RFP # DEVELOPMENT PLANS FOR TH AVENUE. Addendum #2 Date issued and released: July 23, 2015

Transcription

1 RFP # DEVELOPMENT PLANS FOR TH AVENUE Addendum #2 Date issued and released: July 23, 2015 Changes to RFP: Section 3.4 Questions/Answers has been changed to: 3.4 Questions/Answers. All questions must be submitted by no later than Friday, July 17, 2015 by 4:00 PM. All questions will be answered in an addendum issued on Thursday, July 23, 2015, and posted on the Oakland Housing Authority website by 5:00 PM. (Oakland Housing Authority website at Select Business Opportunities/ Procurement / Current Bid Opportunities / Active Bids / Select the desired Bid#). Responses to Questions: The following questions were submitted by the deadline and are answered in this addendum. General Questions: Question 1: Is the California Affordable Housing Initiatives (CAHI) selling the property? If not, does it have financing or money to subsidize the development of the site? Answer: CAHI is seeking creative development proposals and asks bidders to present their ideas and plans that meet CAHI s priorities for this property. As reflected in the Purchase Offer scoring category, the purchase price is a significant consideration. However, the CAHI Board of Directors will consider requests for financial assistance deemed necessary to make the Respondent s proposal viable. Addendum #2 to RFP #15-011

2 Question 2: Is CAHI not in the market to rehab and maintain the property? Answer: Yes, CAHI is not in the market to rehab and maintain the property. Question 3: What is the cash or purchase market value of the property? Answer: CAHI could have listed the property for sale but is not interested in selling the property outright. CAHI is seeking to sell the property to the developer with the most viable idea to return the property to an active residential use that will enhance the neighborhood and potentially create new affordable units for lower- and moderateincome households. Question 4: If a proposed development plan calls for rehabilitation, does CAHI have the money to rehabilitate it? Answer: While CAHI is open to all proposals, including proposals that request financial assistance to rehabilitate the property, it should be noted that the net revenue to CAHI (ie. net of any subsidy contributions) is a significant selection consideration as reflected in the 18 points granted in the Purchase Offer scoring category. Question 5: How will the proceeds be used if CAHI sells the property? Answer: CAHI is a non-profit organization whose mission is to provide affordable housing. The proceeds will be used for affordable housing purposes that further its mission. Question 6: Do Section 8 vouchers come with the property? Answer: CAHI does not have access to Project-Based Section 8 Vouchers (PBV). Any proposal that includes PBVs would be subject to the Oakland Housing Authority s procedures and final approval by the Authority s Board of Commissioners. If your proposal includes PBVs, please include a narrative explaining how your financing strategy would change if the project does not receive an allocation of PBVs. Question 7: If the proposal involves applying for low income tax credits, can CAHI or the Oakland Housing Authority hold a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing to approve the tax credits? Answer: CAHI does not have the authority to issue tax exempt bonds. While the Oakland Housing Authority can issue bonds, it is currently not in a position to do so for this CAHI-sponsored disposition. Question 8: May I use the Density Bonus Law to outline the affordability use for the number of years to back-up the development plan? Answer: A Density Bonus may be granted; however that would be within the purview of the City of Oakland s planning and zoning entitlements review. Question 9: How will CAHI determine the history or experience of an entity if the company had recently filed as a limited liability company? Answer: In order to fully evaluate an entity s experience and capacity to undertake real estate, Respondents should consider applying as the parent organization or company, ie. the entity that has an established track record and is in a position to provide the development guaranties. Addendum #2 to RFP #15-011

3 Question 10: It was reported in the RFP that the property was appraised for $1.2 million in How is the property best valued? Answer: Value is residual and therefore is variable based on your proposed use. CAHI is soliciting proposals where both the proposed development concept and purchase price are integrally connected. Question 11: For each unit, what would be the market rent CAHI anticipates getting once the building is totally renovated? Answer: Please propose what is determined by your team to be market rent. Question 12: When CAHI is talking about returning the property to active residential use, does it mean enhancing the neighborhood aesthetically, being a part of the community or being a resource for the community? Answer: CAHI is open to creative ideas and is asking bidders to propose how its project will enhance the neighborhood. Question 13: Has there been any community engagement so far? Answer: No. Question 14: Is CAHI or the Oakland Housing Authority aware of the views of the community and whether they will accept a change of use for this property? Answer: No. Question 15: How does CAHI plan to enforce the low income component? Answer: If affordable units are to be included, the land would be encumbered with the restrictions via a deed of trust and/or a regulatory agreement. Question 16: Is the City of Oakland planning to break up the property and sell the units as condominiums? Answer: No, the property is offered as is and CAHI has not engaged in any planning discussions with the City of Oakland. Question 17: Is CAHI interested in participating in the ownership of the property after the sale/transfer? Answer: Generally speaking, CAHI is not interested in participating in long term ownership of the site but we are open to proposals that may include a long-term ground lease. Question 18: Why was the building closed for almost 10 years? Answer: The building was closed due to habitability issues. Question 19: Can it be determined that the building s design contributed to the habitability issues, for example, the laundry room s location? Answer: No, not to our knowledge. Question 20: What if all the proposals are lowball offers? Will CAHI reject all proposals and decide not to sell the property? Answer: CAHI reserves the right to reject any or all proposals, including terminating the RFP process if it is in its best interest to do so. Addendum #2 to RFP #15-011

4 Question 21: When does CAHI anticipate a final decision? Answer: Approximately two months after the deadline submission date of August 21, Building: Question 22: What is the square footage of each unit? Answer: The average square footage per unit is 939 square feet. The average square footage was derived from page 43 of the attached 2012 appraisal report. Question 23: Is there any community space in the building? Answer: There are no indoor community spaces, but there are external common areas. Question 24: Is there a laundry room? Answer: Yes. Question 25: Do you know what the source of hot water is? We did not see water heaters in the units, but we also did not see any central boilers. Answer: The building uses a central hot water boiler system. The boilers are located in a room adjacent to the laundry room. Question 26: Do you know what the total amperage delivered to the electrical meters is? Answer: No. Reports/Surveys: Question 27: Will CAHI disclose the April 2012 appraisal report? We are interested in the square footage, comps, and demographics. Answer: Yes, however, please read the appraiser s notification on the cover sheet of the attached 2012 appraisal report in its entirety. The appraiser is allowing people to read the report at the reader s own risk. The appraiser is not responsible for any errors or omissions discovered in the report by readers. Question 28: Are there floor plans of the building? Answer: No. Question 29: Do you have other reports filed on the property that can be made available? Answer: No. Question 30: Are there previous property reports, i.e. Phase I reports? Answer: No. Question 31: Does CAHI have an old rent roll that it can disclose? Answer: No. Addendum #2 to RFP #15-011

5 Question 32: Does CAHI have a current rent survey in the neighborhood that it can disclose? Answer: No. Question 33: Are there any existing drawings, including floor plans and site plans, available for the site? Answer: No. Evaluation Criteria: Question 34: Affordable housing is given the least number of points among the six criteria. If affordable housing is stated as a priority, why is the criterion scored minimally? Answer: Affordable housing is a second priority; CAHI is first looking to return the property back to an active residential use in a way that enhances the neighborhood. The affordable housing points are viewed as bonus points for this RFP. Question 35: Are there extra levels of preference given to affordability? Answer: Affordability accounts for 10 of the 100 points in this RFP. We will evaluate proposals that contain a variety of affordable units, depth of affordability, and terms against other submitted proposals. Question 36: If the proposed development plan is not to purchase the building but to rehab it, how will the proposal earn the 18 points for this criterion? Answer: CAHI is open to considering options such as transferring the property to another entity, or maintaining the land but transferring all structures above the land. All proposals should include a purchase offer outlining how the Respondent will establish site control in order to develop a project on its own behalf. Question 37: Affordability is worth 10 points in the RFP but the price criterion is worth 18 points. How can CAHI curve the price criterion, with Affordable Unit s 10 points versus the Purchase Offer s 18 points? How will these criteria reconcile? Answer: A Respondent s Purchase Offer score will be based on the amount offered. And a Respondent s Affordable Units score will be based on the proposed number of affordable units, depth of affordability, and term of the restrictions. An evaluation panel will review and score each of these categories along with the other scoring categories and total scores will be reconciled at the end. Proposals with the highest overall scores will be considered in the competitive range. CAHI reserves the right to interview Respondents in the competitive range prior to making a selection recommendation to the CAHI Board. Question 38: Will the Purchase Offers be evaluated with the highest offer getting the highest points? The RFP states that CAHI is interested in the Best Value which seems subjective. Answer: Yes, the highest Purchase Offer will get the highest points in that scoring category. The subjectivity of Best Value is evaluated based on the other scoring categories. Addendum #2 to RFP #15-011

