Here is Why He Filed

5/21/2018 Here is Why He Filed

1/83

Page 1 of 9

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF

MISSOURI WESTERN DIVISION

)

)

In re: ))

TAC INVESTMENTS, LLC ) Case No. 14-40253-11

)

)

Debtor. )

CREDITOR OPTIMA LLCS MOTION FOR AN ORDER LIFTING AUTOMATIC

STAY TO PERMIT FORECLOSURE OF DEED OF TRUST ON REAL ESTATE OR, IN

THE ALTERNATIVE, DISMISSING BANKRUPTCY PROCEEDING

INTRODUCTION

Creditor, Optima LLC, (Optima) hereby moves the court for its Order lifting the

automatic stay in this case to permit Optima to proceed with the foreclosure of a Deed of Trust

on certain real estate owned by the Debtor in Cass County, Missouri. Alternatively, Optima

requests the Courts OrderDismissing this Chapter 11 proceeding.

The only asset of any significance listed in the schedules originally filed by the Debtor is

this real estate located in Cass County Missouri. Optima holds a Deed of Trust on that real

estate. The Deed of Trust was given to Optima as security for a $125,000.000 loan made by

Optima to the Debtor pursuant to a Promissory Note dated October 17, 2012. True copies of the

Promissory Note and Deed of Trust are attached as Exhibits 1 and 2 to this Motion. Under the

terms of the Promissory Note the $125,000.00 principle balance of the loan and any unpaid

interest was to be repaid in full on or before October 15, 2013. The Note provides that the

annual interest payments are to be 12% of the principle balance of the loan, paid on a monthlybasis. Those interest payments were current up to the October 15, 2013 deadline for full

payment of the $125,000.00 principle of the loan.

The Debtor failed to repay the principle balance due on October 15, 2013 as required by

the terms of the Promissory Note. From and after October 15, 2013 the only payments received

Case 14-40253-can11 Doc 44 Filed 05/29/14 Entered 05/29/14 16:44:02 Desc MainDocument Page 1 of 83


2/83

Page 2 of 9

by Optima from the Debtor have been a $1250.00 interest payment received in November of

2013 and a single check dated March 11, 2014 for $520.83. That March 11, 2014 check was

mailed by counsel for the Debtor to counsel for Optima on April 7, 2014 and characterized as

the monthly adequate protection payment.

As a result of the Debtors failure to remit a timely payment of the balance due on the

Promissory Note by October 15, 2013, Optima proceeded to institute a Non-Judicial foreclosure

of its Deed of Trust. After compliance with all notice and publication requirements established

by Missouri law for Non-Judicial foreclosures, the sale of the Debtors Cass County real estate

was scheduled to occur at 2:00 pm on January 28, 2014. The institution of this Bankruptcy

proceeding on the morning of January 28, 2014 prevented the foreclosure sale from going

forward.

This Chapter 11 proceeding presents a classic example of the reason Congress enacted

special rules for disposition of single asset real estate bankruptcy cases. Under the

circumstances Optima is convinced that the petition filed in this case serves no purpose other

than as a tactic designed to stave off creditors when the debtors have no hope of

reorganizing. Ad Hoc Group of Timber Noteholders v Pac Lumber Co. , 508 F.3d 214, 223 (

5

th

Cir 2007).

OPTIMAS GROUNDS FOR AN ORDER LIFTING THE AUTOMATIC STAY

As its grounds for an Order lifting the automatic stay Optima relies on the following

points. Any one of these points provides sufficient grounds for lifting the automatic stay.

Cumulatively these points present an overwhelming case for lifting the stay in this proceeding.

Failure to Comply with Section 362 (d) (3)

This Chapter 11 proceeding is a Single Asset Real Estate Bankruptcy (hereinafter

SARE). All three parts of the test for determining a proceeding to be a SARE bankruptcy are

met in this case. (See, 11 U.S.C. Section 101(51b)) First, the Debtors real estate, located in

Cass County Missouri is a single property consisting of three contiguous lotstwo vacant lots



3/83

Page 3 of 9

and one lot with a building leased to the operator of a commercial business. All of the Debtors

property is described in the Deed of Trust, Exhibit 2 to this Motion. Second, all or substantially

all of the Debtors gross income is derived from rent on the buildingowned by the Debtor.

Third, the Debtor has no business operations of any significance other than the lease of its Cass

County real estate. All these facts are verified by the Schedules filed by the Debtor in this case.

Moreover the Debtors representative conceded these facts at the first meeting of creditors

occurring on March 26, 2014.

Debtors Bankruptcy Petition was filed on January28, 2014, the same day the real estate

was scheduled to be sold on the Cass County Circuit Courthouse steps pursuant to Optimas

Non-Judicial Foreclosure on the Deed of Trust. More than ninety days has passed since the filing

of Debtors Bankruptcy Petition. To date, Debtor has not filed a reorganization plan, nor sought

an extension of the ninety day deadline for filing a reorganization plan provided in 11 U.S.C.

Section 362(d)(3) for SARE Bankruptcies.

Nor has the Debtor tendered any monthly payments to Optima equal to the interest owed

on the balance due under the Promissory Note, calculated by using the 12% non-default

interest rate provided in that Note. Disregarding foreclosure costs, attorneys fees and

compounding interest amountsall of which are by the terms of the Note to be included in thebalance now owed by the Debtor to Optima -- the balance owed under the terms of the Note is no

less than $132,500.00. That figure is determined by the following calculation: six months of

simple interest from 12/1/13 through 5/1/14 equals $1250.00 X 6 = $7500.00 + $125,000.00 =

$132,500.00). Using the non-default contract rate set forth in the Note of 12%, monthly

adequate protection payments can be no less than $1325.00. The sole post-bankruptcy payment

of $520.83 tendered by the Debtor on April 7, 2014 can in no way be characterized as a good

faith attempt to comply with section 362 (d) (3).

Absent compliance with section 362 (d) (3) the Debtor is not entitled to the protection

provided by the automatic stay. Accordingly the automatic stay should be lifted to allow Optima

to proceed with the foreclosure sale.



4/83

Page 4 of 9

The Debtor has no Significant Equity in the Real Estate and the Property is not Neccessary

to an Effective Reorganization

Section 362 (d) of the Code requires the Court to lift the automatic stay in a SARE

bankruptcy if the following two matters are established: 1) the debtor does not have equity in the

real estate and 2) the real estate is not necessary for an effective reorganization. Both of these

factors are present in this case. Attached as Exhibit 3 to this Motion is a copy of an Appraisal of

the Debtors real estate commissioned by counsel for Optima. That Appraisal was prepared by

the State Certified, Licensed Appraisers Robin Marx and Matthew Woods, both associated with

the Appraisal firm Bliss Associates LLC. As reflected in the Appraisal, as of May 6, 2014 the

fair market value of the Debtors real estate is $125,000.00. This amount is, of course, well

below the current balance owed under the terms of the Note.

Under the law Optima need not demonstrate the Debtors complete lack of equity in the

real estate. A secured creditor such as Optima is also entitled to take into account prospective

foreclosure costs in determining the amount of its lien against the real estate. In this case

however the amount of Optimas lien already exceeds the fair market value of the real estate.

This is true even before attorneys fees and foreclosure fees incurred to date and projected to be

incurred in the future are added to the total. Accordingly, the first prong of the two part test of

Section 362 (d) (2) is established.

Under Section 362 (g) once Optima establishes the lack of the Debtors equity in the real

estate, the burden shifts to the Debtor to prove the real estate is necessary to an effective

reorganization. Since the January 28, 2014 filing of this Chapter 11 proceeding, the Debtor has

not provided any reorganization plan, or even a hint of how its financial affairs could be

reorganized in anything close to an effective manner. As noted by the United States SupremeCourt in United Savings Assn v Timbers of Inwood Forrest Assocs Ltd, 484 U.S. 365 (1988) a

failure of the Debtor to come forward with a reorganization plan in the first several months of a

Chapter 11 proceeding is a strong indicator that no such plan could be constructed.



