduction from a total
assessment of $9,520,345 in 2011.
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V. ANALYSIS OF DATA AND CONCLUSION
A. Highest and Best Use
Highest and best use is a fundamental premise of real estate valuation and may be
briefly defined as:
The reasonably probable and legal use of vacant land or improved
property, which is physically possible, appropriately supported,
financially feasible, and results in the highest value. The four
criteria the highest and best use must meet are legal
permissibility, physical possibility, financial feasibility, and
maximum profitability.
The appraised property is zoned to permit a wide range of commercial uses and
the historical use of the existing improvements for retail stores has been a
permitted use. Commercial retail uses are well suited to this location with its
direct frontage on Crandon Boulevard at the entryway to Key Biscayne. This use
is also compatible with surrounding land uses and consistent with the Village
future land use plan.
While the appraised property is substantially improved with two existing
commercial buildings, these improvements were originally constructed in 1950
(over 60 years old). They are now the oldest commercial structures on Key
Biscayne. Numerous other commercial properties of similar vintage on the island
were redeveloped some time ago. It is evident the existing buildings on the
appraised property are subject to significant physical and functional obsolescence,
as reflected in their recent weak rental and occupancy experience.
The market for retail space in Key Biscayne appears to be in balance (see earlier
discussion). Now effectively built out, future commercial development on Key
Biscayne will be limited to redevelopment and replacement of existing older
facilities, such as those on the appraised property.
We conclude the most economically feasible and maximally productive use of the
appraised property is for redevelopment with a new commercial use such as the
retail store pads being marketed by current ownership.
B. Methodology
Usual appraisal procedure involves an estimate of value by three separate
approaches: the cost approach, the sales comparison approach, and the income
capitalization approach. From the indications of these analyses and the weight
accorded to each, an opinion of value is reached based on judgment within the
outline of the appraisal process.
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As discussed above, highest and best use of the appraised property is concluded to
be redevelopment with a new commercial use. In this instance the existing
improvements on the property have reached the end of their economic life and the
underlying land is the sole contributor to value. The primary method of valuing
land is the sales comparison approach. As a supplement to this methodology, we
have also considered an income capitalization analysis based on a potential
ground lease of the property.
C. Sales Comparison Approach
1. Market Data
Following is an individual description of eight sales of land parcels considered
relevant to the valuation of the appraised property. While some of these
properties included building improvements, these improvements had typically
reached the end of their economic lives and were slated for demolition
(similar to the appraised property). The sale write-ups are followed by a
location map, summary and our analysis.
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Land Sale No.: 1
Location: 1833-59 S.W. 3 Avenue, Miami
Date of Sale: November 13, 2012
Grantor: Starlight Export Finance
Grantee: LeVenir Investments
OR Book and Page: 28366/4990
Folio No.: 01-4138-001-2360, 2370, 2380, 2390, 2400
Legal Description: Lots 4 to 8, Block 18, Holleman Park, as recorded
in Plat Book 8, Page 33 of the Public Records of
Miami-Dade County
Zoning: T6-8O, Urban Core
Land Use Designation: Mixed Use
Site Size: 37,500 square feet
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Street Frontage: S.W. 3 Avenue
Improvements at Sale: Cleared and fenced vacant site
Sale Price and Terms: $4,500,000 – Cash to the seller
Price Per S.F. of Land: $120.00
Comments: This midblock commercial site had been listed for
sale at an asking price of $5,000,000. Zoning of the
property permits both a range of commercial uses as
well as multifamily residential development. Both
of these uses are sited in the immediate
neighborhood of the sale property. Prior ownership
had obtained approvals for development of up to
128 residential units on the site. A center median in
S.W. 3 Avenue restricts direct vehicular access to
northbound traffic.
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Land Sale No.: 2
Location: S.W. 7 and S.W. 8 Streets east of S.W. 12 Avenue,
Miami
Date of Sale: December 20, 2012
Grantor: Calle Ocho LLC
Grantee: Mother Queen Inc.
OR Book and Page: 28420/3382
Folio Nos.: 01-4102-008-0100 and 13 others
Legal Description: Lots 3 to 17, Block 30, Emory Carter
Resubdivision, as recorded in Plat Book 6, Page 40
of the Public Records of Miami-Dade County
Zoning: T6-8O, Urban Core
Land Use Designation: Mixed Use
Site Size: 95,396 square feet
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Street Frontage: S.W. 8 and S.W. 7 Street and S.W. 12 Avenue
Improvements at Sale: Cleared and fenced vacant site
Sale Price and Terms: $12,120,000 – Cash to the seller
Price Per S.F. of Land: $127.05
Comments: This double corner commercial site fronts on both
S.W. 7 and S.W. 8 Streets immediately west of the
Miami CBD. At the time of this sale a 25 year
ground lease of the property to CVS had
commenced as the site of a 14,000 square foot
pharmacy store. The grantor on the sale had listed
the property as a prime net ground lease investment
with an asking price of $12,850,000. The grantee
was a foreign buyer looking for a high quality real
estate investment.
