an appraisal report of the vacant three-story 126 room limited service/economy hotel located at ...

247 Pages·2017·5.12 MB·English

AN APPRAISAL REPORT OF THE VACANT THREE-STORY 126 ROOM LIMITED
SERVICE/ECONOMY HOTEL LOCATED AT 1241 NORTH 53RD AVENUE IN
PHOENIX, MARICOPA COUNTY, ARIZONA.

PREPARED FOR

ARIZONA DEPARTMENT OF TRANSPORTATION
205 SOUTH 17TH AVENUE, MD 612E
PHOENIX, ARIZONA 85007

ATTENTION

MR. JIM WALCUTT

PROJECT: H882701R
HIGHWAY: SOUTH MOUNTAIN FREEWAY
SECTION: SALT RIVER – JCT. I-10 PAPAGO FREEWAY
ADOT PARCEL: L-C-021
PARCEL NUMBER: 103-27-029B & 103-30-291

DATE OF REPORT

FEBRUARY 14, 2017

EFFECTIVE DATE OF VALUATION

DECEMBER 29, 2016

PREPARED BY
February 14, 2017

TO: Arizona Department of Transportation
205 South 17th Avenue, MD 612E
Phoenix, Arizona 85007

ATTN: Mr. Jim Walcutt
Right of Way Operations Section

RE: An Appraisal Report of the vacant three-story 126 room Limited Service/Economy Hotel
located at 1241 North 53rd Avenue in Phoenix, Maricopa County, Arizona.

Dear Mr. Walcutt:

As requested, I have appraised the “As Is” Market Value of the aforementioned property. The value
estimate is supported by market analysis which is communicated through a summation appraisal
format plus exhibits, which describes and identifies methods of approach and valuation.

The subject consists of a 126 room hotel formally known as the Days Inn Phoenix West Hotel. Due
to the fact that the subject property has been vacant for over a year and nearly all of the first floor
rooms, and many of the rooms on the second and third floors have been vandalized to various degrees,
it was determined that all of the units would require various degrees of remodeling including, but not
limited to, new carpet, new paint, new sink vanities and mirrors, and new hinged closet doors. The
working order and condition of the air conditioning units, bathroom flooring, shower/tub inserts,
toilets, and bathroom fixtures are unknown and it is expected that at least half of the units would
require replacement of these items as well. Additionally approximately 50% of the rooms would
require new front doors, 25% of the rooms would require new windows, and all of the rooms would
require new key card entry systems.

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. It is noted that this appraisal is a revised version of a previous report completed on
January 12, 2017.

The intended users of this report are Arizona Department of Transportation, Federal Highway
Administration (FHWA), and their affiliates, successors, nominees and/or assigns. The intended
use of the appraisal report is financial decisions to be made by the client. This report is not intended
for any other use or any other users.
This report was prepared under the Appraisal Report option of Standards Rule 2-2(a) of the 2016-
2017 edition of USPAP. As USPAP gives appraisers the flexibility to vary the level of information
in an Appraisal Report depending on the intended use and intended users of the appraisal,

This type of report has a moderate level of detail. It summarizes the information analyzed, the
appraisal methods employed, and the reasoning that supports the analyses, opinion, and
conclusions. It meets or exceeds the former Summary Appraisal Report requirements that were
contained in the 2012-2013 edition of USPAP. For additional information, please refer to
Addendum USPAP Reporting Options.

An environmental study has not been provided. The appraiser has not identified any toxic waste
and/or possible hazardous contaminant on the site; however, it does not mean that such materials do
not exist. The appraiser is without the expertise to identify and/or detect such substances. Because
of the liability generated if toxic wastes and/or contaminants are found on the proposed site, it is
strongly recommended that a specialist in the detection of toxic waste be retained to investigate for
possible contamination.

