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HomeMy WebLinkAboutappraisalsJ _= OFF al` CR, The Honorable Mayor and November 21, 2003 Members of the City Commission Keith A. Carswell, Director Department of Economic DPH2 - November 25, 2003 City Commission Meeting Option to Purchase Real Property Located at 254 NE 59`h Terrace LHP # 68 in Connection with Little Haiti Park Pursuant to your directive at the November 13, 2003 City Commission meeting, attached for your perusal you will find a copy of the appraisal reports prepared on the above referenced property. Should you require any additional information, please feel free to call me. KAC:mv.M Optionlhp68Comm.doc c: Joe Arriola, Chief Administrator/City Manager Alejandro Villarello, City Attorney Priscilla A. Thompson, City Clerk THREE BAY WAREHOUSE BUILDING 254-274 NE 59 TERRACE MIANII, FLORIDA Prestige Appraisal Services REAL ESTATE APPRAISERS Prestige Appraisal Services REAL ESTATE -_ R R?_SERS • October 14, 2003 Mr. Dirk Duval Office of Asset Management City of Miami 444 SW 2"d Avenue, 3rd Floor Miami, Florida 33130 Dear Mr. Duval, CORAL WA_ =514 .._x : , --Cs_ - - 9 5-_:58 ?HONE As requested, we have personally inspected and appraised the three bay warehouse building. located at 254-274 NE 59 Terrace, Miami, Florida . The purpose of the appraisal is to provide an opinion of market value of the fee simple estate as of October 3, 2003. The intended use of this appraisal is for purchasing purposes, with the intended client being the City of Miami Office of Asset Management. It is our opinion and conclusion that the market value of the fee simple estate of the herein described property, as of October 3, 2003 is S430,000. This transmittal letter is followed by the certification of the appraisal and the appraisal report #03-590 containing 70 pages. further describing the subject property and containing the reasoning and pertinent data leading to the estimated value. This is a self contained complete appraisal report. Your attention is directed to the "General Underlying, Assumptions" and "Limiting Conditions" which are considered usual for this type of assignment and have been included at the beginning of the report. Respectfully submitted, 1 P ESTIGE APPRAISAL SERVICES, INC. LINDA MOLINARI, SRA STATE -CERTIFIED GENERAL REAL ESTATE APPRAISER #RZ245 (0040a, DARRYL PECK STATE -CERTIFIED RESIDENTIAL REAL ESTATE APPRAISER TRD1139 CERTIFICATION The undersigned do hereby certify that to the best of our knowledge and belief and except as otherwise noted in this appraisal report: The statements of fact contained in this report are true and correct. The reported analyses. opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased, professional analyses, opinions. and conclusions. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. Neither the appraisal assignment nor our compensation is contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate. the attainment of a stipulated result, or the occurrence of a subsequent event. Our analyses. opinions and conclusions were developed, and this report has been prepared in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice, Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. The following person(s) signing this report has(have) made the last personal inspection of the subject property on October 3, 2003, which is also the effective date of valuation: Darryl Peck No person, unless so stated, provided significant professional assistance to the persons) signing this report. The use of this report is subject to the requirements of the Appraisal Institute and the State of Florida relating to review by duly authorized representatives of the Appraisal Institute, and the Florida Real Estate Appraisal Board. As of the date of this report, Linda Molinari, SRA, has completed the requirements of the continuing education program of the Appraisal Institute. RESTIGE APPRAISAL SERVICES, INC. r, MINDA MOLINARI, SRA STATE -CERTIFIED GENERAL REAL ESTATE APPRAISER =RZ245 DARRYL PEC STATE -CERTIFIED RESIDENTIAL REAL ESTATE APPRAISER =RD 1139 Prestige Appraisal Services REAL ESTATE APPRAISERS TABLE OF CONTENTS CONDITIONS OF THE APPRAISAL 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS THE VALUATION PROCESS 6 PURPOSE OF THE APPRAISAL 13 SCOPEOFTHEAPPRAISAL 13 PROPERTY RIGHTS APPRAISED 13 INTENDED USE OF THE REPORT 14 DEFINITION OF MARKET VALUE 14 REASONABLE EXPOSURE TIME 15 PROPERTY IDENTIFICATION 15 OWNERSHIP 15 PROPERTY HISTORY 15 MIAMI-DADE COUNTY OVERVIEW 17 NEIGHBORHOOD ANALYSIS 21 NEIGHBORHOOD PHOTOGRAPHS 23 SITE DATA 24 ZONING 27 DESCRIPTION OF THE IMPROVEMENTS 28 SUBJECT PHOTOGRAPHS 30 TAX AND ASSESSMENT DATA 34 HIGHEST AND BEST USE 35 DISCUSSION OF THE APPRAISAL PROCESS 38 COST APPROACH 39 SALES COMPARISON APPROACH 40 INCOME CAPITALIZATION APPROACH ;5 RECONCILIATION AND VALUE CONCLUSION 63 QUALIFICATIONS OF APPRAISERS 64 Prestige Appraisal Services Page iii CONDITIONS OF THE APPRAISAL GENERAL C VDERL fLVG ASSLMPTIO `S Legal Matters: The legal description used in this report is assumed to be correct, but it may not necessarily have been confirmed by survey. No responsibility is assumed in connection with a survey or for encroachments or overlapping or other discrepancies that might be revealed thereby. Any sketches included in the report are only for the purpose of aiding the reader in visualizing the property and are not necessarily a result of a survey. No responsibility is assumed for an opinion of legal nature, such as to ownership of the property or condition of title. The appraisers assume the title to the property to be marketable; that, unless stated to the contrary. the property is appraised as an unencumbered fee which is not used in violation of acceptable ordinances. statutes or other governmental regulations. Unapparent Conditions: The appraisers assume that there are no hidden or unapparent conditions of the propernv. subsoil or structures which would render it more or less valuable than otherwise comparable property. The appraisers are not experts in determining the presence or absence of hazardous substances, defined as all hazardous or toxic materials, waste. 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. The appraisers assume no responsibility for the studies or analysis which would be required to conclude the presence or absence of such substances or for loss as a result of the presence of such substances. The client is urged to retain an expert in this field, if desired. The value estimate is based on the assumption that the subject property is not so affected. Information and Data: Information, estimates, and opinions furnished to the appraisers and contained in the report, were obtained from sources considered reliable and believed to be true and correct. However, no responsibility for accuracy of such items furnished the appraisers can be assumed by the appraisers. All mortgages, liens, encumbrances, and servitudes have been disregarded unless so specified within the appraisal report. The subject property is appraised as though under responsible ownership and competent management. Zoning. and Licenses: It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconforming use has been stated, defined and considered in the valuation. It is assumed that the subject property complies with all applicable federal, state and local environmental regulations and laws unless noncompliance is stated, defined and considered in the valuation. Prestige Appraisal Services Page I CONDITIONS OF THE APPRAISAL(CONT.) GENERAL UNDERLYING ASSUMPTIONS (CONT.) It is assumed that the information relating to the location of or existence of public utilities that has been obtained through a verbal inquiry from the appropriate utility authority, or has been ascertained from visual evidence is correct. No warranty has been made regarding the exact location or capacities of public utility systems. It is assumed that all licenses, consents or other legislative or administrative authority from local. state or national governmental or private entity or organization have been, or can be, obtained or renewed for any use on which the value estimate contained in the valuation report is based. Flood Insurance Zone The Flood Insurance Zone has been obtained from the Flood Insurance Rate Map published by the Federal Emergency Management Agency. The map number and effective date from which the flood zone information was taken is indicated in the appraisal. In some cases, the subject property is located close to the boundary of rwo different flood zones and it is not possible to determine within which zone the subject property is located. In such a case, the most hazardous zone will be indicated. If there is any question, the appraisers urge that an elevation survey be obtained from a professional land surveyor to determine exactly what flood hazard exists. GENERAL LIMITING CONDITIONS The appraisers will not be required to give testimony or appear in court due to preparing the appraisal with reference to the subject property in question, unless prior arrangements have been made. Possession of the report does not carry with it the right of publication. Out -of -context quoting from or partial reprinting of this appraisal report is not authorized. Further, neither all nor any part of this appraisal report shall !e disseminated to the general public by the use of media for public communication without the prior written consent of the appraisers signing this appraisal report. The authentic copies of this report are bound with a cover which reveals Prestige Appraisal Services name and special seal. Any copy that does not have this seal or original signatures of the appraisers is unauthorized and may have been altered, and is considered invalid. Disclosure of the contents of this report is governed by the By -Laws and Regulations of the Appraisal Institute. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers or the firm with which they are connected, or any reference to the Appraisal Institute or to the appraisal designations) shall be disseminated to the public through advertising media, public relations media, news media, sales media or any other public means of communication without the prior written consent and approval of the author. The distribution of the total valuation in this report, between land and improvements, is applicable only as a part of the whole property. The land value, or the separate value of the improvements, must not be used in conjunction with any other appraisal or estimate and is invalid if so used. This is a Self Contained Complete Appraisal Report which is intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice. Prestige Appraisal Services Page 2 CONDITIONS OF THE APPRAISAL(CONT.) GENERAL LIMITING CONDITIONS (CONT.) The estimate of market value applies to the data specified in the report. Market value of real estate is affected by many related and unrelated economic conditions. local and national, which might necessarily affect the future market value of the subject property. The appraiser, therefore. assumes no liability for an unforeseen precipitous change in the economy. No environmental or concurrency impact studies were either required or made in conjunction with this appraisal report. The appraisers, thereby, reserve the right to alter, amend, revise, or rescind any of :he value opinions based upon any subsequent environmental or concurrency impact studies. research or investigation. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. The appraisers have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since the appraisers have no direct evidence relating to this issue, possible noncompliance with the requirements of ADA in estimating the value of the property has not been considered. An appraisal related to an estate in land that is less than the whole fee simple estate applies only to the fractional interest involved. The value of this fractional interest plus the value of all other fractional interests may or may not equal the value of the entire fee simple estate considered as a whole. The appraisal report related to a geographical portion of a larger parcel is applied only to such geographical portion and should not be considered as applying with equal validity to other portions of the larger parcel or tract. The value of such geographical portions plus the value of all other geographical portions may or may not equal the value of the entire parcel or tract considered as an entity. The appraisal is subject to any proposed improvements or additions being completed as set forth in the plans. specifications, and representations referred to in the report, and all work being performed in a good and workmanlike manner. The appraisal is further subject to the proposed improvements or additions being constructed in accordance with the regulations of the local, county, and state authorities. The plans, specifications, and representations referred to are an integral part of the appraisal report when new construction or new additions, renovations, refurbishing. or remodeling applies. If this appraisal is used for mortgage loan purposes. the appraisers invite attention to the fact that (1) the equity cash requirements of the sponsor have not been analyzed, (2) the loan ratio has not been suggested. and (3) the amortization method and term have not been suggested. The function of this report is not for use in conjunction with a syndication of real property. This report cannot be used for said purposes and, therefore, any use of this report relating to syndication activities is strictly prohibited and unauthorized. If such an unauthorized use of this report takes place, it is understood and agreed that The Ernest Jones Company has no liability to the client ancior third parties. Acceptance of and/or use of this appraisal report constitutes acceptance of the foregoing General Underlying Assumptions and General Limiting Conditions. The appraisers' duties, pursuant to the employment to make the appraisal, are complete upon delivery and acceptance of the appraisal report. However, any corrections or errors should be called to the attention of the appraisers within 60 days of the delivery of the report. Prestige Appraisal Services Page 3 CONDITIONS OF THE APPRAISAL(CONT.1 One or more of the appraisers identified herein are certified under Florida Statute 4-5.501. Accordingly. the certification contained herein is amended to include the following: The analysis, opinions. or conclusions were developed and this report has been prepared in conformity with the requirements of the State of Florida for state -certified appraisers. The use of the report is subject to the requirements of the State of Florida relating to review by the Real Estate Appraisal Subcommittee of the Florida Real Estate Commission. Prestige Appraisal Services Page 4 SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Address: Location: Property Type: Building Size: Year Built: Valuation Date: Purpose of the Appraisal: Property Rights Appraised: Land Area: Zoning: Census Tract: Flood Insurance Zone: Tax Folio Number: 2003Taxes & Assessment: Highest and Best Use: Value Opinions: Cost Approach: Sales Comparison Approach: Income Capitalization Approach: Final Valuation: 254-274 NE 59 Terrace, Miami, Florida Interior lot on the south side of 200 block ofNE 59`h Terrace The subject property consists of three combined one story warehouse bays being used for the storage of spices and sorting of rags 19,516 SF 1950 October 3, 2003 Opinion of Market Value Fee Simple Estate ±25,000 SF (100' x 250') I, Industrial 20.04 Flood Zone X, FEMA Map #120650-0181J Dated 3/2/94 01-3218-015-0280 Total assessed value: S312,357 Real estate taxes: S7,943.91 As Improved, Warehouse space Not Applicable S430,000 S428,000 $430,000 Prestige Appraisal Services Page 5 THE VALUATION PROCESS The following statements about the valuation process come from the Appraisal Institute book The Appraisal of Real Estate, 12`h Edition 2001. The valuation process is a systematic procedure an appraiser follows to provide answers to a client's questions about real property value. It is a model that can be adapted to a wide variety of questions that relate to value. 1 The valuation process begins when the appraiser agrees to take an assignment and ends when the conclusions of the appraisal are reported to the client. Each property is unique, and opinions of many different types of value can be developed for a single property. The most common appraisal assignment is performed to render an opinion of market value. The valuation process contains all the steps appropriate to this type of assignment. The valuation process is accomplished through specific steps. The number of steps followed depends on the nature of the appraisal assignment and the available data. The model provides a pattern that can be used in any appraisal techniques, and to integrate the results of these activities into an opinion of defined value. In addition to assisting appraisers in their work, models that apply the valuation process are recognized by the market of appraiser users and facilitate their understanding of appraisal conclusions. In assignments to develop an opinion of market value, the ultimate goal of the valuation process is a well -supported value conclusion that reflects all the pertinent factors that influence the market value of the property being appraised. To achieve this goal, an appraiser studies a property from three different viewpoints, which are referred to as the approaches to value. The three approaches are described below: 1. In the cost approach, value is estimated as the current cost of reproducing or replacing the improvement (including an appropriate entrepreneurial incentive or profit) minus the loss in value from depreciation plus land or site value. In the sales comparison approach, value is indicated by recent sales of comparable properties in the market. 