APPRAISAL OF 1268 EAST 14TH STREET BROOKLYN, NEW YORK appraisal Jan 1… · The purpose of this appraisal is to estimate the market value of the subject property as of December 8,

APPRAISAL OF

1268 EAST 14TH STREET

BROOKLYN, NEW YORK

W SHUBERT & CO., INC.M


REAL ESTATE APPRAISAL AND CONSULTING

2117 WILLIAMSBRIDGE ROAD, BRONX, NY 10461-1601(718) 863-2200

(FAX) 863-2215

W ILLIAM E. SHUBERT, M AI

INDIVIDUAL M EM BERSHIPS:Appraisal InstituteYoung Mortgage Bankers AssociationRegional Plan AssociationReal Estate Board of New York

PAUL ADLERELIE BENSHABAT

ISAAC BENSHABATMANUEL FERNANDEZ

MICHELLE HENDEEJONATHAN HERDER

DANIEL HIGGINSDON MILLER

EDWARD SUSSAN

January 16, 2015Mr. Howard LorchChief Financial OfficerOhel Children’s Home and Family Services 4510 16th AvenueBrooklyn, NY 11204 Re: 1268 East 14th Street

Brooklyn, New YorkDear Mr. Lorch:

At your request, we have examined the above-captioned property for the purpose ofestimating its market value as of December 8, 2014 (a vacant high-ceilinged one-storybuilding); market value as of July 1, 2016 (the anticipated completion date of theproposed conversion to a three-story 63,000 GSF office building); and market value atstabilized rental occupancy, anticipated to be as of July 1, 2017. The subject currentlyconsists of a high ceilinged one-story former movie production studio, proposed to berenovated to offices, situated on a 26,063 SF site in the Midwood section of Brooklyn, NY.

This appraisal was completed in accordance with the requirements of the AppraisalInstitute, of which I am a member. The appraisal also conforms to the current UniformStandards of Professional Appraisal Practice (USPAP) promulgated by the AppraisalStandards Board of the Appraisal Foundation, and the standards set forth in the 2010Interagency Appraisal and Evaluation Guidelines.

Based on our investigation and analysis, and subject to the limiting conditions stated inthe accompanying report, it is our opinion that the Market Value of this property is:

Value “as is” as of December 8, 2014 (as a vacant “shell” building) $9,475,000

Value as of April 1, 2016 (anticipated completion date) $22,970,000

Value as of April 1, 2017 (at stabilized occupancy) $27,130,000

*see the assumptions stated at page 3 of this report

Respectfully submitted,

____________________ _______________William E. Shubert, MAI Isaac BenshabatCertified General R.E. Appraiser Certified General R.E. AppraiserNY (No. 46-3156), NJ NY (No. 46-49712)

SUMMARY OF SALIENT FACTS AND CONCLUSIONS

Location: 1268 East 14th StreetBrooklyn, New York

Property Rights Appraised: Fee Simple Interest

Site Area: 26,063 square feet

Improvements: Vacant high-ceilinged one-story and basementbuilding, proposed to be renovated to consist ofa 3-story office structure with 63,000 SF, pluscellar level parking for 75 vehicles.

Condition: Anticipated to be excellent when complete.

Zoning: M1-1 (Industrial); permits office and communityfacility use

Assessed Valuation and Taxes:

CALCULATION OF CURRENT TAX LIABILITY

BLOCK/LOT ASSESSED VALUATION TAX RATE/100 TAX LIABILITY

6733/35 $2,192,490 10.684 $234,246

Highest and Best Use: Proposed Use.

Value Conclusions:


Value as of July 1, 2016 (anticipated completion date) $22,970,000

Value as of July 1, 2017 (at stabilized occupancy) $27,130,000



TABLE OF CONTENTS

PageTITLE PAGETRANSMITTAL LETTERSUMMARY OF SALIENT FACTS AND CONCLUSIONSTABLE OF CONTENTSPHOTOGRAPHS OF SUBJECT

INTRODUCTIONPurpose of Appraisal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Function of Appraisal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Market Value Defined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Property Rights Appraised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Legal Description.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Exposure and Marketing Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Scope of Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Extraordinary Assumptions and Hypothetical Conditions.. . . . . . . . . . . . . . . . . 3Subject's Sale History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

NEIGHBORHOOD AND PROPERTY DESCRIPTIONArea Description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Local Area Description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Site Description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Improvement Description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Zoning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Assessed Valuation and Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

HIGHEST AND BEST USEHighest and Best Use Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

VALUATIONThe Appraisal Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Sales Comparison Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Income Capitalization Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Summary and Reconciliation of Value Indications. . . . . . . . . . . . . . . . . . . . . . 53Value Conclusions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55ASSUMPTIONS AND LIMITING CONDITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56ADDENDA

- Architect’s Estimated Construction Costs- Construction Plans - Survey of Investment Criteria- Qualifications of the Appraisers- Recent Appraisals Completed- Clients Served


SUBJECT - 1268 EAST 14 STREETTH

VIEW SOUTH ON EAST 14 STREET- SUBJECT AT RIGHTTH

VIEW NORTH ON EAST 14 STREET- SUBJECT AT LEFTTH

VIEW NORTH ON EAST 13 STREET- SUBJECT AT RIGHTTH

VIEW EAST ON LOCUST AVENUE - SUBJECT AT RIGHT

VIEW WEST ON LOCUST AVENUE - SUBJECT AT LEFT

OPEN ONE-STORY PORTION

TYPICAL VIEW OF THREE-STORY PORTION

BOILERS

PARTIAL ROOF VIEW

1

PURPOSE OF APPRAISAL

The purpose of this appraisal is to estimate the market value of the subject property as

of December 8, 2014 (a vacant high-ceilinged one-story building); as of July 1, 2016

(following the proposed conversion to a three-story 63,000 GSF office building); and

market value at stabilized rental occupancy, anticipated to be as of July 1, 2017.

FUNCTION OF APPRAISAL

The function of this appraisal is to assist Ohel Children’s Home and Family Services

(defined as our client, and the intended user of the report) and its designees, in its realty

analysis for financing purposes by providing a supported opinion of value for the subject.

MARKET VALUE DEFINED1

Market Value is defined as the most probable price which a property should bring in a

competitive and open market under all conditions requisite to a fair sale, with the buyer

and seller each acting prudently and knowledgeably, and assuming the price is not

affected by undue stimulus. Implicit in this definition is the consummation of a sale as of

a specified date and the passing of title from seller to buyer under conditions whereby:

a. The buyer and seller are typically motivated;

b. Both parties are well-informed or well-advised and each acting in what heconsiders his own best interest;

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

d. Payment is made in terms of cash in U.S. dollars or in terms of financialarrangements comparable thereto; and

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

1 This definition of market value was taken from the Department of the Treasury, Office of the Comptroller of

the Currency, 12 CFR Part 34, dated August 24, 1990 (Section 34.42 - Definitions). The above definition is

the same for six of the federal banking agencies: The Federal Reserve System, Office of the Comptroller of

the Currency, Federal Deposit Insurance Corporation, Resolution Trust Corporation, Office of Thrift

Supervision, and the National Credit Union Administration.


