Appraisal Report

Home , Clear Lake AVA

APPRAISAL REPORT

Of the

UNDEVELOPED LAND

Located at

South side of Red Hills Rd. East of State Highway 175, Unincorporated Lake County (Kelseyville), CA 95451

As of

AUGUST 8, 2018

Prepared For Prepared by

Lampro LLC APOR PROPERTIES LLC Erhard & Ilsemarie Arndt Real Estate Valuation & Advisory Services 8880 Seigler Springs Rd. North P.O. Box 945 Kelseyville, CA 95451

The information contained herein is of a confidential nature and is intended for the exclusive use of the persons or firm to whom it is furnished by us. Reproduction, publication, or dissemination of portions hereof may not be made without prior approval of Apor Properties LLC.

APOR PROPERTIES LLC Real Estate Valuation & Advisory Services P.O.Box 204 Palos Verdes Estates, California 90274 Tel 310.346.4256 www.aporproperties.com

October 2, 2018

Lampro LLC Erhard & Ilsemarie Arndt 8880 Seigler Springs Rd. North P.O. Box 945 Kelseyville, CA 95451

Re: Undeveloped Land located on the south side of Red Hills Rd. and east of State Highway 175, Unincorporated Lake County (Kelseyville), CA 95451 (APN: 011-015-180-000, 011-058-011-000, 011-058-030-000, 011-058-110-000, 011-016-210-000)

In accordance with your request, we have conducted an investigation and performed an Appraisal of the above referenced property. The appraisal report accompanies this letter and must remain attached along with all addenda and exhibits for the value opinion set forth to be considered valid.

The first step in the valuation process is to clearly state and understand the appraisal problem. The purpose of this appraisal is to provide our opinion of the “as is” fair market value of the fee simple interest in the above referenced property, as of August 8, 2018. The intended use of the appraisal is for asset valuation purposes including in connection with potential investors in the above referenced subject property.

The subject property is located in the North Bay area approximately 100 miles north of San Francisco, 90 miles northwest of Sacramento and 35 miles east of the Pacific Ocean. The closest urban center is Santa Rosa, 50 miles to the south. The area is in the lower slopes of the Mayacamas Mountains, southwest of Clear Lake. Known as a high-elevation wine region, this is in the Red Hills AVA and within the much larger North Coast AVA.

Situated on the south side of Red Hills Road east of State Highway 175 in the unincorporated community of Kelyseyville in Lake County, the subject property consists of five parcels of land that are mostly in their natural state, irregular shaped and encompassing approximately 7,279,311± square feet or 167.1± acres. Under the jurisdiction of Lake County, the Zoning Designation is PDR (Planned Unit Development Residential) with portions of the site also in combining districts designated SC (Scenic), WW (Waterway)and B5 (Special Lot Size – 5 acres). Site improvements include dirt access roads, a chain link fence access gate off Red Hills Rd. and two wells on site for water. One originally drilled in 1990 and the other in 1996. A copy of the permits is presented in the Addenda. There was an old cabin on site, which is still indicated in the Lake County Tax Assessor’s records, but it is now in disrepair. We have concluded that these existing building improvements do not contribute to the overall value of the subject property.

The site is currently an undeveloped site mostly in its natural state and has a proposed use for a retirement community named The Brightwood Villages.

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Lampro LLC October 2, 2018

The current owners provided copies of the Resolution No. 95-4 approving an amendment to the Lake County General Plan (GPA 95-4) dated November 9, 1995 which changed Land Use Designations for portions of the subject property from RL (Rural Lands 1 unit per 20-40 acres) to RR (Rural Residential 1 unit per 5-20 acres). They also provided copies of the Arndt General Plan of Development (PDR 95-1) which was approved December 5, 1995 and included 21 total conditions. Highlights of the plan include 42 detached or attached residences for senior citizens age 55 and over as well as accessory buildings. Additionally, on November 12, 1999, Use Permit for Specific Plan of Development (UP 98-16) was approved to allow a retirement community subject to 51 terms and conditions. All of these documents are presented in the Addenda.

We were provided with a letter dated May 20, 2011, from then Community Development Director, Richard Coel, stating that the General and Specific Plans of Development are vested indefinitely. A copy of the letter is presented in the Addenda.

We were also provided with a letter dated May 19, 2014, from Erhard Arndt to then Principal Planner of the Community Development Department, Kevin Ingram, requested clarification providing itemized description and numbering of the structures including the quantity of bedroom suites per residence. Subsequently, on June 18, 2014, Kevin Ingram responded with a letter of clarification that the approved project has a maximum number of permitted dwelling units not to exceed 44 (42 units/2 caretaker’s units) with a project description that clearly shows a few hundred living quarters. The conclusion was that any unit containing a full kitchen will be counted towards the maximum 44 permitted Dwelling Units and other independent living units would be classified as a combination of community care and health care facilities with allowed minor cooking facility uses such as a sink, refrigerator or microwave. These letters are presented in the Addenda. Based on this clarification, the proposed Brightwood Recreation Retirement Community appears to be permitted to have the proposed number of units as part of the Brightwood Retirement Community Planned Development since it includes 364 units in 44 low-rise buildings with eight different types of buildings, each with 5 to 20 apartments, assuming that the kitchen and minor cooking facilities are designed and built in compliance.

In September 2018, we spoke to the Lake County Community Development Department, Planning Division, and a technician reviewed the current file and confirmed that there is a vested use permit as described above. Additionally, he said that the use permit included a review for California Environmental Quality Act (CEQA) and as long as the terms and conditions outlined in the approval are followed without any changes to the proposed project there is no further CEQA review for the use. He stated that the CEQA review for use is separate than a review for grading or any proposed project changes. He also clarified that this use permit approval represents a higher level of approval than a zoning permit because the proposed use is more intense than allowed by right. We also spoke with a technician in the Lake County Building Department that confirmed the project has not been submitted to them and does not have a building permit which is required to start construction. They had previously assigned a project number, but the current status is incomplete.

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Lampro LLC October 2, 2018

Environmental Quality Act (CEQA). Certain types of grading (described in Lake County Code Sec 30.22.1) will require submission of engineered plans. Complex Grading may also require the submission of additional reports such as: Biological Resources Survey, Cultural Resources Survey, Geotechnical Report, Hydrologic Study and other site-specific analyses as deemed necessary by the Administrative Official. The County states that the CEQA review is a time-consuming process and it is possible for a project to be statutorily or categorically exempt from CEQA but in our opinion this is unlikely. If an environmental impact report (EIR) is required, it is common for it to extend a project’s timeline up to around two years.

To determine the market value of the subject property we have considered appropriate real estate valuation methodology. A Sales Comparison Approach was utilized with recent sales of similar properties and a unit of comparison of the price per square foot. In our opinion, the Cost Approach and Income Capitalization Approach did not provide a relevant indication of value and therefore were not considered. As previously stated the effective date of value is August 8, 2018. The subject property was physically inspected on August 8, 2018. The date of the report is October 2, 2018.

Therefore, our value estimate represents a current value. Our analyses, opinions and conclusions were developed, and this report has been prepared in conformity with a) the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute; b) the Uniform Standards of Professional Practice (“USPAP”); and c) subject to the attached General Assumptions and Limiting Conditions as well as Extraordinary Assumptions and Hypothetical Conditions.

Based on our analysis, the “as is” fair market value of the fee simple interest in the subject property, as of August 8, 2018, is estimated to be:

FIVE MILLION DOLLARS $5,000,000

Our market value conclusion is based on an estimate of 6 to 12 months exposure time, which is the length of time the subject property would have been offered on the market prior to a hypothetical consummation of a sale at our market value on the effective date of value.

This letter must remain attached to the report in its entirety, including all exhibits, addenda and attachments, for the value opinions set forth to be considered valid. The following report contains a study and analysis of data and other material upon which our value conclusions have been predicated and has been completed under the terms of our engagement letter.

Yours sincerely, Apor Properties LLC

Kevin E. Apor, MAI President

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UNDEVELOPED LAND, KELSEYVILLE, CA CERTIFICATION OF VALUE

CERTIFICATION OF VALUE

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. • I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest with respect to the parties involved. • I have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. • I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • My engagement in this assignment was not contingent upon developing or reporting predetermined results. • My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. • My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. • I have made a personal inspection of the property that is the subject of this report. • No one provided significant professional assistance to the person signing this certification. • The reported analyses, opinions and conclusions were developed, and this report has been prepared in conformity with the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. • As of the date of this report, Kevin E. Apor, MAI, has completed the requirements of the continuing education program for Designated Members of the Appraisal Institute.

Kevin E. Apor, MAI President, Apor Properties LLC

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UNDEVELOPED LAND, KELSEYVILLE, CA PHOTOGRAPHS OF THE SUBJECT PROPERTY

PHOTOGRAPHS OF THE SUBJECT PROPERTY

View of the subject property from western portion of the site

View of the subject property near access road from Red Hills Rd.

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UNDEVELOPED LAND, KELSEYVILLE, CA PHOTOGRAPHS OF THE SUBJECT PROPERTY

View of the subject property along dirt access road at eastern portion of the site

View of the electrical power lines on the subject property along Red Hills Rd.

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UNDEVELOPED LAND, KELSEYVILLE, CA PHOTOGRAPHS OF THE SUBJECT PROPERTY

Street scene looking northeast on Red Hills Rd. from intersection of Highway 175 (subject on the right)

Street scene looking northwest on Highway 175 from intersection of Red Hills Rd.

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UNDEVELOPED LAND, KELSEYVILLE, CA PHOTOGRAPHS OF THE SUBJECT PROPERTY

Street scene looking southeast on Highway 175 at intersection of Red Hills Rd. (subject on the left)

View looking east on Red Hills Rd. near access gate (subject on right)

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UNDEVELOPED LAND, KELSEYVILLE, CA PHOTOGRAPHS OF THE SUBJECT PROPERTY

Aerial view of the subject property

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UNDEVELOPED LAND, KELSEYVILLE, CA PHOTOGRAPHS OF THE SUBJECT PROPERTY

Aerial View of the Subject Property with Assessor’s Parcel Map Overlay Source: Lake County Map Viewer (gispublic.co.lake.ca.us)

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UNDEVELOPED LAND, KELSEYVILLE, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS

SUMMARY OF SALIENT FACTS AND CONCLUSIONS

Type of Property: Undeveloped Land

Addresses: 8840 Red Hills Rd., 8860 Red Hills Rd., 9020 State Highway 175, 8505 Seigler Springs North Rd., 8495 Seigler Springs North Rd., Unincorporated Lake County (Kelseyville), CA 95451

Site Description: The subject property consists of five parcels of land that are mostly in their natural state, irregular shaped and encompassing approximately 7,279,311± square feet or 167.1± acres. The existing general plan land use designations are RL and RR (Rural Lands and Rural Residential) and the zoning is primarily PDR (Planned Unit Development Residential) with portions of the site RL (Rural Lands), B5 (Special Lot Size – 5 acres), SC (Scenic) and WW (Waterway).

Highest and Best Use “As Is Vacant”: In consideration of the physical, legal and financial factors, it is our opinion that the maximally productive use of the site as vacant would be a new, retirement community as approved by the previously discussed use permit.

“As Improved”: Not applicable

Purpose of the Appraisal: The purpose of this appraisal is to estimate the “as is” fair market value of the fee simple estate of the subject property.

Date of Inspection: August 8, 2018

Date of Value: August 8, 2018

Valuation of the Property

Sales Comparison Approach

Concluded Value per Acre: $30,000

“As Is” Fair Market Value Conclusion ...... $5,000,000

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UNDEVELOPED LAND, KELSEYVILLE, CA GENERAL ASSUMPTIONS AND LIMITING CONDITIONS EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS

GENERAL ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal report is subject to the following general assumptions and limiting conditions:

1. No investigation has been made of, and no responsibility is assumed for, the legal description or for legal matters including title or encumbrances. Title to the property is assumed to be good and marketable unless otherwise stated. The property is further assumed to be free and clear of liens, easements, encroachments and other encumbrances unless otherwise stated, and all improvements are assumed to lie within property boundaries.

2. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable, but has not been verified in all cases. No warranty is given as to the accuracy of such information.

3. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been, or can readily be obtained, or renewed for any use on which the value estimates provided in this report are based.

4. Full compliance with all applicable federal, state and local zoning, use, occupancy, environmental, and similar laws and regulations is assumed, unless otherwise stated.

5. No responsibility is taken for changes in market conditions and no obligation is assumed to revise this report to reflect events or conditions, which occur subsequent to the appraisal date hereof.

6. Responsible ownership and competent property management are assumed.

7. The allocation, if any, in this report of the total valuation among components of the property applies only to the program of utilization stated in this report. The separate values for any components may not be applicable for any other purpose and must not be used in conjunction with any other appraisal.

8. Areas and dimensions of the property were obtained from sources believed to be reliable. Maps or sketches, if included in this report, are only to assist the reader in visualizing the property and no responsibility is assumed for their accuracy. No independent surveys were conducted.

9. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that affect value. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

10. No soil analysis or geological studies were ordered or made in conjunction with this report, nor was an investigation made of any water, oil, gas, coal, or other subsurface mineral and use rights or conditions.

11. Neither Apor Properties LLC nor any individuals signing or associated with this report shall be required by reason of this report to give further consultation, to provide testimony or appear in

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UNDEVELOPED LAND, KELSEYVILLE, CA GENERAL ASSUMPTIONS AND LIMITING CONDITIONS EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS

court or other legal proceedings, unless specific arrangements thereto for have been made.

12. This appraisal has been made in conformance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice.

13. We have not been engaged nor are we qualified to detect the existence of hazardous material, which may or may not be present on or near the property. The presence of potentially hazardous substances such as asbestos, urea-formaldehyde foam insulation, industrial wastes, etc. may affect the value of the property. The value estimate herein is predicated on the assumption that there is no such material on, in, or near the property that would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client should retain an expert in this field if further information is desired.

14. The date of value to which the conclusions and opinions expressed in this report apply is set forth in the opinion letter at the front of this report. Our value opinion is based on the purchasing power of the United States’ dollar as of this date.

15. The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property along with a detailed study of ADA requirements could reveal that the property is not in compliance with the act. If so, this would have a negative effect on the property value. We were not furnished with any compliance surveys or any other documents pertaining to this issue and therefore did not consider compliance or noncompliance with the ADA requirements when estimating the value of the property.

16. This appraisal was completed without regard to race, color, religion, national origin, sex, marital status or any other prohibited basis, and does not contain any references which should be regarded as discriminatory.

17. In accordance with our agreement, this report is limited to the value of the subject property. One or more additional issues may exist that could affect the Federal tax treatment of the subject property with respect to which we have prepared this report. This report does not consider or provide a conclusion with respect to any of those issues. With respect to any significant Federal tax issue outside the scope of this report, this report was not written, and cannot be used, by anyone for the purpose of avoiding Federal tax penalties.

18. The appraisers have not reviewed a Phase I and no other environmental site assessment was available for the subject property. From an inspection of the property, there is no evidence of hazardous waste and/or toxic materials present on the sites. However, the appraisers are not qualified to detect such substances and this appraisal and all conclusions are contingent upon these reports being accurate and the subject property being free from any environmental contamination or hazards.

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UNDEVELOPED LAND, KELSEYVILLE, CA GENERAL ASSUMPTIONS AND LIMITING CONDITIONS EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS

When a value opinion is subject to an extraordinary assumption or hypothetical condition the appraiser must state that condition so that its effect on the value opinion or conclusion is clear.

An extraordinary assumption is an assumption that is directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. An extraordinary assumption may be used in an assignment only if:

• It is required to properly develop credible opinions and conclusions; • The appraiser has a reasonable basis for the extraordinary assumption; • Use of the extraordinary assumption results in a credible analysis; and • The appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions.

A hypothetical condition assumes that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. A hypothetical condition may be used in an assignment only if:

• Use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison; • Use of the hypothetical condition results in a credible analysis; and • The appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions.

This appraisal not subject to any extraordinary assumptions or hypothetical conditions.

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UNDEVELOPED LAND, KELSEYVILLE, CA INTRODUCTION AND APPRAISAL PREMISES

INTRODUCTION AND APPRAISAL PREMISES

Identification of Type of Appraisal and Type of Report

This appraisal report is an Appraisal Report format that complies with Standards Rule 2-2 of USPAP and contains all information significant to the solution of the appraisal problem.

Formerly in USPAP there were three written report options for real and personal property appraisal reports: Self-Contained Appraisal Report, Summary Appraisal Report, and Restricted Use Appraisal Report. Effective January 1, 2014 there are only two written report options: Appraisal Report and Restricted Appraisal Report.

Purpose and Intended Use of the Appraisal

The purpose of this appraisal is to provide our opinion of the “as is” fair market value of the fee simple interest in the above referenced property, as of August 8, 2018. The intended use of the appraisal is for asset valuation purposes including in connection with potential investors in the above referenced subject property.

Competency Provision

We have the knowledge and experience to complete this appraisal assignment.

Definition of Value

Fair Market Value – “The price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.” IRS Regulation §20.2031-1.

Date of Opinion of Value

The effective date of value is August 8, 2018.

Property Rights Appraised

Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat is the fee simple estate. However, there are numerous property rights included in what is often referred to as a bundle of rights. Some of the more common property rights include the following:

• Fee simple • Leased fee

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UNDEVELOPED LAND, KELSEYVILLE, CA INTRODUCTION AND APPRAISAL PREMISES

• Leasehold • Compensable interest • Fee simple conditional • Air rights • Transferable development rights (TDRs) • Easements

The interest appraised is the fee simple interest in the subject property. Our value conclusions are subject to the definition of market value, the general assumptions, limiting conditions, and the certification as set forth in the attached appraisal report.

Scope of Work

We have identified the problem based on the client and intended users, intended use of the appraiser’s opinions and conclusions, type and definition of value, effective date of the appraiser’s opinions and conclusions, subject of the assignment and its relevant characteristics, and assignment conditions and have conducted the appropriate scope of work and consider it to be sufficient to produce credible assignment results. A general outline of our scope of work is presented below and includes the preparation of this Appraisal Report format that complies with Standards Rule 2-2 of USPAP and contains all information significant to the solution of the appraisal problem.

For the subject property, a land valuation utilizing a Sales Comparison Approach was considered to be applicable. Based on this approach to value, that we considered to be applicable, we were able to determine a credible opinion of fair market value. Within this approach to value we have investigated numerous comparables within the subject area. Additionally, we have spoken with buyers, sellers, real estate brokers, real estate developers, other appraisers and public officials to confirm the data as it pertains to the subject property in this appraisal assignment.

Property Identification

In order to identify the subject property, we have researched and provided a brief description including a plat map from the Lake County Assessor’s Office. Additionally, we have presented identifying information for the subject property including street addresses, city and state. We have also used assessor’s parcel numbers (APN) to identify the subject site and included a legal description which more specifically describes the site’s boundaries.

Property Inspection

A personal inspection of the subject property report was made by Kevin E. Apor, MAI on August 8, 2018.

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UNDEVELOPED LAND, KELSEYVILLE, CA INTRODUCTION AND APPRAISAL PREMISES

Data Research

We have reviewed and to the extent applicable incorporated the information from all client provided documentation. Title information and property history data are also based upon client provided documentation as well as public records. An investigation of the property’s compliances and zoning was undertaken. To the extent possible, flood insurance zone data was provided by FEMA and earthquake fault hazard information was obtained from the USGS. The submitted sale comparisons, as well as other pertinent data contained herein, have been obtained from the subject’s immediate market area. Sales data has been obtained from public records, as well as knowledgeable brokers in the marketplace, and verified with a party to the transaction wherever possible.

Analyses, Opinions and Conclusions

This report is an Appraisal Report. Our analyses, opinions and conclusions were developed, and this report has been prepared in conformity with a) the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute; b) the Uniform Standards of Professional Practice (“USPAP”); and c) subject to the attached General Assumptions and Limiting Conditions as well as Extraordinary Assumptions and Hypothetical Conditions.

Property Identification

Physical Addresses: 8840 Red Hills Rd., 8860 Red Hills Rd., 9020 State Highway 175, 8505 Seigler Springs North Rd., 8495 Seigler Springs North Rd., Unincorporated Lake County (Kelseyville), CA 95451

Location: The subject site is situated on the south side of Red Hills Road and east of State Highway 175.

Assessor’s Parcel Nos.: 011-015-180-000 011-058-011-000 011-058-030-000 011-058-110-000 011-016-210-000

Legal Description: See Addenda

Identification of any Personal Property or Intangibles

We have not separately identified and valued any personal property or intangible assets at the subject property.

Use of the Property as of the Date of Value

As of the date of value, the subject property was an undeveloped site mostly in its natural state.

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UNDEVELOPED LAND, KELSEYVILLE, CA INTRODUCTION AND APPRAISAL PREMISES

Property History and Current Ownership

Based on public records and information provided by the client, as of the date of value, August 8, 2018, the subject property was owned by Erhard Arndt and Ilse Arndt, Trustees of the Erhard Arndt and Ilse Arndt Revocable Trust of 1988.

The parcels were acquired in an assemblage by the current owners beginning in the mid-1980’s and with the last parcel to be purchased in January 1995, which was the upper parcel that fronts Red Hills Rd. (011- 015-180-000).

The site is currently an undeveloped site mostly in its natural state and has a proposed use for a retirement community named The Brightwood Villages.

We were also provided with a letter dated May 19, 2014, from Erhard Arndt to then Principal Planner of the Community Development Department, Kevin Ingram, requested clarification providing itemized description and numbering of the structures including the quantity of bedroom suites per residence. A copy of the letter is presented in the Addenda. Subsequently, on June 18, 2014, Kevin Ingram responded with a letter of clarification that the approved project has a maximum number of permitted dwelling units not to exceed 44 (42 units/2 caretaker’s units) with a project description that clearly shows a few hundred living quarters. The conclusion was that any unit containing a full kitchen will be counted towards the maximum 44 permitted Dwelling Units and other independent living units would be classified as a combination of community care and health care facilities with allowed minor cooking facility uses such as a sink, refrigerator or microwave. These letters are presented in the Addenda. Based on this clarification, the proposed Brightwood Recreation Retirement Community appears to be permitted to have the proposed number of units as part of the Brightwood Retirement Community Planned Development since it includes 364 units in 44 low-rise buildings with eight different types of buildings, each with 5 to 20 apartments, assuming that the kitchen and minor cooking facilities are designed and built in compliance.

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UNDEVELOPED LAND, KELSEYVILLE, CA INTRODUCTION AND APPRAISAL PREMISES

review for use is separate than a review for grading or any proposed project changes. He also clarified that this use permit approval represents a higher level of approval than a zoning permit because the proposed use is more intense than allowed by right. We also spoke with a technician in the Lake County Building Department that confirmed the project has not been submitted to them and does not have a building permit which is required to start construction. They had previously assigned a project number, but the current status is incomplete.

As described by Lake County, if a project exceeds one acre of native vegetation cleared, or a variety of other minimal criteria, then the Project shall be designated as Complex Grading. Therefore, based on the proposed project the subject would be designated as Complex Grading. This will require submitting a completed grading permit application and the necessary application materials (permit requirements) and include the fees for an Initial Study and Archaeological Review by Sonoma State pursuant to the California Environmental Quality Act (CEQA). Certain types of grading (described in Lake County Code Sec 30.22.1) will require submission of engineered plans. Complex Grading may also require the submission of additional reports such as: Biological Resources Survey, Cultural Resources Survey, Geotechnical Report, Hydrologic Study and other site-specific analyses as deemed necessary by the Administrative Official. The County states that the CEQA review is a time-consuming process and it is possible for a project to be statutorily or categorically exempt from CEQA. If an environmental impact report (EIR) is required, Title 14. California Code of Regulations Chapter 3. Guidelines for Implementation of the California Environmental Quality Act includes Sections 15100 to 15112 related to time limits to govern the process of implementation of CEQA. There are many variables, some of which involve discretionary approval, therefore projecting the timing and outcomes for the subject project is highly subjective. We have considered the prior reviews, approvals and general support expressed both in our discussions with Lake County staff and in the various written correspondence from Lake County to be an indication that the process will be completed in a timely manner. However, we have concluded that the potential for the project to be categorically exempt from CEQA is very unlikely, while there is the potential for delays from third-party consultants, reviews or opposition during the approval process could extend a project’s timeline up one to two years, with the most likely outcome a scenario somewhere in between.

