COMPLETE APPRAISAL- SUMMARY REPORT



Summary Report

REAL ESTATE APPRAISAL

Of

Subject Property Name

[pic]

Subject Address, Subject City

Subject County County

Subject State, Subject Zip/Postal

As of

May 9, 2011

Prepared For

Mr./Ms. Ima Lender

Bank & Trust, Co.

Client Address

Client City, Client State/Province, 03301

Client File:

ClientFileNum

Prepared by

Appraisal Co. Valuation & Consulting

Tom Armstrong, MAI, NH-137

-- --, --, -----

File Name:

N1 03312011

Appraisal Co. Valuation & Consulting

|[pic] | |001-555-1212 |

| |PO Box 001, 987 Route 1 |Fax: 001-555-2121 |

| |MyCity, |admin@ |

| |MyState/Province, 03245 | |

March 31, 2011

Mr./Ms. Ima Lender

Bank & Trust, Co.

Client Address

Client City, Client State/Province

03301

|Re: |Summary Report, Real Estate Appraisal |

| |Subject Property Name |

| |Subject Address, Subject City, |

| |Subject County County, Subject State, Subject Zip/Postal |

| | |

| |File Name: N1 03312011 |

Dear Mr./Ms. Lender:

At your request, we have prepared an appraisal for the above referenced property, which may be briefly described as follows:

Capsule Description here

Please reference page 13 of this report for important information regarding the scope of research and analysis for this appraisal, including property identification, inspection, highest and best use analysis and valuation methodology.

We certify that we have no present or contemplated future interest in the property beyond this estimate of value. The appraiser has not performed any prior services regarding the subject within the previous three years of the appraisal date.

Your attention is directed to the Limiting Conditions and Assumptions section of this report (page 11). Acceptance of this report constitutes an agreement with these conditions and assumptions. In particular, we note the following:

Hypothetical Conditions:

• There are no hypothetical conditions for this appraisal.

• None.

• None.

|[pic] |Mr./Ms. Lender |

| |Bank & Trust, Co. |

| |March 31, 2011 |

| |Page 2 |

Extraordinary Assumptions:

• There are no Extraordinary Assumptions for this appraisal.

• None.

• None.

Based on the appraisal described in the accompanying report, subject to the Limiting Conditions and Assumptions, Extraordinary Assumptions and Hypothetical Conditions (if any), we have made the following value conclusion(s):

Current As Is Market Value:

The “As Is” market value of the Fee Simple estate of the property, as of May 9, 2011, is

One Million Fifty Thousand Dollars ($1,050,000)

The market exposure time[1] preceding May 9, 2011 would have been 2 months and the estimated marketing period[2] as of May 9, 2011 is 2 months.

Prospective As Complete Market Value:

The “As Complete” market value of the Fee Simple estate of the property, as of May 9, 2011, is

One Million Fifty Thousand Dollars ($1,050,000)

The market exposure time preceding May 9, 2011 would have been 4 months and the estimated marketing period as of May 9, 2011 is 4 months.

Prospective As Stabilized Market Value:

The “As Stabilized” market value of the Fee Simple estate of the property, as of May 9, 2011, is

One Million Fifty Thousand Dollars ($1,050,000)

The market exposure time preceding May 9, 2011 would have been 5 months and the estimated marketing period as of May 9, 2011 is 5 months.

Respectfully submitted,

Appraisal Co. Valuation & Consulting

|Tom Armstrong, MAI |-- --, -- |

|NH-137 |----- |

Table of Contents

Summary of Important Facts and Conclusions 6

Definitions 8

Limiting Conditions and Assumptions 11

Scope of Work 13

Market Area Analysis 15

Market Area Location and Boundaries 16

Market Area and Property Characteristics 16

Location Map 17

Property Description 18

Site Plan/Tax Map/Survey 20

Improvements Plan 25

Subject Photographs 26

Assessment and Taxes 28

Zoning 29

Highest and Best Use 30

Valuation Methodology 31

Analyses Applied 31

Cost Approach 32

Land Value 32

Sales Comparison Approach – Land Valuation 32

Land Comparables 33

Comparables Map 38

Analysis Grid 38

Comparable Land Sale Adjustments 40

Sales Comparison Approach Conclusion – Land Valuation 40

Cost Analysis 41

Depreciation Analysis 41

Cost Approach Conclusion 42

Sales Comparison Approach 44

Comparables 44

Comparables Map 49

Analysis Grid 49

Comparable Sale Adjustments 51

Sales Comparison Approach Conclusion 51

Income Approach 52

Direct Capitalization Analysis 52

Potential Gross Income (PGI) 52

Space Types & Occupancy 52

Rent Roll 53

Recent Leases 55

Overall Rent Ranges 55

Major Tenants 55

Lease Expiration Schedule 55

Market Rent 56

Comparables Map 60

Analysis Grid 60

Comparable Rent Adjustments 61

Summary of Market Rent 63

Potential Gross Income Summary 64

Vacancy and Collection Loss 65

Expenses 65

Capitalization Rate 67

Capitalization to Value 70

Direct Capitalization Analysis Conclusion 70

Effective Gross Income Multiplier Analysis (EGIM) 71

Net Income Multiplier Analysis (NIM) 72

Stabilization Calculations 73

Final Reconciliation 76

Value Indications 76

Value Conclusion 76

Certification Statement 78

Addenda 79

Summary of Important Facts and Conclusions

|General |

|Subject: |Subject Property Name |

| |Subject Address, Subject City, |

| |Subject County County, Subject State, Subject Zip/Postal |

| | |

| |Capsule Description here |

|Owner: |Owner Name |

|Legal Description: |Legal Desc1 |

|Date of Report: |March 31, 2011 |

|Intended Use: |The intended use is for mortgage financing. |

|Intended User(s): |The client and property owner. |

Assessment:

