APPRAISAL REPORT SINGLE-TENANT RETAIL BUILDING AND...

APPRAISAL REPORT

SINGLE-TENANT RETAIL BUILDING AND TWO, SINGLE-FAMILY RESIDENCES

723 SOUTH INGLEWOOD AVENUE AND 401 AND 403 MAGNOLIA AVENUE

INGLEWOOD, CALIFORNIA 90301-3203

AERIAL MAP

Magnolia Avenue

723 S. Inglewood Avenue

401 Magnolia Avenue

403 Magnolia Avenue

Pacific Realty Associates, Inc. Appraisal & Consultation

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EXECUTIVE SUMMARY

Property Type: Single-Tenant Retail Building and Two, Single-Family Residences

Address: Building A – 723 South Inglewood Avenue, Inglewood, California 90301

Building B – 401 Magnolia Avenue, Inglewood, California 90301

Building C – 403 Magnolia Avenue, Inglewood, CA 90301

Assessor’s Parcel No.: 4022-013-019

Thomas Brothers Page: LA 703-B3

Census Tract: 6014.02

Property Rights Appraised: “As Is” Leased Fee Estate Market Value

Date of Value: March 13, 2018

Date of Inspection: March 13, 2018

Gross and Net Land Area: 8,110 square feet or 0.19 acres

Zoning: R-3, Residential Multiple-Family

Flood Zone Information: Subject is located within Zone X under community ID panel 06037C1780F dated September 26, 2008. Flood insurance is not required within this zone.

Improvements: The subject parcel is currently improved with three, non-contiguous, one-story buildings together totaling 4,917 rentable square feet. Building A, addressed as 723 South Inglewood Avenue, is a one-story retail building totaling 3,536 rentable square feet constructed in 1926. Building A is of mixed brick, wood siding and wood frame/stucco construction. Building A, which is currently utilized by an online clothing distribution business, is not provided HVAC (heating, ventilation


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and air conditioning) and on-site parking. Building A was previously used as a bookstore and before that as a local market.

Buildings B and C are one-story, single-family residences (SFRs) developed in 1929. Building B is addressed as 401 Magnolia Avenue, totals 681 rentable/livable square feet and is of wood frame and plaster construction. Building B has two bedrooms and one bath. Building C is addressed as 403 Magnolia Avenue, has wood panel exterior walls and totals 700 rentable/livable square feet. Building C has one bedroom and one bath.

A concrete-paved driveway between Buildings B and C, plus a 25’ x 20’ two-car, enclosed parking garage at the end of the driveway, are shared by only the residential tenants. The garage is improved with sealed concrete floors, exposed plywood and drywall walls, exposed wood beam ceilings and a roll-up metal door. The garage is not included in the total building area as this is not rentable or livable space. The aggregate subject property has a floor area ratio of 0.61 or a site footprint coverage of 60.6%. The aggregate subject property has a weighted average year built of 1927. Overall, the subject improvements are constructed of average quality materials and currently are in average physical condition.

Occupancy: 100.0% by three tenants. Building A (retail) is leased for a two-year term which expires on May 1, 2019; the tenant has no renewal option. Buildings B and C (residential) are occupied by tenants on month-to-month leases and who have been in-place for eight and 37 years, respectively.

Highest and Best Use: As Though Vacant – Develop up to five multi-family residential units for purchase by individual owners

As Improved – Renovate the existing improvements and continue current utilization as a retail/residential property for purchase by an investor

Actual Age: Building A – 92 years; Buildings B and C – 89 years


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Effective Age: 91 years (weighted average year built of 1927)

Estimated Economic Life: 110 years

Remaining Economic Life: ±19 years

Subject Positive Risk Factors: -Subject property is a non-signalized corner site.

