APPRAISAL REPORT - images1.loopnet.com...October 25, 2019 . Barbara Findler . 3676 Oak Cliff Dr....

APPRAISAL REPORT

EXISTING MIXED-USE PROPERTY

119-125 E. Alvarado Street Fallbrook, California 92028

San Diego County Job No.: CAS-19-083

PREPARED FOR

Barbara Findler 3676 Oak Cliff Dr.

Fallbrook, CA 92028

PREPARED BY

Geoffrey W. Capell Capell Appraisal Services

Solana Beach, California 92075

DATE OF VALUE

October 3, 2019

DATE OF REPORT

October 25, 2019

October 25, 2019 Barbara Findler 3676 Oak Cliff Dr. Fallbrook, CA 92028 Re: Appraisal of an existing mixed-use property located at 119-125 E. Alvarado Street, Fallbrook,

California 92028 (Job No.: CAS-19-083) Dear Ms. Findler:

In accordance with your request, I have prepared an appraisal of the above-referenced real property for the purpose of formulating and expressing my opinion of its “As Is” market value as of October 3, 2019. Based on my inspection of the subject property and surrounding neighborhood, analysis of relevant data, and the preparation of the most applicable approaches to value, it is my opinion that the market value of the leased fee interest in the subject property, as of October 3, 2019, is:

ONE MILLION TWENTY-FIVE THOUSAND DOLLARS

$1,025,000 The client of this appraisal report is Barbara Findler. The intended use of the appraisal is for establishing a purchase price and other internal uses and no other use is permitted. This appraisal will comply with the Uniform Standards of Professional Appraisal Practice ("USPAP"), promulgated by the Appraisal Standards Board of the Appraisal Foundation. The intended user of this appraisal report is the Barbara Findler. The analysis and conclusions within this report are subject to this report’s Contingencies and Limiting Conditions. As agreed upon with the client, only the most applicable approaches to value – in this report’s case the Income and Sales Comparison Approaches – are utilized in the valuation of the subject property and provide a credible estimate of the subject’s market value. I have no present or contemplated future interest in the real estate or personal interest with respect to the subject matter or the parties involved in this appraisal report and my employment in this matter is not in any manner contingent upon anything other than the delivery of this report. In the three years from the date of the engagement of this current assignment, those signing this report have not provided appraisal related services to the subject property. Respectfully submitted,

GEOFFREY W. CAPELL, MAI Certificate No. AG034686 CA/Expires 29-Jul-20

Capell Appraisal Services [email protected]

mailto:[email protected]

CERTIFICATION OF THE APPRAISAL

I do hereby certify that during the completion of this assignment that, except as specifically noted:

1. To the best of my knowledge and belief, the statements of fact contained in this appraisal report, upon which the analyses, opinions, and conclusions expressed herein are based, are true and correct.

2. 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.

3. I have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved.

4. I have performed no (or the specified) 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.

5. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

6. My engagement in this assignment was not contingent upon developing or reporting predetermined results.

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

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

9. Geoffrey W. Capell, MAI has inspected the property and prepared the analyses, conclusions, and opinions concerning real estate that are set forth in this appraisal report. No change of any item of the appraisal report shall be made by anyone other than Geoffrey W. Capell, MAI, who shall have no responsibility for any such unauthorized change.

10. No other person(s) provided professional assistance in the preparation of the appraisal report.

11. As of the date of this report, Geoffrey W. Capell, MAI has completed the continuing education program of the

Appraisal Institute.

12. In the three years from the date of the engagement of this current assignment, Geoffrey W. Capell, MAI has not provided appraisal related services to the subject property.

Date Signed: October 25, 2019

GEOFFREY W. CAPELL, MAI State Certified General Appraiser Certification No. AG034686 CA/Expires July 29, 2020

TABLE OF CONTENTS

REPORT SUMMARY.................................................................................................. 1 INTRODUCTION ....................................................................................................... 3 LOCATION ANALYSIS ............................................................................................. 9 LAND DESCRIPTION ................................................................................................ 21 IMPROVEMENT DESCRIPTION .............................................................................. 26 MARKET STUDY………………. .............................................................................. 27 EXPOSURE AND MARKETING PERIOD……………… ........................................ 34 HIGHEST AND BEST USE ........................................................................................ 35 VALUATION ANALYSIS .......................................................................................... 39 Income Approach ................................................................................................. 41 Sales Comparison Approach................................................................................ 51 RECONCILIATION ..................................................................................................... 56 FINAL VALUATION ................................................................................................. 56 ASSUMPTIONS AND LIMITING CONDITIONS ADDENDA

Subject Photographs Building Layout Flood Map Zoning Map Appraiser’s Qualifications Appraiser’s License

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Capell Appraisal Services

REPORT SUMMARY

Property/Location: Existing Mixed-Use Property

119-125 E. Alvarado Street Fallbrook, California 92028

Assessor’s Parcel No.: 103-228-13-00 Census Tract No.: 189.04 County: San Diego Owner of Record: Barbara Findler Trust Property’s Last Transfer:

Date of Transfer:

August 15, 1996

Sale Price: $215,000 (Doc. No. 0414418)

Present Contract: None Site and Improvements:

Building Data Site Data Property Type: Mixed-Use Size1: 5,062 SF; 0.12-Acres Building SF2: 3,782 (NRA/GBA) Excess Land: No Year Built: 1940/Renovated Lot Shape: Triangular Rem. Econ. Life: 30 Years Topography: Level Occupant: Multi-Tenant Zoning Class: FB-V2 (Fallbrook Village) Occupancy: 100% (Current) Subject Use: Legal Non-Conforming

1 Based on San Diego County Assessor’s records 2 Based on owner provided building plans


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Appraisal Valuation Summary Date of Report: October 25, 2019 Date of Value: October 3, 2019 Rights Appraised: Leased Fee Appraisal Premise: “As Is” Highest & Best Use: “As if Vacant” Mixed-Use “As Improved” Existing Mixed-Use Most Likely Buyer: Investor Exposure Period: 3-9 Months Marketing Period: 3-9 Months

Valuation Approaches Utilized – “As Is” Value

Income Approach: Indicated Value:$86,182

4.0%Expense Ratio (% of EGI):Expense Ratio ($/SF GBA):Net Operating Income:Going-In Capitalization Rate:

Sales Comparison Approach: Indicated Value:No. of Comparables Used:Unadjusted $/SF Bldg. Range: $215.38 - $347.14Adjusted $/SF Bldg. Range: $273.95 - $288.45Adjusted Average $/SF: $280.53Final $/SF Value Selected:

$57,623

$1,000,000 Projected Gross Income:Vacancy & Collection Allowance:

$6.6430.4%

$280.00

5.75%

$1,060,000 Five

Value Conclusions

“As Is” Value Other ValueCost Approach N/A N/AIncome Approach $1,000,000 N/ASales Comparison Approach $1,060,000 N/AFinal Estimate of Value: $1,025,000 N/A


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INTRODUCTION

“As Is” Date of Value/Property Inspection

The as is date of value is October 3, 2019, which was the most recent date of inspection.

Date of Report

The date of this report is October 25, 2019.

Purpose of Appraisal

The purpose of the appraisal is to estimate the “as is” market value of the leased fee interest in the subject

property.

Function of Appraisal

The function of this report is to provide Barbara Findler with an appraisal report. The appraisal is

prepared using proper principles and techniques in order to derive a final value conclusion for the

subject property.

Intended Use/Users of Appraisal

This appraisal is to be used for establishing a purchase price and other internal uses and no other use

is permitted. The intended user of this appraisal is the Barbara Findler. This report may not be

used for any purpose, by any party, other than the stated intended user without the written consent of

the appraiser and the appraiser specifically disclaims any liability to such unauthorized third parties.


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Property Rights Appraised

The interest appraised is the leased fee interest.

Definition of Market Value3

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,

knowledgeably and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of sale as of the specified date and the passing of title

from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. Both parties are well informed or well advised, and acting in what they consider their own best

interests;

3. A reasonable time is allowed for exposure in the open market;

4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

5. The price represents the normal consideration for the property sold unaffected by special or

creative financing or sales commissions granted by anyone associated with the sale.

Definition of Market Value “As-Is”

“As Is” Market Value means an as is value of the property on the appraisal date. This is an estimate

of the value of the property in the condition observed upon inspection and as it physically and legally

exists without hypothetical conditions, assumptions or qualifications as of the date the appraisal is

prepared.

3Definitions found in this appraisal report’s Introduction section are compatible with definitions from The Dictionary of Real Estate Appraisal, Fifth Edition (Appraisal Institute, 2010), OCC, OTS,RTC, FDIC, NCUA, and the Board of Governors of the Federal Reserve System.


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Definition of Cash Equivalency

Cash Equivalency is a price expressed in terms of cash, as distinguished from a price expressed

totally or partly in terms of the face amounts of notes or other securities that cannot be sold at their

face amounts.

Definition of Fee Estate

Absolute ownership unencumbered by any other interest or estate, subject only to the limitations

imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

Definition of Leased Fee Estate

A leased fee estate is an ownership interest held by a landlord with the right of use and occupancy

conveyed by lease to others; the rights of the lessor (the leased fee owner) and the leased fee are

specified by contract terms contained within the lease.

Definition of Personal Property

Identifiable tangible objects that are considered by the general public as being “personal” – for

example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment;

all tangible property that is not classified as real estate.

Permanent fixtures and/or equipment affixed to the improvements/land such as walk-in

freezers/refrigerators, built-in kitchen equipment, and attached fixtures, built-in cabinetry and

shelving, attached seating booths and bar tables, and in some cases decorative lighting and electrical

fixtures. These items are necessary in the operation of a restaurant and typically included (and not

allocated) in the sale of similar restaurant properties, which is the case – for instance – of the

comparables utilized in the Sales Comparison Approach of this appraisal report. Non-realty, personal


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property and/or non-permanently attached FF&E items (i.e., point of sale equipment, chairs,

audio/visual equipment, etc.) are not included in this appraisal.

