Appraisal

OFFICE CONDOMINIUM UNITS

APPRAISAL REPORT

LOCATED AT:

UNITS 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 THE LAKES FRONTAGE CENTER CONDOMINIUM

14100 PALMETTO FRONTAGE ROAD MIAMI LAKES, FLORIDA 33016

PREPARED FOR:

EASTERN NATIONAL BANK 799 BRICKELL PLAZA, 10TH FLOOR

MIAMI, FLORIDA 33131

AS OF:

AUGUST 22, 2011

PREPARED BY:

QUINLIVAN APPRAISAL, P.A.

7300 NORTH KENDALL DRIVE - SUITE 530 MIAMI, FLORIDA 33156

QUINLIVAN APPRAISALA PROFESSIONAL ASSOCIATION

7300 NORTH KENDALL DRIVE, SUITE 530 MIAMI, FLORIDA 33156

J. Mark Quinlivan, MAI State Certified General Appraiser RZ 000112

Telephone (305) 663-6611 Fax (305) 670-4330 [email protected]

Thomas F. Magenheimer, MAI State Certified General Appraiser RZ 000553

August 24, 2011 Marianella Lozada-Duque Eastern National Bank 799 Brickell Plaza, 10th Floor Miami, Florida 33131 Dear Ms. Lozada-Duque: In accordance with your request and authorization, I have prepared this Appraisal Report covering the following described property:

Units 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 of The Lakes Frontage Center Condominium located at 14100 Palmetto Frontage Road, Miami Lakes, Florida

The purpose of this Appraisal is to estimate the As Is Market Value of the subject units as of the market conditions existing on August 22, 2011, being one of the dates of personal inspection. The Appraisal Report that follows sets forth the identification of the property, the assumptions and limiting conditions, pertinent facts about the area and the subject property, comparable data, the results of the investigations and analyses, and the reasoning leading to the conclusions set forth. This report was prepared in accordance with the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) relating to appraisal standards as enumerated in Title 12, Code of Federal Regulation, Part 34 (12CFR34) and in compliance with the most current Uniform Standards of Professional Appraisal Practice (USPAP) as adopted by the Appraisal Standards Board of the Appraisal Foundation.

Marianella Lozada-Duque August 24, 2011 Page 2 Based on the inspection of the property and the investigation and analyses undertaken, I have formed the opinion that the subject units had an As Is Market Value based upon the market conditions prevalent on August 22, 2011, as follows:

TWO MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS

($2,650,000) Respectfully submitted,

J. Mark Quinlivan, MAI State-Certified General Appraiser Certification Number: RZ0000112

Brian M. Quinlivan Registered Trainee Appraiser License Number: RI19051 JMQ/rp (11-063U)

T A B L E O F C O N T E N T S

PAGE COVER PAGE TRANSMITTAL LETTER TABLE OF CONTENTS

CERTIFICATION OF VALUE .................................................................................................... 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS.................................................. 3

INTRODUCTION ........................................................................................................................ 21 INTRODUCTION ................................................................................................................... 22 IDENTIFICATION OF THE PROPERTY........................................................................... 22 LOCATION ............................................................................................................................. 22 PURPOSE AND DATE OF APPRAISAL ............................................................................. 22 INTENDED USE AND INTENDED USER OF APPRAISAL............................................. 22 LEGAL DESCRIPTION......................................................................................................... 22 PROPERTY RIGHTS APPRAISED ..................................................................................... 22 DEFINITION OF MARKET VALUE ................................................................................... 23 ASSESSMENT AND TAXES 2010...................................................................................... 24 OWNER OF RECORD AND ADDRESS .............................................................................. 25 FIVE-YEAR HISTORY OF TITLE ...................................................................................... 25

SCOPE OF THE APPRAISAL ................................................................................................... 26 LOCATION ANALYSIS .............................................................................................................. 29

COUNTY DATA...................................................................................................................... 30 NEIGHBORHOOD DATA..................................................................................................... 39

SITE DATA .................................................................................................................................. 42 ZONING ....................................................................................................................................... 45 HIGHEST AND BEST USE ....................................................................................................... 48 DESCRIPTION OF IMPROVEMENTS .................................................................................... 52 THE APPRAISAL PROCESS..................................................................................................... 58 INCOME APPROACH................................................................................................................ 61 SALES COMPARISON APPROACH ........................................................................................ 67 RECONCILIATION AND VALUE CONCLUSION ................................................................. 85 ADDENDA ................................................................................................................................... 88

ASSUMPTIONS AND LIMITING CONDITIONS QUALIFICATIONS CLIENT LIST ENGAGEMENT LETTER RENT ROLL / EXPENSES

CERTIFICATION OF VALUE

The undersigned hereby certifies that, to the best of my knowledge and belief: (A) The statements of fact contained in the report are true and correct. (B) The reported analyses, opinions and conclusions are limited only by the

assumptions and limiting conditions set forth, and are our personal, unbiased professional analyses, opinions and conclusions.

(C) I have no present or prospective interest in the property that is the subject

of this report, and we have no personal interest or bias with respect to the parties involved.

(D) I have no bias with respect to the property that is the subject of this report

or to the parties involved with this assignment. (E) My engagement in this assignment is not contingent upon developing or

reporting predetermined results. (F) The appraisers compensation for completing this assignment is not

contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. Furthermore, the appraisal assignment is not based on a requested minimum valuation, a specific valuation or the approval of a loan.

(G) The appraisers analyses, opinions and conclusions are developed, and

this report is prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, and the requirements of the State of Florida for state-certified appraisers.

(H) Use of this report is subject to the requirements of the State of Florida

relating to review by the Real Estate Appraisal Subcommittee of the Florida Real Estate Commission.

(I) Brian Quinlivan has made a personal inspection of the property that is the

subject of this report. (J) No one provided professional assistance to the persons signing this

report.

QUINLIVAN APPRAISAL 1

(K) The reported analyses, opinions, and conclusions are developed, and this

report is prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

(L) The use of this report is subject to the requirements of the Appraisal

Institute relating to review by its duly authorized representatives. (M) The appraiser has not performed any services on the subject property

within the past three years. As of the date of this report, J. Mark Quinlivan has completed the requirements under the continuing education program for The Appraisal Institute. Based on the inspection of the property and the investigation and analyses undertaken, subject to the assumptions and limiting conditions set forth in the Addendum of this report, I have formed the opinion, as of August 22, 2011 the subject units had an As Is Market Value of:

TWO MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS

($2,650,000)

J. MARK QUINLIVAN, MAI STATE CERTIFIED GENERAL APPRAISER CERTIFICATION NUMBER: RZ0000112

BRIAN M. QUINLIVAN REGISTERED TRAINEE APPRAISER

LICENSE NUMBER: RI 19051



SUMMARY OF SALIENT FACTS AND CONCLUSIONS Type Report Self-contained Purpose of Appraisal As Is Market Value Property Rights Appraised Fee Simple Location 14100 Palmetto Frontage Road

Miami Lakes, Florida Legal Description Units 100, 101, 103, 104, 105, 106, 107, 108, 109,

110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 and a combined 64.528% interest in the common elements, The Lakes Frontage Center Condominium, OR Book 24401, Page 4031, Public Records of Miami-Dade County, Florida.

Age 1983 Zoning IU-C, Industrial Conditional Highest and Best Use Existing office condominium use Indications of Value: Cost Approach Not Applicable Income Approach $2,210,000 Sales Comparison Approach (Gross Value) $3,320,000 As Is Market Value $2,650,000 Date of Value Estimate August 22, 2011 Date of Inspection August 22, 2011 Date of Report August 24, 2011 Remarks The subject units are located in a 30-unit office

condominium building known as The Lakes Frontage Center Condominium.

14100 PALMETTO FRONTAGE ROAD

LOOKING NORTHEASTERLY ON PALMETTO FRONTAGE ROAD- SUBJECT BUILDING TO LEFT


SUBJECT BUILDING

LOOKING NORTHWESTERLY ALONG NW 80 AVENUE- SUBJECT BUILDING TO RIGHT


INTERIOR- TYPICAL UNIT



UNFINISHED UNIT

UNFINISHED UNIT


INTRODUCTION



INTRODUCTION IDENTIFICATION OF THE PROPERTY Twenty-two office condominium units located within the Lakes Frontage Center Condominium.

LOCATION 14100 Palmetto Frontage Road Miami Lakes, Florida.

PURPOSE AND DATE OF APPRAISAL The purpose of this Appraisal is to estimate the As Is Market Value of the subject units as of the market conditions existing on August 22, 2011, being one of the dates of personal inspection.