[pic]

|Sale History: |The subject has not sold in the last three years, according to public records. |

| |Or: |

| |The subject sold for $1,250,000on January 1, 2011. |

| |MRS SalesComnt |

| | |

| |Prior to this transaction the subject sold for Older Sale Price on Older Sale Date. |

| |Older Sale Comment. |

| | |

| |PreviousSaleComnt |

|Current Listing/Contract(s): |The subject is not currently listed for sale, or under contract. |

| |Or: |

| |The subject was listed by Listing Agency, Inc for $1,750,000 on January 21, 2011. |

| |ListingCmnt |

| |And/Or |

| |The subject is currently under option for $1,500,000. The option date is January 1, |

| |2011. OptionComnt. |

| |And/or |

| |The subject is under contract for sale for $1,500,000. |

| |Contract Date: January 21, 2011 |

| |Financing Terms: Contract Financing |

| |Buyer: ContractGrantee |

| |ContractComnt |

Land:

[pic]

Improvements:

[pic]

See area definitions, page 9.

|Zoning: |Zoning Code |

|Highest and Best Use |HBU as vacant |

|of the Site: | |

|Highest and Best Use |HBU as improved |

|as Improved: | |

|Type of Value: |Market Value |

|Value Indications |

|Land Value: |$600,000 | | |

|Cost Approach: |$1,430,000 | | |

|Sales Comparison Approach: |$1,025,000 | | |

|Income Approach: | | | |

|Direct Capitalization |$1,090,000 | | |

|EGIM Analysis |$1,055,000 | | |

|NIM Analysis |$1,050,000 | | |

|Reconciled Value(s): |As Is |As Complete |As Stabilized |

|Value Conclusion(s) |$1,050,000 |$1,050,000 |$1,050,000 |

|Effective Date(s) |May 9, 2011 |May 9, 2011 |May 9, 2011 |

|Property Rights |Fee Simple |Fee Simple |Fee Simple |

Definitions

Market Value

Per Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. (Source: 12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24,1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994.)

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

1. Buyer and seller are typically motivated;

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

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

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

5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

A Fee Simple estate is definedError! Bookmark not defined. as:

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.

A Leased Fee interest is definedError! Bookmark not defined. as:

A freehold (ownership interest) where the possessory interest has been granted to another party by the creation of a contractual landlord-tenant relationship (i.e., a lease).

Marketing Time is definedError! Bookmark not defined. as:

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 the appraisal.

Marketing time differs from exposure time, which is always presumed to precede the effective date of the 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.

Exposure Time is definedError! Bookmark not defined. as:

1. The time a property remains on the market.

2. The estimated length of time 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; a retrospective estimate based on an analysis of past events assuming a competitive and open market.

See Marketing Time, above.

Gross Building Area (GBA): 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 region.Error! Bookmark not defined.

Rentable Area (RA): For office buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the building that penetrate through the floor to the areas below. The rentable area of a floor is computed by measuring the inside finished surface of the dominant portion of the permanent building walls, excluding any major permanent penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to local practice.Error! Bookmark not defined.

Gross Leasable Area (GLA): Total floor area designed for the occupancy and exclusive use of tenants, including basements and mezzanines; measured from the center of joint partitioning to the outside wall surfaces.Error! Bookmark not defined.

As Is Market Value

The estimate of the market value of the real property in its current physical condition, use and zoning as of the appraisal date.Error! Bookmark not defined.

Stabilized Value

Stabilized value is the prospective value of a property after construction has been completed and market occupancy and cash flow have been achieved.[3]

As Complete Value

The prospective value of a property after all construction has been completed. This value reflects all expenditures for lease-up and occupancy that may be expected to have occurred at that point in time, which may or may not put the property at stabilized value.

Limiting Conditions and Assumptions

Acceptance of and/or use of this report constitutes acceptance of the following limiting conditions and assumptions; these can only be modified by written documents executed by both parties.

This appraisal is to be used only for the purpose stated herein. While distribution of this appraisal in its entirety is at the discretion of the client, individual sections shall not be distributed; this report is intended to be used in whole and not in part.

No part of this appraisal, its value estimates or the identity of the firm or the appraiser(s) may be communicated to the public through advertising, public relations, media sales, or other media.

All files, work papers and documents developed in connection with this assignment are the property of Appraisal Co. Valuation & Consulting. Information, estimates and opinions are verified where possible, but cannot be guaranteed. Plans provided are intended to assist the client in visualizing the property; no other use of these plans is intended or permitted.

No hidden or unapparent conditions of the property, subsoil or structure, which would make the property more or less valuable, were discovered by the appraiser(s) or made known to the appraiser(s). No responsibility is assumed for such conditions or engineering necessary to discover them. Unless otherwise stated, this appraisal assumes there is no existence of hazardous materials or conditions, in any form, on or near the subject property.

Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyl, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, was not called to the attention of the appraiser nor did the appraiser become aware of such during the appraiser’s inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser, however, is not qualified to test for such substances. The presence of such hazardous substances may affect the value of the property. The value opinion developed herein is predicated on the assumption that no such hazardous substances exist on or in the property or in such proximity thereto, which would cause a loss in value. No responsibility is assumed for any such hazardous substances, nor for any expertise or knowledge required to discover them.