5/83

Page 5 of 9

In this case there are simply no prospects for a successful reorganization of the Debtors

business, with or without the real estate subject to Optimas deed of trust. This is not a situation

in which a debtor is midway through the construction of some residential or commercial

development with the prospect of substantial revenues to be generated upon completion of such a

project. The Debtors schedules show the sole source of its revenue to be a monthly rental

payment of $2,000.00. There is no work underway or planned for improvements to the other two

lots. Read in their entirety the Debtors schedules -- and in particular Debtors Statement of

Financial Affairsreveals that the Debtors only revenue is a monthly rental payment of

$2,000.00 from a lease of the one improved lot owned by the Debtor. That rental payment is

insufficient to fund any viable reorganization plan and there are apparently no viable option for

generating additional revenues.

As explained above, the monthly interest currently owed to Optima on the unpaid balance

of Promissory Note principle, plus accrued interest called for by the terms of the Promissory

Note is now more than $1,325.00. That sum will increase again when May turns to June. Again,

it should be remembered that the Note also entitles Optima to recover all attorneys fees and

other costs of foreclosure or other efforts to collect amounts due under the terms of the Note.

Adding monthly interest on the current balance of the Note, calculated by using the non-default

contract rate to the costs Optima has incurred to date for the aborted foreclosure sale as well asthe Appraisal attached to this Motion will increase the monthly adequate protection payments

due to Optima by another hundred dollars or so. Once the costs of real estate taxes, insurance

and the maintenance of the rental property are added to the monthly payments to which Optima

is now entitled, it becomes clear that the debtor simply has no revenue on which a successful

reorganization plan can be constructed. There will certainly be no funds remaining from the

Debtors revenue stream from which any meaningful payments can be made against the current

principle balance due under the Note. Finally the Debtors schedules reveal that the lease of the

Debtors real estate is due to expire in July of 2014. Thus, there is a significant risk that after

July of 2014 the Debtor will have No Revenue to fund a reorganization plan.

This bankruptcy proceeding appears to be a nothing more than a desperate attempt to

delay foreclosure by filing a Chapter 11 petition hours before a scheduled foreclosure sale.



6/83

Page 6 of 9

There simply are no realistic, potential revenue streams available to this Debtor which could be

utilized to create a viable reorganization plan. Optima should not be forced to continue waiting

to exercise the rights it received in consideration of the funds it loaned the Debtor on October 17,

2012.

OPTIMAS GROUNDS FOR DISMISSAL

Alternatively, the Debtors Failure to Account for the Proceeds of the Optima Loan in a

timely manner, as Ordered by the Trustee, Justifies Dismissal of the Case

On March 26, 2014 the principle owner of the Debtor appeared at the first meeting of

Creditors. In the course of his questioning the Trustee inquired about the Debtors use of the

$125,000.00 loaned to the Debtor by Optima in October of 2012. These questions were prompted

by the fact that there were no references to the proceeds of the Optima loan in any of the

schedules filed by the Debtor. In response to the Trustees questions Mr. Covey testified that the

proceeds of the Optima loan had been transferred to a different company controlled by Mr.

Coveys mother. Mr. Covey failed to explain the terms under which those funds were

transferred, the consideration received by the Debtor in return for the transfer of funds orwhether the transfer created an account receivable that should have been listed as an asset on the

Debtors schedules. In addition, Mr. Covey and his counsel noted that the schedules filed by the

Debtor had mistakenly listed Mr. Covey as a co-debtor based on the mistaken impression that he

had guaranteed the Optima loan. In response to these circumstances the Trustee ordered the

Debtor to file amended schedules to delete references to Mr. Covey as a co-debtor reflecting and

the transfer of the Optima loan funds and the consideration received by the Debtor in return for

that transfer.

On May 5, 2014 the Debtors attorney filed an amended schedule deleting Mr. Covey as

a co-debtor, but failed to include the Debtors verification of that amended schedule. As a result

of that omission the amended schedule was stricken from the record. On May, 19, 2014 the

Debtor filed the same amended schedule but included the required verification. However, the



7/83

Page 7 of 9

Debtor failed to comply with the Trustees directions in regard to amending the schedules to

account for the undisclosed terms under which the debtor transferred the proceeds of the Optima

loan until May 28, 2014. The amended schedule filed that day listed a $125,000.00 receivable

form Energy Vox Corp apparently the company now owned by the mother of the principle

owner of the Debtor, Troy Covey.

The Debtors handling of the proceeds of the Optima loan is emblematic of its approach

to business in general and this bankruptcy proceeding in particular. All indications are that the

Debtor simply wrote a $125,000.00 check to a company owned by the mother of the principle

owner of the Debtor. Apparently, no loan agreement or other document calling for the

repayment of those funds was ever prepared. Apparently no interest is being charged by the

Debtor in connection with this transaction. Indeed, there is no indication that the Debtor ever

contemplated the repayment of the $125,000.00 transferred to Energy Vox prior to being

questioned about the transaction at the first meeting of creditors. It is difficult to accept that the

debtor simply forgot about a $125,000.00 asset when its schedules were initially filed. All of

this is indicative of the fact that this entire proceeding is an abuse of the bankruptcy process to

frustrate Optima and prevent the exercise of rights the Debtor expressly agreed to give Optima in

a fair arms-length transaction.

CONCLUSION

When Congress enacted the amendments to the Bankruptcy Code creating the rules

governing SARE bankruptcies, those amendments were intended to address the unfair hardship

on secured creditors occurring in this proceeding. The Debtor has effectively stymied Optima in

the exercise of rights expressly granted by the terms of the Note and Deed of Trust. A total of

$520.83 has been tendered to Optima since the filing of this bankruptcy and all the while the



8/83

Page 8 of 9

Debtor has continued to receive thousands of dollars in rental revenue from the tenant occupying

the real estate in Cass County.

The appraisal attached as Exhibit 3 to this motion makes it clear that the only impact of

this bankruptcy proceeding has been to permit the debtor to collect rent from January 28, 2014

until the automatic stay is lifted or the case dismissed. The Debtor has no equity in its sole asset.

With each passing day the amount by which the outstanding balance owed by the Debtor to

Optima will exceed the amount realistically obtainable from a foreclosure sale grows. It is time

to allow Optima to proceed with the foreclosure sale.

Respectfully submitted,ORRICK & ERSKINE, LLPBy: /s/ Paul Schepers

Paul Schepers, MO #32550Orrick & Erskine, LLP11900 College Blvd.Overland Park, KS 66210(913) 888-1777(913) 888-1794 [email protected]

Attorney for Optima, LLC

mailto:[email protected]:[email protected]:[email protected]


9/83

Page 9 of 9

CERTIFICATE OF SERVICE

The undersigned hereby certifies that on the 29th day of May, 2014, the foregoing was

electronically filed with the Clerk of Court using the CM/ECF system which will sendnotification of such filing to all counsel who are deemed to have consented to electronic service.

/s/ Paul Schepers

Paul Schepers



10/83



11/83



12/83



13/83



14/83



15/83



16/83



17/83



18/83



19/83



20/83



21/83



22/83



23/83



24/83



25/83

MARKET VALUE ESTIMATE

April 29, 2014

The New Jaudon Roadhouse

20300-04 Holmes Road (State Route D)

Belton, Missouri 64012

An Appraisal Report

prepared forOrrick & Erskine, LLP

Job No. 5025366



26/83

Bliss Associates, LLC 1000 Walnut StReal Estate Valuation Suite 920

and Professional Services Kansas City, MO 64106

816-221-9100 816-221-9101 faxwww.BlissAppraisal.com

May 16, 2014

Paul Schepers

Orrick & Erskine, LLP901 N. 8th, Ste. 203

Kansas City, Kansas 66101

Dear Mr. Schepers:

The appraisal report you requested is enclosed. Its purpose is to estimate market value,subject to limiting conditions, of the

Bar/RestaurantThe New Jaudon Roadhouse

20300 - 04 South Holmes Road (State Route D)

Belton, Missouri 64012.

