A MASTER BINDER FOR GROUP A APPRAISAL REPORT Of the Fee Simple Interest for DOA Surplus Land-Sale Units 1 and 11 Appraisals

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1 A MASTER BINDER FOR GROUP A APPRAISAL REPORT Of the Fee Simple Interest for DOA Surplus Land-Sale Units 1 and 11 Appraisals Sale Unit 1 Acreage Location West Side Pine Street, ±840 Feet North of Sunset West Side Pine Street, ±725 Feet North of Sunset West Side Pine Street, ±600 Feet North of Sunset West Side Pine Street, ±480 Feet North of Sunset West Side Pine Street, ±230 Feet North of Sunset East Side Pine Street, ±810 Feet North of Sunset East Side Pine Street, ±920 Feet North of Sunset Sale Unit 11 Acreage Location North Side of Helm Drive, ±300 Feet East of Escondido Sale Unit 1 is Located on Both Sides of Pine Street, North of Sunset Road, Sale Unit 11 is Located on the North Side of Helm Drive, ±300 Feet East of Escondido Unincorporated Paradise Township, Clark County, NV, and For the Purpose of Developing an Opinion of the Current Market Value As of August 24, 2014 Prepared For Ms. Temple Mullen, Property Acquisition Administrator Clark County Department of Aviation P.O. Box Las Vegas, NV, Prepared by Chris C. Lauger, MAI P.O. Box Las Vegas, NV, File Name: PO

2 P.O. Box Las Vegas, NV, Phone: Fax: September 23, 2014 Ms. Temple Mullen Property Acquisition Administrator Clark County Department of Aviation P.O. Box Las Vegas, NV Re: Group A Master Appraisal Report Binder for the Appraisals of DOA Surplus Land-Sale Unit 1 (located on both sides of Pine Street, ±400 feet north of Sunset Road) and Sale Unit 11 (located on the north side of Helm Drive, ±300 feet west of Escondido Street), Unincorporated Paradise Township, Clark County, NV, and Dear Ms. Mullen: At your request, I have prepared appraisal reports for Sale Unit 1 (located on both sides of Pine Street, ±400 feet north of Sunset Road) and Sale Unit 11 (located on the north side of Helm Drive, ±300 feet west of Escondido Street), referenced above, which will be auctioned separately. This master appraisal report binder must be used in conjunction with two supplemental binders for each Sale Unit (Binder 1 and Binder 11). Sale Unit 1 is comprised of seven parcels totaling 4.3 net acres. Sale Unit 11 is a single parcel.76 net acres in size. Sale Unit 1 is located on both sides of Pine Street, ±400 feet north of Sunset Road and Sale Unit 11 is located on the north side of Helm Drive, ±300 feet west of Escondido Street. Both parcels are located within Unincorporated Paradise Township of Clark County in the Airport submarket. The following table illustrates the parcels that make up Sale Unit 1 and Sale Unit 11 and their respective sizes and locations. Sale Unit 1 Acreage Location West Side Pine Street, ±840 Feet North of Sunset West Side Pine Street, ±725 Feet North of Sunset West Side Pine Street, ±600 Feet North of Sunset West Side Pine Street, ±480 Feet North of Sunset West Side Pine Street, ±230 Feet North of Sunset East Side Pine Street, ±810 Feet North of Sunset East Side Pine Street, ±920 Feet North of Sunset Sale Unit 11 Acreage Location North Side of Helm Drive, ±300 Feet East of Escondido

3 Ms. Temple Mullen Property Acquisition Administrator Clark County Department of Aviation September 23, 2014 Page 2 The land areas noted were taken from information provided by Clark County and Clark County public records. The site improvements include retaining walls adjacent to improved properties or temporary fencing adjacent to the street or unimproved properties. The sites are zoned R-E, Rural Estates Residential with a planned land use of BDRP - Business Design and Research Park. Attached to this letter of transmittal is an appraisal report which describes the methodology used to form an opinion of the requested market value of the subject Property, and is intended to comply with the reporting requirements of the Uniform Standards of Appraisal Practice as adopted by the Appraisal Foundation. This report is also intended to comply with the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute, the Office of the Comptroller of the Currency (OCC dated October 28, 1994) as well as the guidelines set by the client, Clark County Department of Aviation in establishing the requested market values. The intended use of this appraisal is to assist in the sale of the identified property rights. The appraisal report is not intended for any other use. The intended users are the Clark County Real Property Management acting on behalf of the Clark County Department of Aviation. Use of the report by others is not intended. It is noted that the subject is anticipated to be auctioned by Clark County and it is likely this appraisal will be viewed by parties interested in purchasing the property. The fee simple estate is being valued subject to limitations imposed by governmental powers which include Reservation of an Avigation Easement for Sale Unit 1 and 11. Sale Unit 1 has additional BLM reservations. Please reference page 13 of this report for important information regarding the scope of research and analysis for this appraisal, including property identification, inspection, highest and best use analysis and valuation methodology. I certify that I have no present or contemplated future interest in the property beyond this opinion of value. I have not performed any prior services regarding the subject within the previous three years of the appraisal date.

4 Ms. Temple Mullen Property Acquisition Administrator Clark County Department of Aviation September 23, 2014 Page 3 Your attention is directed to the Limiting Conditions and Assumptions section of this report (page 9). Acceptance of this report constitutes an agreement with these conditions and assumptions. In particular, I note the following: Hypothetical Condition: There are no hypothetical conditions for this appraisal. Extraordinary Assumptions: There are no extraordinary assumptions for this appraisal. Based on the appraisal described in the accompanying report, subject to the Limiting Conditions and Assumptions, I have made the following value conclusion: Current: The current market value of the subject s in Fee Simple estate as of August 24, 2014, is: Property Parcel Binder 1-Sale Unit 1 (4.3 Net Acres) APN s thru 009; ; and Parcel Binder 11-Sale Unit 11 (.76 Net Acres) APN Market Value Opinion $1,405,000 $220,000 The market exposure time preceding August 24, 2014 would have been 12 months and the estimated marketing period as of August 24, 2014 is 12 months. Respectfully submitted, Chris C. Lauger, MAI Nevada Certificate: NV-A CG Expires: March 31, 2016

5 TABLE OF CONTENTS Summary of Important Facts and Conclusions... 6 General Assumptions and Limiting Conditions... 9 Definitions Scope of Work Regional Analysis Market Area Analysis Airport Cooperative Management Area (CMA) Vacant Land Market Industrial Market Analysis Market Area Summary Site Description and Analysis Assessor s Parcel Map and Aerial Photo (Sale Unit 1) Assessor s Parcel Map and Aerial Photo (Sale Unit 11) Subject Photographs Assessment and Taxes Zoning Airport Environs Regulations Highest and Best Use Valuation Methodology Analyses Applied Land Valuation Comparables Land Comparables Land Sales Summary and Location Map Certification Statement Addenda Engagement Letter Restrictive Covenant and Reservations Qualifications of Chris C. Lauger, MAI Glossary... 88

6 Summary of Important Facts and Conclusions Summary of Important Facts and Conclusions Subject: The subject consists of two assemblages to be auctioned by Clark County identified as Sale Unit 1 and Sale Unit 11. Sale Unit 1 is comprised of seven parcels totaling 4.3 net acres. Sale Unit 11 is a single parcel.76 net acres in size. Sale Unit 1 is located on both sides of Pine Street, ±400 feet north of Sunset Road and Sale Unit 11 is located on the north side of Helm Drive, ±300 feet west of Escondido Street. The site is within Unincorporated Paradise Township in the Airport submarket. Owner: Legal Description: Clark County Department of Aviation See Addenda Date of Report: September 23, 2014 Intended Use: Intended User(s): Sale History: Current Listing/Contract: The intended use is to assist in the sale of the identified property rights. The appraisal report is not intended for any other use. The Clark County Real Property Management acting on behalf of the Clark County Department of Aviation. Use of the report by others is not intended. The parcels have all been under the ownership of Clark County since at least 2001, with most being under Clark County s ownership since The subject is not known to be listed for sale or lease as of the date of value or in the recent past. It is the intent of Clark County to sell the parcels as two economic units through a public auction process in Q4 of

