Fort Walton Beach Council agenda — 03-23-2010 Special-Soundside Develp. Project — reading text

7,7, 000,000, 000000 Milla a Rate 0. 0129683 Estimated Taxes 90,778 Per Unit 454 Page 24 Value Tech Realty Services, Inc. www.gotovalue.com 107-  Sound Side Apartments Highest and Best ( Intended) Use Highest and Best (Intended) Use Introduction According to The Appraisal ofReal Estate, the highest and best use of a property is defined as follows: 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 value. Fundamental in the above definition are separate estimates of the highest and best use of the subject property as if vacant and as improved. Although the highest and best use of the site may be determined to be different from the existing improvements, the improvements will continue as the highest and best use until land value exceeds the properties total value plus demolition costs. In this section of the appraisal, we address the highest and best use relative to the HUD requirement that the property be examined based on its intended use. As -If Vacant Physically Possible The subject site is rectangular in shape and contains 13. 50 acres of land. The subject has good frontage and visibility, and provides convenient access to major traffic routes in the area. Considering the site' s location and size as well as land uses on similar sites within the neighborhood, a residential support or residential service use would be physically possible. Legally Permissible The subject has a residential zoning in place for low to high density development. The site is within an area that supports a multifamily use. The subject as a proposed multifamily housing project is a permissible use of the site and is compatible with adjacent land uses. Financially Feasible As indicated in this appraisal, the subject generates sufficient revenues and expenses to operate as a multifamily rental housing development. Conclusion of Highest and Best ( Intended) Use — As Vacant The subjects intended use is considered to be the highest and best use as a residential/ multifamily development oriented to low and moderate income households. Highest and Best ( Intended) Use — As Improved ( Proposed) The subject will provide a good -quality rental product designed to meet the needs of low to moderate income households. The subject' s unit mix and improvements are physically well suited for the market. A survey of the market indicates occupancy levels are relatively stable. Further, a detailed supply and demand analysis indicates excess demand for affordable rental housing, as well as an under supply of affordable apartments in the subject' s market. As such, the subject " as proposed" is considered the highest and best use of the site " as improved." Value Tech Realty Services, Inc. www.gotovalue.com Page 25 108- Sound Side Apartments Income and Expense Analysis Income and Expense Analysis Market Rent Analysis — Market rent is estimated for the subject based on the assumption that no income restrictions apply. This assumption is made in order to determine if the restricted rents are above or below market rents. To evaluate appropriate market rental rates for the subject, we conducted a rental survey of the competitive projects within the area. Leasing agents and managers provided the most current information available in the market regarding rental rates, occupancies, and market conditions. The following map shows the locations of the Comparable Rentals followed by a summary table and detailed written descriptions of each comparable in the addenda. Comparable Rentals Map The subject will be a newly constructed, good -quality apartment community. The supply of similar communities within the market area is limited. As such, supplemental rent comparables are provided. Chez Elan is located in Fort Walton Beach, north of the subject site. It was originally built in 2004 with additions in 2006 and 2008 and offers a total of 267 units. Occupancy at the time of survey was 87 %. This represents a slight decline from previous months, but management indicated that occupancy levels are higher than originally expected for this time of year. The property offers one, two and three bedroom units, with rents ranging from $ 810 to $ 1, 500 per month. Typical amenities include pool, sport courts, fitness room, and business center. The property was offering a $ 299 move -in- special for the month of January. Page 26 Value Tech Realty Services, Inc. www.gotovalue.com 109-  Sound Side Apartments Income and Expense Analysis Cayo Grande Fort Walton is located in Fort Walton Beach, northwest of the subject site. It was built in 1989 with 168 units. Occupancy at the time of survey was 95 %. The property offers one and two bedroom units, with rents ranging from $ 730 to $ 1, 045 per month. Typical amenities include tennis courts, fitness room, pool, clubhouse, and business center. At the time of survey, the property was offering -promotional rents on all unit types. Madison Parc is located in Fort Walton Beach, northwest of the subject site. It was built in 1999 with 