Document Redmond_doc_86fc78dd77

Appellant's Exhibit 81 (as referenced in June 30, 2017 Appellant WPDC Cleveland LLC's Witness and Exhibit List) ---PAGE BREAK--- CJM appraisal report Cleveland Street Building Located at: 16390 Cleveland Street Redmond, WA 98052 Client: Andorra Ventures LLC CJM File No. RB16.125 □ate of InspectionATalue: September 19, 2016 Date of Report: October 3,2016 Appraisal performed by Chuck Munson, MAI, ASA, AI-GRS & Aaron DeColllbus, Certified General Real Estate Appraiser, ASC-DCF Appellant WPDC Cleveland's Exhibit 81 - Page 1 of 88 ---PAGE BREAK--- GJM October 3,2016 CJMFileNo,:RB16-]25 Mr. Sean Miller Andoira Ventures LLC 1416 SW Roxbury Street Seattle, WA 98106 Re: Appraisal of the Cleveland Street Building, a 2,799 square foot commercial building located at 16390 Cleveland Street, Redmond, WA 98052 Dear Mr. Miller; In accoidance with your request, we have completed an appraisal repoit and fomied an opinion of the market value in cash or cash equivalent terms of the fee simple interest, as defined in the addendum of this report, of the above-captioned property. As the result of the inspection, investigation, and analyses, it is our opinion that the market value, estimated as of September 19, 2016, and subject to the assumptions and limiting conditions appearing in the addendum of this repoit, is as follows: FINAL CONCLUSIONS OF VALUE Value Estimate Effective Date Property Component $925,000 $1,275,000 $250,000 September 19, 2016 September 19, 2016 September 19, 2016 As Is Value Value As If Presently at Stabilized Occupancy Building Replacement Value The value estimates above reflect the subject’s fee simple interest. At the values above, the estimated markeling/exposure period is three to six montlis, more or less As Is: and three to six months, more or less. As if Presently at Stabilized Occupancy. Three extraordinary assumptions are made: 1) the subject will be renovated during the timeline anticipated and according to the plans and specifications provided to CJM, 2) the subject interior is in shell condition, per the buyer; and 3) the site is free of environmental contamination. No additional extraordinary assumptions or hypothetical conditions are used as part of this report. CJM has not previously appraised the subject. Chuck Munson, MAI, ASA, AI-GRS, and Aaron DeCollibus have provided no other services nor engaged in any activity related to the subject property in the three years preceding acceptance of this assignment. 1.S30 UOth Avenue N Suite 200, Bellevue WA ySOO.S I Tel 425.454.678') I www.cjmadvisora.com Appellant WPDC Cleveland's Exhibit 81 - Page 2 of 88 ---PAGE BREAK--- Mr. Sean Miller Andorra Ventures LLC October 3,2016 The accompanying narrative appraisal report identifies the subject property, describes the market for this type of property, and presents specific market data and analysis leading to the estimate of value cited above. Sincerely, CJM Investment Property Advisors J 3 I Aaron DeCollibus Certified General Real Estate Appraiser, ASC-DCF 1102324 C. J. Munson MA1,ASA,AI-GRS 1100720 3 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 3 of 88 ---PAGE BREAK--- TABLE OF CONTENTS LETTER OF SUMMARY OF IMPORTANT FACTS & CONCLUSIONS.............. Area Subject SCOPE OF PRIMARY MARKET AND NEIGHBORHOOD CHARACTERISTICS Area Primary Market Commercial SUBJECT SITE . Site Land Use Restrictions & Environmental Conclusion and IMPROVEMENT Physical SUBJECT HIGHEST & BEST INCOME CAPITALIZATION Market Rents Potential Rental Expense Estimates & Net Operating Overall Capitalization Rate Direct Capitalization Technique Indication of SALES COMPARISON Comparable Building Sales Value INSURABLE REPLACEMENT RECONCILIATION & FINAL ESTIMATES OF ASSUMPTIONS AND LIMITING QUALIFICATIONS OF THE 2 5 7 10 11 15 15 19 22 23 23 23 26 28 29 29 31 33 35 37 43 44 44 45 48 51 51 58 59 61 67 A1 A5 A7 CJM 4 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 4 of 88 ---PAGE BREAK--- SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Cleveland Street Building 16390 Cleveland Street Redmond, WA 98052 PROPERTY IDENTIFICATION SITE DESCRIPTION [PHONE REDACTED] Assessor Parcel Number(s): The Cleveland Street Building site consists of a flat, irregular-shaped parcel with total 3,140 sq, ft., or 0.07 acres, of site area. The subject site is located at the intersection of 164th Street NE and Cleveland Street in downtown Redmond. Redmond is via Redmond Way, located one block north of the subject, with SR-520, located about two miles east, provide access to the Bellevue and Seattle CBD's. The subject improvements occupy the entire site so no vehicular ingress/egress exists, although the adjacent- west site is partially open parking. Overall, access is adequate with ingress/egress non-existent. Appear to be adequate Public utilities are present and service is adequate. Shape, Topography & Area Access & Ingress/Egress Access to downtown Soils Conditions Utilities Old Town Zoning IMPROVEMENTS DESCRIPTION 1956/2016 According to the King County Assessor, the Cleveland Street Building has gross building area 2,760 sq, ft. Based on the plans provided to CJM by buyer-developer Sean Miller ([PHONE REDACTED]), the renovated building will have gross and rentable area of 2,799 sq. ft. Consequently, the gross and rentable building area estimated In the plans will be used estimate value. The building is currently shell space with no interior finishes. According Mr. Miller proposed renovations will include new exterior finishes, roof replacement, installation of ADA-complaint restroom, new lighting fixtures and displays, and adding a private office at the southwest corner with storage at the north end. According to Mr. Miller, the estimated renovation budget is $235,000 with a construction timeline of 12 to 14 weeks, No onsite parking, not uncommon for downtown Redmond. Nevertheless, the lack of onsite parking reduces the attractiveness of the improvements. Year Built Building Area Existing Condition Parking 5 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 5 of 88 ---PAGE BREAK--- SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS HIGHEST AND BEST USE Commercial use VALUE CONCLUSION BY APPROACH $1,275,000 (before deducting stabilization costs) Income Approach STABILIZED OPERATING STATEMENT Cleveland Street Building Rate/SF/Yr Category RSF NNN Income Expense Comments Rental Income; Estimated annual market rate of $33.00 /SF, NNN $92,367 Cleveland Street Building Additional Revenue: Potential Gross Rental Income: Less Vacancy & Credit Loss; Effective Gross Income: 2,799 $33.00 io $92,367 ($4,618) 5.00% Vacancy & Collection Loss $87.749 Operating Expenses: NNN Contingency Structural Reserves ($4,387) 5.00% EGI ($560) $0.20/SFofGBA $82,801 $1,175,000 $1,375,000 Rounded to nearest $25,000 OAR of 6.00% to 7.00%: $1,125,000 to $1,400,000 (before deducting stabilization costs) Sales Comparison Approach NA Cost Approach $250,000 Building Replacement Value FINAL ESTIMATES OF VALUE Effective Date Value Estimate Property Component $925,000 $1,275,000 $250,000 As Is Value Value As If Presently at Stabilized Occupancy Building Replacement Value September 19, 2016 September 19, 2016 September 19, 2016 three to six months. As Is three to six months. As If Presently at Stabilized Occupancy MARKETING/EXPOSURE TIME DATE OF INSPECTION September 19, 2016 CJM 6 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 6 of 88 ---PAGE BREAK--- DeLorme Street Atlas USA® 2010 "^DELORME w«it VAfif^v^vr "!"yancpuwer emauHItni’ 0(n»i!uiTTIt „ Pitr^iiv.H i J \ 7^ "MflnAJ . - ^ ■ ' wnlimock — 'Iry ' ' jtrnitin Fei4« ‘^C4pp«i MMnlAJr iQt Springi Regional Map Ljnirt UJr S i , -veddcf CfoMinf «CultuB Lako Minning Park tj/ i Ik yrEifr \ j , urinm htrimi. X W4«iriDim< I *Unti»ii Baaeti . BoundAfV Moplc Ffilla Cl«cl» - I ^ Si1[(ptJni ufAAtJ ; ’ i * t ''SaliJtfka ’ ' * ^CottUi* Hill ' ” * t r L6ke Cowienan MipT*IBa)'* •TarntfAl* ^Cangil , eie«s Cbwiehan Gay* 'Eudebuntf OllV-’;-.r ^ ~ RlcnirdiQft fKaniTkBs IhffiriicnioA I Bay i Ijgmfiion ^M*iti»#nKrtirti ,aiIL4the ii^tehVot^n l • Boekpon ptikianai... ' ^ *Ol»b< 0a}> r* l«Hl ftn'A Alvar Jordan Caiwood Sookp ‘Jn / * - r "7 'Wv.ifi^y SlftOon ■ , • *M«rcrioiJ ■w OBk I lar&pr .Cotipeniii*; ■ Sllvana * < ^ ' ‘ - I^ir'rrniticiVt' fluianio ini * " * Fkijliia ^dlsevvo^ ; ToVi Coioy R:o£t>Faajton VLnut>vpdd ' r Towns 0 ad; ’ ^0^01 nat Y iingloy 1 * ^♦Muhtiiposdowfnith — . ai/e* ^0 HIngaldn ^ -r ^ ^ Duvall ^ ' y j" ^ ^‘Sc.an le " Port Angalob Robt IX_>P Ciaflji (gSifli T; siorlop y la IndlanoiR ypoiflibo'* f'A'y Skyk^mlilt^ IM ,c«ilc«l< FollGily • snoduiilmlt ►litORiroh , * Morin ElfRd ^ TuVrtlia , I i' *Mppi«kvood ^Bremerton r * , * . * * M tl 0 r. i I < ■ • » 4 •.Quinauil 1 Wonalctieo.* '1 I V y fAiiburo' ^^FtraJt V WiltOn j,c , - Moyollwp i ^ yji • '•i(^/i«ooiti 8o4IOn HbiOm's ' * ■ “ ^ * , '*'L^h«Cilr ^iponnwo^^ MoWco^. V 01 y m Rja ^ I 10*^ Cd^ton 1. ^fleilys "ii .‘Clt EUim Kumptullps I Stiellon. iSnwreelBw 'kOuikl»y<* • MiltiKh ' ' i V Qitini » \ t I HouutnjTi^j^ KbPi d«ii>tfonlosa no fed Lfitvti MiLiftiy ReMrvo<>on Roinitf t » / I i Eotonvilli / yoeweit* ^jerooklyi^---4 iTf nina Oueodn > tahrgid l4AiiftM^--i. y A V ■i a \ Ssloh : > , ^UnlonGsp K..r Sotrth Bend i Pd £11 \ ^ilOfi Lfborn) • llo Rwidif k IMOllo Swon > ' » • • \ % m- i -Telado f I to 'l:z '^Mawlla^GroyaRiver t > V, s . pp^ • ^lCo4UoRo«K leo V i - ^ ( I Cothfiimol U-v r :x m % ■ * longview i. ! -1 L t ■ '•“'CtinwOMl Trout LftVO • Is ^ MW Store 1 ! .SM.COO TM Dala use subject to license. © DeLorme. DeLorme Street Allas USA® 2010. www.delorme.com MN(IS7'F) V r«’25.25 mi Dala Zoom 7-0 Appellant WPDC Cleveland's Exhibit 81 - Page 7 of 88 ---PAGE BREAK--- DeLorme Street Atlas USA® 2010 DtLORME Robs .&ranh« Psili Area Map / f> S ,Tulo(tp L^V •MKtiORBuftCfiT™' ♦V i\ yi^icfcfi) 1^ Ptfx w-jj.II.^ , [&y>H V . U#=r^ ■i t- I 0^ Stevens ^iWmI Loko Stevens □ Comer * *4 ‘7 7 . .Rrnie i X r I ,1hre» take* ■ N; ' Glendale,. *Msi(wellon r if f Snchomleti Coinor\ jMur^ya Cbfnar * 4- ^If^SiTeMioftV / .1 > itM • SSOTBSihetjtniy IPJJII tJikll a WellBce ii ■all^ 'A e Portdambl* inlet l.'ef I; PaiH ‘i ' 1 riTsien Field • Sky > t Gold Bar Martha Lake I ^Cethcart S Vi Glfforvtew. / v,y tat': I- . -(ijorth Cxeek .Kennard Comer MeUb'y -jfj Hl(h Rock r 'Seattle Helihte ' , MegnilOKa Ton ooo Shorelihi' ;e ■'i"0 As \6V Ksnmere > « . WoodinvIHi’ t tAdlnnele ,'Ceilajte Lake ^btivall 5ubiectI h ‘ A» ^Soeiianttih •t \ 11 KtnAeftOia V I Jui^nlta I * HI Ik (0110 \ iiKiV : Novelty ,Port Medr Ui7na~ V. Ankc ,^^50 lie ok ^Kdiitfluy ^Meridian Ha^^ts ^MBBnoira Beach I * - " k ■ Sunrise Beech ■ShotoAcee * » / ■ ■ ■ > Gtc Homer * y* ’ . .'V>Doeh Polni^.^ .fldololito ^MloWay ^ A ' *GsorHQtown t ,Covfng(eft ^nedondo J *5^j^dale C'OM AirIialll Lnkote^ Ai^ .iVs] VuonesViat ^Bayne 'Cumberland flQ n'U'W *Lod Hilt 1a FedijelWay Black olamond Browns PolnI Rtision I ..yis ^Graan River « *Kumrmr ll^oilOfhet paeiho //miXoff ■ - t \ \ f s L ^Neweukum ' V Tacoma J«ciemi : MMton^ yEtfgewopd tA ela. 1 Gcnm ^ ' 4W.TO0 tee Data use subject lo llcenDO. © DeLorme. DeLorme Street Allas USA® 2010. www.de lorme. com I MNOSr'E) * V = B,31 ml Dam Zoom B O Appellant WPDC Cleveland's Exhibit 81 - Page 8 of 88 ---PAGE BREAK--- Appellant WPDC Cleveland's Exhibit 81 - Page 9 of 88 ---PAGE BREAK--- SUBJECT photographs Photo 1: View north towards the Cleveland Street Building * ■sIStV ■ Photo 2: View northeast towards subject from across Cleveland Street I j Photo 3: Rear of Cleveland Street Building CJM 10 Rfll6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 10 of 88 ---PAGE BREAK--- SCOPE OF WORK The Uniform Standards of Professional Appraisal Practice (USPAP), published by the Appraisal Foundation, requires the identification and disclosure of the appraisal problem to be solved in order to determine the appropriate scope of work, as well as the type and extent of research and analysis required to develop a credible value opinion. The scope of work is acceptable when it meets the expectations of the intended user(s) of the report, as well as the overall expectations of the appraisal profession. INTRODUCTION APPRAISAL PREMISES Cleveland Street Building 16390 Cleveland Street Redmond, WA 98052 Property Identification The purpose of this appraisal is to estimate as is market value. Purpose of the Appraisal Market value is defined as: Definition of 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 each are acting in what they consider to be their own best interest; 3. A reasonable time is allowed for exposure to 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. Source; Volume 12, Code of Federal Regulation, Part 34, Subpart C; Washington. Also appears in: Appraisal Standards Board, Uniform Standards of Professional Appraisal Practice Our client is Andorra Ventures LLC. The intended user of this report is Andorra Ventures, LLC. This report is intended for no other users. The intended use of this appraisai is to assist in establishing market value for acquisition purposes. The report is intended for no other use. CJM is an independent, fee-based real estate appraisal firm. The fee charged for this appraisal is not contingent upon a minimum valuation, a specific valuation, or the approval of a loan. Client & Intended Users Intended Use Appraiser Independence 11 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 11 of 88 ---PAGE BREAK--- SCOPE OF WORK The individuals signing this report, as the qualifications appearing at the end of this report verify, are qualified to do this appraisal. CJM warrants that none of its management staff, employees, or agents has any present or prospective financial or ownership interest in the subject property or in any related property. CJM has not previously appraised the subject. Chuck Munson, MAI, ASA, AI-GRS, and Aaron DeCollibus have provided no other services nor engaged in any activity related to the subject property in the three years preceding acceptance of this assignment. Chattel property used to operate a commercial building, e.g., fixtures, office furniture, etc., is included in the estate appraised. This appraisal does not address unforeseeable events that could impact the property improvements and/or the market conditions reflected in the analyses that follow. The forecasts, projections, and value estimates contained herein are based how on current market conditions, anticipated short-term supply and demand factors, as well as future economic conditions reflected by the expectations and perceptions of market participants. Although best efforts have been made to estimate reasonable value conclusions and marketing periods for the subject property, unforeseeable events such as natural disasters, terrorist activity, significant government interventions, or unpublished major economic indicators could impact future marketability of the subject beyond what is foreseen