A MARKET RENT STUDY Upper Pontalba Residential Units LOCATED AT 500 St. Peter Street New Orleans, Louisiana 70116 Effective Date of Market Rent Determination: January 15, 2015 FOR Mr. Jon Smith French Market Corporation 1008 North Peters Street New Orleans, Louisiana 70116 Our File Number: 14-1870 BY P. M. McEnery, MAI S. Parkerson McEnery, MAI The McEnery Company 810 Union Street, Fourth Floor New Orleans, Louisiana 70112 Phone: (504) 274-2701 Fax: (504) 274-2702 www.mceneryco.com i January 26, 2015 Mr. Jon Smith French Market Corporation 1008 North Peters Street New Orleans, Louisiana 70116 Our File Number: 14-1870 Re.: 500 St. Peter Street, New Orleans, Louisiana 70116 Dear Mr. Smith: Pursuant to our conversation, and in accordance with our agreed upon engagement for the Fair Market Rent Study for the 50 residential units situated within the 2nd, 3rd and 4th floors of the Upper Pontabla. This report shall serve as the conveyance of our opinion of Fair Market Rent for the subject property. The body of this report contains a total of 38 numbered pages. This market rent study conforms to the 2015 USPAP standards. It is subject to, and conditioned upon AO-28, AO-29, and SMT-9 (revised) of the Uniform Standards of Professional Appraisal Practices, 2014-2015 Edition. The subject of this report is known as The Upper Pontalba, which was originally a collection of sixteen individual four-story row houses. Through a major interior renovation in 1935, the improvements were interconnected and the upper floors were converted into 50 individual apartments. The improvements are situated on the St. Peter side of Jackson Square in the French Quarter, with frontage along St. Peter Street, Chartres Street and Decatur Street. The ground floor of the property is divided into 14 commercial units; however, the exclusive focus of this assignment will be the 50 apartments units on the upper three floors. These units blend historic design with some distinct modern features and finishes. Each apartment has unique elements in layout and design. The 2nd floor apartments are referred with ‘B’ units, while the 3rd floor apartments are ‘C’ units and the 4th floor apartments are ‘D’ and ‘E’ units. The specific unit mix will be broken down in full detail within the body of this report. Each of the units is separately metered and the tenants are currently responsible for their own utilities, water and cable expenses. As such, our market rental rate determinations will be based on the same gross terms in which the tenants must pay for their own utility related expenses. Currently, six of the units are undergoing interior renovations including as fresh paint on the walls, new fixtures, new flooring, new kitchen and bathroom cabinets and updated kitchen appliances. These renovations are expected to be completed within the next two months. ii Mr. Smith Page Two January 26, 2015 Our rental study concludes to individual market rent determinations for each of the 50 residential units situated within The Upper Pontalba. These rental rate determinations are based on anticipation that each of the subject units is in similar condition, as is expected upon completion of the current renovations. It is worth noting that French Market Corporation is spending roughly $5,600,000 to perform upgrades such as replacing windows throughout the subject property, as there have been notable examples in recent years of peeling paint and water intrusion issues throughout many of the units. This work has already been in progress in various units that have required work on a case by case basis. While some of that work has already taken place, there are still a number of water intrusion issues throughout the various units and those will continue to be remedied in the future. The owners also plan to put new gutters into place and to perform updates to the common space. Our market rental rate determinations do not take into account the upgraded condition that will result from these proposed repairs, as there is not a firm timeline in place for this project. Leasable area determinations are based off unit layout and size breakdown which has been provided by the owners. These plans were produced by I. William Sizeler & Associates. Copies of these plans are included in the attached addenda. These plans indicate the total leasable area to be 66,282 square feet, which is broken down into 24,584 square feet of Net Rentable Area (NRA) within the 16 units on the 2nd floor, 24,298 square feet of NRA in the 16 units on the 3rd floor and 17,400 square feet of NRA in the 18 units on the 4th floor. 