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Leeds Long Term Care appraisal as-is going concernAPPRAISAL OF AS -IS GOING CONCERN <SUMMARY REPORT> OF 222 River Rd, Leeds, MA (aka HAMPSHIRE CARE) Prepared for Date of Appraisal Date of Written Report Pennington Geis HAMPSHIRE CARE 222 River Rd Leeds, MA 10/15/2008 11/15/2008 APPRAISED BY Kitchell Lee MAI CCIM BCI Appraisal /Berkshire Cascade 108 Main St Shelburne, MA 01370 MA CERTIFIED-GENERAL REAL ESTATE APPRAISER: 4280 CT CERTIFIED GENERAL REAL ESTATE APPRAISER: RCG.0000884 This appraisal report is prepared for the sole and exclusive use of Hampshire Care to assist with the divesture related decision. It is not to be relied upon by any third parties for any purpose whatsoever. 11/15/2008 Pennington Geis, Administrator 1 Care 222 River Rd Leeds, MA RE: Hampshire Care 222 River Rd Leeds, Hampshire County, MA 01053 Dear Ms Geis: I am transmitting the summary report of my appraisal of the estimated market value of the As -Is Going Concern per hypothetical condition for the reference parcel of real estate as of 10/15/2008. This report sets forth my value conclusion, along with supporting data and reasoning. The value opinion reported is qualified by certain definitions, limiting conditions, and certifications which are set forth in this report. This appraisal was performed in accordance with and subject to the requirements of the USPAP (Uniform Standards of Professional Practice), the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. This appraisal may not be distributed to or relied upon by other persons or entities without my written permission. The property was inspected by me, and the report was prepared by me, Kitchell Lee. If you have any questions concerning the report, please contact me at (413) 625 -6287 Best Regards, Kitchell Lee MAI CCIM 108 River Rd Shelburne Falls, MA 01370 2 TABLE OF CONTENTS INTRODUCTION EXECUTIVE SUMMARY 4 CERTIIICATION OF VALUE 5 ASSUMPTIONS LIMITING CONDITIONS 6 SCOPE OF APPRAISAL 7 FACTUAL DESCRIPTIONS IDENTIFICATION HISTORY OF THE PROPERTY 8 AREA ANALYSIS 8 TAX AND ZONING 12 SITE IMPROVEMENTS 13 ANALYSIS OF DATA VALUATION HIGHEST BEST USE 15 COST APPROACH 16 SALES COMPARISON APPROACH 16 INCOME CAPITALIZATION APPROACH 26 RECONCILIATION 43 ADDENDA QUALIFICATION OF THE APPRAISER 44 3 3 4 4 h;XECCPFIVE SUMMARY OWNER Hampshire County Regional Council of Government LOCATION 222 River Rd Leeds, MA Hampshire County PROPERTY TYPE DATE OF VALUE ESTIMATE FINAL VALUE Nursing home 10/15/2008 PROPERTY RIGHTS As -is going concern per hypothetical condition APPRAISED SITE: as -is 106.2 acres per Hypothetical Condition 6 acre site nursing home IMPROVEMENT Masonry structure ZONING RR: rural residential, Legally Non conforming use ASSESSED VALUE $2,716,200 (05- 001 -001) Taxable (Map /Lot) $5,303,500 (05- 001 -304) Non taxable REAL ESTATE TAX $30,421 (Tax rate) $11.20/1000 EPA HAZARD Not known, not an enviroiunental engineer. FLOOD ZONE Above 100yr flood zone CURRENT USE Nursing home DEED (Book/Page) 0697/161 Hampshire County Reg of Deeds HIGHEST BEST USE As -Is Skilled Nursing Facility APPROACHES TO VALUE: COST APPROACH NA SALES COMPARISON $3,776,000 INCOME APPROACH $3,809,000 $3,776,000 CERTIFICATION OF V ,�11, t 11? I certify that, to the hest of my knowledge and belief: 1. The statements of fact contained in this report arc true and correct. 2. The reported analysis, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions. 3. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. 4. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event resulting from the analysis, opinions, or conclusions in, or the use of this report. 5. My analysis, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 6. I have made a personal inspection of the property that is the subject of this report. 7. No one provided significant professional assistance to the person signing this report. Certify to the all of above by Kitchell ee IMIAI l/ r Date 5 ASSUMPTIONS AND LIMITING CONDITIONS I. No responsibility is assumed for the legal description or for matters including legal or title considerations 'Title to the property is assumed to be good and marketable unless otherwise stated. 2 The property is appraised free and clear of any and all liens or encumbrances unless otherwise staled. 3. Responsible ownership and competent property management are assumed. I. The information furnished by others is believed to be reliable. I lowever, no warranty is given for its accuracy. 5. All engineering is assumed to be correct if relevant to this report. The plot plans and illustrative material is in this report are included only to assist the reader in visualizing the property. 6. It is assumed that there are no hidden or unapparanl conditions of the property, subsoil, or structures that render the property to be more or less valuable, No responsibility shall be assumed for such conditions or fur arranging for engineering and /or architectural studies that may be required to discover them. 7. It is assumed that there is full compliance with all applicable federal, state, anci local environmental regulations and laws unless noncompliance is stated, defined, and considered in this appraisal report. Any discovery and subsequent notice to the appraiser of such non compliance is a sole responsibility of the client. 8. It is assumed that all applicable zoning and use of regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in the appraisal report. 9. It is assumed that all required licenses, certificate of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 10. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. I I. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 12. The possession of this report, or a copy thereof, does not carry vvith it the right of publication. 13. The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made. 14. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser. 15. Unless stated otherwise in this report, the existence of hazardous materials and toxic substances were not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser is not qualified to detect such substance. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. 16. ADA Americans with Disabilities Act) became effective January 26, 1992. Although a visual survey has been made, this appraiser is not qualified to determine whether it is in conformity with the various detailed requirements of the ADA. Since 1 have no direct evidence relating to this issue, I did not consider possible non- compliance with the requirements of ADA in estimating the value of the property. 17. Per agreement with the client, the subject shall be valued as -if the subject's site is 6 acres and this appraisal shall not consider the remaining acreage. 18. Per agreement with the client, the subject shall be appraised as -is going concern value. 19. It is assumed the subject's water and sewage system are in compliance and acceptable per state and municipal codes and standards. 