at the present time. Competency Statement Warranty Prior Services Personal Property Unforeseeable Events September 19, 2016 Effective Date This is a valuation of the fee simple estate for the Cleveland Street Building. Property Rights Appraised The following is a brief summary of the procedures utilized in the development of this appraisal, considering the relative complexity and characteristics of the property appraised, the assignment conditions, and the intended use and users of the report. A careful inspection of the Cleveland Street Building site was undertaken by Aaron DeCollibus on September 19, 2016. In addition, observations of surrounding properties have been made, photographs of which are included in the report. The inspection of the site focused particularly on characteristics which most directly impact value, e.g., condition of improvements, access, and utility. Photographs appear where applicable in this report. A description of the site and improvements is included. Aaron DeCollibus inspected the properties used for comparative sales analysis. APPRAISAL PROCEDURES Site Visit Comparable Property Inspections Location is of great importance with respect to marketability, so in addition to a physical examination of the subject property, we have considered the economic and demographic trends of Seattle and the Competing Market Analysis CJM 12 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 12 of 88 ---PAGE BREAK--- SCOPE OF WORK Redmond market along with competitive property trends, This analysis has been pursued in an effort to accurately weigh submarket strength as well as marketability. Population growth trends and demographic data have been derived from information provided by the WSOFM (Washington State Office of Financial Management) and ESRI (Environmental Systems Research Institute). Other data and information sources, including state and local governmental agencies, properly owners, real estate agents, etc., are typically cited in the report, and phone numbers are also provided in case the reader finds a need to expand the data presented. Real estate has no intrinsic value; its worth depends on what someone will pay for it. An appraisal conclusion is, therefore, not an estimate of property value as much as a behavioral assessment of “typically motivated" buyers and sellers. Consequently, it is imperative to identify the purchaser profile during the appraisal effort, based on similar properties and uses. In the case of the subject's 2,799 sq, ft. building, the most likely purchaser is an owner-user, individual investor, partnership, or LLC. Purchaser Profile The highest and best use of the Cleveland Street Building properly is as for Commercial use. HIGHEST AND BEST USE Two valuation techniques, the income capitalization approach and the sales comparison approach, were used to arrive at the opinion of value appearing in the transmittal letter. After review of the above considerations, it was determined that an income capitalization approach would be both appropriate and necessary for the Cleveland Street Building valuation estimate. Sources for income and expense projections include 1) data from comparable rental properties, 2) expense comparables, 4) comparable OAR sales, and 4) input from market participants. After review of the above considerations, the sales comparison approach was developed for this assignment. Five comparabie saies similar in age, condition, location, size and functional utility were selected. The sales were compared with the subject using qualitative analyses with value per square foot as the primary unit of comparison. Input from market participants familiar with the Cleveland Street Building was also considered. The cost approach is a weak means of estimating value because, among other things, the direct correlation between cost and value has been waned over decades due to rising component costs and construction requirements, as well as disparities in costs among property types, and to have accurate estimates, a person must, in some cases, know market value before even getting started. If the market value is already known, then the cost approach is irrelevant. An appraisal is tasked with simulating typical market behavior, and investors seldom use the cost approach. For these reasons, the cost approach will not be used. APPROACHES TO VALUE Income Capitalization Approach Sales Comparison Approach Cost Approach 13 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 13 of 88 ---PAGE BREAK--- SCOPE OF WORK Reconciliation The conclusions from each valuation approach utilized in this assignment have been logically weighed and baianced in the reconciliation reiative to the strength of each approach and the degree to which each approach is used in the marketplace. Three extraordinary assumptions are made: 1) the subject wiil be renovated during the timeline anticipated and according to the plans and specifications provided to CJM, 2) the subject interior is in sheli condition, per the buyer; and 3) the site is free of environmental contamination. No additional extraordinary assumptions or hypothetical conditions are used as part of this report. HYPOTHETICAL CONDITIONS AND/OR EXTRAORDINARY ASSUMPTIONS It is the intent of this report to comply with the following; REPORT COMPLIANCE The Uniform Standards of Professional Appraisal Practice (USPAP), Appraisal Foundation; Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA); Title 12, Part 34 (Real Estate Lending and Appraisals) and Part 225 (Bank Holding Companies and Change in Bank Control) of the Code of Federal Regulations (CFR), Office of the Comptroller of the Currency; Appendix E of the Commercial Real Estate and Construction Lending Comptroller's Handbook, Office of the Comptroller of the Currency; Statement of Financial Accounting Standards 157 (FAS 157), Financial Accounting Standards Board; Federal Deposit Insurance Corporation (FDIC) Part 12 CFR 323; The joint statements of policy guidelines issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration; Any additional appraisal requirements of the client. SCOPE OF WORK CONCLUSION The relative complexity and characteristics of the property appraised, the intended use and users of the report, and the assignment conditions have all been considered above. The procedures utilized in the development of the appraisal, providing insight into the level of data and analysis leading to value estimate conclusions, have also been discussed. Again, additional discussions appear throughout the report in relevant sections, providing additional details into the scope of work pursued in the development of the appraisal. CJM 14 RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 14 of 88 ---PAGE BREAK--- PRIMARY MARKET AND NEIGHBORHOOD CHARACTERISTICS This section of the appraisal considers neighborhood trends within the subject primary market area. INTRODUCTION AREA PROFILES Physical Profile The Cleveland Street Building site is located in downtown Redmond within northwestern King County. The City of Redmond, which encompasses about 17 square miles, is located about four-miles east of Lake Washington, five-miles northeast of Bellevue, and 11-miles northeast of the Seattle CBD. The city is bordered by Kirkland to the west, Bellevue to the southwest, and Sammamish to the southeast, with unincorporated areas of King County to the north and east. Redmond also surrounds 640-acre Marymoor Park at the north end of Lake Sammamish. Relative Location Microsoft Campus Redmond enjoys a number of major employers. The largest by far, with almost 34,000 employees, is Microsoft. Other major employers are listed in the following table. CJM 15 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 15 of 88 ---PAGE BREAK--- PRIMARY MARKET AND NEIGHBORHOOD CHARACTERISTICS REDMOND'S TEN LARGEST EMPLOYERS Company Employees Microsoft Corporation Terax (fomnerly Genie Industries) EuresI Dining Services @ Microsoft Nintendo of America AT&T Mobiiity Lake Washington Schooi District Physio-Control United Parcel Service Honeywell Aerojet 33,792 2,078 980 942 915 877 728 690 686 517 Source; City of Redmond, Washington Except for the Lake Washington School District, all of the largest employers in Redmond are in the private sector. Property Maintenance and Appearance The Cleveland Street Building site is located in downtown Redmond, which includes a mix of older commercial buildings alongside newer mixed-use properties. tvi m Red 160 mixed-use complex New mixed use project Overall, properties are average to above-average in condition and appearance. Neighborhood Cycle Before the recent building boom, Redmond's Downtown District hadn't changed much in years. Most high-tech employees commuted from Seattle to the Eastside because they couldn’t find the quality apartment properties or the hip neighborhoods that Seattle offered. Over the past five+ years, however, downtown Redmond has become significantly more urban with the addition of many mid-rise apartment buildings which include ground-floor restaurants and shops. Based on the evidence, the neighborhood is in a period of growth. i I CJM 16 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 16 of 88 ---PAGE BREAK--- CJM Site Map Prepared by C. J. Munson 1612S 16390 Cleveland St, Redmond, Washington, 98052 Drive Times; 5, lO, 15 minute radii DRIVETIME MAP J I, I I 5 minutes 10 minutes 15 minutes 9 Redmond 2 BlAf 1 Per CoStar CJM 19 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 19 of 88 ---PAGE BREAK--- PRIMARY MARKET AND NEIGHBORHOOD CHARACTERISTICS As the chart illustrates, rates declined significantly in late 2015/early 2016, but rebounded over the past two quarters. Kidder Mathews Q2 2016 Seattle Retail Market Report forecasts retail rental rates will remain steady over the near term on the Eastside. Rental Rate Appreciation Vacancy & Absorption Trends Kidder Mathews Q2 2016 Seattle Retail Market Report indicated King County retail vacancy of 4,0%, a decline of 20 basis points from Q1 2016. CJM survey of nearby commercial space is summarized in the following table. REDMOND COMMERCIAL VACANCY SURVEY September 2016 Vacancy Levels Vacant SF Total SF Vacancy Building 13,073 8,420 6,800 153,620 69,743 4,120 8,554 2,799 11.9% 28.1% 13.2% 1,555 2,369 Point Redmond, 16651 Redmond Way 16528 Cleveland Street, Building D Old Town Lofts, 16161 Cleveland Street Redmond Center, 15770 Redmond Way Bear Creek Village. 17124 NE Redmond Way 16005 NE Redmond Way 16401 Redmond Way Subject: 16309 Cleveland Street 899 3.5% 5,400 7.5% 5,225 0.0% 0 0.0% 0 100% 2,799 6.8% 18,208 267,090 Total Source: CJM Our September 2016 CJM survey indicates a downtown Redmond commercial vacancy of near 6.8%, although this is not a complete survey of buildings in the market and, based on a general visual inspection, the actual vacancy rate is likely lower. CJM RB16-125 20 Appellant WPDC Cleveland's Exhibit 81 - Page 20 of 88 ---PAGE BREAK--- PRIMARY MARKET AND NEIGHBORHOOD CHARACTERISTICS Absorplion for the subject's competing market, Q3 2013 to 2016 YTD, is illustrated below’. Absorption Not Absorption 40 30 I 20 I 10 0 I I -10 -20 ^0 I I I ^0 2016 2016 2015 2015 2014 2014 2013 03 03 01 01 03 01 Q3 AM 16380 CI»V9l!»nd SI Redmond i>2Sldr inirTtit SH'ir? As the chart illustrates, over the past 12 quarters the pattern Is three quarters of positive absorption followed by one quarter of negative absorption. As the graph illustrates, Q2 2016 reported negative absorption, which suggests positive absorption for the remainder of 2016. Reconciling the data, demand is adequate for commercial space. Sales & Marketing Trends As a general basis for comparison, Realty Rates Investor Survey reported Q3 2016 OARs for free-standing commercial buildings ranged from 4.41% to 14.69%, with a central tendency of 8.20%, a decline of eight basis points from the previous quarter, and 14 basis points year-over-year. These figures, however, reflect the nationwide market. Sales of small, free-standing commercial properties in Redmond over the last three years have exhibited OARs from 5.25% to 8.25%, Comparable OAR sales used later in this report indicated a range of 2.97% to 8.52%. Market participants interviewed by CJM for this report and other small commercial buildings on the Eastside indicated a narrower range of OARS from 5.00% to 7.00%. We searched the Commercial MLS using the following parameters: Office, Retail, Industrial, Redmond, Active and the search produced 12 active listing. We substituted Sold, Closing date January 1, 2015 to present, which produced 17 closed sales. The evidence indicates sufficient demand for Redmond commercial buildings with, arguably, an undersupply of buildings. OAR Trends Commercial Building Sales 1 Per CoStar 21 RB16-125 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 21 of 88 ---PAGE BREAK--- PRIMARY MARKET AND NEIGHBORHOOD CHARACTERISTICS The selected comparable buildings used later indicated a price per square foot range of $299 to $649 per sq. ft. Anticipated Future Behavior Continued growth in the downtown Redmond core The Cleveland Street Building's neighborhood is convenient to commuting routes, employment centers, as well as shopping and schools. The maintenance and appearance of neighborhood properties vary, but are generally average. The neighborhood is in a period of stabilization. The Cleveland Street Building site has a favorable location in downtown Redmond with adequate access, frontage on commercial arterial, with vacancy in the competing market around 6.0%. All things considered, neighborhood desirability is average. CONCLUSION CJM 22 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 22 of 88 ---PAGE BREAK--- SUBJECT SITE DESCRIPTION This section of the appraisal report summarizes characteristics of the subject site. INTRODUCTION IDENTIFICATION 16390 Cleveland Street Redmond (King County) WA 98052 Location [PHONE REDACTED] The owner of record is Rain City Development LLC Assessor's Parcel Number/Owner of Record SITE DESCRIPTION The Cleveland Street Building site is a flat, irregular-shaped parcel with total site area of 3,140 sq. ft. (0.07 acres). The improvements have 2,799 rentable square feet, indicating an F.A.R. of 0.89:1.0. Consequently, no excess or surplus land exists. The Cleveland Street Building site is located in the downtown Redmond commercial core with frontage on Cleveland Street, the primary northbound commercial arterial for downtown. Immediately surrounding properties are predominately commercial and retail service-oriented developments. Shape, Topography, Area & F.A.R. Immediately Surrounding Properties ■ ■ - ■ V : ^ i Restaurant adjacent west The maintenance and appearance of surrounding properties vary but are generally average. The subject site is located at the intersection of 164th Street NE and Cleveland Street in downtown