1995 Jacobson AppraisalReal Estate Appraiser & Consultan)
1 South Main
Roger D. Jacobson, MAI
Kalispell, Montana 59901
4•'• 60/•
Fax •'s •0•
July 14, 1995
The City of Kalispell
Attn: Lawrence Gallagher, Director
Planning, Economic & Community Development Department
P. O. Box 1997
Kalispell, MT 59903-1997
Re: City Owned Site - North of Sanitary Sewer Treatment Plant
Dear Mr. Gallagher:
Your engagement letter dated June 22, 1995, Item 6, requests a narrative discussion and report
of the highest and best use, long term lease considerations, redevelopment potential and/or other
uses permitted in an I-1 Zone, for the site located north of the Sanitary Sewer Treatment Plant
and specifically identified as Parcel 1 on a Certificate of Survey recently prepared by S. R.
Smith, Surveyor. That survey reflects a gross site area of 30.064 acres and net site area of
29.542 acres. The survey does not reflect the location of the runway for the Kalispell City
Airport, which crosses the northeast corner of the site, affecting usable site area and restricting
building development in a lateral transition zone on a 1:7 plane, beginning 125 feet from the
runway centerline.
We have examined the site and assembled pertinent data regarding highest and best use, lease
and redevelopment potential. Currently the site is improved with soccer fields for public use.
As noted, the runway for the city airport cuts across the northeast corner of the site. A few
small aircraft are tied down on the site and a large number of various type small trailers are
parked in the vicinity fronting Airport Road.
The site is to be analyzed with current zoning, which is I-1, Light Industrial.
Highest and best use is defined as:
"The reasonably probable and legal use of vacant land or an improved property, which
is physically possible, appropriately supported, financially feasible, and that results in the
highest value. The four criteria the highest and best use must meet are legal
permissibility, physical possibility, financial feasibility, and maximum profitability."'
1 op. cit. page 149
Implied in this definition is that the determination of highest and best use takes into account the
contribution of a specific use to the community and community development goals as well as the
benefits of that use to individual property owners. Hence, in certain situations the highest and
best use of land may be for parks, greenbelts, preservation, conservation, wildlife habitats, and
like.
The four basic tests of highest and best use of a property are:
1. Legally Permissible
2. Physically Possible
3. Financially Feasible
4. Maximally Productive
Although the four criteria interact and therefore may be considered in concert, for practical
purposes legal permissibility and physical possibility are typically tested first to set initial
limiting parameters on the highest and best use. The last two criteria concern the possibilities
for net positive return and highest possible return. A four part analysis for dealing with these
two tests has recently been suggested and will be used in this appraisal :2
1. Land use patterns and recent developments in the area.
2. Supply and demand status considering sales, properties for sale, and occupancies.
3. Use change after the sale of comparable properties.
4. Site value less demolition cost compared to the value as improved.
Legal Permissibility of Use - With zoning in the subject as I-1, Light Industrial, the permitted
uses are specified in Chapter 27.18 of the Kalispell Zoning Ordinance, pages 45 through 48.
Airplane hangars are specifically noted as permitted uses, together with a large number of uses
that could be compatible with existing surrounding uses. The large number of permitted uses
is considered non-restrictive for the subject site.
Physical Possibility of Use - The large size of the site (30.064 acres gross) offers few if any
restrictions on use. The topography is generally level and open. Accessibility is good from
Airport Road with access from both the north and south portions of the site which front Airport
Road.
2Joe R. Roberts, MAI and Eric Roberts, MAI "A No -Nonsense Approach to Highest and Best Use", page 269, "The Appraisal
Journal", April 1993, published by Appraisal Institute.
Lease Analysis - City Airport Lands
7/10/95
2
Land Use Patterns and Recent Developments - Industrial development has tended to center in
two locations, the LaSalle Industrial Park on Ash Road in the Evergreen area, and the Kalispell
Industrial Park located 5 miles south of Kalispell on Highway 93. Limited commercial uses
have developed along rural highway locations where accessibility was an important factor, such
as for Mergenthaler Transport & Storage on Highway 93. Central city areas with industrial
development include the area in the vicinity of South Meridian where Meridian Mini -Storage has
located. The two noted industrial park developments have experienced recent sales reflecting
per square foot prices between $0.50 and $0.70, depending on the size of the sites which ranged
from 1.06 acres to 3.87 acres.
The vicinity of Airport Road, with the near but off highway aspects, has experienced limited
commercial development in recent years, with most commercial activity taking place north of
18th Street. The areas south and west of the city airport on Airport Road have been actively
developing with new residential subdivisions.