20. It is assumed no secondary detached building improvements shall be considered in this appraisal. Bound by the all of the above assumptions and limiting condition Kitc ell Lee MAI /Al a Date 6 6 SUBJECT: FRONT VIEW SOUTH WING: REAR FRONT ENTRANCE FRONT ENTRANCE: INTERIOR WEST WING REAR: CHILLER BOILER ROOM MAINTENANCE GARAGE EAST WING:REAR INSTITUTIONAL KITCHEN DNING ROOM/FUNCTION HALL HALLWAY OF A WING REHAB ROOM NURSE STATION SINGLE BED ROOM 2 BEDS /ROOM OUTSIDE GROUND SCOPE OF APPRAISAL Appraisal is the process of estimating a value. First, the problem of the appraisal has to he defined. Then the data related to the problem has to be collected and processed. These are then analyzed and interpreted to derive a value. PROPERTY RIGIITS APPRAISED The property right being appraised in this report is the fee simple As -is Going Concern Value per client's instruction. The subject shall be appraised as -if it is on 6 acre site per hypothctical condition agreed by the client. (See #17 &18 Assumptions and Limiting Conditions). No secondary improvements like an deteriorated nurse's residence or camp structures shall be considered. DATA COLLECTION& COMPETENCY: The subject's data was obtained from site visits and interviews with the direct and indirect market participants. Also the assessor's property cards and deeds at the Registries of Deeds were examined. The data of comparable sales, leases and other significant facts were obtained from Warren Group, MLS, RERC, assessors' property cards, brokers, the area building owners, and the state government (DHCFP DHCQ) officials. This appraiser has previously done similar type valuation research and has done extensive research into the industry journals and literatures. DATA ANALYSIS AND VALUE ESTIMATION: The above collected data was synthesized to conduct the appraisal of highest and hest use analysis, client's request and three approaches to the value. The analysis was conducted with the help of Microsoft Excel 2003 and verified with HP 19BII calculator. PURPOSE AND USE OF THE APPRAISAL The purpose of this appraisal is to arrive at a market value of the subject's property as As -is going concern per hypothetical condition and the extraordinary assumption (17, 18, 19 20 of the above). It will be used for the owner's divesture proceeding. TYPE OF APPRAISAL AND REPORT This appraisal report is a summary report in conformance with the USPAP standard. The appraisal was conducted as a full appraisal. Additional supporting data and analysis relevant to this appraisal is on file in this appraiser's office. DATE OF VALUE ESTIMATION The effective date of the valuation is 10/15/2008 DEFINITION OF VALUE The value of this appraisal is a market value. This is defined in as: the Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under the conditions whereby: 7 1. buyer nrld.seller area typically motivated; 2. bath parties 11r e well irl /armed or n('1/ uch i.src/ aril acting in what they c•ansic/er their cnrn hrsl interests; 3. a reasonable time ts. al /owed far exposure al the open market; 4. payment is made in terms of cosh in US. dollars or in terms of /inanciol arrangements comparable thereto; and 5. the price represents the normal con.sidercitiwn f r the property sold unaffected by .special or creative financing or sales concessions granted by anyone associated with the .sale. (USPAP 2005 P210) This definition will be applicable for federally related transaction in reference to FIRREA of 1989. EXPOSURE TIME THE MARKETING 1-IISTORY OF THE SUBJECT The exposure time prior to this appraisal date is 1.0 year based on the market analysis. According to the client, the property is not actively marketed by a broker, nor is it listed in MLS. However it is to be considered for a divesture by the Hampshire Regional Council of Government. IDENTIFICATION OF PROPERTY Same as listed in the Executive Summary HISTORY OF PROPERTY The subject was originally acquired by the county for a TB retreat center in early 1900s. The present nursing home was built circa 1972. It was managed by the administrator under the supervision of the Hampshire County government which has evolved as Hampshire County Regional Council of Government (COG). The improvement has been maintained and no significant modification or renovation have been done. At present COG plans to divest the property. AREA ANALYSIS The subject is in the village of Leeds within the City of Northampton, Massachusetts, 2+ hours west of Boston and 30 minutes north of Springfield. The town is one of the 23 towns of Hampshire County which borders Franklin, Berkshire and Hamden County. The population of the county is 152,251. (2000 Demographic USA). The largest towns are Northampton(28,978) Amherst (34,874) and Easthampton (15,994). The rest are smaller towns and rural hilltowns. (See the Map, Attached) Below are some comparative economic data_for the surrounding towns. (2006 PVPC) 8 1, d"' 1 iii.,,,,. 1 Lon 1 oI) Alm rrilisiti 0 N:11,1111, g Lake 1 ,11 1 r 4 41 0 0 tvl id illy bury .Wolervine Loop I .1;c Newcomb iNoiril I holsoo 0 0 Fast I\ lirldlebol) I Wen f Ti(n:tilt:rug: I It uldulpli 0 !tether Weitiwoi Ratan:lie Lake Mineiva Ilruntun 0 GorcMoillnoin (73 Ski Aren )Nord ..Inliitsla C)alr Mountain -Slorrs Rdh olp h 6 rock bri- IdiWtoo Ski Center /Wa rrensbu q. Lake Pleasant...JP:: Toultney Mot/Wart) Ft:a n ki Lake Geo Granville Resort' 0 1101futeiter 1, Glens Palls 'Judson Falls Bromley Mountain spr,ingfield N' tbarlestoWn iopkini Fails Creek No11 0 11411 Argyle !°DolgevilleMatrntain Saratoga 0 Sa i e ll Roy,ar prings Willard Mounterii Oti !IS I om WalP°1' I Io tk i ,..,„Mount Snow P ningt ,a, Resort allston Spa or e enfit ,f I Ciiiajohar!e q1:1 1 Schc eetady Bennington t P Li o ..;ay Ant terdliTn?...„,. N it&ton B silaron.Sp Sdl;owna1;• H i vi Cobl filo" V 44 'f'? lbany 0 C liatlemoni Chelmsford .l a m s— i ,ci l■lbrIllft d G rc;en 11 t Richntorid lle o s iachendon— N estmere Aidrn Delmar Jimmy Rd Shelburne Falls 0. Fitchpu A. 2:22 Riv Rod till Westerlo r m i rig t er/ Nassau.. ipitt' -i'YT„i', e: 4 .4. :t'- 6 11, :04 Deer Run 0 e. R sort Greenville o. .0 Hobari 0 Skiln/ihdpam Roxbury Mountair,L,/ 1 i i l Rosendale Libe'r i Staatsburg Aenia Hyde Park nt r l orriii -New'Paltz gto.ni 1 0 fontice,116 Flighldriii 9.0..PoughkeepsiC 1 Terryville Walden (1., 0 Red Oaks Min Oakville' Li1(Ie Pond.. !1) .0 .9/er I Water Nalional park Oilier park Narional Seashore Urban area mild:Iry lam Glacier t=•• vahurgh Warwi lking‘yhog i Newthil- I ii 0 0 a'rn Marsh Fel iy COXSOC gue I In 0 V1'10(0101 Os 0 Often ro Lenox nd ._Eas th a in pton- Flill ale s i n estfielti 7 Great Bari Fr ,/.1iley ingston 0 Millerton •t\ I Mt: Frisse I o Parl'98Naugatua I alll? eyn Trumbull Bedford m• Coram i4tih'ead `J.ersey. nS.a 0 iDt flnnder d'-o Sejaiiiek:••:•E0s!. ""T' 0. e tYr w R P. tehogue International border Scale border Limired access Time zone toll Limited access Conimenial divide ben Primary toad Secondary road Unpaved or nri vine mad REGIONAL alichester 13e Waterbu O. Jamaica ‘1'11He RI June e Cy ....El p Geographic feature y. L 111 a nnver Le bunun 0 (1ranon. Plainfie d Cla rein on i Holden Rton 4:11olyoke rn I Vn116..Y.RUSOF t CiA,„),., 0 pi 1 Mbin 1 I l o ss ,p6e King Pine Ski 'IymMol, Mouritriff 41• F r .4:s.:..'• 0 ipce bLinWriC ‘,..,Merrilditll 0 1 ...6 I 4 eon Y... o shapjeigh 1 ipr. Va r,imn &LI Sa Richlands rs MoOl 1 c., 0 o u s rieid 0 n d Suncook E Arvlilford Southbridge Sa Mon- 1 p.; c)chester "Dover/ .