C y CL£ K E 2019 A G 13 "11:o?

CITY OF EL PASO, TEXAS AGENDA ITEM DEPARTMENT HEAD'S SUMMARY FORM

DEPARTMENT: El Paso Water Utilities Public - Service Board (EPWater)

AGENDA DATE: Introduction - £\()

CONTACT PERSON/PHONE: James Wolff, 594-5511

DISTRICT(S) AFFECTED: 8

SUBJECT: APPROVE the following Ordinance

Authorizing the City Manager to sign a Contract of Sale with the Housing Authority of the City of El Paso for the sale of 6.325 acres of land more or less, being described as Lot 3, Block I , Coronado Del Sol, an Addition to the City of El Paso, El Paso County, Texas. (District: 8) EPWater, James Wolff, (915) 594-551 1.

BACKGROUND / DISCUSSION:

This parcel of land, is owned by the City of El Paso and managed by the El Paso Water Utilities - Public Service Board (EPWU/PSB). On August 9, 2017, the Public Service Board declared the inexpedient to the system and authorized the President/CEO of El Paso Water to forward the recommendation to the El Paso City Council for approval at the price per square foot reflected in the April 2017 appraisal obtained by the El Paso Independent School District.

The property appraised by Genevieve Pendergras for $130,680 per acre.

PRIOR COUNCIL ACTION: Has the Council previously considered this item or a closely related one?

No. City Council has not previously considered a related sale between the Housing Authority of the City of El Paso and EPWater.

AMOUNT AND SOURCE OF FUNDING: N\A

BOARD / COMMISSION ACTION: On August 9, 2017, the El Paso Water Utilities - Public Service Board declared the property inexpedient to the system and authorized the President/CEO to sell the property.

AFTER EXECUTION OF ALL DOCUMENTS, PLEASE CONTACT JAMES WOLFF TO PICK UP THE DOCUMENTS. 594-5511. THANK YOU.

APPRAISAL REPORT

VACANT LAND MESA HILLS DRIVE EL PASO, TEXAS 79912

APPRAISER’S FILE REFERENCE #7184

PREPARED FOR: Mr. Carlos Gallinar, AICP CNU-A Construction Project Manager Facilities & Construction El Paso Independent School District 6531 Boeing Drive El Paso, Texas 79925

PREPARED BY: Genevieve S. Pendergras, MAI Wilkinson, Pendergras & Beard, LP PO Box 13501 El Paso, Texas 79913

CURRENT DATE OF VALUATION March 30, 2017

WILKINSON, PENDERGRAS &BEARD, L.P.

JACK H. WILKINSON, MAI, AI/GRS, CPA PHYSICAL: 401 E MAIN, SUITE 408 / EL PASO, TX 79901 GENEVIEVE S. PENDERGRAS, MAI MAILING: PO BOX 13501 / EL PASO, TX 79913 WALKER R. BEARD, CCIM, CPM, MAI VOICE (915) 845-3459 JOHN R. SCHATZMAN, JR. FAX (915) 242-0935 [email protected] WWW.WPBEP.COM

April 5, 2017

Mr. Carlos Gallinar, AICP CNU-A El Paso Independent School District 6531 Boeing Drive El Paso, Texas

Re: Vacant Land located on Mesa Hills Drive, El Paso, Texas 79912 Appraiser’s File Reference #7184

Dear Mr. Gallinar:

The purpose of the following appraisal report is to develop an opinion of market value of the fee simple interest in the above referenced property as of March 30, 2017 for my client and intended user, the El Paso Independent School District. It is my understanding the intended use of the appraisal report is to assist in determining the market value for internal decision making purposes.

The property being appraised is the current “as is” fee simple value of 336,283 square feet of vacant land.

The use of this report is subject to the requirements of the relating to review by its duly authorized representatives and the attached limiting conditions. This appraisal was prepared in accordance with USPAP and the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) relating to appraisal standards as enumerated in Chapter 12, Code of Federal Regulation, Part 34 (12 CFR 34). I estimate a reasonable exposure time for the subject of 12 months or less.

Market Value as used in this report is defined 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.

Mr. Gallinar April 5, 2017 Appraiser’s File Reference #7184

Based on the agreed to Scope of Work, and as outlined in the report, I am of the opinion that the current market value of the fee simple rights of ownership of the “as is” subject as of March 30, 2017, is:

ONE MILLION TEN THOUSAND DOLLARS ($1,010,000). *

* Subject to the Extraordinary Assumptions and Limiting Conditions as noted on Page 8 of this report

The value reported is qualified by certain definitions, assumptions and limiting conditions, and certifications that are set forth in the attached report. This letter is invalid as an opinion of value if detached from the report.

I, the undersigned, do hereby certify that to the best of my knowledge and belief, the facts and data used herein are true and correct, that Genevieve S. Pendergras, MAI has personally inspected the subject, and that I have no interest present or current therein.

Respectfully submitted,

______Genevieve S. Pendergras, MAI State Certified TX-1331023-G

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 3 of 69 Table of Contents

INTRODUCTION Letter of Transmittal 1 Table of Contents 5 Executive Summary 6 General Assumptions & Limiting Conditions 8 Extraordinary Assumptions & Hypothetical Conditions 10

IDENTIFICATION OF THE ASSIGNMENT Aerial & Subject Photographs 10 Client & Intended User of the Appraisal 12 Intended Use of the Appraisal 12 Identification of the Property Appraised 12 Legal Description 12 Statement of Ownership & Property History 12 Property Interests Appraised 13 Type & Definition of Value 14 Dates Used in the Appraisal 14 Scope of Work 15 Valuation Process 16 Exposure & Marketing Times 17

PRESENTATION OF THE DATA National Economic Data 20 City & Regional Description 26 Neighborhood Description 38 Site Description 45 49 Assessed Value & Ad Valorem Taxes 50

ANALYSIS OF THE DATA Highest & Best Use 52 Site Value Estimate 55 Certification Statement 66 Qualifications of the Appraiser 67

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 4 of 69 Executive Summary

Current Date of Appraisal: March 30, 2017

Date of Report: April 5, 2017

Appraiser’s File Reference: #7184

Interests Appraised: 100% fee simple

Legal Address: Mesa Hills Drive, El Paso, Texas 79912

Legal Description: Lots 3, 4, & 5, Block 1, Coronado Del Sol El Paso County, Texas

Land Size: 336,283 SF or 7.72 Acres. The parcel is bisected by a PSB Row. The non- contiguous parcels contain 0.53 and 0.88 acres for a total of 1.41 acres that are separated from the remaining 6.31 acres by the right of way. Highest & Best Use – Vacant: Duplex or Town Home Development

Zoning: R-5; R-3, Residential District

Exposure & Marketing Time: 12 months / 12 months

ESTIMATED CURRENT VALUE

FINAL VALUE ESTIMATE $1,010,000 *

* Subject to the Extraordinary Assumptions and Limiting Conditions as noted on Page 8 of this report.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 5 of 69 General Assumptions & Limiting Conditions

This appraisal is subject to the following general assumptions and limiting conditions when applicable.

No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated.

The property is appraised free and clear of any or all liens or unless otherwise stated.

Responsible ownership and competent are assumed.

The information furnished by others is believed to be reliable, but no warranty is given for its accuracy.

All engineering studies are assumed to be correct. The plot plans and illustrative material in this report are included only to help the reader visualize the property.

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 obtaining the engineering studies that may be required to discover them.

It is assumed that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal report.

It is assumed that the property conforms to all applicable zoning and use regulations and restrictions unless nonconformity has been identified, described, and considered in this appraisal.

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

It is assumed that the use of the land and improvements is confined within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report.

Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyl's, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraiser become aware of such during the appraiser's inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser, however, is not qualified to test such substances or conditions. The presence of such hazardous substances may affect the value of the property. The value estimated is predicated on the assumption that no such hazardous substances exist on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 6 of 69 General Assumptions & Limiting Conditions

Possession of this report, or a copy hereof, does not carry with it the right of publication, nor may it be used for any purpose by anyone but the client without the previous written consent of the appraiser or the client and in any event, only with proper identification.

I am not required to give testimony or attendance in court by reason of this appraisal without prior agreement mutually agreeable to both the appraiser and the client.

Any allocation of the total value estimated in this report between the land and improvements applies only under the stated program of utilization. The separate values allocated to the land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

Neither all nor any part of the contents of this report shall be conveyed to the public through advertising, public relations, news, sales or other media, without the written consent and approval of the author, particularly as to valuation conclusions, the identity of the appraiser or firm with which he is connected, or any reference to the Appraisal Institute or to the MAI designation.

