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TRANSMITTAL LETTER Date : 1/30/2009 Alliant Insurance Services, Inc. 1301 Dove St., Suite 200 Newport Beach, CA 92660-2436 RE: Appraisal Services for 1 structures in the Cost a Mesa Sanitary District. In response to your request and authorization, we h ave undertaken the investigations and analyses necessary to estimate the replacement cost new of the structures contained in the schedule of values for the Costa M esa Sanitary District. Scope of Work: The scope of this assignment is to develop an opini on of value for replacement cost new of the structures for insurance purposes. The value of the land on which the improvements are attached is not included in this a nalysis. The most meaningful and reliable approach to determine replacement cost new for the insurable value is the cost approach. Replacement cost new is the cost of creating a buil ding having similar utility, using current standards of design and materials. It is n ot necessarily the cost of creating a replica of the existing structure if the improvemen ts are constructed of outdated materials, technique, and design. Excluded from th e appraisal are assets of intangible nature, records and drawings, inventory items, pers onal property and leased property. Insurable value is based on current base constructi on costs, excluding site improvements, indirect costs, land and entrepreneur ial profit. The services provided include close examination all structures on the list provided. All aspects of the structural improvements which includ e construction type, quality, size, and other attributes are considered in the analysis. S tructure size is based on data provided by the client; the size data is verified during the building analysis. Sources for replacement cost information include, but are not l imited to actual historical costs, files, databases, and industry price guides. The selected unit of comparison for the cost approach analysis is cost per square foot, which is consistent with how market participants typically evaluate construction costs. A Detail Building Report for each structure is deve loped and provided in this report which indicates general building characteristics and the total replacement cost. Fluctuations in Values: It appears that most of the variances in previously reported values are the result of dated information. Other possibly reasons for variances may be the result of inaccurate reporting of improvement size, quality or features. Additionally, previously reported values may have been calculated using an estimate a verage price per square foot, while not taking into consideration individual building c haracteristics, local and current cost adjustments for each structure. Value Comparison Report: A review of the Value Comparison Report and the ind ividual building detail reports reflects some changes in the replacement cost value s. The appraised values reflect the replacement cost of the building improvements only and do not include personal property or business interruption values. The Value Comparison Report, found before the Appra isal Building Detail Report pages, identifies and explains the variance ratios and app licable changes of the structures’ attributes including square footage and or other fe atures identified during the site inspections. Overall, the differences in the estimated values fo r the structures appear to be primarily due to the updating of current replacement costs. The structures appear to be well built and well maintained properties with the overall val ue changes falling within a reasonable range. We appreciate the opportunity to work with you on t his project and hope that the findings and detailed information on the individual structur es is helpful to you and the client. Please contact us if we can be of any further assis tance. Sincerely, Alliant Appraisal Services CERTIFICATION We the undersigned do hereby certify that to the be st of my knowledge and belief except as otherwise noted in this report: 1) We have previously appraised properties of this type and am competent to appraise this property. 2) That the reported analyses, opinions, and conclu sions are limited only by the reported assumptions and limiting conditions, and a re my personal, unbiased professional analyses, opinions, and conclusions. 3) That we 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. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. 4) That our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause o f the client, the amount of the value estimate, the attainment of a stipulated resu lt, or the occurrence of a subsequent event. 5) That, to the best of our knowledge and belief, t he reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Pro fessional Ethics and the Standards of Professional Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP ). Standards rules 2-2(c). 6) Alliant Appraiser, Kim White, has made on-site i nspections of the properties in this report. 7) No one has provided significant professional ass istance to Alliant Appraisal Services or the persons preparing this report. 8) That, the use of this report is subject to the r equirements of the Appraisal Institute relating to review by its duly authorized representatives. Alliant Appraisal Services The client and intended user of this report are All iant Insurance Services and their client. The purpose of this report is for use in insurance placement. A cost approach is utilized to develop the insurable value. This is part of th e fee simple interest in the structure. ASSUMPTIONS AND LIMITING CONDITIONS To assist the reader in interpreting the report, su ch assumptions and limiting conditions as related to the properties considered in this report are set forth as follows: SPECIAL ASSUMPTIONS AND LIMITING CONDITIONS None STANDARD ASSUMPTIONS AND LIMITING CONDITIONS 1. The conclusions and opinions expressed in this r eport apply to the date of the survey. 2. The appraiser assumes no responsibility for econ omic, physical or demographic factors which may affect or alter the opinions in t his report if said economic, physical or demographic factors were not present as of the date of the letter of transmittal accompanying this report. The appraiser is not obligated to predict future political, economic or social trends. 3. Disclosure of the contents of this appraisal rep ort is governed by the Code of Professional Ethics and the Standards of Profession al Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP). 4. In preparing this report, the appraiser was requ ired to rely on information furnished by other individuals or found in previous ly existing records and/or documents. Unless otherwise indicated, such informa tion is presumed to be reliable. However, no warranty, either express or i mplied, is given by the appraiser for the accuracy of such information and the appraiser assumes no responsibility for information relied upon later fo und to have been inaccurate. No responsibility is assumed for errors or omissions, or for information not disclosed which might otherwise affect the valuation estimate . The appraiser reserves the right to make such adjustments to the analyses, opi nions and conclusions set forth in this report as may be required by consider ation of additional data or more reliable data that may become available. 