7 Summary of Important Facts and Conclusions Sale Unit 1 Land: Sale Unit 11 Sale Unit 1 Acreage Location West Side Pine Street, ±840 Feet North of Sunset West Side Pine Street, ±725 Feet North of Sunset West Side Pine Street, ±600 Feet North of Sunset West Side Pine Street, ±480 Feet North of Sunset West Side Pine Street, ±230 Feet North of Sunset East Side Pine Street, ±810 Feet North of Sunset East Side Pine Street, ±920 Feet North of Sunset Sale Unit 11 Acreage Location North Side of Helm Drive, ±300 Feet East of Escondido Parcel ID Usable Land Area (Acres) Land Summary Usable Land Area (Sq Ft) Frontage - Primary Street (Feet) Average Depth (Feet) , , , , , , , , Assessment: Real Estate Assessment and Taxes Tax ID Land Improvements Total Tax Rate Tax Rate Per Taxes Sale $33,389 $0 $33,389 $ $100 $ Unit $22,411 $945 $23,356 $ $100 $ Sale Unit $22,411 $0 $22,411 $ $100 $ $45,280 $3,398 $48,678 $ $100 $1, $21,040 $3,398 $24,438 $ $100 $ $29,272 $2,453 $31,725 $ $100 $ $52,142 $3,398 $55,540 $ $100 $1,

8 Summary of Important Facts and Conclusions Zoning: Planned Land Use: Highest and Best Use of the Site as Vacant: R-E, Rural Estates Residential BDRP - Business Design and Research Park Is to hold until demand warrants development of the sites as speculative development or for immediate development for an owner/user or a build-to-suit opportunity. VALUE INDICATIONS Reconciled Value: Current Market Value Effective Date: August 24, 2014 Property Rights: Fee Simple Property Parcel Binder 1-Sale Unit 1 (4.3 Net Acres) APN s thru 009; ; and Parcel Binder 11-Sale Unit 11 (.76 Net Acres) APN Market Value Opinion $1,405,000 $220,000 8

9 General Assumptions and Limiting Conditions General Assumptions and Limiting Conditions Acceptance of and/or use of this report constitutes acceptance of the following limiting conditions and assumptions; these can only be modified by written documents executed by both parties. This appraisal is to be used only for the purpose stated herein. While distribution of this appraisal in its entirety is at the discretion of the client, individual sections shall not be distributed; this report is intended to be used in whole and not in part. No part of this appraisal, its value opinions or the identity of the firm or the appraiser may be communicated to the public through advertising, public relations, media sales, or other media. All files, work papers and documents developed in connection with this assignment are the property of Asset Insight of Nevada. Information, estimates and opinions are verified where possible, but cannot be guaranteed. Plans provided are intended to assist the client in visualizing the property; no other use of these plans is intended or permitted. No hidden or unapparent conditions of the property, subsoil or structure, which would make the property more or less valuable, were discovered by the appraiser or made known to the appraiser. No responsibility is assumed for such conditions or engineering necessary to discover them. Unless otherwise stated, this appraisal assumes there is no existence of hazardous materials or conditions, in any form, on or near the subject property. Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyl, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, was not called to the attention of the appraiser nor did the appraiser become aware of such during the appraiser s inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser, however, is not qualified to test for such substances. The presence of such hazardous substances may affect the value of the property. The value opinion developed herein is predicated on the assumption that no such hazardous substances exist on or in the property or in such proximity thereto, which would cause a loss in value. No responsibility is assumed for any such hazardous substances, nor for any expertise or knowledge required to discover them. Unless stated herein, the property is assumed to be outside of areas where flood hazard insurance is mandatory. Maps used by public and private agencies to determine these areas are limited with respect to accuracy. Due diligence has been exercised in interpreting these maps, but no responsibility is assumed for misinterpretation. Good title, free of liens, encumbrances and special assessments is assumed. No responsibility is assumed for matters of a legal nature. Master Binder 9

10 General Assumptions and Limiting Conditions Necessary licenses, permits, consents, legislative or administrative authority from any local, state or Federal government or private entity are assumed to be in place or reasonably obtainable. It is assumed there are no zoning violations, encroachments, easements or other restrictions which would affect the subject property, unless otherwise stated. The appraiser is not required to give testimony in Court in connection with this appraisal. If the appraisers are subpoenaed pursuant to a court order, the client agrees to pay the appraiser Asset Insight of Nevada s regular per diem rate plus expenses. Appraisals are based on the data available at the time the assignment is completed. Amendments/modifications to appraisals based on new information made available after the appraisal was completed will be made, as soon as reasonably possible, for an additional fee. Definitions Market Value 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 are 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 interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (This Market Value definition is from regulations published by federal regulatory agencies pursuant to Title XI of the Financial Institutions Reform Recovery, and Enforcement Act (FIRREA) of 1989 between July 5, 1990 & August 24, 1990, by the Federal Reserve System (FRS), National Credit Union Administration (NCUA), Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) & the Office of Comptroller of the Currency (OCC). This definition is also referenced in regulations jointly published by the OCC< OTS, FRS, and FDIC on June 7, 1994, and in the Interagency Appraisal and Evaluation Guidelines, dated October 27, 1994.) Master Binder 10

11 General Assumptions and Limiting Conditions A Fee Simple interest is defined 1 as: Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. When ownership of the land is transferred via a patent, the United States will reserve (1) rights-of-way for ditches and canals, (2) minerals of known value, and (3) rights-of-way for roads, public utilities, and flood control improvements. As discussed below, mineral extraction is not considered to be the highest and best use of the land, and therefore the mineral reservation does not negatively affect the value of the land. The right-of-way reservation for ditches and canals is included in all patents issued by the United States when conveying land, and it has not been exercised in the recent past in the State of Nevada to allow development of ditches and canals. The ditches and canals reservation permits the United States to construct irrigation ditches and canals, and stock water pipelines including appurtenances such as valves, pressure reducers, etc., required for the transportation of water across non-federal land (BLM Acquisition Handbook, H , Chapter V). A future irrigation ditch or stock water pipeline is an unlikely issue facing the subject land. The noted utility easements are of typical widths and unless otherwise noted, do not significantly affect the buildable area or the use potential of the site. There may also be potentially saleable minerals in the area, including possibly on the parcels. However, it is not felt that mineral extraction reflects the highest and best use of the land. This is supported by the fact that urban development and not mining is the planned use of all of the SNPLMA auctioned Federal land within the development ring around the Las Vegas Valley. With that in mind, the subject land is in a fairly mature area, and the U.S. Government s reservation of minerals of known value is not expected to negatively affect the value of the property. Additionally, the parcels are not being sold with any mineral rights. The parcels have limited desert vegetation. Marketing Time is defined 2 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 the appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and 1 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. pg. 78 (Chicago: Appraisal Institute, 2010). 2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010). Master Binder 11

12 General Assumptions and Limiting Conditions Personal Property Market Value Opinions" address the determination of reasonable exposure and marketing time.) Exposure Time is defined 3 as: 1. The time a property remains on the market. 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; a retrospective estimate based on an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions. (Appraisal Standards Board of The Appraisal Foundation, Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions") Market value estimates imply that an adequate marketing effort and reasonable time for exposure occurred prior to the effective date of the appraisal. In the case of disposition value, the time frame allowed for marketing the property rights is somewhat limited, but the marketing effort is orderly and adequate. With liquidation value, the time frame for marketing the property rights is so severely limited that an adequate marketing program cannot be implemented. (The Report of the Appraisal Institute Special Task Force on Value Definitions qualifies exposure time in terms of the three above-mentioned values.) See also marketing time. 3 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010). Master Binder 12