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PROPERTY RIGHTS APPRAISED

The property rights appraised are those of the Fee Simple Interest, defined as: "Absolute

ownership unencumbered by other interest or estate, subject only to the limitations of

eminent domain, escheat, police power, and taxation." The subject is reported to be2

partially encumbered by lease; as a premise of this appraisal, we have assumed that this

lease can be terminated at nominal cost and delay. 3

LEGAL DESCRIPTION

The subject property is designated by the City of New York Bureau of Real Property

Assessment as Block 6733, Lot 35, Borough of Brooklyn. This method of description is

commonly referred to in place of a metes and bounds description in New York City.

MARKETING AND EXPOSURE TIME

As explained in Statement 6 and advisory opinion AO-7 of the Appraisal Standards Board

of The Appraisal Foundation, marketing time and exposure time are distinct concepts.

Marketing time refers to the period immediately following the effective date of appraisal.

Considering current and anticipated economic conditions, it is our opinion that a period

of less than one year will be required to sell the subject property at the value estimated.

Exposure time is defined as the estimated length of offering time the subject property

would have required prior to the effective date of the appraisal in order to consummate

a sale at the appraised value, on that date. Exposure time therefore precedes the

effective date of the appraisal. Exposure time for the subject property is estimated to be

less than one year.

SCOPE OF SERVICES

Wm. Shubert & Co., Inc. has been retained by Ohel Children’s Home and Family

[Appraisal Institute, “The Appraisal of Real Estate”, 11th ed. (Chicago: American Institute of Real EstateAppraisers, 1996), p. 127.]

3[American Institute of Real Estate Appraisers, “The Appraisal of Real Estate”, 11th ed. (Chicago:

American Institute of Real Estate Appraisers, 1996), p. 127]


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Services to estimate the market value of 1268 East 14th Street, Brooklyn, New York,

referred to as the subject property. In completing this assignment, we undertook the

following scope of services:

- Inspected the subject property and its surrounding area.

- Examined building plans and construction costs provided by ownership.

- Defined the subject property and researched its history of ownership.

- Reviewed demographic and economic trends in the immediate area, and in theregion.

- Reviewed zoning regulations applicable to the subject property.

- Studied the historic trend in tax liability, estimated current taxes, andprojected the future trend in tax liability.

- Analyzed Highest and Best Use.

- Estimated market value by development of the Sales Comparison and IncomeCapitalization Approaches.

- Reconciled the indications of the various approaches, and arrived at a finalvalue conclusion as of the defined dates.

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS

Extraordinary assumptions underlying this appraisal consist of the following:

1. We have assumed that the subject will be completed consistent with the plansprovided to us (and presented in this appraisal as exhibits), and that the total cost ofrenovations will be as reported. We have assumed that the development will comply withall building and zoning codes, and that a certificate of occupancy will be granted to theproject, as described, when complete.

2. The plans provided are incomplete, and do not contain building measurements.Building areas provided by ownership are assumed to be accurate.

3. Since ownership is a nonprofit entity, ICAP tax benefits will reportedly not be appliedfor. This benefit must be applied for prior to obtaining a building permit; given this, wehave valued the subject assuming that a potential purchaser, at a future date, will not beeligible for this benefit.

4. The zoning lot description filed in ACRIS identifies one of the subject’s southern lotboundaries as being 135' wide, while a survey provided by ownership, and the ScheduleA from the subsequent transfer deed, identify this boundary as 155'. We relied on the


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figure shown in the survey and on the Schedule A, since it seems most appropriatebased on the remaining perimeter measurements (which are consistent in all documents).

Hypothetical conditions underlying this appraisal consist of the following:

1. We have valued the subject “as if complete”; it is not complete at this time.

We advise the users of this appraisal that the extraordinary assumptions relied on, if

found to be false, could alter the appraiser’s opinions or conclusions. The hypothetical

conditions relied on have a significant effect on the appraisers opinions and conclusions.

SUBJECT'S SALE HISTORY

According to public records, the subject property has been held in the current ownership

(Ohel Children’s Home and Family Services, Inc.) since October 30, 2014, when it was

purchased for a recorded consideration of $8,450,000 from Avenue M Realty Holdings,

LLC. Avenue M Realty, LLC had purchased the property on December 9, 2013 for a

recorded consideration of $15,050,000, including an adjacent parcel which was sold

separately on December 11, 2014 to “Extra Space of Brooklyn 14 Street at a price ofth

$10,850,000..


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REGIONAL MAP

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AREA DESCRIPTION

New York City is located on the Atlantic Seaboard near the midway point of the

Boston/New York/Washington Megalopolis corridor. It is recognized as the United States'

and the world's financial center. As well as possessing an excellent natural harbor, New

York is one of the leading cultural meccas of the world, with fine universities, museums,

libraries, theaters, and music institutions. It is renowned as a medical center and is a

popular national and international tourist attraction.

The City of New York encompasses 300 square miles of land, and its population of 7.5

million people positions it as the most populated city in the United States. Manhattan is

the nation's financial capital and serves as a world financial capital along with London

and Tokyo. Over 2,500 foreign firms have offices in New York, including approximately

450 foreign banks. In addition, New York is the home of over 100 Industrial and Service

Fortune 500 companies, more than any other city in the United States. In order to house

the City's business activity, Manhattan has over 350 million square feet of office space.

New York represents one of the premier tourist destinations in the United States. It is a

world renowned center of culture, entertainment, and shopping, containing hundreds of

museums, art galleries, theaters, restaurants, and retail stores. The City is home to such

musical institutions as the New York City Symphony, Carnegie Hall, Lincoln Center, and

the Metropolitan Opera, and with its many Broadway and off-Broadway plays and

musicals, is the performing arts capital of the world. In addition, the City's many tourist

attractions such as the Statue of Liberty, Empire State Building, United Nations, New

York Stock Exchange, Central Park, and many others, draw millions of visitors each year.

The entire city covers 204,681 acres, or 320 square miles.

Of the five boroughs which comprise the City of New York, each being a county, the

Bronx is the only mainland borough; Brooklyn, Queens, Richmond (Staten Island), and


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Manhattan are located on islands. The highest concentration of jobs, as well as financial

and cultural activity, is in Manhattan, often considered synonymous with New York City

as a whole. Manhattan Island has an area of 22.5 square miles, a length of 13.4 miles

and a width, at its widest point at 86th Street, of 2.3 miles.

