Document Text Content
Integra Realty Resources
Caribbean
Appraisal of Going Concern
IGY American Yacht Harbor Marina
Mixed Use Property
18A-1, 18-B1,18-B and 18-W Remainder Estate Smith Bay
East End Quarter, St. Thomas, Virgin Islands
Client Reference: 23559
Prepared For:
Banco Popular de Puerto Rico
Effective Date of the Appraisal:
November 25, 2015
Report Format:
Appraisal Report —Standard Format
IRR - Caribbean
File Number: 172-2015-0181
IGY American Yacht Harbor Marina
18A-1, 18-61,18-B and 18-W Remainder Estate Smith Bay
East End Quarter, St. Thomas, Virgin Islands
Integra Realty Resources
Caribbean
December 15, 2015
Roberto A. Soltero
Vice President
Banco Popular de Puerto Rico
PO Box 362708
San Juan, PR 00936-2708
6500 Red Hook Plaza Suite 201
St. Thomas, VI 00802
U.S. Virgin Islands
T 340-714-7325
T 844-952-7304
caribbean@irr.com
www.irr.com
SUBJECT: Market Value Appraisal
IGY American Yacht Harbor Marina
18A-1, 18-61,18-B and 18-W Remainder Estate Smith Bay
East End Quarter, St. Thomas, Virgin Islands
Client Reference: 23559
IRR - Caribbean File No. 172-2015-0181
Dear Mr. Soltero:
Integra Realty Resources — Caribbean is pleased to submit the accompanying appraisal of
the referenced property. The purpose of the appraisal is to develop an opinion of the
market value of the leased fee (going concern) interest in the property. The client for the
assignment is Banco Popular de Puerto Rico, and the intended use is for Commercial credit
administration.
The appraisal is intended to conform with the Uniform Standards of Professional Appraisal
Practice (USPAP), the Code of Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute, the Principles of Appraisal Practice and Code of Ethics of
the American Society of Appraisers, the RICS Valuation Professional Standards, the
International Valuation Standards, applicable jurisdictional appraisal regulations, and the
appraisal guidelines of Banco Popular de Puerto Rico. The appraisal is also prepared in
accordance with the appraisal regulations issued in connection with the Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA).
To report the assignment results, we use the Appraisal Report option of Standards Rule 2-
2(a) of USPAP. As USPAP gives appraisers the flexibility to vary the level of information in an
Appraisal Report depending on the intended use and intended users of the appraisal, we
Roberto A. Soltero
Banco Popular de Puerto Rico
December 15, 2015
Page 2
adhere to the Integra Realty Resources internal standards for an Appraisal Report —
Standard Format. This format summarizes the information analyzed, the appraisal methods
employed, and the reasoning that supports the analyses, opinions, and conclusions.
The subject is an existing 250-slip marina with 5 commercial buildings containing a mixture
of retail and office space types. The buildings contain 48,661 square feet of rentable area
and were constructed in multiple stages; with the majority of the construction completed in
1993. The commercial space is 85% leased as of the effective appraisal date. The marina
docks were constructed in multiple phases between 1991-1995 and are 52.8% occupied as
of the effective appraisal date. The total site area is 2.76 acres or 120,226 square feet, which
includes 0.64 acre or 27,878 square feet, that is re-claimed land. The property also includes
3.2 acres of seabed under the marina dock structures which is leased to the property owner
from the Government of the Virgin Islands.
Based on the valuation analysis in the accompanying report, and subject to the definitions,
assumptions, and limiting conditions expressed in the report, our opinion of value is as
follows:
Value Conclusion*
Appraisal Premise
Market Value
Interest Appraised Date of Value Value Conclusion
Leased Fee (Going Concern) November 25, 2015 $24,360,000
*Values expressed in United States Dollars
Allocation of Going Concern Value
Amount % of Total
Tangible Property
Land & Improvements $24,250,000 99.5%
Tangible Personal Property (FF&E) $110,000 0.5%
Total Tangible Property $24,360,000 100.0%
I nta ngi ble Assets $0 0.0%
Market Value* $24,360,000 100.0%
*Specifically excluded from the valuation are cash and equivalents and current liabilities.
The allocation of value components is based on the going-concern premise, which holds that
the value of a business as a going-concern is equal to the sum of the values of the tangible
and intangible assets. The allocation assumes continued operation of the marina business.
Were the marina business to cease operations, the values of the individual components
would likely be different from the allocated values of the going concern.
