18Q0002_SOW_29May2018_Atch1.pdf

STATEMENT OF WORK

FOR NON-REAL ESTATE VALUATION

Two Maritime Vessels:

1) SS City of Milwaukee and

2) USCGC Acacia (WLB-406)

1. BACKGROUND

USDA-Rural Development (RD) provides direct or guaranteed loans to eligible applicants for development and construction of Community Facilities (CF) involving both real and chattel property. To support the CF program, USDA Rural Development requires an appraisal prepared by a certified general real estate appraiser, in accordance with RD Instructions, Part 1922-A and Part 1942-A, which may be located at: http://www.rd.usda.gov/publications/regulations-guidelines/instructions.

As the subjects of this assignment two separate maritime vessels require a valuation report to be prepared by an appropriately licensed and certified Marine Surveyor. Said marine surveyor shall be retained to prepare a valuation report for each vessel.

2. IDENTIFICATION OF THE SUBJECT PROPERTY

Provide complete detailed legal description of each vessel including but not limited to:

a) Ship’s Name

b) IMO Identification Number

c) Any other Legal description or Supporting Documentation

3. OBJECTIVE

Rural Development, in accordance with RD Instruction 1942.3, requires an appraisal/survey be prepared by a qualified independent marine surveyor-appraiser. In the subject assignment, the qualified independent marine surveyor should be an appropriately credentialed Marine Surveyor, having experience in appraisal of commercial and/or historical maritime shipping vessels. The qualified surveyor is being engaged for the purpose of estimating the appropriate Market Value and provide a completed valuation report compliant with USPAP Standards 7&8. The appraisal shall include individual values for each of the two maritime vessels that are to be appraised.

4. SCOPE OF THIS ASSIGNMENT

The contractor must follow all applicable regulatory authority mandates within the appropriate jurisdiction.

The contractor shall procure and provide appraisals which will be used to estimate the “as developed market value” of the property identified above. The applicant should transmit the appraisal in pdf format to two (2) email addresses identified as Item 9 of this Statement of Work. In addition, the contractor will supply additional copies of the appraisal in pdf format when requested by Rural Development.

5. REQUIREMENTS

This Statement of Work (SOW) / Appraisal Assignment Guidance document identifies specific assignment conditions and requirements of USDA-RD applicable to the appraisal of the Personal Property listed above. The marine surveyor is to contact the Regional RD Appraiser identified within the contact for a pre-conference prior to starting the assignment.

Client: As determined and identified by United States Department of Agriculture-Rural Development (USDA-RD) to the marine surveyor.

Intended User: United States Department of Agriculture-Rural Development (USDA-RD) shall be identified as an intended user of the appraisal report. Any other intended users should be identified by name or type in accordance with instructions from the client.

Intended Use: The intended use of the appraisal is to assist USDA-RD in making lending decisions and collateral risk management involving the subject property.

Interest to be Valued: The interest to be valued within the appraisal assignment is that of the fee simple estate or other estate as identified by the marine surveyor which is appropriate for the assignment.

SPECIAL NOTES AND INTENDED USE:

• All value conclusions cited in the appraisal must be clearly identified as defined in this statement of work.

• The appraisal must provide an analysis of the Highest and Best Use of the property using the four criteria including physically possible, legally permissible, financially feasible and maximally productive considering the property “as presently improved.” The marine surveyor should identify and include specific discussion regarding those uses which are legally permissible for the subject vessels.

• All extraordinary assumptions must be labeled as such and must be clear and conspicuous to the reader of the report and include the statement required by SR 8-2 (a) (xi).

• Hypothetical conditions must be approved by Rural Development prior to their implementation and completion of the appraisal assignment.

The final valuation report is to provide the:

Market Value Definition

Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

(Source: 12CFR, Chapter 1, Subpart C, Part 34.42(g))

In order to estimate the market value of the subject facility as defined above, USDA recognizes other methods of valuation may be necessary, including valuation of the property as a going concern. Analysis of historical incomes, expenses, operating uses, recognition of personal property including fixtures, trade equipment, and other tangible and intangible assets of the business may be required as part of the appraisal assignment.

Market Value of Going Concern

The market value of an established and operating business including the real property, personal property, financial assets, and the intangible assets of the business.

(Source: Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute)

If market value of the going concern is estimated by the appraiser, values of both tangible and intangible assets, including values attributed to realty, personal property, and contributory business valuation, must be reported individually and separately within the appraisal. It should also be noted that each ship is reportedly listed as a National Historic Landmark and the effect of this designation on value is to be considered.

Value in Use

“The value of a property assuming a specific use, which may or may not be the property’s highest and best use on the effective date of the appraisal. Value in use may or may not be equal to market value, but is different conceptually” (Source: Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute)

Insurable Value for each vessel shall be provided.

Liquidation Value for each vessel shall be provided.

The analysis for each vessel should include adequate operating costs for the proposed use as a museum, as well as operating cost for any alternative uses that can be reasonably supported.