Population

Population growth in the period since 1980 reversed several decades of decline. The

decreasing population base from World War II through 1980 is attributable to a number

of factors, notably a tendency to migrate towards suburban areas, a reduction in

household size, and a long-term decline in manufacturing jobs. Population rose in the

period following the 1980's due to the strength of the economy, particularly the financial

and service sectors. The following table illustrates population trends for the city:

1970 1980 1990 2000 2010 2011 2015

Overall 7,894,862 7,071,639 7,322,564 8,008,278 8,175,133 8,214,677 8,336,835

% Change 1.5% -10.4% 3.5% 9.4% 2.1% 0.5% 1.5%

Bronx 1,471,701 1,168,972 1,203,789 1,332,650 1,385,108 1,390,185 1,414,136

% Change 3.3% -20.6% 3.0% 10.7% 3.9% 0.4% 1.7%

Brooklyn 2,602,012 2,230,936 2,300,664 2,465,326 2,504,700 2,521,808 2,567,516

% Change -1.0% -14.3% 3.1% 7.2% 1.6% 0.7% 1.8%

Manhattan 1,539,233 1,428,285 1,487,536 1,537,195 1,585,873 1,592,826 1,617,436

% Change -9.4% -7.2% 4.1% 3.3% 3.2% 0.4% 1.5%

Queens 1,986,473 1,891,325 1,951,598 2,229,379 2,230,722 2,240,310 2,259,683

% Change 9.8% -4.8% 3.2% 14.2% 0.1% 0.4% 0.9%

Staten Island 295,443 352,121 378,977 443,728 468,730 469,548 478,064

% Change 33.1% 19.2% 7.6% 17.1% 5.6% 0.2% 1.8%

Source: 1970-2010 US Census and ESRI for 2011 and 2016 projections

Transportation

New York has the most extensive subway system in the world, exceeding all others in

total miles of underground track (448), in number of stations (458), in rolling stock


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(6,674), and in the total number of passenger miles per year (307 million). In addition,

the Long Island Railroad, MetroNorth, and Amtrak provide suburban commuter and

intercity rail service. The subway system deteriorated significantly between 1950 and

1980. A ten year multibillion dollar capital program, begun in 1982, improved subway

service and the condition of the capital stock significantly. This program included

improvement of the subway system, buses, ferries, airports, and heliports.

The highway system in Manhattan is comprised of the Franklin Delano Roosevelt (FDR)

Drive, and the remnants of the West Side Highway, which leads to the Henry Hudson

Parkway. Plans to rebuild the West Side Highway were stalled by community opposition

for over twenty years, but are now going forward, accompanied by the construction of a

riverfront park. New York City is connected to New Jersey by the George Washington

Bridge, and the Lincoln and Holland Tunnels; to Queens and Long Island via the

Queensboro (59th Street) Bridge, the Triboro Bridge, and the Queens Midtown Tunnel;

to Brooklyn by the Brooklyn, Manhattan, and Williamsburg Bridges and the Brooklyn

Battery Tunnel; and to points north by the Major Deegan Expressway (I-87), the Henry

Hudson and Bronx River Parkways, and the New England Thruway (I-95).

Health

New York City offers a contrast in health care, including the finest medical facilities in the

nation. Internationally known medical institutions include Columbia Presbyterian Medical

Center, New York University Medical Center, the Rockefeller Institute, Sloan Kettering

Center, Mount Sinai, and New York Hospitals, plus numerous specialized institutions.

Education

Elementary and secondary education varies; fine private and excellent public schools are

available, although many districts suffer from low reading scores and high dropout rates.

Colleges include Columbia University, New York University, Pace University, the New

School for Social Research, the Fashion Institute of Technology, Manhattan Community


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College, and the City University of New York. The city's 23 public and 53 independent

institutions of higher education enroll a total of 356,000 students.

Culture and Recreation

New York City offers an unsurpassed variety of cultural activities, including such world

class museums as The Metropolitan Museum of Art, The Museum of Modern Art, The

Guggenheim, and the Museum of Natural History, plus dozens of smaller museums.

Broadway, Off Broadway and Off-Off Broadway constitute by far the largest theater

community in the nation. Music is offered by the New York Philharmonic, the

Metropolitan Opera and the City Opera at Lincoln Center, and Carnegie Hall. Several

world famous dance troupes are located in New York. Other attractions include the New

York Aquarium, the Bronx Zoo, and the Bronx and Brooklyn Botanical Gardens.

Cultural activities constitute a $6 billion industry in New York City. One-fifth of the

audience of 64 million arrives from outside the region. Given the density of

overdevelopment, New York City offers relatively few opportunities for outdoor recreation.

Central Park, designed by Frederick Law Olmsted, draws most outdoor fans. Additional

opportunities are available in parks near the Hudson and East Rivers.

Conclusion

Fundamental factors which reflect the ultimate vibrancy of the City include:

- The New York Metropolitan area is the largest consumer market in the world. Cityresidents alone represent more than $50 billion in annual buying power.

- The number of major corporations headquartered in the City is more than the totalfound in Chicago, Los Angeles, Philadelphia, and Detroit combined.

- New York is the home of the New York and American Stock Exchanges andvarious commodity exchanges.

- The City is the world capital of international commerce and finance. Of all foreigncorporations with offices in the United States, more than 60% have theirheadquarters here. In recent years, many foreign banks have opened offices inthe City, and additional requests to establish offices await regulatory approval.

- New York City is the home of the United Nations and associated international


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consulates and missions.

- The City has the most comprehensive transportation and distribution system in thenation. The Port of New York is one of the world's largest natural harbors. Withits modern containerization facilities, the harbor has assumed an even greater rolein the nation's maritime commerce.

- Office space in the Central Business District totals approximately 360 millionsquare feet, more than any other American city.

- The City remains the nation's leading tourist center, offering a matchlessconcentration of cultural and recreational resources. It is also the center for visualand performing arts, and the fashion industry. The above indicators confirm thatNew York remains the leading center of commerce, culture, education, andfinance in the country.

Report On Current Economic Conditions

Real estate functions as one element of a broad economic environment, and is influenced

by national, regional and local trends. The following summary provides a brief overview

of current economic conditions as described by the New York City Office of Management

and Budget, and the New York City Economic Development Corporation:

Highlights

! U.S. Economy - While the harsh winter, weaker trade figures and an inventoryadjustment sapped growth in the first quarter, the economy appears to haverecovered in the second quarter. Employment indicators were strong and thehousing market continues to rebound, albeit at a less torrid pace than the previoustwo years.

! Financial Markets - Wall Street is facing weakness due to a recent slowdown infixed income, currencies and commodities trading. Issuance and trading ofsecurities has slowed, including most types of bonds. Despite a similar slump inequity trading, stock prices continue to rise, with the S&P 500 gaining almost fivepercent in the first half of 2014.

! Inflation -The Fed continues to pare back its bond purchase program and looksset to shutter the current round of quantitative easing by the end of the year. Withinflation pressures under control, the Fed remains committed to keepingshort-term interest rates near zero for an extended period. Longer-term, controlover interest on bank reserves provides the Fed an additional tool to managemonetary policy without using traditional policy levers.

! Labor Markets - Following three years of spectacular growth, the New York Citylabor market continues to expand, but at a more subdued pace. Over the past four


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months, only 15,000 private sector jobs have been added, the slowest pace of jobgrowth for the February through May period since the recovery began. While thegains so far this year have been muted, some sectors continue to experiencesteady growth.

Unemployment Rates

Place of Residence 12 Months Ending

July-14 July-13

Bronx 11.3% 12.2%

Brooklyn 8.7% 9.7%

Manhattan 6.7% 7.5%

Queens 7.3% 8.0%

Staten Island 7.4% 8.2%

NYC 8.1% 8.9%

! Employment - Private sector jobs in New York City rose by 25,000 in July 2014after a rise of 1,700 jobs in June 2014. Government jobs in the City rose slightly, resulting in a net overall increase of 25,100 total private and public sector jobs inJuly. Since July 2013, private sector employment has risen by 101,000 jobs.New York City’s unemployment rate was 8.1% in July 2014.

