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Home My WebLink About13 - An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication FeesQ �EwPpRT CITY OF O � z NEWPORT BEACH <,FORN'P City Council Staff Report November 10, 2020 Agenda Item No. 13 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Seimone Jurjis, Community Development Director - 949-644-3232, sjurjis@newportbeachca.gov PREPARED BY: Lauren Wooding Whitlinger, Real Property Administrator, Iwooding@newportbeachca.gov PHONE: 949-644-3236 TITLE: Resolution No. 2020-95: An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication Fees ABSTRACT: Pursuant to Section 19.52.070 of the Newport Beach Municipal Code, the City of Newport Beach ("City") requires a subdivider of residential land projects containing 50 lots or less to: dedicate parkland as part of the development; pay an in -lieu fee equal to the value of land required for parkland; or a combination of the two. A fair market value update to the parkland in -lieu fee ("Park In -Lieu Fee") was last approved by the City Council in 2007 under Resolution No. 2007-30. An update to the fair market value appraisal has been performed and an updated Park In -Lieu Fee calculated. For City Council's consideration is a resolution to approve an updated Park In -Lieu Fee. RECOMMENDATION: a) Find the adoption of this resolution 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 b) Adopt Resolution No. 2020-95, A Resolution of the City Council of the City of Newport Beach, California, Establishing the Fair Market Value Per Acre to be Used in Assessing In -Lieu Park Dedication Fees Pursuant to Section 19.52.070 of the Newport Beach Municipal Code (Attachment A). FISCAL IMPACT If the resolution is adopted the amount of annual Park In -Lieu Fees collected would increase for those projects that are not approved under an existing Development Agreements or have not had their applications deemed complete. Development Agreements lock in the Park In -Lieu Fee rate at the time the agreements are approved. For those projects that are not under a Development Agreement the fee collected is based on the number of "for sale" residential units that have been added above what is currently existing. For example: an existing single-family dwelling is torn down and replaced with a two -unit condominium. The project applicant would pay a Park In -Lieu Fee equivalent to the one added unit. 13-1 Resolution No. 2020-95: An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication Fees November 10, 2020 Page 2 Park In -Lieu Fees are set at the time a project application is deemed complete by Community Development Department and are due to the City upon recordation of the parcel map. Project applications deemed complete after approval of this item will have Park In -Lieu Fees assessed based on the adjusted fee amounts. The amount of fees collected fluctuates year to year. For example, in FY 2016-17 $3,339,610 in Park In -Lieu Fees were collected, but in FY 2019-20 only $208,822 were collected. Year-to-date for FY 2020-21, $208,694 in Park In -Lieu Fees have been collected. It is anticipated the amount Park In -Lieu Fees collected would go up over the next two years, but it is difficult to estimate the amount. The Park In -Lieu Fee program has funded the development of many parks, such as Grant Howald Park, Sunset View Park, and Marina Park. DISCUSSION: Background Title 19 of the Newport Beach Municipal Code ("NBMC"), the Subdivision Code, outlines the City's compliance with the Subdivision Map Act (Division 2 of Title 7 of the California Government Code), for the purpose of adopting tract and parcel maps while implementing the City's General Plan. Chapter 19.52 of the Subdivision Code, Park Dedications and Fees, provides for the dedication of land, the payment of fees in lieu of dedication, or a combination of both, for park and recreational purpose in relation to residential developments in the City. Under NBMC Section 19.52.070 of the Subdivision Code, when a Park In -Lieu Fee is required to be paid, the fee is computed by multiplying the acreage of parkland required of the project by the fair market value per acre. Fair market value per acre is to be established by periodic appraisal prepared by the City, to ensure the Park In -Lieu Fee remains current with property value appreciation. The last adjustment approved by the City Council was in 2007, which established the current fee of $26,125 per residential unit. Assessing and Calculating Fees In Lieu of Dedication California State Statute 66477 (the Quimby Act) establishes the methodology for assessing and calculating parkland dedication and in -lieu fee requirements. Consistent with the Quimby Act, the Subdivision Code requires park dedication, and/or payment of Park In -Lieu Fees, for residential subdivisions resulting in additional dwelling units. Park In -Lieu Fees are assessed as a condition to the approval of a tentative map or parcel map, and they are used to help fund the City's acquisition or rehabilitation of parkland to meet the park and recreational demands of new residential development. 13-2 Resolution No. 2020-95: An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication Fees November 10, 2020 Page 3 In accordance with the Quimby Act, if a proposed subdivision contains fifty parcels or fewer, the subdivider may pay an in -lieu fee equal to the value of the parkland that would otherwise be required for dedication. If a proposed subdivision contains fifty parcels or more, the decision-making body shall determine whether land dedication, in -lieu fees, or a combination of the two shall be required. Pursuant to the Subdivision Code, the following factors are to be used in the calculation of parkland dedication and fee requirements: • The City's established parkland dedication ratio of five (5) acres of parkland per 1,000 people expected to reside in a subdivision, or 0.005 acres per person. • The average number of persons per household in the City based on data from the most recent available federal or state census, currently 2.09 persons per unit. • The per -acre value of land in the City as established by periodic appraisal. Using the factors listed above, the Park In -Lieu Fee per new residential unit can be calculated as follows: Park In -Lieu Fee Calculation Methodology 0.005 acres per person x 2.09 persons per unit 0.01045 acres of parkland dedication per unit 0.01045 acres x fair market land value per acre Park In -Lieu Fee per unit Appraisal to Determine Fair Market Land Value Per Acre Since 1979, the City has used an appraisal of Eastbluff Park to establish the fair market land value per acre to be used in setting the Park In -Lieu Fees. In 2006, the City appraised Eastbluff Park as well as a second park site — Bob Henry Park, to set the Park In -Lieu Fees. Consistent with the previous appraisals, the properties were appraised by Integra Realty Resources ("Integra") on August 13, 2019, assuming the sites had the following characteristics: • Multifamily residential zoning with no entitlements • Maximum density of 14 dwelling units per acre • Utilities available to the developments • Sites assumed to be vacant and unimproved • Sites assumed to have relatively level topography • Sites assumed to have no view potential 13-3 Resolution No. 2020-95: An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication Fees November 10, 2020 Page 4 Since the subject fee applies to only residential subdivisions, multifamily residential use of the properties is assumed in order to establish the fair market value of vacant, residentially zoned land in the City. In preparation of this latest Park In -Lieu Fee update, staff considered which areas of the City were likely to be selected for new park sites and determined West Newport and the Airport Area had more limited existing park resources. A third site was appraised by Integra to reflect the most likely property type, a hypothetical industrially zoned property of 20,000 square feet in West Newport, to be acquired by the City to create a new park resource for the underserved area. Use of three sites also provides a more accurate representation of the average land values in the City. The tables on the next page contain the results of all three appraisals, and the adjusted Park In -Lieu Fee if the appraisal results are used to establish fair market land value using the Park In -Lieu Fee Calculation Methodology outlined in the section above. Property Eastbluff Park (Attachment B) Bob Henry Park (Attachment C) Hypothetical West Newport Industrial Property (Attachment D) Total FMV Cost Per Acre $52,380,000 $3,776,652 $19,150,000 $3,989,660 $1,500,000 $3,267,000 Average (3 sites) I $3,677,771 Park In -Lieu -- Calculation 0.005 acres per person x 2.09 persons per unit 0.01045 acres of park land dedication per unit 0.01045 acres x $3,675,000 FMV per acre (rounded) $38,403.75 $38,400 (rounded) Park In -Lieu Fee per unit 13-4 Resolution No. 2020-95: An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication Fees November 10, 2020 Page 5 The proposed Park In -Lieu Fee of $38,400 per unit equates to an approximately 47 percent increase over the current fee of $26,125 per unit, established by City Council in May 2007, or over three percent per year. Due to the large increase in the fee, staff recommends phasing -in the increase over two years by charging $30,217 per unit at adoption of the Resolution, setting the fee at $34,309 per unit one-year following the date of adoption, and setting the fee at $38,400 per unit two -years following the date of adoption. BIA Outreach Staff contacted the Orange County Chapter of the Building Industry Association of Southern California ("BIA") in September to notify them of the proposed Park In -Lieu Fee update, and to request their review and comment on the appraisal reports and resulting fee increase. Steve LaMotte, the BIA's Chapter Executive Officer, reviewed the information and confirmed on October 20, 2020, via email the BIA is not opposed to the fee update due to the time since the last fee increase, and because the fee is proposed to be phased -in over two years. Park Fee City Comparisons Staff conducted a survey of surrounding cities to determine both how parkland dedications and in -lieu fees are determined and what fees are being charged. Similar to the City of Newport Beach, the cities of Yorba Linda, Orange, Irvine, and Garden Grove set their park dedication fees based on fair market land value. Fees in Yorba Linda were last updated in 2015 and are based on a fair market land value of $1,851,250 per acre. The City of Orange determines the fair market land value at the time the project is being processed and uses a formula of 3.0 acres per 1,000 people to determine their acre of parkland dedication per unit requirement. Similarly, the City of Irvine requires a subdivider to obtain an appraisal at the time of their application, and the fee is based on the fair market land value of the property they are developing, their proposed density, and a factor of 2.0 acres per 1,000 people to determine the per unit requirement. The City of Garden Grove also requires a fee reflecting the estimated cost of land acquisition required for park and recreation purposes, and as of February 12, 2019, the fee per single family unit is $11,794, and the fee per multifamily unit is $9,804. The cities of Costa Mesa and Los Angeles base their park dedication fees on projected demographic growth and future demand for park and recreation facilities as the population increases. Collected Park In -Lieu Fees Park In -Lieu Fees are set at the time a project application is deemed complete and are due to the City upon recordation of the parcel map. Project applications deemed complete after approval of this item will have Park In -Lieu Fees assessed based on the adjusted fee amounts. Year-to-date for FY 2020-21, $208,694 in Park In -Lieu Fees have been collected, and an additional $287,375 is anticipated to be collected. 13-5 Resolution No. 2020-95: An Update to the Established Fair Market Value Per Acre for Assessing In -Lieu Park Dedication Fees November 10, 2020 Page 6 ENVIRONMENTAL REVIEW: Staff recommends the City Council find adoption of the resolution 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 — Resolution No. 2020-95 Attachment B — Integra Realty Resources Appraisal Report — Eastbluff Park, Dated August 27, 2019 Attachment C — Integra Realty Resources Appraisal Report — Bob Henry Park, Dated August 27, 2019 Attachment D — Integra Realty Resources Appraisal Report — Hypothetical Property Near Intersection of Placentia Avenue and Production Place, Newport Beach, Dated September 4, 2019 13-6 Attachment A Resolution No. 2020-95 13-7 RESOLUTION NO. 2020-95 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, ESTABLISHING THE FAIR MARKET VALUE PER ACRE TO BE USED IN ASSESSING IN -LIEU PARK DEDICATION FEES PURSUANT TO SECTION 19.52.070 OF THE NEWPORT BEACH MUNICIPAL CODE WHEREAS, Chapter 19.52 (Park Dedications and Fees) of the Newport Beach Municipal Code ("NBMC") establishes a parkland dedication standard of five (5) acres per thousand population expected to reside in new residential subdivisions in the City of Newport Beach ("City"); WHEREAS, Section 19.52.050(B) requires the subdivider pay an in -lieu fee equal to the value of land required for dedication for subdivisions containing 50 lots or less; WHEREAS, Section 19.52.050(C) allows the decision-making body to require land dedication, an in -lieu fee, or a combination of the two for subdivisions containing more than 50 lots; WHEREAS, Section 19.52.070 establishes that when a fee is required to be paid in -lieu of land dedication, that fee shall be equal to the acreage of land which would otherwise be required to be dedicated, multiplied by the fair market value per acre as established by periodic appraisal prepared by the City ("In -Lieu Park Dedication Fee"); WHEREAS, the City has retained a qualified appraiser to update and establish the fair market value per acre; WHEREAS, the results of the appraisals of two park sites and one commercial industrial property in the City have established an average value of $3,675,000 as the fair market value per acre; WHEREAS, said fair market value would establish an In -Lieu Park Dedication Fee of $38,400 per new residential unit created by an approved subdivision; WHEREAS, Resolution No. 2007-30 previously established the fair market value per acre to be used in computing In -Lieu Park Dedication Fee, and said resolution is to be hereby superseded and replaced; and WHEREAS, the City Council has reviewed the appraisal reports and determines the average fair market cost per acre to be appropriate. 13-8 Resolution 2020 - Page 2 of 3 NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The amount of $3,675,000 is the fair market value per acre to be used in assessing In -Lieu Park Dedication Fee pursuant to Chapter 19.52 (Park Dedications and Fees) of the NBMC. Section 2: The amount of $38,400 per new residential unit created by an approved subdivision is the fair market value in assessing In -Lieu Park Dedication Fee pursuant to Chapter 19.52 of the NBMC. Section 3: The In -Lieu Park Dedication Fee established herein shall be phased -in over three years following approval of this resolution. The fee, upon approval, shall be set at $30,217 per unit; one (1) year following the approval date of this resolution, the fee shall be set at $34,309 per unit; and two (2) years following the approval date of this resolution, the fee shall be set at $38,400 per unit. Section 4: The recitals provided above are true and correct and incorporated into the operative part of this resolution. This resolution supersedes and replaces Resolution No. 2007- 30 and any other resolution that conflicts with the fee amount, adjustments, and phase in provided in the previous sections. Section 5: The City Council finds the adoption of this resolution 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, Division 6, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Section 6: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. 13-9 Resolution 2020 - Page 3 of 3 Section 7: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this 10th day of November, 2020_ Will O'Neill Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE C, Aaron C. Harp City Attorney 13-10 Attachment B Integra Realty Resources Appraisal Report — Eastbluff Park, Dated August 27, 2019 13-11 Integra Realty Resources Los Angeles Appraisal of Real Property Eastbluff Park Vacant Land 2555 Vista Del Oro �.. NV Aw moi; �� r all, �? XA EMTBLUFF y " PARK rr L Integra Realty Resources Los Angeles August 28, 2019 16030 Ventura Boulevard T 818.290.5400 Suite 620 F 818.290.5401 Encino, CA 91436-4473 www.irr.com Lauren Wooding Whitlinger Real Property Administrator City of Newport Beach 100 Civic Center Drive, First floor Bay D Newport Beach, CA 92660 SUBJECT: Fair Market Value Appraisal Eastbluff Park 2555 Vista Del Oro Newport Beach, Orange County, California 92660 IRR - Los Angeles File No. 121-2019-0209 Dear Ms. Wooding Whitlinger: Integra Realty Resources — Los Angeles is pleased to submit the accompanying appraisal of the referenced property. The purpose of the appraisal is to develop an opinion of the fair market value of the land associated with the subject, assuming it is vacant, unimproved land. The client for the assignment is City of Newport Beach, and the intended use is to assist the City of Newport Beach in establishing Park In -Lieu fees. The subject is currently improved with Eastbluff Park and contains an area of 13.87 acres or 604,177 square feet. The property is zoned PR, Parks and Recreation. We have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. The appraisal is intended to conform with the Uniform Standards of Professional Appraisal Practice (USPAP) and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. To report the assignment results, we use the Appraisal Report option of Standards Rule 2-2(a) of USPAP. 13-14 Lauren Wooding Whitlinger City of Newport Beach August 28, 2019 Page 2 Based on the valuation analysis in the accompanying report, and subject to the definitions, assumptions, and limiting conditions expressed in the report, our opinion of value is as follows: Value Conclusion Appraisal Premise Interest Appraised Date of Value Value Conclusion Fair Market Value Fee Simple August 13, 2019 $52,380,000 Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subjectto the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. The subject Eastbluff Park is an irregularly shaped parcel. The irregular shape could impact its development potential. Because the intended use of this appraisal is to set park in -lieu fees, we have not considered the shape of the subjectwhen making adjustments to the comparables. The value conclusions are based on the following hypothetical conditions that may affectthe assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land at a density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. If you have any questions or comments, please contact the undersigned. Thank you for the opportunity to be of service. Respectfully submitted, INTEGRA REALTY RESOURCES - LOS ANGELES Beth B. Finestone, MAI, AI-GRS, FRICS, CRE Certified General Real Estate Appraiser California Certificate # AGO04030 Telephone: (818) 290-5455 Email: bfinestone@irr.com 7�1�2��- Thomas G. Richardson Certified General Real Estate Appraiser California Certificate # 3004940 Telephone: (818) 290-5408 Email: trichardson@irr.com lirr 13-15 Table of Contents Summary of Salient Facts and Conclusions 1 Highest and Best Use 23 General Information 2 Valuation 25 Identification of Subject 2 Valuation Methodology 25 Sale History 2 Sales Comparison Approach 26 Pending Transactions 2 Analysis and Adjustment of Sales 30 Purpose of the Appraisal 2 Land Value Conclusion 34 Definition of Fair Market Value 2 Reconciliation and Conclusion of Value 35 Definition of Property Rights Appraised 3 Exposure Time 35 Intended Use and User 3 Marketing Time 35 Applicable Requirements 3 Certification 36 Report Format 3 Prior Services 4 Assumptions and Limiting Conditions 38 Scope of Work 4 Addenda Economic Analysis 5 A. Appraiser Qualifications Orange County Area Analysis 5 B. Comparable Data Surrounding Area Analysis 10 Multifamily Market Analysis 14 Property Analysis 18 Land Description and Analysis 18 Real Estate Taxes 22 Eastbluff Park `irr 13-16 Summary of Salient Facts and Conclusions 1 Summary of Salient Facts and Conclusions Property Name Eastbluff Park Address 2555 Vista Del Oro Newport Beach, Orange County, California 92660 Property Type Land - Residential Owner of Record City of Newport Beach Tax ID 440-161-01 Land Area 13.87 acres; 604,177 SF Zoning Designation PR, Parks and Recreation Highest and Best Use Multifamily use Exposure Time; Marketing Period 6-12 months; 6-12 months Effective Date of the Appra i s a I August 13, 2019 Date of the Report August 28, 2019 Property Interest Appraised Fee Si mpl e Sales Comparison Approach Number of Sales 5 Range of Sale Dates May 16 to Nov 18 Range of Prices per Unit (Unadjusted) $246,479 - $407,143 Market Value Conclusion $52,380,000 ($270,000/Unit) The values reported above are subject to the definitions, assumptions, and limiting conditions set forth in the accompanying report ofwhich this summary is a part. No party other than City of Newport Beach may use or rely on the information, opinions, and conclusions contained in the report. It is assumed that the users ofthe report have read the entire report, including all ofthe definitions, assumptions, and limiting conditions contained therein. Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be fa Ise as of the effective date of the a ppra i sa I, we reserve the right to modify our va I ue concl us ions. 1. The subject Eastbluff Park is an irregu I a rly shaped parcel. The irregu I a r shape cou I d impact its development potential. Because the intended use of this appraisal is to set park in -lieu fees, we have not considered the shape of the subject when making adjustments to the comparables. The value conclusions are based on the following hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land at a density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Eastbluff Park 01rr 13-17 General Information General Information Identification of Subject The subject is currently improved with Eastbluff Park and contains an area of 13.87 acres or 604,177 square feet. The property is zoned PR, Parks and Recreation. We have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. A legal description of the property is was requested but not provided. Property Identification Property Name Eastbluff Park Address 2555 Vista Del Oro Newport Beach, California 92660 Tax ID 440-161-01 Owner of Record City of Newport Beach Sale History The subject is owned by the City of Newport Beach. To the best of our knowledge, no sale or transfer of ownership has taken place within a three-year period prior to the effective appraisal date. Pending Transactions To the best of our knowledge, the property is not subject to an agreement of sale or an option to buy, nor is it listed for sale, as of the effective appraisal date. Purpose of the Appraisal The purpose of the appraisal is to develop an opinion of the fair market value of the land associated with the subject, assuming it is vacant, unimproved land as of the effective date of the appraisal, August 13, 2019. The date of the report is August 28, 2019. The appraisal is valid only as of the stated effective date. Definition of Fair Market Value "Fair Market Value", as defined pursuant to Part 3, Title 7, Chapter 9, Article 4, of the California Code of Civil Procedure, entitled: Eminent Domain Law, is as follows: Fair Market Value ... Article 4. Measure of Compensation for Property Taken. Eastbluff Park ®rr 13-18 General Information 3 1263.320 (a) The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. (b) The fair market value of the property taken for which there is no relevant, comparable market is its value on the date of valuation as determined by any method valuation that is just and equitable. 1263.330 The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following: (a) The project for which the property is taken. (b) The eminent domain proceeding in which the property is taken. (c) Any preliminary actions of the plaintiff relating to the taking of the property. Definition of Property Rights Appraised Fee simple estate is defined as, "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) Intended Use and User The intended use of the appraisal is to assist the City of Newport Beach in establishing Park In -Lieu fees. The client and intended user is the City of Newport Beach. The appraisal is not intended for any other use or user. No party or parties other than City of Newport Beach may use or rely on the information, opinions, and conclusions contained in this report. Applicable Requirements This appraisal is intended to conform to the requirements of the following: • Uniform Standards of Professional Appraisal Practice (USPAP); • Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; Report Format This report is prepared under the Appraisal Report option of Standards Rule 2-2(a) of USPAP. USPAP gives appraisers the flexibility to vary the level of information in an Appraisal Report depending on the intended use and intended users of the appraisal. This report summarizes the information analyzed, Eastbluff Park ®rr 13-19 General Information 4 the appraisal methods employed, and the reasoning that supports the analyses, opinions, and conclusions. Prior Services USPAP requires appraisers to disclose to the client any other services they have provided in connection with the subject property in the prior three years, including valuation, consulting, property management, brokerage, or any other services. We have not performed any services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. Scope of Work To determine the appropriate scope of work for the assignment, we considered the intended use of the appraisal, the needs of the user, the complexity of the property, and other pertinent factors. Our concluded scope of work is described below. Valuation Methodology Appraisers usually consider the use of three approaches to value when developing a market value opinion for real property. These are the cost approach, sales comparison approach, and income capitalization approach. Use of the approaches in this assignment is summarized as follows: Approaches to Value Approach ApplicabiIityto Subject Use in Assignment Cost Approach Not Appl i ca bl a Not Uti I i zed Sales Comparison Approach Applicable Utilized Income Capitalization Approach Not Applicable Not Utilized We use only the sales comparison approach in developing an opinion of value for the subject. This approach is applicable to the subject because there is an active market for similar properties, and sufficient sales data is available for analysis. The cost approach is not applicable because we have been instructed to value the site as if it is vacant land and therefore, we do not consider any of the improvements. The income approach is not applicable because the subject is not likely to generate rental income in its current state. Research and Analysis The type and extent of our research and analysis is detailed in individual sections of the report. This includes the steps we took to verify comparable sales, which are disclosed in the comparable sale profile sheets in the addenda to the report. Although we make an effort to confirm the arms -length nature of each sale with a party to the transaction, it is sometimes necessary to rely on secondary verification from sources deemed reliable. Inspection Thomas G. Richardson conducted an on-site inspection on August 13, 2019. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE, viewed the property on August 14, 2019. irr Eastbluff Park 13-20 Orange County Area Analysis Economic Analysis Orange County Area Analysis Orange County is 791 square miles in size and has a population density of 4,076 persons per square mile. Orange County is part of the Los Angeles -Long Beach -Anaheim, CA Metropolitan Statistical Area, hereinafter called the Los Angeles MSA, as defined by the U.S. Office of Management and Budget. Population Orange County has an estimated 2019 population of 3,222,381, which represents an average annual 0.8% increase over the 2010 census of 3,010,232. Orange County added an average of 23,572 residents per year over the 2010-2019 period, and its annual growth rate is similar to that of the State of California. Looking forward, Orange County's population is projected to increase at a 0.8% annual rate from 2019-2024, equivalent to the addition of an average of 25,162 residents per year. The Orange County growth rate is expected to be similar to that of California. Population Trends Population Compound Ann. %Chng 2010 Census 2019 Estimate 2024 Projection 2010-2019 2019-2024 USA 308,745,538 329,236,175 340,950,101 0.7% 0.7% California 37,253,956 39,964,848 41,541,098 0.8% 0.8% Orange County, CA 3,010,232 3,222,381 3,348,192 0.8% 0.8% Los Angeles -Long Beach -Anaheim, CA Metro 12,828,837 13,478,088 13,913,534 0.6% 0.6% Source: Environics Analytics Employment Total employment in Orange County is currently estimated at 1,623,126 jobs. Between year-end 2007 and the present, employment rose by 104,370 jobs, equivalent to a 6.9% increase over the entire period. There were gains in employment in eight out of the past ten years despite the national economic downturn and slow recovery. Although Orange County's employment rose over the last decade, it underperformed California, which experienced an increase in employment of 9.3% or 1,472,215 jobs over this period. A comparison of unemployment rates is another way of gauging an area's economic health. Over the past decade, the Orange County unemployment rate has been consistently lower than that of California, with an average unemployment rate of 6.2% in comparison to an 8.3% rate for California. A lower unemployment rate is a positive indicator. Recent data shows that the Orange County unemployment rate is 3.2% in comparison to a 4.4% rate for California, a positive sign that is consistent with the fact that Orange County has outperformed California in the rate of job growth over the past two years. Eastbluff Park ®rr 13-21 Orange County Area Analysis 6 Employment Trends Total Employment (Year End) Unemployment Rate (Ann. Avg.) Year Orange County Change California Change Orange County California 2007 1,518,756 8,230 15,790,869 7,690 3.9% 5.4% 2008 1,451,569 -4.4% 15,281,705 -3.2% 5.3% 7.3% 2009 1,364,569 -6.0% 14,481,855 -5.2% 8.7% 11.1% 2010 1,382,514 1.3% 14,541,592 0.4% 9.7% 12.2% 2011 1,392,442 0.7% 14,735,619 1.3% 9.0% 11.7% 2012 1,436,698 3.2% 15,223,789 3.3% 7.9% 10.4% 2013 1,465,326 2.0% 15,657,015 2.8% 6.6% 8.9% 2014 1,509,910 3.0% 16,089,814 2.8% 5.5% 7.5% 2015 1,551,455 2.8% 16,606,038 3.2% 4.5% 6.2% 2016 1,589,304 2.4% 16,930,563 2.0% 4.0% 5.5% 2017 1,623,126 2.1% 17,263,084 2.0% 3.5% 4.8% Overall Change 2007-2017 104,370 6.9% 1,472,215 9.3% Avg Unemp. Rate 2007-2017 6.2% 8.3% Unemployment Rate - July 2019 3.2% 4.4% Source: Bureau of Labor Statistics and Economy.com. Employment figures are from the Qua rterlyCensus of Employment and Wages (QCEW). Unemployment rates are from the Current Population Survey (CPS). The figures are not seasonally adjusted. Major employers in Orange County are shown in the following table. Major Employers - Orange County, CA Name Number of Employees 1 Walt Disney Co. 29,000 2 University of California, Irvine 23,610 3 St. Joseph Health 11,930 4 Allied Universal 8,230 5 Kaiser Permanente 7,690 6 The Boeing Company 6,100 7 W a I ma rt 6,000 8 California State University, Fullerton 5,780 9 Bank of America Corp. 5,500 10 Target Corp. 5,400 Source: Southern California Association of Governments, Comprehensive Annual Financial Report, June 2018 Gross Domestic Product Gross Domestic Product (GDP) is a measure of economic activity based on the total value of goods and services produced in a defined geographic area. Although GDP figures are not available at the county level, data reported for the Los Angeles MSA is considered meaningful when compared to the nation overall, as Orange County is part of the MSA and subject to its influence. Economic growth, as measured by annual changes in GDP, has been somewhat higher in the Los Angeles MSA than the United States overall during the past eight years. The Los Angeles MSA has grown at a 2.6% average annual rate while the United States has grown at a 1.9% rate. As the national Eastbluff Park ®rr 13-22 Orange County Area Analysis 7 economy improves, the Los Angeles MSA continues to perform better than the United States. GDP for the Los Angeles MSA rose by 2.8% in 2017 while the United States GDP rose by 2.1%. The Los Angeles MSA has a per capita GDP of $67,763, which is 32% greater than the United States GDP of $51,337. This means that Los Angeles MSA industries and employers are adding relatively more value to the economy than their counterparts in the United States overall. Gross Domestic Product ($ Mil) ($ Mil) Year Los Angeles MSA %Change United States %Change 2010 754,535 14,628,165 2011 760,055 0.7% 14,833,679 1.4% 2012 781,151 2.8% 15,126,281 2.0% 2013 796,341 1.9% 15,348,034 1.5% 2014 826,980 3.8% 15,717,469 2.4% 2015 869,246 5.1% 16,148,486 2.7% 2016 880,453 1.3% 16,383,812 1.5% 2017 904,899 2.8% 16,721,499 2.1% Compound % Chg (2010-2017) 2.6% 1.9% GDP Per Capita 2017 $67,763 $51,337 Source: Bureau of Economic Analysis and Economy.com; data released September 2016. The release ofstate and local GDP data has a longer lagtime than national data.The data represents inflation-adjusted "real" GDP stated in 2009 dollars. Income, Education and Age Orange County is more affluent than California. Median household income for Orange County is $91,094, which is 22.2% greater than the corresponding figure for California. Median Household Income - 2019 Median Orange County, CA $91,094 California $74,558 Comparison of Orange County, CA to California +22.2% Source: Environics Analytics Residents of Orange County have a higher level of educational attainment than those of California. An estimated 39% of Orange County residents are college graduates with four-year degrees, versus 33% of California residents. People in Orange County are slightly older than their California counterparts. The median age for Orange County is 38 years, while the median age for California is 37 years. Eastbluff Park ®rr 13-23 Orange County Area Analysis Education & Age - 2019 80 70 60 50% 40 30 20 10% Percent College Graduate Median Age Orange County, CA California Source:Environics Analytics Conclusion so 45 40 35 30 25 20 15 10 Orange County, CA California The Orange County economy will benefit from a growing population base and higher income and education levels. Orange County experienced growth in the number of jobs and has maintained a consistently lower unemployment rate than California over the past decade. Moreover, Orange County benefits from being part of the Los Angeles MSA, which is the second most populous metropolitan area in the country, and exhibits both a higher rate of GDP growth and a higher level of GDP per capita than the nation overall. We anticipate that the Orange County economy will improve and employment will grow, strengthening the demand for real estate. This assumes continued growth in the national economy. Many sources are predicting a recession in 2020. It is currently uncertain if this will come to pass. Eastbluff Park ®rr 13-24 Orange County Area Analysis Area Map knd Oaks r ti Long V bing Eastbluff Park wo te�wesr vin2, OntarPa :i htorwalk 5} e.rxr, 91 Carona i3arden Grov, ? 