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HomeMy WebLinkAboutPK11-371 - Original - McKee & Schalka Real Estate Appraisal Services and Consultants, Inc. - Kent Pool Appraisal - 05/13/2011 / % 11 i%�ij�% r. Re c ,­% rd s M SENT Document 'W:,asH+rrarora �F/ CONTRACT COVER SHEET This is to be completed by the Contract Manager prior to submission to City Clerks Office. All portions are to be completed. f you have questions, please contact City Clerk's Office. Vendor Name: McKee & Schalka Real Estate Appraisal Services and Consultants, Inc Vendor Number: ID Edwards (Number Contract Number: This is assigned by City Clerk's Office Project Name: 2011 Appraisal of Kent Pool Description: ❑ lnterlocal Agreement ❑ Change Order A❑mendment ❑Contract X Other: Appraisal of Kent Pool 20 11. Contract Effective Date: Termination late: Contract Renewal Notice (Days): 0 Number of days required notice for termination or renewal or amendment Contract Manager: Julie Parascondola Department: Parks Admin Contract Amount: N/A Approval Authority: (CIRCLE ONE) Department Director Mayor City Council Detain: (i.e. address, location, parcel number, tax id, etc.):. Annual extension of contract termination and increase of $10,000 to operating agreement_ ..._..w..._- __. A....... _ m. ___...._ . _ ._._._..__.. .-___�__ _.._ . . .. ...... As of 08/27/14 Appraisal of Kent Meridian Pool 25316101't Avenge Southeast Kent, Washington ri �A ! y .w., "➢'`aa;—P'rnmk � yrnxe�mw u w Bainbridge ,,,r"I nor Nrp Wlw-y Bvl*ue rs.. 5arnm�!ttisla r J� AlSI1 7 NeaA 4rt � 5Af s , Sibµyr�q � Ne^w[.xaMBG �� ByxryOueki _.�y fq� r* ��qq Xn9 .w+4µ'u,rn � "Na9brya4 ,k"+Y'JV-, v".0 PA �5zy�roy °'i C�et Puanacwr u'� Plrarst7P'+ M�+�i�Rar��1a YVU:ratYarw Hrvgh2�, �Fp 34+yri7uv aid" �gVk�m+➢� �'urv.�ain�n�,Hmtaw�.pw Mirrrua«axrrrr. Vmzkr- NOcv,;YmFp P,arh OMb Sa',os �:ai .'d.emA &C ID5!&k4u 5A 'f" Prraav' I ki Des mgiraes i 111 n. "WWnluy & mn� 0 ed rtteurx S6 tsar✓^r�3 Kent w l5 REAL ESTATE APPRAISAL SERVICES$CONSULTANTS,INC, Seattle, Washington APPRAISAL of Market Rent Kent Meridian Pool 25316 101s' Avenue Southeast Kent, Washington Aso May 13, 2011 Authorized by: Hope Gibson Park Planning & Development Manager City of Kent Prepared by: Kenneth A. Barnes, MAI, CITE Arthur Jones, Appraiser 84 SCr-!ALKA REAL EsrATE APPRAMAL SERVICFS&CONSULTANTS,AMC... 1200 6th Avenve,Wte 1805,Seattle,WaShmgt"1-0-1 Tel:206 343 a909 I www.rrwoaf wa?I Far.2W 3S&5777 l(Reference No. 3021 kvIcKEE & SciH-ALIKA, Real Estate Appraisal Services&Cons0ants, Inc. May 20, 2011 Ms, I lope Gibson, RLA Park Planning & Development Manager City of Kent-Parks, Recreation &Community Services 220 Fourth Avenue South Kent,WA 98032 Project: Estimate of Market Rent Property Name Kent Meridian Pool Description: Public swimming pool Location: 25316 101st Avenue Southeast Municipality: Kent, Washington Real Property Description: A portion of King County APN. 202205-9066 McKee &Schalka Reference No.: 31218 Dear Ms. Gibson: We have prepared this summary appraisal report for the subject property. The subject is a public swimming located on the campus of Kent Meridian fligh School in Kent, Washington. The pool was constructed in 1971 by King, County. '"I'he fee simple interest in the subject is owned by the Kent School District. They lease the improvements to the City of Kent, who then sublease the pool to a licensed pool operator. The intended use of this appraisal is for determination of an appropriate market rent to be charged by the City of Kent to the pool operator (sublessee). We have made the special assumption that the pool improvements must remain on site and be open to the public. The accompanying appraisal has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) and with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. It is subject to the Assumptions, Certification & Limiting Conditions contained in this report. As a result of our investigation and analysis, our conclusions are: Effective Value Description Valuation Date Conclusion Market Rent May 13, 2011 No Rent* ssuiiies a lease terin of three to faze years, zvitli lessee responsible for all expeiises includiag utilities typical repairs and niaiii tettatice, acid taxes,and lessor respoiisiblefor capital repairs. Respectfully submitted, 6 2 rthur J(�fi' , Appraiser ra iser WA State-Certified General Reap Estate Appraiser(1100578) WA State-Registered Apprais r rainee(1000956)1200 01 Avenue,Suite 1905,Seattle,Washington 98 101 T6:206.343.8909 1 www mseo� rNn F­n6 386 5777 Kent Meridian Pool,May 20,2011 Certification, Disclosure and Use Restriction I certify that, to the best of my knowledge and belief a The statements of fact contained in this report are true and correct. 0 The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses,opinions, and conclusions. 0 1 have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. ® I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. ® My engagement in this assignment was not contingent upon developing or reporting predetermined results. a My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. • My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. Mr. Kenneth A. Barnes, MAI, CRE and Mr. Arthur Jones have made a personal inspection of the property that is the subject of this report. No one provided significant professional assistance to the person(s) signing this report, with the exception of other associates of McKee&Schalka, Inc. The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. The use of this report is subject to the requirements, of the Appraisal Institute relating to review by its duly authorized representatives. • As of the date of this report, Mr. Kenneth A, Barnes, MAI, CRE, has completed the requirements of the continuing education program of the Appraisal Institute. RESTRICTION UPON DISCLOSURE&USE: This appraisal is intended for use only by the client and intended users specifically identified in the report, and may not be transmitted or communicated to any other party without the specific written permission of McKee & Schalka, Inc. Disclosure of the contents of this appraisal report is governed by the By-Laws & Regulations of the Appraisal lnstitute. 