Appraisal Report - LoopNet · 2018-07-31 · Appraisal Report 526 Emory Street San Jose, Santa Clara County, California 95110 Report Date: June 14, 2018 FOR: TMC Financing Mr. Bruce

Appraisal Report

526 Emory Street

San Jose, Santa Clara County, California 95110

Report Date: June 14, 2018

FOR:

TMC Financing Mr. Bruce Whitaker

10 South Third Street San Jose, CA 95113

Valbridge Property Advisors

3160 Crow Canyon Place, Suite 245 San Ramon, CA 94583 925.327.1660 phone Valbridge File Number: 408.279.3428 fax CA03-18-0330-000 valbridge.com

© 2018 VALBRIDGE PROPERTY ADVISORS

3160 Crow Canyon Place, Suite 245

San Ramon, CA 94583

925.327.1660 phone

408.279.3428 fax

valbridge.com

June 14, 2018

Stephen D. Kuhnhoff, MAI, ASA

925.327.1660, ext. 7203

[email protected]

Mr. Bruce Whitaker

TMC Financing

10 South Third Street

San Jose, CA 95113

RE: Appraisal Report

526 Emory Street


Dear Mr. Whitaker:

In accordance with your request, we have performed an appraisal of the above referenced property.

This appraisal report sets forth the pertinent data gathered, the techniques employed, and the

reasoning leading to our value opinions. This letter of transmittal is not valid if separated from the

appraisal report.

The subject property, as referenced above, is located on 526 Emory Street in San Jose California

95110 and is further identified as Assessor’s Parcel Number (APN) 259-09-021. The subject is a 0.28

acre or 12,000 square foot site. The improvements consist of a 2,100 square foot concrete block

industrial building. The property is owner-occupied by Labors International Union of America. The

improvements were built circa 1920 and are in fair to average condition.

We developed our analyses, opinions, and conclusions and prepared this report in conformity with

the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; the

Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal

Institute; the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA); and the

requirements of our client as we understand them.

Mr. Bruce Whitaker

TMC Financing

Page 2

© 2018 VALBRIDGE PROPERTY ADVISORS

The client in this assignment is TMC Financing and the intended users of this report are TMC

Financing, U.S. Small business Administration, and Bridge Bank and no others. The intended use is for

loan purposes and no other use. The value opinions reported herein are subject to the definitions,

assumptions and limiting conditions, and certification contained in this report.

The acceptance of this appraisal assignment and the completion of the appraisal report submitted

herewith are subject to the General Assumptions and Limiting Conditions contained in the report.

The findings and conclusions are further contingent upon the following extraordinary assumptions

and/or hypothetical conditions which might have affected the assignment results:

Extraordinary Assumptions: None.

Hypothetical Conditions: None.

Based on the analysis contained in the following report, our value conclusions are summarized as

follows:

Respectfully submitted,

Valbridge Property Advisors


Managing Director

California Certified License #AG001791

Component As Is

Value Type Market Value

Property Rights Appraised Fee Simple

Effective Date of Value June 8, 2018

Value Conclusion $1,325,000

$630.95 psf

Value Conclusions

526 EMORY STREET

TABLE OF CONTENTS

© 2018 VALBRIDGE PROPERTY ADVISORS Page i

Table of Contents

Cover Page

Letter of Transmittal

Table of Contents ....................................................................................................................................................................... i

Summary of Salient Facts ....................................................................................................................................................... ii

Aerial and Front Views ............................................................................................................................................................ iv

Location Map .............................................................................................................................................................................. v

Introduction ................................................................................................................................................................................. 1

Scope of Work ............................................................................................................................................................................ 4

Regional and Market Area Analysis .................................................................................................................................... 6

City and Neighborhood Analysis ..................................................................................................................................... 11

Site Description ....................................................................................................................................................................... 16

Improvements Description ................................................................................................................................................. 24

Subject Photos ......................................................................................................................................................................... 28

Assessment and Tax Data ................................................................................................................................................... 30

Market Analysis ....................................................................................................................................................................... 32

Highest and Best Use ............................................................................................................................................................ 37

Sales Comparison Approach .............................................................................................................................................. 39

Income Capitalization Approach ...................................................................................................................................... 58

Reconciliation ........................................................................................................................................................................... 77

Replacement Cost New and Insurable Value .............................................................................................................. 79

General Assumptions and Limiting Conditions .......................................................................................................... 80

Certification – Stephen D. Kuhnhoff, MAI, ASA .......................................................................................................... 87

Addenda .................................................................................................................................................................................... 88

Subject Photographs ........................................................................................................................................................ 89

Engagement Letter ........................................................................................................................................................... 90

Preliminary Title Report ................................................................................................................................................... 95

Purchase Agreement ...................................................................................................................................................... 113

Glossary ............................................................................................................................................................................... 142

Qualifications / License ................................................................................................................................................. 148

Valbridge Property Advisors Information / Office Locations ......................................................................... 152

526 EMORY STREET

SUMMARY OF SALIENT FACTS

© 2018 VALBRIDGE PROPERTY ADVISORS Page ii

Summary of Salient Facts

Summary of Salient Facts

Property Identification

Property Address 526 Emory Street


Latitude & Longitude 37.343845, -121.913243

Tax Parcel Number 259-09-021

Property Owner Laborers International Union of America

Site

Zoning Light Industrial (LI)

FEMA Flood Map No. 06085C0231H

Flood Zone Zone D

Primary Land Area 0.275 acres

Existing Improvements

Property Use Industrial

Investment Class C

Occupancy Type Industrial

Gross Building Area (GBA) 2,100 sf

Net Rentable Area (NRA) 2,100 sf

Number of Units 1

Number of Buildings 1

Number of Stories 1

Year Built 1920

Condition Fair to Average

Construction Class C - Concrete Block

Construction Quality Average

Percent Office 10.0%

Clear Height 9.0'

Surface Parking 25 spaces

Valuation Opinions

Highest & Best Use - As Vacant Light industrial use

Highest & Best Use - As Improved Light industrial use

Reasonable Exposure Time 6 months

Reasonable Marketing Time 6 months

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SUMMARY OF SALIENT FACTS

© 2018 VALBRIDGE PROPERTY ADVISORS Page iii

Our findings and conclusions are further contingent upon the following extraordinary assumptions


Extraordinary Assumptions: None.

Hypothetical Conditions: None.

Approach to Value As Is

Cost Not Developed

Sales Comparison $1,390,000

Income Capitalization

Direct Capitalization $1,250,000

Component As Is





$630.95 psf

Value Indications

Value Conclusions

526 EMORY STREET

AERIAL AND FRONT VIEWS

© 2018 VALBRIDGE PROPERTY ADVISORS Page iv

Aerial and Front Views

AERIAL VIEW

FRONT VIEW

526 EMORY STREET

LOCATION MAP

© 2018 VALBRIDGE PROPERTY ADVISORS Page v

Location Map

526 EMORY STREET

INTRODUCTION

© 2018 VALBRIDGE PROPERTY ADVISORS Page 1

Introduction

Client and Intended Users of the Appraisal The client in this assignment is TMC Financing and the intended users of this report are TMC

Financing, U.S. Small business Administration, and Bridge Bank and no others.

Intended Use of the Appraisal The intended use of this report is loan purposes and no other use.

Real Estate Identification The subject property is located at 526 Emory Street, San Jose, Santa Clara County, California 95110.

The subject property is further identified by Assessor Parcel Number 259-09-021.

Legal Description A copy of the Preliminary Title Report is included in the addenda of this report.

Use of Real Estate as of the Effective Date of Value As of the effective date of value, the subject was a meeting place property.

Use of Real Estate as Reflected in this Appraisal The subject is an industrial property.

Ownership of the Property According to NDC Data, title to the subject property is vested in Laborers International Union of

America.

History of the Property Ownership of the subject property has not changed within the past three years. The current owner

acquired the subject property on July 15, 1988 for a recorded consideration of $290,000. The grantor

was Novot, and the recording number was 0009758950. When appropriate, we have considered and

analyzed the known history of the subject in the development of our opinions and conclusions.

Listings/Offers/Contracts The subject is not currently listed for sale or under contract for sale. There have been offers to

purchase the subject property.

The subject property was listed around April 1, 2018 for $1,325,000. The listing agent indicated there

were five very interested parties. The subject is under contract for sale. The purchase contract is

dated April 18, 2018. The contract price is $1,325,000. A copy of the contract or other documentation

is included in the Addenda. The contract price is supported by our market value conclusion.

Type and Definition of Value The appraisal problem (the term “Purpose of Appraisal” has been retired from appraisal terminology)

is to develop an opinion of the market value of the subject property. “Market Value,” as used in this

526 EMORY STREET

INTRODUCTION


appraisal, is defined as “the most probable price that a property should bring in a competitive and

open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently

and knowledgeably, and assuming the price is not affected by undue stimulus.” Implicit in this

definition is the consummation of a sale as of a specified date and the passing of title from seller to

buyer under conditions whereby:

Buyer and seller are typically motivated.

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

interests;

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

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements

comparable thereto; and

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

creative financing or sale concessions granted by anyone associated with the sale.”1

The value conclusions apply to the value of the subject property under the market conditions

presumed on the effective date(s) of value.

Please refer to the Glossary in the Addenda section for additional definitions of terms used in this

report.

Valuation Scenarios, Property Rights Appraised, and Effective Dates of Value Per the scope of our assignment we developed opinions of value for the subject property under the

following scenarios of value:

We completed an appraisal inspection of the subject property on June 8, 2018.

Date of Report The date of this report is June 14, 2018, which is the same as the date of the letter of transmittal.

List of Items Requested but Not Provided Environmental Assessment Report

Assumptions and Conditions of the Appraisal The acceptance of this appraisal assignment and the completion of the appraisal report submitted

herewith are subject to the General Assumptions and Limiting Conditions contained in the report.

The findings and conclusions are further contingent upon the following extraordinary assumptions


1 Source: Code of Federal Regulations, Title 12, Banks and Banking, Part 722.2-Definitions

Valuation Scenario Effective Date of Value

As Is Market Value of the Fee Simple Interest June 8, 2018

526 EMORY STREET

INTRODUCTION


Extraordinary Assumptions

None.

Hypothetical Conditions

None.

526 EMORY STREET

SCOPE OF WORK


Scope of Work

The elements addressed in the Scope of Work are (1) the extent to which the subject property is

identified, (2) the extent to which the subject property is inspected, (3) the type and extent of data

researched, (4) the type and extent of analysis applied, (5) the type of appraisal report prepared, and

(6) the inclusion or exclusion of items of non-realty in the development of the value opinion. These

items are discussed as below.

Extent to Which the Property Was Identified The three components of the property identification are summarized as follows:

Legal Characteristics - The subject was legally identified via assessor parcel number, plat

map, site visit, Google Earth, and public records.

Economic Characteristics - Economic characteristics of the subject property were identified

via information provided by our client, as well as a comparison to properties with similar

locational and physical characteristics.

Physical Characteristics - The subject was physically identified via property inspection by

Stephen D. Kuhnhoff, MAI, ASA.

Extent to Which the Property Was Inspected I inspected the subject on June 8, 2018. The improvements were measured during the course of the

inspection.

Type and Extent of Data Researched We researched and analyzed: (1) market area data, (2) property-specific market data, (3) zoning and

land-use data, and (4) current data on comparable listings and transactions. We also interviewed

people familiar with the subject market/property type.

This report was prepared with the assistance of full-time trainee/assistant (Allison Hutchinson) who

performed and assisted in all tasks of the report under full appraiser’s supervision, including defining

the problem, purpose of the appraisal, scope of work, research and data collection, market/economic

analysis, highest and best use analysis, application of value approaches, reconciliation and written

appraisal report.

Type and Extent of Analysis Applied (Valuation Methodology) We observed surrounding land use trends, the condition of any improvements, demand for the

subject property, and relevant legal limitations in concluding a highest and best use. We then valued

the subject based on that highest and best use conclusion.

Appraisers develop an opinion of property value with specific appraisal procedures that reflect three

distinct methods of data analysis: the cost approach, sales comparison approach, and income

capitalization approach. One or more of these approaches are used in all estimations of value.

526 EMORY STREET

SCOPE OF WORK


Cost Approach - In the cost approach, the value indication reflects the sum of current

depreciated replacement or reproduction cost, land value, and an appropriate

entrepreneurial incentive or profit.

Sales Comparison Approach - In the sales comparison approach, value is indicated by recent

sales and/or listings of comparable properties in the market, with the appraiser analyzing the

impact of material differences in both economic and physical elements between the subject

and the comparables.

Income Capitalization Approach - In the income capitalization approach, value is indicated by

the capitalization of anticipated future income. There are two types of capitalization: direct

capitalization and yield capitalization, more commonly known as discounted cash flow (DCF)

analysis.

Approaches Applied - All of these approaches to value were considered. We assessed the

availability of data and applicability of each approach to value within the context of the

characteristics of the subject property and the needs and requirements of the client. Based

on this assessment the Sales Comparison and Income Capitalization Approaches were

developed. The Cost Approach was not used because market participants and other analysts

would not consider the cost approach applicable, and thus we have omitted them from our

analysis. Further discussion of the extent of our analysis and the methodology of each

approach is provided later in the respective valuation sections.

Appraisal Conformity and Report Type We developed our analyses, opinions, and conclusions and prepared this report in conformity with

the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; the

Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal

Institute; and the requirements of our client as we understand them. This is an Appraisal Report as

defined by the Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2a.

Personal Property/FF&E All items of non-realty are excluded from this analysis. The opinion of market value developed herein

is reflective of real estate only.

526 EMORY STREET

REGIONAL AND MARKET AREA ANALYSIS


Regional and Market Area Analysis

REGIONAL MAP

Overview The subject property is located in the San Francisco Bay Region, an area which is comprised of the

nine counties bordering the San Francisco Bay. According to the State of California Department of

Finance, the area had a combined population of approximately 7.71 million as of January 1, 2017.

The Department of Finance characterizes the San Francisco Bay Area by a moderate climate,

diversified economy and one of the highest standards of living in the United States.

Population Santa Clara County is the most populous of the nine counties comprising the San Francisco Bay

Region, with an estimated 1,938,180 residents as of January 1, 2017 according to the State of

California Department of Finance. San Jose is the largest city in the county and the third largest in

California, surpassing San Francisco.

According to the Site to Do Business projections, presented below, the county’s population is

expected to increase 1.2% between 2017 and 2022, while San Jose will increase approximately 1.2%

over the same period.

526 EMORY STREET



Transportation Excellent transportation routes and linkages to all major cities within the region and throughout the

state are primary reasons for the advancement of business activity in the Bay Area, including Santa

Clara County.

Air service in the area is provided by Norman

Y. Mineta San Jose International Airport,

which accommodated almost 12.5 million

passengers in 2017. San Francisco and

Oakland airports are also within an hour’s

drive from most portions of the county.

Although air travel is down over the past two

years, In 2010, San Jose International Airport

completed the first phase of a two-phase

expansion with the goal of increasing service

to 17.3 million travelers a year, at a cost of

$1.3 billion. Planning for the second phase,

nine additional gates and a new concourse

extension at the south end of Terminal B,

began early in 2018.

The area has a well-developed freeway system although traffic congestion is unquestionably one of the

negative aspects. The county’s transportation network also includes a number of expressways, which

provide streamlined access to most interior locations. Lawrence Expressway, San Tomas Expressway and

Foothill Expressway run north-south, while Central Expressway and Montague Expressway run roughly

east-west.

Employment High-technology employment and a skilled workforce translate into relatively high-income levels,

and Santa Clara County is one of the most affluent metropolitan regions in the nation. Silicon Valley’s

economy is stable, although its narrow range of driving industries has kept recent growth very slow.

Significant employment sectors within Santa Clara County include manufacturing; professional,

scientific, and technical services; health care; retail; and educational services. Some of the largest

employers are associated with the computer industry such as Adobe, Apple, AMD, and Hewlett-

Packard; hospitals such as the VA Medical Center, Kaiser Permanente, and the San Jose Medical

Population

Annual %

Change Estimated Projected

Annual %

Change

Area 2000 2010 2000 - 10 2017 2022 2017 - 22

United States of America 281,421,906 308,745,538 1.0% 327,514,334 341,323,594 0.8%

California 33,871,648 37,253,956 1.0% 39,611,295 41,298,900 0.9%

Santa Clara County, CA 1,682,585 1,781,642 0.6% 1,958,087 2,075,690 1.2%

San Jose, CA 911,461 952,705 0.5% 1,042,940 1,103,315 1.2%

Source: Site-to-Do-Business (STDB Online)

526 EMORY STREET



Center; space and aerotech including NASA and Lockheed Martin; and educational facilities such as

San Jose State University and Stanford University School of Medicine.