2a, nia Ana bailie Hunt; j6t0n B ach costa pesa - -� 73 O if � Sari oeen aroma ivaiivnz naaa San Bernardi a moreno va ley ra , Sek Hemet � Cleveland . F National Forest tg F Camp Pendleton Marine Corps ' Base Pala LR La _RLR _ I_ a L c rralWN&,203S HERE irr 13-25 Surrounding Area Analysis Surrounding Area Analysis Boundaries The subject is located in a primarily residential area within the City of Newport Beach. This area is generally delineated as follows: North Upper Newport Bay South West Coast Highway / State Route 1 East MacArthur Boulevard West Upper Newport Bay A map identifying the location of the property follows this section. Access and Linkages 10 Primary access to the area is provided by Jamboree Road and MacArthur Boulevard, major arterials that cross Orange County in a north/south direction. Access to the subject from Jamboree Road is provided by Eastbluff Drive. Access to the subject from MacArthur Boulevard is provided by University Drive, which becomes Eastbluff Drive at Jamboree Road. Overall, vehicular access is average. Public transportation is provided by Orange County Transportation Authority. The nearest bus stop is located at the intersection of Eastbluff Drive and Vista Del Sol, approximately 500 feet east of the subject. The local market perceives public transportation as average compared to other areas in the region. However, the primary mode of transportation in this area is the automobile. John Wayne Airport is located about three miles northeast from the property. Downtown Los Angeles, the economic and cultural center of the region, is approximately 35 miles northwest from the property. Demand Generators Major employers include Hoag Memorial Hospital, Pacific Life Insurance, Glidewell Dental, PIMCO Advisors, and Newport -Mesa Unified School District. In addition to its strong employment base, the area is easily accessible to other employment centers within Orange County. Demographics A demographic profile of the surrounding area, including population, households, and income data, is presented in the following table. Eastbluff Park Lir 13-26 Surrounding Area Analysis 4,926 56,064 126,182 992,781 11 Households 2019 5,159 60,743 136,529 1,062,951 13,477,890 Surrounding Area Demographics 5,353 63,444 142,495 1,105,004 14,007,885 Compound % Change 2010-2019 0.5% 0.9% 0.9% Orange County, 0.8% 2019 Estimates 1 -Mile Radius 3 -Mile Radius 5 -Mile Radius CA California Population 2010 10,854 138,967 327,948 3,010,232 37,253,956 Population 2019 11,544 150,443 354,932 3,222,381 39,964,848 Population 2024 12,037 156,789 369,969 3,348,192 41,541,098 Compound%Change 2010-2019 0.7% 0.9% 0.9% 0.8% 0.8% Compound % Change 2019-2024 0.8% 0.8% 0.8% 0.8% 0.8% Households 2010 4,926 56,064 126,182 992,781 12,577,498 Households 2019 5,159 60,743 136,529 1,062,951 13,477,890 Households 2024 5,353 63,444 142,495 1,105,004 14,007,885 Compound % Change 2010-2019 0.5% 0.9% 0.9% 0.8% 0.8% Compound % Change 2019-2024 0.7% 0.9% 0.9% 0.8% 0.8% Median Household Income 2019 $125,147 $96,877 $98,761 $91,094 $74,558 Average Household Size 2.2 2.3 2.5 3.0 2.9 College Graduate% 69% 56% 53% 39% 33% Median Age 46 38 38 38 37 Owner Occupied % 54% 42% 46% 59% 56% Renter Occupied % 46% 58% 54% 41% 44% Median Owner Occupied Housing Value $1,820,457 $1,237,768 $967,632 $733,175 $530,982 Median Year Structure Built 1980 1977 1977 1976 1976 Avg. Travel Time to Work in Min. 26 25 26 30 32 Source: Environics Analytics As shown above, the current population within a 3 -mile radius of the subject is 150,443, and the average household size is 2.3. Population in the area has grown since the 2010 census, and this trend is projected to continue over the next five years. Compared to Orange County overall, the population within a 3 -mile radius is projected to grow at a similar rate. Median household income is $96,877, which is higher than the household income for Orange County. Residents within a 3 -mile radius have a considerably higher level of educational attainment than those of Orange County, and median owner -occupied home values are considerably higher. Services and Amenities The nearest commercial area with restaurants, convenience stores and support services are located directly east from the subject across Vista Del Oro. The closest lodging facilities are located within two miles of the property. The nearest fire and police stations are within one mile of the property. Land Use In the immediate vicinity of the subject, land uses include a mix of residential and commercial. Other land use characteristics are summarized as follows: rrr Eastbluff Park 13-27 Surrounding Area Analysis 12 Surrounding Area Land Uses Character of Area Suburban Predominant Age of Improvements 40 years Predominant Quality and Condition Average Approximate Percent Developed 90% Infrastructure/Planning Average Subject's Immediate Surroundings North Multifamily residential and Eastbluff Elementary School South Multifamily residential East Mix of commercial and multifamily residential West Upper Newport Bay State Marine Conservation Area Development Activity and Trends During the last five years, development has been predominantly of commercial and multifamily uses, and has included notable commercial developments such as Lido House Hotel, a 103,470 square foot hotel, PIMCO's 380,000 square foot Newport Beach office headquarters, and notable multifamily developments such as The Place, which includes 177 units, and Blue Sol, which includes 113 units. The pace of development has generally been intermittent over this time. Outlook and Conclusions The area is in the stabilization stage of its life cycle. Given the history of the area and the growth trends, it is anticipated that property values will increase in the near future, assuming continued growth in the economy. Eastbluff Park Lir 13-28 Surrounding Area Analysis 13 Surrounding Area Map or,mqia 16. � — Coast 4`- 171.1 College PP SAN )OAQUIN MARSH COSM MLI-Sa SANTA ANA UMIVERStTY TOWN HEIGHTS CENTER CR��as 4s .Alt .2 W I!W, St UNIVERSITY OF CALIFORNIA -IRVINE U ri i vors i ty 6f Cal if or n l3, I rvi me Cliff Haven 4� 7�0 ... TURTLE N 3 Newport Beach t jsl�nd Lido.. .Isle San Joaquin Hills LV Bing Mboa Wand 0 2019�I iprosof gcrp'orai bri 0 2M HERE A Eastbluff Park L11 13-29 Multifamily Market Analysis 14 Multifamily Market Analysis The subject is located at the northeast corner of Dover Drive and 16th Street / Castaways Lane in a residential area of the City of Newport Beach. Given prevailing land use patterns and our client's instruction that the subject be analyzed as vacant land with a maximum density of 14 dwelling units per acre, the most likely use is multifamily residential. As such, we have included a multifamily market analysis. Metro Area Overview The subject is located in the Orange County metro area as defined by Costar. Trended supply and demand statistics, including inventory levels, absorption, vacancy, and rental rates for all classes of space are presented in the ensuing table. All Multifamily Orange County Metro Trends Net Under Net Rent Completions Construction Absorption Asking Growth Price Cap Period Stock Demand Vacancy 12 Months Stock 12 Months Rent 12 Month Growth Rate 2009 Q2 212,635 198,499 6.64% 3,864 5,917 465 $1,560 -4.24% -20.23% 5.60% 2010 Q2 217,447 204,854 5.78% 4,812 4,200 6,363 $1,519 -2.61% 15.07% 5.26% 2011 Q2 218,212 206,358 5.42% 765 3,521 1,508 $1,533 0.88% 22.52% 4.84% 2012 Q2 221,627 208,536 5.90% 3,415 2,489 2,171 $1,578 2.95% 3.62% 4.81% 2013 Q2 222,019 211,752 4.61% 392 4,615 3,222 $1,633 3.50% 4.52% 4.76% 2014 Q2 224,572 214,969 4.27% 2,553 7,957 3,220 $1,699 4.02% 4.74% 4.72% 2015 Q2 228,053 217,566 4.59% 3,481 9,381 2,604 $1,781 4.84% 9.84% 4.50% 2016 Q2 231,363 221,690 4.17% 3,310 8,004 4,121 $1,872 5.11% 9.01% 4.38% 2017 Q2 236,158 224,953 4.73% 4,795 8,125 3,264 $1,942 3.75% 7.00% 4.27% 2018 Q2 240,153 228,485 4.85% 3,995 8,609 3,534 $1,988 2.34% 4.83% 4.23% 2019 Q2 242,014 230,524 4.74% 1,861 7,372 2,040 $2,052 3.21% 4.24% 4.24% Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Orange County Metro Trends and Forecasts $2,500.0 $2,000.0 $1,500.0 $1,000.0 $500.0 $0.0 Vacancy Rate vs. Asking Rent 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Eastbluff Park 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 13-30 Multifamily Market Analysis 15 • The current vacancy rate in the metro area is 4.74%; the vacancy rate has relatively stable over the past two years. • Asking rent averages $2,052 per unit in the metro area, and values have increased by 5.65% from 2017 Q2. 3,000 2,500 2,000 1,500 1,000 500 0 -500 Supply and Demand Trends ''yyti y� �'' y°ytidy� y'' ao-° 0- <-) o -h a� ao 0-(00i10ao-y° a�ti � ay� � ay'' A ay° � ayti % ay % a % ay° � o-yti o 0joN Qti (S',otiotiQ;111 Q;1; od,o;1; otiotiotiotiotioti,otiotiod 6.0 5.0% 4.0 3.0% 2.0% 1.0 0.0 Completions (SF) Absorption (SF) —Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. • The total stock (units) has increased by 2.48% from 2017 Q2, and the demand has also increased by 2.48%. • Between Q2 2014 and Q2 2019, net completions in the metro area have averaged 3,332 units annually and reached a peak of 2,407 units in 2017 Q1. • Between Q2 2014 and Q2 2019, net absorption in the metro area has averaged 3,131 units annually and reached a peak of 1,427 units in 2018 Q2. Submarket Overview The subject is located in the Newport Beach submarket as defined by Costar. Trended supply and demand statistics, including inventory levels, absorption, vacancy, and rental rates for all classes of space are presented in the following table. Eastbluff Park Lir 13-31 Multifamily Market Analysis 16 All Multifamily Newport Beach Submarket Trends Net Under Net Rent Completions Construction Absorption Asking Growth Price Cap Period Stock Demand Vacancy 12 Months Stock 12 Months Rent 12 Month Growth Rate 2009 Q2 8,587 8,047 6.29% -10 0 -119 $1,947 -8.43% -20.49% 5.61% 2010 Q2 8,587 8,099 5.69% 0 0 52 $1,985 1.94% 15.18% 5.25% 2011 Q2 8,587 8,179 4.75% 0 0 81 $2,018 1.70% 22.85% 4.82% 2012 Q2 8,587 8,121 5.43% 0 0 -59 $2,078 2.98% 3.77% 4.79% 2013 Q2 8,587 8,150 5.09% 0 0 28 $2,180 4.86% 4.15% 4.75% 2014 Q2 8,587 8,213 4.35% 0 0 64 $2,307 5.84% 4.29% 4.71% 2015 Q2 8,587 8,199 4.51% 0 524 -14 $2,389 3.54% 9.49% 4.51% 2016 Q2 8,533 8,228 3.58% -54 524 29 $2,529 5.89% 8.67% 4.39% 2017 Q2 9,057 8,276 8.63% 524 0 47 $2,571 1.65% 6.80% 4.28% 2018 Q2 9,057 8,590 5.16% 0 0 314 $2,598 1.03% 4.59% 4.23% 2019 Q2 9,057 8,568 5.40% 0 0 -21 $2,687 3.43% 4.15% 4.26% Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. • The Newport Beach submarket comprises 3.7% of the metro building stock and 3.7% of the metro building demand. • The vacancy rate in the Newport Beach submarket is 5.40%, which is somewhat higher than the metro area's average of 4.74%. • Newport Beach market rate is $2,687 per unit which is higher than the metro area's average rate of $2,052 per unit. Newport Beach Submarket Trends and Forecasts $3,000.00 $2,500.00 $2,000.00 $1,500.00 $1,000.00 $500.00 $0.00 Vacancy Rate vs. Asking Rent 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: CoStar, Inc.; compiled by Integra Realty Resources, Inc. 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% • The current vacancy rate in the submarket area is 5.40%; the vacancy rate has decreased by 323 basis points from the peak in 2017 Q2. Eastbluff Park Lir 13-32 Multifamily Market Analysis 17 • Asking rent averages $2,687 per unit in the submarket area, and values have increased by 4.1% from 2017 Q2. Supply and Demand Trends 600 12.0% 500 10.0% 400 300 8.0% 200 100 � 6.0% 4.0% 0 , , — 2.0% -100 -200 0.0% o - o-° 0- 03 0; U 0ti 0i 0� o-° o -ti o -ti 0' o -ti o -ti o� o-° o -ti oti ti� ti °` tih ti� ti� ti� do do do do AU ti� tiw tiw tiw tiw ti� do ,yo ,yo ,yo ,yo ell ,yo ,yo ,yo ,yo yo yo yo ell If;", yo ,yo ,yo ,yo ,yo ,yo ,yo yo ,yo Completions (SF) Absorption (SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. • The total stock (units) has increased by 5.47% from 2014 Q2, while the demand has increased by 4.32%. • Between 2014 Q2 and 2019 Q2, net completions in the submarket area have averaged 78 units annually and reached a peak of 524 units in 2017 Q1. • Between 2014 Q2 and 2019 Q2, net absorption in the submarket area has averaged 70 units annually and reached a peak of 193 units in 2017 Q3. Multifamily Market Outlook and Conclusions Supply and demand trends in this submarket have signs of stability with low vacancy rates and slowly improving rental rates. In the future, the multifamily market is expected to continue its stability and slow improvement, assuming continued growth in the national economy. Eastbluff Park Lir 13-33 Land Description and Analysis 18 Property Analysis Land Description and Analysis Land Description Land Area 13.87 acres; 604,177 SF Source of Land Area Public Records Primary Street Frontage Vista Del Oro Shape Irregular (Not considered in our analysis. Please refer to Extraordinary Assumption number 1) Corner No Topography Generally level and at street grade Drainage No problems reported or observed Environmental Hazards None reported or observed Ground Stability No problems reported or observed Flood Area Panel Number 06059CO269K Date March 21, 2019 Zone X Description Outside of 500 -year floodplain Insurance Required? No Zoning; Other Regulations Zoning Jurisdiction City of Newport Beach Zoning Designation PR Description Parks and Recreation Legally Conforming? Appears to be legally conforming Zoning Change Likely? Yes Permitted Uses Aquatic facilities, golf courses, marina support facilities, parks, and other similar recreational facilities Maximum Density Assume 14 dwelling units per acre Utilities Service Provider Water City of Newport Beach Sewer City of Newport Beach Electricity Southern California Edison Natural Gas Southern California Gas Company Local Phone Various Zoning The subject is currently zoned PR, Parks and Recreation. However, we have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. The subject is appraised on an unentitled residential land basis. In addition, we Eastbluff Park Lir 13-34 Land Description and Analysis were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. 19 Potential Development Density Based on instructions from our client, we assume that a maximum density of 14 dwelling units per acre could be developed on the site. Therefore, the assumed development potential of the site is 194 units. Easements, Encroachments and Restrictions We were not provided a current title report to review. We are not aware of any easements, encroachments, or restrictions that would adversely affect value. Our valuation assumes no adverse impacts from easements, encroachments, or restrictions, and further assumes that the subject has clear and marketable title. Conclusion of Site Analysis The subject is irregularly shaped and narrow in the middle of the site, however, we assume that this would not impact the development of the site to a density of 14 units per acre. We are not aware of any other particular restrictions on development. Eastbluff Park LIr 13-35 Land Description and Analysis a'3 , View of subject looking west. (Photo Taken on August 13, 2019) View of subject looking east. (Photo Taken on August 13, 2019) --mmmm- - Vista Del Oro looking north. (Photo Taken on August 13, 2019) Eastbluff Park 20 View of subject looking northeast. (Photo Taken on August 13, 2019) View of subject looking southwest. (Photo Taken on August 13, 2019) Vista Del Oro looking south. (Photo Taken on August 13, 2019) irr 13-36 Land Description and Analysis 21 Plat Map . P ELr:v Ipti�uruurff asmrta AocwAer 440-16 PACE I of a ewrrnitllT O�RAIIGEECmurvRa¢s�E�o�aEnvE0. 2� vISTF pE� 9oL5R 1=200 N rT � E ' 22 MS9 � N IRVINE 4' as. sr -Fa E<sre� BLK52 oer sor i3,e�ac. rur. for zz> srAzzr •A 1110 ,q�`'or� sEEPAGEY sue. —I NO 6230 ,• �S r� 33 MARCH 1969 1R✓/NE 5Y/P. mW /-88 NOTE-ASSESSOR'5 RDCK B ASSESSOR'S MAP TRACT N06230 AI M24.5-lO TO/3 /NC, PARCEL NUMBERS eOOK440PAGF16 O SHOWN IN CIRCLE`. CQURIT OF ORANGE Eastbluff Park err 13-37 Real Estate Taxes 22 Real Estate Taxes Real estate tax assessments are administered by the Assessor of Orange County and are estimated by jurisdiction on a county basis for the subject. The property is subject to the property tax rules of the State of California, which control the activities and policies of local assessment jurisdictions. These laws were significantly modified on June 7, 1978, when the State's voters passed Proposition 13, adding Article XIIIA to the State Constitution. Proposition 13 abolished the practice of periodic reassessment of properties based on market value appraisals. Instead, real property is subject to reassessment (i.e., revaluation at full or partial current market value) only when changes in ownership or new construction take place. Otherwise, increases in assessed value are limited to a general rate of 2%, plus the rates needed to service any bonded indebtedness. Special assessments can also be added and are often related to the installation of infrastructure. Generally speaking, property taxes in Orange County tend to range from 1.1 % to 1.4% of a property's assessed value. Due to California's tax laws, most properties within Orange County have very similar effective tax rates. The subject property is owned by the City of Newport Beach and therefore it is not subject to real estate taxes. It is located in tax rate area 07-042 which carries a 2018-2019 base tax rate of 1.05084%. Real estate taxes would be adjusted upon sale of the subject property. Eastbluff Park ®rr 13-38 Highest and Best Use 23 Highest and Best Use Process Before a property can be valued, an opinion of highest and best use must be developed for the subject site, both as vacant, and as improved. By definition, the highest and best use must be: • Physically possible. • Legally permissible under the zoning regulations and other restrictions that apply to the site. • Financially feasible. • Maximally productive, i.e., capable of producing the highest value from among the permissible, possible, and financially feasible uses. Highest and Best Use As Vacant Legally Permissible The site is zoned PR, Parks and Recreation. However, we have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. Therefore, none of the park equipment or improvements was considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Given our client's instructions, only multifamily use is given further consideration in determining the highest and best use of the site as vacant. Physically Possible The subject site is irregularly shaped and is narrow in the middle of the site, which could impact its development potential. Because the intended use of this appraisal is to set park in -lieu fees, we assume that the shape of the subject would not prohibit development of the subject to a density of 14 units per acre and have not considered the shape of the subject in our determination of highest and best use. Overall, the physical characteristics of the site and the availability of utilities result in functional utility suitable for a variety of uses. Financially Feasible/Maximally Productive A use is considered financially feasible if it produces a positive net return. A variety of uses may be potentially financially feasible for the subject. For purposes of this analysis, multifamily use is assumed at the appraised land value. Conclusion Development of the site for multifamily use is the only use that meets the four tests of highest and best use. Therefore, it is concluded to be the highest and best use of the property as vacant. As Improved Per our client's instructions, we assume the subject is vacant, unimproved land. Therefore, a highest and best analysis as improved is not applicable. Eastbluff Park Lir 13-39 Highest and Best Use 24 Most Probable Buyer Taking into account the functional utility of the site, area development trends, and our assumption of 14 dwelling units per acre as the highest and best use, the probable buyer is a developer. Eastbluff Park LIr 13-40 Valuation Methodology 25 Valuation Valuation Methodology Appraisers usually consider three approaches to estimating the market value of real property. These are the cost approach, sales comparison approach and the income capitalization approach. The cost approach assumes that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility. This approach is particularly applicable when the improvements being appraised are relatively new and represent the highest and best use of the land or when the property has unique or specialized improvements for which there is little or no sales data from comparable properties. The sales comparison approach assumes that an informed purchaser would pay no more for a property than the cost of acquiring another existing property with the same utility. This approach is especially appropriate when an active market provides sufficient reliable data. The sales comparison approach is less reliable in an inactive market or when estimating the value of properties for which no directly comparable sales data is available. The sales comparison approach is often relied upon for owner -user properties. The income capitalization approach reflects the market's perception of a relationship between a property's potential income and its market value. This approach converts the anticipated net income from ownership of a property into a value indication through capitalization. The primary methods are direct capitalization and discounted cash flow analysis, with one or both methods applied, as appropriate. This approach is widely used in appraising income-producing properties. Reconciliation of the various indications into a conclusion of value is based on an evaluation of the quantity and quality of available data in each approach and the applicability of each approach to the property type. The methodology employed in this assignment is summarized as follows: Approaches to Value Approach ApplicabiIityto Subject Use in Assignment Cost Approach Not Appl i ca bl a Not Uti I i zed Sales Comparison Approach Applicable Utilized Income Capitalization Approach Not Applicable Not Utilized Eastbluff Park ®rr 13-41 Sales Comparison Approach Sales Comparison Approach 26 To develop an opinion of the subject's land value, as vacant and available to be developed to its highest and best use, we utilize the sales comparison approach. This approach develops an indication of value by researching, verifying, and analyzing sales of similar properties. Our sales research focused on transactions within the following parameters: • Location: The City of Newport Beach and nearby communities. Size: We initially searched for sites up to 25 acres. However, we were unable to uncover transactions of larger sites similar in size to the subject. Use: Multifamily residential. We initially searched for sales of unentitled multifamily residential sites in the vicinity of the subject. Unfortunately, the only comparable data we were able to uncover was entitled. We found that buyers of unentitled land take the land through the entitlement process during escrow and if entitlements are not achieved, the buyer does not close on the transaction. Based on our interviews, the sale price is reflective of an entitled price due to the seller sharing in the risk by having to hold the property for an extended period. Due to the lack of unentitled land sales, we have relied on entitled data and have adjusted for the value of the entitlements as part of the adjustment process. • Transaction Date: March 2016 through the date of value. For this analysis, we use price per unit as the appropriate unit of comparison because market participants typically compare sale prices and property values on this basis. The sales most relevant to analyzing the subject's land value are summarized in the following table: irr Eastbluff Park 13-42 Sales Comparison Approach 27 Summary of Comparable Land Sales Sale Date; SF; $/SF No. Name/Address Status Sale Price Acres Zoning $/Unit Land $/Acre 1 2152 Alton Pkwy. Nov -18 $28,620,000 230,868 5.1, IBC Multi- $307,742 $123.97 $5,400,000 Irvine Closed 5.30 Use Orange County Comments: This is the sale of a 5.3 acre site improved with an industrial building at the time of sale. Tim Walker, the buyer's broker, indicated that although the property was improved with an industrial building, it was purchased for land value as the property was entitled at the time of sale for 93 townhouses. 2 671 W. 17th St. Jun -17 $17,100,000 94,090 MG, General $407,143 $181.74 $7,916,667 Costa Mesa Closed 2.16 Industrial Orange County Comments: This property is located at the southeast corner of 17th Street and Pomona Avenue. Itis irregular in shape with level topography. The surrounding land uses in the immediate area include a mix of industrial, retail, and multi family residential. According to the buyer's broker, Brandon Johnson with Tierra DevelopmentAdvisors, the site was sold as vacant land and was fully entitled for42 townhomes. The sale included approved tract maps, however, the infrastructure was not completed. 3 929 Baker St. Jan -17 $21,350,000 201,247 R2 -MD, $381,250 $106.09 $4,621,212 Costa Mesa Closed 4.62 Multiple Family Orange County Residential, Comments: This property is located on south side of Baker Street and east of Milbro Street. Itis rectangular in shape with level topography. The surrounding land uses in the immediate area are single and multi family residences, along with an education center adjacent to the site. According to the buyer, David Sanson with Civic Property Group, the site was improved with an old industrial building that added no value. The sale was based on land value and was fully entitled to develop 56 single-family residences. 4 C2E- 71 Residential Units Dec -16 $17,500,000 147,843 5.1, IBC Multi- $246,479 $118.37 $5,156,158 17150 Von Karma Ave. Closed 3.39 Use Irvine Orange County Comments: This property is a portion of a former 8.5 acre lot which was entitled for 361 apartment units and 71 townhouses. However, the property was split into two parcels and the approximate 3.4 acre portion which was entitled for 71 townhouses is the parcel that sold in this transaction. 5 671 W. 17th St. May -16 $35,000,000 301,217 MG, General $259,259 $116.20 $5,061,461 Costa Mesa Closed 6.92 Industrial Orange County Comments: This is the sale of 3 of 4 lots located on the southeast corner of 17th Street and Pomona Avenue in Costa Mesa. The property was improved with an industrial development at the time of sale. However, the listing brokerindicated the property was sold for land value. The property was nearly fully entitled at the time of sale by the seller. A tentative tractmap for 135 residences was in place and the buyer demolished the improvements and recorded the final map. The units area mixture of attached and detached residences. The project name is 17th West. Subject 604,177 Parks and Eastbluff Park 13.87 Recreation Newport Beach, CA Eastbluff Park 11'G 13-43 Sales Comparison Approach 28 Comparable Land Sales Map Eastbluff Park ®r 13-44 F11i6 Awe Su P .c,—r A%:r= A%!F: South: iii Coast Plaza ID 1-4'0$ POV n ok SS johnwayr"? A,: ort ID Coast College CoEia Mesa SAN JOAQUIN NIARSq irview -2 Yic#aria S# SANTA ANA.) UNIVERSITY TOWN THEIGHTS CENTER V. W I Mh S UNIVERSITY OF CALIFORNIA -IRVINE 4 California, Irvine LV king Cliff Haven 0,201.9 Mr-r436ft --orpDralon 0 MS HERE Eastbluff Park ®r 13-44 Sales Comparison Approach Sale 1 2152 Alton Parkway Sale 3 929 Baker Street Sale 5 671 W. 17th St. Eastbluff Park 29 k -Uv*= Sale 2 671 West 17th Street Sale 4 C2E - 71 Residential Units LIr 13-45 Sales Comparison Approach 30 Analysis and Adjustment of Sales The sales are compared to the larger parcel and adjusted to account for material differences that affect value. Adjustments are considered for the following factors, in the sequence shown below. Adjustment Factor Accounts For Comments Effective Sale Price Atypical economics of a transaction, No adjustments required. such as demolition cost or expenditures by buyer at time of purchase. Real Property Rights Fee simple, leased fee, leasehold, partial interest, etc. Financing Terms Seller financing, or assumption of existing financing, at non -market terms. Conditions of Sale Extraordinary motivation of buyer or seller, assemblage, forced sale. Market Conditions Changes in the economic environment over time that affect the appreciation and depreciation of real estate. Location Market or submarket area influences on sale price; surrounding land use influences. No adjustments required. No adjustments required. No adjustments required. Multifamily market research and market participants have reported improving multifamily land values in the market area. It was reported that multifamily land is increasing in value at a rate of 5% to 10% annually. Considering the market trend data and market participant opinions, we have applied an annual market conditions adjustment of 6% per year to account for this trend. Compared to the subject, each of the sales require upward adjustments for location. Our adjustments are based on the difference between rental rates for multifamily residential units within a one -mile radius of the subject and a one -mile radius of each of the comparables. Access/Exposure Convenience to transportation No adjustments required. facilities; ease of site access; visibility; traffic counts. Eastbluff Park ®rr 13-46 Sales Comparison Approach 31 Adjustment Factor Accounts For Comments Size Inverse relationship that often exists Compared to the subject, each of the between parcel size and unit value. sales require downward adjustments for size due to economies of scale. Shape and Primary physical factors that affect the We assume that the shape of the Topography utility of a site for its highest and best subject would not prohibit use. development of the subject to a density of 14 units per acre, therefore, no adjustments were required. Zoning (Density) Government regulations that affect Per our client's instructions, we the types and intensities of uses assume the subject has a maximum allowable on a site. density of 14 dwelling units per acre. Since we have analyzed the sales on a price per unit basis, the difference in density between the subject and each of the comparables is not a major issue. However, we do apply minor adjustments for their differences. Sale 3 was adjusted downward for its lower density. Lower density sites have more land area per unit and typically sell for a higher price per unit. Sales 1, 2, 4, and 5 were adjusted upward for their higher densities, as higher density sites typically sell for a lower price per unit, due to the lower ratio of land per unit. Entitlements The specific level of governmental Per our client's instruction, we assume approvals attained pertaining to the subject is unentitled multifamily development of a site. residential land. Based on conversations with Jim Gallagher with the Hoffman Company, Mike Hunter with Land Advisors, and Michelle Jefcoat with CBRE, an entitled property can command a premium ranging from 25% to 50% over raw, unentitled land. Each of the sales sold with entitlements and are adjusted downward. Sale 2 received a slightly higher adjustment as the seller entitled the site prior to the transaction which resulted in a shorter escrow period. Eastbluff Park ®rr 13-47 Sales Comparison Approach 32 Adjustment Factor Accounts For Comments Site Improvements Improvements that contribute income Compared to the subject, Sales 1 and beyond demolition costs are 3 require upward adjustments for considered superior. Sites that require demolition costs. demolition prior to development are considered inferior. Views Accounts for any scenic views for the No adjustments required. multifamily units that are proposed within the development. The following table summarizes the adjustments we make to each sale. Please note that we have included quantitative adjustments on the following grid which are somewhat subjective on the part of the appraisers, due to the lack of data to quantify most adjustments. They have been included to aid the reader in following our thought process. Eastbluff Park ®rr 13-48 Sales Comparison Approach Land Sales Adjustment Grid Range of Adjusted Prices $228,732 - $312,849 Average $267,884 Indicated Value 33 Eastbluff Park IrrMr 13-49 Subject Comparable Comparable Comparable Comparable4 Comparable Address Eastbluff Park - 2152 Alton Pkwy. 671 W. 17th St. 929 Baker St. 17150 Von Karma 671 W. 17th St. 2555 Vista Del Oro Ave. City Newport Beach Irvine Costa Mesa Costa Mesa Irvine Costa Mesa County Orange Orange Orange Orange Orange Orange State California CA CA CA CA CA Sale Date Nov -18 Jun -17 Jan -17 Dec -16 May -16 Sale Status Closed Closed Closed Closed Closed Sale Price $28,620,000 $17,100,000 $21,350,000 $17,500,000 $35,000,000 Square Feet 604,177 230,868 94,090 201,247 147,843 301,217 Acres 13.87 5.30 2.16 4.62 3.39 6.92 Number of Units 194 93 42 56 71 135 Dwelling Units Per Acre 14.0 17.5 19.4 12.1 20.9 19.5 SF Per Dwelling Unit 3,114 2,482 2,240 3,594 2,082 2,231 Price per Unit $307,742 $407,143 $381,250 $246,479 $259,259 Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple % Adj ustment - - - - - Financing Terms Cash to seller Cash to seller Cash to seller Cash to seller Cash to seller % Adjustment - - - - - Conditions of Sale % Adj ustment - - - - Market Conditions 8/13/2019 Nov -18 Jun -17 Jan -17 Dec -16 May -16 Annual %Adjustment 6% 5% 13% 16% 16% 20% Cumulative Adjusted Price $323,129 $460,071 $442,250 $285,915 $311,111 Location 15% 10% 10% 15% 10% Access/Exposure - - - - - Size -5% -7% -5% -5% -5% Shape and Topography - - - - - Zoning(Density) 5% 5% -5% 5% 5% Entitlements -35% -40% -35% -35% -35% Site Improvements 3% - 2% - - Vi ews - - - - - Net$Adjustment -$54,932 -$147,223 -$145,943 -$57,183 -$77,778 Net % Adjustment -17% -32% -33% -20% -25% Final Adjusted Price $268,197 $312,849 $296,308 $228,732 $233,333 Overall Adjustment -13% -23% -22% -7% -10% Range of Adjusted Prices $228,732 - $312,849 Average $267,884 Indicated Value 33 Eastbluff Park IrrMr 13-49 Sales Comparison Approach Land Value Conclusion 34 Prior to adjustment, the sales reflect a range of $246,479 - $407,143 per unit. After adjustment, the range is narrowed to $228,732 - $312,849 per unit, with an average of $267,884 per unit. To arrive at an indication of value, we place primary emphasis on Sale 1, as it is the most recent sale and is similar in terms of density to the subject. Secondary emphasis is placed on Sale 3, as it is an older transaction but has a similar density to the subject. Based on the preceding analysis, we arrive at a value conclusion as follows: Land Value Conclusion Indicated Value per Unit $270,000 Subject Units 194 Indicated Value $52,380,000 Our value conclusion of $52,380,000 equates to $3,776,496 per acre or $86.70 per square foot. After considering the required adjustments, these conclusions are well within the range of our data. rrr Eastbluff Park 13-50 Reconciliation and Conclusion of Value 35 Reconciliation and Conclusion of Value As discussed previously, we use only the sales comparison approach in developing an opinion of value for the subject. The cost and income approaches are not applicable, and are not used. Based on the preceding valuation analysis and subject to the definitions, assumptions, and limiting conditions expressed in the report, our value opinion follows: Value Conclusion Appraisal Premise Interest Appraised Date of Value Value Conclusion Fair Market Va I ue Fee Si mpl e August 13, 2019 $52,380,000 Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the following extraordi nary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value concl us i ons. 1. The subject Eastbluff Park is an irregularly shaped parcel. The irregular shape could impact its development potential. Because the intended use of this appraisal is to set park in -lieu fees, we have not considered the shape of the subject when making adjustments to the comparables. The value conclusions are based on the following hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land at a density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Exposure Time Exposure time is the length of time the subject property would have been exposed for sale in the market had it sold on the effective valuation date at the concluded market value. Exposure time is always presumed to precede the effective date of the appraisal. Based on our review of recent sales transactions for similar properties and our analysis of supply and demand in the local market, it is our opinion that the probable exposure time for the subject at the concluded market value stated previously is 6-12 months. Marketing Time Marketing time is an estimate of the amount of time it might take to sell a property at the concluded market value immediately following the effective date of value. As we foresee no significant changes in market conditions in the near term, it is our opinion that a reasonable marketing period for the subject is likely to be the same as the exposure time. Accordingly, we estimate the subject's marketing period at 6-12 months. Eastbluff Park ®rr 13-51 Certification Certification We certify that, to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. We 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. 