APPRAISAL REPORT LOCATED AT:

Transcription

1 APPRAISAL REPORT OFFICE CONDOMINIUM UNITS LOCATED AT: UNITS 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 THE LAKES FRONTAGE CENTER CONDOMINIUM PALMETTO FRONTAGE ROAD MIAMI LAKES, FLORIDA PREPARED FOR: EASTERN NATIONAL BANK 799 BRICKELL PLAZA, 10 TH FLOOR MIAMI, FLORIDA AS OF: AUGUST 22, 2011 PREPARED BY:, P.A NORTH KENDALL DRIVE - SUITE 530 MIAMI, FLORIDA 33156

2 J. Mark Quinlivan, MAI State Certified General Appraiser RZ A PROFESSIONAL ASSOCIATION 7300 NORTH KENDALL DRIVE, SUITE 530 MIAMI, FLORIDA Telephone (305) Fax (305) jmqmai@aol.com Thomas F. Magenheimer, MAI State Certified General Appraiser RZ August 24, 2011 Marianella Lozada-Duque Eastern National Bank 799 Brickell Plaza, 10 th Floor Miami, Florida Dear Ms. Lozada-Duque: In accordance with your request and authorization, I have prepared this Appraisal Report covering the following described property: Units 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 of The Lakes Frontage Center Condominium located at Palmetto Frontage Road, Miami Lakes, Florida The purpose of this Appraisal is to estimate the As Is Market Value of the subject units as of the market conditions existing on August 22, 2011, being one of the dates of personal inspection. The Appraisal Report that follows sets forth the identification of the property, the assumptions and limiting conditions, pertinent facts about the area and the subject property, comparable data, the results of the investigations and analyses, and the reasoning leading to the conclusions set forth. This report was prepared in accordance with the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) relating to appraisal standards as enumerated in Title 12, Code of Federal Regulation, Part 34 (12CFR34) and in compliance with the most current Uniform Standards of Professional Appraisal Practice (USPAP) as adopted by the Appraisal Standards Board of the Appraisal Foundation.

3 Marianella Lozada-Duque August 24, 2011 Page 2 Based on the inspection of the property and the investigation and analyses undertaken, I have formed the opinion that the subject units had an As Is Market Value based upon the market conditions prevalent on August 22, 2011, as follows: TWO MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($2,650,000) Respectfully submitted, J. Mark Quinlivan, MAI State-Certified General Appraiser Certification Number: RZ Brian M. Quinlivan Registered Trainee Appraiser License Number: RI19051 JMQ/rp (11-063U)

4 T A B L E O F C O N T E N T S COVER PAGE PAGE TRANSMITTAL LETTER TABLE OF CONTENTS CERTIFICATION OF VALUE... 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS... 3 INTRODUCTION INTRODUCTION IDENTIFICATION OF THE PROPERTY LOCATION PURPOSE AND DATE OF APPRAISAL INTENDED USE AND INTENDED USER OF APPRAISAL LEGAL DESCRIPTION PROPERTY RIGHTS APPRAISED DEFINITION OF MARKET VALUE ASSESSMENT AND TAXES OWNER OF RECORD AND ADDRESS FIVE-YEAR HISTORY OF TITLE SCOPE OF THE APPRAISAL LOCATION ANALYSIS COUNTY DATA NEIGHBORHOOD DATA SITE DATA ZONING HIGHEST AND BEST USE DESCRIPTION OF IMPROVEMENTS THE APPRAISAL PROCESS INCOME APPROACH SALES COMPARISON APPROACH RECONCILIATION AND VALUE CONCLUSION ADDENDA... 88

5 ASSUMPTIONS AND LIMITING CONDITIONS QUALIFICATIONS CLIENT LIST ENGAGEMENT LETTER RENT ROLL / EXPENSES

6 CERTIFICATION OF VALUE The undersigned hereby certifies that, to the best of my knowledge and belief: (A) (B) (C) (D) (E) (F) (G) (H) (I) (J) The statements of fact contained in the report are true and correct. The reported analyses, opinions and conclusions are limited only by the assumptions and limiting conditions set forth, and are our personal, unbiased professional analyses, opinions and conclusions. I have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. My engagement in this assignment is not contingent upon developing or reporting predetermined results. The appraiser s compensation for completing this assignment is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. Furthermore, the appraisal assignment is not based on a requested minimum valuation, a specific valuation or the approval of a loan. The appraiser s analyses, opinions and conclusions are developed, and this report is prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, and the requirements of the State of Florida for state-certified appraisers. Use of this report is subject to the requirements of the State of Florida relating to review by the Real Estate Appraisal Subcommittee of the Florida Real Estate Commission. Brian Quinlivan has made a personal inspection of the property that is the subject of this report. No one provided professional assistance to the persons signing this report. 1

7 (K) (L) (M) The reported analyses, opinions, and conclusions are developed, and this report is prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. The appraiser has not performed any services on the subject property within the past three years. As of the date of this report, J. Mark Quinlivan has completed the requirements under the continuing education program for The Appraisal Institute. Based on the inspection of the property and the investigation and analyses undertaken, subject to the assumptions and limiting conditions set forth in the Addendum of this report, I have formed the opinion, as of August 22, 2011 the subject units had an As Is Market Value of: TWO MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($2,650,000) J. MARK QUINLIVAN, MAI STATE CERTIFIED GENERAL APPRAISER CERTIFICATION NUMBER: RZ BRIAN M. QUINLIVAN REGISTERED TRAINEE APPRAISER LICENSE NUMBER: RI

8 SUMMARY OF SALIENT FACTS AND CONCLUSIONS Type Report Purpose of Appraisal Property Rights Appraised Location Self-contained As Is Market Value Fee Simple Palmetto Frontage Road Miami Lakes, Florida Legal Description Units 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 and a combined % interest in the common elements, The Lakes Frontage Center Condominium, OR Book 24401, Page 4031, Public Records of Miami-Dade County, Florida. Age 1983 Zoning Highest and Best Use IU-C, Industrial Conditional Existing office condominium use Indications of Value: Cost Approach Not Applicable Income Approach $2,210,000 Sales Comparison Approach (Gross Value) $3,320,000 As Is Market Value $2,650,000 Date of Value Estimate August 22, 2011 Date of Inspection August 22, 2011 Date of Report August 24, 2011 Remarks The subject units are located in a 30-unit office condominium building known as The Lakes Frontage Center Condominium. 3