5. No opinion as to the title of the subject is ren dered. The scope of this assignment is limited to the extent that ownership is not at i ssue. 6. The appraiser assumes no responsibility for hidd en or non-apparent conditions of the structures that render the subject property mor e or less valuable. No responsibility is assumed for arranging for enginee ring, geologic or environmental studies that may be required to disco ver such hidden or non-apparent conditions. 7. The appraiser has not been provided any written information regarding the presence of any material or substance on or in any portion of the subject property or improvements thereon, which material or substanc e possesses or may possess toxic, hazardous and/or other harmful and/o r dangerous characteristics. Appraisers are not generally qualified to investiga te or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the value of the subject prope rty. The value estimated in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such pr oximity thereto that it would cause a loss in value. The appraiser assumes no res ponsibility for the presence of any such substance or material on or in the subj ect property, nor for any expertise or engineering knowledge required to disc over the presence of such substance or material. 8. This report assumes the subject property is in c ompliance with all federal, state and local environmental laws, regulations and rules . 9. The subject property is assumed to be in full co mpliance with all applicable zoning and land use regulations and restrictions. 10. The property is assumed to have all required li censes, permits, certificates, consents or other legislative and/or administrative authority from any local, state or national government or private entity or organiz ation have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 11. No opinion is expressed as to the value of subs urface oil, gas or mineral rights or whether the property is subject to surface entry fo r the exploration or removal or such materials, except as is expressly stated. 12. Maps, plats and exhibits included or referenced in this report are for illustration only to serve as an aid in visualizing matters disc ussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced or used apa rt from the report. 13. No opinion is intended to be expressed for matt ers which require legal expertise or specialized investigation or knowledge beyond th at customarily employed by real estate appraisers. 14. The liability of the appraiser is limited to th e client only and to the fee actually received. If any legal action is brought against th e appraiser, and the appraiser prevails, the party initiating such legal action sh all reimburse the appraiser for all costs, including legal fees, incurred by the apprai ser. 15. Possession of this report, or a copy of it, doe s not carry with it the right of publication. Without the written consent of the app raiser, this report may not be used for any purpose by any person other than the p arty to whom it is addressed. In any event, this report may be used only with pro per written qualification and only in its entirety for its stated purpose. Neithe r all, nor any part, of the contents of this report shall be disseminated to the public through advertising media, public relations, news media, sales media, or any p ublic means of communication without prior written consent and app roval of the appraiser. 17. The property that is the subject of this report is within a geographic area prone to earthquakes and other seismic disturbances. Except as specifically indicated in the report, no seismic or geologic studies have bee n provided to the appraiser concerning the geologic and/or seismic condition of the subject property. The appraiser assumes no responsibility for the possibl e effect on the subject property of seismic activity and/or earthquakes. 18. Testimony or attendance in court or at any othe r hearing is not required by reason or rendering this report, unless such arrang ements are made a reasonable time in advance of said hearing. Further , unless otherwise indicated, separate arrangements shall be made concerning comp ensation for the appraiser's time to prepare for and attend any such hearing. 19. The appraiser finds no obvious evidence of stru ctural deficiencies in any improvements located on the subject property. Howev er, the appraiser assumes no responsibility for hidden defects or non-conform ity with specific governmental requirements, such as fire, building and safety, ea rthquake or occupancy codes, unless inspections by qualified independent profess ionals or governmental agencies were provided to the appraiser. Further, t he appraiser is not a licensed engineer or architect and assumes no responsibilit y for structural deficiencies not apparent to the appraiser at the time of inspec tion. 20. No termite, dry rot, wet rot, pest or other inf estation report was made available to the appraiser. It is assumed that there is no relat ed damage or infestation, unless otherwise stated. 21. No engineering survey has been made by the appr aiser. Except as specifically stated, data relative to size and area of the subje ct property was taken from sources considered reliable and no encroachment of the subject properties considered to exist. 22. No soils or geological studies or reports were made available to the appraiser. It is therefore assumed that there are no soil conditi ons which negatively affect the subject property. As no hydrology studies were avai lable for review, it is assumed that any drainage through or across the subject pro perty would be contained, and the property under appraisement would not be subjec t to flooding. 23. The inspection of the subject property could no t determine if asbestos was present in the building structure. No report was ma de available concerning the presence/absence of asbestos, and therefore the app raiser has not considered the presence of asbestos as a factor in this apprai sal. 24. The Americans with Disabilities Act (ADA) becam e effective January 26, 1992. The appraiser has not made a specific compliance su rvey and analysis of the subject property to determine whether or not it is in conformity with the various detailed requirement of the ADA. It is possible tha t a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could well reveal that the subject property is not in com pliance with one or more of the requirements of the Act. If so, this fact could hav e a negative effect upon the value of the subject property. Since the appraisers have no direct evidence relating to this issue, possible non-compliance wit h the requirements of the ADA in estimating the value of the property has not bee n considered.