Real property interest valued is the fee simple estate. The restaurant equipment was not

valued. Final value indication as of May 6, 2014 is

$125,000.

This appraisal is subject to special limiting conditions found on the following page. Thisappraisal is also subject to standard assumptions and general limiting conditions found inappraisal criteria.

Thank you for choosing Bliss Associates, LLC.

Sincerely,

Bliss Associates, LLC

By:

Matthew R. Woods Robert E. Marx, MAI,SRAState Certified Appraiser State Certified Appraiser



27/83


i

PREFACE

SPECIAL LIMITING CONDITIONS

Special limiting conditions consist of extraordinary assumptions and hypothetical conditions.The Uniform Standards of Professional Appraisal Practice (USPAP) defines extraordinaryassumptionas an assumption, directly related to a specific assignment, which, if found to befalse, could alter the appraisers opinions or conclusions. A hypothetical conditionisdefined as that which is contrary to what exists, but is supposed for the purpose of analysis.

The following extraordinary assumptions and/or hypothetical conditions apply to thisappraisal. The client is advised that their use might have affected the assignment results

Extraordinary Assumptions

1. The subject contains several items of FF&E in the form of kitchen and bar equipmentand furnishings. These items are not valued in this report.2. The land area appraised includes alley and street vacations that are not in the title

commitment. The title company reported that the county has not recorded anythingabout the vacations.

Hypothetical Conditions

1. The subject has a total land area of approximately 111,513 SF. We attributed50,000 SF to the improvements and the remaining 61,513 SF is considered excessland.



28/83


ii

CERTIFICATION

I certify that, to the best of my knowledge and belief:

statements of fact contained in this report are true and correct; reported analyses, opinions, and conclusions are limited only by the reported

assumptions and limiting conditions, and are my personal, impartial, and unbiasedprofessional analyses, opinions, and conclusions;

I have no present or prospective interest in the property that is the subject of thisreport, 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 theparties involved with this assignment;

I have performed no services, as an appraiser or in any other capacity, regarding theproperty that is the subject of this report within the three- year period immediatelypreceding acceptance of this assignment.

my engagement in this assignment was not contingent upon developing or reportingpredetermined results;

my compensation for completing this assignment is not contingent upon thedevelopment 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 astipulated 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 beenprepared, in conformity with the Uniform Standards of Professional Appraisal

Practice(USPAP) of The Appraisal Foundation and the Supplemental Standards ofProfessional Appraisal Practiceand Code of Professional Ethicsof The AppraisalInstitute;

I have made an inspection of the property that is the subject of this report; no one provided significant real property appraisal assistance to the person(s)

signing this report; and

the use of this report is subject to the requirements of the Appraisal Institute relatingto review by its duly authorized representatives.

By:Matthew R. Woods

Certified General AppraiserMissouri 2005090012

Effective date May 6, 2014

Date of the appraisal report: May 16, 2014



29/83


iii

CERTIFICATION

I certify that, to the best of my knowledge and belief:

statements of fact contained in this report are true and correct; reported analyses, opinions, and conclusions are limited only by the reported

assumptions and limiting conditions, and are my personal, impartial, and unbiasedprofessional analyses, opinions, and conclusions;

I have no present or prospective interest in the property that is the subject of thisreport, 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 theparties involved with this assignment;

I have performed no services, as an appraiser or in any other capacity, regarding theproperty that is the subject of this report within the three- year period immediatelypreceding acceptance of this assignment.

my engagement in this assignment was not contingent upon developing or reportingpredetermined results;

my compensation for completing this assignment is not contingent upon thedevelopment 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 astipulated 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 beenprepared, in conformity with the Uniform Standards of Professional Appraisal

Practice(USPAP) of The Appraisal Foundation and the Supplemental Standards ofProfessional Appraisal Practiceand Code of Professional Ethicsof The AppraisalInstitute;

I have made a personal inspection of the exterior of the property that is the subjectof this report;

no one provided significant real property appraisal assistance to the person(s)signing this report;

the use of this report is subject to the requirements of the Appraisal Institute relatingto review by its duly authorized representatives; and

as of the date of this report, I have completed the requirements of the continuingeducation program of the Appraisal Institute.

By:

Robert E. Marx, MAI, SRA

Certified General AppraiserMissouri # RA001238

Effective date May 6, 2014Date of the appraisal report: May 16, 2014



30/83


iv

TABLE OF CONTENTS

PREFACE ............................................................................................................................... iSPECIAL LIMITING CONDITIONS ................................................................................... iCERTIFICATION ............................................................................................................. iiTABLE OF CONTENTS .................................................................................................. iv

INTRODUCTION ................................................................................................................ 1EXECUTIVE SUMMARY .................................................................................................. 1CONCLUSION ............................................................................................................... 2SCOPE ............................................................................................................................ 3CRITERIA ........................................................................................................................ 3

MARKET AREA ANALYSIS ................................................................................................... 6 AREA DEMOGRAPHICS ................................................................................................. 8

SUBJECT ............................................................................................................................ 11IDENTIFICATION ......................................................................................................... 11HISTORY ...................................................................................................................... 12SITE DESCRIPTION ....................................................................................................... 13IMPROVEMENTS DESCRIPTION .................................................................................. 16BUILDING SKETCH ...................................................................................................... 16IMPROVEMENTS ANALYSIS ......................................................................................... 17SUBJECT PHOTOGRAPHS ........................................................................................... 18REAL ESTATE TAXES ..................................................................................................... 21

USE .................................................................................................................................... 22MARKET OVERVIEW .................................................................................................... 22REASONABLE EXPOSURE AND MARKETING TIME ..................................................... 23 HIGHEST AND BEST USE ............................................................................................. 25

INCOME APPROACH ........................................................................................................ 26RENT ............................................................................................................................ 26COMPARABLE LEASE PHOTOGRAPHS ....................................................................... 28

VACANCY AND COLLECTION LOSS ........................................................................... 29EXPENSES ..................................................................................................................... 29STABILIZED STATEMENT ............................................................................................. 30DIRECT CAPITALIZATION ........................................................................................... 31SUMMARY AND CONCLUSION ................................................................................. 31

SALES COMPARISON APPROACH ................................................................................... 32COMPARABLE SALES ................................................................................................... 32EXPLANATION OF ADJUSTMENTS .............................................................................. 33ADJUSTMENT GRID ..................................................................................................... 35SUMMARY AND CONCLUSION ................................................................................. 35

EXCESS LAND VALUATION .............................................................................................. 36IDENTIFICATION ......................................................................................................... 36MARKET OVERVIEW .................................................................................................... 36COMPARABLE LAND SALES ........................................................................................ 38EXPLANATION OF ADJUSTMENTS .............................................................................. 39ADJUSTMENT GRID ..................................................................................................... 40SUMMARY AND CONCLUSION ................................................................................. 40



31/83


v

DOCUMENTSComparable Land Sale write-upsComparable Improved Sale write-upsAppraiser Resumes



32/83


1

INTRODUCTION

EXECUTIVE SUMMARY

Property Type Bar/Restaurant

Property / Location: 20300 - 04 South Holmes Road (StateRoute D)Belton, Missouri 64012

MSA: Kansas City

Effective Date: May 6, 2014

Property Rights: Fee Simple

Owner of Record: TAC Investments, LLC

Improved Land Area: 50,000 SF

Excess Land Area: 61,513 SF

Building Area:

Gross Building Area 2,407 SFNet Rentable Area 2,407 SF

Zoning: None

Year Built: 1935

Highest and Best Use: Continued use of the existingimprovements

MARKETVALUE INDICATIONS:

Cost Approach: Not ApplicableIncome Approach: $90,000Sales Comparison Approach:

Improved Tract $110,000Excess Land $ 15,000Total $125,000

Final Value Indication: $125,000



33/83


2

CONCLUSION

Reconciliation

The subject is a 2,407 SF Bar/Restaurant. It consists of a one-story wood frame building thatwas originally constructed in 1935. There is a 400 SF loft office accessible from the rear of

the property. The subject is currently 100% leased and utilized as a bar/restaurant.

