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Home My WebLink AboutOrdinance No. 3021-2018_____________________________________________________________________________________ New Text Underlined; [DELETED TEXT BRACKETED] Sponsored by: Administration CITY OF KENAI ORDINANCE NO. 3021-2018 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, DETERMINING THAT TRACT C DRAGSETH SUBDIVISION – 2017 ADDITION, LOCATED WITHIN THE EAST ½ SECTION 7, TOWNSHIP 5 NORTH, RANGE 11 WEST, SEWARD MERIDIAN, CITY OF KENAI, KENAI RECORDING DISTRICT, KENAI PENINSULA BOROUGH, ALASKA IS NOT NEEDED FOR A PUBLIC PURPOSE AND APPROVING A SALE OF THE PROPERTY FOR ITS APPRAISED VALUE TO RON HYDE. WHEREAS, in May 2017 the City Council approved the sale of Tract A, Dragseth Subdivision to Ron Hyde/ PRL Logistics Inc., with the understanding that the City would also sell the adjacent airstrip after a subdivision was completed; and, WHEREAS, a subdivision of adjacent land has been completed creating a new parcel encompassing the airstrip described as Tract C Dragseth Subdivision – 2017 Addition, Located within the East ½ Section 7, Township 5 North, Range 11 West, Seward Meridian, City of Kenai, Kenai Recording District, Kenai Peninsula Borough, Alaska; and, WHEREAS, the property will be conveyed by a deed subject to entry and right of first refusal agreement that restricts almost all development on the new parcel, limits the allowable use, and allows the City a first right to repurchase the parcel for the purchase price adjusted annually by the Anchorage Consumer Price Index; and, WHEREAS, the parcel owned by the City is general fund property no longer needed for a public, purpose and public access along the beach is preserved through easements on the plat; and, WHEREAS, as of March 30, 2018 the parcel appraised for $56,000; and, WHEREAS, the sale is a negotiated sale pursuant to KMC 22.05.090 intended to encourage new enterprise in the City; and, WHEREAS, the sale is intended to facilitate the operation of airships inside the City utilizing new technology and enabling a new means of cargo transportation and innovative emergency management; and, WHEREAS, it is anticipated that the operation of airships will benefit the City and local economy bringing in new jobs and a new industry. Ordinance No. 3021-2018 Page 2 of 3 _____________________________________________________________________________________ New Text Underlined; [DELETED TEXT BRACKETED] NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, as follows: Section 1. Statement of Ownership: That the City of Kenai is the owner of Tract C Dragseth Subdivision – 2017 Addition, Located within the East ½ Section 7, Township 5 North, Range 11 West, Seward Meridian, City of Kenai, Kenai Recording District, Kenai Peninsula Borough, Alaska. Section 2. Public Purpose and Best Interest Finding: a. That the property is not needed for future public purposes. That the sale of the property is in the best interest of the City as it is intended to limit development, protect sensitive habitat, maintain public access along the beach, and promote new economic opportunities. b. That the purpose of the sale is to encourage new enterprise, namely the operation of airships enabling a new means of cargo transportation and innovative emergency management. Section 3. Authorization of Sale: a. That the Kenai City Council hereby authorizes the City Manager to sell the City-owned land described as Tract C Dragseth Subdivision – 2017 Addition, Located within the East ½ Section 7, Township 5 North, Range 11 West, Seward Meridian, City of Kenai, Kenai Recording District, Kenai Peninsula Borough, Alaska, including any and all improvements thereon. The Sale shall be subject to the development and use restrictions and first right of refusal provided in the attached Deed Subject to Right of Entry and Right of First Refusal Agreement. b. That the sale shall be by negotiated sale pursuant to KMC 22.05.090 –Conveyance to Encourage New Enterprise, for the March 30, 2018 appraised fair market value of $56,000. Section 4. Title: That title shall be conveyed by the attached Deed Subject to Right of Entry and Right of First Refusal Agreement. Section 5. Proceeds of Sale. That should a sale of the property be finalized, per Article 5-11 of the Kenai Municipal Charter, all revenues of the sale shall be recorded in the General Land Sale Permanent Fund. The principle balance of the General Land Sale Permanent Fund may not be spent or appropriated for any purpose, however revenues earned on the investments of the fund may be used for any lawful purpose. Section 6. Severability: That if any part or provision of this ordinance or application thereof to any person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision, or application directly involved in all controversy in which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder of this title or application thereof to other persons or circumstances. The City Council hereby declares that it would have enacted the remainder of this ordinance even without such part, provision, or application. Ordinance No. 3021-2018 Page 3 of 3 Section 7. Effective Date: That pursuant to KMC 1.15.070(f), this ordinance shall take effect 30 days after adoption. ENACTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 161h day of May, 2018. ATTEST: BRIAN GABRIEL SR., MAYOR New Text Underlined; [DELETED TEXT BRACKETED) Introduced: May 2, 2018 Enacted : May 16, 2018 Effective: June 15, 2018 DEED SUBJECT TO RIGHT OF ENTRY The Grantor, City of Kenai, an Alaska municipal corporation, whose address is 210 Fidalgo Avenue, Kenai, Alaska 99611 for and in consideration of the sum of Ten and no/100 Dollars ($10.00) in hand paid, does hereby grants and conveys unto Grantee, Ronald Hyde, whose address is 421 W 1st Avenue, Suite 250, Anchorage, AK 99501, in fee simple subject to the condition subsequent and covenants and restrictions set forth herein, all of that certain real property situated within the Kenai Recording District, Third Judicial District, State of Alaska, subject, more particularly described as follows, to-wit: Tract C, Dragseth Subdivision 2017 Addition, According to the Official Plat Thereof, Filed Under Plat Number 2017-60, Records of the Kenai Recording District, Third Judicial District, State of Alaska. RESERVING TO THE GRANTOR, all oil, gas and other minerals; SUBJECT TO easements, restrictions and reservations of record; and PROVIDED, that the Property shall be used, and Grantee, his heirs and assigns, by acceptance hereof and by agreement with Grantor, hereby expressly covenants to use the Property, consistent with and as provided in the attached Covenants and Restrictions on Use of Tract C, Dragseth Subdivision (the “Covenants and Restrictions”) and the Covenants and Restrictions shall run with the land and shall be binding upon the Grantee and all other persons and parties claiming through the Grantee. PROVIDED FURTHER, as a condition subsequent to this conveyance, that if the Property is used for purposes other than as set forth in the Covenants and Restrictions, then the Grantor may enter the Property and terminate the estate herein conveyed. [SIGNATURE LINES FOLLOW ON NEXT PAGE] Deed Subject to Right of Entry Page 2 DATED: This ___________ day of _______________, 2018. GRANTOR: CITY OF KENAI, Grantor By ______________________________ As its City Manager GRANTEE: Ronald Hyde STATE OF ALASKA THIRD JUDICIAL DISTRICT The foregoing instrument was acknowledged before me this _______ day of ________________, 2018, by Ronald Hyde. ____________________________________ NOTARY PUBLIC FOR ALASKA My Commission Expires:______ STATE OF ALASKA THIRD JUDICIAL DISTRICT The foregoing instrument was acknowledged before me this _______ day of ________________, 2018, by Paul Ostrander, City Manager of the City of Kenai, an Alaska municipality, on behalf of the municipality. NOTARY PUBLIC FOR ALASKA My Commission Expires:______ Deed Subject to Right of Entry Page 3 COVENANTS AND RESTRICTIONS ON USE OF TRACT C, DRAGSETH SUBDIVISION The following covenants and restrictions apply to and are hereby imposed upon Tract C, Dragseth Subdivision 2017 Addition, According to the Official Plat Thereof, Filed Under Plat Number 2017-60, Records of the Kenai Recording District, Third Judicial District, State of Alaska. 1. The Property shall be used the purpose of aircraft landing, loading and departing and for no other purpose inconsistent with such use. 2. All vegetation on the Property shall be maintained in its natural state except as follows: a. The existing landing area may be maintained and graded but no additional material other than sand may be introduced onto the surface except as provided in paragraph 2.b, below, and the airstrip shall be maintained as a grass surface with Alaska native grasses. b. The area labelled “Staging Area” as shown on Attachment 1, not extending more than 400 feet immediately north of Royal Street, may be surfaced with gravel or crushed rock, with the exception that any vegetative dunes must be maintained in a natural state. c. Vegetation may be disturbed but only if and to the extent necessary to install and maintain lighting, a windsock pole, and fencing. d. A moveable building not exceeding dimensions of 12 feet by 20 feet nor greater than one story in height may be placed on the property. e. No improvements other than those provided for in this attachment may be made to the property. 3. The existing landing area as shown on the sketch attached hereto as Attachment 1 shall not be expanded except as provided in paragraph 2.b, above. 4. The Property shall not be subdivided Kenai Recording District Return to: City of Kenai 210 Fidalgo Ave. Kenai, AK 99611 Right of First Refusal Agreement Page 1 RIGHT OF FIRST REFUSAL AGREEMENT This Right of First Refusal Agreement (this “Agreement”) is made on this ____ day of _______________, 2018 (the “Effective Date”), by and between Ronald Hyde his heirs and assigns, whose address is 421 W 1st Avenue, Suite 250, Anchorage, AK 99501, (the “Grantor”), and the City of Kenai, an Alaska municipality (the “Grantee”) whose address is 210 Fidalgo Avenue, Kenai, Alaska 99611. RECITALS WHEREAS, Grantor is the owner of the following-described property: Tract C, Dragseth Subdivision 2017 Addition, According to the Official Plat Thereof, Filed Under Plat Number 2017-60, Records of the Kenai Recording District, Third Judicial District, State of Alaska (the “Property”); WHEREAS, Grantee desires to obtain a right of first refusal to purchase the Property; and WHEREAS, Grantor agrees to grant Grantee a right of first refusal to purchase the Property. NOW, FOR AND IN CONSIDERATION of Ten and 00/100 Dollars ($10.00) and other good and valuable considerations, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Grant of Right of First Refusal. Grantor does hereby grant, bargain and convey unto Grantee, during the Term, the exclusive and irrevocable ongoing right of first refusal to purchase the Property (the “Right”) upon the following terms: (a) Notification of Sale. If, at any time during the Term, Grantor receives an offer from a bona fide third party to purchase all or any portion of the Property that is acceptable to Grantor as evidenced by a signed letter of intent memorializing all of the material business points of such offer (the “Acceptable Offer”), then Grantor shall, within five (5) days after receipt of the same, forward a copy of the Acceptable Offer to Grantee. (b) Exercise of Right. If Grantee elects to exercise the Right, Grantee shall give written notice of its exercise of the Right to Grantor within ninety (90) days of Grantee’s receipt of the Acceptable Offer, at the address set forth below. If Grantee fails to exercise the Right during such thirty (30) day-period, then Grantor shall be free to sell the Property to the bona fide third party on Right of First Refusal Agreement Page 2 terms and conditions, including the Purchase Price, that are no more favorable to the bona fide third party than the terms and conditions stated in the Acceptable Offer. (c) Purchase Price. If the Right is exercised, the “Purchase Price” shall be an amount equal to the sum of $56,000, adjusted annually on January 1 of each year by an amount equal to the percentage change of the Consumer Price Index for All Urban Consumers for Anchorage, Alaska (“Anchorage CPI”). If the Anchorage CPI is not then being published, a similar index will be used. (d) Terms/Proration. If the Right is exercised, all costs and terms related to the sale and purchase of the Property pursuant to the Right other than the Purchase Price shall be as set forth in the Acceptable Offer, unless expressly modified herein, and shall be documented on the form of purchase agreement set forth above. 2. Title. Within fourteen (14) days after Grantee has exercised the Right, Grantor shall deliver to the Grantee a title commitment (the “Title Commitment”) covering the Property which shall reflect that marketable fee simple title to the Property is vested in Grantor and that same is insurable by a title insurance company licensed to do business in the State of Alaska at regular rates, free and clear of all liens, encumbrances, easements and restrictions, excepting only those permitted encumbrances set forth on Exhibit B hereto (the “Permitted Encumbrances”). Grantor shall deliver to Grantee, within ten (10) days after Grantee has exercised the Right, copies, to the extent owned and possessed by or under the control of Grantor, of all site plans and specifications; surveys and topographic studies of the Property; seismic or geological investigations/reports; environmental reports; title reports; engineering studies; soils or borings reports; current tax bills; lease information; and any other documents reasonably pertaining to the Property. If Grantor receives any notices pertaining to the Property during the Term, it shall deliver a copy of said notice to Grantee within five (5) days after receipt of the same. 3. Term and Extension. The term of this Agreement shall commence on the Effective Date of, and expire ninety-nine years from the date hereof. 4. Remedies upon Default. If Grantor shall default hereunder, Grantee may bring an action for specific performance and/or exercise all rights and remedies available to Grantee at law or in equity. 5. Possession. Upon any exercise of the Right, Grantee shall be entitled to the exclusive and lawful possession of the Property at closing. 6. Entire Agreement. This Agreement, including the exhibits hereto, which are incorporated herein by reference and made a part hereof, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, whether written, oral, express or implied, with respect to such subject matter. Right of First Refusal Agreement Page 3 7. Amendment. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. 8. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); or (c) when received if mailed by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses set forth above (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8) 9. Governing Law. This Agreement (including its formation, construction, termination and the relationships between the parties hereto) shall be governed by and construed in accordance with the internal laws of the State of Alaska without giving effect to any choice or conflict of law provision or rule (whether of the State of Alaska or any other jurisdiction). 