This appraisal assignment was drafted to adhere to the standards and practices of the Appraisal
Institute, plus the guidelines and recommendations set forth in the Uniform Standards of Professional
Appraisal Practice (USPAP) by the Appraisal Foundation and to conform with the appraisal
standards required by ADOT.

The market value estimate reported in this appraisal assignment incorporates all ownership rights
included in the Fee Simple Estate. The value estimate is based upon the assumption the subject
property is unencumbered by any other interest/estate and is "free and clear" of all liens, subject to
only the limitations of the four powers of government.

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Based on the information found in my investigation, I am of the opinion that the As Is Market Value
of the subject, as of December 29, 2016, is:

ONE MILLION NINE HUNDRED TEN THOUSAND DOLLARS
($2,260,000.00)

VALUATION SUMMARY:
Hotel Value Conclusion $1,910,000

Building Value $1,122,200
Land Value $ 750,000
FF & E $ 37,800
Business Value $ 0

Billboard Site Value $ 350,000

Total Value $2,260,000

Respectfully submitted,

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TABLE OF CONTENTS

FACTS AND CONCLUSIONS ................................................................................................... 5
SCOPE OF WORK....................................................................................................................... 7
AREA MAP ................................................................................................................................. 17
REGIONAL AND CITY DATA ................................................................................................ 17
NEIGHBORHOOD DATA ANALYSIS ................................................................................... 37
PLAT MAP .................................................................................................................................. 52
AERIAL VIEW ........................................................................................................................... 53
SITE DATA ANALYSIS ............................................................................................................ 54
ZONING MAP ............................................................................................................................ 59
SUBJECT PHOTOGRAPHS .................................................................................................... 60
IMPROVEMENT DESCRIPTION .......................................................................................... 85
HIGHEST AND BEST USE ...................................................................................................... 89
VALUATION PROCESS ........................................................................................................... 95
COST APPROACH .................................................................................................................... 97
SALES COMPARISON APPROACH ................................................................................... 118
INCOME CAPITALIZATION APPROACH ........................................................................ 144
BILLBOARD VAUATION ...................................................................................................... 166
RECONCILIATION ................................................................................................................ 187
CERTIFICATION .................................................................................................................... 189

ADDENDA

Engagement Letter ..........................................................................................................EXHIBIT 1
Zoning Designation .........................................................................................................EXHIBIT 2
Partial Cost Budget .........................................................................................................EXHIBIT 3
Title Report .....................................................................................................................EXHIBIT 4
PwC Hotel Lodging Report ............................................................................................EXHIBIT 5
Billboard Lease ...............................................................................................................EXHIBIT 6
USPAP Reporting Options .............................................................................................EXHIBIT 7
Contingent and Limiting Conditions ..............................................................................EXHIBIT 8

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FACTS AND CONCLUSIONS
TYPE OF PROPERTY: Vacant three-story 126 room Limited
Service/Economy Hotel

LOCATION: The subject is located at 1241 North 53rd Avenue
in Phoenix, Maricopa County, Arizona.

REPORT PURPOSE: The purpose of this appraisal is to estimate the
"As Is" Market Value of the subject property.

TAX PARCEL NUMBER (S): 103-27-029B & 103-30-291

SITE AREA: According to Maricopa County records, the
subject site totals 2.34 acres or 102,033 square
feet. It is noted that this site area includes a 30 foot
by 52 foot billboard site that is leased by Clear
Channel. Therefore, the total site area associated
with the subject improvements equates to 2.31
acres or 100,473 square feet.

ZONING: A-1, Light Industrial; City of Phoenix

FLOOD ZONE: The location is within an area denoted as being in
an "X" Flood Hazard Area, as found on Federal
Emergency Management Agency Flood
Insurance Rate Map number 04013C2185L based
on the October 16, 2013 flood data.

IMPROVEMENTS: The subject is a vacant three-story 126 room
Limited Service/Economy Hotel totaling 43,770
square feet of building area. The property is in fair
condition and was constructed in 1986. The hotel
consists of two exterior corridor buildings with
amenities including a small breakfast area, small
conference room, and an outdoor swimming pool.

