Item 1

Item 2

N216-0085

APPRAISAL REPORT

OF A

COMMERCIAL PROPERTY

LOCATED AT

16 SOUTH PALAFOX STREET PENSACOLA, ESCAMBIA COUNTY, FLORIDA 32502

EXCLUSIVELY FOR

CITY OF PENSACOLA PLANNING SERVICES DIVISION

CLIENT RFP #777748

AS OF

MARCH 3, 2016

BY

CHARLES C. SHERRILL, JR., MAI STATE CERTIFIED GENERAL APPRAISER #RZ1665

410 EAST GOVERNMENT STREET

PENSACOLA, FLORIDA

32502 APPRAISAL REPORT

The subject property consists of a two-story building, related site improvements, and underlying land which are located at 16 South Palafox Street in Pensacola, Florida. The subject property is comprised of two separate suites (one per floor), and each is represented by an individual (separate) tax account. For this appraisal assignment, the two suites are referred to as Suite 100 and Suite 200, respectively. Suite 100 is occupied as a restaurant/bar, and Suite 200 is occupied as a bar. As discussed in this appraisal report, Suite 100 includes outside space that is utilized by its tenant for dining and storage purposes. It should be noted that the restaurant equipment, furnishings, fixtures, and other items of personal property that are located within the suite spaces are considered to be items of personal property, and they have not been included in this valuation.

It is concluded for this appraisal that the rental terms of the subject leases are generally equivalent to the prevailing terms in the local market. Accordingly, the values of the fee simple title and the leased fee estate in the subject property are considered to be generally equivalent to one another.

The three traditional approaches to value income-producing properties are the Cost Approach, the Sales Comparison Approach, and the Income Capitalization Approach. Based upon the type and specific characteristics of the subject property, the Cost Approach was not considered to be appropriate for this valuation. Accordingly, the appraiser did not perform this particular approach to value the subject property. The subject property is a commercial property with two leases in place. Buyers of this type of property in the local market typically rely most heavily on the Sales Comparison and Income Capitalization Approaches in making buying decisions. Additionally, recent sales and rented activity of similar type properties in the local market is considered to be sufficient to produce credible results. Lastly, this appraisal process is concluded to be adequate based upon the intended use of this appraisal. Accordingly, the appraiser has determined that the performing of the Sales Comparison and Income Capitalization Approaches in this appraisal process is sufficient to achieve credible assignment results based primarily upon the intended use of this appraisal. The appraiser has clearly identified and explained the scope of work for this assignment within this appraisal report.

This is an Appraisal Report which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice. As such, it clearly and accurately sets forth the appraisal in a manner that will not be misleading; contains sufficient information to enable the intended users of the appraisal to understand the report properly; and clearly and accurately discloses all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated within this report. The appraiser is not responsible for the unauthorized use of this appraisal report.

CLIENT: City of Pensacola Attention: Mr. George J. Maiberger Purchasing Manager 222 West Main Street Pensacola, Florida 32502 2 N216-0085 APPRAISER: Charles C. Sherrill, Jr., MAI State Certified General Appraiser #RZ1665 Sherrill Appraisal Company 410 East Government Street Pensacola, FL 32502

APPRAISAL FILE NUMBER: N216-0085

CLIENT RFP #: 777748

PROPERTY LOCATION: 16 South Palafox Street, Pensacola, Escambia County, Florida 32502

PROPERTY TYPE/ CURRENT USE: Bar/Restaurant

REPORTED PROPERTY OWNERS: Community Redevelopment Agency (CRA) City of Pensacola

OCCUPANTS: The property is fully occupied by two rental tenants - Kaple Holding, Inc. (First Floor) and Play Pensacola, Inc. (Second Floor). Summaries of these two leases are presented in the addendum of this appraisal report.

TAX ACCOUNT NUMBERS: 13-0472-000 (Suite 100) 13 -0472-100 (Suite 200)

PARCEL IDENTIFICATION NOS.: 00-0S-00-9001-004-263 (Suite 100) 00 -0S-00-9001-005-263 (Suite 200)

CURRENT PROPERTY TAX ASSESSMENT (COMBINED): $306,064; However, the current tax expense of the subject is based upon a reduced assessed value of $274,731 that results from an annual increase limit that applies to non-homesteaded properties in the State of Florida. It should be noted that the above assessments are considerably below the final concluded market value in this appraisal. Future assessments of the subject property by the Escambia County Property Appraiser’s Office could increase in the future, particularly if the property were to sell. There apparently were no delinquent property taxes as of the effective date of this valuation as the 2015 tax bill for Suite 100 (Parcel A) was due but was not yet delinquent as of that date. The 2015 tax bill for Suite 200 (Parcel B) has been paid satisfactorily.

3 N216-0085 LEGAL DESCRIPTIONS: Legal descriptions of the subject property obtained from the Escambia County Property Appraiser’s Office and a warranty deed are presented in the addendum of this appraisal report.

ZONING CLASSIFICATION: C-2A; Downtown Retail Commercial

FUTURE LAND USE CLASSIFICATION: Historic and Preservation Land Use

TYPE AND DEFINITION OF VALUE: The purpose of this appraisal is to provide the appraiser's best estimate of the market value of the subject real property as of the effective date. Market value is defined under 12 U.S.C. 1818, 1819 and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) as well as the Office of the Comptroller of the Currency, as “the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus”. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

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

INTENDED USER OF APPRAISAL REPORT: City of Pensacola; No other party is entitled to rely upon this report without written consent of the appraiser.

4 N216-0085 INTENDED USE OF REPORT: For the sole purpose of assisting the client, City of Pensacola, in internal business decisions concerning the possible sale of the subject property.

INTERESTS VALUED: Fee Simple Title (defined as absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power, taxation, and/or any easements that may be present on the property) and Leased Fee Estate (defined as an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; usually consists of the right to receive rent and the right to repossession at the termination of the lease/leases).

DATE OF PROPERTY INSPECTIONS: March 3, 2016 and March 7, 2016

EFFECTIVE DATE OF VALUE: March 3, 2016

DATE OF APPRAISAL REPORT: March 14, 2016

FINAL ESTIMATE OF VALUE:

FEE SIMPLE TITLE: $790,000 (Subject to the appraisal assumptions and limiting conditions that are presented in the addendum of this appraisal report)

LEASED FEE ESTATE: $790,000 (Subject to the appraisal assumptions and limiting conditions that are presented in the addendum of this appraisal report)

5 N216-0085 SCOPE OF WORK PERFORMED IN THIS APPRAISAL ASSIGNMENT:

The three traditional approaches to value income-producing properties are the Cost Approach, the Sales Comparison Approach, and the Income Capitalization Approach. Based upon the type and specific characteristics of the subject property, the Cost Approach was not considered to be appropriate for this valuation. Accordingly, the appraiser did not perform this particular approach to value the subject property. The subject property is a commercial property with two leases in place. Buyers of this type of property in the local market typically rely most heavily on the Sales Comparison and Income Capitalization Approaches in making buying decisions. Additionally, recent sales and rented activity of similar type properties in the local market is considered to be sufficient to produce credible results. Lastly, this appraisal process is concluded to be adequate based upon the intended use of this appraisal. Accordingly, the appraiser has determined that the performing of the Sales Comparison and Income Capitalization Approaches in this appraisal process is sufficient to achieve credible assignment results based primarily upon the intended use of this appraisal. The appraiser has clearly identified and explained the scope of work for this assignment within this appraisal report.

In performing this appraisal of the subject property, Charles C. Sherrill, Jr., MAI first identified the problem to be solved. Based upon the property type and intended use of this appraisal, the appraiser determined and performed the scope of work necessary to develop assignment results that were credible, and disclosed this scope of work in the appraisal report. In doing so, the appraiser performed multiple inspections of the subject property, conducted a telephone interview with a representative of the property owner, reviewed the two subject leases, and gathered information from the subject's neighborhood or similar competitive neighborhoods in the local area on comparable improved sales. This information was applied in the Sales Comparison Approach to valuation.

Secondly, rent comparables of properties considered to be similar to the subject property were also researched and analyzed for this valuation. Operating expenses and overall capitalization rates were extracted from the local market. A value was concluded by use of the Income Capitalization Technique, and it was given additional consideration in the final value conclusions. For this valuation, the appraiser did not perform the Cost Approach since it was considered to not be appropriate in appraising a property of this type. Based upon the property type of the subject and the intended use of this valuation, the appraiser concluded that the primary approaches to value the subject property for this appraisal are the Sales Comparison and Income Capitalization Approaches, and that this particular scope of appraisal work is sufficient to achieve credible assignment results.

This narrative appraisal report is the result of these processes. This Appraisal Report is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated above. The appraiser is not responsible for unauthorized use of this report.

6 N216-0085 DESCRIPTION OF REAL ESTATE APPRAISED:

Location Description: Known as the "City of Five Flags," Pensacola is the western-most city in the panhandle of Florida. Pensacola, the county seat, is located in the extreme southern portion of Escambia County. Escambia County encompasses 661 square miles of land and an additional 64,000 acres of waterways. Escambia County has experienced steady growth during its history as it represents the economic center for Northwest Florida. Its location generally bordering the Gulf of Mexico and three bays has resulted in outward growth in certain directions over the years. These growth areas include such neighboring cities/communities as Gulf Breeze, Milton, Pace, and Navarre (in Santa Rosa County), as well as the northern vicinity of Pensacola.

According to recent (2014) statistics from the U. S. Census Bureau, there are 310,659 residents in Escambia County, which ranked 18th in county population in Florida. Escambia County’s population increased at a rate of 4.4 percent in the previous 4 years, and this gradual increase is anticipated for the near-term future. Escambia County has a diversified economic base which includes tourism, military (U. S. Navy), and a strong service sector. The area has a current unemployment rate of 5.7 percent, which is slightly above the state and national averages (5.2 percent and 5.5 percent, respectively).