`t 'P orb 1 A /kLy an r-444, Exete :O- /..'6 'Derry lia Iiipt‘ Ne bun OSII Ir o r: 4 N. •ddlebol •t;': w oi Norpan MAPtVEST 0 1999 MapQuest.corn, Inc. POWERSTREETS flied (lousing /'rice Ailed Household Incw w HAMPSHIRE COUN'T'Y 225,000 55,530 Northampton 247,500 51,258 Easthampton 225,000 53,711 Hatfield 250,000 49,835 Hadley 244,000 64,793 Amherst 270,500 46,293 S Hadley 225,000 56,141 The City of Northampton is located in the middle of the county along the Connecticut River. I -91 provides north south traffic. MA Turnpike is 15 minutes away which provides east -west traffic. There is an interstate bus system as well as regional PVTA system that connects to other towns. Hartford Bradley airport is 45+ minutes away. (Sec the Map, Attached) The city has a population of 28,978 (PVPC 2006). The land area is 37.7 sq. miles. It is the county seat. In 50s and 60s, the city had a strong industrial base. However by 70s it was transformed to 'arts town in America." It has significant downtown retail mix with professional offices. Smith College is located at the city and provides a cultural influence. This service oriented economic base is reflected in the PVPC data: O EMPLOYMENT NUMBER %OF COMMUNITY TOTAL Manufacturing 3112 8.6% Arts, entertainment Rec 2244 6.2% Whole sale retail 2,163 6.0% Healthcare &Social Assist 4844 13.4% Services 21,744 60.2% According to PVPC, "Northampton maintains an attractive mix of industry, retail, culture, service, education and quality of life which has contributed to its becoming a popular place to live and work." NEIGHBORHOOD MARKET ANALYSIS The subject is in the Village of Leeds, located in the western part of Northampton in the rural area. Primarily it is residential mixed with few light manufacturing. Other wise there are large tracts of woods, farms, reservoir and streams. River Road follows the Mill River on one side and a hillside on the other. There is a limited potential for a commercial development in the immediate surrounding. It is in the isolated rural neighborhood which was an ideal for the TB clinic of the past. 9 Fig/rand Lakos lower L'ako Dam ay'St Mill fiiiv.eriDam Rocky Hill Pond Ram Hill Dead Swamp Water Urban arca Miliitry land Airport 1 1 Golf course t7. A Bascorn Hill Kid s •ookout Island L--- Dam 1 k•-s. Hanging Shopping Centel 1)1 t/ 11/11\ 4 ,1 l 8,110 Alt its Ili/1,11 NOritiliIIIIM011 RLSC11.1011 '•:011 i olligi/ nW l I '1••‘.. V Oppei Dam. i wi,,,„„11,11 /....-1- 1 ,,,s,„„„„, f ,e Devils 1)oli I 1 7 1 ..ortIllivtul) I 11 0 1 1 A/1(c( ble )tai (,:l L.: USI Forest i 1 C:aiey 11111 (Nash Hat Cliesollit\_ illoimmin Graham Pohd 'N 1 Norih Halfield r Grass Hie 1 .Horse ..(Streer I Searsville i fiesert:/o/r, i Gere Hill/ i Nungee s. r Ilianisburg Williamsburg Davis Hill Swamp 6 ri, I— l! Station Baltlecock Hill Shingle Hill 1 Brass MI I t Reservoir -Unquomonlc Pond ..t 1 Miller Hill Walnut A Old Wolf Hill Mount'ain Pond Tob Hill Turkey•Hill i Cemetery Hospiial. university County border Vern Bald Hill Mineral Hills --••-ss cslhampton l'• tch ococo,l "•i, P nchon Cub Hill s M 111River radowss 7. jta).,in j nr): D l ersion, •ar;c4.1,irK\,>41 ,:,4. :River ‘Atidville 0, 7 ramaea Limiled access road c== Primary road Other road s Unpaved or private road LEEDS/NORTHAMPTON Rail/oat! Geographic femme Mill Ri (?oberts Meadow Rservoir I Roberts'Hill, Upper Sawmill Hills 5 eservoir avdenvillc 22 'River Rd .Millpond Visrion Da North Farms s llfiv Ganaq r sland Oa dor Sllop pipg eI(lla Iasi WI IsAAPOVEST 0 1999 Mapcluest.cont, Inc. POWEBSTREETS There are two major hospitals nearby, VA I Iospilal in Florence and Cooley Dickenson l lospital toward Northampton center. Valley Medical Group also has a facility in Florence. They do provide the referral to the nursing honks. Below are the nursing homes and the related facilities in Northampton: Yr Built Reel traits Residents Occupancy Assessment 1 lampshire Care 1972 120 1 1 1 93% $8, I 1 I, 150 Calvin Coolidge 1971 125 114 91% $4,350,290 Linda Manor 1989 123 115 93% $5,615,000 Northampton Rehab 1971 166 140 84% $4,152,000 TOTAL 534 The subject and three others arc the major skilled nursing facilities in the Northampton areas. The total available beds are 534. There are rest homes and a retirement community that has nursing beds. However they are not full skilled nursing facilities where the patients are given continuous care. Below is the list. Yr Built Bed units Residents Occupancy Assessment River Valley Rest Horne 1829 24 NA NA $503,300 Lathrop Homes 1930 39 NA NA $1,491,800 Rockridge Retirement 1970 2004 39 NA NA (Assessed value includes 12 cottages and 30 apartments) $8,431,900 TOTAL 102 DEMOGRAPHICS: Due to the aging of the Baby Boom generation, US population of 65 or older is projected to grow from 12.6% in 2007 to 14.55% in 2015 and to 18.2% in 2025. Below is the past data of the population 65 years and over: (US Census Bureau) 1990 2000 change US 31,241,831 34,991,753 12% Northeast 6,995,156 7,372,282 5.4% MA 819,284 860 5.0% According to the Center for Studying Health System Change, "the impact of Baby Boomer driven will not he immediate." They project the utilization of inpa.ticnt will bz on)y.0.7% /year increase over the next decade. (4/3/06) This is due to the shifts in new technology as well as the Boomers' relative goocl health. Alliance for Aging Research stated that "reaching 65 these days is by no means what it was to reach 65 in the 1950s. It's just a generally far healthier population." 10 10 However the increase demand for lung -term health care services arc inevitable. According to Standard I'uui Industry analysis. 85 and older is the "fastest growing segment oldie 1.1S population." Also the numbers of the nursing home beds per 1000 people aged 65 or older fell from 45.5 in 2007 to /17.0 in 2006 while the occupancy rate rose slightly from 8=1.6% to 81.7°/,. (Managed (.arc Digest /S &1' 2008) MARKET SLGMEN'I': In order to assess the demand potential for the subject type facilities, the age 67 and older demographics are narrowed to the adjoining towns of Northampton. Below is the table: (US Census 2000) (Census 2000) 55yrs- 64rrs 6 yrs c.r'• over Northampton 2209 3644 Easthampton 1261 2059 Hatfield 341 489 Southampton 515 473 Williamsburg 227 284 Whately 236 181 Worthington 147 123 Westhampton 147 110 Chesterfield 111 101 Cummington 89 96 Goshen 115 90 TOTAL 5398 7650 There are three methods to forecast the population of 65 older in 2010. First is to apply 5% change stated in the above table (for MA) between 1990 -2000. If this is applied to 67 yrs older, the population is projected to be 8032 in 2010. Second is to apply 14.55% for the national long term forecast provided by the Census Bureau for 2010. The result is 8759. The third is based on the Census 2000 Summary File I. The mortality ratio for the 65 -74 year group in 1990 transitioning to 75 -84 age group in 2000 is 9.32 (75 -84 yr group to 85 -94 is 61 It is assumed that 7650 of 67 years older (Yr 2000) will be subjected to the similar ratio 10 years later in the year 2010. This resulted in 6937. Also 5.5 -64 age -group (in 2000) will be 65 =74 age in 2010 assuming there is 00 significant mortality rate. Under this assumption, the total population for the 65 years and older is estimated at 12,335. Based on the above analysis, the projection of 65 years and older in Northampton area in 2010 falls within 8032 to 12,335. Park Urban area Mditmy bold A irpon Golf rpm sc Shopping Centel C'cnicten liospiIai. L_...J pniycrsity County bordci Roberts eadow \Reservoir 5 222 River Rd: NEIGIIBORFIOOD Bross Rd Mill H Pond K In gsleY �IPo/e Hill Rd d d .5 sS/ hHayd'enville s\ Ai Lis Limited access road Primary load Other road Unpaved or private road Railroad Miller Hill Meadow Brook 6, Geographic feature :il /till O T. Brass Millpond 222 ive Rd er t �e O v tL a lr •;Mill River Evergre Bd vergre Ql c io o m Leeds IN. 0O: rn t F \ore���73 O y ilI River Pf �h S% r�., 69) Roberts Hill C/ 11° •l �r Mill River _Dewey Sl MA Q J S 1 1999 MepQuest.com, Inc. POWERSTREETS ZONING RR- Rural Residential The subject is a pre- existing use and is therefore legally non- conforming. CONCLUSION: The