The property has been listed for sale several times over the past ten years by Frank Darien who was formerly with WR Real Estate and now is with Berolone Realty in Santa Rosa and John Everett with Morgan Lane-Re/Max Gold in Lakeport. They last marketed the property several years ago for $1,750,000 excluding the upper parcel that fronts Red Hills Rd. (011-015-180-000) and based on being used for a vineyard with 130+ plantable acres as estimated by LincolnAE LLC Agricultural Engineering. Another estimate from M.B.C. Construction, Inc. of Ukiah provided a cost of $12,000 per acre to clear and prep the property for vineyard use with an estimate of approximately 140 acres of developed ground possible. Based on conversations with John Everett, there was only one written offer for a portion of the entire property which was from the nearby vineyard owner, Beckstoffer, which was based on a very low price per acre as vineyard land.

To our knowledge, there have not been any sale transactions involving the subject property during the past three years and the property is not currently listed for sale.

Exposure Time/Marketing Period

Exposure time is defined by USPAP as: “The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at value on the

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UNDEVELOPED LAND, KELSEYVILLE, CA INTRODUCTION AND APPRAISAL PREMISES

effective date of the appraisal; a retrospective opinion based on an analysis of past events assuming a competitive and open market.” Thus, exposure time is a retrospective concept based on historical information.

“Reasonable marketing time is an estimate of the amount of time it might take to sell an interest in real property at its estimated value during the period immediately after the effective date of the appraisal; the anticipated time required to expose the property to a pool of prospective purchasers and to allow appropriate time for negotiation, the exercise of due diligence, and the consummation of a sale at a price supportable by concurrent market conditions.”

In an advisory opinion, the ASB defines marketing time as the amount of time it might take to sell a property interest in real estate at the estimated value level during the period immediately after the effective date of an appraisal. In contrast to exposure time, marketing time is a forward-looking estimate or a projection of future events.

When developing an opinion of market value, the appraiser must also develop an opinion of reasonable exposure time linked to the value opinion. In our valuation of the subject property, we considered an estimate of 6 to 12 months exposure time to be appropriate.

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UNDEVELOPED LAND, KELSEYVILLE, CA REGIONAL & NEIGHBORHOOD OVERVIEW

Regional Map

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UNDEVELOPED LAND, KELSEYVILLE, CA REGIONAL & NEIGHBORHOOD OVERVIEW

REGIONAL & NEIGHBORHOOD OVERVIEW

Introduction

We have analyzed demographic and economic information as it relates to the interaction of real estate market’s supply and demand. This market analysis provides a tool to predict a property’s market position and to estimate current and future occupancy and rental rates. Furthermore, a market analysis provides a basis for determining highest and best use of the subject property. Overall market conditions, as well as the property’s ability to compete in its market segment, influence income and occupancy performance. Market conditions are influenced by a variety of factors; we have focused on the historical and projected trends in following areas categories:

• gross domestic product • population • employment • personal income • consumer spending • housing

The subject market’s economic performance and the property’s ability to maintain its market position is a result of its specific attributes, including overall quality, amenities, location and reputation in the marketplace. To evaluate the factors that influence a property’s income potential over a projection term, the market has been analyzed at two levels: first from a broad market perspective (Regional Overview) without specific consideration of the subject property; second from a more narrowly defined market perspective with regards to the subject’s neighborhood influences (Neighborhood Analysis).

A property is an integral part of its surrounding and must not be treated as an entity separate and apart from its surroundings. The value of a property is not found exclusively in its physical characteristics. Physical, economic, political and sociological forces found in the area interact to give value to a property. In order to determine the degree of influence extended by these forces on a property, their past and probable future trends must be analyzed in depth. Therefore, in order to determine the value of a property, a careful and thorough analysis must be made of the area in which the property under study is found. The area is commonly referred to as a neighborhood.

A neighborhood can be a portion of a city, a community or an entire town. It is usually considered to be an area which exhibits a fairly high degree of homogeneity as to use, tenancy and certain other characteristics. Homogeneity is a state of uniform structure of composition throughout. Therefore, in real estate technology, a homogeneous neighborhood is one in which property use types are similar. Thus, a neighborhood is more or less a unified area with somewhat definite boundaries. The objective of a neighborhood analysis is to determine perceivable patterns of growth, structure and change that may detract from or enhance property values. The analysis provides a framework or context in which the property values are estimated. The following paragraphs discuss the characteristics of the subject’s neighborhood.

The subject property is located in Northern California in the wine country region north of San Francisco. More specifically this is within the unincorporated community of Kelyseyville in Lake County. Therefore, we have researched trends and statistics for the regional area as well as the subject’s local neighborhood.

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North Bay Area

Due to its proximity, the North Bay area is influenced by trends in San Francisco since the region is located just to the north. According to the Summer 2018 The Regional Outlook San Francisco from Beaconomics: “The San Francisco (MD) economy is booming and the region continues to enjoy strong economic growth. Job gains over the past year have helped push the area’s unemployment rate down to one of the lowest in California. And the median home price continues to reach for the sky, increasing significantly as supply fails to keep pace with demand. Notably, building permits for multi-family housing are down compared to last year”.

The North Bay is known worldwide for a premium wine growing region and is often referred to as wine country. This is due to the long history of viticulture and wine making. With the prominence of this industry, the boundaries defined by the American Viticultural Areas (“AVA”) tend to shape the general perception of defining boundaries. Traveling north, the further from San Francisco the surrounding counties are less populated and have smaller overall economies. We have considered all six counties of Lake, Marin, Mendocino, Napa, Sonoma, and Solano that make up the North Bay. These same six counties make up the North Coast AVA with the subject located in the northern Mayacamas Mountains at the southwest edge of Clear Lake which is a high-elevation wine region that is also in the smaller Red Hills AVA. Since the subject property is located in Lake County, it will be our primary focus. Lake County General Plan September 2008

Lake County

Lake County encompasses approximately 1,261 square miles of varied topography. Most of the County is unincorporated with only two incorporated cities, the City of Clearlake and the City of Lakeport. Lakeport is on the west shore of Clear Lake and was incorporated in 1888 and is the Lake County seat. As described in the current Lake County General Plan (2008): “Lake County lies within the Pacific Coastal ranges approximately 100 miles north of San Francisco, 90 miles northwest of Sacramento, and 35 miles east of the Pacific Ocean. Lake County is bounded by Mendocino County to the west, Yolo, Colusa, and Glenn Counties to the east, and Sonoma and Napa counties to the south. The major roadways that traverse the County include State Route 20, which joins up with Highway 101 and Interstate 5, and State Routes 29, 53, and 175 (see Figure 1-1 for location details). There are three major watersheds in the County: Cache Creek, Putah Creek and Eel River. Additionally, Clear Lake, the largest natural lake entirely within California, is located completely within Lake County”.

Source: Lake County General Plan (2008)

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UNDEVELOPED LAND, KELSEYVILLE, CA REGIONAL & NEIGHBORHOOD OVERVIEW

PopulationDRAFT LAKE & C EmploymentOUNTY HOUSING ELEMENT 2015

The 2015 Lake County Housing Element included the table presented below which illustrates the historic Table 3-12: Families & Individuals Below the Poverty Level population data for Lake County and California. County population growth outpaced the state during the Poverty Status in 1999 periodD fromRAFT 1970LAKE CtoOUNTY 2000 H whichOUSING according ELEMENT to the report is primarily a result of in-migration, particularly2015 Families Percent Individuals Percent of retirees, rather than a natural increase due to birthrate. Senior (65 and older) population is increasing Lake County 1,986 12.9% 10,081 17.6% and makes up Californiaalmost 20% of the 845,991County population10.6% . The 4,706,130County also reports14.2% that retirees are attracted by the rural atmosphereSource: U.S., access Census to Bureau recreational activities and lower housing costs. Table 3-1 Historic Population (Lake County & California) A second poverty indexLake is County established by the U.S. Department ofCa lifornia Health and Human Population Percent Percent Services are Populationpublished annually as ‘poverty guidelines.’Population These guidelinesPopulation are Change used for Year Change Change Change administr1940 ative purposes8,069 to determine eligibility for assistance6,907,387 from various federal programs.1950 Poverty11,481 guidelines 3,412 do not tabulate42% the number10,586,223 of people living3,678,836 in poverty. 53% Eligibility1960 for Section13,786 8 low 2,305 income housing20% through HUD15,717,204 is not tied to5,130,981 the poverty 48% guideline1970 s index. 19,548 5,762 42% 19,953,134 4,235,930 27% 1980 36,366 16,818 86% 23,667,902 3,714,768 19% 1990 50,631 14,265 39% 29,760,021 6,092,119 26% Employment2000 58,309 7,678 15% 33,871,648 4,111,627 14% 2010 64,665 6,356 11% 37,253,956 3,382,308 10% Employment is a critical factor in relationship to the demand for housing. A strong Source: U.S. Census Bureau correlation*California Department exists between of Finance the (E- 4,increase 2010 Population in the Estimates) employment base and the necessity for additional housing. Between 2005 and 2010, Lake County experienced little to no growth in total employment as evidenced in Table 3-13 with recent gains since 2010. According to the State of California, Department of Finance, E-1 Population Estimates for Cities, Counties This periodTable 3 -of2 Population stagnant (Lake employment County and is Incorporatedcoupled with Cities) a rising unemployment rate during andthe the sameYear State periodwith Annual as Clearlake indicated Percent Change in Table Lakeport— January 3-14. 1, Unemployment2017Lake and County 2018 . Sacramento, in LakeUnincorporated County California, is May 201traditionally8, as of January higher 1, 2018than, theLake State County and had National an estimated average population and fluctuates of 65,081 substantially residentsCounty . Most with recently, annual 2000population growth13,147 was 0.5% from 204,82017 to 2018. The only58,235 two incorporated40,358 cities in the county lows around2010 7 percent15,250 and high rates over4.753 15 percent over64,665 the last 25 years44,662. According areto Clearlakethe2013 California with a Employmentpopulation15,192 of 15,917Development and4,713 Lakeport Department with 5,134.64.531 the civilian unemployment44,626 rate in Lake* Source: County California in 2015 Department was 7.7 ofpercent Finance. (E-4, 2010 Population Estimates; 2010 Benchmark) According to the State of California, Employment Development Department (EDD) as of May 2018, the seasonally Changes unadjusted in age groups unemployment can indicate rate future for Lake housing County needs was. Table4.5%. 3Kelseyville-3 compares CDP age had an unemployment group changes rate of betw 5.0%.een Additionally, 2000 and the2010 table. The below number illustrates of children the historic aged employment 10-19 has and unemploymentdeclined overrate. the Table past 3 ten-13: yearsTotal Employment. Since 2000 and, the number of people between the ages of 50-59 increased from almost 14% of the population to 17.4% in 2010. This trend Unemployment Rate (Lake County) coupled with an increase in proportion for the 60-69 age group may indicated people are looking towards retirementTotal are Employment migrating to theUnemployment area. All otherRate age groups are expected to remainYear fairl y steady with some declines in the upper age brackets as a percentage of total 1990population. 18,210 8.9% 1995 20,890 11.7% Table 3-3: Age Distribution (Lake County) 2000 21,420 7.3% 2000 2010 Lake County 2005 23,930 7.9% 2010 Number24,930 Percent 15.3%Number Percent 0-9 2015 6,973 26,910 11.9% 7.7%7,207 11.1% 10-19 8,316 14.2% 8,078 12.5% Source: California Employment Department 20-29 4,613 7.9% 6,708 10.4% 30-39 6,848 11.7% 6,512 10.1% The table40-49 below illustrates the current 9,150Industry Employment15.6% and Labor8,565 Force in Lake County.13.2% The county unemployment50-59 rate is higher than both8,154 the state and13.9% national rates.10,998 Additionally, Lake17.0% County’s self- employment60-69 rate is reportedly four times6,395 the state and10.9% national average8,948. 13.8% 70-79 5,456 9.3% 4,769 7.4%

80+ 2,819 4.8% 2,880 4.5% TOTAL 58,724 100.0% 64,665

Source: 2000 Census; 2010 Census Summary File 1, QT-P1 PAGE 25 OF 124 3-7

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UNDEVELOPED LAND, KELSEYVILLE, CA REGIONAL & NEIGHBORHOOD OVERVIEW

July 20, 2018 Employment Development Department Lake County Labor Market Information Division (916) 262-2162 Industry Employment & Labor Force March 2017 Benchmark

Data Not Seasonally Adjusted Jun 17 Apr 18 May 18 Jun 18 Percent Change Revised Prelim Month Year Civilian Labor Force (1) 29,610 29,610 29,430 29,460 0.1% -0.5% Civilian Employment 27,970 28,140 28,120 27,900 -0.8% -0.3% Civilian Unemployment 1,640 1,470 1,310 1,560 19.1% -4.9% Civilian Unemployment Rate 5.5% 5.0% 4.5% 5.3% (CA Unemployment Rate) 4.8% 3.8% 3.7% 4.5% (U.S. Unemployment Rate) 4.5% 3.7% 3.6% 4.2%

Total, All Industries (2) 17,010 17,090 17,210 17,160 -0.3% 0.9% Total Farm 1,130 970 1,170 1,100 -6.0% -2.7% Total Nonfarm 15,880 16,120 16,040 16,060 0.1% 1.1% Total Private 11,460 11,620 11,540 11,670 1.1% 1.8% Goods Producing 1,070 1,090 1,080 1,060 -1.9% -0.9% Mining, Logging and Construction 730 750 730 710 -2.7% -2.7% Manufacturing 340 350 360 360 0.0% 5.9% Durable Goods 90 130 120 100 -16.7% 11.1% Nondurable Goods 250 220 240 260 8.3% 4.0% Service Providing 14,810 15,030 14,970 14,990 0.1% 1.2% Private Service Providing 10,380 10,530 10,460 10,600 1.3% 2.1% Trade, Transportation & Utilities 2,910 2,840 2,820 2,840 0.7% -2.4% Wholesale Trade 100 90 80 80 0.0% -20.0% Retail Trade 2,260 2,200 2,210 2,230 0.9% -1.3% Transportation, Warehousing & Utilities 540 550 530 530 0.0% -1.9% Information 120 100 100 100 0.0% -16.7% Financial Activities 410 370 380 380 0.0% -7.3% Professional & Business Services 620 650 650 640 -1.5% 3.2% Educational & Health Services 4,560 4,850 4,760 4,820 1.3% 5.7% Leisure & Hospitality 1,230 1,160 1,180 1,240 5.1% 0.8% Other Services 560 570 580 580 0.0% 3.6% Government 4,430 4,500 4,510 4,390 -2.7% -0.9% Federal Government 170 130 140 150 7.1% -11.8% State & Local Government 4,260 4,370 4,360 4,240 -2.8% -0.5% State Government 230 200 200 220 10.0% -4.3% Local Government 4,040 4,170 4,160 4,020 -3.4% -0.5%

AsNotes: illustrated in the above table, the largest sector of the economy is in services. The largest service industries(1) Civilian arelabor educational force data are andby place health of residence; services, include government, self-employed retail trade and leisure and hospitality. Total farmindividuals, industry unpaid employment family workers, is householdjust slightly domestic smaller workers, than & leisuworkersre andon strike. trade. Data may not add due to rounding. The unemployment rate is calculated using unrounded data. Economy(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, & workers on strike. OverviewData may not add due to rounding. AsThese defined data are in produced the current by the 2012 Labor MarketEconomic Information Census Division, the of subject the California property is located in the Clearlake, CA MicropolitanEmployment Development Statistical Department Area (MSA) (EDD).. MS QuestionsA is defined should beby directed the California to: the Office of Management and BudgetJorge Villalobos (OMB) 707-566-3882as at least or one Randy urban Weaver cluster 707-441-5706 of at least 10,000 but less than 50,000 population, plus adjacentThese data, territory as well asthat other has labor a high market degree data, are of available social and via the economic Internet integration with the core as measured by commutingat http://www.labormarketinfo.edd.ca.gov. ties. The total personal income If you need of assistance,Clearlake, please CA MISA call (916) chang 262-2162.ed from 1,972,318 ($000s) in 2010 to 2,560,157 ($000s) in 2016, a change of 587,839 ($000s) (29.8%). The per capita personal income ##### changed from $30,464 in 2010 to $39,930 in 2016, a change of $9,466 (31.1%).

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Industry Estimated Percent Employment Public administration 1,857 8.1% Source: US Census Bureau American Community Survey 2015 Estimates UNDEVELOPED LAND, KELSEYVILLE, CA REGIONAL & NEIGHBORHOOD OVERVIEW Major employers in the County are shown in Table 1-4.

Table 1-4 Major Employers in LakeMajor County Employers in Lake County Employer Name Location Industry Adobe Creek Packing Co Inc Kelseyville Fruits & Vegetables-Growers & Shippers Brunos Shop Smart Lakeport Business Services NEC Calpine Corp Middletown Electric Companies Evergreen Lakeport Healthcare Lakeport Nursing & Convalescent Homes Hardester's Market & Hardware Middletown Grocers-Retail Hidden Valley Lake Assn Hidden Valley Lk Membership Sports & Recreation Clubs Kmart Lakeport Department Stores Konocti Vista Casino Resort Lakeport Casinos Lake County Social Services Deptartment Lower Lake Government Offices-County Lakeport Skilled Nursing Center Lakeport Convalescent Homes Mariani Dryers Kelseyville Fruit Drying Meadowood Nursing Center Clearlake Convalescent Homes Middletown Unified Middletown School Districts People Services Inc Lakeport Social Service & Welfare Organizations Rancheria Grille Nice Restaurants Robinson Rancheria Resort and Casino Nice Casinos Running Creek Casino Upper Lake Casinos Safeway Clearlake Grocers-Retail Scully Packing Co Finley Fruits & Vegetables-Growers & Shippers Shcl Family Health Center Clearlake Family & Children Services St Helena Hospital Clear Lake Clearlake Hospitals Sutter Lakeside Hospital Lakeport Hospitals Travel Centers of America Not Available Truck Stops & Plazas Twin Pine Casino & Hotel Middletown Casinos Walmart Clearlake Department Stores Source: America's Labor Market Information System (ALMIS) Employer Database, 2016 1st Edition.

AgricultureThe County has a varied tax base. Tax base information is tracked and maintained by the Lake County AgricultureAssessor’s Office. has long The been following a critical tables component show the tax of base the for economy the County in Lakeas well County. as for the Major incorporated crops include grapes,jurisdictions. cut trees, Table walnuts 1-5 shows and the pears. secured The real most property recent value complete for the analysis entire County was presented (both incorporated in the USDA and 2012 Censusunincorporated of Agriculture areas) .and Table we 1 -have6 shows presented the secured a summary real property of the value data by jurisdictionbelow. The. censusIt splits isthe in County the process ofup being into theupdated incorporated in 2018, jurisdictions, with data as and of the2017. communities Published that reports make indicated up the unincorporated that the more County. recent valuation ofLake total County agricultural production has reachedPublic nearly Review $114 Draft million. There is a large financial impact1- 8due to Local Hazard Mitigation Plan theJanuary value 2018 of the overall production, but this once labor-intensive industry has become increasingly modernized with improvements in technology and mechanization that results in a smaller impact on the number of related jobs. Seasonal employment ranges from approximately 600 to 1,700 at harvest.

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Lake County California

20122007 % change

Number of Farms 838 845 - 1

Land in Farms 150,721 acres 124,199 acres + 21

Average Size of Farm 180 acres 147 acres + 22

Market Value of Products Sold $99,463,000 $61,102,000 + 63 Crop Sales $97,477,000 (98 percent) Livestock Sales $1,985,000 (2 percent)

Average Per Farm $118,691 $72,310 + 64

Government Payments $100,000 $154,000 - 35

Average Per Farm Receiving Payments $2,499 $7,714 - 68

Farms by Size, 2012 Land in Farms, 2012 by Land Use 400 Pastureland 50.1% 300

200 Farms

Other uses 100 8.2%

Woodland 22.4% 0 Cropland 1-9 10-49 50-179 180-499 500-999 1,000+ 19.3% Acres

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Lake County – California

Ranked items among the 58 state counties and 3,079 U.S. counties, 2012 Item Quantity State Rank Universe 1 U.S. RankUniverse 1 MARKET VALUE OF AGRICULTURAL PRODUCTS SOLD ($1,000)

Total value of agricultural products sold 99,463 37 58 1,176 3,077 Value of crops including nursery and greenhouse 97,477 35 58 666 3,072 Value of livestock, poultry, and their products 1,985 55 58 2,756 3,076

VALUE OF SALES BY COMMODITY GROUP ($1,000)

Grains, oilseeds, dry beans, and dry peas 36 43 48 2,754 2,926 Tobacco - - - - 436 Cotton and cottonseed - - 11 - 635 Vegetables, melons, potatoes, and sweet potatoes 376 46 55 1,217 2,802 Fruits, tree nuts, and berries 91,649 27 56 44 2,724 Nursery, greenhouse, floriculture, and sod (D) 35 56 (D) 2,678 Cut Christmas trees and short rotation woody crops 8 34 41 1,016 1,530 Other crops and hay (D) 46 58 (D) 3,049 Poultry and eggs 117 34 57 1,360 3,013 Cattle and calves 1,032 54 57 2,605 3,056 Milk from cows - - 40 - 2,038 Hogs and pigs 10 47 55 2,087 2,827 Sheep, goats, wool, mohair, and milk 669 24 56 249 2,988 Horses, ponies, mules, burros, and donkeys 132 45 56 1,608 3,011 Aquaculture (Z) 41 45 1,259 1,366 Other animals and other animal products 25 45 58 1,791 2,924

TOP CROP ITEMS (acres)

Grapes 8,112 16 53 21 2,144 Cut Christmas trees 5,415 1 43 10 1,557 Walnuts, English 4,836 15 47 15 406 Forage-land used for all hay and haylage, grass silage, and greenchop 2,810 44 58 2,556 3,057 Pears, all 2,323 2 47 7 1,711

TOP LIVESTOCK INVENTORY ITEMS (number)

Layers 4,229 24 57 871 3,040 Cattle and calves 3,294 54 57 2,577 3,063 Pullets for laying flock replacement 1,797 14 55 491 2,637 Goats, all 1,757 24 53 254 2,996 Sheep and lambs 1,278 36 56 706 2,897

Other County Highlights, 2012

Economic Characteristics Quantity Operator Characteristics Quantity Farms by value of sales: Principal operators by primary occupation: Less than $1,000 196 Farming 368 $1,000 to $2,499 54 Other 470 $2,500 to $4,999 68 $5,000 to $9,999 79 Principal operators by sex: $10,000 to $19,999 93 Male 666 $20,000 to $24,999 46 Female 172 $25,000 to $39,999 67 $40,000 to $49,999 30 Average age of principal operator (years) 62.6 $50,000 to $99,999 91 $100,000 to $249,999 55 All operators by race 2: $250,000 to $499,999 22 American Indian or Alaska Native 12 $500,000 or more 37 Asian 31 Black or African American 11 Total farm production expenses ($1,000) 74,236 Native Hawaiian or Other Pacific Islander 7 Average per farm ($) 88,587 White 1,185 More than one race 14 Net cash farm income of operation ($1,000) 27,724 Average per farm ($) 33,083 All operators of Spanish, Hispanic, or Latino Origin 2 96 See “Census of Agriculture, Volume 1, Geographic Area Series” for complete footnotes, explanations, definitions, and methodology. - Represents zero. (D) Withheld to avoid disclosing data for individual operations. (Z) Less than half of the unit shown. 1 Universe is number of counties in state or U.S. with item. 2 Data were collected for a maximum of three operators per farm.

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Grapes & Wineries Grapes represent the largest crop, in terms of acreage, in Lake County, followed by cut Christmas trees, walnuts, forage-land and pears. There has also been a significant decline in revenue from walnuts due to rotation into vineyards.

Within Lake County, it is estimated that a total of approximately 9,000 acres are planted with wine grapes. Cabernet Sauvignon is the most planted variety with approximately 3,300 acres. Sauvignon Blanc is the second with 1,790 acres. Projections estimate that this could double in the next few years, since many new vineyards are being planted. In January 2018, Lake County Department of Agriculture released the 2016 Crop Report. The Report indicated that Lake County’s agriculture valuation at $113,829,790; which is the highest number recorded and a 12% increase from 2015. The 2017 Grape Crush Report also indicated that total wine grape revenue for Lake County increased 6.7% to $83,773,506 in 2017. Although still the smallest market out of the North Coast counties that include Mendocino, Lake, Sonoma and Napa it had the largest percentage increase. Lake County was also the only North Coast county that had total tonnage growth in 2017, up 2.3% to 47,800, led by a 26% jump in cabernet production.

