APPRAISAL REPORT OF. TANGERINE PLAZA SHOPPING CENTER nd Street South St. Petersburg, Pinellas County, Florida URS File Number

Transcription

1 APPRAISAL REPORT OF TANGERINE PLAZA SHOPPING CENTER nd Street South St. Petersburg, Pinellas County, Florida URS File Number FOR Mr. Bruce E. Grimes Director, Real Estate City of St. Petersburg P.O. Box 2842 St. Petersburg, Florida

2 TABLE OF CONTENTS Letter of Transmittal... Certificate of Valuation... Executive Summary...1 Subject Maps and Photographs... 7 Purpose, Intended Use and Date of Appraisal Scope of Appraisal Valuation Definitions Legal Description Ownership and Five-Year History of Subject Property Market Area: Location, Description and Trend Real Property Assessments and Taxes Land Use and Zoning Classification Concurrency and Impact Fees Site Description Improvement Description Marketability and Estimated Marketing Period Highest and Best Use Analysis Introduction to the Appraisal Process Sales Comparison Approach Comparable Improved Sales Analysis of Comparable Improved Sales Comparative Summary Summary of Sales Comparison Approach Income Capitalization Approach Comparable Rentals Analysis of Comparable Rentals Subject Lease Analysis Estimates of Rental Revenue Capitalization and Discounting Yield Capitalization Method Discounted Cash Flow Summaries Summary of Income Capitalization Approach Reconciliation and Final Value Estimate Assumptions and Limiting Conditions Appraiser Qualifications... Addendum...

3 May 18, 2018 Mr. Bruce E. Grimes Director, Real Estate City of St. Petersburg P.O. Box 2842 St. Petersburg, Florida RE: Tangerine Plaza Shopping Center nd Street South St. Petersburg, Florida, Dear Mr. Grimes: As requested, a detailed investigation, analysis and appraisal have been made of the market value of the leased fee estate of the referenced property, in as-is condition as of the appraisal date. As requested, we have prepared a complete appraisal and are submitting this appraisal in a summary appraisal report format. Included within the accompanying appraisal report are exhibits and documented data in support of the value conclusions. All material collected during our analysis has been retained in our files and is available for inspection upon request. This appraisal has been prepared in compliance with the Uniform Standards of Professional Appraisal Practice and governmental regulations, as well as the client s appraisal and reporting requirements. The opportunity to have been of service is appreciated. Should you have any questions or comments, or require additional information, please do not hesitate to contact us. Very truly yours, H. Linwood Gilbert, Jr., MAI State-Certified General Real Estate Appraiser RZ0940 Thomas J. Eipper State-Certified General Real Estate Appraiser RZ3319

4 CERTIFICATION This is to certify that, upon request for valuation by Mr. Bruce E. Grimes, Director, Real Estate, City of St. Petersburg, we have personally inspected, collected and analyzed various data, and appraised the market value of the leased fee estate of the subject property, located at nd Street South, St. Petersburg, Florida We certify that, to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. We have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. Our reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. This certificate is also a certification under Florida Real Estate License Law Chapter 475. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives We have made a personal inspection of the property that is the subject of this report. Also, we made an inspection of the selected comparable properties.

5 No one provided significant real property appraisal assistance to the persons signing this certification. As of the date of this report, H. Linwood Gilbert, Jr., MAI, has completed the continuing education program for Designated Members of the Appraisal Institute. As of the date of this report, Thomas J. Eipper has completed the Standards and Ethics Education Requirement for Candidates/Practicing Affiliates of the Appraisal Institute. The undersigned appraisers, based on education, work experience and the previous appraisal of properties similar to the subject, are competent and qualified to appraise the property. This certificate is in accordance with the Uniform Standards of Professional Appraisal Practice Standard Rule 2-3 and with the Appraisal Institute's Supplemental Standards of Professional Practice. It is also a certification under Florida Real Estate Appraisal Board of the Division of Real Estate of the Department of Business and Professional Regulation. The reader should review the Assumptions and Limiting Conditions, to which this analysis is subject, included at the end of the report. In our opinion, the leased fee estate of the subject property, located at nd Street South, St. Petersburg, Florida 33712, had a market value, in as-is condition and as of the appraisal date of April 10, 2018, of approximately TWO MILLION TWO HUNDRED THOUSAND DOLLARS ($2,200,000). The above value does not include personal property, such as furnishings, fixtures and equipment. H. Linwood Gilbert, Jr., MAI State-Certified General Real Estate Appraiser RZ0940 Thomas J. Eipper State-Certified General Real Estate Appraiser RZ3319

6 EXECUTIVE SUMMARY Property Name: Property Classification: Address: Tangerine Plaza Shopping Center a.k.a. Midtown Plaza Neighborhood Shopping Center nd Street South St. Petersburg, Pinellas County, Florida Location: Northeast corner of 18 th Avenue South and 22 nd Street South, approximately one mile south and one mile east of Interstate 275, in the south Saint Petersburg neighborhood area known as Midtown. Municipal Jurisdiction: County: Section, Township and Range: City of St. Petersburg Pinellas County 25/31S/16E Census Tract: Metropolitan Statistical Area: Property Ownership: Property Rights Appraised: Tampa-St. Petersburg-Clearwater City of St. Petersburg Leased fee estate Legal Description: Parke Sub Partial Replat and Addition Blk 1, Lot 1 County Identification No.: Purpose of Appraisal: Estimate market value as-is Appraisal/Inspection Dates: April 10, 2018 Date of Report: May 18, 2018 Report Type: Intended User of Appraisal: Summary appraisal report Client, City of St. Petersburg

7 Intended Use of Appraisal: Evaluate the property that is the subject of this appraisal for asset management purposes and to aid in future negotiations Property Assessment 2017: $4,240,000 Tax Millage Rate 2017: mils Ad Valorem Taxes 2017: $93, Non - Ad Valorem Taxes: $0.00 Personal Property Tax 2017: Total Property Taxes: Neighborhood: Land Use Plan: Zoning District: Site Data: NA $93, Gross $89, Net The subject is a neighborhood shopping center located on a four-lane east-west collector roadway characterized by retail and office of various uses. The immediate market or neighborhood surrounds the traffic collector and extends for approximately 1.0 miles north to south and 3.25 miles east to west. Neighborhood boundaries are best described as I- 275 to the west, 7th Avenue South to the north, 4th Street South to the east and 22nd Avenue South to the south, but customers, clients and employees come from a broader market area. PR-MU, Planned Redevelopment Mixed Used District CCT-1 Corridor Commercial Traditional The subject fronts approximately 605 feet along the northerly side of 18th Avenue South and has depth of approximately 259 feet along the easterly side of 22nd Street South. The site is rectangular and contains approximately 156,940 square feet or 3.60 acres. The site is level to slightly sloping and drainage appears adequate. Access is available from asphalt paved streets on all sides of the site. Onsite parking is provided to the front of the building. Public right-of-way parking is not available. URS Page 2

8 Soil is sandy, typical for the area, and it is assumed that no adverse subsoil conditions exist. Municipal potable water and waste water disposal are available to the site, as are electric and telephone services. There are no known impediments to development. Drainage and utility easements appear typical. Flood Zone Data: Improvement Data: X, above 100-year flood plain, per FEMA Map Panel G, dated September 3, The subject property is improved with a small neighborhood shopping center consisting of two attached one-story masonry commercial buildings with concrete flooring and typical retail glass storefronts totaling 48,378 square feet of gross building area and 47,390 square feet of rentable square feet. Exterior of the buildings have a painted stucco finish and present in average condition. Originally constructed in 2005, the interior of the buildings have been demised to include one junior box retail space containing 39,079 rentable square feet and seven in-line local shop suites ranging from 536 to 1,310 square feet and totaling 8,311 rentable square feet. Wall height/eave height is approximately 28 feet for the junior box and 16 feet for the multi-tenant in-line store building. Interior ceiling height in the multi-tenant building is generally 10 feet. The junior box ceiling height is typically open to the roof deck, with various office and back room finished ceiling areas of approximately 8 to 10 feet in height. The buildings are fully air conditioned and wet sprinklered. The roof is of a flat design with built up roofing, and this report is subject to receipt of satisfactory structural and roof inspections. Building Area GBA RSF Junior Box - SF 39,734 39,079 In-line Stores - SF 8,644 8,311 Total SF 48,378 47,390 The general condition of the building is average. The economic life of the subject building is typically 50 years. The estimated effective age of the building is 10 years, indicating a remaining economic life of 40 years. URS Page 3

9 Site improvements consist of asphalt paving for parking with 179 designated spaces, including handicap spaces but not including 6 marked spaces reserved for junior box shopping cart corrals, circulation and delivery, concrete sidewalks, stormwater detention area, two double-sided illuminated signs, landscaping, overhead lighting, underground drainage, and underground laterals for municipal water and sewer. The site improvements appear adequate and functional. The economic lives of the various site improvements typically range between 20 years and 50 years, depending on the item and its standard useful life. Personal Property: Tenancy: The junior box formerly occupied by Walmart contains personal property which we are advised is owned by Walmart, which they will either sell under separate agreement or liquidate in the event of a new user. No personal property is applicable for this appraisal. At date of appraisal, there were five tenants, four of which were in occupancy. The fifth tenant is Walmart, who vacated their 39,075 sq. ft. junior box in 2016 but is current and paying all lease obligations. Two of the occupying tenants, Suites 1778 and 1782, had leases that have either expired or was terminated for default. Both store remain open but neither are paying any rent or CAM charges that continue to accrue, and both have significant arrearages of approximately one year past due. One occupying tenant, China Star restaurant, let their lease expire in December 2017 and is now month-to-month paying un-escalated base rent but no CAM charges. The fifth and last occupying tenant is a mobile phone provider whose lease runs through November 2019 and is current on all rental charges. We note also that a Community Resources Office of the St. Petersburg Police Department currently occupies Suite 1786 on a temporary basis without being charged rental. This space is considered vacant and available for our analysis. URS Page 4

10 In summary, of the five tenants with a leasehold interest: four are in occupancy and Walmart is vacant but paying rent; two of the four physical occupancies are current and paying rent though one is only month-to-month; and the two remaining occupancies, both beauty related stores, are monthto-month and open for business though notably delinquent and currently not paying any rent or CAM charges. As of the date of appraisal, physical vacancy was about 89.1%, while economic vacancy was only 12.1% due to Walmart continuing to pay their lease obligations on vacated space. Please refer to the Subject Lease Analysis section of this report for further discussion. Environmental Conditions: No unusual environmental conditions were observed, but this appraisal is subject to receipt of a satisfactory environmental audit. ADA Standards: Highest and Best Use: The appraisers are not expert in matters of compliance of Americans with Disabilities Act, and our appraisal is subject to receipt of certification by an architect or engineer that no extensive changes to the property are required. As if vacant and available, the subject site has a highest and best use for development to commercial use, primarily retail shopping center with a smaller grocery anchor than currently exists, or mixed use, when supported by the market. As currently improved, the existing commercial use contributes value to the site and is therefore representative of its highest and best use as improved. Marketing/Exposure Periods: Twelve months/ Twelve months URS Page 5

11 Value Indications Cost Approach N/A Sales Comparison Approach $2,300,000 Income Capitalization Approach $2,200,000 Final Estimate of Value $2,200,000 As Is URS Page 6

12 SUBJECT MAPS AND PHOTOGRAPHS Area Location Map Neighborhood Map URS Page 7

13 Area Aerial Photograph Neighborhood Aerial Photograph URS Page 8

14 Property Appraiser s Plat Map Property Appraiser s Aerial Photograph URS Page 9

15 Recorded Plat URS Page 10

16 Subject Photographs 1. Monument signage along 18 th Avenue South 2. View northeast from southwest site corner 3. View northerly of in-line stores 4. View easterly of junior box/walmart space 5. View southeasterly of in-line stores space 6. View northeasterly of junior box/walmart space URS Page 11

17 7. Easterly elevation 8. Northerly elevation 9. Westerly view along Queensboro Avenue South Subject on the left 10. Northerly view along 2 1st Street South Subject on the left 11. Easterly view along 18 th Avenue South Subject on the left 12. Westerly view from Subject corner along 18 th Avenue South through 22 nd St. So. intersection URS Page 12

18 13. Unit 1762 China Star Restaurant 14. Unit 1762 China Star Restaurant 15. Unit 1766 Cell Touch/Metro PCS 16. Unit 1766 Typical Restroom 17. Unit 1770 Vacant Shell 18. Unit 1770 Typical Restroom 19. Unit 1778 My Beauty Supply 20. Unit 1778 Typical Electric Panel URS Page 13

19 21. Unit 1782 Meme s Beauty Supply/Salon 22. Unit 1786 Community Services 23. Unit 1794 Vacant Walmart box 24. Unit 1794 Vacant Walmart box 25. Unit 1794 Vacant Walmart box 26. Unit 1794 Vacant Walmart box 27. Unit 1794 Vacant Walmart box 28. Unit 1794 Vacant Walmart box URS Page 14

20 PURPOSE, INTENDED USE AND DATE OF APPRAISAL Purpose of this appraisal is to estimate, with the highest degree of accuracy possible, the market value, in as-is condition, of the leased fee estate of the subject property. The intended user of this appraisal report is the client, City of St. Petersburg. This appraisal report is prepared for the sole and exclusive use of the intended user and may not be relied upon by any third parties for any purpose whatsoever without the prior written consent of the appraiser. No additional intended users are identified by the appraiser. The intended use is to evaluate the property that is the subject of this appraisal for asset management purposes and to aid in future negotiations, subject to the stated scope of work, purpose of the appraisal, reporting requirements of this appraisal report and definition of market value. Property rights appraised are the leased fee estate of the subject property. This is a complete appraisal in a summary appraisal report format. Date of this appraisal is April 10, 2018, the last date of inspection. Date of report is May 18, URS Page 15

21 SCOPE OF APPRAISAL The scope of work for this appraisal assignment includes the identification of the appraisal problem, which is the valuation of the subject property in its as-is condition. The steps taken in the analysis include: Personal inspection of the property under appraisement. In order to determine the competitive market of the subject, analysis was made of regional and neighborhood data and ascertainment of demographic and economic trends that affect the property and its intended use. In order to determine the competitive market position of the subject, analysis was made of economic trends affecting the property, including supply and demand analysis of properties considered directly competitive in the market, resulting in analysis of highest and best use of the property, both as if vacant and as improved. Description of the property site, including verification with applicable governmental authorities as to land use regulations, utilities, and property taxes, as well as non-invasive inspection and complete description of the physical characteristics of the existing or planned improvements. Please note that the appraisers are not engineers or contractors, and the inspection is limited to a visual inspection as to general quality and condition. While obvious impairments will be brought to the attention of the client, an inspection by a licensed engineer, pest control or other professional is always recommended. Estimation of highest and best use of the site, both as if vacant and as improved. Estimation of value using two approaches: sales comparison and income capitalization approaches. There is adequate market data to support these approaches to market value. In order to apply the sales comparison approach, research was made of sales comparable properties through two real estate sales reporting services and the Property Appraiser's Office. Each sale was inspected, photographed and the transaction verified with a party considered knowledgeable as to the details of the transaction and motivation of the parties, principally with the buyer, seller, real estate broker or manager involved. Qualitative and quantitative adjustments are made to comparable sales in order to obtain an indication of value of the subject. In order to apply the income capitalization approach, identification was made of competitive properties within the market area, which were inspected and photographed. Research was made as to rental rates and occupancies based on interviews with managers and owners. Inspection was made of the comparable rental properties in order to estimate market rental rates and occupancy for the subject property. Analysis of historical income and expenses of the subject, comparison with income and expense experience of competitive properties and research into supply-demand and occupancy-vacancy characteristics in order to project potential net income of the subject. URS Page 16

22 Market research was made of national and local economic trends, survey of available financing and market derived equity returns, and research into appropriate financial and capitalization rates in order to estimate appropriate capitalization and yield rates applicable to the subject. Appropriate capitalization rates are applied to the estimated net income in order to capitalize the income to an indication of value. Reconciliation of the value indications, with emphasis placed on the approach(es) considered most reflective of current market activity for final value estimate. URS Page 17

23 VALUATION DEFINITIONS Estate is, a right or interest in property. Defines an owner s degree, quantity, nature, and extent of interest in property. There are many different types of estates, including freehold (fee simple, determinable fee, and life estate) and leasehold. To be an estate in land, an interest must allow possession (either now or in the future) and be differentiated primarily by its duration. 1 As related to property, the terms estate and interest are synonymous for the purpose of this appraisal. Unless otherwise distinguished, the term property indicates real property in this report. Fee simple estate is the property interest represented by, "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." 2 Leased fee estate or interest is, the ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires. 3 Leasehold estate or interest is, the right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. 4 Hypothetical condition is, (1) a condition that is presumed to be true when it is known to be false. (SVP); or (2) a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. Comment: hypothetical conditions are 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 analysis. 5 Please refer to USPAP regulations. As an example, this condition is sometimes applied to an anticipated zoning change. Extraordinary assumption is, an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser s opinions and conclusions. Comment: 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. 6 Please refer to USPAP regulations. Market Value for the purposes of this appraisal, as defined in the Federal Register, Department of the Treasury Agencies appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p. 79. Ibid, p. 90. Ibid, p Ibid, p Ibid, p Ibid, p. 83. URS Page 18

24 buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: Buyer and seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their own best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 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. 7 Market value is also defined as: "The most probable price, as of a specified date, in cash or in terms equivalent to cash, or in other precisely revealed terms for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and for selfinterest, and assuming that neither is under undue duress. " 8 Market value is described (not defined) in the Uniform Standards of Professional Appraisal Practice (USPAP) as, a type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal. 9 Prospective opinion of value is, a value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. 10 Encumbrance is defined as, any claim or liability that affects or limits the title to property. An encumbrance can affect the title such as a mortgage or other lien, or it can affect the physical condition of the property such as an easement. An encumbrance cannot prevent the transfer of possession, but it does remain after the transfer. 11 Fixture is defined as, an article that was once personal property but has since been installed or attached to the land or building in a rather permanent manner so that it is regarded in law as part of the real estate Federal Register, Department of the Treasury, Interagency Appraisal and Evaluation Guidelines, December 10, 2010, p Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p Appraisal Institute, Uniform Standards of Professional Appraisal Practice and Advisory Opinions Edition, The Appraisal Foundation, USA, 2016, p. 4. Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p Ibid, p. 76. Ibid, p. 93. URS Page 19

25 LEGAL DESCRIPTION The legal description of the subject property, obtained from the Clerk of Court s office and contained in the most recent recorded transfer deed to current ownership as recorded in Pinellas County Official Records Book 14392, page 1957, is as follows. Lot 7, Block C, Parke Subdivision, according to the map or plat thereof as recorded in Plat Book 9 on Page 55 of the Public Records of Pinellas County, Florida, a/k/a th Avenue South, St. Petersburg, Florida 33712, together with all oil, gas, mineral, and other subsurface rights in and to the above described property. The abbreviated legal description obtained from the Property Appraisers Office is as follows: PARKE SUB PARTIAL REPLAT AND ADDITION BLK 1, LOT 1 URS Page 20

26 OWNERSHIP AND FIVE-YEAR HISTORY OF SUBJECT PROPERTY A review of the public records indicates that the subject property ownership is in the name of City of St. Petersburg, with a mailing address of P.O. Box 2842, St. Petersburg, Florida According to Official Records Book 14392, page 1957, the subject real property was last transferred in May 2005 by Quit Claim Deed from United Companies Financial Corporation, for consideration of approximately $100. The City then leased the vacant site, pursuant to a development agreement, to developer Urban Development Solutions (Larry Newsome) at a reported rate of $5.00 per year for 99 years (subsequently reduced to 40 years), expressly for development of the subject plaza in 2005 with assistance from the City and additional private financing. The subject s original grocery anchor, Sweetbay Supermarket, vacated the subject in early 2013 as part of closing 33 underperforming stores in Florida. Walmart filled the subject junior grocery box less than a year later, opening a Walmart Neighborhood Market in January Unfortunately, Walmart vacated the subject three years later in early 2017, also citing insufficient sales revenue, but continues to pay their lease as of the date of this appraisal. The underlying developer ultimately defaulted on their loan and the City of St. Petersburg acquired the developers leased fee interest for a reported $2,200,000 at auction in The subject property is currently being professionally managed by The Sembler Company, who replaced the developer s management. The subject s junior box grocery space containing 39,079 rentable square feet, currently under lease and formerly occupied by Walmart, is being marketed for sub-let by SRS Real Estate Partners. Asking lease rate for available space is not specified by the leasing brokers. The subject property is not known to be listed for sale. The City of St. Petersburg, however, issued an RFP for the subject site on April 30, 2018, and proposals may include an option to purchase the subject. Proposals are due by July 2, The RFP can be found at the following link: za%20rfp%20final.pdf No title search was conducted by the appraisers, and the above is provided for informational purposes only and is not warranted. URS Page 21

27 MARKET AREA: LOCATION, DESCRIPTION AND TREND A market area is a geographic area wherein occupants usually have an observable commonality of interests. Market areas can be large areas, equating to an entire county or even a group of counties, depending on the purpose of analysis. Habitats, buildings and business enterprises may be relatively uniform, as in a district or neighborhood, all within a larger market area; that is, a smaller area exhibits a greater degree of commonality than the larger area. For example, there may be a retail district and/or industrial zone within a mixed use neighborhood which includes residences, and this neighborhood and other connecting neighborhoods and districts may form a larger market area. A market area is the area from which demand for a particular property or use is drawn, and will vary by use type. For example, the market area for a community shopping center is larger than the market area for a neighborhood or strip shopping center. There is no set life expectancy for a market area, neighborhood or district, and major changes can interrupt the order of the stages. In some instances, after a period of decline, a neighborhood may undergo a transition to other land uses, or its life cycle may begin again due to revitalization and redevelopment of land or buildings. Social considerations in a market area analysis involve a description of occupants and visitors revealing their reasons and motivations for living, working and visiting within the market area. These reasons may include the market areas reputation, environment and availability and convenience to employment, shopping/service centers and recreation centers. Demographic analysis is often related to driving times and linkages to commonly used supporting properties and facilities, rather than by specific census tracts. A residential neighborhood is typically a group of complementary land uses, such as homes, schools and neighborhood commerce, whereas a district may be characterized by homogenous land uses, such as industrial districts or office districts or high-rise districts. Although a market area may be confined to a neighborhood, a market area is often larger and may include a broad array of land uses and several neighborhoods and census tracts. Some of the smallest areas of commonality may be referred to as traffic analysis zones or commercial nodes which are based on specific traffic routes and particular roadway intersections. Each neighborhood or district has a dynamic quality of its own, which is described as the life cycle of a neighborhood or district. The complementary land uses that comprise neighborhoods and the homogenous land uses that comprise districts typically evolve through four stages. 1. Growth - A period during which the neighborhood gains public favor and acceptance. 2. Stability - A period of equilibrium without marked gains or losses. 3. Decline - A period of diminishing demand. 4. Revitalization - A period of renewal, modernization and increasing demand. The demographic analysis that follows was obtained using information from the Appraisal Institute / Site To Do Business data service. The compiled information is based on forecast modifications to the 2010 census utilized for demographic projections. URS Page 22

28 Market Area The subject is a neighborhood shopping center located on a four-lane east-west collector roadway characterized by retail and office of various uses. The immediate market or neighborhood surrounds the traffic collector and extends for approximately 1.0 miles north to south and 3.25 miles east to west. Neighborhood boundaries are best described as I-275 to the west, 7 th Avenue South to the north, 4 th Street South to the east and 22 nd Avenue South to the south, but customers, clients and employees come from a broader market area. The subject is located in the Tampa-St. Petersburg-Clearwater metropolitan statistical area. A Drive Time analysis was prepared using 5, 10 and 15 minute drive times. For the subject property, the broader market area is generally described using a 15-minute drive time from the subject property, which best represents the potential market area in terms of the concentration of potential users and employees. The main transportation route through the market area, Interstate 275, extends from north of Tampa south through St. Petersburg to near Bradenton, and connects with Interstate 75 to both north and south. The westerly terminus of Interstate 4 intersects I-275 near downtown Tampa and extends across the state through Orlando, terminating at I-95 near Daytona Beach. Interstate 175 and 375 connect downtown St. Petersburg with nearby I-275. Central Avenue, 1 st Avenue and 4th Street are primary traffic arteries through downtown St. Petersburg. Market Area Boundaries Source: STDBOnline.co URS Page 23

29 Social Influences Population Totals In the identified area, the current year population is 129,510. In 2010, the Census count in the area was 122,337. The rate of change since 2010 was 0.79% annually. The five-year projection for the population in the area is 134,758 representing a change of 0.80% annually from 2017 to Currently, the population is 48.0% male and 52.0% female. The difference between change in population and change in households is a result of two factors, the presence of group quarters (dormitory or other non-household) population in the market area and the average number of persons per household. The group quarters population in the market area was 2,311 in 2017, or 1.78 percent of the total population. Average household size is 2.12 in 2017, compared to 2.10 in the year minute 10 minute 15 minute 2000 Total Population 26, , , Total Population 25, , , Total Population 28, , , Group Quarters 911 3,733 2, Total Population 29, , ,758 Population Characteristics The median age for the United States was 37.2 in 2010 and 37.8 in the year In the market area, the median age of the population was 45.4, compared to 47.5 years currently. By age group, the changes in the percent distribution of the market area population show the following: 5 minute 10 minute 15 minute 2017 Population by Age Total 28, , , % 4.8% 4.3% % 4.8% 4.5% % 4.7% 4.6% % 12.1% 9.8% % 12.8% 12.1% % 11.9% 11.5% % 14.1% 14.0% % 15.5% 15.6% % 11.3% 12.3% % 5.4% 7.1% % 2.6% 4.2% % 82.7% 83.9% URS Page 24

