Self-Contained Appraisal Report - City of Fresno

Self-Contained Appraisal Report Hotel Fresno 1241 Broadway Plaza Fresno, California 93721 APN (s): 466-214-01, & 466-206-54T

Date of Report: October 17, 2012

Prepared for: Ms. Jill S. Knight Corporate Headquarters Johnson Capital 2603 Main Street, Suite 200 Irvine, California 92614

Prepared by: Eric A. Segal, Appraiser

DRAFT

October 17, 2012

Ms. Jill S. Knight Corporate Headquarters Johnson Capital 2603 Main Street, Suite 200 Irvine, California 92614

RE:

Hotel Fresno 1241 Broadway Plaza Fresno, California 93721 APN: 466-214-01

Dear Ms. Knight: At your request and authorization, Seevers  Jordan  Ziegenmeyer has completed an appraisal pertaining to the above-referenced real property. This report was prepared in compliance with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice (USPAP) and, as such, represents a Self-Contained Appraisal Report. The subject property represents a proposed redevelopment of a former hotel, known as Hotel Fresno, which is located in Downtown Fresno. Specifically, the subject property is situated along the west line of Broadway Plaza, north of Broadway Street, east of H Street, within the City of Fresno, Fresno County, California. The subject property is situated on a single assessor’s parcel number identified as 466-214-01, which contains approximately 22,500 square feet of land area (0.52± acres). An additional parcel (APN: 466-206-54T), which contains 30,208 square feet of land area (0.69± acres), will be acquired by the property owner from the Redevelopment Agency in order to provide 79 uncovered parking spaces for the proposed redevelopment of the subject. Therefore, the total area of the subject site, upon acquisition of the additional parcel, is 52,708± square feet of land area (1.21± acres). The proposed improvements will represent a mixed use project with 79 apartment units (73 market rate units and six low-income units) and five ground floor commercial suites. This project will offer seven different floor plans that range in size from 736 to 2,091 square feet. The five commercial suites will total 19,508± usable square feet. Project amenities will include uncovered parking (79 spaces), tenant lounge and an on-site laundry room (located within the basement of the building). The subject property is more fully described legally and physically within the attached report. The proposed unit mix for the proposed project is outlined in the table on the following page.

3825 Atherton Road, Suite 500 | Rocklin, CA 95765 | Phone: 916.435.3883 | Fax: 916.435.4774 

Ms. Jill S. Knight October 17, 2012 Page 2

Living Area Range (SF) 736 - 867 795 889 - 1,097 976 - 993 1,105 - 1,130 1,221 - 1,390 1,751 - 2,091 Total Living Area:

Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA Penthouse + Loft Total Residential Units:

No. of Units 32 1 24 2 9 4 7 79

Unit 102 103 104 105 106 Total Commercial Units:

No. of Units 1 1 1 1 1 5 Total Rentable Area:

Average Living Area (SF) 816 795 1,023 985 1,113 1,291 1,862 81,382 Rentable Area (SF) 7,218 1,468 1,827 1,505 7,490 19,508

Common Area (SF):

17,055

Total Gross Building Area

117,945

*The building also includes a partial basement which contains 8,300 square feet of area.

We have been requested to estimate the hypothetical market value of the subject property assuming completion of proposed construction and stabilized occupancy. According to USPAP, a hypothetical condition is defined as “that which is contrary to what exists, but is supposed for the purpose of the analysis.” This value is hypothetical since the building is completely vacant and has not yet been renovated. Additionally, we have developed an opinion of as-is market value of the subject as of the date of inspection (October 8, 2012). As a result of our analysis, our opinions of market value for the subject property, in accordance with the definitions, certifications, assumptions, limiting conditions, and hypothetical conditions set forth in the attached document, are presented below: Value Estimate

Conclusion

Hypothetical Market Value Assuming Completion $ 15,150,000 of Renovation and Stabilized Occupancy As-Is Market Value

$830,000

This letter must remain attached to the report, which contains 132 pages, plus related exhibits and Addenda, in order for the value opinions to be considered valid. We hereby certify the property has been inspected and we have impartially considered all data collected in the investigation. Further, we have no past, present or anticipated future interest in the property. The subject property does not have any significant natural, cultural, recreational or scientific value. The appraiser certifies this appraisal assignment was not based on a requested minimum valuation, a specific valuation or the approval of a loan.

Ms. Jill S. Knight October 17, 2012 Page 2

This appraisal has been performed in accordance with the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP), Title IX of the Federal Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA), the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, Federal regulatory requirements and guidelines that may apply, as well as the requirements of the FHA MAP Program for a 220(d)(3) Rehabilitation and Neighborhood Conservation Program. Thank you for the opportunity to work with you on this assignment. Sincerely,

Eric A. Segal, Appraiser State Certification No.: AG026558 Expires: February 18, 2013 /jab

12-380

TABLE OF CONTENTS Transmittal Letter Table of Contents Summary of Important Facts and Conclusions

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Introduction Property Description & History Type and Definition of Value Client, Intended User and Intended Use of the Report Property Rights Appraised Appraisal Report Format Dates of Inspection, Value and Report Scope of Work Extraordinary Assumptions, Hypothetical Conditions and Significant Factors General Assumptions and Limiting Conditions Certification Statements

3 4 4 5 5 5 5 8 9 11

Market Area Macroeconomic Overview Fresno County Regional Overview Neighborhood Overview Apartment Market Overview Retail Market Overview

12 15 21 26 32

Subject Property Property Identification and Legal Data Site Description Improvement Description Subject Photographs Highest and Best Use Analysis

36 41 44 48 50

Valuation Analysis Approaches to Value Appraisal Methodology Cost Approach Sales Comparison Approach Income Capitalization Approach Analysis of Adjustments Operating Expense Analysis Reconciliation As-Is Market Value Conclusions of Market Value Exposure Time & Marketing Time

52 54 55 71 87 96 115 126 128 131 132

Addenda Engagement Documentation HUD Form 92274 HUD Form 92264 HUD Form 92264 (As-Is) HUD Form 92264A Preliminary Title Report Site Plan Floor Plans Construction/Revonation Cost Budget Phase I Environmental Site Assessment (excerpt) ALTA Survey MAP Third Party Reviewer Certification Readdressing/Reassigning Appraisal Reports Glossary of Terms Qualifications of Appraiser(s)

SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Property Name:

Hotel Fresno

Property Type:

Proposed mixed-use project that will contain 79 apartment units and five commercial suites

Street Address:

1241 Broadway Plaza Fresno, California 93721

Location:

The subject property is situated along the west line of Broadway Plaza, north of Broadway Street, east of H Street, within the City of Fresno, Fresno County, California.

Assessor’s Parcel Number(s):

466-214-01 & 466-206-54T

Census Tract / Block Number:

1.00 / 1

Owner of Record: APN: 466-214-01 APN: 466-206-54T

Hotel Frezno, LLC Redevelopment Agency of Fresno

Zoning:

C4: Central Trading

Flood Zone:

Zone X500 – Areas of 500-year flood and areas of 100year flood with average depths of less than one foot or with drainage areas less than one square mile, as well as areas protected by levees from 100-year flooding. An area inundated by 0.2% annual chance flooding.

Earthquake Zone:

Zone 3 – Moderate seismic activity (not located in a FaultRupture Hazard Zone)

Land Area: APN: 466-214-01 APN: 466-206-54T Total: Project Summary:

22,500± square feet (0.52± acres) 30,208± square feet (0.69± acres) 52,708± square feet (1.21± acres) Living Area Range (SF) 736 - 867 795 889 - 1,097 976 - 993 1,105 - 1,130 1,221 - 1,390 1,751 - 2,091 Total Living Area:

Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA Penthouse + Loft Total Residential Units:

No. of Units 32 1 24 2 9 4 7 79

Unit 102 103 104 105 106 Total Commercial Units:

No. of Units 1 1 1 1 1 5 Total Rentable Area:

Average Living Area (SF) 816 795 1,023 985 1,113 1,291 1,862 81,382 Rentable Area (SF) 7,218 1,468 1,827 1,505 7,490 19,508

Common Area (SF):

17,055

Total Gross Building Area

117,945

*The building also includes a partial basement which contains 8,300 square feet of area.

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Highest and Best Use:

Completion of proposed renovation as a mixed-use project and lease-up of vacant space

Date of Inspection:

October 8, 2012

Effective Date of Value:

October 8, 2012

Date of Report:

October 17, 2012

Property Rights Appraised:

Fee simple estate

Exposure & Marketing Time:

6 months

Conclusions of Market Value:

Value Estimate

Conclusion

Hypothetical Market Value Assuming Completion $ 15,150,000 of Renovation and Stabilized Occupancy As-Is Market Value

$830,000

The value conclusions are subject to the General and Extraordinary Assumptions, Limiting Conditions, Significant Factors and Hypothetical Conditions contained within this report.

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INTRODUCTION Property Description & History The subject property represents a proposed redevelopment of a former hotel, known as Hotel Fresno, which is located in Downtown Fresno. Specifically, the subject property is situated along the west line of Broadway Plaza, north of Broadway Street, east of H Street, within the City of Fresno, Fresno County, California. The subject property is situated on a single assessor’s parcel number identified as 466-214-01, which contains approximately 22,500 square feet of land area (0.52± acres). An additional parcel (APN: 466-206-54T), which contains 30,208 square feet of land area (0.69± acres), will be acquired by the property owner from the Redevelopment Agency in order to provide 79 uncovered parking spaces for the proposed redevelopment of the subject. Therefore, the total area of the subject site, upon acquisition of the additional parcel, is 52,708± square feet of land area (1.21± acres). The existing hotel was originally constructed in 1912 and occupied as the former Hotel Fresno until 1983. Reportedly, the interiors of the seven floors of the building have been substantially demolished with removal of fixtures, heating and cooling equipment, and a significant amount of non-structural building materials. The proposed improvements will represent a mixed use project with 79 apartment units and five ground floor commercial suites. This project will offer seven different floor plans that range in size from 736 to 2,091 square feet. The five commercial suites will total 19,508± usable square feet. Project amenities will include uncovered parking (79 spaces), tenant lounge and an onsite laundry room (located within the basement of the building). The proposed unit mix for the project is outlined in the table below: Living Area Range (SF) 736 - 867 795 889 - 1,097 976 - 993 1,105 - 1,130 1,221 - 1,390 1,751 - 2,091 Total Living Area:

Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA Penthouse + Loft Total Residential Units:

No. of Units 32 1 24 2 9 4 7 79

Unit 102 103 104 105 106 Total Commercial Units:

No. of Units 1 1 1 1 1 5 Total Rentable Area:

Average Living Area (SF) 816 795 1,023 985 1,113 1,291 1,862 81,382 Rentable Area (SF) 7,218 1,468 1,827 1,505 7,490 19,508

Common Area (SF):

17,055

Total Gross Building Area

117,945

*The building also includes a partial basement which contains 8,300 square feet of area.

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The subject property is not gated and is accessible via Broadway Plaza to the northeast, Broadway Street to the south and H Street to the southwest. Uncovered on-site parking will be made available for residential tenants (on parcel 466-206-54T, located to the northwest of Hotel Fresno), which will be acquired by the property owner. Additionally, there will be street parking available for guests, as well as the commercial tenants and patrons. According to public records and to the best of our knowledge, there have been no sales of the subject property within the previous three years. Additionally, the subject property is not currently listed for sale on the market. Type and Definition of Value The purpose of this appraisal is to estimate the hypothetical market value of the subject property assuming completion of conversion/renovation and stabilized occupancy, and the as-is market value (fee simple estate) of the subject property as of the date of inspection (October 8, 2012). Market value is defined as follows: Market value:

The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1

Please refer to the Glossary of Terms in the Addenda to this report for the definition of hypothetical condition and value as is. Client, Intended User and Intended Use of the Report The client and intended user of this appraisal report is Johnson Capital and the U.S. Department of Housing and Urban Development (HUD). It is our understanding this appraisal report will be used for financing purposes.

1 Code of Federal Regulations, Title 12, Section 34.42 (55 Federal Register 34696, Aug. 24, 1990; as amended at 57 Federal Register 12202, Apr. 9, 1992; 59 Federal Register 29499, June 7, 1994).

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Property Rights Appraised The value estimated herein is for the fee simple estate, defined as follows: Fee Simple Estate:

absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.2

The rights appraised are also subject to the General and Extraordinary Assumptions, Limiting Conditions and Significant Factors contained in this report, as well as any exceptions, encroachments, easements and rights-of-way recorded. Appraisal Report Format This report is presented in a Self-Contained Appraisal Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice (USPAP). Dates of Inspection, Value and Report The subject property was inspected on October 8, 2012, which represents the effective date of market value. This appraisal report was completed and assembled on October 17, 2012. Scope of Work This appraisal report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). This analysis is intended to be an “appraisal assignment,” as defined by USPAP; the intention is the appraisal service be performed in such a manner that the result of the analysis, opinions, or conclusion be that of a disinterested third party. We researched and documented several legal and physical aspects of the subject property. A physical exterior inspection of the property was completed and serves as the basis for the site and improvement descriptions contained in this report. Documents provided for this analysis include a site plan, floor plans, a developer’s cost budget and the preliminary title report. Interviews were conducted with Mr. Mehran Baghgegian, the developer of the subject, regarding the property’s history, as well as the proposed renovation plans. We contacted the City of Fresno Planning Department regarding zoning and entitlements. The subject’s earthquake zone, flood zone and utilities were verified with the applicable public agencies. Property tax information for the current tax year was obtained from the Fresno County Tax Collector’s Office.

2

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 78.

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The appraiser also analyzed and documented data relating to the subject’s neighborhood and surrounding market areas. This information was obtained through personal inspections of portions of the neighborhood and market areas; newspaper articles; real estate broker reports; real estate conferences; and interviews with various market participants, including property owners, property managers, brokers, developers and local government agencies. All three traditional approaches to value (cost, sales comparison and income capitalization) were used in the valuation of the subject property. The conclusions reached through each approach were then reconciled into a final opinion of hypothetical market value, assuming completion of conversion/renovation and stabilized occupancy. Finally, deductions for renovation/conversion costs and lease-up costs were made in order to estimate a final opinion of as-is market value for the subject property. The data sources used to research comparables for this specific appraisal assignment included our internal SJZ database, Costar, Loopnet and Realquest. Our search criteria for comparable sales of apartment properties in order of importance was; property type (apartments), location (within the Central Valley region), size (between 30 and 500 units) and effective age/condition (preferably newer construction in good condition). Given the limited amount of recent sales of comparable apartment properties in the Central Valley, these search parameters resulted in very few comparable sales. Additionally, all of the apartment properties in this search, which are considered somewhat comparable to the subject, are significantly older. Thus, we conducted a secondary search which included the Sacramento MSA to balance out the data set with recently constructed apartment projects that have recently sold. This region is considered the closest to the Central Valley in terms of property values, demographics, tenant profile, as well as buyer profiles. It is noted that the appraiser was unable to identify any recent mid-rise style mixed-use properties (that represented renovations and/or conversions of historic buildings) that have recently sold in either the Central Valley or Sacramento MSA. The subject property represents a unique project within its primary market area. While similar projects do exist in the San Francisco Bay Area, pricing in this market is far superior to the subject’s Central Valley location and would require substantial adjustments, weakening the reliability of these comparables. Therefore, we did not expand our search to include mixed-use high rise properties within the Bay Area. As part of the income capitalization approach to value, the appraiser conducted a survey of several similar apartment projects located in the subject’s neighborhood in order to determine market rent for the subject. The property managers at each of the selected apartment projects were interviewed and the information provided is considered accurate as of the date of the survey (10/1/2012 through 10/5/2012). Furthermore, the reader should note that a rent survey, similar to an appraisal, is a snap shot in time and rents and rent concessions can fluctuate at comparable apartment properties on a weekly or even a daily basis, as market conditions change.

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The individuals involved in the preparation of this appraisal include Eric A. Segal, Appraiser, and Katharine A. Campos, Research Analyst. Ms. Campos inspected the subject property; collected and confirmed data related to the subject property, comparables and the neighborhood/ market area; analyzed market data; and prepared a draft report with a preliminary estimate of value. Mr. Segal, made an inspection of the subject property, offered professional guidance and instruction, reviewed the draft report and made necessary revisions.

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EXTRAORDINARY ASSUMPTIONS, HYPOTHETICAL CONDITIONS AND SIGNIFICANT FACTORS The valuation is premised on the following extraordinary assumptions, significant factors and hypothetical conditions, the use of which may have affected assignment results. Extraordinary Assumptions 1. It is assumed the proposed improvements will be constructed as detailed on the developer’s construction budget provided for use in this appraisal. Additionally, it is assumed the proposed renovation will be constructed in a workmanlike manner and exhibit no construction defects upon completion. If the actual construction is of inferior condition or quality than proposed, the market value estimates would likely be lower. 2. The existing subject site consists of APN: 466-214-01, which contains approximately 22,500 square feet (0.52 acres) of land area. APN: 466-206-54T, located to the northwest of the subject property, is currently owned by the Redevelopment Agency. Per conversations with Mr. Baghgegian, current ownership of the subject property plans to acquire this parcel in order to furnish the subject property with 79 uncovered parking stalls for residential tenants. As such, we have utilized a site area of 52,708± square feet (1.21 acres) in our appraisal, assuming the property owner acquires the additional parcel (APN: 466-206-54T). If at the completion of renovation of the subject, the additional parcel is not acquired this could affect our conclusion of value. Significant Factors 1. As an apartment complex, the proposed Hotel Fresno will include a minor amount of personal property consisting of furniture, fixtures and equipment (F.F. & E.). These items include refrigerators, ranges/ovens and dishwashers within the units as well as furniture and other office equipment in the leasing office. If the subject’s F.F. & E. were to be liquidated, it would be at a significantly discounted price relative to the acquisition or replacement price. Given these factors, the contributory value of subject’s F.F. & E. is considered nominal in comparison to the value of the real estate. Additionally, it is noted that apartment properties typically transfer with all F.F. & E. in place. This was the case with all of the improved sales data included in this report. Hypothetical Conditions 1. The estimate of market value assuming completion of conversion/renovation and stabilized occupancy derived herein represents a value subject to hypothetical conditions. In order to estimate the as-is market value of the subject property, we first derived an estimate of market value assuming completion of conversion/renovation and stabilized occupancy. This value is subject to a hypothetical condition, defined as “that which is contrary to what exists, but is supposed for the purpose of the analysis.”3 This value is hypothetical since the building is completely vacant and has not yet been renovated. 3

The Uniform Standards of Professional Appraisal Practice, 2010 ed. (Appraisal Standards Board), 3.

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GENERAL ASSUMPTIONS AND LIMITING CONDITIONS 1. 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. 2. No responsibility is assumed for matters of law or legal interpretation. 3. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 4. The information and data furnished by others in preparation of this report is believed to be reliable, but no warranty is given for its accuracy. 5. It is assumed 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. 6. It is assumed 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. 7. It is assumed the property conforms to all applicable zoning and use regulations and restrictions unless nonconformity has been identified, described and considered in the appraisal report. 8. It is assumed all required licenses, certificates of occupancy, 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 value estimate contained in this report is based. 9. It is assumed the use of the land and improvements is confined within the boundaries or property lines of the property described and there is no encroachment or trespass unless noted in the report. 10. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, ureaformaldehyde foam insulation and other potentially hazardous materials may affect the value of the property. The value estimated is predicated on the assumption there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. The intended user of this report is urged to retain an expert in this field, if desired. 11. The Americans with Disabilities Act (ADA) became effective January 26, 1992. I (we) have not made a specific survey or analysis of this property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. Since compliance matches each owner’s financial ability with the cost-to cure the property’s potential physical characteristics, the real estate appraiser cannot comment on compliance with ADA. A brief summary of the

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subject’s physical aspects is included in this report. It in no way suggests ADA compliance by the current owner. Given that compliance can change with each owner’s financial ability to cure non-accessibility, the value of the subject does not consider possible non-compliance. Specific study of both the owner’s financial ability and the cost-to-cure any deficiencies would be needed for the Department of Justice to determine compliance. 12. The appraisal is to be considered in its entirety and use of only a portion thereof will render the appraisal invalid. 13. Possession of this report or a copy thereof does not carry with it the right of publication nor may it be used for any purpose by anyone other than the client without the previous written consent of Seevers  Jordan  Ziegenmeyer. 14. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or any other media without the prior written consent and approval of Seevers  Jordan  Ziegenmeyer. 15. The liability of Seevers  Jordan  Ziegenmeyer and its employees/subcontractors for errors/ omissions, if any, in this work is limited to the amount of its compensation for the work performed in this assignment. 16. Acceptance and/or use of the appraisal report constitutes acceptance of all assumptions and limiting conditions stated in this report. 17. An inspection of the subject property revealed no apparent adverse easements, encroachments or other conditions that currently impact the property. According to the preliminary title report provided for this appraisal (see Addenda), the subject contains easements for roadways, canals and irrigation, public utilities, telegraph and telephone, and ingress egress. However, these easements are typical for the area and are not considered to adversely affect the value or marketability of the subject property. The appraiser is not a surveyor nor qualified to determine the exact location of any easements. It is assumed any easements do not have an impact on the opinion(s) of value set forth in this report. If, at some future date, any easements are determined to have a detrimental impact on value, the appraiser reserves the right to amend the opinion(s) of value contained herein. 18. This appraisal report is prepared for the exclusive use of the appraiser’s client. No third parties are authorized to rely upon this report without the express consent of the appraiser. 19. The appraiser is not qualified to determine the existence of mold, the cause of mold, the type of mold or whether mold might pose any risk to the property or its inhabitants. Additional inspection by a qualified professional is recommended.

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CERTIFICATION STATEMENT 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 performed no services regarding 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.

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



My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.



The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

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

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Katharine A. Campos, Research Analyst, provided significant real property appraisal assistance to the person signing this certification.

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

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I certify that my State of California real estate appraiser license has never been revoked, suspended, cancelled, or restricted.

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I have the knowledge and experience to complete this appraisal assignment. Please see the Qualifications of Appraiser(s) portion of the Addenda to this report for additional information.



As of the date of this report, I have completed the Standards and Ethics Education Requirement of the Appraisal Institute for Associate Members.

Eric A. Segal, Appraiser State Certification No.: AG026558 (Expires: February 18, 2013)

October 17, 2012 DATE

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MACROECONOMIC OVERVIEW Introduction The U.S. economy has seen ups and downs over the past several quarters, but appears to be in the early stages of recovery. The broadest measure of the economy, the gross domestic product (GDP), grew at an annual rate of 1.7% in the second quarter of 2012, and 2.0% in the first quarter. The rate of growth for the year 2011 was 1.7%. According to the Bureau of Economic Analysis, the increase in GDP in the second quarter reflected growth in personal consumption, exports, nonresidential fixed investment, and residential fixed investment; these increases were partly offset by declines in private inventory investment and state and local government spending, and an increase in imports. The employment situation has also seen some slight improvement. The U.S. unemployment rate was 8.1% in August 2012, down from 9.1% a year ago (August 2011). Most economists and analysts are expecting to see continued gradual improvement in economic and employment conditions over the next 12 months. Although job growth has been slower than expected, businesses are stepping up investment in things like equipment and software, and consumer spending is also on the rise. As of September 2012, the Federal Reserve was predicting the economy will grow by 1.7% to 2.0% in 2012. But the central bank expects to see more improvement next year, with a growth forecast of 2.5% to 3% for 2013. In late 2008 and much of 2009, the nation experienced the largest financial crisis in decades. The crisis stemmed mainly from subprime mortgage lending practices and the subsequent decline in the housing market. The events of 2008-2009 are widely known and documented, including housing market declines, property foreclosures, bank failures, Federal bailouts, stimulus spending, etc. Bank lending was very limited in the early months of the crisis, but many banks have resumed lending at this point, albeit with much tighter restrictions. Many of the nation’s largest financial institutions are now repaying Federal bailouts, but access to the capital markets remains difficult as bank balance sheets continue to be clogged with troubled loans and other assets. Employment Conditions The national unemployment rate rose above 10% in 2009, marking the first time the unemployment rate reached double-digits in 26 years. Payrolls fell throughout 2009, bringing the total number of unemployed persons to nearly 15 million. Job growth was slightly positive in 2011 and year-to-date 2012, but unemployment remains relatively high at 8.1% as of August 2012. In California, the unemployment rate was 10.6% in August 2012, down from 11.9% a year ago. The state’s unemployment rate has declined slightly over the past several months. The number of nonfarm jobs in California increased by 298,700 jobs (up 2.1%) in the one-year period ending in

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August 2012. Future job growth is difficult to forecast, but most experts do not expect the state to see significant employment growth for several years. California’s budget deficit is a factor in the jobs outlook. Many State government employees, who comprise a substantial portion of workers in the Sacramento region, have been forced to take unpaid furlough days in the past couple of years. The budget deficit is not expected to improve significantly in the near term, which could prolong recovery in the local economy. Outlook for Commercial Real Estate Generally speaking, commercial real estate conditions improved slightly in 2010 and 2011 compared to the preceding couple of years. However, stabilization has been shaky and recovery is expected to be protracted. In Emerging Trends in Real Estate 2012, published in late 2011 by the Urban Land Institute and PricewaterhouseCoopers, market conditions were summarized as follows: “For 2012, U.S. real estate players must resign themselves to a slowing, grind-it-out recovery following a period of mostly sporadic growth, confined largely to ‘wealth island’ real estate markets –the primary 24hour gateways located along global pathways.... Most commercial markets have stabilized, but will find marked improvement in occupancies and rents relatively elusive.... Enduring economic doldrums and the absence of dynamic jobs generators hamstring overall demand, weighing on real estate markets.” In most metropolitan areas, market activity (sales and leasing) increased in 2011 compared to previous years, and buyers and sellers have moved closer on pricing, but strict lending practices continue to make it difficult for potential buyers to obtain financing. Another challenge comes from real estate loans coming due that were made during the peak expansion years. For example, five-year loans made in 2007 will become due in 2012, with many borrowers unable to pay or refinance. This means additional commercial foreclosures are likely to hit the market. However, compared to the residential sector, which has seen big waves of significant foreclosure activity, the commercial sector should see a longer and slower correction. This is because of “pretend and extend” practices, an increase in note sales, the return of the commercial mortgage backed-securities market, and an increase in refinancing and loan workouts. Some troubled assets will still return to the marketplace, but on a more limited and gradual basis than was once expected. While commercial real estate values may see further declines, they should not be as significant as those seen in the 2007-2009 period. On a national basis, commercial properties have seen declines of 30 to 50 percent, on average, from the peak in 2007. According to the PwC Real Estate Investor Survey for recent quarters, commercial real estate is a relatively attractive investment compared to alternative investment vehicles. Although the industry has certain issues and risks, it offers more transparency and predictability than other investments in the current economy. The apartment sector has shown strong improvement in recent quarters, and now a growing number of buyers are revisiting the rebounding industrial sector as it continues to

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demonstrate positive signs of recovery. Some office markets also began showing signs of economic growth and recovery in the first half of 2012. In the PwC report for 3rd quarter 2012, it was noted that the relatively strong improvement seen in the early months of 2012 has decelerated in recent months. Investors still face a great deal of uncertainty in real estate. However, PwC concluded in the 3rd quarter report that “despite a sluggish outlook for the U.S. economy and the industry’s less-thanstellar recovery, a low cost of capital, limited additions to supply, and a fondness for cash flows continue to motivate commercial real estate investors.” Capitalization rates and yield rates increased significantly in 2008-2009 as lenders and equity investors perceived greater risk in real estate investments. On average, rates stabilized in 2010 and began to decline in 2011, although there continue to be many differences among locations and property types. According to PwC, in the 3rd quarter of 2012 average cap rates declined for all types of shopping centers, offices and industrial properties; the only cap rate increase was for the net lease market. Looking forward, the 3rd quarter PwC report states, “Even though the recovery of the commercial real estate industry remains uneven and very location and sector specific, commercial real estate remains a prime target for investment capital as it continues to perform well relative to alternative investment vehicles.... Helping to fuel demand for commercial real estate are low interest rates, which are not expected to increase anytime soon.” Most survey participants expect overall cap rates to hold steady over the next six months in nearly all markets. With respect to land, many developers that hold title to unimproved properties are holding for development until market conditions show more solid improvement. Many improved properties are transferring for less than replacement cost, indicating the infeasibility of new construction in the current market. By most accounts, the market for vacant land continues to be limited, except for speculators willing to hold the land for a number of years, or properties for which build-to-suit arrangements have been made. Recovery in the land market is not expected until the commercial sector reaches a point where new construction is feasible. Conclusion After market conditions declined rapidly in 2008-2009 amid turmoil in the financial markets and great uncertainty about the economy, the years 2010-2011 and year-to-date 2012 have brought stabilization and some improvement for the overall economy and also for commercial real estate markets. Nevertheless, credit remains tight, employment gains have been meager, and vacancy remains high for most commercial property markets. Given current and recent conditions in the economy, employment and credit markets, the expectation is that job growth will be moderate for several years and the recovery for commercial real estate will be protracted.

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FRESNO COUNTY REGIONAL OVERVIEW

Introduction Fresno County is the fifth largest county in California, encompassing 6,000 square miles. The county is bordered on the north by Madera County, the south by Kings and Tulare Counties, the west by Monterey and San Benito Counties, and the east by Inyo County. It is located approximately 185 miles southeast of San Francisco, 190 miles south of Sacramento and 220 miles north of Los Angeles. Fresno’s central location within the state has helped make the region a transportation and distribution hub for numerous large companies servicing the state. Fresno County has flourished as an agricultural center, and is now the number one agricultural producing county in the United States. The city of Fresno is the largest city in the county and sixth largest in California. Fresno represents the county seat of government, and contains a number of city and county government offices in the downtown area. Population Fresno County has a population of over 945,000 and has experienced moderate growth over the past five years, with an average growth rate of 1.2% per year.

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The following table illustrates population trends for areas within Fresno County over the past few years.