The quality of life afforded by the mild climate and abundant recreational activities and rich history and culture is an added feature that attracts new industries to the area. The availability of office and manufacturing facilities and an educated workforce give Escambia County the ideal catalyst for future growth and prosperity. Overall, the area’s moderate anticipated population growth, diversified work force, and abundance of recreational activities provide for a relatively stable near-term outlook for this metropolitan area.

Neighborhood Description: The subject property is located in the city limits of Pensacola in the Downtown Central Business District and is comprised of a mixed residential and commercial area. The subject neighborhood boundaries are generally defined as East Garden Street on the north, North Ninth Avenue on the east, Pensacola Bay on the south, and A Street on the west. Land uses in the general area include retail establishments, offices, restaurants, banks, auto service garages, apartments, residences, warehouses, churches, motels, condominiums, lounges, and courthouses.

Two new real estate projects which should have a positive impact on the marketability of the subject neighborhood are the new $15 million Northwest Florida YMCA facility (currently under construction), and a proposed yet un-named $50 million mixed-use complex with 260 apartment units are concluded to be significant catalysts for additional downtown development. Overall, the neighborhood is convenient to Pensacola Bay, Downtown Pensacola, churches, shopping facilities, schools, medical facilities, recreational facilities, and other major sources of employment. No adverse neighborhood conditions were observed by the appraiser. The subject property is concluded to be well-suited to its neighborhood.

7 N216-0085

Summary of Local Commercial Real Estate Market: After a number of years of steady growth in the local commercial real estate market (as well as other sectors), the health of the market weakened during 2006 to 2011. Demand for commercial space declined in the local market during that time period due to weakened economic conditions which resulted in an oversupply of inventory. The net result of this market weakness was an increase in vacancy rates, a decline in rental rates and values, an increase in property foreclosures, and extended marketing periods. However, the market began to stabilize in late 2011, and it has gradually increased in the past one to two years. It is concluded that the local market, as well as the subject property, should continue this slight improvement trend in the foreseeable future. Based upon the location, quality, and other physical characteristics of the subject property, its overall current anticipated relative position within the local marketplace is concluded to be favorable.

Site Description: The subject property is located on the east side of South Palafox Street. The property is situated immediately adjacent to an office, a restaurant, and a public parking garage (at the rear of the parcel). The interior parcel is fairly regular in shape. The site has 37.82 feet of frontage on the east side of South Palafox Street and an average depth of 108 feet. According to the Escambia County Property Appraiser’s Office, the property contains approximately 0.0947 acre. This equates by calculation to a land area of 4,125 square feet. Based upon the 5,400-square foot size of the structure and this land area, the indicated lot coverage for the subject is 130.9 percent. This is considered to be relatively unfavorable as evidenced by the lack of on-site parking availability at the subject, but it is fairly common of similar properties in the immediate Downtown Pensacola market.

The property is level. Public sanitary sewer service is available to the subject. The public utilities available to the site are considered to be adequate. It appears that the parcel is not located within a designated flood area (Flood Zone X; Flood Panel Map # 12033C0390G). South Palafox Street is a two-laned roadway in front of the subject. Overall access to the property is concluded to be adequate.

The subject property is zoned C-2A; Downtown Retail Commercial under the zoning ordinances of the City of Pensacola. The commercial land use districts are established by the City of Pensacola for the purpose of providing areas of commercial development ranging from compact shopping areas to limited industrial/high intensity commercial uses. Conventional residential usage is allowed as well as residential uses on upper floors above ground floor commercial or offices and in other types of mixed use development. Specifically the C-2A (as well as C-2) district’s regulations are intended to provide for major commercial areas intended primarily for retail sales and service establishments oriented to a general community and/or regional market. Permitted uses within this district are very broad and include single-family residential, multiple- family residential, offices, medical offices retail, restaurants, banks, warehouses, nightclubs, and marinas. However, outside storage and/or repairs are prohibited. There are no required minimum yard requirements for the subject and the maximum building height is 100 feet. There are generally no maximum lot coverage requirements in the C-2A district.

8 N216-0085 Site Description (Cont’d): The commercial land use districts are established by the City of Pensacola for the purpose of providing areas of commercial development ranging from compact shopping areas to limited industrial/high intensity commercial uses. Conventional residential use is allowed as well as residential uses on upper floors above ground floor commercial or office uses and in other types of mixed use development. The C-1 zoning district’s regulations are intended to provide for conveniently supplying the immediate needs of the community where they types of services rendered and the commodities sold are those which are needed frequently. The downtown and retail commercial (C-2A and C-2) zoning districts’ regulations are intended primarily for retail sales and service establishments oriented to a general community and/or regional market. The C-3 wholesale and light industry zoning district’s regulations are intended to provide for general commercial services, wholesale distribution, storage, and light fabrication. The present bar/restaurant use of the subject property is apparently permitted by the current C- 2A zoning classification. The property has a Future Land Use Classification of Historic and Preservation Land Use.

Description of Improvements: The subject improvements consist of a two-story commercial building which according to the Escambia County Property Appraiser’s Office contains 5,400 square feet of Gross Building Area (GBA). The building is comprised of two separate suites, and each is located on an entire floor of the structure. The facility is constructed of brick veneer exterior walls on a concrete foundation. The roof cover is reported to be of a built up material. The building has an eave height of approximately 20 feet.

Based upon the unit sizes of the two subject units as indicated by the respective leases, the Net Rentable Area (NRA) of the facility is 4,874 square feet. As a result of the presence of the two interior staircases and elevator shaft, the building efficiency ratio of the subject equates to a 90.3 percent (4,874 square feet of NRA / 5,400 square feet of GBA = 0.903).

Suite 100 is the first floor rental space, which according to lease documentation contains 1,338 square feet of interior space. This attractive space is occupied by the rental tenant as a bar and restaurant. This space is configured with a bar area with interior seating for approximately 35 patrons, a kitchen area for the preparation of appetizers and light entrees, and two restrooms. Its interior condition is considered to be good as it consists of exposed brick and sheetrock interior walls, exposed and acoustical tile ceilings, and an attractive sealed concrete flooring. The interior of this space was extensively renovated in 2010, and it is considered to be in relatively good physical condition.

As previously mentioned, additional downstairs space is included in the lease of Suite 100. Specifically, the tenant also has the right of usage of the northerly approximately 9 feet of the adjacent covered breezeway, which according to lease documentation contains 702 square feet. This area is adjacent to the covered walkway that provides pedestrian access between North Palafox Street and the Jefferson Street structured-parking garage. This covered rental area is configured with outside dining spaces for 60 patrons. Additionally, outside open storage is available at the rear of the Suite 100. The tenant is able to house its refrigerated cooler and other storage items in this small fenced-yard area that contains 156 square feet (based upon the reported dimensions of 12 by 13 feet). It should be noted that three uncovered dining tables are situated in front of Suite 100 along the sidewalk (adjacent to North Palafox Street). Seating is available for 12 patrons in this area. However, the use of this space is available via a business license with the City of Pensacola, and is therefore not included in this lease of the subject Suite (or this analysis).

9 N216-0085 Description of Improvements (Cont’d): The Suite 200 space is accessed from the ground floor by two separate covered staircases, along with a passenger elevator. This rental suite reportedly contains 3,536 square feet of space that is occupied by the tenant as a bar. It generally has an open floor plan with several storage rooms and four restrooms. The quality of its interior finish is concluded to be relatively average as it consists of brick and sheetrock interior walls, acoustical tile ceilings, and vinyl tile flooring. The interior of this space was also renovated in 2011, and it is considered to be in relatively average physical condition.

As previously mentioned, the bar and restaurant equipment, the interior furniture and fixtures, and other items of personal property within the subject spaces have not been included in this valuation.

The subject site improvements are relatively minimal as they consist of the covered breezeway adjacent to Suite 100, a brick sidewalk, and the fenced storage area at the rear of the property. There are no on-site parking spaces at the subject property, but this is fairly common for many of the commercial properties in the Downtown Pensacola vicinity. However, a public structured- parking garage is located immediately adjacent to the subject, and other surface parking lots are situated within relatively close proximity to the property. Overall, the subject structure and site improvements are considered to be physically well-adapted to the site.

SALES HISTORY OF SUBJECT PROPERTY:

According to the public records, the subject property was acquired by the current owners prior to 2010. The appraiser is unaware of any sales transactions of the property in the five years preceding the effective date of this valuation. No current listings, options, or agreements of sale of the subject property were discovered by the appraiser in the course of this analysis. However, an interested party has submitted a letter of interest to purchase the property and the client is considering the possibility of selling this asset.

HIGHEST AND BEST USE:

Highest and best use may be defined as “The reasonable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.” The first determination (highest and best use of land as though vacant) reflects the fact that the land value is derived from potential land use. The second determination (highest and best use of property as improved) refers to the optimum use that could be made of the property considering the existing structures, when applicable.

10 N216-0085 Highest and best use as if vacant. The legally permissible uses of the subject site include single-family residential, multiple-family residential, offices, medical offices retail, restaurants, banks, warehouses, nightclubs, and marinas. The potential for a zoning change appears to be unlikely. A legally permissible use that is also physically possible would be a retail/restaurant or office use. Such uses are considered to be financially feasible based upon the size and physical characteristics, the zoning, the neighborhood conditions, and the location of the subject parcel. Thus, the maximally productive and highest and best use of the subject site as though it were vacant would be a retail/restaurant or office use.

Highest and best use as improved. As previously mentioned, the current improvements are well-adapted to the parcel (physically possible) and they represent a legally permitted use. Neither demolition of the existing structures and redevelopment of the subject site nor modification of the existing improvements would result in a higher return to the land than is currently being achieved. Accordingly, the existing bar/restaurant suites are therefore concluded to be the highest and best use of the property as improved, and they could be readily converted to an office or general retail use.