6 Question 39: Will priority or more points be given to a proposal that will return the property to active use sooner than later? Answer: Yes. Addendum #2 to RFP #15-011

7 RFP # DEVELOPMENT PLANS FOR TH AVENUE Addendum #2 Date issued and released: July 23, 2015 Bidder hereby acknowledges this addendum: Name of Firm: Authorized Signature: Date: Acknowledgement of this Addendum must be included with your bid. Addendum #2 to RFP #15-011

8 APPRAISAL OF AN EXISTING APARTMENT BUILDING th Avenue, Oakland, CA APN APPRAISER'S NOTIFICATION TO READERS OF THE APPRAISAL REPORT I, Napoleon Forte, Appraiser am aware of my appraisal report on th Ave, Oakland, CA being read by people who were not the original intended user of the report. One may review the report in its entirety however; reliance on the content of the appraisal report is at the reader's own risk. Appraiser is not responsible for any errors or omissions discovered in the report by the reader. Reader has no legal recourse to the Appraiser for the content and use of this appraisal report now or in the future. Appraiser is responsible only to the original intended users of the appraisal report. Readers of the report, however, can assume that the report was prepared in a professional manner and according to USPAP standards. USPAP are "Uniform Standards of Professional Appraisal Practice" authorized by the U.S. Congress to assure quality appraisals nationwide. Napoleon Forte, MBA, ASA, Managing Appraiser Front View Aerial View Market MarketValue Value Price/Sq.Ft. Price/Gross SF Opinion of Market Value :APARTMENT AS-IS $ 1,200,000 $1,7300,000 $ 87 /SF Opinion of Value - Three Buildings: Opinion of Market Value : AS-REPAIRED $ 1,700,000 $ 123 /SF Opinion of Value 0.31Acre Parcel of Land: 814,000 Land & Building: Date of Value is: Date Report prepared:,400,000 Price/Unit $ 80,000 $ $ 113,000 Recommended Highest and Best Use: $80Housing (per GBA) Multi-Family (same as current use)with maximum density per current zoning-rm-3 March 16, 2012 March 5, 2012 PREPARED FOR CLIENT Oakland Housing Authority Deni Adaniya, Housing Development Program Manager 1619 Harrison St, Oakland, CA (510) * Fax (510) * dadaniya@oakha.org PREPARED BY Napoleon Forte, MBA, ASA, MRICS, Managing Appraiser Telephone (510) * Fax (510) , napforte@aol.com CERTIFIED GENERAL APPRAISAL SERVICES Airport Center, 306 Pendleton Way Oakland, California 94621

9 Date: April 9, 2012 To: TRANSMITTAL LETTER Deni Adaniya, Housing Development Program Manager Oakland Housing Authority (510) * Fax (510) * dadaniya@oakha.org From: Napoleon Forte, MBA, ASA, MRICS, Managing Appraiser, CA License No. AG Subject: APPRAISAL OF AN EXISTNG 15 unit APARTMENT BUILDING Your completed appraisal report is attached. As you requested, a USPAP Summary appraisal has been prepared for the 15 unit Apartment building located at th Avenue, APN Oakland, CA 94606, County of Alameda, owned and managed by Oakland Housing Authority. The purpose for this appraisal is to form an opinion of the as-is market value of the fee simple interest in the Apartment building to support housing policy decisions. USPAP are Uniform Standards of Professional Appraisal Practice authorized and required by the U.S. Congress to ensure consistent accuracy and quality appraisals nationwide. The Oakland Housing Authority their advisors are the intended users of this report. The intended use is for housing policy decisions. Market value is the type of value requested, defined, derived, and supported in this appraisal report. This multi-family property was inspected by the Appraiser and is located in the Central East area of Oakland consisting of one three-story building with 15 apartment units with no elevator, security fencing, play areas, parking area, and work areas. The painted stucco building is judged to be in fair condition with a total capacity of 13,788 square feet including stairs, storage area and hallways situated on a 14,946 SF level rectangular lot with vehicular entry off 9th Avenue into the parking lot. The Sales Comparison and Income appraisal procedures were used to estimate the market value of the fee simple interest in the subject property. An expanded Highest and Best Use analysis was performed on the site as requested by our Client. Based on the attached appraisal report and subject to the assumptions and limiting conditions contained herein, it is my opinion that the as-is market value of the fee simple interest in the subject property, as of March 16, 2012 was: Market Value Price/Sq.Ft. Market Value Price/Gross SF Price/Unit Opinion of Market Value : AS-IS $ 1,200,000 $ 87 /SF $ 80,000 Opinion of Market Value : AS-REPAIRED $ 1,700,000 $ 123 /SF $ 113,000 Opinion of Value - Three APARTMENT Buildings: $1,7300,000 $227 Opinion of Value 0.31Acre Parcel of Land: 814, Recommended Highest and Best Use: Multi-Family Housing (same as current use)with maximum density per current zoning-rm-3 Land & Building:,400,000 $80 (per GBA) Date of Value is: March 16, 2012 Date Report prepared: March 5, 2012 CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 2

10 This is a USPAP Summary Appraisal Report. The report discusses and describes the market data compiled from our market research, as well as, generally accepted apartment valuation analysis USPAP requires the Appraiser to identify the value contribution of any personal property or other nonrealty included in the value estimate. The subject property contained personal property and trade fixtures of the owner/tenant; however, they were not included in the opinion of market value. The attached USPAP Summary Appraisal Report complies with the appraisal standards and regulations of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The appraisal also complies with the standards of the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Federal Reserve. In addition, this appraisal conforms to the Uniform Standards of Professional Appraisal Practice (USPAP) and the American Society of Appraisers Code of Ethics. It also complies with the appraisal requirements of our Client, the Oakland Housing Authority. I hereby submit the attached appraisal report containing the results of our unbiased professional investigation and opinion of as-is market value. It has been a pleasure to be of continuing service to THE OAKLAND HOUSING AUTHORITY. Thank you for your patience and for this opportunity to be commissioned as your Appraiser. If you have any questions regarding the conclusions or the contents of this report, please call or me immediately, (510) , Fax (510) napforte@aol.com. Respectfully submitted, Napoleon L. Forte, MBA, ASA, MRICS, Certified General Appraiser, CA State License No. AG CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 3

