Real Estate Appraisal

SUMMARY REPORT REAL ESTATE APPRAISAL

Of Subject Property Name

Subject Address, Subject City Subject County County Subject State, Subject Zip/Postal

As of January 21, 2013

Prepared For Mr./Ms. Ima Lender Bank & Trust, Co. Client Address Client City, Client State/Province, 03301

Client File: ClientFileNum

Prepared by APPRAISAL CO. VALUATION & CONSULTING Tom Armstrong, MAI, NH-137 -- --, --, -----

File Name: N1 03312011 APPRAISAL CO. VALUATION & CONSULTING 001-555-1212 PO Box 001, 987 Route 1 Fax: 001-555-2121 MyCity, [email protected] MyState/Province, 03245 www.narrative1.com

January 21, 2013

Mr./Ms. Ima Lender Bank & Trust, Co. Client Address Client City, Client State/Province 03301

Re: Summary Report, Real Estate Appraisal Subject Property Name Subject Address, Subject City, Subject County County, Subject State, Subject Zip/Postal

File Name: N1 03312011

Dear Mr./Ms. Lender:

At your request, we have prepared an appraisal for the above referenced property, which may be briefly described as follows:

Capsule Description here

Please reference page 11 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.

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.

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, we note the following:

Hypothetical Conditions:

 There are no hypothetical conditions for this appraisal.  None.  None. Mr./Ms. Lender Bank & Trust, Co. March 31, 2011 Page 2

Extraordinary Assumptions:

 There are no Extraordinary Assumptions for this appraisal.  None.  None.

Based on the appraisal described in the accompanying report, subject to the Limiting Conditions and Assumptions, Extraordinary Assumptions and Hypothetical Conditions (if any), we have made the following value conclusion(s):

Current As Is Market Value: The “As Is” market value of the Fee Simple estate of the property, as of January 21, 2013, is

One Million Fifty Thousand One Dollars ($1,050,001)

The market exposure time preceding January 21, 2013 would have been 2 months and the estimated marketing period as of January 21, 2013 is 2 months.

Prospective As Complete Market Value: The “As Complete” market value of the Fee Simple estate of the property, as of January 21, 2013, is

One Million Fifty Thousand Dollars ($1,050,000)

Prospective As Stabilized Market Value: The “As Stabilized” market value of the Fee Simple estate of the property, as of January 21, 2013, is

One Million Fifty Thousand Dollars ($1,050,000)

Respectfully submitted, Appraisal Co. Valuation & Consulting

Tom Armstrong, MAI -- --, -- NH-137 ----- TABLE OF CONTENTS

Summary of Important Facts and Conclusions...... 6 Limiting Conditions and Assumptions...... 9 Scope of Work...... 11 Market Area Analysis...... 13 Market Area Location and Boundaries...... 14 Market Area and Property Characteristics...... 14 Location Map...... 15 Property Description...... 16 Site Plan/Tax Map/Survey...... 18 Improvements Plan...... 23 Subject Photographs...... 24 Assessment and Taxes...... 26 Assessment Analysis...... 26 Zoning...... 27 Highest and Best Use...... 28 Valuation Methodology...... 29 Analyses Applied...... 29 Cost Approach...... 30 Land Value...... 30 Sales Comparison Approach – Land Valuation...... 30 Land Comparables...... 31 Comparables Map...... 36 Analysis Grid...... 36 Comparable Land Sale Adjustments...... 38 Sales Comparison Approach Conclusion – Land Valuation...... 38 Cost Analysis...... 39 Depreciation Analysis...... 39 Cost Approach Conclusion...... 40 Sales Comparison Approach...... 42 Comparables...... 42 Comparables Map...... 47 Analysis Grid...... 47 Comparable Sale Adjustments...... 49 Sales Comparison Approach Conclusion...... 49 Income Approach...... 51 Direct Capitalization Analysis...... 51 Potential Gross Income (PGI)...... 51 Space Types & Occupancy...... 51 Rent Roll...... 52 Recent Leases...... 54 Overall Rent Ranges...... 54 Major Tenants...... 54 Lease Expiration Schedule...... 54 Market Rent...... 55 Comparables Map...... 59 Analysis Grid...... 59 Comparable Rent Adjustments...... 60 Summary of Market Rent...... 62 Potential Gross Income Summary...... 63 Other Income...... 64 Vacancy and Collection Loss...... 64 Effective Gross Income...... 64 Expenses...... 64 Net Operating Income...... 76 Capitalization Rate...... 76 Capitalization to Value...... 79 Direct Capitalization Analysis Conclusion...... 79 Effective Gross Income Multiplier Analysis (EGIM)...... 80 Net Income Multiplier Analysis (NIM)...... 81 Stabilization Calculations...... 82 Final Reconciliation...... 85 Value Indications...... 85 Value Conclusion...... 85 Certification Statement...... 87 Addenda...... 88 Glossary...... 90 Summary of Important Facts and Conclusions

GENERAL Subject: Subject Property Name Subject Address, Subject City, Subject County County, Subject State, Subject Zip/Postal

Capsule Description here

Owner: Owner Name

Legal Description: Legal Desc1

Date of Report: January 21, 2013

Intended Use: The intended use is for mortgage financing.

Intended User(s): The client and property owner.

Assessment: Real Estate Assessment and Taxes Tax ID Land Improvements Other Total City County Other Tax Rate Taxes Rate Rate Rate TaxID $350,000 $700,000 $35,000 $1,085,000 $10.00 $15.00 $5.00 $30.00 $32,550

Sale History: The subject has not sold in the last three years, according to public records. Or: The subject sold for $1,250,000on January 1, 2013. MRS SalesComnt

Prior to this transaction the subject sold for Older Sale Price on Older Sale Date. Older Sale Comment.

PreviousSaleComnt

Your Footer Here Software by Narrative1.com 6 Current The subject is not currently listed for sale, or under Listing/Contract(s): contract. Or: The subject was listed by Listing Agency, Inc for $1,750,000 on January 21, 2013. ListingCmnt And/Or The subject is currently under option for $1,500,000. The option date is January 1, 2013. OptionComnt. And/or The subject is under contract for sale for $1,500,000. Contract Date: January 21, 2013 Financing Terms: Contract Financing Buyer: ContractGrantee ContractComnt

Land: Land Summary Parcel ID Gross Land Gross Land Usable Land Usable Land Topography Shape Area (Acres) Area (Sq Ft) Area (Acres) Area (Sq Ft) Parcel 1 2.00 87,120 2.00 87,120 Level Site shape

Improvements: Building Summary Building Year Built Condition Number of Gross Building Rentable Area Number of Name/ID Stories Area Units Building 1 1988 Good 2.0 12,995 12,500 14 Notes:

Zoning: Zoning Code

Highest and Best Use HBU as vacant of the Site:

Highest and Best Use HBU as improved as Improved: Type of Value: Market Value

VALUE INDICATIONS Land Value: $600,000 Cost Approach: $1,430,000 Sales Comparison $1,025,000 Approach: Income Approach: Direct Capitalization $1,090,000 EGIM Analysis $1,055,000

Your Footer Here Software by Narrative1.com 7 NIM Analysis $1,050,000

Reconciled Value(s): As Is As Complete As Stabilized Value Conclusion(s) $1,050,000 $1,050,000 $1,050,000 Effective Date (s) January 21, 2013 January 21, 2013 January 21, 2013 Property Rights Fee Simple Fee Simple Fee Simple

Your Footer Here Software by Narrative1.com 8 Limiting Conditions and Assumptions 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 estimates or the identity of the firm or the appraiser(s) 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 Appraisal Co. Valuation & Consulting. 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(s) or made known to the appraiser(s). 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.

Your Footer Here Software by Narrative1.com 9 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(s) are 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(s) Appraisal Co. Valuation & Consulting’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.

Americans with Disabilities Act (ADA) of 1990 A civil rights act passed by Congress guaranteeing individuals with disabilities equal opportunity in public accommodations, employment, transportation, government services, and telecommunications. Statutory deadlines become effective on various dates between 1990 and 1997. Appraisal Co. Valuation & Consulting has not made a determination regarding the subject’s ADA compliance or non-compliance. Non- compliance could have a negative impact on value, however this has not been considered or analyzed in this appraisal.

Your Footer Here Software by Narrative1.com 10 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 Mr./Ms. Ima Lender, -- Bank & Trust, Co.. The problem to be solved is to estimate the 'as is' market value of the subject property. The intended use is for mortgage financing. This appraisal is intended for the use of client and property owner.

SCOPE OF WORK Report Type: This is a Summary Report as defined by Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(B). This format provides a summary of the appraisal process, subject and market data and valuation analyses.

Property Identification: The subject has been identified by the legal description and the assessors' parcel number.

Inspection: A complete interior and exterior inspection of the subject property has been made, and photographs taken.

Market Area and Analysis of A complete analysis of market conditions has been Market Conditions: 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.

Highest and Best Use Analysis: A complete as vacant and as improved 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 concluded. Type of Value: Market Value

Your Footer Here Software by Narrative1.com 11 Valuation Analyses Cost Approach: A cost approach was applied as there is adequate data to develop a land value and the depreciation accrued to the improvements can be reasonably measured.

Sales Comparison Approach: A sales approach was applied as there is adequate data to develop a value estimate and this approach reflects market behavior for this property type.

Income Approach: An income approach was applied as the subject is an income producing property and there is adequate data to develop a value estimate with this approach.

Hypothetical Conditions:  There are no hypothetical conditions for this appraisal.  None.  None.

Extraordinary Assumptions:  There are no Extraordinary Assumptions for this appraisal.  None.  None.  Information Not Available:  --  --  --

Comments

Your Footer Here Software by Narrative1.com 12 Market Area Analysis Area Description & Boundaries T he neighborhood boundaries extend from ____ to ___ on a north south axis and from ___ to ____ on an east west axis.

Area & Property Use Characteristics Up Stbl Dn Location Urban Suburban Rural P opulation T rend Build Up Over 75% 25% to 75% Under 25% Employment T rend Built Up Fully Dev. Rapid Steady Slow P ersonal Income Level P roperty Values Increasing Stable Declining Retail Sales Demand/Supply Shortage In Balance Over Supply New Construction Vacancy T rend Increasing Stable Declining Vacancy T rend Change in Economic Base Likely Unlikely T aking P lace Rental Demand

Land Use Trends Supply/Demand Present Land Use Under In Bal. Over Vacancy Land Use 15% 1 Family 10% 45% Retail 10% 20% Multifamily 10% Vacant 10% 1 Family 15% 5% Office 10% Industrial 5% 5% Indust rial 10% Office 10% Vacant 5% 100%

Change in Land Use Likely Multifamily 20% Not Likely

T aking P lace Retail 45%

Land uses in the neighborhood consist of ___

Age Range for Subject P roperty T ype 1970 to 2009 Rent Range for Subject P roperty T ype $12.00 to $12.00 / square foot

Adjacent Property Use Adjacent property uses inlcude ___

Your Footer Here Software by Narrative1.com 13 Optional narrative headings – delete if using table above

Market Area Location and Boundaries Describe

Market Area and Property Characteristics Describe

Population Trends Describe/Analyze

Housing Trends Describe/Analyze

Income Trends Describe/Analyze

Major Employers Describe/Analyze

Unemployment Trends Describe/Analyze

Land Use Trends Describe/Analyze

Your Footer Here Software by Narrative1.com 14 Location Map

Your Footer Here Software by Narrative1.com 15 Property Description Capsule Description here

Multiple parcels table – delete if only one parcel Land Summary Parcel ID Gross Land Gross Land Usable Land Usable Land Topography Shape Area (Acres) Area (Sq Ft) Area (Acres) Area (Sq Ft) Parcel 1 2.00 87,120 2.00 87,120 Level Site shape

SITE Location: The subject is located on the south side of Route, at the southwest region of the downtown commercial district.

Current Use of the Improved as … Property: Site Size: Total: 2.00 acres; 87,120 square feet

Usable: 2.00 acres; 87,120 square feet Parcel 1 usable land area comments

Shape: The site is roughly rectangular.

Frontage/Access: The subject property has good access with frontage as follows:  Primary Front Street: 310 feet  Secondary Front Street: 50 feet The site has an average depth of 255 feet. It is a corner lot.

Visibility: Average

Topography: The subject has level topography at grade and no areas of wetlands.

Soil Conditions: The soil conditions observed at the subject appear to be typical of the region and adequate to support development.