Unless stated herein, the property is assumed to be outside of areas where flood hazard insurance is mandatory. Maps used by public and private agencies to determine these areas are limited with respect to accuracy. Due diligence has been exercised in interpreting these maps, but no responsibility is assumed for misinterpretation.

Good title, free of liens, encumbrances and special assessments is assumed. No responsibility is assumed for matters of a legal nature.

Necessary licenses, permits, consents, legislative or administrative authority from any local, state or Federal government or private entity are assumed to be in place or reasonably obtainable.

It is assumed there are no zoning violations, encroachments, easements or other restrictions which would affect the subject property, unless otherwise stated.

The appraiser(s) are not required to give testimony in Court in connection with this appraisal. If the appraisers are subpoenaed pursuant to a court order, the client agrees to pay the appraiser(s) Appraisal Co. Valuation & Consulting’s regular per diem rate plus expenses.

Appraisals are based on the data available at the time the assignment is completed. Amendments/modifications to appraisals based on new information made available after the appraisal was completed will be made, as soon as reasonably possible, for an additional fee.

Americans with Disabilities Act (ADA) of 1990

A civil rights act passed by Congress guaranteeing individuals with disabilities equal opportunity in public accommodations, employment, transportation, government services, and telecommunications. Statutory deadlines become effective on various dates between 1990 and 1997. Appraisal Co. Valuation & Consulting has not made a determination regarding the subject’s ADA compliance or non-compliance. Non-compliance could have a negative impact on value, however this has not been considered or analyzed in this appraisal.

Scope of Work

According to the Uniform Standards of Professional Appraisal Practice, it is the appraiser’s responsibility to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem and intended user(s). Therefore, the appraiser must identify and consider:

● the client and intended users;

● the intended use of the report;

● the type and definition of value;

● the effective date of value;

● assignment conditions;

● typical client expectations; and

● typical appraisal work by peers for similar assignments.

This appraisal is prepared for Mr./Ms. Ima Lender, -- Bank & Trust, Co.. The problem to be solved is to estimate the 'as is' market value of the subject property. The intended use is for mortgage financing. This appraisal is intended for the use of client and property owner.

|Scope of Work |

|Report Type: |This is a Summary Report as defined by Uniform Standards of Professional |

| |Appraisal Practice under Standards Rule 2-2(B). This format provides a summary of|

| |the appraisal process, subject and market data and valuation analyses. |

|Property Identification: |The subject has been identified by the legal description and the assessors' |

| |parcel number. |

|Inspection: |A complete interior and exterior inspection of the subject property has been |

| |made, and photographs taken. |

|Market Area and Analysis of Market Conditions: |A complete analysis of market conditions has been made. The appraiser maintains |

| |and has access to comprehensive databases for this market area and has reviewed |

| |the market for sales and listings relevant to this analysis. |

|Highest and Best Use Analysis: |A complete as vacant and as improved highest and best use analysis for the |

| |subject has been made. Physically possible, legally permissible and financially |

| |feasible uses were considered, and the maximally productive use was concluded. |

|Type of Value: |Market Value |

|Valuation Analyses | |

|Cost Approach: |A cost approach was applied as there is adequate data to develop a land value and|

| |the depreciation accrued to the improvements can be reasonably measured. |

| | |

|Sales Comparison Approach: |A sales approach was applied as there is adequate data to develop a value |

| |estimate and this approach reflects market behavior for this property type. |

| | |

|Income Approach: |An income approach was applied as the subject is an income producing property and|

| |there is adequate data to develop a value estimate with this approach. |

| | |

|Hypothetical Conditions: |There are no hypothetical conditions for this appraisal. |

| |None. |

| |None. |

|Extraordinary Assumptions: |There are no Extraordinary Assumptions for this appraisal. |

| |None. |

| |None. |

|Information Not Available: |-- |

| |-- |

| |-- |

Comments

Market Area Analysis

[pic]

Optional narrative headings – delete if using table above

Market Area Location and Boundaries

Describe

Market Area and Property Characteristics

Describe

Population Trends

Describe/Analyze

Housing Trends

Describe/Analyze

Income Trends

Describe/Analyze

Major Employers

Describe/Analyze

Unemployment Trends

Describe/Analyze

Land Use Trends

Describe/Analyze

Location Map

[pic]

Property Description

Capsule Description here

Multiple parcels table – delete if only one parcel

[pic]

|Site |

|Location: |The subject is located on the south side of Route, at the southwest region of the downtown |

| |commercial district. |

|Current Use of the Property: |Improved as … |

|Site Size: |Total: 2.00 acres; 87,120 square feet |

| | |

| |Usable: 2.00 acres; 87,120 square feet |

| |Parcel 1 usable land area comments |

|Shape: |The site is roughly rectangular. |

|Frontage/Access: |The subject property has good access with frontage as follows: |

| |Primary Front Street: 310 feet |

| |Secondary Front Street: 50 feet |

| |The site has an average depth of 255 feet. It is a corner lot. |

|Visibility: |Average |

|Topography: |The subject has level topography at grade and no areas of wetlands. |

|Soil Conditions: |The soil conditions observed at the subject appear to be typical of the region and adequate |

| |to support development. |

|Utilities: |Electricity: Electricity |

| |Sewer: Sewer |

| |Water: Water |

| |Natural Gas: Gas |

| |Underground Utilities: UndergroundUtilities |

| |Adequacy: UtilitesAdequacy |

|Site Improvements: |StreetLights |

| |Sidewalk |

| |CurbGutter |

| |The landscaping consists of … |

| | |

|Flood Zone: |The subject is located in an area mapped by the Federal Emergency Management Agency (FEMA). |

| |The subject is located in FEMA flood zone X, which is not classified as a flood hazard area. |

| | |

| |FEMA Map Number: 11-22-33 |

| |FEMA Map Date: January 1, 1988 |

| | |

| |The subject is not in a flood zone. |

|Wetlands/Watershed: |WetlandsWatershed |

|Environmental Issues: |Environmental Issues |

|Encumbrance / Easements: |Encumbrance or Easement |

|Site Comments: |SiteComnt |

Insert Site #2 here (How?)

