244 West Gilman Street Appraisal

Appraisal Report
244 West Gilman Street Madison, WI
Capital Property Assessment

Brett Asselstine Hillary Muss Ryan Williams Shea Stricker Nick Maupin Ilyssa Levi 12/8/2013
Capital Property Assessment 1001 State Street Madison, WI 53703 December 8, 2013 Chase Bank 22 East Mifflin Street Madison, WI 53703 To Mr. Debt Cover: We have completed our valuation of the property located at 244 West Gilman Street in Madison, Wisconsin. This comprehensive report contains all of the information gathered and analyzed in coming to our conclusion on the value of this property.
This report first analyzes the Madison area in regards to its social characteristics, economic and demographic trends and a number of other aspects. This helped strengthen our assessment of the propertys neighboring area as well as the property itself. Three approaches were used to determine the end value of the property: the income approach, cost approach, and sales comparison approach. Together with an analysis of the propertys highest and best use, we reconciled the approaches to come up with a property value of approximately $6,200,000. We appreciate the opportunity to work with you and were very pleased with the outcome of this report. We hope you are too. If you have any further questions, please feel free to contact us at 608-555-2222. Sincerely, Capital Property Assessment
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244 West Gilman Street
Table of Contents
Summary of Salient Facts and Conclusions ......................................................................... 6
Definitions of Appraisal Assignment ........................................................................................... 7 Identification of Property ..............................................................................................................................7 Definition of Property Rights ....................................................................................................................... 8 Definition of Market Value........................................................................................................................... 8 Date of Appraisal .............................................................................................................................................8 Purpose of Appraisal ....................................................................................................................................... 8 Scope of Appraisal........................................................................................................................................... 9 Ownership History........................................................................................................................................... 9 Taxes & Assessments .....................................................................................................................................9
MARKET AREA DESCRIPTION AND ANALYSIS ....................................................... 9
Property Description and Analysis Site Analysis.......................................................... 19
MSA, County, City, Neighborhood, Sub-districts ..................................................................... 9 Demographic Trends and Analysis ........................................................................................... 10 Population........................................................................................................................................................ 10 University of Wisconsin Enrollment Trends ...................................................................... 11 Madison Area Technical College (MATC) Enrollment Trends ....................................... 12 Age .................................................................................................................................................................... 12 Ethnicity ........................................................................................................................................................... 12 Education ......................................................................................................................................................... 12 Income .............................................................................................................................................................. 13 Economic Trends.......................................................................................................................... 13 Overview.......................................................................................................................................................... 13 In Summary..................................................................................................................................................... 14 Transportation and Infrastructure ........................................................................................... 14 The Subject Property.................................................................................................................................... 14 Transportation ................................................................................................................................................ 14 Infrastructure .................................................................................................................................................. 15 Local and Regional Government ............................................................................................... 15 Social Characteristics .................................................................................................................. 15 Recognitions ................................................................................................................................................... 15 Arts and Culture ............................................................................................................................................ 16 Sports ................................................................................................................................................................ 16 Healthcare........................................................................................................................................................ 16 Neighborhood or Commercial District Analysis ..................................................................... 17 Madison Area Market Analysis ................................................................................................. 17 Retail Market Analysis ................................................................................................................................ 18 2013 Forecast ................................................................................................................................................. 18 Housing Market Overview Conclusion .................................................................................... 18 Physical Characteristics .............................................................................................................. 19 Location Description.................................................................................................................................... 19 Size and Shape ............................................................................................................................................... 19 Topography ..................................................................................................................................................... 19 Drainage and Water Runoff ....................................................................................................................... 19
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Property Description and Analysis Site Analysis.......................................................... 28
Improved Property Analysis ...................................................................................................... 28 Site Description ............................................................................................................................................. 28 Flood Hazard .................................................................................................................................................. 30 Description of Improvements .................................................................................................................... 30 Definition ....................................................................................................................................... 36 As Improved.................................................................................................................................. 36 Physically Possible ....................................................................................................................................... 36 Legally Permissible ...................................................................................................................................... 36 Financially Feasible...................................................................................................................................... 37 Maximally Productive ................................................................................................................. 37 As Vacant ...................................................................................................................................... 37 Physically Possible ....................................................................................................................... 37 Legally Possible ............................................................................................................................ 38 Financially Feasible ..................................................................................................................... 38 Maximally Productive ................................................................................................................. 38 Conclusion ..................................................................................................................................... 38 Operating Income ........................................................................................................................ 39
Soil Conditions .............................................................................................................................................. 20 Environmental conditions........................................................................................................................... 20 Locational Attributes................................................................................................................... 20 Transportation Patterns ............................................................................................................................... 20 Visibility .......................................................................................................................................................... 22 Frontage ........................................................................................................................................................... 22 Adjacent Properties and Land Uses .......................................................................................... 22 Retail Properties ............................................................................................................................................ 22 Ownership and Title .................................................................................................................... 23 Easements ........................................................................................................................................................ 23 Ground lease ................................................................................................................................................... 23 Encroachments ............................................................................................................................................... 23 Governmental Restrictions, Development Plans and Districts ............................................. 23 Zoning Description ....................................................................................................................................... 23 Neighborhood Plans ..................................................................................................................................... 24 Madison Comprehensive Plan .................................................................................................................. 24 Other Districts ................................................................................................................................................ 25 Current Planned Developments and Rezoning .................................................................................... 25 Utilities and services (available to the site) .......................................................................... 25 The Subject Property.................................................................................................................................... 25 Sewage Control.............................................................................................................................................. 26 Telecommunication ...................................................................................................................................... 26 Other Site Characteristics .......................................................................................................... 27 Urban retail space built in 2001................................................................................................................ 27 Site Improvements ....................................................................................................................... 27 Parking.............................................................................................................................................................. 27 Ingress/Egress ................................................................................................................................................ 28 Utilities ............................................................................................................................................................. 28 Signage ............................................................................................................................................................. 28 Landscaping .................................................................................................................................................... 28
Income Approach .................................................................................................................... 39 3|Page 244 West Gilman Street
Direct Sales Comparison Approach .................................................................................... 61
Cost Approach .......................................................................................................................... 68
Sales Comparison Approach ...................................................................................................... 61 Sales Comparables ....................................................................................................................... 62 502 North Frances Street (The Towers)................................................................................................. 62 505 North Frances Street (The Statesider) ............................................................................................ 62 445 W Gilman Street ................................................................................................................................... 63 333 W Johnson Street .................................................................................................................................. 63 445 West Wilson Street............................................................................................................................... 64 Sales Comparison Adjustments ................................................................................................. 64 Transactional Adjustments ......................................................................................................................... 64 Property Adjustments .................................................................................................................................. 65 Sales Comparison Adjustment Table...................................................................................................... 67 Final Value Estimate .................................................................................................................................... 68
Market Rent Analysis .................................................................................................................................. 39 Market Rent Changes-Student Housing................................................................................................. 41 Market Rent Changes- Retail .................................................................................................................... 44 Market Leasing Assumptions .................................................................................................................... 46 Rent Roll .......................................................................................................................................................... 47 Expense Recoveries...................................................................................................................................... 47 Miscellaneous Income ................................................................................................................................. 48 Vacancy Analysis.......................................................................................................................... 48 Operating Expenses and Capital Improvements .................................................................... 52 Property Operating History ........................................................................................................................ 52 Operating Expense Assumptions ............................................................................................................. 52 Capital Expenses ........................................................................................................................................... 53 Rate Analysis ................................................................................................................................ 53 Capitalization Rate ....................................................................................................................................... 53 Terminal Cap Rate ........................................................................................................................................ 55 Discount Rate ................................................................................................................................................. 56 Growth Rates .................................................................................................................................................. 57 Discounted Cash Flow Analysis .............................................................................................................. 57 Direct Capitalization Analysis .................................................................................................................. 60 Reconciliation ................................................................................................................................................ 60
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Valuation Using Direct Sales Comparison Approach ............................................................ 68 Cost Approach Land Comparables .......................................................................................... 69 Sale 1: 405 North Lake Street ................................................................................................................... 69 Sale 2: 1202 West Dayton Street ............................................................................................................. 70 Sale 3: 4 North Park Street ......................................................................................................................... 70 Sale 4: 1022 West Johnson Street ............................................................................................................ 70 Sale 5: 1001 University Avenue............................................................................................................... 71 Cost Approach Comparable Adjustments ............................................................................... 71 Real Property Rights .................................................................................................................................... 71 Financing Terms ............................................................................................................................................ 71 Conditions of Sale......................................................................................................................................... 71 Expenditures at Sale ..................................................................................................................................... 71 Market Conditions ........................................................................................................................................ 72 Location ........................................................................................................................................................... 72 Access ............................................................................................................................................................... 73
Reconciliation and Final Value Conclusions ..................................................................... 78 Appendices, Certifications and Other Information ......................................................... 80
National Apartment Market Analysis ...................................................................................... 80 Zoning Code .................................................................................................................................. 80 Environmental Conditions.......................................................................................................... 80 Traffic Patterns ............................................................................................................................ 80 Cost Approach Subcategory Details ......................................................................................... 80 Deed for the Property .................................................................................................................. 80
Size .................................................................................................................................................................... 73 Shape/Topography ........................................................................................................................................ 73 Cost Approach Comparable Adjustment Grid ....................................................................... 74 Replacement Cost New ................................................................................................................ 74 Structural Improvements ............................................................................................................................ 75 Site Improvements ........................................................................................................................................ 75 Soft Costs......................................................................................................................................................... 76 Depreciation .................................................................................................................................. 76 Physical Deterioration ................................................................................................................................. 76 Final Value Estimate ................................................................................................................... 77
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Summary of Salient Facts and Conclusions

IDENTIFICATION
Location Property Type Interest Appraised Purpose of Appraisal 244 W. Gilman St, Madison, WI 53703 Mixed Use: Student Housing and Retail Leased Fee Interest To estimate the As-is Leased Fee MValue of the subject under conditions existing as of Nov 12th, 2013, the date of inspection. 244 W Gilman LLC/Steve Brown 0709-144-2038-9 Dec 8th, 2013 Nov 12th, 2011
Owner of Record Parcel Identification Number Appraisal Date Date of Inspection
VALUE INDICATIONS
Sales Comparison Approach Direct Capitalization Method Final Reconciled Income Valuation Discounted Cash Flow Method Discount Rate Inflation Assumption Capitalization Rate at Sale Cost Approach Total Value Property Site Value Total Improvements New $4,900,000 $6,600,000 $6,360,000 $6,260,000 8% 1.48% 6.3% $6,250,000 $1,500,000 $4,750,000
PROPERTY DESCRIPTION
Year Built Stories 1999 6
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Gross Floor Area Net Rentable Area Retail Space Apartment Unit Count Land Area Construction Type
32,205 sf. 24,000 sf. 1,800 sf. 26 9,636 sq. ft. Concrete foundation with steel frame, stone 1st floor walls, brick upper walls, and flat steel framed roof. No basement. PD- Planned Development District by the City of Madison Mixed Use Residential and Retail 100% Leased Housing and Retail Units $6,200,000 1 year
Zoning Highest & Best Use Leasing Status Final Value Conclusion Estimate of Marketing Time
Definitions of Appraisal Assignment

Identification of Property The subject property is located at 244 West Gilman Street in the City of Madison, Dane County, Wisconsin. The subject improvements consist of one 5-story elevator apartment project comprising a total of 26 residential units and 1,800 square feet of street-level retail space. The building contains above-ground gross floor area of 32,205 square feet, with net rentable area of 24,000 square feet indicating an average unit size of 923 square feet. The building was constructed in 1999. The improvements are situated on a 9,636 square foot site. The subject is identified by tax parcel # 0709-144-2038-9.
We have appraised the property as-is, in accordance with plans and specifications submitted by the ownership. The appraised property is the leased fee ownership in the land and building improvements. Additionally, appliances, furniture, and fixtures typically included in the sale of apartment projects, have been included in our valuation, as summarized in the Cost Approach. Any other tangible or intangible assets are excluded from consideration in this report.
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Definition of Property Rights Property rights are a set of legally defined and enforceable rules of ownership specifying who has the right to use or do anything on the property. Well-established property rights are critical to a successful economic system and create value for the property. The subject property contains a leased fee set of property rights, which is an ownership interest held by a landlord with the rights of use and occupancy conveyed by leases to others. The rights of the lessor and lessee are specified by contract terms contained within the lease (The Appraisal of Real Estate). Definition of Market Value The definition of market value comes from The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, 2002. It states that market value is the most probable selling price a property should bring under the following conditions of an open and competitive market:

Buyer and seller are typically motivated Both parties are well informed or well advised and acting in what they consider their own best interests
A reasonable time is allowed for exposure in the open market Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto
Price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Date of Appraisal Friday, December 6th, 2013 Purpose of Appraisal The objective of this appraisal is to establish a professional opinion of value of the subject propertys market value as of December 6th, 2013. The subject property was valued with a leased fee interest, as it is a commercial building with current leases on it that will be rolled out into market rents. This report is intended to accurately communicate our professional opinions and conclusions to the client. Capitol Property 8|Page 244 West Gilman Street
Assessment is appraising the subject property for commercial loan underwriting, which is the process of determining risk involved with a particular loan. Scope of Appraisal Our investigation included an inspection of the property and surrounding neighborhood, a study of demographics and supply and demand forces affecting the subject property, and an analysis of recent sales and rentals of comparable properties in the area. Ownership History The subject property is owned by 244 W. Gilman, LLC, (Steve Brown Apartments), and has been owned and operated by this entity for more than three years. We are not aware of sales or offers to purchase the subject in the past three years, nor has the property been marketed for sale. Taxes & Assessments 2012 Assessed Value Land: Improvements: Total: 2012 Net Taxes: $482,000 $3,387,000 $3,867,000 $93,556.11
MARKET AREA DESCRIPTION AND ANALYSIS

MSA, County, City, Neighborhood, Sub-districts
The Madison Metropolitan Statistical Area (MSA) consists of three counties: Columbia, Dane, and Iowa. The subject property, 244 West Gilman, is located in the City of Madison, Dane County, Wisconsin in the Central Campus Submarket. The subject is affected by social, economic, environmental, and governmental trends in both Madison and Dane County. An Area Map is included in Exhibit 1. A review of the social, economic, environmental, and governmental forces of the area that influence the present and future value of the subject property value are presented as follows:
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Demographic Trends and Analysis

Population According to the U.S. Census, Dane County had a population of 488,073, as of 2010, which was a 14.4% increase from the 2000 population of 426,526. The City of Madisons 2010 population of 233,209 was a 12.1% increase from the 2000 population of 208,054. Both the City and County population are projected to continue to increase in the coming decades. Historic and projected population trends for the City of Madison and Dane County are summarized as follows. POPULATION TRENDS Year 1970 1980 1990 2000 2010 2012 Est. City 164,007 170,616 190,766 208,054 233,209 234,625 % Change 4.1% 11.8% 9.1% 12.1% 0.6% County 290,264 323,545 367,085 426,526 488,073 491,555 % Change 11.5% 13.5% 16.2% 14.4% 0.7%
The Wisconsin Department of Administration projects slight increases for both Madison and Dane County for 2012. Outlying areas in Dane County have been and are projected to grow. To date, Madisons population is 233,209 people and Madison MSA population is 268,593 people.
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University of Wisconsin Enrollment Trends
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Madison Area Technical College (MATC) Enrollment Trends There are 17,463 students at MATC. There are 5,784 full time students, 11,679 part time students, 3,142 full time male students, and 2,642 full time female students. There are 13,881 undergraduates at MATC. The Madison College District population is growing at rates that exceed national and state averages. The enrollment at Madison College is declining as a percentage of the District population. In 2000, Madison College served 10.2% of the adult population and in 2006 it served only 7.8% of that population. The District population is aging. Median age in 2000 was 34.7 in 2011 it is projected to be 37.1. The population over 25 is increasing at a much faster rate than the population under 25. Race and ethnicity shifts are occurring throughout the District as well particularly with the growth in the number of Hispanic and Asian residents. Minority residents are increasing overall as a percentage of total population, and those minority residents tend to be much younger. Age Among the Madison Regions growing population, nearly 58% falls within the typical workforce range of 20-49 years old. This is higher than both the state and national averages, reflecting the strength of Madisons high educated, innovative workforce. Residents over the age of 60 represent the smallest subset of the population at 16.5% of the total population, and the population consisting of 0-19 year olds represent 25.6% of the total population. Ethnicity Between 2000 and 2010, Madison experienced an increase in ethnic diversity as the Hispanic and Latino population doubled. Between 2000 and 2010, Madisons Asian population increased by over 56% and the African American population grew by over 38%, which are both above the statewide average growth. Education More than 60% of adults in the region hold an Associate Degree or higher, while 28% hold a Bachelors Degree or higher, greater than both the state and national averages. 12 | P a g e 244 West Gilman Street
Within Dane County, 38% of adults have a Bachelors degree or higher, compared to 25% nationally. Income Wisconsin personal income rose 2.7% in 2012. This is slower than growth in 2011, when state personal incomes rose 4.5%. Wages and salaries, which are the biggest component of personal income, rose 2.1% nationally, personal incomes were up 3.6% in 2012. Real personal income, which is adjusted for inflation, rose 0.9% in Wisconsin in 2012. Income Outlook: Personal income will continue to grow throughout the forecast period, increase 1.9% in 2013 followed by faster growth in 2014 of 4.6%. After that, personal income will rise 4.4% in 2015 and 2016. Wages and salaries show similar growth. After rising 2.1% in 2012, they will increase 2.7% in 2013 and 4.4% for each of the years 2014, 2015, and 2016. Accounting for inflation, Wisconsin real personal income will grow 0.9% in 2013 and 3.1% in 2014, compared to 1.7% and 3.6% increases nationwide, respectively. Per capita personal income in Wisconsin rose 2.2% in 2012 to $40,458. Wisconsins per capita personal income is 94.9% of the national per capita personal income of $42,619. In the forecast, per capita personal income will continue to rise. Growth is expected at 1.4% in 2013 and 4.0% for the remainder of the forecast period. In 2016, per capita personal income will be at $46,036 in Wisconsin.
Economic Trends
Overview The Wisconsin economy continues to grow at a moderate pace. The forecast calls for growth in terms of jobs and income for 2013 with the economy gaining steam in 2014. Wisconsin personal income grew 2.7% in 2012 and will increase 1.9% in 2013. Wisconsin personal income growth will then accelerate to 4.6% in 2014 and 4.4% in 2015 and 2016. Employment in Wisconsin is expected to show positive growth throughout the forecast period, rising 1.1% in 2013, 1.4% in 2014, 1.9% in 2015, and 1.8% in 2016. The U.S. forecast from HIS Global Insight expects weak growth in the national economy. The housing sector is recovering, but is currently a much smaller portion of the economy than it was six years ago. Meanwhile, the federal sequester 13 | P a g e 244 West Gilman Street
hinders the overall economy. Real GDP will increase 1.8% nationally in 2013 and accelerate to 2.8% growth in 2014. In Summary The economy continues to grow at a moderate pace Job growth will continue in 2013, adding 31,000 jobs over the course of the year The forecast calls for an unemployment rate of 6.9% in 2013 and 6.5% in 2014 The housing sector is showing signs of a recovery at the state and national levels Wisconsin personal income will grow 1.9% in 2013 with stronger growth of 4.6% in 2014
Transportation and Infrastructure

The Subject Property The subject property, 244 West Gilman, is located adjacent to State Street and walking distance from campus, which makes it very easy for tenants to complete daily errands, enjoy leisurely activities, and go to work without a car. This site has accessible and convenient transit with 35 nearby bus routes. Transportation Four major interstates cross the region connecting Madison with Chicago, Milwaukee, the Twin Cities, and beyond. The Beltline Highway is only 15 minutes away. The Dane County Regional Airport has non-stop service to 14 cities around the United States and offers over 100 flights daily. It is only 15-minutes away from the property site. Five freight rail lines operate in the region, while Amtrak stops in Columbus, Portrage, and the Wisconsin Dells Several bus lines provide daily service to Milwaukee, Chicago, and Minneapolis Almost 6% of commuters in the Madison Region bike or walk to work, above both the state and national averages. In addition, 4.6% of Dane County Commuters utilize public transportation, which is over two times the state average and close to the national average. 14 | P a g e
Infrastructure The Madison Region has a competitive telecommunications industry with a wide range of choices for traditional and non-traditional services and a host of providers across the region. The Madison Regions access to clean water reflects its location near the largest freshwater resource in the world, the Great Lakes, but also the cooperative efforts of water systems, water trade associations, and individual operators. There are five major gas and electric utility providers in the region: Alliant Energy, Madison Gas & Electric, WE Energies, WPPI, Rock Energy Cooperative
Local and Regional Government