13 Scope of Work Scope of Work According to the Uniform Standards of Professional Appraisal Practice, it is the appraiser s responsibility to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem and intended user(s). Therefore, the appraiser must identify and consider: the client and intended users; the intended use of the report; the type and definition of value; the effective date of value; assignment conditions; typical client expectations; and typical appraisal work by peers for similar assignments. This appraisal is prepared for Ms. Temple Mullen, Property Acquisition Administrator, Clark County Department of Aviation. The problem to be solved is to determine the market value of the property. The intended use is to assist in the sale of the identified property rights. The appraisal report is not intended for any other use.. This appraisal is intended for the use of Clark County Real Property Management acting on behalf of the Clark County Department of Aviation. Use of the report by others is not intended.. The fee simple estate is being valued subject to limitations imposed by governmental powers which include Restrictive Covenants and a Reservation of an Avigation Easement for Sale Unit 1 and Sale Unit 11. Additionally, the Bureau of Land Management is reserving the following for Sale Unit 1: A right-of-way for ditches or canals by the authority of the United States pursuant to the Act of August 30, 1890 (43 U.S.C. 945); and All mineral deposits in the land so patented, and to it, or persons authorized by it, the right to prospect for, mine, and remove such deposits from the same under applicable law and regulations to be established by the Secretary of the Interior. When ownership of the land is transferred via a patent, the United States will reserve (1) rights-of-way for ditches and canals, (2) minerals of known value, and (3) rights-of-way for roads, public utilities, and flood control improvements. As discussed below, mineral extraction is not considered to be the highest and best use of the land, and therefore the mineral reservation does not negatively affect the value of Sale Unit 1. The right-of-way reservation for ditches and canals is included in all patents issued by the United States when conveying land, and it has not been exercised in the recent past in the State of Nevada to allow development of ditches and canals. It appears that the ditches and canals reservation permits the United States to construct irrigation ditches and canals, and stock water pipelines including appurtenances such as valves, pressure Master Binder 13

14 Scope of Work reducers, etc., required for the transportation of water across non-federal land (BLM Acquisition Handbook, H , Chapter V). A future irrigation ditch or stock water pipeline is an unlikely issue facing Sale Unit 1. The utility easements for public water and sewer lines, power lines, telephone lines and gas lines are of typical widths and unless otherwise noted, do not significantly affect the buildable area or the use potential of the site. There may also be potentially saleable minerals in the area, including possibly on the parcels. However, it is not felt that mineral extraction reflects the highest and best use of Sale Unit 1. This is supported by the fact that urban development and not mining is the planned use of all of the SNPLMA auctioned Federal land within the development ring around the Las Vegas Valley. With that in mind, the subject land is in a fairly mature area, and the U.S. Government s reservation of minerals of known value is not expected to negatively affect the value of Sale Unit 1. Additionally, Sale Unit 1 not being sold with any mineral rights. Report Type: This is an Appraisal Report as defined by Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(a). This format provides a summary or description of the appraisal process, subject and market data and valuation analyses. This appraisal consists of this master binder and two parcel binders, 1 and 11, which must be viewed and analyzed collectively to understand the logic and scope of work for this assignment. Property Identification: Inspection: Market Area and Analysis of Market Conditions: Highest and Best Use Analysis: The subject has been identified by the legal description and the assessors' parcel numbers. A complete inspection of the subject properties have been made, and photographs taken on August 8th and 24th. A complete analysis of market conditions has been made. The appraiser maintains and has access to comprehensive databases for this market area and has reviewed the market for sales and listings relevant to this analysis. A complete as vacant highest and best use analysis for the subject has been made. Physically possible, legally permissible and financially feasible uses were considered, and the maximally productive use was Master Binder 14

15 Scope of Work concluded. Type of Value: Valuation Analyses Cost Approach: Sales Comparison Approach: Income Approach: Current Market Value A cost approach was not applied as the subject is vacant unimproved land that the cost approach provides no guidance to value. A sales approach was applied as there is adequate data to develop a value opinion and this approach reflects market behavior for vacant land. An income approach was not applied as the subject is vacant partially improved land with no income component. Therefore, an income approach provides no relevant information regarding the subject's market value. Hypothetical Condition: There are no hypothetical conditions for this appraisal. Extraordinary Assumption: There are no extraordinary assumptions for this appraisal. Information Not Available: ALTA or similar survey Environmental report Master Binder 15

16 Regional Analysis Regional Analysis Sale Unit 11 Sale Unit 1 The subject is located within the Las Vegas Valley at the southern tip of Nevada. Las Vegas is often the name referencing the areas surrounding the City of Las Vegas, including the cities of Henderson, North Las Vegas as well as the resort areas on or near Las Vegas Boulevard, or the Strip. As the seat of Clark County, the county population comprises roughly 72% of Nevada's residents and is the 14 th most populous County in the United States. Las Vegas' growth can be tied originally to the construction of railroad routes, Hoover Dam, the legalization of gambling and liberal divorce laws. More recently the megahotel resorts have garnered Las Vegas world-wide media attention. Las Vegas is a world-wide destination for entertainment, shopping, dining, beach and night clubs, exhibition and conventions. The Las Vegas market represents a leisure, meeting and convention destination and has been the #1 ranked convention venue for the last 20 years hosting 53 of the 250 largest shows in Las Vegas has the most hotel rooms of any city in the United States and has the 12 largest hotels in the world. Master Binder 16

17 1,522,962 1,584,166 1,662,773 1,729,522 1,803,774 1,867,817 1,912,349 1,939,407 1,953,422 1,967,926 2,000,759 Regional Analysis The Las Vegas Valley population surpassed 2 million residents in Prior to the housing bubble and the crash of the local and national economy, the Las Vegas MSA had not had a growth rate below 3% since 1971 and was consistently rated as one of the top MSA s for growth adding roughly 65,000 new residents per year. Driver license surrenders, a measure of how many new residents are moving to Las Vegas and hit a low of 4,262 per month in The surrenders have rebounded to 5,200 per month through April 2013, a sign that newcomers are returning to Las Vegas. The following graphic shows the population growth in Clark County. 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , , The Clark County school district enrollments shrank for the first time since the 1980's. As the economy recovers so has the enrollment which was up 1% in versus The last construction boom began with the Mirage in 1989 and included 50,000 new hotel rooms with Las Vegas having 19 of the 25 largest hotels in the world at one time. Prior to 2008, the hotel gaming sector was believed to be recession proof. Beginning with the work stoppage of Echelon on August 1, 2008, the resort corridor and all commercial property types in and around Las Vegas showed the overbuilding that occurred. Lower airline capacity, tighter credit markets and the general economic downturn left hotel-casinos and the Las Vegas economy as a whole reeling. As the economy faltered, numerous projects under construction were poised to saturate an already overbuilt market. The overbuilt resort corridor and faltering economy placed pressure on key Las Vegas metrics, but many of the benchmark figures have rebounded. For 2013, the average city wide occupancy rate was 84.3%, down from 84.4% from Average daily room rate (ADR) was up 2.4%; convention attendance was up 3.3%; visitor volume was flat; passenger count was up 0.5% and gaming revenue was up 2.9% with Strip gaming Master Binder 17