Redmond. Redmond is via Redmond Way, located one block north of the subject, with SR-520, located about two miles east, provide access to the Bellevue and Seattle CBD's. The subject improvements occupy the entire site so no vehicular ingress/egress exists, although the adjacent- west site is partially open parking. Overall, access is adequate with ingress/egress non-existent. RB16-125 Adjacent-south mixed-use building Access, Ingress/Egress Access to downtown 23 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 23 of 88 ---PAGE BREAK--- ■1 2N0 loswoi fri Appellant WPDC Cleveland's Exhibit 81 - Page 24 of 88 ---PAGE BREAK--- ne steakhouse ft Appellant WPDC Cleveland's Exhibit 81 - Page 25 of 88 ---PAGE BREAK--- SUBJECT SITE DESCRIPTION 64 feet on both Cleveland Street and 164th Ave NE^ Cleveland Street: 14,000 vehicles per day^ Visibility and exposure are average for commercial use. No excess or surplus land present No soils report has been provided CJM. However, based on the appearance of the existing Improvements and of surrounding properties, it appears that soils conditions are adequate to accommodate the existing improvements well into the future. No guarantee of this latter statement is made, however. Frontage Visibility & Exposure Excess Land Area Soils Conditions Public utilities are present and service is adequate. Utilities LAND USE RESTRICTIONS & ENVIRONMENTAL LIMITATIONS Zoning & Land Use Regulations The subject site is zoned Old Town (OT), an area consisting of transitional development, located between the Downtown Core and Downtown Neighborhood Districts. Zoning Designation Permitted uses include, but are not limited to, multi-family, mixed-use, general sales or services, and religious institutions. Permitted Uses Maximum six floors with TDRs, five floors without, Maximum Buiiding Height Maximum F.A.R. is 1.25 with TDRs. Maximum F.A.R. The subject is legal and conforming use. CJM was not provided a preliminary title report. CJM is not aware of any easements, covenants or restrictions negatively impacting the marketability of the Cleveland Street Building site, Typical easements on behalf of utilities service providers are also assumed. Legai & Conforming Use Easements, Covenants & Restrictions There are no apparent encroachments. Apparent Encroachments To our knowledge, the site is not subject to any unusual assessments or LID expenses. Assessments and LID Expenses Per Pierce County GIS ^ Per Coster, most recent year 2014 CJM 26 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 26 of 88 ---PAGE BREAK--- 4 Zoning Map U i SMT TSQ EH TR 1 I OT RVBD P Subject 1 E BC CTR R30 TWNC R12 CITY OF REDMOND ZONING CLASSIFICATIONS Business Park Downtovm Districts BP CC-1,CC-2.CC-3 CC-4,CC-5,CC-6 General Commercial Gateway Design District Industry Maiufacluring Park Neighborhood Commercial Overlake Business & Advanced Technology Overtake Desi^ Distriot Overtake Village Design District Single-Fanily Constrained Single-Family Urbwt GC GDD 1 MP NC OBAT ODD OV R-1,R-2,R-3 R-4,R-5,R-«.R-IS,RIN R-12,R-18,R-20,R-30 Multi-Family Urban Semi-Rural Retail Commercial 1 RA-6 RC Urt^n Recreation UR - Redmond City Limits ] Zoning Lines [ Appellant WPDC Cleveland's Exhibit 81 - Page 27 of 88 ---PAGE BREAK--- SUBJECT SITE DESCRIPTION According to FEMA panel no. 53033C-0390G dated March 30, 1990; the subject is in Zone X, The subject is outside the 500 year flood plain. The appraiser is not an expert in this matter and is reporting data from FEMA maps. Maps prepared by the U.S. Geological Survey’ provide seismic hazard information appiicable to various geographic locations. Determining which map to use and how to appiy the data given on the map requires knowing 1) how earthquake forces are measured, 2) the International Building Code, 3) the relative importance of the building on the site as determined by the USGS, and 4) the period of time over which the seismic risk should be measured. CJM is not an expert in these matters. If seismic activity potential is a matter of concern, an expert in the field should be consulted. Flood Hazard Seismic Activity Based on a visual inspection of the subject property, there does not appear to be any hazardous waste. There is no refuse in the area and the likelihood that the subject property was used as a dumping ground in the past is minimal. The conclusions of value and highest and best use within this report are contingent upon the absence of hazardous waste or site contamination. Hazardous Waste The site does not appear to have any archeological significance and there appears to be no threatened aquifers, endangered species, etc. CJM does not guarantee that there are no additional environmental concerns, but only that none were evident during visual inspection. Again, no guarantee of this statement is made, and it is recommended that a professional environmental assessment firm be retained if the status of the Cleveland Street Building site in this regard is questioned. Other Environmental Concerns No external obsolescence was noted. External Obsolescence CONCLUSION AND MARKETABILITY The Cleveland Street Building site totals 3,140 square feet, or 0.07 acres, and is iocated in the commercial core of downtown Redmond. The subject site is flat, irregular in shape, with average access and adequate visibility and exposure for general commercial use. All public utilities are available and there do not appear to be any easements, covenants or restrictions, which would negatively impact the marketability of the site. Based on zoning allowances, the improvements are a legal, conforming use. Site desirability is average when weighing its location, zoning, topography, and access. Summary of Characteristics Marketability htlp;//Barthquake.usgs.gov/hazards CJM 28 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 28 of 88 ---PAGE BREAK--- IMPROVEMENT DESCRIPTION This section of the report summarizes the Cleveland Street Building's improvements. INTRODUCTION PHYSICAL CHARACTERISTICS According to the King County Assessor, the Cleveland Street Building has gross building area 2,760 sq. ft. Based on the plans provided to CJM, the renovated building will have rentable area of 2,276 sq, ft. with a 523 sq. ft. enclosed storage area (this area could be readily transformed into rentable square footage at little cost). Consequently, the total renovated gross and rentable building area is 2,799 sq. ft., and will be the amount used to estimate value. General Overview Cleveland Street Building The building is currently shell space with no interior finishes. According buyer-developer Sean Miller ([PHONE REDACTED]), proposed renovations will include new exterior finishes, roof replacement, installation of ADA- complaint restroom, new lighting fixtures and displays, and adding a private office at the southwest corner with storage at the north end. According to Mr. Milter, the estimated renovation budget is $235,000 with a construction timeline of 12 to 14 weeks. The Cleveland Street Building's improvements are discussed below. 1956, renovated 2016 Year Built Concrete foundation, wood framing Foundation & Frame Cedar siding and stucco Exterior Finish 29 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 29 of 88 ---PAGE BREAK--- IMPROVEMENT DESCRIPTION Flat, torchdown Roof Clear Height 18 feet 1 grade level door Grade Level & Dock High Doors Standard Windows & Doors Standard Interior Finishes None HVAC Insulation/soundproofing are assumed to be adequate and meet code. insuiation/Soundproofmg Sprinkler None No additional security system beyond standard locks Security No onsite parking Based on the proposed renovations, the subject building will have has adequate functional utility for general commercial use. Parking Functional Utility Condition Average Chronological life is 60 years, effective age, upon completion of renovations, is new, with economic life estimated at no iess than 30 years. Chronological, Effective, & Economic Age Chattel property is included in value estimates since these items are not typically excluded by purchasers and sellers when executing sales of commercial buildings in the subject market area. Title III of the Americans with Disabilities Act (ADA) prohibits discrimination on the basis of disability by private entities in places of public accommodations, and requires that places of public accommodations and commercial facilities be designed, constructed and/or altered in order to be readily accessible to, and usable by, persons with disabilities. Section 36.304 of the ADA requires a place of public accommodation to remove architectural and communication barriers where such removal is readably achievable. Cleveland Street Building is at grade level and appears to conform to ADA. However, the extent to which the ADA applies to the Cleveland Street Building is not determined in this report. Again, Cleveland Street Building buyer estimates total renovations costs of approximately $235,000 with an expected completion date of 12 to 14 weeks. Based on the proposed renovations and current condition of the building, the proposed renovation timeline Is reasonable. Chattel Property Americans with Disabilities Act (ADA) Compliance Renovation Timeline CJM 30 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 30 of 88 ---PAGE BREAK--- IHPROVEMEMT DESCRIPTION The Cleveland Street Building is competitive in terms of its location, condition and functional utility. Based on characteristics described earlier, competitiveness with other commercial buildings should be average. Marketability The Cleveland Street Building is a single-story commercial building located in downtown Redmond. The renovated building has gross and rentable area of 2,799 sq. ft. with no onsite parking. Upon completion of renovations, the building will be average in condition and appeal with adequate functional utility for general commercial use. Appeal to the market is average based on the location, functional utility and condition. The purchaser profile is an owner-user or investor/developer. CONCLUSION Purchaser Profile 31 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 31 of 88 ---PAGE BREAK--- Floor Layout Appellant WPDC Cleveland's Exhibit 81 - Page 32 of 88 ---PAGE BREAK--- SUBJECT HISTORY The Subject History includes a discussion of the sales history, assessed value, property taxes, and probable immediate future activity. INTRODUCTION HISTORY 1956 with renovations proposed Andorra Ventures, LLC is under contract (an assignment from another buyer) to purchase the Cleveland Street Building for $900,000, equivalent to $288 per square foot. The purchase price relative to the concluded estimate of value is discussed in the Reconciliation seclion, The 2016 assessed value and taxes are summarized in the table below. Date Of Construction Transaction History Assessed Value & Property Tax Summary 2016 ASSESSED VALUE & PROPERTY TAX SUMMARY Tax Year 2016 Assessed Value: Parcel [PHONE REDACTED] Land: Improvements Total TaxRate/$1,000 $292,900 $23.500 $316,400 $9.64 $3,063 2016 Total Taxes Source: King County records As of the writing of this report, first half taxes are paid. Complete purchase and commence with renovations PROBABLE IMMEDIATE FUTURE ACTIVITY 33 RB16-125 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 33 of 88 ---PAGE BREAK--- This page intentionally left blank CJM 34 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 34 of 88 ---PAGE BREAK--- HIGHEST & BEST USE The concerns of the highest and best use analysis are 1) the use which is legally permissible, 2) the most likely/physically possible use, 3) the use which is most financially feasible and, ultimately, 4) the use which maximizes productivity, specifically income productivity. The four considerations are not isolated but are, rather, overlapping and to varying degrees inseparable. INTRODUCTION THE FOUR HIGHEST & BEST USE CRITERIA The subject site is zoned Old Town (OT), an area consisting of transitional development, located between the Downtown Cone and Downtown Neighborhood Districts. Based on the legally permissible uses, the subject is a legal, conforming Legally Permissible Uses use. The Cleveland Street Building, upon renovation, will have average functional utility and appeal. Demand for commercial buildings in the immediate neighborhood is adequate and vacancies are low. As improved, the most likely, physically possible use of the subject is for commercial use. Recent sales of commercial buildings in the Cleveland Street Building's competing market indicate adequate investment demand, and support continued commercial use for the foreseeable future. Were the site vacant, based on the subject’s land use designation, surrounding improvements, present improvements, and market conditions, commercial development would be most likely. Based on our inspection on September 19, 2016, the property is vacant, but scheduled for renovations with the buyer an owner-user. If the site were vacant, feasibility of new commercial construction would be questionable and a prudent investor would most likely wait for economic demand to increase before beginning a new project. As proposed, the subject could accommodate a variety of business such as retail, personal services, or office tenants. The Cleveland Street Building, upon renovation, will be in adequate condition to produce Income well into the future. Again, the subject building has total gross and rentable area of 2,799 sq. ft. Productivity maximization is therefore judged to be optimized by general commercial use. The typical purchaser profile for the subject is an investor, owner- user, or a developer. Most Likely & Physically Possible Use Financial Feasibility Discussion Productivity Maximization HIGHEST & BEST USE CONCLUSION Commercial use Highest & Best Use As Effectively Vacant Highest & Best Use As If Improved As Proposed Commercial use 35 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 35 of 88 ---PAGE BREAK--- * This page intentionally left blank CJM 36 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 36 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH An investor purchasing income-producing real estate, like a small hospitality facility, is essentiaily exchanging a sum of present dollars for the right to receive an anticipated future Income stream. Consequently, from an investor's viewpoint, the perceived value of a particular property is directly correlated with its earning potential; the higher the earnings, the higher the value, or potential sales price will be. INTRODUCTION Again, the Cleveland Street Building is currently vacant with the buyer intending to occupy the building upon completion of the renovations, estimated at $235,000, or about $75/sq. ft. The following tables summarize comparable rental properties representative of the subject’s market area. In the selection of