APPRAISAL PROCESS:

The three traditional approaches to estimate the value of the income-producing properties are the Cost Approach, the Sales Comparison Approach (formerly called the Market Approach), and the Income Capitalization Approach. All three approaches are based upon the basic principle of substitution, which affirms that a prudent buyer will not pay more for a property than the cost of an equally desirable site plus the cost to construct a similar building (Cost Approach), the cost to acquire a competing property which is equal in desirability and utility (Sales Comparison Approach), or the cost to acquire a substitute income stream of equal quantity, quality, and durability (Income Capitalization Approach).

A summary of the Sales Comparison Approach for this appraisal is presented on the following pages.

11 N216-0085 SUMMARY OF SALES COMPARISON APPROACH (FEE SIMPLE TITLE):

A summary of the data pertaining to improved sales considered to be similar to the subject is presented below. Detailed information and photographs of each of these comparables, and a location map are presented in the addendum of this appraisal report.

COMP RECORD DATE OF SALE PRICE/ EST. NO. NO. LOCATION SALE PRICE SQ. FT.* SQ. FT.* OAR 1 5948 105 Gregory Square 09/30/15 $407,000 / $435,000** 3,312 $131.34** 8.56% 2 5884 214 East Church Street 03/31/15 $209,750 1,407 $149.08 N/A 3 5871 600 East Government Street 09/09/15 $545,000 3,644 $149.56 8.43% 4 5945 401 South Palafox Street 03/10/15 $390,000 2,113 $184.57 8.77%

OAR: Overall Capitalization Rate N/A: Not Applicable

*Square Feet of Gross Building Area (GBA) **Base purchase price, without consideration of credit that was earned by the buyer, as former tenant, from a portion of its previous rent payments.

The above building sales represent properties considered generally comparable to the subject. The office facilities range in size from 1,407 to 3,644 square feet, which is smaller than the size of the subject building. All are located in the immediate subject neighborhood. The effective building ages range from approximately 15 to 30 years, which is fairly similar to that of the subject. The above comparables range in price from $209,750 to $545,000. Before adjustments, these comparables indicate a broad unit price range of $131.34 to $184.57 per square foot of building area, including the land and site improvement contribution . However, all but one of these comparables reflect the lower end of this indicated unit price range.

In this analysis, price adjustments were considered for such dissimilarities as property rights conveyed, atypical financing, conditions of the sale, market conditions (time), location, age, condition, quality, size, on-site parking availability, ancillary outside rental space, and zoning. Based upon the particular comparables included in this valuation analysis, no price adjustments were considered necessary for property rights conveyed, atypical financing, conditions of sale, or zoning.

However, when compared to the subject, slight upward unit price adjustments were considered to be necessary to each of the sales to account for the improved local market conditions that have occurred since these sales were transacted. An upward unit price adjustment was considered to be necessary to Comparable No. 1 for locational differences based upon its location on Gregory Square. The unit prices of each comparable were adjusted slightly downward to account for their smaller building sizes, relative to the subject. A downward unit price adjustment was considered necessary to Comparable No. 4 to account for its relatively superior building quality and condition. The unit prices of Comparable Nos. 1 and 3 were adjusted slightly downward to reflect their superior land-to-building-ratios/on-site parking availability, relative to the subject. Lastly, the unit prices of each comparable was adjusted slightly upward based upon their lack of ancillary outside rental space, when compared to the subject.

12 N216-0085 After the above adjustments were made to the unit prices of the comparables, the indicated value range for the subject is $143.50 to $152.09 per square foot. In placing most weight on Comparable Nos. 2 and 3, which are the sales that resulted in the least price adjustments, a unit value towards the middle to lower end of the above range is concluded to be appropriate for the subject. Therefore, a value of $145.00 per square foot of Gross Building Area is estimated for this valuation. This concluded unit value is within and is fairly well-bracketed by the unadjusted unit price range of the comparables. This is considered to be reasonable based upon property characteristics and current market conditions.

The estimated value of the subject property from this sales comparison analysis is shown below. A grid summarizing the price adjustments is presented on the following page of this appraisal report.

SUMMARY OF VALUATION CONCLUSION– FEE SIMPLE TITLE

5,400 SQ. FT. (GROSS BUILDING AREA) x $145.00/SQ. FT. = $783,000

ROUNDED TO: $780,000

The above total value estimate of $780,000 exceeds the total sales price range of $209,750 to $545,000 that is indicated by the above comparables. However, this is concluded to be reasonable based primarily upon the smaller size of the comparables, relative to the subject property.

13 N216-0085 s16-0085grid.xls

s16-0085 grid SUMMARY OF BUILDING SALES ADJUSTMENTS

Comp. No. 1 Comp. No. 2 Comp. No. 3 Comp. No. 4

Index Number 5948 5884 5871 5945

Total Sales Price $435,000 $209,750 $545,000 $390,000

Square Feet 3,312 1,407 3,644 2,113

Price Per Square Foot $131.34 $149.08 $149.56 $184.57

Price Adjustments Property Rights Conveyed 0% 0% 0% 0% Adjusted Unit Price $131.34 $149.08 $149.56 $184.57 Atypical Financing Terms 0% 0% 0% 0% Adjusted Unit Price $131.34 $149.08 $149.56 $184.57 Conditions of Sale 0% 0% 0% 0% Adjusted Unit Price $131.34 $149.08 $149.56 $184.57 Market Conditions (Time) 1% 3% 1% 3% Adjusted Unit Price $132.65 $153.55 $151.06 $190.11

Adjustments- Physical Characteristics Location 15% ------Building Size -5% -10% -5% -10% Age/Condition/Quality ------15% Land/Bldg. Ratio/On-Site Pking -5% - - -5% - - Ancillary Outside Rental Area 5% 5% 5% 5% Zoning ------Other ------Cumulative Adjustments 10% -5% -5% -20%

Adjusted Price Per Square Foot $145.92 $145.87 $143.50 $152.09

14 N216-0085 SUMMARY OF INCOME CAPITALIZATION APPROACH (FEE SIMPLE TITLE):

MARKET RENT ANALYSIS – SUITE 100:

The rental data considered to be comparable to the Subject Suite 100 for this analysis is presented below. It should be noted that the search for comparables was expanded to include office properties given the lack of available current rental data for restaurant properties in the immediate Downtown District. Additionally, the recent lease of the Subject Suite 100 has been included in this analysis.

COMP RECORD SIZE UNIT NO . NO. LOCATION DATE (SQ. FT.) RENT/SQ. FT. 1 6967 24 West Chase Street 08/24/15 1,005 $16.00 2 6968 116 South Palafox Street 06/23/15 2,180 $16.51 3 6994 16 South Palafox Street, Suite 100 12/03/15 1,338 $16.99 (Subject Lease ) 4 6969 17 West Government Street, Unit C 05/26/15 1,600 $18.50 5 6960 216 South Palafox Place 10/02/15 1,500 $20.00

The above rent comparables were considered to be generally similar to the subject space, and were thus meaningful for this analysis. Photographs of these rental properties are presented at the conclusion of this summary report. All of the comparables are located in the immediate Downtown Pensacola area within approximately 4 blocks of the subject. All involve historic properties that have been renovated in recent years like the subject. The rental rates of the comparables range from $16.00 to $20.00 per square foot. In most instances, the leases reflect a net basis in which the tenant is responsible for the payment of its pro-rata share of the real estate taxes, casualty insurance premiums, interior maintenance charges, and utility expenses.

After necessary rental rate adjustments are made for such dissimilarities as market conditions (time), location, size, condition, quality, operating expense payments, and on-site parking, when compared to the subject, the indicated rental rate range for this subject interior space is $16.00 to $17.17 per square foot on a net basis. In placing most emphasis on Comparable Nos. 3 and 5, which are the comparables that resulted in the fewest and least rate adjustments, a rate towards the upper end of this range is concluded to be reasonable for this subject space. Therefore, a rate of $17.00 per square foot on a net basis was estimated to be market rent for this subject interior space. As previously mentioned, the equipment and furnishings have not been included in this analysis.

In giving consideration to the 858-square foot exterior space of this subject suite, a significantly- reduced rental rate is concluded to be appropriate. Based upon the open characteristic, size, location, and uses of this breezeway and rear storage space, a rental rate of $5.00 per square foot is considered to be reasonable. This indicates a total annual rent of $4,290 for this particular space (858 sq. ft. x $5.00/sq. ft. = $4,290), which represents 18.9 percent of the above-concluded rent for the interior space.

It should be noted that the above market rent estimates are fairly consistent with the recently- signed lease renewal of the subject suite. When combined with the rent of the interior space, the total annual market-derived rent for Suite 100 is $27,036.

15 N216-0085 i16-0085rentgrid-suite100.xls

i16-0085rentgrid-Suite 100 SUMMARY OF RENTAL RATE ADJUSTMENTS

Comp. No. 1 Comp. No. 2 Comp. No. 3 Comp. No. 4 Comp. No. 5

Index Number 6967 6968 6994 6969 6960

Square Feet 1,005 2,180 1,338 1,600 1,500

Unit Rent Per Square Foot $16.00 $16.51 $16.99 $18.50 $20.00

Rate Adjustments Property Rights Conveyed ------Conditions of Lease ------Market Conditions (Time) 1% 2% - - 2% 1% Cumulative Adjustments for Above Conditions 1% 2% 0% 2% 1% Adjusted Rate Per Square Foot for Above Conditions $16.16 $16.84 $16.99 $18.87 $20.20

Other Rate Adjustments Location 10% ------Age/Condition/Quality 5% 15% - - 10% -5% Unit Size ------On-Site Parking -10% -5% - - -10% -10% Expenses - - -15% - - -15% - - Other ------Cumulative Adjustments 5% -5% 0% -15% -15%

Adjusted Rate Per Square Foot $16.97 $16.00 $16.99 $16.04 $17.17 (Subject)

Note: Adjustment analysis is based upon subject interior space (without consideration to additional outside space that is included in the subject lease).

16 N216-0085 MARKET RENT ANALYSIS – SUITE 200:

The rental data considered to be comparable to the Subject Suite 200 for this analysis is presented below. As previously mentioned, the search for comparables was expanded to include office properties given the lack of available current rental data for restaurant properties in the immediate Downtown District. Additionally, the recent lease of the Subject Suite 200 has been included in this analysis. It should be noted that the numerical order of these comparables is not sequential to minimize duplication in the addendum of this appraisal report.