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 (s)he is connected, or any reference to the Appraisal Institute or to the MAI designation) shall be disseminated to the public through advertising media, public relations media, news media, sales media or any other public means of communication without the prior written consent and approval of the undersigned. No part of this report or any of the conclusions may be included in any offering statement, memorandum, prospectus or registration without the prior written consent of the appraiser. Kenneth A. Barnes, MAI, CRE ArthurJo es Appraiser WA State-Cerlified General Real Estate Appraiser(1100578) WA State-Reg iste rec Apprais r ainee(1000956) McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 General Assumptions and Limiting Conditions The attached report may only be used or reviewed in its entirety. No individual pages, portions, analyses or conclusions may be separated from the complete report or verbally disseminated without transmittal of the entire report. The report is intended solely for the review and use by the client identified in the Transmittal Letter, and may not be transferred to any other party without the specific written permission of McKee&Schalka, Inc. Certain aspects of the report (including analysis methodology, spreadsheets, textual formatting and content) are considered the exclusive intellectual property of McKee&Schalka, Inc. All rights are reserved. The following General Assumptions and Limiting Conditions are supplemented by additional specific assumptions and limiting conditions identified in the attached report. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, structures, or environment (including asbestos, formaldehyde, radon, soil contamination, structural conditions, legal compliance including zoning and Americans With Disabilities Act compliance, title or legal conditions, mineral or other valuable conditions or rights, or unknown soils, hydrological, or environmental factors)that render it more or less valuable. We have no expertise in any of these areas, and we specifically counsel the client to perform additional investigation by qualified experts. No responsibility is assumed for such conditions or for arranging the studies that may be required to discover them. The liability of McKee&Schalka, Inc.and its employees is limited to the client only. The value conclusions are the result of integration of the entire appraisal process, including multiple methodologies, approaches and analyses. Any specific errors or omissions may or may not change the value conclusions. The appraiser is not required to give further consultation, testimony or attendance in court by reason of this appraisal unless arrangements have been previously made. The information furnished by others is believed to be reliable,but no warranty is given for its accuracy. The forecasts, projections and estimates contained in this report are based on current market conditions, anticipated short-term supply and demand factors, and a stable economy. These forecasts are, therefore, subject to changes with future conditions. The analyses and conclusions are valid only as of the date of transmittal of the report. The appraiser has made no survey of the property and assumes no responsibility in connection with such matters. Any sketch or identified survey of the property included in this report is only for the purpose of assisting the reader to visualize the property. No responsibility is assumed for the legal description or for matters including legal or title considerations. The property is appraised free and clear of any or all liens or encumbrances, unless otherwise stated. Title to the property is assumed to be good and marketable. Responsible ownership and competent management are assumed. The allocation of total value to land, buildings, or any fractional part or interest as shown in this report, is invalidated if used separately or in conjunction with any other appraisal. ii McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 TABLE OF CONTENTS AND INDEX Certification,Disclosure,and Use Restriction......................................................................i General Assumptions and Limiting Conditions ..................................................................ii Assignment Scope of Work,Information,&Definitions.....................................................1 Identityof Property.....................................................................................................1 LegalDescription.........................................................................................................1 Title Report,Easements,&Other Restrictions.........................................................1 Purpose of the Appraisal............................................................................................1 Client and Intended User of Appraisal.....................................................................1 Intended Use of Appraisal..........................................................................................1 PropertyRights Appraised.........................................................................................1 Scopeof the Appraisal.................................................................................................1 