3. In the income capitalization approach, value is indicated by a property's earning power, based on the capitalization of income. Traditionally, specific appraisal techniques are applied within the three approaches to derive indications or real property value. One or more approaches to value may be used depending on their applicability to the particular appraisal assignment, the nature of the property, the needs of the client, or the available data. The three approaches are interrelated. Each requires the gathering and analysis of data that ,The Appraisal of Real Estate, 12'h Edition, Appraisal Institute, pg 49 Prestige AppraisalServices Page 6 THE VALUATION PROCESS(CONT) pertains to the property being appraised. To complete the valuation process. the appraiser integrates the information drawn from market research. data analysis, and the application of the approaches to form a value conclusion. This conclusion may be presented as a single point or estimate of value or, if the assignment permits, a range within which the value may fall. A summary of the process is included on the following page. Prestige Appraisal Services Page 7 THE VALUATION PROCESS(CONT) The Valuation Process Definition of the Problem identification Intended Purpose of Date of Identification of Extraordinary Hypothetic a! of client/ use of appraisal opinion characteristics assumptions conditions intended appraisal (including of value of property user definition (including location of value) and property rights to be valued) Scope of Work Data Collection and Property Description Market Area Data Subject Property Data Comparable Property Data General characteristics of region, Specific characteristics of land and Sales, listings, offerings, vacancies. city, and neighborhood improvements, personal property, costs and depreciation, income and business assets, et:. expenses. capitalization rates. etc. Market Analysis Demand studies. Supply studies Marketability studies Data Analysis Highest and Beat Use Analysts Site as though vacant Ideal improvement property as improved Land Value Opinion Cost Capitalization Application of the Approaches to Value Sales Comparison Income Reconciliation of Value Indications and Final Opinion of Value Report of Defined Value Prestige Appraisal Services Page 8 THE VALUATION PROCESS(CONT) DEFINITION OF THE APPRAISAL PROBLEM The first step in the valuation process is the development of a clear statement of the appraisal problem. This sets the limits of the appraisal and eliminates any ambiguity about the nature of the assignment. The definition of the problem should include: 1) Identification of the client and intended users of the appraisal. 2) Intended use of the appraisal. 3) Purpose of the appraisal (including the definition of value. 4) Date of the opinion of value. 5) Identification of the characteristics of the property (including its location, the property rights to be valued, and other features). 6) Extraordinary assumptions. 7) Hypothetical conditions. Before identifying the characteristics of the property and any extraordinary assumptions and hypothetical conditions that are relevant to the purpose of the assignment, the appraiser must clearly identify the client, intended use, purpose, and date of the appraisal. This information is provided in the Executive Summary on page 5. The process of defining the appraisal problem leads directly into the appraiser's decision about the scope of work necessary to fulfill the assignment. DESCRIPTION OF THE SCOPE OF THE APPRAISAL The scope of the appraisal refers to the extent of the process in which data are collected, confirmed, reported and analysis is applied in the assignment. The scope is described to protect third parties whose reliance on an appraisal report may be affected by this information. An appraiser determines the extent of the work for the report based on the significance of the appraisal problem. In this report, the appraiser has been requested to estimate the current market value of the subject property located in the "Little Haiti" neighborhood of the City of Miami. The property is identified as an industrial building located in and Industrial (I) zoning. Based upon the results of the appraiser's inspections on October 3, 2003 of the subject site and the primary neighborhood, a search of public records for sales data relative to recent transfer of comparable and/or competitive properties has been conducted. Data was gathered from public records. The appraiser has relied upon information obtained from local real estate brokerage firms, a principal participant in the transaction, copies of recorded instruments, as well as data received from the client. The appraiser surveyed other properties which were considered to be the most competitive to the subject properties. Information of the sale was conducted by telephone interview with a party to the transaction. Analysis of recorded deeds were used for secondary verification. Prestige Appraisal Services Page 9 THE VALUATION PROCESS(CONT) In conclusion, the appraiser relied upon the data obtained by this appraiser's direct verification in the sales comparison and the income analysis. The Cost Approach was not utilized in this report due to the subject's age and non conformity as discussed on page 38. All other information was considered supporting documentation. DATA COLLECTION AND PROPERTY DESCRIPTION Following the preliminary analysis (ie, the identification of the appraisal problem and determination, of the scope of work), the appraiser gathers data on the market area, the subject property, and comparable properties in the market. The data needed by appraisers can be divided into generic data and specific data. General data includes information about trends in the social, economic, governmental, and environmental forces that affect property value in the defined market area. A trend is a momentum or tendency in a general direction brought about by a series of interrelated changes. General data can contribute significantly to an appraiser's understanding of the marketplace. Specific data relates to the property being appraised and to comparable properties. This data includes legal, physical, locational, cost and income and expense information, about the properties and the details of comparable sales. Financial arrangements that could affect selling prices are also considered. Data on comparable properties can be either general data that an appraiser has on file or specific data that must be gathered for a particular assignment. The amount and type of data collected for an appraisal depend on the approaches used to develop an opinion of value and on the defined scope of work. In a given valuation assignment, more than one approach to value is usually appropriate and necessary to arrive at a value indication. Depending on the problem or problems to be addressed, one approach may be given greater emphasis in deriving the final opinion of value. In conducting a particular assignment, the appraiser's judgement and experience and the quantity and quality of data available for analysis may determine which approach or approaches are used. DATA ANALYSIS Once the appropriate data on the market area, subject property, and site has been collected and reviewed for accuracy, the appraiser begins the process of data analysis, which has two components: market analysis and highest and best use analysis. Prestige Appraisal Services Page 10 THE VALUATION PROCESS(CONT) MARKET ANALYSIS In the Uniform Standards of Appraisal Practice, market analysis is defined a study of market conditions for a specific type of property. A description of prevalent market conditions helps the reader of an appraisal report understand the motivation of participants in the market for the subject property. Broad market conditions provide the background for local and neighborhood market influences that have direct bearing on the value of the subject property. Market analysis serves two important functions. First, it provides a background against which local development are considered. Second, a knowledge of the broad changes that affect supply and demand gives an appraiser an indication of how values change over time. The data and conclusions generated through market analysis are essential components in other portions of the valuation process. Market analysis yields information needed for each of the three traditional approaches to value. HIGHEST AND BEST USE ANALYSIS Analysis of the highest and best use of the land as though vacant and of the property as improved is essential in the valuation process. Through highest and best use analysis, the appraiser interprets the market forces that affect the subject property and identifies the use or uses on which the final opinion of value is based. Analyzing the highest and best use of the land as though vacant helps the appraiser identify comparable properties. Whenever possible, the property being appraised should be compared with similar properties that have ben sold recently in the same market. Potentially comparable properties that do not have the same highest and best use are usually eliminated by further analysis. Estimating the land's highest and best use as though vacant is a necessary part of deriving an opinion of value. FINAL RECONCILIATION OF VALUE INDICATION The final analysis step in the valuation process is the reconciliation of the value indications derived into a single dollar figure or a range into which the value will most likely fall. The nature of reconciliation depends upon the appraisal problem, the approaches that have been used, and the reliability of the value indication derived/ The final opinion of defined value, which is the goal of the valuation process, is usually reported in a single figure. However, if may be reported as a range of value or as value in relation to some stated benchmark amount (ie. more than or less than a given dollar amount. Prestige Appraisal Services Page 11 THE VALUATION PROCESS(CONT) The assignment is not complete until the conclusion is stated in a report and presented to the client. The reported value is the appraiser's opinion and reflects the experience and judgement that has been applied to the study of the assembled data. The appraisal report is the tangible expression of the appraiser's work and the last step in the valuation process. The final estimate of market value is found after the analysis of the three approaches to value. Prestige Appraisal Services Page 12 PURPOSE OF THE APPRAISAL The purpose of the appraisal is to estimate the market value of the certain property rights as delineated below, of the herein described premises, subject to the assumptions and limiting, conditions stated, as of October 3, 2003. SCOPE OF THE APPRAISAL In preparing this appraisal, the Appraiser(s) • inspected the subject property on October 3, 2003. • gathered information on comparable improved sales and rentals • confirmed and analyzed the data and applied the Sales Comparison, and Income Capitalization Approaches To develop the opinion of value, the Appraiser(s) performed a complete appraisal process, as defined by the Uniform Standards of Professional Appraisal Practice. This means that no departures from Standard 1 were invoked. PROPERTY RIGHTS APPRAISED This appraisal is for the "Fee Simple Title" of all the rights to ownership in the subject property that represents the market value of the real estate. "Fee Simple Title" is defined in The Dictionary of Real Estate Appraisal, Third Edition, American Institute of Real Estate Appraisers, 1993 as: A title that signifies' ownership of all the rights in a parcel of real property subject only to limitations of the four powers of government. The subject property is owner occupied, and the property is being appraised in fee simple. Prestige Appraisal Services Page 13 INTENDED USE OF THE REPORT It is our understanding that this appraisal report is to be used to assist our client. the City of Miami Office of Asset Management in purchasing decisions. In accordance with our employment agreement, our findings and conclusions are being presented in a Self Contained Report format. As such, it presents complete discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the Appraiser's opinion of value. Additional supporting documentation concerning the data, reasoning, and analyses may be retained in the Appraiser's office file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated herein. The Appraisers are not responsible for unauthorized use of this report. This report is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice -effective January 1, 2003. DEFINITION OF MARKET VALUE A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States of America is: 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 consummation of a sale as of a specified date and passing of title from seller to buyer under conditions whereby: a. buyer and seller are typically motivated; b. both parties are well informed or well advised, and each acting in what they considers their best interests; c. a reasonable time is allowed for exposure in the market; d. payment is made in terms of cash in U.S. Dollars or in terms of financial arrangements comparable thereto; and e. 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. Prestige Appraisal Services Page 14 REASONABLE EXPOSURE TIME Reasonable exposure time is 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. assuming adequate, sufficient and reasonable effort. We estimate an exposure time of 6-12 months based on the location, property type, condition, listing periods of similar properties in the area, information gathered through sales verification and discussions with market participants. PROPERTY IDENTIFICATION The subject property has a local street address of, 254-274 NE 59 Terrace, Miami, Miami -Dade County, Florida and can be legally described as: Lots 5 to 9 inclusive, less N 5 ft for street, Block 12, PIERCES DIV OF LEMON CITY, Plat Book B, Page 43 of the Public Records of Miami -Dade County, Florida. . It can be further identified on the property records of the Miami -Dade County Property Appraiser's Office under Tax Folio Number 01-3218-015-0280. OWNERSHIP We have not been provided with an authoritative title report to ascertain current ownership. However, the public record lists title in the name of Charlotte Stevens, 11111 Biscayne Boulevard, r;'420, North Miami, Florida 33181. PROPERTY HISTORY The public records indicate that the subject property was purchased in April 1973 for $140,000. There has been no transaction of the subject property within the past three years. Prestige Appraisal Services Page 15 REGIONAL MAP Everglades National Park everglades Wildlife Management Area 0 North Lauderdale. °Pompano j Beach 889 817 870 Oakland Park Sunrise ° ° i °Lauderdale Lakes ° auderhitl Plantation ; New Melrose 4k O Fort Dame Lauderdale Cooper° City Pembroke Pines o 441 Lakes - , FLORIDA' Carol City° The E v e r g l a des 9 4' Miami Hialeah Garpens _ Lakes, 11 Hialeah %ami Shores Dania @Holywood °Hallandale Beach Aventura SUBJECT PROPERTY 254 NE 59th Terr Miami, FL 33137 IJiami Springs 934 821 _ = 836 27 — OMiiaml 41 _ 41 Westc es Westwood Lake f 11874 i i'Richmol<Richmond FiHeights Cutler Ridge Perr,ne Goulds '',1 B>;scayneBay Princeton 821 997 Leisure City Homestead • 1 _ °Coral Gables Kendall 0Miami Beach Hey Biscayne Florida Revs Biscayne National Park ,!Copvright 021303 Microsoft Corp. andtorntPsuppliers. All rights reserved. t i a n t i c Ocean Prestige Appraisal Services Page 16 REGIONAL ANALYSIS Miami -Dade County is comprised of 30 municipalities plus the unincorporated land section with a land area of approximately 2,432 square miles. The current population is in excess of 2,000,000. The projected population is estimated to grow at a rate of 1 % per year. In the year 2000, Miami - Dade County is projected to have a population of approximately 2,100,000. Miami -Dade County was established as a system of government encompassing the entire county in 1957. The purpose of this type of government was to establish one governing body for the county to establish one supply of services such as fire, police, etc. for the county. Tourism is Miami -Dade County's largest industry with an estimated eight million visitors annually, contributing greatly to the area's economy. Generally, the tourism of Miami -Dade County is located in the Miami Beach area and has become a year round attraction. However, Miami -Dade County in recent years has begun to shift from a tourist oriented economy to an economy with a widely diversified economic base. The county's attractiveness as a residential area and its cultural attractions have combined with tourism to produce a diversified economic base. In 1995, the total number of tourists visiting Miami -Dade County was 9.4 million. Miami -Dade County continues to be one of the nations fastest growing areas as a result of immigration or people from Central and South America, the country of Haiti, and from the Northeast U.S. Hurricane Andrew has caused some of Miami -Dade County population to shift north into Broward County. It is not known whether this shift is temporary or permanent. The attraction to the area is primarily due to the weather but as far as metropolitan areas go it has a relatively low cost of living,. The cost of living is relatively low for a large metropolitan area, about 7.7% above the United States's average. The per capita personal income in Miami -Dade County per capita income was S21,312 in 1998 as compared to S21,650 for the State of Florida and S21,889 for the United States. The primary economic forces (other than population) in Miami -Dade County which have an impact on real estate value are employment and income. Prestige Appraisal Services Page 17 REGIONAL ANALYSIS(CONT) Miami -Dade County percentage distribution of employment by sector for 1998 is as follows: Construction Finance, Insurance, Real Estate Manufacturing Services Wholesale Trade Retail Trade Transportation/Utilities Government 3.5% 6.8% 7.6% 33.0% 8.4% 17.8°%o 8.8% 14.1% The unemployment rate in Miami -Dade County was about 5.8% in 1999. Florida's unemployment rate was about 7.6% in August 1996. The national average was about 5.4% in April 1996. The jobless rate has remained stable on a state, local and national level over the last year. The rural southwest area of Miami -Dade county is one of the nations's leaders in the production of winter vegetables, tropical fruits, limes and avocados. The produce form this area is shipped throughout the United States. The area's farming and agribusiness accounted for four hundred million dollars in annual sales in 1989. The favorable geographic location of Miami -Dade County, the trained commercial and industrial labor force and the favorable transportation facilities have caused the economic base of the county to expand by attracting national and international firms doing business in Latin America. Trade with Latin America, Europe and countries in the Caribbean during the past several years has caused substantial growth in the number of financial institutions conducting business in Miami - Dade County. The large Hispanic labor force, as well as Florida's proximity to Latin America, has also contributed to the growth of the banking industry. The Miami -Dade County transportation system includes a network of expressway systems both east and west but also north and south. Due to the fast growth and population shifts, the roadway system has become overburdened. Metro -Rail is a 20.5 mile elevated rapid transit system that extends southward from downtown Miami to the Dadeland area, paralleling U.S. Highway #1 and northwesterly from downtown Miami to the City of Hialeah. In conjunction with this system, there is the downtown People Mover System which encircles the Central Business District of Miami, from the Omni area to the north to the Brickell Avenue area to the south. Prestige Appraisal Services Page 18 REGIONAL ANALYSIS(CONT) Miami International