I 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 (The Americans with Disabilities Act) which become effective January 26, 1992. 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 I have no direct evidence relating to this issue, I did not consider possible non-compliance with the requirements of ADA in estimating the value of the property.

The forecast of income and expenses are not predictions of the future. Rather, they are my best estimate of current market thinking on future income and expenses. I make no warranty or representation that these forecasts will materialize. The market is constantly fluctuating and changing. I do not predict or in any way warrant the conditions of a future real estate market, but I can only reflect what the investment community, as of the date of appraisal, envisages for the future in terms of rental rates, expenses, supply and demand.

The forecasted potential gross income referred to in this appraisal may be based on summaries or incomplete as provided by the owner or third parties. I have reviewed the lease documents and assume no responsibility for the authenticity or completeness of lease information provided by others. I recommend that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.

My appraisal is based on estimates, assumptions and other information developed from research of the market, knowledge of the industry, and information that was provided. I have not, as part of my appraisal, performed an audit or review of the financial information used and, therefore, I do not express an opinion or any other form of assurance with regard to the same. Under the terms of this engagement, I have no obligation to revise this report or the estimated financial results to reflect events or conditions that occur subsequent to the date of this appraisal.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 7 of 69 Extraordinary Assumptions & Hypothetical Conditions

This appraisal is subject to the following extraordinary assumptions and hypothetical conditions.

An Extraordinary Assumption is defined as “an 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.”1

 Two of the subject parcels that are valued in this analysis are separated from the larger parcel by a PSB Row that is under separate ownership. The placement of the ROW is such that these two parcels do not have frontage or access without crossing the ROW. My appraisal assumes and is made subject to access being permitted by crossing over the row to these two parcels via the larger acreage owned by EPISD that is immediately contiguous to the PSB Row. Should this assumption be proven to be false, the value conclusion may change.

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.”2

 There are no hypothetical conditions considered in this analysis.

1 The Appraisal Foundation, USPAP (2016-2017 Edition), Page U-3.

2Ibid.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 8 of 69

IDENTIFICATION OF THE ASSIGNMENT

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 9 of 69 Subject Aerial & Photographs

0.88 Acres

6.31 Acres

0.53 Acres

*Boundary lines provide a general outline of the subject property and are approximate.

View of subject and immediate trade area.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 10 of 69 Subject Aerial & Photographs

View of the subject site facing west taken from View of the subject site facing southwest taken Mesa Hills Drive. from Mesa Hills Drive.

Street scene of Mesa Hills Drive facing south Street scene of Mesa Hills Drive facing north taken at the subject site. taken at the subject site.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 11 of 69 Identification of the Assignment

CLIENT & INTENDED USER OF THE APPRAISAL: My client and intended user is the El Paso Independent School District. This report may not be distributed to, or relied upon by, other persons or entities without my written permission.

INTENDED USE OF THE APPRAISAL: It is my understanding the intended use of the appraisal is to assist in determining the market value for internal decision making purposes.

IDENTIFICATION OF THE PROPERTY APPRAISED: I have been requested to provide an appraisal of a parcel of land that contains 336,283 square feet or 7.72 acres. The land is comprised of three separate parcels containing 6.31 acres, 0.88 acres and 0.53 acres. The three parcels are separated by a Public Service Board Row that is under separate ownership. The parcels containing 0.88 and 0.53 acres do not have frontage or access to any improved streets. The parcel containing 6.31 acres contains frontage and access to Mesa Hills Drive along its eastern boundary. I have assumed access will be permitted by crossing over the PSB Row to from the larger 6.31-acre tract to the two smaller tracts. It is my understanding the purpose of this appraisal is to estimate the market value of the site to be used for internal decision making purposes.

LEGAL DESCRIPTION: Lots 3, 4, & 5, Block 1, Coronado Del Sol, City of El Paso, El Paso County, Texas.

STATEMENT OF OWNERSHIP & PROPERTY HISTORY: The subject site has been under the ownership of the El Paso Independent School District since July 22, 1986 or for over 30 years. The subject site is not currently listed or under contract for sale to the best of the appraiser’s knowledge. There have been no sales transactions relating to the subject site recorded within the past three years based

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 12 of 69 Identification of the Assignment

on a search of the El Paso County records. This represents a complete three-year history of the subject.

PROPERTY INTERESTS APPRAISED: This appraisal report is intended to comply with Standard 2-2 of the Uniform Standards of Professional Appraisal Practice, 2016-2017 Edition.

The appraisal will consider . Assets to include personal property, supplies, materials on hand, inventories, and any current or intangible assets that may exist are not part of this appraisal.

Fee Simple, Leased Fee, and Leasehold are defined as follows.

A fee simple estate implies absolute ownership unencumbered by any other interest or estate.3

A leased fee estate is an ownership interest held by a with the right of use and occupancy conveyed by lease to others; the rights of the (the leased fee owner) and the lessee (leaseholder) are specified by contract terms contained within the lease.4

A , which is held by a lessee (the tenant and renter), conveys the right of use and occupancy for a stated term under certain conditions.5

Real Property is defined as follows.

Real property includes all interests, benefits, and rights inherent in the ownership of physical real estate.6

3The Dictionary of Real Estate, Fifth Edition, 2010, Appraisal Institute. Page 78.

4 Ibid., Page 111

5 Ibid., Page 111.

6 Ibid., Page 161.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 13 of 69 Identification of the Assignment

Personal Property is defined as follows.

Personal property includes movable items of property that are not permanently affixed to, or part of, the real estate.7

TYPE & DEFINITION OF VALUE: The purpose of this appraisal is to estimate the current “as is” market value.

Market Value, as used in this report, is defined 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 are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

 Buyer and seller are typically motivated;

 Both parties are well informed or well advised, and acting in what they consider their own best interests;

 A reasonable time is allowed for exposure in the open market;

 Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

 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.”8

DATES USED IN THE APPRAISAL: The “as-is” subject is currently appraised as of March 30, 2017, the current date of inspection. The date of this report is April 5, 2017.

7 Ibid., Page 145.

8Interagency Appraisal and Evaluation Guidelines, December 2010, OCC: 12 CFR part 34, subpart C.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 14 of 69 Identification of the Assignment

SCOPE OF WORK: It has been my intention to prepare this appraisal in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation, and the Code of Ethics and the Standards of Professional Practice of the Appraisal Institute. Engineering studies, ADA determinations, surveys, title reports, flood plain determinations, and environmental audits are beyond the scope of work of this appraisal.

Extent to Which the Property is identified: I have been provided with a location map outlining the subject property and a legal description and size of the subject site. I have researched the El Paso County records for information regarding the subject site. I have relied on the information provided by the El Paso Independent School District for the subject land area. I researched data from the market pertaining to the subject including but not limited to records from El Paso County, El Paso Central Appraisal District and the City of El Paso. I have performed a current inspection of the subject property and neighborhood.

Extent to Which Tangible Property is Inspected: In preparing this appraisal, Genevieve S. Pendergras, MAI inspected the subject on March 30, 2017, which is the effective date of this report. I drove the immediate area and viewed all of the comparables used in this appraisal from the street.

I visited the subject property in order to develop impressions of physical characteristics based on visual observations of apparent, not unapparent conditions. I am not an engineer and I am not qualified to assess structural integrity or the adequacy and condition of its mechanical, electrical, or plumbing components. This appraisal is not a property condition report, and should not be relied upon to disclose any conditions present in the property, and it does not guarantee the property to be free of defects. I am not licensed inspectors, and I did not make an “inspection” of the property as defined by TREC Rule 535.227-535.231 for real estate inspectors.

I am not qualified to detect or identify hazardous substances, which may, or may not, be present on, in, or near the subject property. The presence of hazardous materials may negatively affect market value. I do not have reason to suspect the presence of

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 15 of 69 Identification of the Assignment hazardous substances, and I valued the subject assuming that none are present. No responsibility is assumed for any such conditions or for any expertise or engineering required to detect or discover them. I urge the user of this report to obtain the services of specialists for the purpose of conducting inspections, engineering studies, or environmental audits. While I refer to FEMA flood maps, I am not a surveyor and I am not qualified to make flood plain determinations, and I recommend that a qualified party be consulted before any investment decision is made.