comparable commercial rentals, focus was placed on units available in downtown Redmond similar in condition, frontage, exposure, and availability of off-street parking. The five properties ultimately selected were chosen because of their comparability and adequacy of data available. The comparable rentals are shown on the following locator map. Comparable Commercial Rental Rate Analysis 37 CJM RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 37 of 88 ---PAGE BREAK--- Delorme DeLorme Street Allas USA® 2010 Comparable Rentals Map £ 1 i«ST PaM :3 'O £ I > P T,2. C ;iComparat4e Rental No. 5[ GuiH Trip Restaurant NEa^^r - > NE < ■ ■ - J ! I Cl * i I Car^BAKCJwi = NE 84-m WAY S % m NEe3W>WAr > g NES3R&CT S«OU HwUinrt- _ NE 83RO ST 16CTW AVE PJE ReAnwid Uigog Care NE 83RD 0 NE 83ftD STi ^ Taecpifxtar ST < z 'A f«)a»MV4a^C<« Z t'^a-iIi imrin (bwd Pojic ^ Ne«j$T5r £ 12 3< o Comparable Rental No. 3 ^Redmond Way Building ugifirHT^ ^ ^ «E ftOTHST ■j5i) ^tiama^fftUoas^ g I jg- -4 ‘ft. ■ / fl«dmond X a: a Comparable Rental No. 2 ' Red 160 * C s s i! IM«rviU.AM* X LIT X n I Comparable Rental No. 4 Hbmegrown Buitdir^ < % ■fr X § SubjoCT Rcvdane % I rrwAng^ Jitp^emCd % □ ^T»g^q^5 Se-wr ^‘ciCi.Cenlce 0«1WT ? Uj tirim Acstenf ' 'S^imtnc ■5 YP. < < F.S0i*9«r, * J5 - . Comparable Rental Mo. 1^ -"'Bear Creek Vitage ' :^U*eMH9talL8 o Gcoi^of tM9. c NE '-A«A:WMfSiA» a Cen«t« « N\ A X o ccM sqk CAMnov* s s I 1^ KE 73RP WAV %so # 1 Scale 1 7,200 Data use s-jbjed to license. DeLorme. DeLorme Street AUas USA® 2010. www.delorme.com TV / r = 60o,0ft Data Zoom 14-7 Appellant WPDC Cleveland's Exhibit 81 - Page 38 of 88 ---PAGE BREAK--- COMPARABLE COMMERCIAL RENTAL SUMMARY Frontage/ Leased Area Lease Date Exposure Annual Lease Rate/SF Year Built/ 1 Ren Comments/Verification No. Location $45.00 MultRenanL Safeway-anchored retail center located at east end of downtown Redmond. Annual NNN expenses are estimated at $6.40/sq.fL Steven Olsen. JSH Properties, [PHONE REDACTED] 1 Bear Creek Village 17220 Redmond Way Redmond. WA 1978 1,190 May 13, 989 feet 35,000 ADT 2016 NNN -500 feet 17,900 ADT $35.00 Newer, mixed-use, two-building complex located at west end of downtown Redmond. Annual NNN expenses are estimated at $5.35 per sq.ft. Cameron Kent, Ewing and Clark, [PHONE REDACTED] 2 Red 160 16015 Cleveland Street Redmond, WA 2010 1,947 October 6. 2015 NNN 1,720 February 16, $24.00 Single-story, multi-tenant commercial building located mid-block and located outside the downtown core. Annual NNN expenses are estimated at $4.08 per sq. ft. Parking ratio of 1.9 stalls per 1,000 RSF. 3 Redmond Way 15935 Redmond Way Redmond, WA 1978 172 feet 30,000 ADT 2015 NNN Brian Kenworthy, Kidder Mathews, 206-799- 4545 Renovated commercial building located in central dovmtovm Redmond. John Booth, Wallace Properties, [PHONE REDACTED] $33.00 1911/2015 2,797 January 12, 61 feet 14,000 ADT 4 Homegrown Building 7841 Leary Way NE Redmond, WA 2015 NNN $21.62 100 feet 9,000 ADT Mixed-use commercial building located on northwest periphery of downtown Redmond. Parking ratio of 5.5 stalls per 1,000 RSF. CJM Files 5 Guilt Trip Restaurant 8440 160th AveNE Redmond, WA 1990 2,120 January 1 2014 NNN -130 feet* 14,000 ADT 2,799 NA NA Single-stoiy commercial building with no off-street parking and proposed renovations. No onsite parking. S Cleveland Street Building 16390 Cleveland Street Redmond 1956/ 2016 RSF ’ PerCoStar * Subject's combined frontage feet Appellant WPDC Cleveland's Exhibit 81 - Page 39 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH Comparable Rental No. 1 is the 175,253 square foot Bear Creek Village. The comparable is a Safeway-anchored retail center located at the east end of downtown Redmond. The nine-building complex is well- maintained with good exposure and adequate parking for general commercial use. Comparable Rental No. 1 iZOS, BAA. :5 . . oasss !ii Lf ‘ jfll i rr ‘ 4^i ■ V ■ jtt' f:v )C • y, I Bear Creek Village Bear Creek Village leased 1,190 sq. ft. on May 13, 2016 with an annual lease rate of $45.00/sq. ft., NNN. The comparable's superior exposure, parking, and anchor-tenant indicates a Cleveland Street Building annual market rate less than $45,00/sq. ft., NNN. Comparable Rental No. 2 is mixed-use Red 160, constructed in 2010. The comparable unit is ground floor commercial space in the 2010-built Red 160 apartment complex. The building is well-maintained with good exposure and adequate off-street parking for the commercial space. Comparable Rental No. 2 Red 160 CJM 40 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 40 of 88 ---PAGE BREAK--- INCOME CAPfTALIZATlOH APPROACH Red 160 leased 1,947 sq. ft. on October 6, 2015 at an annual lease rate of $35,00/sq. ft., NNN. The superior exposure, frontage and parking of the cornparable indicate a Cleveland Street Building annual market rate less than $35.00/sq. ft., NNN. Comparable Rental No. 3 Is the Redmond Way building, a 4,990 square foot building constructed in 1978. The comparable is a free­ standing, multi-tenant building located mid-block and outside the downtown core. The building is average in condition and appeal with adequate exposure for general commercial use and a parking ratio of 1.9 stalls per 1,000 RSF. Comparable Rental No. 3 L£ Redmond Way Redmond Way leased 1,720 sq. ft. on February 16, 2015 at an annual rate of $24.00/sq. ft., NNN. Balancing the comparable’s superior exposure and parking with the subject's superior specific location, renovated condition and comer visibility, a Cleveland Street Building annual market lease rate higher than $24.00/sq. ft., NNN, is concluded. Comparable Rental No. 4 is the Homegrown Building. The comparable is a free-standing, single-story commercial building located in the heart of downtown Redmond and less than one block west of the subject. The recently renovated building is average in condition and appeal with good exposure for commercial use, but, like the subject, has no off- street parking. Comparable Rental No. 4 41 CJM RBie-125 Appellant WPDC Cleveland's Exhibit 81 - Page 41 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH Homegrown Building Homegrown Building ieased 2,797 sq. ft. on January 12, 2015 with the annual asking rate at 533,00/sq, ft., NNN. The comparable and the subject are generally similar; consequently, a Cleveland Street Building annual lease rate similar lo $33.00/sq. ft.. NNN, is concluded. Comparable Rental No. 5. Guilt Trip Restaurant, is a 3,836 square foot two-story, multi-tenant mixed-use commercial building located mid-block on the northwest periphery of downtown Redmond. The ground floor commercial space is occupied by the Guilt Trip Restaurant and the unit is average in condition and appeal with adequate exposure and parking for commercial use. Comparable Rental No. 5 Guilt Trip Restaurant CJM RB16-125 42 Appellant WPDC Cleveland's Exhibit 81 - Page 42 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH Guilt Trip Restaurant lease 2,120 sq. ft. on January 1, 2014 with the annual asking rate at $21.62/sq. ft., NNN. Baiancing the subject's superior exposure, renovated condition, and improved market conditions with the Guilt Trip’s superior parking, a Cleveland Street Building’s annual market lease rate higher than $21.62/sq. ft., NNN, is concluded. MARKET RENTS DISCUSSION The Cleveland Street Building consists of a single-story commercial building with total rentable area of 2,799 sq. ft. Rent and characteristics for the comparable units, discussed eariier, is summarized in the following tabie. COMPARABLE RENTALS QUALITATIVE SUMMARY Rental Rate Adjustments Rental No. 5 Rental No. 4 Rental No. 2 Rental No. 3 Rental No. 1 Subject Redmond Homegrown Guilt Trip Way Building Restaurant 2010 W8 1911/2015 1990 May 13, October Febaiary January 12, January 1, 2016 6,2015 16,2015 2015 Ti90 1,947 _ 1.720 _ 2,797 WS.o'o * $35.00 $24.00 $33.00 $21.62 Bear Creek Village Cleveland Street Building 1956/2016 Red 160 Name 1978 Year Built/Renovated NA Lease Date 2014 2,120 2,799 Leased Amount (SF)_ Annual NNN Lease Rate NA Qualitative Category + + + Market Conditions Location Condition Frontage Exposure visibility Parking Ratio Anchor Tenant + + + + + + <$45.00 <$35.00 >$24.00 ~$33.00 >$21.62 Annual NNN Lease Rate/SF Based on Ihe previous discussions, the Cieveiand Street Building annual lease rate should be higher than $24.00, less than $35.00, and similar to $33.00 persq. ft., NNN. Cameron Kent (Ewing & Clark, [PHONE REDACTED]), listing broker for Comparabie Rentai No. 2, Red 160, suggested downtown Redmond annual rental rates are generally In the mid-$30.00 per sq. ft., NNN, $33.00/sq. ft., NNN Reconciling the comparable rentals discussion with Mr. Kent's comment, a Cleveland Street Buiiding annual market lease rate of $33,00 per sq. ft., NNN, is concluded and will be used to estimate value. Market Participant Comments Market Rental Rate Conclusion 43 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 43 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH $92,367 Multiplying the concluded annual market rental rate of $33.00 /sq. ft., NNN, by the subject's 2,799 rentable square feet produces annual potential rental income of $92,367. POTENTIAL RENTAL INCOME Deductions from Potential Rental Income 4.00%ofPGIor $3,695 Kidder Mathews Q2 2016 Seattle Retail Market Report indicated King County retail vacancy of 4.0% while our own survey of submarket competing buildings, as well as discussions with local leasing agents and a review of Commercial MLS data indicated the immediate surrounding area's vacancy rate is approximately 6.8%. We are tasked with simulating typical market behavior, and buyers of small commercial buildings similar to the subject generally use a vacancy and collection loss totaling 5.00%. Considering the current submarket vacancy, as well as the subject's location relative to the competing market, a rate of 4.00% will be assumed, considering that 1) vacancy is hypothetically estimated in perpetuity and may not align with present market vacancy levels or actual occupancy, and 2) collection loss is estimated separately. This vacancy level, again, assumes market rental rates. Multiplying the vacancy contingency of 4.00% by the potential rental income produces annual vacancy loss of $3,695, with a separate collection loss contingency below. 1.00%ofPGIor $924 Loss in income due to delinquency and bad debt usually ranges from 0.50% to 1.50% of scheduled gross rental income. A delinquency/bad debt estimate no greater than 1.00% of potential gross rental income is assumed equivalent to $924 annually. 5.00% of PGI, or $4,618 Combined the vacancy and collection loss estimate is 5.00%, equivalent to $4,618 of gross potential income. $87,749 Deducting the above projections for income loss due to vacancy and delinquency/bad debt from the previous potential gross rental income estimate generates an effective gross rental income estimate of $87,749. Vacancy Estimate Delinquency & Bad Debt Total Deductions from Potential Gross Rental Income Effective Gross Rental Income Estimate EXPENSE ESTIMATES & NET OPERATING INCOME Again, for our analysis, we are assuming tenants pay all operating expenses except replacement reserves for major structural components and a miscellaneous contingency. This is typical at competing properties. Operating Expenses CJM 44 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 44 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH Most triple net leases provide for management expense reimbursement. Reimbursable expenses can include management fees whether the landlord contracts with a management company or the landlord performs the management service. In conformity to typical market behavior, management expense is reimbursable. 5,00% of EGI, or $4,387 This contingency category is for ownership expenses such as utilities and insurance for vacant space and miscellaneous expenses not covered by the triple net leases. A contingency of 5.00% of effective gross income or $4,387 per year is used. $0,20 per sq. ft., or $560 When structural reserves are collected, these expenses typically range from $0.15 to $0,30 per sq, ft. per year. Considering the age and condition of the renovated building, an estimate of $0.20 per sq. ft. for the Cleveland Street Building is estimated. An estimate of $0.20 per sq. ft. of gross building area indicates an annual expense of $560, equivalent to 0.64% of EGI. $4,947 The estimated operating expenses amount to $4,947 , or $1.77 per sq. ft. of gross building area, and 5.64% of EGI. For reference, similar small commercial buildings CJM has recently appraised are presented below. OPERATING EXPENSE COMPARABLES Management Miscellaneous Expense Contingency Structural Reserves Total Operating Expenses Operating Exp Operating Exp per RSF as % of EGI RSF Address/Name 5.36% 7.15% 6.43% $0.40 RSF $1.00 RSF $1.80 RSF 7.100 4,260 4.100 1011 Milton Way, Milton 1003 Bristol Ave SW, Lakewood 2016 NW Market Street, Seattle 5.64% $1.77 RSF 2,799 Cleveland Street Building The expense comparables add support to the subject’s estimated subject operating expenses indicating the conclusions are reasonable. $82,801 Subtracting the total expenses of $4,947 from the total effective gross income of $87,749 indicates a net operating income of $82,801 . Net Operating Income OVERALL CAPITALIZATION RATE SELECTION Two methods are used to generate a realistic overall capitalization rate: 1) investor surveys, and 2) comparable sales extractions. Introduction 45 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 45 of 88 ---PAGE BREAK--- INCOME CAPITALIZATION APPROACH 4.50% to 8.00% Investor Surveys As a general basis for comparison, Realty Rates Investor Survey reported Q3 2016 OARs for free-standing commercial buildings ranged from 4.41% to 14.69%, with a central tendency of 8.20%, a decline of eight basis points from the previous quarter, and 14 basis points year- over-year. These figures, however, reflect the nationwide market. 2.97% to 8.52% Comparable Sales Sales volume of comparable commercial buildings in the Redmond area has been modest requiring an expansion of the search area to the Eastside market area. A list of OAR comparables was compiled, and from that list the five apparent best comparable sales were selected based on date of sale, location, condition, tenant mix, and for reflecting (apparent) typical investor motivation, and subsequently inspected to insure adequate physical conformity. OVERALL CAPITALIZATION RATES Total Rentable SF Sale Price Designation/ Location Year Built Sale OAR Date No. June 19, 2015 Leega Tofu House 3411 184th Street SW, Redmond Center 7625 170th Ave NE, Redmond 85 Redmond Place 8460 164th Ave NE, Redmond Pickering Place Building 1435 11th Ave NW, Issaquah Bis on Main Building 10213 Main Street, Bellevue $2,200,000 6.20% 4,990 1987 1 June 23, $3,500,000 5,396 6.11% 2002 2 2016 February 1, $2,725,000 6.00% 8,666 1987 3 2016 August 14, 2015 $2,992,000 8.52% 9,912 1996 4 November 18,2015 $4,000,000 2.97% 1928 6,052 5 Source: CBA, Loopnet TW Leega Tofu House it.t Address; 3411 184th Street SW City: Year Built: 1987 RSF: 4,990 Date of Sale: June 19, 2015 Effective Sale Price: $2,200,000 re.'