Unemployment The unemployment rate in Santa Clara County is currently less than the rates of the state and nation.

The County unemployment rate was 2.6% as of February 2018 (most recent available). The State of

California was at 4.2% while the Nation was at 4.1% for the same time period. Unemployment rates

locally and nationwide have been on a decreasing trend over the last several years, as shown in the

table below.

The information below was obtained from the “UCLA Anderson Forecast for the Nation: December

2017 Report,” presented by the UCLA Anderson School of Management.

The forecast for 2018 is sunny, while 2019 will be cloudy according to the Anderson School of

Management. The national GDP is growing at a strong rate and is expected to continue to do so into

through the second quarter of 2018, but then as the unemployment rate drops below 4% and

employment growth slows due to a shortage of labor, growth will drop back to the 2% growth rate

seen previously. By the end of 2019, the cloudy predictions are for a growth rate of 1.5% or possibly

lower.

Employment by Industry - Santa Clara County, CA

2017 Percent of

Industry Estimate Employment

Agriculture/Mining 6,643 0.70%

Construction 51,243 5.40%

Manufacturing 167,015 17.60%

Wholesale trade 19,928 2.10%

Retail trade 85,406 9.00%

Transportation/Utilities 27,520 2.90%

Information 34,162 3.60%

Finance/Insurance/Real Estate Services 44,601 4.70%

Services 491,556 51.80%

Public Administration 20,877 2.20%

Total 948,950 100.0%


Unemployment Rates

Area YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 2017 YTD

United States of America 9.3% 8.5% 7.9% 6.7% 5.6% 5.0% 4.7% 4.1%

California 11.0% 9.6% 8.0% 6.6% 5.6% 5.0% 4.2% 4.2%

Santa Clara County, CA 8.4% 7.0% 5.5% 4.3% 3.7% 3.3% 2.6% 2.6%

San Jose, CA 9.4% 7.8% 6.1% 4.8% 4.1% 3.7% 2.9% 2.9%

Source: Bureau of Labor Statistics - Year End - National & State Seasonally Adjusted

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Monetary Policy In the Post-Yellen Era

The Janet Yellen era is coming to an

end with Jerome Powell’s

appointment, however his views on

monetary policy are very similar to

hers on monetary policy and not

many changes are expected on that

front. That said, on regulatory policy,

Powell is anticipated to be more open

than Yellen when it comes to

reconsidering the 2009-2012 financial

crisis regulations. Therefore, it is

anticipated that the gradual interest

rate normalization policy that started

in December and continued with a 25

basis point increase to the current

1.75% rate in March, will continue

with two more increases in 2018 and

then well into 2019. By the end of

2019, the federal funds rate will likely approximate 3%.

Powell’s Fed will also continue the policy of gradually shrinking the Fed’s balance sheet, which began

in October – quantitative easing that expanded the balance sheet from $800 billion to over four

trillion dollars over several years, now with a target of tightening back to $2.5-$3.0 trillion.

Inflation

It appears that the second quarter slowdown in inflation was transitory and inflation will continue in

excess of 2% at a steady pace for the foreseeable future. The primary source for the rising inflation

rate will be a significant rebound in wage growth, which after creeping along around 2%, is forecast

to accelerate to approximately 4% by late 2018 on a year-over-year basis.

Real consumption spending is maintaining its strength experienced in 2016 by increasing 2.7% and

2.8% in 2017 and 2018, respectively. However, as auto sales slow in 2019 consumption growth will

slip back to 2.2%. However, it is forecast by the Anderson report that as long as stock and house

prices remain elevated, the consumer, or at least the high-end consumer, will remain in good shape.

In the case of the lower end consumer they are encouraged by Wal*Mart reporting a strong 2.7%

increase in year-over-year same store sales in their latest quarter.

Global Economy

In response to a recovering global economy, real exports are recovering from the near zero growth

of 2015 and 2016. Real exports are estimated to increase by 3.2% this year and 4.5% and 4.1% in

2018 and 2019, respectively.

The real risk to our export forecast and for that matter the entire forecast is political. In less than a

year, President Trump has dismantled the Trans Pacific Partnership (TPP) trade treaty and the global

climate accord. The North American Free Trade Treaty (NAFTA) could be next. Leaving NAFTA is not

so simple because it would undo countless supply chains among the three countries (U.S., Canada

and Mexico) involved, and the gross trade volumes among the three NAFTA partners amounts to

526 EMORY STREET



over one trillion dollars per year. Especially hard hit would be the U.S. automobile industry where

parts cross borders several times in the manufacturing of a single automobile. In the view of the

Anderson Report, should the U.S. leave NAFTA, the growth outlook would deteriorate and the

chance of a recession in late 2018 or 2019 would significantly increase.

The California Forecast

In the September 2017 quarterly UCLA Anderson forecast essay UCLA Anderson Forecast Director

and Senior Economist Jerry Nickelsburg states that the forecast for California’s unemployment is for

continued growth, but that is likely due to the federal administration’s difficulty getting legislation

through Congress and a result of more job seekers brought into the market, rather than more jobs

being available. The tightening of immigration rules is expected to have a significant effect in

California, however due to protections already in place, not as big an effect as they might have

otherwise had. California is expected to grow at a rate slightly faster than the US as a whole, and be

at a 4.5% unemployment rate by the end of 2019.

Median Household Income In Santa Clara County, San Jose, the county seat, ranks first out of the entire nation in terms of

median household income for major metropolitan areas. San Francisco, about 50 miles to the north

of San Jose, also ranked as one of the wealthiest cities in the nation: it holds the number two spot

with a median household income of about 9% less than San Jose.

Total median household income for the region is presented in the following table. Overall, the

subject compares favorably to the state and the country.

Conclusions Historically, the Santa Clara County region has been considered a desirable place to both live and

work. Physical features and a strong local economy attract both businesses and residents. It is a

worldwide leader in technology and a regional employment center, with an increasingly diversified

economy. While traffic congestion will continue to be a problem, residents remain among the most

affluent in the country.

526 EMORY STREET

CITY AND NEIGHBORHOOD ANALYSIS


City and Neighborhood Analysis

NEIGHBORHOOD MAP

The subject is located in the City of San Jose. San Jose is the largest city in the county and is the

County Seat. Historically, San Jose was a support city for the surrounding agricultural industry, acting

as a cannery and distribution center. More recently, San Jose served as a bedroom community for

Sunnyvale and Santa Clara (the original “Silicon Valley”), providing affordable housing for workers.

Today, San Jose has come into its own right as an industrial and commercial center.

San Jose is located in the heart of “Silicon Valley,” in the central portion of Santa Clara County. San

Jose is bordered by the City of Santa Clara and the San Francisco Bay to the north, the City of

Morgan Hill to the south, and the cities of Saratoga and Cupertino to the west.

San Jose is the largest city in Santa Clara County, both in terms of population and area. The Urban

Service Area is approximately 87,000 acres, of which 20% is vacant or unused. About 40% of this

vacant land is designated for residential development. These residential land reserves will enable San

Jose to accommodate demands for new housing created by future economic development.

Newer industrial development in San Jose consists of administrative offices, research and

development, and light manufacturing uses, replacing many of the heavier manufacturing uses that

526 EMORY STREET



historically characterized the central city industrial areas. In fact, some of the older, heavy-industrial

development is being rehabilitated and converted to new, high-technology uses. Most of San Jose’s

industrial development has a low-profile, landscaped industrial park character.

San Jose has excellent access to local transportation and is served by many regional transportation

networks. Interstate 280 runs within the central region of the city in an east-west direction and

provides access to the San Mateo peninsula and San Francisco to the northwest. Interstate 280

eventually turns into Interstate 680, when it crosses east of Highway 101. At this point it veers

northeast toward the East Bay and Tri-Valley areas of Alameda County. Interstate 880 originates in

the East Bay and slashes through San Jose where it changes into Highway 17 where it continues

onward toward the Pacific Ocean and Santa Cruz.

The Bayshore Freeway, Highway 101, traverses the city in a generally north-south direction and also

links to the peninsula and San Francisco with San Jose. The Stevens Creek Freeway, Highway 85, runs

along the western boundary of the city and links the two major east-west routes. Highway 85 was

recently extended from Interstate 280 south to the southern portions of San Jose, Los Gatos, and

Saratoga. This extension has dramatically improved access to these desirable residential areas with

the northern employment centers in Mountain View. Similarly, Highway 237 runs in an east-west

direction through the northern portion of San Jose connecting Mountain View to the west with the

City of Milpitas to the east.

The San Jose downtown core has undergone major renovation and revitalization over the last 15

years. Improvements to the freeway system, as well as construction of the new light rail system, have

significantly improved access to the downtown core from other areas of the city and county. Other

major downtown public projects include the Children’s Discovery Museum, the new San Jose

Convention Center, as well as the San Jose Arena, home of the San Jose Sharks of the National

Hockey League and also the San Jose Barracuda of the American Hockey League, who began play in

San Jose with their 2015-16 seasons.

Today, San Jose’s revitalized Downtown Core has evolved into financial, office, cultural and

entertainment centers. Outside the Downtown Core Area, commercial development exists in the

form of neighborhood and community commercial centers, strip commercial developments along

arterial streets, and regional shopping centers.

Neighborhood Location and Boundaries The subject neighborhood is located in the Central section of San Jose. The area is suburban in

nature. The neighborhood is bounded by I-880/Nimitz Freeway to the north, Highway 87 to the east,

and The Alameda to the south and southwest.

Major neighborhood arterials include Coleman and Stockton Avenues in a north-south direction and

Taylor and Hedding Streets in the east-west direction. The San Jose international Airport dominates

the north portion of the neighborhood. Coleman Avenue has an infill community shopping center

anchored by Trader Joe’s and a Target Store. The subject immediate neighborhood is bounded by

Highway 880 to the northwest Coleman Avenue to the northeast and the railroad tracks to the

southwest and Taylor Avenue to the southeast.

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Immediate neighborhood consists primarily of industrial properties constructed in the 1940s and 50s.

There are few older residences as well. Other industrial uses the neighborhood includes auto body,

auto repair, and industrial yard space used by contractors.

Demographics The following table depicts the area demographics in San Jose within a one-, three-, and five-mile

radius from the subject.

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Transportation Routes Within the immediate area of the subject, transportation access helps define the character of its

development. Major travel and commuter routes within the area of the subject include I-880 and The

Alameda. Access to the area is considered good.

Neighborhood Land Use The subject neighborhood is located in an area with primarily industrial land uses. An approximate

breakdown of the development in the area is as follows:

Neighborhood Demographics

Radius 1 mile 3 miles 5 miles

Population Summary

2001 Population 12,316 185,064 569,024

2011 Population 14,222 196,796 609,643

2018 Population 15,480 218,349 681,043

2023 Population Estimate 16,357 232,608 725,061

Annual % Change (2018 - 2023) 1.1% 1.3% 1.3%

Housing Unit Summary

2001 Housing Units 4,814 65,945 191,990

% Owner Occupied 34.1% 37.7% 47.0%

% Renter Occupied 61.2% 59.3% 50.5%

2011 Housing Units 5,965 76,173 218,218

% Owner Occupied 31.4% 36.8% 43.9%


2018 Housing Units 6,335 82,565 238,362

% Owner Occupied 30.1% 35.8% 43.0%


2023 Housing Units 6,744 88,260 254,051

% Owner Occupied 29.4% 35.2% 42.6%


Annual % Change (2018 - 2023) 1.3% 1.3% 1.3%

Income Summary

2018 Median Household Income $82,455 $68,163 $80,249

2023 Median Household Income Estimate $102,056 $82,018 $91,987

Annual % Change 4.4% 3.8% 2.8%

2018 Per Capita Income $46,188 $36,863 $37,830

2023 Per Capita Income Estimate $54,810 $43,322 $43,573

Annual % Change 3.5% 3.3% 2.9%


526 EMORY STREET



LAND USES

Developed 95%

Built up: 95

Residential: 10%

Retail: 25%

Office: 20%

Industrial: 45%

Vacant: 5%

Conclusions In summary, the subject is located in the western portion of the City of San Jose. The subject’s

immediate neighborhood consists of a variety of industrial uses. No adverse neighborhood

conditions were noted. Overall, the subject neighborhood is in the mature stage of its life cycle.

526 EMORY STREET

SITE DESCRIPTION


Site Description

The subject site is located on 526 Emory Street in San Jose, California 95110. The characteristics of

the site are summarized as follows:

Site Characteristics Location: 526 Emory Street in San Jose, California 95110

Gross Land Area: 0.28 Acres or 12,000 SF

Usable Land Area: 0.28 Acres or 12,000 SF

Usable Land %: 100.0%

Shape: Square

Topography: Level

Drainage: Assumed adequate

Grade: At street grade

Utilities: All are available to the site.

Off-Site Improvements: Off-site improvements include concrete curbs gutters sidewalks

and streetlights.

Interior or Corner: Interior

Signalized Intersection: No: No traffic signal at, or near, the site

Excess Land: None

Surplus Land: None

Street Frontage / Access Frontage Road Primary

Street Name: Emory Street

Street Type: Tertiary

Frontage (Linear Ft.): 100

Number of Curb Cuts: 2

Additional Access Alley Access: No

Water or Port Access: No

Rail Access: No

Flood Zone Data Flood Map Panel/Number: 06085C0231H

Flood Map Date: 05-18-2009

Flood Zone: Zone D

Zone D designation is used for areas where there are possible but

undetermined flood hazards. In areas designated as Zone D, no

analysis of flood hazards has been conducted. Mandatory flood

526 EMORY STREET

SITE DESCRIPTION


insurance purchase requirements do not apply, but coverage is

available.

Site Area in Flood: 0.00%

Other Site Conditions Soil Type: A detailed soil analysis was not available for review. Based on

information provided by the client and our property inspection, it

appears that the soils are stable and suitable for a variety of uses.

Environmental Issues: We have not been provided a Phase I Site Assessment on the

subject property. However, a physical inspection indicated no

signs of detrimental site contamination. Further, the client has

indicated that "the Appraiser may assume that no contamination

or environmental conditions exist which would impact value."

Thus, our value estimate is predicated on the assumption that

there is no toxic contamination that would have an impact on the

subject site.

Easements/Encroachments: A Preliminary Title Report by Old Republic Title Company, dated

April 11, 2018, was provided to the appraiser for review. The

report did not identify any easements or encumbrances that exist

materially which would affect the value of the subject, either

positively or negatively.

Earthquake Zone: The property is not located in an Alquist-Priolo Special Studies

Zone for earthquake hazard. Earthquake hazard is typical for the

overall area.

Adjacent Land Uses North: Light industrial, manufacturing, assembly place

South: Retail, automotive repair, industrial

East: Community garden, industrial, vacant land

West: Industrial and single-family housing

Site Ratings Access: Good

Visibility: Average

Zoning Designation Zoning Jurisdiction: City of San Jose

Zoning Classification: LI, Light Industrial

General Plan Designation: Light Industrial

Permitted Uses: A variety of light industrial uses

Zoning Comments: The light industrial zoning district is intended for a wide variety of

industrial uses and excludes uses with unmitigated hazardous or

526 EMORY STREET

SITE DESCRIPTION


nuisance effects. The design controls are less stringent than those

for the industrial park zoning district. Examples of typical uses are

warehousing, wholesaling, and light manufacturing. Sites

designated light industrial may also contain service

establishments that serve only employees of businesses located

in the industrial areas. In addition, warehouse retail uses may be

allowed where they are compatible with adjacent industrial uses

and will not constrain future use of the subject site for industrial

purposes. When located within an area with a combined

industrial/ commercial general plan designation, a broader range

of uses will be considered including uses such as retail, church/

religious assembly, social and community centers, recreational

uses, or similar uses but only when the non-industrial use does

not result in the imposition of additional constraints on

neighboring industrial users in the exclusively industrial areas.