9 14100 PALMETTO FRONTAGE ROAD LOOKING NORTHEASTERLY ON PALMETTO FRONTAGE ROAD- SUBJECT BUILDING TO LEFT 4

10 SUBJECT BUILDING LOOKING NORTHWESTERLY ALONG NW 80 AVENUE- SUBJECT BUILDING TO RIGHT 5

11 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 6

12 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 7

13 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 8

14 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 9

15 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 10

16 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 11

17 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 12

18 UNFINISHED UNIT UNFINISHED UNIT 13

19 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 14

20 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 15

21 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 16

22 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 17

23 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 18

24 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 19

25 INTERIOR- TYPICAL UNIT INTERIOR- TYPICAL UNIT 20

26 INTRODUCTION 21

27 INTRODUCTION IDENTIFICATION OF THE PROPERTY Twenty-two office condominium units located within the Lakes Frontage Center Condominium. LOCATION Palmetto Frontage Road Miami Lakes, Florida. PURPOSE AND DATE OF APPRAISAL The purpose of this Appraisal is to estimate the As Is Market Value of the subject units as of the market conditions existing on August 22, 2011, being one of the dates of personal inspection. INTENDED USE AND INTENDED USER OF APPRAISAL The intended use of this appraisal is to assist the client in loan underwriting and/or credit decisions. The intended user is Eastern National Bank. LEGAL DESCRIPTION Units 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 and a combined % interest in the common elements, The Lakes Frontage Center Condominium, OR Book 24401, Page 4031, Public Records of Miami-Dade County, Florida. PROPERTY RIGHTS APPRAISED The property is appraised in fee simple: a fee without limitations to any particular class of heirs or restrictions, but subject to the limitations of eminent domain, escheat, police power and taxation, as well as utility easements of record. 22

28 DEFINITION OF MARKET VALUE Market Value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised and acting in what they consider their own best interest; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents a normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (Source: USPAP Edition) 23

29 ASSESSMENT AND TAXES 2010 The subject property is assessed under the jurisdiction of the Town of Miami Lakes, Florida. The assessment for the property is established each year as of January 1st by the Miami-Dade County Property Appraiser's Office at 100% of "Just Value." Just Value has been equated to Market Value less closing costs. While the State of Florida requires real estate to be assessed at 100% of Just Value, in reality the ratio of the assessed value to sales price is generally below 100%. Folio No. Unit Assessed Value Millage Rate Tax Amount $203, $4, $168, $3, $77, $1, $36, $ $164, $3, $169, $3, $266, $5, $133, $2, $151, $3, $205, $4, $122, $2, $59, $1, $65, $1, $34, $ $60, $1, $63, $1, $175, $3, $293, $6, $204, $4, $309, $6, $249, $5, $282, $5, $3,495,050 $71,

30 OWNER OF RECORD AND ADDRESS Palmetto Road Frontage, LLC Palmetto Frontage Road, #101 Miami Lakes, FL FIVE-YEAR HISTORY OF TITLE According to the Public Records of Miami-Dade County, there have been no sale transactions of the subject units within the past three years. 25

31 SCOPE OF THE APPRAISAL 26

32 SCOPE OF THE APPRAISAL The scope of the assignment relates to the extent and manner in which research is conducted, data is gathered and analysis is applied, all based upon the following problem-identifying factors stated elsewhere in this report. This appraisal of the subject has been presented in the form of a Self-contained Appraisal Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2 (a) of the USPAP. Data related to the subject property was derived from various sources including but not limited to the Miami-Dade County Property Appraiser s Office, Miami-Dade County plats as compiled by First American Real Estate Solutions, Inc., FEMA flood zone maps, Land Development Regulations of the Town of Miami Lakes, condominium documents and tax roll information provided by ISCNET. Comparable sale sources include First American Real Estate Solutions, Inc., an on-line computer service provided by First American Real Estate Solutions (ISC Division), Board of Realtors Multiple Listing Services, Miami-Dade County Property Appraiser s Office and LoopNet. Sales prices are typically confirmed with a party to the transaction, i.e., buyer, seller, real estate agent or attorney to the transaction. A search for office condominium units within the subject market area was conducted. The initial sales period researched was from January of 2009 through the date of valuation. The sales all have similar improvements and highest and best uses as the subject property. Several other sales were considered, but were not included because there was too wide a difference in physical factors, location and time. 27

33 ESTIMATED MARKETING PERIOD The estimated value of the subject is predicated upon a normal marketing period. A normal marketing period is generally defined as the most probable amount of time necessary to expose and actively market a property on the open market to achieve a sale. Implicit in this definition are the following assumptions: (A) The property will be actively exposed and aggressively marketed to potential purchasers through marketing channels commonly used by sellers and buyers of similar type properties. (B) (C) The property will be offered at a price reflecting the most probable markup over market value used by sellers of similar type properties. A sale will be consummated under the terms and conditions of the definition of Market Value required by the regulation. In order to estimate the marketability of this property, sales activity in this market area is reviewed over the past three years, multiple listings are reviewed and real estate brokers operating in the area are interviewed. Based on the above sources, the marketing period for the subject property is estimated to be less than twelve months. ESTIMATED EXPOSURE TIME Exposure time is defined as the estimated length of time the property interest being appraised would have offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. In estimating a reasonable exposure time for the subject property, the appraisers have taken the following steps: Discussion with buyers, sellers, brokers and/or review of multiple listings of commercial condominium units in the area related to historic marketing periods. Based on the above sources, exposure time is estimated to have been twelve months for the subject property. 28