! Office Market - The office market has thrived so far in 2014, with leasing activityup 34 percent on a year-over-year basis. Primary market asking rents continuetheir steady climb, rising above $70 per square foot for the first time in five years.Investors remain bullish on the office market, as shown by the number of largecommercial transactions so far this year. However, the recent slowdown inoffice-using employment growth is a cause for concern going forward. In August2014, the Manhattan Class A direct vacancy rate fell to 9.8 percent while theaverage rental rate rose slightly to $72 PSF. the same month, the DowntownClass A direct vacancy rate fell to 10.6 percent and the rental rate remained at $54PSF. The Manhattan Class A sublease vacancy rate decreased slightly in Augustover the previous month, from 1.9 percent to 1.8 percent.

Class A Office Vacancy Rates and Average Rents

Vacancy Rate Average Rents/SF

Direct Sublease Direct Sublease

Date/Market Aug-14 Jul-14 Aug-14 Aug-14 Jul-14 Aug-14

Midtown 9.8% 9.9% 2.2% $78 $76 $71

Midtown South 6.5% 6.8% 1.7% $66 $66 $50

Downtown 10.6% 11.0% 0.6% $54 $54 $41

Manhattan Total 9.8% 9.9% 1.8% $72 $71 $67

Source: Cushman and Wakefield

! Residential Market - The housing market continues to gain momentum with salesvolume and average prices recording solid gains in the first quarter from a yearago. With demand continuing to be strong while inventories remain lean, permit


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issuances are expected to continue climbing. Building permits have posteddouble-digit gains since 2010, and look likely to continue that trend in 2014.

City of New York Housing Unit PermitsYear Bronx Brooklyn Manhattan Queens Staten Island Total

2002 2,626 5,247 5,407 3,464 1,756 18,500

2003 2,935 6,054 5,232 4,399 2,598 21,218

2004 4,924 6,825 4,555 6,853 2,051 25,208

2005 4,937 9,028 8,493 7,269 1,872 31,599

2006 4,658 9,191 8,790 7,252 1,036 30,927

2007 9,520 7,625 10,930 3,104 739 31,918

2008 2,128 12,357 9,700 7,730 1,255 31,915

2009 1,647 1,003 1,363 1,474 570 6,057

2010 1,064 2,093 872 2,358 508 6,895

2011 1,116 1,522 2,535 3,182 581 8,936

2012 2,552 3,353 2,492 1,529 673 10,599

2013 2,480 5,632 4,845 2,579 590 16,126

! Transit Ridership - Total ridership on MTA subways, trains and buses in July 2014 was 227.1 million, an increase of .0 percent from July 2013. Subway ridership in July 2014 was 146.3 million, a 3.9 percent increase from July2013.Source: Metropolitan Transportation Authority

! Tourism and Travel Air Traffic - In June 2014, 10.6 million passengers flew intoand out of the region's airports, an increase of 3.8 percent from June 2013. Domestic air carriers accounted for 6.7 million passengers, a 3.0 percent increasefrom June 2013. 3.9 million passengers traveled with international air carriersin June 2014, a 5.1 percent increase from June 2013.Source: Port Authority of New York and New Jersey

! Broadway Ticket Sales - Total Broadway attendance was approximately 1.1million during the five weeks ending August 31, 2014, up 10.2 percent from thesame period last year. Broadway revenue during this period was about $123.2million, up 12.7 percent from last year.Source: The Broadway League

! Hotel Occupancy - In July 2014, the average daily hotel room rate was $259, a1.4 percent increase from July 2013. Hotel occupancy was 91.2 percent in July 2014, up from 90.5 percent in July 2013. The average daily hotel room rateincreased the most in hotels charging between $185 and $220 per night.



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BROOKLYN BOROUGH DESCRIPTION

The borough of Brooklyn is situated at the western end of Long Island, bounded to the

north by New York County and the East River, to the east by Queens County and

Jamaica Bay, to the south by the Atlantic Ocean, and to the west by Staten Island, Upper

and Lower New York Bays, and the East River.

Population

Brooklyn is the most heavily populated of the five boroughs which comprise New York

City, with Kings County (the county name) accounting for over 30% of the city's

population. It is also the seventh most populous county in the United States. The

following table illustrates the trend in population for the borough:

POPULATION TRENDS KINGS COUNTY 1910 - 2010

Year 1910 1920 1940 1960 1980 2000 2010

Population 1,634,351 2,018,356 2,698,285 2,627,319 2,230,936 2,465,326 2,504,700

Change 23% 34% -3% -15% 11% 2%

Source: US Census Bureau

A decrease in the crime rate, coupled with the housing and related construction boom,

caused a rise in the population in recent years. Population density is approximately

10,000 people per square mile.

Income and Employment

Brooklyn exhibits diversity in neighborhood income levels, from affluent households in the

northwest portions of the county to pockets of poverty in Bushwick and Brownsville in

central Brooklyn, where family income is well below the city median. The median

household income for 2010 was $40,382, fourth among the five boroughs, ahead of only

the Bronx. Approximately 25% of all households earn less than $18,690 per year. The

following table illustrates the unemployment rate for the borough:


13

UNEMPLOYMENT RATE FOR NYC AND BROOKLYN

2004 2006 2007 2008 2009 2010 2011 2012 7/2013

NYC 7.1% 5.0% 4.9% 5.5% 9.2% 9.6% 9.0% 9.2% 8.7%

Brooklyn 7.6% 5.4% 5.3% 5.9% 9.8% 10.3% 9.8% 9.9% 9.6%

Source: NY State Department of Labor

The borough typically averages an unemployment rate about one-half to one percent

higher than the city as a whole. After a sharp rise at the beginning of the recession, the

county has seen a slight decline in the rate similar to the surrounding area. The

percentage of people in poverty was 21.8% in 2011, second highest in the city after the

Bronx. Major employers in Brooklyn include Pfizer, Citigroup, American International

Group, J.P. Morgan Chase and Company, Verizon Communications, IBM, Morgan

Stanley, Merrill Lynch, Altria Group, Goldman Sachs Group, MetLife, Time Warner,

PepsiCo, Alcoa, Hess, American Life Insurance and American Express.

Housing

The Borough of Brooklyn possesses a range in housing, from multi-million dollar luxury

brownstones to inner-city slums. There were 1,000,293 units in Brooklyn in 2010, up

from 930,966 in 2000. Many of these were built prior to 1939 (38.1%), with 40.1% built

between 1940 and 1969. A lack of developable land has hindered new construction in

recent years. The Furman Center reports that there were 3,045 new housing units built

in 2000, rising to 10,707 in 2008. These figures fell dramatically following the recession

of 2008-10, with only 531 units built in 2009 and 274 in 2010, but has since rebounded.