30 Persons of Hispanic origin represent 9.6% of the population in the identified area compared to 18.1% of the U.S. population. Persons of Hispanic Origin may be of any race. The Diversity Index, which measures the probability that two people from the same area will be from different race/ethnic groups, is 42.8 in the identified area, compared to 64.0 for the U.S. as a whole. Population by Education In 2017, the educational attainment of the population aged 25 years or older in the neighborhood area was distributed as follows: 5.9 percent had not earned a high school diploma (16.4 percent in the U.S.) 23.5 percent were high school graduates only (29.6 percent in the U.S.) 9.8 percent had completed an Associate degree (7.2 percent in the U.S.) 20.2 percent had a Bachelor s degree (17.0 percent in the U.S.) 10.8 percent had earned a Master s/professional/doctorate Degree (9.7 percent in the U.S.) Households The household count in this area has changed from 57,059 in 2010 to 59,963 in the current year, a change of 0.69% annually. The five-year projection of households is 62,196, a change of 0.73% annually from the current year total. Average household size is currently 2.12, compared to 2.10 in the year The number of families in the current year is 31,773 in the specified area. 5 minute 10 minute 15 minute 2000 Households 9,929 50,864 58, Average Household Size Households 9,379 49,537 57, Average Household Size Households 10,187 51,525 59, Average Household Size Households 10,718 53,330 62, Average Household Size Annual Rate 1.02% 0.69% 0.73% Housing Currently, 52.1% of the 70,880 housing units in the area are owner occupied; 32.5%, renter occupied; and 15.4% are vacant. Currently, in the U.S., 55.6% of the housing units in the area are owner occupied; 33.1% are renter occupied; and 11.3% are vacant. In 2010, there were 68,020 housing units in the area % owner occupied, 27.9% renter occupied, and 16.1% vacant. The annual rate of change in housing units since 2010 is 1.85%. Median home value in the area is $166,100, compared to a median home value of $207,344 for the U.S. In five years, median value is projected to change by 4.88% annually to $210,747. URS Page 25

31 5 minute 10 minute 15 minute 2000 Housing Units 11,829 58,996 67,224 Owner Occupied Housing 47.0% 51.6% 60.7% Renter Occupied Housing 36.9% 34.6% 25.9% Vacant Housing Units 16.1% 13.8% 13.4% 2010 Housing Units 11,819 60,340 68,020 Owner Occupied Housing 41.7% 47.5% 56.0% Renter Occupied Housing 37.6% 34.5% 27.9% Vacant Housing Units 20.6% 17.9% 16.1% 2017 Housing Units 12,686 62,929 70,880 Owner Occupied Housing 37.1% 42.9% 52.1% Renter Occupied Housing 43.2% 39.0% 32.5% Vacant Housing Units 19.7% 18.1% 15.4% Economic Influences Economic considerations involve the financial capacity of a neighborhood s occupants to rent or own property, to maintain it in an attractive and desirable condition, and to renovate or rehabilitate it when needed. Many of the subdivisions in the market area were originally developed in the distant past, but with current redevelopment of many residential and commercial properties. In general, residential property values declined during the recession, but began to improve in about 2012 and are now at or near pre-recession levels in many markets. The area is expected to continue increasing population levels and stable growth of housing units. Business Climate and Economic Activity In the market area, there is an approximate ratio of 63.7% white-collar occupations, 18.8% services occupations and 17.5% blue-collar occupations. 5 minute 10 minute 15 minute 2017 Employed Population 16+ by Occupation Total 10,293 54,293 62,303 White Collar 45.8% 62.0% 63.7% Management/Business/Financial 7.5% 12.7% 14.9% Professional 15.0% 23.5% 21.4% Sales 10.1% 10.8% 11.5% Administrative Support 13.1% 15.0% 15.9% Services 35.6% 22.9% 18.8% Blue Collar 18.5% 15.2% 17.5% Farming/Forestry/Fishing 0.2% 0.2% 0.3% Construction/Extraction 4.1% 3.2% 4.4% Installation/Maintenance/Repair 1.4% 2.8% 3.8% Production 3.3% 3.7% 4.7% Transportation/Material Moving 9.5% 5.2% 4.2% URS Page 26

32 The ten basic industries and the participation in the market are reflected in the chart below. The services industry makes up the largest employment pool, with 52.0% of the total work force Employed Population 16+ by Industry Total 10,296 54,293 62,303 Agriculture/Mining 0.2% 0.4% 0.8% Construction 4.3% 4.1% 5.9% Manufacturing 4.3% 5.8% 7.3% Wholesale Trade 0.6% 1.9% 2.5% Retail Trade 11.7% 11.5% 12.3% Transportation/Utilities 4.1% 4.6% 3.3% Information 0.9% 1.5% 1.9% Finance/Insurance/Real Estate 6.1% 9.3% 11.1% Services 64.1% 56.8% 52.0% Public Administration 3.7% 3.9% 3.0% Unemployment 5 minute 10 minute 15 minute Historically, over the last twenty years, Pinellas County has often enjoyed a lower unemployment rate than either the State of Florida or the U.S. in general. That history reversed during the recession, but employment rates in the county and throughout Florida have begun to exceed national averages. As of February 2018, the state average unemployment rate was 3.9%, while the national average was higher at 4.1%. Unemployment in the Pinellas County area is 3.2% as of February URS Page 27

33 Households by Income Current median household income is $47,362 in the area, compared to $56,124 for all U.S. households. Median household income is projected to be $52,824 in five years, compared to $62,316 for all U.S. households. 5 minute 10 minute 15 minute Median Household Income 2017 $28,138 $41,304 $47, $29,103 $45,457 $52,824 Current average household income is $67,708 in this area, compared to $80,675 for all U.S. households. Average household income is projected to be $77,081 in five years, compared to $91,585 for all U.S. households. 5 minute 10 minute 15 minute 2017 Households by Income Household Income Base 10,187 51,525 59,963 <$15, % 16.2% 12.4% $15,000 - $24, % 13.5% 12.1% $25,000 - $34, % 12.0% 12.3% $35,000 - $49, % 16.4% 15.3% $50,000 - $74, % 17.6% 19.7% $75,000 - $99, % 9.7% 11.2% $100,000 - $149, % 8.4% 9.6% $150,000 - $199, % 3.3% 3.5% $200, % 2.9% 3.9% Average Household Income $40,446 $60,297 $67,708 Current per capita income is $31,824 in the area, compared to the U.S. per capita income of $30,820. The per capita income is projected to be $35,993 in five years, compared to $34,828 for all U.S. households. 5 minute 10 minute 15 minute Per Capita Income 2017 $15,764 $28,240 $31, $17,314 $31,891 $35,993 Disposable Income & Consumer Expenditures Current median household disposable income is $39,911 and the average disposable income is $53,920. In addition, the total household expenditures are $3,520,087,156 and the average amount spent per household is $58, URS Page 28

34 Governmental Influences The subject market area is in the City of St. Petersburg and Pinellas County. The market area is governed by these jurisdictions for future land use plans and zoning codes. The purpose and primary effect of the Future Land Use Plan is to provide a general outline for growth for a given area in an attempt to support and provide for orderly growth within the state. The implementation of this land use plan has the effect of eventually requiring the zoning ordinances to be in compliance with the plan within a reasonable period of time. The designations, therefore, of the land use plan should be viewed as the long-term intentions with respect to a given land area and its boundaries. Most commercial land uses are designated along major traffic arteries and at commercial nodes within the market area, which are often surrounded by residential uses. The governmental tax burdens within the market area appear to be in proportion to the governmental services provided. Environmental Influences Property uses within the market area include residential uses, including single-family, condominiums, apartments, and supporting commercial uses that include retail stores, restaurants, professional services, medical services and banking. Places of worship, schools and public libraries are also convenient. Fire and police protection appear to be adequate for the present population. The market area has good transportation routes via roadways connecting linkages. In addition to nearby recreational bay waters within the market area, there are several parks and golf courses nearby. International airports and regional malls are within easy commute. Conclusion Outlook for the subject neighborhood appears favorable. Although the market was comparatively slow during the recession, market activity began improving in about 2012, and nearby commercial and residential properties have relatively high and improving occupancy and rental rates. Newer and redeveloped commercial and residential properties are evident in and around this market. The substantial population base surrounding the market area provides a good employee pool and consumer base. Population and housing units in the market area increased nominally between 2010 and 2017, and are expected to increase similarly though steadily in the future. Population density is expected to increase in the market area long term, as more intense development occurs on the available land and underdeveloped sites. Property values are generally increasing and are expected to appreciate over the long term. These factors favorably influence the subject neighborhood and its market area, and no adverse factors were noted. URS Page 29

35 REAL PROPERTY ASSESSMENTS AND TAXES The subject parcel identification and assessments are obtained from the Property Appraiser s office as noted below. The current millage rate for the ad valorem taxes on the real property is mils in the subject district. Real Property Assessments and Taxes 2017 Parcel Number Assessed Value Total Gross Tax Total Net Tax $4,240,000 $93, $89, Total $4,240,000 $93, $89, Property taxes for the subject declined 3.4% in 2013 and have increased annually since, as noted in the following table: Tax Year Mils Historical Real Property Assessments and Taxes Assessed/ Just Value Gross Tax Net Tax Net Tax /RSF $ 4,240,000 $ 93, $ 89, $ % $ 4,200,000 $ 92, $ 88, $ % $ 3,745,000 $ 85, $ 81, $ % $ 3,650,000 $ 83, $ 80, $ % $ 3,500,000 $ 80, $ 77, $ % $ 3,625,000 $ 83, $ 80, $ 1.65 Property taxes in Florida are due by March 31, and may be paid as early as November 1, when a 4% discount is allowed. The discount decreases by 1% per month until March, when there is no discount. Prudent property owners typically take advantage of the 4% discount and pay real estate taxes in November, rather than in March of the following year. Taxes become delinquent April l, after which time a penalty is imposed. Certificates for delinquent taxes are auctioned approximately 60 days from delinquency, and the holder of a tax certificate may seek foreclosure to recoup investment or to acquire title in approximately 22 months. Chg URS Page 30

36 LAND USE AND ZONING CLASSIFICATION The Land Use plan sets forth the physical plans for growth and development of a community. The primary thrust of the Plan is to determine the overall development of the county, where it was, where it is today and how the future land use patterns and policies will reflect and meet the needs of growth tomorrow, and zoning is a specifically delineated area or district within which regulations and requirements uniformly govern the use, placement, spacing and size of land and buildings. The Land Use Plan and Zoning work hand in hand and must be compatible in intent prior to development of any property. In the event of pre-existing conditions of lot or building non-conformities, a property may be considered legally conforming per a grandfather rule. Pre-existing conditions in compliance, which predate adoption of zoning regulations or become non-conforming by virtue of right-ofway changes, typically will place the property in a special exception category as legally nonconforming. Future Land Use Plan According to the City of St. Petersburg Future Land Use, from the documentation and mapping by the Planning Commission, the area of the subject site is located in a PR-MU, Planned Redevelopment Mixed Used District, which permits a variety of commercial and residential uses. Maximum Floor area ratio is 1.25 and net residential density is 24 dwelling units per acre. With respect to the surrounding, existing land use and the subject's existing use, the subject property is presently compatible with the general Comprehensive Land Use Plan. Future Land Use Map URS Page 31

37 Zoning CCT-1 Corridor Commercial Traditional The purpose of the CCT district regulation is to protect the traditional commercial character of these corridors while permitting rehabilitation, improvement and redevelopment in a manner that encourages walkable streetscapes. The regulations include urban design guidelines, including zero setbacks, building design (e.g., requiring windows and entryways at ground level), crossaccess, and other standards, to reflect and reinforce the unique character within each of the districts. The subject land is zoned CCT-1 Corridor Commercial Traditional, This district generally allows one-story to three-story development containing mixed uses with multifamily structures. Additional density is possible when affordable workforce housing is provided. Minimum Lot Size Minimum Lot Width Minimum Lot Depth 4,500 square feet N/A N/A Maximum Floor Area Ratio 1.0 FAR, workforce housing bonus potential 0.2 Maximum Residential Density 24 units per acre, workforce housing bonus potential of 6 units per acre Maximum Lot/Impervious Coverage 95% Typical Building FAR 20% to 35% Front Building Setback Side Building Setback Rear Building Setback Corner Setback Maximum Height Parking Requirements: 0 ft. from the property line or 10 ft. from the curb, whichever is greater 0 ft. from the property line or 5 ft. from the curb, whichever is greater 0 feet with alley, 10 feet no alley N/A 42 feet 3.3 spaces per 1,000 SF retail sales 2.5 spaces per 1,000 SF business office 3.3 spaces per 1,000 SF medical office URS Page 32

38 Zoning Map South St. Petersburg CRA According to the City of St. Petersburg: The Property is located within the South St. Petersburg Community Redevelopment Area ("CRA") which includes 7.4 square miles on south St. Petersburg, more than twenty neighborhoods and two Florida Main Street Districts, with estimated population of 33,620 people or 14% or St. Petersburg s total population. The CRA is governed by the South St. Petersburg Community Redevelopment Plan ("Plan"), which centers on reinvigorating the housing market through rehabilitation and new construction; expanding opportunities for entrepreneurs, minority, women and disadvantaged business enterprises and small businesses; revitalizing commercial corridors to grow existing businesses and attract new ones; growing the manufacturing "belt" that bisects the CRA from east to west to create new jobs for residents; and improving the work readiness skills of residents. A major component of Plan was the creation of a tax increment financing ("TIF") district that will be in effect until 2045 and will be a sustainable source of revenue to fund the City s revitalization initiatives over the life of the Plan. The innovative approach of the Plan is to use most of its TIF revenues to provide direct assistance for private investment in residential and non-residential redevelopment in the form of grants, loans, TIF abatements or other vehicles that help businesses leverage capital from diverse sources. In FY2016, the first year of the Plan, City Administration allocated approximately $468,000 in TIF revenues for workforce development, business development and corridor revitalization and housing. Over $400,000 in grants were URS Page 33

39 awarded to thirty businesses in the CRA, including several along the 22nd Street corridor, and this funding source will continue to grow over the life of the Plan providing invaluable access to capital for South St. Petersburg businesses and property owners. In FY2017, with a budget exceeding $1.2 million, the City of St. Petersburg awarded approximately $550,000 in commercial grant funding to over thirty businesses within South St. Petersburg. Another $600,000 is budgeted for workforce development initiatives. City Administration is currently preparing the FY2018 CRA budget to allocate over $2.1 million in TIF revenue. For more information on the South St. Petersburg Community Redevelopment Area, visit: URS Page 34

40 URS Page 35

41 Zoning and Land Use Conformity The above zoning and land use information represents a brief review of the zoning regulations. Although the jurisdiction has rather straightforward zoning regulations, the regulations can be rather complex and interrelated, and not all factors potentially affecting the subject property can be shown. The reader is advised to consult the zoning regulation and department personnel for an optimum understanding of these regulations. URS Page 36

42 CONCURRENCY AND IMPACT FEES The 2011 Amendments to Chapter 163, Florida Statutes, required local governments to adopt comprehensive land use plans that include minimum specified levels of service for four types of public services and facilities, including sanitary sewer, stormwater, potable water and solid waste. Chapter 163 also prohibits local governments from issuing development permits if levels of service are below the specified level or if the development's impact would cause levels of service to fall below the specified levels. This means that the availability of public facilities must be concurrent with the impacts of the development. The original concurrency requirements became effective in January A local government may extend the concurrency requirement so that it applies to additional facilities within its jurisdiction such as schools, transportation including mass transit, and parks and recreation According to employees of the Planning and Land Use/Zoning Department, it does not appear that concurrency guidelines would adversely affect typical development on the subject site. Impact fees The local and county jurisdictions charge water, sewer and transportation impact fees on new development. Redevelopment is charged the difference between the fees required under the new classification and those required under the previous classification. Permit and Service Fees Each jurisdiction typically has several departments monitoring the various aspects of property development. Additional permit fees, plan review fees, hookup charges, inspection fees, service fees, deposits, and special fees, such as, tree removal/replacement charges, may all be applicable to new construction. If all impact fees, permit fees, and service charges are applicable to a development, then the total cost is typically between 2% and 5% of the total project s development costs, including land and improvements. URS Page 37

43 SITE DESCRIPTION Data sources for this site description include information provided by the Property Appraiser s office, other public records, a personal inspection by the appraisers and review of a site plan and recorded plat. No survey was available. Site Description The subject fronts approximately 605 feet along the northerly side of 18 th Avenue South and has depth of approximately 259 feet along the easterly side of 22 nd Street South. The site is rectangular and contains approximately 156,940 square feet or 3.60 acres. The site is level to slightly sloping and drainage appears adequate. Access is available from asphalt paved streets on all sides of the site. Onsite parking is provided to the front of the building. Public right-ofway parking is not available. Soil is sandy, typical for the area, and it is assumed that no adverse subsoil conditions exist. Municipal potable water and waste water disposal are available to the site, as are electric and telephone services. There are no known impediments to development. Drainage and utility easements appear typical. Property Characteristics Land Area Site Configuration Dimensions Terrain/Vegetation Soil Conditions Access 156,940 square feet or 3.60 acres Rectangular Subject comprises an entire City block with frontage of 605 feet along northerly side of 18 th Avenue South and southerly side of Queensboro Avenue South; and depth of 259 feet along easterly side of 22 nd Street South and westerly side of 21 st Street South. Generally level with water detention area near the southeast corner of the site. Average landscaped areas and a few trees Appears to be sandy to sandy loam, typical for the area. No subsidence was noted, but many areas of Florida are susceptible to soil issues, and a geotechnical investigation by a professional engineer is always recommended. Pedestrian and vehicular access is available along all four subject boundaries. URS Page 38

44 Traffic Counts Flood Zone FDOT 2017 counts in subject neighborhood: 4,300 AADT - 18 th Ave. South, west of I-275; 7,600 AADT - 22 nd St. South, east of Dr. M.L.K.; 2,900 AADT 16 th St. South, south of 22 nd Ave. S. X, above 100-year flood plain FEMA Map Panel G, dated September 3, 2003 Drainage Potable water Sewer Garbage collection Electricity Telecommunications Police protection Fire protection Public transportation Emergency medical service Onsite underground drainage, retention pond, and typical run-off into municipal stormwater system City of St. Petersburg City of St. Petersburg City of St. Petersburg Duke Energy Verizon and others City of St. Petersburg City of St. Petersburg Fire Department and nearest facility is Fire Station 3 at th Avenue South, St. Petersburg, Florida PSTA Pinellas County Encumbrances According to the county Property Appraiser maps, there were no significant easements related to the subject site. No survey was available for review. However, typical utility easements may be present and should not negatively affect the property. The appraiser is not aware of any title encumbrances, easements, encroachments, deed restrictions, covenants, association rules, special assessments or other possible encumbrances which may adversely affect title to the subject property. No title search information has been presented to the appraiser. URS Page 39

45 Recorded Plat Sketch Site Plan URS Page 40

46 Aerial Site Views URS Page 41

47 Flood Map URS Page 42

48 IMPROVEMENT DESCRIPTION Data source for description of improvements includes the Property Appraiser s office, personal inspection and review of the subject rent roll and a site plan prepared by Walmart in September No engineered site plan or floor plans were available for review. The interior of the subject building was inspected and photographed. Walmart s concluded total shopping center improvement size is slightly less overall (0.4%) than reported by the Pinellas County Property Appraiser, primarily due to a difference of 2.7% in the size of the in-line store spaces, but the sketch contains no measurements. For this appraisal we have relied on Property Appraiser records for gross building dimensions, verified by appraiser field measurements where possible, and the subject rent roll provided by the property management as to rentable building area as noted in the table below. The subject property is improved with a small neighborhood shopping center consisting of two attached one-story masonry commercial buildings with concrete flooring and typical retail glass storefronts totaling 48,378 square feet of gross building area and 47,390 square feet of rentable square feet. Exterior of the buildings have a painted stucco finish and present in average condition. Originally constructed in 2005, the interior of the buildings have been demised to include one junior box retail space containing 39,079 rentable square feet and seven in-line local shop suites ranging from 536 to 1,310 square feet and totaling 8,311 rentable square feet. Wall height/eave height is approximately 28 feet for the junior box and 16 feet for the multi-tenant inline store building. Interior ceiling height in the multi-tenant building is generally 10 feet. The junior box ceiling height is typically open to the roof deck, with various office and back room finished ceiling areas of approximately 8 to 10 feet in height. The buildings are fully air conditioned and wet sprinklered. The roof is of a flat design with built up roofing, and this report is subject to receipt of satisfactory structural and roof inspections. The general condition of the building is average. The economic life of the subject building is typically 50 years. The estimated effective age of the building is 10 years, indicating a remaining economic life of 40 years. Based on non-invasive visual inspection and knowledge of construction of similar buildings in the market, the following description is offered. Structural Design Building Area GBA RSF Junior Box - SF 39,734 39,079 In-line Stores - SF 8,644 8,311 Total SF 48,378 47,390 Foundations Floor Structures Reinforced concrete spread footings Poured concrete slab URS Page 43

49 Building Frame Roof Structures Roof Covering Masonry load bearing perimeter and interior walls Steel decking over steel bar joists with built up roofing for flat roof design Built up bitumen roofing Exterior Description Exterior Walls Eave Height Exterior Doors Windows Concrete block with painted stucco finish and typical glass retail storefronts Approximately 16 & 28 feet from floor level Retail glass design; hollow metal Fixed pane windows Interior Description Walls and Wall Coverings Interior Trim & Hardware Interior Doors Ceiling Floor Covering Elevators/Stairways Painted drywall over wood or metal studs Average quality Hollow core wooden doors Generally suspended acoustical panels in finished areas. The junior box shopping area has an open ceiling to the painted roof deck. The junior box has primarily polished concrete flooring, with commercial grade carpet and vinyl/tile floor cover in the restrooms, food prep and/or office areas. The in-line tenant spaces generally have commercial grade carpet and/or tile/ VCT floor cover. Not applicable Equipment and Mechanical Systems Plumbing Electrical Service Plumbing and baths appear adequate Commercial grade for retail and office uses, generally in average condition URS Page 44

50 Lighting Heating and Air Conditioning Fire Protection System Typically overhead inset fluorescent lighting. Individual split systems The buildings are fully wet sprinklered for fire protection, and manual fire extinguishers are located within the building Quality, Condition and Economic Life The subject building improvements appear to be of average quality materials and average workmanship, as compared to similar buildings constructed in this community at about the same time as the subject s construction. No opinion can be expressed as to the original building plans or the obtaining of proper building permits. Deferred maintenance to the building improvements appears minor, limited to cleaning and touch up painting. Property management is currently planning for exterior repainting of the building and knee walls along the parking lot perimeter as part of typical capital maintenance, budgeted at $57,300 based on current bids. We have deducted this amount in estimating value for the subject. Property management is also considering upgrades to landscaping, current bid at approximately $41,000, also factored into our estimate of as-is market value. Site Improvements Site improvements consist of asphalt paving for parking with 179 designated spaces, including handicap spaces but not including 6 marked spaces reserved for junior box shopping cart corrals, circulation and delivery, concrete sidewalks, stormwater detention area, two double-sided illuminated signs, landscaping, overhead lighting, underground drainage, and underground laterals for municipal water and sewer. The site improvements appear adequate and functional. The economic lives of the various site improvements typically range between 20 years and 50 years, depending on the item and its standard useful life. Personal Property The junior box formerly occupied by Walmart contains personal property which we are advised is owned by Walmart, which they will either sell under separate agreement or liquidate in the event of a new user. No personal property is applicable for this appraisal. URS Page 45

51 Improvement Sketches URS Page 46

52 Property Appraiser Sketch Junior Box Space Property Appraiser Sketch Local/In-line Shop Space URS Page 47

53 Floor Plan - Junior Box/Former Walmart Space URS Page 48

54 MARKETABILITY AND ESTIMATED MARKETING PERIOD Marketability looks at the market appeal of the subject property; more specifically, it analyzes and supports a reasonable marketing period to affect the sale of the subject property. Included in this analysis is a discussion of supply, competition, and demand of the subject property and competitive properties located within the market area. Marketability is defined as, the relative desirability of a property (for sale or lease) in comparison with similar or competing properties in the area. 13 That is, a property with good marketability has superior features or condition in comparison with competing properties. A marketability study is a microeconomic study that examines the marketability of a given property or class of properties, usually focusing on the market segment(s) in which the property is likely to generate demand. Marketability studies are useful in determining a specific highest and best use, testing a specific highest and best use, testing development proposals, and projecting an appropriate tenant mix. 14 While this type of study is typically quite detailed and specific, a brief version is part of the highest and best use analysis of every appraisal. A marketability analysis is defined as, the study of how a specific property is expected to perform in a specific market. A marketability analysis expands on a market analysis by addressing a specific property. 15 Market value estimates imply that an adequate marketing effort and reasonable time for exposure occurred prior to the effective date of the appraisal. Exposure time is, (1) the time a property remains on the market, or (2) the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. Exposure time is always presumed to occur prior to the effective date of the appraisal. 16 Exposure time is different for various types of property and under various market conditions. It is noted that the overall concept of reasonable exposure encompasses not only adequate, sufficient, and reasonable time but also adequate, sufficient, and reasonable effort. This statement focuses on the time component. The fact that exposure time is always presumed to occur prior to the effective date of the appraisal is substantiated by related facts in the appraisal process: supply/demand conditions as of the effective date of the appraisal; the use of current cost information; the analysis of historical sales information (sold after exposure and after completion of negotiations between the seller and buyer); and Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p Appraisal Institute, The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago, Illinois, 2010, p Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p Ibid, p. 82. URS Page 49

