APPRAISAL REPORT

Property Located at 1915 Spring Garden Street & 903 Reynolds Place, Greensboro, NC

Prepared for Robert S. Fuller American National Bank Hawthorne Communities, LLC

Effective Date of Appraisal October 19th, 2018

Prepared by Merritt Wilson & Dick Foster, MAI Foster Appraisal Services, Inc 351 S. Swing Road Greensboro, NC 27409 1915 Spring Garden Street, Greensboro, NC

October 30th, 2018 File # M181003 Revised October 31, 2018

Dick Foster, MAI and Merritt Wilson Foster Appraisal Services, Inc. 351 S. Swing Road Greensboro, NC 27409

Robert Fuller American National Bank 628 Main Street, Danville, VA 24541

Re: Appraisal of Reynolds Place Apartments at: 1915 Spring Garden Street & 903 Reynolds Place, Greensboro, NC

Dear Mr. Fuller:

As per your request, I have visited and appraised the above referenced real properties for the purpose of estimating the market value of the Leased Fee interest. The effective date of this appraisal is October 19th, 2018, the date of site visitation for the value estimate “As Is”. The estimated date of completion and prospective date of value from the value “At Completion” is May 1, 2019. The attached report contains the data and analysis utilized in arriving at this estimate. As a result of my analysis and investigation, I have estimated the market value of the leased fee interest of the property subject to all assumptions and limitations as specifically provided within this narrative report to be:

AS IS $1,985,000 (Including Excess Land)

AS COMPLETE & STABILIZED $2,860,000

This appraisal complies with the Uniform Standards of Professional Appraisal Practice, Title XI of FIRREA. This is an Appraisal Report, which is intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice. As such, it presents summary discussions of the data, reasoning, and analysis that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser’s file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated within. The appraisers are not responsible for unauthorized use of this report.

Foster Appraisal Services, Inc. 1 1915 Spring Garden Street, Greensboro, NC

It was a pleasure preparing this report for you and your institution. Please contact me if I may be of further assistance in the interpretation of these findings and conclusions.

Sincerely,

Dick Foster, MAI Merritt Wilson NC State Certificate #A-1070 NC State Certificate #A-7427

Foster Appraisal Services, Inc. 2 1915 Spring Garden Street, Greensboro, NC

TABLE OF CONTENTS

INTRODUCTION

Title Page Letter of Transmittal ...... 1 Table of Contents ...... 3 Summary of Salient Facts & Conclusions ...... 4 Assumptions and Limiting Conditions ...... 6 Scope of work ...... 9 Extraordinary Assumptions and Hypothetical Conditions ...... 11 Client, Intended Use of the Report ...... 12 Type of Opinion ...... 12 Interest Valued ...... 12 Effective Date of Value ...... 13 Reasonable Exposure Time & Marketing Time ...... 13 Purpose of the Appraisal ...... 13 Appraisal Development and Reporting Process ...... 14 Greensboro Area Data ...... 15 Neighborhood Description ...... 26

FACTUAL DESCRIPTIONS

Site Analysis ...... 27 Description of Improvements ...... 29 Legal Description ...... 33 History of Ownership ...... 33 Assessed Tax Value ...... 34

ANALYSIS AND CONCLUSIONS

Highest and Best Use ...... 34 Cost Approach ...... 45 Income Approach ...... 51 Market Rentals Summary ...... 60 Income Approach Conclusion to Value ...... 69 Market Approach ...... 69 Market Approach Conclusion to Value ...... 76 Final Analysis ...... 77 Certification ...... 78 Addenda ...... 82

Foster Appraisal Services, Inc. 3 1915 Spring Garden Street, Greensboro, NC

SUMMARY OF SALIENT FACTS AND CONCLUSIONS

PROPERTY LOCATION: Existing 16 Unit 48 Bed Student Housing Complex with Proposed 12 Units 24 Bed Building Reynolds Place 1915 Spring Garden Street Greensboro, North Carolina

EFFECTIVE DATE OF APPRAISAL: October 19th, 2018 “As Is”

PROSPECTIVE DATE OF VALUE: May1, 2019 “At Completion”

PROPERTY RIGHTS: Leased Fee

LAND DESCRIPTION: +/-1.42 +/- acres or 61,855 square feet served by all city utilities and re-zoned RM-26. The site has frontage on Spring Garden Street, and Reynolds Avenue and is accessed off both. The site is served by public water, sewer, electricity, gas, and telephone. Parking is on-site.

IMPROVEMENT DESCRIPTION: 16-unit, 48-bedroom apartment complex containing 2 buildings, built in 1999. The complex contains all, three-bed, three-bath units with a shared kitchen and living room. The buildings are both identical with +/-9,312 SF of NLA each, concrete footing and subfloor, wood frame, brick exterior, and asphalt shingle roof. Each building contains 8, +/-1,164 SF units. NLA is +/-18,624 SF.

The owner plans to remove an existing duplex, which is being utilized as the campus office and construct a three story +/-14,406 SF, 12-unit building. This building will be of similar construction to the existing buildings but will have brick veneer on the first floor and siding on the second and third floors. Additionally, this building will contain all 2 bed 2 bath units.

Foster Appraisal Services, Inc. 4 1915 Spring Garden Street, Greensboro, NC

HIGHEST AND BEST USE: Multi-Family

LAND VALUE: $790,000 As If Vacant

Cost Approach $5,590,000 As Is $3,050,000 At Compl.

Income Approach $1,985,000 As Is $2,860,000 At Compl. & Stab

Sales Comparison Approach $1,900,000 As Is $3,040,000 At Compl. & Stab

FINAL CONCLUSION OF VALUE: $1,985,000 “As Is”

$2,860,000 “At Compl. & Stabilized”

Foster Appraisal Services, Inc. 5 1915 Spring Garden Street, Greensboro, NC

ASSUMPTIONS AND LIMTING CONDITIONS

The certification of the Appraisers appearing in the appraisal report is subject to the following conditions and to such specific and limiting conditions as are set forth by the Appraisers in the report.

1. The appraisers assume no responsibility for matters of legal nature affecting the property appraised or the title thereto, nor do the appraisers render any opinion as to the title, which is assumed to be good and marketable. The property is appraised as though under responsible ownership.

2. Any sketch in the report may show approximate dimensions and is included to assist the reader in visualizing the property. The appraisers have made no survey of the property.

3. The appraisers are not required to give testimony or appear in court because of having made the appraisal with reference to the property in question, unless arrangements have been previously made therefore.

4. Any distribution of the valuation in the report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisal and are invalid if so used.

5. The appraisers assume that there are no hidden or unapparent conditions of the property, subsoil, or structures, which would render it more or less valuable. The appraisers assume no responsibility for such conditions, or for engineering which might be required to discover such factors.

6. Information, estimates, and opinions furnished to the appraisers, and contained in this report, were obtained from sources considered reliable and believed to be true and correct. However, no responsibility for accuracy of such items furnished the appraisers can be assumed by the appraisers.

7. Disclosure of the contents of the appraisal report is governed by the Bylaws and Regulations of the professional appraisal organizations with which the appraisers are affiliated.

8. Neither all nor any part of the contents of this report shall be conveyed to any person or entity, other than the appraiser’s or firm’s client, through advertising, solicitation materials, public relations, news, sales, or other media without written consent and approval of the authors, particularly as to valuation conclusions, the identity of the appraisers or firm with which the appraisers is connected, or any reference to the professional organizations with which the appraisers is affiliated or to the designation of the appraisers. Further, the appraisers or firm assumes no obligation, liability, or accountability to any third party. If this report is placed in the hands of anyone but the

Foster Appraisal Services, Inc. 6 1915 Spring Garden Street, Greensboro, NC

client indicated in this report, the client shall make such party aware of all assumptions and limiting conditions of this assignment.

9. On all appraisals, subject to satisfactory completion, repairs, or alterations, the appraisal report and value conclusions are contingent upon completion of the improvements in a workmanlike manner.

10. In this appraisal assignment, the existence of potentially hazardous material used in the construction or maintenance of the building, such as the presence of urea formaldehyde foam insulation, and/or existence of toxic waste, which may or may not be present on the property, has not been considered. The appraisers are not qualified to detect such substances. It is urged that the client retain an expert in this field if desired.

11. A legal description was not provided to the appraisers by the client. The legal description in the report is assumed to be correct. The appraisers assume no responsibility for matters legal in character nor do we render any opinion as to title, which is assumed to be good and marketable.

12. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws, and that all zoning, building, and use regulations and restrictions of all types have been complied with unless non-compliance is stated, defined and considered in the appraisal report. It is further assumed that all licenses, consents, permits, or legislative or administrative authority required by any local, state, federal and/or private entity or organization have been or can be obtained or renewed for any use considered in the value estimate.

13. Possession of this report, or a copy thereof, does not carry with it the right of publication, nor may it be used for other than its intended use by anyone other than the client without the prior written consent of the appraisers or the client, and then only with the proper identification and qualification and only in its entirety. No change of any item in the report shall be made by anyone other than the Appraisers and/or officer of the firm. The appraisers and firm shall have no responsibility if any such change is made.

14. Any after-tax investment analysis and resulting measures of return on investment are intended to reflect only possible and general market considerations, whether used to estimate value or return on investment given a purchase price. Please note that the appraisers do not claim expertise in tax matters and advises client to seek competent tax advice.

15. The liability of appraisers and the firm is limited to the client only and to the fee actually received by appraisers. Further, there is no accountability, obligation, or liability to any third party. If this report is placed in the hands of anyone other than the client, the client shall make such party aware of all limiting conditions and assumptions of the assignment and related discussions. The appraisers are in no way to be responsible for any costs incurred to discover or correct any deficiencies of any type present in the property; physically, financially, and/or legally. In the case of limited partnerships or syndication offerings or stock offerings in property, client agrees that in case of lawsuit

Foster Appraisal Services, Inc. 7 1915 Spring Garden Street, Greensboro, NC

(brought by lender, partner or part owner in any form of ownership, tenant, or any other party), any and all awards, settlements of any type in such suit, regardless of outcome, Client will hold appraisers completely harmless in any such action.

16. Any projections, forecasts, etc. regarding future patterns of income and/or expenses, prices/values, etc. represent the analyst's best estimates of investor anticipation with respect to these items, based on information available at the date of appraisal or analysis. Such information includes forecasts/projections published by recognized sources such as economists, financial publications, investor surveys, etc. Economic trends can affect future behavior of income, expenses, values, etc. Changes in these items caused by future occurrences could result in values different from those established in this report. The appraisers cannot accept responsibility for economic variables in the future which could not have been known or anticipated at the date of analysis (inflation rates, economic upswings or downturns, fiscal policy changes, etc.).

17. The Americans with Disabilities Act (ADA) became effective January 26, 1992. The appraisers 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, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non- compliance with the requirements of ADA in estimating the value of the property.

18. The value estimated contained within this report assumes no impact on value because of "Section 404 Wetlands" as defined by the U.S. Army Corps of Engineers. The appraisers have found no evidence of wetlands, but are not experts in this field. It is recommended that the client seek the advice of an expert to determine any potential impact of wetlands on the property.

19. Acceptance of, and/or use of, this appraisal report by the Client or any third party constitutes acceptance of the above conditions. APPRAISERS’S LIABILITY EXTENDS ONLY TO STATED CLIENT, NOT SUBSEQUENT PARTIES OR USERS, AND IS LIMITED TO THE FEE RECEIVED.

Foster Appraisal Services, Inc. 8 1915 Spring Garden Street, Greensboro, NC

SCOPE OF WORK

For any type of appraisal assignment, an appraiser must:

1. Identify the problem to be solved: 2. Determine and perform the scope of work necessary to develop credible assignment results; and 3. Disclose the scope of work in the report.

In order to properly identify the problem to be solved, gather proper data and produce credible assignment results an appraiser must identify the seven most significant parameters of an appraisal assignment.

1. Client: the party or parties who engage an appraiser (by employment or contract) in a specific assignment. 2. Intended User(s): the client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment. 3. Intended Use: the use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment. 4. Type of opinion, such as an appraisal opinion, appraisal review opinion, appraisal consulting opinion, or other type of opinion. 5. Effective Date – an appraiser’s conclusions are reflective of the effective date of the appraisal and may be a current date, prospective date, or retrospective date. 6. Relevant characteristics about the subject of the assignment. The subject of the appraisal assignment must be identified. The subject of an appraisal is always a defined real estate interest, not the land or physical structure affected by the real estate interest being valued. 7. Assignment conditions – any extraordinary assumptions, hypothetical conditions, supplemental standards or jurisdictional exceptions that may affect an appraisal must be identified and explained.

These parameters are defined as follows:

The subject is an existing 16 units student housing complex located at 1911-1915 Spring Garden and 903 E. Reynolds Place in Greensboro, NC. The site consists of +/-1.42 acres. The site and units have been platted as condos, however, they are being operated and will be sold under one ownership, therefore, will be valued as an aggregate value in one property. The owner plans to remove the existing office and add 12, 2bedroom 2 bath units in one, three story building. The proposed building will not be platted as condos. The site has recently been approved for re-zoning to RM-26. The subject will be offered for sale once construction is under way.

Foster Appraisal Services, Inc. 9 1915 Spring Garden Street, Greensboro, NC

The appraisers have been asked to provide an opinion of the current market value of the subject property “As Is”, “At Completion”, and “At Stabilized Occupancy”. This process involves inspecting the property and comparing it to other similar properties. The comparison typically uses three approaches; the Cost Approach, the Sales Comparison Approach, and the Income Approach. The Cost Approach to value will be most useful in valuing the proposed improvements as the improvements will be new construction and physical depreciation will not be a factor.

The appraisers have searched the area for information available for sales of similar land and improved properties that have occurred as recently as possible for the Sales Comparison Approach and have used the most similar to the subject property. Adjustments are made to the comparables for items of dissimilarity such as terms of financing, time, location, age, and other conditions that affect the sale price. A value range is generally indicated by the adjustments that are reconciled into an indicated value for the subject by this approach.