Room mix breakdown is as follows:

57 – Single King Rooms*
69 – Double Rooms
126 – Total Rooms

*It is noted that one of the single king rooms is
ADA compliant (Room 106) located on the first
floor of the northern building.
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It is noted that a billboard owned by Clear
Channel is located on the subject site. Clear
Channel is leasing the site area, estimated to be
approximately 30 foot by 52 foot. The monopole
billboard is designed to accommodate angled
back to back 14 foot by 48 foot sign panel faces.
The billboard is approximately 15 years old and
consists of one static face and one digital face.
The west facing static panel is Clear Channel sign
number 003859 and the east facing digital panel
is sign number 003866. The billboard has permits
from both the City of Phoenix (183085) and
ADOT (05600). The billboard will be valued
separate from the hotel valuation at the end of this
appraisal report.

PARKING: The subject has 135 open parking spaces. The
subject’s parking ratio is 1.07 spaces per room.

HIGHEST & BEST USE: As Vacant: Hold for future industrial or hotel
development as demand warrants.
As Improved: Current Use

EFFECTIVE DATE OF VALUATION: December 29, 2016

MARKET VALUE CONCLUSIONS:
Cost Approach $1,765,000
Sales Comparison Approach $1,870,000
Income Approach $1,910,000
Building Value Conclusion $1,910,000

Improvement Value $1,122,200
Land Value $ 750,000
FF & E $ 37,800
Business Value $ 0

Billboard Site Value $ 350,000

Total Value $2,260,000

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SCOPE OF WORK
The practice of appraisal can be considered to be less of a science dictated by strict rules and more
of an art, in which rules guide the appraiser towards a trustworthy, responsible and credible
valuation. The Uniform Standards of Professional Appraisal Practice (USPAP) provides
guidelines for this process to be undertaken through the Scope of Work Rule, to which all appraisal
professionals must adhere.

The USPAP 2016-2017 SCOPE OF WORK RULE states:

For each appraisal and appraisal review assignment, an appraiser must:

1. identify the problem to be solved;
2. determine and perform the scope of work necessary to develop credible assignment results;
and
3. disclose the scope of work in the report.

An appraiser must properly identify the problem to be solved in order to determine the appropriate
scope of work. The appraiser must be prepared to demonstrate that the scope of work is sufficient
to produce credible assignment results.
(The Appraisal Foundation, USPAP 2016-2017 edition, Pg. U-13)

Comment: Scope of work includes, but is not limited to:
 the extent to which the property is identified;
 the extent to which tangible property is inspected;
 the type and extent of data researched; and
 the type and extent of analyses applied to arrive at opinions or conclusions.

Appraisers have broad flexibility and significant responsibility in determining the appropriate scope
of work for an appraisal and appraisal review.

Credible assignment results require support by relevant evidence and logic. The credibility of
assignment results is always measured in the context of the intended use.

For this individual assignment, the appraiser shall address the three aspects of the Scope of Work
Rule; Problem Identification, Scope of Work Acceptability and Disclosure Obligations.

PROBLEM IDENTIFICATION (PURPOSE):

An appraiser must gather and analyze information about those assignment elements that are
necessary to properly identify the appraisal or appraisal review problem to be solved. (The Appraisal
Foundation, USPAP 2016-2017 edition, Pg. U-13)

The purpose of this appraisal is to estimate the "As Is" Market Value of the subject property.
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INTENDED USE/USERS:

The use of this appraisal report is for financial decisions to be made by the client. The intended users
of this report are Arizona Department of Transportation, Federal Highway Administration (FHWA),
and their affiliates, successors, assigns, and/or its clients. This report is not intended for any other use
or any other users.