If required, the marine surveyor shall defend the appraisal in court or in the USDA appeals process, if testimony is required within five (5) years of the appraisal date. Any additional expense incurred for such subsequent services should be negotiated separately between the marine surveyor and the client at the time the service is required or requested.

6. CHATTLE PROPERTY (FF&E)

Valuation of chattel (FF&E) property, exclusive of inventory, must be developed and reported separately from the “as-developed present market value” of each subject vessel. Chattels must be evaluated in accordance with generally accepted methods of determining value. Appraisals of chattel must reflect and report the age, condition, and remaining useful life of the equipment/fixture.

7. LAND VALUE

NOT APPLICABLE

8. REPORT FORMAT

Reports shall be in compliance with the reporting requirements of USPAP Standard Rule 8-2 for an Appraisal Report in compliance with USDA‐RD requirements.

Reports must, at a minimum, contain the following items:

i. Transmittal letter;

ii. Factual information about each subject property;

iii. Regional and neighborhood data;

iv. Description of the subject property;

v. Description of existing and planned (if applicable) improvements;

vi. Highest and best use analysis;

vii. A statement regarding any environmental issues, such as potential contamination of the property from hazardous substances, hazardous wastes, or petroleum products;

viii. A cost approach analysis (if applicable);

ix. A sales comparison approach analysis (if applicable);

x. An income approach analysis (if applicable);

xi. If one of these standard approaches is not used, the reconciliation narrative will provide a full and complete explanation of the reasons for exclusion of the approach.

xii. A reconciliation of the value indications derived from the included approaches to value;

xiii. A signed certification in accordance with SR 8-3.

In addition, the following general information is to be included in the report:

Appraisal must comply with the current edition of USPAP as of the effective date of valuation.

All reports must include a legal description of the subject property.

All reports must include photographs of the interior and exterior of the subject property and of the exterior of all comparable properties including both comparable rentals and comparable sales.

All reports must include a map showing the location of the subject:

All reports must include the following exhibits of the subject property:

• Blue Prints/Plans (if available) including beam, keel draft, LOA, displacement, etc.

• Floor plans for each deck level as well as exterior dimensions.

All analyses within the income approach should be well supported with narrative discussion. The marine surveyor must provide good support for the income, operating, expense and capitalization rate analyses within the approach. The expense analysis, if developed, should be supported by a three-year operating history of the subject, if available, and by comparable market analysis. Analysis and discussion must include presentation of comparable data utilized to estimate income, expenses and the overall rate conclusions of the income approach.

The capitalization rate selected for the subject must be derived from the most recent sales of similar vessels in the competitive market. Support for the overall rate should be provided using other accepted methods such as the band-of-investment technique, the debt coverage ratio formula, and regional investment criteria surveys.

If the income, vacancy, expenses, or capitalization rate is not adequately supported, the Rural Development Review Appraiser will require the contract marine surveyor to make revisions that provide the necessary support before the appraisal can be accepted.

All reports must include an appropriately supported estimate of the remaining economic life of the subject, both in its current condition and as if any proposed over-haul/renovation construction were complete, as applicable.

Appraisals must include a discussion of deferred maintenance at the subject properties.

Items of deferred maintenance must be listed, and the cost to cure each item must be estimated, with support provided.

It is anticipated delineation of values applicable to the various components & design of the two vessels and will be presented and analyzed by the marine surveyor. Delineations of value should be based on the specific use, income, and expenses associated with the differing components comprising the subject property, if possible.

The final opinion of value presented in the valuation survey must have considered a cost approach, sales comparison approach, and an income approach. If one of these standard approaches is not used, the reconciliation narrative must provide a full and complete explanation of the reasons for exclusion of the approach.

The reconciliation will also fully discuss and reconcile variances in the value indications concluded by each approach as well as delineated value indications of each component contributing to the concluded total facility value.

Appraisals must contain the previous five-year ownership history for each vessel being surveyed.

If the marine surveyor observes potential contamination from hazardous substances, hazardous wastes, or petroleum products beyond containment within usual bunker storage, or obtains other information about such contamination, that information should be provided to the Agency together with an indication of its potential impact on the value of the asset.

Appraisal reports are subject to review by Rural Development. The Marine Surveyor must be prepared to discuss their analyses, opinions, and conclusions and provide additional written support, clarification, and a corrected electronic appraisal report, at no additional cost, if requested by a USDA Regional Appraisal Reviewer.

USDA-RD Regional Appraisal Reviewer:

Joseph G. Lolli, CCIM –

843.549.1822 ext. 126 Joseph.Lolli@sc.usda.gov

USDA-RD Senior National Appraiser Mike Schnetzler Phone No.: 505.220.8112 Mike.Schnetzler@wdc.usda.gov

9. POINTS OF CONTACT

USDA-RD Michigan Contract Program Director

Karen D. Cooper – 517.324.5203 KarenD.Cooper@mi.usda.gov

USDA-RD Michigan Community Facilities Programs Specialist Keith Sebright– 231-486-2525 Keith.Sebright@mi.usda.gov

Date Issued: 29May2018