Unavailability of Information.....................................................................................2 ADACompliance.........................................................................................................2 Ownershipof Property................................................................................................2 History and Current Status of Property ...................................................................2 Assumptions, Hypothetical Conditions, Limiting Conditions, & Jurisdictional Exceptions.....................................................................................................................2 Effective Date of Value Estimate................................................................................3 Date of Report Preparation.........................................................................................3 PropertyData............................................................................................................................4 Neighborhood Description.........................................................................................4 Kent...................................................................................................................4 Downtown Development..............................................................................4 East Hill Neighborhood.................................................................................5 Subject Property Description......................................................................................5 Highest&Best Use...................................................................................................................7 Highest and Best Use As If Vacant and Unimproved............................................7 Highest and Best Use As Currently Improved........................................................7 MarketRent Estimate...............................................................................................................8 RentComparisons........................................................................................................8 Additional Indications...................................................................................9 Market Rent Conclusion.............................................................................................10 ADDENDA................................................................................................................................11 Aerial Photograph Subject Photographs Neighborhood Map Agreement Comparison Map Appraisers' Experience &Qualifications iii McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Assignment Scope of Work, Information,&Definitions ♦ 1 Assignment Scope of Work, Information, & Definitions Identity of Property The subject is located at 25316101st Avenue Southeast in Kent, King County,Washington. Legal Description The property can be described as a portion of King County Assessor's Parcel #202205-9066. Title Report, Easements, &Other Restrictions We have not been provided with a title report for the subject. We specifically assume that there are no title issues that would unduly impact the utility of the property. Purpose of the Appraisal The purpose of this appraisal is to estimate the Market Rent for the subject improvements. The following definition of Market Rent is found in The Dictionary of Real Estate Appraisal, 5th ed. (2010),Pages 121-122: "Market Rent means the most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (Tis)." Client and Intended User of Appraisal The client and intended user of this report is the City of Kent. Intended Use of Appraisal The intended use of this appraisal is to assist in lease negotiations. Property Rights Appraised We are estimating the market rent for the fee simple interest in the property, under the special assumption that the pool improvements must remain on site and be open to the public. Scope of the Appraisal This is a summary appraisal report with the reasoning supporting the appraisals included. Our scope of work included inspection of the subject property and a review of the existing lease for McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Assignment Scope of Work,Information,&Definitions ♦ 2 the subject property. Our research also included the gathering of information from the market, including a search for recent comparable leases. We then estimated the market rent based on an analysis of the comparisons. Unavailability of Information We have not been provided with a structural inspection report, a hydrologic or soils report, or an environmental site assessment. We are not expert in these areas, and generally rely on the technical reports of qualified personnel. We specifically assume that there are no unapparent conditions which affect the value or utility of the property. ADA Compliance We have not been provided with any documented information regarding the compliance of the building improvements with the Americans with Disabilities Act (ADA). We are not an expert in ADA compliance issues and specifically assume that there are no unapparent conditions with regard to ADA compliance which affect the value or utility of the property. Ownership of Property The owner of the fee simple interest in the subject property is the Kent School District. History and Current Status of Property The subject was constructed in 1971 by King County as a result of one of the Forward Thrust ballot initiatives. The$118 million ballot initiative passed in 1968 in support of the Department of Parks and Recreation was, at the time, the largest parks and recreation bond issue ever passed in the