34 LOCATION ANALYSIS 29

35 COUNTY DATA Miami-Dade County - Location and Size Miami-Dade County, which comprises the metropolitan area of Miami, is situated on the southeast tip of the state of Florida. It is bordered on the east by the Atlantic Ocean, on the west by Monroe and Collier Counties, on the north by Broward County, and on the south by Monroe County (the Florida Keys). Miami-Dade County, the largest county in area and population in the state of Florida, covers an area of 2,054 square miles with an altitude ranging from sea level to 25 feet. Water covers 354 square miles of the County. Although the County is relatively large, approximately half of the total area is comprised of the Everglades, which is a natural area that will not be developed. Therefore, only the eastern section of Miami-Dade County encompasses the area which is currently developed or available for future development. Miami-Dade County's location, its southern latitude and proximity to the Gulf Stream provide for mild winters and pleasant summers. Population The state of Florida has increased rapidly in population from 9,740,000 in 1980 to 12,937,926 in 1990 and 15,982,378 in The 2009 population of Florida was estimated at 18,537,969. Florida is expected to add an average of only about 209,000 residents a year between 2007 and 2010, compared with annual increases of about 418,000 people between 2002 and Miami-Dade County's population increased from 1,626,000 in 1980 to 1,937,094 in 1990, reflecting an average annual compounded growth rate of 1.77%, compared with 2.88% for the state of Florida. By 2000, Miami-Dade County's population increased to approximately 2,253,362 and in 2008 it is estimated at 2,398,245. The population is estimated to grow to 2,560,000 by the Year Miami-Dade County's population growth during the last four decades has been dramatic especially in relation to national trends. From 1950 to 1990 the United States population increased by 60% while the population of Miami-Dade County has almost quadrupled from 495,084 to 1,937,000. During this period, the state of Florida was elevated from the 20th most populous state to the 4th in 1990 and continues to be the fourth most populous state. During the 1960s, the major increase in Miami-Dade County's population was due to the large immigration of Cubans. Today, Cuban and other Spanish speaking people comprise approximately 62% of Miami-Dade County's population. The increase in Hispanic population has had favorable effects on the local economy and has helped to create a multi-national cultural environment in the area. 30

36 The overall population of Miami-Dade County is well dispersed throughout the entire area, yet has several key areas of concentration. During the 1960s, several sub-areas accounted for approximately 70% of the growth. These areas include Hialeah, northern Miami-Dade County, the Beach area, the Miami River area, the area southwest of Miami International Airport, as well as the Kendall and Cutler Ridge areas. In the first half of the 1970s, population growth continued in an uneven fashion especially in the urban fringes. Since 1970, approximately three-fourths of the total population growth for the County has occurred in the unincorporated areas. The older centrally located cities such as Miami, Miami Beach and Coral Gables have grown at modest rates from 1970 to Unincorporated Miami- Dade County has evidenced the most rapid growth which continues to occur in areas in northeast Miami-Dade County (Aventura), as well as the currently expanding southwest area, especially in sections of Flagler Street, S.W. 8th Street, North Kendall Drive and Homestead. Population trends indicate that most of the population growth in Miami-Dade County between 2010 and 2015 will occur in outlying areas such as North Miami Beach, the Kendall area west of the Florida Turnpike, the S.W. 8th Street area west of the Florida Turnpike, the Hialeah-Miami Lakes area, as well as those areas both east and west of U.S. Highway 1 between Cutler Ridge and Florida City. Employment Trends The dominant characteristic of Miami-Dade County is that it is primarily trade and service based. Personal, business and repair services have had a substantial increase in importance in the economic base over the last decade. The major sectors of the economy include services, wholesale and retail trade, transportation, communications, public utilities, government and manufacturing. The most dominant industries which form the County's economic base are construction and tourism. Tourism is Miami-Dade County's biggest industry with an estimated 12.1 million visitors in 2008 contributing to more than 50 percent of the area's economy. Aviation and related industries are responsible for another large segment of the economy. The largest employer in Miami-Dade County is the Miami-Dade County School Board, followed by Miami-Dade County, Federal Government, State of Florida, Jackson Health System, American Airlines, University of Miami, Baptist Health Systems of South Florida, AT&T, and Florida Power and Light. Assuming additional importance is the growing prominence of Miami- Dade County as a center for international trade, finance and tourism. The establishment of Miami as the "Gateway of the Americas" should provide the area with a much needed degree of economic diversification. This should enable Miami-Dade County to weather slowdowns in the national economy by an increase of trade through the Port of Miami, growth of international arrivals at the airport, the Free Trade Zone, and the substantial foreign investment in the local economy, particularly in real estate. 31

37 In December of 2009, Florida s unemployment rate was 11.8 percent, up from 3.6 percent in The unemployment rate for Miami-Dade County was 11.3 percent, up from 3.8 percent in T A B L E 1 ESTIMATES OF MIAMI-DADE COUNTY TOURIST TRENDS INTERNATIONAL DOMESTIC TOTAL ,248,380 6,053,220 11,301, ,322,200 6,262,800 11,585, ,492,900 6,473,000 11,965, ,169,043 6,662,546 12,831, ,684,400 6,251,564 11,935, ,060,100 6,544,000 12,604,100 Source: Greater Miami Convention and Visitors Bureau, Tourism Facts and Figures Figures for 2010 indicate 12,604,100 overnight visitors came to Miami-Dade County, a 5.6% increase from Table 2 shows that the bulk of international visitors to Miami-Dade County originate from Central and South American Countries (52.2%), followed by European Countries (23.5%) and Canada (9.9%). England and Germany accounted for the largest proportion of European visitors. In 2010 there were a total of 4,334,004 passengers passing through the Port of Miami and approximately 17,985,000 arriving through Miami International Airport. During 2010, the number of Port of Miami passengers increased 9.3% from 2009 and 2.7% from During 2010 the passengers arriving at the airport increased 5.7% from 2009 and 5.5% from The arrivals at the airport are fairly evenly distributed between international and domestic passengers. In 2010, domestic passengers totaled 9,432,074 and international passengers totaled 8,552,

38 T A B L E 2 ESTIMATES OF INTERNATIONAL VISITORS BY REGION REGION EUROPEAN COUNTRIES 23.0% 23.6% 23.5% 22.5% CARIBBEAN COUNTRIES 12.5% 12.4% 12.1% 12.0% CENTRAL AMERICAN 9.4% 9.3% 9.3% 9.1% COUNTRIES SOUTH AMERICAN 42.8% 42.3% 42.9% 44.9% COUNTRIES CANADA 9.9% 10.1% 9.9% 9.5% OTHER COUNTRIES 2.4% 2.3% 2.3% 2.0 TOTAL 100% 100% 100% 100% Source: Greater Miami Convention and Visitors Bureau, Tourism Facts and Figures There are approximately 50,000 motel and hotel rooms in 470 lodging facilities in Greater Miami and the Beaches. The area had an occupancy rate of 74.5 percent as of January 2011, down 0.8% from January The difference between the 2010 and 2011 hotel occupancy figures may be skewed by the presence of the Super Bowl in South Florida in The airport area had the highest occupancy rate as of January 2011 at around 85%. Average room rate for hotel rooms in Miami-Dade County was $ in January of 2011, up from $ in January of The average room rate for the same period in 2008 was $ Therefore, the average hotel room rates in 2011 indicate an increase of 4.0% over the 2010 rate and an increase of 17.0% over the 2008 rate. The first in a series of new luxury properties opened in February 2004 when the 380-room Ritz Carlton opened in Miami Beach. In May of 2005, the 210-room Le Meridian opened in Sunny Isles Beach. Three other new hotels with a total of 271 rooms opened in Miami Beach during In 2009, 11 new hotels with 2,054 rooms were completed with the largest being the Epic Hotel in downtown Miami. Miami-Dade Financial Resources Over the course of the last decade, Greater Miami has evolved into a major international financial center. Domestic and international businesses find convenient access to a full array of services provided by locally-based state and national commercial banks, savings and loan associations, foreign banks, non-depository credit institutions, securities and commodities brokers and insurance companies. 33