Supply and Demand - One current listing of a site with I-1 zoning was noted, fronting the City
Airport at the southeast end of the runway. That site has transferred several times in recent
years as each new owner is apparently speculating somewhat on the potential for appreciation
in value. A transaction which just closed involved a 9 acre parcel fronting on Highway 93,
(with B-2 zoning) between the highway and the city airport runway. The purchaser is in process
of constructing a 24,000 square foot farm and ranch supply store on that site, and plans to
develop a portion of the site for other uses. There have been a limited number of available sites
near the airport, and an apparent limited corresponding demand, at least until the last few
months which noted the 9 acre sale and the current listing. On the Airport Road side of the
runway no recent sales or listings were found.
Use Change After Sale (Comparable Properties) - Use changes have been limited to those from
vacant or unimproved land to improved.
Site Value vs. Value as Improved - It is to be recognized that in cases where a site has existing
improvements on it, the highest and best use may be determined to be different from the existing
use. The existing use will continue, however, unless and until land value in its highest and best
use exceeds the total value of the property in its existing use. With the subject being vacant and
unimproved (except for the airport runway), the value would necessarily be considered as
vacant.
Conclusion of Highest and Best Use - The subject is concluded to have a highest and best use
for potential development with airport related uses, particularly those which would qualify as
permitted within the I-1 Zoning. With regard to long term benefits to the owner (City of
Kalispell), the potential exists for long term ground leases, preferably to lessee's who would
desire to construct improvements which would contribute to the tax base, resulting in tax income
as well as lease income from the site.
Lease Analysis - City Airport Lands
7/10/95
3
Leasing Potential:
With regard to leasing potential, we investigated ground leases around the State of Montana as
well as parts of Idaho and eastern Washington. The following is a tabulation of findings.
IDENTIFICATION
$/SQ FT / YEAR RANGE
Billings
$0.06 to $0.17
Bozeman
$0.05 to $0.20
Great Falls
$0.035 to $0.05
Helena
$0.055 to $0.11
Kalispell
$0.065 to $0.10
Missoula
$0.075 to $0.13
Sidney
$0.04
McCall, Idaho
$0.05
Boise, Idaho
$0.035 to $0.07
Spokane, Washington
Fso-lo to $0.117
The Montana locations were surveyed by the Montana Department of Aeronautics in 1994, with
data supplied by airport managers. The ranges of lease were reported to deal with "unimproved"
and "improved" sites, with improved noted as being served with utilities. The Idaho lease data
was obtained from an appraiser in Boise and reflects 1993 data. The Spokane information came
from an appraiser in Spokane, and reflects data from 1989 through 1993. Also included in the
Spokane information was a schedule noting changes in a 35 year lease beginning 1-1-93.
Lease Escalation Schedule - Spokane
1-1-93 to 12-31-02
at
$0.10/sf/yr
1-1-03 to 12-31-07
at
$0.115/sf/yr
1-1-08 to 12-31-12
at
$0.13/sf/yr
1-1-13 to 12-31-17
at
$0.15/sf/yr
1-1-18 to 12-31-22
at
$0.17/sf/yr
1-1-23 to 12-31-27
at
$0.195/sf/yr
Lease Analysis - City Airport Lands
7/10/95
4
Additional detailed lease data was obtained regarding two leased sites in Missoula. The first is
a 16,996 square foot site leased for hangar use, with the lease beginning 5-27-87 and running
for 20 years, at $0.075/sf for the first 10 years, $0.10/sf/yr for the next 5 years and $0.13/sf/yr
for the last 5 years. The lease date indicates that the $0.075/sf/yr will be in effect until 5/96,
changing 6/96 to $0.10/sf/yr. The lessor is the Missoula County Airport Authority and the
lessees are R. D. Kembel and T. G. Stevens. A six bay hangar was constructed on the site.
The second lease is from Missoula County Airport Authority to Minuteman Aviation, and
involves 12.63 acres. The lease began 6-1-88 and runs for 25 years. The lease rate through
6/90 was $0.05/sf/yr, from 7-90 through 6-95 is $0.075/sf/yr, from 7-95 through 6-00 will be
$0.10/sf/yr and for the remaining 13 years is $0.13/sf/yr.
The lease data in general reflects a fairly narrow range of economic lease potential, with
variations apparently due to the location and size of the main airport facility and possibly the
size of the site, although the Minuteman Aviation lease involves a large site (12.63 acres) and
reflects prices similar to the small leases. The manager at Glacier Park International Airport
also stated that the size of the site was not a determining factor in lease rate, with large sites
leasing at the same rate as small sites. Lesser demand locations such as Sydney, Montana reflect
the lowest prices, with the highest rates in Billings and Bozeman. Glacier International Airport
is currently quoting $0.12/sf/yr for new leases. The Kalispell City Airport is not a major airport
facility, hence uses such as a Federal Express or UPS facility are not likely. On the other hand
the Kalispell City Airport is extremely well located with respect to many businesses on the south
edge of Kalispell, and particularly the Outlaw Inn Convention Center. There also appears to be
good demand for hangar space and a potential for increasing commercial/industrial demand in
the vicinity of the City Airport with pending redevelopment of the ballfield areas on the east side
of the runway and the current development of one large site with a 24,000 square foot farm and
ranch supply store. It is our opinion thus that land leases in the vicinity of the Kalispell City
Airport should fall within the $0.075 to $0.10/sf/yr range, depending on the nature of the
individual lease arrangement.