INTENDED USE AND INTENDED USER OF APPRAISAL The intended use of this appraisal is to assist the client in loan underwriting and/or credit decisions. The intended user is Eastern National Bank.

LEGAL DESCRIPTION Units 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 113, 114, 116, 117, 202, 203, 304, 320, 370, 380 & 390 and a combined 64.528% interest in the common elements, The Lakes Frontage Center Condominium, OR Book 24401, Page 4031, Public Records of Miami-Dade County, Florida. PROPERTY RIGHTS APPRAISED The property is appraised in fee simple: a fee without limitations to any particular class of heirs or restrictions, but subject to the limitations of eminent domain, escheat, police power and taxation, as well as utility easements of record.


DEFINITION OF MARKET VALUE Market Value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1) buyer and seller are typically motivated; (2) both parties are well informed or well advised and acting in what

they consider their own best 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 a normal consideration for the property sold

unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

(Source: USPAP 2010-2011 Edition)


ASSESSMENT AND TAXES 2010 The subject property is assessed under the jurisdiction of the Town of Miami Lakes, Florida. The assessment for the property is established each year as of January 1st by the Miami-Dade County Property Appraiser's Office at 100% of "Just Value." Just Value has been equated to Market Value less closing costs. While the State of Florida requires real estate to be assessed at 100% of Just Value, in reality the ratio of the assessed value to sales price is generally below 100%.

Folio No. Unit Assessed Value Millage Rate Tax Amount 32-2015-045-0010 100 $203,070 0.0205295 $4,168.93 32-2015-045-0020 101 $168,270 0.0205295 $3,454.50 32-2015-045-0040 103 $77,380 0.0205295 $1,588.57 32-2015-045-0050 104 $36,010 0.0205295 $739.27 32-2015-045-0060 105 $164,120 0.0205295 $3,369.30 32-2015-045-0070 106 $169,480 0.0205295 $3,479.34 32-2015-045-0080 107 $266,250 0.0205295 $5,465.98 32-2015-045-0090 108 $133,300 0.0205295 $2,736.58 32-2015-045-0100 109 $151,650 0.0205295 $3,113.30 32-2015-045-0110 110 $205,490 0.0205295 $4,218.61 32-2015-045-0120 111 $122,910 0.0205295 $2,523.28 32-2015-045-0140 113 $59,900 0.0205295 $1,229.72 32-2015-045-0150 114 $65,780 0.0205295 $1,350.43 32-2015-045-0160 116 $34,100 0.0205295 $700.06 32-2015-045-0170 117 $60,250 0.0205295 $1,236.90 32-2015-045-0200 202 $63,360 0.0205295 $1,300.75 32-2015-045-0210 203 $175,360 0.0205295 $3,600.05 32-2015-045-0250 304 $293,260 0.0205295 $6,020.48 32-2015-045-0270 320 $204,100 0.0205295 $4,190.07 32-2015-045-0280 370 $309,190 0.0205295 $6,347.52 32-2015-045-0290 380 $249,120 0.0205295 $5,114.31 32-2015-045-0300 390 $282,700 0.0205295 $5,803.69 $3,495,050 $71,751.63


OWNER OF RECORD AND ADDRESS Palmetto Road Frontage, LLC 14100 Palmetto Frontage Road, #101 Miami Lakes, FL 33016-1557

FIVE-YEAR HISTORY OF TITLE According to the Public Records of Miami-Dade County, there have been no sale transactions of the subject units within the past three years.

SCOPE OF THE APPRAISAL



SCOPE OF THE APPRAISAL The scope of the assignment relates to the extent and manner in which research is conducted, data is gathered and analysis is applied, all based upon the following problem-identifying factors stated elsewhere in this report. This appraisal of the subject has been presented in the form of a Self-contained Appraisal Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2 (a) of the USPAP. Data related to the subject property was derived from various sources including but not limited to the Miami-Dade County Property Appraisers Office, Miami-Dade County plats as compiled by First American Real Estate Solutions, Inc., FEMA flood zone maps, Land Development Regulations of the Town of Miami Lakes, condominium documents and tax roll information provided by ISCNET. Comparable sale sources include First American Real Estate Solutions, Inc., an on-line computer service provided by First American Real Estate Solutions (ISC Division), Board of Realtors Multiple Listing Services, Miami-Dade County Property Appraisers Office and LoopNet. Sales prices are typically confirmed with a party to the transaction, i.e., buyer, seller, real estate agent or attorney to the transaction. A search for office condominium units within the subject market area was conducted. The initial sales period researched was from January of 2009 through the date of valuation. The sales all have similar improvements and highest and best uses as the subject property. Several other sales were considered, but were not included because there was too wide a difference in physical factors, location and time.


ESTIMATED MARKETING PERIOD The estimated value of the subject is predicated upon a normal marketing period. A normal marketing period is generally defined as the most probable amount of time necessary to expose and actively market a property on the open market to achieve a sale. Implicit in this definition are the following assumptions:

(A) The property will be actively exposed and aggressively marketed to potential purchasers through marketing channels commonly used by sellers and buyers of similar type properties.

(B) The property will be offered at a price reflecting the most probable markup

over market value used by sellers of similar type properties.

(C) A sale will be consummated under the terms and conditions of the definition of Market Value required by the regulation.

In order to estimate the marketability of this property, sales activity in this market area is reviewed over the past three years, multiple listings are reviewed and real estate brokers operating in the area are interviewed. Based on the above sources, the marketing period for the subject property is estimated to be less than twelve months. ESTIMATED EXPOSURE TIME Exposure time is defined as the estimated length of time the property interest being appraised would have offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. In estimating a reasonable exposure time for the subject property, the appraisers have taken the following steps:

Discussion with buyers, sellers, brokers and/or review of multiple listings of commercial condominium units in the area related to historic marketing periods.

Based on the above sources, exposure time is estimated to have been twelve months for the subject property.

LOCATION ANALYSIS



COUNTY DATA Miami-Dade County - Location and Size Miami-Dade County, which comprises the metropolitan area of Miami, is situated on the southeast tip of the state of Florida. It is bordered on the east by the Atlantic Ocean, on the west by Monroe and Collier Counties, on the north by Broward County, and on the south by Monroe County (the Florida Keys). Miami-Dade County, the largest county in area and population in the state of Florida, covers an area of 2,054 square miles with an altitude ranging from sea level to 25 feet. Water covers 354 square miles of the County. Although the County is relatively large, approximately half of the total area is comprised of the Everglades, which is a natural area that will not be developed. Therefore, only the eastern section of Miami-Dade County encompasses the area which is currently developed or available for future development. Miami-Dade County's location, its southern latitude and proximity to the Gulf Stream provide for mild winters and pleasant summers. Population The state of Florida has increased rapidly in population from 9,740,000 in 1980 to 12,937,926 in 1990 and 15,982,378 in 2000. The 2009 population of Florida was estimated at 18,537,969. Florida is expected to add an average of only about 209,000 residents a year between 2007 and 2010, compared with annual increases of about 418,000 people between 2002 and 2006. Miami-Dade County's population increased from 1,626,000 in 1980 to 1,937,094 in 1990, reflecting an average annual compounded growth rate of 1.77%, compared with 2.88% for the state of Florida. By 2000, Miami-Dade County's population increased to approximately 2,253,362 and in 2008 it is estimated at 2,398,245. The population is estimated to grow to 2,560,000 by the Year 2010. Miami-Dade County's population growth during the last four decades has been dramatic especially in relation to national trends. From 1950 to 1990 the United States population increased by 60% while the population of Miami-Dade County has almost quadrupled from 495,084 to 1,937,000. During this period, the state of Florida was elevated from the 20th most populous state to the 4th in 1990 and continues to be the fourth most populous state. During the 1960s, the major increase in Miami-Dade County's population was due to the large immigration of Cubans. Today, Cuban and other Spanish speaking people comprise approximately 62% of Miami-Dade County's population. The increase in Hispanic population has had favorable effects on the local economy and has helped to create a multi-national cultural environment in the area.