18 Millions Billions Regional Analysis revenue up 4.8%. Through May 2014, visitor volume is up 4.5%, occupancy is up 3.2%, ADR is up 7.6%, convention attendance is up 3.1% while gaming revenue is down 0.5% county-wide. The following graphic shows that by 2013 visitor volume has returned to pre-recession levels, but gaming revenue has not recovered. 40 Visitor Volume $11 Gaming Revenue 39 $ Back to Pre- Recession Level $9 $8 Well Below Pre-Recession $ The Las Vegas Strip has numerous upgrades and remodels underway, but no new construction. This is the first time since the mid 80's that no new major resort was under construction on the Strip. The massive City Center project and the adjacent Cosmopolitan resort both added high-end properties with shopping and dining choices, but have not performed well enough to repay their development costs. However, Deutsche Bank has sold the Cosmopolitan after having to finance to finish the project and operate the resort for several years. Mothballed projects that had commenced construction include Echelon (5,000 rooms), Fountainbleau (4,800 rooms and condos), the Summerlin Mall and the Wyndham timeshare tower at Twain and I-15. Additionally, expansion of the World Market Center, Manhattan West as well as numerous large and small projects were delayed or cancelled entirely. As of Q3-2014, Wyndham has resumed construction on a scaled-back project, as has the Summerlin Mall and Gramercy (Manhattan West). Caesar s Entertainment has redeveloped three casinos into Project Linq which includes a 500-foot observation wheel and the SLS (Sahara) is undergoing a $400 million total renovation to reposition the property. The Fountainbleau was purchased by investor Carl Ichan and has had widespread speculation regarding the sale of the construction materials rather than restarting the project. Additionally, Genting Gaming has purchased the Echelon site from Boyd Gaming and will presumably restart work on the project on a scaled-back basis. The multi-family sector had excess inventory due to the glut of condominiums and single-family homes. The multi-family sector showed the highest dollar sales volume in 2011 of all the commercial sectors nationwide and was the only product type with notable new construction in Las Vegas in Master Binder 18

19 Regional Analysis After leading the County in foreclosures and price drops, the Las Vegas housing market hit bottom around January 2012 and has showed significant improvement since then. The existing home market sales were made up of 70% of traditional buyers and sellers in 2013, up from 51% in 2012 and 26% in However, Nevada still ranks in the top 5 states for their foreclosure rate. But signs of recovery continue with the median existing home price in June of $199,900, up 2.5% from May, but up 14.2% from June As of June 2014, the median price of a new home is $288,192, up 8% from June New home construction began to recover in 2012 and continues to show strength in 2014 with median new home prices up 30% year over year and new home sales up significantly as shown in the following graphic. New Homes Sold in Las Vegas 33,600 28,600 23,600 25,230 29,248 30,750 36,051 18,600 19,670 13,600 8,600 10,464 5,271 5,341 3,894 5,554 7,303 3, In addition to the new construction in residential real estate, the overall economy has been adding jobs, including in the manufacturing sectors. The industrial market has shown the strongest recover with numerous large-tenant industrial buildings under construction and Colliers International reporting a healthy positive absorption of 3.6 million square feet in Occupied industrial space exceeded 100 million square feet, a figure not reached since New inventory of 813,948 was delivered to the Las Vegas market in 2013, primarily build-to-suit projects. The high occupancy rates experienced by all types of commercial real estate before the financial market meltdown combined with overbuilding and increased costs made the Las Vegas market particularly vulnerable once tourism demand decreased. The Q2-14 vacancy rates for commercial real estate continue to stagnate and are now at 10.1% for industrial, down from 11.2% in Q1; retail vacancy is reported at 9.1%, down from 9.5% Master Binder 19

20 Regional Analysis in Q1, and office vacancy is reported at 19.8%, down from 20.8% in Q1, according to Colliers International, a real estate consulting firm. 100% 95% 90% 85% 80% 75% Apartment Office Industrial Retail 70% Visitation figures have increased, but other key metrics have not. Large-scale construction is not feasible in Las Vegas beyond hotel-casino upgrades, renovations or small build-to suit projects. The significant price drops in residential and commercial real estate presented buyers with the opportunity to purchase properties at significant discounts to cost. Banks REO foreclosures activity appears to be at or near the end of the cycle. Pricing has found a bottom and is rebounding for well placed functional buildings. Due to the decline in revenue and sales tax, governmental spending cuts have resulted in layoffs, furloughs and other cost cutting measures. This combined with the general downturn in the economy this left Nevada with the Nation's highest unemployment rate for much of 2010 through However, as the national economy has rebounded, the Nevada and Las Vegas economies have improved. As of June 2014, Nevada had a 7.7% unemploymen, down from 7.9% in May and down from 10% reported in June The unemployment rate in Clark County/Las Vegas was 7.9% in June, unchanged from May The following graphic displays Las Vegas recent unemployment rate. Master Binder 20

21 Regional Analysis Las Vegas Unemployment Rate Regional Summary Las Vegas should continue to recover at an anemic rate compared to the pre-recession growth levels. Positive signs continue to emerge with new projects, public and private being announced. The local economy is in a recovery stage and appears poised to enter into expansion for several property types. Master Binder 21

22 Market Area Analysis Market Area Analysis The numbers above represent the individual parcels, but Sale Unit 1 is located to the right and shown as numbers 1 thru 7 and Sale Unit 11 is located on the left referenced as 8. Market Area Location and Boundaries A market area can encompass one or more neighborhoods and/or districts. In a neighborhood, the operation of social, economic, government and environmental forces generally influence property values in the same way. The market area may consist of a mixture of uses (termed a neighborhood), or one of similar uses (termed a district). The subject is a business park zoned property and its main competition for users would come Master Binder 22

23 Market Area Analysis from other similarly zoned parcels. Therefore, I have utilized a market area for delineating the subject s competitive area. The subject market area is located in the airport submarket of the Las Vegas Valley and is characterized by mostly industrial uses with commercial uses along major arterials and some residential uses primarily within the northeastern portion of the defined market area. The subject market area is located in the west and central portions of the airport submarket. The market area is delineated by the following boundaries: Russell Road to the north; Whitney Mesa Bluff to the east; Sunset Road westerly to Eastern Avenue then southerly along the edge of industrial development to Paradise Road, southerly to Warm Springs Road; westerly to Las Vegas Boulevard; northerly to Sunset Road and easterly across McCarran International Airport to Russell Road. These boundaries have been selected as the area that industrial land and buildings compete with directly. Within the market area I-215, Sunset Road and Russell Road are the primary east west arterials with intersections at US 95 to the east and Las Vegas Boulevard or I-15 to the west. Russell Road does not go through McCarran International Airport, but is a major arterial on both sides of the airport. The 215 airport collector is being renovated to alleviate rush hour congestion as it provides major access to UNLV and the east side of the Strip resort corridor for workers. McCarran International Airport is located within the market area, although the east side of the airport provides freight service, the west side is primarily for private aircraft and Grand Canyon helicopter tours. This location impacts some of the properties in the flight path and within certain portions of the Airport Environs overlay district. Many parcels cannot be developed to residential uses and numerous residential properties were condemned by Clark County along Russell Road around Eastern Avenue. During peak take-off and landing times, almost continuous air traffic is experienced in the market area. Aside from the noise associated with the airport and the accident potential zone associated with the location, there do not appear to be any additional external influences adversely affecting the market area. It is also noted that there has not been any negative impact to rental rates, occupancy rates or sale prices for industrial properties in the Airport submarket. A significant portion of the market area is within the McCarran Airport Environs Overlay District, including the Sale Unit 1 s location within the AE-70 Airport Overlay and Sale Unit 11 s location within the AE-60 Airport Overlay. Due to being within the Airport Environs Overlay, the subject property and proposed properties have higher insulation and window construction specifications required to abate the noise associated with the airplane traffic. Airport Cooperative Management Area (CMA) McCarran International Airport is located within the subject market area. This location impacts some of the properties in the flight path and within certain portions of the Airport Master Binder 23