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Land Sale No.: 3
Location: 10690 W. Flagler Street, Sweetwater
Date of Sale: March 23, 2012
Grantor: Alban LLC
Grantee: JP Morgan Chase Bank
OR Book and Page: 28082/2765
Folio No.: 25-4005-001-0450
Legal Description: Portion of Tract 6, Block 3 of Richardson-Kellett
Land Co., as recorded in Plat Book 1, Page 19 of
the Public Records of Miami-Dade County
Zoning: C-1, Commercial
Land Designation: Commercial
Site Size: 23,761 square feet
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Street Frontage: Flagler Street and S.W. 107 Avenue
Improvements at Sale: A 2,000 square foot service station constructed in
1980
Sale Price and Terms: $3,200,000 – Cash to the seller
Price Per S.F. of Land: $134.67
Comments: This commercial corner site at a signaled
intersection is an outparcel of a neighborhood
shopping center. At the time of sale the property
was improved with a service station. The grantee
purchased the property intending to raze the
improvements and construct a branch bank facility.
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Land Sale No.: 4
Location: 12795 S. Dixie Highway, Pinecrest
Date of Sale: April 15, 2011
Grantor: Ocean Bank
Grantee: JP Morgan Chase
OR Book and Page: 27694/2720
Folio No.: 20-5015-000-0330
Legal Description: Metes and bounds description in NW¼ of Section
15, Township 55 South, Range 40 East in Miami-
Dade County
Zoning: BU-1A, Business
Land Use Designation: Commercial
Site Size: 25,265 square feet
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Street Frontage: S. Dixie Highway
Improvements at Sale: Service station of 3,700 square feet constructed in
1982
Sale Price and Terms: $3,550,000 – Cash to the seller
Price Per S.F. of Land: $140.51
Comments: This corner outparcel on S. Dixie Highway was the
site of a former service station. The grantee
purchased the site to redevelop with a branch bank
for their own use. The grantor had purchased the
site in 2009 for $3,100,000 also intending to
redevelop the property for their own use.
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Land Sale No. 5
Location: 2524 Le Jeune Road, Coral Gables
Date of Sale: December 11, 2012
Grantor: ARC Gables LLC
Grantee: Coral Gables Miracle Mile Hotel
O.R. Book and Page: 28404/4780
Folio Nos.: 03-4117-008-1111, 1120; 1135; and 1140
Legal Description: Lots 25-32, Block 6, CORAL GABLES
BILTMORE, as recorded in Plat Book 20, Page 28
of the Public Records of Miami-Dade County.
Zoning: C, Commercial
Land Use Designation: Commercial Low Rise Intensity
Site Size: 28,164 square feet
Street Frontage: Lejeune Road and Valencia Avenue
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Improvements at Sale: Apartment building of 7,546 square feet built in
1949
Sale Price and Terms: $4,000,000 - Cash to the seller
Price Per Square Foot of Land: $142.03
Comments: This corner commercial site on Le Jeune Road in
Coral Gables sits at a signaled intersection. The
grantor on this sale had acquired the property from
a foreclosing lender in June 2011 for $2,946,000
and subsequently listed it for lease as a prospective
branch bank site. Eight apartment units constructed
in 1949 on a portion of the site had no contributory
value.
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Land Sale No.: 6
Location: 12290 Biscayne Boulevard, North Miami
Date of Sale: December 31, 2012
Grantor: MTV 123, LLC
Grantee: Earth Wind, LLC
OR Book and Page: 28432/1570
Folio No.: 06-2228-001-0550
Legal Description: Lots 1, 2, 24 and 25, Block 339, Miami Shores Unit
1, as recorded in Plat Book 17, Page 46 of the
Public Records of Miami-Dade County
Zoning: C-2B, Business
Land Use Designation: Business and Office
Site Size: 29,089 square feet
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Street Frontage: Biscayne Boulevard and N.E. 123 Street
Improvements at Sale: Newly constructed branch bank of 3,683 square feet
Sale Price and Terms: $4,650,000 – Cash to the seller
Price Per S.F. of Land: $159.90
Comments: This corner commercial site was purchased by the
grantor in December 2011 for redevelopment with a
branch bank. After signing a 15 year ground lease,
Bank United reportedly spent over $1 million
improving the site for their use with rent
commencing in July 2012. The grantee on this sale
purchased the improved property as a triple net
ground lease investment in December 2012 for
$4,650,000.
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Land Sale No.: 7
Location: Northwest corner of Coral Way and S.W. 2 Avenue,
Miami
Date of Sale: August 5, 2011
Grantor: Brickell Village Corporate Center
Grantee: JP Morgan Chase Bank
OR Book and Page: 27782/3465
Folio Nos.: 01-4138-051-0490; 0610; and 0620
Legal Description: Lots 2 and 21 less the east 10 feet, Block 91S,
Miami Heights, as recorded in Plat Book 5, Page 29
of the public records of Miami-Dade County.