39 Greater Miami has the largest concentration of domestic and international banks south of New York City. With more than 90 percent of the state's foreign banks operating offices in Miami, this market dominates international banking in Florida. Overall, about 150 domestic banks, foreign banks and Edge Act banks operate in Greater Miami. The greatest concentration is located along Brickell Avenue in downtown Miami. Transportation Miami-Dade County has an extensive expressway system with access to all points in the County. However, due to the rapidly increasing population, some of the expressways, especially Interstate 95, are becoming overburdened. In 1985 Miami-Dade County completed a 20.5 mile elevated rapid transit system. This system originally extended southward from downtown Miami to Dadeland, paralleling U.S. Highway 1 and northwesterly from downtown Miami to Hialeah. Recently, the system was extended about a mile from Hialeah to the Palmetto Expressway at NW 74 th Street. In conjunction with this system, there is a Downtown People Mover Automated Transit system which encircles the central business district of Miami and extends south to the Brickell area and north to the Omni area. Miami-Dade County is served by the CSX and Florida East Coast Railroads for freight and Amtrak Rail, Greyhound and Trailways Interstate bus lines for passenger service. Miami International Airport, one of the nation's largest and busiest, had approximately 35.7 million arrivals and departures in The airport is currently undergoing a $5.4 billion expansion. A South Terminal has recently been completed and a North Terminal is under construction and a fourth runway is planned. Miami has become a port of embarkation for airlines and ships bound for Central and South American Countries. The Port of Miami, besides being the largest passenger port in the nation, is also important as a cargo center with a 2009 annual tonnage of approximately 6.83 million down from 7.43 million in The port s traditional customer base has been Europe, China, Latin America and the Caribbean, accounting for 65% of the port s total volume. Miami's comprehensive transportation system and its strategic location have enabled it to become an important international transportation center, providing commercial access to Latin America and the Caribbean. Government Miami-Dade County is comprised of unincorporated areas, as well as 36 municipalities, the largest of which is the city of Miami. 34

40 Miami-Dade County is governed under a modified two-tier metropolitan government. The purpose of this type government was to establish one governing body for the county, and to establish one supply of services such as fire, police, etc. for the county. The upper tier is the County, which provides broad "regional" or county functions, such as metropolitan planning, welfare, health and transit services. The thirty-six municipalities represent the lower tier of government, providing a varying array of services within their jurisdictional boundaries. The County also maintains lower tier functions, such as the provision of municipal-type services, including police and fire, to the unincorporated areas and certain municipalities on a negotiated basis. The County operates under the Commission-Manager form of government. Legislative and policy-making authority is vested in the elected thirteen-member Board of County Commissioners; the Commission appointed County Manager is the chief administrator. Miami- Dade County has operated under the metropolitan form of government since 1957, when the Home Rule Charter was passed by the local electorate. Prior to Home Rule, the County had to rely on the State Legislature for the enactment of its laws. County government had not been able to respond to the tremendous demand for municipal services in this rapidly urbanizing area, which is larger than the State of Rhode Island or Delaware. The need to combine services duplicated by the County and numerous cities was also clearly evident. The Charter permitted the limited County government to reorganize into a general purpose "municipal-type" government capable of performing the full range of public functions into an area wide operation. Real Estate At the end of 2010, the Miami-Dade County Office Market contained approximately 81 million square feet of office space. Approximately 28.8% of this space is located in the Miami central business district and adjacent Brickell Avenue and 20% in the Airport West area. The vacancy rate of office buildings in Miami-Dade County was flat during 2010 at about 15%, but up from 11.3% in 2007 to 10.8% in However, during 2010 office inventory grew by about 800,000 square feet, most of which was in the Brickell Avenue market area. The total new offices under construction totals about 1,213 million square feet. Again, most of the new office construction is concentrated in the Brickell Avenue market area. Other market areas with new construction of office space include Coral Gables and Central Miami. Asking rental rates have been declining in 2010 with the average county lease rate falling below $30 per square foot for the first time since Office rental rates in new buildings typically range from $26.00 to $40.00 per square foot. The low end of the range is for office space in the suburban markets. The upper end of the range is for first class office space in Downtown Miami, Brickell Avenue, Coconut Grove and Coral Gables. 35

41 The Greater Miami Industrial Market, as of the end of 2010, consisted of approximately million square feet of industrial space and approximately 16.1 million square feet of flex space. The approximate percentage location of this space is as follows: MARKET AREA % OF TOTAL MARKET SPACE AIRPORT WEST 29.6% HIALEAH 25.6% MEDLEY 16.7% MIAMI LAKES 3.3% NORTHEAST DADE 4.8% NORTHCENTRAL DADE 14.9% SOUTH DADE 5.1% TOTAL 100% The county's vacancy rate for the overall Miami-Dade County industrial market for the end of 2010 was 10%. Airport West, the largest industrial area, had a vacancy rate of 10.9% as of the end of Industrial rental rates generally average $7.50 per square foot, down 11% on an average of $8.00 per square foot at the end of No new industrial space is expected to be constructed during much of For the month of fourth quarter of 2010 there were 842 building permits issued in Miami-Dade County, compared to 398 permits issued in the fourth quarter of The increase in new permits issued between the same quarter of 2009 to 2010 is approximately 3.8 times. The total number of permits issued in 2010 amounted to 2,297. This is in contrast to the 1,150 permits issued in Miami-Dade s single-family home sales increased 11.1% in the fourth quarter of 2010 in comparison with the fourth quarter of A total of 200 new homes were reported sold in the fourth quarter of In the fourth quarter of 2010, the median sales price for single-family units was $206,578, down 24.9% from the year earlier. Existing condo sales showed gains of 25.8% in December 2009 over the units sold in November The median sales price for condos decreased slightly by 0.5% during the same period. During the last 12 months, condo sales increased 49.6%. Over the same period, the average sales price was $142,650; a year ago, it was $239,367 for a 40.4% decline. Reinhold P. Wolff Quarterly Housing Report shows a vacancy rate of 2.8% for rental apartment buildings in the First Quarter of 2011, lower than the 5.8% rate of the first quarter of The vacancy rate had been declining steadily since 2006 due to the reduction of inventory caused by the large amount of condominium conversions. Since 2007 many ownership housing units, including both condominiums and single family houses, were placed into the rental market by developers and individual owners. 36

