APPRAISAL REPORT PROPERTY OF ROLLINGWOOD REAL ESTATE LLC nd Street, SW Washington, DC VALUED AS OF. April 9, 2014 PREPARED FOR

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1 APPRAISAL REPORT PROPERTY OF ROLLINGWOOD REAL ESTATE LLC nd Street, SW Washington, DC VALUED AS OF April 9, 2014 PREPARED FOR The District of Columbia c/o Letwich & Ludaway, LLC 1400 K Street, NW, Suite 1000 Washington, DC Parli Appraisal, Inc Chain Bridge Road, Suite 207, Fairfax, Virginia 22030

2 April 26, 2014 Thomas D. Bridenbaugh, Esq. Letwich & Ludaway, LLC 1400 K Street, NW, Suite 1000 Washington, DC Re: Property of Rollingwood Real Estate, LLC nd Street, SW Washington, DC Dear Mr. Bridenbaugh: In response to your request, we have completed an appraisal of the property owned by Rollingwood Real Estate, LLC, located at nd Street, SW, Washington, DC. The subject property consists of one tax parcel with a legal description of Square 0605 Lot The purpose of this appraisal is to develop an opinion of the current market value of the identified real estate. The identified property is part of the proposed assemblage for the new DC United Soccer Stadium; however, this fact is to be disregarded and the property valued as-if the stadium were not proposed. We will develop an opinion of market value for the property as if the project did not exist. Letwich & Ludaway, LLC on behalf of The District of Columbia is our client and the intended user of our appraisal and report. We understand that it intends to use this appraisal and report to assist in possible purchase of the property. The function of the appraisal is to provide a market value estimate for compensating the property owner for the property rights acquired according to District Law and the United States Constitution. We prepared this appraisal in conformance with the requirements of the Uniform Appraisal Standards for Federal Land Acquisitions (Interagency Land Acquisitions Conference 2000). In addition, the report is in conformance with the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute.

3 Thomas D. Bridenbaugh, Esq. April 15, 2014 Page 2 of 2 Our opinion of market values for the subject property under two different assumptions is effective as of April 9, The concluded values are subject to the assumptions and limiting conditions contained in our report. In our opinion, the market value of the subject property as of April 9, 2014, assuming that the existing lease can be terminated in five years, is: FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS ($4,800,000) Furthermore, it is our opinion that the market value of the subject property as assuming the lease is in effect until its reported termination date of of April 9, 2014, THREE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($3,650,000) We appreciate the opportunity to be of service in this appraisal assignment. We will welcome any questions from designated users of the report if issues arise that require clarification. Respectfully submitted, PARLI APPRAISAL, INC. Richard L. Parli, MAI President

4 TABLE OF CONTENTS THE APPRAISAL PROBLEM... 1 PROPERTY APPRAISED... 2 PURPOSE OF APPRAISAL... 2 INTENDED USE and INTENDED USER... 2 REPORT DATE and VALUATION DATE... 3 STATEMENT OF OWNERSHIP... 3 PROPERTY AGREEMENTS... 3 REAL PROPERTY ASSESSMENTS AND TAXES... 3 SCOPE OF APPRAISAL... 5 OPERATIONAL DEFINITIONS... 6 ASSUMPTIONS AND LIMITING CONDITIONS... 7 CERTIFICATION... 9 LOCATION DESCRIPTION....9 Residential Overview PROPERTY ANALYSIS VALUATION Comparable Land Sales Analysis of Comparable Land Sales FINAL OF OPINION OF VALUE ADDENDA APPRAISER S QUALIFICATIONS

5 SUMMARY OF FACTS AND CONCLUSIONS Property Name: Project Numbers: Rollingwood Real Estate LLC Property Federal: Not Applicable District: Not Applicable Address: nd Street, SW, Washington, DC Property Location: West of South Capitol Street SW; at the northeast corner of the intersection of 2 nd Street, SW and S Street, SW Tax Map Number: Square 0650; Lot 0007 FEMA Flood Hazard Map Number: B and B: Zone C, Minimal flood potential Legal Description: Square 0650; Lot 0007 Owner of Record: Land Area: Rollingwood Real Estate LLC 25,612 square feet ( acres) Improvements: Zoning: Utilities: Environmental Considerations Property Interests Appraised: Improved with 1- and 2-story reinforced concrete warehouse building built in 1972, containing 14,870 square feet, 12 to 14 foot ceiling heights, with 2,230 square feet of office. CR/CG zone district Development is subject to Zoning Commission review Public water and sewer, electric, natural gas, and telephone are available No environmental studies are known to have been conducted. Fee Simple Highest and Best Use: Class B Multifamily/Retail project to FAR of 7.2 Effective Date of Value: April 9, 2014 Concluded Market Value: Assuming a 5 year hold: Assuming lease runs to term: $4,800,000 $3,650,000

6 AERIAL VIEW OF nd STREET, SW

7 THE APPRAISAL PROBLEM The appraisal problem concerns a 25,612 square foot ( acres) parcel bounded by 2 nd Street, S Street, right-of-way for Potomac Avenue, and industrial property owned by others in southwest Washington, DC. It is directly across 2 nd Street, SW from the National Defense University of Fort McNair, three blocks west of South Capitol Street, four blocks west of the Washington Nationals Stadium, and four blocks north of the Anacostia River. The subject property is on the western edge of the redeveloping Capitol Riverfront area surrounding the Nationals Stadium. The subject property has the following unusual issues that we must address in this valuation assignment: 1) The area surrounding the Nationals Stadium known as the Capitol Riverfront area is undergoing extensive mixed use redevelopment with multifamily, office, hotel, retail/restaurant, and entertainment uses 2) The property falls under the Capital Gateway zoning overlay area and all development is subject to review and approval for projects consistent with the Comprehensive Plan 3) Zoning overlays provide significant density upgrades for incorporating residential and affordable dwelling components. 4) The site is in the midst of a historically heavy industrial area and some nearby sites have required environmental cleanup, but no environmental study is known to have been conducted on the subject site. 5) The District of Columbia intends to acquire property rights in the subject property for the DC United Soccer Stadium. The fact that the subject property may be subject to purchase by The District of Columbia was public knowledge in April Nonetheless, the scope-of-project rule dictates that the project for which the property rights are being taken be disregarded in the value. The appraisal problem is to estimate market value of the property rights while disregarding the possible development of the soccer stadium. The property is reportedly under lease that extends possibly to January We have been asked to render our opinion of market value if the lease can be terminated early and if the lease must run to full term. We were not provided with a copy of the lease nor a lease summary; however, we have obtained lease information from a party considered reliable and have based our analysis on this information. If additional details of the lease are made available, this valuation may be subject to change. The District Of Columbia Rollingwood Real Estate LLC Page 1