- ■ Contact: Chin Cho, buyer Information held back by request OAR: 6.20% CJM 46 RB16-1Z5 Appellant WPDC Cleveland's Exhibit 81 - Page 46 of 88 ---PAGE BREAK--- INCOME CAPfTAUZATlON APPROACH Redmond Center Address: 7625 170th Ave NE City; Redmond Year Built; 2002 RSF: 5,396 Date of Sale; June 23, 2016 Effective Sale Price; $3,500,000 Contact; Chesil Thye, Keller Williams Realty, [PHONE REDACTED] OAR: 6.11% f* ■ 85 Redmond Place Address; 8460 164th Ave NE City: Redmond Year Built: 1987 No. of Units: 8,666 Date of Sale: February 1, 2016 Effective Sale Price: $2,725,000 Contact: Brian Liebsohn, Line Properties, [PHONE REDACTED] OAR: 6,00% Pickering Place Building Address: 1435 11th Ave NW City: Issaquah Year Built; 1996 RSF: 9,912 Date of Sale; August 14, 2015 Effective Sale Price: $2,992,000 Contact: Dean Altaras, NAI Puget Sound [PHONE REDACTED] OAR: B.52% 47 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 47 of 88 ---PAGE BREAK--- INCOME CAPITAUZATION APPROACH Bis on Main Building Address: 10213 Main Street City; Bellevue Year Built: 1928 RSF: 6,052 Date of Sale: November 18, 2015 Effective Sale Price: $4,000,000 % rfftii ifwa Contact: Dean Altaras, NAI Puget Sound, 425'586-5613 OAR: 2.97% Overall capitalization rates (OARs) among the comparable sales range from 2.97% to 8.52%, with a central tendency of 5.96%. The high end of the range is set by a distressed sale while the low end is set by a well-located property in downtown Bellevue. Based on local and regional sales activity, with input from local market participants, an overall capitalization rate for the Cleveland Street Building is a range from 6.00% to 7.00%. Relative risk is average. 6.00% to 7.00% Reconciliation of Overall Rates Based on the preponderance of evidence, and the Cleveland Street Building's relative risk, an overall capitalization rate range of 6.00% to 7,00% is a reasonable expectation. DIRECT CAPITALIZATION TECHNIQUE INDICATION OF VALUE $1,275,000 Capitalizing the net operating income estimate of $82,801 by the previously concluded OAR range of 6.00% to 7.00% produces an estimated building value range of $1,175,000 to $1,375,000 equivalent to $420 to $491 per sq. ft. With no reason to emphasize one end of the range over the other, a stabilized value estimate of $1,275,000, or $456 /sq. ft. is conciuded. CJM 48 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 48 of 88 ---PAGE BREAK--- INCOME CAPITALtZATION APPROACH The stabilized operating statement appears below. STABILIZED OPERATING STATEMENT Cleveland Street Building Annual Totals Category Potential Gross Commercial Income 2,799 $92,367 $92,367 /sfA'R NNN $33.00 sf@ Subject Building Total Less; Vacancy & Collection Loss Vacancy Contingency Collection Loss Contingency @ Total Income Deductions $3,695 PGI 4.00% i00% 5.00% $924 PCI $4.618 PGI $87.749 Effective Gross Commercial Rental Income; Operating Expenses Amount $4,387 MSP $1.57 $0.20 $1.77 % EGI 5.00% 0.64% S.64% NNN Vacancy Contingency Structural Reserves Total Deductions $560 $82,801 Net Operating Income; $1,175,000 $1,375,000 7.00% 6.00% Estimated at OAR 49 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 49 of 88 ---PAGE BREAK--- I # This page intentionally left blank CJM 50 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 50 of 88 ---PAGE BREAK--- SALES COMPARISON APPROACH The sales comparison approach is a method of estimating the market vaiue of the subject by comparing it with simiiar properties. A premise of the saies comparison approach is that the market wiil determine the price for the property being appraised in the same manner that it determines the vaiue of comparabie competitive properties. Essentialiy, the saies comparison approach is a systematic procedure for carrying out comparative shopping. INTRODUCTION This section of the report describes the buiiding saies used for comparison, anaiyzes each saie in relation to the subject, and concludes with a vaiue estimate based on value per square foot. The search focused on sales in the immediate Redmond area. A search for sales produced five comparable properties that were purchased within the past 29 months and are similar to the subject in location, size, condition and functional utility. The comparables are evaluated on a qualitative basis relative to the subject. In conformity with typical market behavior, price per square foot is the primary unit of comparison. The location of each comparable sale is identified on the map found below. Following the map is a summary table that lists relevant properly data and the details of each sales transaction. COMPARABLE BUILDING SALES SUMMARY CJM 51 RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 51 of 88 ---PAGE BREAK--- DELORME DeLorme Street Atlas USA® 2010 Comparable Building Sales Map ME 67TH 5T - S?T>iSt p»3« John's Rzza 13 £ a rv Comparable Sale No. First Citizens Building 9 VSbge Sware ^ ME aSTM ST ■ > C m Os** K^merv ■ - 2 'Comparable Sate No. A Q5 Redmond Place 1 o > Sl < T s? r» \ > 2 ne 83RD WAY < T rn t \ ME 63RD Cr m RvintoNi NE83RO \ RestMTant- MB 83RD^l80THAVE^e K3 NE 83RD ST \ I % 2 Taco Del Uar ne 82NO ST tti \ C i ■z < sssa. £ X < < ;;^Oan3Pit«9 S ■A .1 NE B]$l ST o X o > 4ft < 2 tfooet R4*ci'ifir« ^ Comparable Sale No. 1 }*o''2S?5S Redmond Way Building NE BOTH ST S lU P Ckdd e>a lU>< ''-ft ''C.Vo fi Redmond X c 7 2 < > yKl.1 ffOlAM* < 5* s ' Comparable Sale No. [Redmond Way IMm» o 'Vi < %d % £ £ w ■ Aw- % £l ■ ■ T>«Art»ei jtwi.lnc McOOftM-l VX' Owy Queoi ReomoM $ .Sjbjeolt; ' 3> t \ < •A t ifl I * 4 £ rnteR" z > ^PapncFiMM \ •p tf X c? tu A/ 2 s o b NE 7RTK ST Sr Q rT.'f E e Loe^(tt9wa~o^ CBfaere Rs^-^Orv a. RefinondStiK e; Incomparable Sate No. 2" ^j5r5< Redmortd Center LJJ a Cola stons c»7tpie()' 5 S CQia»*i O"caiocrt, NE73RDST Nc 73RO WAY v* > \ % CS«CT.;-jnwT >fe« AZZ^i bear creek pkwy > X p. T NE 7isr CT $ Scale 1 :8.000 Data use subject to license. ® DeLorme, DeLorme Street Atlas USA® 2010. www.delorme.com •m f r = 6€6.7fl Data Zoom l4-6 Appellant WPDC Cleveland's Exhibit 81 - Page 52 of 88 ---PAGE BREAK--- COMPARABLE COMMERCIAL BUILDING SALES SUMMARY Frontage^ Exposure' Sale Eff.Sale Price/ Property/ Location Year Built Building RSF Price SF Comments/Verification No. Date $1,950,000 $391 172 feet 30,000 ADT Sii^le-story, multi-tenant commercial building located at the center of downtown Redmond. Parking ratio of 1.9 stalls per 1,000 RSF. 1 Redmond Way 15935 Redmond Way Redmond 1978 February 8. 4,990 2016 Brian Kenworthy, Kidder Mathews, 206-799- 4545 Well-maintained, multi-tenant commercial building with parking ratio of three stalls per 1,000 RSF. June 23. 5,396 118 feet 28,000 ADT $3,500,000 $649 2 Redmond Center 7625 170th Ave NE Redmond 2002 2016 Chesil Thye, Keller Williams Realty. 253-848- 5304 $2,985,000 $410 Recently renovated, former liquor store. Parking ratio of about four stalls per 1,000 1920/ June 1,2016 7,280 91 feet 12,900 ADT 3 Redmond Square Market 16389 Redmond Way Redmond 2010 RSF. Michael Azose, Azose Commercial Properties. [PHONE REDACTED] $2,725,000 $314 152 feet 15,000 ADT Multi-tenant commercial building with parking ratio of 2.4 stalls per 1.000 RSF. 85 Redmond Place 8460 164th Ave NE Redmond 1987 Febmaryl, 8.666 4 2016 Brian Liebsohn, Line Properties, 425455- 1122 $2,550,000 $299 177 feet 7,000 ADT Fonner bank with parking ratio of 4.2 stalls per 1,000 RSF. Ben Norbe, Kidder Mathews, [PHONE REDACTED] First Citizens Building 15801 85th Street Redmond 1990 April 18, 8,521 5 2014 -130 feet* 14,000 ADT NA Single-story commercial building with no off-street parking and proposed renovations. S Cleveland Street Building 1956/ 16390 Cleveland Street Redmond NA 2,799 NA RSF 2016 ^ PerCoSlar * Subject’s combined frontage feet Appellant WPDC Cleveland's Exhibit 81 - Page 53 of 88 ---PAGE BREAK--- SALES COMPARISON APPROACH In the discussions that follow, we will compare and contrast the five comparable sales in the table on the previous page with the Cleveland Street Building. Comparable Sales Discussion Comparable Building Sale No, 1 is the 4,990 sq. ft. Redmond Way, built in 1978. The comparable is a free-standing, multi-tenant building located at the west end of downtown Redmond. The building is average in condition and appeal with adequate exposure for general commercial use and a parking ratio of 1.9 stalls per 1,000 RSF. Annual NNN expenses are estimated at $4.08 per sq. ft. Comparable Building Sale No. 1 Redmond Way The Redmond Way sold on February 8, 2016 for a price equivalent to $391/sq. ft. Balancing the comparable's superior exposure with the subject’s superior renovated condition and corner visibility, a Cleveland Street Building value equal to or higher than $391/sq. ft. is concluded. Comparable Building Sale No. 2, Redmond Center, is a 5,396 sq. ft. building constructed in 2002. The comparable is a low-rise, multi-tenant commercial building located at the east end of downtown Redmond. The building is well-maintained with good exposure for commercial use and a parking ratio of about three stalls per 1,000 RSF. Tenants Include Starbucks and Sprint. Comparable Building Sale No. 2 CJM 54 RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 54 of 88 ---PAGE BREAK--- SALES COMPARISON APPROACH -4r I 4 ( t hr t J iS* •f U i. 'M * 1 . - u " fj*. Redmond Center The Redmond Center was sold on June 23. 2016 for a price equivalent to $649/sq, ft. Based on the comparable’s superior location and parking characteristics, a Cleveiand Street Building value of less than $649/sq. ft. is concluded. Comparable Building Sale No. 3 is a 7,280 sq. ft. commercial building constructed in 1920. The comparable is a free-standing commercial building located in downtown Redmond with frontage on westbound Redmond Way. The 2010-renovated building is average in condition and appeal with good exposure for commercial use and off-street parking. Comparable Building Sale No. 3 > ‘ t ; ^ I lV % a Redmond Square Market 55 RB16-125 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 55 of 88 ---PAGE BREAK--- SALES COMPARISON APPROACH Redmond Square Market sold on June 1, 2016 for a price equivalent to $410/sq. ft. With most weight given to the subject’s superior condition, upon renovation, and marginally superior exposure, a Cleveland Street Building value of equal to or higher than $410/sq. ft. is concluded. Comparable Building Sale No. 4 is 85 Redmond Place, comparable consists of two, single-story commercial buildings with frontage on a well-travelled arterial in downtown Redmond. The buildings are average in condition with good exposure, but below- average parking, for commercial use. Tenants are a mix of local service businesses. Comparable Building Sale No. 4 The Mi r [it 85 Redmond Place The comparable building sold on February 1, 2016 for a price equivalent to $314/sq. ft. The subject's superior location within the downtown core, renovated condition, and corner visibility indicate a Cleveland Street Building value higher than $314 per sq, ft. Comparable Building Sale No. 5 Comparable Building Sale No. 5 is the former First Citizens Building. The comparable building is a two-story, single-tenant former bank located on the northwest periphery of downtown Redmond. The building is located on a local arterial with below-average exposure for retail use but has a parking ratio of 4,2 stalls per 1,000 RSF. According to the broker, the building had deferred maintenance of about $80,000 at the time of sale. CJM 56 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 56 of 88 ---PAGE BREAK--- SALES APPROACH > V ■ W - ^ ^ t- . t- * 'i First Citizens Building First Citizens Building sold on April 18. 2014 for a price equivalent to $299 per sq. ft. Again, the improved market conditions and superior condition of the subject indicate a Cleveland Street Building value higher than $299 per sq. ft. The adjustment grid found on the following page summarizes the differences between the Cleveland Street Building and the seven comparable sales, as described above. Superior characteristics of the subject, relative to the comparable safes, are indicated with plus signs and inferior characteristics are indicated with minus signs QUALITATIVE ADJUSTMENT SUMMARY TABLE Adjustment Summary Sales Sale 4 Sales Sale 2 Sale1 Subject Category First 85 Redmond Square Marirel June 1, 2016 1920/2010 7,280 Cleveland Street Building Redmond Center Redmond Redmond Place February April 18, 1,2016 Citizens Building Name Way June 23, February 8,2016 NA Date of Sale 2014 2016 1990 1987 2002 1978 1956/2016 2,799 Year(s) Built Rentable Square Footage Sales Price/DU 8,521 8,666 5,396 4,990 $299 $314 $410 $649 $391 NA Qualitative Adjs: + + Market Conditions Location w/in Downtown Core Access to Linkages Condition/Appeal Frontage Visibility Exposure Parking Characteristics + + + + + + + + + + + + >$299 >$314 >$410 <$649 >$391 Value Potential: 57 RB16-125 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 57 of 88 ---PAGE BREAK--- SALES COMPARISON APPROACH The previous discussion suggests a subject value higher than equal to or higher than $391, but less than $649/sq. ft., with emphasis towards the lower end of the range. $1,125,000 to $1,400,000 With most weight given to the comparable sales discussion, a subject value range of $400 to $500 per square foot is reconciled. Multiplying the Cleveland Street Building's 2,799 sq. ft. by the estimated value range produces a market value estimate of $1,125,000 to $1,400,000 (rounded). The Cost >4pproac/7 follows. VALUE CONCLUSION CJM 58 RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 58 of 88 ---PAGE BREAK--- INSURABLE REPLACEMENT ANALYSIS Purchasers of existing commercial buildings in the Puget Sound market typically do not employ the cost approach when formulating offers. We do not employ the Cost Approach unless the appraised property is proposed or new. Again, the Cleveland Street Building South Building completed in 1956; consequently, the Cost Approach to value is not INTRODUCTION was used. Andorra Ventures LLC has requested an estimate of the building replacement value to determine feasibility of the proposed renovations. INSURABLE REPLACEMENT COST $210,000 Direct Building Costs In order to develop a Cleveland Street Building replacement value, three comparable warehouse/commercial buildings CJM recently appraised, and their direct construction costs, are presented in the following table. Direct Cost Comparables Direct Cost Per SF Buiiding Gross SF Building $52 10,250 12,450 18,000 Tusco Warehouse. Orcas Island South End Garden Park. Tacoma Chinook Lumber Store, North Bend $101 $150 Source: CJM Files The Chinook Lumber Store and the South End Garden Park are generally superior in appeal and functional utility indicating a subject direct cost estimate less than $101/sq. ft, is most likely. For additional support, BuildingJournal.com’s cost estimator was used with the following parameters: 1) Building Type-Warehouse, 2) Location-Seattle, and 3) Lump sum value new. The resulting estimated direct building cost range is $50 to $80 per sq. ft. Reconciling the cost comparbles and the BuildingJournal.com estimated ranges, a direct cost estimate towards the lower end of the cost comparable range, $75 /sq. ft., is concluded. The direct cost per ft. estimate produces a direct building cost total of $210,000 (rounded) for the 2,799 square-foot building. 