The subject site does include one area with substantial frontage on Airport Road, where a large
number of trailers are currently displayed "for sale". That area is considered superior to the
general hangar development area, with potential for lease rates in the upper portion of the noted
range, perhaps as high as the $0.17 to $0.20/sf/yr noted in the Billings and Bozeman areas.
The potential for leasing to someone for construction other than that which would be related to
the city airport was examined. Assuming a ground lease at the lower end of the proposed range,
$0.075/sf/yr, a one acre parcel would have a lease amount of 43,560 X $0.075 or $3,267/yr.
At a 10% capitalization rate this would suggest a site value of $32,670. This would compare
with a 1.06 acre industrial site sale at $32,500. The implication is that there is little if any
incentive to a lessee to lease rather than purchase, unless he could invest the capital at a return
of more than 10 % . In addition an owner would have the benefits of any increase in value with
Lease Analysis - City Airport Lands
7/10/95
5
the ownership, whereas on the lease he would likely be faced with increased lease payment in
later years. The potential for leasing other than for airport related uses thus appears minimal.
It is recommended that an overall plan be developed for the available area, identifying various
potential usable sites for hangars and related uses. Reproductions of available maps and surveys
which identify the subject area are attached.
rdj
Lease Analysis - City Airport Lands
7/10/95
6
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SW Corner ��� POINT OF BEGINNING
SW1/4 NWl/4 IN$ PARCEL 2 Parcel 2
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I-1 Light`lndustrial
IlSections
27.18.010 Intent
27.18.020 Permitted Uses
27.18.030 Uses Which May Be Permitted By Conditional Use
Permit
27.18.040 Property Development Standards
27.18~010- Intent . An industrial district to provide areas
for light industrial uses that typically do not create objectionable
characteristics (such as dirt, noise, glares heat, odor, smoke, etc.) which
extend beyond the lot lines. Such light industrial uses would include light
manufacturing, processing, fabrication and assembling of products or
materials, warehousing and storage and transporation facilities. This district
is also intended to accommodate various adult -type uses that may otherwise
infringe or negatively influence the residential or commercial character oi
Other zoning districts.
(1). Alcohol/alcoholic beverage, manufacture.
(2). Alcohol beverage, distribution.
(3). Appliance distributors, wholesale/repair.
(4). Art foundry, metal sculpture, molding and casting.
(5). Assembly of machines and appliances.
(6). Auction house - excluding livestock/animal/fowl.
(7). Automobile, assembly and manufacture.
(8). Automobile parking, commercial or public.
(9). Automobile repair garages' excluding body shops.
(10). Automobile service station (see definition).
(11). Bakeries or baking plants.
(12). Bedding/carpet/upholstery, -- manufacturing, cleaning, renovating.
(13). Boat building/repair.
(14). Boat sales, new and used.
(15). Book bindery.
(16). Bottling works/soft drinks.
(17). Building materials, storage/sale including lumber yards.
(18). Bus repair and storage.
(19). Cabinet shop.
(20). Candy products manufacture, wholesale.
(21). Car wash, automobile detailing shop.
(22). Clothing manufacture.
(23). Cold storage plants.
(24). Concrete products/paving materials/mixing plants.
(25). Contractor's plants/storage yards.
(26). Dairy bar/ice cream manufacturing, retail on premises.
I-1 Light Industrial
(77). Tire recapping and retreading.
(78). Trailer sales areas.
(79). Truck rentals, single axle, less
(80). Upholstery shop.
(81). Warehousing.
(82). Waste paper/rags collection and
(83). Well drilling business.
(84). Well pump sales and service.
(85). Woodworking shops, mill work.
Conditional Use Permit.
(1) .
(2) .
<3>.
(4).
(5).
(6) .
(7).
(0) .
(9).
(10).
(11>.
(12) .
(13).
(i4).
(\5).
(16) .
(17).
(20).
(21) .
(22).
(23) .
(24).
(25).
(26).
(27).
(28).
(29).
(30).
(31).
(32).
(33).
(34).
(35).
(36).
(37).
(38).
(39).
(40).
than 20,100# gvw.
baling.
May Be Permitted By
Airports, hangers, and landing fields.
