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Realty Advisors 12365 Huron Street #1800 Westminster, CO 80234 720-310-2726

Date Issued: 3/25/2020File No. 2143

Narrative Appraisal ReportOf

10090 Garrison StWestminster, CO 80021

Prepared ForMichelle Marie Falasco Coffey and Kevin Coffey

10090 Garrison StWestminster, CO 80021

Prepared ByPhil A McDonald

Certified General Appraiser

10090 Garrison Street, Westminster, CO 80021 February 17, 2020

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TABLE OF CONTENTS

Introduction and Summary ......................................................................................................................................................................... 3 Letter of Transmittal .......................................................................................................................................................................... 3 Certification of the Appraisers ........................................................................................................................................................... 4 General Assumptions and Limiting Conditions ................................................................................................................................. 5 Summary of Salient Facts .................................................................................................................................................................. 9 Scope of Work ................................................................................................................................................................................. 10 Purpose of Analysis ......................................................................................................................................................................... 11 Intended use and user of the report .................................................................................................................................................. 11 Property Description ........................................................................................................................................................................ 12 Property Identification and Site Description .................................................................................................................................... 12 Location Map ................................................................................................................................................................................... 14 Plat Map ........................................................................................................................................................................................... 15 Traffic Count Map ........................................................................................................................................................................... 16 Zoning Map ...................................................................................................................................................................................... 17 Aerial Map ....................................................................................................................................................................................... 18 Description of Improvements ........................................................................................................................................................... 19 Subject Photo Pages ......................................................................................................................................................................... 23 Market Conditions Denver Metro Area – Office ............................................................................................................................ 33 Local Market Conditions Northwest Submarket .............................................................................................................................. 34

Highest and Best Use ............................................................................................................................................................................... 35 As Though Vacant ........................................................................................................................................................................... 35 As Improved ..................................................................................................................................................................................... 36

The Appraisal Process .............................................................................................................................................................................. 38 Sales Comparison Approach ................................................................................................................................................................ 39

Conclusions: ..................................................................................................................................................................................... 47 Income Capitalization Approach .......................................................................................................................................................... 48

Indicated Value from Direct Capitalization Analysis ...................................................................................................................... 59 Cost Approach.................................................................................................................................................................................. 60

Reconciliation of Value ........................................................................................................................................................................... 61 Addendum ................................................................................................................................................................................................ 62

Building Classifications ................................................................................................................................................................... 66 Certification ..................................................................................................................................................................................... 67 Qualifications ................................................................................................................................................................................... 68


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Introduction and Summary

Letter of Transmittal Realty Advisors Commercial Appraisal Services Phone 720-310-2726 Fax 800-400-7896 www.bwoo.com

Westminster, CO 80021

Subject: 10090 Garrison StWestminster, CO 80021

25-Mar-20

Kevin CoffeyMichelle Marie Falasco Coffey and Kevin Coffey10090 Garrison St

Dear Client,

Effective Date of Appraisal: 2/17/2020

Property Rights Appraised: Fee Simple

Market Value on Effective Date: $1,000,000

Respectfully submitted,

Realty Advisors

By:

Phil A. McDonald Colorado Certified General AppraiserCG40004543 Exp. 12/31/2021

In accordance with your request, we have prepared a complete appraisal, communicated in this Narrative Appraisal Report covering the above referenced property for the purpose of estimating its market value.

This appraisal report is intended to meet the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation, the Standards of Professional Appraisal, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), and the Supplemental Standards. Our analyses, opinions, and conclusion are subject to the Assumptions and Limiting Conditions in the report. To reiterate, this is a complete appraisal, summary report. This value estimate is based on the definitions, qualifications, assumptions, limiting conditions, and certifications in the report. This appraisal is not subject to any hypothetical or extraordinary assumptions that would have a material impact on the property value.

Based on our inspection of the subject property and surrounding neighborhood, our gathering of relevant data, preparation of the most applicable approach to value, and our analyses, opinions, and conclusions, we estimate the market value as follows.


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

assignment. 5. My engagement in this assignment was not contingent upon developing or reporting predetermined results. 6. My compensation for completing this assignment is not contingent upon the development or reporting of a

predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

7. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and any supplemental standards. In addition, this report conforms to the requirements of the Financial Institution Reform, Recovery and Enforcement Act (FIRREA).

8. Phil A. McDonald has made a personal inspection of the interior and exterior of the property that is the subject of this report.

9. No other person provided significant professional assistance to the persons signing this report. 10. Phil A. McDonald has extensive experience in the appraisal/review of similar property types. 11. This appraisal assignment was not based on a requested minimum valuation, a specific valuation, or approval

of a loan. 12. The appraiser has not completed any prior services involving the subject property during the previous 3 years. . Respectfully submitted, Realty Advisors By:

Phil A. McDonald Phil A. McDonald Colorado Certified General Appraiser CG40004543 Exp. 12/31/2021


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General Assumptions and Limiting Conditions 1. Any legal description or plats reported herein are assumed to be accurate. Any sketches, surveys, plats,

photographs, drawings or other exhibits are included only to assist the intended user to better understand and visualize the subject property, the environs, and the competitive data. We have made no survey of the property and assume no responsibility in connection with such matters.

2. The appraiser has not conducted any engineering or architectural surveys in connection with this appraisal assignment. Information reported pertaining to dimensions, sizes, and areas is either based on measurements taken by the appraiser or the appraiser’s staff or was obtained or taken from referenced sources and is considered reliable. No responsibility is assumed for the costs of preparation or for arranging geotechnical engineering, architectural, or other types of studies, surveys, or inspections that require the expertise of a qualified professional.

3. No responsibility is assumed for matters legal in nature. Title is assumed to be good and marketable and in fee simple unless discussed otherwise in the report. The property is considered to be free and clear of existing liens, easements, restrictions, and encumbrances, except as noted.

4. Unless otherwise noted herein, it is assumed there are no encroachments or violations of any zoning or other regulations affecting the subject property and the utilization of the land and improvements is within the boundaries or property lines of the property described.

5. Realty Advisors assumes there are no private deed restrictions affecting the property which would limit the use of the subject property in any way.

6. It is assumed the subject property is not adversely affected by the potential of floods.

7. It is assumed all water and sewer facilities (existing and proposed) are or will be in good working order and are or will be of sufficient size to adequately serve any proposed buildings.

8. Unless otherwise noted within the report, the depiction of the physical condition of the improvements described herein is based on visual inspection. No liability is assumed for the soundness of structural members since no engineering tests were conducted. No liability is assumed for the condition of mechanical equipment, plumbing, or electrical components, as complete tests were not made. No responsibility is assumed for hidden, unapparent or masked property conditions or characteristics that were not clearly apparent during our inspection.

9. If building improvements are present on the site, no significant evidence of termite damage or infestation was observed during our physical inspection, unless so noted in the report. No termite inspection report was available, unless so noted in the report. No responsibility is assumed for hidden damages or infestation.

10. If noted in the report, any proposed or incomplete improvements included in this report are assumed to be satisfactorily completed in a workmanlike manner or will be thus completed within a reasonable length of time according to plans and specifications submitted.

11. No responsibility is assumed for hidden defects or for conformity to specific governmental requirements, such as fire, building, and safety, earthquake, or occupancy codes, except where specific professional or governmental inspections have been completed and reported in the appraisal report.

12. The property is assumed to be under financially sound, competent and aggressive ownership.


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13. The appraisers assume no responsibility for any changes in economic or physical conditions which occur following the effective date of this report that would influence or affect the analyses, opinions, or conclusions in the report. Any subsequent changes are beyond the scope of the report.

14. The value estimates reported herein apply to the entire property. Any proration or division of the total into fractional interests will invalidate the value estimates, unless such proration or division of interests is set forth in the report.

15. Any division of the land and improvement values estimated herein is applicable only under the program of utilization shown. These separate valuations are invalidated by any other application.

16. Unless otherwise noted in the report, only the real property is considered, so no consideration is given to the value of personal property or equipment located on the premises or the costs of moving or relocating such personal property or equipment.

17. Unless otherwise stated, it is assumed the rights of ownership exclude subsurface oil, gas, and/or mineral assets. For this reason, contributing value, if any, of rights or whether property is available for subsurface entry to facilitate their exploration and/or extraction have not been considered.

18. Any projections of income and expenses, including the reversion at time of resale, are not predictions of the future. Rather, they are our best estimate of current market thinking of what future trends will be. No warranty or representation is made that these projections will materialize. The real estate market is constantly fluctuating and changing. It is not the task of an appraiser to estimate the conditions of a future real estate market, but rather to reflect what the investment community envisions for the future in terms of expectations of growth in rental rates, expenses, and supply and demand.

19. Unless subsoil opinions based upon engineering core borings were furnished, it is assumed there are no subsoil defects present, which would impair development of the land to its maximum permitted use or would render it more or less valuable. No responsibility is assumed for such conditions or for engineering which may be required to discover them.

20. Realty Advisors representatives are not experts in determining the presence or absence of hazardous substances, defined as all hazardous or toxic materials, wastes, pollutants or contaminants (including, but not limited to, asbestos, PCB, UFFI, or other raw materials or chemicals) used in construction or otherwise present on the property. We assume no responsibility for the studies or analyses which would be required to determine the presence or absence of such substances or for loss as a result of the presence of such substances. Appraisers are not qualified to detect such substances. The client is urged to retain an expert in this field.

21. We are not experts in determining the habitat for protected or endangered species, including, but not limited to, animal or plant life (such as bald eagles, gophers, tortoises, etc.) that may be present on the property. We assume no responsibility for the studies or analyses which would be required to determine the presence or absence of such species or for loss as a result of the presence of such species.