10. Choice of Forum. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby shall be instituted exclusively in the United States District Court for the District of Alaska or the Trial Court for Third Judicial District of Alaska, in each case located in Kenai, Alaska and the appropriate appellate courts therefrom, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party’s address set forth herein shall be effective service of process for any suit, action, or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding has been brought in an inconvenient forum. 11. Waiver of Jury Trial. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 12. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 13. Headings. The headings in this Agreement are for reference purposes only and shall not affect the interpretation of this Agreement. 14. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable Right of First Refusal Agreement Page 4 manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible. 15. Waiver. No waiver by any party of any of the provisions hereof shall be effective unless expressly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on this the _____ day of ______________, 2018. GRANTOR: Ronald Hyde GRANTEE: City of Kenai By: Paul Ostrander City Manager Right of First Refusal Agreement Page 5 STATE OF ALASKA THIRD JUDICIAL DISTRICT The foregoing instrument was acknowledged before me this _______ day of ________________, 2018, by Ronald Hyde. NOTARY PUBLIC FOR ALASKA My Commission Expires:__________ STATE OF ALASKA THIRD JUDICIAL DISTRICT The foregoing instrument was acknowledged before me this _______ day of ________________, 2018, by Paul Ostrander, City Manager of the City of Kenai, an Alaska municipality, on behalf of the municipality. NOTARY PUBLIC FOR ALASKA My Commission Expires:__________ MEMORANDUM TO: Mayor Brian Gabriel and Kenai City Council FROM: Paul Ostrander, City Manager DATE: April 26, 2018 SUBJECT: Ordinance 3021-2018 – Sale of Airstrip property to Ron Hyde ______________________________________________________________________ In May of 2017, the City Council approved the sale of Tract A, Dragseth Subdivision to Ron Hyde through Ordinance 2957-2017 (substitute). That sale was contingent on the ability of Mr. Hyde to purchase adjacent City owned land for the use of an existing airstrip. Ron Hyde has been operating the airstrip since May of 2017 under a Special Use Permit issued by the City Council through Resolution No 2017-20. A conditional use permit was issued by the City of Kenai Planning and Zoning Commission on the airstrip property to allow its use as an airport. The conditional use permit will remain with the property after sale. The planned use of the airstrip by airships - new technology developed and manufactured by Lockheed Martin - will provide jobs and will benefit the local economy. This ordinance authorizes the sale of the airstrip parcel, now subdivided as Tract C Dragseth Subdivision – 2017 Addition for the fair market appraised value of $56,000. Your consideration is appreciated. Attachments: Ordinance No. 2957-2017 (substitute) and associated memo Resolution No. 2017-20 and associated memo Sponsored by: Administration CITY OF KENAI ORDINANCE NO. 2957-2017 (SUBSTITUTE) AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORIZING THE SALE OF TRACT A, DRAGSETH SUBDIVISION 2016 ADDITION, ACCORDING TO THE OFFICIAL PLAT THEREOF, UNDER PLAT NO . 2016-22, FILED IN THE KENAI RECORDING DISTRICT, THIRD JUDICIAL DISTRICT, STATE OF ALASKA, INCLUDING ALL IMPROVEMENTS THEREON, TO PRL LOGISTICS INC., AND PROVIDING THE SALE PROCEEDS TO THE STATE OF ALASKA FOR REIMBURSEMENT INTO GRANT NO. 15-DC- 078 FOR USE BY THE CITY TO CONTINUE ENHANCING ACCESS AND OTHER RELATED IMPROVEMENTS TO THE SOUTH BEACH. WHEREAS, the City manages dip net access issues on its beaches which includes conflicts between local property owners and dip net fishery participants; and, WHEREAS, in 2014 the City Council appropriated $1,900 ,000 of State Grant funds (Grant No . 15-DC-078) via Ordinance No. 2771-2014 for the purpose of designing and constructing a new roadway for access to the South Beach and related improvements to help alleviate such conflicts; and, WHEREAS, after numerous meetings with affected property owners and state and federal agencies weighing alternatives for improved access , including obtaining permitting for building a new road across City owned wetlands , the City with State approval, authorized the purchase of seven abutting parcels from Ark Properties, LLC for the purpose of constructing a new road with minimal wetland disturbance through Resolution No . 2015-50 (Substitute); and, WHEREAS, the City needed only a portion of the newly acquired property for the purpose of road construction; and , WHEREAS . the State 's approval of the utilization of Grant funds for the purchase of the property was conditioned on proceeds from the sale of the unneeded property and improvements thereon going back into the grant for the City 's use for South Beach access and related improvements; and, WHEREAS, the City completed construction of a new road providing beach access and a re-plat of the seven parcels allowing the City to maintain the land needed for the road and maximizing the value of the unneeded land and improvements for resale; and, WHEREAS, the City is expending significant funds maintaining the land and improvements for re-sale and the nature of the improvements limits the available market; and , WHEREAS, PRL Logistics. Inc .. (PRL) has made an offer to purchase the property based on numerous conditions; and. New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No . 2757-2017 Page 2 of 3 WHEREAS, PRL's business plan is to potentially use the property for office space, lodging , restauranUbar, event hosting and airport related activities to support its business, including the operation of an ai rship; and , WHEREAS, all of these uses will require the approval by City Planning Commission of conditional use permits given the current zon ing of the property; and , WHEREAS , PRL 's offer is also condit ioned on the abi lity to purchase adjacent City owned land for the use of an existing airstrip for fix winged and airship uses; and, WHEREAS , PRL 's acquisition of the adjacent property will require a subdivision and conditional use permit; and , WHEREAS , PRL has previously refurbished and repurposed old cannery property in the City demonstrating a responsib ility towards environmental sens itivity and respect for the history of the City; and, WHEREAS , it is anticipated that PRL 's acqu isition of additional property in the City will create new economic opportunities and will be managed in a responsible manner; and, WHEREAS, the City Council fi nds that it is in the best interest of the City to sell Tract A, Dragseth Subdivision 2016 Addition , according to the official plat thereof, under Plat No. 2016- 22, filed in the Kenai Recording District, Third Judicial District, State of Alaska, including all improvements thereon to PRL for the purchase price of $825,000 ; and , WHEREAS , in accepting PRL's offer, the City Council agrees to work cooperatively with PRL for the future sale of the adjacent City owned lands that include the airstrip ; and ; WHEREAS , the property being sold is unique in that it is neither General Fund Land, nor Airport Land , but instead land he ld by the State Grant, therefo re City Code provisions governing General Fund Land and A irport Land do not apply; and WHEREAS , the C ity Council finds tha t it is in the best interest of the City to sell the property for the aforementioned reasons to PRL without a recent appra isal. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, as follows : Section 1. Form : That th is is a non-code ord inance . Section 2 . Statement of Ownersh ip: That the City of Kenai is the owner of Tract A, Dragseth Subdivision 2016 Addition , according to the official p lat thereof, under Plat No . 2016- 22, filed in the Kenai Recording District, Third Judicial District, State of Alaska , including all improvements thereon . Section 3. Public Purpose and Best Interest Findings: That the property is not needed for future public purposes . The sale of the Property is in the best interests of the City as it is intended to promote new econom ic opportunities and the proceeds wi ll be used to continue development of access to the South Beach and related improvements in compliance with Grant No . 15-DC-078. New Text Underlined ; [D~LETED TEXT BRACKETED] Ordinance No. 2757-2017 Page 3 of 3 Section 4. Authorization of Sale : That the Kenai City Council hereby authorizes the City Manager to sell the City-owned lands described as Tract A, Dragseth Subdivision 2016 Addition , according to the official plat thereof, under Plat No . 2016 -22, filed in the Kenai Recording District, Third Judicial D istrict, State of Alaska, including all improvements thereon, under the terms established in the attached Purchase and Sale Agreement and Addendum subject to the additional essential terms and conditions of sale on page 6 of the Purchase and Sale Agreement as amended by the Addendum. Section 5. T itle : That title shall be conveyed by warranty deed . Section 6. Proceeds of Sale : That should a sale of the property be finalized, all revenues from the sale shall be provided to the State of Alaska for Grant No. 15-DC-078 for the City's use for South Beach access and related improvements. Section 7. Severability: That if any part or provision of this ordinance or application thereof to any person o r circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision , or application directly involved in all controversy in which this judgment shall have been rendered , and shall not affect or impair the val idity of the remainder of th is title or application thereof to other persons or c ircumstances . The City Council hereby declares that it would have enacted the remainder of this ordinance even w ithout such part, provision, o r application . Section 8. Effective Date: That pursuant to KMC 1.1 5.070(f), this ord inance shall take effect 30 days after adoption . (Emergency ordinances and ordinance making , repealing, transferring, or otherwise chang ing appropriations , shall go into effect immediately upon passage unless they specify a later time: "That pursuant to KMC 1.15.0?0(f), this ordinance shall take effect upon adoption"). ENACTED BY THE COUNCIL OF THE CITY OF KENAI , ALASKA, this 17th day of May , 2017 . ~·~cl. ATTEST: if3RIAN GABRIEL SR ., MAYOR New Te xt U nd erl ined ; [DELETED TE XT BRACKE TE D] Introduced : May 3, 2017 Enacted : May 17, 2017 Effective : June 16, 2017 'lltttar a1/t'1 a Po.~~ e~ a1/t'1 a ratw<-e /J 210 Fidalgo Ave, Kenai , Alaska 99611-7794 Telephone : (907) 283-7535 I Fax: (907) 283-3014 www.kenai.city MEMORANDUM TO: FROM: DATE: SUBJECT: Mayor Brian Gabriel and Kenai City Council Paul Ostrander, City Manager ?. o · May 10, 2017 Ordinance 2957-2017 (Substitute)-addendum to purchase and sale agreement modifying financing method This substitute ordinance recognizes and incorporates two addendums to the original purchase and sale agreement rece ived from the buyer's agent that modify the terms and conditions of the sale . The origina l purchase and sale agreement anticipated owner financing with a down payment of 15% and an interest rate of 4% for 6 months or December 31, 2017 , whichever was earlier, followed by a balloon payment for the rema ining principal at that time to satisfy the terms of the loan . The buyer is now proposing to utilize conventional financing for the purchase of the property with closing scheduled for June 20 , 2017. Modifications to closing costs for the buyer and seller as a result of the change in financing are also outlined on the addendum and First National Bank is removed as the holder of the escrow. The two addendums are attached for your reference . r. ~/ ;;:, 'sf' ~--*' ~thuifJo( / KENAI, ALASKA ~ Sponsored by: Administration CITY OF KENAI RESOLUTION NO. 2017-20 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI , ALASKA, APPROVING A SPECIAL USE PERMIT FOR PRL LOGISTICS INC., FOR THE CONTINGENT USE OF AN AIRSTRIP ON CITY OWNED PROPERTY ADJACENT TO THE SOUTH BEACH. WHEREAS , the City is in the process of selling PRL Logistics Inc., (PRL) a parcel of property as provided in Ordinance No . 2957-2017; and, WHEREAS, one condition of the sale is that PRL also be able to purchase adjacent City land that contains an airstrip for airship and fixed wing operations; and, WHEREAS, the airstrip is on several parcels of City land and the sale of the 'airstrip' property cannot be completed until a future subdivision occurs; and , WHEREAS, the Special Use Permit authorized by this Resolution is intended to allow PRL authority to occupy the airstrip prior to the future subd ivision and sale of the property; and, WHEREAS, while the Special Use Permit authorizes PRL to occupy the property for purposes of aircraft operations , the limitations of zoning on the parcels on which the airstrip sits, additionally requires the Planning and Zoning Commission to approve airport uses as a conditional use before any aircraft operations can occur; and WHEREAS, as provided in Ordinance No. 2957-2017 , the City Council finds that it is in the best interest of the City to approve this Special Use Permit as PRL's business plans will provide a unique economic benefit to the City by bringing new industry and business to the area. NOW, THEREFORE , BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA: Section 1. That the attached Special Use Permit authorizing PRL to occupy the airstrip identified in the Special Use Permit for aircraft operations is approved. The City Manager is authorized to execute the Special Use Permit, with the condition that actual aircraft uses of the property cannot actually begin until and unless additional separate Conditional Use Permits are obtained by PRL from the City's Planning and Zoning Commission. Section 2. That this Resolution takes effect immediately upon passage . PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 17th day of May, 2017. d--xb4?