The overall population of Miami-Dade County is well dispersed throughout the entire area, yet has several key areas of concentration. During the 1960s, several sub-areas accounted for approximately 70% of the growth. These areas include Hialeah, northern Miami-Dade County, the Beach area, the Miami River area, the area southwest of Miami International Airport, as well as the Kendall and Cutler Ridge areas. In the first half of the 1970s, population growth continued in an uneven fashion especially in the urban fringes. Since 1970, approximately three-fourths of the total population growth for the County has occurred in the unincorporated areas. The older centrally located cities such as Miami, Miami Beach and Coral Gables have grown at modest rates from 1970 to 1990. Unincorporated Miami-Dade County has evidenced the most rapid growth which continues to occur in areas in northeast Miami-Dade County (Aventura), as well as the currently expanding southwest area, especially in sections of Flagler Street, S.W. 8th Street, North Kendall Drive and Homestead. Population trends indicate that most of the population growth in Miami-Dade County between 2010 and 2015 will occur in outlying areas such as North Miami Beach, the Kendall area west of the Florida Turnpike, the S.W. 8th Street area west of the Florida Turnpike, the Hialeah-Miami Lakes area, as well as those areas both east and west of U.S. Highway 1 between Cutler Ridge and Florida City. Employment Trends The dominant characteristic of Miami-Dade County is that it is primarily trade and service based. Personal, business and repair services have had a substantial increase in importance in the economic base over the last decade. The major sectors of the economy include services, wholesale and retail trade, transportation, communications, public utilities, government and manufacturing. The most dominant industries which form the County's economic base are construction and tourism. Tourism is Miami-Dade County's biggest industry with an estimated 12.1 million visitors in 2008 contributing to more than 50 percent of the area's economy. Aviation and related industries are responsible for another large segment of the economy. The largest employer in Miami-Dade County is the Miami-Dade County School Board, followed by Miami-Dade County, Federal Government, State of Florida, Jackson Health System, American Airlines, University of Miami, Baptist Health Systems of South Florida, AT&T, and Florida Power and Light. Assuming additional importance is the growing prominence of Miami-Dade County as a center for international trade, finance and tourism. The establishment of Miami as the "Gateway of the Americas" should provide the area with a much needed degree of economic diversification. This should enable Miami-Dade County to weather slowdowns in the national economy by an increase of trade through the Port of Miami, growth of international arrivals at the airport, the Free Trade Zone, and the substantial foreign investment in the local economy, particularly in real estate.


In December of 2009, Floridas unemployment rate was 11.8 percent, up from 3.6 percent in 2006. The unemployment rate for Miami-Dade County was 11.3 percent, up from 3.8 percent in 2007.

T A B L E 1

ESTIMATES OF MIAMI-DADE COUNTY TOURIST TRENDS

INTERNATIONAL DOMESTIC TOTAL

2005 5,248,380 6,053,220 11,301,600

2006 5,322,200 6,262,800 11,585,000

2007 5,492,900 6,473,000 11,965,900

2008 6,169,043 6,662,546 12,831,589

2009 5,684,400 6,251,564 11,935,964

2010 6,060,100 6,544,000 12,604,100

Source: Greater Miami Convention and Visitors Bureau, Tourism Facts and Figures Figures for 2010 indicate 12,604,100 overnight visitors came to Miami-Dade County, a 5.6% increase from 2009. Table 2 shows that the bulk of international visitors to Miami-Dade County originate from Central and South American Countries (52.2%), followed by European Countries (23.5%) and Canada (9.9%). England and Germany accounted for the largest proportion of European visitors. In 2010 there were a total of 4,334,004 passengers passing through the Port of Miami and approximately 17,985,000 arriving through Miami International Airport. During 2010, the number of Port of Miami passengers increased 9.3% from 2009 and 2.7% from 2008. During 2010 the passengers arriving at the airport increased 5.7% from 2009 and 5.5% from 2008. The arrivals at the airport are fairly evenly distributed between international and domestic passengers. In 2010, domestic passengers totaled 9,432,074 and international passengers totaled 8,552,895.


T A B L E 2

ESTIMATES OF INTERNATIONAL VISITORS BY REGION

REGION 2006 2007 2008 2009

EUROPEAN COUNTRIES 23.0% 23.6% 23.5% 22.5%

CARIBBEAN COUNTRIES 12.5% 12.4% 12.1% 12.0%

CENTRAL AMERICAN COUNTRIES

9.4% 9.3% 9.3% 9.1%

SOUTH AMERICAN COUNTRIES

42.8% 42.3% 42.9% 44.9%

CANADA 9.9% 10.1% 9.9% 9.5%

OTHER COUNTRIES 2.4% 2.3% 2.3% 2.0

TOTAL 100% 100% 100% 100%

Source: Greater Miami Convention and Visitors Bureau, Tourism Facts and Figures There are approximately 50,000 motel and hotel rooms in 470 lodging facilities in Greater Miami and the Beaches. The area had an occupancy rate of 74.5 percent as of January 2011, down 0.8% from January 2010. The difference between the 2010 and 2011 hotel occupancy figures may be skewed by the presence of the Super Bowl in South Florida in 2010. The airport area had the highest occupancy rate as of January 2011 at around 85%. Average room rate for hotel rooms in Miami-Dade County was $171.51 in January of 2011, up from $164.88 in January of 2010. The average room rate for the same period in 2008 was $146.54. Therefore, the average hotel room rates in 2011 indicate an increase of 4.0% over the 2010 rate and an increase of 17.0% over the 2008 rate. The first in a series of new luxury properties opened in February 2004 when the 380-room Ritz Carlton opened in Miami Beach. In May of 2005, the 210-room Le Meridian opened in Sunny Isles Beach. Three other new hotels with a total of 271 rooms opened in Miami Beach during 2005. In 2009, 11 new hotels with 2,054 rooms were completed with the largest being the Epic Hotel in downtown Miami. Miami-Dade Financial Resources Over the course of the last decade, Greater Miami has evolved into a major international financial center. Domestic and international businesses find convenient access to a full array of services provided by locally-based state and national commercial banks, savings and loan associations, foreign banks, non-depository credit institutions, securities and commodities brokers and insurance companies.


Greater Miami has the largest concentration of domestic and international banks south of New York City. With more than 90 percent of the state's foreign banks operating offices in Miami, this market dominates international banking in Florida. Overall, about 150 domestic banks, foreign banks and Edge Act banks operate in Greater Miami. The greatest concentration is located along Brickell Avenue in downtown Miami. Transportation Miami-Dade County has an extensive expressway system with access to all points in the County. However, due to the rapidly increasing population, some of the expressways, especially Interstate 95, are becoming overburdened. In 1985 Miami-Dade County completed a 20.5 mile elevated rapid transit system. This system originally extended southward from downtown Miami to Dadeland, paralleling U.S. Highway 1 and northwesterly from downtown Miami to Hialeah. Recently, the system was extended about a mile from Hialeah to the Palmetto Expressway at NW 74th Street. In conjunction with this system, there is a Downtown People Mover Automated Transit system which encircles the central business district of Miami and extends south to the Brickell area and north to the Omni area. Miami-Dade County is served by the CSX and Florida East Coast Railroads for freight and Amtrak Rail, Greyhound and Trailways Interstate bus lines for passenger service. Miami International Airport, one of the nation's largest and busiest, had approximately 35.7 million arrivals and departures in 2010. The airport is currently undergoing a $5.4 billion expansion. A South Terminal has recently been completed and a North Terminal is under construction and a fourth runway is planned. Miami has become a port of embarkation for airlines and ships bound for Central and South American Countries. The Port of Miami, besides being the largest passenger port in the nation, is also important as a cargo center with a 2009 annual tonnage of approximately 6.83 million down from 7.43 million in 2008. The ports traditional customer base has been Europe, China, Latin America and the Caribbean, accounting for 65% of the ports total volume. Miami's comprehensive transportation system and its strategic location have enabled it to become an important international transportation center, providing commercial access to Latin America and the Caribbean. Government Miami-Dade County is comprised of unincorporated areas, as well as 36 municipalities, the largest of which is the city of Miami.


Miami-Dade County is governed under a modified two-tier metropolitan government. The purpose of this type government was to establish one governing body for the county, and to establish one supply of services such as fire, police, etc. for the county. The upper tier is the County, which provides broad "regional" or county functions, such as metropolitan planning, welfare, health and transit services. The thirty-six municipalities represent the lower tier of government, providing a varying array of services within their jurisdictional boundaries. The County also maintains lower tier functions, such as the provision of municipal-type services, including police and fire, to the unincorporated areas and certain municipalities on a negotiated basis. The County operates under the Commission-Manager form of government. Legislative and policy-making authority is vested in the elected thirteen-member Board of County Commissioners; the Commission appointed County Manager is the chief administrator. Miami-Dade County has operated under the metropolitan form of government since 1957, when the Home Rule Charter was passed by the local electorate. Prior to Home Rule, the County had to rely on the State Legislature for the enactment of its laws. County government had not been able to respond to the tremendous demand for municipal services in this rapidly urbanizing area, which is larger than the State of Rhode Island or Delaware. The need to combine services duplicated by the County and numerous cities was also clearly evident. The Charter permitted the limited County government to reorganize into a general purpose "municipal-type" government capable of performing the full range of public functions into an area wide operation. Real Estate At the end of 2010, the Miami-Dade County Office Market contained approximately 81 million square feet of office space. Approximately 28.8% of this space is located in the Miami central business district and adjacent Brickell Avenue and 20% in the Airport West area. The vacancy rate of office buildings in Miami-Dade County was flat during 2010 at about 15%, but up from 11.3% in 2007 to 10.8% in 2008. However, during 2010 office inventory grew by about 800,000 square feet, most of which was in the Brickell Avenue market area. The total new offices under construction totals about 1,213 million square feet. Again, most of the new office construction is concentrated in the Brickell Avenue market area. Other market areas with new construction of office space include Coral Gables and Central Miami. Asking rental rates have been declining in 2010 with the average county lease rate falling below $30 per square foot for the first time since 2006. Office rental rates in new buildings typically range from $26.00 to $40.00 per square foot. The low end of the range is for office space in the suburban markets. The upper end of the range is for first class office space in Downtown Miami, Brickell Avenue, Coconut Grove and Coral Gables.