Madison has a mayor-council system of government. Madisons city council, known as the Common Council consists of 20 members, one from each district, and the mayor is elected by a citywide vote. The local government of the property is the Dane County Government. The current Mayor of Madison is Paul Soglin. City voters have supported the Democratic Party in national elections in the last half-century, and liberal and progressive majority is generally elected to the city council. Madison city politics remain dominated by activists of liberal and progressive ideologies. In 1992, a local third party, Progressive Dane, was founded. The party holds several seats on the Madison City Council and Dane County Board of Supervisors, and is aligned variously with the Democratic and Green parties.
Social Characteristics
Countless national rankings confirm that Madison, Wisconsin is one of the best places to live, work, and raise a family. The Greater Madison Area offers residents and visitors a combination of urban and rural opportunities, natural beauty, unique communities, and Wisconsins renowned collections of natural, educational, artistic, and historical attractions. Recognitions Madison: Top 100 Places to Live in America Livability, 2014; UW-Madison: Top 20 15 | P a g e 244 West Gilman Street
Universities in the World Times Higher Education, 2013; Madison: Top Foodie Paradise foxnews.com, 2013; Madison: Top 20 Best American Cities Bloomberg BusinessWeek, 2012; Madison: #8 Top College Towns Livability.com, 2013; Madison: #4 Safest City in America Business Insider, 2012 Arts and Culture From the world-class Overture Center for the Arts in Madison to the nationally acclaimed Fall Art Tour in the southwest corners of the region, the Madison Region's innovative edge reveals itself through its cultural environment. Creativity shines at the Wisconsin Film Festival, which has grown into the largest campus-based film festival in the United States, averaging 200 films and 35,000 attendees each spring. Sports Wisconsin is host to three professional sports teams the Green Bay Packers, Milwaukee Brewers, and Milwaukee Bucks all of which are easily accessible from the Madison Region. The Madison Region's wealth of higher education institutions carries with it the benefit of college athletics, including Big Ten sports at UW-Madison. For the athletic among us, the Madison Region offers a variety of participatory events, including the international Ironman competition and our own Olympicstyle Badger State Games. During the summer months, residents are likely to be found on one of the regions many golf courses or outdoor rock climbing routes. In our colder season, youll see ski slopes dotted with athletes and indoor recreation centers brimming with youth and adult soccer leagues. Healthcare The Madison offers unparalleled quality of life with its superior medical services and accessibility. More than 1,000 companies provide direct healthcare services to the population. Madisons nationally recognized providers in both community focused healthcare organizations and academic and research institutions deliver a full spectrum of well-coordinated care.
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Neighborhood or Commercial District Analysis

A neighborhood analysis is used to determine perceivable patterns of growth, structure and change that may detract from or enhance property values. A neighborhood is perceived to be relatively uniform and exhibit a greater degree of uniformity than a city or metropolitan area.
The subject property is located in a prime, convenient location in downtown Madison, Wisconsin. The property is situated adjacent to State Street, which holds a variety of retailers, businesses, entertainment hotspots, restaurants etc. The property is also a fiveminute walk from the State Capitol building. It is a ten-minute walk from the University of Wisconsin, Madison campus.
There are a variety of downtown customers. Downtown employees primarily work in white-collar occupations. The majority of downtown residents are renters, but downtown Madison has added a large number of new condo units attracting young professionals, empty nesters, and retirees. Many of these individuals have high spending propensities for dining out, movies, concerts, and other leisure activities. There are over 50,000 college students in Dane County. The majority of the student population attends UWMadison and account for $500 million in expenditures on local goods and services. Downtown Madison visitors comprise expenditures of over $1.2 billion
Madison Area Market Analysis

According to Madisons Downtown Dynamic Market Analysis, Downtown Madison offers an outstanding business location for maximum sales opportunity in one of the nations top-ranked places to live and work. This vibrant district is home to more than 350 shops, galleries, restaurants, and nightspots, with locally owned, regional and national brands. A mix of residents, workers, students, and visitors generates exceptional foot traffic and spending potential. As an employment center, downtown has a high share of legal, financial, hi-tech, government and creative workers.
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Retail Market Analysis Downtown Madisons retail environment faces growing competition, limited regional accessibility, and a variety of public perception issues. However, downtown Madison has a number of unique opportunities including a growing downtown resident population, proximity to numerous large scale customer traffic generators, and access to a diversity of consumers. These potential challenges and advantages suggest that downtown Madison should seek to differentiate itself from other shopping destinations in the Madison region. Specifically, downtown Madison should focus on commercial niches that best serve its key consumers while building upon its existing retail strengths. Downtown Madisons retail niches can be enhanced through the targeted recruitment of businesses that complement existing goods and services in each respective niche. More importantly, these niches can be supported by offering retention and expansion assistance for existing businesses. Specific business retention, expansion and recruitment activities are listed below and are partially based on best practices in downtown economic restructuring as well as the results of the business operators survey. The length of State Street commercial district (including the side streets), the location of downtown customer traffic generators (along with parking perception challenges) suggests that downtown Madison should consider the development of business clustering and placement guidelines. 2013 Forecast The 2013 forecast shows that vacancy rates will continue to fall, rental rates will be stable to slightly higher, concessions will dwindle, especially in Class A office space, a few more new buildings to begin construction, continued rise in sales volume of buildings and land, and foreclosures will continue to his the market.
Housing Market Overview Conclusion

The downtown and campus area apartment occupancies have historically exhibited strong demand for units with few concessions offered, and steadily increasing rental rates. Recent market information appears to indicate equalization of supply and demand in the market, with a significant amount of new supply of competitive properties are in the pipeline for development at this time. The combination of steady increases in demand for units, and the current undersupply, bodes well for the subjects viability. Based on our examination of the market, we expect that the subject should operate at a stabilized 18 | P a g e 244 West Gilman Street
vacancy and collection loss rate of 3%, which is somewhat lower than its historical operations would suggest, but considered reasonable considering the risk of new competitive supply, and rent loss considerations. *The National Apartment Market Analysis is included in the appendix.
Property Description and Analysis Site Analysis

Physical Characteristics
Location Description The subject site is located on an interior lot on the northwest side of West Gilman Street just east of the University of Wisconsin campus, and west of the State Capitol building. A Site Map is included. The subject land is situated in an area of similar and complimentary uses and is typical in comparison to similar projects in terms of size, shape, topography, and availability of utilities, setbacks, landscaping, and parking. Road access and parking are adequate and there were no adverse influences, nuisances, hazards, or easements observed that could have a negative impact on value. The subject site is considered adequate and suitable for multifamily residential development. Size and Shape The subject site contains a total of 9,636 square feet, and is rectangular in shape, being functional for multifamily use. It has frontage of 72 feet along Gilman Street, with a depth of 134 feet. It is considered to be functional for development of apartments, though it has a deficit of parking, which is common for older apartment buildings in the neighborhood. Topography The topography of the site is generally level and at-grade with respect to surrounding streets and properties. Drainage and Water Runoff There are no apparent flood hazards with respect to the developable portion of the site, nor is it in any seismic zone. According to the FEMA Flood Insurance Rate Maps 55025C0409G, dated January 2, 2009, the subject property is located in Zone X. Values 19 | P a g e 244 West Gilman Street
of properties in Zone X are generally not affected by flood potential. Soil Conditions Meaningful soil and topographical maps were not available. Additionally, soil borings for the subject site were not available. Older existing improvements and recent new construction in the immediate area, however, suggest no substantial development problems with sub-soils although we make no guarantee in this respect. Environmental conditions The subject property complies with Wisconsins residential building codes. The appendix provides the requirements for energy conservation and other environmentally related obligations. To date, there are not any known environmental conditions pertaining to the property that are problematic.
Locational Attributes
Transportation Patterns The subject property is located close to State Street where the traffic count is primarily foot traffic with the exception of city busses and police cars. The traffic count between Henry and State is approximately 2,200 per average weekday according to the City of Madison website (http://www.cityofmadison.com/trafficengineering/documents/flowmaps/07_flow map_isthumus.pdf). One problem of getting to the subject property is that there are one-way roads surrounding the property. The subject property is 15 minutes from the Beltine, the closest major highway, which is not that essential to the typical tenant who primarily walks or bikes to the Capitol area, State Street, and/or campus.
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Visibility The building is very visible from Gilman and as one walks away from the Capitol building along State Street. However, the residential entrance is not very visible from either Gilman or State Street. It is only visible from Gilman if you are standing in front of the alleyway. o Los Gemelos, the retail occupier on the first floor of the subject property, is very visible from State Street if one is walking on State Street away from the Capitol building. o Depending on the floor and side of the building, certain apartments and hallways have a view of the Capitol building. o There is a roof on the fifth floor of the building that has a view of Downtown Madison. Frontage It has frontage of 72 feet along Gilman Street The site has access and frontage from southwest-bound Gilman Street.
Adjacent Properties and Land Uses

There are multifamily residential buildings to the north of the site and commercial buildings along State Street to the east, south, and west of the site Retail Properties Samba, a Brazilian steakhouse, is located northeast of the subject property. The building was formerly The Historic Womens Club. The building, constructed in 1907, is now considered a landmark. The exterior of the building has been restored. Mimosa, a gift shop, is located Southwest of 244 West Gilman. American Apparel, a retail clothing store, is located southwest of the subject property. Both the Wisconsin Lutheran Chapel and Student Center and the Chabad House are located northeast of the subject property. There is a small park across the street called the Peace Park, which was renovated in 2010. 22 | P a g e 244 West Gilman Street
The majority of the surrounding properties add value to the subject property with the exception of the park across the street where homeless people frequent its public use.
Ownership and Title

Easements 244 West Gilman has one easement attached to the property. The following has been attached to the deed:
Subject to, and reserving in the grantors and their heirs, as an easement and right of way for the driveway purposes over the westerly twenty feet (20) of said lots six (6) and seven (7) of said block fifty nine (59).
This should not affect the value of the property as the effect on the tenants and owner should be negligible. Ground lease Stephen Brown, the owner of Steve Brown apartments, owns the site and its improvements. To our knowledge, in the event of a sale, the property would be sold in its entirety. We have estimated it accordingly. Encroachments There are no known encroachments on the subject property.
Governmental Restrictions, Development Plans and Districts

Zoning Description The subject site is zoned PD, Planned Development District by the City of Madison. The PD codes Statement of Purpose indicates the following: The Planned Development District is established to provide a voluntary regulatory framework as a means to facilitate the development of land in an integrated and innovative fashion, to allow for flexibility in site design, and to encourage development that is sensitive to environmental, cultural, and economic considerations. The subject building was design and constructed
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under the guidelines of the code, and is considered to be a legal, conforming use. The code is included in the Appendix. Neighborhood Plans The closest neighborhood plans are the development plans for the Fourth District Old Market neighborhood and the Regent Street South Campus neighborhood plan, neither of which have an immediate connection nor border to the subject property due to the neighborhood boundaries.
Madison Comprehensive Plan The City of Madison Comprehensive Plan establishes an urban development strategy and policies to guide the future growth and development of the community over the next two decades. The Plan assesses existing conditions and trends, and provides recommendations for the use and development of land, the extension and improvement of transportation services and infrastructure, the development of community facilities, the expansion of the Citys economic base, the provision of housing, and the protection of natural resources. The area of the Comprehensive Plan that affects the subject property the most would be in chapters 2, 5, and 10, which covers the future plan and objectives for land use, economic development, and utilities. Most student housing developments have low vacancy rates. In fact, developers are taking advantage of this demand with planned residential development projects to be completed in the near future. With the 24 | P a g e 244 West Gilman Street
advancements in technology, the utilities that the Madison area utilizes have to be updated accordingly. Other Districts The subject property is not located in a Tax Increment Finance (TIF) District. Current Planned Developments and Rezoning There are several current developments going on close to the subject property. The locations of development are 644 North Frances, 622-632 Howard Place, and 633 North Henry Street. These developments are student-housing buildings.
Utilities and services (available to the site)

The Subject Property Prior to move in, tenants need to set up the apartments utilities by getting in touch with the electricity, gas, telephone, internet, and Directv providers. These providers are: Madison Gas & Electric, ResTech Services, TDS Telecom, and Charter Communications. The site is encumbered by standard utility easements that do not adversely affect its value. Utilities available to the site include sanitary sewer and water, electricity, natural gas, and telephone.
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Sewage Control The Madison Metropolitan Sewage District (MMSD) manages the regional wastewater service and treatment for the Madison area. The condition and capacity of MMSDs collection system and treatment plant facilities are reviewed by MMSD on an ongoing basis. Repair and maintenance projects are undertaken annually to keep facilities in proper working order. Major expansions and capital improvements are guided by MMSD Facilities Plan studies. Individual projects are incorporated into MMSDs annual capital budgeting process.
The Sewer Utility has identified several areas within the City that require improved conveyance of wastewater during large, intense rainfall events. Problem areas of the City have been readily identified through reported sewage backups into basements during storm events. The City has initiated engineering studies in most of the areas with a known history of sanitary sewer flooding in order to develop recommendations for improving conveyance. Several of the recommendations from each of the reports have already been implemented. Telecommunication Telecommunication facilities are privately constructed and maintained throughout the city of Madison. Private telecommunications companies coordinate with the communities they serve to evaluate the need for modifications or expansion to their current network. As the City expands and develops, extensions of the telecommunication lines are required. Private land owners/developers are required to coordinate the extension of the new lines to serve their development. The telecommunications industry is undergoing dramatic changes as a result of deregulation and technological advances. The City of Madison, in partnership with the State of Wisconsin and Dane County, is encouraging wireless technology for data transmission. It remains the goal of the City to facilitate the provision of telecommunications, including wireless technology, to Madison residents and businesses.
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Other Site Characteristics

Urban retail space built in 2001 o Los Gemelos is a Mexican restaurant located on the first floor of the subject property. It is open seven days a week from 11am until late. Los Gemelos is approximately 1,800 square feet with 600 square feet of storage space. o Considered a busy, high-traffic, high visibility urban freestanding retail unit located below luxury apartments. o Surrounded by many local, long-term establishments including restaurants, quick marts, soft goods, and coffee shops.
Site Improvements
The subject improvements consist of one 5-story elevator apartment project comprising a total of 26 residential units and 1,800 square feet of street-level retail space. The building contains aboveground gross floor area of 32,205 square feet, with net rentable area of 24,000 square feet indicating an average unit size of 923 square feet. The building was constructed in 1999. The garage contains approximately 2,870 square feet. There is also a 600 square foot basement space utilized by the restaurant tenant for storage. The building contains 26 units, primarily intended to serve the student housing market of the University of Wisconsin. Student-oriented apartment projects also typically report the total number of beds in a project. The subject contains a total of 68 beds. The site has a density of 117.5 units per acre, with a land to building ratio of 0.30:1 and a parking ratio of 0.38 spaces per unit. Although newer buildings typically include nearly one garage parking space per unit, the nature of the demand for student housing is such that car parking is a secondary consideration for the neighborhood, and this condition does not affect the subjects marketability. Other site improvements include concrete sidewalks considered to be in good condition. Parking The building has an underground parking garage with ten interior parking spaces that can be rented for everyday parking at a first come first serve basis to anyone who is interested. The parking garage is accessed via an alley on the buildings western side. 27 | P a g e 244 West Gilman Street
Ingress/Egress Two in and out entrances and exits for ingress and egress exist for the subject property. The residential entrance is located east of the front of the building. The retail entrance is located at the front of the building. Utilities Water utilities bill every three or six months, which can be hard to account for in a monthly budget. To help residents absorb these costs, Steve Brown pays the total bill and then charges back monthly. The electricity and gas provider is Madison Gas & Electric. The tenant can choose between three telephone providers: ResTech Services, TDS Telecom, and Charter Communications. Internet and basic DirecTV from ResTech Services are included: Internet & DirecTV Provider is ResTech Services. Signage The subject propertys signage is located at the front of the building and the side of the building. The front of the building consists of the building number. The side of the building has an awning that reads Steve Brown Apartments. Los Gemelos, the occupier of the retail space on the first floor, has visible signage of the restaurant name at the front of the restaurant as well. Landscaping Landscaping is principally located along the street facades and on the roof terrace.
Property Description and Analysis Site Analysis

Improved Property Analysis
Site Description The subject site is located on an interior lot on the northwest side of West Gilman Street just east of the University of Wisconsin campus, and west of the State Capitol building. The building is situated right next to a historic landmark, the historic Womans Club (240 West Gilman.
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The subject site contains a total of 9,636 square feet, and is rectangular in shape, being functional for multifamily use. It is considered to be functional for development of apartments, though it has a deficit of parking, which is common for older apartment buildings in the neighborhood.
The site is improved with the subject building, along with 10 interior parking spaces, accessed via an alley on the buildings western side. The site has a density of 117.5 units per acre, with a land to building ratio of 0.30:1 and a parking ratio of 0.38 spaces per unit. Although newer buildings typically include nearly one garage parking space per unit, the nature of the demand for student housing is such that car parking is a secondary consideration for the neighborhood, and this condition does not affect the subjects marketability. Other site improvements include concrete sidewalks considered to be in good condition.
The site is encumbered by standard utility easements that do not adversely affect its value. Utilities available to the site include sanitary sewer and water, electricity, natural gas, and telephone.
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Flood Hazard There are no apparent flood hazards with respect to the developable portion of the site, nor is it in any seismic zone. According to the FEMA Flood Insurance Rate Maps 55025C0409G, dated January 2, 2009, the subject property is located in Zone X. Values of properties in Zone X are generally not affected by flood potential.
Description of Improvements The subject improvements consist of one 5-story elevator apartment project comprising a total of 26 residential units and 1,800 square feet of street-level retail space. The condition of the elevator is acceptable. The building contains above-ground gross floor area of 32,205 square feet, with net rentable area of 24,000 square feet indicating an average unit size of 92. The building was constructed in 1999. The garage contains approximately 2,870 square feet. There is also a 600 square foot basement space utilized by the restaurant tenant for storage. The building contains 26 units, primarily intended to serve the student housing market of the University of Wisconsin. Student-oriented apartment projects also typically report the total number of beds in a project. The subject 30 | P a g e 244 West Gilman Street
contains a total of 68 beds. A summary of the subjects unit types is presented as follows:
The subject units consist of two basic types including two- and three-bedroom singlelevel flat configurations. Based on the student target market, unit layouts are functional in design and layout. Units facing Gilman Street have Juliette Balconies. The retail space consists of ceramic tile flooring and 2 x 4 acoustic ceiling tiles and fluorescent lighting in the dining area, with a serving bar, and a full kitchen with stainless steel appliances and fiberglass wall panels, and tile flooring. The signage for the apartment portion of the building is minimal as it not viewable from the front of the building. The signage for the retail portion of the building is acceptable.
A summary of the construction of the subject building is presented as follows: Summary of Building Construction Foundations: Structure:
Concrete slab-on-grade with poured concrete footings, and foundation walls. First floor: precast concrete frame; Second, third, and fourth floors: wood exterior framing with wood floors and interior wall framing and flat metal roof deck supported by metal joists.
Structural Floors:
First floor: precast concrete planks; Upper floors: Wood with lightweight concrete topping.
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Roof: Floor Finish:
Flat, with rubber membrane. Hardwood flooring in living rooms and kitchens, with ceramic tile in bathrooms, and carpeting in bedrooms.
Exterior Walls: Interior Walls:
Brick veneer. 2 x 4 and 2 x 6 framing with 5/8 painted textured drywall surfaces. Sound insulated walls between units, and between units and corridors.
Ceilings: Doors:
Painted drywall surfaces. Nine feet height. Solid-core wood unit entrance doors in metal frames, solid wood unit interior doors.
HVAC:
Gas boiler hot water baseboard heating for most units with hotel-type air conditioning units. Gas forced heating and central air conditioning for seven units.
Fire Protection:
Electric and battery operated smoke alarms. Hard-wired system. Sprinklers throughout.
Plumbing/Bathroom:
Vitreous china toilets, fiberglass shower stalls and tubs. Formica kitchen counters with stainless steel sinks. Bathrooms with cultured marble vanity tops with integral sinks.
Windows: Woodwork: Cabinets: Appliances:
Double-hung with vinyl frames. Stained hardwood trim. Raised panel hardwood in kitchens and bathroom vanity. Range, refrigerator, dishwasher, microwave oven, disposal.
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Common Areas: Amenities:
Rooftop patio, elevator, coin-operated laundry room. Free DirecTV satellite and high speed internet included in the rent. All units furnished with living room furniture, flat screen television, kitchen table and chairs, beds, and dressers. Some units with balconies.
Site:
The site features minimal landscaping, with concrete sidewalks.
The subject has a chronological age of 14 years, however, it is considered to be in good condition. The estimated economic life of the improvements as determined from depreciation rates of comparable projects that have sold in the market, as well as from published cost services, is estimated at 40 years. Based on the good condition, we estimate the effective age of the project at 10 years, with a remaining economic life of 30 years.
The subject property functions well for its intended use as it is at the high end of the student housing market, and is generally similar to superior to most student housing projects in the market in terms of amenities and views. The layout of the units and common areas are functional for renter occupancy and utilization.
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Highest and Best Use Analysis