Lake County includes the Clear Lake AVA, High Valley AVA and the Red Hills AVA where the subject property is located. About 20 out-of-county wineries purchase Lake County grapes from independent growers. Following a recent historical trend, estimates are that approximately 80% of the grapes grown in Lake County go out of the area with an increased demand for filler grapes from Napa Valley wineries that are allowed to use up to 15% of non-Napa Valley grapes. In 2017, Lake County Cabernet Sauvignon grapes averaged $2,500 a ton and Napa Cab averaged $7,510 providing an economic incentive for wineries to continue this practice.

While the majority of the grapes from Lake County have historically been used as filler grapes there has also been an increased effort to establish Lake County as a higher-profile region for wineries. There are currently over 30 wineries and several of the larger vineyards and wineries are making significant investments.

Tourism & Recreation The other primary component of the local economy is tourism and recreation. Due to the accessibility and popularity of its several lakes and accompanying recreational areas. Clear Lake is the largest natural freshwater lake in California, with 63 square miles of surface area, and more than 100 miles of shoreline. Lake County in the past has been ranked as the cleanest air in California as certified by the State’s Air Resource’s Board. The wineries discussed above are also a popular destination for tourists with many wineries having tasting rooms and related events.

Having been closed since 2009, the lakefront 124.2-acre, Konocti Harbor Resort & Spa, was a long-time destination for tourists and a significant part of the local economy. The property includes guest rooms, full service restaurant and bar, amphitheater, conference facility, spa and marina. However, the former long-time owner for 50 years was the Local 38 of the United Association of Plumbers, Pipefitters and Journeymen. They were forced to sell after a federal lawsuit settlement that claimed the union mishandled members' benefit plans by diverting an estimated $36 million into renovating and operating Konocti Harbor. After being on the on and off the market for about ten years, the property sold on March 6, 2018 for $5 million. The new owners have extensive plans to rebuild and renovate the property with a targeted reopening in 2020. This has the potential to have a significant positive impact on the local economy.

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There are also four casino properties owned by Tribal Nations in Lake County that contribute to the local economy and provide tourism, entertainment and recreational amenities to the area. Konocti Vista Casino is located on Clear Lake and includes 325 slot machines, a full-service restaurant and snack bar, 80 room motel, 90 slip marina, 74 space RV park and a convenience store. Opened in 1989, on Clear Lake the Robinson Rancheria Bingo & Casino has an approximately 10,000 square feet casino floor, slot machines, table games, 900-seat bingo facility, three restaurants, banquet space, lounge and 48 room hotel. Twin Pine Casino is located in Middleton with an approximately 25,000 square feet casino floor, slot machines, table games, restaurant, lounge and 59 room hotel. Opened in 2012, Running Creek Casino has a casino with 349 slot machines, five table games, two restaurants, banquet facility and lounge.

Cannabis Lake County has been working during the past two years on the development of an ordinance of the Lake County Code with new procedures to regulate the cultivation, manufacturing, transportation, distribution, testing, retail, and micro-business of cannabis. It was decided to regulate cannabis activities through the County’s police powers to regulate land use using the County’s Zoning Ordinance.

According to the Economic Costs and Benefits of Proposed Bureau of Cannabis Control Regulations for the Implementation of the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA) published in April 2018 for the California Bureau of Cannabis Control by the University of California Agricultural Issues Center the overall legal cannabis segment with retail revenue without counting state excise and sales taxes is estimated to be about $5 billion. Based on information from various sources including Lake County Cannabis Workshops in 2018 and data published by a local advocate group there is a wide range of projected economic impact for Lake County. As a crop, cannabis has the potential for revenue yield per acre that will could exceed any other current crop. There is also the risk of overplanting, just like with other crops that spike in popularity. There is the potential for growth in income and jobs for the local economy and tax revenues but there is also significant opposition from the community.

Board of Supervisors, County of Lake, State of California Lake County Ordinance No. 3073 was passed on March 20, 2018, with excerpts that included the following: “…the County’s geographic and climatic conditions, along with the sparse population in many areas of the County provide conditions that are favorable to outdoor cannabis cultivation, and the County has experienced a significant increase in the number of people in the County cultivating large amounts of cannabis. Cannabis grower can achieve a high per-plant yield because of the County’s favorable growing conditions. With the use of custom soils and fertilizers, it is not uncommon for plants to grow up to 12 feet high, six feet in diameter and produce between two (2) to seven (7) pounds of dried bud. Many of these seasonal growers are unfamiliar with local and state regulations aimed at protecting the environment and are causing significant damage to area watersheds. Soils, fertilizers and pesticides are commonly left behind as sites are abandoned for winter…according to law enforcement officials, the amount of cannabis cultivated in Lake County has increased significantly with each growing season and is increasingly occurring in residential areas, in close proximity to residences, and on vacant, unsupervised and unsecured properties. During the last three years, Lake County has experienced an ongoing large number of complaints regarding the odor, threats to public safety and other nuisances that unregulated cannabis cultivation sites can create…the cultivation of cannabis has the potential for increased crime, intimidation and threats. As cannabis plants mature, certain varieties produce strong odor which creates an attractive nuisance by alerting people to the location of valuable cannabis plants; this creates an increased risk of crimes including burglary, trespassing, robbery and armed robbery…”

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The ordinance included numerous amendments to prior sections of the Lake County Code. Neighboring Sonoma County, in August 2018, passed revisions to rules governing business and farms that included limiting most cultivation to sites of 10 acres or larger. This is intended to reduce the reported negative issues associated with smaller cannabis farmers. Estimates of the economic impact of cannabis vary widely and more time will be needed to identify longer term trends.

Accessibility

In the 2018 Community Vision Forums hosted by Lake County, participants expressed the need to improve public transportation and roads to improve the quality of life and economy.

There are no major freeways in Lake County. Lake County is accessible from Mendocino County to the west via State Highway 20 and 175. State Highway 20 continues across the county and is the only highway access from Colusa County to the east. State Highway 29 provided access from Napa County to the south. Lake Area Planning Council (APC), which is the Regional Transportation Planning Agency (RTPA) for the Lake County region, recently announced that a $65 million project that is the first third of a $195 million plan to turn eight miles of Highway 29 into a four-lane expressway from its current two-lane status has been funded from federal, state and county sources and is set to begin construction in the summer of 2019.There is no highway access from the north since the county is bordered by the Mendocino National Forest. Local access is provided by State Highways 20, 29, 53, 175 and 281. In general, the highway system in Lake County is geographically limited by the mountainous terrain and the lakes.

Lake Transit is Lake County’s public transportation system and offers local bus routes, as well as one that runs between Lakeport and Ukiah.

Lake County is a bedroom community for many that commute south to jobs in Calistoga, Napa and Santa Rosa. As of the 2010 Census over 4,500 workers commuted to Sonoma, Mendocino and Napa County while less than 300 commuted from Mendocino County to Lake County. There is one airport in Lake County, Lampson Field Airport (K102) which is a public airport, with a single 3,600 foot runway. The closest commercial airport is Charles M. Schultz - Sonoma County Airport (STS) which is located approximately 70 miles south of Lake County near Santa Rosa and offers service from Alaska Airlines, American Airlines/Sky West, United Airlines and Sun Country Airlines.

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Education

According to the U.S. Census Bureau, 83.7% of Lake County residents are high school graduates or higher and 16.2% have a bachelor’s degree or higher. There are two community colleges in Lake County, Mendocino Community College – Lake Center and Yuba College – Clear Lake Campus. There are also five public school districts in Lake County.

Healthcare

There are three hospitals located in Lake County. St. Helena Family Health Center in Clearlake, Sutter Lakeside Hospital in Lakeport and Adventist Health Clear Lake in Clearlake.

Neighborhood Maps

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Kelseyville - Neighborhood Overview

The unincorporated communities within Lake County include Clearlake Oaks, Clear Lake Riviera, Coyote Valley, Kelseyville, Lower Lake, Lucerne, Middletown, Nice, North Lakeport, Soda Bay and Upper Lake. Other areas include Blue Lakes, Boggs Lake/Cobb/Loch Lomond Mountain, Glenhaven, Guenoc Ranch, Lake Pillsbury and Spring Valley Lake.

As discussed, the subject property is located in the community of Kelseyville. According to Lake County, the 2007 population was 3,363. The County further describes the community as, “located at the western base of Mt. Konocti between Highway 29 and Clear Lake, is a key agricultural center in Lake County. Once known as the ‘Pear Capital of the World,’ the area is also known for walnuts and wine grapes. The community contains numerous retail shops and is in close proximity to Clear Lake State Park, which includes a visitor’s center, camping, boating, hiking, and swimming facilities. With administrative offices

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in Kelseyville, the Kelseyville Unified School District provides educational services within the community. The district operates three elementary schools, one middle school, and two high schools. There are two elementary schools, one middle school, and one high school located within Kelseyville. Water is provided by the Kelseyville County Waterworks District No. 3 through its two wells. Groundwater provides the primary water source for both municipal and agricultural water users. Kelseyville is within the Big Valley Water Inventory Unit. Wastewater service is also provided by the Kelseyville County Water Works District, with its treatment facility located just north of the community”.

Surrounding Uses

The directly adjacent uses include the following:

• North – On the north side of Red Hills Rd. towards Highway 175 there are two, single-family residences and an 8-acre walnut family with a 2BR mobile home on site. Towards the east, there are seven parcels ranging from 4 to 39 acres in size that are all walnut farms with either a single-family residence or mobile home on site. Across Red Hills Rd. is Boatique Vineyard and Winery which opened in July 2015. The site was assembled with a $2.1 million purchase in July 2011 for the largest portion containing 58 acres and a 5BR/BA single-family residence. In April 2015, an 11.4-acre parcel with a 2BR/2BA single-family residence was added for $400,000 and a 4.9-acre parcel was added on January 12, 2018 for $393,000. The adjacent land at Red Hills Rd. and Seigler Springs Rd. is the 1,397-acre Amber Knolls Vineyard and Crimson Ridge Vineyard owned by Beckstoffer Vineyards that we previously mentioned in the appraisal.

• South – There is a 3BR/4BA single-family residence on a 17.5-acre site at 9045 Wildcat Rd. (just south of Highway 175) that sold on April 2, 2018 for $475,000. The 39.7-acre Rainbow Ranch which includes three parcels with a barn, 2BR single-family residence, duplex, mobile home, ponds and former fish hatchery that was on the market for 5-6 years asking as much as $2.25 million before selling for $600,000 on May 5, 2013. There is also a 3BR/2BA single-family residence situated on 6.5 acres at 9030 Highway 175 that sold on July 31, 2015 for $450,000. There are also several undeveloped parcels on the south side of the property towards the east.

• East – Undeveloped land

• West – Single-family residence located at the northwest corner of Red Hills Rd. and Highway 175. Across Highway 175 at 8951 Highway 175, there is a 17.3-acre vineyard with a 3BR/1BA single-family residence on site that sold in July 2014 for $450,000. There is also a 2BR/1BA home and several undeveloped parcels across the highway from the subject property. Additionally, Obsidian Ridge Vineyard, which is located just to the west.

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The directly surrounding properties include a mix of undeveloped land, mobile homes, single-family homes, walnut orchards, vineyards and a ranch that was formerly a fish hatchery.

Life Cycle

A neighborhood’s life cycle usually consists of four different stages: growth, a period during which the market area gains public favor and acceptance; stability, a period of equilibrium without marked gains or losses; decline, a period of diminishing demand; revitalization, a period of renewal, redevelopment, modernization, and increasing demand. The subject property’s immediate neighborhood is considered to be in the revitalization stage of its life cycle. The two largest investments in the revitalization of the immediate area are the Beckstoffer Vineyards and Boatique Vineyard & Winery.

Conclusion and Factors that Influence Value

The region and neighborhood have both opportunities and challenges that will influence real estate values in the future. The community is relatively small with very slow population growth in recent years and relatively remote although it is within driving distance of several larger urban centers. The primary local industries are agriculture and recreation/tourism. Many residences commute out of the county for higher paying jobs.

Opportunities include the growth and recognition for local vineyards and wineries including the nearby Obsidian Ridge Vineyard, Beckstoffer Vineyards and Boatique Vineyard & Winery. Additionally, the recent sale with planned renovation and reopening of the Konocti Harbor Resort & Spa would bring back jobs lost when is closed 10 years ago and will be a boost to the local economy. Surrounded by mountains, lakes, creeks, vineyards, orchards and ranches but this also comes with certain risks and responsibilities. Lake County is making efforts to manage these natural resources and risks, but in the short term there is a need to recover from several years of floods and wildfires that impacted the area.

Overall, as undeveloped land the subject property has good compatibility to the surrounding land uses and since it is surrounded by a mix of residential and agricultural uses there are a variety of potential future uses that would also be compatible. Over the long term the region and neighborhood have many characteristics that will be positive influences on the value of real estate.

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MARKET ANALYSIS

Introduction

The subject property is undeveloped land in the unincorporated community of Kelyseyville in Lake County. There are a variety of potential uses for the subject property based on the location, characteristics, conformity with surrounding uses and overall market conditions. In order to be the most relevant, we have narrowed the focus of this Market Analysis to those property types that we have concluded to be the most likely uses for the subject property.

The subject property is surrounded by several single-family homes and we have researched trends in the local residential submarket.

Additionally, the location is within the Red Hills AVA with several surrounding vineyard, several of which have recently made significant investments in new facilities, tasting rooms and vineyards. We have concluded that other crops, including walnuts or pears, would not be a likely use and therefore we have not focused on these agricultural uses.

Based on the proposed senior housing development we have also researched the senior housing market. Due to the complexity of this property type and required capital for larger properties, there are many regional or national senior housing operators. Local operators tend to operate smaller facilities with less than 25 beds/units. Based on the size of the proposed project we have research trends in the national senior housing market as well as the local market.

Kelseyville Single-Family Residential Market

Existing Home Sales For our analysis of the Kelseyville housing market we utilized available data for the subject property’s 95451 zip code. A zip code area map is presented to the right.

There are currently 78 single-family homes available for sale in the subject property’s 95451 zip code ranging from $179,000 to $2,995,000. The low-end of the range represents a new 900 square foot home with a 200 square foot detached office located on a steep, rural lot off of Highway 175 at Mt. Hannah. The high-end representing a property located on Seigler Springs Rd. named Black Rock Ranch with 79 acres, vineyard and Cougars Leap Winery.

In addition to available homes, we have researched closed sales over the past four years within the subject’s 95451 zip code. We relied on data available from the CRMLS from January 2014 to July 2018, with the charts on the following page illustrating trends for median sales price and months of inventory. The annual median sales price was $239,000 in 2014; $265,000 in 2015; $276,950 in 2016; $297,000 in 2017 and $319,500 year-to-date 2018. Although there are monthly fluctuations, the median sales price has been trending higher and the number of

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active listings has generally ranged from 100 and 130 homes. This correlates to the months of inventory tends to be seasonal but typically between 6 and 12 months.

LAKE COUNTY HOUSING ELEMENT 2015

Inventory of Vacant and Underdeveloped Sites – Low Density Designations Table 2-4 provides a summary of estimated developable land within Lake County for all low density residential land use designations as of July 2014. Land values for an unimproved vacant residential lot range from $5,000 - $15,000 (2014) which would enable moderate and above moderate income housing options. The total holding capacity for residential units, based on the minimum and maximum allowable density for each single family designation, is also listed in Table 2-4. As shown, there is a total holding capacity of 7,275 units based on the minimum density and a total holding Therefore,capacity in our opinion of 26,870 the units statistics based from on the the maximum broad market density. generally These identifiedindicate that lands the are market has appreciatedmore but thana quantifiable adequate amountto meet isthe inconclusive RHNA housing based ne onlyeds on for this the data. planning period for both moderate and above moderate income housing.

ResidentialSecond Land Dwelling Units In order toMost determine single thefamily amount residential of land zon availablees in Lake in Lake County County qualify for forresidential second development,unit construction we reviewed the 2015 Lakeof some County kind .Housing All residential Element zones and, andhave a includefew commerciald the table zones, below in fact that qualify summaries for some the County’s recent survey.form ofThe additional report also habitation. states: As“Given an example, the rural b etweennature Januaryof unincorporated 2005 and January Lake County 2010, there is a there were 118 residential second unit and granny unit construction permits issued significantwithin amount the ofunincorporated vacant and underutilized areas of the County.land. Much During of thisthis landsame is time constrained period 15 by farm a number of factors includinglabor quarters hazardous were slopes, also approved.floodplains, Althoughgaps in communications not factored into infrastructure, this analysis mostwater of supply and sanitation,these accessibility units qualify and highas afford fire abledanger”. housing.

Summary of Vacant and Underutilized Land Inventory Table 2-4: Summary of Vacant and Underutilized Land Inventory by General Plan Designation - Low Density Designationsby General Plan Designation – Low Density Designations Dwelling Dwelling General Number of Unit Unit Plan Acres Density Range Parcels potential potential Designation (Max.) (Min.) RL 2,802 214,028 1 unit/20-60 ac. 10,701 3,567 RR 2,816 9,442 1 unit/5-20 ac. 1,888 472 SRe 1,790 2,845 1 unit/1-3 ac. 2,845 948 LDR 4,953 2,287 1 unit/1 ac. To 5 units/1 ac. 11,435 2,287 Total 12,361 228,602 26,870 7,275 This analysis includes all parcels in the County jurisdiction that are larger than 7,000 sq. ft. and have an improvement value of less than $15,000. Parcels that are split-zoned are included in the "Number of Parcels" count, but the acreage of the opposing general plan designation is not included in the "Acres" count. Source: Lake County GIS Database (September 2014).

Source: 2015 Lake County Housing Element Appendix B, to this report, contains a listing by address and community of over 1,100 properties in Lake County identified as being suitable for moderate income housing. The subjectThis property list is byhas no General means Planexhaustive Designations of all availableof RL and lands RR. As suitable illustrate for d moderate above, there and is a large supply of availableabove mo landderate for income development. housing inThis Lake large County. supply Identified contributes properties to the were land determinedcosts in Lake County being muchusing lower the than following those criteria: of the Bay lot size Area of and 6,000 Sacramento to 8,000 squareRegion. fee Int addition; less than to lower $3,000 land costs, developmentimprovement permitting value fees; within in Lakecommunity County growth are lowerboundaries than; near neighboring transit corridors counties., and This in includes proximity to basic community services. All identified sites have ready access to basic infrastructure and contain no environmental constraints.

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construction permitting fees as well as costs associated with securing other necessary entitlements. The 2015 Lake County Housing Element also projected that if the trends over the past five years continue there will be a little over 300 new homes built in the County between 2014 and 2019 which is less than half their projected need for new housing.

Vineyard Land

As previously discussed, grapes represent the largest crop, in terms of acreage, in Lake County. It is estimated that a total of approximately 9,000 acres are planted to wine grapes and Lake County includes the Clear Lake AVA, High Valley AVA and the Red Hills AVA, where the subject property is located. VALUES: LAND & LEASE Projections estimate that the total acreage planted could double in the next few years, since many new LAND USE VALUE PER ACRE ACTIVITY / TREND RENT RANGE ACTIVITY / TREND

vineyards are being planted. The 2017 issue of the Trends in Agricultural Land and Lease Values stated: REGION TWO NAPA COUNTY “Lake Vineyards County, - Prime like Napa Mendocino Valley has$300,000 seen - >$400,000 its agricultural industryStrong/Increasing centered almostN/A exclusivelyN/A on vineyards and wineries.Vineyards - Secondary The market Napa Valley demand$120,000 for - vineyards$300,000 in LakeStrong/Increasing County remained N/Astrong, with a modestN/A number of sales. Vineyards Sales - Outlying in Napathe County Big Valley $50,000area generally- >$120,000 ranged fromLimited/Stable $25,000 to $38,000N/A per acre,N/A for vineyards Plantable - Prime Napa Valley $200,000 - >$250,000 Strong/Increasing N/A N/A typically producing from six to over seven tons per acre. The highest priced vineyards in Lake County were Plantable - Secondary Napa Valley $50,000 - $200,000 Strong/Increasing N/A N/A located in the Red Hills and High Valley regions, mostly for high quality, upland Cabernet vineyards Plantable - Outlying Napa County $25,000 - >$50,000 Limited/Stable N/A N/A developed on volcanic soils. The market appears to have stabilized over the past year. Mendocino and Homesite - Prime Napa Valley $2,000,000 - >$5,000,000 Strong/Increasing N/A N/A Lake HomesiteCounties - Secondary have Napa seen Valley pear acreage$300,000 - >$2,500,000stabilize in the lastStrong/Increasing few years. MostN/A of the remainingN/A orchards are high producingHomesite - Outlying and Napa owned County by a handful$0 - >$350,000 of long time growers.Limited/Stable The 2016 cropN/A was slightly belowN/A historical averages, with general good size and fruit quality. Given the strong demand from canneries and fresh fruit suppliers, the market price for pears was at recordSONOMA highs. COUNTY Most growers received average prices from $400 to $450+ Vineyards per - Resistant ton, whichRootstock is nearly$90,000 double - $170,000 the price receivedModerate-Strong/Increasing five years ago. N/AThe outlook appearsN/A bright for Plantable Land (or old Vines) $45,000 - $100,000 Moderate-Strong/Increasing N/A N/A the remaining growers in the business, with forecast demand and prices both being good. The outlook for $400,000 Homesite $0 - >$3,100,000 Moderate-Strong/Stable$400,000 N/A N/A Napa County the industry,Napa County however is Sonomasomewhat County concerning,Sonoma with County increasing operating costs, uncertainty of labor, and $350,000 VINEYARD PLANTABLE Sonoma-Marin LAND Pasture VINEYARD $6,000 - $13,800 PLANTABLE LANDModerate-Strong/Increasing$350,000 N/A N/A $300,000 new regulations which could have a major impact on profitability$300,000 going forward. There are few orchard sales in the area (Lake County), and for theMENDOCINO first time in COUNTY nearly a decade, good orchards are contributing a $250,000 Prime $250,000 few thousand Vineyards - Anderson dollars Valley per acre above$65,000 bare- >$100,000 land values. ThatLimited/Stable said, no new orchardsN/A have beenN/A planted or $200,000 $200,000 are scheduled Vineyards - Inland to Mendocino be planted in the$22,000 market. - $40,000 The walnut plantingLimited/Stable craze has alsoN/A reached LakeN/A County, with $150,000 Plantable - Anderson Valley $25,000 - $35,000 Limited/Stable$150,000 N/A N/A Secondary some small devPrime elopments showing-up on the fertile bottomlands”. $100,000 Plantable - Inland Mendocino $10,000 - $15,000 Limited/Stable$100,000 N/A N/A Secondary Outlying $50,000 LAKE COUNTY $50,000 Outlying 1994 1996 1998 1998 1998 2002 1994 1996 1994 1996 2002 2000 2002 2006 2006 201 2006 201 201 2006 201 2000 2000 2004 2008 201 201 201 2004 2008 201 201 201 2004 2008 201 201 201 2004 2008 201 201 201 1994 1996 1998 2002 $0 Vineyards - Resistant Rootstock 2000 $25,000 - $50,000 Moderate/Stable$0 N/A N/A 0 0 0 0 2 4 6 2 4 6 2 4 6 Plantable Land or Pears $8,000 - $14,000 2 Limited/Stable4 6 N/A N/A

$120,000 HUMBOLDT COUNTY$120,000 Mendocino County Mendocino County Lake County Lake County VINEYARD PLANTABLE Dairy Pasture LAND VINEYARD $5,000 - $7,800 PLANTABLE LANDLimited/Stable-Increasing N/A N/A www.calasfmra.com $100,000 $100,000 DEL NORTE COUNTY $80,000 $80,000 Anderson Valley Dairy Pasture $3,500 - $6,000 Limited / Stable-Increasing N/A N/A $60,000 Irrigated Cropland (Lily Bulbs) $7,500 - $8,000 Limited / Stable-Increasing$60,000 N/A N/A

