APPRAISAL REPORT 70-UNIT PERMANENT SUPPORTIVE HOUSING (PSH) PROJECT Anaheim, California _______________________________________________ APPRAISAL REPORT 70-UNIT PERMANENT SUPPORTIVE HOUSING (PSH) PROJECT Anaheim, California ___________________________________________ SUBMITTED TO: SUBMITTED BY: TLP * REALTY ADVISORS 30497 Canwood Street, Suite 201 Agoura Hills, CA 91301 Telephone 818-851-9474 Email: [email protected] Web: www.TLPRA.com File No.: 20-224 DATES OF VALUE: March 1, 2020 - Fee Simple Market Value As Is May 1, 2021 - Leased Fee PMVCC November 1, 2021 - Leased Fee PMVSO DATE OF REPORT: July 9, 2020 July 9, 2020 RE: In accordance with your request, we have made an examination of the above-referenced property, for the purpose of estimating the requested market value estimates of the property and the proposed improvements. Specifically requested, and provided in this report are the following value scenarios: VALUE CONCLUSIONS NO.VALUE PREMISE COMMENT 1 Fee Simple Market Value As Is Vacant - 70 Unit Motel 2 Leased Fee PMVCC - Restricted Rents Trending Considered 3 Leased Fee PMVSO - Restricted Rents Trending Considered 4 Hypothetical Leased Fee PMVSO - Market Rents Trending Considered and accounting for un- subordinated rents, if any 5 Market Value LIHTCs - Low Income Housing Tax Credits (RD) 6 Insurable Cost Estimate 7 Leased Fee PMVSO - Restricted Rents No Trending 8 Leased Fee Market Value NPV of subsidy rent over term of contract (15 years) 9 Leased Fee Market Value De Control Value With Tax Exemption 10 Leased Fee Market Value De Control Value Without Tax Exemption 11 Hypothetical Leased Fee PMVSO - Market Rents No Trending Definition of Appraisal Assignment and Report Format This appraisal has been prepared under the CCRC appraisal Guidelines and it has been completed in conformance with the requirements of the Appraisal Foundation's, Uniform Standards of Professional Appraisal Practice (USPAP and the written report options of USPAP Standards Rule 2-2(a) and Title XI of FIRREA. I make no other warranties, either expressed or implied, as to the character and nature of such services and products. Property Summary The proposed is the adaptive re-use of an existing (constructed in 1977 with an addition in 1985) into 69 efficiency (plus one Manager’s unit - a 1BD unit) permanent supportive housing units targeting veterans (20 units - Project Based HAP for a 15 year term), individuals who are at-risk of homelessness, homeless, and chronically homeless with a mental health diagnosis. The rehabilitation of the existing two-story, 70-room motel will include adjusting room layouts to provide for approximately 69 adequately sized efficiency/studio units for individuals earning no more than 30% of the Area Median Income (AMI) in Orange County. Residents will pay no more than 30% of their income (which in many cases, given the target population, is a General Relief or Social Security benefit which is $910 per month). The existing 298 square foot motel rooms (which include full private bathrooms in each unit) will be modified to include a small kitchenette with a food preparation area, refrigerator, small sink, two- burner stove, and microwave. The interior of the units will be completely refinished to include all new flooring and paint; new plumbing fixtures, redesigned bathrooms for accessibility and water efficiency. All units will be fully furnished. Ten percent (10%) of the units (7) will be modified to include mobility features, as defined in CBC 11B 809.2 through 11B 809.4, and four percent (4%) of the units (3) will be modified to include communications features, as defined in CBC 11B 809.5. All ground floor units will be accessible. The property currently includes a management/office space that will be renovated for use by the social services, case management, and property management staff to provide supportive services for the residents. is working closely with the City of Anaheim Community and Economic Development on the required Supportive Services Plan to ensure that residents will have adequate supportive services. The space will include approximately 1,819 square feet of common area amenities, such as individual counseling offices, TV lounge, computer room, and multi-purpose gathering and meeting rooms. The existing pool will be filled in and a new 1,400 square foot recreation/community room will be added at the center of the property and will include a full kitchen and gathering spaces. Outdoor recreation/leisure spaces totaling 11,008 square feet will include seating areas with BBQs, tables and benches and a community garden. The site will receive a fresh, water-wise landscape design. Please refer to the following market value conclusions and their respective dates of values: VALUE CONCLUSIONS NO.VALUE PREMISE COMMENT DATE OF VALUE VALUE CONCLUSION 1 Fee Simple Market Value As Is Vacant - 70 Unit Motel (approved for renovation) 3/1/2020 $3,940,000 2 Leased Fee PMVCC - Restricted Rents Trending Considered 5/1/2021 $6,900,000 3 Leased Fee