The Greater Miami Industrial Market, as of the end of 2010, consisted of approximately 178.7 million square feet of industrial space and approximately 16.1 million square feet of flex space. The approximate percentage location of this space is as follows:

MARKET AREA % OF TOTAL MARKET SPACE

AIRPORT WEST 29.6%

HIALEAH 25.6% MEDLEY 16.7% MIAMI LAKES 3.3% NORTHEAST DADE 4.8%

NORTHCENTRAL DADE 14.9% SOUTH DADE 5.1%

TOTAL 100% The county's vacancy rate for the overall Miami-Dade County industrial market for the end of 2010 was 10%. Airport West, the largest industrial area, had a vacancy rate of 10.9% as of the end of 2010. Industrial rental rates generally average $7.50 per square foot, down 11% on an average of $8.00 per square foot at the end of 2009. No new industrial space is expected to be constructed during much of 2011. For the month of fourth quarter of 2010 there were 842 building permits issued in Miami-Dade County, compared to 398 permits issued in the fourth quarter of 2009. The increase in new permits issued between the same quarter of 2009 to 2010 is approximately 3.8 times. The total number of permits issued in 2010 amounted to 2,297. This is in contrast to the 1,150 permits issued in 2009. Miami-Dades single-family home sales increased 11.1% in the fourth quarter of 2010 in comparison with the fourth quarter of 2009. A total of 200 new homes were reported sold in the fourth quarter of 2010. In the fourth quarter of 2010, the median sales price for single-family units was $206,578, down 24.9% from the year earlier. Existing condo sales showed gains of 25.8% in December 2009 over the units sold in November 2009. The median sales price for condos decreased slightly by 0.5% during the same period. During the last 12 months, condo sales increased 49.6%. Over the same period, the average sales price was $142,650; a year ago, it was $239,367 for a 40.4% decline. Reinhold P. Wolff Quarterly Housing Report shows a vacancy rate of 2.8% for rental apartment buildings in the First Quarter of 2011, lower than the 5.8% rate of the first quarter of 2010. The vacancy rate had been declining steadily since 2006 due to the reduction of inventory caused by the large amount of condominium conversions. Since 2007 many ownership housing units, including both condominiums and single family houses, were placed into the rental market by developers and individual owners.


The condominium apartment market is currently experiencing an all-time high inventory for new units. High-rise condominium towers have been recently completed in the traditional condominium locations such as Brickell Avenue, Coral Gables, Aventura and the Miami beaches, as well as areas with no existing high-rise condominiums, such as the central business district of Miami, the Edgewater, Little Havana and Shenandoah neighborhoods of the city of Miami. Additionally, many existing rental apartment projects have been converted to condominiums. Sales of new condominiums peaked in the second quarter of 2005 with 14,700 units sold during the first six months of 2005. New condominium sales during 2010 totaled 3,700 units, down 19% from the 4,556 units sold during 2009. The new condominium apartment market is in a largely oversupply condition. The Miami-Dade County retail market contains approximately 59.5 million square feet in buildings over 20,000 square feet. The major retail markets in Miami-Dade County include Hialeah, Coral Gables/South Miami-Dade, Aventura and Kendall. Rental rates typically range from $20.00 to $45.00 per square foot with rates in the $80 to $120 per square foot on South Beach. The overall Miami-Dade County vacancy rate for 2010 was approximately 5.8%. The total net absorption of new retail space was only about 39,400 square feet during 2010. Very little, if any, significant sized retail space is expected to be constructed during 2011. Conclusions In the future, one of the principal growth areas for Miami-Dade County is expected to be the international sector. Miami-Dade County, because of its geographic location and excellent transportation facilities, is well-suited to attract both business individuals and tourists from Latin America. It is already one of the principal shopping markets for Central and South Americans visiting the United States and one of the principal export points for goods and services destined for Latin America. The existence of major financial institutions, retail outlets, corporations and other business entities, coupled with its geographic location, transportation systems and planned international trade centers give Miami-Dade County an excellent opportunity for continued growth as an international center. During 2010 all segments of the commercial real estate market will continue to experience increasing vacancy rates and decreasing rental rates. With decreasing sale prices for both single family residences ad condominium apartment units, sales activity is expected to rise during 2011.

LOCATION MAP



NEIGHBORHOOD DATA The subject site is located within the Town of Miami Lakes, approximately fourteen miles northwest of the Central Business District of Miami. The subject property may further be identified as being located on the northwesterly corner of Palmetto Frontage Road and N.W. 80th Avenue, one block west of the Palmetto Expressway. The boundaries of the subject neighborhood are generally delineated as N.W. 138th Street to the south, The Palmetto Expressway (S.R. 826) to the north, Interstate 75 to the west and N.W. 57th Avenue to the east. This area encompasses approximately six square miles. Miami Lakes, a residential community in northwest Miami-Dade County at the bend in the Palmetto Expressway, is located between N.W. 57th Avenue to the east and N.W. 87th Avenue to the west, and the Palmetto Expressway to the north, and NW 138th Street to the south. This community began development in the 1960s and is almost totally developed today with a combination of single family residences, town houses, rental apartment buildings, condominium apartment buildings, warehouses, retail stores and offices. The residences generally range in price from $500,000 to $1,000,000. The Town of Miami Lakes was incorporated in 2000 as the 31st municipality in Miami-Dade County. Miami Lakes was a master planned community developed in the 1960s by the Graham family. The original master plan was over 3,000 acres in size that would allow over 30 years of growth. As its name implies, the town has 23 lakes within its boundaries. The Town currently has over 27,000 residents. The Town has a council-manger form of government with an elected mayor and town council. The majority of Miami Lakes area (approximately four sections) is located east of the Palmetto Expressway. The section located west of the Palmetto Expressway, north and east of Interstate 75 and south of N.W. 154th Street is the most recently developed section of Miami Lakes. The easterly portion of this section is primarily zoned for industrial/office use and has been developed almost exclusively with low and mid-rise office buildings. The buildings are primarily owned by the Graham Companies, the developer of Miami Lakes. Tenants in these buildings include State Farm, American Express, Kislak Bank, Ikon Office Solutions, Attorneys, Insurance Company, Minolta, Keen Battle Mead Insurance and American Healthcare services. The westerly half of this section has been developed with single family residences, townhouses and condominium apartments. These properties were developed from the mid-1980s to the late 1990s. The Palmetto Expressway extends westerly from the Golden Glades Interchange (intersection of I-95, Florida Turnpike and US 441) to N.W. 77th Avenue, thence southerly to US Highway 1 at S.W. 104th Street in South Miami-Dade County. Interstate I-75 connects to the Palmetto Expressway at N.W. 138th Street. Interstate 75 extends northerly to Ft. Lauderdale at S.R. 84 (I-595) and then extends west to Naples and the West Coast of Florida. I-75 provides the subject neighborhood with good access to the southern and western regions of Broward County.


The subject property is located in commerce park located between the Palmetto Expressway on the east, N.W. 154th Street to the north, Interstate 75 to the south, and N.W. 82nd Avenue to the west. The district is mostly improved with one- to four-story office buildings and one-story flex space buildings. The commerce park has some vacant land available for development. In summary, the subject property is located in a commercial district on the east side of Miami Lakes. Miami Lakes is a relatively strong suburban office/industrial market because of its good access via the Palmetto Expressway and I-75, and its proximity to the Miami International Airport. The Palmetto Expressway and I-75 link the subject neighborhood with both Miami and Ft. Lauderdale.