The cost approach involves estimating the cost to construct, at current prices, a replica of the proposed buildings being appraised. The dollar amounts for the reproduction cost new are developed in conjunction with local building contractors and the replacement cost with Marshall Valuation Service. In addition, competing properties were observed. After determining the estimated replacement cost new, depreciation from all causes is determined and deducted from the estimated cost new. The depreciated cost of the site improvements and the land value are then added for a value of the subject by the cost approach. The appraisers were provided with cost estimate for the proposed improvements which have been compared for reasonableness to the cost found in the cost guide.

A logical and direct approach to value of an apartment complex is the market approach. However, the approach is only applicable when a sufficient number of comparable sales are available to provide a reliable indication of market value. It can be said that the market approach to value considers all factors of supply and demand in the marketplace. The market approach provides a strong indication of value when applicable because the value is derived from the market.

In the Income Approach, the anticipated cash flow from the subject property is estimated and converted into a present value through the capitalization process. Capitalization rates are extracted from competitive properties in the market or by using other techniques when applicable. We are of the opinion that a property such as the subject is most reasonably recognized as an income producing improvement with the most reliable indication of market value being based on capitalization of the prospective net income that can be generated by the property at a market derived rate. Properties such as the subject are typically valued on the basis of their income potential; therefore, the value indicated by this approach generally receives primary consideration.

As part of this assignment, the appraisers have made independent investigations and analyses. In addition, data retained in the appraisers’ office is continually updated for use

Foster Appraisal Services, Inc. 10 1915 Spring Garden Street, Greensboro, NC in all assignments. Finally, listed below are the major data sources used in this appraisal report:

Tax maps and Guilford County GIS were utilized for additional site information.

Market Sales Data 2018 Real Property Index Apartment Guide Internal files located in the appraisers’ office Previous appraisals Current data extracted from the market

This appraisal complies with the Uniform Standards of Professional Appraisal Practice, Title XI of FIRREA. This is an Appraisal Report, which is intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice. As such, it presents summary discussions of the data, reasoning, and analysis that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser’s file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated within. The appraisers are not responsible for unauthorized use of this report. This appraisal is of real property only and does not include any personal property.

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDTIONS

An extraordinary assumption is defined as “as assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.” USPAP 2016-2017, page 307

Comment: 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.

This appraisal is based on the assumption that the proposed building and site plans will be accepted with no major changes required.

We assume that the subject could be developed with 36 units if it were vacant based on the allowable density under current zoning.

This appraisal is also based on the extraordinary assumption that the subject will be constructed in a good workman like manor and according to the specifications and limited plans.

An environmental survey was not provided, we assume no soil contamination exists.

Foster Appraisal Services, Inc. 11 1915 Spring Garden Street, Greensboro, NC

We make the assumption that no unforeseen issues will delay construction. This appraisal is based on the extraordinary assumption that the subject will be complete by May 1, 2019.

A hypothetical condition is defined as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results but is used for the purpose of analysis”. USPAP 2016- 2017, page 308

Comment: Hypothetical conditions are 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.

This report does not include any hypothetical conditions.

CLIENT, INTENDED USER AND INTENDED USE OF THE REPORT

This appraisal is intended to assist the client, American National Bank, with financial decisions concerning the property located at 1911-1915 Spring Garden and 903 E. Reynolds Place, Greensboro, NC. The client has requested this appraisal. The appraisers are not responsible for unauthorized use of this report.

INTEREST VALUED

The subject is currently leased therefore the interest valued will be leased Fee.

 Leased fee estate: the ownership interest of the owner or landlord. The lease fee interest of a property is held in fee with the right of the use and occupancy conveyed by lease to others. A property consisting of the right to receive rentals over a period of time, plus the right of ultimate repossession at the time of termination of the lease.

Source: The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, Copyright, 1993, Reprinted 2002.

TYPE OF OPINION

The client has requested that the appraisers form an opinion of value of the leased fee interest of the subject property “as is” and “at completion and stabilized occupancy”.

Foster Appraisal Services, Inc. 12 1915 Spring Garden Street, Greensboro, NC

EFFECTIVE DATES OF VALUE

October 19th, 2018 – the Effective Date of the Appraisal “As Is”

May 1st, 2019 – Prospective Date of Value “At Completion”

Stabilized Occupancy is estimated to be reached by August 31st, 2019.

October 30th, 2018- Date of Report

REASONABLE EXPOSURE TIME AND MARKETING TIME

According to The Appraisal Foundation, 1992, exposure time is defined 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 market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market." Implied within this definition is that not only reasonable time is afforded, but also reasonable effort.

According to the Dictionary of Real Estate Appraisal, Third Edition, 1993, "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".

To determine the reasonable exposure time prior to the effective date of the appraisal and the estimated marketing time immediately following the effective date of the appraisal, evidence from the market is reviewed and local brokers are consulted. In the appraiser's opinion, the two estimates of time are similar in that the market evidence available to determine the estimated times is the same.

The appraiser was unable to determine the length of time any of the sales in the sales comparison approach were on the market. Many brokers are not keeping up with the length of time properties are listed for sale prior to a transaction. The current real estate market economic conditions have resulted in a significant decline in development. Financing for such ventures has also become very stringent; however, the subject is located in one in a proven commercial area. This location appears to be attracting reasonable demand with few vacancies noted in the area. The appraiser is of the opinion that the reasonable marketing time for the subject property, is six months to two years with a most probable exposure time of 12 months, but could be entirely dependent upon present economic conditions. Similar to the marketing time, the appraiser estimated the typical exposure time to be six months to two years with a most probable exposure time of 12 months.

PURPOSE OF THE APPRAISAL

The purpose of the appraisal is to provide the appraiser’s best estimate of market value of the subject property.

Foster Appraisal Services, Inc. 13 1915 Spring Garden Street, Greensboro, NC

Market value is defined by the financial regulatory agencies as follows:

The definition of market value is “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, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

a. buyer and seller are typically motivated b. both parties are well informed or well advised, and each acting in what he considers his own best interest; c. a reasonable time is allowed for exposure in the open market; d. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and e. The price represents the normal consideration for the property sold unaffected by special or creative financing or sale concessions granted by anyone associated with the sale.

APPRAISAL DEVELOPMENT AND REPORTING PROCESS

The scope of the appraisal is the estimate of market value for real property that involves a systematic process of defining the problem; defining the work and acquiring the available data, which is then classified, analyzed and interpreted into an estimate of value.

The appraisers are to estimate the market value of the subject property, which involves visiting the property and comparing it to other similar properties. The comparison typically uses three approaches to value: the cost approach, the sales comparison approach and the income approach. However, due to the amount of depreciation the cost approach is not utilized within this analysis.

In preparing this appraisal, the appraisers:

Visited the subject site on October 19th, 2018.

Analyzed subject information.

Gathered local rental and sales data.

Confirmed and analyzed the data and applied the Market and Income approaches to value.

Concluded final estimate of value.

This Appraisal Report is a brief recapitulation of the appraiser’s data, analysis, and conclusions. Supporting documentation is retained in the appraiser’s file.

Foster Appraisal Services, Inc. 14 1915 Spring Garden Street, Greensboro, NC

REGIONAL, SOCIAL, ECONOMIC, and GOVERNMENTAL DATA

The Appraisal of Real Estate, 13th Edition identifies four forces, which influence value. They are:

1. Social Forces 2. Economic circumstances 3. Governmental controls and regulations 4. Environmental conditions1

The dynamics and interplay of these forces affect real estate values. They are the overall determinants of supply and demand. Thus, these four forces will serve as the foundation for the Area Analysis section. A review of each of these forces and their respective importance to the Piedmont Triad market is therefore indicated.

1 The Appraisal of Real Estate Page 44, 13th Edition, Chicago: The American Institute of Real Estate Appraisers.

Foster Appraisal Services, Inc. 15 1915 Spring Garden Street, Greensboro, NC

The above map shows the Piedmont Triad area made up of twelve counties and the three major cities of Greensboro, High Point and Winston-Salem. This area is located in the north central part of North Carolina and offers excellent (5) interstate highway systems. This location is within 650 miles of more than half the US population and major markets. It is also located on the I-40/85 between Raleigh and Charlotte.

The total population of the Piedmont Triad was estimated at 1,637,224 in 2012 and is the 37th largest metro region in the U.S. This population is projected to grow to over two million by 2030. Greensboro is the largest city with 272,190 people in 2011 with Winston- Salem having 232,143 people and High Point having 105,493. Burlington and Alamance County have been the fastest growing areas.

The work force is estimated at more than 800,000. The State is “a right to work” state and has the lowest union enrollment in the nation. Some of the major employers are listed as follows not including local governments:

Foster Appraisal Services, Inc. 16 1915 Spring Garden Street, Greensboro, NC

One of the major advantages of this area is the Piedmont Triad International Airport which has three runways of 10,001 feet, 9,000 feet and 6,380 feet. Air service is supplied by US Airways, Delta, United, Continental, American and Allegiant Air. It is the Atlantic hub for FedEx and headquarters and manufacturing for Honda Jet. Terminal has 30 passenger gates serving Delta, United and US Airways.

Foster Appraisal Services, Inc. 17 1915 Spring Garden Street, Greensboro, NC

Trucking is offered by more than 150 firms with over 100 maintaining local terminals. Two deep water ports are in North Carolina and rail freight service is offered by Norfolk Southern and CSX Railway with terminal in the Triad. Amtrak also serves the major cities in the Triad.

Nineteen colleges and universities are located in the Triad including Elon University, Wake Forest University, NC A&T, UNC Greensboro and Guilford College.

Additional details are supplied by the following Region Profile:

Foster Appraisal Services, Inc. 18 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 19 1915 Spring Garden Street, Greensboro, NC

The counties within the Piedmont Triad are Alamance, Caswell, Davidson, Davie, Forsyth, Guilford, Montgomery, Randolph, Rockingham, Stokes, Surry, and Yadkin.

The analysis of social considerations focuses primarily on population characteristics as they generally define social forces. The analysis of the composition of an area’s population and demographics provides the opportunity to evaluate future trends for products and services. These factors are keys to anticipating the supply and demand for particular types of real property. Typically, the greater the number of potential consumers within a specific market area, the higher the demand will be for virtually every type of available good and service available. North Carolina has consistently been one of the most desirable places to move to east of the Mississippi River for the past 25 years as indicated by the following graph and data:

Foster Appraisal Services, Inc. 20 1915 Spring Garden Street, Greensboro, NC

2010 Population Growth High Point, NC North United and Population Statistics Carolina States

Total Population 94,392 9,450,965 308,455,134

Square Miles 93.27 48,710.88 N/A

Population Density 1,012.10 194.00 87.20

Population Change Since 27.01% 42.61% 24.02% 1990

Population Change Since 9.96% 17.41% 9.61% 2000

Forecasted Population 6.16% 7.44% 4.52% Change by 2014

Statistic Winston-Salem North Carolina National

Population (2012) 229,617 9,535,483 311,173,000

Population (2000) 185,480 8,049,313 281,421,906

Population growth 23.8% 18.5% 10.6%

Winston-Salem Winston-Salem is located in Forsyth County and is part of the 28th largest Combined Metropolitan Area in the United States, Greensboro/Winston-Salem/High Point, which itself is surrounded by two of the nation’s fastest growing metropolitan areas, Charlotte and Raleigh/Durham. On an even larger scale, Forsyth County is part of several connected metropolitan areas stretching along Interstate 85 from Raleigh to Alabama that includes Greensboro, Charlotte, Greenville, and Atlanta.

Manufacturing has long been a key component of Forsyth County’s economy however, as the manufacturing industry declined both locally and nationally, Forsyth County’s economy has become more service-oriented. The city is most known for its association with the tobacco industry and is the home of Camel cigarettes. Finance is also represented in Winston-Salem with Wells Fargo and BB&T having corporate and regional headquarters here. Recently, Winston-Salem has moved from manufacturing to more of an information and technology-based economy especially in the areas of medicine, research and finance.

Foster Appraisal Services, Inc. 21 1915 Spring Garden Street, Greensboro, NC

The City of Winston-Salem operates under a council/manager form of government. The city manager oversees the administration of city services with the help of four assistant city managers, who coordinate the day-to-day operations of specific areas within city government.

About 57.2% of the homes are owner occupied with an average household size of 2.43 people. There are 90,752 households with and median household income of $40,689.

Several higher education institutions are located in Winston-Salem and include Forsyth Technical Community College, UNC School of Arts, Winston-Salem State University and Wake Forest University, including Bowman Gray School of Medicine.

Interstate 40 passes through Winston-Salem, providing a natural distribution center to the Eastern United States. U.S. Highways serving the area include: US 421, US 158, and US 311. State Highways serving the area include: NC 150, NC 8, and NC 109. Services available to business and industry are adequate. The city provides city water and sewer within Winston-Salem. Bell South Telecommunications provides telephone service with many long-distance services available through various companies. Several companies provide cellular telephone service. Piedmont Natural Gas Company provides natural gas and Duke Power Company supplies the electric power to the area. Most areas of the city have city water and sewer. Due to the pleasant climate, a stable economy, convenient location to recreational facilities, major highways, good quality of educational facilities, growing diversified industries, and the progressive government, the demand for residency in the area is felt to increase with future growth. These factors also effectively lure new industry locating to the southeast to the Winston-Salem area. Winston-Salem has experienced progressive economic development and business recruitment as growth and stability continues.

Greensboro Greensboro, the county seat of Guilford County, is located in the Piedmont Triad Region of North Carolina. It is the largest city in the Greensboro/Winston-Salem/High Point Metropolitan Statistical Area. Winston-Salem is 27 miles west and High Point is adjacent to the southwest of Greensboro. High Point and Greensboro are both located within Guilford County.

The city of Greensboro offers a variety of housing styles in a wide range of prices. According to the 2012 Census, there were 127,376 total households in Greensboro with 45.9% being owner occupied and 43.8% being renter occupied. The average household size is 2.41 persons.