Definition of Intangible Assets

Nonphysical assets, including but not limited to franchises, trademarks, patents, copyrights, goodwill,

equities, securities, and contracts, as distinguished from physical assets such as facilities and

equipment. Intangible assets are not included in this appraisal.

Scope of Work

This appraisal report is intended to be an “appraisal assignment” as defined in the Uniform Standards

of Professional Practice as published by the Appraisal Standards Board (ASB) of The Appraisal

Foundation. It is the intent that the appraisal assignment be performed in such a manner that the

results of the analysis, opinions, and conclusions be credible.

It is the intent that all appropriate data deemed pertinent to the solution of the appraisal problem be

collected, confirmed, and reported in conformity with the Uniform Standards of Professional Practice

(USPAP), adopted be the Appraisal Standards Board of the Appraisal Foundation and the Code of

Professional Ethics and Standards of Professional Practice of the Appraisal Institute.

This appraisal of the subject has been presented in the form of an Appraisal Report, which is intended

to comply with the minimum reporting requirements set forth under Standards Rule 2-2(a) of the

USPAP. Furthermore, this appraisal is intended to be appropriate in relation to the significance of the

appraisal problem. All applicable approaches – in this report’s case the Income and Sales Comparison

Approaches – are utilized in the valuation of the subject property and provide a credible estimate of

the subject’s market value(s). Support for the approach(s) used is discussed in the Valuation Section.

The appraisers have the appropriate knowledge, education and experience to complete this

assignment competently. Appraiser qualifications are attached to this report. Other activities

undertaken by Geoffrey Capell, MAI during the course of this appraisal are as follows:


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• An interior and exterior inspection of the subject property and surrounding neighborhood on October 3, 2019.

• An inspection of the exterior of the comparable properties.

• Research and investigation of current market conditions relative to the property type

being appraised, as well as the market sector with which the subject is identified.

• Interviews with brokers, appraisers, property owners and/or managers, as well as relevant public agencies or governing bodies.

• Collection, verification and analysis of market data and any other pertinent information

necessary to the valuation process.

• Compilation of the descriptions, reasoning and explanations, leading to final value conclusions, within this report.

• No other person(s) provided assistance in the preparation of this appraisal report.

• In the three years from the date of the engagement of this current assignment, Geoffrey W. Capell, MAI has not provided services related to the subject.

Furniture, Fixtures and Equipment

The furniture, fixtures and equipment (FF&E) items are not valued within this report.

Current Ownership

Current ownership is vested in Barbara Findler. Ownership History

The current ownership interest (Barbara Findler) acquired the subject property on August 15, 1996

for $215,000, as recorded on Doc. No. 1996-0414418. There have been other intrafamily transfers

since the property was purchased, but there haven’t been any subsequent grant deeds.

To the best of my knowledge, no other full value (arms-length) transfers of the subject title are

known to occur during the past three years.


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Assessed Valuation and Taxes

The subject parcel is located in Tax Rate Area 75003, with a 2019-2020 base tax rate of 1.08097%

plus special assessment charges. Assessed values and taxes are summarized as follows.

APN Land Improvements Total Base Direct/Special Total

103-225-13-00 $182,498 $277,399 $459,897 $4,971.34 $47.80 $5,019.14

Assessed Values Property Taxes

The Assessor’s assessment of market value is limited to a maximum increase of 2% per year, unless

the property is transferred or there is substantial new construction. Proposition 13 typically requires

reassessment of real property upon a change of ownership. In either event, the property is re-

appraised to current market value, usually as evidenced by the sale price or the construction costs.

Assessed value is generally not considered an accurate reflection of market value, as it is not

particularly sensitive to economic fluctuations affecting the property. If the County Tax Assessor’s

estimate of market value is higher than the sale price, then Proposition 8 provides for the

reassessment of real property due to a decline in market value. A property owner must petition for a

reassessment, in order to lower property taxes or receive a tax refund. If the owner disputes the

reassessed value, an appeals procedure is in place for a more detailed reassessment of market value in

accordance with Proposition 8.

According to the San Diego County Assessor, the current fiscal year’s secured property tax bills are

current.


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LOCATION ANALYSIS

SOUTHERN CALIFORNIA

The subject property is located in San Diego County and within the broad Southern California area,

defined by most analysts, to include Los Angeles, Orange, San Bernardino, San Diego, Riverside and

Ventura counties. This Southern California six-county area had a January 2018 population of

22,292,254 up 0.7% from 22,133,888 in 2017. Historic and projected population for this region is

shown below.

Population Change Historic & Projected Population 2000-2008 207-2020

County 1980 1990 2000 2007 2010 2020 Total % Total % Los Angeles 7,484,700 8,863,164 9,519,330 10,331,939 10,461,007 10,885,092 812,609 8.5 2,021,918 22.8 San Diego 1,861,846 2,498,016 2,832,563 3,098,269 3,258,951 3,633,572 265,706 9.4 1,135,556 45.5 Orange 1,932,709 2,410,556 2,846,289 3,260,162 3,098,121 3,526,144 251,832 8.9 1,115,588 46.3 San Bernardino 895,016 1,418,380 1,710,139 2,133,377 2,028,013 2,456,089 317,874 18.6 1,037,709 73.2 Riverside 663,166 1,170,413 1,545,387 2,165,148 2,031,625 2,675,648 486,238 31.5 1,505,235 128.6 Ventura 532,200 669,016 753,197 860,664 825,512 924,410 72,315 9.6 255,394 38.2

SOURCES: Census, Kiplinger California Letter, The Meyers Group, Market Profiles, State Department of Finance.

California’s unemployment rate held steady at 4.3 percent in March 2019 – tying the record low set

during April in a series dating back to the beginning of 1976 – while the state’s employers added

5,500 nonfarm payroll jobs, according to data released today by the California Employment

Development Department (EDD) from two surveys. California has now gained a total of 2,899,900

jobs since the economic expansion began in February 2010.

The U.S. unemployment rate fell to 3.7 percent, while the nation’s employers added 223,000 nonfarm

payroll jobs.

In August 2019, the state’s unemployment rate was 4.1 percent. The unemployment rate is derived

from a federal survey of 5,100 California households.

SAN DIEGO COUNTY

San Diego County is located in Southern California, with the Pacific coastline on the western edge

and the Anza Borrego Desert as the eastern border. The topography is a broad coastal plain (where

urbanization has occurred), with hills and mountains in the central portion, and desert area to the east.


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San Diego County ranks second in population among California’s 58 counties, behind Los Angeles

and the third most populous county in the nation. The population of San Diego County was estimated

to be 3,340,050 for 2016, which is expected to reach 3,415,000 by the year 2018 for an average

annual growth rate of 1.1 percent. Snapshots of key San Diego County economic indicators are

shown on the following charts.


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According June 2018 press release prepared by the Employment Development Department the

unemployment rate in the San Diego County was 2.9 percent in May 2018, unchanged from a revised

2.9 percent in April 2018, and below the year-ago estimate of 3.7 percent. This compares with an

unadjusted unemployment rate of 3.7 percent for California and 3.6 percent for the nation during the

same period.

The following comments pertaining to the San Diego County economy are excerpts from the 2018-

2019 Economic Forecast and Industry Outlook report published by the Los Angeles County

Economic Development Corporation (LAEDC) in April 2018.

Second only to Orange County in terms of the percent of the population with a university degree, San Diego County is the fifth most populous county in the country and contains the 17th largest city. Forty-two percent of San Diegan college graduates hold so-called STEM degrees. The county is notable for its high concentration of tourism, health care, defense and biotechnology. As was noted above, San Diego County is home to a highly skilled workforce. Indeed, the county boasts the 12th most concentrated population of advanced degree holders in the country in addition to being the youngest major American county. With higher than average median incomes and lower than average unemployment compared to the state, San Diego possesses a strong present economy and promising economic outlook. In 2017, San Diego County’s economy grew at an estimated rate of 1.1 percent compared with 2.5 percent for the State and accounted for 8.4 percent of California’s Gross State Product, commensurate to hosting 8.4 percent of the state’s population. San Diego County’s real gross county product is expected to increase modestly to 1.2 percent this year and to 1.3 percent in 2019.


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Labor Market In 2017, San Diego County’s unemployment rate averaged 4.0 percent, the lowest since it was 4.0 percent in 2006. This is well below the state unemployment rate and second only to Orange County. In 2018, the unemployment rate is predicted to drop again 3.6 and then to 3.0 percent in 2019.

San Diego County added 22,200 wage and salary jobs last year, increasing the number of nonfarm jobs from 1.42 million 2016 to 1.45 million in 2017. This corresponded to an annual employment growth rate 1.6 percent, compared with 1.9 percent average for the rest of California.

The labor market in San Diego County is forecast experience additional improvements over the next two years with an anticipated annual increase in nonfarm jobs of 1.5 percent this year before slowing slightly to 1.2 percent in 2019.


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Most industries in the county added jobs last year, a trend bucked by labor market contractions in transportation, warehousing and utilities (2.0 percent) and wholesale trade (0.5 percent). The largest percentage gains were other services personal services or maintenance repair work, for example - (6.6 percent), real estate, rental and leasing (5.3 percent), and construction (5.1 percent). In absolute terms, the largest number of jobs were added by the public services industry (5,500), health care and social assistance (4,900 jobs), and construction (3,900 jobs each).

The sectors that posted the largest employment declines were transportation, warehousing and utilities (600 jobs), manufacturing (200 jobs), and wholesale trade (200 jobs) between 2016 and 2017. Most industries are expected to add to their payrolls this year (2018), the top-hiring being health care and social assistance (4,400 jobs), leisure and hospitality (3,600 jobs), public utilities (3,400 jobs), and construction (2,700 jobs). Only manufacturing is predicted to lose employment (200 jobs), but this is in keeping of a broader regional trend of either eliminating manufacturing opportunities or transitioning to automated production.