24 Market Area Analysis Environs Overlay District. Many parcels cannot be developed to residential uses. Aside from the noise associated with the airport and the accident potential zone associated with the location, there do not appear to be any additional external influences adversely affecting the neighborhood. It should also be noted that much of the market area/neighborhood is within McCarran International Airport s Cooperative Management Area (CMA). The CMA covers approximately 20,000 acres in southwest Las Vegas, and consists generally of properties once owned by the Federal government. In 1998, the Southern Nevada Public Lands Management Act was enacted by Congress, which allowed the BLM to transfer its 5,200 acres of CMA land to Clark County s control. Clark County subsequently master planned the CMA for mostly Business Park/Industrial or airport compatible development. No residential or hotel zoning was expected to be allowed in the CMA, and schools, zoos, theaters, hospitals and RV parks were discouraged The CMA boundaries were established to encompass the airport flight zones (i.e. the Airport Environs), and development within the CMA is controlled in order to minimize conflicts between the airport and the public with regard to aircraft noise and the potential for accident hazards resulting from the airport operations. The following map shows the subject within the CMA and Sale Unit 1 within the AE-70 Overlay and Sale Unit 11 within the AE-60 Overlay. SU 11 SU 1 In January 2013 the Clark County Department of Aviation announced plans to remove deed restrictions on some of the CMA land. This resulted in significant price increases as any CMA land that could subsequently be developed to residential uses has been put under contract to homebuilders. This has put upward pressure on industrial zoned land that cannot be developed to a residential use due to the limited inventory available. Master Binder 24

25 Market Area Analysis Adding to the residential land supply and driving prices up surely was not foreseen by the Department of Aviation. Nonetheless, that is what occurred. Vacant Land Market After several years of declining prices, the Las Vegas land market had a resurgence in 2012 that began with residential land and expanded into other land types during Retail transactions have occurred throughout the valley, but most of those locations are highly superior to the subject area. The majority of industrial transactions have occurred in the southwest and speedway portion of the North Las Vegas submarket. The land transactions occuring in the southwest submarket are primarily for build-to-suit projects while the transactions that occurred in the Las Vegas Speedway area were primarily land speculators with limited owner/user transactions. As the overall Las Vegas economy has recovered, investors are once again actively pursuing land opportunities. The overall land market is shown in the following graphic based on Colliers International data. Commercial real estate of all sectors are seeing increasing occupancy rates and declining vacancy rates. At the same time, Strip visitation, hotel occupancy rates and other metrics continue to improve as Las Vegas once again gains traction in the recovery. The recent opening of the SLS (former Sahara) should continue to drive visitation as it is the first new or remodeled property to open on the Strip since the Cosmopolitan did in Industrial Market Analysis As of March 2014, Trepp reports commercial mortgage backed securities (CMBS) delinquency rates nationwide dropped to 6.54% the lowest rate since October During 2013, new delinquencies dipped below the $1 billion threshold for the first time since Master Binder 25

26 Market Area Analysis February 2009 and resolutions outpaced new additions to the delinquencies by nearly two-toone. Noteworthy is that industrial continues to have one of the highest delinquency rates at 8.82%, trailing only multi-family. The Las Vegas industrial market is ranked as the 35 th largest market in the U.S. by CBRE, a commercial real estate services firm. With over 114 Million square feet of inventory, Las Vegas is considered a secondary industrial market with somewhat limited REIT ownership of newer and larger projects throughout the valley. Local industrial demand is limited by the sparse population surrounding the Las Vegas Valley compared to larger markets. Las Vegas benefits from its proximity to Southern California, the largest industrial market in the U.S. Colliers reports increased absorption as has other reporting agencies as the overall Las Vegas market enters recovery with little expansion of new product, primarily build-tosuit projects. Demand for industrial space softened in Las Vegas beginning in 2006 due to the recession, financial crisis, elevated unemployment, and overall declining real estate values. Developers tabled planned projects until demand for industrial space strengthens as numerous projects were completed but failed to achieve stabilized occupancy. After REO ownership, properties were available for purchase by opportunistic buyers generally at prices still below replacement cost. Although Las Vegas has trailed the national recovery, pricing of industrial assets is increasing due to limited new construction locally since The inventory scarcity most noted within the Las Vegas valley has been large single-tenant facilities. With sales transactions increasing, functional and well located buildings of all sizes are experiencing shortages of inventory. Colliers International surveyed 4,730 industrial properties throughout the Las Vegas Valley accounting for 114,692,686 square feet of industrial space. As of Q2 2014, Colliers reported a vacancy rate of 10.4% including subleased space, down from 11.6% in Q1 based on a reported net positive absorption of 1,403,579 square feet in Q2. The subject is located in the Airport submarket; which as of Q2-14 Colliers shows having 506 properties accounting for 14,306,334 square feet of industrial space. The Airport submarket comprises 12.5% of the industrial space in the Las Vegas market, the third largest of the seven submarkets, behind only the Southwest and North Las Vegas submarkets. The Airport submarket has generally had the highest average rental rates and a similar or lower vacancy rate compared to the overall Las Vegas market due to its desirable location and larger REIT and professional ownership compared to other submarkets. A synopsis of the submarkets and overall Las Vegas industrial market is shown on the following graphic with the Airport submarket highlighted. Master Binder 26

27 Market Area Analysis The Airport submarket had a vacancy factor of 14.2% as of Q2, down from 15.9% in Q1 and reported Q2 absorption of 238,154 square feet. Through 2013, the Las Vegas industrial market had 3,628,929 square feet of absorption, more than the last five years combined with the majority of that absorption being reported in big box space in North Las Vegas or the southwest submarket. The local absorption mirrored the 240 million square feet of positive absorption nationwide through the first three quarters of 2013, the highest since Master Binder 27

28 Market Area Analysis The Q2-14 absorption valley-wide was 1,403,579 square feet with the airport submarket having 238,154 square feet of the total. Both of these figures represent a significant increase from the same time period of The 2013 valley-wide absorption for industrial space was positive 3,628,929 square feet, with 327,908 square feet of the total within the Airport submarket. The 2012 absorption was negative 268,262 square feet, which offset the positive absorption in 2011 of 369,902 square feet, while the 2010 absorption was negative 1,177,068 square feet. The Airport submarket reported a negative net absorption of 91,932 square feet in 2012 and negative net absorption of 94,437 square feet in There was 813,948 square feet of new inventory completed valley-wide in 2013 with 44,923 square feet reported in the Airport submarket. During Q1, there was 417,142 square feet of new inventory valley-wide, none located in the airport submarket. There is 244,502 square feet under construction, 193,000 square feet located in the Airport submarket. The new inventory of 813,948 square feet in 2013 was up significantly from the 50,000 square foot of inventory completed valley-wide in 2012, 228,154 square feet completed in 2011 and 340,928 square feet was completed valley-wide in The majority of the new construction is located in the southwest submarket. The only speculative development actively being marketed includes the South 15 Airport Center at the Henderson Executive Airport and the Jones and Sunset Industrial Park, both projects involving Panattoni Development. Prologis, the large industrial Real Estate Investment Trust, announced a speculative 464,203 square foot industrial building. There are large owner/user facilities in the construction and planning stages in the Las Vegas Valley. Switch Communications recently completed an expansion of their SuperNap data center of 400,000 square feet in the southwest submarket as part of a 900,000 square foot overall expansion. The industrial market began its recovery in the second half of 2012 with strong appreciation and activity throughout The big-box space has had the strongest demand, with occupiers seeking to accommodate logistical and distribution demands. This combined with the gradual overall economic improvement has pushed demand throughout the industrial sector including down to smaller single-tenant industrial buildings with significant SBA financing transpiring. The following graphic shows new deliveries from 1982 to 2013 in the Las Vegas market. Master Binder 28