40 of the units are 2 bedroom floor plans, while the other 10 units are either 1 bedroom units or efficiency units. The 2 bedroom units have an average NRA of 1,529 square feet, while the 1 bedroom/efficiency units have an average NRA of 511 square feet. The outdoor balcony spaces have not been included within these size calculations. However, the additional level of marketability associated with this amenity has been taken into account within our rental analysis. This report includes a market rent study that analyzes current rental rates that are being generated by similar residential units within the French Quarter - in order to determine a reasonable market rental rate for each of the 50 units within the subject property. As will be demonstrated within this report, a number of the current rental rates are presently leased at below market rates, while a few others are leased for rates that are higher than market rent. There are also several units that are generating annual rentals that are in line with reasonable market rental rates. Our market rent conclusions are not based on the current subject contract rents, but rather on the comparable data that we have researched and presented herein. iii Mr. Smith Page Two January 26, 2015 This report conforms to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation; our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of stipulated result, or the occurrence of a subsequent event; the appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan; and the indication of value does not contain any personal property. The comparable data included within this report suggests market rental rate figures that range from $1.40 per square foot to $2.00 per square foot on a monthly basis. The market rent, as concluded within this report and as averaged across the units equates to an average rent of $1.64 per square foot. These quoted rental rates assume gross rental terms with the tenants responsible for the water, cable and all utilities, as is the case with the current lease terms. As per current FIRREA minimum appraisal standards, we HAVE completed similar assignments in this area. Based on the data and analysis contained within this report, it is our opinion that the Annual Potential Gross Income for the residential subject units based on the Market Rent Study as of January 15, 2015 is: ONE MILLION THREE HUNDRED AND SIX THOUSAND DOLLARS ($1,306,000) Per Annum This is to certify that we have no interest, present or contemplated, in the subject property. My/our opinions of value are subject to the General and Special Assumptions and Limiting Conditions, Certification and Restriction upon Disclosure and Use which are stated in the body of the report. Respectfully submitted, _________________________________ _________________________________ P. M. McEnery, MAI S. Parkerson McEnery, MAI Louisiana State Certified Louisiana State Certified General Real Estate Appraiser #G1102 General Real Estate Appraiser #G1526 *Unit by unit market rental rate conclusions included on Pages x, xi, 34 and 35. iv Aerial View Subject Property v Site Views vi vii viii ix Market Rental Rate Conclusion – Residential Rental Units Unit Unit Unit NRA Market Monthly Annual Address Number Type (SF) Rent PSF Market Rent Market Rent 627 Decatur B 2BR/1BA 1,385 $1.90 $2,631.50 $31,578.00 C 2BR/1BA 1,415 $1.80 $2,547.00 $30,564.00 D 2BR/1BA 1,092 $1.50 $1,638.00 $19,656.00 633 Decatur B 2BR/1BA 1,384 $1.90 $2,629.60 $31,555.20 C 2BR/1BA 1,387 $1.80 $2,496.60 $29,959.20 D 2BR/1BA 1,102 $1.50 $1,653.00 $19,836.00 502 St. Peter B 2BR/1BA 1,680 $2.00 $3,360.00 $40,320.00 C 2BR/1BA 1,716 $1.80 $3,088.80 $37,065.60 D 2BR/1BA 1,352 $1.50 $2,028.00 $24,336.00 506 St. Peter B 1BR/1BA 482 $1.70 $819.40 $9,832.80 C Eff. 467 $1.65 $770.55 $9,246.60 D Eff. 543 $1.60 $868.80 $10,425.60 508 St. Peter B 2BR/2BA 1,873 $1.65 $3,090.45 $37,085.40 C 2BR/2BA 1,620 $1.55 $2,511.00 $30,132.00 D 2BR/1BA 1,159 $1.40 $1,622.60 $19,471.20 512 St. Peter B 2BR/1BA 1,813 $1.65 $2,991.45 $35,897.40 C 2BR/2BA 1,801 $1.55 $2,791.55 $33,498.60 D 2BR/1BA 1,239 $1.40 $1,734.60 $20,815.20 516 St. Peter B 2BR/2BA 1,921 $1.65 $3,169.65 $38,035.80 C 2BR/2BA 1,904 $1.55 $2,951.20 $35,414.40 D 2BR/1BA 1,129 $1.40 $1,580.60 $18,967.20 520 St.