City Clovis Coalinga Firebaugh Fowler Fresno Huron Kerman Kingsburg Mendota Orange Cove Parlier Reedley Sanger San Joaquin Selma Unincorporated Total

2007 90,155 17,336 6,988 5,101 470,817 6,528 12,571 11,041 10,037 9,113 13,506 23,227 23,713 3,788 22,813 166,354 893,088

2008 92,484 18,310 7,198 5,387 477,499 6,493 12,841 11,109 10,548 9,197 13,903 23,811 24,187 3,993 22,999 166,562 906,521

POPULATION TRENDS 2009 2010 93,629 95,447 18,303 18,206 7,262 7,464 5,476 5,561 487,353 494,053 6,658 6,790 13,286 13,551 11,293 11,383 10,761 10,983 9,182 9,128 14,244 14,463 23,790 24,139 24,118 24,286 3,993 4,010 23,048 23,217 166,164 167,077 918,560 929,758

2011 96,848 17,996 7,591 5,699 497,561 6,765 13,699 11,465 11,038 9,163 14,601 24,407 24,391 4,010 23,307 167,548 936,089

2012 98,611 16,817 7,794 5,756 505,009 6,786 13,942 11,536 11,167 9,319 14,826 24,622 24,638 4,031 23,687 167,170 945,711

%/Yr 1.9% -0.6% 2.3% 2.6% 1.5% 0.8% 2.2% 0.9% 2.3% 0.5% 2.0% 1.2% 0.8% 1.3% 0.8% 0.1% 1.2%

Source: California Department of Finance

Most of the county’s residents live in the city of Fresno, with a population of about 505,000. The next largest city is the neighboring city of Clovis, with over 98,000 residents. Clovis is experiencing one of the highest rates of growth in the county, with an average annual growth rate of 1.9% since 2007. The cities of Firebaugh, Fowler, Kerman, Mendota and Parlier have also experienced rapid growth over the last five years. Fresno’s population growth is largely the result of increased migration of residents from the congested and relatively expensive urban areas of the San Francisco Bay Area and Southern California. Fresno County offers several convenient population hubs along State Highway 99 and Interstate 5, the two primary transportation corridors within California. The availability of affordable existing and new housing has been the driving factor in attracting more residents to the county. In the future, most growth is expected in the cities of Fresno and Clovis, as they possess the greatest levels of existing and proposed infrastructure. Transportation The availability of a broad transportation network has been a major factor in the county’s population growth. The area benefits from its central location within the state of California and its good freeway system. The main highways in the county are Interstate 5 and State Highway 99. Both highways run north-south, with Highway 99 running through the city of Fresno approximately 20 miles east of Interstate 5. These highways are the major arteries linking Northern and Southern California, and

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support thousands of cars and trucks daily. Within the city of Fresno, several other freeways facilitate traffic flow effectively throughout the city and into neighboring communities. The Fresno Yosemite International Airport (FYI) is located in the eastern portion of the city of Fresno. This airport encompasses 2,300 acres of land area, and includes a 97,000 square foot terminal. FYI is currently served by United, Delta, Continental, US Airways and American Airlines, and five regional air carriers providing service to major destinations. Additionally, two commuter airlines provide service to secondary locations. The airport accommodates over 2,000 passengers each day. Public transportation services are available to Fresno County residents from several service providers. Fresno Area Express (FAX) offers 18 fixed-route bus lines and 100 buses serving the greater Fresno Metropolitan Area. Fresno County Rural Transit Agency provides fixed-route and scheduled pick-up bus service to and from all cities and many rural areas within the county. Private bus service is provided by Greyhound, while Amtrak provides private rail service within the county. Employment & Economy The California Employment Development Department has reported the following employment data for Fresno County over the past several years.

Labor Force Employment Job Growth Unemployment Rate

2006 411,400 378,500 n/a 8.0%

EMPLOYMENT TRENDS 2007 2008 2009 419,300 429,800 434,600 383,600 385,000 369,300 5,100 1,400 (15,700) 8.5% 10.4% 15.0%

2010 440,100 366,000 (3,300) 16.8%

2011 442,100 368,900 2,900 16.6%

Source: California Employment Development Department

The unemployment rate in Fresno County was 15.3% in June 2012, which compares to rates of 10.7% for California and 8.2% for the U.S. Most areas within the state and nation, including Fresno County, saw declining unemployment rates in 2004 through 2006, increases from 2007 to 2010, and declines in 2011 and into 2012. Fresno County’s unemployment rate is influenced significantly by the agricultural nature of the area, as many farming jobs are seasonal.

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The following chart shows employment by industry sector within the county. EMPLOYMENT BY SECTOR Government Trade/Transp/Util Agriculture Educ/Health Services Prof/Business Services Leisure & Hospitality Manufacturing Financial Activities Construction Other Services Information 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Source: California Employment Development Department

The area’s largest employment sectors are Government; Trade, Transportation and Utilities (which includes retail and wholesale trade); and Agriculture. The area’s largest employment sector is Government, which accounts for about one-fifth of all employment. Most Government jobs are at the City of Fresno and Fresno County. Except for the Education and Health sector, all employment sectors experienced employment declines over the past year. The three sectors with the largest declines in the past year include Professional and Business, Trade, Transportation and Utilities and Construction/Natural Resources. The Construction/Natural Resources sector lost the most jobs over the past year, reporting a decline of 4,100. Education and Health reported an increase of 100 jobs. Industries reporting job increases over the past year in Kings County include the Government, Leisure/Hospitality and Professional/Business sectors. Agriculture represents a major segment of the economy, with the county producing some 250 commercial crops including grapes, cotton, tomatoes, cattle, and a wide variety of fruits and nuts. Fresno County is the number one producer of agricultural goods in the United States. There are also a number of agribusinesses that have emerged as a result of the large agricultural production, including food processing and packaging, warehousing, transportation, farm machinery, sheet and bottle glass, fertilizer, pesticides, and wine production. Fresno County Farm Bureau statistics report that one in every three jobs in the county relates directly or indirectly to agriculture.

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The following table lists the largest employers in the region. TOP 10 EMPLOYERS Employer

Employees

Fresno Unified School District

7,418

County of Fresno

7,050

Community Medical Centers

4,360

Clovis Unified School District

3,221

City of Fresno

3,610

Foster Farms

2,500

St. Agnes Medical Center

2,383

Kaiser Permanente Medical Center

2,000

California State University, Fresno

1,993

Pelco

1,900

Source: Fresno Economic Development Corporation

Other major private sector employers in the county include Aetna US Healthcare, which operates a health insurance call center; Grundfos pumps, a pump manufacturing company; Pelco, security equipment manufacturing company; Sun Maid Growers, a raisin processing facility; and The Gap, which operates a distribution center. In recent years, several companies have relocated to Fresno County from other parts of the state. Sinclair Systems relocated their North American headquarters and manufacturing operations from Campbell to Fresno, citing reduced overhead and affordable housing as the main reasons. Rayovac Corporation decided to relocate its Hayward distribution operations to a facility in Fresno County due to its central location, UPS next day service, affordable cost of living and a plentiful workforce. Household Income Median household income represents a broad statistical measure of well-being or standard of living in a community. The median income level divides households into two equal segments with one half of households earning less than the median and the other half earning more. The median income is considered to be a better indicator than the average household income as it is not dramatically affected by unusually high or low values. In the year 2010 (most recent data available from the U.S. Census), Fresno County’s median household income was $44,869, which was lower than the state of California’s median income of $57,664. Recreation & Community Facilities Fresno County enjoys good recreational and cultural opportunities. In the city of Fresno, cultural attractions include the William Saroyan Theater, which hosts the Fresno Philharmonic Orchestra and

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the Fresno Ballet Company; the renovated Tower Theater, which showcases nationally acclaimed performing artists of all genres; the Fresno Metropolitan Museum; and the Fresno Art Museum. Fresno County has good access to several regional attractions located outside the borders of the county, including Yosemite National Park, Sequoia and Kings Canyon National Parks, the Monterey Bay Aquarium, Los Angeles and San Francisco. The Fresno County area has a well-developed education system, with numerous elementary middle and high schools, as well as several junior colleges. The area’s primary secondary education provider is California State University at Fresno, one of 23 CSU campuses throughout the state. Founded in 1911, the school has offered advanced degrees since 1949. The university enrolls over 20,000 students annually, awarding approximately 3,000 degrees each year. The 327-acre main campus is located in northeast Fresno, and offers degree programs in dozens of disciplines. Conclusion Fresno County is a primary commerce center in California’s Central Valley. The region represents a growing community that was once dependent on agriculture but has transitioned into a more diverse economy. Like most of the state and nation, the region has recently experienced high unemployment and declines in the residential and commercial real estate markets. However, the region has good long-term potential and the local economy appears to be approaching stabilization. The county’s central location and good transportation network have attracted new businesses and residents to the area. The relative affordability compared to the Bay Area and Southern California is also a positive factor for attracting residents and businesses.

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NEIGHBORHOOD OVERVIEW

Introduction This section of the report provides an analysis of the observable data that indicate patterns of growth, structure and/or change that may enhance or detract from property values. For the purpose of this analysis, a neighborhood is defined as “a group of complementary land uses; a congruous grouping of inhabitants, buildings or business enterprises.”4 Neighborhood Boundaries The boundaries of a neighborhood identify the physical area that influences the value of the subject property. These boundaries may coincide with observable changes in prevailing land use or occupant characteristics. Physical features such as the type of development, street patterns, terrain, vegetation and parcel size tend to identify neighborhoods. Roadways, waterways and changing elevations can also create neighborhood boundaries. The subject property is located within the southern portion of the city of Fresno, in the downtown area. The neighborhood boundaries can generally be described as Highway 180 to the north, Highway 41 to the east and Highway 99 to the south and west. 4

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 133.

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Demographics According to demographic reports, the population of the neighborhood, which includes all persons in the 93721 zip code, was 7,463 persons in 2010, with a projected increase to 7,566 persons in 2015. The median age is 30.5 years and the average household size is 2.42 persons. The median household income in the subject’s neighborhood is $16,332, suggesting the area is a low income submarket. There are an estimated 1,708 occupied housing units in the neighborhood, of which 12% are owneroccupied and 88% are renter occupied. Additionally, according to STDB Online, the population of the neighborhood within one mile of the subject property was 17,443 persons in 2010. The median age is 27.5 years and the average household size is 3.23. The median household income within one mile of the subject property is $15,774. There are an estimated 4,248 occupied households in the immediate neighborhood, with 17% owner-occupied, and 83% renter occupied. The city of Fresno Redevelopment Agency and several new projects (both completed and proposed) have resulted in a shift in demographics within the subject’s immediate area over the past few years. As an outcome, many professionals have relocated to the downtown area in pursuit of an urban lifestyle. Thus, the previously stated income figures reported from 2010 do not capture the recent changes within the subject’s neighborhood and the subject’s target demographics. According to the California Employment Development Department, the city of Fresno has an unemployment rate of 13.2% as of August 2012. The area’s unemployment rate is slightly lower than the unemployment rates of the Fresno MSA (14%) and Fresno County (14%). As reported by DataQuick Information Services, the median resale home price in Fresno County as of August 2012 (latest data available) was $158,000, which marks a 5.3% increase from August 2011. Transportation The subject property is accessible via Broadway Plaza, Broadway Street and H Street. The site lies approximately ½ mile east of Highway 99, one mile south of Highway 180 and approximately one mile west of Highway 41. Highway 99 is a main north-south transportation route in California providing direct access to the cities of Tulare and Bakersfield, before merging with Interstate 5 near Bakersfield. To the north, Highway 99 travels through the cities of Madera, Merced, Modesto, Stockton, Sacramento, Yuba City, Chico and Red Bluff, before merging with Interstate 5 and continuing north to Redding, Oregon, Washington and Canada. Highway 41 connects the subject with north Fresno and Clovis to the north and Hanford to the south. Highway 180 basically connects the subject with the east and west sides of Fresno. The nearest major airport is Fresno Yosemite International airport, located approximately five miles northeast of the subject.

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Land Uses Commercial development in the neighborhood is primarily located south east of the subject. Residential developments are also present in the area, and are located mainly to the north of the subject. Furthermore, there are few undeveloped sites in the neighborhood, with the majority of vacant lots being located along the railroad tracks. Land uses north of the subject’s immediate area are primarily industrial in nature, with some newer residential development intermixed. The subject property is located within an older industrial area in downtown Fresno containing primarily small and medium sized industrial buildings. Most industrial buildings in the area are over 20 years old, in fair to average condition and of fair to average construction quality. The downtown area of Fresno is in the beginning stages of revitalization. Recently there has been significant new construction of “loft” style projects as well as two conversions of industrial properties into residential lofts, some with ground floor retail, in the subject’s neighborhood. Based on our inspection of the neighborhood, there are five projects that recently opened or are close to completion; Fulton Village (five blocks north of the subject), Broadway Studios (seven blocks north of the subject property), 64 Fulton Studios, 330 Van Ness Avenue and Mayflower Lofts (a few blocks north of the subject property). According to the City of Fresno’s website, there are two specific areas that are the focus of the city’s revitalization efforts. The first is called the Fulton Corridor Specific Plan, which is the area highlighted in turquoise, and the other is called the Downtown Neighborhoods Community Plan, which is the grey area shown on the map below. The subject is located within the Fulton Corridor Specific Plan.

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The Fulton Corridor Specific Plan and the Downtown Neighborhoods Community Plan together encompass several distinct center city areas including the Central Business District, the Cultural Arts District, the South Stadium zone, Chinatown as well as the surrounding Lowell, Jefferson, Southwest, and Southeast neighborhoods. In all, the combined plan areas comprise approximately 7,000 acres. Both plans are basically a new set of regulations that will reduce development difficulty, costs, and uncertainty, making good projects easier to build downtown. Specifically, the Fulton Corridor Specific Plan is a community-led process wherein a 21-stakeholder committee will make recommendations to the Mayor and City Council on new development laws for downtown, investments in infrastructure, and the future of the Fulton Mall. The two plans represent an important opportunity to revitalize these areas, focusing on rehabilitation, aesthetics, infrastructure, incorporation of a high speed rail station, and attraction and expansion of businesses. The Specific Plan will bring these elements and more together into one legally enforceable document with a complete environmental impact report. On January 28, 2010, the City Council, with support from Mayor Ashley Swearengin, approved a contract for consulting services for preparation of the Fulton Corridor Specific Plan and the Downtown Neighborhoods Community Plan. According to Wilma Quan, with the City of Fresno Redevelopment Agency, both plans are currently within the fifth phase (Environmental Review) of the six phases. The final phase for both plans is expected to be complete by late 2013. To the west of the subject is the Fulton Mall. Fresno's Fulton Mall is a six block long outdoor pedestrian mall, and is the centerpiece of Fresno's Central Business District. On the Fulton Mall is a wide variety of shopping, services and offices. The Fulton Mall stretches from Tuolumne Street at its northern end, to Inyo Street at its southern end. From the earliest days of Fresno, this corridor, once "Fulton Street," has been the heart of the city's downtown. The mall is bisected by three "cross malls" along Merced, Mariposa and Kern Streets. The mall was built in 1964 as part of a major urban renewal project. Many of Fresno's most historic buildings are located along the mall, which is recognized as an important modernist landscape design. The mall is also home to a world-class public art collection. It was the nation's second downtown pedestrian mall. The mall is also home to a twice weekly farmers market near the mall clock tower at Fulton & Mariposa Streets. The downtown area includes several restaurants, retail shops and high rise offices typical of a downtown area. Most notably are the City offices at 2600 Fresno Street as well as County offices and Federal offices. The closest hospital to the subject property is the Community Regional Medical Center located on a 58-acre campus in downtown Fresno on Fresno Street. Community Regional is an academic-affiliated medical center with more than 600 beds.

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The following table summarizes some of the land use characteristics of the subjects’ neighborhood: Neighborhood Life Cycle Stage Real Estate Cycle Land Uses Age Range of R/E Improvements General Quality & Condition of Improvements Percentage Developed (approximate) Infrastructure / Land Planning Location of Undeveloped Land Relative to Subject Distance of Undeveloped Land Relative to Subject

Revitalization Recession Commercial/Residential/Industrial New – 50+ years Fair to Good 90% Average West/Northwest Less than 1/4 mile

Community Uses Community uses in the neighborhood include schools, parks, churches, libraries and other recreational facilities. One of the closest and most notable community uses is the Chukchansi Park baseball field, which is located approximately three blocks south of the subject property (Fulton Mall) and is home to the Fresno Grizzlies, the AAA affiliate of the San Francisco Giants, as well as the Fresno Fuego soccer team. Fresno City College, a local community college with approximately 26,000 students, is approximately two miles north of the subject property. The subject’s surrounding area also includes public golf courses, the Fresno Zoo, community centers, the Lion’s Den skateboard park and multiple sports complexes. Additionally, Fresno State University, the largest higher education facility in the region, is located northeast of the subject property along Shaw Avenue. Conclusion In summary, the subject’s neighborhood primarily consists of commercial, residential and industrial development with some recent revitalization and new construction nearby. The subject’s location in downtown Fresno and specifically within the Fulton Corridor Specific Plan area, and its accessibility to major arterials, particularly Highway 99, Highway 41 and Highway 180, are positive factors that should contribute to the future viability and success of the subject property.

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APARTMENT MARKET OVERVIEW National/Regional Market Conditions In most of the nation’s markets, apartment market conditions have improved in 2010-2012, with rising rental rates, declining vacancy rates and falling capitalization rates. During the years 2008 and 2009, apartment market conditions declined amid falling demand due to rising unemployment, and increasing supply due to growing competition from single-family homes and condominiums available for rent. According to the PwC Real Estate Investor Survey, dated Third Quarter 2012, the apartment market continues to improve and is one of the most desirable property types among investors. While rental rates declined in the year 2009, they increased by about 2% in 2010 and nearly 4% in 2011. Apartment sales volume also increased in 2010 and 2011. The PwC Third Quarter 2012 report stated: “The national apartment market remains firmly planted in the expansion phase of the real estate cycle, characterized by strong demand, robust rent growth and new supply.” Nationally, vacancy has fallen to its lowest level in 10 years. Amid the increasing sales volume and recovering market fundamentals, overall capitalization rates have fallen over the past year. For the third quarter, the PwC survey respondents indicated a cap rate range of 3.75% to 10.00% with an average of 5.74% as of the Third Quarter 2012. This is decreased from 5.76% last quarter and down from 5.98% a year ago. Central Valley Area – Introduction The Central Valley apartment market has been relatively stable with well-balanced supply and demand. Specifically, rental rates were steadily increasing from 2000 to 2008, with declines in 2009 and 2010, and slight increases seen in 2011 and into the beginning of 2012. The market was very strong in the late 1990’s and early part of the 2000’s due to rising population, employment and income levels in the region. In response to rising demand, there was significant new construction in the 2000-2004 period, most notably in the growth areas of the main cities in the Central Valley, such as Fresno’s northeast region. Many of these new projects were Class-A properties with relatively high rental rates. As a result of the new construction, some of these areas saw climbing vacancy rates around 2004, and there was some softening in the apartment market during this time frame. Construction has slowed in the “outlying growth” areas over the past couple of years, allowing the market to return to a more balanced state, as developers are currently looking to infill locations such as downtown Fresno, which is seeing construction of new apartment projects. In general, housing market conditions are having mixed effects on the apartment market. On the positive side, many people who no longer can afford their mortgages are returning to the market as renters. But on the negative side, many single-family homes are being offered for rent when they

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cannot be sold. The rental home market is referred to as the “shadow market” and these homes are part of the supply competing with apartments for renters. Residential Rent Trends Analysis of RealFacts rent data for market-rate apartment complexes throughout the Central Valley (including the counties of Fresno, Madera, Merced and Stanislaus) shows that rents and occupancy rates have remained relatively flat over the past year. The RealFacts survey includes 110 properties and 20,107 rental units renting in size from studio to four-bedroom units. Only one of the properties surveyed was constructed before 1960, two properties surveyed were constructed in the 1960’s, 31 were constructed in the 1970’s, 49 were constructed in the 1980’s, 15 in the 1990’s and 12 in the 2000’s. The table below presents the average rents per quarter for the Central Valley region. The average rent region wide for Second Quarter 2012 (most recent data available) was $809 compared with $796 in First Quarter 2011, indicating relatively flat to slightly rising rents during the last year, overall. Average Rents per Quarter for the Central Valley Region Average Studio 1 bd 1 ba 2 bd 1 ba 2 bd 2 ba 2 bd TH 3 bd 2 ba 3 bd TH

2Q 2010 $789 $580 $712 $745 $889 $905 $1,012 $1,223

3Q 2010 $788 $592 $709 $739 $894 $894 $1,028 $1,233

4Q 2010 $786 $583 $706 $739 $890 $885 $1,031 $1,215

1Q 2011 $786 $578 $707 $741 $888 $898 $1,028 $1,240

2Q 2011 $796 $585 $711 $749 $906 $902 $1,036 $1,236

3Q 2011 $800 $593 $715 $763 $902 $899 $1,042 $1,219

4Q 2011 $803 $589 $720 $762 $907 $916 $1,027 $1,224

1Q 2012 $804 $596 $723 $764 $910 $914 $1,031 $1,228

2Q 2012 $809 $597 $725 $770 $916 $915 $1,031 $1,230

1 Yr. Change 1.6% 2.0% 2.1% 2.8% 1.1% 1.4% -0.4% -0.5%

Source: RealFacts, 2nd Quarter 2012

Out of the seven different unit types surveyed by RealFacts, rents have decreased slightly for the three-bedroom/two-bath units (-0.4%) and the three-bedroom townhouse units (-0.5%), while the rents have increased slightly for the other five unit types over the last year. The largest gains were seen in the small units including, two-bedroom/one-bath units (2.8%), one-bedroom/one-bath units (2.1%) and the studio units (2.0%). Overall, the average rents hovered in the $785 to $795’s range from Second Quarter 2010 to Second Quarter 2011, with an increase to $800 in Third Quarter 2011, and subsequent increases of $803 (4Q 2011), $804 (1Q 2012) and $809 in the most recent quarter. It is noted, within the city of Fresno, the average rental rate seen in Second Quarter 2012, was $823, which represents a 3.0% increase in rental rates over the past year. The table on the following page presents annual average rents for the Central Valley region. The data shows a steady increase in rents between 2004 and 2008. Subsequently, the average annual

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rents for the Central Valley decreased in 2009 and again in 2010 in response to the economic downturn. In the beginning of 2011 the data shows a slight uptick in the average annual rent for the Central Valley, followed by further increases in 2012. Overall, rents have increased 1.2% over the past year and 0.5% over the past four years. Average Rents by Year for the Central Valley Region Average

2004 $722

2005 $744

2006 $772

2007 $793

2008 $802

2009 $798

2010 $788

2011 $796

2012 $806

1 Yr. Change 4 Yr. Change 1.2% 0.5%

Source: RealFacts, 2nd Quarter 2012

Occupancy Levels and Vacancy Occupancy levels generally are an indicator of housing demand. Over the past two years, occupancy in the Central Valley region has hovered between 93.4% and 93.8%. Occupancy rates were particularly low in 2004 when they reached 93.5% after a high of 96.2% in 2003 and again in 2009 when they fell to 91.7%. In 2005, 2006, 2007 and 2008 occupancy remained steady at around 95% while average rents were increasing. Then in 2009 occupancy fell by almost 2.7% and rents also began to decline. In 2010 rents fell again but occupancy rose back to a more stabilized level of 93.4%, which suggests that the market was moving towards equilibrium. 2011 and 2012 mark increases in occupancy to 93.7% (2011) and 93.8% (2012), which coincides with slight increases seen in the average rental rates during the past two years. Overall, the last year reflects a positive 0.1% change in occupancy rates. However, over the past four years, occupancy rates have seen a negative -0.6% change overall. It is noted, the Second Quarter 2012 occupancy rate for the city of Fresno was 94.2%. The following table presents the yearly occupancy rates for the Central Valley Region by RealFacts Second Quarter 2012 Survey Report: Average Occupancy by Year for the Central Valley Region Average

2004 93.5%

2005 95.5%

2006 94.9%

2007 95.1%

2008 94.4%

2009 91.7%

2010 93.4%

2011 93.7%

2012 93.8%

1 Yr. Change 4 Yr. Change 0.1% -0.6%

Source: RealFacts, 2nd Quarter 2012

The following table presents the quarterly occupancy rates for the Central Valley Region by RealFacts Second Quarter 2012 Survey Report: Average Occupancy per Quarter for the Central Valley Region

Average

2Q 2010 92.2%

3Q 2010 93.6%

4Q 2010 94.7%

1Q 2011 94.1%

2Q 2011 93.4%

3Q 2011 94.4%

4Q 2011 93.1%

1Q 2012 93.6%

2Q 2012 94.0%

1 Yr. Change 0.6%

Source: RealFacts, 2nd Quarter 2012

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Overall, the one year change reflects an increase of 0.6% in occupancy rates. The initial impression from these survey results would appear to be that the Central Valley Region is stabilizing in terms of occupancy at apartment properties. Number of Transactions According to RealFacts there has been no transaction of larger-type market rate apartment complexes (75+ units) in the Central Valley Region in 2012 (thus far), three transactions occurred in 2011, one transaction in 2010, and no transactions in 2009. This activity is much less than in previous years as there were five transactions in 2007, which is more than the amount of transactions over the past three years combined. The price per unit in 2011 increased slightly to $55,844, up from $53,409 in 2009. The price per unit has fallen significantly from a high of $99,964 in 2008. It is noted that the price per unit is considered to be somewhat skewed as there have been a limited number of transactions over the last few years. Investment and Market Activity In its report issued for Third Quarter 2012, PricewaterhouseCoopers (PwC) announced that the national apartment market remains firmly planted in the expansion phase of the real estate cycle, characterized by strong demand, robust rent growth and new supply. One participant predicts, “The home ownership bubble has popped and many families will never go back to that lifestyle of living.” The PwC Third Quarter 2012 claims investors are upbeat and optimistic with regards to the National Apartment Market, noting the market’s superior asset performance, “Many investors are still looking to place capital in the apartment sector. In the second quarter of 2012, total sales reached $16.2 billion, the highest level since 2007, as per Real Capital Analytics. At the same time, the average overall capitalization rate in the PwC Survey has fallen to a level seen in 2007. In fact, the current average overall capitalization rate is just below the average of 5.76% seen five years ago.” Vivid improvements in fundamentals and a historically low cost of capital propelled transaction volume despite steep competition among eager buyers. Total sales volume surged from roughly $32.0 billion in 2010 to nearly $51.0 billion in 2011, as per Real Capital Analytics. Market rent change rate in 3Q 2012 ranged from -2.00% to 10.00% with an average of 2.73%. This is down seven basis points from last quarter and up 73 basis points from a year ago. Market expenses in 3Q 2012 ranged from 1.00% to 3.50%, with an average of 2.69%. This is up four basis points from the last quarter and up one basis point from a year ago. Discount rates in 3Q 2012 ranged from 5.25% to 14.00%, with an average of 8.28%. This is down two basis points from last quarter and down six basis points from a year ago.

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Average marketing time in 3Q 2012 was 5.3 months, unchanged from last quarter and down from 5.9 months a year ago. New Construction The following chart indicates the number of multifamily (5+ units) permits issued over the recent past in Fresno County. It is noted these figures include for-rent apartments and for-sale condominiums. Multifamily Building Permits (Fresno County)

Source: U.S. census SOCDS Building Permits Database

New construction of multifamily projects was very rapid in 2003-2006 with over a thousand multifamily permits issued each of these years. A significant drop was seen in 2007, again in 2008 and almost no new construction was seen in 2009 with only 106 permits issued that year. The number of permits issued in 2010 (273) increased significantly compared to 2009 but still significantly below previous years. In 2011, another decrease was seen with only 168 multifamily permits issued, down from 273 in 2010. So far in 2012 there have only been 156 multifamily permits issued which suggests construction of new apartments may not be feasible in this market at this specific time unless subsidized. Conclusion The supply of housing and the demand for housing is related to regional economic activity, the current policies of the jurisdiction, the demographics of the area, and a host of other factors. The apartment market slowed in the Central Valley Region in 2009 with rents slightly declining and occupancy less than 95%. The slowdown, however, appears to be stabilizing as occupancy rates

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approached 94% in Second Quarter 2012, indicating a stable rental market. Sales activity has significantly dwindled since 2007 with no sales in 2012 (thus far), three sales in 2011, one sale in 2010, no sales in 2009 and two transactions in 2008. This has resulted in falling average price per unit/average price per square foot for apartment properties. Despite the lack of activity in the apartment market, rents have been relatively stable over the past year. In summary, the outlook for the residential rental market is stable over the short term, which is estimated by market participants to be between one and two years and stable to increasing beyond the current economic slowdown.

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RETAIL MARKET OVERVIEW Regional Market Conditions Generally speaking, the Central California retail market is contracting in the wake of the current economic recession, housing market declines and tight credit situation over the past several years. The average market vacancy rates have been generally increasing since 2006 and net absorption figures have been much lower in recent quarters compared to the height of the market in 2004-2006. Most areas are seeing lower rental rates, TI’s, greater landlord concessions and shorter lease terms. Vacancy rates have crept upward and absorption has slowed, as the region as a whole is considered to be operating under unhealthy market conditions. Core urban areas like Fresno that have traditionally reported vacancy rates at or below 10%, have seen vacancy rates climb above this rate over the past couple of years. The retail market continued to stabilize as vacancy and lease rate trends remained relatively flat throughout most of 2010, 2011 and the beginning of 2012. According to a market survey published by CB Richard Ellis, as of the Second Quarter 2012 (most recent data available), the retail market vacancy rate in Fresno area was 11.6%, which is unchanged since Fourth Quarter 2011, however slightly higher than the vacancy rate reported a year ago (11.0%). The CB Richard Ellis Second Quarter 2012 Market View Survey stated, “Vacancy rates and average asking lease rates remained stable enough that landlord incentives in the way of free rent and tenant improvement dollars, although still available, are being offered at reduced levels from a year ago. This could very well be a sign that the market is finding balance and heading toward positive growth. As optimism increases, the market should continue to stabilize and bring a new level of activity for tenants and investors.” The CB Richard Ellis Retail Market Overview reports 513,500 square feet of retail space is currently under construction in the Fresno MSA. “Construction activity increased for the Fresno retail market as two projects are currently under construction and another is proposed for the second half of the year. Clovis Crossing, located at the northeast corner of Hendon and Clovis Avenues, is expected to bring 491,000 square feet of retail shopping to the Clovis submarket. This project began in March 2012 and is estimated to be complete by the end of the year.” Anchor tenants expected for this shopping center include, Wal-Mart Supercenter (212,000 sf), Dick’s Sporting Goods (50,000 sf), Famous Footwear and Home Goods. Stated in the CB Richard Ellis Second Quarter 2012 Retail Market Overview, “DSW Shoes and Carter’s remain under construction in the Northeast submarket and are anticipated to be complete this winter. Campus Pointe, a 240,000 square foot proposed shopping center, also located in the Clovis submarket, is expected to break ground in the second half of 2012.” Campus Pointe is expected to add 753,500 square feet of retail space. According to a market survey published by CB Richard Ellis, as of the Second Quarter 2012, the average asking lease rate in the Fresno area remained steady (from the first half of 2010) at $1.19 per

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square foot, NNN. The overall asking lease rate in the subject’s Southwest submarket is approximately $0.95 per square foot, NNN as of Second Quarter 2012. This rate is lower than the average asking lease rate for the entire Fresno region, which suggests the subject’s location is inferior to other Fresno submarkets. Based on our conversations with market participants in the region, retail rents in the overall Central Valley have dropped anywhere from 20% to 30% since their peak in 2009; with variation attributable to the location and/or quality of the space. Further, since the peak in the retail market in 2006, sales prices for retail properties have dropped as much as 50% in some areas. Lease rates are projected to be flat over the next 12 months for most product types and locations. We also expect to still see landlord concessions (albeit less aggressive) and a slow absorption period over the next 12 months. Overall, fluctuations in vacancy and absorption are expected in the short term due to the continuing declines in the real estate market and wider macroeconomic uncertainty. The recent crisis in the credit markets has reduced the financing available to owner-users and investors seeking to purchase buildings/properties. Currently, the supply of commercial space exceeds demand, and supply will likely increase as the number of commercial property foreclosures accelerates into 2012. The Central Valley retail market has seen small signs of improvement and overall vacancy has remained within the 11% to 12% range since 2010, which shows signs of a possible, yet slow, economic recovery for the market. The Fresno retail market is expected to see moderate growth and slight positive momentum into the second half of 2012 and into 2013. Survey of Market Participants In order to accurately analyze retail market conditions, it is important to obtain the opinions of market participants, especially parties that are executing lease and sale agreements. Next, we have exhibited the results of a survey of various market participants from the Central Valley, including primarily real estate brokers. The results of the survey provide us with a closer look at the current market conditions for retail properties in the region. 