22. No environmental impact studies were either requested or made in conjunction with this analysis. The appraiser hereby reserves the right to alter, amend, revise, or rescind any of the value opinions based upon any subsequent environmental impact studies, research, and investigation.


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23. The appraisal is based on the premise that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated in the report; further, that all applicable zoning, building, and use regulations and restrictions of all types have been complied with unless otherwise stated in the report; further, it is assumed that all required licenses, consents, permits, or other legislative or administrative authority, local, state, federal and/or private entity or organization have been or can be obtained or renewed for any use considered in the value estimate.

24. Neither all nor any part of the contents of this report or copy thereof, shall be conveyed to the public through advertising, public relations, news, sales, or any other media, without the prior written consent and approval of the appraiser. This limitation pertains to any valuation conclusions, the identity of the analyst or the firm and any reference to the professional organization of which the appraiser is affiliated or to the designations thereof.

25. Although the appraiser has made, insofar as is practical, every effort to verify as factual and true all information and data set forth in this report, no responsibility is assumed for the accuracy of any information furnished the appraiser either by the client or others. If for any reason, future investigations should prove any data to be in substantial variance with that presented in this report, the appraiser reserves the right to alter or change any or all analysis, opinions, or conclusions and/or estimates of value.

26. If this report has been prepared in a so-called “public non-disclosure” state, real estate sales prices and other data, such as rents, prices, and financing, are not a matter of public record. If this is such a “non-disclosure” state, although extensive effort has been expended to verify pertinent data with buyers, sellers, brokers, lenders, lessors, lessees, and other sources considered reliable, it has not always been possible to independently verify all significant facts. In these instances, the appraiser may have relied on verification obtained and reported by appraisers outside of our office. Also, as necessary, assumptions and adjustments have been made based on comparisons and analyses using data in the report and on interviews with market participants. It is suggested the client consider independent verification as a prerequisite to any transaction involving sale, lease, or other significant commitment of funds to the subject property.

27. This report is null and void if used in any connection with a real estate syndicate or syndication, defined as a general or limited partnership, joint venture, unincorporated association, or similar organization formed for or engaged in investment or gain from an interest in real property, including but not limited to a sale, exchange, trade, development, or lease of property on behalf of others or which is required to be registered with the U.S. Securities and Exchange Commission or any Federal or State Agency which regulates investments made as a public offering.

28. The American Disabilities Act of 1990 (ADA) sets strict and specific standards for handicapped access to and within most commercial and industrial buildings. Determination of compliance with these standards is beyond appraisal expertise and, therefore, has not been attempted by the appraisers. For purposes of this appraisal, we are assuming the building is in compliance; however, we recommend an architectural inspection of the building to determine compliance or requirements for compliance. We assume no responsibility for the cost of such determination and our appraisal is subject to revision if the building is not in compliance.

29. This appraisal report has been prepared for the exclusive benefit of our client(s). It may not be used or relied upon by any other party. Any party who uses or relies upon any information in this report, without the preparer's written consent, does so at their own risk.


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30. The client agrees to indemnify and hold harmless Realty Advisors and its affiliates, partners, agents, and employees from and against any losses, claims, damages, or liabilities, which may be asserted by any person or entity who may receive our report, except to the extent of any losses, claims, damages or liabilities (or actions in respect thereof) arising by reason of gross negligence or willful misconduct of Realty Advisors in preparing the report and will reimburse Realty Advisors for all expenses (including counsel fees) as they are incurred by Realty Advisors in connection with investigating, preparing, or defending any such action or claim.

31. In any circumstance in which the foregoing indemnification is held by a court to be unavailable to Realty Advisors, our client and Realty Advisors shall contribute to any aggregate losses, claims, damages or liabilities (including the related fees and expenses) to which Our Client and Realty Advisors may be subject in such proportion that Realty Advisors shall be responsible only for that portion represented by the percentage that the fees paid to Realty Advisors for the portion of its services or work product giving rise to the liability bears to the value of the transaction giving rise to such liability.

32. Realty Advisors has completed an inspection of the subject property which consisted of less than inspecting 100% of the interior and exterior of the improvements. Accordingly, Realty Advisors reserves the right to amend the appraised value and appraisal conclusions if engineering reports or other evidence is found, which would materially impact the reported conclusions.

33. The right is reserved by the appraiser to make adjustments to the analyses, opinions, and conclusions set forth in this report as may be required by consideration of additional or more reliable data that may become available. No change of this report shall be made by anyone other than the appraiser or appraisers. The appraiser(s) shall have no responsibility for any unauthorized change(s) to the report.

34. If the client instructions to the appraiser were to inspect only the exterior of the improvements in the appraisal process, the physical attributes of the property were observed from the street(s) as of the inspection date of the appraisal. Physical characteristics of the property were obtained from tax assessment records, available plans, if any, descriptive information, and interviewing the client and other knowledgeable persons. It is assumed the interior of the subject property is consistent with the exterior conditions as observed and that other information relied upon is accurate.

35. The submission of this report constitutes completion of the services authorized. It is submitted on the condition the client will provide reasonable notice and customary compensation, including expert witness fees, relating to any subsequent required attendance at conferences, depositions, and judicial or administrative proceedings. In the event the appraiser is subpoenaed for either an appearance or a request to produce documents, a best effort will be made to notify the client immediately. The client has the sole responsibility for obtaining a protective order, providing legal instruction not to appear with the appraisal report and related work files and will answer all questions pertaining to the assignment, the preparation of the report, and the reasoning used to formulate the estimate of value. Unless paid in whole or in part by the party issuing the subpoena or by another party of interest in the matter, the client is responsible for all unpaid fees resulting from the appearance or production of documents regardless of who orders the work.

36. Acceptance or use of this report constitutes agreement by the client and any other users that any liability for errors, omissions or judgment of appraiser is limited to the amount of the appraisal fee.

37. Use of this appraisal report constitutes acknowledgement and acceptance of the general assumptions and limiting conditions, special assumptions (if any), extraordinary assumptions (if any), and hypothetical conditions (if any) on which this estimate of market value is based.


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Summary of Salient Facts

Property Address: 10090 Garrison St Trend: StableCity: Westminster Property Values: IncreasingState: CO Velocity: StableZip Code: 80021 Rents: IncreasingCensus Tract: 98.24 Vacancy: Declining Parcel No.: 29-151-03-009 Population Growth: Increasing

0 Employment: Growing Owner of Record: Coffey Real Estate LLCDate of Prior Sale: 12/1/2004Prior Sale Price: $520,000 Appraiser Name: Phil McDonaldDocument No. F2139652 Appraiser Certification: CG40004543Exposure Time: 180 Days Certification Expiration: 12/31/2021

Certification State: COClient Name: Michelle Marie Falasco Coffey and Kevin Coffey

Parcel Size (Acres): 0.794 Client Contact: Kevin CoffeyZoning: PUD Client Address: 10090 Garrison StProperty Type: Office Client City, State, Zip Westminster, CO 80021Flood Zone: X Appraisal File No. 2143Panel: 080008 0088G Report Type: Summary NarrativePanel Date: 1/20/2016 Interest Appraised: Fee Simple

Purpose of Appraisal: Asset DispositionUse of Appraisal: Legal Settlement

Tax Year: 2018 Appraisal Effective Date: 2/17/2020Actual Value: Date of Report: 3/25/2020 Land: $233,462 Hypothetical Conditions: None Building: $301,138 Extraordinary Assumptions: NoneTotal Actual Value: $534,600 Highest and Best UseTotal Assessed Value: $155,034 As-If Vacant Office/Special UseTaxes $12,780.00 As Improved Single-Tenant Office

Scope of Work Complete Appraisal

Sales Approach (SCA): $1,050,000Income Approach: $970,000Final Opinion of Value: $1,000,000

Value Indicators

Subject Property Identification Market Conditions:

Appraisal Characteristics:

Site Characteristics:

Taxes


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Scope of Work

This Narrative Appraisal Report presents only summary discussion of the data and valuation conclusion. The appraiser retains supporting documentation in his file, and the depth of discussion is specific to your needs and for the intended use.

Narrative Appraisal Report. Each approach to value is given consideration and those that are applicable and necessary are developed and reported. If an approach would not produce credible results and is not applicable or necessary, it is not developed and not reported. The Income Approach is a common method used by market participants buying and selling multiple tenant income producing property. The Sales Comparison Approach is typically given secondary consideration for this type of investment property. The Cost Approach is applicable and most reliable when appraising an improved property with newer improvements. The subject property is not a newer property and has significant depreciation. Because of the impact of depreciation on an existing property, the alternative to construct a new property is not typically considered by an investor. Therefore, the Cost Approach is not applicable and is not developed.

The physical inspection of the subject property includes an inspection of the parcels and improvements. When necessary, each of the comparables used in the appraisal includes an inspection of the exterior of the property which may take place near the effective date of appraisal or prior to the effective date of appraisal, but subsequent to the sale date of the comparable. Market data is researched through commonly used and available data sources for this property type and is confirmed through a secondary data source, and market participants (when available).

Adequacy of Scope

The appraiser has proposed and the Client has agreed (prior to submission) that the level of development and reporting detailed above is sufficient to address the substantiate criteria of a reasonable Scope of Work within the context of the Intended Users and Intended Use. The appraiser does not anticipate further development or reporting requirements for this assignment. Any additional requests from the Client or any third parties may represent a change in the assignment conditions and require the development of a new assignment.

Prior Services

The appraiser has not provided any prior services involving the subject property during the last three-year period prior to the effective date of appraisal.


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Purpose of Analysis

The purpose of this appraisal report is to estimate the market value of the Fee Simple interest in the above-referenced property. Market Value is defined by the federal financial institutions regulatory agencies as follows:

“Market Value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) the buyer and seller are typically motivated; (2) both parties are well-informed or well-advised, and acting in what they consider to be 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 United States 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.”