Development Standards:

Minimum lot area: 10,000 square feet

Minimum setback:

Front: 15 feet

Side: 0 feet from property line, or 25 feet from residential

district, whichever is greater

Rear: 0 feet from property line, or 25 feet from residential

district, whichever is greater

Maximum height: 50 feet, unless a different max. is

established in Chapter 20.85

Minimum street frontage: 60 feet

Parking (for industrial services): 1 space per 350 square

feet of floor area

For outdoor storage: 1 space per employee

For more information regarding light industrial zone

development standards, please contact the San Jose Planning

Division at (408) 535-3555.

Analysis/Comments on Site The subject site is an interior parcel containing 0.28 acres or 12,000 square feet. It is generally level

and at street grade with all utilities available. The site frontage is improved with concrete curbs,

gutters, sidewalks, and streetlights. The site has average visibility and access, and the site utility is

rated as average. Overall, the site is well suited for a variety of industrial uses.

526 EMORY STREET

SITE DESCRIPTION


TAX/PLAT MAP

526 EMORY STREET

SITE DESCRIPTION


SITE PLAN

526 EMORY STREET

SITE DESCRIPTION


FLOOD MAP

526 EMORY STREET

SITE DESCRIPTION


TOPOGRAPHIC MAP

526 EMORY STREET

SITE DESCRIPTION


ZONING MAP

526 EMORY STREET

IMPROVEMENTS DESCRIPTION


Improvements Description

The subject property is improved with a concrete block industrial building containing 2,100 square

feet and built circa 1920. The interior build out includes an office and apparent restrooms. The build

out contains approximately 210 square feet or approximately 10% of the building. The remaining

building area is an open area. There are grade level rollup doors. It appears that the building was

likely used for light industrial historically. It is currently used as a meeting hall for retired laborers.

Improvement Characteristics Property Type: Industrial

Property Subtype: Industrial

Occupancy Type: Industrial

Tenancy: Single-Tenant

Investment Class: Class C

Number of Buildings: 1

Number of Stories 1

Construction Class: C - Concrete Block per Marshall Valuation Service

Construction Quality: Average

Gross Building Area (GBA): 2,100 SF (based on our measurements)

Net Rentable Area (NRA): 2,100 SF (based on our measurements)

Features Clear Height: 9.00 feet

Drive-In Doors: 2

Ratios & Parking Land-to-Building Ratio: 5.71 to 1 (Usable Land/GBA)

Floor Area Ratio (FAR): 0.18 (based on GBA)

Parking Spaces: 25

Parking Ratio: 11.9 (per 1,000 sf of GBA)

Age / Life Year Built: 1920

Renovated/Yr. Renovated: No

Condition: Fair to Average

Actual Age: 98 years

Effective Age: 50 years

Typical Building Life: 60 years

Remaining Economic Life: 10 years

526 EMORY STREET



Structural Characteristics Foundation: Concrete slab on grade

Building Frame: Concrete block

Exterior Walls: Block/Stucco

Roof Type / Material: Flat design with wood joist and sheathing and a composition built-

up cover.

Interior Characteristics Floors: Concrete

Walls: Concrete block and painted drywall

Ceiling: A combination of open ceilings and dropped acoustical tile

Lighting: Fluorescent and incandescent

Restrooms: 2 restrooms

Mechanical Systems Electrical: Adequate for current use

Plumbing: Adequate.

Heating: Space heaters

Air Conditioning: None

Fire Protection/Sprinklers: None

Number of Elevators: 0

Site Improvements Site Improvements: The site is improved with asphalt surface parking and

landscaping.

Landscaping: Minimal

Legal, Conforming Status Legally Permitted Use: Yes

Conforms to Parking: Yes

Conformity Conclusion: The subject property represents a legal and conforming use.

Deferred Maintenance No significant deferred maintenance was noted during our inspection.

Analysis/Comments on Improvements The property is improved with a one story light industrial building containing 2,100 square feet. The

building has an office and two restrooms with the remainder open bay area. The building has two

rollup doors. The remainder of the site is improved with asphalt surface parking and minimal

landscaping. There is also a 225 square foot canopy. A portion of the site is chain-link fencing. The

street frontage portion of the parking lot has wrought iron fence with a rolling entry gate. The

526 EMORY STREET



building is currently used utilized as a meeting hall for contract laborers. It appears to be originally

built for a light industrial use. The functional utility of the property is average based upon a

comparison of similar properties in the market area.

526 EMORY STREET



BUILDING SKETCH

526 EMORY STREET

SUBJECT PHOTOS


Subject Photos

Emory Street looking north, subject on right

Parking lot entrance

526 EMORY STREET

SUBJECT PHOTOS


View of building from Emory Street

South elevation

Additional pictures in the Addenda

526 EMORY STREET

ASSESSMENT AND TAX DATA


Assessment and Tax Data

Assessment Methodology The State of California has provided for a unified system to assess real estate for property taxes.

Assessment Districts are established on a county basis to assess real estate within the county. The

appraised property falls under the taxing jurisdiction of Santa Clara County and is subject to both

general taxes and direct assessments.

Assessed Values and Property Taxes The subject’s assessed values, applicable tax rates and total taxes including direct assessments are

shown in the following table:

General Taxes

The amount of General Taxes due is quantified by multiplying the assessed value by the tax rate. In

the State of California, real estate is assessed at 100% of market value as determined by the County

Assessor’s Office. The tax rate consists of a base rate of 1% plus any bonds or fees approved by the

voters. The County Tax Rate for the subject property is 1.195660%.

Direct Assessments

Direct assessments are tax levies that are not dependent upon the assessed value of the property.

They are levied regardless of assessment. According to the Santa Clara County Tax Collector’s Office,

the direct assessments for the subject property totals $1,109.

Current and Future Taxes

Proposition 13 was passed by voters in June 1978 and substantially changed the taxation of real

estate in California. This constitutional amendment rolled back the base year for assessment

purposes to the tax year 1975-1976. Annual increases in assessed value are limited to 2 percent per

year, regardless of the rate of inflation. Real estate is subject to re-appraisal to current market value

upon a change in ownership or new construction. Property assessments in years subsequent to a

change of ownership or new construction are referred to as factored base values.

Proposition 8, which passed in 1979, states that the Assessor shall lower tax roll values to fair market

value whenever the assessed value exceeds fair market value. It mandates that the lower of fair

market value or factored base value be placed on the assessment roll. When fair market values are

enrolled, the Assessor reassesses the property annually until such time as fair market value again

equals or exceeds the factored base year value. For properties that have been owned for several

years, the assessed value may not reflect the current fair market value. Furthermore, due to

adjustments following a Prop 8 reduction, increases in assessed value can increase substantially more

than 2% per year until the assessment again matches the factored base year value.

Tax Schedule

Parcel

Assessor's

Appraised

Assessor's

Appraised Assessed Tax Millage Effective Special Tax

Tax Year Number Value - Land Value - Imp. Value Rate Rate Tax Rate Assessments Expense

1 2018 259-09-021 $426,865 $41,623 $468,488 $1.195660 per $100 1.195660% $1,109 $6,711

Total $426,865 $41,623 $468,488 $1,109 $6,711

526 EMORY STREET

ASSESSMENT AND TAX DATA


Conclusions According to the Santa Clara County Tax Assessors Office the subject’s property taxes are current as

of the date of value.

526 EMORY STREET

MARKET ANALYSIS


Market Analysis

MARKET AREA MAP

The subject is a single tenant industrial building. Colliers International tracks Industrial market

conditions in the Silicon Valley and publishes quarterly reports. The report discusses market

conditions including vacancy, asking rental rates and the amount of product in areas throughout

Santa Clara County for Q1 2018 (most recent report). We will also include a brief discussion of the

San Jose submarket which the subject property competes in, with data provided by CoStar Analytics.

526 EMORY STREET

MARKET ANALYSIS


526 EMORY STREET

MARKET ANALYSIS


Industrial Market Conditions –Industrial For industrial properties, growth appears to be experiencing modest but positive change for the

overall Silicon Valley metro wide area. The inventory for industrial properties totals 63,665,414 square

feet; of this amount, there are 775,414 square feet available, indicating a vacancy rate of 2.8%. The

rental rate has experienced a decrease over the previous quarter, which had a higher reported

vacancy rate of 3.2%. The current asking rental rate was $1.29 per square foot per month, NNN.

The San Jose local market appears to be outperforming Silicon Valley in terms of vacancy rates, but is

also slightly below the market average metro-wide rental rate. As of Q1 2018, the current vacancy

rate was reportedly 2.0% for San Jose, which is slightly lower than the previous quarter’s vacancy rate

of 3.6%. On the other hand, the San Jose average asking rate was reportedly $12.63 per square foot

or $1.05 per square foot per month, NNN for light industrial properties, which is lower than the

Silicon Valley average rate of $1.29.

Owner-User Market

Buyers of similar industrial properties are primarily owner-users. Owner-users tend to buy properties

at lower capitalization rates than investors based on business dynamics relating to buy versus lease

decisions and tax benefits. The upshot of this is that owner-users are sometimes willing to pay more

for a property than a typical investor, based on what other owner-users are paying for similar

properties. This is contrasted with an investment purchaser who typically values a property based on

the value of the income stream.

Owner-user demand for industrial product has been driven by historically low interest rates in recent

years which have placed downward pressure on overall capitalization rates relative to owner-user

purchases.

526 EMORY STREET

MARKET ANALYSIS


Capitalization & Yield Rate Trends We have considered the historical average capitalization and yield rates for industrial warehouse

properties over the last seven years, as reported by the Real Estate Research Corp. (“RERC”). The

historical rates are illustrated in the following table.

Rates have been falling, albeit not consistently, since 2009. In the beginning of 2009, the average cap

rate was about 8.2% and the average yield rate was about 8.0%. Since then, rates have decreased

significantly. The average cap rate as of the First Quarter of 2018 was 6.5% and the average yield rate

was 7.6%.

Notably, cap rates have increased marginally over the past year and appear to be stabilizing,

somewhat. Historically, the spread between capitalization and yield rates has been anywhere from

about 100 to 200 basis points. Over the past five years, the spread has averaged about 200 basis

points; that is, yield rates have been about 2.0 percentage points higher than capitalization rates.

526 EMORY STREET

MARKET ANALYSIS


Summary The San Jose industrial market, as well as the metro-wide Silicon Valley market, have seen positive

gains over the last year and are projected to show positive trends in terms of overall growth. Overall,

the short and long-term outlook for the industrial market and the subject property remains good.

Santa Clara County is considered to be one of the premier industrial locations in the Bay Area. It is

our opinion that the subject property is the most attractive to an owner user with an industrial tenant

considered to be the most likely user.

526 EMORY STREET

HIGHEST AND BEST USE


Highest and Best Use

The Highest and Best Use of a property is the use that is legally permissible, physically possible, and

financially feasible which results in the highest value. An opinion of the highest and best use results

from consideration of the criteria noted above under the market conditions or likely conditions as of

the effective date of value. Determination of highest and best use results from the judgment and

analytical skills of the appraiser. It represents an opinion, not a fact. In appraisal practice, the concept

of highest and best use represents the premise upon which value is based.

Analysis of Highest and Best Use As If Vacant The primary determinants of the highest and best use of the property as if vacant are the issues of

(1) Legal permissibility, (2) Physical possibility, (3) Financial feasibility, and (4) Maximum productivity.

Legally Permissible

The subject site is zoned LI, Light Industrial which controls the general nature of permissible uses but

is appropriate for the location and physical elements of the subject property, providing for a

consistency of use with the general neighborhood. The location of the subject property is

appropriate for the uses allowed, as noted previously, and a change in zoning is unlikely. There are

no known easements, encroachments, covenants or other use restrictions that would unduly limit or

impede development.

Physically Possible

The physical attributes allow for a number of potential uses. Elements such as size, shape, availability

of utilities, known hazards (flood, environmental, etc.), and other potential influences are described in

the Site Description and have been considered. There are no items of a physical nature that would

materially limit appropriate and likely development.

Financially Feasible

The probable use of the site for industrial development conforms to the pattern of land use in the

market area. A review of published yield, rental and occupancy rates suggest that there is a balanced

supply and demand is sufficient to support construction costs and ensure timely absorption of

additional inventory in this market. Therefore, near-term speculative development of the subject site

is marginally financially feasible.

Maximally Productive

Among the financially feasible uses, the use that results in the highest value (the maximally

productive use) is the highest and best use. Considering these factors, the maximally productive use

as though vacant is for industrial use.

Conclusion of Highest and Best Use As If Vacant

The conclusion of the highest and best use as if vacant is for industrial use.

Analysis of Highest and Best Use as Improved In determining the highest and best use of the property as improved, the focus is on three

possibilities for the property: (1) continuation of the existing use, (2) modification of the existing use,

or (3) demolition and redevelopment of the land.

526 EMORY STREET

HIGHEST AND BEST USE


Retaining the improvements as they exist meets the tests for physical possibility, legal permissibility

and financial feasibility. The improvements are in fair to average condition and any alternative use of

the existing improvements is unlikely to be economically feasible. The market value of the property

as improved exceeds the combination of vacant site value plus cost of demolition of the

improvements. Therefore demolition and redevelopment of the site is not maximally productive.

Conclusion of Highest and Best Use As Improved

The highest and best use of the subject property, as improved, is light industrial use.

Excess/Surplus Land

The improved subject property has a land-to-building ratio that is larger than generally associated

with similar properties. We considered whether the additional land area is excess and allows for

separate development, or if it is simply surplus land that provides some additional utility for

expansion, storage, etc. In the first case, ‘excess’ land may be legally separated from the parent tract

and have a distinctly separate HBU while in the second, the land is not separable from the larger

tract.

We note that the subject property does not contain any excess or surplus land.

Most Probable Buyer As of the date of value, the most probable buyer of the subject property is an owner-user.

526 EMORY STREET

SALES COMPARISON APPROACH


Sales Comparison Approach

Methodology The sales comparison approach develops an indication of market value by analyzing closed sales,

listings, or pending sales of properties similar to the subject, focusing on the difference between the

subject and the comparables using all appropriate elements of comparison. This approach is based

on principles of supply and demand, balance, externalities, and substitution, or the premise that a

buyer would pay no more for a specific property that the cost of obtaining a property with the same

quality, utility, and perceived benefits of ownership.

Unit of Comparison

The primary unit of comparison selected depends on the appraisal problem and nature of the

property. The primary unit of comparison in the market for industrial properties such as the subject

property is price per square foot.

Elements of Comparison

Elements of comparison are the characteristics or attributes of properties and transactions that cause

the prices of real estate to vary. The primary elements of comparison considered in sales comparison

analysis are as follows: (1) property rights conveyed, (2) financing terms, (3) conditions of sale, (4)

expenditures made immediately after purchase, (5) market conditions, (6) location, and (7) physical

characteristics.

Comparable Sales Data

To obtain and verify comparable sales of industrial properties, we conducted a search of public

records, field surveys, interviews with knowledgeable real estate professionals in the area, as well as a

review of our internal database. The subject is an industrial property with a low FAR and ample yard

space located in the San Jose market area. We searched San Jose and nearby competitive cities

within Santa Clara County for similar sized buildings.

We have included five sales and one listing in our analysis, as these comparables are judged to be

the most comparable in developing an indication of the market value of the subject property. The

following table summarizes each of the sale comparables and is followed by a map displaying the

location of each comparable in relation to the subject. Summary sheets detailing each comparable

follow the location map.

The comparable sales range in size from 1,034 to 4,208 square feet. Before adjustment, the

comparables indicate a unit price range from $421.82 to $967.12 per rentable square foot.