Given the age of the improvements, the cost approach is not considered applicable. It is notdeveloped in this report.

The subject is currently 100% leased to one tenant. The lease is set to expire in June 2014.We estimated market rent by comparison to current leases from the surrounding area.Vacancy allowance was then estimated and operating expenses were subtracted usingexpenses taken from similar properties. The net operating income is then capitalized at amarket derived overall rate to estimate the value of the subject property by directcapitalization.

In the sales comparison approach, sales of small multi-purpose and restaurant buildingslocated in various locations throughout Kansas City, Missouri were directly compared to thesubject based on physical differences. The basis for the comparison was the price persquare foot of unit area. After adjustments, the comparable sales provide a reliableindication of value.

Both approaches are considered to offer a credible indication of value, given the quantityand quality of the data. The most likely buyer is an owner occupant and the salescomparison approach is considered the most reliable.

In addition to the improved parcel we considered 61,513 SF to be excess land. Only thesales comparison approach is utilized in the development of a market value estimate.

Improved Tract $110,000Excess Land $ 15,000$125,000

FINAL VALUE ESTIMATE: $125,000



34/83


3

SCOPE

Scope of work is defined by the Uniform Standards of Professional Appraisal Practice(USPAP) as the type and extent of research and analysis in an assignment. The scope ofthis assignment complies with USPAP and the specific reporting requirements of the client.

The specific scope of work for this appraisal assignment and report is outlined below. Theresulting analysis is considered adequate to provide a credible result given the purpose,intended use and intended users of the assignment.

Property Inspection and Identification

The subject property was personally inspected by Matthew R. Woods on May 6, 2014.Robert E. Marx inspected the exterior on May 16, 2014. The inspection included a walk-through of the building exterior and interior. Both the exterior and interior werephotographed. An inspection of the surrounding neighborhood was also made from publicthoroughfares. The property was further identified through county records.

Type and Extent of Data Researched

Public records were relied upon for the site dimensions, site area, zoning, flooddetermination, ownership, legal description, and tax assessment data. The size of thebuilding is based on on-site measurements. Improved and unimproved sales from themarket were researched using the Bliss Associates proprietary database, the Heartland MLS,Costar and Loopnet databases, and other published sources.

Type and Extent of Analysis AppliedIn this analysis, the income and sales comparison approaches to value are developed.Given the age of the subject, the cost approach is not considered applicable. Appropriate

methodology and techniques deemed pertinent and necessary to the analysis were utilized.The highest and best use of the property was determined to be continued use of the existingimprovements.

Type of Appraisal Report

This is an appraisal report which is intended to comply with the reporting requirements setforth under USPAP Standards Rule 2-2(a).

CRITERIA

PurposeThe purpose of the appraisal is to estimate the market value.

Intended Use of the AppraisalThe intended use of this report is for removing a stay of a bankruptcy for the mortgagee,Optima LLC.



35/83


4

Client and Intended UserOrrick & Erskine, LLP is the client. It and Optima, LLC are the intended users. Theappraisers and Bliss Associates, LLC are not responsible for unauthorized use of this reportby third parties.

Effective DateMay 6, 2014

Type of Value EstimatedThe type of value estimated in this appraisal is market value.

Market Value

Market valuemeans the most probable price which a property should bring in acompetitive and open market under all conditions requisite to a fair sale, the buyer andseller each acting prudently and knowledgeably, and assuming the price is not affected byundue stimulus. Implicit in this definition are the consummation of a sale as of a specified

date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;(2) Both parties are well informed or well advised, and acting in what they consider

their own best interests;(3) A reasonable time is allowed for exposure in the open market;(4) Payment is made in terms of cash in United States dollars or in terms of financial

arrangements comparable thereto; and(5) The price represents the normal consideration for the property sold unaffected by

special or creative financing or sales concessions granted by anyone associated withthe sale.1

Property RightsReal property interest valued is fee simple estate.

Assumptions and General Limiting Conditions

This report assumes the following:1. That title to the property interest appraised is good and marketable, unless otherwise

noted; the report assumes no responsibility for the legal description or for legalmatters or those relating to title considerations.

2. That the property is free and clear of any and all liens or encumbrances unless statedotherwise.

3. That the property has responsible ownership and competent property management.4. The information furnished by others is reliable; however, no warranty is given for theaccuracy of such information.

5. That all engineering is correct; the intention of the report is that plot plans andillustrative materials are to assist the reader in visualizing the property.

6. That there are no hidden or unapparent conditions of the property, subsoil, or

1Source: Code of Federal Regulations; Title 12--Banks And Banking; Chapter I--Comptroller Of The Currency,Department Of The Treasury; Part 34--Real Estate Lending And Appraisals--Subpart CAppraisals Sec. 34.42Definitions; Revised as of January 1, 2000



36/83


5

structures that render it more or less valuable. No responsibility is assumed for suchconditions or for procuring engineering services that may be necessary to discoverthem.

7. That the property complies fully with all applicable federal, state, and localenvironmental regulations and laws, unless noncompliance is specified in the report.

8. That the property complies with all zoning and use regulations and restrictions, unless

the report acknowledges nonconformity.9. That the owners and/or property managers either have or could procure or renew any

licenses, certificates of occupancy, consents, or other legislative or administrativeauthority from any local, state, or national government, or private entity ororganization, upon which the value conclusion reported depends.

10. That the utilization of the land and improvements is within the boundaries or propertylines and that there are no encroachments or trespasses by or upon the property,unless noted in the report.

Additional conditions bearing upon this report are as follows:1. The distribution, if any, of the total valuation in this report between land and

improvements applies only under the stated program of utilization; any separateallocations must not be used in any other appraisal and are invalid if so used.

2. Possession of this report, or any copy hereof, does not imply the right of publication.3. By reason of this appraisal, the appraiser is relieved of any obligation to give further

consultation or testimony, or to attend court with reference to the property inquestion, unless prior arrangements have been made.

4. Neither all nor any part of this report--especially any conclusions regarding value, theidentity of the appraiser or the firm with which the appraiser is associated--may bedisseminated to the public through advertising, public relations, news, sales-promotion, or other media without the prior written consent and approval of theappraiser.

5. The value estimates in the report apply to the entire property interest as described inthe report; any proration or division of the total into fractional interests wouldinvalidate the value conclusions, unless such proration or division of interests hasbeen set forth in the report.

6. Unless stated otherwise in this report, the appraiser has not been advised or becomeaware of the existence of any hazardous substances and/or toxic wastes that may ormay not be present on the property; the appraiser has no knowledge of the existenceof such materials on or in the property; the value estimated in the report is contingentupon the assumption that there is no hazardous condition on or in the property, or insuch proximity to the property that it would cause a loss in value.

7. No compliance survey or analysis of the subject property relating to the requirementsof theAmericans with Disabilities Act of 1991 (ADA) exists. Such a survey couldreveal that the property does not comply with one or more requirements of the Act,thus having a negative effect upon value. Unless stated otherwise in the report, thereis no direct evidence relating to this issue. This report does not, therefore, consider

possible noncompliance in estimating the value of the property.



37/83


6

MARKET AREA ANALYSIS

LOCATION

The subject property is located at the southwest corner of 203rdStreet and Holmes Road(State Route D) in Unincorporated Cass County, Missouri. The following map shows thesubjects location within the Kansas City Metropolitan Area.

Neighborhood MapMetropolitan Perspective

As the map illustrates, the neighborhood is in the southern portion of the Kansas CityMetropolitan Area. Access to the neighborhood is primarily provided by Missouri Highway150 and Missouri Highway 58. The subjects general neighborhood is considered to bebound by Missouri Highway 150/ 203rd Street to the north, Holmes Road to the east, 175 thStreet and 177thStreet to the south, and Kenneth Road to the west. The map on thefollowing page shows the neighborhood in greater detail from a local perspective.