8 PROPERTY APPRAISED The subject property consists of one tax parcel containing a total of 25,612 square feet ( acres) of CR/CG zoned land. The property does not have an approved PUD development plan. It is located in Ward 6, Southwest Neighborhood Cluster 9, and Advisory Neighborhood Commission ANC 6d, and situated at the corner of 2 nd Street, SW and S Street, SW, between South Capitol Street SW and Fort McNair. It is within the Capitol Gateway Overlay District and the Anacostia Waterfront Initiative Area. USPS address: nd Street, SW Washington, DC Tax Map Number: Square 0605; Lot 0007 PURPOSE OF APPRAISAL The purpose of the appraisal is to estimate the fair market value of the landowner s rights acquired as defined by the District Law, as follows: Fair market value is the highest cash price that the property would have brought at the time of the taking, considering the property's highest and most profitable use, assuming: (1) the property was offered for sale on the open market; (2) the property was left on the market for a reasonable time to find a buyer; (3) the buyer wanted to buy the property but was not forced to buy it; (4) the seller wanted to sell the property but was not forced to sell; (5) both the buyer and the seller knew of all the favorable and unfavorable circumstances and facts about the property; and (6) both the buyer and the seller knew the property's current use and all other potentially suitable uses. The fair market value of the property should be determined in view of the most valuable use or uses for which the property reasonably can or may be put, and for which there is a demand. The most valuable use or uses to which the property can or may be put includes either some existing use, or a use which is so reasonably likely to arise in the near future, that the availability of the property for that use would affect its market value. Our opinion of value will be in terms of all cash to the seller. INTENDED USE and INTENDED USER Letwich & Ludaway, LLC on behalf of The District of Columbia is our client and the intended user of our appraisal and report. It is our understanding that our client intends to use this appraisal to assist in possible purchase of the property. The function of the report is to provide a FMV estimate for compensating the property owner for the acquisition of property rights acquired according to the United States Constitution, Amendment V, that reads in part, nor shall private property be taken for public use, without just compensation. The District Of Columbia Rollingwood Real Estate LLC Page 2

9 REPORT DATE and VALUATION DATE We completed the appraisal report on April 15, 2014 the report date. The effective date of value, or the valuation date, is April 9, The property was inspected on the effective valuation date. STATEMENT OF OWNERSHIP Title to the property is in the name of Rollingwood Real Estate LLC who purchased it by Special Warranty Deed on February 7, 2011 from Enrique Lyon for $2,175,000 as shown in District of Columbia land records recorded at document Enrique Lyon had purchased the property on September 20, 2004 from Federal Center Plaza Corporation as Trustee for The Donohoe Profit Sharing/401(K) Savings Plan for $2,000,000 as shown in District of Columbia land records recorded at document The seller held financing of $1,675,000 (83.75%) recorded in a Purchase Money Deed of Trust and Security Agreement shown in District of Columbia land records at document PROPERTY AGREEMENTS To the best of our knowledge, the property is not currently listed or offered for sale, and is not under contract, or option. However, based on discussions with the leasing broker, the entire property is fully leased to a single tenant as follows: o Leased to Capital Bikeshare which operates a bike share system in the Washington DC metropolitan area with 140 stations and 1,200 bikes. o Annual lease rate of $12/SF. o Annual operating expense reimbursement of $3/SF. o Term of 10 years beginning in late 2011/early PROPERTY RIGHTS APPRAISED As shown above, the property is reportedly under lease. Therefore, the property rights appraised in this valuation are the leased fee interest. The District Of Columbia Rollingwood Real Estate LLC Page 3

10 REAL PROPERTY ASSESSMENTS AND TAXES The property s ad valorem tax burden for Tax Year 2014 is $109, District of Columbia ad valorem tax rate for commercial and industrial real property, including hotels and motels, is $1.65 per $100 of assessed value for the first $3 million of assessed value and $1.85 per $100 of assessed value for assessed value greater than $3 million. Total assessed value is $6,240,020. Total assessed value for the land is $5,378,520 or $210 per square foot of land. Square/Lot Land Imp Total $Land/sf $5,378,520 $861,500 $6,240,020 $ Tax $109, The District Of Columbia Rollingwood Real Estate LLC Page 4

11 SCOPE OF APPRAISAL This appraisal is intended to conform to the reporting standards of the Uniform Appraisal Standard for Federal Land Acquisitions (UASFLA). 1) We inspected the property most recently on April 9, Photographs included in this report were taken on that date. 2) We based regional, Washington, DC, and neighborhood data on information and data in the Parli Appraisal library and on Washington, DC, land records, mapping, planning, zoning, and assessment data from District offices. We obtained economic development data and information from the Office of the Deputy Mayor for Planning and Economic Development. We based our neighborhood description on demographic data and our physical observation and inspection. 3) We based property information and descriptions on our personal inspection of the site and neighborhood, information from the DC Office of Planning (DCOP), other sources of relevant information. 4) We collected market data used in developing our approaches to value from the Parli Appraisal office files, other appraisers, brokers, builders, developers, property owners and managers, assessors, lenders, and other persons knowledgeable about the subject property and its market segment. 5) We studied and analyzed local, regional, and national trends related to and affecting office, residential, and commercial land in the subject property s market area. We developed information about the supply and demand for developable land based on an analysis of local data regarding construction, sale, and absorption of mixed-use projects. 6) We developed an estimate of the highest and best use for the subject property using the data and information compiled in the steps described above. 7) We made an extensive survey of developable land and sites in southeast and southwest Washington and their surrounding area using the Washington, DC, Real Property Tax Database and the CoStar database to indentify recently negotiated sales and development activities affecting properties similar to the subject. We collected Information about the comparable sales from Washington, DC, Real Property tax records, Washington, DC, Recorder of Deeds data, CoStar data, and persons knowledgeable about them and their market segment. When possible, we confirmed comparable sale data with a principal. 8) We used only the sales comparison approach to develop and form opinions of the parent property s unit value per FAR foot and its market value. 9) We developed our final opinions of market value and the market value of the property interests to be acquired after assembling and analyzing the data and information described in this scope of work for the appraisal. 10) We are satisfied that our scope of the work is sufficient to develop credible assignment results and that other appraisers would agree. The District Of Columbia Rollingwood Real Estate LLC Page 5