total suppl or the subject type facility in the primary market is 534 beds. Considering the increasing aging population in 2010, there should be adequate demands For nursing homes and skilled nursing facility in near future. This is exemplified by the occupancy rate of the subject nursing market higher than the 2007 national average of 84.7% (S &P Industry Survey) and the median at 88.6% (ahca 2008) TAX AND ASSESSMENT FY 08 I'Y 07 FY 06 Tax Rote: 11.20 10.89 1 1 .73 (per 1000) fl ssessmenu taxed 2,716,200 2,716,200 2,716,200 exempt 5,394,950 5,394,950 5,394,950 Tax Amount 30,421 29,579 31,861 %Change 3% According to the assessor, the subject is primarily taxed on the land. The building improvement as a nursing facility is exempt like a hospital. Permitted Use- residential, day care, municipal facilities, agriculture. Not Permitted- lodging house, halfway house, fraternities, dormitories, townhouses, 3+ story multi family, most community facilities (maybe special permit), most commercial or industrial Density Reg: Min lot- 40,000 sf (nursing home- 70,000+ sf plus 1000 sf /bedroom) Min frontage- 175 feet Min depth- 200 feet Set backs- 40' front/20' side /50' rear Max Bld height- 35' Max Bld coverage- 15% Min open space- 80% According to Northampton Planning official, a nursing home is allowed per Special Permit. Any construction after a demolition, as an assisted living facility or a new nursing home, will require a Special Permit. 12 PED Reservation. nulitary bin; GlaCitn 0 Water tentronal parl. Other part, Seashore Urban area Bennington 0' rP.P!'-nBrodie 0 HancoLik 0 Janihy Pk LA 1•! 2 7 Stockbridge e 0 limisatonic Mohawk Mountain Slci Area ht,lyslach Adortmom 4'00C1lOt Li s \Clarksburg °S tamford Great Barrington Otis Ridge Ski Area Adams lariesbuto 0 Dalton Cifininington 4 Pittsfield Winsted charleinuot BerAsInre E dal Siandford Ski Area Torrington o Collinsville 11arwiilton Secondary road Unpaved or mime road SURROUNDING TOWNS Wilmington Jacksonville Weadshoto 0• Williamstown North Adams WrIliamsbur Sfii Sundown 9 c iSirtlAury WeAtogue !flue Hills Itarli nail \\0.S/ Ilrattlehorn 0 Shelburne Palls 2 5 f NOrth 222 Ril,er..RclkifitierSt 2 Amherst Engthampton V Marsh Iniernational ',Order p Geographic feattric Ferry State border Limited access Time 7000 Limited access Continental divide free Primary road County border Hinsdale 6 1 TITriiers 0 V59' /ILerfield Manchester Vinchestel No111)110111 1 I. Southwood 4fl Act:es r l Rockville 68 L Is:(0111 0 We'd Swatize) 8 4 Beiciietiown-- i./' South Hadley •.k.. 1; 'are yoke o 7 Chicopee7- .westfield ;Springfield East Feeding 1.6115 aim. Longmeadow Southwick On gm ea d o.w____.1.4_•._.__ Enfield t .Stafford Springs 0 202 47 ottith o. Troy C). Bigelow Holldw S.P South e 0 MAPOVEST ".N 1999 MapQuast.com, I Cov 0 POWERSTREETS 0 Jafit Lake D SVinc 110111/ enntson 0 Rec Area North Brookfield SITE ANALYS The topography of the subject is hilly but has a plateau tivhere the nursing home is located. The access is from the two drive ways from the River Road and is steep but levels out at the plateau. PHYSICAL: Frontage Area Shape Topography. Drainage UTILTITES: Water Sewer Electric Telephone Cable 1,550+ feet along the River Road 106.2 acres total (per assessor's record), 6 acres per hypothetical condition Irregular 1 -Iilly with flat area at the top, steep along River Road. Adequate for the hypothetical subject of 6 acres City water with water tower City WMECo Verizon Comcast IMPROVEMENTS Paved parking and street. FLOOD PLAIN FEMA Flood Insurance Rate Map: 250167 0001 4/3/1978 Not in the flood zone CONCLUSION: The subject's site is secluded and has no retail potential. It is remote. The poor access to major highway makes it undesirable as industrial use. Because of the topography, there is a limited subdivision potential. The subject type use could be appropriate. IMPROVEMENT BUILDING: Yr Built GLA 1972 53,575 sf Nursing wings- 26,730 sf Office, cafeteria support- 26,845sf Bed Units 120 total, 2 beds /room- 15 rooms/ wing, 1 bed /room- 6 rooms /wing Design Central hub- administration offices, dining, kitchen, mechanical, laundry, maintenance garage. East Win; short term nursing with nursing station and rehab unit South and West Wing -long term nursing with nursing station Construction Masonry and steel Roof Rubber membrane, 201. yrs old l;xtcrior Wall Brick, glass and concrete Hoek interior Wall Dry wall, painted blocks, Floor Electric Plumbing IIVAC Vinyl and resilient flooring 2500 amp 120/208 V, back -up generator, fire alarm system Central baths per each wing, mostly half bath /room, some full bath /room. Wet sprinklers, pressure boosted by 130,000 gallon water tower (120') ft has the town sewer. 2 Weil McClain institutional boilers 36 years old, 6000 above ground tank Central AC with a recent Carrier chiller. 14 pR i old Y- s' h Name: EASTHAMPTON Date: 11 /15/2008 Scale rr ,.r...c 'N. *e Of h Irj I r Location: 042° 21' 52.3" N 072° 42' 30.6" W Caption: SUBJECT TOPOGRAPHY N N' 1 ei 1 7 /4 ..C' F- e; (f) r C.) co !);0 I I I ROOM U. 1 I-3 U1 T -1 c.)t H o I WI! I ii —7 0 0 11 Q NURSES STATION LINEN RNI t7) SO 1 La) ROON1 EX IT A o 4> z Soiled Room L Room Ir. Nurses rtHz; Sta. 0 0 Ef3 15 T 0 0 0 0 0 0 0 0 0 o 0 0 HIGH EST AND BEST USE The market value ofa property must consider the most profitable and competitive use of the subject. This is done in the Highest and Best Use Analysis. Basically Blur fundamental issues arc examined: a property use being physically possible, legally permissible, financially feasible, and maximally productive. The underlying economic principles of this analysis are supply and demand, substitution, balance, and conformity. The highest and best use of the subject per hypothetical condition and the extra ordinary assumption is as -is on -going use on 6 acre lot. 15 15 HIGHEST AND BEST USE; The subject is presently legally non- conforming Nursing home. Any change of use has to be done through a special permit by the town zoning officials. Per hypothetical condition the site is large enough for the present use as a nursing home. The building foot print is adequate for the present use. 'HIE VALUATION PROCESS S(:OI'F OF ANALYSIS There arc three approaches in the valuation process: cost, sales comparison and income capitalization. "Typically the Cost Approach is used first, then the Sales Comparison Approach, and Finally Income Capitalization Approach. At the end Reconciliation is made to arrive. at the final value of the subject. "Ile subject is not a special use improvement nor a new construction. The building 96 years old. Therefor the Cost Approach is not applicable and shall not be used In this appraisal, Sales Comparison and Income Capitalization Approaches shall he used. SALES COMPARISON APPROACH The market value of the subject is derived by comparing the subject with properties that have been sold. Ideally the best comparable sale should be identical to the subject. However no two properties are completely alike. Therefor adjustments are made for their differences, compared to the subject. This approach is primarily based on the economic principle of substitution which states that no rational buyer will pay more for a property if he can buy a similar or equally desirable unit at the same or lower price. SCOPE OF THE APPROACH In this analysis, the summary of the comparable sales shall be presented in a table form. This will be analyzed in an Adjustment Grid. Each adjustment shall be discussed in the Narrative section. The final value shall be made in the Conclusion. 