ZELL & ASSOCIATES Real Estate Appraisers and Counselors

ZELL & ASSOCIATES Real Estate Appraisers and Counselors A Complete Appraisal Report of: 7.47 Acres of Land Known as the: SE Division Property Located At: 15004 SE Division Street Portland OR, 97236 Prepared for: City of Portland BES 1120 SW 5th Avenue, Room 1000 Portland, OR 97204 Date of Value: January 16, 2014 Prepared by: Craig Zell, MAI, SRA And James Arnett Zell Report No.: 14-002

February 6, 2014 City of Portland BES Attn: Ms. Shannah Anderson 1120 SW 5th Avenue, Room 1000 Portland, OR 97204 Zell Report Number 14-002 Dear Ms. Anderson: Upon your written instructions dated January 2, 2014, we have personally inspected and performed a complete appraisal of the fee simple interest in three vacant R3 zoned tax lots totaling 7.47 acres located in Portland, OR more fully described herein. The purpose of this report is to communicate the data and reasoning used by the appraisers to form an opinion of the market value. It is understood this report is for use by the Client to evaluate real property value for potential purchase. We certify that we have no present or contemplated future interest in the property beyond this estimate of value. The appraiser has not performed any prior services regarding the subject within the previous three years of the appraisal date. In the appraisal process, we have reviewed the data from the market area, trends in the district, sales and asking prices of comparable properties. We have considered the value of the property through the use of the sales comparison approach as the only relevant approach for valuing the subject property.

City of Portland BES Attn: Ms. Shannah Anderson Page Two File No. 14-002 After due consideration of the information contained in the report and based upon our knowledge of market conditions as of the date of inspection, January 16, 2014, the as is market value of the subject property is estimated to be: 7.47 Acres of R3 Zoned Land: $1,570,000 The values concluded in this report are expressly subject to the conditions, assumptions, limiting conditions, and comments appearing on the subsequent pages attached. The report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP), and the laws of the State of Oregon. Thank you for allowing us to be of service and please do not hesitate to contact us with any questions. Respectfully Submitted, Craig Zell, MAI, SRA James Arnett OR Certified General Appraiser #C000108 OR Certified General Appraiser #C000881 Expiration May 31, 2014 Expiration August 31, 2014

TABLE OF CONTENTS SUMMARY OF FACTS AND CONCLUSIONS...1 ASSUMPTIONS AND LIMITING CONDITIONS...4 Extraordinary Assumptions and Hypothetical Conditions...5 GENERAL CONSIDERATIONS...6 Intended Use and User of the Appraisal Report...6 Scope of the Appraisal...6 Definition of Market Value...7 Property Rights Appraised...7 Date of the Inspection...7 Personal Property, Fixtures, and Intangible Items...8 Competency Provision...8 Unavailability of Information...8 Location of the Property and Identification of the Market area...8 Legal Description...8 Ownership and Sales History...8 Compliance...9 Exposure Time...9 SITE DESCRIPTION...10 NEIGHBORHOOD MARKET SUMMARY...13 SUBJECT PHOTOS...18 HIGHEST AND BEST USE ANALYSIS...20 Legally Permissible...20 Physically Possible...20 Financial Feasibility...21 Highest and Best Use Conclusion...21 VALUE PROCEDURE...22 SALES COMPARISON APPROACH:...23 Sales Comparison Approach...23 Conclusion of Land Value...24 SALES COMPARABLE MAP...25 LAND SALE PHOTOS...26 RECONCILIATION AND FINAL VALUE CONCLUSION...29 14-002 SE Division Street Zell & Associates i

ADDENDA Certification Qualifications Letter of Engagement Metroscan Property Profile 14-002 SE Division Street Zell & Associates ii