12 OPERATIONAL DEFINITIONS This appraisal is intended to conform to the Uniform Standards of Professional Appraisal Practice (USPAP), DDOT Right of Way Policies and Procedures, and the Uniform Appraisal Standards for Federal Land Acquisitions (Interagency Land Acquisitions Conference 2000). As such, we have used the following definitions: Fair Market Value is the highest cash price that the property would have brought at the time of the taking, considering the property's highest and most profitable use, assuming: (1) the property was offered for sale on the open market; (2) the property was left on the market for a reasonable time to find a buyer; (3) the buyer wanted to buy the property but was not forced to buy it; (4) the seller wanted to sell the property but was not forced to sell; (5) both the buyer and the seller knew of all the favorable and unfavorable circumstances and facts about the property; and (6) both the buyer and the seller knew the property's current use and all other potentially suitable uses. 1 For the purpose of this appraisal, the terms Market Value and Fair Market Value are synonymous and may be used interchangeably. Highest and Best Use (District of Columbia): The fair market value of the property should be determined in view of the most valuable use or uses for which the property reasonably can or may be put, and for which there is a demand. The most valuable use or uses to which the property can or may be put includes either some existing use, or a use which is so reasonably likely to arise in the near future, that the availability of the property for that use would affect its market value. 2 Fee Simple Estate: 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. 3 1 District Department of Transportation, Right of Way Policies and Procedures Manual (June 9, 2011), Chapter 6, Section 6.8, page 6-11, 2 District Department of Transportation, Right of Way Policies and Procedures Manual (June 9, 2011), Chapter 6, Section 6.8, page 6-11, 3 Dictionary of Real Estate Appraisal, page 113. The District Of Columbia Rollingwood Real Estate LLC Page 6

13 ASSUMPTIONS AND LIMITING CONDITIONS We prepared this appraisal report with the following general assumptions: 1) No responsibility is assumed for the legal description or for matters including legal or title consideration. Title to the property is assumed to be good and marketable unless otherwise stated. 2) The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 3) Responsible ownership and competent property management are assumed. 4) The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. 5) All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property. 6) It is assumed that there are no hidden or apparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 7) It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report. 8) It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined, and considered in the appraisal report. 9) It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 10) It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. 11) Unless otherwise stated in the report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraisers become aware of such during the appraisers inspection. The appraisers have no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraisers, however, are not qualified to test such substances or conditions. If the presence of such substances, or environmental conditions, may affect the value of the property, the value estimated is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss of value. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them. 12) The Americans with Disabilities Act (ADA) became effective January 26, We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. The District Of Columbia Rollingwood Real Estate LLC Page 7

14 In preparing this appraisal report, we did make the following extraordinary assumptions: 1) Other than as specifically noted in the report, we are not aware of any other easements affecting the property and specifically assume that there are none that have a negative effect on value. 2) We have based our value conclusions on terms specified in a lease that we have not seen. We assume the terms stated in this report are correct. however, if additional details of the lease are made available, this valuation may be subject to change. In preparing this appraisal report, we base our value conclusions on the following hypothetical condition: 1) We are aware that The District of Columbia wishes to acquire the subject property for development as part of the DC United Soccer Stadium and may pursue eminent domain proceedings to acquire it. Our appraisal specifically does not consider the impact of possible eminent domain proceedings may have on the subject property. 2) The impact on the neighborhood of the possible development of a soccer stadium has been ignored. We prepared this appraisal report with the following general limiting conditions: 1) The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 2) Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraisers or through a Freedom of Information Act request, and in any event only with proper written qualification and only in its entirety. 3) The appraisers herein, by reason of this appraisal, are not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made. We acknowledge that certain prior arrangements have been made relating to this assignment. 4) Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or the firm with which the appraisers are connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraisers. The District Of Columbia Rollingwood Real Estate LLC Page 8

15 CERTIFICATION I certify that, to the best of our knowledge and belief: 1) I made personal inspections of the property that is the subject of this report and that we afforded the landowner(s) the opportunity to accompany us at the time of the inspection. 2) I have made a personal field inspection of the comparables sales relied upon in making the appraisal. 3) I have not performed an appraisal of the property that is the subject of this report within the threeas represented by year period immediately preceding acceptance of this assignment. 4) The subject and the comparable sales relied upon in making the appraisal were the photographs contained in the report. 5) The statements of fact contained in this report are true and correct. 6) The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. 7) William B. Daubert provided significant real property appraisal assistance to the person signing this report. I certify that the so named is qualified to perform the tasks. 8) I have no present or prospective interest in the assets that are the subject of this report, and we have no personal interest or bias with respect to the parties involved. 9) My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of our client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. 10) I prepared this appraisal in conformance with the requirements of the Uniform Appraisal Standards for Federal Land Acquisitionss (Interagency Land Acquisitions Conference 2000), and with the Uniform Standards of Professional Appraisal Practice. 11) I understand that the appraisalal is to be used in connection with the possible acquisition of land for development of the DC United Soccer Stadium by The District of Columbia. 12) This appraisal has been made in conformity with the appropriate District laws, regulations, and policies and procedures applicable to appraisal of property for such purposes. 13) To the best of our knowledge, no portion of the value assigned to the property consists of items which are noncompensable under the established laws of the District. 14) I have not revealed the findings and results of this appraisal to anyone other than our client, and we will not do so until so authorized by or client, or until we are required to do so by due process of law, or until we are released from the obligations by having publicly testified to these findings. 15) The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 16) As of the date of this report, Richard L. Parli, MAI, has completed the continuing education program of the Appraisal Institute. 17) As of the date of this report, Richard L. Parli is a certified general real estate appraiser, licensed by the District of Columbia Appraiser Board, allowing the performance of real estatee appraisals within the District of Columbia. Richard L. Parli, MAI Certified General Real Estate Appraiser District of Columbia Certificate #GA The District Of Columbia Rollingwood Real Estate LLC Page 9

16 LOCATION DESCRIPTION The subject property is located in southwest Washington, DC, between Nationals Stadium and the Capitol River Front area on the east and Fort McNair on the west. The immediate area is known as Buzzard Point and defined by the Anacostia River on the east and Potomac River on the west. South Capitol Street is the main north/south roadway, while M Street and I-395/295 are the main east/west routes. The location is just over 1 mile south of the Capitol Building. Subject Location The Washington, DC Primary Metropolitan Statistical Area (PMSA) is part of the Baltimore- Washington Consolidated Metropolitan Statistical Area (CMSA). The CMSA is the fourth largest in the nation. The Washington, DC, PMSA includes the District of Columbia, the nation s capitol, and the surrounding suburban areas. There are five Maryland counties, eleven Virginia counties, six independent Virginia cities, and two West Virginia counties. An extensive transportation network serves the area including I-95, I-495, I-66, the Metrorail and MetroBus systems, the Virginia Railway Express (VRE) and the Maryland Transit Administration commuter rail (MARC) link Washington, DC, to the larger region. Washington National (Ronald Regan) Airport, Dulles International Airport in Virginia, and Baltimore-Washington International Airport in Maryland provide transportation linkage to the nation. CSX Transportation, Norfolk Southern Railway, and Canadian Pacific Railway provide freight rail service. Amtrak provides passenger rail service. The property is located in Ward 6 in Washington, DC on the west of South Capitol Street across from Nationals Stadium and 3 blocks west of the Frederick Douglass Memorial Bridge. South Capitol Street is a major arterial that links the subject property to the city center and to the regional The District Of Columbia Rollingwood Real Estate LLC Page 10