29 Market Area Analysis The following is a graphic showing the industrial buildings that have been constructed in the Las Vegas market since Project Square Footage Address Zip Submarket Year Completion USA Micro 130, west teco avenue Southwest 2011 Novelty Facility 39, East Maule Avenue Airport 2012 Las Vegas Bread 45,000 Southwest Southwest 2013 SHFL 83, El Camino Road Southwest 2013 Food Center 86, Coleman Street North Las Vegas 2013 Switch Nap 400, West Capovilla Avenue Southwest 2013 FedEx Facility 296, East Bruner Avenue Henderson Airport 2014 Gaming Headquarters 45,500 Southwest Southwest 2014 VadaTech R & D 70, North Gibson Road Henderson 2014 Fabric Facility 106,870 Henderson Henderson 2014 Cold Storage 200, Linn Lane North Las Vegas 2014 Cold Storage 70, Hinson Street Southwest 2015 Konami Gaming 193, Konami Circle Airport 2015 Prologis 464, Bay lake Trail North Las Vegas 2015 Gaming Headquarters 150,000 West Sunset Southwest 2016 Pharmaceutical 110, Montana Stream Southwest 2015 The fabric facility noted has been cancelled and the site has been put up for sale. The building is included in the graphic to show that despite a lack of standing inventory, not all proposed deals are consummating. There has not been any new development of multitenant buildings, which bodes well for standing inventory as evidenced by the decline in vacancy rates and the increase in average rental rates. Additionally, several buildings designed for multi-tenant occupancy have been occupied or modified for single-tenant use. Rental rates have begun to rebound with fewer concessions being granted. The current rental rates are down 40% from the pre-recession peak. The weighted Las Vegas monthly average triple net lease rate in Q2 was $.53 per square foot, up from $52 in Q1. The Airport submarket had a $.70 per square foot monthly average rental rate in Q2, up from the $.67 reported in Q1. The local industrial market has shown decreasing availability rates as demand has picked up with fewer rental concessions. The market can best be summed up as in recovery but not expansion outside of minimal build-to-suit projects and one speculative building, which are currently large single-tenant projects. The lack of new inventory going- Master Binder 29

30 Market Area Analysis forward will help alleviate some of the vacancy. Nonetheless, there are several product types that lack quality product availability. CBRE s Senior Managing Economist, Art Jones stated in Q2-14 that landlords are seeing the pendulum of pricing power shift in their direction and are able to raise rents modestly in most major markets. Similarly, Mr. John Ramous, Vice President of Harsch Investment Properties of Las Vegas stated in a January 2014 meeting that since the recession began Harsch has favored signing short-term leases and has recently begun to command annual rent increases of 10% to 15% for those renewing tenants as the supply of quality inventory has dwindled. As future expectations of rental rates increase, prices for industrial assets should continue to rise. The industrial asking prices are shown in the following graphics. The average Las Vegas asking price is $96.48 per square foot as of July 2014, an increase of 15.4% over July 2013 based on Loopnet data. Market Area Summary The local real estate market needs job growth to occur as Las Vegas continues to recover. The unemployment rate continues to drop to 7.4% as of June SBA financing is dominating the local market for owner/user and business expansion lending as prices have not rebounded enough for speculative development to be feasible. Submarket Stature Submarket Demand Vacancy Trends New Supply Threat Rental Trends Airport Submarket Attribute Ratings Average Average Average Average Above Average Master Binder 30

31 Site Description and Analysis Site Description and Analysis Sale Unit 1 is located on both sides of Pine Street, ±400 feet north of Sunset Road and Sale Unit 11 is located on the north side of Helm Drive, ±300 feet west of Escondido Street. within unincorporated Clark County. Sale Unit 1 is located within the zip code and the census tract. Sale Unit 11 is located in the zip code and the census tract. Current Use: Site Size: The sites are level unimproved sites with the exception of perimeter fencing, some of which is temporary in nature. Parcel ID Usable Land Area (Acres) Land Summary Usable Land Area (Sq Ft) Frontage - Primary Street (Feet) Average Depth (Feet) , Sale Unit , , , , , , Sale Unit , Shape: Rectangular Frontage/Access: The subject property has good access. Sale Unit 1 is comprised of two separate pieces; one is on the west side of Pine Street that has a depth of 175 feet and a width of roughly 798 feet totaling 3.2 net acres. The second portion of Sale Unit 1 is located on the east side of Pine Street and has a depth of 175 feet and a width of 273 feet and totals 1.11 net acres. The shallow depth is the most limiting aspect of Sale Unit 1 and is exacerbated by Sale Unit 1 being comprised of two separate parcels from a physical and development standpoint. Sale Unit 11 has a depth of 110 feet and a width of 301 feet. Visibility: Topography: Soil Conditions: Utilities: Average The subject sites are level and ready for development. The soil conditions observed at the subject appear to be typical of the region and adequate to support development. Electricity: supplied by NV Energy Master Binder 31

32 Site Description and Analysis Site Improvements: Street Lights Recreational trail Desert vegetation Sewer: supplied by Clark County 8 line in Pine Street Water: supplied by Las Vegas Valley Water District 8 at Sunset and Pine, and at the northeast corner of Natural Gas: supplied by Southwest Gas Underground Utilities: The site is serviced by underground utilities. Utilities are typical for the market and allowed uses. Flood Zone: The subject is located in an area mapped by the Federal Emergency Management Agency (FEMA). The subject is located in FEMA flood zone X, which is not classified as a flood hazard area. FEMA Map Number: 32003C2560F (SU 1) and 32003C2580F (SU 11) FEMA Map Date: November 16, 2011 The subject is not in a flood zone. Sale Unit 1 Master Binder 32

33 Site Description and Analysis Sale Unit 11 Wetlands/Watershed: Environmental Issues: Encumbrance / Easements: Site Comments: The subject is not in a watershed. None noted The only known easements are typical utility easements. Title report is contained in the addenda. Both Sale Units will transfer with typical CC&R's for avigation easements that preclude "non-compatible" uses for the sites based on their location within the Airport Environs Overlay. The Comparables utilized had similar highest and best uses as the subject. Sale Unit 1 consists of seven parcels, two of which are separated from the other five by the Pine Street Right-of-way and totals 3.2 acres for the five parcels and 1.11 acres for the two separate parcels. Sale Unit 11 consists of one parcel that is.76 net acres. Master Binder 33

34 Site Description and Analysis Assessor s Parcel Map and Aerial Photo (Sale Unit 1) The parcel map and aerial also have a close-up of the site for clarity of their condition. *Aerial flight date 2/17/13 Master Binder 34

35 Site Description and Analysis Assessor s Parcel Map and Aerial Photo (Sale Unit 11) The parcel map and aerial also have a close-up of the site for clarity of their condition. *Aerial flight date 2/17/13 Master Binder 35

36 Site Description and Analysis Subject Photographs Looking northerly along Pine Street, Sale Unit 1 to the left. Looking southerly along Pine Street, Sale Unit 1 to the right. Looking northerly along Pine Street, Sale Parcel 1 to the left. Master Binder 36

37 Site Description and Analysis Looing southerly along Pine Street across the western portion of Sale Unit 1. Looking northerly along Pine Street across the eastern portion of Sale Unit 1. Looking southeasterly from Pine Street across the eastern portion of Sale Unit 1. Master Binder 37

38 Site Description and Analysis Looking northwesterly from Helm Drive across Sale Unit 11. Looking northerly from Helm Drive across Sale Unit 11. Looking northeasterly from Helm Drive across Sale Unit 11. Master Binder 38