42 The condominium apartment market is currently experiencing an all-time high inventory for new units. High-rise condominium towers have been recently completed in the traditional condominium locations such as Brickell Avenue, Coral Gables, Aventura and the Miami beaches, as well as areas with no existing high-rise condominiums, such as the central business district of Miami, the Edgewater, Little Havana and Shenandoah neighborhoods of the city of Miami. Additionally, many existing rental apartment projects have been converted to condominiums. Sales of new condominiums peaked in the second quarter of 2005 with 14,700 units sold during the first six months of New condominium sales during 2010 totaled 3,700 units, down 19% from the 4,556 units sold during The new condominium apartment market is in a largely oversupply condition. The Miami-Dade County retail market contains approximately 59.5 million square feet in buildings over 20,000 square feet. The major retail markets in Miami-Dade County include Hialeah, Coral Gables/South Miami-Dade, Aventura and Kendall. Rental rates typically range from $20.00 to $45.00 per square foot with rates in the $80 to $120 per square foot on South Beach. The overall Miami-Dade County vacancy rate for 2010 was approximately 5.8%. The total net absorption of new retail space was only about 39,400 square feet during Very little, if any, significant sized retail space is expected to be constructed during Conclusions In the future, one of the principal growth areas for Miami-Dade County is expected to be the international sector. Miami-Dade County, because of its geographic location and excellent transportation facilities, is well-suited to attract both business individuals and tourists from Latin America. It is already one of the principal shopping markets for Central and South Americans visiting the United States and one of the principal export points for goods and services destined for Latin America. The existence of major financial institutions, retail outlets, corporations and other business entities, coupled with its geographic location, transportation systems and planned international trade centers give Miami-Dade County an excellent opportunity for continued growth as an international center. During 2010 all segments of the commercial real estate market will continue to experience increasing vacancy rates and decreasing rental rates. With decreasing sale prices for both single family residences ad condominium apartment units, sales activity is expected to rise during

43 LOCATION MAP 38

44 NEIGHBORHOOD DATA The subject site is located within the Town of Miami Lakes, approximately fourteen miles northwest of the Central Business District of Miami. The subject property may further be identified as being located on the northwesterly corner of Palmetto Frontage Road and N.W. 80 th Avenue, one block west of the Palmetto Expressway. The boundaries of the subject neighborhood are generally delineated as N.W. 138 th Street to the south, The Palmetto Expressway (S.R. 826) to the north, Interstate 75 to the west and N.W. 57 th Avenue to the east. This area encompasses approximately six square miles. Miami Lakes, a residential community in northwest Miami-Dade County at the bend in the Palmetto Expressway, is located between N.W. 57 th Avenue to the east and N.W. 87 th Avenue to the west, and the Palmetto Expressway to the north, and NW 138 th Street to the south. This community began development in the 1960s and is almost totally developed today with a combination of single family residences, town houses, rental apartment buildings, condominium apartment buildings, warehouses, retail stores and offices. The residences generally range in price from $500,000 to $1,000,000. The Town of Miami Lakes was incorporated in 2000 as the 31 st municipality in Miami-Dade County. Miami Lakes was a master planned community developed in the 1960 s by the Graham family. The original master plan was over 3,000 acres in size that would allow over 30 years of growth. As its name implies, the town has 23 lakes within its boundaries. The Town currently has over 27,000 residents. The Town has a council-manger form of government with an elected mayor and town council. The majority of Miami Lakes area (approximately four sections) is located east of the Palmetto Expressway. The section located west of the Palmetto Expressway, north and east of Interstate 75 and south of N.W. 154 th Street is the most recently developed section of Miami Lakes. The easterly portion of this section is primarily zoned for industrial/office use and has been developed almost exclusively with low and mid-rise office buildings. The buildings are primarily owned by the Graham Companies, the developer of Miami Lakes. Tenants in these buildings include State Farm, American Express, Kislak Bank, Ikon Office Solutions, Attorney s, Insurance Company, Minolta, Keen Battle Mead Insurance and American Healthcare services. The westerly half of this section has been developed with single family residences, townhouses and condominium apartments. These properties were developed from the mid-1980s to the late 1990s. The Palmetto Expressway extends westerly from the Golden Glades Interchange (intersection of I-95, Florida Turnpike and US 441) to N.W. 77 th Avenue, thence southerly to US Highway 1 at S.W. 104 th Street in South Miami-Dade County. Interstate I-75 connects to the Palmetto Expressway at N.W. 138 th Street. Interstate 75 extends northerly to Ft. Lauderdale at S.R. 84 (I- 595) and then extends west to Naples and the West Coast of Florida. I-75 provides the subject neighborhood with good access to the southern and western regions of Broward County. 39

45 The subject property is located in commerce park located between the Palmetto Expressway on the east, N.W. 154 th Street to the north, Interstate 75 to the south, and N.W. 82 nd Avenue to the west. The district is mostly improved with one- to four-story office buildings and one-story flex space buildings. The commerce park has some vacant land available for development. In summary, the subject property is located in a commercial district on the east side of Miami Lakes. Miami Lakes is a relatively strong suburban office/industrial market because of its good access via the Palmetto Expressway and I-75, and its proximity to the Miami International Airport. The Palmetto Expressway and I-75 link the subject neighborhood with both Miami and Ft. Lauderdale. 40

46 NEIGHBORHOOD MAP 41

47 SITE DATA 42

48 SITE DATA Dimensions and Shape: The site is mostly rectangular in shape. The site fronts 195 feet, more or less, along the northwesterly side of Palmetto Frontage Road and approximately 340 feet along the northeasterly side of N.W. 80 Avenue. Source: Condominium Documents Area: 66,300 square feet (approximate) Source: Condominium Documents Topography and Drainage: The site is level and approximately at street grade. Flood Zone: Map No C0114L (Effective September 11, 2009) "AE" Base flood elevation determined- 6 feet Soil and Subsoil: The immediate area of the subject site appears to have no unusual soil or subsoil conditions. Unusual conditions would be brought out by test borings. Utilities: Water: Sewer: Electricity: Telephone: Miami-Dade Water & Sewer Department Miami-Dade Water & Sewer Department Florida Power & Light Company AT & T Street Improvements: Palmetto Frontage Road is asphalt paved with a dedicated width of 50 feet. Palmetto Frontage Road has one northerly bound lane and one southerly bound lane in the vicinity of the subject. 43