Interstate 40 and Interstate 85 intersect in Greensboro, providing a natural distribution center of the Eastern United States. U.S. Highways serving the area include: US 421, US 29, US 70, US 311, and US 220. State Highways serving Greensboro include: NC 150, NC 68, NC 61, NC 22, NC 66, and NC 62. The Greensboro thoroughfare system is well planned and moves traffic efficiently. Existing and proposed road projects ensure mobility through all quadrants of the city and Guilford County. An urban loop, Painter Boulevard, is under construction and the Interstate 85 by-pass opened in early 2004. In the near future, US 220

Foster Appraisal Services, Inc. 22 1915 Spring Garden Street, Greensboro, NC

and US 29 are to become interstates as well as a section of NC 68. Interstate 40 has been widened through Greensboro. There are six lanes (three in each direction) from Holden Road west to past Guilford College Road. There are ten lanes (five in each direction) from west of Guilford College Road to N.C. Highway 68.

To further illustrate the transportation changes that are on-going in the Greensboro area, the following exhibits illustrate the current Greensboro highway configuration and the proposed highway configuration by the year 2015:

In the area of economic forces, there is a broad industrial base with more than 320 industrial establishments in the city and 650 in the county. Services available to business and industry are adequate. The City of Greensboro provides city water and sewer within Greensboro. In areas where city water and sewer are not available, individual well and septic tank systems are regulated under the control of the Guilford County Health Department. Bell South Telecommunications provides telephone service with many long-distance services available through various companies. Several companies provide cellular telephone service. Piedmont Natural Gas Company provides natural gas and Duke Power Company supplies the electric power to the area.

Due to the pleasant climate, a stable economy, convenient location to recreational facilities, major highways, good quality of educational facilities, growth of diversified industries, and the progressive government, the demand for residency in the area is felt to increase with future growth. These factors also effectively lure new industry locating to the southeast to the Greensboro area. Greensboro has experienced progressive economic development and business recruitment as growth and stability continues.

High Point High Point is also located in the Piedmont Triad region of North Carolina and is part of the Metropolitan Statistical Area (MSA) of Greensboro, Winston Salem, and High Point. The Greensboro/Winston Salem/ High Point MSA includes the counties of Alamance Davidson, Davie, Forsyth, Guilford, Randolph, Stokes, and Yadkin. High Point is in the southwest section of Guilford County with its boundaries also in Davidson, Forsyth, and Randolph Counties. Greensboro is the county seat of Guilford County.

Foster Appraisal Services, Inc. 23 1915 Spring Garden Street, Greensboro, NC

The main East/West, North/South Highways that intersect within the High Point area include: Interstates 40, 77, and 85; U.S. 311, 29, 52, 421, 220, and 70. The State Primary Highways serving the area are: NC 68, 66, 62, and 109. Existing and proposed road projects ensure mobility through all quadrants of the city and Guilford County. Road construction is underway on the U.S. 311 Bypass, the widening of Interstate 40, and the widening of Interstate 85. The High Point thoroughfare system is well planned and moves traffic efficiently.

Social Forces The city of Greensboro offers a variety of housing styles in a wide range of prices. According to the 2012 Census, there were 125,852 total households in Greensboro with 53.1% being owner occupied and 46.9% being renter occupied. The average household size is 2.45 persons. Numerous apartment complexes are available throughout the city. Greensboro City Schools along with Guilford County Schools have consolidated into one school system. The public school system of Guilford County is comprised of 68 elementary, 23 middle, and 28 high schools (not including ten alternative schools). In addition to its public school system, Guilford County has 35 private schools. Total enrollment for the 2013/14 year was 72,388 students. The University of North Carolina Greensboro has an enrollment of approximately 18,400. Greensboro benefits from its central Triad location with convenient access to several major colleges, universities, and technical institutes within a 30-minute drive.

Greensboro is served by Cone Health. There are numerous religious facilities in the area with several denominations represented in Greensboro. Greensboro receives three daily newspapers, 10 metropolitan television stations, and 30 metropolitan radio stations. One attractive aspect of the Greensboro area is the variety of cultural centers, parks and recreational facilities available. Festivals and events that take place throughout the year include: the North Carolina Shakespeare Festival, the North Carolina Medieval Faire, Oak Hollow Championship Boat Races, The Wyndham Open, Pops in the Park, Jazz Spirit, and Day in the Park. Greensboro has numerous shopping centers providing various retail businesses.

Economic Forces The Greensboro economy and the surrounding Piedmont Triad area, traditionally has been centered around textiles, tobacco, and furniture. Greensboro's central proximity in the state has made it a popular place for families and businesses, as well as becoming more of a logistical hub with FedEx having regional operations based in the city. Notable companies headquartered in Greensboro include the Honda Aircraft Company, ITG Brands, Kayser-Roth, VF, Mack Trucks, Volvo Trucks of North America, Qorvo, the International Textile Group, NewBridge Bank, The Fresh Market, Cook Out, Ham's, Biscuitville, Tripps, and Columbia Forest Products. Greensboro is a "center of operations" for the insurance company Lincoln Financial Group.[56] Greensboro is also headquarters to the Atlantic Coast Conference. Although traditionally associated with the textile and tobacco industries, city leaders are working to attract new businesses in the nanotech, high-tech, aviation and transportation/logistics sectors. The University of North Carolina at Greensboro and North Carolina A&T State University opened a joint research park, Gateway University Research Park.

Foster Appraisal Services, Inc. 24 1915 Spring Garden Street, Greensboro, NC

Major employers in Greensboro include: Guilford County Schools (10,394), Cone Health (7,218), City of Greensboro (3,108), United States Postal Service (2,800), Guilford County (2,700), University of North Carolina Greensboro (2,499), High Point Regional Health System (2,320), Bank of America (2,000), American Express (2,000), and TE Connectivity (2,000).

Greensboro has enjoyed a stable economic environment in the past with a base of textiles and small industrial businesses. Due to the recent economic downturn, many manufacturing jobs were lost. In the appraiser’s opinion, economic recovery is imminent as evidenced by the slowly recovering national economy. Greensboro and Guilford County have many assets to offer such as highways and infrastructure and will undoubtedly follow suit. The future appears good as new development and infrastructure will help the area to continue to diversify.

Governmental Forces An elected city council and county commissioners make up the management of both the Greensboro and Guilford County government system. The government systems of both the county and city work well together and have the reputation as being one of the more progressive in the state. Greensboro is served by the city police and fire departments and by the Guilford County Sheriff's Department. There are also volunteer fire departments.

Services available to business and industry in the Greensboro area are more than adequate. Southern Bell and North State Telephone Company provide telephone service with many long-distance services available through various companies. Natural gas is provided by Piedmont Natural Gas Company and Duke Power Company supplies the electric power to the area. Most areas of the city have city water and sewer. In areas where this service is not available, individual well and septic tank systems are regulated under the control of the Guilford County Health Department.

Environmental Forces Greensboro appears to have an adequate water supply and sewage treatment plant. Environmentally conscience decisions have been made by limiting development neighboring water shed areas. Greensboro enjoys a pleasant climate with moderate rain and snow fall annually.

NEIGHBORHOOD DESCRIPTION

For the purpose of this report, the definition of the term "neighborhood" as found in The Appraisal of Real Estate, Twelfth Edition, published by the Appraisal Institute, 2001, is used. This definition is as follows: "A group of complementary land uses; a related grouping of inhabitants, buildings, or business enterprises."

Foster Appraisal Services, Inc. 25 1915 Spring Garden Street, Greensboro, NC

NEIGHBORHOOD ANALYSIS

The subject neighborhood is bordered by West Lee Street to the south, Wendover Avenue to the west, Freeman Mill Road to the east, and West Market Street to the north. The subject area is made up of a high density area which accommodates retail, service, and some office buildings with high density residential neighborhoods in the surrounding area. The area is 80% built up with new growth to the south and east of the subject; in the immediate area there are old buildings being torn down to provide space for new buildings. The most influential feature of the neighborhood is UNCG College which is the catalyst for demand in the neighborhood. There are major traffic arteries that allow access to the subject area such as West Lee Street, Wendover Ave., West Market, and Freeman Mill Road. There are several small shops and restaurants in the neighborhood which serve the surrounding residences. It is the appraiser’s opinion that this area will remain stable throughout the foreseeable future

UNC-Greensboro is located about ½ mile from the subject to the east. UNC-Greensboro is part of the North Carolina College System. With more than 18,600 students and 2,500 faculty and staff. UNCG is the largest state university in the Piedmont Triad and has an annual economic impact of more than $1 billion. The campus has grown to include 24 residence halls and 30 academic buildings on 210 acres.

A demographic study of a one, three, and five-mile radius has been included in the addendum of this report. This study shows a population of 208,196 people within five miles and a median household income of $41,534. However, the current unemployment rate for the area is 4.1% which indicates the result of a strong economy.

The subject neighborhood is considered to be in a moderate growth stage of its economic life. The subject is well located within this neighborhood and enjoys the access convenience of Spring Garden Street and its high traffic count. Overall the neighborhood is considered desirable as evidenced by moderate growth.

Foster Appraisal Services, Inc. 26 1915 Spring Garden Street, Greensboro, NC

SITE ANALYSIS

Foster Appraisal Services, Inc. 27 1915 Spring Garden Street, Greensboro, NC

The site is located on the south side of Spring Garden Street, and the west side of East Reynolds Place, in Greensboro, NC. The street address is 1911-1915 Spring Garden and 903 E. Reynolds Place, Greensboro, NC. The subject is located in a mixed use area with uses such as single family, multi-family, religious, and commercial uses surrounding the immediate area of the subject. The site is at street level and slopes slightly to the north. A legal description found in the deed indicates a land area of 1.42 acres or 61,855 square feet. Soils appear to be suitable for development.

Additional details of this site are as follows:

Area: +/-1.42 acres or 61,855 square feet, per deed book 6682 page 1844. We estimate +/-0.46 acres or 20,105 SF to be excess land. This calculation is based solely on the density of 26 units per 43,560 SF being 1,675 SF per unit.

Frontage: Frontage and access are off both Spring Garden Street and E. Reynolds Place.

Shape: Irregular, but functional.

Topography: The site slopes to the north and is at street grade.

Soil Conditions: A soil survey was not made available but soil conditions appear to be suitable for the existing improvements. The appraiser assumes no soil contamination exists.

Flood Plain: The site is not located in a flood plain according to Flood Hazards Map #3710785400j dated June 18, 2007

Utilities: All public utilities are available to the site.

Zoning: According to Mike Kirkman of the City of Greensboro, the subject has been approved for re-zoning from RM-18 to CD-RM-26. These zoning definitions are as follows:

RM-18, Residential Multi-family 18 District The RM-18, Residential Multi-family district is primarily intended to accommodate multi-family and other residential uses at a density of 18.0 units per acre or less.

RM-26, Residential Multi-family 26 District The RM-26, Residential Multi-family district is primarily intended to accommodate multi-family and other residential uses at a density of 26.0 units per acre or less.

The subject has been rezoned to CD-RM-26. The only conditional use is that the site be developed for a residential use. Based on general calculations, Mr. Kirkman believes the subject site could be developed with 36 units. The subject is currently improved with two 8 units buildings, totaling 18 units. The owner plans to remove the existing

Foster Appraisal Services, Inc. 28 1915 Spring Garden Street, Greensboro, NC duplex/office to building a 12-unit building. Though the site could be developed with 36 units in total, we believe the site could only physically accommodate an additional 12 units due to parking requirements. Per Mike Kirkman with the City of Greensboro Planning department, each 3-bedroom unit requires 2 parking spaces and each 2- bedroom unit requires 1.5 spaces. This standard would require the subject to have 50 spaces, of which it presently has 51. We believe this would limit the subject to a 28-unit development. Based on the assumption, we will estimate the excess land to be 12 units.

Easements and Encroachments: Typical utility easements are assumed. No encroachments are known to the appraiser.

Street Improvements: Spring Garden Street is a two-lane road asphalt paved road with concrete curb and gutter. East Reynolds Place is a two-lane access road with no stripping, curbing, or guttering.

Traffic Count: Spring Garden Street has an average daily traffic count of 19,000 cars. East Reynolds Place does not have a reported traffic count.

In summary, the subject has a well-located site, with good topography, public utilities, and good access.

DESCRIPTION OF IMPROVEMENTS

The existing improvements consist of two, two-story buildings, and a duplex currently used as an office which will be raised for an additional apartment building. The buildings have concrete subfloors, brick with wood frames, and asphalt shingle roofs. The two buildings contain 8, 3bedroom units each, totaling 16-units, and 48 bedrooms. The complex was built in 1999. The complex contains all, three-bedroom, three-bath units with a shared kitchen and living room. The buildings are both identical with +/-9,312 SF of

Foster Appraisal Services, Inc. 29 1915 Spring Garden Street, Greensboro, NC

NLA each. Each building contains 8, +/-1,164 SF units. The interiors of the units have carpet in the living room and bedrooms, and tile in the bathrooms and kitchens. The walls are painted sheetrock and the ceilings are spray textured. The improvements have been maintained and are in average.

Additional details of construction are listed as follows:

Year Constructed: 1999

Foundation: Concrete and block

Floor System: Concrete slab on the first floor and wood floor system on the second floor.

Doors: Painted metal storm doors.

Windows: Assumed double plated glass windows. Framing: Wood

Exterior Walls: Brick veneer Gutter and downspouts: Aluminum.

Roof Structure: Wood

Roof Cover: Asphalt shingles.

Interior Wall Finish: Painted drywall.

Floor Cover: High traffic carpet throughout, except in bathroom and kitchens. These areas have ceramic tile.

Heating & Cooling: Heating and cooling is by central heat and air.

Plumbing: Typical white porcelain sink, toilet, and bathtub in bathroom.

Parking and paving: The parking lot is paved asphalt. A total of 51 spaces are provided, two of which are handi cap parking. The existing parking does not meet parking requirements per the survey.

FF&E The value of an oven/range, refrigerator, and dishwasher is included in the value of each unit.