Type & Extent of Data Researched: Market research was conducted for land. Sources used to obtain information included but were not limited to public records, discussions with involved parties, real estate brokers, property managers, and other appraisers. Confirmation of sales and rents involved discussions with knowledgeable parties. Confirmation of market data as used in this appraisal was obtained from sources believed to be reliable; however, I assume no responsibility for their accuracy.

Texas is a non-disclosure state. It is important that the intended users of this appraisal understand that in Texas, there is no legal requirement for grantors or grantees to disclose any information relative to a transfer of real property, other than the recordation of the itself. In Texas, the deed contains no information about the transaction, including the purchase price. As a result, no data source provides absolute coverage of all transactions. It is possible that there are sales of which I am unaware. My data sources provide all the data typically available to appraisers in the normal course of business.

Type & Extent of Analysis Applied: I have considered market conditions including but not limited to city and market area data. I have analyzed the data from the market to determine the highest and best use of the subject property.

VALUATION PROCESS: I have considered all three approaches to value. The three approaches are generally called the Cost Approach, the Sales Comparison Approach, and the Income Capitalization Approach. I have used the Sales Comparison Approach, which is the most widely accepted approach to value for the subject as vacant, fee simple land. The

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 16 of 69 Identification of the Assignment

Cost Approach and Income Capitalization Approaches to value are not applicable and are not applied.

SALES COMPARISON APPROACH: The Sales Comparison Approach to value is probably the most easily understood by the general public because people familiarize themselves with the real estate market as they look for locations and make comparisons of relative values and amenities. The Sales Comparison Approach conforms to the theory of substitution, which states that a person is not justified in paying more for a particular property than what they must pay for a highly similar property, considering all factors equal.

The Sales Comparison Approach employs comparable market sales obtained by researching the market. The approach estimates value by comparing similar to the subject property that have more recently been sold, listed for sale or are under contract for purchase. Units of comparison are developed and similarities and differ- ences of the market sales are compared with the subject in order to estimate value. The units of comparison may reflect both physical and/or economic indicators.

The approach is applicable to all types or real property interests if there are sufficient and reliable transactions to indicate value patterns or market trends. If the market is weak or market transactions are insufficient, the approach may be limited.

EXPOSURE & MARKETING TIMES: Exposure time is 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. Exposure time is different for various types of real estate and under various market conditions. The estimate of the time period for reasonable exposure time is not intended to be a predication of a date of sale.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 17 of 69 Identification of the Assignment

I have analyzed the comparable sales in order to determine the reasonable exposure time for these sales. Additionally, I have surveyed knowledgeable participants. I am of the opinion an exposure time of 12 months appears appropriate for the subject based on the final market value estimate.

Marketing time is forward looking and I am of the opinion a marketing time of 12 months appears reasonable for the subject. Marketing time is “an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal.”9 It is my opinion that similar conditions prevail that suggests 12 months or less to be an appropriate marketing time for the subject property.

9 The Dictionary of Real Estate, Fifth Edition, 2010, Appraisal Institute. Page 121.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 18 of 69

PRESENTATION OF THE DATA

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 19 of 69 National Economic Data

NATIONAL ECONOMIC INDICATORS As of February 2017 Feb‐17 Aug‐16 Feb‐16 Aug‐15 Feb‐15 Market Rates & Bond Yields Reserve Bank Discount Rate 1.25 0.75 1.00 0.75 0.75 Prime Rate (monthly average) 3.75 3.25 3.50 3.25 3.25 Federal Funds Rate 0.66 0.40 0.38 0.14 0.11 3‐Month Treasury Bills 0.67 0.30 0.31 0.07 0.02 6‐Month Treasury Bills 0.82 0.44 0.44 0.22 0.07 ‐3 month rate 1.05 0.80 0.67 0.33 0.30 U.S. 5‐Year Bond 2.03 1.13 1.22 1.54 1.47 U.S. 10‐Year Bond 2.49 1.56 1.78 2.17 1.98 U.S. 30‐Year Bond 3.09 2.26 2.62 2.86 2.57 Municipal Tax Exempts (Aaa) 3.26 2.55 2.73 3.31 3.05 Municipal Tax Exempts (A) 3.90 3.10 3.31 3.92 3.62 Corporate Bonds (Aaa) 3.95 3.32 3.96 4.04 3.64 Corporate Bonds (A) 4.18 3.60 5.39 4.39 3.81 Corporate Bonds (Baa) 4.64 4.24 5.34 5.15 4.51

Stock Dividend Yields Common Stocks ‐ 500 2.04 2.12 2.38 2.16 2.00

Other Benchmarks Industrial Production Index 75.4 77.5 75.6 76.7 77.7 Unemployment (%) 4.7 4.9 4.9 5.1 5.5 Monetary Aggregates, daily avg M1, $‐Billions 3,374.0 3,320.0 3,119.5 3,030.3 2,988.2 M2, $‐Billions 13,313.1 12,955.4 12,510.4 12,083.3 11,820.3 Consumer Price Index All Urban Consumers 243.6 240.8 237.1 238.3 234.7

Personal Disposable Income 4Q15 3Q15 4Q14 3Q14 4Q13 Per Capita; Annual Rate in Current $s 39,481 39,354 38,785 38,571 37,907

Savings as % of DPI 5.6 5.9 6.0 5.9 5.8

Source: “News & Advocacy; Economic Indicators”. Appraisal Institute.org. February 2017 Revised. March 30, 2017. http://www.appraisalinstitute.org/ano/econ_indicator/indicators.aspx

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 20 of 69 National Economic Data

The following are current money rates.

Current Money Rates March 29, 2017 (close of day) Indicator Value Prime Rate 4 30 Year T-Bond 2.99 10 Year T-Note 2.39 Fed Funds 0.91 Mortgage Rate 30 Year 4.23

Source: “Prime Rate”. Financial Forecast Center. March 2017. http://www.forecasts.org/prime.htm

The following charts demonstrate the money rate trends over the past year. In all cases the rates have increased in the most recent quarter consistent with the increase in the fed funds rate initiated by the Federal Reserve.

The U.S. inflation rate has fluctuated between 0.76% to 1.66% over the past two years. The Financial Forecast Center’s projection for the U.S. inflation rate for the next 6 to 12 months is an increase in the inflation rate to more typical values between 1% to 2%. As of January 2017, the inflation rate is 2.5%.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 21 of 69 National Economic Data

Source: “Consumer Price Index”. Forecasts.org. March 2017. March 30, 2017. http://www.forecasts.org/inflation.htm

At present the Peso is trading around 18.71 against the Dollar. The forecast is for an exchange rate of between 20 and 21 pesos to the dollar in 2017. The range has been between 14.50 and 21.40 over the past two years. The exchange range was at peak at the end of 2016 but has decreased slightly. The increase in the exchange rate has a significant impact on El Paso, which relies on Mexican consumers for retail services.

ECONOMIC FORECAST:

The following economic forecast for the U.S. Metro region was compiled by Moody’s Analytics as of November 2016, (www.economy.com), the most recent information available.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 22 of 69 National Economic Data

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 23 of 69 National Economic Data

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 24 of 69 National Economic Data

CONCLUSION:

The analysis performed by Moody’s mainly focuses on the uncertainty perceived in the market due to the recent presidential election. How well the market and the economy hold up in the coming year will depend on how quickly the new administration will be able to articulate and implement its economic policies. The analysis indicates that the strengths in the U.S. economy consist of a productive workforce, active labor market, high innovation and entrepreneurship and mobile labor force. Weaknesses include a larger number of labor market nonparticipants, large budge and current account deficits, skewed income and wealth distribution and polarized political system. Near-term inflation is anticipated to increase at a very moderate rate.

The following chart lists the current macroeconomic indicators as compiled by the Financial Forecast Center.

Current Economic Indicators March 29, 2017 (close of day) Indicator Value S&P 500 2,361.13 US GDP Growth, % 1.90 US Inflation Rate, % 2.74 US Unemployment Rate, % 4.70 Gold Price, $/oa 1,251.10 WTI Oil Price, $/bbl 49.51 US 10 Yr Treasury, % 2.39

The center indicates the current US Inflation rate is 2.74%. For the purposes of this report and based upon review of the historical and forecasted inflation, future long-term inflation is estimated at 2.0% per year.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 25 of 69 City & Regional Description

INTRODUCTION:

The purpose of the City & Regional Description is to identify the forces that affect property value in a given region. This section will serve as an economic base analysis that surveys the industries and businesses that generate employment and income in the El Paso community. This section will also discuss population growth and levels of income, both of which are functions of employment. The four primary forces that affect property value are environmental characteristics, governmental forces, social factors and economic trends.