Roberto A. Soltero
Banco Popular de Puerto Rico
December 15, 2015
Page 3
Extraordinary Assumptions and Hypothetical Conditions
The value conclusions are subject to the following extraordinary assumptions that may affect the assignment
results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to
be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions.
1. The subject property has a fueling dock and four fuel storage tanks located on site; including three diesel
and one gasoline. There were no signs of contamination during our inspection and we have assumed that
there is no adverse environmental impact in connection with the existing fuel equipment used on the
subject property.
2. The parking garage at the subject slightly encroaches on the neighboring property to the immediate
northwest. This land is owned by the Government of the Virgin Islands and we have assumed that no claim
will arise from the encroachments.
3. For this analysis, we have valued the going concern interest in the subject property and have allocated the
value of the personal property from the value of the real property. We were provided with financial
statments from ownership that indicates the depreciated book value of these assets. It is beyond our scope
to value these assets in use; therefore, we have assumed that the book values of teh personal property
items shown in the statments provided by ownership are reasonably accurate for the purpose of this
allocation exercise.
The value conclusions are based on the following hypothetical conditions that may affect the assignment
results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal
but is supposed for the purpose of analysis.
1. No hypothetical conditions were employed in this analysis.
The opinions of value expressed in this report are based on estimates and forecasts that are
prospective in nature and subject to considerable risk and uncertainty. Events may occur
that could cause the performance of the property to differ materially from our estimates,
such as changes in the economy, interest rates, capitalization rates, financial strength of
tenants, and behavior of investors, lenders, and consumers. Additionally, our opinions and
forecasts are based partly on data obtained from interviews and third party sources, which
are not always completely reliable. Although we are of the opinion that our findings are
reasonable based on available evidence, we are not responsible for the effects of future
occurrences that cannot reasonably be foreseen at this time.
irr.
Roberto A. Soltero
Banco Popular de Puerto Rico
December 15, 2015
Page 4
If you have any questions or comments, please contact the undersigned. Thank you for the
opportunity to be of service.
Respectfully submitted,
Integra Realty Resources - Caribbean
Mark J. Weathers
Certified General Real Estate Appraiser
VI Certificate # 1-21738-1B
Telephone: 340-714-7325
Email: mweathers@irr.com
James V. Andrews, MAI, CRE, FRICS, ASA, CVA
Certified General Real Estate Appraiser
VI Certificate # 0-14194-1B
Telephone: 345-746-3110
Email: jandrews@irr.com
El
Table of Contents
Summary of Salient Facts and Conclusions 1 Income Capitalization Approach 57
General Information 3 Market Rent Analysis — General Retail
Identification of Subject 3 Space 59
Sale History 3 Market Rent Analysis — General Office
Pending Transactions 3 Space 65
Purpose of the Appraisal 4 Market Rent Analysis — Restaurant Space 71
Basis of Value 4 Market Rent Analysis — Marina Slip Rentals78
Definition of Property Rights Appraised 4 Reconciliation and Conclusion of Value 106
Definition of Going-Concern Premise 4 Exposure Time 107
Intended Use and User 5 Marketing Period 107
Applicable Requirements Prior Services 5 5 Allocation of Going-Concern Value 108 Value of Furniture, Fixtures and Equipment
Cornpetency 5 (FF&E) 108
Independence 6 Value of Intangible Assets 109
RICS Valuer Registration 6 Allocation of Going-Concern Value 109
Currency 6 Insurable Replacement Cost 110
Scope of Work 6 Certification 111
Economic Analysis 8 Assumptions and Limiting Conditions 113
Area Analysis 8 Addenda
Surrounding Area Analysis 22 A. Appraiser Qualifications
Marina Market Analysis 25 B. Financials and Property Information
Property Analysis 36 C. Comparable Data
Land Description and Analysis 36 D. DCF Reports
Improvements Description and Analysis 42 E. Engagement Letter
Real Estate Taxes 52
Highest and Best Use 54
Valuation 56
Valuation Methodology 56
IGY American Yacht Harbor Marina
ID,
Summary of Salient Facts and Conclusions 1
Summary of Salient Facts and Conclusions
Property Name
Address
Property Type
Owner of Record
Parcel ID
Legal Description
IGY Ameri can Yacht Harbor Marina
18A-1, 18-B1,18-B and 18-W Remainder Estate Smith Bay
East End Quarter, St. Thomas, Virgin Islands
Mixed Use- Marina
IGY-AYH ST. Thomas Holdings, LLC
1-07702-0135-00, 1-07702-0134-00, 1-07702-0133-00, and
1-07702-0198-00
Parcel Nos. 18A-1 Remainder, 18B-1 Remainder, 18B
Remainder Estate and 18-W Estate Smith Bay, Nos. 1,2 and