Zoning: T6-24 Urban Core
Land Use Designation: Urban Mixed Use
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Site Size: 30,053 square feet
Street Frontage: Coral Way and S.W. 2 Avenue
Improvements at Sale: None, vacant land
Sale Price and Terms: $4,999,000 – Cash to the seller
Price Per S.F. of Land: $166.34
Comments: This corner site on Coral Way is located at a
signaled intersection. Opposite corners of this
intersection are improved with a drug store and a
grocery store. The buyer on this sale has been
acquiring a number of sites in South Florida for
development with branch bank facilities.
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Land Sale No.: 8
Location: 801 S.W. 27 Avenue, Miami
Date of Sale: June 19, 2012
Grantor: Habana Heights LLC
Grantee: Chandler Chase LH
OR Book and Page: 28160/344
Folio Nos.: 01-4110-070-0010
Legal Description: Tract B, Humble Trail Addition, as recorded in Plat
Book 84, Page 77 of the Public Records of Miami-
Dade County
Zoning: T6-8O, Urban Core
Land Use Designation: Mixed Use
Site Size: 30,928 square feet
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Street Frontage: S.W. 8 Street and S.W. 27 Avenue
Improvements at Sale: Recently constructed branch bank of 4,200 square
feet
Sale Price and Terms: $5,960,000 – Cash to the seller
Price Per S.F. of Land: $192.71
Comments: This corner commercial site had been a service
station prior to its recent redevelopment with a
branch bank. This sale is the purchase of a 20 year
ground lease between Chase Bank and the grantor.
Rent under this lease commenced in March, 2012.
The location is at a signaled intersection of two
heavily travelled commercial arterials in Miami.
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LAND SALES LOCATION MAP
APPRAISED PROPERTY
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SUMMARY OF LAND SALES
Sale
No.
Location
Sale Date
Site Size S.F.
Primary Street
Frontage
Zoning
Use Prior to
Sale
Proposed Use
Sale Price
Price/S.F.
Land
1 1833 S.W. 3 Avenue,
Miami
November 2012 37,500 S.W. 3 Avenue T6-8O Vacant N/A $4,500,000 $120.00
2 S.W. 8 Street and S.W. 12
Avenue, Miami
December 2012 95,396 S.W. 8 Street T6-8O Vacant Drug store $12,120,000 $127.05
3 10690 W. Flagler Street,
Sweetwater
March 2012 23,761 Flagler Street C-1 Service
Station
Branch bank $3,200,000 $134.67
4 12795 S. Dixie Highway,
Pinecrest
April 2011 25,265 S. Dixie
Highway
BU-1A Service
Station
Branch bank $3,550,000 $140.51
5 2524 Lejeune Road, Coral
Gables
December 2012 28,164 Lejeune Road C Apartments Branch bank $4,000,000 $142.03
6 12290 Biscayne Boulevard,
North Miami
December 2012 29,089 Biscayne
Boulevard
C-2B Restaurant Branch bank $4,650,000 $159.90
7 Northwest corner of Coral
Way and S.W. 2 Avenue,
Miami
August 2011 30,053 Coral Way T6-24 Vacant Branch bank $4,999,000 $166.34
8 801 S.W. 27 Avenue,
Miami
June 2012 30,928 S.W. 8 Street/
S.W. 27 Avenue
T6-8O Service
station
Branch bank $5,960,000 $192.71
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2. Analysis of Sales and Conclusion
Prior to any necessary adjustments, the eight sales considered reflect a price
range of $120 to $193 per square foot of land. Parcel sizes range from 23,761
to 95,396 square feet and compare to the appraised property’s 58,850 square
feet. Each of the sales was zoned and land use planned to permit commercial
uses similar to those proposed for the appraised property. Each of the sale
properties fronts on a commercial thoroughfare serving heavily developed
areas of Miami-Dade County. Five of these properties have subsequently
been redeveloped with new commercial uses, including branch banks and a
drugstore.
At the time of sale five of these properties contained building improvements
(three service stations, a restaurant and an apartment). However, these
improvements had typically reached the end of their economic lives and were
all slated for demolition by the buyers. Each of these sales is considered to be
an indication of land value.
The eight sales considered occurred between April 2011 and December 2012
with six closing in 2012. While most real estate prices throughout the county
declined significantly after peaking in 2007, prices tended to stabilize by late
2010 and early 2011. Only during the past year have prices evidenced some
upturn as local economic conditions show gradual improvement. As a result
some upward adjustment for date of sale is warranted to the oldest sales
considered here, particularly Sales 4 and 7 in 2011.
Factors influencing these land sale prices include the size of the site and
contemplated building footprint; the surrounding neighborhood demographics;
the commercial exposure and access of the site; and its development status.