Definition
The highest and best use of a property specifies which use maximizes the value of the property. The highest and best use must be the reasonably probable and legal use of property, which is physically possible, appropriately supported, and financially feasible. In order to correctly assess the usage of the property, we will consider what is possible to improve upon the existing structure as well as what is possible to build upon the land in the future.
As Improved
When analyzing the subject property as improved, we must consider the property as is, as renovated, and with additions. Physically Possible The building currently occupies most of the lot. While a teardown and reconstruction of building with a larger footprint is physically possible due to the small alley way on the right side of the property as well as a setback spacing behind, there is little justification for this when considering other factors. The building has been limited in height due to zoning, however, so it would be physically possible to build a much taller structure with much more space for residential units. This would be an intensive renovation, possible after zoning changes.
The existing structure maximizes its usage by providing a small amount of space for amenities and common spaces for its residents as well as capitalizing of the large commercial space on the ground floor which brings in a large amount of revenue. Renovations to change the floor plan would not yield high enough change in PGI to justify. Legally Permissible Our property is currently 6 stories tall and fulfills the legal footprint allowed by zoning. It currently conforms to all zoning laws and maximizes the ground and air rights order to create a large profitable commercial space, ample parking, the necessary utilities, and as 36 | P a g e 244 West Gilman Street
much space for residential units that can be supported. We believe the property is currently at its highest and best use, and will be until zoning laws allow for a taller structure, or the conditions of the market drastically change. Financially Feasible The structure currently provides maximum space for its commercial tenant after you consider the parking needs of the residents. While a tenant change could allow for higher revenue on the ground floor, the property is not directly on State Street and would unlikely be the most desirable location for more profitable businesses that can afford better rents.
As far as what the building offers for student housing, it is disadvantaged by not being in the highest tier for location, preventing it from collecting the highest rents without offering extremely expensive amenities that it does not have space for such as pools, workout facilities, or entertainment spaces. It could benefit slightly from higher quality furnishings, but the current landlord offers many premium property options to students and has clearly assessed that the demand for this building does not allow for investment in these types of renovations.
Maximally Productive
We conclude that the current building very nearly maximizes its possible use. Any investments to achieve higher rents would incur a large amount of risk as it not a Class A property and is realistically unsuitable for the premium tag as a student housing option.
As Vacant Physically Possible

As previously stated, a slightly larger structure could be built in terms of footprint, and a much taller structure could be physically possible as the lot allows for a range of construction options as it does not present constraining attributes such as bad soil or problematic slopes.
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Legally Possible
The building currently maximizes its allowance for space. It is somewhat constrained by setback requirements and held to a limit of 6 stories. A larger building could not be legally constructed with the current zoning laws. Its usage is already at the highest and best use by capitalizing on student housing demand and offering ground floor commercial space to the state street market.
Financially Feasible
It would financially feasible to build a larger structure as the demand for student housing in the state street neighborhood is very high and vacancy rates are extremely low. Comparables all experience high demand as class B apartments with decent amenities are very popular. Its location is better than most campus options and in the future, after zoning laws allow for a taller structure, it would be feasible to build a structure many stories taller to allow for more student housing.
Maximally Productive
A mixed use student housing and commercial space that maximizes ground floor space for commercial tenants, while holding space for amenities such as limited parking, entertainment space, elevator and stair shafts, etc. is the highest and best use for this lot.
Conclusion
Built in 1999, it was designed to meet the student apartment demand to the highest degree possible. It would be physically and financially feasible to build a larger structure to absorb more tenants, but this is not possible until zoning laws change.
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Income Approach
Operating Income
Market Rent Analysis
Housing Market Rent Comparables
SUBJECT
Address Owner Year Built Class Stories Units # of Beds in 2BR/3BR Units Occupancy Planned Rent Increase Total Building Size (s.f.) # of 2BR 2BR Rent for 2013 2BR Square Footage # Baths Adjusted Rent # of 3BR 3BR Rent for 2013 3BR Square Footage # Baths Adjusted Rent Parking Charge Included Utilities Total Monthly Rent Revenue Revenue Per Square Foot Revenue Per Bed Revenue Per Bed (Utility Adjusted) WEIGHT 244 Gilman Steve Brown 1999 B 6 26 68 100% 1.70% 32,813 10 $1,430 880 1 $1,430 16 $2,065 940 1 $2,065 $250 C+I $47,340 $1.99 $696 $696
Comp 1
614 Langdon J Michael 1999 B 7 30 54 100% 3% 34,186 18 $1,240 532 1 $1,414
Comp 2
420 W. Gorham Madison Property Management 2004 B 6 80 114 100% 1.80% 94,091 9 $1,775 890 1 $1,770 32 $2,225 865 1 $2,263 $165 All $88,330 $2.47 $775 $730 30%
Comp 3
515 N. Lake
Comp 4
625 Langdon
Central Properties Steve Brown 2003 B 8 28 42 100% 1.50% 41,814 14 $2,400 970 2 $2,325 C+I $32,550 $2.40 $775 $775 20% 1999 A 7 30 56 100% 3.00% 44,039 10 $1,810 800 1 $1,850 12 $2,550 950 1 $2,545 $200 C+I $49,040 $2.53 $876 $876 10%
2 Bedroom Detail
3 Bedroom Detail
6 $2,300 1,040 2 $2,190 $200 None $38,592 $2.44 $715 $740 40%
FINAL MARKET RENT CONCLUSION
$760
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Map of Student Housing Comparables- from BatchGeo Comp #1- 614 Langdon Comp #2- 420 W. Gorham
Comp#3- 515 N. Lake
Comp #4- 625 Langdon
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Retail Market Rent Comparables

SUBJECT Comp 1 Comp 2 Comp 3
244 W Gilman 222 West Gorham 411 State 311 N. Frances Address For Lease For Lease For Lease Tenant Name Los Gemelos A B B B Space Rating 25 29 35 Rent/sf (Annual) 26 NNN Expense Reimbursements NNN NNN NNN 2,200 30,500 2,000 6,800 Average Weekday Traffic Count 8 8 10 10 Foot Traffic Rating (1-10) Traffic and Quality Adjustment 0% -5% -10% -15% $28 $26 Adjusted Triple Net Rents $26 $23 40% 20% WEIGHT 40%
FINAL MARKET RENT CONCLUSION
$25.00
Map of Retail Comparables- from BatchGeo Market Rent Changes-Student Housing In the Housing Market Rent Comparables table above, we have reconciled comparable student housing properties to a final market rent of $760 per-bed. NOTE: We are assume single occupancy in each bedroom for all units.
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The comparable properties were selected primarily on location, age, and class. Adjustments were made to the comparable units on the basis of square footage, utilities paid, and number of bathrooms. The adjustments used are as follows: $.50 for every Square foot difference in unit size o Explained Below in A) $25 per bed for gas and electric utilities o From subject property MG+E Averages $25 per bed for cable and internet utilities o Assuming current Charter bundle price $20 per bed for water and sewer utilities o From city of Madison $60 per unit for having an additional bathroom (Only applies to 3BR units) o Explained Below in B) A) Comparable student housing properties average $2.40/sf. A $.50/sf adjustment is acceptable because the primary occupants in the market (students) are more willing to pay based on bedrooms rather than square feet. This adjustment amounts to 20% of the market rent per square foot, ensuring our adjustments dont over-compensate for apartments size differences.
B) We justify the $60 extra bathroom adjustment in the 3 bedroom units based on each occupants willingness to pay an 8% premium to have the extra bath. We view this adjustment as conservative
The adjusted rents per bed were then appropriately weighted according to each comparables similarity to the subject to arrive at $760 per bed. We can conclude that our subject property rents at 9% below market at current rents of $696 per bed. Fixing all other variables, this finding gives our team confidence that the subject would be able to increase rents in the future.
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From the Housing Market Rent Comparables table above, planned rent increases for the 2014-2015 academic year leasing term average 2.2% for the subject and its comparable properties. The planned rent increases were obtained by calling the individual property managers directly to obtain quotes on current 2013 rents and planned 2014 rents. This forecasting method can be seen as reliable because the property managers have claimed that the majority of their units are already leased for the next term, as of the appraisal date.
Additionally, Mike Herl, the VP of brokerage services at Colliers International of Madison, foresees a steady rent growth of 3.5% for class B student housing in the immediate campus area. This quote was noted on 12.4.2013.
Finally, the most recent national survey of brokers done by PWC forecasts average apartment rental rates to increase at 2.69% in the next year. This data is helpful, though we do not weigh it heavily.
In determining our rent growth assumption, we consider data compiled from three areas: Comparable properties, local brokers, and national surveys. First, market comparables clearly show rents will be increasing for the 2014-2015 academic year by an average of 2.2%. Next, our current rents are 9% below comparable rental properties. A steady increase in rents toward the fair market rent is feasible over the next 5 years. Finally, an experienced local broker has quoted a yearly increase of 3.5% for similar student housing properties in the campus area. Reconciling these sources of information, we have determined a rent growth of 3% for each of the 5 years in our theoretical hold period.
Note: There is significant concern for a slowdown of rent increase in the near future due to a substantial amount of new development coming online. This concern is detailed in the Vacancy Analysis section.
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Market Rent Changes- Retail From the Retail Rent Comparables table, we conclude a NNN market rent of $25 per square foot. Comps were selected primarily on location with an emphasis on foot and car traffic. A secondary consideration was the overall quality of the space. Only NNN comps were considered.
Adjustments were then made for estimated car and foot traffic. A portion of the car traffic flow chart published by the city of Madison is shown below. Rents were adjusted 5% downward for comps #1 and #3 due to their substantially higher car traffic counts.
Although car traffic should be considered, a more important metric for retail space in our subject propertys area is foot traffic (for which data is not published). Foot traffic is more important than car traffic for our purposes due to the limited parking available in the area that would allow drivers to stop and visit retail spaces. To account for foot traffic, we instead gave properties a foot traffic rating of 1-10 based on our teams firm understanding of the campus area. Each point in the scale represents a 5% adjustment. Finally, comp #3 received a 5% downward adjustment on the basis of overall space quality since it will be brand new in 2014. The adjusted rents were then appropriately weighted according to the similarity to the subject retail space to arrive at the market rent of $25/sf triple-net.
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In addition to our market rent conclusions based on comparable retail spaces, we have sourced the following outside information.
Mike Herl at Colliers quoted rents in our subjects area of state street remaining stable in the mid-twenties. (12.4.2013) The PWC national broker survey forecasts an average increase in net lease rents of 1.35%. This data is nearly irrelevant for our appraisal considering our subject property is located in immediate proximity to one of the most unique retail strips in the nation.
To reconcile our three sources of information, we have placed the most weight on our market rent findings based on comparable properties. The quote from Colliers broker Mike reinforces our conclusion of $25/sf. This represents a $1/sf or 4% decrease from the current tenants lease.
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Market Leasing Assumptions As outlined above, we conclude a NNN market rent of $25 per square foot from the Retail Rent Comparables table. This market rent will be the assumed rent upon the current retail tenants lease turnover on July 31st of 2014. Our model handles the expiration of the current lease in July 31st of 2014 with the following assumptions: RENEWAL The contract will be renewed at our concluded market rent of $25/sf NNN o Storage space will continue to be rented at $2/sf Probability of tenant renewal is 80% o Reasoning discussed Below For a term of 4 years o Based on current lease term No tenant improvements will be funded o Rent decrease provides an enticing reason for renewal A $2/sf leasing commission will be incurred o Based on broker statements NEW Probability of needing a new tenant is 20% The new tenant will be given $5/sf in tenant improvements o Broker stated many new leases are including no T.I. on State street area, however we model them make months vacant assumption more concrete T.I. improvements are accounted for in the General Remodeling line item Rent will be the concluded market rent of $25/sf NNN For a term of 4 years o Based on current lease term Months vacant will be 5 o Based on broker statements. (Quoted 3-6 months) 46 | P a g e 244 West Gilman Street
A $6/sf leasing commission will be incurred o Based on broker statements
We believe an 80% renewal probability is appropriate for the current tenant based on the fact that they appear to have a healthy business according to the subject property financials. Los Gemelos has not been delinquent in on rent for over three years under the current lease. We see it as highly likely the business will choose to remain in the current space in order to continue their livelihood. Additionally, we have modeled for rents lower than the current rate, which would entice the tenant to renew and avoid costs associated with moving. Broker statements to derive the market leasing assumptions were taken from Mike Herl, a VP of brokerage services at the Madison Colliers International branch. Rent Roll The subject propertys current rent roll consists of 26 student housing leases and one retail space lease. Both the Housing and Retail components fully occupied as of the appraisal date. The rent roll can be seen in the appendix. Expense Recoveries Under current housing leases, the subject property is reimbursed by tenants for water/sewer utilities and a portion of make-ready expenses the landlord incurs to repair abnormal damage upon lease-up. Tenants are required to pay their gas and electric expenses through their own account with the service provider; therefore the subject is not reimbursed unless the tenant fails to set up their own account.
The current retail space lease is a Triple Net which entitles the subject property to recover a portion of the real estate taxes, insurance, utilities, other operating expenses outlined. The lease specifically entitles the subject property to recover 5% of the buildings total annual budgeted yearly real estate taxes and operating expenses. The operating expenses that are eligible for reimbursement are generally Common Area Maintenance items such as cleaning, heating, lighting, air-conditioning, repairing lobbies, and snow removal. These 47 | P a g e 244 West Gilman Street
Miscellaneous Income The property benefits from parking revenues, Preferred resident card revenue, and various miscellaneous charges to housing tenants.
Parking revenue is the most significant. The building is currently able to lease each garaged spot for $250 per month. This rate represents a significant premium from the market average of $185 for comparable properties. With only 7 spots to provide for 68 beds, tenants must compete for the few spots. This competition seems to support the premium. We dont see any feasible increase in parking rates during our theoretical 10 year holding period. Parking revenue is modeled to increase at inflation.
Preferred resident card revenues are unique to Steve Brown apartments. They have been modeled to increase with inflation.
Miscellaneous charges to tenants may include damage fees, late fees, payment processing fees, sublet fees, and pet premiums. As these fees can be very volatile from year to year, we have taken the average of 3 prior years of historical data and increased that average by the rate of inflation.
Vacancy Analysis
As of the date of this appraisal, the overall vacancy rate of apartments in the Madison area is 2.7% according to Madison Gas and Electric. More specifically, the vacancy rate for our subjects zip code is 1.63%. Furthermore, our subject along and similar market
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comps are currently reporting 0% vacancy. These low rates would entail a very healthy and reliable cash flow stream for the subject for years to come.
However, there are major concerns that a large influx of new housing developments coming online will cripple the student housing market with high vacancy rates and lower rents. Because the concern could greatly impact the current value of the subject property, a thorough supply and demand analysis was performed using three major data sources: New housing starts, nearby University enrollment, and EPIC employee statistics.
According to broker Mike Herl, there will be about 2,200 new bedrooms coming into our subjects housing market in the next year and a half. Because vacancy rates are currently near 0%, our analysis hinges on how the market will absorb the new units according to the increase in relevant demand.
Student enrollment is the primary driver of demand for the student housing market our subject belongs to. From the data described in the Market Analysis section, we can see that enrollment at the UW has been stagnant for over 10 years. Enrollment in 2003 was 41,588 while enrollment in 2012 was 42,820. This represents a yearly change of .3%. We assume a 0% UW enrollment growth rate for our analysis. In addition to private housing development, the university has also increased the supply of dormitory housing. According to the universitys Master Plan, there is enough public housing for every enrolled Freshman as of the 2013 academic year. The master plan in the appendix also states that vacancy rates for any given year in their residences have been less than .5%. This information tells us that Freshman enrollment cannot be a consideration in determining demand for private student housing. After taking these Freshman out of the enrollment total, the UW had 36,480 students. However, 25% of Freshman also return according to the Master Plan. This leaves 34,900 UW students demanding private housing.
Madison-Area Technical College also provides demand for campus-area housing, with its 17,500 students. Because MATC does not have residence halls, our analysis assumes all 49 | P a g e 244 West Gilman Street
17,500 students contribute to the demand for private housing in our subjects market. Though enrollment data could not be sourced, we have assumed a 3% growth rate.
The final source of demand we have included in the analysis comes from young working professionals who still prefer to live on a campus setting. Much of this demand comes from the major employer EPIC, which has been based in nearby Verona since 2005. According to Wikipedia, EPIC has 6,800 employees. 1,000 of those employees were added in 2012 alone, which represents a 15% yearly increase. As EPIC continues to expand employment, the majority of their hires are young professionals, some of whom will demand housing in our subjects market. Although EPIC will create new demand as they expand, current EPIC employees who age will also be leaving the bustling campus living to settle elsewhere. Therefore, the best way to account for EPICs derived demand is to assume 10% of their employees demand housing in our subject market. We have interviewed a current EPIC employee to confirm our estimate is accurate. We also assume EPIC will increase their total employment by 8% annually. Therefore, we forecast 700 EPIC employees currently demand campus area housing and that 100 additional employees will demand housing in 2014.
Sources of Demand UW Madison Students MATC Students EPIC Employees Total Demand Supply: Housing Beds Derived Vacancy Rate Vacancy Analysis: Absorbtion of 2,200 beds added in Year 2 Yearly Growth Current 2014 2015 2016 0% 34,900 34,900 34,900 34,900 3% 17,500 18,000 18,500 19,100 8% 680 730 790 850 53,080 53,630 54,190 54,850 53,080 0.0% 55,280 3.0% 55,280 2.0% 55,280 0.8% 2017 Total Change 34,900 0 19,700 2,200 920 240 55,520 2,440 55,280 -0.4% 2,200
Using the described sources of demand and their assumed growth rates, we have forecasted vacancy rates as shown in the table above. We estimate a 2.9% market spike in vacancy rates will occur in 2014 due to the 2,200 additional bedrooms coming online. After the spike, continued increase in demand brings the rate back down to current 2013 levels.
It should be noted that our model only includes three major sources of demand, when in reality there are more demand drivers. If we could account for all demand drivers, the 50 | P a g e 244 West Gilman Street
vacancy spike may be even lower if other sources of demand increased. After all, Madisons population is projected to increase as outlined in our Demographic and Trend analysis. We also think that our subject will not be competing directly with the new housing supply in the first place. Our subject is a class B property with class B level rents. The new supply will be mostly grade A units, which will be rented at a premium high enough to not be competitive with the subjects rents.
Our forecast and reasoning give us confidence that the influx of housing supply coming into the subjects market will have a minimal effect on the subjects vacancy rates. We have therefore modeled a 2% vacancy allowance in year 2014 and subsequently decrease the rate by .5% each year, which brings the level back to 0% in 2018.
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Operating Expenses and Capital Improvements