Airport is one of the nations busiest airports as it is a major hub from and to Latin America and to Europe as well as the rest of the United States. There are approximately 30 million arrivals and departures annually. The Port of Miami has become one of the countries largest cargo and cruise ship ports, and is expanding rapidly. In 2001, the Port of Miami handled approximately 8 million tons of cargo and 4 million passengers. Railroad transportation is provided by the Florida East Coast Railway and the Seaboard Coast Line now CSX Transportation. Miami -Dade County also has a mass transit rail and people mover system. Bus transportation is available from a wide variety of carriers as well as by public buses and private jitneys. Home prices on average in Miami -Dade County have been increasing over the last five years. In 2001, there were 6,500 new home sales with an average price of $175,000 and 25,000 used home sales with an average price of nearly $150,000. Development in Miami -Dade County has been expanding both west and southwest and to the northwest portion of the county. The Miami -Dade County Master Plan as well as concurrence has helped to control rapid growth in new areas. Also building permits have declined somewhat due to the stricter lending guidelines as a result of the savings and loan crisis and the oversupply of office, industrial, retail centers and some multifamily housing projects like condominiums. All this regulation and growth management control has led to higher costs of land. Miami -Dade County has implemented a developmental impact plan that has resulted in concurrence guidelines. For development to take place, all roads and infrastructure must be in place or developers are responsible for the costs. Impact fees have been imposed for roads parks, fire and police services. The result of concurrence has been higher land costs. The fees have resulted in higher home prices that are then passed -through to the end buyer/user. Prestige Appraisal Services Page 19 REGIONAL ANALYSIS(CONT) Conclusion to Regional Analysis: Beginning in January 2001, and six additional times this year, with fears of recession, the discount rate was decreased. The Federal Reserve Board has continued to decrease interest rates which indicates that recession remains a concern. If US economic grows to slowly it is feared that would pose a risk of recession. The Prime Rate is currently 4.0%. It is expected that this rate will now stabilize and eventually rise slowly. Miami -Dade County has changed drastically during the past thirty years. The established trends point to continued economic growth and future marketability of the area although at a somewhat slower pace than in previous decades. This pattern follows the national tread. No overly negative forecasts are indicated by the slowing rate. The South Florida weather climate, existence of a well designed expressway and street system, and availability of utilities has been a plus for the investment climate of Miami -Dade County. Thus, the overall social, economic, governmental, and environmental forces in Miami -Dade County that affect real estate values are considered to be stable over the long run. Prestige Appraisal Services Page 20 NEIGHBORHOOD ANALYSIS LITTLE H aITI/LEMON CITY The subject is located in the Little Haiti section of the City of Miami. The neighborhood consists of a 200 square block area north of downtown Miami. The neighborhood boundaries are 83rd Street to the north, North Miami Avenue to the west, Biscayne Boulevard to the east and 41' Street to the south. "Little Haiti's population is estimated to be 60,000 residents. The industrial portion covers an area from NE 58th Street to the south, NE 79th Street to the north, NE 4th Court to the east, and NE 2"d Avenue to the west. This is where the subject is located. A portion along the west side of NE 4th Court is part of the Morningside West Industrial area. The " Little Haiti Park Properties" are just a small part of the entire Little Haiti industrial and commercial area. The boundaries of the proposed park is NE 58`h Terrace to the south, NE 63rd Street to the north, NE 2nd Avenue to the west and NE 4`h Avenue to the east. The idea of a park in Little Haiti emerged when a 1998 evaluation by the city's parks department determined that Little Haiti had a parkland deficiency of 28.22 acres. This area is approximately 60 acres in size, however only 30 acres iare slated to be purchased. The city created Little Haiti Park Working Group crafted the district boundaries after a series of advertized community meetings. Commissioner Arthur Teele Jr., the groups chairman, said last year the "area proposed was selected due to the large tracts of undeveloped land that is presently vacant as well as the desire to remove the blight and slum of two existing trailer parks." Seventy nine parcels of land are involved in the park district many of which are under similar ownership. The city is planning to issue $25 million dollars in bonds for the park according to City Manager Carlos Gimenez. With the land included, the park is estimated to cost $20 million to $50 million dollars. Most of the interior of this area is zoned I, Industrial by the City of Miami and the borders of the area is zoned C-2 Commercial. The improved properties range from small to large industrial warehouses and commercial buildings. The properties are both single and multi tenant. The majority these buildings were constructed in the 1950's, with a few constructed in the 1970's and 1980's. There is evidence of abandoned buildings, buildings with significant deferred maintenance, and a overall vacancy rate of ten percent or more. The low rental rates in the area have led to poor maintenance of the building stock. Also within this area are two trailer parks that are in poor to fair condition. Although the area needs a park, many of the current land and business owners were against the idea of a park in this location. They had indicated that the Biscayne Boulevard corridor has been steadily improving with new or remodeled stores, restaurants and motels. Many of the MLS listings mentioned the popular Soyka restaurant. The homes in Morningside, and Bay Vista have appreciated greatly in recent years as a result of increased interest in the area and the amount of renovation and remodeling of the old homes taking place. They feel that their properties will appreciate in value as the neighborhood improves. Some say that the park proposal has hurt business, in that no one wants to rent property that is slated to be purchased by the city. In the area south of NE 62"d Street, which is being evaluated by the city first, is mostly composed of multi tenant warehouse properties occupied by small business people. The predominant businesses located there are paint and body shops, auto repair shops, shoe and clothing exporters, furniture restorers, art and music studios. The Magic City Trailer Park is also in the center of this industrial area which houses some of its low income workers. Prestige Appraisal Services Page 21 NEIGHBORHOOD ANALYSIS(CONT) To the north of NE 62nd Street to NE 79`h Street, the area is primarily composed of single tenant light to heavy manufacturing or storage type buildings on large parcels of land. At the present time there are numerous vacant or abandoned properties. Many of the buildings which are still occupied are in need of maintenance. The type of business that took place in these buildings over the past fifty years, heavy parts manufacturing, clothing manufacturing, and so on has been moved overseas or gone out of business completely. The division of some of these large buildings into smaller sizes may help to increase occupancy. The businesses may have also moved to better located or modern industrial parks in Miami -Dade or Broward Counties. The area is also cris crossed with railroad spurs, many of which are no Longer in use due to the increased use of truck transportation. The City of Miami Commission at its September 28`h• 1998 Budget Hearing unanimously approved a resolution requesting the Florida Legislature to identify funds for acquiring land, design, and development of a full service park in the Little Haiti neighborhood. The park would include a soccer stadium with seating for about 8,000 people. Since September 1998, four different architectural plans have been studied. The Office of Asset Management has been given the task of acquiring land for the park. Little Haiti Housing Association (LHHA) In 1987 the Little Haiti Housing Association (LHHA), a non profit organization was founded. The goal was to use housing as a primary vehicle to improve the shelter and socio-economic conditions of Haitians in the Little Haiti neighborhood. The comprehensive home ownership strategy produced rehabilitated and new affordable housing for both renters and first time home buyers. LHHA also intervenes in three additional areas deemed critical to a successful stabilization of the neighborhood: 1)social programs related to youth, 2)economic development, including job creation, lending to businesses, and entrepreneurial training; and 3)financial integration, such as increasing the presence of bank branches in the neighborhood. Conclusion Currently there are some financial incentives being offered from corporate America. But overall this market area suffers from lack of investment and general upkeep. This has caused a decline in the marketability of commercial and industrial properties. The positive changes taking place in the area to the east of the subject property will eventually reach the subject neighborhood. To the south, in the Omni area, old industrial buildings are being converted to night clubs, residential lofts, music and art studios. The Design District has improved dramatically over the past ten years followed by the housing in the Buena Vista neighborhoods. The Little River Industrial Park and the Morningside West Industrial area will improve as well in time. The proposed park if planned and maintained properly should help to increase property values as shown in studies of the "effects of regional parks on the value of residential property. " Prestige Appraisal Services Page 22 NEIGHBORHOOD PHOTOGRAPHS Looking East on NE 59th Terrace Subject on Right Looking West on NE 59`h Terrace, Subject on Left Prestige Appraisal Services Page 2 SITE DATA The subject property is an interior lot located on the south side of NE 59`h Terrace. The street or mailing address is 254-274 NE 59 Terrace. The size and dimensions of this property was taken from plat maps and from information obtained from Public Records. Site Area: Shape: Dimensions: Frontage: 25,000 SF, or 0.573 acres Rectangular 100' X 250' 250' along NE 59 Terrace and 100' in depth Topography: Appears level & slightly above street grade from observation. Drainage: Appears adequate. Site Access: Direct access from NE 59`h Terrace only titilities: Electric, water, sewer, gas and telephone Easements/Restrictions: There are no known adverse public restrictions. Locational Attributes: The subject has an interior location on NE 59`h Terrace Street Improvements: Soil/Subsoil: Soil Condition: Census Tract: NE 59`h Terrace is two lanes wide with one lane in each direction No soil -boring test or engineering reports were submitted to the appraiser. Normal bearing capacities assumed. This appraisal is based on the assumption that there has been no soil contamination. We know of no environmental study on the subject property. 20.04 Prestige Appraisal Services Pave 24 SITE DATA (CONT.) Flood Zone: Parking: Functional Adequacy: Zone: X, Map #120650-0181J. Dated 3i2;94. There is limited parking on the subject site. The subject site has an adequate size and shape permitting functional development of the site if it were vacant. The site has a good frontage and adequate access. The exposure is average along NE 59`h Terrace. There once was railway access to the rear of the property. The rail access by the Florida East Coast Railway has been abandoned. Site Improvements: Asphalt pavement, 6' chain link fenced area at the east edge of the property. Land to Building Ratio: 1.28:1 Coverage: 78% Prestige Appraisal Services Page 25 PLAT MAP DUF_7$ TRACT ' nr �-5£ ' ; BISCAYNE1 ,ARK .I.i.11 59th `ERR- ®RENE St Lfr ;ORR 13 59 th PIEfre S 4E 24 ` ' r w R,SK 211 Pag 0 I IB . 17111C t 58th Ud - T•R2ACIT 57th 20 2 ST 15Ctn otr 6) 59. 58th r IS 8 BA` Prestige Appraisal Services Page 26 ZONING (CONT.) The subject property appears to be a legal non -conforming use of the subject zoning, district. The subject covers 78 % of the subject site and landscaping is less than 10% of the site. The subject property requires ten parking spaces for which it currently has none on site. The maximum foot print can only be 15,000 SF being 60% of the 25,000 SF lot size. DESCRIPTION OF THE IMPROVEMENTS The subject property is presently a single story multi- tenant CBS dock height building constructed in 1950. The building was originally constructed to be a four tenant improvement with four back to back bays, but is currently being used by three tenants. There is 19,516 square feet of warehouse space. One unit has a 28 foot by 50 foot mezzanine. Two of the bays have a small wall air conditioned office space. There is one bathroom in the building,. The building has an interior height of 16 feet. The exterior height is 20 feet. The metal beam roof is supported by steel five inch diameter columns. Each unit has metal gates. Behind the gates are steel overhead doors on both the front and rear of the building. The following construction data pertains to the subject property: Construction Data Foundation: Reinforced concrete footings and slab on compacted fill Main Wall Structure: Concrete block, reinforced concrete columns Exterior Walls: CBS, painted stucco Interior Walls: Painted drywall on wood studs Roof: Built up tar and gravel, or rolled slate over insulation, plywood deck, supported by metal beams supported by round 5" steel poles Exposed concrete slab in warehouse. vinyl tile in office area Flooring: Lighting: Fluorescent or incandescent lighting in work areas Prestige Appraisal Services Page 28 DESCRIPTION OF THE IMPROVEMENTS(CONT.) Doors: Windows: Air Conditioning: Bathrooms: Ceiling in office: Security: Signage: Condition: Metal exterior, wood interior, large metal gates nine metal overhead doors. Jalousie windows with steel bars in front Wall air conditioning in office areas Toilet, sink, concrete floor, plaster walls Plaster Metal bars on doorways, None Average Functional Adequacy The building has a functional layout and is functionally situated on the site. It is adequately designed and the materials and construction methods used are typical for this type of property. The building has been properly maintained and has an estimated remaining economic life of twenty five years of a total economic life of fifty years. No known functional or external obsolescence exists at the present time. Prestige Appraisal Services Page 29 SUBJECT PHOTOGRAPHS Front of Subject Property from Across NE 59th Terrace Rear View of Subject Property from Railway Easement Prestige Appraisal Services Page 30 SUBJECT PHOTOGRAPHS Interior view of Building Additional Interior View Prestige Appraisal Services Page 31 SUBJECT PHOTOGRAPHS Another Interior View of Subject Property View of Railway Easement from NE 3' Avenue Prestige Appraisal Services Page 32 BUILDING SKETCH ua x >: 2D 2<; ; J M! o n0 OFFICE ;I # EA R-a 2 s. !! ! ,,,,UILDING ARIA TOTAL Z7V7NG AREA 25: NE 55 TERRACE MI I,FLO:RIDA OCTOBER3,2Q3 19518.0 Square et :2g .: :tare Feet: SQUARE FOOTAGE CALCULATIONS BUILDING 23E.e X a=.: = :35:6.0 3<. . T L LIVING E :a51G.: SQ.FT. Prestige Appraisal Services Page 33 TAX ASSESSMENT ANALYSIS The 2003 tax assessment for the subject property was as follows: FOLIO # 01-3218-015-0280 LAND $ 81,250 BUILDING S 231,107 TOTAL $ 312,357 TAXES S7,943.91 Based on land (25,000 SF) and building (19,516 SF), the indicated assessments on a "per square foot" basis are as follows: Land $81,250 _ 25,000 SF = $3.25 Building S 231,107 - 19,516 SF = $11.84 The assessments appear to be in line with other similar properties in the area. Assessed value is for Ad Valorem purposes only and is not necessarily indicative of market value. Prestige Appraisal Services Page 34 HIGHEST AND BEST USE A valuation concept that can be applied to either the land or improvements. It normally is used to mean that use of a parcel of land (without regard to any improvements upon it) that will bring the greatest net return to the land over a given period of time. The concept of highest and best use can also be applied to a property that has some improvements upon it that have a remaining economic life. In this context, highest and best use can refer to that use of the existing improvements which is most profitable to the owner. It is possible to have two different highest and best uses for the same property, one for the land ignoring the improvements, and another that recognizes the presence of the improvements. Inherent in reaching any conclusion as to Highest and Best Use of a property is the consideration of the many principles related to valuation. The Principle of Anticipation is predicated on the foundation that value is created by the anticipation of future benefits. It is not based on historical costs but on what current market participants believe the future benefits to the purchaser will be. The Principle of Conformity addresses itself to the issue that property achieves its optimum value when the use to which it is put, and the design and layout of any structure situated on the land. blends well with its environs. The use need not be the same as all surrounding properties, but it must be homogeneous with those uses. All of these factors must be considered in arriving at a conclusion as to the Highest and Best Use of a property. The purpose of this appraisal is to estimate market value. The Highest and Best Use analyses identifies the most profitable, competitive uses to which the property can be put. Therefore, the Highest and Best Use of a property is a critical factor of market value. Definition Highest and Best Use may be defined as: "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 Highest and Best Use of land as vacant assumes that a parcel of land is vacant. The focus of the analyses is what type ofbuilding or other improvement should be constructed on the land and when. Interim use and potential future highest and best use must be addressed, when relevant. 