$40,000 $40,000 Anderson Valley production includes beef cattle, range it is a major contributor to the local $20,000 pasture, irrigated pasture, and a small economy. Approximately 26%$20,00 0 of all Inland number of vineyards. Agricultural land the timber harvested in California Inland 201 1994 1996 1998 2000 2008 201 201 1998 201 1994 1996 1994 1996 1998 1998 1994 1996 2002 2000 201 2004 2004 2002 2002 2000 2006 201 2006 201 2006 201 2008 201 201 2006 2000 201 2004 2008 201 201 201 201 2004 2008 201 $0 is closely held and sales activity2002 is non- comes from the North Coast$0 Region. 0 4 6 2 0 0 0 2 4 6 2 4 6 2 4 6

2017 TRENDS existent. Generally sales from adjacent Private timberland ownership is counties must be relied on to value the almost equally divided between large Source: Values: Land & Lease, 2017 Trends in Agricultural Land and Lease Values $16,000 agricultural land in $16,00Trinity0 County. industrial holdings and small privately Humboldt Dairy Sonoma-Marin owned tree farms. Improvements $14,000 PASTURE PASTURE $14,000 in the housing market have led to

TM Timber Productio $12,000 $12,000 PAGE 39 OF 124 in Agricultural Land & Lease Values Timber production occurs in most of increased demand and prices for saw $10,000 the counties (except$10,00 for0 Napa) that logs. Demand for timberland, particu- comprise the North Coast Region. For larly redwood timberland, is strong $8,000 $8,000 Humboldt and Mendocino Counties with few properties available for sale. $6,000 $6,000

$4,000 $4,000

$2,000 $2,000 www.calasfmra.com 2017 TRENDSTM in Agricultural Land & Lease Values 31 1994 1996 1998 2002 1994 1996 1998 2000 2002 2000 2006 201 $0 2006 201 $0 2004 2008 201 201 201 2004 2008 201 201 201

0 0 2 4 6 2 4 6 33 TWO REGION UNDEVELOPED LAND, KELSEYVILLE, CA MARKET ANALYSIS

There are currently over 30 wineries and several of the larger vineyards and wineries are making significant investments. Shannon Ridge wines is the largest vintner based in Lake County, and in May 2018 purchased the Nice Wine Co. production facility community of Nice. They previously have made their wines at other various facilities in the area with production of about 180,000 cases a year with brands that include Buck Shack, High Valley, Old Pearl, Playtime, Shannon Reserve, Shannon Ridge High Elevation Collection and Vigilance at retail prices from $18 to $38 per bottle. One of the best-known grape growers in Northern California is Andy Beckstoffer of Beckstoffer Vineyards with over 40 years of experience growing premium wine grapes in Napa and Mendocino County. Beckstoffer has also made a major investment in Lake County. California’s Next Big Wine Region: The Beckstoffers Bet on Red Hills, was published in Forbes Magazine in August 2016 and discusses Beckstoffer’s approximately 1,379 acres named Amber Knolls Vineyard and Crimson Ridge Vineyard. These vineyards are located directly northeast of the subject property at Red Hills Rd. and Seigler Springs Rd. Beckstoffer is pushing for wine makers to produce an ultra-premium wine with the local grapes at a price point of $80 to $100 a bottle and quality on the level of Napa wines that sell for $350 or more. The first vintages of this wine will be available in 2019. Another example of a local winery gaining a higher profile is Obsidian Ridge Vineyard, which is located just to the west of the subject property in Kelseyville. In July 2018, the San Francisco Chronicle published a story titled, The rise of the Red Hills of Lake County. The article discussed Obsidian Ridge’s existing 105-acre vineyard and their plan to add 140 acres. This reflects to overall growth in the Red Hills which currently has 1,000 acres in the process of development or recently developed, to add to the existing 3,250 acres in the AVA. State of the Wine Industry 2018 published by Silicon Valley Bank reported:

“Given the premiumization trend and the reputation of Napa and Sonoma as premium wine–growing regions, it is logical to presume that the North Coast should have the highest growth rates in planted acreage, but that is not the case. The highest growth rates in California are in regions where plantable land is available and where prices are more reasonable compared with those on the North Coast. Although the growth rate in planted acres on the North Coast is smaller than in other regions, price per acre is a different issue. As noted earlier, cabernet is leading growth among all premium varietals today, and Napa cabernet acreage has a value structure unto itself. That price and value equation has become even more distorted in the past year… the average price per ton of cabernet … has increased dramatically over the years since the median baby boomer hit age 35 in 1994. Over the past several years, the price of grapes has continued to rise, with ninetieth- percentile Napa cabernet now fetching north of $10,000 or more per ton and the best land in Napa reaching $400,000 per planted acre. Despite the heavy unrelenting upward trends in North Coast vineyard values since 1994, the date when wine demand accelerated, we believe we are at a place in the cycle where both grape prices and land values will pause their climb. This is due to multiple factors, including headwinds in sales for wineries selling luxury wine, the aging boomer cohort that drove growth for the past 20 years, an inability to pass grape price increases on to consumers and the delay in the millennials’ full entrance to consumerism”.

Senior Housing – Independent & Assisted Living

The United States Fair Housing Act protects all residents from discrimination on the basis of race, color, national origin, religion, sex, handicap or familial status but specifically exempts some senior housing facilities and communities from liability for familial status discrimination. In order to qualify for this exemption a facility or community must meet various requirements and be for persons 55 years of age or older; or 62 years of age or older. The senior housing market includes different property types that can be categorized by the type of housing and level of services to seniors. These are broadly defined as either independent living or assisted living. Independent living facilities are lifestyle oriented and tend to offer a variety of amenities for recreation

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and activities. Assisted living includes subcategories such as Alzheimer’s and dementia care, rehabilitation and skilled nursing with 24-hour care.

National Investment Center for Seniors Housing & Care (NIC), a non-profit organization that provides data and analytics on the sector reported in July 2018 that U.S. national occupancy rates for independent living and assisted living properties averaged 90.2% and 85.2%, in the secondChapter quarter 4: Property of 2018 Type. They Outlook also reported that seniors housing occupancy rates have now trended downward over the past 10 quarters and the occupancy for assisted living was the lowest since the NIC began to report the data in late 2005. One reason cited for the decline in occupancy is the inventory growth which is just coming off a cyclical high in the fourth quarter of 2017. Development is projected to continue to be active for the foreseeable future due to the sector’s strong demographics trends.

Senior Housing: An Update The senior housing and care sector continues to garner growing attention ● Greater liquidity. As transaction volumes increase, investors have from institutional investors. Private equity funds, pension funds, public and become more comfortable knowing that multiple exit strategies are likely. private REITs, banks, the government-sponsored enterprises (GSEs), life insurance companies, high-net-worth individuals, and others now provide ● Rising transparency and understanding. Information about debt and equity to the sector. As of the second quarter of 2017, more than market fundamentals and capital market conditions from sources such $14 billion of transactions occurred on a rolling four-quarter total. as NIC MAP and Real Capital Analytics (RCA), as well as active REIT participation in the sector and increasing Wall Street analysts’ coverage, The mix of players is changing, and large institutional investors are now allows investors, lenders, and borrowers to better understand current replacing some of the larger public REITs as buyers. Pricing remains conditions, providing for a more disciplined capital market. favorable for sellers, with the average price per unit remaining near record highs, while cap rates remain relatively low. Private sector returns continue ● Emerging post-acute-care coordination opportuni- to outpace broader property returns, with the ten-year senior housing total ties. The Affordable Care Act and changes in Medicare’s payment investment return beating the NCREIF NPI by more than 400 basis points structure have changed the payor landscape. Alternative payment plans as of the first quarter of 2017. and networks, such as accountable care organizations (ACOs), managed care organizations (MCOs), and bundled payments, are displacing Investors are attracted to the sector for a number of reasons. fee-for-service payment plans in both Medicare and private health plans. Senior housing operators, as well as skilled nursing and post-acute ● Enticing demographics. While the baby boomers will not reach providers, have new opportunities to become part of the emerging 80 until 2026, demographic tailwinds are quickly advancing. Growth in care continuum. the 82-to-86 cohort (the cohort that dominates assisted living and independent living properties) starts to accelerate this year and will generally ● Mounting understanding of the benefts for residents. continue to do so until 2025, providing a nice demographic driver for Anecdotal evidence suggests that the hospitality and social aspects senior housing. Between 2017 and 2025, this cohort will increase in size of living in a senior housing setting offers physical and psychological by 1.5 million persons, or 29 percent, from 5.1 million to 6.6 million. benefits that can extend and expand a person’s quality and length of life.

● Compelling investment returns. Institutional-quality private-pay Rarely does an opportunity occur where there are no challenges. For senior senior housing has consistently produced steady income and strong appre- housing, two challenges currently dominate: unit supply and labor shortages. ciation returns for more than ten years, consistently beating total returns for apartments, retail space, offices, industrial properties, and hotels. First are inventory supply concerns. As debt and equity capital have become more available in the years since the Great Recession, development activity

Inventory Growth and Occupancy Rates: 31 Primary Senior Housing Markets, 4Q 2005–2Q 2017

92% 8,000 Occupancy 91% 7,000 Inventory growth 90% 6,000

89% 5,000

88% 4,000

87% 3,000

86% 2,000

85% 1,000

84% 0

4Q 2005 1Q 2007 1Q 2008 1Q 2009 1Q 2010 1Q 2011 1Q 2012 1Q 2013 1Q 2014 1Q 2015 1Q 2016 2Q 2017 Source: National Investment Center for Seniors Housing & Care (NIC).

Emerging Trends in Real Estate® 2018 63 PAGE 41 OF 124

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has ramped up. Since early 2010, when occupancies reached a cyclical low of unemployment rate falling to a 16-year low of 4.3 percent in July 2017, the 86.9 percent, 79,000 units have come on line within the NIC MAP 31 Primary challenge of recruiting and retaining employees is expected to only grow. Markets, a 16 percent increase in supply. More recently, in the year ending in Shortages in the health care professions as well as in other industry sectors, the second quarter of 2017, 22,000 units have come on line. such as the construction trades, are slowly putting upward pressure on wage rates. In the 12 months ending in July, average hourly earnings rose 2.5 However, it is notable that not all markets have seen significant development percent—down slightly from 2.6 percent in 2016, but up from 2.3 percent activity. Nearly half (i.e., 48 percent) of this growth occurred in seven metro- in 2015 and 2.1 percent 2014. politan markets: Dallas, Chicago, Minneapolis, Atlanta, Houston, Miami, and Boston. Dallas and Chicago alone accounted for nearly one of every five new In this environment, operators will need to boost their operational efficiency senior housing units of new inventory in the past 12 months. and staff productivity through technology, training, and mentoring in order to grow their net operating incomes (NOIs) and maintain their bottom lines. The second challenge is the labor market. Increasingly, operators are reporting labor shortages in all occupations across their operating plat- National Investment Center for Seniors Housing & Care (NIC). forms, ranging from care managers to executive directors. With the national

AccordingSingle-Family to the PwC Homes and Urban Land Institute Emergingholding Trends strong versusin Real historical Estate patterns, - United according States to data and from Canada Gallup. Gallup analyst Jeffrey M. Jones notes, “Senior citizens In the housing market’s upward climb out of crisis, experts are 2018: “Addressing the residential needs of the populationhave movingbeen immune through from the theirtrend of 60s, declining 70s, homeownership. and 80s is creating trying to get a firm handle on the inflection point. In the U.S. Between 2001 and 2009, an average of 81 percent owned a a spectrumCensus ofBureau’s oppor Residentialtunity Vacanciesfor the andreal Homeownership estate com munity. That spectrum spans geography and reveals an home. Since then, 82 percent report owning their home.” array ofJuly market report for n theiches second defined quarter ofby 2017, levels a pivot of point service. The driving force, though, is the inexorable increase in the emerged: homeownership rates had inched up consistently senior demographic cohort. As of 2016, there were 49.4Looking million in a bigger-pictureU.S. residents way at aged housing’s 65 mountainor older, of mov or -about 15 from a 50-year low of 62.9 percent in the second quarter of ing-target indices and indicators, the measure’s directional shift percent2016 of to total 63.7 percent population. in the second By quarter2030, of that 2017. figure is projected to grow to 75.5 million, or 21 percent of the from decline, to flattening, to ever so slight an increase provides population, according to the U.S. Census Bureau. The rangea fresh of context product for looking types at extendsotherwise well-established from active andage -targeted What the data point may signify, in the long run, is uncertain. If familiar trends. If the homeownership rate continues to inch back communitiesYogi Berra for were new around, retirees he might or say near that -homeownershipretirees, to facilitiesin with graduated levels of living assistance and health from here toward its 65 percent historical level, one might look at the United States and its role in American dreams of opportunity care. While it is the 82-to-86-year-old cohort that dominatesthis as one more the emancipating assisted livingevent from and the morelong-tail intensivegravity of care are 90 percent mental, and the other half based in statistical the Great Recession. sector,reality. even After that all that demand has happened segment in housing, will a rising be home increasing- by the millions. Since this has been considered a ownership rate is a psychological bright-line moment. specialized investment segment, many are not awareHousing’s of the Goldilocks rising Recovery liquidity (more than $14 billion in transactions in the year ending second-quarter 2017) and returns outpacing the NCREIF NPI benchmark by For strategic or financial investors in residential development, Within this freshly defined framework, the housing business 400 basistwo immediatepoints. Housingimportant sub-themes for seniors stand topped out anew withinthe list this of community’sall residential thought s egmentsand practice inleaders this gut-check year’s survey their in terms of its developmenttiny quantitative blip. and One is investment that homeownership prospects rates among for 2018.assumptions While and supply recheck hastheir strategic been onpriorities the around increase, a recent the young adult part of the ownership spectrum are stabilizing constructive, steady-as-she-goes fundamentals environment annualafterized an completions extended period remainof decline. relative That said,ly the modest change here at aboutheading 22,000 into 2018. units”. is that ages 35 to 39 have usurped the role that ages 30 to 34 An executive-level lender in the builder acquisition, construction, As referencedonce had as in the the dominant above age-range report for we people have entering also home included- the U.S. Census projections of population by age. ownership for the first time, with homeownership rates of 55.8 and development space describes that environment this way: The datapercent shows and 45.2 that percent, nationally respectively. the As population the leading edge 65 of years“Demographics, and over jobs is currentlyand wage growth, 15%. moderately Several low other interest notable nationalthe trends 77 million–strong are included millennial ingeneration this data crosses including that 35-year- the populationrates, still-affordable 65 years prices, and and olderpent-up prdemand—layeredojected to surpass on the old benchmark—with a starting line of January 2016—one may top of this very low for-sale inventory situation.” populationlook back under at July 18 2017’s years year-over-year old by 2035 increase and of 0.8grow percent to -over 23% of the total population by 2060. age point in homeownership rates as a turning point. Demand trends—particularly among the barbell generational cohorts of young adults and aging baby boomers—are solid Projected Age Groups and Sex Composition of the Population and sustainable through the next decade or so, but not without ProjectionsAlso, for homeownership the United States: rates2017-2060 among 65-plus-year-olds—where baby boomers are swelling the ranks by the minute—are also the noise, mess, unevenness, and elusiveness of the real world Main series. Table 2 to make profitably serving those unmet needs an ongoing chal- (2016 base population. Resident population as of July 1. Numbers in thousands) 64 Emerging Trends in 2016Real Estate® 20182020 2025 2030 2035 2040 2045 2050 2055 2060 Total 323,128 332,639 344,234 355,101 364,862 373,528 381,390 388,922 396,557 404,483 .Under 18 years 73,642 73,967 74,654 75,652 76,664 77,131 77,561 78,225 79,148 80,137 .Under 5 years 19,927 20,439 20,868 20,976 20,993 21,106 21,319 21,610 21,914 22,144 .5 to 13 years 36,954 36,780 37,074 38,051 38,453 38,568 38,715 39,049 39,532 40,090 .14 to 17 years 16,761 16,748 16,712 16,625 17,217 17,457 17,527 17,566 17,701 17,903 .18 to 64 years 200,241 202,621 204,354 206,311 210,201 215,571 220,995 225,023 227,794 229,670 .18 to 24 years 30,844 30,380 30,554 30,612 30,519 31,369 31,943 32,126 32,229 32,467 .25 to 44 years 85,147 88,843 92,328 94,370 95,368 95,067 96,054 97,459 98,727 100,230 .45 to 64 years 84,250 83,398 81,472 81,329 84,314 89,135 92,998 95,437 96,838 96,973 .65 years and over 49,244 56,052 65,226 73,138 77,997 80,827 82,835 85,675 89,615 94,676 .85 years and over 6,380 6,701 7,450 9,074 11,793 14,430 16,953 18,561 18,913 19,019 .100 years and over 82 92 120 140 156 196 270 386 486 589

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UNDEVELOPED LAND, KELSEYVILLE, CA MARKET ANALYSIS

On a local level, the 2015 Lake County Housing Element indicates that seniors over 65 years old represent nearly 20% and a growing segment of the population in Lake County which means that Lake County has a significantly higher percentage of the population in that age range than the national average. Additionally, the report states: “Senior households are defined as households with one or more persons over the age of 65 years. The ready access to recreational activities and the relatively low cost of housing have historically made Lake County attractive to senior households and retirees. Because of these recreational amenities and the high percentage of homes owned and held for occasional use by residents outside the area, it appears reasonable to conclude that Lake County will continue to be attractive as a retirement destination”. There are currently several apartment complexes in Lake County that operate as senior complexes with a few that offer subsidized housing for seniors. There are also several small assisted living facilities. However, there are no larger complexes that offer the range of amenities and services as proposed for the subject property’s Brightwood Recreation Retirement Community.

Conclusion and Factors that Influence Value

We have concluded that the residential market in the unincorporated community of Kelyseyville in Lake County represents a more affordable housing market than the nearby areas of Sonoma and Napa Counties. Prices have been gradually appreciating in recent years but at a slower pace than these other markets. Residential land prices are also significantly lower than those surrounding markets and there is a large supply of available land for development. This creates a dynamic where lower development costs reduce the required aggregate retail sell-out required for new construction to be financially feasible. However, the limited availability of infrastructure, accessibility and higher-paying local jobs has slowed the amount of new construction and reduced the typical size of new projects.

Vineyard land represents a lower cost alternative to Sonoma and Napa, similar to the residential markets noted above. The land values also correlate to the lower prices for wine grapes in the area. However, the region is gradually moving beyond just being known for filler grapes and in recent years there have several large investments in local vineyards and wineries. Vineyard land prices have recovered from the lows several years ago but there is still a large supply of land and ability for rotation from other crops into grapes which also increases the potential supply.

Senior housing is currently a favored property type for investors and demographic trends support demand in the foreseeable future. Over time, these trends should offset the recent national declines in occupancy which have been caused by supply exceeding demand.

The subject property should also benefit from a lack of local competition. Senior housing is also a destination-oriented property type, less reliant on high traffic, exposure and accessibility which is well suited for the characteristics of the subject’s location.

The recent positive general market trends must also be tempered by the fact that real estate is highly cyclical and market participants seem to be beginning to express some caution with respect to the continuation of the current cycle.

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UNDEVELOPED LAND, KELSEYVILLE, CA SITE DESCRIPTION

SITE DESCRIPTION

Addresses: 8840 Red Hills Rd., 8860 Red Hills Rd., 9020 State Highway 175, 8505 Seigler Springs North Rd., 8495 Seigler Springs North Rd., Unincorporated Lake County (Kelseyville), CA 95451

Location: The subject site is situated on the south side of Red Hills Rd. and east of State Highway 175.

Assessor’s Parcel Nos.: 011-015-180-000 011-058-011-000 011-058-030-000 011-058-110-000 011-016-210-000

Shape, Size, and Zoning: The subject property is generally irregular shaped, approximately 7,279,311± square feet or 167.1± acres, the existing general plan land use designations are RL and RR (Rural Lands and Rural Residential) and zoning is primarily PDR (Planned Unit Development Residential) with portions of the site RL (Rural Lands), B5 (Special Lot Size – 5 acres), SC (Scenic) and WW (Waterway).

Topography: The neighborhood and the subject site are generally sloping and based on the topographical map from Lake County presented below the elevation ranges from approximately 2,400 feet at the northwest portion of the site up to over 2,800 square feet to the southeast.

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UNDEVELOPED LAND, KELSEYVILLE, CA SITE DESCRIPTION

The map on the following page from Lake County also shows the estimated slope of the site, ranging from 0-10% (grey), 10-20% (yellow), 20-30% (red) and greater than 30% (green).

Based on a report provided by the previous listing broker from LincolnAE LLC Agricultural Engineering, based on the topography and soils, excluding the upper parcel that fronts Red Hills Rd. (011-015-180-000), it was estimated that there could be 130+ plantable acres for use as a grape vineyard. Another estimate from M.B.C. Construction, Inc. of Ukiah provided a cost of $12,000 per acre to clear and prep the property for vineyard use with an estimate of approximately 140 acres of developed ground possible.

Flood Zone: The subject property is located in flood zones “D”. Zone D is an area in which flood hazards are undetermined, but possible. The flood zone information was obtained from FEMA Map, Lake County Unincorporated Areas, Community Panel No. 06033C0667D, Map revision date September 30, 2005. A copy of the FIRM Flood Insurance Rate Map is presented in the Addenda.

Utilities and Services: Electricity and telephone are the only utility and service provided to the site.

On-site water is available from two wells originally drilled in 1990 and the other in 1996. We were provided with a copy of a report performed in June 2016 by Alpha Analytical Laboratories Inc. The original permits indicated the depth of the smaller well to be 230 feet with 5-inch casing and an estimated 40 gallons per minute (GPM) and the larger well has a depth of 50+ feet with 8-inch casing. The Kelseyville wastewater collection and treatment facility were constructed in the late 1960’s. The collection system serves the downtown and surrounding residential areas of Kelseyville northwest of the subject property.

There is currently no on-site sewage disposal system and there are no municipal sewer lines to the site. According to a letter provided by the Client, in 1998, John

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UNDEVELOPED LAND, KELSEYVILLE, CA SITE DESCRIPTION

Del Signore, R.E.H.S., competed a soil study and determined that the west portion of the subject property (APN 011-058-011-000) appears suitable for on-site sewage disposal.

Site Improvements: The subject property is mostly in its natural state. However, site improvements include dirt access roads, a chain link fence access gate off Red Hills Rd. and two wells on site for water. There was an old cabin on site, which is still indicated in the Lake County Tax Assessor’s records, but it is now in disrepair. We have concluded that these existing building improvements do not contribute to the overall value of the subject property.

Soil Condition: The viticultural soils of Lake County generally include hillside soils formed on volcanic materials, hillside soils formed on sandstone and shale, terrace alluvial soils, and valley alluvial soils. Soil map units are the basic geographic unit of the Soil Survey Geographic Database. A map unit (MU) is a collection of areas defined and named the same in terms of their soil components. Lake County identifies the subject property to be in MUSYM of 117, 118, 138 and 139 as illustrated in the map below. These are categorized by Lake County as having Erosion Hazard Ratings of “moderate” for 117 and 138, and “severe” for 118 and 139.

It is assumed that there are no other hidden or unapparent conditions of the property, subsoil, or structures that affect value. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. No soil analysis or geological studies were ordered or made in

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UNDEVELOPED LAND, KELSEYVILLE, CA SITE DESCRIPTION

conjunction with this report, nor was an investigation made of any water, oil, gas, coal, or other subsurface mineral and use rights or conditions. Easements and Encroachments: The appraisers were not provided with a preliminary title report for the subject property. It is suggested that a legal opinion be obtained to ensure that no adverse easements or encroachments exist.

Environmental and Special Hazards: The appraisers have not reviewed a Phase I or other environmental site assessment for the subject property. From an inspection of the property, there is no evidence of hazardous waste and/or toxic materials present on the site. However, the appraisers are not qualified to detect such substances and this appraisal and all conclusions are contingent upon these reports being accurate and the subject property being free from any environmental contamination or hazards.