SUMMARY OF FACTS AND CONCLUSIONS Client: Intended User(s): Intended Use: Subject Property: Location: Existing Improvements: Legal Description: Site size: Zone: City of Portland BES City of Portland BES This appraisal is intended to be used as an aid for potential purchase by the Client. The subject property consists of three vacant R3 zoned tax lots totaling 7.47 acres. The subject property is located at 15004 SE Division Street in Portland, Multnomah County, OR, 97236. None. Tax Lots 3400, 3500, and 4200 on Tax Map 1S2E12BA. Approximately 7.47 acres total, according to the Metroscan Property Profile reports that are copied in the Addenda. The subject is zoned R3, by City of Portland. The R3 zone is a low density multi-family zone that permits 14.5 units per acre. Density bonuses can be achieved to increase density to a maximum of 21 units per acre. This zone typically produces townhouses and small multi-dwelling buildings such as garden apartments with relatively low building coverage. The R3 zone is the City's lowest density multi-family zone. Property Rights Appraised: Fee Simple Effective Date of Value: January 16, 2014 Date of Inspection: January 16, 2014 Date of Report: February 6, 2014 Purpose and Function: The purpose of this report is to communicate the data and reasoning used by the appraisers to form an opinion of the market value. The function of this report is to aid the Client in establishing a value for potential purchase. 14-002 SE Division Street Zell & Associates 1

Assignment Conditions: Scope and Identification of the Appraisal Problem: None. To estimate the current 'as is' market value of the subject utilizing all relevant approaches to value that can be supported in the market as of the date of value. Assessment and taxation: Tax ID Land Total Assessed Value Taxes R334813 $501,500 $501,500 $249,240 $5,232 R334782 $413,000 $413,000 $189,310 $3,974 R334768 $63,500 $63,500 $32,740 $687 Totals $978,000 $978,000 $471,290 $9,893 The market land value is slightly below the value concluded in this report. However, taxation is not a significant determinant of value. Flood Hazard area: The subject is located on FEMA Flood Map 4101830120E, the date of which is unknown. It is within Zone X. The subject is not in a flood zone. Easements or Encumbrances: We were not provided with a title report and it is assumed that no easements or encumbrances exist that would negatively affect the value of the subject. Should any prove to exist the appraisers reserve the right to amend the value opinion accordingly. Hazardous Waste/Materials: There were no obvious hazardous materials observed at the site during the inspection of the property, but I have no expertise in this area. If there is concern over this issue, the client is advised to consult with an expert in this area. Census Tract: 91.01 Ownership and Sales History: Ownership is vested in Ronald and Theresa Virnig, according to the Multnomah County records as reported by MetroScan. No sales have occurred in the past 3 years. Currently the property is marketed for sale at $2,540,000. This amount is significantly greater than the amount concluded in this appraisal report, however, this value is consistent with a fee simple townhouse subdivision value. It is our opinion that the subject market area is not likely to feasibly support 14-002 SE Division Street Zell & Associates 2

108 fee simple for sale townhomes. Our highest and best use analysis indicates that construction of 108 affordable multifamily housing units is maximally productive. According to the Client, the City of Portland BES has the subject property under contract. We requested a copy of the purchase and sale agreement but were denied a copy. The Client wishes to keep the contract price confidential in order to avoid bias in the value opinion. Highest and Best Use: The highest and best use is for development of 157 affordable multi-family housing units. Valuation Methodology: Each approach to value is considered but only the sales comparison approach is relevant. Sales of similarly zoned land purchased for the development of similar residential housing are analyzed and compared to the subject for an indication of market value. Marketing/Exposure Time: Less than 12 months at the appraised value. Indicated Values: 7.47 Acres of R2 Zoned Land: $1,570,000 14-002 SE Division Street Zell & Associates 3

ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report and the certification of value are expressly contingent upon and subject to the following: 1. The legal description is assumed to be correct and all matters of a legal nature or facts which might be revealed by a survey are excluded from the opinion of value herein 1. 2. That the title to the property is assumed to be good and merchantable. 3. That the property is free and clear of all liens or encumbrances including taxes and assessments not specifically referred to in the appraisal. 4. That management and ownership of the property is responsible. 5. The sketch of the subject improvements, if any, is intended to assist the reader in visualizing the property and is correct only to a reasonable degree of accuracy, as it was made without the aid of a survey. 6. Subsoil characteristics of the subject site appear to be suitable for the intended use. No further studies were undertaken and no responsibility is assumed. Subsurface rights were not considered in making this appraisal. 7. We are not qualified to detect the presence of toxic or hazardous substances or materials that may influence or be associated with the subject or adjacent properties. We have made no investigation or analysis as to the presence of such materials. 8. It is assumed that full compliance has been made with all applicable federal, state and local environmental regulations and laws unless specifically stated otherwise in this report. It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless specifically stated otherwise in this report. It is assumed that the improvements, if any, are within the boundaries or property lines of the property described and that there is no encroachment or trespass unless specifically stated otherwise in this report. 9. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Any fractional use of the portions of this report with any other appraisal is invalid. 10. Possession of this report, or any portion thereof, does not carry right of publication. Neither all nor any portion of this report may be disseminated to the public through any media or communication without the prior written consent of the author of this report, nor may it be used for any purpose by anyone but the client without previous written consent of the appraiser and then only under the proper qualifications and in its entirety. 11. In the event of subpoena or other required appearance before any court or other formal hearing concerning any or all of the subject matter of this report, the customary charge will 14-002 SE Division Street Zell & Associates 4