Source: Office of the Comptroller of the Currency under 12 CFR, Part 34, subpart C-appraisals, 34.42 Definitions (f)

Intended use and user of the report The intended users of this report are the client listed on the Summary of Salient Facts page of this report, and their subsidiaries, and/or affiliates for determination of market value. It may be used in connection with the acquisition, disposition, financing, and the sale of the property. The intended user may use and rely upon this report and the reporting organization agrees to cooperate in answering questions by any of the parties in connection with the report. The appraisal report is not to be used by any other entity for any purpose without the written consent of the appraisers. If used, it must only be used in its entirety and not its parts, which could be misleading.

The appraisers are not responsible for unauthorized distribution and/or use of this report. As such, it presents only summary discussions of the data, analyses, opinions, and conclusions used in the appraisal process to develop the appraisers’ estimate of market value. Supporting documentation concerning the data, analyses, opinions, and conclusions are retained in the appraisers’ file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use previously stated. The appraisers are not responsible for unauthorized use of this report. As agreed, upon with the client prior to the preparation of this appraisal, this report is the result of a full appraisal process, and those approaches to value that are applicable and necessary have been developed.

Reading of the request for appraisal services and related attachments; Physical inspection of the subject, neighborhood, and submarket; Researching public records or other sources deemed reliable, relative to the subject; Researching public records or other sources deemed reliable for sales of comparable properties; Presenting the results in this complete appraisal, summary report. The appraisers used only the most applicable approaches to value. Support for the approaches used is

discussed in the Valuation Section.


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Property Description

Property Identification and Site Description

Property Address:City:State:Zip Code:Parcel No.:

29-151-03-009

Legal Description:

29-151-03-009

Census Tract:

Parcel Size (Acres): 29-151-03-009 0.794

Zoning:

Subject Property is a: Legal Conforming Use

Area Improvements:

Utilities:

PUD

Lot 1, Crown Pointe Subdivision, Filing No. 3

The subject property consists of the following parcel number(s):

10090 Garrison StWestminster

CO80021

The subject property is legally described as:

County of Jefferson, State of Colorado

98.24

Site Characteristics

Planned Unit Development - Mixed use including residential, office and retail. Permitted uses are site specific within the planned development.

The subject is located on a paved neighborhood collector street improved with curb, gutters and sidewalks. The subject is an interior parcel adjacent to single family detached homes on the north and south of the subject. The property has access via two cutouts located along Garrison Street. The subject is the only commercial improvement in this area of the neighborhood and is surrounded by single family detached homes. The neighborhood is approximately 90% built up with homes located to the south of the subject being completed in recent years.

All public utilities are available at the subject property and are adequate for the subject property.


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Flood Hazard: Flood Zone: X

Panel: 080008 0088G

Panel Date: 1/20/2016

Soils Conditions:

Hazardous Waste/Toxic Conditions:

Title Report:

Comments:

The value estimate rendered in this report is predicated on the assumption there is no hazardous material on or in the property that would cause a loss in value. No evidence of hazardous waste or toxic materials was visible. Realty Advisors has no knowledge of the existence of these substances on or in the subject property. However, Realty Advisors is not qualified to detect hazardous waste or toxic material.

A title report was not submitted for our review. This report is not intended to render any opinion whatsoever regarding any adverse easements or encroachments that may affect the subject property. Our value estimate is, however, predicted upon there being no adverse title conditions, easements, or encroachments that would cause a loss in value or prohibit development. No responsibility is assumed for any such conditions or for any expertise or knowledge to discover them.

Please refer to the ”General Assumption and Limiting Conditions” regarding soils and title conditions and other considerations.

Site Characteristics (continued)

A geological engineering report has not been furnished for our review, nor has such a study been commissioned for the purpose of this appraisal. Our physical inspection did not reveal any drainage or topographical problems that would adversely affect the marketability of the subject property. There is no visual evidence of any inadequate soil support or drainage conditions; as such, there appear to be no impediments to reasonable development of the site. For the purpose of this assignment, it is assumed the topsoil and subsoil conditions are stable and adequate to support the existing improvements.

Easements and Encroachments:

No title report or other source reference was provided with regard to determining any easements that might affect the subject. It is assumed there are no such easements or other restrictions which would have a material impact on the subject.


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Location Map

Location Map


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Plat Map

Plat Map


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Traffic Count Map

Traffic Count Map


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Zoning Map

Zoning Map


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Aerial Map

Aerial Map


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Description of Improvements

Property Type:

Year Built:

No. Buildings:

No. of Stories:

Quality:

Building Areas: Gross Building Area (GBA) (SF) 5,421

Parking:

Parking Spaces TotalParking Ratio (Spaces/1,000 SF) #REF!

Building Location/ One Story Office BuildingLot Layout:

BuildingDesign and Layout:

The areas indicated above are obtained through County Assessors data and visual observation.

Office

1989

One

One Story

The subject is a Class C single story office building with a frame and brick exterior, pitched roof with asphalt shingles, a concrete building sidewalk around the perimeter and in rear lot of the building with a fenced rear lot. Interior improvements consist predominately of tile and carpet floor coverings, drywall walls, acoustic drop ceilings and florescent lighting. Bath areas are improved with tile floors and wainscoting, drywall walls and ceilings and incandescent lighting. The reception area is improved with granite counters and tile floor coverings. Interior and exterior improvements are all of average to good quality.

Parking is located in the front and sides of the building on a paved lot and is adequate for the current improvements.

The subject property is a small office building typical in size to single tenant buildings in the area. The subject is configured as a multi-tenant property with most office suites improved with one or two rooms. The subject consists of a main reception area at the building entranced with a small lobby area, a large training room, smaller conference room, utility room with laundry, men’s and women’s restroom and individual office suites.

The subject improvements are located near the center of the parcel with a side yard on the north and south. The front of the parcel on the west side is improved as an asphalt parking lot and the rear section of the parcel is improved as a fenced yard.


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Exposure/Visibility:

Marketing Period:

Subject's Marketing Period: 150 Days

Exposure:

Year 2011 / 100th Ave near Wadsworth Blvd

18,766

Visibility:

Functional Utility:

The subject is an interior parcel in an area of single-family homes and has average visibility. The visibility of the subject is improved by the larger parcel size of the subject an unusual nature of a commercial property in a residential area. More typical of a day care facility or other similar properties located in such settings. The subject has overall average visibility.

Description of Improvements (continued)

Exposure and Visibility of commercial properties are interrelated in terms of the overall benefit to the property, but are made up of distinctly different elements. Exposure is a function of location and impacted by externalities, as such it is typically not possible for an individual property owner to make changes which would impact exposure. Since it is possible to make modifications to property improvements and signage which may change a properties visibility, it is important that exposure and visibility be given separate consideration.The exposure of a commercial property is an important location consideration. Commercial properties such as office, retail and hospitality benefit significantly from locations with good exposure. It is desirable for these commercial properties to be located with exposure to high traffic counts. Exposure of a commercial property relates to the number of potential viewers of a property. The visibility of these types of commercial properties is of significant importance, and relates to the visibility the property has to the exposure of the property. Visibility of a property relates to the capture of potential viewers (exposure).

While it is important to consider the elements that make up exposure and visibility separately, the benefit to a property is from the combination of exposure and visibility. A property with excellent exposure (frontage to high traffic count) and poor visibility does not receive the benefit of excellent exposure. Just as a property with excellent visibility (hard corner lot) at an intersection with very low traffic counts does not have sufficient exposure for the visibility to be of high value.

The subject's functional utility is typical of other similar sized office buildings in the market.

Marketing period is the estimated period of time it would take to sell a property at the concluded market value during the period immediately following the effective date of appraisal.

The subject is an interior residential neighborhhood collector street with minimal exposure and no traffic counts exist for the subject's street. The nearest traffic count on an arterial street is depicted below.


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Access:

Landscaping:

Condition:

Exposure Time:

Subject's Exposure Time: 180 Days

Access to the subject is via two cutouts on Garrison Street which is a

neighborhood collector street. Garrison Street connects with 100th Avenue

approximately one block south of the subject. 100th Avenue is a four-lane secondary arterial street running east and west. Traffic traveling in both

directions along 100th Avenue can access Garrison Street. 100th Way is located more immediately to the south of the subject and is a neighborhood

collector street connecting to 101st Avenue in a round about 1 block east of the

subject. 101st Avenue is a collector street separating the commercial and residential uses in the neighborhood and provides good secondary access to the subject. Overall the subject has good access.


The subject is well maintained and is in overall good condition. The subject’s roof and windows were recently replaced, and a new solar system was installed in recent years. No deferred maintenance was noted, no immediate repairs are necessary and the subject is currently in marketable condition.

Exposure time is the estimated length of time that the property interest being appraised would have been offered on the market prior to the consummation of a sale at market value on the effective date of the appraisal. Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market.

Marketing time differs from exposure time in respect to the period of time preceding and sub-sequent to the effective date of appraisal. Exposure time is always presumed to precede the effective date of the appraisal. Whereas, marketing time is the time it would take an interest in real property to sell on the market sub-sequent to the effective date of the appraisal.

Analysis, estimation and reporting of exposure time are consistent with the definition of Market Value. To arrive at an estimated exposure time, the appraiser’s analysis includes consideration of actual days on the market of the comparable sales used in the appraisal and other similar properties within the subject’s market area which have not been included in the final analysis.

The subject is landscaped with trees, shrubs and sod in various locations. Landscaping is well maintained and typical for the area.