Utilities: Electricity: Electricity Sewer: Sewer Water: Water Natural Gas: Gas Underground Utilities: UndergroundUtilities Adequacy: UtilitesAdequacy

Site Improvements:  StreetLights  Sidewalk

Your Footer Here Software by Narrative1.com 16  CurbGutter  The landscaping consists of … 

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: 11-22-33 FEMA Map Date: January 1, 1988

The subject is not in a flood zone.

Wetlands/Watershed: WetlandsWatershed

Environmental Issues: Environmental Issues

Encumbrance / Encumbrance or Easement Easements:

Site Comments: SiteComnt

Insert Site #2 here (How?)

Your Footer Here Software by Narrative1.com 17 Site Plan/Tax Map/Survey

Your Footer Here Software by Narrative1.com 18 IMPROVEMENTS DESCRIPTION Development/Property Subject Property Name Name:

Property Type: Office

Overview: Capsule Description here

Multiple buildings table, delete if only one building Building Summary Building Year Built Condition Number of Gross Building Rentable Area Number of Name/ID Stories Area Units Building 1 1988 Good 2.0 12,995 12,500 14 Notes:

GENERAL - BUILDING 1 Building Identification: Building 1

Building Description: BuildingDesc

Building Class: A, B or C

Construction: Steel and masonry

Construction Quality: ConstructionQuality

Year Built: 1988

Renovations: --

Effective Age: 20 years

Remaining Useful Life: 30

Condition: Good

Appeal/Appearance: AppealAppearance

Areas, Ratios & Number of Stories: 2.00 Numbers: Gross Building Area: 12,995 Gross Leasable Area: NA Rentable Area: 12,500 Number of Units: 14

Building Efficiency Ratio: 96.2%

Your Footer Here Software by Narrative1.com 19 FOUNDATION, FRAME & EXTERIOR - BUILDING 1 Foundation: Poured concrete slab

Basement/Sublevels: 1,215 square feet; NumSublevels sublevel(s)

Basement Use: --

Structural Frame: FrameType

Column Spacing: 24 Feet

Bay Dimension: 0

Exterior: ExteriorWalls

Windows: Windows

Roof/Cover: RoofType / RoofCover

Service Access/ The building is served by NumDoor overhead doors; Overhead Doors: NumDoorLeveler with levelers.

Other:

INTERIOR - BUILDING 1 Interior Layout: FloorPlanLayout

Floor Cover: FloorCovering

Walls: Painted drywall

Ceilings & Ceiling Acoustic ceiling panels / 18 Height:

Lighting: A mix of fluorescent and incandescent lighting.

Restrooms: Restrooms

Other:

MECHANICAL SYSTEMS - BUILDING 1 Heating: HeatType

Your Footer Here Software by Narrative1.com 20 Cooling: ACType

Electrical: ElectricityDesc

Plumbing Condition: PlumbingCondition

Sprinkler: FireSprinklerType

Elevators/Escalators: NumElevator / NumEscalator

Security: Security

Other:

Comments, Building 1: Comments

Insert Building #2 Here (How?)

PARKING Parking Type and Type: ParkingType Number of Spaces: Spaces: 48 Condition: ParkingLotCond

Parking Ratio: 3.84 spaces per 1,000 square feet.

Other:

PROPERTY ANALYSIS Design & Functional Overall design and functional utility Utility:

Deferred Maintenance: DefMaintenanceComnt

Capital Improvements: Planned Capital Improvements

Other:

Comments: OverallPropertyComments

Americans With Disabilities Act Please reference the Limiting Conditions and Assumptions section of this report on page 10.

Your Footer Here Software by Narrative1.com 21 Hazardous Substances Please reference the Limiting Conditions and Assumptions section of this report on page 10.

Your Footer Here Software by Narrative1.com 22 Improvements Plan

Your Footer Here Software by Narrative1.com 23 Subject Photographs

Picture Here

Description Here

Picture Here

Description Here

Your Footer Here Software by Narrative1.com 24 Picture Here

Description Here

Picture Here

Description Here

Your Footer Here Software by Narrative1.com 25 Assessment and Taxes

Taxing Authority Taxing Authority

Assessment Year 2011

Real Estate Assessment and Taxes Tax ID Land Improvements Other Total City County Other Tax Rate Taxes Rate Rate Rate TaxID $350,000 $700,000 $35,000 $1,085,000 $10.00 $15.00 $5.00 $30.00 $32,550

Real Estate Assessment Analysis Tax ID Per SF Per Acre Total Equalization Implied Value Ratio TaxID $83.49 $542,500 $1,085,000 100.0% $1,085,000 Notes:

Comments Assessment comments here

Assessment Analysis We have analyzed the assessment and corresponding taxation of competitive properties in the marketplace as a test of reasonableness compared to the subject’s current assessment and taxation.

Real Estate Tax Analysis Assessment Overall Name Property Type Tax ID Year Taxes Comparison 5a Bridge Street Garden/Low-Rise TaxID 2011 $119,140 $0.00 $0 Similar 1 Bridge Street Mixed Use TaxID 2011 $12,478 Similar 4 Bridge Street Mixed Use TaxID 2011 $12,478 Similar 12 Bridge Street Mixed Use 0 2011 $25,876 Similar 4 Bridge Street Mixed Use TaxID 2011 $12,478 Similar 5a Bridge Street Garden/Low-Rise TaxID 2011 $119,140 Similar Notes:

 Analysis

Your Footer Here Software by Narrative1.com 26 Zoning LAND USE CONTROLS Zoning Code Zoning Code

Zoning Description Zoning Description

Zoning Density/FAR 0.15

Actual Density of Use Actual density of use

Current Use Legally Conforming Current Use Legally Conforming

Zoning Change Likely Zoning Change Likely

Zoning Change Description Zoning Change Description

Set Back Distance Set Back Distance

Side Yard Distance Side Yard Distance

Zoning Comments Zoning Comments

Your Footer Here Software by Narrative1.com 27 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 The highest and best use of the site, as vacant, is for HBU as vacant.

HBU vacant comments

Highest and Best Use as Improved The highest and best use of the subject as improved HBU as improved.

HBU as improved comments

Your Footer Here Software by Narrative1.com 28 Valuation Methodology Three basic approaches may be used to arrive at an estimate 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 estimate 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 estimate 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 developed because there is adequate data to develop a land value and the depreciation accrued to the improvements can be reasonably measured.

A sales comparison analysis was considered and was developed because there is adequate data to develop a value estimate and this approach reflects market behavior for this property type.

An income analysis was considered and was developed because the subject is an income producing property and there is adequate data to develop a value estimate with this approach.

Your Footer Here Software by Narrative1.com 29 Cost Approach The Cost Approach is based on the principle of substitution - that a prudent and rational person would pay no more for a property than the cost to construct a similar and competitive property, assuming no undue delay in the process. The Cost Approach tends to set the upper limit of value before depreciation is considered. The applied process is as follows:

 Estimate the land value according to its Highest and Best Use. We have used the Sales Comparison Approach; the process is as follows:

o Comparable sales, contracts for sale and current offerings are researched and documented.

o Each comparable is analyzed and adjusted to equate with the subject property.

o The value indication of each comparable is analyzed and the data reconciled for a land value indication.

 Estimate the replacement cost of the building and site improvements.

 Estimate the physical, functional and/or external depreciation accrued to the improvements.

 Sum the depreciated value of the improvements with the value of the land for an indication of value.

Land Value The subject’s land value has been developed via the sales comparison approach. Sales Comparison Approach – Land Valuation 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.

Your Footer Here Software by Narrative1.com 30  The most meaningful unit of value for the subject property is determined.

 Each comparable sale is analyzed and where appropriate, adjusted to equate with the subject property.

 The value indication of each comparable sale is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach.

Land Comparables We have researched three comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction.

Comparable Address Date Price Per Land Unit Land Units Comparable City Price Price per Acre Acres Notes Subject Subject Address 1/1/11 $0 20.00

Subject Subject City $0 $0 2.00

1 Comp G Address 1/11/07 $27,879 33.00 Land Sale Comp ID #9 notes here. Land Sale Comp ID #9 notes here. Land Sale Comp ID #9 notes here. Land Sale 1 Comp G City $920,000 $334,545 2.75 Comp ID #9 notes here.

2 Comp E Address 4/14/07 $20,370 27.00 Land Sale Comp ID #10 notes here. Land Sale Comp ID #10 notes here. Land Sale Comp ID #10 notes here. Land Sale 2 Comp E City $550,000 $333,333 1.65 Comp ID #10 notes here.

3 Comp C Address 7/4/07 $0 26.00 Land Sale Comp ID #11 notes here. Land Sale Comp ID #11 notes here. Land Sale Comp ID #11 notes here. Land Sale 3 Comp C City $750,000 $0 2.42 Comp ID #11 notes here.

Your Footer Here Software by Narrative1.com 31 Land Comparable 1

Transaction ID 9 Date 1/11/07 Address Com p G Address Price $920,000 City Com p G City Price per Acre $334,545 State Com p G St at e Financing Cash Tax ID Com p G T ax ID Property Rights Fee Sim ple Grantor Com p G Grantor Days on Market 102 Grantee Com p G Grantee Verification Source Broker, Assessor, Deed Legal Description Com p G Legal Description

Site Acres 2.8 Topography Level Land SF 119,790 Zoning City Com m ercial Road Frontage 225 Flood Zone None Shape Rectangular Encumbrance or Easement None Utilities M unicipal utilities Environmental Issues None

Improvements GBA 0 Condition 0 GLA 0 Ancillary Buildings 0 No. of Stories 0 Parking Year Built 0

Notes Com p G com m ent s here. Comp G comm ents here. Com p G com ment s here. Com p G com m ent s here. Com p G com m ents here. Com p G com ments here. Com p G comm ent s here. Com p G comm ent s here. Com p G com ments here. Com p G comm ents here. Comp G comm ents here. Com p G com ment s here. Com p G com m ent s here. Com p G comm ents here. Com p G com m ent s here. Comp G comm ents here. Com p G com ment s here. Com p G com m ent s here. Com p G com m ents here. Com p G com ments here. Com p G comm ent s here.

Transaction ID 10 Date 4/14/07 Address Com p E Address Price $550,000 City Com p E City Acre Unit Price $333,333 State Com p E St at e Financing Cash Tax ID Com p C T ax ID Property Rights Fee Sim ple Grantor Com p E Grantor Days on Market 102 Grantee Com p E Grantee Verification Source Broker, Assessor, Deed Legal Description Com p C Legal Description

Site Acres 1.7 Topography Sloping Land SF 71,874 Zoning City Com m ercial Road Frontage 225 Flood Zone None Shape Rectangular Encumbrance or Easement None Utilities M unicipal utilities Environmental Issues None

Notes Com p E com m ent s here. Comp E comm ents here. Com p E com ment s here. Com p E com m ent s here. Com p E com m ents here. Com p E com ments here. Com p E comm ent s here. Com p E comm ent s here. Com p E com ments here. Com p E comm ents here. Comp E comm ents here. Com p E com ment s here. Com p E com m ent s here. Com p E comm ents here. Com p E com m ent s here. Comp E comm ents here. Com p E com ment s here. Com p E com m ent s here. Com p E com m ents here. Com p E com ments here. Com p E comm ent s here.

Transaction ID 11 Date 7/4/07 Address Com p C Address Price $750,000 City Com p C City Acre Unit Price $309,917 State Com p C St at e Financing Cash Tax ID Com p C T ax ID Property Rights Fee Sim ple Grantor Com p C Grantor Days on Market 102 Grantee Com p C Grantee Verification Source Broker, Assessor, Deed Legal Description Com p C Legal Description

Site Acres 2.4 Topography Level with pocket of wet land Land SF 105,415 Zoning Citynear Comfront m age ercial - see not es. Road Frontage 225 Flood Zone None Shape Rectangular Encumbrance or Easement None Utilities M unicipal utilities Environmental Issues None

Notes Com p C com m ent s here. Comp C comm ents here. Com p C com ment s here. Com p C com m ent s here. Com p C com m ents here. Com p C com ments here. Com p C comm ent s here. Com p C comm ent s here. Com p C com ments here. Com p C comm ents here. Comp C comm ents here. Com p C com ment s here.