A Fresno area broker, representing Grubb and Ellis, indicated he expects little activity over the next year, with stabilization in the retail market coming no earlier than the end of 2012.



A broker with Brekke Real Estate Inc. indicated there is a very large amount of commercial space available and only a few potential tenants. This oversupply issue has prompted lease offers at 50-60% below the asking rental rates. The broker thinks vacant and partially improved commercial land should be held until market conditions improve, which is expected to take three to five years.

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Retail Submarket Analysis In order to analyze the subject’s submarket, we have utilized market surveys published by CB Richard Ellis. Additionally, we have utilized CoStar Property, a commercial real estate information service, in order to specifically analyze retail properties in proximity to the subject property. According to market surveys prepared by CB Richard Ellis, the subject’s Southeast submarket contains 2,666,942 square feet of net rentable area. The overall retail vacancy rate in the Southeast submarket is approximately 11.4% as of Second Quarter 2012. This rate is slightly lower than the average vacancy rate for the entire Fresno region (11.6%). Overall, the general amount of vacancy indicates that supply slightly exceeds demand. In addition to examining the market surveys published by CB Richard Ellis, we searched CoStar Property for existing retail properties within the subjects 93721 zip code. This search revealed a total of 245 properties containing a total rentable area of 4,160,109 square feet, of which 338,751 square feet is vacant. The indicated vacancy rate is 8.1%. This rate is lower than the vacancy rate reported for the subject’s submarket in the Second Quarter 2012 CB Richard Ellis Retail Market survey. The difference is primarily attributable to the fact that the CoStar survey focused on properties located in the subject’s immediate area, while the CB Richard Ellis Survey includes all retail properties containing greater than 20,000 square feet within the entire Southeast submarket. The chart below details the average vacancy rate, absorption and deliveries of retail properties within the 93721 zip code since Fourth Quarter 2009.

Source: CoStar Property

As illustrated by the chart on the preceding page, vacancy rates for the retail properties proximate to the subject have fluctuated and generally increased since Fourth Quarter 2009; however, over the

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past three consecutive quarters vacancy has been on a downward trend, with a slight increase seen in Third Quarter 2012. Over the last three years, vacancy rates for similar nearby retail properties have been consistently between 6.5% and 10%. Net absorption for 2011 was negative; however increases in absorption were seen in First Quarter 2012 and Second Quarter 2012, as vacancy rates were decreasing. Given the high percentage of commercial build-out in the area and current market conditions, there have not been any additional deliveries of space in the last three years. Future demand for retail space is expected to be limited in the near-term as well. Consumer spending has declined substantially with the ongoing credit crisis and increasing unemployment figures, which has led to decreased sales for retailers. Combined with the volatility in the stock market and the contraction in the residential sector over the past few years, consumer confidence at the local level has been near an all-time low. The limited population growth, increasing unemployment figures and overall trend towards saving rather than spending bear watching, as these factors play an integral role in the future demand for retail space. However, based on the recent trend/shift of professionals that have relocated to the downtown area of Fresno, many mixed-use projects (with ground floor retail) have thrived in the area as a result of increasing commercial demand from tenants. Two recent urban living projects that have benefitted include Iron Bird Lofts (which consists of 11,550 square feet of commercial space demised into 23 suites – currently 20 are occupied) and the Vagabond and H Street Lofts (which consists of 7,520 square feet demised into seven suites – all of which are currently occupied). While the market for retail properties has been contracting over the last two to three years, activity appears to have stabilized/bottomed out and have begun to improve slightly. However, due to declines in rental rates, it is highly unlikely that new construction on vacant sites is financially feasible at this time, which is substantiated by the fact that very few projects are proposed in the current market (with the exception of possibly the Clovis submarket). However, with a successful retail business model, owner user and build-to-suit projects may be feasible. Conclusion Overall, retail market conditions for the subject’s immediate area and regionally are not considered strong enough to warrant significant new construction. The existing inventory of retail space, both in this area and in the overall Central Valley, may necessitate a development hold on vacant sites for the next one to three years, as the current supply of retail space is absorbed and rental rates and sale prices stabilize and begin to rebound. However, there are some positive signs, such as the recent decrease in vacancy, increased absorption, stabilization of rental rates, as well as increased market activity in the second half of 2012 that could indicate the early stages of a recovery. However, limited new construction has begun/been proposed in the current market, which may increase the levels of inventory of this property type. Stabilization of property values and rental rates is not expected until the end of 2012, at the earliest.

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PROPERTY IDENTIFICATION AND LEGAL DATA

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Location The subject property is situated along the west line of Broadway Plaza, north of Broadway Street, east of H Street, within the City of Fresno, California. Street Address 1241 Broadway Plaza Fresno, California 93721 Assessor’s Parcel Number(s) The subject property is identified by Fresno County Assessor’s parcel numbers 466-214-01 & 466206-54T. Owner of Record Title to the subject property is presently vested with Hotel Frezno, LLC (APN: 466-214-01) and the Redevelopment Agency of Fresno (APN: 466-206-54T). Legal Description A legal description of the subject property is included in the grant deed, a copy of which is included in the Addenda to this report. Property Taxes The property tax system in California was amended in 1978 by Article XIII to the State Constitution, commonly referred to as Proposition 13. It provides for a limitation on property taxes and for a procedure to establish the current taxable value of real property by reference to a base year value, which is then modified annually to reflect inflation (if any). Annual increases cannot exceed 2% per year. The base year was set at 1975-76 or any year thereafter in which the property is substantially improved or changes ownership. When either of these two conditions occurs, the property is to be reappraised at market value, which becomes the new base year assessed value. Proposition 13 also limits the maximum tax rate to 1% of the value of the property, exclusive of bonds and direct charges. Bonded indebtedness approved prior to 1978, and any bonds subsequently approved by a two-thirds vote of the district in which the property is located, can be added to the 1% tax rate.

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Tax information for the subject property is tabulated as follows for the current tax year: APN: Assessed Value Land Improvements Personal Property Total Assessed Value:

466-214-01 $ $ $

322,951 758,554 -

$

1,081,505

Tax Rate (Area 005-005): Countywide Fresno Pen Override Fresno USD 99C Fresno USD 04A Fresno USD 07REF Fresno USD 01D Fresno USD 01E Fresno USD 02A Fresno USD 04B Fresno USD 01F Fresno USD 98B Fresno USD 98A Fresno USD 10REF Fresno USD 10, 11A State Center GO BD State Center 04 GO Bond State College 2002 2007A State College 02 S 09A State College 02 S 09B Total Tax Rate

1.000000% 0.032438% 0.017092% 0.004848% 0.004118% 0.008278% 0.013414% 0.030522% 0.022326% 0.012344% 0.012878% 0.015618% 0.003640% 0.043722% 0.001740% 0.000002% 0.004176% 0.000430% 0.000722% 1.228308%

Taxes on Assessed Value

$

13,284.21

Direct Charges: Dowtown Fres Pbid Fr Citation/Penalty Met Flood Assessment Fresno Mosquito & Vector Fr Structure Demolition Subtotal Direct Charges

$ $ $ $ $ $

1,744.78 1,409.74 161.48 2.08 479.06 3,797.14

Total Property Taxes

$ 17,081.35

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According to the Fresno County Treasurer-Tax Collector’s Office, the appraised property is subject to a tax rate of 1.228308% on total assessed value. The property is also encumbered by five direct charges, listed in the preceding table. These represent annual charges that cannot be paid off. The subject does not have a special assessment obligation relating to Mello-Roos or Assessment District bonds. It is noted APN: 466-206-54T is currently owned by the Redevelopment Agency of Fresno and is not subject to taxes. It is assumed this parcel will be acquired by Hotel Fresno’s current owner and will be subject to a similar tax rate as APN: 466-214-01 (as shown in the table on the previous page – 1.228308%). Public records indicate that the owner is current on all property taxes. Conditions of Title A preliminary title report prepared by Fidelity National Title Company, dated March 12, 2008, was provided for use in this appraisal and is included in the Addenda to the report. While the appraiser has reviewed the conditions of title and has determined no adverse impact on value, it is noted the title insurance report is dated. The appraiser assumes no negative title restrictions have been recorded since the date of the preliminary title report. The appraiser accepts no responsibility for matters pertaining to title. Zoning Source:

City of Fresno Planning Department

Zoning:

C-4: Central Trading

Purpose:

According to representatives with the City of Fresno Planning Department, the C-4 – Central Trading District is intended to serve as a central trading district area for an urbanized area. The facilities provided for here are those that cannot and should not be dispersed into the smaller shopping area. Permitted uses include typical commercial uses such as retail (drugstores, supermarkets, florist shops, clothing stores, etc.), office (professional, medical, and business), gymnasiums, laboratories, banks, restaurants, hotels, motels, the conversion to, or the rehabilitation of, a single family dwelling and multiple dwellings, and many other commercial uses. In addition, uses such as mixed use projects, night clubs, mortuaries, automotive centers, public parking structures and lots, motion picture theaters and other commercial uses are permitted subject to a conditional use permit. The subject’s proposed renovation/conversion requires a conditional use permit. Based on conversations with Ms. Sophia Pagoulatos, the supervising planner with the City of Fresno Planning Department, an application for a conditional use permit is currently in progress. Further, the building was constructed prior to 1954; therefore, the Fresno Municipal Code exempts its parking requirements and on-site parking is not required.

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It is noted, the subject is located on Fresno’s Local Register of Historic Places and the National Register of Historic Places. According to Ms. Milford W. Donalson, the State of California Historic Preservation Officer, the proposed renovation will not adversely affect the historic property. Conclusion:

It is assumed the completed subject improvements will represent a legal conforming use. The proposed density of the subject is 65.3 dwelling units per acre.

Flood Zone Source:

Digital Media Services (www.floodmaps.com)

Flood Zone:

Zone X500 – Areas of 500-year flood and areas of 100-year flood with average depths of less than one foot or with drainage areas less than one square mile, as well as areas protected by levees from 100-year flooding. An area inundated by 0.2% annual chance flooding.

Map Panel:

060048-2110H

Panel Date:

February 18, 2009

Flood Insurance:

Not required

Earthquake Zone According to the Seismic Safety Commission, the subject site is located within Zone 3, which is considered to be the lowest risk zone in California. There are only two zones in California: Zone 4, which is assigned to areas near major faults; and Zone 3, which is assigned to all other areas of more moderate seismic activity. In addition, the subject is not located in a Fault-Rupture Hazard Zone (formerly referred to as an Alquist-Priolo Special Study Zone), as defined by Special Publication 42 (revised January 1994) of the California Department of Conservation, Division of Mines and Geology. Easements An inspection of the subject property revealed no apparent adverse easements, encroachments or other conditions that currently impact the subject property. It is assumed the subject contains easements for roadways, public utilities, and water and sewer pipelines, which are typical for the area and are not considered to adversely affect the value or marketability of the subject property. The appraiser is not a surveyor nor qualified to determine the exact location of any easements. It is assumed any easements do not have an impact on the opinion(s) of value set forth in this report. If, at some future date, any easements are determined to have a detrimental impact on value, the appraiser reserves the right to amend the opinion(s) of value contained herein.

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SITE DESCRIPTION Tuolumne Street

Broadway Plaza APN: 466-206-54T

H Street

Subject Property ~ Hotel Fresno Broadway Street

Fresno Street

Source : Google Maps

Assessor’s Parcel Number(s)

466-214-01 & 466-206-54T

Land Area: APN: 466-214-01 APN: 466-206-54T Total:

22,500± square feet (0.52± acres) 30,208± square feet (0.69± acres) 52,708± square feet (1.21± acres)

Shape:

Rectangular

Topography:

Generally level and at street grade

Drainage:

It appears the site is paved in such as way so as to provide adequate drainage.

Frontage/Visibility:

The subject property has frontage and visibility along the west line of Broadway Plaza, the east line of H Street and the north line of Broadway Street.

Access:

The site is accessible via curb cuts along the west line of Broadway Plaza, the east line of H Street and the north line of Broadway Street.

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Utilities:

All public utilities including electricity, natural gas, water, sewer and telephone service are readily accessible to the subject site along the property's street frontage. Utilities are served by the following providers: PG&E – gas PG&E – electricity City of Fresno – water and sewer

Soil:

Based on the existence of improvements on the subject site and adjacent parcels, it appears the subject possesses adequate load-bearing capacity for development.

Environmental Issues:

A Phase I Environmental Site Assessment report was provided for this analysis, an excerpt of which is included in the Addenda to this report. The report concluded no evidence of recognized environmental conditions in connection with the subject. The report concluded no additional investigation appears to be warranted at this time.

Off-site Improvements:

Off-site improvements include asphalt paved streets, curbs, gutters, sidewalks and street lights.

Adjacent Uses: Northeast Northwest Southeast Southwest

Fulton Mall/parking lot IRS Building/office development Parking lot/vacant land Parking lot/vacant land

Functional Adequacy:

Overall, the subject site is functional in terms of its size, topography, shape and overall location within the Downtown Fresno market area. There appear to be no unusual or restrictive physical limitations of the site.

Conclusion:

The subject site is considered physically suitable for development.

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SITE PLAN

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PROPOSED IMPROVEMENT DESCRIPTION The subject property represents a proposed redevelopment of a former hotel, known as Hotel Fresno, which is located in Downtown Fresno. Specifically, the subject property is situated along the west line of Broadway Plaza, north of Broadway Street, east of H Street, within the City of Fresno, Fresno County, California. The subject property is situated on a single assessor’s parcel number identified as 466-214-01, which contains approximately 22,500 square feet of land area (0.52± acres). An additional parcel (APN: 466-206-54T), which contains 30,208 square feet of land area (0.69± acres), will be acquired by the property owner from the Redevelopment Agency in order to provide 79 uncovered parking spaces for the proposed redevelopment of the subject. Therefore, the total area of the subject site, upon acquisition of the additional parcel, is 52,708± square feet of land area (1.21± acres). The existing hotel was originally constructed in 1912 and occupied as the former Hotel Fresno until 1983. Reportedly, the interiors of the seven floors of the building have been substantially demolished with removal of fixtures, heating and cooling equipment, and a significant amount of non-structural building materials. The proposed improvements will represent a mixed use project with 79 apartment units and five ground floor commercial suites. This project will offer seven different floor plans that range in size from 736 to 2,091 square feet. The five commercial suites will total 19,508± usable square feet. Project amenities will include uncovered parking (79 spaces), tenant lounge and an onsite laundry room (located within the basement of the building). The proposed unit mix for the project is outlined in the table below:

Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA Penthouse + Loft Total Residential Units:

Living No. of Units Area Range (SF) 32 736 - 867 1 795 24 889 - 1,097 2 976 - 993 9 1,105 - 1,130 4 1,221 - 1,390 7 1,751 - 2,091 79 Total Living Area:

Average Living Area (SF) 816 795 1,023 985 1,113 1,291 1,862 81,382

Unit 102 103 104 105 106 Total Commercial Units:

No. of Units 1 1 1 1 1 5 Total Rentable Area:

Rentable Area (SF) 7,218 1,468 1,827 1,505 7,490 19,508

Common Area (SF):

17,055

Total Gross Building Area

117,945

*The building also includes a partial basement which contains 8,300 square feet of area.

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The subject property is not gated and is accessible via Broadway Plaza to the northeast, Broadway Street to the south and H Street to the southwest. Uncovered on-site parking will be made available for residential tenants (on parcel 466-206-54T, located to the northwest of Hotel Fresno), which will be acquired by the property owner. Additionally, there will be street parking available for guests, as well as the commercial tenants and patrons. A description of the existing improvements is provided below based on our inspection of the property on October 8, 2012, as well as descriptions of the proposed renovation based on conversations with the developer (Mr. Mehran Baghgegian) and the provided developer’s cost budget. Structural Description Foundation:

Reinforced concrete slab

Structure:

The existing building contains of brick and masonry construction with historic decorative stone work.

Exterior Walls:

The proposed renovation will consist of concrete and steel exterior walls with decorative moldings and wrought iron accents.

Roof:

Flat concrete build-up roof

Doors:

Wood interior doors with aluminum cladding and stainless steel hardware and sliding glass doors to balconies with aluminum frames

Windows:

Dual pane clear glass windows and double hung windows

Building Area:

The apartment units will encompass a total living building area of 81,382± square feet. The commercial suites will contain a total usable building area of 19,508± square feet and there will be a combined common area of 17,055± square feet. The gross area of the building is 117,945± square feet and there is 8,000± square feet of area within the basement of the building.

Number of Stories:

Seven

HVAC:

Central HVAC

Utilities:

The units will be individually metered for electricity and gas.

Other:

The building will have an elevator (which will also access the laundry room in the basement) and stairwells for upper floors access.

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Interior - Apartment Units (Proposed) Overview:

The proposed improvements will include 79 apartment units located on the second through seventh floors. There will be 13 units located on each floor (second through the sixth floors). Seven penthouse units will be located on the seventh floor. A lobby entrance to the building from Broadway Plaza will be located on the first floor. Tenant access will also be provided from the back of the building (west side). Common areas will consist of a tenant lounge, laundry facility (located within the basement of the building), an elevator, stairwells, a leasing office (located on the first or second floor), hallways and common area space for tenants.

Floors:

Epoxy sealed concrete

Walls:

Taped, textured and painted drywall

Ceilings:

Finished

Lighting:

Recessed lighting in the kitchen and bathrooms and track lighting in the living areas

Kitchens:

Each unit will contain a full kitchen with stainless steel appliances (refrigerator, electric oven/range, dishwasher and garbage disposal). The countertops will be stone and the flooring will be epoxy sealed concrete.

Plumbing/Bathrooms:

All of the units have one or two bathrooms. Each bathroom will contain epoxy sealed concrete flooring, stone countertops and a combination tile shower. Penthouse units will be supplied with washer/dryer hook-ups. Additionally, the building will be fire-sprinklered.

Other:

Six units (located on the second floor) will include a balcony.

Amenities Unit/Project Amenities:

As an apartment complex, the subject property will include a minor amount of personal property consisting of furniture, fixtures and equipment (F.F. & E.). Specifically, each residential unit will be supplied with a refrigerator, oven/range, dishwasher and garbage disposal. Project amenities include uncovered on-site parking (one space per residential unit), a tenant lounge and an on-site laundry facility.

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Interior – Commercial Portion Overview:

The commercial space will total 19,508± usable square feet and will be demised into five suites upon completion. Interior build-out of the commercial suites will include epoxy sealed concrete floors, taped, textured and painted drywall and fluorescent and track lighting.

Common Areas Parking:

Upon acquiring the parcel located to the northwest of APN: 466-214-01, there will be a total of 79 uncovered parking spaces on-site for residential tenants. The parking ratio equates to approximately 1 parking space per residential unit. This is compliant with the zoning requirements. Additionally, there is street parking available for guests and the commercial tenants and patrons.

Fencing/Gates:

The subject site will not be gated.

Landscaping:

The project will feature average landscaping consisting of shrubs, lawn and walkways.

Floor Area Ratio:

2.24

Age/Condition Chronological Age:

100 years (built in 1912)

Effective Age:

New (upon completion)

Remaining Economic Life:

50± years (upon completion) It is noted our determination of the effective age and remaining economic life considers the subject property will be routinely maintained and there will be sufficient replacement reserves to replace short lived items in order for the property to sustain a remaining economic life of 50± years.

Condition:

Good to excellent (upon completion)

Quality:

Good

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SUBJECT PHOTOGRAPHS

Exterior view of the subject property from Broadway Plaza

Exterior view of the subject property (northeast side)

Exterior view of the subject property

Front entrance to the subject property from Broadway Plaza

Northwest side of the subject property

Rear exterior view of the subject property

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Rear exterior view of the subject property

Exterior view of the subject property (southwest side) from the parking lot

View of the subject property (south side)

Looking southeast along Broadway Plaza

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HIGHEST AND BEST USE ANALYSIS The term “highest and best use,” as used in this report, is defined as follows: The reasonably probable and legal use of vacant land or an improved property that 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, financial feasibility, and maximum productivity. Alternatively, the probable use of land or improved property – specific with respect to the user and timing of the use – that is adequately supported and results in the highest present value.5 Two analyses are typically required for highest and best use. The first analysis is highest and best use of the land as vacant. The second analysis is the highest and best use of the site as improved. (Definitions of these terms are provided in the Glossary of Terms in the Addenda to this report.) Highest and Best Use as though Vacant In accordance with the definition of highest and best use, it is appropriate to analyze the subject property as though vacant as it relates to legal permissibility, physical possibility, financial feasibility and maximum productivity. The subject is zoned C-4 – Central Trading District, which is intended to serve as a central trading district area for an urbanized area. Mixed-use project are permitted with conditional use permits, which according to Ms. Sophia Pagoulatos, the supervising planner with the City of Fresno Planning Department, an application for a conditional use permit is currently in progress. This use is compatible with surrounding land uses and is considered physically possible. In the subject’s downtown submarket, the apartment and commercial markets are expected to perform well as the downtown Fresno area undergoes a major renovation project and the economy begins to rebound. In consideration of the physical, legal and financial factors aforementioned, it is our opinion that the maximally productive use of the site is for a mixed-use (residential/commercial) project to be constructed after national and local economic market conditions rebound. As will be demonstrated later in this report, the conclusion of market value upon completion of renovation estimated herein exceeds the value derived via the cost approach, suggesting the proposed project is feasible. Further, in light of the fact the developer intends to acquire parcel 466-206-54T for use as available on-site parking for residents of the Hotel Fresno residential project, assemblage of the two parcels is considered maximally productive. Highest and Best Use as Improved As with the highest and best use as though vacant, the four tests of highest and best use must also be applied to the subject property considering the in-place improvements. Consideration must be given 5

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 93.

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to the continued as-is use of the subject property, as well as alternative uses for the property. The subject property is an historic hotel in the downtown district of the city of Fresno, which was closed in 1983 and has remained uninhabitable for several decades. Based on the valuation analysis conducted herein, the maximally productive use of the subject property is completion of the proposed renovation and conversion of the subject property to multifamily residential use, as the market value upon completion of renovation exceeds the market value of the property, as-is, plus the costs of renovation. Consequently, though the property, in its as-is condition, is not functional for economic uses, the subject property is not suited for demolition. The highest and best use is for renovation and conversion to a mixed-use multifamily apartment complex with a ground floor commercial component. Probably Buyer The probable buyer of the subject property as improved would most likely be an investor given the size and the property type, which is income producing. Additionally, it is noted the potential pool of buyers is somewhat limited given the mixed-use nature and historic status of the building.

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APPROACHES TO VALUE The valuation process is a systematic procedure used in the valuation of real property.6 This process involves the investigation, organization and analysis of pertinent market data and other related factors that affect the market value of real estate. The market data is analyzed in terms of any one or all of the three traditional approaches to estimating real estate value. These are the cost, sales comparison, and income capitalization approaches. Each approach to value is briefly discussed and defined as follows: Cost Approach The cost approach is based on the premise that no prudent buyer would pay more for a particular property than the cost to acquire a similar site and construct improvements of equivalent desirability and utility. Thus, this approach to value relates directly to the economic principle of substitution, as well as supply and demand. The cost approach is most applicable when valuing properties where the improvements are new or suffer only a minor amount of accrued depreciation, and is especially persuasive when the site value is well supported. The cost approach is also highly relevant when valuing special-purpose or specialty properties and other properties that are not frequently exchanged in the market. The definition of the cost approach is offered as follows: A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the estimated land value. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised.7 Sales Comparison Approach The sales comparison approach is based on the premise that the value of a property is directly related to the prices being generated for comparable, competitive properties in the marketplace. Similar to the cost approach, the economic principles of substitution, as well as supply and demand are basic to the sales comparison approach. This approach has broad applicability and is particularly persuasive when there has been an adequate volume of recent, reliable transactions of similar properties that indicate value patterns or trends in the market. When sufficient data are available, this approach is the most direct and systematic approach to value estimation. Typically, the sales comparison approach is most pertinent when valuing land, single-family homes and small, owner-occupied commercial and office properties. 6 7

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 205. The Dictionary of Real Estate Appraisal, 47.

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The definition of the sales comparison approach is offered as follows: The process of deriving a value indication for the subject property by comparing market information for similar properties with the property being appraised, identifying appropriate units of comparison, and making qualitative comparisons with or quantitative adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison.8 Income Capitalization Approach The income capitalization approach is based on the premise that income-producing real estate is typically purchased as an investment. From an investor's point of view, the potential earning power of a property is the critical element affecting value. The concepts of anticipation and change, as they relate to supply and demand issues and substitution, are fundamental to this valuation approach. These concepts are important because the value of income-producing real estate is created by the expectation of benefits (income) to be derived in the future, which is subject to changes in market conditions. Value may be defined as the present worth of the rights to these future benefits. The validity of the income capitalization approach hinges upon the accuracy of which the income expectancy of a property can be measured. Within the income capitalization approach there are two basic techniques that can be utilized to estimate market value. These techniques of valuation are direct capitalization and yield capitalization. Direct Capitalization: A method used to convert an estimate of a single year’s income expectancy into an indication of value in one direct step, either by dividing the net income estimate by an appropriate capitalization rate or by multiplying the income estimate by an appropriate factor. Direct capitalization employs capitalization rates and multipliers extracted or developed from market data. Only a single year’s income is used. Yield and value changes are implied but not identified.9 Yield Capitalization: A method used to convert future benefits into present value by 1) discounting each future benefit at an appropriate yield rate, or 2) developing an overall rate that explicitly reflects the investment’s income pattern, holding period, value change, and yield rate.10 The definition of the income capitalization approach is offered as follows: A set of procedures through which an appraiser derives a value indication for an incomeproducing property by converting its anticipated benefits (cash flows and reversion) into property value. This conversion can be accomplished in two ways. One year’s income expectancy can be capitalized at a market-derived capitalization rate or at a capitalization rate that reflects a specified income pattern, return on investment, and change in the value of the investment. Alternatively, the annual cash flows for the holding period and the reversion can be discounted at a specified yield rate.11 8

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 175. The Dictionary of Real Estate Appraisal, 58. 10 The Dictionary of Real Estate Appraisal, 211. 11 The Dictionary of Real Estate Appraisal, 99. 9

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APPRAISAL METHODOLOGY All three traditional approaches to value (cost, sales comparison and income capitalization) will be used in the valuation of the subject property. The conclusions reached through each approach will then be reconciled into a final opinion of hypothetical market value, assuming completion of conversation/renovation and stabilized occupancy. Finally, deductions for renovation/conversion costs and lease-up costs will be applied in order to estimate a final opinion of as-is market value for the subject property. The data sources used to research comparables for this specific appraisal assignment included our internal SJZ database, Costar, Loopnet and Realquest. Our search criteria for comparable sales of apartment properties in order of importance was; property type (apartments), location (within the Central Valley region), size (between 30 and 500 units) and effective age/condition (preferably newer construction in good condition). Given the limited amount of recent sales of comparable apartment properties in the Central Valley, these search parameters resulted in very few comparable sales. Additionally, all of the apartment properties in this search, which are considered somewhat comparable to the subject, are significantly older. Thus, we conducted a secondary search which included the Sacramento MSA to balance out the data set with recently constructed apartment projects that have recently sold. This region is considered the closest to the Central Valley in terms of property values, demographics, tenant profile, as well as buyer profiles. It is noted that the appraiser was unable to identify any recent mid-rise style mixed-use properties (that represented renovations and/or conversions of historic buildings) that have recently sold in either the Central Valley or Sacramento MSA. The subject property represents a unique project within its primary market area. While similar projects do exist in the San Francisco Bay Area, pricing in this market is far superior to the subject’s Central Valley location and would require substantial adjustments, weakening the reliability of these comparables. Therefore, we did not expand our search to include mixed-use high rise properties within the Bay Area. As part of the income capitalization approach to value, the appraiser conducted a survey of several similar apartment projects located in the subject’s neighborhood in order to determine market rent for the subject. The property managers at each of the selected apartment projects were interviewed and the information provided is considered accurate as of the date of the survey (10/1/2012 through 10/5/2012). Furthermore, the reader should note that a rent survey, similar to an appraisal, is a snap shot in time and rents and rent concessions can fluctuate at comparable apartment properties on a weekly or even a daily basis, as market conditions change.