17 highway transportation network via the Frederick Douglass Memorial Bridge, Suitland Parkway, and I-295. The Navy Yard Metrorail Station provides access to the National s stadium and the new Southeast Federal Center adjoining the Washington Navy Yard. The Waterfront-SEU Metrorail Station provides secondary access. The Anacostia Waterfront Initiative (AWI) is a multi-agency effort to revitalize the Anacostia River waterfront. The area is commonly referred to as the Capitol Riverfront and includes the subject property. Construction of the new Washington Nationals Stadium has been a catalyst encouraging new office, residential, and supporting commercial and public development in the area. The AWI encompasses the entire length of the Anacostia River and includes the South Capitol Street Corridor and the Near Southeast as target areas. The subject property is within both these areas. The Subject goal of the AWI is a clean and vibrant waterfront with parks, recreation uses, and urban waterfront settings and to ensure that neighborhoods and people living along the Anacostia River share the social and economic benefits derived from a revitalized waterfront. Development activity in Capitol Riverfront area has been focused primarily east of South Capitol Street, surrounding National s stadium and extending to the Metro stop. Although little freestanding retail is currently present in the neighborhood, most residential and office buildings contain retail space on the first floor. Capitol Riverfront Complete (sq ft) development statistics are summarized below: 4 o o Approximately 8,300 residential units either exist or are planned for the area (2,427 existing with another 5,866 units scheduled for completion by 2017). Almost 2,170 of the proposed units targeted for a 2017 delivery are part of Forrest City Development s The Yards phase 2. Over million square feet of office space has been built in the area since 2000; an additional million square feet is proposed for delivery before Infrastructure Total Hotel Total Retail Total Residential Total Park Total Office Total Mixed-use Total Entertainment Total 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 Proposed (sq ft) Retail Total Residential Total Infrastructure Total TBD Total o Over 700 hotel rooms are planned (delivery before 2017), in addition to the recently completed 204- room Courtyard Marriott off M street, north of Nationals Stadium Retail Total Residential Total Office Total Mixed-use Total 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 4 Capitol Riverfront Business Improvement District; The District Of Columbia Rollingwood Real Estate LLC Page 11

18 The Capitol Riverfront, Navy Yard, and South Capitol corridor continue to be a focus for development interest. Recent activity in the market area includes: o o o o Onyx on First apartment building sold on June 25, 2013 for $82.25 million or $309,000 per unit for the 266 unit building. The Class A building was constructed in 2008 and has a gross building area 202,241 square feet, indicating an FAR for the half acre site of 9.0. The location is across from the Navy Yard Metrorail station. A 15,296 square foot hotel site sold on March 7, 2013 for $6,900,000 to develop a 167 unit hotel across N Street from Nationals Stadium. A 15,567 square foot hotel site sold on May 29, 2013 on the northeast corner of M and Half Street, SE for development of a Homewood Suites hotel. The price was $13,000,000 and included TDRs. A 29,626 square foot mixed use residential site at 1244 South Capitol Street, SE sold in December 2013 for $ per square foot. The South Capitol Street corridor is in the beginning phases of an estimated $1 billion project to replace the Frederick Douglass Memorial Bridge with a 6 lane bridge, create a new traffic oval at the Potomac Avenue intersection, and redesign sections of South Capitol Street into a scenic boulevard with improved traffic flows between I-395/Southwest Freeway to the north and the I- 295/Anacostia Freeway across the Anacostia River to the south. Phase 1 of this project is projected to be completed in The subject property will benefit from this project as shown on the aerial concept drawing. Now Outside Aggregate Storage Subject Now W/H & Concrete Batch Additionally, the DC government is moving forward with a 22-mile Priority Streetcar system which is projected to include a streetcar line into the Buzzard Point area in close proximity to the subject The District Of Columbia Rollingwood Real Estate LLC Page 12

19 property. The timing on this is estimated at no sooner than It is significant that directly across S Street from the subject property, Akridge Companies owns 9 acres of land planned for 2.7 million square feet of development and extending almost to the Anacostia River, which they purchased in Akdridge indicates that the Buzzard Point area has been substantially improved by the following events since their purchase of this 9 acres: Development of Nationals Park Removing elevated portion of South Capitol Street bridge. Shut down of the PEPCO power plant and removal of 2 large power generators. Current South Capitol Street Bridge and roadway redesign and proposed improvements. However, Akridge reported that extension of the Streetcar system into the immediate area will be the most important impact on their future development of the 9 acres of land. Generally, they are anticipating an ultimate build out of primarily residential uses with ground floor retail. The most recent development news includes a preliminary deal to construct a new 20,000-seat soccer stadium at Buzzard Point for the DC United Soccer team. The District of Columbia must fund land acquisition and infrastructure ($150 million) for the development to be realized. This appraisal concerns land which The District of Columbia may acquire as part of this deal. As stated earlier, a condition of this appraisal is to disregard the potential impact of this potential stadium deal on the subject property. Thus, it is valued as-if no DC United Stadium is to be built. Nationals DC United Subject Site The District Of Columbia Rollingwood Real Estate LLC Page 13

20 Residential Overview During the Great Recession, the Washington, DC metro stood out for its economic stability. Following the downturn, the metro area stood out for its rapid expansion. Stability and strength during those years drew apartment developers to the metro area, resulting in a massive building spree. Until recently, the DC apartment market had shrugged off the usual effects of elevated construction volumes. But now, as more projects are completing, increasing supply volumes have dampened fundamentals. In some market segments, development-related backtracking has been severe particularly on the pricing side of operations. One surprising element that separates DC from other hot-development markets is that the supply-induced slowdown at the top end of the market has carried down into middle- and lower-market product segments, which have seen flattening rent growth levels. One good sign, so far, is that apartment demand has accelerated, thanks to economic strength and very favorable demographic characteristics in the metro area. But even with such strong structural drivers, demand has not kept pace with supply. And the gap between demand and supply will likely widen next year, given that supply levels are scheduled to double over the next year. This will undoubtedly result in some near-term pain for the market. But the metro s structural drivers create a favorable long-term outlook. MFP Research reports the following current metro area condition: A sizable upturn in apartment completions that will hit at a time when job production has cooled somewhat should position Washington, DC among the nation s revenue growth laggards during MPF Research anticipates that the U.S. capital in fact will be the worst performer for revenue change across the country s really big metros, with declines in both occupancy and rent achievement combining for a total loss near 2%. 5 The elevated construction and federal spending cuts caused the Washington, D.C. metro area to slide to number 27 on Marcus & Millichap s 2014 National Apartment Index (NAI) Rank, down 10 places from 2013, the largest index decline. Marcus & Millichap anticipates that employers will add 58,100 jobs in 2014, an annual increase of 1.9%. In spite of this, the region s vacancy will rise to 5.9%, an annual increase of 80 basis points. Meanwhile, rent growth will slow down to 2% this year, from 2.6% in 2013, leading to an average rent of $1,590 per month. See adjacent graph. 6 Over the next two years, the apartment market could, 5 April 21, / html. April 21, 2014 The District Of Columbia Rollingwood Real Estate LLC Page 14