55 the analysis of future income expectancy projected from the effective date of the appraisal. 17 Marketing time is defined as, an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of the appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. 18 Strengths & Weaknesses Strengths of the subject include its corner location on a primary east-west neighborhood collector with good exposure, access, circulation and signage. The subject is located in a Community Redevelopment Area where TIF financing funds may be available from the City of St. Petersburg for redevelopment. The City is supportive to further development the subject intersection as a retail node within the neighborhood, and to that end have assisted the planned development of a convenience store with fuel and restaurant with a separate medical office building across 18 th Avenue South from the subject, the development for which recently broke ground. Once completed, this new development should bring additional exposure and traffic to the subject location. Weakness of the subject includes its current high vacancy and comparatively low neighborhood income levels as compared to other parts of the City and County. Traffic counts are low for a retail shopping center. Two national grocer tenants, Sweetbay Supermarket and a Walmart Neighborhood Market, have vacated the subject junior box within the last five years, indicating the neighborhood may not support a grocery store the size of the subject s approximate 40,000 square feet junior box space. A Market Analysis conducted in November 2017 by Community Solutions Group also concluded the subject trade area can only support a grocery/household retail tenant to about 30,000 square feet. The cost to demise a retail box into two or more smaller spaces can be significant. Market participants on the buyer s side report increasing interest in commercial real estate, but uncertainty remains as to the future. Some of this uncertainty relates to a slowly improving economy and possible increases in interest rates. Reasonable Exposure and Marketing Period for Subject The appraiser must analyze historic data and future projections in order to estimate historic market exposure time and the future marketing period. According to owners and brokers active in the subject s market area and in similar markets, it was revealed that there is an increasingly active market for this type of property throughout the area and in the subject s local market. The presence of an active market was supported by review of data obtained from the Property Appraiser s office for transfer of such properties. During the last few years, the marketing period for similar properties has typically ranged from four to twelve months, but with some Appraisal Institute, Uniform Standards of Professional Appraisal Practice and Advisory Opinions 2006 Edition, The Appraisal Foundation, USA, 2006, p. 90. Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p URS Page 50

56 properties requiring more than twelve months if they are of an unusual condition or if they appear to be priced above the market. The subject property should be well received if placed on the market for sale. Based on the above, we estimate a typical exposure period for comparable sales of twelve months. Similarly, a marketing period for the subject of twelve months is estimated. Selling commissions in order to effect the sale of a property similar to the subject are usually 7.0% and downward. For the subject property type and its value range, a commission level of 5.0% is typical. Availability of Mortgage Financing At the present time, third-party financing is becoming more readily available for acquisition and/or development of properties similar to the subject, yet many lenders guide borrowers to SBA financing. Underwriting remains stringent, but relationships with lenders may assist in a loan qualification. Conversations with commercial bank lenders implied that appropriate interest rates for properties similar to the subject would typically range from approximately 4.5% to 6.5%, dependent on the term and length of period between interest rate reviews. The loan-to-value ratio would typically range between 50% and 75% of value. The range of the debt coverage ratio is typically 1.3 to 1.5 for income producing properties, and loan origination fees or points are typically 0.0% to 1.0%. Additional prerequisites for approval of financing include the personal guarantee of the owner, as well as an excellent credit history and prior successful ownership of properties similar to the subject. Strength and quality of the cash flows from the property and the condition of the property would also be considered. Typical buyers are owner/users or experienced property investors with motivation of positive cash flow. URS Page 51

57 HIGHEST AND BEST USE ANALYSIS The highest and best use concept is reflective of a basic assumption about real estate and market behavior; that the price a buyer will pay for a property is based on their conclusion about the most profitable use of the site or property. Therefore, sites and improved properties tend to be put to their highest and best uses and, in this manner, maximize the profit potential for the property owner. The determination of a property's highest and best use may or may not conform with the existing use of the site because the alternative uses of the site may be restricted by the presence of improvements or legal encumbrances. The highest and best use is determined separately for the land or site as though vacant and available to be put to its highest and best use than for the improvements. Highest and best use is defined as, "(1) the reasonably probable use and property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. (2) the use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset s existing use or for some alternative use. This is determined by the use that a market participant would have in mind for that asset when formulating the price that it would be willing to bid. (3) the highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. (Uniform Appraisal Standards for Federal Land Acquisitions). " 19 The first determination reveals the fact that land value is derived from potential land use. Land has limited value unless there is a present or anticipated use for it; the amount of value depends on the nature of the land's anticipated use. According to the concept of surplus productivity, the highest and best use of a site is that use among all reasonable alternative uses that yields the highest present land value after payments are made for labor, capital, and coordination. The highest and best use of a property as improved refers to the optimal use that could be made of the property, including all existing structures. The implication is that the existing improvement should be renovated or retained as long as it continues to contribute to the total market value of the site, or until the return from a new improvement would more than off-set the cost of demolishing the existing building and constructing a new one. To determine the highest and best use of the subject site, as if vacant, the use must meet four criteria. The highest and best use must be 1) legal permissibility, 2) physically possible, 3) financially feasible, and 4) maximally productive. These criteria should usually be considered sequentially; a use may be financially feasible, but this is irrelevant if it is physically impossible or legally prohibited. 19 Appraisal Institute, The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015, p URS Page 52

58 Legal Permissibility Restrictions, zoning codes, building codes, land use controls, and environmental regulations are considered because they may preclude many possible highest and best uses. The subject site has an overall land use designation of PR-MU, Planned Redevelopment Mixed Used District, and is zoned CCT-1 Corridor Commercial Traditional, in which a variety of commercial uses are permitted, limited by parking, setback and lot coverage requirements. Maximum Floor Area Ratio (FAR) is 1.0 under the current zoning designation, with a workforce housing bonus potential of 0.2. Residential uses are permitted to a density of 24 units per acre, with workforce housing bonus potential of 6 units per acres. The subject site is of sufficient size to meet minimum development criteria. Physically Possible The size, shape, area, and terrain of a site affect uses to which land may be developed. The subject site is 156,940 square feet or 3.60 acres, is generally level and readily developable. The site has adequate frontage for exposure and visibility. Primary access is along the southerly and westerly subject boundaries from 18 th Avenue South and 22 nd Street South. The site consists of an entire City block with multiple two-lane access drives. No soil tests were available. However, improvements in the general area have typically been constructed without undue foundation expense. Municipal potable water, sewer, garbage collection and electricity are available. Overall, the site size, topography, configuration, and orientation are sufficient for development. Financially Feasible All the potential uses of the subject site that are expected to produce a positive return are regarded as financially feasible and are examined here. The market area population is served by good quality linkages providing good quality access throughout the county, the MSA and statewide. The market area population, social characteristics, and income characteristics are below average. The outlook for the URS Page 53

59 market area is positive, with nominal though steady growth expected for the economic base, population and income characteristics. Office uses are permitted and will fit the site. The office market is improving, yet suburban vacancy rates may still be high in some locations and investors are taking a conservative approach to speculative building. However, the market appears to support build to suit space. Residential uses are permitted and will fit the site. The submarket population and housing growth is growing near an average pace for the area, reporting growth rates around 1% annually to Submarket income levels and spending power are below average for the broader market. Retail and general commercial uses are permitted and will fit the site. The retail market has been improving and vacancies declining in recent years. Investors are taking a conservative approach to speculative building. However, the market appears to support build to suit space as evidenced by several single tenant projects completed in the region in recent years, as well as new commercial development just beginning across 18 th Avenue South from the subject. As noted previously, the subject as improved includes a junior retail box space consisting of 39,079 rentable square feet. Originally intended as a grocery anchor space for the shopping center, two national retailers, Sweetbay Supermarket and a Walmart Neighborhood Market, have each occupied then vacated the space, citing an inability to produce satisfactory revenues. Recently, a Market Analysis was conducted in November 2017 by Community Solutions Group which concluded the subject trade area can support a grocery/household retail tenant up to 30,000 square feet, but not 40,000 square feet, based on neighborhood demographics, income and spending ability. Taken together, the two grocery tenant experiences and the recent market survey tend to indicate that a single retail box of 39,079 square feet is too large for the subject neighborhood to support. Maximally Productive Physically, the subject can support combinations of building area scenarios in multiple story designs, limited by floor area ratio and parking requirements. However, market demand and rental rates do not typically support the additional costs for vertical construction and structured parking. For this reason, virtually all developments in the neighborhood are of one or occasionally two story design. Implied in the definition of highest and best use is that the determination of highest and best use takes into account the contribution of a specific use to the community and community development goals, as well as the benefits of that use to individual property owners. As noted above, the City of St. Petersburg controls the leased fee estate in the subject property and has long been active in facilitating redevelopment in the subject s South St. Petersburg URS Page 54

60 neighborhoods, with a specific community interest in the subject site being developed to offer some type of affordable and healthy food options they deem lacking in the subject neighborhood. As if vacant, the maximally productive use of the subject site is for development to a commercial retail use such as the existing community shopping center in a single story design, including a smaller grocery/home goods space of perhaps 20,000 to 30,000 square feet, and to a maximum FAR of approximately 30%, indicating likely building size around 47,100 square feet. Highest and Best Use As If Vacant Physically, the subject property is suitable for commercial, retail, office or residential development, and legally, the subject site can be developed with commercial or retail mixed uses. The subject site has average quality linkages, along with access and visibility from surrounding thoroughfares. Financial analysis of all physically possible and legally permissible uses indicates the property will be best utilized for a phased build to suit development of a commercial/retail or mixed use development consistent with zoning regulations, or to hold for future development until economic conditions improve sufficiently to support speculative development. As if vacant and available, the subject site has a highest and best use for development to commercial use, primarily retail shopping center with a smaller grocery anchor than currently exists, or mixed use, when supported by the market. Highest and Best Use As Improved As currently improved, the existing commercial use contributes value to the site and is therefore representative of its highest and best use as improved. URS Page 55

61 INTRODUCTION TO THE APPRAISAL PROCESS Traditionally, three approaches are used to arrive at an estimate of market value, the cost, sales comparison, and income capitalization approaches. Ideally, each approach, properly employed, provides an accurate indication of value, but, due to the unique characteristics of various types of properties, one or more of the approaches may be inappropriate or inapplicable in arriving at an estimate of value. The three approaches are: Cost Approach The cost approach is based on the principle of substitution, that no prudent person would pay more for a property than the cost to acquire a similar site and construct a building of equal desirability and utility, assuming no undue or costly delay. The procedure involves first estimating value of the site as if vacant. Anticipated direct and indirect costs necessary to reconstruct all improvements are then estimated, predicated upon labor and material prices prevailing on the appraisal date. From this construction cost estimate, deductions are made for accrued depreciation caused by physical deterioration and functional and economical obsolescence. This depreciated cost figure is then added to the estimated value of the site, resulting in the indication of value by the cost approach. The cost approach is most accurate when applied to a relatively new structure with no functional deficiencies, and which represents highest and best use of the site. The depreciation estimates are difficult to precisely measure from market data, so the indication of value may largely depend on the experience, judgment and ability of the appraiser, especially for older improvements. Sales Comparison Approach The sales comparison approach is also based on the principle of substitution; that a prudent person would pay no more for a property than the cost to acquire another property of similar desirability or utility. The process involves the collecting, analyzing, and comparing of sales, listings and offers for properties similar to the property under appraisement. After the most comparable property transactions are identified, adjustments are made for such variables as changes in market conditions since date of sale, location, size, physical characteristics and terms of sale. Advantages of the sales comparison approach are that it permits direct comparison of the property under appraisement to factual market transactions involving similar properties, and that it is probably the approach most easily understood. Limitations of the sales comparison approach are that no two properties are identical, and dissimilarities between the comparable properties and the subject may relate to intangible qualities that are difficult to measure. Application of this approach may be limited by the lack of data for specific types of properties. Income Capitalization Approach The income capitalization approach is based on the principle of anticipation; that value of a property may be measured by the present worth of anticipated future benefits accruing to the ownership and use of the property. The procedure involves estimating gross income the property URS Page 56

62 is capable of producing, then deducting vacancy/collection losses and expenses which might be incurred in the operation. Resultant net income, as estimated by the appraiser, is converted to an indication of value through various means of capitalization or discounting. The income capitalization approach is most accurate in valuation of income producing properties. If sufficient sales of tenant-occupied, investor-owned comparables may be located, the income capitalization approach can provide a highly accurate value indication. The approach, however, has limited application for non-income producing properties, such as vacant land. Reconciliation of Value Indications Final step in the valuation process is reconciliation of value estimates indicated by the approaches outlined above, weighting each according to their relative importance, based on market appropriateness and availability and reliability of data. Dependent on type of property and purpose of appraisal, one or all of the approaches may be considered reliable. Result of this final reconciliation of values is the estimate of value as defined in the report. Valuation Methodology The three approaches to market value estimation were considered. As discussed earlier, other than for preleased space, new development is slow and speculative development is generally not warranted at this time. Further, many improved properties similar to the subject are currently selling for less than replacement cost. For these reasons, in this appraisal the cost approach was deemed less reliable and has not been developed. The sales comparison approach and the income capitalization approach do include data of sufficient quantity and quality to derive a reasonably accurate indication of value and both have been developed and reported below. These two approaches to value are reconciled at the end of this report. URS Page 57

63 SALES COMPARISON APPROACH The sales comparison approach, like the cost approach, is based on the principle of substitution; in other words, the value of a property should be no higher than the cost to acquire another property offering similar physical or locational attributes. This procedure involves market research to identify similar properties which have recently sold or are offered for sale, investigation of the sale transactions to insure their validity and to determine motivating forces, and comparison of the sold properties to the subject, adjusting prices paid for various dissimilarities having a discernible effect on value. Adjustments are made for such factors as changes in market conditions since time of sale, location, size, land area, income producing capabilities, and if available, terms of sale. This analysis is usually processed on a unit of comparison basis. The unit of comparison most commonly employed for improved properties such as the subject is price paid per square foot of building area including land, and may be analyzed separately from land value on a contributory value basis. The application of the market or sales comparison method requires the appraiser to follow the following steps: 1. Market research - to obtain information about transactions, listings and other offerings similar to the subject. 2. Verification of the information to determine if it is factual, accurate, reflects arm s length market conditions, and whether or not any unusual terms or conditions were present. 3. Develop relevant units of comparison. 4. Compare the subject and comparable sales according to the elements of comparison and adjust the sales price of each comparable toward the subject. 5. Reconcile the multiple value indications that result from the comparable sales into a single value indication. Applying the sales comparison approach to value to the subject property, these five steps were employed. In our research of the public records, we searched for sales with a highest and best use the same as or similar to the highest and best use of the subject and with buildings of generally similar construction quality, size, age and condition. The comparable sales were verified with a principal of the transaction, or with persons with direct knowledge of the transaction. In the verification process, we have attempted to obtain additional data that is normally appropriate in the sales comparison approach. This data would include the intended use of the property, mortgage terms, extraordinary acquisition or development costs, and any other data deemed relevant. Salient data regarding the comparable sales considered most indicative of value of the subject follow. URS Page 58

64 Comparable Improved Sales URS Page 59

65 Comparable Improved Sale Number 1 Location Marina Village Shopping Center th Street South St. Petersburg, Pinellas County, Florida Date of Sale June 2017 OR Instrument Book 19683, page 510 Grantor Grantee PV-Marina Village, LLC Sauteur, LLC Indicated Consideration $6,200,000 Allocated to land $2,500,000 Allocated to Improvements $3,700,000 Parcel Identification Number Site Description Land Area 287,496 sq. ft., or 6.60 acres Land Use/Zoning PR-C/CCS-2, City of St. Petersburg Floor Area Ratio 0.21 Improvement Description Construction Masonry and stucco Condition Average Year Built 1985 & 2003 Effective Age 20 Years Stories One Building NRA 61,791 sq. ft. URS Page 60

66 Units of Comparison Price per NRA Sq. Ft. $ including land $ excluding land Comments This comparable is located in the Skyway Marina District of South St. Petersburg, north of the Pinellas Bayway and south of 46 th Avenue South along the westerly side of 34 th Street South (US Highway 19). US 19 is a primary retail corridor. Trade area tenants include Publix Super Market, Walmart, Ace Hardware, Mattress One, Bealls Outlet and Bealls Department Store The comparable site has good exposure and access. Daily traffic counts are about 26,500 along 34 th Street South in front of the subject. Within one mile, estimated population is 11,442 persons and average household income is $84,569. Majority of this neighborhood shopping center is comprised of two adjoining one-story masonry and stucco buildings originally constructed in A third building containing 9,000 square feet was added in 2003 to total 61,791 rentable square feet. The improvements have been maintained in good condition and ceiling heights range approximately 11 to 12 feet. There are nineteen tenant spaces ranging from 1,093 to square feet and occupancy was 89.1% at time of sale with two spaces vacant. The center is anchored by Dollar Tree and Anytime Fitness, with national shop tenants that include Sprint, Domino s Pizza, Beef O Brady s, UPS Store and State Farm, in addition to various local shop tenants. Buyer acquired this property as a stabilized investment. The cap rate at time of sale is reported at 8.20%, indicating NOI of approximately $508,400 or $8.23 per square foot. There was no distress in this arm s length transaction. The property previously sold in January 2014 for approximately $54.75 per square foot while un-stabilized. Confirmation Broker-Ron Schultz/Colliers International, Public Records; CoStar; LoopNet URS Page 61

67 Comparable Improved Sale Number 2 Location Albertsons/Win-Dixie 2460 east Bay Drive Largo, Pinellas County, Florida Date of Sale May 2018 OR Instrument Book 20043, page 281 Grantor Grantee BRNK Largo East Bay, LLC William Mickle, Jr. Indicated Consideration $2,800,000 Allocated to land $1,800,000 Allocated to Improvements $1,000,000 Parcel Identification Number Site Description Land Area 180,500 sq. ft., or 4.14 acres Land Use/Zoning C-3 Floor Area Ratio 0.22 Improvement Description Construction Condition Year Built Effective Age Stories Building NRA Masonry and stucco Average 1983 / Renovated 20 Years One 40,496 sq. ft. URS Page 62

68 Units of Comparison Price per NRA Sq. Ft. $69.14 including land $24.69 excluding land Comments This comparable sale is located in the signalized northeast corner of East Bay Drive and Keene Road. Both roadways are high traffic corridors. The site has limited visibility from East Bay Drive due to lot depth but has pole sign exposure. Visibility from Keene Road is very good. There are five points of ingress/egress. Daily traffic counts are 58,500 vehicles along East Bay Drive at the subject s intersection. Within one mile, estimated population is 16,481 persons and average household income is $59,138. Improvements consist of a single tenant supermarket building originally constructed in 2013 and maintained in good condition. This property is master leased to Albertsons and subleased to Winn-Dixie. The initial lease began in 1983 and included six, five-year renewal options. The current option period expires October 2023, and there are three renewal options remaining. The lease is absolute net with zero landlord responsibilities. Base rent is $5.12 per square foot and reported to be below market. Buyer acquired this property as a stabilized passive investment and the property sold for 96.7% of list price at a capitalization rate of 7.40%. There was no distress in this arm s length transaction. The property previously transferred in June 2013 for indicated consideration of approximately $1,928,600. Confirmation Broker-Ron Schultz/Colliers International, Public Records; CoStar; LoopNet URS Page 63

69 Comparable Improved Sale Number 3 Location Win-Dixie Plaza E. Dr. Martin Luther King Blvd. Seffner, Hillsborough County, Florida Date of Sale March 2018 OR Instrument Book 25654, page 1770 Grantor Grantee Global Building Lakewood SC, LLC Lo Exclusivo, LLC Indicated Consideration $4,500,000 Less Out Parcels $ 600,000 Adjusted Consideration $3,900,000 Allocated to land $1,500,000 Allocated to Improvements $2,400,000 Parcel Identification Number U ZZZ Shopping Ctr U ZZZ Excess Land Site Description Land Area 255,464 sq. ft., or 5.86 acres Land Use/Zoning PD-MU Floor Area Ratio 0.23 Improvement Description Construction Masonry and stucco Condition Average Year Built 1992 & 2000/Renovated 2005 Effective Age 15 Years URS Page 64

70 Stories Building NRA Units of Comparison Price per NRA Sq. Ft. One 50,073 sq. ft. $77.89 including land $47.93 excluding land Comments This comparable is located in the northeast quadrant of East Dr. Martin Luther King Jr. Boulevard and Lakewood Drive, about one mile east of I-75 and 1.5 miles south of I-4 in Seffner. This is a small retail corner along a minor east-west corridor. Walgreen s is located across the intersection and retailers located in front of the shopping center along the roadway include Waffle House, Amscot and a small retail strip anchored by Dunkin Donuts, Metro PCS and Dominos. Daily traffic counts are 35,000 along Dr. M.L.K. and 4,500 along Lakewood Drive. Within one mile, estimated population 12,274 persons and average household income is $58,055. This recent sale comprised a total of 8.06 acres including two out parcels totaling 2.20 acres, one of which is 1.4 acres adjacent to the shopping center and buildable, and currently being marketed for pre-leasing for development of an additional retail strip. Deducting estimated value for the excess land indicates 5.86 acres to the shopping center sale at an adjusted price of $3,900,000, or $77.89 per square foot of building area, as noted above. Improvements consist of a neighborhood shopping center containing a 40,000 square foot grocery supermarket built in 1992 and occupied by Winn-Dixie, and an eight unit attached retail strip constructed in 2000 and occupied by Boost Mobile and local tenants. The center was fully occupied. Buyer is an experienced investor who acquired this stabilized property as a value-add play through development of the available outparcel. Marketing time for the sale was approximately 90 days to contract and the cap rate was reported to be 7% on stabilized occupancy. There was no apparent distress in this arm s length transaction and no other sales within the previous five years. Confirmation Developer Representative; Public Records; CoStar; LoopNet URS Page 65

71 Comparable Improved Sale Number 4 Location Valrico Center Shoppes 3309 Lithia Pinecrest Road Valrico, Hillsborough County, Florida Date of Sale December 2015 Grantor Grantee ABS Fla Investor, LLC WEG Valrico, LLC Indicated Consideration $3,925,000 Allocated to land $2,000,000 Allocated to Improvements $1,925,000 Recorded In OR Book 23732, page 1635 Tax Parcel ID U ZZZ Site Description Gross Land Area 5.42 acres; 236,197square feet Land Use/Zoning PD, Planned Development, by Hillsborough County Floor Area Ratio 0.24 Traffic Count 29,000 Improvement Description Construction Masonry and stucco Condition Average Year Built 1997 Effective Age 15 Years Stories One URS Page 66

72 Building GBA Units of Comparison Price per GBA Sq. Ft. 54,100 square feet $72.55 including land $35.58 excluding land Comments This comparable is located east of Interstate 75 and three miles south of State Road 60 in the northeast corner of Lithia Pinecrest Road and Bloomingdale Avenue. Publix and Fresh Market grocery anchored centers are located to the south across Bloomingdale Avenue. Harbor Freight Tools and WaWa are located to the west, adjacent to a planned Walmart Supercenter site. Daily traffic counts are about 19,000 along Lithia Pinecrest in front of the site and 5,500 along South Miller Road. Within one mile, estimated population was 8,223 persons and average household income was $102,276 in the year of sale. This is a former Albertson s grocery store that had been vacant since The grocery anchor box was built in 1997 of masonry and stucco. Wall height is 28 feet. The building was in average condition. Of the 54,100 square feet of building area, 3,500 square feet had already been split off for a liquor store. Buyer acquired the property with intent to further demise the remaining box in two, leasing 30,000 square feet to specialty organic grocer Sprouts Farmer s Market planning with an opening date in early 2017 and 20,000 square feet to lease up. Floor area ratio and site layout allows buyer to also offer an outparcel for new development. Buyer is a subsidiary of Woerner Equity Group, a development firm from West Palm Beach, Florida, who had the Sprouts tenant in hand when they acquired this property. Marketing time for this sale was approximately 18 months. There was no distress in this arm s length transaction. The property had not previously transferred within the last five years. Verification Grantee; CoStar; Public Records URS Page 67