The property is in overall good condition. No significant deferred maintenance was noted other than the parking area needing to be resealed, however, this will be done during the construction of the proposed building.

Foster Appraisal Services, Inc. 30 1915 Spring Garden Street, Greensboro, NC

We estimate the effective age of the existing improvements to be 14 years with an economic life of 45 years.

The owner plans to remove an existing duplex, which is being utilized as the campus office and construct a three story +/-14,406 SF, 12-unit building. This building will be of similar construction to the existing buildings but will have brick veneer on the first floor and siding on the second and third floors. This building will contain all 2-bedroom, 2 bath units.

Additional details of construction are listed as follows:

Year Constructed: To be completed in 2019.

Foundation: Concrete and block

Floor System: Concrete slab on the first floor and wood floor system on the second and third floor.

Foster Appraisal Services, Inc. 31 1915 Spring Garden Street, Greensboro, NC

Doors: Painted metal storm doors.

Windows: Assumed double plated glass windows.

Framing: Wood

Exterior Walls: Brick veneer on the first floor and siding on the second and third floor.

Gutter and downspouts: Aluminum.

Roof Structure: Wood

Roof Cover: Asphalt shingles.

Interior Wall Finish: Painted drywall.

Floor Cover: High traffic carpet throughout, except in bathroom and kitchens. These areas have ceramic tile.

Heating & Cooling: Heating and cooling is by central heat and air.

Plumbing: Typical white porcelain sink, toilet, and bathtub in bathroom.

Parking and paving: The parking lot is paved asphalt. A total of 51 spaces are provided, two of which are handi cap parking. The existing parking does not meet parking requirements per the survey.

FF&E The value of an oven/range, refrigerator, and dishwasher is included in the value of each unit.

These improvements will be in new or excellent condition at completion. No deferred maintenance will exist.

We estimate the effective age of the proposed improvements to be 0 years with an economic life of 45 years. For appraisal purposes, we will estimate the overall effective age of the campus to be 10 years at completion.

Foster Appraisal Services, Inc. 32 1915 Spring Garden Street, Greensboro, NC

LEGAL DESCRIPTION

The subject property is legally described in the Deed recorded in Deed Book 7535 Pages 2899-2901 in the Guilford County Register of Deeds Office, Greensboro, North Carolina. A copy of this deed is included in the addenda of this report.

HISTORY OF OWNERSHIP

As mentioned earlier in the report, the individual units have been platted and recorded as individual condos. Both the units and the site are shown on the tax records to be under the ownership of Hawthorne Communities, LLC.

Hawthorne Communities, LLC gained title to the subject “units” from American National Bank and Trust Company on September 27, 2013 for $1,150,000 per the tax stamps. This transaction is recorded in deed book 7535 pages 2899 to 2901 recorded in the Guilford County Register of Deeds office.

Hawthorne Communities, LLC gained title to the “site” from TC Partners 1, LLC for NTC consideration per the deeds. The Deed is dated February 9th, 2018 and recorded in Deed Book 8024 Page 1375-1376 in the Guilford County Register of Deeds Office, Greensboro, North Carolina.

Foster Appraisal Services, Inc. 33 1915 Spring Garden Street, Greensboro, NC

TC Partners 1, LLC gained title to the “site” from Reynolds Place Apartments, LLC for $1,650,000 consideration per the deeds. The Deed is dated February 23rd, 2007 and recorded in Deed Book 6682 Page 1842-1844 in the Guilford County Register of Deeds Office, Greensboro, North Carolina.

The appraiser is not aware of any transactions pertaining to the subject which have taken place over the last three years. If the client is in question of past or present ownership, we suggest a title search be performed by a competent professional. According to the owner, the proposed improvements will not be platted as condos.

ASSESSED VALUE AND TAXES

The subject property is shown on the Guilford County Tax Records as being 19 parcels, however, since we are appraising the subject under common ownership as a single parcel, we will analyze the tax liability based on the total property. The subject property has a total assessed value of $1,516,000. The subject property is located inside the city limits of Greensboro. The 2018 tax rate has been established at $1.363 per $100 of assessed value. The property estimated taxes are estimated as follows:

Total Assessed Value 2018 Tax Rate/$100 Estimated 2018 Tax Liability $1,516,000 $1.363 $20,663.08

The appraiser believes the current assessed value would be favorable to the owner at this time.

AT COMPLETION Based on the cost approach, the subject will have a value of $3,050,000 at completion. We will estimate the subject property to have an assessed value of 90% of the this value or $2,745,000. The subject property is located inside the city limits of Greensboro. The 2018 tax rate has been established at $1.363 per $100 of assessed value. The property estimated taxes are estimated as follows:

Total Assessed Value 2018 Tax Rate/$100 Estimated 2018 Tax Liability $2,745,000 $1.363 $37,414.35

HIGHEST AND BEST USE ANALYSIS

Highest and Best Use of Land as Though Vacant If the land were vacant in the subject area, it could be developed within the restrictions of zoning. A probable use must be such that sufficient income is produced by a building or buildings to allow for a return to the land. The present zoning allows the site to be utilized for student housing type improvements. Some of the surrounding sites are also utilized for such improvements and the area has been developed with other apartment and residential projects. These uses have shown good economic success and occupancy is

Foster Appraisal Services, Inc. 34 1915 Spring Garden Street, Greensboro, NC

relatively good. Therefore, the highest and best use of the site as if vacant is for rezoning to multi-family zoning and to be improved with multi-family development which would take advantage of the convenient location and proximity to area educational faculties, conform to current surroundings, and fully utilize the site.

Physically Possible Use The physical aspects of the site are the first constraints on its possible use. The larger the site, the greater the potential to achieve economies of scale and flexibility in development. The subject property consists of approximately 1.42 acres of land. The size, shape, and topography of the site are conducive to a wide variety of uses. The property has adequate access. The physical constraints of the site are not believed to hinder development of the subject to its highest and best use.

Feasible Use From a financial standpoint, any property development that would produce a positive rate of return is considered a feasible use. Factors determining feasible uses include those previously discussed when considering both possible and legal uses. Additional factors that need to be considered with respect to feasibility include location, access, frontage/shape, and adjacent land uses. In addition, an analysis of relevant market information concerning the demand and supply of the subject property type helps determine an expected return and thus the feasibility of a potential or existing use. If the land were vacant in the subject area, it could be developed within the restrictions of zoning. Though the site could be developed with 36 units in total, we believe the site could only physically accommodate an additional 12 units. Based on the assumption, we will estimate the excess land to be 12 units.

In analyzing the feasible use of the subject property, we have considered the factors previously listed. The property consists of approximately 1.42 acres of land and is located in an area characterized primarily by mixed use development with a strong presence of single family, multi family, and student housing. The appraisers found adequate market data to analyze, and believes that these properties are in good demand.

HIGHEST AND BEST USE OF VACANT LAND In the final analysis, a determination must be made as to which feasible use is the subject's highest and best use. The subject has a desirable location in the northwestern edge of downtown Greensboro. Also, the demand for moderately priced student housing in the area is presently adequate. After considering the possible, legal, and feasible uses of the subject site, it is our opinion that the highest and best use, as vacant, is for multi- family development. A lease survey can be seen in the Income Approach to Value section of this report, which lends support to this conclusion.

HIGHEST AND BEST USE AS IMPROVED Since the existing improvements include a student housing complex, the demand for student housing is adequate in the Greensboro area, and the current zoning permits the existing and proposed improvements, also, the existing improvements return a satisfactory yield to the land, the highest and best use as improved is for continued use of the existing improvements and to develop the remainder of the site as proposed.

Foster Appraisal Services, Inc. 35 1915 Spring Garden Street, Greensboro, NC

THE VALUATION OF LAND BY THE SALES COMPARISON APPROACH

The value of the subject site will be estimated using the Sales Comparison Approach to Value by comparing the subject site to similar vacant properties and making the necessary adjustments to the comparable sales considering factors such as:

1) Property Rights Conveyed, 2) Financing, 3) Conditions of Sale, 4) Market Conditions (time), 5) Location/Access, and 6) Physical Characteristics

The appraiser has made a careful survey of the area and has found four land sales within the subject area, which are comparable to the subject site. One of the four sales (sale #3) is part of the subject’s development. Use of this sale is not preferred, but due to limited number of value indicators, we will utilize this sale. All comparable sales are located in areas with similar utilities and zoning. The appraiser believes that the quantity and quality of the following sales data, after proper adjustments, produce a sound estimate of value for the subject tract. The vacant land sales considered comparable to the subject follow on the immediate pages. This valuation of the land is subject to the theory of consistent use. The Dictionary of Real Estate Appraisal has defined consistent use as follows:

consistent use: The concept that land cannot be valued on the basis of one use while the improvements are valued on the basis of another.

The following land sales were found that exhibited a reasonable degree of similarity to the subject property. The subject property consists of +/-1.42 acres of land that would legally allow 36 units if vacant. If the number of allowable units is changed in any way, it will have an impact on value.

Following the sales data is an adjustment grid, which compares the comparables to the subject parcel of land.

Foster Appraisal Services, Inc. 36 1915 Spring Garden Street, Greensboro, NC

COMPARABLE LAND SALES SUMMARY

Location Sale Date Price No. of Units Price/Unit 900 Hobbs Road 3/17 $3,200,00 188 $17,021 0 705 Pisgah Church 10/17 $1,760,00 71 $24,789 Road 0 3523 Lewiston Road 4/18 $729,164 68 $10,723 1001 Pisgah Church 8/16 $280,000 14 $20,000 Road

LAND SALE NO. 1

Property Identification Multi-family Address 900 Hobbs Road, Greensboro, North Carolina Tax ID 7855127365 Sale Data Grantor Somerset at Friendly Center Grantee Friendly Center Apartments, LLC Sale Date March 15, 2017 Deed Book/Page 7913/480-482 Sale Price $3,200,000 Verification Deeds/Public records/ Buyer Phil Payonk Land Data Zoning PUD Topography Mostly level and cleared Utilities All Public Shape Irregular Land Size Information Gross Land Size 4.02 Acres or 175,111 SF Indicators Sale Price/Gross Acre $796,020

Foster Appraisal Services, Inc. 37 1915 Spring Garden Street, Greensboro, NC

Sale Price/Gross SF $18.27 Sale Price/Unit $17,021 Remarks: This sale is located on the corner of Northline Avenue and Hobbs Road, at Friendly Shopping Center. This site was developed with 188 units.

Foster Appraisal Services, Inc. 38 1915 Spring Garden Street, Greensboro, NC

LAND SALE NO. 2 Property Identification Address 705 Pisgah Church Road, Greensboro, North Carolina Sale Data Grantor Henson Realty, LLC Grantee D. R. Horton, Inc Sale Date October 3rd,2017 Deed Book/Page 7982/471-474 Sale Price $1,760,000 Verification CoStar, Deeds, Listing Broker Paul Milam Land Data Zoning CD-RM-8 Topography Rolling and wooded Utilities All City Shape Irregular, but functional Land Size Information Gross Land Size 11.756 Acres or 512,091 SF Indicators Sale Price/Gross Acre $149,711 Sale Price/SF $3.43 Sale Price/Unit $24,789 Remarks The site was rezoned to CD-RM-8, and allowed 71 units per Brad Yoder “seller’s representative”.

Foster Appraisal Services, Inc. 39 1915 Spring Garden Street, Greensboro, NC

LAND SALE NO. 3

Property Identification Multi-family Address 3525 Lewiston Road, Greensboro, NC Sale Data Grantor William Henry Smith and wife Grantee Smith FARMS Greensboro, LLC Sale Date April 9, 2018 Deed Book/Page 8036/1846-1848 Sale Price $729,164 Verification Sales Contract Land Data Zoning CD-RM-12 Topography Mostly clear Utilities All Public Shape Irregular, but functional Land Size Information Gross Land Size 8.75 Acres or 381,150 SF # of Allowable Units 68 Indicators Sale Price/Gross Acre $83,333 Sale Price/Gross SF $1.91 Sale Price/Allowable Unit $10,723 Remarks This property is planned to be developed along with adjacent tracts as a multifamily development. This site is traversed by a noise cone from an airport.

Foster Appraisal Services, Inc. 40 1915 Spring Garden Street, Greensboro, NC

LAND SALE NO. 4

Property Identification Multi-family Address 1001 Pisgah Church Road, Greensboro, NC Sale Data Grantor McCracken Properties, Inc. Grantee Bostic Investments, LLC Sale Date August 4, 2016 Deed Book/Page 7842/1107-1109 Sale Price $280,000 Verification Deeds/Public Records/Seller John McCracken Land Data Zoning CU-RM-8 Topography Wooded Utilities All Public Shape Triangular, but functional Land Size Information Gross Land Size 2.51 Acres or 109,336 SF # of Allowable Units 14 Indicators Sale Price/Gross Acre $111,554 Sale Price/Gross SF $2.56 Sale Price/Allowable Unit $20,000

Foster Appraisal Services, Inc. 41 1915 Spring Garden Street, Greensboro, NC

LAND SALES SUMMARY

The appraiser searched the market for the best sales available in both time and location. There are few sales of multi-family land in Greensboro, especially in the subject neighborhood.

The appraiser located four land sales that are considered reasonably similar to the subject and are felt representative of the actions of typical buyers and sellers in the market. The comparable land sales occurred over the past two years. The sales vary in size ranging from 2.51 to 11.756 acres allowing 14 to 188 units. The unit of comparison for multi- family land sales is the price per allowable unit. The comparable land sales indicate a range of values from $10,723 to $24,789 per unit. This range can be further narrowed down by comparing each to the subject property.

The primary items of consideration are for property rights, financing terms, conditions of sale, and expenditures immediately after purchase, and marketing conditions. If applicable, adjustments are applied individually on the following grid.

Foster Appraisal Services, Inc. 42 1915 Spring Garden Street, Greensboro, NC

CONDITIONS OF SALE ADJUSTMENT No conditions of sale adjustments are warranted

MARKET CONDITIONS OR TIME ADJUSTMENT All three sales are current sales and no adjustment is warranted.