Site Plan/Tax Map/Survey

|Improvements Description |

|Development/Property Name: |Subject Property Name |

|Property Type: |Office |

|Overview: |Capsule Description here |

Multiple buildings table, delete if only one building

[pic]

|General - Building 1 |

|Building Identification: |Building 1 |

|Building Description: |BuildingDesc |

|Building Class: |A, B or C |

|Construction: |Steel and masonry |

|Construction Quality: |ConstructionQuality |

|Year Built: |1988 |

|Renovations: |-- |

|Effective Age: |20 years |

|Remaining Useful Life: |30 |

|Condition: |Good |

|Appeal/Appearance: |AppealAppearance |

|Areas, Ratios & Numbers: |Number of Stories: 2.00 |

| |Gross Building Area: 12,995 |

| |Gross Leasable Area: NA |

| |Rentable Area: 12,500 |

| |Number of Units: 14 |

| | |

| |Building Efficiency Ratio: 96.2% |

| | |

|Foundation, Frame & Exterior - Building 1 |

|Foundation: |Poured concrete slab |

|Basement/Sublevels: |1,215 square feet; NumSublevels sublevel(s) |

|Basement Use: |-- |

|Structural Frame: |FrameType |

|Column Spacing: |24 Feet |

|Bay Dimension: |0 |

|Exterior: |ExteriorWalls |

|Windows: |Windows |

|Roof/Cover: |RoofType / RoofCover |

|Service Access/ Overhead Doors: |The building is served by NumDoor overhead doors; NumDoorLeveler with levelers. |

|Other: | |

|Interior - Building 1 |

|Interior Layout: |FloorPlanLayout |

|Floor Cover: |FloorCovering |

|Walls: |Painted drywall |

|Ceilings & Ceiling Height: |Acoustic ceiling panels / 18 |

|Lighting: |A mix of fluorescent and incandescent lighting. |

|Restrooms: |Restrooms |

|Other: | |

|Mechanical Systems - Building 1 |

|Heating: |HeatType |

|Cooling: |ACType |

|Electrical: |ElectricityDesc |

|Plumbing Condition: |PlumbingCondition |

|Sprinkler: |FireSprinklerType |

|Elevators/Escalators: |NumElevator / NumEscalator |

|Security: |Security |

|Other: | |

|Comments, Building 1: |Comments |

Insert Building #2 Here (How?)

|Parking |

|Parking Type and Number of Spaces: |Type: ParkingType |

| |Spaces: 48 |

| |Condition: ParkingLotCond |

|Parking Ratio: |3.84 spaces per 1,000 square feet. |

|Other: | |

|Property Analysis |

|Design & Functional Utility: |Overall design and functional utility |

|Deferred Maintenance: |DefMaintenanceComnt |

|Capital Improvements: |Planned Capital Improvements |

|Other: | |

|Comments: |OverallPropertyComments |

Americans With Disabilities Act

Please reference the Limiting Conditions and Assumptions section of this report on page 12.

Hazardous Substances

Please reference the Limiting Conditions and Assumptions section of this report on page 12.

Improvements Plan

Subject Photographs

|Picture Here |

| |

|Description Here |

| |

|Picture Here |

| |

|Description Here |

|Picture Here |

| |

|Description Here |

| |

|Picture Here |

| |

|Description Here |

Assessment and Taxes

|Taxing Authority |Taxing Authority |

|Assessment Year |2011 |

[pic]

[pic]

Comments

Assessment comments here

Zoning

|Land Use Controls |

|Zoning Code |Zoning Code |

|Zoning Description |Zoning Description |

|Zoning Density/FAR |0.15 |

|Actual Density of Use |Actual density of use |

|Current Use Legally Conforming |Current Use Legally Conforming |

|Zoning Change Likely |Zoning Change Likely |

|Zoning Change Description |Zoning Change Description |

|Set Back Distance |Set Back Distance |

|Side Yard Distance |Side Yard Distance |

|Zoning Comments |Zoning Comments |

Highest and Best Use

Highest and best use may be defined as

the reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. Error! Bookmark not defined.

1. Legally Permissible: What uses are permitted by zoning and other legal restrictions?

2. Physically Possible: To what use is the site physically adaptable?

3. Financially Feasible: Which possible and permissible use will produce any net return to the owner of the site?

4. Maximally Productive. Among the feasible uses which use will produce the highest net return, (i.e., the highest present worth)?

Highest and Best Use of the Site

The highest and best use of the site, as vacant, is for HBU as vacant.

HBU vacant comments

Highest and Best Use as Improved

The highest and best use of the subject as improved HBU as improved.