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Personal Income

In conjunction with, and because of, rising levels of employment, San Diego County’s residents have also experienced gains in personal income. Total personal income in the county increased by almost 3.2 percent in 2017 to $189 billion (nominal). Personal income has been rising in San Diego County on a year-over-year basis since 2009 –it has been rising nominally since 2001 except for 2009 – and is expected to reach $194.6 billion this year, rising yet again in 2019 to $200.1 billion. Real per capita personal income was $50,295 last year, up from $49,798 in 2016, below Orange and Los Angeles Counties but relatively high for the region. Persistent job growth, diminished unemployment and low inflation likely contributed to this. Over the next two years, modest gains in real per capita income are expected to continue: 1.0 percent in 2018 and almost 0.8 percent in 2019. Again, real per capita income in San Diego County is high for the region. Moreover, the slow growth in real per capita income is likely due to low county growth and job creation in sectors, especially hospitality, personal services and construction, that are not the highest paying.


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Housing Market

The nation’s housing markets have taken far longer to recover from the 2007 housing crash than most industry experts anticipated, but San Diego County has recovered better than other counties. Indeed, the number of new housing permits issued in 2017 were 55.7 percent of permits issued in 2003, the pre-recession peak. After the second home price nadir in 2011, the upward swing in home prices continued to trend thusly in 2017 and is project to do so through 2019. The median price for all homes (attached and detached, new and existing) in San Diego County was roughly $521,000 in December 2017, up by 6.5 percent from a year earlier. The median home price in San Diego County has risen on a year-over-year basis since the second quarter of 2012 and in 2017 and have exceeded the prerecession peak of $496,000 in 2004. This puts San Diego County on par with Orange County in terms of average home price recover vis-à-vis prerecession prices.


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New home construction minorly decelerated in 2017, declining by 3.9 percent to 9,580 new residential units permitted compared with 9,970 in 2016. New housing permit increases are projected to modestly increase in 2018 and more modestly still in 2019. However, these increases are still estimated to be less than two thirds of the new housing permits issued in 2003, the apex of prerecession San Diego housing construction. As median home prices increase, the signaling should prompt developers to demand additional new housing permits. Therefore, it might be expected for the housing stock to continue expanding in the medium term.

Looking Ahead

Over the next two years, the growth rate of San Diego County’s economy is expected to be somewhat below that of the California average. Indeed, the county’s economy is only projected to have grown by 2.5 percent by 2019, making San Diego the lowest growth county in the region outside Ventura. An extremely inelastic labor supply and job growth in absolute terms in lower wage industries could be contributing to this stagnation. San Diego’s population growth is forecast to keep pace with that of the rest of California. This puts the county as regionally intermediate in terms of population growth. San Diego County’s construction, real estate, health care and hospitality industries and personal services industries are projected to have the strongest growth. Though much of this growth is not in well-paying jobs, the county possesses the human capital base, low unemployment and real income levels capable of stimulating brighter economic horizons.


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San Diego County Indicators


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COMMUNITY OF FALLBROOK

Fallbrook is a predominantly rural unincorporated community in North San Diego County that is

located approximately 54 miles north of downtown San Diego. Fallbrook is bordered to the west by

Camp Pendleton, and unincorporated San Diego County sections on the north, south and east. This

community has a population of over 40,000 persons and covers an area of approximately 56 square

miles. Fallbrook has an average age of 31 years with a median household income of $43,778.

The community of Fallbrook is characterized as having a small-town village atmosphere with much

of the business activity contained along Main Avenue and Mission Road. Commercial properties can

also be found along Alvarado Street, Fallbrook Street and Ammunition Road. Fallbrook is recognized

as the avocado capital of the world. Agriculture and nursery products, flowers and citrus produce

accounts for just under a third of the area’s personal income. Most civilian employment within the

area consists of small locally owned businesses that serve the general area and agricultural

businesses. Business activity is primarily concentrated along Main Avenue, between Mission Road

(subject’s street) and Ammunition Road. Main Avenue merges with Mission Road where

commercial activity continues south towards the Fallbrook Community Airpark.

Bonsall, Rainbow, and DeLuz (as shown on the map below) are Fallbrook’s neighboring

communities, and share the same general history and rural characteristics as Fallbrook, which

provides a variety of goods and services for these adjacent communities, in addition to medical

personnel and facilities, schools, recreation, and entertainment opportunities. Bonsall is represented

by a Sponsor Group, Rainbow has a Community Planning Group, and DeLuz has chosen to remain

under the direct authority of San Diego County.


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NEIGHBORHOOD MAP

Immediate Surroundings

Specifically, the subject is located on the south side of E. Alvarado Street, one block east of S. Main

Street. This area is a small pocket of retail, office and industrial properties built around the 1940s

and retail buildings. Adjacent west to the subject is The Vince Ross Square, which is party of the

Fallbrook Village Association. Adjacent south to the subject is a 3,800 SF medical office built in

1990. Across E. Alvarado Street to the north is a 2,600 SF office building. Across S. Vine Street to

the east are storefront retail properties.

Conclusion

The subject property is located in the central portion of the community of Fallbrook just east of the

moderately traveled S. Main Street. The subject benefits from its close proximity to the downtown

area. In short, the subject site has a average mixed-use location.


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PLAT MAP APN: 103-228-13-00


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LAND DESCRIPTION Reference Drawings/Documents Soils Report/ Engineering Plans: None provided Hazardous Waste/ Toxic Studies: None provided Preliminary Title Report: None provided Site Details Location: 119-125 E. Alvarado Street Fallbrook, California 92028 (APN 103-228-13-00) Site Area:4 5,062 SF (0.12-Acre) Shape: Triangular (a Plat Map is found on the previous page) Topography/Drainage: Level. Drainage appears to be adequate Zoning: FB-V2 (Fallbrook Village 2 Zone). This zone is intended to encourage

the retention and attraction of businesses compatible with a primarily retail environment fronting on a pedestrian-oriented street. Residential uses are allowed as a secondary use. It is a buffer between the retail orientated FB-V1 and the heavier uses allowed in the FB-V3.

According to the County of San Diego, retail space requires 4.0 spaces per 1,000 SF of GBA and 1.5 spaces per one-bedroom apartment. Based on the subject’s size and unit mix, 14 spaces are required. The subject has nine total parking spaces, due to ownership purchasing five spaces on a parcel adjacent to the west (four spaces on site). The subject does not meet the aforementioned requirements and thus considered a legal, non-conforming use due to a grandfather clause. A zoning map is included in the addendum.

4Source: County of San Diego Assessor public records and parcel maps


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Flood Zone: The subject site is located in Flood Zone X, which is outside the 100- and 500-year floodplain per FEMA Community Panel No. 06073C0150G, dated May 16, 2012. Flood insurance is not required. A flood map is included in the addendum.

Utilities: All connected to the site and installed underground. Street Improvements: The subject is located on the south side of E. Alvarado Street, one

block east of Main Avenue. E. Alvarado Street is an east/west secondary street with a dedicated width of 50 feet. Street improvements include asphalt paving; gutters and sidewalks on the both sides of the street; pole-mounted streetlights; and above ground utility poles.

Earthquake Zone: All of Southern California is rated Seismic Zone 4. There are neither

previously mapped faults that traverse the site, nor is the site within the boundaries of the California Special Studies Zone for fault hazards. However, any property lying in Southern California bears the imminent risk of earthquake damage due to seismic activity in the region as a whole. Lenders in the subject’s area do not generally require earthquake insurance.

Soils Conditions: A geotechnical investigation report was not submitted for my review.

This appraisal report assumes that all recommendations (for grading; compaction; and foundation design, construction and maintenance of) provided by the soils engineer were implemented, and that construction designs provided for adequate load-bearing capacity and structural engineering to support the existing structures.

Hazardous Waste/ Toxic Conditions: A hazardous or toxic waste investigation report was not submitted for

my review. This appraisal will not determine whether or not the appraised property has any hazardous contamination. My value estimate is predicated upon the assumption that the subject property is free of any toxic material, or any other adverse geotechnical or soils conditions that would cause a loss in value. No responsibility is assumed for any toxic conditions or for any expertise or engineering knowledge required to discover and/or correct such conditions if they exist.

Easements and Encroachments: As previously noted, a preliminary title report was not submitted for

my review. Utility and public easements are assumed to exist and considered typical. No adverse easements or encroachments were


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observed during my inspection of the site. Identification of these items is of a legal nature and an attorney specializing in this field should be consulted for their opinion concerning these items. This report is not intended to render any opinion whatsoever regarding any adverse title conditions, easements or encroachments that may affect the subject property. My value estimate is, however, predicated upon there being no adverse title conditions, easements or encroachments that would cause a loss in value or prohibit development and no responsibility is assumed for any such conditions or for any expertise or knowledge to discover them.


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AERIAL MAP

N


25

BUILDING PLANS


26

IMPROVEMENT DESCRIPTION

Property Type: Mixed-Use (Retail/Residential) Subject Photographs are included in the Addenda Year Built: 1908 No. Buildings: One No Stories: Two Quality: Class C (Average) Building Areas (SF) 5: Building area and unit square footages are summarized as follows:

Address Space Use Size (SF) % of GBA119 E. Alvarado Street Apartment 580 15%121 E. Alvarado Street Retail 597 16%123 E. Alvarado Street Retail 2,025 54%125 E. Alvarado Street Apartment 580 15%

Total Net Rentable Area (NRA) 3,782 100%Total Gross Building Area (GBA) 3,782 100% The retail units have street access/exposure along E. Alvarado Street. The two residential units are accessible via one exterior stairwell on the south side of the improvement.