United States. The Kent Meridian Pool was constructed on land owned by the Kent School District. When the pool failed to be a profitable venture, the county assigned their lease to the City of Kent. After a year of closure the city subleased the pool to a pool operator. The most recent agreement was between the City and Aquatics Management Group. This agreement commenced in March of 2003, with a five year initial term and a five year option term. The pool is not currently listed for sale and we are not aware of any other agreements,offers,or other direct indications of value for the subject. Assumptions,Hypothetical Conditions,Limiting Conditions,&jurisdictional Exceptions This appraisal is subject to the General Assumptions and Limiting Conditions found at the beginning of this report, as well as the assumptions in the previous paragraphs. In specific, we have made the special assumption that the pool improvements must remain on site and be open to the public. McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Assignment Scope of Work, Information,&Definitions ♦ 3 Effective Date of Value Estimate May 13,2011 Date of Report Preparation May 20,2011 McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Property Data ♦ 4 Property Data Neighborhood Description Kent The subject neighborhood is within the East Hill neighborhood of the incorporated City of Kent, Washington. The cities of Tukwila and Renton are located to the north, and the city of Auburn is to the south. Large portions of Tukwila, Renton, Kent and Auburn occupy the relatively wide, level valley floor of the Green River valley, often referred to as the Kent Valley. The City of Kent had a population of 88,760 according to the Washington State Office of Financial Management's April 2010 population estimate. As of July 1, 2010, the City of Kent completed the annexation of the adjacent Panther Lake area of King County to the north. This added roughly 24,000 people to the incorporated area. This recent annexation pushes the population to around 113,000, making Kent the sixth largest city in Washington. The city has an average household income of$62,475 per the city of Kent web site. Interstate-5 (I-5) runs north/south along the ridge just west of the valley. I-5 connects to the north with downtown Seattle, and connects in the south with Tacoma. The Port of Seattle is adjacent to downtown Seattle and the Port of Tacoma is adjacent to downtown Tacoma. These are the two largest ports in the state, and are among the most active container ports on the West Coast. Freight consolidation for outgoing container traffic is done in warehouses in the Kent Valley, and much of the storage and distribution of products coming into the port is accomplished in warehouses in this industrial neighborhood,most of which is north of the Kent CBD. Boeing has its major space center facility in Kent, and has one of its major commercial airplane manufacturing plants in Renton. The valley has many multi-tenant business and industrial parks of varying sizes. Downtown Development Also of note are the ongoing developments in downtown Kent. Kent Station is an 18.2 acre mixed use development that will eventually consist of 470,000 sf of retail, education, entertainment and residential space. Phase I of the project opened in November 2005 while Phase II opened in October 2006. These two phases consisted mostly of the retail space,a 30,000 sf civic plaza, a 14-screen AMC Theater and a two-story branch campus for Green River Community College. Subsequent phases have included additional grade-level retail and three stories of office that are partially occupied by Green River Community College, with the most recent$22 million expansion completed in July of 2009. The project is located adjacent to Sound Transit's Sounder Commuter rail station and parking garage. Other major developments include the Kent ShoWare Events Center, which is the home to the Seattle Thunderbirds professional hockey team, and Town Square Plaza, a city development with a farmers market, water features,and seating. McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Property Data ♦ 5 East Hill Neighborhood The subject property is located in the East Hill area of Kent. Kent is essentially divided into three distinct areas. The western portion of Kent consists of a residential neighborhood and commercial districts along Interstate-5 and Highway-99 (Pacific Highway South). The central portion of Kent is a valley with an extensive warehouse and manufacturing district, downtown retail area and city center. The eastern portion of Kent is located on a plateau above the valley and consists of the East Hill neighborhood. Access to the East Hill neighborhood is via a series of major arterials and highways. East/west access is made possible via SE 276th Street, SE 208th Street, SE 240th Street, and the Kent- Kangley Road (SR-516). North/south access through the East Hill neighborhood is primarily via Highway 515 which is the main north/south arterial connecting Kent to Renton. Highway 515 is 10861 Ave SE which turns into 104th Avenue SE to the south. It is also known as the Benson Highway. The 272nd/277th east/west corridor was completed about seven years ago and links the Valley Freeway (SR-167) to Kent East Hill. This arterial is a two-way, two-lane roadway with a center turn lane. Significant population growth over the last few decades has increased demand for commercial properties to provide services to the surrounding residential neighborhoods. Shopping centers and other retail properties have been developed along the major arterials to serve the needs of surrounding residential neighborhoods. Much of this recent commercial development has occurred on the Kent