526 EMORY STREET



Improved Sales Summary

Comp. Year Occupancy Unadjusted

No. Date of Sale Location Built NRA at Sale Sale Price PSF

1 May-18 457 Sam Cava Lane Campbell, California 1987 2,380 100.0% $1,375,000 $577.73

2 April-18 532 McKendrie Street San Jose, California 1925 1,034 100.0% $1,000,000 $967.12

3 January-18 250 Commercial Street San Jose, California 1960 4,208 100.0% $1,775,000 $421.82

4 June-17 960 American Street San Carlos, California 1950 2,400 100.0% $1,650,000 $687.50

5 May-17 750 Industrial Road San Carlos, California 1968 3,500 0.0% $2,200,000 $628.57

6 Listing 120 San Jose Avenue San Jose, California 1957 1,708 100.0% $1,399,000 $819.09

526 EMORY STREET



COMPARABLE SALES MAP

526 EMORY STREET



INDUSTRIAL COMPARABLE 1


Property/Sale ID 99693/436411

Property Type Manufacturing

Address 457 Sam Cava Lane

City, State Zip Campbell, California 95008

County Santa Clara

MSA

Submarket Campbell

Latitude/Longitude 37.285261/-121.941975

Tax ID 421-09-057

Transaction Data

Sale Date May 15, 2018

Sale Status Recorded

Grantor Richard Zehring

Grantee Arttu Takala

Property Rights Fee Simple

Financing Cash

Conditions of Sale 1031 exchange

Recording Number 0023933236

Days on Market 51 Days

Sale Price $1,375,000

Adjusted Price $1,375,000

Property Description

Gross Building SF 2,380

Net Rentable SF 2,380

No. of Units 0

No. of Lots 1

Stories 1

Building Condition Average

Building Quality Average

Construction Class C - Masonry

Year Built 1987

Investment Class B

Tenancy Single-Tenant

Office Space % 0.0%

Drive-In Doors 1

Sprinklers None

Rail Access No

Water/Port Access No

Parking Spaces 5

Pkg/1,000 SF GBA 2.1

Pkg/1,000 SF NRA 2.1

Gross Acres 0.13

526 EMORY STREET



Usable Acres 0.13

Flr. Area Ratio (FAR) 0.42

Gross Land to Bldg 2.36

Usable Land to Bldg 2.36

Access Average

Visibility Average

Corner/Interior Corner

Flood Hazard Zone Zone X

Physical Indicators

$/SF GBA $577.73

$/SF NRA $577.73

$/Unit $0

Occupancy at Sale 100.0%

Remarks X

The property is a single-tenant industrial building located on the north side of Sam Cava Lane in the

downtown portion of Campbell, California. The improvements consist of a masonry building containing

2,380 square feet net rentable area built in 1987. The building contains 14-18 foot ceilings, 1 drive in

door, and ample yard space. The underlying site consists of a corner parcel containing 6,050 square feet,

indicating an FAR of 39%. The site has average access and average visibility. There are five parking

spaces available to the site, indicating a parking ratio of 2.10/1,000.

The property sold in May 2018 for $1,375,000 or $577.73 per square foot. The property was in escrow for

30 days, and the transaction was part of a 1031 exchange. The seller also plans to lease back the building

for 60 days.

526 EMORY STREET






Property Type Industrial

Address 532 McKendrie Street

City, State Zip San Jose, California 95110

County Santa Clara

MSA San Jose

Submarket San Jose


Tax ID 230-40-024

Transaction Data

Sale Date April 16, 2018


Grantor Aguaristi Plastering Inc.

Grantee Cal Painting Inc.


Financing Conventional, and cash

Conditions of Sale Typical


Days on Market 180 Days






No. of Units 1

No. of Lots 1

Stories 1



Construction Class D - Wood Frame

Year Built 1925

Investment Class C


Office Space % 0.0%

Clear Height (ft) 12.00

Rail Access No


Parking Spaces 2



Gross Acres 0.11

Usable Acres 0.11

526 EMORY STREET






Density (Units/Acre) 8.71

Access Good

Visibility Good

Corner/Interior Interior

Flood Hazard Zone Zone D

Physical Indicators

$/SF GBA $967.12

$/SF NRA $967.12

$/Unit $1,000,000


Remarks X

The property is a single-tenant industrial building located on the south side of McKendrie Street Lane in

the northwest portion of San Jose, California. The improvements consist of a wood-frame building

containing 1,034 square feet net rentable area built in 1925. The underlying site consists of a parcel with

an interior configuration containing 5,000 square feet, indicating an FAR of 21%. The site has good

access and good visibility, and is located by two major thoroughfares, Coleman Avenue and W. Hedding

Street, and I-880. There are two parking spaces available to the site, indicating a parking ratio of

1.93/1,000.

The property sold in May 2018. The property sold for $1,000,000 or $967.12 per square foot. The

property was in escrow for 180 days. The buyer is an owner-user, and was allowed to move in and lease

the space during the lengthy escrow period.

526 EMORY STREET







Property Name 250 Commercial Street

Address 250 Commercial Street


County Santa Clara

MSA San Jose

Submarket San Jose


Tax ID 235-11-033

Transaction Data

Sale Date January 3, 2018


Grantor The Barry L & Mary Emily

Cohen

Grantee Leo & Kim Maniglia



Conditions of Sale None



Exp. Imm. After Sale $0





No. of Units 1

No. of Lots 1

Stories 1



Construction Class D - Wood Frame

Year Built 1960

Investment Class C




Dock-High Doors 0

Drive-In Doors 3

Rail Access No


Parking Spaces 5

526 EMORY STREET





Gross Acres 0.89

Usable Acres 0.89





Access Average

Visibility Average

Corner/Interior Mid-Block

Physical Indicators

$/SF GBA $421.82

$/SF NRA $421.82

$/Unit $1,775,000


Remarks X

The property involved in this transaction consists of a single-story, single-tenant industrial building

situated along Commercial Street in San Jose, CA. This property was originally constructed in 1960 and is

in overall average condition. In total, this building contains 4,208 square feet of gross and net rentable

building area, demised for single-tenant use. The site is a rectangular mid-block site used for a bus

company. The building is situated on a 38,768 square foot, or 0.89 acre site, indicating an overall floor

area ratio (FAR) 0.11. On-site parking is available at this property, with an overall parking ratio of 1.00

parking spaces per 1,000 square feet of building area.

This property sold on January 3, 2018, with a total sale price of $1,775,000. Financing for this sale

consisted of a $443,750 down payment, as well as conventional financing through Heritage Bank for the

remainder of the sale price. Reportedly, this sale was also not influenced by any unusual conditions of

sale.

526 EMORY STREET







Address 960 American Street

City, State Zip San Carlos, California 94070

County San Mateo

MSA San Francisco


Tax ID 046-204-010

Transaction Data

Sale Date June 29, 2017


Grantor Valerie Modesitt

Grantee Ravella Construction

Inc./Joe Ravella


Financing Conventional

Conditions of Sale 1031 exchange


Days on Market 4 Mos 29 Days






No. of Units 1

No. of Lots 1

Stories 1



Year Built 1950

Investment Class C


Office Space % 0.0%


Drive-In Doors 2

Rail Access No


Parking Spaces 10



Gross Acres 0.23

Usable Acres 0.23



526 EMORY STREET





Access Average

Visibility Average


Flood Hazard Zone Zone X

Physical Indicators

$/SF GBA $687.50

$/SF NRA $687.50

$/Unit $1,650,000


Remarks X

The property is a single-tenant industrial building located on the corner of American Street and Bayport

Avenue in San Carlos, California. The improvements consist of a building containing 2,400 square feet

net rentable area built in 1950. The building contains 18 foot ceilings, 2 drive-in doors, and a bathroom,

and the building is serviced by a phase power w/ 3 phase converter. The underlying site consists of a

single corner parcel containing 10,088 square feet, indicating an FAR of 24%. The site has good access

and average visibility, and is located by Highway 101 and Highway 82/El Camino Real. There are ten

parking spaces available to the site, indicating a parking ratio of 4.17/1,000. The lot is fenced and gated,

and the parking lot was re-paved in 2005.

The property sold in June 2017. The property sold for $1,650,000 or $687.50 per square foot. The

property was in escrow for 60 days. The buyer is an owner-user. The property was in escrow for 60 days,

and the transaction was part of a 1031 exchange.

526 EMORY STREET






Property Type Industrial Other

Property Name Superior Body Shop

Address 750 Industrial Road

City, State Zip San Carlos, California 94070

County San Mateo

MSA San Francisco


Tax ID 046-127-010, 046-127-020

Transaction Data

Sale Date May 12, 2017


Grantor Daniel P. & Martha A.

D'Amico

Grantee Superior Body Shop





Days on Market 11 Mos 27 Days






No. of Units 1

No. of Lots 2

Stories 1



Construction Class C - Masonry

Year Built 1968

Investment Class C


Office Space % 14.3%


Drive-In Doors 2

Sprinklers Fully sprinklered

Rail Access No


Parking Spaces 8



526 EMORY STREET



Gross Acres 0.30

Usable Acres 0.30





Access Good

Visibility Average

Corner/Interior Yes

Flood Hazard Zone Zone AE

Physical Indicators

$/SF GBA $628.57

$/SF NRA $628.57

$/Unit $2,200,000


Remarks X

The property is a single-tenant industrial building located on the south side of Industrial Road in the San

Carlos, California. The improvements consist of a masonry building containing 2,380 square feet net

rentable area built in 1987. The building contains 18 foot ceilings, 2 drive in doors, sprinklers, and 500

square feet of office space. The underlying site consists of two parcels containing 12,976 square feet,

indicating an FAR of 27%. The site has good access and average visibility, and is located by Highway 101

and Highway 82/El Camino Real. There are eight parking spaces available to the site, indicating a parking

ratio of 2.29/1,000.

The property sold in May 2017. The property sold for $2,220,000 or $628.57 per square foot. The

property was in escrow for 60 days, and was not occupied at the time of sale. The buyer is an owner-

user, who operates Superior Body Shop. Financing terms were conventional and cash.

526 EMORY STREET







Address 120 San Jose Avenue


County Santa Clara

MSA San Jose


Tax ID 455-02-010

Transaction Data

Sale Status Listing

Grantor Michael G & Monica A

Salinas

Grantee TBA


Financing Assumed loan, and cash


Days on Market 1 Month 28 Days






No. of Units 1

No. of Lots 1

Stories 1



Year Built 1957

Investment Class C



Drive-In Doors 2

Rail Access No


Parking Spaces 3



Gross Acres 0.18

Usable Acres 0.18





Access Average

526 EMORY STREET



Visibility Average


Flood Hazard Zone Zone AO/Zone D

Financial Data & Indicators (Actual) 5.1%

OAR 4.2%

Physical Indicators

$/SF GBA $819.09

$/SF NRA $819.09

$/Unit $1,399,000


Remarks X

The property is located on the south side of San Jose Avenue in the central portion of San Jose,

California. The improvements consist of a metal building containing 1,708 square feet net rentable area.

The improvements were constructed in 1957, and features of the improvements include 16 foot ceilings,

a restroom, two roll up doors, and 6,000 square feet of fenced yard space. The underlying site consists of

a single parcel with an interior configuration containing 7,955 square feet, indicating an FAR of 21%. The

site has average access and average visibility, and is located close to Highway 87. There are three off

street parking spaces, indicating a parking ratio of 1.76/1,000.

This represents a listing for the property. The asking price is $1,399,000 or $819.09 per square foot. The

property has been on the market for 1 month and 28 days. The potential gross income is estimated at

$78,000. Deducting for 5% vacancy and 20% for expenses, yields a net income of $59,280 and a cap rate

of 4.2%.

526 EMORY STREET



Sales Comparison Analysis When necessary, adjustments were made for differences in various elements of comparison,

including property rights conveyed, financing terms, conditions of sale, expenditures made

immediately after purchase, market conditions, location, and other physical characteristics. If the

element in comparison is considered superior to that of the subject, we applied a negative

adjustment. Conversely, a positive adjustment to the comparable was applied if inferior. A summary

of the elements of comparison follows.

Transaction Adjustments

Transaction adjustments include: 1) real property rights conveyed, 2) financing terms, 3) conditions

of sale, and 4) expenditures made immediately after purchase. These items, which are applied prior

to the application of the market conditions and property adjustments, are discussed as follows.

Real Property Rights Conveyed

In the case of the subject property, the fee simple interest is considered. In the current marketplace,

owner-users are paying a premium over investor purchases. All of the sales comparables were also

fee simple interest and no adjustment for property rights was required.

Financing Terms

All of the comparable sales involved typical market terms by which the sellers received cash or its

equivalent and the buyers paid cash or tendered typical down payments and obtained conventional

financing at market terms for the balance. Therefore, no adjustments for this category were required.

Conditions of Sale

Comparable 6 is a listing as opposed to a closed transaction. We had made a downward adjustment

for conditions of sale. The remaining sales did not indicate any condition of sale adjustments to be

warranted for atypical conditions.

Expenditures Made Immediately After Purchase

The parties to the sale comparables did not anticipate expenditures immediately after purchase; no

adjustments were required.

Market Conditions Adjustment Market conditions change over time as a result of inflation, deflation, fluctuations in supply and

demand and other factors. As discussed in the Market Overview section earlier, market conditions in

the subject’s market have improved over the past two years, however, at a more tempered rate. The

sales were adjusted a more moderate 2% upward to account for improving market conditions.

Property Adjustments Property adjustments are usually expressed quantitatively as percentages that reflect the increase or

decrease in value attributable to the various characteristics of the property. In some instances,

however, qualitative adjustments are utilized. Property adjustments are applied after the application

of transaction adjustments, and include:

1. Locational Characteristics

2. Physical Characteristics

526 EMORY STREET



3. Economic Characteristics

The adjustments are discussed as follows:

Location

The subject is located in in central San Jose and close to the San Jose international Airport. It is

considered to be a good location for an industrial property. The sale comparables have similar

locations and no adjustment is required.

Size

The subject is 2,100 square feet in size. Based on economies of scale, smaller buildings tend to sell

for more on a per square foot basis and vice versa. Sale 2 is much smaller and was adjusted

downward for size. Sales 3 and 5 are much larger in size and received an upward adjustment. The

remaining comparables are relatively similar in overall size and no adjustments were deemed

necessary.

Age/Condition

The subject improvements were constructed in 1920 and have been adequately maintained in overall

fair to average condition for the neighborhood. All the comparables have improvements with newer

effective ages and required downward adjustment for age/condition.

Construction Quality/Appeal

The subject is of average Class C concrete block construction. The comparables have relatively similar

designs and functional utility and no adjustments were warranted.

Parking Ratio/FAR

The subject property has a parking ratio of 11.9/1000 and a floor area ratio (FAR) of 18%. Properties

with ample yard space and low FAR are considered unique and scarce in the current market. Sale 1

has a much higher FAR than the subject and received an upward adjustment. Sales 2, 4, 5 and 6 also

required small upward adjustments.

526 EMORY STREET



Improved Sales Comparison Approach Adjustment Grid

Subject Sale # 1 Sale # 2 Sale # 3 Sale # 4 Sale # 5 Sale # 6

Sale ID 436411 436414 436353 436413 436412 436415

Date of Value & Sale May-18 May-18 April-18 January-18 June-17 May-17 N/A

Net Rentable Area 2,100 sf 2,380 1,034 4,208 2,400 3,500 1,708

Land Area (acres) 0.2755 0.1289 0.1148 0.8900 0.2316 0.2979 0.1826

Unadjusted Sales Price $1,375,000 $1,000,000 $1,775,000 $1,650,000 $2,200,000 $1,399,000

Unadjusted Sales Price PSF of NRA $577.73 $967.12 $421.82 $687.50 $628.57 $819.09FALSE FALSE FALSE FALSE FALSE FALSE

Transactional Adjustments

Property Rights Conveyed Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple

Adjustment - - - - - -

Adjusted Sales Price $577.73 $967.12 $421.82 $687.50 $628.57 $819.09

FALSE FALSE FALSE FALSE FALSE FALSEFinancing Terms Cash to Seller Cash Conventional, and

cash

Conventional, and

cash

Conventional Conventional, and

cash

Assumed loan, and

cash



FALSE FALSE FALSE FALSE FALSE FALSEConditions of Sale Typical 1031 exchange Typical Typical 1031 exchange Typical Listing

Adjustment - - - - - -5.0%


FALSE FALSE FALSE FALSE FALSE FALSEExpenditures after Sale $0 $0 $0 $0 $0 $0



Market Conditions Adjustments

Elapsed Time from Date of Value 0.04 years 0.12 years 0.41 years 0.92 years 1.05 years 0.00 years

Market Trend Through May-18 0.1% 0.2% 0.8% 1.8% 2.1% -

Analyzed Sales Price $578.24 $969.50 $425.24 $700.16 $641.80 $778.13

0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Property Adjustments

Location 526 Emory Street 457 Sam Cava Lane 532 McKendrie

Street

250 Commercial

Street

960 American Street 750 Industrial Road 120 San Jose Avenue

San Jose, California Campbell, California San Jose, California San Jose, California San Carlos,

California

San Carlos,

California

San Jose, California


0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Size 2,100 sf 2,380 sf 1,034 sf 4,208 sf 2,400 sf 3,500 sf 1,708 sf

Adjustment - -10.0% 10.0% - 5.0% -

0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Age/Condition Year Built 1920 1987 1925 1960 1950 1968 1957

Condition Fair to Average Average Average Average Average Average Average

Adjustment -15.0% -5.0% -5.0% -5.0% -5.0% -5.0%

0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Construction Quality Average Class C -

Concrete Block

Average Class C -

Masonry

Average Class D -

Wood Frame

Average Class D -

Wood Frame

Average Class C -

Metal

Average Class C -

Masonry

Average Class C -

Metal


0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Parking Ratio/FAR 11.9/18% 2.1/42% 1.93/21% 1.19/11% 4.17/24% 2.29/27% 1.76/21%

Adjustment 10.0% 2.0% - 2.0% 2.0% 2.0%

Net Physical Adjustment 5.0% -13.0% 5.0% -3.0% 2.0% -3.0%

Adjusted Sales Price PSF of NRA $607.15 $843.47 $446.50 $679.15 $654.63 $754.79

526 EMORY STREET



Sales Comparison Approach Value Indication From the market data available, we used industrial building sales in competitive market areas which

were adjusted based on pertinent elements of comparison. The unadjusted unit value for the

comparable sales ranged from $421.82 to $967.12 per square foot, with an average of $683.64 per

square foot.