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COST APPROACH The cost approach is based upon the principle that a prudent buyer would not pay more for a particular property than the cost of producing a substitute property with equal desirability and utility. The estimate of value by the cost approach is derived by adding the value of the site (as if vacant) to the depreciated cost of the improvements. This approach can be applied to any given structure based on either a replacement cost estimate, or a reproduction cost estimate. We will use a replacement cost estimate in our analysis of the subject property. This term is defined as follows: Replacement Cost:

The estimated cost to construct, at current prices as of the effective appraisal date, a substitute for the building being appraised, using modern materials and current standards, design, and layout.12

Further, we will use the comparative-unit method to derive replacement costs for the subject’s improvements. The definition of this method is as follows: Comparative-Unit:

A method used to derive a cost estimate in terms of dollars per unit of area or volume based on known costs of similar structures that are adjusted for time and physical differences; usually applied to total building area.13

In developing the cost approach, we will utilize information contained in the Marshall Valuation Service, a nationally recognized cost-estimating guide published by the Marshall & Swift Corporation. While the construction/renovation costs were provided for our use in this appraisal, the subject represents an existing hotel that is proposed to be renovated/converted to a mixed-use project. Therefore, the costs provided by the developer are not similar to the estimates provided by the Marshall Valuation Service, which account for the replacement cost of the proposed conversion, as if the site was vacant. The renovation costs provided will be analyzed in the As-Is Valuation section presented at the end of this report. The significant factors to address when considering the comparative-unit method of the cost approach to valuation are:    

Land Valuation Direct and Indirect Costs Accrued Depreciation Developer’s Incentive

These four components of the cost approach will be presented on the following pages along with the final valuation of the subject property via the cost approach, which will be presented at the end of this section. 12 13

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 168. The Dictionary of Real Estate Appraisal, 38.

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Land Valuation The first step in the cost approach is to estimate the market value of the subject’s underlying land. In doing so, we researched recent sales and listings of vacant sites in the subject’s market area and surrounding areas. After gathering the most comparable sales available, the sales comparison approach is employed to develop an opinion of market value for the subject. Our search criteria for comparable sales in order of importance was; zoning (C-4/ Commercial/Mixed-Use), location (within Downtown Fresno) and size (less than three acres). In order to assemble the comparable sales, we searched public records and other data sources for leads, then confirmed the raw data obtained with parties directly related to the transactions (primarily brokers, buyers and sellers). When analyzing the comparable sales data, consideration is given to factors such as property rights conveyed, financing terms, conditions of sale and market conditions. Differences in physical characteristics, such as location, visibility/accessibility, land area, density and site utility (shape, topography, etc.), are also considered in the analysis. We will begin by presenting a summary tabulation and location map, followed by detailed sales sheets, a discussion of adjustments, an adjustment grid and our conclusion of land value for the subject property. These sales and listings are the most recent transactions considered to be reasonably similar to the subject property.

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LAND SALES SUMMARY Sale Date

Sale Price

Land Area Acre/SF

Price per SF

Zoning

Oct-12 (Listing)

$135,000

0.25 10,890

$12.40

C-4

2 1743 L Street Fresno APN(s): 466-103-09, -10 & -29; 466-132-02, -03 & -06

Jan-12

$525,000

1.25 54,663

$9.60

C-4

3 1612 Fulton Street Fresno APN: 466-144-07

Jan-11

$532,500

0.86 37,462

$14.21

C-4

4 1430 P Street Fresno APN: 466-054-04

Jan-10

$375,000

0.86 37,500

$10.00

C-4

No.

Property Identification

1 1133 G Street Fresno APN: 467-062-04U

LAND SALES MAP

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LAND SALE 1 (LISTING) Property Identification Commercial Land

1133 G Street Fresno, California 93706 Fresno County Map Grid: 124-E6 APN: 467-062-04U

Sale Data Grantor PG&E Grantee Listing Sale Date Listing Deed Book Page Listing Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $135,000 PV of Bonds $0 Land Data Land Area (SF) 10,890 Land Area (Acres) 0.25 Zoning C-4 – Central Trading Shape Nearly rectangular Corner Orientation No Street Frontage Along G Street Topography Generally level Off-Site Improvements All to site On-Site Improvements PG&E service building Indicators Sale Price per SF $12.40 Sale Price per Acre $540,000 Remarks This is a current listing of a commercial site zoned C-4. The site is currently improved with a 384 square foot PG&E service building; however, this building is considered to offer no contributory value to the site overall.

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LAND SALE 2 Property Identification Commercial Land

1743 L Street Fresno, California 93721 Fresno County Map Grid: N/Av APN(s): 466-103-09, -10 & -29; 466132-02, -03 & -06

Sale Data Grantor Housing Authority of the City of Fresno Grantee Granville Homes, Inc. Sale Date 01/13/2012 Deed Book Page 5154 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $525,000 PV of Bonds $0 Land Data Land Area (SF) 54,663 Land Area (Acres) 1.25 Zoning C-4 – Central Trading Shape Nearly rectangular (as individual parcels) Corner Orientation Yes Street Frontage Along L Street and East Divisadero Street Topography Generally level Off-Site Improvements All to site On-Site Improvements Single family residence Indicators Sale Price per SF $9.60 Sale Price per Acre $418,360 Remarks This property was previously developed with a single family residence, which is not considered to contribute any value to the property. There were no brokers involved in the sale and was a direct deal between buyer/seller. The buyer plans to construct a multi-family development (approximately 50-70 units). It is noted, only the parcel map associated with APN: 466-132-02, -03 & -06 is displayed above.

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LAND SALE 3 Property Identification Commercial Land

1612 Fulton Street Fresno, California 93721 Fresno County Map Grid: 124-E5 APN: 466-144-07

Sale Data Grantor Fresno City and County Historical Society Grantee Granville Homes, Inc. Sale Date 01/25/2011 Deed Book Page 33628 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $532,500 PV of Bonds $0 Land Data Land Area (SF) 37,462 Land Area (Acres) 0.86 Zoning C-4 – Central Trading Shape Nearly rectangular Corner Orientation Yes Street Frontage Along Fulton Street and San Joaquin Street Topography Generally level Off-Site Improvements All to site On-Site Improvements None Indicators Sale Price per SF $14.21 Sale Price per Acre $619,186 Remarks This property is located at the southeast corner of Fulton Street and San Joaquin Street in Downtown Fresno approximately two blocks east of the subject. This property is proposed for a mixed-use development by Granville Homes. Currently they are in the early schematic stages of this project but estimate that the project will include 35 residential units.

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LAND SALE 4 Property Identification Commercial Land

1430 P Street Fresno, California 93721 Fresno County Map Grid: 124-E5 APN: 466-054-04

Sale Data Grantor J C Young Family, LLC Grantee Jorge & Minerva Dominguez Sale Date 01/22/2010 Deed Book Page 25245 Property Rights Fee Simple Conditions of Sale Market Financing Terms Cash Equivalent Sale Price $375,000 PV of Bonds $0 Land Data Land Area (SF) 37,500 Land Area (Acres) 0.86 Zoning C-4 – Central Trading Shape Nearly rectangular Corner Orientation Yes Street Frontage Along P Street, Toulumne Street and North Effie Street Topography Generally level Off-Site Improvements All to site On-Site Improvements Car wash facility and a walk-up Taqueria Indicators Sale Price per SF $10.00 Sale Price per Acre $436,047 Remarks This property sold for land value only and the car wash facility or the small Taqueria isn’t considered to offer any contributory value to the site overall. The owner of the walk-up Taqueria purchased this site to demo the existing improvements and build a full-service sit down restaurant in approximately two years. The full service, hand car wash facility was closed prior to the sale and is currently vacant.

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Discussion of Adjustments In order to estimate the market value of the subject’s underlying land, the comparable transactions are adjusted for differences compared to the subject. If a comparable has an attribute that is considered superior to that of the subject, it is adjusted downward to negate the effect the item has on the price of the comparable. The opposite is true of categories that are considered inferior to the subject, and upward adjustments are applied. The unit of comparison use in this analysis is the price per square foot. The appraiser has considered the need to make adjustments for the following items. Property Rights Conveyed In transactions of real property, the rights being conveyed vary widely and have a significant impact on the sales price. As previously noted, the opinion of value in this report is based on a fee simple estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat; as well as non-detrimental easements, and conditions, covenants and restrictions (CC&Rs). The subject property and all the comparables represent fee simple estate transactions. Therefore, adjustments for this factor are not necessary. Financing Terms In analyzing the comparables, it is necessary to adjust for financing terms that differ from market terms. Typically, if the buyer retained third party financing (other than the seller) for the purpose of purchasing the property, a cash price is presumed and no adjustment is required. However, in instances where by the seller provides financing as a debt instrument, a premium may have been paid by the buyer for below market financing terms or a discount may have been demanded by the buyer if the financing terms were above market. The premium or discounted price must then be adjusted to a cash equivalent basis. All of the comparable sales were cash to the seller transactions and, therefore, do not require adjustments. Expenditures After Sale The subject site is appraised as if vacant. Sale 3 represents raw land, with no on-site improvements. Sales 1, 2 and 4 all contained improvements at the time of sale. Sale 1 is improved with a PG&E service building, Sale 2 with a residence and Sale 4 with a car wash facility. All of these improvements are considered to be at the end of their economic life, offering no contributory value. The structures are to be demolished prior to development of the site(s). Thus, an upward adjustment of 5% is applied to these comparable sales to reflect the additional cost to be incurred for demolition.

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Time - Market Conditions Market conditions generally change over time, but the date of this appraisal is for a specific point in time. Therefore, in an unstable economy, one that is undergoing changes in the value of the dollar, interest rates and economic growth or decline, extra attention needs to be paid to assess changing market conditions. Significant changes in price levels can occur in several areas of a municipality, while prices in other areas remain relatively stable. Although the adjustment for market conditions is often referred to as a time adjustment, time is not the cause of the adjustment. In evaluating market conditions, changes between the sale dates and the effective date of this appraisal may warrant adjustment; however, if market conditions have not changed, then no adjustment is required. Market conditions have continued to decline for commercial land in the Central Valley region as there is little demand for new construction. Therefore, the land sale that transferred in 2010 is adjusted downward 10% and the land sale that transferred in early 2011 is adjusted downward 5% to account for the contraction in market conditions since the sales dates due to macro-economic changes in the real estate market since the date of this sale. Location - Visibility/Accessibility The subject property is located in Downtown Fresno as are all of the comparables. The accessibility of land can have a direct impact on value. For example, if a property is landlocked, this is considered to be an inferior position compared to a property with open accessibility. However, if a property has good visibility or is in proximity to major linkages, this is considered a superior amenity in comparison to a property with limited visibility.

The subject property has excellent visibility along three roadways, two of which are considered primary thoroughfares/arterials. Sale 1 is an interior parcel with frontage and visibility only along one street (G Street). This comparable is considered inferior to the subject in terms of visibility/accessibility and is adjusted upward 15%. Sales 2 through 4 are located on a corner with visibility on at least two roads, however, only one of which is considered a neighborhood thoroughfare and are considered slightly inferior to the subject in terms of visibility/accessibility. Thus, only a minor upward adjustment of 5% was considered necessary for these comparable sales. No other adjustments are necessary. Zoning The subject property is zoned C-4 as are all of the comparables. Therefore, no adjustments are considered necessary for zoning or intended use.

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Plottage In general, due to economies of scale, the market exhibits an inverse relationship between size and price per unit (acre/sf/unit), such that larger parcels tend to sell for a lower price per unit than smaller parcels, all else being equal and vice versa. Most of the comparable sales are somewhat smaller in size than the subject (less than an acre – excluding Sale 2) and require varying degrees of adjustments. Sales 3 and 4 are both around 37,500 square feet and required a slightly larger downward adjustment of 10%. Sale 1 is significantly smaller than the subject and required a larger downward adjustment of 20% to equate it to the subject. No other adjustments are necessary for plottage. Other - Conditions of Sale Adverse conditions of sale can account for a significant discrepancy from the sales price actually paid compared to that of the market. This discrepancy in price is generally attributed to the motivations of the buyer and the seller. Certain conditions of sale are considered to be non-market and may include the following: a seller acting under duress, a lack of exposure to the open market, an inter-family or inter-business transaction for the sake of family or business interest, an unusual tax consideration, a premium paid for site assemblage, a sale at legal auction or an eminent domain proceeding. Sale 1 represents an active listing and must be adjusted downward, since a buyer would likely negotiate a price below the asking price. Historically, buyers were able to negotiate the asking price down slightly between 5% and 10% under normal market conditions. However, given the current instability of the market, buyers are able to negotiate prices down between 10% and 30% from the actual listing price. Thus, we have adjusted Sale 1downward by 20% for condition of sale. No other adjustments are deemed necessary for this category. Adjustment Grid The adjustments discussed on the preceding pages are shown in the table on the next page.

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LAND SALES ADJUSTMENT GRID Location of Project

8. Value Fully Improved

Date of Sale Sales Price Sq. Ft. Price per Sq. Ft.

Size of Subject Property

52,708

1241 Broadway Plaza, Fresno, California

Sq. Ft.

Comparable Sales

Comparable Sales

Comparable Sales

Comparable Sales

Comparable Sales

Address No. 1

Address No. 2

Address No. 3

Address No. 4

Address No. 5

1133 G Street Fresno, California

1743 L Street Fresno, California

1612 Fulton Street Fresno, California

1430 P Street Fresno, California

Oct-12 $135,000 10,890 $12.40

Jan-12 $525,000 54,663 $9.60

Jan-11 $532,500 37,462 $14.21

Jan-10 $375,000 37,500 $10.00

115%

105%

95% 105%

90% 105%

80% 105%

90% 105%

90% 105%

80% 77.3% 9.58

110.3% 10.58

89.8% 12.76

89.3% 8.93

$504,943

$557,651

$672,554

$470,682

Adjustments (%) Time Location Zoning Plottage Demolition Piling, Etc. Other (Conditions of Sale) Total Adjustment Factor Adjusted Sq. Ft. Price Indicated Value by Comparison

Conclusion of Land Value In this analysis, we analyzed three land sales and one listing for comparison to the subject property. The adjustment grid above illustrates the quantitative adjustments applied to the market data in order to equate with the subject property. Prior to adjusting for differences between the comparables and the subject property, the data set reflects an unadjusted range of $9.60 to $14.21 per square foot of land area. After applying the appropriate adjustments, the value range narrowed to $8.93 to $12.76 per square foot of land area. Sale 2 is considered to represent the best indicator of market value for the subject’s underlying land, as it is a recent transaction that is located in proximity to the subject. Further, Sale 2 received the least amount of net and gross adjustments. Additionally, Sale 3 is considered to be an outlier of the data set and represents the highest indicator of value for the subject’s underlying land. With greatest emphasis placed on Sale 2, with support from the remaining comparable sales, we have concluded $10.00 per square foot of land area. The concluded per square foot indicator is applied to the subject’s land area to arrive at a value of the underlying land. 52,708 square feet x $10.00 per square foot = $527,076 Rd. $530,000

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Direct and Indirect Costs – Marshall Valuation Service Later in this section, we will present a replacement cost approach valuation sheet for the subject property, developed by reference to the Marshall Valuation Service, a nationally recognized costestimating guide published by the Marshall & Swift Corporation. For the Marshall estimate, we will obtain and employ a per square foot cost indicator (Calculator Method) for an Average Class-C Retail Store and an Average Class-C Apartment. In light of the physical characteristics of the subject, these categories of improvements are deemed as being most similar to the subject. Before going further in this analysis, it is important to discuss what is included and what is not included in the cost indicator. These items, as stated verbatim in the Marshall Valuation Service booklet, are tabulated as follows: Included in the Costs 1. In the Calculator Section, the actual costs used are final costs to the owner and will include average architects and engineers fees. These, in turn, include plans, plan check and building permits, and survey to establish building lines and grades. 2. Normal interest on only the actual building funds during period of construction and processing fee for service charges is included. Typically, this will average half of the going rate over the time period plus the service fee. 3. All material and labor costs include all appropriate local, state and federal sales or GSE taxes, etc. 4. Normal site preparation including finish, grading and excavation for foundation and backfill for the structure only. 5. Utilities from structure to lot line figured for typical setback except where noted in some Unit-inPlace cost sections (mobile homes). 6. Contractor’s overhead and profit including job supervision, workmen’s compensation, fire and liability insurance, unemployment insurance, equipment, temporary facilities, security, etc., are included. Not Included in the Costs 1. Costs of buying or assembling land such as escrow fees, legal fees, property taxes, right of way costs, demolition, storm drains, or rough grading, are considered costs of doing business or land improvement costs. 2. Piling or hillside foundations are priced separately in the manual and are considered an improvement to the land. This also refers to soil compaction and vibration, terracing, etc. 3. Costs of land planning or preliminary concept and layout for large developments inclusive of entrepreneurial incentives or developer’s overhead and profit are not included, nor is interest or

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taxes on the land, feasibility studies, certificate of need, environmental impact reports, hazardous material testing, appraisal or consulting fees, etc. 4. Discounts or bonuses paid for financing are considered a cost of doing business, as are funds for operating start up, project bond issues, permanent financing, developmental overhead for fixture and equipment purchases, etc. 5. Yard improvements including septic systems, signs, landscaping, paving, walls, yard lighting, pool or other recreation facilities, etc. 6. Off-site costs including roads, utilities, park fees, jurisdictional hookup, tap-in, impact or entitlement fees and assessments, etc. 7. Furnishings and fixtures, usually not found in the general contract, that are peculiar to a definite tenant, such as seating or kitchen equipment, etc. 8. Marketing costs to create first occupancy including model or advertising expenses, leasing or broker’s commissions, temporary operation of property owners’ association, fill-up or membership sales costs and fees. The cost indicators applicable to the subject’s improvements are calculated as follows: MARSHALL BUILDING COST INDICATORS Average Class C Apartment (High-Rise) (Section 11, Page 18) Base Cost Fire Sprinklers Total Base Cost

$ $ $

Current Multiplier Local Multiplier Height per Story Perimeter Multiplier Total Cost

81.02 2.50 83.52 1.020 1.240 1.055 0.977

$

108.88

Average Class-C Retail (Section 13, Page 26) Base Cost Fire Sprinklers Total Base Cost

$ $ $

Current Multiplier Local Multiplier Height per Story Perimeter Multiplier Total Cost

74.18 3.00 77.18 1.000 1.240 1.000 0.797

$

76.28

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Several additional lump sum direct costs must also be considered. These costs include estimates for the built-in appliances, elevators, balconies, as well as site improvements (paving, landscaping, etc.). The built-in appliances, elevators and balcony costs are estimated by reference to the Marshall Valuation Guide. The table below shows the calculations:

Lump Sum Costs (Section 11, Pages 34 - 36) Built-In Appliances Elevator Balconies

(79 Units @ $2,275 per unit) 1 Elevator @ $75,125 (6 x 100sf x $26.00)

$ $ $

179,725 75,125 15,600

One additional lump sum cost factor must also be considered for site improvements, including site clearing, grading, paving, landscaping and lighting. Generally, site improvement costs range between $2.00 and $10.00 per square foot for a mid-sized site with a regular shape, level topography and typical landscaping quantity and quality. It is noted that the subject property lacks project amenities such as a pool, sports court and extensive landscaping, which would indicate that the subject is on the lower end of the range. Thus, given the subject’s location, small parcel size, lack of project amenities and generally level topography of the subject site, a site cost estimate of $3.00 per square foot appears reasonable. This is considered appropriate given the downward trend in construction costs resulting from contractors becoming more aggressive in bidding projects. These costs are generally in line with market and are considered reasonable. In addition to the above costs, additional indirect cost items must be incorporated. These items include the appraisal fee ($9,500), interim property taxes (assuming a 12-month construction period), lease-up costs (based on the average monthly rental income over a 12-month lease-up period), loan fees (1% of directs), title and escrow on land closing (0.5% of directs), legal/organizational ($30,000) and a contingency factor for cost and/or construction time overruns (3% of directs). Cost estimates for each of these items are estimated on the cost approach summary sheet at the end of this section. Accrued Depreciation Accrued depreciation represents a loss in value from the replacement cost estimate of improvements from any cause, as of the date of the appraisal. A loss to structures or other improvements emanates from one or more of three sources. The sources are physical deterioration, functional obsolescence or external obsolescence.

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The five basic elements of accrued depreciation in structures are:     

Curable physical deterioration Incurable physical deterioration Curable functional obsolescence Incurable functional obsolescence External obsolescence

Curable physical deterioration refers to items of deferred maintenance; the estimate of curable physical deterioration is applicable only to the items subject to current repair. Thus, the measure of this element of accrued depreciation is the cost of restoring an item to new or reasonably new condition (that is, cost to cure), which may include the cost of exterior painting, roof repair, etc. Incurable physical deterioration involves an estimate of depreciation that is not practical or currently feasible to correct. It pertains to all structural elements that are not listed in the physically curable category. Functional obsolescence is the adverse effect on value resulting from defects in design. To be curable, the cost of replacing the outmoded or unacceptable aspect must be at least offset by the anticipated increase in value. Incurable functional obsolescence may be caused by a deficiency or by a superadequacy. External influences can cause a loss in value to any property. External obsolescence, which is the result of the diminished utility of a structure due to negative influences from outside the property, is almost always incurable. Based on the income capitalization approach value conclusion, the subject property does not appear to be impacted by external obsolescence. Developer’s Incentive According to industry sources, developer’s incentive (overhead and profit) historically has ranged anywhere from 5% to 15% in the Fresno regional area. For purposes of our analysis, we have utilized a developer’s incentive of 5%. Conclusion Considering the components discussed on the previous pages, the estimated market value via the cost approach is detailed on the following page.

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COST APPROACH SUMMARY – MARSHALL VALUATION DIRECT COSTS Apartment Component Commercial Component Appliances Elevator Balconies Site Improvements

95,080 SF @ 22,865 SF @ 79 units @ 1 elevator @ 600 SF @ 52,708 SF @

$108.88 / SF = $76.28 / SF = $2,275.00 / unit = $75,125.00 / elevator = $26.00 / SF = $3.00 / SF =

$ $ $ $ $

10,352,579 1,744,038 179,725 $75,125.00 15,600 158,123

Total Direct Costs

$ 12,525,190

INDIRECT COSTS Appraisal Fee Interim Taxes Lease-up Costs Title & Escrow on Land Loan Fees Legal and Organizational Contingency

1.2283% of land value for 12 months @ 0.5% of direct costs @ 1.0% of direct costs @ 3.0% of direct costs

$ $ $ $ $ $ $

9,500 10,307 685,353 62,626 125,252 30,000 375,756

Total Indirect Costs

$

Total Direct and Indirect Costs

$ 13,823,983

1,298,794

ACCRUED DEPRECIATION Physical Deterioration Economic Obsolescence Depreciated Costs DEVELOPER'S INCENTIVE

$0 $0 $ 13,823,983 @

5%

$

Total Project Costs

691,199

$ 14,515,183

LAND VALUE

$530,000

Total Project Costs TOTAL PROJECT COSTS

$ 15,045,183 (Rd.) $ 15,050,000

*It is noted that the square footages used in the table above are the gross building areas of both the commercial and apartment areas.

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SALES COMPARISON APPROACH In the sales comparison approach, the market value of the subject property is estimated by a comparison to similar properties that have recently sold, are listed for sale, or are under contract. The underlying premise of the sales comparison approach is the market value of a property is directly related to the price of comparable, competitive properties in the marketplace. This approach is based on the economic principle of substitution. According to The Appraisal of Real Estate, 13th Edition (Chicago: Appraisal Institute, 2008), “The principle of substitution holds that the value of property tends to be set by the price that would be paid to acquire a substitute property of similar utility and desirability within a reasonable amount of time. The principle implies that the reliability of the sales comparison approach is diminished if substitute properties are not available in the market.” The proper application of this approach requires obtaining sale data for comparison with the subject. Our search criteria for comparable sales of apartment properties in order of importance was: property type (apartments), location (within the Central Valley region), size (between 30 and 500 units) and effective age/condition (preferably newer construction in good condition). Given the limited amount of recent sales of comparable apartment properties in the Central Valley, these search parameters resulted in very few comparable sales. Additionally, all of the apartment properties in this search, which are considered somewhat comparable to the subject, are significantly older. Thus, we conducted a secondary search that included the Sacramento MSA to balance out the data set with recently constructed apartment projects that have recently sold. This region is considered the closest to the Central Valley in terms of property values, demographics, tenant profile, as well as buyer profiles. It is noted that the appraiser was unable to identify any recent mid-rise style mixed-use properties (that represented renovations and/or conversions of historic buildings) that have recently sold in either the Central Valley or Sacramento MSA. The subject property represents a unique project within its primary market area. While similar projects do exist in the San Francisco Bay Area, pricing in this market is far superior to the subject’s Central Valley location and would require substantial adjustments, weakening the reliability of these comparables. Therefore, we did not expand our search to include mixed-use high rise properties within the Bay Area. On the following pages, we will present and analyze several comparable sales. We will begin by presenting a location map and summary tabulation, followed by detailed sales sheets, a discussion of necessary adjustments, and our conclusion of value via this approach. These sales are the most recent transactions that were considered to be reasonably similar to the subject.

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APARTMENT SALES SUMMARY Sale No.

Property Identification

Sale Date

Sale Price

No. of Units

Price per Unit

Year Built

Overall Cap Rate

1

Granite Point Apartments 4500 Truxel Road Sacramento, Sacramento County APN: 225-0070-105

Sep-12

$45,500,000

384

$118,490

2003

5.70%

2

Broadstone at Strawberry Creek 8282 Calvine Road Sacramento, Sacramento County APN: 115-0130-075

Jun-12

$36,000,000

264

$136,364

2005

5.90%

3

Capitol Towers 1500 7th Street Sacramento APN(s): 006-0300-002, -003, & -004

May-12

$64,000,000

409

$156,479

1961/2006

5.75%

4

The Terraces at Highland Reserve 700 Gibson Drive Roseville APN: 363-011-001

Sep-11

$40,500,000

273

$148,352

2002

5.29%

5

Walnut Woods 275 East Minnesota Avenue Turlock APN: 072-18-07

Mar-11

$7,350,000

100

$73,500

1986

7.50%

Oct-12 (appraisal)

N/Ap

79

N/Ap

1912/2013

N/Ap

Subject Hotel Fresno 1241 Broadway Plaza Fresno

APARTMENT SALES MAP

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IMPROVED SALE 1 Property Identification Granite Point Apartments 4500 Truxel Road Sacramento, California 95834 APN: 225-0070-105

Sale Data Grantor Grantee Sale Date Deed Book/Page Property Rights Conditions of Sale Financing Terms Sale Price Project Data Land Area Zoning Year Built Number of Stories Construction Type Unit Amenities

Project Amenities Parking Unit Mix 1 bedroom/1 bath 2 bedroom/1 bath 2 bedroom/2 bath 3 bedroom/2 bath Total/Average

Northwestern Mutual Life Insurance Company MSP Del, LLC 09/05/2012 120905-946 Fee Simple Market Cash Equivalent $45,500,000

18.88 acres (Density – 20.33 dwelling units/acre) Multifamily residential 2003 Three Wood frame with stucco exterior Refrigerator, oven/range, disposal, dishwasher, microwave, balcony/patio, vaulted ceiling, in-unit full size washer/dryer and fireplaces in some units Pool, spa, sauna, clubhouse, business center, party room, fitness center, game room, BBQ/picnic area Carports and open parking No. of Units 240 48 84 12 384

Unit Size (SF) 898 1,051 1,170 1,337 990

Rent per Mo. $895 - $1,170 $1,110 - $1,230 $1,195 - $1,335 $1,405 - $1,525 $1,101

Indicators Sale Price per Unit $118,490 Overall Capitalization Rate 5.70% Property Vacancy % 2.6% Property Expenses Per Unit $5,615 Remarks This property represents Granite Point, a 384 unit apartment community that recently transferred. The listing broker reported there were no sales conditions that affected the sale.

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IMPROVED SALE 2 Property Identification Broadstone at Strawberry Creek 8282 Calvine Road Sacramento, California 95828 APN: 115-0130-075

Sale Data Grantor Grantee Sale Date Deed Book/Page Property Rights Conditions of Sale Financing Terms Sale Price Project Data Land Area Zoning Year Built Number of Stories Construction Type Unit Amenities

Project Amenities

Parking Unit Mix 1 bedroom/1 bath 2 bedroom/2 bath 3 bedroom/2 bath Total/Average

ACPRE BCK Realty, LLC Decron Properties/Nf Broadstone Strawberry Creek 06/01/2012 120531-1192 Fee Simple Market Cash Equivalent $36,000,000

13.42 acres (Density – 19.67 dwelling units/acre) SPA –Special Planning Area 2005 Three Wood frame with stucco exterior Refrigerator, oven/range, disposal, dishwasher, microwave, central HVAC, balcony/patio, fireplace (some units), ceiling fan, in-unit full size washer/dryer Pool, spa, clubhouse, business center, fitness center, game room, Wi-Fi at clubhouse and pool, BBQ/picnic area, basketball court Detached single-car garages, carports and open parking No. of Units 76 168 20 264

Unit Size (SF) 750 1,135 1,349 1,025

Rent per Mo. $952 - $1,300 $1,161 - $1,477 $1,600 - $1,900 $1,162

Indicators Sale Price per Unit $136,364 Overall Capitalization Rate 5.90% Property Vacancy % 6% Property Expenses Per Unit $5,300 Remarks This property represents a recent sale of a 264-unit apartment community identified as Broadstone at Strawberry Creek. The project is located within the southwest quadrant of Calvine Road and Auberry Drive in Sacramento. This property attracted 12 offers according to an article in the Business Journal and the buyer was a Los Angeles investor who paid all cash.

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IMPROVED SALE 3 Property Identification Capitol Towers 1500 7th Street Sacramento, California 95814 APN(s): 006-0300-002, -003, & 004

Sale Data Grantor Grantee Sale Date Deed Book/Page Property Rights Conditions of Sale Financing Terms Sale Price Project Data Land Area Zoning Year Built Number of Stories Construction Type Unit Amenities Project Amenities Parking Unit Mix Studio Studio 1 bedroom/1 bath 1 bedroom/1 bath 2 bedroom/1 bath 2 bedroom/2 bath 3 bedroom/2 bath 3 bedroom/2 bath Total/Average

Capitol Villas Sacramento, LL KW Captowers, LLC 05/11/2012 120514-62 Fee Simple Market Cash Equivalent $64,000,000

10.21 acres (Density – 40.0 dwelling units/acre) R5 –Multifamily residential 1961/2006 (renovated) 15 Steel frame Refrigerator, oven/range, disposal, dishwasher, microwave central HVAC, balcony/patio, ceiling fan Pool, spa, clubhouse, business center, fitness center, game room Covered (off-site parking garage) and open on-site parking No. of Units 48 91 119 78 44 13 13 3 409

Unit Size (SF) 509 570 602 780 792 960 1,145 1,208 409

Rent per Mo. $915 $955 - $1,075 $960 $1,205 - $1,445 $1,260 $1,570 - $1,810 $1,820 - $2,180 $1,500 $1,159

Indicators Sale Price per Unit $156,479 Overall Capitalization Rate 5.75% Property Vacancy % 7% Property Expenses Per Unit $4,094 Remarks This property consists of 409 units, 203 units are located within the 15-story tower (referred to as Capitol Towers) and the remaining units are located within the surrounding two-story buildings (referred to as the Capitol Villas. The property also has five ground floor retail units (located within the tower).

