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HomeMy WebLinkAbout11 - Purchase and Sale Agreement with LAB Holding, LLC for the Balboa Theater Property, Located at 707 E. Balboa Boulevard<C SEW Pp�T CITY OF O � z NEWPORT BEACH i FO City Council Staff Report < RN October 11, 2016 Agenda Item No. 11 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Kimberly Brandt, Community Development Director - 949-644-3232, kbrandt@newportbeachca.gov PREPARED BY: Seimone Jurjis, Assistant Community Development Director, CBO PHONE: 949-644-3236, sjurjis(@newportbeachca.gov TITLE: Purchase and Sale Agreement with Lab Holding, LLC for the Balboa Theater Property, Located at 707 E. Balboa Boulevard ABSTRACT: In April 2016, the City Council entered into an exclusive negotiating agreement (ENA) with Lab Holding, LLC (LAB) for the Balboa Theater located at 707-709 E. Balboa Boulevard. The ENA allowed the parties the exclusive right to negotiate in good faith the terms of a purchase and sale agreement for the property. The parties have concluded negotiations and agree to the proposed terms. Staff is recommending the City Council approve the attached agreement, which sells the property for $1,000,000. Proceeds from the sale will be returned to the Federal Community Development Block Grant (CDBG) account for repurposing. RECOMMENDATION: a) Find the execution of a purchase and sale agreement is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines; and b) Authorize the City Manager to execute a purchase and sale agreement, in a form substantially similar to the attached agreement, and all associated documents, with Lab Holding, LLC to sell the property at 707-709 E. Balboa Boulevard for a price of $1,000,000. FUNDING REQUIREMENTS: No funding is required for this item. Proceeds from the sale will be returned to the CDBG Fund for repurposing. Purchase and Sale agreement between the City of Newport Beach and Lab Holding, LLC, for the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard October 11, 2016 Page 2 DISCUSSION: Theater Histor The Balboa Theater is located in Balboa Village near the Balboa Pier between Washington and Main Streets. The property operated as a theater from the time it was built in the late 1920s, until it closed in 1992. After the City's acquisition of the site in 1998, the property was leased to the Balboa Performing Arts Theatre Foundation (Foundation). After termination of the lease agreement between the City and Foundation in 2014, the City Council directed staff to sell the property. Open Bid Process In June 2015, staff advertised the property for sale, and the City received five proposals from private parties. After a thorough review and selection process staff recommended beginning negotiations with the LAB. On March 24, 2016, the City Council entered into an ENA with the LAB. The ENA allowed the parties the exclusive right to negotiate in good faith the terms of a purchase and sale agreement for the property. Lab Holding, LLC The LAB (Attachment D) is privately owned by Shaheen and Linda Sadeghi, an owner - developer and operator with 25 years of experience repurposing existing older structures while preserving the historic character of the buildings. The LAB team has shown a broad understanding of the historic nature of the Balboa Theater and its significance to Balboa Village and the surrounding community. The LAB team proposes to restore the original building ensuring flexibility for multi -use events and performances, as well as to restore the original fagade of the theater bringing back its historic marquee. The business plan reflects a neighborhood cafe with a live performing arts stage; small scale live music stage; and flexible gathering rooms for guests or private community celebrations. The plan also proposes food services and alcohol beverage sales. The LAB's historic projects include: • LAB Anti -Mall — City of Costa Mesa • SoBeCa — City of Costa Mesa • The Casino — City of San Clemente • Anaheim Packing House — City of Anaheim • MAKE Building — City of Anaheim • BARN Building — City of Anaheim • Packard Building — City of Anaheim 11-2 Purchase and Sale agreement between the City of Newport Beach and Lab Holding, LLC, for the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard October 11, 2016 Page 3 Current Condition of Proaert The Balboa Theater was constructed in the late 1920s during a time when building codes were very limited. The existing building is considered structurally deficient and not safe for occupancy. The perimeter walls are classified as unreinforced masonry and need significant structural upgrades. A substantial investment will be necessary to bring the building up to current code requirements relating to structural, seismic, and ADA compliance. New plumbing, mechanical, and electrical systems would also be required. LAB estimates they will spend $2 million on the remodel of the existing building to meet current code requirements. Appraisals Conducted Staff commissioned two separate appraisers to determine the value of the property. The first appraisal (Attachment B) was based on highest and best use of the property. This included completely demolishing the existing structure and redeveloping the property as a new mixed use project, consisting of residential and commercial uses. The appraised value of the land for highest and best use is $1,625,000. The second appraisal (Attachment C) was based on the value in its current "as -is" condition. The appraisal report took into account the cost of remodeling the existing building with the required upgrades associated with structural, ADA, and utilities. The "as -is" value of the property is $890,000. Federal Community Development Block Grant Funds The Balboa Theater was acquired by the City in 1998 by using Federal CDBG funds. If the City Council agrees to sell the property, then the proceeds would be restricted to CDBG eligible activities. The proceeds could not be returned for general fund use. Purchase and Sale Agreement Staff has prepared a purchase and sale agreement (Attachment A) to outline terms of the sale. The important terms of the agreement are: 1. Buyer is paying $1,000,000; 2. Buyer is purchasing the property in "as -is" condition; 3. Escrow shall close on January 13, 2017, or sooner; 4. City to record deed restrictions on the property title limiting its use to: theater, cultural center, event center, or other related performing arts uses. Ancillary commercial use of the property shall be permitted; 11-3 Purchase and Sale agreement between the City of Newport Beach and Lab Holding, LLC, for the Balboa Theater Property, Located at 707-709 E. Balboa Boulevard October 11, 2016 Page 4 5. City's first right to repurchase the property from the Buyer should they elect not to redevelop the property as a theater use; and, 6. Buyer to be solely responsible for any costs related to the preparation of design documents in order to determine the scope of the development. This agreement has been reviewed by the City Attorney's office and has been approved as to form. Deed Restriction Under the terms of the agreement, the City will record a deed restriction against the property's title, which will limit its use to a theater, cultural center, event center, or other related performing arts uses. Ancillary commercial uses of the property shall be permitted. This will ensure that a performing arts use will be maintained in perpetuity or until the City releases the deed restriction. Additionally, the City has first right to repurchase the property should the LAB elect to not redevelop the property as a theater use. Staff Recommendation Since the purchase price of $1,000,000 offered by the LAB is above the "as -is" market value of $890,000, staff is recommending the City Council accept the offer and approve the purchase and sale agreement. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Purchase and Sale Agreement w/Deed Restriction Attachment B — Appraisal — Highest and Best Use Attachment C — Appraisal — "As -Is" Condition Attachment D — LAB Holding LLC Proposal 11-4 Attachment A Purchase and Sale Agreement with Deed Restriction 11-5 AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND ESCROW INSTRUCTIONS Escrow No, Date of Opening of Escrow: , 2016 To: National Commercial Escrow Officer ("Escrow Holder") 18500 Von Karman, Suite 600 Irvine, CA 92612 Attn: Nathan Thompson Telephone: 949-885-2473 THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND ESCROW INSTRUCTIONS ("Agreement") is made this day of , 2016, by and between the City of Newport Beach, a California municipal corporation and charter city ("City") and Lab Holding, LLC, a California limited liability company (`Buyer"). City and Buyer are sometimes hereinafter individually referred to as a "Party" and collectively as the "Parties." herein: RECITALS: The following Recitals are a substantive part of this Agreement and are incorporated A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Pursuant to Government Code §54222, the City sent written notice of its intent to lease or sell the Property on June 11, 2015 to specified public entities for low- and moderate -income housing, park, and recreational and school purposes. C. Pursuant to the Newport Beach Municipal Code and City Council Policy F-7, the City conducted an analysis to determine the open market value of the property that is the subject of this Agreement, using an appraisal by a reputable and independent professional appraiser to determine the highest value of the property in its current condition. D. The City conducted an open bid or proposal process to ensure the fairest process in selecting a buyer for the property that is the subject of this Agreement. E, City is the owner of that certain real property of approximately 5,200 square feet and commonly known as 707 E. Balboa Boulevard, located in the City of Newport Beach, County of Orange, State of California 92661 (A.P.N. 048-135-02), as more particularly described in the legal description attached hereto and incorporated by reference herein as Exhibit "A," and as depicted on the map attached hereto and incorporated by reference herein as Exhibit "B" ("Property"). 11-6 F. City desires to sell to Buyer, and Buyer desires to purchase from City, the Property, all on the terms and conditions set forth in this Agreement. NOW, THEREFORE, the Parties hereto agree as follows: TERMS AND CONDITIONS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Buyer agree as follows: 1. PURCHASE AND SALE OF PROPERTY. Buyer hereby agrees to purchase from City, and City agrees to sell to Buyer the Property, upon the terms and conditions hereinafter set forth. 2. PAYMENT OF PURCHASE PRICE. 2.1 Amount of Purchase Price. The purchase price for the Property shall be One Million Dollars and 00/100 ($1,000,000.00) ("Purchase Price"). The City shall deposit the Purchase Price, once received from Buyer, into the City's Community Development Bloch Grant ("CDBG") fund. 2.2 Pgpnent of Purchase Price. (a) Not later than two (2) days following the Opening of Escrow, as defined herein, Buyer shall deposit in Escrow in good funds, the suin of One Hundred Thousand Dollars and 00/100 ($100,000.00) ("Deposit"), which Deposit shall be applicable to the Purchase Price upon the closing of Escrow. In the event this Agreement is terminated by Buyer before the expiration of the Due Diligence Period, as defined herein, or Buyer disapproves of any of the items requiring approval of Buyer hereunder before the expiration of the Due Diligence Period, the Deposit shall be promptly returned to Buyer. Buyer shall have the unqualified and unrestricted right to terminate its obligations under this Agreement before the expiration of the Due Diligence Period. (b) On or before the Closing Date, as defined herein, Buyer shall deposit the balance of the Purchase Price, subject to any other credits or debits hereunder, with the Escrow Holder in "good funds." "Good fiends" shall mean a wire transfer of fiends, cashier's or certified check drawn on or issued by the offices of a financial institution located in the State of California, or cash. 2.3 Interest Bearing Account. The Escrow Holder shall deposit the funds specified in Section 2.2 in an interest bearing account. All interest earned on said funds shall be credited to Buyer. 3. OPENING OF ESCROW. Within five (5) business clays after the execution of this Agreement by City, the Parties shall open an escrow ("Escrow") with the Escrow Holder by causing an executed copy of this Agreement to be deposited with the Escrow Holder. Escrow Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 2 11-7 shall be deemed open on the date that City delivers this executed Agreement to the Escrow Holder. 4. ADDITIONAL FUNDS AND DOCUMENTS REQUIRED FROM BUYER AND CITY. 4.1 Buyer. Buyer agrees that on or before 1:00 p,m, P.S.T. on the business day preceding the Closing Date, as defined herein, Buyer shall deposit with the Escrow Holder all additional funds and/or documents (executed and acknowledged, if appropriate) that are necessary to comply with the terms of this Agreement, including without limitation, the following: (a) The Purchase Price; (b) A Preliminary Change of Ownership Statement completed in the manner required in Orange County, California; and (c) Such funds and other items and instruments as may be necessary for Escrow Holder to comply with this Agreement. 4.2 City. City agrees that on or before 1:00 p.m. P.S.T. on the business day preceding the Closing Date, as defined herein, City shall deposit with the Escrow Holder such fiends and other items and instruments (executed and acknowledged, if appropriate) as may be necessary for the Escrow Holder to comply with this Agreement, including without limitation, the following: (a) A grant deed conveying the Property to Buyer in substantially the same form as that attached hereto and incorporated herein by reference as Exhibit "C," to include the restrictions as further set forth in Section 10 below ("Grant Deed"); (b) A Non -Foreign Affidavit on the Escrow Holder's Standard form or a form substantially similar thereto ("Non -Foreign Affidavit"); and (c) Such fiends and other items and instruments as may be necessary for Escrow Holder to comply with this Agreement. The Escrow Holder shall cause the Grant Deed to be recorded when it can issue the Title Policy in the form described and as defined in Section 7 below, and holds for the account of City the items described above to be delivered to City through Escrow, less costs, expenses, and disbursements chargeable to City pursuant to the terms hereof. 4.3 Due_Diligence Period. Commencing upon the Opening of Escrow and continuing thereafter for fifteen (15) calendar days ("Due Diligence Period"), Buyer, its agents, and employees shall: (a) examine and inspect the Property and shall know and be satisfied with the physical condition, quality, quantity, and state of repair of the Property in all respects and by proceeding to Closing, Buyer shall be deemed to have determined that Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 3 11-8 the same is satisfactory to Buyer; (b) review all instruments, records, and documents which Buyer deems appropriate or advisable to review in connection with this transaction, including, but not by way of limitation, any and all plans, specifications, surveys, environmental assessments and reports, and Buyer, by proceeding to Closing, shall be deemed to have determined that the same and the information and data contained therein and evidenced thereby are satisfactory to Buyer; (c) review all applicable laws, ordinances, rules and govermnental regulations (including those relating to building, zoning and land use) affecting the development, use, occupancy or enjoyment of the Property, and Buyer, by proceeding to Closing, shall be deemed to have determined that the same are satisfactory to Buyer; and (d) at its own cost and expense, made its own independent investigation respecting the Property and all other aspects of this transaction, and shall have relied thereon and on the advice of its consultants in entering into this Agreement, and Buyer, by proceeding to Closing, shall be deemed to have determined that the same are satisfactory to Buyer. If during the Due Diligence Period, Buyer determines the condition of the Property is such that Buyer no longer desires to acquire the Property, Buyer shall provide written notice of its election to terminate this Agreement, which written notice must be received by the City before the expiration of the Due Diligence Period. Should Buyer fail to provide written notice of its election to terminate this Agreement Buyer shall be conclusively determined to have accepted the condition of the Property. 4.4. Preliminary Title Report. Within ten (10) business days after the opening of Escrow, the City, at the City's expense, shall furnish Buyer with a Preliminary Title Report on the Property issued by Fidelity National Title Insurance Company ("Title Company") and dated within thirty (30) calendar days of the opening of Escrow. The Preliminary Title Report shall be accompanied by legible copies of all underlying documents for all exceptions ("Exceptions") set forth in the Preliminary Title Report. Buyer shall have ten (10) business days from receipt of the Preliminary Title Report within which to give written notice to the City of the Buyer's approval or disapproval of any of such Exceptions. The Buyer's failure to provide such written notice of the Preliminary Title Report within such time limit shall be deemed approval of the Preliminary Title Report, If Buyer notifies the City of its disapproval of any Exceptions in the Preliminary Title Report, or is deemed to have disapproved the Preliminary Title Report, the City shall have the right, but not the obligation, to remove any disapproved Exceptions within ten (10) business days after receiving written notice of the Buyer's disapproval or provide assurances satisfactory to the reviewing Party that such Exception(s) will be removed on or before the Closing. If the City cannot or does not elect to remove any of the disapproved Exceptions within that period, the Buyer shall have ten (10) calendar days after the expiration of such fifteen (15) calendar day period to either give the City written notice that the Buyer elects to proceed with the acquisition of the Property subject to the disapproved Exceptions or to give the City written notice that the Buyer elects to terminate this Agreement. The Buyer shall have the right to approve or disapprove any Exceptions reported by the Title Company after the City has approved the Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 4 11-9 condition of title for the Property. Neither Party shall voluntarily create any new Exceptions to title following the date of this Agreement. 4.5. Miscellaneous Documents. On or before five (5) business days following the opening of Escrow, City shall deliver to Buyer all documents relating to the Property which City may have in its possession including but not limited to all copies of a Phase I Environtnental Report, together with engineering reports, soils studies, environmental audits and reports, enviromnental impact report, and all other doe-uments relating to the Property for Buyer's review. If Buyer does not acquire the Property, all documents given by City shall be promptly returned to City. In addition, City shall deliver to Buyer (or cause the Escrow Holder to deliver to Buyer), natural hazard disclosure reports covering the Property in such forth as required by law, which shall be countersigned and returned to City and the Escrow Holder. 4.6 Entry„for Investigation. Subject to the conditions hereafter stated and the rights of tenants in possession, City grants to Buyer, its agents and employees a limited license to enter upon any portion of the Property for the purpose of conducting engineering surveys, soil tests, investigations or other studies reasonably necessary to evaluate the condition of the Property, which studies, surveys, investigations and tests shall be done at Buyer's sole cost and expense. Buyer shall (a) notify City prior to each entry of the date and purpose of intended entry and provide to City the names and affiliations of the persons entering the Property; (b) conduct all studies in a diligent, expeditious and safe manner and not allow any dangerous or hazardous conditions to occur on the Property during or after such investigation; (c) comply with all applicable laws and governmental regulations; (d) keep the Property free and clear of all materialmen's liens, lis pendens and other liens arising out of the entry and work performed under this paragraph; (e) maintain or assure maintenance of workers' compensation insurance (or state approved self-insurance) on all persons entering the Property in the amounts required by the State of California; (f) provide to City prior to initial entry a certificate of insurance evidencing that Buyer has procured and paid premiums for a commercial general liability insurance policy written on a per occurrence and not claims made basis in a combined single limit of not less than Two Million Dollars and 001100 ($2,000,000.00) which insurance names the City as additional insured entitled to not less than thirty (30) calendar days cancellation notice and coverage shall apply on a primary basis and shall not require contribution from any insurance or self-insurance maintained by the City; and (g) return the Property to its original condition following Buyer's entry. Buyer agrees to indemnify, defend, protect and hold City and the Property free and harmless from any and all loss, liability, claims, damages and expenses (including but not limited to attorneys' fees and costs) arising directly or indirectly from the exercise of said license, or from Buyer's failure to comply with the conditions to Buyer's entry onto the Property provided herein. Such undertaking of indemnity shall survive Close of Escrow or the termination of this Agreement for any reason. The limited license herein granted shall be co -extensive with the term of this Agreement or any extension thereof. 4.7 Independent Contract Consideration. Contemporaneously with the execution of this Agreement, Buyer shall deliver to City a check in the amount of One Hundred Dollars and 00/100 ($100.00) ("Independent Contract Consideration"), which amount the Parties bargained for and agreed to as consideration for the City's grant to Buyer of Buyer's right to purchase the Property pursuant to the terms hereof and for City's execution, delivery, and performance of this Agreement. The Independent Contract Consideration is in addition to and Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 5 11-10 independent of any other consideration or payment provided in this Agreement, is nonrefundable under any circumstances, will be retained by City notwithstanding any other provisions of this Agreement and will be applied against the Purchase Price in the event the Closing occurs hereunder. S. BROKERS. The City did not use a broker and no brokerage fees have been incurred by City. 6. CLOSING DATE. 6.1 Initial Closing Date. Escrow shall close on or before January 13, 2017 ("Closing Date"). The terms "Close of Escrow or "Closing" are used herein to mean the time City's Grant Deed is filed for record by the Escrow Holder in the Office of the County Recorder of Orange County, California. City and Buyer each specifically agrees to strictly comply and perforin its obligations herein in the time and manner specified and waives any and all rights to claim such compliance by mere substantial compliance with the terms of this Agreement. 6.2 City and Buyer shall have the right, but not the obligation, to extend the Closing Date by mutual written agreement. 6.3 Distribution of Documents. Following the Close of Escrow, the Escrow Holder shall distribute the documents as follows: (a) To Buyer: (i) One (1) certified conformed copy of the Grant Deed, the original to be mailed to Buyer following recordation thereof; (ii) One (1) duplicate original of the Non -Foreign Affidavit; and (iii) One (1) certified copy, conformed if recorded, of any other docuznent delivered to the Escrow Holder by City or Buyer pursuant to the terms hereof. (b) To City: (i) One (1) certified conformed copy of the Grant Deed, the original to be mailed to Buyer following recordation thereof; and (ii) One (1) certified copy, conformed if recorded, of any other document delivered to the Escrow Holder by City or Buyer pursuant to the teens hereof. Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 6 7. TITLE POLICY. 7.1 Title Policy to be Issued b Cit . When the Escrow Holder holds for City the Grant Deed in favor of Buyer executed and aclmowledged by City covering the Property, the Escrow Holder shall cause to be issued and delivered to City and Buyer as of the Closing a CLTA standard coverage policy of title insurance ("Title Policy"), or, upon Buyer's request therefore, an ALTA standard coverage policy of title insurance, issued by Title Company, with liability in the amount of the Purchase Price, covering the Property and showing title vested in Buyer free of encumbrances, except: (a) All nondelinquent general and special real property taxes and assessments for the current fiscal year; (b) The deed restrictions as fiu-ther set forth in Section 10 below; (c) Easements, encumbrances, covenants, conditions, restrictions, reservations, rights-of-way and other matters of record, as approved or deemed approved by City pursuant to Section 4.4 above; (d) The standard printed exceptions and exclusions contained in the CLTA or ALTA form policy; and (e) Any exceptions created or consented to by Buyer, including without limitation, any. exceptions arising by reason of Buyer's possession of or entry on the Property. 8. CONDITIONS PRECEDENT TO CLOSE OF ESCROW. 8.1 Conditions to Bu er's Obligations. The obligations of Buyer under this Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by Buyer of each of the following conditions precedent: (a) Title Company shall issue the Title Policy as required by Section 7 of this Agreement insuring title to the Property vested in Buyer or other vestee designated by City for vesting purposes only; (b) The Escrow Holder holds and shall deliver to Buyer the instruments and funds, if any, accruing to Buyer pursuant to this Agreement; (c) City has delivered all documents required to be delivered under Section 4.2 above; (d) All representations and warranties specified in Section 10.1 are tme and correct; and (e) Buyer's approval of any other conditions specified in this Agreement. Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 7 11-12 8.2 Conditions to City's Obligations. The obligations of City under this Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by City of each of the following conditions precedent: (a) The Escrow Holder holds and shall deliver to City the instruments and fiends accruing to City pursuant to this Agreement. 9. ESCROW PROVISIONS. 9.1 Escrow Instructions. This Agreement, when signed by City and Buyer, shall also constitute Escrow instructions to the Escrow Holder. If required by the Escrow Holder, City and Buyer agree to execute the Escrow Holder's standard Escrow instructions, provided that the same are consistent with and do not conflict with the provisions of this Agreement. In the event of any such conflict, the provisions of this Agreement shall prevail. 9.2 General Escrow Provisions. The Escrow Holder shall deliver the Title Policy to the Buyer and instruct the Orange County Recorder to mail the Grant Deed to Buyer at the address set forth in Section 15.16 after recordation. All funds received in this Escrow shall be deposited in one (1) or more general escrow accounts of the Escrow Holder with any bank doing business in Orange County, California, and may be disbursed to any other general escrow account or accounts. All disbursements shall be made by the Escrow Holder's check. This Agreement and any modifications, amendments, or supplements thereto may be executed in counterparts and shall be valid and binding as if all of the parties' signatures were on one {1) document. 9.3 Proration of Real Property Taxes. All nondelinquent general and special real property taxes shall be prorated to the Close of Escrow on the basis of a thirty (30) calendar day month and a three hundred sixty day (360) calendar year. In the event that property taxes are assessed on a parcel of real property which includes land other than the Property, such proration shall include only taxes attributable to the Property, calculated in terms of total gross square feet of land assessed pursuant to the tax statement versus total gross square footage of the Property. Any supplemental tax bills received after Close of Escrow shall be paid by City to the extent they relate to a period prior to Close of Escrow, and by Buyer, to the extent they relate to a period after Close of Escrow. If a supplemental tax bill covers a period commencing before and continuing after Close of Escrow, the party named in the bill will pay the tax and the other party shall reimburse the first party its pro rata share within thirty (30) calendar days after receipt of a copy of the tax bill and evidence of the second Party's payment of same. The provisions of this Section shall survive Close of Escrow. If either Party fails to pay its pro rata share of taxes by the times herein provided, interest shall accrue on all unpaid amounts from when owing until paid at five percent (5%) over the Federal Discount Rate quoted by the Federal Reserve Bank of San Francisco on the twenty fifth (25th) day of the month preceding the date interest commences to accrue. 9.4 Payment of Costs. City shall pay one-half (112) of the Escrow fee, title insurance premiums for that portion of the Title Policy premium which would be incurred for a CLTA form policy, and the charge for drawing the Grant Deed. Buyer shall pay the one-half (112) of the Escrow fee, charges for recording the Grant Deed, and that portion of the Title Policy Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 8 11-13 premium which is attributable to the additional cost of obtaining any additional coverage requested by City, including the difference between CLTA and ALTA coverage. All other costs of Escrow not otherwise specifically allocated by this Agreement shall be apportioned between the Parties in a manner consistent with the custom and usage of Escrow Holder. This transaction is exempt from payment of doctunentary transfer taxes. 9.5 Termination and Cancellation of Escrow. Time is of the essence of this Agreement. Unless otherwise agreed to as provided by Section 6.2, if Escrow fails to close as provided in Section 6 above, Escrow shall terminate automatically without further action by the Escrow Holder or any Party, and the Escrow Holder is instructed to return all fields and documents then in Escrow to the respective depositor of the same with the Escrow Holder. Cancellation of Escrow, as provided herein, shall be without prejudice to whatever legal rights City or Buyer may have against each other arising from the Escrow or this Agreement. 10. REPRESENTATIONS AND WARRANTIES. 10.1 Rgpresentations and Warranties. City hereby makes the following representations and warranties to Buyer, each of which (i) is material and relied upon by Buyer in inaking its determination to enter into this Agreement; (ii) is true in all respects as of the date hereof and shall be true in all respects on the date of Close of Escrow on the Property; and (iii) shall survive the Close of Escrow of the purchase and sale of the Property as well as any future transfer of the Property to Buyer or any transferee, successor or assignee of Buyer: (a) City has received no notice or has no actual knowledge that any govermnental authority or any employee or agent thereof considers any construction of the proposed improvements on the Property or the present or proposed operation, use or ownership of the Property to violate or have violated any ordinance, rule, law, regulation or order of any government or agency, body or subdivision thereof, or that any investigation has been commenced or is contemplated respecting such possible violations. (b) There are no pending or threatened litigation, allegations, lawsuits or claims, whether for personal injury, property damage, landlord -tenant disputes, property taxes, contractual disputes or otherwise, which do or may affect the Property or the operation or value thereof, and there are no actions or proceedings pending or, to the best of City's knowledge, threatened against City before any court or administrative agency in any way connected with the Property and neither the entering into of this Agreerncnt nor the consummation of the transactions contemplated hereby will constitute or result in a violation or breach by City of any judgment, order, writ, injunction or decree issued against or imposed upon it. There is no action, suit, proceeding or investigation pending or threatened against City which would become a cloud on City's title to and have a material adverse impact upon the Property or any portion thereof or which questions the validity or enforceability of the transaction contemplated by this Agreement or any action taken pursuant hereto in any court or before or by any federal, district, county, or municipal department, commission, board, bureau, agency or other govertimental instrumentality. Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 9 11-14 (c) There are no contracts, leases, claims or rights affecting the Property and no agreements entered into by or under City shall survive the Close of Escrow that would adversely affect Buyer's rights with respect to the Property except as heretofore disclosed in writing by City to Buyer. (d) City has the unimpeded power and authority to execute, deliver and perform City's obligations under this Agreement and the documents executed and delivered by City pursuant hereto. All representations and warranties made hereunder are in addition to any representations and warranties implied by law and in no event shall this Section 10.1 be construed to limit, diminish or reduce any obligation of disclosure implied upon City by law. The representations and warranties of City set forth in this Agreement hereof shall survive Closing for a period of one (1) year. City shall have no liability to Buyer for a breach of any representation or warranty unless written notice ("Breach Notice") containing a description of the specific nature of such breach shall have been given by Buyer to City prior to the expiration of said one year period and an action shall have been commenced by Buyer against City within sixty (60) days following the expiration of such one (1) year period ("Outside Date"). 10.2 Disclaimer of Representations and Warranties. Buyer acknowledges that as of Close of Escrow it will have had an adequate opportunity to inspect the Property and to investigate its physical characteristics and conditions. Upon the Close of Escrow, Buyer shall be deemed to have waived any and all objections to the physical characteristics and conditions of the Property which would be disclosed by a reasonable and diligent inspection. Buyer acknowledges that, except as specifically provided herein, neither City nor any of its employees, agents, or representatives has made any representations, warranties or agreements to or with Buyer on behalf of City as to any matters concerning the Property, the present use thereof, or the suitability of Buyer's intended use of the Property. The foregoing disclaimer includes, without limitation, topography, climate, air, water rights, utilities, present and future zoning, soil, subsoil, the acreage of the Property or square footage of buildings located thereon, the purpose to which the Property is suited, drainage, and access to public roads. Buyer further acknowledges and agrees that the Property is to be purchased, conveyed, and accepted by Buyer in its present condition, "AS -IS," and that no patent or latent physical condition of the Property, whether or not known or discovered, shall affect the rights of either Party hereto. Buyer has investigated and has knowledge of operative or imposed governmental laws and regulations (including, but not limited to, zoning, environmental, including specifically the regulations of the Environmental Protection Agency, and land use laws and regulations) to which the Property may be subject, and is acquiring the Property on the basis of its review and determination of the application and effect of such laws and regulations. Buyer has neither received nor relied upon any representations concerning such laws and regulations made by City, City's employees, agents, or any other person acting on behalf of City. Any agreements, warranties or representations not expressly contained in this Agreement shall in no way bind City. IN ADDITION TO BUYER'S ACCEPTANCE OF THE PROPERTY IN AN "AS IS" CONDITION, BUYER EXPRESSLY ACKNOWLEDGES AND AGREES TO THE Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 10 11-15 FOLLOWING CONDITIONS UNDER WHICH THE PROPERTY IS BEING TRANSFERRED TO BUYER BUYER ACKNOWLEDGES AND AGREES THAT THE PURCHASE IS FOR PROPERTY THAT CONSISTS OF A NON -CONFORMING USE AND NONCONFORMING STRUCTURE THAT IS DEFICIENT AS TO PARKING. BUYER ACKNOWLEDGES AND AGREES THAT THE BUILDING IS STRUCTURALLY DEFICIENT AND WILL BE REQUIRED TO UNDERGO A STRUCTURAL RETROFIT BEFORE OCCUPANCY. BUYER ACKNOWLEDGES AND AGREES THAT THE EXISTING BUILDING WAS CONSTRUCTED WITHOUT FIRE SPRINKLERS AND WILL BE REQUIRED TO MEET CURRENT ADOPTED FIRE SPRINKLER AND FIRE ALARM REQUIREMENTS. BUYER ACKNOWLEDGES AND AGREES TO A DEED RESTRICTION RECORDED ON TITLE LIMITING THE PROPERTY USES TO: THEATER, CULTURAL CENTER, EVENT CENTER, OR OTHER PERFORMING ARTS USES. ANCILLARY COMMERCIAL USES OF THE PROPERTY SHALL BE PERMITTED. BUYER ACKNOWLEDGES AND AGREES TO CITY'S FIRST RIGHT OF REFUSAL TO REPURCHASE THE PROPERTY FROM BUYER, SHOULD BUYER ELECT NOT TO REDEVELOP THE PROPERTY AS A THEATER, CULTURAL CENTER, EVENT CENTER, OR FOR OTHER PERFORMING ARTS USES. THE CITY'S OPTION TO REPURCHASE THE PROPERTY SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT. BUYER ACKNOWLEDGES AND AGREES THAT BUYER SHALL BE RESPONSIBLE FOR OBTAINING ALL NECESSARY PERMITS AND ENTITLEMENTS RELATED TO THE PROPERTY, INCLUDING BUT NOT LIMITED TO THOSE PURSUANT TO THE CITY OF NEWPORT BEACH, THE CALIFORNIA COASTAL COMMISSION, THE CALIFORNIA ENVIRONMENTAL QUALITY ACT, AND THE CALIFORNIA ALCOHOL AND BEVERAGE CONTROL. BUYER FURTHER ACKNOWLEDGES THAT THE PROPERTY IS IMPROVED WITH STRUCTURES THAT DO NOT COMPLY WITH CURRENT BUILDING STANDARDS REQUIRED UNDER THE AMERCANS WITH DISABILITIES ACT OF 1990 OR ITS IMPLEMENTING REGULATIONS AND CITY'S ENERGY CODE. ALL FUTURE DEVELOPMENT OF THE PROPERTY WILL REQUIRE COMPLIANCE WITH ALL FEDERAL, STATE AND LOCAL BUILDING STANDARDS AND CODES APPLICABLE TO THE IMPROVEMENTS. BUYER REPRESENTS AND WARRANTS THAT BUYER IS A KNOWLEDGABLE, EXPERIENCED, AND SOPHISTICATED BUYER OF REAL ESTATE AND THAT, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER HAS RELIED AND SHALL RELY SOLELY ON (A) BUYER'S OWN EXPERTISE AND THAT OF BUYER'S CONSULTANTS PERTAINING TO DUE DILIGENCE AND OTHERWISE RELATING TO EVALUATING THE PURCHASE OF THE PROPERTY AND ITS OPERATIONS, AND (B) BUYER'S OWN KNOWLEDGE OF THE PROPERTY BASED .