21 however, see some demand spill over from the tight condo market. Currently, most condo projects have less than 50 units and are unable to meet the growing demand for housing. As would-be owners wait for new projects to show up, some larger Class A apartment developments may be converted to condos, lessening the impact on apartment operations and meeting the demands of the for-sale condo market. 7 Market Area Analysis The subject market area is defined as the area between the Anacostia River and Washington Channel on the west and east and I-395 on the north. This area is shown in the following map: There are currently 10 multifamily buildings in the market area that were built after 1990 and contain at least 50 units. These are summarized in the following data: 8 Building Name Building Address Building Class Number Of Units Total Vacant Available Vacancy % Year Built Onyx on First st St SE A Sky House Phase II th St SW A Capper ACC Townhomes 900 5th St SE B Arthur Capper Senior I 900 5th St SE B at Capitol Yards 70 I St SE A Capitol Yards 100 I St SE A M Apartments 400 M St SE A Foundry Lofts 301 Tingey St SE A Camden South Capitol S Capitol St SW A Capitol Yards 909 New Jersey Ave SE A , % 7 Ibid. 8 CoStar, April 2014 The District Of Columbia Rollingwood Real Estate LLC Page 15

22 Note that the overall vacancy rate is just over 3% and that the only property west of South Capitol Street and south of M Street is the Camden South Capitol Apartments (see comments below). There are currently four buildings under construction, as summarized in the following table. Building Name Building Address Building Class Number Of Units Expected Completion River Parc st St SE A Twelve th St SE A Sky House East th St SW A Park Chelsea 880 New Jersey Ave SE A ,199 None of these buildings are in the southwest quadrant of M Street and South Capitol Street. There are 10 proposed multifamily projects in the market area, summarized as follows: Building Name Building Address Building Class Number Of Units Proposed Construction 3rd St SW A Northwest Waterfront Station th St SW A 365 The Wharf Apartments - Parcel Water St SW A Riverfront on the Anacostia 1650 S Capitol St SE A Capitol Yards 23 Eye St SE A I St SE A 220 Randall School Project 65 I St SW A Arthur Capper Carrollsburg 200 L St SE A St. Matthew's Residences 222 M St SW A New Jersey Ave SE A Parcel N Residential Tingey St SE A Akridge at Half Street 1299 Half St SE A New Jersey Ave SE A ,473 Note that only one project (St. Matthew s Residences) is located in the southwest quadrant of M Street and South Capitol Street. Although the market displays high occupancy (±97%), there are nearly 1,200 units under construction and an additional 4,473 units that could come on line by Demographics for the market area are summarized below: 9 9 STDBOnline.com; April, 2014 The District Of Columbia Rollingwood Real Estate LLC Page 16

23 The data indicates an increase in renter occupied households for the market area of 894 units in five years, or a growth rate of about 180 units per year. This increase in demand is well shy of the under-construction supply and is dwarfed by the proposed total that could come on line within the next four years. Capitol Riverfront Residential Market The Capitol Riverfront residential market grew strongly in years 2011/2012 and into 2013/2014. Population increased to an estimated 4000 residents by year end 2012 and is estimated to exceed 5,000 people by year-end Residential development consists almost entirely of multi-family Class A apartments; with a smaller amount of multi-family condo and townhouse projects. Average monthly rent and price statistics include: o Capitol Riverfront Average Effective Rental Rate: $2.72 per square foot o Washington DC Average Effective Rental Rate: $2.89 per square foot o Capitol Riverfront Average Condominium Price: $465 per square foot o Washington DC Average Condominium Price: $450 per square foot We note that effective rent increases have flattened in both the Capitol Riverfront market area and in the greater Washington DC area as well. In fact, rents have declined at a reported 8% from 2012, which saw substantial increases. This is attributable to recent increases in supply. Both vacancy and concessions remain low and long-term investor confidence remains high. The Capitol Riverfront market has strong developer interest. Recent additions include the Camden South Capitol Apartments (276 units). Over 648 new dwelling units are scheduled for completion in year A recent resident survey indicated that almost 67% of existing residents have household incomes exceeding $100,000. Despite strong income demographics, 14.5% of the existing and planned residential development will reportedly be leased or sold as affordable units below full market rates. The map below depicts existing and planned residential projects and unit counts. Eight other proposed projects are not shown in the adjacent figure: Camden South Capitol ( 276 o Jefferson/Axiom at Capitol Yards; JP Morgan Asset Management (695 units) o Akridge at Half Street; Akridge (280 units) o Square 701; Grosvenor (285 units) o Foundry Lofts; Forest City Washington (170 units) o The Yards Parcel N; Forest City Washington (325 units) o Twelve12 4 th Street; Forest City Washington (218 units) o RiverFront on the Anacostia; Florida Rock/MRP Realty (300 units) o Park Chelsea; WC Smith (430 units). Subject The Toll Brothers project (11b on previous map) obtained approval in July 2013 for a 13-story apartment building with 3-level below grade parking garage and rooftop pool next to the Velocity 10 Annual Report 2012; Capitol Riverfront BID. The District Of Columbia Rollingwood Real Estate LLC Page 17

24 Condos. The Camden South Capitol apartments, shown in the photo below, was completed in It consists of an 10 story building with 276 units and total floor area of 386,612 square feet. There are 10 unit types. Total site density approaches 9.4 FAR with 12 ADU s and three levels of underground parking. Model types and current face rents as reported by the leasing agent are shown in the following tables. Leasing for the Camden South Capitol was reported to have started May 1, Currently there are 197 units leased and occupied. This indicates an absorption pace of 6% per month. Leasing statistics and model types are shown in the adjacent tables. Leasing Started 5/1/2013 Units The performance to date for the Camden South Capitol project indicates a moderate/secondary residential market in the area west of South Capitol Street. Model Type Bedroom Bathroom Size (sf) A A B ,043 B ,197 B ,295 A A A S S04A Pace/Month Leased & Occupied 71.0% % Model Type Rent / Month Studio $1,700 Studio & Den $1,800 1 BedRoom $2,100 1 BedRoom & Den $2,500 2 BedRoom $3,000 2 BedRoom & Den $3,400 Parking $99/spc The District Of Columbia Rollingwood Real Estate LLC Page 18