The table on the following page illustrates pricing for various types of housing in the

county as reported by Douglas Elliman:


14

Brooklyn Market Matrix 2Q-2013 % Chg (QTR) 1Q-2013 % Chg (yr) 2Q-2012

Average Sales Price $671,964 5.90% $634,594 14.70% $585,777

Median Sales Price $550,000 6.80% $515,000 15.30% $477,108

Number of Sales 1,855 15.40% 1,608 -6.70% 1,988

Days on Market (From Last List Date) 146 -8.80% 160 -8.20% 159

Listing Discount From Last List Price) 0.10% 1.10% 4.00%

Listing Inventory 4,704 41.50% 3,325 -18.50% 5,772

Absorption Rate (mos) 7.6 22.60% 6.2 -12.60% 8.7

Year-to-Date 2Q-2013 % Chg (QTR) 1Q-2013 % Chg (yr) 2Q-2012

Average Sales Price (vo) $654,612 N/A N/A 13.60% $576,023

Median Sales Price (yrb) $535,000 N/A N/A 14.90% $465,426

Number of Sales (Nab) 3,463 N/A N/A -8.70% 3,795

Condo Market Matrix 2Q-2013 % Chg 1Q-2013 % Chg (yr) 2Q-2012


Average Price per Sq Ft $726 7.40% $676 1.40% $716


Number of Sales (Closed) 717 46.60% 489 11.90% 641


Listing Discount (From Last List Price) 1.30% 2.20% 2.00%

Co-op Market Matrix 2Q-2013 % Chg (QTR) 1Q-2013 % Chg (yr) 2Q-2012



Number of Sales (Closed) 483 3.60% 466 22.60% 394



Luxury Market Matrix 2Q-2013 % Chg (QTR) 1Q-2013 % Chg (yr) 2Q-2012

Average Sales Price $1,905,420 5.20% $1,810,931 15.10% $1,655,637

Median Sales Price $1,650,000 8.00% $1,527,500 20.40% $1,370,000

Number of Sales (Closed) 185 15.60% 160 -6.60% 198

Days on Market (From Last List Date) 148 -12.90% 170 35.80% 109



15

Brownstone Market Matrix 2Q-2013 % Chg (QTR) 1Q-2013 % Chg (yr) 2Q-2012

Average Sales Price $1,910,645 16.30% $1,643,213 18.50% $1,612,361

Average Price Per Sq Ft $657 16.10% $566 16.90% $562

Median Sales Price $1,600,000 16.40% $1,375,000 21.70% $1,315,000

1-Family $1,600,000 8.10% $1,480,000 3.20% $1,550,000

2-Family $1,450,000 9.40% $1,325,000 13.50% $1,277,500

3-Family $2,117,000 51.20% $1,400,000 76.40% $1,200,000

Number of Sales 69 -16.90% 83 -11.50% 78

New Development Market Matrix 2Q-2013 % Chg (QTR) 1Q-2013 % Chg (yr) 2Q-2012


Average Price Per Sq Ft $786 11.20% $707 11.80% $703


Number of Sales 271 11.50% 243 -9.10% 298



source: Douglas Elliman

! Inventory fell to 5-year low in the second quarter. There were 4,704 listings at the endof the second quarter, 18.5% below prior year levels. It's the lowest second quarter onrecord and the third lowest quarter since DE began tracking this metric in late 2007.

! Sales slipped as price indicators rose for 5th consecutive quarter to 10-year recordsThere were 1,855 sales to close in the second quarter, 6.7% less than during the prioryear quarter. Median sales price jumped by 15.3% to $550,000 over the same period, arecord high, in a market characterized by chronically low supply.

! Days on market dropped as market pace accelerated The time it took to sell a propertyfell by nearly two weeks as the monthly absorption rate reached 7.6 months, 1.2 monthsfaster than the prior year quarter.

Brooklyn Apartment Rental Market! All rental price indicators continued to show year-over-year gain. Median rental priceincreased 5.1% to $2,675 from the same period last year. Average rental price expanded8.2% to $3,035 and average price per square foot increased by 6.4% to $37.66 from theprior year period.

! Marketing time edged higher as listing discount compressed from prior year level. Thenumber of days to market a rental property was 36 days, a modest 2-day increase fromthe same month last year, but 11 days faster than in the prior month. Listing discount fellsharply to 6% from 11.2% in the prior year quarter.


16

! The number of new rentals edged higher as landlords continue to set list prices moreconsistently with actual market conditions.

New rentals expanded by a modest 3.7% from prior year levels after falling 3.1% in theprior month. The last two months show a more balanced market with little change in newactivity inferring that lease renewal activity has stabilized.

! The upper half of the market showed more overall price growth. The blended averagerental price of studio and 1-bedroom apartments increased by 6.7% from a prior year to$2,401. The 2-bedroom and 3- and more bedroom blended average sales priceexpanded by 12% to $3,800 over the same period.

Brooklyn Rental Market Jul 13 %Chg (mo) Jun 13 %Chg (yr) Jul 12

Average Rental Price $3,035 -2.80% $3,122 8.20% $2,806

Rental Price per Square Foot $37.66 4.70% $35.97 6.40% $35.41

Median Rental Price $2,675 -2.30% $2,737 5.10% $2,546

Number of New Rentals 393 -4.60% 412 3.70% 379

Days on Market (From Original List Date) 36 -23.40% 47 5.90% 34

Listing Discount (From Original List Price) 6.00% 9.70% 11.20%

Brooklyn Studio Rental Matrix Jul 13 %Chg (mo) Jun 13 %Chg (yr) Jul 12

Average Rental Price $2,136 -5.30% $2,256 16.30% $1,836

Rental Price per Square Foot $34.27 -15.30% $40.47 -0.50% $34.43

Median Rental Price $2,000 9.00% $1,835 11.10% $1,800

Number of New Rentals 60 36.40% 44 39.50% 43

Brooklyn 1-Bedroom Rental Matrix Jul 13 %Chg (mo) Jun 13 %Chg (yr) Jul 12

Average Rental Price $2,504 1.90% $2,458 5.70% $2,368




Brooklyn 2-Bedroom Rental Matrix Jul 13 %Chg (mo) Jun 13 %Chg (yr) Jul 12

Average Rental Price $3,553 6.60% $3,333 16.20% $3,058



Number of New Rentals 129 -7.20% 139 -9.20% 142

3+-Bedroom Rental Matrix Jul 13 %Chg (mo) Jun 13 %Chg (yr) Jul 12

Average Rental Price $4,449 -7.10% $4,790 -1.70% $4,528

Rental Price per Square Foot $35.29 -1.50% $35.82 -2.90% $36.35

Median Rental Price $3,500 -16.50% $4,191 -9.30% $3,859


Source: Douglas Elliman


17

Office Market

According to the Newmark Grubb Knight Frank 4Q14 Brooklyn Office Market report, and

the CoStar 2013 Mid-year Office Report, the New York Outer Borough Office market

ended the fourth quarter of 2014 with a vacancy rate of 6.1%. The vacancy rate was

down over the previous quarter, with net absorption totaling positive 73,128 square feet

in the fourth quarter. Asking rental rates ended the fourth quarter at $37.15, a nominal

decrease over the previous quarter, but an increase over the prior year. Net absorption

for the Brooklyn office market was positive 73,128 square feet in the fourth quarter 2014.

