Kitsap County Assessor

Kitsap County Assessor Narrative for Countywide Model Tax Year: 2018 Appraisal Date: 1/1/2017 Property Type: Countywide Retail - Standalone Drug Store Updated 6/12/2017 by CM20 Area Overview Countywide models are for properties located throughout Kitsap County, rather than by neighborhood. Property Type Overview A stand alone drug store is a good quality single tenant building with approximately 14,500 square feet to 18,000 square feet in size. Situated at high traffic lighted intersections they command some of the best commercial locations available in Kitsap County. Drug store tenants in attached units associated with shopping centers are valued using the Retail Large Single Tenant model. Economic Overview: This property type typically remains occupied for the economic life of the building. Valuation Summary Approach Used: Income Analysis and Conclusion Summary: The three approaches to value were considered. The cost approach was given little consideration in the appraiser's final analysis. Cost approach components such as replacement cost new, effective age, and depreciation are difficult to accurately calculate in a mass appraisal model. A market/sales comparison approach uses sale prices of comparable properties to calculate value. The market/sales approach was not applied as Kitsap County lacks sufficient, recent sales. The income approach was selected as the best method for valuing these properties. The data used to develop our current model data was collected from our mail survey, site visits, local sales, national publications, and data supplied for review or appeal. Drug stores, built by or for the intended tenant are at primary intersections representing superior locations throughout the county. The tenant (drug store) typically sells the property and leases it back at a lease rate substantially higher than commanded by similar properties. A sale-leaseback transaction is defined as a financing arrangement in which real property is sold by its owner-user, who simultaneously leases the property from the buyer for continued use. Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute 2002. As such, the value dictated by these sales is for value in use rather than the fair market value as if it were an unencumbered fee estate. Sale and resale of these properties reflect a value more attributable to the creditworthiness of the business enterprise than the real estate value itself. Both the sales and documented income have not been used in this analysis. Model Calibration Preliminary Ratio Analysis: Analysis of sales resulted in a mean ratio of 115%, a median ratio of 107%, and a coefficient of disperson (COD) of 25.8. /Sales Comparison Approach Data and Analysis Sales: Range of Sale Dates: 1/1/2013 to 12/31/2016. A total of 5 local sales, and 14 regional sales, and 0 national sales were used in the sales analysis. Additional information is provided on the sales analysis Printed 6/12/2017

Property type: Countywide Retail - Standalone Drug Store (continued) data sheet. Kitsap County attempts to review, analyze, and validate via telephone, mail, or in person interviews, all commercial sales within the county for inclusion or exclusion in our market/sales approach. /Sales Rates: Sales ranged from $58.90 to $193.48 per square foot. A 5% trend was applied to sales from 2013. Income Approach and Data Analysis Values were calculated using a triple net (NNN) income model. Income and expense information was collected from mailed surveys, property representatives, on-site visits, and market research (publications, newsletters, websites, etc.) Three local drug store rents were documented. The leases in place for drug stores occupied by a national chain are typically for twenty to twenty-five years with multiple five-year renewal clauses and are an absolute net basis where the tenant is responsible for all operating expenses. The lease amount established is more by investors estimate of required return rather than market rates. Therefore, the documented rents of stores currently occupied by chain pharmacy retailers have not been used as a basis of value. Using the principal of substitution, review of other large single tenant structures, and their rents, were used to develop the income model. Data: The Assessor validated rents from 44% of the market. Typical reported rents had a range of $4.59 to $17.34. We selected $3.95 to $11.50 for our model. Vacancy Data: Typical reported vacancy had a range of to 10. We selected 5% to 5% for our model. Expense Data: Typical reported expense had a range of 5% to 