NEIGHBORHOOD MAP


SITE DATA



SITE DATA Dimensions and Shape: The site is mostly rectangular in shape. The site fronts 195 feet, more or less, along the northwesterly side of Palmetto Frontage Road and approximately 340 feet along the northeasterly side of N.W. 80 Avenue. Source: Condominium Documents Area: 66,300 square feet (approximate) Source: Condominium Documents Topography and Drainage: The site is level and approximately at street grade. Flood Zone: Map No. 12086C0114L (Effective September 11, 2009)

"AE" Base flood elevation determined- 6 feet Soil and Subsoil: The immediate area of the subject site appears to have no unusual soil or subsoil conditions. Unusual conditions would be brought out by test borings. Utilities: Water: Miami-Dade Water & Sewer Department Sewer: Miami-Dade Water & Sewer Department Electricity: Florida Power & Light Company Telephone: AT & T Street Improvements: Palmetto Frontage Road is asphalt paved with a dedicated width of 50 feet. Palmetto Frontage Road has one northerly bound lane and one southerly bound lane in the vicinity of the subject.

SITE MAP


ZONING



ZONING Under Ordinance of the Town of Miami Lakes Classification: IU-C Industrial Conditional Intent: The IU-C District shall be applied only to those lands that appropriately may be used and utilized for the development, construction, and operation of large industrial projects and industrial park development of the nature, type and character with the public health, safety, comfort, convenience and the general welfare of the county. Permitted uses include utility plants and substations such as, but not limited to, sewage, water, power, communications and gas and every use permitted in the IU-1 and IU-3 districts such as aircraft hangars, bakeries, auto painting, bottling plants, breweries, cold storage warehouses, food packing, furniture manufacturing, garages, lumber yards, office buildings, banks, boat repairs, hotels, radio stations, limited retail, millwork, showrooms, parking lots, storage warehouses, welding shops and textile mills, animal reduction plants, cement plants, blooming mills, distilleries, foundries, paper mills, and stockyards. Development Standards

Minimum Street Frontage: 330 feet

Minimum Lot Depth: 330 feet

Minimum Land Size: 10 acres; credit for right-of-way

Building Setbacks:

Front 25 feet, sites up to 2 acres net

2 acres or greater, 15% of lesser dimension of property; maximum 50 feet, minimum 25 feet

Side 10 feet from interior side lines

25 feet from side property line abutting a highway right-of-way

Rear 20 feet from residential district

5 feet from industrial or business district, properties with open wall None, industrial or business district - properties with closed wall.

Minimum setback on through lot, same as for front setback


Minimum Landscaped Open Space: 20% of net land area

Minimum Greenbelt Areas Abutting Right-of-Ways or Residential Districts 8 feet for sites up to 3 acres(net)

10 feet for sites over 3 acres (net) Minimum Offstreet Parking Space: Industrial Area: Single Tenant Building 1 per 1,000, up to 10,000 square feet; then 1

per 2,000 square feet. Multi-tenant Building 1 per 1,000 square feet, min. of 2 per bay. Office Area: 1 per 300 square feet of gross building area

allocated for offices. Open Lot or Walled-In Uses: 2 for each 5,000 square feet of lot area or 15

spaces per 2 employees, whichever is greater; these must be no more than 1,500 feet from the use.

Wholesale Showrooms: 1 for each 600 square feet of showroom Building Height: No building shall be of a height greater than the width of the widest street upon which such buildings abuts.

HIGHEST AND BEST USE



HIGHEST AND BEST USE Fundamental to the concept of value is the theory of highest and best use. Land is valued as if vacant and available for its highest and best use. The Appraisal Institute in The Appraisal of Real Estate, Thirteenth Edition, defines highest and best use as follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and results in the highest value. Land has limited value unless there is a present or anticipated use for it; the amount of value depends on the nature of the land's anticipated use, according to the concept of surplus productivity. Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination, is generally regarded as the highest and best use of the land as though vacant. The highest and best use of a property as improved refers to the optimal use that could be made of the property including all existing structures. The implication is that the existing improvement should be renovated or retained as so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one. In estimating the highest and best use there are essentially four stages of analysis: 1. Possible Use. What uses of the site being appraised are physically possible? 2. Permissible Use (Legal) What uses are permitted by Zoning and Deed

Restriction, if any? 3. Feasible Use. Which possible and permissible uses will produce a net return to

the owner of the site? 4. Maximally Productive. Among feasible uses, which use will produce the highest

net return to the owner of the site? The highest and best use of the land (or site), if vacant and available for use, may be different from the highest and best use of the improved property. This is true when the improvements are not an appropriate use, but make a contribution to the total property value in excess of the value of the site. The following four-point test is required in estimating the Highest and Best Use. The use must be legal. The use must be probable, not speculative or conjectural. There must be a profitable demand for such use and it must return to the land the highest net return for the longest period of time.


These tests have been applied to the subject property. In arriving at the estimate of Highest and Best Use, the subject site is analyzed as vacant and available for development and as developed. Possible Use The site fronts 195 feet, more or less, along the northwesterly side of Palmetto Frontage Road and approximately 340 feet along the northeasterly side of N.W. 80 Avenue. Therefore, the site has adequate access and exposure on two neighborhood traffic arteries. The subject site is mostly rectangular, with sufficient street frontage and depth for functional utility. All necessary utility services are available along existing street right-of-ways. The site is filled to street grade and does not appear to have any drainage or subsoil deficiencies. The subject site is 66,300 square feet in size which equates to 1.52 acres. The size of the subject site would allow a medium to large scale use. The physical characteristics of the subject site would not restrict any use of the site. Permissible Use Permissible or legal uses are those uses which are permitted by zoning or deed restrictions. There are presently no known private deed restrictions of record. The site is zoned for industrial usage. The zoning of the site permits office and industrial uses. Feasible Use/Maximally Productive Use The physical characteristics and zoning of the subject property permit a wide range of potential uses. The possible and permissible uses of the subject site include offices, warehouses, showrooms and bank branches. The site is a corner location with frontage on two traffic arteries. The site has adequate access and exposure. Similar sites in the vicinity of the subject site are improved with office buildings and commercial condominiums. Based on an analysis of the subject site, the highest and best use of the site is estimated to be for office usage.


Highest and Best Use as Improved The site is improved with a three-story office condominium building. The building was constructed in 1983 but was renovated when converted to condominium usage. The building is in good condition. The value indication of the property as a rental at stabilized occupancy is estimated in the Income Approach at $2,210,000. The As Is value indication based on a discounted sellout of the condominium units is estimated in the Sales Comparison Approach at $2,650,000. Since the value indication by the Income Approach is significantly less than the value indication by the Sales Comparison Approach, the operation of the property as a rental is indicated not to be the highest and best use of the property. However, due to the presently soft market conditions for commercial condominium units, the immediate sell off of the individual units is probably not feasible. Based on the above analysis, the highest and best use of the property as improved is considered to be for an interim operation as a rental and eventual sellout of the individual condominium units when market conditions improve.

DESCRIPTION OF IMPROVEMENTS



DESCRIPTION OF IMPROVEMENTS Age and Condition According to the Public Records of Miami-Dade County, the building improvements were originally constructed in 1983 but was recently renovated and converted to condominium use. From a personal inspection of the property, the improvements appear to be in good condition. Description The subject units are located in a 30-unit office condominium building known as The Lakes Frontage Center Condominium. With the exception of Unit 106, the subject units are fully built out. Unit 106 is mostly complete but would require a cost estimate of $10.00 per square foot to complete. Unit Sizes

Unit Size (Net SF) Unit Size (Net SF) 100 1,173 113 346 101 972 114 380 103 447 116 197 104 208 117 348 105 948 202 366 106 979 203 1,013 107 1,538 304 1,694 108 770 320 1,179 109 876 370 1,786 110 1,187 380 1,439 111 710 390 1,633

The combined size of the units is 20,189 net square feet. (Source: Condominium Documents) Details of Construction Foundation: Poured concrete spread footings in excavation trench Exterior Walls: 8 concrete block stuccoed and painted Windows: Fixed glass in aluminum frame Roof: Flat, built-up composition Interior Walls: Drywall-painted


Ceilings: Acoustical tile Floors: Carpet, wood and tile Lighting: Fluorescent Equipment and Fixtures Central air conditioning Site Improvements Landscaping Asphalt paved parking

FIRST FLOOR PLAN


SECOND FLOOR PLAN


THIRD FLOOR PLAN


THE APPRAISAL PROCESS



THE APPRAISAL PROCESS The appraisal of real estate is generally valuated by means of one or more of the following approaches:

(1) The Cost Approach (2) The Income Approach (3) The Sales Comparison Approach

The Cost Approach In the Cost Approach, land and building are valued as though they are separate entities. The land value is first estimated as if vacant. Then, by consulting various cost services, local building contractors and knowledge of construction costs, the replacement cost new of the building is estimated. Accrued depreciation from all sources including physical deterioration, functional and economic obsolescence must be deducted from this cost. The estimated land value is then added to the depreciated cost of the building to give the "depreciated replacement cost" of the property. The Cost Approach is based on the premise that the value of a commodity tends to be set by the cost of acquiring an equally desirable substitute. Applied to real estate, the assumption is that a person would not likely pay more for a property than it would cost him to acquire a suitable site and place an equally desirable building upon it. Costs would include direct cost of construction, indirect costs such as financing costs, land and developer/builder's profit. The subject units are located in an office condominium building on a single site with common parking facilities. The Cost Approach typically is not applicable to individual units in condominium properties where there are multiple units with multiple ownership of the common elements. Therefore, the Cost Approach would have no applicability in this situation and was not utilized. Income Approach The Income Approach is based on the premise that the value of a property may be determined by the amount of net income it can reasonably produce over its remaining economic life. The rationale of the approach is that the present worth of a future income stream is equivalent to the value of the property which produces that income. Four basic steps comprise the Income Approach: (1) Estimate the reasonable expectable annual gross income the

property will likely produce.