be made for such appearance and I am not required to give further consultation or testimony unless arrangements have been made previously. 12. The comparable sales data outlined in this report has been checked as closely as possible for errors and is considered accurate, but this accuracy is limited to the reliability of the people contacted who were involved in the sale and to the information they passed on to the appraiser during his investigation. 13. That general economic conditions and interest rates will remain relatively constant or experience no significant change during the projected marketing period. Current rates of interest are reported nationally by www.bloomberg.com/markets/rates/index.html on January 17, 2014 as follows: Fixed 30-year residential mortgage rates average 4.42% and 5-Year Treasury Bonds are yielding 1.63%. The prime rate is 3.25%. 14. The liability of the appraiser, his employees and subcontractors is limited to the initial employer (client) only, and only up to the amount of the fee actually received for the assignment. Further, there is no accountability, obligation or liability to any third party. If the appraisal report is placed in the hands of anyone other than the initial employer, the initial employer shall make such party aware of all limiting conditions and assumptions of the assignment and related discussions. The appraiser is in no way responsible for any costs incurred to discover or correct any deficiency (if any) in the property. 15. Acceptance of and/or use of this appraisal report constitutes acceptance of the foregoing assumptions and limiting conditions. Extraordinary Assumptions and Hypothetical Conditions None. 14-002 SE Division Street Zell & Associates 5

GENERAL CONSIDERATIONS Intended Use and User of the Appraisal Report City of Portland BES is the intended user of this report. Any other user is prohibited without the prior written consent of the appraiser. Reliance on the analysis or conclusions within this report is limited to the user. The appraiser s responsibility is limited solely to the client. The intended use of this appraisal is to aid the Client in establishing a value for potential purchase. Scope of the Appraisal The scope of the appraisal encompasses the necessary research and analysis to prepare the report in accordance with the intended use. The report is intended to comply with the laws of the State of Oregon and was prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP). Property Identification and Inspection The property was identified by means of the Multnomah County assessor s map. Additional features of the property were obtained from the internet including aerial photography and zoning information. No other tangible property was considered. An onsite inspection was made whereby the appraiser viewed the subject from the street. Scope of Research Research involved review of comparable sales data obtained from Title Co. records, Metroscan, RMLS, CoStar Comps, public records, and conversations with local developers, and regional government officials. Each of the sales was confirmed by one of the staff of Zell & Associates by interviews with a person knowledgeable of the sale, typically the real estate agent or the buyer. In some cases where the interviews were inconsequential or unavailable, public records were reviewed and documents were relied upon for details of the transaction. Each of the sales used in the analysis was physically viewed and photographed. This market data was adjusted for superior and inferior characteristics and applied to the subject to form an opinion of market value. The highest and best use conclusion was developed through an analysis of the physical aspects of the subject property and its surrounding area. Each of the applicable approaches to value was considered and ultimately the sales comparison approach was used in this analysis. 14-002 SE Division Street Zell & Associates 6

Definition of Market Value This appraisal has been completed for the purpose of estimating market value of the subject property, defined as: "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: a. buyer and seller are typically motivated; b. both parties are well informed or well advised, and each acting in what they consider their own best interest; c. a reasonable time is allowed for exposure in the open market; d. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; e. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." 2 Property Rights Appraised This assignment concerns the appraisal of the fee simple interest in the subject site. 'Fee simple' is defined 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." 3 Date of the Inspection The property was inspected by James Arnett on January 16, 2014 for the purpose of this appraisal. Craig Zell, MAI, SRA has inspected the property and reviewed the report and concurs with the conclusions. 2 3 Office of the Comptroller of the Currency under 12 CRF, Part 34, Subpart C-Appraisals, 34.42 Definitions [f]. The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, Chicago, 1993, Page 140. 14-002 SE Division Street Zell & Associates 7