We have adjusted the comparable sales based on pertinent elements of comparison as discussed

earlier and summarized the adjustments in the preceding grid. After adjusting the comparables for

these differences, an adjusted unit value range from approximately $446.50 to $843.47 per square

foot is indicated for the subject with an average of $664.28 and median of $666.89.

we have weighted comparables more or less equally. We have concluded a unit value of $660 per

square foot to be appropriate for the subject property. This yields a rounded fee simple value

conclusion by the Sales Comparison Approach of $1,390,000.

Improved Sales Statistics

Metric Unadjusted Adjusted

Minimum Sale Price per Sq. Ft. $421.82 $446.50

Maximum Sale Price per Sq. Ft. $967.12 $843.47

Median Sale Price per Sq. Ft. $658.04 $666.89

Mean Sale Price per Sq. Ft. $683.64 $664.28

Improved Sales Comparison Approach Value Indication

Reasonable Adjusted Comparable Range

2,100 sf x $446.50 = $937,646

2,100 sf x $843.47 = $1,771,281

As Is Fee Simple Market Value Indication

2,100 sf x $660.00 = $1,390,000

526 EMORY STREET

INCOME CAPITALIZATION APPROACH


Income Capitalization Approach

Methodology The income capitalization approach is developed by converting anticipated future income into a

present value by a capitalization process. There are two types of capitalization: direct capitalization

and yield capitalization, more commonly known as discounted cash flow (DCF) analysis.

Income-producing properties, by nature, are developed and purchased for investment purposes,

where earning power, including an income stream and return of investment, are the most critical

elements affecting value. The forecast of income and selection of appropriate rate(s) are therefore

important aspects of the valuation process. The process of developing the income approach consists

of the following analyses: Market Rent Analysis, Income Analysis, Vacancy Analysis, Expense Analysis,

and Rate Analysis.

Application of Methodology In appraisal practice, the estimate of net income can be based either on actual contract rents or the

estimated market rents for the property being appraised. The subject is currently owner occupied.

As such, we will value the fee simple interest in the subject by utilizing direct capitalization using our

estimate of market rent.

Estimate of Market Rent To develop an opinion of market rent, we surveyed representatives of comparable and competitive

properties in the local market area, focusing on those offering the greatest similarity in terms of

location, size, and market appeal. We searched within the subject’s market for recent leases of

industrial properties with physical and locational characteristics that bracket the subject’s features.

Most comparable are small industrial properties with low floor area ratios.

Following is a table summarizing each rent comparable and a map illustrating the location of each

comparable in relation to the subject. Details of each comparable follow the location map.

526 EMORY STREET



Rent Comparable Summary

Comp. Date of Comp. Year Rental Lease

No. Survey / Lease Type Location Built Rate / SF Structure

1 April-18 Lease 771 Coleman Avenue San Jose, California 1948 $2.25 Industrial Gross

2 January-18 Lease 1201 North 15th Street San Jose, California 1963 $3.13 NNN

3 May-18 Lease 563 Asbury Street San Jose, California 1953 $4.41 Industrial Gross

4 Listing Lease 120 San Jose Avenue San Jose, California 1957 $3.80 Industrial Gross

526 EMORY STREET



RENT COMPARABLE LOCATION MAP

526 EMORY STREET



INDUSTRIAL RENT COMPARABLE 1


Property/Rent ID 131704/12313


Address 771 Coleman Avenue


County Santa Clara

MSA San Jose


Tax ID 259-09-023

Transaction Data

Lessor Dasco Construction &

Drywall, Inc.

Lessee Golden Bridge Investments

Tenant SF 3,000

Entire Bldg Lease Yes

Lease Status Executed

Lease Signed April 2, 2018

Commencement May 1, 2018

Expiration April 30, 2021

Term (mos.) 36

Lease Type Industrial Gross

Renewal Options Unknown

Rent Escalation 3% annual increases

xxx xxx

Rental Rates xxx

Initial Rent/SF $2.25

Effective Rent/SF $2.32




Year Built 1948

Investment Class B




Stories 1

Units 1

Office Ratio 40.0%

Drive-In Doors 1

Rail Access No


Parking Spaces 8



526 EMORY STREET



Gross Acres 0.37

Usable Acres 0.37


Land to Bldg Ratio 5.37

Access Good

Visibility Average


Remarks X

The property is located on the south side of Coleman Avenue in the northwest portion of San Jose,

California. The improvements consist of a masonry building containing 3,000 square feet net rentable

area. The improvements were constructed in 1948. The building contains 1,200 square feet of office

space, and includes a break room and restroom. Other features of the building include 1 drive-in door

and a large fenced yard. The underlying site consists of a single parcel with a corner configuration

containing 16,117 square feet, indicating an FAR of 19%. The site has good access and average visibility,

and is located close to Highway 87, The Alameda, and I-880. There are eight parking spaces, indicating a

parking ratio of 2.67/1,000.

Dasco Construction & Drywall, Inc. leased this industrial space, as-is, in April 2018. The lease term was 36

months. The initial monthly rental rate was $2.25 per square foot per month, industrial gross with 3%

annual increases.

526 EMORY STREET







Property Name Low FAR Industrial Property

Address 1201 North 15th Street


County Santa Clara

MSA San Jose


Tax ID 237-07-075

Transaction Data

Lessor Louis M & Joanne S

Rosendin

Lessee Greenwaste Recovery

Tenant SF 4,800

Lease Status Renewal

Commencement January 10, 2018

Expiration January 9, 2023

Term (mos.) 60

Lease Type NNN

Renewal Options Yes

xxx xxx

Rental Rates xxx


Current Rent/SF $3.13





Year Built 1963

Investment Class C





Stories 1

Units 1

Office Ratio 0.0%


Drive-In Doors 2

Rail Access No


Gross Acres 1.31

526 EMORY STREET



Usable Acres 1.31



Access Good

Visibility Average

Corner/Interior Mid-Block

Verification

Confirmed With Colliers marketing materials, CoStar, NDC Data

Confirmed By Allison Hutchinson

Confirmation Date 6/8/2018

Remarks X

This property consists of a single parcel in San Jose. It has a mid-block lot configuration and a

rectangular shape, and approximately 211 feet of frontage along North 15th Street. The property has a

small building with a large fenced yard. The underlying site measures 57,218 square feet or 1.31 acres.

The improvements measure 4,800 square feet and were constructed circa 1963. The resulting floor area

ratio is 8%.

Greenwaste Recovery leased this industrial space, as-is, in January of 2018 for a five years term. The

initial monthly rental rate was $3.13 NNN per square foot of building area. There are 3% annual

increases to rent.

526 EMORY STREET







Address 563 Asbury Street


County Santa Clara

MSA San Jose

Submarket San Jose


Tax ID 259-09-013

Transaction Data

Lessor Picone Painters

Lessee Scaffolding American

Tenant SF 1,100


Lease Status Executed

Lease Signed May 1, 2018

Commencement May 1, 2018

Expiration April 30, 2020

Term (mos.) 24


Concessions Detail As-Is

xxx xxx

Rental Rates xxx






Year Built 1953

Investment Class C



Stories 1

Units 1


Drive-In Doors 1

Rail Access No


Gross Acres 0.28

Usable Acres 0.28



526 EMORY STREET



Access Good

Visibility Average


Remarks X

The property is located on the north side of Asbury Street in the northwest portion of San Jose,

California. The improvements consist of a wood-framed building containing 1,100 square feet net

rentable area. The improvements were constructed in 1953. Features of the building include 1 drive-in

door and a large fenced yard. The underlying site consists of a single parcel with an interior

configuration containing 12,040 square feet, indicating an FAR of 9%. The site has good access and

average visibility, and is located close to Highway 87, The Alameda, and I-880. Parking is considered

adequate for the existing industrial use.

The property was leased as-is in May of 2018 for a lease term of 24 months. The starting rental rate was

$4,850 per month or $4.41 per square foot per month, industrial gross. There was no free rent or any

other concessions offered to the tenant.

526 EMORY STREET







Address 120 San Jose Avenue


County Santa Clara

MSA San Jose


Tax ID 455-02-010

Transaction Data

Lessor Michael G & Monica A

Salinas

Lessee N/A

Tenant SF 1,708


Lease Status Listing


xxx xxx

Rental Rates xxx






Year Built 1957

Investment Class C




Stories 1

Units 1


Drive-In Doors 2

Rail Access No


Parking Spaces 3



Gross Acres 0.18

Usable Acres 0.18



Access Average

Visibility Average

526 EMORY STREET




Remarks X

The property is located on the south side of San Jose Avenue in the central portion of San Jose,

California. The improvements consist of a metal building containing 1,708 square feet net rentable area.

The improvements were constructed in 1957, and features of the improvements include 16 foot ceilings,

a restroom, two roll up doors, and 6,000 square feet of fenced yard space. The underlying site consists of

a single parcel with an interior configuration containing 7,955 square feet, indicating an FAR of 21%. The

site has average access and average visibility, and is located close to Highway 87. There are three off

street parking spaces, indicating a parking ratio of 1.76/1,000.

The property is currently for lease. The asking rental rate is currently $3.80 per square foot per month,

industrial gross. The property is also for sale.

526 EMORY STREET



Market Rent Analysis All of the leases are analyzed and adjustments are made for differences in the various elements of

comparison, including market conditions, location, size, and other relevant factors. If the comparable

is considered superior to the subject, we applied a negative adjustment to the comparable. A

positive adjustment to the comparable property is applied if it is considered inferior to the subject. A

summary of the elements of comparison follows.

Transaction Adjustments

These items are applied prior to the application of property adjustments. Transaction adjustments

include

1) Expense structure

2) Concessions

3) Tenant improvement packages

4) Market conditions


Expense structure

We have elected to value the subject based on an industrial gross expense arrangement as this is

typical of similar industrial space in the market area. And under an industrial gross lease arrangement

the landlord is responsible for taxes and insurance and exterior maintenance. Comparable 2 is a

triple net lease. Under a triple net lease the tenant is responsible for all operating expenses. We have

adjusted this comparable upward by $0.30 per square foot to account for the expense differential.

Concessions

No concessions were given to the comparable leases, and therefore, no adjustment was required for

this particular category.

Tenant Improvement Allowance

The comparables were all leased and as is basis. No adjustments were warranted.

Market Conditions (Time)

Market conditions change over time as a result of inflation, deflation, fluctuations in supply and

demand and other factors. As discussed in the Market Overview section earlier, market conditions in

the subject’s market have improved over the past two years, however, at a more tempered rate.

Over the past year rent in the Silicon Valley industrial market have increased approximately 7.6%.

Further small industrial properties with low floor area ratios are in great demand. The rent

comparables were adjusted 3% upward to account for improving market conditions.

Property Adjustments Property adjustments are usually expressed quantitatively as percentages that reflect the increase or

decrease in value attributable to the various characteristics of the property. The adjustments include:

1) Location

2) Size

3) Age/Condition

526 EMORY STREET



4) Construction Quality

5) Parking


Location

The subject is as a central San Jose location in close proximity to the airport. The comparables all

have similar San Jose locations and no adjustment is required.

Size

The subject building contains 2,100 square feet. Based on economies of scale, smaller units tend to

rent for more on a per square foot basis and vice versa. Rental 3 is considerably smaller and was

adjusted downward for size, while Rent Comparables 1 and 2 are considerably larger and received

upward adjustments. The remaining comparable is relatively similar in overall size and no adjustment

was given.

Age/Condition

The subject improvements were constructed in 1920 and are in overall fair to average condition for

the neighborhood. All four rent comparables required downward adjustment for the subject’s

somewhat inferior condition.

Quality/Appeal

The subject is of average Class C concrete block construction. Rental Comparables 1, 2, and 4 were of

inferior quality and build, and received an upward adjustment. The remaining comparable has

relatively similar designs and functional utility and no adjustment was warranted.

Parking/FAR

The subject has a parking ratio of approximately 11.90 per 1,000 square feet of building area and has

an FAR of 18%. Rentals 2 and 3 have much lower FARs and require downward adjustment.

526 EMORY STREET



Rent Comparable Adjustment Grid - Industrial Space

Rental 1 Rental 2 Rental 3 Rental 4

Comparable ID 12313 12312 12314 12311

Date of Value & Survey/Lease Date May-18 April-18 June-18 May-18 Listing

Net Rentable Area 2,100 sf 3,000 sf 4,800 sf 1,100 sf 1,708 sf

Land Area (acres) 0.275 0.37 1.31354 0.2764 0.18262

Monthly Rental Rate $2.25 $3.13 $4.41 $3.80

Transactional Adjustments

Expense Structure Industrial Gross Industrial Gross NNN Industrial Gross Industrial Gross

Adjustment $0.00 $0.35 $0.00 $0.00

Rent Concessions As-Is As-Is As-Is As-Is

Adjustment $0.00 $0.00 $0.00 $0.00

Tenant Imp. Allowance - Over Base Amount None None None None

Adjustment $0.00 $0.00 $0.00 $0.00

Net Lease Structure Adjustment $0.00 $0.35 $0.00 $0.00

Effective Rental Rate $2.25 $3.48 $4.41 $3.80

FALSE FALSE FALSE FALSEConditions of Lease Typical Typical Typical Listing

Adjustment $0.00 $0.00 $0.00 -$0.19

Adjusted Rental Rate $2.25 $3.48 $4.41 $3.61

FALSE FALSE FALSE FALSEMarket Conditions Adjustments

Elapsed Time from Date of Value 0.16 years -0.02 years 0.08 years 0.00 years

Market Trend Through May-18 0.5% -0.1% 0.2% -

Analyzed Rental Rate $2.26 $3.48 $4.42 $3.61

0.0% 0.0% 0.0% 0.0%Property Adjustments

Location 526 Emory Street 771 Coleman

Avenue

1201 North 15th

Street

563 Asbury Street 120 San Jose Avenue

San Jose, California San Jose, California San Jose, California San Jose, California San Jose, California

Adjustment - - - -

0.0% 0.0% 0.0% 0.0%Tenant Space Size 2,100 sf 3,000 sf 4,800 sf 1,100 sf 1,708 sf

Adjustment 5.0% 10.0% -5.0% -

0.0% 0.0% 0.0% 0.0%Age/Condition Year Built 1920 1948 1963 1953 1957

Condition Fair to Average Average Average Average Average

Adjustment -2.0% -3.0% -2.0% -2.0%

0.0% 0.0% 0.0% 0.0%Construction Quality Average Class C -

Concrete Block

Average Class S -

Metal

Average Class S -

Steel Frame

Average Class D -

Wood Frame

Average Class S -

Metal

Adjustment 5.0% 5.0% - 5.0%

0.0% 0.0% 0.0% 0.0%Parking/FAR 11.90 / 18% 2.67 / 19% Adequate / 8% Adequate / 9% 1.76 / 21%

Adjustment - -5.0% -5.0% -

Net Physical Adjustment 8.0% 7.0% -12.0% 3.0%

Adjusted Monthly Rental Rate $2.44 $3.72 $3.89 $3.72

526 EMORY STREET



Market Rent Indication From the available market data, medical office leases in competitive market areas were selected as

most comparable to the subject. The unadjusted lease rates for the comparables ranged from $2.25

to $4.41 per square foot, with an average of $3.40 per square foot.