COMP RECORD SIZE UNIT NO. NO. LOCATION DATE (SQ. FT.) RENT/SQ. FT. 6 6944 109 East Garden Street, Suite A 11/26/14 2,648 $13.85 7 6995 16 South Palafox Street, Suite 200 12/03/15 3,536 $14.70 (Subject Lease) 1 6967 24 West Chase Street 08/24/15 1,005 $16.00 2 6968 116 South Palafox Street 06/23/15 2,180 $16.51 4 6969 17 West Government Street, Unit C 05/26/15 1,600 $18.50

The above rent comparables were considered to be generally similar to the subject space, and were thus meaningful for this analysis. Photographs of these rental properties are presented at the conclusion of this summary report. All of the comparables are located in the immediate Downtown Pensacola area within approximately 4 blocks of the subject. All involve historic properties that have been renovated in recent years like the subject. The rental rates of the comparables range from $13.85 to $18.50 per square foot. In most instances, the leases reflect a net basis in which the tenant is responsible for the payment of its pro-rata share of the real estate taxes, casualty insurance premiums, interior maintenance charges, and utility expenses.

After necessary rental rate adjustments are made for such dissimilarities as market conditions (time), location, size, condition, quality, operating expense payments, and on-site parking, when compared to the subject, the indicated rental rate range for this subject space is $13.21 to $15.69 per square foot on a net basis. In placing equal emphasis on each comparable, a rate towards the middle of this range is concluded to be reasonable for this subject space. Therefore, a rate of $14.50 per square foot on a net basis was estimated to be market rent for this subject space. It should be noted that this market rent estimate is fairly reflective of the current contract rent of $14.70 per square foot of this subject space. The resulting estimated Potential Gross Revenue for the subject totals $78,308 ($6,526 per month).

17 N216-0085 i16-0085rentgrid-suite200.xls

i16-0085rentgrid-Suite 200 SUMMARY OF RENTAL RATE ADJUSTMENTS

Index Number 6944 6995 6967 6968 6969

Square Feet 2,648 3,536 1,005 2,180 1,600

Unit Rent Per Square Foot $13.85 $14.70 $16.00 $16.51 $18.50

Rate Adjustments Property Rights Conveyed ------Conditions of Lease ------Market Conditions (Time) 3% - - 1% 2% 2% Cumulative Adjustments for Above Conditions 3% 0% 1% 2% 2% Adjusted Rate Per Square Foot for Above Conditions $14.27 $14.70 $16.16 $16.84 $18.87

Other Rate Adjustments Location 15% - - 10% - - - - Age/Condition/Quality 5% - - -5% 5% - - Unit Size - - - - -5% -5% -5% On-Site Parking -10% - - -10% -5% -10% Expenses ------15% -15% Other ------Cumulative Adjustments 10% 0% -10% -20% -30%

Adjusted Rate Per Square Foot $15.69 $14.70 $14.54 $13.47 $13.21 (Subject)

18 N216-0085

Vacancy and collection loss, and operating expense information was obtained for competing properties in the local market and used as a basis for this valuation analysis. For this valuation, a vacancy and collection loss of 5.0 percent has been estimated. The total projected operating expenses for the subject amount to $6,476. This equates to 8.7 percent of the Effective Gross Revenue and $1.20 per square foot of Gross Building Area, which are considered to be reasonable based upon the net-lease arrangement.

Overall capitalization rates were also derived from the previously-presented comparable sales, as well as national real estate investor surveys. The comparable sales indicated an overall capitalization rate of 8.43 to 8.77 percent. The PwC Real Estate Investor Survey (formerly the Korpacz Real Estate Investor Survey – 3rd Quarter, 2015) indicates overall capitalization rates for quality office properties within larger markets at a broad range of 3.5 to 8.0 percent. The average of these current published rates was 5.66 percent.

From this data, an overall capitalization rate of 8.5 percent is concluded to be best reflective of the subject property, and it was used as a basis for the attached Stabilized Income Capitalization method of valuation. The resulting estimated value estimate of the property from this appraisal approach is $800,000. This equates to $148.15 per square foot of Gross Building Area, which is fairly reflective the comparables within the previous Sales Comparison Analysis.

19 N216-0085 (VALUE OF FEE SIMPLE TITLE IN PROPERTY)

i16-0085s INCOME APPROACH (Stabilized Income Capitalization Method)

Potential Gross Revenue: Suite 100 - Interior Space 1,338 Sq. Ft. @ $17.00 Per Sq Ft = $22,746 Suite 100 - Outside Space 858 Sq. Ft. @ $5.00 Per Sq Ft = $4,290 Suite 200 3,536 Sq. Ft. @ $14.50 Per Sq Ft = $51,272 Combined: $78,308

Less Vacancy & Collection Loss @ 5.0% = $3,915

Effective Gross Revenue: $74,393

Less Operating Expenses:

Management Fee: $2,976 4.0% Real Estate Taxes: Tenant Typically to Pay Insurance: Tenant Typically to Pay Repairs & Maintenance: Tenant Typically to Pay Reserves for Replacement: $2,000 2.7% Miscellaneous: $1,500 2.0%

Total Expenses: 8.7% $6,476

Net Operating Income: $67,917

Capitalized at an overall rate of 8.50% obtained directly from the market indicates a value estimate as follows:

$67,917 divided by overall rate of 8.50% = $799,022

Rounded: $800,000

Note: Figures may not total due to computer rounding.

20 N216-0085 RECONCILIATION AND VALUE CONCLUSION:

For this valuation of the fee simple title in the subject property, both the Sales Comparison and Income Capitalization Approaches were performed. The indicated values from these methods were $780,000 and $800,000 respectively, which represents a variance of 2.6 percent. In reconciling the value indications from these methods, the Sales Comparison Approach has been given equal weight to the Income Capitalization Approach. This is due to the type and size of the subject property, along with the quality and quantity of market data available to the appraiser.

Accordingly, the market value of both the fee simple title and leased fee estate in the subject property as of March 3, 2016, based upon the appraisal assumptions and limiting conditions that are presented on the following pages, is estimated to be $790,000. As mentioned, this appraisal was prepared for the exclusive use of the City of Pensacola.

Exposure time is defined by USPAP as the estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. It is a retrospective opinion based on an analysis of past events assuming a competitive and open market. The property sales indicated that the exposure time (i.e., the length of time the subject property would have been exposed for sale in the market had it sold at the market value concluded in this analysis as of the date of this valuation) would have been approximately 6 to 12 months. The estimated marketing time (i.e., the amount of time it would probably take to sell the subject property if it were exposed in the market, beginning on the date of this valuation) is projected to be approximately 6 to 12 months.

Attached are summary of the two subject leases, the assumptions and limiting conditions of this appraisal, the certification of the appraiser, a copy of the appraiser’s state certification, subject photographs, location maps, a site plan, an aerial photograph, a building sketch, legal descriptions, a warranty deed, a flood zone map, zoning maps, comparable data sheets and photographs, comparable location maps, and the appraiser's professional qualifications.

21 N216-0085

SUMMARY OF SUBJECT LEASE - SUITE 100

PROPERTY LOCATION: 16 South Palafox Street – Suite 100 (First Floor), Pensacola, Florida 32502

LESSOR: Community Redevelopment Agency of the City of Pensacola

LESSEE: Kaple Holdings, Inc.

BUILDING AREA: 1,338 Square Feet (Net Rentable Area) plus 858 Square Feet-outside space

CURRENT LEASE TERM: December 3, 2015 – December 2, 2020 (4 years and 10 months remain as of the effective date of valuation).

LEASE TERM RENEWAL: The tenant has an option to renew this lease for 5 years at a rental rate to be negotiated upon renewal.

CURRENT ANNUAL RENT: $27,000; $22,728 ($1,894 per month) for interior space and $4,272 ($356 per month) for exterior space.

CURRENT ANNUAL RENT PER SQ. FT.: $16.99 Per Square Foot of NRA of interior space and $5.00 per square foot for exterior space.

RENT ESCALATIONS: There are annual rent escalations of 2.0 percent per year.

RENEWAL LEASE RENTAL RATE: To be negotiated.

PAYMENT OF OPERATING EXPENSES: The lease reflects a net basis in which the tenant is responsible for its pro-rata share of real estate taxes, casualty insurance premiums, interior maintenance charges, and all utility expenses.

ADDITIONAL TERMS: None

22 N216-0085

SUMMARY OF SUBJECT LEASE – SUITE 200

PROPERTY LOCATION: 16 South Palafox Street – Suite 200 (Second Floor), Pensacola, Florida 32502

LESSOR: Community Redevelopment Agency of the City of Pensacola

LESSEE: Play Pensacola, Inc.

BUILDING AREA: 3,536 Square Feet +/- (Net Rentable Area)

CURRENT LEASE TERM: December 3, 2015 – December 2, 2020 (4 years and 10 months remain as of the effective date of valuation).

LEASE TERM RENEWAL: The tenant has an option to renew this lease for 5 years at a rental rate to be negotiated upon renewal.

CURRENT ANNUAL RENT: $51,985 annually ($4,332 per month).

CURRENT ANNUAL RENT PER SQ. FT.: $14.70 Per Square Foot of NRA

RENT ESCALATIONS: There are annual rent escalations of 2.0 percent per year.

RENEWAL LEASE RENTAL RATE: To be negotiated.

PAYMENT OF OPERATING EXPENSES: The lease reflects a net basis in which the tenant is responsible for its pro-rata share of real estate taxes, casualty insurance premiums, interior maintenance charges, and all utility expenses.