38/83


7

Neighborhood MapLocal Perspective

Surrounding Land Uses & Development

The subject propertys four tracts are located along the east, south, and west of the Village ofLoch Lloyd, as illustrated by the aerial photograph on the following page. The subjectsimmediate neighborhood is comprised primarily of single-family and agricultural uses, aswell as some special use properties. Residential uses include both moderate-density single-

family residences and single-family residences on agricultural acreage. The most substantialresidential development is located within the Village of Loch Lloyd development, which iscomprised of a number of upscale single-family residences. A number of older, moremoderately priced single-family residences are located in the Holmes Valley subdivision.The remainder of the neighborhood is largely comprised of agricultural uses, includingresidences on acreage. The only major land use in the area is the golf course within theVillage of Loch Lloyd.

New development in the area is essentially limited to development within the Village ofLoch Lloyd, as well as the previously discussed religious facility. Substantial developmenthas not reached the subjects vicinity from any of the surrounding communities. Vacancy inthe area was noted to be minimal in the neighborhood. The condition of properties in theneighborhood varies greatly. Properties in the Village of Loch Lloyd are generally in goodcondition, while other residences in the area range from poor to average-to-good in terms ofcondition.

The aerial photograph on the following page illustrates the general composition of thesubjects neighborhood.



39/83


8

Aerial Photograph

AREA DEMOGRAPHICS

The following map shows a 1-mile, 3-mile and 5-mile radius from the location of 20300 SState Route D in unincorporated Cass County, Missouri:



40/83


9

The following charts show population demographics, particularly household and medianincome demographics within a 1-mile, 3-mile and 5-mile radius from the location of 20300S State Route D:

20300 S State Route D (1-Mile Radius) Census Trends

2010% Change

10-13 2013% Change

13-18 2018

Population 152 1.3% 154 2.6% 158

Number of Households 54 1.9% 55 3.6% 57

Median Household Income $60,413 8.6% $65,593

*Data from STDBOnline

The population within a 1-mile radius of the area has increased 1.3% since the previouscensus was taken in 2010 to reach 154 people. A further increase of 2.6% is expectedwithin the next five years. There are currently estimated to be 55 households within thearea, with a median household income of $60,413. This is expected to increase to $65,593

per household by 2018 for 57 households.


2010% Change

10-13 2013% Change

13-18 2018

Population 2,414 1.2% 2,442 3.0% 2,515

Number of Households 863 1.9% 879 3.4% 909



The current population in the area within 3-miles of the subject property is estimated to be

2,442 people. Current estimates expect an increase of 3.0% over the next five years to reach2,515 people by 2018. There are 879 households within 3-miles of the area, bearing amedian household income of $64,172. This is expected to increase to $74,492 perhousehold by 2018 for 909 households.


2010% Change

10-13 2013% Change

13-18 2018

Population 18,504 0.9% 18,674 2.2% 19,081

Number of Households 6,960 1.5% 7,067 2.6% 7,250



The population within a 5-mile radius of the subject property has increased 0.9% since theprevious census was taken in 2010 to reach 18,674 people. A further increase of 2.2% isexpected over the next five years. There are currently estimated to be 7,067 householdswithin the subject area, with a median household income of $58,209. This is expected toincrease to $66,737 per household by 2018 for 7,250 households.

The following table shows the relative retail sales of the area compared to the relative retailexpenditures of the areas population:



41/83


10

1-Mile 3-Mile 5-Mile

Demand (Retail Potential) $1,851,272.00 $29,270,099.00 $219,495,952.00

Supply (Retail Sales) $278,613.00 $6,795,604.00 $74,050,895.00

Retail Gap $1,572,658.56 $22,474,494.84 $145,445,057.38


Are a Market Profi le 2013

The chart shows the total retail expenditures of the subject population and compares them tothe actual retail sales within the subject area. If the retail sales are greater than the retailpotential, it shows that neighboring communities are shopping within the subject area at agreater rate. If the retail sales are less than the retail potential, it shows that the subject areaspopulation is doing a portion of its shopping in neighboring communities. We call thiscomparison the retail gap.

The table below shows the top ten retail consumer expenditures for households within eachradius from the subject property:

1-Mile 3-Mile 5-Mile

Food And Beverages $8,922.47 $9,397.25 $8,815.31

Food At Home $5,487.21 $5,742.26 $5,393.86

Food Away From Home $3,435.26 $3,654.99 $3,421.45

Entertainment $3,822.83 $4,027.28 $3,674.23

TV, Video and Audio $1,417.69 $1,487.61 $1,403.33

Apparel $1,624.99 $1,731.59 $1,620.25

Household Furnishings and Appliances $1,200.11 $1,265.28 $1,162.29

Furniture $540.89 $572.64 $530.93

Child Care $457.33 $502.42 $469.50

Lawn and Garden $523.19 $542.59 $476.04

Computer $270.36 $287.88 $266.41

Household Supplies $808.79 $841.77 $780.50

Transportation $8,774.89 $9,201.79 $8,611.70

Vehicle Purchases $4,117.76 $4,307.22 $4,008.84

Gasoline and Motor Oil $3,415.41 $3,588.04 $3,400.11

Maintenance and Repairs $1,241.72 $1,306.53 $1,202.75


Top Retail Consumer Expenditures 2013

The table takes the areas retail sales and breaks them down by the type of product beingsold for selected categories. Top retail sectors for the subject areas include food andbeverages, transportation, entertainment, and apparel.

Conclusion

The neighborhood is located in a largely rural area in the southern portion of the Kansas Citymetropolitan area with average access via highways and main thoroughfares. Growth in thearea has largely been limited to properties within the Village of Loch Lloyd, although someadditional development of special use properties has occurred. Growth within the villagehas been steady. Given the areas demographics and historical trends, it is likely theneighborhood will remain in a stable phase for the foreseeable future, with additionalgrowth possible as the economic and real estate markets improve.



42/83


11

SUBJECT

IDENTIFICATION

Brief Property Description

The subject property consists of a single-story wood frame bar building that was originallyconstructed in 1935. It is on a concrete slab. In addition there are two adjoining land tractsthat are unimproved. There a total of three tracts with three separate parcel identificationnumbers. The individual parcels are summarized the table below. For purposes of thisreport 50,000 SF of land will be considered with the improvements while the remaining61,513 SF is considered excess land.

Birds Eye ViewTaken to the West

Bar/Restaurant Unimproved Land Unimproved Land

Property Location 20300 S Holmes Road No Address Assigned 20304 Holmes Road

Parcel Identification 2514300 2514700 2514800Number of Buildings 1 NA 1

Owner of Record TAC Investments LLC TAC Investments LLC TAC Investments LLC

Land Area (SF) 24,829 32,234 54,450

Land Area (Ac) 0.57 0.74 1.25

No. of Stories 1 NA NA

Design Freestanding NA NA

Year Built 1935 NA NA

Gross Building Area (SF) 2,407 NA NA

Zoning NA NA C-2

Corner Yes No No

Frontage 203rd/Holmes None Holmes

Condition-Exterior Avg NA NA

Condition-Interior Avg NA NA

Unincorporated, Cass

County, MO


County, MO


County, MO



43/83


12

Address20300 - 04 South Holmes Road (State Route D)Belton, Cass County, Missouri 64012

Legal Descriptions

Parcel No.2514300

Lots 1-4, Block 1, Village of Jaudon, Cass County, Missouri.

Parcel No.2514700

Lots 23-28, Block 4, Village of Jaudon, Cass County, Missouri.

Parcel No.2514800Lots 15-22, Block 3, Village of Jaudon, Cass County, Missouri.

Ownership

TAC Investments, LLC

HISTORY

The ownership purchased the subject in October 2012 from Jerome A. Gable. According tothe title commitment the loan amount was $125K. The actual sale amount is unknown. Thesellers had owned the subject for approximately 8 years prior to the most recent sale.

To the best of our knowledge, no other transactions regarding the subject are known to haveoccurred within the past five years.

The subject is currently leased to the New Jaudon Roadhouse for $2,000 per month or$9.97/SF.