We adjusted the comparable leases based on pertinent elements of comparison as discussed earlier

and summarized them in the preceding adjustment grid. The final adjusted rental rates range from

$2.49 to $3.98 per square foot, with an average of $3.49 per square foot and a median of $3.76 per

square foot. We waited most heavily Rent Comparable 3. This is a very recent lease and in close

proximity to the subject. Based on this analysis, we conclude to a market rental rate for the subject of

$3.75 per square foot per month or $45.00 per square foot per year.

Income Analysis In order to estimate the gross potential income of the subject, we have applied our first-year

projected rent of $45.00 per square foot annually or $94,500 annually, as indicated in the Income

Approach Summary below.

Vacancy/Collection Loss As indicated in the Market Overview section presented earlier, light industrial vacancy is reportedly

3.2% for Silicon Valley as of Q1 2018. Investors typically are applying a combined long-term vacancy

and collection loss allowance 5% in their analysis. As such, we have used a vacancy rate of 5.0%. The

vacancy and collection loss allowance is deducted from the total annual gross scheduled rental

income to arrive at Effective Gross Income (EGI).

Expense Analysis Operating expenses applicable to the subject property must be deducted to arrive at net operating

income. In order to estimate the subjects operating expenses, we have considered five expense

comparable. All expenses are expressed per rentable square foot of the subject and as a percentage

of effective gross income.

Rent Comparable Statistics

Metric Unadjusted Adjusted

Minimum Rental Rate $2.25 $2.49

Maximum Rental Rate $4.41 $3.98

Median Rental Rate $3.47 $3.76

Mean Rental Rate $3.40 $3.49

Year 1 Net Operating Income Schedule

Category NRA Per Sq. Ft. Total % of EGI

Total Potential Rental Income 2,100 sf x $45.00 = $94,500 105.3%

Potential Gross Income (PGI) $45.00 $94,500 105.3%

Less: Vacancy & Collection Loss @ 5.0% $2.25 $4,725 5.3%

Effective Gross Income (EGI) $42.75 $89,775 100.0%

526 EMORY STREET



Operating Expenses

Under industrial gross leases the landlord is responsible for taxes and insurance and exterior

maintenance. In the following table, we present historical operating expenses of five comparables

and our forecast of expenses for the subject property. These include:

Real Estate Taxes

Property Insurance

Management Fees

Repairs & Maintenance

Replacement Reserves

Real Estate Taxes are based on the assumption that the ownership of the subject property transfers,

as of the valuation date, at which time, the subject will be reassessed, with the transfer value used for

real estate tax purposes. The real property tax rate for the subject property is 1.195660% times the

concluded market value estimate via the income approach. An additional line item for special

assessments of $1,109 is merited for the special assessments noted from the Taxes and Assessments

section of this report. Based on the estimated value by direct capitalization, the first-year taxes are

estimated at $16,054 or about $7.65 per rentable square foot.

Insurance expenses for the expense comparables range from $0.17 to $0.47 per rentable square foot.

We have concluded a first-year insurance expense of $0.30 per rentable square foot to be

reasonable, consistent with the current policy. First year insurance expense equals $735.

Property insurance expenses for the comparables range from $0.10 to $0.45 per rentable square foot.

Management expenses are typically expressed as a percentage of effective gross income. The

comparables have management expenses ranging from 1.2% to 4.5% of the effective gross income.

We estimate management expense at 3% of effective gross income.

Property Insurance Per Sq. Ft. % of EGI

Expense Comp # 1 - Concord, California - Actual - 12/2016 $0.17 1.9%

Expense Comp # 2 - Concord, California - Annualized - 9-months Annualized - 12/2017$0.22 2.4%

Expense Comp # 3 - San Leandro, California - Annualized - 0-months Annualized - 12/2017$0.41 4.1%

Expense Comp # 4 - San Leandro, California - Actual - 12/2016 $0.39 3.9%

Expense Comp # 5 - San Jose, California - Actual - 12/2016 $0.47 4.8%

Indicator Average $0.33 3.4%

Stabilized Estimate: $0.30 0.7%

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Expenses repairs and maintenance for the comparables range from $0.23 to $0.41 per rentable

square foot. We have concluded a repairs and maintenance expense of $0.40 per rentable square

foot to be reasonable. First-year repairs and maintenance expenses are estimated at $840.

A prudent investor would typically deduct a certain amount for reserves for capital improvements.

Typical reserve allowances range from 0.5% to 3.0% depending on the type of property and its

effective age. Considering the subject’s current use and its effective age, we estimate reserves at

1.0% of effective gross income.

Deducting the total operating expenses of $22,117 from the effective gross income yields a net

operating income of $67,658, as outlined Net Operating Income Summary.

Management Fees Per Sq. Ft. % of EGI







Repairs & Maintenance Per Sq. Ft. % of EGI


Expense Comp # 2 - Concord, California - Annualized - 9-months Annualized - 12/2017$0.41 4.6%






Replacement Reserves Per Sq. Ft. % of EGI


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Capitalization Rate Analysis The next step is to process the projected net income into a value estimate. This is accomplished by

determining the capitalization rate. The capitalization rate is the ratio of net income to the sale price

(i.e., cap rate = net income ÷ sale price). Once a rate is selected for the subject and the net income

projected, the same formula can be used to estimate market value. The capitalization rate can be

extracted from market sales if the net income is known or can be reasonably estimated at time of

sale.

The selection of a capitalization rate depends on such factors as strength of tenancy, type and quality

of leases, building age and condition, quality of location, and perhaps most importantly, potential for

future change in net operating income, and/or appreciation. For example, a property leased for a

long-term basis with little rental increase for inflation adjustments would be expected to have a

relatively high capitalization rate. On the other hand, projects that are leased below market with

good potential for increase in the near future would generally command a significantly lower

capitalization rate.

To determine an appropriate rate to apply to the subject’s income stream, we have included

capitalization rate comparables of investor purchases in the greater Silicon Valley market to get a

sense of what typical investors are willing to buy industrial properties. The capitalization rates range

from 4.92% to 6.00% with an average of 5.36%.

Year 1 Net Operating Income Schedule

Category NRA Per Sq. Ft. Total % of EGI

Total Potential Rental Income 2,100 sf x $45.00 = $94,500 105.3%

Potential Gross Income (PGI) $45.00 $94,500 105.3%

Less: Vacancy & Collection Loss @ 5.0% $2.25 $4,725 5.3%

Effective Gross Income (EGI) $42.75 $89,775 100.0%

Non-Reimbursable Expenses

Real Estate Taxes $7.65 $16,054 17.9%

Property Insurance $0.35 $735 0.8%

Management Fees $1.28 $2,693 3.0%

Repairs & Maintenance $0.40 $840 0.9%

Replacement Reserves $0.43 $898 1.0%

Total Non-Reimbursable Expenses $10.10 $21,220 23.6%

Less: Total Operating Expenses $10.10 $21,220 23.6%

Year 1 Net Operating Income (NOI) $32.65 $68,555 76.4%

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Given all these factors, and considering the subject’s overall condition, location, and owner-occupied

single tenant configuration, we have selected a capitalization rate as the previous appraisal of 5.50%,

to be applied to the subject’s potential income stream based on market rent. This is well within the

range indicated by the capitalization rate comparables.

Direct Capitalization Conclusions The final step in the Direct Capitalization approach is to divide the estimated net operating income

by the appropriate capitalization rate. The rounded indicated fee simple market value by the direct

capitalization method for the subject property is $1,250,000.

Market Overall Capitalization Rate (OAR) Comparables

Comp. Property Year Occupancy at Actual

No. Date of Sale Name Location Built Time of Sale OAR

1 January-18 2990 Daylight Way 2990 Daylight Way San Jose, California 1976 100.0% 5.23%

2 November-17 254 Kinney Drive 254 Kinney Drive San Jose, California 1980 100.0% 4.92%

3 July-17 1319 Whitton Avenue 1319 Whitton Avenue San Jose, California 1962 100.0% 5.30%

4 September-16 Club Auto Sport 527 Charcot Avenue, Unit 309 San Jose, California 2012 100.0% 5.58%

5 June-16 Industrial Property 2273-2275 De La Cruz Santa Clara, California 1970 100.0% 6.00%

6 May-16 Industrial Property 300 East Gish Road San Jose, California 1951 100.0% 5.14%

5.36%

Direct Capitalization Technique Value Indication

Stabilized Net Operating Income (NOI) $68,555

Divided by Overall Capitalization Rate ÷ 5.50%

As Is Fee Simple Market Value Indication $1,250,000

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RECONCILIATION


Reconciliation

Summary of Value Indications The indicated values from the approaches used and our concluded market values for the subject

property are summarized in the following table.

Reconciliation of the value estimates involves weighing the approaches based on their importance to

their probable influences and on the market reactions of typical users or investors in the

marketplace. Consideration is also given to the quality and quantity of data available for analysis,

and to the advantages and disadvantages as they relate to the subject property.

The Sales Comparison Approach is generally a reliable indicator of value when there are a number of

recent transactions involving properties similar to the subject. Our survey revealed five sale and one

listing which we consider to have similar overall investment appeal as the subject. These sales

generally bracket the subject in terms of size and physical characteristics.

In the Income Approach, we utilized direct capitalization analysis. Our investigation revealed four

comparables leases in the subject’s market. The capitalization rate was determined by analyzing cap

rates indicated by market transaction and analyzing the subject’s potential income stream and

investment appeal.

The subject has most appeal to an owner user. Owner users typically weighted most heavily the sales

comparison approach. We have weighted most heavily the sales comparison approach. We have also

considered the ending purchase the subject property at $1,325,000. It is our opinion that our analysis

provides good support for the ending purchase price. We have concluded a current value to the

$1,325,000.

Approach to Value As Is

Cost Not Developed

Sales Comparison $1,390,000

Income Capitalization

Direct Capitalization $1,250,000

Component As Is





$630.95 psf

Value Indications

Value Conclusions

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RECONCILIATION


Exposure Time and Marketing Periods Based on statistical information about days on market, escrow length, and marketing times gathered

through national investor surveys, sales verification, and interviews of market participants, marketing

and exposure time estimates of 6 months and 6 months, respectively, is considered reasonable and

appropriate for the subject property.

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REPLACEMENT COST NEW AND INSURABLE VALUE


Replacement Cost New and Insurable Value

At the request of the client, an Insurable Value estimate is included within this report. Insurable value

is based on the replacement and/or reproduction costs of physical items that are subject to loss from

hazards. Insurable value is the portion of value of an asset that is acknowledged or recognized under

the provisions of an applicable insurance policy. Typically, it is replacement/reproduction cost of the

property less non-insurable components.

The replacement cost new for the building is estimated using the Marshall Valuation Service Cost

figures for an average quality Class C light industrial building from section 14, page 14 are used.

Based on this analysis, we estimate a replacement cost new for the subject improvements of

$156,723.

The insurable value estimate is presented in the following table:

Direct Cost - Building

Building Identification/Name

Gross Building Area 2,100 sf

Story Height (average in feet) 9'

Number of Floors 1

Year Built 1920

Effective Age 50 years

Marshall Valuation Service

Date Feb-18

Section 14

Page 14

Type Light Industrial

Class Class C

Quality Average

Base Cost/SF of GBA $52.00

Multipliers

Current 1.040(x)

Local 1.380(x)

Perimeter 1.000(x)

Story Height 1.000(x)

Number of Floors 1.000(x)

Net Multiplier 1.435(x)

Adj. Direct Building Cost/SF of GBA $74.63

Adj. Total Direct Building Cost $156,723

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GENERAL ASSUMPTIONS AND LIMITING CONDITIONS


General Assumptions and Limiting Conditions

This appraisal is subject to the following limiting conditions:

1. The legal description – if furnished to us – is assumed to be correct.

2. No responsibility is assumed for legal matters, questions of survey or title, soil or subsoil

conditions, engineering, availability or capacity of utilities, or other similar technical matters.

The appraisal does not constitute a survey of the property appraised. All existing liens and

encumbrances have been disregarded and the property is appraised as though free and

clear, under responsible ownership and competent management unless otherwise noted.

3. Unless otherwise noted, the appraisal will value the property as though free of

contamination. Valbridge Property Advisors | Hulberg and Associates will conduct no

hazardous materials or contamination inspection of any kind. It is recommended that the

client hire an expert if the presence of hazardous materials or contamination poses any

concern.

4. The stamps and/or consideration placed on deeds used to indicate sales are in correct

relationship to the actual dollar amount of the transaction.

5. Unless otherwise noted, it is assumed there are no encroachments, zoning violations or

restrictions existing in the subject property.

6. The appraiser is not required to give testimony or attendance in court by reason of this

appraisal, unless previous arrangements have been made.

7. Unless expressly specified in the engagement letter, the fee for this appraisal does not

include the attendance or giving of testimony by Appraiser at any court, regulatory, or other

proceedings, or any conferences or other work in preparation for such proceeding. If any

partner or employee of Valbridge Property Advisors | Hulberg and Associates is asked or

required to appear and/or testify at any deposition, trial, or other proceeding about the

preparation, conclusions or any other aspect of this assignment, client shall compensate

Appraiser for the time spent by the partner or employee in appearing and/or testifying and

in preparing to testify according to the Appraiser’s then current hourly rate plus

reimbursement of expenses.

8. The values for land and/or improvements, as contained in this report, are constituent parts of

the total value reported and neither is (or are) to be used in making a summation appraisal

of a combination of values created by another appraiser. Either is invalidated if so used.

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9. The dates of value to which the opinions expressed in this report apply are set forth in this

report. We assume no responsibility for economic or physical factors occurring at some point

at a later date, which may affect the opinions stated herein. The forecasts, projections, or

operating estimates contained herein are based on current market conditions and

anticipated short-term supply and demand factors and are subject to change with future

conditions.

10. The sketches, maps, plats and exhibits in this report are included to assist the reader in

visualizing the property. The appraiser has made no survey of the property and assumed no

responsibility in connection with such matters.

11. The information, estimates and opinions, which were obtained from sources outside of this

office, are considered reliable. However, no liability for them can be assumed by the

appraiser.

12. Possession of this report, or a copy thereof, does not carry with it the right of publication.

Neither all, nor any part of the content of the report, or copy thereof (including conclusions

as to property value, the identity of the appraisers, professional designations, reference to

any professional appraisal organization or the firm with which the appraisers are connected),

shall be disseminated to the public through advertising, public relations, news, sales, or other

media without prior written consent and approval.

13. No claim is intended to be expressed for matters of expertise that would require specialized

investigation or knowledge beyond that ordinarily employed by real estate appraisers. We

claim no expertise in areas such as, but not limited to, legal, survey, structural, environmental,

pest control, mechanical, etc.

14. This appraisal was prepared for the sole and exclusive use of the client for the function

outlined herein. Any party who is not the client or intended user identified in the appraisal or

engagement letter is not entitled to rely upon the contents of the appraisal without express

written consent of Valbridge Property Advisors | Hulberg and Associates and Client. The

Client shall not include partners, affiliates, or relatives of the party addressed herein. The

appraiser assumes no obligation, liability or accountability to any third party.

15. Distribution of this report is at the sole discretion of the client, but third-parties not listed as

an intended user on the face of the appraisal or the engagement letter may not rely upon the

contents of the appraisal. In no event shall client give a third-party a partial copy of the

appraisal report. We will make no distribution of the report without the specific direction of

the client.

16. This appraisal shall be used only for the function outlined herein, unless expressly authorized

by Valbridge Property Advisors | Hulberg and Associates.

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17. This appraisal shall be considered in its entirety. No part thereof shall be used separately or

out of context.

18. Unless otherwise noted in the body of this report, this appraisal assumes that the subject

property does not fall within the areas where mandatory flood insurance is effective. Unless

otherwise noted, we have not completed nor have we contracted to have completed an

investigation to identify and/or quantify the presence of non-tidal wetland conditions on the

subject property. Because the appraiser is not a surveyor, he or she makes no guarantees,

express or implied, regarding this determination.

19. The flood maps are not site specific. We are not qualified to confirm the location of the

subject property in relation to flood hazard areas based on the FEMA Flood Insurance Rate

Maps or other surveying techniques. It is recommended that the client obtain a confirmation

of the subject property’s flood zone classification from a licensed surveyor.