HBU as improved comments

Valuation Methodology

Three basic approaches may be used to arrive at an estimate of market value. They are:

1. The Cost Approach

2. The Income Approach

3. The Sales Comparison Approach

Cost Approach

The Cost Approach is summarized as follows:

Cost New

- Depreciation

+ Land Value

= Value

Income Approach

The Income Approach converts the anticipated flow of future benefits (income) to a present value estimate through a capitalization and or a discounting process.

Sales Comparison Approach

The Sales Comparison Approach compares sales of similar properties with the subject property. Each comparable sale is adjusted for its inferior or superior characteristics. The values derived from the adjusted comparable sales form a range of value for the subject. By process of correlation and analysis, a final indicated value is derived.

Final Reconciliation

The appraisal process concludes with the Final Reconciliation of the values derived from the approaches applied for a single estimate of market value. Different properties require different means of analysis and lend themselves to one approach over the others.

Analyses Applied

A cost analysis was considered and was developed because there is adequate data to develop a land value and the depreciation accrued to the improvements can be reasonably measured.

A sales comparison analysis was considered and was developed because there is adequate data to develop a value estimate and this approach reflects market behavior for this property type.

An income analysis was considered and was developed because the subject is an income producing property and there is adequate data to develop a value estimate with this approach.

Cost Approach

The Cost Approach is based on the principle of substitution - that a prudent and rational person would pay no more for a property than the cost to construct a similar and competitive property, assuming no undue delay in the process. The Cost Approach tends to set the upper limit of value before depreciation is considered. The applied process is as follows:

• Estimate the land value according to its Highest and Best Use. We have used the Sales Comparison Approach; the process is as follows:

o Comparable sales, contracts for sale and current offerings are researched and documented.

o Each comparable is analyzed and adjusted to equate with the subject property.

o The value indication of each comparable is analyzed and the data reconciled for a land value indication.

• Estimate the replacement cost of the building and site improvements.

• Estimate the physical, functional and/or external depreciation accrued to the improvements.

• Sum the depreciated value of the improvements with the value of the land for an indication of value.

Land Value

The subject’s land value has been developed via the sales comparison approach.

Sales Comparison Approach – Land Valuation

The Sales Comparison Approach is based on the premise that a buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the Sales Comparison Approach.

• The market in which the subject property competes is investigated; comparable sales, contracts for sale and current offerings are reviewed.

• The most pertinent data is further analyzed and the quality of the transaction is determined.

• The most meaningful unit of value for the subject property is determined.

• Each comparable sale is analyzed and where appropriate, adjusted to equate with the subject property.

• The value indication of each comparable sale is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach.

Land Comparables

We have researched three comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction.

[pic]

[pic]

[pic]

[pic]

To insert more comp sheets:

By default, the Narrative1 template displays three comps for Land, Sales and Leases. To add more:

1. Create a new blank page in Word

2. Right-click and select Fields and Tables (or use the Narrative1 menu from Word’s main menu.)

3. Find the comps in the list, select it and click insert

Comparables Map

[pic]

Analysis Grid

The above sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

|( Property Rights Sold |( Market Trends |

|( Financing |( Location |

|( Conditions of Sale |( Physical Characteristics |

On the following page is a sales comparison grid displaying the subject property, the comparables and the adjustments applied.

[pic]

Comparable Land Sale Adjustments

Property Rights

( Describe/Analyze(

Financing

( Describe/Analyze(

Conditions of Sale

( Describe/Analyze(

Economic Trends

( Describe/Analyze(

Location

( Describe/Analyze(

Adjustment 1

( Describe/Analyze(

Adjustment 2

( Describe/Analyze(

Adjustment 3

( Describe/Analyze(

Adjustment 4

( Describe/Analyze(

Sales Comparison Approach Conclusion – Land Valuation

The adjusted values of the comparable properties range from $309,917 to $334,545; the average is $325,932. All of the value indications have been considered, and in the final analysis, comparables , and , have been given most weight in arriving at our final reconciled per acre value of $300,000.

|As Is Market Value |

|Indicated Value per Acre: |$300,000 |

|Subject Size: |2 |

|Indicated Value: |$600,000 |

|Rounded: |$600,000 |

|Six Hundred Thousand Dollars |

Cost Analysis

The next step in the Cost Approach is to estimate the replacement cost of the buildings and site improvements. The replacement cost of the subject site and building improvements are based on Marshall & Swift, a nationally recognized cost service.

Soft Costs

Where appropriate, we have included the following soft costs:

Engineering

Engineering has been applied at 6.0% of building cost.

Architectural

Architectural has been applied at 5.0% of building and site costs.

Permits and Legal

Permitting and legal costs have been applied at $10,000.

Marketing & Leasing Commissions

It is often appropriate to add marketing expenses and leasing commissions necessary to bring an income producing property to stabilized occupancy to the cost schedule. In this case, these costs have been estimated at $20,000.

Developer's Profit

This factor reflects the profit necessary for the developer to undertake the management, responsibility and risks of construction associated with the subject property. Current valuation theory states that the four components that create value are land, labor, capital and coordination. Developer's profit as used in the Cost Approach reflects the coordination component of value. Typically, developer's profit runs 10% to 20%: we have computed developer's profit at 10.0% of construction costs.

Depreciation Analysis

Depreciation may be defined as any loss of value from any cause. There are three general areas of depreciation: physical deterioration, functional obsolescence and external obsolescence. Depreciation may be curable or incurable, the test being that money spent to cure the depreciation be gained in value. If the depreciation costs more to fix than will be gained in value, then the depreciation is considered incurable.

Physical Deterioration

This results from deterioration from aging and use. This type of depreciation may be curable or incurable.