54%. We selected 6% to 6% for our model. Capitalization Rate (Cap) Data: Typical sale cap rates ranged from 3.14% to 12.02%. We selected 7.5% to 8.75% for our model. Local cap rates were reviewed, along with cap rates from regional sales and from national publications. Income Model Value Range: The income approach calculates a range of values from $40.31 to $136.93 per square foot. Final Ratio Analysis: Analysis of sales resulted in a mean ratio of 104%, a median ratio of 113%, and a coefficient of disperson (COD) of 12.32. Sources Kitsap County Board of Equalization appeal documentation. Washington State Board of Tax appeal documentation. Kitsap County income and expense surveys. Kitsap County sales questionaires. The Dictionary of Real Estate Appraisal, Appraisal Institute, Third Edition, 1993 Property Appraisal and Assessment Administration, IAAO, 1990 Glossary for Property Appraisal and Assessment, IAAO,1997 LoopNet - www.loopnet.com Commercial Brokers Association - www.commercialmls.com Boulder Group Net Lease Report Q4 2016 CBRE Survey 1st Half 2016 Calkain Net Lease s PWC-Korpacz 1st Qtr 2017 Printed 6/12/2017

RETAIL IFICATION GUIDELINES Location Synergy Access Visibility Traffic Parking Quality of Building Condition of Building Delivery Access Highest and Best Use A Associated with a shopping center Destination shopping such as shopping centers or designated retail developments. Multiple accesses, lighted access, round-a-bouts, allway stop signs. Store front or signage highly visible. High traffic count or destination shopping area. Ample on-site parking. Very good retail building with impressive façade. New or recently renovated with modern mechanical upgrades. Good delivery access to rear of building, possibly loading docks. As developed. B Associated with a shopping center or Destination or easy impulse shopping location. Multiple accesses, lighted access, round-a-bouts, allway stop signs. Store front or signage highly visible. High traffic count or destination shopping area. In midst of downtown core walking pattern. Ample on-site parking or adequate nearby parking for locations. Good retail building with attractive façade. New or recently renovated with modern mechanical upgrades. Good delivery access to rear of building, possibly loading docks. As developed. C Free standing or Good traffic from neighboring business mix. Adequate access, possible multiple accesses, turn lane on busy roads. Good store front or signage visibility. Adequate traffic counts. In midst of or at edge of walking pattern. Adequate on-site parking or nearby parking for locations Average retail building, typical façade. Average condition, no functional obsolescence. All Rear access man mechanical components meet doors with good requirements. Typical road. maintenance on building completed as needed. As developed. D Free standing, secondary street locations, or in defunct shopping center. Limited synergy from neighboring businesses. Adequate access, possibly difficult during high traffic commute hours. Limited store front or signage visibility. Adequate to low traffic count, or extremely high count during peak commute hours. Off the main walking pattern for. Adequate to limited on-site parking or nearby parking for locations Average retail building with plain or dated façade. Possible deferred maintenance, possible Possible rear functional obsolescence. May access, alley not meet todays standards for access. mechanical improvements. As developed, possibly transitioning away from current use. E Free standing, secondary street locations, or in defunct shopping center. Limited or none. Adequate to difficult access. Very limited. Low traffic count. Not part of typical walking pattern for areas. Limited parking, distance to parking in areas. Fair or low quality retail building, plain or dated façade. Needs maintenance, possible functional obsolescence, approaching need for redevelopment. Does not meet todays mechanical standards. Limited with narrow alley, or no rear access. Transitioning away from current use or need of complete redevelopment to today's standards. Onsite parking is not typical in areas where 10 building footprint to land is allowed. Locations within the typical walking pattern for areas are prime retail sites. Those located at the fringes or back streets are less desirable. Retail stores in excess of 10,000 sf for single tenant occupancy tend to be square in shape. Retail stores are typically rectangular in shape with the short side being the store frontage. Consider higher rent class if the long side is store frontage.