73 Comparable Improved Sales Chart NO LOCATION DATE TYPE GRANTOR BLDG SF CONSID ALLOC PRICE TOTAL YR BLT LAND SF LAND LAND% FAR GRANTEE TO /SF BLDG SF IMPROV IMP % ESTATE 1 MARINA VILLAGE Jun-17 PV-MARINA VILLAGE, LLC 61,791 $ 6,200,000 TOTAL $ % 1985/ TH ST S SAUTEUR, LLC 287,496 $ 2,500,000 LAND $ % 0.21 ST. PETERSBURG, FL NSC 61,791 $ 3,700,000 IMPROV $ % LF 2 WINN-DIXIE SUPERMARKET May-18 BRNK LARGO EAST BAY 40,496 $ 2,800,000 TOTAL $ % E. BAY DR. WILLIAM MICKLE, JR. 180,500 $ 1,800,000 LAND $ % 0.22 LARGO, FL Box 40,496 $ 1,000,000 IMPROV $ % LF 3 WINN-DIXIE PLAZA Mar-18 GLOBAL BUILDING 50,073 $ 3,900,000 TOTAL $ % '92/' E DR MARTIN LUTHER KING LO EXCLUSIVO LLC 255,464 $ 1,500,000 LAND $ % 0.20 SEFFNER, FL NSC 50,073 $ 2,400,000 IMPROV $ % LF 4 VALRICO CENTER SHOPPES Dec-15 ABS Fla Investor, LLC 54,100 $ 3,925,000 TOTAL $ % LITHIA PINECREST RD. WEG Valricao, LLC 236,197 $ 2,000,000 LAND $ % 0.23 VALRICO, FL NSC 54,100 $ 1,925,000 IMPROV $ % LF Comparable Improved Sales Map URS Page 68

74 Analysis of Comparable Improved Sales All comparable improved sales are adjusted toward the subject for either the comparable s superior or inferior characteristics. The size of the adjustments applied to the comparable sales are in proportion to the magnitude of the difference between the comparable sale and the subject as perceived in the market. Commercial properties are typically analyzed on a unit of comparison basis. The unit of comparison to be used is that unit customarily used in the market in the subject property s locale. After discussions with commercial developers and investors and as evidenced by market activity, it is believed the overall sale price per rentable square foot of building area is appropriate as the unit of comparison for the sales comparison approach. Since the gross building area and the gross leasable area were similar for each comparable property, we did not further distinguish any difference for square foot comparisons. There were a variety of comparable sales found in the subject market. The sales presented herein are the best data available and represent a reasonable basis from which to estimate value of the subject in the current market. Conditions of Sale There may be a variety of conditions of a sale for which adjustments are applicable, including contributory value of FF&E or personal property, concessions by seller, below market seller financing, pay-outs by buyer such as for back taxes, and atypical motivation by buyers or sellers, such as the duress to sell under threat of foreclosure or quick liquidation of a lender-owned property. Conditions of sale are important to the explanation of each transaction. The conditions of sale for most commercial property transactions conform to the definition of market value as applied to real estate. That is, there is a reasonable amount of exposure time, buyers and sellers are well informed of the property and the market, and neither buyer nor seller under duress to transact. The improved sales were all verified as arm s length transactions, and all sales were found to be equivalent to cash transactions. No concessions were found to distort the dollar amount of each sale as reported. All sales represent realty. The motivations of the buyers and sellers were found to be typical for the marketplace. Market Conditions The comparable sales are adjusted for changes in market conditions which have occurred between the date of the comparable sale and the date of the value estimate of the subject site. The degree of the adjustment is in proportion to the magnitude of change that has occurred in the market in the subject property s locale, between the date of the comparable sale and the date of valuation of the subject. The greater the magnitude of change that has occurred, the greater the upward or downward adjustment is be applied to the comparable price. URS Page 69

75 Supported by increasing demand and low interest rates, real estate prices in the market area increased steadily from 1995 to about 2007, with a pause in Due to declining demand, a price leveling became noticeable by late 2007 for most property types. Historically, the annual increases typically averaged 3% to 5% in early years, then climbed to rates between 10% and 20%, possibly more for certain locations in 2004 to 2006, but price increases generally halted, then retreated as demand abated. Prices were fairly stable in 2007, declined in 2008 and 2009 before beginning to stabilize in Pricing was essentially flat in 2010 and 2011, and began slowly increasing by 2012, with the annual percentage increasing into Two of the comparable presented above sold within the last three months and are believed to represent current market conditions. Sales 1 and 4 are increased at 3.0% per annum. Location The adjustment for location is made for market relevant factors such as proximity to complementary supporting uses, zoning and land use regulations, traffic design and traffic volumes, corner influence, transportation and utilities linkages and demographic characteristics, including population density, buying power, primary work force age, disposable income, etc. In general, all of the comparables were superior to the subject as related to traffic and linkages, as well as nearby population density and income characteristics/buying power. Some comparables are located on corners and have superior exposure. All of the comparables were given negative adjustments accordingly. Zoning/ Land Use This category considers differences in the zoning, current and future land use of the comparables as related to the subject. Properties allowing more intensive uses typically sell for higher prices per unit than those with more use restrictions in place, and are adjusted accordingly. Zoning designations of the comparables were the same or reasonably similar to the subject and required little adjustment. Floor Area Ratio FAR The Floor Area Ratio reflects the ratio of land to building area, which affects ease of access, parking and the ability to expand. For example, a small site will feel cramped and a parking space may not be available during certain times of the day. All comparable sales with superior FAR s are adjusted downward, and those with inferior FAR s are adjusted upward. Only one comparable was adjusted for these factors. Building Size Adjustments for building size may be given based upon economies of scale for materials and job labor, and also because the land cost may be averaged over a smaller building area. Typically, smaller buildings are given negative adjustments, as they exhibit higher costs per square foot, and larger buildings are given positive adjustments. URS Page 70

76 No comparable was of significantly larger or smaller size than the subject, so minimal adjustments were warranted. Physical Characteristics Comparison of physical characteristics included consideration for differences of architectural appeal and building quality, effective age and condition which reflects the degree of maintenance, building size and parking availability. Comparables with superior quality of construction materials or other characteristics were given negative adjustments, and those comparables with inferior construction were given positive adjustments. Most comparables were in generally similar condition, and most comparables were similar to the effective age of the subject building. URS Page 71

77 Comparative Summary Sale 1 has a location superior to subject, due to its frontage along US Highway 19 in an area of higher density and household incomes. Comparable building improvements are older than the subject, though renovated and maintained well to similar effective age. The comparable has several national tenants and general occupancy is better than the subject. After adjustment, this comparable is overall superior to the subject. Sale 2 has a location superior to the subject, due to much higher traffic counts and higher neighborhood incomes. This masonry and stucco grocery box is similar in construction style and quality as the subject. the comparable is older than the subject though updated and well maintained in good condition. Lease terms are superior to the subject, being on an absolute net basis. Occupancy of this single tenant grocery is also better than the subject Walmart box, as the comparable tenant is established and still operating on the site and the below market rent diminishes risk if backfilling were required. After adjustment, this comparable is overall superior to the subject. Sale 3 has a location more rural than the subject but superior overall, as the comparable s neighborhood has higher density and household income and there is less retail competition nearby. Overall construction is similar in design, purpose and quality to the subject and the comparable improvements are older though renovated and well maintained. The comparable has a higher land area ratio than the subject and is superior in that respect. The comparable is also superior as to occupancy, as the anchor grocer is in occupancy, which benefits the property and supports value for the local retail shops. After adjustment, this comparable is overall superior to the subject and a net downward adjustment was applied. Sale 4 has a location superior to the subject, primarily due to its growing market area and significantly superior household income in the neighborhood. This was a former Albertson s Supermarket. Quality of the improvements is similar to the subject. The building had been dark a few years but maintained in average condition. This property was vacant at time of sale though buyer had the new grocery tenant in hand and incorporated demising costs in their purchase price and leasing costs prior to consummating the lease. After adjustment for sale and market conditions, this comparable is overall inferior to the subject due to location but otherwise quite similar, indicating a net downward adjustment. URS Page 72

78 Summary of Sales Comparison Approach Prior to adjustments, the sales indicated a range of prices from $69.14 to $ per building square foot. The prices of all comparables were then adjusted for transactional and market conditions and locational and physical differences, as perceived by the marketplace. This analysis indicated an adjusted price range from $41.49 to $51.55 per square foot. Disregarding sale 2, which is a single tenant retail box with no local in-line shops, the adjusted price of the three neighborhood shopping centers most similar to the subject ranged from $46.73 to $54.34 per square foot of rentable building area. With emphasis on Sales 1, 2 and 3, it is our opinion that $50.00 per square of gross building area best represents the indication of market value of the subject property by the sales comparison approach. From this amount we deduct the cost for pressure cleaning and painting the building exterior as discussed earlier, indicating an as-is value for the subject by the sales comparison approach. 47,390 square feet x $50.00 per square foot = $2,369,500 Less Repainting Budget: $ 57,300 Indicate Value As-Is $2,312,200 Rounded, $2,300,000 URS Page 73

79 COMPARABLE IMPROVED SALES ADJUSTMENTS NO LOCATION DATE TYPE BLDG SF CONSID ALLOC PRICE TOTAL YR BLT LAND SF BLDG SF LAND IMPROV TO /SF LAND% IMP % FAR ESTATE TIME/ FIN ADJ PRC LOC QUAL FAR COND OCC NET 1 MARINA VILLAGE Jun-17 61,791 $ 6,200,000 TOTAL $ % 1985/03 3% $ % 0% 0% 0% -25% -50% $ TH ST S 287,496 $ 2,500,000 LAND $ % 0.21 ST. PETERSBURG, FL NSC 61,791 $ 3,700,000 IMPROV $ % LF 3% $ % 0% 0% 0% -25% -50% 2 WINN-DIXIE SUPERMARKET May-18 40,496 $ 2,800,000 TOTAL $ % % $ % 0% 0% 0% -10% -40% $ E. BAY DR. 180,500 $ 1,800,000 LAND $ % 0.22 LARGO, FL Box 40,496 $ 1,000,000 IMPROV $ % LF 0% $ % 0% 0% 0% -10% -40% 3 WINN-DIXIE PLAZA Mar-18 50,073 $ 3,900,000 TOTAL $ % '92/'00 0% $ % 0% -5% 5% -20% -40% $ E DR MARTIN LUTHER KING 255,464 $ 1,500,000 LAND $ % 0.20 SEFFNER, FL NSC 50,073 $ 2,400,000 IMPROV $ % LF 0% $ % 0% -5% 5% -20% -40% 4 VALRICO CENTER SHOPPES Dec-15 54,100 $ 3,925,000 TOTAL $ % % $ % 0% 0% 0% -5% -30% $ LITHIA PINECREST RD. 236,197 $ 2,000,000 LAND $ % 0.23 VALRICO, FL NSC 54,100 $ 1,925,000 IMPROV $ % LF 7% $ % 0% 0% 0% -5% -30% ADJ PRC OVERALL URS Page 74

80 INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the principle of anticipation, the premise that the value of an income producing property may be expressed as the present worth of anticipated future benefits. While appraisal procedure recognizes that all benefits are not monetary in nature, particularly for residential properties, the income capitalization approach attempts to employ a monetary basis as a unit of comparison under appropriate circumstances. All capitalization or discounting methods are based on the concept of time preference, which holds that future income or benefits are worth less than the same benefits received now, and that they decrease systematically as the time for receipt is deferred into the future. Mathematically, income produced by an investment of capital may be determined by multiplying the capital investment by the rate of return. It follows that value of the capital investment (value of the property) can be determined by reversing the equation, dividing income by the rate of return, the procedure referred to as capitalizing the income. The first step in the income capitalization approach is to estimate the potential gross income the property is capable of producing. Occupancy and supply and demand trends in the neighborhood and competing areas are then analyzed, so that an annual projection of vacancy and collection losses may be estimated. Deduction of this allowance leads to an indication of effective gross income. If the property under appraisement is presently leased, the results of the market survey are employed to determine the reasonableness of the existing lease. For example, if existing lease rates are found to be above market levels, there would be a greater likelihood that the tenant would attempt to renegotiate the rent downwards or would be more likely to risk default in order to relocate to less expensive quarters. Next step in the analysis is to estimate annual expenses typically incurred by the owner of the subject property. For this procedure, expenses incurred by similar properties are analyzed, together with historical information on the subject, in an attempt to interpret historical trends and project reasonably accurate expense components for the subject. Deduction of estimated expenses from previously estimated effective gross income results in estimated net operating income. Final step in the valuation process is either a direct capitalization procedure, i.e., the division of the proforma net operating income for the first year by an appropriate capitalization rate in order to indicate value of the property, or a yield capitalization procedure, the discounting of projected income and expenses over a longer period of time. A discussion of various data and analyses necessary to estimate the mentioned components follows, beginning with comparable rentals. URS Page 75

81 Comparable Rentals URS Page 76

82 Rent Comparable No. 1 Historic Manhattan Casino nd Street South St. Petersburg, FL Historical restaurant, catering and event hall building leased from the City of St. Petersburg. Five year lease effective December 2017 plus three 5-year renewals. Six months free rent. Tenant takes as-is with no TI from landlord. Tenant budgets $400,000 or $25.26/SF in TI at their cost. This is a net lease where tenant pays minimum base rent of $2.53/SF plus stepped overages over $1,900,000 in gross sales. Tenant projects sales of $2,400,000 by end of year one, equating to approximately $4.11/SF base net rent. Tenant pays all operating costs and R&M including first $5,000 per occurrence for roof, structure and HVAC repairs or replacement. Landlord pays any such amounts over $5,000. CAM is estimated. URS Page 77

83 Rent Comparable No. 2 Boost Mobile th Avenue South St. Petersburg, FL ,400 square feet rents for $5.14 per square foot plus $1.99 CAM. Rent Comparable No. 3 Lakewood Building 2500 Dr. Martin Luther King Jr. Street South St. Petersburg, FL 612 SF salon suite rents for $11.76 per square foot modified gross. URS Page 78

84 Rent Comparable No. 4 16th Street Plaza th Street St. Petersburg, FL Rents increased 12% YOY to $15.00 modified gross. One year leases only. Easy qualify. Rent Comparable No.5 Freestanding Commercial 1326 Dr. Martin Luther King Jr. Street South St. Petersburg, FL A 1,292 square foot ground floor space available. Asking $14.86 per square foot triple net. URS Page 79

85 Rent Comparable No. 6 Skyway Plaza nd Ave. So. St. Petersburg, FL This is a high vacancy shopping center with little other retail nearby. Large spaces have proven difficult to fill, with some vacancies remaining more than five years. A 46,800 SF former Sweetbay grocery box has been vacant since A former 13,000 SF Walgreens has been vacant since Property management reports $15-$20/SF in deferred maintenance to the shopping center, yet market rental rates do not warrant the expense. Tenant quality is reported too low to risk extending tenant improvement allowances. Typical occupied suite rents tend to range from $7.00 to $10.00 net. No tenant improvements are provided, but perhaps a month rent concession. URS Page 80

86 Rent Comparable No. 7 Lakeview Shopping Center th Street South St. Petersburg, FL This older neighborhood shopping center is located west of I-275 at the signalized interaction of 34 th Street (US Highway 19) and 22 nd Avenue South. The center is anchored by Family Dollar, a small Cricket mobile phone store and supported by a local restaurant and Caribbean Market. Leasing agent reports steady demand. Two prospective tenants are considering the available junior box of 23,046 square feet. Asking rate for the two vacancies are $12.00 for a small 720 square foot suite and $7.00 for the 23,046 square foot junior box. The Caribbean Market pays rent of $9.00 per square foot for its 3,550 square feet. All least terms are triple net. Current year CAM is $2.98 per square foot URS Page 81

87 Rent Comparable No. 8 Coquina Key Plaza th Street South St. Petersburg, FL This shopping center is located in south St. Petersburg in the northeast corner of 45 th Avenue South and 6 th Street South. This is an older center that has experienced difficulty leasing up for several years. Anchored by Save-A-Lot, CVS and Family Dollar, the center has 13.1% vacancy now, but 46% of the center is available. Management is beginning a capital improvement campaign to include new facade work, columns, roof coverings and parking lot surface, among other things. Two new national tenants have been signed who will take occupancy upon completion of capital improvements in about six months. Current local space rents typically range $7.00-$10.00 triple net. Asking rents on available local space has been in the $ $10.00 range plus CAM with no takers. Local shop space will increase to $12.00 plus CAM upon completion of improvements and market response is said to be good. URS Page 82

88 Comparable Rental Chart COMPARABLE RENTAL PROPERTIES NO LOCATION GLA AVAIL OCC/ VAC YB Class SUITE SIZE NET RENT CAM EST MOD GROSS 1 Manhattan Casino 15, % 1920/2005 Single Tenant 15,383 $ 4.11 $3.00 $ nd Street South 0 0.0% C St. Petersburg, FL Boost Mobile 1, % 1950 Single Tenant 1,400 $ 5.14 $1.99 $ th Avenue South 0 0.0% C St. Petersburg, FL Lakewood Buiding 3, % 1961 Beauty Salon 612 $ $1.76 $ Dr. M.L.K. Jr.. St. S % C St. Petersburg, FL th Street Plaza 7, % 1952/ $ $2.72 $ th Street 1, % C $ $2.72 $ St. Petersburg, FL Last Yr 720 $ $2.72 $ Freestanding 1, % 1963 Asking 1,292 $ $2.08 $ Dr. M.L.K. Jr.. St. S. 1, % C St. Petersburg, FL Skyway Plaza 110, % 1959/1985 In-lines 850-5,000 $ 7.00 $3.77 $ nd Ave. So. 73, % In-lines 850-5,000 $ $4.64 $ St. Petersburg, FL Lakeview Shopping Center 56, % 1985 Available 23,046 $ 7.00 $2.98 $ th Street 23, % C Available 720 $ $2.98 $ St. Petersburg, FL Carribean Mkt 3,550 $ 9.00 $2.99 $ Coquina Key Plaza 113, % 1957 Prospective Locals $ $3.00 $ th Street South 14, % C Pending 10,000 $ 8.00 $3.00 $ St. Petersburg, FL Pending 15,000 $ 9.00 $3.00 $ Comment Base min. rent is $2.53/SF plus stepped overages above $1.9M. Freestanding retail buiding south side of 18th Avenue South. Six unit brick retail strip between 24th and 26th Ave South. Owner occupies four. Quoted is end unit. No road signage. Limited parking. Multi-unit one-story retail strip along the east side of 16th Street. One year leases only. Easy qualify. No TI or concessions. 12% rate increase in Freestanding ground floor unit on the northeast corner of 14th Avenue South. Asking rate just reduced 10%. High vacancy shopping center with deferred maintenance and long term vacancies. Neighborhood shopping center west of the suject and I ,257 SF available thoough only 14,815 SF is vacant. Commencing capital improvements. Rates shown are post-renovation rates. Superior Comparable Rental Map URS Page 83

89 Analysis of Comparable Rentals The next step in the income capitalization approach is the estimation of market rent; that is, the rental income that the subject property would most probably command on the open market. Market rent is evidenced by the current rents paid for comparable properties as of the date of the appraisal. In an effort to accurately estimate market rent for the subject property, we have surveyed and obtained information from similar properties. The comparable rentals are analyzed and compared to the subject property and then adjusted to reflect any quantitative or qualitative differences with respect to the subject property as perceived in the market place, thereby providing an indication of the probable market rent that can be commanded by the subject property. Adjustments are made to the comparable rentals for either their superior or inferior characteristics as related to the subject property, in a manner similar to adjustments made to the comparable improved sales used previously in this report. Referring to the comparable rental summary chart, comparable properties indicated a wide range of approximately $5.00 to $15.00 per square foot for smaller local store spaces from 612 to 5,000 square feet. Larger junior box spaces range from $7.00 to $9.00 per square foot for units ranging from 10,000 to 23,000 square feet. These rates are on a triple net basis not including applicable reimbursable charges to the tenant, prior to comparative adjustments, and are representative of the retail demand of the comparable properties in the subject neighborhood, meaning that the amount of rental a store can pay is determined by the same factors that affect value, such as location, competition and demographics. After adjustments, the rentals indicated a range between approximately $5.50 to $14.80, with an average around $10.00 for the smaller units on a triple net basis. Including CAM and reimbursable charges to the landlord, these rates equate to a range of approximately $8.50 to $17.00, with an average of $13.00 for a modified gross comparison. After adjustments, the rentals indicated a range between approximately $6.65 to $8.10, with an average of $7.30 for the larger junior box size units on a triple net basis. Including CAM and reimbursable charges to the landlord, these rates equate to a range of approximately $9.50 to $10.80, with an average of $10.05 for the larger space on a modified gross comparison. The comparables were all reasonably similar to the subject and few net adjustments were required. Additional comparable rentals we analyzed that are located outside the subject s neighborhood but have generally similar characteristics exhibited similar rental ranges. As shown in the tables below in the Subject Lease Analysis discussion, current rents for the subject smaller in-line shops range from $13.00 to $15.00 triple net, and $15.00 to $23.68 per square foot if compared on a modified gross basis which includes varying CAM and reimbursable charges. These rates appear to have been sustainable while the Walmart anchor tenant was open and operating but, as noted throughout this report, the smaller in-line tenancies URS Page 84

90 are failing at these rates since the anchor box went dark. Based on our survey, we conclude the subject rental rates for the smaller in-line store spaces are over market. As shown in the tables below, the subject anchor space is leased to Walmart at $5.50 per square foot on a triple net basis, not including CAM. Including reimbursable charges to this junior box lease indicates a modified gross comparison of approximately $9.92 per square foot for the subject. Based on our survey of the junior box spaces presented above and others similar, we believe the subject junior box lease is within market range as-is. In our third discounted cash flow analysis shown below at the end of this report, the existing box space is demised into two smaller ones. In that scenario, with primarily new interiors and much of the mechanicals new as well, it would be appropriate to increase the base rents Subject Lease Analysis The subject consists of two attached retail buildings configured in an L: shape and comprising a small Neighborhood Shopping Center. Currently, there are eight (8) tenant spaces including seven in-line stores totaling 8,311 square feet and one junior box anchor space containing 39,079 square feet. The in-line store units range from 536 to 1,310 square feet. Total rentable square feet for the subject shopping center are 47,390 square feet (8, ,079=47,390). As of the date of appraisal there were five tenants, four of which were in occupancy. The fifth tenant is the Walmart anchor who vacated their 39,075 sq. ft. junior box in 2016 but is current and paying all lease obligations. We note also that a Community Resource Office of the St. Petersburg Police Department currently occupies Suite 1786 without being charged rental fees. This tenancy is temporary in nature and the 536 square foot space is considered vacant and available for our analysis. The following two tables summarize the current subject rent roll. RENT ROLL SUMMARY Ct Suite Tenant SF % Start Expiration Term Basis Base Rent/Yr Base/SF MG Rent/SF Vacant 1, % n/a $ - $ - $ China Star - Restaurant 1, % May-06 Expired M2M MG $ 19, $ $ Cell Touch (Metro PCS) 1, % Dec-14 Nov-19 5 Years NNN $ 18, $ $ Vacant 1, % n/a $ - $ - $ My Beauty Supply 1, % Jul-14 Terminated M2M NNN $ 18, $ $ Meme's Beauty 1, % May-07 Expired M2M NNN $ 16, $ $ Vacant % n/a $ - $ - $ Wal-Mart 39, % Dec-13 Dec Years Net $ 214, $ 5.50 $ 9.92 URS Page 85

91 RENT ROLL SUMMARY Ct Suite Tenant SF % Base Rent/Yr Base/SF CAM P. Tax Ins. Other Total Add MG Rent/SF Vacant 1, % $ - $ - $ China Star - Restaurant 1, % $ 19, $ $ - $ - $ - $ - $ - $ Cell Touch (Metro PCS) 1, % $ 18, $ $ 7.42 $ 1.76 $ - $ - $ 9.18 $ Vacant 1, % $ - $ - $ - $ My Beauty Supply 1, % $ 18, $ $ 7.42 $ 1.76 $ - $ - $ 9.18 $ Meme's Beauty 1, % $ 16, $ $ 7.42 $ 1.76 $ - $ - $ 9.18 $ Vacant % $ - $ - $ - $ Wal-Mart 39, % $ 214, $ 5.50 $ 2.06 $ 1.86 $ 0.18 $ 0.32 $ 4.42 $ 9.92 Walmart has 8 years and 7 months remaining on their initial lease term, plus six 5-year renewal options. Because the Walmart anchor box is not occupied, overall physical occupancy of the shopping center is very low at 10.9%. Based on the tenant rent roll, the subject is 93.4% occupied; however, as noted below, two of the in-line tenants have accumulated significant delinquencies and are currently not paying any rent or CAM, which pushes current economic occupancy down to 87.9% on a square foot basis. The various occupancy tables are shown in the tables below. Ct. Suite Physical Occupancy RSF Pct Vacant - 1,310 RSF 0 0.0% China Star - Restaurant 1, % Cell Touch 1, % 1770 Vacant - 1,293 RSF 0 0.0% My Beauty Supply 1, % Meme's Beauty Supply/Salon 1, % 1786 Vacant RSF 0 0.0% Wal-Mart - Vacated 0 0.0% Physical Occupancy 5, % Physical Vacancy 42, % Total RSF 47, % Includes only those tenants physically occupying and open for business. Not including vacated Walmart or temporary Community Resources Office. Ct. Suite Rent Roll - Tenant Count RSF Pct Vacant - 1,310 RSF 0 0.0% China Star - Restaurant 1, % Cell Touch 1, % 1770 Vacant - 1,293 RSF 0 0.0% My Beauty Supply 1, % Meme's Beauty Supply/Salon 1, % 1786 Vacant RSF 0 0.0% Wal-Mart 39, % Tenant Encumbered RSF 44, % Unencumbered RSF 3, % Total RSF 47, % Includes all tenants having a leasehold interest except the temporary Community Resource Center Ct. Suite Economic Occupancy RSF Pct Vacant - 1,310 RSF 0 0.0% China Star - Restaurant 1, % Cell Touch 1, % 1770 Vacant - 1,293 RSF 0 0.0% My Beauty Supply 0 0.0% Meme's Beauty Supply/Salon 0 0.0% 1786 Vacant RSF 0 0.0% Wal-Mart 39, % Economic Occupancy 41, % Economic Vacancy 5, % Total RSF 47, % Includes only those tenents current and paying rent. Walmart s lease encompasses the 39,079 square foot junior size retail anchor box located at the easterly end of the subject shopping center. This space was originally occupied by Sweetbay Supermarket, who vacated the subject in early 2013 as part of closing 33 underperforming stores in Florida. Walmart filled the space less than a year later, opening a Walmart Neighborhood URS Page 86