Functional Obsolescence

This results from a lack of utility or desirability due to design or market perception of the improvements. This type of depreciation may be curable or incurable.

External Obsolescence

This is due to circumstances outside the property itself, such as industry, demographic and economic conditions or an undesirable proximate use. This type of depreciation is rarely curable.

Depreciation Accrued to the Subject

[pic]

Analysis

Cost Approach Conclusion

Based on the analysis detailed on the following page, as of May 9, 2011 we have reconciled to a cost approach value of:

$1,430,000

One Million Four Hundred Thirty Thousand Dollars

[pic]

Sales Comparison Approach

The Sales Comparison Approach is based on the premise that a buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the Sales Comparison Approach.

• The market in which the subject property competes is investigated; comparable sales, contracts for sale and current offerings are reviewed.

• The most pertinent data is further analyzed and the quality of the transaction is determined.

• The most meaningful unit of value for the subject property is determined.

• Each comparable sale is analyzed and where appropriate, adjusted to equate with the subject property.

• The value indication of each comparable sale is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach.

Comparables

We have researched three comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction.

[pic]

[pic]

[pic]

[pic]

To insert more comp sheets:

By default, the Narrative1 template displays three comps for Land, Sales and Leases. To add more:

4. Create a new blank page in Word

5. Right-click and select Fields and Tables (or use the Narrative1 menu from Word’s main menu.)

6. Find the comps in the list, select it and click insert

Comparables Map

[pic]

Analysis Grid

The above sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

|( Property Rights Sold |( Market Trends |

|( Financing |( Location |

|( Conditions of Sale |( Physical Characteristics |

On the following page is a sales comparison grid displaying the subject property, the comparables and the adjustments applied.

[pic]

Comparable Sale Adjustments

Property Rights

( Describe/Analyze(

Financing

( Describe/Analyze(

Conditions of Sale

( Describe/Analyze(

Economic Trends

( Describe/Analyze(

Location

( Describe/Analyze(

Adjustment 1

( Describe/Analyze(

Adjustment 2

( Describe/Analyze(

Adjustment 3

( Describe/Analyze(

Adjustment 4

( Describe/Analyze(

Sales Comparison Approach Conclusion

The adjusted values of the comparable properties range from $85.90 to $87.79; the average is $86.65. All of the value indications have been considered, and in the final analysis, comparables , and , have been given most weight in arriving at our final reconciled per square foot value of $82.00.

|As Is Market Value |

|Indicated Value per Square Foot: |$82.00 |

|Subject Size: |12,500 |

|Indicated Value: |$1,025,000 |

|Rounded: |$1,025,000 |

|One Million Twenty Five Thousand Dollars |

Income Approach

The Income Approach to value is based on the present worth of the future rights to income. This type of analysis considers the property from an investor's point of view, the basic premise being that the amount and quality of the income stream are the basis for value of the property.

Direct Capitalization Analysis

The steps involved in capitalizing the subject's net operating income are as follows:

• Develop the subject's Potential Gross Income (PGI) through analysis of the subject’s actual historic income and an analysis of competitive current market income rates.

• Estimate and deduct vacancy and collection losses to develop the Effective Gross Income (EGI).

• Develop and subtract operating expenses to derive the Net Operating Income (NOI).

• Develop the appropriate capitalization rate (Ro).

• Divide the net operating income by the capitalization rate for an estimate of value through the income approach.

Potential Gross Income (PGI)

Current Income

The table below summarizes the subject’s current and historic income.

[pic]

Space Types & Occupancy

The following table details the space types we have defined for the subject, and current occupancy.

[pic]

< Comments: market rent estimates are made by space type>

Lease Structure

The predominant lease structure in the subject property is

Rent Roll

The following rent roll details the current occupancy and rent status on a unit by unit basis.

[pic]

Recent Leases

The following table details leases signed at the subject after January 1, 2007.

[pic]

< Analysis, Notes, Comments here. Analyze/discuss how recent leases compare with longer term history displayed in the rent roll, renewals, recent turn-over, etc. >

Overall Rent Ranges

The following table detail overall rent ranges at the subject, organized by space type.

[pic]

< Analysis, Notes, Comments here. >

Major Tenants

[pic]

< Analysis, Notes, Comments here. >

Lease Expiration Schedule

The lease expiration schedule provides insight to vacancy exposure and lease-up expenses.

[pic]

< Analysis, Notes, Comments here. >

Market Rent

Market Rent Comparables

We have researched three comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction.

[pic]

[pic]

[pic]

[pic]

Comparables Map

[pic]

Analysis Grid

The above rentals have been analyzed and compared with the subject property. We have considered adjustments in the areas of:

|( Lease Terms |( Economic Trends (time) |

|( Conditions of Lease |( Location |

|( Other |( Physical Characteristics |

On the following page is a rental comparison grid displaying the subject property, the comparables and the adjustments applied.

[pic]

Comparable Rent Adjustments

Conditions of Lease

( Describe/Analyze(

Economic Trends

( Describe/Analyze(

Type of Lease/Expense Structure

( Describe/Analyze(

Location

( Describe/Analyze(

Condition

( Describe/Analyze(

Quality

( Describe/Analyze(

Size

( Describe/Analyze(

Market Rent Reconciliation

Based on the above analysis, we have reconciled to a market rent of $12.50, as of May 9, 2011, for the subject .

Summary of Market Rent

The table below summarizes the market rent estimates for the subject, organized by space type.