Foster Appraisal Services, Inc. 43 1915 Spring Garden Street, Greensboro, NC

LOCATION ADJUSTMENT The location adjustment considers proximity to major traffic arteries, neighborhood amenities, and area employment. The subject is considered to be well located with good access, several major employers, colleges, and convenience to shopping and services. Comp #1 is located in very desirable locations in Greensboro, with superior area amenities. This comp was adjusted downward. Comps 2-4 are inferior and required positive adjustments.

DENSITY Investors will typically pay more for land that allows more units because more units typically equal a higher return to the developer. The appraiser attempted to pair sales for an adjustment; however, was unable to do so due to other differences. In analyzing the sales, the appraiser is of the opinion that an adjustment for number of units per acre is warranted for all sales.

NUMBER OF UNITS Typically, a larger development will sell for less on a per unit basis than an equally desirable, but smaller development. This adjustment is similar to the density adjustment; however, this adjustment considers a total number of units, rather than on a unit per acre basis. In analyzing the sales, the appraiser is of the opinion that an adjustment for total number of units is warranted for all sales.

TOPOGRAPHY No adjustments were required.

EXTERNAL OBSOLESCENCE Sale #3 is under the noise cone of the airport. We believe a positive adjustment for external obsolescence created by noise from the airport is warranted. A 15% adjustment was applied to this sale.

ACCESS The subject has two points of access. Sale #1 has three points of access and required a negative 10% adjustment for this superior feature. Sales 2, 3, and 4 are have inferior access and received positive adjustments.

UTILITIES No adjustments were required.

SUMMARY After adjusting the comparable sales for dissimilarities, the range of prices per unit for the sales is $15,660 to $31,977, with a mean of $22,095 and a median of $20,371 per unit. The subject has a great location with good topography, access and utilities. We will conclude to a value of $22,095 per unit.

Foster Appraisal Services, Inc. 44 1915 Spring Garden Street, Greensboro, NC

36 Units x $22,095/Unit = $795,420 minus raising cost $10,000 $785,420

Rounded to $790,000

Land Value Allocation (Excess Land) For appraisal purposes, we will allocate the land value based on utilized density (16 units) and total allowable (36 units) which would legally provide for 20 more units. If the site were vacant we believe the subject site could legally and physically be developed with 36, however, the site is improved with two 8-unit buildings and proposed to be developed with an additional 12-unit building. We believe the site will only physically allow for an additional 12 units due to the configuration of existing improvements, therefore, we will estimate excess land in the amount of 12 units minus raising cost as follows:

12 x $22,095/Unit = $265,140 minus raising cost $10,000 = $255,140

Rounded To $255,000 (Excess Land Value)

THE COST APPROACH TO VALUE

An estimate of value by the Cost Approach is found by estimating the reproduction cost of the new improvements and deducting the accrued depreciation (physical, functional, and economic), which results in the depreciated value of the improvements. The depreciated value of the improvements is then added to the estimated value of the land.

The Cost Approach to Value relies heavily upon the principle of substitution, since a typical buyer would not pay more than the reproduction cost of the new improvement less the accrued depreciation of an equal improvement. It can be said that cost is converted to value by depreciation in this approach.

The Cost Approach to Value is valid if the estimated land value is accurate, if the estimated reproduction cost of the improvements new are correct, and if the depreciation has been correctly estimated. The difficulty lies in estimating physical deterioration, and functional and economic obsolescence. These are judgment factors based on the appraiser's experience. However, the Cost Approach to Value gathers strength when correlated with the other approaches to value. Also, the subject is in new condition, with no depreciation or any type of obsolescence.

Cost estimates have been provided and will be checked for reasonableness by comparing them to costs provided by the Marshall and Swift Cost Guide. The cost of the improvements has been estimated through the Marshall Valuation Service Section 12 Page 16, Dated August 2018, for a Good class D Multiple Residence. These figures have been checked for accuracy with developers in the area and against cost data in the appraiser’s files. The following cost estimate is based on the gross heated building area

Foster Appraisal Services, Inc. 45 1915 Spring Garden Street, Greensboro, NC

of the improvements and includes contractor's profit, overhead, developer’s profit of 8%, as well as architect’s fees.

ACCRUED DEPRECIATION

Depreciation is the difference between the reproduction cost (new) of the improvements and the present market value of the improvements, both estimated at the same date. Depreciation can be classified into three basic categories:

1) physical depreciation, 2) functional obsolescence, and 3) economic obsolescence.

Physical Depreciation

Physical depreciation is based on the wear and tear and natural decay of a structure. This form of depreciation can be further broken down into curable and incurable:

Curable Physical Deterioration, or deferred maintenance, refers to the amount required or replace or repair worn parts of the improvements. These repairs add value to the structure. This amount could be deducted because an informed buyer would pay that much less in the anticipation of making the repairs. Since the subject property is in new and assumed to be completed in good condition, no items of repair are applicable.

Incurable Physical Deterioration refers to those needed repairs whose cost is greater than the amount of added value perceived in the market. In this instance, the incurable physical deterioration was estimated using the Effective Age -Economic Life application. This is a direct method based on observation combined with an age/life formula. When applying the effective age - economic life formula, it is assumed that deterioration occurs at a constant average annual rate over the estimated life of the improvements. The formula is as follows for the existing building:

Effective Age Economic Life = Depreciation 14/45 = 31%

Functional Obsolescence

Functional obsolescence reflects the loss in value brought about by inefficiencies such as inadequacies or super adequacies in construction, or changes in the art of construction. This may be due to a poorly designed floor plan or excesses.

According to observations of the building plans, the subject property will have a desirable floor plans and does not exhibit any functional obsolescence.

Foster Appraisal Services, Inc. 46 1915 Spring Garden Street, Greensboro, NC

Economic Obsolescence

Economic obsolescence is the loss in value due to the impairment of desirability or useful life arising from factors external to the property. Such factors may include economic changes or environmental forces, which affect supply and demand relationships in the market place. This type of depreciation is always incurable.

The week demand has depressed rents and increases vacancies in the office market. This is considered an economic obsolescence and would typically be calculated by estimating the loss of income, and capitalizing it using the yield rate found in the mortgage equality method. The subject will be owner occupied and would only be subjected to this loss of income if it were vacant. The appraiser will assume that the owner will be in place for an extended period of time. In addition, the values between the income and cost approach are relatively tight and suggest a very nominal amount of economic obsolescence if any would be recognized. Therefore, no economic obsolescence will be noted

Your attention is directed to the cost schedules that follow which include cost estimates for the structure and supporting site improvements. These estimated costs are shown as follows:

Foster Appraisal Services, Inc. 47 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 48 1915 Spring Garden Street, Greensboro, NC

Proposed Improvements

The costs from Marshall Valuation Service are averages of final costs including architects’ fees and contractors’ overhead and profit, sales taxes, permit fees and insurance during construction. Interest on interim construction financing is also included. The subject is representative of Class D multiple residences. Multiple residences are referred to as buildings of three or fewer stories, in which each unit has a kitchen and bath, and which are designed for other than transient occupancy. The cost estimates can be found in section 12 page 16 dated August 2018 in the Marshall and Swift Cost Guide. The total cost new for the proposed improvements based on Marshall Valuation is shown as follows:

Foster Appraisal Services, Inc. 49 1915 Spring Garden Street, Greensboro, NC

The developer’s projected cost is as follows:

The developer’s cost estimate was $1,003,000 which is for the site work, building cost, and contractors profit. The building cost only is $863,000. The cost estimate provided by the Marshall & Swift Cost Manual is $867,150 (building only) which is a difference of only $4,150. This is reasonably close to the developer’s cost estimate but suggests that the developer’s cost are reasonable.

Foster Appraisal Services, Inc. 50 1915 Spring Garden Street, Greensboro, NC

The estimated value “As Is” per the cost approach is $1,900,000 which includes the total land value and deducts raising costs. The estimated value of the proposed improvements at completion are $1,150,000. The sum of these two figures represents the value of the total property “At Completion” as follows:

As Is $1,900,000 Proposed Improvements $1,150,000 Total Value $3,050,000

$3,050,000 “AT COMPLETION”

INCOME APPROACH

Using the income approach to value the appraiser converts the anticipated future benefits of ownership into present value. The income approach can best be used on income producing properties because receiving future benefits from an investment motivates the investor. Therefore, it is the present value of future benefits, or income that has to be estimated. The weakness of this approach is in estimating the correct capitalization rate. A difference of a small percentage can make a value difference of thousands of dollars.

Inherent in the income approach is the discounting of anticipated net incomes over the investment holding period. The discount process, or the use of an overall rate, are reliable methods of converting future income projections into an estimated value.

The sometimes-preferred method, the discounted cash flow method (DCF), is a means of isolating differences in the timing of cash flows by discounting these cash flows to their present values.

The overall rate, commonly used, is the direct ratio between annual net income (NOI) and value or sales price. This section of the appraisal will investigate both of these techniques of value estimations.

The income approach begins with a reliable estimate of rental income to be generated by the subject property. Such an estimate is made by a survey of market conditions, both historical and forecasted, giving due consideration to current and future completion for similar type apartment projects.

Of equal consideration is the projection of market vacancy at estimated economic rental rate. Again, an analysis of competitive apartment complex rentals, both existing and forecasted, will provide a reliable estimate for vacancy.

The true merits of the income approach are that it best provides a process of measuring or estimating the extent of future benefits which might reasonably be expected, translating these benefits into a single value at a particular point in time. This income may be developed and supported by comparison in the marketplace. A reliable estimate of the income can then be converted into value. Due to the character of the subject property

Foster Appraisal Services, Inc. 51 1915 Spring Garden Street, Greensboro, NC income stream, the net income can be converted into an indication of value by the following procedure:

1. Direct Capitalization

A. Project potential income from all sources that a competent owner could generate from a property. B. Deduct an estimate of vacancy and collection allowance to arrive at effective gross income. C. Deduct operating expenses, insurance and real estate taxes from effective income. The result is a stabilized net operating income. D. Develop an overall capitalization rate. E. Divide the net operating income by the overall capitalization rate, resulting in a value estimate.

MARKET RENTAL SUMMARY

An investigation of the subject market was conducted in order to verify the appropriate market rent for the subject. Several of the most comparable rentals are listed on the following pages. Due to the subject property type and floor plans the appraiser has estimated a market rent for the three bedroom three bath units on a per bed basis. Following these rents is a discussion of gross income, vacancy and collection loss, effective income, expenses, and net annual income.

Foster Appraisal Services, Inc. 52 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 1 Name: Collegiate Commons Address: 1407 Cunningham Street, Greensboro, NC # Units: 108 Year Built: 2001 Occupancy 3/18 97.2% Utilities: Water, Electric, Cable Amenities: Business Center, Fitness

Unit Type Size Unit Monthly Rent Rent/Bed 3 BR/3Bath 1,275 SF $1,290 $430

Comparable Rental # 2 Name: Spartan Crossing Address: 704 Granit Street, Greensboro, NC # Units: Unknown Year Built: 2005 Occupancy 10/18 99.00% Utilities: Electricity, Cable, Trash Amenities: Security Alarm

Unit Type Size Unit Monthly Rent Rent/Bed 3 BR/3Bath 1,300 $1,650 $550

Foster Appraisal Services, Inc. 53 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 3 Name: Sterling Park Location: 1722 Sherwood Street #A, Greensboro, NC # Units: 54 Occupancy 3/18: 97.2% Year Built: 2008 Utilities: Water, Electricity, Cable, Recycling Amenities: Business Center.

Unit Type Size Unit Monthly Rent Rent/Bed 3 BR/3Bath 1,317 SF $1,605 $535 3 BR/3Bath 1,400 SF $1,620 $540

Comparable Rental # 4 Name: Summit at the edge Location: 1216 Oakland Avenue, Greensboro, NC # Units: 57 Occupancy 10/18: 99% Year Built: 2007 Utilities: Water/sewer, trash, wifi, electricity Amenities: Exercise room, pool

Unit Type Size Unit Monthly Rent Rent/Bed 3BR/3 Bath 1,050 $1,497 $499

Foster Appraisal Services, Inc. 54 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 5 Name: Sebastian Village Location: 1416 E. Washington Street, Greensboro, NC # Units: 48 Occupancy 3/18: 88.90% Year Built: 2007 Utilities: Water, Electricity, Cable, Recycling Amenities: Security Alarm.

Unit Type Size Unit Monthly Rent Rent/Bed 3BR/3 Bath 1,317 SF $1,335 $445

Unit Type Size Unit Monthly Rent Rent/Bed 3BR/3 Bath 1,400 SF $1,395 $465

Comparable Rental # 6 Name: University Landing Location: 1600 Washington Street, Greensboro, NC # Units: 29 Occupancy 3/18: 93.3% Year Built: 2009 Utilities: Water, Electricity, Cable Amenities: Security Alarm

Unit Type Size Unit Monthly Rent Rent/Bed 3BR/3 Bath 1,317 SF $1,350 $450

Unit Type Size Unit Monthly Rent Rent/Bed 3BR/3 Bath 1,400 SF $1,410 $470

Foster Appraisal Services, Inc. 55 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 7 Name: The Park Location: 804 S. Chapman Street, Greensboro, NC # Units: 36 Occupancy 3/18: Unknown Year Built: 2008 Utilities: Electricity, water, cable, trash Amenities: None

Unit Type Size Unit Monthly Rent Rent/Bed 3BR/3 Bath 1,400 SF $1,605 $535

Two Bedroom Two Bath Analysis

An investigation of the subject market was conducted in order to verify the appropriate market rent for the subject. Several of the most comparable rentals are listed on the following pages. Due to the subject property type and floor plans the appraiser has estimated a market rent for the two bedroom two bath units on a per bedroom basis. Following these rents is a discussion of gross income, vacancy and collection loss, effective income, expenses, and net annual income.