Floor Area Ratio: 0.74 (Based on GBA) Parking: As previously discussed, according to the County of San Diego, retail

space requires 4.0 spaces per 1,000 SF of GBA and 1.5 spaces per one-bedroom apartment. Based on the subject’s size and unit mix, 14 spaces are required. The subject has nine total parking spaces, due to ownership purchasing five spaces on a parcel adjacent to the west (plus four spaces on site). The subject does not meet the aforementioned requirements and thus considered a legal, non-conforming use due to a grandfather clause.

Site Improvements: Asphalt paved parking area; adequate landscaping consisting of various

trees and shrubs; Economic Life: The subject was originally constructed in 1940 and is in average overall

condition with an estimated remaining economic life of 30 years.

5Based on building plans, public records and physical measurements taken during my inspection


27

MARKET STUDY

Information regarding retail market conditions is derived from our independent research and as well

as information provided by CoStar Retail Report.

The subject is located in the Outlying SD County North Retail Market, but more specifically within

the Fallbrook Retail Submarket. The subject’s larger market is depicted in the map below, which is

followed by key statistics (Source: CoStar).

OUTLYING SD COUNTY NORTH RETAIL MARKET (SUBJECT MARKET) The subject’s primary submarket area is considered to be the Outlying SD County North Retail

market area. Key statistics for this area are shown on the following tables.


28

Vacancy & Rental Rates

The retail vacancy level in the Outlying SD County North Retail market area has historically

remained below 5.0% on average and due to improving market conditions currently stands at 2.0%.

The five-year average is noted at 3.0%. The average asking rental rate has increased from $1.38/SF

(NNN) in 2012 to the most recent quarter at $2.00/SF. Due to a combination of falling vacancy rates

and rising rental rates the market is experiencing increasing demand.

Fallbrook Retail Submarket

Key statistics for the retail space within the Fallbrook Retail submarket (the subject’s primary

submarket area), which contains approximately 2.8 million SF of surveyed retail space (Source:

Costar), are shown on the following table.


29

The overall retail vacancy rate has averaged 3.0% over the past five years with the current level at

2.0%. The vacancy trend is expected to remain stable over the next 24-36 months.

Fallbrook Multi-Family Submarket

Key statistics for the multi-family space within the Fallbrook Multi-Family ResidentialD10/24/2019

submarket (the subject’s primary submarket area), which contains approximately 3,000 units

surveyed (Source: Costar), are shown on the following table.


30


31

SALES VOLUME, PRICE TRENDS & CAP RATE TRENDS– MIXED-USE PROPERTIES

The subject is a 3,782 SF, mixed use (commercial/residential) property located in the city of

Fallbrook. Sales volume, average sale price (per SF) and capitalization rate trends for mix-use (retail-

residential, office-residential, and retail-office) properties throughout San Diego County are shown

on the following chart (Source: Costar).


32

BROKER INTERVIEWS

My research included interviews of real estate professionals active in the subject’s primary market

area including real estate agents from CBRE, Colliers International, and Cushman Wakefield. The


33

results of broker interviews and conclusions specific to the subject for the subject property derived

from my research are summarized as follows:

SUBJECT PRIMARY MARKET SUMMARY Subject Occupancy History:

Current Occupancy: 100% occupied Immediate Market Area Vacancy: Approximately 3% for retail and 3% for residential properties

General Trends per Broker Consensus

Rental Rates: Both retail and apartment rental rates are anticipated to remain stable over the next 12 to 18 months.

Vacancy: Retail space expected to decline slightly over the next 24-36 months before stabilizing near 3% while the apartment space should remain at or near 3%.

Sale Prices A stabilized market is expected over the short term with minor appreciation expected.

Marketing Periods: 6 to 12 months for a property like the subject Outlook Market conditions are expected to continue to remain stable

with continued improvement over the next 12 to 24 months. Subject Profile if Vacant & Available

Tenant Profile: Local business Most Likely Buyer: Investor Current Risk Level: The subject is a multi-tenant retail/residential property that

would most likely be purchased by an investor. Brokers have stated that the subject would be received well due to limited inventory of available space in the Fallbrook area.

Concluded Subject Vacancy Based on my analysis of market data, my discussions with the aforementioned professionals, as well as demand characteristics and limited availability of similar property, it is my opinion that a blended vacancy and collection allowance of 4.0% over a long-term (5 to 7 or more years) holding period is appropriate.


34

EXPOSURE AND MARKETING PERIOD

Exposure period is the amount of time the real property interest being appraised would have been

offered on the market prior to the hypothetical consummation of a sale at market value on the

effective date of the appraisal. Marketing period is an opinion of the amount of time it might take to

sell the real property interest after the effective date of the appraisal. According to knowledgeable

professionals, the marketing time for mixed-use properties like the subject varies considerably.

It is the consensus expectation of market participants that overall sale and asking prices will continue

to remain relatively “flat” into the near future although there is an increasing likelihood that prices

make increase slightly and marketing periods will decrease – to what degree is largely dependent

upon the extent the overall economy continues to improve over the 12 months. It is noted that the

sales utilized in this appraisal report’s Sales Comparison Approach required marketing period

ranging from 1 to 3 months. Brokers and market participants active in the buying and selling of this

property type indicated that an adequate marketing period – at this time - for the subject property

would be approximately be between 3 - 9 months given the relatively stable demand and limited

availability of properties in the subject’s size range – the caveat being the property is properly priced

and marketed. As such, a concluded marketing period of 3 - 9 months for the subject property is also

considered appropriate.


35

HIGHEST AND BEST USE

Highest and best use is defined as:

“The reasonably probable legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility and maximum profitability.”1

The above definition of the “Highest and Best Use” is in reference to land that is unimproved. In

cases of improved land, a determination of the contributory value of the improvements to the land

must be made. The improvements found on a site may be of inappropriate use, but will usually

continue until the land value in its highest and best use exceeds the total value of the property in its

existing use.

The highest and best use of both land as though vacant and property as improved must meet four

basic tests. These tests consist of the following:

1. Is the use legally permissible or reasonably possible?

2. Is the use physically possible on the site?

3. Is the use economically and financially feasible under proposed and projected market

conditions?

4. Is the use estimated to be the most profitable among the alternatives that are legally permissible, physically possible, and economically feasible?

Highest and Best Use - As If Vacant

Highest and Best Use of the site as if vacant assumes that a parcel of land is vacant or could be vacant

by demolishing the improvements. Given this assumption, this analysis determines the size, quality

and function that would provide the highest return to the land. The four criteria of Highest and Best

Use (as mentioned above) provide a basis for analysis.

1 Source: The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, 2010.


36

To form an opinion as to the Highest and Best Use as vacant, we considered the physical attributes of

the subject property, its zoning, location, known governmental influences, and the uses of the

surrounding properties.

Legally Permissible

Legal restrictions as they apply to the subject property are of two types: private restrictions (deed

restrictions and easements) and public restrictions (zoning). Current information regarding private

restrictions was not provided in this assignment. There appears to be no deed or easement restrictions

on the property that could affect development. The land is not encumbered by a restriction of a long-

term ground lease. Therefore, legal restrictions as they apply to the subject property are primarily the

public restriction of zoning.

The appraised property is currently zoned “FB-V2 (Fallbrook Village 2 Zone)” and is intended to

provide for mixed-use (residential and commercial-retail/office) uses. The subject’s surrounding

predominant use consists of a variety of primarily residential with interspersed commercial. Mixed-

use represents a legally permissible use.

Physically Possible

The size, shape, terrain, soil conditions, accessibility, and availability of utilities for a parcel of land

affect its utility and adaptability. The physical characteristics of the subject site appear to be adequate

in terms of shape, size, topography, available utilities and accessibility. Although the exact soil

composition is unknown, it appears that the soil is also adequate to support building improvements.

Therefore, it appears that the physical characteristics would allow for the legally permissible uses.

Financially Feasible and Maximally Productive

According to the Real Estate Terminology Handbook, a real estate project is feasible when the

analysis indicates that there is a likelihood of satisfying the explicit objectives and when a selected

course of action is tested in the context of specific constraints and limited resources. The feasibility

of a real estate project is normally related to its economic potential.


37

An in-depth feasibility analysis on the possible alternative uses of the site is beyond the scope of this

appraisal assignment. However, in analyzing the subject property, we have investigated the subject’s

regional, city, and neighborhood characteristics, sales of comparable properties, and overall market

conditions. Details regarding each category are presented in respective sections of this appraisal

report.

Conclusion “As Vacant”

It is my opinion that the highest and best use of the subject site, if vacant and available for

development, would likely be achieved with the construction of a mixed-use property (constructed to

maximum allowable density).

Highest and Best Use – “As Improved”

The highest and best use of an improved property at a given time means that use of the land, which

produces the most benefits and, therefore, the highest improved property value. The “use” in the case

of improved property refers to the type of use, as well as how this use is to be exercised in the future.

In determining the highest and best use of land as improved, three use potentials exist: 1) the present

improvements are demolished, and the land is used for another purpose; 2) the present improvements

are retained without substantial physical or operational changes; 3) the present improvements are

retained but with significant changes in the physical property (i.e., remodel/addition) or its

management.

As previously mentioned, a strong demand exists for properties like the subject located in the market

area. Furthermore, the subject improvements conform to other developments in the surrounding

neighborhood. The subject site is improved with a 3,782 SF mixed-use (retail/residential) that has an

estimated remaining economic life of 30 years.

Conclusion – “As Improved”

It appears that the existing property meets all the required tests of the Highest and Best Use concept;

those being legally permissible, physical adaptability and maximum productivity. Based on this


38

analysis, it is my opinion that the existing mixed-use improvements present one of the highest and

best uses of the land “as is”, particularly considering the fact that the improvements contribute value

to the property in excess of its land value.