39 Assessment and Taxes Assessment and Taxes Taxing Authority 470 Assessment Year Real Estate Assessment and Taxes Tax ID Land Improvements Total Tax Rate Tax Rate Per Taxes $33,389 $0 $33,389 $ $100 $ $22,411 $945 $23,356 $ $100 $ $22,411 $0 $22,411 $ $100 $ $45,280 $3,398 $48,678 $ $100 $1, $21,040 $3,398 $24,438 $ $100 $ $29,272 $2,453 $31,725 $ $100 $ $52,142 $3,398 $55,540 $ $100 $1, Real Estate Assessment Analysis Tax ID Per Acre Total Equalization Ratio Implied Value $45,738 $33,389 35% $95, $47,665 $23,356 35% $66, $45,737 $22,411 35% $64, $47,628 $23,814 35% $68, $49,170 $48,678 35% $139, $53,126 $24,438 35% $69, $48,808 $31,725 35% $90, $73,079 $55,540 35% $158,686 Comments According to the Clark County Treasurer, the subject's taxes are delinquent as follows: $0.38 ( ), $0.36 ( ), $0.34 ( ), $0.36 ( ), $0.52 ( ), $0.40 ( ), $0.41 ( ) and $1.42 ( ). However, municipal governments are not charged taxes and since the subject is owned by Clark County, there should not be any taxes owed. Master Binder 39

40 Zoning Zoning Zoning Code Zoning Description Zoning Density/FAR Current Use Legally Conforming Zoning Change Likely Planned Land Use Description R-E, Rural Estates Residential within Clark County. The R-E, Rural Estates Residential District, is established for areas particularly suited for low density residential uses and to the raising of crops and of a limited number of animals for noncommercial purposes. BDRP planned land use is most similar to the surrounding zoning of M-D, which allows up to 80% coverage ratio Unimproved vacant land Only to a use similar to the planned land use BDRP BDRP - Business Design and Research Park The BDRP zoning is set aside for business and design research Parks similar to the M-D zoning. This zoning allows for maximum coverage of 80% of the lot with light manufacturing uses including limited outside uses allowed. This zoning is similar to the surrounding uses of Sale Unit 1 and 11. The immediate surrounding uses are industrial in nature with most, if not all, operations performed indoors. There is limited outside yard storage and street parking available in the area. As shown on the following pages, both Sale Units have current zoning of R-E, Rural Estates Residential and have a planned land use of BDRP, Business Design and Research Park. The surrounding zoning and land uses are office or industrial uses with retail and office uses along major arterials such as Sunset Road, Eastern Avenue and Pecos Road. It is noted that there are still some residential uses near Sale Unit 11, but the majority of the immediate area has been converting to industrial uses, although the recession slowed the transition. Master Binder 40

41 Zoning Airport Environs Regulations Master Binder 41

42 Zoning Master Binder 42

43 Zoning Master Binder 43

44 Zoning Master Binder 44

45 Zoning Master Binder 45

46 Highest and Best Use Highest and Best Use Highest and best use may be defined as the reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. 1. Legally Permissible: What uses are permitted by zoning and other legal restrictions? 2. Physically Possible: To what use is the site physically adaptable? 3. Financially Feasible: Which possible and permissible use will produce any net return to the owner of the site? 4. Maximally Productive: Among the feasible uses which use will produce the highest net return, (i.e., the highest present worth)? Highest and Best Use of the Site as Vacant Legally Permissible Sale Unit 1 and Sale Unit 11 are both within the airport submarket. Sale Unit 1 is comprised of seven parcels located on both sides of Pine Street, north of Sunset Road with 3.2 acres on the west side of Pine and 1.1 acres on the east side. Sale Unit 11 is a.76 net acre parcel located on the north side of Helm Drive, ±300 feet east of Escondido Street. The sites are zoned R-E, Rural Estates Residential, with a planned land use of BDRP, Business Design and Research Park. The R-E zoning is a holding zoning that allows for 1 residential dwelling unit per gross acre. The area surrounding Sale Unit 1 is primarily industrial and office in nature. Similarly, the area surrounding Sale Unit 11 has been transitioning to BDRP uses. Although a zone change is required to develop the sites with an industrial or office use, the zone change cannot be denied unless the application includes atypical requests such as a reduction in parking, etc. Based on this, the development of the parcels is tied to their planned land use of BDRP, which suggests an office or industrial use for the sites. Physically Possible The BDRP planned land use allows for building(s) with a coverage ratio of up to 60%. The 60% coverage ratio suggests a maximum building size of 83,635 square feet for the west portion of Sale Unit 1, a 28,750 square foot building on the eastern portion of Sale Unit 1 and a 19,864 square foot building on Sale Unit 11. Buildings that large would likely have insufficient parking. More likely, a much lower density would be developed on the site based on the limited depth of the sites and the lack of cross access and parking easements with adjacent parcels. Master Binder 46

47 Highest and Best Use Sale Unit 11 site has a depth of 110 feet which only provides adequate ingress/egress for single-tenant product or front-loaded buildings, neither of which have been built lately as discussed earlier. Financially Feasible The industrial vacancy for the overall Las Vegas market is 11.6% as of Q2-14, with the Airport submarket reporting a 14.2% vacancy. The office vacancy for the overall Las Vegas market is 19.8% as of Q2-14 with the airport submarket reporting a 21% vacancy. Based on the high vacancy rates, an office use is not feasible on the sites currently. The only new construction of office buildings have been Class A product, which the subject sites are not large enough to construct Class A Product on. A more likely use is industrial. Due to elevated vacancy rates, limited new construction has occurred in the industrial sector and none of it in the subject s immediate area beyond the 39,857 square foot single-tenant building built in 2010 for an owner/user and the 193,000 square foot expansion of Konami Gaming currently under construction near Sale Unit 11. Maximally Productive Based on the market activity occurring, the most likely use of the subject is to hold until demand warrants development of the sites as speculative development or for immediate development for an owner/user or a build-to-suit opportunity. It is noted that no speculative industrial buildings have been built between 2009 and 2014 in the Las Vegas market, until Prologis made their announcement in July Highest and Best Use Conclusion The highest and best use as vacant is to hold until demand warrants development of the sites as speculative development or for immediate development for an owner/user or a build-to-suit opportunity. Master Binder 47

48 Valuation Methodology Valuation Methodology Three basic approaches may be used to arrive at an opinion of market value. They are: 1. The Cost Approach 2. The Income Approach 3. The Sales Comparison Approach Cost Approach The Cost Approach is summarized as follows: Cost New - Depreciation + Land Value = Value Income Approach The Income Approach converts the anticipated flow of future benefits (income) to a present value opinion through a capitalization and or a discounting process. Sales Comparison Approach The Sales Comparison Approach compares sales of similar properties with the subject property. Each comparable sale is adjusted for its inferior or superior characteristics. The values derived from the adjusted comparable sales form a range of value for the subject. By process of correlation and analysis, a final indicated value is derived. Final Reconciliation The appraisal process concludes with the Final Reconciliation of the values derived from the approaches applied for a single opinion of market value. Different properties require different means of analysis and lend themselves to one approach over the others. Analyses Applied A cost analysis was considered and was not developed because the subject is vacant unimproved land that the cost approach provides no guidance to value. A sales comparison analysis was considered and was developed because there is adequate data to develop a value opinion and this approach reflects market behavior for vacant land. An income analysis was considered and was not developed because the subject is vacant partially improved land with no income component. Therefore, an income approach provides no relevant information regarding the subject's market value. Master Binder 48

49 Land Comparables Land Valuation Comparables The Sales Comparison Approach is based on the premise that a buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the Sales Comparison Approach. The market in which the subject property competes is investigated; comparable sales, contracts for sale and current offerings are reviewed. The most pertinent data is further analyzed and the quality of the transaction is determined. The most meaningful unit of value for the subject property is determined. Each Comparable is analyzed and where appropriate, adjusted to equate with the subject property. The value indication of each Comparable is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach. Land Comparables I have researched numerous listings and transactions and included the five most relevant Comparables for this analysis. The Comparables are summarized and mapped on the following page and followed by individual abstracts. All sales have been researched through numerous sources, inspected and verified by a party to the transaction, whenever possible. The individual parcel valuation discussions are contained in Parcel Binder 1 and 11, respectively. Master Binder 49