�....r...�....I Lab Holding, LLC Agreement for Ptwchase and Sale of Real Property Page I 1 11-16 ON BUYER'S INVESTIGATIONS AND INSPECTIONS OF AND DUE DILIGENCE REGARDING THE PROPERTY AND ITS OPERATIONS. CITY AND BUYER ACKNOWLEDGE AND AGREE THAT THE FOREGOING PROVISIONS OF THIS SECTION HAVE BEEN FREELY BARGAINED FOR BY THE PARTIES AND CONSTITUTES A MATERIAL CONSIDERATION TO CITY FOR THE SALE OF THE PROPERTY AND BUT FOR THIS PROVISION CITY WOULD NOT SELL THE PROPERTY TO BUYER. CITY'S INITIALS r BUYER'S IN.LT,IALS 10.3 Changed Circumstances, If City becomes aware of any fact or circumstance which would change or render incorrect, in whole or in part, any representation or warranty made by City under this Agreement, whether as of the date given or any time thereafter through the Close of Escrow and whether or not such representation or warranty was based upon City's knowledge and/or belief as of a certain date, City will give immediate written notice of such changed fact or circumstance to Buyer, but such notice shall not release City of its liabilities or obligations with respect thereto. City shall issue a certificate as of the Close of Escrow stating that all the representations and warranties contained in Section 10.1 are true and correct as of said date, or setting forth in detail which of such matters are not true and correct. 10.4 Indemnity by Buyer. Buyer shall hold harmless, indemnify and defend City, and the Property from and against (i) except for obligations, liabilities, claims, liens and encumbrances disclosed herein or which Buyer specifically agrees by the terms of this Agreement to assume or take subject, any and all obligations, liabilities, claims, liens or encumbrances, whether direct, contingent or consequential and no matter how arising, in any way related to the Property and arising or accruing on or before the date first above written, or in any way related to or arising from any negligent act, conduct, or omission by Buyer in any way related to the Property or Buyer's breach or default under this Agreement at any time or times on or before the date of the Close of Escrow for the purchase and sale of the Property, including without limitation, any damage to the Property or injury to or death of any person, employees or agents of Buyer; (ii) all costs and expenses, including attorneys' fees, relating to any actions, suits or judgments incident to any of the foregoing; provided that in no event shall any of the indemnities described above in this Section 10.4 arise from any obligations, liabilities, claims, liens or encumbrances that arise from City's gross negligence, willful misconduct or breach or default under this Agreement. Should Buyer fail to discharge or undertake to defend City or the Property pursuant to the indemnities set forth in this Section 10.4 within thirty (30) calendar days after having received written notice from City, then City may settle such liability and Buyer's liability to City shall be conclusively established by such settlement, the amount of such liability to include both the settlement consideration and the reasonable expenses, including attorney's fees, incurred by City in effecting such settlement. 11. SETTLEMENT OF CLAIMS, 11.1 Release of Claims by Buyer. In exchange for the promises contained in this Agreement, and except as to City's obligations set forth in this Agreement or arising from Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 12 11-17 City's gross negligence or willful misconduct, Buyer hereby waives, releases and forever discharges, and agrees to the extent permitted by law that he will not in any manner institute, prosecute or pursue, any and all complaints, charges, claims for relief, demands, damages, suits, actions or causes of action, of any kind, whether in law or in equity, which he asserts or could assert, at common law or under any statute, rule, regulation, order or law, whether federal, state or local, or on any grounds whatsoever, against the City and/or any of its current or former officers, councilmen, agents, representatives, employees, successors and assigns with respect to any event, matter, claim, damage or injury, of any kind related to the Property or the claims made thereunder or in connection therewith as of the date of this Agreement . 11.2 Waiver of Unknown Claims. With respect to the release of claims by Buyer set forth in Section 11, 1, it is agreed and understood that the releases being provided by each of the Parties above apply to all injuries and damages, whether now known or unknown, and whether now existing or which may result in the future due to the actions or omissions of the Parties on or before the Effective Date, With respect to the subject matter of this Agreement, the Parties acknowledge that they have each been fully advised of and understand the provisions of Section 1542 of the California Civil Code which reads: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing this release, which if known by hint or her must have materially affected his or her settlement with the debtor. " In further consideration of the promises and payments pursuant to this Agreement, each Party agrees to, and does hereby, waive and relinquish all rights afforded to him, her or it under California Civil Code Section 1542, or any similar law of any State or territory of the United States or other jurisdiction with respect to the matters of this Agreement. Notwithstanding the above, nothing in this Agreement shall be deemed to waive or release any Party as to any of its obligations or rights under this Agreement. deed. The foregoing provisions shall survive the Closing hereunder and the recordation of the 12. DAMAGE, DESTRUCTION AND CONDEMNATION. 12.1 Risk of physical Loss. Risk of physical loss to the Property shall be borne by City prior to the Close of Escrow and by Buyer thereafter. In the event that the Property shall be damaged by fire, flood, earthquake or other casualty and the estimated cost to repair same exceeds Two Hundred Thousand Dollars and 00/100 ($200,000.00), Buyer may, at its option, elect not to acquire the Property. If Buyer does not so elect or the estimated cost to repair the damage is less than Two Hundred Thousand Dollars and 001100 ($200,000.00), Buyer shall complete the acquisition of the Property, in which case City shall assign to Buyer the interest of City in all insurance proceeds relating to such damage. In the event that such damage shall occur and Buyer elects not to purchase the Property as above provided, then this Agreement shall be terminated and Buyer shall be entitled to the return of all funds and documents deposited hereunder. Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 13 11-18 12.2 Condemnation. In the event that, prior to the Close of Escrow, any governmental entity shall conurnence any actions of eminent domain or similar type proceedings to take any portion of the Property, Buyer shall have the option either to (i) elect not to acquire the Property, or (ii) complete the acquisition of the Property, in which case Buyer shall be entitled to all the proceeds of such taking. 13. Possession. Possession of the Property shall be delivered to Buyer as of Close of Escrow. In the event any personal property remains on the Property following the Close of Escrow, it shall automatically become the property of Buyer. 14. LIQUIDATED DAMAGES. IF BUYER SHOULD DEFAULT FOR ANY REASON WHATSOEVER UNDER THIS AGREEMENT (EXCEPTING ONLY MATERIAL DEFAULT BY CITY HEREUNDER), THEN AND IN SUCH EVENT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, CITY AND BUYER AGREE THAT CITY WILL INCUR DAMAGES BY REASON OF SUCH DEFAULT BY BUYER, WHICH DAMAGES SHALL BE IMPRACTICAL AND EXTREMELY DIFFICULT, IF NOT IMPOSSIBLE, TO ASCERTAIN. CITY AND BUYER, IN A REASONABLE EFFORT TO ASCERTAIN WHAT CITY'S DAMAGES WOULD BE IN THE EVENT OF SUCH DEFAULT BY BUYER HAVE AGREED BY PLACING THEIR INITIALS BELOW THAT THE SUM OF FIFTY THOUSAND DOLLARS ($50,000.00) SHALL BE DEEMED TO CONSTITUTE A REASONABLE ESTIMATE OF CITY'S DAMAGES UNDER THE PROVISIONS OF SECTION 1671 OF THE CALIFORNIA CIVIL CODE. IN THE EVENT OF AND FOR SUCH DEFAULT BY BUYER, BUYER SHALL DELIVER SAID SUM IN GOOD FUNDS TO CITY WITHIN FIVE (5) CALENDAR DAYS AFTER CITY'S WRITTEN DEMAND THEREFOR AS CITY'S SOLE MONETARY REMEDY THEREFOR., UNLESS BUYER WRONGFULLY REFUSES TO CAUSE ESCROW HOLDER TO CANCEL THE ESCROW OR TO RELEASE THE DEPOSIT TO CITY, IN WHICH INSTANCE CITY SHALL ALSO BE ENTITLED TO ALL COSTS AND EXPENSES, INCLUDING ACTUAL ATTORNEYS' FEES INCURRED BY CITY WITH RESPECT TO THOSE CONSEQUENTIAL DAMAGES, IF ANY, WHICH MAY BE INCURRED BY CITY, AFTER THE CLOSING DATE BY REASON OF THE CLOUD ON TITLE TO THE PROPERTY WHICH MAY RESULT FROM BUYER WRONGFUL FAILURE TO CANCEL THE ESCROW AND THIS AGREEMENT. CITY'S INITIALS BUYER'S INITIALS 15. MISCELLANEOUS. 15.1 City Authorization. The City Manager of the City of Newport Beach or his/her designee is hereby authorized, on behalf of the City, to sign all documents necessary and appropriate to carry out and implement this Agreement and to administer the City's obligations, responsibilities and duties to be performed under the Agreement. 15.2 Assignment. Buyer shall not have the right to assign this Agreement or any interest or right hereunder or under the Escrow or to nominate another party to take title to the Property without the prior written consent of City, which consent cannot be unreasonably Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 14 11-19 withheld by City. In no event shall Buyer be released of liability in the event of an assignment or nomination. 15.3 Affixation of Revenue Stamps. The Escrow Holder is hereby specifically instructed to attach documentary transfer and/or revenue stamps to the Grant Deed only after recordation of the Grant Deed. 15.4 Cooperation. City and Buyer agree to cooperate with one another, at no cost or expense to the cooperating Party, in satisfying the conditions to Close of Escrow. City shall be responsible for proceeding with diligence and in good faith to satisfy the conditions, if any, to City's performance set forth in Section 8.1 and Buyer shall be responsible for proceeding with diligence and in good faith to satisfy the conditions, if any, to City's performance set forth in Section 8.2. 15.5 Qualification; Authority. Each Party represents and warrants that it is duly formed, is authorized to do business in the state in which the Property is located and that it has been duly authorized to enter into and perform this Agreement. 15.6 No Attorneys' Pees. In any action between the Parties hereto seeking enforcement of any of the terms and provisions of this Agreement or the Escrow, or in connection with the Property, the prevailing Party in such action shall not be entitled to recover from the other Party its attorneys' fees. 15.7 Interpretation; Governing Law. This Agreement shall be construed according to its fair meaning and as if prepared by both Parties hereto. This Agreement shall be construed in accordance with the laws of the State of California in effect at the time of the execution of this Agreement. Titles and captions are for convenience only and shall not constitute a portion of this Agreement. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others wherever and whenever the context so dictates. 15.8 No Waiver. No delay or omission by either Party hereto in exercising any right or power accruing upon the compliance or failure of performance by the other Party hereto under the provisions of this Agreement shall impair any such right or power or be construed to be a waiver thereof. A waiver by either Party hereto of a breach of any of the covenants, conditions or agreements hereof to be performed by the other Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions hereof. 15.9 Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made by written instrument or endorsement thereon and in each such instance executed on behalf of each Party hereto. 15.10 Severability. If any term, provision, condition or covenant of this Agreement or the application thereof to any Party or circumstances shall, to any extent, be held invalid or unenforceable, the remainder of this instrument, or the application of such term, provision, condition or covenant to persons or circumstances other than those as to whom or Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 15 11-20 which it is held invalid or unenforceable, shall not be affected thereby, and each terns and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 15.11 Merger of Prior AjUeements and Understandings. This Agreement and other documents incorporated herein by reference contain the entire understanding between the Parties relating to the transaction contemplated hereby and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged herein and shall be of no further force or effect. 15.12 Covenants to Survive Escrow. The covenants and agreements contained herein shall survive the Close of Escrow and, subject to the limitations on assignment contained in Section 15.2 above, shall be binding upon and inure to the benefit of the parties hereto and their representatives, heirs, successors and assigns. 15.13 No Withholding Because Non -Foreign City. City represents and warrants to Buyer that City is not, and as of the Close of Escrow will not be, a foreign person within the meaning of Internal Revenue Code Section 1445 and that it will deliver to Buyer on or before the Close of Escrow the Non -Foreign Affidavit as described hereinabove, pursuant to Internal Revenue Code Section 1445(b)(2) and the Regulations promulgated thereunder. 15.14 Time is of the Essence. Time is hereby expressly made of the essence of this Agreement, 15.15 Execution in Counterpart. This Agreement may be executed in several counterparts, and all so executed shall constitute one (1) agreement binding on all Parties hereto, notwithstanding that all Parties are not signatories to the original or the same counterpart. 15.16 Notices. Any notice which either Party may desire to give to the other Party or to the Escrow Holder must be in writing and shall be effective upon delivery if sent via overnight snail with tracking; upon delivery, if delivered by confirmed facsimile or email (with a back up sent by first class mail); when personally delivered, if sent postage prepaid by registered or certified mail, return receipt requested; three (3) business days after deposit in the United States mail, registered, certified, postage fully prepaid and addressed to the respective Parties as set forth below or to such other address and to such other persons as the Parties may hereafter designate by written notice to the other parties hereto: To City: City Manager City of Newport Beach 100 Civic Center Drive PO Box 1768 Newport Beach, CA 92658 (949) 644-3309 Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 16 11-21 Copy to: City of Newport Beach 100 Civic Center Drive PO Box 1768 Newport Beach, CA 92658 Attn: Real Property Administrator (949) 644-3131 (949) 644-3139 (fax) To Buyer: Lab Holding, LLC Attn: Shaheen Sadeghi 709 Randolph Avenue Costa Mesa, CA 92626 Copy to: William M. Hensley 25 Pacific Crest Laguna Niguel, CA 92677 Attn: Real Property Administrator (949) 275-4322 wmichaothenslcy@glnail.com [SIGNATURES ON FOLLOWING PAGE] Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page 17 11-22 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement of Purchase and Sale of Real Property and Escrow Instructions as of the date set forth above. 46CITY"9 "BUYER" CITY OF NEWPORT BEACH, a California LAB HOLDING, LLC, a California limited municipal corporation and charter city liability company By: Dave Kiff City Manager ATTEST: By: Leilani L Brown City Clerk APPROVED AS TO FORM: By: Aaron C. arp (AX, aw 1 LOA 11 City Attorney Name: Shaheen Sadeghi Title: Managing Member Attachments: Exhibit "A" — Property Legal Description Exhibit "B" — Property Depiction Exhibit "C" — Grant Deed [END OF SIGNATURES] Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page IS 11-23 EXHIBIT "A" PROPERTY LEGAL DESCRIPTION All that certain real property situated in the County of Orange, State of California, described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, County of Orange, State of California, as shown on a map recorded in Book 4, Page 11 of Miscellaneous Maps, in the Office of the County Recorder of said County, Excepting all oil, gas minerals and other hydrocarbon substances lying below a depth of 500 feet from the surface of said land, but without the right of entry upon any portion of the surface above a depth of 500 feet, to take, market, mine, explore or drill for same, as reserved in deed recorded April 28, 1969 in Book 8939, Page 653 of Official Records, Assessor's Parcel Number: 048-135-02 Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page A-1 11-24 EXHIBIT SLB" PROPERTY DEPICTION Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page B-1 11-25 Exhibit "B" 4. dun s o jo G X07`.. 717 s} , v , ' a cr> 0 4 T02 12 PropertNk- p4 ,8 10,4 ry 1 a F 4 rOs y ` 104 s; 4,1 Op' ..��•, ,�� . T�' ..fir `' 1 • � � 4s co C CO n p Cc t K - w $ 4 ia. . - Ir - r r 4 - Newport Beach accuracy Every reasonable effort has been made to assure the accuracy of the data provided, however, The City of GIS Newport Beach and its employees and agents disclaim any and all responsibility from or relating to �v�>c��1�. any results obtained in its use. 0 100 200 Imagery: 2009-2013 photos provided by Eagle u Z Feet Imaging www.eagleaerial.com 8123/2016 11-26 EXHIBIT "C" GRANT DEED Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page C-1 11-27 RECORDING REQUESTED BY CITY OF NEWPORT BEACH AND WHEN RECORDED MAIL TO: Attn: City Clerk City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 ORDER: ESCROW NO.: Exempt from recording fee per Government Code §§ 6103 and .27383 (Space Above This Line For Recorder's Use Only) GRANT DEED THE UNDERSIGNED GRANTOR(S) hereby request that the tax declaration not be made a part of the permanent record in the office of the county recorder pursuant to section 11932 of the Revenue and Taxation Code. City of Newport Beach Parcel No: 048-13502 FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, City of Newport Beach, a municipal corporation and charter city hereby GRANTS to Lab Holding LLC, a California limited liability company the following real property in the City of Newport Beach, County of Orange, State of California described in EXHIBIT "A" and delineated on EXHIBIT "B," which exhibits are attached hereto and by this reference are incorporated in and made a part of this Deed, SUBJECT TO: 1) The condition that Grantees, their successors, and assigns, shall at all times use the property for theatrical, cultural center, event center, or for other related performing arts uses. Ancillary commercial uses of the property shall be permitted. 2) The Grantor shall retain the first right of refusal to repurchase the property, should the Grantee elect to not redevelop or use the property in the condition stated above. In the event that the above condition is not satisfied or there is a breach of such condition, Grantor, its successor and assigns, may seek any remedy at law or in equity including, without limitation the right to seek specific performance or to enjoin the continuance of the breach of any such condition. It is specifically understood that any of the foregoing remedies may be employed at the option of the Grantor, and the failure of any of such Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page C-2 11-28 remedies to be employed upon any one or more of any occurrence giving rise to such remedies shall not be a waiver of the right to employ such remedies upon the continuance of such occurrences or any subsequent occurrence. Dated: City of Newport Beach, a municipal corporation and charter city By: Dave Diff City Manager Approved as to Form: CITY A E 'S OFFICE '} �r-err f By: Aaron C. Harp (AM Q+V'.alIU City Attorney Attest; By: Leilani I. Brown City Clerk A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfiilness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF )ss. On , 20 before me, , Notary Public, personally appeared , proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ics), and that by his/her/their signatures(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (seal) Signature Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page C-3 11-29 EXHIBIT "A" LEGAL DESCRIPTION All that certain real property situated in the County of Orange, State of California, described as follows: Lots 4 and 5, Block 10, Balboa Tract, in the City of Newport Beach, County of Orange, State of California, as shown on a map recorded in Book 4, Page 11 of Miscellaneous Maps, in the Office of the County Recorder of said County. Excepting all oil, gas minerals and other hydrocarbon substances lying below a depth of 500 feet from the surface of said land, but without the right of entry upon any portion of the surface above a depth of 500 feet, to take, market, mine, explore or drill for same, as reserved in deed recorded April 28, 1969 in Book 8939, Page 653 of Official Records. Assessor's Parcel Number: 048-135-02 Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page C-4 11-30 EXHIBIT "B" PROPERTY DEPICTION Lab Holding, LLC Agreement for Purchase and Sale of'Real Property Page C -S 11-31 Exhibit "B" r lot *"0. `� Z,; O~ "F%0,� e h� "'0 -107 O % h 1100 s t"i _ �;,��� Propel ty ` 0¢ 03 } ?0O02 t , � i � ^ 4 104J 47-7 �. T � r, � � •-:,�+� �� max, y�yw 105 X04• jj +�* �r0� 100' Ali 47 ti Cb cb co cc A 14 ^ �� �� + �� �� my •� �� � � '+• Or _14 Newport w po Disclaimer: Every reasonable effort has been made to assure the accuracy of the data provided, however, The City of GIS Newport Beach and its employees and agents disclaim any and all responsibility from or relating to ��E`wP4gT any results obtained in its use. 0 100 200 y Imagery: 2009-2013 photos provided by Eagle Feet Imaging wvvw.eagleaerial.com �,tir.nad'r 8/2312016 11-32 CERTIFICATE OF ACCEPTANCE This CERTIFICATE OF ACCEPTANCE is to certify that the interest in real property conveyed by the Grant Deed at the address commonly known as 707 E. Balboa Boulevard, located in the City of Newport Beach, County of Orange, State of California 92661 (A.P.N. 048- 135-02) dated , 2016 from the City of Newport Beach, a California municipal corporation and charter city, as Grantor and Lab Holding, LLC, a California limited liability company, as Grantee, is hereby accepted on , 2016, by the undersigned officer on behalf of the City of Newport Beach pursuant to authority conferred by Resolution No. 1992-82 of the City Council adopted on July 27, 1992. The City consents to the recordation of said document in the Office of the Recorder of Orange County, State of California. APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE Date: C� By: �f) Aaron C. Harp, City Attorney �^ oNll.ccjl�n ATTEST: Date: Leilani I. Brown, City Clerk CITY OF NEWPORT BEACH, A California municipal corporation Date: By: Dave Kiff, City Manager RECOMMENDED FOR ACCEPTANCE: +COMMUNITY DEVELOPMENT DEPARTMENT Date: By: Kimberly Director A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of ORANGE Brandt, Community Development On before me, , Notary Public, personally appeared DAVE KIFF, who proved to ine on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity(ics), and that by his signature on the instrument the person, or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Lab Holding, LLC Agreement for Purchase and Sale of Real Property Page C-6 11-33 Attachment B Appraisal — Highest and Best use 11-34 APPRAISAL REPORT LAND VALUE STUDY BALBOA THEATER PROPERTY 707 EAST BALBOA BOULEVARD NEWPORT BEACH, CALIFORNIA ASSESSOR'S NO.: 048-135-02 R. P. LAURAIN & ASSOCIATES I N C O R P O R A T E D 11-35 APPRAISAL REPORT LAND VALUE STUDY BALBOA THEATER PROPERTY 707 EAST BALBOA BOULEVARD NEWPORT BEACH, CALIFORNIA ASSESSOR'S NO.: 048-135-02 Effective Date of Market Value Study May 8, 2015 Prepared for CITY OF NEWPORT BEACH 100 Civic Center Drive Newport Beach, California 92660 Prepared by R. P. LAURAIN & ASSOCIATES, INC. 3353 Linden Avenue, Suite 200 Long Beach, California 90807 Date of Report May 18, 2015 R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 11-36 R. P. LAURAIN & ASSOCIATES INCORPORATED 3353 LINDEN AVENUE, SUITE 200 LONG BEACH, CALIFORNIA 90807 TELEPHONE (562) 426-0477 May 18, 2015 FACSIMILE (562) 988-2927 Ms. Lauren Wooding Whitlinger Real Property Administrator City of Newport Beach Community Development Department 100 Civic Center Drive Newport Beach, California 92660 Subject: Land Value Study Balboa Theater Property 707 East Balboa Boulevard Newport Beach, California Assessor's No.: 048-135-02 Dear Ms. Wooding Whitlinger: In accordance with your request and authorization, I have personally appraised the above -referenced property as of a current date. The appraisal study included (1) an inspection of the subject property from the adjacent public rights-of-way, (2) a review of market data in the immediate and general subject market area, and (3) a valuation analysis. The subject property is located on southerly side of East Balboa Boulevard, beginning 81 feet westerly of Main Street, within the corporate limits of the City of Newport Beach. The site has a rectangular land configuration, is located in the MU -V (Mixed Use - Vertical) zone district, and contains 5,130 square feet of land area. Refer to the accompanying report for a complete description of the subject property. The subject property is improved with a vacated theater building, commonly known as the Balboa Theater Performing Arts Theater. The highest and best use of the subject property is demolition and clearing of the existing building to make way for a mixed use residential/commercial development. As such, certain demolition and clearing costs will be incurred prior to any development of the subject site. The subject land has been appraised accordingly. APPRAISERS - ANALYSTS 11-37 Ms. Lauren Wooding Whitlinger Real Property Administrator City of Newport Beach May 18, 2015 Page 2 The purpose of this appraisal report is to express an estimate of the fair market value of the fee simple interest in the subject property. After consid- ering the various factors which influence the value of the subject property, the fair market value as of May 8, 2015, is: ONE MILLION SIX HUNDRED TWENTY FIVE THOUSAND DOLLARS $1,625,000. The foregoing value is subject to the assumptions and limiting conditions set forth in the Preface Section and the valuation study in the Valuation Analysis Section. No portion of this report shall be amended or deleted. This appraisal report is submitted in accordance with the Uniform Standards of Professional Appraisal Practice, per Standard Rule 2-2(a), as a complete narrative Appraisal Report; an electronic (PDF) copy has also been provided. We have retained a file copy. If you require any additional information from our file, it would be appreciated if you would contact the undersigned. Very truly yours, R. P. LAURAIN & ASSOCIATES, INC. John P. Laurain, ASA Certified General Real Estate Appraiser California Certification No. AG 025754 JPL:II R. P. LAU R A IN & ASS O C I ATE S INCORPORATED 11-38 TABLE OF CONTENTS Title Page Letter of Transmittal Table of Contents PREFACE Location Map Date of Value Purpose of the Appraisal Property Rights Appraised Intended User of Appraisal Intended Use of Appraisal Scope of the Appraisal Appraiser's Certification Assumptions and Limiting Conditions Terms and Definitions SUBJECT PROPERTY DESCRIPTION Vestee Property Address Legal Description Plat Map Site Description Improvements Assessment Data Ownership History Neighborhood Environment VALUATION ANALYSIS Highest and Best Use Analysis Valuation Methodology Sales Comparison Approach Final Estimate of Value Marketing Exposure R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 11-39 TABLE OF CONTENTS (Continued) MARKET DATA Market Data Summary Market Data Photographs Market Data Map ADDENDA Additional Subject Property Photographs Qualifications of Appraiser R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 11-40 PREFACE 11-41 Data use subject to license. TN Scale 1 :81,250 © DeLorme. DeLorme Street Atlas USA® 2015. MN (12.1°E) o Z km www.delorme.com 1" = 1.28 mi Data Zoom 12-0 11-42 DATE OF VALUE The date of value employed in this report, and all opinions and computations expressed herein, are based on May 8, 2015. Said date being generally concurrent with the inspection of the subject property and valuation analysis process. PURPOSE OF THE APPRAISAL The purpose of this appraisal report is to express an estimate of the unencumbered fee simple market value of the subject land, absent any liens, leases, or other monetary encumbrances, as of the date set forth above. Further, it is the purpose of this appraisal report to describe the subject prop- erty, and to render an opinion of the highest and best use based on (1) the character and physical conditions of the property appraised, (2) the require- ments of local governmental authorities affecting the subject property, (3) the reasonable demand in the open market for properties similar to the subject property, and (4) the location of the subject property considered with respect to other existing and competitive areas within the subject area. Further, it is the purpose of this appraisal report to provide an outline of certain factual and inferential information which was compiled and analyzed in the process of completing this appraisal study. PROPERTY RIGHTS APPRAISED The property rights appraised are those of the fee simple interest. Fee simple is defined as, "An absolute fee; a fee without limitations to any particular class of heirs, or restrictions, but subject to the limitations of eminent domain, escheat, police power, and taxation. An inheritable estate." R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-1 11-43 INTENDED USER OF APPRAISAL It is understood that the intended users of the appraisal will be agents and representatives of the City of Newport Beach. INTENDED USE OF APPRAISAL It is understood that the City of Newport Beach will utilize this appraisal report for the establishment of the fair market value of the subject property for the possible disposition thereof. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-2 11-44 CERTIFICATION The undersigned does hereby certify that: I have personally inspected the subject property; I have no present or con- templated future interest in the real estate which is the subject of this summary appraisal report. Also, I have no personal interest or bias with respect to the subject matter of this appraisal report, or the parties involved in this assignment. My engagement in this assignment and the amount of compensation are not contingent upon the reporting or development of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a predetermined or stipulated result, or the occur- rence of a subsequent event directly related to the intended use of this appraisal. Also, to the best of my knowledge and belief the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct. This appraisal report sets forth all of the assumptions and limiting conditions (imposed by the terms of this assignment or by the undersigned), affecting my personal, impartial, and unbiased professional analyses, opinions, and conclusions. The analyses, opinions, and conclusions, were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, and Code of Professional Ethics. As of this date, I have completed the requirements of the Continuing Education Program of the State of California and the American Society of Appraisers; note that duly authorized representatives of said organizations have the right to review this report. No one other than the undersigned prepared the analyses, conclusions, and opinions for this appraisal study; no other person provided significant professional assistance. I have not appraised the subject property, or provided any other services, within the last three gears. v May 18, 2015J n P. Lat4r , ASA ertified General Real Estate Appraiser California Certification No. AG 025754 Renewal Date: April 16, 2017 R . P . LAURA IN _ & A S S O C I A T E S E APPRAISERS - ANALYSTS 1-4 11-45 SCOPE OF THE APPRAISAL The appraiser, in connection with the following appraisal study, has: 1. Been retained, and has accepted the assignment, to make an objective analysis and valuation study of the subject property and to report, without bias, the estimate of fair market value. The subject property is particularly described in the following portion of this report in the section entitled Subject Property Description. 2. Toured the general area by automobile to become acquainted with the extent, condition, and quality of nearby developments, sales and offerings in the area, density and type of development, topographical features, economic con- ditions, trends toward change, etc. 3. Walked within the subject property, and some of the nearby neighborhood, to become acquainted with the current partic- ular attributes, or shortcomings, of the subject property. 4. Completed an inspection of the subject property for the purpose of becoming familiar with certain physical charac- teristics. 5. Made a visual observation concerning public streets, access, drainage, and topography of the subject property. 6. Obtained information regarding public utilities and sanitary sewer available at the subject site. 7. Made, or obtained from other qualified sources, calculations on the area of land contained within the subject property. Has made, or caused to be made, plats and plot plan drawings of the subject property, and has checked such plats and plot plan drawings for accuracy and fair representation. 8. Taken photographs of the subject property, together with photographs of the immediate environs. 9. Made, or caused to be made, a search of public records for factual information regarding the recent sales of the subject R . P . LAURA IN _ & A S S O C I A T E S APPRAISERS - ANALYSTS 1-5 11-46 SCOPE OF THE APPRAISAL (Continued) property, and for recent sales of comparable properties. Has viewed, confirmed the sale price, and obtained certain other information pertaining to each sale property contained in this report. 10. Reviewed current maps, zoning ordinances, and other material for additional background information pertaining to the subject property, and sale properties. 11. Attempted to visualize the subject property as it would be viewed by a willing and informed buyer, as well as a willing and informed seller. 12. Interviewed various persons, in both public and private life, for factual and inferential information helpful in this appraisal study. 13. Formed an opinion of the highest and best use applicable to the subject property appraised herein. 14. Formed an estimate of market value, as of the date of value expressed herein for the subject property. 15. Prepared and delivered this complete summary appraisal report, in accordance with the Uniform Standards of Professional Appraisal Practice, and in summation of all activities outlined above. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-6 11-47 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal is made with the following understanding as set forth in items No. 1 through 13, inclusive: 1. That this narrative Appraisal Report is intended to comply with reporting requirements set forth in the Uniform Stand- ards of Professional Appraisal Practice, under Standard Rule 2-2(a), for an Appraisal Report. The information contained in this appraisal report is specific to the needs of the client; no responsibility is assumed for the unauthorized use of this report. 2. That title to the subject property is assumed to be good and merchantable. Liens and encumbrances, if any, have not been deducted from the final estimate of value. 3. That the appraiser assumes there are no hidden or unappar- ent conditions of the subject property subsoil which would render it more or less valuable, unless otherwise stated. Further, the appraiser assumes no responsibility for such conditions or for the engineering which might be required to discover such conditions. The property appraised is assumed to meet all governmental codes, requirements, and restrictions, unless otherwise stated. 4. That no soils report, topographical mapping, or survey of the subject property was provided to the appraiser; therefore information, if any, provided by other qualified sources per- taining to these matters is believed accurate, but no liability is assumed for such matters. Further, information, estimates and opinions furnished by others and contained in this report pertaining to the subject property and market data were obtained from sources considered reliable and are believed to be true and correct. No responsibility, however, for the accuracy of such items can be assumed by the appraiser. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-7 11-48 ASSUMPTIONS AND LIMITING CONDITIONS (Continued) 5. That unless otherwise stated herein, it is assumed there are no encroachments, easements, soil toxics/contaminants, or other physical conditions adversely affecting the value of the subject property. 6. That no opinion is expressed regarding matters which are legal in nature or which require specialized investigation or knowledge ordinarily not employed by real estate appraisers, even though such matters may be mentioned in the report. 7. That there are no mineral resources on the subject property having a commercial value. Market sales which were exam- ined make no distinction as to the existence of mineral resources or recognition of value therefore. The value of all minerals of all kinds is therefore excluded from the value of the total property. 8. That the appraiser has conducted a visual inspection of the subject property and the market data properties. Should subsequent information be provided relative to changes or differences in (1) the quality of title, (2) physical condition or characteristics of the properties, and/or (3) governmental restrictions and regulations, which would increase or decrease the value of the subject property, the appraiser reserves the right to amend the final estimate of value. 9. That the appraiser, by reason of this appraisal, is not required to give testimony in court or at any governmental or quasi - governmental hearing with reference to the property appraised, unless contractual arrangements have been pre- viously made therefore. 