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Taxes / Assessment: Tax Year: 2018Actual Value: Land: $233,462 Building: $301,138Total Actual Value: $534,600Assessed Value: Land: $67,704 Building: $87,330Total Assessed Value: $155,034Taxes $12,780.00

Transfer History: Owner of Record: Coffey Real Estate LLCDate of Prior Sale: 12/1/2004Prior Sale Price: $520,000Document No. F2139652

Quit Claim Transfers: Date Document No.10/17/2005 114043

8/15/2008 8060311/13/2009 11485911/13/2009 114861

8/25/2015 97107

Current Agreement of Sale:

The appraiser is not aware of any current agreement of sale or recent listings of the subject property.

The transaction presented above appears to be the most recent market transaction. The following tranfers via quit claim deed have occurred since the most recent sale date listed above. Each quit claim transfer appears to be among related parties.



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Subject Photo Pages

Subject Photo Page

Subject Front

Subject Rear


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Subject Photo Page

Subject Street

Subject Exterior


25

Subject Photo Page

Subject Parking

Subject Exterior


26

Subject Photo Page

Reception Area

Training Room


27

Subject Photo Page

Office Suite

Office Suite


28

Subject Photo Page

Men's Bath

Women Bath


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Subject Photo Page

Conference Room

Interior Corridor


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Economic Analysis Market analysis involves the study of commercial real estate market conditions and the market conditions for a specific type of property. Proper and effective analysis of market conditions is an essential part of the valuation process. The reporting of this analysis provides the reader with insight into the motivation of market participants. National Analysis Our description of the subject property location above began at the micro level moving outward to the macro level of significance in the larger context of a national scope. This macro level is where we begin our analysis, which provides the background for micro level analysis of the subject’s market area. Significant influences at the macro level typically have a direct bearing on property values at the micro level. Gross Domestic Product: Changes in Gross Domestic Product (GDP) and total employment have historically shown a strong correlation to demand for commercial real estate. The hospitality segment has the strongest correlation to GDP. Analysis of these changes provides insight into current demand and expected changes in demand for commercial real estate

Changes In National GDP

Employment Growth Job growth is the most significant demand generator for all commercial real estate property types. The correlation of job growth to commercial real estate demand ranges from 70% to 90% depending on each property type segment used in the correlation analysis. Office, retail and industrial segments have the strongest correlation to job growth. Job growth is a leading indicator of commercial real estate demand. As job growth begins a pattern of increasing, increased demand for commercial real estate is expected to follow. The following table depicts historical changes in unemployment, and GDP.


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Year Unemployment GDP Growth Inflation2010 9.30% 2.60% 1.50%2011 8.50% 1.60% 3.00%2012 7.90% 2.20% 1.70%2013 6.70% 1.80% 1.50%2014 5.60% 2.50% 0.80%2015 5.00% 2.90% 0.70%2016 4.70% 1.60% 2.10%2017 4.10% 2.20% 2.10%2018 3.90% 2.90% 1.90%

National Changes

Regional Analysis The same indications we consider on a national level, changes in GDP and total employment have the same correlation to demand for commercial real estate at the regional level.

State GDP

The following table depicts changes in GDP by state:

GDP Growth By State


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Colorado Job Growth

The following table depicts historical job growth nationwide over the most recent years.

National ColoradoDate Unemployment Unemployment

Feb-19 3.80% —Jan-19 4.00% 3.70%Dec-18 3.90% 3.60%Nov-18 3.70% 3.60%Oct-18 3.80% 3.60%Sep-18 3.70% 3.50%Aug-18 3.80% 3.40%Jul-18 3.90% 3.30%Jun-18 4.00% 3.20%May-18 3.80% 3.10%Apr-18 3.90% 3.00%Mar-18 4.00% 2.90%

State Changes


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Market Conditions Denver Metro Area – Office

Demand for both general and medical office in the Denver Metro Area has exceed overall national demand. National job growth for 2019 is forecast at 1.3% compared to 2.9% for the Denver Metro Area which is also reflective in the difference of forecast for office using job growth which is 1.7% nationally and 2.8% in the Denver Metro Area. The market has responded to this increased demand with many new projects. The number of new project’s is estimated to decline in 2019 to 2.0 million square feet which is approximately 50% of the new projects in the prior year. Approximately 760,000 square feet has been absorbed during the first quarter of 2019 and vacancy rates are expected to decline throughout 2019 to approximately 14% overall which reflects a 50-basis point decline from the previous year. Asking rent for office space in 2018 increased 1.8% and is forecast to increase 2.3% in 2019 reflecting an average asking rent (FSG) of $27.07 PSF. The following chart depicts historic changes and forecasted changes in vacancy and rental rates for office properties within the Denver Metro Area.

Demand for office space remains strongest in the Central Business District. Suburban office markets along the Interstate 25 and Highway 36 corridor have reflected greater demand than suburban office markets outside of these corridors. Vacancy rates have historically been lowest in the still developing sub-markets north and south of the Denver Metro Area with Parker/Castle Rock reflecting an overall vacancy rate of approximately 6.8% during the past year while Norther Colorado Markets such as Fort Collins/Loveland have also reflected a low vacancy rate of approximately 4.0% in 2018. The following table depicts office vacancy rates within the Denver Metro Area during the first quarter of 2019.


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Source: Marcus and Millichap

Local Market Conditions Northwest Submarket

The subject is located in the Northwest Submarket which is also referred to as the Highway 36 corridor and is roughly bound by Interstate 25 on the east, the city of Boulder on the West, Northwest Expressway on the north and 72nd Avenue on the south. This sub-market consists of older Class C properties as well as newly developed Class A office buildings. New inventory continues to be built within this sub-market and vacancy rates are slightly above the overall vacancy rate for the Denver Metro area in this sub-market. Class C properties represent affordability in a market of increasing rents and are in demand with a slightly lower overall vacancy rate. Office property values have increased during the previous 12 months while transaction velocity has remained consistent. The following table depicts details of market transactions during the previous 24-month period.

Time Period No. Transactions Median Y.O.C. Median Size Median PPSF

3/2018 to 3/2019 91 1969 10,160 $185.75

3/2019 to 3/2020 89 1973 11,162 $193.91

Change 4.21%

Source: Catlyst/DMCAR

Northwest Sub-Market Annual Appreciation


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Highest and Best Use Highest and best use is defined in the 4th edition of the Dictionary of Real Estate Appraisal (Appraisal Institute, Chicago, 2002) as follows:

“The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legally permissible, physically possible, financially feasible, and maximum productivity.”

The highest and best use analysis involves three steps:

Step 1 Analysis of the site as though vacant. A determination must be made to leave the site vacant or to improve the site.

Step 2 If it is concluded that the site should be improved, then the ideal Improvement must be determined.

Step 3 A comparisons between the existing improvement and ideal Improvement must be made to determine if the existing improvement should be maintained or modified to conform to the ideal improvement.

As Though Vacant

Legally Permissible

According to the City of Westminster, the appraised property is located in a mixed use planned unit development which provides for limited use on the subject parcel including office, institutional uses such as churches and schools and other limited commercial uses primarily serving the surrounding neighborhood

Physically Possible

The subject’s site is large enough to accommodate small commercial uses. The subject’s site is mostly level and is accommodating to construction of these types of improvements. The site could accommodate most of the legally permissible uses.

Financially Feasible

The subject is located on an interior lot along a collector street into a residential neighborhood. Properties which do not require exposure to high traffic counts are financially feasible.

Maximum Productivity

Office uses, including special use properties such as day care centers generates the greatest revenue. As such development of an office property or similar special use property to the maximum allowable density is the maximally productive use as if vacant.


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As Improved The final step in the highest and best use analysis is to compare the existing use with the ideal improvements. The appraiser applies the tests of physically possible, legally permissible, and financially feasible to determine if the existing improvements can be modified to resemble the ideal improvements.

Legally Permissible

The existing improvements comply with the requirements of the zoning classification and are a legally permissible use.

Physically Possible

The existing improvements are in overall average to good condition. Modifications to the existing improvements that would more closely conform with the ideal improvements include updating, repair, and renovation. Such modifications to the existing improvements and are physically possible.

Financially Feasible

Modifications to the existing improvements are financially feasible if they result in a value that is equal to or greater than the cost of the modification. Repair of deferred maintenance items prevent deterioration of existing income streams and are considered financially feasible. Declining rents and increasing vacancy rates does not provide a sufficient increase in income to justify additional renovations or updating to the property at this time.

Maximum Productivity

The Highest and Best use of the property is as currently improved as an office building. The subject improvement contributes value to the site in its “as is” condition, meaning that the current value of the subject property “as is” exceeds the land value of the subject property “if vacant” less the cost of demolition. Therefore, demolition of the existing improvements to construct the ideal improvements is not financially feasible at this time. Replacement and repair of any deferred maintenance items are the only financially feasible improvements leading to the maximum productivity of the property. The Highest and Best Use “As Improved” is continued use of the “as is” improvements with repair of deferred maintenance items.

The subject property is currently operated as a multi-tenant office building with individual offices being leased to different tenants. The current operation does not maximize the income potential of the property and is not the highest and best use of the property due to the fact that the rentable area is significantly reduced as the result of significant unrentable common areas. These common areas include a training room, break room, conference room and reception area. The remaining rentable area of the subject is not large enough to support these common areas.

The following table presents the current annual gross income as a multi-tenant property and the forecasted annual gross income as a single tenant property.

The subject’s current rental rate as a multi-tenant property is within the market rent range as indicated by the following rent comparables of similar sized single offices.