2 The Appraisal of Real Estate, l2th Edition. The Appraisal Institute. Page 275. Prestige Appraisal Services Page 35 HIGHEST AND BEST USE(CONT.) The Highest and Best Use of a property as improved focuses on the current use of the property and what return it can be expected to produce for each dollar of capital invested. "The Highest and Best Use of both land as though vacant and property as improved must meet four criteria. The Highest and Best Use must be 1. Legally permissible; 2. Physically possible; 3. Financially feasible; and 4. Maximally productive. i3 Legally Permissible Factors which may preclude possible uses of a site include private restrictions, zoning, building codes, historic district controls and environmental regulations. The subject property is zoned I, Industrial District in Miami. All the uses in the C-2 District are also permissible on the subject site. The purpose of this district is to provide areas for industrial uses, retail and wholesaling, places for the manufacture, processing and assembly of materials or items. For a complete description of the areas intended use and legally permissible uses consult the previous zoning section. "As improved" the subject property as a multi -tenant warehouse is a non- conforming, legally permissible use. If the subject site were vacant and able to be put to its highest and best use an industrial or warehouse property would be built on the subject site that meets the current zoning ordinance. Physically Possible The factors which are pertinent to physically possible uses of the site include the size, shape, topography, exposure, access, frontage, orientation, depth, the availability of public utilities, and surrounding properties. The Highest and Best Use of a property as improved also depends on building size, design, layout (site plan), age and condition. The subject site is 25,000 square feet, forming a rectangular -shaped parcel. The allowable size of the improvements is determined by building setbacks, parking and landscaping requirements and the maximum allowable footprint. As improved, the site is well suited to the existing use. The land -to -building ratio is 1.28:1 is typical. There is no room for any expansion of the subject building on it's site. The Highest and Best Use "as vacant" is limited to a industrial, commercial or retail use which can be situated within the physical limitations described under Zoning, and it must be in conformity with surrounding land uses, which except for the trailer park is predominately industrial in nature. The improvements can not exceed a FAR, (floor area ratio) of 1.72 and a maximum footprint of 60% of the subject site. The subject property improvements at 78% coverage exceed the allowable 60%coverage of the site. The maximum footprint is 15,000 SF and the maximum building area is 43,000 SF if additional floors could be added. Based on one parking space for each 1,000 SF of building area, 19 parking spaces Appraisal of Real Estate, 12' Edition. The Appraisal Institute. Page 280. Prestige Appraisal Services Page 36 HIGHEST AND BEST USE(CONT.) are required. The subject property has no marked spaces on site. Therefore it is a legal non conforming. use. Financially Feasible The focus of this criteria is to analyze all uses which meet the first t\vo criteria and analyze them further to determine which are likely to produce an income, or return, equal to or greater than the amount needed to satisfy operating expenses, financial obligations. and capital amortization. All uses of the subject site "as vacant" that are expected to produce a positive rate of return on investment capital are financially feasible. The subject site is currently improved with a 19,516 square foot building in average condition which is multi -tenant occupied. The subject property could be rented to a single, two or three tenants if desired at a rental rate between $3.50 and $4.00 per square foot with the owner paying for the real estate taxes and insurance. Maximally Productive The maximally productive use of the property is that use which should have the highest rate of return on the investment. The maximally productive use of the subject property "as vacant" is a multi -tenant building. The maximally productive use of the subject property "as improved" is to hold the property as an industrial property for its income potential the future demand in this area is determined as influenced by the ongoing proposed project's as discussed under the neighborhood market analysis section in this report. Prestige Appraisal Services Page DISCUSSION OF THE APPRAISAL PROCESS There are three traditional approaches to the valuation of real estate: The first is the Cost Approach. In the Cost Approach, the cost to develop a property is compared with the value of the existing property or similarly developed property. The appraiser estimates the cost to construct a reproduction of, or replacement for, the existing structure and site improvements (including direct costs, indirect costs, and an appropriate entrepreneurial profit). and then deducts all accrued depreciation in the property being appraised from the reproduction or replacement cost of the structure as of the effective appraisal date. When the value of the site is added to this figure, the result is an indication of value of the fee simple interest in the property. The Sales Comparison Approach is the process in which a market value estimate is derived by analyzing the market for similar properties and comparing these properties to the subject property. Data is analyzed from properties that have recently sold, are listed for sale, or are under contract (i.e., recently drawn up purchase offers accompanied by a cash or equivalent deposit). A major premise of the Sales Comparison Approach is that the market value of a property is directly related to the prices of comparable, competitive properties. The comparative analysis performed in the approach focuses on similarities and differences among properties and transactions that affect value. These may include differences in the property rights appraised, the motivations of buyers and sellers, financing terms, market conditions at time of sale, size, location. physical features, and, if the properties produce income, economic characteristics. Elements of comparison are tested against market evidence to determine which elements are sensitive to change and how they affect value. The third is the Income Capitalization Approach. Income -producing real estate is typically purchased as an investment, and from an investor's point of view, earning power is the critical element affecting property value. One basic investment premise is that the higher the earnings the higher the value. An investor who purchases income -producing real estate is essentially trading present dollars for the right to receive future dollars. The Income Capitalization Approach to value consists of methods, techniques and mathematical procedures that an appraiser uses to analyze a property's capacity to generate benefits (i.e., usually the monetary benefits of income and reversion), and convert these benefits into an indication of present value. Two of the three approaches to value were utilized and then correlated and reconciled into a single value estimate. The Cost Approach to Value was not utilized in this appraisal report because the subject building is currently 53 years in age. It would be difficult to determine the accrued depreciation of the subject property. Secondly, the subject building a legal non conforming use, which means it could not be built to its current size again. Based on the maximum 60% footprint regulation, the maximum size would be 15,000 SF. The Cost Approach is best suited for new construction or special purpose properties. The typical appraiser would not calculate the cost approach for this property, therefore it is not a departure from USPAP. Prestige Appraisal Services Page 38 COST APPROACH There are three sources of cost information typically utilized in estimating the Value via the Cost Approach. The first is actual cost data from the subject property. The best data comes from architects and contractors for new buildings. The second source of cost information we used is cost data from warehouses and industrial properties similar to the subject property. Cost comparables are available from builders and architects. The third source is to estimate land value, add the replacement cost new of the improvements based on Marshall Valuation Service cost figures, deduct for depreciation, add entrepreneurial incentive. The first step in the Cost Approach is to estimate the value of the land, as though vacant and ready to be improved to its Highest and Best Use. The land value is estimated on the basis of direct market comparison. Data on recent sales transactions is obtained, analyzed and adjusted for differences. A comprehensive market study revealed four sales which we considered comparable to the subject property and relevant to our analysis. As a result of an analysis of this market data, a land value as if the property were vacant, is estimated. The next step in the Cost Approach is to estimate the replacement cost new of the improvements including the site improvements. By definition, replacement cost is the cost that would be incurred to construct the improvements, with like utility, using currently available materials at prevailing prices. One source of estimating the replacement cost new of improvements was utilized in this analysis. The Marshall Valuation Service was used as a guide in estimating replacement cost new of the subject building. Their central data bank is utilized to reflect modified components and the most up-to-date costs. This permits us to have the most current costing information available, in order to increase the accuracy of the cost estimate. These cost estimates do not include unforeseen increased costs, such as weather hazards or labor disputes. They do include all expenses normally incurred in construction. Once replacement cost new has been estimated, total accrued depreciation must be estimated and then deducted to arrive at a net depreciated cost. Depreciation falls into three broad categories; physical, functional and economic. The last step is estimating entrepreneurial (developer's) incentive. The developer creates, coordinates and oversees the investment, and is entitled to a profit for the creation of the investment. His expertise must be rewarded, and one must account for the time value of the invested funds. Moreover, it is highly unlikely that a developer would sell a project for the cost of the project itself As with all other goods and services generally transferred in the marketplace, individuals require a return on their investment. As noted above the appraisers did not include a cost approach to value because of the 53 year age of the subject property, its legal non conforming use status. Secondly, the present structure footprint of 19,516 SF could not be rebuilt again. Prestige Appraisal Services Page 39 SALES COMPARISON APPROACH The Sales Comparison Approach, traditionally referred to as the market approach, is the most direct approach to estimating value. In this approach, sales of similar properties in the market are analyzed and compared with the subject property. After thorough analysis, appropriate units of comparison are selected that are commonly utilized in the subject property's market; then these units of comparison are used to arrive at a valid value indication. The Sales Comparison Approach assumes that the market will determine a price for the subject property in the same manner it determines prices of similar properties in the marketplace. This assumption conforms with the definition of market value and is based on the principle of substitution in real estate appraising which states that typical buyers will not normally purchase a property at a higher price than that of similar properties available in the market. The Sales Comparison Approach has its greatest validity when there are a sufficient number of comparable properties closely similar to the subject property to develop a valid, reliable value conclusion. The appraisers utilized sales of comparable buildings in the Little River and Little Haiti industrial areas that were felt to be reliable and indicative of the market. The five sales utilized are on the following pages. Prestige Appraisal Services Page 40 SALES COMPARISON APPROACH(CONT.) IMPROVED SALE #1 Address: 381 NE 69 Street, Miami, Florida Sale Date: June 2003 ORB/Page: 20942/2070 Sale Price: S325,000 Terms: $99,000 PMM with the seller Grantor: HB Development II Inc. Grantee: Dionisio H. Cardozo . Folio No.: 01-3218-015-0780 Legal Description: Lots 1 and 26, Block 25. Pierces Div -Lemon City PB B-43 and PB 2/21 Prestige Appraisal Services Page 41 SALES COMPARISON APPROACH(CONT.) Improvement Description: This is a single story CBS single tenant warehouse building with 10,342 square foot of improvements on a 14,350 square foot corner lot. The building is street level, 16 foot ceilings. 4 overhead doors. The building has four tenant spaces each with small offices. There are 5 open parking spaces available on site. The building has 3 phase electric The property was in average to good condition. Building Size: 10,342 SF Year Built: 1971 Lot Size: 14,350 SF Land -to -Building Ratio: 1.39:1 Verified: Dionisio Cardoza, buyer ANALYSIS Sale Price/SF: S31.42 Gross Income: S49,124 Effective Gross Income: S46,668 Vacancy Rate: 5% Expenses: S11,667 Net Income: S35,001 Expense ratio: 25% GIM: 6.61 OAR: 10.76% Comments: Last Sale: Rents: The subject could have been rented for S4.75 per square foot partial net. S220,000 January 2003 Prestige Appraisal Services Page 42 SALES COMPARISON APPROACH(CONT.) Address: Sale Date: ORB/Page: Sale Price: Terms: Grantor: Grantee: Folio No.: Legal Description: IMPROVED SALE #2 6454 NE 4 Avenue, Miami. Florida November 2002 20812/3530 $780,000 $585,000 Conventional mortgage with Unibank Nitzan Shell ASI , Inc. Blue Building. LLC. 01-3218-020-0280 Lengthy, see recording instrument Prestige Appraisal Services Page 43 SALES COMPARISON APPROACH(CONT.) Improvement Description: This is a single story CBS single tenant warehouse building with 28,412 square foot of improvements on a 37,026 square foot corner lot. The building is dock height, 18 foot ceilings, 5 overhead doors. The building has 3,500 SF of office space on two stories. There are 20 open parking spaces available on site. The building has 3 phase electric. compressed air pipes and electrical outlets. Building Size: 28,412 SF Year Built: 1954 Lot Size: 37,026 SF Land -to -Building Ratio: 1.30:1 Verified: Rusty and Janet Atlas, listing agents ANALYSIS Sale Price/SF: $27.45 Gross Income: N/A Effective Gross Income: N/A Vacancy Rate: N/A Expenses: N/A Net Income: N/A Expense ratio: N/A GIM: N/A OAR: N/A Comments: Last Sale: Rents: The subject could have been rented for $5.75 per square foot triple net N/A Prestige Appraisal Services Page 44 SALES COMPARISON APPROACH(CONT.) Address: Sale Date: ORB/Page: Sale Price: Terms: IMPROVED SALE #3 375 NE 72 Terrace, Miami, Florida July 2002 20520/0145 $280,000 $210,000 Conventional mortgage with BAC Florida Bank Grantor: Allied Investment Group. Inc. Grantee: Miami Beach Holdings Co. Folio No.: 01-3207-052-0021 Legal Description: Lot 2. less E 60' Industrial Sites Inc. PB 61/26 Prestige Appraisal Services Page 45 SALES COMPARISON APPROACH(CONT.) Improvement Description: This is a one story CBS street level single tenant warehouse building with a two story office area of 2,000 SF. The building is 18 feet in height above the floor. The property was in average condition. The property was leased by the current owner prior to the sale. Building Size: 10,848 SF Year Built: 1955 Lot Size: 17,424 SF Land -to -Building Ratio: 1.60:1 Verified: Buyer of property ANALYSIS Sale Price/SF: S25.81 Gross Income: S43,392 Vacancy: 5% Effective Gross Income: S41,222 Expenses: S 12,366 Net Income: S28,856 Expense ratio: 30% GIM: 6.45 OAR: 10.30% Comments: Last Sale: The building is now owner occupied S255,000 12/00 Prestige Appraisal Services Page 46 SALES COMPARISON APPROACH(CONT.) Address: Sale Date: ORB/Page: Sale Price: Terms: IMPROVED SALE #4 7251 NE 2 Avenue, Miami, Florida May 2002 20444/0627 $380,000 $285.000 Conventional mortgage with Intercredit Bank Grantor: TNA Palms, Inc. Grantee: Miami Quilting Center, Inc. Folio No.: 01-3207-013-0010 Legal Description: Tract B, Industrial Sites Inc., PB 52/87 Prestige Appraisal Services Page 47 SALES COMPARISON APPROACH(CONT.) Improvement Description: This is a multi tenant building with both street level and dock height access. The structure is 18 feet in height and is both one and two story CBS building. It is of average condition and quality. The tenants include antique stores and clothing exporters. Building Size: 19,122 SF Year Built: 1957 Lot Size: 26,136 SF Land -to -Building Ratio: 1.20:1 Verified: Manager, Miami Quilting Center ANALYSIS Sale Price/SF: S 19.87 Gross Income: S57,366 Vacancy: 5% Effective Gross Income: S54,497 Expenses: S 13,624 Net Income: S40,873 Expense ratio: 25.0% GIM: 6.62 OAR: 10.75% Comments: Last Sale: Rents: S3.00 SF Owner pays RE tax and insurance S225,000 May 2000 Prestige Appraisal Services Page 48 SALES COMPARISON APPROACH(CONT.) Improvement Description: This is a one story CBS multi tenant building with dock height loading docks in the rear. The building is 16 feet in height above the floor. The property once had offices around the east and west sides prior to being converted to a church and then back to being warehouse space. There are currently three large tenant bays, each having an office and bathroom. The bays are 1,650 SF, 3,300 SF and 4,339 SF. The building is in average condition and the quality is considered average as well. Building Size: 9,289 SF Year Built: 1962 Lot Size: 13,397 SF Land -to -Building Ratio: 1.44:1 Verified: Ramon Perez, Buyer ANALYSIS Sale Price/SF: S20.45 Gross Income: S30,000 Vacancy: 5% Effective Gross Income: S28,500 Expenses: S 10,000 Net Income: S18,500 Expense ratio: 35.0% GIM: 6.33 OAR: 9.73 % Comments: Last Sale: Rents: S500, S1,000, S1,000 (53.63, S3.63, 52.76) Owner pays RE tax and insurance S70,000 8/95 Prestige Appraisal Services Page 50 SALES COMPARISON APPROACH(CONT.) Our analysis includes the sales of five improved properties located in the subject marketplace. The unit of comparison utilized in this analysis is the price per square foot and the gross income multiplier. In addition, we were able to obtain financial information on four sales to develop Gross Income Multipliers. Each sale was analyzed with regard to real property rights conveyed, financing terms, conditions of sale, date of sale, location, size/type of building, age/condition and quality of the improvements, and the land -to -building ratio. The following chart contains an analysis of the subject along with the seven comparable sales that we have data for. PRICE PER SQUARE FOOT ANALYSIS Prior to adjustment, the sales prices range from S19.87 to S31.42 per square foot. Adjustments were made to the comparable sales as seen below. Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Price SF N/A $31.42 $27.45 $25.81 $19.87 $20.45 Cond. N/A 0 0 0 0 0 of Sale Time N/A 1% 4% 6% 6% 7% Financing N/A 0 0 0 0 0 Location Imp Size Quality Condition Height L/B Ratio Adj Price SF Avg -5% -5% 0 -5% -5% 19,516 SF 0 0 0 0 0 Avg -5% 0 0 0 0 Avg -15% -10% -5% 0 0 20 FT 5% 0 0 0 0 1.28:1 0 0 0 0 0 N/A S25.38 $24.26 S25.99 $20.00 $20.78 Time was adjusted at 4% per year based on the CPI. No adjustment was made for dock height warehouse space as there is no additional rent being paid for it. Prestige Appraisal Services Page 52 SALES COMPARISON APPROACH (CONT.) PRICE PER SQUARE FOOT ANALYSIS After adjustment, the range of sales is from a low of S20.00 in Sale #4 to a high of S25.99 in Sale #3. Removing Sales # l and Sale #2 because of their magnitude of adjustments, the range narrows to S20.00 to S24.13. The subject property is an older building constructed in 1950 and was in average condition. Based on the above sales the subject property should have a market value of $21.50 per square foot at the lower end of the range. The property that most closely resembles the subject is Sale #5. 19,516 SF X $21.50/SF = $419,594 Rounded toS420,000 GROSS INCOME MULTIPLIER ANALYSIS A buyer of this size and type of property is usually aware of the general range of expected expenses for similar property. For this reason, the Gross Income Multiplier (GIM) is often used as a predicate for investment. At the present time approximately 8,774 square feet or 45% of the rentable space is vacant. The appraisers feel that the subject should have a rental rate of $3.50/SF and a gross income of $68,306. The four sales with data discussed in this section of this report show GIM's as follows: Sale 1 6.61 Sale 2 N/A Sale 3 6.45 Sale 4 6.62 Sale 5 6.33 S68,306 X 6.50 = $443,989 Rounded to$444,000 Prestige Appraisal Services Page 53 SALES COMPARISON APPROACH (CONT.) CONCLtiSION Two units of comparison were utilized in the Sales Comparison Approach. The two estimates are as follows: Price/SF S420,000 GIM S444,000 The values indicated by the two units of comparison were given equal weight. The price per square foot reflects more of the recent past, while the gross income multiplier reflects more of the future due to the increase in rental rates. Our opinion of value via the Sales Comparison Approach, as of December 9, 2002 is:$430,000. Prestige Appraisal Services Page 54 INCOME CAPITALIZATION APPROACH(CONT.) Comparable Rental No. 1 Address: 298 NE 59 Street, Miami, Florida Building Description: One story CBS, 18 foot height. small office. 5.000 square feet available. Street level. The building is in above average condition. Built 1950 Rental Rates: $3.25 per square foot. The tenants pays interior insurance, interior electric. trash removal and phone. Verified: Tenant on site Prestige Appraisal Services Pave 56 INCOME CAPITALIZATION APPROACH(CONT.) Comparable Rental No. 2 Address: 247 NE 59 Street, Miami, Florida Building Description: One story CBS building with two bays which have areas of 2,392 SF each. The building is 14 feet in height and is of average quality and is in average condition. The building was constructed in 1945. Rental Rates: $3.25 SF with the owner paying for real estate taxes and insurance. The owner also is responsible for management and reserves for replacement. Comments: This property is inferior in height and condition to the subject property. The location on NE 59 Street is similar. Verified: Mr. Ben Pumo, agent Prestige Appraisal Services Page 57 INCOME CAPITALIZATION APPROACH(CONT.) Comparable Rental No. 3 Address: 253 NE 73 Street, Miami. Florida Building Description: One story CBS building,. single bay. 16' in height, dock height loading platform. up to 28.412 square feet of area. Constructed in1954 and vas in average condition. Rental Rates: Asking $5.00 per square foot triple net Verified: Listing agent Prestige Appraisal Services Page 58 COMPARABLE RENTALS MAP Rocket Blvd Nw 87th 932 MN 100th St Pinewood Park co cBB C8A NW 95th St C A NW 91 st St 7 NW 87th St NW 85th St NW 84th St Lake Arcola NW 83rd St St Twin Lakes NW 91 st St Little River or NW 81 st St NW 79th St° NW 75th z NW 71 st St NVV 69th St NW 67th St NW 62nd St NVV 81st St 0 z 934 m z 7 NW 77th - NW 76th St St NW 74th St 9A D a z� 441 9B Li NW 69111 St 0 RENTAL NE 247 59th St y NW 66th St 2Miami, FL 33137 NW 64th St z N NW 84th St °G g m Q CI' if) CD z NE 94th St NE 92nd St m NW 82nd St St NE 90th St El Portal NE 87th St NE 86th St NE 82rf f Littkj iy NE 75t1' 0 z m NE 101 st St NE 96th St 915 Miami :0 Shares z m RENTAL 3 253 NE 73rd St Miami, FL 33138 7 ▪ ti NE 73rd St z zi NE71stSt SUBJECT 254 NE 59th St Miami, FL 33137 ° Center f NW 62nd St Center ,,GG Liberrj City BA NW 58th St 933 NW 56th St z NW 55th St r1W 54th St NW 53rd St NW 51 st St co cfl o Miami Little Haiti Z 7 NW 53rd St NW 51 st St D z fO m Lemon City ht NE 56th St RENTAL �1�— NE 541i St 298 NE 59th St Miami, FL 33137 NW 46th St NW 46th Stco co Copyright 0,-21103 Microsoft Corp. and/or its suppliers. All rights reserved. _forth Bay Village Biscayne B ay Biscayne Bay Aquatic Preserve • Lake 1 Prestige Appraisal Services Page 59 INCOME CAPITALIZATION APPROACH(CONT.) POTENTIAL GROSS INCOME: Based on the rental rates of the comparable sales and the rental survey above, it is the appraisers opinion that a rental rate of S3.50/SF should be received by the subject property if it were to be placed in the rental market. The calculations of the potential gross income is presented below. 19,516 SF x $3.50/SF = S68,306 Vacancy & Collection Loss Most of the properties we surveyed were operating at 5% vacancy rates. We have projected a 5.0% vacancy rate for the subject. The amount attributed to vacancy is S3,415. ESTIMATION OF EFFECTIVE GROSS INCOME Based on the current rent roll the subject property's projected annual potential income is as follows: Potential Rental Income: S68,306 Less Vacancy & Losses: S 3,415 (5.0%) Effective Gross Income: S64,891 Estimation of Expenses The reader should note that not all the competitive properties reported all expenses; however, we have used the expenses typical of the market developed as a bench mark from which to develop our pro -forma for the subject. Taxes The 2003 real estate taxes for the subject property reported earlier in this report totaled S7,944 or S0.40 psf. This appears to be reasonable for the subject property. This is an expense paid by the owner. Insurance According to information provided by the current owner, the cost of insurance is $4,702 which appear's to be reasonable and paid by the owner. This is S0.24 psf. Management Management fees of approximately 5% is typical for this market. However properties such as the subject are most often owner managed. Management fees would be $3,244 or $0.166 psf. Utilities All utilities are being paid by the tenant, which includes electric, water/sewer, trash removal and telephone. Maintenance and Repairs The owner is responsible for the exterior maintenance which is approximately $3,500 pe year or S0.18 psf. Prestige Appraisal Services Page 60 INCOME CAPITALIZATION APPROACH(CONT.) Reserves For Replacements Reserves and replacements were based on the cost to replace items such as the roof, repaint the exterior and resurface the parking lot. We have estimated the annual reserves for replacement items as follows: Roof Cover: S40,000 20 year life = S2,000 Painting: $7,500 10 year life = $ 750 Total $2,750 RECONSTRUCTED OPERATING STATEMENT POTENTIAL GROSS $68,306 LESS VACANCY 5.0% 3,415 EFF. GROSS INCOME $64,891 FIXED EXPENSES TAXES $ 7,944 INSURANCE $ 4,702 VARIABLE EXPENSES MANAGEMENT 5% $ 3,244 MAINTENANCE AND REPAIRS $ 3,500 RES & REPLACEMENTS $ 2,750 TOTAL EXPENSES (38.72%) NET OPERATING INCOME $22.140 $42,751 Prestige Appraisal Services Page 61 INCOME CAPITALIZATION APPROACH(CONT.) Direct Capitalization The preceding estimate of stabilized net operating income is processed into an indication of value by a capitalization rate which must be established. The marketplace is the preferred place to obtain data on capitalization rates. We were able to obtain overall rates from six of the improved sales as well as other industrial properties in the general area. Four capitalization rates were derived from sales within this report. Sale #1 indicated 10.76%, Sale #3 indicated 10.30%, Sale #4 indicated 10.75° o and Sale #5 indicated 9.73% . The Korpacz Real Estate Investor Survey for the second quarter, the most recent available shows that warehouse capitalization rates ranged from 7.50% to 11.00% with the mean being 8.82%. These rates were for large investment grade warehouse developments. The subject property is an older property in an older post World War II industrial park away from the current mainstream industrial areas . Therefore, capitalization rates should be significantly higher than the mean 8.82% . Most weight is placed on the more recent sales. Viewing all this information, we believe an overall capitalization rate of 10.00% is appropriate for the subject property. Application NOI - $42,751 $42,751 CAPITALIZATION AT 0 .1000 = $427,510 ROUNDED TO $428,000 Prestige Appraisal Services Page 62 RECONCILIATION AND VALUE CONCLUSION The subject property has now been considered and analyzed with all the data and factors which are believed to have any influence on its value, with the following results: Cost Approach Sales Comparison Approach Income Capitalization Approach Not Applicable 5430,000 5428,000 The Cost Approach to Value was not utilized in this report as the subject building is over fifty years old and the amount of accrued depreciation is difficult to determine accurately. Secondly. this building is a legal non conforming use and could not be constructed again with the same configuration. The cost approach is most applicable for new construction and for special purpose properties. In the Sales Comparison Approach we compared the subject property to similar properties that have sold in the immediate area. Our analysis included five comparable improved sales, which we considered very good indications of value. The Sales Comparison Approach is a pertinent, reliable indication of the value of the subject property, and was regarded as a reliable value indicator. The Income Capitalization Approach is based on actual and market rental information. Good market rental rates were available. The information leading to the established capitalization rate is considered to accurately reflect the present market. This method of valuation would be most pertinent to an investor. After appropriately weighing the values via the two utilized approaches, we arrived at a value that is reasonable given the individual values of the two approaches. As of October 3, 2003, and subject to the contingent and limiting conditions set forth in this report, it is our opinion that the market value of the fee simple interest in the subject property was: ($430,000) Prestige Appraisal Services Page 63 QUALIFICATIONS CLIFFORD DARRYL PECK 3475 N. COUNTRY CLUII DRIVE 0807 AVENTURA, FLORIDA 33180 305-936-8135 PHONE 305-931-9301 FAX DARRRYLPa.AOLCOM EMAIL FORMAL EDUCATION: MASTER OF BUSINESS ADMINISTRATION, NOVA UNIVERSITY, FORT LAUDERDALE, FLORIDA, JUNE 1982 APPRAISAL EDUCATION: I3ACI IELOR OF SCIENCE, BIOLOGY/CHEMISTRY, UNIVERSITY OF MIAMI, CORAL GABLES, FLORIDA, JUNE 1972 SREA 101 INTRO. TO APPRAISING REAL PROPERTY SREA 102 APPLIED RESIDENTIAL PROPERTY VALUATION SREA 201 PRINCIPLES OF INCOME PROPERTY VALUATION SREA 202 APPLIED INCOME PROPERTY VALUATION AIREA IA1 REAL ESTATE APPRAISAL PRINCIPLES AIREA 510 HIGHEST AND BEST USE ANALYSIS AIREA 520 ADVANCE INCOME CAPITALIZATION AIREA 530 ADVANCED SALES COMPARISON AND COST APPROACI-IES FUNDAMENTALS OF RELOCATION APPRAISING SPECIAL PURPOSE PROPERTIES, IN LIMITED MARKETS LUXURY WATERFRONT MARKETS, DETERMINATION OF LAND VALUE ENVIRONMENTAL RISK AND THE REAL ESTATE APPRAISAL PROCESS INTERNET AND THE APPRAISER MARKET AND FEASIBILITY ANALYSIS FOR SHOPPING CENTERS DYNAMICS OF OFFICE BUILDING VALUATION REAL ESTATE VALUATIONS AND THE APPRAISAL INDUSTRY UNDERSTANDING LIMITED APPRAISALS AND APPRAISAL REPORTING APPRAISAL REPORTING OF COMPLEX RESIDENTIAL PROPERTIES APPRAISAL THEORY UPDATE SEMINAR APPRAISING TROUBLED PROPERTIES IIOW TO VERIFY MARKET DATA SUBDIVISION ANALYSIS LITIGATION VALUATION, MOCK TRIAL AVOIDING OR LIMITING LOSS FROM E &. 0 LAWSUIT SUCCESSFUL II0MJs BUILDING, BEING YOUR OWN CONTRACTOR STANDARDS OF PROFESSIONAL PRACTICE PARTS A AND B NON CONFORMING USES SMALL I1OTEUMOTEL VALUATION THE IMPACT OF CONTAMINATION ON REAL ESTATE VALUE RESIDENTIAL DESIGN AND FUNCTIONAL UTILITY APARTMENT APPRAISAL SUPPORTING SALES COMPARISON GRID ADJUSTMENTS LEASE ABSTRACTING AND ANALYSIS CASE STUDIES IN RESIDENTIAL HIGHEST AND BEST USE PARTIAL INTEREST VALUATION DIVIDED PARTIAL INTEREST VALUATION UNDIVIDED HOW TO APPRAISE A BUSINESS CASE STUDIES IN COMMERCIAL HIGHEST AND BEST USE UNDERSTANDING AND TESTING DCF VALUATION MODELS CONVINCING RESIDENTIAL APPRAISALS FIIA APPRAISAL INSPECTION FROM TIME GROUND UP CERTIFICATION: STATE CERTIFIED RESIDENTIAL APPRAISER RD 0001139 SINCE MAY 1991 LICENSE: FLORIDA REAL ESTATE BROKER SINCE 1983 Prestige Appraisal Services Page 64 CLIFFORD DARRYL PECK 3475 N. COUNTRY CLUB DRIVE 11307 AVENTURA, FLORIDA 33130 TYPES OF SINGLE FAMILY RESIDENCES PROPERTIES SMALL RESIDENTIAL INCOME PROPERTIES APPRAISED: CONDOMINIUMS AND COOPERATIVES APARTMENT BUILDINGS WAREHOUSES AND INDUSTRIAL BUILDINGS OFFICE BUILDINGS, MEDICAL OFFICES VACANT LAND AND AGRICULTURAL PROPERTIES SHOPPING CENTERS RETAIL AND CONVENIENCE STORES GAS STATIONS AND CAR WASHES ADULT CONGREGATE LIVING FACILITIES MIXED USE PROPERTIES CHURCHES DAY CARE CENTERS EMPLOYMENT DURING THE PAST FIFTEEN YEARS I HAVE WORKED AS AN I IISTORY: INDEPENDENT APPRAISER DOING A COMBINATION OF BOTH COMMERCIAL APPRAISALS FOR THE FOLLOWING COMPANIES AND FOR PRIVATE INDIVIDUALS. THROUGH THESE COMPANIES 11-IAVE DONE APPRAISAL WORK FOR MANY MAJOR NATIONWIDE LENDERS, LOCAL MORTGAGE COMPANIES, CITIES, ATTORNEYS, REALTORS AND ACCOUNTANTS. PRESTIGE APPRAISAL SERVICES, MIAMI, FLORIDA THE PEPE ORGANIZATION, TUCKERTON, NEW JERSEY MORTGAGE INFORMATION SERVICES, MIRAMAR, FLORIDA NEW YORK SETTLEMENT COMPANY, PLAINVIEW, NEW YORK THE ERNEST JONES COMPANY, HOLLYWOOD, FLORIDA SPAULDING ASSOCIATES, HOMESTEAD, FLORIDA L. B. SLATER COMPANY, HOLLYWOOD, FLORIDA IIARMON GARRIN AND ASSOCIATES, PLANTATION, FLORIDA ADVANCED RESEARCII AND APPRAISAL, MIRAMAR, FLORIDA DANIEL N. STEIN INC., MIAMI, FLORIDA SOUTIIERN REALTY AND APPRAISAL, HOLLYWOOD, FLORIDA PROPERTY CONSULTANTS, MIAMI, FLORIDA LEWIS APPRAISAL AND CONSULTANTS AMERICAN APPRAISAL, MIAMI, FLORIDA Prestige Appraisal Services Page 65 Linda .l. Molinari, SRA • State Certified General Real Estate Appraiser, N° 0000245 LICENSES IMP" 1=111•6 • State Certified Real Estate Appraiser, N° 0000245 • Licensed Real Estate Broker, N° BK 0263923 OFFICES HELD PRES I DENT Prestige Appraisal Service, Inc, (1985-Present) SPECIAL MASTER Value Adjustment Board, Dade County (1992-Present) DIRECTOR S.E. Florida, National Association of Master, (MAMA) VICE PRESIDENT Florida Chapter of National Association of Master Appraiser, (NAM A) (1994) SECRETARY Florida Association of Mortgage Brokers. (FAMB) (1997, 1998) DESIGNATION SENIOR RESIDENTIAL APPRAISER, (SRA) Awarded by Appraisal Institute MASTER SENIOR APPRAISER, (MSA) Awarded by National Association of Master Appraisers MEMBER OF Appraisal Institute Florida Association of REALTORS National Association of REALTORS REALTOR Association of Greater Miami and the Beaches EXPERIENCE PRESIDENT Years Employed (1985-Present) Prestige Appraisal Service, Inc. Miami, FL Currently appraise and review residential, land, commercial and income producing properties. Responsibilities Includes; • Over 20 years experience appraising all types real estate throughout Florida and the U.S. Virgin Islands. • Supervising employees and 5 to 15 independent contractor` depending upon work load. • Review appraisals both in-house and for outside companies. LICENSED REAL. ESTATE BROKER, REALTOR Years Employed (19S5-Present) Licensed real estate broker selling residential, land, and income producing properties. Initiated off-sitc marketing plan for a single family development. REAL ESTATE SALES ASSOCIATE Years Employed (1981-1983) Berkshire Associates Delray Bach, FL Sold timeshares which included exchange privilcdgcs and was responsible for implementing a marketing and referral program for resort sales. Acted as closing agent for all sales. EXPERT WITNESS (2001.1'resent) Expert witness in Federal. and Local courts. Purpose of testimony was for real estate forfeiture and condemnation cases. APPRAISER SPECIAL MASTER (1992-Present) Appraiser Special Master for Miami Dade County, Florida. Responsible for hearing and judging real estate assessment appeal cases. 