The following article was duplicated from a Bloomberg report dated September, 2013:

Brooklyn Offices Catch Media-Tech Boom as Vacancies Drop

Sept. 4 (Bloomberg) -- David Lombino, director of special projects for Two TreesManagement, talks to Bloomberg's David Levitt about his company's plans to redevelopthe former Domino Sugar refinery in Brooklyn as a mixed-use residential and commercialreal estate project. Brooklyn has attracted the attention of developers seeking tocapitalize on the growth potential of its office market. (Source: Bloomberg)

The 1890s-era warehouse sits across from the Brooklyn Navy Yard, a relic of the NewYork borough's industrial past. Originally a shoe factory and later a root-beer bottlingplant, its arched windows were bricked over long ago.

The building, home of Lockaway Self Storage since 1989, is part of some 20 millionsquare feet (1.9 million square meters) of properties in Brooklyn and Queens that are ripefor conversion to offices, according to Tucker Reed, president of the Downtown BrooklynPartnership. The organization is seeking to create a "world-class" business district acrossthe East River from Manhattan in the city's most populous borough.

Developers are beginning to see Brooklyn as an alternative office locale for New York'stechnology and media firms, many of whose employees already live in the area. Theindustrial buildings evoke a feel similar to Manhattan's midtown south, where demandhas driven rents out of reach for some tenants in those fields, while the borough isexperiencing a broader renaissance as retail districts flourish and home prices surge.

"In vast numbers, the tech and creative class of this city is choosing to live in Brooklyn,"Reed said. "And so when they're making their location choices, a lot of them like toassociate their companies with where they live."

Projects in the works include Two Trees Management Co.'s plans to turn the idle DominoSugar refinery building on Williamsburg's waterfront into about 630,000 square feet ofoffices. Manhattan investors Jared Kushner and Aby Rosen agreed in July to buy sixproperties near the foot of the Brooklyn Bridge for a potential office conversion, while apartnership including Jamestown Properties is planning to revamp Industry City, a 6


18

million-square-foot complex in the Sunset Park area.

Tech Triangle

Brooklyn's "tech triangle" -- the Navy Yard area, downtown and the former factory districtknown as Dumbo, for down under the Manhattan Bridge overpass -- is already home toalmost 10 percent of New York City's technology and media firms, according to a reportby Reed's group, released in June. They include Etsy Inc., an online consumer-goodsmerchant with more than 350 employees at its Dumbo headquarters; and MakerBotIndustries LLC, a developer of three-dimensional printers that recently moved toMetroTech Center, a downtown office complex.

At 20.9 million square feet, Brooklyn's office space is less than a third of the 65 millionsquare feet in Manhattan's midtown south, the area roughly between 30th and Canalstreets. If most of the 20 million square feet of industrial space Reed estimates were inBrooklyn, it would create a market almost the size of downtown Philadelphia's.

Tightening Market

Brooklyn's office availability rate -- space that's vacant or scheduled to become emptywithin 12 months -- dropped to 7.8 percent at the end of June, from 13.4 percent 15months earlier, according to data from brokerage Newmark Grubb Knight Frank.Landlords sought an average of $32.13 a square foot in the second quarter, up from$19.04 a decade ago.

That compares with midtown south's 10.4 percent availability rate and average askingrent of $47.49 a square foot. In lower Manhattan, where shrinking financial companieshave left landlords with more than 6 million square feet of space to fill, the availability ratewas 16.1 percent and rents averaged $41.90, according to the brokerage.

With little to no affordable space available in midtown south, creative tenants wouldconsider a refurbished industrial building in Brooklyn before moving into Manhattan'sglass-and-steel skyscrapers, according to Robert Sattler, vice president of brokerageCresa New York.

"If it's created, the tenants will come," he said. "It's just the vibe they're trying to be partof."

Transportation

Brooklyn is served by an extensive subway system, from Brooklyn Heights to Coney

Island. A majority of Brooklynites working in Manhattan typically commute 30-50

minutes. Public transportation is good, with 17 separate subway lines and 72 local bus

lines. The highway system is comprised of the Brooklyn-Queens Expressway, the

Prospect Expressway, the Belt Parkway, and the Gowanus Expressway. The Verrazano

Narrows Bridge offers access to Staten Island and points west of New York City.


19

Brooklyn connects with Manhattan via all major subways; bus lines from southern and

eastern Brooklyn; the Brooklyn, Manhattan and Williamsburg Bridges; and the Brooklyn

Battery Tunnel. Easy access to Manhattan makes Brooklyn a desirable place to live for

many New Yorkers. Brooklyn also possesses excellent access to the three major

metropolitan airports--Kennedy, LaGuardia, and Newark.

Culture and Recreation

Brooklyn has many recreational facilities including Prospect and Marine Park, the

Brooklyn Botanical Gardens, Marine Park Golf Course, Coney Island Amusement Park,

and Brighton, Coney Island and Manhattan Beaches. Coney Island has declined

significantly since its heyday in the earlier part of this century, but is now being

redeveloped, and a long term contract was entered into with an accomplished

amusement park operator; further redevelopment on a vast scale is in the planning

stages. Mayor Bloomberg recently announced an ambitious plan to maximize the

opportunity for city residents to access and engage in waterfront recreational activities.

Cultural and educational amenities are provided by the Brooklyn Academy of Music

(BAM), the Brooklyn Museum, the Brooklyn Children's Museum, and the Brooklyn

Botanical Gardens. BAM draws world acclaimed artists. Concerts and other activities

are offered at Brooklyn College, Kingsborough College, and other local universities.

Brooklyn also maintains a Philharmonic Orchestra.

LOCAL AREA DESCRIPTION

The subject is located within Community District No. 12, in the Midwood section of south-

central Brooklyn. District 12 is bounded by 37th Street and Caton Avenue to the north,

61st Street and Avenue P to the west and south, and Coney Island Avenue to the east

(with an indent to McDonald Avenue between 18 Avenue and the LIRR). th

Neighborhoods within Community Board No. 12 include Borough Park, Kensington, the

Ocean Parkway corridor, and part of Midwood. The subject is located across Coney



NEIGHBORHOOD MAP

0 yds 200 400 600

20

Island Avenue from the balance of Midwood, which is in District 14. Land use and

demographics for the district are shown on the attached exhibit.

The subject property occupies a blockfront site on the south side of Locust Avenue,

between East 13 Street and East 14th Street. The subject is located in an industrially-th

zoned “pocket”, but the surrounding area is primarily residential, consisting essentially

of low density housing with the occasional higher density building, and various community

facility uses including churches, synagogues, and schools. Across the street from the

subject’s East 14 Street frontage is the former Shulamit Parochial School, occupyingth

nearly the entire block. The school was closed over the past year and sold in July, 2014

for $20,000,000, with plans recently filed to erect an 8-story apartment building on the

site. The wider area is served by retail establishments and various other community

services along Coney Island Avenue, 18 Avenue, Avenues J and M, Kings Highway,th

and Bay Parkway.