PMVSO - Restricted Rents Trending Considered 11/1/2021 $7,260,000 4 Hypothetical Leased Fee PMVSO - Market Rents Trending Considered and accounting for un- 11/1/2021 $12,350,000 subordinated rents, if any 5 Market Value LIHTCs - Low Income Housing Tax Credits (RD) $6,636,218 6 Insurable Cost Estimate $3,710,000 7 Leased Fee PMVSO - Restricted Rents No Trending 11/1/2021 $7,200,000 8 Leased Fee Market Value NPV of subsidy rent over term of contract (15 years) $1,210,000 9 Leased Fee Market Value De Control Value With Tax Exemption $9,900,000 10 Leased Fee Market Value De Control Value Without Tax Exemption $9,630,000 11 Hypothetical Leased Fee PMVSO - Market Rents No Trending $12,250,000 The restricted value indication(s) in the previous chart assume that the subject property is and will be exempt from general real estate as a result of the 501 C3 non-profit status. Extraordinary Assumptions It is noted that the use of extraordinary assumptions or hypothetical conditions might affect the assignment results. Hypothetical Conditions - It should be noted that the Hypothetical Market Value (As If Constructed/Stabilized) are as of the current date of value, that being March 1, 2020. These values assume that the subject property is complete and/or stabilized as of the date of the inspection. Value Allocation of Value for Personal Property: It is important to note that the subject property complex will contain personal property (i.e., range/ovens, refrigerators, dishwashers) which have been estimated by the appraisers to have a total cost new which equates to $518,000, or roughly 4% of the hypothetical PMVSO without restrictions indication. When considering the additional value created by the incentives via loans, grants and credits, the FF&E becomes substantially less than one percent of the overall value. Therefore, the value of the personal property is considered to be nominal and any inclusion or exclusion is not considered to have a significant impact on the value of the subject property. 1) On March 11, 2020, the World Health Organization declared COVID-19 as a pandemic. This has led to national, state, and local restrictions on the ability of people to work, travel, and congregate, which has adversely impacted economic activity. At the time of this appraisal assignment, it was not possible to determine how long the restrictions will remain in place to control the spread of the virus. On March 22, 2020, the United States Treasury Secretary estimated that restrictions will last 10-12 weeks. Further, it was not possible to determine the exact impact that it may have on economic conditions and the real estate market. Based on our experience and research in the market and the existing demand for affordable housing (especially the demand for special needs affordable housing), as long as there is funding for these government programs, there does not appear to be any major negative impact from COVID-19 on the subject property. Any short term impact may be realized in a delay in lease up (due to government slow or shut downs), however, the long term impact is deemed to be negligible (assuming these programs remain publicly or privately funded). 2) The appraisers were provided with a preliminary title report from First American Title Insurance Company dated January 22, 2020 (File No. NCS-876497-A-SA1). It is an extraordinary assumption of this appraisal report that (other than noted) there are no additional easements, regulatory agreements, covenants or restrictions which encumber the subject property and would prohibit the site's highest and best use, other than those outlined in this report. 3) It is an extraordinary assumption of this appraisal report that the unit mix information (and unit sizes) as derived from the architectural plans are accurate. 4) It is an extraordinary assumption of this appraisal report that the construction cost estimates and costs spent to date (as provided verbally to the appraiser by the developer) are reasonably accurate. 5) The previous restricted value indication(s) assume that the subject property as proposed will be exempt from general real estate taxes as a result of their proposed non-profit ownership status 501 C3. The appraisers were not provided with any documentation regarding the subject’s non-profit ownership entity. If the ownership entity does not qualify for non-profit status, which would preclude them from paying general real estate taxes, then there would be a considerable impact on the restricted values scenario(s) (assuming general real estate taxes were incorporated into the operating expenses). 6) For purposes of determining the Fee Simple As Is Market Value Conclusion, we added the costs spent to date and deducted the demolition costs from the land value as if vacant. We did not include any of the tenant relocation incentive costs due to the fact that the property was reportedly 100% vacant at the time of sale (Extraordinary Assumption that this is correct and there are no remaining relocation incentives).