11 TABLE OF CONTENTS TRANSMITTAL LETTER... 2 TABLE OF CONTENTS... 4 APPRAISER S SCOPE OF WORK... 6 SUBJECT PROPERTY IDENTIFICATION AND PHOTOS... 7 Building Description... 7 Photos of Subject and surrounding Neighborhood Area... 9 Exterior Views of Apartment Building: Frontage, Street, and Sides... 9 Interior Views of Apartment Building: Separate metering, Living Area Bedroom, and Kitchen Interior Views of Apartment Building: Bathroom, Bedroom, and Wall Heaters REPAIRS (COST PER UNIT) AND REPAIR S CONTRIBUTION TO VALUE SITE IDENTIFICATION USPAP REQUIREMENTS: UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE MARKET AREA ANALYSIS AND ECONOMIC DATA City of Oakland APARTMENT MARKET PRESENT AND FUTURE HIGHEST AND BEST USE ANALYSIS SALES COMPARISON APPROACH Comparable Apartment Sales Location Map Damage Estimate and Condition Adjustment Explained Appraisal Adjustment Process Explained Reconciled Sales Price Per Unit ( Price/Unit) Value based on the Sales Comparison Approach INCOME APPROACH Repairs Required for Future Income Summary of Comparable Apartment Rentals Comparable Apartment Rental Location Map Value based on the Income Approach RECONCILIATION AND FINAL OPINION OF VALUE LAND VALUE ESTIMATE APPRAISER S COMMENTARY: TO REPAIR OR TEARDOWN SUBJECT APT BUILDING? ADDENDA Building Sketches (13,788 SF Gross ) Subject s Zoning Text- RM-3 Mixed Housing Type Residential Zone CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 4

12 General Assumptions and Limiting Conditions Applied By Appraiser Appraiser s USPAP Required Certification Meet Your Appraiser: Napoleon L. Forte CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 5

13 APPRAISER S SCOPE OF WORK The purpose of this report is to provide an opinion of the as-is market value and the highest and best use of the subject multi-family apartment building and site. The following tasks were completed to arrive at the final opinion of market value and highest and best use of the site: We conducted a physical exterior and interior inspection of the subject property on March 16, Oakland Housing Authority Officials provided the access codes for me to enter the building. We conducted a field review of the local market of medium to large apartment buildings within the City of Oakland and Alameda County with special emphasis on the subject s immediate neighborhood supply & demand factors, affordability and local job market. I also inspected the exterior of six comparables apartment buildings to find adequate comparables to aid in estimating the value of the subject. We took photos of all the damaged areas of the subject apartment building and assessed their impact on the market value for the subject property. We estimated the repair costs ($cost/unit) and provided a detailed cost exhibit in the addenda which was used to estimate the as-is and as-repaired value. We determined that the most likely buyer for the subject property would be a medium to large financial services corporation or a large private investment group with adequate property management and access to long-term financial resources. We researched and investigated the current declining market conditions relative to the subject property as well as the market segment/location with which the subject is identified; I developed rental and expense surveys which provided the estimated economic (market) rent and (market) operating expenses for the subject in its as-repaired condition. We interviewed commercial real estate brokers, sales agents, property managers, leasing agents, appraisers and applicable public agencies and governing bodies to obtain, confirm, and verify all market data used including all improved sales, rental data, expense data, zoning and other regulatory requirements for the subject property. We collected, verified, analyzed, and personally confirmed with primary market participants, all relevant comparable sales and rental data. I summarized the data and provided my reasoning and analysis used to develop the final estimates of value set forth in this USPAP Summary Appraisal Report; citing all data sources used in the report. We performed the traditional appraisal process, including data collection, analysis and adjustments, applying generally accepted appraisal procedures and reporting of the appraisal process which was performed without regard to racial, ethnic, religion, marital status, familial status, age, disability, receipt of public assistance, or gender discrimination. We considered all three of the traditional approaches to value: Cost, Sales Comparison, and Income in performing this appraisal assignment. The Sales comparison and Income approaches were ultimately utilized to estimate a reliable value for the subject property. We reconciled the results of the two approaches into one Opinion of Value based on a fee simple ownership interest in the subject property. For our Client, we wrote a meaningful Narrative USPAP Appraisal Summary Report based on the stated intended use and 2012 USPAP Standards. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 6

14 SUBJECT PROPERTY IDENTIFICATION AND PHOTOS Building Description Apartment Building Appraised The first step in the appraisal process is to fully identify the property being appraised using narrative descriptions and photos. The subject property is an 52-year old 3-story family housing oriented 15- unit three-story painted stucco apartment building with 13,788 SF of gross living area situated on a 14,946 SF level parcel. The building has (15) three-bedroom units which are in fair condition. Renovations and updating of all units are needed. See attached photos. Construction is wood frame. Several units have patios. Curb appeal is rated fair with excellent proximity to public transportation, shopping area, downtown and Oakland International Airport. The property fronts 9th Avenue and 9th Avenue and conveniently located within an East Oakland mature residential area. Grounds and Landscaping are adequate for the area. Parking is onsite open for cars both tenants and guests. Sidewalks along the sides of the building are in average condition with no cracks or holes. Roof is flat tar and gravel composite which appears to be water-tight but needs an inspection. Building s first floor is primarily apartments, stairs, walkways, storage and utility rooms. No easements were observed at the property. One exterior stairwell is available. Most units have a balcony. No elevator is available. All outwardly facing units have neighborhood views. Overall condition of the apartments is rated fair by the Appraiser as the building is vacant, been vandalized and was not being maintained at time of inspection. All of the units are in need of extensive repairs. Unit mix is rated good as the (15) three -bedroom one bath units are in high demand by larger families living in the East Oakland area. Each unit has a living room, kitchen with electric appliances, wall heating, dining area, bedrooms and bathroom. Balconies are available on the upper floors. Most have neighborhood views. Building has no cooling air-conditioning which is typical for the area due to year round climate conditions. Management of the building appears inadequate as evidenced by the building s condition and interior and exterior appearances. Several code violations were observed at Appraiser s inspection. Overall, the subject cannot compete for tenants due to its present condition. If repaired, however, the subject building should compete effectively with other multi-family apartment buildings within the local market area. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 7

15 Basic Structural Components and Additional Building Features Parking: Parking for the subject property is provided in open spaces onsite. Parking for the subject is generally consistent with what is found in competing properties within the neighborhood. Foundation: The foundation is a poured concrete slab and judged to be in average condition. Exterior Walls and Structure: The exterior walls are painted stucco with good curb appeal. Heating: Wall heater is in each apartment which is typical for the neighborhood. Heaters need to be removed and replaced American Disabilities Act Compliance (ADA): It appears that this property is not in compliance with current ADA regulations. Please refer to the Assumptions and Limiting Conditions for conditions relating to this issue. 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 noncompliance with the requirements of ADA in estimating the value of the property. We recommend an ADA audit by a qualified ADA firm. Site Improvements & Landscaping: The balance of the site which is not covered with building areas includes an asphalt paved parking lot for cars. Landscaping along the front and sides of the apartment building consists of mature trees with no lawn watering system. Depreciation Obsolescence, Effective Age and Remaining Economic Life: Major physical depreciation and functional obsolescence were noted. See photos attached. The subject improvements have an average actual age estimated of 52 years with an effective age estimated by the Appraiser at 60 years due to no regularly scheduled maintenance program. Based on a life expectancy of 80 years the remaining economic life of the subject property is estimated at approximately 20 years (estimated remaining useful life = 80 years -60 years= 20 years). Major deferred maintenance noted at inspection. Improvement Conclusions: In conclusion, the subject property is considered to offer a mixture of functional floor plans conducive to their intended use as apartments. The quality, average unit size, functional utility and amenities are similar to competing properties. The overall condition of the entire property is fair,and without major repairs to obtain occupancy permits, the subject is not rentable. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 8

16 (AMP10) Apartment Building -15 Units th Avenue, Oakland, CA Photos of Subject and surrounding Neighborhood Area Exterior Views of Apartment Building: Frontage, Street, and Sides Left Photo: Looking at front of subject from two- lanes, 9th Ave. Note: Building designed as Contemporary Multi-family Apartment building with traditional shape and minimal landscaping, painted siding exterior, good curb appeal. Property consists of one building with a 72% coverage ratio. Has a 147-foot frontage on 9th Avenue. See Site map, Plat Map and sketch. Right Photo: View of side of building from parking lot. Note: parking entrance to ground level, first floor balconies, onsite open parking. Left Photo: Looking at the 9th Ave side of building. Note: two-lanes with no paid parking meters around building with adequate landscaping. Right Photo: Looking at court yard attached to subject. Note: average condition, thick concrete, area can be used for multiple family events and recreation. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 9

