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South Bend Redevelopment Commission <br />Regular Meeting –August 6, 2010 <br /> <br />6. NEW BUSINESS (CONT.) <br /> <br />B. Airport Economic Development Area <br /> <br />(7) continued… <br /> <br />in rent. Based on this income stream, <br />deducting a 10% vacancy rate, $604 per year <br />in real estate taxes, $800 per year for <br />insurance, and $1,000 per year in <br />maintenance, the net income per year is <br />$7,316. At a cap rate of 11%, the value of <br />the rental house itself would be $66,500. <br />Staff did verify with a local credit union that <br />they use a cap rate of 9 – 11% to value <br />income producing properties. <br /> <br />The property owner, who owns over 200 <br />properties in this area, has agreed to accept <br />$95,000 for this property. This purchase <br />price would relieve the Commission of any <br />relocation assistance for both the owner’s <br />warehouse and tenants, as the owner is <br />waiting for the Commission’s decision before <br />he signs any long term leases for the tenants <br />currently residing in the two apartments. <br /> <br />Staff feels the acquisition cost of $95,000 is <br />reasonable for this property, and requests <br />your approval of the administrative <br />settlement to allow for the acquisition of this <br />property. Mr. Relos checked with CB <br />Richard Ellis who said $10-$15 per sft was a <br />reasonable lease rate for warehouse space. <br />That lease rate results in a $30,000 valuation <br />for the warehouse. <br /> <br />Mr. Inks noted that the breakdown is that we <br />would be paying $66,000 for the duplex and <br />$29,000 for the warehouse. This is the <br />acquisition that precipitated Mr. Relos’ <br />research on other appraisal methods. The <br /> 17 <br /> <br />