Unit Rental Annual Renewal Options/

Unit Tenant Size (sf) Rate ($/sf) Base Rent Begin End Concessions/

Comments

20300 New Jaudon Roadhouse 2,407 9.97$ 24,000 Jul-12 Jun-14 tenant pays ins

2,407

Lease Term



44/83


13

SITE DESCRIPTION

Location/Access/Frontage

The site is located at the southwest corner of 203rd Street and Holmes Road. The site hasvehicular access via gravel drives from both frontage roads. The site has approximately 350

feet of frontage along the east side of Holmes Road and 165 feet along the north side of203rd Street. An aerial map of the subject site is shown below.

Shape and Size

The site is L shaped and contains 111,513 SF, or 2.56 acres according to the Cass County

records. The plat map is located below.



45/83


14

Topography and Flood Hazard

The site is generally level and at street grade with the frontage roads. According to Flood

Insurance Map 29037C0015F, dated January 2, 2013, the site is situated outside of federallyidentified flood hazard areas. The zone is defined as Zone C. An excerpt from the flood

map is shown below.

Easements/Encroachments

All easements appear to be of a local-service nature enhancing the utility and marketabilityof the property. No encroachments by or upon the property are evident, and no hazards or

nuisances appear to affect the property.

Traffic Count

The subject is located along Holmes Road (State Route D). The nearest traffic counts alongHolmes Road are around 5,500 vehicles per day 4 miles to the north at Highway 58. Nine

miles to the south the counts decrease to around 1,000 vehicles per day.

Zoning

The site is not zoned according to Cass County. The subject has reportedly operated as arestaurant/bar since it was constructed and is presumed to be a legal use of the site.

Utilities

All utilities except sewer are available and installed to the subject site. The subject uses

propane gas. The subject is on a septic system.

Hazardous Materials/Toxic Wastes

There were no hazardous materials observed during an inspection of the property. It isassumed that no toxic wastes were present within the soils. However, Bliss Associates, LLC

is not qualified to detect the presence or absence of such materials. If further evidence isneeded regarding the lack of danger from hazardous materials or toxic waste, authoritieswith expertise in detecting these conditions should be consulted (see Standard Assumptions

and Limiting Conditions, Appraisal Section).



46/83


15

ConclusionThe site has adequate physical characteristics for a variety of potential development. Nosignificant adverse influences were noted. The site has a second tier commercial location.



47/83


16

IMPROVEMENTS DESCRIPTION

The subject property consists of a one-story wood frame building with a pitched metal roof.The total GBA is 2,407 SF. It has a partial basement (864 SF) with a stone foundation and aloft office space with approximately 400 SF. Windows are double hung and fixed windows

in metal and wood frames. The main entrance is a single-glass door in metal frame alongthe east elevation. There are metal doors along the west and south elevations.

The interior consists of a kitchen, prep area, bar, dining area and two lavatories. The finishconsists of tile wood and concrete flooring, exposed duct work, wood side walls, suspendedfluorescent light fixtures and wood partitioning.

The building is 100% heated and cooled with forced air gas heating and central airconditioning. The HVAC is ground mounted. Plumbing and electricity are adequate forrestaurant use.

Site Improvements

There are three pole lights, pole signage, canopy and an 800 SF patio.

BUILDING SKETCH



48/83


17

IMPROVEMENTS ANALYSIS

Deferred Maintenance (Curable)As of the date of inspection, the improvements are noted to be in generally average to fair

condition. Reportedly the roof has a few leaks that the tenant has not been able locate. Thetile flooring in the dining area is worn. The wood flooring is warped in places. We estimatedeferred maintenance of $10,000.

Condition/Physical DepreciationThe original improvements were constructed in 1935. It has been rehabbed and updatedover the years. Most recently (2012) the tenant reportedly replaced 3 air conditioning unitsand installed ductwork throughout the dining and bar area. The total cost wasapproximately $15K to $20K. The effective age is somewhat lower than the weighted age,estimated at 25 to 30 years. The total economic life of the improvements is estimated at 55years.

Functional ObsolescenceThe buildings design as a single-tenant office or retail facility is easily convertible to servicea variety of potential users. The improvements represent a mature commercial building thatfits with the rural feel, but is not typical of contemporary restaurant or retail appeal. Thoughfunctional, the improvements likely have limited appeal. All things considered, the design isfunctional and typical of smaller multi-purpose properties in todays market and the subjectdoes not appear to suffer from functional obsolescence.

External ObsolescenceExternal obsolescence is attributed to factors from outside the subject property and is

generally reflected in market rent levels that are inadequate to support new construction. Inthis case, rent levels do not support new construction and the subject is considered to sufferfrom external obsolescence. The second tier location makes it difficult to compete fortenants in all of the newer buildings that are in more populous areas.



49/83


18

SUBJECT PHOTOGRAPHS

Front (East) Elevation Looking North along Holmes Road

Looking West along 203rd Street North Elevation

West Elevation South Elevation



50/83


19

Bar/Dining AREA Gaming/Dance Area

Prep Area Kitchen

Walk-In Cooler Basement



51/83


20

loft office Area Lavatory

Furnaces Buckets for Leaks

Unimproved Land Unimproved Land



52/83


21

REAL ESTATE TAXES

Real estate taxes in Missouri are calculated by applying the appropriate mill levy to theassessed value, which is based on the County Appraisers appraised value. The assessmentratio for commercial properties is 32%. The assessment ratio for vacant land tracts is 19%.

The following table summarizes the subjects total tax and assessment history over the pasttwo years.

Real estate taxes are forecast at approximately $2,300 or $0.96 per square foot.

HISTORICAL COUNTY APPRAISED VALUES,

ASSESSED VALUES, AND REAL ESTATE TAXES

Owner: TAC Investments, LLC

Mailing Address: 8844 Hillcrest Road, Kansas City, MO

Situs Address: 20300 S State Route D, Belton, MO

2012

Parcel # Appraised Value Assessed Value Real Estate Taxes

2514300 (improved) $80,125 $25,640 $1,861.73

2514700 (vacant) $16,650 $3,160 $212.39

2514800 (vacant) $21,380 $4,060 $272.88

Total $118,155 $32,860 $2,347.00

2013

Parcel # Appraised Value Assessed Value Real Estate Taxes

2514300 (improved) $75,870 $24,280 $1,774.47 *

2514700 (vacant) $16,650 $3,160 $213.89 *

2514800 (vacant) $21,380 $4,060 $274.80 *Total $113,900 $31,500 $2,263.16

*unpaid



53/83


22

USE

MARKET OVERVIEW

Retail Market Cass County

Until recently, the retail market in the Kansas City Metropolitan area struggled because ofthe general poor economic conditions. There was downward pressure on rental rates,upward pressure on vacancy and more perceived risk in the retail sector in general. Morespecifically newly developed retail in the path of development, but which was not yetsurrounded by supporting population suffered the most in the current cycle. Well locatedcenters with established populations surrounding have been able to maintain the status quo,with landlords more willing to negotiate lease rate to maintain occupancy.

The subject development represents a second tier property located along a state route in amainly rural and agricultural setting.

The following chart shows the metropolitan vacancy rate and the various individualsubmarkets throughout the MSA for all retail properties for the Year-end 2013.

The total KCMSA had a vacancy rate of 8.40% for all retail properties with a positiveabsorption of over 1,000,000 SF. Approximately 563,000 SF of retail was constructed in2013. The chart above shows the larger submarkets in the KC metro area. The Cass CountyMarket is not listed in the MSA chart above. CoStars retail statistics for Cass County aresummarized in the following table.



54/83


23

The chart above indicates a current vacancy rate of 7.8% and a five year average vacancyrate of approximately 8%. The survey included 524 existing buildings. Approximately35,000 SF of new retail construction has taken place in the Cass County market in the pastfive year with none in 2013.

Marketability

The subject property has a rural location with limited demand. Access and visibility is goodvia State Route D. The building is older than most retail or restaurant properties in themarket area. Therefore, market appeal is rated below average. Market fundamentals areweak and more conservative underwriting standards exist compared to a few years ago.