Logically at the lower end of the sale price range (Sale 1 @ $120/S.F.) is a
midblock site in a neighborhood with modest demographic characteristics and
no development or leasing commitment in place. Conversely, at the upper end
of the price range (Sales 7 and 8 @ $166-$192/S.F.) are two properties located
in neighborhoods with good demographic characteristics, at signaled
intersections of heavily traveled thoroughfares, and with development or
leasing commitments in place.
Also toward the upper end of the sale price range (Sale 6 @ $160/S.F.) is a
signaled corner site at the intersection of two arterial streets in Miami. Both
Sale Properties 6 and 8 were of recently commenced long term ground leases
under buildings constructed by national credit tenants. These sales are
effectively of low risk investments with no remaining development or leasing
exposure.
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In comparing the appraised property to the eight land sales we have
considered the above average demographics of Key Biscayne; the site’s
locational characteristics (at entrance to Key Biscayne with circuitous access);
as well as its current development and leasing status (a site plan application
and a ground lease agreement for the north portion of the site). Overall we
believe in its current status the appraised property would rate as superior to
those sales in the lower half of the sale price range and more comparable to
those sales in the upper half of the price range.
In addition to this sales data we are aware of the August 2011 acquisition of
the southwesterly portion of the appraised property. This 45,000 + square
foot L-shaped site was purchased by current ownership in a short sale for
$4,750,000. Factors influencing this sale were a pending foreclosure action
against the seller and a parking easement encumbering a portion of the rear of
the site.
We are also aware of the recent sales of 38 Crandon Boulevard (a service
station) and 21 Harbor Drive (a stand up food bar), both located adjacent to
the south of the appraised property. Both of these properties include
improvements which have housed successful businesses for many years. The
sale prices of both of these properties are believed to have been influenced by
the improvements and businesses on each.
Reflecting all of the considerations discussed above, we conclude with a
market value for the appraised property by sales comparison based on $165
per square foot of land, or:
58,850 square feet @ $165/S.F. = $9,710,250
Rounded $9,750,000
D. Income Capitalization Approach
Ownership of the appraised property has recently been marketing it as a retail site
(s) available for ground lease. And in March 2013 a site plan application was
submitted to the Village of Key Biscayne indicating a proposed Walgreens
pharmacy on the north portion of the appraised property and a future building area
on the south portion of the property. Ownership of the appraised property has
indicated to us that they have an executed long term ground lease agreement with
Walgreens for a 10,000 square foot pharmacy and an attached liquor store as
illustrated on the proposed site plan submitted to the Village. Specific terms and
provisions of this lease were not made available to us, other than ownership
saying it is a 60 year triple net ground lease with an initial annual rent of
$530,000 and 10 percent increases every ten years.
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Net leases of retail pads to credit tenants have become increasingly popular real
estate investments. Common retail pad tenants include drugstores, branch banks,
fast food restaurants, and auto parts stores. Outlined below is an income
capitalization approach applied to the appraised property as potential net leased
retail pad (s).
1. Potential Ground Rent
Summarized on the following pages are eight ground leases of retail sites
considered to have relevance to the appraised property. Each of these leases
was to a national credit tenant on a triple net basis with an initial term of at
least 15 years. Lessees in this instance were either a bank or a drug store.
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Ground Lease No. 1
Location: 10760 Biscayne Boulevard, Miami-
Dade County
Lessee: Chase Bank
Intended Use: 3,500 S.F. branch bank and drive
thru
Lease Commencement: September 2010
Initial Term: 15 years
Options: Four 5 year
Increases: 17% in year 6; 12% every five years
Current Annual Rent: $235,000 triple net
Site Size: 38,295 square feet
Street Frontage: Biscayne Boulevard and N.E. 108
Street
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Comments: This corner commercial site is an
outparcel of a K-Mart shopping
center on Biscayne Boulevard. N.E.
108 Street, however, provides local
neighborhood access only.
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Ground Lease No. 2
Location: 12290 Biscayne Boulevard, North
Miami
Lessee: Bank United
Intended Use: 3,683 S.F. branch bank with drive
thru
Lease Commencement: July 2012
Initial Term: 15 years
Options: Four 5 year
Increases: 10% every five years
Current Annual Rent: $260,000 triple net
Site Size: 29,089 square feet
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Street Frontage: Biscayne Boulevard and N.E. 123
Street
Comments: This corner commercial site is
situated at a signaled intersection on
Biscayne Boulevard.
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Ground Lease No. 3
Location: 801 S.W. 27 Avenue, Miami
Lessee: Chase Bank
Intended Use: 4,200 S.F. branch bank and drive
thru
Lease Commencement: March 2012
Initial Term: 20 years
Options: Four 5 year
Increases: N/A
Current Annual Rent: $295,000 triple net
Site Size: 30,928 square feet
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Street Frontage: S.W. 8 Street and S.W. 27 Avenue
Comments: This commercial corner site is
strategically located at the signaled
intersection of S.W. 8 Street and
S.W. 27 Avenue.