108 units. Occupancy at the time of survey was 93 %, down from near capacity levels. Management has decreased rents to remain competitive with other properties in the market. The property offers two bedroom units, with rents set at $ 825 per month. Typical amenities include fitness room, clubhouse, tanning beds and pool. At the time of survey, the property was not offering any rent concessions. Legacy on the Bay is located in Destin, east of the subject site. It was built in 1999 with 300 units. Occupancy at the time of survey was 92 %. The property offers one, two, three, and four bedroom units, with rents ranging from $ 890 to $ 1, 395 per month. Typical amenities include tennis court, fitness room, business room, car care center, and pool. At the time of survey, the property was offering reduced rents on multiple unit types. Management indicated that rent specials are based on unit availability. This property was recently sold and new management was put in place mid -October 2008. The property has since stabilized operations. Alexan Henderson Beach is located in Destin, east of the subject site. Recently opened in July 2009 with two buildings currently under construction, the property began pre -leasing units in May 2009. At the time of survey, the property was 20% occupied and 24% pre -leased. These figures are based on a total unit count of 340, assuming construction is complete. The property is located on a lakefront, with management allowing residents to fish and swim in the lake. The property offers studio, one, and two bedroom units, with rents ranging from $ 960 to $ 1, 480 per month. Typical amenities include fitness room, clubhouse with pool, business center, and media room. Rental Rate Analysis The market rent comparables discussed above were utilized in the rent adjustment grid for each unit type that is provided in the addenda. The following paragraphs provide a discussion of each of the line items that were considered as part of the analysis. Effective Date of Rental The market was surveyed in January 2010. All of the rent comparables were surveyed during the same time period. As such, no adjustment was made for effective date. Type of Project /Stories The subject will be a garden -style apartment building. All of the rent comparables were garden -style as well. Therefore, an adjustment was necessary for this category. Floor of Unit in Building The subject and the rent comparables were all analyzed based on " base" rents. Thus, no adjustments were necessary for floor of unit within a building. Value Tech Realty Services, Inc. www.gotovalue. com Page 27 110-  Sound Side Apartments Income and Expense Analysis Project Occupancy The subject' s estimated stabilized occupancy level is 95 %. An occupancy adjustment is made if the comparable is operating at a level below the subject. The calculation is as follows: Comparable Occ.% _ l * (Unadjusted Rental Rate of Comprable) Subject Occ.% - No adjustment is made if the comparable is operating at a higher occupancy than the subject. Concessions Concessions are present in the market and tend to reflect both individual property and overall market performance. In essence, if management finds they have an unusually high vacancy rate in a particular type of unit, a temporary move -in special might be offered. Further, rising unemployment and continued job loss has put an added strain on operations, creating the need to develop incentives to keep existing tenants and attract new ones. As such, concessions were only applied if a community was offering one that was more than promotional in nature. Year Built /Age The adjustment process employed for age takes into consideration a number of factors. These include differences in standards due to changes in lifestyles of rental tenants, modernization of appliances and /or lack there of, floor plan layouts, as well as general quality. A new community has the opportunity to utilize all of the most modern construction techniques and features to provide state -of t-he -art residences. Today, features that are in demand include washer /dryers in the units and open floor plans. This is different than when apartments were constructed with more closed interiors and did not provide washer /dryers. The basis for adjustments is from comparisons of older properties with newer properties and pricing differentials over the course of time. This methodology provides a quantification process that can be calculated rather than utilizing a more subjective basis of comparing " good" to " average" to " fair." An example of the estimate for age is to take two generally similar properties operated normally from the same market that have been maintained in a similar manner. The difference in their rents after adjustments for size would reflect the depreciation the older property has experienced as a result of age. As a severe age discrepancy does not exist in the range of comparable properties, no adjustment was made to account for year built. Value Tech Realty Services, Inc. www.gotovalue. com Page 28  Sound Side Apartments