[pic]

Potential Gross Income Summary

[pic]

[pic]

Vacancy and Collection Loss

Based on a review of market conditions and the subject’s operating history we have projected vacancy and collection loss at 10.00%.

Expenses

The table below details the subject’s current expenses and recent history.

[pic]

Expenses Analysis and Projection

Real Estate Taxes

( Describe/Analyze(

Insurance

( Describe/Analyze(

Utilities

( Describe/Analyze(

Repairs & Maintenance

( Describe/Analyze(

Cleaning & Painting

( Describe/Analyze(

General & Administrative

( Describe/Analyze(

Common Area Maintenance

( Describe/Analyze(

Grounds

( Describe/Analyze(

Management

( Describe/Analyze(

Miscellaneous

( Describe/Analyze(

Reserves

( Describe/Analyze(

Expense Reimbursements

( Describe/Analyze(

[pic]

[pic]

[pic]

Capitalization Rate

The capitalization rate is the factor that converts the stabilized net operating income (NOI) to a present value. It is the ratio of net income to value or sale price.

NOI ÷ Sale Price = Capitalization Rate

For example, if a property sells for $500,000, and has a stabilized NOI of $50,000, the indicated capitalization rate is 10%.

Market Extracted Rates

The table below details capitalization rates extracted from the market.

[pic]

Band of Investment

This technique utilizes lender and real estate investor investment criteria to develop, or synthesize a capitalization rate. There are four key inputs necessary for this method:

1. The loan-to-value ratio (M)

2. The mortgage interest rate (i)

3. The loan term (n)

4. The equity cap rate or equity dividend rate (RE)

The mortgage variables are used to build the mortgage constant (RM), which is the total amount of the payments made in one year, expressed as a percentage of the original loan amount.

Payments x 12 / Original Loan Amount = Mortgage Constant (RM)

The equity cap rate is the annual return to the investor, expressed as a percent of the original amount invested. The annual return to the investor is also known as the equity dividend rate; it is the profit remaining after debt service and all other expenses.

After Debt Service Profit / Equity Investment = Equity Cap Rate (RE)

Note that the equity cap rate is not the same (usually, that is) as the equity yield rate. The equity yield rate reflects the total return to the investor over the life of the investment. Factors such as appreciation and mortgage pay down affect and usually increase this return to a point higher than the equity dividend rate. In markets where substantial appreciation is expected, investors will often accept a low or even negative equity dividend rate, anticipating a compensating payoff when the property is eventually sold. In markets where little appreciation is expected, much more weight is given to the annual equity dividend.

Formula:

|RM x M |= rate |

|RE x (1-M) |= rate |

| |= Cap Rate (Ro) |

Debt Coverage Ratio Analysis

This technique develops a capitalization rate based on typical mortgage terms. There are four variables necessary for this method:

1. The loan-to-value ratio (M)

2. The mortgage interest rate (i)

3. The loan term (n)

4. The debt coverage ratio (DCR)

Items 1 through 3 are discussed above under the Band of Investment section. In this method it is also used to develop the mortgage constant (RM). The debt coverage ratio is the factor by which income exceeds debt on an annual basis.

Formula:

Debt Coverage Ratio x Loan to Value Ratio x Mortgage Constant = Ro

or: DCR x M x RM = Ro

We have researched mortgage rates and terms typical for the subject within the market area. The table below details the Band of Investment and Debt Coverage Ratio Analyses calculations.

[pic]

Survey Data

Discuss investor or published survey data

Capitalization Rate Conclusion

7.75%

Capitalization to Value

[pic]

Direct Capitalization Analysis Conclusion

Based on the above analysis detailed above, as of May 9, 2011 we have reconciled to a direct capitalization approach value of:

$1,090,000

One Million Ninety Thousand Dollars

Effective Gross Income Multiplier Analysis (EGIM)

The EGIM is the ratio of effective gross income to sale price (Price ( EGI = EGIM).

• Develop the subject's Potential Gross Income (PGI) through analysis of the subject’s actual historic income and an analysis of competitive current market income rates.

• Estimate and deduct vacancy and collection losses to develop the Effective Gross Income (EGI).

• Develop the appropriate EGIM through analysis of comparable sales.

• Multiply the Effective Gross Income by the EGIM for an estimate of value.

Effective Gross Income

Effective Gross Income has been developed previously in this appraisal at $129,300.

The following table summarizes the comparable sales, multipliers and expense ratios.

[pic]

The range of multipliers is 7.84 to 8.38 with an average of 8.13.

( Describe/Analyze(

Therefore, we have reconciled to a multiplier of 8.15.

EGIM Analysis Conclusion

|EGI |$129,300 |

|EGIM |x 8.15 |

|Indicated Value |$1,053,795 |

|Rounded |$1,055,000 |

One Million Fifty Five Thousand Dollars

Net Income Multiplier Analysis (NIM)

The NIM is the ratio of effective net operating income to sale price (Price ( NOI = NIM).

Net Operating Income

The Net Operating Income has been developed previously in this appraisal at $84,370.

The following table summarizes the comparable sales, NOI per square foot and multipliers.

[pic]

The range of multipliers is 12.41 to 12.45 with an average of 12.43.

( Describe/Analyze(

Therefore, we have reconciled to a multiplier of 12.45.

NIM Analysis Conclusion

|NOI |$84,370 |

|NIM |x 12.45 |

|Indicated Value |$1,050,407 |

|Rounded |$1,050,000 |

One Million Fifty Thousand Dollars

Stabilization Calculations

When a property has a below market income stream due to high vacancy and/or below market rents, an adjustment to value is often necessary for lost income over the lease-up period, leasing commissions associated with lease-up and perhaps tenant fit-up and additional operating expenses associated with the vacant space over the lease-up period.