20. If the appraisal is for mortgage loan purposes 1) we assume satisfactory completion of

improvements if construction is not complete, 2) no consideration has been given for rent

loss during rent-up unless noted in the body of this report, and 3) occupancy at levels

consistent with our “Income and Expense Projection” are anticipated.

21. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or

structures which would render it more or less valuable. No responsibility is assumed for such

conditions or for engineering which may be required to discover them.

22. Our inspection included an observation of the land and improvements thereon only. It was

not possible to observe conditions beneath the soil or hidden structural components within

the improvements. We inspected the buildings involved, and reported damage (if any) by

termites, dry rot, wet rot, or other infestations as a matter of information, and no guarantee

of the amount or degree of damage (if any) is implied. Condition of heating, cooling,

ventilation, electrical and plumbing equipment is considered to be commensurate with the

condition of the balance of the improvements unless otherwise stated. Should the client have

concerns in these areas, it is the client’s responsibility to order the appropriate inspections.

The appraiser does not have the skill or expertise to make such inspections and assumes no

responsibility for these items.

23. This appraisal does not guarantee compliance with building code and life safety code

requirements of the local jurisdiction. It is assumed that all required licenses, consents,

certificates of occupancy or other legislative or administrative authority from any local, state

or national governmental or private entity or organization have been or can be obtained or

renewed for any use on which the value conclusion contained in this report is based unless

specifically stated to the contrary.

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24. When possible, we have relied upon building measurements provided by the client, owner, or

associated agents of these parties. In the absence of a detailed rent roll, reliable public

records, or “as-built” plans provided to us, we have relied upon our own measurements of

the subject improvements. We follow typical appraisal industry methods; however, we

recognize that some factors may limit our ability to obtain accurate measurements including,

but not limited to, property access on the day of inspection, basements, fenced/gated areas,

grade elevations, greenery/shrubbery, uneven surfaces, multiple story structures, obtuse or

acute wall angles, immobile obstructions, etc. Professional building area measurements of

the quality, level of detail, or accuracy of professional measurement services are beyond the

scope of this appraisal assignment.

25. We have attempted to reconcile sources of data discovered or provided during the appraisal

process, including assessment department data. Ultimately, the measurements that are

deemed by us to be the most accurate and/or reliable are used within this report. While the

measurements and any accompanying sketches are considered to be reasonably accurate

and reliable, we cannot guarantee their accuracy. Should the client desire a greater level of

measuring detail, they are urged to retain the measurement services of a qualified

professional (space planner, architect or building engineer). We reserve the right to use an

alternative source of building size and amend the analysis, narrative and concluded values (at

additional cost) should this alternative measurement source reflect or reveal substantial

differences with the measurements used within the report.

26. In the absence of being provided with a detailed land survey, we have used assessment

department data to ascertain the physical dimensions and acreage of the property. Should a

survey prove this information to be inaccurate, we reserve the right to amend this appraisal

(at additional cost) if substantial differences are discovered.

27. If only preliminary plans and specifications were available for use in the preparation of this

appraisal, then this appraisal is subject to a review of the final plans and specifications when

available (at additional cost) and we reserve the right to amend this appraisal if substantial

differences are discovered.

28. Unless otherwise stated in this report, the value conclusion is predicated on the assumption

that the property is free of contamination, environmental impairment or hazardous materials.

Unless otherwise stated, the existence of hazardous material was not observed by the

appraiser and the appraiser has no knowledge of the existence of such materials on or in the

property. The appraiser, however, is not qualified to detect such substances. The presence of

substances such as asbestos, urea-formaldehyde foam insulation, or other potentially

hazardous materials may affect the value of the property. No responsibility is assumed for

any such conditions, or for any expertise or engineering knowledge required for discovery.

The client is urged to retain an expert in this field, if desired.

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29. The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. We have not

made a specific compliance survey of the property to determine if it is in conformity with the

various requirements of the ADA. It is possible that a compliance survey of the property,

together with an analysis of the requirements of the ADA, could reveal that the property is

not in compliance with one or more of the requirements of the Act. If so, this could have a

negative effect on the value of the property. Since we have no direct evidence relating to this

issue, we did not consider possible noncompliance with the requirements of ADA in

developing an opinion of value.

30. This appraisal applies to the land and building improvements only. The value of trade

fixtures, furnishings, and other equipment, or subsurface rights (minerals, gas, and oil) were

not considered in this appraisal unless specifically stated to the contrary.

31. No changes in any federal, state or local laws, regulations or codes (including, without

limitation, the Internal Revenue Code) are anticipated, unless specifically stated to the

contrary.

32. Any income and expense estimates contained in the appraisal report are used only for the

purpose of estimating value and do not constitute prediction of future operating results.

Furthermore, it is inevitable that some assumptions will not materialize and that

unanticipated events may occur that will likely affect actual performance.

33. Any estimate of insurable value, if included within the scope of work and presented herein, is

based upon figures developed consistent with industry practices. However, actual local and

regional construction costs may vary significantly from our estimate and individual insurance

policies and underwriters have varied specifications, exclusions, and non-insurable items. As

such, we strongly recommend that the Client obtain estimates from professionals

experienced in establishing insurance coverage. This analysis should not be relied upon to

determine insurance coverage and we make no warranties regarding the accuracy of this

estimate.

34. The data gathered in the course of this assignment (except data furnished by the Client) shall

remain the property of the Appraiser. The appraiser will not violate the confidential nature of

the appraiser-client relationship by improperly disclosing any confidential information

furnished to the appraiser. Notwithstanding the foregoing, the Appraiser is authorized by the

client to disclose all or any portion of the appraisal and related appraisal data to appropriate

representatives of the Appraisal Institute if such disclosure is required to enable the appraiser

to comply with the Bylaws and Regulations of such Institute now or hereafter in effect.

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35. You and Valbridge Property Advisors | Hulberg and Associates both agree that any dispute

over matters in excess of $5,000 will be submitted for resolution by arbitration. This includes

fee disputes and any claim of malpractice. The arbitrator shall be mutually selected. If

Valbridge Property Advisors | Hulberg and Associates and the client cannot agree on the

arbitrator, the presiding head of the Local County Mediation & Arbitration panel shall select

the arbitrator. Such arbitration shall be binding and final. In agreeing to arbitration, we both

acknowledge that, by agreeing to binding arbitration, each of us is giving up the right to

have the dispute decided in a court of law before a judge or jury. In the event that the client,

or any other party, makes a claim against Hulberg and Associates or any of its employees in

connections with or in any way relating to this assignment, the maximum damages

recoverable by such claimant shall be the amount actually received by Valbridge Property

Advisors | Hulberg and Associates for this assignment, and under no circumstances shall any

claim for consequential damages be made.

36. Valbridge Property Advisors | Hulberg and Associates shall have no obligation, liability, or

accountability to any third party. Any party who is not the “client” or intended user identified

on the face of the appraisal or in the engagement letter is not entitled to rely upon the

contents of the appraisal without the express written consent of Valbridge Property Advisors

| Hulberg and Associates. “Client” shall not include partners, affiliates, or relatives of the party

named in the engagement letter. Client shall hold Valbridge Property Advisors | Hulberg and

Associates and its employees harmless in the event of any lawsuit brought by any third party,

lender, partner, or part-owner in any form of ownership or any other party as a result of this

assignment. The client also agrees that in case of lawsuit arising from or in any way involving

these appraisal services, client will hold Valbridge Property Advisors | Hulberg and Associates

harmless from and against any liability, loss, cost, or expense incurred or suffered by

Valbridge Property Advisors | Hulberg and Associates in such action, regardless of its

outcome.

37. The Valbridge Property Advisors office responsible for the preparation of this report is

independently owned and operated by Hulberg and Associates. Neither Valbridge Property

Advisors, Inc., nor any of its affiliates has been engaged to provide this report. Valbridge

Property Advisors, Inc. does not provide valuation services, and has taken no part in the

preparation of this report.

38. If any claim is filed against any of Valbridge Property Advisors, Inc., a Florida Corporation, its

affiliates, officers or employees, or the firm providing this report, in connection with, or in any

way arising out of, or relating to, this report, or the engagement of the firm providing this

report, then (1) under no circumstances shall such claimant be entitled to consequential,

special or other damages, except only for direct compensatory damages, and (2) the

maximum amount of such compensatory damages recoverable by such claimant shall be the

amount actually received by the firm engaged to provide this report.

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39. This report and any associated work files may be subject to evaluation by Valbridge Property

Advisors, Inc., or its affiliates, for quality control purposes.

40. Acceptance and/or use of this appraisal report constitutes acceptance of the foregoing

general assumptions and limiting conditions.

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CERTIFICATION


Certification – Stephen D. Kuhnhoff, MAI, ASA

I certify that, to the best of my knowledge and belief:

1. The statements of fact contained in this report 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 present or prospective interest in the property that is the subject of this report and no

personal interest with respect to the parties involved.

4. The undersigned has not performed 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 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. Stephen D. Kuhnhoff, MAI, ASA has personally inspected the subject property.

10. No one provided significant real property appraisal assistance to the person signing this

certification, unless otherwise noted.

11. The reported analyses, opinions and conclusions were developed, and this report has been

prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of

Professional Appraisal Practice of the Appraisal Institute.

12. The use of this report is subject to the requirements of the Appraisal Institute relating to review

by its duly authorized representatives.

13. As of the date of this report, the undersigned has completed the continuing education program

for Designated Members of the Appraisal Institute and American Society of Appraisers.


Managing Director

California Certified License #AG001791

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ADDENDA


Addenda

Subject Photographs

Engagement Letter

Preliminary Title Report

Purchase Agreement

Glossary

Qualifications / License

Stephen D. Kuhnhoff, MAI, ASA - Managing Director

Information on Valbridge Property Advisors

Office Locations

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ADDENDA


Subject Photographs

South and east elevations East elevation with canopy in foreground

Parking lot Interior

Open area with office in background Restroom

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Engagement Letter

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Preliminary Title Report

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Purchase Agreement

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Glossary Definitions are taken from The Dictionary of Real Estate Appraisal, 6

th Edition (Dictionary), the Uniform Standards of

Professional Appraisal Practice (USPAP), and Building Owners and Managers Association International (BOMA).

Absolute Net Lease

A lease in which the tenant pays all expenses including

structural maintenance, building reserves, and

management; often a long-term lease to a credit tenant.

(Dictionary)

Amortization The process of retiring a debt or recovering a capital

investment, typically through scheduled, systematic

repayment of the principal; a program of periodic

contributions to a sinking fund or debt retirement fund.

(Dictionary)

As Is Market Value The estimate of the market value of real property in its

current physical condition, use, and zoning as of the

appraisal date. (Dictionary)

Base Rent The minimum rent stipulated in a lease. (Dictionary)

Base Year The year on which escalation clauses in a lease are

based. (Dictionary)

Building Common Area In office buildings, the areas of the building that provide

services to building tenants but which are not included

in the office area or store area of any specific tenant.

These areas may include, but shall not be limited to,

main and auxiliary lobbies, atrium spaces at the level of

the finished floor, concierge areas or security desks,

conference rooms, lounges or vending areas, food

service facilities, health or fitness centers, daycare

facilities, locker or shower facilities, mail rooms, fire

control rooms, fully enclosed courtyards outside the

exterior walls, and building core and service areas such

as fully enclosed mechanical or equipment rooms.

Specifically excluded from building common area are

floor common areas, parking space, portions of loading

docks outside the building line, and major vertical

penetrations. (BOMA)

Building Rentable Area The sum of all floor rentable areas. Floor rentable area is

the result of subtracting from the gross measured area

of a floor the major vertical penetrations on that same

floor. It is generally fixed for the life of the building and

is rarely affected by changes in corridor size or

configuration. (BOMA)

Certificate of Occupancy (COO) A formal written acknowledgment by an appropriate

unit of local government that a new construction or

renovation project is at the stage where it meets

applicable health and safety codes and is ready for

commercial or residential occupancy. (Dictionary)

Common Area Maintenance (CAM)

The expense of operating and maintaining common

areas; may or may not include management charges and

usually does not include capital expenditures on tenant

improvements or other improvements to the property.

(Dictionary)

The amount of money charged to tenants for their

shares of maintaining a [shopping] center’s common

area. The charge that a tenant pays for shared services

and facilities such as electricity, security, and

maintenance of parking lots. Items charged to common

area maintenance may include cleaning services, parking

lot sweeping and maintenance, snow removal, security

and upkeep. (ICSC – International Council of Shopping

Centers, 4th

Ed.)

Condominium A multiunit structure, or a unit within such a structure,

with a condominium form of ownership. (Dictionary)

Conservation Easement An interest in real estate restricting future land use to

preservation, conservation, wildlife habitat, or some

combination of those uses. A conservation easement

may permit farming, timber harvesting, or other uses of

a rural nature as well as some types of conservation-

oriented development to continue, subject to the

easement. (Dictionary)

Contributory Value

A type of value that reflects the amount a property or

component of a property contributes to the value of

another asset or to the property as a whole.

The change in the value of a property as a whole,

whether positive or negative, resulting from the addition

or deletion of a property component. Also called

deprival value in some countries. (Dictionary)

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Debt Coverage Ratio (DCR)

The ratio of net operating income to annual debt service

(DCR = NOI/Im), which measures the relative ability of a

property to meet its debt service out of net operating

income; also called debt service coverage ratio (DSCR). A

larger DCR typically indicates a greater ability for a

property to withstand a reduction of income, providing

an improved safety margin for a lender. (Dictionary)

Deed Restriction

A provision written into a deed that limits the use of

land. Deed restrictions usually remain in effect when title

passes to subsequent owners. (Dictionary)

Depreciation

1) In appraisal, a loss in property value from any cause;

the difference between the cost of an improvement

on the effective date of the appraisal and the

market value of the improvement on the same date.

2) In accounting, an allocation of the original cost of

an asset, amortizing the cost over the asset’s life;

calculated using a variety of standard techniques.

(Dictionary)

Disposition Value

The most probable price that a specified interest in

property should bring under the following conditions:

Consummation of a sale within a specified time,

which is shorter than the typical exposure time for

such a property in that market.

The property is subjected to market conditions

prevailing as of the date of valuation;

Both the buyer and seller are acting prudently and

knowledgeably;

The seller is under compulsion to sell;

The buyer is typically motivated;

Both parties are acting in what they consider to be

their best interests;

An adequate marketing effort will be made during

the exposure time;

Payment will be made in cash in U.S. dollars (or the

local currency) or in terms of financial arrangements


The price represents the normal consideration for

the property sold, unaffected by special or creative

financing or sales concessions granted by anyone

associated with the sale. (Dictionary)

Easement The right to use another’s land for a stated purpose.

(Dictionary)

EIFS Exterior Insulation Finishing System. This is a type of

exterior wall cladding system. Sometimes referred to as

dry-vit.

Effective Date

1) The date on which the appraisal or review opinion

applies. (SVP)

2) In a lease document, the date upon which the lease

goes into effect. (Dictionary)

Effective Gross Income (EGI) The anticipated income from all operations of the real

estate after an allowance is made for vacancy and

collection losses and an addition is made for any other

income. (Dictionary)

Effective Rent Total base rent, or minimum rent stipulated in a lease,

over the specified lease term minus rent concessions;

the rent that is effectively paid by a tenant net of

financial concessions provided by a landlord. (TIs).

(Dictionary)

EPDM Ethylene Propylene Diene Monomer Rubber. A type of

synthetic rubber typically used for roof coverings.

(Dictionary)

Escalation Clause

A clause in an agreement that provides for the

adjustment of a price or rent based on some event or

index. e.g., a provision to increase rent if operating

expenses increase; also called escalator clause, expense

recovery clause or stop clause. (Dictionary)

Estoppel Certificate

A signed statement by a party (such as a tenant or a

mortgagee) certifying, for another’s benefit, that certain

facts are correct, such as that a lease exists, that there

are no defaults, and that rent is paid to a certain date.

(Black’s) In real estate, a buyer of rental property

typically requests estoppel certificates from existing

tenants. Sometimes referred to as an estoppel letter.