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Lease Property Leased Building City Address Lease Date Type Rate Type Area SizeBroomfield 7050 W. 120th Ave 1/17/2019 FSG $20.86 Office 187 16,810Wheat Ridge 7760 W. 38th Ave 11/6/2019 FSG $23.08 Office 208 37,736Wheat Ridge 3280 Wadsworth Blvd 7/1/2019 FSG $27.27 Office 220 10,757Westminster 1333 W. 120th Ave 2/1/2020 FSG $24.00 Office 440 85,832Denver 181 E. 56th Ave Active FSG $22.00 Office 310 23,000

Single Office / Smaller Office Lease Comparables

The subject’s current rental rate falls within the range of the rent comparables of $20.86 to $27.27 per square foot on a full-service gross lease term. The subject’s current rentable area is approximately 60% of the total building area.

As presented in more detail in the Income Approach the single tenant rent comparables indicate rental rates ranging from $15.50 to $21.00 per square foot on triple net lease terms as summarized in the following table.

Lease Property Leased Building City Address Lease Date Type Rate Type Area SizeGolden 19316 Goddard Ranch NNN $19.46 Office 8,326 8,326Louisville 850 W. South Boulder Rd NNN $17.50 Office 4,566 4,566Wheat Ridge 4575 Wadsworth Blvd. NNN $16.74 Office 4,424 4,424Lakewood 10075 W. Colfax Ave NNN $21.00 Office 9,134 9,134Arvada 7798 Vance Dr Active NNN $15.50 Office 6,095 6,095

Single-Tenant (Entire Buiding) Lease Comparables

Under the terms of a full-service gross lease the landlord is responsible for the majority of expenses, under the terms of a triple net lease the tenant is responsible for the majority of expenses. These details are discussed in greater detail in the Income Approach. The rentable area as a single-tenant property is 100% of the gross building area.

The maximally productive use of the subject property is operation as a single-tenant property as this results in a significantly larger rentable area without a significant change in the market rental rate. The property is appraised at it’s highest and best use as a single tenant property.


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The Appraisal Process

The Sales Comparison Approach is generally the most applicable method of valuation for owner occupied commercial properties and is also considered as a secondary consideration by investors considering income producing properties. Income producing property investors will typically give secondary consideration to the Sales Comparison Approach. Therefore, the Sales Comparison Approach is applicable to the subject property and is developed.

The Income Approach is generally the most applicable method of valuation for income producing commercial real estate. Income producing property investors give primary consideration to the Income Approach; Therefore, The Income Approach is applicable for properties such as the subject and is developed.

The Cost Approach is most applicable to newer properties without significant depreciation. The underlying assumption and basis for the Cost Approach is that a buyer will pay no more for an existing property than what they could build a new property for of similar functional utility without undue delay. As a property ages physical and functional depreciation can become so significant that the cost to build a similar property with similar functional utility and no depreciation far exceeds to cost of an existing property with depreciation. When this is the case, a buyer considering an older property with significant depreciation, will not typically consider as an alternative building a new property without depreciation at a significantly higher price. In fact, as the price gap increases substantially, the different pricing tier is such that a buyer in one price tier (higher or lower) would not consider a purchase in the other price tier. The subject property is an older property with significant depreciation and a buyer considering the purchase of the subject property would not typically consider as an alternative building a new property with similar functional utility. The Cost Approach is not applicable and is not developed.

Traditionally, the final step in the valuation analysis is the reconciliation of the value indications by the various approaches performed.


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SALES COMPARISON APPROACH

The comparable sales were confirmed by the following sources: Colorado Comps, Realist property data, Catylist, Loopnet, County records, Local MLS, and parties involved in the transactions (when possible). The below listed sales reviewed are concluded to be the most indicative of the subject’s market value.

The comparable sales are summarized on the table which follows.

COMPARABLE SALE SUMMARY TABLE

Subject SALE NO. 1 SALE NO. 2 SALE NO. 3 SALE NO. 4 SALE NO. 5

Address 10090 Garrison St1300 N. Plaza Ct 1391 Highw ay 287 1008 Depot Hill Road 15485 W. 44th Ave 1285 Cimarron Dr

City Westminster Louisville Broomfield Broomfield Golden Lafayette

Proximity See Map See Map See Map See Map See Map

Sale Date U/C - 3/16/2020 24-Apr-18 7% 16-Oct-18 5% 9-Nov-18 5% 14-Jun-19 3%

Sale Price $1,800,000 $475,000 $1,150,000 $833,000 $1,472,000

Doc No. N/A 2018004411 11331 102564 3919119

Buyer Name N/A 1391 Hw y 287 LLC Jacobs Lacey Inv. Happy Tails

GBA 9,273 3,024 8,210 4,500 8,762

Land Area 59,677 13,504 21,780 16,553 13,504

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

Conditions o f Sale Under Contract New 1st DOT New 1st DOT New 1st DOT New 1st DOT

Financing Terms N/A 82% LTV 55% LTV 52% LTV 160% LTV

Lender N/A Collegiate Peaks Bk First Bank CO Bus. Bank Live Oak Bk

Buyer Expenditures None Noted None Noted None Noted None Noted None Noted

M arket Conditions No Adjustment No Adjustment No Adjustment No Adjustment No Adjustment

Adj. Sales Price $1,800,000 $508,250 $1,207,500 $874,650 $1,516,160

Adj. PPSF $194.11 $168.07 $147.08 $194.37 $173.04

Property Type Office Office Off ice Office Office Off ice

Property Class Class C Class C Class C Class C Class C Class C

Year Built 1989 1979 1970 1982 1981 2001

Condition Average Average Average Average - 15% Average Average

Quality Frame/Brick Frame/Brick Brick Frame Brick Frame/Rock

GBA 5,421 9,273 7% 3,024 -7% 8,210 6% 4,500 -3% 8,762 6%

Location Westminster Louisville Broomfield Broomfield Golden Lafayette

Appeal Average Average Average - 15% Average Average Average

Exposure Feeder Feeder Arterial -5% Collector Sec. Arterial -5% Arterial -5%

Visibility Good Good Good Good Good Good

Access Good Good Good Good Good Good

Tenancy *Single Single/Multi Single Single/Multi Single/Multi Single

Land Size 34,587 59,677 13,504 21,780 16,553 13,504

Land/Blg Ratio 6.38 6.44 4.47 4% 2.65 8% 3.68 6% 1.54 11%

Adj. Land Use Res/Comm Res/Comm Res/Comm Commercial Comm/Ind Res/Comm

Net Adjustment 7% 7% 29% -2% 12%

Dollar Adjustment $13.59 $11.77 $42.65 -$3.89 $20.76

Adjusted Price/SF $207.70 $179.84 $189.73 $190.48 $193.80

Weight 25% 15% 15% 20% 25%

*Appraised as single tenant property per Highest and Best Use


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Sales Comparison Summary

The comparables used reflect the best comparables that are available for the subject property and are similar enough to the subject in all factors that have an impact on value to produce a credible result via the Sales Comparison Approach.

Adjustments Applied to Comparable Sales:

Each of the comparables are similar enough in factors that have an impact to produce a credible result after adjustment for differences. The most notable difference between the subject and comparables sales

Market Conditions: Comparable No. 1 was under contract on the effective date of appraisal. No adjustment is applied for the status of this comparable as the actual sales price is utilized in the appraisal grid. Closed transactions are adjusted for date of sale based on historical market appreciation of 4.2% per year during the previous 24 months are previously presented in the Market Conditions section of this report.

Appeal: Comparable No. 2 has a significant portion of the GBA below grade and is inferior in appeal when compared to the subject and other comparables. Adjustment for this difference in appeal is based on analysis of the above listed sales.

Age: All of the comparables are similar in age to the subject property. Comparable No. 2 represents the most significant difference being 19 years older than the subject. An adjustment for appeal made to this comparable is inclusive of any adjustment which would be applied for this significant difference in age and an additional adjustment for this age difference is not applied. The remaining comparables are built within 12 years of the subject and are considered to be built within the subject’s building period and an adjustment for differences in age is not supported.

Condition: All of the comparables, except for Comparable No. 3 appear to be in similar condition with some recent updating to each property. Comparable No. 3 showed signs of deferred maintenance at the time of sale and appears to be in inferior condition to the subject and remaining comparables. Adjustment for this difference is based on analysis of the above listed sales.

Gross Building Area: Market data indicates that larger properties tend to sell for a lower price per square foot when compared to smaller properties. Adjustments for differences in GBA are based on analysis of the comparable sales used in the appraisal. Specifically, secondary paired data analysis of Comparable No. 4 to Comparable No. 5 indicates an adjustment of 1% for each 6.0% difference in size is warranted. This adjustment is applied to each of the comparables.

Exposure: The subject and some of the comparables are located on collector or feeder streets with limited exposure. Office and retail properties often benefit from increased exposure. Comparables located on arterial streets with greater exposure are adjusted for this difference. Adjustment amount and direction is based on analysis of the above listed sales as well as comparison of other office properties with a significant difference in exposure which were not considered to be the best comparables for the subject and are not included in the above listed grid.

Land/Bldg Ratio: Properties with a significant difference in land to building ratio may have an impact on value as higher land to building ratios often indicate additional development opportunity for expansion and significantly lower land to building ratios may indicate inferior functional utility. Adjustments for land to building ratios are based on analysis of the comparable sales used in the appraisal. Specifically, secondary paired data analysis of Comparable No. 1 and Comparable No. 5. This analysis indicates a 1% adjustment for each 0.45 difference in land/building ratio.


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Details of each comparable sale are provided in the following pages.