The area is served by public transportation, which affords rapid access to Manhattan's

business districts. The closest subway station (Q train service) is located at Avenue M

and East 15 Street, two short blocks southeast of the subject. A network of surfaceth

transit is available on selected local streets and avenues, including Coney Island and

Ocean Avenues, Bay Parkway, with crosstown lines on Avenue J, I M, and N. Ocean

Parkway, a major thoroughfare, connects with the Prospect Expressway, and the

Brooklyn-Queens Expressway to the north, and the Belt Parkway (also known as Shore

Parkway) to the south. The Belt Parkway and the Brooklyn-Queens Expressway (I-278)

both provide access to the Verrazano-Narrows Bridge and Staten Island. The Brooklyn-

Queens Expressway also accesses various bridge and tunnel East River crossings to

lower and midtown Manhattan; the Belt Parkway access the Southern State Parkway and

the south shore of Nassau and Suffolk Counties. Brooklyn's only regional mall, the King's


21

Plaza Shopping Center, is located at Avenue U and Flatbush Avenue, a short distance

from the Belt Parkway.

Midwood is a high-quality residential area of Brooklyn, with strong demand for housing

of all sorts as well as for community facility properties including schools and religious

institutions. Property values in this area increased sharply during the past decade,

although declining between 2008 and 2010 following the subprime debacle and

subsequent financial crisis. Values in the area now appear to be experiencing

strengthening trend.


Digital Tax Map - New York City Dept. of FinanceSITE MAP - 12/9/2014

Borough Boundary Condo Flag/Condo Nunber

Tax Block Boundary Air Right Flag/Lot Number

Tax Block Number Subterranean Right Flag/Lot Number

Tax Lot Boundary REUC Flag

Tax Lot Number Under Water Tax Lot Boundary

Condo FKA Tax Lot Number Other Boundary

Tax Lot Dimension Possession Hook

Approximate Tax Lot Dimension Miscelaneous Text

Condo Units Range Label Small Tax Lot Dimension

Building Footprint Surface Water

22

SITE DESCRIPTION

Location

The subject occupies a blockfront site on the south side of Locust Avenue, between East

13 and East 14 Streets, in the Borough of Brooklyn, City of New York.th th

Shape and Area

The site is irregular in configuration, with 144.75 feet of frontage on the west side of East

14 Street, 207.37' of frontage on the south side of Locust Avenue, and 150 feet ofth

frontage on the east side of East 13 Street, containing a total land area of 26,063 SFth

according to measurements shown on a survey prepared by Donald G. Dekenipp, LS,

PC. The subject was part of a larger tax lot that was subdivided; this subdivision is not

yet reflected in NYC’s official online tax maps.

Topography and Drainage

The site is level with street grade, with adequate drainage provided by surface and

subsurface public street improvements. The site lies in an "X" flood zone according to

National Flood Insurance Rate Map Panel #360497-0352F (revised September 5, 2007),

an area outside of the 100- and 500-year floodplains, indicating minimal flood hazard.

Soils and Geology

No soil report dealing with the subject site has been examined by the appraisers. This

valuation assumes that soil and foundation conditions are adequate to support the

existing improvements, or those which may reasonably be contemplated.

Utilities

All of the usual and necessary utilities and services are available to the subject site,

including electricity, gas, telephone, water, and sanitary sewers.

Streets and Access

The subject occupies a blockfront site on Locust Avenue, between East 13 and East 14th th

Streets. Locust Avenue is a 50' wide eastbound local street, extending from Coney Island


23

Avenue to a dead end one block east of East 15 Street. East 14 Street is a 60' wideth th

southbound local street, extending from Avenue H to Emmons Avenue. East 13 Streetth

is a 60' wide northbound local street, extending from Shore Parkway to Avenue H. These

streets are asphalt paved, and are improved with curbs, gutters, and street lighting.

Easements

Typical utility and public service easements common to most urban real estate are

assumed to exist. No easements were uncovered which would have a negative impact

on the subject parcel or its value.

Nuisances and Hazards

No nuisances or hazards such as flood, noise, or odor were uncovered which would have

a negative impact on the subject's value.


Page 1 of 1

FloodInsights Report For:1268 E 14TH ST, BROOKLYN,NY 11230

Geocoding Accuracy: S5 (Very Accurate) - single valid address match, point located at an interpolated position along street line segment

Original Input Address: 1268 E 14TH ST, BROOKLYN,NY 11230

Flood Zone Determinations (Non-Guaranteed)SFHA Within 250 feet of multiple flood zones?

Out No

Map Number3604970352FCommunity Community_Name Zone Panel Panel_Dte COBRA

360497 NEW YORK, CITY OF X 0352F September 05, 2007 COBRA_OUT

FIPS CensusTract

36047 0768.00

12/09/14This Report is for the sole benefit of the Customer that ordered and paid for the Report and is based on the property information provided by that Customer. That Customer's use of this Report is subject to the terms agreed to by that Customer when accessingthis product. No third party is authorized to use or rely on this Report for any purpose. THE SELLER OF THIS REPORT MAKES NO REPRESENTATIONS OR WARRANTIES TO ANY PARTY CONCERNING THE CONTENT, ACCURACY ORCOMPLETENESS OF THIS REPORT, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. The seller of this Report shall not have any liability to any third party for any use or misuse of this Report.

24

IMPROVEMENT DESCRIPTION

The subject consists of a vacant primarily one-story former movie production studio, with

50+ ceiling height in the primary one-story section (a small portion of the building is

configured as three stories). The building is currently undergoing interior demolition, and

is proposed to be renovated for occupancy as a three-story elevatored community facility

type structure containing 63,000 square feet, to be fully owner occupied, with parking for

75 vehicles in the cellar. The following table summarizes the subject’s building areas:

Floor Gross Area

1 23,000

2 22,000

3 18,000

Total: 63,000

The following description of the proposed building is based on limited building plans

provided by ownership, and on our experience with this general construction type:

Construction Features:

Foundation: Reinforced concrete foundation.

Floors: Poured, reinforced concrete.

Framing: Concrete block bearing walls with steel reinforced concrete columns.

Roof: Flat, with single ply rubber roofing cover or similar.

Exterior Walls: Currently brick.

HVAC: An existing gas fired boiler is reported to remain, and will provideheat to all areas of the building. New AC units will be installed on theroof, and will provide chilled air to all areas via ceiling ducts.

Electrical Service: Anticipated to be standard three phase system for all areas.

Plumbing: To be copper supply lines and cast iron waste pipes built to code.

Basement: The basement will contain the boiler, utility meters, storage areas,and attended parking for 75 vehicles.

Interior Finish:

Floors: Anticipated to be ceramic tile and carpeting, or equivalent.


25

Walls: Anticipated to be sheetrocked interior walls.

Ceilings: Anticipated to be painted drywall and dropped acoustical tile ceilingsin metal frame, with lay-in fluorescent light fixtures.

Restrooms: At least seven two fixture restrooms on the first and second floors,

and two on the third floor (plus one multi-stall bathroom), with finishto consist of ceramic tile flooring and wall cover, standard fixtures(sink and commode), and fluorescent lighting.

Comments on Condition and Functionality

The subject is anticipated to be modern and attractive when complete. The “hard” cost

of the project, prepared by prepared by C.R. Schwartzapfel, RA, an architect acting as

consultant to ownership, will be $8,500,000, and ownership reports that soft costs will be

approximately $500,000. The architect reports that while the hard costs do not represent

an actual bid, they are based on detailed pricing estimates; he nevertheless confirms that

an increment for contingencies would be appropriate. We added a 5% contingency factor

to the hard costs, yielding a total estimated construction cost of $9,425,000 ($8,925,000

inflated hard costs + $500,000 soft costs). This is equivalent to $149.60/SF, an adequate

allowance for a renovation of this type in our experience, considering that exterior walls,

the foundation, and certain building systems (such as the boiler) are already in place.