39

VALUATION ANALYSIS Typically, the process of appraising real property consists of compiling and analyzing data from three

different perspectives; these approaches to value are:

• In the Cost Approach, the value of a property is derived by adding the estimated value

of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation (i.e., deterioration and obsolescence) in the structures from all causes. Profit for coordination by the entrepreneur is included in the value indication. This approach is particularly useful in valuing new or nearly new improvements and properties that are not frequently exchanged in the market. The current costs to construct the improvements can be obtained from cost estimators, cost estimating publications, builders and contractors. Depreciation is measured through market research and the application of specific valuation procedures. Land value is estimated separately in the cost approach. This approach is based on the theory of substitution that implies that a knowledgeable buyer will pay no more for the real property than the cost of producing a comparable property of similar utility.

• The Income Approach is based upon the principle that the value of an income producing

property is the present worth of anticipated future benefits, which are comprised of The Annual Income Stream (Cash Flow or Net Income) and the Reversion Benefits (Resale Value). The specific data that an appraiser investigates for this approach might include the property’s gross income expectancy, the expected reduction in gross income caused by vacancy and collection loss, the anticipated annual operating expenses, the pattern and duration of the property’s income stream, and the anticipated resale value or the value of other real property interest reversions. After income and expenses are estimated, the income stream or streams are capitalized by applying an appropriate rate or factor or converted into present value through discounting. In the discounted cash flow analysis, the quantity, variability, timing, and duration of a set of periodic incomes and the quantity and timing of the reversion are specified and discounted to a present value at a specified yield rate. The rates used for capitalization or discounting are derived from acceptable rates of return for similar properties.

• The Sales Comparison Approach is a method of comparing recent sales of similar

properties to the subject property. This approach is based on the principle of substitution in that a prudent investor would pay no more for the real property than the cost of acquiring a satisfactory alternative property that possesses physical, economic and financial comparability. The value of a particular property tends to coincide to the value indicated by the actions of informed buyers and sellers in the marketplace for similar properties.

Based on my analysis of the subject’s area, market participants are generally not buying or selling

with reliance placed on the methodology of the Cost Approach to establish value for an existing

building such as the subject (originally constructed in 1908). Moreover, a Cost Analysis would be


40

unreliable due to speculative estimates of depreciation, particularly economic depreciation. I was

unable to find market support for either an objective or subjective estimate of external obsolescence

(economic depreciation) within the subject marketplace or product type. More importantly, there is a

scarcity of recent comparable land sales in the subject’s neighborhood and market participants

(buyer, sellers and brokers) do not currently utilize the Cost Approach as a basis for valuation on

mixed-use properties like the subject.

In the case of the subject appraisal, we have utilized the Income and Sales Comparison approaches in

valuing the subject property. In this report’s Reconciliation section, the two approaches to value are

reconciled into a final value conclusion. My valuation follows:


41

INCOME APPROACH

The Income Approach is a method of converting the anticipated economic benefits of owning

property into a value estimate through capitalization. The principle of “anticipation” underlies this

approach in that investors recognize the relationship between an asset’s income and its value. In order

to value the anticipated economic benefits of a particular property, potential income and expense

must be estimated, and the most appropriate capitalization method must be selected. The two most

common methods of converting net income into value are direct capitalization and discounted cash

flow analysis. In direct capitalization, net operating income is divided by an overall rate extracted

from the market sales to indicate a value. In the discounted cash flow method, anticipated future net

income streams and a reversionary value are discounted to an estimate of net present value at a

chosen yield rate. In my opinion, the direct capitalization method is appropriate for the subject

property. The following analysis contains the following sections:

• Net Operating Income Estimate

• Capitalization Rate Estimate • Indicated Value from the Income Approach

Net Operating Income Estimate

Subject Occupancy

Current financial information (rent roll) were reviewed during the course of this appraisal

assignment. The subject is a 3,782 SF (NRA) mixed-use property comprised of 2,622 SF (70%) of

retail space and 1,160 SF (30%) of residential space. The subject’s occupancy and tenant leases are

further summarized on the following page. It is noted that the entire property is leased on a Modified

Gross basis.


42

Unit Unit SF % Lease Mo.No. Tenant Name (NRA) NRA Start End Basis Rem. Total $/SF

Leased Retail Space:121 Acupuncture 597 15.8% 06/14/21 MG 20 $1,000 $1.68123 Spa 2,025 53.5% 12/31/19 MG 3 $4,000 $1.98

2,622 69.3% $5,000 $1.91

Leased Residential Space:119 Apartment 580 15.3% 09/01/19 08/31/20 11 $1,095125 Apartment 580 15.3% 01/01/10 12/31/22 39 $1,000

1,160 30.7% $2,095 $1.81

3,782 100.0% $7,095 $1.88BUILDING TOTAL

Lease Term Current Rent/Mo.

Subtotal - Leased Retail Space:

Subtotal - Residential Space:

Market Rental Estimate

I have researched rental comparables for the two subject space types, retail and apartment units. For

the retail space market rent conclusion, I have utilized the average retail size of 1,311 SF the basis for

the comparison. Market rents for each of the subject space types are estimated as follows.

Market Rental Estimate – Retail Space (1,311 SF)

Market rent for the subject is based on a survey of similar-size retail properties that have recently

leased or are currently available for lease on the market. As previously discussed in the Market Study

section, the demand is strong for retail spaces like the subject and availability is very limited. Of the

limited data available, five properties were considered adequate indicators of the subject’s market

rent. These five rent comparables utilized in our analysis are summarized and compared to the subject

on the following page.


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Comparable Rental PropertiesItem Subject

Street Address 119-125 E. Alvarado City/Community Fallbrook County San DiegoProximity to Subject -Year Built 1940/RenovatedSpace Type RetailTotal Building Size (SF) 3,782LEASE DATA

Verification Source OwnershipLease Date/Term Various 8/26/2018 3 Yrs 4/12/2019 3 Yrs 9/5/2019 2 Yrs 12/5/2017 1 YrLease Type Modified GrossSize of Space Leased (SF) 1,311

Monthly Rent $/SF: $1.68 Expenses paid by Tenant Utilities Adjustment for Expenses -

Rent/SF/Month (MG) $1.68 Concessions/Listing Adjust. - Time Adjustment -Economic Adjusted Rent $/SF: $1.68

RENT/SF ADJUSTMENTSSize of Space Leased (SF) 1,311 1,600 1,500 800 -4% 500 -8% 2,000 4%Construction Quality Average E E E E EDesign/Exterior Appeal/Built-Out Average E E E I 8% SS -8%Condition Average SI 4% E E I 8% EFreestanding or POLB [a] POLB POLB POLB POLB POLB POLBParking Ratio 2.4:1 0.8:1 8% 3.7:1 3.0:1 3.2:1 0.8:1 8%Access/Exposure Average SI 4% E SS -4% I 8% S -4%1-Mile Demographics (Population/Avg. Hshld. Income)

18,943 $44,307

18,352 $44,254

17,419 $45,060

10,553 $53,460

16,883 $44,348

18,352 $44,254

Anchored Center No No Yes-Supermarket -8% E No NoTraffic Exposure-ADT [b] 5K ADT 7K ADT 20K ADT -4% 20K ADT -4% 15K ADT -4% 7K ADTBusiness District/Surroundings Average SS -4% E E SI 4% SS

TOTAL ADJUSTMENT: --INDICATED SUBJ. RENT/SF: --

[b] ADT = Average Daily Traffic (in thousands); Source: MPSI

$1.85 $1.89 $1.89 $1.91 $1.90 [a] POLB = Part of larger building (less desirable than a freestanding space/building)

12% -12% -12% 16% 0%

0.0% 0.0% 0.0% 4.0% 0.0%$1.65 $2.15 $2.15 $1.65 $1.90

$1.65 $2.15 $2.15 $1.59 $2.00 0.0% 0.0% 0.0% 0.0% -5.0%

All NNN Expenses All NNN Expenses All NNN Expenses Utilities All NNN Expenses$0.40 $0.40 $0.40 $0.00 $0.40

500 2,000$1.25 $1.75 $1.75 $1.59 $1.60 1,600 1,500 800

Listing (12+ Months)NNN NNN NNN MG NNN

CoStar/Broker CoStar/Broker CoStar/Broker CoStar/Broker Loopnet/Broker

Retail Retail Retail Retail Retail5,000 56,624 4,000 2,500 5,000

San Diego San Diego San Diego1 Block Northwest 0.75-Mile South 1.25 Mile South 3 Blocks Northeast 1 Block Northwest

1960s 1980 1980s 1940s 1995

Summary of Comparable Rental Properties

1 2 3 4 5119 N. Main Avenue 1328 S. Mission Road 1676 S. Mission Road 208 E Mission Road 119 N. Main Avenue

Fallbrook Fallbrook Fallbrook Fallbrook FallbrookSan Diego San Diego


44

RENT COMPARABLE MAP


45

All the comparables are located within a 1.25-mile radius of the subject (subject’s primary market

area and periphery) in the city of Fallbrook. Rental comparable photographs are found in the

addenda.

The comparables have unadjusted rental rates ranging from $1.59 to $2.15/SF (MG Equivalent). An

upward adjustment for market conditions was applied to No. 4, as it was signed in late 2017 and lease

rates have increased since then. Also, No. 5 is a listing that requires a downward adjustment to

reflect the likelihood of a lower negotiated leased rate.

No. 1 ($1.65/SF; MG Equivalent) is located one block northwest of the subject along N. Main

Street. A downward adjustment for No. 1’s slightly superior location on N. Main Street is

outweighed by upward adjustments for its inferior condition, parking ratio and exposure. After

adjustments, No. 1 indicates a subject rent of $1.85/SF.

No. 2 ($2.15/SF; MG Equivalent) is a retail space located ¾-mile south of the subject along S.

Mission Road. Downward adjustments are applied for No. 2’s superior anchor tenancy and traffic

exposure. After adjustments, No. 2 indicates a subject market rent of $1.89/SF.

No. 3 ($2.15/SF; MG Equivalent) is a retail unit located 1.25 miles south of the subject along S.