Your Footer Here Software by Narrative1.com 34 To insert more comp sheets:

By default, the Narrative1 template displays three comps for Land, Sales and Leases. To add more:

1. Create a new blank page in Word 2. Right-click and select Fields and Tables (or use the Narrative1 menu from Word’s main menu.) 3. Find the comps in the list, select it and click insert

Your Footer Here Software by Narrative1.com 35 Comparables Map

Analysis Grid The above sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

Property Rights Sold Market Trends Financing Location Conditions of Sale Physical Characteristics

On the following page is a sales comparison grid displaying the subject property, the comparables and the adjustments applied.

Your Footer Here Software by Narrative1.com 36 Land Analysis Grid Comp 1 Comp 2 Comp 3 Address Subject Comp G Comp E Comp C City Subject City Comp G City Comp E City Comp C City State Subject State Comp G State Comp E State Comp C State Date 1/21/2010 1/11/2007 4/14/2007 7/4/2007 Price $0 $920,000 $550,000 $750,000 Acres 2.00 2.75 1.65 2.42 Acre Unit Price $0 $334,545 $333,333 $309,917 Transaction Adjustments Fee Simple Fee Fee Fee P roperty Rights Simple 0.0% Simple 0.0% Simple 0.0% Financing Conventional Cash 0.0% Cash 0.0% Cash 0.0%

Conditions of Sale Cash Normal 0.0% Normal 0.0% Normal 0.0% Expenditures After Sale $0 $0 $0 Adjusted Acre Unit Price $334,545 $333,333 $309,917 Market T rends T hrough 1/21/10 0.0% 0.0% 0.0% 0.0% Adjusted Acre Unit Price $334,545 $333,333 $309,917 Location Good Good Good Good % Adjustment 0% 0% 0% $ Adjustment $0 $0 $0

Acres 2.00 2.75 1.65 2.42 % Adjustment 0% 0% 0% $ Adjustment $0 $0 $0

Topography Level Level Sloping Level with % Adjustment 0% 0% 0% $ Adjustment $0 $0 $0

Shape Site shape Rectangular Rectangular Rectangular % Adjustment 0% 0% 0% $ Adjustment $0 $0 $0

Utilities Electricity, Municipal Municipal Municipal % Adjustment 0% 0% 0% $ Adjustment $0 $0 $0

Zoning Zoning Code City City City % Adjustment 0% 0% 0% $ Adjustment $0 $0 $0

Adjusted Acre Unit Price $334,545 $333,333 $309,917 Net Adjustments 0.0% 0.0% 0.0% Gross Adjustments 0.0% 0.0% 0.0%

Your Footer Here Software by Narrative1.com 37 Comparable Land Sale Adjustments

Property Rights 4 Describe/Analyze3

Financing 4 Describe/Analyze3

Conditions of Sale 4 Describe/Analyze3

Economic Trends 4 Describe/Analyze3

Location 4 Describe/Analyze3

Acres 4 Describe/Analyze3

Topography 4 Describe/Analyze3

Shape 4 Describe/Analyze3

Utilities 4 Describe/Analyze3

Sales Comparison Approach Conclusion – Land Valuation Land Value Ranges & Reconciled Value Number of Comparables: 3 Unadjusted Adjusted % Δ Low: $309,917 $309,917 0% High: $334,545 $334,545 0% Average: $325,932 $325,932 0% Meadian: $333,333 $333,333 0% Reconciled Value/Unit Value: $333,333 $750,000 $300,000 acres Subject Size: 2.00 Indicated Value: $600,000 Reconciled Final Value: $600,000 Six Hundred Thousand Dollars

Your Footer Here Software by Narrative1.com 38 All of the value indications have been considered, and in the final analysis, comparables <#>, <#> and <#>, have been given most weight in arriving at our final reconciled per acre value of $300,000.

Cost Analysis The next step in the Cost Approach is to estimate the replacement cost of the buildings and site improvements. The replacement cost of the subject site and building improvements are based on Marshall & Swift, a nationally recognized cost service.

Soft Costs Where appropriate, we have included the following soft costs:

Engineering Engineering has been applied at 6.0% of building cost.

Architectural Architectural has been applied at 5.0% of building and site costs.

Permits and Legal Permitting and legal costs have been applied at $10,000.

Marketing & Leasing Commissions It is often appropriate to add marketing expenses and leasing commissions necessary to bring an income producing property to stabilized occupancy to the cost schedule. In this case, these costs have been estimated at $20,000.

Developer's Profit This factor reflects the profit necessary for the developer to undertake the management, responsibility and risks of construction associated with the subject property. Current valuation theory states that the four components that create value are land, labor, capital and coordination. Developer's profit as used in the Cost Approach reflects the coordination component of value. Typically, developer's profit runs 10% to 20%: we have computed developer's profit at 10.0% of construction costs.

Depreciation Analysis Depreciation may be defined as any loss of value from any cause. There are three general areas of depreciation: physical deterioration, functional obsolescence and external obsolescence. Depreciation may be curable or incurable, the test being that money spent to cure the depreciation be gained in value. If the depreciation costs more to fix than will be gained in value, then the depreciation is considered incurable.

Physical Deterioration This results from deterioration from aging and use. This type of depreciation may be curable or incurable.

Your Footer Here Software by Narrative1.com 39 Functional Obsolescence This results from a lack of utility or desirability due to design or market perception of the improvements. This type of depreciation may be curable or incurable.

External Obsolescence This is due to circumstances outside the property itself, such as industry, demographic and economic conditions or an undesirable proximate use. This type of depreciation is rarely curable.

Depreciation Accrued to the Subject

Depreciation: Section 1 of 1 Component Eff. Age Life Percent Amount Physical Depreciation: Building 20 70 29% $395,553 Physical Depreciation: Site 15 20 75% $41,250 Functional Obsolescence Building …………………………………………………………………5% $69,222 External Obsolescence Building …………………………………………………………………0% $0 Total Depreciation $506,025 Depreciated Value of Improvements $933,411 Analysis

Cost Approach Conclusion Based on the analysis detailed on the following page, as of January 21, 2013 we have reconciled to a cost approach value of:

$1,430,000

One Million Four Hundred Thirty Thousand Dollars

Your Footer Here Software by Narrative1.com 40 Marshall & Swift Cost Source: Marshall & Swift # 13: Stores & Commercials No. of Stories Multiplier: 1.000 Local Multiplier: 1.000 Height/Story Multiplier: 1.000 Current Cost Multiplier: 1.000 Perimeter Multiplier: 1.000 Combined Multipliers: 1.000

Building Improvements Item Unit Type Cost Quantity Multiplier Total Building Sq. Ft. $85.00 12,995 1.000 $1,104,575 1.000 $0 1.000 $0 1.000 $0 1.000 $0 Total Building Improvement Costs $1,104,575 Price per SF Gross Building Area $85.00

Site Improvements Item Unit Type Cost Quantity Total Site Preparation & Improvements Lump Sum $50,000 1 $50,000 $0 $0 $0 $0 Total Site Improvement Costs $50,000 Subtotal: Building & Site Costs $1,154,575 Price per SF Gross Building Area $88.85

Soft Costs Item Percent Type Total Engineering …………………………………………………………………6.0% % of Building Cost $66,275 Architectural …………………………………………………………………5.0% % Bld. & Site Cost $57,729 Permits & Legal ………………………………………………………………………………………………………..$10,000 Leasing ………………………………………………………………………………………………$20,000 Total Soft Costs $154,003 Insurable Value (Excludes Site Improvements, related Soft Costs and Developer's Profit) $1,256,078 Total Costs Subtotal: Building, Site & Soft Costs $1,308,578 Developer's Profit 10.0% $130,858 Total Cost $1,439,436 Price per SF Gross Building Area $110.77

Depreciation: Section 1 of 1 Component Eff. Age Life Percent Amount Physical Depreciation: Building 20 70 29% $395,553 Physical Depreciation: Site 15 20 75% $41,250 Functional Obsolescence Building …………………………………………………………………5% $69,222 External Obsolescence Building …………………………………………………………………0% $0 Total Depreciation $506,025 Depreciated Value of Improvements $933,411 Cost Per Square Foot Gross Building Area $71.83

Additional Cost Sections Cost Section 2 ……………………………………………………………………………………..$0 Cost Section 3 ……………………………………………………………………………………..$0 Total Insurable Value (Excludes Site Improvements, related Costs & Developer's Profit) $1,256,078 Land Value Land Value ………………………………………………………………………………………$500,000 Other …………………………………………………………………………………$0 Cost Approach Value Indication $1,433,411 Rounded $1,430,000 Price per SF Gross Building Area $110.04

Your Footer Here Software by Narrative1.com 41 Sales Comparison Approach 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 sale is analyzed and where appropriate, adjusted to equate with the subject property.

 The value indication of each comparable sale is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach.

Comparables We have researched three comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction.

Comparable Address Grantor Price Price Per SF Year Built

Comparable City Grantee Date GBA Construction Notes Subject Subject Address MRS Grantor $1,250,000 $37.88 1988

Subject Subject City Owner Name 1/1/11 12,995 Steel and masonry 1 Comp A Address Comp A Grantor $1,675,000 $85.90 1995 Comp ID #5 notes here. Comp ID #5 notes here. Comp ID #5 notes here. Comp ID #5 notes here. Comp ID #5 notes here. 1 Comp A City Comp A Grantee 7/11/07 19,500 Class C Comp ID #5 notes here.

2 Comp B Address Comp B Grantor $1,725,000 $86.25 1995 Comp ID #6 notes here. Comp ID #6 notes here. Comp ID #6 notes here. Comp ID #6 notes here. Comp ID #6 notes here. 2 Comp B City Comp B Grantee 7/12/06 20,000 Class C Comp ID #6 notes here.

3 Comp C Address Comp C Grantor $1,510,000 $87.79 1995 Comp ID #6 notes here. Comp ID #6 notes here. Comp ID #6 notes here. Comp ID #6 notes here. Comp ID #6 notes here. 3 Comp C City Comp C Grantee 7/14/07 17,200 Class C

Your Footer Here Software by Narrative1.com 42 Comparable 1

Transaction ID 5 Date 7/11/07 Address Com p A Address Price $1,675,000 City Com p A City Price Per SF $85.90 State Com p A Stat e Transaction Type Closed Tax ID Com p A T ax ID Financing Cash Grantor Com p A Grant or Property Rights Fee Sim ple Grantee Com p A Grant ee Days on Market 100 Legal Description Com p A Legal Description Verification Source Broker, Assessor, Deed

Improvements & Financial Data GBA 19,500 PGI $200,000 Rentable Area 17,300 EGI $190,000 No. of Units 22 Expense Ratio 29.00% Year Built 1995 NOI $135,000 Renovations $0 Cap Rate 8.06% Condition Good EGIM 8.38 Notes Com p A com ments here. Com p A com m ents here. Comp A com m ents here. Com p A com m ents here. Comp A com m ents here. Com p A com m ents here. Com p A comm ents here. Com p A com m ents here. Com p A com ments here. Com p A comm ents here. Comp A com m ents here. Com p "A" com ment

Transaction ID 6 Date 7/12/06 Address Com p B Address Price $1,725,000 City Com p B City Price Per SF $86.25 State Com p B St at e Transaction Type Closed Tax ID Com p B T ax ID Financing Cash Grantor Com p B Grantor Property Rights Fee Sim ple Grantee Com p B Grantee Days on Market 101 Legal Description Com p B Legal Description Verification Source Broker, Assessor, Deed

Improvements & Financial Data GBA 20,000 PGI $220,000 Rentable Area 17,540 EGI $203,500 No. of Units 20 Expense Ratio 32.00% Year Built 1995 NOI $138,500 Renovations $0 Cap Rate 8.03% Condition Good EGIM 7.84 Notes Com p B com m ent s here. Comp B comm ents here. Com p B com ment s here. Com p B com m ent s here. Com p B com m ents here. Com p B com ments here. Com p B comm ent s here. Com p B comm ent s here. Com p B com ments here. Com p B comm ents here. Comp B comm ents here. Com p B com men

Transaction ID 7 Date 7/14/07 Address Com p C Address Price $1,510,000 City Com p C City Price Per SF $87.79 State Com p C St at e Transaction Type Closed Tax ID Com p C T ax ID Financing Cash Grantor Com p C Grantor Property Rights Fee Sim ple Grantee Com p C Grantee Days on Market 102 Legal Description Com p C Legal Description Verification Source Broker, Assessor, Deed

Improvements & Financial Data GBA 17,200 PGI $185,000 Rentable Area 16,000 EGI $166,500 No. of Units 17 Expense Ratio 27.00% Year Built 1995 NOI $121,500 Renovations $0 Cap Rate 8.05% Condition Good EGIM 8.16 Notes Com p C com m ent s here. Comp C comm ents here. Com p C com ment s here. Com p C com m ent s here. Com p C com m ents here. Com p C com ments here. Com p C comm ent s here. Com p C comm ent s here. Com p C com ments here. Com p C comm ents here. Comp C comm ents here. Com p C com ment s here.