LOCATION:

The City of El Paso and El Paso County are located in the far west corner of the State of Texas where the borders of Texas, New Mexico and the Country of Mexico intersect encompassing an estimated population of 2.61 million. Mexico borders the County to the south, New Mexico on the west and north, and Hudspeth County, Texas on the east. El Paso is the largest metro area on the U.S./Mexico border, and the region constitutes the largest bi-national and bi-cultural labor force in the Western Hemisphere.

POPULATION:

According to the Site to do Business, the population for the City of El Paso as of 2015 is 685,272, which excludes Ft. Bliss. This is 2.7% above the 2014 figure of 683,444. Historical population growth has averaged 1.8%. There is a total of 231,736 households with an average household size of 2.92 persons within the City of El Paso.

The Site to Do Business shows an El Paso County population of 849,863 as of 2015 or 6.0% greater than the 2014 population of 849,863. Historical population growth has

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 26 of 62 City & Regional Description averaged between 1.5% and 1.8% for El Paso County. There is a total of 276,931 households with an average household size of 3.03 within El Paso County.

The estimated rate of population growth for both the City and Count is well above historical averages for 2015 indicated by the Site to do Business.

According to the Real Estate Center at Texas A&M University, the total Metro population in 2014 is 836,698. They are reporting a 0.248% increase in population over the 2013 figure of 834,630. The employment base is estimated at 296,100.

The Site to Do Business estimates 2020 population at 906,203 for El Paso County for a growth rate of 1.12% per year and at 721,077 for the City of El Paso for a growth rate of 1.05% per year.

El Paso County represents 3.1% of the total Statewide population of 26,956,958 for Texas. According to the Real Estate Center, the State of Texas has experienced population growth rannging from 1.386% to 2.036% for each of the past five years with a growth rate of 1.703% in 2014 as compared to 2013. This is well above the projected growth rate for El Paso.

El Paso is currently the 19th largest city in the United States. The median age in the City of El Paso is 33.0; in El Paso County is 31.9 as compared to 33.6 for Texas and 37.6 for the United States.

ENVIRONMENTAL CHARACTERISTICS:

The City of El Paso is characterized by arid, desert flatlands, changing to fertile irrigated terrain in the Lower and Upper Valley areas. The Franklin Mountains, which begin in Central El Paso, extend northward 16 miles. The area experiences warm dry summer days with cool nights and a relatively mild winter season. Low humidity is prevalent, and the average annual rainfall is 9.43 inches. El Paso has more than 300 days of sunshine per year. The average high temperature is 77.1°F and average low temperature is 52.1°F. The elevation is 3,927 feet.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 27 of 62 City & Regional Description

LOCAL GOVERNMENT:

El Paso City Government: El Paso operated under a council-manager form of government. This system combines political leadership of elected officials in the form of eight Council Members, with the managerial experience of an appointed local government manager. The power is concentrated in the elected council, which hires a qualified manager to carry out its directives and oversee the delivery of public services. The Mayor and council members serve staggered 4-year terms.

El Paso County Government: Voters in El Paso County elect a County Commissioner every four years to represent them in each of the four electoral precincts. The county government is run in the commissioner’s court, which is presided over by a County Judge who is elected county-wide for the same term as the commissioners. The Commissioner’s Court meets every week. Voters in the County Elect County Attorneys, County & District Clerks, County Treasurers, Sheriffs, Tax Assessor Collectors, Justices-of-the Peace and Constables in order to maintain a system of checks and balances.

SOCIAL AND COMMUNITY CHARACTERISTICS:

Public Utilities: The El Paso Electric Company provides electric service to a 10,000- square mile service territory covering parts of West Texas and Southern New Mexico. Natural gas is supplied by Texas Gas Service Company; El Paso Water Utilities provides water and sewer service. AT&T and various cellular providers, provides public telephone service.

El Paso has an adequate water supply with conservation and known sources through 2040. In order to enhance El Paso’s long term supply of potable water, El Paso Water Utilities and Fort Bliss teamed together in a public-private partnership that culminated in the development of the $80 million Kay Bailey Hutchison Desalination Plant. The facility

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 28 of 62 City & Regional Description is currently the world’s largest inland desalination plant with the capacity to produce 27.5 million gallons of potable water each day.

Taxes: There is no state income tax. However, there is a state, county, and city sales tax that totals 8.25%.

In 1980, city and county taxes ad valorem taxes were applied to 100% of the assessed value. The properties in El Paso may be reappraised every year.

Quality of Life: El Paso's central location in the Sun Belt lends itself well to a healthy tourist trade. Shopping in Juarez to the south, Ruidoso and White Sands National Monument and Park to the northeast and Carlsbad Caverns National Park to the east attracts visitors. Recreational activities cover a broad spectrum, both locally and internationally. Juarez, Mexico located across the Rio Grande River offers greyhound racing and bullfighting. Sunland Park, New Mexico provides pari-mutual horse racing and casino gaming. The Tigua Indians have a casino in Lower Valley El Paso. The Sun Bowl is the second oldest football bowl game and is televised nationally. El Paso offers professional baseball, soccer and ice hockey. Due to favorable weather conditions almost year-round, tennis and golf are two popular pastimes and numerous private and public facilities are found in or near El Paso. Ruidoso and Cloudcroft, New Mexico are approximately 150 miles from El Paso and offer snow skiing, fishing, and backpacking.

Commute: The U.S. Census estimates that 40% of El Pasoans have an average commute of 21 minutes and 20% have an average commute of 30 minutes.

Cost of Living: According to the American Chamber of Commerce Research Association (ACCRA), the Cost of Living Index for El Paso is 2.7% below the national average.

Crime: El Paso has been named the “safest large city” in the nation for the fifth year in a row as of 2014 based on yearly data from the FBI’s Uniform Crime Report for the crimes of murder, rape, robbery, aggravated assault, burglary, larceny-theft, motor vehicle theft and arson.

Medical: The El Paso health and medical facilities consist of 15 civilian hospitals with over 1,200 doctors and provide more than 2,400 licensed hospital beds. In terms of employment, this sector is growing rapidly. The William Beaumont Army Medical Center

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 29 of 62 City & Regional Description serves the area's military installations and retired personnel and is one of the seven largest army hospitals in the United States with 209 licensed beds. University Medical Center is a 327-bed acute care teaching facility and is affiliated with the Texas Tech University Health Sciences center and the Paul L. Foster School of Medicine. UMC is home to the only Level 1 Trauma Center within 280 miles of El Paso. In the spring of 2012 the El Paso Children’s Hospital opened. This is the only separately licensed, non- taxing, independent, 501(c) (3) not-for-profit children’s hospital in the El Paso region and the only dedicated Pediatric Hospital within a 200-mile radius of El Paso, Texas.

Education: There are 94 private schools, 9 area public school districts and 11 institutions of higher learning serving the City of El Paso. The El Paso Community College has an enrollment of 30,394 students (Fall 2013) and offers associates degrees. The University of Texas at El Paso has an enrollment of 23,079 (Fall 2014), which reflected an increase in enrollment for the 16th straight year. UTEP has six academic colleges (Business Administration, Education, Engineering, Health Sciences, Liberal Arts, and Science) and offers Bachelor’s, Master’s and Doctoral Programs. New Mexico State University has an enrollment of 26,694 (Fall 2014) and seven academic colleges. The Texas Tech University of Paul L. Foster School of Medicine welcomed its first class of four-year medical students in August 2009.

The independent school districts for El Paso County are the El Paso Independent School District, Socorro Independent School District, Ysleta Independent School District, Canutillo Independent School District, Fabens Independent School District, Anthony Independent School District, San Elizario Independent School District, Tornillo Independent School District and Clint Independent School District. The chart lists the top school districts in order by enrollment and was obtained from the Academic Excellence Indicator System Report as of December 2014 for the 2013-2014 school year, the most recent information available.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 30 of 62 City & Regional Description

ECONOMIC TRENDS:

According to the Real Estate Center at Texas A&M University, employment in metro El Paso was up by 0.1% since the first quarter of 2014 as contained in a report completed for the first half of 2015, the most recent information available. Local businesses added 200 workers to local payrolls with the greatest growth occurring in the education and health services sector adding a combined total of 1,200 jobs. The leisure and hospitality sector recorded the highest rate of growth at 3.2%. The unemployment rate in the metro area has been on a downward trend as is demonstrated in exhibit.