Kitsap County Assessor Tax Year: 2018 Property Type: Retail Countywide Neighborhood: 0 Rtl>20K Outside Rtl>100K SA Drug SupMkt Class A 11.50 11.69 18.50 11.50 7.50 8.75 7.50 7.50 Class B 9.90 10.10 15.50 9.90 7.750 9.000 7.750 7.750 Class C 6.50 8.55 20.00 9.00 9.75 9.25 Class D 5.25 7.70 5.25 10.00 8.25 9.25 8.25 Class E 3.95 6.50 3.95 20.00 8.75 9.75 8.75 Income Mode 302017

Kitsap County Assessor Tax Year 2018 Local Income Survey for Retail - Retail-Large PGI per Unit Vacancy EGI per Unit Expense % $17.56 $17.56 17% $17.34 $17.34 16% $17.34 $17.34 29% $17.34 14% $14.86 $16.94 $16.94 $16.66 $16.66 $1 $1 $15.26 $15.26 29% $14.84 $14.84 33% $13.67 $13.67 29% $13.25 $13.25 29% $13.17 $13.17 $12.55 $12.54 37% $12.46 $12.46 $11.20 $11.20 $10.24 10 $0.00 21% $10.00 $10.00 $9.38 $9.38 $9.24 10 $0.00 17% $9.11 $9.11 23% $8.50 $8.50 3% $8.31 $8.31 6% $8.25 $8.25 $7.64 $7.64 48% $7.49 $7.49 38% $7.19 $7.19 $7.08 $7.08 54% $6.90 $6.90 $6.81 $6.81 5% $6.62 $6.62 $6.50 $6.50 21% $6.46 $6.46 $6.05 $6.05 $5.95 $5.95 8% $5.63 $5.63 $5.62 $5.62 9% $5.57 $5.57 $5.37 $5.37 1 NOI per Unit $14.52 $14.53 $12.31 $14.86 $16.94 $16.66 $1 $10.79 $1 $9.71 $9.41 $13.17 $7.87 $12.46 $11.20 $0.00 $10.00 $9.38 $0.00 $7.00 $8.24 $7.77 $8.25 $3.97 $4.62 $7.18 $3.26 $6.90 $6.47 $6.62 $5.14 $6.46 $6.05 $5.46 $5.63 $5.13 $5.57 $4.80 Printed: 6/12/2017

Kitsap County Assessor Tax Year 2018 Local Income Survey for Retail - Rtl >100,000 sf PGI per Unit Vacancy EGI per Unit Expense % $4.72 $4.72 NOI per Unit $4.72 Kitsap County Assessor Tax Year 2018 Local Income Survey for Retail-CW - SA Drug PGI per Unit Vacancy EGI per Unit Expense % $29.97 $29.97 $24.70 $24.70 $23.37 $23.37 NOI per Unit $29.97 $24.70 $23.37 Printed: 6/12/2017

No. NBRHD PC Account Number Project Name Tax Year 2018 Countywide Retail Large Single Tenant, Standalone Drug Stores, and Supermarkets Sales from 01/01/2013 through 12/31/2016 Class Units Excise No. 5% V C Sales Date Sales Price Trended Sales Price Model Value Other Values Total TY2018 Value 8401101 590 162501-2-078-2001 Wherehouse Music A 14,100 $ 1,930,650 8401101 590 162501-2-079-2000 Party City A 13,776 $ 1,886,310 06/12/2013 $ 6,500,000 $ 6,825,000 8401101 590 162501-2-080-2007 La Z Boy Furniture A 15,990 $ 2,189,470 $ 7,704,300 113%1 8401101 580 162501-2-091-2004 Applebees A 5,742 $ 1,514,410 $ 183,460 2 8401508 590 352501-4-095-2003 Dollar Tree B 18,600 2015EX00757 V 02/06/2015 $ 2,825,000 $ 2,825,000 $ 2,121,770 $ 2,121,770 75% 3 8401508 590 352501-4-095-2003 Dollar Tree B 18,600 2014EX07745 V 11/24/2014 $ 2,250,000 $ 2,250,000 $ 2,121,770 $ 2,121,770 94% 8401101 592 4489-000-009-0003 Michaels + Center C 22,700 $ 2,033,990 $ 4,733,300 4 8401101 562 4489-000-035-0001 2013EX03749 TJ Maxx C 26,400 W 06/12/2013 $ 9,500,000 $ 9,975,000 $ 2,357,530 $ 492,730 $ 11,737,730 118% 8401101 460 4489-000-037-0009 LO Parking for Kitsap Place $ 2,120,180 8100506 590 122401-2-038-2005 Former Albertson's C 50,930 5 8100506 460 122401-2-039-2004 Parking Lot 2016EX05050 W 07/14/2016 $ 