3.00% of direct costs, or $6,300 A contingency of 3.00% of direct costs, equivalent to $6,300, is included to cover any unexpected cost overruns. 7.50% of direct costs, or $15,800 Contractor's profit margin is estimated at 7.50% of total preliminary direct cost estimate, equivalent to $15,800, sq. Contingency Contractor Profit Margin 59 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 59 of 88 ---PAGE BREAK--- SALES COMPARISON APPROACH Sales Tax $20,800 Sales tax is estimated at 9.60% of the hard costs and contingency estimated above. INSURABLE REPLACEMENT VALUE $250,000 The sum of the above individual costs amounts to a Cleveland Street Building replacement value of $250,000 (rounded) or $89 /sq. ft. The Reconciliation section follows. CJM 60 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 60 of 88 ---PAGE BREAK--- RECONCILIATION & FINAL ESTIMATES OF VALUE The two valuation techniques employed in this assignment are summarized below, followed by the value estimate considered the most realistic, along with estimated exposure and marketing periods. INTRODUCTION VALUE ESTIMATES The conclusions from each approach to value are summarized in the following table. SUMMARY OF VALUE CONCLUSIONS Value Indications Summary by Approach As If Presently Stabilized Date Technique $1,275,000 $1,125,000 to $1,400,000 September 19, 2016 September 19, 2016 September 19,2016 Income Approach Sales Comparison Approach Cost Approach NA A discussion of 1) the accuracy and adequacy of data and analyses, 2) and weaknesses of each approach, and 3) market perception of a) approaches and b) techniques in those approaches, will be discussed below. Discussion of Approaches Accuracy and Adequacy of Data and Analyses The Income Cap/(a//zaf;on Approach used extensive data and analyses when estimating market rent and expense levels. The based on rental projections of income and expenses were comparables, as well as typical market behavior and input from knowledgeable brokerage and management personnel. In the Sales Comparison Approach, recent comparable sales of similar market area buildings were used to estimate market value. As a consequence, the accuracy and adequacy of data and analyses in the Sales Comparison Approach is considered satisfactory. The Cost Approach does not simulate typical investor behavior so it was not employed in this assignment. The Cost Approach was not used because it has the lowest credibility of the three approaches because of the weak correlation between reproduction costs and market value—particularly for properties that are more yian a few years old. Because investors would not utilize the Cosf Approach when evaluating the subject, we have not utilized the Cosf Approach in this analysis. The Sales Comparison Approach emphasized the Value Per Square Foot Technique, which is the technique widely used by purchasers of commercial buildings in the Redmond/Eastside market. At present, the purchaser profile for such buildings as the subject could be an and Weaknesses 61 RB16-125 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 61 of 88 ---PAGE BREAK--- RECONCILIATION & FINAL ESTIMATES OF VALUE owner-user or investor. Investors typically use the sales comparison approach as a test of reasonableness for the income capitalization approach. The Income Capitalization Approach, which can more specifically analyze a commercial property's income and expense potential, is commonly used to establish a framework of value for a property. This valuation approach usually does the best Job of estimating the present value of future benefits where relatively sophisticated market participants are involved. Market Perception of Approaches and Techniques the Cleveland Street Building, the market perception is that the income capitalization approach, which most closely reflects typical investor behavior, provides the best indication of market value. The sales comparison approach is sometimes considered by investors and is used a test of reasonable for the income capitalization approach in this report. The cost approach is given little or no consideration by investors for existing buildings in the present economy and, again, was used to ascertain a building replacement value estimate. With respect to estimating the value of commercial buildings similar to Preliminary Value as if Presently Stabilized $1,275,000 Again, the value concluded in the Income Capitalization Approach is $1,275,000, while the value range estimated in the Sales Comparison Approach is $1,125,000 to $1,400,000. The Income Approach provides the greatest strength in terms of an accurate reflection of subject value potential, while conforming to typical investor behavior when attempting to estimate the present value of future benefits. As a result, the best indication of Cleveland Street Building market value, as if presently stabilized, is $1,275,000, or $456 /sq. ft. Estimate of As Is Value Again, the Cleveland Street Building is vacant with renovations proposed by the buyer for owner-user occupancy. In order to arrive at the as is value, a deduction for renovations and lease-up costs, were the building available for lease, are discussed below. Deductions for Renovation & Stabilization Costs Estimated Renovation Costs $235,000 Again, the buyer of the Cleveland Street Building property, Sean Miller, has estimated about $235,000 in renovations to prepare the building for his group’s use. The renovations include the following: • Upgrades to plumbing, HVAC, and lighting totaling $58,000 • Roof replacement totaling $30,000 • Exterior fapade repairs and renovations totaling $35,000 • Interior renovations including building out a private office, $40,000 CJM 62 RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 62 of 88 ---PAGE BREAK--- RECONCILIATION & FINAL ESTIMATES OF VALUE • Additional items include lighting fixtures, displays, signs, and permit fees estimated at $70,000 Mr. Miller’s estimated construction timeline is 12 to 14 weeks. Overall, the shell of the interior is in adequate condition and, based on the limited renovations proposed by Mr. Miller, the Cleveland Street Building should be available for occupancy on or about December 1, 2016. $23,000 Assuming a three month lease-up period after construction completion, lost rental revenue is estimated at $23,000^ (rounded). $4,000 Smaller commercial buildings CJM recently appraised reported NNN expense reimbursements ranging from $3.00 to $6,00/sq. ft. ($0.25 to $0.50 per sq. ft. per month) Based on the renovated condition of the subject, a NNN reimbursement of $0.50/sq. ft. is estimated, resulting in lost NNN reimbursements of $4,000 (rounded). $23,000 Based on the concluded annual market rental rate of $33.00/sq. ft., and assuming a five year lease with lease commissions of 5.00% of the total lease value, lease commissions are estimated $23,000 (rounded). Lost Rental Revenue Lost NNN Reimbursements Lease Commissions $285,000 Adding the lease-up costs with the estimated construction budget yields preliminary stabilization costs of $285,000. 20% of preliminary costs, or $75,000 A knowledgeable market participant would require compensation lor risk taken in stabilizing the Cleveland Street building. Based on conversations with commercial developers throughout the Puget Sound region, typically anticipate gross profit ranging between 10% and 30% of total market value. In this analysis, we have assumed a developer's gross profit margin of 20%, equivalent to $75,000 (rounded). $360,000 Adding the entrepreneurial incentive of $75,000 to the preliminary stabilization costs yields a total stabilization cost estimate of $360,000, equivalent to $129 per sq. ft. Preliminary Estimate of Stabiiization Costs Entrepreneurial Incentive Total Stabilization Costs $33.00/SFA'r = $2.75/SF/Mon $2.75/SF X 2.799 SF X 3 months 63 CJM RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 63 of 88 ---PAGE BREAK--- RECONCILIATION & FINAL ESTIMATES OF VALUE $925,000 Deducting the stabilization costs from the preliminary estimate of value yields an as is value estimate of $925,000, or $330/sq. ft. The following table summarizes the concluded estimates of value. Final Estimate of As Is Value Summary of Estimates of Value Value Estimate Effective Date Property Component $925,000 $1,275,000 $250,000 September 19. 2016 September 19, 2016 September 19, 2016 As Is Value Value As If Presently at Stabilized Occupancy Building Replacement Value The values reflected the subject’s fee simple estate. Again, the building replacement value is estimated at $250,000 while Mr. Miller's estimated renovation costs are $235,000. Based on the evidence, renovation of the building is warranted. Again, the Cleveland Street Building has a pending saie price of $900,000, equivalent to $288/sq. ft. According to the Seth Baiiey, a business partner of the buyer, Sean Miiier, the $900,000 purchase price was based on as-if completed broker opinion of value in conjunction with the renovation cost estimate. As Mr. Bailey stated, "with the BPO valuation [around $1,300,000], and after calculating our expenses, we felt pretty comfortable that $900,000 was a fair price." Based on the sale conditions, the subject purchase price is reasonable. Again, our estimate of value is based on the evidence discussed throughout the report and is adequately supported by the market comparables. Three to six months, more or less The exposure period is the estimated length of time the subject properly would have been offered on the market prior to a hypothetical sale at market value on the effective date of the appraisal. The marketing period is an estimate of the time it might take to sell a properly at the estimated market value during the period immediately following the effective date of the appraisal. The selected comparable building sales exhibited exposure and marketing periods of approximately one month to over one year on the market. Considering the comparables exposure and marketing periods, and the above value estimate, the anticipated exposure and marketing periods for the Cleveland Street Building property if it were offered for sale on the open market at the value indicated above. Replacement Value vs. Estimated Renovation Costs Purchase Price vs. Estimate of As Is Value Marketing/Exposure Time CJM RB16-125 64 Appellant WPDC Cleveland's Exhibit 81 - Page 64 of 88 ---PAGE BREAK--- RECOSCILtATtON & FINAL ESTIMATES OF VALUE At the above value estimate the anticipated exposure and marketing periods for the subject are estimated at three to six months, more or less. The certification, definitions, and Assumptions and Limiting Conditions appear on the foiiowing pages. 65 CJM RB16-125 Appellant WPDC Cleveland's Exhibit 81 - Page 65 of 88 ---PAGE BREAK--- This page intentionally left blank CJM 66 RBI 6-125 Appellant WPDC Cleveland's Exhibit 81 - Page 66 of 88 ---PAGE BREAK--- CERTIFICATION I certify that, to the best of my knowledge and belief: the statements of fact contained in this report are true and correct; the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial and unbiased professional analyses, opinions, and conclusions; I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved; C. J. Munson and Aaron DeCollibus have performed no services, as an appraiser or in any other capacity, 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; my compensation for completing this assigmnent 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; The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute; 1 have made a personal inspection of the property that is the subject of this report; no one certification; the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; and of the date of this report, both C. J. Munson and Aaron DeCollibus have completed the continuing education program of the Appraisal Institute and the Standards and Ethics Education Rcquircnienl of the Appraisal Institute. provided significant real property appraisal assistance to the person signing this as 9 Aaron DeCollibus, Appraiser, ASC-DCF C. J. Munson, MAI, ASA, Al-GRS Appellant WPDC Cleveland's Exhibit 81 - Page 67 of 88 ---PAGE BREAK--- This page intentionally left blank ■t Appellant WPDC Cleveland's Exhibit 81 - Page 68 of 88 ---PAGE BREAK--- APPENDIX Deilnirion of Highest and Best Use Highest and best use is defined as: The nasomhlj probable and legal use of vacant land or an improved property that is pi>yshiilty possible, appropriately supported, financially feasible, and that results in the highest value. The four eriferia the highest and best use must meet are physical possibility, financial feasibility, and maximum productivity. Alteivutively, the probable use of land or improved property— specific with respect to the user and timing of the me—that is adequately supported and results in ike highest present value. Source: Appraisal Institute,, The Diclioiiary of Real Estate Appraisal, 5th Ed. (Chicago; Appraisal Institute, 2010), 93. Definition of Fee Simple Estate Possession of a title in fee establishes the interest in property known as the fee simple estate-tif., 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. Source: Appraisal Institute, The Appraisal of Real Estate, 14thEd. (Chicago: Appraisal Institute, 2008), 111. Owners in fee simple may choose to improve or not to improve their property. They may also retain ownership or transfer property title by selling the property or giving it away. They may also lease the property to a leaseholder, or tenant, over a defined period of time. This latter act creates the leased fee, or lessor’s (landlord’s), estate and the leasehold, or lessee’s (tenant’s), estate. Definition of Leased Fee Estate Again, the leased fee estate is the lessor's or landlord’s, estate. A leased fee estate is an ownership interest held by a landlord with the rights of use and oceupamy conveyed by lease to others. The rights of lessor (the leased fee owner) and teased fee are specified ly contract terms contained within the lease. Source: Appraisal Institute, The Appraisal