Your Footer Here Software by Narrative1.com 45 To insert more comp sheets:

By default, the Narrative1 template displays three comps for Land, Sales and Leases. To add more:

4. Create a new blank page in Word 5. Right-click and select Fields and Tables (or use the Narrative1 menu from Word’s main menu.) 6. Find the comps in the list, select it and click insert

Analysis Grid The above sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

Property Rights Sold Market Trends Financing Location Conditions of Sale Physical Characteristics

On the following page is a sales comparison grid displaying the subject property, the comparables and the adjustments applied.

Your Footer Here Software by Narrative1.com 47 Analysis Grid Comp 1 Comp 2 Comp 3 Address Subject Address Comp A Address Comp B Address Comp C Address City Subject City Comp A City Comp B City Comp C City State Subject State Comp A State Comp B State Comp C State Date 1/21/2010 7/11/2007 7/12/2006 7/14/2007 Price $1,250,000 $1,675,000 $1,725,000 $1,510,000 GBA 12,995 19,500 20,000 17,200 GBA Unit Price $96.19 $85.90 $86.25 $87.79 Transaction Adjustments P roperty Rights Leased Fee Fee Simple 0.0% Fee Simple 0.0% Fee Simple 0.0% Financing Conventional Cash 0.0% Cash 0.0% Cash 0.0% Conditions of Sale Cash Normal 0.0% Normal 0.0% Normal 0.0% Expenditures After Sale $0 $0 $0 Adjusted GBA Unit Price $85.90 $86.25 $87.79 Market T rends T hrough 1/21/10 0.0% 0.0% 0.0% 0.0% Adjusted GBA Unit Price $85.90 $86.25 $87.79 Location Average Good Good Good % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 GBA 12,995 19,500 20,000 17,200 % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 Year Built 1988 1995 1995 1995 % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 Acres 2.0 1.9 2.0 2.0 % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 Road Frontage 310 200 210 252 % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00

% Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00

Adjusted GBA Unit Price $85.90 $86.25 $87.79 Net Adjustments 0.0% 0.0% 0.0% Gross Adjustments 0.0% 0.0% 0.0%

Your Footer Here Software by Narrative1.com 48 Comparable Sale Adjustments

Property Rights 4 Describe/Analyze3

Financing 4 Describe/Analyze3

Conditions of Sale 4 Describe/Analyze3

Economic Trends 4 Describe/Analyze3

Location 4 Describe/Analyze3

GBA 4 Describe/Analyze3

Year Built 4 Describe/Analyze3

Acres 4 Describe/Analyze3

Road Frontage 4 Describe/Analyze3

Sales Comparison Approach Conclusion Value Ranges & Reconciled Value Number of Comps: 3 Unadjusted Adjusted % Δ Low: $96.22 $96.22 0% High: $105.35 $105.35 0% Average: $101.69 $101.69 0% Median: $103.50 $103.50 0% Reconciled Value/Unit Value: $103.50 $1,812,000.00 $82.00 gba Subject Size: 100,000 Indicated Value: $8,200,000 Reconciled Final Value: $1,025,000 One Million Twenty Five Thousand Dollars

Your Footer Here Software by Narrative1.com 49 All of the value indications have been considered, and in the final analysis, comparables <#>, <#> and <#>, have been given most weight in arriving at our final reconciled per square foot value of $82.00.

Your Footer Here Software by Narrative1.com 50 Income Approach The Income Approach to value is based on the present worth of the future rights to income. This type of analysis considers the property from an investor's point of view, the basic premise being that the amount and quality of the income stream are the basis for value of the property.

Direct Capitalization Analysis The steps involved in capitalizing the subject's net operating income are as follows:

 Develop the subject's Potential Gross Income (PGI) through analysis of the subject’s actual historic income and an analysis of competitive current market income rates.

 Estimate and deduct vacancy and collection losses to develop the Effective Gross Income (EGI).

 Develop and subtract operating expenses to derive the Net Operating Income (NOI).

 Develop the appropriate capitalization rate (Ro).

 Divide the net operating income by the capitalization rate for an estimate of value through the income approach.

Potential Gross Income (PGI)

Current Income The table below summarizes the subject’s current and historic income.

Income Summary Appraisal Budget 2010 2009 Unit/Space Type Amount $/SF $/Unit Amount $/SF $/Unit Amount $/SF $/Unit Amount $/SF $/Unit Small Office $24,000 $12.00 $12,000 $24,000 $12.00 $12,000 $24,000 $12.00 $12,000 $24,000 $12.00 $12,000 Medium Office $22,000 $10.00 $22,000 $42,000 $19.09 $42,000 $19,000 $8.64 $19,000 $18,000 $8.18 $18,000 Small Retail $57,000 $15.00 $28,500 $27,000 $7.11 $13,500 $26,000 $6.84 $13,000 $25,000 $6.58 $12,500 Medium Retail $39,000 $13.00 $39,000 $39,000 $13.00 $39,000 $65,000 $21.67 $65,000 $64,000 $21.33 $64,000 Totals $142,000 $12.91 $23,667 $132,000 $12.00 $22,000 $134,000 $12.18 $22,333 $131,000 $11.91 $21,833

Space Types & Occupancy The following table details the space types we have defined for the subject, and current occupancy.

Your Footer Here Software by Narrative1.com 51 Units/ SF % of SF SF % Space Type Tenants Total Total Leased Vacant Vacant Small Office 2 2,000 18.2% 1,200 800 7.3% Medium Office 1 2,200 20.0% 2,200 0 0.0% Small Retail 2 3,800 34.5% 3,800 0 0.0% Medium Retail 1 3,000 27.3% 3,000 0 0.0% Totals 6 11,000 100.0% 10,200 800 7.3%

< Comments: market rent estimates are made by space type>

Lease Structure The predominant lease structure in the subject property is

Rent Roll The following rent roll details the current occupancy and rent status on a unit by unit basis.

Your Footer Here Software by Narrative1.com 52 Rent Roll Re nt Roll Suit No. % of Le ase Lease Lease Le ase Contract Cntr. Re nt Asking $ Market Cntr./As Tenant/Unit Name No. Space Type Unit SF Total Start End Term Type Re nt* SF or Unit SF or Unit Rent Variance Vision Center 1 Small Office 1 2,000 17.9% 10/1/2010 12/1/2012 26.04 Mos. Modified Gross $31,000 $15.50 $12.00 29% Outdoor Sports 2 Medium Office 1 1,800 16.1% 3/1/2010 3/1/2015 60.03 Mos. Net $25,200 $14.00 $10.00 40% Sub Shop & More 3 Small Retail 1 3,000 26.8% 3/2/2011 9/1/2015 54.04 Mos. Gross $36,000 $12.00 $15.00 -20% Acme Hardware 4 Medium Retail 1 1,200 10.7% 1/1/2007 1/1/2017 120.09 Net $15,900 $13.25 $13.00 2% Vacant 5 Small Office 1 800 7.1% 0 Mos. Net $12.00 $12.00 0% Stephens 6 1 Bedroom 1 700 6.3% 6/1/2011 6/30/2012 12.98 Mos. Gross $9,000 $750.00 $700.00 7% Vacant a 2 Bedroom 1 800 7.1% 1/21/2012 12/31/2012 11.34 Mos. $820.00 $800.00 2% Smith b 3 Bedroom 1 900 8.0% 2/21/2012 12/31/2012 10.32 Mos. $10,800 $900.00 $950.00 -5% Totals 8 11,200 100.0% Total $127,900 $13.32 Leased 6 9,600 85.7% Total Commercial $108,100 $13.51 Rent/SF/Year Vacant 2 1,600 14.3% Total Multifamily $19,800 $12.38 *Contract Rent = Annualized rent as of appraisal date Rent per SF for occupied space

Your Footer Here Software by Narrative1.com 53 Recent Leases The following table details leases signed at the subject after January 1, 2007.

Recent Leases Lease Date Lease Date Contract Contract Tenant Space Type Start End Rent* Rent/SF* Retail Tenant 1 Small Retail 1/1/2009 1/1/2010 $31,000 $15.50 Retail Tenant 3 Medium Retail 3/2/2008 9/1/2009 $36,000 $12.00 Retail Tenant 2 Small Retail 3/1/2008 3/1/2009 $25,200 $14.00 Office Tenant 3 Medium Office 6/1/2007 6/30/2010 $26,400 $12.00 *Contract Rent = Annualized rent as of appraisal date

< Analysis, Notes, Comments here. Analyze/discuss how recent leases compare with longer term history displayed in the rent roll, renewals, recent turn-over, etc. >

Overall Rent Ranges The following table detail overall rent ranges at the subject, organized by space type.

Rent Ranges by Space Type Space Type Avg. Size Units Low High Average Small Office 1,000 1 $13.25 $13.25 $13.25 Medium Office 2,200 1 $12.00 $12.00 $12.00 Small Retail 1,900 2 $14.00 $15.50 $14.75 Medium Retail 3,000 1 $12.00 $12.00 $12.00

< Analysis, Notes, Comments here. >

Major Tenants

Major Tenants Lease Date Contract Contract Tenant Space Type SF End Rent* Rent/SF* Retail Tenant 3 Medium Retail 3,000 9/1/2009 $36,000 $12.00 Office Tenant 3 Medium Office 2,200 6/30/2010 $26,400 $12.00 Retail Tenant 1 Small Retail 2,000 1/1/2010 $31,000 $15.50 *Contract Rent = Annualized rent as of appraisal date

Lease Expiration Schedule The lease expiration schedule provides insight to vacancy exposure and lease-up expenses.

Your Footer Here Software by Narrative1.com 54 Lease Expirations Year Ending SF Expiring* % of Total Cumulative % of Total 1/21/2011 2,200 20.0% 2,200 20.0% 1/21/2012 0 0.0% 2,200 20.0% 1/21/2013 0 0.0% 2,200 20.0% 1/21/2014 0 0.0% 2,200 20.0% 1/21/2015 0 0.0% 2,200 20.0% 1/21/2016 0 0.0% 2,200 20.0% 1/21/2017 0 0.0% 2,200 20.0% 1/21/2018 0 0.0% 2,200 20.0% 1/21/2019 0 0.0% 2,200 20.0% 1/21/2020 0 0.0% 2,200 20.0% *Existing commercial leases only. Projected leases, if any, excluded

Market Rent

Market Rent Comparables We have researched three comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction.

Comparable Name City Date Rent Rent Measure Terms SF Leased Notes 1 Alton Place City 3 4/22/07 12.00 Per Square Foot Triple Net 10,000 Lease Comp ID #1 notes here. Lease Comp ID #1 notes here. Lease Comp ID #1 notes here. Lease Comp ID #1 notes here. 2 Smith Center City 1 4/20/07 10.00 Per Square Foot Triple Net 10,000 Lease Comp ID #2 notes here. Lease Comp ID #2 notes here. Lease Comp ID #2 notes here. Lease Comp ID #2 notes here. 3 City Center City 2 4/25/07 15.00 Per Square Foot Triple Net 10,000 Lease Comp ID #3 notes here. Lease Comp ID #3 notes here. Lease Comp ID #3 notes here. Lease Comp ID #3 notes here.

Your Footer Here Software by Narrative1.com 55 Multifamily Rent Comparable 1

Location Building ID 2400 Name 1 Bridge Street Address 40 Lovejoy Ln Year Built 1988 City Concord Condition Fair State NH No. of Buildings 1 Market Lakes Region GBA 27,600 Property Major Type Office No. of Units 16 Vacancy --

Units & Rent Description No. Units Unit Size Rms/BR/Bth Rent/Month Rent/SF 1 Bedroom 2 700 $750 $12.86 2 Bedroom 12 800 $820 $12.30 3 Bedroom 8 900 $900 $12.00 3 Br W Loft 1 1,100 $1,100 $1.00

Comments

Your Footer Here Software by Narrative1.com 56 Lease Comparable 2

Location Building ID Name Address Year Built City Condition State No. of Buildings Market GBA Property Major Type No. of Units Vacancy

Leases Tenant Size $/SF Type Date Term

Comments

Your Footer Here Software by Narrative1.com 57 Lease Comparable 3

Location Building ID Name Address Year Built City Condition State No. of Buildings Market GBA Property Major Type No. of Units Vacancy

Leases Tenant Size $/SF Type Date Term

Comments

Analysis Grid The above rentals have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

Lease Terms Economic Trends (time) Conditions of Lease Location Other Physical Characteristics

On the following page is a rental comparison grid displaying the subject property, the comparables and the adjustments applied.