3,000,000 $ 3,000,000 $ 4,548,050 $ (909,610) $ 3,638,440 121% Ratio NBRHD Neighborhood PC Property Class Count 5 8401101 Silverdale 590 Other retail trade Low 75% Highway 303 East 592 Community Center High 121% 8401508 Bremerton 460 Parking Median 113% 8100506 Wheaton Way Mean 104% 8100502 West Bremerton VC Property Class AAD 0.14 8402307 South Kitsap UGA D Not economic unit COD 12.32 8400302 Kingston V W S 8 M Valid Sale With other property Segregation Outlier Other Removed Sales 5% No. NBRHD PC Account Number Project Name Class Units Excise No. V C Sales Date Sales Price Trended Sales Price Model Value Other Values Total TY2018 Value 1 8401101 592 162501-4-110-2007 Bucklin Place - Albertsons A 58,012 2015EX01368 V 03/06/2015 $ 9,229,396 $ 9,229,396 $ 7,943,390 $ 7,943,390 86% 2 8100506 590 122401-2-038-2005 Albertson's store w/039 C 50,930 2015EX03523 V 05/27/2015 $ 3,668,563 $ 3,668,563 $ 4,548,050 $ (909,610) $ 3,638,440 99% 3 8400302 590 272702-2-044-2006 Kingston Rite Aid A 18,187 2013EX05633 M 08/15/2013 $ 5,615,000 $ 5,895,750 $ 4,006,120 $ 4,006,120 68% 4 8100502 590 3783-008-012-0006 Bremerton Walgreens B 14,406 2014EX07806 M 11/20/2014 $ 7,745,000 $ 7,745,000 $ 2,572,900 $ 2,572,900 33% 5 8402307 592 302402-3-047-2009 Former Kmart/Strip Retail Mile Hill C 72,627 2016EX09631 8 12/13/2016 $ 2,000,000 $ 2,000,000 $ 4,180,530 $ 1,303,960 $ 5,484,490 274% 6 8401101 592 162501-3-119-2000 Mickelberry Ctr -Goodwill Industries C 61,151 2015EX01213 V 03/02/2015 $ 6,632,000 $ 6,632,000 $ 2,897,610 $ 1,663,340 $ 4,560,950 69% 7 8401101 590 162501-4-096-2005 Furniture Store and Sporting Goods C 116,703 2013EX05260 S 08/05/2013 $ 10,050,000 $ 10,552,500 $ 10,421,580 $ 10,421,580 99% 8 8401101 590 362401-3-082-2000 Walgreen's Port Orchard A 15,112 2016EX01112 M 02/11/2016 $ 5,175,000 $ 5,175,000 $ 3,328,760 $ 3,328,760 64% 1 Part of a portfolio sale of based on the merger of Albertsons and Safeway 2 Part of a portfolio sale of based on the merger of Albertsons and Safeway 3 Sale included leased fee estate, purchase price determined by credit rating of tenant. 4 Sale included leased fee estate, purchase price determined by credit rating of tenant. 5 Outlier 6 Mix of retail main floor and warehouse, mini-storage in basement. 7 Property was split into two sites after sale. 8 Sale included leased fee estate, purchase price determined by credit rating of tenant. Ratio

Other County Sales January 1, 2013 - April 11, 2017 Big Box >100K County Account No Project Excise Date Sale Price Size $/Unit Cap King '5514000010 Midway Lowes 2832894 08-Nov-16 $ 14,115,500 135041 $ 104.53 King 783080-0006 Fred Meyers 2614591 13-Jun-13 $ 13,380,000 166593 $ 80.32 King 092104-9017 Former Target 2701560 19-Nov-14 $ 8,200,000 101909 $ 80.46 King '3523049103 Dania 2781736 26-Feb-16 $ 10,000,000 100036 $ 99.96 Pierce '0220123050 Home Depot - Tacoma 4372800 + 30-Jun-15 $ 32,655,000 137071 $ 238.23 6.07% Whatcom '3803181364010000 Home Depot - Bellingham 193900 09-Jun-15 $ 25,590,000 104950 $ 