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Ground Lease No. 4
Location: 11201 S.W. 40 Street, Miami-Dade
County
Lessee: TD Bank
Intended Use: 3,960 S.F. branch bank and drive
thru
Lease Commencement: June 2011
Initial Term: 20 years
Options: Four 5 year
Increases: 10% every 5 years
Current Annual Rent: $300,000 triple net
Site Size: 25,541 square feet
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Street Frontage: S.W. 40 Street and S.W. 112 Avenue
Comments: This smaller corner site is an
outparcel of a 300,000 square foot
shopping center. The small size of
the site is mitigated by cross parking
and access easements.
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Ground Lease No. 5
Location: 7400 S.W. 40 Street (Bird Road),
Miami-Dade County
Lessee: TD Bank
Intended Use: 2,964 S.F. branch bank and drive
thru
Lease Commencement: August, 2012
Initial Term: 20 years
Options: Four 5 year
Increases: 12% every 5 years
Current Annual Rent: $300,000 triple net
Site Size: 56,432 square feet
Street Frontage: Bird Road and S.W. 74 Avenue
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Comments: This large corner commercial site
fronts directly on Bird Road, just
east of its interchange with the
Palmetto Expressway.
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Ground Lease No. 6
Location: 1695 Alton Road, Miami Beach
Lessee: Bank United
Intended Use: 4,900 S.F. branch bank and drive
thru
Lease Commencement: Early 2011
Initial Term: 10 years
Options: Two 5 year
Increases: 3% annually
Current Annual Rent: $339,000 triple net
Site Size: 15,000 square feet
Street Frontage: Alton Road and 17 Street
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Comments: This corner site on Miami Beach is
located at a signaled intersection on
Alton Road. Bank United reportedly
spent over $2.5 million in improving
the property. The property had been
marketed as a prime triple net ground
lease investment and was purchased
by a private investor from South
America.
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Ground Lease No. 7
Location: 16795 S. Dixie Highway, Palmetto
Bay
Lessee: Walgreens
Intended Use: 14,056 S.F. pharmacy and drive thru
Lease Commencement: June 2007
Initial Term: 25 years
Options: Ten 5 year
Increases: 10% in 25th year and every 10 years
after
Current Annual Rent: $467,000 triple net
Site Size: 50,191 square feet
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Street Frontage: S. Dixie Highway and S.W. 168
Street
Comments: This corner commercial site is
located at a signaled intersection on
S. Dixie Highway.
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Ground Lease No. 8
Location: S.W. 7 and S.W. 8 Streets east of
S.W. 12 Avenue, Miami
Lessee: CVS
Intended Use: 14,028 S.F. pharmacy and drive thru
Lease Commencement: July 2012
Initial Term: 25 years
Options: Five 5 year
Increases: N/A
Current Annual Rent: $720,000 triple net
Site Size: 95,396 square feet
Street Frontage: S.W. 8 and S.W. 7 Street and S.W.
12 Avenue
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Comments: This double corner site fronts on
both S.W. 7 and S.W. 8 Streets
immediately west of the downtown
Miami CBD.
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RETAIL GROUND LEASE LOCATION MAP
APPRAISED PROPERTY
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SUMMARY OF RETAIL PAD GROUND LEASES
No.
Location
Lessee Initial
Term
Lease
Commencement
Site Size
(S.F.)
Building
Footprint (S.F.)
At Signaled
Intersection
Commercial Exposure
Current
Annual Rent
1 10760 Biscayne Boulevard,
Miami-Dade County
Chase Bank 15 years September 2010 38,295 3,500 Yes Biscayne Boulevard $235,000
NNN
2 12290 Biscayne Boulevard,
North Miami
Bank United 15 years July 2012 29,089 3,683 Yes Biscayne Boulevard/N.W.
123 Street
$260,000
NNN
3 801 S.W. 27 Avenue,
Miami
Chase Bank 20 years March 2012 30,928 4,200 Yes S.W. 8 Street/S.W. 27
Avenue
$295,000
NNN
4 11201 S.W. 40 Street,
Miami-Dade County
TD Bank 20 years June 2011 25,541 3,960 Yes S.W. 40 Street $300,000
NNN
5 7400 S.W. 40 Street,
Miami-Dade County
TD Bank 20 years August 2012 56,432 2,964 No S.W. 40 Street $300,000
NNN
6 1695 Alton Road, Miami
Beach
Bank United 10 years Early 2011 15,000 4,900 Yes Alton Road/ 17 Street $339,000
NNN
7 16795 S. Dixie Highway,
Palmetto Bay
Walgreen’s 25 years June 2007 50,191 14,056 Yes S. Dixie Highway $467,000
NNN
8 S.W. 7/8 Streets/S.W. 12
Avenue, Miami
CVS 25 years July 2012 95,396 14,028 Yes S.W. 7 and 8 Streets/
S.W. 12 Avenue
$720,000
NNN
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The eight ground leases considered reflect a broad range of rents from
$230,000 to $720,000 triple net annually for sites ranging from 15,000 to
95,396 square feet in size. Factors influencing these rents include the
neighborhood demographics, the commercial exposure and access of the site
and the size of the contemplated building footprint. At the low end of these
rentals (Rent 1) is a site in a neighborhood with modest demographics and
access and exposure effectively limited to one fronting street. At the upper
end of these rentals (Rentals 6 to 8) are three corner sites at signaled
intersections with very good access and exposure.