-Subject has good proximity to Centinela Hospital Medical Center, The Forum (a multi-purpose indoor arena for concerts, sporting events, etc.), the Los Angeles Entertainment Center (site of Hollywood Park Casino and future home of the Los Angeles Rams and Los Angeles Chargers of the National Football League), and the Los Angeles International Airport

-Subject has good proximity to Interstates 405 (San Diego Freeway) and 105 (Century Freeway)

Subject Negative Risk Factors: -Subject improvements are old (built in 1926 and 1929), have an estimated remaining economic life of roughly 19 years and should be renovated.

-Subject has limited parking (two spaces or ratio of 0.4 spaces per 1,000 square feet of rentable building area), which is for use by the residential tenants only. The subject retail building is not provided any parking.

“AS IS” LEASED FEE ESTATE MARKET VALUE

Cost Approach: Not Applicable

Income Approach: $1,090,000

Sales Comparison Approach: $1,105,000

Reconciled Values: $1,090,000

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LOCATION MAP

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Based on CBRE’s Retail MarketView report (which is published quarterly every year), the overall

retail vacancy rate for the Greater Los Angeles Area was 4.9% during 4th Quarter 2017, which

equals the 4.9% rate reported in 4th Quarter 2016. The average asking retail rent in Greater Los

Angeles in 4th Quarter 2017 was $2.71 per square foot, contrasted with $2.48 per square foot in

4th Quarter 2016. The subject property is located in the City of Inglewood which falls within the

LAX sub-area of the South Bay submarket of Greater Los Angeles Area, based on the CBRE

Retail MarketView report. The overall retail vacancy rate in the South Bay submarket was 3.3%

in 4th Quarter 2017. In comparison, the year-ago overall retail vacancy rate in the South Bay

submarket was slightly higher at 3.6%. The average asking retail rent in the South Bay submarket

was $1.81 per square foot in 4th Quarter 2017, a significant decrease from the year-ago rate of

$2.36 per square foot. The overall retail vacancy rate in the LAX sub-area was 1.0% in 4th

Quarter 2017, compared to 0.1% in 4th Quarter 2016. The average asking retail rent in the LAX

sub-area was $0.58 per square foot in 4th Quarter 2017. CBRE did not report an average asking

retail rent for the LAX sub-area in 4th Quarter 2016.

The outlook for the Greater Los Angeles retail market remains steady over the next 12 months.

Momentum gained over the last few years is likely to level out and slow down. Vacancy levels

are expected to move up slightly throughout 2018, according to CBRE, while rental rate growth is

also expected to increase gradually over the next four quarters.

Various factors contribute to the continued stability of the Los Angeles County residential market.

According to the Los Angeles Economic Development Corporation’s (LAEDC) October 2017

Economic Update, Los Angeles County has one of the largest manufacturing centers in the nation,

is a global gateway for trade and tourism, and draws entrepreneurs and risk-takers from around the

world. In 2017, real GDP in Los Angeles County grew at 3.2%, an increase from the prior year

when the economy grew by 2.1%. Still, this year’s growth rate was below the national rate of

growth of 2.4%. Real GDP growth is expected to be 2.4% for 2018 and 2.2% for 2019, outpacing

the nation in both years (2.3% and 2.1%, respectively).


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In 2017, the average unemployment rate in Los Angeles County reached 4.6%, the lowest

unemployment rate since 2000 and more than 63.0% below the post-recession peak rate of 12.5%

reached in 2010. It is expected to decline slowly over the next two years, falling to 4.3% in 2018

and reaching 4.1% in 2019 as the County, similar to the State, starts to move above full

employment. Job growth has been positive since 2011, averaging 2.5% annually. This is

expected to slow to 1.9% for the next two years as there are fewer jobs needed to be added and as

the labor market tightens. Nonfarm employment was up in 2017 by 56,900 wage and salary jobs,

reaching just over 4.4 million jobs, an increase of 1.3% over 2016. Almost all industry sectors

added jobs in 2017. The largest private sector gains were in health care and social assistance

(adding 21,800 jobs), leisure and hospitality (adding 7,900 jobs), and other services (6,700 jobs).