~ ''(ltfl~ tt1/t/e, a Pa~t, e~ tt11't!t-a f"u.trq-e JI 210 Fidalgo Ave, Kenai, Alaska 99611-7794 Telephone: (907) 283-7535 I Fax: (907) 283-3014 www.kenai.city MEMORANDUM TO: FROM: DATE: SUBJECT: Mayor Brian Gabriel and Kenai City Council Paul Ostrander, City Manager May 10, 2017 Resolution 2017-20 Approving A Special Use Permit For PRL Logistics The City of Kenai is currently considering the sale of Tract A, Dragseth Subdivision, 2016 Addition to PRL Logistics . One condition of that sale is that PRL Logistics also be able to purchase the adjacent City land that contains an airstrip. This resolution approves the issuance of a Special Use Permit (SUP) that authorizes non-exclusive use of that airstrip and surrounding area of approximately 3 acres as shown on the attached Exhibit A. Eventually, PRL Logistics intends on using the airstrip for aircraft operations, including utilization by both fixed wing aircraft and an airship . However, during the term of the SUP, only fixed wing aircraft w ill be using the airstrip , therefore only approximately 3 acres of the area will be utilized. While this SUP authorizes PRL Logistics to occupy this area for these purposes, separate Conditional Use Permits issued by the Planning and Zoning Commission will also be required before those activities may be conducted . If PRL Logistics is successful in obtaining this SUP as well as the necessary associated Conditional Use Permits , the intent of Administration is to begin the process of creating a saleable parcel of approximately 25 .32 acres through subdivision as depicted on Exhibit A pursuant to the proposed purchase agreement for Tract A. Once the subdivision is recorded , an ordinance authorizing the sale of the new parcel would be presented to Council for their consideration . The sales price of the parcel would be fair market value as determined by a fee appraisal. ~ RELIANJ --.._~A D V I SORY SER V I CES 9330 Vanguard Drive, Suite 201 Anchorage, Alaska 99507 Phone: (907) 929 -2226 Fax: (907) 929-2260 Email : admin@rel iantadvisory.com www .reli an tadvisory.com NHN Royal St NHN Royal St Kenai, Alaska 99611 L atitude : 60.5 329, Longitude: -151 .27033 Relia nt R eference Number: 18 -025 0 as of March 30 , 2018 Prepared For: Ronald Hyde, Jr. Letter of Transmittal April 23, 2018 Mr. Ronald Hyde, Jr. 1948 Brandilyn St. Anchorage, AK 995 16 RE: NllN Ro~al St NHN Royal St Kenai, Alaska 99611 Dear Mr. Hyde: RELIANT 9330 Vanguard Drive, Suite 201 Anchorage, Ala ska 99507 Phone : (907) 929-2226 Fax: (907) 929-2260 Email : admin@relian tadvisory .com \VWW.reliantadvi sorv .com At your request, an appraisal of the above referenced property has been prepared. The results of the assignment are presented in Appraisal Report format. The purpose of the assignment is to estimate the current market va lue of the real estate subject to planned restrictions on use. The F ee Simp l e interest in the subject h as been analyzed. The report will be used by you (the Client) and the City of Kenai for prospective acquisition/sale purposes. Although other parties may in some cases obtain a copy of this report, it should not be relied upon by anyone other than the intended users or for anything other than the intended use. This assignment ha s been prepared and presented in conformance with your instructions, the current Uniform Standards of Professional Appraisal Practi ce (USPAP) as promulgated b y the Appraisal Standards Board of the Appraisal Foundation, as well a s the byl aws of the Appraisal Ins titute. The subject is a large acreage tract im proved with a s mall grass airstrip. A site and neighborhood in spection has been made and photographs taken. Market information and data regarding other similar real estate has been obtained. This data has been analyzed using appropriate techniques and methodologies necessary to develop a credible es timate of market va lue. The econom y and real estate markets are changing in Alaska, with a greater amount of uncertainty than in recent history. This appraisal is va lid as of the effective date, based on the market information, publications , and forecasts th at are readily avai lable to market participants as of the effective date. It is acknowledged th at anecdotal evidence, including di scussions with market participa nt s, suggests a softening real estate market. That said, in many segments of the market there is limited c urrent comparable data available that would indicate and quantify any changes in prices. 18-0250 Letter of Transmitta l Page i l!-~-v ~-s ~-R Y_I A_s f-R ~-1 cl RE: NUN Ro~ al St The appraiser has relied upon the most current and relevant data available, while at the same time attempting to reflect the perspective of market participants, including owner-users, investors, buyers and sellers. The intended users of this report should be aware that the appraisal is intended to refl ect the general prevailing consensus of market expectations as of the effective date and that these may ultimately tum out to be materially different than events that actuall y occur subsequent to the effective date. As a result of research and analysis , the value estim ate for the subject is as fo ll ows: FINAL MARKET VALUE ESTIMATE-ENCUMBERED NHN Royal St Property Rights Value Perspective Effective Date of Appraisal Final Market Value Estimate Fee Simple Current March 30, 2018 $56,000 The val ue estimates are based on a marketing period of approximately 12 months and an exposure period of approximately 12 months. The value opinion reported above is qualified by certain assumptions, limiting conditions, certifications and definitions, which are set forth in the body of the report. This letter is invalid as an opinion of value if detached from the report, which contains the text , exhibits and Addendum. Thank you for the opportunity to be of service . If you have any questions, please feel free to call. Respectfully submitted, (h.(L \J(I \t' d .11,,.Z l ( ll LM"..f\..l Barbara J. Belluomini A laska Certified General -No. 706 18 -02 50 Letter of Transmittal Page ii NHN Royal St Certification Certification The undersigned certifies that, to the best of her knowledge and belief: 1 . The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are her personal, impartial and unbiased professional analyses, opinions, and conclusions. 3. She has no present or prospective interest in the property that is the subject of this rep ort and no personal interest with respect to the parties involved. 4. She has no bi as with respect to the property that is the subject of this report or to the parties involved with this assignment. 5. She has not prov ided a previous service, as an appraiser or in any other capacity, regarding the s ubject within the three years prior to accepting this assignment. 6. Engagement in this assignment was not contingent upon her developing or reporting predetennined results. 7. Compensation for completing thi s assignment is not contingent upon the development or reporting of a predetermined va lue or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a sti pulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 8. Analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 9. A personal walk-through of the subject property has been made by Barbara Belluomini. I 0. No one provided significant real property appraisal assistance to the person signing this certification and she is competent and qualified to perform the appraisal assignment. 11. The reported ana lyses, opinions and conclusions were developed , and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 12. The use of this report is subject to the requirements of the Appraisal In st itute relating to review by its duly authorized representatives. 13 . As of the date of this report, Barbara Belluomini has completed the requirements of the continuing education program for Practicing Affiliates of the Appraisal Institute and for certified appraisers in the State of Alaska. (>)(\. \::)(l \C 4. V7{.L( U Lo(\/\.'-~\.l Barbara J. Belluomini Alaska Certified General No. 706 18-0250 Page iii RELIANT -----lLC U Y1l11' $1Hil!' NHN Roya l S t Table of Contents Table of Contents LETTER OF TRANSMITTAL .................................................................................................................................. I CERTIFICATION .................................................................................................................................................... 111 TABLE OF CONTENTS ........................................................................................................................................... V ASSIGNMENT OVERVIEW ................................................................................................................................ -1- IDENTITY OF PROPERTY ........................................................................................................................................ -1 - Name ............................................................................................................................................................... -I - Brief Description ............................................................................................................................................. -I - Address ............................................................................................................................................................ -I - Geo Coordinates ............................................................................................................................................. -I - Physical Location ............................................................................................................................................ -I - Assessor's Tax Parcel Number(s) ................................................................................................................... -I - Abbreviated Legal Description ....................................................................................................................... -I - SCOPE OF ASSIGNMENT ........................................................................................................................................ -I - Value Definition .............................................................................................................................................. -I - Other Definitions ............................................................................................................................................. -2 - Purpose ........................................................................................................................................................... -2 - Intended Use ................................................................................................................................................... -2 - Intended Users ................................................................................................................................................ -2 - Property Interest Appraised ............................................................................................................................ -2 - Property Rights Appraised .............................................................................................................................. -2 - Report Presentation ........................................................................................................................................ -2 - In spection Date ............................................................................................................................................... -2 - Effective Date .................................................................................................................................................. -2 - Report Date ..................................................................................................................................................... -3 - SCOPE OF WORK ................................................................................................................................................... -3 - Overview ......................................................................................................................................................... -3 - Limitations to Scope of Work .......................................................................................................................... -3 - Compliance ..................................................................................................................................................... -3 - Assignment Presentation ................................................................................................................................. -3 - Special Client Instructions .............................................................................................................................. -3 - Subject In spection ........................................................................................................................................... -3 - Information Provided to Appraiser for Consideration .................................................................................... -3 - Market Analysis ............................................................................................................................................... -4 - Approaches to Value ....................................................................................................................................... -4 - Valuation Process ........................................................................................................................................... -4 - OWNERSHIP AND SALES I NFORMATION ................................................................................................................ -5 - Current Owner of Record ................................................................................................................................ -5 - Three Year Transaction History ...................................................................................................................... -5 - EXTRAORDINARY ASSUMPTIONS, LIMITING CONDITIONS .................................................................................... -5 - HYPOTHETICAL CONDITIONS ................................................................................................................................ -6- COMPETENCY OF APPRAISER ................................................................................................................................ -6 - AREA DATA .......................................................................................................................................................... -7 - REGIONAL AREA DATA ........................................................................................................................................ -7 - LOCAL AREA DATA ............................................................................................................................................ -10 - Employ1nent Data ......................................................................................................................................... -I 0 - Kenai ............................................................................................................................................................. -I I - Soldotna ........................................................................................................................................................ -1 I - 18-0250 ~ RELIANJ '!.