Improved Sales Location Map


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Address Proximity to Subject

Sale Date Sale Price

GBA Land/Bldg Ratio

Year Built Condition

Exposure Appeal

Weight in Weighted Scale

Features

Sale No. 1

Average

1300 N. Plaza Ct

U/C - 3/16/2020

9,273

1979

See Map

$1,800,000

6.44

25%

Feeder Average

Comparable No. 1 is a larger office building configured and operated as a multi-tenant property at the time of sale. The property was not incumbered by long-term leases and was marketed as an owner user (single tenant) property as well as a potential investment property. This property was under contract on the effective date of appraisal and closed prior to the date of report and is a good indication of current market activity. The transaction included the sale of an adjacent vacant parcel of approximately .70 acres. The combined parcels have a similar land to building ratio as the subject. This property is located on a feeder street of a residential subdivision and is similar in location to the subject. This comparable required a small net adjustment and is given greater consideration.


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GBA Land/Bldg Ratio


Exposure Appeal


4/24/2018 $475,000

Sale No. 2

Features

1391 Highway 287 See Map

3,024 4.47

1970 Average

Arterial Average -

15%

Comparable No. 2 is a smaller single-tenant office building with frontage to an arterial street. This property is also located at the entrance to a residential sub-division and has some similarity to the subject’s location. This older property has a similar land to building ratio as the subject and is improved with parking areas in the front, rear and side. This property has a similar configuration to the subject with 14 private offices, reception area, kitchen and conference room. A portion of the GBA of this building is below grade and is considered to have inferior appeal to the subject. This comparable is given less consideration due to this difference and the signficant difference in age.


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GBA Land/Bldg Ratio


Exposure Appeal


10/16/2018 $1,150,000

Sale No. 3

Features

1008 Depot Hill Road See Map

8,210 2.65

1982 Average -

Collector Average

15%

Comparable No. 3 is a larger two-story office building configured for one tenant on each floor. This property was operated as a school at the time of sale with a portion of the property being vacant. The property is similar in age to the subject and appears to be in overall inferior condition at the time of sale. This property is located on a collector street in an office park and is less similar to the subject in terms of location. The lower level of this property is partially below grade. This comparable is required larger adjustments and is given less consideration due to the significant differences between the subject and this property.


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GBA Land/Bldg Ratio


Exposure Appeal


11/9/2018 $833,000

Sale No. 4

Features

15485 W. 44th Ave See Map

4,500 3.68

1981 Average

Sec. Arterial Average

20%

Comparable No. 4 is a similar sized office building, similar in age and was renovated in 2015. This property was configured and operated as a single-tenant property prior to sale and was also separately metered for three units. This property is located on a secondary arterial street in a commercial/industrial area and is less similar to the subject in terms of location. A portion of this property is improved as warehouse space which is less similar to the subject’s overall functional utility. While this property required a small net adjustment it is given slightly less consideration due to differences in functional utility and location.


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GBA Land/Bldg Ratio


Exposure Appeal


6/14/2019 $1,472,000

Sale No. 5

Features

1285 Cimarron Dr See Map

8,762 1.54

2001 Average

Arterial Average

25%

Comparable No. 5 is a larger single-tenant office building with a smaller land to building ratio. This is a newer multi-level property configured as a single tenant/owner user property. This property is located in a small office park on a feeder street leading to a residential sub-division. This property also has frontage to South Boulder Road which is an arterial street. This property has superior exposure to the subject. This property was the most recent sale on the effective date of appraisal and is given greater consideration.


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Correlation of Comparable Sales:

Comparable No. 1 was under contract at the time of inspection and closed prior to the date of report. This comparable is a good indication of current market activity and is given greater consideration. Comparable No. 5 is the most recent closed sale prior to the effective date of appraisal and is also given greater consideration. Comparable No. 2 and Comparable No. 3 each required a larger single line adjustment, are consider less similar to the subject than other comparables are given the least consideration.

Each of the comparable sales is given consideration in the following weighted scale.

SALE NO. PRICE/SF WEIGHT INDICATOR1 $207.70 25% $51.922 $179.84 15% $26.983 $189.73 15% $28.464 $190.48 20% $38.105 $193.80 25% $48.45

TOTAL 100% $193.91

WEIGHTED SCALE - Price Per Square Foot

Conclusions:

The following table presents the concluded “as is” value of the subject by the Sales Comparison Approach:

Square Feet Indicated PPSF Value Indication Rounded5,421 $193.91 $1,051,167 $1,050,000Total $1,050,000

Value Indication


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INCOME CAPITALIZATION APPROACH

The Income Approach is a method of converting the anticipated economic benefits of owning a property into a value estimate through capitalization or discounting. The principles of anticipation and substitution underlie this approach. Investors recognize the relationship between the income a real property can generate and its value. In order to value the anticipated economic benefits of a particular property, potential income and expenses must be estimated, and the most appropriate capitalization method applied. By the same token, investors will pay no more for a property than it would cost to purchase an acceptable substitute potential income. This investment may be realty or some other commodity.

The two most common methods of converting net income into value are direct capitalization and discounted cash flow analysis. In direct capitalization, net operating income is divided by an overall rate extracted from the market to indicate a market value. In the discounted cash flow method, anticipated future net income streams and a reversionary value or refinance are discounted to an estimate of net present value at a chosen yield rate. The direct capitalization method is most appropriate for the subject property.


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Analysis of Tenancy

The contract rent for the subject property is shown below.

Tenant Square Contract Rent Annual

Name Length Width Feet** Monthly Rent SF/Yr Base Rent

101 Brenda Smeltzer 15 10 150 Monthly $400 $32.00 $4,800.00102 M. Kurry 15 11 165 Monthly $375 $27.27 $4,500.00103 Hager 15 11 165 Monthly $250 $18.18 $3,000.00104 Jeffco Midget 13 12 156 Monthly $425 $32.69 $5,100.00105 Angie-Perry 17 12 204 Monthly $500 $29.41 $6,000.00106 TLC/McKenzie 15 12 180 Monthly $350 $23.33 $4,200.00107 McKenzie/CPA 15 13 195 Monthly $450 $27.69 $5,400.00108 Foundation BEH 15 14 210 Monthly $450 $25.71 $5,400.00109 Quest 15 14 210 Monthly $390 $22.29 $4,680.00

*110 Kevin 23 12 276 Monthly $675 $29.35 $8,100.00111 Lumino 23 12 276 Monthly $675 $29.35 $8,100.00112 Stretch Colo 23 12 276 Monthly $650 $28.26 $7,800.00

N/A Aclaim 0 Monthly $460 N/A $5,520.00Total Leased Space 2,463 $72,600.00Common Areas Lease Range

100 Training Room 26 23 598 Size RateBoard/Conf. Rm 18 12 216 Low 150 $18.18Kitchen 17 13 221 High 276 $32.69File Room 12 14 168 Median 200 $27.98Reception 20 16 320 Average 205 $27.13Baths/Corridors/Misc. N/A N/A 1,435

Total Common Areas 2,958Total 5,421 $72,600.00*Imputed rent

**Dimensions and square feet are estimated and essentially correct

Lease Analysis

Suite Term

As discussed in the Highest and Best Use section of this report the subject is currently operated as a multi-tenant property which is not the Highest and Best Use of the property as improved. As previously discussed, rent comparables of similar sized space indicates that the contract rents for the subject are within the range of market rent for similar sized units.

The current operation of the property results in limited rentable (income producing) space and has extensive common areas in excess of what is typically supported by aa property this size.

“According to the concept of consistent use, an improvement must be valued based on a use that is consistent with the property’s highest and best use.” Appraisal Institute, Appraisal of Real Estate, 12 th Edition

The highest and best use of the subject property is operation as a single-tenant office building or multi-tenant with fewer tenants which maximizes the rentable (income producing) area of the building. As single-tenant operation increases the rentable square feet to 100% of the building size. As depicted above the rentable square feet of the property as currently operated is below 50% or just above 50% if some common areas such as the training room or conference room are converted to leased space.

The subject property is appraised consistent with it’s highest and best use as a single-tenant property.


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Contract Rent Comparison

The contract rent of the subject property as a multi-tenant property reflects full service gross lease terms with the property owner responsible for the majority of expenses. As previously discussed, the contract rent for the subject is within the range of comparables of similar sized units presented in the Highest and Best Use section of this appraisal. Existing units within the subject property are all leased on a month to month basis and the subject is not encumbered by any long-term leases.

The subject is appraised consistent with its highest and best use as a single tenant property which are typically leased on triple net lease terms with the tenant responsible for the majority of expenses. The rent comparables considered in the Income Approach as single tenant rent comparables leased on triple net terms.

The existing contract rent of the subject is not indicative of the market rent of the subject as a single-tenant property and no reconciliation between market rent and existing contract rent is attempted as the contract rent represents a different use of the property.

Expense Allocation

The rent comparables for the subject property are leased on triple net terms with the tenant responsible for the majority of expenses. Under the terms of a triple-net lease, the property expenses are allocated as follows:

Expense Item Property Owner Expense Tenant Expense

Property Taxes 0% 100%Insurance 0% 100%Utilities 0% 100%Maintenance 0% 100%Reserves 100% 0%Management 100% 0%

Expense Allocation of Existing Leases

Potential Gross Income

Market rent comparables have been analyzed to estimate what market rent is for the subject property. Market rent is the basis for estimating the market value of the fee simple estate or interest. Market rent is what a property should rent for based on a study of rental rates of similar, competing properties in the market. Contract rent is used to determine the leased fee interest in a property; market rent is used to determine the fee simple interest in a property. In either case, market rent is estimated to reach a determination if the subject’s contract rent is above, below or at market rates.

Summary of Market Rent Comparables

The appraisers selected rent comparables most similar to the subject’s space and operation as a single tenant property or multi-tenant property with larger units maximizing the rentable area of the subject. The comparables reflect market rent for similar space. Several comparable rentals were analyzed, but these were concluded to be the best indicators of market rent for the subject. The rent comparables utilized are summarized and compared to the subject in the following table.