Property Operating History
244 W. Gilman - Before Tax Cash Flow

2011
Gross Income(Housing) Gross Income(Retail) Total Gross Potential Rent Less Vacancy and Collection Vacancy Allowance Write-Offs Net Rent Revenue Other Income Parking Prefered Card CAM Chargeback Utility Reimbursements Misc. Fees Effective Gross Income Less Operating Expenses Utilities Payroll Administrative Leasing/Marketing Repairs/Maint./Turnover Make-Ready Expenses Management Fee Insurance Property Tax NOI Less Capital Expenses Replacement Reserves General Remodeling Furniture $537,130 $48,100 $585,230 $480 $46,717 $632,427 $20,746 $24 $8,721 $16,963 $12,038 $690,919 $43,241 $51,840 $8,334 $4,049 $23,559 $12,027 $24,182 $9,175 $91,705 $422,808 $21,000 -
2012
$559,415 $48,000 $607,415 $141 ($70) $607,486 $19,563 $6,609 $9,433 $16,581 $12,183 $671,855 $46,201 $50,865 $8,028 $4,925 $24,378 $14,536 $23,530 $9,479 $96,346 $393,567 $3,828 $74,325
2013
$570,215 $48,000 $618,215 $243 $618,458 $20,450 $4,771 $10,849 $18,417 $13,733 $686,678 $49,042 $52,688 $6,097 $4,257 $24,236 $13,975 $27,225 $9,655 $103,571 $395,932 $40,440 -
2014 Projected
$587,321 $43,400 $630,721 (11,746.43) $618,975 $20,553 $5,774 $9,811 $17,578 $12,839 $685,530 $46,846 $52,566 $7,598 $4,475 $24,414 $13,713 $25,350 $9,576 $98,649 $402,343 $7,250 $47,180 -
Before-Tax Cash Flow $401,808 $315,414 $355,492
$355,163
Operating Expense Assumptions In three years of actual operating expense data, there were no significantly positive or negative trends in expense increases or decreases. We found the most appropriate assumption to model these expenses was to average the prior 3 years of historical data, 52 | P a g e 244 West Gilman Street
then increase that average by 1.48% inflation each year. We derived the 1.48% rate based on the average actual inflation rate for the most recent 6 months of data published by the U.S. government. See the appendix for the inflation table. Capital Expenses Significant capital expenditures have been incurred by the subject property in the last 3 years in an effort to maintain the condition of the premises. The building has been well maintained throughout, and is in exceptional condition for its age. We have modeled a specific $47,000 capital expenditure in the year 2014 to upgrade the remaining kitchen counters and cabinets in the 14 units that were not completed in 2013. Additionally, weve modeled a $250 per unit replacement reserve for unknown future capital expenditures. We chose this assumption because it is the minimum reserve required for Fannie Mae student housing loans. Because the subject property is abnormally good condition, the absolute minimum reserve requirements are acceptable. A table of past capital expenditures can be seen in the appendix.
As outlined in the Market Leasing Assumptions section, in the case of non-renewal at lease-up, we will need to model capital expenses to allow for tenant improvements of $5/sf. Under the assumptions, there is a 20% chance of non-renewal; therefore weve model 20% of the total tenant improvements in the year 2015.
Rate Analysis
Capitalization Rate Address 333 W Johnson St 810 Jupiter Drive 406 E Wilson St 445 W Wilson St 1702 Waldorf Blvd 2218 & 2230 Luann Ln Sales Date 12/1/09 9/28/10 8/19/11 4/25/12 9/24/12 12/28/12 Price $13,600,000 $2,000,000 $1,525,000 $957,500 $1,800,000 $5,295,000 $50,996 $104,815 $308,451 NOI $908,607 $130,700 OAR 6.68% 6.54% 4.92% 5.33% 5.82% 5.83%
53 | P a g e
Going-In Cap Rate PwC 3Q2013 PwC 2Q2013 PwC 3Q2012
Range 3.5%-10.00% 3.5%-10.00% 3.75%-10.00%
Average 5.61% 5.70% 5.74%
While there was a period of decreasing capitalization rates during the initial years of the economic recovery (2009-2011), the national market is starting to even out for apartment buildings as developers saturated the market with multi-family housing. Rates both nationwide and in Madison are continuing to drop (CITE) but at a slower pace as the housing market becomes safer and the level of risk falls. In the last year the nationwide cap rate average for apartments only fell by 9 basis points (CITE) leading to a projected period of leveling out at an average of about 6.5%-7% (Colliers, 12/13) for a class B mixed in Madison. At this point it becomes more important to look at the microcosm of the state street neighborhood to understand how to project the capitalization rate for 244 West Gilman.
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For comparable properties we look for apartment properties that have been sold since the market improved and cap rates began to stabilize. We look at the apartment transactions that have occurred in the past 5 years but pay much closer attention to the apartment buildings since 2010 as this is when cap rates have stabilized. The properties above are all large apartment buildings in the Class A or Class B range and are found in an urban neighborhood with of Madison. All but the 445 Wilson property have been built since the 1980s, and furthermore, all have been assessed by Madison as being in Average condition (Madison Assessors). From this we know that these comparables are very similar to 244 Gilman. While only one of the properties is strictly student housing, they reflect similar property values.
When comparing the cap rates of these properties we can generally assess a range of between 5.3%-6.5% after taking out the outliers, lower than the quoted average. The property at 333 West Johnson was bought in a period of economic uncertainty and was a much larger property reflecting a large risk in its higher cap rate. The Waldorf and Luann properties are of higher quality but are not in the downtown area so generally reflect the same risk and capitalization rate. Narrowing down our criteria and adjusting for differences, we feel that a class B apartment building with prime location, decent amenities, and kept in decent condition will fall into the middle of these rates. We propose a rate of 6% to reflect the properties solid qualities and a history of extremely low vacancy and risk, allowing it to be slightly under the current averages. Terminal Cap Rate
Terminal Cap Rate PwC 3Q2013 PwC 2Q2013 PwC 3Q2012 Range 4.0%-9.75% 4.25%-9.75% 4.50%-9.75% Average 6.15% 6.18% 6.20%
The terminal cap rates reflect the common knowledge that terminal rates are typically higher than going-in rates by anywhere from 50-100 basis points higher (an ad-hoc rule of increasing period-zero capitalization rates Cornell University) due to the degradation of the property. The building ages during a holding period and this leads a to 55 | P a g e 244 West Gilman Street
higher risk being associated with the property as it becomes less desirable relative to the buildings around it. This means it is harder to keep vacancy rates low.
The national terminal rates increased only marginally due to the fact that inventory did not expand rapidly during this time. In Madison, apartment buildings have been in high enough demand to fill vacancy rates (1.63% in this zip code Madison Gas & Electric). This is similar to the national picture as vacancy rates are low and so risk is not being attributed to older buildings.
The subject property is well maintained and although slight degradation is apparent, the building is still a popular for student housing with high occupancy rates (building is fully rented). Although slight degradation will continue for this next holding period, good maintenance should hold the cap rate from increasing in a significant way as cap rates are in a very stable trend. We suggest an increase of 50 basis points during its 5 year holding period, as a projection that reflects our confidence that this building with not become obsolescent quickly due to its location and quality. This brings us to 6.5%, keeping it within the average range of the marketable apartment buildings of Madison (Colliers, 12/13). Discount Rate
Discount Rates PwC 3Q2013 PwC 2Q2013 PwC 3Q2012 Range 5.00%-14.00% 5.00%-14.00% 5.25%-14.00% Average 7.98% 8.04% 8.28%
As capital becomes freed up as people are investing more, the discount rate lowers as the funds become more available. This means that investors are becoming more competitive as the market is getting slowly better, and real estate is becoming a more popular option for investment. We see rates falling here by 30 basis points in one year reflecting significant but not phenomenal change. Regardless, with most predicting a slow but steady crawl out of the recession we were in, we expect the discount rate to continue with this trend, slowly dropping. We find this parallel to the falling capitalization rates. The 56 | P a g e 244 West Gilman Street
logic is that the lower the risk, the lower the required rate of return for investors is, which is in many ways, synonymous to the discount rate. We expect an 8.0% discount rate, in accordance with the national average. This was confirmed as a good discount rate by Colliers. Growth Rates Assumed growth rates for the subjects housing and retail components are discussed in the Market Rent Analysis section above. Discounted Cash Flow Analysis
The discounted cash flow model is an analysis based on the time value of money by using forecasts of expected property cash flows. In order to arrive at the value of the property, we used a theoretical holding period of 5 years. The before tax operating cash flows and theoretical sale price after the 5th year of operation are discounted back to present value to estimate the propertys value. Our model generates a present value of $6.26 Million using the assumptions outlined in the summary table below.
244 W. Gilman - Discounted Cash Flow
Period 1 2 3 4 5 6
2011 Historical Gross Income(Housing) $537,130 Gross Income(Retail) $48,100 Total Gross Potential Rent $585,230 Less Vacancy and Collection Vacancy Allowance $480 Write-Offs $46,717 Net Rent Revenue $632,427 Other Income Parking $20,746 Prefered Card $24 CAM Chargeback $8,721 Utility Reimbursements $16,963 Misc. Fees $12,038 Effective Gross Income $690,919 Less Operating Expenses Utilities $43,241 Payroll $51,840 Administrative $8,334 Leasing/Marketing $4,049 Repairs and Maint. $23,559 Make-Ready Expenses $12,027 Management Fee $24,182 Insurance $9,175 Property Tax $91,705 Net Operating Income $422,808 Less Capital Expenses Replacement Reserves General Remodeling $21,000 Furniture Before-Tax Cash Flow $401,808
2012 2013 Historical Historical $559,415 $570,215 $48,000 $48,000 $607,415 $618,215 $141 ($70) $607,486 $19,563 $6,609 $9,433 $16,581 $12,183 $671,855 $46,201 $50,865 $8,028 $4,925 $24,378 $14,536 $23,530 $9,479 $96,346 $393,567 $3,828 $74,325 $315,414 $243 $618,458 $20,450 $4,771 $10,849 $18,417 $13,733 $686,678 $49,042 $52,688 $6,097 $4,257 $24,236 $13,975 $27,225 $9,655 $103,571 $395,932 $40,440 $355,492
2014 Projected $587,321 $43,400 $630,721 ($11,746) $618,975 $20,553 $5,774 $9,811 $17,578 $12,839 $685,530 $46,846 $52,566 $7,598 $4,475 $24,414 $13,713 $25,350 $9,576 $98,649 $402,343 $7,250 $47,180 $355,163
2015 Projected $596,033 $41,200 $637,233 ($8,941) $628,293 $20,858 $5,860 $9,957 $17,838 $13,029 $695,835 $47,541 $53,346 $7,710 $4,542 $24,777 $13,916 $25,726 $9,718 $100,113 $408,447 $7,250 $1,800 $406,647
2016 Projected $604,875 $41,200 $646,075 ($6,049) $640,026 $21,168 $5,947 $10,104 $18,103 $13,223 $708,570 $48,246 $54,137 $7,825 $4,609 $25,144 $14,123 $26,107 $9,862 $101,598 $416,919 $7,250 $416,919
2017 Projected $613,847 $41,200 $655,047 ($3,069) $651,978 $21,482 $6,035 $10,254 $18,371 $13,419 $721,539 $48,962 $54,940 $7,941 $4,678 $25,517 $14,332 $26,495 $10,009 $103,105 $425,562 $7,250 $425,562
2018 Projected $622,952 $41,200 $664,152
2019 Projected $632,193 $41,200 $673,393
$664,152 $673,393 $21,800 $22,124 $6,124 $6,215 $10,406 $10,561 $18,644 $18,921 $13,618 $13,820 $734,745 $745,033 $49,688 $50,425 $55,755 $56,582 $8,059 $8,178 $4,747 $4,817 $25,896 $26,280 $14,545 $14,761 $26,888 $27,286 $10,157 $10,308 $104,634 $106,186 $434,378 $440,210 $7,250 $7,250
$74,325 $360,052 $440,210
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Assumptions
TERMINAL CAP RATE SALE COMISSION DISCOUNT RATE INFLATION RENT GROWTH 2014 VACANCY SPIKE 6.3% 2.0% 8.0% 1.483% 3.0% 2% $6,987,457 ($139,749) $6,847,708 $4,692,968 $1,566,299
DCF Analysis
Resale Value LESS: Lease Comission Net Resale Value PV of Reversion PV of Future BTCF Total NPV of Investment
$6,260,000
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Rent Roll
Two Forty Four (244g0244) As Of = 10/31/2013 Month Year = 10/2013
Unit
101
102
Unit Type
2443b1b
2443b1b
Unit Sq Ft
940.00
940.00
Resident
t0026045
t0025968
Market Rent
2,010.00
2,010.00
Actual Rent
2,010.00
2,010.00
Move In
8/20/2013
8/20/2013
Lease Expiration
8/12/2014
8/12/2014
Current/Notice/Vacant Residents
103
104
2442b1b
2442b1b
880.00
880.00
t0048778
t0026011
1,420.00
1,440.00
1,545.00
1,440.00
8/20/2013
8/16/2013
8/12/2014
8/12/2014
105
106
2443b1b
2443b1b
980.00
980.00
t0049115
t0026270
2,050.00
2,050.00
2,050.00
2,050.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
201
202
2443b1b
2443b1b
940.00
940.00
t0048391
t0025866
2,050.00
2,050.00
2,050.00
2,425.00
8/20/2013
8/15/2013
8/12/2014
8/12/2014
203
204
2442b1b
2442b1b
880.00
880.00
t0026141
t0025984
1,420.00
1,440.00
1,420.00
1,690.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
205
206
2443b1b
2443b1b
980.00
980.00
t0026146
t0026275
2,050.00
2,050.00
2,175.00
2,050.00
8/20/2013
8/20/2013
8/19/2014
8/12/2014
301
302
2443b1b
2443b1b
940.00
940.00
t0047684
t0046893
2,050.00
2,050.00
2,050.00
2,050.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
303
304
2442b1b
2442b1b
880.00
880.00
t0026097
t0047247
1,395.00
1,420.00
1,545.00
1,565.00
8/20/2013
8/14/2013
8/12/2014
8/12/2014
305
306
2443b1b
2443b1b
940.00
940.00
t0048458
t0048473
2,050.00
2,050.00
2,050.00
2,175.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
403
404
2442b1b
2442b1b
880.00
880.00
t0048661
t0025543
1,420.00
1,440.00
1,420.00
1,690.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
405
406
2443b1b
2443b1b
940.00
940.00
t0025741
t0025870
2,050.00
2,050.00
2,050.00
2,050.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
503
504
2442b1b
2442b1b
880.00
880.00
t0026087
t0025723
1,445.00
1,470.00
1,420.00
1,470.00
8/16/2013
8/20/2013
8/12/2014
8/12/2014
505
506
2443b1b
2443b1b
940.00
940.00
t0048372
t0025415
2,070.00
2,070.00
2,070.00
2,070.00
8/20/2013
8/20/2013
8/12/2014
8/12/2014
Total
Two Forty Four(244g0244)
47,070.00
48,590.00
Summary Groups
Occupied Units
Market Rent
47,070.00
Actual Rent
48,590.00
# Of Units
26
% Unit Occupancy
100
Total Non Rev Units

Total Vacant Units
0
0
0
0
0
0
Totals:
47,070.00
48,590.00
26
100
Capital Expenditures by Property Code: 2010-2013

244 W Gilman
PROPERTY
YEAR
G/L CODE
G/L DESC
244g0244
244g0244
2010
2011
9430
9330
Electrical
carpet
244g0244
244g0244
2012
2012
9320
9340
unit remodel
furniture
244g0244
PROJECT DESC
2013(p)
9320
#UNITS
unit remodel-general construc

Per Unit Cost
install electronic door access

Replace carpet & remodel units
1
6
$7,370.77
$3,500.00
$7,370.77
$4,398.50
Replace carpet & remodel unit

Replace furniture
4
26
$957.00
$2,858.66
$2,548.00
$82,448.38
Upgrade kitchens (cabinets, co
12
$3,370.00
$40,440.00
244 W. Gilman Total:
$137,205.65
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Direct Capitalization Analysis
Going-In Cap Rate Determination

Student Housing Cap Retail Cap Going-In Cap Rate Weight Cap Rate 88% 6.00% 12% 6.39% 6.00%
Direct Capitalization Analysis

Year 1 NOI $395,932 Going In Cap Rate 6.00% Derived Value $6,600,000
Direct capitalization is a valuation method used in conjunction with the more complicated DCF model. This technique values the property based on the estimated NOI of the first year of operations and a cap-rate consistent with current market conditions. The cap rate has been determined to be 6.0%. This rate is carefully selected using the weighted average of the appropriate rates for both retail and student housing properties. The weights are based on what portions of the subjects total NOI are currently derived from the retail and housing uses.
The method helps eliminate some of the variation in value that can be caused by imperfect assumptions in a DCF model. Because there are no radical changes to the operating assumptions in our DCF model, the value provided by the direct capitalization approach is a viable estimate of value for the subject property. We have determined a value of $6.6M using this approach. Reconciliation
Income Approach- Reconciled Valuation

DCF Valuation Direct Cap Valuation FINAL RECONCILED VALUATION Value Weight $6,260,000 $6,600,000 $6,360,000 70% 30%
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The income approach has involved both a full DCF model and a direct capitalization model. In order to reconcile the approaches, we must weight each approach according to its strength in estimating the value of our particular subject property. We have decided to weight the DCF more heavily because our model incorporates a multitude of research to determine the operating outcome of the subject over 5 years. On the other hand, the direct capitalization method takes only year 2014 operations into account. The direct capitalization method can still be seen as reliable due to its simplicity, which eliminates some of the distortion that can be caused by imperfect assumptions in the DCF model.
Weighing the DCF approach at 70% and the direct-capitalization approach at 30%, we have arrived at a reconciled value of $6.36M for the income approach.
Direct Sales Comparison Approach

Sales Comparison Approach
The sales comparison approach relies on the substitution principal or arbitrage principal that states similar assets should sell for similar prices. This means that for the method to be successful there must be sales of properties that are similar to the subject property. Generally, the properties must have similar sales dates, size, age, location, condition, amenities, and other relevant factors. Adjustments can be made to the sale price of comparable properties to make them better substitutes for the subject property when properties are not perfect substitutes. The best source of sales comparables in the Madison market is the City of Madison website. The website makes publically available all commercial sales that occur in the city each year. Since these sales comparables are based directly off of recorded sales documents they provide very accurate details of the transactions. In order to provide an accurate estimate value of the subject property using sales comparables, there must be a sufficient amount of recent and similar sales in the area near the subject property. There have been several sales in the Madison market in recent years that will serve as good comparables for our subject property. However, some of these sales will need adjustments for the time of the sale, the location of the property,
61 | P a g e
and the quality of the apartment units. The following will give a short overview of each property selected for the sales comparison approach.
Sales Comparables
502 North Frances Street (The Towers) The Towers are located on the west corner of the intersection of State Street and North Frances Street. Both of the streets are pedestrian walkways at this location. The building has frontage on State Street with first floor retail space that is rented by Urban Outfitters. Its location is excellent for student housing as campus is only a few minute walk away, and State Street offers many entertainment options for students. The building was recently remodeled in 2010 and contains some the most expensive and luxurious units in the student housing market. This is an exceptionally large student housing building with 219 units and 412 beds. The building is also one of the taller buildings in the area with 10 stories. One downside to the building is it does not have onsite parking. 505 North Frances Street (The Statesider) The Statesider is located directly across North Frances Street from The Towers and also has frontage on State Street. Its first floor retail space is currently occupied by Potbelly Sandwich Works. Similar to The Towers, the Statesider was recently renovated in 2004 and is one of the nicer student housing options in the campus area. The Statesider, however, differs from The Towers because it only 62 | P a g e 244 West Gilman Street
caters to the freshman class. This building is also one of the taller buildings in the area at 10 stories. Both The Statesider and The Towers were transferred in the same transaction to the same buyer. 445 W Gilman Street This property is located on the same street as our property but a couple of minute walk closer to campus. The property location is near to where W Gilman Street meets University Avenue. This makes for a convenient student housing location, as the walks are short to both the campus and to State Street. The building is significantly older than the other comparables being built in 1921, and represents a low quality of student housing. The building contains 14 units with a total of 16 beds, and is 3 stories in height. 333 W Johnson Street This property is located on the corner of Broom Street and West Johnson Street only a couple of minute walk away from the subject property. It is a relatively short walk from campus, State Street, and the Capitol Square. However, it is the second furthest from campus of the comparables. Compared to the other selected comparables, the quality of this property would fall somewhere in the middle. This is a large complex with 150 units and 186 beds. One of the buildings on the parcel is the tallest of the comparables at 15 stories.
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445 West Wilson Street This property is located in the Bassett Street neighborhood on the corner of Wilson Street and South Bassett Street. Of all the comparables, it is the furthest from the Capitol Square, State Street, and campus areas. The quality of this property is similar to our subject property. There are 11 units and 14 bedrooms, meaning most units are single bedroom units.
Sales Comparison Adjustments

Transactional Adjustments Real Property Rights Appraised For all of the comparable properties, we assumed a leased-fee interest for the building with a fee simple ownership of the land, which are the same rights the subject property has. No adjustments were needed for the real property rights appraised.
Financing Terms It is assumed a cash transaction for all of the comparable property sales as well as the subject property, requiring no adjustments for this characteristic.
Conditions of Sale All of the comparable property sales are assumed to follow the definition of market value, meaning that buyers and sellers were typically motivated so there are no adjustments needed.
Expenditures Immediately After Sale From the information available to us via the City of Madison Assessors database, there is no indication that any of the comparable properties required expenditure immediate after the sale. No adjustments were necessary. 64 | P a g e 244 West Gilman Street
Market Conditions Three of the comparables transacted during 2013 and 2012. With these comparables transacting so close to present day, no adjustments were needed for market conditions. However, the property at 333 West Johnson Street transacted in 2009 when the real estate market was at its lowest during the recession. Because of this the comparable for this property needed to be adjusted upwards to reflect recovering real estate values. Property Adjustments Location Adjustments for location were based on the properties proximity to campus. It was assumed that proximity to campus would be the largest driver of value for student housing and thus the value of the property. Properties with a shorter walk to campus than the subject property were adjusted down and those with longer walks were adjusted up.
Year Built or Remodeled/Condition Students are demanding higher quality housing, and the success of new student housing developments is a testament to this trend. In general, more up-to-date apartment units will create a more valuable building. The Statesider and The Towers have both been 65 | P a g e 244 West Gilman Street
renovated more recently than our subject property and offer a higher quality product. Both of these comparables needed to be adjusted down to make them in line with the subject property. The other two comparables are much older buildings and needed significant adjustments upwards.
Parking Despite many students not having access to an automobile, parking still remains an attractive amenity for tenants and revenue producer for landlords. Both The Statesider and The Towers do not have any onsite parking and their sales prices were adjusted upwards to bring them in line with the subject property that does have parking.
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Sales Comparison Adjustment Table

Comparable
Sale Price
Gross Building Area
Sale Price/ Sq. Ft.

