APPRAISAL REPORT Of the UNDEVELOPED LAND Located at South side of Red Hills Rd. East of State Highway 175, Unincorporated Lake County (Kelseyville), CA 95451 As of AUGUST 8, 2018 Prepared For Prepared by Lampro LLC APOR PROPERTIES LLC Erhard & Ilsemarie Arndt Real Estate Valuation & Advisory Services 8880 Seigler Springs Rd. North P.O. Box 945 Kelseyville, CA 95451 The information contained herein is of a confidential nature and is intended for the exclusive use of the persons or firm to whom it is furnished by us. Reproduction, publication, or dissemination of portions hereof may not be made without prior approval of Apor Properties LLC. APOR PROPERTIES LLC Real Estate Valuation & Advisory Services P.O.Box 204 Palos Verdes Estates, California 90274 Tel 310.346.4256 www.aporproperties.com October 2, 2018 Lampro LLC Erhard & Ilsemarie Arndt 8880 Seigler Springs Rd. North P.O. Box 945 Kelseyville, CA 95451 Re: Undeveloped Land located on the south side of Red Hills Rd. and east of State Highway 175, Unincorporated Lake County (Kelseyville), CA 95451 (APN: 011-015-180-000, 011-058-011-000, 011-058-030-000, 011-058-110-000, 011-016-210-000) In accordance with your request, we have conducted an investigation and performed an Appraisal of the above referenced property. The appraisal report accompanies this letter and must remain attached along with all addenda and exhibits for the value opinion set forth to be considered valid. The first step in the valuation process is to clearly state and understand the appraisal problem. The purpose of this appraisal is to provide our opinion of the “as is” fair market value of the fee simple interest in the above referenced property, as of August 8, 2018. The intended use of the appraisal is for asset valuation purposes including in connection with potential investors in the above referenced subject property. The subject property is located in the North Bay area approximately 100 miles north of San Francisco, 90 miles northwest of Sacramento and 35 miles east of the Pacific Ocean. The closest urban center is Santa Rosa, 50 miles to the south. The area is in the lower slopes of the Mayacamas Mountains, southwest of Clear Lake. Known as a high-elevation wine region, this is in the Red Hills AVA and within the much larger North Coast AVA. Situated on the south side of Red Hills Road east of State Highway 175 in the unincorporated community of Kelyseyville in Lake County, the subject property consists of five parcels of land that are mostly in their natural state, irregular shaped and encompassing approximately 7,279,311± square feet or 167.1± acres. Under the jurisdiction of Lake County, the Zoning Designation is PDR (Planned Unit Development Residential) with portions of the site also in combining districts designated SC (Scenic), WW (Waterway)and B5 (Special Lot Size – 5 acres). Site improvements include dirt access roads, a chain link fence access gate off Red Hills Rd. and two wells on site for water. One originally drilled in 1990 and the other in 1996. A copy of the permits is presented in the Addenda. There was an old cabin on site, which is still indicated in the Lake County Tax Assessor’s records, but it is now in disrepair. We have concluded that these existing building improvements do not contribute to the overall value of the subject property. The site is currently an undeveloped site mostly in its natural state and has a proposed use for a retirement community named The Brightwood Villages. PAGE 2 OF 124 Lampro LLC October 2, 2018 The current owners provided copies of the Resolution No. 95-4 approving an amendment to the Lake County general Plan (gPA 95-4) dated November 9, 1995 which changed Land Use Designations for portions of the subject property from RL (Rural Lands 1 unit per 20-40 acres) to RR (Rural Residential 1 unit per 5-20 acres). They also provided copies of the Arndt general Plan of Development (PDR 95-1) which was approved December 5, 1995 and included 21 total conditions. Highlights of the plan include 42 detached or attached residences for senior citizens age 55 and over as well as accessory buildings. Additionally, on November 12, 1999, Use Permit for Specific Plan of Development (UP 98-16) was approved to allow a retirement community subject to 51 terms and conditions. All of these documents are presented in the Addenda. We were provided with a letter dated May 20, 2011, from then Community Development Director, Richard Coel, stating that the general and Specific Plans of Development are vested indefinitely. A copy of the letter is presented in the Addenda. We were also provided with a letter dated May 19, 2014, from Erhard Arndt to then Principal Planner of the Community Development Department, Kevin Ingram, requested clarification providing itemized description and numbering of the structures including the quantity of bedroom suites per