17 Interior Views of Apartment Building: Separate metering, Living Area Bedroom, and Kitchen Left Photo: Looking at the utiliy gas meters. Note: 16 meters as one is for building use. Right Photo: Looking at the interior living area of a typical 3-bedroom unit. Note: fair condition needing painting, and remove & replace: drywalls, electrical wiring, plumbing, lighting, doors and flooring cover. Left Photo: Looking at typical bedroom. Note: fair condition and in need of remove & replace: windows, walls, electrical,flooring and light fixtures. Needs prep and painting. Right Photo: Looking at typical kitchen. Note: fair conditions and in need of remove & replace: cabinets, walls & ceiling, electrical, flooring appliances, plumbing, countertops, doors and light fixtures. Need prep and painting. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 10

18 Interior Views of Apartment Building: Bathroom, Bedroom, and Wall Heaters Left Photo: Looking at typical bathroom. Note: fair conditions and in need of remove & replace: cabinets, walls & ceilings, electrical,flooring, bath fixtures, flooring & floor covers, plumbing and light fixtures. Needs prep and painting. Right Photo: Looking at typical bedroom flooring and walls. Note: fair conditions and in need removing trash and remove & replace: walls & ceilings, electrical, flooring, flooring & floor covers, light fixtures. Needs prep and painting. Left Photo: Looking at typical wall heater. Note: fair conditions and need to remove & replace: flooring & floor covers, and wall heater. Needs prep and painting. Right Photo: fixtures. Looking at typical bathroom damage throughout building. Note: need remove and replace all bathrooms and CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 11

19 Interior Views of Apartment Building: Bedroom, Living Room, Kitchen, and Balcony Left Photo: Looking at typical water damage in bedroom throughout building. Note: need remove and replace 95% of all walls, ceilings and flooring. Right Photo: Looking at typical living room damage throughout building. Note: need to remove and replace 95% of all walls doors, flooring & floor covering and ceilings. Then, paint all interior spaces. Left Photo: Looking at another example of typical kitchen damage thoughout building. Note: need remove and replace kitchen fixtures, cabinets, flooring, ceilings and appliances. Right Photo: Looking at typical balconies on each floor. Note: in average condition, offers neighborhood views but needs exterior painting. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 12

20 REPAIRS (COST PER UNIT) AND REPAIR S CONTRIBUTION TO VALUE Most of the 15 units are in the same condition with major repairs needed to bring to rentable condition as shown on the repair list below. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 13

21 SITE IDENTIFICATION Shape of Parcel The site is a 14,946 SF rectangular with one curb cut off 9th St into the parking lot. One parcel make up subject site: th Av. See plat and street map below. Plat Zoning (RM-3 The RM-3 Mixed Housing Type Residential Zone intent is to create, maintain, and enhance residential areas characterized by a mix of single family home, duplexes, townhouses, and small multi-unit buildings. Zoning Analysis for RM-3- Mixed Housing Type Residential Zone - 3 RM-3 Mixed Housing Type Residential Zone - 3. The intent of the RM-3 zone is to create, maintain, and enhance residential areas characterized by a mix of single family homes, duplexes, townhouses, small multi-unit buildings, and neighborhood businesses where appropriate. The subject apartment use is a permitted use per existing zoning code. See zoning text in the addenda of this report. See Zoning text in addenda with a listing of permitted uses of the subject site. The subject property is a permitted use which is in compliance with zoning. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 14

22 USPAP REQUIREMENTS: UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE Extraordinary Assumptions No extraordinary assumption was applied in this appraisal. An extraordinary assumption is defined as an assumption, directly related to a specific assignment, which, if found to be false, could alter the Appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. Hypothetical Conditions Hypothetical conditions were used in the development of the as-repaired value because the repairs were not made as of the date of the Appraiser s inspection. A hypothetical condition is defined as that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. Personal Property Appraised: Furniture, Fixtures, and Equipment FF&E: Our estimate of market value does not include any furniture, fixtures, or equipment, which would not normally be considered to be real property. Nor does it include the worth of the business operations. Intended User The Oakland Housing Authority and their designated advisors are entitled to the possession and use of this appraisal report. Intended Use of Appraisal This appraisal will be used to support a commercial loan decision. Definition of Market Value Market value is the standard of value used in this appraisal. Market value is defined as follows: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller tobuyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well -informed or well-advised, and acting in what they consider their own best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 15

23 Source of Market Value Definition: Federal Register, Vol. 55, No. 165, Friday, October 13, 1990, Rules and Regulations, 12 CFR Part 34.42(f), (FNMA 1004B 6-93) Source of As-Is Market Value Definition: Appraisal Policies and Practices of Insured Institutions and Services Corporation, Federal Home Loan Bank Board, Final Rule, 12 CFR Parts 563 and 571, December 21, As-Is Market Value Explained Market Value as-is means an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of inspection. When an AS-IS valuation premise is used, the property is valued as of a specified date, assuming the property is in precisely the condition or status it actually was in on the effective date of value, This condition must be accurately described in the appraisal report. In summary, an appraisal of the AS-IS condition will estimate the defined value of a property while precisely reflecting its actual physical, legal, economic, and political status on the effective date of valuation. Date of Inspection and Parties Attending The date of our last inspection was March 16, Ikenna Forte, Licensed Appraiser inspected the subject property. Date of Value March 16, 2012 is the effective date of value for the market value of the subject property. Our Client requested a value as of the date of death of their mother who was an owner of record of the subject property. Report Date March 7, 2012 is the date this appraisal report was signed. Exposure Time USPAP requires exposure time whenever an Appraiser states a market value figure within an appraisal report. To estimate the exposure time for the subject property, we considered the historical marketing times of comparable properties up to March 16, Exposure time is always presumed to be historical in that it always precedes the effective date of the appraisal. Exposure time may be defined as follows: the estimated length of time the property interest being appraised typically would have been offered for sale prior to a hypothetical sale at the stated market value or most probable sales price on the effective date of this appraisal. I have estimated the exposure time to be 6-12 months assuming professional broker marketing, available financing and advertising for the subject property CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 16

24 MARKET AREA ANALYSIS AND ECONOMIC DATA City of Oakland Oakland is the eighth-largest city in the U.S. and the county seat of Alameda County. It lies on the eastern shore of San Francisco Bay, nestled against the Berkeley Hills and bordering five of the East Bay Regional Parks. To Oakland's north is Berkeley, home to the renowned University of California, Berkeley, and to its west across the Bay Bridge is San Francisco. Oakland is located in the San Francisco Bay Area, the sixth most populated metropolitan area in the United States. The Bay Area has a population of over 7 million. As of 2010, Oakland's population was 410,886 and is expected to grow by 6.09% by 2014 making it the third-largest city in the San Francisco Bay Area, after San Jose and San Francisco. Major employers in Oakland include the local, state, and federal governments, United States Postal Service, the Port of Oakland and carriers associated with the port, regional transportation and utility authorities, Kaiser Permanente, Clorox and Dreyer's Grand Ice Cream. Oakland Population Growth Trends Source: CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 17