East Hill along the Benson Highway(104th Avenue SE). Recent developments in East Hill are centered around two major intersections. The first area is the intersection of SE 256th St and 104th Ave SE, just south of the subject within the Kent- Kangley corridor. Major anchor tenants in this vicinity include Home Depot,Target,Top Food & Drug, TJ Maxx and Walgreens. Single family residential developments surround the shopping centers, especially to the east of 104th Avenue SE where numerous subdivisions are located. The second major intersection consists of 104th Avenue SE and 240th Street, about a mile north of the subject. Major anchor tenants in this area include Big 5 Sporting Goods, Fred Meyer,and Safeway. Subject Property Description The following brief description of the subject site and improvements is based on the records of the King County Assessor, and our inspection of the subject property. Please refer to the Subject Photographs included in the addenda of this report for further visualization of the subject site and improvements. The subject is part of the larger Kent Meridian High School Campus. The entire parcel on which the subject is located is 1,684,900 sf (38.68 acres). Using King County's iMap Property Information tool, we have estimated that the portion of the site dedicated to the subject is approximately 46,000 sf (1.06 acres). The street address of the subject is 25316 101st Avenue Southeast, in Kent. The portion of the larger parcel that we have allocated to the subject is generally rectangular, level, and at grade with the surrounding campus. The subject has no McKee &SchaIka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Property Data ♦ 6 visibility from the surrounding streets and is accessed via the entrances to the larger high school campus. This entrance is the signalized intersection of SE 256th Street and 1019'Avenue SE. We have not been provided with a soils report or an environmental site assessment and assume that the soils are free from contamination and adequate to support the improvements. The subject is served by typical public utilities including water, sewer, natural gas, electricity, and telephone service. The site is located on FEMA map panel number 53033C-1252F, which has an effective date of May 16, 1995. According to this map the subject is located in Zone X, which are areas outside the 500-year floodplain. The subject is zoned Medium Density Multifamily Residential (MR-M) in the jurisdiction of the City of Kent. Most residential uses are allowed, including attached single-family houses, duplexes, multifamily, and mobile home parks. No commercial uses are permitted. Public facilities (firehouses, police stations, libraries, and administrative offices of governmental agencies, primary and secondary schools, vocational schools,and colleges) and public parks are conditional uses. We note that the recreation use "Public Assembly (indoor)," which includes sports facilities, is not a permitted use in the subject's zone. Parking requirements for swimming pools are not Iisted in the Kent Municipal Code. In such cases, the amount of parking required shall be determined by the planning department, based on staff experience and parking required for similar uses. The subject has 30 parking stalls attributed to its use. The 2011 assessment of the larger parcel on which the subject is located is as follows: 2011 2011 Total 2011 2011 King Co.Parcel# Land Value Structure Value Assessed Value$ Taxes$ 202205-9066 $10,109,400 1 $6,205,000 $16,314,400 $17.95 "The property is tax exempt. Tax charges include a $10.00 conservation fee and a $7.25 noxious weed fee. The subject improvements consist of a 13,055 sf, concrete block and concrete tilt-up panel, community pool according to the King County Assessor. They are primarily single story and construction was completed in 1971. The entrance is located at the northwest corner of the improvements. Inside the entrance is a counter for collecting admission. Locker rooms are Iocated to the left and right of the entrance. Also located near the entrance is a small office,staff locker rooms, and restrooms. The pool itself is 35 yards long and six lanes wide. At the west end of the pool it is three feet deep,it gets gradually deeper with a diving well at the east end of the pool that has a depth of twelve feet. There is a storage room located at the west end of the pool. The mechanical systems are located on the north side of the building. There are two small areas of seating on the north and south sides of the pool—each with three rows of stadium style bench seating. Please refer to the subject photographs included in the Addenda of this report for further visualization of the subject improvements. McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Highest&Best Use ♦ 7 Highest & Best Use Highest and Best Use As If Vacant and Unimproved The site is level and easily accessed from surrounding streets. If vacant and unimproved, the zoning would limit the site to residential and multifamily uses,or public facility uses. Since the school surrounds the subject, and given that the school is using modular buildings on site, it seems evident the school has increasing demand for site area. We conclude that the highest and best use of the site if vacant and unimproved would be for school use. Highest and Best Use As Currently Improved As improved, the site is improved with a municipal swimming pool. We are not aware of any legal document that requires the site to be improved with this pool, or that requires the pool to be operated. However, when the County initially transferred the pool to the City to avoid the financial burden the City closed the pool. Residents put political pressure on the