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IMPROVED SALE 4 Property Identification The Terraces at Highland Reserve 700 Gibson Drive Roseville, California 95678 APN: 363-011-001

Sale Data Grantor Grantee Sale Date Deed Book/Page Property Rights Conditions of Sale Financing Terms Sale Price Project Data Land Area Zoning Year Built Number of Stories Construction Type Unit Amenities Project Amenities Parking Unit Mix 1 bedroom/1 bath 2 bedroom/2 bath 3 bedroom/2 bath Total/Average Indicators Sale Price per Unit Overall Capitalization Rate Property Vacancy % Property Expenses Per Unit

SMII Highland Reserve LLC Terraces at Highland Property Owner 09/27/2011 75486 Fee simple Market Cash equivalent $40,500,000

14.90 (Density – 18.3 dwelling units/acre) Multifamily residential 2002 Two Wood frame with stucco exterior and stone accents Refrigerator, range/oven, disposal, dishwasher, HVAC, balcony/patio, washer/dryer and fireplace in some of the units Pool, spa, clubhouse, fitness center, playground, BBQ area, tot lot Garages and open parking No. of Units 64 129 80 273

Unit Size (SF) 772 1,040 1,170 1,015

Rent per Mo. $950-$995 $1,199-$1,249 $1,239-$1,289 N/Av

$148,352 5.29% 4% $4,615 (estimated by appraiser)

Remarks This is the recent sale of a 273-unit apartment property called The Terraces at Highland Reserve, which is located in Roseville. The purchase price was $40,500,000 and the property closed escrow on September 27, 2011. This property was built in 2002 and is considered to be in good condition. It is noted each apartment unit includes a garage.

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IMPROVED SALE 5 Property Identification Walnut Woods 275 East Minnesota Avenue Turlock, California 95382 APN: 072-18-07

Sale Data Grantor Grantee Sale Date Deed Book/Page Property Rights Conditions of Sale Financing Terms Sale Price Project Data Land Area Zoning Year Built Number of Stories Construction Type Unit Amenities

Project Amenities Parking Unit Mix 1 bedroom/1 bath 2 bedroom/1 bath 2 bedroom/2 bath 2 bedroom/2 bath Total/Average Indicators Sale Price per Unit Overall Capitalization Rate Property Vacancy % Property Expenses Per Unit

JCM Partners Tilden Properties 03/07/2011 18416 Fee simple Market Cash equivalent $7,350,000

4.77 acres (Density – 21.3 dwelling units/acre) Multifamily residential 1986 Two Wood frame with vertical wood siding Refrigerator, range/oven, disposal, dishwasher, central heat and air, balcony/patio, washer/dryer hook-ups in the units and fireplace in some of the units Pool, spa, clubhouse Carport and open parking No. of Units 20 12 60 8 100

Unit Size (SF) 730 874 992 992 925

Rent per Mo. $795 $895 $975 $1,000 $931

$73,500 7.50% 3% $4,158 (estimated by appraiser)

Remarks This comparable sale represents a 100-unit apartment property called Walnut Woods, which is located in Turlock. The purchase price was $7,350,000 and the property closed escrow on March 7, 2011. This property was built in 1986 and is considered inferior to the subject in terms of location, design and appeal, effective age and condition.

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Discussion of Adjustments In order to estimate the fee simple market value of the subject property, the comparable transactions are adjusted to the subject with regard to categories that affect value. If a comparable has an attribute that is considered superior to that of the subject, it is adjusted downward to negate the effect the item has on the price of the comparable. The opposite is true of categories considered inferior to the subject. To isolate and quantify the adjustments on the comparable sales data, it is considered appropriate to use percent adjustments. At a minimum, the appraiser considers the need to make adjustments for the following items:      

Property rights conveyed Sales or financing concessions Conditions of sale (motivation) Expenditures after sale Date of sale/time -market conditions Physical features

A paired sales analysis is performed in a meaningful way when the quantity and quality of data are available. However, as a result of the limited data present in the market, many of the adjustments require the appraiser’s experience and knowledge of the market and information obtained from those knowledgeable and active in the marketplace. A detailed analysis involving each of these factors is presented below. Property Rights Conveyed In transactions of real property, the rights being conveyed vary widely and have a significant impact on the sales price. The opinion of value in this report is based on a fee simple estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat, as well as non-detrimental easements, community facility districts and conditions, and covenants and restrictions (CC&Rs). All the comparables represent fee simple estate transactions. Therefore, adjustments for property rights are not necessary. Sales or Financing Concessions In analyzing the comparables, it is necessary to adjust for financing terms that differ from market terms. Typically, if the buyer retained third party financing (other than the seller) for the purpose of purchasing the property, a cash price is presumed and no adjustment is required. However, in instances where the seller provides financing as a debt instrument, a premium may have been paid by the buyer for below market financing terms or a discount may have been demanded by the buyer

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if the financing terms were above market. The premium or discounted price must then be adjusted to a cash equivalent basis. All of the comparable sales were all cash to the seller or cash equivalent transactions. As a result, none of the comparable sales were adjusted for financing. Conditions of Sale Adverse conditions of sale can account for a significant discrepancy from the sales price actually paid compared to that of the market. This discrepancy in price is generally attributed to the motivations of the buyer and the seller. Certain conditions of sale are considered to be non-market and may include the following:       

a seller acting under duress, a lack of exposure to the open market, an inter-family or inter-business transaction for the sake of family or business interest, an unusual tax consideration, a premium paid for site assemblage, a sale at legal auction, or an eminent domain proceeding.

All of the comparable transactions represented arm’s length transactions with no unusual conditions or contingencies. Thus, no adjustments were warranted for condition of sale. Expenditures After Sale This element of comparison considers expenditures after sale, such as repairs for deferred maintenance or lease-up costs. All of the comparable sales were operating at stabilized occupancy at the time of sale and had no issues of deferred maintenance. Therefore, no adjustments are warranted for expenditures after sale. Date of Sale/Time - Market Conditions Market conditions generally change over time, but the date of this appraisal is for a specific point in time. Therefore, in an unstable economy, one that is undergoing changes in the value of the dollar, interest rates and economic growth or decline, extra attention needs to be paid to assess changing market conditions. Significant changes in price levels can occur in several areas of a municipality, while prices in other areas remain relatively stable. Although the adjustment for market conditions is often referred to as a time adjustment, time is not the cause of the adjustment. An adjustment for changes in market conditions was analyzed. In evaluating market conditions, changes between the comparable sales’ date and the effective date of this appraisal may warrant

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adjustment; however, if market conditions have not changed, then no adjustment is required. The apartment market in the subject’s general market area, while historically stable, declined throughout 2008 and 2009. As referenced in the apartment market overview section of this report, market conditions have slightly improved in 2010/2011 and the beginning of 2012 as the market has begun to stabilize for apartment properties. Apartment rents for similar properties have risen, while capitalization rates have generally decreased. As such, Sale 4 (which transferred in the second half of 2011) receives a slight upward adjustment and Sale 5 (which transferred within the first half of 2011) receives a larger upward adjustment. The remaining comparable sales (which transferred in 2012) do not warrant adjustments for market conditions. Physical Characteristics Location The subject is considered to possess an average location for an apartment property within Downtown Fresno. The subject’s area is currently being revitalized with several new projects recently constructed, currently under construction or proposed. Factors considered in evaluating location include, but are not limited to, demographics, growth rates, surrounding uses and property values. Sales 1 and 2 are located within Sacramento, in areas that are considered slightly superior to the subject’s location. These sales require slight downward adjustments to equate them to the subject. Sale 3 is located in downtown Sacramento, proximate to the State Capitol and a substantial amount of Class A offices and commercial development; thus, a 10% adjustment is warranted. Sale 4 is located in Roseville (Sacramento MSA), which is considered superior than the subject’s location, given itsr proximity to other Class A residential, office and commercial properties. A larger downward adjustment is applied to Sale 4. Sale 5 is located within the city of Turlock, an inferior area, given its size and proximity to larger MSAs. Therefore, we have applied an upward adjustment to Sale 5. These adjustments are based on the rent differential between these submarkets and the subject’s submarket. No other adjustments are required in this category. Site/View The visibility and accessibility of a property can have a direct impact on property value. For example, if a property is landlocked, this is considered to be an inferior position compared to a property with open accessibility. However, if a property has good visibility or is in proximity to major linkages, this is considered a superior amenity in comparison to a property with limited visibility. All of the comparable sales have good exposure and views, as such no adjustments are required for this adjustment category.

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Design and Appeal Sales 1, 2 and 5 are inferior in design and appeal due to their configuration and general layout as garden style apartments. Upward adjustments are applied to these comparables. Sale 3 has a similar layout and design as the subject (Capitol Towers) and Sale 4 (although a garden style apartment community), has an excellent level of appeal; thus, no adjustment is required to Sales 3 and 4. Quality of Construction Based on our review of the proposed renovation of the subject property, the improvements will reflect good construction quality and appeal. Based on our exterior inspections of the comparables, all of the comparables also exhibit good construction quality and appeal and no adjustments are warranted for quality of construction. Year Built The subject improvements were originally built in 1912 and upon completion will represent new construction. All of the comparable sales have varying effective ages. An adjustment of approximately 1% per year difference in effective age is applied to the comparables to reflect the discrepancies in remaining economic life. Condition Upon completion, the subject property will be in good condition. Most of the comparable sales are considered to be in similar condition, excluding Sale 5. Sale 5 is considered to be in an inferior condition, thus an upward adjustment was required. Gross Building Area The subject property will have a gross building area of 117,945± square feet, upon completion. The comparable sales gross building area ranges from 89,200± square feet to 380,292± square feet. Differences in gross building area have already been taken into account within the unit size, number of units and amenities adjustments; therefore, no adjustments are necessary for differences in gross building area. Average Unit Size Upon completion of renovation, the subject’s average unit size will be approximately 1,078 square feet (weighted average). The comparable sales exhibit a range of average unit sizes from 680 to 1,025 square feet. All else being equal, larger units command higher rents than smaller units. The

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comparables are adjusted by the difference between their average unit sizes and the average unit size of the subject property, as it relates to the effect on sale price per unit. In determining the adjustment to be employed for unit size differences, we researched our appraisal files and analyzed similar properties throughout the subject’s market area. All else being equal, larger units command higher rents than smaller units. For the basis of this analysis, we will utilize an adjustment factor of $0.30 psf/month. All of the comparable sales have smaller average unit sizes than the subject property and are considered inferior with regards to average unit size. For example, Sale 1 has an average unit size of 990 square feet. The monthly rent differential is about $26 per unit, or $316 annually. After accounting for vacancy and collection loss (7%) and operating expenses (33%), similar to the subject property, and capitalizing the difference in net operating income per unit at 6.00% yields a value difference of about $3,172.26 per unit, or approximately 2.68% of the effective sale price of this comparable ($118,490 per unit). As such, this sale requires a downward adjustment of 3% (rounded) or approximately $3,555. Similar adjustments are applied to the other comparables. Unit Breakdown An apartment’s unit breakdown can also affect the price since larger unit types typically draw more income than do smaller unit types. The subject, as well as Sales 1, 2 and 4, have one-, two- and three-bedroom unit types. However, Sale 3 offers studio, one-, two- and three-bedroom units and Sale 5 only contains one- and two-bedroom unit types. These comparable sales are considered inferior to the subject in terms of unit breakdown and are adjusted upward. Basement Description The subject property has a partial basement (8,730± square feet) that will be utilized as a laundry facility. None of the comparable sales contain basements and upward adjustments were applied to all of the comparable sales to account for their lack of basement areas. Functional Utility Upon completion, the subject property will have average functional utility, as do all of the comparables; therefore, no adjustments are required for this adjustment category. Heating/Cooling The heating/cooling for the subject property (upon completion) will consist of a central HVAC system, similar to all of the comparable sales; therefore, no adjustments are necessary.

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Parking on/off Site The subject property will offer on-site uncovered parking. Sales 1, 3 and 5 offer on-site uncovered and covered parking and are considered slightly superior to the subject. Sales 2 and 4 offer garages, carports and on-site uncovered parking and are considered superior to the subject. All of the comparables receive downward adjustments to equate them to the subject. Project Amenities and Fee (if applicable) Upon completion of renovation the subject property will offer a tenant lounge and laundry facility. Due to the size of the all of the comparable sales analyzed, these projects offer a greater amount of project amenities, such as, but not limited to: pool, spa, fitness center, business center, picnic area, etc.) As such, Sales 1 through 5 all receive downward adjustments. Other – Density The density of a project is another characteristic that requires consideration. A lower project density is a desirable feature as it results in more open space, thus creating a more park-like setting. With a proposed 79 units on 1.21± acres, the density of the project will be 65.3 dwelling units per acre. Sales 1, 2, 4 and 5 have lower project densities of 20.3, 19.7, 18.3 and 21.3 units per acre, respectively, as these projects represent garden style projects. These comparables are adjustment downward to account for the lower project densities. These are the only adjustments made since Sale 4 has a project density of 40 units per acre and is deemed generally similar to the subject. Other – Number of Units Size differences between apartment complexes, in terms of total number of units, can make a difference in the prices of apartments because there are economies of scale that are offered with larger sized projects. That is, all else being equal, larger complexes tend to sell for less per unit than smaller properties and vice versa. The subject property will have 79 units (upon completion of renovation), and the comparables have between 100 and 409 units. All of the comparables, excluding Sale 5 (which contains 100 units), require upward adjustments for the differences in number of units compared to the subject property. Other – Ground Floor Retail In addition to the residential units at the subject, the subject will also offer five ground floor retail suites. The ground floor retail suites increase the value of the subject property by increasing the potential income. As will be shown in the Income Capitalization Approach section of this report, the subject’s projected commercial income will account for approximately 25% of the potential gross

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income of the subject. Similar to the subject, Sale 3 has ground floor retail space and no adjustment is required. Conversely, Sales 1, 2, 4 and 5 do not contain retail space or other income generating qualities and upward adjustments were applied to these comparables. Adjustment Grids Tables incorporating the adjustments discussed on the preceding pages are presented in the tables on the following pages. IMPROVED SALES ADJUSTMENT GRIDS Item Address

Subject Property

Hotel Fresno 1241 Broadway Plaza Fresno, California

Comparable Sale No. 1

Comparable Sale No. 2

Comparable Sale No. 3

Granite Point Apartments 4500 Truxel Road Sacramento, California

Broadstone at Strawberry Creek 8282 Calvine Road Sacramento, California

Capitol Towers 1500 7th Street Sacramento, California

Proximity to subject Sales price Sales price per GBA Annual EGI EGIM (1)* Sales price per unit Sales price per room Data source Adjustments Sales or financing concessions Date of sale/time Location Site/view Design and appeal Quality of construction Year built Condition Gross Building Area Average Unit Size

$15,150,000 $128.45 $1,081,267 14.01 $191,772 $29,882

175 miles NW Furn. $45,500,000

x Unf.

Description

10/8/12 Downtown Fresno Good Excellent Good 1912/2013 Good 117,945 Sq. ft. 1,078 Sq. ft.

Basement description Functional utility Heating/cooling Parking on/off site Project amenities and fee (if applicable) Other Other Other

Density Number of Units Ground Floor Retail

0 0 0 0 33 5 1 1 26 7 2 2 20 8 3 2 0 0 4 0 79 507 145 125

N/Av $136,364 N/Av Public records/Business Journal + (-) $ Adjust. Description

N/Av $156,479 N/Av Seller's broker/public records Description + (-) $ Adjust.

9/5/12 Sl. Superior Similar Sl. Inferior Similar 2003 Similar 380,292 Sq. ft. 990 Sq. ft.

6/1/12 Sl. Superior Similar Sl. Inferior Similar 2005 Similar 274,660 Sq. ft. 1,025 Sq. ft.

5/11/12 Superior Similar Similar Similar 1961/2006 Similar 286,730 Sq. ft. 680 Sq. ft.

0 240 48 84 12 384

($5,924) $5,924 $11,849

$3,555

Fair to Average

Sl. Superior

65.3

20.3

79

384

Yes

None

Adjusted sales price of comparables per unit

+

$3,555

($3,555)

None Similar Similar Garages/Carports

($5,924)

Sl. Superior

$10,909

$1,364

$171,810

x

+

0 1 1 1 1 2 2 2 2 3 359 438

$4,694 $4,694

($4,694)

($6,818)

Sl. Superior

($15,648)

40 409

53,182

$31,296

Similar

$34,091 $

$14,083

($6,818)

$20,455

-

$10,954

None Similar Similar Carports/On-site

($4,091)

None

$29,622 53,320

$4,091

264

($15,648)

No. Room count No. of Units Tot. Br. Ba. Vac.

139 197 44 13 16 409

19.7

$17,773

$

$6,818

0 0 1 1 2 2 2 3 0 0 472 452

0 76 168 20 0 264

($3,555)

-

($6,818)

No. Room count No. of Units Tot. Br. Ba. Vac.

0 0 1 1 1 2 2 2 2 3 540 480

None Similar Similar Carports/On-site

x

$223.21

N/Av $118,490 N/Av Buyer's broker/public records + (-) $ Adjust. Description

Partial Average Central HVAC On-site

Net Adjustment (Total)

170 miles NW $64,000,000 Furn.

x Unf.

$131.07

$119.64

No. No. Room count No. Room count No. of of Units Tot. Br. Ba. Vac. Units Tot. Br. Ba. Vac.

Unit Breakdown

160 miles NW Furn. $36,000,000

x Unf.

x

+

$189,545

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$

29,731 $186,210

84

Item Address

Subject Property

Hotel Fresno 1241 Broadway Plaza Fresno, California

Comparable Sale No. 4

Comparable Sale No. 5

The Terraces at Highland Reserve 700 Gibson Drive Roseville, California

Walnut Woods 275 East Minnesota Avenue Turlock, California

Proximity to subject Sales price Sales price per GBA Annual EGI EGIM (1)* Sales price per unit Sales price per room Data source Adjustments Sales or financing concessions Date of sale/time Location Site/view Design and appeal Quality of construction Year built Condition Gross Building Area Average Unit Size

$15,150,000 $128.45 $1,081,267 14.01 $191,772 $29,882

Basement description Functional utility Heating/cooling Parking on/off site Project amenities and fee (if applicable) Other Other

Density

Number of Units Ground Floor Other j Retail ( ) Net Adjustment (Total)

9/27/11 Sig. Superior Similar Similar Similar 2002 Similar 277,168 Sq. ft. 1,015 Sq. ft.

Br.

0 64 129 80

0 1 2 3

None Similar Similar Garages/Carports

Fair to Average

Superior

65.3

18.3

79

273

Yes

None

x

Adjusted sales price of comparables per unit

+

3/7/11 Inferior Similar Inferior Similar 1986 Inferior 89,200 Sq. ft. 892 Sq. ft.

0 20 80

0 1 2

100

$4,451

$18,375 $7,350

No. Room count No. of Units Tot. Br. Ba. Vac.

$3,675 $2,205

($2,205)

($14,835)

Sl. Superior

($3,675)

21.3

($2,205)

100 None

$37,088

$188,407

Sq. ft. Sq. ft.

$5,880

($7,418)

40,055

+ (-) $ Adjust.

0 1 2

180 180

$22,253

$

Description

$7,350

None Similar Similar Carport/On-site

($4,451)

-

Furn.

$7,350 $7,350

No. Room count No. of Units Tot. Br. Ba. Vac.

562 482

273

Partial Average Central HVAC On-site

Public records + (-) $ Adjust. Description

$1,484

0 1 2 2

Unf.

N/Av $73,500 N/Av

$16,319

No. No. Room count No. of Ba. Vac. Units Tot. Br. Ba. Vac.

0 0 0 5 1 1 7 2 2 8 3 2 0 4 0 507 145 125

80 miles NW Furn. $7,350,000 $82.40

$7,418 ($22,253)

Room count Tot.

x Unf.

N/Av $148,352 N/Av Seller's broker/public records + (-) $ Adjust. Description

10/8/12 Downtown Fresno Good Excellent Good 1912/2013 Good 117,945 Sq. ft. 1,078 Sq. ft.

0 33 26 20 0 79

190 miles NW Furn. $40,500,000 $146.12

Description

No. of Units

Unit Breakdown

x Unf.

Comparable Sale No. 6

x

+

$18,375

-

$

69,825

+

-

$

$143,325

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Value Conclusion – Sales Comparison Approach The market data set involves several sales of apartment/mixed use properties considered to be reasonable indicators of value for the subject. The adjustment grid on the preceding page illustrates the quantitative adjustments applied to the market data in order to equate them with the subject. The adjusted value range narrowed to $143,325 to $189,545 per unit, which is considered a relatively narrow range. The average of our data set was $183,993 per unit and the median was $186,210 per unit. All of the sales required significant gross adjustments, which weakens the reliability of this approach. Additionally, there were no comparable sales located in Fresno which required our search parameters to expand geographically and further weakens this approach. However, the adjustments adequately accounted for differences between the comparables and the subject and are considered well supported. Sale 5 is considered an outlier of the data set and the lower indicator of value. This comparable sale required the greatest number of net adjustments ($69,825) and represents the oldest sale (transferred in early 2011). Excluding Sale 5 tightens our range further to $171,810 per unit to $189,545 per unit. Given the new adjusted range and the subject’s proposed new renovation, which is offset by its lack of project amenities, we have concluded a value of $185,000 per unit, towards the middle to upper end of the adjusted range for the subject property. Applying this indicator to the total number of unit’s results in the following estimate of market value for the subject via the sales comparison approach: 79 units x $188,000 per unit = $14,852,000 CONCLUSION OF VALUE VIA THE SALES COMPARISON APPROACH

Rd. $14,850,000

The market value estimate is based on a hypothetical condition assuming completion of renovation and stabilized occupancy. The final section of the appraisal will address the required deductions for renovation/conversion costs and lease-up costs in order to arrive at an opinion of as-is market value.

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INCOME CAPITALIZATION APPROACH For income-producing real estate, the future earning power of the property is widely regarded as the single most critical element affecting its value. Hence, the income capitalization approach is often deemed to be the most meaningful indication of value. Based on the specifics of the subject property, we will exclusively apply the direct capitalization method of the income capitalization approach. Direct capitalization converts an estimate of a single year’s net operating income into an indication of value in one direct step. This step is accomplished either by dividing the income estimate by the relevant income rate (an overall capitalization rate), or by multiplying the income estimate by a proper factor (such as a gross, effective gross or net income multiplier). In the subject’s market area, buyers and sellers of properties like the subject typically handle direct capitalization by using an overall rate, as opposed to a multiplier. Therefore, this method of direct capitalization will be employed in this analysis. The components of the direct capitalization method are tabulated as follows and discussed below:    

Potential Gross Income Vacancy and Collection Loss Operating Expenses Overall Capitalization Rate

Contract Rent - Residential The subject’s units will be comprised of 73 market rate units and six restricted rent/low-income units as shown in the table on the following page. It is assumed the property owner will be responsible for water, sewer and garbage expenses, while the tenants will be responsible for electricity, cable, and telephone expenses, as this is typical for the local apartment market. Given the subject property does not yet have any executed leases, we will use market rent to estimate the market value of the subject property (market rate units). The assigned low-income/restricted units will be utilized in our calculation of potential gross income for the subject. A summation of the pro-forma rental rates is presented in the table below. It is noted that there are no known rent concessions that will be offered, such as free rent. Further, although the subject property will possibly feature an employee and/or manager unit, it is assumed this unit will not receive a discount or be included in the employee/manager’s salary.

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Market Rate Apartment Units Unit No.

Avg. Rentable Area (SF)

Average Pro-forma Lease Rate/Mo.

1-bedroom/1-bathroom

28

816

$979

1-bedroom/1-bathroom + Balcony

1

795

$954

2-bedroom/2-bathroom

22

1,023

$1,228

2-bedroom/2-bathroom + Balcony

2

985

$1,231

3-bedroom/2-bathroom

9

1,113

$1,336

3-bedroom/2-bathroom + Balcony

4

1,291

$1,640

3-bedroom/2-bathroom penthouse + Loft

7

1,862

$2,234

1-bedroom/1-bathroom

1

816

$543

1-bedroom/1-bathroom

3

816

$687

2-bedroom/2-bathroom

2

1,023

$826

Total:

79

Unit Type

Restricted Rent Apartment Units:

Contract Rent - Commercial The commercial component of the subject will consist of five ground floor suites. Given the subject property does not yet have any executed leases, we will use market rent to estimate the market value of the subject property. Below we have provided an outline of the subject’s proposed commercial suites along with the pro-forma rental rates. The subject’s suites range from 1,600 square feet (average size of smaller suites) to 7,345 square feet (average size of larger units) of rentable area. Given the wide range of suite sizes, two sets of rent comparables (small and large) will be analyzed to determine market rent for the subject property. Commercial Units Unit

Unit No.

Avg. Rentable Area (SF)

Pro-forma Lease Rate/Mo. (NNN)

102

1

7,218

$1.35

103

1

1,468

$1.35

104

1

1,827

$1.35

105

1

1,505

$1.35

106

1

7,490

$1.35

Total:

5

19,508

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Market Rent Comparables - Residential We will determine market rent by analyzing rents being achieved by similar apartment projects located in the subject’s neighborhood. Our research revealed several properties that are considered to be good indicators of market rent for the subject property. On the following pages, we will present a location map of the subject and comparables, followed by our discussion of adjustments and HUD Form 92273 adjustment grid for each of the subject’s various apartment unit types (one-bedroom, one-bedroom with balcony, two-bedroom, two-bedroom with loft, three-bedroom, three-bedroom with balcony and three-bedroom penthouse with loft units). It is noted that the rents indicated in the summary sheet and detail sheets on the following pages include both the current asking rents at each of the apartment properties and the most recent actual rents. The rents indicated in the adjustment grids (92273) are the most recent actual rents being achieved at each apartment project that we could accurately confirm (rent that was actually paid as indicated in the instructions by HUD for completing a 92273). Sometimes rents that are currently being marketed at a specific project for a particular unit may be slightly different (more or less depending on current market conditions, the properties current vacancy rate, renovated vs. an unrenovated unit, etc.), than the most recent lease signed for that same unit type at the same project.

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RENT SURVEY No. Project 1

Iron Bird Lofts 1901 North Fulton Street Fresno (559) 412-7558

2

Vagabond Lofts & H Street Lofts 1807 Broadway and 1830 H Street Fresno (559) 233-0288

3

4

5

Year Built

Total Units

2009

2006/2008

Broadway Lofts 1625 Broadway Street Fresno (559) 486-3000

2011

Fulton Village 1729 Fulton Street Fresno (559) 440-8313

2011

Mayflower Lofts 1415 Broadway Street Fresno (626) 277-7703

Unit Type

Unit Size (sf)

Asking Rent Per Month

Most Current Actual Rent

80

1 Br./1 Ba. + Loft 1 Br./1 Ba. + Loft 1 Br./1 Ba. + Loft 2 Br./1 Ba. 2 Br./1.5 Ba. + Loft + Garage 2 Br./2 Ba.

1,097 1,150 1,217 1,063 1,440 1,530

$1,100 N/Av N/Av $1,050 $1,400 $1,500

$995 $900 $1,050 $995 $1,375 $1,500

65

1 Br./1 Ba. 1 Br./1 Ba. + Loft 1 Br./1 Ba. + Loft 1 Br./1 Ba. + Loft 2 Br./1 Ba. 2 Br./1 Ba. 1 Br./1 Ba. + Loft 1 Br./1 Ba. + Loft 1 Br./1 Ba. + Loft

680 686 755 980 920 988 630 680 800

$800 $825 $850 $1,000 $950 $975 $800 $825 $925

Studio 1 Br./1 Ba. + Loft 1 Br./1 Ba.

350-500 745-875 1,145-1,240

$650 $895 $1,250

$895 $1,050

Studio + Garage 1 Br./1 Ba. 2 Br./1.5 Ba. + Garage

460 700 1,300

$695 $875 $1,465

$875 $1,395

1 Br./1 Ba. 1 Br./1 Ba. + Loft 2 Br./1.5 Ba. 2 Br./2 Ba. Penthouse + Loft

665 807 1,088 1,650

$798 - $800 $800 - $1,049 $1,200 - $1,360 $1,895

$800 $968 $1,200 $1,895

23

46

2011/2012

18

Occupancy 92%

100%

$900

$900 100%

90%

94%

RENT COMPARABLES MAP

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RENTAL 1 Property Identification Iron Bird Lofts 1901 North Fulton Street Fresno, California Verification: Teresa Kelly (559) 412-7558

Project Data Total Units Year Built Current Occupancy Rate Number of Stories Construction Type Unit Amenities

Project Amenities Parking Utilities Included Unit Mix 1 bedroom/1 bath + Loft 1 bedroom/1 bath + Loft 1 bedroom/1 bath + Loft 2 bedroom/1 bath 2 bedroom/1.5 bath + Garage 2 bedroom/2 bath

80 2009 92% 3 Wood frame with stucco exterior and a corrugated metal façade Refrigerator, range/oven, disposal, dishwasher, washer and dryer hook-ups, central HVAC, balcony/patio in some units On-site laundry room, BBQ/courtyard area Uncovered parking and some units include an attached garage Water, sewer and garbage Unit Size (SF) 1,097 1,150 1,217 1,063 1,440 1,530

Rent per Mo. $1,100 N/Av N/Av $1,050 $1,400 $1,500

Actual Rents $995 $900 $1,050 $995 $1,375 $1,500

Remarks This comparable is located at the southwest corner of East Divisadero Street and Fulton Street, the northwest corner of Fulton Street and Sacramento Street and the northeast corner of Sacramento Street and Broadway Street and features loft style one and two-bedroom floor plans. This project is currently not offering any rent specials. It is noted the twobedroom/1.5-bathroom unit includes an attached garage.