49 SITE MAP 44

50 ZONING 45

51 ZONING Under Ordinance of the Town of Miami Lakes Classification: IU-C Industrial Conditional Intent: The IU-C District shall be applied only to those lands that appropriately may be used and utilized for the development, construction, and operation of large industrial projects and industrial park development of the nature, type and character with the public health, safety, comfort, convenience and the general welfare of the county. Permitted uses include utility plants and substations such as, but not limited to, sewage, water, power, communications and gas and every use permitted in the IU-1 and IU-3 districts such as aircraft hangars, bakeries, auto painting, bottling plants, breweries, cold storage warehouses, food packing, furniture manufacturing, garages, lumber yards, office buildings, banks, boat repairs, hotels, radio stations, limited retail, millwork, showrooms, parking lots, storage warehouses, welding shops and textile mills, animal reduction plants, cement plants, blooming mills, distilleries, foundries, paper mills, and stockyards. Development Standards Minimum Street Frontage: Minimum Lot Depth: Minimum Land Size: Building Setbacks: Front Side Rear 330 feet 330 feet 10 acres; credit for right-of-way 25 feet, sites up to 2 acres net 2 acres or greater, 15% of lesser dimension of property; maximum 50 feet, minimum 25 feet 10 feet from interior side lines 25 feet from side property line abutting a highway right-of-way 20 feet from residential district 5 feet from industrial or business district, properties with open wall None, industrial or business district - properties with closed wall. Minimum setback on through lot, same as for front setback 46

52 Minimum Landscaped Open Space: 20% of net land area Minimum Greenbelt Areas Abutting Right-of-Ways or Residential Districts 8 feet for sites up to 3 acres(net) 10 feet for sites over 3 acres (net) Minimum Offstreet Parking Space: Industrial Area: Single Tenant Building 1 per 1,000, up to 10,000 square feet; then 1 per 2,000 square feet. Multi-tenant Building Office Area: 1 per 1,000 square feet, min. of 2 per bay. 1 per 300 square feet of gross building area allocated for offices. Open Lot or Walled-In Uses: 2 for each 5,000 square feet of lot area or 15 spaces per 2 employees, whichever is greater; these must be no more than 1,500 feet from the use. Wholesale Showrooms: Building Height: 1 for each 600 square feet of showroom No building shall be of a height greater than the width of the widest street upon which such buildings abuts. 47

53 HIGHEST AND BEST USE 48

54 HIGHEST AND BEST USE Fundamental to the concept of value is the theory of highest and best use. Land is valued as if vacant and available for its highest and best use. The Appraisal Institute in The Appraisal of Real Estate, Thirteenth Edition, defines highest and best use as follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and results in the highest value. 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. Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination, is generally regarded as the highest and best use of the land as though vacant. 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 so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one. In estimating the highest and best use there are essentially four stages of analysis: 1. Possible Use. What uses of the site being appraised are physically possible? 2. Permissible Use (Legal) What uses are permitted by Zoning and Deed Restriction, if any? 3. Feasible Use. Which possible and permissible uses will produce a net return to the owner of the site? 4. Maximally Productive. Among feasible uses, which use will produce the highest net return to the owner of the site? The highest and best use of the land (or site), if vacant and available for use, may be different from the highest and best use of the improved property. This is true when the improvements are not an appropriate use, but make a contribution to the total property value in excess of the value of the site. The following four-point test is required in estimating the Highest and Best Use. The use must be legal. The use must be probable, not speculative or conjectural. There must be a profitable demand for such use and it must return to the land the highest net return for the longest period of time. 49

55 These tests have been applied to the subject property. In arriving at the estimate of Highest and Best Use, the subject site is analyzed as vacant and available for development and as developed. Possible Use The site fronts 195 feet, more or less, along the northwesterly side of Palmetto Frontage Road and approximately 340 feet along the northeasterly side of N.W. 80 Avenue. Therefore, the site has adequate access and exposure on two neighborhood traffic arteries. The subject site is mostly rectangular, with sufficient street frontage and depth for functional utility. All necessary utility services are available along existing street right-of-ways. The site is filled to street grade and does not appear to have any drainage or subsoil deficiencies. The subject site is 66,300 square feet in size which equates to 1.52 acres. The size of the subject site would allow a medium to large scale use. The physical characteristics of the subject site would not restrict any use of the site. Permissible Use Permissible or legal uses are those uses which are permitted by zoning or deed restrictions. There are presently no known private deed restrictions of record. The site is zoned for industrial usage. The zoning of the site permits office and industrial uses. Feasible Use/Maximally Productive Use The physical characteristics and zoning of the subject property permit a wide range of potential uses. The possible and permissible uses of the subject site include offices, warehouses, showrooms and bank branches. The site is a corner location with frontage on two traffic arteries. The site has adequate access and exposure. Similar sites in the vicinity of the subject site are improved with office buildings and commercial condominiums. Based on an analysis of the subject site, the highest and best use of the site is estimated to be for office usage. 50

56 Highest and Best Use as Improved The site is improved with a three-story office condominium building. The building was constructed in 1983 but was renovated when converted to condominium usage. The building is in good condition. The value indication of the property as a rental at stabilized occupancy is estimated in the Income Approach at $2,210,000. The As Is value indication based on a discounted sellout of the condominium units is estimated in the Sales Comparison Approach at $2,650,000. Since the value indication by the Income Approach is significantly less than the value indication by the Sales Comparison Approach, the operation of the property as a rental is indicated not to be the highest and best use of the property. However, due to the presently soft market conditions for commercial condominium units, the immediate sell off of the individual units is probably not feasible. Based on the above analysis, the highest and best use of the property as improved is considered to be for an interim operation as a rental and eventual sellout of the individual condominium units when market conditions improve. 51