Government payrolls grew by 1,200 jobs.

Four sectors lost jobs over the year. Manufacturing continued to shrink for the fourth consecutive

year, losing 4,600 jobs in 2017. Retail trade decreased by 1,300 jobs. Finance and insurance shed

200 jobs, and the natural resources sector, which in Los Angeles County is confined to oil and gas

field operations, declined by 100 jobs, the fourth consecutive yearly decline. As the rate of job

creation slows, the number of jobs added will also decline, with 47,800 jobs expected to be added

in 2018 and 34,300 in 2019.

The sectors expected to add the largest number of jobs over the next two years are health care and

social assistance (24,660 new jobs), and administrative and support services (16,320 jobs).

Construction will add 14,610 over the next two years, and leisure and hospitality is expected to

gain 12,120 jobs. After four consecutive years with an increase in job numbers, government

employment will contract slightly by roughly 1,100 jobs. Manufacturing is expected to continue

its decline in employment, losing 1,400 jobs through 2019.

Personal income in Los Angeles County has been rising, posting consecutive year-over-year

increases since 2013. In 2016, personal income totaled $563.9 billion and is predicted to reach

$585.5 billion in 2017. It is forecast that the personal income growth pattern will continue,


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reaching $619.7 billion in 2019. Similar to total personal income, real per capita income has also

been rising, reaching $48,790 in 2016 and $50,650 as predicted in 2017. It is expected that this

rise in real per capita income will continue, increasing to $52,080 in 2019.

It is expected that almost all industry sectors will add jobs over the next two years. However, the

strongest job growth, in terms of number of new jobs, will be in the following industries: health

care and social assistance (annual growth rates of 2.3% and 1.4% in 2018 and 2019, respectively);

administrative and support (16,300 jobs through 2019); construction (annual growth rates of 3.7%

and 6.4% in 2018 and 2019, respectively; adding 14,600 jobs through 2019); leisure and

hospitality, with the lion’s share being in food services (18,880 new jobs in 2018 and 2019, or

1.8% annual average); and retail trade (4,500 jobs through 2019).

In 2017, the number of permits issued for new home construction in Los Angeles County

increased over the year by 8.9% to 22,010 units permitted. New home construction peaked in Los

Angeles County in 2004 at 26,935 units permitted before falling to a low of 5,653 units in 2009.

Since then, new home construction has increased at a gradual pace, with the exception of 2016. It

is notable that in the aftermath of the recession, the number of permits issued for multi-family

homes rose relative to new single-family construction. Between 2000 and 2005, the share of

single-family permits averaged 46.0% of total new home construction. Since then, the share has

steadily declined, falling to just 25.0% in 2017. In 2017, the median home price in Los Angeles

County increased over the year by 8.0% to an estimated $560,860. The median home price in Los

Angeles County has increased by 75.0% since bottoming out in 2011 and ended last year 5.4%

above its former peak.

According to Marcus & Millichap, the broad labor market and high single-family home prices are

driving demand for apartments. Amid consistent job growth in the Los Angeles Metropolitan

area, particularly in the hospitality and healthcare sectors, household formation is rising. As a

result of the vast improvement since the recession, the labor market has improved significantly,

spurring strong demand for housing. Due to the high cost of single-family homes and the infill


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nature of the metro, the vast majority of these new households are renting apartments, pushing the

vacancy rate below 4.0%. As rental rates have risen, the absorption of units has been most

pronounced in more affordable areas such as the South Bay and the San Fernando Valley markets.

The number of multi-family construction starts jumped significantly in 2014, 2015, 2016 and

2017 in Los Angeles County, far outpacing the near-flat trend in single-family residential starts.

This is due to the increased demand for rental housing, evidenced by the steep rise in rents,

especially in the urban city-center areas of Los Angeles County. Construction of multi-family

housing will experience higher levels last seen in the mid-1980s, which accommodated the arrival

of Baby Boomers to the housing market. This time, the need for multi-family housing will be

fueled by their Gen Y children.