10. That drawings, plats, maps, and other exhibits contained in this report are for illustration purposes only and are not nec- essarily prepared to standard engineering or architectural scale. 11. That this report is effective only when considered in its entire form, as delivered to the client. No portion of this report will be considered binding if taken out of context. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-8 11-49 ASSUMPTIONS AND LIMITING CONDITIONS (Continued) 12. That possession of this report, or a copy thereof, does not carry with it the right of publication, nor shall the contents of this report be copied or conveyed to the public through advertising, public relations, sales, news, or other media, without the written consent and approval of the appraiser, particularly with regard to the valuation of the property appraised and the identity of the appraiser, or the firm with which he is connected, or any reference to the Appraisal Institute, or the American Society of Appraisers, or designa- tions conferred by said organizations. 13. That this appraisal study is considered completely confi- dential and will not be disclosed or discussed, in whole or in part, with anyone other than the client, or persons designated by the client. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-9 11-50 TERMS AND DEFINITIONS Certain technical terms have been used in the following report which are defined herein for the benefit of those who may not be fully familiar with said terms. MARKET VALUE (or Fair Market Value Market value is sometimes referred to as Fair Market Value; the latter is a legal term, and a common synonym of Market Value. Market value as defined in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) is defined as follows: "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 knowl- edgeably, and assuming the price is not affected by undue stim- ulus. 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." SALES COMPARISON APPROACH: One of the three accepted methods of estimating Market Value. This approach consists of the investigation of recent sales of similar properties to determine the price at which said properties sold. The information so gathered is judged and considered by the appraiser as to its comparability to the subject property. Recent comparable sales are the basis for the Sales Comparison Approach. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 1-10 11-51 TERMS AND DEFINITIONS (Continued) COST -SUMMATION APPROACH: Another accepted method of estimating Market Value. This approach consists of estimating the new construction cost of the building and yard improvements and making allowances for appropriate amount of depreciation. The depre- ciated reconstruction value of the improvements is then added to the Land Value estimate gained from the Sales Comparison Approach. The sum of these two figures is the value indicated by the Cost -Summation Approach. INCOME CAPITALIZATION APPROACH: The Income Capitalization Approach consists of capitalizing the net income of the property under study. The capitalization method studies the income stream, allows for (1) vacancy and credit loss, (2) fixed expenses, (3) operating expenses, and (4) reserves for replacement (if applicable), and estimates the amount of money which would be paid by a prudent investor to obtain the net income. The capitalization rate is usually commensurate with the risk, and is adjusted for future depreciation or appreciation in value. DEPRECIATION: Used in this appraisal to indicate a lessening in value from any one or more of several causes. Depreciation is not based on age alone, but can result from a combination of age, condition or repair, functional utility, neighborhood influ- ences, or any of several outside economic causes. Depreciation applies only to improvements. The amount of depreciation is a matter for the judgment of the appraiser. HIGHEST AND BEST USE: Used in this appraisal to describe that private use which will (1) yield the greatest net return on the investment, (2) be permitted or have the reasonable probability of being permitted under applicable laws and ordinances, and (3) be appropriate and feasible under a reasonable planning, zoning, and land use concept. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 11-52 SUBJECT PROPERTY DESCRIPTION 11-53 SUBJECT PROPERTY i - HIM KPI RM hklS NOR View looking southerly at the subject property from Balboa Boulevard. See additional photographs in the Addenda Section. APPARENT VESTEE: City of Newport Beach PROPERTY ADDRESS: 707 East Balboa Boulevard Newport Beach, California LEGAL DESCRIPTION: Lots 4 and 5, Block 10, The Balboa Tract, per map recorded in Book 4, Page 11 of Miscellaneous Maps, in the office of the County Recorder, County of Orange, California. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-1 11-54 SITE DESCRIPTION LOCATION: Southerly side of East Balboa Boulevard, beginning 81 feet westerly of Main Street, within the corporate limits of the City of Newport Beach. LAND SHAPE: Rectangular land configuration. DIMENSIONS: 54' x 95;' refer to the highlighted portion of the plat map on the following page. LAND AREA: 5,130 square feet. TOPOGRAPHY: Effectively level. DRAINAGE: Appears to be adequate; no major depres- sions were noted within the boundaries of the subject property which would cause a water ponding condition during the rainy season. SOIL STABILITY: Appears to be adequate based on the existing development, as well as develop- ments in the immediate neighbor -hood. A soils report, however, has not been provided for review. The subject property has been appraised assuming adequate soil bearing quality. SOIL CONTAMINATION: None known or observed, however, a soil study has not been provided for review. The subject property has been appraised as though free of soil contaminants. ACCESS: The subject property has 54 feet of frontage on Balboa Boulevard, and 54 feet on a public alley. RIGHT-OF-WAY WIDTH STREET SURFACING CURB AND GUTTER Balboa Boulevard: 70 feet. Public alley: 10 feet. Asphalt paved traffic lanes. Concrete curbs and gutters. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-2 11-55 APN: 048-135-02 CV rn TAE BALBOA TRACT AM 4 - BAY FRONT 5EC%oR NM 6 - RC—" OF BLOCK 9. BALBOA ow 8 - PARCEL NAP P.M. 24 PARCEL MAP PAA F] MARCH 1949 POR, w 1/0, 5f C. 35, T 6 $, R ra w f 12 s WA#RHGFOtl A1EAT/E � t6 0 E'_/ xj7E-5L& OF, 0 r � 134E a 9 �IF� H �� $ 133�(�` �•BLK. 9, 81A(BOA MAN ` L STWST 30 ✓ _ n � o Q` s- ¢ '-�s- c s �i 1 9 `w6rv.EP� 8u Mi. �� Q___...-.� Y'1[mDX�c St.. 132 ' m �,Aa E > iXK. � 11 ` a assEsscrrF's @eaerc a x 3 Q x r r=aa�� rvr�,wt�eas 616-3T- �s� g /� �• J 7H- 3. s ASSESSPF'S 46F to 15.E V (D m FCOLN Q48 PDGF l x enuvry or p4nmre A s STREET R Bn 144 r Flewr 95etxAY R. P. LAURAIN APPRAISERS - ANALYSTS 2-3 11-56 SITE DESCRIPTION (Continued) STREET LIGHTS: Mounted on ornamental standards. SIDEWALK: Concrete sidewalks. PUBLIC UTILITIES: Water, gas, electric power, and telephone service are available at the subject site. SANITARY SEWER: Available at subject site. ENCROACHMENTS: None known or observed, however, a survey of the subject property was not provided for review. EASEMENTS: A Preliminary Title report prepared by Commonwealth Land Title Company, dated April 6, 2015, does not identify any easements impact the subject property. ILLEGAL USES: None observed. PRESENT USE: Vacant theater building in dilapidated condition. ZONING: The subject property is located in the Mixed Use -Vertical (MU -V) zone designation of the City of Newport Beach. The MU -V zone district is intended to provide for first level commercial uses with residential uses on the second level. A wide variety of commercial uses including retail, office, restaurants, personal services, etc., are permitted. Note that commercial uses are also permitted on the second level, however, residential uses on the ground floor are generally prohibited. It should also be noted that the subject prop- erty is located in the Balboa Village Parking Management Overlay District. On-site parking is not required for most commercial uses in parking overlay district (excluding certain assembly uses). R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-4 11-57 SITE DESCRIPTION (Continued) ZONING: (Continued) The minimum lot size in the MU -V zone district is 2,500 square feet, with a minimum lot width of 25 feet. The floor area ratio (FAR) for mixed use developments requires a minimum and maximum nonresidential (commercial use) FAR of 0.35 and 0.50, respectively. The maximum FAR for residential uses, as part of a mixed use development, is 1.0. The maxi- mum FAR for nonresidential developments (all commercial) is 0.75. The residential development density, as part of a mixed use project, requires a minimum lot area of 1,631 square feet per dwelling unit, and a maximum lot area of 2,167 square feet per dwelling unit. In the subject case, there is a 10 foot setback requirement from the rear alley; there are no front or side yard setback requirements. The maximum building height is 26 feet. As stated, the subject property is located in the Balboa Village Parking Management Overlay District and, therefore, there are no on-site parking requirements for most com- mercial uses such as retail, office, restaurants, personal services, etc. On-site parking requirements for residential units is two covered spaces per unit. A development containing three residential units would also require a guest parking space, for a total of seven on-site parking spaces. HIGHEST AND BEST USE: The reader is referred to the first portion of the Valuation Analysis Section for a discus- sion regarding the highest and best use of the subject property. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-5 11-58 IMPROVEMENTS COMMENT: The subject property is improved with a vacated theater building, commonly known as the Balboa Theater Performing Arts Theater. It is understood that the theater has been vacant for more than 15 years. The property was originally acquired by the City of Newport Beach in 1998. The building is of brick masonry construction. Although certain seismic work was attempted at some point in the past, per the City of Newport Beach, the seismic work was never completed. The building is in poor -dilapidated condition. As part of past uncompleted reno- vation efforts it is understood that large portions of the interior concrete slab were removed, the interior was almost completely gutted, there are holes in the roof that have not been repaired, and there may also be certain termite damage. Note that an exterior inspection was conducted; the interior of the building was viewed from the front windows. The building is full lot coverage, having a foot- print of approximately 5,130 square foot (lot size), and is of two-story height, with unfin- ished wood beam open ceilings (no second level). Per Assessor's records the building was originally constructed in 1927. The exist- ing building is not considered having any contributory value or renovation potential for a highest and best use development. As such, the subject appraisal study is based on the underlying land value, less demolition and clearing costs. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-6 11-59 ASSESSMENT DATA ASSESSOR'S PARCEL NO.: ASSESSED VALUATIONS: TAX CODE AREA: TAX YEAR: REAL ESTATE TAXES SPECIAL ASSESSMENTS OWNERSHIP HISTORY 048-135-02 Land: $588,284. Improvements: $ 25,572. 7001. 2013-2014. Not applicable; tax exempt.* None known. COMMENT: The subject property has been vested with the City of Newport Beach since 1998. Due to the date of acquisition, the purchase price is not considered relevant to the current market value. NEIGHBORHOOD ENVIRONMENT LOCATION: The subject property is located on the Balboa Peninsula in the southwesterly portion of the City of Newport Beach. The Newport Bay and Pacific Ocean are located north and south of the Balboa Peninsula, respectively. Com- munities in the immediate area include Laguna Beach, Aliso Viejo, Laguna Woods, Irvine, Costa Mesa, and Huntington Beach. * Real estate taxes will be adjusted in the event the subject property is sold to a private party or private corporation. The adjusted real estate tax burden will be approximately 1.1% of the sale price, or Assessor's "cash value." In the absence of a sale, transfer, or capital improvements, the maximum allowable increase in the assessed valuations is 2% per year (per the Real Estate Tax Initiative of 1978, known as Proposition 13). R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-7 11-60 NEIGHBORHOOD ENVIRONMENT (Continued) LOCATION: (Continued) The City of Newport Beach was incorporated in 1906 and includes 16,654 acres of land area, 14,894 acres of ocean water area, 800 acres of Bay water area, and 800 acres of Harbor water area. LAND USES: The predominant uses in the City of Newport Beach are single family and multiple family residential developments, which account for approximately 50% of the total land area, followed by open space and recreational uses which account for 36±% of the total land area. Commercial, institutional, and industrial uses generally account for remaining land area. There are also a number of hotel develop- ments within the City. The John Wayne Airport is located adjacent to the extreme northerly portion of the City boundary. The Balboa Peninsula consists primarily of single family and low density multiple family developments, as well as marinas and yacht clubs. The Peninsula appears to be in a revitalization stage wherein older single family and multiple family dwellings are being demolished and cleared from the site to make way for new, multi-million dollar estate homes. Private redevelopment of new single family homes is focused primarily on those prop- erties in close proximity to the beach or bay. Commercial uses on the Balboa Peninsula are primarily located on Balboa Boulevard, (1) between Main Street and Palm Street, adjacent to the Peninsula Park, (2) between 20th and 23rd, and (3) at the intersection of 32nd Street. The Balboa and Newport Piers are also located on the Peninsula, extending into the Pacific Ocean. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-8 11-61 NEIGHBORHOOD ENVIRONMENT (Continued) LAND USES (Continued): The Balboa Fun Zone and the Balboa Island Ferry are located one block northerly of the subject site. The Balboa Fun Zone is a popular tourist attraction offering various rides, arcade games, vintage shops, restau- rants and public parking lots. Balboa Island Ferry carries up to 100 passengers and three automobiles between the Balboa Peninsula and Balboa Island, crossing the 800 -foot channel in approximately three minutes. Peninsula Park, the Balboa Pier, and the Pacific Ocean are located effectively one block southerly of the subject property. ACCESS: Primary thoroughfares in the general subject neighborhood include Balboa Boulevard, Pacific Coast Highway, Superior Avenue, Newport Boulevard, Jamboree Road, and MacArthur Boulevard. The San Joaquin Hills Transportation Corridor (73) Freeway, a toll road, is located at the northerly boundary of the City; the Costa Mesa (55) Freeway is located approximately 1/2 mile northwesterly of the westerly City Boundary; the San Diego (405) Freeway is located approximately one mile north of the extreme northerly portion of the City. Said freeways are part of the freeway network serving the Southern California region. BUILT-UP: The overall subject neighborhood is effec- tively 98% built-up, inclusive of public parks and recreational open spaces. OCCUPANCY: Residential: 75±% owners 25±% tenants Commercial 25± owners 75± tenants R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-9 11-62 NEIGHBORHOOD ENVIRONMENT (Continued) PRICE RANGE: Older single family and low density multiple family residential properties, generally range in value from $750,000 to exceeding $5,000,000 for properties having close proximity to the beach or bay. Residential properties at the lower end of the range generally represent older dwellings that are acquired based on the underlying land value, for development of new residences. Single family and multiple family properties having frontage on the beach or bay, can range in value from $3,000,000 to exceeding $15,000,000. Improved commercial property values in the immediate subject area range widely from approximately $1,0000,000 for smaller lot and block developments contain- ing under 2,500 square feet, to exceeding $5,000,000 for larger commercial and mixed use commercial/residential developments located on multiple lots. TREND: Real estate values, in general, were declining between 1991 and 1995. The value trend, however, generally stabilized during 1996 and 1997. Beginning in 1998, there was evidence of increased real estate market activity. There was an upward value trend affecting resi- dential properties within the immediate and general subject market area, from 2003 through the mid portion of 2006, after which property values generally stabilized. In the early part of 2007, residential property values began to decrease significantly, and the decrease continued through the mid to latter portion of 2009, due primarily to the subprime credit and housing crisis. The residential real estate market generally stabilized in the latter portion of 2009. Begin- ning in 2010, certain markets began to experience varying monthly increases and decreases in sales volumes and pricing, due R . P . LAURA IN _ & A S S O C I A T E S E APPRAISERS - ANALYSTS 2-10 11-63 NEIGHBORHOOD ENVIRONMENT (Continued) TREND: (Continued) primarily to abnormally low interest rates and first time home buyer's tax credits. Overall, property values remained relatively stable from the first portion of 2010 through the latter portion of 2012, after which property values and sales activity began to experience increases through the latter portion of 2014. It appears the property values have begun to stabilize in recent months. AGE RANGE: The age range of all types of improved prop- erties is rather broad. Generally, the age range for single family residences is effec- tively new to 30 years. Typical single family and multiple family developments in the immediate subject area were constructed in the 1970s and 1980s. There are, however, certain single family residential developments ranging in age from effectively new to 5 years. Certain commercial and mixed use properties were constructed as far back as the early 1900s, however, commercial and mixed use properties typically undergo significant reno- vation in the immediate subject area (as opposed to demolition and clearing for new development). As such, the effective age of commercial and mixed use properties ranges widely from 5 years to exceeding 50 years. PROPERTY MAINTENANCE: Property maintenance in the immediate and general neighborhood, evidenced by an on- going maintenance program, ranges from above average to very good. PUBLIC/PRIVATE FACILITIES: The availability and adequacy of public facilities, transportation, schools, commercial facilities, recreational opportunities, and resi- dential housing are rated average. The City of Newport Beach provides police and fire protection. See Valuation Analysis in the following section. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 2-11 11-64 VALUATION ANALYSIS 11-65 VALUATION ANALYSIS The purpose of this valuation study is the estimation of market value of the subject property, as of the date of value set forth herein. Prior to the applica- tion of the appraisal process, which in this case employs the Sales Comparison Approach, it is necessary to consider and analyze the highest and best use of the subject property. H/GHES T AND BES T USE ANAL YS/S: Highest and best use is defined in The Appraisal of Real Estate, by the Appraisal Institute, 11 th Edition, Page 297, as: "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value." In the process of forming an opinion of highest and best use, consideration must be given to various environmental and political factors such as zoning restrictions, probability of zone change, private deed restrictions, location, land size and configuration, topography, and the character/quality of land uses in the immediate and general subject market area. There are four basic criteria utilized in the highest and best use analysis of a property as if vacant, as well as presently improved. The four criteria are summarized as follows: 1. Physically possible. 2. Legally permissible. 3. Financially feasible. 4. Maximally productive. The foregoing are typically considered sequentially; for example, a specific use may prove to be maximally productive, however, if it is not legally permis- sible, or physically possible, the productivity is irrelevant. The subject property has a rectangular land configuration, generally level topography, and contains 5,130 square feet of land area. The site has an inside location on a primary street (Balboa Boulevard), in a beach -oriented community; the subject property is located on the Balboa Peninsula, in the City of Newport Beach. Vehicular access is rated average. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-1 11-66 VALUATION ANALYSIS (Continued) H/GHES T AND BES T USE ANAL YS/S: (Continued) All public utilities including water, gas, electric power, telephone, as well as sanitary sewer are available to the site. The physical characteristics of the subject parcel are considered adequate to accommodate legally permissible uses. The subject property is located in the MU -V (Mixed Use - Vertical) zone district of the City of Newport Beach. The MU -V zone district generally allows for first level commercial use, with second level residential use. Further, the site is located in the Balboa Village Parking Management Overlay District wherein there are no on-site parking requirements for most commercial uses. Resi- dential uses require two covered parking spaces per unit; developments containing three residential units would require one guest parking space (seven total parking spaces). Note that there is rear yard setback requirement at the subject site (adjacent to alley) of ten feet, which setback area cannot be utilized for on-site parking. Tandem parking, however, is permitted. Further, there are certain minimum and maximum floor area ratios (FAR) for residential uses. Based on a review of the MU -V development standards, and discus- sions with the City of Newport Beach Planning Department, the subject site, as if vacant, could support the development of first level commercial use, fronting on Balboa Boulevard, with three residential units on the second level. Note that the maximum FAR for commercial use, as part of a mixed use develop- ment, is 0.50 and, therefore, the maximum commercial development density is 2,565 square feet (5,130 square feet of land area x 0.50). Tandem residential parking garages, plus a guest parking space, could be facilitated at the rear portion of the site, with a commercial use at the front portion of the site, and residential units on the second level. The maximum residential FAR is 1.0. As discussed in the Subject Property Description section, the subject property is improved with a vacated theater building, of brick masonry construction, having a full lot foot print of 5,130 square feet, in overall poor -dilapidated condition. It is not considered economically feasible to renovate the building for an alternate use, especially given that the building requires seismic reinforcement, and any development of the site would require the "cutting" of the rear portion of the building to accommodate the ten foot rear yard setback. As such, the building requires demolition and clearing from the site, prior to a highest and best use development. Demolition and clearing costs are addressed in the latter portion of this section. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-2 11-67 VALUATION ANALYSIS (Continued) H/GHES T AND BES T USE ANAL YS/S: (Continued) The immediate subject area is developed primarily with commercial and mixed use commercial/residential developments, on single or multiple smaller lots (typically containing less than 2,500 square feet of land area, per lot). To the east and west of the immediate subject area, developments consist primarily of single family residences, and some low density multiple family developments. Based on the foregoing, and considering the overall tenant and owner -user demand exhibited at other developments in the immediate area, the maximally productive use, and therefore, the highest and best use of the subject property, is mixed use commercial/residential development, subsequent to the demolition and clearing of the existing subject theater building. The subject property has been appraised accordingly. VALUATION METHODS: There are three conventional methods (approaches) which can be used to estimate value. They are the Sales Comparison Approach, Cost -Summation Approach, and Income Capitalization Approach. Inasmuch as the subject property has been appraised based on the underlying land value, the Sales Comparison Approach is the only approach considered applicable as a reliable indicator of value. It should be noted, however, that there are virtually no vacant commercial or mixed use commercial/residential land sales in the immediate subject area. As such, a Land Extraction Analysis was conducted of various improved commercial and mixed use sale properties having occurred in the immediate subject area. The Land Extraction Analysis is a residual methodology wherein the contributory value of the building(s) and on-site improvements is deducted from the sale price in order to "extract" the indicated underlying land value. The extraction analyses applied to the various sale properties involves certain judgement estimates regarding the replacement costs, effective age, and remaining life of the various buildings. Note that the depreciation is based on a straight-line age/life method, considering the overall condition, age, utility, and remaining life of the various buildings, as of the date of sale. The effective age of any given building can change over time, based on renovation and/or remodeling of certain building components. As such, the overall depreciation is based on the condition of the buildings at the time of sale. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-3 11-68 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: The Sales Comparison Approach takes into account properties which have sold in the open market. This approach, whether applied to vacant or improved property, is based on the Principle of Substitution which states, "The maximum value of a property tends to be set by the cost of acquiring an equally desirable substitute property, assuming no costly delay is encoun- tered in making the substitution." Thus, the Sales Comparison Approach attempts to equate the subject property with sale properties by reviewing and weighing the various elements of comparability. The Sales Comparison Approach has been applied to the subject property after an investigation was conducted of comparable improved commercial and mixed use properties having recently sold in the immediate and general subject market area. As stated, the residual underlying land value of each improved sale property was estimated based on a Land Extraction Analysis. The reader is referred to the Market Data Section for detailed information pertaining to each sale property, as well as the Land Extraction Analysis pertinent to each sale property. Additional comments regarding the various sale properties are contained in the latter portion of this section. Refer also to the Market Data Map in the Market Data Section, for an illustration of the location of the respective land sale properties. The reader is referred to the summary of Extracted Land Value Indicators on the following page. The properties surveyed contain land parcels ranging in size from 2,375 to 15,390 square feet. The sites are improved with various commercial and mixed use buildings ranging in size from 1,860 to 14,906 square feet, and constructed between 1907 and 1980. The Extracted Land Value is set forth in the far right column. The overall sale prices (as improved) range from $1,000,000 to $4,320,000. The extracted land values, however, range from $770,000 to $4,320,000, with indicated land unit rates (as vacant) ranging from $273.01 to $551.44 per square foot of land area. It should be noted that Data 1 is improved with an older restaurant building and parking lot, on a total of six lots. The sale was confirmed with both the listing broker and selling broker, both of whom indicated the purchase price was based on the underlying land value, and that no value was attributed to the building. As such, any value of the building is considered interim in nature and an extraction analysis was not conducted for Data 1. The sales are set forth in chronological order and took place between November, 2012, and February, 2015. R . P . LAURA IN & A S S O C I A T E S E APPRAISERS - ANALYSTS 3-4 11-69 RES/DENT/AL LAND VALUE INDICATORS: As Improved $ Per SF Bldg $ Per SF Land $785.45 $280.70 $889.78 $681.07 $540.81 $463.16 $416.67 $389.86 $395.26 $493.83 $280.16 $422.89 Extracted Land Value $ Per SF Land $4,320,000 $280.70 $1,340,000 $551.44 $ 770,000 $324.21 $ 850,000 $331.38 $2,660,000 $345.68 $2,696,000 $273.01 11-70 Building(s) Use Data Date Land Size Size Built Zoning Sale Price 1 11-12 15,390 sf 5,500 sf 1920 commercial $4,320,000 801 E. Balboa Blvd., Newport Beach MU -V 2 3-13 2,430 sf 1,860 sf 1931 commercial $1,655,000 106 Main Street, Newport Beach MU -V 3 11-13 2,375 sf 2,034 sf 1980 coml/resi $1,100,000 114 22nd St., Newport Beach MU -W2 4 4-14 2,565 sf 2,400 sf 1907 coml/resi $1,000,000 701 E. Balboa Blvd., Newport Beach MU -V 5 8-14 7,695 sf 9,614 sf 1934 coml/resi $3,800,000 111 Main Street, Newport Beach MU -V 6 2-15 9,875 sf 14,906 sf 1956 commercial $4,176,000 3315-3345 Newport Blvd., Newport Beach cc As Improved $ Per SF Bldg $ Per SF Land $785.45 $280.70 $889.78 $681.07 $540.81 $463.16 $416.67 $389.86 $395.26 $493.83 $280.16 $422.89 Extracted Land Value $ Per SF Land $4,320,000 $280.70 $1,340,000 $551.44 $ 770,000 $324.21 $ 850,000 $331.38 $2,660,000 $345.68 $2,696,000 $273.01 11-70 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Financing and Cash Equivalency Adjustments: All of the sales employed herein conveyed title to the fee simple interest and represent arms -length transactions. Sale properties are adjusted for financing arrangements involved in transactions which are not market -typical. A cash equivalency adjustment is generally made in those cases where the cash down payment is generally less than 20% of the purchase price and the financing is other than conventional. The less -than -typical cash down pay- ment, combined with other than conventional financing (such as seller financ- ing), could influence a higher purchase price. All of the sale properties involved cash down payments of 20% or more. A cash equivalency adjust- ment, therefore, is not warranted for any of the sale properties. Market Conditions: Consideration of the market conditions (date of sale) is appropriate when certain sale properties occur during a rising or declining market. The consid- eration for market conditions is based upon observation of the real estate market and value cycles dating back more than 15 years. Based on discussions with local real estate brokers, and observations of overall market conditions, it is apparent that there was an upward value trend affecting residential properties within the immediate and general subject market area, from 2003 through the mid portion of 2006, after which property values generally stabilized. Beginning in 2007, residential property values began to decrease significantly, and the decrease continued through the latter portion of 2009, due primarily to the subprime credit and housing crisis, multi- billion dollar write-downs of mortgage-backed securities by regional and national banks, and a lack of available financing. The residential real estate market generally stabilized in the latter portion of 2009. Beginning in 2010, certain markets began to experience varying monthly increases and decreases in sales volumes and pricing, due primarily to abnormally low interest rates and first time home buyer's tax credits. Over- all, property values have remained relatively stable from the first portion of 2010 through the mid portion of 2012. In the latter portion of 2012 certain resi- dential and commercial markets began to experiences increases in price levels and sales activities, which increases continued through 2014. In recent months, however, overall price levels appear to be stabilizing. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-6 11-71 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Market Conditions: (Continued) Refer to the following graphs, which illustrates the Medium Sales Price for single family residences in the City of Newport Beach, from January 2000, through the mid portion of May, 2015. As can be seen in the above graph, the median sale price has increased consistently since the lows at the end of 2011, and have recently reached levels near the pre -recession peak. Per Trulia data, the median sale price in Newport beach has increased 14.8% over the last year, and 49.4% over the last five years. Note that overall prices on the Balboa Peninsula can be upwards of 50% greater than residential prices in Newport Beach overall, due primarily to the beach location. Although there is a limited number of sale properties and trend data pertaining to commercial properties on Balboa Peninsula, a review was also conducted of certain lease rates in the greater Newport Beach as well as in the adjacent City of Huntington Beach. Following are certain Loopnet graphs pertaining to commercial properties in the Cities of Newport Beach and Huntington Beach. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-7 11-72 VALUATION_ _ (Continued) SALES COMPARISON APPROACH: (Continued) Market Conditions: (Continued) Asking Berl Office for Lease Newport Beach. r -A (VSF/Y'ear) 535,00- 530,410-- 52 5.00 - S20,OC}-� Woury 2037 7Ud0 2000 MID 2011 2412 2013 2014 2015 -- State — Metra —County — City 0.1,1 LoapNa- AAsking Rent Offlcefor Lean Huntington Bead, !CA ($6FNear) 626.x- s2a.oa S22-00-- 324-0—e 9 4 1 —r— I — "A` 20" 204E M13 24t1 2011 2017 2013 2014 2015 — Stow — metra — CDUR-y — City + i -O W- R. P. L A U R A I N & A S S O C I A T E S APPRAISERS - ANALYSTS 3-8 11-73 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Market Conditions: (Continued) x.sking F?ent RetaiI for Lease Huntington Beach. SCA (USF Year; S32.00- 53 -0.00- S2 G. 0 0 32,04530,00520,00 S2B.00- S24.00- $22.W- 920.00-1 -524.40$22,40520.00-I 20063 2007 2005 2009 2010 2011 2012 2013 2014 2015 Ente —Metro —County City lcrL 39NSn. Based on the foregoing, as well as a review of certain improved sale properties in the immediate subject area, and discussions with local brokers and other market participants, a market conditions (date of sale) adjustment has been applied to the various sale properties based on the following schedule: July -December, 2012: January -December, 2013: January -June, 2014: July -December, 2014 January -May, 2015 + 12.0% per year, or + 1.0% per month + 12.0% per year, or + 1.0% per month + 12.0% per year, or + 1.0% per month + 6.0% per year, or + 0.5% per month 0.0% per year, or 0.0% per month As a secondary check note that, based on the foregoing schedule, Data 1, having occurred in November, 2012, is adjusted upward 22%, to $342.46 per square foot of land area (before adjustments for comparability). Comparatively, Data 5, which is located across the street from Data 1, is adjusted upward 2% for market conditions to $352.59 per square foot of land area (based on the extracted land value). Likewise, Data 4, which is located within one block of Data 1, is adjusted upward 5% to $347.95 per square foot of land area (based on the extracted land value). R. P. L A U R A I N _ & A S S O C I A T E S APPRAISERS - ANALYSTS 3-9 11-74 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Elements of Comparability.- After omparability. After viewing all of the land sale properties, an analysis was made of the various elements of comparability. Some of those elements include, but are not limited to, the following: Location. Immediate environmental influences. Land configuration. Corner locations/access. Site prominence/exposure. Topography. Off-site improvements. Parking requirements. Land size. Plans/entitlements. All of the sales employed herein conveyed title to the fee simple interest and represent arms -length transactions. The overall marketability of each sale property was also considered. Marketability is the practical aspect of selling a property in view of all the elements constituting value, and certain economic and financing conditions prevailing as of the date of sale. Allowance was made for these factors when considered applicable. Land Value Analysis: The reader is referred to the Land Value Analysis on the following page regarding certain elements of comparability of the subject property, as com- pared to the various sale properties. The adjustments for comparability are judgment estimates within increments of 5%; all adjustments are intended to be general in the process of equating the subject property with the respective sale properties and varying elements of comparability. In the subject case, overall comparability adjustments have been made to the sale properties with regard to general location, immediate environmental influences, corner location/access, site prominence, off-site improvements, and land size. All of the sale properties are located on the Balboa Peninsula, in the City of Newport Beach, with the exception of Data 6, which is located just westerly of the peninsula. Data 6, therefore, has been adjusted upward 25% due to the inferior general location. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-10 11-75 W 1 1 LAND SALES ANALYSIS: Data: 1 2 3 4 5 6 Extracted land price $4,320,000 $1,340,000 $770,000 $850,000 $2,660,000 $2,696,000 Extracted Price per sf land: $280.70 $551.44 $324.21 $331.38 $345.68 $273.01 Date of sale: 11-12 3-13 11-13 4-14 8-14 2-15 Conditions of sale: typical 0.0% typical 0.0% typical 0.0% typical 0.0% typical 0.0% typical 0.0% Terms of sale (financing): typical 0.0% typical 0.0% typical 0.0% typical 0.0% typical 0.0% typical 0.0% Market conditions: inferior 22.0% inferior 18.0% inferior 10.0% inferior 5.0% inferior 2.0% similar 0.0% Subtotal (adjustments): 22.0% 18.0% 10.0% 5.0% 2.0% 0.0% Adjusted rates: Extracted land price: $5,270,400 $1,581,200 $847,000 $892,500 $2,713,200 $2,696,000 Extracted Price per sf land: $342.46 $650.70 $356.63 $347.95 $352.59 $273.01 Comparability: 1 2 1 3 1 4 5 6 General location: similar similar similar similar similar inferior 25% Immed. envirmnt'l. influences: superior -10% superior -20% inferior 5% similar superior -10% similar Land configuration: similar similar similar similar similar similar Corner location/access: similar similar similar similar similar superior -5% Site prominence: similar similar similar similar similar superior -5% Off-site improvements: similar superior -5% similar similar similar similar Parking requirements: similar similar similar similar similar inferior 5% Land size ($ per SF): inferior 10% superior -5% superior -5% superior -5% inferior 5% inferior 5% Adjust final no. to nearest 5%: Comparability adjustment: 0% -30% 0% -5% -5% 25% 1 2 3 4 5 6 Overall adjusted rate: Extracted land price: $5,270,400 $1,106,840 $847,000 $847,875 $2,577,540 $3,370,000 Price per sf land: $342.46 $455.49 $356.63 $330.55 $334.96 $341.26 11-76 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Land Value Analysis: (Continued) The subject property has frontage on a Balboa Boulevard, within one block of Main Street. Main Street leads directly to Peninsula Park, the Balboa Pier, and the Pacific Ocean, and is primary tourist/pedestrian street. Data 2 is located on Main Street, is deemed superior to the subject property with respect to the immediate environmental influences of Main Street, and has been adjusted downward 20%; a slight downward adjustment of 5% is also applied to Data 2 for the superior off-site sidewalk and street improvements. Data 1 and 5 have corner locations on Main Street and Balboa Boulevard, and have been adjusted downward 10% for immediate environmental influences. Data 3 is located at the westerly end of the peninsula and, although in close proximity to the Newport Pier, Data 3 is deemed slightly inferior regarding immediate environmental influences and has been adjusted upward 5%. Data 6 is located on a primary street, has a corner location, alley frontage, and a relatively large amount of frontage on Newport Boulevard. Overall, Data 6 is deemed superior regarding site prominence and corner location/access, and has been adjusted downward accordingly. Data 6 is also located in the traditional commercial zone designation, and is deemed inferior regarding parking requirements. The subject property represents two legal lots, containing 5,130 total square feet of land area. In accordance with general economic principals, smaller land parcels typically sell at an overall higher rate per square foot of land area as compared to larger land parcels, all other elements of comparability being the same. Data 2, 3, and 4, which represent single lots are considered slightly superior to the subject property on a rate per square foot basis, and have been adjusted downward 5%. Data 5, consisting of 3 lots, and Data 6, having a larger land size, have been adjusted upward 5%. Data 1, consisting of 6 lots, has been adjusted upward 10%. As stated, the reader is referred to the Market Data Section for additional information pertinent to the various sale properties, inclusive of the land extraction analysis pertinent to each sale property. The analysis of the subject property has been considered on both an overall rate per square foot of land area, as well as an overall rate per lot. As stated, the subject site contains 2 legal lots. Data 1 through 5 are located on the Balboa Peninsula and contain between 1 and 6 lots each. Data 6 consists of R . P . LAURA IN _ & A S S O C I A T E S E APPRAISERS - ANALYSTS 3-12 11-77 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Land Value Analysis: (Continued) one larger legal lot and, therefore, a rate per lot is not deemed applicable to Data 6. Based on the foregoing, the overall adjusted land prices (based on the extracted land value), total number of lots, adjusted rate per square foot of land area, and adjusted rate per lot, are summarized as follows: As can be noted, the overall adjusted rates are within a range of $331 to $455 per square foot of land area, however, excluding Data 2, located on Main Street, the rates range from $331 to $357 per square foot. Data 1, 3, 4, and 5 have been given primary weight in the study. Data 2, located on Main Street, and Data 6, located on Newport Boulevard have been assigned secondary weight. The rate per lot for Data 1, 3, 4, and 5 ranges from $847,000 to $878,400, Note that Data 1, at the upper end of the range, is the most dated sale, required the greatest adjustment for market conditions, and did not include any extraction of the building improvements as both the listing and selling broker indicated that the sale price was based on the underlying land value only. As such, and overall rate of $850,000 per lot is considered appropriate for the subject property. An overall rate of $340 per square foot has been applied to the subject land area. The indicated value of the subject property, as if vacant, is adjusted to $1,725,000, as follows: R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-13 11-78 Adjusted No. of Adjusted Adjusted Data Price Lots $ Per SF $ Per Lot 1 $5,270,400 6 $342.46 $878,400 2 $1,106,840 1 $455.49 $1,106,840 3 $847,000 1 $356.63 $847,000 4 $847,875 1 $330.55 $847,875 5 $2,577,540 3 $334.96 $859,180 6 $3,370,000 N.A. $341.26 N.A. As can be noted, the overall adjusted rates are within a range of $331 to $455 per square foot of land area, however, excluding Data 2, located on Main Street, the rates range from $331 to $357 per square foot. Data 1, 3, 4, and 5 have been given primary weight in the study. Data 2, located on Main Street, and Data 6, located on Newport Boulevard have been assigned secondary weight. The rate per lot for Data 1, 3, 4, and 5 ranges from $847,000 to $878,400, Note that Data 1, at the upper end of the range, is the most dated sale, required the greatest adjustment for market conditions, and did not include any extraction of the building improvements as both the listing and selling broker indicated that the sale price was based on the underlying land value only. As such, and overall rate of $850,000 per lot is considered appropriate for the subject property. An overall rate of $340 per square foot has been applied to the subject land area. The indicated value of the subject property, as if vacant, is adjusted to $1,725,000, as follows: R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-13 11-78 VALUATION ANALYSIS (Continued) SALES COMPARISON APPROACH: (Continued) Land Value Analysis: (Continued) 2 lots @ $850,000 = $1,700,000. 5,130 SF @ $340.00 = $1,744,200. Adjusted: $1,725,000. Demolition and clearing costs: As stated, prior to development any potential developer of the site, would be responsible for demolition and clearing of the existing building. As such, a deduction to the underlying land value, as if vacant, is appropriate. A demolition cost estimate specific to the subject site was not provided to the appraiser. The demolition and clearing estimate is based on a review of various cost manuals, actual and estimated demolition costs for similar projects, and discussions with officials at the City of Newport Beach. Demolition and clearing costs for one-story brick masonry buildings can range widely from $5.00 to exceeding $10.00 per square foot of building area. The subject building is full lot coverage, with existing buildings on either side, and has an effective building height of two stories. A cost estimate of $12.00 per square foot of building area, based on a building footprint of 5,130 square feet has been utilized herein. In addition, it is understood that electrical service runs from the adjacent alley, to the subject building, and then to an adjacent building. As such, the electrical service to the adjacent building will have to relocated at an estimated cost of $25,000, per the City of Newport Beach. A 15% contingency has also been included. Based on the foregoing, the demolition cost estimate is adjusted to $100,000, as follows: Building footprint: 5,130 SF @ $12.00 = $61,560. Relocate electrical service: 25.000. Subtotal: $86,560. Contingency (15%): 12.984. Total: $ 99,544. Adjusted: $100,000. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-14 11-79 VALUATION ANALYSIS (Continued) Conclusion: The indicated "as -is" value of the subject property, after consideration of the required demolition and clearing costs, is adjusted to $1,625,000, as follows: Land Value, as if vacant: $1,725,000. Demolition and clearing costs: - 100,000. Indicated "as -is" land value: $1,625,000. Lastly, it is understood that the subject building may be considered to have some historical significance, however, per the City of Newport Beach the building can be demolished and cleared from the site. The foregoing estimate of market value assumes that any potential buyer of the site would be able to obtain certain entitlements during escrow, inclusive of the required approval to demolish and clear from the site the existing theater building, as well as approval of a concept site plan for a new mixed use development. FINAL EST/MATE OF VALUE: Based on the foregoing valuation, the fee simple market value of the subject property, as of May 8, 2015, is estimated at $1,625,000. MARKET/NG EXPOSURE: The marketing exposure of a particular property is a direct function of supply and demand within a particular market segment. Generally, a higher demand results in a shorter marketing period. During the course of market research for the subject valuations, interviews were conducted with parties involved in the transactions employed in the Sales Comparison Approach. Based on said interviews, as well interviews with real estate brokers specializing in the sub- ject market area, the marketing exposure estimated for the subject property, assuming an aggressive and comprehensive marketing program, is approx- imately 3 to 9 months. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3-15 11-80 MARKET DATA 11-81 MARKET DATA SUMMARY EXTRACTED LAND VALUE INDICATORS: As Improved $ Per SF Bldg $ Per SF Land $785.45 $280.70 $889.78 $681.07 $540.81 $463.16 $416.67 $389.86 $395.26 $493.83 $280.16 $422.89 Extracted Land Value $ Per SF Land $4,320,000 $280.70 $1,340,000 $551.44 $ 770,000 $324.21 $ 850,000 $331.38 $2,660,000 $345.68 $2,696,000 $273.01 11-82 Building(s) Use Data Date Land Size Size Built Zoning Sale Price 1 11-12 15,390 sf 5,500 sf 1920 commercial $4,320,000 801 E. Balboa Blvd., Newport Beach MU -V 2 3-13 2,430 sf 1,860 sf 1931 commercial $1,655,000 106 Main Street, Newport Beach MU -V 3 11-13 2,375 sf 2,034 sf 1980 coml/resi $1,100,000 114 22nd St., Newport Beach MU -W2 4 4-14 2,565 sf 2,400 sf 1907 coml/resi $1,000,000 701 E. Balboa Blvd., Newport Beach MU -V 5 8-14 7,695 sf 9,614 sf 1934 coml/resi $3,800,000 111 Main Street, Newport Beach MU -V 6 2-15 9,875 sf 14,906 sf 1956 commercial $4,176,000 3315-3345 Newport Blvd., Newport Beach cc As Improved $ Per SF Bldg $ Per SF Land $785.45 $280.70 $889.78 $681.07 $540.81 $463.16 $416.67 $389.86 $395.26 $493.83 $280.16 $422.89 Extracted Land Value $ Per SF Land $4,320,000 $280.70 $1,340,000 $551.44 $ 770,000 $324.21 $ 850,000 $331.38 $2,660,000 $345.68 $2,696,000 $273.01 11-82 MARKET DATA #1 801 East Balboa Boulevard Newport Beach GRANTOR: Tri -Cor Realty, LLC LAND SIZE: 15,390 sq.ft. GRANTEE: 801 Balboa, LLC BUILDING SIZE: 5,500 sq.ft. SALE DATE: November 8, 2012 CONDITION: Fair DOC. NO.: 689472 YEAR BUILT: 1920 SALE PRICE: $4,320,000 CONSTRUCTION: Stucco TERMS: All cash APN: 048-132-19 CONFIRMED BY: Michael Thornton and Chuck Iverson, brokers VALUE AS IMPROVED: $280.70 per SF land. $785.45 per SF bldg. EXTRACTED LAND VALUE: $4,320,000 $280.70 per SF land. See Land Extraction Analysis on the following page. _ R. P. L A U R A I N & A S S O C I A T E S APPRAISERS - ANALYSTS 4-2 11-83 MARKET DATA #1 (Continued) Land Extraction Analysis: The subject property is improved with a commercial restaurant building constructed in 1920, in overall fair condition, and appurtenant parking lot. The site is located the Balboa Village Parking Management Overlay District. There is no required on-site parking; the parking lot is not required for the existing development. Further, both the listing broker and selling broker indicated that the building required extensive repair, and that the property sold based on the underlying land value, with no value consideration given to the building. Based on the foregoing, the indicated sale price is considered to be that of the underlying land value. Any interim value of the building improvements is con- sidered offset by demolition and clearing of the same. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-3 11-84 MARKET DATA #2 106 Main Street, Newport Beach GRANTOR: 4 Sales LAND SIZE: 2,430 sq.ft. GRANTEE: Henry & Regina BUILDING SIZE: 1,860 sq.ft. Glicksman Yarmark SALE DATE: March 11, 2013 CONDITION: Average -good DOC. NO.: 145147 YEAR BUILT: 1931 SALE PRICE: $1,655,000 CONSTRUCTION: Brick TERMS: All cash APN: 048-132-07 CONFIRMED BY: Nathan Holthouser, broker VALUE AS IMPROVED: $681.07 per SF land. $889.78 per SF bldg. EXTRACTED LAND VALUE: $1,340,000 $551.44 per SF land. See Land Extraction Analysis on the following page. _ R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-4 11-85 MARKET DATA #2 (Continued) Land Extraction Analysis: The sale property is improved with a one-story commercial building, and appurtenant improvements. Commercial building: 1,860 sf @ $150.00 = $279,000 Other property improvements: Rear storage/canopy: $25,000 On-site paving: 7,500 Total, other property improvements: + 32,500 Total direct and certain indirect costs of all improvements: $311,500 Additional Indirect costs: Professional services (2.0%): + 6,200 Real Estate taxes: + 8,240 Contingency (5.0%): + 15,600 Subtotal: $341,540 Financing: + 20,492 Subtotal, direct and indirect costs: $362,032 Depreciation: 33.0% - 119,471 Depreciated value of improvements: $242,561 Entrepreneurial profit: 20.0% of cost new + 72,406 Total value of development, exclusive of land: $314,967 Adjusted: $315,000 Recapitulation: Purchase price: Value of development: Indicated land value: Land size: Rate per square foot of land area: $1,655,000 - 315,000 $1,340,000 2,430 sf $551.44 R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-5 11-86 MARKET DATA #3 114 22nd Street Newport Beach GRANTOR: VMC Properties, LP GRANTEE: McFadden Place, LLC SALE DATE: November 4, 2013 DOC. NO.: 613815 SALE PRICE: $1,100,000 TERMS: $700,000 conventional CONFIRMED BY: Market data resources LAND SIZE: 2,375 sq.ft. BUILDING SIZE: 2,034 sq.ft. CONDITION: Average YEAR BUILT: 1980 CONSTRUCTION: Concrete block APN: 047-151-02 VALUE AS IMPROVED: $463.16 per SF land. $540.81 per SF bldg. EXTRACTED LAND VALUE: $770,000 $324.21 per SF land. See Land Extraction Analysis on the following page. _ R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-6 11-87 MARKET DATA #3 (Continued) Land Extraction Analysis: The sale property is improved with a two-story mixed use commercial/residential building and appurtenant improvements. Commercial/residential building: 2,034 sf @ $135.00 = $274,590 Other property improvements: First level garage with balcony: $22,000 On-site paving: 5,000 Total, other property improvements: + 27,000 Total direct and certain indirect costs of all improvements: $301,590 Additional Indirect costs: Professional services (2.0%): + 6,000 Real Estate taxes: + 5,140 Contingency (5.0%): + 15,100 Subtotal: $327,830 Financing: + 19,670 Subtotal, direct and indirect costs: $347,500 Depreciation: 25.0% - 86,875 Depreciated value of improvements: $260,625 Entrepreneurial profit: 20.0% of cost new + 69,500 Total value of development, exclusive of land: $330,125 Adjusted: $330,000 Recapitulation: Purchase price: Value of development: Indicated land value: Land size: Rate per square foot of land area: $1,100,000 - 330,000 $770,000 2,375 sf $324.21 R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-7 11-88 MARKET DATA #4 701 East Balboa Boulevard Newport Beach GRANTOR: Paul Wilson Trust, et al LAND SIZE: 2,565 sq.ft. GRANTEE: Waheguru Investments, LLC BUILDING SIZE: 2,400 sq.ft. SALE DATE: April 15, 2014 CONDITION: Fair DOC. NO.: 143133 YEAR BUILT: 1907 SALE PRICE: $1,000,000 CONSTRUCTION: Wood and brick TERMS: All cash APN: 048-135-05 CONFIRMED BY: Nathan Holthouser, broker VALUE AS IMPROVED: $389.86 per SF land. $416.67 per SF bldg. EXTRACTED LAND VALUE: $850,000 $331.38 per SF land. See Land Extraction Analysis on the following page. _ R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-8 11-89 MARKET DATA #4 (Continued) Land Extraction Analysis: The sale property is improved with a one and two-story mixed use commercial/residential development and appurtenant improvements. Commerical building 1,000 sf @ $105.00 = $105,000 Residential building - 150,000 1,400 sf @ $115.00 = 161,000 Total cost new of buildings: $266,000 Other property improvements: $331.38 First level garages: $20,000 On-site paving, patio: 5,000 Total, other property improvements: + 25,000 Total direct and certain indirect costs of all improvements: $291,000 Additional Indirect costs: Professional services (2.0%): + 5,800 Real Estate taxes: + 5,090 Contingency (5.0%): + 14,600 Subtotal: $316,490 Financing: 18,989 Subtotal, direct and indirect costs: $335,479 Depreciation: 75.0% - 251,609 Depreciated value of improvements: $83,870 Entrepreneurial profit: 20.0% of cost new 67,096 Total value of development, exclusive of land: $150,966 Adjusted: $150,000 Recapitulation: Purchase price: $1,000,000 Value of development: - 150,000 Indicated land value: $850,000 Land size: 2,565 sf Rate per square foot of land area: $331.38 R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-9 11-90 MARKET DATA #5 1 1 1 Main Street Newport Beach GRANTOR: Stephan G. Lang GRANTEE: Balboa 111 Main, LLC SALE DATE: August 26, 2014 DOC. NO.: 345773 SALE PRICE: $3,800,000 TERMS: $2,140,000 conventional CONFIRMED BY: Chris Deason, broker LAND SIZE: 7,695 sq.ft. BUILDING SIZE: 9,614 sq.ft. CONDITION: Average YEAR BUILT: 1934 CONSTRUCTION: Poured conc. APN: 048-135-09 VALUE AS IMPROVED: $493.83 per SF land. $395.26 per SF bldg. EXTRACTED LAND VALUE: $2,660,000 $345.68 per SF land. See Land Extraction Analysis on the following page. _ R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-10 MARKET DATA #5 (Continued) Land Extraction Analysis: The sale property is improved with a two-story mixed use commercial/residential building and appurtenant improvements. Commercial/residential building: 9,614 sf @ $130.00 = $1,249,820 Other property improvements: Carport: $12,000 Paving: 8,500 Total, other property improvements: + 20,500 Total direct and certain indirect costs of all improvements: $1,270,320 Additional Indirect costs: Professional services, legal, etc. (2.0%): + 25,400 Real Estate taxes: + 17,770 Contingency (5.0%): + 63,500 Subtotal: $1,376,990 Financing: + 82,619 Subtotal, direct and indirect costs: $1,459,609 Depreciation: 42.0% - 613,036 Depreciated value of improvements: $846,573 Entrepreneurial profit: 20.0% of cost new + 291,922 Total value of development, exclusive of land: $1,138,495 Adjusted: $1,140,000 Recapitulation: Purchase price: $3,800,000 Value of development: - 1,140,000 Indicated land value: $2,660,000 Land Size: 7,695 sf Rate per square foot of land area: $345.68 R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-11 11-92 MARKET DATA #6 3315-3345 Newport Boulevard Newport Beach GRANTOR: Port Properties, Inc. GRANTEE: Gerschultz Family Trust SALE DATE: February 5, 2015 DOC. NO.: 57448 SALE PRICE: $4,176,000 TERMS: $2,910,000 cash to assumed loan CONFIRMED BY: Nathan Holthouser, broker LAND SIZE: 9,875 sq.ft. BUILDING SIZE: 14,906 sq.ft. CONDITION: Average YEAR BUILT: 1956 CONSTRUCTION: Brick APN: 423-102-01 VALUE AS IMPROVED: $422.89 per SF land. $280.16 per SF bldg. EXTRACTED LAND VALUE: $2,696,000 $273.01 per SF land. See Land Extraction Analysis on the following page. _ R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-12 11-93 MARKET DATA #6 (Continued) Land Extraction Analysis: The sale property is improved with a two-story mixed use commercial/office building and appurtenant improvements. Commercial/residential building: 14,906 sf @ $110.00 = $1,639,660 Other property improvements: First level carports: $15,000 Paving: 2,500 Total, other property improvements: + 17,500 Total direct and certain indirect costs of all improvements: $1,657,160 Additional Indirect costs: $4,176,000 Value of development: Professional services, legal, etc. (2.0%): + 33,100 Real Estate taxes: + 18,900 Contingency (5.0%): + 82,900 Subtotal: $1,792,060 Financing: + 107,524 Subtotal, direct and indirect costs: $1,899,584 Depreciation: 42.0% - 797,825 Depreciated value of improvements: $1,101,759 Entrepreneurial profit: 20.0% of cost new + 379,917 Total value of development, exclusive of land: $1,481,676 Adjusted: $1,480,000 Recapitulation: Purchase price: $4,176,000 Value of development: - 1,480,000 Indicated land value: $2,696,000 Land size: 9,875 sf Rate per square foot of land area: $273.01 R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4-13 11-94 ��]�llilui� DeLorme Street Atlas USA® 2015 fA FF_UI1. - aYS ft 4p,ryilA�•U_l]R, gyp. _ UWk nNin�UF0. HWGLYt k n_ ��'-S?¢s AVOry i'P yu .ter '0'�}A{r,. So' HORNIN[. STU, V.RATOGA eyI t—y �_nk ( gs ' "+ DATA 6' Kr y� N { A Su,IMA c4R wo a aFP l a JJ+ t74 VISTADR WAVEMY OR a G e tlN 1546 Pi 41 P �R � 's., -. W. GH1 Oe 1 L 291H 31 OR Y-01 yt ?anI ST s+c n H q`9y Iq Uno Cyt zasl A� yc y a °ham° � J'i F` �o lt0sr8f VIAv� s s a r4 a {{y A 1%7 TA til RV d L "51 �` r t� .4--lYggr.4L.F1J_Vn r '4 d ff7 M1 h R 1=21 ay Qale1 Rlal St IL.tiW o _ O G � Cfh;1F•y.4 TFRp ` y€ a ' rkFRn rsivnvn.&ICI A SUBJECT 4 DATA 41 I; DATA 5 -ATA t DATA 2 �--� r� II t' a4�aF1 Data use subject to license. TN Scale 1 : 16,000 0 000 800 1200 1600 2000 fi © DeLorme. DeLorme Street Atlas USA® 2015. MN (11.1"E) o 140 280 420 I T00 m www.delorme.com 1" = 1,333.3 ft Data Zoom 14-3 11-95 -o N, _ Qe 4 MARKET DATA MAP V.RATOGA eyI t—y �_nk ( gs ' "+ DATA 6' Kr y� N { A Su,IMA c4R wo a aFP l a JJ+ t74 VISTADR WAVEMY OR a G e tlN 1546 Pi 41 P �R � 's., -. W. GH1 Oe 1 L 291H 31 OR Y-01 yt ?anI ST s+c n H q`9y Iq Uno Cyt zasl A� yc y a °ham° � J'i F` �o lt0sr8f VIAv� s s a r4 a {{y A 1%7 TA til RV d L "51 �` r t� .4--lYggr.4L.F1J_Vn r '4 d ff7 M1 h R 1=21 ay Qale1 Rlal St IL.tiW o _ O G � Cfh;1F•y.4 TFRp ` y€ a ' rkFRn rsivnvn.&ICI A SUBJECT 4 DATA 41 I; DATA 5 -ATA t DATA 2 �--� r� II t' a4�aF1 Data use subject to license. TN Scale 1 : 16,000 0 000 800 1200 1600 2000 fi © DeLorme. DeLorme Street Atlas USA® 2015. MN (11.1"E) o 140 280 420 I T00 m www.delorme.com 1" = 1,333.3 ft Data Zoom 14-3 11-95 ADDENDA 11-96 See Photo No. 1 on first page of Subject Property Section. PHOTO NO. 2: View looking northwesterly at rear portion of subject building from the public alley. PHOTO NO. 3: Interior view of front portion of subject building. R. P. LAURAIN & A S S O C I A T E S APPRAISERS - ANALYSTS 5-1 11-97 PHOTO NO. 4: View looking westerly along Balboa Boulevard from a point adjacent to the subject property. PHOTO NO. 5: View looking easterly along Balboa Boulevard from the intersection of Washington Avenue. _ R. P. L A U R A I N & A S S O C I A T E S APPRAISERS - ANALYSTS 5-2 11-98 APPRAISERS - ANALYSTS 11-99 BACKGROUND AND QUALIFICATIONS John P. Laurain Certified General Real Estate Appraiser California Certification No. AG 025754 VICE PRESIDENT: R. P. Laurain & Associates, Inc. 3353 Linden Avenue, Suite 200 Long Beach, California 90807 Office: (562) 426-0477 - Fax: (562) 988-2927 rpla@rplaurain.com PROFESSIONAL ORGANIZATION AFFILIATIONS: American Society of Appraisers Senior member; hold professional endorsement and designation "ASA" in urban real estate. American Arbitration Association Associate arbitrator in title insurance matter. Certified General Real Estate Appraiser by the Office of Real Estate Appraisers, State of California. Certification No. AG 025754. APPRAISAL BACKGROUND: Real estate appraisal and valuation consultation services conducted for public purposes include eminent domain studies, street widening and grade separation (bridge) projects, public school and university expansion projects, relocation studies, housing and public loan programs, Navy housing, senior housing, public bond measures, leasing of publicly -owned properties, Quimby Act park fee studies, Fair Political Practices Commission analyses, budgetary studies, and transfers (exchanges) of properties between public agencies. Private real estate appraisal services have been conducted for lending institutions, insurance companies, attorneys, estates for tax and donation purposes, private subdivision development studies, and other private uses. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 11-100 BACKGROUND AND QUALIFICATIONS (Continued) APPRAISAL BACKGROUND: (Continued) Residential Property. Residential properties appraised include single family, condominiums, own - your -own, townhouse, low and medium density multiple family, 100+ unit apartment complexes, waterfront properties, boat docks, mobile home parks, vacant single family lot and acreage parcels, and low to high density vacant land parcels. Commercial and Industria/ Property. Commercial property appraisal studies have included single and multi -tenant retail, strip centers, shopping centers, low-rise and high-rise office buildings, medical offices, restaurants and fast-food developments, nightclubs, con- venience stores, theaters, automobile repair and service facilities, service stations, truck fueling and washing stations, car wash facilities, automobile sales, mixed-use properties including single resident occupancy (SRO) developments, as well as hotel and motel properties, and vacant land. Industrial property appraisals have included warehouses, light and heavy manufacturing, distribution and transit facilities, food processing, cold storage, lumber yards, recycling centers, open storage, vacant land, remnant and landlocked parcels, properties encumbered with oil and water injection wells, sites with soil contamination and land fill properties. Special Purpose and Special Use Properties: Appraisal services and valuation studies of public, quasi -public, special use, and nonprofit facilities include, among others, seaport properties, submerged land, river rights-of-way, reservoirs, conservation/mitigation and wetland properties, utility and railroad rights-of-way, flood control channels, city hall buildings and civic center complexes, courthouses, libraries, fire and police stations, post offices, public parking structures, parks, public and private schools, adult learning centers, athletic facilities and gyms, bowling alleys, tennis centers, youth homes, after school facilities, daycare facilities, homeless shelters, hospitals, skilled nursing facilities, churches, meeting halls and lodges, and veteran facilities. Valuation Methodologies: In addition to the three conventional valuation methods (Sales Comparison Approach, Cost -Summation Approach, and Income Capitalization Approach), valuation methodologies have included discounted cash flow analyses, leased _ R . P . LAURA IN _ & A S S O C I A T E S APPRAISERS - ANALYSTS 2 11-101 BACKGROUND AND QUALIFICATIONS (Continued) APPRAISAL BACKGROUND: (Continued) Valuation Methodologies: (Continued) fee and leasehold analyses, absorption discounts, deferred maintenance, cost -to -cure, bonus value, excess rent, across -the -fence, value -in -use, fractional interests, hypothetical valuations, and reuse studies. Property interests appraised for eminent domain purposes include full and partial takings, as well as severance damage and project benefit studies. Valuation of various types of easements have included permanent surface, street, temporary construction, slope, utility, pipeline and subsurface, aerial, bridge structure, signal light, exclusive and nonexclusive surface rights, multi- layered, battered pilings, tie -back, railroad, drainage ditch, and flood control easements. Clients: Real estate research and analysis services performed on projects for the following public agencies and private corporations while associated with R. P. Laurain & Associates, Inc., since 1986: Cities: City of Alhambra City of Artesia City of Baldwin Park City of Bellflower City of Burbank City of Carson City of Cathedral City City of Compton City of Covina City of Cudahy City of Cypress City of Downey City of EI Segundo City of Hawaiian Gardens City of Huntington Beach City of Huntington Park City of Irwindale City of Lawndale City of Long Beach City of Los Alamitos City of Los Angeles City of Monrovia City of Norwalk City of Ontario City of Palmdale City of Paramount City of Pasadena City of Riverside City of San Juan Capistrano City of Santa Fe Springs City of Seal Beach City of Signal Hill City of South EI Monte City of South Gate City of Tustin City of Upland City of West Hollywood City of Whittier R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 3 11-102 BACKGROUND AND QUALIFICATIONS (Continued) APPRAISAL BACKGROUND: (Continued) Clients: (Continued) Redevelopment Agencies: Azusa Redevelopment Agency Bell Community Redevelopment Agency Glendale Redevelopment Agency Hawaiian Gardens Redevelopment Agency Huntington Beach Redevelopment Agency Huntington Park Redevelopment Agency Irwindale Community Redevelopment Agency La Mirada Redevelopment Agency Long Beach Redevelopment Agency Los Angeles Community Redevelopment Agency Monrovia Redevelopment Agency Ontario Redevelopment Agency Paramount Redevelopment Agency Signal Hill Redevelopment Agency Whittier Redevelopment Agency Other Public Agencies: Alameda Corridor Engineering Team Alameda Corridor Transportation Authority California High Speed Rail Authority Castaic Lake Water Agency Hawthorne School District Long Beach Unified School District Long Beach Water Department Los Angeles County Chief Administrative Office Los Angeles County Internal Services Department Los Angeles County Metropolitan Transportation Authority Long Beach Community College District Los Angeles Unified School District Lynwood Unified School District Port of Los Angeles Riverside County Transportation Commission State of California, Santa Monica Mountains Conservancy U. S. Department of the Navy U. S. Postal Service R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 4 11-103 BACKGROUND AND QUALIFICATIONS (Continued) APPRAISAL BACKGROUND: (Continued) Clients: (Continued) Other: Various attorneys, corporations, lending institutions, and private individuals. Gold Coast Appraisals, Inc. Associate appraiser, as independent contractor, during portions of 1991 and 1992, specializing in appraisal of single family residential through four -unit residential properties. EXPERT WITNESS: Qualified as an expert witness in the Los Angeles County Superior Court, Central District. Qualified as an expert witness in an arbitration matter before Judicial Arbitration and Mediation Services (JAMS), in the County of Orange. Qualified as an expert witness Orange County Superior Court. Provided testimony as an expert witness in conjunction with eminent domain matters before the San Bernardino and Riverside County Superior Courts. ACADEMIC BACKGROUND: Walden High School, Anaheim, California College preparation curriculum; represented school in annual scholastic competition. Los Alamitos/Laurel High Schools Graduate June, 1985 Advanced courses in pre -calculus, and English writing composition. Cypress Community College Basic curriculum. R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS 5 11-104 BACKGROUND AND QUALIFICATIONS (Continued) ACADEMIC BACKGROUND: (Continued) Long Beach Community College Basic curriculum. Real estate and related courses taken through and at various Community Colleges, Universities, the Appraisal Institute, and business schools, in accordance with the Continuing Education Requirements of the State of California, as follows: Fundamentals of Real Estate Appraisal Appraisal Principles and Techniques California Real Estate Principles Real Estate Appraisal: Residential Principles of Economics California Real Estate Economics Basic Income Capitalization Approach Advanced Income Capitalization Approach Advanced Applications Advanced Concepts and Case Studies Real Estate Escrow California Real Estate Law Uniform Standards of Professional Appraisal Practice, Part A Uniform Standards of Professional Appraisal Practice, Part B Federal and State Laws and Regulations R . P . LAURA IN & A S S O C I A T E S APPRAISERS - ANALYSTS lJ 11-105 Attachment C Appraisal — "As -Is" Condition 11-106 FRAZIER CAPITAL VALU-A.TIO►N BUSINF35 VALUATION FAACTIONALIMTBESTS STOCKOPTMM ESOPs OJ@vW= CAFRAL STAULTUR5S Poupouo AOQmmoNs FINANCIAL INSTGUMNIS. NIRRO AC BuY 1 SELLAGAP.Pa.mm PuKcnAn Price ALLocATium LqUIISATiONs ESTATE & GIFT FOGEION CORPGAATTONS BANKRUPTCY CHAR17ABLEGUTINC FINANCING GoI.F Col1R5E3 INTANGIBLE ASSET VALUATION GOODWILL FRANOUSES COVEIrANTSNOTTOCOMPETE TRADERARKS i NAMES KM WORMIN PLACH PERWIS & i mir..,nas DUORMATION ES BASRI LISTS. ROYALTI Job #: 16 -8678 -re Melissa Gordon Contract Real Property Assistant City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 ` COMMERCIAL REAL ESTATE APPRAISAL $1p3 RUIE/LOW Rio OFFICES CAVN'TRY Csuas FULL SERVICE VALUATION RETAa SHUFF1NOCENTERS GAs 5uT1{7 XAR WASHES HEALnCAREFALL.TM MARINAS I}?Dt1$TALU. GoI.F Col1R5E3 IeIULTi-FAMRY &. SCNIPR IiDt18L1a Hcy.. �IFPnNess FACILT1 d. THROUGHOUT THE UNITED STATES LGOGwGFACE.rr>Bs MOB" HOME PARKVRV FAARS RECAEATIpIfwI FAC.. WASTEFAc¢.T!>Es LANb I AGRICULTURAL USES FRACTBONA1,114TFRENTS SURDTVISIONS EA.9F>•.ffi-R8 SCRO=VTrQ?A7'GES%RCS IV IS601 23 -39 $ wLh1G CUNT ERS Wpm EMM SPRCTALUSEBus.mws FAMrtnS http://www.traziercapital.com September 20, 2016 MACHINERY & EQtnPM£NT VALUATION AEAOSFWL� Fpon PAOLcsssmO& RESTAURANTS. FPLASi S t1mr�•, SI,.. CONSTRUCTMCH04KAL COMPUTER M W wOOn nac & Y'�icR TEMT➢E PITVENTOGV Re: Valuation of a Proposed Theater/Event Center Known as The Balboa Theater Located at 707 East Balboa Boulevard Newport Beach, California 92661 Dear Ms. Gordon: The purpose of this report is to set forth our opinion of the market value of the real property under the premise of a fee simple interest in the above referenced property. The property was visited on August 26, 2016 and the effective dates of value are August 26, 2017 "as -stabilized" & "as -complete, " & August 26, 2016 "as -is. " The function or use of this report is to value the subject real estate for the assistance in a purchase transaction. The definitions of value are as such: Market Value As -Is: means an estimate of the market value of a property in the condition observed as of the date of visitation and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications. 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 that 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 title from seller to buyer under conditions whereby: SOUTHERNCALIFORNIA OFFICE PACIFIC NORTHWEST OFFICE NORTHERN CALIFORNIA OFFICE U.S. BANK TOWER EAST COAST OFFICE CONGRESS CENTER ISS MONTGOMERY STREET, SUITE 1409 633 WEST FIFTH STREET, SUITE 5870 44 WALL STREET, 12- FLOOR 1001 SW 5TH AVE., SUITE 1100 SAN FRANCISCO. CALIFORNIA 94104 LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10005 PORTLAND, OREGON 97204 TEL (4151 398-3381 ♦ FAX. 14151 39e-3391 TEL: 1213) 439-9959 • FAX: 1213) 439-9957 TEL: (2121 422-3777 i FAX: (5451 807-4755 TEL 15031 208-3818 11-107 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. Based upon the investigations undertaken, the analyses made, and upon our experience as real estate appraisers, we have formed the opinion that, as of effective date of value, and subject to the premises, assumptions, limiting conditions, and certifications set forth within this report, the subject real estate has the following estimated values. The estimated "as -stabilized" market value of the fee simple interest, upon completion of the planned renovation, as of August 26, 2017, is: TWO MILLION EIGHT HUNDRED NINETY THOUSAND DOLLARS $2,890,000 The estimated "as -complete " market value of the fee simple interest, upon completion of the planned renovation, as of August 26, 2017, is: TWO MILLION EIGHT HUNDRED NINETY THOUSAND DOLLARS $2,890,000 The estimated "as is " market value of the fee simple interest, as of August 26, 2016, is: EIGHT HUNDRED NINETY THOUSAND DOLLARS $890,000 The Restricted Appraisal Report which follows sets forth the results of the investigations and analyses, pertinent facts about the area and the subject property, comparable data, and the reasoning, in part, leading to the conclusions set forth. This report is also in compliance with Title XI of the Federal Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) and with FIRREA 12 CFR PART 323 regulations. This report complies with the Uniform Standards of Professional Appraisal Practice (USPAP) adopted by the Appraisal Foundation, whereby the Standards are procedures to be followed in performing an appraisal. Appraisal reports are based upon information contained within Standard 2-2(a). 11-108 Cordially, FRAZIER CAPITAL K. Bethel, MAI, MA, MA, BA No. AGO13533 sbethel( ,fraziercapital.com o ereno Senior Appraiser License No: AT3002018 j sereno&fraziercapital.com 11-109 AERIAL PHOTOGRAPH OF SUBJECT PURPOSE OF THE REPORT The purpose of this report is to set forth our opinion of the market value of the land and improvements of the subject property under the following premises: ■ The estimated "as -stabilized" fee simple market value upon completion of construction. ■ The estimated "as -complete" fee simple market value upon completion of construction. ■ The estimated "as is " fee simple market value. The purpose of this evaluation is to provide a market value of the property described above. The use of the report is for the assistance in a purchase transaction. The intended client and the preparer have discussed and mutually agreed to the adequacy of this document based on the limited investigation undertaken and its intended use to be used in underwriting a proposed or monitoring a commercial real estate loan. As a result of the limited appraisal process where certain allowable departures have been invoked, the client is aware that the reliability of the value conclusion(s) provided may be impacted to the degree that there is a departure from specific guidelines of USPAP. This report is intended only for the internal use of City of Newport Beach. SCOPE OF THE APPRAISAL As a part of this valuation we have made a number of independent investigations and analyses. We identified the property with the assistance of our client, the property owner, and by referencing public documents available. We conducted a physical visitation of the property, including a walk-through of the building. Several sources of data were researched for this appraisal, including but not limited to Public Records, RealQuest, Costar, Loopnet, and market participant surveys. An Environmental Site Assessment Report was not provided. Two approaches to value have been used: the Sales Comparison (Market) Approach and the Income Approach. We did not use the Cost Approach since typical buyers do not buy based on construction costs and it is difficult to value depreciated assets. The investigations and analyses undertaken include the following: 1. Review of area demographic and economic information. 