25 PROPERTY ANALYSIS This section of the report provides a description of our analyses of the factors influencing the value of the subject property, our conclusion of the highest and best use, and our opinion of the market value as of the effective appr appraisal aisal date. The information presented in this section was derived from the subject's legal description, personal inspection, and information provided by the client and from The District of Columbia offices and departments. We inspected the subject property erty on April 9, We were unable to obtain access to the property and, so, we were unable to inspect the building interior. We viewed the property from surrounding streets. PHYSICAL CHARACTERISTICS The subject property consists of approximately 2 25,612 square feet with an address of nd Street, SW, Washington, DC, Parcel situated at the north northeast quadrant of S Street, SW and 2nd Street, SW with frontage on the undeveloped portion of Potomac Avenue, SW. Estimated property boundary m measurements are: 2nd Street 120 feet; S Street 155 feet; Potomac Avenue 180 feet; east boundary line 200 feet. Visibility: Average Access: Average Topography: Level Fort McNair is directly across 2nd Street to west. Utilities: The DC Water and Sewer Authority provides public water and sewer service to the area. Connections are available in Potomac Avenue. Other typical utilities are nearby and available also. The nearest fire hydrants are located within 500 feet from the subject property. Nationals Park Fort McNair South Capitol St Potomac Ave Subject S Street nd 2 Street Not in Flood Hazard area: A flood map is on the following page. According to Revised Preliminary FEMA FIRM Map B, B, effective November 15, 1985, the site is in Zone C of minimal flood potential The District Of Columbia Rollingwood Real Estate LLC Page 19

26 Potomac Avenue, SW extends west from South Capitol Street, ending at the intersection of 1 st Street, SW and R Street, SW, just before the block which contains the subject property. Discussions with representatives of the District Department of Transportation (DDOT) indicate that there is no plan to either extend Potomac Avenue or to vacate it. As it currently exists, the undeveloped right-of-way for Potomac Avenue is being used by a scrap metal transfer operation which occupies the adjoining site to the east. This site and the right-of-way contain mounds of scrap metal and dumpsters and truck trailers used to transfer the scrap metal to other locations for processing. There is no reason to expect that the scrap metal operation would be closed in the near future; and there is no reason to expect that the condition and use of this section of Potomac Avenue will be changed in the near future. Subject Property Potomac Avenue Scrap Metal Transfer Operation The District Of Columbia Rollingwood Real Estate LLC Page 20

27 Environmental No environmental studies of the property were provided to the appraisers and the appraiser is not aware of any environmental studies that have been completed on the property. Inspection of the subject property from the surrounding streets did not reveal any obvious environmental concerns such as above ground fuel storage tanks. Since this is historically an industrial property, it is possible that fuel storage tanks have existed or do exist on the interior, which we were unable to inspect. Also, the existence of the scrap metal transfer operation on the immediately adjoining site and part of the Potomac Avenue right-of-way raises the possibility of some environmental impact on the subject property over the years. If further environmental studies reveal specific costs to complete any remediation, our value conclusion would be subject to revision. Improvements The land is improved with a 1- and 2-story reinforced concrete warehouse building built in 1972, containing 14,870 square feet, 12 to 14 foot ceiling heights, with 2,230 square feet of office. Reportedly, the property is leased to Capital Bikeshare at $12/SF plus $3/SF operating expense reimbursement. Photo 1: Aerial The District Of Columbia Rollingwood Real Estate LLC Page 21

28 Photo 2: Looking south down 2nd Street with subject on left and Fort McNair on right. Photo 3: Subject looking north across S Street. Photo 4: Looking SW on Potomac Ave right-of-way with subject to the left. Note that Potomac Ave has not been constructed. The District Of Columbia Rollingwood Real Estate LLC Page 22

29 Photo 5: Looking East on S. Street with subject to left. Property line is at the building line. Akridge Cos. owns 9 acres beginning at right. ZONING AND LEGAL CONSIDERATIONS The subject property is zoned Commercial/Residential (CR) and is in the Capitol Gateway Overlay District. Capitol Gateway Overlay District (CG) The Capitol Gateway (CG) Overlay District was established to provide use, height, density (including incentives for bonus density and height), combined lot development, and design requirements to ensure an appropriate mixture of residential and commercial uses and suitable height, bulk, and design of buildings. The overlay is applied to the Buzzard Point and Capitol Gateway areas, which are in the southwest and near southeast quadrants of the city, north or west of the Anacostia River. Specific development objectives of the overlay are: to encourage support and visitor-related uses and continued existing industrial uses; to reduce the height and bulk of buildings along the Anacostia riverfront; to require suitable ground-floor retail and service uses along M Street, near the Navy Yard metro; to provide for a ballpark for major league sport and entertainment and associated uses at Squares and Reservation 247; to establish South Capitol Street as a monumental boulevard; and to provide for the development of Half Street, S.E. and First Street, S.E. as active pedestrian-oriented streets. The overlay is mapped on top of the existing underlying zone districts and where there are conflicts, the CG Overlay governs. Bonus density, and sometimes additional height, is available and density transfers are permitted under certain circumstances. For more information, including design requirements for individual streets and allowable Inclusionary Zoning modifications, see Chapter 16 of the Zoning Regulations. The Future Land Use Plan in the District of Columbia Comprehensive Plan calls for redevelopment of the area surrounding the National s Stadium with high, medium, and moderate density mixed uses. The subject is in an area designated for Medium Density Residential and Moderate Density Commercial uses. The subject and much of the surrounding area were formerly zoned for industrial uses. Industrial uses are now inconsistent with the long-range comprehensive plan for the area, but remain in place until development occurs. The District Of Columbia Rollingwood Real Estate LLC Page 23