Marketing/Exposure Time

Exposure time is presumed to occur prior to the effective date of the appraisal. Marketing time is

assumed to be the time period required to affect a sale subsequent to the effective date of

appraisal. The following information was prepared by Price Waterhouse Coopers. Summarized

on the following page are the First Quarter 2018 results of this survey pertaining to the “National

Net Lease Market” and the “Pacific Region Apartment Market,” a typical sampling reflecting

various investors’ anticipated marketing periods are shown in the following table.

Holding Period Anticipated Marketing Period Source (Years) (Months)

NATIONAL NET LEASE MARKET:

Investor/Brokers 3 to 10 3 to 6 Real Estate Advisor 8 3 to 6 Private Investment Firm 5 to 10 4 to 12 Investment Advisor 3 to 10 4 to 6 Management Company 10 to 20 2 to 12


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CITY OF INGLEWOOD

Inglewood is situated in the southwestern portion of the Los Angeles Metropolitan Area,

approximately 12 miles southwest of the Los Angeles Civic Center. Inglewood encompasses 8.9

square miles and is predominantly a residential community. Incorporated in 1908, Inglewood has

grown from a population of 63,390 in 1960 to 114,900 as of 2017. The City’s labor pool

comprises professional and fairly skilled workers; recent statistics show 49.5% of the local

population (25 years or older) has a high school degree and 17.7% has a Bachelor’s degree or

higher. Based on the most recent data from the United States Census Bureau, the median

household income in the City of Inglewood in 2016 dollars (2012-2016) was $44,377, compared

to $57,952 for Los Angeles County and $63,783 for California. According to CoreLogic, as of

January 2018, the median sale price of a home in Inglewood (in the subject zip code of 90301)

was $443,000 or an increase of 10.6% from the previous year. In comparison, Los Angeles

County reported a higher average median sale price of $580,000 in January 2018 or an increase of

5.5% from January 2017.

Employment for residents of Inglewood includes the aerospace and high-tech companies in nearby

cities, i.e., Hawthorne, El Segundo and Culver City. Significant non-manufacturing job

opportunities are provided in the health care industry (Centinela Hospital Medical Center),

entertainment and sports (The Forum). The following are the top employers in the City of

Inglewood:

City Of Inglewood Inglewood Unified School District Centinela Hospital Medical Center

Marvin Engineering Cosco

Home Depot The Forum


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Los Angeles International Airport (LAX), situated just southwesterly of the City limits, is an

important focal point contributing to the economy of Inglewood. The subject property is located

1.1 miles northeast of LAX and is in the airport’s flight path. The City of Inglewood has good

freeway access as the San Diego Freeway (Interstate 405) skirts the westerly City limits. The

Glenn M. Anderson Freeway (Interstate 105) skirts the southerly end of the City, merging with the

San Diego Freeway to the west. Plans have been made to upgrade and revitalize Downtown

Inglewood through the “Main Street Inglewood” program under a $5 million federal grant.

Because of Inglewood’s proximity to LAX, industrial-zoned properties specifically are in high

demand and command a premium over the neighboring cities of Gardena and Hawthorne.

On February 24, 2015, the Inglewood City-Council voted unanimously to approve an 80,000-seat

stadium at the 238-acre site of the old Hollywood Park racetrack/grandstand, jump-starting the

effort to bring a National Football League (NFL) team back to the area after an absence of two

decades. This proposed development is located approximately one mile southeast of the subject

property. Developers of the project include St. Louis Rams owner, Stan Kroenke, and the

Stockbridge Capital Group. The mixed-use planned development on 238 acres includes the

stadium, a 6,000-seat performing arts center, parks, hundreds of thousands of square feet in retail

and office space and 2,995 dwelling units. On January 12, 2016, the NFL owners approved the

relocation of the St. Louis Rams to the Los Angeles area essentially approving construction of the

proposed stadium which is scheduled for completion in time to open the 2020 football season.