Mission Road. Downward adjustments are applied for No. 3’s smaller unit size (800 SF. vs. subject’s

1,311 SF), superior exposure and traffic count. After adjustments, No. 3 indicates a market rent of

$1.89/SF for the subject.

No. 4 ($1.65/SF; Time Adjusted) is a retail space located three blocks northeast of the subject along

E. Mission Road. Downward adjustments applied for No. 4’s smaller unit size (500 SF) and superior

traffic exposure are outweighed by upward adjustments for its inferior condition, appeal, exposure

and surroundings. After adjustments, No. 4 indicates market rent of $1.91/SF for the subject.

No. 5 ($1.90/SF; MG Equivalent & Listing Adjusted) is a vacant retail space located one block

northwest of the subject. Upward adjustments for No. 5’s larger unit size (2,000 SF) and lower

parking ratio are offset by downward adjustments for its superior appeal and exposure. After

adjustments, No. 5 indicates market rent of $1.90/SF for the subject.


46

After adjustments, the comparables indicate subject market rents that range from $1.85 to $1.91/SF,

with an average of $1.90/SF. The current average monthly contract rent for the two retail suites are

$1.91/SF. Based on my findings, a concluded subject market rental rate of $1.90/SF/Month (MG) is

considered reasonable, within market parameters, and well supported by the comparable rental

properties.

The tenant with remaining term over 12 months will be applied a rent gain bonus or rent loss

depending on their position in relation to market rent which will be discussed below.

Estimate of Rent Loss

As noted within the rent roll the subject’s tenants are considered to have above and below market

lease rates. The overall impact from this rent gain is demonstrated in the table below. The present

worth of the subject’s space exceeding market rent provides risk of tenant rollover therefore a rate of

8.0% is applied. Conversely, below market space is applied a rent loss at a rate of 4.0% due to the

limited risk of a tenant vacating while paying below market. See the following table for calculations

pertaining to rent loss/gain.

Unit Lease Rent Diff. Mos. PV Deficit RentSuite # Tenant Size (SF) Expiration Contract Market @ $1.90/SF /Month Remain. (4.0% Disc.Rate)

121 Acupuncture 597 SF 6/14/2021 $1,000.00 $1,134.30 $134 20 $2,588

Subtotal: Present Worth of Rent Gain ( Above-Market Leases) $2,588

Present Worth of Rent Loss (Below Market MG Leases)Monthly Rent

The overall rent loss is nominal (less than 1% of my concluded value) and, in my opinion, would

have no impact in the sale of the property or its marketability. Thus, the rent loss is not applied in my

final analysis.

Market Rental Estimate – 1-Bedroom Residential Unit

The subject has two 1-Bedroom/1-Bathroom units. Multi-family residential properties like the

subject are typically leased on a one-year lease term with tenants typically responsible for individual

gas/electricity, telephone and cable service. The rent typically includes water/sewer and trash. My

survey analyzed potential rent comparables for the subject, of which four included information on

three-bedroom units similar to the subject. Rental comparable photographs are found in the addenda.


47

Item SubjectLocation: 119-125 E. Alvarado Street

FallbrookProximity to Subject: -Year Built: 1940/Renovated# Units: 2# Stories: 2RENTAL DATA

Unit Type 1 Bed / 1 BathAverage Unit Size (SF) 580Monthly Rent $1,000Utilities paid by tenant: Gas & ElectricCurrent Vacancy: 0%

RENT/SF ADJUSTMENTSMonthly Rent/SF: $1,000

Unit Plan (BR/BA) 1 Bed / 1 Bath 1 Bed / 1 Bath 1 Bed / 1 Bath 1 Bed / 1 Bath 1 Bed / 1 BathAverage Unit Size (SF) 580 650 650 850 -4% 900 -4%Project Amenities None SS -4% SS -4% SS -4% SS -4%Quality/Appeal Average E E E ECondition Average E SS -4% E EParking Type / # Per Unit Open/1.0 Open/1.9 -4% Open/0.5 Open/1.6 Open/2.0 -4%Neighborhood/Surroundings Average I 8% I 8% SI 4% SI 4%

Total Adjustment: -Indicated Market Rent/SF: -

0% 0% -4% -8%$1,100 $1,150 $1,070 $1,095

0% 0% 0% 0%

$1,100 $1,150 $1,115 $1,190

$1,100 $1,150 $1,115 $1,190Gas & Electric Gas & Electric Gas & Electric Gas & Electric

1 Bed / 1 Bath 1 Bed / 1 Bath 1 Bed / 1 Bath 1 Bed / 1 Bath650 650 850 900

25 95 9 62 2 2 2

0.50-Mile Southwest 0.50-Mile Southwest 2 Blocks Northwest 0.25-Mile Northwest1980 1990 1985 1987

795 W. Fallbrook St. 744 W. Fallbrook St. 226 W. Hawthorne St. 235 W. Kalmia St.Fallbrook Fallbrook Fallbrook Fallbrook

Comparable Rental Properties1 2 3 4

No. 1 (1-Bedroom/1-Bathroom; $1,1100/Month) is a leased unit within a 25-unit apartment

complex. Downward adjustments applied for No. 1’s superior project amenities and superior parking

are offset by an upward adjustment for No. 1’s inferior surroundings. After adjustments, No. 1

indicates a subject market rent of $1,100/Month.

No. 2 (1-Bedroom/1-Bathroom; $1,150/Month) is the lease of a one-bedroom apartment located ½-

mile southwest of the subject. Downward adjustments for No. 2’s superior project amenities and

condition are offset by an upward adjustment for No. 2’s inferior surroundings. After adjustments,

No. 2 indicates a subject market rent of $1,150/Month.

No. 3 (1-Bedroom/1-Bathroom; $1,115/Month) is the lease of an apartment unit located two blocks

northwest of the subject within a 9-unit property. An upward adjustment applied for No. 3's slightly

inferior surroundings is outweighed by downward adjustments for its larger unit size (850 SF vs.

subject’s 580 SF) and superior project amenities. After adjustments, No. 3 indicates a subject market

rent of $1,070/Month.

No. 4 (1-Bedroom/1-Bathroom $1,190/Month) is located ¼-mile northwest of the subject along W.

Kalmia Street. An upward adjustment applied for No. 4’s slightly inferior surroundings is


48

outweighed by downward adjustments for its larger unit size (900 SF), superior project amenities and

higher parking ratio. After adjustments, No. 4 indicates a subject market rent of $1,095/Month.

After adjustments, the comparable rental rates range from $1,070 to $1,150/Month, with an average

of $1,104/Month. The subject’s actual average contract for one-bedroom units of $1,048 falls slightly

below the adjusted range. Based on my analysis, a concluded market rent of $1,100/Month for the

subject's (2) 1-bedroom/1-bathroom units are appropriate.

Vacancy and Collection Allowance Estimate

Given the low vacancy levels in the region and primary market area, as well as the subject’s historical

low occupancy levels, it is my opinion that a vacancy and collection allowance of 4.0% over a long-

term (seven or more years) holding period is appropriate for the subject. Also refer to this appraisal

report’s Market Study section.

Operating Expense Estimate

My research revealed that most of the competing mixed-use buildings in the subject's market area are

being leased on both modified gross and triple net basis. On a modified gross basis, the tenant

typically responsible for gas, electricity, telephone, and cable service, while the subject’s landlord is

responsible for real estate taxes, insurance, repairs and maintenance, water, landscape maintenance,

trash collection, management and reserves for replacement of long-term items. For a triple net lease,

the tenant or lessee is responsible for all operating expenses including property taxes, insurance,

building maintenance and utilities. The subject is entirely leased on a modified gross basis.

The subject’s operating statements were provided not for my review. My expense projections are

based on a review of the aforementioned subject financial documentation as well as an analysis of

comparable data, management company surveys, a review of the Institute of Real Estate Management

expense reports, and our previous appraisals of hundreds of commercial properties throughout San

Diego County. The appraiser’s expense projections are shown in the following page.


49

Conclusion

$13,61246,17013,20013,200

$86,182 0

$86,182Less: Vacancy & Collection Allowance 4.0% -$3,447

$82,735

$10,83348

Concluded $/SF GBA: $0.95 3,593Concluded $/SF GBA: $0.40 1,513Concluded $/SF GBA: $0.75 2,837Concluded % of EGI: 6.0% 4,964Concluded $/SF GBA: $0.00 $0Concluded $/SF GBA: $0.35 1,324

$25,112% of EGI: 30.4%$/SF GBA: $6.64

$57,623

121 E. Alvarado (Retail) - Market Rent - $1.90/SF - 597 SF

Comments on Conclusions

PROJECTED GROSS INCOME

APPRAISER PROJECTIONS

123 E. Alvarado (Retail) - Market Rent - $1.90/SF - 2,025 SF119 E. Alvarado (Apt) - Market Rent - $1,100/Month - 580 SF125 E. Alvarado (Apt) - Market Rent - $1,100/Month - 580 SFTotal Projected Gross Rental Income Other Income (Based on Historical Income)TOTAL GROSS INCOME:

EFFECTIVE GROSS INCOME:

PROJECTED OPERATING EXPENSESAssumes a sale (Tax Rate x Indicated Value)Fixed/Direct Assessments:

LESS: PROJECTED OPERATING EXPENSES

CONCLUDED NET OPERATING INCOME: Capitalization Rate Estimate

The subject’s concluded capitalization rate is based on the following:

• All of the sale comparables utilized in this appraisal report’s Sales Comparison Approach were comprised of multi-tenant mixed-use retail-oriented properties in which financial/capitalization rate information were available. These comparables and their indicated capitalization rates are summarized on the following table.