30 CR Permits matter-of-right residential, commercial, recreational and light industrial development to a maximum lot occupancy of 75% for residential use, 20% for public recreation and community center use (up to 40% with Board of Zoning Adjustment approval), and 100% for all other structures, a maximum FAR of 6.0 for all buildings and structures, of which not more than three (3.0) may be used for other than residential purposes, a maximum height of ninety (90) feet for all buildings and structures and forty-five (45) feet for public recreation and community centers. An area equivalent to 10% of the total lot area shall be required at ground level for all new development, and rear yards shall be provided for each residential building or structure. Office and multifamily dwelling uses are both allowed by-right under CG/CR zoning. However, the District of Columbia Office of Zoning (DCOZ) has the authority to impose development conditions, guidelines, and standards that may exceed, or be less than, the matter-of-right standards identified for height, density, lot occupancy, parking, loading, yards, or courts. For the CR category, a maximum of 7.2 FAR is allowed with 80% lot coverage and maximum building height of 100 feet. This amount may be increased to 8.2 FAR with the additional FAR devoted to residential use (Section ). Bonus densities are permitted within the zoning district for additional residential uses with the inclusion of Affordable Dwelling Units (ADU) known as Inclusionary Units per PUD approval and support from the Planning Commission Subject (Section 2603 Set-Aside Requirements). Bonus density must be devoted to inclusionary residential use at a rate of the greater of 8% of gross floor area or 50% of bonus density. All of the residential use (100%) must consist of Inclusionary Units for eligible moderate-income households (2603.4): The subject parcel has frontage on Potomac Avenue. Specific requirements pertain to properties with frontage on this road. o Any portion of a building or structure that exceeds 110 feet in height shall provide an additional one-to-one (1:1) step-back from the building line along Potomac Avenue. The District Of Columbia Rollingwood Real Estate LLC Page 24

31 HIGHEST AND BEST USE The highest and best use of a property is defined the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value. 11 As If Vacant Intense mixed used development is taking place to the north of the Stadium bringing a critical mass of office, residential, and neighborhood retail. The surrounding market area is enjoying strong development interest associated with Nationals Stadium and the Navy yard/riverfront redevelopment. The subject location benefits from visibility directly across 2 nd Street, SW from the National Defense University portion of Fort McNair and proximity to the waterfront. Although properties on the south and west side of South Capitol Street and along Potomac Avenue, including the subject, continue to contain obsolete heavy industrial uses, development is slowly moving in this direction. Adjoining the subject to the south is a ±9-acre parcel of land owned by a major developer who anticipates developing at least 2.7 million square feet of residential buildings when the South Capitol Street bridge project and the streetcar extension are nearing completion (3-5 years). The subject has the advantage of a being a much smaller parcel (a little over ½ acre) which would permit quicker development. Development on the subject property would most likely have primary frontage on 2 nd Street with the required setback along the portion of land adjoining the scrap metal transfer operation. This would allow primary views of Fort McNair and the Potomac River, and would create some distance from the scrap metal operation. The site is less than 1 acre in size; however, the shape and street frontage make it suitable for commercial development. There are two major options for dense mixed-use development available to the subject property commercial office or residential multifamily, each with retail on the first floor. Our research revealed no interest from any market participant in developing office uses at this time in the subject s general area. This would indicate that it is not reasonably probable that the site would be purchased for a mixed use development with an emphasis on commercial office. The property is zoned and planned for commercial/residential development with a by-right site density of 6.0, maximum building height of 90 feet and site coverage of 75%. There are incentives for increasing both FAR density and maximum building height substantially by incorporating affordable residential dwelling units (inclusionary zoning) to as much as 8.2 FAR. Virtually all new multifamily projects are being developed to density exceeding the minimum of 6.0 FAR. Due to the subject s location and surrounding land uses, we conclude a maximum site density of 7.2 FAR, with maximum building height of 100 feet, and 3 levels of underground parking. We conclude highest and best use of the site to be mixed residential and retail use to a developed density of 7.2 FAR. This suggests a 10-story building with 184,406 square feet of space and a 3- level underground parking garage. Parameters and results are detailed in the following table and summarized below. 11 The Appraisal of Real Estate Appraisal, Thirteenth Edition, (Chicago: The Appraisal Institute, 2008), pages The District Of Columbia Rollingwood Real Estate LLC Page 25

32 o o o o o o o o Total site area of 25,612 square feet Allowable site coverage of 20,490 square feet (80% of gross area) Expected site coverage of 18,441 square feet (90% of allowable) Building Floor area consists of 184,406 square feet with approximately 95% consisting of Residential and 5% of retail space 25 foot rear setback containing 4,813 square feet along boundary with adjoining industrial property (currently a scrap metal transfer operation). Building improvements of 10 stories with building height of approximately 100 feet Total parking of 152 spaces requiring 60,977 square feet or 20,326 square feet on each of 3 levels (based on ratio of 0.8 spaces per dwelling unit and 1.33 per 1000 square feet of retail space, at 400 square feet per space) Total developed site FAR of 184,406 square feet o Total developed site FAR of 7.2. Parameters Input SF SetBack Other Yield Net Usable Site Area 25,612 4, % 20,799 Max Site FAR 7.20 Site coverage Max 80% 20, % Max Bld Hght (ft) 100 Story ,406 Average Story Hgh (ft)t: Parking Office: # spc per sf Retail # spc per sf Resi # spc per Unit Parking: sf/space 400 Garage Levels 3.0 Roof & Surface - Below Grade 3.0 Footprint % Net Usable SF Building 90.0% 18,441 Garage 0.0% Total 90.0% 18,441 Type Results Portion Prking Code per 1ksf Bldng FA Req Parking Spaces Req Total Parking sf Parking Ratio (spc/1ksf) Office 0% Retail 5% , , Resi 95% , , % , , Structured Parking counting as FAR (sf) - Building FA (sf): 184,406 Building FAR: 7.20 Total FA (sf): 184,406 Note: Surface, Rooftop, and Below Grade not counted Total Site FAR: 7.20 Concluded Building Floor Area (sf): 184,400 The District Of Columbia Rollingwood Real Estate LLC Page 26

33 Due to the property s general location and the surrounding land uses, a Class B project would be appropriate and maximize land value. The timing of the use is problematic. The market analysis discussed earlier showed a significant inventory of under-construction and proposed competitive units, all of which are considered to have a location advantage to the subject property. It is our opinion that the market will forecast development of the subject site in no less than five years. The most likely purchaser of the subject property is a developer/investor. As Improved The land is improved with a 1- and 2-story reinforced concrete warehouse building built in 1972, containing 14,870 square feet, 12 to 14 foot ceiling heights, with 2,230 square feet of office. The property is leased but no information is available on expiration date. Consideration is given to the existing improvements and their contribution to value. Three sales of industrial properties in the Southwest/Southeast market are summarized in the following table. The sales indicate that the subject, as improved and its continued existing use, is worth at most $200 per square foot of building area, indicating a maximum value of $3.0 million for the property as continued warehouse/industrial use. It is reasonable to conclude a redevelopment density on the site of 7.2 FAR given legal and physical parameters of the site. We previously Existing Industrial Redevelopment estimated Floor Area of 184,406 square feet Floor Area 14, ,406 for a new mixed use development. A $/Floor Area $200 $30 reasonable minimum value of $30 per square Estimated Value $2,956,000 $5,532,180 foot of potential building area indicates a Rounded $3,000,000 $5,500,000 minimum value of $5.5 million for the site under a redevelopment scenario. The calculation of the relative values is shown in the adjacent table. The District Of Columbia Rollingwood Real Estate LLC Page 27