(2) Deduct an allowance for vacancy and collection loss to arrive

at the effective gross income. (3) Deduct the annual expense of operation from the effective

gross income to arrive at the annual net income. (4) Capitalize the annual net income into an indication of value. In this section of the report, a comprehensive market rent survey is conducted in order to estimate the Market Rent for the subject property and to estimate a stabilized occupancy rate. The operating expenses are estimated based on the actual operation of the subject and the operation of comparable office buildings. The Sales Comparison Approach The Sales Comparison Approach is an attempt to measure the reactions of typical buyers and sellers. In this approach, a direct comparison is made between the property being appraised and comparable properties, which have sold recently. These sales are compared for degrees of comparability such as location, size, age, zoning, time, the conditions of sale, financing and other pertinent data, which would affect value. Adjustments are made for these factors in order to arrive at a reliable estimate of value. In this report, sales of office condominium units within the subject development and competitive locations are gathered and analyzed. Reconciliation After applying the three approaches, three separate indications of value are available for analysis. The indicated values obtained from each approach are correlated into one final conclusion of value. Usually one approach will be considered more significant than the rest, either because of the reliability of the data, or because of the type of property involved. Reconciliation is the process by which each approach is objectively weighed according to its importance.

INCOME APPROACH



INCOME APPROACH TO VALUE (At Stabilization) This approach to value is a technique in which the anticipated net income is processed to indicate the capital amount of the investment which produces the net income. The capital amount, called the capitalized value, in effect, is the sum of the anticipated annual rents less the loss of interest until the time of collection. Income Potential Gross Annual Income 20,189 Square Feet x $22.50/SF $454,253 LESS: Vacancy & Collection Loss @ 7.5% -$ 34,069Effective Gross Annual Income $420,184 Operating Expenses Management @ 4% $16,807 RE Taxes (Less 4% Discount) $68,882 Maintenance $157,772 Total Operating Expenses $243,461 -$243,461 Net Operating Income $176,723

$176,723 Capitalized @ 8.00% $2,209,038

Value Indication by Income Approach (Rd) $2,210,000

Typically, these units are owner-occupied and not purchased by investors as income property. This is evidenced by the difference in value between operating the property as a rental and the value by Sales Comparison Approach.


CONTRACT RENT ANALYSIS A rent roll of the property was provided by the property owner. A copy of the rent roll is contained in the addendum of this report. Currently 15 of the 22 units are occupied at a rental rate ranging from $11.59 to $24.12 with an average rent of approximately $22.50. The larger units rent at a lower price per square foot. MARKET RENT ANALYSIS The market rent of the subject building is estimated based on a survey of competitive office properties in the subject market area. A summary of the comparable rentals is as follows:

No. Address Size (S.F.) Age Rental Rate Per S.F.

1 14160 Palmetto Frontage Rd

1,961 575

1985 $16.83 $16.59

2 7759 NW 146 St 1,230 2000 $22.44-$25.00 3 14333 NW 78 Ave 1,085 2005 $19.92* 4 14411 Commerce

Way 1,622 1987 $18.00*

*Asking rate Comparable Rentals 1, 3 and 4 are the rental rates before expenses. Comparable Rental 2 has similar lease terms as the subject units. . Based on an analysis of the contract rental rates as well as comparable rental rates, it is the appraisers opinion that the contract rent is indicative of market rent.


Vacancy and Collection Loss A vacancy and collection loss allowance is a reduction in potential rental income due to space not leased or rents not collected. This allowance is generally expressed as a percentage of Potential Gross Income. As of the date of valuation, 15 of the 22 subject units were occupied indicating a vacancy rate of 31.8%. The CB Richard Ellis Office Market Report Miami-Dade County- Second Quarter 2011 indicates a countywide vacancy rate of 16.8% for office properties and 27.4% in the subject market area. Historically, the vacancy rates in the subject market area have been well below 10%. Based on the above, a stabilized vacancy and collection loss allowance of 7.5% is considered applicable for the subject. Operating Expense Analysis The expenses are based on expense information obtained from the actual operation of the subject building, from operating expenses of similar buildings and from a review of published studies. The property owner provided the operating expenses from January of 2010 to June of 2011. A copy of the operating expenses is contained in the addenda. Management is based on 4% of Effective Gross Annual Income. This item would cover salary and administrative cost for rent collection and record keeping of the subject property. Real Estate Taxes are estimated based on 2010 real estate taxes for the property less a 4% discount for early payment. Maintenance Fees are based on the actual condominium maintenance fees. This expense covers the remaining costs to operate the units such as utilities, insurance, maintenance and reserves for replacement. The indicated operating expense ratio is 57.9%, very high for an income producing property.


SELECTION OF CAPITALIZATION RATE Capitalization is a process which translates an income projection into an indication of value. The connecting link is a rate which reflects the return necessary to attract investment capital. Hence, the selection of an appropriate rate represents a critical factor in the capitalization process.

OVERALL RATES FROM MARKET SALES OF OFFICE PROPERTIES

N0. LOCATION DATE PRICE OVERALL RATE

1 8500 SW 117 Ave, Miami-Dade Co. 7/08 $26,800,000 7.4%

2 355 Alhambra Cir, Coral Gables 7/08 $87,300,000 7.1%

3 1500 Monza Ave, Coral Gables 4/09 $8,500,000 7.2%

4 1790 Coral Way, Miami 6/09 $3,425,000 8.2%

5 2850 Douglas Rd, Coral Gables 8/09 $4,250,000 8.6%

6 5820 Blue Lagoon Dr, Miami-Dade Co 9/09 $6,950,000 7.3%

7 20880 West Dixie Hwy, Miami-Dade Co. 1/10 $3,750,000 8.4%

8 4155 SW 130 Ave., Miami-Dade Co. 8/10 $3,950,000 7.5% OVERALL RATE BY BAND OF INVESTMENT THEORY The overall rate developed by application of the Band of Investment Theory is a synthesis of mortgage debt service and anticipated cash flow to equity which market data discloses as applicable to comparable properties. The rate developed is a weighted average, the weighing being for the respective portions of the value represented by the mortgage and equity positions, or Band of Investment. Cash Flow Weighted Source of Capital Portion Rate Average Mortgage Loan 0.75 x 0.078792 = 0.0591 Equity Funds 0.25 x 0.8 = 0.0200 0.0791 OR Overall Rate 7.91%


From discussions with lending institutions, an investor survey from Realty Rates.com First Quarter 2011 and from an analysis of comparable sales, it is determined the most favorable rate and likely terms available to the subject property would be a mortgage at a loan-to-value ratio of 75% and at an interest rate of 5.7% with an amortization period of 25 years and a term of five to ten years. A cash flow rate of 8.0% is estimated to be sufficient to attract equity funds to this type of investment. Overall Rates From Investor Surveys The Realty Rates.com Investor Survey First Quarter 2011 indicates overall rates for of suburban office buildings ranging from 5.61% to 11.94%, with the average being 9.41%. The Korpacz Price Waterhouse Coopers Investor Survey- Fourth Quarter 2010 indicates overall rates for office buildings ranging from 7.00% to 13.0%, with the average being 9.39%. Overall Rate Conclusion The rates utilized in the Band of Investment are based on rates derived from surveys of large multiple tenant office buildings bought and sold for their income potential. Similarly, the overall rates from the investor survey are for large multiple tenant office buildings bought and sold for their income potential. The overall rates from comparable sales are given primary emphasis in the final analysis since the rates are abstracted from actual sales of buildings in Miami-Dade County. The overall rates from comparable sales range from 7.1% to 8.6%. Based on the above sources, with the overall rates abstracted from the market sales given primary emphasis in the final analysis, a capitalization rate of 8.0% is considered appropriate for the subject property.