The professional and business sector will see an increase in employment with the expansion at ADP that is anticipated to increase employment by 1,100 new jobs by 2020. The retail and leisure and hospitality sectors will see an increase in new positions with the completion of the North Hills Crossing power center in Northeast El Paso and development of the 500,000-square foot Montana

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 31 of 62 City & Regional Description

Crossing center that is anticipated to be complete in late-2017 or early-2018. In addition, several national retailers will enter the market by the end of 2016 to include Whole Foods Market (Northwest), Alamo Drafthouse (Northwest) and Dave & Busters (East). The trend demonstrated is for an increase in employment in the greater El Paso area.

The median home price during the first quarter of 2014 was $139,500, which was down by 1.8% from the same period in 2013. As of March 2015, the home price had rebounded 1.8% to $141,900. The monthly cost of home ownership was $162 higher per month than the average mortgage. Metro wide, vacancy was 7.6% for multifamily at the end of the first quarter 2015, a 30-basis point decline from the prior year. Asking rents rose 0.8% to $794 per month. Multifamily developers scaled back permitting activity as of March 2015 to 1,020 units annualized, down 19.8% from the first quarter 2014. Single family permits totaled 2,240 annualized homes in March 2015, 1.5% below the same time last year. Housing permits have demonstrated a downward trend. However, the permit data does not reflect the significant residential construction in El Paso County just east of the City limits.

The median household income reached $42,400 per year in the first quarter 2015, a 3.5% annual gain. Household earnings had advanced 4.1% in the prior 12-month period.

The following profile of the El Paso MSA was provided by Moody’s Analytics. Moody’s Analytics is a leading independent provider of economic analysis, data and forecasting and credit risk services. Their analysis details El Paso’s recent economic performance and short and long-term outlooks.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 32 of 62 City & Regional Description

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 33 of 62 City & Regional Description

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 34 of 62 City & Regional Description

CONCLUSION:

The El Paso economy is performing well according to the survey. Job growth is below what was evident a year prior but remains strong and broad-based and is outpacing Texas and U.S. averages. Leisure / hospitality, retail and healthcare are leading

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 35 of 62 City & Regional Description employment higher this year. The unemployment rate is at 4.9%. The labor market is tightening with the average workweek in the community longer than the US average. The forecast is for expansion of the El Paso economy at a moderate pace. The leaders of the expansion will be construction and distribution. There is uncertainty surrounding military spending and trade due to the recent presidential election. Continued slow population gains in the community will constrain housing and personal services. In addition, continued below-average household incomes and low educational attainment are negative factors. These factors coupled with the remote geographic location tend to limit the interest of companies relocating to the area. El Paso will continue to show strength but at levels below the state and nation in job growth over the long-term.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 36 of 62 City & Regional Description

Subject

CITY & REGIONAL MAP

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 37 of 62 Neighborhood Analysis

INTRODUCTION: The purpose of the market area analysis is to analyze factors that may affect property values. A market area is defined as (neighborhood analysis) “the objective analysis

of observable and/or quantifiable data indicating discernible patterns of urban growth, structure, and change that may detract from or enhance property values; focuses on four sets of considerations that influence value: social, economic, governmental, and environmental factors.”10

BOUNDARIES: Northwest El Paso is centered approximately six miles northwest of the Downtown Central Business District. The market area is bounded by the Franklin Mountains to the east, Executive Center Boulevard to the south, Rio Grande River to the west, and Loop 375 (Woodrow Bean Trans Mountain) on the north.

ACCESSIBILITY: Access into the subject market area in a generally northwest direction is provided by North Mesa Street, also known as State Highway 20 and Doniphan Drive, a continuation of State Highway 20. Doniphan Drive will eventually become part of Loop 375 which, when completed, will encircle the City of El Paso. Portions of Doniphan Drive were recently expanded as part of the Loop 375 project. Mesa Street begins in the Downtown Central Business District and proceeds in a southeast northwest direction. It

becomes Country Club Road west of the Doniphan Drive and Mesa Street intersection in the Upper Valley in West El Paso. Interstate 10 also bisects the subject market area in a generally northwest direction and is the major traffic arterial connecting the east and west sides of El Paso. A large interchange was completed for I-10 and Sunland Park Drive during 1990, for I-10 and Redd Road during 1999 and for I-10 and Artcraft Road

10 The Dictionary of , Fifth Edition, 2010, Appraisal Institute, Page 133.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 38 of 69 Neighborhood Analysis during 2000. Artcraft Road leads directly to the Santa Teresa Port of Entry into the Republic of Mexico.

The Texas Department of Transportation (TXDOT) completed the expansion of Loop 375 / Transmountain Road at its location west of Interstate 10 during 2014. Currently, there will be two new feeder lanes constructed along Interstate 10 between Executive Center Boulevard and Mesa Street. Construction is underway and will take approximately five to six years for completion. Loop 375 will be extended from its current end at Santa Fe Street in Downtown El Paso along the west side of Interstate 10 to Executive Center Boulevard where it will connect with the existing border highway. Recently, Country Club Road was redesigned and reconstructed with completion in April 2014. The road was reconfigured to a two-lane, concrete paved thoroughfare with a center turning lane and landscape buffers with concrete sidewalks all along the thoroughfare. Significant road construction will be underway for the next approximately five years in Northwest El Paso.

POPULATION: Northwest El Paso comprised 18.8% of total city population or 134,742 by the end of 2016 according to information

obtained from the Site to do

Business.11 The subject market area is the third largest planning sector in the City. The rate of growth indicated in the market area is strong. The only market

11 Source: Site to do Business forecasts for 2012 and 2017.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 39 of 69 Neighborhood Analysis

area to achieve a higher growth rate is East El Paso according to the Site to do Business. There is a total of 43,350 housing units in the market area as of 2016 and the mix is 59.98% owner occupied to 40.02% renter occupied.

The following chart shows the population growth for all of the market areas located within the City of El Paso. The Northwest planning sector has demonstrated a growth rate of 1.8% per year since 2010 and is projected to grow at a rate of approximately 1.14% per year.

Census 2016 % of City Growth 2010 Estimate Population Rate

East 223,509 247,781 34.5% 2.2% Northeast 141,188 149,162 20.8% 1.1% Northwest 123,616 134,742 18.8% 1.8% Lower Valley 94,914 97,198 13.5% 0.5% Central 77,122 79,262 11.0% 0.6% Ft. Bliss 9,841 10,184 1.4% 0.7%

Total City 670,190 718,329 1.4%

LAND USE: The subject market area is predominantly single family residential development intermixed with multi-family dwellings. Small garden offices for professional services are scattered throughout the residential areas in the primary market area. Commercial and

retail development is primarily concentrated along North Mesa Street, Sunland Park Drive, Redd Road, Artcraft Road and Transmountain Road at I-10. Concentrated industrial development is located in the Northwest Corporate Center Industrial Park in the northern section of the market area.

The Northwest market area is expanding. New single-family residential and new supportive retail and commercial development is occurring and planned for the market area. Existing are good and prevailing market rates. Overall the market area is considered to be in a growth cycle. There is still an abundance of vacant land

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 40 of 69 Neighborhood Analysis suitable for development mostly concentrated in the northeastern section of the market area.

DEMOGRAPHICS: Northwest El Paso has a higher median, average and per capita income than the City of El Paso as can be seen in the adjacent chart. The current median and average household incomes are $61,250 and $87,112 for Northwest El Paso. The median income is 46.0% above that of the City of El Paso; the average income is 46.8% and the per capita income is 56.5% above the income reported for the City.