2 E1LCAT1O University ofNorth Florida • Business Administration/ Management Degree Deans List, Cum Laudc Graduated (1981) Jacksonville, FL A Professional School of Real Estate • R.E. Broker's Course • Mortgage Broker's Course Years Attended (1992, 94) Boca Raton, FL Lincoln Graduate Center Courses: • Principles of Appraisal • Practice of Appraisal • Farm and Land Appraisal • Commercial Appraisal • Effective Court Testimony University of North Florida • Commercial Appraising Course American institute of Real Estate Appraisers (Appraisal Institute) Courses completed and passed: • Real Estate; Appraisal Principles • Residential Valuation • Capitalization Theory and Techniques Attended (1985 - 1990) San Antonio, TX Attended (1987) Jacksonville, FL Attended (October 1986) Cocoa Beach, FL Attended (October 1986) Cocoa Beach, FL Attended (October 1988) Orlando, FL • Basic Valuation Attended (September, 1988) (Challenged and Passed) Ft. Lauderdale, FL • Residential Demonstration Report Writing Attended (January 1988) Ft. Lauderdale, FL 3 EDUCATION CONTINUES American Institute of Keal Estate Appraisers. (.Appraisal Institute) Continues • Standards of Professional Practice (A, B &C) Course Attended (June 1987, 1989 & 1997) Cocoa Beach, FL • Money Market and its Impact on Real Estate Seminar Attended (February 1989) Ft. Lauderdale, FL • Residential Case Studies and N ai T ativc Writing Course . Attended (September 1989) Washington, DC • Rates, Ratios and Reasonableness Seminar • Underwriting of the 90's Seminar • Appraising REO and Foreclosure Properties Seminar • Common Problems in Commercial Appraisal Seminar • Understanding Limited Appraisal and Reporting Options- General Course • USPAP & Florida Law Update Course • General Applications Course • Eminent Domain & Condemnation Course Attended (1990) Ft. Lauderdale, FL Attended (1992) Miami, l L Attended (1992) Miami, Fl Attended (1992) Miami, FL Attended (1994) Miami, FL Attended (1994, 1995, 1998, 2000) Attended (May 1996) Orlando,l'l Attended (Oc1.1997) Memphis, TN • Appraisal Of Transferable Development Rights (TDR's) Seminar Attended (Sept. 2000) Boca Raton, FL 4 EDUCATION CONTINUFS American Institute of Metal Estate Appraisers (Appraisal Instituter) Continues • Case Studies in Commercial Highest and Best Use Seminar Attended (July 2001) • Alternative Dispute Resolution (ADR): Meditation and Arbitration, and the Appraiser in ADR Seminar Society of Real Estate Appraisers • Depreciation Analysis Seminar Attended (February 2001) Attended (August 1989) Orlando, FT. National Association of Master Appraisers • Federal, State and Local Guidelines Procedures Legislative, Physical, Economic and Environmental Issues Affecting Appraisals. Attended (1992, 1993, 1994) South Florida Water Management • South Florida Water Management L)istrict Seminar Real Estate _Institute glaze Southeast • Appraising Wetlands Course • Appraising Conservation Easement and Other Less than Fee Interest Course • Environmental Hazards Impact on Real Estate Value Course Attended (May 1997) Miami, FL Attended (Scpt.2000) Miami, 1�L Attended (Sept.2000) Miami, FL Attended (Sept. 2000) Miami, FL. 5 1I1h13R1\ Realty Resources APPRAISAL & REAL ESTATE ECONOMICS ASSOC )AREEA) • MIAMI LOCAL EXPERTISE... NATIONALLY COMPLETE APPRAISAL IN A SUMMARY REPORT Industrial Building 254 N.E. 59 Terrace Miami, Miami -Dade County, FL 33137 PREPARED FOR: Mrs. Laura Billberry Director City of Miami - Office of Asset Management 444 South East 2nd Avenue Miami, FL 33130 EFFECTIVE DATE OF THE APPRAISAL: August 22, 2002 INTEGRA REALTY RESOURCES AREEA/SoUTH FLORIDA File Number: 02-6851 © 2002 BY INTEGRA REALTY RESOURCES Industrial Building 254 NE 59th Terrace, Miami, FL NTEGRA Realty Resources AREEA/SOUTH FLORIDA October 15, 2002 Mrs. Laura Billberry Director City of Miami - Office of Asset Management 444 South East 2nd Avenue Miami, FL 33130 SUBJECT: Market Value Appraisal Industrial Building 254 N.E. 59 Terrace Miami, Miami -Dade County, FL 33137 Integra AREEA/South Florida File No. 02-6851 Dear Mrs. Billberry: Integra Realty Resources - AREEA/South Florida is pleased to transmit the self contained report of a complete appraisal that was prepared on the referenced property. The purpose of this appraisal is to develop an opinion of the market value of the Fee Simple estate of the property as of August 22, 2002, the effective date of the appraisal. This report is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP) for a self- contained appraisal report. As such, it presents discussions of the data, reasoning, and analy- ses that were used in the appraisal process to develop the opinion of value. Additional supporting documentation concerning the data, reasoning, and analyses is retained in our file. The depth of discussion contained in this report is specific to the needs of the client and the intended use of the appraisal as noted herein. The site has an area of approximately 25,000 square feet; it is improved with a one-story, multi -tenant, industrial building constructed in 1950 and containing approximately 18,920 square feet of gross building area and 18,920 square feet of rentable area. As of the effective date of the appraisal, the property is approximately 100% occupied. LOCAL EXPERTISE...NATIONALLY 9400 S. Dadeland Blvd. • Penthouse One • Miami, Florida 33156-2817 Phone: 305-670-0001 • Commercial Fax: 305-670-2276 • Residential Fax: 305-670-2275 • Email: miami@irr.com Mrs. Laura Billberry City of Miami - Office of Asset Management October 15, 2002 Page 2 Based on the analyses and conclusions in the accompanying report, and subject to the definitions, assumptions, and limiting conditions expressed in this report, it is our opinion that the market value of the Fee Simple estate of the property, as of August 22, 2002, is FOUR HUNDRED TEN THOUSAND DOLLARS ($410,000). The preceding value conclusion is subject to any Extraordinary Assumptions and Hypothetical Conditions set forth in this Report. If you have any questions or comments, please contact the undersigned. Thank you for the opportunity to be of service. Respectfully submitted, INTEGRA REALTY RESOURCES AREEA/SoUTH FLORIDA Commercial Division Director State Regis State Certified General Real Estate Appraiser Real Estate 'raiser FL Certificate #RZ0000764 FL Certificate #RI0006980 INDUSTRIAL BUILDING TABLE OF CONTENTS TABLE OF CONTENTS PAGE NO. TABLE OF CONTENTS 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS 2 GENERAL INFORMATION 3 Identification of Subject 3 Current Ownership, Sales History, Status 3 Purpose, Property Rights and Effective Date 3 Intended Use and Intended User 3 Scope of Appraisal 3 Miami -Dade County area Analysis 5 Market Area Analysis 15 Industrial Market Analysis 17 PROPERTY ANALYSIS 18 Description and Analysis of the Land 18 Description and Analysis of the Improvements 21 Real Estate Tax Analysis 23 Highest and Best Use Analyses 24 Valuation Analysis 24 Sales Comparison Approach 25 Income Capitalization Approach 28 Value Indication - Income Capitalization Approach 32 Reconciliation and Conclusion of Value 32 CERTIFICATION 33 ASSUMPTIONS AND LIMITING CONDITIONS 35 ADDENDA Definitions Addendum A Subject Photographs Addendum B Financials and Property Information Addendum C Comparables Addendum D Improved Sales Rentals Letter of Authorization Addendum E Qualifications of the Appraiser(s) Addendum F PAGE 1 Integra Realty Resources INDUSTRIAL BUILDING SUMMARY OF SALIENT FACTS AND CONCLUSIONS SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Industrial Building 254 N.E. 59 Terrace Miami, Miami -Dade County, FL 33137 Census Tract Number Property Tax Identification Number(s) Owner of Record 20.04-1 01-3218-015-0280 Charlotte Stevens Date of the Report Effective Date of the Appraisal October 15, 2002 August 22, 2002 Land Area Gross Building Area (GBA) Rentable Area (RA) Current Occupancy Year Built Zoning Designation Floodplain Map Panel Number and Date Floodplain Designation Real Estate Taxes, Year 2001 Highest and Best Use as Improved Property Rights Appraised Estimated Exposure Time and Marketing Period 0.5700 acres; 24,829 square feet 18,920 square feet 18,920 square feet (4 Bays) 100% 1950 I, INDUSTRIAL, City of Miami 12025C0181J; 03/02/1994 X - Areas of 500 Year Flood $7,946 Continued Industrial Use Fee Simple Estate 12 months; 12 months Market Value Indications Sales Comparison Approach Income Capitalization Approach Direct Capitalization Market Value Conclusion* $400,000 $410,000 $410,000 ($21.67 per SF of RA) *This market value conclusion is subject to extraordinary assumptions and hypothetical conditions set forth in this Report. PAGE 2 Integra Realty Resources INDUSTRIAL BUILDING GENERAL INFORMATION GENERAL INFORMATION IDENTIFICATION OF SUBJECT The property is a 1-story, owner -occupied, industrial building with a gross building area of 18920 square feet and a rentable area of 18,920 square feet. The street address is 254 N.E. 59 Terrace, Miami, FL 33137. The site has an area of 0.5700 acres, or 24,829 square feet, more or less. It is further identified by Tax Folio No. 01-3218-015-0280. A complete legal description of the property is in Addendum C. Photographs of the subject are in Addendum B. CURRENT OWNERSHIP, SALES HISTORY, STATUS The property is currently owned by Charlotte Stevens, who purchased the property as improved in April, 1973 for $140,000. To the best of our knowledge, no sale or transfer of ownership has occurred within the past three years, and as of the effective date of this appraisal, the property is being considered for acquisition by the City of Miami for its Little Haiti Park project. PURPOSE, PROPERTY RIGHTS AND EFFECTIVE DATE The purpose of the appraisal is to develop an opinion of the market value of the Fee Simple interest in the property as of the effective date of the appraisal, August 22, 2002. Unless otherwise stated, all factors pertinent to a determination of value have been considered as of this date. INTENDED USE AND INTENDED USER This appraisal report has been prepared for Mrs. Laura Billberry, Director, City of Miami - Office of Asset Management, 444 South East 2nd Avenue, Miami, FL, for use in acquisition management. It is not intended for any other use or user. SCOPE OF APPRAISAL As part of this appraisal, we have taken the following steps to gather, confirm, and analyze relevant data. • Physically inspected the property and the surrounding market area. An interior & exterior inspection of the property was conducted by Jose E. Valera, ASA on August 22, 2002. Barbara Johenning also conducted an inspection on September 13, 2002. • Collected factual information about the property and the surrounding market and confirmed that information with various sources. • Prepared a highest and best use analysis of the subject site as though vacant and of the property as improved. • Collected, confirmed and analyzed market information under all applicable approaches to value. PAGE 3 Integra Realty Resources INDUSTRIAL BUILDING GENERAL INFORMATION • Prepared an appraisal report setting forth the conclusions developed in this analysis as well as the information upon which the conclusions are based. This is a complete appraisal in a self contained report that is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP) for a self-contained appraisal report. As such, it presents discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the opinion of value. Additional supporting documentation concerning the data, reasoning, and analyses is retained in our file. The depth of discussion contained in this report is specific to the needs of the client and the intended use of the appraisal as noted herein. Pertinent definitions, including the definitions of market value and property rights appraised, are in Addendum A. PAGE 4 Integra Realty Resources INDUSTRIAL BUILDING MIAMI-DADE COUNTY AREA ANALYSIS INTRODUCTION The economic vitality of the surrounding area, and the immediate neighborhood encompassing the subject property, is an important consideration in estimating future real estate demand and income potential. A detailed demographic analysis of Miami - Dade County and the State of Florida was conducted using information provided by NPA Data Services, Inc., a recognized industry source. Information supplied includes historical and projected population, employment and income data. POPULATION Historic and projected population trends for Miami -Dade County are depicted in the following chart. Miami -Dade County Population (1,000's) 3000 2500 2000 1500 1000 500 0 Historic and Projected Population N- rn CO CO CO t5 rn rn N- rn rn rn c, to o o 0 N N N Year S c1 `n N- NNNNN The population of Miami -Dade County, as seen in the accompanying table, increased at a compounded annual rate of 1.54% from 1997 to 2001. For the same time frame, the State of Florida experienced a compounded annual growth rate of approximately 2.47%. Over the last fifteen years Miami -Dade County's average annual compound change was 1.55%, as compared to 2.21% for the State of Florida. Looking ahead over the next 15 years, 2002 to 2016, both Miami -Dade County and the State of Florida are expected to increase in population. It is anticipated that Miami -Dade County will experience increases at an average annual compound rate of 1.07%, while the State of Florida's population is expected to grow at an average annual compound rate of 1.96% for this period. Five year projections reflect growth rates similar to the 15 year estimates, with Miami -Dade County increasing at a rate of 0.96% and the State of Florida at a rate of 2.06%. PAGE 5 Integra Realty Resources INDUSTRIAL BUILDING Both Miami -Dade County and the State of Florida are anticipated to experience continued growth, with future population estimates reflecting growth rates less than those experienced in the past. Population Trends Comparison Historical Projected Average Annual Com pound Change State of Florida Miami -Dade County % % Year Population (000's) Change Population (000's) Change 1987 11,997.3 1,831.4 1992 13,502.0 2.4% 2,000.5 1.8% 1996 14,424.9 1.7% 2,105.6 1.3% 1997 14,677.2 1.7% 2,129.0 1.1% 1998 14,932.2 1.70/0 2,145.2 0.8% 1999 15,116.4 1.2% 2,155.3 0.5% 2000 15,982.4 5.7% 2,253.4 4.5% 2001 16,293.4 1.9% 2,272.7 0.9% 2002 16,649.5 2.2% 2,294.9 1.0% 2003 16,993.7 2.1% 2,315.9 0.9% 2004 17,339.9 2.0% 2,337.7 0.9% 2005 17,688.6 2.0% 2,360.2 1.0% 2006 18,040.8 2.0% 2,383.7 1.0% 2011 19,867.0 10.1% 2,515.1 5.5% 2016 21,800.7 9.7% 2,667.3 6.1% Historical Past 5 years 2.47% 1.54% Past 15 years 2.21% 1.55% Projected Next 5 years 2.06% 0.96% Next 15 years 1.96% 1.07% Source: NPA Data Services, Inc.; compiled by IRR EMPLOYMENT Employment trends for both Miami -Dade County and the State of Florida are anticipated to follow a pattern similar to the population trends for these areas, although at higher rates of increase. Employment trends for Miami -Dade County and the State of Florida are presented in the accompanying chart. From 1997 to 2001, Miami -Dade County realized employment growth at an average annual compound rate of 1.88%. For the same time period, the rate of growth for the State of Florida was 3.10%. These figures indicate that Miami -Dade County lagged the State of Florida in employment growth over the last five years. Looking back fifteen years, employment for Miami -Dade County grew at an average annual compound rate of 1.70%, while the State of Florida experienced a 2.89% growth rate. PAGE 6 Integra Realty Resources INDUSTRIAL BUILDING Estimates for the next five and fifteen year periods reflect rates of employment growth for Miami -Dade County to be below those of the State of Florida. From 2002 to 2006, Miami -Dade County is anticipated to experience a 1.98% average annual growth rate, while the long term projection, 2002 to 2016, indicates a 1.69% average annual compound increase. For the same time frames, the State of Florida is expected to grow at average annual compound rates of 3.05% and 2.52%, respectively. While employment gains do not correlate directly to real estate demand, they do depict the underlying health of the economy. Historical and projected trends for Miami -Dade County indicate growth rates which generally lag the State of Florida's rate. Non -Farm Employment Trends Comparison Historical Proje cted Average Annual Compound Change State of Florida Miami -Dade County % Year Employment(000's) Change Employment(000's) Change 1987 6,052.7 996.9 1992 6,732.7 2.2% 1,044.5 0.9% 1996 7,741.9 3.6% 1,150.3 2.4% 1997 8,022.5 3.6% 1,177.4 2.3'/0 1998 8,272.8 3.1% 1,197.3 1.7°/o 1999 8,551.7 3.4% 1,227.9 2.6'/o 2000 8,844.8 3.4% 1,254.1 2.1'/0 2001 9,019.9 2.0% 1,262.5 0.7% 2002 9,298.9 3.1 % 1,286.3 1 .9% 2003 9,602.5 3.3% 1,313.6 2.1'/0 2004 9,893.6 3.0% 1,339.3 2.0% 2005 10,191.0 3.0% 1,366.0 2.0'/0 2006 10,484.4 2.9% 1,392.3 1.9% 2011 11,842.9 13.0% 1,512.2 8.6'/o 2016 13,102.3 10.6% 1,623.8 7.4'/0 Historical Past 5 years 3.10% 1.88% Past 15 years 2.89% 1.70% P rojected Next 5 years 3.05% 1.98% Next 15 years 2.52% 1.69% Source: NPA Data Services, Inc.; compiled by IRR An analysis of employment mix will further establish an understanding of the economies of Miami -Dade County and the State of Florida, and how they relate to future real estate demand. The following pie chart depicts the current distribution of employment by industry. PAGE 7 Integra Realty Resources INDUSTRIAL BUILDING Miami -Dade County Employment Sectors ❑8.7% •37.1% 11117.2 o 1.4.4i 8.3% ❑11.9% 0 51% .0 % ❑ 15.8% ®Construction AFIRE ['Government ❑Manufacturing • Mining & Other ❑ Retail Trade IN Services ❑TCPU • Wholesale Trade The preceding chart and accompanying tables show that in 2001, the largest employment sectors in Miami -Dade County were FIRE (8.3%), Services (37.1%), Retail Trade (15.8%), and Government (11.9%). In 2001, the State of Florida's largest employment sectors were FIRE (8.7%), Services (37.7%), Retail Trade (17.9%), and Government (12.3%). As shown in the following table, historical trends for Miami -Dade County indicate that the largest meaningful percentage gains in employment over the past fifteen years occurred within the TCPU and Services sectors with annual average compound growth rates of 2.7% and 3.1% respectively. Over the past five years the most significant activity has occurred in the Services and TCPU sectors with annual average compound growth rates of 2.9% and 3.3% respectively. Non -Farm Enrployrnent Trends - Historical Chance rate Mani -Dade County Long Short (n thousartds) % % Term Term 1987 of Total 1992 1996 1997 1998 1999 2000 2001 of Total (15 yr) (5 yr) Total Enployrnertt 926.9 100% 1044.5 1150.3 1177.4 1197.3 1227.9 1254.1 1252.5 103% 1.7% 1.9°/ Construction 51.7 5.2% 45.7 51.5 50.9 51.1 530 54.7 55.2 4.4% 0.5% 1.4% FIRE 98.6 9.9% 91.9 98.1 98.2 ' 101.7 103.7 103.9 104.8 8.3% 0.4% 1.3% G.xetmlerd 118.7 11.9% 135.4 139.3 140.8 144.1 145.2 149.2 150.6 11.9% 1.7% 1.6% Manufacturing 96.0 9.6% 85.6 80.6 78.4 76.1 74.6 73.7 71.0 5.6% -21% -25°/ Muting 8 Cther 10.6 1.1% 11.2 11.5 11.8 11.7 121 125 127 1.0% 1.3% 2.0% Retail Trade 167.9 16.8% 171.1 187.9 189.3 191.2 197.3 199.6 200.1 15.8% 1.3% 1.3% Seraces 307.1 30.8% 350.7 405.3 424.9 433.5 449.0 463.0 468.6 37.1% 3.1% 29% TCPU 75.3 7.6% 75.1 927 96.6 100.5 104.9 107.4 1C9.2 8.7% 27% 3.3% Whdesale Trade 71.2 7.1% 77.9 83.5 86.5 87.6 88.2 90.0 90.4 7.2% 1.7% 1.6% Ttl Non-Manftng. 901.0 90.4% 958.9 1059.8 1099.0 1121.2 1153.3 1180.4 1191.5 94.4% 2C/0 22% Tt1 Cifice-falated' 524.4 526% 578.0 6427 653.9 679.2 697.9 716.1 724.0 57.3% 23% 2.4% `Irtdudes FIRE, Services and Ca.errn er1 PAGE 8 Integra Realty Resources INDUSTRIAL BUILDING Employment trends are further examined in the following chart which depicts growth in the broad -based categories of manufacturing, office related and other non - manufacturing employment. For purposes of this analysis, office related employment is defined as total employment in the FIRE, Services and Government sectors. While not all employment from these sectors is office related, office employment trends tend to mirror the trends from these categories. As seen in these charts, office -related employment has captured an increasing share of total employment, indicating a shift toward a more service -based economy. This is a common trend on a national basis. Miami -Dade County Historic and Projected Non -Agricultural Employment 1,800 -' 1,600 - 1,400 - 1, 200 1,000 800 600 400 200 0 1987 1992 1997 2002 2007 2012 2016 Manuf acturing Other Non - Manufacturing Office Related Historical trends for the State of Florida are summarized in the following chart and indicate the largest meaningful gain in employment over the past fifteen years occurred within the Services sector with annual average compound growth rate of 4.9%. Over the past five years significant activity has occurred in the FIRE and Services sectors with annual average compound growth rates of 4.4% and 4.6%. Non -Farm Employment Trends - Historical Change Rate State of Florida Lag Snort (in thasalds) % % Tenn Term 1987 of Total 1992 1996 1997 1996 1999 2003 2001 d Total (15 yr) (5yr) Total Errtto rrertt 6052.7 10(P/o 67327 7741.9 80725 82728 8651.7 8844.8 9019.9 10CP/o 29% 3.1% FIFE 5720 9.4% 5623 6328 671.0 719.0 754.3 767.4 785.9 8.7% 23% 4.4% Construction 444.6 7.3% 380.7 453.3 469.2 466.0 507.9 5220 544.1 6.0% 1.5% 3.7% C rrrrlert 870.6 14.4% 1003.6 1020.9 1048.5 1054.5 1064.1 1093.0 1108.9 123% 1.7% 1.4% Marlufaztuing 545.0 9.0 o 5023 514.4 515.7 516.7 513.4 516.7 507.4 5,6% -O.5% -0.3% Mining & Cther 1 23. 