__J ~ ti __ , l Page v NHN Ro ya l St T able of Contents Kaliforn s ky Beach (K-Beach) R oad Area ................................................................................................... -11 - Conclusioll .................................................................................................................................................... -12 - N EIG HB O RHOOD D AT A ....................................................................................................................................... -13 - Nam e ............................................................................................................................................................. -13 - Location & Access ........................................................................................................................................ -13 - Character & L and Uses ................................................................................................................................ -13 - S urro unding Uses .......................................................................................................................................... -13 - Typical Age of Improveme nts ........................................................................................................................ -13 - Land D eve lop ed ............................................................................................................................................ -13 - Life Cycle ...................................................................................................................................................... -13 - Tre nds ........................................................................................................................................................... -1 3 - I MMEDIATE NEIG HBORHOO D M AP ..................................................................................................................... -14 - I MME DI AT E NEIG HB ORHOOD PHOTOG RAPH S ..................................................................................................... -15 - MARKET AN ALYSIS ......................................................................................................................................... -17 - WATERFRONT ACRE AGE TRACTS ....................................................................................................................... -17 - Classification ................................................................................................................................................ -17 - Ove rview of Market Survey ........................................................................................................................... -17 - Market Supply ............................................................................................................................................... -17 - Market D emand ............................................................................................................................................. -17 - Equilibrium Sta tus ......................................................................................................................................... -18 - Nea r Term Ma rket Outlook ........................................................................................................................... -18 - IMPACT OF Low OIL PRICES ............................................................................................................................ -18 - Current Co nditions ....................................................................................................................................... -18 - S UBJECT 'S C o MPETJTfVE PosmoN .................................................................................................................... -19 - Competitive Strengths I D ownward Risk Influen ces ..................................................................................... -19 - Competitive Weaknesses I Upwa rd Ris k Influe nces ...................................................................................... -19 - Impact of Marke t Conditions on Subject ....................................................................................................... -19 - DESCRIPTION OF SITE .................................................................................................................................... -21- Add r ess .......................................................................................................................................................... -21 - Geo Coordinat es ........................................................................................................................................... -2 1 - Physical Location .......................................................................................................................................... -2 1 - Assessor 's Tax Parcel Numb er ..................................................................................................................... -2 1 - Abbreviated L egal D escrip tion ..................................................................................................................... -2 1 - Gross S ite Ar ea ............................................................................................................................................. -2 1 - Shape ............................................................................................................................................................. -2 1 - Street Fro ntage ............................................................................................................................................. -21 - Access ............................................................................................................................................................ -2 1 - Exp osure ....................................................................................................................................................... -2 1 - Adjacent L and Uses ...................................................................................................................................... -21 - Top ography ................................................................................................................................................... -2 1 - Water Frontage ............................................................................................................................................. -2 I - Views ............................................................................................................................................................. -21 - S oil Cond ition s .............................................................................................................................................. -2 I - We tlands ........................................................................................................................................................ -22 - Ha z ardous Condit ion s ................................................................................................................................... -22 - Flood Zon e .................................................................................................................................................... -22 - Utilities .......................................................................................................................................................... -22 - AERIAL M AP ....................................................................................................................................................... -23 - PLAT M AP .......................................................................................................................................................... -24 - Zoning ........................................................................................................................................................... -25 - Ea sem ents, Cove nants, E ncroachm en ts & R estric tion s ................................................................................ -26 - Func tional Utility .......................................................................................................................................... -27 - 18-0250 ~ RELIAN.J ~·,1 I Page v i NHN Roya l St T able of Con tents PROPE R TY ASS ESSMEN T & TAXES ............................................................................................................ -29- SUMMARY OF PROPERTY ASSESSMENT & TAXES ............................................................................................... -29 - R e al P roperty ................................................................................................................................................ -29 - P ROPERTY ASSESSMENT & T AX SUMMARY EXHIB IT .......................................................................................... -29 - SUBJECT PHOTOGRAPHS .............................................................................................................................. -31- HIGHEST & BEST USE ..................................................................................................................................... -35 - D EF IN IT ION & METHODOLOGY ........................................................................................................................... -35 - Scop e of Highest & B est Use ........................................................................................................................ -35 - A s -Is-VACAN T ................................................................................................................................................. -35 - Lega lly Perm issible ....................................................................................................................................... -35 - Physically Possible ....................................................................................................................................... -35 - F inancially Feasible ..................................................................................................................................... -35 - Maximally Productive ................................................................................................................................... -35 - LAND VALUATION ........................................................................................................................................... -37 - I NTRODUCTION ................................................................................................................................................... -37 - Methodo logy ................................................................................................................................................. -37 - Units of Co mp arison ..................................................................................................................................... -3 7 - CoMPARABLE D ATA ........................................................................................................................................... -37 - Sources of D ata ............................................................................................................................................. -3 7 - Availability of Data ....................................................................................................................................... -37 - Presentation of Da ta ..................................................................................................................................... -3 7 - S UMMARY O F COMPARAB LE L AN D S ALES EX HI BIT ........................................................................................... -38 - COM PAR AB LE L AN D SALES M AP ........................................................................................................................ -39 - D ESCRCPTION O F DATA ....................................................................................................................................... -40 - Sale No. L-1 .................................................................................................................................................. -40 - Sale No. L-2 .................................................................................................................................................. -40 - Sale No. L-3 .................................................................................................................................................. -40 - Sale No. L-4 .................................................................................................................................................. -40 - Sale No. L-5 .................................................................................................................................................. -40 - Sale No . L-6 .................................................................................................................................................. -4 1 - Sale No. L-7 .................................................................................................................................................. -4 1 - OVERVIEW OF ADJUSTMENTS ............................................................................................................................. -41 - Nature of Adjustm ents ................................................................................................................................... -41 - Property R ights Con veyed. ............................................................................................................................ -41 - Financing Terms ........................................................................................................................................... -42 - Co ndition s of Sa le ......................................................................................................................................... -42 - Marke t Condition s ......................................................................................................................................... -42 - Loca tion ........................................................................................................................................................ -42 - R oad F ro ntage .............................................................................................................................................. -42 - Size ................................................................................................................................................................ -43 - Topography ................................................................................................................................................... -43 - Shape ............................................................................................................................................................. -43 - Utilities .......................................................................................................................................................... -43 - Use I Zoning .................................................................................................................................................. -43 - Wet lands/Limited Utility ............................................................................................................................... -44 - Water Frontage ............................................................................................................................................. -44 - View .............................................................................................................................................................. -44 - Airstr ip .......................................................................................................................................................... -44 - ADJUSTMENT GRID EXHIBI T ............................................................................................................................... -45 - DISCUSS ION & ANALYSIS AFTER A DJUSTMENT ................................................................................................. -46 - LAND V ALUE CALCULATION -UNENCUMBERED ............................................................................................... -46 - 18-0250 RELIANT ----uc I I Page vi i NHN Royal St Table of Contents RESTRICTIONS ON USE ........................................................................................................................................ -46 - FTNALMARKETVALUE EST[MATE ..................................................................................................................... -47 - EXPOS UREPERJOD .............................................................................................................................................. -47 - MARKET ING TIME .............................................................................................................................................. -47 - GENERAL ASSUMPTIONS & LMITING CONDITIONS ........................................................................... -49 - TERMS & DEFINITIONS .................................................................................................................................. -57 - ADDENDUM: LETTER OF ENGAGEMENT ................................................................................................ -59 - ADDENDUM : DEED SUBJECT TO RIGHT OF ENTRY ............................................................................. -61 - ADDENDUM: RIGHT OF FIRST REFUSAL AGREEMENT ...................................................................... -63 - ADDENDUM: EXPERIENCE DATA ............................................................................................................... -65 - 18-0250 RELIANT ----LlC I I Page viii NHN Royal St Assignment Overview Assignment Overview Identity of Prnpcrty Name Brief Description Address Geo Coordinates Physical Location Assessor's Tax Parcel Number(s)1 Abbreviated Legal Description Scope of Assi~nment Value Definition MARKET VALUE (OCC)2 1 Per Tax As ses sor Records. NHN Royal St The subject is a large acreage tract improved with a small grass airs trip. NHN Royal St Kenai, Alaska 996 11 Latitude: 60.5329, Longitude : -15 1.27033 The subject is located at the end of Royal Street. 049-100-52 Tra ct C Dragseth Subdivision, 201 7 Addition, according to th e official plat th e re of filed under Plat N umbe r 201 7-60, R ecords of the K e nai Recording Dis tric t, Third Judicial Distric t, State of Alas ka . (Per Department of Natural Resources Records) The following definition of value is utili z ed in this report: Th e most probable price which a prop erty should bring in a competitive and open market under all c onditions requisite to a fair sale, the buy er and seller each acting prudently and knowle dgeably , and assuming th e price is not qffected by undu e stimulus. Implicit in this definition is th e consumma tion of a sale as of a sp ecified date, and th e passing of title from seller to th e buyer under conditions whereby: a . th e buye r and seller are typically motivate d ; b . b o th parties are well inform ed or well advised, and a c ting in w hat th ey c ons ider th e ir own b est inter ests; c. a reasonable time is allo we d for exposure in th e ope n marke t; d. pay ment is made in te m zs of cash in U.S. dollars or in terms of.financial arrangements comparable th ere to; e. and th e price represents th e normal conside ration f or th e property sold unaffecte d by special or cr eative.financing or s ales co nces sions grante d by any one associate d with the sale. 2 Source: Office o f th e Comptroller of the Currency under 12 CF R, Part 34, Subpart C -Appraisals, 34.43 Definitions [g]. 18-0250 Pa ge -I - NHN Royal St Other Definitions Purpose Intended Use Intended Users Property Interest Appraised Property Rights Appraised Report Presentation APPRAISAL REPORT Inspection Date Effective Date 18-02 50 Assignment Overview Please refer to the Tenns & Definitions section presented in the Addendum for additional definition s of significant tenninology used in this report . To estimate the current market value of the real estate subject to planned res trictions on use . The intended use of the as signment is for prospective acquisition/sale purposes. It should not be relied upon for any other uses. Ronald Hyde, Jr. (the C lient) and the City of Kenai This is an appraisal of the real property. Any intangible and/or personal property is s pecifically excluded from thi s valuation. Fee Simple Appraisal Report Prior to the 2014-20 I S e dition of the Uniform Standards of Professional Appraisal Practice (USP AP), USP AP specified two primary narrative reporting formats: Summary or Self-Contained. Subsequent editions of USP AP replaced these with the Appraisal Report, a n arrative format that is intended to provide minimum reporting standards. Standard 2-2(a) of current USPAP states the following: "The content of an Appraisal Report must be consistent with the intended use of the appraisal and at a minimum ... (i ii) s ummarize information s ufficient to identify the real estate involved in th e appraisal, including tlz e physical, lega l, and economic prop erty characte ris tics relevant to the ass ignment ... (vii) summarize the scope of wo rk used to develop the appraisal ... (viii) s ummarize th e infonnalio n analyzed , the appraisal m eth ods and techniques employed, and th e reasoning that s upports the analyses, opinions, and conclus ions; exclusion of th e sa les comparison approach, cost approach, or income approach must be explain ed ; Co mment: An Appraisal R epo rt must include sufficient information to indicate that th e appraiser complied with the requirements of Standard I. The amount of detail required will vary with th e s ig nificance of th e information to the appraisal. The appraiser must provide s ufficient information to enable the client and intended users to understand the rationale for th e opinions and conclusions, including r eco nciliation of th e data and approac hes, in accordance with Standards Rule 1-6. " Jn essence, th e Appraisal Report format is consistent with the Summary app ra isal form at desc ribed in th e 2012-2013 and prior edition s of USP AP under Standards R ule 2-2{b). March 30, 2018 March 30, 201 8 Page -2 - NHN Royal St Report Date Scope of \Vork Overview Limitations to Scope of Work Compliance Assignment Presentation Special Client Instructions Subject Inspection Information Provided to Appraiser for Consideration 18-0250 Assignment Overview April 23, 2018 Current USP AP requires the appraiser to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem, intended users and intended use. USP AP permits limitations to the scope of work consistent with the appraisal problem, intended user and intended use. The scope of work has been limited by the General Assumptions & Limiting Conditions, Extraordinary Assumptions, Extraordinary Limiting Conditions, and Hypothetical Conditions discussed in the report and Addendum. The Scope of Work has also been limited based on the level of infonnation/documentation available to the appraiser The analysis and reporting of this assignment is compliant with the following: • Uniform Standards of Professional Appraisal Practice (USP AP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation. • The bylaws of the Appraisal Institute. • Client appraisal standards as set forth in the letter of engagement presented in the Addendum. This is an Appraisal Report as defined by the Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(a). This format provides a summary of the appraisal process, subject data and valuation. The level of detail and discussion included varies with the significance of the information to the appraisal, within the context of the intended use and intended users. This is a two-sided document with new sections beginning on odd numbered pages. Note, where a section ends on an odd page Microsoft Word will automatically insert a blank, even numbered page at the end of a section. The Client has requested that the property be appraised subject to planned restrictions on use. A site and neighborhood inspection has been made and photographs taken. Primary data was obtained by the appraiser during the onsite inspection. Secondary sources of property data include client, property owner, and public records. The scope of work is specific to the information on the subject provided to the appraiser by the client and property owner. A partial list of items provided follows: • Plat Map • Deed Subject to Right of Entry (draft) • Right of First Refusal Agreement (draft) The following information wa s not available to the appraiser: ·~ R ~LIA ~l Page -3 - NHN Royal St Assignment Overview • • • Title Report Preliminary Commitment fo r Title Insuran ce Environmental stu dy Market Analysis Research on macro and micro economic conditi ons within the subject's market has been conducted. Research on current market conditions within the subject's sector of th e real estate market has also b ee n conducted . The Appraisal Institute recognizes two categories of market analysis: inferred a nd fundan1ental. Inferred analyses (Level A and B ) are basic methods b y which future supply and demand conditions are inferred b y c urren t and general m a rket conditions (secondary d ata). In fundamental analyses (Level C and D ), general infonnation is supplemented by d etailed data in order to fo recast s upply and demand , as well as subje ct-s p ecific absorption and capture (primary data). The m arket a na lysis performed in this assignment is based on inferred de mand. Approaches to Value LAND VALUATION This approach was developed because it is necessary to develop a credible and rel iable estimate of market val ue for thi s property type or it has been requested by the client. COST APPROACH This approach was n ot developed because it is not typically utili zed by buyers and s ellers in this market for thi s type and age of property. SALES This approach was not developed becau se it is not typically utilized by buyers and COMPARISON sell ers in this market for thi s type and age of property. APPROACH INCOME This approach was not developed because it is necessary to develop a credible and CAPITALIZATION reliable estimate of market value for this property type or it has been requested by APPROACH the client. Valuation Process The valuation process may include research and analysis performed as part of a prior assignment , as well as new research performed s pecifically for this assignment, an d included but was not limited to the followi ng: 18-0250 1. The problem or nature of assignment was identified. 2. A scop e of work was created that lead to credible results that are appropriate for the appraisal problem, intended user and intended use. 3 . Infonnation necessary to complete the assignment was requested and obtained from the c li ent and prop erty owner. 4 . An area, city and neighborhood analysis has been perfonned. 5. An analysis of the s ubject's phys ical and economic characteristics has been perfonned. 6. Intervi ews have been performed with property re presentatives (owners, planners, assessors, brokers, developers and other indi viduals with useful knowledge and insight on the s ubj ect. 'r RELIAN.J ~ I I Page -4 - NHN Royal St Assignment Overview 7. Knowledgeable market participants have been interviewed on the market conditions fo r properties similar to the subj ect. 8. An examination of current zonin g codes affecting the property has been performed. 9. The functiona l utility of the site and/or improvements ha s been determined. I 0. A detailed examination of the subject's economic characteristics has been made to determine the property's risk profile and economic potential. I 1. A highest and best use analysis for the property was performed. 12. Extensive research to identify transactions involving similar properties was performed. 13. An analysis of the subject and available data was performed using commonly accepted valuation techniques and methodologies. 14 . The quantity and quality of available data was considered, along with the applicability of the methodology u sed, and a reconciliation was performed to arrive at the final value estimate. 0\.\ ncrship and Sales Information Current Owner of Record Three Year Transaction History According to Department of Natural Resources Records, the appraised interest in the subj ect is presently owned by City of Kenai. Disclosure and analysis of the s ubject's transaction history (sales , agreements of sale, options, and li stings) within the prior three years is required by USP AP and , if applicable, is presented below. The City of Kenai has owned the subject property in excess of the three-year reporting period. The Client purchased the adjacent property (at the south) from the City in 20 I 7. As part of that transaction, the two parties agreed to negotiate a sale of the subject property as wel l. The Kenai Planning and Zoning Commission approved a conditional use permit allowing Mr. Hyde to utilize the grass airstrip onsite in the meantime. No potential purchase price was disclosed to the appraiser by either party. This appraisal report will reportedly be used in the negotiation process E ~traordinary As sumptions, Limiting C onditions3 Extraordinary assumptions and extraordinary limiting conditions specific to this 3 These are presented in this Assignment Overview chapter because they are specific to this assignment and do not apply to all assignments. However, the appli cable general assumptions and limiting conditions, which are presented in the Addenda to thi s report, do apply to all as signments and should not be viewed as less rel evan t, or carrying less weight, than those presented above simpl y because of their location with the report. Nor should any assumption or ex tra ordinary assumption contained with the body of the report be viewed as le ss rel evant or meaningful than tho se presented above. 18-0250 Page -5 - NHN Royal St A ssignment Overview assignment fo llow. The value estimate presented in this report may be amended in the event that the extraordinary assumpti on s or li miting conditions are fou nd to be false. The reader is advised that the use of these assumptions might have affected the assignment results. 