of Real Estate, 12th Ed. (Chicago: Appraisal Institute, 2001), 83. See also Appraisal Institute, TheAppuisal of Real Estate, 14**' Ed., 114. There is a misconception that the concepts of fee simple interest and leased fee estate are identical if market rent and contractual rent are identical. Implicit in the prior definition of fee simple estate above is the fact that if the tight of use and occupancy is conveyed by lease to another, then absolute ownersliip unencumbered by any other interest or estate ceases to exist during the term of conveyance. No mention is made of relative rental levels being either a necessary or sufficient condition for the creation of either estate. Definition of Leasehold Estate The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the tease. Source; Appraisal Institute, The Appraisal of Real Estate, 14th Ed. (Chicago: Appraisal Institute, 2008), 114. Definition of Matketing Time The reasonable marketing time is: An opinion of the amount of time it might take to sell a real or personal property intenst at the concluded market value level during the period immediately after the effective date of an appraisal. Source: Appraisal Institute., The Dkiionaiy ofRealEstate Appraisal, 5th Ed. (Chicago: Appraisal Institute, 2010), 121. A1 CJM Appellant WPDC Cleveland's Exhibit 81 - Page 69 of 88 ---PAGE BREAK--- APPENDIX RIatketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. The reasonable marketing time is a function of price, time, use and anticipated market conditions such as changes in costs, availability of funds, and labor force; not an isolated estimate of time alone. It can be appropriate for an appraisal to discuss the impact of price/value relationships on prices and the associated marketing time with the reasonable marketing time at the estimate of market value. Definition of Groas Building Area The gross building area is: Totalpor area of a huMu^ e^dndiug unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes me^^^anines and basements if and when typicall)/ included in the nyfon. Source: Appraisal Institute., The Dictionaiy ofRealEstate Affnalsal, 5th Ed. (Chicago: Appraisal Institute, 2010), 90. Definition of Rentable Area Rentable area is: For office the tenant’s pro-rata portion of the entire office par, excluding elements of the building that penetrate through the pur to areas below. The rentable area of a por is computed by meastuing to the inside finished surface of the dominant portion of the permanent building walk, excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to localpractice. Source: Appraisal Institute., The Dictionaiy ofRealEstatej^praisal, 5th Ed. (Chicago: Appraisal Institute, 2010), 167-168. Where a load factor is utilized, it is hypothetically possible for effective rentable area to exceed actual gross floor area. For example, a gross floor area may be 40,000 square feet. From this is deducted elevators, stairs, risers, and ducts, having a total of 3,000 square feet, with a consequent usable area of 37,000 square feet. The usable area of 37,000 square feet is then multiplied by a factor of 1.25 to obtain a hypothetical rentable area of 46,250 square feet. This example is provided on page 364 of John Robert White, MAI, CRE, Editor, The Office building. Definition of Usable Area Usable area is: 1) For office buildings, the actual occupiable area of a por or an office space; computed by measuring from the finished suface of the office side of corridor and other permanent walls, to the center ofpartitions that separate the office from adjoining useabk areas, and to the inside pished surface of the dominant prtion of the permanent outer building walk... 2) The area that is used by the tenants... Source: Appraisal Institute., The Dictionaiy ofRealEstate Appraisal, 5th Ed. (Chicago: Appraisal Institute, 2010), 203. Definition of Market Area Market area is: The geographic or locational delineation of the market for a specific category of real estate, i.e., the area in which alternative, similar properties effectively compete with the subject property in the minds ofprobable, potentialpurchasers and users. Source: Appraisal Institute, The Dictionaiy of'Real Estate Appraisttf 3rd Ed. (Chicago: Appraisal Institute, 2001), 220, and Appraisal Institute, The Appraisal of Real Estate, 13th Ed. (Chicago: Appraisal Institute, 2008), 55. While The Diclionay of Real Estate Appraisal, Edition, is in circulation, we still prefer the Edition definition as reiterated in The Appraisal of Real Estate, 13*''Edition. marketing times and contrast different potential CJM A2 Appellant WPDC Cleveland's Exhibit 81 - Page 70 of 88 ---PAGE BREAK--- APPENDIX of Effective Rent Gross rents less the loss from rental excess tenant improvement costs over normal bsiililmg standards, and miscellaneous costs such as moving expenses, lease buy-outs or assumptions, or other enticements. Soufce: John Robert White, MAI, CRE, Editor-in-Chief, The Office (Chicago: a joint pubhcation of AI, BOMA, ASREC, etc., 1993), 161. Definition of Equilibrium Vacancy Rate The 'frictionaT' vacancy level which occurs in theoy when there is neither an upward pressure on rents due to strong competition among tenants, nor a downward pressure on rents due to strong competition among ownersfor tenants. Source: John Robert White, MAI, CRE, ibid CJM A3 Appellant WPDC Cleveland's Exhibit 81 - Page 71 of 88 ---PAGE BREAK--- This page intentionally left blank CJM A4 Appellant WPDC Cleveland's Exhibit 81 - Page 72 of 88 ---PAGE BREAK--- ASSUMPTIONS AND LIMITING CONDITIONS No JegaJ questions are considered such as rifle, encumbrances, owiietsliip, etc. The property is appraised in fee simple estate as though free and clear of all encumbrances, except as specifically noted within this report. No responsibility is assumed for matters legal in eharacter or nature or matters of land survey or of any architectural, structural, mechanical or engineering nature. The legal description, site and improvement measurements are assumed to be correct as used in this report furnished by the client, his designee, or as derived by the appraiser. The appraiser has inspected, as far as possible by observation, the land and any improvements; however, it possible to personally observe conditions beneath the soil or hidden structural or toxic materials which would render it more or less valuable. No responsibility is assumed for any such conditions or for any engineering expertise to discover them. All mechanical components are assumed to be in operable condition and status standard for properties of the subject type. Conditions of heating, cooling, ventilating, electrical, and plumbing equipment are considered commensurate with the condition of tire balance of the improvements unless otherwise stated. No judgment may be made by me as to adequacy of insulation, type of insulation, or energy efficiency of the improvements or equipment which are assumed standard for subject age and type, lire appraiser does not warrant against problems arising from soil conditions. 1. as 2. was not Unless otherwise stated in this report, the existence of hazardous material, 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, foam insulation, or other potentially hazardous materials, may affect the value of the property. The value estimate is predicated on the such material on or in the property that would cause a loss in value. No 3. assumption that there is no ponsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. res If the appraiser has been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or from any deficiencies discovered before or after they are obtained. No representation or warranties are made concerning obtaining the above-mentioned items. All information as found in data provided by others and relied upon in this appraisal has been reasonably checked and is deemed to be reliable. If any errors or omissions are found, the appraiser reserves the right modify the conclusions reached. The appraiser similarly reserves the right to modify the analyses, conclusions or any value estimate in the appraisal report if dicre become known facts pertinent to the appraisal process which were unknown when the report was finished. 4. 5. to The distribution of the total valuation in this report between land and improvements applies only under the of utilization; and the value shown for either may or may not he its correct Fair Market 6. existmg program Value. The separate valuations for land and buildmg must not be used in conjunction with any Other appraisal and are invaUd if so used. Possession of this report or any copy thereof does not carry with it the right of publication nor may it be used for other than its intended use; the physical report(s) remain the property of the appraiser for the use of the client, the fee being for the analytical services only. This appraisal is to be used only in its entirety, and no part is to be used without the whole report. All conclusions and opinions concerning the analysis, as set forth in the report, were prepared by the appraiser whose signature appears on the appraisal unless indicated as review appraiser. No change of any item in the report shall be made by anyone other than the appraiser, and the appraiser and firm shall have no responsibility if any such unauthorized change is made. 7. 8. AS CJM Appellant WPDC Cleveland's Exhibit 81 - Page 73 of 88 ---PAGE BREAK--- ASSUMPTIONS AND LIMITING CONDITIONS The bylaws and regulations of the Appraisal Institute require each member and candidate to control the use and distribudou of each appraisal report; except as provided, the client may distribute copies of this appraisal report in its entirety to such third parties as he may select. However, selecdve portions of this appraisal report shall not be given to third parties without the prior written consent of the appraiser. 9. Neither all nor any part of dtis appraisal report shall be disseminated to the general public by use of advertising media, public relations, news, sales, or other media for public communicadon without the prior written consent of the appraiser. Employment to make this appraisal does not require testimony in court unless mutually satisfactory arrangements are made in advance. If testimony or deposidon is required because of any subpoena, the client shall be responsible for any addidonal dme, fees, and charges, regardless of issuing party. The liability of CJM Investment Property Advisors, and employees is limited to the client only and to the fee actually received by the appraiser. Further, there is no accountability, obligation or liability to any third party. If this report is placed in the hands of anyone other than the client, the client shall make such party aware of all limiting conditions. In tlie case of limited partnerships or syndication offerings or stock offerings in real estate, clients agree that, in case of lawsuit (brought by lender, partner, or part-owner in any form of ownership, tenant, or any other party) any and all awards, setdementS of any type in such suit, regardless of outcome, client will hold appraiser completely harmless in any such action. Acceptance of or use of this appraisal report by chent or any third party constimtes acceptance of the above conditions. The appraisal is based on the premise that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated in this report. Improvements proposed, if any, as well as repairs required, are considered for purposes of this appraisal to be completed in good and workmanlike manner according to information submitted or considered by the appraiser. In cases of proposed construction, the appraisal is subject to change upon inspection of property after construction is completed. This estimate of Market ^'^alue is as of the date shown, as proposed, as if completed and operating at income levels shown and projected in the appraisal. It is assumed that the property which is the subject of this report will be under prudent and competent ownership and management, neither inefficient nor superefficient. 10. 11. 12. CJM A6 Appellant WPDC Cleveland's Exhibit 81 - Page 74 of 88 ---PAGE BREAK--- CJM The following pages contain: • Appraiser Qualifications • Engagement Contract • Additional Exhibits and Information for Reference Appellant WPDC Cleveland's Exhibit 81 - Page 75 of 88 ---PAGE BREAK--- This page inlentionally left blank Appellant WPDC Cleveland's Exhibit 81 - Page 76 of 88 ---PAGE BREAK--- QUALIFICATIONS OF CARL J. MUNSON, MAI, ASA, AI-GRS EXPERIENCE SUMMARY Mr. Munson has hdd positions in real estate appraisal, development, marketing, and financing. Appraisal work for purposes of real estate acquisition, financing, estate valuation, just compensation, and dissolution has been conducted since 1971. Development work has included apartments, an office building, and residentiaJ subdivisions. Market studies have been prepared leading to most profitable development as well as determining the feasibility of renovation and remodeling, or conversion, of existing commercial or multi-family projects. Market and feasibility studies for commercial and multifamily developments have been conducted since 1977. Experience in financing has included residential, multifamily, and commercial developments. Mr. Munson was voted Appraiser of the Year for 2014 by the Seattle Chapter of the Appraisal Institute. . EDUCATION SUMMARY B. Western Washington University, Bellingham, Washington. Basic Principles of Appraising: An overview of the valuation process including fundamental, economic and valuation assumptions, basic appraisal techniques, the three approaches to value, and appraisal ethics. Income Capitalization Approach Introduction: introduedon to direct capitalizadon, basic cash equivalency, yield capitalizadon, financial functions, and discounted cash flow analysis. Advanced Income Capitalization: Cursory review of information studied in course 1 summarized above, with subsequent detailed analysis of practical applications for financial functions, cash equivalency, discounted cash flow analysis, etc. Urban Appraisal Practices: This class involved advanced analyses and application of cash-flow forecasting, risk analysis, development feasibility, financial alternatives, and tax considerations. Case Studies: Dissection of individual sample valuation cases dealing with, among other topics, valuation of leased interests, present value calculations, various forms of depreciation, and sales comparison analyses. Standards of Professional Appraisal Practice - USPAP: Study of the statements appearing in, underlying reasons behind, and consequences of violation of the Unifom Standards of Pnjessioual ApprtAa! Pmdice (USPAP) of the Appraisal Standards Board of the Appraisal Foundation. Standards of Professional Appraisal Practice - Ethics; Study of the statements