3 East End Quarter, St. Thomas, U.S. Virgin Islands
Land Area
Number of Units
Gross Building Area
Rentable Area
Percent Leased
Year Built; Year Renovated
2.76 acres; 120,226 SF
105
72,808 SF
48,652 SF
85%
1992; N/A
Zoning Designation
Highest a nd Best Use-As if Vacant
Highest a nd Best Use-As Improved
Exposure Time; Marketing Period
Effective Date of the Appraisal
Date of the Report
Property Interest Appraised
W-1, Waterfront- Pleasure
Marina oriented commercial use
Continued marina and commercial use
12-24 months; 12-24 months
November 25, 2015
December 15, 2015
Leased Fee (Going Concern)
Market Value Indications
Cost Approach
Sales Comparison Approach
Income Capitalization Approach
Market Value Conclusion*
Not Used
Not Used
$24,360,000
$24,360,000
*Values expressed in United States Dollars
The values reported above are subject to the definitions, assumptions, and limiting conditions set forth in the accompa nying report of which this
summary is a part. No party other than Banco Popular de Puerto Rico may use or rely on the information, opinions, and conclusions contained in
the report. It is assumed that the users of the report have read the entire report, including all of the definitions, assumptions, and limiting
conditions contained therein.
IGY American Yacht Harbor Marina
Summary of Salient Facts and Conclusions 2
Extraordinary Assumptions and Hypothetical Conditions
The value conclusions are subject to the following extraordinary assumptions that may affect the assignment
results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to
be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions.
1. The subject property has a fueling dock and four fuel storage tanks located on site; including three diesel
and one gasoline. There were no signs of contamination during our inspection and we have assumed that
there is no adverse envi ronmental i nnpact i n connection with the existi ng fuel equi pment used on the
subject property.
2. The parking garage at the subject slightly encroaches on the neighboring property to the immediate
northwest. This land is owned by the Government of the Virgin Islands and we have assumed that no claim
will arise from the encroachments.
3. For this analysis, we have valued the going concern interest in the subject property and have allocated the
value of the personal property from the value of the real property. We were provided with financial
statments from ownership that indicates the depreciated book value of these assets. It is beyond our scope
to value these assets in use; therefore, we have assumed that the book values of teh personal property
items shown in the statments provided by ownership are reasonably accurate for the purpose of this
allocation exercise.
The value conclusions are based on the following hypothetical conditions that may affect the assignment
results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal
but is supposed for the purpose of analysis.
1. No hypothetical conditions were employed in this analysis.
IGY American Yacht Harbor Marina
General Information 3
General Information
Identification of Subject
The subject is an existing 250-slip marina with 5 commercial buildings containing a mixture of retail
and office space types. The buildings contain 48,661 square feet of rentable area and were
constructed in multiple stages; with the majority of the construction completed in 1993. The
commercial space is 85% leased as of the effective appraisal date. The marina docks were constructed
in multiple phases between 1991-1995 and are 52.8% occupied as of the effective appraisal date. The
total site area is 2.76 acres or 120,226 square feet, which includes 0.64 acre or 27,878 square feet,
that is re-claimed land. The property also includes 3.2 acres of seabed under the marina dock
structures which is leased to the property owner from the Government of the Virgin Islands. The legal
description of the property is shown below.
Property Identification
Property Name IGY American Yacht Harbor Marina
Address 18A-1, 18-61,18-B and 18-W Remainder Estate Smith Bay
East End Quarter, St. Thomas, Virgin Islands
Parcel ID 1-07702-0135-00, 1-07702-0134-00, 1-07702-0133-00, and 1-07702-0198-00
Owner of Record IGY-AYH ST. Thomas Holdings, LLC
Legal Description Parcel Nos. 18A-1 Remainder, 18B-1 Remainder, 18B Remainder Estate and 18-W
Estate Smith Bay, Nos. 1,2 and 3 East End Quarter, St. Thomas, U.S. Virgin Islands
Sale History
The most recent closed sale of the subject is summarized as follows:
Sale Date January 19, 2007
Seller MOF VI Limited Partnership
Buyer IGY-AYH ST. Thomas Holdings, LLC
Sale Price $25,500,000
Recording Instrument Number document number 2007000531
Expenditures Since Purchase Unknown
The sale price is consistent with our market value conclusion considering the date of the transaction
and the market fluctuation since that time. To the best of our knowledge, no sale or transfer of
ownership has taken place within a three-year period prior to the effective appraisal date.