REASONABLE EXPOSURE AND MARKETING TIME

The reasonable exposure timeinherent in the market value concept is always presumed toprecede the effective date of the appraisal {USPAP, SR-1-2(c), SMT-6}. By contrast,reasonable marketing timeis an opinion of the amount of time it might take to sell aproperty interest at the concluded market value level during the period of time immediatelyafter the effective date of an appraisal {USPAP, Advisory Opinion, AO-7}.

The subject is an average quality building with adequate access from Holmes Road. It has afunctional layout for a bar or restaurant use and could easily be converted to an office use.Its relatively small size suggests single-tenant occupancy. Vacancy in this submarket isrelatively low (7.8% for general retail). Considering the subjects physical and locationalcharacteristics, a reasonable exposure timeof approximately 12 to 18 months is consideredreasonable given the value conclusion contained in this report.



55/83


24

The graph above generated from Costar indicates marketing time for retail and officebuildings ranged from 184 days to over 1,600 days over the past 9 quarters. The surveyconsisted of office buildings in Belton, Kansas City, Grandview, Pleasant Hill andHarrisonville.

Although the overall market appears to be improving somewhat, the market for retail andoffice properties (as well as other property types) continues to be uncertain. However, arelatively small building like subject should be competitive with other properties on themarket. If the subject were placed on the market on the date of this appraisal, the valueestimate contained in this report is intended to reflect a reasonable marketing timeof 12 to18 months. The estimate of marketing time assumes the property is adequately marketedand mortgage financing is readily available.



56/83


25

HIGHEST AND BEST USE

DefinitionHighest and best use may be defined as, "the reasonably probable and legal use of vacantland or an improved property, which is physically possible, appropriately supported,

financially feasible, and that results in the highest land value." (Appraisal Institute, 275)

Because the use of land can be limited by the presence of improvements, highest and bestuse is determined separately for the site as though vacant and available to be put to itshighest and best use, and for the property as improved.

Highest and best use must meet four criteria. It must be:

physically possible legally permissible financially feasible maximally productive.

These criteria are usually considered sequentially; a use may be financially feasible, but thisis irrelevant if it is physically impossible or legally prohibited.

Highest and Best Use As Vacant

The subject sites physical characteristics are sufficient for development although it has sizelimitations. The surrounding properties along the main thoroughfares consist of mainlyresidential and agricultural uses with limited commercial development. The site is notzoned. Given the location of the site, as well as the surrounding uses, office, industrial orretail uses are likely. However, speculative development is not currently supported byrental rates, therefore holding for future development is the only feasible use. No other usewould result in a higher land value and be physically possible, legally permissible, and

financially feasible. Given these factors, the concluded highest and best use as vacant ismore for light industrial uses similar to those in the immediate area as warranted by demand.

Highest and Best Use As Improved

The site is improved with a restaurant/bar building. Continued use of the building ispresumed to be legally permissible and the improvements are suitable to serve the needs ofa number of users. Demolition and redevelopment is not feasible at this time. Therefore,the highest and best use as improved is continued use of the existing improvements.

Since the subject is on a septic system the land due south of the building is included in theprimary parcel. The balance is considered excess land.



57/83


26

INCOME APPROACH

RENT

Contract Rent

The subject is currently 100% leased to the New Jaudon Roadhouse for $2,000 per monthor $9.97 per sq. ft. The lease began in July 2012 and expires in June 2014. The landlordpays the real estate taxes only.

Market Rent

Most properties in small suburban areas are owner occupied and there is limited leaseinformation and therefore we have expanded the search area. The following rentcomparables are included as indications of market rent. The comparables are located in theBelton and Harrisonville areas of Cass County.

The locations of the market lease comparables are illustrated in the map below.

Lease Comparables Location Map

Property ID Total NRA (SF)

Street Address Yr Blt / Ren

No. City/State Condition Exp. Basis Tenant SF Leased Lease Start Lease Exp. Rate psf Mod Gross Equiv

1 Smoke Shop 4,004 Smoke Shop 4,004 3/14 NA $9.44 $9.44

105 A & B N Scott 1965 Mod Gross

Belton, MO Avg

2 Donnas Dance Studio 3,400 Donnas 3,400 1/14 NA $6.39 $6.39

540 N Scott Ave 1980 Mod Gross

Belton, MO Avg

3 Commercial Bldg 4,077 NA 4,077 5/14 NA $8.24 $8.24

507 Main St 2002 Mod Gross

Belton, MO Avg

4 Shooting Gallery 8,008 NA 8,008 6/13 NA $5.14 $5.14

1700 W Wall 1985 Mod Gross

Harrisonville, MO Avg

5 Row-type bldg 2,500 NA 2,500 6/14 NA $5.00 $5.00

311-13 Main St 1900 Mod Gross

Belton, MO Avg

AVG $6.84 $6.84

Subject Property 2,407

20300 Holmes Rd 1935 New Jaudon Roadhouse 2,407 06/01/12 06/01/14 $9.97 $9.97

Belton, MO Avg-fair

Tenant Detail or Summary



58/83


27

All of the comparables are on a modified gross basis. The locations are all consideredsecond tier and comparable to the subject. The sizes range from 2,500 to 8,008 SF and aregenerally comparable. The rentals range from average to good condition.

Based on the comparables, we conclude a market rental rate of $7.00 per SF on a modifiedgross basis.



59/83


28

COMPARABLE LEASE PHOTOGRAPHS

Lease No. 1 Lease No. 2

Lease No. 3 Lease No. 4

Lease No. 5



60/83


29

Sources of Other IncomeNo reimbursement income is anticipated. Thus, none is included in this analysis.

VACANCY AND COLLECTION LOSS

According to the 4th quarter 2013 CoStar Retail Report, the total vacancy for the South KCgeneral retail market was 14.6%. The most recent vacancy rate of Cass County wasapproximately 8%. Given our observations of the market and the characteristics of thesubject, the stabilized vacancy allowance is estimated at 12%.

EXPENSES

Operating Expenses

The following operating expenses are deducted to arrive at an estimate of net operatingincome (NOI). The following expenses are the landlords responsibility under the subjectsmodified gross lease basis; other expenses are paid by the tenant.

Real Estate Taxes

As discussed on page 21, we have estimated taxes to be $2,300 or $0.96 per square foot.

Insurance

Insurance for small commercial buildings typically range from $0.15 to $0.35 per squarefoot. We have estimated the insurance to be $700 or $0.29 per square foot.

Maintenance & RepairsThe landlords maintenance expense is primarily structural. Given the age and condition ofthe building repairs will be on-going. An allowance of $2,000 or $0.83 per square foot isincluded for structural maintenance.

Property ManagementManagement fees are usually charged as a percentage of effective gross income. A range of3% to 6% is common for commercial properties. Given the subjects characteristics, amanagement fee of 3% is concluded.

Miscellaneous

An allowance of $500 is included for miscellaneous expenses not expressly considered inanother category.

Replacement Reserves

Market participants rarely include replacement reserves in their projections, and the overallcapitalization rate applied in the next section is intended for net income before reserves.Since the replacement reserve is implicit in the capitalization rate, no deduction is appliedfor replacement reserves.



61/83


30

STABILIZED STATEMENT

The effective gross income is $14,827 and the expenses are $5,945 resulting in an NOI of$8,882.

Category

INCOME $Amount PSF % EGI

Rental Income $16,849 $7.00 113.6%

Other Income 0 0.00 0.0%

TOTAL INCOME 16,849 7.00 113.6%

Vacancy est to be 12% (2,022) -0.84 -13.6%

EFFECTIVE GROSS INCOME $14,827 $6.16 100.0%

OPERATING EXPENSES

Taxes $2,300 $0.96 15.5%

Insurance 700 0.29 4.7%

Utilities 0 0.00 0.0%

CAM 0 0.00 0.0%

Maintenance & Repairs 2,000 0.83 13.5%

Janitorial 0 0.00 0.0%

Management & Administration 445 0.18 3.0%

Miscellaneous 500 0.21 3.4%

Total Expenses $5,945 $2.47 40.1%

Net Operating Income $8,882 $3.69 59.9%



62/83


31

DIRECT CAPITALIZATION

As previously indicated, transaction volumes for all types of real estate have been down dueto the Great Recession. The most recent retail capitalization rates that have occurred within

the Kansas City Metropolitan area are summarized in the table below.