The rental data falls into two groupings related primarily to building footprint
size (as opposed to actual site size). Rentals 1 to 6 ($235,000 to $339,000) are
ground leases for building footprints of 3,000-4,000 square feet (branch
banks). Rentals 7 and 8 ($467,000 to $720,000) are ground leases for
footprints of 14,000 + square feet (drug stores). Assuming the appraised
property to be under net ground leases to national credit tenants we conclude
this rental data is consistent with the following market rent for the property as
two potential building pads.
Building Footprint Annual Net Rent
1) 4,000 S.F. or less $275,000-$325,000, say $300,000
2) 10,000 S.F. or more $500,000-$550,000, say $530,000 as leased
On this basis potential annual ground rent for the appraised property is
estimated to total $830,000.
2. Vacancy and Landlord Expenses
Typical retail ground leases are written on a triple net basis and for initial
terms of at least 15 years. As a result the only diminution in net rental income
to the landlord would be due to future vacancy. For net ground lease
properties this potential diminution in net income is typically addressed in the
selection of a capitalization rate applied to the current rental income. Our
assessment of the capitalization rate applicable to the appraised property in
this instance is discussed below.
3. Capitalization Rate and Value Indication
Single tenant net retail leases have become increasingly popular among real
estate investors attracted by the security and stability of their income streams.
As reported by Cassidy Turley, this increasing popularity amidst a limited
supply has acted to drive down single tenant retail net lease cap rates to an
average 7.0 percent by the end of 2012 from over 8.5 two years earlier. This
downward trend is consistent with the following results of RealtyRates.com
First Quarter 2013Investor Survey of net land lease capitalization rates.
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Land Lease Property Type Average Cap Rate
Office 6.60%
Retail 6.20%
Restaurant 7.86%
All Properties 7.10%
Making up these cap rate averages are a variety of retail tenant types ranging
from trophy properties leased to highest credit tenants with cap rates below six
percent to weaker properties leased to lesser-credit tenants in secondary
locations with cap rates above eight percent. In their 1st Quarter 2013 Net
Lease Market Report, The Boulder Group reported the following median cap
rates for national net lease retail tenants in properties built between 2010 and
2012.
Median Cap Rate In Properties Built 2010-2012
Net Lease Retail Tenant Median Cap Rate
Walgreens 5.8%
CVS 6.0%
Rite Aid 8.0%
McDonalds 4.3%
Burger King 6.5%
Fed Ex 6.8%
Verizon 6.4%
Chase Bank 5.0%
Bank of America 5.1%
The reported cap rates of 5.8 to 6.0 percent on Walgreens and CVS net leases
is corroborated by the December 2012 sale of a recently commenced net
ground lease to CVS (Land Sale 2 in this report) for a large site near Miami’s
central business district. This sale was based on a capitalization rate of 5.94
percent.
Importantly, all of the rates above apply to recently commenced net ground
leases to national credit tenants with 15 + year initial terms and escalation
provisions. In the case of the appraised property, a net ground lease
agreement has reportedly been executed with Walgreens for the north portion
of the site (lease provisions other than initial rent and escalations were not
disclosed to us), with the remainder of the site being available for lease. The
actual tenant credit and lease terms on the available site can only be projected
at this time. In addition it is likely commencement of ground rent under
leases on the appraised property is (will be) subject to certain contingencies.
The nature of these contingencies and their impact on actual commencement
of ground rental payments is unknown at this time. As a result we believe
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some premium to the capitalization rate is necessary in this instance for the
uncertainties associated with any projection of ground rent for the appraised
property. In this instance we conclude an average capitalization rate of 6.5
percent is appropriate for the appraised property under its current leasing
status.
Applying this capitalization to the estimated total annual rent for the property
of $830,000 would result in a value indication for the appraised property
assuming all ground leases had been executed and rental payments had
commenced. However, prior to that point the landlord would incur the time,
costs and entrepreneurial effort necessary to secure an additional tenant and
meet whatever contingencies (e.g. zoning, site and building plan approvals;
easements; releases; site clearing; etc.) may be stipulated under the leases. To
provide for this time, cost and entrepreneurial effort we have applied a 20
percent discount factor in developing the following value indication by the
income capitalization approach.
Annual Net Ground Rent at Commencement: $ 830,000
Capitalization Rate: ÷ .065
Value Indication As Ground Leased: $12,769,231
Less Discount Factor Prior to Commencement @20%: $ 2,553,846
Value Indication by Income Capitalization
in Current Status: $10,215,385
Rounded $10,250,000
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E. Reconciliation and Final Value Conclusion
The two approaches to value utilized in this appraisal indicated the values below
for the appraised property:
Sales Comparison Approach: $ 9,750,000
Income Capitalization Approach: $10,250,000
The sales comparison approach considered eight sales of commercial sites which
offered features similar to the appraised property. The sales data provided a
means to develop a value range which would bracket the value of the appraised
property.