2. A review and analysis of the theater/event center market activity for the subject's market area. 3. Interior & Exterior Inspection of the subject property, including a review of the legal description, parcel map, ownership history and visual inspection of the surrounding neighborhood. 4. Accumulation of comparable rental rates and comparable sales. 5. Discussions with city planners, buyers, developers and other knowledgeable persons in the area. Effective Date of Value/Interest Appraised: Transaction History: The effective date of value are August 26, 2017 "as -stabilized" & "as -complete, " & August 26, 2016 "as -is. " Future valuation has been expressed in this report.. The property was visited on August 26, 2016 by Stephen Bethel. Parcel No. Ownership Recording/ Sale Document Sold During Sale Date Price No. Last 3 Yrs 048-135-02 City of Newport 11/10/1998 $ 480,000 98-763074 No Beach/Arts Center Source: RealQuest & CoStar Comps The subject is currently owned by the City of Newport Beach. It has not transacted in the last 5 years that we are aware of. The City of Newport Beach has listed the subject for sale and has conducted an open bid and proposal process to ensure the fairest process in selecting a buyer for the property. In selecting the winning bid, the City of Newport Beach was seeking the most fitting proposal to repurpose the subject property (Balboa Theater) to serve the local community while maintain its original entertainment mission. The City of Newport Beach has awarded the bid to purchase the subject to Lab Holding, LLC with a proposed purchase price of $1,000,000. The purchase price essentially represents the value of the underlying land, given the poor condition of the subject improvement "as -is." The award and purchase price took into consideration the City's mandated Grant Deed Restriction, which is described in more detail below. Grant Deed Restriction: The purchase of the property is subject to the following conditions: 1) The condition that Grantees, their successors, and assigns, shall at all times use the property for theatrical, cultural center, event center, or for other related performing arts uses. Ancillary commercial uses of the property shall be permitted. 2) The Grantor shall retain the first right of refusal to repurchase the property, should the Grantee elect to not redevelop or use the property in the condition stated above. EXTRAORDINARY ASSUMPTIONS/SPECIAL LIMITING CONDITIONS It should be noted that the purchase agreement and Grant Deed Restriction have not been finalized nor executed. With any construction project, there are many contingencies related to project approval, project completion, and timeframes for the development. It is explicitly assumed that all three of these major contingency types will materialize, in keeping with the quality and time horizons that were conveyed to us by the owner's representatives. Land: Flood Zone: Earthquake: Zoning: We assume that all descriptive information for the project, including construction budgets, building plans, and permit application status, are materially accurate. Please note that the use of the extraordinary assumptions stated above might have affected the assignment results. It must be noted that the prospective values in this report are based upon the current market conditions and Frazier Capital cannot be held responsible for unforeseeable events that alter market conditions prior to the effective date of the appraisal. Land Summary Parcel ID Location Gross Land Gross Land Shape Area (Sq Ft) Area (Acres) 048-135-02 707 East Balboa Boulevard 5,130 0.12 regular Totals: 5.130 0.12 Source: Plat Ma According to the National Flood Insurance Program's Flood Insurance Rate Map (FIRM) issued by the Federal Emergency Management Agency (FEMA) the subject is located in an shaded zone X which is defined as areas of 500 -year flood areas of 100 -year flood with average depths of less than 1 foot or with drainage areas less than 1 square mile and areas protected by levees from 100 -year flood. The flood map referenced was Community Panel Number 06059CO382J with an effective date of December 3, 2009. *It should be noted that during our site inspection, it appeared that the subject may have a portion of the site below grade or below the tide line. As a result, seeping of water may exist on-site. For the appraisal report, we have assumed that the subject is adequate and all construction costs will remedy any potential seeping problems. We suggest that the borrower obtain a property inspection report and or phase I environmental report prior to the purchase of the property. According to the California Department of Conservation, Division of Mines and Geology the subject site is not within a defined Alquist-Priolo Fault Zone. The subject site is zoned MU -V - Mixed Use Vertical district by the City of Newport Beach. This designation generally allows for retail, restaurant, office, personal services, & mixed-use (retail/residential) uses. This zoning designation does relate to the nearby properties. The essential provisions include the following: Zoning District: MU -V - Mixed Use Vertical General Plan: MU -V - Mixed Use Vertical Permitted Uses: Height Restrictions: Minimum Setback Requirements: Front Yard (ft) Side Yard (ft): Rear Yard (ft): Parking Requirements: For Retail Use: For Office Use: First 50,000 SF: Next 75,000 SF: More Than 125,001 SF: Maximum FAR: retail, restaurant, office, personal services, & mixed-use (retail/residential) 26 Feet (Flat Roof); Less Than 3/12 Roof Pitch None None None 1 Space per 250 SF 1 Space per 250 SF 1 Space per 300 SF 1 Space per 350 SF 0.75:1 Density: 1,631 SF of lot area per unit Conclusion The subject appears to be a legal but non -conforming use due to its lack of parking Source: Newport Beach Planning Department Website The subject property is located in the Mixed Use -Vertical (MU -V) zone designation of the City of Newport Beach. The MU -V zone district is intended to provide for first level commercial uses with residential uses on the second level. A wide variety of commercial uses including retail, office, restaurants, personal services, etc., are permitted. Note that commercial uses are also permitted on the second level, however, residential uses on the ground floor are generally prohibited. It should also be noted that the subject property is located in the Balboa Village Parking Management Overlay District. On-site parking is not required for most commercial uses in parking overlay district (excluding certain assembly uses). Therefore, there are no on-site parking requirements for most commercial uses such as retail, office, restaurants, personal services, etc. On-site parking requirements for residential units is two covered spaces per unit. A development containing three residential units would also require a guest parking space, for a total of seven on-site parking spaces. Grant Deed Restriction: The purchase of the property is subject to the following conditions: Tax Parcel WAssessed Value: 1) The condition that Grantees, their successors, and assigns, shall at all times use the property for theatrical, cultural center, event center, or for other related performing arts uses. Ancillary commercial uses of the property shall be permitted. 2) The Grantor shall retain the first right of refusal to repurchase the property, should the Grantee elect to not redevelop or use the property in the condition stated above. The subject is owned by the City of Newport Beach. Therefore, the subject does not have any available tax information or property taxes due. City: Newport Beach is known for its corporate offices, mild Pacific coastal climate, and the nearby airport served by a dozen major air carriers and named after legendary resident John Wayne. There are several draws to the City of Newport Beach. The business amenities include a nearby major airport, close proximity to technologically proclaimed University of California at Irvine, a diversified and financially solid local economy, and business friendly City hall. Newport Beach features several bustling areas of business. Each area—or "village"—has its own distinct ambiance and character. Below is a list of the more prominent business districts • Newport Center: Sprawling over 600 acres in the heart of Newport Beach, Newport Center is known for its elegant buildings and panoramic views of the Pacific Ocean. Its world-class outdoor shopping destination—Fashion Island—features more than 200 stores, 40 restaurants and two cinema complexes. In addition to these amenities, 24 office buildings, ranging from low-rise to premier high-rise offices. • Corona del Mar Village: Along East Pacific Coast Highway, restaurants, boutiques and professional businesses combine to form the Corona del Mar Village. • Balboa Island: Upon crossing a small half -mile bridge at the end of Jamboree Road is Balboa Island. Home to charming retail shops and quaint beach cottages. The island, measuring 2.5 miles around, is a favorite destination in Newport Beach. The landmark Balboa Island Ferry, in operation since the 1920s, shuttles people in cars, on bikes and on foot for a quarter -mile ride across the harbor to the Balboa Peninsula. • Balboa Village: Home to the landmark Balboa Pavilion, the Balboa Village is situated between Newport Harbor and the Pacific Ocean. The Balboa Village offers more waterfront recreational activities per square inch than any other area of Orange County. In addition, retail shops and restaurants cater to the beach crowds that flock to this area year-round. • Cannery Village: Artists, restaurateurs and antique dealers have settled in the historic Cannery Village to create an eclectic mix of charming shops and cafes. Encompassing eight square blocks, local artists regularly display their works in outdoor art shows and in the many village galleries. • Airport Area: Orange County's only commercial service airport, John Wayne Airport, has given rise to several surrounding businesses in the Airport Area. A vast number of high-rise buildings encircle the airport, housing everything from financial institutions to hotels to technology-based businesses. The Airport Area is centrally located near the 405 and 73 freeways, and its location complements larger businesses that have the potential for growth and expansion. The chart below offers a synopsis of land use characteristics for the city of Newport Beach: Population: AREA 85,323 309,138,711 Land 16,654 acres 26 square miles Ocean 14,894 acres 23 square miles Bay 800 acres 1.25 square miles Harbor Waters 800 acres 1.25 square miles Total 32,148 acres 51.5 square miles RECREATIONAL ACREAGE 3,584 88 Ocean / Ba / Harbor 16,494 acres 25.77 square miles Parks 53) 450 acres .70 square miles Beaches 2.48% of land 237 acres .37 square miles Total 16,989 acres 26.54 square miles WATER FRONTAGE Ocean 9 miles Harbor 25.4 miles Total 34.4 miles NEWPORT HARBOR Boats 9,900 Piers 1,230 Commercial slips & side ties 2,330 Bay moorings 1,235 As of 2014, Newport Beach's population is 85,323 people. Since 2000, it has had a population growth of 8.39 percent. There are 3,584 people per square mile (population density). The median age is 43.8. The average household size is 2.21 people. Population 0 85,323 309,138,711 Population - 2010 0 85,186 308,745,538 Population -2000 0 78,720 285,036,114 Papulation -1990 0 69,440 251,960,433 Pop. 1990'tct Now A 22.87% 22.69% Pap. 2000 to Now A 8.39% 8.46% Pop, Density 9 3,584 88 Employment: The unemployment rate in Newport Beach is 3.10 percent (U.S. avg. is 6.30%). Recent job growth is Positive. Newport Beach jobs have increased by 0.67 percent. Future job growth over the next ten years is predicted to be 38.20%. Newport Beach, CA, sales tax rate is 8.00%. Income tax is 6.00%. The income per capita is $80,893, which includes all adults and children. The median household income is $109,677. Unemployment Rate ® 3.10% 6.301b R2centjab Growth 0 0,67% 1.1844 Future Job Growth Q 38.20% 36.10% Saies Taxes 0 5.00% 6.00% IncorneTaxes @ 5.00% 4.72% Income per Cap. 6 _S80,893 $28,051 Household Income A $109,537 $53,046 Family Median Income B $150,866 $64,585 Economy: Major retail businesses such as Bloomingdale's have recently located to Newport Beach to take advantage of the upscale demographics. Fletcher Jones, one of the highest selling Mercedes Benz dealerships in the United States has completed a new sales and service facility at a larger Newport Beach site. Rockwell International is also expanding in Newport Beach, bringing their high technology offices into the new millennium. (Source: Newport Beach Chamber of Commerce) Housing: There are currently 431 resale and new homes in Newport Beach, including 38 open houses, and 58 homes in the pre -foreclosure, auction, or bank -owned stages of the foreclosure process. The median sales price for homes in Newport Beach for Apr 21 to Jul 20 was $1,494,000 based on 175 home sales. This represents a decline of 7.8%, or $126,000, compared to the prior quarter and a decrease of 2.0% compared to the prior year. Sales prices have appreciated 39% over the last 5 years in Newport Beach. The average price per square foot is $770 in Newport Beach, and increase of 10.3% over the past year Median Sales Price $1.8m $1.6M $1.2M $1M HOOK LL tL 3 Number of Sales 300 250 200 150 100 r r w m m m L �rt LL LL q w LL LL Education: Newport Beach is served by the Newport Mesa Unified School District. It currently serves approximately 22,500 at twenty-two elementary schools, two intermediate schools, four high schools, one alternative education center, and one adult education center. The University of California, Irvine is located near Newport Beach California. Newport Beach public schools spend $9,910 per student. The average school expenditure in the U.S. is $12,435. There are 24 pupils per teacher, 7,166 students per librarian, and 1,414 children per counselor in Newport Beach, CA schools. Expend. per Student 0 59.910 $12,435 Educ. Expend. per Student 0 $8,400 $10,495 Instr. Expend, per Student A $5,307 $6,405 Pupil/Teacher Ratio 0 23.5 15.3 Students per Librarian 10 7166 903 Students per Counselor 0 1414 513 Source: City of Newport Beach Website, Census.gov, Sperling's Best Places, Trulia.com, Wikipedia, Trulia Market Analysis: Costar Market Report: Orange County Retail Market — Mid -Year 2016 The Orange County retail market did not experience much change in market conditions in the second quarter 2016. The vacancy rate went from 4.3% in the previous quarter to 4.2% in the current quarter. Net absorption was positive 141,291 square feet, and vacant sublease space decreased by (124,491) square feet. Quoted rental rates increased from first quarter 2016 levels, ending at $25.45 per square foot per year. A total of 4 retail buildings with 33,307 square feet of retail space were delivered to the market in the quarter, with 170,592 square feet still under construction at the end of the quarter. Net Absorption: Retail net absorption was slightly positive in Orange County second quarter 2016, with positive 141,291 square feet absorbed in the quarter. In first quarter 2016, net absorption was positive 193,955 square feet, while in fourth quarter 2015, absorption came in at positive 562,982 square feet. In third quarter 2015, positive 282,159 square feet was absorbed in the market. Tenants moving into large blocks of space in 2016 include: Gelson's Market moving into 48,000 square feet at 25632 Crown Valley Parkway; Smart & Final moving into 43,000 square feet at 21500 Yorba Linda Blvd; and U Gym LLC & Ultimate NEV LLC moving into 42,343 square feet at 17091 Beach Blvd. Vacancy: Orange County's retail vacancy rate decreased in the second quarter 2016, ending the quarter at 4.2%. Over the past four quarters, the market has seen an overall increase in the vacancy rate, with the rate going from 3.9% in the third quarter 2015, to 4.0% at the end of the fourth quarter 2015, 4.3% at the end of the first quarter 2016, to 4.2% in the current quarter. The amount of vacant sublease space in the Orange County market has trended down over the past four quarters. At the end of the third quarter 2015, there were 173,183 square feet of vacant sublease space. Currently, there are 83,353 square feet vacant in the market. Largest Lease Signings: The largest lease signings occurring in 2016 included: the 38,068 -square -foot -lease signed by Smart & Final Extra! At 21672 Plano Trabuco Rd; the 27,000 -square -foot -deal signed by Roasting Waters at 7822 Warner Ave; and the 25,952 -square -foot -lease signed by Petsmart at 26761 Aliso Creek. Rental Rates: Average quoted asking rental rates in the Orange County retail market are up over previous quarter levels, and up from their levels four quarters ago. Quoted rents ended the second quarter 2016 at $25.45 per square foot per year. That compares to $25.33 per square foot in the first quarter 2016, and $24.84 per square foot at the end of the third quarter 2015. This represents a 0.5% increase in rental rates in the current quarter, and a 2.40% increase from four quarters ago. Inventory and Construction: During the second quarter 2016, four buildings totaling 33,307 square feet were completed in the Orange County retail market. Over the past four quarters, a total of 1,445,838 square feet of retail space has been built in Orange County. In addition to the current quarter, 13 buildings with 674,711 square feet were completed in first quarter 2016, 25 buildings totaling 687,260 square feet completed in fourth quarter 2015, and 50,560 square feet in four buildings completed in third quarter 2015. There were 170,592 square feet of retail space under construction at the end of the second quarter 2016. Some of the notable 2016 deliveries include: The Source at Beach, a 450,000 -square -foot facility that delivered in first quarter 2016 and is now 11% occupied, and 8501 Irvine Center Dr, a 90,284 -square -foot building that delivered in first quarter 2016 and is now 75% occupied. Total retail inventory in the Orange County market area amounted to 143,931,016 square feet in 10,436 buildings and 1606 centers as of the end of the second quarter 2016. General Retail Properties: The General Retail sector of the market, which includes all freestanding retail buildings, except those contained within a center, reported a vacancy rate of 2.7% at the end of second quarter 2016. There was a total of 1,166,736 square feet vacant at that time. The General Retail sector in Orange County currently has average rental rates of $24.26 per square foot per year. There are 86,792 square feet of space under construction in this sector, with 15,000 square feet having been completed in the second quarter. In all, there are a total of 6,436 buildings with 42,658,845 square feet of General Retail space in Orange County. Sales Activity: Tallying retail building sales of 15,000 square feet or larger, Orange County (California) retail sales figures fell during the first quarter 2016 in terms of dollar volume compared to the fourth quarter of 2015. In the first quarter, nine retail transactions closed with a total volume of $79,376,000. The nine buildings totaled 232,751 square feet and the average price per square foot equated to $341.03 per square foot. That compares to 16 transactions totaling $251,703,500 in the fourth quarter 2015. The total square footage in the fourth quarter was 1,190,353 square feet for an average price per square foot of $211.45. Total retail center sales activity in 2016 was down compared to 2015. In the first three months of 2016, the market saw nine retail sales transactions with a total volume of $79,376,000. The price per square foot averaged $341.03. In the same first three months of 2015, the market posted 12 transactions with a total volume of $171,631,500. The price per square foot averaged $304.45. Cap rates have been lower in 2016, averaging 5.23% compared to the same period in 2015 when they averaged 6.56%. One of the largest transactions that has occurred within the last four quarters in the Orange County (California) market is the sale of 7910 Katella Ave in Stanton. This 81,000 square foot retail building sold for $18,500,000, or $228.40 per square foot. The property sold on 11/2/2015, at a 5.85% cap rate. Total Retail Market Statistics Mita -Year 2616 Snorts- C. 1;4.r Pr pP ,Iyln The subject is located in the Orange County Airport Area retail market. Costar indicates that this market has a current vacancy of 2.40% with a quoted asking rate of $37.43/sf/year or $3.12/sf/month — NNN. It also indicates a positive year to date absorption of 14,998 square feet. General Retail Submarket Statistics Mir!-Yoar 2011 i3c;ach 4iit: ...x'.:."7.241 17,234 :/.234 '..[ii, 37.:i2N I f1 64,0004:113[? More specifically, the subject is located in the Newport Beach retail submarket. Costar indicates that this submarket has a current vacancy of 2.60% with a quoted asking rate of $51.30/sf/year or $4.28/sf/month — NNN. It also indicates a positive year to date absorption of 37,528 square feet. 1.0 Mile Radius Historical Data: We have performed a 1.0 -mile radius search via the CoStar database to determine the market vacancy. The search examined retail properties within a 1.0 -mile radius of the subject, and determined that the market vacancy rate is currently 2.60% in the subject's immediate area. 11-120 QTD 129 529,603 2.60% 0.00% 2.60% 2.60% 2,900 $4.50 $4.50 $4.50 2016 Q2 129 529,603 3.10% 0.00% 3.10% 3.10% 3,830 $4.23 - $4.23 2016 Q1 129 529,603 3.90% 0.00% 3.90% 3.40% -7,320 $3.48 $3.48 2015 Q4 129 529,603 2.50% 0.00% 2.50% 2.50% 152 $3.60 $3.60 2015 Q3 129 529,603 2.50% 0.00% 2.50% 2.50% -4,512 $2.89 $2.89 2015 Q2 129 529,603 1.70% 0.00% 1.70% 1.70% 7,065 $2.89 $2.89 2015 Q1 129 529,603 3.00% 0.00% 3.00% 3.00% -6,250 $2.92 $2.92 2014 Q4 129 529,603 1.80% 0.00% 1.80% 1.80% -3,065 $2.78 $2.78 2014 Q3 129 529,603 1.20% 0.00% 1.20% 1.20% -1,000 $2.68 $2.68 2014 Q2 129 529,603 1.00% 0.00% 1.00% 1.00% 500 $2.66 $2.66 2014 Q1 129 529,603 1.10% 0.00% 1.10% 1.10% 5,600 $2.70 $2.70 2013 Q4 129 529,603 2.20% 0.00% 2.20% 1.10% 5,605 $2.70 $2.70 2013 Q3 129 529,603 3.20% 0.00% 3.20% 2.40% 4,697 $3.30 $3.30 2013 Q2 129 529,603 4.10% 0.00% 4.10% 4.10% -591 $3.39 $3.39 2013 Q1 129 529,603 4.00% 0.00% 4.00% 3.80% -375 $3.46 $3.46 2012 Q4 129 529,603 4.00% 0.00% 4.00% 3.70% -12.500 $3.44 $3.44 2012 Q3 129 529,603 1.60% 0.00% 1.60% 1.60% 6,054 $3.58 $3.58 2012 Q2 129 529,603 2.70% 0.00% 2.70% 2.70% -9,910 $2.70 $2.70 2012 Q1 129 529,603 0.90% 0.00% 0.90% 0.90% 3,246 $2.78 $2.78 2011 Q4 129 529,603 1.50% 0.00% 1.50% 1.50% -938 $2.78 $2.78 Vacancy & Rental Rates 5.5% $4.40 5,0% 4.5 % 4.0% w i6 3,5 % u 3.0% 2.5 % 2,0% 1.5% $4.20 $4.00 $3.80 $3.60 $ 3.40 $3.20 $3,00 $2.80 1.0% $2.60 07 08 09 10 11 12 13 14 15 16 - Vacancy Rate - Rental Rate Source: CoStar Comps Vacancy and Rental Rate Graph. Z Z Z C CD at vu rn At present, the retail market is performing strongly. The graph above shows the historical average vacancy and rental rate trend for retail properties within a 1.0 -mile radius of the subject. As one can see, the vacancy rate has decreased from ±4.00% in 2006 to ±1.90% in 2014. Since 2014, the vacancy rate slightly increased to a current rate of ±2.60%, which is still less than pre -recessionary levels. Rental rates decreased from ±$3.80/sf/month - NNN in 2006 to ±$2.80/sf/month - NNN in 2014. Since then, rental rates have increased significantly to a current average of ±$4.50/sf/month - NNN, which is greater than pre -recessionary levels. Site/Location Analysis: The subject property is located at 707 East Balboa Boulevard, Newport Beach, California. Generally, the subject is located on the Balboa Peninsula along the Newport Beach coastline. 9 Edi �Q cz`�* �7S 4 _ Or ew Bead Qat z y { Q w� LBalboaesort— SPri� Baja Sharkeez )rt Beach Pier i Balboa As Balboa Island Ferry • Ave Balboa Fun Zone 765lEaiat 43at�da BOulmard • Park Newport Apartmei B I G a �mFx � f'1As 6' y m o NEWPORT CENTER Newport Beach k. Country Club C dr�NF CORONA DEL MAR Corona diel Mar "- State Beach Rob( R.A Balboa Island & Peninsula: Balboa Island is an area of Newport Beach, California, Comprising of three artificial islands in Newport Harbor. The Balboa Island Community is joined to the mainland by a short two-lane bridge on the northeast of Balboa Isle and, and a privately operated fleet of three, three -car ferryboats which provide access across the harbor to the Balboa Peninsula. The island got its start in 1906, when developer William Collins decided to dredge a channel along the north side of Newport Bay across from the Balboa Pavilion on the peninsula. He piled the dredged sand and silt on a mud flat until an island was formed. He subdivided the island into residential lots, and Most of the first lots were sold for vacation homes to residents of Pasadena, who traveled to the area on the Pacific Electric Red Car line. On September 18, 2016 the island, which was incorporated into the city of Newport Beach in 1916, is celebrating its 100th anniversary this year with a series of projects and parties. The residents, business owners and visitors will celebrate the island's history at a centennial party at the Harborside Pavilion and Grand Ballroom presented by the Balboa Island Merchants Assn. in conjunction with the Balboa Island Improvement Assn. 11-122 nT _ r'snar i3r r-as,r fir C dr�NF CORONA DEL MAR Corona diel Mar "- State Beach Rob( R.A Balboa Island & Peninsula: Balboa Island is an area of Newport Beach, California, Comprising of three artificial islands in Newport Harbor. The Balboa Island Community is joined to the mainland by a short two-lane bridge on the northeast of Balboa Isle and, and a privately operated fleet of three, three -car ferryboats which provide access across the harbor to the Balboa Peninsula. The island got its start in 1906, when developer William Collins decided to dredge a channel along the north side of Newport Bay across from the Balboa Pavilion on the peninsula. He piled the dredged sand and silt on a mud flat until an island was formed. He subdivided the island into residential lots, and Most of the first lots were sold for vacation homes to residents of Pasadena, who traveled to the area on the Pacific Electric Red Car line. On September 18, 2016 the island, which was incorporated into the city of Newport Beach in 1916, is celebrating its 100th anniversary this year with a series of projects and parties. The residents, business owners and visitors will celebrate the island's history at a centennial party at the Harborside Pavilion and Grand Ballroom presented by the Balboa Island Merchants Assn. in conjunction with the Balboa Island Improvement Assn. 11-122 Population: According to the 2000 US Census, Balboa Island was one of the densest communities in Orange County. Approximately 3,000 residents live on just 0.2 square miles (0.52 km2) giving it a population density of 17,621 people per square mile—higher than that of San Francisco. Housing: The median sales price for homes on Balboa Island from Jun 8 to Sep 7 was $2,625,000 based on 3 home sales. This represents a decrease of 4.5%, or $125,000, since the last quarter and a decrease of 15.3% over the past year. The average price per square foot for this same period fell to $1,387, down from $1,418. Balboa Island is ranked as the 37t' most expensive zip code in the United States according to the Forbes list of Americas Most Expensive ZIP Codes 2015. Median Sales Price $4M $3.5M $3M $2.5M $2M $1.5M $1M r 2 - aT Number of Sales 20 15 10 5 0 Q Il 3 iL 4� Q Q Q Q Q A landmark Balboa Island home by acclaimed architect John Lautner, on and off the market for the past six years, has sold for $3.772 million in March of 2016. 11-123 Balboa Theater: The Balboa Theater first opened in 1928 as the Ritz Theater and original Vaudeville shows before operating as a speakeasy during the tail end of the Prohibition Era, according to historical accounts. In 1939, the venue became known as the Balboa Theater and began showing films. For several years in the early 1970s, it was an adult theater showing X-rated movies under the name Pussycat Theatres. By the late 1970s, it had transformed again, showing revivals of popular films. The city bought the property in 1988, but it fell on hard times in the early 1990's and was shut down in 1992. In 2010, the Balboa Performing Arts Theater Foundation Launched a fundraising effort to renovate the building, but was not successful. In April of 2016, the City Council voted to enter a 9 -month exclusive negotiating agreement to work with Lab Holding on a proposal to rejuvenate the theater. Lab Holding is proposing to restore the theater's original architecture, including the marquee, which likely would reflect the 1920s wrought -iron style. The venue is proposed to have a cafe that would open to the street, a small stage for live music and a second stage for private events. The live -music stage would have an indoor pub but no seating, according to preliminary plans. Currently, the theater is one of ten buildings in Newport Beach that is registered as a historical property. Newport Pier Restaurant: The City Council voted in March to enter an agreement with Bluewater Grill owners Ulcickas and Richard Staunton to develop a conceptual design for a new restaurant at the end of the pier. The new restaurant is proposed to be three stories with floor -to -ceiling windows on the first floor, as well as an outdoor bar and seating area on the second and third floors. The decor is expected to feature wood and steel accents with Cape Cod -style siding, rustic wood tables and umbrellas. The building also is proposed to have a to -go window. The menu will feature fish, but will also include options that appeal to a wide variety of customers. 11-124 Pico Balboa Inn: The Balboa Inn is located on the Balboa Peninsula in the city of Newport Beach, California. It was established in 1929, and added to the National Register of Historical Places in 1986. The "Balboa" got its name from the coastal Balboa Peninsula at Newport Beach, California. People from the Los Angeles area who'd seen it started referring to it as 'The Balboa', or the dance being done in Balboa. In its day, the Balboa Inn was the number one hostelry on the Orange County Coast and the present day "Balboa Inn Resort" is popular. The Inn has been remodeled and modernized a number of times but its graceful Spanish Colonial Revival architecture remains. At one time the Balboa Theater, operated by the colorful, hard -drinking, hard - swearing character Madame La Rue, stood next to the Balboa Inn. The Balboa Inn was, and still is, a favorite getaway spot for Hollywood stars. For example, Olympic athlete and Tarzan star Johnny Weissmueller stayed there. Legend has it that Weissmueller swam the distance between the Balboa Pier and Newport Pier on a regular basis. A current famous room at the Inn is Kareem Abdul-Jabbar's Suite with its nine -foot -high doors. 11-125 The Balboa Pavilion: The Balboa Pavilion in Newport Beach, Orange County, California, is a California Historical Landmark and a National Historic Place. Established on July 1, 1906, the Balboa Pavilion played a prominent role in the development of Newport Beach by attracting real estate buyers to an area formerly designated as "swamp and overflow" land. The Balboa Pavilion is one of California's last surviving waterfront recreational pavilions from the turn of the century. The Pavilion continues to serve the public today as a marine recreational facility and is Newport Beach's most famous landmark, as well as its oldest standing building. The pavilion was designed by Los Angeles freelance architect Fred R. Dorn, who would later go on to work as an associate of Stiles O. Clements of Morgan, Walls & Clements. On July 1, 1906, the 65 -foot (20 m) -high Victorian style building was fully completed to coincide with the completion of the Pacific Electric Railway Red Car Line extension to central Balboa near the Balboa Pavilion on July 4, 1906, after only 10 days of construction. Currently, the Balboa Pavilion is used as a marine recreation facility, with sport fishing boats, the transportation terminal for the Catalina Flyer to Catalina Island, small boat rentals, whale watching, sunset cruises, a restaurant and upstairs ballroom for banquets, receptions and conferences. Balboa Island Ferry: Since 1919, Balboa Island Ferry has provided continuous service for drivers and passengers in vehicles, cyclists, and pedestrians between Balboa Island and Balboa Peninsula in Newport Beach, California. Crossings approximate 800 feet. Via bridges, an alternate route is possible; but the traveling distance increases up to six miles. Many choose the ferry's direct route and enjoy a scenic crossing with historic charm. 11-126 Balboa Fun Zone: The Balboa Fun Zone is a family destination located on the Balboa Peninsula in the city of Newport Beach, Orange County, California. The Balboa Fun Zone offers both an ocean and harbor experience for an estimated seven million annual visitors to Newport Beach. The Fun Zone was built in 1936 by Al Anderson featuring a small beach and a 45' Ferris Wheel as the main attractions. In 1986, Jordan Wank rebuilt the entire area and re -opened it. In 1988, Doo & Sons owned the Balboa Fun Zone, but they walked away after not receiving zoning permits to develop the property into a mixed use of retail and housing. Currently, the greater Balboa Fun Zone area includes the Balboa Village which consists of more retail shops, restaurants, several saloons, a boutique hotel, the Balboa Pier, the beach, and the boardwalks along both the beach and the harbor fronts. Sources: Trulia, Wikipedia, visit Newport Beach, Balboa Island, The Los Angeles Times, Orange County Register 11-127 More specifically, the subject is located along East Balboa Boulevard, which is a primary commercial corridor traveling east to west throughout the Balboa Peninsula. It is located in the heart of the historic Balboa Village, and is ideally located within walking distance of the Balboa Pier, the Balboa Ferry, Balboa Pavilion, Fun Zone, and is not far from The Wedge - Newport's infamous surfing beach, all of which are major attractions and drivers of value for the immediate area. � Positive site characteristics: It has a prime location with frontage on a primary commercial street, is located close in proximity to multiple points of interest and drivers of value, and it has favorable zoning with a wide range of commercial and mixed-use permitted uses. Negative site characteristics: It lacks parking (although not required by zoning) and is an interior lot. Overall, the subject has an excellent location. 11-128 Boat Rentals of America 2 Newport Landing '� Wf Newport Landing <<_ .ems Whale Watching = �} Class 047 g611 ■ ExplorOcean 1 3�'�C Q� _ as "'• w1 WI PizzaPete's 8 Be[ Harbor Liquor &Deli BTSToe Rings &Gifts Balboa Pavilion z� Davey:s Locker Whale: ° Watching.&Sportfishibg. 8 oc `�rt'� San Shi Go`.+1,,, wf Sushi &Asian _ - SJ. Hills Boai:Services Y United States h/ey o; F, Til :: ° Postal service b°a Great Max 8fke ��$+f6nulEst at r 709 Ea6alhoa t7r.1 - .. `11,ri 11 Cruisers Pizza Bar Grill Balboa Inn BXs Restaurant { I'I & Brewhouse WI Cabo Cantina oe38yd Ge H `�rlf��I flY Balboa Municipal Lot peninsula Park Nei m �I dos 91kP Traif a� Ne�ypon 9af60a �� @i/�.Q mm IdiY Positive site characteristics: It has a prime location with frontage on a primary commercial street, is located close in proximity to multiple points of interest and drivers of value, and it has favorable zoning with a wide range of commercial and mixed-use permitted uses. Negative site characteristics: It lacks parking (although not required by zoning) and is an interior lot. Overall, the subject has an excellent location. 