16 t r, SALES COMPARISON APPROACH INTRODUCTION: COMPARABLE SALES Two comparable sales are from Hampshire county and two are from Hamden County. SALE 1 This is located away from the town center nearby Cooley Dick. Hospital. It is two story structure and is operated as a for profit entity by Landmark Health Solutions. It also has a pediatric care center. SALE 2 This located in the rural town of Hampden, south of Springfield, MA. It is away from a dense development and is easily accessible by the road. It is for a profit entity and is managed by Wingate Health Care. It has extensive Alzheimer care. SALE 2 This is located on the secondary road in Palmer, MA. It is on a large track of land but has extensive wetland. It is managed by the owner operator and is a for profit nursing home. SALE 3 This is located at the eastern edges of South Hadley near Granby town line. It is on Rt 202 and is easily accessible. The building is in good condition with a good design and quality. It is managed by Wingate Healthcare. See the Map, Attached) 17 Hancock 0 1 Canaan 0 ShOlitil)1111 A401//), ri/l011. I NVII I i ISVIIIIIIIgill11 1 Haystdo. 1 I A4ottniditi kl.boclloicl lksiiiingEtiii 0 Pownal 0 ry11111111 Monntron Ifetiox Of 9 2 0 'Housatonic \Vaicr National (Wier park Nalional Seashore Urban area Reservation. uilitaiv lane Glacier JIM ihy Pk Ltmesboro 0 .iPittsficicl Great 00Y Ridge Ski Area Mohawk Mountain Ski Area 0 Dalton Marsh For, l• cams Tune aone Cominenial divide Comity binder S Ski Area COMPARABLE SALES Orange r.rAti;01: Slit Sundown inll Limbed access free Primal) load Secondary road Unpaved or OrIVTIC road 0 Itendthoro O• O' sl Inr° 1 C- 0 Ni,rili A!clinns.. climleinnm Eleifkshtle Easi Jacksonville °Goslt WiIIiatnbur Railroad 0 Ed8thampton 0 NLIVkillt! Mi/Pk.. Viide. r Ski Atua i: West Briillleboro 21(.1. Shelluanc •Sim Wentogne Blue Hills 0 Coninsei!le NW Iniernaiional border A Geographic rCRIIIIT SIAIC horde; rrn Limited access Hinsdale 11 `.0 liro -....0e.st:field, -'Springfield East Feeding Hills. warn Longmeadow ,authwiek' ..i 1 1 o t ngmea 47 1-faprdville Stafford C/ 1. Sp l'ing5 Southyood Acre 1 I RoclIville 68 1. 00 g;1 0 50P 1 ri 6 64P--. 0 4incliesier o Nun lilichl 410/1<rene lVesl Ibun)"8'1' 0 Tiuy Lake Den flISC) Rec Area 19 Bart 0 Jaff re) 0 Viitch coda n North Brookfield Southbr MAPOVES1 1999 MapQuest.cont, Inc. POWERSTREETS 11 SUMMARY OF COMPARABLE SALES: SALE PRICE Subject Sale 1 Sale 2 Sale 3 Sale 4 Northampton Northampton Hampden Palmer So Hadley 2,752,000 3,265,000 2,200,000 8,170,660 PROPERTY RIGHTS Fee Simp Fee Simp Fee Simp Fee Simp Fee Simp FINANCING Market Market Market Market Market CONDITION OF SALE Arm's L Arm's L Arm's L Arm's L Arm's L MARKET COND Current 4/4/2005 6/26/2006 3/15/2004 3/24/2006 LOCATION Good Similar Similar Similar Similar IMPROVEMENT Building GLA: 53,575 70,295 26,904 12,136 47,890 of Bed Units: 120 166 100 61 132 Yr BUILT 1972 1971 1965/1985 1963 1987 CONDITION Average Avg -Good Average Average Very Good CONST TYPE Masonry Masonry Masonry Masonry&Wd Masonry LOT: Acre Total 6 6.2 3.11 12.34 5.97 Topogrph Hill &Lev Level Level Level Level Wetland None None None Some None 18 ADJUSTMENT GRID: COMPARABLE SALES: SALE PRICE Adjusted Price Subject Sale 1 Sale 2 Sale 3 Sale 4 Northampton Northampton Hampden Palmer So Hadley 2,752,000 3,265,000 2,200,000 8,170,660 4,666,000 3,265,000 2,200,000 8,170,660 PROPERTY RIGHTS Fee Simp Fee Simp Fee Simp Fee Simp Fee Simp Adjustment 0 0 0 0 FINANCING Market Market Market Market Market Adjustment 0 0 0 0 CONDITION OF SALE Arm's L Arm's L Arm's L Arm's L Arm's L Adjustment 0 0 0 0 MARKET CONDITION Current 4/4/2005 6/26/2006 3/15/2004 3/24/2006 Adjustment 457,499 192,393 292,213 547,577 ADJUSTED PRICE 5,123,499 3,457,393 2,492,213 8,718,237 SITE: acres 6 6.2 3.11 12.34 5.97 Adjustment 0 43,350 0 0 LOCATION Average Similar Similar Similar Similar Adjustment 0% 0% 0% 0% Adjustment 0 0 0 0 Building Condition Average Avg -Good Average Average Very Good Adjustment -10% 0% 0% -29% Adjustment 487,952 0 0 2,490,925 ADJUSTED PRICE 4,635,547 3,500,743 2,492,213 6,227,312 of Bed Units: /Bed SUBJECT'S VALUE: Comp Sale Avg:1 &2 Avg:2 &3 Avg:1,2, &3 Avg:1,2,3 &4 /Bed 31,466 37,932 34,596 41,013 of Bed 120 120 120 120 3,775,944 4,551,803 4,151,535 4,921,600 Value Range: 3,776,000 4,552,000 4,152,000 4,922,000.Rounded CONCLUSION: 3,776,000 166 100 61 132 27,925 35,007 40,856 47,177 19 NARRATIVE: ADJUSTMENT GRID SALE PRICE Sale 1 did major renovation right after the purchase of the property. The buys purchased the property at foreclosure with an intention of capital improvements. The amount was $1,914,00 per HCF -1 and the administrator. This is added to the initial purchase price. MARKET CONDITION Time differential: Adjustments: Future value factor (applied to initial price) SITE: Pair Data Analysis: Sale 4 Very Good Sale 1 Sale 2 Sale 3 Sale 4 4/4/2005 6/26/2006 3/15/2004 3/24/2006 SUBJECT 6/2/2008 6/2/2008 6/2/2008 6/2/2008 Adjust Yr 3.16 1.94 4.22 2.19 3% per year shall be used to reflect the CPI average which can be applied to the revenue growth. Sale 1 Sale 2 Sale 3 Sale 4 FV factor Adjustmen Adjustment 1.10 9.80% 457,499 1.06 5.89% 192,393 1.13 13.28% 292,213 1.07 6.70% 547,577 Sale 1 and 4 are similar in size. There are no adjustments. Sale 3 is larger but has wetland. Its usable portion is similar to the subject. Sale 2 is smaller than the subject. The upward adjustment is made based on the excess land prices in Hampden. LOCATION ADJUSTMENT All the comparable sales are in smaller towns like the subject, away from large cities. Therefore there are no adjustments. BUILDING CONDITION The subject has items of deferred maintenance and could use updated design. The adjustments are based on the cost to repair and the pair data analysis after the Location adjustments. Sale 1 Sale 2 Sale 3 Sale 4 ADJUSTED PRICE after Location: 5,123,499 3,500,743 2,492,213 8,718,237 Building Size: SF 70,295 26,904 12,136 47,890 /SF 73 130 205 182 sale 2 Average 1 3 adjustment/grade 4 182 130 52 29% 10% Grade avg avg -good good very good 1 2 3 4 20 The cost to upgrade the subject to average -good requires the upgrade to roof, healing system and other minor upgrades. RCN (replacement cost new) was derived from Marshall Valuation and the maintenance supervisor, From this a residual value was subtracted which resulted in $505,000 This is close to the downward adjustment made for Sale 1:Avg -Good to Average and provides the lest of reasonableness of the pair data analysis. COMMON UNIT OF COMPARISON The going concern value of the Nursing Home industry primarily use per Bed unit. In this appraisal this will be used. CONCLUSION: SALES COMPARISON APPROACH Sale 4 is superior in condition and quality than the subject. Therefore it shall not be relied on. Sale 3 is similar to the subject but its building size is much smaller than the subject and shall not be relied on. Sale 2 is larger than Sale 3, but is smaller than the subject. Sale 1 was a foreclosure sale but the buyers did extensive renovation. Also it is in the same town as the subject and the building is larger than the subject. This and Sale 2 shall be averaged to derive the /bed unit for the subject which is $34,596 USD. To this subject total bed units are multiplied which is 120 beds. The conclusion is $3,776,000 (rounded). 