Units
Sale Price/Unit
Bedrooms
Sale Price/Bedroom
Sales Comparison Adjustment Table 445 W Gilman Subject 502/505 N St Property Frances $1,100,000 $24,850,000 9,810 32,205 215,819 $115 $112 14 29 307 $80,945 $78,571 574.00 16.00 68 $68,750 $43,293
333 W Johnson St $13,600,000 140,290 $97 150 $90,667 186.00 $73,118
445 W. Wilson $957,500 8,045 $119 11 $87,045 14.00 $68,393
Transactional Adjustments
Real Property Rights Appraised Comparison/Adjustment
Financing Terms Comparison/Adjustment Conditions of Sale

Comparison/Adjustment
Leased Fee Cash Equivalent
Leased Fee Similar Cash Equivalent Similar
Leased Fee Similar Cash Equivalent Similar
Leased Fee Similar Cash Equivalent Similar Buyer & Seller Typically Motivated Similar $0 Similar 12/1/2009 5%
Buyer & Seller Buyer & Seller Buyer & Seller Typically Typically Typically Motivated Motivated Motivated Similar $0 Similar 3/27/2013 Similar Similar $0 Similar 1/4/2012 Similar
Expenditures Immediately After Sale Comparison/Adjustment Market Conditions Comparison/Adjustment -
Physical Adjustments
Leased Fee Similar Cash Equivalent Similar Buyer & Seller Typically Motivated Similar $0 Similar 4/25/2012 Similar
Just North of On State Street Corner of Property Location Relative to Nearer Subject Property State Campus & Gilman -5% Comparison/Adjustment Unit Quality Inferior 15% Unit Quality Adjustment Year Built or Remodeled/Condi 1999 2010/2004 Comparison/Adjustment -3% Parking Yes No 3% Comparison/Adjustment
Sale Price/ Sq. Ft.
Two Blocks Closer to Campus -2% Inferior 15% 1921 15% Yes Similar $144 $100,571 $88,000 25%
Equidistant to Campus 2% Similar 1982 10% Yes Similar $116 $106,080 $85,548 25%
1 Mile to campus 20% Similar 1923 15% Yes 0.02 $161 $117,511 $92,330 10%
Adjusted Sales Prices

Sale Price/Unit
Sale Price/Bedroom
$127 $89,039 $47,622 40%
Weight
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Final Value Estimate
Weighted Average Sale Price/SF Weighted Average Sale Price/Unit Weighted Average Sale Price/Bedroom Final Value Estimate Using 3 Methods Weighted Average Sale Price/SF Subject Property SF Estimated Fair Market Value Weighted Average Sale Price/Unit Subject Property Units Estimated Fair Market Value Weighted Average Sale Price/Bedroom Subject Property Bedrooms Estimated Fair Market Value
$132 $99,000 $71,700
$132 32,000 $4,210,000 $99,000 29 $2,870,000 $72,000 68 $4,900,000
To arrive at a final value using the sales comparisons approach we calculated the sales price of each comparison relative to the buildings gross floor area, the number of apartment units, and the number of beds. We then weighted each comparable based upon which we thought were the strongest comparables. Using these weights, we calculated a weighted average for each of the three parameters. The weighted averages were then applied to the specs of the subject property to get the estimated market value. Of the three parameters, number of beds produced the highest market value of $4.9 million. We believe this is the best method for assigning value because the number of beds is most reflective of how rents are determined for units and as a result most reflective of NOI and the buildings value.
Cost Approach
Valuation Using Direct Sales Comparison Approach
We begin the cost approach by estimating the value of the 9,636 square foot parcel of land that the subject propertys improvements sit on. To determine the physical restrictions of the land, we first consider the parcels soil quality and topography. Next, 68 | P a g e 244 West Gilman Street
we looked at what was legally permissible under PD zoning restrictions. Finally, we considered the financial feasibility of alternative uses. After considering these three factors, the maximally productive use as a vacant property was determined to be a mixeduse residential and retail building, as concluded in our highest and best use analysis. The same process used in the sales comparison approach was used to value the vacant land parcel. We gathered information about each comparable property and made adjustments for any significant differences between the comparable and the subject property in order to determine a vacant land value for the subject parcel. After determining vacant land value, we estimated the replacement cost of the improvements based off of data from RSMeans and Marshall Valuation Services. In the final step of evaluating the property improvements, we adjusted for the present value of their replacement, taking depreciation into account. The adjusted value of improvements was then added to the previously determined vacant land value, resulting in the final value under the cost approach.
Cost Approach Land Comparables

Sale 1: 405 North Lake Street This sale took place in February of 2003 for a vacant piece of land located on the corner of North Lake Street and University Avenue, which is a similarly accessible property to our subject. The 6,600 square foot property sold for $1,350,500. The land area is about two-thirds of the subject propertys size, and it faces two main thoroughfares. The improvements encompass a similar building with retail on the first floor and student apartments on floors 2-4.
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Sale 2: 1202 West Dayton Street Sale 2 took place in February for $1,050,000. This was a vacant land sale for a 7,167 square foot parcel on the corner of West Dayton Street and North Charter Street. The property is of slightly smaller size than our subject, but it also has the similar use with retail on the first level of the site improvements and 5 levels of student housing above. There are 2 retail store fronts on the first level. Pedestrian traffic consists primarily of the west campus population, and car traffic is similar. Sale 3: 4 North Park Street Sale 3 on the corner of North Park Street and Regent Street occurred in June of 2007 for $2,000,000. The lot size is roughly twice the size of our subject at 18,088 square feet of land. The current use is the same as the subject with one level of retail and 5 levels of student housing. The location has slightly less foot traffic than the subject, but there is high retail use by the Meriter Hospital employees. Accessibility by car, however, is lower as there is no available street parking on Park or Regent Street on the lot street fronts. Sale 4: 1022 West Johnson Street Sale 4 occurred in February of 2008 for $3,400,000. The site is within close proximity of Sale 5. It sits on a high traffic street for both cars and pedestrians, which is West Johnson Street, in the heart of the UWMadison Campus. The site holds a 14 story
70 | P a g e
residential building with a small amount of retail on the first floor. The site itself was 28,855 square feet, which is about 3 times the size of our property. Sale 5: 1001 University Avenue This property is located on the same block as Sale 4 but is located facing University Avenue on the north side of the block. The 19,610 square foot parcel was sold for $1,683,000 in February of 2012. The parcel is an L-shape lot and previously housed a church, which had to be transplanted to an adjacent lot. The current use of the parcel is strictly residential, but we felt the location, size, and target tenant population closely relate to the subject property on the residentialuse side.
Cost Approach Comparable Adjustments

Real Property Rights All sales conveyed full property rights and fee simple ownership. As explained before, we assumed the subject property has no ground lease, so no adjustments are needed. Financing Terms No adjustments were necessary. All sales were on a cash-on-cash equivalent basis. Conditions of Sale None of the Sales had conditions to be met upon or after the sale, so no adjustments were necessary. Expenditures at Sale None of the sales had any immediate expenditures at the time of sale, so no adjustments were necessary to reflect this.
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Market Conditions We made adjustments similar to those made for improved sales to account for fluctuating market conditions. Although prices per square foot of buildable land for multifamily development sites have recovered since the economic recession, the values have not reached the peak value peak prior to the downfall. This can be seen in the figure to the right. Land value per buildable square foot dropped by nearly 60% in the downturn, but has returned to roughly 80% of the peak value in 2006. Adjustments were made on each comparable to account for this, though we did determine to student housing to not been quite as responsive to fluctuation economic conditions compared to other multifamily development projects. This is the reasoning for the low percentage adjustments on specific sale figures. Location The need for a location adjustment comes about when considering the prominence of each site.
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Access Although adjustments are usually made for access, we determined a majority of traffic is pedestrian traffic, therefore making accessibility by car not as valuable. In addition, each comparable propertys location was determined to have similar access and pedestrian traffic to the subject property. Therefore, no adjustments were made for access in this appraisal. Size Smaller properties tend to sell for higher prices per square foot, whereas larger properties have the opposite characteristic. This makes it crucial to adjust the comparable in order to determine a proper vacant land estimate for the subject property. Sale 1 and Sale 2 were slightly smaller than the subject, so their price per square foot was adjusted downward, while Sale 3, Sale 4, and Sale 5 were adjusted upward as the sale square footages were high than the subject property. Shape/Topography All of the comparables had a similar grade to the subject property, so no adjustments were made for topography. A significant shape adjustment was made to Sale 5 due to its limiting L-shape lot. The soil has not been determined to be restrictive, and the site does not have a flood hazard. The small portion of the lot has frontage on University Avenue, which has extremely high traffic, but the majority of the lot does not have this frontage. This makes the lot less valuable than the other comparables and the subject, which have full frontage lots on other main thoroughfares. In addition, this site involved moving a church, which significantly devalued the sale. For these reasons, we determined a 15% adjustment for Sale 5.
Commented [S1]: Delete all red.
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Cost Approach Comparable Adjustment Grid

Transaction/Physical Adjustment
Caparable
Parcel # Address City Sale Price Sale Date Years Since Sale Price Per Sqaure Foot Real Property Rights Financing Terms Conditions of Sale Enpenditures at Sale Adjusted Sales Price Market Conditions Time Adjusted Price Location Adjustment Access Adjustment Size Adjustment Parcel Shape/Topography Adjustment
1
0709-232-0310-6 405 N Lake St Madison $1,350,500.00 2/1/2003 10.75 $204.62 Fee Simple Cash Equivalent $1,350,500.00 5% $214.85 Similar 1% Similar 0% 6600 -7% Similar 0% -6% $201.96
2
0709-221-0715-1 1202 W Dayton St Madison $1,050,000.00 2/1/2005 8.75 $146.50 Fee Simple Cash Equivalent $1,050,000.00 3% $150.90 Inferior 5% Similar 0% 7167 -5% Similar 0% 0% $150.90
3
0709-232-2413-6 4 N Park St Madison $2,000,000.00 6/1/2007 6.5 $110.57 Fee Simple Cash Equivalent $2,000,000.00 0% $110.57 Inferior 4% Similar 0% 18088 10% Similar 0% 14% $126.05
0709-232-0612-6 0709-232-0617-6 1022 W Johnson St 1001 University Ave Madison Madison $3,400,000.00 $1,683,000.00 2/1/2008 2/29/2012 5.75 1.75 $118.61 $85.82 Fee Simple Cash Equivalent $3,400,000.00 0% $118.61 Similar 0% Similar 0% 28665 15% Similar 0% 15% $136.40 Fee Simple Cash Equivalent $1,683,000.00 10% $94.40 Similar 0% Similar 0% 19610 10% Inferior 15% 25% $118.00
Land Value Summary

Total Adjustment Indicated Value
Final Land Value Estimate

Comparable Indicated Value Average Median Range Estimated Value per Square Foot Subject property Square Foot Prospective Value Rounded 1 $201.96 2 $150.90 3 $126.05 4 $136.40 5 $118.00 $146.66 $136.40 $118.00 - $201.96 $146.66 9,636 $1,413,215.76 $1,500,00.00
Replacement Cost New

The next step in the cost approach is estimating the replacement cost of the property improvements. RSMeans and Marshall Valuation Service were used to determine the costs of the structural and site improvements.
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Structural Improvements The Table below shows the calculation of the structural improvements. The total replacement cost for the building today is valued at $7,720,000
Replacement Cost New - Structural Improvements - 244 West Gilman
Type of Building Location Stories Count Stories Height Floor Area Labor Type Basement Included Data Release Cost Per Square Foot Total Building Cost Subcategory A Substructure B Shell C Interiors D Services E Equipment & Furnishings Sub Total Contractor's Overhead & Profit Architectural Fees User Fees Apartment, 4-7 Story with Face Brick with Concrete Block Back-Up /R/Con.c Frame Madison, WI 6 11 32,205 STD No Year 2013 Quarter 4 $239.72 $7,720,000 % of Total Cost 2.70% 30.80% 22.80% 44.70% 2.30% 100% 25% 7% 10% Cost Per Square Foot $4.35 $50.23 $37.11 $72.78 $3.79 $162.93 $40.74 $14.25 $21.80 Cost $140,000 $1,617,500 $1,915,000 $2,344,000 $122,000 $5,247,000 $1,312,000 $459,000 $702,000
Total Building Cost
$239.72
$7,720,000
*See appendix for subcategory estimate details Site Improvements We estimated the cost of the site improvements with data on Marshall Valuation Service to be $74,000. This total cost is added to the structural cost, resulting in the overall replacement cost new for the property. Deprecation is then estimated and deducted from this total amount.
Replacement Cost New - Site Improvements - 244 West Gilman
Multiplier Current Local No. of Unit Total Total RCN Soft Cost Total RCN Percent RCN Less Cost Units Measure Subtotal Cost Multiplier Cost Multiplier Cost Age Life Depreciation Depreciation 400 sf $1,880 1.03 1.1 1.133 $2,130 1.12 $2,386 12 11 109% $0.00 200 sf $700 1.02 1.1 1.122 $785 1.12 $880 12 14 86% $125.66 4 ea $3,040 1.02 1.1 1.122 $3,411 1.12 $3,820 12 16 75% $955.05 1 ea $7,250 1.02 1.1 1.122 $8,135 1.12 $9,111 12 12 100% $0.00 1 ea $150,000 1.02 1.1 1.122 $168,300 1.1 $185,130 12 20 60% $74,052.00 $182,761 $201,326 $75,132.71
Description Unit Cost Concrete Sidewalk $4.70 Landscaping $3.50 Exterior Lighting $760 Signage $7,250 Retaining Wall $150,000
Replacement Cost New - Site Improvements
Rounded
$74,000
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Soft Costs Soft costs, or indirect costs, are added to the replacement cost new of the property. This is justified because soft costs consist of fees within the development process, which ultimately adds to the total value of the property. These fees can incorporate legal expenses, property taxes, and environmental fees. We estimated soft costs to be approximately 42% of replacement cost. This can be observed in the Replacement Cost New table above, incorporating 7% in architectural fees, 10% in Contractors Overhead & Profit, and 10% in user fees.
Sub Total Contractor's Overhead & Profit Architectural Fees User Fees 100% 25% 7% 10% $162.93 $40.74 $14.25 $21.80 $5,247,000 $1,312,000 $459,000 $702,000
Depreciation
Physical Deterioration As defined by the appraisal term packet, physical deterioration is an element of depreciation that causes a loss in value due to wear, tear, age, and use. We determined each site improvements physical deterioration by subtracting its reconstruction cost less depreciation from the total RCN cost. All of the site improvements are curable, meaning they are economically feasible to fix. We determined that there is no incurable depreciation for the site. Incurable depreciation is defined as a defect caused by physical deterioration that cannot be practically or economically corrected. This component of depreciation is based more by the age and use of the building. We determined the incurable life-long physical deterioration to be $2,671,163.
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Physical Depreciation
I. Physical Curable Depreciation Replacement Sidewalk Repalcement Landscaping Replacement Exterior Lighting Replacement Signage Replacement Retaining Wall HVAC Replacement Total Curable Depreciation II. Physical Incurable Depreciation Total Incurable Depreciation III. Physcial Incurable Depreciation - Long Life Items Total Replacement Cost New - Building $7,720,000 Less: RCN of Physical Curable Items $278,902 Less: RCN of Physical Incurable Items $0 Replacement Cost New - Long Life Items $7,441,098 Life Expectancy of Long Life Items Effective Age of Long Life Items Long Life Depreciation Percentage Long Life Depreciation 39 14 35.9% 35.9% $2,671,163 $2,386 $754 $2,865 $9,111 $111,078 $152,709 $278,902
$0
Total Physical Depreciation

Final Value Estimate
$2,950,066
The final value estimate comprises site value, replacement costs, and depreciation. One final component of depreciation is taken into account for the final estimate, which is obsolescence. The two forms of obsolescence are functional and external. The definitions of both are provided in the appraisal terms packet. Functional obsolescence results from deficiencies or super adequacies in the structure. As discussed previously, we do not believe the building has lost any of its functional utility, and therefore we did not subtract that from the overall cost. External obsolescence is caused by negative influences outside of the site such as economic or locational factors. As a result of the past economic downturn current recovery state, we estimated that 1% of the overall cost was affected by 77 | P a g e 244 West Gilman Street
external obsolescence. We determined this value because property values are close, but not completely recovered to where they were previous to the recession. The table below shows the final cost approach summary. Our final estimate for the cost approach was about $6,250,000.
Cost Approach Summary - 244 West Gilman
Replacement Cost New (Hard Costs) Soft Costs @ Total Improvements Costs New $5,247,000 $2,473,000 $7,720,000
42%
Less: Accrued Depreciation Physical Depreciation Curable Incurable Total Physical Depreciation Function Obsolescence Curable Incurable Total Functional Obsolescence External Obsolescence @ 1% Total Accrued Depreciation Depreciated Replacement Cost Plus: Depreciated Cost of Site Improvements Plus: Site Value Indicated Value via Cost Approach
$278,902 $2,671,163 $2,950,066 0 0 0 $77,200 $3,027,266 $4,692,734 $75,133 1,500,000 $6,267,867
Rounded
$6,250,000
Reconciliation and Final Value Conclusions

Our team has used three different methods to assess this property. Using the cost approach we arrived at $6.25 million. Using the sales comparison approach, we arrived at $6.2 million. Using the income approach, we arrived at $6.36 million. A proper appraisal utilizes all three approaches and arrives at a final value through weighing each approach appropriately. 78 | P a g e 244 West Gilman Street
In the Madison rental market, we believe the income approach estimated the fair value of the property most accurately. For an income producing property, it is logical to assess a propertys value by looking at the ROI for an investor. The value is validated through the similarity between the final values proposed by the cost and income approaches.
The sales comparison approach is usually a good determinant for value in a stable market or a market with many recent comparable transactions. Our sales comparison approach shows that properties have sold at low prices, considering how much the typical Class B apartment building can generate as a yearly NOI. Furthermore, with few recent comparables it is difficult to determine the most current market price. Our theory is that the market is not in equilibrium. This is displayed by the discrepancy in the sales comparison approach and income approach and is supported by the number of new suppliers in the market, represented by the new developments within the downtown Madison metro area. Madison is in a period where student housing inventory is going to increase; theoretically, this would decrease rents while land values are increasing with the increase in buyers.
With an increase in similar property transaction data, the sales comparison approach would yield a much higher number. Since this is not the case, we have decided to weight the sales comparison approach lightly at 10%.
As this is a commercial property, in the sense that it brings in revenue, we have the advantage of being able to evaluate it based on its costs, revenue sources, and the realistic cost of attracting investors. It is usually a stronger method than the cost approach as buyers can directly decide whether their investment will satisfy their individual required rate of return. Due to these factors, we heavily weighted the income approach as an indicator of true value. We will assign this approach at 75% of our final valuation. The cost approach is the least relevant to residential and retail properties. It is helpful for giving buyers and sellers another point of reference for what the property represents as a stand-alone structure, but it does not incorporate the income producing aspect of the 79 | P a g e 244 West Gilman Street
property. In this case, the other two approaches were more realistic for the valuation. For our calculation of true market value, we will assign the cost approach at 15% of our final value.
Appendices, Certifications and Other Information