The stadium is estimated to cost $2.6 billion or $1 billion more than New Jersey’s MetLife

Stadium which is currently the NFL’s most costly venue. The stadium is part of a multi-purpose

venue totaling more than three million square foot and will be the NFL’s largest (in square feet).

The capacity of the new stadium could exceed 100,000 for special events, and the current mayor

of Inglewood, James Butts, has ambitions to host the Super Bowl at the stadium which is already

being touted as the cornerstone of a year-round sports, music, and entertainment events district.

The stadium is designed with a 19-acre transparent canopy which will cover the sports venue and


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parts of the surrounding development. During the 2028 Summer Olympics, the stadium is

expected to host the opening ceremonies and soccer events.

Another notable fixture within the subject vicinity is The Forum, a multi-purpose indoor arena,

which is located along West Manchester Boulevard just north of the former Hollywood Park

Racetrack or one mile northeast of the subject property. The Forum was the former home of the

NBA’s Los Angeles Lakers, the NHL’s Los Angeles Kings, the WNBA’s Los Angeles Sparks; it

was acquired in 2012 for $23.5 million by the Madison Square Garden Company, owners of New

York’s Madison Square Garden. The Forum reopened in January 2014 and today hosts a variety

of world-class events including concerts, boxing championships, the MTV Video Music Awards,

etc. In September 2014, The Forum was added to the National Register of Historic Places.

Inglewood is currently considering adding another major sports venue within its City limits. The

Los Angeles Clippers is a professional basketball team that competes in the National Basketball

Association (NBA) as a member of the league’s Western Conference Pacific Division. The

Clippers currently play their home games at Staples Center in Downtown Los Angeles and are tied

to a lease with Anschutz Entertainment Group (owner of the Staples Center) through 2024. The

Clippers’ owner, billionaire Steve Balmer (who acquired the Clippers in 2014) would reportedly

pay for the new arena which, if construction is approved, will seat 18,000 to 20,000 fans and

include on-site parking. The proposed arena will be bounded by Century Avenue to the north and

Yukon Avenue to the east on land that is currently occupied by an assortment of businesses

including a storage company, auto detailing shop and motel. The Clippers arena will be located

approximately 1.6 miles southeast of the subject property.


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SURROUNDINGS

The subject property is located 9.5 miles southwest of the Los Angeles City Hall, but is close to

four noteworthy properties in the City of Inglewood. Centinela Hospital Medical Center, a 369-

bed acute care facility serving the City and neighboring areas since 1924, is located 0.7 miles

southeast of the subject property. The Forum and Los Angeles Entertainment Center are situated

roughly 1.0 mile northeast and southeast of the property under study, respectively. Los Angeles

International Airport (LAX) is positioned 1.1 miles southwest of the subject. The Inglewood City

Hall is situated 0.6 miles northeast of the subject.

The subject area is fully built-out primarily with one and two-story, single and multi-family

residences constructed between the 1920s and the 1960s currently in overall average to very good

physical condition. The only other commercial building within the vicinity is located three lots

southeast of the property under study at the northeast corner of Inglewood Avenue and Buckhorn

Street. This 3,948 square foot, one-story wood frame/stucco building was completed in 1948 and

is currently occupied by the Latin University of Theology. The main commercial district in the

vicinity is located approximately two blocks south of the subject property along Arbor Vitae

Street, an east-west arterial. These commercial developments are tenanted mostly by local or

mom-and-pop businesses, except for a Unocal 76 gas station which is located at the southwest

corner of the intersection of Inglewood Avenue and Arbor Vitae Street.