City and the pool was re-opened after a year. Now the City subsidizes the pool operation. There is a defacto municipal requirement that the pool exists and be open to the public. Although the land value would exceed the capitalized value of the pool net income, this legal restriction makes the highest and best use to be continuing use of the pool. McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Market Rent Estimate ♦ 8 Market Rent Estimate Rent Comparisons Our search for comparisons was extensive. We focused on municipalities and school districts in the Seattle Metropolitan Area. In addition,we researched news articles concerning public pools in the area. From this group of potential comparisons, we selected comparisons that are functionally similar to the subject(primarily in terms of amenities provided) and are run by an independent pool operator. Rent Comparison No. 1 is the agreement to run the Evergreen Pool, in South Seattle. The pool was a Forward Thrust pool that was constructed by King County on land owned by the Highline School District. King County closed the pool on August 31, 2009. At this time the county also terminated their lease with the school district. Whitewater Aquatics came forward with a proposal to manage the pool in order to get it reopened. In 2010 the district entered into a four year agreement with Whitewater to manage the pool. We note that the district representative reported that although the term is specified, the condition of the building systems is somewhat tenuous and that there are termination clauses if continued operation becomes financially unfeasible for either party. Under the agreement, Whitewater is responsible for all the costs associated with operation of the pool and does not share any revenue with the district. In addition, the school district agreed to repair the roof, which was damaged in a fire, and King County agreed to give $50,000 towards operational costs and an additional $50,000 towards capital improvements. In order to receive any of the money allocated from King County, Whitewater has to apply to the district for those funds. The Highline School District entered the agreement with no intention of seeing any financial gain, but rather to reopen the pool with no negative impact on their budget. The school district bears no responsibility or costs associated with the pool outside of managing the lease and the one time funds from King County. Rent Comparison No. 2 is the agreement to run the Mt. Rainier Pool,in Des Moines. This pool is also owned by the Highline School District. It was previously run through an agreement with three municipalities—Des Moines, SeaTac, and Normandy Park. When one of the municipalities decided that they no longer wanted to participate the pool faced closure. A citizen vote resulted in the creation of a Metropolitan Pool District, which has the ability to generate their own tax revenue. The pool district entered into an agreement with the Highline School District in which they pay the district$1/year to lease the facility. The pool district then entered into an agreement with Aquatics Management Group (AMG) to operate the pool. In this agreement the pools district is responsible for capital expenditures and the operator is responsible for ordinary repairs and maintenance and utilities. There is no payment from AMG to the pool district for the right to be the pool operator. It was reported by AMG that in 2010 this resulted in a profit of$3,000. Rent Comparison No. 3 is the agreement to operate the Juanita Pool, in Kirkland. The Juanita Pool is owned by the Lake Washington School District and was self-operated for most of its McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Market Rent Estimate ♦ 9 history. Historically, the pool was losing about $150,000/year and, due to recent budget constraints, it was decided that unless the annual loss could be eliminated (or greatly reduced) the pool would have to be closed. The district sent out an RFP to pool operators,which resulted in three interested parties. The pool is now operated by WAVE Aquatics. They are responsible for ordinary maintenance and repairs, utilities, and other operational costs, while the district is responsible for capital costs. WAVE does not share revenue, nor do they make an annual payment to the district. Rent Comparison No.4 is the agreement to run the Redmond Pool, in Redmond. The pool was previously managed by Northwest Center who reported requiring an $80,000/year subsidy from the City in order to cover operating Iosses. In 2009 it was discovered that there were a number deferred maintenance items that needed attention and the pool was closed. At this time the agreement with Northwest Center was terminated. After repairs were completed by the City the current agreement between the City of Redmond and WAVE Aquatics was negotiated. Under this agreement WAVE operates the pool at their own expense, including operation, ordinary maintenance and repair, staffing, and utilities. WAVE also received a one time payment of$32,000 from the City for startup costs. Under the agreement WAVE pays to the City of Redmond 50% of net revenues from the pool (however, the $32,000 could be deducted from the net revenue for the first year of the agreement). The City of Redmond is responsible for capital improvements. The agreement started in January of 2010 and has a two year initial term, with the right to extend the term for two 2-year periods. We anticipate the capital improvement costs will exceed the net revenue share, leaving the City with no positive income,but a lower subsidy than previously required. Additional Indications Indication No. 1 is the most recent agreement for operation of the subject. This