ADDITIONAL TERMS: None

23 N216-0085

ASSUMPTIONS AND LIMITING CONDITIONS:

This appraisal and the appraiser’s certification that follows is subject to the following assumptions and limiting conditions:

1. The three traditional approaches to value income-producing properties are the Cost Approach, the Sales Comparison Approach, and the Income Capitalization Approach. Based upon the type and specific characteristics of the subject property, the Cost Approach was not considered to be appropriate for this valuation. Accordingly, the appraiser did not perform this particular approach to value the subject property. The subject property is a commercial property with two leases in place. Buyers of this type of property in the local market typically rely most heavily on the Sales Comparison and Income Capitalization Approaches in making buying decisions. Additionally, recent sales and rented activity of similar type properties in the local market is considered to be sufficient to produce credible results. Lastly, this appraisal process is concluded to be adequate based upon the intended use of this appraisal. Accordingly, the appraiser has determined that the performing of the Sales Comparison and Income Capitalization Approaches in this appraisal process is sufficient to achieve credible assignment results based primarily upon the intended use of this appraisal. The appraiser has clearly identified and explained the scope of work for this assignment within this appraisal report.

2. This is an Appraisal Report which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice. As such, it clearly and accurately sets forth the appraisal in a manner that will not be misleading; contains sufficient information to enable the intended users of the appraisal to understand the report properly; and clearly and accurately discloses all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated within this report. The appraiser is not responsible for the unauthorized use of this appraisal report.

3. The client is the party who engages an appraiser (by employment or contract) in a specific assignment. A party receiving a copy of this report from the client does not, as a consequence, become a party to the appraiser-client relationship. Any person who receives a copy of this appraisal report as a consequence of disclosure requirements that apply to an appraiser’s client, does not become an intended user of this report unless the client specifically identifies them at the time of the assignment. The appraiser’s written consent and approval must be obtained before this appraisal report can be conveyed by anyone to the public through advertising, public relations, news, sales, or other media.

4. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report. The property is appraised as though free and clear of any or all liens and encumbrances unless otherwise stated in this report. Responsible ownership and competent property management are assumed unless otherwise stated in this report. Typical mortgage loan encumbrances and utility easements are assumed to exist.

24 N216-0085

5. If the property is improved, it is assumed that the structural and mechanical components of the building are in good condition and operating properly, unless reported otherwise.

6. The information furnished by others is believed to be accurate, true, and reliable. However, no warranty is given for its accuracy.

7. All engineering is assumed to be correct. Any plot plans and illustrative material in this report are included only to assist the reader in visualizing the property.

8. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover such conditions.

9. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated in this report.

10. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in this appraisal report.

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

12. Any sketch in this report may show approximate dimensions and is included to assist the reader in visualizing the property. Maps and exhibits found in this report are provided for reader reference purposes only. No guarantee as to accuracy is expressed or implied unless otherwise stated in this report. No survey has been made by the appraiser for the purpose of this report.

13. It is assumed that the utilization of the land and improvement is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report.

14. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substance should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment. The presence of substance such as asbestos, urea- formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The appraiser's value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraiser's descriptions and resulting comments are the result of the routine observations made during the appraisal process.

25 N216-0085

15. Unless otherwise stated in this report, the subject property is appraised without a specific compliance survey having been conducted to determine if the property is or is not in conformance with the requirements of the Americans with Disabilities Act. The presence of architectural and communication barriers that are structural in nature that would restrict access by disabled individuals may adversely affect the property's value, marketability, or utility.

16. The appraiser warrants only that the value conclusion is his best opinion estimate as of the exact day of valuation. For prospective value estimates, the appraiser cannot be held responsible for unforeseeable events which might alter market conditions prior to the effective date of the appraisal.

17. Any proposed improvements are assumed to be completed in good workmanlike manner in accordance with the submitted plans and specifications.

18. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

19. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used, or reproduced in part or its entirety, for any purpose by any person other than City of Pensacola without the written consent of the appraiser, and in any event, only with proper written qualification and only in its entirety.

20. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news sales, or other media without prior written consent and approval of the appraiser.

21. Use of this appraisal constitutes acceptance of the stated limiting conditions and assumptions. The appraiser’s liability extends to the current client and not to subsequent users of the appraisal.

22. The Americans with Disabilities Act (ADA) became effective January 26, 1992. For improved properties, we have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, 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 noncompliance with the requirement of ADA in estimating the value of the property.

23. The appraiser certifies that he has no debt relationship with City of Pensacola .

26 N216-0085

24. This valuation is contingent upon there being no contamination of the soil due to any source, including but not limited to underground tanks, if any.

25. This valuation is contingent upon a survey, legal description, and land and building area calculations being prepared by a qualified and properly licensed engineer to indicate the subject property to be basically the same as described in this appraisal report.

EXTRAORDINARY APPRAISAL ASSUMPTIONS:

1. This valuation is based upon the extraordinary assumption that Subject Suite 100 includes the outside area that is utilized for dining and storage purposes, as discussed in this appraisal report. It should be noted that the use of this extraordinary assumption may affect the value conclusion in this appraisal. It should be noted that the use of this extraordinary assumption may affect the value conclusion in this appraisal.

HYPOTHETICAL CONDITIONS OF THE APPRAISAL:

There are no hypothetical conditions of this appraisal.

27 N216-0085

CERTIFICATION OF THE APPRAISER

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

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

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

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

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

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

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

• The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989.

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

• I have made a personal inspection of the property that is the subject of this appraisal report.

• I have performed services as an appraiser regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. I have discussed with the client and hereby disclose that I previously performed an appraisal of market rent of the subject property of this assignment for the client in October of 2015. However, I have not performed any other appraisal or other real estate services involving the subject property in the three years preceding the effective date of this valuation. I conclude that I have no conflict of interest in performing this appraisal assignment for the client.

• No one provided significant real property appraisal assistance to the person signing this appraisal report and certification.

• I currently hold an appropriate state license or certification allowing the performance of real estate appraisals in connection with federally related transactions of properties located in Florida.

• My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the State of Florida for state-certified appraisers.

28 N216-0085

The Appraisal Institute and the State of Florida conduct mandatory programs of continuing education for its designated members and licensees, respectively. Appraisers who meet the minimum standards of these programs are awarded periodic educational certification. As of the date of this report, I have completed the requirements of the continuing education programs for designated members of the Appraisal Institute, and of the State of Florida, respectively.

The use of this report is subject to the requirements of the State of Florida relating to review by the Real Estate Appraisal Subcommittee of the Florida Real Estate Commission, as well as the Appraisal Institute.

______Charles C. Sherrill, Jr., MAI State Certified General Appraiser #RZ1665

29 N216-0085

PHOTOGRAPHS OF SUBJECT PROPERTY

Front View of Subject Property

View of Rear of Subject Property PHOTOGRAPHS OF SUBJECT PROPERTY

Interior View of Subject Suite 100 Space

Interior View of Outside Seating in Breezeway – Suite 100

PHOTOGRAPHS OF SUBJECT PROPERTY

View of Outside Storage Area – Suite 100

Interior View of Subject Suite 200 PHOTOGRAPHS OF SUBJECT PROPERTY

Subject Street Scene From Palafox Street

Chris Jones Escambia County Property Appraiser

March 10, 2016 1:587

Map Grid All Roads 00.005 0.01 0.02 mi

City Road Easement 00.01 0.02 0.04 km County Road Property Line

Interstate

State Road

US Highway

Chris Jones Escambia County Property Appraiser

March 10, 2016 1:283

Map Grid All Roads 00.0035 0.007 0.014 mi

City Road Easement 00.005 0.01 0.02 km County Road Property Line

Interstate

State Road

US Highway

13-0472-000 SEE BELOW 17 000S00-9001-004-263 2015 Real Estate 16 S PALAFOX ST SUITE COMMUNITY REDEVELOPMENT LEASED TO KAPLE HOLDINGS FOR 1ST AGENCY FOR FLOOR WINE & CHEE SE SHOP SUITE 100 10091 HILLVIEW RD BEG AT A PT PENSACOLA, FL 32514 See Additional Legal on Tax Roll

COUNTY 6.6165 101,308 0 101,308 670.30 PUBLIC SCHOOLS BY LOCAL BOARD 2.1140 121,504 0 121,504 256.86 BY STATE LAW 4.9990 121,504 0 121,504 607.40 PENSACOLA 4.2895 101,308 0 101,308 434.56 DOWNTOWN 2.0000 101,308 0 101,308 202.62 WATER MANAGEMENT 0.0378 101,308 0 101,308 3.83 M.S.T.U. LIBRARY 0.3590 101,308 0 101,308 36.37

20.4158 $2,211.94

$0.00

$2,211.94

If Paid By Nov 30, 2015 Dec 31, 2015 Jan 31, 2016 Feb 29, 2016 Mar 31, 2016 Please Pay 2,123.46 2,145.58 2,167.70 2,189.82 2,211.94

13-0472-000 SEE ABOVE 17 000S00-9001-004-263 2015 Real Estate 16 S PALAFOX ST SUITE LEASED TO KAPLE HOLDINGS FOR 1ST COMMUNITY REDEVELOPMENT FLOOR WINE & CHEE SE SHOP SUITE 100 BEG AGENCY FOR AT A PT 10091 HILLVIEW RD See Additional Legal on Tax Roll PENSACOLA, FL 32514

If Paid By Nov 30, 2015 Dec 31, 2015 Jan 31, 2016 Feb 29, 2016 Mar 31, 2016 Please Pay 2,123.46 2,145.58 2,167.70 2,189.82 2,211.94

1 130472000 2015 9

13-0472-100 SEE BELOW 17 000S00-9001-005-263 2015 Paid Real Estate 16 S PALAFOX ST SUITE COMMUNITY REDEVELOPMENT LEASE TO TITAN ENTERTAINMENT FOR AGENCYOF THE CITY OF PENSACOLA 2ND FLOOR PLAY BA R SUITE 200 BEG AT FLORI A PT ON E 16 S PALAFOX ST SUITE 200 See Additional Legal on Tax Roll PENSACOLA, FL 32502