36 4. We have not performed any services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. 5. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 6. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 7. Our 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. 8. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice as well as applicable state appraisal regulations. 9. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 11. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE, viewed the property that is the subject of this report. Thomas G. Richardson has personally inspected the subject. 12. No one provided significant real property appraisal assistance to the person(s) signing this certification. 13. We have experience in appraising properties similar to the subject and are in compliance with the Competency Rule of USPAP. 14. As of the date of this report, Beth B. Finestone, MAI, AI-GRS, FRICS, CRE has completed the continuing education program for Designated Members of the Appraisal Institute. Eastbluff Park ®rr 13-52 Certification 15. As of the date of this report, Thomas G. Richardson has completed the Standards and Ethics Education Requirements for Candidates of the Appraisal Institute. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE Certified General Real Estate Appraiser California Certificate # AGO04030 Eastbluff Park Thomas G. Richardson Certified General Real Estate Appraiser California Certificate # 3004940 37 rrr 13-53 Assumptions and Limiting Conditions Assumptions and Limiting Conditions This appraisal and any other work product related to this engagement are limited by the following standard assumptions, except as otherwise noted in the report: The title is marketable and free and clear of all liens, encumbrances, encroachments, easements and restrictions. The property is under responsible ownership and competent management and is available for its highest and best use. 38 2. There are no existing judgments or pending or threatened litigation that could affect the value of the property. 3. There are no hidden or undisclosed conditions of the land or of the improvements that would render the property more or less valuable. Furthermore, there is no asbestos in the property. 4. The revenue stamps placed on any deed referenced herein to indicate the sale price are in correct relation to the actual dollar amount of the transaction. 5. The property is in compliance with all applicable building, environmental, zoning, and other federal, state and local laws, regulations and codes. 6. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. This appraisal and any other work product related to this engagement are subject to the following limiting conditions, except as otherwise noted in the report: 1. An appraisal is inherently subjective and represents our opinion as to the value of the property appraised. 2. The conclusions stated in our appraisal apply only as of the effective date of the appraisal, and no representation is made as to the effect of subsequent events. 3. No changes in any federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated. 4. No environmental impact studies were either requested or made in conjunction with this appraisal, and we reserve the right to revise or rescind any of the value opinions based upon any subsequent environmental impact studies. If any environmental impact statement is required by law, the appraisal assumes that such statement will be favorable and will be approved by the appropriate regulatory bodies. 5. Unless otherwise agreed to in writing, we are not required to give testimony, respond to any subpoena or attend any court, governmental or other hearing with reference to the property without compensation relative to such additional employment. 6. We have made no survey of the property and assume no responsibility in connection with such matters. Any sketch or survey of the property included in this report is for illustrative purposes only and should not be considered to be scaled accurately for size. The appraisal Eastbluff Park ®rr 13-54 Assumptions and Limiting Conditions 39 covers the property as described in this report, and the areas and dimensions set forth are assumed to be correct. 7. No opinion is expressed as to the value of subsurface oil, gas or mineral rights, if any, and we have assumed that the property is not subject to surface entry for the exploration or removal of such materials, unless otherwise noted in our appraisal. 8. We accept no responsibility for considerations requiring expertise in other fields. Such considerations include, but are not limited to, legal descriptions and other legal matters such as legal title, geologic considerations such as soils and seismic stability; and civil, mechanical, electrical, structural and other engineering and environmental matters. Such considerations may also include determinations of compliance with zoning and other federal, state, and local laws, regulations and codes. 9. The distribution of the total valuation in the report between land and improvements applies only under the reported highest and best use of the property. The allocations of value for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. The appraisal report shall be considered only in its entirety. No part of the appraisal report shall be utilized separately or out of context. 10. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or any reference to the Appraisal Institute) shall be disseminated through advertising media, public relations media, news media or any other means of communication (including without limitation prospectuses, private offering memoranda and other offering material provided to prospective investors) without the prior written consent of the persons signing the report. 11. Information, estimates and opinions contained in the report and obtained from third -party sources are assumed to be reliable and have not been independently verified. 12. Any income and expense estimates contained in the appraisal report are used only for the purpose of estimating value and do not constitute predictions of future operating results. 13. If the property is subject to one or more leases, any estimate of residual value contained in the appraisal may be particularly affected by significant changes in the condition of the economy, of the real estate industry, or of the appraised property at the time these leases expire or otherwise terminate. 14. Unless otherwise stated in the report, no consideration has been given to personal property located on the premises or to the cost of moving or relocating such personal property; only the real property has been considered. 15. The current purchasing power of the dollar is the basis for the values stated in the appraisal; we have assumed that no extreme fluctuations in economic cycles will occur. 16. The values found herein are subject to these and to any other assumptions or conditions set forth in the body of this report but which may have been omitted from this list of Assumptions and Limiting Conditions. 17. The analyses contained in the report necessarily incorporate numerous estimates and assumptions regarding property performance, general and local business and economic irr Eastbluff Park 13-55 Assumptions and Limiting Conditions 40 conditions, the absence of material changes in the competitive environment and other matters. Some estimates or assumptions, however, inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our analysis will vary from our estimates, and the variations may be material. 18. The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of the property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. We claim no expertise in ADA issues, and render no opinion regarding compliance of the subject with ADA regulations. Inasmuch as compliance matches each owner's financial ability with the cost to cure the non- conforming physical characteristics of a property, a specific study of both the owner's financial ability and the cost to cure any deficiencies would be needed for the Department of Justice to determine compliance. 19. The appraisal report is prepared for the exclusive benefit of the Client, its subsidiaries and/or affiliates. It may not be used or relied upon by any other party. All parties who use or rely upon any information in the report without our written consent do so at their own risk. 20. No studies have been provided to us indicating the presence or absence of hazardous materials on the subject property or in the improvements, and our valuation is predicated upon the assumption that the subject property is free and clear of any environment hazards including, without limitation, hazardous wastes, toxic substances and mold. No representations or warranties are made regarding the environmental condition of the subject property. Integra Realty Resources — Los Angeles, Integra Realty Resources, Inc., Integra Strategic Ventures, Inc. and/or any of their respective officers, owners, managers, directors, agents, subcontractors or employees (the "Integra Parties"), shall not be responsible for any such environmental conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because we are not experts in the field of environmental conditions, the appraisal report cannot be considered as an environmental assessment of the subject property. 21. The persons signing the report may have reviewed available flood maps and may have noted in the appraisal report whether the subject property is located in an identified Special Flood Hazard Area. We are not qualified to detect such areas and therefore do not guarantee such determinations. The presence of flood plain areas and/or wetlands may affect the value of the property, and the value conclusion is predicated on the assumption that wetlands are non- existent or minimal. 22. Integra Realty Resources — Los Angeles is not a building or environmental inspector. Integra Los Angeles does not guarantee that the subject property is free of defects or environmental problems. Mold may be present in the subject property and a professional inspection is recommended. 23. The appraisal report and value conclusions for an appraisal assume the satisfactory completion of construction, repairs or alterations in a workmanlike manner. 24. It is expressly acknowledged that in any action which may be brought against any of the Integra Parties, arising out of, relating to, or in any way pertaining to this engagement, the Eastbluff Park ®rr 13-56 Assumptions and Limiting Conditions 41 appraisal reports, and/or any other related work product, the Integra Parties shall not be responsible or liable for any incidental or consequential damages or losses, unless the appraisal was fraudulent or prepared with intentional misconduct. It is further acknowledged that the collective liability of the Integra Parties in any such action shall not exceed the fees paid for the preparation of the appraisal report unless the appraisal was fraudulent or prepared with intentional misconduct. Finally, it is acknowledged that the fees charged herein are in reliance upon the foregoing limitations of liability. 25. Integra Realty Resources — Los Angeles, an independently owned and operated company, has prepared the appraisal for the specific intended use stated elsewhere in the report. The use of the appraisal report by anyone other than the Client is prohibited except as otherwise provided. Accordingly, the appraisal report is addressed to and shall be solely for the Client's use and benefit unless we provide our prior written consent. We expressly reserve the unrestricted right to withhold our consent to your disclosure of the appraisal report or any other work product related to the engagement (or any part thereof including, without limitation, conclusions of value and our identity), to any third parties. Stated again for clarification, unless our prior written consent is obtained, no third party may rely on the appraisal report (even if their reliance was foreseeable). 26. The conclusions of this report are estimates based on known current trends and reasonably foreseeable future occurrences. These estimates are based partly on property information, data obtained in public records, interviews, existing trends, buyer -seller decision criteria in the current market, and research conducted by third parties, and such data are not always completely reliable. The Integra Parties are not responsible for these and other future occurrences that could not have reasonably been foreseen on the effective date of this assignment. Furthermore, it is inevitable that some assumptions will not materialize and that unanticipated events may occur that will likely affect actual performance. While we are of the opinion that our findings are reasonable based on current market conditions, we do not represent that these estimates will actually be achieved, as they are subject to considerable risk and uncertainty. Moreover, we assume competent and effective management and marketing for the duration of the projected holding period of this property. 27. The appraisal is also subject to the following: irr Eastbluff Park 13-57 Assumptions and Limiting Conditions Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be fa Ise as of the effective date of the a ppra i sa I, we reserve the right to modify our va I ue concl us ions. 42 1. The subject Eastbluff Park is an irregu I a rly shaped parcel. The irregu I a r shape cou I d impact its development potential. Because the intended use of this appraisal is to set park in -lieu fees, we have not considered the shape of the subject when making adjustments to the comparables. The value conclusions are based on the following hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land at a density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Eastbluff Park ®rr 13-58 Addenda Addendum A Appraiser Qualifications rrr Eastbluff Park 13-59 Integ Beth B. Finestone MAI AI-GRS FRICS CRE Loss Angeles Realty Resources � � � � Los Angeles Experience 16030 Ventura Boulevard Suite 620 Ms. Finestone, Managing Director for and a principal of INTEGRA REALTY RESOURCES — LOS Encino, CA 91436-4473 ANGELES, has been with the firm since 2004 and has been appraising in Southern California since 1981. She has specialized in valuation and consulting services related to public agency T 818.290.5400 clients and for major, investment grade commercial properties, e.g., office, industrial, retail, F 818.290.5401 multifamily, land, and special purpose properties, for over 30 years. Ms. Finestone previously held senior positions with Finestone & Associates and Cushman & irr.com Wakefield of California. At Finestone & Associates from 1996 through 2003, she specialized in real estate appraisal, valuation and consulting services with focus on preparation of appraisals for industrial, commercial, and special purpose properties. This focus included consultation services, due diligence work, litigation support, and expert witness designation. At Cushman & Wakefield of California, Inc. from 1983 through 1996, Ms. Finestone was in the Los Angeles Appraisal Services Group, specializing in real estate valuation and consulting. By the end of her tenure, she was responsible for the management the Los Angeles Valuation Advisory Services Group, including preparation and review of appraisal reports, business development, consulting and litigation work, management and coordination of multi property assignments and national accounts, professional staff development, and support staff supervision. Ms. Finestone's clients include public agencies, right of way firms, lenders, institutional investors, major corporations, law firms, and individual property owners. Her services include a wide range of specialized studies including value diminution (from both internal and external influences), market demand, feasibility, severance damages and project benefits, investment analysis, assessment allocation, reuse analysis, and the valuation of partial interests including leasehold, leased fee, possessory interests, and minority interests. Recent assignments include the 22 flowage easements for the State of California Department of Water Resources, 35 easements related to a culvert upgrade project in Los Angeles County, more than 100 partial acquisitions related to the California High Speed Rail Authority Project, 39 properties for the SR 91 Improvement Project, 10 properties for the Devore Interchange Improvements Project, and 28 properties for the Lakeview and Tustin Avenues/Rose Drive Grade Separation Project. Ms. Finestone has also been active in the appraisal of large tracts of mitigation land for Orange County Transportation Authority (OCTA). She has been involved in the appraisal of a number of mitigation parcels in Northern California for the High Speed Rail Authority. These involved land banks and conservation easements. Ms. Finestone also has significant experience valuing transportation corridor properties and pipeline easements. She has been extensively involved in valuing and doing counseling and consulting work related to rail corridors and crossings as part of the proposed high speed rail project in Central California. In addition, she has also appraised a number of federally owned properties, including the West Los Angeles Federal Building, federal courthouses in Los Angeles and Orange counties, and two Army 11 r. bfinestone@irr.com - 818.290.5455 13-60 Integ Beth B. Finestone MAI AI-GRS FRICS CRE Loss Angeles Realty Resources � � � � Los Angeles Experience (Cont'd) 16030 Ventura Boulevard Suite 620 Reserve centers in the Los Angeles area. Much of this work has included a consulting Encino, CA 91436-4473 component to aide clients in making feasibility and reuse studies of their properties. Ms. Finestone also has significant appraisal review experience and has reviewed large numbers of T 818.290.5400 appraisals for Hatch Mott MacDonald, OCTA, City of Ontario, and the Los Angeles Unified School F 818.290.5401 District. Professional Activities & Affiliations irr.com Appraisal Institute, Member (MAI) , December 1988 Appraisal Institute, General Review Specialist, June 2015 Royal Institute of Chartered Surveyors, Fellow (FRICS) , August 2008 Member: International Right of Way Association Counselor of Real Estate (CRE) , November 2015 Licenses California, Certified General Real Estate Appraiser, AG004030, Expires August 2020 Education M.B.A., Pepperdine University B.S., Kinesiology, University of California, Los Angeles Successfully completed numerous real estate and related courses and seminars sponsored by the Appraisal Institute, accredited universities, and others Currently certified by the Appraisal Institute's program of continuing education for its designated members Qualified Before Courts & Administrative Bodies Superior courts in California within the counties of Los Angeles and Orange Tax Appeal Boards of Los Angeles and San Diego counties Arbitration testimony at hearings in Los Angeles County Miscellaneous Los Angeles Business Journal 2009 Nominee for Executive of the Year — Women Making a Difference, May 2009 Designated one of Real Estate Southern California's 2006 Women of Influence, October 2006 11"1"� bfinestone@irr.com - 818.290.5455 13-61 gra Thomas G. Richardson L seAngelesltyResources Experience 16030 Ventura Boulevard Suite 620 Mr. Richardson, Senior Analyst, began his career in real estate appraisal in 2012 and joined Encino, CA 91436-4473 INTEGRA REALTY RESOURCES — LOS ANGELES in 2015. His responsibilities with the firm include researching property sale and lease transactions; interviewing buyers, sellers, investors, tenants, T 818-290-5400 and brokers with regard to the details of those transactions; analyzing and documenting F 818-290-5401 economic and real estate market conditions; examining zoning, general plan, and other land -use control documents as applicable to appraisal assignments; and incorporating the presentation of his research efforts in appraisal reports. irr.com In addition, his experience encompasses appraisal reports of multifamily residences, single and multitenant commercial and industrial properties, including shopping centers, office buildings, warehouses, retail and industrial condominiums, mixed-use commercial and residential buildings, religious facilities, and various categories of land. His appraisal work has also addressed the impact to property value caused by various internal and external influences. His recent appraisal work for right -of -way -related purposes includes assignments for the 1-405 Improvement Project, Culver -University Improvement Project, Regional Connector Transit Project, Century Boulevard Mobility Improvement Project, Riverside Transmission Reliability Project, Centennial Corridor Project, and California High -Speed Rail Authority. Professional Activities & Affiliations Candidate for Designation: Appraisal Institute, Southern California Chapter Licenses California, Certified General Real Estate License, 3004940, Expires November 2019 Education B.A., History, University of California, Los Angeles Completed the following courses and seminars: Advanced Concepts & Case Studies Basic Appraisal Principles Basic Appraisal Procedures Business Practices and Ethics Commercial Appraisal Review Expert Witness for Commercial Appraisers General Appraiser Income Approach, Part I General Appraiser Income Approach, Part II General Appraiser Market Analysis and Highest & Best Use Advanced Market Analysis and Highest & Best Use General Appraiser Report Writing and Case Studies General Appraiser Sales Comparison Approach General Appraiser Site Valuation and Cost Approach Real Estate Finance, Statistics, and Valuation Modeling Uniform Standards of Professional Appraisal Practice Quantitative Analysis trichardson@irr.com - 818-290-5408 I r r. 13-62 About IRR Integra Realty Resources, Inc. (IRR) provides world-class commercial real estate valuation, counseling, and advisory services. Routinely ranked among leading property valuation and consulting firms, we are now the largest independent firm in our industry in the United States, with local offices coast to coast and in the Caribbean. IRR offices are led by MAI -designated Senior Managing Directors, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets. This experience, coupled with our understanding of how national trends affect the local markets, empowers our clients with the unique knowledge, access, and historical perspective they need to make the most informed decisions. Many of the nation's top financial institutions, developers, corporations, law firms, and government agencies rely on our professional real estate opinions to best understand the value, use, and feasibility of real estate in their market. Local Expertise... Nationally! irr.com irr© 13-63 Addendum 6 Comparable Data rrr Eastbluff Park 13-64 Land Sale Profile Location & Property Identification Property Name: 2152 Alton Parkway Sub -Property Type: Residential, Former Use: Condo/Townhouse Address: 2152 Alton Pky. City/State/Zip: Irvine, CA 92606 County: Orange Submarket: Central Market Orientation: Industrial Park IRR Event ID: 2214415 Sale No. 1 Sale Information Sale Analysis Sale Price: $28,620,000 Former Use: Industrial Effective Sale Price: $28,620,000 Proposed Use Change: Yes Sale Date: 11/01/2018 Proposed Use Desc.: 93 Townhouses Sale Status: Closed Entitlement @ T.O.S.: Yes $/SF GBA: $235.27 Entitlement Status.: Seller entitled for 93 $/SF NRA: $235.27 townhouses $/Acre(Gross): $5,400,000 $/Land SF(Gross): $123.97 Improvement and Site Data $/Unit: $307,742 /Approved Unit MSA: Los Angeles -Long Beach -Santa $/Land SF(Potential): $235.27 Ana, CA Metropolitan Grantor/Seller: Dynasty Real Property Group Statistical Area LLC Grantee/Buyer: KB Home Coastal, Inc. Legal/Tax/Parcel ID: 435-122-06 Assemblage: No GBA-SF: 121,650 Portfolio Sale: No NRA -SF: 121,650 Property Rights: Fee Simple Acres(Gross): 5.30 of Interest Conveyed: 100.00 Land-SF(Gross): 230,868 Document Type: Deed No. of Units (Potential): 93 Recording No.: 18-397495 Year Built: 1971 Verified By: Jerardo Arciniega, MAI Most Recent Renovation: 2007 Verification Date: 02/22/2019 Property Class: C Confirmation Source: Tim Walker - Lee & Associates No. of Truck Doors: 15 - (949) 230-7649 Overhead/Grade/Bay: 1 Verification Type: Confirmed -Buyer Broker Percent Office: 4% Secondary Verific. Source: Deed Total Parking Spaces: 100 Park. Ratio 1000 SF GLA: 0.82 2152 Alton Parkway 01rr 13-65 Land Sale Profile Improvement and Site Data (Cont'd) Park. Ratio 1000 SF GBA: Shape: Bldg. to Land Ratio FAR: Utilities: Source of Land Info. Comments 0.82 Rectangular 0.53 Electricity, Water Public, Sewer, Gas, Telephone, CableTV Public Records This is the sale of a 5.3 acre site improved with an industrial building at the time of sale. Tim Walker, the buyer's broker, indicated that although the property was improved with an industrial building, it was purchased for land value as the property was entitled at the time of sale for 93 townhouses. 2152 Alton Parkway Sale No. 1 ®rr 13-66 Land Sale Profile Location & Property Identification Property Name: 671 West 17th Street Sub -Property Type: Residential Address: 671 W. 17th St. City/State/Zip: Costa Mesa, CA 92627 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 1981958 Sale Information Sale Price: $17,100,000 Effective Sale Price: $17,100,000 Sale Date: 06/30/2017 Sale Status: Closed $/Acre(Gross): $7,916,667 $/Land SF(Gross): $181.74 Grantor/Seller: W -WP Westside Gateway Source of Land Info.: Owner VII Grantee/Buyer: Westside Gateway Development LLC Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Document Type: Deed Recording No.: 272838 Verified By: Aaron S. You Verification Date: 06/27/2018 Confirmation Source: Brandon Johnson with Tierra Development Advisors - (949) 379-5263 Verification Type: Confirmed -Buyer Broker Improvement and Site Data MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/Parcel ID: Portion of 424-291-11 671 West 17th Street Sale No. 2 Acres(Gross): 2.16 Land-SF(Gross): 94,090 Shape: Irregular Topography: Level Corner Lot: Yes Zoning Code: MG Zoning Desc.: General Industrial Source of Land Info.: Public Records Comments This property is located at the southeast corner of 17th Street and Pomona Avenue. It is irregular in shape with level topography. The surrounding land uses in the immediate area include a mix of industrial, retail, and multi -family residential. According to the buyer's broker, Brandon Johnson with Tierra Development Advisors, the site was sold as vacant land and was fully entitled for 42 townhomes. The sale included approved tract maps, however, the infrastructure was not completed. 01rr 13-67 Land Sale Profile Location & Property Identification Property Name: 929 Baker Street Sub -Property Type: Residential Address: 929 Baker St. City/State/Zip: Costa Mesa, CA 92626 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 1981970 Sale Information Sale Price: $21,350,000 Effective Sale Price: $21,350,000 Sale Date: 01/05/2017 Sale Status: Closed $/Acre(Gross): $4,621,212 $/Land SF(Gross): $106.09 Grantor/Seller: R & T Holmes Family Limited Partnership and William L. Steel, Trustee Grantee/Buyer: Socal Baker, LLC Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Document Type: Deed Recording No.: 5421 Verified By: Aaron S. You Verification Date: 06/26/2018 Confirmation Source: David Sanson with Civic Property Group - (925) 685-0110 Verification Type: Confirmed -Buyer Improvement and Site Data MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/ParcelID: 141-242-03 929 Baker Street Sale No. 3 Acres(Gross): Land-SF(Gross): Shape: Topography: Corner Lot: Zoning Code: Zoning Desc.: Source of Land Info. Comments 4.62 201,247 Rectangular Level No R2 -MD Multiple Family Residential Public Records This property is located on south side of Baker Street and east of Milbro Street. It is rectangular in shape with level topography. The surrounding land uses in the immediate area are single and multi -family residences, along with an education center adjacent to the site. According to the buyer, David Sanson with Civic Property Group, the site was improved with an old industrial building that added no value. The sale was based on land value and was fully entitled to develop 56 single-family residences. 01rr 13-68 Land Sale Profile Location & Property Identification Property Name: C2E - 71 Residential Units Sub -Property Type: Residential, Effective Sale Price: Condo/Townhouse Address: 17150 Von Karman Ave. City/State/Zip: Irvine, CA 92614 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 2214474 Sale Information Sale Price: $17,500,000 Effective Sale Price: $17,500,000 Sale Date: 12/22/2016 Sale Status: Closed $/Acre(Gross): $5,156,158 $/Land SF(Gross): $118.37 $/Unit: $246,479 /Approved Lot Grantor/Seller: Fairfield Von Karman, LLC Grantee/Buyer: Irvine Gateway Development Source of Land Info.: LLC Assemblage: No Portfolio Sale: No Property Rights: Fee Simple of Interest Conveyed: 100.00 Document Type: Deed Recording No.: 16-650355 Verified By: Jerardo Arciniega, MAI Verification Date: 02/28/2019 Confirmation Source: Mike Hunter - Land Advisors - (949) 656-8013 Verification Type: Confirmed -Seller Broker Secondary Verific. Source: Deed Sale Analysis Proposed Use Desc.: 71 Townhouses Entitlement @ T.O.S.: Yes C2E - 71 Residential Units Sale No. 4 Entitlement Status.: Approved for 71 townhouses Improvement and Site Data Legal/Tax/ParcelID: 435-211-02 Acres(G ross): 3.39 Land-SF(Gross): 147,842 No. of Units (Potential): 71 Shape: Rectangular Corner Lot: No Utilities: Electricity, Water Public, Sewer, Gas, Telephone, CableTV Source of Land Info.: Public Records Comments This property is a portion of a former 8.5 acre lot which was entitled for 361 apartment units and 71 townhouses. However, the property was split into two parcels and the approximate 3.4 acre portion which was entitled for 71 townhouses is the parcel that sold in this transaction. 01rr 13-69 Land Sale Profile Location & Property Identification Property Name: 671 W. 17th St. Sub -Property Type: Residential, Effective Sale Price: Condo/Townhouse Address: 671 W. 17th St. City/State/Zip: Costa Mesa, CA 92627 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 2214470 Sale Information Sale Price: $35,000,000 Effective Sale Price: $35,000,000 Sale Date: 05/04/2016 Sale Status: Closed $/Acre(Gross): $5,061,461 $/Land SF(Gross): $116.20 $/Unit: $259,259 /Approved Unit Grantor/Seller: W -WP Westside Gateway Corner Lot: Owner VII, LLC Grantee/Buyer: Meritage Homes of California, Utilities: Inc. Assemblage: No Property Rights: Fee Simple of Interest Conveyed: 100.00 Document Type: Deed Recording No.: 16-198583 Verified By: Jerardo Arciniega, MAI Verification Date: 02/26/2019 Confirmation Source: Brandon Johnson - Tierra Development Advisors - (949) 275-0748 Verification Type: Confirmed -Seller Broker Secondary Verific. Source: Deed Sale Analysis Former Use: Industrial 671 W. 17th St. Sale No. 5 Proposed Use Change: Yes Proposed Use Desc.: 135 Residential Units Entitlement @ T.O.S.: Yes Entitlement Status.: Tentative Tract Map in Place for 135 units Improvement and Site Data MSA: Los Angeles -Long Beach -Santa Ana, CA Metropolitan Statistical Area Legal/Tax/Parcel ID: 424-291-12, -13 & -14 Acres(Usable/Gross): 0.00/6.92 Land -S F (U sa b I e/Gross) : 0/301,217 No. of Units (Potential): 135 Shape: Irregular Corner Lot: Yes Zoning Desc.: General Industrial Utilities: Electricity, Water Public, Sewer, Gas, Telephone, CableTV Source of Land Info.: Broker Comments This is the sale of 3 of 4 lots located on the southeast corner of 17th Street and Pomona Avenue in Costa Mesa. The property was improved with an industrial development at the time of sale. However, the listing broker indicated the property was sold for land value. The Lirir 13-70 Land Sale Profile Comments (Cont'd) property was nearly fully entitled at the time of sale by the seller. A tentative tract map for 135 residences was in place and the buyer demolished the improvements and recorded the final map. The units are a mixture of attached and detached residences. The project name is 17th West. The fourth lot was sold in June 2017 and was fully entitled for 42 units. The fourth lot is 2 acres and sold for $17,100,000. The listing broker indicated the street improvements were already in place at the time of sale and this added $150,000 per lot to the sale price. 671 W. 17th St. Sale No. 5 ®rr 13-71 Attachment C Integra Realty Resources Appraisal Report — Bob Henry Park, Dated August 27, 2019 13-72 Integra Realty Resources Los Angeles Appraisal of Real Property Bob Henry Park Vacant Land 900 Dover Dr. L Integra Realty Resources Los Angeles August 27, 2019 16030 Ventura Boulevard T 818.290.5400 Suite 620 F 818.290.5401 Encino, CA 91436-4473 www.irr.com Lauren Wooding Whitlinger Real Property Administrator City of Newport Beach 100 Civic Center Drive, First floor Bay D Newport Beach, CA 92660 SUBJECT: Fair Market Value Appraisal Bob Henry Park 900 Dover Dr. (NEC Dover Drive and Castaways Lane) Newport Beach, Orange County, California 92660 IRR - Los Angeles File No. 121-2019-0208 Dear Ms. Wooding Whitlinger: Integra Realty Resources — Los Angeles is pleased to submit the accompanying appraisal of the referenced property. The purpose of the appraisal is to develop an opinion of the fair market value of the land associated with the subject, assuming it is vacant, unimproved land. The client for the assignment is City of Newport Beach, and the intended use is to assist the City of Newport Beach in establishing Park In -Lieu fees. The subject is currently improved with Bob Henry Park and contains an area of 4.80 acres or 209,088 square feet. The property is zoned PC -43, Upper Castaways Planned Community. We have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. The appraisal is intended to conform with the Uniform Standards of Professional Appraisal Practice (USPAP) and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. To report the assignment results, we use the Appraisal Report option of Standards Rule 2-2(a) of USPAP. 