Natural & Seismic Hazard Area: We reviewed the Lake County 2018 Hazard Mitigation Plan Update January 2018 Public Review Draft which indicates that the Hazard Mitigation Planning Committee (HMPC) identified Lake County is vulnerable to numerous hazards including floods, earthquakes, drought, landslides, wildfires, and other severe weather events are among the hazards that can have a significant impact on the County. All of the hazards require various types of responses as contemplated within the report.Table ES-2 Lake County Hazard Identification Assessment Probability of Climate Geographic Future Magnitude/ Change Hazard Extent Occurrences Severity Significance Influence Agricultural Hazards Significant Highly Likely Limited High Medium Aquatic Biological Hazards: Significant Highly Likely Limited High High cyanobacterial bloom Aquatic Biological Hazards: quagga Significant Likely Critical High High mussel Climate Change Extensive Likely Limited High – Dam Failure Limited Occasional Limited High Low Drought and Water Shortage Extensive Likely Critical High Medium Earthquake Extensive Likely Critical High Low Flood: 1%/0.2% Annual Chance Limited Occasional/Unlikely Limited High Medium Flood: Localized/Stormwater Limited Likely Limited Medium Medium Hazardous Materials Transport Limited Likely Limited Medium Low Landslide and Debris Flows Significant Likely Limited Medium Medium Levee Failure Significant Likely Limited Medium Medium Severe Weather: Extreme Heat Significant Likely Critical Medium Medium Severe Weather: Heavy Rains, Snow, Significant Highly Likely Critical High High and Storms Severe Weather: High Winds Significant Likely Critical High Low Subsidence Limited Occasional Limited Low Low Volcano Significant Unlikely Critical High Low Wildfire Significant Highly Likely Critical High High Geographic Extent Magnitude/Severity Limited: Less than 10% of planning Catastrophic—More than 50 percent of property severely damaged; shutdown of area facilities for more than 30 days; and/or multiple deaths Significant: 10-50% of planning area Critical—25-50 percent of property severely damaged; shutdown of facilities for at Extensive: 50-100% of planning least two weeks; and/or injuries and/or illnesses result in permanent disability area Limited—10-25 percent of property severely damaged; shutdown of facilities for Probability of Future more than a week; and/or injuries/illnesses treatable do not result in permanent Occurrences disability Highly Likely: Near 100% chance of Negligible—Less than 10 percent of property severely damaged, shutdown of occurrence in next year, or happens facilities and services for less than 24 hours; and/or injuries/illnesses treatable every year. with first aid Likely: Between 10 and 100% Significance chance of occurrence in next year, Low: minimal potential impact or has a recurrence interval of 10 Medium: moderate potential impact years or less. High: widespread potential impact Occasional: Between 1 and 10% Climate Change Impact: chance of occurrence in the next Low: Climate change is not likely to increase the probability of this hazard. year, or has a recurrence interval of Medium: Climate change is likely to increase the probability of this hazard. 11 to 100 years. High: Climate change is very likely to increase the probability of this hazard. Unlikely: Less than 1% chance of occurrence in next 100 years, or has a recurrence interval of greater than every 100 years. Source: Lake County 2018 Hazard Mitigation Plan Update January 2018 Public Review Draft Lake County Public Review Draft iii Local Hazard Mitigation Plan Update January 2018 PAGE 47 OF 124

UNDEVELOPED LAND, KELSEYVILLE, CA SITE DESCRIPTION

The report also stated that there have been by far the most State and Federal Disaster Declarations between 1950 and 2017 for fire and flood. Declarations for floods occurred in 1950, 1955, 1958 (twice), 1963 (twice), 1964, 1970, 1980, 1983, 1986, 1995 (twice), 1997, 1998, 2005/2206, 2006 and 2017 (twice). There were declarations for fires in 1985, 1987, 1996, 2012, 2015 (three times) and 2016. in 2012 the Wye Fire burned in Lake and Colusa County, consuming 7,394 acres. The more recent fires included the 2015, Valley Fire and Rocky Fire and in 2016, the Clayton Fire. The map below was recently published by the Los Angeles Times.

At the time of this appraisal, there were two active fires, the River and Ranch Fires which combined to become the Mendocino Complex Fire and was the largest in state history.

According to the USGS, Lake County has the Clear Lake volcanic field, with Mount Konocti the largest volcanic feature, and current geothermal activity. The latest volcanic reportedly activity happened about 10,000 years ago.

Lake County identifies various natural hazards including Special Floor Hazard Areas, Dam Failure Inundation Areas, Earthquake Fault Zones and Wildland Fire Hazard Areas. As presented in the map below all of the site is within a Wildland

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UNDEVELOPED LAND, KELSEYVILLE, CA SITE DESCRIPTION

Fire Hazard Areas (red) and a portion is within an Earthquake Fault Zone (yellow with red lines).

Additionally, we have included two maps from the State of California in the Addenda that illustrate potentially Active Faults and Special Studies Zone Boundaries that show several in the vicinity of the subject property. However, we are not licensed geologists and the appraiser suggests that one is retained to ensure that no adverse conditions exist other than those discussed throughout the report.

Site Plan: A site plan for the subject property was provided by the Client for the proposed project named The Brightwood Villages and is presented in the Addenda.

Conclusion and Factors that Influence Value

The subject property is surrounded by mountains, lakes, creeks and natural beauty but this also comes with certain risks and responsibilities. A potential buyer would most likely be provided with a natural hazard disclosure report that notifies the buyers of mapped natural hazards and satisfies the seller’s code obligations, which includes disclosure of federal, state, and locally mapped hazards. It would be recommended that there be additional investigation to ensure that no adverse conditions exist other than those discussed throughout the report.

Any new development would need to be designed with consideration of the slope, soils, required septic systems, required water wells, fire hazard and seismic hazard areas. These factors would generally have a negative influence on value due to reducing the amount of the site that could be developed and likely increasing the costs of new construction. However, this would be offset by the positive influence of the natural beauty surrounding the site.

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UNDEVELOPED LAND, KELSEYVILLE, CA IMPROVEMENT DESCRIPTION

IMPROVEMENT DESCRIPTION

As of the date of value the subject property was undeveloped land mostly in its natural state and therefore the Improvement Description section is not applicable. However, we have included a description of the proposed improvements.

Proposed Improvements

As previously discussed, the subject property has a proposed use for a retirement community named The Brightwood Villages. The current owners provided copies of the Resolution No. 95-4 approving an amendment to the Lake County General Plan (GPA 95-4) dated November 9, 1995; the Arndt General Plan of Development (PDR 95-1) which was approved December 5, 1995 and the Use Permit for Specific Plan of Development (UP 98-16) which was approved November 12, 1999.

Site Plan (Exhibit to PDR 95-1)

Based on the Project Memorandum provided by the Client, the proposed Brightwood Recreation Retirement Community is planned to include 364 units in 44 low-rise buildings with a building area of 414,320± square feet with an additional 107,639± square feet for offices, recreational and commercial space. Therefore, the total area is 521,959± square feet. The following table from the Project Memorandum shows the proposed mix of uses within the units.

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Table 1: Construction Intensities in the Individual Phases 1-5

Construction Phases Residential Units Communal Space Parking Spaces Total Area in m2

Year 1 54 7 354 4,311.60 Year 2 67 12 67 9,045.00 Year 3 84 10 84 8,550.00 Year 4 67 8 67 9,045.00 Year 5 92 7 72 7,540.00

gesamt 364 44 644 38,491.60

The „total area“ item in Table 1 contains both the planned usable floor space of 29,480 m 2 and the adjoining areas. The 644 designated parking spaces accommodate 344 parking spaces for the respective residential units.

UNDEVELOPED LAND, KELSEYVILLE, CA IMPROVEMENT DESCRIPTION Table 2: Distribution of the Residential Units in the Individual Buildings

Units Buildings Residential Units Communal Space Parking Places

Apartments 33 232 33 232 Administration and Security Services 2 12 2 12 Medical Care 5 76 5 56 Medical Care Alzheimer 2 20 2 20 Short-Term Guest Residences 2 24 2 24 Available Parking Places 0 0 0 300

Total 44 364 44 644

The proposed improvements included in the residential units and communal space is currently planned The aforementioned Activity Center has a total area of 10,000 m2 and serves, to be constructed in five phases. Planned site improvements facilities with wellness characteristics are swimming pools,among saunas, other whirlpools, things, to accommodate sports facilitie s,commercial, activity center, i.e. rented, open-air business theater premiand on- -site chapel. On-site parkingses. will Table include 3 shows 644 open that recreationspaces for residentsareas (swimming and guests. pools, sauna, whirlpool, etc.) as well as technical and administrative spaces are also housed in this Conclusion and Factors that Influence Value building.

In summary, as of the date of value the subject property was undeveloped land mostly in its natural state and therefore the Improvement Description section is not applicable. However, the subject property has a proposed use for a retirement community named The Brightwood Villages that if built would be a new, excellent quality retirement community.

des Projektes des Beschreibung Allgemeine Section I

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UNDEVELOPED LAND, KELSEYVILLE, CA REAL ESTATES TAXES

REAL ESTATE TAXES

The property taxes that a California taxpayer pays are based on their property's assessed value as determined by the county assessor. Under California law (Proposition 13), a property's assessed value generally is established when the property changes ownership or when it is newly constructed.

The property is under the jurisdiction of the Lake County Assessor’s Office in Tax Rate Area 056-035. As of the 2017-2018 assessment year the subject property was assessed at a total value of $550,926. The total property taxes were $6,155 including direct assessments.

Assessor’s Parcel # 011-015-180-000 011-058-011-000 011-058-030-000 011-058-110-000 011-016-210-000 Assessed Land Value $79,589 $241,545 $77,368 $123,006 $17,355 Assessed Crop Value 0 0 0 0 0 Assessed Structure Value 0 0 $12,063 0 0 Assessed Net Value $79,589 $241,545 $89,431 $123,006 $17,355 Tax Rate (2017-2018) 1.090560% Direct Assessments $52.98 $104.28 $63.70 $66.74 $33.26 Total Tax $896 $2,662 $1,011 $1,369 $217

Based on public records there is an existing structure on parcel 011-058-03-00 that was originally constructed in 1961.

Conclusion and Factors that Influence Value

With the passage of Proposition 13, taxes would most likely be reassessed at a higher rate based on our conclusion of the value, if and when the property is sold in the future. At that time, the prevailing tax rate would be applied to the new assessed value. Based upon our value estimates, the potential property taxes could increase for a new buyer. The tax collector also indicates that the property taxes are paid through the most recent billing cycle and are therefore current.

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

ZONING

All property in Lake County has a land use designation based on the overall land use plan, and General Plan for the county. These classification and land use patterns were determined based on the long-range vision of growth and development on the county, with public health, safety, infrastructure provision, environmental constraints or protection, ability to provide public services and historic uses and patterns. If a property owner desires to use their land in a way not identified by, or appropriate for, the land use classification, a General Plan Amendment and zoning district change may be required.

All property in Lake County has been classified into zoning districts based on the overall land use plan for the county. Each zoning district outlines the land development regulations and restrictions applicable to the specific property. The following definitions are provided by the County:

Base Zoning “Every property has some kind of base zoning. A base-zoning district prescribes the types of activities or land uses that may take place on a particular lot”.

Combining Zoning “In certain situations, combining zoning is added to the base zoning to address specific concerns such as public safety or resource protection. It is not unusual for a property to have one or more combining zoning districts in addition to its base-zoning district”.

The regulations of the combining district shall apply to the land in the same manner as the base zoning district regulations. Combining district regulations shall apply whenever the symbol and the boundaries of the area are shown on the sectional district maps. When a symbol for a combining district is added to a base zoning district symbol, the regulations of the combining district shall be applicable in addition to the base zoning district regulations. If any of the provisions of the combining district conflict with provisions of the base zoning district regulations, the provisions which are most restrictive shall govern.

The zoning designations for each parcel are presented in the table below based on available information from Lake County (gispublic.co.lake.ca.us). The subject site is also illustrated in the portions of the Lake County Zoning and Land Use maps below. The individual parcels are illustrated in the presented maps from the Lake County ArcGIS Viewer.

Assessor’s Parcel # 011-015-180-000 011-058-011-000 011-058-030-000 011-058-110-000 011-016-210-000 Base Zoning District PDR PDR SPLIT PDR PDR Full Zoning PDR-SC PDR-SC-WW RL-B5 (5ac) & PDR PDR-SC PDR General Plan RR RL RL RL RR

As presented above, the Zoning Designation is PDR (Planned Unit Development Residential) with portions of the site also in combining districts designated SC (Scenic), WW (Waterway)and B5 (Special Lot Size – 5 acres). The General Plan Designations for the subject property are RR (Rural Residential) and RL (Rural Lands). Per Sec. 21-41.1 of the Lake County Code which is related to Performance Standards, “All uses permitted in Chapter 21 of the Lake County Code shall comply with all applicable performance standards of the base zoning district, combining district, and as set forth herein, except as provided in Section 41.3”. Therefore, the Zoning category determines how the property can be used and developed which for the subject property is primarily PDR.

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

Base Zoning Map

General Plan Land Use Map

Source: Lake County

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

The following zoning districts apply to portions of the subject site with a brief summary of each.

Residential Districts “PDR” – Planned Unit Development Residential: The permitted uses in this district include: One (1) single-family dwelling or mobile home, agricultural and residential accessory uses and accessory structures, including barns and stables, one (1) foster or small family home, family care home, supportive housing unit, transitional housing unit or small family care home not to exceed six (6) persons in addition to the resident family, ag-family dwelling, bed and breakfast, farm labor quarters, granny unit, and guesthouse.

Uses permitted by General and Specific Plans of Development include all those uses permitted in the SR, R1, R2 and R3 districts and private storage

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

facilities for exclusive use by the residents of the development, for projects with a minimum of 100 dwelling units and those uses permitted in the C1 district, for projects with a minimum of 50 acres and 200 dwelling units all those uses permitted in the CR district, recreational facilities, community facilities and temporary model home complexes and real estate sales office for the limited purpose of conducting sales or rental of lots or units with the PDR.

Alternative design projects, such as clustered housing, can use the discretionary “Planned Development Residential” procedure, which permits customized development standards.

The County does grant density bonuses, reduction or alteration of standards, fee waivers or other incentives to projects, which provide affordable, senior, energy-saving and/or innovative design housing.

Combining Districts “SC” – Scenic: The purpose is to protect and enhance views of scenic areas from the County’s scenic highways and roadways for the benefit of local residential and resort development, the motoring public, and the recreation based economy of the County. Prohibits offsite advertising, sanitary landfills, outdoor storage, singlewide and commercial mobile homes.

“WW” – Waterway: Protects creeks and riparian habitat.

“B” – Special Lot Size: Used to specify a different minimum lot size or density allowed.

Planning Commission Districts

The subject property is located in District 5.

Design Review

Lake County does not require a business license for any businesses but to build a new building for a new business, add on to an existing building or make major structural modifications, a design review permit will likely be required. Design review is also required in all commercial, industrial and multi-family residential zoning districts for new buildings for businesses or industries, new apartment buildings and substantial additions to existing commercial buildings.

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DRAFT LAKE COUNTY HOUSING ELEMENT 2015

UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

Design review involves a review of proposed plans by the Design Review Committee and a permit issued by Tablethat committee. 5-3: Residential The ZoningCounty DistrictZoning StandardsOrdinance provides that a design review permit may be granted Zone Typical Min. Lot Area Minimum Building Lot Min. Minimum when the DesignUses Review Committee finds that: Setback (ft) Height Coverage Density Open Permitted Limits (ft) (%) Space per Water Sewer Well Septic Sq.ft. FY SY RY Unit TableR11. The 5Single-3: proposed Residential use Zoning is permitted District in Standards the district. 20 5 15 Primary- One story 6,000 NA Family 35 ft. – 35% sq.ft./ DU Zone2. TheDwellingsTypical site is adequateX X Min. in size,Lot Area shape, 6,000 location Minimum and physical Building characteristics Lot to Min.accommodate Minimum the proposedUses development.X X 15,000 Setback (ft) AccessoryHeight - TwoCoverage story Density Open Permitted 20Limits ft. (ft) – 30%(%) Space per 3. There are adequateWaterX Sewer services, Well SepticincludingX 15,000 Sq.ft. fire FY protection, SY RY water supply and sewage disposal. Unit R14. TheDSingleRAFT proposal LAKE C isOUNTY consistent HOUSINGX withX E allLEMENT 40,000applicable 20 zoning 5 15 and Primary land- use Oneplans. story 6,000 N A 2015 Family 35 ft. – 35% sq.ft./ DU 5. TheDwellings placement X and Xdesign of structures6,000 are compatible with existing development. R2 Single X X 15,000 20 5 15 PrincipalAccessory- - OneTwo story Single NA Family X X 8,000 3520 ft. – 40%30% Family - Dwellings; X X X X 15,000 Accessory - Two story 6,000 DiscretionaryDuplexes permit approvals are not required for single family20 ft. development,– 35% unlesssq.ft. a subdivision is X X 40,000 X X 15,000 Duplex - being proposed as part of the overall development. As far as procedures for multi- family development, X X 40,000 4,000 projectsR2 upSingle to 20 units do not require approval of a20 use 5 permit.15 PrincipalLarger- multi One-family story develsq.ft.Single opmentsNA require a minor useFamily permit to Xbe approvedX by the Planning 8,000 Commission. 35 ft. – 40% Family - R3 Dwellings;Multifamily X X X 10,00015,000 20 5 20 PrincipalAccessory - - One Two story story 16,000 DU/ Apartment DuplexesDwellings 4520 ft. – 40%35% 3,000sq.ft. units - General Development X Standards X X X 20,00015,000 Accessory Two story sq.ft.Duplex - (100 sq. ft.) X X 40,000 - 20 ft. – 35% 4,000 X X 20,000 Three story sq.ft. <7 dwelling 30% units - TheR3 following Multifamily is a summaryX X of the development 10,000 standards20 5 20 fromPrincipal Lake - CountyOne story as presented1 DU/ Apartmentin the Draft X X 40,000 (300 sq. ft.) Dwellings 45 ft. – 40% 3,000 units - Lake County Housing Element . X X 20,000 Accessory Two story sq.ft. (100 sq. ft.) PDR Planned NA NA NA One story 1DU/ SFD (1000) Table 5-3: Residential Zoning District Standards - 20 ft. – 35% Development – 40% 3,000- Townhouse- Zone PlansTypical X Min. Lot AreaX 20,000 Minimum Building ThreeLot story 6,000Min. >7<7Minimum unitsdwelling Uses Setback (ft) Height Coverage30% sq.fDensityt. (300unitsOpen sq.- ft.) Permitted Limits (ft) (%) (300Space sq. per ft.) X X 40,000 Two story Townhouse- Water Sewer Well Septic Sq.ft. FY SY RY Unit – 35% >7 units PDRR1 PlannedSingle NA NA20 5 15 NAPrimary - One story story 6,0001DU/ (300NSFDA sq.(1000) ft.) Family 35 ft. – 35% sq.ft./ DU Development Three– 40% story 3,000- AptsTownhouse - - Dwellings X X 6,000 Plans X X 15,000 Accessory- – Two30% story 6,000 (100>7 units sq. ft.) 20 ft. – 30% sq.ft. (300 sq. ft.) SR Single 40,000X sq.ft. X 15,000 30 5 20 Principal - Two story 1 DU/ NA Townhouse - Family 35 ft. – 35% 40,000 >7 units X X 40,000 Dwellings Accessory- sq.ft. (300 sq. ft.)

20 ft. Three story Apts - R2 Single 20 5 15 Principal- One story Single NA – 30% (100 sq. ft.) Family X X 8,000 35 ft. – 40% Family - RR Single 5 acres 30 15 25 Principal - - - N/A Dwellings; 6,000 SR SingleFamily 40,000 sq.ft.X X 15,000 30 5 20 35ft.PrincipalAccessory - - Two story 1 DU/ NA Duplexes 20 ft. – 35% sq.ft. FamilyDwellings; 35 ft. 40,000 Accessory- DwellingsFarmworker X X 15,000 Accessory - Duplexsq.ft. - 20ft. Housing; X X 40,000 20 ft. 4,000 2015 DRAFT LAKE COUNTY HOUSING ELEMENT Agricultural Farm Labor sq.ft. Accessory- RR SingleCamps 5 acres 30 15 25 Principal - - - N/A R3 FamilyMultifamily X X 10,000 20 5 20 45ft.35ft.Principal - One story 1 DU/ Apartment

Dwellings; Dwellings 45 ft. – 40% 3,000 units - Accessory- RL FarmworkerSingle 20 acres X X 20,000 30 15 25 AccessoryPrincipal- Two -story sq.ft.- (100N/A sq. ft.) 20ft. Housing;Family -35 20 ft. ft. – 35% Agricultural FarmDwellings; Labor X X 20,000 5-7 Three story <7 dwelling AccessoAccessoryry- CampsFarmworker 30% units - Housing; 45ft.20 ft. X X 40,000 (300 sq. ft.) Farm Labor

Camps Agricultural PDR Planned NA NA NA One story 1DU/ SFD (1000) (MUP) Accessory- Development 45 ft. – 40% 3,000- Townhouse- Plans 5-7 6,000 >7 units sq.ft. (300 sq. ft.) Two story Townhouse- – 35% >7 units (300 sq. ft.) Three story Apts - Analysis of Land Use and Development Standards– 30% Related to Residential(100 sq. ft.) Development and Affordable Housing SR Single 40,000 sq.ft. 30 5 20 Principal- 1 DU/ NA Family 35 ft. 40,000 TheDwellings County has more than enough vacant land,Accessory zoned- at a varietysq.ft. of densities, to 20 ft. PAGE 58 OF 124 accommodate its housing needs . Current adopted residential development standards RR hSingleave not posed5 acres any significant constrain30 ts 15to the25 creationPrincipal- of more- affordable- housingN/A . Family 35ft.

Dwellings; Accessory- Farmworker Site development Standards 20ft. Housing; Agricultural ThroughFarm Labor its Zoning Ordinance, the County enforces minimum site development Accessory- Camps standards for new residential uses. These include:45ft. maximum number of dwelling units, minimum lot size and width, setbacks, lot coverage, maximum building height, minimum parking standards, open space and overlay districts and manufactured homes. 5-7 Maximum number of dwelling units The county permits a maximum of two dwelling units within the R1, SR, RR, RR and PDR zoning districts. The R2 zoning district permits up to five duplexes per project if the project does not exceed a maximum permitted density of 4,000 square feet per dwelling unit and the General Plans allowed density. The R3 zoning district permits duplexes, triplexes, fourplexes or apartment buildings, multi-family dwelling groups up to 20 dwelling units per project if the project does not exceed a maximum permitted density of the General Plan. Approval of a use permit can allow duplexes over 5 per project and mobile home parks within the R2 zoning district. The R3 zoning district allows mobile home parks, dwelling groups such as town houses, timeshares and condominium, and multifamily dwelling groups containing more than twenty (20) residential dwelling units per project and those projects requesting a reduction in development standards, subject to approval of a Minor use permit. Affordable housing projects are expedited through the approval process. Alternative design projects, such as clustered housing, can use the discretionary “Planned Development Residential” procedure, which permits customized development standards. The County does grant density bonuses, reduction or alteration of standards, fee waivers or other incentives to projects, which provide affordable, senior, energy-saving and/or innovative design housing.

Minimum Lot Size and Width, Setbacks and Maximum Building Height These development standards are identified in table 1-51. Minimum lot sizes range from 6,000-40,000 square feet and minimum lot widths 60-150 feet for the R1, R2, R3

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DRAFT LAKE COUNTY HOUSING ELEMENT 2015

and SR zoning districts. The RR, and RL zoning districts minimum lot sizes vary depending upon slope, fuel loading and landslide risk. Those minimum lot sizes range from 5-65 acres and the minimum lot width ranges from 200-400 feet. The maximum building height for a single family residence is 35 feet, unless the development is proposed within the scenic corridor. The scenic height regulations provide a maximum building height range of 18-35 feet depending upon setback from scenic roadway. The maximum building height within the R3 zoning district is 45 feet and the height limit may be increased subject to obtaining a use permit. These standards are comparable to those in other counties and do not pose any undue constraints to the development of housing in the County.

Exceptions to Certain Development Standards Because of Lake County’s often mountainous terrain and a surplus of older subdivision lots created prior to any local regulation, many properties are difficult to develop in accordance with the normal zoning standards. Therefore, the 1986 Zoning Ordinance included special provisions that allow reduced setbacks by right when certain conditions exist, such as substandard lot size or width, substantial slope, or for infill in an older neighborhood. Where one of the special provisions does not apply, a setback reduction of not more than 25 percent may be approved through a “minor use permit” provision. Since the Community Development Director is designated as the public hearing officer, this procedure is faster and less expensive than the previously required variance from the county’s Planning Commission. The state-mandated variance findings, which often are difficult to make, also are unnecessary in approving a minor use permit.