residence. Subsequently, on June 18, 2014, Kevin Ingram responded with a letter of clarification that the approved project has a maximum number of permitted dwelling units not to exceed 44 (42 units/2 caretaker’s units) with a project description that clearly shows a few hundred living quarters. The conclusion was that any unit containing a full kitchen will be counted towards the maximum 44 permitted Dwelling Units and other independent living units would be classified as a combination of community care and health care facilities with allowed minor cooking facility uses such as a sink, refrigerator or microwave. These letters are presented in the Addenda. Based on this clarification, the proposed Brightwood Recreation Retirement Community appears to be permitted to have the proposed number of units as part of the Brightwood Retirement Community Planned Development since it includes 364 units in 44 low-rise buildings with eight different types of buildings, each with 5 to 20 apartments, assuming that the kitchen and minor cooking facilities are designed and built in compliance. In September 2018, we spoke to the Lake County Community Development Department, Planning Division, and a technician reviewed the current file and confirmed that there is a vested use permit as described above. Additionally, he said that the use permit included a review for California Environmental Quality Act (CEQA) and as long as the terms and conditions outlined in the approval are followed without any changes to the proposed project there is no further CEQA review for the use. He stated that the CEQA review for use is separate than a review for grading or any proposed project changes. He also clarified that this use permit approval represents a higher level of approval than a zoning permit because the proposed use is more intense than allowed by right. We also spoke with a technician in the Lake County Building Department that confirmed the project has not been submitted to them and does not have a building permit which is required to start construction. They had previously assigned a project number, but the current status is incomplete. As described by Lake County, if a project exceeds one acre of native vegetation cleared, or a variety of other minimal criteria, then the Project shall be designated as Complex Grading. Therefore, based on the proposed project the subject would be designated as Complex grading. This will require submitting a completed grading permit application and the necessary application materials (permit requirements) and include the fees for an Initial Study and Archaeological Review by Sonoma State pursuant to the California PAGE 3 OF 124 Lampro LLC October 2, 2018 Environmental Quality Act (CEQA). Certain types of grading (described in Lake County Code Sec 30.22.1) will require submission of engineered plans. Complex Grading may also require the submission of additional reports such as: Biological Resources Survey, Cultural Resources Survey, Geotechnical Report, Hydrologic Study and other site-specific analyses as deemed necessary by the Administrative Official. The County states that the CEQA review is a time-consuming process and it is possible for a project to be statutorily or categorically exempt from CEQA but in our opinion this is unlikely. If an environmental impact report (EIR) is required, it is common for it to extend a project’s timeline up to around two years. To determine the market value of the subject property we have considered appropriate real estate valuation methodology. A Sales Comparison Approach was utilized with recent sales of similar properties and a unit of comparison of the price per square foot. In our opinion, the Cost Approach and Income Capitalization Approach did not provide a relevant indication of value and therefore were not considered. As previously stated the effective date of value is August 8, 2018. The subject property was physically inspected on August 8, 2018. The date of the report is October 2, 2018. Therefore, our value estimate represents a current value. Our analyses, opinions and conclusions were developed, and this report has been prepared in conformity with a) the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute; b) the Uniform Standards of Professional Practice (“USPAP”); and c) subject to the attached general Assumptions and Limiting Conditions as well as Extraordinary Assumptions and Hypothetical Conditions. Based on our analysis, the “as is” fair market value of the fee simple interest in the subject property, as of August 8, 2018, is estimated to be: FIVE MILLION DOLLARS $5,000,000 Our market value conclusion is based on an estimate of 6 to 12 months exposure time, which is the length of time the subject property would have been offered on the market prior to a hypothetical consummation of a sale at our market value on the effective date of value.