Pending Transactions
To the best of our knowledge, the property is not subject to an agreement of sale or an option to buy,
nor is it listed for sale, as of the effective appraisal date.
IGY American Yacht Harbor Marina
irr.
General Information 4
Purpose of the Appraisal
The purpose of the appraisal is to develop an opinion of the market value of the leased fee (going
concern) interest in the property as of the effective date of the appraisal, November 25, 2015. The
date of the report is December 15, 2015. The appraisal is valid only as of the stated effective date or
dates.
Basis of Value
Market value is defined as:
"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 conditions whereby:
• Buyer and seller are typically motivated;
• Both parties are well informed or well advised, and acting in what they consider their own
best interests;
• A reasonable time is allowed for exposure in the open market;
• Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements
comparable thereto; and
• The price represents the normal consideration for the property sold unaffected by special or
creative financing or sales concessions granted by anyone associated with the sale."
(Source: Code of Federal Regulations, Title 12, Chapter!, Part 34.42[g]; also Interagency Appraisal and
Evaluation Guidelines, Federal Register, 75 FR 77449, December 10, 2010, page 77472)
Definition of Property Rights Appraised
Leased fee interest is defined as, "A freehold (ownership interest) where the possessory interest has
been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease)."
Lease is defined as, "A contract in which rights to use and occupy land or structures are transferred by
the owner to another for a specified period of time in return for a specified rent."
(Source: The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago, Illinois,
2010)
Definition of Going-Concern Premise
Going-Concern Premise is defined as, "one of the premises under which the total assets of a business
can be valued; the assumption that a company is expected to continue operating well into the future
(usually indefinitely). Under the going-concern premise, the value of a business as a going concern is
equal to the sum of the value of the tangible assets and the value of the intangible assets, which may
IGY American Yacht Harbor Marina
General Information 5
include the value of excess profit, where asset values are derived consistently with the going-concern
premise."
(Source: The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago, Illinois,
2010)
Intended Use and User
The intended use of the appraisal is for Commercial credit administration. The client and intended
user is Banco Popular de Puerto Rico. The appraisal is not intended for any other use or user. No party
or parties other than Banco Popular de Puerto Rico may use or rely on the information, opinions, and
conclusions contained in this report.
Applicable Requirements
This appraisal is intended to conform to the requirements of the following:
• Uniform Standards of Professional Appraisal Practice (USPAP);
• Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal
Institute;
• The Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers
• The RICS Valuation Professional Standards;
• The International Valuation Standards of the IVSC;
• Applicable jurisdictional regulations;
• Appraisal requirements of Title XI of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA), revised June 7, 1994;
• Interagency Appraisal and Evaluation Guidelines issued December 10, 2010;
• Appraisal guidelines of Banco Popular de Puerto Rico.
Prior Services
USPAP requires appraisers to disclose to the client any other services they have provided in
connection with the subject property in the prior three years, including valuation, consulting, property
management, brokerage, or any other services. The RICS Red Book also contains requirements for
valuers to disclose previous involvement with the subject property within twelve months. We have
not performed any services, as an appraiser or in any other capacity, regarding the property that is the
subject of this report within the three-year period immediately preceding acceptance of this
assignment.
Competency
We hereby confirm that we possess adequate knowledge and skills to perform the assignment
competently, including an understanding area/regional market conditions, and factors which pertain
to the property type in question.
IGY American Yacht Harbor Marina
General Information 6
Independence
We hereby confirm that we have no conflicts of interest or material involvement in the property which
is the subject of this valuation; and that we are acting as unbiased, independent, external valuers.
RICS Valuer Registration
We confirm that we are in compliance with the RICS Valuer Registration program, which is mandatory
for RICS members in the Caribbean region.
Currency
Unless otherwise stated, all financial figures in this report are expressed in United States Dollars.
Scope of Work
To determine the appropriate scope of work for the assignment, we considered the intended use of
the appraisal, the needs of the user, the complexity of the property, and other pertinent factors. Our
concluded scope of work is described below.