Personal Property, Fixtures, and Intangible Items No personal property, fixtures, or intangible items were included in this valuation. Competency Provision The Uniform Standards of Professional Appraisal Practice (USPAP) requires that prior to accepting or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently. 4 The appraiser hereby certifies that he/she has the necessary experience and knowledge to complete this assignment competently. Unavailability of Information It is considered that all information necessary to complete this assignment properly was available to the appraiser during the course of assignment unless otherwise noted in the individual sections of the appraisal. We also relied on multiple broker interviews and opinions. In all the data was less than perfect, but the best available and allowed us to generate a credible opinion of value. Location of the Property and Identification of the Market area The subject property is located at 15004 SE Division Street in Portland, Multnomah County, OR, 97236. The market area is concluded to be the greater metropolitan Portland area. Legal Description Tax Lots 3400, 3500, and 4200 on Tax Map 1S2E12BA. Ownership and Sales History Ownership is vested in Ronald and Theresa Virnig, according to the Multnomah County Assessor s office. No sales have occurred in the past 3 years. Currently the property is marketed for sale at $2,540,000. This amount is significantly greater than the amount concluded in this appraisal report. This value is consistent with a fee simple townhouse subdivision value. It is our opinion that the subject market area is not likely to feasibly support 108 fee simple for sale townhomes. Our highest and best use analysis indicates that construction of 108 affordable multifamily housing units is maximally productive. 4 USPAP, 2005 Edition, The Appraisal Foundation 14-002 SE Division Street Zell & Associates 8

According to the Client, the City of Portland BES has the subject property under contract. We requested a copy of the purchase and sale agreement but were denied a copy. The Client wishes to keep the contract price confidential in order to avoid bias in the value opinion. Compliance This appraisal has been prepared in compliance with our best interpretation of the current Uniform Standards of Professional Appraisal Practice except as noted earlier, any client Supplemental Standards, and the laws of the State wherein the property is located. Should this report be transferred to another party and/or is reviewed by another party and there are questions or additional work necessary to comply with their subsequent standards, the appraiser reserves the right to charge appropriate additional fees for the work and time expended. Exposure Time Defined as the estimated length of time that 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, the subject has an exposure time of less than 12 months at the appraised value. 14-002 SE Division Street Zell & Associates 9

SITE DESCRIPTION Location: Neighborhood Description: The subject address is 15004 SE Division Street in Portland, Multnomah County, OR, 97236. The subject s neighborhood is defined as the Centennial Neighborhood in eastern Multnomah County. Neighborhood boundaries are SW 148 th Avenue to the west, SW 182 nd Avenue to the east, SE Powell to the south and E Burnside to the north. SE Division is largely characterized by commercial uses with residential intermixed. Single family residential is the dominant use after one or two blocks off SE Division while multifamily uses are clustered nearer the main arterials. As many other large swaths of the outer east side of Portland, the subject lies within a low to moderate income are as defined by the City. Census data for the 97236 zip 14-002 SE Division Street Zell & Associates 10

code indicates 31.7% of residents have a combined family income less than $25,000. As such, much of the housing targets those who need affordable homes and apartments. According to the City of Portland s crime database, the subject is located in a relatively high crime neighborhood with the majority of crimes consisting of larceny (simple theft), disorderly conduct, and assault. Shopping and Services: Employment: Schools: Transportation: Located at the corner of SE 148 th and SE Division is a Fred Meyer store that is the neighborhood s main retailer. Fast food and limited restaurants and bars are also present. Mall 205 is the nearest regional mall. The subject is located some distance from downtown Portland but close enough to Interstate 205 that commuting to other eastside employers and Vancouver is reasonable. Portland Public School District. SE Division is a major east/west surface route along with E Burnside and SE Powell. These streets connect to Highway 205, which is approximately 2 miles west of the subject. Interstate 205 connects to Highway 84 to the north and Interstate 5 to the south. Site Size: 7.47 gross acres according to the assessor s map. This makes the subject one of, if not the largest, vacant sites in the area. Despite the lower density multifamily zone, this site requires a relatively large number of units at 108-157. 14-002 SE Division Street Zell & Associates 11