As a supplemental methodology, the income capitalization approach considered a
ground lease of the appraised property. While the assumptions made as to net
income and capitalization rate are considered reasonable, they are by necessity
conjectural and without full knowledge of actual leases which may encumber the
property.
Giving consideration to the both approaches to value in this instance, market
value of the appraised property is concluded to be:
$10,000,000
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VI. ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report has been made with the following general assumptions:
1. No responsibility is assumed for the legal description or for matters including
legal or title considerations. Title to the property is assumed to be good and
marketable unless otherwise stated.
2. The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
3. Responsible ownership and competent property management are assumed.
4. The information furnished by others is believed to be reliable and, whenever
possible, it was cross checked with another source. However, no warranty is
given for its accuracy.
5. All engineering is assumed to be correct. The plot plans, plats, maps, and
illustrative material in this report are included only to assist the reader in
visualizing the property.
6. It is assumed that there are no hidden or unapparent conditions of the property,
subsoil, or structures that render it more or less valuable. No responsibility is
assumed for such conditions or for arranging for engineering studies that may be
required to discover them.
7. It is assumed that there is full compliance with all applicable federal, state, and
local environmental regulations and laws unless noncompliance is stated, defined,
and considered in the appraisal report.
8. It is assumed that all applicable zoning and use regulations and restrictions have
been complied with, unless a nonconformity has been stated, defined, and
considered in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy, consents, or
other legislative or administrative authority from any local, state, or national
government or private entity or organization have been or can be obtained or
renewed for any use on which the value estimate contained in this report is based.
10. It is assumed that the utilization of the land and improvements is within the
boundaries or property lines of the property described and that there is no
encroachment or trespass unless noted in the report.
11. The existence of hazardous material, which may or may not be present on the
property, was not observed by the appraisers. The appraisers have no knowledge
of the existence of such materials within or near the property. The appraisers,
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however, are not qualified to detect such substances. The presence of substances
such as asbestos, urea-formaldehyde foam insulation or other potentially
hazardous materials may affect the value of the property. The value estimate is
predicated on the assumption that there is no such material within or near the
property that would cause a loss in value. No responsibility is assumed for any
such conditions or for any expertise or engineering knowledge required to
discover them. The client is urged to retain an expert in this field, if desired.
The appraisal is intended to comply with the appraisal requirements of the Code
of Professional Ethics and Standards of Professional Conduct of the Appraisal
Institute.
This appraisal report has been made with the following general limiting conditions:
1. The distribution, if any, of the total valuation in this report between land and
improvements applies only under the stated program of utilization. The separate
allocations for land and buildings must not be used in conjunction with any other
appraisal and are invalid if so used.
2. Possession of this report, or a copy thereof, does not carry with it the right of
publication.
3. The appraiser, by reason of this appraisal, is not required to give further
consultation, testimony, or be in attendance in court with reference to the property
in question unless arrangements have been previously made.
4. Neither all nor any part of the contents of this report (especially any conclusions
as to value, the identity of the appraiser, or the firm with which the appraiser is
connected) shall be disseminated to the public through advertising, public
relations, news, sales, or other media without the prior written consent and
approval of the appraiser.
5. Any value estimates provided in the report apply to the entire property, and any
proration or division of the total into fractional interests will invalidate the value
estimate, unless such proration or division of interests has been set forth in the
report.
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VII. CERTIFICATION
We certify that, to the best of our knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are our personal, unbiased professional
analyses, opinions, and conclusions.
3. We have no present or prospective interest in the property that is the subject of
this report, and we have no personal interest or bias with respect to the parties
involved.
4. Our compensation is not contingent upon the reporting of a predetermined value
or direction in value that favors the cause of the client, the amount of the value
estimate, the attainment of a stipulated result, or the occurrence of a subsequent
event.
5. The appraisal assignment was not based on a requested minimum valuation, a
specific valuation, or the approval of a loan.
6. Our analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the Uniform Standards of Professional Appraisal
Practice, the Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute, and the requirements of the State of
Florida for state-certified appraisers.
7. The use of this report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives.
8. No one provided significant professional assistance to the undersigned.
9. As of the date of this report, the undersigned has completed the requirements of
the continuing education program of the Appraisal Institute.
10. The use of this report is subject to the requirements of the State of Florida relating
to review by the Real Estate Appraisal Subcommittee of the Florida Real Estate
Commission.
11. The undersigned have made an inspection of the property that is the subject of this
report.
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12. We have not previously appraised this property nor have we performed any other
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.