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RENTAL 2 Property Identification Vagabond & H Street Lofts 1807 Broadway and 1830 H Street Fresno, California Verification: Joanne Carrasco (559) 233-0288

Project Data Total Units Year Built Current Occupancy Rate Number of Stories Construction Type Unit Amenities

Project Amenities Parking Utilities Included Unit Mix 1 bedroom/1 bath 1 bedroom/1 bath + Loft 1 bedroom/1 bath + Loft 1 bedroom/1 bath + Loft 2 bedroom/1 bath 2 bedroom/1 bath 1 bedroom/1 bath + Loft 1 bedroom/1 bath + Loft 1 bedroom/1 bath + Loft

65 2006/2008 100% 2 Wood frame with stucco exterior Refrigerator, range/oven, disposal, dishwasher (some units), washer and dryer hook-ups, central HVAC, balcony/patio in some units Courtyard areas with picnic tables and BBQ’s Uncovered parking Water, sewer and garbage Unit Size (SF) 680 686 755 980 920 988 630 680 800

Rent per Mo. $800 $825 $850 $1,000 $950 $975 $800 $825 $925

Actual Rents

$900

$900

Remarks This comparable represents two existing apartment complexes known as Vagabond Lofts and H Street Lofts, which are contiguous to each other and situated within the same block in Downtown Fresno. Specifically, Vagabond Lofts is situated at the northwest corner of Broadway and Amador Street and the northeast corner of H Street and Amador Street; whereas, H Street Lofts is located along the east side of H Street between Sacramento and Amador Streets. The property features loft style one and two-bedroom floor plans. This project is currently not offering any rent specials.

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92

RENTAL 3 Property Identification Broadway Lofts 1625 Broadway Street Fresno, California Verification: Darla Hall (559) 412-7558

Project Data Total Units Year Built Current Occupancy Rate Number of Stories Construction Type Unit Amenities Project Amenities Parking Utilities Included Unit Mix Studio 1 bedroom/1 bath + Loft 1 bedroom/1 bath

23 2011 (conversion from an old industrial building) 100% 2 Concrete and brick (actual conversion from an old industrial property into a residential loft project) Refrigerator, range/oven, disposal, dishwasher (some units), central HVAC, and one unit has a patio On-site laundry room Uncovered parking Water, sewer and garbage Unit Size (SF) 350-500 745-875 1,145-1,240

Rent per Mo. $650 $895 $1,250

Actual Rents $895 $1,050

Remarks This comparable features studio, loft/one-bed and one bedroom floor plans. This property was an actual conversion from an old industrial property into a residential loft project and features exposed brick walls, exposed ceilings and some of the old windows. This project is currently not offering any rent concessions.

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RENTAL 4 Property Identification Fulton Village 1729 Fulton Street Fresno, California Verification: Marci (with Granville Homes) (559) 440-8313

Project Data Total Units Year Built Current Occupancy Rate Number of Stories Construction Type Unit Amenities Project Amenities Parking Utilities Included Unit Mix Studio + Garage 1 bedroom/1 bath 2 bedroom/1.5 bath + Garage

46 2011 90% 3 Wood frame with stucco exterior Refrigerator, range/oven, disposal, washer and dryer hook-ups, central HVAC, balcony/patio Courtyard Garages and uncovered parking Water, sewer and garbage Unit Size (SF) 460 700 1,300

Rent per Mo. $695 $875 $1,465

Actual Rents $875 $1,395

Remarks This project represents the recently opened Fulton Village. Fulton Village offers 46 urban lifestyle units, complete with cutting-edge GV Eco-Smart technology and is designed to be net-zero in energy usage. This comparable features studio, one and two-bedroom floor plans and is currently operating at 90% occupancy. According to Marci with Granville Homes, studios and one bedroom vacant units have a waiting list. The property is not currently offering any rent concessions.

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RENTAL 5 Property Identification Mayflower Lofts 1415 Broadway Street Fresno, California Verification: Romi (626) 277-7703

Project Data Total Units Year Built Occupancy Rate Number of Stories Construction Type Unit Amenities Project Amenities Parking Utilities Included Unit Mix 1 bedroom/1 bath 1 bedroom/1 bath + Loft 2 bedroom/1.5 bath 2 bedroom/2 bath+Penthouse/Loft

18 2011/2012 94% 3 Wood frame with stucco exterior Refrigerator, range/oven, disposal, dishwasher, central HVAC, patio, washer/dryer hook-ups None Uncovered parking Water, sewer and garbage Unit Size (SF) 665 807 1,088 1,650

Rent per Mo. $798 - $800 $800 - $1,049 $1,200 - $1,360 $1,895

Actual Rents $800 $968 $1,200 $1,895

Remarks This project was finalized in June 2012. The Mayflower Lofts offers 18 urban lifestyle units. This comparable features one and two-bedroom floor plans. Two of the units are loft configurations and it is noted the larger two-bedroom units represent penthouse units (located on the top floor of the building). It is noted this project is currently not offering any rental concessions.

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ANALYSIS OF ADJUSTMENTS When comparing similar apartments to the subject property, certain adjustments are required to equate the market data to the subject. These factors are shown in the adjustment grids later in this section. Below is a discussion of the elements of comparison considered in this analysis. Effective Date of Rental The effective date of value for this appraisal is October 8, 2012. The information on the comparable rental properties was obtained as of October 2012. The rents indicated in the adjustment grids (92273) are the most recent actual rents being achieved at each project that we could accurately confirm (rent that was actually paid as indicated in the instructions by HUD for completing a 92273). No adjustments are necessary for the effective date of the survey (market conditions). Type of Project/Stories The subject property represents a mid-rise building that will contain a total of seven stories (residential units will be within the second through seventh floors). All of the comparable rents represent low-rise buildings and are adjusted upward $25 to account for the inferior view amenities. Floor of Unit in Building In the analysis of the subject’s penthouse units, upward adjustments are made for comparable units that are not located on the top floor of the building. Year Built Upon completion of renovation, the subject improvements will exhibit a new effective age and be in good condition. The comparables display varying effective ages. An adjustment of approximately 1% per year difference in effective age is applied to the comparables to reflect the discrepancies in remaining economic life. Living Area (Sq. Ft. Area) The comparables have varying unit sizes compared to the subject. In determining the adjustment to be employed for unit size, it is helpful to look at differences in monthly rent between the varying floor plans within the same project. In this analysis, we looked at the different unit types within each of the comparable projects to derive an adjustment for unit size. The comparables indicate an adjustment for square footage of $0.20 to $0.80 per square foot. Based on our experience with similar multifamily projects in the region, along with analysis of the comparables, a reasonable adjustment factor for unit size is $0.30 psf/month for all the subject’s unit types. We will employ this adjustment factor for the comparables with significantly different unit sizes compared to the subject.

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Number of Bedrooms The subject will contain various unit types (upon completion) as do the comparables. In determining the adjustment to be employed for differences in the number of bedrooms, we researched our appraisal files and analyzed similar properties throughout Northern California and the Central Valley. Our analysis indicates that in the subject’s market, an extra bedroom/den increases the rent by approximately $25 to $100 per month in addition to the difference in square footage. We will employ an adjustment of $50 for the difference in bedroom count with two bedrooms being superior than one bedroom and vice versa. In terms of a loft/bedroom vs. a bedroom flat the loft/bedroom is considered more desirable in the subject’s submarket based on a paired analysis. We will employ an adjustment of $10 for a loft style unit vs. a flat. Number of Baths The subject units will have between one and two bathrooms. In determining the adjustment to be employed for differences in the number of baths, we researched our appraisal files and analyzed similar properties throughout Northern California and the Central Valley. Our analysis indicates that in the subject’s market, an extra bathroom increases the rent by $25 to $100 per month. Thus, we will employ an adjustment factor of $25 for a half bathroom and $50 for a full bathroom. Balcony/Terrace/Patio Six of the subject’s two-bedroom and three-bedroom units (all on the second floor) will have enclosed balconies. The subject’s market area places minimal value on balconies and patios, therefore, a modest adjustment of $20 is considered reasonable. Garage or Carport/Parking The subject property will feature on-site uncovered parking for all of the units. Similarly, most of the comparables offer on-site uncovered parking. Select units within Rent 1 (Iron Bird Lofts) and Rent 4 (Fulton Village) offer attached garages. An adjustment factor of $50 is applied for the difference between a unit having a garage and another unit only having uncovered parking. Dishwasher All of the subject’s units will include a dishwasher. The units within Rents 1 and 3 also include a dishwasher, while the remaining comparables do not. A slight $5 per month upward adjustment will be made to comparables without a dishwasher in comparison to the subject’s units. Washer/Dryer The subject property will contain an on-site laundry facility (which will be located within the

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97

basement of the building). Additionally, the subject’s penthouse units will have hook-ups for a washer and dryer. The comparables either offer hook-ups in the units or an on-site laundry facility (Rent 1 – Iron Bird Lofts has both hook-ups within the units and an on-site laundry facility). In the analysis of the subject’s unit (excluding the penthouse units), rent comparables that offer hook-ups are adjusted downward by $10 for this superior feature. In the analysis of the subject’s penthouse units, upward adjustments of $10 were applied to comparables that only offer an on-site laundry facility. Additionally, a downward adjustment of $5 was applied to Rent 1 (Iron Bird Lofts) in the analysis of the subject’s penthouse units, to account for additionally offering an on-site laundry facility in addition to hook-ups. Additional Amenities Upon completion of renovation, the subject property will offer a tenant lounge as an additional project amenity. Rent 3 (Broadway Lofts) and Rent 5 (Mayflower Lofts) do not have any additional outdoor amenities. Therefore, these comparable rentals are considered slightly inferior in comparison to the subject property and are adjusted upward by $10. Rent 1 (Iron Bird Lofts) has a BBQ/picnic area, Rent 2 (Vagabond and H Street Lofts) has two courtyard areas and Rent 4 (Fulton Village) includes a courtyard. These comparables are considered similar to the subject property and no adjustments are required. Quality/Appeal Upon completion of the renovation, the subject property’s improvements will reflect excellent construction quality and appeal. Based on our inspections of the comparables, units at Vagabond/H Street Lofts (Rent 2) require an adjustment for this element of comparison. This project is considered only average in terms of quality and appeal and requires an upward adjustment of $50 for this category. Further, in the analysis of the subject’s penthouse units, Rents 1 through 4 require upward adjustments of $50, as these projects do not offer penthouse units. Adjustment Grids Based on the market data analysis and rental comparison, adjustment grids for the subject’s units are presented on the following pages.

 Seevers  Jordan  Ziegenmeyer 

98

RENT ADJUSTMENT GRID – ONE-BEDROOM/ONE-BATHROOM (816 SF) Estimates of Market Rent by Comparison

OMB Approval No. 2502-0507

U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner

(exp. 10/30/2012)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection. This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. 2. Hotel Fresno

1. Unit Type

A. Iron Bird Lofts

1241 Broadway Plaza Fresno, California

1-bedroom/1-bath (816 sf) Characteristics

B. Vagabond & H Street Lofts

1901 North Fulton Street Fresno, California Data

Data

C. Broadway Lofts

1807 Broadway & 1830 H Street Fresno, California Adjustments

Data

+

-

Adjustments -

Data

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

2-6

1, 2 & 3

1&2

1&2

Data

+

-

10/2012

$25 Walk-up / 2 Stories

1415 Broadway Street Fresno, California Adjustments -

10/2012

10/2012

E. Mayflower Lofts

1729 Fulton Street Fresno, California Adjustments

+

3. Effective Date of Rental

6. Project Occupancy %

D. Fulton Village

1625 Broadway Street Fresno, California

Data

-

$25 Walk-up / 3 Stories

$25

Walk-up / 3 Stories

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

8. Year Built

2013

2010

2011

$18

2011

$18

2011/2012

9. Sq. Ft. Area

816

1,097

($84)

980

($49)

745

$21

700

$35

807

1

1+

($10)

1+

($10)

1+

10. Number of Bedrooms 11. Number of Baths

2008

$50

($10)

1

1+ 1.0

$19 $3 ($10)

1.0

1.0

1.0

1.0

1.0

12. Number of Rooms

5

5

5

5

5

13. Balc./Terrace/Patio

No

Yes

No

No

Yes

On-site uncovered

On-site uncovered

On-site uncovered

On-site uncovered

On-site uncovered

On-site uncovered

Yes

Yes

Yes

Yes

Yes

Yes

b. Range/Oven

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

g. Washer/Dryer

On-site facility

Hook-ups / On-site

On-site

Hook-ups

h. Pool/Rec. Area

No

No

No

No

14. Garage or Carport/Parking 15. Equipment a.

16. Services

A/C

($20)

($10)

Hook-ups

$5 ($10)

No

5 No

($20)

No $5

No Hook-ups

($10)

Heat/Type

No / Central

No / Central

No / Central

No / Central

No / Central

No / Central

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

e. Other: Gargage/Cable 17. Storage 18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

Excellent

Excellent

Average

21. Unit Rent Per Month / Net Adjustment

$995

22. Total Adjustment / Gross Adjustment

$45

$1,000

$169

23. Indicated Rent 24. Correlated Subject Rent

($124)

$916 $1,000 high rent

($69)

$10

$50

Excellent

$130

$895

$199 $1,061

($10)

$74

Courtyard

None

Excellent

Excellent

$875

$84 $959

($30)

$82

$968

$112 $927

($10)

No

b. Cook/Type

a.

$25

1, 2 & 3

1, 2 & 3

7. Concessions

$20

+

10/2012

10/2012

$25 Walk-up / 2 Stories

Adjustments

+

$10 -$20

$57

$77 $1,005

If there are any Remarks, check here and add the remarks to the back of page. $1,061

low rent

$916 Appraiser's Signature

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12 Previous editions are obsolete

form HUD-92273 (07/2003)

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99

RENT ADJUSTMENT GRID - ONE-BEDROOM/ONE-BATHROOM + BALCONY (795 SF) Estimates of Market Rent by Comparison

OMB Approval No. 2502-0507

U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner

(exp. 10/30/2012)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection This agency may not collect this information and you are not required to complete this form unless it displays a currently valid OMB control number 2. Hotel Fresno A. Iron Bird Lofts B. Vagabond & H Street Lofts C. Broadway Lofts D. Fulton Village E. Mayflower Lofts 1. Unit Type

1-bedroom/1-bath 1241 Broadway Plaza Fresno, California (795 sf) Characteristics

1901 North Fulton Street Fresno, California Data

Data

1807 Broadway & 1830 H Street Fresno, California Adjustments

Data

+

-

1625 Broadway Street Fresno, California

Adjustments -

Data

Adjustments

+

10/2012

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

2

1, 2 & 3

1&2

1&2

Data

+

-

3. Effective Date of Rental

6. Project Occupancy %

1729 Fulton Street Fresno, California

$25 Walk-up / 2 Stories

Adjustments -

10/2012

10/2012

1415 Broadway Street Fresno, California Data

-

$25 Walk-up / 3 Stories

$25

Walk-up / 3 Stories

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

8. Year Built

2013

2010

9. Sq. Ft. Area

795

1,097

($91)

1

1+

($10)

1.0

1.0

10. Number of Bedrooms 11. Number of Baths

2008

$43

2011

$18

2011

$18

2011/2012

755

$12

745

$15

700

$29

807

($4)

1

1+

($10)

1.0

1.0

1+

5

5

5

13. Balc./Terrace/Patio

Yes

Yes

No

On-site uncovered

On-site uncovered

On-site uncovered

($10)

1.0 5

5

5 No

On-site uncovered

On-site uncovered

On-site uncovered Yes

$20

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

On-site facility

Hook-ups / On-site

On-site

Hook-ups

g. Washer/Dryer

($10)

Hook-ups

$5 ($10)

No Hook-ups

($10)

No

No

No

No

No

No

No / Central

No / Central

No / Central

No / Central

No / Central

No / Central

b. Cook/Type

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

e. Other: Gargage/Cable 17. Storage 18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

Excellent

Excellent

Average

21. Unit Rent Per Month / Net Adjustment

$995

22. Total Adjustment / Gross Adjustment

$45

$850

$156

23. Indicated Rent 24. Correlated Subject Rent

($111)

$929 $940 high rent

$50

Excellent

$155

$895

$175 $985

($10)

$88

Courtyard

None

Excellent

Excellent

$875

$98 $973

($10)

$76

$968

$86 $941

$5 ($10)

$10

-$24

$79

$103 $1,024

If there are any Remarks, check here and add the remarks to the back of page. $1,024

low rent

$929 Appraiser's Signature

\

($20)

$10

$20

No $5

Services Heat/Type

h. Pool/Rec. Area

$19

Yes

No

$20

b. Range/Oven

15. Equipment a. A/C

16.

1+

($10)

1.0

12. Number of Rooms 14. Garage or Carport/Parking

$25

1, 2 & 3

1, 2 & 3

7. Concessions

$20

+

10/2012

10/2012

$25 Walk-up / 2 Stories

Adjustments

+

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12

Previous editions are obsolete

form HUD-92273 (07/2003)

 Seevers  Jordan  Ziegenmeyer 

100

RENT ADJUSTMENT GRID – TWO-BEDROOM/TWO-BATHROOM (1,023 SF) Estimates of Market Rent by Comparison

U.S. Department of Housing and Urban Development

OMB Approval No. 2502-0507

Office of Housing Federal Housing Commissioner

(exp. 10/30/2012)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection. This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. 2. Hotel Fresno

1. Unit Type

A. Iron Bird Lofts

1241 Broadway Plaza Fresno, California

2-bedroom/2-bath (1,023 sf) Characteristics

B. Vagabond & H Street Lofts

1901 North Fulton Street Fresno, California Data

Data

C. Broadway Lofts

1807 Broadway & 1830 H Street Fresno, California Adjustments

Data

+

-

Adjustments -

D. Fulton Village

1625 Broadway Street Fresno, California Data

Adjustments

+

E. Mayflower Lofts

1729 Fulton Street Fresno, California Data

+

-

1415 Broadway Street Fresno, California Adjustments -

10/2012

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

2-6

1, 2 & 3

1&2

1&2

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

6. Project Occupancy % 8. Year Built

2013

2010

9. Sq. Ft. Area

1,023

1,063

10. Number of Bedrooms 11. Number of Baths 12. Number of Rooms 13. Balc./Terrace/Patio 14. Garage or Carport/Parking

2 1.0

7

6

$25 Walk-up / 2 Stories

$20 ($12)

$25 Walk-up / 2 Stories

$45

2011

$18

2011

$31

745

$83

1,300

1+

$40

2

$50

1.0

$50

1.5

1.0

5

6

$25

Walk-up / 3 Stories

$28

2011/2012

1.5

No

Yes

No

No

Yes

($20)

No

On-site uncovered

On-site uncovered

On-site uncovered

Garage

($50)

On-site uncovered

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

On-site facility

Hook-ups / On-site

On-site

Hook-ups

($10)

Hook-ups

$5 ($10)

No $5

No Hook-ups

($10)

No

No

No

No

No

No

Heat/Type

No / Central

No / Central

No / Central

No / Central

No / Central

No / Central

b. Cook/Type

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

h. Pool/Rec. Area a.

e. Other: Gargage/Cable 17. Storage 18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

Excellent

Excellent

Average

21. Unit Rent Per Month / Net Adjustment

$995

22. Total Adjustment / Gross Adjustment

($42)

$95

$900

$137

23. Indicated Rent 24. Correlated Subject Rent

$25

7

7

Yes

g. Washer/Dryer

($20)

2 $25

Yes

A/C

$24

1,088

($83)

On-site uncovered

($20)

$1,048 $1,225 high rent

($10)

$10

$50

Excellent

$206

$895

$216 $1,096

$0

$226

Courtyard

None

Excellent

Excellent

$1,395

$226 $1,121

($163)

$83

$1,200

$246 $1,315

$25

1, 2 & 3

1, 2 & 3

920 2 $50

$25 Walk-up / 3 Stories

2008

+

10/2012

10/2012

b. Range/Oven

15. Equipment a.

16. Services

2 2.0

10/2012

Adjustments -

3. Effective Date of Rental

7. Concessions

10/2012

Data

+

$5 ($10)

$10 -$30

$89

$119 $1,260

If there are any Remarks, check here and add the remarks to the back of page. $1,315

low rent

$1,048 Appraiser's Signature

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12 Previous editions are obsolete

form HUD-92273 (07/2003)

 Seevers  Jordan  Ziegenmeyer 

101

RENT ADJUSTMENT GRID - TWO-BEDROOM/TWO-BATHROOM + BALCONY (985 SF) Estimates of Market Rent by Comparison

U.S. Department of Housing and Urban Development Office of Housing

OMB Approval No. 2502-0507 (exp. 10/30/2012)

Federal Housing Commissioner

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection. This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. 2. Hotel Fresno

1. Unit Type

A. Iron Bird Lofts

1241 Broadway Plaza Fresno, California

2-bedroom/2-bath (985 sf) Characteristics

B. Vagabond & H Street Lofts

1901 North Fulton Street Fresno, California Data

Data

C. Broadway Lofts

1807 Broadway & 1830 H Street Fresno, California Adjustments

Data

+

-

Adjustments -

Data

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

2

1, 2 & 3

1&2

1&2

Data

+

-

10/2012

$25 Walk-up / 2 Stories

1415 Broadway Street Fresno, California Adjustments -

10/2012

10/2012

E. Mayflower Lofts

1729 Fulton Street Fresno, California Adjustments

+

3. Effective Date of Rental

6. Project Occupancy %

D. Fulton Village

1625 Broadway Street Fresno, California

Data

-

$25 Walk-up / 3 Stories

$25

Walk-up / 3 Stories

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

8. Year Built

2013

2010

9. Sq. Ft. Area

985

1,063

10. Number of Bedrooms 11. Number of Baths 12. Number of Rooms 13. Balc./Terrace/Patio 14. Garage or Carport/Parking

2 1.0

7

6

2008

$45

2011

$18

2011

920

$20

745

$72

1,300

1+

$40

2

$50

1.0

$50

1.5

2 $50

1.0

5

6

Yes

Yes

No

On-site uncovered

On-site uncovered

On-site uncovered

No

$20

Garage

2011/2012

1.5 No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

On-site facility

Hook-ups / On-site

On-site

Hook-ups

($10)

Hook-ups

($10)

No $5

No Hook-ups

($10)

No

No

No

No

No

No

Heat/Type

No / Central

No / Central

No / Central

No / Central

No / Central

No / Central

b. Cook/Type

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

h. Pool/Rec. Area a.

e. Other: Gargage/Cable 17. Storage 18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

Excellent

Excellent

Average

21. Unit Rent Per Month / Net Adjustment

$995

22. Total Adjustment / Gross Adjustment

$95

$900

$128

23. Indicated Rent 24. Correlated Subject Rent

($33)

$1,057 $1,200 high rent

($10)

$10

$50

Excellent

$215

$895

$225 $1,105

$0

$235

Courtyard

None

Excellent

Excellent

$1,395

$235 $1,130

($155)

$83

$1,200

$237 $1,323

$20

On-site uncovered

($50)

Yes

g. Washer/Dryer

$25

7

Yes

$5

($31)

2 $25

Yes

A/C

$24

1,088

7

On-site uncovered

$20

$28 ($95)

b. Range/Oven

15. Equipment a.

16. Services

2 2.0

$20

$25

1, 2 & 3

1, 2 & 3

7. Concessions

($23)

+

10/2012

10/2012

$25 Walk-up / 2 Stories

Adjustments

+

$5 ($10)

$10 -$41

$109

$150 $1,268

If there are any Remarks, check here and add the remarks to the back of page. $1,323

low rent

$1,057 Appraiser's Signature

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12 Previous editions are obsolete

form HUD-92273 (07/2003)

 Seevers  Jordan  Ziegenmeyer 

102

RENT ADJUSTMENT GRID – THREE-BEDROOM/TWO-BATHROOM (1,113 SF) OMB Approval No. 2502-0507

U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner

Estimates of Market Rent by Comparison

(exp. 10/30/2012)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection. This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. 2. Hotel Fresno

1. Unit Type

A. Iron Bird Lofts

1241 Broadway Plaza Fresno, California

3-bedroom/2-bath (1,113 sf) Characteristics

B. Vagabond & H Street Lofts

1901 North Fulton Street Fresno, California Data

Data

C. Broadway Lofts

1807 Broadway & 1830 H Street Fresno, California Adjustments

Data

+

-

Adjustments -

D. Fulton Village

1625 Broadway Street Fresno, California Data

Adjustments

+

E. Mayflower Lofts

1729 Fulton Street Fresno, California -

Data

+

1415 Broadway Street Fresno, California Adjustments -

10/2012

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

2-6

3

1&2

1&2

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

6. Project Occupancy % 8. Year Built

2013

2010

9. Sq. Ft. Area

1,113

1,530

10. Number of Bedrooms 11. Number of Baths

3

2

2.0

2.0

12. Number of Rooms

8

7

13. Balc./Terrace/Patio

No

Yes

On-site uncovered Yes

b. Range/Oven

$25 Walk-up / 2 Stories

$30 ($125) $50

$25 Walk-up / 2 Stories

2008

$49

2011

988

$38

1,145

$25 Walk-up / 3 Stories

$25

$21

2011 1,300

Walk-up / 3 Stories

$28

2011/2012

$38

1,600

($56)

2

$50

1

$100

2

$50

2+

1.0

$50

1.0

$50

1.5

$25

2.0

($146) $40

6

5

7

No

Yes

($20)

No

On-site uncovered

On-site uncovered

On-site uncovered

Garage

($50)

On-site uncovered

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

On-site facility

Hook-ups / On-site

On-site

Hook-ups

15. Equipment a.

A/C

g. Washer/Dryer

($20)

($10)

Hook-ups

$5 ($10)

7

No $5

No Hook-ups

($10)

No

No

No

No

No

No

Heat/Type

No / Central

No / Central

No / Central

No / Central

No / Central

No / Central

b. Cook/Type

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

h. Pool/Rec. Area a.

e. Other: Gargage/Cable 17. Storage 18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

Excellent

Excellent

Average

21. Unit Rent Per Month / Net Adjustment

$1,500

22. Total Adjustment / Gross Adjustment

$105

$975

$260

23. Indicated Rent 24. Correlated Subject Rent

($155)

$1,450 $1,350 high rent

($10)

$10

$50

Excellent

$266

$1,050

$276 $1,231

($10)

$206

Courtyard

None

Excellent

Excellent

$1,395

$216 $1,246

($136)

$133

$1,895

$269 $1,392

$25

3

1, 2 & 3

($10)

+

10/2012

10/2012

No

14. Garage or Carport/Parking

16. Services

10/2012

Adjustments -

3. Effective Date of Rental

7. Concessions

10/2012

Data

+

$5 ($10)

$10 ($156)

$118

$274 $1,857

If there are any Remarks, check here and add the remarks to the back of page. $1,857

low rent

$1,231 Appraiser's Signature

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12 Previous editions are obsolete

form HUD-92273 (07/2003)

 Seevers  Jordan  Ziegenmeyer 

103

RENT ADJUSTMENT GRID - THREE-BEDROOM/TWO-BATHROOM + BALCONY (1,291 SF) Estimates of Market Rent by Comparison

U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner

OMB Approval No. 2502-0507 (exp. 10/30/2012)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection. This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. 2. Hotel Fresno

1. Unit Type

A. Iron Bird Lofts

1241 Broadway Plaza Fresno, California

3-bedroom/2-bath (1,291 sf)

B. Vagabond & H Street Lofts

1901 North Fulton Street Fresno, California

C. Broadway Lofts

1807 Broadway & 1830 H Street Fresno, California

Data

Data

10/2012

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

2

3

1&2

1&2

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

8. Year Built

2013

2010

9. Sq. Ft. Area

1,291

1,530

10. Number of Bedrooms 11. Number of Baths

3

2

2.0

2.0

$25 Walk-up / 2 Stories

$30 ($72) $50

Adjustments +

Adjustments +

Data

$25 Walk-up / 2 Stories

$25 Walk-up / 3 Stories

$25

$49

2011

$21

2011

$91

1,145

$44

1,300

Walk-up / 3 Stories

$28

2011/2012

2

$50

1

$100

2

$50

2+

$50

1.0

$50

1.5

$25

2.0

7

7

$20

No

$20

Yes

No

8

7

6

Yes

No

On-site uncovered

On-site uncovered

On-site uncovered

5

On-site uncovered

Garage

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

On-site facility

Hook-ups / On-site

On-site

Hook-ups

A/C

g. Washer/Dryer

($10)

Hook-ups

$5 ($10)

No Hook-ups

($10)

No

No

No

No

No

No

No / Central

No / Central

No / Central

No / Central

No / Central

b. Cook/Type

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

e. Other: Gargage/Cable

18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

Excellent

Excellent

Average

21. Unit Rent Per Month / Net Adjustment

$1,500

22. Total Adjustment / Gross Adjustment

$105

$975

$187

23. Indicated Rent 24. Correlated Subject Rent

($82)

$1,523 $1,500 high rent

($10)

$10

$50

Excellent

$340

$1,050

$350 $1,305

$0

$270

Courtyard

None

Excellent

Excellent

$1,395

$270 $1,320

($63)

$133

$1,895

$196 $1,465

$20

No $5

No / Central

17. Storage

$40

Yes

Heat/Type

h. Pool/Rec. Area a.