57 DESCRIPTION OF IMPROVEMENTS 52

58 DESCRIPTION OF IMPROVEMENTS Age and Condition According to the Public Records of Miami-Dade County, the building improvements were originally constructed in 1983 but was recently renovated and converted to condominium use. From a personal inspection of the property, the improvements appear to be in good condition. Description The subject units are located in a 30-unit office condominium building known as The Lakes Frontage Center Condominium. With the exception of Unit 106, the subject units are fully built out. Unit 106 is mostly complete but would require a cost estimate of $10.00 per square foot to complete. Unit Sizes Unit Size (Net SF) Unit Size (Net SF) 100 1, , , , , , , , ,633 The combined size of the units is 20,189 net square feet. (Source: Condominium Documents) Details of Construction Foundation: Exterior Walls: Windows: Roof: Interior Walls: Poured concrete spread footings in excavation trench 8 concrete block stuccoed and painted Fixed glass in aluminum frame Flat, built-up composition Drywall-painted 53

59 Ceilings: Floors: Lighting: Acoustical tile Carpet, wood and tile Fluorescent Equipment and Fixtures Central air conditioning Site Improvements Landscaping Asphalt paved parking 54

60 FIRST FLOOR PLAN 55

61 SECOND FLOOR PLAN 56

62 THIRD FLOOR PLAN 57

63 THE APPRAISAL PROCESS 58

64 THE APPRAISAL PROCESS The appraisal of real estate is generally valuated by means of one or more of the following approaches: (1) The Cost Approach (2) The Income Approach (3) The Sales Comparison Approach The Cost Approach In the Cost Approach, land and building are valued as though they are separate entities. The land value is first estimated as if vacant. Then, by consulting various cost services, local building contractors and knowledge of construction costs, the replacement cost new of the building is estimated. Accrued depreciation from all sources including physical deterioration, functional and economic obsolescence must be deducted from this cost. The estimated land value is then added to the depreciated cost of the building to give the "depreciated replacement cost" of the property. The Cost Approach is based on the premise that the value of a commodity tends to be set by the cost of acquiring an equally desirable substitute. Applied to real estate, the assumption is that a person would not likely pay more for a property than it would cost him to acquire a suitable site and place an equally desirable building upon it. Costs would include direct cost of construction, indirect costs such as financing costs, land and developer/builder's profit. The subject units are located in an office condominium building on a single site with common parking facilities. The Cost Approach typically is not applicable to individual units in condominium properties where there are multiple units with multiple ownership of the common elements. Therefore, the Cost Approach would have no applicability in this situation and was not utilized. Income Approach The Income Approach is based on the premise that the value of a property may be determined by the amount of net income it can reasonably produce over its remaining economic life. The rationale of the approach is that the present worth of a future income stream is equivalent to the value of the property which produces that income. Four basic steps comprise the Income Approach: (1) Estimate the reasonable expectable annual gross income the property will likely produce. 59

65 (2) Deduct an allowance for vacancy and collection loss to arrive at the effective gross income. (3) Deduct the annual expense of operation from the effective gross income to arrive at the annual net income. (4) Capitalize the annual net income into an indication of value. In this section of the report, a comprehensive market rent survey is conducted in order to estimate the Market Rent for the subject property and to estimate a stabilized occupancy rate. The operating expenses are estimated based on the actual operation of the subject and the operation of comparable office buildings. The Sales Comparison Approach The Sales Comparison Approach is an attempt to measure the reactions of typical buyers and sellers. In this approach, a direct comparison is made between the property being appraised and comparable properties, which have sold recently. These sales are compared for degrees of comparability such as location, size, age, zoning, time, the conditions of sale, financing and other pertinent data, which would affect value. Adjustments are made for these factors in order to arrive at a reliable estimate of value. In this report, sales of office condominium units within the subject development and competitive locations are gathered and analyzed. Reconciliation After applying the three approaches, three separate indications of value are available for analysis. The indicated values obtained from each approach are correlated into one final conclusion of value. Usually one approach will be considered more significant than the rest, either because of the reliability of the data, or because of the type of property involved. Reconciliation is the process by which each approach is objectively weighed according to its importance. 60

66 INCOME APPROACH 61

67 INCOME APPROACH TO VALUE (At Stabilization) This approach to value is a technique in which the anticipated net income is processed to indicate the capital amount of the investment which produces the net income. The capital amount, called the capitalized value, in effect, is the sum of the anticipated annual rents less the loss of interest until the time of collection. Income Potential Gross Annual Income 20,189 Square Feet x $22.50/SF $454,253 LESS: Vacancy & Collection 7.5% -$ 34,069 Effective Gross Annual Income $420,184 Operating Expenses 4% $16,807 RE Taxes (Less 4% Discount) $68,882 Maintenance $157,772 Total Operating Expenses $243,461 -$243,461 Net Operating Income $176,723 $176, % $2,209,038 Value Indication by Income Approach (Rd) $2,210,000 Typically, these units are owner-occupied and not purchased by investors as income property. This is evidenced by the difference in value between operating the property as a rental and the value by Sales Comparison Approach. 62

68 CONTRACT RENT ANALYSIS A rent roll of the property was provided by the property owner. A copy of the rent roll is contained in the addendum of this report. Currently 15 of the 22 units are occupied at a rental rate ranging from $11.59 to $24.12 with an average rent of approximately $ The larger units rent at a lower price per square foot. MARKET RENT ANALYSIS The market rent of the subject building is estimated based on a survey of competitive office properties in the subject market area. A summary of the comparable rentals is as follows: No. Address Size (S.F.) Age Rental Rate Per S.F Palmetto 1, $16.83 Frontage Rd 575 $ NW 146 St 1, $22.44-$ NW 78 Ave 1, $19.92* Way Commerce *Asking rate 1, $18.00* Comparable Rentals 1, 3 and 4 are the rental rates before expenses. Comparable Rental 2 has similar lease terms as the subject units.. Based on an analysis of the contract rental rates as well as comparable rental rates, it is the appraiser s opinion that the contract rent is indicative of market rent. 63

69 Vacancy and Collection Loss A vacancy and collection loss allowance is a reduction in potential rental income due to space not leased or rents not collected. This allowance is generally expressed as a percentage of Potential Gross Income. As of the date of valuation, 15 of the 22 subject units were occupied indicating a vacancy rate of 31.8%. The CB Richard Ellis Office Market Report Miami-Dade County- Second Quarter 2011 indicates a countywide vacancy rate of 16.8% for office properties and 27.4% in the subject market area. Historically, the vacancy rates in the subject market area have been well below 10%. Based on the above, a stabilized vacancy and collection loss allowance of 7.5% is considered applicable for the subject. Operating Expense Analysis The expenses are based on expense information obtained from the actual operation of the subject building, from operating expenses of similar buildings and from a review of published studies. The property owner provided the operating expenses from January of 2010 to June of A copy of the operating expenses is contained in the addenda. Management is based on 4% of Effective Gross Annual Income. This item would cover salary and administrative cost for rent collection and record keeping of the subject property. Real Estate Taxes are estimated based on 2010 real estate taxes for the property less a 4% discount for early payment. Maintenance Fees are based on the actual condominium maintenance fees. This expense covers the remaining costs to operate the units such as utilities, insurance, maintenance and reserves for replacement. The indicated operating expense ratio is 57.9%, very high for an income producing property. 64