Foster Appraisal Services, Inc. 56 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 1 Name: Spartan Crossing Address: 704 Granit Street, Greensboro, NC # Units: Unknown Year Built: 2005 Occupancy 10/18 99.00% Utilities: Electricity, Cable, Trash Amenities: Security Alarm

Unit Type Size Unit Monthly Rent Rent/Bed 2 BR/2Bath 834 $1,200 $600

Foster Appraisal Services, Inc. 57 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 2 Name: Sebastian Village Location: 1416 E. Washington Street, Greensboro, NC # Units: 72 Occupancy 3/18: 97.20% Year Built: 2007 Utilities: Water, Electricity, Cable, Recycling Amenities: Security Alarm.

Unit Type Size Unit Monthly Rent Rent/Bed 2BR/2 Bath 976 SF $1,020 $510

Unit Type Size Unit Monthly Rent Rent/Bed 2BR/2 Bath 1,009 SF $1,020 $510

Unit Type Size Unit Monthly Rent Rent/Bed 2BR/2 Bath 1,086 SF $1,040 $520

Foster Appraisal Services, Inc. 58 1915 Spring Garden Street, Greensboro, NC

Comparable Rental # 3 Name: Sterling Park Location: 1722 Sherwood Street #A, Greensboro, NC # Units: 30 Occupancy 3/18: 100% Year Built: 2008 Utilities: Water, Electricity, Cable, Recycling Amenities: Business Center.

Unit Type Size Unit Monthly Rent Rent/Bed 2 BR/2Bath 976 SF $1,170 $585 2 BR/2Bath 1,086 SF $1,180 $590

Comparable Rental # 4 Name: University Landing Location: 1600 Washington Street, Greensboro, NC # Units: 21 Occupancy 3/18: 90.9% Year Built: 2009 Utilities: Water, Electricity, Cable Amenities: Security Alarm

Unit Type Size Unit Monthly Rent Rent/Bed 2BR/2 Bath 976 SF $980 $490

Unit Type Size Unit Monthly Rent Rent/Bed 2BR/2 Bath 1,085 SF $1,000 $500

Foster Appraisal Services, Inc. 59 1915 Spring Garden Street, Greensboro, NC

The subject consists of 16, three-bedroom, three-bath units and a proposed 12, two- bedroom, two-bath units. The subject’s utility package includes: electricity ($50.00 allowance), water and sewer, internet, and trash. The appraiser has searched the market for similar student housing facilities of similar age and amenities. The comps provided rental rates from $385 to $550 per unit for three-bed, three-bath units, and from $510 to $600 per bedroom for the two-bedroom, two bath units. The current rent for the existing 3-bedroom, 3-bath units is $450-465 which we consider to be market rates.

The property manager will be asking $575/bed for the two-bedroom, two-bath units at completion. This rate is also supported by the range of rental rates provided by competing properties.

Rental Analysis Conclusion Based on a survey of competing properties in the subject’s market we have found market rents to be as follows:

3-Bedroom, 3-Bath Units $460/Bed

2-Bedroom, 2-Bath Units $575/Bed

Vacancy and Credit Loss/Absorption As of the date of inspection, the subject was 90% occupied. The appraiser surveyed competing properties and found occupancies from 88.9%-100% for three-bedroom, three- bath units, and occupancies from 90.9% to 100% in the subject area. The appraiser inspected surrounding competing properties and noticed very few vacancies. The 2018 Real Data Apartment Survey has reported a vacancy rate of 2.7% for two-bedroom units and a 3.3% vacancy for three-bedroom units in the Greensboro-Winston Student Housing Market. The appraiser has given most credence to reported occupancies in the very immediate area. Based on the comparables and information provided by market participants a vacancy of 95% is considered typical for the subject property for each unit type.

The proposed 2-bedroom, 2 bath units (24 bedrooms) are to be completed in May of 2019. The property manager, Brian Nelson, believes they will have at least 10 beds pre- leased at completion, and will lease the remaining 14 bedrooms from May to August of 2019. They Apartment Index does not provide stats for properties under lease-up or any meaningful absorption stats for student housing. It does state that the overall apartment market is healthy, with 1,984 units absorbed over the last year which easily offset the 1,613 units added to the supply over the same period.

Below is a chart of apartment stats by type. These statistics were provided by the 2018 Real Data Apartment Index. These stats for student housing indicate that the subject’s rental rates and vacancy rates are inline with market expectations.

Foster Appraisal Services, Inc. 60 1915 Spring Garden Street, Greensboro, NC

Discounted Cash Flow The income stream has also been analyzed by a discounted cash flow analysis, which has been structured on estimated net operating income with both rent, and expense increases. The rental increases are estimated at an annual rate of 2.0% and expenses are increased at an annual rate of 2.0%. This rental increase is supported by the modern apartment housing market trend. The expenses have been increased in line with typical CPI increases.

The Investor Survey, by RealtyRates.com 2nd quarter 2018 provides a range of discount rates, which are applicable to Student Housing. This range is from 6.66% to 13.69%, with an average of 10.32%. The discount rate can be viewed as the desired rate of return and includes components such as the cost of capital and risk. However, this survey is of high-grade properties. The discount rate may be derived as follows:

Safe Rate (10 Yr. T Bill as of 10/25/18 0.0314 Add for Risk 0.0250 Add for Lack of Liquidity 0.0225 Indicated Discount Rate 0.0789

Round To 0.8

Foster Appraisal Services, Inc. 61 1915 Spring Garden Street, Greensboro, NC

The safe rate has been based on the available yield rate for 10-year US Treasury bond. The adjustments made to the safe rate reflect the added risk with this type of investment and for the fact that cash could not be quickly obtained from this investment.

An investor has the choice of many types of securities, bonds, debentures, stocks, enterprises, or other real estate. However, this 8.00% discount rate reflects what the typical attitude would be toward this particular real estate investment. The following assumptions are utilized for the discounted cash flow analysis:

Discount Rate of 8.00% Projection Period of 5 Years and 10 Years Expense increases of 2.0% per Year Income Increases of 2.0% per Year Vacancy 5% annually Reserves for Replacement will remain the same throughout the forecast period Terminal Capitalization Rate of 6.5% Sales Commission of 3.0%

AS IS

Foster Appraisal Services, Inc. 62 1915 Spring Garden Street, Greensboro, NC

Gross Potential Income The initial market rental rates for the subject units have been determined as shown. Other income from utility reimbursements, deposits, late fees, pet fees, etc. is estimated to be additional income contributing to the GPI.

Vacancy and Credit Loss This figure represents the loss of potential income due to the portion of the subject that could not be rented during the year, or the vacancy levels created during the periods of tenant turnover between rental terms. As of the date of inspection, the subject was 90% occupied. The appraiser surveyed competing properties and found occupancies from 88.9%-100% for three-bedroom, three-bath units, and occupancies from 90.9% to 100% in the subject area. The appraiser inspected surrounding competing properties and noticed very few vacancies. The 2018 Real Data Apartment Survey has reported a vacancy rate of 2.7% for two-bedroom units and a 3.3% vacancy for three-bedroom units in the Greensboro-Winston Student Housing Market. The appraiser has given most credence to reported occupancies in the very immediate area. Based on the comparables and information provided by market participants a vacancy of 95% is considered typical for the subject property for the three bed units. This will include a 4.5% vacancy and 0.5% credit loss.

Effective Gross Income This figure is simply the amount of income the subject will actually generate after reflecting the vacancy and collection loss.

Operating Expenses As previously mentioned, in order to arrive at a net income estimate, the typical expenses that would be incurred by the subject property to produce the anticipated income stream, as well as any vacancy and collection loss, must be deducted from the potential gross income. The operating expenses are usually estimated by analyzing the actual subject expenses and by comparison with similar properties and discussions with area property managers. An operating budget has been provided by the subject developer and the estimates are considered to be reasonable. The first full year of stabilized expenses were used.

Our studies have shown that the most accurate unit of comparison in apartment expenses is on a per square foot basis using the net leaseable area (NLA), on a per bed, or on a percentage basis (% of EGI). Based on this information we estimate the expenses for the subject to be approximately $8.11 per SF, $3,148 per bed, or 57.7% of EGI. Our research indicates that this amount is slightly above area operating expenses, however, the subject provides a utility allowance to the tenant, this significantly increases expenses, and is a property type that requires extensive management. This expense also includes reserves for replacements. The property manager has provided use with a detailed operating history which has provided itemized expenses. These expenses are considered to be in line with market rates.

Expense items from similar properties have been reviewed and analyzed for this analysis. Certain expenses do seem to stabilize where some adjust over time for inflation. Based

Foster Appraisal Services, Inc. 63 1915 Spring Garden Street, Greensboro, NC

upon our analysis of the market conditions, the following list sets forth the discussion of each expense item (management, utilities, structural maintenance, etc.) to be deducted from the potential gross income. The expenses anticipated to be incurred by the subject appear to be in line with comparable apartments of this age, size, etc., in the greater regional area.

Management /Administration Management/Administration fees are usually based on a percentage of the effective gross income of the particular project and complexes of comparable size to the subject are typically managed by professional management. Typically, management companies first base their fees on a range of approximately three to six percent of effective gross income for full management services and a variation of that rate when they are combined with additional property managers. The developer’s expense estimate considers a management company fee and on-site administration separately as shown above. The subject will demonstrate a management fee of approximately 7% of the effective gross rental income and additional 3% administrative expenses.

Taxes - Real Estate Real Estate Taxes were discussed in the front portion of the report. The appraiser has estimated this expense to be $430.48 per bed or $20,663 annually which is $1.11/SF.

Insurance The insurance expense for the subject is based on the rates paid by the owner for its coverage for fire, extended coverage, and public liability. The manager provided an expense of $3,928 annually which is $81.83/bed or $0.21/SF.

Maintenance and Repairs This item includes interior and exterior maintenance and repairs. This item is reported at $22,520 annually or $469.17 per bed or $1.21/SF per year.

Contract Services This expense includes lawn care, pest control, snow removal, ect... The provided expense is $5,948 annually or $123.92/bed or $0.32/SF annually.

Utilities The subject will include a $50 electricity allowance and water/sewer/wifi/trash in the rent. Additionally, the owner will have common area utility expenses. The manager provided an expense of $62,607 annually or $1,304/bed or $3.36/SF.

Marketing In order to effectively compete for leases with the comparable apartment complexes in the area, the subject must continue advertise extensively. This expense is $2,617 annually or $54.52/Unit or $0.14/SF annually.

Legal/Professional Fees These expenses are often incurred during evections or tax preparation, ect... This expense is $3,000 annually or $62.50/Unit or $0.16/SF annually.

Foster Appraisal Services, Inc. 64 1915 Spring Garden Street, Greensboro, NC

Reserve for Replacement The reserves for replacement expense is an estimate based on the establishment of a sinking fund to replace short lived items that may be anticipated to fully expire their usefulness or be replaced during the holding period of the property. This reserve usually includes floor covering, air conditioning and heating components, appliances, hot water heaters, and roof covering. An estimate of $4,656/yr. ($97.00/Bed and $0.25/SF) is set aside for the replacement items.

Conclusion The discounted cash flow analysis has provided a value of the subject, “AS IS” based on a five-year projection at $1,700,000 and $1,730,000 which is based on a 10-year projection. Both indicators are reasonable and this is a tight range. Due to a strong student housing market, we will conclude to the upper end of the range at $1,730,000 + $255,000 (Excess Land) for the value of $1,985,000 “AS IS”.

DCF “AT COMPLETION & STABILIZED OCC.”

Discount Rate of 8.00% Projection Period of 5 Years and 10 Years Expense increases of 2.0% per Year Income Increases of 2.0% per Year Vacancy of 9.5% during the first year (Lease up) then stabilized at 5% annually. Reserves for Replacement will remain the same throughout the forecast period Terminal Capitalization Rate of 6.5% Sales Commission of 3.0%

Foster Appraisal Services, Inc. 65 1915 Spring Garden Street, Greensboro, NC

Gross Potential Income The initial market rental rates for the subject units have been determined as shown. Other income from utility reimbursements, deposits, late fees, pet fees, etc. is estimated to be additional income contributing to the GPI.

Vacancy and Credit Loss This figure represents the loss of potential income due to the portion of the subject that could not be rented during the year, or the vacancy levels created during the periods of tenant turnover between rental terms. As of the date of inspection, the subject was 90% occupied. The appraiser surveyed competing properties and found occupancies from 88.9%-100% for three-bedroom, three-bath units, and occupancies from 90.9% to 100% in the subject area. The appraiser inspected surrounding competing properties and noticed very few vacancies. The 2018 Real Data Apartment Survey has reported a vacancy rate of 2.7% for two-bedroom units and a 3.3% vacancy for three-bedroom units in the Greensboro-Winston Student Housing Market. The appraiser has given most credence to reported occupancies in the very immediate area. Based on the comparables and information provided by market participants a vacancy of 95% is considered typical for

Foster Appraisal Services, Inc. 66 1915 Spring Garden Street, Greensboro, NC

the subject property for the three bed units. This will include a 4.5% vacancy and 0.5% credit loss.

Effective Gross Income This figure is simply the amount of income the subject will actually generate after reflecting the vacancy and collection loss.

Operating Expenses As previously mentioned, in order to arrive at a net income estimate, the typical expenses that would be incurred by the subject property to produce the anticipated income stream, as well as any vacancy and collection loss, must be deducted from the potential gross income. The operating expenses are usually estimated by analyzing the actual subject expenses and by comparison with similar properties and discussions with area property managers. An operating budget has been provided by the subject developer and the estimates are considered to be reasonable. The first full year of stabilized expenses were used.

Our studies have shown that the most accurate unit of comparison in apartment expenses is on a per square foot basis using the net leaseable area (NLA), on a per bed, or on a percentage basis (% of EGI). Based on this information we estimate the expenses for the subject to be approximately $7.13 per SF, $3,272 per bed, or 60.5% of EGI. Our research indicates that this amount is slightly above area operating expenses, however, the subject provides a utility allowance to the tenant, this significantly increases expenses, and is a property type that requires extensive management. This expense also includes reserves for replacements. The property manager has provided use with a detailed operating history for the subject’s current 48 beds or 18,624 SF. In order to project expenses for the subject at completion, we divided each expense category by the number of existing beds (48), then multiplied the expense per bed times the number of bedrooms at completion (72).