COUNTY 6.6165 173,423 0 173,423 1,147.45 PUBLIC SCHOOLS BY LOCAL BOARD 2.1140 184,560 0 184,560 390.16 BY STATE LAW 4.9990 184,560 0 184,560 922.62 PENSACOLA 4.2895 173,423 0 173,423 743.90 DOWNTOWN 2.0000 173,423 0 173,423 346.85 WATER MANAGEMENT 0.0378 173,423 0 173,423 6.56 M.S.T.U. LIBRARY 0.3590 173,423 0 173,423 62.26

20.4158 $3,619.80

$0.00

$3,619.80

If Paid By Jan 31, 2016 Please Pay $0.00

13-0472-100 SEE ABOVE 17 000S00-9001-005-263 2015 Paid Real Estate 16 S PALAFOX ST SUITE LEASE TO TITAN ENTERTAINMENT FOR 2ND COMMUNITY REDEVELOPMENT FLOOR PLAY BA R SUITE 200 BEG AT A PT AGENCYOF THE CITY OF PENSACOLA ON E FLORI See Additional Legal on Tax Roll 16 S PALAFOX ST SUITE 200 PENSACOLA, FL 32502

If Paid By Jan 31, 2016 Please Pay $0.00

Paid By PLAY PENSACOLA INC Paid 01/13/2016 Receipt # 2016-0009842 $3,547.40

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COMPARABLE SALES DATA

COMPARABLE BUILDING SALE

COMPARABLE NO.: 1 RECORD NUMBER: 5948

CLASSIFICATION: OFFICE

DATE: 09/30/2015

LOCATION: 105 GREGORY SQUARE, PENSACOLA, FLORIDA

GRANTOR: TARRAGONA DEVELOPMENT, LLC GRANTEE: PHARR HOLDINGS, LLC

REFERENCE: OR 7414 PAGE 1973; 15-330; GCMLS #2141119

BRIEF LEGAL DESCRIPTION: ARPENT LOT 28, OLD CITY TRACT, ESCAMBIA COUNTY, FLORIDA

TOTAL LAND AREA: 0.2957 ACRE (12,881 SQ. FT.) BUILDING SIZE: 3,312 SQ. FT. YEAR BUILT: 1946 (EFFECTIVE 1990) BUILDING AGE: 20 YEARS

ZONING: C-3; COMMERCIAL HIGHEST & BEST USE: OFFICE TERMS: CASH TO SELLER

COMMENTS: • 15-330; GCMLS #2141119 • PROPERTY WAS LISTED FOR SALE WITH SPERRY VAN NESS AT A PRICE OF $449,000 (GCMLS #2141119). • PARCEL ID NO.: 00-0S-00-9007-002-028 • JURISDICTION: DOWNTOWN PENSACOLA, FLORIDA

The property is located on the East Gregory Square cul-de-sac at its intersection with North Tarragona Street. This corner parcel is fairly regular in shape. The site has 110 feet of frontage on the south side of Gregory Square and 121 feet on the east side of North Tarragona Street. According to the Escambia County Property Appraiser’s Office, the property contains approximately 0.2957 acre. This equates by calculation to 12,881 square feet of land area. The indicated land-to-building ratio for the subject is 3.9 to 1.0, which is considered to be relatively adequate.

The property is fairly level and appears to have satisfactory drainage. The public utilities available to the site are considered to be adequate. Access to the property is concluded to be adequate. It appears that the parcel is not located within a designated flood area (Flood Zone X; Flood Map 12033C0390G).

The improvements consist of a one-story professional office building which according to the Escambia County Property Appraiser’s Office contains 3,312 square feet. The facility is constructed of masonry exterior walls on a concrete foundation. The roof cover is of a built-up material. The building has an eave height which ranges from approximately 14 to 18 feet.

The floor plan of the office consists of a reception area, multiple private offices, a conference room, two restrooms, and a small kitchen area. The facility was occupied primarily by the buyer, but several tenants lease individual offices within the building on reported short-term bases. The facility is ideally-suited for occupancy with a single tenant. The interior finish of the building is considered to be of relatively good quality as it generally consists of ceramic tile and laminate (wood) flooring, sheetrock interior walls, and sheetrock ceilings.

The building is reported to have been constructed in 1946, but it was extensively renovated in recent years. Overall, this well-maintained facility is considered to be of good quality of construction and in relatively good physical condition. Its effective age is estimated to be approximately 20 years.

The site improvements consist of 12 asphalt-paved parking spaces, concrete sidewalks, concrete curb cuts, decorative exterior lighting, and attractive landscaping with an irrigation system.

SALES PRICE ANALYSIS

SALES PRICE: $407,000/$435,000* SALES PRICE PER SQUARE FOOT OF BUILDING AREA: $131.34* PER SQ. FT. ESTIMATED UNIT RENT: $16.50 PER SQ. FT. INDICATED GROSS INCOME: $54,648 ESTIMATED VACANCY LOSS & EXPENSES: - $17,412 INDICATED NET OPERATING INCOME: $37,236 INDICATED CAPITALIZATION RATE: 8.56%

*Base purchase price, without consideration of credit that was earned by the buyer, as former tenant, from a portion of its previous rent payments.

PHOTOGRAPH OF COMPARABLE PROPERTY

(5948) 105 Gregory Square, Pensacola, FL

COMPARABLE BUILDING SALE

COMPARABLE NO.: 2 RECORD NUMBER: 5884

CLASSIFICATION: OFFICE

DATE: 03/31/15

LOCATION: 214 EAST CHURCH STREET, PENSACOLA, FLORIDA

GRANTOR: DONOVAN FAMILY LIMITED PARTNERSHIP GRANTEE: KENT D. SKOLROOD

REFERENCE: OR 7326 PAGE 1360; MLS #476633

BRIEF LEGAL DESCRIPTION: PORTION OF LOT 18, OLD CITY TRACT, ESCAMBIA COUNTY, FLORIDA

TOTAL LAND AREA: 0.085 ACRE (3,703 SQ. FT.) BUILDING SIZE: 1,407 SQ. FT. YEAR BUILT: 1900 (EFFECTIVE 1970) BUILDING AGE: 30 YEARS

ZONING: HC-1; HISTORICAL COMMERCIAL HIGHEST & BEST USE: OFFICE TERMS: CASH TO SELLER

COMMENTS: • PROPERTY IS LOCATED ON THE NORTH SIDE OF EAST CHURCH STREET, JUST WEST OF SOUTH ADAMS STREET. • PROPERTY WAS LISTED FOR SALE WITH DONOVAN REALTY, INC. AT A PRICE OF $209,750 (MLS #476633). • LAND TO BUILDING RATIO IS 2.6 TO 1.0. • PARCEL ID NO.: 00-0S-00-9005-002-018 • JURISDICTION: CITY OF PENSACOLA, FLORIDA

SALES PRICE ANALYSIS

SALES PRICE: $209,750 SALES PRICE PER SQUARE FOOT OF BUILDING AREA: $149.08 PER SQ. FT. ESTIMATED UNIT RENT: N/A INDICATED GROSS INCOME: N/A ESTIMATED VACANCY LOSS & EXPENSES: N/A INDICATED NET OPERATING INCOME: N/A INDICATED CAPITALIZATION RATE: N/A

PHOTOGRAPH OF COMPARABLE PROPERTY

(5884) 214 East Church Street, Pensacola, FL COMPARABLE BUILDING SALE

COMPARABLE NO.: 3 RECORD NUMBER: 5871

CLASSIFICATION: OFFICE

DATE: 09/24/2015

LOCATION: 600 EAST GOVERNMENT STREET, PENSACOLA, FLORIDA

GRANTOR: LMD PROPERTIES, LLC GRANTEE: GULF DOC, LLC

REFERENCE: OR 7411 PAGE 530; GCMLS #29583815

BRIEF LEGAL DESCRIPTION: LOT 144 WITHIN BLOCK 20, OLD CITY TRACT, ESCAMBIA COUNTY, FLORIDA

TOTAL LAND AREA: 10,454 SQ. FT. (0.24 ACRE) BUILDING SIZE: 3,644 SQ. FT. YEAR BUILT: 1980 BUILDING AGE: 20-25 YEARS +/-

ZONING: HC-1; HISTORIC COMMERCIAL HIGHEST & BEST USE: OFFICE TERMS: CONVENTIONAL MORTGAGE AT MARKET TERMS

COMMENTS: • SHERRILL APPRAISAL COMPANY FILE #15-352 AND #15-514 • TWO-STORY OFFICE LOCATED AT THE NORTHEAST CORNER OF EAST GOVERNMENT STREET AND EAST CEVALLOS STREET. • LAND TO BUILDING RATIO: 2.9 TO 1.0. • PROPERTY IS LISTED FOR SALE WITH NAI HALFORD AT A PRICE OF $595,000 (GCMLS #29583815). • PARCEL ID NO.: 00-0S-00-9001-001-144 • JURISDICTION: CITY OF PENSACOLA, FLORIDA

SALES PRICE ANALYSIS

SALES PRICE: $545,000 SALES PRICE PER SQUARE FOOT OF BUILDING AREA: $149.56 PER SQ. FT. ESTIMATED UNIT RENT: $18.50 PER SQ. FT. INDICATED GROSS INCOME: $67,414 ESTIMATED VACANCY LOSS & EXPENSES: - $21,470 INDICATED NET OPERATING INCOME: $45,944 INDICATED CAPITALIZATION RATE: 8.43%

PHOTOGRAPH OF COMPARABLE PROPERTY

(5871) 600 East Government Street, Pensacola, FL COMPARABLE BUILDING SALE

COMPARABLE NO.: 4 RECORD NUMBER: 5945

CLASSIFICATION: RETAIL/OFFICE

DATE: 3/10/2015

LOCATION: 401 SOUTH PALAFOX STREET, PENSACOLA, FLORIDA

GRANTOR: PENSACOLA CAPITAL, LLC GRANTEE: DON ALANS, INC.