25 APARTMENT MARKET PRESENT AND FUTURE Apartment Occupancy Trends Market conditions in the apartment sector strengthened significantly from 2007 through Prior to this period and during the recession of in early 2007, rent levels remained relatively constant and vacancy rates in some markets significantly exceeded 9 percent. However, with the economic recovery and increased employment primarily in the technology sector, rents began to increase in 2009 and vacancy rates fell to below five percent in most areas. The vacancy is tending to stabilize around 5%. Although the statistics shown are all apartments, large and small complexes, they indicate the general trends within the multi-family market. According to the real estate consulting firm CLRsearch.com, occupancy within Oakland as of the end of 2010 is illustrated on the following table. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 18

26 Apartment Rental Rate Trends The apartment rental market is currently showing stable to decline due to lack of Oakland s high unemployment rate and an upward movement in the inflation rate for fuel and food. As a result of the weakening job market and overall economy, apartment rents in have increased approximately percent the one bedroom/one bath units but show significant declines for the two & three bedroom/one bath units; respectively, -11.8% for two, and - 25% for three bedrooms since the end of A search of the permit counter at The Oakland Housing Authority showed no new apartment construction permits for 2012 year to date. However, there were over five permits issued for the construction of residential condominiums, a competing alternative to apartment living. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 19

27 HIGHEST AND BEST USE ANALYSIS This section is devoted to determining the highest and best use of the subject property. Highest and best use is usually determined under two different scenarios: 1. As if the site were vacant land; 2. As improved (existing buildings on site). Highest and best use of land as if vacant is defined as that use, from among reasonably probable and legal alternative uses, found to be physically possible, appropriately supported, financially feasible and which results in the highest land value. This analysis determines a use (new or existing) that would bring the highest value to the site (if it became vacant and had no building on it). The highest and best use of the site as improved is defined similarly except it is the use that results in the highest property value (based on the land and existing building). Improved in this sense means the existing buildings and structures on the site as they are and their current use, not repaired or renovated. Repairs and renovations would add to the value under an as-improved analysis. This analysis looks at the design possibilities of the existing building and its impact on the value of whole property. The best design based on market demand brings the maximum value to the whole property. Highest and best use for the property as improved may be the same or different from the highest and best use of the land as if vacant. If the highest and best use of the improvements is not the same as the land as if vacant, the highest and best use as improved is referred to as the highest and best "interim" use of the property. In this case, the subject s interim use is also its highest and best use. Conclusion Highest and Best of Subject Property The concept of highest and best use as indicated above represents the premise upon which value is based. Any use considered under the two scenarios must pass the following four tests: legal permissibility; physical possibility; financial feasibility; and maximum profitability. Highest and best use analysis involves assessing the subject both as if vacant and as improved. AS VACANT The property is zoned for (RM-3) medium density residential use and is of sufficient size to accommodate various types of residential developments. The immediate area includes various multifamily and single family land uses. Considering present zoning, the surrounding land uses, location attributes, legal restrictions and supply & demand for multi-family use; it is our opinion that a multifamily residential oriented use would be reasonable and appropriate. Of the multi-family uses, apartment is ranked #1 and condominiums #2. Therefore, it is our opinion that the highest and best use would be for a medium density multi-family building related use. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 20

28 AS IMPROVED As improved (both as-is or as-repaired), the subject property is a multi-family housing development. As improved describes the existing building and its current use (what type of build is on the site and what is the building being use for). As improved in this context does not mean that one has completed necessary repairs or renovations to the building. Whether the building has or has not been renovated, or is vacant, its current use is multi-family. The current use is legally permissible and physically possible. The improvements in their present condition and certainly in the repaired condition continue to contribute value to the property and based on our analysis, the existing use is financially feasible. Therefore, it is our opinion that the highest and best use of the subject property, as improved (with or without renovations), is for a continued multi-family building related use. The multi-family use would bring the highest value to the land. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 21

29 SALES COMPARISON APPROACH The Sales Comparison Approach is a process in which sales of similar properties (in addition to listings, properties under contract for sale, offers and refusals) are analyzed and compared to the subject. Following steps were completed in processing the Sales Comparison Approach to arrive at an indication of value for the subject apartment building: Step 1. Research the market to obtain information pertaining to sales, listings, pending sales that are similar to the subject property. Step 2. Investigate the market data to determine whether they are factually correct and accurate. Step 3. Determine relevant units of comparison (e.g., sales price per square foot), and develop a comparative analysis for each. Step 4. Compare the subject and comparable sales according to the elements of comparison and adjust as appropriate. Step 5. Reconcile the multiple value indications that result from the adjustment of the comparable sales into a single value indication. A summary of comparable building sales, which summarizes the physical and. economic characteristics of the sales, follows. Next, a market grid is prepared where the sales are then analyzed, adjusted, and related to the subject property. The adjusted sales prices are then correlated, resulting in a conclusion of value for the subject property. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 22

30 COMPARABLE APARTMENT SALE NO. 1 Sales Comp No.1 Sales Price: Property Information $1,862,500 or $156 /SF-gross; Price/Unit = $ 124,166/unit Subject Address: 271 Jayne Avenue, Oakland, CA Proximity to Subject: 1.60 miles NW County: Alameda Submarket: Oakland Tax ID No-APN : Total Improvement No. of Units/ Information Average Size (SF): Gross Building Area: 11,973 SF Price/Unit = $124,166 /unit Year Built and Age: 1960, 52 years Price/SF-gross = $156/SF-gross 15 units/ 798SF Condition: Average Unit Mix (no. & bedroom ct): (6) one bedroom one bath units, (9) 2Bdrm one bath units, total rooms=15 Parking Spaces Onsite/ Rating: parking on-site Garage Sales Information Closing Date of Sale: 9/30/11 Buyer: Oakline Properties, LLC Seller: Leba Frank T & Kelly B Terms of Sale: Cash Equivalent Property Rights Transferred: Fee simple Deed Document No: Marketing Time: 6 days Vacancy % at Sale: 5% Land Information Land Area: Zoning: 0.19 Acres/ 8,125 SF RU-2/S -12 Multi-family Residential Appraiser s Comments Commentary Comments: This comp has superior condition and location to subject. MLS Public income information was available. Overall, subject is inferior. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 23

31 COMPARABLE APARTMENT BUILDING SALE No. 2 Sales Comp No. 2 Subject Sales Price: $ 340,000 or $ 68/SF-gross ; Price/Unit = $ 56,666/unit Property Information Address: 6625 Bancroft Avenue, Oakland, CA Proximity to Subject: County: Alameda Submarket: Oakland Tax ID No-APN : Improvement Information Gross Building Area: 5,001 SF Price/Unit = $ 56,666/unit Year Built and Age: 1946, 65 years Price/SF-gross = $ 68/SF-gross Total No. of Units/ Average Size (SF): 6 units/ 833SF Condition: Average Unit Mix (no. & bedroom ct): (6) two bedroom one bath units, total rooms=15 Parking Spaces Onsite/ Rating: parking on-site -open Sales Information Closing Date of Sale: 3/20/12 Buyer: not reported Seller: Joyful House LLC Terms of Sale: Cash Equivalent Property Rights Transferred: Fee simple Deed Document No: MLS Marketing Time: 8 days Vacancy % at Sale: 5% Land Information Land Area: Zoning: 0.08 Acres/ 3,670 SF RU-4 Multi-family Residential Appraiser s Comments Commentary Comments: This comp has superior condition to subject, but similar location and small building. MLS Public income information was available. Overall, subject is inferior. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 24