(Dictionary)

Excess Land Land that is not needed to serve or support the existing

use. The highest and best use of the excess land may or

may not be the same as the highest and best use of the

improved parcel. Excess land has the potential to be

sold separately and is valued separately. (Dictionary)

Excess Rent The amount by which contract rent exceeds market rent

at the time of the appraisal; created by a lease favorable

to the landlord (lessor) and may reflect unusual

management, unknowledgeable or unusually motivated

parties, a lease execution in an earlier, stronger rental

market, or an agreement of the parties. (Dictionary)

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Expense Stop

A clause in a lease that limits the landlord’s expense

obligation, which results in the lessee paying operating

expenses above a stated level or amount. (Dictionary)

Exposure Time

1) The time a property remains on the market.

2) The estimated length of time that the 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; Comment: Exposure

time is a retrospective opinion based on an analysis

of past events assuming a competitive and open

market. (Dictionary)

Extraordinary Assumption

An assumption, directly related to a specific assignment,

as of the effective date of the assignment results, which,

if found to be false, could alter the appraiser’s opinions

or conclusions. Comment: Extraordinary assumptions

presume as fact otherwise uncertain information about

physical, legal, or economic characteristics of the subject

property; or about conditions external to the property

such as market conditions or trends; or about the

integrity of data used in an analysis. (USPAP, 2016-2017

ed.)

Fee Simple Estate

Absolute ownership unencumbered by any other

interest or estate, subject only to the limitations

imposed by the governmental powers of taxation,

eminent domain, police power, and escheat. (Dictionary)

Floor Common Area In an office building, the areas on a floor such as

washrooms, janitorial closets, electrical rooms,

telephone rooms, mechanical rooms, elevator lobbies,

and public corridors which are available primarily for the

use of tenants on that floor. (BOMA)

Full Service (Gross) Lease

A lease in which the landlord receives stipulated rent

and is obligated to pay all of the property’s operating

and fixed expenses; also called a full service lease.

(Dictionary)

Furniture, Fixtures, and Equipment (FF&E) Business trade fixtures and personal property, exclusive

of inventory. (Dictionary)

Going-Concern Value

An outdated label for the market value of all the

tangible and intangible assets of an established and

operating business with an indefinite life, as if sold in

aggregate; more accurately termed the market value of

the going concern or market value of the total assets of

the business. (Dictionary)

Gross Building Area (GBA) 1) Total floor area of a building, excluding unenclosed

areas, measured from the exterior of the walls of

the above-grade area. This includes mezzanines

and basements if and when typically included in the

market area of the type of property involved.

2) Gross leasable area plus all common areas.

3) For residential space, the total area of all floor levels

measured from the exterior of the walls and

including the superstructure and substructure

basement; typically does not include garage space.

(Dictionary)

Gross Measured Area The total area of a building enclosed by the dominant

portion (the portion of the inside finished surface of the

permanent outer building wall which is 50 percent or

more of the vertical floor-to-ceiling dimension, at the

given point being measured as one moves horizontally

along the wall), excluding parking areas and loading

docks (or portions of same) outside the building line. It

is generally not used for leasing purposes and is

calculated on a floor by floor basis. (BOMA)

Gross Up Method

A method of calculating variable operating expenses in

income-producing properties when less than 100%

occupancy is assumed. Expenses reimbursed based on

the amount of occupied space, rather than on the total

building area, are described as “grossed up.” (Dictionary)

Gross Retail Sellout The sum of the separate and distinct market value

opinions for each of the units in a condominium,

subdivision development, or portfolio of properties, as

of the date of valuation. The aggregate of retail values

does not represent the value of all the units as though

sold together in a single transaction; it is simply the total

of the individual market value conclusions. Also called

the aggregate of the retail values, aggregate retail selling

price or sum of the retail values.. (Dictionary)

Ground Lease

A lease that grants the right to use and occupy land.

Improvements made by the ground lessee typically

revert to the ground lessor at the end of the lease term.

(Dictionary)

Ground Rent The rent paid for the right to use and occupy land

according to the terms of a ground lease; the portion of

the total rent allocated to the underlying land.

(Dictionary)

526 EMORY STREET

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HVAC Heating, ventilation, air conditioning (HVAC) system. A

unit that regulates the temperature and distribution of

heat and fresh air throughout a building. (Dictionary)

Highest and Best Use

1) The reasonably probable use of property that

results in the highest value. The four criteria that the

highest and best use must meet are legal

permissibility, physical possibility, financial

feasibility, and maximum productivity.

2) The use of an asset that maximizes its potential and

that is possible, legally permissible, and financially

feasible. The highest and best use may be for

continuation of an asset’s existing use of for some

alternative use. This is determined by the use that a

market participant would have in mind for the asset

when formulating the price that it would be willing

to bid. (IVS)

3) [The] highest and most profitable use for which the

property is adaptable and needed or likely to be

needed in the reasonably near future. (Uniform

Appraisal Standards for Federal Land Acquisitions)

(Dictionary)

Hypothetical Condition

1) A condition that is presumed to be true when it is

known to be false. (SVP – Standards of Valuation

Practice, effective January 1, 2015)

2) A condition, directly related to a specific

assignment, which is contrary to what is known by

the appraiser to exist on the effective date of the

assignment results, but is used for the purpose of

analysis. Comment: Hypothetical conditions are

contrary to known facts about physical, legal, or

economic characteristics of the subject property; or

about conditions external to the property, such as

market conditions or trends; or about the integrity

of data used in an analysis. (USPAP, 2016-2017 ed.)

(Dictionary)

Industrial Gross Lease

A type of modified gross lease of an industrial property

in which the landlord and tenant share expenses. The

landlord receives stipulated rent and is obligated to pay

certain operating expenses, often structural

maintenance, insurance and real property taxes, as

specified in the lease. There are significant regional and

local differences in the use of this term. (Dictionary)

Insurable Value

A type of value for insurance purposes. (Typically this

includes replacement cost less basement excavation,

foundation, underground piping and architect’s fees).

(Dictionary)

Investment Value

The value of a property to a particular investor or class

of investors based on the investor’s specific

requirements. Investment value may be different from

market value because it depends on a set of investment

criteria that are not necessarily typical of the market.

(Dictionary)

Just Compensation

In condemnation, the amount of loss for which a

property owner is compensated when his or her

property is taken. Just compensation should put the

owner in as good a position pecuniarily as he or she

would have been if the property had not been taken.

(Dictionary)

Leased Fee Interest The ownership interest held by the lessor, which

includes the right to receive the contract rent specified

in the lease plus the reversionary right when the lease

expires. (Dictionary)

Leasehold Interest The right held by the lessee to use and occupy real

estate for a stated term and under the conditions

specified in the lease. (Dictionary)

Lessee (Tenant) One who has the right to occupancy and use of the

property of another for a period of time according to a

lease agreement. (Dictionary)

Lessor (Landlord) One who conveys the rights of occupancy and use to

others under a lease agreement. (Dictionary)

Liquidation Value

The most probable price that a specified interest in

property should bring under the following conditions:

Consummation of a sale within a short time period.

The property is subjected to market conditions

prevailing as of the date of valuation.

Both the buyer and seller are acting prudently and

knowledgeably.

The seller is under extreme compulsion to sell.

The buyer is typically motivated.

Both parties are acting in what they consider to be

their best interests.

A normal marketing effort is not possible due to the

brief exposure time.

Payment will be made in cash in U.S. dollars (or the

local currency) or in terms of financial arrangements

comparable thereto.


the property sold, unaffected by special or creative


associated with the sale. (Dictionary)

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Loan to Value Ratio (LTV) The ratio between a mortgage loan and the value of the

property pledged as security, usually expressed as a

percentage. (Dictionary)

Major Vertical Penetrations Stairs, elevator shafts, flues, pipe shafts, vertical ducts,

and the like, and their enclosing walls. Atria, lightwells

and similar penetrations above the finished floor are

included in this definition. Not included, however, are

vertical penetrations built for the private use of a tenant

occupying office areas on more than one floor.

Structural columns, openings for vertical electric cable or

telephone distribution, and openings for plumbing lines

are not considered to be major vertical penetrations.

(BOMA)

Market Rent The most probable rent that a property should bring in a

competitive and open market reflecting the conditions

and restrictions of a specified lease agreement,

including the rental adjustment and revaluation,

permitted uses, use restrictions, expense obligations;

term, concessions, renewal and purchase options and

tenant improvements (TIs). (Dictionary)

Market Value

The most probable price that a property should bring in

a competitive and open market under all conditions

requisite to a fair sale, the buyer and seller each acting

prudently and knowledgeably, and assuming the price is

not affected by undue stimulus. Implicit in this definition

is the consummation of a sale as of a specified date and

the passing of title from seller to buyer under conditions

whereby:

Buyer and seller are typically motivated;

Both parties are well informed or well advised, and

acting in what they consider their own best

interests;

A reasonable time is allowed for exposure in the

open market;

Payment is made in terms of cash in United States

dollars or in terms of financial arrangements



the property sold unaffected by special or creative


associated with the sale.

(Dictionary)

Marketing Time

An opinion of the amount of time it might take to sell a

real or personal property interest at the concluded

market value level during the period immediately after

the effective date of an appraisal. Marketing time differs

from exposure time, which is always presumed to

precede the effective date of an appraisal. (Advisory

Opinion 7 of the Appraisal Standards Board of the

Appraisal Foundation and Statement on Appraisal

Standards No. 6, “Reasonable Exposure Time in Real

Property and Personal Property Market Value Opinions”

address the determination of reasonable exposure and

marketing time.) (Dictionary)

Master Lease

A lease in which the fee owner leases a part or the entire

property to a single entity (the master lease) in return

for a stipulated rent. The master lessee then leases the

property to multiple tenants. (Dictionary)

Modified Gross Lease

A lease in which the landlord receives stipulated rent

and is obligated to pay some, but not all, of the

property’s operating and fixed expenses. Since

assignment of expenses varies among modified gross

leases, expense responsibility must always be specified.

In some markets, a modified gross lease may be called a

double net lease, net net lease, partial net lease, or semi-

gross lease. (Dictionary)

Operating Expense Ratio The ratio of total operating expenses to effective gross

income (TOE/EGI); the complement of the net income

ratio, i.e., OER = 1 – NIR (Dictionary)

Option

A legal contract, typically purchased for a stated

consideration, that permits but does not require the

holder of the option (known as the optionee) to buy, sell,

or lease real estate for a stipulated period of time in

accordance with specified terms; a unilateral right to

exercise a privilege. (Dictionary)

Partial Interest Divided or undivided rights in real estate that represent

less than the whole, i.e., a fractional interest such as a

tenancy in common, easement, or life interest.

(Dictionary)

Pass Through

A tenant’s portion of operating expenses that may be

composed of common area maintenance (CAM), real

property taxes, property insurance, and any other

expenses determined in the lease agreement to be paid

by the tenant. (Dictionary)

Potential Gross Income (PGI) The total income attributable to property at full

occupancy before vacancy and operating expenses are

deducted. (Dictionary)

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Prospective Future Value Upon Completion A prospective market value may be appropriate for the

valuation of a property interest related to a credit

decision for a proposed development or renovation

project. According to USPAP, an appraisal with a

prospective market value reflects an effective date that

is subsequent to the date of the appraisal report. … The

prospective market value –as completed- reflects the

property’s market value as of the time that development

is expected to be complete. (Dictionary)

Prospective Future Value Upon Stabilization A prospective market value may be appropriate for the

valuation of a property interest related to a credit

decision for a proposed development or renovation

project. According to USPAP, an appraisal with a

prospective market value reflects an effective date that

is subsequent to the date of the appraisal report …The

prospective market value – as stabilized – reflects the

property’s market value as of the time the property is

projected to achieve stabilized occupancy. For an

income-producing property, stabilized occupancy is the

occupancy level that a property is expected to achieve

after the property is exposed to the market for lease

over a reasonable period of time and at comparable

terms and conditions to other similar properties.

(Dictionary)

Replacement Cost The estimated cost to construct, at current prices as of a

specific date, a substitute for a building or other

improvements, using modern materials and current

standards, design, and layout. (Dictionary)

Reproduction Cost The estimated cost to construct, at current prices as of

the effective date of the appraisal, an exact duplicate or

replica of the building being appraised, using the same

materials, construction standards, design, layout, and

quality of workmanship and embodying all of the

deficiencies, superadequacies, and obsolescence of the

subject building. (Dictionary)

Retrospective Value Opinion A value opinion effective as of a specified historical date.

The term retrospective does not define a type of value.

Instead, it identifies a value opinion as being effective at

some specific prior date. Value as of a historical date is

frequently sought in connection with property tax

appeals, damage models, lease renegotiation, deficiency

judgments, estate tax, and condemnation. Inclusion of

the type of value with this term is appropriate, e.g.,

“retrospective market value opinion.” (Dictionary)

Sandwich Leasehold Estate

The interest held by the sandwich leaseholder when the

property is subleased to another party; a type of

leasehold estate. (Dictionary)

Sublease

An agreement in which the lessee in a prior lease

conveys the right of use and occupancy of a property to

another, the sublessee, for a specific period of time,

which may or may not be coterminous with the

underlying lease term. (Dictionary)

Subordination

A contractual arrangement in which a party with a claim

to certain assets agrees to make his or her claim junior,

or subordinate, to the claims of another party.

(Dictionary)

Surplus Land

Land that is not currently needed to support the existing

use but cannot be separated from the property and sold

off for another use. Surplus land does not have an

independent highest and best use and may or may not

contribute value to the improved parcel. (Dictionary)

Triple Net (Net Net Net) Lease

An alternative term for a type of net lease. In some

markets, a net net net lease is defined as a lease in

which the tenant assumes all expenses (fixed and

variable) of operating a property except that the

landlord is responsible for structural maintenance,

building reserves, and management; also called NNN

lease, net net net lease, or fully net lease. (Dictionary)

(The market definition of a triple net lease varies; in

some cases tenants pay for items such as roof repairs,

parking lot repairs, and other similar items.)

Usable Area The measured area of an office area, store area, or

building common area on a floor. The total of all the

usable areas for a floor shall equal floor usable area of

that same floor. (BOMA)

Value-in-Use

The value of a property assuming a specific use, which

may or may not be the property’s highest and best use

on the effective date of the appraisal. Value in use may

or may not be equal to market value but is different

conceptually. (Dictionary)

526 EMORY STREET

ADDENDA


Qualifications / License

526 EMORY STREET

ADDENDA


Qualifications of Stephen D. Kuhnhoff, MAI, ASA

Managing Director Valbridge Property Advisors | Northern California

Independent Valuations for a Variable World

State Certifications

Certified General

State of California

Membership/Affiliations

Member: Appraisal Institute MAI Designation

Senior Member: American Society of Appraisers (ASA)

designated in Machinery/Technical Valuation

and Real Property Urban

Experience

Managing Director

Valbridge Property Advisors | Northern California (2013-Present)

Senior Vice President/Branch Manager

Hulberg & Associates, Inc. (1998-2013) (joined to create

Valbridge in 2013)

Senior Appraiser

Hulberg & Associates, Inc. (1987-1998)

Manager, Real Estate, Machinery & Equipment Appraisal

Arthur Andersen & Company (1984-1987)

Commercial Real Estate, Machinery & Equipment Appraiser

Marshall & Stevens, Inc. (1979-1984)

Appraisal/valuation and consulting assignments include:

Commercial: Retail shopping centers, medical and

professional office buildings, vacant land.

Industrial: Self storage, warehouses, manufacturing, R&D,

biotech, vacant land.

Residential: Single family, apartments, vacant land

Special Purpose: Athletic clubs, hospitals, medical clinics,

assisted living, convalescent hospitals, nursing

homes, marinas, hotels, motels.

Other: Minority interest valuation, condemnation,

litigation support, arbitrations and review

appraisals.

Education

Bachelor of Arts and

Secondary Education

Credential

Mathematics

Sonoma State University

Contact Details

925-327-1660 ext. 7203 (p)

408-279-3428 (f)

[email protected] (e)

Valbridge Property Advisors l

Northern California

3160 Crow Canyon Place,

#245

San Ramon, CA 94583

www.valbridge.com

mailto:[email protected]

http://www.valbridge.com/

526 EMORY STREET

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Qualified as expert witness in Alameda, Contra Costa,

Monterey, San Mateo, and Santa Clara Counties and in the

State of Utah

526 EMORY STREET

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526 EMORY STREET

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Valbridge Property Advisors Information / Office Locations

526 EMORY STREET

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Appraisal Report - LoopNet · 2018-07-31 · Appraisal Report 526 Emory Street San Jose, Santa Clara County, California 95110 Report Date: June 14, 2018 FOR: TMC Financing Mr. Bruce

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