243.83 6.3 Yakima 181321-24437 Shopko Yakima 440947 26-Jun-15 $ 9,931,506 94237 $ 105.39 7.3 Retail-Large >10K County Account No Project Excise Date price Size $/Unit Cap King 216163-0100 Best Buy - Issaquah 2627746 29-Aug-13 $ 6,720,000 45440 $ 147.89 8.0 King 7269100050 former McClendon's Hardware 2677099 17-Jun-14 $ 5,560,000 18928 $ 293.74 Pierce '0319332035 Kmart 4422372 27-Jan-17 $ 2,800,000 55552 $ 50.40 Snohomish '00518000002100 Petco 1107892 11-Jul-16 $ 4,745,000 11552 $ 410.75 Snohomish '32041900311100 Petco & Grocery Outlet 1116340 28-Sep-16 $ 8,300,000 28702 $ 289.18 Snohomish '00393000000500 O'Reilly Auto Parts 1125638 06-Feb-17 $ 3,250,000 17712 $ 183.49 Thurston 12821120500 Big Lots 723333 02-May-14 $ 3,700,000 35836 $ 103.25 7.25% Whatcom '38021250041110000 Petsmart 190267 31-Dec-14 $ 3,500,000 25272 $ 138.49 Whatcom '3802125004120000 Michael's 191296 02-Mar-15 $ 4,050,000 23800 $ 170.17 Whatcom '4003191371900000 Tractor Supply 204459 15-Aug-16 $ 4,057,000 47503 $ 85.41 Whatcom 3802125004110000 Petsmart 206487 24-Oct-16 $ 4,353,000 25272 $ 172.25 Drug Stores County Account No Project Excise Date price Size $/Unit Cap Grant 311944000 Rite Aid - Moses Lake 1355922 18-Nov-15 $ 5,650,000 16763 $ 337.05 6.46% Grays Harbor 052209000100 Rite Aid E211919 31-Mar-14 $ 7,800,000 17384 $ 448.69 7.3 King 247390-0020 Rite Aid - Fairwood 2620059 25-Jul-13 $ 6,645,000 16892 $ 393.38 King 2161630120 Walgreens Issaquah 2661148 03-Apr-14 $ 6,910,000 15120 $ 457.01 6.16% King 320380-0005 Bartell Drugs 2853142 14-Mar-17 $ 4,100,000 12480 $ 328.53 King 122800-0044 Walgreen's 2853550 15-Mar-17 $ 5,500,000 13905 $ 395.54 Pierce 6026190030 Rite Aid Graham 4313220 04-Jun-13 $ 5,350,000 17387 $ 307.70 8.86% Pierce '0319213016 Rite Aid Spanaway 4325804 24-Oct-13 $ 2,365,000 21878 $ 108.10 Pierce 351500074 Walgreens & Starbucks 4359714 03-Feb-15 $ 10,052,000 15154 $ 663.32 6.12% Snohomish Walgreens Lake Stevens 103797 26-Apr-13 $ 9,294,605 14891 $ 624.18 5.95% Snohomish '00372700801303 Walgreens Lynnwood 1034520 28-Jun-13 $ 5,890,000 12336 $ 477.46 7.0 Snohomish '30052700401400 Bartell Drugs 1061787 24-Oct-14 $ 5,934,000 14300 $ 414.97 6.0 Whatcom 3803180235460000 Walgreens - Bellingham 195269 05-Aug-15 $ 7,178,000 15035 $ 477.42 6.27% Whatcom '3902290575060000 Rite Aid Ferndale 190497 21-Jan-15 $ 3,800,000 17278 $ 219.93 Supermarkets County Account No Project Excise Date price Size $/Unit Cap King '2225069026 Haggen Albertsons Grocery 2806636 27-Jun-16 $ 12,746,440 46733 $ 272.75 3.14% King '0723049624 Haggen Safeway Grocery 2808816 08-Jul-16 $ 8,778,100 48528 $ 180.89 4.73% King '9517600010 Country 2820467 30-Aug-16 $ 4,500,000 39973 $ 112.58 Pierce '0420041184 Albertson's 4404391 18-Jul-16 $ 8,795,000 53880 $ 163.23 Pierce '7470021611 former Albertson's/Haggen 4429155 11-Apr-17 $ 13,500,000 44647 $ 302.37 Snohomish '27051100400800 Haggen's 1106616 20-Jun-16 $ 3,250,000 51619 $ 62.96 Snohomish '00521900500600 Roger's Mountlake Terrace 1116987 02-Oct-16 $ 2,500,000 27590 $ 90.61