6 20% 139.3 171.4 187.5 188.9 185.7 195.7 2025 223/o 3.6% 3.4% Rita I Trade 1169.9 19.3% 1287.2 1481.2 14929 1511.8 1543.6 1584.0 1610.4 17.9% 23% 1.7% Seruces 1750.2 28.9% 2216.2 2720.7 2858.4 3201.3 3164.6 3310.4 3399.1 37.7% 4.9% 4.6% CPU 2883 4.8% 316.6 373.8 326.3 401.0 417.2 4321 444.4 4.9 o 3.1% 3.5% W-desale Trade 2885 4.8% 324.6 363.5 383.1 393.6 401.0 413.5 419.3 46% 27% 29% itl N:Dri-Martttlg. 5507.7 91.0% 6230.4 7227.5 7506.8 7756.1 8038.3 8328.1 85125 94.4% 3.23/o 3.3% 11! Cffia: laced` 3193 527% 37821 4384.4 4587.9 4774.9 49829 5170.7 5291.9 59.7% 3.7% 3.8% 'Irldudes FIFE, Services and Gaemment PAGE 9 Integra Realty Resources INDUSTRIAL BUILDING Future projections are summarized in the following tables. Fifteen year projections for Miami -Dade County show Wholesale Trade related employment leading all other sectors with Government as the next leading sector. The State of Florida forecast has Services related employment leading all other sectors with Wholesale Trade as the next leading sector. Non -Farm Envioyrrent Trends - Projected Mani -Dade County On tha sa xls) 2002 of Total 2007 Change Rate Long Short Term Term 2011 2012 2013 2014 2015 2016 of Total (15 yr) (5yr) Total Employment 1285.3 100% 1416.8 15122 1532.8 1554.0 1577.3 1599.5 1623.8 100 o 1.7% 1.4% Construction FIRE Gaemrrert Manufacturirg M nirg & Other Detail Trade Services TCPU 1Mhdesale Trade 55.9 4.3% 60.5 64.1 64.8 65.6 66.4 67.2 68.1 4.2% 1.4% 1.2% 106.4 8.3% 115.2 121.3 122.6 123.9 125.4 126.8 128.3 7.9% 1.3% 1.1% 154.6 120%o 175.8 191.3 194.7 198.2 201.9 205.4 209.2 129% 22% 1.8% 71.2 5.5% 725 726 725 723 722 721 720 4.4% 0.1% -0.2% 128 1.0% 13.9 14.8 15.0 15.2 15.4 15.7 15.9 1.0% 1.6% 1.5% 203.4 15.8% 221.5 234.4 237.1 239.8 2429 245.8 249.1 15.3% 1.5% 1.2% 478.4 37.2% 531.9 5722 581.2 590.5 600.6 610.3 620.9 38.2% 1.9% 1.6% 110.9 a6% 120.2 126.5 127.7 129.0 130.4 131.7 133.2 8.2% 1.3% 1.0% 927 7.2% 105.2 115.0 117.3 119.6 1221 124.5 127.1 7.8% 233/0 20% Ttl Non-Manftrg. 1215.0 94.5% 1344.3 1439.6 1460.4 1481.7 1505.1 1527.4 1551.8 95.6% 1.8% 1.5% 1110fiC2Falated' 739.3 57.5% 8229 884.9 898.5 9125 927.8 9425 958.4 59.0% 1.9% 1.6% 'Includes FIRE, Senices and Gaerrrrent Non -Farm Enployrrent Trends - Projected State of Florida (in thousands) 2002 ofTotal 2007 2011 2012 2013 2014 2015 2016 Change Rate L Short Tenn Term d Total (15 yr) (5 yr) Total Errriorrert Construction FIRE Gmemrrerd Manufacturing M rirg & other Retail Trade Setaoes 'CPU Mx esale Trade 9298.9 557.7 809.0 1137.4 518.4 209.4 1659.1 3517.6 4%.3 434.0 100 o 107626 6.0% 8.7% 122% 5.6% 23% 17.8% 37.8% 4.9% 4.7% 628.5 933.0 1295.7 572.7 246.2 1913.8 4146.4 517.6 511.8 118429 679.1 1017.7 1408.7 605.2 274.6 2099.3 4627.2 530.2 571.1 12084.5 690.1 1037.0 1433.2 611.0 281.2 2140.3 4737.9 539.2 584.7 12228.6 701.3 1056.5 1457.9 616.7 287.8 2181.6 4850.2 578.2 598.4 12587.7 713.4 1077.2 1484.3 6228 294.9 2225.5 4938.9 587.8 613.0 12837.2 725.0 1097.0 1509.4 628.0 301.8 2267.6 5384.5 5E5.8 627.1 13102.3 737.4 1118.1 1536.2 633.8 3C9.1 23123 5206.9 6C6.5 6421 100% 5.6% 8.5% 11.7% 4.8% 24% 17.6% 39.7/0 4.6% 4.9% 25% 20% 23% 22% 1.4% 28% 24% 28% 21% 28% 20% 1.7% 1.9% 1.7% 0.9% 24% 20%o 24% 1.6% 24% Total Nun-Mtanftng 8780.5 94.4% 10190.0 11237.8 11473.5 117120 11%5.0 12209.2 12468.5 95.2% 25% 21% TtI Clfiae-Ralated" 5464.1 58.8% 63721 7053.6 7208.1 7364.6 7530.4 7690.9 7861.2 60.0% 26% 223/ "Inducts FIRE, Swims and G,errrnent PAGE 10 Integra Realty Resources INDUSTRIAL BUILDING An examination of total employment figures reveals that Miami -Dade County accounted for approximately 16.59/ of the State of Florida's employment in 1987. By 2001, this ratio changed to 14.0% and it is projected at 12.4% through 2016. This is an indication that Miami -Dade County is growing at a rate below that of the State of Florida as a whole. The varied composition of the region's employment base and an examination of its major employers indicate a diversified economy that is not dependent upon any particular sector. Therefore, Miami -Dade County should be less susceptible to cyclical fluctuations that have occurred in other areas dominated by a single industry. The region's major employers are identified below. Major Public Sector Employers in Miami -Dade County Major Private Sector Employers in Miami -Dade County Employer # of Employees Employer # of Employees 1. Miami -Dade County Public Schools 35,469 1. American Airlines 9,000 2. Miami -Dade County 30,000 2. Precision Response Corporation 8,000 3. Federal Government 18,276 3. University of Miami 7,800 4. State Government 18.100 4. Baptist Health Systems of South Fla. 7,500 5. Jackson Memorial Hospital 8,191 5. BellSouth 4,240 6. City of Miami 3,400 6. Publix Super Markets 4,000 7. Florida International University 2,591 7. Florida Power & Light Company 3,823 8. Miami -Dade Community College 2,345 8. Mount Sinai Medical Center of Greater Miami 2,868 9. V.A. Hospital 2,000 9. Winn -Dixie Stores 2,672 10. City of Miami Beach 1,702 10. First Union National Bank of Florida 2,500 <Source: The Beacon Council's "Miami Business Profile", 2000-2001 Edition> INCOME Personal income is also a significant factor in determining the real estimate demand in a given market. As illustrated in the accompanying charts, Miami -Dade County's per capita income has historically achieved a growth rate similar to the State of Florida. PAGE 11 Integra Realty Resources INDUSTRIAL BUILDING From 1997 to 2001, Miami -Dade County has achieved per capita income growth at an average annual compound rate of 2.10%. For the same time period, the average annual compound rate of growth for the State of Florida was 2.06%. Over the last fifteen years, Miami -Dade County's per capita income growth was at an average annual compound rate of 1.01% while the State of Florida's growth recorded an average annual compound rate of 1.55%. Projections for the next five and fifteen year periods reflect rates of per capita income growth for Miami -Dade County greater than the anticipated gains in income for the State of Florida. For the two time frames, 2002 to 2006 and 2002 to 2016, Miami -Dade County is anticipated to experience a 3.04% and a 2.29% average annual growth rate respectively. For the same time frames, the State of Florida is expected to grow at average annual compound rates of 2.58% and 1.88%, respectively. Personal Income per Capita Comparison Historical Protected Average Annual Compound Change Year 1987 1992 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2011 2016 Historical P rojected State of Florida Income/Capita $21 ,745.03 $22,555.97 $24,619.70 $25,242.97 $26,097.46 S26,487.20 $26,954.86 $27,260.03 $27,965.81 $28,748.66 $29,496.88 S30,274.32 $30,964.19 $33,729.82 S36,049.08 Past 5 years Past 15 years Next 5 years Next 15 years Change 0.8% 2.4% 2.5% 3.4% 1.5% 1.8% 1.1% 2.6% 2.8% 2.6% 2.6% 2.3% 8.9% 6.9% Miami -Dade County Income/Capita 821,163.97 S19,279.95 S22,288.16 S22,615.17 S23,328.61 $23,811.75 $24,352.98 S24,727.89 S25,485.59 $26,318.10 527,118.80 527,956.65 S28,718.34 $31,922.27 $34,711.24 Change -1 .4% 3.8% 0.0% 3.2% 2.1% 2.3% 1.5% 3.1% 3.3% 3.0% 3.1% 2.7% 11.2% 8.7% 2.06% 2.10% 1.55% 1.01% 2.58% 3.04% 1.88% 2.29% Source. NPA Data Services, Inc.; compiled by IRR An examination of personal income on a per household basis instead of a per capita basis reveals that, since 1999, Miami -Dade County has experienced a growth rate above that of the State of Florida, and future projections show Miami -Dade County with a growth rate above that of the State of Florida. In absolute dollars, Miami -Dade County's personal income historically has been below that of the State of Florida, both on a per capita and per household basis. PAGE 12 Integra Realty Resources INDUSTRIAL BUILDING Income per Household Comparison Historical Projected Average Annual Compound Change State of Florida Miami -Dade County °r° Year Income/Household Change Income/Household Change 1987 $54,945.51 $57,937.65 1992 $57,090.74 0.8% $53,996.52 -1.4% 1996 $62.651 .97 2.4% $62,755.14 3.8% 1997 $64,160.21 2.4% $63,597.29 0.0% 1998 $86,267.62 3.3% $65,552.97 3.1 % 1999 $666,788.89 0.6% $66,409.51 1.3% 2000 $67,728.71 1.4% $70,393.09 6.0% 2001 $68,463.96 1 .1 % $71 ,464.1 7 1.5% 2002 $70,000.20 2.2% $73,429.96 2.8% 2003 $71 ,719.71 2.5 % $75,598.74 3.0% 2004 $73,342.15 2.3% $77,662.62 2.7% 2005 $75,026.42 2.3% $79,819.15 2.8% 2006 $76,483.42 1.9% $61,744.97 2.4% 2011 $81,963.97 7.2% $89,490.99 9.5% 2016.$66,192.01 5.2% $95,629.54 7.1°% Historical Past 5 years 1.79% 2.63% Past 15 years 1.51% 1.40% Projected Next 5 years 2.24% 2.72% Next 15 years 1.55% 1.98% Source: NPA Data Services, Inc.; compiled by IRR CONCLUSION Overall, the economic outlook for Miami -Dade County and the State of Florida is positive. Total population for both areas is projected to increase slightly. More importantly, both areas are projected to experience increasing employment growth. Based on this analysis, it is anticipated that the State of Florida and Miami -Dade County will continue to grow and prosper. The expected growth should provide an economic base that supports demand for real estate in the subject neighborhood and for the subject property. These conditions should stimulate increases in general property values within the foreseeable future. PAGE 13 Integra Realty Resources Mach Bosch Sags II.Aou. SUBJECT' Street Atlas USA® 2003 AYamie oo..o INDUSTRIAL BUILDING MIAMI-DADE COUNTY AREA ANALYSIS MIAMI-DADE COUNTY AREA MAP • 9L_, I ;ra J _ }'--- —' t�:arr .•) 1 I I I� LI � 1 I / f ill • SY et-nf A`3 iJ PAGE 14 Integra Realty Resources INDUSTRIAL BUILDING MARKET AREA ANALYSIS MARKET AREA ANALYSIS The subject is located in the central part of the City of Miami in an area commonly known as "Little Haiti". The area is urban in nature and is approximately 95% developed. In addition, the subject is located in the "North Central" Enterprise Zone; a special incentive, designated urban growth area as outlined by Miami -Dade County. The subject is part of the proposed City of Miami's acquisitions for the 60d acre Little Haiti Park project. The immediate neighborhood consists primarily of older, industrial development surrounded by lower income, medium density, multi -family and single family homes. The subject is located in an older, low rental industrial area consisting of warehouses, light manufacturing and automobile repair facilities. There is little demand for new construction, however, there is ample potential for re -development. Over the years, the area has remained somewhat depressed and stagnant; however„ as demand and prices increase in the neighboring design district and the trend starts to spill over into the subject market, this area could begin to experience some re -development. At this early stage, it would be difficult to predict with any certainty that this will occur. However, IRR-AREEA, through its research, has received reports of two (2) projects in the subject's market area whose properties have been re -developed to support uses for artists and studios, etc. Land use immediately surrounding the subject is predominantly industrial with typical ages of building improvements ranging from 25 to 50 years. Property types adjoining the subject include small, owner -occupied warehouse properties. Primary access to the area is via Biscayne Boulevard and N.E. 2nd Avenue with secondary access available from I-95 and North Miami Avenue. Access is average. Other than the nearby MacArthur Dairy Bottling Plant, most major employers are located outside the subject market area, closer in to Downtown Miami and the Airport. However, the industrial and commercial areas within the subject market support a variety of factory level, commercial oriented employment. The area is in a stagnant stage of its life cycle. Recent development activity has been minimal, but some early signs of revitalization are evident. In our opinion, property values may increase slightly in the near future. PAGE 15 Integra Realty Resources INDUSTRIAL BUILDING MARKET AREA ANALYSIS MARKET AREA MAP DELORME NN T3f0 ST 1 11� w+1�sr9 TIN 3Sm ST gtv ESTM TER 7 ST ST e9m ST NE was R NTT esm sT TIE 0-7144 — \- \ Sem sr N STTH Si • 51S- ST SCSI ST r 1:::. ���'" �--_ .e^ yr ---1 '-1 �r TES a) 1 sw''S'ST 1� 1'l_.ViL_#,_tL._ A TEvs6TN ST 1E.16m ST 1I� �'�� f �1 SE Cm sT 1` �/ 'E S9T1 ST 11 E AST1- ST NN ..910 ST i( 422002 wLorm•. atm. AUN U3AR9 2003. wlw.w.0010n0.•. cone ST IE sal s— lE TIW ST .E¢RMST 11 6�' Street Atlas USA® 2003 E "-90 ST 'IL T ��E eS,>;sT . eE esmTE�i __��� 61STST PAGE 16 Integra Realty Resources INDUSTRIAL BUILDING INDUSTRIAL MARKET ANALYSIS INDUSTRIAL MARKET ANALYSIS The property is located within the Central Miami industrial submarket which is defined as N.W. 103`d Street south to N.W. 12th Street, between N.W. 37th Avenue and Miami Beach. The Central Miami submarket contains approximately 22,319,000 square feet of older, industrial space primarily consisting of warehouse/distribution/light manufacturing types of space with no new construction activity. The current vacancy rate for the Central Miami submarket is reported to be approximately 8% to 10%. In the near future, the vacancy rate is expected to remain at the currently higher rates of 10% to 20%. The average market rental rate is $3.75 to $5.75 which represents a decrease from 2001. In the near future, industrial rental rates are expected to remain at the current rate or slightly higher. Properties that are currently available for rent and/or considered to be primary competition for the subject are as follows: SUMMARY OF COMPETITIVE PROPERTIES Rentable Rent/ Area Occupancy Year Square No. Property Name/Address (SF) Rate Built Foot Lease Type 1 298 NE 59 Street 5,000 100% 1950 $3.12 Gross Comments: Above average condition. Wholesale gift shop tenant for over 12 year. 2 247 NE 59 Street 4,785 100% 1945 $3.25 Gross Comments: 12' ceilings - average condition. 3 6701 NE 2 Court 7,015 0% 1953 $3.75 Gross Comments: Average condition — single tenant building. 4 253 NE 73 Street 26,648 0% 1952 $4.50 NNN Comments: Single tenant industrial building — average condition. 5 6454 NE 4 Avenue 28,412 0% 1954 $5.75 NNN Comments: Single tenant industrial building — average condition SUBJECT 18,920 100% 1950 Gross PAGE 17 Integra Realty Resources INDUSTRIAL BUILDING DESCRIPTION AND ANALYSIS OF THE LAND PROPERTY ANALYSIS DESCRIPTION AND ANALYSIS OF THE LAND PHYSICAL FEATURES Land Area Approximately 0.5700 acres, or 24,829 square feet. Configuration Rectangular, 250' x 100' +/-±. Frontage Feet 250 Ft. - NE 59th Terrace Rail Access N/A Topography Level Drainage Appears adequate Floodplain Areas of 500 Year Flood Community Panel # 12025C0181J, effective 03/02/1994 Flood Zone X Flood Insurance Not typically required in this zone. Environmental Hazards Environmental evaluation is beyond our scope of expertise. A qualified engineer should be consulted on this matter. No obvious hazardous materials or conditions were observed during our inspection. Ground Stability We were not furnished a soil analysis to review but assume that the soil's load bearing capacity is sufficient to support the existing structure. We did not observe any evidence to the contrary during our inspection of the property. PAGE 18 Integra Realty Resources INDUSTRIAL BUILDING DESCRIPTION AND ANALYSIS OF THE LAND ZONING Designation: Description: Permitted Uses: Zoning Jurisdiction: I, Industrial This category applies to manufacturing, processing, assembly & storage activities, and generally limits activities to those which do not generate excessive noise, illumination, pollution, etc. A variety of commercial/industrial uses including warehousing, manufacture, assembly, wholesale activities, commercial parking and storage facilities, freight terminals, facilities, etc. City of Miami Lot Restrictions Minimum Lot Area Minimum Lot Frontage Required 5000 SF 50 Feet Provided 25,000 250 Building Restrictions Maximum Height Max. Floor Area Ratio Max. Impervious Cov. Min. Front Setback Min. Side Setback Required 120 Feet or 10 Stories 1.72 Times Gross Lot Area 0.60 Times Gross Lot Area No Setback Required No Setback Required Conformity Based on our inspection and a review of the site plan, the current use of the site appears to constitute a legally permissible use that conforms to the current zoning ordinance. PAGE 19 Integra Realty Resources INDUSTRIAL BUILDING DESCRIPTION AND ANALYSIS OF THE LAND OTHER LEGAL AND REGULATORY CONSTRAINTS Easements, Encumbrances, and Moratoriums Although we were not provided a current title report to review, we are not aware of any easements, encumbrances, or restrictions that would adversely affect the use of the site. A title search is recommended to determine whether any adverse conditions exist. We are not aware of any type of development moratorium that would affect the property. Encroachments We were not provided a survey. However, an inspection of the site revealed no apparent encroachments Other Land Use Regulations We are not aware of any other land use regulations that would affect the property. UTILITIES Utilities Water/Sewer Electricity Local Telephone Provider Miami -Dade Water & Sewer Florida Power & Light Bell South Availability at site at site at site PAGE 20 Integra Realty Resources INDUSTRIAL BUILDING DESCRIPTION AND ANALYSIS OF THE IMPROVEMENTS DESCRIPTION AND ANALYSIS OF THE IMPROVEMENTS EXTERIOR DESCRIPTION Name of Property Industrial Building General Property Type Industrial Property Sub Type Warehouse or Storage Occupancy Type Multi -tenant (4 bays) Size Gross Building Area (GBA) 18,920 square feet Rentable Area (RA) 18,920 square feet Number of Buildings/Stories One; one Current Occupancy 100% Number of Tenants 4 Year Built 1950 (52 years actual age) Estimated Effective Age 35 years Estimated Economic Life 50 years (per Marshall Valuation Service) Structural Frame CBS Exterior Walls/Windows CBS / Aluminum Frame Roof Flat, Composition over Steel Trusses & Concrete The interior inspection of the subject suggests no leakage at the date of inspection. Ceiling Height approx. 