11-128 Building "As -Is ": The subject consists of one 1.0 story, brick masonry building of average quality construction and currently in poor condition. According to county records, the subject has a building area of 6,912 square feet. It is assumed that there was previously a second floor/mezzanine in the subject property, however as of the date of inspection, the subject did not appear to have a built -out second floor. The subject does not offer any on-site parking; however, this is typical of the market. Building Area: The vacant 6,912 square foot Balboa Theater building is located on the Balboa Peninsula in the City of Newport Beach. It has high interior ceilings and the original brick exterior walls add character and history to the building. The subject is 100% vacant and the interior of the building has already been prepared for a major renovation. The Balboa Theater was originally constructed between 1927 and 1928; the site is listed on the local Newport Beach Register of Historical Properties in 1992, but is not listed on State or National registers. BUILDING AREA - "AS -IS" Use 1st Floor 2nd Floor Total % of Total Theater 6,912 - 6,912 100% Total 6,912 - 6,912 100% Source: County Records "As -Stabilized" & As -Complete ": The subject has a proposed renovation that will result in the property operating as a multi-purpose event/entertainment/theater venue with an ancillary commercial use as a caf6/restaurant. According to the preliminary plans as of the effective date, the subject will be a 1.0 story building and will have a gross building area of 5,200 square feet. According to the buyer, the renovation will result in three primary components: 1) An intimate neighborhood cafe open to the public and also serving as the catering kitchen for events in the theater; 2) A small scale live music stage (standing room only) for patrons including a pub counter; 3) An adjoining gathering room for rentals by guests for private celebrations ( i.e. meetings, small weddings, etc.) The picture below is a conceptual floor plan for the subject "as -stabilized" and "as - complete. " It should be noted that the picture below is provided for informational purposes only. The conceptual floor plan has not been finalized as of the effective date. There are also no immediate plans to have a mezzanine area that we are aware of. 11-129 STAGE 1 I I I-_1 I I STAGE 2 TIERED THEATER ' Arm SEATING I�rll� POTENTIAL BAR MEZZANINE BAR STORAGE OPEN a KITCHEN ME145 WOMENS ESTR00 RESTROOM RESTROOM CHECK IN i CAFE CAFE SEATN8 SEATING / Building Area: BUILDING AREA - "AS -STABILIZED" & "AS -COMPLETE" Use 1st Floor 2nd Floor Total % of Total Theater/Music Performance Room 1,500 - 1,500 29% Private Event Space/Stage Room 1,500 - 1,500 29% Cafe/Restaurant 2,000 - 2,000 38% Pub Counter 200 - 200 4% Tota 1 5,200 - 5,200 100% Quality of Construction: Average Condition: "As -Is" — Poor "As -Stabilized" - excellent 11-130 Effective Age/ Actual Age The subject's age and effective age are shown in the table below: Subject's Effective Age/ Actual Age - "As -Is" Year Year Chronological Effective Expected Constructed Remodeled Age Age Life* Remaining Economic Life 1927 N/A 89 35 45 10 Source: *Marshall Valuation Service Cost Guide (Depreciation Section 97) Subject's Effective Age/ Actual Age - "As -Stabilized" & "As -Complete" Year Year Chronological Effective Expected Constructed Remodeled Age Age Life* Remaining Economic Life 1927 2016/2017 89 15 45 30 Source: *Marshall Valuation Service Cost Guide (Depreciation Section 97) Our analysis assumes that the subject has been renovated, which will reduce the effective age of the building. Therefore, we have calculated a weighted year built and year renovated for the subject for our analysis. The renovation appears to be extensive; therefore, we have applied most emphasis on the year renovated. The subject's weighted year built and year renovated can be seen in the table below. Weighted Average of Year Built and Year Renovated Subject Year Percentage Weighted Difference Age Year Built 1927 0.25 482 Year Renovated 2016 0.75 1512 Tota 1 1994 Deferred Maintenance: We have observed deferred maintenance in the subject property. However, it is explicitly assumed that the projected construction budget will remedy all deferred maintenance existing on the subject "as -is." Projected Construction Budget: PROJECTED CONSTRUCTION BUDGET Acquisition Costs (Land Allocation) Source: Buyer's Construction Budget $1,000,000 $1,744,600 $ 252,870 $1,997,470 $1,997,470 $2,997,470 The buyer's projected construction cost indicates a land allocation of $1,000,000 (purchase price), a construction cost total (not including land acquisition costs) of $1,997,470 or $384.13/bldg. sq. ft., and a total cost figure (including land acquisition costs) of $2,997,470 or $576.44/bldg. sq. ft. It should be noted that the "as -stabilized" & "as -complete" value conclusion assumes that the subject had already been purchased. Therefore, we have concentrated on the construction cost total (not including land acquisition costs) of $1,997,470 or $384.13/bldg. sq. ft. in our analysis. Reasonableness Test: To test the reasonableness of the borrower's construction budget, we calculated an approximate construction budget based on cost estimates from the Marshall & Swift Cost Guide, as seen below. WEIGHTED COSTS PER SQ FT Subject Component % of Building Use (Cost) Cost Per Building $/Sq ft Source Type Cost/ Sq Ft Hard Costs Hard Cost Bldg Sq Ft 1,500 Total Site Improvement Costs Excellent $ 5.00 $ 26,000 Building Rehab Costs 1,500 $ 200.00 $ 1,040,000 Interior Buildout 29% $ 100.00 $ 520,000 Contractor Fees /General Requirements 5% $ 15.25 $ 79,300 Direct Cost Contingency 5% $ 15.25 $ 79,300 Total Hard Costs 4% $ 4.94 Total 5,200 Indirect Costs 100% $ 211.39 Architecture, Engineering, & Consulting 5% $ 15.25 $ 79,300 Permits & Fees $ 10.00 $ 52,000 Taxes, Ins., Legal, & Accounting 2% $ 6.10 $ 31,720 Marketing & Leasing Costs 1% $ 3.05 $ 15,860 Indirect Cost Contingency 5% (of indirect) $ 1.72 $ 8,944 Development Fee 3% $ 9.15 $ 47,580 Property Tax During Construction 1.1% $ 3.36 $ 17,466 Total Indirect Cost Total Hard & Soft Costs $ 384.13 Total Cost (including land allocation) $ 576.44 Source: Buyer's Construction Budget $1,000,000 $1,744,600 $ 252,870 $1,997,470 $1,997,470 $2,997,470 The buyer's projected construction cost indicates a land allocation of $1,000,000 (purchase price), a construction cost total (not including land acquisition costs) of $1,997,470 or $384.13/bldg. sq. ft., and a total cost figure (including land acquisition costs) of $2,997,470 or $576.44/bldg. sq. ft. It should be noted that the "as -stabilized" & "as -complete" value conclusion assumes that the subject had already been purchased. Therefore, we have concentrated on the construction cost total (not including land acquisition costs) of $1,997,470 or $384.13/bldg. sq. ft. in our analysis. Reasonableness Test: To test the reasonableness of the borrower's construction budget, we calculated an approximate construction budget based on cost estimates from the Marshall & Swift Cost Guide, as seen below. WEIGHTED COSTS PER SQ FT Subject Component Sq Ft Building Use (Cost) Bldg Class Building $/Sq ft Source Type Cost/ Sq Ft Weight (%Sq Ft) Adjusted $/Sq Ft Theater 1,500 Theater (Live -Stage) C Excellent Section 16, page 12 $261.44 29% $ 75.42 Theater/Event Space 1,500 Cocktail Lounge C Excellent Section 13, page 13 $194.69 29% $ 56.16 Cafe/Restaurant 2,000 Cocktail Lounge C Excellent Section 13, page 13 $194.69 38% $ 74.88 Pub/Bar 200 Bar/Tavern C Good Section 13, page 13 $ 128.38 4% $ 4.94 Total 5,200 100% $ 211.39 Source: Marshall & Swift Cost Manual 11-132 COMPARATIVE UNIT COST METHOD Base Weighted Cost Per Sq Ft Subtotal x # Stories Adjustment x Perimeter Adjustment Subtotal x Local Multiplier (Newport Beach) x Current Multiplier x Square Footage (Bldg) x Site Costs Grading Floor, slab on grade Subtotal Plus: Additional Indirect Costs x Entrepreneurial Profit Total Cost New, Excluding Land $ 211.39 1.00 x $211.39 1.00 x $211.39 1.24 x $262.12 1.00 x $262.12 5,200 $1,363,043 land sq ft 5,130 x 5,130 x 15% 10% Subtotal Depreciated Value of Improvements Plus: Land Value (Borrower's Purchase Price) Total Cost Rounded Source: Marshall & Swift Cost Manual $1.29 $6,618 $7.10 $36,423 $43,041 $1,406,083 $210,913 $1,616,996 $161,700 $1,778,696 $1,778,696 $1,778,696 $1,000,000 $ 2,778,696 $ 2,780,000 Overall, we find that the borrower's construction budget is reasonable. Therefore, we have concentrated on the construction cost total (not including land acquisition costs) of $1,997,470 or $384.13/bldg. sq. ft. in our analysis. The concluded total construction costs (not including land acquisition costs) will be deducted from the "As -Stabilized" and "As -Complete" value conclusions to reach an "As -Is" value. Occupancy The subject is currently 100% vacant, however, it will be 100% occupied by the buyer upon the completion of construction. Environmental Concerns: None that we are aware of. We did not obtain an environmental survey. 11-133 HIGHEST AND BEST USE AS VACANT Physically Possible: From a physical standpoint, the site is sufficient to support a range of urban uses. Legally Permissible: Legally, uses are restricted by the local zoning code. The subject site is zoned MU -V - Mixed Use Vertical district by the City of Newport Beach. This designation generally allows for retail, restaurant, office, personal services, & mixed-use (retail/residential) uses. The subject will, according to the City of Newport Beach, have a grant deed restriction for the subject to be used for entertainment/theater use with ancillary commercial uses. Financially Feasible: The subject has an excellent location on a primary commercial street on the Balboa Peninsula in Newport Beach, CA. There is a high demand for space in the area and there is a low supply of available land. Therefore, it is financially feasible to develop. Maximally Productive: Overall, we have concluded that the maximally productive use of the site, as vacant, is to develop the site for entertainment/theater use with an ancillary commercial use in accordance with the future grant deed restriction. Overall Conclusion As -Vacant: The concluded highest and best use as vacant is to develop the site for entertainment/theater use with an ancillary commercial use in accordance with the future grant deed restriction. HIGHEST AND BEST USE AS IMPROVED Physically Possible: From a physical standpoint, the building has ample deferred maintenance and is in need of a major remodel. Legally Permissible: From a legal standpoint, the subject site is restricted to the impending grant deed restriction and zoning code. Therefore, it is legally permissible to be repurposed for entertainment /theater use with an ancillary commercial use in accordance with the future grant deed restriction. Financially Feasible: Based on our analysis of average land values in the market, the "as -stabilized" and "as - complete" improvement value is still greater than the "as -is" value and the underlying land value. Therefore, the improvement should be repurposed for entertainment/ theater use with an ancillary commercial use in accordance with the future grant deed restriction. Maximally Productive: Overall, the subject is dilapidated and in need of a remodel. The "as -stabilized" and "as - complete" improvement value including the renovation costs greatly contributes to the subject's value as a whole. Therefore, repurposing the subject in accordance to the grant deed restriction would be maximally productive at this time. Overall Conclusion As -Improved. The property would achieve its highest and best use as -improved if it were repurposed for entertainment /theater use with an ancillary commercial use in accordance with the future grant deed restriction. 11-134 Marketing Time: The marketing period is defined as the time it might take to sell a property interest in real estate appraised at the estimated market value level during the period immediately after the effective date of appraisal. By definition exposure period differs from the market period in that exposure time always precedes the effective date of appraisal while market period begins immediately after the effective date of an appraisal. Furthermore, unlike exposure period, market period considers anticipated changes in market conditions. Existing financing for retail buildings is also available. A summary of the marketing time of comparable buildings in the subject neighborhood can be seen in the table below. MARKETING TIME OF COMPARABLES IN THE SUBJECT NEIGHBORHOOD (2 mile radius) Sale Bldg Days +/-Months # Address Type of Building Date Sq Ft on Market on Market 1 200 Main St, Newport Beach, CA 92661 Retail -Storefront 5/16/2016 4,464 68 2.27 2 706 E Bay Ave, Newport Beach, CA 92661 Retail -Storefront 4/28/2016 3,247 672 22.40 3 702 E Bay Ave, Newport Beach, CA 92661 Retail -Storefront 4/22/2016 5,000 627 20.90 4 609 E Balboa Blvd, Newport Beach, CA92661 Retail -Storefront 5/1/2015 2,900 70 2.33 5 514 W Balboa Blvd, Newport Beach, CA 92661 Retail -Storefront 4/15/2015 2,364 173 5.77 6 111 Main St, Newport Beach, CA 92661 Retail -Storefront 8/26/2014 8,760 141 4.70 7 106 Main St, Newport Beach, CA 92661 Retail -Restaurant 3/11/2013 2,430 104 3.47 High 672 22.40 Low 68 2.27 Average 265 8.83 Median 141 4.70 Exposure Time: Conversations with brokers as well as the marketing time from the sale comparables in the subject neighborhood indicate a marketing time of 6-12 months to sell the property. Exposure period is defined as the estimated length of time a property interest being appraised would have been offered in the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. The exposure time period is estimated to be 6-12 months. 11-135 APPROACHES TO VALUE/METHODOLOGY Equal emphasis was placed on the Sales Comparison Approach and the Income approach. The subject appeals to both owner -users and investors. Overall, the market area is a mix of owner -occupied and investment properties, and the appraiser has concluded that each approach is applicable due to the subject's product type and location. The Cost Approach was not employed as none of the market participants interviewed rely on the value indication by the Cost Approach when estimating the value of properties similar to the subject. Brokers, buyers, and sellers do not quote construction costs figures in marketing, pricing, and buying/selling buildings similar to the subject. The value conclusions presented are of the subject assuming that the property is sold and completely remodeled in accordance with the construction budget and future grand deed. Therefore, we have applied additional adjustments to reach an "as -value" for the subject. As previously mentioned, the subject will be sold with a grant deed restricting the subject's use for entertainment/theater use with an ancillary commercial use. Therefore, a portion of the subject's area will not be used for retail/restaurant/bar uses and we have discounted the subject's value based on the loss in utility for a portion of this building area. The final analytical step in the valuation process is the reconciliation of the value indications into a single dollar figure. We have examined the relative dependability and applicability of each approach in relation with the subject's fee simple interest. In addition, we will also consider the importance and influence of each approach in relation to the reactions of typical investors in the current market. The result is a final value conclusion of the market value of the fee simple interest in the subject property as of the date value. MARKET A search was undertaken to identify recent sales of comparable properties. In our survey approximately nine sales of retail buildings between 2,000 to 10,000 square feet were uncovered that sold after January 1, 2013. The area of these sales ranged within the Balboa Peninsula and Newport Harbor area. The quality of this data was average and the quantity was low in number. There was a lack of comparable properties given the subject's unique specific location. As a result, the appraiser expanded the original search criteria and went further back in time to include properties that sold with similar locational characteristics. Of these sales, six were seen to be the most relevant to the subject property. Our initial survey of comparable buildings consisted of sales of special use properties including theaters, concert halls, and entertainment venues within Southern California. However, there was a severe lack of comparables due to the subject's special use. Therefore, we narrowed our search to find comparable retail, restaurant, and bar/tavern properties with similar locations as the subject. Then, we made additional adjustments discounting the value of the area that is restricted to theater/entertainment uses via the grand deed. 11-136 SUMMARY OF IMPROVED SALES # Type of Property Sale Date Cash Bldg $/Sq Ft OAR Location Doc No. Equivalent Sq Ft Buyer Sale Price Seller Parcel No. Verification Source 1 Retail Storefront Building 5/16/2016 $ 2,300,000 4,464 $ 515.23 N/A 200 Main St 218097 Newport Beach, CA 92661 JSL Balboa LLC Joanna Tooker & Richard E Vogel 048-131-09 Nathan Holthouser (Listing Broker) (949) 725-8500 2 Retail Storefront Building 4/28/2016 $ 1,992,000 3,247 $ 613.49 3.00% 706 E BayAve 188961 Newport Beach, CA 92661 Billy& Sothy Kong Maddy Kent J & Lauri L Trust 048-133-15 Chris Maddy(Listing Broker) (866) 845-5273 3 Retail Storefront Building 4/22/2016 $ 1,850,000 5,000 $ 370.00 4.20% 702 E BayAve 178266 Newport Beach, CA 92661 Ricci Family Revocable Trust Western Family Living Trust 048-133-07 Gary Rocha (Listing Broker) (949) 566-8675 4 Retail Storefront Building 5/1/2015 $ 2,300,000 6,000 $ 383.33 N/A 609 E Balboa Blvd 2274906 Newport Beach, CA 92661 Pacific 360 LLC 609 E. Balboa LLC 932-160-37,-038 Yazen Haddad (Listing Broker) (949) 204-3678 5 Retail Storefront Building 4/15/2015 $ 1,165,000 2,364 $ 492.81 N/A 514 W Balboa Blvd 193950 Newport Beach, CA 92661 Michael G & Dorothy S Forge Western Family Living Trust 048-071-10 Chris Maddy(Listing Broker) (866) 845-5273 6 Retail Storefront Building 3/11/2013 $ 1,655,000 2,430 $ 681.07 5.32% 106 Main St 145147 Newport Beach, CA 92661 Henry& Regina Glicksman Yarmark Trust 4 Sails 048-132-07 Nathan Holthouser (Listing Broker) (949) 419-3200 Average $ 509.32 4.17% Median $ 504.02 4.20% 11-137 Data use subject to license. *N Scale 1 : 7,200 a zoo aoo soo soo moo n © DeLorme. DeLorme Street Atlas USA® 2013. MN (11.9°E) 0 20 ,zo mo 240 300 www.delorme.com 1" = 600.0 ft Data Zoom 14-7 11-138 IMPROVED SALES ANALYSIS ADJUSTMENTS (AS -STABILIZED) Value Indication for Subject $ 614.88 $ 657.17 $ 491.62 $ 493.35 $ 536.67 $ 787.11 Date of Sale (Changes in Market Conditions): In making time adjustments, we considered changes in rent levels, changes in the demand for retail storefront buildings within the coastal Newport Beach area. Based on our analysis of the average retail rental rates in the area, we found that the average retail rental rate has increased by ±60.71% over the last 8 -years, equating to an increase of ±0.63% per month. Thus, we have applied this monthly increase to each comparable based the number of months each sold prior to the effective date. Location: The subject and comparables all have similar locations within a few block of each other. Therefore, there is no significant or quantifiable difference in location. Building Size: We have made adjustments based on the square footage of the comparables in comparison to the subject property. Typically, larger spaces sell for less on a price per square foot basis and smaller spaces for more. We have made our adjustments 11-139 Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Sale 6 Building Size 5,200 4,464 3,247 5,000 6,000 2,364 2,430 Land Area 5,130 3,049 3,484 3,484 5,478 2,178 2,613 FAR 1.01 1.46 0.93 1.44 1.10 1.09 0.93 Sale Date n/a 5/16/2016 4/28/2016 4/22/2016 5/1/2015 4/15/2015 3/11/2013 Parking Ratio (per 1,000 sf) - 0.90 - - 1.00 - - Yr Built/ Condition 1994 1929 1915 1946 1990 1960 1931 Life 45 45 45 45 45 45 45 Street E Balboa Blvd Main St E Bay Ave E Bay Ave E Balboa Blvd W Balboa Blvd Main St City Newport Beach Newport Beach Newport Beach Newport Beach Newport Beach Newport Beach Newport Beach Zip Code 92661 92661 92661 92661 92661 92661 92661 Unadjusted Price/SF $ 515.23 $ 613.49 $ 370.00 $ 383.33 $ 492.81 $ 681.07 Property Rights 0% 0% 0% 0% 0% 0% Subtotal 515.23 613.49 370.00 383.33 492.81 681.07 Financing Terms 0% 0% 0% 0% 0% 0% Subtotal 515.23 613.49 370.00 383.33 492.81 681.07 Expenditures After Sale 0% 0% 0% 0% 0% 0% Subtotal 515.23 613.49 370.00 383.33 492.81 681.07 Conditions of Sale 0% 0% 0% 0% 0% 0% Subtotal 515.23 613.49 370.00 383.33 492.81 681.07 Market Conditions 2% 3% 3% 10% 10% 27% Subtotal $ 525.54 $ 631.89 $ 381.10 $ 421.67 $ 542.09 $ 864.96 Other Adjustments Location 0% 0% 0% 0% 0% 0% Location (Specific) 0% 0% 0% 0% 0% 0% Physical Characteristics Building Size -3% -9% 0% 4% -13% -12% Year Built/ Condition 10% 15% 15% 10% 10% 5% Functional Utility 0% 0% 0% 0% 0% 0% Site Size (FAR) 10% -2% 14% 3% 2% -2% Total Net Adjustments 17% 4% 29% 17% -1% -9% Total Absolute Adjustments 25% 29% 32% 27% 35% 46% Value Indication for Subject $ 614.88 $ 657.17 $ 491.62 $ 493.35 $ 536.67 $ 787.11 Date of Sale (Changes in Market Conditions): In making time adjustments, we considered changes in rent levels, changes in the demand for retail storefront buildings within the coastal Newport Beach area. Based on our analysis of the average retail rental rates in the area, we found that the average retail rental rate has increased by ±60.71% over the last 8 -years, equating to an increase of ±0.63% per month. Thus, we have applied this monthly increase to each comparable based the number of months each sold prior to the effective date. Location: The subject and comparables all have similar locations within a few block of each other. Therefore, there is no significant or quantifiable difference in location. Building Size: We have made adjustments based on the square footage of the comparables in comparison to the subject property. Typically, larger spaces sell for less on a price per square foot basis and smaller spaces for more. We have made our adjustments 11-139 accordingly. This is best explained by the law of diminishing returns where the next square feet have less value than the one prior. Year Built/Condition: We have made upward adjustments ranging from 5% to 15% to the comparables for being inferior in condition compared to the subject "as -stabilized" & "as -complete." Our analysis assumes that the subject has been renovated, which will reduce the effective age of the building. Therefore, we have calculated a weighted year built and year renovated for the subject for our analysis. The renovation appears to be extensive; therefore, we have applied most emphasis on the year renovated. The subject's weighted year built and year renovated can be seen in the table below. Weighted Average of Year Built and Year Renovated Subject Year Percentage Weighted Difference Age Year Built 1927 0.25 482 Year Renovated 2016 0.75 1512 Tota 1 1994 Site Size (FAR): We have made adjustments to varying degrees based on the differences in the floor -to - area ratios between the subject and the comparables. These adjustments can be seen in the table below: Floor to Area Ratio Calculation Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Sale 6 Building Area 5,200 4,464 3,247 5,000 6,000 2,364 2,430 Land Area 5,130 3,049 3,484 3,484 5,478 2,178 2,613 Floor to Area Ratio 1.01 1.46 0.93 1.44 1.10 1.09 0.93 Equivalent Land Area 4,404 3,203 4,933 5,919 2,332 2,397 New FAR 1.014 1.014 1.014 1.014 1.014 1.014 Difference (Land Area) 1,355 (281) 1,449 441 154 (216) Land Value/sq ft $ 350.00 $ 350.00 $ 350.00 $ 350.00 $ 350.00 $ 350.00 Total Value Needing Adjustment 474,218 (98,248) 507,042 154,431 53,962 (75,499) Unadjusted Sale Price $ 2,300,000 $ 1,992,000 $ 1,850,000 $ 2,300,000 $ 1,165,000 $ 1,655,000 Adjusted Sale Price $ 2,774,218 $ 1,893,752 $ 2,357,042 $ 2,454,431 $ 1,218,962 $ 1,579,501 Sq Ft of building 4,464 3,247 5,000 6,000 2,364 2,430 Adjusted Price/Sq Ft $ 621.46 $ 583.23 $ 471.41 $ 409.07 $ 515.64 $ 650.00 Unadjusted Price/Sq Ft $ 515.23 $ 613.49 $ 370.00 $ 383.33 $ 492.81 $ 681.07 Difference 21% -5% 27% 7% 5% -5% Scalar 50% 10% -2% 14% 3% 2% -2% 11-140 Summary ofAdjustments SUMMARY OF ADJUSTMENTS - "AS -STABILIZED" Unadjusted Adjusted % $/Sq Ft $/Sq Ft Change Sale One 515.23 614.88 19% Sale Two 613.49 657.17 7% Sale Three 370.00 491.62 33% Sale Four 383.33 493.35 29% Sale Five 492.81 536.67 9% Sale Six 681.07 787.11 16% Range 370.00 - 681.071 491.62 - 787.11 1 7% - 33% Average 509.32 596.80 19% Median 504.02 575.77 17% Upper Quartile 588.93 646.60 26% Lower Quartile 410.70 504.18 11% Standard Deviation 123.24 114.52 10% All comparables are meaningful indicators of value due to their similar locations on the Balboa Peninsula and due to their similar physical characteristics. However, no single comparable provided a leading indication of value. As a result, we have used a point of central tendency. We have concluded at $600/sf for the subject "as -stabilized." CONCLUDED IMPROVED VALUE - "AS -STABILIZED" Concluded Subject Indicated Subject Improved Value Sq Ft Improved Value $ 600.00 x 5,200 = $ 3,120, 000 Rounded $ 3,120, 000 "It should be noted that the value conclusion shown above assumes that the subject is completely renovated, with all tenant improvements installed. Consequently, it does not represent the "as -is" value of the subject. We have applied additional adjustment (near the end of this report) to concluded to an "as -complete" and "as -is" value for the subject. INCOME We have surveyed lease rates for retail buildings in the market (1 -mile radius) between 1,000 to 10,000 square feet. There was a lack of comparable lease given the subject's unique specific location. As a result, the appraiser expanded the original search criteria and went further back in time to include properties that leased with similar locational characteristics. A summary of the leases is presented on the next chart: SUMMARY OF COMPARABLE LEASE DATA - "AS -STABILIZED" # Property Type Date Term Available Base Rent/ Expense Increases Effective Location/Tenant Sq Ft Sq Ft Treatments Concessions Rent Agent/Tel. No. Asking/Actual 1 Retail/Brewery 11/1/2015 5 yrs 1,986 $ 3.25 nnn 3% annual $ 3.25 3305 Newport Blvd Newport Beach, CA 92663 Secondary Source: Costar Comps Actual 2 Retail/Storefront 3/1/2014 5 yrs 2,400 $ 2.20 nnn steps $ 2.20 104 Main St Newport Beach, CA 92661 David Peckenpaugh (Listing Broker) (714) 375-5777 Actual 3 Retail/Storefront 12/1/2013 4 yrs 2,500 $ 1.60 nnn n/a $ 1.60 813 E Balboa Blvd Newport Beach, CA 92661 Steven W. Legere (Listing Broker) (949) 267-8391 Actual 4 Retail/Restaurant 9/1/2012 5 yrs 1,100 $ 2.23 mg n/a $ 2.23 705 E Balboa Blvd Newport Beach, CA 92661 Laura Mamakos (Listing Broker) (714) 633-2344 Actu a 1 5 Retail/Restaurant Current Negotiable 1,182 $ 4.75 nnn n/a $ 4.75 514 W Balboa Blvd tbd Newport Beach, CA 92661 Michael Forge (Listing Broker) (310) 699-2131 Asking 6 Retail/Storefront Current 5 yrs 1,400 $ 3.99 nnn n/a $ 3.99 514 E Oceanfront tbd Newport Beach, CA 926611211 Ronnie Givargis (Listing Broker) (949) 451-1217 Asking AVERAGE $ 3.00 $ 3.00 MEDIAN $ 2.74 $ 2.74 11-142 Data use subject to license. *N Scale 1 : 5,600 0 60BU 1n1 160 200 80 © DeLorme. DeLorme Street Atlas USA® 2013. MN „s 180 320 480 0 0 =e> m www.delorme.com 1" = 466.7 ft Data Zoom 15-2 11-143 Our initial survey of comparable buildings consisted of leases of special use properties including theaters, concert halls, and entertainment venues within Southern California. However, there was a severe lack of comparables due to the subject's special use. Therefore, we narrowed our search to find comparable retail, restaurant, and bar/tavern properties with similar locations as the subject. Then, we made additional adjustments discounting the value of the area that is restricted to theater/entertainment uses via the grand deed. COMPARABLE LEASE ANALYSIS ADJUSTMENTS - "AS -STABILIZED" Location Location (Specific) Physical Characteristics Available Sq Ft Parking Year Built/ Condition Functional Utility Net Adjustments Absolute Adjustments Value Indication for Subject 0.52 (1.07) Subject Lease 1 Lease 2 Lease 3 Lease 4 Lease 5 Lease 6 Available / Leased Sq Ft 5,200 1,986 2,400 2,500 1,100 1,182 1,400 Building Size 5,200 6,541 2,400 2,500 3,761 2,364 9,500 Land Size 5,130 11,761 2,614 2,614 2,614 2,178 5,415 FAR 1.01 0.56 0.92 0.96 1.44 1.09 1.75 Use Restaurant/Bar Restaurant/Bar General Retail General Retail Restaurant/Bar Restaurant/Bar General Retail Date Leased 11/1/2015 3/1/2014 12/1/2013 9/1/2012 Current Current Expense Treatment nnn nnn nnn nnn mg nnn nnn Parking Ratio (per 1,000 sq ft) - 2.45 - 0.80 0.80 - - Year Built/ Condition 1994 1959 1934 1946 1978 1960 1948 Shopping Center (Y/N)? No Yes No No No No No Street E Balboa Blvd Newport Blvd Main St E Balboa Blvd E Balboa Blvd W Balboa Blvd E Oceanfront City Newport Beach Newport Beach Newport Beach Newport Beach Newport Beach Newport Beach Newport Beach Zip Code 92661 92663 92661 92661 92661 92661 926611211 Asking/ Actual Actual Actual Actual Actual Asking Asking Unadjusted $/Sq ft/Mo $ 3.25 $ 2.20 $ 1.60 $ 2.23 $ 4.75 $ 3.99 Legal Rights: - - - - - - Subtotal 3.25 2.20 1.60 2.23 4.75 3.99 Conditions of Rent: - - - - - - Subtotal 3.25 2.20 1.60 2.23 4.75 3.99 Expense Characteristics - - - (0.40) - - Subtotal 3.25 2.20 1.60 1.83 4.75 3.99 Income Characteristics - - - - - - Subtotal 3.25 2.20 1.60 1.83 4.75 3.99 Market Conditions at the Time of Lease 0.20 0.42 0.34 0.56 (0.48) (0.40) Subtotal 3.45 2.62 1.94 2.39 4.27 3.59 Location Location (Specific) Physical Characteristics Available Sq Ft Parking Year Built/ Condition Functional Utility Net Adjustments Absolute Adjustments Value Indication for Subject 0.52 (1.07) (0.71) (0.50) (0.94) (1.65) (1.31) (0.71) (0.07) (0.03) 0.18 0.07 0.38 0.35 0.26 0.19 0.24 0.43 0.36 - 0.39 0.29 - - 0.54 $ (0.91) $ (0.13) $ (0.05) $ (0.52) $ (1.15) $ (0.03) $ 2.85 $ 1.85 $ 1.35 $ 2.32 $ 2.63 $ 2.99 $ 2.54 $ 2.49 $ 1.89 $ 1.87 $ 3.12 $ 3.56 AVERAGE $ 2.58 MEDIAN $ 2.52 Expense Characteristics 11-144 of the Lease Include whether the property's expenses are full service gross, triple net, modified gross etc. We have made a downward adjustment of -$0.40 to comp #4 for being a modified gross expense lease while all other lease comparables are min expense leases. We have concluded that the subject would rent as a min expense lease as well. Market Conditions at the Time of Lease: In making time adjustments, we considered changes in rent levels, changes in the demand for retail storefront buildings within the coastal Newport Beach area. Based on our analysis of the average retail rental rates in the area, we found that the average retail rental rate has increased by ±60.71% over the last 8 -years, equating to an increase of ±0.63% per month. Thus, we have applied this monthly increase to comparables #1 through #4 based the number of months each leased prior to the effective date. Location (General): Location (Specific): Comparables #5 and #6 are asking leases, rather than contracted rental rates. Therefore, we have applied a downward adjustment of -10% to each comparable to account for the typical discount from asking to actual lease rates. The subject and comparables all have similar locations within coastal Newport Beach. Therefore, there is not significant or quantifiable difference in general location. Comparable #1 is located further northeast of the subject, and has an inferior specific location. This specific location within Newport Beach has less pedestrian traffic and lacks the amenities or points of interest that the subject has on the Balboa Peninsula. Therefore, a downward adjustment was applied to comparable #1. All other comparables are have similar specific locations and do not warrant adjustments. Available Sq. ft.: We have made adjustments based on the square footage of the comparables in comparison to the subject property. Typically, larger spaces lease for less on a price per square foot basis and smaller spaces for more. We have made our adjustments accordingly. Site Size (FAR): Floor Area Ratio Calculation Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Sale 6 Building Area 5,200 6,541 2,400 2,500 3,761 2,364 9,500 Land Area 5,130 11,761 2,614 2,614 2,614 2,178 5,415 Floor to Area Ratio 1,011 0.56 0.92 0.96 1.44 1.09 1.75 Difference -82% -10% -6% 30% 7% 42% Scalar 25% -21% -3% -1% 7% 2% 11% Rent/ sq ft $ 3.45 $ 2.62 $ 1.94 $ 2.39 $ 4.27 $ 3.59 Corresponding Change $ (0.71) $ (0.07) $ (0.03) $ 0.18 $ 0.07 $ 0.38 Adjusted Value $ 2.74 $ 2.55 $ 1.91 $ 2.57 $ 4.34 $ 3.97 Difference $ (0.71) $ (0.07) $ (0.03) $ 0.18 $ 0.07 $ 0.38 11-145 Year Built/Condition: We have made upward adjustments ranging from 5% to 15% to the comparables for being inferior in condition compared to the subject "as -stabilized" & "as -complete." Our analysis assumes that the subject has been renovated, which will reduce the effective age of the building. Therefore, we have calculated a weighted year built and year renovated for the subject for our analysis. The renovation appears to be extensive; therefore, we have applied most emphasis on the year renovated. The subject's weighted year built and year renovated can be seen in the table below. Weighted Average of Year Built and Year Renovated No single comparable provided a leading indication of value. As a result, we have concluded at a point of central tendency. We have initially concluded at $2.50/sf/month — NNN for the subject. 11-146 Subject Year Percentage Weighted Difference Age Year Built 1927 0.25 482 Year Renovated 2016 0.75 1512 Tota 1 1994 Functional Utility: We have made upward adjustments to comparables #2, #3, and #6 for being retail storefront properties and lacking the utility that the subject will have "as -stabilized" and "as -complete" operating partially as a restaurant/bar. Due to the specific use and interior - build -out, restaurant/bar properties tend to obtain greater overall rental rates compared to general retail spaces. Summary of Lease Adjustments: SUMMARY OF ADJUSTMENTS - "AS-STABILZIED" Unadjusted Adjusted % Rent/Sq Ft Rent/Sq Ft Change Lease One $ 3.25 $ 2.54 -22% Lease Two $ 2.20 $ 2.49 13% Lease Three $ 1.60 $ 1.89 18% Lease Four $ 2.23 $ 1.87 -16% Lease Five $ 4.75 $ 3.12 -34% Lease Six $ 3.99 $ 3.56 -11% Range 1.60 - 4.75 1.87 - 3.56 -34% - 18% Average $ 3.00 $ 2.58 -9% Median $ 2.74 $ 2.52 -13% Upper Quartile $ 3.81 $ 2.98 7% Lower Quartile $ 2.21 $ 2.04 -20% Standard Deviation 1.2 0.7 20% No single comparable provided a leading indication of value. As a result, we have concluded at a point of central tendency. We have initially concluded at $2.50/sf/month — NNN for the subject. 11-146 Reasonableness Test: Often times, restaurants, bars/taverns, and entertainment venues determine their lease rate based on the gross sales of the operation. Especially in unique locations, such as the subject's, where rental rates vary greatly. As a result, we have provided a Cost of Occupancy analysis as a reasonableness test to our market derived rental rate conclusion. It should be noted that the following analysis is for informational purposes only and is used as a secondary check to the rent conclusion from the comparable property analysis. The calculated figures are hypothetical in nature, and are based on national/ regional data and may not be indicative of the subject's future sales figures. Cost of Occupancy (rent as a % of sales) — Cost of occupancy is a good value indicator because a restaurant is truly valuable contingent upon how well the business performs (gross sales). The property can be large, small, in a bad location, etc., however if the business performs well, it may have more value than comparables. Since the buyer did not provide proforma income and expenses, we have used secondary benchmark data for the annual sales per square foot for similar restaurant and bar/nightclub uses in order to derive a hypothetical annual gross sales figure to calculate a hypothetical costs of occupancy. AVERAGE SALES PER SQUARE FOOT Average Source Type Sales/ Sq Ft Market Realist Quick -Service Restaurant $143 Baker Tilly Quick -Service Restaurant $200-$400 Biz Stats Quick -Service Restaurant $369-$453 Ibisworld.com Bar/Nightclub $160 RestaurantOwner.com Food-service/Bar $355 National Restaurant Association Quick -Service Restaurant $314.69 Average $281 Upper Quartile $335 Lower Quartile $220 Max $453 Min $143 The secondary sources indicate a benchmark average sales figure of $281/sf with a range of $143-$453/sf for similar type use properties. Based on the subject's excellent location on the Balboa Peninsula in Newport Beach, CA, the appraiser has placed more emphasis on the average and upper quartile figures of $281/sf and $335/sf, respectively. This was primarily influenced by the subject's location, which has good pedestrian traffic in an area with tourism and a local population with a high purchasing power. AVERAGE SALES PER SQUARE FOOT CONCLUSION Sales/Sq Ft Subject Sq Ft Gross Sales A\terage $281 5,200 $ 1,459,198 Upper Quartile $335 5,200 $ 1,742,000 Based on the hypothetical gross sales figures shown above, we also researched secondary benchmark data of the average rent as a percentage of gross sales (cost of occupancy). Our findings can be seen below. 11-147 Market Rent Conclusions for the Subject: COST OF OCCUPANCY Average Source Type (RenttSales) Baker Tilly Quick -Service Restaurant 6%-10% Restaurant Real Estate Advisors Quick -Service Restaurant 6%-10% Biz Stats Food Service/Drinking Est 7.76% Business Reference Guide Limited Service Restaurant 8%-12% Business Reference Guide Bar/Nightclub 6%-10% Ibisworld.com Restaurant 7.2%-12.9% RestaurantOwner.com Food-service/Bar 7.60% National Restaurant Association Quick -Service Restaurant 8.10% SmallBusiness.com Quick -Service Restaurant 8%-10% Average 8.50% Upper Quartile 9.00% Lower Quartile 8.00% Max 12.90% Min 6.00% Generally, the cost of occupancy percentage for similar property types is 6%-10%. If the rental rate (as a percentage of sales) is higher than 10% then the business will typically have operating losses. Once again, based on the subject's excellent location, we have placed more emphasis on the average and the upper quartile of 8.50% and 9.00%, respectively. The subject has a prime location for the use and prime locations typically demand greater rental rates overall. COST OF OCCUPANCY CONCLUSION Cost of Annual Subject Indicated Gross Sales Occ. Rent Sq Ft Rent/sf/month Average $1,459,198 8.50% $124,032 5,200 $ 1.99 Upper Quartile $1,742,000 8.50% $148,070 5,200 $ 2.37 Average $1,459,198 9.00% $131,328 5,200 $ 2.10 Upper Quartile $1,742,000 9.00% $156,780 5,200 $ 2.51 By using the hypothetical annual sales projection and projected cost of occupancy figures, we find that our previous conclusion of $2.50/sf/month — NNN is toward the high end but within the overall range as indicated by the cost of occupancy analysis. As a result, we find that our rental rate conclusion $2.50/sf/month — NNN is reasonable and supported our cost of occupancy analysis. The concluded effective rent and other market lease terms for the subject are presented in the following summary. CONCLUDED MARKET LEASE TERMS Category Amount- Restaurant Base Rent/Mo $2.50/sf/mo -nnn Effective Rent/Mo $2.50/sf/mo -nnn Annual Escalation CPI Tenant Improvements Restaurant/bar Average Lease Term 3-5 yrs 11-148 Subject Lease The subject is currently not encumbered by a lease agreement that we are aware of. Vacancy: 1.0 Mile Radius Historical Data.- We ata:We have performed a 1.0 -mile radius search via the CoStar database to determine the market vacancy. The search examined retail properties within a 1.0 -mile radius of the subject, and determined that the market vacancy rate is currently 2.60% in the subject's immediate area. QTD 129 529,603 2016 Q2 129 529,603 2016 Q1 129 529,603 2015 Q4 129 529,603 2015 Q3 129 529,603 2015 Q2 129 529,603 2015 Q1 129 529,603 2014 Q4 129 529,603 2014 Q3 129 529,603 2014 Q2 129 529,603 2014 Q1 129 529,603 2013 Q4 129 529,603 2013 Q3 129 529,603 2013 Q2 129 529,603 2013 Q1 129 529,603 2012 Q4 129 529,603 2012 Q3 129 529,603 2012 Q2 129 529,603 2012 Q1 129 529,603 2011 Q4 129 529,603 2.60% 0.00% 3.10% 0.00% 3.90% 0.00% 2.50% 0.00% 2.50% 0.00% 1.70% 0.00% 1 3.00% 0.00% 1.80% 0.00% 1 1.20% 0.00% 1 1.00% 0.00% 1 1.10% 0.00% 1 2.20% 0.00% 3.20% 0.00% 4.10% 0.00% 4.00% 0.00% 4.00% 0.00% 1.60% 0.00% 1 2.70% 0.00% 0.90% 0.00% 1.50% 0.00% 1 Vacancy & Rental Rates 58% 5.0 % 4,5% 4.0% v T 3,5 C 3.0% m 25% 20% 1,8% 1.0% { 2.60% 2.60% 2,900 $4.50 $4.50 $4.50 3.10% 3.10% 3,830 $4.23 - $4.23 3.90% 3.40% -7,320 $3.48 $3.48 2.50% 2.50% 152 $3.60 $3.60 2.50% 2.50% -4,512 $2.89 $2.89 .70% 1.70% 7,065 $2.89 $2.89 3.00% 3.00% -6,250 $2.92 $2.92 .80% 1.80% -3,065 $2.78 $2.78 .20% 1.20% -1,000 $2.68 $2.68 .00% 1.00% 500 $2.66 $2.66 .10% 1.10% 5,600 $2.70 $2.70 2.20% 1.10% 5,605 $2.70 $2.70 3.20% 2.40% 4,697 $3.30 $3.30 4.10% 4.10% -591 $3.39 $3.39 4.00% 3.80% -375 $3.46 $3.46 4.00% 3.70% -12.500 $3.44 $3.44 .60% 1.60% 6,054 $3.58 $3.58 2.70% 2.70% -9,910 $2.70 $2.70 0.90% 0.90% 3,246 $2.78 $2.78 .50% 1.50% -938 $2.78 $2.78 07 08 09 10 11 12 13 14 15 - Vacancy Rate ` Rental Rate Source: Costar Comps Vacancy and Rental Rate Graph. $4.40 $4,20 $4,00 $380 z $3.60 , CD $3.40 d $3,20 fD $3.00 $2.80 $2.60 16 These variables indicate a vacancy rate of 2.60% or 3.00% (rounded). The credit risk is estimated to be 1% and is a subjective estimate. Therefore, the vacancy and collection loss is estimated to be 4.0%. 11-149 07 08 09 10 11 12 13 14 15 - Vacancy Rate ` Rental Rate Source: Costar Comps Vacancy and Rental Rate Graph. $4.40 $4,20 $4,00 $380 z $3.60 , CD $3.40 d $3,20 fD $3.00 $2.80 $2.60 16 These variables indicate a vacancy rate of 2.60% or 3.00% (rounded). The credit risk is estimated to be 1% and is a subjective estimate. Therefore, the vacancy and collection loss is estimated to be 4.0%. 