Abutting the north side of the subject is a two-story, 2,772 square foot, multi-family residential

building completed in 2011. West of the subject property is a one-story, two bedroom/one bath

single-family residence built in 1947 totaling 1,057 square feet. Across the street from the subject,

occupying the southwest corner of Inglewood and Magnolia avenues, is a 2,424 square foot

fourplex residential building developed in 1939. On the northeast corner of Inglewood and

Magnolia avenues is a duplex residence built in 1924 and partially renovated in 2015. A 914

square foot, single-family residence built in 1927 is located at the southeast corner of Inglewood

and Magnolia avenues. Overall, the subject district is well established with no adverse influences.

Pacific Realty Associates, Inc.

PLAT MAP


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THE IMPROVEMENTS

The following improvements description is based on information from public records and the

appraiser’s on-site inspection.

Property Type, Building Areas and Year Built

The subject parcel is currently improved with three, non-contiguous, one-story buildings

including: Building A, addressed as 723 South Inglewood Avenue, which is a single-tenant retail

building totaling 3,536 rentable square feet constructed in 1926. Building A, which is utilized by

an online clothing distribution business, is not provided HVAC (heating, ventilation and air

conditioning) and on-site parking. Building A was previously used as a bookstore and before that

as a local market.

Buildings B and C are single-family residences developed in 1929. Building B is addressed as

401 Magnolia Avenue, totals 681 rentable/livable square feet and has two bedrooms and one bath.

Building C is addressed as 403 Magnolia Avenue, totals 700 rentable/livable square feet and has

one bedroom and one bath. A concrete-paved driveway between Buildings B and C, plus a 25’ x

20’ two-car, enclosed parking garage at the end of the driveway, are shared by only the residential

tenants.

Los Angeles County Assessor’s records and the Multiple Listing Service show the subject

improvements total 4,152 rentable square feet. Based on the appraiser’s on-site measurements, the

three subject buildings together total 4,917 rentable square feet. The disparity in building areas

lies in Building A which has been enlarged along its west perimeter. A total rentable building area

of 4,917 square feet is therefore used for the subject property throughout this report. The garage

is not included in the total building area as this is not rentable or livable space. The table on

the following page summarizes features of each of the subject buildings.

BUILDING A – 723 SOUTH INGLEWOOD AVENUE


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No. Year Square FootBldg. Floors Building Type Built* Construction Bldg. Area Percent

A One-story Single-tenant retail 1926 Mixed** 3,536 71.9% B One-story 2 bdrm./1 bath single-family home 1929 WF/Plaster 681 13.9% C One-story 1 bdrm./1 bath single-family home 1929 Wood Panel 700 14.2%

4,917 100.0%

*Aggregate subject property has a weighted average year built of 1927 **Brick and wood siding on east side; wood frame and stucco on north, south and west sides

Construction Features

Foundation and Floor Structure: Rebar reinforced concrete pad type footing foundation with continuous perimeter footings, with concrete slab floor, rebar reinforced and sealed.

Exterior Walls: Building A – Brick and wood siding on east side; wood frame and stucco on north, south and west sides. Building B – Wood frame and plaster. Building C – Wood panels.

Roof Structure: Building A - Flat composition roof; Buildings B and C – Flat and slightly pitched roof with composition cover. The ages of the roof on all three subject buildings are unknown. No leak stains were noted on ceiling undersides in all the subject buildings.

Property Characteristics

Floor Area Ratio (FAR): 0.61 (based on an aggregate building area of 4,917 rentable square feet and 8,110 square feet of gross and net land area)

Site Footprint Coverage: 60.6% (based on an aggregate building area of 4,917 rentable square feet and 8,110 square feet of gross and net land area)

Building Amenities: Building A – Contains five demised work areas; two, single-fixture (one toilet, one sink) restrooms; and one additional restroom with a toilet, sink and tub. Building A is improved with painted concrete and tile floors, painted drywall walls and ceilings, Formica counter and wood cabinets, and ceiling and wall fixture lights. Building A has a minimum ceiling clearance of 10 feet, but is not provided HVAC (heating, ventilation and air conditioning) and on-site parking.