14 - 16 Ft. Column Spacing N/A Dock Height Loading Doors 5 Drive -In Doors 0 Special Features N/A PAGE 21 Integra Realty Resources INDUSTRIAL BUILDING DESCRIPTION AND ANALYSIS OF THE IMPROVEMENTS INTERIOR DESCRIPTION AND MECHANICAL SYSTEMS Office Space Approximately 5% HVAC Office Unit Plant None Sprinklers None Elevators N/A SITE IMPROVEMENTS Parking Number of Spaces 8 Type Unpaved in front Parking Ratio 0.42 spaces per 1,000 SF, or 1 space per 2,365 SF IMPROVEMENTS ANALYSIS Construction Quality Condition Deferred Maintenance Functional Utility ADA Compliance Environmental The quality of construction is slightly above average. The condition of the improvements is average. The property has been reasonably well main- tained. Our inspection did not reveal any significant deferred maintenance. Our inspection did not reveal any significant items of functional obsolescence. The property is assumed to be ADA compliant. We are neither considered experts nor competent to assess environmental issues. Upon physical inspection of the site and improvements, no indication "to the untrained eye" of environmental hazard was found. Unless stated otherwise, we assume no hazardous conditions exist on or near the subject. We recommend the client consider retaining an expert in this area. PAGE 22 Integra Realty Resources INDUSTRIAL BUILDING REAL ESTATE TAX ANALYSIS REAL ESTATE TAX ANALYSIS The property is assessed under the jurisdiction of the Miami -Dade County Property Appraisers Office. Florida Statutes require that Ad Valorem Assessments be at one hundred percent (100%) of "Just"'Market Value in accordance with Section 193.011 State Statutes, less allowances for costs and terms of sale. Assessments are effective January 1st of the calendar year with notification to the property owner during the summer where the property owner has the right of petition. Tax notices are then forwarded to property owner during the month of October with the maximum discount of four percent (4.0%) for early payment in November. Delinquent taxes are affected in April and, if not paid thereafter, tax certificates could be sold. Property Tax ID Number(s) 01-3218-015-0280 Land Assessment $60,000 Building Assessment $216,807 Total Assessment $276,807 The composite tax rate for the subject for the 2001 tax year is 0.027041 mills. Application of this rate to the total assessed value of $276,807 results in a real estate tax liability of $7,485. In addition, there is a metropolitan benefit charge of $461 per year. Thus, the total annual property tax liability is $7,946, reflecting $0.42 per square foot of gross building area. Based on our valuation of the subject, the assessed value appears low. PAGE 23 Integra Realty Resources INDUSTRIAL BUILDING VALUATION ANALYSIS HIGHEST AND BEST USE ANALYSES AS THOUGH VACANT • The only permitted uses under zoning that are consistent with prevailing land use patterns in the area are industrial/warehouse and light manufacturing uses. • There are no physical limitations that would prohibit development of any of these uses on the site. • Present market conditions are not favorable to new development and it is our opinion that a newly constructed industrial building on the site would not have a value commensurate with its cost. Therefore, industrial use is not financially feasible. • There is no reasonably probable use of the site at this time that would generate a positive residual land value, therefore, the highest and best use, as though vacant, would be to hold the property as investment until such time as market conditions improve. Therefore, since industrial use is not a maximally productive use, the highest and best use of the site, as though vacant, would be to hold for future development. AS IMPROVED There appears to be a demand for smaller industrial space and the building is well suited for an owner -occupant. The property complies with current zoning and land use. Remodeling or demolition of the existing improvements would not be financially feasible at this time under current market conditions. Therefore, we conclude that the current industrial warehouse use is the highest and best use of the property, as improved. VALUATION ANALYSIS We have utilized the sales comparison and income capitalization approaches in valuing the property. The cost approach has been omitted because the property is fifty-two years old and is beyond the age at which market participants typically use this methodology in pricing and valuing assets. Therefore, the cost approach is not applicable to the assignment and omission of this approach does not constitute departure under USPAP. PAGE 24 Integra Realty Resources INDUSTRIAL BUILDING SALES COMPARISON APPROACH SALES COMPARISON APPROACH To develop an opinion of overall property value by the sales comparison approach, we analyzed four sales on a price per square foot of square feet of rentable area basis. The sales occurred within the 7/7/01 — 4/18/02 time period and reflect a range of unadjusted unit prices of $15.01 to $23.88 per square foot. They are summarized as follows: SUMMARY OF COMPARABLE IMPROVED SALES No. Name/Address Price/ Sale Year Pct. SF of SF of Date Built Occup RA RA 1 Industrial Building 4/02 1962 100% 7,956 523.88 300 NE 62 Street Miami Miami -Dade, FL Comments: Below Average Condition; 3 Truck Doors, + 1 Dock Height 2 Industrial Building 3/02 1962 100% 11,571 $20.74 301 NE 61 Street Miami Miami -Dade, FL Comments: Average Condition; 3 Drive -In Doors 3 Industrial Building 12/01 1950 0 19,730 515.21 250 NE 60 Street Miami Miami -Dade, FL Comments: Average Condition; 4 Drive-in Doors 4 Industrial Building 7/01 1952 0 26,648 S15.01 253 NE 73 Street Miami Miami -Dade, FL Comments: Average Condition, 3 Dock High Doors, Purchase by Owner of Adjacent Property SUBJECT 1950 100% 18,920 The subject represents a 1-story, CBS warehouse building of approximately 18,920 gross square feet. The improvements are situated on approximately 25, 000 square feet of land, were constructed in 1950 and appear to be in average condition and quality. There are five (5) dock height doors and ceiling heights measure approximately 14' to 16'. No adjustments were required for property rights, financing or conditions of sale. In addition, no significant appreciation has been noted in the recent past; therefore, no time - market adjustments were deemed necessary. The comparables were all located within the subject's immediate neighborhood. Locational adjustments were only considered necessary for access and visibility characteristics. PAGE 25 Integra Realty Resources INDUSTRIAL BUILDING SALES COMPARISON APPROACH Comparable Sale No. 1 represents the sale of a 7,956 square foot warehouse constructed in 1962. Access and visibility were superior due to its location on N.E. 62nd Street, a major westbound artery. The improvements were average in quality, but considered to be below average in condition and in physical characteristics. Overall, slight upward adjustments were applied for age/condition/quality and physical characteristics, while a downward adjustment was considered necessary for its access/visibility and smaller size. No other adjustments were required. Comparable Sale No. 2 was the sale of an 11,571 square foot warehouse built in 1962 and of average condition and quality. Access and visibility were superior due to its location on N.E. 61st Street, a major eastbound artery. The building has lower height and drive-in doors. Upward adjustments were applied for inferior age/quality, and a downward adjustment was applied for access/visibility and its smaller size. Comparable Sale No. 3 was the sale of a 19,730 square foot warehouse built in 1950, having similar height and four (4) drive-in doors. This sale was considered similar to the subject in location, size and age, but was considered inferior in condition and physical characteristics. Comparable Sale No. 4 was the sale of a 26,648 square foot warehouse built in 1952 and of average condition and quality. This property had three (3) dock height doors. Upward adjustments were applied for slightly inferior physical characteristics and condition, as well as for its larger building size. A downward adjustment for marketability was applied to this sale due to its purchase by the owner of the adjacent property. Location was considered similar. Each sale was compared to the subject and its price per square foot was adjusted to compensate for all significant differences that affect value. Based on this analysis, the four improved sales provide a range of value indications from $16.73 to $22.68 per square foot. Placing equal weight on all of the comparable sales, it is our opinion that the applicable unit value is toward the higher end of the range of value, at $21.00 per square foot. This results in an overall property value indication as follows: 18,920 SF of RA @ $21.00/SF $397,320 Indicated Property Value $397,320 Rounded To $400,000 PAGE 26 Integra Realty Resources INDUSTRIAL BUILDING SALES COMPARISON APPROACH LMPROVED SALES ADJUSTMENT GRID Sale No. 1 2 3 4 Industrial Industrial Industrial Industrial Name Building Building Building Building Sale Date 04/18/02 03/01/02 12/12/01 07/07/01 Sale Price $190,000 $240,000 $300,000 $400,000 Rentable Area in SF 7,956 11,571 19,730 26,648 Price Per SF of RA $23.88 $20.74 $15.21 $15.01 Property Rights 1.000 1.000 1.000 1.000 Financing Terms 1.000 1.000 1.000 1.000 Conditions Of Sale 1.000 1.000 1.000 1.000 Time/Market Conditions Cumulative Adjustment Factor 1.000 1.000 1.000 1.000 Adjusted Price per SF of RA $23.88 $20.74 $15.21 $15.01 Location -10% -10% Physical Characteristics +5% +5% +5% +5% Age/Condition/Quality +5% +5% +5% +5% Building Size -50/0 -5% -- +10% Marketability -- -- -5% Net % Adjustment -5% -5% +10% +15% Final Adjusted Price per SF of RA $22.68 $19.71 $16.73 $17.26 Range of Adjusted Prices Min $16.73 / Mean $19.10 / Max $22.68 Indicated Value per SF of RA $21.00 Subject SF of RA 18,920 Indicated Property Value $397,320 Final Indicated Property Value $397,320 Rounded To $400,000 PAGE 27 Integra Realty Resources INDUSTRIAL BUILDING INCOME CAPITALIZATION APPROACH INCOME CAPITALIZATION APPROACH ECONOMIC PROFILE OF PROPERTY The property is currently 100% occupied by four (4) tenants. The appraisers have requested income and expense information from the property owner's agents. However, no data was provided to the appraisers. According to the building owners/ agent, the tenants are on verbal, month -to -month occupancy agreements and pay approximately $5.00 per square foot on a gross lease basis. For purposes of this analysis, we have, therefore, appraised the property as vacant and available for rent at market terms and conditions as of the date of the appraisal. MARKET RENTAL ESTIMATE In the valuation of a leased fee estate, contract rents establish income for the leased space but market rent is the basis for estimating income for current and future vacant space. To estimate market rent, we analyzed the five comparable rentals that are summarized in the following table. SUMMARY OF COMPARABLE RENTALS Rentable Lease Area Term Base Lease No. Name/Address (SF) (Yrs) Rent/SF Type 1 Industrial Bldg. 5,000 Annual $3.12 Gross 298 NE 59 Street Miami Miami -Dade, FL Comments: Above Average Condition, Wholesale gift shop - Tenant for over 12 years. 2 Industrial Bldg. 4,785 Annual $3.25 Gross 247 NE 59 Street Miami Miami -Dade, FL Comments: Street Level - 12' Ceilings. Tenant Pays Utilities. Average Condition 3 Industrial Bldg. 7,015 Annual $3.75 Gross 6701 NE 2 Court Miami Miami -Dade, FL Comments: Single Tenant Building - Average Condition 4 Industrial Bldg. 26,648 Annual $4.50 NNN 253 NE 73 Street Miami Miami -Dade, FL Comments: Single Tenant Bldg. - Average Condition 5 Industrial Bldg. 28,412 Annual $5.75 NNN 6454 NE 4 Avenue Miami Miami -Dade, FL Comments: Single Tenant Updated Bldg. w/2 story offices, parking Subject 18,920 PAGE 28 Integra Realty Resources INDUSTRIAL BUILDING INCOME CAPITALIZATION APPROACH Each comparable was compared to the subject and adjustments were made to compensate for differences in lease terms, market conditions, property characteristics and other relevant factors. Adjustments for differences in the allocation of expenses between landlord and tenant were based on our judgment that typical lease terms for current and future vacant space at the subject would be on a Gross basis with expense responsibilities apportioned as follows: EXPENSE STRUCTURE Expense Owner Tenant Real Estate Taxes X Insurance X Utilities X Repairs/Maintenance X X General / Administrative X Management Fees X Rentacement Reserves X After adjustment, the five comparables indicate a market rental range for the subject of $ 3.12 to $ 5.75 per square foot. Placing primary weight on Comparable Sale Nos. 3 and 4, it is our opinion that a market rental rate of $4.50 per square foot is appropriate. We note that the concluded market rental rate is slightly below the mean of the comparable rentals range. PAGE 29 Integra Realty Resources INDUSTRIAL BUILDING INCOME CAPITALIZATION APPROACH ESTIMATE OF STABILIZED INCOME AND EXPENSES Because the property is stabilized, the first forecast year was used to develop a stabilized income and expense statement. The first forecast year is the 12 month period following the effective date of the appraisal, starting 8/22/02 and ending 8/21/03. On this basis, potential gross rent was estimated as follows: Contract Rent — Forecast Year: N/A Plus: Vacant Space at Market Rent: 18,920 SF @ $4.50/SF $85,140 Potential Gross Rent: S85,140 The Income Reconstruction Chart, below, shows our income and expense projections for the first forecast year as well as historic income and expense figures provided by the property owner. Some of the key points of our analysis are summarized as follows: • Stabilized vacancy and collection loss was estimated at 10% based on the current vacancy rate in the submarket including an allowance for credit loss. Vacancy and collection loss was deducted from PGI to arrive at effective gross gross income ("EGI"). • No additional income was added to EGI to arrive at Total EGI. • Operating expenses were estimated at $25,344 overall or $1.34 per square foot based on an analysis of the subject's current taxes, our experience with expenses at comparable properties and industry expense guidelines. Total operating expenses include management fees of 3% of Total EGI and replacement reserves of $0.12 per square foot. • Operating expenses were deducted from Total EGI to arrive at net operating income ("NOI") of $51,282. PAGE 30 Integra Realty Resources INDUSTRIAL BUILDING INCOME CAPITALIZATION APPROACH INCOME RECONSTRUCTION CHART Category Gross Income Forecast Year 08/22/02 - 08/21/03 (Stabilized Basis) Per SF of Amount RA Potential Gross Rent $85,140 $4.50 Expense Reimbursements Potential Gross Income $85,140 $4.50 Vacancy/Collection Loss 10%-$8,514 -S0.45 Effective Gross Income $76,626 $4.05 Other Income Total Effective Gross Income $76,626 $4.05 Expenses Real Estate Taxes $7,628 $0.40 Insurance $6,622 $0.35 Utilities Repairs/Maintenance $4,725 S0.25 General / Administrative $1,800 $0.10 Management Fees 3% $2,299 $0.12 Replacement Reserves $0.12/SF $2,270 $0.12 Total Expenses Operating Expense Ratio Net Operating Income $25,344 $1.34 33.1% 33.1% $51,282 $2.71 DIRECT CAPITALIZATION We estimated a capitalization rate of 12.50% based on rates extracted from comparable sales and supported by investor surveys and the band of investment method. Applying this capitalization rate to the stabilized net operating income of $51,282, we arrived at a value indication as follows: Effective Gross Income $76,626 Less Expenses $25,344 Net Operating Income $51,282 Capitalization Rate 12.50% Stabilized Value Indication $410,256 As Is Value Indication $410,256 Rounded To $410,000 PAGE 31 Integra Realty Resources INDUSTRIAL BUILDING RECONCILIATION AND CONCLUSION OF VALUE VALUE INDICATION - INCOME CAPITALIZATION APPROACH We have only utilized the Direct Capitalization Method because it is more reflective of the thought process of the typical investor in this property type. Therefore, we have arrived at a final value indication by the income approach of $410,000. RECONCILIATION AND CONCLUSION OF VALUE The value indications developed under the three approaches are as follows: Cost Approach N/A Sales Comparison Approach $400,000 Income Capitalization Approach $410,000 The income approach was given the greatest weight because the most likely purchaser is an investor who would negotiate a purchase price in relation to the income that the property is capable of producing. The sales comparison approach was given less weight although investors do give consideration to prices of comparable properties in their decision making. Accordingly, it is our opinion that the market value of the Fee Simple Estate of the subject as of August 22, 2002, is: FOUR HUNDRED TEN THOUSAND DOLLARS ($410,000). The preceding value conclusion is subject to any Extraordinary Assumptions and Hypothetical Conditions set forth in this Report. ESTIMATED EXPOSURE TIME AND MARKETING PERIOD Based on recent sales transactions and interviews with market participants, it is our opinion that the probable exposure time for the property would have been 12 months. Because we foresee no significant changes in market conditions in the near term, it is our judgment that a reasonable marketing period is likely to be the same as the exposure time. Therefore, the subject's marketing period is estimated at 12 months. PAGE 32 Integra Realty Resources INDUSTRIAL BUILDING CERTIFICATION CERTIFICATION We certify that, to the best of our 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 our personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. We 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. We have no bias with respect to the property that is the subject of this report or the parties involved with this assignment. 5. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 6. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in compliance with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP), and in accordance with the appraisal regulations issued in connection with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). 8. Jose E. Valera, ASA made a personal inspection of the property that is the subject of this report on August 22, 2002. Barbara Johenning also personally inspected the subject. 9. No one has provided significant real property appraisal assistance to the person(s) signing this certification. 10. This appraisal is not based on a requested minimum valuation, a specific valuation, or the approval of a loan. 11. We have not relied on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value. 12. It is our opinion that the subject does not include any enhancement in value as a result of any natural, cultural, recreational or scientific influences retrospective or prospective. 13. We have experience in appraising properties similar to the subject and are in compliance with the Competency Rule of USPAP. PAGE 33 Integra Realty Resources INDUSTRIAL BUILDING CERTIFICATION 14. The use of this report is subject to the requirements of the Appraisal Institute and/or the American Society of Appraisers relating to review by its duly authorized representatives. 15. As of the date of this appraisal, Jose E. Valera, ASA has completed the requirements of the continuing education program of the Appraisal Institute and/or the American Society of Appraisers. Qualifications of the Appraiser(s) are in Addendum F. lera, ASA ommerci 1 Division Director State Certified General Real Estate Appraiser FL Certificate #RZ0000764 Registre Real Estate Appraiser FL Certificate #RI0006980 PAGE 34 Integra Realty Resources