13-75 Lauren Wooding Whitlinger City of Newport Beach August 27, 2019 Page 2 Based on the valuation analysis in the accompanying report, and subject to the definitions, assumptions, and limiting conditions expressed in the report, our opinion of value is as follows: Value Conclusion Appraisal Premise Interest Appraised Date of Value Value Conclusion Fair Market Value Fee Simple August 13, 2019 $19,150,000 Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subjectto the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. None The value conclusions are based on the following hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land ata density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. If you have any questions or comments, please contact the undersigned. Thank you for the opportunity to be of service. Respectfully submitted, INTEGRA REALTY RESOURCES - LOS ANGELES Beth B. Finestone, MAI, AI-GRS, FRICS, CRE Certified General Real Estate Appraiser California Certificate # AGO04030 Telephone: (818) 290-5455 Email: bfinestone@irr.com Thomas G. Richardson Certified General Real Estate Appraiser California Certificate # 3004940 Telephone: (818) 290-5408 Email: trichardson@irr.com 13-76 Table of Contents Summary of Salient Facts and Conclusions 1 Highest and Best Use 23 General Information 2 Valuation 25 Identification of Subject 2 Valuation Methodology 25 Sale History 2 Sales Comparison Approach 26 Pending Transactions 2 Analysis and Adjustment of Sales 30 Purpose of the Appraisal 2 Land Value Conclusion 34 Definition of Fair Market Value 2 Reconciliation and Conclusion of Value 35 Definition of Property Rights Appraised 3 Exposure Time 35 Intended Use and User 3 Marketing Time 35 Applicable Requirements 3 Certification 36 Report Format 3 Prior Services 4 Assumptions and Limiting Conditions 38 Scope of Work 4 Addenda Economic Analysis 5 A. Appraiser Qualifications Orange County Area Analysis 5 B. Comparable Data Surrounding Area Analysis 10 Multifamily Market Analysis 14 Property Analysis 18 Land Description and Analysis 18 Real Estate Taxes 22 Bob Henry Park `irr 13-77 Summary of Salient Facts and Conclusions 1 Summary of Salient Facts and Conclusions Property Name Bob Henry Park Address 900 Dover Dr. Newport Beach, Orange County, California 91324 Property Type Land - Residential Owner of Record City of Newport Beach Tax ID 117-801-15 Land Area 4.80 acres; 209,088 SF Zoning Designation PC -43, Upper Castaways Planned Community Highest and Best Use Multifamily use Exposure Time; Marketing Period 6-12 months; 6-12 months Effective Date of the Appra i s a I August 13, 2019 Date of the Report August 27, 2019 Property Interest Appraised Fee Si mpl e Sales Comparison Approach Number of Sales 5 Range of Sale Dates May 16 to Nov 18 Range of Prices per Unit (Unadjusted) $246,479 - $407,143 Market Value Conclusion $19,150,000 ($284,970/Unit) The values reported above are subject to the definitions, assumptions, and limiting conditions set forth in the accompanying report ofwhich this summary is a part. No party other than City of Newport Beach may use or rely on the information, opinions, and conclusions contained in the report. It is assumed that the users ofthe report have read the entire report, including all ofthe definitions, assumptions, and limiting conditions contained therein. Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the fol lowing extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. None The value conclusions are based on the fol lowing hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contra ry to known fact on the effective date of the appraisal but i s supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land ata density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Bob Henry Park 01rr 13-78 General Information General Information Identification of Subject The subject is currently improved with Bob Henry Park and contains an area of 4.80 acres or 209,088 square feet. The property is zoned PC -43, Upper Castaways Planned Community. We have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. A legal description of the property is was requested but not provided. Property Identification Property Name Bob Henry Park Address 900 Dover Dr. (NEC Dover Drive and Castaways Lane) Newport Beach, California 91324 Tax ID 117-801-15 Owner of Record City of Newport Beach Sale History The subject is owned by the City of Newport Beach. To the best of our knowledge, no sale or transfer of ownership has taken place within a three-year period prior to the effective appraisal date. Pending Transactions To the best of our knowledge, the property is not subject to an agreement of sale or an option to buy, nor is it listed for sale, as of the effective appraisal date. Purpose of the Appraisal The purpose of the appraisal is to develop an opinion of the fair market value of the land associated with the subject, assuming it is vacant, unimproved land as of the effective date of the appraisal, August 13, 2019. The date of the report is August 27, 2019. The appraisal is valid only as of the stated effective date. Definition of Fair Market Value "Fair Market Value", as defined pursuant to Part 3, Title 7, Chapter 9, Article 4, of the California Code of Civil Procedure, entitled: Eminent Domain Law, is as follows: Fair Market Value ... Article 4. Measure of Compensation for Property Taken. Bob Henry Park ®rr 13-79 General Information 3 1263.320 (a) The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. (b) The fair market value of the property taken for which there is no relevant, comparable market is its value on the date of valuation as determined by any method valuation that is just and equitable. 1263.330 The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following: (a) The project for which the property is taken. (b) The eminent domain proceeding in which the property is taken. (c) Any preliminary actions of the plaintiff relating to the taking of the property. Definition of Property Rights Appraised Fee simple estate is defined as, "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) Intended Use and User The intended use of the appraisal is to assist the City of Newport Beach in establishing Park In -Lieu fees. The client and intended user is the City of Newport Beach. The appraisal is not intended for any other use or user. No party or parties other than City of Newport Beach may use or rely on the information, opinions, and conclusions contained in this report. Applicable Requirements This appraisal is intended to conform to the requirements of the following: • Uniform Standards of Professional Appraisal Practice (USPAP); • Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; Report Format This report is prepared under the Appraisal Report option of Standards Rule 2-2(a) of USPAP. USPAP gives appraisers the flexibility to vary the level of information in an Appraisal Report depending on the intended use and intended users of the appraisal. This report summarizes the information analyzed, Bob Henry Park ®rr 13-80 General Information 4 the appraisal methods employed, and the reasoning that supports the analyses, opinions, and conclusions. Prior Services USPAP requires appraisers to disclose to the client any other services they have provided in connection with the subject property in the prior three years, including valuation, consulting, property management, brokerage, or any other services. We have not performed any services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. Scope of Work To determine the appropriate scope of work for the assignment, we considered the intended use of the appraisal, the needs of the user, the complexity of the property, and other pertinent factors. Our concluded scope of work is described below. Valuation Methodology Appraisers usually consider the use of three approaches to value when developing a market value opinion for real property. These are the cost approach, sales comparison approach, and income capitalization approach. Use of the approaches in this assignment is summarized as follows: Approaches to Value Approach ApplicabiIityto Subject Use in Assignment Cost Approach Not Appl i ca bl a Not Uti I i zed Sales Comparison Approach Applicable Utilized Income Capitalization Approach Not Applicable Not Utilized We use only the sales comparison approach in developing an opinion of value for the subject. This approach is applicable to the subject because there is an active market for similar properties, and sufficient sales data is available for analysis. The cost approach is not applicable because we have been instructed to value the site as if it is vacant land and therefore, we do not consider any of the improvements. The income approach is not applicable because the subject is not likely to generate rental income in its current state. Research and Analysis The type and extent of our research and analysis is detailed in individual sections of the report. This includes the steps we took to verify comparable sales, which are disclosed in the comparable sale profile sheets in the addenda to the report. Although we make an effort to confirm the arms -length nature of each sale with a party to the transaction, it is sometimes necessary to rely on secondary verification from sources deemed reliable. Inspection Thomas G. Richardson conducted an on-site inspection on August 13, 2019.Beth B. Finestone, MAI, AI- GRS, FRICS, CRE, viewed the property on August 14, 2019. Bob Henry Park ®rr 13-81 Orange County Area Analysis Economic Analysis Orange County Area Analysis Orange County is 791 square miles in size and has a population density of 4,076 persons per square mile. Orange County is part of the Los Angeles -Long Beach -Anaheim, CA Metropolitan Statistical Area, hereinafter called the Los Angeles MSA, as defined by the U.S. Office of Management and Budget. Population Orange County has an estimated 2019 population of 3,222,381, which represents an average annual 0.8% increase over the 2010 census of 3,010,232. Orange County added an average of 23,572 residents per year over the 2010-2019 period, and its annual growth rate is similar to that of the State of California. Looking forward, Orange County's population is projected to increase at a 0.8% annual rate from 2019-2024, equivalent to the addition of an average of 25,162 residents per year. The Orange County growth rate is expected to be similar to that of California. Population Trends Population Compound Ann. %Chng 2010 Census 2019 Estimate 2024 Projection 2010-2019 2019-2024 USA 308,745,538 329,236,175 340,950,101 0.7% 0.7% California 37,253,956 39,964,848 41,541,098 0.8% 0.8% Orange County, CA 3,010,232 3,222,381 3,348,192 0.8% 0.8% Los Angeles -Long Beach -Anaheim, CA Metro 12,828,837 13,478,088 13,913,534 0.6% 0.6% Source: Environics Analytics Employment Total employment in Orange County is currently estimated at 1,623,126 jobs. Between year-end 2007 and the present, employment rose by 104,370 jobs, equivalent to a 6.9% increase over the entire period. There were gains in employment in eight out of the past ten years despite the national economic downturn and slow recovery. Although Orange County's employment rose over the last decade, it underperformed California, which experienced an increase in employment of 9.3% or 1,472,215 jobs over this period. A comparison of unemployment rates is another way of gauging an area's economic health. Over the past decade, the Orange County unemployment rate has been consistently lower than that of California, with an average unemployment rate of 6.2% in comparison to an 8.3% rate for California. A lower unemployment rate is a positive indicator. Recent data shows that the Orange County unemployment rate is 3.2% in comparison to a 4.3% rate for California, a positive sign that is consistent with the fact that Orange County has outperformed California in the rate of job growth over the past two years. Bob Henry Park ®rr 13-82 Orange County Area Analysis Employment Trends Total Employment (Year End) Unemployment Rate (Ann. Avg.) Year Orange County Change California Change Orange County California 2007 1,518,756 8,230 15,790,869 7,690 3.9% 5.4% 2008 1,451,569 -4.4% 15,281,705 -3.2% 5.3% 7.3% 2009 1,364,569 -6.0% 14,481,855 -5.2% 8.7% 11.1% 2010 1,382,514 1.3% 14,541,592 0.4% 9.7% 12.2% 2011 1,392,442 0.7% 14,735,619 1.3% 9.0% 11.7% 2012 1,436,698 3.2% 15,223,789 3.3% 7.9% 10.4% 2013 1,465,326 2.0% 15,657,015 2.8% 6.6% 8.9% 2014 1,509,910 3.0% 16,089,814 2.8% 5.5% 7.5% 2015 1,551,455 2.8% 16,606,038 3.2% 4.5% 6.2% 2016 1,589,304 2.4% 16,930,563 2.0% 4.0% 5.5% 2017 1,623,126 2.1% 17,263,084 2.0% 3.5% 4.8% Overall Change 2007-2017 104,370 6.9% 1,472,215 9.3% Avg Unemp. Rate 2007-2017 6.2% 8.3% Unemployment Rate - March 2019 3.2% 4.3% Source: Bureau of Labor Statistics and Economy.com. Employment figures are from the Quarterly Census of Employment and Wages (QCEW). Unemployment rates are from the Current Population Survey (CPS). The figures are not seasonally adjusted. Major employers in Orange County are shown in the following table. Major Employers - Orange County, CA Name Number of Employees 1 Walt Disney Co. 29,000 2 University of California, Irvine 23,610 3 St. Joseph Health 11,930 4 Allied Universal 8,230 5 Kaiser Permanente 7,690 6 The Boeing Company 6,100 7 W a I ma rt 6,000 8 California State University, Fullerton 5,780 9 Bank of America Corp. 5,500 10 Target Corp. 5,400 Source: Southern California Association of Governments, Comprehensive Annual Financial Report, June 2018 Gross Domestic Product A Gross Domestic Product (GDP) is a measure of economic activity based on the total value of goods and services produced in a defined geographic area. Although GDP figures are not available at the county level, data reported for the Los Angeles MSA is considered meaningful when compared to the nation overall, as Orange County is part of the MSA and subject to its influence. Economic growth, as measured by annual changes in GDP, has been somewhat higher in the Los Angeles MSA than the United States overall during the past eight years. The Los Angeles MSA has grown at a 2.6% average annual rate while the United States has grown at a 1.9% rate. As the national Bob Henry Park L11 13-83 Orange County Area Analysis 7 economy improves, the Los Angeles MSA continues to perform better than the United States. GDP for the Los Angeles MSA rose by 2.8% in 2017 while the United States GDP rose by 2.1%. The Los Angeles MSA has a per capita GDP of $67,763, which is 32% greater than the United States GDP of $51,337. This means that Los Angeles MSA industries and employers are adding relatively more value to the economy than their counterparts in the United States overall. Gross Domestic Product ($ Mil) ($ Mil) Year Los Angeles MSA %Change United States %Change 2010 754,535 14,628,165 2011 760,055 0.7% 14,833,679 1.4% 2012 781,151 2.8% 15,126,281 2.0% 2013 796,341 1.9% 15,348,034 1.5% 2014 826,980 3.8% 15,717,469 2.4% 2015 869,246 5.1% 16,148,486 2.7% 2016 880,453 1.3% 16,383,812 1.5% 2017 904,899 2.8% 16,721,499 2.1% Compound % Chg (2010-2017) 2.6% 1.9% GDP Per Capita 2017 $67,763 $51,337 Source: Bureau of Economic Analysis and Economy.com; data released September 2016. The release ofstate and local GDP data has a longer lagtime than national data.The data represents inflation-adjusted "real" GDP stated in 2009 dollars. Income, Education and Age Orange County is more affluent than California. Median household income for Orange County is $91,094, which is 22.2% greater than the corresponding figure for California. Median Household Income - 2019 Median Orange County, CA $91,094 California $74,558 Comparison of Orange County, CA to California +22.2% Source: Environics Analytics Residents of Orange County have a higher level of educational attainment than those of California. An estimated 39% of Orange County residents are college graduates with four-year degrees, versus 33% of California residents. People in Orange County are slightly older than their California counterparts. The median age for Orange County is 38 years, while the median age for California is 37 years. Bob Henry Park irr. 13-84 Orange County Area Analysis Education & Age - 2019 80 70 60 50% 40 30 20 10% Percent College Graduate Median Age Orange County, CA California Source:Environics Analytics Conclusion so 45 40 35 30 25 20 15 10 Orange County, CA California The Orange County economy will benefit from a growing population base and higher income and education levels. Orange County experienced growth in the number of jobs and has maintained a consistently lower unemployment rate than California over the past decade. Moreover, Orange County benefits from being part of the Los Angeles MSA, which is the second most populous metropolitan area in the country, and exhibits both a higher rate of GDP growth and a higher level of GDP per capita than the nation overall. We anticipate that the Orange County economy will improve and employment will grow, strengthening the demand for real estate. This assumes continued growth in the national economy. Many sources are predicting a recession in 2020. It is currently uncertain if this will come to pass. Bob Henry Park ®rr 13-85 Orange County Area Analysis Area Map Gle Santa Monica F1, Hawthorne Gai-dena C q 4 Terrance Long k4 LV Bing Bob Henry Park Fq9' I intana San l3e�'pa.rdido 0V Vi ij 0 - Ac e-- na On Xe I a 116-1, Pomona Riv IF Norw Ik' u jg�I�dn Coro ffla Valley harden (rbvj Santa Ana Hun Iii for ach Cast% -, esa Cleveland NatiorLal Forest Camp PLnd[Man Pala Marine corps I -R. Base [ rtsid ista ?a I S Hemet U HERE I ®r 13-86 Surrounding Area Analysis Surrounding Area Analysis Boundaries The subject is located in a primarily residential area within the City of Newport Beach. This area is generally delineated as follows: North 19th Street South West Coast Highway / State Route 1 East Upper Newport Bay West Newport Boulevard A map identifying the location of the property follows this section. Access and Linkages Primary access to the area is provided by Newport Boulevard (State Route 55), a major arterial that crosses Orange County in a north/south direction. Access to the subject from Newport Boulevard is provided by 16th Street. Overall, vehicular access is average. Public transportation is provided by Orange County Transportation Authority. The nearest bus stops are located at the intersection of 16th Street and Dover Drive and near the northwest corner of the subject. The local market perceives public transportation as average compared to other areas in the region. However, the primary mode of transportation in this area is the automobile. 10 John Wayne Airport is located about four miles northeast from the property. Downtown Los Angeles, the economic and cultural center of the region, is approximately 35 miles northwest from the property. Demand Generators Major employers include Hoag Memorial Hospital, Pacific Life Insurance, Glidewell Dental, PIMCO Advisors, and Newport -Mesa Unified School District. In addition to its strong employment base, the area is easily accessible to other employment centers within Orange County. Demographics A demographic profile of the surrounding area, including population, households, and income data, is presented in the following table. Bob Henry Park Lir 13-87 Surrounding Area Analysis 7,718 54,198 98,336 992,781 11 Households 2019 8,051 57,200 105,556 1,062,951 13,477,890 Surrounding Area Demographics 8,331 59,440 110,080 1,105,004 14,007,885 Compound % Change 2010-2019 0.5% 0.6% 0.8% Orange County, 0.8% 2019 Estimates 1 -Mile Radius 3 -Mile Radius 5 -Mile Radius CA California Population 2010 17,284 132,168 248,366 3,010,232 37,253,956 Population 2019 18,015 139,237 266,288 3,222,381 39,964,848 Population 2024 18,621 144,355 277,150 3,348,192 41,541,098 Compound%Change 2010-2019 0.5% 0.6% 0.8% 0.8% 0.8% Compound % Change 2019-2024 0.7% 0.7% 0.8% 0.8% 0.8% Households 2010 7,718 54,198 98,336 992,781 12,577,498 Households 2019 8,051 57,200 105,556 1,062,951 13,477,890 Households 2024 8,331 59,440 110,080 1,105,004 14,007,885 Compound % Change 2010-2019 0.5% 0.6% 0.8% 0.8% 0.8% Compound % Change 2019-2024 0.7% 0.8% 0.8% 0.8% 0.8% Median Household Income 2019 $118,690 $98,167 $98,967 $91,094 $74,558 Average Household Size 2.2 2.4 2.4 3.0 2.9 College Graduate% 64% 51% 52% 39% 33% Median Age 44 41 40 38 37 Owner Occupied % 50% 44% 49% 59% 56% Renter Occupied % 50% 56% 51% 41% 44% Median Owner Occupied Housing Value $1,947,299 $1,324,882 $983,430 $733,175 $530,982 Median Year Structure Built 1968 1971 1974 1976 1976 Avg. Travel Time to Work in Min. 26 26 26 30 32 Source: Environics Analytics As shown above, the current population within a 3 -mile radius of the subject is 139,237, and the average household size is 2.4. Population in the area has grown since the 2010 census, and this trend is projected to continue over the next five years. Compared to Orange County overall, the population within a 3 -mile radius is projected to grow at a slightly slower rate. Median household income is $98,167, which is higher than the household income for Orange County. Residents within a 3 -mile radius have a considerably higher level of educational attainment than those of Orange County, and median owner -occupied home values are considerably higher. Services and Amenities The nearest commercial area with restaurants, convenience stores and support services are located at the intersection of Irvine Avenue and Westcliff Drive, about one-half of a mile northwest from the property. The closest lodging facilities are located within one mile of the property. The nearest fire and police stations are within two miles of the property. Land Use In the immediate vicinity of the subject, land uses include a mix of residential, commercial, and religious facilities. Other land use characteristics are summarized as follows: irr Bob Henry Park 13-88 Surrounding Area Analysis 12 Surrounding Area Land Uses Character of Area Suburban Predominant Age of Improvements 50 years Predominant Quality and Condition Average Approximate Percent Developed 95% Infrastructure/Planning Average Subject's Immediate Surroundings North Single-family residential (Castaways community) South Newport Harbor Lutheran Church East Single-family residential (Castaways community) West Mix of commercial and religious uses Development Activity and Trends During the last five years, development has been predominantly of commercial and multifamily uses, and has included notable commercial developments such as Lido House Hotel, a 103,470 square foot hotel, PIMCO's 380,000 square foot Newport Beach office headquarters, and notable multifamily developments such as The Place, which includes 177 units, and Blue Sol, which includes 113 units. The pace of development has generally been intermittent over this time. Outlook and Conclusions The area is in the stabilization stage of its life cycle. Given the history of the area and the growth trends, it is anticipated that property values will increase in the near future, assuming continued growth in the economy. Bob Henry Park Lir 13-89 Surrounding Area Analysis Surrounding Area Map Newport Isle Newport Beach to Hing Bob Henry Park Cliff Haven Newpo-t Newport Heights gyp S€ach gay Country °asr yw PWW i Course Oub Fashim Y I i island 13 Lido is e Newport Bay Linda Is e Balboa Island Balboa ISAl7CO2019MmrosoftCorporaim02MHERE L11 13-90 Multifamily Market Analysis 14 Multifamily Market Analysis The subject is located at the northeast corner of Dover Drive and 16th Street / Castaways Lane in a residential area of the City of Newport Beach. Given prevailing land use patterns and our client's instruction that the subject be analyzed as vacant land with a maximum density of 14 dwelling units per acre, the most likely use is multifamily residential. As such, we have included a multifamily market analysis. Metro Area Overview The subject is located in the Orange County metro area as defined by Costar. Trended supply and demand statistics, including inventory levels, absorption, vacancy, and rental rates for all classes of space are presented in the ensuing table. All Multifamily Orange County Metro Trends Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Orange County Metro Trends and Forecasts $2,500.0 $2,000.0 $1,500.0 $1,000.0 $500.0 $0.0 Vacancy Rate vs. Asking Rent 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Bob Henry Park 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 13-91 Net Under Net Rent Completions Construction Absorption Asking Growth Price Cap Period Stock Demand Vacancy 12 Months Stock 12 Months Rent 12 Month Growth Rate 2009 Q2 212,635 198,499 6.64% 3,864 5,917 465 $1,560 -4.24% -20.23% 5.60% 2010 Q2 217,447 204,854 5.78% 4,812 4,200 6,363 $1,519 -2.61% 15.07% 5.26% 2011 Q2 218,212 206,358 5.42% 765 3,521 1,508 $1,533 0.88% 22.52% 4.84% 2012 Q2 221,627 208,536 5.90% 3,415 2,489 2,171 $1,578 2.95% 3.62% 4.81% 2013 Q2 222,019 211,752 4.61% 392 4,615 3,222 $1,633 3.50% 4.52% 4.76% 2014 Q2 224,572 214,969 4.27% 2,553 7,957 3,220 $1,699 4.02% 4.74% 4.72% 2015 Q2 228,053 217,566 4.59% 3,481 9,381 2,604 $1,781 4.84% 9.84% 4.50% 2016 Q2 231,363 221,690 4.17% 3,310 8,004 4,121 $1,872 5.11% 9.01% 4.38% 2017 Q2 236,158 224,953 4.73% 4,795 8,125 3,264 $1,942 3.75% 7.00% 4.27% 2018 Q2 240,153 228,485 4.85% 3,995 8,609 3,534 $1,988 2.34% 4.83% 4.23% 2019 Q2 242,014 230,524 4.74% 1,861 7,372 2,040 $2,052 3.21% 4.24% 4.24% Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Orange County Metro Trends and Forecasts $2,500.0 $2,000.0 $1,500.0 $1,000.0 $500.0 $0.0 Vacancy Rate vs. Asking Rent 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Bob Henry Park 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 13-91 Multifamily Market Analysis • The current vacancy rate in the metro area is 4.74%; the vacancy rate has relatively stable over the past two years. • Asking rent averages $2,052 per unit in the metro area, and values have increased by 5.65% from 2017 Q2. 3,000 2,500 2,000 1,500 1,000 500 9 -500 Supply and Demand Trends 01 0- A Oi y�yN�oti�yoti��otih�oo�A A �% % otiotioti,otitiotiotitio' ti,o' otiotio ,otio'(o' y�dy�yVVyVyyVd Completions (SF) Absorption (SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 15 • The total stock (units) has increased by 2.48% from 2017 Q2, and the demand has also increased by 2.48%. • Between Q2 2014 and Q2 2019, net completions in the metro area have averaged 3,332 units annually and reached a peak of 2,407 units in 2017 Q1. • Between Q2 2014 and Q2 2019, net absorption in the metro area has averaged 3,131 units annually and reached a peak of 1,427 units in 2018 Q2. Submarket Overview The subject is located in the Newport Beach submarket as defined by CoStar. Trended supply and demand statistics, including inventory levels, absorption, vacancy, and rental rates for all classes of space are presented in the following table. Bob Henry Park Lir 13-92 Multifamily Market Analysis 16 All Multifamily Newport Beach Submarket Trends Net Under Net Rent Completions Construction Absorption Asking Growth Price Cap Period Stock Demand Vacancy 12 Months Stock 12 Months Rent 12 Month Growth Rate 2009 Q2 8,587 8,047 6.29% -10 0 -119 $1,947 -8.43% -20.49% 5.61% 2010 Q2 8,587 8,099 5.69% 0 0 52 $1,985 1.94% 15.18% 5.25% 2011 Q2 8,587 8,179 4.75% 0 0 81 $2,018 1.70% 22.85% 4.82% 2012 Q2 8,587 8,121 5.43% 0 0 -59 $2,078 2.98% 3.77% 4.79% 2013 Q2 8,587 8,150 5.09% 0 0 28 $2,180 4.86% 4.15% 4.75% 2014 Q2 8,587 8,213 4.35% 0 0 64 $2,307 5.84% 4.29% 4.71% 2015 Q2 8,587 8,199 4.51% 0 524 -14 $2,389 3.54% 9.49% 4.51% 2016 Q2 8,533 8,228 3.58% -54 524 29 $2,529 5.89% 8.67% 4.39% 2017 Q2 9,057 8,276 8.63% 524 0 47 $2,571 1.65% 6.80% 4.28% 2018 Q2 9,057 8,590 5.16% 0 0 314 $2,598 1.03% 4.59% 4.23% 2019 Q2 9,057 8,568 5.40% 0 0 -21 $2,687 3.43% 4.15% 4.26% Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. • The Newport Beach submarket comprises 3.7% of the metro building stock and 3.7% of the metro building demand. • The vacancy rate in the Newport Beach submarket is 5.40%, which is somewhat higher than the metro area's average of 4.74%. • Newport Beach market rate is $2,687 per unit which is higher than the metro area's average rate of $2,052 per unit. Newport Beach Submarket Trends and Forecasts $3,000.00 $2,500.00 $2,000.00 $1,500.00 $1,000.00 $500.00 $0.00 Vacancy Rate vs. Asking Rent 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% • The current vacancy rate in the submarket area is 5.40%; the vacancy rate has decreased by 323 basis points from the peak in 2017 Q2. Bob Henry Park ®rr 13-93 Multifamily Market Analysis 17 • Asking rent averages $2,687 per unit in the submarket area, and values have increased by 4.1% from 2017 Q2. Supply and Demand Trends 600 12.0% 500 10.0% 400 300 8.0% 200 6.0% 100 . — — I I _ , , _ 4.0% 0 -100 2.0% -200 0.0% 0� 0, 0� 0' U 0- CP 0' U 0- 0� 0' U 0y 0j 0� U 0, 0� ti� tih tih tih tih � ti� ti� ti� ti� ti� l til ti� ti� ti� ti� ti� ti� LO ,LO LO _& ,10 _0 ,1Oti,10 ,10 ,10 ,LO LO If;",- _1 _1 _1 ,y0 ,y0 ,LO Completions (SF) Absorption (SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. • The total stock (units) has increased by 5.47% from 2014 Q2, while the demand has increased by 4.32%. • Between 2014 Q2 and 2019 Q2, net completions in the submarket area have averaged 78 units annually and reached a peak of 524 units in 2017 Q1. • Between 2014 Q2 and 2019 Q2, net absorption in the submarket area has averaged 70 units annually and reached a peak of 193 units in 2017 Q3. Multifamily Market Outlook and Conclusions Supply and demand trends in this submarket have signs of stability with low vacancy rates and slowly improving rental rates. In the future, the multifamily market is expected to continue its stability and slow improvement, assuming continued growth in the national economy. irr Bob Henry Park 13-94 Land Description and Analysis 18 Property Analysis Land Description and Analysis Land Description Land Area 4.80 acres; 209,088 SF Source of Land Area Public Records Primary Street Frontage Dover Dr. Secondary Street Frontage 16th St./ Castaways Dr. Shape Irregular Corner Yes Topography Generally level and at street grade Drainage No problems reported or observed Environmental Hazards None reported or observed Ground Stability No problems reported or observed Flood Area Panel Number 06059CO382K Date March 21, 2019 Zone X Description Outside of 500 -year floodplain Insurance Required? No Zoning; Other Regulations Zoning Jurisdiction City of Newport Beach Zoning Designation PC -43 Description Upper Castaways Planned Community Legally Conforming? Appears to be legally conforming Zoning Change Likely? Yes Maximum Density Assume 14 dwelling units per acre Utilities Service Provider Water City of Newport Beach Sewer City of Newport Beach Electricity Southern California Edison Natural Gas Southern California Gas Company Local Phone Va ri ous Zoning The subject is currently zoned PC -43, Upper Castaways Planned Community. However, we have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Bob Henry Park Lir 13-95 Land Description and Analysis Potential Development Density 19 Based on instructions from our client, we assume that a maximum density of fourteen dwelling units per acre could be developed on the site. Therefore, it appears that the assumed development potential of the site is 67 units. Easements, Encroachments and Restrictions We were not provided a current title report to review. We are not aware of any easements, encroachments, or restrictions that would adversely affect value. Our valuation assumes no adverse impacts from easements, encroachments, or restrictions, and further assumes that the subject has clear and marketable title. Conclusion of Site Analysis Overall, the physical characteristics of the site and the availability of utilities result in functional utility suitable for a variety of uses. We are not aware of any other particular restrictions on development. Bob Henry Park LIr 13-96 Land Description and Analysis View of subject looking northeast. (Photo Taken on August 13, 2019) Castaways Lane / 161h Street looking east. (Photo Taken on August 13, 2019) Dover Drive looking north. (Photo Taken on August 13, 2019) Bob Henry Park 20 View of subject looking south. (Photo Taken on August 13, 2019) Castaways Lane / 16th Street looking west. (Photo Taken on August 13, 2019) Dover Drive looking south. (Photo Taken on August 13, 2019) 13-97 Land Description and Analysis Plat Map POR. E. 1/2, S.E. 1/4, SFC. 27. T 6 S. R 10 N IIS NFP n'a� vHfPa2L0 fn4 PiANf.F -�r�.v=r essessrw aerr. u4P,�s�s cwr r, cmc sss; ssra xAxes rm �roAreul�F is :N AbFi I sr OTi1Efi :li£.5- 1 U�i 'li 6e AlFk/-'+��CFo. 4LL FT('H'� hFSFna, 49-27 TRACT O.fiJJ IA. � 801 ' car s 49-Z� 5 4CTs®�p.112 r'9 SxFER1IXtx�O � � s ,� s9 0 P 2 63 / 4e5-03 — ORIVE +ei'.�� X10 n. 3a.arw er, sce rwe i �`i SFr vn�e J N N io a` Case A r 14 c�a N -1 W 440-13 9 A PARCEL MAP P.M. 001-50 typ rE ... ASSESSnP'S 8ioCN d ASSESSOR'S MAP MARCH 1966 [PACT N0. 7125 M.M. 39-7.8 aARCEL NU+.r13fA5 snox 117 PACE 80 TPA L7 N0. l5012lam.' &dl M.M. 753-23 to 32 Enc. SHOWN TN cr+3ci E5 cDur✓"1 OF nRnrJCE 21 Bob Henry Park x fai ve it slRK? 13-98 Real Estate Taxes 22 Real Estate Taxes Real estate tax assessments are administered by the Assessor of Orange County and are estimated by jurisdiction on a county basis for the subject. The property is subject to the property tax rules of the State of California, which control the activities and policies of local assessment jurisdictions. These laws were significantly modified on June 7, 1978, when the State's voters passed Proposition 13, adding Article XIIIA to the State Constitution. Proposition 13 abolished the practice of periodic reassessment of properties based on market value appraisals. Instead, real property is subject to reassessment (i.e., revaluation at full or partial current market value) only when changes in ownership or new construction take place. Otherwise, increases in assessed value are limited to a general rate of 2%, plus the rates needed to service any bonded indebtedness. Special assessments can also be added and are often related to the installation of infrastructure. Generally speaking, property taxes in Orange County tend to range from 1.1 % to 1.4% of a property's assessed value. Due to California's tax laws, most properties within Orange County have very similar effective tax rates. The subject property is owned by the City of Newport Beach and therefore it is not subject to real estate taxes. It is located in tax rate area 07-045 which carries a 2018-2019 base tax rate of 1.05084%. Real estate taxes would be adjusted upon sale of the subject property. Bob Henry Park Lir 13-99 Highest and Best Use 23 Highest and Best Use Process Before a property can be valued, an opinion of highest and best use must be developed for the subject site, both as vacant, and as improved. By definition, the highest and best use must be: • Legally permissible under the zoning regulations and other restrictions that apply to the site. • Physically possible. • Financially feasible. • Maximally productive, i.e., capable of producing the highest value from among the permissible, possible, and financially feasible uses. Highest and Best Use As Vacant Legally Permissible The subject is currently zoned PC -43, Upper Castaways Planned Community. However, we have been instructed by our client to assume the site is vacant and zoned for multifamily residential with a maximum density of 14 dwelling units per acre. Therefore, none of the park equipment or improvements was considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Given our client's instructions, only multifamily use is given further consideration in determining the highest and best use of the site as vacant. Physically Possible The physical characteristics of the site do not appear to impose any unusual restrictions on development. Overall, the physical characteristics of the site and the availability of utilities result in functional utility suitable for a variety of uses. Financially Feasible/Maximally Productive A use is considered financially feasible if it produces a positive net return. A variety of uses may be potentially financially feasible for the subject. For purposes of this analysis, multifamily use is assumed at the appraised land value. Conclusion Development of the site for multifamily use is the only use that meets the four tests of highest and best use. Therefore, it is concluded to be the highest and best use of the property as vacant. As Improved Per our client's instructions, we assume the subject is vacant, unimproved land. Therefore, a highest and best analysis as improved is not applicable. Bob Henry Park Lir 13-100 Highest and Best Use 24 Most Probable Buyer Taking into account the functional utility of the site, area development trends, and our assumption of 14 dwelling units per acre as the highest and best use, the probable buyer is a developer. Bob Henry Park LIr 13-101 Valuation Methodology 25 Valuation Valuation Methodology Appraisers usually consider three approaches to estimating the market value of real property. These are the cost approach, sales comparison approach and the income capitalization approach. The cost approach assumes that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility. This approach is particularly applicable when the improvements being appraised are relatively new and represent the highest and best use of the land or when the property has unique or specialized improvements for which there is little or no sales data from comparable properties. The sales comparison approach assumes that an informed purchaser would pay no more for a property than the cost of acquiring another existing property with the same utility. This approach is especially appropriate when an active market provides sufficient reliable data. The sales comparison approach is less reliable in an inactive market or when estimating the value of properties for which no directly comparable sales data is available. The sales comparison approach is often relied upon for owner -user properties. The income capitalization approach reflects the market's perception of a relationship between a property's potential income and its market value. This approach converts the anticipated net income from ownership of a property into a value indication through capitalization. The primary methods are direct capitalization and discounted cash flow analysis, with one or both methods applied, as appropriate. This approach is widely used in appraising income-producing properties. Reconciliation of the various indications into a conclusion of value is based on an evaluation of the quantity and quality of available data in each approach and the applicability of each approach to the property type. The methodology employed in this assignment is summarized as follows: Approaches to Value Approach ApplicabiIityto Subject Use in Assignment Cost Approach Not Appl i ca bl a Not Uti I i zed Sales Comparison Approach Applicable Utilized Income Capitalization Approach Not Applicable Not Utilized Bob Henry Park irr. 13-102 Sales Comparison Approach Sales Comparison Approach 26 To develop an opinion of the subject's land value, as vacant and available to be developed to its highest and best use, we utilize the sales comparison approach. This approach develops an indication of value by researching, verifying, and analyzing sales of similar properties. Our sales research focused on transactions within the following parameters: • Location: The City of Newport Beach and nearby communities. • Size: Up to 10 acres Use: Multifamily residential. We initially searched for sales of unentitled multifamily residential sites in the vicinity of the subject. Unfortunately, the only comparable data we were able to uncover was entitled. We found that buyers of unentitled land take the land through the entitlement process during escrow and if entitlements are not achieved, the buyer does not close on the transaction. Based on our interviews, the sale price is reflective of an entitled price due to the seller sharing in the risk by having to hold the property for an extended period. Due to the lack of unentitled land sales, we have relied on entitled data and have adjusted for the value of the entitlements as part of the adjustment process. • Transaction Date: May 2016 through the date of value. For this analysis, we use price per unit as the appropriate unit of comparison because market participants typically compare sale prices and property values on this basis. The sales most relevant to analyzing the subject's land value are summarized in the following table: Bob Henry Park LIr 13-103 Sales Comparison Approach 27 Summary of Comparable Land Sales Sale Date; SF; $/SF No. Name/Address Status Sale Price Acres Zoning $/Unit Land $/Acre 1 2152 Alton Pkwy. Nov -18 $28,620,000 230,868 5.1, IBC Multi- $307,742 $123.97 $5,400,000 Irvine Closed 5.30 Use Orange County Comments: This is the sale of a 5.3 acre site improved with an industrial building at the time of sale. Tim Walker, the buyer's broker, indicated that although the property was improved with an industrial building, it was purchased for land value as the property was entitled at the time of sale for 93 townhouses. 