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Lease Comparable Table

Subject COMP NO. 1 COMP NO. 2 COMP NO. 3 COMP NO. 4 COMP NO. 5

Address 10090 Garrison St 19316 Goddard Ranch850 W. South Boulder Rd4575 Wadsw orth Blvd. 10075 W. Colfax Ave7798 Vance Dr

City Westminster Golden Louisville Wheat Ridge Lakew ood Arvada

Proximity See Map See Map See Map See Map See Map

Monthly Rent $13,502.00 $6,658.75 $500.00 $15,984.50 $570.00

Lease Rate $19.46 $17.50 $16.74 $21.00 $15.50

Lease SF 8,326 4,566 4,424 9,134 6,095

Lease Terms NNN NNN NNN NNN NNN

Free Rent None None None None None

TI's None None None None None

Adj. Rent PSF $19.46 $17.50 $16.74 $21.00 $15.50

Adj. RPSF $19.46 $17.50 $16.74 $21.00 $15.50

Year Built 1989 1992 2000 1930 1962 1975

Building Size 5,421 Average Average Average Average Average

Property Class Class C Class C Class C Class C Class C Class C

Leased Space (SF) 5,421 8,326 4,566 4,424 9,134 6,095

Appeal Average Average Average Average Average Average

Exposure Feeder Feeder Arterial Arterial Arterial Collector

Visbility Average Average Average Average Average Average

Access Average Average Average Average Average Average

Adj. Land Use Commercial Commercial Commercial Commercial Commercial Commercial

Adjusted Rent/SF $19.46 $17.50 $16.74 $21.00 $15.50

Weight 10% 30% 30% 20% 10%

Lease Comparable Analysis Each lease comparable is similar enough to the subject the no adjustments could be quantified or extracted, and a qualitative analysis is applied through the use of a weighted scale. The lease comparables indicate a triple net lease rate for the subject from $15.50 to $21.00 PSF. Comparable No. 2 and Comparable No. 3 are most similar to the subject’s size and are most similar in terms of functional utility. These rent comparables indicate a triple net lease rate ranging from $16.74 to $17.50 PSF. Further depiction of each lease comparable are presented in the following pages.


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Rent Comparables Location Map


53

Address Lease RateCondition VisibilityAppeal Exposure


10%Weight in Weighted Scale

Weight in Weighted Scale 30%

850 W. South Boulder Rd

Average ArterialAverage Average

Feeder

Rent Comparable No. 1


19316 Goddard Ranch

Average$19.46

AverageAverage

$17.50


54



4575 Wadsw orth Blvd. $16.74Average AverageAverage Arterial





10075 W. Colfax Ave $21.00Average AverageAverage Arterial


55


7798 Vance Dr $15.50Average AverageAverage Collector




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Market Rental Summary

The comparable rental properties utilized in the appraiser’s analysis are located within the subject’s market area. The adjustment grid presented here arrives at an estimated market rent for the subject property.

Comparable No. 2 and Comparable No. 3 are most similar to the subject’s size and are given greater consideration.

RENT COMP PRICE/SF WEIGHT INDICATOR1 $19.46 10% $1.952 $17.50 30% $5.253 $16.74 30% $5.024 $21.00 20% $4.205 $15.50 10% $1.55

TOTAL 100% $17.97

WEIGHTED SCALE

Concluded Potential Gross Rental Income

As previously discussed, the potential gross rental income is based on market rent in valuing the fee simple estate. Market rent is applied to the subject property to determine the Potential Gross Income of the property as depicted below.

Potential Rental Income (Fee Simple) $97,404.53Plus: Expense Reimbursements $41,030.00Plus: Other Income $0.00

Total Potential Gross Income $138,434.53

Potential Gross Income

Vacancy and Collection Loss Market conditions have softened in recent years; however, properties in the immediate vicinity are in demand. Based on our findings and discussions with area brokers, a market vacancy and collection allowance for other similar properties of 14.0% is concluded. This vacancy allowance is consistent with the overall vacancy rate as discussed in the Market Conditions section of this report. This vacancy and collection allowance and would typically be applied to an estimate of the fee simple estate or the leased fee estate if a unit is vacant or if the current lease term was short enough in duration to anticipate tenant turnover during a typical holding period of 7- to 10-year.

Operating Expenses

The comparables are all leased on a triple net basis. Under the terms of a NNN lease the tenant is responsible for all expenses except management and reserves. This is a common lease term for the subject property. Management fees are based on typical management charges for similar properties.

Projected operating expenses for the subject are summarized as follows.


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Broker GuidelinesExpense Item Total 5,421 SF $/SF

Property Taxes $12,780 $1.00 - $2.50Insurance $2,550 $0.25 - $1.00Utilities $9,000 $1.50 - $3.50Trash/Phone $1,200 $0.20 - $0.75Maintenance $5,500 $1.00 - $3.00Reserves $1,500 $0.20 - $0.50Janitorial $5,000 $0.50 - $1.00Administrative $2,500 $0.20 - $0.50Legal/Accounting $2,500 $0.20 - $0.50Management $4,627 4% - 7% EGI

Total Expenses $47,157

$1.66

$1.01$0.28

$0.85

$0.22

Estimated Expenses

$2.36$0.47

$8.70

$/Sq.Ft.

$0.92$0.46$0.46

Property taxes are based on the actual assessment. All other expenses are based on a consensus of broker guidelines, historical operating expenses of the subject property, and on a review of industry standards. The concluded property management expense is based on an industry standard of 5.0% of effective gross rental income. This expense typically ranges from 2% to 6% for similar properties. The subject is in overall average to good condition.

Reimbursed Expenses Each of the rent comparables used to determine the Potential Gross Income indicate market rents reflecting NNN terms. Under a triple net lease, all of the expenses except management and reserves are paid by the tenant. These are depicted as expense reimbursements for purposes of our analysis; however, these are paid by the tenant directly.

Expense Item Total 5,421 SFProperty Taxes $12,780Insurance $2,550Utilities $9,000Maintenance $5,500Administrative $2,500Legal/Accounting $2,500

Total Reimbursements $34,830 $6.43

$1.01$0.46$0.46

Reimbursed Expenses$/Sq.Ft.

$2.36$0.47$1.66


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Income and Expense Summary

Potential Rental Income (Fee Simple) $97,404.53Plus: Expense Reimbursements $41,030.00Plus: Other Income $0.00

Total Potential Gross Income $138,434.53Less: Vacancy and Collection Loss 14% $19,380.83

Effective Gross Income $119,053.69Less: Operating Expenses $47,156.72

Net Operating Income $71,896.98

Income and Expense Summary

Direct Capitalization The capitalization rate is developed based on appropriate sources. Buildings like the subject are typically purchased by investors. The appraisers’ research includes survey data and analysis of specific market data.

MARKET DATA The table below depicts capitalization rates indicated by other similar sales and active listings on the effective date of appraisal, which are most reflective of the alternatives and investor in this property type would consider.

Type Sale Date Address City Size Sales $ NOI OAROffice Subject 10090 Garrison St Westminster 5,421 N/A $71,897 7.40%Office 7/13/2018 5730 Ward Road Arvada 20,320 $2,510,000 $172,186 6.86%Office Active 19316 Goddard Ranch Rd Golden 8,321 $2,314,000 $161,980 7.00%Office 10/16/2018 1008 Depot Hill Road Broomfield 8,210 $1,150,000 $83,260 7.24%Office 14/4/2019 8725 W 14th Ave Lakewood 13,048 $1,250,000 $92,500 7.40%Office 6/13/2019 1385 Carr St Lakewood 6,208 $715,000 $52,910 7.40%Office 4/2/2019 11049 W. 44th Ave Wheat Ridge 16,540 $1,700,000 $136,000 8.00%

Market Derived Capitalization Rates

Applied Capitalization Rate As discussed above, the subject property represents a typical level of risk. Therefore, a capitalization rate in the middle of the range is appropriate.


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Indicated Value from Direct Capitalization Analysis

Direct Capitalization

Based on the preceding indications, the indicated market value of the fee simple interest in the subject property is calculated as follows:

Subject Net Operating Income Capitalization Rate Value Indication Rounded$71,897 7.40% $971,581 $970,000

$970,000

Indicated Value

Concluded Value by The Income Approach


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Cost Approach

The underlying principle of the Cost Approach is the Principle of Substitution. This approach to value is based on the assumption an informed purchaser would pay no more than the cost of producing a substitute property with the same utility as that of the subject property assuming no undue delay due to construction. As such, the Cost Approach is most applicable to newer properties. As a property increases in age and depreciation the gap between the replacement cost new and price of an existing property widens to the point that the Principle of Substitution no longer is applicable due to the fact that the price to purchase an existing property and the replacement cost are at different pricing point. In this situation, the replacement cost is not considered as an alternative to an investor.

The subject property is an older property and the Cost Approach is not applicable or necessary and is not developed.


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Reconciliation of Value Indicated values by the Income Capitalization and Sales Comparison approaches are summarized as follows:

Approach ValueSales Comparison Approach $1,050,000Income Approach $970,000Concluded Value $1,000,000

Reconcliation of Value

The Sales Comparison Approach is predicated on the principle that an investor would pay no more for an existing property than for a comparable property with similar utility. This approach is most often used by potential purchasers intending to utilize a property as owner occupants.

The Income Approach is the most applicable method of valuation for investor purchased properties. This approach is predicated on the principles of substitution and anticipated economic benefits. Therefore, it best reflects the income characteristics of the subject.

The subject property would likely be considered by investors making a purchase decision based on the anticipated future income the property will generate as well as owner users making a decision based on the functional utility of the property. Therefore, the Income Approach and Sales Comparison Approach are both given consideration in the reconciliation of value.

