Singh Development, Waltonwood of Novi Market Study and Appraisal for Assisted Living Facility and Appraisal of Going Concern Novi, Michigan

Waltonwood of Novi is an independent and assisted living community located in Novi adjacent to the Twelve Oaks Shopping Mall. Signh development, the developer/owner of the property, was looking to refinance the existing project and a detailed market study and appraisal were required by the lender. Allen and Associates was contracted to prepare the market study and appraisal for the assisted living portion of the development only and to determine the extent of the demand to warrant the development.

Within the category of assisted living there are conventional assisted living and dementia (memory) care. The subject, similar to most assisted living and memory care developments, offers a variety of health care service levels. The pricing and categorization of the health care services in the assisted living and memory care industry is extremely confusing and most developments categorize and price these services differently in an attempt to make rate comparisons difficult.

Allen & Associates determined the market area for the facility based upon an analysis of the competitive supply of similar types of units, physical and psychological boundaries and, the geographic locations of potential senior households and of adult children, who are often the buyers. Our Market Analysis was developed after a thorough analysis of supply and demand factors for the subject primary and secondary market areas. Furthermore we analyzed the broader economic factors that impact the subject property. The market analysis provided a general discussion of the local housing market, as well as estimates of future demand for the market area.

The market analysis provided a focus on the supply local developments deemed to be the subject's Absorption periods primary competitors. Representatives from each of these developments were interviewed during our market research. An inventory analysis of the pipeline supply of competitive units was developed. The market analysis also provided an opinion of market rent for the various subject unit offerings. The market rental rate analysis for the varied subject units was developed using HUD form 92273.

The demand analysis analyzed four measures of market depth: (1) Penetration rate - the ratio of the number of subject property units to the number of income-qualified households in the market area; (2) Saturation rate - the ratio of the number of subject property units plus the number of competing units to the number of income qualified households in the market area; (3) Absorption period - the estimated number of months to fill the subject property units; and (4) Residual demand based on renter household growth plus replacement housing less excess vacancy. Demand potential from inside and outside of the market area was examined.

From these analyses estimates for absorption rates and stabilization dates were developed. Based upon our analysis we determined that there was in fact sufficient demand in the market for assisted living to warrant the development.