In this regard the size of the property can work against it as the depth of the market for a project this size is untested. Topography: Current Use: Current Zoning: The subject is essentially level. Vacant. The property is enclosed by a chain link fence. The subject is zoned R3, by City of Portland. The R3 zone is a low density multi-family zone that permits 14.5 units per acre. Density bonuses can be achieved to increase density to a maximum of 21 units per acre. This zone typically produces townhouses and small multidwelling buildings such as garden apartments with relatively low building coverage. The R3 zone is the City's lowest density multi-family zone. Potential for Re-zone: Accessibility: Utilities: Very little potential for re-zoning exists. Direct from SE Division Street at the north. Additional access appears to be possible from SE Taggart Street at the southwest corner of the site, as well as another unnamed street at the south end of the subject parcel. All necessary utilities for development are available at the adjoining streets. Flood Hazard Area: The subject is located on FEMA Flood Map 4101830120E. It is within Zone X. The subject is not in a flood zone. Easements or Encumbrances: Hazardous Waste/Materials: We were not provided with a title report and it is assumed that no easements or encumbrances exist that would negatively affect the value of the subject. If such easements prove to exist the appraisers reserve the right to amend the value conclusion accordingly. There were no obvious hazardous materials observed at the site during the inspection of the property, but I have no expertise in this area. If there is concern over this issue, the client is advised to consult with an expert in this area. 14-002 SE Division Street Zell & Associates 12

NEIGHBORHOOD MARKET SUMMARY This area is characterized as a low to moderate income area according the City of Portland and as such the housing units target those who need affordable homes or apartments. Based on the subject s R3 zoning we surveyed the RMLS for sales of attached units and condominiums using a market area of SE 148 th to SE 202 nd and SE Powell to NE Glisan. These products consist of townhomes, stacked flats, detached homes (condominium ownership), and garden style condominiums. There are 9 listings with an average list price of $136,000. Nine sales are pending with an average list price of $114,111 and 52 have sold in the last 12 months with an average sales price of $108,750. This data suggests that this market is extremely sensitive to price point as the remaining listings are $28,000 higher than the average sales price. When we searched for new product we found only 3 listings of units built since 2012 whose average sales price is $229,000. No pending or closed sales of newer construction were found. This indicates that this market is viewed by market participants as a market that cannot successfully absorb new fee simple construction. As is widely reported, Portland s vacancy for multifamily housing remains very low. There has been a surge new apartment development to meet demand in the popular close in neighborhoods of SE, North and NW Portland. As rents appreciate, the need for affordable rental housing also increases. As shown in this NAI, Norris Beggs & Simpson exhibit, the vacancy rate for SE Portland is 2.35%. 14-002 SE Division Street Zell & Associates 13

Land sales that we found are sales that are being developed into affordable apartment housing. Combined, this data suggests that subject s market area is not ripe for the construction of for sale housing. The price point of for sale units is not likely high enough to make development feasible, particularly when the size of the subject parcel requires a large number of units. Based on this we conclude that the neighborhood market would most likely support affordable rental housing over for sale fee simple properties. 14-002 SE Division Street Zell & Associates 14

Location Map 14-002 SE Division Street Zell & Associates 15

Neighborhood Map 14-002 SE Division Street Zell & Associates 16

Plat Map Zoning Map 14-002 SE Division Street Zell & Associates 17

SUBJECT PHOTOS Viewing south across subject from SE Division Street Marketing sign. 14-002 SE Division Street Zell & Associates 18

Viewing east on SE Division, subject on right. Viewing west on SE Division, subject on left. 14-002 SE Division Street Zell & Associates 19

Highest and Best Use is defined as: HIGHEST AND BEST USE ANALYSIS "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability." 5 In testing legal permissibility, current land use regulations are considered, along with any reasonably probable modification of such land use. Physical possibility concerns suitability of the property for various kinds of development, considering such factors as size, shape, topography, soil conditions, and overall utility of the site. Financial feasibility concerns potential income to be generated by improvement of the site. An integral part of feasibility analysis is interpretation of supply and demand, the rate of absorption, and the effects of financing. Among the uses which are legally permissible, physically possible, and financial feasible, the use which obtains maximum profit or return is considered to be the highest and best use. Legally Permissible The subject is zoned R3, by City of Portland. The R3 zone is a low density multi-family zone that permits 14.5 units per acre. Density bonuses can be achieved to increase density to a maximum of 21 units per acre. This zone typically produces townhouses and small multi-dwelling buildings such as garden apartments with relatively low building coverage. The R3 zone is the City's lowest density multi-family zone. Based on the 7.47 gross acres, this translates into 108-157 units. Physically Possible All utilities are present to the site and it is level posing no physical impediment to development. 5 The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, Chicago, IL, 1993, Page 171 14-002 SE Division Street Zell & Associates 20