Your Footer Here Software by Narrative1.com 59 Lease Analysis Grid Comp 1 Comp 2 Comp 3 Address Subject Address 3 Address 1 Address 2 City Subject City City 3 City 1 City 2 State Subject State State 3 State 1 State 2 Lessee Lessee 4 Lessee 2 Lessee 7 Date 1/21/2010 4/22/2007 4/20/2007 4/25/2007 Effective Rent $12.00 $10.00 $15.00 Rent Measure Per Square Per Square Per Square Terms Triple Net Triple Net Triple Net Term 5 Years 3 Years 8 Years SF Leased 10,000 10,000 10,000 Transaction Adjustments

Conditions of Lease Normal 0% Normal 0% Normal 0% Other Similar 0% Similar 0% Similar 0% Adjusted Rent $12.00 $10.00 $15.00 Market Trends/Year 0.0% 0.0% 0.0% 0.0% Adjusted Rent $12.00 $10.00 $15.00 Expenses $0.00 $0.00 $0.00 Adjusted Rent $12.00 $10.00 $15.00 Location Good Good Good % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 Condition Good Good Average Excellent % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 SF Leased 0 10000 10000 10000 % Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00

% Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00

% Adjustment 0% 0% 0% $ Adjustment $0.00 $0.00 $0.00 Adjusted Rent $12.00 $10.00 $15.00 Net Adjustments 0.0% 0.0% 0.0% Gross Adjustments 0.0% 0.0% 0.0%

Comparable Rent Adjustments

Conditions of Lease  Describe/Analyze

Your Footer Here Software by Narrative1.com 60 Economic Trends  Describe/Analyze

Type of Lease/Expense Structure  Describe/Analyze

Location  Describe/Analyze

Condition  Describe/Analyze

--  Describe/Analyze

Market Rent Reconciliation Ranges & Reconciled Rent Number of Comps: 3 Unadjusted Adjusted % Δ Low: $14.00 $14.00 0% High: $15.50 $15.50 0% Average: $15.00 $15.00 0% Median: $15.50 $15.50 0% Reconciled Market Rent: $12.50 Twelve Dollars and Fifty Cents

Based on the above analysis, we have reconciled to a market rent of $12.50, as of January 21, 2013, for the subject .

Your Footer Here Software by Narrative1.com 61 Summary of Market Rent The table below summarizes the market rent estimates for the subject, organized by space type.

Market Rent by Space Type Space Type Rent Increases Type Term Notes / Concessions Small Office $12.00 3% per annum Net 2 years Note 1 Medium Office $10.00 3% per annum Net 3 years Note 2 Small Retail $15.00 3% per annum Net 4 years Note 3 Medium Retail $13.00 3% per annum Net 5 years Note 4

Your Footer Here Software by Narrative1.com 62 Potential Gross Income Summary Potential Gross Income - Occupied Space Contract Contract Market Market Contract V. Occupied Space SF Units Rent Rent/SF Rent Rent/SF Mkt. Rent Small Office 1,200 1 $15,900 $13.25 $14,400 $12.00 110.4% Medium Office 2,200 1 $26,400 $12.00 $22,000 $10.00 120.0% Small Retail 3,800 2 $56,200 $14.79 $57,000 $15.00 98.6% Medium Retail 3,000 1 $36,000 $12.00 $39,000 $13.00 92.3% Occupied Space Totals 10,200 5 $134,500 $13.19 $132,400 $12.98 101.6% *Contract Rent = Annualized rent as of appraisal date

Potential Gross Income - Vacant Space Potential Gross Rent Market Market Vacant Space SF Units Rent Rent/SF Small Office 800 1 $9,600 $12.00 Vacant Space Totals 800 1 $9,600 $12.00

Potential Gross Income Summary Market Rent Contract & Market Rent Market PGI For Occupied Space $132,400 Contract Rent For Occupied Space $134,500 Market PGI For Vacant Space $9,600 Market PGI For Vacant Space $9,600 Market Potential Gross Income $142,000 Contract & Market PGI $144,100 Market PGI per SF $12.91 Contract & Market PGI per SF $13.10 Contract to Market Ratio 101.5%

Your Footer Here Software by Narrative1.com 63 Gross Incom e

3 Bedroom $10,800 2 Bedroom $9,600 Small Office $40,600 1 Bedroom $9,000

Medium Retail $15,900

Medium Office $25,200

Small Retail $36,000

Other Income  Describe/AnalyzeOther Income is projected at $2,700.

Vacancy and Collection Loss Based on a review of market conditions and the subject’s operating history we have projected vacancy and collection loss at 10.00%.

Effective Gross Income Potential Gross Income $158,800 Other Income $2,700 Less: Vacancy & Collection Loss 10.00% Effective Gross Income $142,920

Expenses The table below details the subject’s current expenses and recent history.

Your Footer Here Software by Narrative1.com 64 Expense Summary Appraisal Budget 2014 2013 Expense Amount $/SF $/Unit % EGI Amount $/SF $/Unit % EGI Amount $/SF $/Unit % EGI Amount $/SF $/Unit % EGI Taxes $12,478 $0.42 $1,248 7.8% $12,200 $0.41 $1,220 7.6% $12,500 $0.42 $1,250 7.8% $12,000 $0.40 $1,200 7.5% Insurance $4,500 $0.15 $450 2.8% $4,500 $0.15 $450 2.8% $4,500 $0.15 $450 2.8% $4,500 $0.15 $450 2.8% Management $13,571 $0.45 $1,357 8.5% $5,500 $0.18 $550 3.4% $5,500 $0.18 $550 3.4% $5,500 $0.18 $550 3.4% Advertising and Marketing $7,500 $0.25 $750 4.7% $7,500 $0.25 $750 4.7% $7,500 $0.25 $750 4.7% $7,500 $0.25 $750 4.7% Total Utilities $2,500 $0.08 $250 1.6% $2,500 $0.08 $250 1.6% $2,500 $0.08 $250 1.6% $2,500 $0.08 $250 1.6% Repairs and Maintenance $2,000 $0.07 $200 1.3% $6,015 $0.20 $602 3.8% $6,015 $0.20 $602 3.8% $6,015 $0.20 $602 3.8% CAM $1,000 $0.03 $100 0.6% $2,406 $0.08 $241 1.5% $2,406 $0.08 $241 1.5% $2,406 $0.08 $241 1.5% Painting and Decorating $900 $0.03 $90 0.6% $899 $0.03 $90 0.6% $899 $0.03 $90 0.6% $899 $0.03 $90 0.6% Cleaning and Janitorial $900 $0.03 $90 0.6% $876 $0.03 $88 0.5% $988 $0.03 $99 0.6% $876 $0.03 $88 0.5% Payroll $800 $0.03 $80 0.5% $853 $0.03 $85 0.5% $799 $0.03 $80 0.5% $853 $0.03 $85 0.5% Security $700 $0.02 $70 0.4% $830 $0.03 $83 0.5% $699 $0.02 $70 0.4% $830 $0.03 $83 0.5% Roads and Grounds $600 $0.02 $60 0.4% $807 $0.03 $81 0.5% $599 $0.02 $60 0.4% $807 $0.03 $81 0.5% Other Expenses $500 $0.02 $50 0.3% $784 $0.03 $78 0.5% $499 $0.02 $50 0.3% $784 $0.03 $78 0.5% Totals $47,949 $3.75 $4,795 30.0% $46,431 $3.63 $4,643 29.1% $45,603 $3.56 $4,560 28.6% $46,231 $3.61 $4,623 29.0% Notes: $/SF and/or $/Unit are based on totals for the property.

Expenses Analysis and Projection The subject expense profile has been compared with ten comparables, detailed in the following table.

Your Footer Here Software by Narrative1.com 65 Expense Comparables Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6 Comp 7 Comp 8 Comp 9 Comp 10 Ranges Address 40 Lovejoy Lane 8 Bridge Street 12 Bridge Street 4 Bridge Street 5 Bridge Street 40 Lovejoy Lane 4 Bridge Street 8 Bridge Street 5 Bridge Street 12 Bridge Street 10 Comparables City Concord Concord Concord, Concord Concord Concord Concord Concord Concord Concord, Date 1/1/2011 1/1/2011 6/25/2012 1/1/2011 1/1/2011 1/1/2011 1/1/2011 1/1/2011 1/1/2011 6/25/2012 GBA 15,600 11,400 7,500 27,600 30,000 15,600 27,600 11,400 30,000 7,500 No. of Units 19 12 10 16 57 19 16 12 57 10 PGI $158,800 $215,000 $165,460 $157,360 $177,400 $158,800 $157,360 $215,000 $177,400 $165,460 Vacancy 10% 5% 10% 10% 10% 10% 10% 5% 10% 10% EGI $142,920 $204,250 $148,914 $141,624 $159,660 $142,920 $141,624 $204,250 $159,660 $148,914 Low Avg. Med. High Taxes $/SF $0.80 $2.19 $3.45 $0.45 $3.97 $0.80 $0.45 $2.19 $3.97 $3.45 $0.45 $2.17 $2.19 $3.97 Insurance $/SF $0.29 $1.58 $0.60 $0.16 $0.15 $0.29 $0.16 $1.58 $0.15 $0.60 $0.15 $0.56 $0.29 $1.58 Management % EGI 8.5% 9.8% 9.4% 8.5% 8.5% 8.5% 8.5% 9.8% 8.5% 9.4% 8.5% 8.9% 8.5% 9.8% Advertising and Marketing $/SF $0.48 $0.00 $1.00 $0.27 $0.25 $0.48 $0.27 $0.00 $0.25 $1.00 $0.25 $0.50 $0.38 $1.00 Total Utilities $/SF $0.16 $1.71 $0.33 $0.09 $0.08 $0.16 $0.09 $1.71 $0.08 $0.33 $0.08 $0.48 $0.16 $1.71 Repairs and Maintenance $/SF $0.13 $1.10 $0.27 $0.07 $0.07 $0.13 $0.07 $1.10 $0.07 $0.27 $0.07 $0.33 $0.13 $1.10 CAM $/SF $0.06 $0.00 $0.13 $0.04 $0.03 $0.06 $0.04 $0.00 $0.03 $0.13 $0.03 $0.07 $0.05 $0.13 Painting And Decorating $/SF $0.06 $0.00 $0.12 $0.03 $0.03 $0.06 $0.03 $0.00 $0.03 $0.12 $0.03 $0.06 $0.05 $0.12 Cleaning and Janitorial $/SF $0.42 $0.39 $0.00 $0.00 $0.02 $0.42 $0.00 $0.39 $0.02 $0.00 $0.02 $0.28 $0.39 $0.42 Payroll $/SF $0.05 $0.88 $0.11 $0.03 $0.03 $0.05 $0.03 $0.88 $0.03 $0.11 $0.03 $0.22 $0.05 $0.88 Security $/SF $0.04 $0.32 $0.09 $0.03 $0.02 $0.04 $0.03 $0.32 $0.02 $0.09 $0.02 $0.10 $0.04 $0.32 Roads and Grounds $/SF $0.04 $0.48 $0.08 $0.02 $0.02 $0.04 $0.02 $0.48 $0.02 $0.08 $0.02 $0.13 $0.04 $0.48 Other Expenses $/SF $0.03 $0.00 $0.07 $0.02 $0.02 $0.03 $0.02 $0.00 $0.02 $0.07 $0.02 $0.03 $0.03 $0.07 Reserves $/SF $0.03 $0.88 $0.05 $0.01 $0.00 $0.03 $0.01 $0.88 $0.00 $0.05 $0.01 $0.24 $0.04 $0.88 Total Expenses $/SF $3.01 $11.28 $6.51 $1.70 $1.60 $3.01 $1.70 $11.28 $1.60 $6.51 $1.60 $4.82 $3.01 $11.28 Total Expenses % EGI 32.8% 63.0% 32.8% 33.1% 30.0% 32.8% 33.1% 63.0% 30.0% 32.8% 30.0% 38.3% 32.8% 63.0% Notes:

Your Footer Here Software by Narrative1.com 66 Taxes This expense category includes all local, county, and state property tax levies, including special assessments.