11-149 Expenses No proforma operating expenses were provided. Consequently, we have estimated the expenses by looking at a secondary source, the IREM Expense Guide. SELECTED REGIONAL AREAS OPEN SHOPPING CENTER REGION 9 CHART OF ACCOUNTS $/TOTAL POTENTIAL GLA $/TOTAL AVG. ACTUAL OCCUP. EXPNS-OPEN/CA MAINT & REPAIR PRKG LOT/SDWLK SWEEPING ROOF REPAIR PLUMBING ELECTRICAL PAINT/DECORATE OTHER SUBTOTAL M & R SERVICES OUTDRLANDSCAPE SNOW REMOVAL SECURITY TRASH REMOVAL CLEANING OTHER SUBTOTAL SRVCS UTILITIES ELECTRICITY HVAC FUEL-ELEC HVAC FUEL -OIL HVAC FUEL -GAS HVAC FUEL -STEAM HVAC FUEL -OTHER WATER & SEWER COMB ELEC OTHER SUBTOTAL UTILS OTHER ADMIN FEE OTHER CA EXPNS TAXES R/E TAX OTHER TAX/FEES INSURANCE LIABILITY PROPERTY -OTHER SUBTOTL INS/TAX OTHER EXPENSES ADMIN PAYROLL MANAGEMENTFEE MERCH ASSOC PROF SRVCS MARKETING OTHER MAINT OTHER HVAC FOOD COURT OTHER CENTERS SQ. FT. ------------$ ----------- CENTERS SQ. FT. ------------$ 10,000 MED RANGE 10,000 MED RANGE LOW HIGH LOW HIGH 34 497 .04 .02 .16 28 291 .13 .07 .17 37 355 .03 .02 .05 42 459 .04 .02 .07 41 441 .05 .03 .08 26 280 .02 .01 .04 38 454 .10 .04 .15 50 592 .35 .19 .62 47 567 .17 .10 .35 1 9 .08 .08 .08 28 419 .24 .13 .77 37 336 .18 .10 .30 42 535 .21 .11 .36 19 288 .04 .02 .10 49 588 .73 .54 1.48 45 555 .23 .13 .34 3 24 .15 .01 .15 6 141 .17 .01 .28 4 18 .07 .06 .07 47 583 .26 .10 .50 1 8 3.95 3.95 3.95 7 69 .04 .03 .07 48 585 .70 .33 .90 22 330 .20 .07 .36 9 125 .08 .02 .08 49 587 1.29 .68 2.98 5 33 .01 .01 .01 48 585 .26 .14 .45 18 310 .05 .03 .08 47 476 .25 .14 .39 5 94 .01 .01 .01 50 592 1.44 .76 3.19 3 129 .80 .27 .80 48 568 .56 .38 .83 1 3 .17 .17 .17 23 312 .09 .06 .16 2 121 .08 .04 .08 12 69 .53 .09 1.24 10 110 .09 .07 .12 14 173 .04 .01 .25 34 461 .06 .02 .16 28 271 .14 .10 .18 37 319 .04 .02 .07 42 417 .05 .02 .09 41 399 .06 .03 .09 26 255 .03 .01 .05 38 409 .10 .05 .23 50 542 .42 .24 .74 47 517 .21 .10 .37 1 9 .08 .08 .08 28 387 .37 .21 .82 37 305 .22 .10 .43 42 495 .22 .12 .45 19 264 .05 .02 .11 49 538 .86 .63 1.79 45 505 .27 .14 .44 3 23 .16 .01 .16 6 133 .17 .01 .29 4 16 .10 .07 .10 47 533 .30 .11 .64 1 8 3.95 3.95 3.95 7 59 .05 .03 .11 48 535 .72 .37 1.15 22 301 .24 .09 .43 9 115 .08 .02 .09 49 538 1.35 .87 3.23 5 29 .01 .01 .01 48 535 .32 .15 .50 18 293 .06 .03 .08 47 433 .32 .14 .48 5 87 .01 .01 .01 50 542 1.65 .98 3.79 3 122 .85 .27 .85 48 519 .66 .46 .96 1 2 .29 .29 .29 23 283 .11 .06 .20 2 109 .15 .04 .15 12 59 .64 .10 1.41 10 99 .09 .08 .18 14 156 .04 .01 .26 E/I RATIO (TAE/TAI) .32 MGT FEE CAM REIMBURSABLE 36% FOOTNOTE: SQUARE FOOTAGE FIGURES (SQ. FT.) ARE REPORTED IN MULTIPLES OF TEN THOUSAND. SEE GUIDELINES SECTION FOR EXPLANATION OF REPORTS AND INTERPRETATION OF DATA. COPYRIGHT 2015, IREM. 11-150 Property Tax: Currently, the subject is city owned and is exempt from all property taxes. The subject is located in the tax area 07-001 which has a based tax levy rate of 1.05567%. It should be noted that this tax levy rate does not include any direct or special assessments. The appraiser was not provided the projected property tax information including the assessed value, logistics of property tax payment, or the amount of exemptions (if -any). Therefore, we have assumed that the subject will be assessed at the "as -stabilized" market value and have used the base tax levy rate of 1.05567% in our Direct Capitalization table. Derivation from Comparable Sales: We have performed a search for cap rates within a 2 -mile radius of the subject property. SALE COMPARABLE CAPITALIZATION RATES (Newport Beach Retail & Restaurant) Bldg Type/ Bldg Year Sale Cap # Street Address Sale Date Sq Ft Built Price Rate 1 Retail -Storefront April 28, 2016 3,247 1915 1,992,000 3.00% 706 E Bay Ave Newport Beach, CA 92661 2 Retail -Storefront April 22, 2016 5,000 1946 1,850,000 4.20% 702 E Bay Ave Newport Beach, CA 92661 3 Retail -Storefront August 26, 2014 8,760 1934 4,000,000 6.09% 111 Main St Newport Beach, CA 92661 4 Retail -Restaurant March 11, 2013 2,430 1931 1,655,000 5.32% 106 Main St Newport Beach, CA 92661 5 Retail -Restaurant For Sale 4,722 1970 7,200,000 3.92% 3110 Newport Blvd Newport Beach, CA 92663 6 -Restaurant For Sale 3,080 1,968 3,250,000 3.26% 2601 W Coast Hwy Newport Beach, CA 92660 Average 4.30% Median 4.06% Upper Quartile 5.04% Lower Quartile 3.43% Minimum 3.00% Maximum 6.09% Source: CoStar Comps The preceding sales indicate a 3.00% to 6.09% range of overall capitalization rates with an average and median of 4.30% and 4.06%, respectively. Cap Rate Conclusion: The subject has an excellent location but is larger than most of the comparables. Larger properties with similar property uses tend to have greater cap rates based on the lower population of prospective tenants, especially in a market where most tenants are looking for smaller spaces to maximize revenues. In addition, comparables #4 and #5 are listings rather than actual sales, which typically provide for lower proforma cap rates based on the listing price. Based on these factors, coupled with the fact that the subject has no on- site parking and will operate only partially as a restaurant/bar, we have concluded to a cap rate between the average and the upper quartile at 4.50%. Direct Capitalization Table: DIRECT CAPITALIZATION SUMMARY - "AS -STABILIZED" $/sq ft sq ft Totals REVENUE NNN Potential Gross Income Plus: Recoveries Plus: Other Recoveries Potential Gross Income Less: Vacancy Loss @ Less: Collection Loss @ Sub Total of Effective Gross Income EXPENSES IREM RETAIL Maint. & Repair Services Utilities Admin/Payroll Management Costs @ Less: Real Estate Taxes Direct Tax @ Special Assessments Less:lnsurance @ Less: Replacement/Reserves Total Operating Expenses Net Operating Income Overall Capitalization Rate Indicated Stabilized Value $ 2.50 5,200 $156,000 5,200 $56,625 $0- $212,625 3.00% ($6,379) 1.00% ($2,126) ($8,505) $204,120 $ 0.75 per sq ft/yr ($3,900) $ 1.45 per sq ft/yr ($7,540) $ 2.25 per sq ft/yr ($11,700) $ 0.35 per sq ft/yr ($1,820) 5% of EGI ($10,206) 1.0556700% $ 56,625 $ 10.89 ($31,301) $ 0.035 per sf/mo ($2,184) 1 % of EGI ($2,041) ($70,692) $133,428 4.50% $2,965,062 Expense Recap Expenses/ Expenses/ % of Gross % of Effective Total Sq Ft/Yr Sq Ft/Mo Income Gross Income Total $ 70,692 $ 13.59 $ 1.133 33% 35% Recoverable $ 56,625 $ 10.89 $ 0.907 27% 28% "Mav be subiect to roundina **It should be noted that the value conclusion shown above assumes that the subject is completely renovated, with all tenant improvements installed. Consequently, it does not represent the "as -is" value of the subiect. We have applied additional adjustment (near the end of this report) to concluded to an "as -complete" and "as -is" value for the subject. 11-152 I\ 717 Y Y [��.i`/\_ II\ I�Il1Ly111 �1► l �l►`Y�F.� Grand Deed Discount: As previously mentioned, the subject will be sold with a grant deed restricting the subject's use for entertainment/theater use with an ancillary commercial use. Therefore, a portion of the subject's area will not be used for retail/restaurant/bar uses and we have discounted the subject's value based on the loss in utility for a portion of this building area. DISCOUNT - GRANT DEED Discount Rate Assumptions Discount Rate (Below Market Rates) 5.0% Tenant Component Sq Ft Market Discount Effective Months Monthly Total Present Rent Rent Left Loss Loss Value Event/Seating Space 1,500 $2.50 50% $1.25 60 $ (1,875) $ (112,500) $ (99,358) Theater/Stage Area 1,500 $2.50 25% $1.88 60 $ (930) $ (55,800) $ (49,281) Total (2,805) (168,300) (148,639) These calculations are based on that of a zero coupon bond, as typically used in bond analysis, based on the following formula: where: PV= cf 1 - 1/(1 + d/lW] d/12 C =coupon t = time d = discount rate 12 = the averaging of the annual discount rate to a monthly discount rate The discounted rental rates are valued at a lower discount rate (5%). The rational is that there is higher risk for above market rents than for below market rental rates. The present value of the descanted rental rates, assuming a 5 -year lease, gives a discount of -$148,639 to the directly capitalized value of the property. 11-153 Construction Costs: PROJECTED CONSTRUCTION BUDGET Acquisition Costs (Land Allocation) 5% $ 15.25 $ $1,000,000 Permits & Fees % of $ Cost Per $ 52,000 Hard Costs Hard Cost Bldg Sq Ft 6.10 Total Site Improvement Costs Marketing & Leasing Costs $ 5.00 $ 26,000 Building Rehab Costs Indirect Cost Contingency $ 200.00 $ 1,040,000 Interior Buildout Development Fee $ 100.00 $ 520,000 Contractor Fees /General Requirements 5% $ 15.25 $ 79,300 Direct Cost Contingency 5% $ 15.25 $ 79,300 Total Hard Costs $1,744,600 Indirect Costs Architecture, Engineering, & Consulting 5% $ 15.25 $ 79,300 Permits & Fees $ 10.00 $ 52,000 Taxes, Ins., Legal, & Accounting 2% $ 6.10 $ 31,720 Marketing & Leasing Costs 1% $ 3.05 $ 15,860 Indirect Cost Contingency 5% (of indirect) $ 1.72 $ 8,944 Development Fee 3% $ 9.15 $ 47,580 Property Tax During Construction 1.1% $ 3.36 $ 17,466 Total Indirect Cost $ 252,870 Total Hard & Soft Costs $ 384.13 $1,997,4707 $$1,997,470 Total Cost (including land allocation) $ 576.44 $2,997,470 Source: Buyer's Construction Budget **It should be noted that the "as -stabilized" & "as -complete" value conclusion assumes that the subject had already been purchased. Therefore, we have concentrated on the total construction costs (not including land acquisition costs) of $1,997,470 or $384.13/bldg. sq. ft. in our analysis. The concluded total construction costs (not including land acquisition costs) will be deducted from the "As -Stabilized" and "As - Complete" value conclusions to reach an "As -Is" value. 11-154 Reconciliation We have relied upon the Market Approach and Income Approach since the property is appealing to both and owner -user and an investor, and because properties in the area are a mix of investment and owner -occupied buildings SUMMARY OF VALUE CONCLUSIONS Effective Date Cost Market* Income Conclusion Base "As -Stabilized" Value: Less: Discount for Grant Deed Concluded "As -Stabilized" Value: Rounded "As -Stabilized" Value: August 26, 2017 Less: Absorption Costs Concluded "As -Complete" Value: Rounded "As -Complete" Value: August 26, 2017 Less: Construction Costs Final "As Is" Value: Rounded "As Is" Value August 26, 2016 Not Applicable $3,120,000 $2,965,062 ($148,639) ($148,639) $3,042,531 ($148,639) $2,971,361 $2,816,423 $2,970,000 $2,820,000 $2,893,892 $2,890,000 $0 $0 $0 $2,970,000 $2,820,000 $2,970,000 $2,820,000 $2,890,000 $2,890,000 ($1,997,470) ($1,997,470) ($1,997,470) $972,530 $822,530 $970,000 $820,000 $892,530 $890,000 *Also called Direct Comparison Approach We have concluded on an "as -stabilized" & "as -complete" value of $2,890,000 (rounded)and an "as is" value of $890,000 (rounded). Definition of Value 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 best interests; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in United States 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. Assumptions and Hypothetical Conditions Affecting the Analysis and Conclusions The prospective values assume that the subject is purchased, the grant deed restriction is implemented, and the subject is remodeled based on the contingencies conveyed to use by the owner's representative. Purpose/Use: The purpose of this evaluation is to provide a market value of the property described above. The use of the report is for the assistance in a purchase transaction. 1. The following scope of services identifies all actions taken in the course of providing an estimate of the concluded Market Value for the subject as defined by the Uniform Standards of Professional Appraisal Practice (USPAP). Any procedures, processes or issues not specifically identified have not been performed. 11-155 2. This evaluation is prepared in accordance with the Interagency Appraisal and Evaluation Guidelines, dated October 27, 1994 and "OCC Comptrollers Handbook on Real Estate and Construction Lending, Appendix E, Interagency Appraisal and Evaluation Guidelines." This document is intended to meet the requirements of a Restricted Report as set forth under Standards Rule (S.R.) 2-2 (C) of USPAP. In accordance with a prior agreement between the client, City of Newport Beach, and the preparer, Frazier Capital Valuation, certain allowable USPAP departures have been invoked in the performance of this assignment. The departures are identified as S.R. 1-3 (a) and (b); and S.R. 1-4 (b), (d), (e), (f) and (g). This document is intended for internal bank use only. The intended client and the preparer have discussed and mutually agreed to the adequacy of this document based on the limited investigation undertaken and its intended use to be used in underwriting a proposed or monitoring a commercial real estate loan. As a result of the limited appraisal process where certain allowable departures have been invoked, the client is aware that the reliability of the value conclusion(s) provided may be impacted to the degree that there is a departure from specific guidelines of USPAP. This report is intended only for the internal use of City of Newport Beach. The evaluation was performed by Frazier Capital Valuation. Individual preparer's qualifications, general assumptions and limiting conditions and certification are kept on file. 4. Stephen Bethel inspected the subject property, Jacob Sereno did not. 5. The source(s) of comparable information used in developing this analysis include, and are generally limited to: City of Newport Beach Appraisal File, Costar Comps, , IREM, Loopnet.com, and market participant surveys. 6. For tenanted properties, rents reported for comparable income producing properties were researched and analyzed to establish market rent for the subject. A reconstructed operating statement was then developed using the estimated market rent and market derived vacancy and operating expenses to arrive at an estimated net operating income (NOI). A market derived overall capitalization rate (OAR) was applied to produce an estimate value for the subject by direct capitalization. Again, no personal inspection of the properties was made. 7. In reconciling a final conclusion, or range of conclusions, for this report, the preparer has reconciled various approaches giving consideration to the most appropriate method for the property in question. This report further complies with the requirements of a limited; restricted appraisal as defined by USPAP, and the appraiser is independent. A list of Frazier Capital's General Limiting Conditions and Assumptions that pertain to this report are on file. 11-156 CERTIFICATION We certify that as of September 20, 2016: • The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. • I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. • I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • My engagement in this assignment was not contingent upon developing or reporting predetermined results. • My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. • My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. • Stephen Bethel has made a personal inspection of the property that is the subject of this report. Jacob Sereno has not. • Mariet Nazlikian provided minor real property appraisal assistance to the person signing this certification. • The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. • As of the date of this report, I (Stephen K. Bethel) have completed the continuing education program of the Appraisal Institute. • Stephen K. Bethel, MAI is a "Certified General Real Estate Appraiser" within the state of California. Mr. Bethel's OREA Appraiser Identification Number is AGO 13533. • This appraisal report is invalid unless all signature pages have been signed. • We are competent to value this particular property type and have valued similar property types. • Disclosure of the contents of this appraisal report is governed by the Bylaws and Regulations of the Appraisal Institute. • I have not provided any services as an appraiser or in any other capacity regarding the subject property within the prior three years. The Appraisal Institute conducts voluntary programs of continuing education for its designated members. MAIs who meet the minimum standards of this program are awarded periodic educational certification. Respectfully submitted, Stephen K. thel, MAI, MA, MA, BA ob Sereno Californ' REA License Number AGO 13533 California OREA License Number AT3002018 11-157 lata — •os r�.ffdY'S'�f Fes. 'Coo1J 4134 4q, As 4,o �Nr�r AV' ,v w gd'a,.A'Y gift riYl rywfy 4'L' fAP YIIf CY W) 8'r BAI BOA TRACT $A r FpaV r 5£CTrpv fir. —rf RE—SUR OF BtOCW 9 g,1i "e 6—k5 Ai l YAP 800 WAA 8--.5i P"t .7,67_g PGR12 . N r� SEC' 35, 1 6 S# R 10 ►r x WASWrON k 5.r :a '+� m• n 7XX i (? 1 1 I 1 E - `t 1 PLAT MAP V NQ7€ A55£S5l?R y 6kllGn If p" ra I ftman 5 IRc s ASSfSSpq=§ MA, 11-158 �► x nr-rs 1'�o-�r '�1+fCf L 9Ji< 2CT— CJr.01 13 I `t 1 PLAT MAP V NQ7€ A55£S5l?R y 6kllGn If p" ra I ftman 5 IRc s ASSfSSpq=§ MA, 11-158 Subject I ►,— Front of Building Front of Building #2 Left Side from front of building Rear Left area 11-159 Z4 Al Vi :Aw if VIA L!3 _ ___. i j f'� - - =_=-�� - � �- �. �� '��� , i,� 1 �__ •.r Y �• r----�-'�._- ��+� - _ - ry �- . - r f l f - - 1t C` �� ryry� ! :' _ �_ i _,� �� __. _ � � .. �� Subject y`4 Rear of Building showing Seismic problems Street Scene with Subject on Right Street Scene in Opposite Direction 11-162 Comparable Sale Photographs y� a 1 3 2 Newhot_ 4 I!; 3�� r OAS '► 74. won. F• �i Comparable Lease Photographs j nu: 3 2 4 11-165 Comparable Lease Photographs 5 11-166 LEGAL DESCRIPTION 11-167 RealQuest.com ® - Report Property Detail Report For Property Located At : 707 E BALBOA BLVD, NEWPORT BEACH, CA 92661-1305 Owner Information Owner Name: Mailing Address: Vesting Codes: Location Information Legal Description: County: Census Tract / Block: Township -Range -Sect: Legal Book/Page: Legal Lot: Legal Block: Market Area: Neighbor Code: Owner Transfer Information Recording/Sale Date: Sale Price: Document #: Last Market Sale Information Recording/Sale Date: Sale Price: Sale Type: Document #: Deed Type: Transfer Document #: New Construction: Title Company: Lender: Seller Name: Prior Sale Information Prior Rec/Sale Date: Prior Sale Price: Prior Doc Number: Prior Deed Type: Property Characteristics Year Built / Eff: 1927/ Gross Area: 6,912 Building Area: 6,912 Tot Adj Area: Above Grade: # of Stories: 2.00 Other Improvements: Site Information Zoning: Lot Area: Land Use: Site Influence: Tax Information Total Value: Land Value: Improvement Value: Total Taxable Value: Page 1 of 1 Corel-ogic, RealQuest Professional CITY OF NEWPORT BEACH/ARTS CENTER PO BOX 752, NEWPORT BEACH CA 92661-0752 B003 C/O BALBOA PERFORMING //CO BALBOA TR LOT 4 BLK 10(LOT 5 BILK 10 TR 104 ORANGE, CA APN: 628.00/3 Alternate APN: Parking Spaces: Subdivision: Heat Type: Map Reference: 4 Tract #: 10 School District: NP School District Name: Condition: Munic/Township: Deed Type: 1 st Mtg Document #: 11/10/1998 / 11/05/1998 1st Mtg Amount/Type: 1st Mtg Int. Rate/Type: FULL 1st Mtg Document#: 763074 2nd Mtg Amount/Type: GRANT DEED 2nd Mtg Int. Rate/Type: Price Per SgFt: Multi/Split Sale: C J W INC 11/13/1995 1 Prior Lender: Prior 1 st Mtg Amt/Type: 504042 Prior 1 st Mtg Rate/Type: GRANT DEED 5,227 TAX EXEMPT $626,120 $600,038 $26,082 048-135-02 BALBOA TR 33-B5 I 104 NEWPORT MESA Total Rooms/Offices Garage Area: Total Restrooms: Garage Capacity: Roof Type: Parking Spaces: Roof Material: Heat Type: Construction: Air Cond: Foundation: Pool: Exterior wall: Quality: Basement Area: Condition: Acres: 0.12 County Use: Lot Width/Depth: x State Use: Commercial Units: Water Type: Sewer Type: Building Class: Assessed Year: 2015 Property Tax: Improved %: 4% Tax Area: Tax Year: Tax Exemption: EXEMPT (8) C 07001 MISC 11-168 http://proclassic.realquest. com/j sp/report. j sp?&client=&action=confirm&type=getreport&r... 9/20/2016 ENGAGEMENT LETTER 11-169 FRAZIEP CAPITAL VALUATION BUSINESS VALUATION ♦ COMMFRCTAL REAL ESTATE APPRAISAL FRACTKWALMmIars `SOPS STO('Y OPTIONS CONPTgXC.ALSTRUCUM FULL SERVICE VALUATION HXIR RUFJ[nw RLtR OPPIN�s i1a. EOPPRNO CF7Niixs GAS STATRTNS/CARWASHES ==WASHES iAOQUarnoNrs � FAcumEc am BA AL ffi HAn PR" ALLOC1,TIO S ATERGIPT "Iq mATwNs FOREKRN CORPORATlOMS (.LULTI•FAME.Y k St7+wR HOUSING HELTWFrrA=FAcan s THROUGHOUT THE UNIT -ED STATES �FAK. Moeus Hoe�PARILURv eARu eF� u60 CenR[TAscB Gff'rwo ReatF/ATtaNALFfUs WASTEFAcnt�t S8D /PASIONuCUWTIxAi. USES INTtnEcls IMANGmLE ASSET VALUATION (800) 239-3998 SCI CEHTRS =a F4AN�es WRNRRBS SPECIALUSEBOS2WSFACIL S COVGO ERAN ORMRM is PLACE PERIOM & LICENSES MACHINERY & EQUIPMENT VALUATION N=H1AnoNBASE/IAM KNOwflow ROYALTffi http://www.frazlarcapltal.com AEE Food PRoRRPSTAVRANrs �RNO METALW PVSTXS MACHINESROPS ODMSIRUCMM MSIWA. WOOUwORXM FURMTURR&Q CftIRflS TEnM2 INVENTORY August 24, 2016 Melissa Gordon Contract Real Property Assistant City of Newport Beach Community Development Department (Building Division) 100 Civic Center Drive Newport Beach, CA 92660 T: (949) 644-3206; mgordon@neymortbeachea.gov Re: Valuation of it -Theater 709 East Balboa Blvd Newport Beach, CA Dear Ms. Gordon: Thank you for considering us for the valuation of the above mentioned real estate. PURPOSE We understand that the purpose of this assignment is to provide a real estate appraisal of the property based upon a fair market value (assuming to be used in perpetuity with a •xci-- thoa4ar deed restrictiowith the date of value being the current date of value. USE ee'4'I S h A I 16z 1► m l k- j 4-o An, Ungrlor o-trWV, ttk -ill �vfnv�,►r�ar+s �eS, Art iIIAvy (Malec The use of this report is to be for the valuation of the rdal estate, including without limitation, 0 f for internal decision-making purposes. be REPORTS AND TIMING - We will provide three reports. The date of completion will be within 3 weeks of the signed engagement letter and receipt of all reasonably requested supporting documentation relating to the property) �' OW U Z r no I A k r 4-6 n T4 � ithn 6� r 2 01 z U ( U: 37:�S NORTHERN CALIFORNIA OFFICE ISS MONTGOMERY STREET, SUITE 1409 SAN FRANCISCO, CALIFORNIA 94104 TEL: (415) 398-3381 ♦ FAX: (41S) 398-3391 SOUTHERN CALIFORNIA OFFICE U.S. BANK TOWER EAST COAST OFFICE 633 WEST FIFTH STREET, SUITE 5870 44 WALL STREET, 12- FLOOR LOS ANGELES, CALIFORNLA 9007L NEW YORE, NEW YORK L0005 TEL: (213) 439-9956 • FAX: (213) 439-9957 TEL: (212) 422-3777 ♦ FAX: (6061 807-4755 PACIFIC NORTHWEST OFFICE CONGRESS CENTER 1001 SW STH AVE., SUITE 1100 PORTLAND, OREGON 97204 TEL: (503) 208-3818 11-170 PROFESSIONAL FEES AND EXPERIENCE Th fee for this engagement is , due by der- i!�► � � � v1 � W ( VM ( 3 d) XMyS 0� Q(ei Q+- 0� CONFIDENTIALITY We agree that the information and the data provided to us in connection with this engagement, written or oral, will be kept confidential by us and by our officers, employees and agents. ACCEPTANCE If this contract is acceptable to you, then please: (1) initial the contractual conditions provided; (2) sign this engagement letter; (3) submit all four pages with applicable initials and signatures, via fax to (213) 439-9957; and (4) submit a check for $0. By signing this agreement the client shall defend, indemnify and hold harmless Frazier Capital and its employees, agents or subcontractors against all third party claims and any judgments, losses, damages or expenses relating to the performance, or non-performance, of any services by Frazier Capital relating to this assignment. If you have any questions, please contact Stephen Bethel at our Los Angeles office at 633 West Fifth Street, Ste. 5870, Los Angeles, CA 90071, Tel. No. 213/439-9956 ext 102. We look forward/0 working with you. Cordially AL Steph6fi K. Bethel Director SKB/nk Enclosure Signature Printed Name: WU Y S Title: � C U I I Date: 812, H 11� CONTRACTUAL CONDITIONS In consideration of Frazier Capital performing the appraisal services specified, at the fees charged, the client for whom our appraisal report is prepared agrees to the following terms and conditions. These terms and conditions may be amended or supplemented only by an agreement in writing signed by Frazier Capital. • Client warrants that the person authorizing this engagement is empowered to do so. • It is your understanding that the performance of professional services and the resulting appraisal cannot be used for syndicate(s), investment trust(s), limited partnerships, or any business entity, which utilizes the appraisal or report or any information contained, to solicit investors, limited partners, or any fractional interests. In addition, it shall not be used for hard money lending purposes. • Any client use of the appraisal report is conditioned upon payment of all Frazier Capital's fees and expenses in accordance with the agreed payment terms. • Fees are due and payable regardless of whether or not conclusions reached coincide with client expectations. Fees are in no way related to values detennined by Frazier Capital. • Unless specifically brought to our attention, we will assume there are no hidden or unexpected conditions that would adversely affect value. • Our reports, the Frazier Capital name, and the name of any subcontractor, are not to be used in whole or in part outside the client's organization, without the prior written approval, except for review by the client's auditors, legal counsel, and by representatives of taxing authorities. We will likewise preserve the confidential nature of information received from you, or developed during this engagement, in accordance with our established professional standards. We will respond to legal process for client information after delivering a copy of such process to client. • Client agrees that Frazier Capital does not, either by entering into this contract or by performing the services rendered, assume, abridge, abrogate or undertake to discharge any duty of client to any other person. • Delivery schedules quoted assume (unless otherwise stated) that: Written authorization and the payment or retainer requested will be received in a timely manner as agreed; All supporting information to be provided by the client will be readily available; and, Our appraisal staff will be afforded ready access to all things and persons necessary for the appraisal. • No opinion is intended to be expressed about matters that require legal or specialized expertise, investigation or knowledge beyond that customarily employed by Type or Print Name it vii t ► S initial 1 date fl'� I ha 11-172 CONTRACTUAL CONDITIONS appraisers. Clients seeking engineering, legal, tax, accounting, investment or other professional advice should retain such advisors. • Frazier Capital warrants that it will perform its services in a professional manner in accordance with appraisal industry standards. Frazier Capital makes no further warranty of any kind, express or implied. • Frazier Capital expressly limits its liability under any legal theory to the amount of the fee paid. • Frazier Capital expressly disclaims liability as an insurer or guarantor. Any person seeking greater protection from loss or damage than is provided for herein should obtain appropriate insurance. • Hazardous substances, if present within a facility, can introduce an actual or potential liability that may adversely affect marketability and value. Such affect may be in the form of immediate expense or future liability. In the development of our opinion of value, no consideration will be given to such liability or its impact on value unless Frazier Capital is specifically retained to prepare an environmental or toxic contamination report. Unless such a report is prepared by Frazier Capital, client releases Frazier Capital from any and all liability related in any way to environmental matters. • The client shall defend, indemnify and hold harmless Frazier Capital and its employees, agents or subcontractors against all third party claims and any judgments, losses, damages or expenses relating to the performance, or non- performance(including, without limitation, attorneys' fees), of any services relating to the assigiunent, by Frazier Capital. • If Frazier Capital is requested or compelled to produce documents or testify with regard to the work performed, regardless of who makes such request, client shall reimburse Frazier Capital for all costs, including attorneys' fees, preparation and travel time, interview, deposition and court time and expenses, all at Frazier Capital's then existing hourly rates. • In the event of a dispute involving interpretation or performance under this agreement, the dispute shall be submitted to arbitration under the rules of commercial arbitration of the American Arbitration Association, the results of which shall be binding on all parties to this agreement. The arbitration shall be conducted in the city in which the Frazer Capital's office servicing this agreement is located. The party prevailing at the arbitration shall recover from the other party its costs and expenses, including attorneys', arbitrators and stenographers fees from the other party. • Current economic changes are volatile and the value is only as good as of the date of value. Values can change considerably from the date of value. The client understands that there is always risk of relying upon an appraised value. Type or Print Name'IYYW �J 0_j. _c initial J3 2 date 912 I i� 11-173 PROFESSIONAL QUALIFICATIONS 11-174 STEPHEN K. BETHEL NATIONAL DIRECTOR PRESENT POSITION Mr. Bethel is the director of Frazier Capital Valuation, specializing in the valuation of private/public equity businesses and financial instruments, commercial real estate investments, and the counseling of business owners and commercial real property owners. Active in the business and valuation profession for over 20 years, he has valued domestic and international businesses, commercial real estate investments, and industrial machinery and equipment, and was the CFO of a multi -national medical manufacturing company. PUBLICATIONS The Business Valuation Resource Guide 386 pages, Mattatall Press, 2006 ISBN 0-9721330-0-3 CIP 2002107171 Business Valuation Rules of Thumb & Formula Resource Guide 463 pages, Mattatall Press, 2009 ISBN 0-9721330-2-9 CIP 2009925146 The Valuation ofMovie Theater Operations 175 pages, Mattatall Press, 2009 ISBN 0-9721330-1-2 CIP 2007929910 The Valuation of Auto & Recreational Vehicle Dealership Operations 180 pages, Mattatall Press, 2009 ISBN 0-9721330-5-0 CIP 2009925149 The Valuation ofLiquor Store Operations 165 pages, Mattatall Press, 2009 ISBN 0-9721330-3-6 CIP 2009925147 The Valuation ofAmusement Parks &Family Entertainment Center Operations 185 pages, Mattatall Press, 2009 ISBN 0-9721330-4-3 CIP 2009925148 Valuing, Buying &Selling Fast Food and Fast Casual Restaurant Operations 280 pages, Mattatall Press, 2015 ISBN 978-0-9721330-7-4 CIP 2015900514 Valuing, Buying & Selling Gas Station Operations 320 pages, Mattatall Press, 2015 ISBN 978-0-9721330-8-1 CIP 2015900513 PROFESSIONAL QUALIFICATIONS Mr. Bethel is a member of the Institute of Business Appraisers (IBA, is an MAI with the Appraisal Institute, as well as being a State appointed Probate Referee FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-175 STEPHEN K. BETHEL NATIONAL DIRECTOR with the State of California, as well as a receiver. EXPERIENCE Business Valuation of private and public enterprise equity for: estate tax purposes, gifting, establishing employee stock ownership plans (ESOPs), a basis for sale and/or buy -sell agreements, liquidations, both for and against the IRS. Valuations include C and S Corps, estates, trusts, limited and general partnerships, family limited partnerships (FLPs), real estate limited partnerships (RELPs), holding companies, limited liability corporations (LLCs), discount studies, and intangible assets for SEC and IRS filing purposes. Mr. Bethel has conducted valuations and consulting assignments throughout the United States and internationally. Financial instrument valuations include domestic and foreign debt, options, warrants, convertibles, preferred stock, swaps, mortgage pools and hybrid securities. Partial representation of industries of businesses valued include: advertising and market research, agriculture, adhesives and sealants, apparel, automotive service & dealerships, automotive tools and accessories, banking and savings, beer and soft drink distribution, biotechnology, broadcasting, building and forest products, concrete manufacturing, construction and contracting, chemicals, computer software and equipment, computer technology, drug manufacturers, equipment leasing, sporting equipment, healthcare, insurance, liquidation, machine tooling, media and film technology, medical equipment and supplies, metal plating, mining, packaging, paper and pulp, pet foods, industrial oils and lubricants, paints and allied products, pharmaceuticals, plastics, professional practices, publishing and communications, real estate management and development, research and development, retail/wholesale, steel, solid waste, telecommunications, tires, trucking and freight, and venture capital (ranging from high to low tech.). Intangible Assets Intangible asset valuations have included contracts, trademarks, trade names, utility and design patents, non -compete agreements, chemical formulas, goodwill, medical patient records and files, know how, and opinions as to domestic and international fair licensing rates for IRS, SEC and transfer pricing purposes, as well as for purchase price allocation purposes. Real Estate States where properties have been valued include: New York Texas Arizona Delaware Nevada Colorado Oregon Washington New Jersey Pennsylvania Mississippi California Wisconsin South Carolina Massachusetts Virginia Maryland Illinois Idaho Ohio Indiana North Carolina Kentucky Michigan Oklahoma Missouri Louisiana FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-176 STEPHEN K. BETHEL NATIONAL DIRECTOR Alabama West Virginia Maine Hawaii Alaska Tennessee Wyoming Montana Iowa North Dakota South Dakota Florida Georgia New Mexico Commercial consulting/valuations of existing and to be developed malls, community, and neighborhood shopping centers; fast food restaurants, high/mid/garden style office buildings, medical office buildings; distribution, manufacturing, research and development, business parks; high/low rise apartment complexes both with and without bond assistance, senior housing; condominium conversions; hospitals, acute and outpatient facilities, skilled nursing and retirement communities; motels, hotels, and resorts; clubs; entertainment centers; marinas; golf courses, agricultural uses ranging from dry crop land to orchards and vineyards; self storage facilities; subdivisions and planned communities; easements, leaseholds, fractional and partial interests; mortuaries; mines and rock quarries; mountains; auto and trucking dealership facilities; movie theatres (mega and multi-plexes); historic properties; schools; churches; ice skating rinks; wineries and grape crush facilities; tax appeal and testimony, throughout the United States. Mr. Bethel has also valued numerous tenancies in common (fractional), leasehold interests and special use businesses throughout the United States. Certified General in California (Lic. # AG013533) Certified General in Nevada (Cert. # A.0205911 -CG) Certified General in New York (Id # 46000049863) Certified General in New Jersey (Id #42RG00249900) Certified General in Oregon (Id #C001249) California Real Estate Broker (Lic. #01242276). Software proficiency includes Argus, DynaLease & Project. Machinery, Equipment, Inventory & Personal Property Valuations for orderly/forced liquidation and value in use purposes. Industries and equipment include tire and automotive, mining, manufacturing, metal plating, wood and pulp, retail, clothing inventory, office equipment and machinery, cars, trucks, trucking and hauling equipment, construction equipment, grocery store and bakery equipment, car wash and gas station equipment, medical, bottling equipment, banking and finance, as well as a wide range of different inventories. Personal property appraisals have consisted of art, murals, antiques, jewelry, silver and other assorted collectibles. PREVIOUS POSITIONS Prior to Frazier Capital, Mr. Bethel was a Manager of Financial & Business Valuation Consulting at Marshall & Stevens, Vice President at Landauer FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-177 STEPHEN K. BETHEL NATIONAL DIRECTOR Associates and at Interstate Corporation, and an associate at Hanford/Healy. Previously, Mr. Bethel was the Chief Financial Officer of J. Hewitt Inc., a global medical manufacturing company, having operations in Japan, Australia, and the United States. Additional responsibilities included coordinating operations with foreign subsidiaries, interacting with the FDA and national/state toxic regulatory agencies. Mr. Bethel also has experience in the electronics and semi -conductor industries, as well as in the patent and trademark field. EDUCATION Masters in International Finance University of Glasgow, Great Britain' Thesis: Financial Engineering for Hedging Foreign Exchange Risk ' Chartered in 1452 2 Chartered in 1412 Masters in European Business University of St. Andrews, Great Britain Thesis: Pound/Dollar Exchange Rate Forecasting Advanced Bachelors in Economics Occidental College, Los Angeles, California Substantial course work in mathematics/chemistry Thesis: Transfer Pricing for the Trucking and Railway Industry FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-178 Chemicals/Plastics/Adhesives Ameron International, Inc. ChemArrow Devoe Marine Coatings General Plastics Shercon Communications The Dohring Company Hart -Hanks Commercial Real Estate Contractors Interior Removal Specialists Giangregorio Construction Merli Concrete Pumping Pumpstar Reliable Contractors Supreme Construction Co., Inc. West Venture Construction Computer Technology/Telecommunications Genoa Technology Linksys VCI Zero One Zyxel Communications Distribution/Wholesale Badger Paper Company Beton Industries Dr. Rawstock Esportia International Kitty Queen Pet Foods Myers Electrical Products, Inc. Product Sales Structural Materials WhiteCap Industries Equipment Leasing Companies MFC Leasing Co. S. Merli & Sons Dynamic Concrete Pumping Financial Institutions Aetna Financial Company American Residential Mortgage Corporation Bank of America Bank of California Bankers Mutual Bankers Trust Barclays Bank plc Boston Financial California Bank and Trust California State Bank California United Bank Canadian Imperial Bank of Commerce Commercial Center Bank Community Bank Citicorp Dwyer-Curlett, Inc. El Dorado Bank Fannie Mae Far East National Bank First Fidelity First Los Angeles Bank Glendale Federal Bank Grossmont Bank Guardian Life Insurance Company of America Hokkaido Takushoku Bank, Ltd Home Federal Bank Home Savings of America Imperial Thrift and Loan Association JP Morgan Lend Lease Manufacturers