Lot Coverage The maximum lot coverage requirements on R1, R2, and R3 lots range from 30-40%. SR, RR and RL zoned lots do not have a maximum lot coverage requirement. These UNDEVELOPED LrequiremeAND, KELSEYVILLEnts do, CAnot pose a constraint or undue hardship upon development. ZONING

Table 5-4: Parking Requirements for New Housing Unit Type Parking Requirements Single Family Dwelling 2 uncovered Single Family Dwelling within the RD District 2 covered Single Family Dwelling with Granny Unit less than 720 sq ft 3 uncovered Single Family Dwelling with Granny Unit between 720-1008 sq ft 4 uncovered Single Family Dwelling 2 bd or less within the PDR District 1 covered / 1 uncovered Single Family Dwelling 3 bd or more within the PDR District 2 covered / 1 uncovered Residential Second Unit 2 uncovered Duplex 2 uncovered per unit 2 spaces per unit, 1/2 uncovered guest paking Multi Family for each unit, and 1 RV space per 5 units Source: Article 46, Lake County Zoning Ordinance

5-9 Community Growth Boundary

A Community Growth Boundary is defined by Lake County as: “An officially adopted and mapped line separating land to be developed at urban densities (1 or more DU/acre) from land to be protected for natural resources or developed at rural densities (I DU/5 or more acres). Community Growth Boundaries (also referred to as urban limit lines and urban growth boundaries) are regulatory tools, often designated for long periods of time (20 or more years) to provide greater certainty for both development and conservation goals. These boundaries help preserve the feeling of “open space” between communities and help maintain community separation and identity. The majority of these boundaries in Lake County were established by adopted Area Plans between 1988 and 2007. Each of the Community Growth Boundaries contain enough vacant or underutilized land to accommodate a high, 3 percent average growth rate through the year 2030. However, not all land within these Boundaries is currently serviceable with water and wastewater services, and growth within the Boundaries is subject to the availability of capacity and funding for such services”.

The subject site is outside of the current Community Growth Boundaries.

Wastewater Capacity Analysis, Sewer & Water Connection

Lake County Special Districts maintains four wastewater treatment facilities and ten water systems. The District requires that developers wishing to construct four single-family equivalent units or more, submit a capacity analysis to the District for review.

If a parcel is within 200 feet of on an existing sewer main, then a proposed development could potentially complete a mainline extension once a Sewer Connection Permit is obtained. Although longer connections are possible with additional costs and requirements, for parcels that are more than 200 feet, a septic system would be the most likely and the Environmental Health Department regulates the installation of a septic system. Site Evaluations for wastewater treatment are required with a minimum of two test pits that must be prepared in the area of the proposed onsite wastewater treatment/disposal field. Similar to the process for evaluating a sewer connection, a site is analyzed to determine if a water main serves the property. If there is a water main in close proximity the mainline could be extended to the site. Otherwise, the Environmental Health Department regulates the feasibility and drilling of a well.

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

The subject property is currently too far from the existing sewer and water connections for an extension of either to be cost feasible. Therefore, an adequate on-site septic system and wells for water would be required.

Commercial Cannabis Cultivation Exclusion Areas

With the voter approval in November 2016 of California Proposition 64 (AB-64); the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA); allowed adults aged 21 years or older to possess and use marijuana for recreational purposes.

California’s cannabis laws grant local governments the authority to allow, limit or ban the number of cannabis operations within their city or county limits.

Lake County has been working during the past two years on the development of an ordinance of the Lake County Code with new procedures to regulate the cultivation, manufacturing, transportation, distribution, testing, retail, and micro-business of cannabis. It was decided to regulate cannabis activities through the County’s police powers to regulate land use using the County’s Zoning Ordinance.

Ordinance No. 3073 Amending Chapter 21, Article 27 of the Lake County Code Pertaining to Cannabis Cultivation was adopted by the Board of Supervisors on March 20, 2018. It went into effect on April 19, 2018.

Commercial Cannabis Cultivation Exclusion Zone

A large portion of the subject property is located within a Commercial Cannabis Cultivation Exclusion Zone as illustrated in the map below from Lake County.

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

Additionally, the possession, cultivation and distribution of medical or recreational cannabis remains illegal under the federal Controlled Substances Act (CSA) and cannabis remains categorized as a Schedule I drug. The U.S. Department of Justice (DOJ) maintains authority to prosecute state legal cannabis businesses under various federal laws including federal drug and money laundering statutes.

Existing Permits & Approvals

To generally summarize, Per Sec. 60.1 of the Lake County Code, states that permits expire two years after they were granted unless there has been substantial physical construction or use of the property in reliance of the permits with specific methods also available for extensions. The County defines this to be 15% of the total estimated cost of the project or preparation of construction plans. However, if any use permitted by one of these permits is abandoned for a period of two (2) years, then the permit as it relates to that use shall expire and be null and void, and any subsequent use of the property shall conform to the current regulations of the particular zoning district in which the property is located. There are also various other grounds for revocation of a permit. In September 2018, we spoke to the Lake County Community Development Department, Planning Division, and a technician reviewed the current file and confirmed that there is a vested use permit as described above. Additionally, he said that the use permit included a review for California Environmental Quality Act (CEQA) and as long as the terms and conditions outlined in the approval are followed without any changes to the proposed project there is no further CEQA review for the use. He stated that the CEQA review for use is separate than a review for grading or any proposed project changes. He also clarified that this use permit approval represents a higher level of approval than a zoning permit because the proposed use is more intense than allowed by right. We also spoke with a technician in the Lake County Building Department that confirmed the project has not been submitted to them and does not have a building permit which is required to start construction. They had previously assigned a project number, but the current status is incomplete.

As described by Lake County and presented in the table on the following page, if a project exceeds one acre of native vegetation cleared, or a variety of other minimal criteria, then the Project shall be

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

designated as Complex Grading. Additionally, the Lake County Erosion Hazard Rating (EHR) system is used to classify the erodibility of soils based on their classification in the current Lake County Soil Survey. The classification organizes soils into three (3) categories: slight, moderate, and severe Erosion Hazard Rating. The classification is determined from evaluation of a combination of the erodibility of the particular soil profile and the percent slope on which it is found. Lake County identifies the subject property to be in MUSYM of 117, 118, 138 and 139. These are categorized by Lake County as having Erosion Hazard Ratings of “moderate” for 117 and 138, and “severe” for 118 and 139.

Based on the scope of the proposed project the subject, we have concluded that it would be designated as Complex Grading. This will require submitting a completed grading permit application and the necessary application materials (permit requirements) and include the fees for an Initial Study and Archaeological Review by Sonoma State pursuant to the California Environmental Quality Act (CEQA). Certain types of grading (described in Lake County Code Sec 30.22.1) will require submission of engineered plans. Complex Grading may also require the submission of additional reports such as: Biological Resources Survey, Cultural Resources Survey, Geotechnical Report, Hydrologic Study and other site- specific analyses as deemed necessary by the Administrative Official. The County states that the CEQA review is a time-consuming process and it is possible for a project to be statutorily or categorically exempt from CEQA but in our opinion this is unlikely. If an environmental impact report (EIR) is required, it is common for it to extend a project’s timeline up to two years.

Exempt Simple Standard Complex SOIL TYPES (shown in cubic yards) Contains asbestos (always requires dust mitigation plan) never <250 <1,000 >1,000 Slight erosion hazard rating (EHR)1 <50 <500 <5,000 >5,000 Moderate EHR1 <50 <500 <2,000 >2,000 Severe EHR1 <50 <500 <1,000 >1,000 Acres of native vegetation cleared <1 <1 >1 >1 Slope greater than 25% X requires FEMA-mapped floodway or geologic hazard engineering X AGRICULTURE Routine agricultural practices X Crop conversion2 with slight EHR1 X Crop conversion2 with moderate or severe EHR1 X CUTS AND FILLS <10 feet or Cut depth none engineered >10 feet <8 feet or Fill depth none engineered >8 feet requires Cut to fill ratio greater than 2:1 engineering X BUILDING PADS Building pads not listed below; up to 500 cubic yards disturbed material X Building pads in watercourse, with severe erosion hazard, or in NOA see permit criteria Building pads removing riparian vegetation X

RESOURCES Sensitive species present X Effect on oak woodlands X Cultural resources known X Dredging; occurring in watercourse; affecting existing drainage; riparian vegetation removal X

IS/MND3 & Arch CEQA Review Level none CE & Arch Review Review 1. Erosion Hazard Rating as mapped by the USDA Lake County Soil Survey 2. Crop conversions do not expand footprint; 30 feet from water bank; slope <2:1 3. Other documents required may include engineered plans, biological and archaeological surveys, hydrologic study, and other site- specific analyses as deemed necessary

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UNDEVELOPED LAND, KELSEYVILLE, CA ZONING

Conclusion & Conformity of the Subject Use

The subject property is undeveloped land and therefore there is no need to determine if the existing use and improvements are in conformity with the current zoning code.

After inspection of the subject property and an examination of the applicable zoning ordinances, it is assumed that allowed uses include various agricultural and residential uses; and based on the size of the subject property additional commercial uses could be allowed with General and Specific Plans of Development. Additionally, based on the approved use permit, the proposed retirement community is also a legal, conforming use.

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UNDEVELOPED LAND, KELSEYVILLE, CA HIGHEST AND BEST USE

HIGHEST AND BEST USE

Introduction

The theory of highest and best use is fundamental to the concept of value. Highest and best use analysis identifies the most profitable, competitive use to which the property can be put.

Highest and best use may be defined as “The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.”

In determining the highest and best use a distinction is made between the site as though vacant and as improved.

The following tests must be met in estimating the highest and best use: The use must be legal, the use must be probable, not speculative or conjectural, there must be a profitable demand for such use, and it must return to the land the highest net return for the longest period of time.

In arriving at the estimate of highest and best use, the subject site was analyzed: 1) as though vacant and available for development and 2) as improved as of the date of value.

In each of the previous sections of the report including the Regional Overview, Neighborhood Analysis, Market Analysis, Site Description, Improvement Description, Real Estate Taxes and Zoning we have identified factors that influence value. These factors that were identified form the basis for our conclusions not only to value but also the Highest and Best Use as Vacant and As Improved which we discuss below.

Highest and Best Use as Vacant

Physically Possible The size, shape, terrain, location and utility availability impose physical constraints upon the types of uses possible for the site. Any use incompatible with the utility capacity or constraints imposed by the size, shape or terrain would not be considered physically possible. As noted in the “Site Description” section of the report, the subject site is of sufficient size with 167.1± acres and shape such that development potential is not inhibited. Drainage is assumed to be adequate. Any new development would need to be designed with consideration of Highway 175 and Red Hills Road which travel across portions of the site. The topography of the site is sloping and would prevent development on those portions with excessive slope. Additionally, there is a portion of the site to the east that is in a designated Earthquake Fault Zone and Cole Creek crosses through a portion of the site on the west side. Additionally, development would require adequate septic systems and water wells. These conditions would all have to be considered for any future development.

Legally Permissible The site is located within the existing general plan land use designations RL and RR (Rural Lands and Rural Residential) and the zoning is primarily PDR (Planned Unit Development Residential) with portions of the site RL (Rural Lands), B5 (Special Lot Size – 5 acres), SC (Scenic) and WW (Waterway). After inspection of

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the subject property and an examination of the applicable zoning ordinances, it is assumed that allowed uses include various agricultural and residential uses; and based on the size of the subject property additional commercial uses could be allowed with General and Specific Plans of Development. Based on the approved use permit, the proposed retirement community is also a legal, conforming use.

Financially Feasible/Maximally Productive The final criteria for Highest and Best Use pertain to the potential return on the property subject to its various physically possible and legally permissible uses. A financially feasible use is one which provides a positive return on the land subsequent to the payment of all costs of development and satisfaction of the investor’s rate of return. The maximally productive use refers to the one which, of all uses that are financially feasible, yields the highest value. Of the physically possible and legally permissible uses that include agricultural and residential uses; and based on the size of the subject property additional commercial uses could be allowed with General and Specific Plans of Development we have concluded that based on the current market conditions all would be financially feasible. Therefore, we have further analyzed these potential uses to determine our opinion of the maximally productive use.

Agricultural uses that are common in Lake County include crops such as walnuts, pears and grapes. Based on the 2017 issue of the Trends in Agricultural Land and Lease Values walnuts prices peaked in 2014 and then declined in 2015 to 2016 with a slight recovery in 2017 to approximately $2,000 to $2,500 per ton. Lake County prices for pears averages approximately $400 to $450+ per ton which is nearly double the price five years ago. Future concerns include rising operating costs, labor and regulation. Recent orchard land sales in Lake County have been reported at only a few thousand dollars per acre over undeveloped land values. The prices of these crops are reflected in trends in plantings. As prices escalate for certain crops there tends to be rotation. The subject’s location is within the Red Hills AVA with several surrounding vineyards, several of which have recently made significant investments in new facilities, tasting rooms and vineyards. Besides the price for each of these crops there is also different costs, yields, management and operating expenses. Based on the 2017 issue of the Trends in Agricultural Land and Lease Values plantable land in Lake County ranges from $8,000 to $14,000 per acre and vineyard land planted with resistant rootstock ranges from $25,000 to $50,000 per acre. As previously discussed, for the subject property a report provided by the previous listing broker from LincolnAE LLC Agricultural Engineering, based on the topography and soils, excluding the upper parcel that fronts Red Hills Rd. (011-015-180-000), it was estimated that there could be 130+ plantable acres for use as a grape vineyard. Another estimate from M.B.C. Construction, Inc. of Ukiah provided a cost of $12,000 per acre to clear and prep the property for vineyard use with an estimate of approximately 140 acres of developed ground possible. Based on the data presented in the Sales Comparison Approach section of this report, Sale No. 3, which is the Bartolucci Vineyard is located on two sites in nearby Lakeport and Finley, in 2017 they had gross income of $950,000 for 96 planted acres or just under $10,000 per acre. Using that data to estimate the potential gross income for a vineyard at the subject property would be in the range of $1,300,000 to $1,400,000. Therefore, we have concluded that none of these agricultural uses represent the maximally productive use.

We also considered use of the subject property for outdoor cannabis farming. However, a large portion of the subject property is located within a Commercial Cannabis Cultivation Exclusion Zone. Additionally, the possession, cultivation and distribution of medical or recreational cannabis remains illegal under the federal Controlled Substances Act (CSA) and cannabis remains categorized as a Schedule I drug. The U.S. Department of Justice (DOJ) maintains authority to prosecute state legal cannabis businesses under various federal laws including federal drug and money laundering statutes. For the purposes of this

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appraisal, we have concluded that due to current federal laws, cannabis would not be a legally permissible use and therefore not considered as potentially maximally productive.

The subject property is surrounded by several single-family homes and we have concluded that new, residential development would be a legally permissible use. Any subdivision for new, single-family residences would require compliance with the Subdivision Ordinance of the County of Lake. The allowable density would be determined through the complete application process and review process by the Planning Commission who upon receipt of the tentative map would then submit to the County Surveyor Division, Lake County Flood Control and Water Conservation District Manager, Department of Public Works, Regional Water Quality Control Board, private and public utilities servicing the area proposed for subdivision, each county and city entitled by law to review and recommend thereon; and any affected school district; the Real Estate Commissioner of the State of California; the District Director of the State Department of Transportation since the proposed subdivision abuts upon a State highway, and any other person or agency deemed to be an interested person or agency by the Planning Commission. The process would involve consideration of a slope analysis, required easements, roads and streets. Therefore, we do not know the number of homes that could be developed but based on the maximum number of 44 dwelling units approved in the General Plan of Development (PDR 95-1) and Specific Plan of Development (UP 98-16) we considered this as a hypothetical subdivision size. Developers often simply rely on a static model in pricing undeveloped land. In this analysis projected unit values are used to calculate the potential sales proceeds and aggregate retail value. From this amount, a deduction for soft costs, construction costs and entrepreneurial profit with the residual amount representing land value. Based on current listings for new homes in Lake County, prices range from approximately $350,000 to $500,000. With larger lots and lower density, a projected aggregate retail value would be $22,000,000 assume average home sales at $500,000 for average home size of 2,000 square feet at $250/SF. Based on soft costs of 8.0%, construction costs of $175/SF including site work and 12.5% profit the residual land value would be less than $13,000 per acre. Lower density uses for the subject property, such as a private ranch or residential compound with a main residence, guest house and other accessory structures would likely be priced at a significantly lower land value per acre as evidenced by several recent sales and current listings. For example, Perini Ranch with two large residences and orchards on 183 acres at 1220 Perini Rd. in Lower Lake has been for sale for about five months at $2,395,000 ($13,087/acre), Paradise Valley Ranch in a more remote area of Lower Lake in Jericho Valley has been on the market for approximately two years with over 2,100 acres at $5.95 million ($2,805/acre) and 351 acres of undeveloped land at 540 Old Long Valley Rd. in Clearlake Oaks has been for sale for more than a year at $1,760,000 ($5,008/acre) . There is also the 630 acre JKL Ranch at 10749 Highway 29 in Lower Lake that has been a cattle ranch for many years and is currently under contract with an asking price of $1.85 million ($2,937/acre). Additionally, there was a sale of 334 acres of “RR” zoned, undeveloped land at 15355 E. Highway 20 in Clearlake Oaks in September 2016 at $330,000 ($988/acre).

Although we have not performed a complete feasibility study, based on the proposed retirement community that is planned to include 364 units in 44 low-rise buildings with additional offices, recreational, commercial space and extensive site improvements facilities the potential, we have projected potential gross rental income for the units. This is simply a high-level estimate based on the general description of the proposed improvements from the specific plan for the purposes of comparing to the other alternative uses and not a forecast of future operations. Based on the current rates at several other smaller facilities in Lake County including Brookdale Clearlake was built in 2000 on a 2.5 acre site with capacity for 44 residents and has 306 square foot studios and 416 square foot one bedrooms starting at $2,800 for studios and $3,000 for one bedrooms. Other properties include Oakmont Gardens which is a 1,255 acre retirement community in Santa Rosa with about 200 residents, owned by MBK Senior Living, floorplans

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include one and two bedroom units and prices ranging from $3,825 to $5,200 per month. Therefore, conservatively projecting average base rent of $2,000 per month for independent living, the potential rental income is $8,736,000 (364 units x $2000 x 12 months). This excludes the significant potential income from other sources related to care, services, utilities, amenities and recreational activities. Based on the Project Memorandum provided by the Client, the proposed Brightwood Recreation Retirement Community annual rental income is projected to surpass $15 million by year five of operations. Therefore, this far exceeds any of the other various physically possible and legally permissible uses. As discussed in the Market Analysis section, senior housing is currently a favored property type for investors and demographic trends support demand in the foreseeable future. Senior housing is a destination-oriented property type, less reliant on high traffic, exposure and accessibility which is well suited for the subject’s location. Additionally, there are currently no large retirement communities in the area that could offer the amenities, levels of assistance and care.

In consideration of the physical, legal and financial factors, it is our opinion that the maximally productive use of the site as vacant would be a new, retirement community as approved by the previously discussed use permit.

Highest and Best Use as Improved

In this analysis, the appraisers must determine whether the existing improvements should be continued in use or whether it is financially feasible to demolish, convert, or add to the existing improvements. Since the subject property is currently an undeveloped site mostly in its natural state, the highest and best use of the property as improved is not applicable.

Most Probable Buyer

Based on the physical and economic characteristics of the subject property, the most probable buyer would be an investor.

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UNDEVELOPED LAND, KELSEYVILLE, CA VALUATION THEORY

VALUATION THEORY

In traditional valuation theory, the three approaches to estimating the value of an asset are the Cost Approach, Sales Comparison Approach, and Income Capitalization Approach. From the indications of these analyses, an opinion of value is reached based upon expert judgment within the outline of the appraisal process.

Cost Approach

The Cost Approach considers the cost to replace the existing improvements, less accrued depreciation, plus the market value of the land. The Cost Approach is based on the understanding that market participants relate value to cost. The value of the property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation in the structure from all causes. Profit for coordination by the entrepreneur is included in the value indication.

Sales Comparison Approach

The Sales Comparison Approach estimates value based on what other purchasers and sellers in the market have agreed to as price for comparable properties. This approach is based upon the principle of substitution, which states that the limits of prices, rents, and rates tend to be set by the prevailing prices, rents, and rates of equally desirable substitutes. In conducting the Sales Comparison Approach, we gather data on reasonably substitutable properties and make adjustments for factors including market conditions, zoning, location, conditions of sale, etc. The resulting adjusted prices lead to an estimate of the price one might expect to realize upon sale of the property.

Income Capitalization Approach

The Income Capitalization Approach simulates the reasoning of an investor who views the cash flows that would result from the anticipated revenue and expense on a property throughout its lifetime. The net income developed in our analysis is the balance of potential income remaining after vacancy and collection loss, and operating expenses. This net income is then capitalized at an appropriate rate to derive an estimate of value or discounted by an appropriate yield rate over a typical projection period in a discounted cash flow analysis. Thus, two key steps are involved: (1) estimating the net income applicable to the subject and (2) choosing appropriate capitalization rates and/or discount rates. The appropriate rates are ones that will provide both a return on the investment and a return of the investment over the life of the particular property.

Correlation and Conclusion

Based upon the type of property, the intended use of the appraisal, the identified scope of work, and the quality and quantity of data available for analysis, we have considered the Cost, Sales Comparison and Income Capitalization Approaches to value. All three approaches to value are applicable to many appraisals, but one or more approaches may have greater significance in a given assignment. The Cost Approach, Sales Comparison and Income Capitalization approaches to value are utilized to check each other. Inherent in each is an interpretation of market conditions as they affect the subject property. If

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only one approach were used, a factor might be overlooked or misinterpreted. The quality and the quantity of the data in each approach are considered, along with the relevance of each to the property.

For the subject property, a land valuation utilizing a Sales Comparison Approach, as well as consideration of alternative methods, was considered to be applicable. Based on this approach to value, that we considered to be applicable, we were able to determine a credible opinion of fair market value. Within this approach to value we have investigated numerous comparables within the subject area. Additionally, we have spoken with buyers, sellers, real estate brokers, real estate developers, other appraisers and public officials to confirm the data as it pertains to the subject property in this appraisal assignment.

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SALES COMPARISON APPROACH

Land Valuation - Introduction

Based on land valuation theory the appraisal principles that influence land or site value are anticipation, change, supply and demand, substitution and balance. The supply of land is relatively stable, affected only by natural events that rarely affect the land with which appraisers are concerned. Values for land fluctuate as investors anticipate increases or decreases in future demand. Similarly, at any given time it is assumed that investors will purchase the lowest priced site assuming all other factors are equal. These principles tend to bring the supply and demand for sites into equilibrium over the long term, however short-term imbalances typically exist.

The valuation of land requires careful analysis of a complex variety of factors. There are four generally recognized procedures used to value vacant land:

• Sales Comparison • Extraction • Allocation • Income Capitalization

In the Sales Comparison Approach, the appraiser estimates the value of a property by comparing it with similar, recently sold and/or listed properties located within competing areas. The land sales are analyzed and adjusted to reflect differing property rights conveyed, financing terms, conditions of sale (motivation), market conditions (sale date), location, physical characteristics, available utilities and zoning. Physical characteristics of the site include its size, shape, frontage, topography, location and view. This technique is considered to be the most applicable and credible method for the valuation of the subject property and will be the primary technique employed in this appraisal. However, due to a lack of sales and the comparability of the available data it weakened the support for this procedure and compelled us to utilize the alternative method of allocation to support our final conclusion.

The allocation method assumes that there is a market oriented or typical ratio of land value to property value for specific properties in specific locations. This technique is usually employed when values cannot be estimated by direct comparison. This may occur in densely developed urban areas or remote rural areas where sales occur very seldom. Due to the limited sales data, this technique was also utilized in order to establish approximate land value using this as a secondary technique to support our conclusion via sales comparison.

The extraction method assumes that the land value is equivalent to that amount of property value that is left over after deducting or extracting the depreciated cost of the improvements from the overall value. This technique is most common in rural areas where comparable sales are not available and the building’s contribution to value is small and easy to identify. This technique is not considered appropriate for the subject property.

The income capitalization technique requires that several conditions exist. The building value is known or can be accurately estimated; net operating income to the property is known or can be estimated; and that both building and land capitalization rates can be extracted from the market. The income from hypothetical improvements representing the highest and best use of the site can be estimated from market rents and as can estimated operating expenses; however due to the many assumptions and variables the results are not considered to be reliable. Furthermore, that portion of the income

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attributable to the land cannot be accurately estimated and land capitalization rates are rarely available from the market. Therefore, this technique is not considered appropriate for the subject property.