92 Market in January Unfortunately, Walmart vacated the subject three years later in early 2017, citing insufficient sales revenue, but continues to honor their lease obligations. Walmart has 8 years and 7 months remaining on their initial lease term that expires on December 2, 2026, plus six 5-year renewal options. Renewals are automatic unless Walmart advises the landlord at least 180 days in advance of term expiration of its intent not to renew. Base rent for the current/initial lease term is $5.50 per square foot on a triple net basis. Base rent increases 5% with each option period. Additional rent for reimbursable expenses includes its prorated share of all necessary and reasonable CAM charges, property taxes, building insurance and common area utilities. Additional rent for property taxes is paid annually when the tax bill is due and not included in Walmart s monthly payment schedule. The amount of CAM reimbursements Walmart pays is lower than that of the in-line stores, partially due to expense exclusions contained in Walmart s lease such as administrative and overhead costs for property management, administrative costs for the property including legal or professional fees, supplies and management salaries or any advertising or promotional costs for the shopping center. Walmart pays their own garbage removal and is responsible for maintenance and repair of the roof over their building, including structural repairs. This lease requires the landlord to maintain all common areas of the subject shopping center in first-class condition during the lease period. The four tenants physically occupying the subject are the China Star restaurant, Cell Touch/Metro PCS and two beauty related stores, My Beauty Supply and Meme s Beauty Salon. Each of these tenants occupies a 1,293 square foot in-line store suite. Original leases are triple net with tenants paying a base rent of $13.00 to $15.00 per square foot annually, plus a proportional share of CAM including management, property taxes, insurance and common utilities as reimbursable expenses to the landlord. Current year reimbursable expenses total $9.18 per square foot, comprised of $7.42 for CAM and $1.76 for real property taxes. Current year CAM is higher than a typical stabilized property of this type, but appears to include additional general and administrative expenses, some taxes for prior years and additional legal and professional fees incurred. As noted in the rent roll table above, three of the four occupying tenants are now on month-tomonth tenancies. One of those, China Star restaurant, was one of the original tenants of the development. Their recent lease expired December 2017 yet this tenant elected not to exercise their renewal option. We are advised that China Star is currently paying their previous base rental of $15.00 per square foot, but are no longer paying CAM charges. The other two monthto-month tenants both have expired or terminated leases, and neither has been paying any rent or reimbursements for most of the last year. Our understanding is these tenants have been allowed to remain in place while the landlord (City of St. Petersburg) assesses their options for this asset. The fourth, and last, occupying tenant is a mobile phone provider, Cell touch (Metro PCS) whose current lease runs through November 2019 and is current on all rental charges. Current year base rent for Cell Touch is $14.50 per square foot, again on a triple net basis, increasing $0.50 per square foot in December 2018 for the last year of their lease. They have one 5-year option to renew on unspecified terms. URS Page 87

93 Summary The shopping center has struggled since Walmart vacated the anchor space in 2016 and in-line tenant performance is obviously declining. As of the date of appraisal, physical occupancy was only 10.9%, while economic occupancy is higher at 87.9% due to Walmart s continuing to pay their lease obligations on their vacated space. While the overall Tampa Bay retail market has been improving in recent years, the subject s South St. Petersburg neighborhood has remained relatively flat, exhibiting lower demand than most submarkets primarily due to limited income and spending power of a majority of its residents. The subject shopping center has experienced two major grocery tenants vacate its junior anchor box space since 2013, and has been unable to re-tenant the anchor space since it became vacant in early Based on market research and review of subject data and appraiser file data, it is our opinion that the subject neighborhood is likely unable to support a single tenant junior box grocery tenant of 40,000 square feet. Further, without a major retailer in occupancy of the subject anchor space to create exposure and foot traffic, the in-line tenants will continue to falter at the current rental rates until the subject becomes 100% vacant, even though Walmart may continue to pay on its lease for years to come. It is worth noting that Walmart s lease requires the landlord to maintain all shopping center common areas in first class condition, meaning that even if a landlord chose to let the center go dark and rely on collecting rental payments from Walmart, the landlord would still incur significant expenses for maintenance of the property. Based on our research and analysis of relevant factors, we conclude that Walmart s current contract rental amount approximates market rent for the existing anchor box space, yet there appear to be few prospective tenants for this size space in the subject neighborhood and the space will likely require being demised into two smaller units for new occupancy. As to the subject inline suites, we conclude the existing contract rents are above market for the subject property in its current state, where the subject anchor space is not occupied by a good, high volume grocery/home goods tenant that can provide exposure and drive foot traffic to the in-line tenants. As noted in more detail below, we have developed several discounted cash flow scenarios for the subject. Since Walmart controls the anchor box space, we have utilized their current lease terms and applied market based rent estimates to the in-line store spaces. Under a different scenario we also project cash flows assuming a replacement tenant for the anchor space were found, and have applied stepped market rents for the subject in-line stores in that instance. All projections estimate a base rent plus CAM expenses for the subject, as is now customary in the market. Please refer to the following schedule of estimated market rate base rents. Unanchored rates are applied in our valuation scenarios 1 and 2, while anchored rates are applied in scenario 3. All rates are escalated annually with inflation in our discounted cash flow analysis below. URS Page 88

94 MARKET RENTAL ESTIMATE - NNN SPACE UNIT RSF TYPE UN-ANCHORED ANCHORED ,310 End cap $9.00 $ ,293 Restaurant $9.00 $ ,293 Store $9.00 $ ,293 Store $9.00 $ ,293 Store $9.00 $ ,293 Store $9.00 $ Store $9.00 $12.00 AS-IS DEMISED ,079 Anchor Box $5.50 $7.00 URS Page 89

95 Estimates of Rental Revenue As-is, the subject is anchored by the Walmart lease encompassing 82.5% of the subject shopping center. With 8.7 years remaining on Walmart s lease, there is a level of revenue fairly certain; however, without a strong shopping center anchor the in-line store occupancy is declining and the four in-line tenants currently occupying the subject appear unable or unwilling to continue paying current rent levels. There are currently four in-line tenants occupying 10.9% of the rentable area, but three of them are now month-to-month and two have not paid rent in some time since Walmart moved out. The third let their lease expire without renewal and currently occupies month-to-month paying their previous un-escalated contract rent of $15.00 per square foot but without CAM reimbursements. The fourth in-line tenant, a mobile phone provider, is current on their existing lease that expires November 2019, and currently pays $14.50 per square foot plus CAM and reimbursable expenses. Both Walmart and the subject property s owner, the City of St. Petersburg, are marketing to relet the Walmart space to new tenants and, as noted previously, demising the Walmart box into two smaller spaces appears likely. Further, the type of tenant(s) that backfill the Walmart space may affect the type of in-line tenants attracted to the center and the amount of market rent obtainable for the in-line shops. Due to the status of current tenancies, for this appraisal we have prepared and analyzed three different discounted cash flow models for the subject. DCF-1 assumes the in-line tenancies continue to fail and become dark along with the anchor box. This analysis essentially estimates the net present value of the Walmart lease after deducting operating and maintenance expenses for the shopping center, assumes Walmart does not exercise their option to renew for another five year term and estimates the shopping center is re-let by year 11 of analysis. DCF-2 assumes that Walmart continues to honor its lease but the box remains dark for the remainder of their initial lease term and the in-line store are re-let at lower neighborhood retail rates reflective of the shopping center having no anchor. DCF-3 assumes the subject anchor space is demised in two and the shopping center re-tenanted at market rental rates reflective of a junior anchored shopping center in the subject neighborhood. The DCF analyses presented incorporate various market rental and occupancy cost scenarios, and each are discussed in more detail under Discounted Cash Flow Summaries near the end of this report section below. URS Page 90

96 Vacancy As was discussed in the rental market survey, the eight comparable rentals considered directly competitive with the subject report between 0% and 100% occupancy, including large anchor boxes, and occupancies at other retail shopping center developments in the neighborhood reported general occupancy in excess of 90%. According to the First Quarter 2018 issue of the Colliers Tampa Bay Retail survey, the range of Pinellas County vacancy rates is from 4.9% in the mid-county sector to 9.3% in South Pinellas. The North Pinellas portion is 6.2%. There is a total of 25,677,988 square feet within 516 buildings included in this survey. The overall retail vacancy rate for the county for the first quarter 2018 is a weighted average of 6.8%. The net absorption for the quarter was positive 68,717 square feet countywide, with Mid- Pinellas absorbing the most at 69,680 square feet while the South-Pinellas/St. Petersburg CBD had negative absorption of -55,585 square feet. An additional 101,760 square feet was completed in Mid-Pinellas and 151,952 square feet are under construction in South-Pinellas, of which a portion is pre-leased. The weighted average base rental rate was $15.68 per square foot in North Pinellas, $14.17 mid-county and $13.06 per square foot for the South Pinellas/St. Petersburg CBD submarket. According to the CoStar Retail Report for the subject s South Pinellas submarket, overall vacancy is 6.7% with -32,294 square feet of negative absorption in the first quarter Vacancy in the first quarter is up 70 basis points over year-end 2017, though forecast to fall back to 6.1% by the end of the year. Average asking rent ranges from $16.60 to $20.57 with an average of $16.94 per square foot, There is a total of 19,168,494 square feet in this survey. The subject is located in the southern part of the south county market area, and has the advantage of being located at a signalized intersection along a primary east-west collector roadway. Currently, the subject exhibits 6.6% vacancy based on the rent roll, though two of the in-line store tenants have significant delinquencies and are not paying and the Walmart box, which accounts for 82.5% of the total subject square feet, is leased but dark. The recent economic conditions had a negative effect on occupancies, but the economy has recovered to near prerecession levels. There is positive absorption occurring in the subject market area and there is little new construction in the pipeline. Occupancies are expected to remain stable to slowly increasing, and rents are increasing as vacancies decline. Typical leases on this type of property tend to range around five years for the in-line stores while leases for junior retail boxes can range from five to twenty years plus renewal options. Typically, tenants are renewing their leases if possible. However, it is possible that a vacancy could occur at the end of the lease period. Estimating a three month vacancy each five year lease period over a holding period of ten years would indicate a vacancy and credit loss estimate in the range of 4.76%, which is reasonable in the current climate. Given the location and design of the subject and considering the rental history, we have estimated the stabilized market vacancy, including credit loss, for the subject property at seven (7.0%) percent per annum. URS Page 91

97 Operating Expenses In a gross lease, also referred to as a full service lease, the tenant pays only the lease amount, and the landlord is responsible for interior and exterior building maintenance, janitorial service, taxes, insurance, utilities and other expenses. The tenant may pay as additional rent the increase in certain expenses above the first year during subsequent years of a lease term, referred to as a base stop. Under a NNN net lease arrangement, the tenant pays a base lease amount, plus its pro rata share of all expenses incurred in the operation and maintenance of the building. Between the two is a modified gross lease, which may take many forms. Typically, the tenant pays the base rent and often reimburses the owner for certain expenses such as taxes and insurance, and directly pays certain expenses, such as utilities and interior maintenance, but all terms are negotiable. We estimate the subject market rent would be on a net basis, whereby the landlord is reimbursed by CAM for all expenses, including, but not limited to real estate taxes, insurance, common utilities, maintenance and repair, groundskeeping and management. Therefore, the nonreimbursable operating expenses will be structural maintenance and repair, and, if applicable, tenant improvements, concessions, leasing commissions and an allowance for reserves, such as for roof cover replacement. Walmart s reimbursements are capped according to their lease. The annual estimated reimbursable (CAM) and non-reimbursable expenses are displayed in the below chart. The several expense categories are discussed below. Real Estate Taxes Real estate taxes were previously estimated at $1.89 per square foot. Property Insurance Insurance expense can vary widely for a property such as the subject, dependent upon a variety of factors, including relationship of the landlord with the insurer, construction of the building and occupancy. Insurance is typically found to range from approximately $0.20 to $0.50 per square foot for similar buildings, based on replacement costs, fire rating and tenancy. Historic insurance expense in 2016 and 2017 for the subject was reported near the low end of this typical range at $0.18 and $0.19 per square foot, respectively. We were unable to review existing insurance policies to formulate an opinion as to their applicability in the coming year. Applying a 3% inflationary increase to last year s policy indicates an annual premium of $9,329, or $0.20 per rentable square foot, which appears reasonable. Utilities Expenses for utilities, including electric, water and sewer are paid by the tenants with individual accounts and the garbage collection expense is shared, as is typical with multi-tenant properties having individual meters. In periods of vacancy, landlord may incur electricity and water charges for a temporary period, but these costs are typically minor. A reimbursable expense includes common area electricity for signage and lighting and also water charges for irrigation. URS Page 92

98 Reimbursable charges over the last two years for electricity have ranged from $0.28 to $0.29 per square foot, higher than typical but reasonable for the subject keeping the parking lot lit at night. We have applied $0.29 per square foot for electric charges. Water, sewer and garbage charges over the last two years have ranged from $0.20 in 2016 to $0.17 in 2017, the difference largely reflecting Walmart moving out in early For water, sewer and garbage, we applied $300 per month or $0.08 per square foot in the first years of our first scenario, as a minimum service level with little to no occupancy, $0.18 per square foot in scenario two in-line occupancies but Walmart remaining vacant, and $0.20 per square foot in scenario three assuming the Walmart box and in-line shops are re-tenanted with typical occupancies. Repairs and Maintenance Maintenance and repairs include plumbing, electrical and air conditioning repair, fire protection maintenance, paving, striping, parking lot cleaning, portering, maintenance of building exterior and interior, exterior touch-up painting, pressure washing and window cleaning. With gross leases, the landlord is responsible for all maintenance and repairs not caused by a tenant. With net leases the tenant is obligated to pay these costs, and modified gross leases have negotiable responsibilities. Repair and maintenance expense for properties such as the subject are typically related to several annual emergency expenses of a few hundred dollars each, plus more extensive repairs during time of tenant turnover. Actual maintenance expense for similar buildings can vary somewhat, based primarily on the age and condition of the premises and level of service provided by the building owners and managers. Parking lot and common area sweeping and portering services for the subject property was reported as costing between $0.42 in 2016 and $0.29 per square foot in The current contract is $12,480 per year or $0.26 per square foot including 4 days sweeping and 2 days portering, the minimum frequency according to Walmart s lease. Property management is considering an increase to 3 days portering, which would add $0.05 per square foot annually. We have estimated $0.26 per square foot, approximately $12,500 annually, for this expense category in the first year of out DCF scenarios 1 and 2, increasing to $14,000 or $0.30 in scenario 3, based on historical and projected expenses which appear reasonable. General maintenance expenses reported for the subject in 2016 and 2017 were $0.05 and $0.00 per square foot, respectively, while fire protection maintenance was reported as $0.03 and $0.04 per square foot for the same time periods. Additionally, Roof repairs of $0.01 and $0.08 per square foot were reported for 2016 & For a building of similar age and condition to the subject, a budget of approximately $400 per month or $0.10 per square foot is applicable for the reimbursable portion in expense category and includes annual pressure cleaning, general maintenance, roof maintenance and fire protection. URS Page 93

99 One-Time Maintenance Budgets We note The Sembler Company began managing the subject in the fall of 2016 after the City acquired the leasehold at auction, and appears to have addressed general deferred maintenance that may have existed at the time. They are currently planning for completion of pressure cleaning and painting of the building exterior and parking lot perimeter knee walls this year or next, with a budget of $57,300 based on bids received. As the paint coating is at or near the end of its life, we estimate an investor would make this deduction and have applied the expense as a one-time deduction on our DCF Value Summary page for all scenarios. Management is also considering landscaping upgrades with a current bid of $41,000. In our opinion, current landscaping is suitable, if maintained, for our DCF-1 and DCF-2 scenarios, and we have deducted this expense also as a one-time expense in our DCF-3 scenario described further below. Gardening & Landscaping Maintenance of the yard and landscape areas are usually the responsibility of single-tenant users and net lease tenants. With multi-tenant leases, the landlord is usually responsible. During periods of normal turnover, the landlord is expected to have expenses, although minor. For the subject property, the landlord is responsible to pay for all landscaping and irrigation maintenance and repair as a reimbursable expense. The subject reported expenses of $0.35 and $0.41 for 2016 and 2017, respectively, for this expense category. The current contract for normal monthly landscaping is $885.00, equivalent to $0.22 per square foot on an annual basis. Based on historic costs and competitive costs, we estimate this expense at $1,200 monthly or $0.30 per square foot, and includes mowing, landscape and irrigation maintenance and debris collection. Pest Control Monitoring and maintenance of outdoor pest control is usually the responsibility of single-tenant users and net lease tenants. With multi-tenant leases, the landlord is usually responsible as a reimbursable expense. The subject does not currently have a pest control contract, though most shopping centers do. Management has bid the service and budgeted an expense of $ annually plus an initial service charge of $96.00, which appears reasonable. Based on current proposed costs and competitive costs, we estimate this expense at $ per year or $0.02 per square foot. Security Security expenses for the subject consist of monitoring service and systems as well as a roving patrols. Historical expenses reported for the subject were $1.03 and $0.90 for 2016 & 2017, respectively. Currently, the contract rate for security is $0.92 per square foot for nightly security staffing from 10 p.m. to 6 a.m., or 56 hours per week. Management is considering an increase to security to operate from 2 p.m. to 6 a.m., or 112 hours per week, equating to an annual rate of $1.84 per building square foot. Based on historical expenses and competitive costs, we estimate this expense near the higher rate at $1.90 per square foot for in the first year of our DCF Scenario 1, where the shopping center would essentially be vacant as the Walmart lease runs and in-line URS Page 94

100 shops are idle, and apply a lower expense of $0.95 per square foot, near the current contract rate, to scenarios 2 and 3 when the center has more activity with higher occupancy. Management Fees Management fees for properties such as the subject are typically 4.0% to 6.0% of effective gross income. We estimate 6.0% for management as a reimbursable expense for the subject shopping center, and there would be additional compensation to management in the form of lease commissions. Also, management may be further compensated for monitoring any capital improvements programs of the property, typically at a rate of 5% to 10% of such improvement cost. General & Administrative Expenses for owner s accounting and legal services, if any, beyond the management service expenses are included in this category. Also, administrative expenses for the landlord/owner may be included for correspondence, subscriptions, licenses, telephone, information systems and related transportation costs. Due to additional monitoring and re-tenanting required for the subject, we budget this category slightly higher than normal at 1.0% of effective gross income or approximately $0.08 to $0.10 per square foot, as a reimbursable expense typical for shopping centers similar to the subject. Junior Box Back-Fill Costs Costs to demise and re-let the subject junior anchor space are estimated below and applies only to our third discounted cash flow analysis, DCF-3. As discussed below in the DCF Summaries section, it is our opinion that the current tenant, Walmart, would be sufficiently motivated to pay these expenses for the landlord in order to back-fill the space and in exchange for being released from the remainder of their lease. As such, this expense item is not included as a line item expense in our DCF-3 cash flow model, but is presented below for purpose of analysis. Based on interviews with retail brokers, developers and review of appraiser file data of similar properties, the cost to demise a retail junior box might begin around $250,000 and easily escalate to $400,000 or $500,000 or more, depending on the new tenant requirements and lease terms. Likewise, tenant improvement cost can be as low as $0-$10.00 per square foot for second generation space to discount retailers in the lower rental range, or up to say $75.00 per square foot or more for a national tenant in a new development with a long term lease. For the subject, we estimate just under $400,000, or $10.00 per square foot, to demise the subject junior box in two, which includes delivering the spaces in vanilla shell condition. As some of the construction will be new, we estimate an additional $5.00 per square foot for tenant improvements. Free rent concessions maybe applied in the market, primarily during construction, but are not deducted here under the assumption that Walmart would continue to pay its contractual rent anyway until rental payments from new tenants commence. We have estimated market rent for the smaller demised junior box spaces at $7.00 per square foot triple net. Leasing commissions are estimated based on a 4% commission on the base rent only for an initial term of ten years. Total URS Page 95

101 lease-up costs to demise and re-let the subject junior box under this scenario is estimated at $750,000, rounded, as detailed in the following table. Again, this expense item is not included as a line item expense in our DCF-3 cash flow model, but is presented as part of our analysis. Please refer to the Discounted Cash Flows Summary section of this report for further discussion. LEASEUP COST ESTIMATE - JUNIOR BOX Size - 19,540 SF 39,079 Rental Rate/SF/YR $7.00 $ 273,553 Lease Term - Years 10 $ 2,735,530 Commission 4.00% $ 109,421 Demising Cost/SF $10.00 $ 390,790 TI $5.00 $ 195,395 Concessions $0.00 incl Legal/Consulting Allow $ 50,000 $ 745,606 Rounded $ 750,000 Lease Terms and Concessions Lease terms are typically 3 to 10 years in the market, and we have applied an average 5 years for the majority of tenants and 10 years for the larger anchor units. From time-to-time, a landlord may elect to offer one or two months rent on an initial lease of a new tenant, but this is not prevalent in the market. In our opinion, no concessions are applicable to this subject property. Renewal Probability and Lag Time We estimate a typical 75% renewal probability at time of lease expiration for majority of tenant space. For this type of property, the time between vacation and re-leasing is typically two months to four months. We have applied three months for the time after a tenant lease expires for the tenants who do not renew their lease. Tenant Improvements Tenant improvements for existing, second generation space is typically from $1.00 to $10.00 per square foot. This includes a paint, paper and carpet allowance, based on the assumption that new walls will not be required. If a larger tenant vacates, then additional modifications may be required. Generally, higher quality properties and tenants generally equate to higher rents and tenant improvement charges, and the converse is also true. Accordingly, we are budgeting a tenant improvement allowance for the in-line shops of $2.00 per square foot for new leases in our DCF-2 with lower local rents, and $5.00 per square foot in our DCF-3 version with the subject re-tenanted at higher rental amounts. The larger anchor box is budgeted at $10.00 per square foot. URS Page 96

102 Leasing Commissions Commissions payable to a building management and leasing company, if an in-house department is not used, are typically 4.0% of gross rental income on a new lease. If the tenant is represented by an outside broker, the outside broker receives 4.0%, and the in-house broker receives 2.0%, or 6.0% total. For a renewal, the inside broker receives 2.0%, unless the tenant has retained a broker, in which case the outside broker receives 2.0%, and the in-house broker receives 2.0%, or 4.0% total. Larger anchor boxes on longer term leases tend to be lower overall. For a typical new lease, we believe there is a 50/50 chance the tenant will be represented by an outside broker, and estimate average commissions at 4.0% across the subject property. For renewals, we estimate commissions at 2.0%. Capital Reserves This item of expense is to set aside a sinking fund for short-lived assets so that their timely replacement can occur and the subject property can continue to be well maintained, retain its competitive market position and remain economically profitable. This expense item is a fund to replace or repair all non-recurring structural maintenance items. The landlord is responsible for structural repairs and roof cover replacement when needed. Reserves are budgeted at 2.0% of effective gross income, an amount in excess of the calculated reserves, but considered an industry average. Pro Forma Operating Statement Based on the previous discussion of income and expenses, a pro forma operating statement was prepared and is shown in the accompanying cash flow analysis. URS Page 97

103 Capitalization and Discounting Having estimated net operating income for the subject property, it is necessary to convert this projected series of annual incomes to an estimate of market value. Two primary methods of capitalization are typically employed, direct capitalization, i.e., the division of the pro forma net operating income for the first year by an appropriate capitalization rate in order to indicate the value of the property, or yield capitalization, the discounting of projected income and expenses over a longer period of time. In the case of the subject property, the discounted cash flow analysis is considered more reflective of anticipated conditions but both are employed in this report. In order to arrive at a value estimate by the income capitalization approach, the estimate of net operating income must be capitalized or converted to a value indication. The value of an income-producing property is dependent upon income produced and cost of capital, whether obtained from mortgage financing or equity. Income capitalization employed by appraisers is a function of return on and return of invested capital. As currently required in the market in the appraisal field today, there are numerous methods based on this concept. All of the methodologies, however, are derived from the basic formula: V = I / R Where "V" equals value, or present worth, "I" equals annual income to be capitalized, and "R" equals the rate of capitalization. Employment of this formula is referred to as direct capitalization. Direct Capitalization This is a method used to convert a single year s estimate of income to a value indication in the income capitalization approach. This single year of net income typically represents stabilized income for a true representation. Implicit in this methodology is a blending of investors return on and return of capital. For a successful application of this methodology, there must be a body of highly comparable market data from which overall rates may be derived. Other methods may convert gross income or effective gross income by applying a multiplier as sometimes used in the sales comparison approach. Residual methodology allows for capitalization of income allocated to an investment component of unknown value after all investments of known values have been satisfied. These residual techniques are divided into several classifications; namely those based on the physical components, land and building, and those based on the financial components, mortgage and equity. For instance, in the equity residual technique, an appraiser will deduct annual debt service from net operating income to yield residual income for the equity interest. The equity income is then capitalized to a value using a market based equity capitalization rate. The capitalized equity value is then added to the mortgage amount to indicate the total value of the property. This technique, which is applied using either the Ellwood Formula or the simplified Akerson arithmetic format, is basically a variation of the property residual technique. URS Page 98