Bank Marine Midland Bank Mellon Bank North County Bank OakTree Federal Savings PNC Bank Corp. Raymond James Financial Security Pacific Sumitomo Union Bank of California Valley Independent Bank Ventura County National Bank Wells Fargo Bank, N.A. Western Security Bancorp FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-179 Real Estate Fractional Interests Loma Vista Woods, Ltd (Stand Alone) Pacific Industrial Properties Estate of Gottfried Merli Estate Pasadena Triangle Associates Estate of Alwin V. Dierker San Gorgonio Investors Estate of Morris Latt So-Pac Real Estate Group Estate of Ruth Levine Spectrum/Riverside Centre Associates Estate of Poretta Urban Ventures Corp. Rosenzsweig Limited Partnership W.M. Properties Alwin V. Dierker Trust Zobelein Company Westenhaver Trust Benlin Properties, LP McDonald Trust Law Firms Tebbe Trust Aprahamian & Friend Azul Pacifico Atkinson, Andelson, Loya, Ruud & Romo Government Agencies Berger, Kahn, Shafton, Moss, Figler, & Internal Revenue Service Simon CMOW Frandzel & Share Insurance Freeman, Freeman & Smiley Aon Gibson, Dunn & Crutcher Aetna Hughes & Luce Canada Life Loeb & Loeb Canada Life Assurance Company Sheppard, Mullin, Richter & Hampton Carl Warren Cotrak Services Limited/General Partnerships Nationwide Life Insurance Company AGATE Court Investors, LP Avalon Company Investment Holding Companies Benlin Properties, LP 3 D Investments Boltz Properties, LP Academy Associates, Ltd. Bristol House Partnership Azul Pacifico California TC Group, LP Bolo Corporation CT Company, GP Butterfield Ranch, Ltd. CFM, GP CMOW Deep Valley Investors, GP Consolidated Mesa Dierker Properties, Family LP CPR Daytona Associates El Rancho Verde DoubleDay LLP Helzel-Kirshman Venture Capital, LP DIAMICO Enterprises Hicker, Goebols, & Eorsen, GP ECHO USA JFJ Partners Equity Reserve Inc. KAMA Development, LP Fern Properties L&L Properties, GP Fredricks Development Lewis Accord, LP Geatra Capital Corp. Merli-Niesner Partnership Huntington Pacific, Ltd. Pacific Southeast Partners The Irvine Company Parcwood-Corona, Ltd Las Vegas Land and Development Co. PGA West Associates, LP Leisure Industries, Inc. QBM Partnership Lewis Development Co. RoseTree Venture Capital, LP FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-180 San Fernando Mission Partnership Medical/Dental Schnakenberg Properties, LP Optometry Unicycle Venture Capital, LP Wesley Ru Family ,LP Services Whittier Downs Aspen Square Management Wilshire Promenade, LP Dilday Brother's Mortuary Grubb & Ellis Manufacturing Shamrock Golf American Excelsior WEST -GROUP MANAGEMENT LLC Angelus Plating Company Wah Wing Song Funeral Corporation Applied Air Engineering Agriculture Astro Fab, Inc Trucking, Auto & Related Industries Beazerwest Cement Company 4 Day Tires Burlingame Industries C. Earl Brown California Bean Growers Enterprise rent -a -car Calplate Fischer Tool D & M Engineering Lansdale & Carr Diversey Lever Inc Macho Tires Grefco, Inc. Santa Ana Lincoln Mercury Hughes Enterprises Bakeries (commercial) Le Saint Logistics Trusts Murdock, Inc. Estate of Dorothy Chandler Profab Estate of Frank Sinatra Slot Line Skyline Homes, Inc. Other Texas Mining Company Automobile Club of Southern California United Refrigeration Diocese of San Bernardino Wambold Fine Furniture Mardan Foundation Western Excelsior Paramount Redevelopment Agency Western Badge and Trophy Southern California Edison Westfield Precision Products FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com Businesses with Significant Realty Medical/Pharmaceutical Assets Anabolic Laboratories Acute General Hospitals Beaver Medical Agriculture Cumberland Healthcare Alzheimer's Units/Non Medical Senior Delma Corporation Care/Sub acute Care Facilities Kaiser Permanente Assisted Living Facilities/Retirement Medco Projects/CCRC's NeoTherapeutics, Inc. Automobile/Trucking and RV Dealerships Pacifica Hospital Auto and Truck Dealerships UniHealth Auto Repair Services UVP Inc. Bakeries (retail) Bakeries (commercial) Professional Practices Beer and Wine Bars Accounting Billboards FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com Bowling and Entertainment Centers Car Washes Coin Operated Laundry Convalescent Hospitals Country Clubs Day care facilities Dry Cleaners Eldercare/Adult Daycare Franchises Garden Centers and Nurseries Gasoline Service Stations & C Stores Golf Courses Grocery Stores and Markets Health & Fitness Clubs Ice Skating Rinks Insurance Adjusters Kennels Liquidation Businesses Liquor Stores Lumberyards Marinas Meat and Fish Markets Mines and Rock Quarries Mortuaries/Funeral Homes/Cemeteries Motels/Hotels & Bed and Breakfasts Motor Cycle Shops Movie Theaters Night Clubs Nurseries Nursing Homes Parking Lots Pawnshops Psychiatric Hospitals Radio Stations Restaurants (Limited Service) Restaurants (Full Service) Solid Waste Processing/Landfill/Recycling Scrap/Salva eg Yards Swap -Meets Theatre, Tire Stores and Sales Veterinary Clinics Vineyards Wineries FRAZIER CAPITAL VALUATION (800) 239-3998/ www.fraziercapital.com 11-182 Jacob V. Sereno Senior Appraiser PRESENT POSITION Mr. Sereno is a Senior Appraiser for Frazier Capital Valuation, which specializes in the valuation of private/public equity businesses and financial instruments, commercial real estate investments, FF&E (furniture, fixtures, and equipment) and the counseling of business owners and commercial real property investors. EXPERIENCE Real Estate Commercial consulting/valuations of existing and to be developed malls, community, regional and neighborhood shopping centers; fast food restaurants, high/mid/garden style office buildings, medical office buildings; distribution, manufacturing, research and development, business parks; high/low rise apartment complexes, hotels and motels, fertilizer plants, tank farms, vacant commercial and residential land, mixed use properties, gas stations, auto dealership facilities, and residential construction projects throughout the United States. Mr. Sereno has also appraised both leased fee and leasehold interests. Machinery, Equipment, Inventory & Personal Property Valuations for orderly liquidation, forced liquidation and value in use purposes. Industries and equipment include CNC equipment, bank equipment, safe/vaults, tire and automotive, manufacturing, retail, clothing inventory, office equipment and machinery, cars, trucks, trucking and hauling equipment, construction equipment (including heavy machinery), bakery equipment, car wash and gas station equipment, medical, printing/screening, and bottling equipment as well as a wide range of different inventories. Business Valuations include C and S Corps, trusts, limited and general partnerships, Real Estate Limited Partnerships, and limited liability corporations (LLCs). Experience in valuing partial interests of real estate holding companies and/or partnerships. Insurance Mr. Sereno also provides expertise in all classifications of real and personal property insurance appraisal. Our insurance appraisals provide a third party, unbiased opinion of replacement or reproduction cost value of real estate, equipment, machinery, inventory, and other fixed assets. Mr. Sereno has experience working on insurance appraisals throughout the United States. PREVIOUS POSITIONS Prior to joining Frazier Capital, Mr. Sereno worked as an analyst for a private equity and home loans firm in Los Angeles, while also working as an analyst for two years in the Business/Grants Department for Occidental College. FRAZIER CAPITAL VALUATION 633 W. 5t" St., #5870 Los Angeles, CA 90071 (213) 439-9956 x105 jsereno@fraziercapital.com 11-184 EDUCATION Jacob V. Sereno Senior Appraiser B.A., Economics with an emphasis in Business Management Minor, Politics Occidental College, Los Angeles, CA. May 2013 As a student, Mr. Sereno completed coursework in econometrics, mathematics, statistics, macro & micro -economic theory, game theory, business management, international policy, finance, and accounting, as well as extensive coursework in the fields of urban environmental policy, political theory, and history. Appraisal Institute: Real Estate Valuation Education (315+ hours) Trainee Courses (150+ hours): Appraisal Principles, Appraisal Procedures, Uniform Standards of Professional Appraisal Practice (USPAP), Residential Sales Comparison & Income Approach, Residential Report Writing and Case Studies, Residential Site Valuation & Cost Approach, Residential Appraisal Market Analysis and Highest & Best Use Analysis, General Courses (165+ hours): General Income Approach I, General Sales Comparison Approach, Real Estate Statistics and Valuation Modeling, General Appraiser Site Valuation & Cost Approach, General Appraiser Market Analysis and Highest & Best Use, and 30 hours of various electives. California Office of Real Estate Appraisers Trainee License # AT3002018 ARGUS Software (14 hours) ARGUS Valuation -DCF Training Class (In -class) Los Angeles Harbor College (2015) Accounting I & II FRAZIER CAPITAL VALUATION 633 W. 5th St., #5870 Los Angeles, CA 90071 (213) 439-9956 x105 jsereno@fraziercapital.com 11-185 Business, Consumer Services & Housing Agency BUREAU OF REAL ESTATE APPRAISERS REAL ESTATE APPRAISER LICENSE Jacob V. Sereno has successfully met the requirements for a license as a residential real estate appraiser in the State of California and is, therefore, entitled to use the title: "Trainee Real Estate Appraiser" This license has been issued in accordance with the provisions of the Real Estate Appraisers' Licensing and Certification Law. BREA APPRAISER IDENTIFICATION NUMBER: 3002018 Effective Date: April 1, 2016 Date Expires: March 31, 2018 �)naAZ��- Jim artin, Bureau Chief, BREA 3026301 11-186,1 Real Estate Appraisals Frazier Capital Valuation has appraised properties in almost all of the 50 states in the United States, as well as in Mexico. We are adept at appraising the following types of properties: Commercial: • Medical Office Buildings • Auto and Truck • Creative Use Buildings Dealership Facilities • Restaurants • Training Facilities • Bank Branches • Parking Garages • TV/Film Production Facilities • Gas Stations • Communication Systems Office: • High/Mid Rise/Garden Style Office Buildings Retail: • Regional Malls • Big Box Retail • Factory Outlet Centers • Community and Neighborhood Shopping Centers • Strip Centers • Power Centers • NNN Investments • Car Washes • Auto Repair/Quick Lube • Swap Meets • Supermarkets • Fast Food • Veterinary/Kennels • Day Care • Department Stores • Drug Stores • Garden Centers & Nurseries 11-187 Healthcare: • Acute General Hospitals • Psychiatric Hospitals • Convalescent Hospitals • Assisted Living Facilities • Surgery Centers • Retirement Projects/CCRCs • Medical Offices • Alzheimer's Units • Sub Acute Care Facilities • Skilled Nursing • Medical Practices • Dental Practices Recreational: • Marinas • Swimming Pools • Clubs • Bowling Centers • Golf Courses • Country Clubs • Miniature Golf Courses • Tennis Clubs • Health & Fitness Clubs • Multiplex Theaters/Megaplex Theatres • IMAX Theatres • Drive In Theatres • Concert Halls • Ice Skating Rinks • Equestrian Centers (Olympic Equestrian Centers) • Bowling Alleys • Family Entertainment (Amusement Parks) • RV Facilities Industrial: • Regional Distribution Centers/Warehouses • Research Labs/Clean Rooms • Business Parks • R&D Facilities • Wineries and Grape Crush Facilities • Aircraft Hangers • Shipyards • Truck Stops/Terminals • Cold Storage • Solid Waste Facilities • Recycling Facilities (MRFs) • Land Fills • Mini -Warehouses • Salvage Yards • Food Processing Centers • USDA Certified Centers • Bottling Companies • Self Storage Facilities Lodging: • Motels/Hotels • Rural Resorts • Bed & Breakfasts • Timeshares Land: • Easements • Mines and Rock Quarries • Subdivisions • Commercial & Industrial Land Other: • Churches • Monasteries • Mega Churches • Schools • Historic Properties • Mortuaries • Government Buildings Multi -family: • High/Low Rise Apartment Complexes • Senior Housing • Condominium Conversions • Retirement Communities • Mobile Home Parks Interests: • Indian Land • Leaseholds • Life Estates • Easements • Fractional and Partial Interests • Mortgages & Trust Deeds Energy Efficient Uses: • Wind Farms • Solar Buildings (Commercial, Industrial, & Residential) • Utilities • Cogeneration Facilities Agriculture: • Wetlands • Timber • Vineyards • Ranches • Fruit Orchards • Christmas Tree Farms • Food and Chemical Processing Facilities • Water Rights • Wineries • Fish Farms • Greenhouse Operations • Hydroponic Operations 11-188 Business Valuations Frazier Capital Valuation has appraised businesses in Northern and Central America, as well as in Europe, for publicly traded and privately held businesses, financial institutions, and the Internal Revenue Service. We are experts in valuing minority and controlled interests of public and privately held businesses. A summary of the different industries in which we have experience is summarized below. Conglomerates Conglomerates Consumer Goods Appliances Auto Parts Beverages - Brewers Beverages - Soft Drinks Beverages - Wineries & Distillers Business Equipment Cleaning Products Confectioners Dairy Products Electronic Equipment Farm Products Food - Major Diversified Home Furnishings & Fixtures Housewares & Accessories Meat Products Office Supplies Packaging & Containers Paper & Paper Products Personal Products Photographic Equipment & Supplies Processed & Packaged Goods Recreational Goods, Other Recreational Vehicles Rubber & Plastics Sporting Goods Textile - Apparel Clothing Textile - Apparel Footwear & Accessories Toys & Games Trucks & Other Vehicles 11-189 Financial Apparel Stores Insurance Brokers Auto Dealerships Life Insurance Auto Parts Stores Mortgage Investment Auto Parts Wholesale Property & Casualty Insurance Basic Materials Wholesale Property Management Broadcasting - Radio Real Estate Development Broadcasting - TV Regional - Southwest Banks Building Materials Wholesale Savings & Loans Business Services Surety & Title Insurance CATV Systems Catalog & Mail Order Houses Healthcare Computers Wholesale Biotechnology Consumer Services Home Health Care Department Stores Hospitals Discount, Variety Stores Long -Term Care Facilities Drug Stores Medical Appliances & Drugs Wholesale Equipment Education & Training Services Medical Instruments & Electronics Stores Supplies Electronics Wholesale Medical Laboratories & Entertainment - Diversified Research Medical Practitioners Food Wholesale Specialized Health Services Gaming Activities General Entertainment Industrial Goods Grocery Stores Aerospace/Defense Products & Home Furnishing Stores Services Home Improvement Stores Cement Industrial Equipment Diversified Machinery Wholesale Farm & Construction Jewelry Stores Machinery Lodging General Building Materials Management Services General Contractors Marketing Services Heavy Construction Medical Equipment Wholesale Industrial Electrical Equipment Movie Production, Theaters Industrial Equipment & Music & Video Stores Components Personal Services Lumber, Wood Production Publishing - Books Machine Tools & Accessories Publishing - Newspapers Manufactured Housing Publishing - Periodicals Metal Fabrication Rental & Leasing Services Pollution & Treatment Controls Research Services Residential Construction Resorts & Casinos Small Tools & Accessories Restaurants Textile Industrial Security & Protection Services Waste Management Shipping Services Specialty Eateries Advertising Agencies Specialty Retail, Other Air Delivery & Freight Services Sporting Activities Air Services, Other Sporting Goods Stores Staffing & Outsourcing Services Technical Services Toy & Hobby Stores Trucking Wholesale, Other Technology Application Software Business Software & Services Communication Equipment Computer Based Systems Computer Peripherals Data Storage Devices Diversified Communication Services Diversified Computer Systems Diversified Electronics Healthcare Information Services Information & Delivery Services Information Technology Services Internet Information Providers Internet Service Providers Internet Software & Services Networking & Communication Devices Personal Computers Scientific & Technical Instruments Security Software & Services Wireless Communications Utilities Diversified Utilities Electric Utilities Water Utilities 11-190 Equipment Appraisals Frazier Capital Valuation has experience valuing M&E from a variety of different industries, from CT Scans and MRIs to Bulldozers, Cranes and Rolling Stock throughout the United States and Mexico. Services On Site Physical Inspection & Appraisal - the determination of value based upon a physical inspection of the assets in order to determine its operating condition followed by extensive research to the determine the requisite value required. Desktop Opinions - a hypothetical determination of value based solely upon information provided by the client and conducted without benefit of a physical inspection. Inventory - the inventory and tagging of all equipment and furnishings and/or selected items. Inventories can involve a wide variety of differing size facilities including business offices, manufacturing plants and even healthcare facilities including hospitals. Simultaneous appraisals of equipment may also be involved. Personal Property Tax Appeals - in some jurisdictions, business equipment is assessed at its market value. Occasionally, these assessments do not properly reflect current market value. Usually, this is because the taxing authority either is not familiar with or has not physically inspected the equipment. We can determine the market value in accordance with local or state regulations and represent our findings within whatever appeal process is required. Insurance Premium Valuation - insurance companies will on occasion, request an appraisal, especially of high tech assets, prior to issuing a policy covering the assets in the event of loss or damage. We can provide full appraisal reports in compliance with the stipulations of the policy under consideration. 11-191 Insurance loss Valuation - insurance appraisals are important when natural disasters such as floods, hurricanes, earthquakes, tornados or other sources of damage cause a loss of equipment, supplies or facilities. Insurance replacement costs can be just and fair or not. Our appraisal of the appropriate replacement cost, as defined within the specific policy, insures that our clients receive the full and appropriate value in order to replace those lost items. Charitable Donations - businesses and other related organizations occasionally donate equipment, new or used. Donors are eligible to receive tax relief for the donation to any non-profit corporation. We provide appraisals that document the value of the donation at the time of bequest. Hospital and Medical Equipment We appraise a wide range of medical equipment from a single piece of equipment to fully equipped practices, clinics, nursing homes, assisted living facilities and entire hospitals. • PET/CT Imaging System • Tomo Therapy Systems • Hospital Equipment Appraisals • MRI Imaging Systems • Medical Equipment Suppliers • Office and Business Equipment • Medical Lasers • Surgical Centers • Nursing Homes • General Medical Equipment • Private medical Practices • Orthopedics • Dental Facilities • College Medical Facilities • Ophthalmology • Nuclear Medicine • Physical Therapy Equipment • Gamma Knife • Imaging • Charitable Contributions (IRS 8283) • Cardiovascular • Expert Testimony • EP Systems • Equipment Inventory and Tagging • Barcoding of Inventory • Clinics • Cancer Center Appraisals • Ultrasound Equipment • GE Equipment Appraisals • Siemens Medical Equipment • Philips Equipment Appraisals • PACS Systems/Servers • Nuclear Imaging Systems • Biograph PET/CT • Advanced PET Systems • And more • Nuclear Camera 11-192 Office Machinery and Equipment Appraisals We appraise the entire range of office and commercial equipment. • Oil Service Equipment • Oil Drilling Equipment • Mining Equipment • Wind Turbine Equipment • Plant Machinery • Office Equipment • Computer Equipment • Office Furniture • Automotive • Electronics • Medical Equipment • Restaurant Equipment • Telecommunications Equipment • Plumbing Equipment • Expert Testimony • Solar Equipment • Construction Equipment • Commercial Equipment • Trucking Equipment • Aviation Equipment • Hospital Equipment • Farm Equipment/Agriculture • Printing Equipment • Electrical Equipment • Charitable Contributions (IRS 8283) • Bottling Equipment • And more Construction and Heavy Equipment Appraisals A V=7 We appraise construction and heavy equipment including the following. • Oil Service Equipment • Drilling Equipment • Cranes • Oil Drilling Equipment • Asphalt Equipment • Waste Disposal Equipment • Mining Equipment • Stevedore Equipment • Backhoes • Plant Machinery • Construction Equipment • Wheel Loaders 11-193 • Caterpillar Equipment • Plant Machinery • Front End Loaders • Deere Equipment • Excavators • Cement Trucks • Case Equipment • Scrapers • Farm Equipment • Komatsu Equipment • Graders • Textile Equipment • Bobcat Equipment • Commercial Equipment • Tow Trucks • Hitachi Equipment • Trucks/Trailers • Asphalt Batch Plants • Volvo Equipment • Cement Batch Plants • Dozers • JCB Equipment • Plumbing Equipment • Wheel Loaders • New Holland Equipment • Electrical Equipment • Rollers • Grove Equipment • Excavators • Skid Steers • Terex Equipment • Forklifts • Expert Testimony • BOMAG Equipment • Pan Scrapers • And more • INGERSOLL-RAND • Mining Equipment • Sterling Trucks • Freightliner • Trucking Equipment Strick Trailers • Truck Equipment Appraisals We appraise a range of various types of trucks and rolling stock, including the following: Truck Manufacturers: Service Trucks: Trailer Manufacturers: • Freightliner Trucks • Dump Trucks • Great Dane Trailers • International Trucks • Rolloff Trucks • Utility Trailers • Ford Trucks • Trash Trucks • Fruehauf Trailers • Peterbilit Trucks • Tow Trucks • Transcraft Trailers • Kenworth Trucks • Cement Trucks • Trailmobile Trailers • Mack Trucks • Box Trucks • Wabash Trailers • Volvo Trucks • Toyota Trucks • Fontaine Trailers • GMC Trucks • Ottawa Trucks • Dorsey Trailers • Isuzu Trucks • Tanker Trucks • Wilson Trailers • Chevrolet Trucks • Fire Trucks • Trail King Trailers • Sterling Trucks • Diamond Rio • Strick Trailers • Western Star Trucks • Autocar Trucks • East Trailers • Oshkosh Trucks • And more • Asphalt Trucks • Fuel Trucks 11-194 Business Valuation Resource Guide The book penetrates business brokerage and valuation consulting's mystique and empowers the reader by revealing, in layman's terms, the techniques for valuing different assets and businesses, and how to buy or sell a business. No other book on the market covers all of these issues in one source. It is packed with spreadsheets, examples, forms and checklists which can be used immediately. Critical value drivers for appraising and pricing any closely held business How to value patents, goodwill and other intangibles Industry rules of thumb and why using them is sometimes a big mistake How to value fractional interests Where to obtain effective resources for valuing businesses, real estate, and equipment Why equipment values will radically vary depending on the value definition used How to quickly analyze real estate and its contribution to value Why a lease is the most important deal breaker for selling a business What to remind your attorney about for drafting asset or stock sale agreements Powerful tax ramifications for a stock versus an asset sale Frazier Capital Valuation's Publications (available at www.amazon.com) When business brokers can and cannot help you How seller financing makes or breaks most small business transactions Buyer due diligence methods and tricks sellers use to disguise cash flows How to screen buyers and sellers Purchase price allocations for asset sales Business Valuation Rules of Thumb & Formula Resource Guide This book is the only one of its kind which provides rules of thumb for valuing hundreds of different businesses. In each section, the critical value drivers for a business are identified, along with the industry specific Red Flags and other risks related to purchasing a business that buyers should be aware of. For readers interested in learning about costs of operation, the book outlines key financial benchmarks for most of the business categories. Ratios for cost of goods sold, managers' salaries, operating expenses, rent(occupancy costs), working capital and profit margins can also be found in these sections. Of interest to many buyers will be the write-up sections of each industry which discuss available financing and typical terms for business loans. The chapters in this book are organized in accordance with the SIC (Standard Industrial Classification) numbers of businesses and NAICS codes. www.fraziercaaita1.com (800) 239-3998 11-195 The Valuation of Amusement Parks & Family Entertainment Center Onerations This book is the definitive guide to the amusement park industry's techniques for valuing amusement park businesses and their assets. Useful areas are: The Amusement Park Industry Profile Vital Demographic Statistics for the Family Entertainment Center Typical Revenue and Expense Streams of Amusement Parks Typical Demand Factors for Amusement Parks How to Find Direct and Indirect Competitors Construction Trends in Family Entertainment Centers The Nuances of an Amusement Park's Revenue Streams and Expenses How to Analyze a Family Entertainment Center's Financial Statements Compare an Amusement Park's Financial Ratios to the Industry Family Entertainment Business Valuation Rules of Thumb Valuing the Real Estate of Amusement Parks Typical Equipment and Start up Costs for Family Entertainment Centers Typical Equipment Installation Costs for Amusement Parks Frazier Capital Valuation's Publications (available at www.amazon.com) Business Acquisition Rates of Return Real Estate Cap Rates for Various Amusement Parks Red Flags to Watch out for The Valuation of Liquor Store Operations Here you will easily understand not only how to value, sell or purchase any liquor store but also discover: Liquor Distribution Channels Licensing Requirements for each State How to Value Liquor Licenses Construction Trends in Liquor Stores The Nuances of a Liquor Store's Revenue Streams and Expenses How to Analyze a Liquor Store's Financial Statements Compare a Liquor Store's Financial Ratios to the Industry Liquor Store Business Valuation Rules of Thumb Valuing the Real Estate of Liquor Stores Typical Equipment for Various Liquor Stores Typical Equipment Installation Costs for Liquor Stores Business Acquisition Rates of Return Real Estate Cap Rates for Various Liquor Stores How Skim works in the Liquor Store Industry www.fraziercaaita1.com (800) 239-3998 11-196 Red Flags to Watch out for The Valuation of Movie Theater Operations This is the definitive guide to Movie Theater Valuations. No other book on the market covers all of these issues in one source. Here you will easily understand not only how to value, sell or purchase any theater but also discover: Movie Distribution Channels Construction Trends in Theaters How Film Distribution, Negotiations and Licensing Really Work Film Licensing & Pricing Formulas How to Analyze a Theater's Financial Statements Compare a Theater's Ratios to the Industry Theater Valuation Rules of Thumb Analyzing Cash Flows for Single Operations versus Multiple Location Theaters How IMAX, Mega and Multi-Plex Theaters Differ in Facilities Valuing the Real Estate of Theaters and the Nuances which can Drastically Affect Value How many Screens and Seats should a Theater have? What Changes are Likely to Happen in the next Five to Eight Years Typical Equipment for Various Theaters Understanding Auditorium Layouts, Sound and Projection Systems Frazier Capital Valuation's Publications (available at www.amazon.com) Typical Installation Costs for New Theaters Real Estate Cap Rates for Various Theater Types The Valuation of Auto & Recreational Vehicle Dealership Operations Ir This book is the definitive guide. Here you will easily understand not only how to value, sell or purchase any RV or auto dealership, but you will also discover: Franchising Agreements with Vehicle Manufacturers Service and Parts Sales Trends Typical Revenue and Expense Margins for Auto and RV Dealers Trade Organizations How to Analyze a Dealer's Financial Statements Compare a Dealer's Financial Ratios to the Industry How LIFO Reserves Affect Inventory Value Dealership Business Valuation Rules of Thumb Valuing the Real Estate of Dealerships Typical Equipment and Start up Costs for Dealerships Typical Equipment Installation Costs for Dealerships Business Acquisition Rates of Return Real Estate Cap Rates for Various Dealerships www.fraziercapita1.com (800) 239-3998 11-197 Valuing, Buying and Selling Fast Food and Fast Casual Restaurant Operations This is the definitive guide to Fast Food and Fast Casual Valuations and Transactions. No other book on the market covers all of these issues in one source. Here you will easily understand not only how to value, sell or purchase any franchise restaurant but also discover: Sample Franchise and Comparative Initial Costs Industry Leaders Ranking of Top Restaurants in American by Number of Locations Checklists for Important Items for Acquisitions The Nuances of a Fast Food and Fast Casual Operator's Revenue Streams and Expenses How to Analyze an Operator's Financial Statements Compare a Fast Food Operator's Ratios to the Industry Fast Food Business Valuation Rules of Thumb Analyzing Cash Flows for Operators How to Crank Out Discounted Cash Flows Valuing the Real Estate of Fast Food Restaurants and the Nuances Which can Drastically Affect Value Frazier Capital Valuation's Publications (available at www.amazon.com) What Changes are Likely to Happen in the Next Five to Eight Years Business Acquisition Rates of Return Real Estate Cap Rates for Various Fast Food Operations Typical Equipment for Various Food Operations How the Equipment can Make or Break an Operation Equipment Value in Use versus Orderly Liquidation Values Calculating a fair market rental rate in 5 minutes Fast Food and Fast Casual Resources Valuing, Buying & Selling Gas Station Operations This book is the definitive guide. Here you will easily understand not only how to value, sell or purchase any Gas Station, but you will also discover: Sample Franchise and Comparative Initial Costs Industry Leaders Ranking of Top Stations in America by Number of Locations Checklists for Important Items for Acquisitions www.fraziercapita1.com (800) 239-3998 11-198 The Nuances of a Gas Station Operator's Revenue Streams and Expenses How to Analyze an Operator's Financial Statements Compare a Gas Station Operator's Ratios to the Industry Gas Station Business Valuation Rules of Thumb Analyzing Cash Flows for Operators How to Crank Out Discounted Cash Flows Valuing the Real Estate of Gas Stations and the Nuances Which can Drastically Affect Value What Changes are Likely to Happen in the Next Five to Eight Years Business Acquisition Rates of Return Real Estate Cap Rates for Various Gas Station Operations Typical Equipment for Various Gas Stations and C -Store Operations How the Equipment can Make or Break an Operation Equipment Value in Use versus Orderly Liquidation Values Calculating a fair market rental rate in 5 minutes Gas Station and Convenience Store Resources Frazier Capital Valuation's Publications (available at www.amazon.com) www.fraziercaaita1.com (800) 239-3998 11-199 Attachment D LAB Holding LLC Proposal 11-200 NEWPORT BEACH ., 12-201 October 17, 2015 l a b h o d I n U I I C Lauren Wooding Whitlinger Real Property Administrator City of Newport Beach 100 Civic .Cent'er Drive Newport Beach, CA 9:2660 Dear Ms. Wooding Whitli.nger,' Thankyou for the opportu' nity to provide this additional information on our offer to purchase the Balboa Theatre. We are excited by the opportunity to resurrect ,this community amenity for Balboa Village. Our firm's interest is in bringing the Theatre back and operating as,a multi-purpose events/ performance venue. As such, the two City conditions placed on the purchase of the prop- erty are acceptable. We will refer to the building as the Balboa' Theatre, the Historic. Balboa Theatre or The Balboa. Following,ft you will find detailed information on our firm's experience, in restoring 'historic Y P g structures and in operating event/performance venues. We understand ,the importance these landmarks play in our community and would be hon- ored to have the opportunity to work with this building. Please contact Chris Bennett from our office ifq require uire further. information He can be Y reached at 949.933.5296 or .at chris@thelab.com. . Sincerely, Shaheen Sadeghi President LAB Holding 11-202 4.77 i Using historic references, the LAB team will restore the original architecture of the Balboa Theater with a prominent marquee. Further study will be made on the design of the marquee and whether the original 20's wrought iron design or the historic neon design would be suitable. The central entry will be restored with the two side bays re-established as store- fronts for the on-ste cafe and box office. Further study will be done on the historic interior to determine what can be brought back while ensuring flexibility as a multi -use space. Interior colors, materials and finishes will be in keeping with the period of the building. 11-203 dmpr7 Th--. &a —* -9 - — ' 4j 4rfA 30TH AXX! V AWAR FA 'r 0-olff-'L- 11-204 1 ILLUMINATED RESTORE WINDOW'S CORNER SIGN STANDOFF AND FRONT BUILDIND FACADE �L9 177.'iU►� I IUKL I BUD I H 0 r IP'N i STORE FRONT 11-205 1 Em i MEN ONE,- F I y,,. �,p� 11-206 The LAB team intends to restore the original facade of the Balboa Theatre bringing back the historic marquee. We plan on simplifying the current proposed interior layout to make the space more conducive and flexible for multi -use events and performances while remaining within the currently approved development envelope. The main focus of our due diligence will be understanding how we can remain within substantial conformance of the current approved plans and due diligence to confirm construction estimations. Once under contract, we will share detailed plans with City staff to confirm our con- formance with approved plans and what plans may be required for building modifications. We will also have our construction manager, architect and contractors on site to physically inspect the building. We are requesting a 45 day due diligence period to undertake this work. The acquisition and construction will be financed with a construction loan. Following, please find a draft proforma showing our construction assumptions. These assumptions will be tested during the due diligence period and prior to closing escrow. 1-207 First and foremost, we view the Balboa Theater as a local historic treasure and as such should be repurposed to serve the local community maintaining its original entertainment mission. The LAB (Little American Business) therefore proposes the following in keeping with our long tradition of celebrating small business and site specific community based proj- ects. We propose the following for the historic Balboa Theater based on our event venue experience in the local marketplace. Amenities would include 3 •primary components: (1) intimate neighborhood cafe open to the public and also serving as the catering kitchen for events in the theater ; (2) small scale live music stage (standing room only) for patrons includ- ing pub counter; (3) adjoining gathering room for rental by guests for private celebrations (i.e. meetings, small weddings, etc.). We may propose a flexible connection between the two event spaces allowing these to be combined into one larger space when more seating may be required. The inspiration for the core element of our model is the highly acclaimed Rockwood Mu- sic Hall of New York City. (rockwoodmusichall.com). Having booked local musicians over the course of the last 20 years at the LAB and CAMP properties, and now on a weekly basis for the vibrant Anaheim Packing House, we believe the OC music scene needs a home with his- torical soul. The Rockwood venue is unique in that it offers musicians a comfortable small stage to debut new songs and material to a small audience with manageable short sets; and patrons enjoy an entertaining rotation of various musicians without intimidating door/ticket charges in an informal and relaxing environment. MARKETING The LAB boasts a strong marketing framework with more than 20 years of brand rec- ognition to a local artistically inclined audience. We believe cross promotion between the LAB, CAMP and Anaheim Packing House patrons via our social media networks and event programming would be a natural fit and support for initial marketing efforts of the Balboa Theater. 11-208 We suggest allocating approximately 1500 sq.ft. for the primary music performance room; with another 1500 sq.ft. for the private event space, which could also serve as a secondary stage room for special event nights (i.e. jazz series, acoustic night, etc). The cafe could occu- py approximately 2000 sq.ft. and pub counter within the entertainment rooms approximately 200 sq.ft. Our team of event management professionals are already in place to conceptualize various musical programs as well as cross promote via our existing private event and wedding businesses. We have longstanding relationships with the AOCVCB, various local music pro- moters, meeting management professionals as well as event vendors/suppliers for a smooth transition to this new venue opportunity. FINANCIAL As with our various existing venue businesses, we believe the successful financial model involves reliance on several components to provide a consistent income base. (1) The Balboa Theater cafe would provide a consistent rental income source as an independent amenity i.e. tenant. (2) the small stage room would generate income from the pub counter (with perhaps a one drink minimum for the over 21 yrs. crowd. Potential ticket sales would only be enforced if there were larger name musicians appearing, akin to the Pockwood model). (3) The primary source of income would be in the rental of the 2nd stage room for private celebrations. We have learned that being on site and word of mouth is paramount for the success of the pri- vate rentals. Therefore, the exposure of the venue to the weekly musical guests would be a natural opportunity to expose the public to the amenity of the private rental. We would project rental of the cafe at market rents (approximately $2/sq.ft. plus percent- age rent); pub counter (self owned and managed) income combined with approximately 4-8 pri- vate room rentals per month which is highly achievable for this unique and historic property. We would be happy to tour you through some of our existing operations so you can see both the quality of building rehabilitation and the venue operations. 11-209