Auction yards, livestock.
Auto wrecking/junk yards (see definition).
Bar, tavern, cocktail lounge, clubs.
Bulk storage of liquified propane and similar f\ammables.
Canvas/burlap products manufacturing, sales, and storage.
China manufacture.
Electrical distribution station.
Electric light/power generating station.
Emery cloth/sandpaper manufacturing.
Enameling, japaning, lacquering, plating, galvanizing of metal.
Excelsior/fiber manufacture.
Explosives, ammunition, fireworks, gunpowder manufacturing.
Extractive industries.
Feed/seed processing and cleaning.
Flour mill.
Fuel oil, gas, petroleum products bulk storage
Furniture manufacture.
Gasoline storage (comply with fire code).
Glass or glass products manufacture.
Grain elevators.
Heliports.
Hosiery manufacture.
Industry/light manufacturing - no smoke, fumes,
Insulation material manufacture and sales.
Landfill, sanitary disposal.
Law enforcement/fire stations.
and sales.
odor, dust.
Libraries, museums, and similar cultural facilities.
Machine tool manufacture.
Monument manufacture and stone cutting and sales.
Pottery, porcelain and china manufacture.
Railroad freight yards/terminals/classification yards.
Railroad rights -of -way.
Recycling center.
Rifle range, indoor.
Rock crushers.
Rodenticide, insecticide, pesticide mixing plants.
Schools, commercial (see definition).
Sexually oriented business.
Sewage treatment plant.
City of Kalispell Zoning Ordinance
(27). Dairy products processing/bottling/distribution.
<28>. Electrical appliance, manufacture and assembly.
(29). Electrical sales and contracting companies.
(30). Farm implement sales and service.
(31). Farm machinery assembly, repair and sales.
(32). Feed and seed, farm supply.
(33). Fertilizer , -bulk sales.
(34). Food bank.
(35). Food products manufacturing, storage, processing, and packaging.
(36). Frozen food lockers.
(27}. Furriers, retail sales and storage.
(038). Garden supplies, retail sales.
(39). Gases, liquified petroleum in portable metal cylinders, storage
and sales.
(40). Hangers (airplane).
(41). Hatcheries, fish.
(42). Heating, ventilation, air conditioning (HVAC)/sheet metal shop'
sales and service.
(43). Heavy equipment sales and service.
(44). Ice manufacture, storage and sales.
(45\. Janitor supplies/services/contracting.
(46). Jewelry and clock manufacture.
(47). Laboratories, commercial or industrial research and testing.
(48). Laundries/dry cleaning plants.
<49>. Light assembly of small gadgets/widgets.
(50). Locksmiths or gunsmiths.
(51). Machine shops.
(52). Manufactured home sales lot.
(53). Mini -brewery.
(54). Mini -storage.
(55). Motorcycle sales and repair.
(56). Musical instrument manufacture.
(57). Optical/scientific instrument manufacturing.
(58). Paint and body shops.
(59). Parks.
(60). Pharmaceutical products, manufacturing, processing, packaging/
storage.
(61). Plumbing and heating materials, retail and service only.
(62). Plumbing shop and yard.
(63). Prefabricated building materials, assembly and manufacture.
(64). Printing, publishing, reproductionv blueprinting, and photostatzn4
establishments. �
(65). Public utility storage yards and associated offices.
(66). Radiator repair.
(67). Rag, bag, and carpet cleaning establishments.
(63). Rental service stores and yards.
(69). Repair/serVice of industrial equipment or machinery.
(70). Repair/service of office and household equipment.
(71). Second hand stores (see definition).
(72). Shoe manufacture.
(73). Sign manufacture, painting and maintenance.
(74). Storage warehousesv yards - no distribution or sale on premises.
(75). Taxidermist.
(76). Tire dealer. alionment center. �
City of Kalispell Zoning urainance
(41). Temporary building/structure.
(42). Textile machinery manufacture.
(43). Textile manufacture.
(44). Tile manufacturing.
(45). Transmission towers and accessory facilities.
(46). Truck: terminal/repair/hauling and storage yards.
(47). Veterinary clinic, large animals.
(43). Water treatment plants.
(49). Water storage facilities.
27.18.040: Property Development Standards.
(1). Minimum Lot Area: 7000 square feet
(2). Minimum Lot Width (FT): 70
(3). Minimum Yards (FT):
Front Yard - 20
Side Yard - 10
Rear Yard - 20
Side Corner - 20
(4). Maximum Building Height (FT): 40
(5). Permitted Lot Coverage (%): N/A
(6). Off -Street Parking: Refer to Sections 27.26 and 27.27.
(7). Maximum Fence Heights (FT):
Front - 10
Side - 10
Rear - 10
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