It is the opinion of the undersigned that the property described herein has the following
market value, as of April 30, 2013:
$10,000,000
___________________________ _____________________________
Edward N. Parker, MAI Geoffrey D. Heath, MAI
State Certified General Appraiser State Certified General Appraiser
License #RZ144 License #RZ1456
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VIII. QUALIFICATIONS
EDWARD N. PARKER, MAI
Investors Research Associates, Inc.
5730 S.W. 74 Street, Suite 100
South Miami, Florida 33143-5381
Phone No.: (305) 665-3407
Fax No.: (305) 665-4921
Academic
University of Alabama - B.S., Marketing
University of Miami - M.B.A.
Experience
Mr. Parker began his career as a real estate consultant in 1972 with the Reinhold P. Wolff Economic Research
Company in Coral Gables, Florida. As a staff analyst, he was responsible for the preparation of market
feasibility studies, retail studies, economic use analyses, and site location studies.
In 1974, Mr. Parker joined the Miami office of Real Estate Research Corporation (RERC), a wholly owned
subsidiary of the First National Bank of Chicago. As a staff appraiser and analyst, Mr. Parker prepared
appraisals of all types of income-producing properties located throughout the United States and the Caribbean.
These valuations involved fee simple interest, leaseholds, partial interests, and going-concern valuations. He
has also appraised a large number of special purpose properties including schools, marinas, resorts, and
specialized manufacturing facilities. Mr. Parker's administrative responsibility at RERC included the
coordination of the appraisal of the assets of two major Miami-based REITS during their orderly portfolio
disposition. Mr. Parker also managed the annual ongoing portfolio appraisal of the properties comprising the
First National Bank of Chicago commingled pension trust known as Fund F.
In June, 1981, Mr. Parker joined Investors Research Associates, Inc. as a principal. The firm specializes in
income property appraisals, highest and best use and market studies, as well as consultation services for major
lending institutions, insurance companies, real estate syndicators, developers, pension funds and governmental
agencies. Discounted cash flow and sensitivity analyses, as well as absorption studies are some of the services
provided to clients. The firm has successfully completed a number of very complex valuation assignments
involving environmentally sensitive wetlands including offshore island properties for private and public
clients. Agricultural properties including row crop land, groves, and tree nurseries are another specialty.
Mr. Parker’s experience includes condemnation appraisals for both public and private clients. The public
client list includes the Florida Department of Transportation, South Florida Water Management District,
National Park Service, U.S. Department of Justice, Dade County HUD, Dade County Department of Facilities
Management, and Miami-Dade Water and Sewer Department. Property types appraised for condemnation
purposes include office buildings, retail stores, restaurants, service stations, banks, churches, apartments,
vacant sites, agricultural (crop land and tropical fruit groves), and environmentally sensitive wetlands.
Mr. Parker has qualified as an expert witness in Dade, Broward, Monroe and Duval County Circuit Courts,
U.S. District Court, and U.S. Bankruptcy Court. He is also currently certified under the continuing education
program conducted by the Appraisal Institute.
Affiliations
Member of the Appraisal Institute - MAI
Licensed Real Estate Broker - State of Florida
State Certified General Appraiser-0000144
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Geoffrey D. Heath, MAI
Academic
London School of Economics, M.Sc., Economics
University of Chicago, M.B.A., Finance
Lehigh University, B.A., Finance
Experience
Before associating with E. Roger Budny in early 1988, Mr. Heath served as Senior Vice
President of Real Estate Research Corporation as a specialist in the economics and
appraisal of real estate. Prior experience includes Deputy director of all appraisal
services for that firm. He has directed numerous major appraisal assignments throughout
the country. They have included valuations of substantial commercial real estate
portfolios for a variety of purposes including merger, acquisition, divestiture, and current
value reporting.
Mr. Heath has appraised a large number of special-purpose properties including schools,
mobile home parks, marinas, resorts, and specialized manufacturing facilities. These
valuations have involved fee simple interests, leaseholds, as well as partnership and
partial interests. They have included both existing and proposed projects.
Within South Florida, significant appraisals include: valuation of a major Dade County
portfolio including a hotel and resort complex, 11 office buildings, 5 shopping centers, 31
industrial buildings, 5 apartment complexes, and 228 acres of prime land; a multiuse high
rise comprising office, apartment and parking uses within the Jackson medical complex;
the 1,200-room Fountainbleau Hilton Hotel; market rent assessments for 30 U.S.
government offices and warehouses; and appraisals of 8 major mobile home communities
with over 5,500 homesites.
Mr. Heath has performed numerous economic and marketability studies for new suburban
developments as well as downtown redevelopment. These assignments have involved the
evaluation of retail potential, office space demand, and hotel and housing marketability.
In addition, he has served as land disposition and economic consultant to a number of
U.S. cities.
Affiliations
Appraisal Institute, MAI, Certificate No. 6090
Florida Real Estate Broker
South Florida Chapter 24, Appraisal Institute (Board of Directors, Admissions
Committee)
State of Florida Certified General Appraiser No. RZ0001456