34 It is our opinion that the highest and best use of the property, as improved, is to retain the building in its rental capacity for at least five years, and then redevelop with 184,406 square feet of Class B multifamily and retail space with 3 levels of underground parking. Again, the most likely purchaser of the subject property is a developer/investor. The District Of Columbia Rollingwood Real Estate LLC Page 28

35 VALUATION The highest and best use of the property is for re-development with a Class B Apartment/retail project in no less than 5 years. Therefore, the current value of the land as a site for an 184,406 square foot apartment/retail development is of initial concern. Arriving at this value, the impact of a five year delay in development will then be calculated. Land is valued as vacant and available for development to its highest and best use by one of four methods sales comparison, extraction, allocation, or income. When adequate information is available, the sales comparison method is generally considered most appropriate to value land. In the Sales Comparison Method, an opinion of market value is developed by comparing properties similar to the subject property that have recently conveyed in the open competitive market. A major premise of the method is that the market value of a property is related to the prices of competitive properties know as comparable. The comparable sales provide a basis for developing an opinion about the subject property s current market value Comparable Land Sales The subject s highest and best use is for mixed-use development with multi-family residential and retail with 184,406 square feet of building area. The site will be valued first as if demolition of the existing improvements is not required. We found suitable land sales in the subject property s immediate market area. The price per FAR foot is the typical unit of value for high-density, development land within the local market. Therefore, we will use price per FAR foot in our analysis. The adjacent map shows the location of the subject and comparable properties. Each Comparable is described on the following pages. Our analysis and adjustments are described in the next section with an adjustment grid that summarizing adjustments and supporting our opinion of value for the subject property. Comp 4 Comp 1 Subject Comp 2 Comp 3 The District Of Columbia Rollingwood Real Estate LLC Page 29

36 COMPARABLE 1 Location: M Street and First Street SE Grantor: COFELD LLC; 1 ST & M Street LLC; COFELD/CAM Venture LLC (Meisel & Cohen Property Management) Grantee: Ballpark Square, LLC (Grosvenor USA Limited) Deed Date: October 9, 2012 Reference: , , Parcel ID No: , , , , , , , , , , , , , , , , , , , , , , ; Collectively now know as Zoning: CG/CR FAR: 7.7 Land Area: 53,653 square feet Improvements: None Utilities: All available Consideration: $25,810,742 Unit Price: $481.07/SF Unit Price: $62.19/FAR foot Financing: All cash to seller Confirmation: Buyer Broker, Deed; Public Records; Observation Remarks: Purchase of assemblage of parcels from three joint ventures controlled by Cohen Property Management. Located NW quadrant of 1 st and N Street, directly across from Nationals Stadium. Mixed use residential/hotel with 415,000 square feet of space. Block is being developed as Ballpark Square with a total of 660,000 sf. The District Of Columbia Rollingwood Real Estate LLC Page 30

37 COMPARABLE 2 Location: Grantor: 1025 First Street SE Square 699N Phase II Developer, LLC (The Cohen Companies Inc.) Toll DC LP (Toll Brothers, Inc.) Grantee: Deed Date: April 13, 2012 Reference: Parcel ID No: Square 0699N Lots 0823 and 7000 Zoning: C-3-C FAR: 5.6 (279,044 sf) Land Area: 49,889 SF Improvements: 3 Level Under Ground Parking Garage with 212 spaces Utilities: All available Consideration: $24,000,000 Unit Price: $481.07/SF Unit Price: $86.01/FAR foot Financing: All cash to seller Confirmation: Selling Broker (A Benjamin), Deed; Public Records; Observation Remarks: Land with Transferable Development Rights and completed 3 level underground parking garage with 212 spaces adjacent to Velocity Condominium project. Building reportedly with have 250 residential units indicating a per-dwelling Unit price of $70,000 and parking ratio of 0.85 spaces per unit. Grantor constructed adjacent Velocity project and built garage for this planned multifamily project. Grantee bid was reportedly unsolicited. Broker reported that property transferred with plans and TDR s in place, and reported garage contributing $6 to $7 million. The District Of Columbia Rollingwood Real Estate LLC Page 31

38 COMPARABLE 3 Location: Grantor: Grantee: Deed Date: September 28, 2012 Reference: Parcel ID No: Square 0699N Lot 0824 Half Street and K Street SE Square 699N Phase II Developer, LLC (The Cohen Companies Inc.) Toll DC LP (Toll Brothers, Inc.) Zoning: C-3-C FAR: 10.7 (302,297 square feet) Land Area: 28,201 SF Improvements: None Utilities: All available Consideration: $14,500,000 Unit Price: $514.17/SF Unit Price: $47.97/FAR Financing: All cash to seller Confirmation: Selling Broker (A Benjamin), Deed; Public Records; Observation Remarks: Grantee owns adjacent parcel and constructing 250 unit multifamily condominium project. Grantee purchased both parcels from Grantor who constructed neighboring Velocity Condominium project. Broker reported that this site transferred without plans or improvements but with the expectation of developing approximately 250 to 300 dwelling units. The District Of Columbia Rollingwood Real Estate LLC Page 32

39 COMPARABLE 4 Location: 1244 S. Capitol Street, SE Grantor: DC Ballpark 2, LLC (Lehman Brothers Holdings, Inc.) Grantee: 1244 South Capitol Residential, LLC (JGB Companies) Deed Date: December 18, 2013 Reference: Parcel ID No: Square 0700, Lots 0037, 0038, 0039, 0045, 0046, & 0803 Zoning: CG/CR Land Area: 29,625 SF FAR: 9.5 (281,438 square feet) Improvements: Canopy and other service station site improvements Utilities: All available Consideration: $17,000,000; adjusted to $17,500,000 Unit Price: $573.84/SF; Unit Price: $60.40/FAR foot; adjusted to $62.18/FAR foot Financing: All cash to seller Confirmation: Buyer Rep (B. Moll), Seller Rep (J. Shister), Public records Remarks: Grantee sold site with density approved but for an office development. Buyer plans on a residential development with first floor retail (possibly 2 nd floor retail space as well). 130 building height will provide upper floors with panoramic views in all directions. Property was offered without a price in a competitive process that attracted 8 offers; three finalists were chosen and JBG was chosen on the basis of price and other factors. Phase 2 environmental indicated some residual service station contamination, but site was taken as is and buyer expects possible environmental clean-up costs of ±$500,000. Buyer also expects to obtain vacation of alley separating two main parcels. Residential portion of development will be inclusionary of affordable dwelling units. The District Of Columbia Rollingwood Real Estate LLC Page 33