SALES COMPARISON APPROACH



SALES COMPARISON APPROACH TO VALUE This approach to value is a technique in which the Market Value estimate is predicated upon prices paid in actual market transactions of similar properties. These similar, or comparable, transactions (sales) are adjusted to indicate a value to the subject. The Sales Comparison Approach is a process of analyzing sales of similar recently sold properties in order to derive an indication of the most probable sales price of the property being appraised. The reliability of this approach is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and the absence of non-typical conditions affecting the sale. The following page contains a summary of sales of similar properties, which have recently sold. Several other sales are considered, but are not included because there is too wide a difference in physical factors, location and time. The sales are analyzed based on a sale price per square foot of adjusted building area. In comparing the sales to the subject, consideration is given to factors of time, location, physical characteristics and terms and conditions of the sale. A profile and photograph of the comparable condominium buildings, a summary of comparable office condo sales, a sales map and a value conclusion follows herein.


PARK WEST PROFESSIONAL CENTER ADDRESS: 7767 N.W. 146 Street Miami-Lakes, Florida LOCATION: 7 blocks northeast of the subject property NUMBER OF UNITS: 44 BUILDING AGE: 2001 BUILDING CONDITION: Good RECENT SALES/LISTINGS:

Date of Sale Sale Price Unit Number Unit Size (S.F.) Price (S.F.)

10/2009 $210,000 ED-2 1,051 $199.80 REMARKS: The building is in good condition.

PARK WEST

PROFESSIONAL CENTER



JCMH CONDOMINIUM ADDRESS: 814 Ponce de Leon Boulevard Coral Gables, Florida LOCATION: 2 blocks northeast of the subject property NUMBER OF UNITS: 16 BUILDING AGE: 2005 BUILDING CONDITION: Good RECENT SALES/LISTINGS:

Date of Sale Sale Price Unit Number Unit Size (S.F.) Price (S.F.)

7/2010 $152,500 1 1,085 $140.55 1/2011 $180,000 12 1,085 $165.90

REMARKS: The building is in good condition.


JCMH CONDOMINIUM

SUMMARY OF COMPARABLE OFFICE CONDOMINIUMS

No. Date Name Address Unit Location AgeUnit Size Sale Price Price/SF

1 10/2009 Park West Professional Center 7767 N.W. 146 St. ED-2 7 blocks NE 2001 1,051 $210,000 $199.802 7/2010 J C M H Condominium 14329 N.W. 78 Ave. 1 2 blocks NE 2005 1,085 $152,500 $140.553 1/2011 J C M H Condominium 14351 N.W. 78 Ave. 12 2 blocks NE 2005 1,085 $180,000 $165.90

4 Listing Lakes Frontage Center Condo.14100 Palmetto Frontage Rd. N/A

Subject Building 1983 751 $150,000* $199.73*

5 Listing Lakes Frontage Center Condo.14100 Palmetto Frontage Rd. N/A Subject units 1983 20,189 $4,500,000* $223.69*

Subject Unit Lakes Frontage Center Condo.14100 Palmetto Frontage Rd.

1983 20,189

*Asking price

SALES MAP



ANALYSIS OF SALES The unit prices of the closed sales range from $140.55 to $199.80 per square foot and range in time from October of 2009 to January of 2011. The prices per square foot are based on the unit sizes reported on the tax roll of the Miami-Dade County Property Appraisers Office. The size of the subject unit based on the tax roll is 6,640 square feet. For purposes of direct comparison with the comparable sale properties, the size of the subject unit reported in the county tax roll is utilized in this analysis. In comparing the sale properties to the subject units, consideration was given to time of sale, location, age/condition of the building, and tenant improvements. Park West Professional Center The unit price of Sale 1 occurring in the Park West Professional Center, $199.80 per square foot, is considered an upper limit of value of the subject units. Sale 1 requires a downward adjustment for the declining market conditions in this market area since October of 2009. JCMH Condominium The unit prices of the sales that occurred in the JCMH Condominium range in unit price from $140.55 to $165.90. Sales 2 and 3 have the same buyer but different sellers. The seller of Sale 2 is a financial institution and the unit appears to have sold for below market value (approximately 15%) when compared to the identical Sale 3 unit. The subject building was constructed in 1983 but was renovated when converted to condominium usage. The sales and subject units are similar in condition. A summary of adjustments is as follows: Sale 1 Sale 2 Sale 3 Unit Price $199.80 $140.55 $165.90 Market Conditions -15% = = Age/Building Condition = = = Unit Size = = = Other = +15% = Total Adjustments -15% = = Adjusted Unit Price $169.83 $161.63 $165.90


Sale 4 is a current listing for one unit in the subject building based on gross size. Sale 5 is a current listing for the subject units. No difference in unit price is evidenced by these listings for purchasing in bulk. As stated previously, with the exception of Unit 106, the subject units are fully built out. Unit 106 is mostly complete but would require a cost estimate of $10.00 per square foot to complete. This cost estimate equates to $9,790. Conclusion Gross Sellout Value The adjusted unit prices range from $161.63 to $169.83. Based on a careful analysis of the unit sales, it is estimated that the subject units have a value as follows:

Size (NSF) Price/SF Estimated Value 20,189 SF $165.00 $3,331,185 LESS: Cost to Complete Unit 106 $9,790 $3,321,395 Gross Value by Sales Comparison Approach (Rd) $3,320,000

The indicated average unit price of the subject units based on the Gross Sellout Value is approximately $150,909 per unit.


AS IS MARKET VALUE Converting the Gross Sellout Value to an as is Market Value requires a discounting process to account for selling expenses and holding costs, if any, sell all of the units over an absorption period. The discounting process can be performed in several methods. The first method would be a discounted sellout analysis. First, an absorption period is estimated for the unsold units. Estimated sales expenses and holding costs are then deducted from the gross sales proceeds to derive net sales proceeds. A discount rate is then applied to the net sales proceeds to reflect a return on debt and equity capital. A second method is to abstract a discount from sales of bulk inventories of condominium units. The discounting process is performed based on a matched pair analysis of bulk sales of commercial condominium units to sales of individual commercial condominium units in the same project or comparable projects. The estimated bulk sale adjustment is then applied to the estimated gross sellout value to indicate the as is value of the property. The following pages contain three case studies of comparisons of bulk sales and individual sales of commercial condominium units. The unit prices of the comparable units are discounted to the unit price of the bulk sales.

SUMMARY OF BULK COMMERCIAL CONDOMINIUM SALES

Name Bldg. Unit Unit Sale Sale Price Discount

No. Location Age No. Sq. Ft. Date Recordation Price Per Sq. Ft. Percentage

1 1600 Ponce Office Condo 2008 1001 972 Sep-09 27001/3049 $522,500 $537.55 5.61% 1600 Ponce de Leon Blvd

1002 1,149 Sep-09 $612,549 $533.11 4.83%

Coral Gables

1003 1,447 Sep-09 27014/317

$783,600 $541.53 6.31%1004 876 Sep-09 $504,400 $575.80 11.88%1005 876 Sep-09 27001/2919 $519,900 $593.49 14.51%1006 1,447 Sep-09 27024/2195 $862,000 $595.72 14.83%1007 1,149 Sep-09 27029/3438 $687,600 $598.43 15.22%1008 972 Sep-09 27024/2280 $517,300 $532.20 4.66%1101, 1102, 1103 & 1104

4,444 Jul-10 27366/1928 $2,294,100 $516.22 1.71%

904 876 Aug-10 27410/3702 $400,000 $456.62 -11.12%905 876 Nov-10 27497/4103 $400,000 $456.62 -11.12%801, 802, 803, 804, 18,620 Mar-11 27634/3362 $9,447,400 $507.38 805, 806, 807, 808, 906, 907, 908, 1202, 1203, 1206, 1207& 1208