The table below details the stabilization calculations for the subject.

[pic]

Actual PGI for Vacant Space: This figure is from the Rent Roll table and is the dollar amount of the subject’s current vacancy.

Stabilized PGI for Vacant Space: This figure is calculated from the Rent Roll table. It is the dollar amount of vacancy at stabilized occupancy, calculated by multiplying the PGI at market rent by the stabilized vacancy and collection loss rate. In this case, $142,000 x 10.00% = $14,200.

Adjusted EGI Rent Loss: These lines reflect the anticipated change percentage and dollar for income trends over the stabilization period

% Leased: The projected percentage of space absorbed by the market for the given year. The percentage is measured against the original vacancy, not remaining vacancy.

$ Leased: The dollar amount for the space absorbed.

Annualized Rent Ross for $ Leased at 50%: This line assumes that absorption will take place over the course of the year and that on average, only 50% of the rent will be captured. In effect, the calculation assumes space is occupied at the mid-point of the year.

$ Vacant: This is the dollar amount of remaining rent loss and is carried forward to the next year.

Leasing Commissions: The leasing commissions are calculated based on the inputs at the bottom of the table. There are two inputs: the rate and the number of years to apply the commission. These factors are applied to the dollar value of the leased space for the year (the "$ Leased" row). Note the total amount is applied in year the space is leased.

Tenant Improvements: Expenses related to tenant fit-up that are typically paid by the owner.

Other:

Discount Rate: The discount rate is used to convert the anticipated future cash flows to a present value. It reflects the risks and timing of the cash flows and typically consists of a blend of equity and debt position requirements.

The discount rate is used to convert the anticipated future cash flows to a present value. It reflects the risks and timing of the cash flows and can consist of equity or a blend of equity and debt position requirements.

In this case, based on the risk characteristics of the subject’s projected stabilization we have applied a discount rate of 12.0%.

Or, for a more detailed development of the discount rate, delete the paragraph above and modify this text:

The following formula is a method for developing the discount rate using a blend of debt and equity requirements.

Debt X LTV

Equity x 1-LTV

Equals = Blended Rate

We have researched the local market for debt and equity terms and have applied the following inputs in the discount rate model:

Debt @ 8.0% x 30% = 2.4%

Equity @ 18.0% x 70% = 12.6%

Equals Blended Rate = 15.0%

Additionally, we have also reviewed published surveys from and >. These surveys report the following:

>

Therefore, based on these indicators, we have applied the discount rate at 12.0%% to convert future cash flows to a present value.

Present Value, Rounded: Based on the above inputs, the indicated stabilization adjustment, after rounding, is $0.

Final Reconciliation

The process of reconciliation involves the analysis of each approach to value. The quality of data applied, the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. Finally, each is considered separately and comparatively with each other.

Value Indications

|Land Value: |$600,000 |

|Cost Approach: |$1,430,000 |

|Sales Comparison Approach: |$1,025,000 |

|Income Approach: | |

|Direct Capitalization |$1,090,000 |

|EGIM Analysis |$1,055,000 |

|NIM Analysis |$1,050,000 |

Cost Approach

(Discuss data quality, quantity and relevance of approach(

Sales Comparison Approach

(Discuss data quality, quantity and relevance of approach(

Income Approach – Direct Capitalization

(Discuss data quality, quantity and relevance of approach(

Income Approach – EGIM Analysis

(Discuss data quality, quantity and relevance of approach(

Income Approach – NIM Analysis

(Discuss data quality, quantity and relevance of approach(

Value Conclusion

Based on the data and analyses developed in this appraisal, we have reconciled to the following value conclusion(s), as of May 9, 2011, subject to the Limiting Conditions and Assumptions of this appraisal.

|Reconciled Value(s): |Premise: As Is |

| |Interest: Fee Simple |

| |Value Conclusion: $1,050,000 |

| |One Million Fifty Thousand Dollars |

| |Premise: As Complete |

| |Interest: Fee Simple |

| |Value Conclusion: $1,050,000 |

| |One Million Fifty Thousand Dollars |

| | |

| |Premise: As Stabilized |

| |Interest: Fee Simple |

| |Value Conclusion: $1,050,000 |

| |One Million Fifty Thousand Dollars |

Certification Statement

We certify that, to the best of our knowledge and belief:

← The statements of fact contained in this report are true and correct.

← The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions and conclusions.

← We have no present or prospective future interest in the property that is the subject of this report, and have no personal interest with respect to the parties involved.

← We have no bias with respect to the property that is the subject of this report, or to the parties involved with this assignment.

← Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

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

← Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).

← No one provided significant real property appraisal assistance to the person(s) signing this certification.

← We certify sufficient competence to appraise this property through education and experience, in addition to the internal resources of the appraisal firm.

← The appraiser has not performed any prior services regarding the subject within the previous three years of the appraisal date.

← Tom Armstrong has made an inspection of the subject property.

← -- -- has made an inspection of the subject property.

See N1 Autotext Misc category for Appraisal Institute certification statements

| | |

|Tom Armstrong, MAI |-- --, -- |

|NH-137 |----- |

Addenda

Qualifications Placeholder Page

-----------------------

[1] Exposure Time: see definition on page 9.

[2] Marketing Time: see definition on page 9.

[3] . Thomas W. Armstrong, MAI

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download