Financial Feasibility The subject s zone supports various kinds of lower density multifamily construction. Townhouse development has fallen out of favor and is reportedly difficult to finance. The average sales price of attached or a condominium property is $108,000 which is not likely high enough to support construction of new for sale product. However, low vacancy rates and the need for affordable housing indicate sufficient demand for apartment housing. Highest and Best Use Conclusion The maximally productive, and therefore highest and best use of the subject is concluded to be for the development of 157 apartment units that would target the affordable housing market. We believe that a purchaser would take the steps necessary to achieve maximum density and that the City would be cooperative, recognizing the need for additional affordable housing. 14-002 SE Division Street Zell & Associates 21

VALUE PROCEDURE There are three basic approaches that are generally accepted by the professional societies in the appraisal of real property and the estimation of market value. These are: The cost approach; the sales comparison approach; and the income approach. Each method utilizes data collected from market activity when available or appropriate. The sales comparison approach relies upon market transactions of similar properties and after comparison of various factors such as zoning, topography, terms of sale, date of sale, and most importantly development potential. After adjusting for differences between the subject and the comparables, we are able to arrive at an indication of value in the competitive marketplace. The cost approach is based on the principle of substitution which states that...a prudent investor will pay no more for a property than the amount for which the site can be acquired and for which improvements that have equal desirability and utility can be constructed without undue delay. The income approach estimates the value of future benefits (income) in terms of the present. Gross income is estimated from comparable income producing properties, from which expenses are subtracted and the net income is then capitalized at a rate, which reflects the risk of the particular property. This method then indicates a present value of the income stream for the subject property. Each approach to value was considered but ultimately only the sales comparison approach is used, as it is the only relevant method. 14-002 SE Division Street Zell & Associates 22

Sales Comparison Approach SALES COMPARISON APPROACH: The primary factor affecting the value of the subject is its location in an area with limited support for new for sale residences and the need for additional affordable housing. It s large size and low density multifamily zone also sets it apart from the comparable sales. All this information is considered in our conclusion of value. The exhibit below summarizes the most relevant sales data: Land Sales Summary Net Price Number Raw Sale Sale Size Per of Density Lot No. Name City Zone Date Price (Acres) Acre Lots (DU/Acre) Price Sub 15004 SE DIVISION STREET Portland R3 7.47 157 21.02 Act 247 NE 146th AVE Portland R1 Active $ 1,300,000 3.00 $ 1,300,000 112 37.33 $ 11,607 1 17101 SE DIVISION Portland R1 Oct-13 $425,000 1.53 $277,778 78 50.98 $5,449 2 6300 NE KILLINGSWORTH Portland R2 Oct-13 $110,000 0.38 $289,474 12 31.58 $9,167 3 SWC SE 170TH AND DIVISION Portland R1 Oct-12 $70,000 0.42 $70,000 12 28.57 $5,833 4 29 SE 141st AVE Portland R2 May-12 $290,000 0.91 $318,681 27 29.67 $10,741 5 117 SE 151st AVE Portland RH Jul-07 $250,000 0.30 $833,333 27 90.00 $9,259 MINIMUM 0.30 $70,000 12 28.57 $5,449 MAXIMUM 1.53 $833,333 78 90.00 $10,741 AVERAGES 0.71 $357,853 31 46.16 $8,090 Active Listing 1: Located north of the subject across the street from Glendoveer Golf course this comparable has a similar number of possible units, but a higher density. It is a 3 acre parcel and will require less site development expense due to the higher percentage of building coverage allowed under the R1 zoning. The location is slightly superior. Sale 1: This recent sale is the assemblage of two lots located north of SE Division on either side of SE 171 st Avenue. The buyer is Portland Habilitation Center, an organization that, among other things, constructs affordable housing. The developer is Home First, a contractor that works with Portland Habilitation Center to construct a turnkey building. Totaling 1.53 acres and zoned R1 the developer reported that they will construct 48 apartment units on the west side of SE 171 st and 30 units on the east side for a total of 78 units. At the time of purchase they believed the existing home would be a tear down, but after closing on the property they discovered the home was salvageable and will retain it. At the time of sale, the property was owned by RBC bank and it was reportedly their last asset in Oregon. According to the broker, Chris Balmes PC, the bank was motivated to sell it, which resulted in a very good buy at $5,449 per unit. Compared to the subject, the location is inferior as are the conditions of sale. Combined, these factors warrant a substantial positive adjustment. Sale 2: A rather unique property, this comparable was affected by pre-existing CC&R s that require the units to be owner occupied. The broker reported that the surrounding tax lots were purchased by Habitat for Humanity and will be developed into duplexes. The buyer is a 14-002 SE Division Street Zell & Associates 23