The supplementary materials within the appendix are found starting on the following page in the order presented below:
National Apartment Market Analysis Zoning Code Environmental Conditions Traffic Patterns Cost Approach Subcategory Details Deed for the Property
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National Apartment Market

According to our PwC Real Estate Barometer, 87.0% of the U.S. apartment sector is in the expansion phase of the real estate cycle; however, many investors are taking note of the recent success in the singlefamily market. "We are paying close attention to the 'cost-to-rent' versus 'cost-to-own' equation," remarks an investor. Another participant comments, "Recovery in the single-family market continues to challenge our underwriting assumptions as we pursue acquisitions." Investors are taking both the strengthening single-family market and new apartment supply into consideration in cash flow modeling.
Table 29
"Rents are still increasing, but at a much slower rate," notes a participant. As such, the quarterly increase in this markets average initial-year market rent change rate is nine basis points compared to 13 basis points in the prior quarter (see Table 29). While Survey results suggest that apartment rent growth has peaked, the impact has not yet resulted in rising overall cap rates. This markets average overall cap rate falls to 5.61% this quarter, the lowest level in five years and well below the peak in the fourth quarter of 2009. Most investors foresee cap rates holding steady for apartments over the next six months. !
KEY 3Q13 SURVEY STATS*

Total Vacancy Assumption: Average Range 5.6% 1.0% to 15.0%
Months of Free Rent(1): Average Range % of participants using 0.8 0 to 3 53.3%
M M
Market Conditions Favor: Buyers Sellers Neither

* M, L, = change from prior quarter (1) on a ten-year lease
6.3% 73.3% 20.4%
L M L
NATIONAL APARTMENT MARKET Third Quarter 2013

CURRENT DISCOUNT RATE (IRR) Range Average Change (Basis Points) OVERALL CAP RATE (OAR) Range Average Change (Basis Points) RESIDUAL CAP RATE Range Average Change (Basis Points) MARKET RENT CHANGEb Range Average Change (Basis Points) EXPENSE CHANGEb Range Average Change (Basis Points) MARKETING TIME Range Average Change (M, L, =)
a. Rate on unleveraged, all-cash transactions b. Initial rate of change
c a a
LAST QUARTER 5.00% 14.00% 8.04% 6
1 YEAR AGO 5.25% 14.00% 8.28% 30 3.75% 10.00% 5.74% 13 4.50% 9.75% 6.20% 5 (2.00%) 10.00% 2.73% 4 1.00% 3.50% 2.69% 0 0 18 5.3
M
3 YEARS AGO 6.00% 14.00% 9.40% 142 4.50% 11.00% 7.12% 151 5.25% 11.00% 7.54% 139 (10.00%) 3.00% (0.12%) + 281 0.00% 4.00% 2.42% + 27 1 18 7.2
M
5 YEARS AGO 6.00% 10.50% 8.23% 25 3.50% 8.00% 5.86% 25 4.50% 8.50% 6.74% 59 0.00% 8.00% 3.13% 44 2.50% 3.75% 2.97% 28 1 12 6.0
M
5.00% 14.00% 7.98%
3.50% 10.00% 5.61%
3.50% 10.00% 5.70% 9
4.00% 9.75% 6.15%
4.25% 9.75% 6.18% 3
(2.00%) 7.00% 2.69%
(2.00%) 7.00% 2.60% +9
1.00% 3.50% 2.69%
1.00% 3.50% 2.67% +2
0 18 5.0
0 18 5.1
M
c. In months
PWC
www.pwc.com
4 9
This report provided to University of Wisconsin, as a subscriber, for its use only
APPENDIX 1 ZONING CODE
0 1 2 3 4 5 6 3 7 8 6 4
9
4
4
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Wisconsin Legislature: Chapter SPS 322
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Table of contents
Previous file: Chapter SPS 321
Register December 2011 No. 672

Chapter SPS 322
ENERGY CONSERVATION
Subchapter I Scope and Application
SPS 322.01 Scope. SPS 322.02 Application.
Subchapter II Definitions
SPS 322.10 Definitions.
Subchapter III Insulation Materials and Installation
SPS 322.20 Basic requirements. SPS 322.21 Protection of insulation.
Subchapter IV Dwelling Thermal Envelope
SPS 322.30 General design requirements. SPS 322.31 Prescriptive insulation and fenestration criteria. SPS 322.32 Specific insulation requirements. SPS 322.33 Slab floors. SPS 322.34 Crawl spaces. SPS 322.35 Thermally isolated sunrooms. SPS 322.36 Fenestration. SPS 322.37 Air leakage. SPS 322.38 Vapor retarders. SPS 322.39 Ventilation and moisture control.
Subchapter V Systems
SPS 322.40 Indoor temperatures and equipment sizing. SPS 322.41 Temperature control. SPS 322.42 Duct systems. SPS 322.43 Duct and plenum sealing. SPS 322.44 Pipe insulation. SPS 322.45 Air conditioner and heat pump efficiencies. SPS 322.46 Replacement furnace and boiler efficiencies.
Subchapter VI Simulated Performance Alternative
SPS 322.50 General. SPS 322.51 Performance-based compliance.
The Wisconsin Administrative Code on this web site is updated on the 1st day of each month, current as of that date. See also Are the Codes on this Website Official?
http://docs.legis.wisconsin.gov/code/admin_code/sps/safety_and_buildings_and_environment/320_325/322[12/9/2013 1:12:14 AM]
SPS 322.52 Documentation. SPS 322.53 Calculation procedure.

Note: Chapter Ind 22 was renumbered to be chapter ILHR 22, Register, February, 1985, No. 350, eff. 3-1-85. Chapter ILHR 22 was repealed and recreated to be chapter Comm 22, Register, January, 1999, No. 517, eff. 2-1-99. Chapter Comm 22 as it existed on March 31, 2009, was repealed and a new chapter Comm 22 was created effective April 1, 2009. Chapter Comm 22 was renumbered chapter SPS 322 under s. 13.92 (4) (b) 1., Stats., Register December 2011 No. 672.
Subchapter I Scope and Application

SPS 322.01
Scope. (1)This chapter applies to all one- and 2-family dwellings covered by this code that use any amount of non-renewable energy for heat generation.
Note: Non-renewable energy sources used for heat distribution only will not require compliance with this chapter. Note: Although the actual source of heat delivered by a heat pump is renewable, a dwelling using a heat pump is not exempt from the requirements of this chapter due to the required input of electricity to run the pump and compressor.
(2)The equipment efficiency standards in this chapter apply to all one- and 2-family dwellings covered by this code that use the respective equipment.
(3)The vapor retarder requirements under s. SPS 322.38 and the moisture control and ventilation requirements under s. SPS 322.39 apply to any dwelling with insulation installed, whether or not the insulation is required under this code.
Note: The Public Service Commission has rules regulating "non-essential uses" of natural gas, such as snow melting and lighting in ch. PSC 136 of the Wisconsin Administrative Code. History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (3) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.02
Application. (1)This chapter is not intended to conflict with any safety or health requirements. Where a conflict occurs, the safety and health requirements shall govern.
(2)This chapter allows the designer the option of using various methods to demonstrate compliance with thermal performance requirements. The designer shall identify on the plan submittal form what method or subchapter is being used, and indicate the design criteria and how it is being applied. Unless specifically exempted, all requirements of this chapter apply regardless of the method used.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09.
Subchapter II Definitions
SPS 322.10
Definitions. (1)"Air-impermeable" means having an air permeance less than or equal to 0.02 L/sm2 at a pressure differential of 75 pascals when tested according to ASTM E 2178 or ASTM E 283.
(2)"Conditioned floor area" means the sum of areas of all floors in conditioned space in the structure, including basements, cellars, and intermediate floored levels measured from the exterior faces of exterior walls or from the center line of interior walls, excluding covered walkways, open roofed-over areas, porches, exterior terraces or steps, chimneys, roof overhangs and similar features.
(3)"Conditioned space" means space within the dwelling thermal envelope which is provided with heated air or surfaces to provide a heated space capable of maintaining the temperature of the space to at least 50F at design conditions.
(4)"Crawl space wall" means the opaque portion of a wall which encloses a crawl space and is partially or totally below grade.
(5)"Dwelling thermal envelope" means the elements of a dwelling with enclosed conditioned space through which thermal energy may be transferred to or from unconditioned space or the exterior.
(6)"Exterior wall area" means the normal projection of the dwelling envelope wall area bounding interior space which is conditioned by an energy-using system including opaque wall, window and door area. Any skylight shaft walls that are 12 inches or more in depth, measured from the ceiling plane to the roof deck, are considered in the area of exterior walls and are not considered part of the roof assembly.
(7)"Heated slab" means a floor slab in which an uninsulated heating element, uninsulated hydronic tubing or uninsulated hot air distribution system is in contact with the slab or placed within the slab or the subgrade.
(8)"HVAC" means heating, ventilating and air conditioning.
(9)"HVAC system" means the equipment, distribution network, and terminals that provide either collectively or individually the processes of heating, ventilating, or air conditioning to a building.
(10)"Infiltration" means the uncontrolled inward air leakage through cracks and interstices in any dwelling element and around windows and doors of a dwelling caused by the pressure effects of wind, and the effect of differences in the indoor and outdoor air density.
(11)"IC-rated" means an electrical fixture tested and listed by an independent testing laboratory as being suitable for installation in a cavity where the fixture may be in direct contact with thermal insulation or combustible materials.
(12)"Mass wall" means a wall of concrete block, concrete, insulated concrete forms, masonry cavity, brick other than brick veneer, earth and solid timber or logs.
(13)"Opaque areas" means all exposed areas of a dwelling envelope which enclose conditioned space except openings for windows, skylights, doors and dwelling service systems.
(14)"Proposed design" means a description of the proposed dwelling used to estimate annual energy use for determining compliance based on total building performance.
(15)"Renewable energy sources" means sources of energy, excluding minerals and petroleum products, derived from incoming solar radiation, trees and other plants, wind, waves and tides, lake or pond thermal differences and from the internal heat of the earth.
(16)"Roof assembly" means all components of the roof and ceiling envelope through which heat flows, thus creating a building transmission heat loss or gain, where such assembly is exposed to outdoor air and encloses a heated space. Any skylight shaft walls less than 12 inches in depth, as measured from the ceiling plane to the roof deck, are considered in the roof assembly and are not considered in the area of exterior walls.
(17)"Sun room" means a one-story structure attached to a dwelling with a glazing area in excess of 40% of the gross area of the structure's exterior walls and roof and with any screened areas capable of being covered or replaced with glazing during the heating season.
Note: A thermally isolated sun room does not count in the calculation of amount of glazing.
(18)"System" means a combination of central or terminal equipment and their components, controls, accessories, interconnecting means, and terminal devices by which energy is transformed so as to perform a specific function, such as HVAC, water heating, or illumination.
(19)"Thermal resistance" or "R-value" means a measure of the ability to retard the flow of heat. The R-value is the reciprocal of thermal transmittance or U-factor expressed as R = 1/U.
Note: The higher the R-value of a material, the more difficult it is for heat to be transmitted through the material.
(20)"Thermal transmittance" or "U-factor" means the time rate of heat flow through a body or assembly which is located between 2 different environments, expressed in Btu/h ft.2 F. The U-factor applies to combinations of different materials used in series along the heat flow path and also to single materials that comprise a dwelling section, including cavity air spaces and air films on both sides of a dwelling element.
Note: The lower the U-factor of a material, the more difficult it is for heat to be transmitted through the material. Note: The thermal transmittance is also referred to as the coefficient of heat transfer or the coefficient of heat transmission.
(21)"Thermally isolated" means physically and thermally separated with separate zone or separate equipment controls for space heating.
(22)"Thermostat" means an automatic control device actuated by temperature and designed to be responsive to temperature.
(23)"Ventilation" means the process of supplying or removing air by natural or mechanical means to or from any space. The air may or may not have been conditioned.
(24)"Zone" means a space or group of spaces within a dwelling with heating requirements sufficiently similar so that comfort conditions can be maintained throughout by a single controlling device.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; CR 09-104: am. (17) Register December 2010 No. 660, eff. 1-1-11.
Subchapter III Insulation Materials and Installation

SPS 322.20
Basic requirements. (1)
General. When available, information and values on thermal properties, performance of building envelope sections and components, and heat transfer shall be obtained from the ASHRAE Handbook of Fundamentals.
(2)Computation of R-values. (a) Insulation material used in layers, such as framing cavity insulation and insulating sheathing, shall be summed to compute the component R-value.
(b) The manufacturer's settled R-value shall be used for blown insulation.
(c) Computed R-values may not include values for air films or for building materials other than insulation materials.
Note: The REScheck program will automatically account for air films and other building materials.
(3)LaboratorY or field test measurements. (a) General dwelling thermal envelope materials. When information specified under sub. (1) is not available, or when a different value is claimed, supporting data shall be obtained using one of the following test methods:
1. ASTM C177, Standard test method for steady state heat flux measurements and thermal transmission properties by means of the guarded-hot-plate apparatus.
2. ASTM C335, Standard test method for steady state heat transfer properties of pipe insulation.
3. ASTM C518, Standard test method for steady state thermal transmission properties by means of the heat flow meter apparatus.
4. ASTM C1363, Standard test method for the thermal performance of building materials and envelope assemblies by means of a hot box apparatus.
(b) Foam plastic insulation. 1. When information specified under sub. (1) is not available, or when a different value is claimed, foam plastic insulation that uses a gas other than air as the insulating medium shall use laboratory or field tests conducted on representative samples that have been aged for the equivalent of 5 years or until the Rvalue has stabilized.
2. The tests shall be conducted by an independent third party using the standards listed under par. (a) and shall be submitted for department review and approval in accordance with s. SPS 320.18.
(c) Concrete masonry units. Systems using integrally-insulated concrete masonry units shall be evaluated for thermal performance in accordance with one of the following:
1. Default values as approved by the department with no extrapolations or interpolations.
2. Laboratory or field test measurements specified under par. (a).
3. The material approval process specified in s. SPS 320.18.
(4)General installation. (a) Materials, equipment and systems shall be identified in a manner that will allow a determination of their compliance with the applicable provisions of this code.
(b) All insulation materials, caulking and weatherstripping, fenestration assemblies, mechanical equipment and systems components, and water-heating equipment and system components shall be installed in accordance with the manufacturer's installation instructions.
(c) Manufacturer's installation instructions shall be available on the job site at the time of inspection.
(d) Roof and ceiling, floor and wall cavity batt or board insulation shall be installed in a manner which will permit inspection of the manufacturer's R-value identification mark.
(5)Identification. (a) A thermal resistance identification mark shall be applied by the manufacturer to each piece of dwelling envelope insulation 12-inches or greater in width.
(b) 1. The thickness of blown-in roof and ceiling insulation shall be identified by thickness markings that are labeled in inches and installed at least one for every 300 square feet through the attic space.
2. The markers shall be affixed to trusses or joists marking the minimum initial installed thickness and minimum settled thickness with numbers a minimum of one-inch in height.
3. Each marker shall face the attic access.
4. The thickness of installed insulation shall meet or exceed the minimum initial installed thickness shown by the marker.
(6)Certificate. (a) A permanent certificate shall be posted on or immediately adjacent to the electrical distribution panel.
(b) The certificate shall be completed by the owner, builder or insulation installer.
(c) The certificate shall list at least the following information:
1. The predominant R-values of insulation installed in or on ceilings or roofs, walls, foundation walls, slabs and any heating ducts that are outside the thermal envelope.
2. The U-factors of all windows, skylights and doors.

(d) If using the REScheck or REM/Rate software programs, the certificate shall be printed from that program.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (3) (a) made under s. 13.92 (4) (b) 1., Stats., Register March 2009 No. 639; correction in (3) (b) 2., (c) 3. made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.21
Protection of insulation.
(1)
BlanKet insulation. Insulating blankets or batts shall be held in place with a covering or other means of mechanical or adhesive fastening.
Note: If the insulation is on a below-grade wall, s. SPS 322.38 (4) may prohibit the use of vapor retarder material used as the covering.
(2)Wind wash protection. (a) Except as provided under s. SPS 322.39 (4) for cathedral ceilings, all airpermeable insulation materials installed in any position other than horizontal, shall be covered on the cold-in-winter side with a permanently attached material of low air permeability to maintain the R-value of the insulation.
Note: Suitable materials for this purpose include house wrap permanently attached with batten strips, asphalt-impregnated felt or tar paper, plywood, oriented strand board or OSB, siding material, rigid insulation sheathing, etc.
(b) If non-rigid sheet material is used, it shall be water vapor permeable.

Note: Water vapor permeable materials for this purpose include house wrap permanently attached with batten strips and asphalt-impregnated felt or tar paper.
(3)Foam plastic insulation. (a) Exterior foam plastic insulation shall be protected from physical damage and damage from ultraviolet light with a permanent, opaque, weather-resistant covering or coating.
(b) The protective covering shall cover the exposed exterior insulation and extend a minimum of 6 inches below grade.
Note: For interior applications, a thermal barrier may be required under s. SPS 321.11. History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (2) (a) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
Subchapter IV Dwelling Thermal Envelope

SPS 322.30General design requirements. (1)
General. Dwelling thermal envelope insulation amounts and details shall be determined using one of the methods described in this subchapter.
(2)Infiltration. (a) Infiltration for heating design loads shall be calculated based on a maximum of 0.5 air change per hour in the heated space.
(b) 1. If the proposed design takes credit for a reduced air change per hour level, documentation of the measures providing the reduction or the results of a post-construction blower door test conducted in accordance ASTM E 779 shall be provided to the department.
2. The minimum air change per hour rate may not be less than 0.2, unless mechanical ventilation is provided.
(3)Basements and crawl spaces. Where basement and crawl space walls are part of the dwelling thermal envelope, their R-values and U-factors shall be based on the wall components. Adjacent soil may not be considered in the determination.
(4)Garages.
(a) Except as provided under par. (b), a garage may not be provided with any supplemental heat unless all of the following conditions are met:
Note: Because of the scope of this chapter, the requirements under this subsection apply only to heat generated from non-renewable sources.
1. The dwelling shall be thermally isolated from the garage.