Expense items from similar properties have been reviewed and analyzed for this analysis. Certain expenses do seem to stabilize where some adjust over time for inflation. Based upon our analysis of the market conditions, the following list sets forth the discussion of each expense item (management, utilities, structural maintenance, etc.) to be deducted from the potential gross income. The expenses anticipated to be incurred by the subject appear to be in line with comparable apartments of this age, size, etc., in the greater regional area.

Management /Administration Management/Administration fees are usually based on a percentage of the effective gross income of the particular project and complexes of comparable size to the subject are typically managed by professional management. Typically, management companies first base their fees on a range of approximately three to six percent of effective gross income for full management services and a variation of that rate when they are combined with additional property managers. The developer’s expense estimate considers a management company fee and on-site administration separately as shown above. The

Foster Appraisal Services, Inc. 67 1915 Spring Garden Street, Greensboro, NC

subject will demonstrate a management fee of approximately 7% of the effective gross rental income and additional 3% administrative expenses.

Taxes - Real Estate Real Estate Taxes were discussed in the front portion of the report. The appraiser has estimated this expense to be $37,414 or $519.64 per bed or annually which is $1.13/SF.

Insurance The insurance expense for the subject is based on the rates paid by the owner for its coverage for fire, extended coverage, and public liability. We have estimated this expense to be $5,892 annually which is $81.83/bedroom or $0.18/SF.

Maintenance and Repairs This item includes interior and exterior maintenance and repairs. This item is estimated to be $37,780 annually or $524.72 per bedroom or $1.14/SF per year.

Contract Services This expense includes lawn care, pest control, snow removal, ect... The estimated expense is $8,922 annually or $123.92/bedroom or $0.27/SF annually.

Utilities The subject will include a $50 electricity allowance and water/sewer/wifi/trash in the rent. Additionally, the owner will have common area utility expenses. We estimated an expense of $93,911 annually or $1,304/bed or $2.84/SF.

Marketing In order to effectively compete for leases with the comparable apartment complexes in the area, the subject must continue advertise extensively. This expense is $3,926 annually or $54.52/Unit or $0.12/SF annually.

Legal/Professional Fees These expenses are often incurred during evections or tax preparation, ect... This expense is estimated to be $4,500 annually or $62.50/Unit or $0.14/SF annually.

Reserve for Replacement The reserves for replacement expense is an estimate based on the establishment of a sinking fund to replace short lived items that may be anticipated to fully expire their usefulness or be replaced during the holding period of the property. This reserve usually includes floor covering, air conditioning and heating components, appliances, hot water heaters, and roof covering. An estimate of $8,258/yr. ($114.69/Bedrooms and $0.25/SF) is set aside for the replacement items.

Conclusion Due to the minimal lease up period (less than one year), we will do not believe further discounting of rent loss necessary. The discounted cash flow analysis has provided a value of the subject, “At Completion & Stabilized” based on a five-year projection at $2,800,000 and $2,860,000 which is based on a 10-year projection. Both indicators are

Foster Appraisal Services, Inc. 68 1915 Spring Garden Street, Greensboro, NC

reasonable and this is a tight range. Due to a strong student housing market, we will conclude to the upper end of the range at $2,860,000 for the value “At Completion & Stabilized”.

Value “At Completion and Stabilized Occupancy” $2,860,000

MARKET APPROACH TO VALUE

A logical and direct approach to value of any property is the Sales Comparison Approach to Value. It can be said that this approach considers all factors of supply and demand in the market place. A definition of the Sales Comparison Approach to Value is as follows:

Sales Comparison Approach: Approach through which an appraiser derives a value indication by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison and making adjustments, based on the elements of comparison, to the sale prices of the comparable sales.

The market approach provides a strong indication of value when applicable because the value is derived directly from the market. The reliability of this approach depends upon the availability of such similar sales, the degree of comparability between properties, verification of the sales date, and the conditions under which the property is sold. The strength of the market approach is that it reflects actual market behavior of typical purchasers and sellers under current market conditions. It is direct, logical, and understandable. Its weakness is that there may be inadequate data in the market data to justify its use, and that it is based on historical data rather than future expectation where conditions of comparability may not closely conform to the subject property. As such, the greater the adjustment of the comparable, the less reliable is the indicated value from the analysis.

The Sales Comparison Approach will offer a somewhat limited ability to estimate market value of the subject due to a lack of sales of similar student apartment in the general subject area available to compare to the subject improvements. Sales of comparable student apartment improvements were obtained from the Greensboro area. Sales of truly comparable properties in the immediate area are limited. The appraiser used the most current sales available and verified each with a party involved in the transaction.

Foster Appraisal Services, Inc. 69 1915 Spring Garden Street, Greensboro, NC

SALE #1 University Landing Apartments is a 52 unit, 134 bedroom student apartment complex located at 1600 E. Washington Street in Greensboro that provides housing for students attending local colleges. The apartments range from 2 bedroom/2 bath units to 3 bedroom/3 bath units. This property was built in 2009. On December 12, 2017, Gang of 5 Guys, LLC sold this property to Univ Landing NCAT, LLC according to deed book 8004 page 242-244. The tax stamps on this deed indicate a purchase price of $3,915,000. Costar and broker Steve Maygar provided a price of $4,400,000 which is $32,836/bedroom or $68.55/SF. We believe the price provided by the broker to be most correct.

University Landing Apartments

SALE #2 The University Heights Apartments is a 24-unit, 60 bedroom student apartment complex located at 111 Marshall Street in Greensboro that provided housing for students attending local colleges such as A&T. The apartments range from 2 bedroom/2 bath units to 3 bedroom/3 bath units. This property was built in 2008. On December 27, 2017, HNP Investments, LLC sold this property to Height at A&T Apartments, LLC for a price of $1,625,000 or $27,083/bedroom or $64.48/SF according to deed book 8009 page 2189- 2191. Verified by broker Steve Maygar

University Heights Apartments

Foster Appraisal Services, Inc. 70 1915 Spring Garden Street, Greensboro, NC

SALE #3 Campus Crossing at Campus Village on 2909-2911 Spring Garden Street in Greensboro, NC is an apartment complex built in 1988 with 16 apartment units. 8 apartments are 2BR/2 Bath and 8 units are 3 BR/2 Bath for a total of 40 bedrooms. This is a student- centered property, housing students from local colleges. This property sold on May 16, 2017 for $1,350,000 or $33,750/bedroom or $87.62/square foot of building area according to deed book 7939 page 3024-3029. The seller is identified as C View, LLC, and the buyer is Haree Properties, LLC. Confirmed by broker David Sloop.

Campus Crossing at Campus Village Apartments

SALE #4 Summit at the Edge at Street, 1216 Oakland Avenue in Greensboro is a student housing complex built in 2007 with 60, 3-bedroom apartments containing a total of 180 bedrooms. This is a student-centered property, housing students from local Colleges. The building includes an office, swimming pool, exercise room, which utilize 3 of the units. This property sold on June 1, 2017 for $6,872,500 or $38,181/bed or $104.13/SF according to deed book 7940 page 560-564. Verified by broker Steve Maygar

Summit at the Edge Apartments

Foster Appraisal Services, Inc. 71 1915 Spring Garden Street, Greensboro, NC

These sales are summarized in the following grid.

Foster Appraisal Services, Inc. 72 1915 Spring Garden Street, Greensboro, NC

As Is

EXPLANATION OF ADJUSTMENTS

Market Adjustment This adjustment considers the date of sale of the comparable properties, or an appreciation/depreciation factor. Generally, prices rise over time due to inflation and the decreasing supply of land. A minor time adjustment has been applied to each sale.

Location/Access This is considered to be an important factor affecting property values in the subject market. Comps 1 and 2 are located in a less desirable location and required positive location adjustments. Comps 3 and 4 are located similarly to the subject and did not require an adjustment.

Foster Appraisal Services, Inc. 73 1915 Spring Garden Street, Greensboro, NC

Complex Size Typically, a larger building or apartment complex will sell for less on a per unit basis than an equally desirable, but smaller building. This is generally true due to the fact that a smaller building can be utilized with less maintenance and utility expense than a larger building. The subject apartment buildings have a total NLA of 18,624 square feet. The comparables range from 15,408 to 66,000 square feet. Adjustments were required for all of the comparable sales. We assume the subject and comps have similar size common areas and room sizes and do not require adjustments for these features.

Age The age of a building at the time of sale could affect its desirability in the market. This appears to be a significant factor. The subject apartment units are considered to have an effective age of 14 years. The Comparable Sales required adjustments based on 1% per year difference in age.

Quality The comparable sales are considered to be of similar quality to the subject improvements. Condition The subject is considered to be in good condition as are the comps.

Sales Price per Square Foot The comparison of the comparable sales to the subject on a square foot basis has provided a range from $72.65 to $109.38 per square foot of building area. The most obvious differences in the sales are the size and age of the complexes. Based on these sales, a value estimate of $88.57 per square foot is concluded and provides the following value indication for the subject improvements:

18,624 SF X $88.57/SF = $1,649,528 + $255,000 (Excess Land) = $1,904,528

Rounded To $1,900,000 AS IS

Sales Price Per Bedroom The “per bedroom” comparison has provided a range of value estimates for the subject bedrooms from $30,513 to $40,105 per bedroom. As with the prior analysis, the comparable sales required minor adjustments and the value indications are fairly close. The appraisers have placed the greatest reliance on the middle of the indicated range for an estimate of the subject’s per unit value which is determined to be $35,851. The total value indication is as follows

48 Bedrooms X $35,851/Bdrm = $1,720,848 + $255,000 (Excess Land) = $1,975,848

Rounded To $1,980,000 As Is

The appraisers conclude the value estimate indicated by the analysis of the sales comparison approach is as follows: $1,900,000 As Is

Foster Appraisal Services, Inc. 74 1915 Spring Garden Street, Greensboro, NC

At Completion

EXPLANATION OF ADJUSTMENTS

Market Adjustment This adjustment considers the date of sale of the comparable properties, or an appreciation/depreciation factor. Generally, prices rise over time due to inflation and the decreasing supply of land. A minor time adjustment has been applied to each sale.

Location/Access This is considered to be an important factor affecting property values in the subject market. Comps 1 and 2 are located in a less desirable location and required positive location adjustments. Comps 3 and 4 are located similarly to the subject and did not require an adjustment.

Foster Appraisal Services, Inc. 75 1915 Spring Garden Street, Greensboro, NC

Complex Size Typically, a larger building or apartment complex will sell for less on a per unit basis than an equally desirable, but smaller building. This is generally true due to the fact that a smaller building can be utilized with less maintenance and utility expense than a larger building. The subject apartment buildings will have a total NLA of 33,030 square feet at completion. The comparables range from 15,408 to 66,000 square feet. Adjustments were required for all of the comparable sales.

Age The age of a building at the time of sale could affect its desirability in the market. This appears to be a significant factor. The subject apartment units are considered to have an averaged effective age of 10 years at completion. The Comparable Sales required adjustments based on 1% per year difference in age.

Quality The comparable sales are considered to be of similar quality to the subject improvements. Condition The subject will be analyzed in “very good” condition at completion. This is slightly superior to the comps and require a positive adjustment to each comp.

Sales Price per Square Foot The comparison of the comparable sales to the subject on a square foot basis has provided a range from $77.23 to $112.53 per square foot of building area. The most obvious differences in the sales are the size and age of the complexes. Based on these sales, a value estimate of $92.13 per square foot is concluded and provides the following value indication for the subject improvements:

33,030 SF X $92.13/SF = $3,043,054

Rounded To $3,040,000 At Completion

Sales Price Per Bedroom The “per bedroom” comparison has provided a range of value estimates for the subject bedrooms from $32,438 to $42,033 per bedroom. As with the prior analysis, the comparable sales required minor adjustments and the value indications are fairly close. The appraisers have placed the greatest reliance on the middle of the indicated range for an estimate of the subject’s per unit value which is determined to be $37,827. The total value indication is as follows

72 Bedrooms X $37,827/Bdrm = $2,723,544

Rounded To $2,720,000 As Is

The appraisers conclude the value estimate indicated by the analysis of the sales comparison approach is as follows: $3,040,000 At Completion

Foster Appraisal Services, Inc. 76 1915 Spring Garden Street, Greensboro, NC

RECONCILIATION OF MARKET VALUE

The reconciliation process consists of reviewing various independently derived valuation methods, weighing respective merits, and correlating the conclusions into a final estimate of value. In order to estimate the market value of the property being appraised, proper weight has to be given to each individual approach and its estimate of value.

Subject Value (Vacant Land) The site value, as if vacant, was estimated by utilizing the sales comparison approach based on similar vacant land sales. The weakness of this approach is that no two properties are ever exactly alike, amenities, purchase considerations, and the exact conditions of each sale are sometimes unknown. The strength of this approach is that it measures the actions of buyers and sellers in the market place. For the land value, vacant land sales have been adjusted for date of sale, size, shape, location, physical characteristics, and the highest and best use. The Sales Comparison Approach is considered to be the strongest indicator of value for the subject tract, as if vacant, in this instance. The estimated value (land only), via the Sales Comparison Approach, is as follows:

$790,000 “AS IS IF VACANT”

Cost Approach to Value The cost approach was utilized to estimate the depreciated value of the proposed condominium project. The estimated value of the land, via the market approach, is then added for a complete value estimate. The weakness of the cost approach is that unit cost figures and accrued depreciation are sometimes difficult to measure. The strength of the cost approach is that this will be new construction and the unit costs were substantiated by using a cost estimate service such as The Marshall Valuation Service and with conversations with local builders and contractors considered knowledgeable in the local construction market. The following value via the Cost Approach represents the “at completion” value of the proposed apartment community development. The estimated value, via the Cost Approach, is as follows:

$1,900,000 “AS IS INCLUDING EXCESS LAND”

$3,050,000 “AT COMPLETION”

Income Approach to Value The Income Approach analyzes the anticipated cash flow from the subject property and converts the total into a present value through the discount process. In this case, the estimated value of the proposed apartment community is estimated to be:

$1,985,000 “AS IS INCLUDING EXCESS LAND”

$2,860,000 “AT COMPLETION & STABILIZED”

Foster Appraisal Services, Inc. 77 1915 Spring Garden Street, Greensboro, NC

Sales Comparison Approach to Value (Improved) The Sales Comparison approach provides valuable indicators for estimating market value. This method does, however, lose some of its reliability when comparisons are not highly similar or data is clouded. In this instance, there was sufficient comparable data to make reliable comparisons; the market approach was reliable and reflective of the attitudes of buyers and sellers in the subject market. The estimate of value for the proposed development is as follows:

$1,900,000 “AS IS INCLUDING EXCESS LAND”

$3,040,000 “AT COMPLETION & STABILIZED”

Final Reconciliation

After analysis of the three approaches to value and considering the type and reliability of the data upon which each was based, as well as the strength of the local market for the subject property type, greatest emphasis is placed on the findings indicated in the Income Approach to value.