1. In the absence of a we tl ands delineation from the Anny Corp s of Engineers, the appraiser considered information includ ed on the s ubdivision plat map, on the USDA Natura l Resource Conservation Service's online Web Soil Survey and physical clues (e.g. vegetation present, surface water, etc.) during th e onsite inspection in order to estima te the quantity o f wetlands on site . Base d on the information gathered, th e site area impacted by low wet areas is estimated at just over 22 acres (85% of the property). This is not a precise estim ate and it is recommended that a survey be conducted to determine the exact areas that are impacted. For the purposes of this appraisal, howeve r, it is an ex traordinary assumption of this assignment that the area consisting of wetlands is 22.31 acres. 2. A Conditiona l Land Use Permit was previou sly granted to the Client, allowing the use/operation of the gras s airs trip onsite . This was necessary because an airstrip is a conditional use in the Rural R esidential (RR) Zone. It is an extraordin ary assumption of this as signment that th e pennit will continue to be renewed. Hypothetical Conditions Hypothetical conditions specific to this assignment are as follows . The reader is advised that the use of the se hypothetical conditions might have affected the assignment results. l. At the request of the Client, the subject property has been appraised b ased on the hypothetical condi tion that its use is restricted to aircraft landing, loading and departing (see a draft of the Deed Subject to Right of Entry, which incorporates the Covenants and Restrictions on Use, included in the Addendum). 2. The sale will also reportedly be subject to a Right of First Refusal Agreement (draft, again, included in the Addendum). Given the 99-year term and difficulty in estimating CPI adjustments over an extended period of time, any potential va lue impact associated with the terms of thi s document is excluded. Competenc~ of Appraiser 18-0250 The apprai ser has previously performed simi lar assignments and meets the Competency Rule of USP AP. Please refer to the Experience Data presented in the Addendum for further information on the appraiser 's background and experience . • . RELIAN.J ._,:) , I I I Page -6 - NHN Royal St Area Data Regional Area Data 18 -02 50 Area D ata Although elements of Alaska's economy are directly affected by certain national and international factors (e.g. interest rates, the va lue o f th e U.S. Dollar, etc.), Alaska's economic cycles do not typically align with the rest of the nation for several reasons. First , Alaska's location -although central to the industriali zed world by air -is remote relative to the rest of the U.S. Its extreme lati tude promotes in tense but short seasons of work. Its prolific natural resources are valuable , but its ru gged terrain makes them difficult to extract and bring to market. Las tly, its extreme climate det ers rapid population growth which prevents the local population fro m reaching a se lf-sustaining level. One dramatic instance of when Alaska 's economy diverged from the Nation 's was when employment in A laska continued to increase through the Great Reces sion during what ended up being 2 1 years of job growth in the s tate followed b y much quicker recovery than the Nation as a whole. Alaska's cycles of growth and recession have been based on the quantity and price of resources exported (precious metals, timber, seafood, coal, and -most importantly -o i l) which lends to more extreme swings over longer periods of time. Today, the State's economy is more diverse th a n it ever has been. However, the tripod that continues to support the economy is made up of oil/gas, government spending, and other sectors (other mining/natural resources, hospitality/touri sm, manufac turing/fishing, and transportation to name a few) and most of the weight is s till placed on oil/gas. Alaska is still highly dependent on the production and price of oil, and while production ha s s teadily d ecreased from a high in the late 1980s, the price has been volatile. Between 2013 a nd early 2014, oil showed stability above $95/barrel. Though the problem of low production remained (and remains) a longer-tem1 concern, these oil pri ces provided bountiful revenue to Alaska at a time when many other states were struggling w ith crippling budget defi cits . However , due primarily to a glut of new supply from the U.S. and some decreases in global demand , prices began to slide in mid-20 14 . As of January 2018, Alaskan crude stands at roughly $64 per barrel. As prices h ave remained low, the state government h as faced re venue shortfall s ofroughly $3 billion and substantial budget-tightening (or additional reve nue sources) will presumably follow in the near to mid -term. The State's substantial budget reserves from 2014 will not be able to o ffset revenue s hortfall s much lo nger without budget cuts. The State also has over $50 billion within the Permanent Fund , which - whil e not legal fo r lawmakers to spend without amending the State consti tution (requirin g a 2/3 rds majority vote) -does suggest a strong balance sheet. That said, th e State government h ad an annual average of 800 fewer full-tim e positions in 2017 than in 2016. This is in comparison to the average of 1,400 fewer positions in 2016 than in 2015. The pressure on the State 's budget at this time is obvious, as reflected by recen t downgrad ing of its credit rating b y Moody's (Aa3), and the other two agencies keeping their ratings (Fitch-AA+, Standard & Poor' s -AA+) along with their assigning a "negative" outlook. According to an article in th e Anchorage Daily News, ADN , (fo rm erly known Page -7 - NHN Royal St Area Data as Alaska Dispatch News) from June 20, 2017, Standard & Poor's (S&P) firm said in a report '"'(W)ithout structural fiscal reform in the 2017 legislative session , we would likely lower the state debt ratings,". The article continues on with "adding that it expects lawmakers to enact a budget for the 2018 fiscal year in the next 90 days. If the state adopts 'a balanced budget with fiscal reforms that does not significantly rely on reserves,' the agency said it may remove the state's ratings from the credit watch without a downgrade.". Debate is ongoing about how to deal with the new fiscal realities of low oil prices -whether with spending cuts, new revenue sources (including potentially tapping the Pennanent Fund) or a combination of both. Ultimately, the full impact oflower oil prices is not yet known . 2017, proved to be a year of discovery, with Bill Armstrong and hi s partner , Oil Search discovering an oil field that wo uld yield 500 million to three billion barrels of oil. One bright spot, however, was the recent discovery of two large oil reserves b y Ca el us and Armstrong. These finds could reportedly yield as much as 200,000 and 120 ,000 barrels/day in the future. Beyond oil and gas, th e s tate economy continues to benefit from a confluence of strong production and stable prices for several other natural re sources (minerals and seafood). Also buttressing the Alaskan economy is the level of federa l spending in the state. For example, in FY2014, the U.S. government sent a total of $11.3 billion to Alaska and its residen ts 4 . This sum made Alaska the third highes t recipient of per capita federal dollars for the year (behind Maryland and Virginia). The level offederal spending in Alaska, per capita, is approximately 50% above the national average. Meanwhile, job gains in the health care industry have been consistent and strong for most of the la st decade. According to the Alaska Department of Labor, the health care industry added 1,800 jobs in 2017, and it is expected to add another 700 jobs in 2018. Lastly, after down years in 2009 and 20 I 0, touri sm leveled out and then experienced more noticeable improvement in 2012 through 2016. State economists expect that the combination of a strengthening national economy and the addition of severa l cruise ships to the Alaskan market will continue to provide a boost for thi s important industry. Historic employment changes, as well as the forecast for 2018 are presented in the following chart: 4 htm://www.pewtrus ts.org/-/med ia/asset./20 16/03/federal spending in th e states 200520 14 .pdf, accessed Jan- 20 17 18-0250 RELIANT -----llC Page -8 - NH N Royal St Tapering Job Losses for Alaska PERCENT CHANGE FROM PR I OR YEAR , 2008 TO 2018 0.2 9' Area Data -~·EJ 20 15 20 -0 5 9' -1.l % -1.9 9' •PIE lim inary .. Fore ca st Source: A!Dsko Deportment aj l.Dbor an d WrNt/orce Development, ReROrdi and Anatysis Seaicn According to state economists, Alaska significantly outperformed the Nation's economy as a whole during the past decade. After the minor losses in 2009 ended 21 straight years of overall job growth, Alaska gained modest jobs through 2015. However, in 2017, employment decreased by 1.1 %. While some gains were seen in the health care and local government sectors, they were relatively minor and more than offset by losses in sectors related to oil and gas as well as construction. The outlook for 2018 is a further lo ss of jobs -again tied to low oil prices and their fallout -but not nearly a s severe as the prior years. Health care and local government are the only two sectors expected to gain jobs. In summary, the Alaskan economy is suffering from the pressure of low oil prices and state government budget issues, and this is expected to continue, with economists5 predicting approximately three more years of recession followed by a leveling off at the "new normal." While the state as a whole remains relatively healthy at this time, there is clearly nervousness stemming from future uncertainty regarding the depth and duration of the current environment. 5 Presentation to Alaska S enate Labor and C ommerce Committee on January 18-1 9 , 201 7. Presenters included Mouhc ine Guettabi and Ralph Townsend (Univers ity of Alaska Anchorage Institute of Social and Ec onomic Research), and Jonathan King (Northe rn Economics). 18-0250 Page -9 - NHN Royal St Local Area Data Overview Employment Data 18-02 50 Area D ata The Kenai Peninsula Borough (KPB) is located in Southcentral Alaska. It covers not only the Kenai Peninsula itself, but also a large, relatively unpopulated area on the west side of Cook Inlet. According to the Department of Labor, the estimated population in 2017 was 58 ,024. Major economic influences include commercial fishing, oil and gas, and tourism . Unemployment in the Borough is cyclical, being highest in the winter months and lowest in the summer months. For the last five years, the average annual unemployment rate for the KPB (the most specific infonnation available) has ranged between 7.9 and 8.6 percent. In 2017 , the unemployment rate averaged 8.5 percent; a slight decrease from 2016 (8.6 percent). For comparison, the average monthly unemployment rate for Alaska was 7.2 percent and the United States was 4.4 percent. Looking back, the annual unemployment rate averages for the KPB in 2015 and 2014 were both 7.9 percent. RELIANT ~I OYIS !i' SHY 1 t\'~ Page -10 - NHN Roy al S t Kenai Soldotna Kaliforosky Beach (K-Beach) Road Area 18 -0250 1 5 0 ! )] 0 .. "' .. c 90 Cl e ... 0 c. &O E II c :I 3 0 00 0 .... -.... 0 0 " N N 8 N ~ 0 N Y~ar ., 0 N I 0 Kenai Peninsula Borough 0 Al as~. "' .... 0 ,.. Area Data "' 8 N ... 0 N The city of Kenai is situated on the west coast of the Kenai Peninsula between the Kenai Mountains and Cook Inlet. According to the 2015 U.S . Census (American Community Survey) data, Kenai is the most populous city in the Kenai Peninsula Borough. Kenai's population of 7,412 is 12 percent of the KPB and nearly one percent of the population of Alaska. The 2015 figure represented a gain of 412 over the 2010 Census . Kenai encompasses 29 .9 square miles of land and 5 .6 square miles of water. It lies 59 air miles (150 highway miles) to the southwest of Anchorage. The city's major industries are oil and gas, tourism and fishing (sports, subsistence, and commercial). The city of Soldotna is situated about 11 miles southeast of Kenai. As of 2015 , Soldotna's population stood at 4,409, roughly 8% of the Borough's overall population. The 2015 population figure represented a gain of 246 over the 2010 Census. Soldotna encompasses approximately seven s quare miles of land centered on the Kenai Ri ver, which winds its way across the Peninsula from east to west. The top five employers are: Central Penin sula Ho spital, Kenai Peninsula Borough and School District, Fred Meyer retail store, Safeway store, and Kenai Peninsula College. Kalifomsky Beach Road is a major arterial that extends from the Sterling Highway (Mile 96) at the southeast, in Soldotna, to its intersection with Bridge Access Road at the northwest. The Kenai city center is northwest of the Bridge Access Road intersection about three miles . Kalifomsky Beach Road provides alternate access (from the Kenai Spur Highway) between Soldotna and Kenai. In addition , from the Bridge Access Road intersection, Kalifomsky Beach Road continues an additional 16+/-miles w es t and then south along the Cook Inlet bluff to the southern intersection with the Sterling Highway (Mile I 09 ; 13 miles south of the Soldotna C entral Bus iness District). Some of the Kalifornsky Beach Road area lies within the Kenai and Soldotna city limit s, but the majority lies outside of any incorporated area . Pa ge -11 -RELIANT ----llC HV I S 1 1 I !11 I 'f5 NHN Royal St Conclusion 18-0250 Area Data Much like the State, the Borough economy is supported by commercial fishing, oil and gas, and tourism. The Central Kenai Peninsula also benefits from being the seat of local government and the location of Central Peninsula Hospital. The hospital has undergone substantial expansion in recent years and continues to draw practitioners and other healthcare-oriented businesses to the area. RELIANT -----uc I CY I HI' S!H 1[!S Page-12- NHN Royal St Neif,!hhorhood Data Name Location & Access Area Data Kalifornsky Beach (K-Beach) Road Area -West The immediate neighborhood is located south (across the Kenai ruver) of the Kenai Central Business District (CBD). Access from the CBD is via Bridge Access Road, Kalifornsky Beach Road, Cannery and Old Cannery Roads . Royal Street, on which the subject fronts , is north of Kalifomsky Beach Road about 1.6 miles. The neighborhood location and access/linkages are shown on the Immediate Neighborhood Map that follows. Neighborhood access is considered typical of the market. Character & Land The neighborhood character is demonstrated by the neighborhood photos that Uses follow. These photos were taken in close proximity to the subject and are representative of the character of the neighborhood. As with most of A laska and the local market , neighborhood land uses are mixed. Surrounding Uses Surrounding uses include Hilcorp, Inlet Fish Producers, The Cannery Lodge, and PRL Logistics to the east/northeast. High-end (mostly custom) residential uses predominate to the south. Cook Inlet and its associated tidal flats border the property to the west/northwest. Typical Age of 1980s through new construction Improvements Land Developed Roughly 70 -75 % Life Cycle Developing DEVELOPING This area continues to be developed with a mixture of indu s trial , marine-oriented and residential uses, particularly on lots with Cook Inlet or Kenai River