70 SELECTION OF CAPITALIZATION RATE Capitalization is a process which translates an income projection into an indication of value. The connecting link is a rate which reflects the return necessary to attract investment capital. Hence, the selection of an appropriate rate represents a critical factor in the capitalization process. OVERALL RATES FROM MARKET SALES OF OFFICE PROPERTIES N0. LOCATION DATE PRICE OVERALL RATE SW 117 Ave, Miami-Dade Co. 7/08 $26,800, % Alhambra Cir, Coral Gables 7/08 $87,300, % Monza Ave, Coral Gables 4/09 $8,500, % Coral Way, Miami 6/09 $3,425, % Douglas Rd, Coral Gables 8/09 $4,250, % Blue Lagoon Dr, Miami-Dade Co 9/09 $6,950, % West Dixie Hwy, Miami-Dade Co. 1/10 $3,750, % SW 130 Ave., Miami-Dade Co. 8/10 $3,950, % OVERALL RATE BY BAND OF INVESTMENT THEORY The overall rate developed by application of the Band of Investment Theory is a synthesis of mortgage debt service and anticipated cash flow to equity which market data discloses as applicable to comparable properties. The rate developed is a weighted average, the weighing being for the respective portions of the value represented by the mortgage and equity positions, or Band of Investment. Cash Flow Weighted Source of Capital Portion Rate Average Mortgage Loan 0.75 x = Equity Funds 0.25 x 0.8 = OR Overall Rate 7.91% 65

71 From discussions with lending institutions, an investor survey from Realty Rates.com First Quarter 2011 and from an analysis of comparable sales, it is determined the most favorable rate and likely terms available to the subject property would be a mortgage at a loan-to-value ratio of 75% and at an interest rate of 5.7% with an amortization period of 25 years and a term of five to ten years. A cash flow rate of 8.0% is estimated to be sufficient to attract equity funds to this type of investment. Overall Rates From Investor Surveys The Realty Rates.com Investor Survey First Quarter 2011 indicates overall rates for of suburban office buildings ranging from 5.61% to 11.94%, with the average being 9.41%. The Korpacz Price Waterhouse Coopers Investor Survey- Fourth Quarter 2010 indicates overall rates for office buildings ranging from 7.00% to 13.0%, with the average being 9.39%. Overall Rate Conclusion The rates utilized in the Band of Investment are based on rates derived from surveys of large multiple tenant office buildings bought and sold for their income potential. Similarly, the overall rates from the investor survey are for large multiple tenant office buildings bought and sold for their income potential. The overall rates from comparable sales are given primary emphasis in the final analysis since the rates are abstracted from actual sales of buildings in Miami-Dade County. The overall rates from comparable sales range from 7.1% to 8.6%. Based on the above sources, with the overall rates abstracted from the market sales given primary emphasis in the final analysis, a capitalization rate of 8.0% is considered appropriate for the subject property. 66

72 SALES COMPARISON APPROACH 67

73 SALES COMPARISON APPROACH TO VALUE This approach to value is a technique in which the Market Value estimate is predicated upon prices paid in actual market transactions of similar properties. These similar, or comparable, transactions (sales) are adjusted to indicate a value to the subject. The Sales Comparison Approach is a process of analyzing sales of similar recently sold properties in order to derive an indication of the most probable sales price of the property being appraised. The reliability of this approach is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and the absence of non-typical conditions affecting the sale. The following page contains a summary of sales of similar properties, which have recently sold. Several other sales are considered, but are not included because there is too wide a difference in physical factors, location and time. The sales are analyzed based on a sale price per square foot of adjusted building area. In comparing the sales to the subject, consideration is given to factors of time, location, physical characteristics and terms and conditions of the sale. A profile and photograph of the comparable condominium buildings, a summary of comparable office condo sales, a sales map and a value conclusion follows herein. 68

74 PARK WEST PROFESSIONAL CENTER ADDRESS: LOCATION: 7767 N.W. 146 Street Miami-Lakes, Florida 7 blocks northeast of the subject property NUMBER OF UNITS: 44 BUILDING AGE: 2001 BUILDING CONDITION: Good RECENT SALES/LISTINGS: Date of Sale Sale Price Unit Number Unit Size (S.F.) Price (S.F.) 10/2009 $210,000 ED-2 1,051 $ REMARKS: The building is in good condition. 69

75 PARK WEST PROFESSIONAL CENTER 70

76 JCMH CONDOMINIUM ADDRESS: LOCATION: 814 Ponce de Leon Boulevard Coral Gables, Florida 2 blocks northeast of the subject property NUMBER OF UNITS: 16 BUILDING AGE: 2005 BUILDING CONDITION: Good RECENT SALES/LISTINGS: Date of Sale Sale Price Unit Number Unit Size (S.F.) Price (S.F.) 7/2010 $152, ,085 $ /2011 $180, ,085 $ REMARKS: The building is in good condition. 71

77 JCMH CONDOMINIUM 72

78 SUMMARY OF COMPARABLE OFFICE CONDOMINIUMS No. Date Name Address Unit Location Age Unit Size Sale Price Price/SF 1 10/2009 Park West Professional Center 7767 N.W. 146 St. ED-2 7 blocks NE ,051 $210,000 $ /2010 J C M H Condominium N.W. 78 Ave. 1 2 blocks NE ,085 $152,500 $ /2011 J C M H Condominium N.W. 78 Ave blocks NE ,085 $180,000 $ Palmetto Frontage Subject 4 Listing Lakes Frontage Center Condo. Rd. N/A Building $150,000* $199.73* Palmetto Frontage 5 Listing Lakes Frontage Center Condo. Rd. N/A Subject units ,189 $4,500,000* $223.69* Palmetto Frontage Subject Unit Lakes Frontage Center Condo. Rd ,189 *Asking price

79 SALES MAP 74