As such, it is our judgment that the present market value, of the leased fee estate for the proposed subject property, as of October 19, 2018 is as follows:

AS IS $1,985,000 (Including Excess Land)

It is our judgment that the present market value, of the leased fee estate for the proposed subject property, as of May 1, 2019 is as follows:

AS COMPLETE & STABILIZED $2,860,000

Foster Appraisal Services, Inc. 78 1915 Spring Garden Street, Greensboro, NC

CERTIFICATION

The Appraiser certifies and agrees that:

1. Appraiser has no present or contemplated future interest in the property appraised; and neither the employment to make the appraisal, nor the compensation for it, is contingent upon the appraised value of the property.

2. The Appraiser has no personal interest in or bias with respect to the subject matter of the appraisal report or the participants to the sale. The "Estimate of Market Value" in the appraisal report is not based in whole or in part upon the race, color, or national origin of the prospective owners or occupants of the property appraised, or upon the race, color or national origin of the present owners or occupants of the properties in the vicinity of the property appraised.

3. Dick Foster personally inspected the property. To the best of the Appraiser's knowledge and belief, all statements and information in this report are true and correct, and the Appraiser has not knowingly withheld any significant information.

4. All contingent and limiting conditions are contained herein (imposed by the terms of assignment or by the undersigned affecting the analyses, opinions, and conclusions contained in the report).

5. This appraisal report has been made in conformity with and is subject to the requirements of the Code of Professional Ethics and Standards of Professional Conduct of the appraisal organizations with which the Appraiser is affiliated.

6. All conclusions and opinions concerning the real estate that are set forth in the appraisal report were prepared by the Appraiser whose signature appears on the appraisal report, unless indicated as "Review Appraiser." No change of any item in the appraisal report shall be made by anyone other than the Appraiser, and the Appraiser shall have no responsibility for any such unauthorized change.

7. The Appraisal Institute of Real Estate Appraisers conducts a voluntary program of continuing education for its designated members. As of the date of this report, Dick Foster has completed the requirements of the continuing education program of the Appraisal Institute of Real Estate Appraisers.

8. In this appraisal assignment, the existence of potentially hazardous material used in the construction or maintenance of the building, such as the presence of urea formaldehyde foam insulation, and or existence of toxic waste, which may or may not be present on the property, was not observed by us; nor do we have any knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The existence of urea formaldehyde insulation or other potentially hazardous waste material may have an effect on the value of the property. The client is urged to retain an expert in this field.

Foster Appraisal Services, Inc. 79 1915 Spring Garden Street, Greensboro, NC

9. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or approval of a loan.

10. I have previously appraised the subject property on November 15, 2012 for NewBridge Bank. The previous appraisal is retained in file M#111106.

11. The Appraisal Institute conducts a voluntary program of continuing education for its designated members. As of the date of this report, Dick Foster has completed the requirements of the continuing education program of the Appraisal Institute.

It was a pleasure preparing this report for you and your institution. Please contact me if I may be of further assistance in the interpretation of these findings and conclusions.

Respectfully submitted,

Dick Foster, MAI NC State Certificate #A-1070

CERTIFICATION

I certify that, to the best of my knowledge and belief:

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

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and is my person, impartial unbiased professional analyses, opinions and conclusions.

3. I have no present or perspective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved.

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

5. My analyses, opinions, and conclusions were developed, and this report has been

Foster Appraisal Services, Inc. 80 1915 Spring Garden Street, Greensboro, NC

prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

6. Merritt Wilson has made a personal inspection of the property that is the subject of this report.

7. No one provided significant professional assistance to the person signing this report.

8. To the best of my knowledge and belief, the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct. Data and information secured from others is believed reliable but its accuracy is not warranted.

9. This appraisal report sets forth all the limiting conditions (imposed by the term of my assignment or by the appraiser) affecting the analysis, opinions, and conclusions contained in this report

10. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan.

11. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

12. I have no bias with respect to the property that is the subject of this report or the parties involved with this assignment.

13. My engagement in this assignment was not contingent upon developing or reporting predetermined results.

14. I have previously appraised the subject property on November 15, 2012 for NewBridge Bank. The previous appraisal is retained in file M#111106.

It was a pleasure preparing this report for you and your institution. Please contact me if I may be of further assistance in the interpretation of these findings and conclusions.

Respectfully submitted,

Merritt Wilson NC State Certificate #A-7427

Foster Appraisal Services, Inc. 81 1915 Spring Garden Street, Greensboro, NC

ADDENDUM

Looking west on Spring Garden Street. Looking east on Spring Garden Street.

Looking south on Reynold’s Place. Looking north on Reynold’s Place.

Foster Appraisal Services, Inc. 82 1915 Spring Garden Street, Greensboro, NC

North side of the building/campus. East side of the building/campus

South side of the building/campus. West side of the building/campus

Foster Appraisal Services, Inc. 83 1915 Spring Garden Street, Greensboro, NC

Interior of the existing 3 bed 3 bath units

Typical kitchen

Typical living room

Foster Appraisal Services, Inc. 84 1915 Spring Garden Street, Greensboro, NC

Typical bathroom fixtures.

Typical bedroom.

Foster Appraisal Services, Inc. 85 1915 Spring Garden Street, Greensboro, NC

Building to be raised. Mailbox Kiosk

Foster Appraisal Services, Inc. 86 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 87 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 88 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 89 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 90 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 91 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 92 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 93 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 94 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 95 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 96 1915 Spring Garden Street, Greensboro, NC

Foster Appraisal Services, Inc. 97 1915 Spring Garden Street, Greensboro, NC

QUALIFICATIONS OF THE APPRAISER

Charles D. “Dick” Foster, MAI

Business Address: Foster Appraisal Services Inc. 351 South Swing Road Greensboro, North Carolina 27409 (336) 279-1172 ext 300 FAX (336) 834-0303 Email: [email protected]

EDUCATION

High School - Enka High School, Enka, NC College - BS degree in Business Administration in the major field of General Management from Western Carolina University.

APPRAISAL EDUCATION

American Institute of Real Estate Appraisers Course IA, Basic Appraisal Principles. Methods & Techniques at the University of North Carolina.

American Institute of Real Estate Appraisers Course 1B, Capitalization Theory and Techniques at the University of Georgia.

American Institute of Real Estate Appraisers Course Case Studies in Real Estate Valuation at the University of Colorado.

American Institute of Real Estate Appraisers Course Valuation Analysis and Report Writing at the University of Colorado.

American Institute of Real Estate Appraisers Course Standards of Professional Practice in Little Rock, Arkansas.

American Institute of Real Estate Appraisers Course Real Estate Investment Analysis at the University of Texas, Arlington, Texas.

Appraisal Institute Review Theory – General Instructor: Nick Tillema, MAI

SEMINARS - Partial List)

Appraisal Practice for Litigation - Instructor: James H. Pritchett, MAI; Understanding Limited Appraisals and Reporting Options - Instructor: Frank E. Harrison, MAI; Highest and Best Use Applications - Instructor: Charles W. Rex, MAI; Sales Comparison Approach Using the Market Data Grid. Instructor: Frank E. Harrison, MAI; Uniform Appraisal Standards for Federal Land Acquisition The Valuation of Real Estate - The Viewpoint of the CPM. Instructor: B. A. 'Bill" Pittman, CPM; Discounted Cash Flow Analysis - Instructor: Clifford B. Fisher, Jr., MAI; Rates, Ratios, & Reasonableness - Instructor: Clifford B. Fisher, MAI; Appraising Apartments - Instructor: Phil Rociz, MAI; Special Purpose Properties - Instructor: Mark L Ratterman, MAI; Subdivision Analysis - Instructor: Robert S. Martin, MAI Litigation Skills for the Appraiser-Instructor: David Craig, MAI Eminent Domain and Condemnation-Instructor: James H. Pritchett, MAI Golf Courses and Country Clubs-Instructor: Andy Hinds, MAI & Harvey P. Jeffers, MAI Office Building Valuation: Vincent M. Dowling, MAI Appraising Distressed Commercial Properties: William Anglyn, MAI Appraisal of Local Retail Properties: Thomas Dorsey

Foster Appraisal Services, Inc. 98 1915 Spring Garden Street, Greensboro, NC

An Introduction to Valuing Green Buildings: Tom Dorsey, MAI Introduction to Vineyard and Winery Valuation: JoAnn Wall ARA Appraising the appraisal: Appraisal Review-General: Leslie Sellers MAI Fundamentals of Separating Real Property, Personal Property and Intangible Business Assets: Leslie Sellers, MAI Introduction to Conservation Easement Valuation: Nick Tillema, MAI

EXPERIENCE

Four years as a staff appraiser for Mr. Robert L. Harrison, MAI of Springfield, Missouri, consisting of residential, commercial, industrial, agricultural and condemnation assignments Three years as chief appraiser for Stone County, Missouri the mass appraisal of the entire county. Thirteen years associated with Appraisal Services, Inc. Five years with Foster Rich and Company as principal Presently with Foster Appraisal Services Inc.

ORGANIZATIONS

Appraiser holds the “MAI” designation from the Appraisal Institute. Licensed Real Estate Broker in the State of North Carolina. Certified General Appraiser for the State of North Carolina # A1070.

PARTIAL CLIENT LIST

Wells Fargo First State Bank Fidelity Bank Carter Bank Truliant Credit Union High Point Bank Financial First Federal TD America Capital Advisors SunTrust American National First Citizens Bank Capitol Bank Grand South Bank BB&T NewBridge Bank City of Greensboro First Community Bank HIG Capital Bank of Oak Ridge Carolina Bank Bank of North Carolina NC Department of Transportation First National Bank First Bank

QUALIFICATIONS OF THE APPRAISER

Merritt Wilson 6613 Maplegate Lane

Foster Appraisal Services, Inc. 99 1915 Spring Garden Street, Greensboro, NC

Pleasant Garden, NC 27313

Business Address: Foster Appraisal Services, Inc. 351 South Swing Road Greensboro, NC 27409 (336) 279-1172 Fax (336) 834-0303 Email: [email protected]

Date of Birth

February 21, 1986

Education

High School Vandalia Christian School

Appraisal Education

R-1, Dan Mohr Real Estate Schools, Greensboro, NC, Joyce Pusey, MAI, Instructor

R-2, Dan Mohr Real Estate Schools, Greensboro, NC, Joyce Pusey, MAI, Instructor

R-3, Dan Mohr Real Estate Schools, Greensboro, NC, Joyce Pusey, MAI, Instructor

R-4, Dan Mohr Real Estate Schools, Greensboro, NC, Joyce Pusey, MAI, Instructor

G-1, Dan Mohr Real Estate Schools, Greensboro, NC, Ron Loftis, MAI, Instructor

G-2, Dan Mohr Real Estate Schools, Greensboro, NC, Ron Loftis, MAI, Instructor

G-3, Dan Mohr Real Estate Schools, Greensboro, NC, Ron Loftis, MAI, Instructor

Seminars –

Subdivision Valuation: A Comprehensive Guide to Valuing Improved Subdivisions - Instructor: Stephen F. Fanning, MAI 7 Hour National USPAP Update Coarse- Instructor: Joyce Pusey, SRA The Discounted Cash Flow Model: Concepts, Issues, and Applications- Instructor: John Urubek, MAI Effective Appraisal Writing- Instructor: Alan Blankenship, PhD Appraising Distressed Commercial Real Estate- Instructor: William “Ted Anglyn, MAI The Appraisal Capstone Course- Instructor: William Lewis Spearman 2011 Real Estate Valuation Conference: Local, National, and Global Issues- Instructor: Panel Appraising the Appraisal: Appraisal Review-General- Instructor: Leslie P. Seller, MAI, SRA 2010 President Appraisal Institute 7 Hour National USPAP Update Coarse- Instructor: Ron Loftis, MAI Comparative Analysis- Instructor: Arlen C. Mills, MAI, SRA

Foster Appraisal Services, Inc. 100 1915 Spring Garden Street, Greensboro, NC

Forecasting Revenue- Instructor: William T. Anglyn, MAI 7 Hour National USPAP Update Coarse- Instructor: Steve Vehmeier Online Advanced Internet Search Strategies- Instructor: Jim Amorin, MAI, SRA Supervisor and Changes- A. H. A. Williams Online Small Hotel and Motel Valuation-David C. Lennhoff 7 Hour National USPAP Update Coarse- Instructor: John Bosworth, MAI, SRA Eminent Domain and Condemnation- Instructor: John R. Underwood, MAI, SRA

Experience

Trainee experience with Dick Foster, MAI, with a concentration on commercial properties. Currently serving as a staff appraiser for Foster Appraisal Service, Inc.

Organizations

Certified General Appraiser in the State of North Carolina # A7427.

Certified General Appraiser in the State of Virginia # 4001 015948.

Foster Appraisal Services, Inc. 101