Taxes 2 Subject $/SF Comparables (10) Appraisal 2014 $0.42 Low $0.45 $119,140 Annualized $0.50 Avgerage $2.17 $3.97 Budget $0.41 Median $2.19 2013 $0.40 High $3.97 Comp 1 $0.80 Comp 2 $2.19 Comp 3 $3.45 Comp 4 $0.45 Comp 5 $3.97 Comp 6 $0.80 Comp 7 $0.45 Comp 8 $2.19 Comp 9 $3.97 Comp 10 $3.45 Notes:

 Describe/Analyze

Insurance Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious mischief, and additional perils.

Your Footer Here Software by Narrative1.com 67 Insurance 2 Subject $/SF Comparables (10) Appraisal 2014 $0.15 Low $0.15 $4,500 Annualized $0.30 Avgerage $0.56 $0.15 Budget $0.15 Median $0.29 2013 $0.15 High $1.58 Comp 1 $0.29 Comp 2 $1.58 Comp 3 $0.60 Comp 4 $0.16 Comp 5 $0.15 Comp 6 $0.29 Comp 7 $0.16 Comp 8 $1.58 Comp 9 $0.15 Comp 10 $0.60 Notes:

Management An expense item representing the sum paid for management services; a variable operating expense. Management services may be contracted for or provided by the property owner. Management expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services, printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses.

Management 4 Subject % EGI Comparables (10) Appraisal 2014 3.4% Low 8.5% $13,571 Annualized 6.9% Avgerage 8.9% 8.5% Budget $0.03 Median 8.5% 2013 $0.03 High 9.8% Comp 1 8.5% Comp 2 9.8% Comp 3 9.4% Comp 4 8.5% Comp 5 8.5% Comp 6 8.5% Comp 7 8.5% Comp 8 9.8% Comp 9 8.5% Comp 10 9.4% Notes:

Your Footer Here Software by Narrative1.com 68  Describe/Analyze

Advertising and Marketing The items in this category include professional fees and other general administrative expenses, such as rent of offices and general expenses and the services needed to operate the property.

Advertising and Marketing 2 Subject $/SF Comparables (8) Appraisal 2014 $0.25 Low $0.25 $7,500 Annualized $0.50 Avgerage $0.50 $0.25 Budget $0.25 Median $0.38 2013 $0.25 High $1.00 Comp 1 $0.48 Comp 3 $1.00 Comp 4 $0.27 Comp 5 $0.25 Comp 6 $0.48 Comp 7 $0.27 Comp 9 $0.25 Comp 10 $1.00 Notes:

Total Utilities Utilities expenses typically include electric, gas, water, sewer, and trash removal.

Total Utilities 2 Subject $/SF Comparables (10) Appraisal 2014 $0.08 Low $0.08 $2,500 Annualized $0.17 Avgerage $0.48 $0.08 Budget $0.08 Median $0.16 2013 $0.08 High $1.71 Comp 1 $0.16 Comp 2 $1.71 Comp 3 $0.33 Comp 4 $0.09 Comp 5 $0.08 Comp 6 $0.16 Comp 7 $0.09 Comp 8 $1.71 Comp 9 $0.08 Comp 10 $0.33 Notes:

Your Footer Here Software by Narrative1.com 69  Describe/Analyze

Repairs and Maintenance All expenses incurred for the general repairs and maintenance of the building including common areas and general upkeep. Repairs and maintenance expense includes elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items.

Repairs and Maintenance 2 Subject $/SF Comparables (10) Appraisal 2014 $0.20 Low $0.07 $2,000 Annualized $0.40 Avgerage $0.33 $0.07 Budget $0.20 Median $0.13 2013 $0.20 High $1.10 Comp 1 $0.13 Comp 2 $1.10 Comp 3 $0.27 Comp 4 $0.07 Comp 5 $0.07 Comp 6 $0.13 Comp 7 $0.07 Comp 8 $1.10 Comp 9 $0.07 Comp 10 $0.27 Notes:

CAM Common area maintenance (CAM) is the expense of operating and maintaining common areas of the property. The common area is the total area within a property that is not designed for rental, but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities.

Your Footer Here Software by Narrative1.com 70 CAM 2 Subject $/SF Comparables (8) Appraisal 2014 $0.08 Low $0.03 $1,000 Annualized $0.16 Avgerage $0.07 $0.03 Budget $0.08 Median $0.05 2013 $0.08 High $0.13 Comp 1 $0.06 Comp 3 $0.13 Comp 4 $0.04 Comp 5 $0.03 Comp 6 $0.06 Comp 7 $0.04 Comp 9 $0.03 Comp 10 $0.13 Notes:

Painting and Decorating

Painting And Decorating 2 Subject $/SF Comparables (8) Appraisal 2014 $0.03 Low $0.03 $900 Annualized $0.03 Avgerage $0.06 $0.03 Budget $0.03 Median $0.05 2013 $0.03 High $0.12 Comp 1 $0.06 Comp 3 $0.12 Comp 4 $0.03 Comp 5 $0.03 Comp 6 $0.06 Comp 7 $0.03 Comp 9 $0.03 Comp 10 $0.12 Notes:

Cleaning and Janitorial The expense for building cleaning and janitorial services including all of the required items for both daytime and night-time cleaning and janitorial service for tenant spaces, public areas, atriums, elevators, restrooms, windows, etc.

Your Footer Here Software by Narrative1.com 71 Cleaning and Janitorial 2 Subject $/SF Comparables (6) Appraisal 2014 $0.03 Low $0.02 $0 Annualized $0.03 Avgerage $0.28 $0.00 Budget $0.03 Median $0.39 2013 $0.03 High $0.42 Comp 1 $0.42 Comp 2 $0.39 Comp 5 $0.02 Comp 6 $0.42 Comp 8 $0.39 Notes:

Payroll The payroll expenses for all employees involved in the on-going operation of the property, but whose salaries and wages are not included in other expense categories. Payroll 2 Subject $/SF Comparables (10) Appraisal 2014 $0.03 Low $0.03 $800 Annualized $0.03 Avgerage $0.22 $0.03 Budget $0.03 Median $0.05 2013 $0.03 High $0.88 Comp 1 $0.05 Comp 2 $0.88 Comp 3 $0.11 Comp 4 $0.03 Comp 5 $0.03 Comp 6 $0.05 Comp 7 $0.03 Comp 8 $0.88 Comp 9 $0.03 Comp 10 $0.11 Notes:

Security Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security expenses not covered elsewhere. This item also includes the expense of maintenance of security systems such as alarms and closed circuit television (CCTV), and ordinary supplies necessary to operate a security program such as batteries, control forms, access cards, security uniforms, etc.

Your Footer Here Software by Narrative1.com 72 Security 2 Subject $/SF Comparables (10) Appraisal 2014 $0.02 Low $0.02 $700 Annualized $0.03 Avgerage $0.10 $0.02 Budget $0.03 Median $0.04 2013 $0.03 High $0.32 Comp 1 $0.04 Comp 2 $0.32 Comp 3 $0.09 Comp 4 $0.03 Comp 5 $0.02 Comp 6 $0.04 Comp 7 $0.03 Comp 8 $0.32 Comp 9 $0.02 Comp 10 $0.09 Notes:

Roads and Grounds The cost of maintaining the grounds, roads and parking areas of the property.

Roads and Grounds 2 Subject $/SF Comparables (10) Appraisal 2014 $0.02 Low $0.02 $600 Annualized $0.03 Avgerage $0.13 $0.02 Budget $0.03 Median $0.04 2013 $0.03 High $0.48 Comp 1 $0.04 Comp 2 $0.48 Comp 3 $0.08 Comp 4 $0.02 Comp 5 $0.02 Comp 6 $0.04 Comp 7 $0.02 Comp 8 $0.48 Comp 9 $0.02 Comp 10 $0.08 Notes:

Your Footer Here Software by Narrative1.com 73 Other Expenses Any other expenses incurred in the operation of the property not specifically covered elsewhere.

Other Expenses 2 Subject $/SF Comparables (8) Appraisal 2014 $0.02 Low $0.02 $500 Annualized $0.03 Avgerage $0.03 $0.02 Budget $0.03 Median $0.03 2013 $0.03 High $0.07 Comp 1 $0.03 Comp 3 $0.07 Comp 4 $0.02 Comp 5 $0.02 Comp 6 $0.03 Comp 7 $0.02 Comp 9 $0.02 Comp 10 $0.07 Notes:

Reserves An allowance that provides for the periodic replacement of building components that wear out more rapidly than the building itself and must be replaced periodically during the building’s useful or economic life. Reserves are also called reserve(s) for replacement or replacement allowance. These components may include one or more of the following: roof covering; carpeting; kitchen, bath, and laundry equipment; compressors, elevators, and boilers; specific structural items and equipment that have limited economic life expectancies; interior improvements to tenant space that are made periodically by the landlord, usually at lease renewal; sidewalks, driveways; parking areas; and exterior painting.

Your Footer Here Software by Narrative1.com 74 Reserves 2 Subject $/SF Comparables (8) Appraisal 2014 $0.01 Low $0.01 $0 Annualized $0.03 Avgerage $0.24 $0.00 Budget $0.03 Median $0.04 2013 $0.03 High $0.88 Comp 1 $0.03 Comp 2 $0.88 Comp 3 $0.05 Comp 4 $0.01 Comp 6 $0.03 Comp 7 $0.01 Comp 8 $0.88 Comp 10 $0.05 Notes:

Expense Reimbursements Expense Reimbursed Amount* Notes Taxes No Insurance No Utilities No Repairs/Maintenance No Misc./Other No Management No Reserves No Total $0 * Adjusted for vacancy

Expenses

Reserves 6%

Taxes 26% Management 24%

Insurance Misc./Other 10% 5%

Repairs/Maintenance Utilities 17% 12%

Your Footer Here Software by Narrative1.com 75 Net Operating Income Effective Gross Income $133,890 Less: Less Expenses $45,389 Add: Expense Reimbursements $0 Net Operating Income $88,501

$148,600 Cash Flow Profile $133,890

$88,501

$45,389

Potential Gross IncomeEffective Gross IncomeExpenses Exp. ReimbursementsNet Operating Income

Cash Flow Potential Gross Effective Gross Exp. Reim- Income Income Expenses bursements NOI Amount $148,600 $133,890 $45,389 $0 $88,501

Capitalization Rate The capitalization rate is the factor that converts the stabilized net operating income (NOI) to a present value. It is the ratio of net income to value or sale price.

NOI ÷ Sale Price = Capitalization Rate

For example, if a property sells for $500,000, and has a stabilized NOI of $50,000, the indicated capitalization rate is 10%.

Market Extracted Rates The table below details capitalization rates extracted from the market.

Your Footer Here Software by Narrative1.com 76 Comparable Sale Cap Rates Comparable City Price Date NOI Cap Rate 1 Comp A City $1,675,000 7/11/2007 $135,000 8.06% 2 Comp B City $1,725,000 7/12/2006 $138,500 8.03% 3 Comp C City $1,510,000 7/14/2007 $121,500 8.05%

Band of Investment This technique utilizes lender and real estate investor investment criteria to develop, or synthesize a capitalization rate. There are four key inputs necessary for this method:

1. The loan-to-value ratio (M) 2. The mortgage interest rate (i) 3. The loan term (n) 4. The equity cap rate or equity dividend rate (RE)

The mortgage variables are used to build the mortgage constant (RM), which is the total amount of the payments made in one year, expressed as a percentage of the original loan amount.

Payments x 12 / Original Loan Amount = Mortgage Constant (RM)

The equity cap rate is the annual return to the investor, expressed as a percent of the original amount invested. The annual return to the investor is also known as the equity dividend rate; it is the profit remaining after debt service and all other expenses.

After Debt Service Profit / Equity Investment = Equity Cap Rate (RE)

Note that the equity cap rate is not the same (usually, that is) as the equity yield rate. The equity yield rate reflects the total return to the investor over the life of the investment. Factors such as appreciation and mortgage pay down affect and usually increase this return to a point higher than the equity dividend rate. In markets where substantial appreciation is expected, investors will often accept a low or even negative equity dividend rate, anticipating a compensating payoff when the property is eventually sold. In markets where little appreciation is expected, much more weight is given to the annual equity dividend.