The following chart shows the most recent income statistics by market area and by income bracket in the major planning sectors of the City of El Paso. As the chart shows, Northwest El Paso has higher income characteristics than the other planning sectors of the City of El Paso.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 41 of 69 Neighborhood Analysis

2016 Households by Lower Northeast Income Northwest East Valley/ Ft. Bliss Central City County less than $15,000 12.0% 11.5% 26.5% 17.9% 34.4% 17.8% 17.9% $15,000‐$24,000 8.9% 10.6% 18.6% 13.2% 18.1% 12.8% 13.4% $25,000‐$34,999 8.3% 10.9% 14.0% 13.3% 11.9% 11.4% 12.1% $35,000‐$49,999 12.0% 15.9% 15.7% 16.3% 12.4% 14.7% 14.9% $50,000‐$74,999 16.2% 21.6% 14.4% 18.0% 10.8% 17.6% 17.4% $75,000‐$99,999 11.6% 12.0% 5.4% 9.6% 5.5% 9.8% 9.5% $100,000‐$149,999 16.9% 11.7% 3.9% 8.8% 4.1% 10.1% 9.5% $150,000‐$199,999 6.7% 3.6% 1.0% 1.9% 1.3% 3.2% 3.0% $200,000+ 7.4% 2.3% 0.5% 1.1% 1.5% 2.6% 2.4% Median$ 61,250 $ 50,828 $ 27,837 $ 39,081 $ 23,040 $ 41,953 $ 40,518 Average$ 87,112 $ 64,320 $ 38,443 $ 51,836 $ 38,756 $ 59,345 $ 57,457 Per Capita$ 31,848 $ 21,016 $ 12,474 $ 17,912 $ 14,829 $ 20,348 $ 18,991

The following chart shows the income trends for 2016 as compared to 2015. The data is showing an increase in median income of 6.4% and an increase in average and per capita incomes of 3.1% and 4.2%, respectively for Northwest El Paso. For the City of El Paso, the data is showing and increase in median, average and per capita incomes of 6.8%; 4.2% and 4.4%, respectively and for El Paso County the data is showing an increase in median, average and per capita incomes of 6.3%; 4.5% and 4.8%, respectively. Overall, incomes have increased over the past year in the market area and regional area.

Northwest City County Income Trends 2016 2015 % Change 2016 2015 % Change 2016 2015 % Change Median$ 61,250 $ 57,314 6.4%$ 41,953 $ 39,089 6.8%$ 40,518 $ 37,950 6.3% Average$ 87,112 $ 84,504 3.1%$ 59,345 $ 56,953 4.2%$ 57,457 $ 54,968 4.5% Per Capita$ 31,848 $ 30,560 4.2%$ 20,348 $ 19,497 4.4%$ 18,991 $ 18,129 4.8%

LIFE CYCLE OF REAL ESTATE MARKETS: Real estate markets are dynamic, and appraisers describe this quality as a market’s life cycle. The four stages of the typical life cycle are:

1. Growth – a period during which the market area gains public favor and acceptance

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 42 of 69 Neighborhood Analysis

2. Stability – a period of equilibrium without marked gains or losses 3. Decline – a period of diminishing demand 4. Revitalization – a period of renewal, redevelopment, modernization, and increasing demand

Northwest El Paso is widely considered to be in a growth life cycle. The area has strong population growth and growth in commercial development activity to include retail, and office.

CONCLUSION: To summarize, the Northwest Market area is in a growth cycle. Strong areas of growth are in the northernmost section of the market where there is an abundance of land suitable for development. Development is occurring along primary thoroughfares and is expanding as residential development is absorbed. Industrial improvements are mostly limited toward the Northwest corporate center with little new or future development. The office warehouse sector is expanding to accommodate a variety of tenant requirements. Most commercial development has been for owner occupancy with limited speculative construction. Residential development and absorption continues at a steady pace. development has been a strong sector for the past couple of years but vacancies have decreased and currently do not support current construction. The market area has a higher median and average income than the City of El Paso and is well poised for continued growth.

WILKINSON, PENDERGRAS & BEARD L.P. PAGE 43 of 69 Neighborhood Analysis

SUBJECT

MARKET AREA MAP

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 44 of 69 Site Description

SIZE AND SHAPE: The subject site is reflective of three separate parcels of land that are under the ownership of the El Paso Independent School District and are separated from each other by a PSB Row. The three separate parcels of land contain 6.31 acres; 0.88 acres and 0.53 acres. The 0.88 and 0.53 acre tracts are located in the rear portion of the larger site adjacent to a drainage canal and both of these tracts are separated from each other and from the larger piece of land by the right of way. I have assumed a permanent easement would be provided to allow access to these two tracts of land via the larger piece that sits just south of the right of way and fronts Mesa Hills Drive. Typically, pavement can be installed over the ROW’s. Typically, the area can be used for paving, parking or landscaping but not for the construction of permanent improvements. The 0.88 and 0.53 acres (1.41 acres total) that are separated from each other and from the larger piece of land do not have the shape, configuration or necessary access for development of improvements other than parking, driveways or landscaping that benefits the larger site. Therefore, this 1.41 acres has diminished utility. I have valued the entire parcel containing 7.72 acres or 336,283 square feet and have applied an adjustment for the diminished utility of the area that lies beyond the right of way. My valuation assumes that access will be granted to the smaller tracts by crossing over the PSB Row that separates the three tracts of land.

The land is generally level. The topography does not have significant variations. The site is above street grade with Mesa Hills Drive. The site is adjacent to a drainage canal on the northern and western boundaries. The site has good frontage and access to Mesa Hills Drive on its’ eastern boundary.

SOIL: Soil tests were not available. Therefore, I do not express an opinion as to the quality of the soil. My report assumes and is made subject to the soil being of good load bearing quality.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 45 of 69 Site Description

MINERAL DEPOSITS: There are no identifiable mineral deposits having commercial value existing on the subject site.

UTILITIES: Gas is provided by the Texas Gas Services Company and electric by El Paso Electric Company. Basic telephone service is provided by AT&T. Water and sewer is provided by the El Paso Water Utilities.

TOPOGRAPHY & FLOOD ZONE: It appears that the subject site is not located in a designated flood plain according to Map #4802140027D of the Federal Emergency Management System as of January 3, 1997. My appraisal assumes and is made subject to the subject site not being located in a designated flood plain.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 46 of 69 Site Description

EASEMENTS AND ENCROACHMENTS: There are no apparent adverse easements or encroachments based upon inspection however, I have not been provided with a boundary survey or title policy to verify this. I have assumed there will be an access easement to the smaller tracts of land that sit beyond the PSB Row. My report assumes, and is made subject to, no adverse easements or encroachments that affect utility.

ENVIRONMENTAL: I have not been provided with a current environmental survey for the subject property. I am not an expert in environmental matters and the reader is advised to seek professional assistance in such matters. My report assumes and is made subject to the land and improvements not being contaminated by any hazardous substances.

SURROUNDING AREA AND DEVELOPMENT:

Across the drainage channel to the north are single family residential improvements. Adjacent to the west is a drainage channel followed by Interstate 10. Adjacent to the east is Mesa Hills Drive followed by apartment and single family residential improvements. Adjacent to the south are apartment improvements (Retreat at Mesa Hills).

STREETS: Mesa Hills Drive is a two-lane, asphalt-paved street, at the location of the subject that generally lies in a north/south direction at the location of the subject.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 47 of 69 Site Description

LOCATION MAP PROVIDED BY EPISD

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 48 of 69 Zoning

The subject is zoned R-5; R-3, Residential District, which are classified as Light Residential Districts according to the City of El Paso.

“The purpose of these districts is to promote and preserve residential development within the city to create basic neighborhood units. It is intended that the district regulations maintain a low density of dwelling units supporting a suburban-urban interface that permits developments utilizing varying lot configurations. The regulations of the districts will permit primarily single-family and two-family residential areas, and recreational and institutional uses incidental to and serving the neighborhood.”12

The zoning generally allows for development of single family residential, duplex, church or school improvements without a special permit.

12 “Municipal Code of the City of El Paso, Texas”. Title 20 – Zoning. Current through Ord. #18545 approved 07/26/2016. http://library.municode.com/index.aspx?clientId=16180&stateId=43&stateName=Texas.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 49 of 69 Assessed Value & Ad Valorem Taxes

OVERVIEW: The three parcels are under the ownership of EPISD and are therefore, tax exempt. According to the Central Appraisal District, the three parcels have a combined 2016 assessed value of $1,154,459 and are assessed under Parcels C815-999-0010-0300; C815-999-0010-0500 & C815-999-0010-0400 at a 2016 tax rate of $2.816715. The assessed values have remained unchanged for the past five years. As previously indicated, the subject is tax exempt.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 50 of 69

ANALYSIS OF THE DATA

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 51 of 69 Highest and Best Use

INTRODUCTION: Highest and Best Use as used in this report is as:

"That reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financially feasibility, and maximum productivity."13

The highest and best use of a property is an economic concept that measures the interaction of the four criteria. The determination of a property’s highest and best use is a critical appraisal component that provides the valuation framework upon which comparable market information is derived.

To render a reliable use and value estimate, the highest and best use of the property as if vacant must be considered separately from the highest and best use of the property as improved. This is because the site must be valued as though vacant and available for development to its highest and best use even if the property’s existing improvements do not represent the highest and best use of the site.