21 SALE 1 IDENTIFICATION NORTHAMPTON REHAB NURSING CENTER Address 737 Bridge Rd Northampton MA Assessor's Map Lot 18C/48/1 SALE'S DATA Sale Price Type of Sale Financing Verification LEGAL Book Page 8212/109 Hampshire County Reg of Deeds Grantor /Grantee Nhamton Nursing Home inc /Northampton Health Care RE Landmark Health Date of Sale 4/4/2005 IMPROVEMENT Yr Built Type 1971 Masonry Size:GLA -sf 70,295 Number of Bed Units 166 Occupancy 84% Quality Condition Avg -Good of Story 2 Sprinklers Sprinklers Use Nursing home SITE Size: acre 6.2 Topography Wetland Level None Zoning URB REMARKS In Northampton. Managed by Landmark Health Solution Inc. It has pediatrics unit. Extensive renovation after the purchase. Confirmed with administrator $1.914M record. 2,752,000 Foreclosure Market Administrator Assessor MLS Public Records 22 SALE 2 IDENTIFICATION Address Assessor's Map Lot SALE'S DATA Sale Price Type of Sale Financing Verification LEGAL Mary Lyons Skilled Care Center 34 Main St Hampden 12/158 3,265,000 Arm's Length Market Administrator Assessor DHCFP Public Records MA Book Page 16004/227 Hamden County Reg of Deeds Grantor /Grantee G &L Mary Lyons LLC/WHC Hampden Inc Date of Sale 6/26/2006 IMPROVEMENT Yr Built Type 1965/1985 Masonry Size:GLA -sf 26,904 Number of Bed Units 100 Occupancy 96% Quality Condition Average #of Story 1 Sprinklers Sprinklers Use Nursing home SITE Size: acre 3.11 Topography Wetland Level None Zoning C REMARKS In a rural community of Hampden. NE wing built in 1985. Managed by Wingate Healthcare. 23 SALE 3 IDENTIFICATION Address Assessor's Map Lot SALE'S DATA Sale Price Type of Sale Financing Verification LEGAL Palmer Healthcare Center 250 Shearer St Palmer Map12 Lot32 2,200,000 Arm's Length Market Manager Assessor Public Records MA Book Page 14016/359 Hamden County Reg of Deeds Grantor /Grantee Arcidi Assoc/Wellman Realty Inc Date of Sale 3/15/2004 IMPROVEMENT Yr Built Type 1963 Masonry&Wd Size:GLA -sf 12,136 Number of Bed Units 61 Occupancy 93% Quality Condition Average #of Story 1 &2 Sprinklers Sprinklers Use Nursing home SITE Size: acre 12.34 Topography Wetland Level Some Zoning GB REMARKS In a rural community of Palmer. The and has we( land. Smaller building. Some rooms have 4 beds. SALE 4 IDENTIFICATION Address Assessor's Map Lot SALE'S DATA Sale Price Type of Sale Financing Verification LEGAL 8,170,660 Arm's Length NA Employee Assessor Public Records WINGATE SO HADLEY REHAB SKILLED NURSING RESIDENCE 573 Granby Rd So Hadley MA 32/81 Book Page 8658/100 Hampshire County Reg of Deeds Grantor /Grantee Senior Res Care S SRC-GP S Hadley lnc/NHP Prop Bus Trust Date of Sale 3/24/2006 IMPROVEMENT Yr Built Type 1987 Masonry Size:GLA -sf 47,890 Number of Bed Units 132 Occupancy 89% Quality Condition Very Good of Story 2 Sprinklers' Sprinklers Use. Nursing home SITE Size: acre 5.97 Topography Wetland Level Zoning BA1 REMARKS In a rural section of S Hadley. Managed by Wingate Healthcare. None 25 INCOME CAPITALIZATION APPROACH: [)IRI;C"I CAPITALIZATION This approach is primarily based on the economic principles ufanticipalic and change where a buyer anticipates future benefits and estimates their present value considering the changes in the future. In l)ircct Capitalization, a single year's income (Year 1 forecast) is converted to a value by dividing with appropriate capitalization rate or multiplied by a multiplier. In this analysis, NOI (net operating income) shall be divided by Ro (overall capitalization rate). SCOPE. OF THE APPROACH First the subject's income and the market income shall be analyzed. Second, the expense analysis shall be discussed. Third, ROS reconstructed operating statement) shall be constructed. Finally Ro overall capitalization rate) shall be discussed and will be applied to NO1 net operating income) to derive a value estimate. 26 26 INCOME ANALYSIS SUBJECT INCOME Subject's primary income is from the charges made to the patients, ancillary services and other income. The room and board rate per day as follows: West South Wings Long term: $240 (dble bed /rm) $255 (private room) East Wing short term: $295 The subject participates in Medicaid program and is reimbursed by the MA DHS(Human Service). It also receives the payment from Medicare related services. Below is the revenue account:(Statement of Activities 12/2007) OPERATING REVENUE Priv patients Medicare patients Pub -aided patients Sub Total bed days occupied Ancillary Income Other Income TOTAL OPER REVENUE 2007 Amount per Diem 1,995,135 2,081,174 4,484,640 8,560,949 40,441 10,753 44,422 8,616,124 213 MARKET INCOME The survey of income and the bed rate was done for the nursing home facilities in the subject area and the comparable sales. This is based on the interview as well as MA DHCFP HCF -1 Cost reports. Below is the summary: COMPARABLE INCOMES Bd Rate /Day Total OpRev PatBdDays perDiem Northampton Rehab Northampton Mary Lyon- Hampden (4beds 2beds -1bed) /room Palmer Healthcare Palmer (4beds 2beds) /room Wingate -S Hadley Linda Manor Northampton Calvin Coolidge- Northampton Center for Ext Care Amherst $250 -$300 $200 $250 -$260 $240 -$250 $270 -$295 $260 -$280 278 -$311 295 -$305 14,367,700 7,093,957 4,358,408 10,828,397 10,352,607 10,149,727 11,403,538 CONCLUSION: INCOME ANALYSIS Subject's board rate /day is within the market range. The subject's per Diem revenue is higher than Sale 2 3 (Mary Lyon Palmer). However for Northampton area, it is lower than other comparable facilities. 49,317 35,093 21,810 42,823 42,454 39,993 45,794 AVG 291 202 200 253 244 254 249 242 27 EXPENSE ANALYSIS: SUBJECT EXPENSE 2006 Expense was based on HCF -1 provided by Lando Alsher's Nursing Home Fin Stat Profile. 2007 Expense was based on the Annual Financial Statements of 12/2007 of the subject. 2007 excludes all Hampshire COG related expenses. 2006 LANDA ALTSHER NURSING HOME FIN STAT PROFILE (modified) OPERATING EXPENSE Nursing Adm General Property Expense Plant Operation Dietary Laundry linen Housekeeping Medical services* Social services Consultants* Recreation Ancillaries` Non Nursing County' 2006 Amount 4,227,136 1,074,208 135,696 508,182 931,887 107,575 221,495 146,831 149,548 6,075 142,683 873,763 456,641 (HCF1) per Diem 103.73 26.36 3.33 12.47 22.87 2.64 5.44 3.6 3.67 0.15 3.5 21.45 11.21 /Rev 51.5% 13.1% 1.7% 6.2% 11.4% 1.3% 2.7% 1.8% 1.8% 0.1% 1.7% 10.6% 5.6% Total Operating Exp 8,981,720 220.42 109.5% HCF -1 uses different line items than Annual Financial Statements of the subject. They are changed as below: Medical services: Consultants: Ancillaries: Non Nursing -Cty: QA/Ward clerk +MDS Physician Other Variable +Legend drugs +Restorative 2006 (statement)- County related expenses. 2007 ANNUAL FINANCIAL STATEMENTS OPERATING EXPENSE Nursing Adm General Property Expense Plant Operation Dietary Laundry linen Housekeeping Medical services Social services Consultants Recreation Ancillaries (county expense excluded) Total Operating Exp 2007 Amount per Diem 4,142,355 102.43 1 ,470,794 36.36 144,857 3.58 529,424 13.08 906,167 22.41 104,035 2.57 163,943 4.05 .92,254 2.27 125,868 3.11 13,950 0.34 118,106 2.93 587,360 14.51 /Rev 48.08% 17.07% 1.68% 6.14% 10.52% 1.21% 1.90% 1.07% 1.46% 0.16% 1.37% 6.82% 8,399,113 207.64 97.48% 28 MARKET EXPENSE 2006 MARKET EXPENSE: 2006 expense shall be compared based on the Landa Altsher Nursing Home Financial and Statistical Profile which is based on HCF -1 reported to DHCFP. It will compare the per Diem expense and %lper diem Revenue. Below is the table: Abbreviation: NR -N: Northampton Rehab Northampton ML -H: Mary Lyon- Hampden PH -P Palmer Healthcare Palmer W -SH: Wingate -S Hadley LM -N: Linda Manor Northampton CC -N: Calvin Coolidge- Northampton CEx A: Center for Ext Care Amherst SBR -H: Sunbridge Hadley 29 Nursing I 128.5 Adm General 1 29.7 r A i I NU: inspector DHCQ- CarePai D e fi ci e n c y: 200712006 1 3 3 \5 6 LANUA&AL 1 SHER:2006 MARKET EXPENSE ANALYSIS: per NR -N: total beds 164 13.61 c 1 f0 W W el W6 O 49 5.5 3.5 3.1 0.8 3.1 6.1 6.3 2.4 2.9 65.1 16.2' 10.41 N V Mt^ A N O O W A CO 0) 0) W UI I 66 \15 \45 21810 22265 PH -P 61 15.5 12.2 N O] co W W O CO N N 22 \6 42823 W -SH: 120 14.4 --,co A N W 0) W O-' A A A O O) co N W 15.4 11 A CO O U) N -.4.03 N W 0) 0) CJ W� A V W A 00 n c0 O 2 W N N W N N Cn O co V O W -n...4 A O (n A W V W A O O .P A Cn -4 V m V A O) co V co W• D A co N A C W o A j m k A D A O A•• art W CT N s K.rS�+$ N )'�'t- ;r�7ca 4 pr ;�iYc4 1.4.4 PIN N .pal O c0 V c :+i 9 V _(��4 1 qq•�L rt•� JY�. 