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Home My WebLink About6B (3)�o IS ( 3) �oT� BF Community & Economic Development 1865 1200 County -City Building, 227 West Jefferson, South Bend, Indiana 46601 -1830 Phone 574/235 -9371 Fax 574/235 -9021 To: Redevelopment Commission '/� From: David Relos, Economic Development Planner0W Subject: Administrative Settlement for acquisition of 701 W. Indiana Ave. Date: January 03, 2012 This is the staff report for the administrative settlement that is needed for the acquisition of 701 W. Indiana Avenue, also known as Donna Lee's Tavern. This property sits at the northwest corner of Scott and Indiana, with Scott Street becoming the new entrance from the south into Ignition Park (see attached map). According to the Uniform Relocation Act, an administrative settlement is authorized when negotiations exceed the market value of the property and are necessary for its acquisition. On November 22, 2011 the Commission approved Resolution No. 2966, setting the offer price for this property at $33,500, which is the average appraised value. To relocate the tavern currently operating on this property, another building that could accommodate it would need to be identified, and that building brought up to current building and fire codes. According to zoning ordinances, a tavern is a controlled use, and as such, relocation options are limited. Funding would be required to acquire and rehabilitate a new building for this tavern's relocation. In addition, a firm would need to be hired to assist the property owner through the various departments who would need to approve this controlled use relocation, and to provide design services for the work needed on a new building. Costs would be incurred to move and install coolers, sinks, bar, and furniture and fixtures (see attached Nonresidential Moves, Summary of Covered Items). After much thought, this property owner has decided to close her tavern and not relocate. This will further help to clean and clear this area on the southern boundary of Ignition Park, and enhance this entrance into the Park. A general valuation method for a small neighborhood tavern is 2 to 2.5 times gross receipts. Two times the average of the last three year's gross receipts for this business is $163,000. The $33,500 property value plus $163,000 business value arrives at a value of $196,500. This property owner asks for a lump sum payment of $190,000. What We Do Today Makes A Difference! Potential relocation costs to move this business range from a minimum of $205,000 to $280,000. The attached Relocation Cost Potential compares costs if this business were to be relocated. These relocation costs are very conservative, and likely will be tens of thousands of dollars more (For the relocation of a private club one block to the west, the Building and Fire Departments required $56,290 in improvements alone to the new building.). For comparison purposes, the private club one block away was acquired and relocated one year ago. This club's building on Indiana had an average appraised value of $24,000. In addition, relocation costs totaled $153,290, for total acquisition and relocation costs of $177,290 (this club moved themselves and installed their own bar and fixtures). Earlier this year, Michiana Lock & Key had an average appraised value of $65,000, with $275,000 in relocation costs, for total acquisition and relocation costs of $340,000. Staff believes the administrative settlement of $156,500 ($190,000 less the acquisition cost of $33,500) for this business is reasonable, in light of costs that would be incurred if it were relocated (see attached Buyout vs Relocation), and requests your approval to allow the acquisition and eventual clearance of this property. What We Do Today Makes A Difference! C m j d N C A J NONRESIDENTIAL MOVES SUMMARY OF COVERED ITEMS (In addition to acquisition costs) Moving Costs: • Lesser of 2 quotes from a moving company to move the personal property • Packing, crating, unpacking and uncrating of personal property • Disconnecting, dismantling, removing, reassembling, and reinstalling of machinery, equipment, and personal property, including modifications necessary to meet federal, state, or local codes and ordinances to adapt it to the new structure, and modifications necessary to adapt the utilities at the new site • If an item cannot reasonably be moved (walk in cooler, beer cooler, ice machine, sinks), the cost of the substitute item, including installation, less the sale or trade - in value of the old item(s) • Replacement value of property lost, stolen, or damaged in the process of moving • Costs of a license, permit, fee, or certification needed at the new site • Professional services to plan, move, or install items • Re- lettering signs or stationary • Time spent searching and negotiating, based on reasonable salary or earnings • Fees paid to a real estate agent, exclusive of commissions Reestablishment Expenses: • Repairs and improvements to the new site as required by federal, state, or local code and ordinance • Modifications to the new site to accommodate the business operation • Construction and installation cost for exterior signing • Redecoration or replacement of soiled or worn surfaces at the new site • Advertisement of the new site • Estimated increased costs of operation during the first 2 years for property taxes, insurance premiums, and utility charges RELOCATION COST POTENTIAL Bars on the market: Dunham Inn (2008), $175,000 Plus costs to bring it up to code (no longer grand fathered) Phis moving costs Plus professional services for zoning, special exceptions, and design services Yakety Yak, Mishawaka IN, currently on the market for $250,000 Plus costs to bring it up to code (no longer grand fathered) Plus moving costs Plus professional services for zoning, special exceptions, and design services Conservative estimated costs: Rehab for code: $15,000 Moving costs: $5,000 Professional services: $10,000 Total estimated costs: $30,000 Buildings currently on the market in South Bend: 4005 Western Ave, 2,520 sf, $179,000 3617 McKinley, 2,000 sf, $195,000 17911 SR 23, 2,880 sf, $165,000 Plus build out to accommodate a bar & meet code Plus moving costs Plus professional services for zoning, special exceptions, and design services Conservative estimated costs: Build out: $30,000 Moving costs: $5,000 Professional services: $10,000 Total estimated costs: $45,000 These costs are likely to be much higher. For example, the private club was required by the Building and Fire Departments to make $56,290 in building improvements, and they are not open to the general public. Costs for bathroom and ingress / egress requirements to meet the Americans with Disability Act, bar installation (including coolers, sinks, ice machine, etc), emergency lighting and exit signage, smoke detectors and alert system, and fire wall protection would all be required by these two departments. BUYOUT VS RELOCATION Summary Valuation: Based on a general rule of thumb of two times gross receipts for small bar valuation, this business is valued at $163,000 plus $33,500 for the property, or $196,500. The only current bar on the market staff could find is in Mishawaka. Acquisition and relocation costs to move this business to that location would be a minimum of $280,000. A bar in the current general location was for sale in 2008 for $175,000. Costs to acquire and move to this location would have been a minimum of $205,000. Current buildings for sale in South Bend that could accommodate this business range from $165,000 to $195,000, in addition to minimum relocation costs of $45,000, for a range of $210,000 to $240,000.