($93)

On-site uncovered

($50)

b. Range/Oven

15. Equipment a.

$38

1,600

($3)

1.0

Yes

$25

3

1, 2 & 3

988

Adjustments +

10/2012

10/2012

2008

13. Balc./Terrace/Patio

16. Services

Data

10/2012

10/2012

12. Number of Rooms

14. Garage or Carport/Parking

Adjustments +

Data

1415 Broadway Street Fresno, California

Characteristics

7. Concessions

Data

E. Mayflower Lofts

1729 Fulton Street Fresno, California

3. Effective Date of Rental

6. Project Occupancy %

Adjustments +

D. Fulton Village

1625 Broadway Street Fresno, California

$5 ($10)

$10

($103)

$138

$241 $1,930

If there are any Remarks, check here and add the remarks to the back of page. $1,930

low rent

$1,305 Appraiser's Signature

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12 Previous editions are obsolete

form HUD-92273 (07/2003)

 Seevers  Jordan  Ziegenmeyer 

104

RENT ADJUSTMENT GRID - THREE-BEDROOM/TWO-BATHROOM PENTHOUSE + LOFT (1,862 SF) Estimates of Market Rent by Comparison

U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner

OMB Approval No. 2502-0507 (exp. 10/30/2012)

Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required by the Housing Appropriation Act of 9/28/1994. The information is needed to analyze the reasonableness of the Annual Adjustment Factor formula, and will be used where rent levels for a specific unit type, in a Substantial Rehabilitation or New Construction Contract, exceed the existing FMR rent. The information is considered nonsensitive and does not require special protection. This agency may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. 2. Hotel Fresno

1. Unit Type

A. Iron Bird Lofts

1241 Broadway Plaza Fresno, California

3-bedroom/2-bath Penthouse Characteristics

B. Vagabond & H Street Lofts

1901 North Fulton Street Fresno, California Data

Data

C. Broadway Lofts

1807 Broadway & 1830 H Street Fresno, California Adjustments

Data

+

-

Adjustments -

D. Fulton Village

1625 Broadway Street Fresno, California Data

Adjustments

+

E. Mayflower Lofts

1729 Fulton Street Fresno, California Data

+

-

1415 Broadway Street Fresno, California Adjustments -

10/2012

10/2012

4. Type of Project/Stories

Mid-Rise / 7 Stories

Walk-up / 3 Stories

5. Floor of Unit in Building

7

3

1&2

0%

92%

100%

100%

90%

94%

None

None

None

None

None

None

6. Project Occupancy %

10/2012 $25 Walk-up / 2 Stories

1&2

$75

+

10/2012

10/2012

$25 Walk-up / 2 Stories

Adjustments -

3. Effective Date of Rental

7. Concessions

10/2012

Data

+

$25 Walk-up / 3 Stories

$25

Walk-up / 3 Stories

$75

$75

3

1, 2 & 3

$25

8. Year Built

2013

2010

$30

2008

$49

2011

$21

2011

$28

2011/2012

$38

9. Sq. Ft. Area

1,862

1,530

$100

988

$262

1,145

$215

1,300

$169

1,600

$79

$60

$50

10. Number of Bedrooms

3+

2

11. Number of Baths

2.0

2.0

12. Number of Rooms

8

7

13. Balc./Terrace/Patio

No

Yes

On-site uncovered Yes

b. Range/Oven

$60

1

$110

2

$60

2+

$50

1.0

$50

1.5

$25

2.0

6

5

7

No

No

Yes

($10)

No

On-site uncovered

On-site uncovered

On-site uncovered

Garage

($50)

On-site uncovered

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

c. Refrigerator

Yes

Yes

Yes

Yes

Yes

Yes

d. Disposal

Yes

Yes

Yes

Yes

Yes

Yes

e. Microwave

No

No

No

No

No

f. Dishwasher

Yes

Yes

No

Yes

No

Hook-ups

Hook-ups / On-site

14. Garage or Carport/Parking A/C

15. Equipment a.

g. Washer/Dryer

($10)

($5)

$5

On-site

Hook-ups

$10

7

No $5

No

No

No

No

No

No

No

No / Central

No / Central

No / Central

No / Central

No / Central

No / Central

b. Cook/Type

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

No / Electric

c. Electricity

No

No

No

No

No

No

d. Water Cold/Hot

Yes

Yes

Yes

Yes

Yes

Yes

a.

e. Other: Gargage/Cable 17. Storage 18. Project Location/Visibility 19. Other: Additional Amenities 20. Other: Quality/Appeal

Yes

Yes

Yes

Yes

Yes

Yes

Average

Average

Average

Average

Average

Average

Average

Average

Good

Average

Average

Average

Lounge

BBQ Area

Courtyard

None

$10

Courtyard

Excellent

Good

$100

Good

$50

Good

$626

$1,050

$566

$1,395

21. Unit Rent Per Month / Net Adjustment

$1,500

22. Total Adjustment / Gross Adjustment

Average

$265

$975

$280

23. Indicated Rent 24. Correlated Subject Rent

($15)

$50

$1,750 $2,100 high rent

$0 $626

$1,601

$0 $566

$1,616

None

($60)

$50

Excellent

$437

$1,895

$497 $1,772

$5

Hook-ups

Hook-ups

Heat/Type

h. Pool/Rec. Area 16. Services

2 1.0

$10 $0

$207

$207 $2,102

If there are any Remarks, check here and add the remarks to the back of page. $2,102

low rent

$1,601 Appraiser's Signature

Date (mm/dd/yy)

Reviewer's Signature

Date (mm/dd/yy)

10/17/12 Previous editions are obsolete

form HUD-92273 (07/2003)

 Seevers  Jordan  Ziegenmeyer 

105

Market Rent Conclusion – Residential In order to establish market rent for the subject’s 73 market rate residential units, we surveyed a number of comparable apartment projects within the subject’s neighborhood and surrounding areas. The comparable properties presented on the preceding pages are considered to be the most similar to the subject that we could accurately confirm. A summary of the concluded market rental rates is offered as follows: Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA + Loft Penthouse

# of Units 3 1 79 2 9 4 7

Avg. Rentable Area (SF) Pro-forma Rent/Month 816 $979 795 $954 1,023 $1,228 985 $1,231 1,113 $1,336 1,291 $1,640 1,862 $2,234

Market Rent/Month $1,000 $950 $1,225 $1,200 $1,350 $1,500 $2,100

Our conclusions of market rent for the one-bedroom/one-bath units (816 sf) are slightly higher than the subject’s pro-forma estimates and our conclusion of market rent for the subject’s one-bedroom unit that includes a balcony is consistent with the subject’s pro-forma rental rate estimate. Rent 4 (Fulton Village) and Rent 5 (Mayflower Lofts) were relied upon in our conclusions of market rent for the subject’s one-bedroom units, as these comparables required the least amount of overall adjustments. Our conclusions of market rent are generally consistent with the pro-forma estimates for the two-bedroom and two-bedroom with balcony units. In the analysis of the subject’s twobedroom units, Rent 1 (Iron Bird Lofts) and Rent 5 (Mayflower Lofts) received the least amount of adjustments and were given the most consideration in our conclusion. Our conclusion of market rent for the three-bedroom units (1,113 sf) is slightly above the pro-forma estimate and the our conclusions of market rent for the three-bedroom with balcony and penthouse units are below the pro-forma estimates. Rent 1 (Iron Bird Lofts), Rent 3 (Broadway Lofts) and Rent 5 (Mayflower Lofts) proved to be the best indicators of market rent for the subject’s three-bedroom unit types as they received the least amount of adjustments. Market Rent Conclusion – Residential (Restricted Units) In addition to the 73 market rate apartment units, the subject property will also have six restricted units. According to the developer, Mr. Mehran Baghgegian, the six restricted units will not be floating units and will be contained within the second and third floors. The following assigned lowincome/restricted units will be utilized in our calculation of potential gross income for the subject, as shown in the table on the following page.

 Seevers  Jordan  Ziegenmeyer 

106

Restricted Rent Apartment Units: Unit No. 1

Avg. Rentable Area (SF) 816

Average Pro-forma Lease Rate/Mo. $543

1-bedroom/1-bathroom

3

816

$687

2-bedroom/2-bathroom

2

1,023

$826

Unit Type 1-bedroom/1-bathroom

Laundry Income The subject property represents a proposed project; thus, historical laundry income was not available. Based on a survey of similar projects in the area, laundry income typically ranges from $50 to $100 per unit on an annual basis. This is evidenced by the expense comparable Iron Bird Lofts, presented in the analysis of operating expenses later in this section that averaged $74 per unit/year during 2011. Given that the subject will include hook-ups for washers and dryers within the three-bedroom penthouse units, a laundry income of $75 per unit, annually, or $5,925 per year for laundry income for the subject. Miscellaneous Income - Residential Additionally, the subject will receive other miscellaneous income in the form of late charges, security deposits forfeited and repair and expense reimbursements. Typically for apartment complexes miscellaneous income ranges from $25 to $100 per unit on an annual basis. The subject property represents a proposed project; thus, historical miscellaneous information was not available. Based on a survey of the expense comparables included in our expense analysis section of this report, miscellaneous ranges from $30 to $258 per unit on an annual basis. Given the specifics of the subject, we have concluded miscellaneous income at $150 per unit, annually, or $11,850 for the subject’s miscellaneous income. Apartment Market Rental Income Based on the concluded market rents for the subject’s 73 market rate apartment units, the restricted rents for the six low-income apartment units and the concluded laundry income and miscellaneous income, the potential gross rental income (residential component) is calculated in the table on the following page.

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Market Rent Conclusions Market Rate Apartment Units Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA + Loft Penthouse

# of Units 28 1 22 2 9 4 7

Avg. Rentable Area (SF) 816 795 1,023 985 1,113 1,291 1,862

Pro-forma Rent/Month $979 $954 $1,228 $1,231 $1,336 $1,640 $2,234

Market Rent/Month $1,000 $950 $1,225 $1,200 $1,350 $1,500 $2,100

Monthly Income $28,000 $950 $26,950 $2,400 $12,150 $6,000 $14,700

Annual Income $336,000 $11,400 $323,400 $28,800 $145,800 $72,000 $176,400

1 BR/1 BA 1 BR/1 BA 2 BR/2 BA

1 3 2

816 816 1,023

$543 $687 $826

Restricted Rent/Month $543 $687 $826

$543 $2,061 $1,652

$6,516 $24,732 $19,824

Total

79

$95,406

$1,144,872

Restricted Rent Apartment Units

Laundry Income

$5,925

Miscellaneous Income

$11,850 Total Potential Gross Income - Residential:

1,162,647

Market Rent Comparables - Commercial We will determine market rent for the commercial suites by analyzing rents being achieved by similar commercial properties located in the subject’s neighborhood. Our research revealed several properties that are considered to be good indicators of market rent for the subject property. As previously mentioned throughout this report, the subject’s suites range from 1,600 square feet (average size of smaller suites) to 7,345

square feet (average size of larger units) of rentable area. Given the wide range of suite sizes, two sets of rent comparables (small and large) will be analyzed to determine market rent for the subject property. On the following pages, we will present a location map of the subject and comparables, followed by our HUD Form 92273 adjustment grid.

RETAIL RENT SURVEY Tenant / Property Identification

Lease Date

Lease Term

Rentable Area (SF)

Rent PSF/Mo.

Lease Type

Increases

Year Built

1

Valley Water Wise 1901 North Fulton Street, Suite 112 Fresno

Feb-12

1 year

179

$1.96

Gross

N/Av

2009

2

Fresno Capital Fund, LLC 1221 Van Ness Avenue Fresno

Jul-11

5 years

1,130

$1.30

Mod. Gross

Scheduled

N/Av

3

Bistro Fresno 901 L Street Fresno

Jan-11

5 years

1,500

$1.50

Mod. Gross

Scheduled

1929/2009

4

Listing 954 & 970 N Street Fresno

Listing

Negotiable

1,336

$1.65

NNN

Negotiable

N/Av

No. Smaller Suites

Larger Suites 5

City of Fresno Construction Management 1721 Van Ness Avenue Fresno

Sep-12

N/Av

10,500

$1.20

Gross

N/Av

N/Av

6

Fresno County Hispanic Commission 1805 Broadway Street, Suites C2, C5 & C7 Fresno

Aug-12*

5 years

5,000

$1.20

Gross

N/Av

2006/2008

7

Public Health Institute 2100 Tulare Street, Suite 160 Fresno

Apr-12

N/Av

2,400

$1.30

Gross

N/Av

1930

8

Listing 1759 Fulton Street Fresno

Listing

Negotiable

4,319

$1.50

NNN

Negotiable

2011

*Renewal of an existing lease

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RETAIL RENT COMPARABLE MAP

RENTAL 1 Valley Water Wise 1901 North Fulton Street, Suite 112 Fresno, Fresno County

This lease is for 179 square feet of commercial space located within the Iron Bird Lofts project, a mixed use project that consists of residential units and ground floor commercial space. The rent is $1.96 psf/month, gross.

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RENTAL 2 Fresno Capital Fund, LLC 1221 Van Ness Avenue Fresno, Fresno County

This lease is for 1,130 square feet of commercial space located along Van Ness Avenue, which is a major neighborhood thoroughfare. The rent is $1.30 psf, modified gross, with scheduled increases.

RENTAL 3 Bistro Fresno 901 L Street Fresno, Fresno County This is a lease for 1,500 square feet of ground floor commercial space within the Virginia Building. The rent is $1.50 psf, modified gross, with scheduled increases. The lease term is for 5 years with two 5-year options. This property was built in 1929, however, it was completely renovated in 2009.

RENTAL 4 (LISTING) Listing 954 & 970 N Street Fresno, Fresno County This lease is for 1,336 square feet of commercial space along Tulare Street, which is considered a major neighborhood thoroughfare. Although exact age of this property is unknown it appears to be newer or recently renovated and is considered only slightly inferior to the subject in terms of age. The asking rent is $1.65 psf, modified gross.

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RENTAL 5 City of Fresno Construction Management 1721 Van Ness Avenue Fresno, Fresno County

This comparable represents a recent lease of 10,500 square feet of commercial space along Van Ness Avenue in downtown Fresno. The tenant signed a lease at a rental rate of $1.20 psf/month, gross. The lease term and escalations were not available.

RENTAL 6 Fresno County Hispanic Commission 1805 Broadway Street, Suites C2, C5 & C7 Fresno, Fresno County

This comparable represents a recent lease renewal of 5,000 square feet of commercial space located within the Vagabond Lofts project (ground floor). The tenant renewed at a rental rate of $1.20 psf/month, gross.

RENTAL 7 Public Health Institute 1805 Broadway Street, Suites C2, C5 & C7 Fresno, Fresno County This lease represents 2,400 square feet of commercial space located within the historic Rowell Building in downtown Fresno. The tenant signed the lease in April 2012 at a rental rate of $1.30 psf/month, gross. The building was constructed in 1930 and has been renovated.

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RENTAL 8 (LISTING) Listing 1759 Fulton Street Fresno, Fresno County This is a current listing for a 3,699 square foot retail suite within the Fulton Village mixed-use project, which is located one block east of the subject. This project is still under construction and is expected to be excellent in terms of quality/appeal. The asking rent is $1.50 psf, NNN.

RETAIL RENT ADJUSTMENT GRIDS Estimates of Market Rent by Comparison

U.S. Department of Housing and Urban Development

OMB Approval No. 2502-0029

Office of Housing

(exp. 7/31/2009)

Federal Housing Commissioner Pub lic R ep o r t i ng B ur d en for this collection of indormation is estimated to average 24 hours per response, including the time for reviewing inst ructions, searching existing data sources, gathering and maint aining t he data needed, and completing and reviewing the collection of information. This information is required to obtain benefits. HUD may not collect t his information, and you are not required to complete this form, unless it displays a currently valid OM B number. This information is being collected under Public Law 101-625, which requires the Department of Housing and urban Development to implement a system for mortgage insusrance for mortgage insured under Sections 207, 221, 223, 232, 0r 241 of the National Housing Act. The information will be used by HUD to approve rents, propert y appriasals, and mortage amounts, and to execute a firm committment. Confident iality to respondents is ensured if it would result in competitive harm in accordance with Freedom of Information Act (FOIA) provisions, or if it could impact on the ability of the Department's mission t o provide housing units under t he various Sect ions of the housing legislation.

1. Unit Type

2 Subject Property (Address)

A. Comparable Property No. 1

B. Comparable Property No. 2

D. Comparable Property No. 3

C. Comparable Property No. 4

Commercial

1241 Broadw ay Plaza

1901 North Fulton Street, Suite 112

1221 Van Ness Avenue

901 L Street

954 & 970 N Street

Fresno, California

Fresno, CA

Fresno, CA

Fresno, CA

Characteristics

Data

Adjustments

Data

3. Effective Date of Lease

Adjustments

Data

+

-

Fresno, CA Adjustments

Data

+

-

-

Oct-12

Feb-12

Jul-11

Jan-11

Listing

4. Type of Project

Commercial

Similar

Similar

Similar

Similar

5. Tenant Space

Ground floor/in-line

Similar

Similar

Similar

Similar

6. Project Occupancy

0%

N/Av

N/Av

N/Av

7. Concessions

None

N/Av

N/Av

N/Av

8. Year Built

2013

2009

9. Rentable Area (SF) 10. Parking

$0.20

N/Av $0.05

N/Av

179

1,130

1,500

1,336

Similar

Similar

Similar

Similar

Gross

Gross

Mod. Gross

Mod. Gross

NNN

Good

Similar

Similar

Similar

Similar

Average

Similar

Similar

Similar

Similar

Excellent

Similar

Sl. Inferior

$0.07

Similar

$0.05

$0.20

Similar

Lease Conditions

Listing

14. Unit Rent Per SF/Mo

$1.96

15. Total Adjustment PSF

$1.30

$1.50

($0.24)

16. Indicated Rent PSF

$0.26

$1.72

17. Correlated Subject Rent PSF

$1.60

($0.25) $1.65

$0.05

$1.56

+

N/Av

1929/2009

1,600

12. Project Location/Visibility Quality/Appeal

($0.29)

N/Av

Street Only

11. Lease Type 13. Other: Tenant Improvements

$0.06

Adjustments

Data

+

$0.00

$1.55

$1.65

If there are any Rem arks, check here and add the rem arks to the back of page.

No te: In the adjustments co lumn, enter do llar amo unts by which subject pro perty varies fro m co mparable pro perties. If subject is better, enter a "P lus" amo unt and if subject is 'inferio r to the co mparable, enter a "M inus" amo unt. Use back o f page to explain adjustments as needed.

Appraiser's Signature

Review er's Signature

Date (mm/dd/yyyy) 10/17/2012

Previous editions are obsolete

form HUD-92273 (07/2003)

Estimates of Market Rent by Comparison

U.S. Department of Housing and Urban Development

OMB Approval No. 2502-0029

Office of Housing

(exp. 7/31/2009)

Federal Housing Commissioner Pub lic R ep o r t ing B ur d en for this collection of indormation is estimated to average 24 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required to obtain benefits. HUD may not collect this information, and you are not required to complete this form, unless it displays a currently valid OM B number. This information is being collected under Public Law 101-625, which requires the Department of Housing and urban Development to implement a system for mortgage insusrance for mortgage insured under Sections 207, 221, 223, 232, 0r 241 of the National Housing Act. The information will be used by HUD to approve rents, property appriasals, and mortage amounts, and to execute a firm committment. Confidentiality to respondents is ensured if it would result in competitive harm in accordance wit h Freedom of Information Act (FOIA) provisions, or if it could impact on the ability of the Department's mission to provide housing units under the various Sections of the housing legislation.

1. Unit Type

2 Subject Property (Address)

A. Comparable Property No. 1

B. Comparable Property No. 2

Commercial

1241 Broadw ay Plaza

1721 Van Ness Avenue

1805 Broadw ay Street, Suites C2, C5 & C7 2100 Tulare Street, Suite 160

Fresno, California

Fresno, CA

Fresno, CA

Characteristics

Data

Adjustments

Data

3. Effective Date of Lease

D. Comparable Property No. 3

C. Comparable Property No. 4 1759 Fulton Street

Fresno, CA Adjustments

Data

+

-

Fresno, CA Adjustments

Data

+

-

-

Oct-12

Sep-12

Aug-12*

Apr-12

Listing

4. Type of Project

Commercial

Similar

Similar

Similar

Similar

5. Tenant Space

Ground floor/in-line

Similar

Similar

Similar

Similar

6. Project Occupancy

0%

N/Av

N/Av

N/Av

7. Concessions

None

N/Av

N/Av

N/Av

8. Year Built

2013

N/Av

$0.12

7,354

10,500

$0.06

Street Only

Similar

9. Rentable Area (SF) 10. Parking 11. Lease Type 12. Project Location/Visibility 13. Other: Tenant Improvements Quality/Appeal

2006/2008 5,000

$0.06 ($0.06)

Similar

N/Av $0.13

2,400

($0.13)

Similar

4,319

Gross

Gross

Gross

NNN

Good

Similar

Similar

Similar

Similar

Similar

Similar

Similar

Similar

Similar

Similar

($0.08)

Similar

Similar

$0.20

Similar

Lease Conditions

Listing $1.20

15. Total Adjustment PSF

$1.20 $0.18

16. Indicated Rent PSF 17. Correlated Subject Rent PSF

2011

Gross

14. Unit Rent Per SF/Mo

$1.38 $1.30

$1.30 $0.00

$1.20

+

N/Av

1930

Average Excellent

Adjustments

Data

+

($0.23) $1.50

$0.00 $1.30

($0.10) $1.40

If there are any Rem arks, check here and add the remarks to the back of page.

No te: In the adjustments column, enter do llar amo unts by which subject pro perty varies fro m co mparable pro perties. If subject is better, enter a "P lus" amo unt and if subject is 'inferio r to the co mparable, enter a "M inus" amo unt. Use back of page to explain adjustments as needed.

Appraiser's Signature

Review er's Signature

Date (mm/dd/yyyy) 10/17/2012 form HUD-92273 (07/2003)

Previous editions are obsolete

In order to establish market rent for the subject’s commercial space, we surveyed a number of comparable commercial properties within the Downtown Fresno submarket. The comparable

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112

properties presented on the preceding pages are considered to be the most similar to the subject that we could accurately confirm. We have utilized a gross lease type for the subject, similar to the leasing strategy of most of the comparables. Under a gross leasing strategy, the tenant is responsible for their utilities and janitorial expenses only. The landlord covers, property taxes, insurance, maintenance and repairs and property management expenses. Additional factors considered when adjusting the comparables consist of effective date of the lease, type of project, tenant space, project occupancy, concessions, year built, rentable area, parking, lease type, project location/visibility, tenant improvements, quality/appeal and lease conditions. In equating the comparables to the subject, most required little adjustment and all are considered good indicators of market rent for the subject. After analyzing the data, the rental range narrowed to $1.55 to $1.72 per square foot, per month, gross, for the smaller suites, and $1.20 to $1.40 per square foot, per month, gross, for the larger suites. Given the adjusted rental rates and the specific nuances of the subject, a market rent for the subject of $1.60 per square foot, per month, gross, for the smaller suites, and a market rent of $1.30 per square foot, per month, gross, for the larger suites appear reasonable. The subject does not have any executed commercial leases; thus, market rent will be used for the subject’s suites in our calculation of potential gross income for the subject. Total Potential Gross Income The total potential gross income for the subject consists of market rent and restricted rent for the apartment units, market rent for the commercial component, laundry income and miscellaneous income. These various income sources are summarized on the next page. The calculation of total potential gross income is presented in the Income Capitalization Approach summary sheet at the end of this section.

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Market Rent Conclusions Market Rate Apartment Units Unit Type # of Units Avg. Rentable Area (SF) Pro-forma Rent/Month 1 BR / 1 BA 28 816 $979 1 BR / 1 BA + Balcony 1 795 $954 2 BR / 2 BA 22 1,023 $1,228 2 BR / 2 BA + Balcony 2 985 $1,231 3 BR / 2 BA 9 1,113 $1,336 3 BR / 2 BA + Balcony 4 1,291 $1,640 3 BR / 2 BA + Loft Penthouse 7 1,862 $2,234

Market Rent/Month $1,000 $950 $1,225 $1,200 $1,350 $1,500 $2,100

Monthly Income Annual Income $28,000 $336,000 $950 $11,400 $26,950 $323,400 $2,400 $28,800 $12,150 $145,800 $6,000 $72,000 $14,700 $176,400

Restricted Rent Apartment Units 1 BR/1 BA 1 BR/1 BA 2 BR/2 BA

1 3 2

Total

79

816 816 1,023

$543 $687 $826

Restricted Rent/Month $543 $687 $826

$543 $2,061 $1,652

$6,516 $24,732 $19,824

$95,406

$1,144,872

Laundry Income

$5,925

Miscellaneous Income

$11,850

Commercial Component Unit 102 Unit 103 Unit 104 Unit 105 Unit 106

1 1 1 1 1

7,218 1,468 1,827 1,505 7,490

5

19,508

Pro-forma Rent PSF/Month, NNN

Pro-forma Rent PSF/Month, Gross

$1.35 $1.35 $1.35 $1.35 $1.35

$1.30 $1.60 $1.60 $1.60 $1.30

$9,383 $2,349 $2,923 $2,408 $9,737

$112,601 $28,186 $35,078 $28,896 $116,844

$26,800

$321,605

Total Potential Gross Income:

1,484,252

Vacancy and Collection Loss This portion of the analysis considers the valuation of the subject property at stabilized occupancy. Stabilized occupancy is defined as follows: An expression of the expected occupancy of a property in its particular market considering current and forecasted supply and demand, assuming it is priced at market rent. 14 In keeping with the concept of stabilized occupancy, an allowance for vacancy and collection loss must be considered for reductions in potential income attributable to vacancies, tenant turnover, and nonpayment of rent. The apartment rent comparables surveyed reflect a range in vacancy from 0% to 10%, with an average of 5%. Additionally, as indicated in the Apartment Market Overview section of this report the Second Quarter 2012 for the Central Valley region (including the counties of Fresno, Madera, Merced and Stanislaus) was 6%, which suggests that the market is moving towards equilibrium. Given the current stabilized occupancy rate of the subject’s submarket as well as the Central Valley region, the overall risk to the subject property appears to be low with sufficient to increasing demand. However, per HUD requirements, the minimum vacancy and collection loss must

14

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 185.

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be 7%. Thus, over the economic life of the property, it is forecasted the normal vacancy rate will be 7% of potential gross income. As indicated in the Retail Market Overview section of this report the Second Quarter 2012 retail market vacancy rate in the Fresno area was 11.6%. Additionally, our retail submarket analysis indicated an 8.1% vacancy rate for the subject’s neighborhood (95721 zip code). After taking into account all market factors for the retail component, a stabilized vacancy rate of 10% is considered reasonable over the life of the property for the commercial component. OPERATING EXPENSE ANALYSIS Introduction To determine operating expenses for the subject as a mixed-use project with 79 multifamily units and five commercial suites, we considered the pro-forma expenses provided by the developer and expenses of comparable mixed-use projects operating at a stabilized level. Typically, the best indications of a property’s future expenses are its historical expenses; however, since the subject will represent new construction upon completion, we have relied upon our research of the market, discussions with the developer and indications from the market expense comparables as they apply to the unique characteristics of the subject’s future improvements. The following table exhibits expenses of several comparable mixed-use projects in Northern California, the pro-forma expense estimates provided by the developer of the subject and the concluded pro-forma expenses. It is noted, the pro-forma expense estimates provided by the developer appear low in comparison to other comparable properties in the subject’s area; therefore, limited reliance is placed on the pro-forma estimates in our final conclusion of expenses for the subject. The expense comparables are also presented in HUD Form 92274, included in the Addenda to this report.

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OPERATING EXPENSE COMPARABLES

Income Item

Merced Lofts

Vagabond & H Street Lofts

Iron Bird Lofts

SUBJECT

SUBJECT

Merced, California 14 Units 2010 Exp year

Fresno, California 65 Units 2011 Exp year

Fresno, California 80 Units 2011 Exp year

Pro-Forma Expenses 79 Units

Pro-Forma Estimate 79 Units

Total

Total

Total

per unit

Rental Income Apartments Rentals Commercial Rentals

$ $

126,000 $ 69,330 $

Vacancy

$

(11,896) $

Other Income Laundry/Storage Miscellaneous Total

$ $ $

- $ 420 $ 420 $

TOTAL INCOME

$

Expense Item Administrative Advertising / Renting Management General Administrative Total Administrative Operating Elevator Fuel Electricity Gas Water/Sewer Garbage Payroll Security Other Total Operating Maintenance Decorating Repairs Exterminating Insurance Ground Expenses Other Total Maintenance Taxes Real estate taxes Personal Property tax Employee Payroll tax Other Total Taxes Reserves/Replacements TOTAL EXPENSES: % of EGI

183,854 $ Total

9,000 4,952

per unit

$ $

615,765 $ 98,960 $

(850)

$

(35,315) $

(543)

30 30

$ $ $

- $ 11,905 $ 11,905 $

183 183

13,132

$

per unit

691,315 $ Total

9,473 1,522

10,636

per unit

Total

per unit

Total

per unit

$ 1,029,780 $ $ 216,880 $

12,872 2,711

$ $

1,176,179 $ 374,554 $

14,888 4,741

$ $

1,144,872 $ 321,605 $

14,492 4,071

$ (111,370) $

(1,392)

$

(149,221) $

(1,889)

$

(113,546) $

(1,437)

74 258 332

$ $ $

- $ - $ - $

-

$ $ $

5,925 $ 11,850 $ 17,775 $

14,523

$

17,741

$

$ $ $

5,895 20,645 26,540

$ $ $

$ 1,161,830 $

per unit

Total

per unit

1,401,512 $ Total

per unit

1,370,706 $ Total

75 150 225 17,351 per unit

$ $ $ $

8,127 9,833 17,960

$ $ $ $

581 702 1,283

$ $ $ $

14,311 24,193 66,956 105,460

$ $ $ $

220 372 1,030 1,622

$ $ $ $

10,764 $ 40,664 $ 79,841 $ 131,269 $

135 508 998 1,641

$ $ $ $

10,000 42,045 15,104 67,149

$ $ $ $

127 532 191 850

$ $ $ $

11,850 47,975 47,400 107,225

$ $ $ $

150 607 600 1,357

$ $ $ $ $ $ $ $ $ $

3,124 2,183 1,310 3,056 2,183 11,856

$ $ $ $ $ $ $ $ $ $

223 156 94 218 156 847

$ $ $ $ $ $ $ $ $ $

5,306 2,123 9,551 4,245 42,603 1,872 65,700

$ $ $ $ $ $ $ $ $ $

82 33 147 65 655 29 1,011

$ $ $ $ $ $ $ $ $ $

20,405 8,167 17,823 16,454 44,230 2,086 109,165

$ $ $ $ $ $ $ $ $ $

255 102 223 206 553 26 1,365

$ $ $ $ $ $ $ $ $ $

12,000 21,000 9,000 30,000 16,800 60,000 148,800

$ $ $ $ $ $ $ $ $ $

152 266 114 380 213 759 1,884

$ $ $ $ $ $ $ $ $ $

7,900 11,850 7,110 16,590 11,850 51,350 106,650

$ $ $ $ $ $ $ $ $ $

100 150 90 210 150 650 1,350

$ $ $ $ $ $ $

20,125 3,865 915 24,905

$ $ $ $ $ $ $

1,438 276 65 1,779

$ $ $ $ $ $ $

16,007 4,020 7,604 17,833 45,464

$ $ $ $ $ $ $

246 62 117 274 699

$ $ $ $ $ $ $

37,331 1,800 13,047 27,394 79,572

$ $ $ $ $ $ $

467 23 163 342 995

$ $ $ $ $ $ $

18,000 2,400 30,000 6,000 56,400

$ $ $ $ $ $ $

228 30 380 76 714

$ $ $ $ $ $ $

15,800 2,370 15,800 7,900 41,870

$ $ $ $ $ $ $

200 30 200 100 530

$ $ $ $ $

17,097 17,097

$ $ $ $ $

1,221 1,221

$ $ $ $ $

68,001 5,322 73,323

$ $ $ $ $

1,046 82 1,128

$ $ $ $ $

68,380 68,380

$ $ $ $ $

855 855

$ $ $ $ $

117,653 117,653

$ $ $ $ $

1,489 1,489

$ $ $ $ $

189,933 189,933

$ $ $ $ $

2,404 2,404

-

$

-

$

-

$

-

$

15,800 $

200

$

- $ $71,818 39%

$5,130

- $ $289,947 42%

$4,461

- $ $388,386 33%

$4,855

- $ $390,002 28%

 Seevers  Jordan  Ziegenmeyer 

$4,937

$461,477 34%

$5,841

116

Expense Itemization This portion of the analysis can be misinterpreted if not properly explained. For instance, while we were privy to a number of expense statements from comparable projects, providing both aggregate figures and detailed itemization of expenses, management entities tend to use different categories and interpret specific items applicable to common categories in different ways. For the purpose of this discussion, we will use broad classifications of Administrative, Operating, Maintenance, Taxes and Replacement Allowance. Our line item expense conclusions are offered below. Administrative - This expense category includes costs such as advertising and marketing (including model units and the employee unit), licenses and permits, office supplies, professional and legal fees, management, telephone, and other support functions. The subject’s pro-forma administrative expenses are $850 per unit/year. The comparables exhibit a wide range of administrative expenses from $1,283 to $1,641 per unit/year. In this analysis, we have concluded a pro forma administrative expense estimate of $1,357/unit/year, giving primary weight to the comparables’ expenses. It is noted that on a percentage basis of EGI, the comparables indicated a range of 3.50% to 4.42% for management expenses. Based on the specifics of the subject our conclusion at 3.50% for management appears reasonable and it is within the range exhibited by the comparables, albeit at the lower end of the range. Operating - This is a broad category, which is comprised of utilities for common areas and payroll, which includes employee units. It does not include utilities for the apartment units, as the units will be individually metered and paid directly by the tenants. The subject’s pro-forma expense for this category is $1,884 per unit per year. The comparables exhibit a range of operating expenses from $847 to $1,365/unit/year. With most emphasis on the comparables’ expenses, our conclusion for operating expenses is $1,350/unit/year. Maintenance - This category includes expenses for routine maintenance and repairs, landscaping, HVAC service, and unit turnover expenses (materials and supplies, painting and cleaning) and property insurance. The subject’s reported pro-forma maintenance/repairs expense is $714/unit/year. The comparables exhibit a wide range of maintenance/repairs expenses from $699 to $1,779/unit/year. In this analysis, we have concluded $530/unit/year as a reasonable estimate for routine maintenance, repairs and property insurance, which is within the range exhibited by the expense comparables. Taxes – With regard to property taxes, under Proposition 13, properties that are sold or constructed after March 1, 1975, are assessed at the sales price or current market value. Taxes and direct charges for this analysis will therefore be based on an assumed market sale and subsequent reassessment at a rate of 1.228308%. A property tax base, not including personal property, of $189,933 is estimated. In addition, the subject has annual direct levies of $3,797. An estimated property tax of $2,404 per unit, per year, results. This is higher than the subject’s historical indication because it is based on a hypothetical reassessment at market value. Other taxes include employee payroll tax, worker’s compensation and health insurance/employee benefits. The comparables provide little detail in this category; these items are likely included in other line items, such as payroll or administrative. Thus, these expenses have already been accounted for in this analysis. Therefore, the pro-forma estimate for taxes is $2,404 per unit per year. Replacement Allowance - The subject's improvements feature a number of short-lived items, such as concrete and asphalt paving, electrical appliances, kitchen equipment, mechanical systems, and roof surfaces which will eventually require replacement during a typical investment holding period.