As a result of the preceding discussion, the market value concluded by this complete appraisal for the fee simple interest in the subject property, as of February 17, 2020, is:

“AS IS” VALUE

ONE MILLION DOLLARS

$1,000,000

The value estimates are based on the definitions, assumptions, limiting conditions, and certification in the report and any hypothetical conditions and/or extraordinary assumptions.

By this reference, the Addendum is made an integral part of this report.


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Addendum


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Glossary Appraisal Report: The written report presented by an appraiser regarding the value of a property; should include a description and summary of the method(s) used to calculate the value of the property Assessed Value: Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. 1 Capital Expenditure: Investments of cash or the creation of liability to acquire or improve an asset, e.g., land, buildings, building additions, site improvements, machinery, equipment; as distinguished from cash outflows for expense items that are normally considered part of the current period’s operations. 2 Cash Equivalency: The procedure in which the sale prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms. Complete Appraisal: The act or process of developing an opinion of value or an opinion of value developed without invoking the DEPARTURE RULE. 3 Cost Approach: This approach is based on the premise that an informed purchaser would pay no more than the cost of producing a substitute property with the same utility as the subject property. The analysis involves estimating the current cost (including both direct and indirect costs) to construct a replacement for the existing structure and related site improvements, deducting for evidence of accrued depreciation, and adding the estimated land value. Deferred Maintenance: Curable, physical deterioration that should be corrected immediately, although work has not commenced; denotes the need for immediate expenditures but does not necessarily suggest inadequate maintenance in the past. 4 Economic Life: The period of time over which improvements to real estate contribute to property value. 5 Effective Date of the Appraisal: The date at which the value opinion in an appraisal applies, which may or may not be the date of inspection; the date of the market conditions that provide the context for the value opinion. 6 Effective Gross Revenue Multiplier (EGRM): A factor which reflects the relationship between the gross annual revenue of the real estate and its sale price or value. Effective Rent: 1) The rental rate net of financial concessions such as periods of no rent during a lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis. 7 2) The economic rent paid by the lessee when normalized to account for financial concessions, such as escalation clauses, and other factors. Contract, or normal, rents must be converted to effective rents to form a consistent basis of comparison between comparables. Exposure Time: 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 upon an analysis of past events assuming a competitive and open market. Exposure time is different for various types of real estate and under various market conditions. It is noted that the overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. The fact that exposure time is always presumed to occur prior to the effective date of the appraisal is substantiated by related facts in the appraisal process: supply/demand conditions as of the effective date of the appraisal; the use of current cost information; the analysis of historical sales information (sold after exposure and after completion of negotiations between the seller and buyer); and the analysis of future income expectancy estimated from the effective date of the appraisal. 8 Extraordinary Assumptions: An assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinion or conclusions. 9 Fair Market Share: The ratio of the submarket inventory over the fair market share. Fee Simple Estate: Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government. 10 Floor Area Ratio (FAR): The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. 7 Going Concern Value: Going concern value is the value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. 1 Gross Building Area (GBA): The sum of all areas at each floor as measured to the exterior walls.

1 The Appraisal of Real Estate, Eleventh Edition, Appraisal Institute, 1996. 2 The Dictionary of Real Estate Appraisal, Third Edition, 1993, p. 47. 3 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 1. 4 The Dictionary of Real Estate Appraisal, Third Edition, 1993, p. 92. 5 The Appraisal of Real Estate, 10th ed. (Chicago: Appraisal Institute, 1992), p. 344. 6 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 222. 7 The Dictionary of Real Estate Appraisal, Third Edition, 1993. 8 "Uniform Standards of Professional Appraisal Practice" (Washington, D.C.: The Appraisal Foundation, 1996), p. 75. 9 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 3. 10 The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993), p. 120.


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Highest and Best Use: The reasonably probable and legal use of vacant land or an improved property which is physically possible, appropriately supported, financially feasible and that results in the highest value. 11 Hypothetical Condition: That which is contrary to what exists but is supposed for the purpose of analysis. 12 Income Capitalization Approach: This approach derives a value indication for income-producing property by converting anticipated monetary benefits into a property value. This conversion is typically accomplished in two ways: A direct capitalization analysis where one year's income expectancy or an annual average of several years' income expectancies may be capitalized at a market-derived capitalization rate or a capitalization rate that reflects a specified income pattern, return on investment, and change in the value of the investment; secondly, a discounted cash flow analysis where the annual cash flows for the holding period and the reversion may be discounted at a specified yield rate. Insurable Value: Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. 1 Intended Use: The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment. 13

Intended User: The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communications with the client at the time of the assignment. 14 Internal Rate of Return (“IRR”): The yield rate to the ownership position realized over the term of an investment. Investment Value: Investment value is the value of an investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser. 1 Leasehold Estate: The right to use and occupy real estate for a stated term and under certain conditions; conveyed by a lease. 15 Leased Fee Estate: An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease. 16 Limited Appraisal: The act or process of developing an opinion of value or an opinion of value developed under and resulting from invoking the DEPARTURE RULE. 17 Load Factor: The amount added to usable area to calculate the rentable area. It is also referred to as a “rentable add-on factor” which, according to BOMA, “is computed by dividing the difference between the usable square footage and rentable square footage by the amount of the usable area. Convert the figure into a percentage by multiplying by 100”. Market Value: 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 specific 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." 18

Market Value "As If Complete" On The Appraisal Date: Market value as if complete on the appraisal date is an estimate of the market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of the appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this estimate of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. Market Value "As Is" On The Appraisal Date: Market value “as is” on the appraisal date is an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date of appraisal. Marketing Period: The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal. 7

11 The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute), p. 171. 12 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 3. 13 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 3. 14 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 3. 15 The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993), p. 177. 16 The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993), p. 204. 17 "Uniform Standards of Professional Appraisal Practice" (The Appraisal Foundation, 2003 Edition), p. 1. 18 "Uniform Standards of Professional Appraisal Practice" (Washington, D.C.: The Appraisal Foundation, 1996), p. 10.


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Net Lease: Lease in which all or some of the operating expenses are paid directly by the tenant. The landlord never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent. Net Rentable Area (NRA): 1) The area on which rent is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. 19

Penetration Rate: The ratio of the actual market share of a submarket over the fair market share of a submarket. Principle of Substitution: This principle affirms that no prudent buyer would pay more for a property than the cost to acquire a similar site and construct improvements of equal desirability and utility without undue delay. Reconciliation: The strengths and weaknesses of the individual approaches to value may vary based on the quality and quantity of data available in each instance. The final value conclusion is based on the appraisers' judgment with respect to the appropriateness of each approach as it applies to the property being appraised. Replacement Cost: The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design, and layout. Sales Comparison Approach: This approach derives a value indication by comparing the subject property to similar properties that have recently sold, applying appropriate units of comparison and making adjustments, based on the elements of comparison, to the sale prices of the comparables. Analysis of properties currently listed for sale is also useful in setting the upper limit of value. The overriding premise of this approach is that an informed purchaser would pay no more than the cost of acquiring an equally desirable substitute. Scope of the Appraisal: Extent of the process in which data are collected, confirmed, and reported. 20 Use Value: Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property’s highest and best use or the monetary amount that might be realized upon its sale. 1

19 1990 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990) 20 The Dictionary of Real Estate Appraisal, Third Edition, 1993, p. 322.


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Building Classifications

The Building Owners and Managers Association International (BOMA) classifies commercial space as: Class A, Class B, and Class C. Class A buildings have the "most prestigious buildings competing for premier office users with rents above average for the area” with "high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence." Class B buildings compete "for a wide range of users with rents in the average range for the area." Class C buildings are aimed towards "tenants requiring functional space at rents below the average for the area." The Urban Land Institute classifies commercial space as: Class A space can be characterized as buildings that have excellent location and access and attract high quality tenants. Building materials are high quality and rents are competitive with other new buildings. Class B buildings have good locations, management, and construction, and tenant standards are high. Class C buildings are typically 15 to 25 years old but are maintaining steady occupancy. Professional organizations have provided definitions to classify quality of space, as depicted above. However, differences in opinion in regards to proper classification of commercial space exist among commercial real estate professionals. For purposes of this appraisal classification of commercial space is as follows:

Class A: This classification is reserved for those properties which represent the best in class for a property type. In addition to the level of quality presented in the above definitions a Class A property has a very strong identity of location and is considered to be a landmark property. This is an elite class of property and as such, there are few Class A properties. It is accepted in some circles that Class A would represent the best in class for a particular market, however this view dilutes the characteristics and definition of a Class A property. In fact, many markets and even more sub-markets do not have any Class A properties. The only market specific variation for purposes of this appraisal is that Class A properties located in Gateway Cities exceed what is generally accepted as Class A properties in the top 25 markets. Some Class A properties located in Gateway Cities could be better classified as “World Class” properties. It is common that tertiary markets will not contain Class A properties, however exceptions do exist.

Class B: This classification represents most quality commercial properties with good market appeal and a relatively low effective age. Class B properties appeal to national credit tenants and while not landmark properties have favorable location features and/or good identity of location.

Class C: This classification represents a large inventory of commercial properties which meet or exceed market standards for the property type. While some properties with a relatively low effective age are categorized as Class C, the bulk of this category includes property with an effective age exceeding 15 to 20 years. A property of low quality or more commonly poor location features with a low effective age is categorized as a Class C property.

Unclassified: The minimum criteria for a property to classified as a Class C property is that it meets or exceeds market standards for the property type. Many commercial properties have deficiencies which do not meet market standards. While these properties may remain financially viable and have a remaining economic life, they are considered substandard properties and are therefore unclassified.


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Certification

Certification


68

Qualifications

Qualifications

Documents

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