board member for Habitat and purchased the property and will self-finance the construction, as financing for a for sale condominium project was not available in this market area. Twelve units will be constructed indicating a value of $9,167 per unit. When compared to the subject, this location is similar. Although closer in than the subject, the mobile home court across the street was a significant negative influence according to the broker. Sale 3: Located across SE Division from comparable 1, this small parcel was purchased for $70,000. The plans for this property are still largely unknown. According to Portland Maps, it appears the buyer has requested preliminary information regarding a possible 19 unit complex, though the zoning allows a maximum of 18. The buyer s broker reported that due to setbacks on the site, 12 units was most likely to be achieved. Therefore, we have used 12 units as our unit of comparison, which yields $5,833 per unit. Sale 4: This sale consists of an assemblage of two lots: the SWC of E Burnside and SE 141 st Avenue and adjacent lot to the south. Each was improved with a home at the time of sale and both will be razed for the development of 27 family apartment units (3 bed 2 bath units). Total acquisition costs are $10,741 per unit. The location is similar if not slightly superior in that it is closer in and near the 148 th Avenue Max station. However, being near the max line can also be considered a negative influence due to the higher incidences of crime along the light rail corridor. This is a Portland Habilitation Center purchase to be built out by Homes first. Sale 5: Also a Portland Habilitation Center purchase this sale is a bit older having closed in 2007. It is recently completed and improved with 27 units. This property is also very near the 148 th Avenue Max station. Conclusion of Land Value We spoke at length with Rob Justice, of Home First who stated that in order to successfully develop affordable housing (without government subsidy) they need to acquire land at $10,000 per unit or less. The sales data bears that out by providing a range of value between $5,500 and $10,741 per unit. The non distressed sales focus on values between $9,000 and $11,000 per unit. This is where we feel the subject value lies. Because the subject parcel is much larger it is likely that more site improvements such as parking lots or interior roads will be required. All of the comparables used were higher density buildings with greater site coverage than the subject. This is somewhat offset by the relatively superior location of the subject being near the area s only significant grocery and retailer, Fred Meyer. Therefore we estimate a value of $10,000 per unit for the subject. Based on the maximum number of units allowed under the R3 zone (157) we have concluded a value for the subject land of: ONE MILLION FIVE HUNDRED SEVENTY THOUSAND DOLLARS $1,570,000 14-002 SE Division Street Zell & Associates 24

SALES COMPARABLE MAP Sales Comparable Map 14-002 SE Division Street Zell & Associates 25

LAND SALE PHOTOS 17101 SE Division 6300 NE Killingsworth 14-002 SE Division Street Zell & Associates 26

SWC SE Division and SE 170 th Ave. 29 SE 141 st Ave. 14-002 SE Division Street Zell & Associates 27

117 SE 151 st Ave. 14-002 SE Division Street Zell & Associates 28

RECONCILIATION AND FINAL VALUE CONCLUSION Consideration of the various analyses and approaches resulted in the following conclusions: 7.47 Acres of R2 Zoned Land: $1,570,000 The previous sections analyzed factors within the regional and immediate markets for indications of population growth, supply and demand, typical pricing, and ranges of value within which the subject must compete. These factors were utilized in estimating market value of the land. First the highest and best use was concluded to be for the construction of 157 apartment units targeting the affordable housing market, which is the maximum number allowed under the R3 zoning. Then the value of multifamily development land was estimated using 5 comparable sales. After adjustment the comparable sales provided a value range between $9,000 and $11,000 per unit. Given the subject s good location but large site and comparatively low density that will require more site improvements a value of $10,000 per unit was concluded. Based on 157 likely units a final value of $1,570,000 was indicated. The quality of market data was limited but sufficient so as to conclude a value for each of the subject s components. The quality of the data was good, and was reliably confirmed to a degree that the full story was able to be learned which enabled the appraiser to adjust for inferior and superior features in the sales. 14-002 SE Division Street Zell & Associates 29