104 Consideration is given both the typical debt position and equity yield requirements in estimating an appropriate capitalization rate. Band of Investment Mortgage Equity Analysis The band of investment - mortgage equity technique is based on the premise that investments in income-producing properties are typically financed with a mortgage and that the equity investor will seek to obtain the best available loan terms in order to maximize the potential profits of leverage. The estimate of an overall rate by the band of investment analysis develops a weighted average between the return on investment as required to cover mortgage interest and the return of investment that is required to provide a competitive equity dividend rate. The weights are the percentages of total investment represented by the initial principal of the mortgage loan and the initial equity investment. Utilizing the band of investment-mortgage equity technique requires the estimation of current mortgage rates and terms. in order to estimate a typical mortgage constant for a property such as the subject. The band of investment technique may also be applied to either the physical components of the property or to the debt and equity capital positions. Most commonly employed is the mortgage/equity method, which is based on the premise that investments in income producing properties are typically financed with a mortgage, and that the equity investor will seek to obtain the best available loan terms in order to maximize the potential benefit of leverage. The estimation of an overall rate by the band of investment analysis develops a weighted average between the return on investment as required to cover mortgage interest and principal reduction, and the return on investment that is required to provide a competitive equity dividend rate. The weights in this formula are the percentage of total investment represented by the initial principal balance of the mortgage loan and the initial equity investment. Interest rates for industrial properties have been quite low and are expected to remain low for the immediate future. The First Quarter 2018 publication of RealtyRates.com, representing previous quarter statistics, indicates a broad range of permanent interest rates for similar properties ranging upward from 3.11% to a high of 10.08%, and with an average of 5.95%, as noted below. Interest Rates Retail Property Types Low High st Quarter Average st Quarter Average All Types 3.11% 10.01% 5.48% 5.63% Anchored 3.31% 8.86% 5.99% 6.29% Un-Anchored 3.31% 10.01% 6.66% 6.97% Freestanding 3.14% 10.08% 5.61% 5.92% Source: RealtyRates.com, Investor Survey 1st Quarter 2018 In recent years, the cost of capital has been lower but asset lending has strict requirements. Survey of local and regional financial institutions around the state indicate a number are readily available to lend on owner-occupied properties and to investors on solid, income producing properties with experienced management, at a likely rate of approximately 4.5% to 6.5%, URS Page 99

105 depending on the status of lending index rates, which are susceptible to daily changes. Also, the credit strength of the borrower and tenants are considered in the loan underwriting process. Amortization periods ranged from 15 to 40 years, with an average of approximately 25 years. Terms of loans typically range between 5 and 10 years. A balloon payment is preferred by the lender, rather than a full term loan, and many loan transactions provide for a rate change in the fifth and tenth years. Another parameter reflecting risk from the lender s viewpoint is the relationship of outstanding mortgage balance to total value. Often, a buyer will want to borrow the maximum amount possible and request a higher loan-to-value (LTV) ratio. This ratio also determines the debt service coverage ratio (DSCR) on income producing properties. The lower the LTV, the higher the DSCR, and a lender may prefer a higher DSCR to allow for a greater margin or safer cushion for loan repayment. According to RealtyRates.com data, loan to value ratios ranged from 60% to 90%, with an average of 75%, and the debt coverage ratio for loans ranged from approximately 1.05 to 1.90, with an average of a 1.48 ratio for anchored retail centers. A third component of the equation is the cash-on-cash or equity dividend rate. In an all-cash sale, the equity dividend rate is equivalent to the overall capitalization rate. In examining comparable sales in a leveraged situation, the equity dividend rate for the first year of the projection period is often difficult to measure, due to the lack of details as to interest rates and terms, as well as wide variation in properties and circumstances. When purchasing a property with significant upside potential, the purchaser may accept a nominal cash-on-cash return during the first year, whereas the purchaser of an older property in a crowded market might require a higher return. Based on conversations with investors and brokers, equity dividends often tend to range from approximately 5.0% to 10.0% during the first year, with several indicating 8.0% to 10.0% as a current target, though many do not expect to receive a return on their investment the first year. Of course, in a leveraged situation, any increase in rents and profitability results in significant increases in the equity dividend rate in later years. Occasionally, if the property is encumbered with leases with limited increases, so that income will not increase with inflation, the equity dividend requirement will be higher, reflecting the disadvantage to ownership. In summary, considering the several factors of the subject, we estimate that a mortgage loan may be obtained at 70% of property value at an interest rate of 6.0%, with amortization based on a 25 year term, and that an equity investor could be attracted with an 10.0% initial equity dividend rate. These factors are utilized in the following table. URS Page 100

106 Mortgage/ Equity Technique Overall Capitalization Rate Component Ratio Rate Weighted Rate Mortgage Equity Total Overall Capitalization Rate 8.40% Source: Urban Realty Solutions Variations in the loan or equity rates will slightly lower or raise the indicated capitalization rate. For example, a lower interest rate and/or lower equity rate will lower the overall rate. Conversely, higher interest and/or higher equity rates, or a shorter amortization period will raise the overall rate, or a change in the debt-equity weighting will alter the outcome. As many lenders expect eventual increasing of rates, a higher debt coverage ratio may be required. Sales Extraction During our market survey, investors and brokers were asked to provide specific information on capitalization rates applicable to recent transactions. While some declined to provide specific data for recent sales, those surveyed indicated a range from a low of approximately 6.5% to 7.0% for newer properties with longer term NNN leases, to a high of approximately 9.5% for an inferior property. Generally, capitalization rates predominantly range from 7.5% to 8.5%, dependent on age, condition, competitive market position, prospects of additional competition and other factors. Direct capitalization is primarily applicable to stabilized properties with a steady, predictable income stream. If still in lease-up, or if income is expected to vary, properties are often valued on a yield basis, rather than by direct capitalization. While not all details of the income and expenses of the comparable sales were provided, sometimes only the capitalization rate or the net income, it is unlikely the cash flow summaries included deductions for management and reserves, which would lower the capitalization rates. Based on the best available data, the following capitalization rates were estimated. Sale Number Overall Rate % % % Brokers report an improving market in general, as the economy is improving and as financing is more readily available. Further, buyers may feel a sense of urgency, as there has been a noticeable increase in occupancies in most locations and interest rates are expected to increase. Private funds and individuals have been the primary buyers. URS Page 101

107 Market Survey Another reliable method for estimating the market capitalization rates is by the survey of potential purchasers and brokers active in the market. In order to determine the latest real estate trends, in addition to review of current sales activity and survey of local brokers and investors, we reviewed national surveys of financial rates and other real estate investment indices for unleveraged and leveraged properties from several organizations. These include the Real Estate Investor Survey National Market Indicators from PriceWaterhouseCoopers (PwC), Investor Survey from RealtyRates.com, and the University of Florida Bergstrom Center of Real Estate Studies Survey of Emerging Market Conditions. Consensus of these published materials and our more current interviews is that direct capitalization rates for institutional grade properties range around 6.0% and yield rates range around 7.0%. According to these surveys, the majority of investor respondents use NOI before deduction of replacement reserves, TI s and commissions in direct capitalization. In effect, when analyzing a sale, by deducting a reserve allowance, a lower capitalization rate will result, all other factors being equal, and this is true for any additional expense which would lower the yield of a property analysis. In our direct capitalization analysis, we have capitalized net income before deduction of tenant improvements, commissions and capital reserves. National Market Indicators includes quarterly rates for Regional Mall, CBD Office, Warehouse and Apartments. These are for institutional grade investments and not generally applicable to the subject, but help reflect the trends of the overall market. The following chart is PwC s First Quarter 2018 Investor Survey. URS Page 102

108 The first quarter 2018 publication RealtyRates.com Investor Survey presented nationwide capitalization rates from a direct investor survey and two calculation methods, a DCR technique and a band of investment technique. The DCR technique typically indicated lower rates than its market survey, and the band of investment typically indicated rates higher than its survey. The results of the survey method is shown below Overall Capitalization Rates Retail Properties Low High Averages All Types 4.49% 14.66% 9.97% Anchored 4.49% 13.25% 10.11% Un-Anchored 5.38% 14.66% 10.94% Freestanding 4.93% 13.96% 10.53% Source: RealtyRates.com, First Quarter 2018 The CBRE North America Cap Rate Survey for the Second half 2017 reports the spread between different classes of grocery-anchored neighborhood/community centers was at its widest since the start of the survey in CBRE reports in the 2H 2017 survey: Stabilized grocery-anchored neighborhood/community center assets recorded a 7- bps increase in cap rates, ending H at an average of 7.33%. The rise was primarily driven by lower-quality centers in Tier II and III markets, for which investors asked for higher yields. A large increase of 20 bps was observed in Class C cap rates in Tier II markets. At the other end of the spectrum, Class A assets held stronger positions across markets; those in Tier I markets fell by 6 bps from H Core and core-plus investors continued to invest capital in grocery-anchored quality centers, as well as net lease properties in primary trade areas. Value-add acquisitions of neighborhood/community centers registered an average cap rate of 8.98%, up by 5 bps from H Cap rates for all market tiers rose marginally, driven by rising vacancies and soft income growth. Class C cap rates had the largest increases, ranging from 28 to 31 bps, while Class B cap rates increased less sharply. CBRE professionals predict that cap rates for neighborhood/community centers will stay the same or increase moderately in About 49% of survey respondents expect cap rates to remain unchanged and another 30% anticipate small increases (less than 25 bps) against the backdrop of a strong economic outlook, healthy consumer spending and potential benefits of tax reform. URS Page 103

109 For the Tampa market, a Tier II Metro in the survey, CBRE reports capitalization rates for retail neighborhood/community centers as follows for the second half of 2017: Tampa - Tier II Metro Neighborhood/Community Ctrs Low High Average Class A 5.25% 6.25% 5.75% Class B 7.25% 8.00% 7.63% Class C 8.50% 10.25% 9.38% On a national comparison basis, Florida is often perceived as lower risk compared to most other states over the long term, due to Florida s relatively strong population and long-term economic growth and, therefore, Florida often commands a 1/4 percent, or 25 basis points, reduction for investment seekers. This means that an investor is willing to accept a lower return based on the perceived lower risk and potential greater appreciation. Summary The subject is considered a Class B value-add investment with a relatively guaranteed floor value based on a long term Walmart lease and upside potential through re-tenanting the anchors and inline tenants with little risk of rent loss in the process. Based on analysis of the foregoing information and the location and condition of the subject property, an 8.5% overall capitalization rate is deemed appropriate for the subject property and is applied to each of our three different income approach scenarios. Application of direct capitalization requires a stable income stream. The subject currently has stabilized occupancy which is applied to year one of our first two valuation scenarios. As the third scenario, DCF-3, requires demising the anchor box re-letting the property at higher market rates, the result is a prospective stabilized net operating income the third year, and this amount is capitalized to an indication of prospective value, as reflected in the following chart: Direct Capitalization Summary DCF-1 DCF-2 DCF-3 Rate 8.50% 8.50% 8.50% Income Year Income $125,994 $210,151 $272,177 Indicated Value $1,482,281 $2,472,363 $3,202,084 ROUNDED $1,480,000 $2,470,000 $3,200,000 URS Page 104

110 Yield Capitalization Method Ownership of a property includes the initial outflow of the acquisition price, the receipt of positive cash flows during the period of ownership or holding period, and the receipt of cash at time of eventual sale of the property. As our goal is to solve for the initial price or value, yield capitalization discounts the stream of projected cash flows over the holding period plus the reversion to a present value based on a market-required yield rate or internal rate of return. Yield rates are mathematically equivalent to the capitalization rate plus the compound rate of change, typically the inflation rate, adjusted for the market s perception of changes in value over the holding period and the minor effects of tax treatment and other factors on market rates. Below is a discussion of discount or yield rates, equivalent to the internal rate of return anticipated by investors, as well as the terminal capitalization rate for resale of the property at the end of the holding period. Terminal Overall Capitalization Rate The terminal or residual capitalization rate is employed to estimate the value of the reversion, i.e., the future sale price of the property at the end of the holding period. In the analysis, a holding period of ten years is relatively standard. In practice, value is not materially affected as long as the holding period is at least sufficient for the property to become stabilized. As is typical in the market, in order to account for the uncertainty and risk of not achieving the projected cash flows for the subject property during a ten-year discounted cash flow model (DCF), a premium is typically added to the acquisition capitalization rate in order to estimate the terminal overall capitalization rate. This premium is adjusted for the subject s location and the competitive market environment of the property under consideration. Based on the PWC and RealtyRates surveys and other factors, we believe a terminal capitalization rate of 50 basis points greater than the going-in overall capitalization rate is appropriate for the subject property. Accordingly, the terminal overall capitalization rate, applied to the 11th year projected net income for the subject, is estimated at 9.0%. Discount Rate or Yield Rate Mathematically, if both income and value of a property are expected to change at a constant rate over a projected holding period, the discount rate should be approximately equal to the direct capitalization rate plus the compound rate of change. However, analysis of market data indicates this is seldom the case, reflecting the effects of mortgage amortization and depreciation, the effects of income and expenses increasing at varying rates, and market adjustments for expectation of real value increases in excess of inflationary increases. Capitalization rates have declined during the past years, and the discount or yield rates have also declined. In addition to the effects of declining interest rates, yield rates have declined due to growing investor interest (demand) in real estate, which is due to the perceived continuing appreciation. The PwC survey indicated yield rates around 7.6%, or approximately 1.5% above the capitalization rate, for institutional grade regional mall properties. URS Page 105

111 RealtyRates.com indicated the following yield rates on a national basis. Acquisition Discount Rates Survey Retail Low High Averages All Types 5.56% 14.67% 10.69% Anchored 5.56% 13.49% 10.76% Un-Anchored 6.22% 14.67% 11.35% Freestanding 5.89% 14.34% 11.19% Source: RealtyRates.com, Investor Survey First Quarter 2018 Based on the above analyses, the discount or yield rate for the subject property is estimated at 12.0%. Growth Rates Virtually all investors expect future increases in rents and expenses, primarily based on expectations of inflation, adjusted for the outlook in the competitive market of the subject. In many metro areas, rents are projected to be slightly higher than last year and expenses are expected to be similar. Both have been fairly flat due to the recession. The Florida market appears to be recovering more quickly than previously expected, primarily due to continued population growth. A multitude of investors expect moderate future increases in rents based on stabilizing occupancies, and expenses increases primarily based on inflation. Presently, rental increases and property expenses are expected to parallel the consumer price index as general inflation. For the subject, based on data from the national surveys and local practice, the annual income change is estimated at 2.5%, and expense change rate is similarly estimated at 2.5% per year. Costs of Sale This reflects the expenses to be incurred at time of sale of the subject property at the end of the projected holding period. Based on a survey of local real estate brokers, a real estate commission of 5.0% is estimated for a property of the size, location and price range of the subject. Other costs of sale, such as surveys, documentary stamp tax, title insurance, attorney fees and miscellaneous costs are estimated at 1.5% of future sales price. The combined closing costs are estimated at 6.5%. URS Page 106

112 Discounted Cash Flow Summaries DCF-1: We assume that Walmart continues to pay on its lease, their box remains dark and that local in-line tenants continue to erode at current rent levels without a shopping center anchor. The three month-to-month in-line tenancies are deemed terminated at the beginning of analysis and the fourth in-line lease, to Cell Touch, is assumed to vacate the remainder of their tenancy by giving three months notice of termination as allowed by the terms of their lease. This analysis results in a physically empty shopping center by month four of our DCF-1 scenario, with the only revenue thereafter being Walmart s base rent. The shopping center still needs to be maintained in good condition, however, according to Walmart s lease, so many of the operating expenses remain the same and some, such as security, are estimated to increase. This analysis essentially estimates the net present value of the Walmart lease after deducting operating and maintenance expenses for the shopping center, and assumes Walmart does not exercise their option to renew for another five year term. Walmart s base rent is $5.50 per square foot annually, without escalation, throughout their initial lease term expiring on December 3, Base rental for the Cell Touch lease is $14.50 per square foot through November of 2018, however, we have only applied three months of rental income for this unit in year one as noted above. Additional rent for reimbursable expenses are $9.18 per square foot for the in-line store Cell Touch, consisting of $7.42 for CAM and $1.76 for real estate taxes as currently billed on the rent roll, for its time in occupancy. This amount is higher than normal due to additional expenses in 2016, such as additional administrative expenses and some past due amounts apparently to stabilize the property after the City purchased the leasehold interest of the developer at auction. Walmart does not reimburse for all expenses applied to the in-line shops, such as administrative expenses, management salaries and overhead or legal expenses. Walmart s additional monthly rent in 2018 includes of $2.06 for CAM, $0.18 for insurance and $0.32 for additional utilities for a total of $2.56 per square foot per annum according to the rent roll. In addition, Walmart pays a pro-rata share of real estate taxes at the end of the year, estimated at $1.89 per square foot. Walmart s total additional rent for CAM and real estate tax reimbursement is $4.45 per square foot applied in the first year of analysis. For this scenario, we assume Walmart will not renew and estimate the landlord will place a new tenant in the Walmart space and local shops with escalated market rents commencing about 16 months after Walmart expires, at the beginning of year eleven. Tenant improvements, escalated annually from $5.00 per square foot for the in-line shops and $10.00 per square foot for the box space in the current year, as well as leasing commissions, are deducted at the end of year ten assuming tenants are in place and rental payments commence in January of year 11. On the DCF Value Summary page we deduct a onetime expense for exterior repainting as discussed earlier. DCF-1 analysis results in a net present value for the subject of approximately $1,300,000, or $27.43 per square foot of gross rentable building area. URS Page 107

113 DCF-2: We assume that Walmart continues to pay on its lease, the box remains dark for the remainder of their initial lease term. Walmart s base rent of $5.50 and additional rent of $4.45 per square foot as reimbursable to landlord are applied according to their lease, the same as we applied in DCF-1. We assume this space is not demised into smaller units and is re-let to a single tenant in year 10, with rent commencing approximately fourteen months after Walmart s term expires, or by the beginning of analysis year 11. Lease-up and commissions are deducted in year 10 assuming the transaction closes prior to rent commencement. Base rent and additional rent for the new tenant in year 10 are increased annually from year one with inflation. The in-line stores are re-let at lower, more competitive neighborhood rents to entice occupancy, while reflecting no shopping center anchor. The four existing tenants restate their leases at the beginning of analysis with staggered initial lease terms of one to four years to provide continuity of future tenant rollover. New leases thereafter are for average terms of five years. The three inline stores now vacant, Units 1754, 1770 and 1786, are absorbed in the first year for initial five year terms at the rate of one space per quarter. We estimate renewal probability at 75% at the end of each lease term, equating to approximately three months vacancy per expiration. All in-line tenant leases begin at base rent of $9.00 per square foot triple net, plus full CAM based on estimated expenses of $4.68 per square foot, in the first year of analysis and escalated thereafter with inflation. The discount rate is reduced 100 basis points to 11.0% to reflect less risk and additional cash flows. On the DCF Value Summary page we deduct a one-time expense for exterior repainting as discussed earlier. DCF-2 analysis results in a net present value for the subject of approximately $1,940,000, or $40.94 per square foot of gross rentable building area. URS Page 108

114 DCF-3: The subject s sole anchor space is currently dark with the potential to remain so for nearly nine years. For this analysis, we assume the subject anchor box is re-tenanted. Considering the subject has already experienced two major supermarket tenants vacating the space, and considering the conclusions of the subject neighborhood Market Analysis by Community Solutions Group referenced earlier, we conclude the subject neighborhood cannot likely support a single grocery/home goods tenant in the junior box space of 39,079 square feet, and the space will be demised into two smaller units of roughly equivalent size, though actual demised space sizes may differ. Typically, in cases where an anchor tenant vacates prior to their lease ending and the space is retenanted, negotiations between landlord and the vacated tenant ensue to address lease-up costs to backfill the space and the original tenants leasehold position after a new tenant takes occupancy. Reimbursements for the cost to re-let a retail box are highly negotiable between the landlord and vacated tenant, and will depend on a number of factors including the remaining term of the existing lease, identity and quality of the current and replacement tenant(s), terms of the new lease and cost of new tenant improvements. The landlord s position is often for the original tenant to pay all costs to re-tenant the property, plus any rental loss and perhaps a liquidated damages fee, while the tenant may wish to have their remaining lease obligations extinguished, or perhaps to remain the sublessor so they can control potential competition in the future from occupying the location. Walmart has 8.7 years remaining on their current lease term representing roughly $3,500,000 in remaining rental obligations. Lease-up costs to back fill the space were previously estimated at $750,000, and the next two years of the current Walmart lease equates to approximately $780,000, rounded. Deducting these two expenses from Walmart s remaining obligation indicates a potential savings to Walmart of approximately $1,940,000 over the remaining lease term if the space is backfilled within two years and Walmart reimburses the cost to do so. We estimate this savings is sufficient to motivate Walmart to pay landlords re-tenanting costs to re-let the property. From the landlord s side, the benefit of such an arrangement includes regaining control of the subject anchor space in hope of enhancing the property for the neighborhood and to drive demand for the attached local shop suites. In this analysis we assume the subject s junior box space is demised in two and re-let to new tenants. Further, we estimate that Walmart would be willing to reimburse the landlord for all cost of re-letting, including leasing commissions, the cost to demise the space into smaller units, tenant improvements or concessions to the new tenants and an allowance for landlord s legal/consulting costs. No rental loss is applied to the subject, assuming that Walmart continues to honor its lease terms until re-letting occurs and new rental payments commence. We estimate two years, including time for marketing, negotiations, construction and any free rent concessions, for new tenant s rental payments to begin in year 3 of the analysis period. We estimate for analysis that both demised spaces are leased concurrently with rent commencement approximately three years hence for an initial term of ten years, thereby occupying the single junior box line-item in our DCF-3 income/expense chart below. We further estimate the tenant quality for the new anchor spaces will be inferior to Walmart and market rent for the in-line local spaces will be lower than current lease contracts. Based on analysis of comparable properties we estimate current market rent for the two smaller junior box spaces, of URS Page 109

115 around 19,500 square feet each, to be approximately $7.00 per square foot on a triple net basis, plus full prorated reimbursement for CAM and all operating expenses of the shopping center, escalated with inflation to date of commencement. For the seven in-line store suites, we have previously estimated market rent of approximately $12.00 per square foot on a triple net basis assuming the shopping center had a typical retail anchor in occupancy. The four existing tenants all expressed interest in continuing occupancy at the subject if they could get through the dark anchor period. We estimate a prudent investor would re-state the four current in-line suite tenancies, reflecting lower non-anchored neighborhood rental rates of $9.00 per square foot triple net as we applied in DCF-2, for terms of three to five years in order to prevent the center from going completely dark during the anchor re-letting process and to stagger tenant roll over. Any landlord cost to re-write these leases is included in re-tenanting legal costs reimbursable from Walmart as previously discussed, so are not further deducted for these initial re-stated terms. These four leases then re-set to market rent escalated with inflation for average terms of five y ears. The three vacant in-line store suites are held vacant the first two years and leased up in year three with the new anchors in place, at quarterly intervals and at market rates again escalated with inflation. On the DCF Value Summary page we deduct a one-time expense for exterior repainting and re-landscaping as discussed earlier. DCF-3 analysis results in a net present value for the subject of approximately $2,970,000, or $62.67 per square foot of gross rentable building area. Summary of Discounted Cash Flow Analysis DCF-1 DCF-2 DCF-3 Terminal Overall Capitalization Rate 9.00% 9.00% 9.00% Discount or Yield Rate 12.00% 11.00% 11.00% Indicated Value, As-is $1,300,000 $1,940,000 $2,970,000 URS Page 110

116 Summary of Income Capitalization Approach For this appraisal we prepared and analyzed three different discounted cash flow models included in this report. The DCF analysis presented incorporate various market rental and occupancy cost scenarios, presenting a range of views that may be taken by a typical investor. DCF-1 is likely a worst case scenario, where the rest of the shopping center goes dark and an investor relies primarily on income from the Walmart lease for a return on investment. DCF-2 assumes that Walmart continuous to honor its lease but there is no agreement between the parties to re-let the anchor space so it remains dark for the remainder of the current lease term and the in-line stores are re-let at lower neighborhood retail rates reflective of the shopping center having no anchor. DCF-3 presents the more positive scenario, but relies on assumptions about replacing the anchor tenant, Walmart, based on agreements that may well be reasonable but were not in place as of the appraisal date. This type analysis might motivate a buyer seeking value-add opportunities to buy, and it may influence the price they would pay, but investors rarely pay a price for property performance not yet achieved. The results of these analyses are as follows: DCF-1 DCF-2 DCF-3 Direct Capitalization $1,480,000 $2,540,000 $3,260,000 Yield Capitalization $1,300,000 $1,940,000 $2,970,000 In our opinion, DCF analysis number 2 is most reflective of as-is value for the subject property. As may be noted above, direct capitalization indicated a stabilized value in the first year of analysis of approximately $2,540,000, and yield capitalization indicated an as-is value of the subject of $1,940,000. Both analyses are considered reliable indications of value for their respective purpose. Direct capitalization best analyzes properties already stabilized and likely to remain so over the analysis period, or is applied to a future period when stabilization is expected to occur. Yield capitalization allows for stabilization to occur and for periodic fluctuations in market activity. The subject is deemed stable in year one and throughout the first eight years of the ten year analysis; however, estimated vacancy of the large anchor tenant space in years 9 and 10 results in a lower as-is value by yield analysis. The purpose of this appraisal is to estimate the market value of the subject in as-is condition which, in our opinion, requires giving weight to each of the income capitalization methods employed. Therefore, the indication of value by the income capitalization approach is estimated at $2,200,000. Please refer to the following cash flow projections and corresponding discounted income for the as-is value. URS Page 111