In this type of analysis, the appraiser will conduct an analysis of the site as vacant and as improved to determine based on the interaction of the four criteria; legal

permissibility, physical possibility, financial feasibility and maximum profitability; the highest and best use as if vacant and as improved (if applicable).

13The Dictionary of Real Estate Appraisal, 5th Edition, 2010. Appraisal Institute, Page 93.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 52 of 69 Highest and Best Use

Legally Permissible: The aggregate subject property as of the effective date of the appraisal is zoned R-5; R-3, Residential Districts according to the City of El Paso. This zoning generally permits development of residential, duplex, church or school improvements.

Physically Possible Uses: The aggregate subject site contains 7.72 acres or 336,283 square feet. The site has frontage and access from Mesa Hills Drive along its eastern boundary. The site is above street grade and generally level. The site has good overall frontage and access and is surrounded by apartment and single-family improvements. The current zoning does not permit apartment construction. However, duplex construction is permitted.

Economically and Financially Feasible Use: Present economic and environmental conditions are the next considerations. Economic conditions refer mostly to the market in which the subject competes such as absorption of the different possible uses for the site within the subject market area.

Recent construction of various mixed-use apartment and retail / office improvements has been occurring to include several mixed-use improvements along Montecillo Boulevard. There has also been construction of town home improvements off North Mesa Street on Camelot Drive. These have been receiving very strong market

reception. In addition, a site along Thorn in West El Paso was recently developed with a mixed-use apartment / retail property. Leasing of the property started within the past six months. A new apartment complex was completed behind the Cinemark movie theater north of the subject. Apartment demand has softened due to the new construction but the demand for town home or condo improvements has been very strong. I have interviewed several realtors who have indicated that sales have been strong with good overall demand for a duplex or town home product with limited supply. The subject site is well located and adjacent to an established area of residential and apartment

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 53 of 69 Highest and Best Use

construction apartment community that offers both apartment and town home units. The subject site is in close proximity to area shopping, restaurant and retail improvements that are just southeast of the subject at Mesa Hills Drive and Sunland Park Drive. The subject site is adjacent to a drainage channel, which is followed by Interstate 10. Residential lot development would likely be on the lower-end of the price range because of the Interstate views. I am of the opinion the most profitable use of the subject site would be for duplex or town-home development.

Development of both a church and school are legally permitted. However, these uses are not the most profitable uses of the subject site.

Maximally Productive: Duplex or town-home construction is considered as the highest and best use of the subject site. The principal of maximum productivity states that "the selected land use must yield the highest value of the possible uses."14 It is my opinion that duplex or town-home construction is the most profitable use of the overall subject site and will add value to the site as if vacant.

HIGHEST AND BEST USE AS IF VACANT: Duplex or town-home construction is considered as the highest and best use as vacant.

14 The Dictionary of Real Estate Appraisal, 4th Edition, Appraisal Institute, Page 180.

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 54 of 69 Site Value Estimate

OVERVIEW: In this report, the Sales Comparison Approach is deemed to be applicable in valuing a site and is the most common technique for valuing land when comparable sales are available. To apply these technique sales, listings, or pending contracts of similar parcels of land are analyzed, compared, and adjusted to provide a value indication for the subject site being appraised.

ANALYSIS OF THE LAND COMPARABLES: The following are sales of sites oriented toward high density residential, secondary commercial or mixed used construction. These are the most recent comparable sales available in the market area and have occurred over the past five years. Detailed comparable sheets are included in this section.

Comp Location Sale Size Zoning Price Per No. Date Sq. Ft. Square Ft.

1435 Country Club Road 06/2015 162,463 S-D $3.54

1218 410 Thorn Avenue 03/2015 66,623 C-1 $8.63

1203 6950 Helen of Troy Drive 11/2013 235,921 C-2 $3.58

938 6332 Santiago Street 03/2013 224,508 R-5 $3.05

981 Westwind just north of Belvidere 10/2012 313,937 PR-1 $2.71

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 55 of 69 Site Value Estimate

SALE 938

SALE 1203

SALE 1218

SALE 981

SALE 1435

SUBJECT

LAND SALES COMPARABLE MAP

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ADJUSTMENTS TO THE LAND COMPARABLES: Adjustments are made to the site comparables to reflect economic and physical differences in contrast with the subject. The following are the economic and physical adjustments considered in this site valuation analysis.

1. Property Rights Conveyed 2. Financing Terms 3. Buyer/Seller Motivation 4. Buyer Costs 5. Market Conditions (Time) 6. Location 7. Frontage/Corner Influences 8. Utility 9. Size (Economies of Scale) 10. Topography 11. Zoning 12. Other Physical Features Adjustments for the first five categories reflect economic adjustments to the comparables while categories six through 12 reflect physical differences. Adjustments for the first four categories are made on a Dollar basis while all remaining adjustments are made on a percentage basis.

Economic Adjustments: Property Rights Conveyed: The sales reflect 100% equity interests of fee simple transactions requiring no adjustment. Financing Terms: All of the sales were cash to the grantor or involved short-term grantor financing at market terms. Buyer/Seller Motivation: The sales were all between unrelated parties without undue motivation. Buyer Costs: None of the sales required any unusual buyer costs that require consideration as compared to the as is subject site. Market Conditions (Time): The sales obtained were from 2015, 2013, and 2012. No sales were available for 2016 or 2014. Based on review of paired sales over this time frame, an average upward market conditions adjustment of 2% per year is considered appropriate and applied to the sales as required.

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Physical Adjustments: Location: The subject and sales are all located in Northwest El Paso with similar locational influences. Frontage/Corner Influence: The subject is very well located in close proximity to concentrated retail and restaurant development and surrounded by established apartment, town home and single family residential construction with Interstate exposure. Sales 1435 and 1203 are considered similar. Sales 938 and 981 have inferior frontage and exposure. Sale 1218 has better exposure to a higher traffic count. Adjustments of 10% or 20% are applied as required. Utility: The subject site contains a combined area of 7.72 acres. Of that total, 1.41 acres are separated from each other and the larger area by a PSB Row and have diminished utility. I have researched sales of land that have occurred where the sales have diminished utility due to topography or easements. On average, the sales transacted at a 75% discount. The 1.14 acres of the subject that is separated from the larger area has a value that is 25% of the market value due to diminished utility. To determine the appropriate adjustment to the larger area, I have taken 25% of the 1.14 acres for an area of 0.29 acres and added this to the larger contiguous site area of 6.31 acres for a total acreage of 6.60 acres that will be valued at 100% of market value. This represents 85% of the total site area of 7.72 acres (6.60 acres / 7.72 acres). Therefore, the appropriate downward utility adjustment applied to the comparables is -15% (100% - 85%). This adjustment acknowledges the diminished utility of the 1.14 acres that is separated from the larger portion of the subject site and cannot support construction of improvements other than paving, landscaping or parking. Size (Economies of Scale): Economies of scale suggest that smaller properties generally sell for more per unit than larger properties. An adjustment of 5% for every incremental change in size when comparing the subject to the comparables is applied (5% for every 100% change). Topography: Sale 981 had rough topography on the downhill slope of the Franklin Mountains and is adjusted upward by +15%. Zoning: Sales that are zoned S-D or Commercial have superior utility for mixed use development and are adjusted downward by -5%. Other Physical Features: Sale 1218 has utility for retail or office due to the superior exposure. The site was developed with a mixed-use improvement. Sale 1218 is adjusted downward by -10%. The following are the adjustments to the market transactions in comparison with the “as is” subject.