Formula: RM x M = rate RE x (1-M) = rate = Cap Rate (Ro)

Debt Coverage Ratio Analysis This technique develops a capitalization rate based on typical mortgage terms. There are four variables necessary for this method:

1. The loan-to-value ratio (M)

Your Footer Here Software by Narrative1.com 77 2. The mortgage interest rate (i) 3. The loan term (n) 4. The debt coverage ratio (DCR)

Items 1 through 3 are discussed above under the Band of Investment section. In this method it is also used to develop the mortgage constant (RM). The debt coverage ratio is the factor by which income exceeds debt on an annual basis.

Formula: Debt Coverage Ratio x Loan to Value Ratio x Mortgage Constant = Ro or: DCR x M x RM = Ro

We have researched mortgage rates and terms typical for the subject within the market area. The table below details the Band of Investment and Debt Coverage Ratio Analyses calculations.

Capitalization Rate Calculations

Capitalization Rate Variables Mortgage Interest Rate 6.25% Loan Term (Years) 20 Loan To Value Ratio 70.% Debt Coverage Ratio 1.25 Equity Dividend Rate 8.00%

Band of Investment Analysis Mortgage Constant Loan Ratio Contributions 0.087711384 x 70.% = 6.14% Equity Dividend Rate Equity Ratio 8.00% x 30.% = 2.40% Band of Investment Capitalization Rate 8.54%

Debt Coverage Ratio Analysis Debt Coverage Ratio x Loan to Value Ratio x Mortgage Constant 1.25 x 0.7 x 0.0877113842853083 = 7.67% Debt Coverage Ratio Capitalization Rate 7.67%

Survey Data Discuss investor or published survey data

Capitalization Rate Conclusion 7.75%

Your Footer Here Software by Narrative1.com 78 Capitalization to Value Income Capitalization Analysis Unit/Space Type Income Method Units/SF Annual % of PGI Small Office $14.50 $/SF/Year 2,800 $40,600 27.6% Medium Office $14.00 $/SF/Year 1,800 $25,200 17.1% Small Retail $12.00 $/SF/Year 3,000 $36,000 24.5% Medium Retail $13.25 $/SF/Year 1,200 $15,900 10.8% 1 Bedroom $750.00 $/Month 1 $9,000 6.1% 2 Bedroom $800.00 $/Month 1 $9,600 6.5% 3 Bedroom $900.00 $/Month 1 $10,800 7.3% Potential Gross Income: $147,100 100.0% Vacancy & Collection Loss 10.00% $14,710 Other Income: $1,500 Effective Gross Income (EGI): $133,890 91.0%

Expense Amount (% or Method Annual $/SF Taxes $12,000 $/Year $12,000 $0.92 Insurance $4,500 $/Year $4,500 $0.35 Utilities $5,500 $/Year $5,500 $0.42 Repairs/Maintenance $7,500 $/Year $7,500 $0.58 Misc./Other $2,500 $/Year $2,500 $0.19 Management 8% % of EGI $10,711 $0.82 Reserves 2.0% % of EGI $2,678 $0.21 Total Expenses: $45,389 $3.49 Expense Ratio (Expenses/EGI): 33.90% Expense Reimbursements: $0 Net Expense Ratio 33.90% Net Operating Income (NOI): $88,501 $6.81 Capitalization Rate: 7.75% Value (NOI/Cap Rate): $1,141,948 $87.88 Rounded: $1,090,000 $83.88

Direct Capitalization Analysis Conclusion Based on the above analysis detailed above, as of January 21, 2013 we have reconciled to a direct capitalization approach value of:

$1,090,000

One Million Ninety Thousand Dollars

Your Footer Here Software by Narrative1.com 79 Effective Gross Income Multiplier Analysis (EGIM) The EGIM is the ratio of effective gross income to sale price (Price  EGI = EGIM).

 Develop the subject's Potential Gross Income (PGI) through analysis of the subject’s actual historic income and an analysis of competitive current market income rates.

 Estimate and deduct vacancy and collection losses to develop the Effective Gross Income (EGI).

 Develop the appropriate EGIM through analysis of comparable sales.

 Multiply the Effective Gross Income by the EGIM for an estimate of value.

Effective Gross Income Effective Gross Income has been developed previously in this appraisal at $129,300.

The following table summarizes the comparable sales, multipliers and expense ratios.

Effective Gross Income Multipliers Comparable City Price Date Expense Ratio EGIM 1 Comp A City $1,675,000 7/11/2007 29.0% 8.38 2 Comp B City $1,725,000 7/12/2006 32.0% 7.84 3 Comp C City $1,510,000 7/14/2007 27.0% 8.16

The range of multipliers is 7.84 to 8.38 with an average of 8.13.

4 Describe/Analyze3

Therefore, we have reconciled to a multiplier of 8.15.

EGIM Analysis Conclusion EGI $129,300 EGIM x 8.15 Indicated Value $1,053,795 Rounded $1,055,000 One Million Fifty Five Thousand Dollars

Your Footer Here Software by Narrative1.com 80 Net Income Multiplier Analysis (NIM) The NIM is the ratio of effective net operating income to sale price (Price  NOI = NIM).

Net Operating Income The Net Operating Income has been developed previously in this appraisal at $84,370.

The following table summarizes the comparable sales, NOI per square foot and multipliers.

Net Income Multipliers Comparable City Price Date NOI/SF NIM 1 Comp A City $1,675,000 7/11/2007 $6.92 12.41 2 Comp B City $1,725,000 7/12/2006 $6.93 12.45 3 Comp C City $1,510,000 7/14/2007 $7.06 12.43

The range of multipliers is 12.41 to 12.45 with an average of 12.43.

4 Describe/Analyze3

Therefore, we have reconciled to a multiplier of 12.45.

NIM Analysis Conclusion NOI $84,370 NIM x 12.45 Indicated Value $1,050,407 Rounded $1,050,000 One Million Fifty Thousand Dollars

Your Footer Here Software by Narrative1.com 81 Stabilization Calculations When a property has a below market income stream due to high vacancy and/or below market rents, an adjustment to value is often necessary for lost income over the lease-up period, leasing commissions associated with lease-up and perhaps tenant fit-up and additional operating expenses associated with the vacant space over the lease-up period.

The table below details the stabilization calculations for the subject.

Stabilization Calculations

Item Year 1 Year 2 Year 3 Year 4 Year 5 Actual PGI for Vacant Space $9,600 Stabilized PGI for Vacant Space @ 10.0% $14,200 Effective Gross Income for Vacant Space $0 $0 $0 $0 $0 Change 0% 0% 0% 0% Adjusted EGI Rent Loss $0 $0 $0 $0 $0 % Leased 0% 0% 0% 0% 0% $ Leased $0 $0 $0 $0 $0 Annualized Rent Loss for $ Leased at 50% $0 $0 $0 $0 $0 $ Vacant $0 $0 $0 $0 $0 Leasing Commissions* $0 $0 $0 $0 $0 Tenant Improvements $0 $0 $0 $0 $0 Other $0 $0 $0 $0 $0 Other $0 $0 $0 $0 $0 Totals $0 $0 $0 $0 $0 Discount Rate 12.0% Present Value $0 Rounded $0 *Leasing Commission Rate 8.0% For example, a $10,000 annual lease would have a Number Years Commission Applies 2 commission of $1,600 ($10,000 x 8.0% x 2 Years = $1,600)

Actual PGI for Vacant Space: This figure is from the Rent Roll table and is the dollar amount of the subject’s current vacancy.

Stabilized PGI for Vacant Space: This figure is calculated from the Rent Roll table. It is the dollar amount of vacancy at stabilized occupancy, calculated by multiplying the PGI at market rent by the stabilized vacancy and collection loss rate. In this case, $142,000 x 10.00% = $14,200.

Adjusted EGI Rent Loss: These lines reflect the anticipated change percentage and dollar for income trends over the stabilization period

% Leased: The projected percentage of space absorbed by the market for the given year. The percentage is measured against the original vacancy, not remaining vacancy.

$ Leased: The dollar amount for the space absorbed.

Annualized Rent Ross for $ Leased at 50%: This line assumes that absorption will take place over the course of the year and that on average, only 50% of the rent will be captured. In effect, the calculation assumes space is occupied at the mid-point of the year.

Your Footer Here Software by Narrative1.com 82 $ Vacant: This is the dollar amount of remaining rent loss and is carried forward to the next year.

Leasing Commissions: The leasing commissions are calculated based on the inputs at the bottom of the table. There are two inputs: the rate and the number of years to apply the commission. These factors are applied to the dollar value of the leased space for the year (the "$ Leased" row). Note the total amount is applied in year the space is leased.

Tenant Improvements: Expenses related to tenant fit-up that are typically paid by the owner.

Other:

Discount Rate: The discount rate is used to convert the anticipated future cash flows to a present value. It reflects the risks and timing of the cash flows and typically consists of a blend of equity and debt position requirements.

The discount rate is used to convert the anticipated future cash flows to a present value. It reflects the risks and timing of the cash flows and can consist of equity or a blend of equity and debt position requirements.

In this case, based on the risk characteristics of the subject’s projected stabilization we have applied a discount rate of 12.0%.

Or, for a more detailed development of the discount rate, delete the paragraph above and modify this text: The following formula is a method for developing the discount rate using a blend of debt and equity requirements.

Debt X LTV Equity x 1-LTV Equals = Blended Rate

We have researched the local market for debt and equity terms and have applied the following inputs in the discount rate model:

Debt @ 8.0% x 30% = 2.4% Equity @ 18.0% x 70% = 12.6% Equals Blended Rate = 15.0%

Additionally, we have also reviewed published surveys from RealtyRates.com and << source >>. These surveys report the following:

<< survey ranges >>

Your Footer Here Software by Narrative1.com 83 Therefore, based on these indicators, we have applied the discount rate at 12.0%% to convert future cash flows to a present value.

Present Value, Rounded: Based on the above inputs, the indicated stabilization adjustment, after rounding, is $0.

Your Footer Here Software by Narrative1.com 84 Final Reconciliation The process of reconciliation involves the analysis of each approach to value. The quality of data applied, the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. Finally, each is considered separately and comparatively with each other.

Value Indications Land Value: $600,000 Cost Approach: $1,430,000 Sales Comparison Approach: $1,025,000 Income Approach: Direct Capitalization $1,090,000 EGIM Analysis $1,055,000 NIM Analysis $1,050,000

Cost Approach 4Discuss data quality, quantity and relevance of approach3

Sales Comparison Approach 4Discuss data quality, quantity and relevance of approach3

Income Approach – Direct Capitalization 4Discuss data quality, quantity and relevance of approach3

Income Approach – EGIM Analysis 4Discuss data quality, quantity and relevance of approach3

Income Approach – NIM Analysis 4Discuss data quality, quantity and relevance of approach3

Value Conclusion Based on the data and analyses developed in this appraisal, we have reconciled to the following value conclusion(s), as of January 21, 2013, subject to the Limiting Conditions and Assumptions of this appraisal.

Reconciled Value(s): Premise: As Is Interest: Fee Simple Value Conclusion: $1,050,000 One Million Fifty Thousand Dollars

Your Footer Here Software by Narrative1.com 85 Premise: As Complete Interest: Fee Simple Value Conclusion: $1,050,000 One Million Fifty Thousand Dollars

Premise: As Stabilized Interest: Fee Simple Value Conclusion: $1,050,000 One Million Fifty Thousand Dollars

Your Footer Here Software by Narrative1.com 86 Certification Statement We certify that, to the best of our knowledge and belief:

 The statements of fact contained in this report are true and correct.

 The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions and conclusions.

 We have no present or prospective future interest in the property that is the subject of this report, and have no personal interest with respect to the parties involved.

 We have no bias with respect to the property that is the subject of this report, or to the parties involved with this assignment.

 Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

 Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

 Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).

 No one provided significant real property appraisal assistance to the person(s) signing this certification.

 We certify sufficient competence to appraise this property through education and experience, in addition to the internal resources of the appraisal firm.

 The appraiser has not performed any prior services regarding the subject within the previous three years of the appraisal date.

 Tom Armstrong has made an inspection of the subject property.

 -- -- has made an inspection of the subject property.

See N1 Autotext Misc category for Appraisal Institute certification statements

Tom Armstrong, MAI -- --, -- NH-137 -----

Your Footer Here Software by Narrative1.com 87 Addenda

Your Footer Here Software by Narrative1.com 88 Qualifications Placeholder Page

Your Footer Here Software by Narrative1.com 89 Glossary This glossary contains the definitions of common words and phrases, used throughout the appraisal industry, as applied within this document. Please refer to the publications listed in the Works Cited section below for more information.