117 DCF-1: TANGERINE PLAZA DISCOUNTED CASH FLOW ANALYSIS ANNUAL INCOME INCREASE 2.50% ANNUAL EXPENSE INCREASE 2.50% UNIT EXPIRES TENANT AREA $/SF PROSPECTIVE TENANT 1,310 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 20,123 CAM/ REIMBURSEMENT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8, CHINA STAR RESTAURANT 1,293 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 19,862 CAM/ REIMBURSEMENT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8, CELL TOUCH 1,293 $ 3.63 $ 4,687 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 19,862 CAM/ REIMBURSEMENT $ 2.30 $ 2,967 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8, PROSPECTIVE TENANT 1,293 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 19,862 CAM/ REIMBURSEMENT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8, MY BEAUTY SUPPLY 1,293 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 19,862 CAM/ REIMBURSEMENT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8, MEME'S BEAUTY SUPPLY 1,293 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 19,862 CAM/ REIMBURSEMENT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8, COMMUITY SERVICES 536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 8,234 CAM/ REIMBURSEMENT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 3, WAL-MART MARKET 39,079 $ 5.50 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 143,290 $ - $ 300,147 CAM/ REIMBURSEMENT $ 4.45 $ 173,937 $ 178,285 $ 182,742 $ 187,311 $ 191,994 $ 196,794 $ 201,714 $ 206,756 $ 141,284 $ - $ 267,093 POTENTIAL GROSS INCOME 47,390 $ , , , , , , , , , ,191 VAC & COLL TO TURNOVER 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 100.0% 0.0% TOTAL VAC & COLL ALLOWANCE 47,390 N/A N/A N/A N/A N/A N/A N/A N/A N/A 100.0% 7.0% VAC & COLL ADJUST TO ALLOWANCE % N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.0% 7.0% LESS VAC & COLL - AREA/ SF 47,390 8,311 8,311 8,311 8,311 8,311 8,311 8,311 8,311 8,311 47,390 3,317 LESS VAC & COLL - DOLLAR AMT 47,390 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 52,583 EFFECTIVE GROSS INCOME 47,390 $ 8.37 $ 396,526 $ 393,220 $ 397,677 $ 402,246 $ 406,928 $ 411,728 $ 416,648 $ 421,691 $ 284,573 $ - $ 698,608 EXPENSES AREA $/SF RE TAXES 47,390 $ 1.89 $ 89,610 $ 91,850 $ 94,147 $ 96,500 $ 98,913 $ 101,385 $ 103,920 $ 106,518 $ 109,181 $ 111,911 $ 114,708 INSURANCE 47,390 $ 0.20 $ 9,300 $ 9,533 $ 9,771 $ 10,015 $ 10,265 $ 10,522 $ 10,785 $ 11,055 $ 11,331 $ 11,614 $ 11,905 UTILITIES - ELECTRIC 47,390 $ 0.29 $ 13,800 $ 14,145 $ 14,499 $ 14,861 $ 15,233 $ 15,613 $ 16,004 $ 16,404 $ 16,814 $ 17,234 $ 17,665 UTILITIES - WSG 47,390 $ 0.08 $ 3,600 $ 3,690 $ 3,782 $ 3,877 $ 3,974 $ 4,073 $ 4,175 $ 4,279 $ 4,386 $ 4,496 $ 4,608 PARKING LOT/PORTERING MAINT. 47,390 $ 0.26 $ 12,500 $ 12,813 $ 13,133 $ 13,461 $ 13,798 $ 14,143 $ 14,496 $ 14,859 $ 15,230 $ 15,611 $ 16,001 BLDG MAINTENANCE 47,390 $ 0.10 $ 4,800 $ 4,920 $ 5,043 $ 5,169 $ 5,298 $ 5,431 $ 5,567 $ 5,706 $ 5,848 $ 5,995 $ 6,144 GARDENING & LANDSCAPING 47,390 $ 0.30 $ 14,400 $ 14,760 $ 15,129 $ 15,507 $ 15,895 $ 16,292 $ 16,700 $ 17,117 $ 17,545 $ 17,984 $ 18,433 PEST CONTROL 47,390 $ 0.02 $ 800 $ 820 $ 841 $ 862 $ 883 $ 905 $ 928 $ 951 $ 975 $ 999 $ 1,024 SECURITY & MONITORING 47,390 $ 1.90 $ 90,000 $ 92,250 $ 94,556 $ 96,920 $ 99,343 $ 101,827 $ 104,372 $ 106,982 $ 109,656 $ 112,398 $ 115, % 0.0% 47,390 $ 0.08 $ 3,965 $ 3,932 $ 3,977 $ 4,022 $ 4,069 $ 4,117 $ 4,166 $ 4,217 $ 4,322 $ 4,430 $ 6, % 47,390 $ 0.42 $ 19,826 $ 19,661 $ 19,884 $ 20,112 $ 20,346 $ 20,586 $ 20,832 $ 21,085 $ 21,612 $ 22,152 $ 34, % 47,390 $ 0.17 $ 7,931 $ 7,864 $ 7,954 $ 8,045 $ 8,139 $ 8,235 $ 8,333 $ 8,434 $ 5,691 $ - $ 13,972 TOTAL EXPENSES 47,390 $ 5.71 $ 270,532 $ 276,238 $ 282,714 $ 289,352 $ 296,156 $ 303,130 $ 310,278 $ 317,605 $ 322,592 $ 324,823 $ 361,586 NET INCOME 47,390 $ 2.66 $ 125,994 $ 116,982 $ 114,963 $ 112,894 $ 110,773 $ 108,598 $ 106,370 $ 104,086 $ (38,019) $ (324,823) $ 337,022 LESS TENANT IMPROVEMENT ALLOW IN-LINE $ 5.00 $ - $ - $ - $ - $ - $ - $ - $ - $ 51,897 $ - LESS TENANT IMPROVEMENT ALLOW BOX $ $ - $ - $ - $ - $ - $ - $ - $ - $ 488,043 $ - LESS LEASING COMMISSION ALLOW 4.00% $ - $ - $ - $ - $ - $ - $ - $ - $ 145,592 $ - TOTAL DEDUCTIONS 47,390 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 685,531 $ - NET CASH FLOW 47,390 $ 2.66 $ 125,994 $ 116,982 $ 114,963 $ 112,894 $ 110,773 $ 108,598 $ 106,370 $ 104,086 $ (38,019) $ (1,010,355) $ 337,022 URS Page 112

118 DCF-1 VALUE SUMMARY RATE ANALYSIS SUMMARY CAPITALIZATION RATE 8.5% PLUS LOAD FACTOR FOR TERMINAL RATE 0.5% TERMINAL CAPITALIZATION RATE 9.0% DISCOUNT RATE 12.0% RESALE ANALYSIS NET INCOME YEAR 11 $ 337,022 CAPITALIZATION RATE 9.0% SALE PRICE $ 3,744,689 LESS 5.0% $ 187,234 LESS CLOSING 1.5% $ 56,170 TOTAL DEDUCTIONS $ 243,405 NET SALES PROCEEDS $ 3,501,285 PRESENT VALUE CALCULATION YEAR REVENUES 1 $ 125,994 2 $ 116,982 3 $ 114,963 4 $ 112,894 5 $ 110,773 6 $ 108,598 7 $ 106,370 8 $ 104,086 9 $ (38,019) 10 $ 2,490,930 TOTAL REVENUES $ 3,353,570 PRESENT VALUE OF REVENUES $ 1,355,658 LESS DEDUCTIONS: RE-PAINT $ (57,300) AS-IS VALUE $ 1,298,358 INDICATED VALUE, ROUNDED $ 1,300,000 URS Page 113

119 DCF-2: TANGERINE PLAZA DISCOUNTED CASH FLOW ANALYSIS ANNUAL INCOME INCREASE 2.50% ANNUAL EXPENSE INCREASE 2.50% UNIT EXPIRES TENANT AREA $/SF PROSPECTIVE TENANT 1,310 $ 6.75 $ 8,843 $ 12,085 $ 12,387 $ 12,697 $ 13,014 $ 10,004 $ 13,673 $ 14,015 $ 14,365 $ 14,724 $ 15,092 CAM/ REIMBURSEMENT $ 3.48 $ 4,562 $ 6,234 $ 6,390 $ 6,550 $ 6,714 $ 5,161 $ 7,054 $ 7,230 $ 7,411 $ 7,596 $ 6, CHINA STAR RESTAURANT 1,293 $ 9.00 $ 11,637 $ 11,928 $ 12,226 $ 12,532 $ 9,634 $ 13,166 $ 13,495 $ 13,833 $ 14,179 $ 10,900 $ 14,896 CAM/ REIMBURSEMENT $ 4.64 $ 6,004 $ 6,154 $ 6,307 $ 6,465 $ 4,970 $ 6,792 $ 6,962 $ 5,525 $ 7,315 $ 5,623 $ 7, CELL TOUCH 1,293 $ 9.00 $ 11,637 $ 11,928 $ 12,226 $ 9,399 $ 12,845 $ 13,166 $ 13,495 $ 13,833 $ 10,634 $ 14,533 $ 14,896 CAM/ REIMBURSEMENT $ 4.64 $ 6,004 $ 6,154 $ 6,307 $ 4,849 $ 6,627 $ 6,792 $ 6,962 $ 7,136 $ 5,486 $ 7,498 $ 7, PROSPECTIVE TENANT 1,293 $ 4.50 $ 5,819 $ 11,928 $ 12,226 $ 12,532 $ 12,845 $ 9,875 $ 13,495 $ 13,833 $ 14,179 $ 14,533 $ 11,172 CAM/ REIMBURSEMENT $ 2.32 $ 3,002 $ 6,154 $ 6,307 $ 6,465 $ 6,627 $ 5,094 $ 6,962 $ 7,136 $ 7,315 $ 7,498 $ 5, MY BEAUTY SUPPLY 1,293 $ 9.00 $ 11,637 $ 11,928 $ 9,170 $ 12,532 $ 12,845 $ 13,166 $ 13,495 $ 10,375 $ 14,179 $ 14,533 $ 14,896 CAM/ REIMBURSEMENT $ 4.64 $ 6,004 $ 6,154 $ 4,731 $ 6,465 $ 6,627 $ 6,792 $ 6,962 $ 5,352 $ 7,315 $ 7,498 $ 7, MEME'S BEAUTY SUPPLY 1,293 $ 9.00 $ 11,637 $ 8,946 $ 12,226 $ 12,532 $ 12,845 $ 13,166 $ 10,122 $ 13,833 $ 14,179 $ 14,533 $ 14,896 CAM/ REIMBURSEMENT $ 4.64 $ 6,004 $ 4,615 $ 6,307 $ 6,465 $ 6,627 $ 6,792 $ 5,222 $ 7,136 $ 7,315 $ 7,498 $ 7, PROSPECTIVE TENANT 536 $ 2.25 $ 1,206 $ 4,945 $ 5,068 $ 5,195 $ 5,325 $ 4,093 $ 5,594 $ 5,734 $ 5,878 $ 6,025 $ 4,631 CAM/ REIMBURSEMENT $ 1.16 $ 622 $ 2,551 $ 2,615 $ 2,680 $ 2,747 $ 2,112 $ 2,886 $ 2,958 $ 3,032 $ 3,108 $ 2, WAL-MART MARKET 39,079 $ 5.50 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 214,935 $ 143,290 $ - $ 275,134 CAM/ REIMBURSEMENT $ 4.45 $ 173,937 $ 178,285 $ 182,742 $ 187,311 $ 191,994 $ 196,794 $ 201,714 $ 206,756 $ 141,284 $ - $ 223,513 POTENTIAL GROSS INCOME 47,390 $ , , , , , , , , , , ,050 VAC & COLL TO TURNOVER 47, % 0.7% 0.7% 0.7% 0.7% 1.7% 0.7% 0.7% 28.2% 83.1% 1.7% TOTAL VAC & COLL ALLOWANCE 47, % 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 28.2% 83.1% 7.0% VAC & COLL ADJUST TO ALLOWANCE % 47, % 6.3% 6.3% 6.3% 6.3% 5.3% 6.3% 6.3% 0.0% 0.0% 5.3% LESS VAC & COLL ALLOWANCE- AREA/ SF 47,390 1,941 2,994 2,994 2,994 2,994 2,533 2,994 2, ,533 LESS VAC & COLL ALLOWANCE- $ 47,390 $ 0.42 $ 19,806 $ 31,900 $ 32,358 $ 32,828 $ 33,309 $ 28,211 $ 34,308 $ 34,724 $ - $ - $ 33,884 EFFECTIVE GROSS INCOME 47,390 $ 9.78 $ 463,680 $ 473,021 $ 479,813 $ 486,774 $ 493,910 $ 499,691 $ 508,721 $ 514,895 $ 417,352 $ 136,098 $ 600,166 EXPENSES AREA $/SF RE TAXES 47,390 $ 1.89 $ 89,610 $ 91,850 $ 94,147 $ 96,500 $ 98,913 $ 101,385 $ 103,920 $ 106,518 $ 109,181 $ 111,911 $ 114,708 INTANGIBLE TAXES 47,390 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - INSURANCE 47,390 $ 0.20 $ 9,300 $ 9,533 $ 9,771 $ 10,015 $ 10,265 $ 10,522 $ 10,785 $ 11,055 $ 11,331 $ 11,614 $ 11,905 UTILITIES - ELECTRIC 47,390 $ 0.29 $ 13,800 $ 14,145 $ 14,499 $ 14,861 $ 15,233 $ 15,613 $ 16,004 $ 16,404 $ 16,814 $ 17,234 $ 17,665 UTILITIES - WSG 47,390 $ 0.18 $ 8,500 $ 8,713 $ 8,930 $ 9,154 $ 9,382 $ 9,617 $ 9,857 $ 10,104 $ 10,356 $ 10,615 $ 10,881 PARKING LOT/PORTERING MAINT. 47,390 $ 0.26 $ 12,500 $ 12,813 $ 13,133 $ 13,461 $ 13,798 $ 14,143 $ 14,496 $ 14,859 $ 15,230 $ 15,611 $ 16,001 BLDG MAINTENANCE 47,390 $ 0.10 $ 4,800 $ 4,920 $ 5,043 $ 5,169 $ 5,298 $ 5,431 $ 5,567 $ 5,706 $ 5,848 $ 5,995 $ 6,144 GARDENING & LANDSCAPING 47,390 $ 0.30 $ 14,400 $ 14,760 $ 15,129 $ 15,507 $ 15,895 $ 16,292 $ 16,700 $ 17,117 $ 17,545 $ 17,984 $ 18,433 PEST CONTROL 47,390 $ 0.02 $ 800 $ 820 $ 841 $ 862 $ 883 $ 905 $ 928 $ 951 $ 975 $ 999 $ 1,024 SECURITY & MONITORING 47,390 $ 0.95 $ 45,000 $ 46,125 $ 47,278 $ 48,460 $ 49,672 $ 50,913 $ 52,186 $ 53,491 $ 54,828 $ 56,199 $ 57, % 0.0% 47,390 $ 0.10 $ 4,637 $ 4,730 $ 4,798 $ 4,868 $ 4,939 $ 4,997 $ 5,087 $ 5,149 $ 4,174 $ 1,361 $ 6, % 47,390 $ 0.49 $ 23,184 $ 23,651 $ 23,991 $ 24,339 $ 24,695 $ 24,985 $ 25,436 $ 25,745 $ 20,868 $ 6,805 $ 30, % 47,390 $ 0.20 $ 9,274 $ 9,460 $ 9,596 $ 9,735 $ 9,878 $ 9,994 $ 10,174 $ 10,298 $ 8,347 $ 2,722 $ 12,003 TOTAL EXPENSES 47,390 $ 4.98 $ 235,804 $ 241,519 $ 247,155 $ 252,931 $ 258,851 $ 264,797 $ 271,140 $ 277,395 $ 275,497 $ 259,049 $ 302,379 NET INCOME 47,390 $ 4.81 $ 227,876 $ 231,502 $ 232,658 $ 233,844 $ 235,058 $ 234,894 $ 237,580 $ 237,500 $ 141,855 $ (122,951) $ 297,787 LESS TENANT IMPROVEMENT ALLOW IN-LINE $ 2.00 $ 6,278 $ 2,651 $ 2,717 $ 2,785 $ 2,854 $ 7,103 $ 2,999 $ 3,074 $ 3,151 $ 3,230 $ 8,036 LESS TENANT IMPROVEMENT ALLOW BOX $ $ - $ - $ - $ - $ - $ - $ - $ - $ 488,043 $ - LESS LEASING COMMISSION ALLOW 4.00% $ 5,650 $ 2,386 $ 2,445 $ 2,506 $ 2,569 $ 6,393 $ 2,699 $ 2,767 $ 2,836 $ 110,276 $ 7,233 TOTAL DEDUCTIONS 47,390 $ 0.25 $ 11,928 $ 5,036 $ 5,162 $ 5,291 $ 5,423 $ 13,496 $ 5,698 $ 5,840 $ 5,987 $ 601,549 $ 15,269 NET CASH FLOW 47,390 $ 4.56 $ 215,948 $ 226,466 $ 227,496 $ 228,552 $ 229,635 $ 221,398 $ 231,882 $ 231,659 $ 135,868 $ (724,500) $ 282,518 URS Page 114

120 DCF-2 VALUE SUMMARY RATE ANALYSIS SUMMARY CAPITALIZATION RATE 8.5% PLUS LOAD FACTOR FOR TERMINAL RATE 0.5% TERMINAL CAPITALIZATION RATE 9.0% DISCOUNT RATE 11.0% RESALE ANALYSIS NET INCOME YEAR 11 $ 282,518 CAPITALIZATION RATE 9.0% SALE PRICE $ 3,139,086 LESS 5.0% $ 156,954 LESS CLOSING 1.5% $ 47,086 TOTAL DEDUCTIONS $ 204,041 NET SALES PROCEEDS $ 2,935,046 PRESENT VALUE CALCULATION YEAR REVENUES 1 $ 215,948 2 $ 226,466 3 $ 227,496 4 $ 228,552 5 $ 229,635 6 $ 221,398 7 $ 231,882 8 $ 231,659 9 $ 135, $ 2,210,546 TOTAL REVENUES $ 4,159,450 PRESENT VALUE OF REVENUES $ 1,993,741 LESS DEDUCTIONS: RE-PAINT $ (57,300) AS-IS VALUE $ 1,936,441 INDICATED VALUE, ROUNDED $ 1,940,000 URS Page 115

121 DCF-3: TANGERINE PLAZA DISCOUNTED CASH FLOW ANALYSIS ANNUAL INCOME INCREASE 2.50% ANNUAL EXPENSE INCREASE 2.50% UNIT EXPIRES TENANT AREA $/SF PROSPECTIVE TENANT 1,310 $ $ - $ - $ 12,387 $ 16,929 $ 17,352 $ 17,786 $ 18,230 $ 14,015 $ 19,153 $ 19,632 $ 20,123 CAM/ REIMBURSEMENT $ 4.85 $ - $ - $ 5,002 $ 6,836 $ 7,007 $ 7,182 $ 7,362 $ 5,659 $ 7,734 $ 7,928 $ 8, CHINA STAR RESTAURANT 1,293 $ 9.00 $ 11,637 $ 11,928 $ 12,226 $ 12,532 $ 12,845 $ 13,166 $ 17,994 $ 18,444 $ 18,905 $ 19,377 $ 14,896 CAM/ REIMBURSEMENT $ 4.70 $ 6,072 $ 6,086 $ 6,101 $ 6,116 $ 6,132 $ 5,317 $ 7,266 $ 7,448 $ 7,634 $ 7,825 $ 6, CELL TOUCH 1,293 $ 9.00 $ 11,637 $ 11,928 $ 12,226 $ 12,532 $ 12,845 $ 13,166 $ 17,994 $ 18,444 $ 18,905 $ 19,377 $ 14,896 CAM/ REIMBURSEMENT $ 4.70 $ 6,072 $ 6,224 $ 6,379 $ 6,539 $ 6,702 $ 6,870 $ 7,266 $ 7,448 $ 7,634 $ 7,825 $ 6, PROSPECTIVE TENANT 1,293 $ $ - $ - $ 8,151 $ 16,709 $ 17,127 $ 17,555 $ 17,994 $ 13,833 $ 18,905 $ 19,377 $ 19,862 CAM/ REIMBURSEMENT $ 4.85 $ - $ - $ 3,291 $ 6,747 $ 6,916 $ 7,089 $ 7,266 $ 5,586 $ 7,634 $ 7,825 $ 8, MY BEAUTY SUPPLY 1,293 $ 9.00 $ 11,637 $ 11,928 $ 12,226 $ 12,532 $ 17,127 $ 17,555 $ 17,994 $ 18,444 $ 14,179 $ 19,377 $ 19,862 CAM/ REIMBURSEMENT $ 4.70 $ 6,072 $ 6,224 $ 6,379 $ 5,061 $ 6,916 $ 7,089 $ 7,266 $ 7,448 $ 5,726 $ 7,825 $ 8, MEME'S BEAUTY SUPPLY 1,293 $ 9.00 $ 11,637 $ 11,928 $ 12,226 $ 12,532 $ 12,845 $ 17,555 $ 17,994 $ 18,444 $ 18,905 $ 14,533 $ 19,862 CAM/ REIMBURSEMENT $ 4.70 $ 6,072 $ 4,817 $ 6,379 $ 6,539 $ 5,187 $ 7,089 $ 5,675 $ 7,448 $ 7,634 $ 5,869 $ 8, PROSPECTIVE TENANT 536 $ $ - $ - $ 1,689 $ 6,927 $ 7,100 $ 7,277 $ 7,459 $ 5,734 $ 7,837 $ 8,033 $ 8,234 CAM/ REIMBURSEMENT $ 4.85 $ - $ - $ 682 $ 2,797 $ 2,867 $ 2,939 $ 3,012 $ 2,316 $ 3,165 $ 3,244 $ 3, WAL-MART/NEW ANCHORS 39,079 $ 5.50 $ 214,935 $ 214,935 $ 287,402 $ 294,587 $ 301,951 $ 309,500 $ 317,238 $ 325,169 $ 333,298 $ 341,630 $ 350,171 CAM/ REIMBURSEMENT $ 4.45 $ 173,937 $ 178,285 $ 188,693 $ 193,410 $ 198,245 $ 203,202 $ 208,282 $ 213,489 $ 218,826 $ 224,296 $ 229,904 POTENTIAL GROSS INCOME 47,390 $ , , , , , , , , , , ,353 VAC & COLL TO TURNOVER 47, % 6.6% 2.9% 0.7% 0.7% 1.4% 0.0% 1.7% 0.7% 0.7% 1.4% TOTAL VAC & COLL ALLOWANCE 47, % 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% VAC & COLL ADJUST TO ALLOWANCE % 47, % 0.4% 4.1% 6.3% 6.3% 5.6% 7.0% 5.3% 6.3% 6.3% 5.6% LESS VAC & COLL ALLOWANCE- AREA/ S 47, ,941 2,994 2,994 2,671 3,317 2,533 2,994 2,994 2,671 LESS VAC & COLL ALLOWANCE- $ 47,390 $ 0.04 $ 1,730 $ 1,747 $ 23,818 $ 39,128 $ 40,382 $ 37,215 $ 48,040 $ 36,840 $ 45,241 $ 46,372 $ 42,007 EFFECTIVE GROSS INCOME 47,390 $ 9.66 $ 457,977 $ 462,535 $ 557,622 $ 580,195 $ 598,783 $ 623,121 $ 638,251 $ 652,526 $ 670,832 $ 687,602 $ 703,346 EXPENSES AREA $/SF RE TAXES 47,390 $ 1.89 $ 89,610 $ 91,850 $ 94,147 $ 96,500 $ 98,913 $ 101,385 $ 103,920 $ 106,518 $ 109,181 $ 111,911 $ 114,708 INTANGIBLE TAXES 47,390 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - INSURANCE 47,390 $ 0.20 $ 9,300 $ 9,533 $ 9,771 $ 10,015 $ 10,265 $ 10,522 $ 10,785 $ 11,055 $ 11,331 $ 11,614 $ 11,905 UTILITIES - ELECTRIC 47,390 $ 0.29 $ 13,800 $ 14,145 $ 14,499 $ 14,861 $ 15,233 $ 15,613 $ 16,004 $ 16,404 $ 16,814 $ 17,234 $ 17,665 UTILITIES - WSG 47,390 $ 0.20 $ 9,500 $ 9,738 $ 9,981 $ 10,230 $ 10,486 $ 10,748 $ 11,017 $ 11,293 $ 11,575 $ 11,864 $ 12,161 PARKING LOT/PORTERING MAINT. 47,390 $ 0.30 $ 14,000 $ 14,350 $ 14,709 $ 15,076 $ 15,453 $ 15,840 $ 16,236 $ 16,642 $ 17,058 $ 17,484 $ 17,921 BLDG MAINTENANCE 47,390 $ 0.10 $ 4,800 $ 4,920 $ 5,043 $ 5,169 $ 5,298 $ 5,431 $ 5,567 $ 5,706 $ 5,848 $ 5,995 $ 6,144 GARDENING & LANDSCAPING 47,390 $ 0.30 $ 14,400 $ 14,760 $ 15,129 $ 15,507 $ 15,895 $ 16,292 $ 16,700 $ 17,117 $ 17,545 $ 17,984 $ 18,433 PEST CONTROL 47,390 $ 0.02 $ 800 $ 820 $ 841 $ 862 $ 883 $ 905 $ 928 $ 951 $ 975 $ 999 $ 1,024 SECURITY & MONITORING 47,390 $ 0.95 $ 45,000 $ 46,125 $ 47,278 $ 48,460 $ 49,672 $ 50,913 $ 52,186 $ 53,491 $ 54,828 $ 56,199 $ 57, % 0.0% 47,390 $ 0.10 $ 4,580 $ 4,625 $ 5,576 $ 5,802 $ 5,988 $ 6,231 $ 6,383 $ 6,525 $ 6,708 $ 6,876 $ 7, % 47,390 $ 0.48 $ 22,899 $ 23,127 $ 27,881 $ 29,010 $ 29,939 $ 31,156 $ 31,913 $ 32,626 $ 33,542 $ 34,380 $ 35, % 47,390 $ 0.19 $ 9,160 $ 9,251 $ 11,152 $ 11,604 $ 11,976 $ 12,462 $ 12,765 $ 13,051 $ 13,417 $ 13,752 $ 14,067 TOTAL EXPENSES 47,390 $ 5.02 $ 237,848 $ 243,243 $ 256,006 $ 263,097 $ 270,001 $ 277,500 $ 284,402 $ 291,378 $ 298,821 $ 306,292 $ 313,834 NET INCOME 47,390 $ 4.65 $ 220,129 $ 219,292 $ 301,616 $ 317,098 $ 328,782 $ 345,621 $ 353,849 $ 361,148 $ 372,010 $ 381,310 $ 389,513 LESS TENANT IMPROVEMENT ALLOW IN-LINE $ 5.00 $ - $ - $ 16,490 $ 6,962 $ 7,136 $ 14,629 $ - $ 18,656 $ 7,877 $ 8,074 $ 16,551 LESS TENANT IMPROVEMENT ALLOW BOX $ $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - LESS LEASING COMMISSION ALLOW 4.00% $ - $ - $ 7,915 $ 3,342 $ 3,425 $ 7,022 $ - $ 8,955 $ 3,781 $ 3,875 $ 7,945 TOTAL DEDUCTIONS 47,390 $ - $ - $ - $ 24,405 $ 10,304 $ 10,562 $ 21,651 $ - $ 27,612 $ 11,658 $ 11,949 $ 24,496 NET CASH FLOW 47,390 $ 4.65 $ 220,129 $ 219,292 $ 277,211 $ 306,794 $ 318,221 $ 323,970 $ 353,849 $ 333,537 $ 360,352 $ 369,361 $ 365,017 URS Page 116