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Property owners typically do not set aside funds each year for the ultimate replacement of such shortlived items. However, since these items generally have a lesser economic life than the structure itself, and are not subject to recovery under the preceding repairs and maintenance category, a replacement allowance should be considered. Under this methodology, the property owner deposits funds annually so that they earn interest and will ultimately be available to pay for the replacement of the short-lived items. This is also referred to as a sinking fund technique. This type of analysis models cash outflows for replacements as a level annuity. Per conversations with brokers, property owners and property managers active in the apartment market within the subject property’s market area estimate the typical replacement allowance for an apartment community ranges from $200 to $450 per unit. However, operating expenses analyzed in this report did not report a replacement allowance expense. Considering the subject’s excellent quality and condition (upon completion of renovation), a reserve allowance of $200 per unit, per year, appears reasonable. The cumulative expense estimate of $461,477 is equivalent to $5,841 per unit per year, or approximately 33.7% of effective gross income (based on the potential gross income previously derived and a 7% vacancy allowance for the residential component and a 10% vacancy allowance for the commercial component). Our experience with apartment projects indicates that, typically, conventional apartments operate at 35-50% of effective gross income (EGI). The comparables and pro-forma estimate provided by the developer indicate ranges of 28% to 42% of EGI and a range of $4,461 to $5,130 on a per unit basis. The subject’s pro-forma expense estimate is within the range of the comparables as a percentage of EGI, however, on a per unit basis, the subject is above the range of the comparables. Regarding our selection of expense comparables it is always our preference having operating expense information for projects proximate to the subject, similar in size as well as age/quality to the subject. It is oftentimes difficult to obtain detailed operating expense comps from outside sources in light of the proprietary nature of the information. Thus, our resources for this type of information are extremely limited. Information is obtained from marketing brochures for comparable sales/listings (which happen to include this information) and previous clients and other apartment management companies (willing to share this type of information). Our selection of expense comparables is considered the most similar to the subject in terms of property type (mixed-use project), location (within Central California), size (less than 100 units) and age/quality (newer construction and good quality) that could be obtained given the limited available resources. HUD FORM 92274 HUD Form 92274 (Operating Expense Analysis Worksheet) is presented in the addenda to this report. Total Operating Expenses Adding all of the expense items discussed above, total pro forma operating expenses for the subject property is estimated on the income sheet at the end of this section.

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Overall Capitalization Rate To provide an estimate of market value for the subject property via the direct capitalization method of the income capitalization approach, an overall capitalization rate must be estimated. The overall capitalization rate is the ratio between the net operating income as of the date of value and a property’s cash equivalent sales price. The overall rate is a reflection of the present value of anticipated future benefits. As with the sales comparison approach, this method also relies upon the similarity between comparable sales and the subject property. In our derivation of the appropriate capitalization rate, two sources are considered: 1) market sales and 2) a band of investment analysis. These sources are discussed as follows: Market Sales The capitalization rate to be applied to the subject’s net operating income can be based on an analysis and interpretation of market transactions. Overall capitalization rates can reasonably be viewed as a function of risk. For instance the riskier the investment, the higher the overall capitalization rate. To determine a capitalization rate for the subject property we analyzed the sales of comparable apartments shown in the table below: MARKET CAPITALIZATION RATES Sale Date

Sale Price

No. of Units/ Rentable Area (SF)

NOI

Overall Cap Rate

Granite Point Apartments 4500 Truxel Road Sacramento, Sacramento County

Sep-12

$45,500,000

384

$2,593,500

5.70%

Broadstone at Strawberry Creek 8282 Calvine Road Sacramento, Sacramento County

Jun-12

$36,000,000

264

$2,124,000

5.90%

Capitol Towers 1500 7th Street Sacramento

May-12

$64,000,000

409

$3,680,000

5.75%

River Oaks Apartments 1000 Allison Drive Vacaville

Jan-12

$52,400,000

312

$3,013,000

5.75%

The Terraces at Highland Reserve 700 Gibson Drive Roseville

Sep-11

$40,500,000

273

$2,142,450

5.29%

Walnut Woods 275 East Minnesota Avenue Turlock

Mar-11

$7,350,000

100

$551,250

7.50%

Victoria Square Apartments 1550 North Hope Avenue Reedley

Feb-11

$6,750,000

104

$445,500

6.60%

Property Identification

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The market data indicate a range of capitalization rates from 5.29% to 7.50% with a majority under 6.50%. Overall, capitalization rates can reasonably be viewed as a function of risk. That is, the riskier the investment, the higher the overall capitalization rate. In determining a capitalization rate, consideration is given to the subject’s location, building size, condition, effective age and quality of construction. All of these comparable sales were previously analyzed in comparison to the subject on a per unit basis and it was determined that the subject was towards the upper end of the adjusted range of the comparables based on our conclusion on a per unit basis, in comparison to the unadjusted range (see Sales Comparison Approach for our analysis and discussion). The comparable sales can be viewed similarly in terms of a cap rate with the low end of the range representing higher-end projects. Thus, it is reasonable to conclude a cap rate towards the lower end of the range. The subject property upon completion of renovation will consists of a mixed-use project with 79 apartment units and five commercial suites and will have a new effective age. The proposed overall quality and appeal of the project is deemed good. Further, the subject property possesses a good location, located in downtown Fresno, just east of State Highway 99, with good visibility and accessibility. Capitalization rates appear to be on a downward trend, as all of the comparable sales that have transferred in 2012 have capitalization rates under 6.00%. We have concluded a cap rate for the subject towards the low end of the range of 6.00%. This conclusion appears to be consistent with our broker survey as reported below and as previously indicated in our apartment market overview: Robin Kane – RCK Organization: Mr. Kane specializes in multifamily residential properties throughout the Central Valley, but primarily in Fresno and the surrounding areas. He reports that the multifamily residential market is showing signs of stabilization and recovery. Mr. Kane stated he believes the worst is behind us, as 1Q 2009 into 2Q 2009 marked the bottom. Fresno and the surrounding areas have had a slower recovery timeline, as they represent tertiary markets, behind Southern California and the Sacramento area. He stated rent concessions are winding down, as property owners are only offering free rent on specific units (usually one-bedroom and studio units). Mr. Kane reported that two-bedroom units are faring the best, with decreased vacancy levels and slight increases in average rental rates. As far as capitalization rates, Mr. Kane stated capitalization rates are in the range of 7.00% to 7.50%, with properties with significant deferred maintenance transferring at 8.00% to 8.50% and newer more desirable properties in favorable areas are in the area of 6.00% to 7.00%. Additionally, according to the national PwC Real Estate Investor Survey, dated Third Quarter 2012, the national apartment overall capitalization rate has been on a downward trend for several quarters. The PwC survey indicates a range of capitalization rates from 3.75% to 10.00%, with an average of 5.74% as of the Third Quarter 2012. This is decreased from 5.76% last quarter and down from 5.98% a year ago.

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Band of Investment An alternative method of obtaining an overall capitalization rate is to build a rate based on current financing requirements through a band of investment. Since most income-producing properties are purchased with debt and equity capital, the overall capitalization rate must satisfy the market return requirements of both investment positions – lenders and equity investors. Band of Investment is defined as follows: Band of Investment: a technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.15 We have obtained financing parameters from recent loans made on several commercial properties in the Northern California/Central Valley region. Based on a database compiled for commercial properties throughout the region, financing parameters from recent loans generally indicate loan-to value ratios between 60% to 75%, beginning interest rates from 5.50% to 7.50%, and amortization periods from 20 to 40 years (with a tendency towards 25 to 30 years). Recently, many deals are being made at 65% loan-to-value with a 6.00% interest rate for 25 years, resetting every five years. However, because this is very competitive, for strong borrowers banks are willing to underwrite loans at a 5.00% interest rate with a 70% loan-to-value for 25 years, fixed for 10 years. In the analysis of the subject property, a loan-to-value ratio of 65%, a mortgage interest rate of 5.00%, and a loan amortization period of 25 years, is concluded. As for the equity dividend rate, the market data indicates a relatively wide range among investors in similar properties. Equity dividend rates generally reflect the risk associated with an investment; i.e., the higher the risk, the higher the return that would be required by the investor. During the expansionary period, it was not uncommon to see low (or even negative) equity dividend rates, as investors were involved in exchanges and/or purchased properties on the speculation of increasing values. However, with real estate currently in a period of contraction, higher equity dividend rates are required to account for the risk of decreasing property values. To estimate an equity dividend rate for the subject property, it is necessary to consider current target rates that real estate investors are attempting to obtain on a wide variety of investments. The table below shows dividend comparisons reported in a leading publication within the appraisal industry, the PwC Real Estate Investor Survey, published by PricewaterhouseCoopers. The PwC Dividend Indicator represents a composite average rate for a variety of commercial real estate markets.

15

The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 16.

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Year

PwC Yield Indicators

Long-Term Mortgages

10-Year Treasuries

2005 2006 2007 2008 2009 2010 2011 Jan. 2012 Apr. 2012 Jul. 2012

9.43% 8.81% 8.41% 8.47% 9.49% 9.58% 9.05% 8.89% 8.78% 8.74%

5.57% 6.45% 6.84% 6.50% 7.55% 5.60% 5.21% 4.67% 4.60% 4.25%

4.29% 4.76% 4.72% 3.82% 3.09% 3.31% 2.96% 1.97% 2.22% 1.61%

Another indicator for the subject would be reflected in the current junk bond rates, which take into account increased risk associated with relatively high risk income streams. According to the Wall Street Journal, current yield rates for High Yield100 bonds average 7.684%, while the Triple-C rated bonds average 12.940%. In the current market it is expected the equity dividend rate requirement would be greater than safer, more liquid assets such as a Certificates of Deposits (CDs) or the 10-Year Treasury bond. In terms of equity parameters, we have examined equity dividend rates extracted from recent sales of incomeproducing properties in the Northern California region. The market data indicate a relatively wide range in equity dividend rates among investors in commercial properties, with some investors expecting returns of zero or less, and others as high as 10%. Equity dividend rates generally reflect the risk associated with an investment; i.e., the higher the risk, the higher the return that would be required by the investor. Based on the specifics of the subject property, we have concluded an equity dividend rate in the range of 3.00% to 6.00% would be reasonable. Based on our financing and equity conclusions above, the band of investment analysis is presented in the table below. This analysis indicates a reasonable range of overall capitalization rates for the subject property.

Mortgage Interest Rate Amortization Period (Years) Loan-to-Value Ratio Mortgage Constant Equity Dividend Rate

Mortgage Requirement Equity Requirement

Indicated Overall Cap Rate:

BAND OF INVESTMENT 5.00% 25 65% 0.07015 3.00% to 6.00%

65% x 35% x 100%

0.07015 = 0.03000 =

(Min.)

4.56% 1.05% 5.61% 5.61%

65% x 35% x 100%

0.07015 = 0.06000 =

(Max.)

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4.56% 2.10% 6.66% 6.66%

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Capitalization Rate Conclusion The table below summarizes the capitalization rates derived via the two sources. Source

Range

Comparable Sales

5.29%

to

7.50%

Band of Investment

5.61%

to

6.66%

The PwC Real Estate Investor Survey summarizes current conditions for the national apartment market: “the national apartment market remains firmly planted in the expansion phase of the real estate cycle, characterized by strong demand, robust rent growth and new supply.” One participant predicts, “the home ownership bubble has popped and many families will never go back to that lifestyle of living.” The PwC Third Quarter 2012 claims investors are upbeat and optimistic with regards to the National Apartment Market, noting the market’s superior asset performance, “many investors are still looking to place capital in the apartment sector. In the second quarter of 2012, total sales reached $16.2 billion, the highest level since 2007, as per Real Capital Analytics. At the same time, the average overall capitalization rate in the PwC Survey has fallen to a level seen in 2007. In fact, the current average overall capitalization rate is just below the average of 5.76% seen five years ago.” Both the market sales and band of investment analysis were used to derive a capitalization rate for the subject property. We were able to identify several recent sales of multifamily residential properties to estimate an overall rate. Given good comparable sales information, this approach leads to a dependable range of capitalization rates. Conversely, the band of investment analysis uses generalized loan parameters and equity dividend rate estimates, which are subjective. As a result, the band of investment is given less emphasis in deriving a capitalization rate for the subject. The following table summarizes our opinion of the strengths and weaknesses of the subject and its competitive position in the local market area. Risk Factor Location General Market Conditions Competitive Market Position Contract Income Characteristics Age / Condition of Improvements Mid- to Long-term Upside Potential Overall Impact on Applicable Overall Rate

Effect on Overall Rate ↓ ↑↑ ↔ ↔ ↓↓ ↓ ↔/↓

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Considering the attributes of the subject property, as well as market conditions for multifamily properties, a capitalization rate of 6.00% is estimated for the subject property, with primary emphasis on the market sales with support from the band of investment analysis. Value Conclusion – Income Capitalization Approach Applying the components discussed on the preceding pages (potential gross income, vacancy, operating expenses and overall capitalization rate), the market value conclusion via the income capitalization approach is offered on the following page. Once again, this value estimate subject to a hypothetical condition, which assumes the proposed renovation is complete and the project is at stabilized occupancy at market rental rates. The final section of the appraisal will address the required deductions for renovation costs and lease-up costs in order to arrive at an opinion of as-is market value.

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INCOME CAPITALIZATION APPROACH Potential Gross Income (PGI) Base Rental Income - Residential Market Rent Units: # of Units 28 1 22 2 9 4 7 73

Unit Type 1 BR / 1 BA 1 BR / 1 BA + Balcony 2 BR / 2 BA 2 BR / 2 BA + Balcony 3 BR / 2 BA 3 BR / 2 BA + Balcony 3 BR / 2 BA Penthouse + Loft

Weighted Rentable Base Rent Unit Size (SF) per Month 816 $1,000 795 $950 1,023 $1,225 985 $1,200 1,113 $1,350 1,291 $1,500 1,862 $2,100 1,126 $1,249

Monthly Income $ 28,000 $ 950 $ 26,950 $ 2,400 $ 12,150 $ 6,000 $ 14,700 $ 91,150

$ $ $ $ $ $ $ $

Annual Income 336,000 11,400 323,400 28,800 145,800 72,000 176,400 1,093,800

$ $ $ $

6,516 24,732 19,824 51,072

Restricted Rent Units: 1 BR/1 BA 1 BR/1 BA 2 BR/2 BA Total Base Rental Income

1 3 2 6

816 816 1,023 885

$543 $687 $826 $709

$ $ $ $

543 2,061 1,652 4,256

79

1,054

$1,208

$

95,406

Laundry Income Misc. Income Total Misc. Income

$ 1,144,872 $ $ $

5,925 11,850 17,775

Total Potential Gross Income - Residential

$

Vacancy & Collection Loss - Residential

@

7%

of PGI

1,162,647

$

(81,385)

$

321,605

$

(32,160)

Base Rental Income - Commercial Unit 103, 104 & 105 Unit 102 & 106

4,800 14,708 19,508

SF @ SF @

$1.60 $1.30

psf/mo. psf/mo.

$ $ $

92,160 229,445 321,605

Total Potential Gross Income - Commercial Vacancy & Collection Loss - Commercial

@

10%

of PGI

Effective Gross Income (EGI)

$

1,370,706

Operating Expenses Per Unit Administrative Advertising Property Management General Administrative Operating Elevator Utilities Payroll Maintenance Repairs Exterminating Property Insurance Grounds Maintenance Taxes Real Estate Taxes - Ad Valorem Real Estate Taxes - Direct Charges Replacement Allowances Total Expenses

Total

% of EGI

$150 $607 $600

$ $ $

11,850 47,975 47,400

1.0% 3.5% 4.1%

$100 $600 $650

$ $ $

7,900 47,400 51,350

0.7% 4.1% 4.4%

$200 $30 $200 $100

$ $ $ $

15,800 2,370 15,800 7,900

1.4% 0.2% 1.4% 0.7%

$2,356 $48 $200

$ $ $

186,135 3,797 15,800

16.0% 0.3% 1.4%

$5,841

$

461,477

33.7%

Net Operating Income (NOI)

$

(461,477)

$

909,229

DIRECT CAPITALIZATION N.O.I

divided by

$909,229

÷

Cap Rate

=

Value

6.00%

$

15,153,812

CONCLUSION OF VALUE VIA THE INCOME CAPITALIZATION APPROACH:

Rd. $

15,150,000

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RECONCILIATION & CONCLUSION The value conclusions indicated by the cost, sales comparison and income capitalization approaches to value are: Cost Approach Sales Comparison Approach Income Capitalization Approach

$ 15,050,000 $ 14,850,000 $ 15,150,000

In reconciling the three approaches to value, consideration is given to the individual strengths and weaknesses of each approach. Cost Approach In the application of this approach, we first estimated the market value of the subject’s underlying land. The land sales employed were considered reasonably similar to the subject, and overall, it is our opinion they resulted in an accurate valuation of the subject property. The cost of the proposed improvements was then considered utilizing two costing sources –the Marshall Valuation Service, published by the Marshall & Swift Corporation. The cost approach is relevant to the valuation of the subject property because the subject represents proposed conversion/renovation of an existing, historic hotel. While the cost approach is considered relevant, many properties are still selling below replacement cost, weakening the reliability of this approach. Therefore, the cost approach is considered to only produce a supporting indicator of value. Sales Comparison Approach The sales comparison approach is typically most relevant when valuing small, owner-user properties; however, it can be useful in appraising any type of property for which recent market sales data can be obtained. In this analysis, we analyzed several recent sales of apartment projects and retail buildings in the subject’s market area and similar areas. Most of the sales required significant gross adjustments, which weakened the reliability of this approach. Additionally, there were relatively few comparable apartment sales in Fresno, which required our search parameters to expand geographically and further weakened this approach. However, we believe the adjustments adequately accounted for any differences between the comparables and the subject and are well supported. Overall, the sales comparison approach is considered a good value indicator of the subject property and will be relied upon as a supporting indicator of value when determining our conclusion of market value.

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Income Capitalization Approach We began the income capitalization approach by estimating the potential gross income for the subject property, which consists of market rent for the apartment market, market rent for the commercial component, laundry income and miscellaneous income. Then, with consideration given to a stabilized vacancy factor and reasonable operating expenses, a pro-forma net operating income for the subject was calculated. At this point, the method chosen to estimate the value of the subject property was direct capitalization. An appropriate capitalization rate was selected based on the indications of several recent comparable sales, with support from a band of investment analysis. Buyers of income-producing real estate rely primarily upon the income capitalization approach when assessing the feasibility of an investment. Therefore, this analysis is typically relied upon most heavily to value income properties. This approach is considered highly relevant to the valuation of the subject as an income-producing project. The reliability of this approach is good due to the fact we identified ample comparable market data in estimating market rent, vacancy, operating expenses and a capitalization rate. Conclusion The value indications via the cost, sales comparison and income capitalization approaches are within approximately 2% of one another. In this analysis, only the sales comparison and income capitalization valuation methods are deemed to provide reasonable estimates of market value for the subject property. With primary weight given to the income capitalization approach, with support from the sales comparison approach, we have concluded a market value, assuming completion of conversion/renovation and stabilized occupancy, of $15,150,000 for the subject property.

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AS-IS MARKET VALUATION The market value estimated in the previous section of this report is subject to the hypothetical condition the proposed renovation of the Hotel Fresno is complete, converting the subject property into a 79-unit, seven story multifamily apartment building with ground floor retail space. In order to estimate the as-is market value of the subject property, deductions from the preceding value will be made for construction (renovation) costs. A developer’s budget was provided for use in our analysis, which is appended hereto, and, based on a review of the construction (renovation) budget, total costs, including lease-up costs and developer’s incentive (profit), equate to $14,319,402. Deducting the total costs above from the previously derived market value upon completion of renovation and stabilized occupancy, the as-is market value of the subject property is estimated as follows: Market Value Upon Completion of Renovation and Stabilized Occupancy (subject to a Hypothetical Condition)

$15,150,000

Less Total Construction (Renovation) Costs

-14,319,402

As-Is Market Value

$830,598 Rd. $830,000

The indicated as-is market value above equates to $7.04 per square foot of building area ($830,000 ÷ 117,945 square feet). As a test for reasonableness, below we have arrayed three sales of vacant buildings acquired for redevelopment. Sale Date

Sale Price

Building Area

Price per SF

Year Built

1 707-711 Marin Street Vallejo, Solano County APN: 0056-162-080

Oct-10

$475,000

40,000

$11.88

1918

2 2107 Inyo Street Fresno, Fresno County APN: 468-252-05

Jul-10

$350,000

9,456

$37.01

1922

3 1417 Broadway Street Fresno, Fresno County APN: 466-205-05

Jul-09

$235,000

17,886

$13.14

1925

No.

Property Identification

Summary of Adjustments: 

Sale 1 requires a downward adjustment for its superior location within the city of Vallejo, an area proximate to the Bay Area. Further, Sale 1 contains 40,000 square feet of gross building

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area and requires a significant downward adjustment of 25% to account for its smaller size in comparison to the subject. No further adjustments are warranted for Sale 1. 

Sale 2 requires a downward adjustment for its superior location in comparison to the subject (at the northeast corner of Inyo Street and Van Ness Avenue – a primary thoroughfare through the city of Fresno). Further, Sale 2 contains 9,456 square feet of gross area, which is substantially less area than the subject. Therefore, a significant downward adjustment is applied to Sale 2 for differences in gross building area. Finally, Sale 2 possesses on-site parking, which is considered a superior feature and is adjusted downward 10%. No other adjustments are required to Sale 2.



Sale 3 contains 17,886 square feet of gross building area and requires a downward adjustment of 30% to account for the differences in size between the comparable and the subject. No further adjustments are necessary to Sale 3.

Presented below is an adjustment grid comparing the above sales to the subject property in its as-is condition. Item Address

Subject

Comparable

Comparable

Comparable

Property

Sale No. 1

Sale No. 2

Sale No. 3

707-711 Marin Street Vallejo, California

2107 Inyo Street Fresno, California

1417 Broadway Street Fresno, California

Hotel Fresno 1241 Broadway Plaza Fresno, California

190 miles NW

Proximity to subject

x

Sales price

Unf.

Furn.

0.5 miles SE $475,000

x

Unf.

Furn.

$11.88

Sales price per GBA

0.1 miles NW $350,000

x

Unf.

Furn.

$235,000

$37.01

$13.14

Annual EGI EGIM (1)*

N/Av

N/Av

N/Av

Sales price per unit

N/Av

N/Av

N/Av

Sales price per room

N/Av

N/Av

Data source Adjustments

Public Records/CoStar Description

+ (-) $ Adjust.

Description

N/Av

Public Records/CoStar

Public Records/CoStar

+ (-) $ Adjust.

Description

Description

+ (-) $ Adjust.

Sales or financing concessions Date of sale/time Location Site/view

10/8/12

10/29/10

Downtown Fresno

Sig. Superior

($2.38)

7/2/10

7/31/09

Similar

Superior ($7.40)

Good

Similar

Sig. Superior

Design and appeal

Average

Similar

Similar

Similar

Quality of construction

Average

Similar

Similar

Similar

Year built

1912

1918

1922

1925

Condition

Poor

Similar

Similar

Similar

Gross Building Area

117,945

Average Unit Size

Sq. ft.

40,000

Sq. ft.

Sq. ft.

($2.97)

9,456

Sq. ft.

($14.81)

Similar

17,886

Sq. ft.

Sq. ft.

Sq. ft.

Sq. ft.

No. No. Room count No. Room count No. of of Units Tot. Br. Ba. Vac. Units Tot. Br. Ba. Vac.

No. Room count No. of Units Tot. Br. Ba. Vac.

No. Room count No. of Units Tot. Br. Ba. Vac.

($3.94)

Unit Breakdown

Basement description Functional utility Heating/cooling Parking on/off site Project amenities and fee (if applicable)

Partial

None

None

Similar

Obsolete

Similar

Similar

Similar

None

Similar

Similar

Limited

Similar

Superior

None

Similar

 + x ‐

Net Adjustment (Total) Adjusted sales price of comparables per s.f.

Similar ($3.70)

Similar $

5.34 $6.53

+ x ‐

Similar

Similar $

25.91

 + x  ‐

$11.10

 Seevers  Jordan  Ziegenmeyer 

$

3.94 $9.20

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Based on the analysis presented on the previous page, which suggests an adjusted range in value per square foot of $6.53 to $11.10, the conclusion of as-is market value estimated herein of $830,000, or $7.04 per square foot, is considered reasonable and supported by the data.

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CONCLUSIONS OF MARKET VALUE The purpose of this appraisal was to estimate the hypothetical (fee simple) market value of the subject property, assuming completion of conversion/renovation and stabilized occupancy, as well as the as-is market value of the property (as of the date of inspection), of the proposed redevelopment of a former historic hotel, known as Hotel Fresno, which is located in Downtown Fresno. As a result of our analysis, the market value conclusions for the subject property, in accordance with the definitions, certifications, assumptions and limiting conditions contained within the attached document, are… Value Estimate

Conclusion

Hypothetical Market Value Assuming Completion $ 15,150,000 of Renovation and Stabilized Occupancy As-Is Market Value

$830,000

 Seevers  Jordan  Ziegenmeyer 

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EXPOSURE TIME & MARKETING TIME Exposure Time Exposure time is the period a property interest 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. In order to estimate a reasonable exposure time for the subject, we searched researched the actual exposure time involved in the sale of similar properties located in the subject’s market area. Specifically, we looked at the comparables sales used in the sales comparison approach. The results showed a range of 48 days to approximately 7 months on the market. Given the subject’s location, loft style, mixeduse nature and medium size of the project we have concluded an exposure time toward the middle of the range of 6 months. Marketing Time Marketing time reflects the time it might take to sell an interest in real property at its estimated market value during the period immediately after the effective date of the appraisal. An estimate of marketing time can be made by considering surveys of investors, such as the PwC Real Estate Investor Survey, published by PricewaterhouseCoopers. The national marketing times for apartment properties are summarized in the following table. National Apartment Market - Third Quarter 2012 Avg Marketing Time Current Qtr Last Qtr Year Ago Range (in months) 0.00 - 18.00 0.00 - 18.00 0.00 - 18.00 Average (in months) 5.3 5.3 5.90 Change (%) -10.17 * In months

The PwC survey indicates a range of marketing times from 0 to 18 months for apartment properties with an average of 5 months (rounded). The subject’s medium size, loft style and location in Fresno suggests the marketing time may be above the average of this range due to the limited number of potential buyers for this size and type of loft project in the Central Valley region. Market participants, local commercial real estate brokers and developers indicate that, if appropriately priced, the subject property could be marketed within a 6 to 9 month time frame. Further, it is our opinion there is no indication potential marketing times should differ significantly from historical exposure times. Consequently, a marketing time equal to the previously concluded exposure time of 6 months is considered reasonable for the subject property, assuming appropriate pricing and a professional marketing strategy.

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132