2. The garage floor, ceiling and walls shall be provided with a vapor retarder in accordance with s. SPS 322.38.
3. All building elements shall meet the requirements of s. SPS 322.31.
(b) The thermal envelope requirements under par. (a) are not required if all of the following conditions are met:
1. The thermostat is permanently limited to a maximum of 50F.
2. Heating equipment is either separate from the dwelling unit equipment or installed as a separate zone.
3. Separate heating equipment shall be sized to provide a maximum indoor temperature of 50F.
(5)MasonrY veneer. When insulation is placed on the exterior of a foundation supporting a masonry veneer exterior, the horizontal foundation surface supporting the veneer is not required to be insulated to satisfy the foundation insulation requirement.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (4) (a) 2., 3. made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.31Prescriptive insulation and fenestration criteria. (1)

ReQuirements. (a) Except as specifically provided under this subchapter, dwellings using the prescriptive method shall meet the requirements of Table 322.31-1 or 322.31-2.
(b) In Tables 322.31-1 and 322.31-2, zone 2 consists of the following 15 northern counties: Ashland, Bayfield, Burnett, Douglas, Florence, Forest, Iron, Langlade, Lincoln, Oneida, Price, Sawyer, Taylor, Vilas and Washburn. Zone 1 consists of all other counties not included in zone 2.
(2)Thermal envelope. (a) General. If the total dwelling thermal envelope UA is less than or equal to the total UA resulting from using the U-factors in Table 322.31-2 multiplied by the same assembly area as in the proposed building, the dwelling is in compliance with this chapter. The UA calculation shall be done using a method consistent with the ASHRAE Handbook of Fundamentals and shall include the thermal bridging effects of framing materials.
Note: UA is equal to the product of the U-factor times the assembly area. Note: REScheck is an acceptable software program for determining compliance with this section.
(b) Software version. If a REScheck software program is used to show compliance with this section, a version approved by the department shall be used.
Note: The downloadable version of REScheck 4.2.2, Wisconsin 2009 Code, meets the requirements of this code.
(3)Appliance efficiencY. (a) Except as allowed under par. (b) and s. SPS 322.46, oil-fired and gas-fired furnaces and boilers shall meet the minimum efficiency requirements in Table 322.31-3.
(b) In new construction, an oil-fired or gas-fired furnace or boiler meeting the federal efficiency standard but not the requirements of Table 322.31-3 may be installed if the dwelling thermal envelope requirements of Table 322.31-4 are met.
TABLE 322.31-1
INSULATION AND FENESTRATION REQUIREMENTS BY COMPONENTa

- See PDF for table
TABLE 322.31-2
EQUIVALENT U-FACTORS
- See PDF for table - See PDF for table
TABLE 322.31-4
COMPONENT DWELLING THERMAL ENVELOPE REQUIREMENTS
FOR DWELLINGS USING LOWER EFFICIENCY APPLIANCESa
- See PDF for table
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; EmR0917: emerg. am. (2) (b), eff. 9-5-09; CR 09-072: am. (2) (b) Register March 2010 No. 651, eff. 4-1-10; CR 09-104: am. Tables 22.31-1 and 22.31-4 Register December 2010 No. 660, eff. 1-1-11; correction in (1) (a), (b), (2) (a), (b), (3) (a), (b), Table 322.31-1, Table 322.31-4 made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.32
Specific insulation requirements. (1)
Ceilings with attic spaces. R-38 will satisfy the ceiling R-value requirement for a dwelling where the full height of uncompressed R-38 insulation extends over the wall top plate at the eaves.
(2)Ceilings without attic spaces. Where the design of the roof or ceiling assembly does not allow sufficient space for the required R-49 insulation, the minimum required insulation for the roof or ceiling assembly shall be R-30. This reduction of insulation shall be limited to 500 square feet of ceiling area.
(3)Mass walls. (a) The requirements of Table 322.31-1 are applicable in a mass wall where at least 50 percent of the required insulation R-value is on the exterior of, or integral to, the wall.
(b) Mass walls that do not meet the specifications under par. (a) for insulation placement shall meet the wood frame wall insulation requirements of Table 322.31-1.
(4)Steel-frame ceilings, walls and floors. (a) Steel-frame ceilings, walls and floors shall meet the insulation requirements of Table 322.32 or shall meet the U-factor requirements in Table 322.31-2.
(b) The calculation of the U-factor for a steel-frame envelope assembly shall use a series-parallel path calculation method.
(5)Floors. Floor insulation shall be installed to maintain permanent contact with the underside of the subfloor decking.
(6)Basement walls. (a) Walls associated with conditioned basements shall be insulated from the top of the basement wall down to the basement floor.
(b) Walls associated with unconditioned basements shall meet the requirement in par. (a) unless the floor overhead is insulated in accordance with Table 322.31-1.
(c) Where the total basement wall area is less than 50 percent below grade, the entire wall area, including the below-grade portion, is included as part of the area of exterior walls.
(7)BoX sill and rim joist spaces. Box sills and joist spaces at outside walls shall be insulated to the required wall R-value with air-impermeable insulation that is sealed on all sides to all framing members and the foundation, or with airpermeable insulation held in place as required under s. SPS 322.21 (1).
(8)Overhang joist spaces. (a) Joist spaces that extend beyond exterior walls shall be insulated with an R-value of 30 or higher with insulation that completely fills the cavity including over the
top of the exterior wall supporting the joists.

(b) The joist space insulation shall be air sealed either by using an air-impermeable insulation that is sealed to all framing members or by covering the insulation with a rigid material that is caulked or sealed to all framing members.
(c) If piping that is subject to freezing is located in the joist space, additional insulation shall be provided on the unconditioned side of the space.
(9)Wall insulation. Except for closed-cell sprayed foam, wall insulation shall completely fill the wall cavity.
- See PDF for table
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (3) (a), (b), (4) (a), (6) (b), (7) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.33
Slab floors. (1)
Heated or unheated slabs. Any heated or unheated slab floor, the bottom of which is less than 12 inches below adjacent grade, shall be provided with perimeter insulation in accordance with Table 322.31-1 or Table 322.31-4.
(2)Heated slabs. In addition to meeting the requirement under sub. (1), if applicable, heated slab floors of any depth below grade shall meet the under-slab R-value requirement in accordance with Table 322.31-1 or Table 322.31-4.
(3)Details. (a) The top edge of insulation installed between the exterior wall and the edge of the interior slab may be cut at a 45 degree angle away from the exterior wall.
(b) Horizontal insulation extending outside of the foundation shall be covered by soil a minimum of 10 inches thick or by pavement.
Note: See Appendix for further explanatory materials. History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; CR 09-104: am. (1), (2) Register December 2010 No. 660, eff. 1-1-11; correction in (1), (2) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.34
Crawl spaces. (1)
Frost protection. If the bottom of the crawl space serving as the dwelling foundation is less than 48 inches below adjacent grade, the foundation shall be frost protected in accordance with Table 322.31-1 for frost protected slabs.
(2)Vapor retarder. Any exposed earth in crawl spaces shall be covered with a continuous vapor retarder.
(b) All decayable organic material, including topsoil, shall be removed from crawl space floors prior to placing the vapor retarder.
(c) All joints of the vapor retarder shall overlap by 6 inches and be sealed or taped.
(d) The edges of the vapor retarder shall extend at least 6 inches up the foundation wall and shall be attached to the foundation wall.
(3)Uninsulated crawl spaces. (a) For crawl spaces that are outside of the thermal envelope, ventilation openings equal to at least 1/1500 of the floor space shall be provided.
(b) At least 50% of the ventilating area shall be provided at opposite sides of the crawl space or as far apart as possible.
(c) The floor above the crawl space shall be insulated in accordance with Table 322.31-1.
(4)Insulated crawl spaces. (a) As an alternative to insulating floors over unheated crawl spaces, crawl space walls shall be insulated in accordance with Table 322.31-1.
(b) Crawl space wall insulation shall be permanently fastened to the wall and shall extend the entire height of the wall.
(c) The crawl space may not be vented to the outside unless the floor above is insulated in accordance with Table 322.31-1.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (1), (3) (c), (4) (a), (c) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.35Thermally isolated sunrooms. (1)The minimum opaque ceiling insulation R-value shall be R-24. The minimum opaque wall R-value shall be R-13.
(2)The maximum fenestration U-factor shall be 0.50 and the maximum skylight Ufactor shall be 0.75.
(3)New walls, windows and doors separating a sunroom from conditioned space shall meet the building thermal envelope requirements.
(4)The temperature in the conditioned space shall be controlled as a separate zone or shall use separate heating equipment.
(5)Glazing in a thermally-isolated sunroom is not considered to be in the dwelling thermal envelope.
SPS 322.36Fenestration. (1)

Average U-factors. An area-weighted average of fenestration products may be used to satisfy the U-factor requirements.
(2)MaXimum fenestration U-factor. The area weighted average maximum fenestration U-factor permitted using trade offs from s. SPS 322.31 (2) or subchapter VI shall be 0.40 for vertical fenestration, and 0.75 for skylights.
(3)Glazed fenestration eXemption. Up to 15 square feet of glazed fenestration per dwelling unit may be exempt from U-factor requirements of the chapter.
(4)OpaQue door eXemption. One opaque door assembly is exempted from the U-factor requirements of this chapter.
(5)Replacement fenestration. Where an existing fenestration unit is replaced with a new fenestration unit, including sash and glazing, the replacement unit shall meet the U-factor requirements of this chapter.
(6)Certified products. Except as provided in sub. (7), fenestration rating, certification and labeling of U-factors for windows, doors and skylights shall be in accordance with NFRC 100.
(7)Default values. When a manufacturer has not determined product U-factor in accordance with NFRC 100, U-factors shall be determined by assigning a default value in accordance with Tables 322.36-1 and 322.36-2. Where a composite of materials of two different product types is used, the product shall be assigned the higher U-factor.
- See PDF for table
a Glass block assemblies shall have a default value of 0.60.
- See PDF for table
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (2), (7) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.37
Air leakage. (1)
General. The requirements of this section apply to those components that separate interior conditioned space from a garage or an unconditioned space.
(2)Window and door assemblies. (a) General. Except as specified in par. (b), windows, skylights and sliding glass doors shall have an air infiltration rate of no more than 0.3 cfm per square foot, and swinging doors no more than 0.5 cfm per square foot, when tested according to NFRC 400 or AAMA/WDMA/CSA 101/I.S.2/A440 by an accredited, independent laboratory and listed and labeled by the manufacturer.
(b) Exception. Site-constructed doors and windows shall be sealed with gasketing or weatherstripping or shall be covered with a storm door or storm window.
(3)Joint and penetration sealing. (a) Exterior joints, seams or penetrations in the dwelling envelope, which are sources of air leakage, shall be sealed with durable caulking materials, closed with gasketing systems, taped, or covered with water-vapor-permeable house wrap. Joints to be treated include all of the following:
1. Openings, cracks and joints between wall cavities and window or door frames.
2. Between separate wall assemblies or their sill-plates and foundations.
3. Between walls, roof, ceilings or attic ceiling seals, and between separate wall panel assemblies, including between interior and exterior walls.
4. Penetrations of utility services through walls, floor and roof assemblies, and penetrations through top and bottom wall plates.
(b) Sealing shall be provided at the attic and crawl space panels, at recessed lights and around all plumbing and electrical penetrations, where these openings are located in the dwelling thermal envelope.
(c) The sealing methods between dissimilar materials shall allow for differential expansion and contraction.
(4)Recessed lighting. When installed in the dwelling envelope, recessed lighting fixtures shall be sealed to limit air leakage between conditioned and unconditioned spaces by one of the following means:
(a) The fixture shall be IC-rated and labeled with enclosures that are sealed or gasketed to prevent air leakage to the ceiling cavity or unconditioned space.
(b) The fixture shall be IC-rated and labeled as meeting ASTM E 283 when tested at 1.57 psi pressure differential with no more than 2.0 cfm of air movement from the conditioned space to the ceiling cavity.
(c) 1. The fixture shall be located inside an airtight sealed box with clearances of at least 0.5 inch from combustible material and 3 inches from insulation.
2. If the fixture is non-IC-rated, the box shall be constructed of noncombustible material that does not readily conduct heat.
Note: Cement board meets the requirements of this section. Drywall and metal do not.
(5)Fan housings. Gaps between a fan housing and a ceiling or wall that could result in air leaks shall be gasketed, sealed or caulked.
SPS 322.38
Vapor retarders. (1)
General. (a) Definition. Under this section, a vapor retarder is a material with no intrinsic thermal or structural properties that has a rating of 1.0 perm or less when tested in accordance with ASTM standard E 96, Procedure A.
(b) Continuity. The vapor retarder shall be continuous. All joints in a vapor retarder consisting of sheet material shall be overlapped 6 inches and taped or sealed. Rips, punctures and voids in the vapor retarder shall be patched with vapor retarder materials and taped or sealed.
(2)Frame assemblies. (a) General. Except as provided under par. (c), all frame walls, frame floors and frame ceilings that comprise the thermal envelope, shall have a vapor retarder installed on the warm-in-winter side of the thermal insulation.
(b) Coverage. The vapor retarder shall cover the exposed insulation and the interior face of the framing.
(c) Exceptions. 1. Where the vapor retarder is omitted, as allowed under subds. 2. to 4., all sources of air leakage, such as between double top or bottom plates or between double studs, shall be caulked or sealed.
2. No vapor retarder is required in the box sill.
3. No vapor retarder is required where batt insulation is provided with foil or kraft paper backing on the warm-in-winter side and the nailing tabs are tightly fastened to the warm-in-winter face of the framing members.
4. No vapor retarder is required over cavities that are insulated solely with sprayapplied foam unless required by the foam manufacturer.
Note: This requirement does not require the cavity to be completely filled. It only requires that the total required R-value come from the foam, including any exterior foam sheathing, and no other insulation material is present in the cavity.
(3)Concrete floors. (a) Except as allowed under par. (d), a vapor retarder shall be installed directly under the concrete floor slab or under the base course of concrete floor slabs.
(b) Vapor retarder material shall be at least 6 mils in thickness or shall be a reinforced material.
(c) Joints in the vapor retarder shall be overlapped at least 6 inches and taped or sealed.
(d) A vapor retarder is not required under the slab of an unconditioned attached garage.
(4)Concrete or masonrY basement walls. A non-rigid sheet vapor retarder with a perm rating of 0.1 or less is prohibited in all of the following locations:
(a) On a concrete or masonry wall which is below grade to any extent.
(b) On an insulated frame wall constructed in front of a concrete or masonry wall which is below grade to any extent.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; CR 09-104: r. (3) (d), renum. (3) (e) to be (3) (d) Register December 2010 No. 660, eff. 1-1-11; correction in (3) (a) made under s. 13.92 (4) (b) 7. Register December 2010 No. 660.
SPS 322.39
Ventilation and moisture control. (1)
General. Design and construction shall prevent deterioration from moisture condensation and ice damming.
(2)Vented attics. (a) 1. Except as allowed under subd. 6., where air-permeable ceiling or attic insulation is installed in a horizontal position, ventilation shall be provided above the insulation in accordance with this paragraph.
2. At least 50% of the net free ventilating area shall be distributed at the high sides of the roof.
3. The remainder of the net free ventilating area shall be distributed in the lower half of the roof or attic area.
4. If more than 50%, but less than 75% of the net free ventilating area is provided at the high sides of the roof, the total net free ventilating area shall be a minimum of 1/300 of the horizontal area of the ceiling.
5. If 75% or more of the net free ventilating area is provided at the upper sides of the roof, the total net free ventilating area shall be at least 1/150 of the horizontal area of the ceiling.
6. Ventilation is not required for separated roof areas, such as dormers, bump-outs or bays that cover a floor area of 40 ft2 or less.
(b) Engineered systems that provide equivalent ventilation to that required under this subsection may be used.
(c) Insulation shall not block the free flow of air.
(3)Conditioned attics. Attic spaces are not required to be vented where airimpermeable insulation is attached directly to the underside of the roof deck and all of the following conditions are met:
(a) No interior vapor retarders are installed between the living space and the conditioned attic.
(b) The temperature in the attic space is maintained high enough to prevent any moisture condensation on the insulation.
Note: Maintaining the interior surface temperature of the insulation at or above the dew point temperature of the interior air will minimize condensation. Maintaining at least 45F on the surface of the insulation will minimize condensation on the surface when the interior air temperature is 70F and the interior relative humidity is 45%.
(4)Cathedral ceilings. Air-permeable insulation in a cathedral ceiling assembly shall fill the entire cavity space unless an air barrier separates the top of the insulation from the ventilation space.
(5)Mechanical ventilation. Outdoor air intakes and exhausts shall have automatic or gravity dampers that close when the ventilation system is not operating.
(6)Clothes drYers. Clothes dryers shall be vented to the outside of the structure.
Note: See s. SPS 323.14 for vent material requirements. History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09.
Subchapter V Systems
SPS 322.40
Indoor temperatures and equipment sizing. (1)
General. The indoor temperatures listed under sub. (2) shall be used to determine the total dwelling heat loss and to select the size of the of the heating equipment.
(2)Indoor design temperatures. Unheated, non-habitable basement areas shall use a heating design temperature of less than 50F. All other areas of a dwelling shall use a heating design temperature of 70F.
(3)EQuipment sizing. Heating design loads including ventilation loads for the purpose of sizing systems shall be determined in accordance with the REScheck or REM/RATE software programs or one of the procedures described in Chapter 29 of ASHRAE Handbook of Fundamentals.
Note: Residential heat balance, residential load factor, Canadian F280 and ACCA Manuals J and S are among the methods recognized as equipment-sizing protocols under chapter 29. History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09.
SPS 322.41
Temperature control.
(1)
General. Each system shall be provided with an adjustable thermostat for the regulation of temperature.
(2)Circulating hot water sYstems. Circulating hot water systems shall include an automatic or readily accessible manual switch to turn off the circulating pump when the system is not in use.
(3)MercurY thermostats. The installation of thermostats containing mercury is prohibited.
Note: This section does not require the replacement of existing mercury-containing thermostats.
(4)Heat pump supplementarY heat. Heat pumps having supplementary electricresistance heat shall have controls that, except during defrost, prevent supplemental heat operation when the heat pump compressor can meet the heating load.
Wisconsin Legislature: Chapter SPS 322 History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09.
SPS 322.42
Duct systems. (1)Supply and return heating ducts, or portions thereof, that are not located completely within the thermal envelope, shall be provided with insulation with a thermal resistance of at least R-8.
(2)Building framing cavities may not be used as supply ducts.
SPS 322.43
Duct and plenum sealing.
(1)Duct systems with joints not located entirely within the conditioned space or with joints located on the unconditioned side of stud bays, joist cavities and similar spaces, shall be sealed in accordance with this section.
(2)Sealing shall be accomplished using welds, gaskets, mastics, mastic-plusembedded-fabric systems or tapes installed in accordance with the manufacturer's instructions.
(3)Insulation that provides a continuous air barrier may be used in lieu of sealing metal ducts.
(4)Tapes and mastics used with rigid fibrous glass ducts shall be listed and labeled as complying with UL 181A.
(5)Tapes and mastics used with flexible air ducts shall be listed and labeled as complying with UL 181B.
(6)Tapes with rubber-based adhesives may not be used.
Note: Standard duct tape or "duck tape" has a rubber-based adhesive and does not comply with the requirements of this section. History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09.
SPS 322.44Pipe insulation. Heating pipes in unheated spaces shall be insulated with material providing a minimum thermal resistance of R-4 as measured on a flat surface in accordance with ASTM standard C 335 at a mean temperature of 75F.
SPS 322.45
Air conditioner and heat pump efficiencies. (1)Heating and cooling equipment shall meet the minimum efficiency requirements in Table 322.45 when tested and rated in accordance with the applicable test procedure.
(2)The efficiency shall be verified through certification under an approved certification program or, if no certification program exists, the equipment efficiency ratings shall be supported by data furnished by the manufacturer.
(3)Where multiple rating conditions or performance requirements are provided, the equipment shall satisfy all efficiency requirements under this chapter.
(4)Where components, such as indoor or outdoor coils, from different manufacturers are used, calculations and supporting data shall be furnished by the designer that demonstrate that the combined efficiency of the specified components meets the requirements under this section.
- See PDF for table
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (1) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.46Replacement furnace and boiler efficiencies. (1)A replacement furnace in existing construction may meet only the prevailing federal efficiency standard provided the duct distribution system is sealed and tested at 0.02 inches water gage across the entire system, including the manufacturer's air
handler enclosure, to have air leakage less than 10 percent of the furnace manufacturer's rated air flow across the blower at high speed.
Note: 0.02 inches water gage is equal to approximately 25 pascals.
(2)A replacement boiler in existing construction may meet only the prevailing federal standard provided there is no installed circulation pump larger than 1/20 horsepower and no circulation pump runs continuously.
Subchapter VI Simulated Performance Alternative