32 COMPARABLE APARTMENT BUILDING SALE No. 3 Sales Comp No. 3 Subject Sales Price: $1,175,000 or $217 /SF-gross; Price/Unit = $ 146,875/unit Property Information Address: 3803 Manila Avenue, Oakland, CA Proximity to Subject: County: Alameda Submarket: Oakland Tax ID No-APN : Improvement Information Gross Building Area: 5400 SF Price/Unit = $ 146,875/unit Year Built and Age: 1920, 92 years Price/SF-gross = $217/SF-gross Total No. of Units/ Average Size (SF): 8 units/ 1250SF Condition: Average Unit Mix (no. & bedroom ct): (6) one bedroom one bath units, (2) 2Bdrm one bath units, total rooms=8 Parking Spaces Onsite/ Rating: parking on-street only Sales Information Closing Date of Sale: 11/30/11 Buyer: Oakline Properties, LLC Seller: Manila Street, LLC Terms of Sale: Cash Equivalent Property Rights Transferred: Fee simple Deed Document No: MLS Marketing Time: 12 days Vacancy % at Sale: 5% Land Information Land Area: Zoning: 0.10 Acres/ 5200 SF RM-3 Multi-family Residential Appraiser s Comments Commentary Comments: This comp has superior condition and location to subject, although its much older. MLS Public income information was available. Overall, subject is inferior. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 25

33 COMPARABLE APARTMENT BUILDING SALE No. 4 Sales Price: Sales Comp No. 4 Subject $765,000 or $118 /SF-gross; Price/Unit = $76,500 /unit Property Information Address: th Avenue, Oakland, CA Proximity to Subject: County: Alameda Submarket: Oakland Tax ID No-APN : Improvement Information Gross Building Area: 6,450 SF Price/Unit = $76,500 /unit Year Built and Age: 1961, 51 years Price/SF-gross = $118/SF-gross Total No. of Units/ Average Size (SF): 15 units/ 645 SF Condition: Average Unit Mix (no. & bedroom ct): (10) 2Bdrm one bath units, total rooms=10 Parking Spaces Onsite/ Rating: parking on-site open Sales Information Closing Date of Sale: 5/6/11 Buyer: th Partners LP Seller: Shea Williams Terms of Sale: Cash Equivalent Property Rights Transferred: Fee simple Deed Document No: Marketing Time: 12 days Vacancy % at Sale: 5% Land Information Land Area: Zoning: 0.24 Acres/ 10,300 SF RM-3 Multi-family Residential Appraiser s Comments Commentary Comments: This comp has superior condition and location to subject, although it s the same age. MLS Public income information was available. Overall, subject is inferior. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 26

34 Comparable Apartment Sales Location Map (AMP10) Apartment Building -15 Units CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 27

35 A Summary of Comparable Building Sales which summarizes the physical and. economic characteristics of the sales follows. The sales are then analyzed, adjusted, and related to the subject property. The adjusted sales prices are then correlated, resulting in a conclusion of value. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 28

36 Damage Estimate and Condition Adjustment Explained The adjustment for condition is the $234,000 figure shown in the contribution to value sheet shown below, which also provides the As-Repaired value. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 29

37 Appraisal Adjustment Process Explained Appraisal Adjustments are made for all features that are different and value impacting. As indicated by above adjustments dollars are added or subtracted to the sales price of a comparable property. When comparing one or more different features of a property, one must account for the dollar effect each feature would have on the selling price assuming an arms-length transaction between a willing seller and buyer. Professional Appraisers make qualitative (subjective) and quantitative (factual research data) adjustments to comparable properties in an effort to net out all differences to arrive at what the comparable property would have sold for if it were identical to the subject property. Each adjusted comp provides an indication of what the subject is likely to sell for in the open market. Therefore, the number of value indicators for the subject property is based on the number of comps used in the appraisal report. All adjustments must be market-supported and clearly explained to lead the reader to the same conclusion as the Appraiser. Adjustments are one of the most important and most difficult area of appraising any type of property due to the research effort and critical thinking required for their support. Reconciled Sales Price Per Unit ( Price/Unit) The unadjusted sales price per unit for the comparables ranges from $56,000 to $146,000 per unit. The adjusted sales price per unit ranges from $ 14,000 to $ 104,000 per unit. The adjusted mean (average) sales price per unit was $67,000 and the adjusted median (mid-point) sales price per unit was $75,000. Comparable Influence The adjusted Price/Unit range is $14,000 to $104,000. The best comparables for establishing the market value for the subject are comparable No 1 and 4. They show the lowest gross adjustments to the subject and are the most similar to the subject with location and size given major weight. Their indicated range of value is from $54,315/Unit to $104,281/Unit. Comp 1 is in a better market area, higher density developed multi-family area, superior features, smaller GBA making the subject value slightly less than indicated by Comp 1. Comp 4 is in the same market area but lesser developed multi-family area, much smaller GBA with superior condition making the subject more than the value indicated by Comp 4. Comp No. 2 is in same market area, lesser location, much smaller GBA making the subject value more than indicated by Comp 2. Comp 3 is in a better neighborhood, better location, much smaller GBA making the subject value much less than indicated by Comp 3. My opinion is that the market grid analysis is well-developed and the adjustments made are well-supported. Therefore, I have concluded that as of March 16, 2012, the as-is market value for subject was $80,000/Unit Market Value Based on: Price Per Unit 15 units X $80,000/unit = $1,200,000 rounded CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 30

38 Value based on the Sales Comparison Approach I have considered all relevant data and therefore, estimated the as-is market value of the fee simple interest of the subject property (land and buildings), according to the sales comparison approach, as of March 16, 2012, was: Sales Comparison Approach Sales Comparison Approach $ 1,200,000 $ 1,954,000 CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 31

39 INCOME APPROACH Direct Capitalization requires net operating income from the next 12 months to be calculated and divided by a CAP rate to derive a value for the subject apartment building which is formulated as follows: Following are the processing steps involved: Market Value (MV) = NOI R 0. Step 1: estimate future benefits. The appraiser first estimates the annual potential gross income for a property. This involves estimating how much rent each unit could generate in the current market place. The rental rates being charged by the current owner may be too low and may not reflect potential market rental rates. Appraisers study the current market place to estimate potential rental rates. Step 2: estimate effective gross income. The appraiser then calculates an effective gross income for the property by reducing the annual potential gross income by a vacancy allowance amount. The vacancy allowance amount is determined by current market rental conditions for the type of property being analyzed. Step 3: add miscellaneous income (other income) to estimated income. Income such as parking fees, laundry and vending receipts are added to the income. Step4: deduct operating expenses from gross effective income. Operating expenses are deducted from the effective gross income to determine the annual net operating income for the property. Step 5: determine an accurate CAP rate for the subject property. Once the net operating income is determined, a capitalization rate is calculated for the property. Step 6: Calculate the subject market value by using the direct CAP rate formula: Net Operating Income Estimated Market Value (MV) = = $ Capitalization Rate (R 0 ) The following rent comps were used to determine market rent which is used to assess subject s existing rent and to compare and support rent Comps used in this report. This analysis is summarized in the Rent Comparable Adjustment Grid followed by Appraiser comments. Repairs Required for Future Income The $244,000 estimate in repairs must be made to bring the property to a livable condition. Therefore, the income approach analysis is based on potential rents that the subject is projected to receive once rehab d. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 32

40 Summary of Comparable Apartment Rentals (AMP10) Apartment Building -15 Units COMPARABLE RENTAL No. 1 Rental No. 1 Subject Project/Location: Address: 271 Jayne Ave, Oakland, CA Unit Mix: Unit Type No. of Units Average Rent Average Size Sq. Ft. Rent/SF $/SF 1 / 1 6 $ $ 1.72/SF 2 / /SF Total 15 Total Units: 15 Units Project Occupancy: 99% Charges in Addition to Rent: None Subsidies and Restrictions at Project: None; No government help with rent, conventional open Market Rents. Rent restrictions due to Oakland Rent Control ordinance in effect as are most units. Oakland is a rent control market. Other Comments: Open Market Rate Project rents confirmed and used, not BMR rents Date Information Verified: 4/5/12; Rent quotes are for turn-over units Comments: Average quality three-story apartment no elevator development with garage parking and proximity to Lake Merritt. The property appears to be adequately maintained, and overall this is development is in fair condition. Project offers three different floor plans: 1bedroomx1bath, 2bedroom x 1bath, and 3bedroom x 1bath. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 33