2 671 W. 17th St. Jun -17 $17,100,000 94,090 MG, General $407,143 $181.74 $7,916,667 Costa Mesa Closed 2.16 Industrial Orange County Comments: This property is located at the southeast corner of 17th Street and Pomona Avenue. Itis irregular in shape with level topography. The surrounding land uses in the immediate area include a mix of industrial, retail, and multi family residential. According to the buyer's broker, Brandon Johnson with Tierra DevelopmentAdvisors, the site was sold as vacant land and was fully entitled for42 townhomes. The sale included approved tract maps, however, the infrastructure was not completed. 3 929 Baker St. Jan -17 $21,350,000 201,247 R2 -MD, $381,250 $106.09 $4,621,212 Costa Mesa Closed 4.62 Multiple Family Orange County Residential, Comments: This property is located on south side of Baker Street and east of Milbro Street. Itis rectangular in shape with level topography. The surrounding land uses in the immediate area are single and multi family residences, along with an education center adjacent to the site. According to the buyer, David Sanson with Civic Property Group, the site was improved with an old industrial building that added no value. The sale was based on land value and was fully entitled to develop 56 single-family residences. 4 C2E- 71 Residential Units Dec -16 $17,500,000 147,843 5.1, IBC Multi- $246,479 $118.37 $5,156,158 17150 Von Karma Ave. Closed 3.39 Use Irvine Orange County Comments: This property is a portion of a former 8.5 acre lot which was entitled for 361 apartment units and 71 townhouses. However, the property was split into two parcels and the approximate 3.4 acre portion which was entitled for 71 townhouses is the parcel that sold in this transaction. 5 671 W. 17th St. May -16 $35,000,000 301,217 MG, General $259,259 $116.20 $5,061,461 Costa Mesa Closed 6.92 Industrial Orange County Comments: This is the sale of 3 of 4 lots located on the southeast corner of 17th Street and Pomona Avenue in Costa Mesa. The property was improved with an industrial development at the time of sale. However, the listing brokerindicated the property was sold for land value. The property was nearly fully entitled at the time of sale by the seller. A tentative tractmap for 135 residences was in place and the buyer demolished the improvements and recorded the final map. The units area mixture of attached and detached residences. The project name is 17th West. Subject 209,088 Upper Bob Henry Park 4.80 Castaways Newport Beach, CA Planned rrr Bob Henry Park 13-104 Sales Comparison Approach Comparable Land Sales Map INTERSBURG 39 gton Reach TINCTON BEACH Bob Henry Park 28 BRISTOL r NORTI WARNER 261 t Sana Ana Ma6rle CorpS REPUSEhC HOME. SS : Ait Station COMO i �On ING �a dirpoft Irvine i EAST 13 Costa SAN JOAQUIN UNIV�RSITV TURTLE ROCK RESEARCH PARR i iiif Haven _ t 4'TURTLE RIDGE s Newport Beach _y_ 73.: Lido San Joaquin Hills Isle Balboa - Island Corona del Naar P 2'J'3 IAici6's"dfi-Coiprr 02a ,3 HERE L11 13-105 Sales Comparison Approach Sale 1 2152 Alton Parkway Sale 3 929 Baker Street Sale 5 671 W. 17th St. Bob Henry Park 29 k Sale 2 671 West 17th Street Sale 4 C2E - 71 Residential Units LIr 13-106 Sales Comparison Approach 30 Analysis and Adjustment of Sales The sales are compared to the larger parcel and adjusted to account for material differences that affect value. Adjustments are considered for the following factors, in the sequence shown below. Adjustment Factor Accounts For Comments Effective Sale Price Atypical economics of a transaction, No adjustments required. such as demolition cost or expenditures by buyer at time of purchase. Real Property Rights Fee simple, leased fee, leasehold, partial interest, etc. Financing Terms Seller financing, or assumption of existing financing, at non -market terms. Conditions of Sale Extraordinary motivation of buyer or seller, assemblage, forced sale. Market Conditions Changes in the economic environment over time that affect the appreciation and depreciation of real estate. Location Market or submarket area influences on sale price; surrounding land use influences. No adjustments required. No adjustments required. No adjustments required. Multifamily market research and market participants have reported improving multifamily land values in the market area. It was reported that multifamily land is increasing in value at a rate of 5% to 10% annually. Considering the market trend data and market participant opinions, we have applied an annual market conditions adjustment of 6% per year to account for this trend. Compared to the subject, each of the sales require upward adjustments for location. Our adjustments are based on the difference between rental rates for multifamily residential units within a one -mile radius of the subject and a one -mile radius of each of the comparables. Access/Exposure Convenience to transportation No adjustments required. facilities; ease of site access; visibility; traffic counts. Bob Henry Park irr. 13-107 Sales Comparison Approach Adjustment Factor Accounts For Comments Size Inverse relationship that often exists between parcel size and unit value. Shape and Primary physical factors that affect the Topography utility of a site for its highest and best use. Zoning (Density) Government regulations that affect the types and intensities of uses allowable on a site. Bob Henry Park 31 Compared to the subject, Sale 2 requires a downward adjustment, while Sale 5 requires an upward adjustment for size due to economies of scale. We assume that the shape of the subject would not prohibit development of the subject to a density of 14 units per acre, therefore, no adjustments were required. Per our client's instructions, we assume the subject has a maximum density of 14 dwelling units per acre. Since we have analyzed the sales on a price per unit basis, the difference in density between the subject and each of the comparables is not a major issue. However, we do apply minor adjustments for their differences. Sale 3 was adjusted downward for its lower density. Lower density sites have more land area per unit and typically sell for a higher price per unit. Sales 1, 2, 4, and 5 were adjusted upward for their higher densities, as higher density sites typically sell for a lower price per unit, due to the lower ratio of land per unit. Lir 13-108 Sales Comparison Approach Adjustment Factor Accounts For Comments Entitlements Site Improvements Views The specific level of governmental approvals attained pertaining to development of a site. Improvements that contribute income beyond demolition costs are considered superior. Sites that require demolition prior to development are considered inferior. Accounts for any scenic views for the multifamily units that are proposed within the development. 32 Per our client's instruction, we assume the subject is unentitled multifamily residential land. Based on conversations with Jim Gallagher with the Hoffman Company, Mike Hunter with Land Advisors, and Michelle Jefcoat with CBRE, an entitled property can command a premium ranging from 25% to 50% over raw, unentitled land. Each of the sales sold with entitlements and are adjusted downward. Sale 2 received a slightly higher adjustment as the seller entitled the site prior to the transaction which resulted in a shorter escrow period. Compared to the subject, Sales 1 and 3 require upward adjustments for demolition costs associated with existing improvements. No adjustments required. The following table summarizes the adjustments we make to each sale. Please note that we have included quantitative adjustments on the following grid which are somewhat subjective on the part of the appraisers, due to the lack of data to quantify most adjustments. They have been included to aid the reader in following our thought process. Bob Henry Park L11 13-109 Sales Comparison Approach Land Sales Adjustment Grid Range of Adjusted Prices J$243,028 - $322,050 Indicated Value J$285,000 33 Bob Henry Park Of" 13-110 Subject Comparable Comparable Comparable Comparable4 Comparable Address Bob Henry Park - 2152 Alton Pkwy. 671 W. 17th St. 929 Baker St. 17150 Von Karman 671 W. 17th St. 900 Dover Dr. Ave. City Newport Beach Irvine Costa Mesa Costa Mesa Irvine Costa Mesa County Orange Orange Orange Orange Orange Orange State California CA CA CA CA CA Sale Date Nov -18 Jun -17 Jan -17 Dec -16 May -16 Sale Status Closed Closed Closed Closed Closed Sale Price $28,620,000 $17,100,000 $21,350,000 $17,500,000 $35,000,000 Square Feet 209,088 230,868 94,090 201,247 147,843 301,217 Acres 4.80 5.30 2.16 4.62 3.39 6.92 Number of Units 67 93 42 56 71 135 Dwelling Units Per Acre 14.0 17.5 19.4 12.1 20.9 19.5 SF Per Dwelling Unit 3,111 2,482 2,240 3,594 2,082 2,231 Price per Unit $307,742 $407,143 $381,250 $246,479 $259,259 Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple % Adjustment - - - - Financing Terms Cash to seller Cash to seller Cash to seller Cash to seller Cash to seller % Adjustment - - - - - Conditions of Sale % Adjustment - - - - Market Conditions 8/13/2019 Nov -18 Jun -17 Jan -17 Dec -16 May -16 Annual %Adjustment 6% 5% 13% 16% 16% 20% Cumulative Adjusted Price $323,129 $460,071 $442,250 $285,915 $311,111 Location 15% 10% 10% 15% 10% Access/Exposure - - - - - Size - -5% - - 5% Shape and Topography - - - - - Zoning(Density) 5% 5% -5% 5% 5% Entitlements -35% -40% -35% -35% -35% Site Improvements 3% - 2% - - Vi ews - - - - - Net$Adjustment -$38,775 -$138,021 -$123,830 -$42,887 -$46,667 Net % Adj ustment -12% -30% -28% -15% -15% Final Adjusted Price $284,354 $322,050 $318,420 $243,028 $264,444 Overall Adjustment -8% -21% -16% -1% 2% Range of Adjusted Prices J$243,028 - $322,050 Indicated Value J$285,000 33 Bob Henry Park Of" 13-110 Sales Comparison Approach Land Value Conclusion 34 Prior to adjustment, the sales reflect a range of $246,479 - $407,143 per unit. After adjustment, the range is narrowed to $243,028 - $322,050 per unit, with an average of $286,459 per unit. To arrive at an indication of value, we place primary emphasis on Sale 1, as it is the most recent sale and is similar in size and density to the subject. Secondary emphasis is placed on Sale 3 as it is an older transaction but is similar in size and density to the subject. Based on the preceding analysis, we arrive at a value conclusion as follows: Land Value Conclusion Indicated Value per Unit $285,000 Subject Units 67 Indicated Value $19,152,000 Rounded $19,150,000 Our value conclusion of $19,150,000 equates to $3,989,583 per acre or $91.59 per square foot. After considering the required adjustments, these conclusions are well within the range of our data. Bob Henry Park Lir 13-111 Reconciliation and Conclusion of Value 35 Reconciliation and Conclusion of Value As discussed previously, we use only the sales comparison approach in developing an opinion of value for the subject. The cost and income approaches are not applicable, and are not used. Based on the preceding valuation analysis and subject to the definitions, assumptions, and limiting conditions expressed in the report, our value opinion follows: Value Conclusion Appraisal Premise Interest Appraised Date of Value Value Conclusion Fair Market Value Fee Simple August 13, 2019 $19,150,000 Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. None The value conclusions are based on the fol lowing hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contra ry to known fact on the effective date of the appraisal but i s supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land ata density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Exposure Time Exposure time is the length of time the subject property would have been exposed for sale in the market had it sold on the effective valuation date at the concluded market value. Exposure time is always presumed to precede the effective date of the appraisal. Based on our review of recent sales transactions for similar properties and our analysis of supply and demand in the local market, it is our opinion that the probable exposure time for the subject at the concluded market value stated previously is 6-12 months. Marketing Time Marketing time is an estimate of the amount of time it might take to sell a property at the concluded market value immediately following the effective date of value. As we foresee no significant changes in market conditions in the near term, it is our opinion that a reasonable marketing period for the subject is likely to be the same as the exposure time. Accordingly, we estimate the subject's marketing period at 6-12 months. Bob Henry Park ®rr 13-112 Certification Certification We certify that, to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. We 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. 36 4. We have not performed any services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. 5. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 6. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 7. Our 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. 8. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice as well as applicable state appraisal regulations. 9. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 11. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE, viewed the property that is the subject of this report. Thomas G. Richardson has personally inspected the subject. 12. No one provided significant real property appraisal assistance to the person(s) signing this certification. 13. We have experience in appraising properties similar to the subject and are in compliance with the Competency Rule of USPAP. 14. As of the date of this report, Beth B. Finestone, MAI, AI-GRS, FRICS, CRE has completed the continuing education program for Designated Members of the Appraisal Institute. Bob Henry Park irr. 13-113 Certification 15. As of the date of this report, Thomas G. Richardson has completed the Standards and Ethics Education Requirements for Candidates of the Appraisal Institute. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE Certified General Real Estate Appraiser California Certificate # AGO04030 Thomas G. Richardson Certified General Real Estate Appraiser California Certificate # 3004940 37 Bob Henry Park 01rr 13-114 Assumptions and Limiting Conditions Assumptions and Limiting Conditions This appraisal and any other work product related to this engagement are limited by the following standard assumptions, except as otherwise noted in the report: The title is marketable and free and clear of all liens, encumbrances, encroachments, easements and restrictions. The property is under responsible ownership and competent management and is available for its highest and best use. 38 2. There are no existing judgments or pending or threatened litigation that could affect the value of the property. 3. There are no hidden or undisclosed conditions of the land or of the improvements that would render the property more or less valuable. Furthermore, there is no asbestos in the property. 4. The revenue stamps placed on any deed referenced herein to indicate the sale price are in correct relation to the actual dollar amount of the transaction. 5. The property is in compliance with all applicable building, environmental, zoning, and other federal, state and local laws, regulations and codes. 6. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. This appraisal and any other work product related to this engagement are subject to the following limiting conditions, except as otherwise noted in the report: 1. An appraisal is inherently subjective and represents our opinion as to the value of the property appraised. 2. The conclusions stated in our appraisal apply only as of the effective date of the appraisal, and no representation is made as to the effect of subsequent events. 3. No changes in any federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated. 4. No environmental impact studies were either requested or made in conjunction with this appraisal, and we reserve the right to revise or rescind any of the value opinions based upon any subsequent environmental impact studies. If any environmental impact statement is required by law, the appraisal assumes that such statement will be favorable and will be approved by the appropriate regulatory bodies. 5. Unless otherwise agreed to in writing, we are not required to give testimony, respond to any subpoena or attend any court, governmental or other hearing with reference to the property without compensation relative to such additional employment. 6. We have made no survey of the property and assume no responsibility in connection with such matters. Any sketch or survey of the property included in this report is for illustrative purposes only and should not be considered to be scaled accurately for size. The appraisal Bob Henry Park irr. 13-115 Assumptions and Limiting Conditions 39 covers the property as described in this report, and the areas and dimensions set forth are assumed to be correct. 7. No opinion is expressed as to the value of subsurface oil, gas or mineral rights, if any, and we have assumed that the property is not subject to surface entry for the exploration or removal of such materials, unless otherwise noted in our appraisal. 8. We accept no responsibility for considerations requiring expertise in other fields. Such considerations include, but are not limited to, legal descriptions and other legal matters such as legal title, geologic considerations such as soils and seismic stability; and civil, mechanical, electrical, structural and other engineering and environmental matters. Such considerations may also include determinations of compliance with zoning and other federal, state, and local laws, regulations and codes. 9. The distribution of the total valuation in the report between land and improvements applies only under the reported highest and best use of the property. The allocations of value for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. The appraisal report shall be considered only in its entirety. No part of the appraisal report shall be utilized separately or out of context. 10. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or any reference to the Appraisal Institute) shall be disseminated through advertising media, public relations media, news media or any other means of communication (including without limitation prospectuses, private offering memoranda and other offering material provided to prospective investors) without the prior written consent of the persons signing the report. 11. Information, estimates and opinions contained in the report and obtained from third -party sources are assumed to be reliable and have not been independently verified. 12. Any income and expense estimates contained in the appraisal report are used only for the purpose of estimating value and do not constitute predictions of future operating results. 13. If the property is subject to one or more leases, any estimate of residual value contained in the appraisal may be particularly affected by significant changes in the condition of the economy, of the real estate industry, or of the appraised property at the time these leases expire or otherwise terminate. 14. Unless otherwise stated in the report, no consideration has been given to personal property located on the premises or to the cost of moving or relocating such personal property; only the real property has been considered. 15. The current purchasing power of the dollar is the basis for the values stated in the appraisal; we have assumed that no extreme fluctuations in economic cycles will occur. 16. The values found herein are subject to these and to any other assumptions or conditions set forth in the body of this report but which may have been omitted from this list of Assumptions and Limiting Conditions. 17. The analyses contained in the report necessarily incorporate numerous estimates and assumptions regarding property performance, general and local business and economic Bob Henry Park Lir 13-116 Assumptions and Limiting Conditions 40 conditions, the absence of material changes in the competitive environment and other matters. Some estimates or assumptions, however, inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our analysis will vary from our estimates, and the variations may be material. 18. The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of the property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. We claim no expertise in ADA issues, and render no opinion regarding compliance of the subject with ADA regulations. Inasmuch as compliance matches each owner's financial ability with the cost to cure the non- conforming physical characteristics of a property, a specific study of both the owner's financial ability and the cost to cure any deficiencies would be needed for the Department of Justice to determine compliance. 19. The appraisal report is prepared for the exclusive benefit of the Client, its subsidiaries and/or affiliates. It may not be used or relied upon by any other party. All parties who use or rely upon any information in the report without our written consent do so at their own risk. 20. No studies have been provided to us indicating the presence or absence of hazardous materials on the subject property or in the improvements, and our valuation is predicated upon the assumption that the subject property is free and clear of any environment hazards including, without limitation, hazardous wastes, toxic substances and mold. No representations or warranties are made regarding the environmental condition of the subject property. Integra Realty Resources — Los Angeles, Integra Realty Resources, Inc., Integra Strategic Ventures, Inc. and/or any of their respective officers, owners, managers, directors, agents, subcontractors or employees (the "Integra Parties"), shall not be responsible for any such environmental conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because we are not experts in the field of environmental conditions, the appraisal report cannot be considered as an environmental assessment of the subject property. 21. The persons signing the report may have reviewed available flood maps and may have noted in the appraisal report whether the subject property is located in an identified Special Flood Hazard Area. We are not qualified to detect such areas and therefore do not guarantee such determinations. The presence of flood plain areas and/or wetlands may affect the value of the property, and the value conclusion is predicated on the assumption that wetlands are non- existent or minimal. 22. Integra Realty Resources — Los Angeles is not a building or environmental inspector. Integra Los Angeles does not guarantee that the subject property is free of defects or environmental problems. Mold may be present in the subject property and a professional inspection is recommended. 23. The appraisal report and value conclusions for an appraisal assume the satisfactory completion of construction, repairs or alterations in a workmanlike manner. 24. It is expressly acknowledged that in any action which may be brought against any of the Integra Parties, arising out of, relating to, or in any way pertaining to this engagement, the Bob Henry Park irr. 13-117 Assumptions and Limiting Conditions 41 appraisal reports, and/or any other related work product, the Integra Parties shall not be responsible or liable for any incidental or consequential damages or losses, unless the appraisal was fraudulent or prepared with intentional misconduct. It is further acknowledged that the collective liability of the Integra Parties in any such action shall not exceed the fees paid for the preparation of the appraisal report unless the appraisal was fraudulent or prepared with intentional misconduct. Finally, it is acknowledged that the fees charged herein are in reliance upon the foregoing limitations of liability. 25. Integra Realty Resources — Los Angeles, an independently owned and operated company, has prepared the appraisal for the specific intended use stated elsewhere in the report. The use of the appraisal report by anyone other than the Client is prohibited except as otherwise provided. Accordingly, the appraisal report is addressed to and shall be solely for the Client's use and benefit unless we provide our prior written consent. We expressly reserve the unrestricted right to withhold our consent to your disclosure of the appraisal report or any other work product related to the engagement (or any part thereof including, without limitation, conclusions of value and our identity), to any third parties. Stated again for clarification, unless our prior written consent is obtained, no third party may rely on the appraisal report (even if their reliance was foreseeable). 26. The conclusions of this report are estimates based on known current trends and reasonably foreseeable future occurrences. These estimates are based partly on property information, data obtained in public records, interviews, existing trends, buyer -seller decision criteria in the current market, and research conducted by third parties, and such data are not always completely reliable. The Integra Parties are not responsible for these and other future occurrences that could not have reasonably been foreseen on the effective date of this assignment. Furthermore, it is inevitable that some assumptions will not materialize and that unanticipated events may occur that will likely affect actual performance. While we are of the opinion that our findings are reasonable based on current market conditions, we do not represent that these estimates will actually be achieved, as they are subject to considerable risk and uncertainty. Moreover, we assume competent and effective management and marketing for the duration of the projected holding period of this property. 27. The appraisal is also subject to the following: Bob Henry Park ®rr 13-118 Assumptions and Limiting Conditions Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the fol lowing extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 42 1. None The value conclusions are based on the fol lowing hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contra ry to known fact on the effective date of the appraisal but i s supposed for the purpose of analysis. 1. The client requested that the subject property be appraised assuming the site were vacant unimproved residential land ata density of 14 units per acre. Therefore, none of the park equipment or improvements were considered in this analysis. The subject is appraised on an unentitled residential land basis. In addition, we were instructed to assume that no future lots would have view potential, that the sites were nearly level, and that the property had utilities available. Bob Henry Park ®rr 13-119 Addenda Addendum A Appraiser Qualifications rrr Bob Henry Park 13-120 Integ Beth B. Finestone MAI AI-GRS FRICS CRE Loss Angeles Realty Resources � � � � Los Angeles Experience 16030 Ventura Boulevard Suite 620 Ms. Finestone, Managing Director for and a principal of INTEGRA REALTY RESOURCES — LOS Encino, CA 91436-4473 ANGELES, has been with the firm since 2004 and has been appraising in Southern California since 1981. She has specialized in valuation and consulting services related to public agency T 818.290.5400 clients and for major, investment grade commercial properties, e.g., office, industrial, retail, F 818.290.5401 multifamily, land, and special purpose properties, for over 30 years. Ms. Finestone previously held senior positions with Finestone & Associates and Cushman & irr.com Wakefield of California. At Finestone & Associates from 1996 through 2003, she specialized in real estate appraisal, valuation and consulting services with focus on preparation of appraisals for industrial, commercial, and special purpose properties. This focus included consultation services, due diligence work, litigation support, and expert witness designation. At Cushman & Wakefield of California, Inc. from 1983 through 1996, Ms. Finestone was in the Los Angeles Appraisal Services Group, specializing in real estate valuation and consulting. By the end of her tenure, she was responsible for the management the Los Angeles Valuation Advisory Services Group, including preparation and review of appraisal reports, business development, consulting and litigation work, management and coordination of multi property assignments and national accounts, professional staff development, and support staff supervision. Ms. Finestone's clients include public agencies, right of way firms, lenders, institutional investors, major corporations, law firms, and individual property owners. Her services include a wide range of specialized studies including value diminution (from both internal and external influences), market demand, feasibility, severance damages and project benefits, investment analysis, assessment allocation, reuse analysis, and the valuation of partial interests including leasehold, leased fee, possessory interests, and minority interests. Recent assignments include the 22 flowage easements for the State of California Department of Water Resources, 35 easements related to a culvert upgrade project in Los Angeles County, more than 100 partial acquisitions related to the California High Speed Rail Authority Project, 39 properties for the SR 91 Improvement Project, 10 properties for the Devore Interchange Improvements Project, and 28 properties for the Lakeview and Tustin Avenues/Rose Drive Grade Separation Project. Ms. Finestone has also been active in the appraisal of large tracts of mitigation land for Orange County Transportation Authority (OCTA). She has been involved in the appraisal of a number of mitigation parcels in Northern California for the High Speed Rail Authority. These involved land banks and conservation easements. Ms. Finestone also has significant experience valuing transportation corridor properties and pipeline easements. She has been extensively involved in valuing and doing counseling and consulting work related to rail corridors and crossings as part of the proposed high speed rail project in Central California. In addition, she has also appraised a number of federally owned properties, including the West Los Angeles Federal Building, federal courthouses in Los Angeles and Orange counties, and two Army lr bfinestone@irr.com - 818.290.5455 13-121 Integ Beth B. Finestone MAI AI-GRS FRICS CRE Loss Angeles Realty Resources � � � � Los Angeles Experience (Cont'd) 16030 Ventura Boulevard Suite 620 Reserve centers in the Los Angeles area. Much of this work has included a consulting Encino, CA 91436-4473 component to aide clients in making feasibility and reuse studies of their properties. Ms. Finestone also has significant appraisal review experience and has reviewed large numbers of T 818.290.5400 appraisals for Hatch Mott MacDonald, OCTA, City of Ontario, and the Los Angeles Unified School F 818.290.5401 District. Professional Activities & Affiliations irr.com Appraisal Institute, Member (MAI) , December 1988 Appraisal Institute, General Review Specialist, June 2015 Royal Institute of Chartered Surveyors, Fellow (FRICS) , August 2008 Member: International Right of Way Association Counselor of Real Estate (CRE) , November 2015 Licenses California, Certified General Real Estate Appraiser, AG004030, Expires August 2020 Education M.B.A., Pepperdine University B.S., Kinesiology, University of California, Los Angeles Successfully completed numerous real estate and related courses and seminars sponsored by the Appraisal Institute, accredited universities, and others Currently certified by the Appraisal Institute's program of continuing education for its designated members Qualified Before Courts & Administrative Bodies Superior courts in California within the counties of Los Angeles and Orange Tax Appeal Boards of Los Angeles and San Diego counties Arbitration testimony at hearings in Los Angeles County Miscellaneous Los Angeles Business Journal 2009 Nominee for Executive of the Year — Women Making a Difference, May 2009 Designated one of Real Estate Southern California's 2006 Women of Influence, October 2006 lr bfinestone@irr.com - 818.290.5455 13-122 gra Thomas G. Richardson L seAngelesltyResources Experience 16030 Ventura Boulevard Suite 620 Mr. Richardson, Senior Analyst, began his career in real estate appraisal in 2012 and joined Encino, CA 91436-4473 INTEGRA REALTY RESOURCES — LOS ANGELES in 2015. His responsibilities with the firm include