SPS 322.50
General. This subchapter establishes criteria for compliance using simulated energy performance analysis. The analysis shall include heating, cooling, and service water heating energy only.
SPS 322.51Performance-based compliance. Compliance based on simulated energy performance requires that a proposed dwelling be shown to have an annual energy cost that is less than or equal to the annual energy cost of the standard reference design.
SPS 322.52
Documentation. (1)
Compliance software tools. Documentation verifying that the methods and accuracy of the compliance software tools conform to the provisions of this subchapter shall be provided to the inspector.
Note: REM/Rate is an acceptable software program for determining compliance with this section.
(2)Compliance report. Compliance software tools shall generate a report that documents that the proposed design has annual energy costs less than or equal to the annual energy costs of the standard reference design. The compliance documentation shall include all of the following information:
(a) Address of the dwelling.
(b) 1. An inspection checklist documenting the building component characteristics of the proposed design as listed in Table 322.53-1.
2. The inspection checklist shall show the estimated annual energy cost for both the standard reference design and the proposed design.
(c) Name of individual completing the compliance report.
(d) Name and version of the compliance software tool.
(3)Additional documentation. The inspector may require any of the following documents:
(a) Documentation of the building component characteristics of the standard reference design.
(b) A certification signed by the builder providing the building component characteristics of the proposed design as given in Table 322.53-1.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (2) (b), (3) (b) made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
SPS 322.53
Calculation procedure.
(1)
General. Except as specifically allowed under this section, the standard reference design and proposed design shall be configured and analyzed using identical methods and techniques.
(2)Reference and proposed designs. The standard reference design and proposed design shall be configured and analyzed as specified by Table 322.53-1. Table 322.53-1 shall include by reference all notes contained in Table 322.31-1.
(3)Calculation software tools. Calculation procedures used to comply with this section shall be capable of calculating the annual energy consumption of all building elements that differ between the standard reference design and the proposed design and shall include the following capabilities:
(a) Computer generation of the standard reference design using only the input for the proposed design. The calculation procedure may not allow the user to directly modify the building component characteristics of the standard reference design.
(b) Calculation of whole-building sizing as a single zone for the heating and cooling equipment in the standard reference design residence in accordance with s. SPS 322.40 (3).
(c) Calculations that account for the effects of indoor and outdoor temperatures and part-load ratios on the performance of heating, ventilating and air conditioning equipment based on climate and equipment sizing.
(d) Printed code official inspection checklist listing each of the proposed design component characteristics from Table 322.53-1 determined by the analysis to provide compliance, along with their respective performance ratings.
- See PDF for table
a Glazing shall be defined as sunlight-transmitting fenestration, including the area of sash, curbing or other framing elements, that enclose conditioned space. Glazing includes the area of sunlight-transmitting fenestration assemblies in walls bounding conditioned basements. For doors where the sunlight-transmitting opening is less than 50% of the door area, the glazing area is the sunlight transmitting opening area. For all other doors, the glazing area is the rough frame opening area for the door including the door and the frame.
b For residences with conditioned basements, R-2 and R-4 residences and townhouses, the following formula shall be used to determine glazing area: AF = As X FA X F where:
1. AF = Total glazing area.
2. As = Standard reference design total glazing area.
3. FA = (Above-grade thermal boundary gross wall area)/(above-grade boundary wall area + 0.5 x below-grade boundary wall area).
4. F = (Above-grade thermal boundary wall area)/(above-grade thermal boundary wall area + common wall area) or 0.56, whichever is greater.
And where:
5. Thermal boundary wall is any wall that separates conditioned space from unconditioned space or ambient conditions.
6. Above-grade thermal boundary wall is any thermal boundary wall component not in contact with soil.
7. Below-grade boundary wall is any thermal boundary wall in soil contact.
8. Common wall area is the area of walls shared with an adjoining dwelling unit.
c For fenestrations facing within 15 degrees of true south that are directly coupled to thermal storage mass, the winter interior shade fraction may be increased to 0.95 in the proposed design.
d Where Leakage Area (L) is defined in accordance with Section 5.1 of ASHRAE 119 and where: SLA = L/CFA where L and CFA are in the same units.
e Tested envelope leakage shall be determined and documented by an independent party approved by the code official. Hourly calculations as specified in the 2005 ASHRAE Handbook of Fundamentals, Chapter 27, page 27.21, Equation 40, Sherman-Grimsrud model, or the equivalent shall be used to determine the energy loads resulting from infiltration.
f The combined air exchange rate for infiltration and mechanical ventilation shall be
determined in accordance with Equation 43 of 2005 ASHRAE Handbook of Fundamentals page 27.23 and the "Whole-house Ventilation" provisions of 2005 ASHRAE Handbook of Fundamentals, page 27.18 for intermittent mechanical ventilation.
g Thermal Storage Element means a component not part of the floors, walls or ceilings that is part of a passive solar system, and that provides thermal storage such as enclosed water columns, rock beds, or phase-change containers. A thermal storage element must be in the same room as fenestration that faces within 15 degrees of true south, or must be connected to a room with pipes or ducts that allow the element to be actively charged.
h For a proposed design with multiple heating, cooling or water heating systems using different fuel types, the applicable standard reference design system capacities and fuel types shall be weighted in accordance with their respective loads as calculated by accepted engineering practice for each equipment and fuel type present.
i For a proposed design without a proposed heating system, a heating system of 90% annual fuel utilization shall be assumed for both the standard reference design and proposed design. For electric heating systems, the prevailing federal minimum efficiency air-source heat pump shall be used for the standard reference design.
j For a proposed design home without a proposed cooling system, an electric air conditioner with the prevailing federal minimum efficiency shall be assumed for both the standard reference design and the proposed design.
k For a proposed design with a non-storage-type water heater, a 40-gallon storage-type water heater with the prevailing federal minimum energy factor for the same fuel as the predominant heating fuel type shall be assumed. For the case of a proposed design without a proposed water heater, a 40-gallon storage-type water heater with the prevailing federal minimum efficiency for the same fuel as the predominant heating fuel type shall be assumed for both the proposed design and standard reference design.
- See PDF for table
a Default values given by this table are for untested distribution systems, which must still meet minimum requirements for duct system insulation.
b Hydronic systems means those systems that distribute heating and cooling energy directly to individual spaces using liquids pumped through closed loop piping and that do not depend on ducted, forced air flows to maintain space temperatures.
c Entire system in conditioned space means that no component of the distribution system, including the air handler unit, is located outside of the conditioned space.
d Proposed "reduced leakage" means leakage to outdoors not greater than 3 cfm per 100 ft2 of conditioned floor area and total leakage not greater than 9 cfm per 100 ft2 of conditioned floor area at a pressure differential of 0.02 inches w.g. across the entire system, including the manufacturer's air handler enclosure. Total leakage of not greater than 3 cfm per 100 ft2 of conditioned floor area at a pressure difference of 0.02 inches w.g. across the entire system, including the manufacturer's air handler enclosure, shall be deemed to meet this requirement without measurement of leakage to the outdoors. This performance shall be specified as required in the construction documents and confirmed through field-testing of installed systems as documented by an approved independent party.
e Ductless systems may have forced airflow across a coil but may not have any ducted airflows external to the manufacturer's air handler enclosure.
History: CR 08-043: cr. Register March 2009 No. 639, eff. 4-1-09; correction in (2), (3) (b), (d), Table 322.53-1 made under s. 13.92 (4) (b) 7., Stats., Register December 2011 No. 672.
Next file: Chapter SPS 323
0 65 26
rS rte a Ch
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ks oo Br St
r r
50 67
20 00
0 45 30
6600
00 91
s ce an r F
Henry St
0 15 26
50 63 50 28
00 68
Carroll St
RK PA
St
6350
50 72 ST
LA
ST
0 15 29
0 25 22
50 62
50 71
LA
s ce an r F
St
99 32
r r
r
4050
NA VE
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ST
5800
MA ER H S
WISCONSIN AVE
20 95 0
2000
St
1250
Pinckney St
0 55 27
St at e
Gilman St
1400
36900
30050
24200
16350
16250
16100
7600
18700
6300
2550
2000
Johnson St
m Ha
21450
24300
22750
15350
19550
16750
18400
See West Campus [Sheet 9]
7700
8600
850
Franklin St
3400
2350
13450
2500
9550
00 19
2600
9250
2750
E JOHNSON ST
1100
E DAYTON ST
5450
N BLAIR ST
1850
Dayton St
700
2350
N PATERSON ST
800
Brearly St
2150
Ingersoll St
18200
7150
N BASSETT ST
N WEBSTER ST
N BEDFORD ST
2500
4100
2150
2350
2400
1500
8250
Carroll St
1700
4300
Martin Luther King Jr Blvd
2700
800
6000
19200
19950
17550
18800
17650
13950
4650
16900
21100
23750
45100
4050
8800
3550
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Mifflin St
1250
00 177
W Mifflin St
Blount St
1450
2100
3050
2900
00 24
Livingston St
8750
N FAIRCHILD ST
N BUTLER ST
36 50
ST
7700
1300
15200
6700
49950
57350
51200
8450
S FAIRCHILD ST
3500
51650
11150
S WEBSTER ST
E WASHINGTON AVE
Hancock St
5500
19000
4500
S BASSETT ST
7400
S BROOM ST
2800
3900
4400
S BUTLER ST
25050
Pinckney St
2750
1000
4300
2100
2400
2500
2500
2550
4300
1650
1600
2050
S PATERSON ST
S BEDFORD ST
2600
2050
12600
10650
W DOTY ST
12150
3550
3350
E DOTY ST
850
3950
7250
3050
3450
4200
23650
1250
4550
8900
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7300
6400
W WILSON ST
E WILSON ST
3450
10700
00 50
2000
1350
2650
2035 0
215 00
1150
3350
3700
20300
r
Monona Bay
13700
JOHN NOLEN DR
WILLIAMSON ST
200
2450
1550
Jenifer St
3300
1100
1150
Isthmus - Sheet 7 of 14
City of Madison Average Weekday Traffic Volume 2011 Sheet 7 of 14
26,001 - 120,000 AWT Not Available
See Southcentral [Sheet 8]
0 - 1,500 1,501 - 3,000 3,001 - 10,000
10,001 - 26,000
See East Isthmus [Sheet 4]
Lake Monona
SPAIGHT ST
950
Avg Weeday Traffic
Brearly St
50 0
No Scale
Isthmus
2300
18000
RE DR SHO H T OR
18700
16850
S BALDWIN ST
2250
S INGERSOLL ST
PROUDFIT ST
Livingston St
Brearly St
00 17
S BLAIR ST
Main St
1000
1400
1400
3850
2100
4050
45450
32000
W JOHNSON ST
20100
00 63
21350
ilto
1700
1350
1850
12 80 0
15 t 5S 0
N BALDWIN ST
E GORHAM ST
13100
0 00 24
15800
3250
See East Isthmus [Sheet 4]
50 79
0 30 34
00 22
59 00
0 30 24
00 75
Lake Mendota
U N ER IV TY SI A VE
00 44
0 75 19
0 85 24
N N DO G
00 26
1000
2200
1850
1950
0 10 30
R EG EN T
00 37
W D A O YT N ST
50 41
50 26
00 13
50 10
50 44
IN G ST
36500
15950
00 439
0 00 39
[
RT H
NO
Square Foot Cost Estimate Report

Estimate Name:
244 W Gilman
Building Type: Location: Stories Count (L.F.): Stories Height Floor Area (S.F.): LaborType Basement Included: Data Release: Cost Per Square Foot
Apartment, 4-7 Story with Face Brick with Concrete Block Back-up / R/Conc. Frame
MADISON, WI
6.00 11.00 32,205.00 STD
No
Year 2013 Quarter 4
$239.72 $7,720,000.00
Total Building Cost
Costs are derived from a building model with basic components. Scope differences and market conditions can cause costs to vary significantly.
% of Total
A Substructure A1010 Standard Foundations 2.7%
Cost Per SF
$4.35 $2.17
Cost
$140,000 $70,000
Strip footing, concrete, reinforced, load 22.0 KLF, soil bearing capacity 6 KSF, 16" deep x 48" wide Spread footings, 3000 PSI concrete, load 500K, soil bearing capacity 6 KSF, 9' - 6" square x 30" deep
A1030 Slab on Grade $1.09 $35,000
Slab on grade, 4" thick, light industrial, reinforced

A2010 Basement Excavation $0.05 $1,500
Excavate and fill, 100,000 SF, 4' deep, sand, gravel, or common earth, on site storage
A2020 Basement Walls $1.04 $33,500
Foundation wall, CIP, 4' wall height, direct chute, .148 CY/LF, 7.2 PLF, 12" thick
B Shell B1010 Floor Construction 30.8% $50.23 $16.35 $1,617,500 $526,500
Cast-in-place concrete column, 12" square, tied, 200K load, 10' story height, 140 lbs/LF, 4000PSI Cast-in-place concrete beam and slab, 8" slab, one way, 16" column, 30'x35' bay, 40 PSF superimposed load, 158 PSF total load Cast-in-place concrete beam and slab, 8" slab, one way, 22" column, 30'x35' bay, 125 PSF superimposed load, 254 PSF total load
B1020 Roof Construction $3.17 $102,000
Roof, concrete, beam and slab, 30'x35' bay, 40 PSF superimposed load, 16" deep beam, 8" slab, 158 PSF total load
B2010 Exterior Walls $22.96 $739,500
Brick wall, composite double wythe, standard face/CMU back-up, 8" thick, perlite core fill
B2020 Exterior Windows $5.99 $193,000
Windows, aluminum, sliding, standard glass, 5' x 3'

B2030 Exterior Doors $0.43 $14,000
Door, aluminum & glass, without transom, wide stile, hardware, 3'-0" x 7'-0" opening Door, aluminum & glass, without transom, non-standard, double door, hardware, 6'-0" x 7'-0" opening
B3010 Roof Coverings $1.32 $42,500
Roofing, asphalt flood coat, gravel, base sheet, 3 plies 15# asphalt felt, mopped Insulation, rigid, roof deck, composite with 2" EPS, 1" perlite Roof edges, aluminum, duranodic, .050" thick, 6" face
2012
1-800-334-3509 softwaresupport@rsmeans.com
% of Total
Flashing, aluminum, no backing sides, .019" Gravel stop, aluminum, extruded, 4", mill finish, .050" thick
C Interiors C1010 Partitions 22.8%
Cost Per SF
Cost
$37.11 $9.55
$1,195,000 $307,500
Metal partition, 5/8"fire rated gypsum board face, 1/4" sound deadening gypsum board, 2-1/2" @ 24", same opposite face, no insulation 1/2" fire rated gypsum board, taped & finished, painted on metal furring
C1020 Interior Doors $7.50 $241,500
Door, single leaf, wood frame, 3'-0" x 7'-0" x 1-3/8", birch, solid core Door, single leaf, wood frame, 3'-0" x 7'-0" x 1-3/8", birch, hollow core
C1030 Fittings $3.91 $126,000
Cabinets, residential, wall, two doors x 48" wide

C2010 Stair Construction $3.28 $105,500
Stairs, steel, cement filled metal pan & picket rail, 12 risers, with landing
C3010 Wall Finishes $2.98 $96,000
Painting, interior on plaster and drywall, walls & ceilings, roller work, primer & 2 coats Vinyl wall covering, fabric back, medium weight Ceramic tile, thin set, 4-1/4" x 4-1/4"
C3020 Floor Finishes $5.65 $182,000
Carpet tile, nylon, fusion bonded, 18" x 18" or 24" x 24", 24 oz Carpet tile, nylon, fusion bonded, 18" x 18" or 24" x 24", 35 oz Carpet, padding, add to above, minimum Carpet, padding, add to above, maximum Vinyl, composition tile, minimum Vinyl, composition tile, maximum Tile, ceramic natural clay
C3030 Ceiling Finishes $4.24 $136,500
Gypsum board ceilings, 1/2" fire rated gypsum board, painted and textured finish, 7/8"resilient channel furring, 24" OC support
D Services D1010 Elevators and Lifts 44.7% $72.78 $13.29 $2,344,000 $428,000
1.00-Traction geared elevators, passenger, 2000 lb, 5 floors, 200 FPM Traction, geared passenger, 3500 lb, 6 floors, 10' story height, 2 car group, 200 FPM
D2010 Plumbing Fixtures $18.30 $589,500
Kitchen sink w/trim, countertop, PE on CI, 24" x 21", single bowl Laundry sink w/trim, PE on CI, black iron frame, 24" x 20", single compt Service sink w/trim, PE on CI, corner floor, 28" x 28", w/rim guard Bathroom, lavatory & water closet, 2 wall plumbing, stand alone Bathroom, lavatory & water closet, 1 wall plumbing, share common plumbing wall* Bathroom, three fixture, 2 wall plumbing, lavatory, water closet & bathtub, stand alone
D2020 Domestic Water Distribution $4.72 $152,000
Gas fired water heater, residential, 100< F rise, 30 gal tank, 32 GPH
D2040 Rain Water Drainage $0.23 $7,500
Roof drain, DWV PVC, 4" diam, diam, 10' high Roof drain, DWV PVC, 4" diam, for each additional foot add
D3010 Energy Supply $8.43 $271,500
Apartment building heating system, fin tube radiation, forced hot water, 30,000 SF area,300,000 CF vol
D3030 Cooling Generating Systems $10.06 $324,000
Packaged chiller, air cooled, with fan coil unit, medical centers, 40,000 SF, 93.33 ton
D4010 Sprinklers $2.86 $92,000
Wet pipe sprinkler systems, steel, light hazard, 1 floor, 10,000 SF Wet pipe sprinkler systems, steel, light hazard, each additional floor, 10,000 SF
D4020 Standpipes $1.69 $54,500
2012
% of Total
Wet standpipe risers, class III, steel, black, sch 40, 6" diam pipe, 1 floor Wet standpipe risers, class III, steel, black, sch 40, 6" diam pipe, additional floors Fire pump, electric, with controller, 4" pump, 30 HP, 500 GPM
D5010 Electrical Service/Distribution
Cost Per SF
Cost
$3.97
$128,000
Service installation, includes breakers, metering, 20' conduit & wire, 3 phase, 4 wire, 120/208 V, 1600 A Feeder installation 600 V, including RGS conduit and XHHW wire, 1600 A Switchgear installation, incl switchboard, panels & circuit breaker, 120/208 V, 1600 A
D5020 Lighting and Branch Wiring $7.14 $230,000
Receptacles incl plate, box, conduit, wire, 10 per 1000 SF, 1.2 watts per SF Wall switches, 2.5 per 1000 SF Miscellaneous power, 2 watts Central air conditioning power, 3 watts Motor installation, three phase, 200 V, 15 HP motor size Incandescent fixtures recess mounted, type A, 1 watt per SF, 8 FC, 6 fixtures per 1000 SF
D5030 Communications and Security $1.85 $59,500
Communication and alarm systems, fire detection, addressable, 50 detectors, includes outlets, boxes, conduit and wire Fire alarm command center, addressable with voice, excl. wire & conduit Internet wiring, 2 data/voice outlets per 1000 S.F.
D5090 Other Electrical Systems $0.23 $7,500
Generator sets, w/battery, charger, muffler and transfer switch, gas/gasoline operated, 3 phase, 4 wire, 277/480 V, 11.5 kW Generator sets, w/battery, charger, muffler and transfer switch, diesel engine with fuel tank, 30 kW
E Equipment & Furnishings E1090 Other Equipment 2.3% $3.79 $3.79 $122,000 $122,000
75.00-Detection Systems, heat detector, smoke detector, ceiling type, excl. wires & conduit 3.00-Laundry equipment, washer, residential, 4 cycle, average 3.00-Laundry equipment, dryers, gas-fired residential, 16 lb capacity, average 15.00-Closed circuit television system (CCTV), surveillance, for additional camera stations, add 1.00-Closed circuit television system (CCTV), surveillance, one station (camera & monitor) 26.00-Garbage disposal, residential appliances, sink type, minimum 26.00-Dishwasher, residential appliances, built-in, 2 cycles, minimum 26.00-Unit kitchen, combination range, refrigerator and sink, 30" wide, minimum 26.00-Microwave ovens, residential appliances, minimum
F Special Construction G Building Sitework 0.0% 0.0% $0.00 $0.00 $0 $0
Sub Total Contractor's Overhead & Profit Architectural Fees User Fees
100% 25.0 % 7.0 % 10.0 %
$162.93 $40.74 $14.25 $21.80
$5,247,000.00 $1,312,000.00 $459,000.00 $702,000.00
Total Building Cost
$239.72
$7,720,000.00
2012

244 West Gilman Street Appraisal

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Appraisal Report

244 West Gilman Street Madison, WI

Capital Property Assessment

244 West Gilman Street

MARKET AREA DESCRIPTION AND ANALYSIS ....................................................... 9

Property Description and Analysis Site Analysis.......................................................... 19

244 West Gilman Street

Property Description and Analysis Site Analysis.......................................................... 28

Income Approach .................................................................................................................... 39 3|Page 244 West Gilman Street

Direct Sales Comparison Approach .................................................................................... 61

Cost Approach .......................................................................................................................... 68

244 West Gilman Street

244 West Gilman Street

Summary of Salient Facts and Conclusions

Owner of Record Parcel Identification Number Appraisal Date Date of Inspection

244 West Gilman Street

Definitions of Appraisal Assignment

244 West Gilman Street

MARKET AREA DESCRIPTION AND ANALYSIS

244 West Gilman Street

Demographic Trends and Analysis

244 West Gilman Street

University of Wisconsin Enrollment Trends

244 West Gilman Street

Transportation and Infrastructure

244 West Gilman Street

Local and Regional Government

244 West Gilman Street

Neighborhood or Commercial District Analysis

Madison Area Market Analysis

244 West Gilman Street

Housing Market Overview Conclusion

Property Description and Analysis Site Analysis

244 West Gilman Street

244 West Gilman Street

Adjacent Properties and Land Uses

Ownership and Title

Governmental Restrictions, Development Plans and Districts

244 West Gilman Street

Utilities and services (available to the site)

244 West Gilman Street

244 West Gilman Street

Other Site Characteristics

Property Description and Analysis Site Analysis

244 West Gilman Street

244 West Gilman Street

244 West Gilman Street

Roof: Floor Finish:

Exterior Walls: Interior Walls:

Windows: Woodwork: Cabinets: Appliances:

244 West Gilman Street

Common Areas: Amenities:

The site features minimal landscaping, with concrete sidewalks.

244 West Gilman Street

244 West Gilman Street

244 West Gilman Street

Highest and Best Use Analysis

As Vacant Physically Possible

244 West Gilman Street

244 West Gilman Street

FINAL MARKET RENT CONCLUSION

244 West Gilman Street

Comp#3- 515 N. Lake

Comp #4- 625 Langdon