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LAND SALES ADJUSTMENT GRID

PROPERTY INFORMATION Subject 1435 1218 1203 938 981 Sale/Asking Price/SF $3.54 $8.63 $3.58 $3.05 $2.71 Size - Square Feet 336,283 162,463 66,623 235,921 224,508 313,937 Date Of Sale March-17 Jun-15 Mar-15 Nov-13 Mar-13 Oct-12 ECONOMIC ADJUSTMENTS Property Rights Conveyed: Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple $ Adjustment $0.00 $0.00 $0.00 $0.00 $0.00 Financing Terms: Market Market Market Market Market $ Adjustment $0.00 $0.00 $0.00 $0.00 $0.00 Buyer/Seller Motivation: Normal Normal Normal Normal Normal $ Adjustment $0.00 $0.00 $0.00 $0.00 $0.00 Buyer Costs: Normal Normal Normal Normal Normal $ Adjustment $0.00 $0.00 $0.00 $0.00 $0.00 Fee Simple/Stabilized/Cash Equivalent Price $3.54 $8.63 $3.58 $3.05 $2.71 Market Conditions (Time): 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 1.7 2.0 3.3 3.9 4.3 Tot. Time Adj. 3.45% 3.95% 6.58% 7.89% 8.60% Updated Price $3.66 $8.97 $3.82 $3.29 $2.94 PHYSICAL ADJUSTMENTS Location: Similar Similar Similar Similar Similar Northwest % Adjustment 0.00% 0.00% 0.00% 0.00% 0.00% Frontage / Access:Mid-Block Similar Superior Similar Inferior Inferior % AdjustmentSecondary 0.00% -20.00% 0.00% 10.00% 10.00% Utility: Considered Considered Considered Considered Considered Diminished % Adjustment -15.00% -15.00% -15.00% -15.00% -15.00% Size (Economies of Scale): Smaller Smaller Smaller Smaller Smaller 336,283 % Adjustment -5.35% -20.24% -2.13% -2.49% -0.36% Topography: Similar Similar Similar Similar Rough Generally Level % Adjustment 0.00% 0.00% 0.00% 0.00% 15.00% Zoning: SD C-1 C-2 R-5 PR-1 R-2/R-3 % Adjustment -5.00% -5.00% -5.00% 0.00% 0.00% Other Physical Features: N/A Retail N/A N/A N/A % Adjustment 0.00% -10.00% 0.00% 0.00% 0.00% Composite Physical Adjustment % -25.35% -70.24% -22.13% -7.49% 9.64% Composite Physical Adjustment $ ($0.93) ($6.30) ($0.84) ($0.25) $0.28 INDICATED SUBJECT VALUE / SQ. FT. $2.73 $2.67 $2.97 $3.04 $3.23

Unadjusted Adjusted Applied min $2.71 $2.67 max $8.63 $3.23 average $4.30 $2.93 median $3.54 $3.14$ 3.00

Indicated Value$ 1,008,849 Rounded$ 1,010,000

SUBJECT SITE VALUE CONCLUSION:

Current Land Value: The adjusted sales indicate a range from $2.67 to $3.23 per square foot with a mean and median of $2.93 and $3.14 per square foot. I am of the

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opinion a current “as is” value of $3.00 per square foot is well supported for the subject site or $1,010,000, rounded ($3.00 / sf x 336,283 sf = $1,008,849).* This value is within the range of both the unadjusted sales prices per square foot ($2.71 / sf to $8.63 / sf) and the adjusted sales prices per square foot ($2.67 / sf to $3.23 / sf) and is considered well supported. This value acknowledges the diminished utility of the area that is separated by the PSB Row.

* Subject to the Extraordinary Assumptions and Limiting Conditions as noted on Page 8 of this report

WILKINSON, PENDERGRAS &BEARD, L.P. PAGE 65 of 69 Certification

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 not provided any services with regard to the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment, I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment, my engagement in this assignment was not contingent upon developing or reporting predetermined results, my compensation is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event, directly related to the intended use of this appraisal, my analyses, opinions, and conclusions were developed, and this report was prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute and to the Uniform Standards of Professional Appraisal Practice, 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 report, No one provided significant real property appraisal assistance to the person signing this certification, as of the date of this report, Genevieve S. Pendergras, MAI, has completed the continuing education and Standards and Ethics education requirement of the Appraisal Institute

______Genevieve S. Pendergras, MAI State Certified TX-1331023-G April 5, 2017

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GENEVIEVE S. PENDERGRAS

PROFESSIONAL EXPERIENCE: Member Appraisal Institute (MAI) - #402810 Qualified Expert Witness – El Paso County Courts at Law Certified General Real Estate Appraiser licensed in Texas and New Mexico Certified General Texas 1331023-G expires 05/31/2018 Certified General New Mexico 02600-G expires 04/30/2018

EDUCATIONAL BACKGROUND AND SPECIAL TRAINING: Graduate of the University of Texas at El Paso in the Bachelor of Science Degree in Business Administration with a concentration in Economics.

Appraisal Institute Courses: Real Estate Appraisal Principles Basic Valuation Procedures Capitalization Theory & Techniques – Part A Capitalization Theory & Techniques – Part B General Applications Report Writing & Valuation Analysis Standards of Professional Practice Subdivision Valuation Seminar The Uniform Standards of Appraisal Practice Update Course Business Practices & Ethics Appraising Nursing Facilities General Demonstration Report Writing Seminar Forecasting Revenue Attacking & Defending an Appraisal in Litigation Separating Real Personal Property and Intangible Business Assets & Condemnation Complex Litigation Appraisal Case Studies Online Rates & Ratios: Making Sense of GIMs, OARs and DCF Appraising Airports & Airplane Hangers Appraising Cell Towers Carving Out Your Legal Niche: Do’s and Don’ts of Litigation Support Commercial Bankruptcy, Workouts, and the Valuation Process Regression Analysis is Becoming Mainstream IRS Valuation Highest & Best Use and Market Analysis Advanced Sales Comparison & Cost Approaches Advanced Applications Valuation of Assisted Living Facilities

EMPLOYMENT: 1999 to Present – Partner, Wilkinson, Pendergras & Beard, L.P. 1996 to February 1999 – Credit / Collection Manager, International Data, LLC

REPRESENTATIVE APPRAISALS: Residential Subdivision Development, Commercial Subdivision Development, Easement Valuations, Right of Way Valuations, Eminent Domain & Condemnation, Municipal Utility Reimbursements, Partial Interests, Fast Food Restaurants, Restaurants, Light Industrial, Heavy Industrial, Office/warehouse, Office, Governmental Office, Retail, ,

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Hotel/Motel, Banks, Self-Storage, Commercial Land, Agricultural Land, Automotive Dealerships, Special-Purpose, Truck Dealerships, Mobile Home, Car Washes, Churches, IRS Valuations, Day Care, Fitness Center

REPRESENTATIVE CLIENTS: Bank of America, Wells Fargo Bank, BBVA Compass Bank, Bank of the West, West Star Bank, First National Bank, Washington Federal, The National Bank of El Paso, The National Bank of Arizona, Inter National Bank, Comerica Bank, First Savings Bank, United Bank, City Bank, Pioneer Bank, Capital Bank, G.E. Capital Assurance, V.P. Clarence Co., Kemp Smith, Scott Hulse, Gordon, Davis, Johnson & Shane, PC, Texas Tech University, El Paso Independent School District, Barron & Adler, LLP, Mounce, Green, Myers, Safi, Paxson & Galatzan, P.C., Windle, Hood, Alley, Norton, Brittain & Jay, LLP, Hunt Communities, El Paso Water Utilities, City of El Paso, Lower Valley Housing Authority, Seminole Finance, Hobson, Stribling & Carson, LLP, Lauterbach & Borshchow & Company, El Paso Independent School District, Town of Horizon City, Plains Capital Bank, PVC Murcor, Bank 34, Scott Hulse, PC, Kemp Smith, PC, The Greater El Paso Chamber of Commerce, The City of El Paso

QUALIFIED AS EXPERT WITNESS: Deposition, 5 hours at Ainsa Hutson, LLP, Frank Ainsa, legal counsel, 02/17/2009 Deposition, 8 hours at El Paso County Courthouse, Barron Adler, Mr. Roy Brandys legal counsel, 07/12/10 Deposition, 6 hours at Windle, Hood, Alley, Norton, Britain & Jay, LLP, Jeff Alley, legal counsel, 04/11/2011 El Paso County Court #6, Cause 2009-4045, Clyde A. Pine, Jr., Legal Counsel, 07/25/11 Bankruptcy Case No.11-30977, DHC Realty, Harrel L. Davis, Legal Counsel, Deposition, 6 hours; 03/13/12 Bankruptcy Case No.11-30977, DHC Realty, Harrel L. Davis, Legal Counsel, Testimony, 5 hours; 03/17/12

PROFESSIONAL ORGANIZATIONS: Appraisal Institute – MAI El Paso Estate Planning Council – Board Member The Greater El Paso Chamber of Commerce – Leadership El Paso Class XXXVI Greater El Paso CCIM Chapter

SPEAKING ENGAGEMENTS: “Overview of the Appraisal Process” - Capital Bank Appraisal Department, February 2014 “Appraisals for Estate & Business Planning” – The Estate Planning Council, March 2015

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