researching property sale and lease transactions; interviewing buyers, sellers, investors, tenants, T 818-290-5400 and brokers with regard to the details of those transactions; analyzing and documenting F 818-290-5401 economic and real estate market conditions; examining zoning, general plan, and other land -use control documents as applicable to appraisal assignments; and incorporating the presentation of his research efforts in appraisal reports. irr.com In addition, his experience encompasses appraisal reports of multifamily residences, single and multitenant commercial and industrial properties, including shopping centers, office buildings, warehouses, retail and industrial condominiums, mixed-use commercial and residential buildings, religious facilities, and various categories of land. His appraisal work has also addressed the impact to property value caused by various internal and external influences. His recent appraisal work for right -of -way -related purposes includes assignments for the 1-405 Improvement Project, Culver -University Improvement Project, Regional Connector Transit Project, Century Boulevard Mobility Improvement Project, Riverside Transmission Reliability Project, Centennial Corridor Project, and California High -Speed Rail Authority. Professional Activities & Affiliations Candidate for Designation: Appraisal Institute, Southern California Chapter Licenses California, Certified General Real Estate License, 3004940, Expires November 2019 Education B.A., History, University of California, Los Angeles Completed the following courses and seminars: Advanced Concepts & Case Studies Basic Appraisal Principles Basic Appraisal Procedures Business Practices and Ethics Commercial Appraisal Review Expert Witness for Commercial Appraisers General Appraiser Income Approach, Part I General Appraiser Income Approach, Part II General Appraiser Market Analysis and Highest & Best Use Advanced Market Analysis and Highest & Best Use General Appraiser Report Writing and Case Studies General Appraiser Sales Comparison Approach General Appraiser Site Valuation and Cost Approach Real Estate Finance, Statistics, and Valuation Modeling Uniform Standards of Professional Appraisal Practice Quantitative Analysis l1r", trichardson@irr.com - 818-290-5408 13-123 About IRR Integra Realty Resources, Inc. (IRR) provides world-class commercial real estate valuation, counseling, and advisory services. Routinely ranked among leading property valuation and consulting firms, we are now the largest independent firm in our industry in the United States, with local offices coast to coast and in the Caribbean. IRR offices are led by MAI -designated Senior Managing Directors, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets. This experience, coupled with our understanding of how national trends affect the local markets, empowers our clients with the unique knowledge, access, and historical perspective they need to make the most informed decisions. Many of the nation's top financial institutions, developers, corporations, law firms, and government agencies rely on our professional real estate opinions to best understand the value, use, and feasibility of real estate in their market. Local Expertise... Nationally! irr.com irr© 13-124 Addendum 6 Comparable Data irr Bob Henry Park 13-125 Land Sale Profile Location & Property Identification Property Name: 2152 Alton Parkway Sub -Property Type: Residential, Former Use: Condo/Townhouse Address: 2152 Alton Pky. City/State/Zip: Irvine, CA 92606 County: Orange Submarket: Central Market Orientation: Industrial Park IRR Event ID: 2214415 Sale No. 1 Sale Information Sale Analysis Sale Price: $28,620,000 Former Use: Industrial Effective Sale Price: $28,620,000 Proposed Use Change: Yes Sale Date: 11/01/2018 Proposed Use Desc.: 93 Townhouses Sale Status: Closed Entitlement @ T.O.S.: Yes $/SF GBA: $235.27 Entitlement Status.: Seller entitled for 93 $/SF NRA: $235.27 townhouses $/Acre(Gross): $5,400,000 $/Land SF(Gross): $123.97 Improvement and Site Data $/Unit: $307,742 /Approved Unit MSA: Los Angeles -Long Beach -Santa $/Land SF(Potential): $235.27 Ana, CA Metropolitan Grantor/Seller: Dynasty Real Property Group Statistical Area LLC Grantee/Buyer: KB Home Coastal, Inc. Legal/Tax/Parcel ID: 435-122-06 Assemblage: No GBA-SF: 121,650 Portfolio Sale: No NRA -SF: 121,650 Property Rights: Fee Simple Acres(Gross): 5.30 of Interest Conveyed: 100.00 Land-SF(Gross): 230,868 Document Type: Deed No. of Units (Potential): 93 Recording No.: 18-397495 Year Built: 1971 Verified By: Jerardo Arciniega, MAI Most Recent Renovation: 2007 Verification Date: 02/22/2019 Property Class: C Confirmation Source: Tim Walker - Lee & Associates No. of Truck Doors: 15 - (949) 230-7649 Overhead/Grade/Bay: 1 Verification Type: Confirmed -Buyer Broker Percent Office: 4% Secondary Verific. Source: Deed Total Parking Spaces: 100 Park. Ratio 1000 SF GLA: 0.82 2152 Alton Parkway 01rr 13-126 Land Sale Profile Improvement and Site Data (Cont'd) Park. Ratio 1000 SF GBA: Shape: Bldg. to Land Ratio FAR: Utilities: Source of Land Info. Comments 0.82 Rectangular 0.53 Electricity, Water Public, Sewer, Gas, Telephone, CableTV Public Records This is the sale of a 5.3 acre site improved with an industrial building at the time of sale. Tim Walker, the buyer's broker, indicated that although the property was improved with an industrial building, it was purchased for land value as the property was entitled at the time of sale for 93 townhouses. 2152 Alton Parkway Sale No. 1 ®rr 13-127 Land Sale Profile Location & Property Identification Property Name: 671 West 17th Street Sub -Property Type: Residential Address: 671 W. 17th St. City/State/Zip: Costa Mesa, CA 92627 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 1981958 Sale Information Sale Price: $17,100,000 Effective Sale Price: $17,100,000 Sale Date: 06/30/2017 Sale Status: Closed $/Acre(Gross): $7,916,667 $/Land SF(Gross): $181.74 Grantor/Seller: W -WP Westside Gateway Source of Land Info.: Owner VII Grantee/Buyer: Westside Gateway Development LLC Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Document Type: Deed Recording No.: 272838 Verified By: Aaron S. You Verification Date: 06/27/2018 Confirmation Source: Brandon Johnson with Tierra Development Advisors - (949) 379-5263 Verification Type: Confirmed -Buyer Broker Improvement and Site Data MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/Parcel ID: Portion of 424-291-11 671 West 17th Street Sale No. 2 Acres(Gross): 2.16 Land-SF(Gross): 94,090 Shape: Irregular Topography: Level Corner Lot: Yes Zoning Code: MG Zoning Desc.: General Industrial Source of Land Info.: Public Records Comments This property is located at the southeast corner of 17th Street and Pomona Avenue. It is irregular in shape with level topography. The surrounding land uses in the immediate area include a mix of industrial, retail, and multi -family residential. According to the buyer's broker, Brandon Johnson with Tierra Development Advisors, the site was sold as vacant land and was fully entitled for 42 townhomes. The sale included approved tract maps, however, the infrastructure was not completed. 01rr 13-128 Land Sale Profile Location & Property Identification Property Name: 929 Baker Street Sub -Property Type: Residential Address: 929 Baker St. City/State/Zip: Costa Mesa, CA 92626 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 1981970 Sale Information Sale Price: $21,350,000 Effective Sale Price: $21,350,000 Sale Date: 01/05/2017 Sale Status: Closed $/Acre(Gross): $4,621,212 $/Land SF(Gross): $106.09 Grantor/Seller: R & T Holmes Family Limited Partnership and William L. Steel, Trustee Grantee/Buyer: Socal Baker, LLC Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Document Type: Deed Recording No.: 5421 Verified By: Aaron S. You Verification Date: 06/26/2018 Confirmation Source: David Sanson with Civic Property Group - (925) 685-0110 Verification Type: Confirmed -Buyer Improvement and Site Data MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/ParcelID: 141-242-03 929 Baker Street Sale No. 3 Acres(Gross): Land-SF(Gross): Shape: Topography: Corner Lot: Zoning Code: Zoning Desc.: Source of Land Info. Comments 4.62 201,247 Rectangular Level No R2 -MD Multiple Family Residential Public Records This property is located on south side of Baker Street and east of Milbro Street. It is rectangular in shape with level topography. The surrounding land uses in the immediate area are single and multi -family residences, along with an education center adjacent to the site. According to the buyer, David Sanson with Civic Property Group, the site was improved with an old industrial building that added no value. The sale was based on land value and was fully entitled to develop 56 single-family residences. 01rr 13-129 Land Sale Profile Location & Property Identification Property Name: C2E - 71 Residential Units Sub -Property Type: Residential, Effective Sale Price: Condo/Townhouse Address: 17150 Von Karman Ave. City/State/Zip: Irvine, CA 92614 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 2214474 Sale Information Sale Price: $17,500,000 Effective Sale Price: $17,500,000 Sale Date: 12/22/2016 Sale Status: Closed $/Acre(Gross): $5,156,158 $/Land SF(Gross): $118.37 $/Unit: $246,479 /Approved Lot Grantor/Seller: Fairfield Von Karman, LLC Grantee/Buyer: Irvine Gateway Development Source of Land Info.: LLC Assemblage: No Portfolio Sale: No Property Rights: Fee Simple of Interest Conveyed: 100.00 Document Type: Deed Recording No.: 16-650355 Verified By: Jerardo Arciniega, MAI Verification Date: 02/28/2019 Confirmation Source: Mike Hunter - Land Advisors - (949) 656-8013 Verification Type: Confirmed -Seller Broker Secondary Verific. Source: Deed Sale Analysis Proposed Use Desc.: 71 Townhouses Entitlement @ T.O.S.: Yes C2E - 71 Residential Units Sale No. 4 Entitlement Status.: Approved for 71 townhouses Improvement and Site Data Legal/Tax/ParcelID: 435-211-02 Acres(G ross): 3.39 Land-SF(Gross): 147,842 No. of Units (Potential): 71 Shape: Rectangular Corner Lot: No Utilities: Electricity, Water Public, Sewer, Gas, Telephone, CableTV Source of Land Info.: Public Records Comments This property is a portion of a former 8.5 acre lot which was entitled for 361 apartment units and 71 townhouses. However, the property was split into two parcels and the approximate 3.4 acre portion which was entitled for 71 townhouses is the parcel that sold in this transaction. 01rr 13-130 Land Sale Profile Location & Property Identification Property Name: 671 W. 17th St. Sub -Property Type: Residential, Sale Date: Condo/Townhouse Address: 671 W. 17th St. City/State/Zip: Costa Mesa, CA 92627 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 2214470 Sale Information Sale Price: $35,000,000 Effective Sale Price: $35,000,000 Sale Date: 05/04/2016 Sale Status: Closed $/Acre(Gross): $5,061,461 $/Land SF(Gross): $116.20 $/Unit: $259,259 /Approved Unit Grantor/Seller: W -WP Westside Gateway Corner Lot: Owner VII, LLC Grantee/Buyer: Meritage Homes of California, Utilities: Inc. Assemblage: No Property Rights: Fee Simple of Interest Conveyed: 100.00 Document Type: Deed Recording No.: 16-198583 Verified By: Jerardo Arciniega, MAI Verification Date: 02/26/2019 Confirmation Source: Brandon Johnson - Tierra Development Advisors - (949) 275-0748 Verification Type: Confirmed -Seller Broker Secondary Verific. Source: Deed Sale Analysis Former Use: Industrial 671 W. 17th St. Sale No. 5 Proposed Use Change: Yes Proposed Use Desc.: 135 Residential Units Entitlement @ T.O.S.: Yes Entitlement Status.: Tentative Tract Map in Place for 135 units Improvement and Site Data MSA: Los Angeles -Long Beach -Santa Ana, CA Metropolitan Statistical Area Legal/Tax/Parcel ID: 424-291-12, -13 & -14 Acres(Usable/Gross): 0.00/6.92 Land -S F (U sa b I e/Gross) : 0/301,217 No. of Units (Potential): 135 Shape: Irregular Corner Lot: Yes Zoning Desc.: General Industrial Utilities: Electricity, Water Public, Sewer, Gas, Telephone, CableTV Source of Land Info.: Broker Comments This is the sale of 3 of 4 lots located on the southeast corner of 17th Street and Pomona Avenue in Costa Mesa. The property was improved with an industrial development at the time of sale. However, the listing broker indicated the property was sold for land value. The 01rr 13-131 Land Sale Profile Comments (Cont'd) property was nearly fully entitled at the time of sale by the seller. A tentative tract map for 135 residences was in place and the buyer demolished the improvements and recorded the final map. The units are a mixture of attached and detached residences. The project name is 17th West. The fourth lot was sold in June 2017 and was fully entitled for 42 units. The fourth lot is 2 acres and sold for $17,100,000. The listing broker indicated the street improvements were already in place at the time of sale and this added $150,000 per lot to the sale price. 671 W. 17th St. Sale No. 5 01rr 13-132 Attachment D Integra Realty Resources Appraisal Report — Hypothetical Property Near Intersection of Placentia Avenue and Production Place, Newport Beach, Dated September 4, 2019 13-133 Integra Realty Resources Los Angeles Appraisal of Real Property Hypothetical Property Near Intersection of Placentia Avenue and Production Place Vacant Land Newport Beach, Orange County, California 92663 Hypothetical Property Near Intersection of Placentia Avenue and Production Place Newport Beach, California 13-135 L Integra Realty Resources Los Angeles September 4, 2019 16030 Ventura Boulevard T 818.290.5400 Suite 620 F 818.290.5401 Encino, CA 91436-4473 www.irr.com Lauren Wooding Whitlinger Real Property Administrator City of Newport Beach 100 Civic Center Drive, First floor Bay D Newport Beach, CA 92660 SUBJECT: Fair Market Value Appraisal Hypothetical Property Near Intersection of Placentia Avenue and Production Place Newport Beach, Orange County, California 92663 IRR - Los Angeles File No. 121-2019-0210 Dear Ms. Wooding Whitlinger: Integra Realty Resources — Los Angeles is pleased to submit the accompanying appraisal of the referenced property. The purpose of the appraisal is to develop an opinion of the fair market value of the fee simple interest of a hypothetical, industrially zoned, vacant land parcel in the area of Placentia Avenue and Production Place, that will likely be the location of a new park to be constructed by the City of Newport Beach. The client for the assignment is the City of Newport Beach, and the intended use is to assist the City of Newport Beach in establishing Park In -Lieu fees. The subject is a hypothetical parcel of vacant land containing an area of 0.46 acres or 20,000 square feet. The parcel size is based on the most typical parcel size of the surrounding industrial properties. The hypothetical property is zoned IG, Industrial, which permits a wide range of moderate to low intensity industrial uses and limited accessory commercial and office uses. The appraisal is intended to conform with the Uniform Standards of Professional Appraisal Practice (USPAP) and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. To report the assignment results, we use the Appraisal Report option of Standards Rule 2-2(a) of USPAP. 13-136 Lauren Wooding Whitlinger City of Newport Beach September 4, 2019 Page 2 Based on the valuation analysis in the accompanying report, and subject to the definitions, assumptions, and limiting conditions expressed in the report, our opinion of value is as follows: Value Conclusion Appraisal Premise Interest Appraised Date of Value Value Conclusion Fair Market Value Fee Simple August 13, 2019 $1,500,000 Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subjectto the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. None The value conclusions are based on the following hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. 1. Perourclient's request, we are appraising a hypothetical industrial property that is vacant land inthearea of Placentia Avenue and Production Place. Based on our determination of the most typical parcel size in the area, the hypothetical property contains 20,000 square feet. If you have any questions or comments, please contact the undersigned. Thank you for the opportunity to be of service. Respectfully submitted, INTEGRA REALTY RESOURCES - LOS ANGELES Beth B. Finestone, MAI, AI-GRS, FRICS, CRE Certified General Real Estate Appraiser California Certificate # AGO04030 Telephone: (818) 290-5455 Email: bfinestone@irr.com Thomas G. Richardson Certified General Real Estate Appraiser California Certificate # 3004940 Telephone: (818) 290-5408 Email: trichardson@irr.com ®rr 13-137 Table of Contents Summary of Salient Facts and Conclusions 1 Land Value Conclusion 34 General Information 2 Reconciliation and Conclusion of Value 35 Identification of Subject 2 Exposure Time 35 Sale History 2 Marketing Period 35 Purpose of the Appraisal 2 Certification 36 Definition of Fair Market Value 2 Assumptions and Limiting Conditions 38 Definition of Property Rights Appraised 3 Intended Use and User 3 Addenda Applicable Requirements 3 A. Appraiser Qualifications Report Format 3 B. Comparable Data Prior Services 3 Scope of Work 4 Economic Analysis 5 Orange County Area Analysis 5 Surrounding Area Analysis 10 Industrial Market Analysis 14 Property Analysis 18 Land Description and Analysis 18 Real Estate Taxes 22 Highest and Best Use 23 Valuation 25 Valuation Methodology 25 Sales Comparison Approach 26 Analysis and Adjustment of Sales 31 irr Hypothetical Property Near Intersection of Placentia Avenue and Production Place 13-138 Summary of Salient Facts and Conclusions 1 Summary of Salient Facts and Conclusions Property Name Hypothetical Property Near Intersection of Placentia Avenue and Production Place Newport Beach, Orange County, California 92663 Property Type La nd Owner of Record N/A Tax ID Hypothetical Property Land Area 0.46 acres; 20,000 SF Zoning Designation IG, Industrial Highest and Best Use Industrial use Exposure Time; Marketing Period 6-12 months; 6-12 months Effective Date of the Appra i s a I August 13, 2019 Date of the Report September 4, 2019 Property Interest Appraised Fee Si mpl e Sales Comparison Approach Number of Sales 7 Ra nge of Sale Dates Jan 16 to Jul 19 Range of Prices per SF (Unadjusted) $48.28 - $90.53 Market Value Conclusion $1,500,000 ($75.00/SF) The value reported above is subject to the definitions, assumptions, and limiting conditions set forth in the accompanying report of which this summary is a part. No party other than City of Newport Beach may use or rely on the information, opinions, and conclusions contained in the report. It is assumed that the users ofthe report have read the entire report, including all of the definitions, assumptions, and limiting conditions contained therein. Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. None The value conclusions are based on the fol lowing hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contra ry to known fact on the effective date of the appraisal but i s supposed for the purpose of analysis. 1. Perourclient's request, we are appraising a hypothetical industrial propertythatis vacantland inthearea of Placentia Avenue and Production Place. Based on our determination of the most typical parcel size in the area, the hypothetical property contains 20,000 square feet. Hypothetical Property Near Intersection of Placentia Avenue and Production Place 01" 13-139 General Information General Information Identification of Subject The subject is a hypothetical parcel of vacant land containing an area of 0.46 acres or 20,000 square feet. The parcel size is based on the most typical parcel size of the surrounding industrial properties. The hypothetical property is zoned IG, Industrial, which permits a wide range of moderate to low intensity industrial uses and limited accessory commercial and office uses. Property Identification Property Name Hypothetical Property Near Intersection of Placentia Avenue and Production Place Newport Beach, California 92663 Owner of Record N/A Sale History The subject is a hypothetical property near Placentia Avenue and Production Place, that will be the likely location for a new park to be constructed by the City of Newport Beach. Since the subject is hypothetical, a discussion of its sale history is not applicable. Purpose of the Appraisal The purpose of the appraisal is to develop an opinion of the fair market value of the fee simple interest in a hypothetical, industrially zoned vacant land property in the area of Placentia Avenue and Production Place. This will likely be the location of a new park to be constructed by the City of Newport Beach. The effective date of the appraisal is August 13, 2019 and the date of the report is September 4, 2019. The appraisal is valid only as of the stated effective date. Definition of Fair Market Value "Fair Market Value", as defined pursuant to Part 3, Title 7, Chapter 9, Article 4, of the California Code of Civil Procedure, entitled: Eminent Domain Law, is as follows: Fair Market Value ... Article 4. Measure of Compensation for Property Taken. 1263.320 (a) The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-140 General Information (b) The fair market value of the property taken for which there is no relevant, comparable market is its value on the date of valuation as determined by any method valuation that is just and equitable. 1263.330 The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following: (a) The project for which the property is taken. (b) The eminent domain proceeding in which the property is taken. (c) Any preliminary actions of the plaintiff relating to the taking of the property. Definition of Property Rights Appraised Fee simple estate is defined as, "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) Intended Use and User The intended use of the appraisal is to assist the City of Newport Beach in establishing Park In -Lieu fees. The client and intended user is the City of Newport Beach. The appraisal is not intended for any other use or user. No party other than the City of Newport Beach may use or rely on the information, opinions, and conclusions contained in this report. Applicable Requirements This appraisal is intended to conform to the requirements of the following: • Uniform Standards of Professional Appraisal Practice (USPAP); • Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; Report Format This report is prepared under the Appraisal Report option of Standards Rule 2-2(a) of USPAP. USPAP gives appraisers the flexibility to vary the level of information in an Appraisal Report depending on the intended use and intended users of the appraisal. This report summarizes the information analyzed, the appraisal methods employed, and the reasoning that supports the analyses, opinions, and conclusions. Prior Services USPAP requires appraisers to disclose to the client any other services they have provided in connection with the subject property in the prior three years, including valuation, consulting, property management, brokerage, or any other services. We have not performed any services, as an appraiser Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-141 General Information 4 or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. Scope of Work To determine the appropriate scope of work for the assignment, we considered the intended use of the appraisal, the needs of the user, the complexity of the property, and other pertinent factors. Our concluded scope of work is described below. Valuation Methodology Appraisers usually consider the use of three approaches to value when developing a market value opinion for real property. These are the cost approach, sales comparison approach, and income capitalization approach. Use of the approaches in this assignment is summarized as follows: Approaches to Value Approach ApplicabiIityto Subject Use in Assignment Cost Approach Not App I i ca bl a Not Uti I i zed Sales Comparison Approach Applicable Utilized Income Capitalization Approach Not Applicable Not Utilized We use only the sales comparison approach in developing an opinion of value for the subject. This approach is applicable to the subject because there is an active market for similar properties, and sufficient sales data is available for analysis. The cost approach is not applicable because there are no improvements that contribute value to the property, and the income approach is not applicable because the subject is not likely to generate rental income in its current state. Research and Analysis The type and extent of our research and analysis is detailed in individual sections of the report. This includes the steps we took to verify comparable sales, which are disclosed in the comparable sale profile sheets in the addenda to the report. Although we make an effort to confirm the arms -length nature of each sale with a party to the transaction, it is sometimes necessary to rely on secondary verification from sources deemed reliable. Inspection Thomas G. Richardson walked the area of the hypothetical parcel on August 13, 2019. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE, viewed the area on August 14, 2019. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-142 Orange County Area Analysis Economic Analysis Orange County Area Analysis Orange County is 791 square miles in size and has a population density of 4,076 persons per square mile. Orange County is part of the Los Angeles -Long Beach -Anaheim, CA Metropolitan Statistical Area, hereinafter called the Los Angeles MSA, as defined by the U.S. Office of Management and Budget. Population Orange County has an estimated 2019 population of 3,222,381, which represents an average annual 0.8% increase over the 2010 census of 3,010,232. Orange County added an average of 23,572 residents per year over the 2010-2019 period, and its annual growth rate is similar to that of the State of California. Looking forward, Orange County's population is projected to increase at a 0.8% annual rate from 2019-2024, equivalent to the addition of an average of 25,162 residents per year. The Orange County growth rate is expected to be similar to that of California. Population Trends Population Compound Ann. %Chng 2010 Census 2019 Estimate 2024 Projection 2010-2019 2019-2024 USA 308,745,538 329,236,175 340,950,101 0.7% 0.7% California 37,253,956 39,964,848 41,541,098 0.8% 0.8% Orange County, CA 3,010,232 3,222,381 3,348,192 0.8% 0.8% Los Angeles -Long Beach -Anaheim, CA Metro 12,828,837 13,478,088 13,913,534 0.6% 0.6% Source: Environics Analytics Employment Total employment in Orange County is currently estimated at 1,623,126 jobs. Between year-end 2007 and the present, employment rose by 104,370 jobs, equivalent to a 6.9% increase over the entire period. There were gains in employment in eight out of the past ten years despite the national economic downturn and slow recovery. Although Orange County's employment rose over the last decade, it underperformed California, which experienced an increase in employment of 9.3% or 1,472,215 jobs over this period. A comparison of unemployment rates is another way of gauging an area's economic health. Over the past decade, the Orange County unemployment rate has been consistently lower than that of California, with an average unemployment rate of 6.2% in comparison to an 8.3% rate for California. A lower unemployment rate is a positive indicator. Recent data shows that the Orange County unemployment rate is 3.2% in comparison to a 4.4% rate for California, a positive sign that is consistent with the fact that Orange County has outperformed California in the rate of job growth over the past two years. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-143 Orange County Area Analysis 6 Employment Trends Total Employment (Year End) Unemployment Rate (Ann. Avg.) Year Orange County Change California Change Orange County California 2007 1,518,756 3 15,790,869 11,930 3.9% 5.4% 2008 1,451,569 -4.4% 15,281,705 -3.2% 5.3% 7.3% 2009 1,364,569 -6.0% 14,481,855 -5.2% 8.7% 11.1% 2010 1,382,514 1.3% 14,541,592 0.4% 9.7% 12.2% 2011 1,392,442 0.7% 14,735,619 1.3% 9.0% 11.7% 2012 1,436,698 3.2% 15,223,789 3.3% 7.9% 10.4% 2013 1,465,326 2.0% 15,657,015 2.8% 6.6% 8.9% 2014 1,509,910 3.0% 16,089,814 2.8% 5.5% 7.5% 2015 1,551,455 2.8% 16,606,038 3.2% 4.5% 6.2% 2016 1,589,304 2.4% 16,930,563 2.0% 4.0% 5.5% 2017 1,623,126 2.1% 17,263,084 2.0% 3.5% 4.8% Overall Change 2007-2017 104,370 6.9% 1,472,215 9.3% Avg Unemp. Rate 2007-2017 6.2% 8.3% Unemployment Rate - July 2019 3.2% 4.4% Source: Bureau of Labor Statistics and Economy.com. Employment figures are from the Qua rterlyCensus of Employment and Wages (QCEW). Unemployment rates are from the Current Population Survey (CPS). The figures are not seasonally adjusted. Major employers in Orange County are shown in the following table. Major Employers - Orange County, CA Source: Southern California Association of Governments, Comprehensive Annual Financial Report, June 2018 Gross Domestic Product Gross Domestic Product (GDP) is a measure of economic activity based on the total value of goods and services produced in a defined geographic area. Although GDP figures are not available at the county level, data reported for the Los Angeles MSA is considered meaningful when compared to the nation overall, as Orange County is part of the MSA and subject to its influence. Economic growth, as measured by annual changes in GDP, has been somewhat higher in the Los Angeles MSA than the United States overall during the past eight years. The Los Angeles MSA has grown at a 2.6% average annual rate while the United States has grown at a 1.9% rate. As the national Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-144 Name Number of Employees 1 Walt Disney Co. 29,000 2 University of California, Irvine 23,610 3 St. Joseph Health 11,930 4 Allied Universal 8,230 5 Kaiser Permanente 7,690 6 The Boeing Company 6,100 7 W a I ma rt 6,000 8 California State University, Fullerton 5,780 9 Bank of America Corp. 5,500 10 Target Corp. 5,400 Source: Southern California Association of Governments, Comprehensive Annual Financial Report, June 2018 Gross Domestic Product Gross Domestic Product (GDP) is a measure of economic activity based on the total value of goods and services produced in a defined geographic area. Although GDP figures are not available at the county level, data reported for the Los Angeles MSA is considered meaningful when compared to the nation overall, as Orange County is part of the MSA and subject to its influence. Economic growth, as measured by annual changes in GDP, has been somewhat higher in the Los Angeles MSA than the United States overall during the past eight years. The Los Angeles MSA has grown at a 2.6% average annual rate while the United States has grown at a 1.9% rate. As the national Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-144 Orange County Area Analysis 7 economy improves, the Los Angeles MSA continues to perform better than the United States. GDP for the Los Angeles MSA rose by 2.8% in 2017 while the United States GDP rose by 2.1%. The Los Angeles MSA has a per capita GDP of $67,763, which is 32% greater than the United States GDP of $51,337. This means that Los Angeles MSA industries and employers are adding relatively more value to the economy than their counterparts in the United States overall. Gross Domestic Product ($ Mil) ($ Mil) Year Los Angeles MSA %Change United States %Change 2010 754,535 14,628,165 2011 760,055 0.7% 14,833,679 1.4% 2012 781,151 2.8% 15,126,281 2.0% 2013 796,341 1.9% 15,348,034 1.5% 2014 826,980 3.8% 15,717,469 2.4% 2015 869,246 5.1% 16,148,486 2.7% 2016 880,453 1.3% 16,383,812 1.5% 2017 904,899 2.8% 16,721,499 2.1% Compound % Chg (2010-2017) 2.6% 1.9% GDP Per Capita 2017 $67,763 $51,337 Source: Bureau of Economic Analysis and Economy.com; data released September 2016. The release ofstate and local GDP data has a longer lagtime than national data.The data represents inflation-adjusted "real" GDP stated in 2009 dollars. Income, Education and Age Orange County is more affluent than California. Median household income for Orange County is $91,094, which is 22.2% greater than the corresponding figure for California. Median Household Income - 2019 Median Orange County, CA $91,094 California $74,558 Comparison of Orange County, CA to California +22.2% Source: Environics Analytics Residents of Orange County have a higher level of educational attainment than those of California. An estimated 39% of Orange County residents are college graduates with four-year degrees, versus 33% of California residents. People in Orange County are slightly older than their California counterparts. The median age for Orange County is 38 years, while the median age for California is 37 years. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-145 Orange County Area Analysis Education & Age - 2019 80% 70 60 50 40 30 20 10% Percent College Graduate Median Age Orange County, CA California Source:Environics Analytics Conclusion 50 45 40 35 30 25 20 15 10 Orange County, CA California The Orange County economy will benefit from a growing population base and higher income and education levels. Orange County experienced growth in the number of jobs and has maintained a consistently lower unemployment rate than California over the past decade. Moreover, Orange County benefits from being part of the Los Angeles MSA, which is the second most populous metropolitan area in the country and exhibits both a higher rate of GDP growth and a higher level of GDP per capita than the nation overall. We anticipate that the Orange County economy will improve, and employment will grow, strengthening the demand for real estate. This assumes continued growth in the national economy. Many sources are predicting a recession in 2020. It is currently uncertain if this will come to pass. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-146 Orange County Area Analysis Area Map iusar�a ira�cs � V bing :1.o Santa A+lorrka Flore� Ingl�wood Ha�vthoane " rpl- Gardena i0M. 'n Torrancz arson Long Beach Garden Grav � Sastta'Ana Irvirie,, Hujdrngton,B c Cosa Mesa rF O f Fontana San Bernardi O �nta � w it Riverside Wen❑ r Valley °' r� Herres T II Cleveland fdat�tinal � Foresi Camp menti etnn paha Marine Corps 1_R - E'.. r O[ean si �eVista r, x.2659 IA �cs:aft Corporaod�l2Q79,�FIER E Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-147 Surrounding Area Analysis Surrounding Area Analysis Boundaries The hypothetical subject is located in a primarily industrial pocket within the City of Newport Beach near its boundary with the City of Costa Mesa. This area is generally delineated as follows: North West 17th Street South West 15th Street East Newport Boulevard West Whittier Avenue A map identifying the location of the property follows this section. Access and Linkages Primary access to the area is provided by Placentia Avenue and Newport Boulevard (SR -55), major arterials that cross Orange County in a north/south direction and 17th Street, which crosses in an east/west direction. Overall, vehicular access is average. 10 Public transportation is provided by Orange County Transportation Authority. The nearest bus stop is located at the intersection of Placentia Avenue and Production Place. The local market perceives public transportation as average compared to other areas in the region. However, the primary mode of transportation in this area is the automobile. John Wayne Airport is located about five miles northeast from the area. Downtown Los Angeles, the economic and cultural center of the region, is approximately 35 miles northwest from the area. Demand Generators Major employers include Hoag Memorial Hospital, Pacific Life Insurance, Glidewell Dental, PIMCO Advisors, and Newport -Mesa Unified School District. In addition to its strong employment base, the area is easily accessible to other employment centers within Orange County. Demographics A demographic profile of the surrounding area, including population, households, and income data, is presented in the following table. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-148 Surrounding Area Analysis 9,455 51,152 107,401 992,781 11 Households 2019 10,098 53,868 112,797 1,062,951 13,477,890 Surrounding Area Demographics 10,543 55,897 116,941 1,105,004 14,007,885 Compound % Change 2010-2019 0.7% 0.6% 0.5% Orange County, 0.8% 2019 Estimates 1 -Mile Radius 3 -Mile Radius 5 -Mile Radius CA California Population 2010 24,602 129,337 269,976 3,010,232 37,253,956 Population 2019 26,262 135,659 283,133 3,222,381 39,964,848 Population 2024 27,351 140,285 292,964 3,348,192 41,541,098 Compound%Change 2010-2019 0.7% 0.5% 0.5% 0.8% 0.8% Compound % Change 2019-2024 0.8% 0.7% 0.7% 0.8% 0.8% Households 2010 9,455 51,152 107,401 992,781 12,577,498 Households 2019 10,098 53,868 112,797 1,062,951 13,477,890 Households 2024 10,543 55,897 116,941 1,105,004 14,007,885 Compound % Change 2010-2019 0.7% 0.6% 0.5% 0.8% 0.8% Compound % Change 2019-2024 0.9% 0.7% 0.7% 0.8% 0.8% Median Household Income 2019 $80,198 $92,225 $99,559 $91,094 $74,558 Average Household Size 2.5 2.5 2.5 3.0 2.9 College Graduate% 43% 46% 48% 39% 33% Median Age 37 40 41 38 37 Owner Occupied % 36% 45% 53% 59% 56% Renter Occupied % 64% 55% 47% 41% 44% Median Owner Occupied Housing Value $886,702 $986,399 $907,564 $733,175 $530,982 Median Year Structure Built 1971 1970 1972 1976 1976 Avg. Travel Time to Work in Min. 27 27 28 30 32 Source: Environics Analytics As shown above, the current population within a 3 -mile radius of the subject is 135,659, and the average household size is 2.5. Population in the area has grown since the 2010 census, and this trend is projected to continue over the next five years. Compared to Orange County overall, the population within a 3 -mile radius is projected to grow at a slightly slower rate. Median household income is $92,225, which is higher than the household income for Orange County. Residents within a 3 -mile radius have a higher level of educational attainment than those of Orange County, and median owner -occupied home values are considerably higher. Services and Amenities The nearest commercial area with restaurants, convenience stores and support services are located at the intersection of 17th Street and Newport Boulevard, about three-quarters of a mile northeast from the property. The closest lodging facilities are located within one mile of the area. The nearest fire and police stations are within three miles of the area. Land Use In the immediate vicinity of the hypothetical subject, land uses include a mix of industrial and multifamily residential. Other land use characteristics are summarized as follows: Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-149 Surrounding Area Analysis 12 Surrounding Area Land Uses Character of Area Suburban Predominant Age of Improvements 50 years Predominant Quality and Condition Average Approximate Percent Developed 95% Infrastructure/Planning Average Immediate Surroundings of Intersection of Placentia Avenue and Production Place North To the north of the intersection of Placentia Avenue and Production Place land uses consist of a mix of industrial and multifamily residential. South To the south of the intersection land uses are a mix of multifamily residential and industrial. East To the east of the intersection land uses are multifamily residential. West To the west of the intersection land uses are industrial. Development Activity and Trends During the last five years, development has been predominantly of commercial and multifamily uses, and has included notable commercial developments such as Lido House Hotel, a 103,470 square foot hotel, PIMCO's 380,000 square foot Newport Beach office headquarters, and notable multifamily developments such as The Place, which includes 177 units, and Blue Sol, which includes 113 units. The pace of development has generally been intermittent over this time. Outlook and Conclusions The area is in the stabilization stage of its life cycle. Given the history of the area and the growth trends, it is anticipated that property values will increase in the near future, assuming continued growth in the economy. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-150 Surrounding Area Analys§ Surrounding Area Map 13 11 )�m� /k mxm �/ � \ . .> � I § olive W 17th St w17K¥ h9 /a § 0 § \rtcl 2 e $ ! W 16th St 4 PrgduCtcpn ? 0 !�®9 $ « } w 15th St ` !�@ r . �� # f o O� J %a "��k f «+® f �` a � i m ® J � ��2� �� b� .e %1. Gel maK a*( yew eHERE Hypothetical Propery Near Intersection of Placentia Avenue and Production qac |rr Industrial Market Analysis 14 Industrial Market Analysis The hypothetical subject is located near Placentia Avenue and Production Place in an industrial area of the City of Newport Beach. Given prevailing land use patterns and our client's instruction that the hypothetical property be analyzed as vacant industrial land, the most likely use is industrial. As such, we have included an industrial market analysis. Metro Area Overview The subject is located in the Orange County metro area as defined by Costar. Trended supply and demand statistics, including inventory levels, absorption, vacancy, and rental rates for all classes of space are presented in the ensuing table. All Industrial Orange County Metro Trends Net Under Net Rent Completions Construction Absorption Asking Growth Price Cap Period Stock Demand Vacancy 12 Months Stock 12 Months Rent 12 Month Growth Rate 2009 Q2 300,404,137 282,283,700 6.03% 517,372 186,534 -4,668,869 $0.78 -4.84% -15.45% 6.46% 2010 Q2 300,634,428 279,223,900 7.12% 230,291 517,941 -3,059,799 $0.74 -6.12% -5.95% 6.60% 2011 Q2 300,581,943 281,434,200 6.37% -52,485 0 2,210,366 $0.72 -1.78% 4.94% 6.31% 2012 Q2 300,209,485 282,941,800 5.75% -372,458 140,225 1,507,523 $0.74 1.76% 4.27% 6.11% 2013 Q2 299,817,332 284,570,800 5.09% -392,153 724,123 1,629,064 $0.77 4.43% 5.88% 5.94% 2014 Q2 299,459,705 287,455,200 4.01% -357,627 965,395 2,884,372 $0.82 6.22% 10.71% 5.67% 2015 Q2 299,478,876 289,904,500 3.20% 19,171 836,582 2,449,336 $0.87 6.94% 12.52% 5.36% 2016 Q2 300,303,258 292,070,800 2.74% 824,382 334,957 2,136,822 $0.95 8.34% 12.46% 5.12% 2017 Q2 300,335,441 291,615,500 2.90% 32,183 395,380 -425,876 $1.02 7.89% 10.37% 4.97% 2018 Q2 299,901,881 292,251,300 2.55% -444,444 1,457,108 624,899 $1.09 6.88% 10.29% 4.84% 2019 Q2 300,739,122 289,580,100 3.71% 832,282 597,960 -2,676,117 $1.15 5.10% 7.63% 4.82% Source: CoStar, Inc.; compiled by Integra Realty Resources, Inc. Orange County Metro Trends and Forecasts Vacancy Rate vs. Asking Rent $1.4 $1.2 $1.0 \ $0.8 , $0.6 $0.4 $0.2 $0.0 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. Hypothetical Property Near Intersection of Placentia Avenue and Production Place 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Lir 13-152 Industrial Market Analysis • The current vacancy rate in the metro area is 3.71%; the vacancy rate has increased by 81 basis points from 2017 Q2. • Asking rent averages $1.15/SF in the metro area, and values have increased by 12.75% from 2017 Q2. 2,000, 000 1,500, 000 1,000, 000 500,000 0 -500,000 -1,000,000 -1,500,000 Supply and Demand Trends 1 � 1 M ci N M It ci N M 1:T 1H N M 'zT ci N M 'T ci N C7 Ci Ci C7 C7 C7 Ci C7 Ci C7 C7 C7 CY Ci C7 C7 C7 C7 C7 C7 ci ci ci rl ri r -I ci ci T -I H i --I c -I c -I c -I c -I c -I i --I c -I c -I c -I O O O O O O O O O O O O O O O O O O O O N N N N N N N N N N N N N N N N N N N N Completions (SF) Absorption (SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 15 • The total stock (SF) has increased by 0.13% from 2017 Q2, while the demand has decreased by 0.70%. • Between 2014 Q2 and 2019 Q2, net completions in the metro area have averaged 150,991 SF annually and reached a peak of 832,282 SF in 2019 Q2. • Between 2014 Q2 and 2019 Q2, net absorption in the metro area has averaged 832,239 SF annually and reached a peak of 2,884,372 SF in 2014 Q2. Submarket Overview The subject is located in the Newport Beach submarket as defined by CoStar. Trended supply and demand statistics, including inventory levels, absorption, vacancy, and rental rates for all classes of space are presented in the following table. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-153 Industrial Market Analysis 16 All Industrial Newport Beach Submarket Trends Net Under Net Rent Completions Construction Absorption Asking Growth Price Cap Period Stock Demand Vacancy 12 Months Stock 12 Months Rent 12 Month Growth Rate 2009 Q2 1,152,487 1,121,200 2.71% 0 0 3,516 $1.19 -5.20% -15.06% 6.29% 2010 Q2 1,152,487 1,104,300 4.18% 0 0 -16.885 $1.12 -5.63% -5.25% 6.41% 2011 Q2 1,152,487 1,060,000 8.02% 0 0 -44.338 $1.09 -2.44% 5.18% 6.12% 2012 Q2 1,152,487 1,098,300 4.70% 0 0 38,328 $1.10 0.71% 4.28% 5.92% 2013 Q2 1,152,487 1,101,000 4.47% 0 0 2,656 $1.15 4.45% 5.60% 5.75% 2014 Q2 1,007,783 966,925 4.05% -144.704 0 -134.068 $1.22 6.15% 9.86% 5.52% 2015 Q2 1,007,783 982,170 2.54% 0 0 15,245 $1.31 6.91% 11.70% 5.23% 2016 Q2 1,007,783 991,863 1.58% 0 0 9,693 $1.41 8.26% 11.50% 5.01% 2017 Q2 1,007,783 987,656 2.00% 0 0 -4,207 $1.52 7.39% 9.47% 4.87% 2018 Q2 1,007,783 986,432 2.12% 0 0 -1,224 $1.61 6.26% 8.71% 4.79% 2019 Q2 1,007,783 990,045 1.76% 0 0 3,613 $1.70 5.03% 6.35% 4.79% Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. • The Newport Beach submarket comprises 0.3% of the metro building stock and 0.3% of the metro building demand. • The vacancy rate in the Newport Beach submarket is 1.76%, which is less than the metro area's average of 3.71%. • Newport Beach market rate is $1.70/SF which is greater than the metro area's average rate of $1.15/SF. Newport Beach Submarket Trends and Forecasts $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Vacancy Rate vs. Asking Rent 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 Asking Rent ($/SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% • The current vacancy rate in the submarket area is 1.76%; the vacancy rate has decreased by 24 basis points from 2017 Q2. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-154 Industrial Market Analysis • Asking rent averages $1.70/SF in the submarket area, and rents have increased by 11.84% from 2017 Q2. Supply and Demand Trends 25,000 4.0% 20,000 3.5% 15,000 3.0% 10,000 2.5% 5,000 , ' ' ' 2.0% 0 -5,000 ' ' ' 1.5% -10,000 1.0% -15,000 0.5% -20,000 0.0% o -ti ati a115 tX N, ati a15 o -ti aIV 117 ati o -ti 111) o-° ati ati ti° tik (Sly yo' yo' yh yo yodo yodo do ti� ti� ti� ti� tiw ti� ti� ti� do do ,yo ,yo ,yo ,yo ,yo ,yo ,yo ,yo ,yo ,yo ,yo Completions (SF) Absorption (SF) Vacancy Rate (%) Source: Costar, Inc.; compiled by Integra Realty Resources, Inc. 17 • The total stock is 1,007,783 SF and the total demand is 990,045 SF. • There have not been positive net completions in the submarket area in the past 5 years (2014 Q2 - 2019 Q2). • Between 2014 Q2 and 2019 Q2, net absorption in the submarket area has averaged -18,491 SF annually and reached a peak of 15,245 SF in 2014 Q2. Industrial Market Outlook and Conclusions Supply and demand trends in this submarket have signs of stability with low vacancy rates and slowly improving rental rates. In the future, the industrial market is expected to continue its stability and slow improvement, assuming continued growth in the national economy. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-155 Land Description and Analysis Property Analysis Land Description and Analysis Land Description Land Area 0.46 acres; 20,000 SF Source of Land Area Public Records Shape Rectangular (Based on thetypical parcel shape in the area) Rail Access No Topography Generally level and atstreetgrade Drainage No problems reported or observed Environmental Hazards None reported or observed Ground Stability No problems reported or observed Flood Area Panel Number 06059CO268J Date December 3, 2009 Zone X Descri pti on Outside of 500 -year fl oodpl a i n I ns u ra nce Required? No 18 Zoning; Other Regulations 10,000 SF ZoningJurisdiction City of Newport Beach Zoning Designation IG Description Industrial Legally Conforming? N/A - Hypothetical Parcel Zoni ng Cha nge Li kel y? No Permitted Uses Awiderange of moderateto low intensity industrial uses and limited accessory commercial and office uses Minimum Lot Area 10,000 SF Minimum Lot Width (Feet) None Minimum Setbacks (Feet) Front- 15 ft.; Side- None; Rear - None unless adjoining a non -industrial zone, then 10 ft. Maximum Building Height Flat roof- 32 ft.; Sloped roof - 37 ft. Maximum Floor Area Ratio 0.75 Parking Requirement Generally 1 per 500 SF for industrial uses Utilities Service Provider Water City of Newport Beach Sewer City of Newport Beach Electricity Southern California Edison Natural Gas Southern California Gas Company Local Phone Various Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-156 Land Description and Analysis Zoning Per our client's instruction, the hypothetical subject is to be valued as though it is vacant industrial land. Based on our review of the zoning map, the predominant zoning designation is IG, Industrial in the area of Placentia Avenue and Production Place. As such, we assume the hypothetical subject is zoned IG, Industrial. Potential Development Density 19 Based on the maximum floor area ratio (FAR) of 0.75 in the current zoning regulations of the subject's assumed zoning, a building of 15,000 square feet could be developed. Therefore, it appears that the development potential of the hypothetical site is 15,000 square feet of building area. Conclusion of Land Analysis Overall, the physical characteristics of the hypothetical site and the availability of utilities result in functional utility suitable for a variety of uses including those permitted by the assumed zoning. We are not aware of any other particular restrictions on development. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-157 Land Description and Analysis View of industrial property at northwest corner of Placentia Avenue and Production Place. (Photo Taken on August 13, 2019) Looking north on Placentia Avenue. (Photo Taken on August 13, 2019) Looking west on Production Place. (Photo Taken on August 13, 2019) 20 View of industrial property at southwest corner of Placentia Avenue and Production Place. (Photo Taken on August 13, 2019) Looking south on Placentia Avenue. (Photo Taken on August 13, 2019) Looking east on Production Place. (Photo Taken on August 13, 2019) Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-158 Land Description and Analysis 21 Plat Map (Near Placentia Avenue and Production Place) z (2) C \,� nus HAF wba.nvRnm Fax oRune counrr Y. 424-14. R zn�ac lq ,,s,ran rcl ,.ose a�lcJ 8' Har Asswss RNV uamurr FOR QIIEH u EEB. Ifil xi �5� /4 13i o!2 I� ��O�F�MGEO II�RAS9F880HEHVE0. )' 6 ' 1041 4 3 (D 5 NEW RT SA TRACT b. 9 5lXTEENTH p SrRFFT 8 i 15� `4 'i la Il��i FIRST AOD/T/ON TO O m V 3 PHODUCTION PLAC£ 5 Q S Q W U O Q NO 3145 MARCH 1979 F/RST ADO TO NFWPORT 4fcF,4 TRACT Al. Al. 6-61 NOTE -ASSESSOR'S BLOCK L ASSESSOR'S MAP TRACT ND 3/45 M M. 99-33 PARCEL NUMBERS BOOK'424 PAGE 14 O SHOWN fN CIRCLES COUNTY OF ORANGE z (2) C \,� R zn�ac lq ,,s,ran rcl ,.ose a�lcJ 8' Ifil xi �5� /4 13i o!2 ,0 BI B )' 6 ' 1041 4 3 (D 5 NEW RT SA TRACT b. i 15� `4 'i la Il��i 10 "s We did not include the plat maps for properties to the east and south of the area of Placentia Avenue and Production Place as the properties in these directions are primarily multifamily residential and therefore not applicable to our analysis. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-159 Ifil xi �5� /4 13i o!2 ,0 BI B )' 6 S 4 3 „i 2�i 5 We did not include the plat maps for properties to the east and south of the area of Placentia Avenue and Production Place as the properties in these directions are primarily multifamily residential and therefore not applicable to our analysis. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-159 Real Estate Taxes 22 Real Estate Taxes Real estate tax assessments are administered by the Assessor of Orange County and are estimated by jurisdiction on a county basis for the subject. The property is subject to the property tax rules of the State of California, which control the activities and policies of local assessment jurisdictions. These laws were significantly modified on June 7, 1978, when the State's voters passed Proposition 13, adding Article XIIIA to the State Constitution. Proposition 13 abolished the practice of periodic reassessment of properties based on market value appraisals. Instead, real property is subject to reassessment (i.e., revaluation at full or partial current market value) only when changes in ownership or new construction take place. Otherwise, increases in assessed value are limited to a general rate of 2%, plus the rates needed to service any bonded indebtedness. Special assessments can also be added and are often related to the installation of infrastructure. Generally speaking, property taxes in Orange County tend to range from 1.1 % to 1.4% of a property's assessed value. Due to California's tax laws, most properties within Orange County have very similar effective tax rates. The hypothetical subject property is assumed to be owned by the City of Newport Beach and therefore it is not subject to real estate taxes. It is located in tax rate area 07-055 which carries a 2018-2019 base tax rate of 1.05084%. Real estate taxes would be adjusted upon sale of the subject property. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-160 Highest and Best Use 23 Highest and Best Use Process Before a property can be valued, an opinion of highest and best use must be developed for the subject site, both as vacant, and as improved. By definition, the highest and best use must be: • Physically possible. • Legally permissible under the zoning regulations and other restrictions that apply to the site. • Financially feasible. • Maximally productive, i.e., capable of producing the highest value from among the permissible, possible, and financially feasible uses. As Vacant Legally Permissible Per our client's instruction, we are appraising a hypothetical industrial property in the area of Placentia Avenue and Production Place. Based on the predominant zoning designations in that area for industrial uses, the site would likely be zoned IG, Industrial. Permitted uses include a wide range of moderate to low intensity industrial uses and limited accessory commercial and office uses. Given our client's instructions, only industrial use is given further consideration in determining the highest and best use of the site as vacant. Physically Possible The hypothetical subject contains 20,000 square feet and is rectangular in shape. The physical characteristics of the hypothetical site do not appear to impose any unusual restrictions on development. Overall, the physical characteristics of the site and the availability of utilities result in functional utility suitable for a variety of uses. Financially Feasible/Maximally Productive A use is considered financially feasible if it produces a positive net return. A variety of uses may be potentially financially feasible for the subject. For purposes of this analysis, industrial use is assumed at the appraised land value. Conclusion Development of the site for industrial use is the only use that meets the four tests of highest and best use. Therefore, it is concluded to be the highest and best use of the property as vacant. As Improved Per our client's instructions, we assume the subject is vacant, unimproved land. Therefore, a highest and best analysis as improved is not applicable. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-161 Highest and Best Use Most Probable Buyer Taking into account the functional utility of the hypothetical site and area development trends, the probable buyer is a developer or owner/user. 24 Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-162 Valuation Methodology 25 Valuation Valuation Methodology Appraisers usually consider three approaches to estimating the market value of real property. These are the cost approach, sales comparison approach and the income capitalization approach. The cost approach assumes that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility. This approach is particularly applicable when the improvements being appraised are relatively new and represent the highest and best use of the land or when the property has unique or specialized improvements for which there is little or no sales data from comparable properties. The sales comparison approach assumes that an informed purchaser would pay no more for a property than the cost of acquiring another existing property with the same utility. This approach is especially appropriate when an active market provides sufficient reliable data. The sales comparison approach is less reliable in an inactive market or when estimating the value of properties for which no directly comparable sales data is available. The sales comparison approach is often relied upon for owner -user properties. The income capitalization approach reflects the market's perception of a relationship between a property's potential income and its market value. This approach converts the anticipated net income from ownership of a property into a value indication through capitalization. The primary methods are direct capitalization and discounted cash flow analysis, with one or both methods applied, as appropriate. This approach is widely used in appraising income-producing properties. Reconciliation of the various indications into a conclusion of value is based on an evaluation of the quantity and quality of available data in each approach and the applicability of each approach to the property type. The methodology employed in this assignment is summarized as follows: Approaches to Value Approach ApplicabiIityto Subject Use in Assignment Cost Approach Not Appl i ca bl a Not Uti I i zed Sales Comparison Approach Applicable Utilized Income Capitalization Approach Not Applicable Not Utilized Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-163 Sales Comparison Approach Sales Comparison Approach 26 To develop an opinion of the subject's land value, as if vacant and available to be developed to its highest and best use, we utilize the sales comparison approach. This approach develops an indication of value by researching, verifying, and analyzing sales of similar properties. Our sales research focused on transactions within the following parameters: • Location: Our initial search focused on the City of Newport Beach and nearby communities. Due to the lack of data, we expanded our search to include all of Orange County. • Size: Up to 1.5 acres. • Use: Industrial • Transaction Date: We initially searched for sales that occurred in the past year but found limited results. As such, we expanded our search from January 2016 through the date of value. For this analysis, we use price per square foot as the appropriate unit of comparison because market participants typically compare sale prices and property values on this basis. The most relevant sales are summarized in the following table. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-164 Sales Comparison Approach 27 Summary of Comparable Land Sales Sale Date; SF; $/SF No. Name/Address Status Sale Price Acres Zoning Land 1 4412 E. La Palma Ave. Jul -19 $2,200,000 40,608 SP2015-1-DA1, $54.18 Anaheim Closed 0.93 Anaheim Orange County Canyon Comments: The property is located mid -block along the south side of East La Palma Avenue, just west of Lakeview Avenue. Surrounding uses include industrial to the west north, and east, and a water retention basin to the south. The seller's broker Jeff Gahagan, with Lee & Associates, confirmed that the transaction was arm's-length and that no conditions affected the sale price. Mr. Gahagan indicated that the buyer purchased the property in order to use the site as a contractor's yard. No entitlements were in place at the time of sale. The site previously sold in November 2017for $1,868,000 or $46.00/SF and Mr. Gahagan indicated that the increase in price since this transaction was based on improving market conditions. This represents an increase of 17.8% or 11.2% on an annual basis. 2 8401 Monroe Ave. Oct -18 $685,000 11,777 IG, Industrial $58.16 Stanton Closed 0.27 General Orange County Comments: This property is located on the north side of Monroe Avenue and west of Dale Avenue. It is slightly irregular in shape with level topography. The property is a vacant lot with asphalt paving and a retractable chain link rolling gate. 3 8551 Edison Dr. May -18 $2,400,000 34,000 IG, Industrial $70.59 Huntington Beach Closed 0.78 General Orange County Comments: The property is located along the north side of Edison Drive, just east of Newland Street. Surrounding land uses include industrial to the west, south, and east, and a flood channel to the north. The transaction was reportedly arm's-length and no conditions affected the sale price. There were several buildings on the site that were in tear -down condition at the time of sale that did not contribute any value to the property. The buyer owns a business on the same block and intends to potentially expand their existing business at some point in the future. The buyer did not pay a premium to assemble the site to their adjacent property. 4 18796 Stewart Ln. Feb -17 $2,100,000 43,500 SP -9, General $48.28 Huntington Beach Closed 1.00 Industrial Orange County Comments: This property is located 150 feet south of Ernest Drive on the east side of Stewart Lane in the city of Huntington Beach. The site had an environmental report completed and it was clear of any known issues at the time of sale. The buyer intended to develop the site to a storage facility. The sale was confirmed with the listing broker, Robert (Bob) Bolen with Huntington Beach Realty. 5 1205 N. Kraemer Blvd. Jul -16 $2,653,000 53,056 Anaheim $50.00 Anaheim Closed 1.22 Canyon Orange County Specific Plan Comments: The property is located on the northwest corner of Kraemer Boulevard and Coronado Street. It is rectangular in shape with level topography. According to the seller's broker, Luke Hudson with Lee & Associates, the property sold as vacant land. The buyer purchased the property to develop a small industrial building and to park theirfood catering trucks. 6 14391 Edwards St. Jan -16 $1,025,000 16,824 M-1, Light $60.92 Westminster Closed 0.39 Industrial Orange County District Comments: This property is located at the southwest corner of Edwards Street and Maple Avenue. The site was marketed as a contractor's yard with industrial zoning, but there was a 1,200 square foot single-family residence on the site, along with othersmall buildings, that could provide rental income at the time of sale. The listing broker, Tom Mulrooney with Ash will Associates, Inc., reported that the sale price was based on the land value and didn't consider the existing house to impact the sale price in either direction. CoStar shows the sale price as $1,250,000, but the Grant Deed and the listing broker confirmed the sale price as $1,025,000. 7 1775-1781 Monrovia Ave. Listing $2,200,000 24,300 MG, General $90.53 Costa Mesa Listing 0.56 Industrial Orange County Comments: This active listing is located along the west side of Monrovia Avenue, between West 18th Street and Sunset Drive. It is surrounded by industrial uses to the east, north, and west and a mix of industrial and single family residential to the south. Steve Eberle confirmed the asking price and indicated that he is currently negotiating with two buyers at a price just below $2,000,000. The site is currently improved with three single-family residences that are generating interim income until the property is redeveloped into an industrial use. Mr. Eberle indicated that there are no entitlements for an industrial use. Subject 20,000 Industrial Hypothetical Property Near Intersection of Placentia Avenue and 0.46 Production Place Newport Beach, CA Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr 13-165 Sales Comparison Approach Comparable Land Sales Map at _ ..._-.. = ...y ABC - - Buena P� kewood r' Fullerton ::ID.)f fr' hEk-f}U7A FULLS Anaheim kxp(e,10 Res.. 28 Hypothetical Property Near Intersection of Placentia Avenue and Production Place ®rr 13-166 fL DORA00 PARR V Joint A For€ Qi 24E Training Orange Center ] 2z Garden Grove Seal Read, Westminster 261 awai Santa Ana Weapons TuSLin StatiCn � ` Fountain ID UH1 361 .24E t - alley (13 �C WOOUB V,1 133J Huntington Beach Irvine E! Tog �y Food - . marine Corps Air Costa Station _Mesa UR LL FO€N *IFr �y* f 73 r. Lake Forest V 6Ing Newpoit Seach Mission' San Joaquin Hills (D 2018 M crosoft Corporation. 02%9 HERE Hypothetical Property Near Intersection of Placentia Avenue and Production Place ®rr 13-166 Sales Comparison Approach Sale 1 4412 East La Palma Avenue Jr �x �' •li aM'!' ' 'Y} yI Sale 3 8551 Edison Dr. Sale 5 1205 North Kraemer Boulevard Sale 2 8401 Monroe Avenue Sale 4 18796 Stewart Lane Sale 6 14391 Edwards Street Hypothetical Property Near Intersection of Placentia Avenue and Production Place ®rr 13-167 Sales Comparison Approach Sale 7 1775-1781 Monrovia Ave. 30 Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-168 Sales Comparison Approach 31 Analysis and Adjustment of Sales The sales are compared to the subject and adjusted to account for material differences that affect value. Adjustments are considered for the following factors, in the sequence shown below. Adjustment Factor Accounts For Comments Effective Sale Price Real Property Rights Financing Terms Conditions of Sale Market Conditions Atypical economics of a transaction, such as demolition cost or expenditures by buyer at time of purchase. Fee simple, leased fee, leasehold, partial interest, etc. Seller financing, or assumption of existing financing, at non -market terms. Extraordinary motivation of buyer or seller, assemblage, forced sale. Changes in the economic environment over time that affect the appreciation and depreciation of real estate. No adjustments required. No adjustments required. No adjustments required. No adjustments required. Industrial market research and market participants have reported improving industrial land values in the market area. According to rental rate information from Costar, industrial rents have increased by 7% per year since the beginning of 2016. Additionally, Sale 1 previously sold in November 2017 for $1,868,000 and then recently sold again in July 2019 for $2,200,000, which represents an increase of 11.2% per year. Considering this data, we have applied an annual market conditions adjustment of 10% per year to account for this trend. Sale 6 is an active listing, which requires a downward adjustment as the actual sale price will likely be lower than the listing price as it is subject to negotiation with the prospective buyer. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-169 Sales Comparison Approach Adjustment Factor Accounts For Comments Location Access/Exposure Size Shape and Topography Zoning Entitlements Site Improvements Market or submarket area influences on sale price; surrounding land use influences Convenience to transportation facilities; ease of site access; visibility; traffic counts. Inverse relationship that often exists between parcel size and unit value. Primary physical factors that affect the utility of a site for its highest and best use. Government regulations that affect the types and intensities of uses allowable on a site. The specific level of governmental approvals attained pertaining to development of a site. Improvements that contribute income beyond demolition costs are considered superior. Sites that require demolition prior to development are considered inferior. 32 Compared to the subject, each of the sales require upward adjustments for location, except for Sale 6. Our adjustments are based on the difference between rental rates for industrial buildings within a one -mile radius of the subject and a one -mile radius of each of the comparables. Compared to the subject, Sale S requires a downward adjustment as it has freeway exposure. No adjustments required. Compared to the subject, Sales 1 and 2 require upward adjustments for shape as they both narrow in shape, which somewhat limits development potential. No adjustments required. No adjustments required. Compared to the subject, Sale 3 requires an upward adjustment for demolition costs. Although Sales 6 and 7 had buildings on site, no adjustments are required as the interim income generated from the improvements would likely offset any costs for demolition. The following table summarizes the adjustments we make to each sale. Please note that we have included quantitative adjustments on the following grid which are somewhat subjective on the part of the appraisers, due to the lack of data to quantify most adjustments. They have been included to aid the reader in following our thought process. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-170 Sales Comparison Approach Land Sales Adjustment Grid Subject Comparable) Comparable Comparable Comparable4 Comparable5 Comparable Comparable Address Near Intersection 4412 E. La Palma 8401 Monroe Ave. 8551 Edison Dr. 18796 Stewart Ln. 1205 N. Kraemer 14391 Edwards St. 1775-1781 of Placentia Ave. Ave. Blvd. Monrovia Ave. and Production PI. City Newport Beach Anaheim Stanton Huntington Beach Huntington Beach Anaheim Westminster Costa Mesa County Orange Orange Orange Orange Orange Orange Orange Orange State California CA CA CA CA CA CA CA Sale Date Jul -19 Oct -18 May -18 Feb -17 Jul -16 Jan -16 Listing SaIeStatus Closed Closed Closed Closed Closed Closed Listing Sale Price $2,200,000 $685,000 $2,400,000 $2,100,000 $2,653,000 $1,025,000 $2,200,000 Square Feet 20,000 40,608 11,777 34,000 43,500 53,056 16,824 24,300 Acres 0.46 0.93 0.27 0.78 1.00 1.22 0.39 0.56 Price per Square Foot $54.18 $58.16 $70.59 $48.28 $50.00 $60.92 $90.53 Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple % Adjustment - - - - - - - FinancingTerms Cash to seller Cash to seller Cash to seller Cash to seller Cash to seller Cash to seller Cash to seller % Adjustment - - - - - - - Conditions of Sale % Adjustment - - - - - - Market Conditions 8/13/2019 Jul -19 Oct -18 May -18 Feb -17 Jul -16 Jan -16 Listing Annual %Adjustment 10% 1% 8% 12% 25% 30% 36% -10% Cumulative Adjusted Price $54.72 $62.82 $79.06 $60.34 $65.00 $82.86 $81.48 Location 15% 15% 5% 10% 15% 10% - Access/Exposure - - - - - -5% - Size - - - - - - - ShapeandTopography 10% 10% - - - - - Zoning - - - - - - - Entitlements - - - - - - Site Improvements - - 1% - - - - Net$Adjustment $13.68 $15.70 $4.74 $6.03 $9.75 $4.14 $0.00 Net % Adjustment 25% 25% 6% 10% 15% 5% 0% Final Adjusted Price $68.40 $78.52 $83.80 $66.38 $74.76 $87.00 $81.48 Overall Adjustment 26% 35% 19% 38% 50% 43% -10% Range of Adjusted Prices $66.38 - $87.00 Average $77.19 Indicated Value $75.00 33 irr Hypothetical Property Near Intersection of Placentia Avenue and Production Place 13-171 Sales Comparison Approach Land Value Conclusion 34 Prior to adjustment, the sales reflect a range of $48.28 - $90.53 per square foot. After adjustment, the range is narrowed to $66.38 - $87.00 per square foot, with an average of $77.19 per square foot. To arrive at an indication of value, we place primary emphasis on Sale 2, as it is a recent sale and is similar in terms of size to the subject. Secondary emphasis is placed on the remaining comparables. Land Value Conclusion Indicated Value per Square Foot $75.00 Subject Square Feet 20,000 Indicated Value $1,500,000 Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-172 Reconciliation and Conclusion of Value 35 Reconciliation and Conclusion of Value As discussed previously, we use only the sales comparison approach in developing an opinion of value for the subject. The cost and income approaches are not applicable, and are not used. Based on the preceding valuation analysis and subject to the definitions, assumptions, and limiting conditions expressed in the report, our value opinion follows: Value Conclusion Appraisal Premise Interest Appraised Date of Value Value Conclusion Fair Market Value Fee Simple August 13, 2019 $1,500,000 Extraordinary Assumptions and Hypothetical Conditions The value conclusions are subject to the fol lowing extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the rightto modify our value conclusions. 1. None The value conclusions are based on the fol lowing hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contra ry to known fact on the effective date of the appraisal but i s supposed for the purpose of analysis. 