BUILDING B – 401 MAGNOLIA AVENUE

Living Room Dining Area

Kitchen and Laundry Area Bedroom 1

Bedroom 2 Bathroom


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Building B – Contains a living room, kitchen, two bedrooms (one with walk-in closet), one bathroom and a laundry room. Building B is improved with hardwood and vinyl tile floors, painted plaster walls and ceilings with fixture ceiling lights. In the kitchen, Building B has a sink, refrigerator/freezer, stove/oven, Formica countertops and wood cabinetry. Building B is not provided HVAC.

Building C – Contains a living room, kitchen, one bedroom, one bathroom and a laundry room. Building C is improved with hardwood, ceramic and vinyl tile floors, painted plaster walls, painted plaster and acoustical tile ceilings with fixture ceiling lights. In the kitchen, Building C has a sink, refrigerator/freezer, stove/oven, ceramic tile countertops and wood cabinetry. Building C is not provided air conditioning, but contains a floor-mounted heater. Both Buildings B and C have a minimum ceiling clearance of eight feet.

A concrete-paved driveway between Buildings B and C, plus a 25’ x 20’ two-car, enclosed parking garage at the end of the driveway, are shared by the residential tenants only. The garage is improved with sealed concrete floors, exposed plywood and drywall walls, exposed wood beam ceilings and a roll-up metal door.

Fire Sprinklers: None in all subject buildings

Landscaping/Site Improvements

Building A has wall-mounted perimeter lights. A walkway between Buildings A and B is

enclosed by a wrought-iron gate along Magnolia Avenue. Building B has metal awnings over the

exterior glass window openings which are secured by wrought-iron security bars. Entrances to

Buildings B and C have wrought-iron and screened metal security doors. Landscaping (grass and

low-lying plants are located along the frontage of Buildings B and C. Building C has a small,

landscaped area at the rear of the residence. Overall, the subject landscaping and site

improvements are in average condition.

BUILDING C – 403 MAGNOLIA AVENUE

Living Room Bedroom

Dining Room Kitchen

Laundry Room Closet

Side and Rear Views of 401 Magnolia Avenue Side and Front Views of 403 Magnolia Avenue

View at Rear of 403 Magnolia Avenue Driveway between 401 and 403 Magnolia Avenues

Two Car Garage Walkway between Buildings A and B


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Capital Value Analysis

Gross Potential Revenue:

Bldg. A – 3,536 rentable square feet @ $0.950 x 12 months .............................. $40,310 Bldg. B – 2 Bedroom/1 Bath = $1,800 per month x 12 months .......................... 21,600 Bldg. C – 1 Bedroom/1 Bath = $1,400 per month x 12 months .......................... 16,800 Estimated Expense Reimbursements .................................................................... 18,177 Total Gross Potential Revenue.............................................................................. $96,887

Effective Gross Revenue:

Total Gross Potential Revenue.............................................................................. $96,887 Less: Vacancy & Collection Loss (4.0%) ............................................................ (3,876) Total Effective Gross Revenue ............................................................................ $93,011

Less Operating Expenses:

Real Estate Taxes ............................................................................... $15,020 Property Insurance ............................................................................. 6,960 Utilities ............................................................................................... 425

Repairs & Maintenance ...................................................................... 4,270 Management Fees (3.0%) .................................................................. 2,790

Administrative.................................................................................... 985 Reserves ............................................................................................. 985 Total ................................................................................................... $31,435

Stabilized Net Operating Income:

Effective Gross Income ........................................................................................ $93,011 Expenses .............................................................................................................. (31,435) NOI ...................................................................................................................... $61,576

Capitalization:

$61,576 ÷ 5.50% ............................................................................................ $1,119,564

Less Rental Deficiency: Bldg. A - $3,359 - $2,400.00 x 13 months remaining ............................ (12,467)

Less Improvement Allowance ....................................................................... (20,000)

“As Is Leased Fee Estate Market Value ................................................... $1,087,097

Rounded To ........................................................................................... $1,090,000

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