1 IN c .n O 3r ;i ..Yk P O 7;:'H%hWt W A A ()I O N O t y'))l f d G) V A b N N 'M a��' v �ri't 3, 1A; III v v v m cn IV O) f0 O F o �3) N N O Di W p ;�2ks� II t 7 N v v O W N M A t 1�J,.t..�.X+. A A J tV l �r �'(n'f' ma ins+ W N j1 N NI_.v cn O V A W V J iY�i: �.sti-, ,A�i p� O O W w N t't O Di „N ,N U I N�W W ti.,. 0. k uI W rr t N"D f �'NAO t. U�1 a t cO F,, )tc O O Y'!`Si r O co O 0) r t I 0 s W r 4.p j .p I s IOW W 4'4:—. t O o 7 N O O I 0 MO CO W O Zi O A Z I. r {a i0 i N O c0 W r I 61W f•�r j O tit Q .cO Sr.+ A �o P II I w S I J °J: N D G i••� W m Social Services Restorative Therapy 1 4.1% Recreation Therapy Legend Drugs 3.8% Other i 2.4% Total:Variable 1 32.0% Fixed Cost j 4.4% Non Nursing 1 16.3% 1 1 TOTAL OP EXPENSE 1 114.8% 1 Nrs HNdy /Resid:2007 1 4.41 REVENUE I 254.51 1 OPERATING EXPENSE I Nursing i 1 50.5% Adm General i 11.7% 1Deficiency:200712006 33 \561 IRATING:Inspector DHCQ CarePathways 1 :Occp 82 %1 96 %1 98 %1 98% 1 Pat days 493171. 350931 218101 42823 ;Capacity 598601 36500! 222651 43800 1 •total beds 1 1641 100j 611 1201 NR -N: I ML -H: 1 PH -P 1 W -SH: OPERATING EXPENSE 'MARKET EXPENSE ANALYSIS: /Diem Revenue) 1 1 LANDA&ALTSH ER: 2006 1 N Ca O A W cn 16 \01 66 \15 \451 22 \61 N• O( o F S V i i i 9)) O 0 W CO 0 O (O e N CT -e: N O o A- (a e N e N A o W Cr, 0 co A 0 N O 0 A 0 co c7 CI1 O e Ca in e N CU e N (O o Cn o e A 'co e j V e O N e O CO e c.> N O a f CO N N co Co (a (A 31 \21 95 42,450 44895 123 LM -N: i CC -N: V a P w v 1 \111 88 %1 399931 45625, 125 V a D p A N 0/241 93 %1 45,494 489101 1341 1 CEx -A: 1 1 1 1 31 50% 8 6.6 .;i11 ti 2 °i f: 14s 4.6% 1 4.4% ti 0.8% o, v'4% 1.4 %iy :may ('3 0.0% 2.2% i j 4'i'r r m 2.0%(r +-r2 ✓b`.' 0.7% o 1.5 +rU 1 8 "0 0!: 0.9% 1.4% '1 1.8%>>' d� 9°CY 0 9% 1 2.4%o o o 7.0 �z7- 54% 3+ 6 o -1.7/ 2.0% 1 8°/ -0 -0.1% Y �7:: 1 2.8% t`?l 33/3,5J y 0. 2% 1 2.6% 2.6 i 0.9% 1 54 1 2006 MARKET EXPENSE: CONCLUSION The subject have following items that are higher than the market based on per Diem Revenue. Subject Avg High Low Nursing 51.5% 40.0% 50.5% 34.4% Dietary 11.4% 6.6% 8.3% 5.0% Plant Operation 6.2% 4.6% 5.3% 4.1 All other line items tend to reflect the market expenses. 32 2007 MARKET EXPENSE: 2007 analysis shall be based on MA DHCFP Forni HCF -1. Some line items that were similar to the subject is not listed on this analysis. Abbreviation: NR -N: Northampton Rehab Northampton ML -H: Mary Lyon- Hampden PH -P Palmer Healthcare Palmer W -SH: Wingate -S Hadley LM -N: Linda Manor Northampton CC -N: Calvin Coolidge Northampton CEx -A: Center for Ext Care Amherst 33 A n 2 r- O z q OO o C (p N a c D Q, N 7 N p_ 3 �1 n m Ro m m 2 0 0 0 El N N O G.1 W N N p W co O N W C71 J 0 0 0 0 0 0 W O) 4,„ O A W Co m N J O J 1 r- 00 O) N A (n Cr.) CO 0 0 0 0 0 0 0 0 N OD U7 A O (0 C71 O N co W v (71 0 0 01(0 (0 01 W (!1 0 0 0 0 0 0 0 0 W 1 d) Cn co co Co N J O Ci0 0 0 0 0 0 0 0 0 N O U7 O1 J O W (.0 (1i 0 0 0 0 0 0 N O A P P O) O A N co U7 J (n J 0 0 0 0 0 0 0 co CO V1 W W O W J P W N (n 0 0 0 0 0 O) N -A 01 V N Cn p 0) A N 0) CO 1, 4. Cb .e o D O ,71 X m C) X v 1 Z co N m D o co D r N (D O 3 ((0 c c !D r 0 17 D Z O 0 0 0( Fo v a c v m .9_ N S F, D 3 2, m •2 1 n w m 2 3 (0 GI 0 d m x b m z 01 m v A m A CO CO m CO V A W N A CO O CO O W 0) N V l N D CO W CO N A V W W 0) N U 1 (O W CO A CO A N N (O U1 A (n W O CO CO CO GI CI Cr) W V 0 Co 4, 2 7) C.; W O CO CO N W .Z) m rn z C m N (0 N O N N 0 O N N N CO O 0 N 01 m O o V 0 A 0 0 0) r- O O N b O CO N co U o O A A 0 0) O 0) In O O N N N o W O O A r D N A O 0 11 W co co 0 1 0 co 0 O Z co 6 o W 0) o N 0 V (O k W A (O Cr) CO o A 0 A 2007 MARKET EXPENSE: CONCLUSION The subject have following items that are higher than the market (based on per Diem Revenue.) Subject Avg High Low Nursing 48.1% 40.5% 46.1% 34.9% Adm General 17.1% 10.8% 14.7% 8.1% Plant Operation 6.1% 4.4% 5.4% 2.9% Dietary 10.5% 6.9% 8.39% 5.95% These line items are like 2006 except Administration General expense. This item in 2007 was based on the Annual Financial Statement and did not follow the DHCFP Schedules for HCF -1 report format. However as a real expense in 2007, it accurately reflects the cost accrued by the subject. Based on the above and the discussion with the administrator, the following findings were concluded. Nursing: This item was high due to use of pool nurses than resident nurses. Higher rates were paid which is reflected in the higher cost. Adm General: This item was high due to the higher health care and benefit costs. The subject has to be bounded by the state regulations since it is under the Hampshire COG. Plant Operation: Mechanicals are aged and needs extensive repair, especially the heating and water system. Dietary: Food service costs tend to be higher due to the contract service the subject has employed. 35 CONCLUSION: EXPENSE ANALYSIS There are four expense items that are higher than the market. Therefore they shall be adjusted except the Plant Operation. This is based on the discussion with the administrator in an attempt to normalize to reflect the market. All other line item expenses shall be used as accrued by the subject since they are at market. These shall be listed in the Narrative section of the Reconstructed Operating Statement: ROS. 36 RECONSTRUCTED OPERATING STATEMENT PGI: Potential Gross Income Vacancy Collection Loss EGI: Effective Gross Income EXPENSES 9,636,000 -954,520 8,681,480 2009 per Diem /EGI Nursing 3,906,666 96.6 45.0% Adm General 1,514,918 37.5 17.4% Property Expense 153,679 3.8 1.8% Plant Operation 545,307 13.5 6.3% Dietary 737,926 18.2 8.5% Laundry linen 107,156 2.6 1.2% Housekeeping 168,861 4.2 1.9% Medical services 95,022 2.3 1.1% Social services 129,644 3.2 1.5% Consultants 14,369 0.4 0.2% Recreation 121,649 3.0 1.4% Ancillaries 604,981 15.0 7.0% SUB TOTAL 8,100,177 200.3 93.3% Reserves 99,667 2.5 1.1% TOTAL OP EXPENSES 8,199,843 202.8 94.5% NOI: Net Operating Income 481,637 Ro: Overall Cap Rate 12.64% VALUE: Capitalized NOI 3,809,033 3,809,000 rounded 37 NARRATIVE: RECONSTRUCTED OPERATING STATEMENT PGI: Potential Gross Income: 2007 2008 2009 Market Income: per Diem 213.1 219.4 220.0 Potential bed days 43,800 43,800 43,800 PGI 9,331,773 9,611,726 9,636,000 EGI: Effective Gross Income: PGI V &C Loss 2007 based on the subject since it is at market. 2008 increase based on CPI average and the survey of the area facilities. 2009 increase based on CPI average and the survey of the area facilities. Vacancy Collection Loss: Vacancy: Based on the subject which is at market 7% 674,520 Collection Loss (G06): based on subject Fl cost 2007 account, modified. 280,000 Total: Vacancy Collection Loss 954,520 Vacancy is based on the subject and the area market occupancy which is higher than the national rate of 85.5% (National Investment Center 2008). EXPENSES As previously discussed in the Expense section. 