frontage. Most of the new con struction has been for single-family residential use. Trends No major shift in prevailing land uses , real estate economics, or demographics are anticipated at this time. Given the fixed supply ofland, current percentage of developed land and demand trends , neighborhood trend s should be towards moderately escalating land values and prices over time. 18-0250 Page -13 - NHN Royal St Immediate Neighborhood Map 18-0250 I )'l'ICD H Are a Data I s ubject Property [ Page -14 -RELIANT ----LLC llVISll' HH I C!S NHN R oyal S t Area Data Immediate Neighborhood Photographs Residence (adjacent) Hilcorp Vacant Lot (typical) Residence (typical) Inlet Fish Producers The Cannery Lodge 18-0250 Page -15 -RELIANT ----LLC 1 11 1111' Hl il nS NHN Royal St Market Analysis Market Analysis \Vaterfront \creage Tracts Classification Overview of Market Survey Market Supply Market Demand 18-0250 An extensive search was made to try to locate sales of properties subject to deed restrictions like those planned for the subject. No recent sales of any acreage tracts subject to similar restrictions were identified. At attempt was then made to locate sales of large acreage tracts with airstrips onsite. Again, no sales were identified. Two listings (one current and one expired) of properties improved with single-family residences and/or hangars , in addition to airstrips, were identified. After researching them further, they weren't considered really similar to the subject. Given the uniqueness of the subject property, then, and the difficulty in fine-tuning the market data, this market analysis considers conditions within the waterfront acreage tract market. The market analysis has been compiled from a variety of sources including a survey of buyers, sellers, real estate agents, appraisers, city assessor's and other market participants. Other sources of data include property tax records , newspaper articles and the Multiple Listing Service (MLS). The available data has been analyzed on a qualitative and quantitative basis . A search of inlet/river front acreage tracts listed for sale through MLS in the greater Kenai/Soldotna/Kasilof areas identifies only two. One is an extremely irregularly shaped 52.66-acre tract located partially above and partially below a steep 75 to 80'high bluff adjacent to the Redoubt Terrace subdivision in Kenai. Zoning is Suburban Residential above the bluff and conservation below it. The bluff is subject to active erosion the actual usable area is unknown. The other listing is of a 50.48-acre tract fronting on a slough of the Kasilof River. It is in an area that is unzoned and is improved with a small single-family residence. This relative lack of available waterfront acreage tracts is not unusual. Most of them are owned by government agencies (federal, state and/or local) or native corporations and held for either public or shareholder benefit. A search of non-waterfront acreage tracts listed for sale through MLS in the same areas turned up a total of 23 properties. Two of those are former gravel pits, both grandfathered as materials sites. A 10-Y ear Comparison Report of land sales, again, for those same areas (through MLS) follows: Page -17 -RELIANT -----uc IC Vl l I' St Vi et ~ NHN Roya l St Equilibrium Status Near Term Market Outlook M a r k et An a lysis 10-year Comparison Report Prop erty Type: La nd Areas 305 -Kenai,310-Kaliforn sky Beac h,32 0 -Kas ilof.3 30 -Sol dotn a,335 -Ridgeway Construction Ty pe : Ex ist ing an d New Cons truction Year #Sold Avg. list Price % List Pri ce Avg. Sold Price % So ld Price Avg . DO M Change C hange 2008 125 $6 5,883 NA $56 ,968 NA 277 2009 5 3 $36 .000 ·45 .36% $32.321 -43 26% 213 2010 75 $57,406 59.46 % $4 7,177 45.96 % 290 2011 84 $35,354 -38 41% $30 ,020 -36.37% 283 2012 8 3 $73,02 2 106 _55% $62,820 109 .26% 30 2 20 13 81 $47,718 -34 .65% $42,862 -31 77% 321 2014 124 $84 ,22 6 76.51% $61,783 44.14% 272 20 15 117 $56,676 -32 71% $49,799 -19 40% 336 2016 105 $58,52 3 3.26% $53,211 6.85% 305 2017 130 $39 792 -32 01% $34,992 -34 24% 29$ This report is , of course, only for those s ales occurring throug h MLS. It does not consider private transactions. Further, it doesn 't differentiate between large acreage tracts versus smaller subdivision lots or lots with water frontage versus those without. One or two high-dollar sales can really skew the averages. Nonethele ss, it is po ssible to see general trends in sales. Overall, the market is in equilibrium at this time with no significant imbalances in either supply or demand. No substantive changes are exp ected in the near term. Impact of Low Oil Prices Current Conditions 18-02 50 A s discussed in the Area Data chapter, the price of crude oil has dropped to roughly half of what it wa s just over two years ago . Although it h as been holding fairly steady at $60-$70/bbl in early 2018 , most experts do not expect a return to prev ious high price levels in the near to mid-term. This is ob viously of concern in Alaska, as the vast m ajority of state governmen t revenue stems from oil. Howev er, available sale transactions in the local market have not yet demonstrated a change in prices. There is nervous nes s a s low oil prices drag on and the State debates spending cuts (and/or revenue increas es vi a new taxes), but the trans actional data does not indicate that real estate fundamental s have been negatively impacted thus far. The number of transactions available for anal ysi s remain s low in mos t cas es, but this is not a departure from historic patterns in thi s relatively small market. Generally speaking, appraisers must be careful to reflect the market based on evidence rather than dictate it ba sed on emotion or opinion. Interviews with brokers and owners can prov ide meaningful insight into market expectation s . Page -18 -RELIANT -----llC A!VISCI' SEH l [fS NHN Royal St Market Analysis While consideration is given to expected future trends , weight is necessarily (and appropriately) placed on actual, documented market activity to date. Efforts have been made to obtain and analyze the most recent sale transactions available in the subject's market segment. It is the appraiser's opinion the available data fairly represents current market and economic conditions. Subject's Competithe Position Competitive Strengths I Downward Risk Influences Competitive Weaknesses I Upward Risk Influences Impact of Market Conditions on Subject 18-0250 • • • • • Large size (26.25 acres) . Topography (generally level , with easy access to the beach) . Substantial amount of water frontage . Excellent view amenity . Availability of electric and natural gas . Note that, although there is a grass airstrip onsite, it does not appear to afford the subject any real advantage within the market segment that it competes. • • • Quantity of wetlands (estimated to encompass 85% of the site). Huge influx of people along the waterfront during the personal use dipnet fishery in July. Planned restrictions on use . Given the subject's strengths and weaknesses and, in particular, the planned restrictions on use, it is expected to capture less than its proportionate market share. Page -19 -RELIANT -----uc UYl :CI' Hl !I C!S NHN Royal St Description of Site Description of Site Address Geo Coordinates Physical Location Assessor,s Tax Parcel Number6 Abbreviated Legal Description Gross Site Area NHN Royal St Kenai, Ala ska 9961 I Latitude: 60.5329, Longitude: -151.27033 The subject is located at the end of Royal Street. 049-100-52 Tract C Dragse th Subdivision, 20 17 Addition, according to the official plat th er eof, filed under Plat Number 2017-60, R ecords of th e Ke nai Recording District, Third Judicial District, State of Alaska. (Per Department of Natural Resources Records) Square Feet: Acres: 1,143 ,232 26.25 SOURCE Plat Map Shape Street Frontage Acce ss Exposure The site is irregularly shaped . The subject has approximately 263' of frontage on Royal Street. Access to and from the subject is considered a verage relative to competing properties. Exposure of the subject is considered average relative to competing properties. Adjacent Land Us es Topography Water Frontage Views Soil Conditions NORTH Vacant wetl and s/tidelands at mouth of Kenai Ri ver SOUTH Single-family residential EAST Cook Inl et WEST Industrial The subject has predominantly level topography, w ith a s light slope d own along the waterfront. 3,048 ' on Cook Inlet T he s ubj ect offers excell ent views of Cook Inlet and the A leutian Range. The US DA Natural Re so urces Conservation Service 's online Web Soil Survey 6 Per Tax Assessor Records . 18-0250 Page -21 -RELIANT ----ll( HVll!i' II Vil!! NHN Royal St Wetlands Description of Site identifies soils in the area as a mix of Clunie Peat, Soldotna Silt Loam and Typic Cryaquents. Clunie Peat consists of peat over silty clay loam formed on tidal flats. These soils are very poorly drained, with a very high runoff. Soldotna Si lt Loam consists of ash-influenced loess over sandy and gravelly drift formed on outwash plains and moraines on till plains. These soils are very deep and well drained . Runoff varies from low to high . Typic Cryaquents consist of slightly decomposed plant material over s ilt loam and very gravelly sand formed on deltas/estuaries. Like Clunie Peat, these soils are very poorly drained, with a very high runoff. Onsite sampling would need to be done for more specific information. It is an ordinary assumption of this report that the soil conditions are typical of the neighborhood and generally similar to those found at the land sale comparables utilized in thi s report. Wetlands are areas that are periodically or permanently inundated by surface or ground water and support vegetation adapted for li fe in saturated soi l. Wetlands include swamps, marshes, bogs and similar areas. Federal law requires that there be no net lo ss of wetlands and their development requires a permit be obtained from the Army Corp of Engineers (ACOE). Note that wetlands in many areas of the State are not delineated or assessed and the ACOE would need to be consulted on the relevant permit process. In the absence of a wetlands delineation from the ACOE, the appraiser considered information included on the subdivision plat map, on the previously discus sed Web Soils Survey and physical clues (e.g. vegetation present, surface water, etc.) during the onsite inspection in order to estimate the quantity of wetlands onsite. Based on the information gathered, the site area impacted by low wet areas is estimated at just over 22 acres (85% of the property). Hazardous Conditions A complete environmental site assessment was not availab le to the appraiser. There are no known or disclo sed environmental issues or hazardous conditions impacting the subject. The detection of hazardous materials or conditions is beyond the scope of expertise and competency of an appraiser, h owever, and it is recommended that any concerns relating to hazardous conditions be addressed by a qualified environment al s pecialist. Furthermore, it is an assumption of thi s report that there are no hazardous conditions present at the subject. Flood Zone The City of Kenai does not participate in the National Flood Insurance Program, nor does it administer floodplain management programs . Utilities Although there is a small grass airstrip onsite, the subject is essentially vacant land. Electric and natural gas are available to adjacent parcels. Public water and sewer are not available; typical of the area. 18 -0250 RELIANT -----uc ICYIS l' SEl!1£1S Page -22 - NHN Royal S t Description of Site Aerial Map ?• 18-0250 RELIANT -------LLC 1 11 1111! SHl l C!! Page -23 - NHN R oyal St Plat Map \ .1·:· ;~ ~ ~ \ L;" -· -'-. I -- J .) IRA.Cl c I _\""Ql rt/ • r~r o . t I .,. :. L. °'\'QtJ'.:.::,·1 ® . . - 18-0250 .. . . .. ~ £ .. 0'"' .].> ' II z .a ~ s: f., tpriC ~ " i .. il 5 ,,r-1../: ...., 1·:-1 ir .... RELIANT -------uc I H 1E l' iltl l US Description of Site + , 1 ttU &c J':•• 1 t)lll -.:.•.t r. St Pr.A\ in• ~"'l 1 1 .l.rr.-,.-.,. Page -24 - NHN Royal St Description of Site Zoning The subject has split zoning. According to the City Manager roughly 29% of the property (at the south) is zoned Heavy Industrial (IH). The remaining 71 % (at the north) is zoned Rural Residential (RR). Although not a common occurrence, spli t zoning is found elsewhere in the city. HEAVY INDUSTRIAL Intent: The IH Zone is established to allow for a broad range of industrial and (IH), CITY OF KENAI commercial uses. It is intended to apply to industrial areas which are sufficiently isolated from residential and commercial areas to avoid any nuisance. Permitted Uses: Automotive sales , automotive service stations, guide service, professional offices, retail business, wholesale business, airports and related uses, automotive repair, manufacturing I fabricating I assembly storage, warehouses, charitable institutions, parks and recreation, dormitories I boarding houses I essential services, fanning I general agriculture, gunsmithing, printing, taxidenny, assemblies (large), parking (off street), personal services, radio I tv transmitters I cell sites. Conditional Uses: Two to seven or more family dwellings, townhouses, mobile home parks, planned unit residential development, banks, business I consumer services, hotels I motel s , lodge, restaurants , theaters I commercial recreation, gas manufacturer I storage, churches, clinics, colleges, elementary schools, governmental buildings, high schools, hospitals, libraries, museums, assisted living, animal boarding, bed and breakfasts, cabin rentals, cemeteries, crematories I funeral homes, day care centers, greenhouses I tree nurseri.es, fraternal organizations I private clubs I social h all s and union halls, nursing, convalescent or rest homes, parking (public lots), recreational vehicle parks, subsurface extraction of natural resources, and surface extraction of natural resources. Prohibited Uses: None. One fami ly dwellings are considered a secondary use, however, and are limited to "one single-family residence per parcel , which is part of the main building." Development Requirements: (I) Open Storage-No open shall be located closer than twenty-five (25') to the adjoining right-of-way of any collector street or main thoroughfare. Any open storage visible from a collector street or main thoroughfare shall be enclosed in an eight-foot (8') high fence of good appearance acceptable to the Commission. (2) Residential Buffer -Wherever an industrial zone abuts or is separated by an alley from a residential zone, the use or building in the IH Zone shall be screened by a sight-obscuring fence or hedge. RURAL Intent: The RR Zone is intended to provide for low density residential RESIDENTIAL (RR), development in outlying and rural areas in a fonn which creates a stable and CITY OF KENAI attractive residential environment. The specific intent in establishing thi s zone is to establish residential structures to an extent which will preserve the rural, open quality of the environment and prevent health hazards in areas not served by-public water and sewer and to prohibit uses which would violate the residenti al character of the environment and 18-0250 RELIANT -----uc Page -25 - IHli!I' lli ll [f! NHN Royal St Easements, Covenants, Encroachments & Restrictions 18-0250 Description of Site generate traffic in predominantly residential areas. Permitted Uses : One-family to four-family d wellings, churches (provided that no part of any buildi ng is located nearer than 30' to any adjoining street or property line), essential services, farming/general agriculture, parking (off street), and radio/tv transmitters/cell sites. Conditional Uses: All other uses are considered conditional use s, except gas manufacturer/storage, which is prohibited. Prohibited Uses: Gas manufacturer/s torage. Basic Design Standards: Minimum Lot Size: Minimum Width: 20,000 sq ft (one-to four-family dwellings) 90' Front Setback: Side Setback: Rear Setback: Maximum Height Maximum Site Coverage: 25' 15' 20' 35' 30% The subject's zoning is not unduly restrictive, pennits a wide variety of uses, and does not appear to materially limit the economic potential or functional utility of the property. A title report was not available/provided to the appraiser. The subdivision plat map identifies normal easements along the property boundaries for streets and utilities. It also identifies 50' wide section line easements along the property's north and east boundaries. Section line easements are considered typical for rural acreage lots. There can be value considerations. In this case, however , the section lines easements are located in areas identified as predominantly wetlands, with dimini shed utility anyway. Finally, the map identifies a public access easement along the waterfront. The easement is 50' from mean h igh water mark. This easement insures public access along the waterfront is maintained; especially for the p opul ar personal use dipnet fishery in July. Access easements are not uncommon in this market, especially where access to waterways is concerned. The property is being appraised based on the hypothetical condition that its use is restricted to aircraft landing, loading and departing . The Covenants and Restrictions on Use, incorporated into the draft Deed Subject to Right of Entry (copy included in the Addendum) stipul a te that: ( 1) The Property shall be used (for) the purpose of aircraft landing, loading and departing and for no other purpose in consistent with such use. (2) All vegetation on the property shall be maintained in it s natural state except as follows: a. The existing landing area may be maintained and graded but no additional material other than sand may be introduced onto the surface except as provided in paragraph 2 .b, below, and the airstrip shall be m aintained as a grass surface with Alaska native Page -26 -RELIANT -----uc IQYIS!l' SEIVICH NHN Royal St Functional Utility 18-0250 Description of Site grasses. b. The area labelled "Staging Area" as shown on Attachment 1, not extending more than 400 feet immediately north of Royal Street, may be surfaced with gravel or crushed rock, with the exception that any vegetative dunes must be maintained in a natural state. c. Vegetation may be disturbed but on ly if and to the extent necessary to install and maintain lighting, a windsock pole, and fencing. d. A moveable building not exceeding dimensions of 12 feet by 20 feet nor greater than one story in height may be placed on the property. e. No improvements other than those provided for in this attachment may be made to the property. 2. The existing landing area as shown on the sketch attached hereto as Attachment 1 shall not be expanded except as provided in paragraph 2.b , above. 3. The Property shall not be subdivided. Obviously, these restrictions on use substantially limit the development potential of the property. This was done by design. The Client (potential buyer) owns PRL Logistics, Inc. The company intends to provide hybrid aircraft (airship) operations to remote locations throughout the state. Besides being a short distance from PRL's existing Cook Inlet Operations Center, the subject property offers additional benefits for potential airship use, including its generally level topography and a combination of the waterfront and grass/wetland s (no large trees or other impediments to taking off/'landing). The impact that these restrictions on use have on value are addressed in the Land Valuation section. As previously discussed, the subject property contains a substantial amount of wetlands. There are no other known physical or economic characteristics that limit the site's development potential and level of functional utility. The subject is generally physically and economically similar to other sites within the market segment that it competes. Overall, the site is concluded to provide average functional utility. RELIANT -----lie HYtl,i' SHYICES Page -27 - NHN Royal St Property Assessment & Taxes Property Assessment & Taxes Summary of Property Assessment & Taxes Real Property Properties located within the subject's market are assessed by the assessor every year. By statute, each property mu st be assessed at 100 % of market value. The millage rate (on which property taxe s are based) is determined annually based on spending and assessment levels. Millage rates vary constantly and are influenced by state law and services provi ded in each individual di strict. The assessed value of all properties located within a district is divided by a particular year's budget requirements to arrive at a millage rate. Thus, actual spending determines the amount of tax, and assessment allocates the tax among property owners. Therefore, an increase or decrease in total assessment will not, by itself, result in a change in the total property tax collected. While ma ss appraisal is useful for the allocation of the total tax liability among property owners, it is not always a reliable indicato r of the market value of a specific property. As such, market participants do not generall y u se assessed value to determine market value. Market participants do carefully analyze the impact of current and projected real esta te taxes on cash flow and market value. While Alaska is a non-di sclosure state and the assessor does not have access to sale information, they do have confirmation from the recorder's office of a sale occurring. Often times the assessment the year following a sale increases dramatically with the burden of disproving the assessment falling on the property owner. This in turn often requires disclosure of any subject sale. Because of these factors, irrespec ti ve of actual historic assessment, most market participants input real estate taxes on a stabilized basis, where projected as sessment correlates with the estimated market va lue and is reflective of assessment in a post-sa le environment. The KPB Assessing Department's online Public Info Parcel Lookup shows the preliminary 2018 tax assessed value ($207 ,900) for the subject as a City- owned 26.25-acre parce l, not impacted by any deed restrictions. The appraiser contacted the Assessing Department and was able to obtain an estimated property assessment with the deed restrictions in place . Note that the estimate is based on the adjustment that the Assessing Department makes for properties s ubject to agricultural restrictions. Based on current land modeling, at the 2017 Mill Rate for Tax Authority Group 30 (Kenai), the estimated assessed value is as follows: Property Assessment & Tax Summary Exhibit PROPERTY ASSESSMENT & TAXES Assessment -Es ti mated Tax Parcel Number Land lmerovements Total Mill Rate Taxes Year 2018 049-100-52 $41.580 iQ $41,580 $8.86 $368 Total $41 ,580 $0 $41 ,580 $8.86 $368 18-0250 Page -29 -RELIANT -----LLC I 0 Y 11' (' S ! I Y I rE f NHN Royal St Subject Photographs Looking west along Royal Street, with the subject property at right. Note the view of Cook Inlet and the AJeutian Range, beyond. Grass airstrip as seen from neighboring parcel at the south. 18-0250 S u bject Photographs Page -31 -RELIANT ----uc ltll !:I' S!IY l t H NHN Royal St Looking south a long the beach and 50 ' public access easement along the property's west boundary. The grass airstrip is on the other s ide of the dunes at left. Looking north from the same spot. The Old Town area of Kenai is seen (across the Kenai River) in the di stance . 18-0250 RELIANT UC ICY t S I' SliY l [fS Subject Photographs Page -32 - NHN Roya l St Looking eas t ov er the wetlands. Looking south from th e s am e location. The airstrip is seen at ri ght. 18-0250 Subject Photographs Page -33 -RELIANT -----uc I OV I HR' SlH I [( ~ NHN Royal St Clo se up of dunes. Area at south end of airstrip (eas t side) to be d eveloped a s a s taging ar ea . 18 -0250 Subject Photographs Page -34 -RELIANT ----LLC HVIHi' Stiil[f! NHN Royal St Highest & Best Use Highest & Best Use Definition & l\lethodology Scope of Highest & Best Use As-ls -Vacant "Highest & Best Use " is defined as: "The reasonably probable use of property that results in th e highest value. The fo ur criteria that the highest and best use must mee t are legal permissibility, physical possibility, financialfeas ibility, and maximum productivity. "7 A specific determ in ation of highest and best u se would require specific cost estimates, which were not available to the appraiser, and is beyond the scope of thi s assignment. Unless otherwise indicated, the highest and best use as vacant analysis s ho uld not be construed as a feasibility s tudy, which is beyond the scope of the current assignment. Rather, the analysis is meant to provide a general indication of highest and best use based on a qualitati ve review of the available evidence. Furthermore, unless otherwise indicated, the assignment is not a feasibility s tudy of potential conversion or renovation of the property and continue d use "as is" or "as proposed" is implicit in the current value estimate. Legally Permissible Private restrictions, zoning, building codes, historic distri c t controls and environmental regulations determine those uses legally permissible on a site. As discussed , the appraisal is prepared subject to planned restrictions on use. Use will be restricted to aircraft landing, loading and departing (again, see a draft of the Deed Subject to Right of Entry, which incorporates the Covenants and Restri ctions on Use, included in the Addendum for particulars). Physically Possible Size, shape, area, terrain , acce ssibility and availability of utilities affect the uses under which a property can be developed. Financially Feasible Feasibility is indi cated by construction trends in the vicinity an d current market conditions. All uses that are expected to produce a positive return are regarded as financially fea sible. Maximally Productive When development options are available, a detennination must b e made as to which feasible use is the maximally profitable use. Within this market, the presence of developer's margin is highly specific to the individual project. Nonetheless, it is noted that developers' marg in s have b een attained within the subject 's geographic area for a variety of property types . The majority of new construction, however, has been by owner users whose needs were not met by th e exi sting inve ntory and there has been less specula tive development. As mentioned , restrictions on use are being reco rded in conjunction with th e 7 Source: The Dictionary of Real Estate Appraisa l, Sixth Edition . Chi cago: Appraisal Inst itute, 2015 . 18-0250 Page -35 -RELIANT -----LlC ltYIS CI' IHYIUS NHN Royal St 18-0250 Highest & Best Use planned sale. No uses other than those specified are permitted. Residential uses predominate to the south of the subject and this is the market segment that has seen the most demand in the area. A combination of the Heavy Industrial (IH) zoning at the south end of the tract and the planned restrictions on use make development w ith a residential use or uses impe1mi ssible. The area to the north that is zoned Rural Residential (RR) is largely wetlands. Even if development with a residential use or uses was physically possible there, the planned restrictions on use would prohibit it. If the property weren't subject to restrictions on use, highest and best u se (as vacant) might include holding it vacant and available for future sa le or development. By holding the si te vacant, the ownership costs would be reduced to real property taxes during the holding period, with the return based on land value appreciation. If market conditions were to warrant it , subdividing the property and/or developing it a with a combination of commercial (likely marine-or tourist-oriented) and resi dential uses might meet the tests of highest and best use. After encumbrance by the restrictions on use, the owner is left with only one development option. This leaves limited utility to the owner. As a consequence, the va lue of the property is substantiall y diminished . Highest and best use, encumbered by the restriction s on use, then, would be to maintain the largely vacant tract, with the grass airstrip, as-is, as provided for in the Covenants and Restrictions on Use (incorporated into the draft Deed Subject to Right of Entry). RELIANT -----uc ICVl !.I' SEU ll f! Page -36 - NHN Royal St Land Valuation Land Valuation Introduction Methodology Units of Comparison Comparable Data Sources of Data Availability of Data Presentation of Data 18-0250 Land is customarily valued as though unimproved and available for development to the use that would justify the highest price and the greatest net return. Sales of unimproved lan d most similar to the subject are investigated and the most appropriate transactions are analyzed. The land value estimate traditionally reflects the fee simple value of raw land with good soil s, available access, availab le utilities, minimal s ite work completed , generally level and at grade, with no site improvements (paving, landscaping, li ghting, etc.). Units of comparison, components into which properties may be divided for purposes of comparison, are derived from comparable sales data. Brokers, developers and other market participants indicated a common unit of comparison for properties in this market is the price per acre. Note that the property is first valued as if unencumbered by the planned restrictions on use; then adjusted for them. The fo ll owing transactions were obtained from various sources including web sites (e.g. A la ska Multiple Listing Service, Craigs li st, etc.), brokers, assessors , appraisers, other individuals and the Reliant, LLC internal database. The availability of comparable data is a function of the subject's location, property type, property size, market size and market activity. There are an adequate number of properties with similar physical and economic characteristics to the subject, but these are traded infrequently. After going back l 0 -15 years, market research identified six sales involving properties that bracket the subject and provide a good basis for comparison. An acreage tract just east of the subject that is being offered for sale to the C lient is also analyzed. A snapshot of these transactions is presented on the following summary table . A map then highlights the location of the comparables relative to the subject. Descriptions of the comparables follow the map. Page -37 -RELIANT -----LLC HY l !.i ' SU !l lf !