CCP 04-10-2007 - Laserfiche WebLink

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~~~ the cRy that, wniks for ynu Re ort Number: A ends Section: Re ort Date r1 ` ~, Council Meetin Date - ~Q 2ap REQUEST FOR COUNCIL CONSIDERATION ITEM DESCRIPTION: Consideration of Resolution Approving Appraisal of Value far Purchase of Leased Fee Interest in 1255 Old Highway S NW DEPARTMENT HEAD'S APPROVAL: Grant Fernelius, Director of Community Development CITY MANAGER'S APPROVAL: No comments to supplement this report ~i'/L Comments attached Recommendation: Waive the reading and adopt the attached resolution approving $685,000 as the City's approved appraisal amount for the leased fee interest for 1255 Old Highway S NW. Legislative History: May 23, 2006 -Council approves resolution authorizing eminent domain action on the property at 1255 Old Highway 8 NW. FinancialIrnpact: The City will be required to deposit the appraised value, with the funds taken from the City's development funds. The actual price of the property will be determined by a panel of commissioners. Explanation: The City initiated a condemnation process in order to acquire the post office building, as part of the redevelopment of the Northwest Quadrant. As part of the process, the City was required to obtain a real estate appraisal. An appraisal report by Patchin Messner & Dodd (PMD) was completed, dated September 26, 2006. The fee simple value of the property is the value of all of the interests in the property. PMD estimated this value to be $1,200,000. The assumption would be that the building would be available far a purchaser to either use the building or lease it at a market rate. But the United States Postal Service has a lease for the entire building that will be in place unti12022, with no right for a purchaser to terminate it. The rights of the fee owner (including the right to receive rent payments and to use the property after expiration of the lease) are known collectively as the "leased fee interest." The rights of the lessee under the lease are collectively referred to as the "leasehold interest." In the present case, the lease payments are far below the market rents that could be obtained today. In such a case, it is said that the tenant has a "leasehold advantage." Therefore a purchaser would not pay as large a price for the leased fee interest, since the stream of income to the fee owner would be substantially less so long as the lease remains in effect. f:\COUNC(f.\REPORTS\200'1\Community f7cvelppmenti4-IO-20p71Ppst Office Appraisal Repnrt.dx