Sale Date Address City Building SF Year Built Sale Price NOI/SF Cap. Rate08/06/18 5545 El Cajon Boulevard San Diego 3,250 1950 $700,000 $11.85 5.50%10/01/19 821 S. Tremont Street Oceanside 4,500 1985 $1,475,000 $17.21 5.25%04/15/19 3327-3333 Adams Avenue San Diego 3,500 1925/Renova $1,215,000 $17.36 5.00%10/25/17 1212 N Santa Fe Avenue Vista 3,611 1982 $960,000 $15.95 6.00%Listing 1211 E. Mission Road Fallbrook 2,125 1957 $595,000 $16.80 6.00%

Other Mixed-Use Sale Properties12/03/18 713 D Street Ramona 2,720 1980s $530,000 $11.50 5.90%07/13/18 3685-3687 5th Ave San Diego 2,581 1920 $1,500,000 $30.92 5.32%01/12/18 3433 University Ave San Diego 8,000 1952 $2,750,000 $18.53 5.39%Listing 3836 43rd Street San Diego 3,080 1924 $995,000 $16.70 5.17%

Average: 5.50%


50

The sales comparables summarized above indicate proforma capitalization rates ranging from 5.00% to 6.00%, with an average of 5.50%.

• Numerous brokers were interviewed from brokerage and development firms active in the

subject’s market area. The consensus opinion of brokers interviewed was that a capitalization rate between 5.50% and 6.00% would be applicable given the subject’s location and historically high occupancy rate.

• As stated earlier, mortgage rates have begun to increase. Financial market volatility together with questions arising from the contentious election, reined in sales slightly over the course of 2016, but the postelection increases in interest rates sparked a significant 15 percent slowdown in nationwide sales in the fourth quarter. It appears that investors have scaled back activity as they await clarity on government policies and as the market recalibrates to higher interest rates. Private investors remain particularly sensitive to tax and policy changes. However, many buyers seek to capitalize on the reduced competition for assets – albeit some investors have refrained from the market to assess the impacts of potential policy changes.

Based on my findings and after further consideration of its physical, locational, and occupancy

characteristics, a concluded capitalization rate of 5.75% for the subject is considered appropriate and

consistent with market levels.

Indicated Value from the Income Approach

$57,623 NOI Capitalized @ 5.75%, rounded $1,000,000


51

SALES COMPARISON APPROACH

An investigation was undertaken to locate sales of similar improvements in the subject’s market area

that could be used to provide direct market indications of the subject’s value. My survey focused

primarily on mixed-use (retail/office/residential) properties most comparable to the subject property.

Due to the subject’s located in Outlying San Diego County, my search included the entire San Diego

County market. Of the limited data available, five properties were considered to be indicative of the

subject’s market value. Each comparable property was visited, and I attempted to verify the sales

information with one or more of the parties to the transaction.

In the case of the subject, the most appropriate unit of comparison is the Price/SF of net rentable

area. My analysis also considers the economic characteristics (NOI per SF) of the comparable versus

the subject ($15.24 NOI/SF based on projected NOI derived in the Income Approach). The following

table summarizes the five comparable properties utilized in my analysis.


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Comparable Building SalesItem Subject

Location/Address: 119-125 E. Alvarado StreetFallbrook

Assessor’s Parcel No. 103-225-13-00Proximity to Subject -Building SF (NRA) 3,782Land (SF) 5,062Year Built 1940/RenovatedProperty Use Apartment & RetailOccupancy 100%SALE DATA

Sale Date -Document No. -Source -Interest Transferred/Appraised Leased FeeList Price: - Time on the Market - List vs Sale Price % Variance -Sale Price:

Actual Price -Cash-Equivalent -

Cash-Equivalent $/SF: - Time Adjustment - Listing/Other Conditions - Time/Conditions Adjusted - Proforma Capitalization Rate: - Net Operating Income PSF $15.24

Financing:Cash Down -1st Trust Deed -1st T.D. Terms -Other Terms -

PRICE/SF ADJUSTMENTSSite Accessibility/Visibility Corner/Average E E E I 8% EBuilding Size (SF) 3,782 4,500 3,500 3,250 3,611 2,125 -4%Space-Use Mix 70% Retail-30% Residential 73% Ret-27% Res. 57% Ret-43% Res. 50% Ret-50% Res. 100% Retail 100% RetailOccupancy 100% 73% 43% 6% 100% 100% 100%Construction Quality Average E E E E EDesign/Appeal Average E SS -4% I 12% SI 4% SI 4%Condition Average E SS -4% I 12% SI 4% EParking Ratio 2.4:1 0.7:1 4% 2.7:1 1.8:1 3.2:1 2.8:1Anchor Tenant No No No No No NoRetail District Desirability Average S -16% S -8% I 12% I 8% I 8%

Street Exposure/Traffic Count* Secondary / Average / 5K E / NC S / 19K ADT -8% S / 20K ADT -8% S / 24K ADT -8% S / 16K ADT -6%TOTAL ADJUSTMENT: -INDICATED SUBJECT PSF: - $288.45 $284.65 $275.69 $273.95 $279.89* ADT = Average Daily Traffic (in thousands); Source: MPSI

-12% -18% 28% 16% 2%

- - - - -Conv. Loan - - - -$1,180,000 - - - -$295,000 All Cash Down All Cash Down All Cash Down Negotiable

$17.21 $17.36 $11.85 $13.63 $16.805.25% 5.00% 5.50% 6.00% 6.00%

$327.78 $347.14 $215.38 $236.16 $274.40 0.0% 0.0% 0.0% 0.0% -2.0%0.0% 0.0% 0.0% 4.0% 0.0%

$327.78 $347.14 $215.38 $227.08 $280.00$1,475,000 $1,215,000 $700,000 $820,000 -$1,475,000 $1,215,000 $700,000 $820,000 -

- -1% -7% -15% -- - 1 Month 3 Months 3 Months

Off-Market $1,225,000 $750,000 $960,000 $595,000Leased Fee Leased Fee Leased Fee Leased Fee Leased Fee

CoStar/Assessor CoStar/Assessor CoStar/Assessor CoStar/Assessor CoStar/Loopnet0435589 0134783 0320842 0497282 -1-Oct-19 15-Apr-19 6-Aug-18 25-Oct-17 Listing

73% 43% 100% 100% 100%Apartment & Retail Apartment & Retail Apartment & Retail Retail Apartment & Retail

1985 1925/Renovated 2014 1950 1982 19574,792 4,356 4,792 12,197 10,4544,500 3,500 3,250 3,611 2,125

14 Miles Southwest 42 Miles Southeast 43 Miles Southeast 11 Miles South 0.75-Mile Northeast150-372-05 439-441-04 472-093-04 161-252-05 105-410-20Oceanside San Diego San Diego Vista Fallbrook

821 S. Tremont Street 3327-3333 Adams Avenue 5545 El Cajon Boulevard 1212 N Santa Fe Avenue 1211 E. Mission Road

Summary of Comparable Building Sales

1 2 3 4 5


53

SALE COMPARABLE MAP


54

Summary and Conclusions

The five comparables have unadjusted cash-equivalent sale prices ranging from $215.38 to

$347.14/SF. An upward market condition adjustment was applied to No. 4 as conditions have

improved since it was sold in late 2017. A downward adjustment is applied to No. 5 to account for

its “listing” status and the likelihood it will sell below the asking price.

Noting the variance in unadjusted price per unit indicators, it is important to adjust each sale for

comparison to the subject with respect to several different, yet interrelated influences on value such

as quality, appeal, condition, accessibility, tenant improvement build-out, parking ratio, street

exposure, and neighborhood desirability. Such adjustments, while relying on the experience and

judgment of the appraiser, tend to be subjective and difficult to support in the market using “paired”

data sales. More subjective adjustments were also supported by interviews with real estate brokers

(including agents from Cushman Wakefield and CBRE) familiar with commercial properties with

restaurant uses like the subject and the market in which the property is located. The aforementioned

adjustments, as summarized in the previous table, are further discussed as follows. Sales comparable

photographs are found in the addenda.

No. 1 ($327.78/SF; $17.21 NOI/SF) is the October 2019 sale of a two-story, multi-tenant residential

over retail property located 14 miles southwest of the subject in the city of Oceanside. An upward

adjustment for No. 1’s lower parking ratio is heavily outweighed by a significant downward

adjustment for No. 1’s superior coastal location. After adjustments, No. 1 indicates a subject value of

$288.45/SF.

No. 2 ($347.14/SF; $17.36 NOI/SF) is a 3,500 SF two-story residential over retail property located

in the Normal Heights neighborhood of San Diego. An upward adjustment for No. 2’s non-stabilized

occupancy is outweighed by downward adjustments for its superior appeal, condition, retail district

and traffic count. After adjustments, No. 2 indicates a subject value of $284.65/SF.

No. 3 ($215.38/SF; $11.85 NOI/SF) is the August 2018 sale of a one-story 3,250 SF retail/apartment

property located in the eastern portion of the city of San Diego. A downward adjustment for No. 3’s

superior traffic count is outweighed by upward adjustments for No. 3’s inferior appeal, condition and

retail district desirability. After adjustments, No. 3 indicates a subject value of $275.69/SF.


55

No. 4 ($236.16/SF; Market Conditions Adjusted; $13.63 NOI/SF) is the sale of a multi-tenant

retail property located 11 miles south of the subject in the city of Vista. A downward adjustment for

No. 4’s superior traffic exposure is outweighed by upward adjustments for its inferior visibility,

appeal, condition and retail district desirability. After adjustments, No. 4 indicates a subject value of

$273.95/SF.

No. 5 ($274.40/SF; Listing Adjusted; $16.80/SF) is the available multi-tenant retail/apartment

property located ¾-mile northeast of the subject along E. Mission Road in the city of Fallbrook.

Downward adjustments for No. 5’s smaller size (2,125 SF vs. subject’s 3,782 SF) and superior traffic

count is outweighed by upward adjustments for its slightly inferior appeal and retail district

desirability. After adjustments, No. 5 indicates a subject value of $279.89/SF.