REFERENCE: OR 7312 PAGE 439; 15-004

BRIEF LEGAL DESCRIPTION: LOWER UNIT COMMERCIAL 401 SOUTH PALAFOX CONDO, ESCAMBIA COUNTY, FLORIDA

TOTAL LAND AREA: 0.7 ACRE (3,049 SQ. FT.) BUILDING SIZE: 2,113 SQ. FT. YEAR BUILT: 1901 BUILDING AGE: 15 YEARS

ZONING: HC-2; HISTORIC COMMERCIAL HIGHEST & BEST USE: RETAIL/OFFICE TERMS: CASH TO SELLER

COMMENTS: • SHERRILL APPRAISAL COMPANY FILE #15-004 • PARCEL ID NO.: 00-0S-00-8000-010-001 • JURISDICTION: CITY OF PENSACOLA, FLORIDA

Site Description: The property is located on the southwest corner of South Palafox and West Zarragossa Streets in Downtown Pensacola. The property is situated immediately adjacent to a similar retail property. The corner parcel is rectangular in shape. The site has 34.17 feet of frontage on the west side of South Palafox Street and 82.5 feet of frontage on the south side of West Zarragossa Street.

According to the Escambia County Property Appraiser’s Office, the property contains 0.07 acre. This equates by calculation to a land area of 3,049 square feet. It should be noted that a portion of this land area is improved with the 646-square foot attached garage that represents a portion of the adjacent condominium unit that is excluded from this valuation. The indicated land-to- building ratio for the subject is 1.4 to 1.0.

The improvements consist of a one-story retail unit. According to the condominium declaration documents, the structure contains 2,113 square feet when including the two attached storage closets located towards the rear of the suite. The unit represents the first floor of a two-unit condominium facility, and it therefore shares common walls and roof. The facility is constructed of concrete block with stucco exterior walls on a concrete foundation.

The floor plan of the suite consists of an open retail area towards the front, and a small office, two restrooms, three storage closets, and a rear doorway towards the rear. A mechanical platform with air handling units and some attic storage (accessed by a set of hide-away drop stairs) are located above the rear portion of the unit. The interior finish of the building consists of ceramic tile and carpeted flooring, exposed brick and sheetrock interior walls, and sheetrock ceilings with high-quality lighting. The building has attractive wood moulding, and high (eleven-foot) ceilings at the front of the facility.

The building is reported to have been initially constructed in 1901, but it has been extensively renovated in recent years. The actual age of the structure is more than 100 years, but its effective age is estimated to be approximately 15 years. Overall, the facility is considered to be in very good physical condition.

The site improvements are minimal based upon the high lot coverage percentage, but this is fairly common for similar properties in Downtown Pensacola.

SALES PRICE ANALYSIS

SALES PRICE: $390,000 SALES PRICE PER SQUARE FOOT OF BUILDING AREA: $184.57 PER SQ. FT. ESTIMATED UNIT RENT: $23.50 PER SQ. FT. INDICATED GROSS INCOME: $49,656 ESTIMATED VACANCY LOSS & EXPENSES: - $15,453 INDICATED NET OPERATING INCOME: $34,203 INDICATED CAPITALIZATION RATE: 8.77%

PHOTOGRAPH OF COMPARABLE PROPERTY

(5945) 401 South Palafox Place, Pensacola, FL (First Floor)

COMPARABLE RENTAL DATA

COMPARABLE RENTAL INDEX

COMPARABLE NO.: 1 RECORD NUMBER: 6967

CLASSIFICATION: OFFICE

DATE: 8/24/2015

LOCATION: 24 WEST CHASE STREET, PENSACOLA, FLORIDA

ANNUAL RENT: $16,080

BUILDING SIZE: 1,005 SQ. FT.

UNIT RENT: $16.00 PER SQUARE FOOT

YEAR BUILT: 1950 (1990 EFFECTIVE) BUILDING AGE: 20 TO 25 YEARS

CONDITION: AVERAGE TO GOOD

HIGHEST AND BEST USE: OFFICE

EXPENSE INFORMATION:

TAXES: TENANT MAINTENANCE: TENANT INSURANCE: TENANT UTILITIES: TENANT

REMARKS:

• MULTIPLE-STORY OFFICE BUILDING LOCATED ON THE NORTH SIDE OF WEST CHASE STREET, BETWEEN NORTH BAYLEN AND NORTH PALAFOX STREETS. • PROPERTY WAS LISTED FOR LEASE WITH SALOMON-GOLDSTEIN PROPERTIES, GULF AT A RATE OF $16.00 PER SQUARE FOOT (GCMLS #2139006). • PARCEL I D#: 00-0S-00-9007-010-037 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6967) 24 West Chase Street, Pensacola COMPARABLE RENTAL INDEX

COMPARABLE NO.: 2 RECORD NUMBER: 6968

CLASSIFICATION: OFFICE/RETAIL

DATE: 6/23/2015

LOCATION: 116 SOUTH PALAFOX STREET, PENSACOLA, FLORIDA

ANNUAL RENT: $36,000

BUILDING SIZE: 2,180 SQ. FT.

UNIT RENT: $16.51 PER SQUARE FOOT

YEAR BUILT: 1900 (1985 EFFECTIVE) BUILDING AGE: 25 TO 30 YEARS

CONDITION: AVERAGE

HIGHEST AND BEST USE: OFFICE/RETAIL

EXPENSE INFORMATION:

TAXES: LANDLORD MAINTENANCE: TENANT INSURANCE: LANDLORD UTILITIES: TENANT

REMARKS:

• TWO-STORY OFFICE BUILDING LOCATED ON THE EAST SIDE OF PALAFOX STREET, NORTH OF EAST INTENDENCIA STREET. • PROPERTY WAS LISTED FOR LEASE WITH NAI HALFORD AT A RATE OF $18.00 PER SQUARE FOOT (GCMLS #2128404). • PARCEL I D#: 00-0S-00-9001-012-174 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6968) 116 South Palafox Street, Pensacola COMPARABLE RENTAL INDEX

COMPARABLE NO.: 3 RECORD NUMBER: 6994

CLASSIFICATION: RESTAURANT/LOUNGE

DATE: 12/3/2015

LOCATION: 16 SOUTH PALAFOX STREET, SUITE 100, PENSACOLA, FLORIDA

ANNUAL RENT: $22,728

BUILDING SIZE: 1,338 SQ. FT.

UNIT RENT: $16.99 PER SQUARE FOOT

YEAR BUILT: 1900 (RENOVATED 2010) BUILDING AGE: 10 to 15 YEARS

CONDITION: AVERAGE TO GOOD

HIGHEST AND BEST USE: RESTAURANT/LOUNGE

EXPENSE INFORMATION:

TAXES: TENANT MAINTENANCE: TENANT INSURANCE: TENANT UTILITIES: TENANT

REMARKS:

• SHERRILL APPRAISAL COMPANY FILE #16-0085 • FIRST FLOOR INTERIOR SPACE OF A TWO-STORY BUILDING LOCATED ON THE EAST SIDE OF SOUTH PALAFOX STREET. TENANT ALSO LEASES SOME COVERED EXTERIOR SPACE AT ADDITIONAL RENT. • PARCEL I D#: 00-0S-00-9001-004-263 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6994) 16 South Palafox Street, Pensacola, FL COMPARABLE RENTAL INDEX

COMPARABLE NO.: 4 RECORD NUMBER: 6969

CLASSIFICATION: OFFICE

DATE: 5/26/2015

LOCATION: 17 WEST GOVERNMENT STREET, UNIT C, PENSACOLA, FLORIDA

ANNUAL RENT: $29,592

BUILDING SIZE: 1,600 SQ. FT.

UNIT RENT: $18.50 PER SQUARE FOOT

YEAR BUILT: 1900 (2000 EFFECTIVE) BUILDING AGE: 15 TO 20 YEARS

CONDITION: AVERAGE TO GOOD

HIGHEST AND BEST USE: OFFICE

EXPENSE INFORMATION:

TAXES: LANDLORD MAINTENANCE: LANDLORD INSURANCE: LANDLORD UTILITIES: LANDLORD

REMARKS:

• OLD #6848 • OFFICE BUILDING LOCATED ON THE SOUTH SIDE OF WEST GOVERNMENT, BETWEEN SOUTH BAYLEN AND SOUTH PALAFOX STREETS IN DOWNTOWN PENSACOLA. • OFFICE SPACE INCLUDES 5 OFF-STREET PARKING SPACES. • PROPERTY WAS LISTED FOR LEASE WITH NAI HALFORD AT A RATE OF $20.50 PER SQUARE FOOT (GCMLS #2091273) • PARCEL I D#: 00-0S-00-9001-001-084 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6969) 17 West Government Street, Pensacola COMPARABLE RENTAL INDEX

COMPARABLE NO.: 5 RECORD NUMBER: 6960

CLASSIFICATION: OFFICE

DATE: 10/02/2015

LOCATION: 216 PALAFOX PLACE, PENSACOLA, FLORIDA

ANNUAL RENT: $30,000

BUILDING SIZE: 1,500 SQ. FT.

UNIT RENT: $20.00 PER SQUARE FOOT

YEAR BUILT: 1900 (1990 EFFECTIVE) BUILDING AGE: 15 TO 25 YEARS

CONDITION: GOOD

HIGHEST AND BEST USE: OFFICE

EXPENSE INFORMATION:

TAXES: TENANT MAINTENANCE: TENANT INSURANCE: TENANT UTILITIES: TENANT

REMARKS:

• OFFICE BUILDING LOCATED ON THE EAST SIDE OF PALAFOX PLACE, BETWEEN EAST GOVERNMENT AND EAST INTENDENCIA STREETS IN DOWNTOWN PENSACOLA. • PROPERTY WAS LISTED FOR LEASE WITH DURNEY PROPERTIES, INC AT A RATE OF $20.00 PER SQUARE FOOT (GCMLS #2141254). • PARCEL I D#: 00-0S-00-9001-003-285 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6960) 216 South Palafox Place, Pensacola COMPARABLE RENTAL INDEX

COMPARABLE NO.: 6 RECORD NUMBER: 6944

CLASSIFICATION: OFFICE

DATE: 11/26/2014

LOCATION: 109 EAST GARDEN STREET, SUITE A, PENSACOLA, FLORIDA

ANNUAL RENT: $36,672

BUILDING SIZE: 2,648 SQ. FT.