The rates range from 8.41% to 12.50% averaging 9.72%. The three most recent sales

indicate rates from 8.9% to 11.6%. Sale No. 5 is located in the subjects South KC marketarea and is the closest in proximity.

The following is a summarized capitalization rate study performed for Johnson County. Thesubject property is considered most similar to a Class C/D single-tenant retail property. Therecommended overall rate for this classification is 10-11.00%.

According to the PWC 4th Quarter 2013 market report, strip centers had capitalization ratesranging from 5 to 10%, averaging 6.98%. These are mainly institutional grade properties.The spread between institutional and non-institutional grade retail properties ranges from 25to 500 basis points, averaging 156 basis points.

We concluded to a capitalization rate of 10%.

SUMMARY AND CONCLUSION

The stabilized NOI for the subject property is capitalized below.

VALUE INDICATION: INCOME APPROACH $90,000

Sale No. Address City State Property Name Event Date: Cap Rate: Net Rentable Area:

1 8350 N Church Rd Kansas City MO Applebee's Restaurant 1/8/2010 8.18 5,285

2 1461 E 151st St Olathe KS Indian Trails Shopping Center 12/15/2010 9.79 31,140

3 8300 Wornall Rd Kansas City MO Blue X Discount Smoke 2/10/2010 8.41 4,435

4 1000 W US-24 Hwy Independence MO 24 Hi-Way Shopping Center 8/15/2012 12.5 45,300

5 1507 Main St Grandview MO Storefronts 6/1/2012 9.36 5,270

6 5438 Johnson Dr Mission KS Pride Cleaners 1/5/2012 10 1,435

7 310 SW Main St Lees Summit MO Two Mixed Use Buildings 5/8/2013 11.6 12,906

8 10 SW 3rd St Lees Summit MO Retail Bldg 5/8/2013 8.19 2,024

9 4831 W 135th St Overland Park KS Strip Center 8/15/2013 9.44 8,366

AVG 9.72

Class-Retail A B C D E

2012

Single Tenant 7.75% 9.00% 10.00% 11.00% 12.00%

Unanchored strip center 8.75% 10.00% 11.00% 12.00% 13.00%

Neighborhood/Community center- anchored 7.75% 9.00% 10.00% 11.00% 12.00%

Net Operating Income / Overall Rate = Estimated Value

$8,882 / 10.00% = $88,823

$90,000 rounded



63/83


32

SALES COMPARISON APPROACH

COMPARABLE SALES

The sales comparison approach involves the comparison of the property being appraisedwith other properties that may have been sold, listed for sale, or are under contract. Theunderlying premise is that the market value of the property is related to the prices ofcomparable, substitute properties. Because of the unique character of each property,adjustments are made of differences between the subject property and those to which it iscompared. Finally, the resulting adjusted sales prices of the comparables are reconciled intoa value conclusion regarding the subject property.

The subject property is a bar/restaurant. It was originally constructed in 1935. The localneighborhood was researched for similar properties. Due to a lack of adequatelycomparable sales in the immediate area, the market radius was expanded to include otherareas of Kanas City, Missouri. The primary criteria for selection were size, age/condition,and quality/construction type. More detailed descriptions of the sales with photographs are

located prior to the DOCUMENTSsection of the report.

Improved Sale Summary

The unit of comparison is the price per square foot.

Sale

No. Property Name Address Date Price $/SF GBA Built Condition LB Ratio

1 former McDonald's 8411 Holmes Rd 7/10/2013 $220,000 $58.32 3,772 1968 Average 12.79

KCMO

2 Feuerborn Bar 21900 Branic Dr 4/18/2014 $255,000 $72.40 3,522 2007 Avg-G 7.92

Peculiar, MO

3 Kickstand Bar 10817 E. Truman Rd 4/1/2014 $118,000 $39.33 3,000 1940 Avg-F 5.81

Independence, MO

4 former Patrikios 9849 Holmes Rd 7/19/2011 $235,000 $55.95 4,200 1963 Avg-F 5.79

KCMO

5 Doughboys Pizza 1806 N Commercial St 7/15/2011 $118,750 $53.98 2,200 1947 Avg-F 7.73

Harrisonville, MO

6 Mandy's Cafe 5920 Winner Rd 1/7/2011 $230,000 $55.83 4,120 1969 Average 7.40

KCMO

Average: $55.97 3,469

New Jaudon Roadhouse 20300 Holmes Rd Subject: 2,437 1935 Avg-F 20.52

Belton, MO



64/83


33

EXPLANATION OF ADJUSTMENTS

Buyer Expenditures

There are no adjustments necessary for buyer expenditures.

Property Rights, Financing Terms, and Conditions of SaleThe sales involved the fee simple estate or leased fee estate at market terms, so no propertyrights adjustments are applied. In addition, each sale involved cash or its equivalent, so nofinancing adjustments are necessary. It is adjusted upward. No other adjustments wererequired for conditions of sale.

Market Conditions

Market conditions for retail and office properties peaked in mid-2006, but have largelyremained stagnant since that time. The sales span a time range from January 2011 to April2014, all well after the real estate crash was fully realized and as such, none of the sales areadjusted for market conditions.

SizeTypically, smaller properties sell for a premium, in part because of the decreased riskinvolved in leasing or selling a smaller sized building due to the greater number potentialusers. Furthermore, there are more potential uses for a smaller property and as such, morepotential buyers. Finally, there are fewer investment dollars needed to invest in a smallerbuilding thus there are potentially more buyers. The sales range from 2,200 SF to 4,200 SF.Sale Nos. 1, 2, 4 and 6 are adjusted upward. Sale Nos. 3 and 5 are relatively similar in sizeand no further adjustments are made.

Location/AccessThe subject has average location and access at the southwest corner of 203rdand HolmesRoad in a sparsely populated area of Cass County. It is considered a secondary, semi-ruralcommercial location. All of the sales have superior locations. Sale Nos. 1 and 4 are locatedalong the same frontage Road but within populous areas of Kansas City, MO. Sale Nos. 2and 5 are located in Cass County in more densely developed areas. Sale Nos. 3 and 6 arelocated in more populous areas with declining growth. All are adjusted downward.



65/83


34

Age/ConditionThe subject is approximately 80 years old. It is in average to fair condition and has someitems of deferred maintenance. Sale Nos. 1, 2, 4 and 6 are all newer than the subject. Sale

Nos. 3 and 5 are considered similar in age. Sale Nos. 1, 2 and 6 are superior condition.Sale Nos. 3, 4 and 5 are similar condition. Except for Sale Nos. 3 and 5 all of the sales areadjusted downward for age/condition.

Quality

The subject is average quality class D wood frame building. The sales are al similar qualityand no adjustments are necessary.

Land to Building RatioThe subject has a land to building ratio of 20.52 to 1. Larger land to building ratios allowfor additional parking and possible expansion. Sale Nos. 3 and 4 have land to building ratiosof less than 6 to 1 and are adjusted upward. No other adjustments are made.



66/83


35

ADJUSTMENT GRID

SUMMARY AND CONCLUSION

After adjustments, the sales provide an indicated unit value range of roughly $37 to $52 persquare foot averaging $45 per square foot. Sale Nos. 2 and 3 are the most recent sales. SaleNos. 2 and 5 are located in Cass County. Sale No. 5 is the most similar in size. Weconcluded at the average of the range at $45 per square foot. The calculatio

Date post:	12-Oct-2015
Category:	Documents
Upload:	diannedawn
View:	145 times
Download:	0 times

Here is Why He Filed

Documents