87-124 AUTHORIZING SALE OF LAND 300 BLOCK WEST 1ST DRIVE

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' ' — — ---- — ,, . ' � �� � I! �� Lease Highlights �' I'. �! � Lessor: City of Decatur ;! i� Lessee: Irving B. Melnick Lease Approved and Recorded: July 29, 1975 I� Lease Term: August 1, 1975 to July 31, 1995 i' Rent: Quarterly installments of $600 in advance ( 5200/month) ; i i Restrictions require that property must be used as a parking i lot. Lessee is responsible for all costs involved in th� maintenance of the parking lot as well as any taxes levied against the premises and is required to return the property in good condition. Payments will therefore be received August 1, November 1 , , �i February 1 and May 1 . Next payment of 5600 will be clv� ; November 1, 1987. � Present Value of Income Stream � � The $600 quarterly income represents a net income to thA owner. In order to calculate the present value , it is � � necessary to estimate a discount rate - what the typical �Ij investor would require as a return on this property. An ; �, investor could receive a safe rate of return of 7% on sur_h ji investments as certificates of deposits. This is assumed to '� be a safe interest rate. A lo return �•�ould be required for investment management which is the handling of the ; investment itself, not typically management of the propert��. A lo return would also be required for the propert�' s lack ''� of liquidity. With its limited use, this property would be I' difficult to sell . A 2g return is also calculated for risk. ��! The risk involved in this property is appealing now to onl� !i a single purchaser, the owner of the South Towne Plaz� own�r ii to the i�orth, also its poor access , encumbranc�s by ii easements, and zoning . A discount rate is thernfore ;�, developed as follows: ;j ;� ;i Yield or Safe Rate 7'; i, Investment Management 10 �� Illiquidity 1% � 0 � Risk 20 C I� TOTAL DISCOUNT RATE llo il i I� I 10 ' aOTHF��i�� _ HUG AP�'�7n.I��Fi`;