The value reported is based upon cash or its equivalent. This appraisal assignment was drafted to
adhere to the Code of Professional Ethics, Bylaws, Regulations and Standards of Professional
Appraisal Practice of the Appraisal Institute, plus the Uniform Standards of Professional Appraisal
Practice promulgated by the Appraisal Standards Board of the Appraisal Foundation as well as
FIRREA Regulations.

EFFECTIVE DATE OF VALUE:

December 29, 2016

DATE OF INSPECTION:

December 29, 2016

INTEREST VALUED:

The subject hotel is currently vacant with no long term leases, thus, the Fee Simple Estate is
considered in this report. The Fee Simple Estate is defined as:

“Absolute ownership unencumbered by any other interest or estate, subject only to the
limitations imposed by the governmental powers of taxation, eminent domain, police power,
and escheat.” (The Dictionary of Real Estate, 6th Ed. (Chicago: Appraisal Institute, 2015)

The subject billboard is located on leased land and the income generated from this ground lease
will be valued, thus a Leased Fee Estate will be considered for the billboard ground lease. The
Leased Fee Estate is defined as follows:

A freehold (ownership interest) where the possessory interest has been granted to another
party by creation of a contractual landlord-tenant relationship (i.e., a lease). (The Dictionary
of Real Estate, 6th Ed. (Chicago: Appraisal Institute, 2015)

In the estimate of value, typically four interdependent factors must be considered as follows:

• Utility - the ability of a product to satisfy a human want, need or desire.

• Scarcity - the present or anticipated supply of an item relative to the demand for it.

• Desire - a purchaser's wish for an item to satisfy human needs (e.g., shelter, clothing,
food, companionship) or individual wants beyond the essentials to support life.

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• Effective Purchasing Power - the ability of an individual or group to participate in a
market, i.e., to acquire goods and services with cash or its equivalent.

MARKET VALUE DEFINITION:

Following is the definition of market value as provided by the client.

Market value as utilized in this report is defined as "the most probable price estimated in
terms of cash in United States dollars or comparable market financial arrangements which
the property would bring if exposed for sale in the open market, with reasonable time
allowed in which to find a purchaser, buying with knowledge of all the uses and purposes
to which it was adapted and for which it was capable."(Arizona Revised Statute 28-7091).

VALUE “AS IS” DEFINITION:

The value of specific ownership rights to an identified parcel of real estate as of the effective
date of the appraisal; relates to what physically exists and is legally permissible and excludes
all assumptions concerning hypothetical market conditions or possible rezoning. (The
Dictionary of Real Estate, 6th Ed. (Chicago: Appraisal Institute, 2015)

EXTRAORDINARY ASSUMPTION: an assumption, directly related to a specific assignment,
as of the effective date of the assignment results, which, if found to be false, could alter the
appraiser’s opinions or conclusions.

Comment: Extraordinary assumptions presume as fact otherwise uncertain information about
physical, legal, or economic characteristics of the subject property; or about conditions external to
the property, such as market conditions or trends; or about the integrity of data used in an analysis.
(The Appraisal Foundation, USPAP 2016-2017 edition. U-3)

 It is noted that the use of an Extraordinary Assumption might have affected the assignment
results.

The windows to all but two of the subject rooms were open and were inspected visually from
outside. Only four of the rooms were able to be inspected fully. It is an Extraordinary Assumption
that the interior of bathroom areas and the two non-visible rooms were in similar condition to the
other rooms and bathrooms that were inspected.

HYPOTHETICAL CONDITION: a condition, directly related to a specific assignment, which
is contrary to what is known by the appraiser to exist on the effective date of the assignment results,
but is used for the purpose of analysis.

Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic
characteristics of the subject property; or about conditions external to the property, such as market
conditions or trends; or about the integrity of data used in an analysis.
(The Appraisal Foundation, USPAP 2016-2017 edition. U-3)

 It is noted that the use of a Hypothetical Condition might have affected the assignment
results.
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