UNIT RENT: $13.85 PER SQUARE FOOT

YEAR BUILT: 1954 RENOVATED 2009 BUILDING AGE: 20-25 YEARS

CONDITION: ABOVE-AVERAGE

HIGHEST AND BEST USE: OFFICE

EXPENSE INFORMATION:

TAXES: TENANT MAINTENANCE: TENANT INSURANCE: TENANT UTILITIES: TENANT

REMARKS:

• OFFICE BUILDING LOCATED ON GARDEN STREET JUST WEST OF TARRAGONA STREET. • PROPERTY WAS LISTED FOR LEASE WITH NAI HALFORD AT A RATE OF $15.00 PER SQUARE FOOT (GCMLS #2010750). • PARCEL I D#: 00-0S-00-9001-004-305 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6944) 109 East Garden Street, Pensacola COMPARABLE RENTAL INDEX

COMPARABLE NO.: 7 RECORD NUMBER: 6995

CLASSIFICATION: RESTAURANT/LOUNGE

DATE: 12/3/2015

LOCATION: 16 SOUTH PALAFOX STREET, SUITE 200 PENSACOLA, FLORIDA

ANNUAL RENT: $51,985

BUILDING SIZE: 3,536 SQ. FT.

UNIT RENT: $14.70 PER SQUARE FOOT

YEAR BUILT: 1900 (RENOVATED 2011) BUILDING AGE: 15 YEARS

CONDITION: AVERAGE

HIGHEST AND BEST USE: RESTAURANT/LOUNGE

EXPENSE INFORMATION:

TAXES: TENANT MAINTENANCE: TENANT INSURANCE: TENANT UTILITIES: TENANT

REMARKS:

• SHERRILL APPRAISAL COMPANY FILE #16-0085 • SECOND FLOOR OF A TWO-STORY BUILDING LOCATED ON THE EAST SIDE OF SOUTH PALAFOX STREET. • PARCEL I D#: 00-0S-00-9001-005-263 • JURISDICTION: CITY OF PENSACOLA, FLORIDA.

PHOTOGRAPH OF COMPARABLE PROPERTY

(6995) 16 South Palafox Street, Pensacola, FL

APPRAISER'S QUALIFICATIONS

NAME: Charles C. Sherrill, Jr., MAI TITLE: President OFFICE ADDRESS: Sherrill Appraisal Company 410 East Government Street Pensacola, Florida 32502 EDUCATION: Bachelor of Arts Degree in Economics, Washington & Lee University, Lexington, Virginia (1984)

Successfully completed the following courses sponsored by the American Institute of Real Estate Appraisers: Course 1A-1 Real Estate Appraisal Principles (Tufts University, 1986) Course 1A-2 Basic Valuation Procedures (University of North Carolina, 1986) Course SPP Standards of Professional Practice (Atlanta, Georgia, 1987) Course 1B-A Capitalization Theory and Techniques - Part A (Florida State University, 1987) Course 1B-B Capitalization Theory and Techniques - Part B (University of Portland, 1988) Course 2-1 Case Studies in Real Estate Valuation (Colorado University, 1988) Course 2-2 Report Writing and Valuation Analysis (University of Central Florida, 1989)

Successfully completed the following course sponsored by the Commercial Investment Real Estate Institute: Course 401 Introduction to Commercial Real Estate Analysis (Pensacola, Florida, 1995/1998)

CONTINUING EDUCATION: Credited with attendance/completion of the following seminars/courses: Appraisal Institute Eminent Domain and Condemnation Uniform Standards of Professional Appraisal Practice Business Practices and Ethics Analyzing Operating Expenses Appraising from Blueprints and Specifications Feasibility, Market Value, and Investment Timing Analyzing Distressed Real Estate Hotel/Motel Valuation Effective Appraisal Report Writing FHA Homebuyer Protection Plan and The Appraisal Process Standards of Professional Practice - Part C Standards of Professional Practice - Part A Fair Lending and the Appraiser Appraisal of Retail Properties Standards of Professional Practice - Part B Understanding Limited Appraisals and General Reporting Options - General Accrued Depreciation Depreciation Analysis Rates, Ratios, and Reasonableness Comprehensive Appraisal Workshop Real Estate Risk Analysis Page 2 APPRAISER'S QUALIFICATIONS

CONTINUING EDUCATION (Continued): Credited with attendance/completion of the following seminars/courses: State Certification USPAP Update Florida Appraisal Laws and Regulations Appraisal of 2-4 Family and Multi-Family Properties Challenging Assignments for Residential Appraiser’s Foreclosure Basics for Appraiser’s Florida Appraiser Supervisor/Trainee Rules Income Capitalization Approach Neighborhood Analysis Communicating the Appraisal Appraisal Principles Sales Comparison Approach Real Estate, Mortgages, and Law

EXPERIENCE: Engaged since 1986 in valuation, consulting, and market studies of various property types, including office, retail, industrial, multi-family residential, churches, restaurants, motels, subdivision developments, commercial land, acreage, marinas, single family residential, and condominiums in numerous states. Have testified as an expert witness numerous times in the Circuit Courts of Escambia, Santa Rosa, and Okaloosa Counties. Prior to joining Sherrill Appraisal Company in 1992, employed by Landauer Associates, Inc., Atlanta, Georgia (1986-1992) as Vice President, Valuation and Technical Services Division.

PROFESSIONAL LICENSES: State Certified General Appraiser (#RZ1665), State of Florida (1993-Present) Licensed Real Estate Broker (#BK0436908), State of Florida (1996-Present) Former Licensed Real Estate Salesman (#SL0436908), State of Florida (1985-1996) Former State Certified Appraiser (#000439), State of Georgia (1991-1992)

PROFESSIONAL MEMBERSHIPS: Member, Appraisal Institute; Awarded the MAI designation by the Appraisal Institute in 1991 Past Member, Regional Ethics and Counseling Panel - Appraisal Institute (1994-1996) Past Member, Escambia County Value Adjustment Board (2008 – 2012) Member, Pensacola Association of Realtors Member, Florida Association of Realtors Member, National Association of Realtors Member, Branch Banking and Trust Company Local Advisory Board of Directors Member, Pensacola Area Chamber of Commerce

CIVIC ACTIVITIES: Member, Rotary Club of Pensacola (Former Board Director); Paul Harris Award Recipient Past President and Executive Committee Member, Pensacola Sports Association Board of Directors Current Board Member, Pensacola Sports Foundation Past Secretary/Past Treasurer, Fiesta of Five Flags Association Board of Governors Past Board Member and Trustee, Pensacola Historical Society Foundation Past Member and Executive Committee Member, Pensacola State College Board of Governors Member and Past Board Director & Executive Committee Member, Pensacola YMCA Past Board Member and Former Treasurer, Pensacola Historical Society Board of Directors Past President, Booker T. Washington High School Baseball Booster Club Board of Directors Graduate, Leadership Pensacola (Class of 1999)

Other civic involvements include various fund raising activities for Boy Scouts of America, Junior Achievement, March of Dimes, American Cancer Society, Leukemia Society, and the American Heart Association. Page 3 APPRAISER'S QUALIFICATIONS

LISTING OF APPRAISER CLIENTS: Mortgage Loan Purposes

Aegon Realty Advisors Company Liberty Bank Bank of America Metric Realty BBVA Compass Metropolitan Life Insurance Company Beach Community Bank National Bank of Commerce (Alabama) Branch Banking & Trust (BB&T) Navy Federal Credit Union Canadian Imperial Bank of Commerce Pen Air Federal Credit Union Centennial Bank Pensacola Government Credit Union Chase Manhattan Mortgage Corp. PNC Bank Charter Bank Premier Bank (Louisiana) Coastal Bank and Trust RBC Bank Colonial Bank of Alabama Regions Bank Cumberland Bank (Kentucky) ServisFirst Bank Dollar Bank Smart Bank Equity Valuation Partners Statewide Mortgage Company First American Bank SunTrust Banks, Inc. First City Bank of Fort Walton Beach Travellers Realty Investment Company First Coast Community Bank Tyndall Federal Credit Union First National Bank of Commerce (Louisiana) United Bank (Alabama) First National Bank of Florida Valuation Management Group First Navy Bank Vanguard Bank & Trust Company Gulf Coast Community Bank Whitney National Bank GulfSouth Private Bank Wachovia Corporation Hancock Bank Wells Fargo Bank

Market Value Purposes

Aetna Realty Advisors Ford Motor Company Bank of Boston Florida Department of Transportation Bank South N. A. Gulf American SBL, Inc. Baptist Health Care Corp. Lakeview Center Barnett Banks, Inc. Lasalle Realty Advisors Barnett Bank Trust Company N. A. Midway Water Company Catholic Church Diocese PHH Relocation and Real Estate Chicago Title Company Pensacola Area Chamber of Commerce Citicorp Real Estate Pensacola Historical Society City of Fort Walton Beach Pensacola State College City of Milton Pensacola Preservation Board (State of Florida) City of Pensacola Port of Pensacola Dusco Property Management Presbytery of Florida Episcopal Church Diocese Recoll Management Corporation Insurance Co. Escambia County, Florida Sacred Heart Hospital Escambia County Employees' Credit Union Saltmarsh, Cleaveland & Gund Escambia County Utilities Authority Southern Company Fairfield Communities, Inc. SouthTrust Bank of Alabama, N.A. Federal Aviation Administration Various Estates, Attorney's, Accountants, Insurance Federal Deposit Insurance Corporation Companies, Churches, & Property Owners First Alabama Bank Waterfront Rescue Mission First National Bank of Georgia Wachovia Settlement Services, LLC Fisher Brown Insurance Company (Cost Analysis) WSRE Television

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