appearing in, underlying reasons behind, and consequences of violation of Tfr Code of Pi^ttional Ethics oitkt ApptMuX Institute. Highest & Best Use and Market Analysis: Supply and demand theor)-; market studies; marketability studies; feasibility andysis; highest and best use analysis. General Appraiser Market Analysis and Highest & Best Use: Primary and seconda^ data collection, fundamental demand forecast, inferred demand projection, market delineation, marginal demand, segmentation, etc. Emphasis of retail and office market analyses. I have taken this course twice. Advanced Applications: Case studies of complicated appraisal problems dealing with income producing properties. Also included economic trend and market demand analysis, competing investments, and appropriate yield rate selection. Small, Mixed-Use Properties: Review of alternative appraisal techniques, potential short comings to be avoided, purchaser profile and case studies applicable to valuation of small, mixed-use, income-producing properties. Separating Real and Personal Property From Intangible Business Assets: Endeavored to show how to separate business assets values from total assets including real and personal property. Allocating Components in Going Concern Appraisals; Methodologies for estimating value contributions of going concern components, i.e., real estate, FF&E, and intangible items, and references for additional sources when valuing specific types of going concerns. Review Theory - General: Fundamentals of appraisal review with a focus on the process used to develop and report opinions of appropriateness and credibility in appraisal reports. Supervisory Appraiser/Trainee Appraiser Course: Focused on USPAP requirements that affect appraiser supervisors. Appellant WPDC Cleveland's Exhibit 81 - Page 77 of 88 ---PAGE BREAK--- QUAUFICATIONS OF CARL J. MUNSON, MAI, ASA, Al-GRS FEASIBILITY AND MARKET STUDIES Office Space Residential Subdivisions Apartments Condoininiums TYPES OF PROPERTIES APPRAISED Residcndal Subdivisions Restaurant Properties Retail Facilities Self-Storage Facilities Shopping Centers Hospitality Facilities Marinas Medical Office Buildings Office Buildings Office/Warehouses Apartments Automobile Dealership Facilities Condominiums Convenience Stores Cross-dock Truck Terminals High 'i'ech Buildings ADDITIONAL QUALIFICATIONS Certified General Real Estate Appraiser, State of Washington Expert wimess testimony, Washington Superior Court State Certified General Appraiser, State of Oregon Certified General Real Estate Appraiser, State of California CLIENTS HAVE INCLUDED Northwest Business Bank Northwest International Bank Omega Funding LLC PACE Healt)* Ad\isors Capital Hank Pacific Consulting Group Pacific Continental Dank Pacific Crest Savings Bank Pacific Life Insurance Company PaciQc Nortliwest Bank Peoples Dank Pierce Conunercial Bank Pioneer Bank Preferred Funding PrcmiccWest Bank Prudendal Mortgage Capital Co. RBC Builder I'inance Rainier Pacific Bank Kcga) Financial Bank River Bank Riveevievi' Community Bank Safeco Safeguard Mortgage Schiro Financial Seattle Sa\'jngs Bank Skagit Stale Bank Snohomish County Fire Difiirici 14 Sound Communiiy Dank Summit Savings Umpqua Bank United Commercial Bank United Sccurit}' Bank University Federal Sa^'ings U. S. Bancorp Viking Community Bank Wacho\'ia Corporation Washington Buiuness Bank Washington Federal Savings Bank Washington Square Capital Washington Trust Bank Wells Fargo West Const Bank Weslsuund Bank Whidbey Island Dank Wilmington Trust Company (Delaware) WMF / Muntoon, Paige Cowlitz Bank Crossland Mortgage East West Bank EF & A Entciprise Dank Evergreen Bank AEGON USA Realty Advisors American Maiinc Bank AmcricanWest Bank Amresco Arclion Dank of America Dank of Bellevue Bank of the Northwest Bank of the Pacific Bank United Bank of Washington Bank of the West Banner Dank Base Capital Bay Mortgage BMC Capita) Boeing Employees Credit Union Boston Private Batik & Tnisl Business Bank of Skagit County Cascade Dank Cascade Mortgage Co. Cathay Dank Centennial Bank Pacific Bank Charter Private Dank Chevron USA CIT Small Business Lending Corp. City Bank City National Bank Cit)’ of Bellingham City of Everett Cit)' of Kirkland City of Oak Harbor City of Shoreline City ofTukwila Clackamas County Bank Coastal Communit)- Bank Cohen Financial Colonial Bank Columbia Bank Commerce Bank Communiiy Financial Corp, Continental Wingate Capital Cornerstone Realty Advisors Conunercial R.E. Financing Covenant Mortgage FBI Formers and Merchants Bank Farmers Bank of Cliina First Gtizens Bank First Community Bank First Heritage Bank First Horizon First Independent Bank First Mutual Bank First Nationwide Dank First Savings Dank First Sound Bank First Union Nauonal Bank Fortune Bank Franklin Bank Frontier Dank GMAC General Bank Gibraltar Savings Glacier Real Estate Finance Hanover Financial Horizon Bank Housing Capital Company InicrBusiness Bank Internalional Commercial Bank of China Ironstone Bank JP Morgan Chase Bank KcyBank icing County, Real Property DInsion Kitsap Bank Lend Lease Lutheran Brotherhood Merchants Bank Metropolitan Federal Sanngs Bank Midfirsl Bank Ml, Rainier National Bank National Dank of Renton National Bank of TulrA'ila Appellant WPDC Cleveland's Exhibit 81 - Page 78 of 88 ---PAGE BREAK--- quaufications of gaiul j. munson, mai, asa, ai-g«s STATE LICENSES T STATE OF WASHINGTON Dfcl'ARlMt'Nl G»r LK*[NSING ' HUSIM.SS AM) Jl'l-SSIONS DIVISION THIS Cl.kTI FIRS TH AT I UK I’KUSON NaMKO HKKkON IS AlTTIOKIZrR, AS I'ROVIDED HY LAW, aS a -I CEHI IKIED GENERAL KEAL ESTATE APPRAISER /j CARL.I ML'NSON 1 40 LAKE BELLEVLE DRIVE tj SUITE 240 BELLEVUE WA 98005 :i ExplratJOh Daio Issued Dele (17/2 Cerl/Uc No. )tll072D Appraiser Certification and Licensure Board state Certified General Appraiser 2d novts o! conjimmg Bducstton r^Qtntotj fot % (r ,r t I , ~ 4 f i i \ ( ) AI Jaee, Y Liconso No.: 0000641 IssooDaia: May 1,2016 Explrallon Date: April 30. 2016 0, Carl J Munson CJM Inuesiiiwnl Property Adulsors 1530140lh AVE NE #200 Bellevue, WA 98005 i t Gae Lynne Coupe*. Adminisiralor f i Appellant WPDC Cleveland's Exhibit 81 - Page 79 of 88 ---PAGE BREAK--- QUALIFICATIONS OF CARLJ. MUNSON, MAI, ASA, AI-GRS K , S > V-JI m Business, Consumer Serv'ices & Mousing Agency BUREAU OF REAL ESTATE APPRAISERS REAL ESTATE APPRAISER LICENSE fA Carl J. Munson fA has met the requirements lor a license as a residential and coniinercial real estate appraiser in ilie State of California and is, therefore, entitled to use the title: m ■■•Certirietl Genei’iil Real Estate Appraiser" fA This license has been issued in accordance with the provisions of the Real Estate Appraisers' Licensing and Certification Law. BREA APPRAISER IDENTIFICATION NUMBER: AG 027121 A Effective Date- Date Expires: July 7, 2015 July 6,2017 I Jim Mbnin. Bureau Chid'. BREA 'i H .W22!!S4 - jff iW: i. tiif ^ ' vcy c. A ^ ^ 'm I Appellant WPDC Cleveland's Exhibit 81 - Page 80 of 88 ---PAGE BREAK--- QUALIFICATIONS OF AARON D. DECOLLIBUS, CANDIDATE FOR DESIGNATION, APPRAISAL INSTITUTE EXPERIENCE SUMMARY Mr. DcCoUibus is a graduate of Pepperdine University’s Gra2iadio School of Business and Management. Prior to joining CJM, Mr. DcCoUibus worked as a commercial real estate broker specializing in office and industrial tenant representation. Mr. DeCollibus has over close to 15 years of experience in the real estate industry as an investor and broker. EDUCATION SUMMARY Pepperdine University, M.BA, Finance Macalester CoUege, B.A., Historj' BuainesB Ptacliccs and Ethics: An introduction of the professional practice requirements and an overview of the Code of Professional Ethics of the Appraisal Institute. Uniform Standards of Professional Appraisal Practice (USPAP) Update; Focuses on recent changes to USPAP requirements for ethical behavior and competent performance by appraisers. Appraisal Principles & Proceduree; A comprehensive introduction to the history, terminology, methods and purpose of Real Estate appraisal along with the theory and concepts behind the three approaches to value. Advanced Income Capitalization! Builds on the topics covered in the general income approach classes with advanced topics including complex lease structures, property valuation techniques (reversions, property model appUcadons, and supporting the discount rate), complex mortgage instruments and the effects of leverage, and investor modvarions, including measures and types of risk, measures of return, and income tax consequences. Advanced Market Attalysis and Highest & Best Uae! Introduces the Level C marketability smdy using fundamental demand analysis to study muldple property types and the physical and economic effects on communides and teal estate. i The theory and applicability of the Income Capitalizadon Approach ate reviewed along with the theory and concepts behind yield capitalizadon formulas. Appraiser Site Valuation & Cost Approach; Fundamentals of site valuation, estimation of current improvement cost, and various methods of recognizing and measuring accrued depreciation. General Sales Compariflon Approach! Detailed discussion of property comparability, techniques to gather proper data and sort appropriately, Quantitative and quahtative comparison elements are examined. iroacli a. ncomi General Market Analysis and Hiphest & Best Use; Primary and secondary data collection, fundamental demand forecast, inferred demand projection, market delineation, marginal demand, segmentation, etc. Emphasis on multi­ family and office market analysis. General Review Thcoty: Fundamentals of the appraisal review process. Course covers topics such as developing opinions of completeness, appropriateness and credibility of the report. Going CoMcerna & MultidlBciplinaty AppralaalB: Detailed discussion on the components of going concern properties, the embedded intangibles and the applicable valuation methods the components. Appellant WPDC Cleveland's Exhibit 81 - Page 81 of 88 ---PAGE BREAK--- QUALIFICATIONS OP AARON D. DECOLUBOS PROFESSIONAL AFFILIATIONS Certified General Real Estate Appraiser, State of Wasliington State Certified General Appraiser, State of Oregon Certified General Real Estate Appraiser, State of California Licensed Wasliington Real Estate Designated Broker Member, International Right of Way Association Argus DCF Software Certified STATE LICENSES STATE OF WASHINGTON lU'SIM-SSANn I'KOI I'JIX-'ISION THIS CKki iUKs I iiAi mi: i'i;usos namhd iikiu.on is An iUiuiZF.H. ss ii\ i.ann, as a DIM'AR I Ml Ml' LK lA'ShNC. CKRI IKIKDGF.NF.RAI, REAL ESTyATr APPRAISER »l AARON DAVID DECOLLIBUS 3' SOI LAKfKIDK AVKS M SKATTI.i: \N'A 98144 *i K Cerl/LIcNo. HII2.U4 Issued Dale fl5/(lN/20!5 Expiration DaiF, lll/].Si'20l7 :i Pi i'jn Ijr t Appraiser Certification and Licensure Board state Certified General Appraiser hours of continuing education required lor rertewet License No.: C0D1207 Issue Date: September 1, 2015 Expiration Date: January 31. 2017 Aaron D, DeCollibus CJM Investmenl Properly Advisors 1530140th AVENE STE 200 Bellevue, WA 98005 ;fi w Gae Lynne CrropeA Administrator ft/ Appellant WPDC Cleveland's Exhibit 81 - Page 82 of 88 ---PAGE BREAK--- QUAUFICATIONS OF AAHON D. DECOLLIBUS A* fA 4 Ifti^ fij 'C IJIIS 4XMlUtl,l,' Appellant WPDC Cleveland's Exhibit 81 - Page 83 of 88 ---PAGE BREAK--- This page intentionally left blank Appellant WPDC Cleveland's Exhibit 81 - Page 84 of 88 ---PAGE BREAK--- CJM ADVISORS 1530140'^ AveNE, Suite 200 Bellevue, Washington 98005 CONTRACT FOR APPRAISAL SERVICES File No.: RB16-125 CJM, herein referred to as the "Appraiser," and Andorra Ventures, LLC, herein referred to as the "Client," hereby agree and contract as follows: I. Contract Work The Appraiser will appraise the comnnercial property located at 16390 Cleveland Street, Redmond, WA, APN [PHONE REDACTED]. The Appraiser will provide the Client with an electronic copy of an appraisal report no later than September 28, 2016 or three weeks from receipt of the signed contract and payment, whichever is later. The intended use of the appraisal is to estimate As Is market value. This appraisal cannot be used for any other purpose than the stated purpose. II. Contract Sum The Appraiser will perform the services outlined above for a fixed fee of $4,000.00 due before any services are performed. If court testimony is required, the additional charge is $250 per hour. III. Termination In the event the appraisal services are stopped by the Client at any time, the Appraiser's fee shall be calculated according to the proportion of work completed on the appraisal assignment prior to the Client's request to stop, with a minimum cancellation fee of $500. The remainder shall be reimbursed. I will develop and report these services in conformity with and subject to the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. ■9 mm DATE September 7, 2016 BY CJM DATEI^1^:ypiii BY Mr. Sean Miller Andorra Ventures LLC 1416 SW Roxbury Street Seattle, WA 98106 [EMAIL REDACTED] [PHONE REDACTED] ^ Check here to request hard copies (up to three). # requested:!____ Appellant WPDC Cleveland's Exhibit 81 - Page 85 of 88 ---PAGE BREAK--- LEGAL DESCRIPTION p 8l«rt / ; Ttia 60 Fael of Lot 1, Block 6, msBsurotj'along the Woslody line of said Lot Town of Redmond, according to the plat thereof recorded in Volume 7 of PIbIIs. page 74, .records of;km9.Cou.trty;'Washington r'S. Redmond .COOMTY VES ■■'NO Is Ihis properly cunenlly Cln»in«l ordcsitrna'led ss forcsl land'' Chipicr 64 33 RCW CInssifled ss cunini uso Isnd ISopeii spaco, fann D m ■ •L D Appellant WPDC Cleveland's Exhibit 81 - Page 86 of 88 ---PAGE BREAK--- Appellant WPDC Cleveland's Exhibit 81 - Page 87 of 88 ---PAGE BREAK--- Purchase Agreement Scott Hensrude(the "Seller"), of the assignment of the purchase and sale of 16390 Cleveland St Redmond WA executed on 6-1-16 between Scott Hensrude and Raincity Development LLC, Woodinville, Washington, does hereby assign and transfer to Andorra Ventures LLC (the "Buyer"), of 10638 Bermuda, Cedar Hills, Utah 84062, the following property. PROPERTY; option to purchase and the assignement of the purchase and sale of 16390 Cleveland st Redmond WA DESCRIPTION: Legal REDMOND TOWN OF S 60 FT TGW POR LOTS 1 & 2 BLOCK 6 SD ADD PER KC COURT CASE# 09-2-03962-3SEA REC# 20100609000937 AMOUNT: $900,000.00 for a TOTAL AMOUNT OF $900,000.00 The above property is sold on an "AS IS" basis. The Seller makes no warranties, express or implied (except as specifically stated in this document). This transfer is effective as of; TBD. The property is now located at 16390 Cleveland ST, Redmond, Washington 98053, and all of such property is in the possession of RainCity Development LLC. This Purchase Agreement shall be signed by Scott Hensrude and by Sean Miller on behalf of Andorra Ventures LLC. Thi.s is a RocketLawyer.com document. Appellant WPDC Cleveland's Exhibit 81 - Page 88 of 88