2 Merrick View 2008 130 1,013 12/09 27111/3943 $315,000 $310.96 5.76% 135 San Lorenzo Ave

840 1,868 12/09 27111/4394 $640,900 $343.09 14.59%

Coral Gables

140, 150, 160, 170, 8,190 Apr-10 27255/4700 $2,400,000 $293.04 770 & 780

790 2,135 8/10 27381/4771 $693,900 $325.01 9.84%550 2,135 11/10 27485/2621

$788,400 $369.27 20.64%

540 2,342 11/10 27486/466 $831,900 $355.21 17.50%850 1,836 12/10 27523/4691

$718,900 $391.56 25.16%

530

1,317

1/11

27545/341

$442,200

$335.76

12.72%

3 Colorama 20021B, 2B, 3B, 4B, 5B,

6B, 8,344 Jul-10 27367/3430 $550,000 $65.92 2445 W. 80 St

7B & 8B

Hialeah 2157 W. 73 St 1985 3 2,629 Mar-10 27228/3832 $200,000 $76.07 13.35% 7760 W. 20 Ave 1986 12 2,290 May-10 27281/721 $200,000 $87.34 24.52% 7600 W. 20 Ave 2003 224 1,004 Dec-10 27691/2943 $80,000 $79.68 17.27% 2271 W. 80 St 2005 A-1 1,426 Apr-11 27667/1993 $106,000 $74.33 11.32% 2231 W. 80 St 2005 D-4 1,300 Jun-11 27756/2055 $100,000 $76.92 14.30% 8000 W. 24 Ave 2002 E-3 1,020 Jun-11 27762/2644 $65,800 $64.51 -2.19% 8055 W. 23 Ave

2002

B-1

1,499 Jun-11

27732/646

$125,000

$83.39 20.95%


BULK SALE ANALYSIS In Case Study 1, 16 units were purchased in bulk in March of 2011 at a unit price of $507.38 per square foot. Four units sold together in July of 2010 at a unit price of $516.22. The remaining sales were of individual units within the same building ranging from $456.62 to $598.43 per square foot. Excluding the two sales that sold below the cost of the bulk sale, the indicated discount rates from this case study range from 1.71% to 15.22%. In Case Study 2, six units were purchased in bulk in April of 2010 at a unit price of $293.04 per square foot. The remaining sales were of individual units within the same building ranging in unit price from $310.96 to $391.56 per square foot. The indicated discount rates from this case study range from 5.76% to 25.16%. In Case Study 3, eight units were purchased in bulk in July of 2010 at a unit price of $65.92 per square foot. The remaining sales are of individual units within the same neighborhood as the building where the bulk sale occurred. These sales range in unit price from $64.51 to $87.34 per square foot. The indicated discount rates from this case study range from 11.32% to 24.52%. Based on the above analysis, a discount rate of 20% of the Gross Value is considered applicable for the subject units.

Gross Sellout Value $3,320,000 Discount Rate 20% As Is Market Value $2,656,000

The indicated average unit price of the subject units based on the As Is Market Value is approximately $120,727 per unit.


MARKET VALUE BY DISCOUNTED SELLOUT Converting the Gross Sellout Value to Market Value requires a discounting process to account for selling expenses and holding costs, if any, from the completion of construction to the sale and closing of all the units. The discounting process is performed in three steps. First, an absorption period is estimated for the unsold units. Estimated sales expenses and holding costs are then deducted from the gross sales proceeds to derive net sales proceeds. A discount rate is then applied to the net sales proceeds to reflect a return on debt and equity capital. Estimate of Absorption Period Based on a review of historic sales and the current soft condition of the office condominium market, it is projected that it will require a period of 24 months to sell the subject units. During the sellout period, the property would be operated as a rental. The rental income is based on the effective gross income of $420,184 estimated previously in the Income Approach. The indicated effective income per square foot is $20.81 ($420,184 20,189 Sq. Ft.). The sale prices for the units were estimated preciously in the Sales Comparison Approach at an average of $165.00 per square foot. The sales prices in year two of the sellout are projected to increase based on a growth rate of 3%. The vacant space is projected to be absorbed over 24 months at a rate of 878 square feet per month (20,189 Sq. Ft. 23 Months). The first month would be projected to not have a sale. The growth rate on expenses is projected at 2% annually. The estimated growth rate is based on historic trends in the Consumer Price Index (CPI) and investor surveys. The Korpacz Price Waterhouse Coopers Investor Survey- Second Quarter 2011 indicates expense growth rates for office buildings ranging from 1.00% to 3.0%. Selling Expenses There will be closing costs, recording fees and legal expenses. It is expected there would be a five year holding period from the date of valuation to the date in which all units are closed. During this period, there will be interest holding costs, sales commissions, and overhead and marketing. These expenses are estimated on the following page. Sales commissions are estimated at 3% of gross sales. Closing costs are estimated at 1.5% of gross sales. Overhead and marketing is estimated at 2.0% of gross sales. Operating expenses are estimated at $12.06 per square foot of the unsold office space while it is operated as a rental. The operating expenses are based on the expenses estimated previously in the Income Approach ($243,461 20,189 Sq. Ft.). The growth rate on operating expenses is projected at 2% annually.


Discount Rate A discount rate (yield rate) is applied to the cash flow over the seven year projection period to reflect a net present value. A discount rate and an overall rate differ in concept. The overall rate is based on current net operating income as of the date of sale. The overall rate implicitly recognizes future income increases and appreciation in property value at the time of sale. Whereas the discount rate explicitly will recognize future income increases and appreciations in property value at time of sale. The overall rate is used in direct capitalization technique using first year net income. The discount rate is used in an annuity capitalization technique with an income stream. The discount rate is influenced by the degree of apparent risk, prospective rates of return of alternative investment opportunities, historical rates of return earned by comparable properties, market attitudes with respect to future inflation or deflation, supply of and demand for mortgage funds, availability of tax shelter, etc. A review of the Realty Rates.com Investor Survey Third Quarter 2011 indicates that typical investors desire an internal rate of return in the 8.63% to 14.43% range for suburban office buildings, with the average being 12.01%. The Korpacz Price Waterhouse Coopers Investor Survey- Second Quarter 2011 indicates discount rates for rental office buildings ranging from 7.0% to 16.0%, with the average being 10.38%. It should be noted that the discount rates reported in the investor surveys are for multiple tenant rental office properties, not fractured interests of office condominiums. Discount rates from sales of fractured interests of office condominium properties are not reported in investor surveys. Sales of fractured interests of office condominium properties are few in number and each property is unique as to overall size, unit size, percentage of ownership, location, etc. Fractured interests of office condominium properties typically sell by the purchase of mortgage notes and are not recorded. Abstracting discount rates from actual sales of fractured interests of office condominium properties is therefore difficult. The discount rates from the investor surveys may not be a direct comparison for fractured interests of office condominium properties, but do provide a general guideline for discount rates for fractured interests. Based on the above analysis, a discount rate of 12.0% is considered appropriate for the subject income stream. The Discounted Sellout Analysis is contained on the following page. The indicated value of the property under a scenario operating as a rental while simultaneously selling out the condominium over two years is $2,650,000. Based on a profit on sales of 10% and a discount rate of 12%, the indicated true Internal Rate of Return (IRR) is 16.8%.


DISCOUNTED MARKET VALUE CONCLUSION Case studies were prepared to abstract a discount from sales of bulk inventories of commercial condominium units. The discounting process is performed based on a matched pair analysis of bulk sales of commercial condominium units to sales of individual commercial condominium units in the same project or comparable projects. The estimated bulk sale adjustment is then applied to the estimated gross sellout value to indicate the as is value of the property. A discounted sellout analysis was also prepared. First, an absorption period is estimated for the unsold units. There has been very limited market activity in the vicinity of the subject which makes estimating an accurate absorption rate difficult. Estimated sales expenses and holding costs are then deducted from the gross sales proceeds to derive net sales proceeds. A discount rate is then applied to the net sales proceeds to reflect a return on debt and equity capital. The discounted value indicated by the bulk sale analysis is $2,656,000. The indicated market value by discounted sellout is $2,646,948. Based on the above, it is the appraisers opinion that the subject units have a Discounted Market Value of:

$2,650,000


RECONCILIATION AND VALUE CONCLUSION


RECONCILIATION AND VALUE CONCLUSION The reconciliation of the data and indicated value estimates is the final step in the appraisal process. Sufficient data has been assembled and analyzed for the purpose of judging the reactions of typical purchasers in the market place. In this report, the three accepted appraisal techniques are utilized. The value estimates indicated by these approaches resulted in the following:

Cost Approach to Value N/A Income Approach to Value $2,210,000

Sales Comparison Approach to Value $2,650,000 Cost Approach to Value The subject unit is located in an office condominium building on a single site with common parking facilities. The Cost Approach typically is not applicable to single units in condominium properties where there are multiple units with multiple ownership of the common elements. Therefore, the Cost Approach would have no applicability in this situation and was not utilized. Income Approach to Value The data in this approach as to the quality, quantity and durability of the income is considered fair. The income and expenses are based on the actual operation of the subject building and comparable buildings. Net Income is capitalized by means of a direct capitalization method with an overall rate derived from market sales, market surveys and a Band of Investment Technique. Typically, these units are owner-occupied and not purchased by investors as income property. This is evidenced by the difference in value between operating the property as a rental

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