1. Perourclient's request, we are appraising a hypothetical industrial propertythatis vacantland inthearea of Placentia Avenue and Production Place. Based on our determination of the most typical parcel size in the area, the hypothetical property contains 20,000 square feet. Exposure Time Exposure time is the length of time the subject property would have been exposed for sale in the market had it sold on the effective valuation date at the concluded market value. Based on the concluded market value stated previously, it is our opinion that the probable exposure time is 6-12 months. Marketing Period Marketing time is an estimate of the amount of time it might take to sell a property at the concluded market value immediately following the effective date of value. We estimate the subject's marketing period at 6-12 months. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-173 Certification Certification We certify that, to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. We 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. 36 4. We have not performed any services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. 5. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 6. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 7. Our 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. 8. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice as well as applicable state appraisal regulations. 9. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 11. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE, viewed the area of the hypothetical parcel that is the subject of this report. Thomas G. Richardson walked the area of the hypothetical parcel. 12. No one provided significant real property appraisal assistance to the person(s) signing this certification. 13. We have experience in appraising properties similar to the subject and are in compliance with the Competency Rule of USPAP. 14. As of the date of this report, Beth B. Finestone, MAI, AI-GRS, FRICS, CRE has completed the continuing education program for Designated Members of the Appraisal Institute. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-174 Certification 15. As of the date of this report, Thomas G. Richardson has completed the Standards and Ethics Education Requirements for Candidates of the Appraisal Institute. Beth B. Finestone, MAI, AI-GRS, FRICS, CRE Certified General Real Estate Appraiser California Certificate # AGO04030 Thomas G. Richardson Certified General Real Estate Appraiser California Certificate # 3004940 37 irr.. Hypothetical Property Near Intersection of Placentia Avenue and Production Place 13-175 Assumptions and Limiting Conditions Assumptions and Limiting Conditions This appraisal and any other work product related to this engagement are limited by the following standard assumptions, except as otherwise noted in the report: The title is marketable and free and clear of all liens, encumbrances, encroachments, easements and restrictions. The property is under responsible ownership and competent management and is available for its highest and best use. 38 2. There are no existing judgments or pending or threatened litigation that could affect the value of the property. 3. There are no hidden or undisclosed conditions of the land or of the improvements that would render the property more or less valuable. Furthermore, there is no asbestos in the property. 4. The revenue stamps placed on any deed referenced herein to indicate the sale price are in correct relation to the actual dollar amount of the transaction. 5. The property is in compliance with all applicable building, environmental, zoning, and other federal, state and local laws, regulations and codes. 6. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. This appraisal and any other work product related to this engagement are subject to the following limiting conditions, except as otherwise noted in the report: 1. An appraisal is inherently subjective and represents our opinion as to the value of the property appraised. 2. The conclusions stated in our appraisal apply only as of the effective date of the appraisal, and no representation is made as to the effect of subsequent events. 3. No changes in any federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated. 4. No environmental impact studies were either requested or made in conjunction with this appraisal, and we reserve the right to revise or rescind any of the value opinions based upon any subsequent environmental impact studies. If any environmental impact statement is required by law, the appraisal assumes that such statement will be favorable and will be approved by the appropriate regulatory bodies. 5. Unless otherwise agreed to in writing, we are not required to give testimony, respond to any subpoena or attend any court, governmental or other hearing with reference to the property without compensation relative to such additional employment. 6. We have made no survey of the property and assume no responsibility in connection with such matters. Any sketch or survey of the property included in this report is for illustrative purposes only and should not be considered to be scaled accurately for size. The appraisal Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-176 Assumptions and Limiting Conditions 39 covers the property as described in this report, and the areas and dimensions set forth are assumed to be correct. 7. No opinion is expressed as to the value of subsurface oil, gas or mineral rights, if any, and we have assumed that the property is not subject to surface entry for the exploration or removal of such materials, unless otherwise noted in our appraisal. 8. We accept no responsibility for considerations requiring expertise in other fields. Such considerations include, but are not limited to, legal descriptions and other legal matters such as legal title, geologic considerations such as soils and seismic stability; and civil, mechanical, electrical, structural and other engineering and environmental matters. Such considerations may also include determinations of compliance with zoning and other federal, state, and local laws, regulations and codes. 9. The distribution of the total valuation in the report between land and improvements applies only under the reported highest and best use of the property. The allocations of value for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. The appraisal report shall be considered only in its entirety. No part of the appraisal report shall be utilized separately or out of context. 10. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or any reference to the Appraisal Institute) shall be disseminated through advertising media, public relations media, news media or any other means of communication (including without limitation prospectuses, private offering memoranda and other offering material provided to prospective investors) without the prior written consent of the persons signing the report. 11. Information, estimates and opinions contained in the report and obtained from third -party sources are assumed to be reliable and have not been independently verified. 12. Any income and expense estimates contained in the appraisal report are used only for the purpose of estimating value and do not constitute predictions of future operating results. 13. If the property is subject to one or more leases, any estimate of residual value contained in the appraisal may be particularly affected by significant changes in the condition of the economy, of the real estate industry, or of the appraised property at the time these leases expire or otherwise terminate. 14. Unless otherwise stated in the report, no consideration has been given to personal property located on the premises or to the cost of moving or relocating such personal property; only the real property has been considered. 1S. The current purchasing power of the dollar is the basis for the values stated in the appraisal; we have assumed that no extreme fluctuations in economic cycles will occur. 16. The values found herein are subject to these and to any other assumptions or conditions set forth in the body of this report but which may have been omitted from this list of Assumptions and Limiting Conditions. 17. The analyses contained in the report necessarily incorporate numerous estimates and assumptions regarding property performance, general and local business and economic Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-177 Assumptions and Limiting Conditions 40 conditions, the absence of material changes in the competitive environment and other matters. Some estimates or assumptions, however, inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our analysis will vary from our estimates, and the variations may be material. 18. The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of the property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. We claim no expertise in ADA issues, and render no opinion regarding compliance of the subject with ADA regulations. Inasmuch as compliance matches each owner's financial ability with the cost to cure the non- conforming physical characteristics of a property, a specific study of both the owner's financial ability and the cost to cure any deficiencies would be needed for the Department of Justice to determine compliance. 19. The appraisal report is prepared for the exclusive benefit of the Client, its subsidiaries and/or affiliates. It may not be used or relied upon by any other party. All parties who use or rely upon any information in the report without our written consent do so at their own risk. 20. No studies have been provided to us indicating the presence or absence of hazardous materials on the subject property or in the improvements, and our valuation is predicated upon the assumption that the subject property is free and clear of any environment hazards including, without limitation, hazardous wastes, toxic substances and mold. No representations or warranties are made regarding the environmental condition of the subject property. Integra Realty Resources — Los Angeles, Integra Realty Resources, Inc., Integra Strategic Ventures, Inc. and/or any of their respective officers, owners, managers, directors, agents, subcontractors or employees (the "Integra Parties"), shall not be responsible for any such environmental conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because we are not experts in the field of environmental conditions, the appraisal report cannot be considered as an environmental assessment of the subject property. 21. The persons signing the report may have reviewed available flood maps and may have noted in the appraisal report whether the subject property is located in an identified Special Flood Hazard Area. We are not qualified to detect such areas and therefore do not guarantee such determinations. The presence of flood plain areas and/or wetlands may affect the value of the property, and the value conclusion is predicated on the assumption that wetlands are non- existent or minimal. 22. Integra Realty Resources — Los Angeles is not a building or environmental inspector. Integra Los Angeles does not guarantee that the subject property is free of defects or environmental problems. Mold may be present in the subject property and a professional inspection is recommended. 23. The appraisal report and value conclusions for an appraisal assume the satisfactory completion of construction, repairs or alterations in a workmanlike manner. 24. It is expressly acknowledged that in any action which may be brought against any of the Integra Parties, arising out of, relating to, or in any way pertaining to this engagement, the Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-178 Assumptions and Limiting Conditions 41 appraisal reports, and/or any other related work product, the Integra Parties shall not be responsible or liable for any incidental or consequential damages or losses, unless the appraisal was fraudulent or prepared with intentional misconduct. It is further acknowledged that the collective liability of the Integra Parties in any such action shall not exceed the fees paid for the preparation of the appraisal report unless the appraisal was fraudulent or prepared with intentional misconduct. Finally, it is acknowledged that the fees charged herein are in reliance upon the foregoing limitations of liability. 25. Integra Realty Resources — Los Angeles, an independently owned and operated company, has prepared the appraisal for the specific intended use stated elsewhere in the report. The use of the appraisal report by anyone other than the Client is prohibited except as otherwise provided. Accordingly, the appraisal report is addressed to and shall be solely for the Client's use and benefit unless we provide our prior written consent. We expressly reserve the unrestricted right to withhold our consent to your disclosure of the appraisal report or any other work product related to the engagement (or any part thereof including, without limitation, conclusions of value and our identity), to any third parties. Stated again for clarification, unless our prior written consent is obtained, no third party may rely on the appraisal report (even if their reliance was foreseeable). 26. The conclusions of this report are estimates based on known current trends and reasonably foreseeable future occurrences. These estimates are based partly on property information, data obtained in public records, interviews, existing trends, buyer -seller decision criteria in the current market, and research conducted by third parties, and such data are not always completely reliable. The Integra Parties are not responsible for these and other future occurrences that could not have reasonably been foreseen on the effective date of this assignment. Furthermore, it is inevitable that some assumptions will not materialize and that unanticipated events may occur that will likely affect actual performance. While we are of the opinion that our findings are reasonable based on current market conditions, we do not represent that these estimates will actually be achieved, as they are subject to considerable risk and uncertainty. Moreover, we assume competent and effective management and marketing for the duration of the projected holding period of this property. 27. The appraisal is also subject to the following: Extraordinary Assumptions and Hypothetical Conditions The vaI ue conclusions are subject to the fol lowing extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions. 1. None The value conclusions are based on the fol lowing hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contra ry to known fact on the effective date of the appraisal but i s supposed for the purpose of analysis. Per our client's request, we are appraising a hypothetical industrial property that is vacant land i n the area of Placentia Avenue and Production Place. Based on our determination of the most typical parcel size in the area, the hypothetical property contains 20,000 square feet. Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-179 Addenda Addendum A Appraiser Qualifications Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-180 Integ Beth B. Finestone MAI AI-GRS FRICS CRE Loss Angeles Realty Resources � � � � Los Angeles Experience 16030 Ventura Boulevard Suite 620 Ms. Finestone, Managing Director for and a principal of INTEGRA REALTY RESOURCES — LOS Encino, CA 91436-4473 ANGELES, has been with the firm since 2004 and has been appraising in Southern California since 1981. She has specialized in valuation and consulting services related to public agency T 818.290.5400 clients and for major, investment grade commercial properties, e.g., office, industrial, retail, F 818.290.5401 multifamily, land, and special purpose properties, for over 30 years. Ms. Finestone previously held senior positions with Finestone & Associates and Cushman & irr.com Wakefield of California. At Finestone & Associates from 1996 through 2003, she specialized in real estate appraisal, valuation and consulting services with focus on preparation of appraisals for industrial, commercial, and special purpose properties. This focus included consultation services, due diligence work, litigation support, and expert witness designation. At Cushman & Wakefield of California, Inc. from 1983 through 1996, Ms. Finestone was in the Los Angeles Appraisal Services Group, specializing in real estate valuation and consulting. By the end of her tenure, she was responsible for the management the Los Angeles Valuation Advisory Services Group, including preparation and review of appraisal reports, business development, consulting and litigation work, management and coordination of multi property assignments and national accounts, professional staff development, and support staff supervision. Ms. Finestone's clients include public agencies, right of way firms, lenders, institutional investors, major corporations, law firms, and individual property owners. Her services include a wide range of specialized studies including value diminution (from both internal and external influences), market demand, feasibility, severance damages and project benefits, investment analysis, assessment allocation, reuse analysis, and the valuation of partial interests including leasehold, leased fee, possessory interests, and minority interests. Recent assignments include the 22 flowage easements for the State of California Department of Water Resources, 35 easements related to a culvert upgrade project in Los Angeles County, more than 100 partial acquisitions related to the California High Speed Rail Authority Project, 39 properties for the SR 91 Improvement Project, 10 properties for the Devore Interchange Improvements Project, and 28 properties for the Lakeview and Tustin Avenues/Rose Drive Grade Separation Project. Ms. Finestone has also been active in the appraisal of large tracts of mitigation land for Orange County Transportation Authority (OCTA). She has been involved in the appraisal of a number of mitigation parcels in Northern California for the High Speed Rail Authority. These involved land banks and conservation easements. Ms. Finestone also has significant experience valuing transportation corridor properties and pipeline easements. She has been extensively involved in valuing and doing counseling and consulting work related to rail corridors and crossings as part of the proposed high speed rail project in Central California. In addition, she has also appraised a number of federally owned properties, including the West Los Angeles Federal Building, federal courthouses in Los Angeles and Orange counties, and two Army lr bfinestone@irr.com - 818.290.5455 13-181 Integ Beth B. Finestone MAI AI-GRS FRICS CRE Loss Angeles Realty Resources � � � � Los Angeles Experience (Cont'd) 16030 Ventura Boulevard Suite 620 Reserve centers in the Los Angeles area. Much of this work has included a consulting Encino, CA 91436-4473 component to aide clients in making feasibility and reuse studies of their properties. Ms. Finestone also has significant appraisal review experience and has reviewed large numbers of T 818.290.5400 appraisals for Hatch Mott MacDonald, OCTA, City of Ontario, and the Los Angeles Unified School F 818.290.5401 District. Professional Activities & Affiliations irr.com Appraisal Institute, Member (MAI) , December 1988 Appraisal Institute, General Review Specialist, June 2015 Royal Institute of Chartered Surveyors, Fellow (FRICS) , August 2008 Member: International Right of Way Association Counselor of Real Estate (CRE) , November 2015 Licenses California, Certified General Real Estate Appraiser, AG004030, Expires August 2020 Education M.B.A., Pepperdine University B.S., Kinesiology, University of California, Los Angeles Successfully completed numerous real estate and related courses and seminars sponsored by the Appraisal Institute, accredited universities, and others Currently certified by the Appraisal Institute's program of continuing education for its designated members Qualified Before Courts & Administrative Bodies Superior courts in California within the counties of Los Angeles and Orange Tax Appeal Boards of Los Angeles and San Diego counties Arbitration testimony at hearings in Los Angeles County Miscellaneous Los Angeles Business Journal 2009 Nominee for Executive of the Year — Women Making a Difference, May 2009 Designated one of Real Estate Southern California's 2006 Women of Influence, October 2006 lr bfinestone@irr.com - 818.290.5455 13-182 gra Thomas G. Richardson L seAngelesltyResources Experience 16030 Ventura Boulevard Suite 620 Mr. Richardson, Senior Analyst, began his career in real estate appraisal in 2012 and joined Encino, CA 91436-4473 INTEGRA REALTY RESOURCES — LOS ANGELES in 2015. His responsibilities with the firm include researching property sale and lease transactions; interviewing buyers, sellers, investors, tenants, T 818-290-5400 and brokers with regard to the details of those transactions; analyzing and documenting F 818-290-5401 economic and real estate market conditions; examining zoning, general plan, and other land -use control documents as applicable to appraisal assignments; and incorporating the presentation of his research efforts in appraisal reports. irr.com In addition, his experience encompasses appraisal reports of multifamily residences, single and multitenant commercial and industrial properties, including shopping centers, office buildings, warehouses, retail and industrial condominiums, mixed-use commercial and residential buildings, religious facilities, and various categories of land. His appraisal work has also addressed the impact to property value caused by various internal and external influences. His recent appraisal work for right -of -way -related purposes includes assignments for the 1-405 Improvement Project, Culver -University Improvement Project, Regional Connector Transit Project, Century Boulevard Mobility Improvement Project, Riverside Transmission Reliability Project, Centennial Corridor Project, and California High -Speed Rail Authority. Professional Activities & Affiliations Candidate for Designation: Appraisal Institute, Southern California Chapter Licenses California, Certified General Real Estate License, 3004940, Expires November 2019 Education B.A., History, University of California, Los Angeles Completed the following courses and seminars: Advanced Concepts & Case Studies Basic Appraisal Principles Basic Appraisal Procedures Business Practices and Ethics Commercial Appraisal Review Expert Witness for Commercial Appraisers General Appraiser Income Approach, Part I General Appraiser Income Approach, Part II General Appraiser Market Analysis and Highest & Best Use Advanced Market Analysis and Highest & Best Use General Appraiser Report Writing and Case Studies General Appraiser Sales Comparison Approach General Appraiser Site Valuation and Cost Approach Real Estate Finance, Statistics, and Valuation Modeling Uniform Standards of Professional Appraisal Practice Quantitative Analysis Advanced Income Capitalization trichardson@irr.com - 818-290-5408 13-183 About IRR Integra Realty Resources, Inc. (IRR) provides world-class commercial real estate valuation, counseling, and advisory services. Routinely ranked among leading property valuation and consulting firms, we are now the largest independent firm in our industry in the United States, with local offices coast to coast and in the Caribbean. IRR offices are led by MAI -designated Senior Managing Directors, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets. This experience, coupled with our understanding of how national trends affect the local markets, empowers our clients with the unique knowledge, access, and historical perspective they need to make the most informed decisions. Many of the nation's top financial institutions, developers, corporations, law firms, and government agencies rely on our professional real estate opinions to best understand the value, use, and feasibility of real estate in their market. Local Expertise... Nationally! irr.com irr© 13-184 Addendum B Comparable Data Hypothetical Property Near Intersection of Placentia Avenue and Production Place irr. 13-185 Land Sale Profile Location & Property Identification Property Name: 4412 East La Palma Avenue Sub -Property Type: Commercial, Industrial Address: 4412 E. La Palma Ave. City/State/Zip: Anaheim, CA 92807 County: Orange Submarket: North Market Orientation: Suburban IRR Event ID: 2267342 Sale Information Sale Price: $2,200,000 Effective Sale Price: $2,200,000 Sale Date: 07/10/2019 Sale Status: Closed $/Acre(Gross): $2,360,009 $/Land SF(Gross): $54.18 Grantor/Seller: 4412 MG Enterprises, LLC Grantee/Buyer: Superior Investment Zoning Code: Properties, LLC Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Exposure Time: 7 (months) Financing: Cash to seller Document Type: Deed Recording No.: 2019000245967 Verified By: Thomas G. Richardson Verification Date: 08/28/2019 Confirmation Source: Jeff Gahagan, Lee & Associates (714) 564-7174 Verification Type: Confirmed -Seller Broker Sale Analysis Entitlement @ T.O.S.: No Improvement and Site Data 4412 East La Palma Avenue Sale No. 1 MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/Parcel ID: 346-431-05 Acres(G ross): 0.93 Land-SF(Gross): 40,608 Shape: Rectangular Topography: Level Corner Lot: No Zoning Code: SP2015-1-DA1 Zoning Desc.: Anaheim Canyon Specific Plan -Industrial Source of Land Info.: Public Records Comments The property is located mid -block along the south side of East La Palma Avenue, just west of Lakeview Avenue. Surrounding uses include industrial to the west, north, and east, and a water retention basin to the south. The seller's broker Jeff Gahagan, with Lee & Associates, confirmed that the transaction was arm's-length and that no conditions affected the sale price. Mr. Gahagan indicated that the buyer purchased the property in order to use the site as a contractor's yard. No entitlements were in place at the time of sale. The site previously sold in November 2017 for $1,868,000 or $46.00/SF and Mr. Gahagan indicated that the increase in price since this transaction was based on improving market conditions. This represents an increase of 17.8% or 11.2% on an annual basis. 01rr 13-186 Land Sale Profile Location & Property Identification Property Name: 8401 Monroe Avenue Sub -Property Type: Commercial, Industrial Address: 8401 Monroe Ave. City/State/Zip: Stanton, CA 90680 County: Orange Submarket: West Market Orientation: Suburban IRR Event ID: 2164635 Sale Information Sale Price: $685,000 Effective Sale Price: $685,000 Sale Date: 10/31/2018 Sale Status: Closed $/Acre(Gross): $2,533,284 $/Land SF(Gross): $58.16 Grantor/Seller: Thomas C. Lewis Grantee/Buyer: Rafael B. Rangel and Susan H. Terrell Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Document Type: Deed Recording No.: 393872 Verified By: Aaron S. You Verification Date: 11/29/2018 Verification Type: Secondary Verification Improvement and Site Data MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/ParcelID: 126-531-06 Acres(Gross): 0.27 Land-SF(Gross): 11,777 Shape: Irregular Topography: Level Sale No. 2 Corner Lot: No Zoning Code: IG Zoning Desc.: Industrial General Source of Land Info.: Public Records Comments This property is located on the north side of Monroe Avenue and west of Dale Avenue. It is slightly irregular in shape with level topography. The property is a vacant lot with asphalt paving and a retractable chain link rolling gate. 8401 Monroe Avenue 01rr 13-187 Land Sale Profile Location & Property Identification Property Name: 8551 Edison Dr. Sub -Property Type: Commercial, Industrial Address: City/State/Zip: County: Submarket: Market Orientation IRR Event ID: Sale Information 8551 Edison Dr. Huntington Beach, CA 92646 Orange RAM Suburban 01.1YLCW Sale Price: $2,400,000 Effective Sale Price: $2,400,000 Sale Date: 05/31/2018 Sale Status: Closed $/Acre(Gross): $3,074,952 $/Land SF(Gross): $70.59 Grantor/Seller: SAAH, LLC Grantee/Buyer: Samir S. Botros and Nahed S. Lu ka Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Exposure Time: 4 (months) Financing: Cash to seller Document Type: Deed Recording No.: 2018000199883 Verified By: Thomas G. Richardson Verification Date: 08/27/2019 Confirmation Source: Costar, Deed, and Public Records Verification Type: Confirmed -Other Sale Analysis Entitlement @ T.O.S.: No Improvement and Site Data Legal/Tax/ParcelID: 148-121-19 & -20 8551 Edison Dr. Sale No. 3 Acres(G ross): 0.78 Land-SF(Gross): 34,000 Zoning Desc.: IG, Industrial General Source of Land Info.: Public Records Comments The property is located along the north side of Edison Drive, just east of Newland Street. Surrounding land uses include industrial to the west, south, and east, and a flood channel to the north. The transaction was reportedly arm's-length and no conditions affected the sale price. There were several buildings on the site that were in tear -down condition at the time of sale that did not contribute any value to the property. The buyer owns a business on the same block and intends to potentially expand their existing business at some point in the future. The buyer did not pay a premium to assemble the site to their adjacent property. Lirir 13-188 Land Sale Profile Location & Property Identification Property Name: 18796 Stewart Lane Sub -Property Type: Commercial, Industrial Address: City/State/Zip: County: Submarket: Market Orientation IRR Event ID: Sale Information 18796 Stewart Ln. Huntington Beach, CA 92648 Orange West 1-71 -- •+. r-. Suburban . � Sale Price: $2,100,000 Effective Sale Price: $2,100,000 Sale Date: 02/15/2017 Sale Status: Closed $/Acre(Gross): $2,102,944 $/Land SF(Gross): $48.28 $/Acre(Usable): $2,102,944 $/Land SF(Usable): $48.28 Grantor/Seller: Robert P. Mandic, Jr. and Constance L. Mandic Grantee/Buyer: Thunder Storage Company, LLC Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Terms of Sale: Conventional Document Type: Deed Recording No.: 64446 Verified By: Jared M. DeCamp Verification Date: 06/19/2017 Confirmation Source: Robert (Bob) Bolen - Huntington Beach Realty, Inc. - 714-960-8541 Verification Type: Confirmed -Seller Broker Improvement and Site Data Legal/Tax/ParcelID: 111-110-02 18796 Stewart Lane Sale No. 4 M Acres(Usable/Gross): 1.00/1.00 Land -S F (U sa b I e/Gross) : 43,500/43,500 Usable/Gross Ratio: 1.00 Shape: Rectangular Topography: Level Corner Lot: No Zoning Code: SP -9 Zoning Desc.: General Industrial Source of Land Info.: Public Records Comments This property is located 150 feet south of Ernest Drive on the east side of Stewart Lane in the city of Huntington Beach. The site had an environmental report completed and it was clear of any known issues at the time of sale. The buyer intended to develop the site to a storage facility. The sale was confirmed with the listing broker, Robert (Bob) Bolen with Huntington Beach Realty. Lirir 13-189 Land Sale Profile Location & Property Identification Property Name: 1205 North Kraemer Boulevard Sub -Property Type: Commercial, Industrial Address: 1205 N. Kraemer Blvd. City/State/Zip: Anaheim, CA 92806 County: Orange Submarket: North Market Orientation: Suburban IRR Event ID: 1424233 Sale Information Sale Price: $2,653,000 Effective Sale Price: $2,653,000 Sale Date: 07/27/2016 Sale Status: Closed $/Acre(Gross): $2,178,161 $/Land SF(Gross): $50.00 Grantor/Seller: CK Limited Partnership Grantee/Buyer: Francisco D. Ceja and Alicia M. Comments Ceja, Trustees of the Ceja Family Trust Assets Sold: Real estate only Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Document Type: Deed Recording No.: 343063 Verified By: Aaron S. You Verification Date: 01/03/2019 Confirmation Source: Luke Hudson with Lee & Associates - (714) 564-7154 Verification Type: Confirmed -Seller Broker Improvement and Site Data Sale No. 5 Acres(Gross): 1.22 Land-SF(Gross): 53,056 Shape: Rectangular Topography: Level Corner Lot: Yes Zoning Code: SP 2015-1 Zoning Desc.: Anaheim Canyon Specific Plan Source of Land Info.: Public Records Comments The property is located on the northwest corner of Kraemer Boulevard and Coronado Street. It is rectangular in shape with level topography. According to the seller's broker, Luke Hudson with Lee & Associates, the property sold as vacant land. The buyer purchased the property to develop a small industrial building and to park their food catering trucks. MSA: Los Angeles -Long Beach -Anaheim, CA Legal/Tax/Parcel ID: 344-351-30 1205 North Kraemer Boulevard 01rr 13-190 Land Sale Profile Location & Property Identification Property Name: 14391 Edwards Street Sub -Property Type: Commercial, Industrial Address: 14391 Edwards St. City/State/Zip: Westminster, CA 92683 County: Orange Submarket: West Market Orientation: Suburban IRR Event ID: 1507859 Sale Information Sale Price: $1,025,000 Effective Sale Price: $1,025,000 Sale Date: 01/22/2016 Sale Status: Closed $/Acre(Gross): $2,654,065 $/Land SF(Gross): $60.92 $/Acre(Usable): $2,654,065 $/Land SF(Usable): $60.92 Grantor/Seller: Cynthia Major, Suzanne Decker & Jennifer Solaimani Grantee/Buyer: Erik A. and Cristy L. Johnson Property Rights: Fee Simple of Interest Conveyed: 100.00 Financing: Cash to seller Terms of Sale: Conventional Document Type: Deed Recording No.: 29788 Verified By: Jared M. DeCamp Verification Date: 06/14/2017 Confirmation Source: Tom Mulrooney - Ashwill Associates, Inc. - 714-456-0500 Verification Type: Confirmed -Buyer Broker Improvement and Site Data Legal/Tax/ParcelID: 195-293-13 Acres(Usa ble/Gross): 0.39/0.39 14391 Edwards Street Sale No. 6 Land-SF(Usa ble/Gross): 16,824/16,824 Usable/Gross Ratio: 1.00 Shape: Rectangular Topography: Level Corner Lot: Yes Zoning Code: M-1 Zoning Desc.: Light Industrial District Source of Land Info.: Public Records Comments This property is located at the southwest corner of Edwards Street and Maple Avenue. The site was marketed as a contractor's yard with industrial zoning, but there was a 1,200 square foot single-family residence on the site, along with other small buildings, that could provide rental income at the time of sale. The listing broker, Tom Mulrooney with Ashwill Associates, Inc., reported that the sale price was based on the land value and didn't consider the existing house to impact the sale price in either direction. Costar shows the sale price as $1,250,000, but the Grant Deed and the listing broker confirmed the sale price as $1,025,000. 01rr 13-191 Land Sale Profile Location & Property Identification Property Name: 1775-1781 Monrovia Ave. Sub -Property Type: Commercial, Industrial Address: 1775-1781 Monrovia Ave. City/State/Zip: Costa Mesa, CA 92627 County: Orange Submarket: Airport Market Orientation: Suburban IRR Event ID: 2267554 Sale Information Listing Price: $2,200,000 Effective Listing Price: $2,200,000 Listing Date: 08/28/2019 Sale Status: Listing $/Acre(Gross): $3,943,359 $/Land SF(Gross): $90.53 Grantor/Seller: Jean E. Hidden Trust Grantee/Buyer: TBD Assets Sold: Real estate only Property Rights: Fee Simple Financing: Cash to seller Verified By: Thomas G. Richardson Verification Date: 08/28/2019 Confirmation Source: Steve Eberle, Eberle Company (949) 350-3231 Verification Type: Confirmed -Seller Broker Sale Analysis Entitlement @ T.O.S.: No Improvement and Site Data Legal/Tax/Parcel ID: 424-361-20 & -21 Acres(Gross): 0.56 Land-SF(Gross): 24,300 Zoning Desc.: MG, General Industrial Source of Land Info.: Public Records 1775-1781 Monrovia Ave. Sale No. 7 Comments This active listing is located along the west side of Monrovia Avenue, between West 18th Street and Sunset Drive. It is surrounded by industrial uses to the east, north, and west, and a mix of industrial and single-family residential to the south. Steve Eberle confirmed the asking price and indicated that he is currently negotiating with two buyers at a price just below $2,000,000. The site is currently improved with three single-family residences that are generating interim income until the property is redeveloped into an industrial use. Mr. Eberle indicated that there are no entitlements for an industrial use. Lirir 13-192