Works Cited: . Appraisal Institute. The Appraisal of Real Estate. 13th ed. Chicago: Appraisal Institute, 2008. Print. . Appraisal Institute. The Dictionary of Real Estate Appraisal. 5th ed. 2010. Print.

Band of Investment and sometimes the exterior walls A technique in which the capitalization of the buildings. rates attributable to components of a  CAM can refer to all operating capital investment are weighted and expenses. combined to derive a weighted-average  CAM can refer to the rate attributable to the total investment. reimbursement by the tenant to (Dictionary, 5th Edition) the landlord for all expenses reimbursable under the lease. Common Area Sometimes reimbursements have 1. The total area within a property that what is called an administrative is not designed for sale or rental but is available for common use by all owners, tenants, or their invitees, load. An example would be a e.g., parking and its appurtenances, 15% addition to total operating malls, sidewalks, landscaped areas, expenses, which are then recreation areas, public toilets, truck prorated among tenants. The and service facilities. administrative load, also called 2. In a shopping center, the walkways an administrative and marketing and areas onto which the stores face fee, can be a substitute for or an and which conduct the flow of addition to a management fee. customer traffic. (ICSC) (Dictionary, 2. The amount of money charged to 5th Edition) tenants for their shares of maintaining a center’s common area. Common Area Maintenance (CAM) The charge that a tenant pays for 1. The expense of operating and shared services and facilities such as maintaining common areas; may or electricity, security, and maintenance may not include management of parking lots. The area maintained charges and usually does not include in common by all tenants, such as capital expenditures on tenant parking lots and common passages. improvements or other improvements The area is often defined in the lease to the property. and may or may not include all  CAM can be a line-item expense physical area to be paid for by all for a group of items that can tenants. Items charged to common include maintenance of the area maintenance may include parking lot and landscaped areas cleaning services, parking lot sweeping and maintenances, snow

Your Footer Here Software by Narrative1.com 90 removal, security, and upkeep. value on the effective date of the (ICSC) (Dictionary, 5th Edition) appraisal; a retrospective estimate based on an analysis of past events Debt Coverage Ratio (DCR) assuming a competitive and open The ratio of net operating income to market. (Dictionary, 5th Edition) annual debt service (DCR = NOI/Im), which measures the relative ability of a External Obsolescence property to meet its debt service out of An element of depreciation; a net operating income; also called debt diminution in value caused by negative service coverage ratio (DSCR). A larger externalities and generally incurable on DCR indicates a greater ability for a the part of the owner, landlord, tenant. property to withstand a downturn in (Dictionary, 5th Edition) revenue, providing an improved safety margin for a lender. (Dictionary, 5th Extraordinary Assumption Edition) An assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s Discount Rate opinions or conclusions. Extraordinary A yield rate used to convert future assumptions presume as fact otherwise payments or receipts into present value; uncertain information about physical, usually considered to be a synonym for legal, or economic characteristics of the yield rate. (Dictionary, 5th Edition) subject property; or about conditions external to the property such as market Effective Age conditions or trends; or about the The age of property that is based on the integrity of data used in an analysis. amount of observed deterioration and (USPAP, 2010-2011 ed.) (Dictionary, obsolescence it has sustained, which 5th Edition) may be different from its chronological age. (Dictionary, 5th Edition) Fee Simple Estate Absolute ownership unencumbered by Effective Date any other interest or estate, subject only 1. The date on which the analyses, to the limitations imposed by the opinion, and advice in an appraisal, governmental powers of taxation, review, or consulting service apply. eminent domain, police power, and 2. In a lease document, the date upon escheat. (Dictionary, 5th Edition) which the lease goes into effect. (Dictionary, 5th Edition) Functional Obsolescence The impairment of functional capacity of Exposure Time a property according to market tastes and 1. The time a property remains on the standards. (Dictionary, 5th Edition) market. 2. The estimated length of time the Functional Utility property interest being appraised The ability of a property or building to would have been offered on the be useful and o perform the function for market prior to the hypothetical which it is intended according to current consummation of a sale at market market tastes and standards; the

Your Footer Here Software by Narrative1.com 91 efficiency of a building’s use in terms of of a property based on the assumption architectural style, design and layout, that the parcel of land is vacant or can be traffic patterns, and the size and type of made vacant by demolishing any rooms. (The Appraisal of Real Estate, improvements. (Dictionary, 5th Edition) 13th Edition) Highest and Best Use of Property as Gross Building Area (GBA) Improved Total floor area of a building, excluding The use that should be made of a unenclosed areas, measured from the property as it exists. An existing exterior of the walls of the above-grade improvement should be renovated or area. This includes mezzanines and retained as is so long as it continues to basements if and when typically contribute to the total market value of included in the region. (Dictionary, 5th the property, or until the return from a Edition) new improvement would more than offset the cost of demolishing the Gross Leasable Area (GLA) existing building and constructing a new Total floor area designed for the one. (Dictionary, 5th Edition) occupancy and exclusive use of tenants, including basements and mezzanines; Hypothetical Condition measured from the center of joint That which is contrary to what exists but partitioning to the outside wall surfaces. is supposed for the purpose of analysis. (Dictionary, 5th Edition) Hypothetical conditions assume conditions contrary to known facts about Highest & Best Use physical, legal, or economic The reasonably probable and legal use of characteristics of the subject property; or vacant land or an improved property that about conditions external to the property, is physically possible, appropriately such as market conditions or trends; or supported, financially feasible, and that about the integrity of data used in an results in the highest value. The four analysis. (Dictionary, 5th Edition) criteria the highest and best use must meet are legal permissibility, physical Leased Fee Interest possibility, financial feasibility, and A freehold (ownership interest) where maximum productivity. Alternatively, the possessory interest has been granted the probable use of land or improved to another party by creation of a property—specific with respect to the contractual landlord-tenant relationship user and timing of the use—that is (i.e., a lease). (Dictionary, 5th Edition) adequately supported and results in the highest present value. (Dictionary, 5th Market Area Edition) The area associated with a subject property that contains its direct Highest and Best Use of Land or a Site competition. (Dictionary, 5th Edition) as Though Vacant Among all reasonable, alternative uses, Market Rent the use that yields the highest present The most probably rent that a property land value, after payments are made for should bring is a competitive and open labor, capital, and coordination. The use market reflecting all conditions and

Your Footer Here Software by Narrative1.com 92 restrictions of the lease agreement,  Statement of the effective date of including permitted uses, use the value opinion. restrictions, expense obligations, term,  Specification as to whether cash, concessions, renewal and purchase terms equivalent to cash, or other options, and tenant improvements (TIs). precisely described financing (Dictionary, 5th Edition) terms are assumed as the basis of the appraisal. Market Value  If the appraisal is conditioned The major focus of most real property upon financing or other terms, appraisal assignments. Both economic specification as to whether the and legal definitions of market value financing or terms are at, below, have been developed and refined. or above market interest rates 1. The most widely accepted and/or contain unusual conditions components of market value are or incentives. The terms of above incorporated in the following —or below—market interest definition: The most probable price rates and/or other special that the specified property interest incentives must be clearly set should sell for in a competitive forth; their contribution to, or market after a reasonable exposure negative influence on, value must time, as of a specified date, in cash, be described and estimated; and or in terms equivalent to cash, under the market data supporting the all conditions requisite to a fair sale, opinion of value must be with the buyer and seller each acting described and explained. prudently, knowledgeably, for self- 3. The following definition of market interest, and assuming that neither is value is used by agencies that under duress. regulate federally insured financial 2. Market value is described in the institutions in the United States: The Uniform Standards of Professional most probable price that a property Appraisal Practice (USPAP) as should bring in a competitive and follows: A type of value, stated as an open market under all conditions opinion, that presumes the transfer of requisite to a fair sale, the buyer and a property (i.e., a right of ownership the seller each acting prudently and or a bundle of such rights), as of a knowledgeably, and assuming the certain date, under specific price is not affected by undue conditions set forth in the definition stimulus. Implicit in this definition is of the term identified by the the consummation of a sale as of a appraiser as applicable in an specified date and the passing of title appraisal. (USPAP, 2010-2011 ed.) from seller to buyer under conditions USPAP also requires that certain whereby: items be included in every appraisal  Buyer and seller are typically report. Among these items, the motivated; following are directly related to the  Both parties are well informed or definition of market value: well advised, and acting in what  Identification of the specific they consider their best interests; property rights to be appraised.  A reasonable time is allowed for exposure in the open market;

Your Footer Here Software by Narrative1.com 93  Payment is made in terms of cash Acquisitions) (Dictionary, 5th in U.S. dollars or in terms of Edition) financial arrangements comparable thereto; and Marketing Time  The price represents the normal An opinion of the amount of time it consideration for the property might take to sell a real or personal sold unaffected by special or property interest at the concluded market creative financing or sales value level during the period concessions granted by anyone immediately after the effective date of associated with the sale. (12 the appraisal. Marketing time differs C.F.R. Part 34.42(g); 55 Federal from exposure time, which is always Register 34696, August 24, 1990, presumed to precede the effective date of as amended at 57 Federal an appraisal. (Advisory Opinion 7 of the Register 12202, April 9, 1992; 59 Standards Board of The Appraisal Federal Register 29499, June 7, Foundation and Statement on Appraisal 1994) Standards No. 6, “Reasonable Exposure 4. The International Valuation Time in Real Property and Personal Standards Council defines market Property Market Value Opinions” value for the purpose of international address the determination of reasonable standards as follows: The estimated exposure and marketing time). amount for which a property should (Dictionary, 5th Edition) exchange on the date of valuation between a willing buyer and a Net Operating Income (NOI) willing seller in an arm’s-length The actual or anticipated net income that transaction after proper marketing remains after all operating expenses are wherein the parties had each acted deducted from effective gross income knowledgeably, prudently, and but before mortgage debt service and without compulsion. (International book depreciation are deducted. Valuation Standards, 8th ed., 2007) (Dictionary, 5th Edition) 5. Market value is the amount in cash, Obsolescence or on terms reasonably equivalent to One cause of depreciation; an cash, for which in all probability the impairment of desirability and property would have sold on the usefulness caused by new inventions, effective date of the appraisal, after a changes in design, improved processes reasonable exposure of time on the for production, or external factors that open competitive market, from a make a property less desirable and willing and reasonably valuable for a continued use; may be knowledgeable seller to a willing and either functional or external. (Dictionary, reasonably knowledgeable buyer, 5th Edition) with neither acting under any compulsion to buy or sell, giving due Parking Ratio consideration to all available A ratio of parking area or parking spaces economic uses of the property at the to an economic or physical unit of time of the appraisal. (Uniform comparison. Minimum required parking Standards for Federal Land ratios of various land uses are often

Your Footer Here Software by Narrative1.com 94 stated in zoning ordinances. (Dictionary, based; calculated according to local 5th Edition) practice. (Dictionary, 5th Edition)

Rentable Area Replacement Cost For office buildings, the tenant’s pro rata The estimated cost to construct, at portion of the entire office floor, current prices as of the effective excluding elements of the building that appraisal date, a substitute for the penetrate through the floor to the areas building being appraised, using modern below. The rentable area of a floor is materials and current standards, design, computed by measuring to the inside and layout. (Dictionary, 5th Edition) finished surface of the dominant portion of the permanent building walls, excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the rent is Scope of Work percentage of potential gross income and The type and extent of research and should reflect the competitive market. Its analyses in an assignment. (Dictionary, treatment can differ according to the 5th Edition) interest being appraised, property type, capitalization method, and whether the Stabilized Occupancy property is at stabilized occupancy. An expression of the expected (Dictionary, 5th Edition) occupancy of a property in its particular market considering current and forecasted supply and demand, assuming it is priced at market rent. (Dictionary, 5th Edition)

Tenant Improvements (TIs) 1. Fixed improvements to the land or structures installed and paid for use by a lessee. 1. The original installation of finished tenant space in a construction project; subject to periodic change for succeeding tenants. (Dictionary, 5th Edition)

Vacancy and Collection Loss A deduction from potential gross income (PGI) made to reflect income reductions due to vacancies, tenant turnover, and non-payment of rent; also called vacancy and credit loss or vacancy and contingency loss. Often vacancy and collection loss is expressed as a

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