2007 /EGI Amount Nursing 48.08% 4,142,355 Adm General 17.07% 1,470,794 Property Expense 1.68% 144,857 Plant Operation 6.14% 529,424 Dietary 10.52% 906,167 Laundry linen 1.21% 104,035 Housekeeping 1.90% 163,943 Medical services 1.07% 92,254 Social services 1.46% 125,868 Consultants 0.16% 13,950 Recreation 1.37% 118,106 Ancillaries 6.82% 587,360 SUB TOTAL 97.48% 8,399,113 8,651,086 Replacement Reserves TOTAL 8,681,480 2008 a Amount 3' f'n2l1 4,266,626 1,514,918 149,203` 545,307 «'1 933,352 107,1561 168,861 95,022'.,t'e 129,6444:'x"'2 °i6 14,3691 +jam.' pcE 121,649:yY F „E 604,981 /EGI 45.0% 17.4% 1.8% 6.3% 8.5% 1.2% 1.9% 1.1% 1.5% 0.2% 1.4 %u 7.0% 93.3% 1.1 94.5% 38 *ADJUSTED ACCOUNTS: 2009 projection Based on the previous years and the discussion with the administrator, the below items have been normalized to reflect the market. Also the COG expense is removed as an abnormal expense. For other items, 3 %/Yr adjustments are applied, based on long term CPI average. 2007 2008 2009 Nursing 4,142,355 4,266,626 3,906,666 Dietary 906,167 933,352 737,926 Replacement Reserves RCN(replacement cost new) of short lived items have been annualized. This is based on the Marshall Valuation Service manual, the maintenance supervisor, and the personal property list. NOI: NET OPERATING INCOME This is based on EGI minus the total Expenses. 39 Ro: OVERALL CAPITALIZATION RATE There are two major methods to estimate the Over All Capitalization Rate (Ro): The Sales Comparison method and the a Band of Investment. Below is the Sales Comparison method: Ro: SALES COMPARISON METHOD Subject Sale 1 Sale 2 Sale 3 Sale 4 SALE PRICE Adjusted Price ADJUSTED PRICE 5,123,499 3,457,393 2,492,213 8,718,237 Market Adjusted EXPENSES /EGI 2,752,000 3,265,000 2,200,000 8,170,660 4,666,000 3,265,000 2,200,000 8,170,660 REVENUE 14,798,731 7,306,776 4,489,160 11,153,249 Adjusted for Market 14,058,794 6,868,369 4,174,919 10,372,521 95% 94% 93% 93% NOI 739,937 438,407 314,241 780,727 Ro 14.44% 12.68% 12.61% 8.96% 12.64% (Avg of Sale 2 and 3) CONCLUSION: SALES COMPARISON METHOD To derive the rate for the subject, the prices are adjusted to reflect 2008 market. Expenses are based on the extracted ratios and actual percentage. They are compared to RMA 2007 -2008 which is 93.5% and provides the test of reasonableness. For the final rate Sale 2 and 3 rates are averaged. 40 The following is the Band of Investment method: Ro: BAND OF INVESTMENT Mortgage M x Rm (add) Equity (1 -M)x Ye (less) Equity in Mortgage M x P x 1 /Sn Weighted Avg 70% 10.04% 7.03% 30% 14% 70% 0.11 15.13% ASSUMPTIONS: BAND OF INVESTMENT M: Mortgage based on 70% LTV Rm: based on Interest- 8.00% Amort (Yrs) 20 Hold Pd(Ys) 5 Ye: Equity Yield Rate P: Prin Paid off 1 /Sn: sinking fund at Ye Projected rate: based on actual liquidity 14% Equity investors equity return S &P, Bus &Fin Ratios, RMA 0.11 15.13% 13r21% 8.00% CONCLUSION: BAND OF INVESTMENT METHOD Projected interest rate is based on the actual rates and the consideration for the credit problems in the present financial market. Equity rate is based on the industry survey based on financial reports. CONCLUSION: Ro OVERALL CAPITALIZATION RATE The Sales Comparison method resulted in 12.64% The Band of Investment result is: 12.39% Due to the uncertainty of financial markets and the interest rate cuts, the Band of Investment shall not be relied on. The conclusion will be based on the Sales Comparison method which is 12.64% According to the nursing home consultant, the average for the subject's region is 12.3 NIC (National Investment Center for the Seniors Housing and Care Industry) listed the range of 11.1%-14% with the average of 12.8 This does provides the test of reasonableness of Ro conclusion. 41 CONCLUSION: INCOME CAPITALIZATION APPROACH The Direct Capitalization was used. Based on the market rent and expenses, NOI was derived. To this Ro was used to derive the value of the subject. This approach estimates the subject's value at 3,809,000 USD 42 RECONCILIATION AS -IS GOING CONCERN VALUE per HYPOTHETICAL CONDITION COST APPROACH NA SALES COMPARISON APPROACH 3,776,000 INCOME CAPITALIZATION APPROACH 3,809,000 COST APPROACH This approach was not used. SALES COMPARISON APPROACH Four comparable sales were used from the region. Sale 3 was not relied on since it is superior to the subject. Sale 2 is much smaller than the subject and was not relied on. The average of Sale 1 -2 was used to derive the estimate for the subject. INCOME CAPITALIZATION APPROACH The Direct Capitalization method was used. First, subject's income and expenses were compared with the market. Then ROS (Reconstructed Operating Statement) was, constructed based on the market income and expense. To NOI (Net Operating Income), Ro (Overall Capitalization Rate) was applied to derive the value estimate of the subject. CONCLUSION The difference between the results of the Sale Comparison Approach and the Income Approach is minor and therefore supports the test of reasonableness. However the Income Approach shall not be relied on since the subject's income and expense had to be adjusted to the market. Therefore the value conclusion shall be based on the Sales Comparison Approach. The As -Is Going Concern value per hypothetical condition of the subject is estimated at $3,776,000 (Three million seven hundred seventy six thousand USD) 43 1984 -1979 FREE ENTERPRISE ASSOCIATE International business consultants for industrial and commercial projects EMPLOYMENT (ACADEMIC) 1984 (winter) GUEST LECTURER MASS COLLEGE OF LIB ARTS 1978 (spring) ADJUNCT FACULTY ASSOCIATE HAMPSHIRE COLLEGE 1977 INSTRUCTOR BROWN UNIVERSITY APPRAISAL, FEASIBILITY, AND RESEARCH PROJECTS (SAMPLE) Valuation of commercial, residential and industrial properties in MA and CT. Review and forensic appraisals of commercial property valuations Valuation consulting on a rail yard and rail right of way. Valuation of environmental impacted properties for litigation proceedings. Valuation of woodlands and farms. Electric power plant valuations and New England electricity market analysis. Property tax consulting and expert witness to Appellate Tax Board and MA Superior Court. Easement and eminent domain valuation for municipal and county governments. Market and real estate impact analysis of tourism for commercial development Investtnent analysis of restaurant chains in MA and CT Real estate investment analysis of a high rise hotel development in NYC. Real estate investment analysis of a shopping mall in CA. Financial analysis of resort development. Development and investment analysis of polymer -wood plant Cost analysis of multi- tenant food service and canning facility, Development JV consulting of a municipal incineration and cogeneration plant. Development and project finance consulting of refinery project. AFFILIATION (PAST PRESENT) APPRAISAL INSTITUTE (President of WMASS Chapter, Member of CT &MA Chpt) IAAO /MAAO CCIM INSTITUTE CCIM) NAT ASSN OF REALTORS ASSOCIATION OF ENERGY ENGINEER LICENSES, CERTIFICATION DESIGNATION APPRAISAL INSTITUTE MAJ MA CT Certified General Real Estate Appraiser MASS Real estate Broker (inactive status) 533946 MASS SOMBWA MBE DBE CCIM INSTITUTE CCIM FAA ATP APPROVED APPRAISER /or APPRAISED FOR (Samples) Warburg Dillon Reed Mundy Associates Banknorth Group Citizens Bank Greenfield Coop [3ank United Coop Bank Source One Mortgage Greenfield Savings MBNA Consumer Services Apex Mortgage Franklin County Engineers IvIHD(MA Hwy Dept) Municipalities First Trade Union Bank Kaiser Permanents Lenox Savings Bank Legacy Bank Interbay Funding