Valuation Methodology
Appraisers usually consider the use of three approaches to value when developing a market value
opinion for real property. These are the cost approach, sales comparison approach, and income
capitalization approach. Use of the approaches in this assignment is summarized as follows:
Approaches to Value
Approach
Applicability to Subject Use in Assignment
Cost Approach Not Applicable Not Utilized
Sales Comparison Approach Not Applicable Not Utilized
Income Capitalization Approach Applicable Utilized
The income capitalization approach is the most reliable valuation method for the subject due to the
following:
• The probable buyer of the subject would base a purchase price decision primarily on the
income generating potential of the property and an anticipated rate of return.
• Sufficient market data regarding income, expenses, and rates of return, is available for
analysis.
The sales comparison approach is not applicable to the subject because:
• This approach does not reflect the primary analysis undertaken by a typical investor-
purchaser.
• There are insufficient sales of comparable properties in this market from which to derive a
credible value conclusion.
The cost approach is not applicable to the subject considering the following:
IGY American Yacht Harbor Marina
General Information 7
• The age of the property makes estimates of accrued depreciation very subjective.
• This approach is not typically used by market participants, except for new properties.
Research and Analysis
The type and extent of our research and analysis is detailed in individual sections of the report. This
includes the steps we took to verify comparable sales, which are disclosed in the comparable sale
profile sheets in the addenda to the report. Although we make an effort to confirm the arms-length
nature of each sale with a party to the transaction, it is sometimes necessary to rely on secondary
verification from sources deemed reliable.
Inspection
Mark J. Weathers conducted an interior and exterior inspection of the property on November 25,
2015. James V. Andrews, MAI, CRE, FRICS, ASA, CVA, also conducted an interior and exterior
inspection on November 25, 2015.
IGY American Yacht Harbor Marina
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Area Analysis 8
Economic Analysis
Area Analysis
Location
The U.S. Virgin Islands are located in the Caribbean Sea and the Atlantic Ocean, about 90 miles (140
km) east of Puerto Rico and immediately west of the British Virgin Islands.
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The territory consists of four main islands: Saint Thomas, Saint John, Saint Croix, and Water Island, as
well as several dozen smaller islands. The combined land area of the islands is roughly twice the size of
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IGY American Yacht Harbor Marina
Area Analysis 9
1
A mild tropical climate, scenic beauty, and status as a U.S. territory make Virgin Islands appealing for
vacationers from United States and Europe. The islands host over 2.5 million visitors per year, most of
whom arrive by cruise ship, and tourism is the dominant economic engine of the islands, accounting
for roughly 70 percent of the total gross territorial product.
Each district has its own distinct landscape, mix and intensity of land uses, cultural identity, and
prospects for future development. St Thomas is home to the capital and the territory's largest city,
Charlotte Amalie, which has an estimated population of roughly 19,000 persons. St Thomas is the
primary center for resort tourism, government, finance, trade, and commerce, but its rugged
landscape limits the land available for agriculture and other types of land-intensive development.
Charlotte Amalie is also home to a major deepwater harbor that is along major shipping routes to the
Panama Canal, and it is just east of the Cyril E King International Airport — one of the busiest airports in
Caribbean. St. Thomas has two cruise ship docks, and is the most frequented cruise ship port in the
Caribbean.
The island of St John is just under 3 miles to the east of St Thomas. Cruz Bay is located on the western
coast of the island and serves as its primary port and link to St Thomas. Nearly two thirds of St John is
owned by the National Park Service and is off-limits to commercial development.
St Croix is largest of the three islands, in both land area and population. It is roughly 45 miles to the
south of St Thomas. Its primary towns are Christiansted and Frederiksted. Overall the island is flatter
and has more land available for additional agricultural, commercial and residential development than
St Thomas. St Croix is also the primary manufacturing center for the Virgin Islands, with rum
distilleries, a major watch-assembly plant, and; until February 2012, one of the world's largest
petroleum refineries (which recently ceased refining operations).
History
The Virgin Islands were originally settled by the Ciboney, Carib, and Arawaks. The islands were named
by Christopher Columbus on his second voyage in 1493 for Saint Ursula and her virgin followers. Over
the next three hundred years, the islands were held by many European powers, including Spain,
England, the Netherlands, France, and Denmark-Norway. The Danes developed the islands with
plantation estates, and the estates boundaries are still used in legal descriptions for land to this day.
The U.S. took possession of the islands on March 31, 1917 and the territory was renamed the Virgin
Islands of the United States. U.S. citizenship was granted to the inhabitants of the islands in 1927.
Government
The U.S. Virgin Islands are an organized, unincorporated United States territory. Even though they are