Land Sales Analysis

To assist in determining the fair market value of the subject property, we conducted multiple searches for comparable sales. Due to the lack of comparability for the available data, we expanded our ranges to include a broader range of proposed uses, wider range of time from one to ten years, wider range of size from a minimum of 100 acres to 50 acres, and wider range of locations from local to a 100-mile and then 200-mile radius.

100 and 200-Mile Radius Maps

From these searches we narrowed the comparable sales in include those that we considered to be most similar to the subject. Typically, sales with a different proposed use are not considered similar since the motivations of the buyers and sellers are too different to provide meaningful comparison. Similarly, location is a characteristic that is unique and cannot be changed which typically excludes comparison of properties not located in the same submarket. Since the available data is imperfect, we have decided to include more sales with each comparable sale selected offering relevant data. Through analysis, comparison and adjustment we were able to derive enough data to determine a credible opinion of value via sales comparison.

The transactions summarized refer to the most pertinent data available; a discussion of the data items is on the ensuing pages. The most common unit of comparison for these properties is the price per square acre of land area; hence, all the data has been analyzed on this basis. Information was also provided by active market participants in order to gauge the current market climate and value trends.

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Summary of Comparable Sales Comparable Land Sales

Sale No. Name & Address APNs Sale Date Sales Price Lot Size (AC) Existing Improvements & Comments Zoning Price/Acre Lake County - Various Intended Uses Existing 2BR/1BA cottage built in 2005. "Located in the Red Hills AVA, one finds a premium vineyard, operating winery and modern cottage known as Black Rock Ranch and Cougars Leap Winery. Rocky terrain and gentle slopes allow the current owner/winemake to produce award-winning wines. Two legal parcels with approximately 79+/- acres provide future opportunities to plant additional vines and develop an estate home with views to Konocti and surrounding 9300-9350 Seigler Springs Rd., Kelseyville, Active vineyards. Truly fantastic property." - Coldwell 1 CA 011-069-34, 35 (Listed Dec. 2017) $ 2,995,000 79.0 Banker Brokers of the Valley A & RL $ 37,911

Existing 1,344 SF barn and apartment, water well, septic, electrical service, perimeter fencing. "Located at the southern end of Lake County, less than 1 mile from the recreational activities of Hidden Valley Lake lies the Herrington Ranch. Nestled in the beautiful rolling hills of Coyote Valley, the property consists of 334.66 gross acres of estate and vineyard development land. Approximately 187 acres have been identified as having slopes less than 30% with portions of this acreage Herrington Ranch, 16750 Herrington Rd., 013-060-40, 013- Active being suitable for vineyard development." - 2 Middletown 014-11, 03 (Listed July 2017) $ 1,595,000 334.7 CBRE RR & RL $ 4,766 Two, 3BR homes and two, 2BR homes, water Bartolucci Vineyard, 3650 & 3750 well and 96 planted acres in Big Valley AVA. Highland Springs Rd., 3805-3925 Hill Ln., 008-022-029, 30, Drip irrigation, overhead sprinkers, multiple and 1890-1970 Argonaut Rd., Lakeport and 34, 51, 52; 008- domestic wells. Gross income $950,000 in 3 Finley, CA 033-29, 40 Pending Sale $ 6,000,000 205 2017 with grapes under contract and sold. A $ 29,268 Undeveloped land. "Three parcels totaling 230+ acres of raw land. Area of excellent water. Ideal for vineyard development excepting the low lying wetlands. Approximately 125+ acres 009-006-44, 78, plantable in the Red Hills appellation, an area 4 8040 Highway 29, Kelseyville, CA 90 8/17/18 $ 1,890,000 230 of established vineyards." - Coldwell Banker RR & CH $ 8,217 Undeveloped land. "Crazy Creek Ranch - 470+/- Acres in a bucolic valley between Middletown and Hidden Valley Lake. Currently being used as a licensed glider port with a 1800' landing strip and potential for expansion up to 3500'. Property has frontage on Hwy 29 which w/ current mixed zoning, it would allow rural residential, highway commercial, light industrial or a planned development. Ideal for a fly in residential community. Mostly level 5 19970 Highway 29, Middletown, CA 014-280-18 10/6/17 $ 2,417,000 485 w/rolling hillsides." - Hidden Valley Lake Realty RR & M2 $ 4,982

"This 650-acre ranch property consists of 5 parcel numbers situated at the convergence of Sweetwater Creek and Kelsey Creek in the premier Kelsey Bench AVA. Secured behind an iron gate, the ranch features 45+/- acres of Cabernet Sauvignon, a beautifully kept single level ranch home with amazing views, a steel 5,000 square foot shop and permitted winery building, a modest secondary residence, and numerous small barn structures/outbuildings." - Re/Max Full 6 9820 Kelsey Creek Dr., Kelseyville, CA 011-004-58 6/16/17 $ 3,500,000 650 Spectrum RL $ 5,385

"108 acres of planted bordeaux reds, Cabernet Sauv, Cab Frac and Merlot. Kelsey Bench AVA ground, 400+ gpm Ag well, highly sought after large acreage capable of producing high yielding premium fruit, volcanic well drained gravel soils, dramatic view of the lake and Mt. Konocti, ideal for investor or operator looking to control sizable brodeaux ground in the North Coast. Multiple parcels, 30x30 equipment shop and executive building site." - 7 6501 Wilson Rd., Kelseyville, CA 007-014-09 9/1/16 $ 3,250,000 115 Re/Max Full Spectrum A $ 28,261

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Regional Sales - Intended Use for Senior Housing/Assisted Living

Currently undeveloped land with proposed Albers Ranch gated active adult community with 301 single-family lots, park, open space and assisted living facility. A Preliminary Development Plan has been accepted by the city but not approved. Review has been in process for approximately two years. Past and current city councils had already approved the proposed 301-unit, gated senior home community east of Deer Valley Road, now known as The Olive Groves on the Albers Ranch. The property is for-sale-by-owner with 4,000 square foot individual lots in the subdivision, a larger 3.0 acre mixed-use parcel and 4.0 acre assisted living parcel. The property is being market unpriced with the potential for a bulk sale of all or a portion of the site. The owner/broker indicated the the Deer Valley Rd., SE of Upper Sand Creek 052-050-021, 057- Active Over assited living parcel is priced at $4 million or 8 Basin, Antioch, CA 042-006 (Listed Aug. 2017) $4,000,000 4.0 to 96.6 $1 million per acre. P-D Not Available

Currently undeveloped land purchased by the Kramer family who is a owner/developer of apartments in the Chico area. We spoke to the ownership and confirmed that there are currently no utilities on site. Bringing these will be a large cost and they are planning to hold the site for future development with hope that the city will extend the sewer main. They indicated that there are no final plans but the site will likely be mixed-use with retail, 9 Maybill Ranch Rd. at Highway 99, Chico, CA 040-020-157, 075 12/15/17 $ 3,100,000 214 office, industrial and multi-family uses. SPA $ 14,457 Retirement Community Projects - Independent & Assisted Living

Proposed retirement community named Rincon del Rio for age 55+ with 415 residents in 345 attached and detached housing units, 85% open space, walking and equestrial trails, three-acre pond, borders Bear River and at 1,200' elevation. Offers independent and assisted living including memory care. On-site amenities include clubhouse and other recreational amenities. Housing in three, six- unit group homes; two, 14-unit lodges, 57-240-18-000, 57- duplexes and detached two bedroom cottages. 240-17-000, 57- Reported total costs to be approximately $180 240-19-000, 57- million. Auburn is located in Placer County, 10450 Rincon Way, Auburn, CA 95602 130-13-000 Not Available Not Available 215 southeast of Sacramento. Not Applicable

Acacia Creek Retirement Community for age 60+ that opened in 2010 with a 305-acre campus with independent and assisted living including memory cary and skilled nursing. Union City is a city in the San Francisco Bay Area in Alameda County. Public records indicate tha the project was built in four phases at a cost of $154 million. Based on their 087-0031-003, public disclosures provided by auditor, Moss 087-0031-008, Adams LLP, the project has 152 units 087-0031-002, including 60, 1BR apartments, 90, 2BR 087-0040-017, apartments and two cottages/houses and was 34400 Mission Blvd., Union City, CA 087-0040-015, Not Available Not Available 302 92% occupied as of February 2018. Not Applicable

Existing, 158-unit retirement center built in 1986 with a total of 51,704 square feet. Marymount Greenhills Retirement Center, Purchased by Cadence Senior Living. Purchase 1201 Broadway, Millbrae, CA 021-290-270 8/15/18 $ 32,000,000 2.3 price equates to $224/SF. RM Not Applicable

Existing, 56-unit and 85,000 square foot assisted living facility in four, cottages built in 1999. Purchased by National Health Investors, Inc. REIT. Purchase price equates to $135/SF and was purchased a NNN investment at a 8% Revere Court, 7707 Rush River Dr., pro forma cap rate leased for 15 years to Sacramento, CA 031-1440-023 6/2/14 $ 11,500,000 3.0 Chancellor Health Care. RM Not Applicable

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Maps of Comparable Sales

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Land Sales Data Discussions

The land comparables had an unadjusted price per acre of land range of $4,766 to $37,911. The comparables will be analyzed and adjusted to reflect differing property rights conveyed, financing terms, conditions of sale (motivation), market conditions (sale date), location, physical characteristics, available utilities and zoning.

Property Rights Conveyed

All of the comparable sales represented the transfer of the fee simple interest. The interest being valued in this appraisal is also the fee simple interest. Therefore, based on a review of the sales no adjustments are warranted for any of the sales for property rights conveyed.

Financing Terms

The financing terms for each of the sales were also analyzed and all of the sales were purchased with all cash or third-party lenders at market-oriented terms. Therefore, no adjustments are warranted for financing terms for the sales.

Conditions of Sale

All of the other sales were reported to be arm’s length transactions and do not warrant adjustments for conditions of sale.

Market Conditions

Changes in market conditions occur over time due to factors such as inflation, deflation, and changes in supply and demand. The subject’s market experienced a decade of appreciation in values from the mid to late-1990’s to the mid-2000’s. The market declined from about 2006 to a low in 2009, briefly rebounded in 2010 before declining again through 2012 but since that point the market has steadily improved. In 2013 to 2015, the rebound accelerated. Prices generally have continued to appreciate through 2016, 2017 and into 2018 but at a slower pace. As discussed in the Market Analysis section of the report, appreciation has been at a slower pace than some nearby markets such as Sonoma and Napa Counties. Changes in market conditions occurring from these sale dates to our date of valuation, August 8, 2018, must be considered. Therefore, all of the sales that closed in 2016 and 2017 warrant a slight upward adjustment. However, the sales that closed in 2018 do not warrant significant adjustment. The currently active listings were given less consideration in our overall conclusion.

Location

Due to the lack of comparability for the available data, we included comparables in locations throughout Lake County and regional sales from Antioch and Chico. Various adjustments are warranted for the comparable based on the characteristics of each location. Sale Nos. 1 and 4 are located less than two miles northwest of the subject property in Kelseyville in generally similar locations. Sale No. 2 is located approximately 25 miles southeast of the subject property near Hidden Valley Lake in an inferior location that warrants upward adjustment. Sale No. 3, 6 and 7 are located approximately 10 to 13 miles northwest of the subject property. The location is considered generally similar. Sale No. 5 is located approximately

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23 miles southeast of the subject property in an inferior location warranting an upward adjustment. Sale Nos. 8 and 9 are located over 100 miles to the southeast in Antioch and northeast in Chico. Both of these locations are considered superior and warrant a downward adjustment.

Physical Characteristics

Each of the comparable sales is compared to the subject property based on size, shape, topography, demolition costs, grading/site work and view.

Site Size - The physical size of a site can affect its overall sale price. Typically, larger sites sell for a lower price per acre due to economies of scale. Sale Nos. 1, 7 and 8 are smaller than the subject and warrant a slight downward adjustment. The 4.0 acre portion of Sale No. 8 that has a proposed use for an assisted living facility warrants a significant downward adjustment. Sale Nos. 2, 3, 4, 5, 6 and 9 are larger than the subject and warrant an upward adjustment on a price per acre of land basis.

Shape - All of the sites have functional shapes and therefore no adjustments are warranted.

Topography – Sale Nos. 1, 3, 7 and 9 have a more level topography and warrant a downward adjustment. Sale No. 4 is also more level, but a portion of the site is in a low, wetlands and therefore an upward adjustment is warranted. None of the other sales warrant significant adjustments for topography.

Demolition Costs – As of the date of value, the subject property was an undeveloped site mostly in its natural state. Several of the comparables had existing improvements but they would most likely not be demolished and therefore no adjustments were warranted for demolition costs.

Grading & Site Work – Like the subject property, Sale Nos. 4, 5, 8 and 9 were undeveloped land and did not warrant adjustment. Sale Nos. 1, 2, 3, 6 and 7 had been previously graded, site work completed, wells, septic and Sale Nos. 1, 2, 3, 6 and 7 had building improvements on the property. Therefore, these all warrant downward adjustments.

Views – The subject property offers views of the nearby vineyards, orchards and the surrounding area. Sale Nos. 3, 4, 7 and 9 all offer inferior views warranting an upward adjustment.

Available Utilities

All of the comparables rely on wells for water and septic for waste water. Electrical service is to the street but only those comparables that have building improvements, as noted above, have these utilities on- site. However, site we have adjusted for site work above, no additional adjustments are warranted to any of the comparables for available utilities.

Zoning & Proposed Use

As previously discussed, it is our opinion that the maximally productive use of the site as vacant would be a new, retirement community as approved by the previously discussed use permit. This is a more intense use of the site than allowed by right. Therefore, adjustments to the comparables are warranted for this proposed use and not just the allowed use per the zoning. All of the comparables with low-density residential,

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vineyard and mixed uses which warrant upward adjustments. Sale No. 8 has a similar proposed use for senior housing and assisted living.

Non-Realty Components of Value

No non-realty components of value warranted adjustments.

Land Valuation Conclusion

Overall, the subject property is a unique asset with characteristics that are common to all of the presented land sales with adjustments applied as warranted. This technique is considered to be the most applicable and credible method for the valuation of the subject property and was the primary technique employed.

Based on our previous analysis of the comparable sales, we have given the most weight to Sale Nos. 3, 8 and 9. Overall, we have given the primary emphasis to the comparable sales and secondary emphasis on the alternative methods. These support each other and result in a credible opinion of value.

Concluded Subject Concluded Price/AC of Land x Land Size (AC) = Land Value $30,000 167.1± $5,013,000 $5,000,000 (Rounded)

However, due to a lack of sales and the comparability of the available data it weakened the support for this procedure and compelled us to utilize the alternative method of allocation to support our final conclusion.

In this method the procedure involves determining a market-oriented ratio of site value to property value. Due to the subjectivity and sensitivity of this analysis this method is used as a secondary technique to support our conclusion via sales comparison. The availability of comprehensive benchmark data increases the credibility of our allocation model. The CBRE U.S. Seniors Housing Development Costs Report (December 2017) reported benchmarks for national senior housing developments based on data from more than 1,500 seniors housing properties of which 250 were proposed and a combination of independent living, assisted living and memory care communities. Site costs averaged $27.75 per square foot of the gross building area, hard costs ranged from $140 to $210 per square foot, soft costs averaged $61.50 per square foot and total costs averaged $283 per square foot. On a percentage of total costs basis, site costs (land) range from 6.5% to 13.9% with an average of 9.5%, hard costs range from 65% to 70% with an average of 65.6%, soft costs average 21.5% and FF&E costs average 3.4%.

We also considered the reported costs for the proposed Rincon del Rio and existing Alicia Creek, as presented in the table on page 71, with estimated construction costs ranging from $154 to $180 million.

Marshall Valuation Service also has estimated costs for Multiple Residences - Retirement Community Complex (Section 12 Page 22) and states that cost data for these complexes represent group averages which can be quite varied in the mix of independent/congregate senior citizen living apartments, elderly assisted living suites and skilled nursing convalescent room units and the auxiliary amenities that are offered.

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The model presented below incorporates these available market benchmarks and applied the to the proposed project. We utilized a conservative ratio of 6.5% for the land and the indicated value is approximately $11 million (rounded).

Land Valuation - Allocation Method Proposed Brightwood Villages South side of Red Hills Rd. , East of State Highway 175, Unincorporated Lake County (Kelseyville), CA 95451 Assumptions Date of Value: Current Developer's Estimated Start Date: 2019 Developer's Estimated Duration: 60 Months Project Summary Independent Living Assisted Living Common Areas & Offices

349,009 SF 56,941 SF 116,009 SF Total 521,959 SF Total $/SF Estimated Construction Costs Soft Costs Legal, Architecural, Design, Fees, Administrative, Marketing 5.0% $ 8,600,000 Real Estate Taxes 1.2% $ 2,064,000 Entrpreneurial Profit 15.0% $ 25,800,000 Total Soft Costs 21.2% $ 36,464,000 $ 69.86 Hard Costs Land Development $6,000 per acre $ 994,920 Construction Directs $200 per SF $ 104,391,848 Site Improvements Lump Sum $ 2,500,000 Contingency & Contractors Profit (10% of Constructon Costs) 10.0% $ 11,987,419 Total Hard Costs 69.7% $ 119,874,186 $ 229.66 Furniture, Fixtures & Equipment (FF&E) FF&E $ 12,000 per unit $ 4,368,000 Total FF&E 2.5% $ 4,368,000 $ 8.37

Total Construction Costs $ 160,706,186 $ 307.89

Allocated Land Value 6.5% $ 11,180,000 $ 21.42 TOTAL $ 171,886,186 Total Development Costs Rounded $ 172,000,000 $ 329.53

We also considered another method that is similar to allocation and based on some of the same assumptions. A static residual method has several common names including the developer’s residual approach, residual approach, subdivision approach, development method, development approach and others. This approach inherently also has a high sensitivity due to small variations in the assumptions (such as profit and soft costs) resulting in a material difference in the concluded value. Inconsistency in the application and the many names assigned to the method has failed to produce a unified body of valuation theory. Based on our experience, appraisers often apply a discounted cash flow (DCF) multi- period spreadsheet valuation analysis, whereas developers often simply rely on a static model in pricing undeveloped land. Every valuation method must not only produce a value estimate consistent with market expectations, but also employ a methodology that accurately reflects the decision-making process actually used by market participants. Therefore, we have utilized a static residual model based on the proposed total building area of 521,959± square feet.

In the previously presented table, there are two sales of existing retirement communities that are inferior to the subject’s proposed project and sold for $135 and $224 per square foot. Based on the assumption that the subject project would be new construction with significant potential projected revenues from operations, we have concluded that it would not be unreasonable for the completed retirement community to have a stabilized value of $325 per square foot or $170 million. Deducting our previously projected total cost of $161 million, the implied static residual land value would be approximately $9,000,000 (rounded). Based on these alternative methods the land value indications are in the range of $9 to $11 million.

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For perspective, as discussed in the Highest and Best Use section of the report, the potential rental income is $8,736,000 (364 units x $2000 X 12 months). This excludes the significant potential income from other sources related to care, services, utilities, amenities and recreational activities. Based on the Project Memorandum provided by the Client, the proposed Brightwood Recreation Retirement Community annual rental income is projected to surpass $15 million by year five of operations. These economics clearly illustrate the significant value added to the property based on the permitted use, and clarification that a density of 364 units is allowed under the Specific Plan, which far exceeds the allowable density by right in the designated zoning district. However, this is not our land value conclusion because this is only a secondary method and the land is not yet fully entitled, the current value would logically be below this range.

As previously discussed, the subject property was acquired by the current owners in an assemblage over approximately 10 years beginning in the mid-1980’s. Subsequently, there has been extensive time, effort and investment over the past 20 years to conceive the proposed use for The Brightwood Villages retirement community. Several significant milestones have now been achieved and have had an incremental positive influence on value including:

• Resolution No. 95-4 approving an amendment to the Lake County General Plan (GPA 95-4) dated November 9, 1995 which changed Land Use Designations for portions of the subject property from RL (Rural Lands 1 unit per 20-40 acres) to RR (Rural Residential 1 unit per 5-20 acres). • Arndt General Plan of Development (PDR 95-1) which was approved December 5, 1995 and included 21 total conditions. Highlights of the plan include 42 detached or attached residences for senior citizens age 55 and over as well as accessory buildings. • Use Permit for Specific Plan of Development (UP 98-16) was approved November 12, 1999, to allow a retirement community subject to 51 terms and conditions. • Letter dated May 20, 2011, from then Community Development Director, Richard Coel, stating that the General and Specific Plans of Development are vested indefinitely. • Letter of clarification dated June 18, 2014, that the approved project has a maximum number of permitted dwelling units not to exceed 44 (42 units/2 caretaker’s units) with a project description that clearly shows a few hundred living quarters. The conclusion was that any unit containing a full kitchen will be counted towards the maximum 44 permitted Dwelling Units and other independent living units would be classified as a combination of community care and health care facilities with allowed minor cooking facility uses such as a sink, refrigerator or microwave. These letters are presented in the Addenda. Based on this clarification, the proposed Brightwood Recreation Retirement Community appears to be permitted to have the proposed number of units as part of the Brightwood Retirement Community Planned Development since it includes 364 units in 44 low-rise buildings with eight different types of buildings, each with 5 to 20 apartments, assuming that the kitchen and minor cooking facilities are designed and built in compliance.

However, the site is currently an undeveloped site mostly in its natural state. There are still numerous additional milestones that need to be achieved before a building permit can be issued and construction of the proposed project can commence. This process will be dependent on both discretionary decisions and various other processes. We assume that the project will require a Complex Grading permit with necessary application materials (permit requirements) and include the fees for an Initial Study and Archaeological Review by Sonoma State pursuant to the California Environmental Quality Act (CEQA), engineered plans and may also require the submission of additional reports such as: Biological Resources

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Survey, Cultural Resources Survey, Geotechnical Report, Hydrologic Study and other site-specific analyses as deemed necessary by the Administrative Official. The County states that the CEQA review is a time- consuming process and it is possible for a project to be statutorily or categorically exempt from CEQA but in our opinion this is unlikely. If an environmental impact report (EIR) is required, it is common for it to extend a project’s timeline up to two years. This overall process will involve significant time and costs with an uncertain outcome. Therefore, there is risk which has a negative influence on the current value.

To quantify the risk, we have assumed that an investor would expect 15% to 20% in entrepreneurial profit on the land, or $1.5 to $2.0 million. Additionally, due to the probability that the remaining entitlement process could take one to three years, with no certainty of the outcome, there would be an additional discount warranted. Based on previous indications of value from allocation and the static residual model and a discount rate of 12% over a potential holding period of three years, the indicated current land value would be between $5 and $6.4 million or $30,000 and $39,000 per acre.

Our concluded land value represents $9.58 per square foot of proposed gross building area. This is significantly below the previously discussed national average of $27.75 per square foot of gross building area and below the first quartile median of $15.25 reported in the CBRE U.S. Seniors Housing Development Costs Report (December 2017). This supports our conclusion based on a discount for the entitlement risk.

It is also notable that the subject property, excluding the upper parcel that fronts Red Hills Rd. (011-015- 180-000), has been listed for sale several times over the past ten years and was last marketed several years ago for $1,750,000 or just under $11,000 per acre. The marketing package included an estimate of 130 to 140 plantable acres and costs of $12,000 per acre to clear and prep the property for vineyard use. However, in our opinion the focus of the marketing was misdirected since it was based on a proposed use as a vineyard. The overall market has improved in recent years, and the property should have been marketed with a focus on the potential upside from completing the entitlement process and potentially developing the proposed retirement community. Therefore, the fact that the property was available for sale several years ago at under $11,000 per acre does not change our conclusion.