After adjustments, the comparables indicate a subject value range of $273.95 to $288.45/SF, with an

average of $280.53/SF. Sale Nos. 1 and 4, which indicated adjusted values of $288.45 and $273.95,

respectively, required the lowest overall net adjustments and are the most economically similar

($17.21 & $13.63 NOI/SF) to the subject ($15.24 NOI/SF). Based on these findings and given the

relatively narrow adjusted value range indicated the comparables, a concluded subject value of

$280.00/SF is considered reasonable and well supported by the comparable sale properties.

Indicated Value from the Sales Comparison Approach

$280.00/SF x 3,782 SF NRA rounded $1,060,000


56

RECONCILIATION

Indicated values from the Income and Sales Comparison Approaches are summarized as follows:

Income Approach: $1,000,000

Sales Comparison Approach: $1,060,000

The Income Approach is a relevant method of valuation for leased fee investment properties and is

less meaningful for properties that are predominately purchased by owner-users and owned in fee

simple. When applying market rent to a user sale the capitalization rates would be lower as the

motivation for buying is not the highest return on investment. A user’s motivation has more to do

with the utility of the building as it relates to the owner’s business and the relationship between

market rent and the current ability to secure desirable financing, making a building mortgage and

related tax benefits a feasible option for a successful business. As the typical buyer for the property

would be an investor, this approach is given strong consideration in my analysis.

The Sales Comparison Approach is based on comparable sales of similar properties located in the

subject’s general market area. By researching recent sales of properties similar to the subject, and

analyzing them for their similarities and differences, an indication of the subject’s value can be

derived. The price-per-square-foot indicator used in this approach is also the tool utilized in this

market by buyers, sellers and brokers as a basis for purchasing such properties.

In the final analysis, primary emphasis and greatest weight was placed on the Income Approach with

secondary weight given to the Sales Comparison Approach.

FINAL VALUATION

Based upon the analysis contained in this complete appraisal report, the concluded “As Is” Market

Value of the subject property as of October 3, 2019 is:

ONE MILLION TWENTY-FIVE THOUSAND DOLLARS

$1,025,000


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ASSUMPTIONS AND LIMITING CONDITIONS

This report is made expressly subject to the conditions and stipulations following:

Specific

1. A preliminary title report was not provided for review. Public utility easements are assumed to exist and considered typical. No adverse easements or encroachments were noted on the preliminary title report nor were any observed during the inspection of the site. I have reviewed neither legal opinions nor engineering reports concerning the aforementioned. I assume the subject property to be free of any easements, covenants or restrictions, which would have a negative impact on the value of the property. Any existing easements, covenants or restrictions are assumed necessary for the highest and best use of the site. These assumptions are formally incorporated into various estimates of this report.

2. I have not received a soils report in connection with this appraisal assignment. In the absence

of a soils report, I assume soil conditions to be adequate to support the existing improvements into the future. This assumption is incorporated into this report.

3. A geologic report covering the subject property was not provided. In the absence of a geologic report, I assume geologic conditions to be stable enough to support the existing improvements into the future. In addition, I assume that no geologic conditions exist which would adversely affect the value of the site or prevent the development of the site to its highest and best use. These assumptions are formally incorporated into various estimates of this report.

4. The subject property is appraised without a specific compliance survey having been conducted to determine if the property is or is not in conformance with the requirements of the Americans with Disabilities Act. The presence of architectural and communications barriers that are structural in nature that would restrict access by disabled individuals may adversely affect the property’s value, marketability, or utility. The analysis contained herein assumes the subject is not impacted by any aspects of the Americans with Disabilities Act and that there are no known non-compliance items subject to confirmation by an appropriately licensed entity, this assumption is incorporated into various estimates of this report.

5. Unless otherwise specifically described and/or stated in this report, the presence of hazardous materials or environmental conditions, which may or may not be present on the subject property, was not observed by the appraiser. However, it should be noted the Appraiser has not been trained, nor is qualified to detect specific hazardous substances or conditions. The presence of adverse materials or naturally occurring substances such as mold/mildew, Asbestos, certain types of insulation, lead paint, and/or any other unseen or existing hazardous materials may affect the value of this property. This value opinion is predicated on the assumption that there is either no such material(s) on or nearby the property, or the client is aware that such hazardous materials may exist. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. Properties built prior to 1978, may in fact contain lead-based paint and may require a certified contractor for removal or special containment. It is recommended the client retain an expert to fully evaluate any environmental concerns, if desired.


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General

1. No responsibility is assumed by us for matters which are legal in nature.

2. The appraisal covers the property described only.

3. Sources of information are believed to be correct and, where feasible, have been verified.

4. That the date of value to which the conclusions and opinions expressed in this report apply, is set forth in the letter of transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American dollar on that date.

5. That the appraiser(s) assumes no responsibility for economic or physical factors, which may affect the opinions herein stated occurring at some date after the date of value.

6. That the appraiser(s) reserves the right to make such adjustments to the valuation therein reported, as may be required by consideration of additional data or more reliable data that may become available.

7. That maps, plats and exhibits included herein are for illustration only as an aid in visualizing matters discussed within the report. They should not be considered as survey, or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

8. By reason of this appraisal, I am not required to give testimony or to be in attendance in court or at any governmental or other hearing with reference to the property without prior arrangements having been made relative to such additional employment.

9. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the firm with which they are connected, or any reference to the Certified General certification) shall be disseminated to the public through advertising media, public relations media, sales media or any other public means of communication without the prior written consent and approval of the authors.

10. Possession of this report, or a copy of it, will not carry with it the right of publication. The report may not be used for any purpose by any person other that the party to whom it is addressed without the written consent of the appraiser and the appraiser specifically disclaims any liability to such unauthorized third parties. In any event, the report may be used only with proper written qualifications and only in its entirety for its stated.


59

ADDENDA


60

SUBJECT PHOTOGRAPHS

Return to Improvement Description

Southern view of the subject from across E. Alvarado Street

Southeastern view of the subject from across E. Alvarado Street


61

SUBJECT PHOTOGRAPHS (Continued)


Northern view of the rear of the subject

Western view of the east side of the subject


62



Northern view of the south/east side of the subject

View of the exterior stairwell on the south side of the subject


63



View of the subject’s parking area

View of the subject’s additional parking area


64



Western view of E. Alvarado Street (subject to the left)

Eastern view of E. Alvarado Street (subject to the right)


65



Interior view of a retail suite



66






67



Interior view of a residential apartment



68






69



Southern view of the subject’s alley from E. Alvarado Street


70

FLOOD MAP

Return to Flood Zone Description


71

ZONING MAP

Return to Zoning Discussion


72

COMPARABLE RETAIL RENTAL PHOTOGRAPHS

Return to Income Approach

RENTAL NOS. 1 & 5 119 N. Main Avenue Fallbrook

RENTAL NO. 2 1328 S. Mission Rd. Fallbrook


73

COMPARABLE RETAIL RENTAL PHOTOGRAPHS (Continued)


RENTAL NO. 4 208 E. Mission Road Fallbrook

RENTAL NO. 3 1676 S. Mission Rd. Fallbrook


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COMPARABLE APARTMENT RENTAL PHOTOGRAPHS


RENTAL NO. 2 4330 30th Street San Diego

RENTAL NO. 1 795 W. Fallbrook St. Fallbrook


75

COMPARABLE APARTMENT RENTAL PHOTOGRAPHS (Continued)


RENTAL NO. 4 235 W. Kalmia St. Fallbrook

RENTAL NO. 3 226 W. Hawthorne St., Fallbrook


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COMPARABLE SALE PHOTOGRAPHS

Return to Sales Comparison Approach

SALE NO. 1 821 S. Tremont St. Oceanside

SALE NO. 2 3327-3333 Adams Avenue, San Diego


77

COMPARABLE SALE PHOTOGRAPHS (Continued)


SALE NO. 3 5545 El Cajon Blvd. San Diego

SALE NO. 4 1212 N. Santa Fe Ave, Vista


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COMPARABLE SALE PHOTOGRAPHS (Continued)


SALE NO. 5 3980-3982 University Ave San Diego


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QUALIFICATIONS of

GEOFFREY W. CAPELL, MAI PROFESSIONAL BACKGROUND Actively engaged in real estate appraisal profession since 2003. Prior to becoming an independent fee appraiser in 2013, I spent three years as a Senior Appraiser with CBRE specializing in retail, office, multi-family residential, commercial and industrial properties throughout Southern California. Between 2009 and 2011, I worked as a senior consultant appraiser at Valuation & Information Group specializing multi-family and health care related appraisals nationwide. From 2003-2009, I worked for Lea Associates, Inc. specializing in all property types.

Capell Appraisal Services (Independent Fee Appraiser) 2013 – Present CBRE, Inc. – Appraisal (Senior Appraiser) 2011 – 2013 Valuation & Information Group (Senior Consultant)

2009 – 2011 Lea Associates, Inc. (Appraiser)

2003 – 2009 EDUCATIONAL ACTIVITIES Loyola Marymount University, Los Angeles, CA Bachelor of Science, Business Administration Appraisal Institute Courses: Advanced Income Capitalization, Advanced Concepts & Case Studies, Advanced Sales Comparison and Cost Approaches, General Market Analysis and Highest & Best Use, Apartment Appraisal, USPAP, General Appraiser Report Writing and Case Studies, Business Practices and Ethics, Appraisal of Nursing Facilities. LICENSING Certified General Real Estate Appraiser - Office of Real Estate Appraisers, State of California (#AG034686; valid thru July 29, 2020) Designated Member - Appraisal Institute (MAI) EXPERIENCE Provided appraisal services in San Diego, Orange, Los Angeles, Riverside, San Bernardino, Santa Barbara, Ventura and Imperial Counties. Since 2003, primary focus has been on the valuation of land, industrial, office, retail, mixed-use and multi-family residential valuation.


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APPRAISAL REPORT - images1.loopnet.com...October 25, 2019 . Barbara Findler . 3676 Oak Cliff Dr....

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