41 COMPARABLE RENTAL No. 2 Rental No. 2 Subject Project/Location: Address: 2268 E 15 th St, Oakland, CA Unit Mix: Unit Type No. of Units Used as Comp In RCS? (Y/N) Average Rent Total Units: 22 Units Project Occupancy: 98% Charges in Addition to Rent: Coin laundry and storage. Interior Size (SF) Subsidies and Restrictions at Project: None; No government help with rent, conventional open Market Rents. Rent restrictions due to Oakland Rent Control ordinance in effect as are most units. Oakland is a rent control market. Other Comments: Open Market Rate Project rents confirmed and used, not BMR rents Date Information Verified: 4/5/12; Rent quotes are for turn-over units Comments: Price/SF 0/1 2 $ $1.56 1/1 16 $ /1 1 $ /1 3 $ Total 22 Average quality three-story apartment walk-up development with garage parking and storage area. The property appears to be adequately maintained, and overall this is development is in fair condition. Project offers two different two floor plans: 2bedroom x 1bath, and 3bedroom x 2baths. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 34

42 COMPARABLE RENTAL No. 3 Rental No. 3 Project/Location: Address: 3050 Fruitvale Avenue, Oakland, CA Unit Mix: Subject Unit Type No. of Units Total Units: 19 units on three stories with no elevator Project Occupancy: 96% Charges in Addition to Rent: Used as Comp In RCS? (Y/N) Average Rent Interior Size (SF) Subsidies and Restrictions at Project: None; No government help with rent, conventional open Market Rents. Rent restrictions due to Oakland Rent Control ordinance in effect as are most units. Oakland is a rent control market. Other Comments: Open Market Rate Project Date Information Verified: 4/5/12; Rent quotes are for turn-over units Comments: Price/SF 2/1 14 NO $ $1.38 2/2 3 NO $ /1 2 YES $ Total 19 Average quality three-story apartment no elevator development with pool, garage parking and storage areas. The property appears to be adequately maintained, and overall this is development is in fair condition. Project offers three different floor plans: 1bedroomx1bath, 2bedroom x 1bath, and 3bedroom x 1bath. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 35

43 COMPARABLE RENTAL No. 4 Rental No. 4 Subject Project/Location: Address: 2615 E15th St, Oakland, CA Unit Mix: Unit Type No. of Units Used as Comp In RCS? (Y/N) Average Rent Interior Size (SF) Price/SF 2/1 10 $ $1.17 Total 10 Total Units: 10 on two stories with no elevators Project Occupancy: 98% Charges in Addition to Rent: Subsidies and Restrictions at Project: None; No government help with rent, conventional open Market Rents. Oakland is a rent control market. Rent restrictions do not apply to Comp 5 as it was built after Other Comments: Open Market Rate Project Date Information Verified: 4/5/12; Rent quotes are for turn-over units Comments: Average quality three-story apartment no elevator development with pool, garage parking and storage areas. The property appears to be adequately maintained, and overall this is development is in above fair condition. Project offers three different floor plans: 1bedroomx1bath, 2bedroom x 1bath, and 3bedroom x 1bath. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 36

44 (AMP10) Apartment Building -15 Units th Avenue, Oakland, CA Comparable Apartment Rental Location Map CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 37

45 Additional Rent Survey: Oakland Rent Survey $ 1500 per Month 3-bedroom Average Rent in Oakland Source: Craigslist Apr 9 - $1685 / 3br - Great 3bd 2bath Unit! Near Bart Apr 9 - $1525 / 3br - OurVeryBest,ReadyNow,Granite,BerberCrpt,Dshwshr,Garage,Pool,Call Soon! - Apr 9 - $1250 / 3br - Large 3 bdrm 1bth 4-plex lower unit available now. Apr 9 - $1250 / 3br - Grande 3 bdrm 1bth la unidad más baja de 4 plex disponible ahora Apr 9 - $1500 / 3br ft² - Duplex for rent Apr 9 - $1500 / 3br ft² - Duplex House for rent Apr 9 - $1300 / 3br ft² - 3BR/2BA Single Family House - Oakland Apr 8 - $1600 / 3br ft² - Beautiful 3 Bed 1 Bath Apr 8 - $1625 / 3br - Penniman Ave HOME~Many extras~garage~yard~applainces~sec 8 ok Apr 8 - $1725 / 3br - House with lovely yard~appliances~hardwood Floors Apr 8 - $1250 / 3br - Upper flat~dining room~carpet~large Kitchen~Shared yard Apr 8 - $1350 / 3br - Lower updated unit in duplex~2baths~appliances~896 31st Street Apr 8 - $1850 / 3br - HUGE Dimond District unit~2baths~huge Kitchen~Dining rm~patio~fireplac CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 38

46 Economic Rent Conclusion & Projection of Stabilized Rental Income: The following reconstructed projected income statement for the subject is based on market rents as shown from our survey above and market expenses per industry standards. Our estimate value is based on the rehab work estimated being completed and the subject property is in rentable condition. Market Rent = $1500/month CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 39

47 Value based on the Income Approach The following table identifies the previous conclusions regarding effective gross income, total expenses and net operating income for the subject property and the application of the Cap rate used. The calculation begins with the effective gross income (EGI) which is the gross income less vacancy and collection loss and ends with the estimated value based on the income approach. DIRECT CAPITALIZATION CALCULATION Effective Gross Income 261,900 Less: Total Operating Expenses 75,190 Net Operating Income 186,710 Overall Cap Rate used 8.50% Indicated Value rounded CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 40

48 RECONCILIATION AND FINAL OPINION OF VALUE Reconciliation is the process of resolving differences in value estimates derived by the various approaches to value. It is the final step in the appraisal process. Two approaches to value were used in this report. A summary of each analysis and reconciliation follows: Summary of Values Sales comparison approach As-Is = $ 1,200,000 Sales comparison approach As-Repaired = $ 1,434,000 Income approach -As-Repaired = $ 2,197,000 In reviewing the income approach, I find that the estimate of market rents is well supported by comparable rentals in the immediate market area of the subject. Estimates of the likely vacancy and collection loss are similarly well supported, not only by the experience data from the comparable rentals but also by a recent survey of the multifamily housing market. Expense data were not available from the historical operations but the IREM industry standards are considered very reliable. A reconstruction of the operating statement for the subject resulted in a ratio of expenses to EGI that was comparable to the range indicated by the comparables. Based on all of this information, the estimate of NOI that would be derived from an investment in the subject appears well supported. In the sales comparison approach, I analyzed sales involving multifamily projects in the market area. Of these transactions, all of the sales were similar in many aspects. All of these sales gave reasonably good indications of the value of the subject and after adjustments for location, condition (major), and amenities, the sales gave a very consistent indication of the per-unit value of the subject. A further analysis indicates a similarly narrow range of Cap rates, which were implied by the sales. Based on my judgment that the most likely purchaser of the subject would be an investor requiring a financial return on the investment, and based on both the sufficiency and consistency of the data available to arrive at the value indication from the income approach, I have placed the greatest weight on the income approach when arriving at my final value estimate. The value estimate by this approach is well supported by the other approaches. In light of all of these considerations, it is my opinion that the best estimate of the value of the fee simple interest in the subject is Final As-Is Value Indication: Six Hundred Fifty Thousand dollars $1,200,000 Final As-Repaired Value Indication: One Million Two Hundred Thousand dollars $1,700,000 Exposure time is presumed to precede the effective date of the appraisal. Based upon an analysis of statistical information about days on market, information gathered through sales verification and interviews with real estate professionals and market participants, exposure time on March 16, 2012was estimated as six to eight months to achieve a sale of the subject property at the value stated above. A reasonable marketing period is an opinion of the time required to sell a property interest at the concluded market value during the period immediately after the effective date of the appraisal. Marketing time is assumed to equal exposure time for the subject property at an estimated time period of six to eight months. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 41