50 Land Comparables Land Sales Summary and Location Map Comp Address Date Price Land SF Price Per SF Price Per Acre Subject Sale Unit 1 and 11 8/24/ Southeast Corner of Sunset Road and Westwind Road 7/24/2014 $1,500, ,202 $9.73 $423,729 2 Northeast Corner of Cimarron Road and Rafael 7/14/2014 $1,850, ,603 $9.00 $391,949 3 Northeast Corner of Buffalo Drive and Rafael 3/28/2014 $2,473, ,600 $6.38 $277,931 Rivera Way 4 Southwest Corner of Sunset Road and El 2/3/2014 $1,500, ,250 $8.86 $386,056 Camino Road East Maule Avenue 12/30/2013 $495,000 50,094 $9.88 $430, Only one of the Comparables utilized is located in the subject s immediate area. This is due to the lack of vacant land available for development. Sale Unit 11 has surrounding vacant land and some older residences that have not been converted to an industrial use. However, many of these properties are being operated as interim uses with industrial users with the residences utilized as make-shift offices. The minimal vacant land surrounding Sale Unit 1 is not being offered for sale. Master Binder 50

51 Land Comparables Land Comparable 1 Name SEC Sunset and Transaction Date 7/24/2014 Westwind Price $1,500,000 Transaction Type Closed Acres 3.54 Conditions of Sale Arm's length Price Per Acre $423,729 Financing Cash to seller Land SF 154,202 Document Number Price Per SF $9.73 Grantor Big Nunzio, LLC. Listing Price $950,000 Grantee Sunset View, LLC. Days on Market 695 Tax ID and 004 Verification Source CoStar and Clark County Records Site Address Southeast Corner of Topography Level Sunset Road and Submarket Southwest Zoning R-E, CC Zip Zoning Type BDRP, Planned Road Frontage 618' Sunset Encumbrance or None Observed Shape Square Environmental Issues None Noted Utilities On site water and sewer Comments This is the sale of two parcels on the south side of Sunset between Jones and Decatur along an unimproved portion of Sunset. There is an improved industrial building to the west, but the remaining surrounding properties are vacant land. The half-street improvements are in place along Westwind and on Sunset west of Westwind only. Sunset Road currently ends roughly 1/4-mile east of this property. Calls to the only agent involved in this transaction were not returned. Master Binder 51

52 Land Comparables Land Comparable 2 Transaction Name NEC Cimarron and Rafael Date 7/14/2014 Rivera Price $1,850,000 Transaction Type Closed Acres 4.72 Conditions of Sale Arm's length Price Per Acre $391,949 Financing Cash to seller Land SF 205,603 Document Number Price Per SF $9.00 Grantor James Cole Holdings, Listing Price $1,850,000 Grantee West Flamingo Road, Days on Market 558 Tax ID Verification Source Grant Traub, Colliers Site Address Northeast Corner of Topography Level Submarket Southwest Zoning C-2, CC Zip Zoning Type BDRP, Planned Road Frontage 660' Cimarron, 330' Encumbrance or None Observed Shape Irregular Environmental Issues None Noted Utilities On site water and sewer Comments This 4.72 net acre site included a billboard and had been listed for over a year at $1,850,000. The buyer offered $1.75 Million, but wanted the seller to include the billboard. With additional parties interested in the party, the seller extracted two $50,000 price increases while the buyer's due diligence was ongoing. The buyer was offered a change to flip the property for a profit, but they will be building their own building on the site. Half-street improvements are in place along Rafael Rivera adjacent to this parcel, but Cimarron is only improved on the opposite side of the street. Master Binder 52

53 Land Comparables Land Comparable 3 Transaction Name NEC Buffalo and Rafael Date 3/28/2014 Rivera Price $2,473,585 Transaction Type Closed Acres 8.90 Conditions of Sale Arm's length Price Per Acre $277,931 Financing Cash to seller Land SF 387,600 Document Number Price Per SF $6.38 Grantor CRE NV Land, Listing Price -- Grantee Beltway 4.77, LLC. Days on Market 758 Tax ID and 019 Verification Source Scott Gragson, Colliers Site Address Northeast Corner of Topography Level Buffalo Drive and Rafael Submarket Southwest Zoning U-V, CC Zip Zoning Type BDRP, Planned Road Frontage 399' Buffalo Encumbrance or None Observed Easement Shape Irregular Environmental Issues None Noted Utilities On site water and sewer Comments This site is located on the immediate corner of the 215-beltway frontage road and Buffalo Drive, with no direct access onto the frontage road. The two parcels consisted of 6.01 and 3.54 acres, but the net acreage has been estimated at 5.36 and 3.54 acres based on the deduction of the half-street right-of-way for Tioga and some of the beltway frontage road right-of-way. All improvements are in place along this property. Master Binder 53

54 Land Comparables Land Comparable 4 Transaction Name SWC of Sunset and El Date 2/3/2014 Camino Price $1,500,000 Transaction Type Closed Acres 3.89 Conditions of Sale Arm's length Price Per Acre $386,056 Financing Cash to seller Land SF 169,250 Document Number Price Per SF $8.86 Grantor Sunset I, LLC. Listing Price $1,750,000 Grantee Bally Properties West, Days on Market 280 Tax ID Verification Source Donna Alderson, CBRE Site Address Southwest Corner of Sunset Road and El Camino Road Topography Level Submarket Southwest Zoning C-2, CC Zip Zoning Type BDRP, Planned Road Frontage 329' Sunset Encumbrance or None Observed Easement Shape Rectangular Environmental Issues None Noted Utilities On site water and sewer Comments This 4.34 acre parcel has been estimated to be 3.89 net acres after deducting the half-street right-of-way for Sunset Road. The parcel was purchased by Bally Technologies for campus expansion of their recently purchased SHFL Entertainment headquarters nearby. Half-street improvements are in place along Sunset Road only. Master Binder 54

55 Land Comparables Land Comparable 5 Transaction Name The north side of Maule Date 12/30/ feet east of Spencer Price $495,000 Transaction Type Closed Acres 1.15 Conditions of Sale Arm's length Price Per Acre $430,434 Financing Cash to seller Land SF 50,094 Document Number Price Per SF $9.88 Grantor Top Flight Properties, Listing Price $595,000 Grantee Mustang Leasing, LLC. Days on Market 2071 Tax ID Verification Source Agent Site Address 2086 East Maule Avenue Topography Level Submarket Airport Zoning M-D, CC Zip Zoning Type BDRP, Planned Road Frontage 151' Maule Encumbrance or None Observed Easement Shape Rectangular Environmental Issues None Noted Utilities On site water and sewer Comments This 1.15 acre site sold within 30 days of being listed according to the agent, Gary Burgher of Pro Commercial Real Estate. There was interest from several parties to purchase the site. The buyer is a local tourist helicopter company whose exact plans are unknown. The site is bordered by industrial properties industrial properties to the north, east and south and an older residential dwelling to the west. Master Binder 55

56 Certification Statement Certification Statement I certify that, to the best of my 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 my personal, impartial, and unbiased professional analyses, opinions and conclusions. I have no present or prospective future interest in the property that is the subject of this report, and have no personal interest with respect to the parties involved. I have not performed any prior services regarding the subject within the previous three years of the appraisal date. 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 was not contingent upon developing or reporting predetermined results. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP). Chris C. Lauger has made an inspection of the subject property. No one provided significant real property appraisal assistance to the person signing this certification. The reported analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. As of the date of this report, I have completed the continuing education program for the Designated Members of the Appraisal Institute. I certify sufficient competence to appraise this property through education and experience. Chris C. Lauger, MAI Nevada Certified General Appraiser Certificate Number NV-A CG Expires March 31, 2016 Master Binder 56

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