122 DCF-3 VALUE SUMMARY RATE ANALYSIS SUMMARY CAPITALIZATION RATE 8.5% PLUS LOAD FACTOR FOR TERMINAL RATE 0.5% TERMINAL CAPITALIZATION RATE 9.0% DISCOUNT RATE 11.0% RESALE ANALYSIS NET INCOME YEAR 11 $ 365,017 CAPITALIZATION RATE 9.0% SALE PRICE $ 4,055,740 LESS 5.0% $ 202,787 LESS CLOSING 1.5% $ 60,836 TOTAL DEDUCTIONS $ 263,623 NET SALES PROCEEDS $ 3,792,117 PRESENT VALUE CALCULATION YEAR REVENUES 1 $ 220,129 2 $ 219,292 3 $ 277,211 4 $ 306,794 5 $ 318,221 6 $ 323,970 7 $ 353,849 8 $ 333,537 9 $ 360, $ 4,161,478 TOTAL REVENUES $ 6,874,831 PRESENT VALUE OF REVENUES $ 3,064,784 LESS DEDUCTIONS: RE-PAINT $ (57,300) LESS DEDUCTIONS: LANDSCAPE $ (41,000) AS-IS VALUE $ 2,966,484 INDICATED VALUE, ROUNDED $ 2,970,000 URS Page 117

123 RECONCILIATION AND FINAL VALUE ESTIMATE The value conclusions of the Cost, Sales Comparison and Income Capitalization Approaches are as follows: Cost Approach N/A Sales Comparison Approach $2,300,000 Income Capitalization Approach $2,200,000 The cost approach is most appropriate when the improvements represent the highest and best use of the site, the improvements are relatively new and depreciation is limited. Due to the age of the improvements, depreciation is difficult to measure in the market, and the cost approach is considered less reliable and was not employed. The sales comparison approach employs the principal of substitution, meaning that a buyer would pay no more for the subject property than the price for which they could acquire a similar property offering similar utility and investor goal fulfillment. A variety of sales of properties quite similar to the subject were found throughout the market, and those considered most applicable to the subject were included within the report. Based on analysis of these sales, the indication of value of the subject by the sales comparison approach is considered quite reliable, and the indication of value is given considerable weight. The income capitalization approach was utilized in the estimation of value for the subject property. For an income producing property, this approach is considered one of the most reliable indicators of value, as it is for the subject. This approach, commonly referred to as the investor's approach because of their reliance on this method for investment decisions, is based upon a study of rents paid for similar properties within the competitive market area. Due to the considerable activity in the market, the income capitalization approach is given primary weight for the subject. The income approach is well supported by the sales comparison approach. Therefore, with primary weight on the value estimate by the income capitalization approach, it is our opinion that the market value of the fee simple estate of the subject property, in as-is condition and as of the appraisal date, April 10, 2018, is approximately $2,200,000. URS Page 118

124 ASSUMPTIONS AND LIMITING CONDITIONS 1. The conclusions as to market value contained herein represent the opinion of the undersigned and are not to be construed in any way as a guarantee or warranty, either expressed or implied, that the property described herein will actually sell for the market value contained in this opinion. 2. 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. 3. No furniture, furnishings, or equipment, unless specifically indicated herein, has been included in our value conclusions. Only the real estate has been considered. 4. The property is appraised free and clear of all encumbrances, unless otherwise noted. 5. No survey of the property was made or caused to be made by the appraiser. It is assumed the legal description closely delineates the property. It was checked with public records for accuracy. Drawings in this report are to assist the reader in visualizing the property and are only an approximation of grounds or building plan. 6. It is assumed that there are no hidden or unapparent conditions of the property's subsoil or structure 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. Subsurface rights (minerals, oil, or water) were not considered in this report. 8. Description and condition of physical improvements, if any, described herein are based on visual observation. As no engineering tests were conducted, no liability can be assumed for soundness of structural members. 9. The appraiser has inspected any improvements. Unless otherwise noted, subject improvements are assumed to be free of termites, dry rot, wet rot, or other infestation. Inspection by a reputable pest control company is recommended for any existing improvement. 10. All value estimates have been made contingent on zoning regulations and land use plans in effect as of the date of appraisal, and based on information provided by governmental authorities and employees. 11. It is assumed that there is full compliance with all applicable federal, state, and local environmental laws and regulations, unless noncompliance is stated, defined, and considered in the appraisal report. 12. It is assumed that all applicable zoning and land use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in the appraisal report. URS Page 119

125 13. 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 predicated. 14. No responsibility is assumed by the appraiser for applicability of "concurrency laws", referring to the 1985 amendments to Chapter 163, Florida Statutes. At this time it is unclear what effect, if any, these laws might have on any property in any given county. As various legislative and judicial action is pending, the reader is cautioned to fully investigate the likelihood of development moratorium or other governmental action with appropriate municipal, county, or state officials. 15. 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. 16. Appraisal does not constitute an inspection for compliance with local building, fire, or zoning codes. Reader is advised to contact local government offices to ensure compliance with applicable ordinances. 17. This appraisal report covers only the premises herein; and no figures provided, analysis thereof, or any unit values derived therefrom are to be construed as applicable to any other property, however similar they may be. 18. Distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Separate valuations of land and improvements must not be used in any other manner, nor in conjunction with any other appraisal, and are invalid if so used. 19. Certain data used in compiling this report was furnished by the client, his counsel, employees, and/or agent, or from other sources believed reliable. However, no liability or responsibility may be assumed for complete accuracy. 20. An effort was made to verify each comparable sale noted in the report. There are times when it is impossible to confirm a sale with the parties involved in the transaction; however, all sales are confirmed through public records. 21. Consideration for preparation of this appraisal report is payment in full by the client of all charges due the appraiser in connection therewith. Any responsibility by the appraiser for any part of this report is conditioned upon full and timely payment. 22. The appraiser, by reason of this report, is not required to give testimony in court with reference to the property herein, nor obligated to appear before any governmental body, board, or agent, unless arrangements have been previously made therefor. URS Page 120

126 23. Unless otherwise noted, this appraisal has been prepared solely for the private use of the client who is listed above as the addressee. No other party is entitled to rely on the information, conclusions, or opinions contained herein. 24. Neither all nor any portion of the contents of this appraisal shall be conveyed to the public through advertising, public relations, news, sales, or other media without the written consent and approval of the appraiser, particularly as to valuation conclusions, identity of the appraiser or firm with which he is connected, or any reference to the Appraisal Institute or to the MAI designation. Furthermore, neither all nor any portion of the contents of this appraisal shall be used in connection with any offer, sale, or purchase of a security (as that term is defined in Section 2(l) of the Securities Act of 1933) without the prior express written consent of the appraiser. 25. Possession of this report or copy thereof does not convey any right of reproduction or publication, nor may it be used by any but the client, the mortgagee, or its successors or assigns, mortgage insurers, or any state or federal department or agency without the prior written consent of both the client and the appraiser, and, in any event, only in its entirety. 26. Before any loans or commitments are made predicated on value conclusions reported in this appraisal, the mortgagee should verify facts and valuation conclusions contained in this report with the appraiser. 27. Cost estimates for construction or reproduction of improvements are based on information from Marshall Valuation Service and other sources referenced in the report and are assumed accurate. 28. Estimates of expenses, particularly as to assessment by the County Property Appraiser and subsequent taxes, are based on historical or typical data. Such estimates are based on assumptions and projections which, as with any prediction, are affected by external forces, many unforeseeable. While all estimates are based on our best knowledge and belief, no responsibility can be assumed that such projections will come true. 29. Responsible ownership and competent property management are assumed. 30. Unless stated otherwise, the possibility of hazardous material, which may or may not be present on the property, was not observed by the appraiser during the course of the normal inspection and research conducted during the appraisal assignment. The appraiser, however, is not professionally qualified to detect such substances, and inspection by a professional in the field is recommended for any property. The presence of substances such as asbestos, ureaformaldehyde foam insulation, or other potentially hazardous materials could affect the value of the property, if found. 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 them. This appraisal report is subject to receipt of an environmental audit confirming that no hazardous or toxic material is located on the premises. Should such material be discovered, final value estimates herein would be reduced by the cost to remove such substances and to restore the URS Page 121

127 premises to serviceable condition, and may further be reduced by indirect expenses and income losses incurred by the owner during abatement. Such adjustments to the value estimate contained herein may be made only by the appraiser and only upon receipt of the environmental audit, construction cost estimates and other data satisfactory to the appraiser at his sole discretion. 31. The Americans With Disabilities Act (ADA), enacted in 1990, provided civil rights protection to persons with disabilities. Title III of this act provides that persons with disabilities are to be provided access equal to, or similar to, that available to the general public in all areas of "public accommodation," which generally means any retail, recreation, social service or lodging establishment. It does not apply to "commercial facilities," which could be a single-tenant office or manufacturing facility, and generally does not require alterations to existing buildings, unless other alterations are made. This latter is subject to interpretation, but it should be assumed that any significant renovation requiring a building permit will also require that the building be brought to current handicap requirements for all or a portion of the building. The appraiser is not professionally qualified in these matters, this appraisal does not constitute an inspection as to compliance with the provisions of the act, and no responsibility is assumed for any known or unknown conditions related to the act, civil rights or building code provisions. A number of professional engineering firms specialize in these matters, and such professional advice should be obtained if there is any doubt as to conformity existing. URS Page 122

128 QUALIFICATIONS OF H. L INWOOD G ILBERT, J R., M A I P R E S I D E N T PRESIDENT, URBAN REALTY SOLUTIONS TAMPA, FLORIDA, DECEMBER 1991 TO PRESENT Mr. Gilbert is the principal of Urban Realty Solutions, a real estate research and appraisal firm providing market value appraisals, market studies, feasibility analyses, damage studies and litigation support on marina, commercial, industrial and residential developments. Services available through related firms include owner representation, market research, site selection, permitting, development budgets, marketing plans, brokerage, construction progress inspections, property management and cash flow and absorption projections. Financial analysis through use of Argus and other software. Consultation with municipalities and private investors regarding economic impacts and multiplier effect of public construction and development incentives. Litigation support for construction damages, lost profits, inverse condemnation and Bert J. Harris Act damages due to imposition of Inordinate Burden. Experience includes development, construction, brokerage and property management for a variety of office, retail, industrial and marina developments. Appraisals have included all types and sizes of residential, commercial, industrial, retail and resort properties. Mr. Gilbert has qualified as an expert witness in bankruptcy, state and federal courts and in the US Virgin Islands. The firm is incorporated as Gilbert Associates, Inc., DBA Urban Realty Solutions, and has been in operation since LICENSES AND CERTIFICATIONS Florida State Certified General Real Estate Appraiser License Number RZ0940 Florida Licensed Real Estate Broker Numbers BK and BK Maryland State Certified General Real Estate Appraiser South Carolina Licensed Real Estate Broker No Merchant Marine Master Captain License Numerous Temporary and Reciprocal Licenses across the Southern United States and Caribbean EDUCATION University of Georgia, Bachelor of Business Administration, 1973 Major in General Business Minors in Finance, Management, Marketing and Real Estate

129 CONTINUING EDUCATION Courses 101 and 201 Society of Real Estate Appraisers Course II, Urban Properties (Commercial/Income) Course VI, Investment Analysis Course VIII, Residential Appraisal Capitalization Theories and Techniques (IBB) Rate Extraction Seminar Course X, Market Analysis Standards of Professional Practice Applied Appraisal Techniques Valuation Litigation / Mock Trial Capital Market Influences on Real Estate Valuation Analyzing Operating Expenses USPAP Core Update for Appraisers Power Lines and Electro-Magnetic Fields Effect on Value and People Eminent Domain and Land Valuation Litigation ALI/ABA Litigation Skills for the Appraiser: An Overview Construction Contracts Strategies for Project Completion and Litigation Avoidance CLE Eminent Domain Conference 2001 Appraisals & Federal Regulations The Valuation of Wetlands Appraising for Pension Fund Portfolios Development Analysis Valuation of Hotels and Motels Income Capitalization Workshop Advanced Capitalization Workshop Calculator and Computer Solutions to Contemporary Problems Hewlett Packard Financial Calculators Advanced Course Impact of Environmental Considerations on Real Estate Appraisals Appraisal Regulations of the Federal Banking Agencies Discount and Capitalization Rate Components The Appraiser as Expert Witness Complex Litigation Appraisal Discount and Capitalization Rate Components Understanding Limited Appraisals and Reporting Options Tax Credits for Low Income Housing Fair Lending and the Appraiser Appraisal of Nursing Facilities Economic Worth of On- Premise Signage Florida Ad Valorem Property Tax Update Regulatory Takings & Property Rights Transportation Issues & Eminent Domain Regression Analysis in Appraisals Analyzing Distressed Real Estate Marina Retrofit, Redesign & Construction FDEP Appraising Submerged Land Easements Developing Resort, 2 nd Home and Golf Course Communities, Urban Land Institute Valuing Enhancement Projects (LEED Green Buildings) & Financial Returns, BOMI Marina Dry Stack Conference, AMI Green Marina Design Marina Shoreline Development & Permitting, LSI Feasibility, Investment Timing & Options, AI Florida State Law Update for Real Estate Appraisers National USPAP Update Course Business Practices and Ethics Inverse Condemnation New Technology for the Real Estate Appraiser Instructor Leadership and Development Conference Separating Real and Personal Property from Intangible Business Assets Analyzing Commercial Lease Clauses Litigation Appraisal The Appraiser As An Expert Witness Oil Spills and Property Values Supervisor/Trainee Roles & Rules Professional s Guide to Uniform Residential Appraisal Report IRS Valuation Federal Agencies and Appraisal: Program Updates Green Building for Appraisers Valuation of Solar Photovoltaic Systems H. Linwood Gilbert, Jr., MAI, has completed the continuing education program of the Appraisal Institute. Mr. Gilbert has also attended courses and seminars covering various aspects of real estate valuation, lending, leasing, marketing and management sponsored by The Urban Land Institute, The Ohio State University, The Massachusetts Institute of Technology, Robert Morris Associates, The Northwest Center for Professional Education, New York University, St. Petersburg College, the University of Shopping Centers (sponsored by The International Council of Shopping Centers), CCIM Institute, Federal Housing Administration, the Environmental Assessment Association and others. He has been a guest lecturer at NAIOP Real Estate Development course, Instructor of a Real Estate Appraisal Course for the International Marina Institute and was guest lecturer at the St. Petersburg BAR Association on ad valorem taxation. Mr. Gilbert is qualified as an Expert Witness in real estate valuation matters in bankruptcy and civil courts.

130 PROFESSIONAL EXPERIENCE April 1993 to September 2004 February 1991 to Current Principal, Executive Vice President, Urban Economics, Inc. Tampa, Florida Principal of real estate research and appraisal firm providing services similar to those provided under Urban Realty Solutions. The firm also focused on support for litigation through valuation and damage studies. Broker of transactions totaling $100+ million. President, Gilbert Associates, Inc. St. Petersburg, Florida Real estate consulting firm providing market research, highest and best use analysis and other financial planning and marketing services. Prepared guidelines for the marketing, construction and management of distressed developments, including determination of status of development approvals, such as Development of Regional Impact, environmental and local permitting; assistance in selection of consultants and contractors, and value engineering for proposed construction. Broker of record for St. Petersburg CBD Master Retail Development company, including oversight of the St. Petersburg Pier Festive Market to February 1991 Vice President, Development, Talquin Development Company St. Petersburg, Florida Responsible for development of all projects in the Tampa Bay area for this Florida Progress Corporation subsidiary, which was begun by Gilbert and two partners and later acquired by Florida Progress. Conducted feasibility analyses for most projects undertaken by Development Division. Managed Development Division and was project director from concept through completion of Bank of America Tower, a 330,000-square foot, $50 million mixed-use development, The Harborage at Bayboro, a 635-slip marine complex, plus numerous office, retail, historical redevelopment and industrial projects. Negotiated partnership with The Wilson Company for development of Carillon Corporate Center, Tampa Bay s premiere mixed use development. Organized construction, marketing, and property management departments, as well as the marine division. Property development and management included approximately 750,000 square feet of commercial and industrial properties. Negotiated major leases for buildings, air rights and submerged lands, and design/build contracts, including conversion of historic school building to moderate income apartments. Provided private sector leadership in the planning and implementation of St. Petersburg s Intown Redevelopment program to 1983 Vice President, Warren Hunnicutt, Jr., Inc. St. Petersburg, Florida Appraised and conducted feasibility analyses on virtually all types of commercial, industrial, hospitality and residential properties, and including islands and environmentally sensitive lands. Conducted and published first county-wide surveys of retail and industrial markets to 1978 Assistant Vice President, Construction Lending and Review Appraiser, Century First National Bank (now Wells Fargo) St. Petersburg, Florida Construction and permanent loan underwriting and administration and review appraiser. Three years as Special Assets officer, handling all legal proceedings, construction completion and marketing of foreclosed properties, which ranged from major hotels to high-rise condominiums to 1972 Real Estate Loan Representative, The Citizens & Southern National Bank Athens, Georgia Underwrote and administered construction and permanent single-family FHA/VA and conventional loans. Appraiser trainee. Also trained in credit card, sales finance, branch management, installment lending and other departments under commercial banking management training program.

131 PROFESSIONAL AFFILIATIONS Appraisal Institute Real Estate Investment Council, Inc. Association of Eminent Domain Professionals The International Marina Institute Southwest Florida Marine Industries Association Marina Operators Association of America Florida Association for the Restoration of Ethics, Inc. Urban Land Institute PIANC The World Association for Waterborne Transport Infrastructure Drystack Working Group MAI Professional Designation Member, Admissions Committee Member, Regional Ethics Panel Member Member Member, Instructor Member Member Member Member Member Member CIVIC ACTIVITIES Past and present memberships include: Board of Directors of Tampa Union Station Preservation and Restoration, Inc.; Co-chairman, Council of Elders of the Community Alliance of St. Petersburg, a biracial organization; Former Board of Governors and Chairman, Transportation Committee, The St. Petersburg Area Chamber of Commerce; Former Board Member and Treasurer, The National Association of Industrial and Office Parks; Former Board Member, The Science Center of Pinellas County (an educational institution); Former Board Member and Transportation Committee Chairman, The Committee of 100 of Pinellas County; Former Board Member, Gulfcoast Certified Development Corporation; Member, Leadership St. Pete and Leadership Tampa Bay, and a Member of the St. Petersburg Suncoasters, sponsors of the Festival of States. Member, Marine Industry Association of Florida. Mr. Gilbert is also active in other community organizations.

132 QUALIFICATIONS OF T HOMAS E IPPER C E R T I F I E D G E N E R A L A P P R A I S E R EDUCATION Lansing Community College Bachelor of Science Program, Major in Classical Music Theory CONTINUING EDUCATION Over 400 hours in real estate continuing education coursework Business Practices and Ethics, Appraisal Institute Perspectives of Review Appraisers, Appraisal Institute Analyzing Distressed Real Estate, Appraisal Institute Appraising Historic Properties, Appraisal Institute Seminar FREAB AB-III: Non-Residential Real Property Basics USPAP (Uniform Standards of Professional Appraisal Practice) FREAB AB-II: Residential Appraisal Course II FREAB AB-I: Fundamentals of Real Estate Appraisal Analyzing/Recasting Financial Statements, IBBA Business Valuations, IBBA Real Estate Investment Analysis Real Estate Appraisal Principles, Levels I&II Residential Appraisal Securitization of Commercial Real Estate Comprehensive Examination, IBBA Real Estate Broker Management Analyzing Business Opportunities Listing & Selling a Business Fair Housing Law & Practice in Real Estate Real Estate Property Management Thomas Eipper has completed the continuing education requirements for the State of Florida. PROFESSIONAL AFFILIATIONS Appraisal Institute, Candidate for Designation Institute of Business Appraisers International Business Brokers Association Florida Business Brokers Association National Association of Realtors Michigan Association of Realtors, Education Committee Chairman, Instructor Cuyahoga Plan Sarasota County Association of Realtors Sarasota Chamber of Commerce Michigan Association of Realtors Montcalm County Association of Realtors, Education Committee Chairman Rotary International LICENSES AND CERTIFICATIONS State Certified General Appraiser License Number RZ3319 Florida Licensed Real Estate Broker Number BK598347

133 PROFESSIONAL EXPERIENCE 2010 to Present Commercial Appraisal Urban Realty Solutions Tampa, Florida Commercial appraisal work completed under MAI supervision involving the valuation of fee simple, leased fee, and leasehold interests in all types of commercial real estate to 2010 Commercial Appraisal ValueNet, Inc. Sarasota, Florida Commercial appraisal work completed under MAI supervision involving the valuation of fee simple, leased fee, and leasehold interests in commercial real estate including existing and proposed shopping centers, office buildings, commercial and residential subdivisions, condominium projects and conversions, apartment buildings, industrial, mixed-use, general commercial/retail, golf courses, convenience stores, banquet facilities, bank branches, a proposed amusement park, auto sales lots, boat slips and vacant land to 800+ acres to 2005 Friedmann s Services Osprey, Florida Purchased a local service company. Reversed downward revenue trend, improved customer base and per unit sales, reduced costs and increased revenues over 400% within five years. Sold the company in fall to Present Real Estate Broker Owner/Operator Osprey, Florida Typical real estate broker office 1994 to 1995 Business Broker Century 21 Frazier & Broz Realty Sarasota, Florida Commercial Sales Department. business in SW Florida. Intermediary for acquisition and sale of small 1991 to 1994 Business Broker Sundial Partners, Inc. Sarasota, Florida Intermediary for acquisition and sale of small businesses in southwest Florida. Some sales included commercial real estate. Provided valuation models to assist setting transaction price. Advised clients in the areas of business valuation, debt and equity structuring, transaction structure, succession planning, non-competes, due diligence, etc. Experience with E-2 and L-1 Visas to 1990 Real Estate Sales and Appraisals Eipper Realtors, Inc. Stanton, Michigan Sales, Property Management and Residential Appraisals. Office manager

134 ADDENDUM

135 Engagement Letter

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140 Subject Property County Property Appraiser Record

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143 Subject Property County Property Appraiser Building Detail