“As Is” Fair Market Value via Sales Comparison Approach ...... $5,000,000

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RECONCILIATION AND FINAL VALUE ESTIMATES

In the preceding sections of this report, indications of the property’s market value based upon relevant appraisal approaches, or techniques, have been derived by processing data considered pertinent to each approach and significant with respect to the property being appraised. As a result of the analysis and appraisal approaches to value, the indications of value by each approach are as follows:

Income Capitalization Approach ...... N/A Sales Comparison Approach ...... $5,000,000 Cost Approach ...... N/A

Reconciliation is the process of analyzing the relevance of the indicated values, resulting in a final value estimate. In each of the approaches, the appraisers have documented all of the input data and briefly explained the methodology in processing and/or analyzing this data. Insofar as the appraisers were able to determine, the data furnished is from reliable sources and has been accepted as being accurate. Because the appraisal of real estate is not, by any means, an exact science, a great deal of subjective judgment on the part of the appraisers becomes a part of each of the recognized approaches. The Sales Comparison Approach involves the direct comparison of the property being appraised with similar market comparables. Each sale was analyzed and compared on a price per acre basis and overall sales price basis. The Sales Comparison Approach is heavily dependent upon the accuracy and comparability of the sales. Although the comparable properties are considered generally similar to the subject property in general physical and economic characteristics, various adjustment factors were warranted. In summary, all of the weight in our conclusion is given to the Sales Comparison Approach.

Based on our analysis, the “as is” fair market value of the fee simple interest in the subject property, as of August 8, 2018, is estimated to be:

FIVE MILLION DOLLARS $5,000,000

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ADDENDA

GENERAL DEFINITIONS1

Assessed value 1. A value set on real estate and personal property by a government as a basis for levying taxes. (IAAO) 2. The monetary amount for a property as officially entered on the assessment roll for purposes of computing the tax levy. Assessed values differ from the assessor's estimate of actual (market) value for three major reasons: fractional assessment ratios, partial exemptions, and decisions by assessing officials to override market value. The process of gathering and interpreting economic data to provide information that can be used by policymakers to formulate tax policy. (IAAO)

Easement An interest in real property that conveys use, but not ownership, of a portion of an owner’s property. Access or right of way easements may be acquired by private parties or public utilities. Governments dedicate conservation, open space, and preservation easements.

Effective date The date at which the analyses, opinions, and advice in an appraisal, review, or consulting service apply.

Fair Market Value The price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate." IRS Regulation §20.2031-1.

Fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

Fee simple conditional A potential fee estate that requires the occurrence of some condition before the transfer is completed.

Floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area.

Identified intangible assets Those intangible assets owned by a business (going concern) that have been separately identified and valued in an appraisal.

1 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015).

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Land-to-building ratio The proportion of land area to gross building area; one of the factors determining comparability of properties.

Leased fee interest An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease.

Leasehold interest The interest held by the lessee (the tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions.

Market rent The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby: 1. Lessee and lessor are typically motivated. 2. Both parties are well informed or well advised, and acting in what they consider their best interests. 3. A reasonable time is allowed for exposure in the open market. 4. The rent payment is made in terms of cash in United States dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract. 5. The rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction.

Marketing time 1. The time it takes an interest in real property to sell on the market sub-sequent to the date of an appraisal. 2. Reasonable marketing time is an estimate of the amount of time it might take to sell an interest in real property at its estimated market value during the period immediately after the effective date of the appraisal; the anticipated time required to expose the property to a pool of prospective purchasers and to allow appropriate time for negotiation, the exercise of due diligence, and the consummation of a sale at a price supportable by concurrent market conditions. Marketing time differs from exposure time, which is always presumed to precede the effective date of the appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions" address the determination of reasonable exposure and marketing time.)

Market value Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the

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consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. buyer and seller are typically motivated; 2. both parties are well informed or well advised and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.2

Negative easement Property that is burdened by an easement; also called servient estate.

Personal property Identifiable tangible objects that are considered by the general public as being “personal,” for example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate. Personal property consists of every kind of property that is not real property; movable without damage to itself or the real estate; subdivided into tangible and intangible.

Prospective value opinion A forecast of the value expected at a specified future date. A prospective value opinion is most frequently sought in connection with real estate projects that are proposed, under construction, or under conversion to a new use, or those that have not achieved sellout or a stabilized level of long-term occupancy at the time the appraisal report is written.

Rentable area The amount of space on which the rent is based; calculated according to local practice.

Retrospective value opinion An opinion of value that is likely to have applied as of a specified historic date. A retrospective value opinion is most frequently sought in connection with appraisals for estate tax, condemnation, inheritance tax, and similar purposes.

Self-contained appraisal report A written appraisal report prepared under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice (USPAP, 2002 ed.). A self-contained appraisal report sets forth the data considered, the appraisal procedures followed, and the reasoning employed in the appraisal, addressing each item in the

2 Appraisal Foundation, USPAP 2008, this example definition is from regulations published by federal regulatory agencies pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 between July 5, 1990, and August 24, 1990, by the Federal Reserve System (FRS), National Credit Union Administration (NCUA), Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the Office of Comptroller of the Currency (OCC). This definition is also referenced in regulations jointly published by the OCC, OTS, FRS, and FDIC on June 7, 1994, and in the Interagency Appraisal and Evaluation Guidelines, dated October 27, 1994.

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depth and detail required by its significance to the appraisal and providing sufficient information so that the client and the users of the report will understand the appraisal and not be misled or confused.

Summary appraisal report A written report prepared under Standards Rule 2-2(b) or 8-2(b). A summary appraisal report contains a summary of all information significant to the solution of the appraisal problem. The essential difference between a self-contained appraisal report and a summary appraisal report is the level of detail of presentation.

Use value In real estate appraisal, the value a specific property has for a specific use; may be the highest and best use of the property or some other use specified as a condition of the appraisal; may be used where legislation has been enacted to preserve farmland, timberland, or other open space land on urban fringes; also known as value in use.

Usable area The area available for assignment or rental to an occupant, including every type of usable space; measured from the inside finish of outer walls to the office side of corridors or permanent partitions and from the centerline of adjacent spaces; includes subdivided occupant space, but no deductions are made for columns and projections. There are two variations of net area: single occupant net assignable area and store net assignable area.

Value “as is” The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; relates to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning.

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PROPERTY REPORTS

8840 Red Hills Rd, Kelseyville, CA 95451, Lake County

N/A N/A 258,311 $55,000 Expired Listing

Beds Bldg Sq Ft Lot Sq Ft Sale Price

N/A N/A RES ACG N/A

Baths Yr Built Type Sale Date

Owner Information

Owner Name: Arndt Erhard (Te) Tax Billing City & State: Cave Junction, OR Owner Name 2: Arndt Ilse (Te) Tax Billing Zip: 97523 Mail Owner Name: Erhard & Ilse Arndt Tax Billing Zip+4: 1205 Tax Billing Address: Po Box 1205

Location Information

Zip Code: 95451 School District: Kelseyville Carrier Route: R004 Comm College District Code: Mendocino Zoning: PDR Census Tract: 11.00

Tax Information

APN : 011-015-18-00 Fire Dept Tax Dist: Kelsyville Tax Area: 056035

Assessment & Tax

Assessment Year 2017 2016 2015 Assessed Value - Total $79,589 $78,029 $76,857 Assessed Value - Land $79,589 $78,029 $76,857 YOY Assessed Change ($) $1,560 $1,172 YOY Assessed Change (%) 2% 1.52%

Tax Year Total Tax Change ($) Change (%) 2015 $823 2016 $880 $56 6.83% 2017 $896 $16 1.84%

Special Assessment Tax Amount Kelseyville Fire $25.00 Mendicino Comm College Bond $16.72 Klsy Usd Multi-Use Bond 02 $8.50 Lc Vector & Mosquito Cntrl $2.76 Total Of Special Assessments $52.98

Characteristics

County Land Use: Resid-Vacant Lot Acres: 5.93 Universal Land Use: Residential Acreage Lot Area: 258,311 Listing Information MLS Listing Number: LC15101609 MLS Current List Price: $1,975,000 MLS Status: Expired MLS Original List Price: $1,975,000 MLS Area: LCKEL - KELSEYVILLE MLS Listing Agent: Lcjohneverett-John Everett MLS Status Change Date: 11/14/2015 MLS Listing Broker: MORGAN LANE REAL ESTATE

Last Market Sale & Sales History

Courtesy of Kevin Apor, Apor Properties, California Regional MLS The data within this report is compiled by CoreLogic from public and private sources. The data is deemed reliable, but is not guaranteed. The accuracy of the data contained herein can be independently verified by the recipient of this report with the applicable county or municipality. Property Detail Generated on 07/05/2018 Page 1 of 2

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9020 Highway 175, Kelseyville, CA 95451, Lake County

N/A N/A 3,484,800 N/A Expired Listing

Beds Bldg Sq Ft Lot Sq Ft Sale Price

N/A N/A RES ACG N/A

Baths Yr Built Type Sale Date

Owner Information

Location Information

Zip Code: 95451 Comm College District Code: Mendocino Carrier Route: R004 Census Tract: 11.00 School District: Kelseyville

Tax Information

APN : 011-058-01-10 Fire Dept Tax Dist: Kelsyville Tax Area: 056035

Assessment & Tax

Assessment Year 2017 2016 2015 Assessed Value - Total $241,545 $236,809 $233,252 Assessed Value - Land $241,545 $236,809 $233,252 YOY Assessed Change ($) $4,736 $3,557 YOY Assessed Change (%) 2% 1.52%

Tax Year Total Tax Change ($) Change (%) 2015 $2,442 2016 $2,613 $171 6.99% 2017 $2,662 $49 1.86%

Special Assessment Tax Amount Mendicino Comm College Bond $50.72 Klsy Usd Multi-Use Bond 02 $25.80 Kelseyville Fire $25.00 Lc Vector & Mosquito Cntrl $2.76 Total Of Special Assessments $104.28

Characteristics

County Land Use: Resid-Vacant Lot Acres: 80 Universal Land Use: Residential Acreage Lot Area: 3,484,800 Listing Information MLS Listing Number: LC15100446 MLS Current List Price: $1,495,000 MLS Status: Expired MLS Original List Price: $1,495,000 MLS Area: LCKEL - KELSEYVILLE MLS Listing Agent: Lcjohneverett-John Everett MLS Status Change Date: 11/11/2015 MLS Listing Broker: MORGAN LANE REAL ESTATE

MLS Listing # Lc11087607 Lc11087607 MLS Status Expired Expired

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8505 Seigler Springs North Rd, Kelseyville, CA 95451, Lake County

N/A N/A 1,742,400 N/A

Beds Bldg Sq Ft Lot Sq Ft Sale Price

N/A N/A RES-NEC N/A

Baths Yr Built Type Sale Date

Owner Information

Location Information

Zip Code: 95451 School District: Kelseyville Carrier Route: R004 Comm College District Code: Mendocino Zoning: PDR Census Tract: 11.00

Tax Information

APN : 011-058-03-00 Tax Area: 056035 % Improved: 13% Fire Dept Tax Dist: Kelsyville

Assessment & Tax

Assessment Year 2017 2016 2015 Assessed Value - Total $89,431 $87,678 $86,362 Assessed Value - Land $77,368 $75,851 $74,712 Assessed Value - Improved $12,063 $11,827 $11,650 YOY Assessed Change ($) $1,753 $1,316 YOY Assessed Change (%) 2% 1.52%

Tax Year Total Tax Change ($) Change (%) 2015 $928 2016 $991 $63 6.81% 2017 $1,011 $19 1.96%

Special Assessment Tax Amount Kelseyville Fire $19.00 Mendicino Comm College Bond $18.78 Lc Vector & Mosquito Cntrl $16.36 Klsy Usd Multi-Use Bond 02 $9.56 Total Of Special Assessments $63.70

Characteristics

County Land Use: Residential-Misc Imps Lot Acres: 40 Universal Land Use: Residential (NEC) Lot Area: 1,742,400 Estimated Value RealAVM™ (1): $218,950 Confidence Score (2): 68 RealAVM™ Range: $172,971 - $264,930 Forecast Standard Deviation (3): 21 Value As Of: 06/21/2018

(1) RealAVM™ is a CoreLogic® derived value and should not be used in lieu of an appr aisal. (2) The Confidence Score is a measure of the extent to which sales data, property information, and comparable sales support the property valuation analysis process. The

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8495 Seigler Springs North Rd, Kelseyville, CA 95451, Lake County

N/A N/A 1,737,608 $85,000

Beds Bldg Sq Ft Lot Sq Ft Sale Price

N/A N/A RES ACG N/A

Baths Yr Built Type Sale Date

Owner Information

Location Information

Zip Code: 95451 Comm College District Code: Mendocino Zoning: PDR Census Tract: 9.00 School District: Kelseyville

Tax Information

APN : 011-058-11-00 Fire Dept Tax Dist: Kelsyville Tax Area: 056035

Assessment & Tax

Assessment Year 2017 2016 2015 Assessed Value - Total $123,006 $120,595 $118,784 Assessed Value - Land $123,006 $120,595 $118,784 YOY Assessed Change ($) $2,411 $1,811 YOY Assessed Change (%) 2% 1.52%

Tax Year Total Tax Change ($) Change (%) 2015 $1,257 2016 $1,344 $87 6.92% 2017 $1,369 $25 1.85%

Special Assessment Tax Amount Mendicino Comm College Bond $25.84 Kelseyville Fire $25.00 Klsy Usd Multi-Use Bond 02 $13.14 Lc Vector & Mosquito Cntrl $2.76 Total Of Special Assessments $66.74

Characteristics

County Land Use: Resid-Vacant Lot Acres: 39.89 Universal Land Use: Residential Acreage Lot Area: 1,737,608

Last Market Sale & Sales History Recording Date: 10/31/1994 Deed Type: Grant Deed Sale Price: $85,000 Owner Name: Arndt Erhard (Te) Document Number: 20754 Owner Name 2: Arndt Ilse (Te) Sale Type: Full Seller: Bordi Stephen W & Kay

Recording Date 05/28/2008 10/31/1994 00/1974 Sale Date 08/30/2001

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8860 Red Hills Rd, Kelseyville, CA 95451, Lake County

N/A N/A 56,192 $12,000

Beds Bldg Sq Ft Lot Sq Ft Sale Price

N/A N/A RES ACG N/A

Baths Yr Built Type Sale Date

Owner Information

Location Information

Zip Code: 95451 School District: Kelseyville Carrier Route: R004 Comm College District Code: Mendocino Zoning: PDR Census Tract: 11.00

Tax Information

APN : 011-016-21-00 Fire Dept Tax Dist: Kelsyville Tax Area: 056035

Assessment & Tax

Assessment Year 2017 2016 2015 Assessed Value - Total $17,355 $17,015 $16,760 Assessed Value - Land $17,355 $17,015 $16,760 YOY Assessed Change ($) $340 $255 YOY Assessed Change (%) 2% 1.52%

Tax Year Total Tax Change ($) Change (%) 2015 $201 2016 $213 $12 6.1% 2017 $217 $4 1.75%

Special Assessment Tax Amount Kelseyville Fire $25.00 Mendicino Comm College Bond $3.64 Lc Vector & Mosquito Cntrl $2.76 Klsy Usd Multi-Use Bond 02 $1.86 Total Of Special Assessments $33.26

Characteristics

County Land Use: Resid-Vacant Lot Acres: 1.29 Universal Land Use: Residential Acreage Lot Area: 56,192

Last Market Sale & Sales History Recording Date: 10/20/1994 Deed Type: Grant Deed Sale Price: $12,000 Owner Name: Arndt Erhard (Te) Document Number: 19977 Owner Name 2: Arndt Ilse (Te) Sale Type: Full Seller: Higday Robert & Annette Recording Date 05/28/2008 10/20/1994 Sale Date 08/30/2001

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LEGAL DESCRIPTION (SOURCE: 2001 GRANT DEED)

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ASSESSOR’S PARCEL MAPS

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FIRM FLOOD INSURANCE RATE MAP (FEMA)

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STATE OF CALIFORNIA EARTHQUAKE ZONES OF REQUIRED INVESTIGATION MAPS

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WATER WELL PERMITS

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RESOLUTION NO. 95-4 APPROVING AN AMENDMENT TO THE LAKE COUNTY GENERAL PLAN (GPA 95-4)

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COUNTY OF LAKE USE PERMIT FOR SPECIFIC PLAN OF DEVELOPMENT UP 98-16 (ERHARD AND ILSE ARNDT)

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LETTER FROM LAKE COUNTY REGARDING VESTING OF PERMITS

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LETTER TO AND FROM THE LAKE COUNTY COMMUNITY DEVELOPMENT DEPARTMENT

I ;-.' / iY , iii" iL5 *i*,tri{"t'"r,,it Recreational R *i*Lent Commünity 8840 Rcd llill Road P.O. Box l0$1 Kclseyville, C^95451

I?ECEIVED

lüAY tr s 2ü14

Kevin Ingram EAKE COUNW COMMI.JN$TY Principal Planner DEVELOPMENT DEPT" Communi § Dev el oprnent Deparh'nent 255 N. Forbcs St. Lakeport, CA 95453

May 19,2$n4

Dear Kevin,

Fotriowing my rneeting with you on Ntay Sth, § arn suhmitting the f,ollowing as requested, which wili firther clari$ tlre site plan for The Bdghtwood Recreational Retirement Commtrnity as described in the §pecific Plam *f Sevelopnent"

The below itemir-ed description and numhering of,structures corresponds to the attached site plan footprint of the Specific Plan of,Xleveloprnent"

Each residmce will have a &ilI kitehen. 'l&e bedroorm suites wili not have fuII kitchens. The suites rnay have ref,rigeration, raicrowave, eoffee or tea rnaker. toa$ter" storage mrd sink or wet bar""

'fheresidences U mrmbercd t-20 {or 2* residenees) on the site map may consist of independent livi*g. §aetr residefiec will consist of 2 to 5 bedroorn suites.

2) The residences mrmbered ?l-27 (orT residemces) on the site rnap rnay oonsist of, independent iiving or assisted living. Each residence wiltr consist of 8-X2 one sr two bedroorn $rites.

3) The residenqes numbered 2S-33 {or 6 re§dences) on the site map rnay consist of independent living. Each residence wiltr eonsist of 6-8 bedroonn suites.

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4j Thc structures 34-35 on the site map &ss congregate care living. No full kitclrcns"

5) The structures 36-37 on the site map are congregate care living. No full kitchens"

6) The rcsideuces 38-39 (or 2 residences) on the site map may each be designated flor shcrt-termr assistance, guests or invitees. Each residence will consist of 8-12 bedroom suites.

7) The residences 4&42 (or 3 residences) are congregate carc living. No fuIl kitchens.

&. The residences 43-44 (or 2 residences) staffi seauri§ or adrniaistrative.

The Brightwood will proväde fuII food sewices from. one main, fully equipped eonernercial kitehe'n as fieeded or requested.

Best rcgalcls. fi7 t o{..:r*t *&* '-fr,riir-s.ns' ük rL'V ,"' Erhard ,'\rnrlt ''

F.O. Box 945 Kelseyviltre, CÄ.9545X Tel,.7ü7-279-060S

Freferred and best eoctast via eMail: globatautospa@gmail"corn

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PROPOSED SITE PLAN FOR THE BRIGHTWOOD RECREATIONAL RETIREMENT COMMUNITY

Source: Client Provided in Project Memorandum

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QUALIFICATIONS OF THE APPRAISER Kevin E. Apor, MAI President, Apor Properties LLC

Professional Experience: Kevin has been in the real estate valuation business since 1992 and is a member of the Appraisal Institute (MAI). He has performed valuation engagements across the United States and his primary practice areas include California, Nevada, Arizona and Hawaii. These engagements have encompassed a complete range of property types including multi-family; retail; hotels; resorts; casino hotels; industrial; office; medical office; mixed-use; residential subdivisions; proposed development projects; special purpose properties such as marinas, power plants, schools, entertainment venues; gas stations and single-family residences. The purpose of these assignments has included appraisals for banks, insurance companies and conduits; valuations for estate and tax planning; partial interest valuation; property tax appeal; portfolio valuation; due diligence for investment groups; feasibility studies for developers; FAS 141 purchase price allocations; and expert testimony for litigation support. Qualified as an Expert Witness: U.S. Bankruptcy Court, Central District of California, Los Angeles Division; U.S. Bankruptcy Court, Central District of California, Santa Ana Division; JAMS, Downtown Los Angeles, Arbitration Practice

Notable Properties Appraised: Gas Company Lofts, DTLA Hollywood Renaissance Hotel Hollywood & Highland Center, Hollywood The Market Lofts, DTLA Hyatt Mission Bay Spa & Marina West Angeles Plaza Shopping Center, L.A. Centre Street Lofts, San Pedro Four Seasons Hualalai, Hawaii (FAS141) Midtown Crossing Shopping Center, L.A. 8th & Hope Highrise Development Site, L.A. The Royal Hawaiian, Waikiki (IFRS1) Rolling Hills Plaza Shopping Center, Torrance Visconti Apts., DTLA Moana Surfrider, Waikiki (IFRS1) Marina Towers Office Bldg., Marina del Rey Orsini II Apts., DTLA Red Rock Hotel & Casino, Las Vegas (FAS141) 9000 Sunset Blvd. Office Bldg., Hollywood Ford Factory Building, Arts District, DTLA Harley-Davidson Dealership, El Cajon 110 Tower Building, San Diego 7 + Bridge, Mixed-Use, Arts District, DTLA Toy Factory Lofts, Arts District, DTLA 1820 Industrial, Arts District, DTLA Biscuit Company Lofts, Arts District, DTLA Urban Radish, Retail, Arts District, DTLA The Elysian Apartments, Echo Park Da Vinci Highrise Development Site, L.A. Dodger Stadium 4S Ranch Subdivision, San Diego Sunset & Vine Tower Apts. & Retail Catalina Island (excluding conservancy) Paseo del Sol Subdivision, Temecula Premier Jet Hanger, Palomar Airport Herb Farm - 113 acres, Coachella Dutton Canyon, Conservation Easement

Playboy Mansion, Holmby Hills, CA Steve McQueen Ranch, Santa Paula, CA La Casa De Las Campanas, Hancock Park, CA Vanderlip Estate, Portuguese Bend, CA Portfolio of 4 SFR’s, Huntington Beach, CA 1119 Calle Vista Dr. Beverly Hills, CA Villa Cascata, Malibu, CA Portfolio of 5 SFR’s, Rancho Palos Verdes, CA Family Compound, Montecito, CA Portfolio of 5 SFR’s, Dana Point, CA Portfolio of 5 SFR’s, L.A. & Ventura Co. Storm Hill – 68 acres, Rolling Hills, CA Family Compound, Encinal Bluffs, Malibu, CA Family Compound, Bel Air, CA Family Compound, Beverly Hills, CA

Recent clients include: Alcatel Lucent, The Tornante Co., Caruso Affiliated, CKE Restaurants, Wells Fargo, Clearinghouse CDFI, Florida Retirement System, Globalview Advisors, PGP Valuation (FDIC), Kattan Muchin Rosenman LLP, McDermott Will & Emory LLP, Arnold & Porter Kaye Scholer LLP, Peitzman Weg Kempinsky LLP, Billet Kaplan & Dawley, Fenigstein & Kaufman, Burkley & Brandlin LLP, SulmeyerKupetz, Michael Barth Law, Ronald Sokol Law, Malcolm Cisneros Law, Robbeloth Law, Whittier Trust Co., Storm Properties, MSD Capital, Kyo-ya Pacific, Strategic Hotels, Station Casinos, AMB Properties, Bristol Group, InsightLA, First Capital, PMC Financial, The Kor Group, Morgan Stanley, Bank of America, Farmers & Merchants Bank, Wachovia Securities, Tudor-Saliba, CalPERS.

Employment History: From 2006 to 2008 Kevin was a Director in the Los Angeles Real Estate Valuation practice of Duff & Phelps LLC. In 1996, he successfully launched a real estate investment company while continuing to own and operate a boutique valuation firm. Prior to that he was employed as a Senior Appraiser for nine years at Joseph J. Blake & Associates in Century City. Between 2010 and 2017, while still performing appraisals as President of Apor Properties LLC, he was also an active real estate broker selling over $100 million of residential and commercial property at Vista Sotheby’s International Realty in Rolling Hills Estates.

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UNDEVELOPED LAND, KELSEYVILLE, CA ADDENDA

Education & Professional Associations: B.S. – Business Administration, University of Southern California Licensed Real Estate Broker, State of California #01277039 Appraisal Institute, Member #11897 Appraisal Institute, Valuation of Sustainable Buildings Professional Development Program Realtor - Member Palos Verdes Peninsula Association of Realtors

Frequent Guest Lecturer: University of Southern California – Real Estate Principles - School of Policy, Planning, and Development California State University, Dominguez Hills – Real Estate Finance (FIN 467) – College of Business Administration and Public Policy

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