49 LAND VALUE ESTIMATE Typical Tax Assessor Ratio: 65% building 35% land 100% Total Opinion of market value of land As-Is : As-Is Market Value (building & Land) = $1,200,000 Land represents 35% of total Value= $ 420,000 Opinion of market value of land As-Repaired : As-Repaired Market Value (building & Land) = $1,700,000 Land represents 35% of total Value= $ 595,000 APPRAISER S COMMENTARY: TO REPAIR OR TEARDOWN SUBJECT APT BUILDING? It is my professional opinion that the existing building should be rehab d and renovated to 2012 standards at a cost of between $230,000 to $235,000 as discussed in this report. The building over the long run would be profitable and add to the needed housing stock of Oakland. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 42

50 ADDENDA Building Sketches (13,788 SF Gross ) CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 43

51 County Record Parcel 12-1 (7699 SF)- Apartment Building Site Area (AMP10) Apartment Building -15 Units TH AVE, OAKLAND, CA Owner Information: Owner Name: HOUSING AUTHORITY OF THE CITYOF OAKLAND Mailing Address: 3798 GRAND AVE, OAKLAND CA C009 Phone Number: Vesting Codes: / / Location Information: Legal Description: County: ALAMEDA, CA APN: Census Tract / Block: / 3 Alternate APN: Township-Range-Sect: Subdivision: Legal Book/Page: Map Reference: 9-E5 / 650-A4 Legal Lot: Tract #: Legal Block: School District: OAKLAND Market Area: Munic/Township: OAKLAND INCORP Neighbor Code: Owner Transfer Information: Recording/Sale Date: 09/03/1969 / Deed Type: DEED (REG) Sale Price: 1st Mtg Document #: Document #: Last Market Sale Information: Recording/Sale Date: / 1st Mtg Amount/Type: / Sale Price: 1st Mtg Int. Rate/Type: / Sale Type: 1st Mtg Document #: Document #: 2nd Mtg Amount/Type: / Deed Type: 2nd Mtg Int. Rate/Type: / Transfer Document #: Price Per SqFt: New Construction: Multi/Split Sale: Title Company: Lender: Seller Name: Prior Sale Information: Prior Rec/Sale Date: / Prior Lender: Prior Sale Price: Prior 1st Mtg Amt/Type: / Prior Doc Number: Prior 1st Mtg Rate/Type: / Prior Deed Type: Property Characteristics: Year Built / Eff: / Total Rooms/Offices: Garage Area: Gross Area: Total Restrooms: Garage Capacity: Building Area: Roof Type: Parking Spaces: Tot Adj Area: Roof Material: Heat Type: Above Grade: Construction: Air Cond: # of Stories: Foundation: Pool: Other Improvements: Exterior wall: Quality: Basement Area: Condition: Site Information: Zoning: Acres: 0.34 County Use: Lot Area: 14,946 Lot Width/Depth: x State Use: Land Use: PUBLIC (NEC) Commercial Units: Water Type: Site Influence: Sewer Type: Building Class: Tax Information: Total Value: Assessed Year: Property Tax: Land Value: Improved %: Tax Area: Improvement Value: Tax Year: Tax Exemption: Total Taxable Value: EXEMPT PUBLIC AGENCY (0300) CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 44

52 Subject s Zoning Text- RM-3 Mixed Housing Type Residential Zone - 3 (AMP10) Apartment Building -15 Units The intent of the RM-3 zone is to designate areas of the Mixed Housing Type Residential Zone appropriate for a wide range of upper story and ground level residential and compatible contemporary multi-family apartment building activity. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 45

53 CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 46

54 General Assumptions and Limiting Conditions Applied By Appraiser This appraisal has been made with the following General Assumptions: 1. No responsibility is assumed for the legal description, or for matters including legal or title considerations. 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 and 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 unapparent 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. Unless otherwise stated in this report, the existence of either hazardous material or toxic waste, which may or may not be present on or in the property, was not investigated by this appraiser. 8. As an appraiser, I am not qualified to properly investigate this property for any discharge, spillage, uncontrolled loss, seepage, filtration or storage of hazardous substances that may adversely affect the value of this property. Neither am I qualified to detect the presence of substances such as asbestos, urea-formaldehyde foam insulation, nor other potentially hazardous materials. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover and/or correct them. 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. 9. 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. 10. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national governmental 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. 11. 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. This appraisal report has been made with the following Limiting Conditions: 1. The allocation of the total estimated value 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 appraiser, and in any event, only with proper written qualification and only in its entirety. 3. The appraiser herein by reason of this appraisal is 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. 4. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news sales, or other media without prior written consent and approval of the appraiser. March 6, 2012 Napoleon Forte, MBA, ASA, MRICS, Managing Appraiser California License No. AG11918 Date Signed CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 47

55 Appraiser s USPAP Required Certification I, Napoleon Forte, Appraiser, certify that, to the best of my knowledge and belief: 1. 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 my personal, impartial and unbiased professional analyses, opinions, and conclusions; 3. I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved; 4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment; 5. my engagement in this assignment was not contingent upon developing or reporting predetermined results; 6. my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal; 7. my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the American Society of Appraisers, and in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; 8. I have made a personal inspection of the property that is the subject of this report; 9. No person provided significant professional assistance to the person signing this report; 10. the appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan; 11. the appraisal process, including data collection and analysis, and the reporting of the appraisal process were performed without racial, ethnic, religious or gender discrimination; 12. I am currently licensed by the State of California Office of Real Estate Appraisers as a "Certified General Real Estate Appraiser", California License No. AG I am competent to perform this appraisal assignment; 14. The use of this report is subject to the requirements of the American Society of Appraisers relating to review by its duly authorized Managers. March 6, 2012 Napoleon Forte, MBA, ASA, MRICS, Managing Appraiser California License No. AG11918 Date Signed CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 48

56 Meet Your Appraiser: Napoleon L. Forte Qualifications of Napoleon Forte The appraiser hereby certifies that he has the appropriate knowledge, education and experience to complete this assignment competently. This appraisal report was prepared by Certified General Appraisal Services, a firm specializing in Real Property research and analysis, especially the valuation of commercial properties. Certified General Appraisal Services conducts valuation studies of both buildings and land for variety of purposes, including foreclosure proceedings, mortgage financing, investment analysis, sales, and listings. Certified General Appraisal Services also maintains an extensive real estate research library with titles and reference manuals on many commercial buildings (including apartments) throughout California. Napoleon Forte is the primary managing Accredited Appraiser with Certified General Appraisal Services. Mr. Forte is also a National Certified USPAP Instructor with the Appraisal Foundation. He holds two Accredited Senior Appraiser (ASA) designations with the American Society of Appraisers in Urban Real Property and Machinery & Equipment. He is also completing a designation in Business Valuation with the American Society of Appraisers. He holds a Masters of Business Administration (MBA) with a major in Financial Management from Golden Gate University of San Francisco, and a Bachelor of Science (BS) degree from Prairie View A & M University-Texas with a major in Mechanical Engineering. He also has completed post graduate credits towards a Masters in Mechanical Engineering at the University of California -Davis California campus. Napoleon Forte holds the following California State Licenses: State Certified General Appraiser License, Real Estate Broker License, General Building Contractor s License-Class B, and California Life-Time Real Estate Teaching Credential with the State of California, and California Manufactured Home Dealers License. Napoleon Forte meets all 2012 education and experience requirements for the American Society of Appraisers and the Appraisal Foundation, Washington, DC. CERTIFIED GENERAL APPRAISAL SERVICES Apartment Building Specialists 49