agreement is between the City of Kent and Aquatic Management Group (AMG). The initial term started in 2003 and was five years with a five year extension option. Under the agreement AMG operates the pool, pays the City $1/year, and pays the leasehold tax (which is based on fair market rent for the premises). AMG is responsible for janitorial service, personnel, utilities, maintenance, advertising, the alarm, and costs associated with insurance and being a licensed pool operator. The City of Kent is responsible for capital improvements and also agreed to an annual payment of up to $20,000 to cover operational losses. It was reported that the pool lost about$2,000 in 2010. Indication No. 2 consists of a couple of agreements between the City of Tacoma and the Tacoma Metropolitan Parks District(TMPD). In general, parks and recreational facilities in the City of Tacoma are owned and operated by the TMPD. However, not all of the facilities have been transferred and there are operational agreements for these facilities. Two of these agreements are for the Eastside Pool and the People's Pool. Under these agreements TMPD operates the pool and covers ordinary repairs and maintenance, utilities, and all other operational costs and receives 100% of the revenue from operations. The City of Tacoma is only responsible for capital improvements. The operation of these two pools is scheduled to continue in this manner until Tacoma and TMPD can negotiate the transfer of ownership,which is expected to be sometime in the next five years. Additional, the TMPD is currently preparing an RFP for the Titlow Pool. The TMPD has a new pool coming online and Titlow was McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May 20,2011 Market Rent Estimate ♦ 10 scheduled for demolition; however, they do not currently have the money to demolish it, so they are seeking an operator to keep the pool open until they can afford to tear it down. The RFP has not yet been issued, but the general tenor of the agreement is that it will keep the pool open at zero(or very little)cost to the TMPD. Market Rent Conclusion In the course of researching our comparisons, we had a discussion with several individuals involved in the local market of pools and pool operators. In general, the consensus is that operating a pool that does not have a number of other amenities(such as waterslides,lazy river, etc.) is not a profitable venture. This is supported by our comparisons, and is further supported by anecdotal evidence, such as the City of Renton (who operates their own pool) losing $50,000/year and reports that the Sumner School District is very close to closing their pool due to negative annual cash flows. Overall, the comparisons show a very strong trend. The market standard for operator agreements is that the operator is responsible for ordinary maintenance and repairs, utilities (including water, electricity, gas), insurance, taxes, and other operational costs (such as personnel, advertising, security, janitorial service, and maintaining proper licensing). The operator pays no rent to the lessor. The responsibility of the lessor is typically limited to capital improvements. The agreements typically have terms of 2-5 years, but frequently have no- penalty termination options due to things such as catastrophic equipment failure. In conclusion, we have concluded that market rent for the subject pool operator is No Rent. This is accompanied by the special assumption that the pool improvements must remain on site and be open to the public. McKee&Schalka Real Estate Appraisal Services&Consultants,Inc. Kent Meridian Pool,May20,2011 ADDENDA ♦ 11 ADDENDA Aerial Photograph Subject Photographs Neighborhood Map Agreement Comparison Map Appraisers' Experience & Qualifications McKee&SchaIka Real Estate Appraisal Services&Consultants,Inc. AERIAL PHOTOGRAPH Aerial Photograph, :0ut/rnr ha�cvs appraxirr� le srte arcs /tars not %'����� �'r e �„are i r r' r Sllk) t j r o a l 14Niwx 1 0 ' 0 l -SUBJECT PHOTOGRAPHS Kent Meridian Pool,Kent, WA,May 20, 2011 Subject Photographs Subject Photographs ell- Exterior view of the subject ,ro building facing generally south and slightly east. 1 View facing south of the access to the subject through the larger Kent i!. Meridian High School campus.. r M 9�dl I app1�i ii �r View of the subject improvements Y and parking facing generally south and slightly west. fYIcKEE & SCf-lALKA REAL ESTATE APPRAISAL SERVICES&CONSULTANTS,INC. Seattle, Washington Kent Meridian Pool, Kent, WA,May 20,2011 Subject Photographs 'f!r View entrance and admissions counter. i i /r I View of the men's staff locker room. /MOM r � I ,, View of the men's locker room. i� f r McKEE & SCiHALKA REAL ESTATE APPRAISAL SERVICES$CONSULTANTS,INC. Seattle, Washington Kant Meridian Pool, Kent, WA,May 20,2011 Subject Photographs v View of the pool from the shallow end near the entrance. a View of the starting blocks and diving board, 0 � rr, /,ifview Of the 11p1 from t4t' ef'p �u l/,/,� end. REAL ESTATE APPRAISAL SERVICES&CONSULTANTS,INC. Seattle, Washington KentMendian Pool,Kent, WA,May20, 2011 Subject Photographs NRON, View of the pool office. s View of the mechanical room. I�. View of a storage room, i cKEE & SCHALKA REAL ESTATE APPRAISAL SERVICES&CONSULTANTS,INC. Seattle, Washington NEIGHBORHOOD MAP igbborbood Map S 222nd St s 222n � �� SE 223rd Si a� stAd ' `' r SE 225th Sm CD an 2 FEswn st e a " F m SE 22st1b St d k,' SEA.227rh PI 22flIYa st S 2211 St SF 22'Swa�st SE a,? SE $ µ ATurnkey o Pr SE n St 1 VP i S<,2�5sas `i � K j Cla n�q U5 `91°2364h S Iz Kent 6 Ct) UJ SE 238th PI awwrrww rwt z! orrhor'W zrr, 1irC .g to s 1s7ttw PI a qis API 1°w",lma-,Si eJmw%esst U � _ S?40Ms. SE 24fPhSt y 2 r2t11nd Sl w *£ t� �' � Vwl'S"mdchSt t Smtli ;w � �, � 244Yh,Sk a 4 $a1ut.e �s W Ward.,Ix,St i V w�11 T � "hW°Pat, " t E hrer ,er St Wy '"', 8 S 24E9n Pt Kent p 2wE1r4r sa HIH Pa I'll Subject c�r.ohw rr,st E Can Laurel sw zar wl.,,,, - wu rra c . SE la th Pi - S .., daairf Al st �.25kdt1ta�t r SF E' mew F1IIa� rrs'E o �p CL S 25Th St a A S H 6 N G T 0 N aa� S 262nd sa f rdy ® v 7Ww �' ¢ Ul SE 2,GAth Pa s 2661h St SE 21F jlqlh St f.,� SE 211al st SE 272nd St % or°tN"i Green a iwrr r s?.771h st, SE x'7 ah s>. ir1 Park ws s 2XT sw > Tree,.._.jr�.', .._. .. ...., ....... a 277ttw 51 ..... .._. rd Park s w m rTM "fPwomas r. SF 21tJlt St u AGREEMENT COMPARISON MAP Agreement Comparison Map oauyasx,S,%,,.e Lynnwood North Creek tvtr _ °"Edmonds ae��,595E i Esperanc�w Prlduntlake41 prroer Richmond Tyrwac� a � �nanJ Highlands vends AsadlteCl sz7, 5 dre4dnt1111 City � Kenmc , ,,.. l�©rn arisen #3 wo; r�ewle Indianola w f POWSWa CP'UV41M1 f r.„' w ,Surprrt'ndstx � ➢�uiwq�ate A ur e'a Comparison #4 Whiter" /Pa 5eabo"d "� ..n r ?' " �1 Rd^fP alhh SC "'�� � ,r ud°; f�iTklaxad Redmond- tYalPux,gUmy Fort 4PIas.k^ VMTY o4 a❑ S lvexdale 8ro'nr t' tha wa a7L ra I,llihc7 i ha o ;<a ix C,a,.:' . lasw; darrrov Poi 5�c fie a y Eus°mk.�ra�Vgx:6mBartx: w ' Pra,r:rrtr st Bainbridge Island "'.'N a Tracptan m rari °ar.,e Mtwd as B ll VItP, ke Swrimamish P uu ErdavdvdS Pofn t P{ sd;sxay. arct.J4r is l Aare ,a 1"� 14IAnIkY��`C atIslandEaSt Ae " rp.'r5tl"tipn a M .�+ 9 4 �a""Y"� X wxw�nawvewtes r� waed Cwx Pees kxch7'rd Nrastk, • ,,,,rat g ,, to rwgtsah East Pa+e Orchard ntolComparison #� ea g__. SE ss—t RdVasho, �etr mt M760ht�s 'rwrn ao(r', Bryn Mawr 11, Seota 6c t, 8aa cv Proubawawd Park SAyrov.ry East Renton lden�o 5cra' Rwertciv ax Highlands cro - � a u 'Jashran Norn"ndy Pa;k r 5eaTac a Qta 4a •• • dbzY aar Cfwmtley+ h ashcn 44wr SG7 xiabaT; i am arisa�n # a a Moines Subject & Indication #1 'gall a W`faurra � Y„,r�ra err h.�i' Kent ,SE272nd St W4Pdaclrlront Reach Cavix'�totro T a9ti equail a Gig tiarbad I.e'a Hifl % 0,40 Pnrrt Aut�zxFlt, Blackp;anvonc9e lskcadd k a?wr fedar &wa, Indication #2 n�u Fnstsland People's Pool Algona Porto % Fh)x Wind d a ',Pf�T Tacorxav Pa�"iFvC. OMC % t'xtWdr+3Kl'tnr t=�Tivetsity y St"r' lWtll'P.64T 4 °fti.`k'N.`"w.: uM VCJYRk BP FifeFuc est T�Pr Place er.a kslaund McNe 1 Indication #2 North Puy11UP n .. SCa}rix3,:.: Enumclaw'�. ,�.1 M+'atlOQt a 410, iar Eastside Suen.ncr r` ... .- "uv., ' Puyallup -ava Bonney1,a9 e v lad sleflata•7nt " Lakewood ,l,. .. „_,ira,,.Samrnvwt,�,•..e ,s�k,x_�..�`. `Buckley APPRAISERS' EXPERIENCE & QUALIFICATIONS McKee & SCHALKA REAL ESTATE APPRAISAL SERVICES&CONSULTANTS,INC. 1200 Sixth Avenue,Suite 1805,Seattle,Washington 98101 Telephone (206)343-8909 Fax (206)386.57r1 EXPERIENCE &QUALIFICATIONS KENNETH A. BARNES, MAI, CRE Mr. Barnes graduated from the University of Missouri -Columbia with a BS in Biochemistry in 1982. In 1988 Mr. Barnes received an MBA with a Finance concentration from the University of Chicago. Mr. Barnes received the MAI (Member Appraisal Institute) designation in 1989. He also holds the CRE designation awarded by the Counselors of Real Estate. Mr. Barnes entered the real estate business in 1981,first as a principal acquiring and renovating small rental properties,and then as an appraiser in 1983 with Moore & Shryock in Columbia, Missouri. In 1984 Mr. Barnes moved to Chicago to join Real Estate Research Corporation. He joined Cushman & Wakefield in 1989 as a Senior Appraiser in Seattle. In 1990, Mr. Barnes was elected an officer of the company as a Director and Manager of the Seattle practice. In 1998 he left the company to travel and returned to CB Richard Ellis. After 18 months of corporate advisory work he joined first one, and then a second, startup in executive roles. Mr. Barnes returned to Cushman & Wakefield in 2001 as Director. Mr.Barnes joined McKee&Schalka in 2006. Mr. Barnes has authored a number of articles in the Appraisal Journal and other real estate publications, and has been a guest speaker or panelist for real estate organizations including NAIOP,IREM and the Appraisal Institute. Mr. Barnes is a Certified General Real Estate Appraiser (Washington State Certificate No. 1100578), and has completed the requirements of the continuing education program of the Appraisal Institute. In his appraisal experience, Mr. Barnes has appraised and analyzed a wide variety of commercial property types, and provided critical appraisal, consultation and litigation services to a diversified range of clients. McKEE & SCHALKA REAL ESTATE APPRAISAL SERVICES&CONSULTANTS,INC. 1200 Sixth Avenue,Suite 1805,Seattle,Washington 98101 Telephone (206)3434M9 Fax (206)3865= EXPERIENCE &QUALIFICATIONS ARTHUR JONES Mr.Jones graduated from Whitman College with a Bachelor of Arts. He majored in Economics and minored in Mathematics. He previously attended Franklin College, in Lugano, Switzerland. Mr. Jones has appraised a variety of property types, including vacant commercial and residential land, retail, industrial, office, special purpose,as well as open space and timberland. Valuation has encompassed fee simple, leased fee and leasehold estates. His appraisal practice has focused on Western Washington. Mr. Jones also has experience with full and partial acquisition appraisals for public agency acquisition. Mr. Jones is a State-Registered Real Estate Appraiser Trainee, No. 1000956. Appraisal coursework includes Real Estate Appraisal, USPAP, General Income Approach Part I, General Income Approach Part II, Market Analysis & Highest and Best Use, and Advanced Income Capitalization. Before joining McKee & Schalka, Mr. Jones co-founded Meydenbauer Entertainment, a full service video production company. He has lived in Washington State his entire life.