Construction is anticipated to be of good quality materials and workmanship, and

examination of plans suggests that the property will be appealing to tenants and visitors.

The building will have 75 attended parking spaces in the cellar, a valuable amenity in this

congested area, and an expansive deck at the third floor level. In sum, the subject, as

proposed, is anticipated to be modern, attractive, and fully functional as community

facility office-type space.


26

ZONING

According to the Zoning Resolution of the City of New York, the subject parcel lies wholly

within an M1-1 (Light Manufacturing) District. The Zoning Resolution defines the M1

district in general as:

M1 Light Manufacturing (High Performance) Districts are designed for a wide rangeof manufacturing and related uses which can conform to a high level of performancestandards. Manufacturing establishments of this type within completely enclosedbuildings provide a buffer between Residence (or Commercial) Districts and otherindustrial uses which involve more objectionable influences. New residentialdevelopment is excluded from these districts except for joint living-work quartersfor artists in M1-5A and M1-5B Districts, dwelling units in M1-5M and M1-6M Districts,and dwelling units in M1-1D, M1-2D, M1-3D, M1-4D, and M1-5D Districts, whereauthorized by the City Planning Commission, both to protect residents from anundesirable environment and to enable the reservation of adequate areas forindustrial development."

Permitted uses in the M1-1 district include a wide range of warehouse, garage and

manufacturing type occupancies, as well as office and retail uses. Specific requirements

of the resolution for this district are as follows:

ZONING STANDARD REQUIREMENT

PERMITTED F.A.R (MAXIMUM) 1.0 (2.4 for community facilities)

FRONT YARD None

SIDE YARD None

REAR YARD (MINIMUM) 20'

INITIAL SETBACK 15' (20' if a narrow street)

FRONT WALL HEIGHT 30' (2 stories); 35' (3 stories) for community facility buildings.

PARKING FOR MFG USES Greater of 1 space per 1,000 SF of floor area, or 1 space per 3 employees;

none for properties with under 15 employees or less than 7,500 square feet.

Note: The above standards may be redefined by exceptions, amendments, special permit uses, etc. Consult an attorney or architect

for a definitive interpretation of the Zoning Resolution.

In light of plans prepared by C.R. Schwartzapfel, RA, the project architect, the proposed

structure is assumed to be a legal, conforming use of the site. We note that since the

completed structure will have an FAR approximately equal to 2.4, use of the structure will

be limited to community facility type occupancy. The following pages, from "The Zoning

Handbook", a publication of the New York City Planning Department, describe the M1

zoning category in greater detail.


M1 districts range from the Garment

District in Manhattan, with its multistory

lofts, to parts of Red Hook or College Point

with many one- or two-story warehouses

studded with loading bays. The M1 dis

trict is often a buffer between M2 or M3

districts and adjacent residential or com

mercial districts. Light industries typically

found in M1 areas include woodworking

shops, auto storage and repair shops, and

wholesale service and storage facilities. In

theory, nearly all industrial uses can locate

in M1 areas if they meet the more stringent

M1 performance standards. Offices and

most retail uses are also permitted. Certain

community facilities, such as hospitals, are

allowed in M1 districts only by special

permit but houses of worship are allowed as-of-right.

In Ml-5A and M1-5B districts mapped

in SoHo/NoHo, artists may occupy joint living-work quarters as an industrial use

in loft bUildings.

Other than M1 districts paired with

residence districts in Special Mixed Use

Districts (see Chapter 6), M1-D, Ml-5M

and M1-6M districts are the only manu

facturing districts in which residences are

permitted. In Ml-D districts, mapped in

Sunset Park and Maspeth, limited new

residential uses with a maximum FAR of

1.65 are permitted only by City Planning

Commission authorization.

Red Hook

Ml-l

Building cannot penetrate

\ sky exposure plane

\ \

/ /

/;

/

(.... I

Ml-4

FAR (max) 1.0 2.0 5.0 2.0 5.0 10.0'

Parking required required required not required not reqUired not required

I FAR bonus up co 20% for a plaza

II

Ml-5

Ml-6

In Ml-5M and Ml-6M districts, mapped

in parts of Chelsea, space in an industrial

building may be converted to dwelling

units, provided a specified amount of floor

area is preserved for particular industrial

and commercial uses. Conversion to dwell

ings is also allowed, with restrictions, in the

Special Tribeca Mixed Use District.

Floor area ratios in Ml districts range

from 1.0 to 10.0 and building height and

setbacks are controlled by sky exposure planes which may be penetrated by

towers in certain districts. Although new

industrial bUildings are usually low-rise

structures that fit within sky exposure

planes, commercial and community facil

ity buildings can be constructed as towers in Ml-3 through Ml-6 districts. In the

highest density manufacturing district,

Ml-6, mapped only in Manhattan, an FAR

of 12 can be achieved with a bonus for a

public plaza. Except along district bound

aries, no side yards are required. Rear yards

at least 20 feet deep are usually required,

except within 100 feet of a corner.

Parking and loading requirements vary with

district and use. M1-1, Ml-2 and Ml-3

districts are subject to parking requirements

based on the type of use and size of an

establishment (Section 44-21 of the Zoning

Resolution). For example, a warehouse in an

M1-1 district requires one off-street parking

space per 2,000 square feet of floor area or per three employees, whichever would

be less. Parking is not required in Ml-4,

M1-S and Ml-6 districts, mapped mainly

in Manhattan loft areas. Requirements for

loading berths of specified dimensions differ

according to district, size and type of use.

Port Morris

1

ZONING DATA TABLE 7

Manufacturing District Floor Area Ratios Community

Commercial Facility FAR FAR FAR'

IIManu',,'uring

2.4M1-1 1.0 1.0

4.8Ml-2 2.0 2.0

6.5Ml-3 5.0 5.0

Ml-4 2.0 6.52.0

6.5Ml-5 5.0 5.0

Ml-5A 5.0 5.0 6.5

6.5Ml-5B 5.0 5.0

Ml-5M 6.55.0 5.0

Ml-6 10.02 10.02 10.02

Ml-6M 10.02 10.02 10.02

M2-1 2.0 2.0 -

M2-2 5.0 5.0 -

M2-3 2.0 2.0 -

M2-4 5.0 5.0 -

M3-1 2.0 2.0 -

M3-2 2.0 2.0 -

Only community facilities in Use Group 4 permitted

, Up to 12.0 FAR with bonus

Digital Tax Map - New York City Dept. of FinanceTAX MAP - 12/9/2014

Borough Boundary Condo Flag/Condo Nunber

Tax Block Boundary Air Right Flag/Lot Number

Tax Block Number Subterranean Right Flag/Lot Number

Tax Lot Boundary REUC Flag

Tax Lot Number Under Water Tax Lot Boundary

Condo FKA Tax Lot Number Other Boundary

Tax Lot Dimension Possession Hook

Approximate Tax Lot Dimension Miscelaneous Text

Condo Units Range Label Small Tax Lot Dimension

Building Footprint Surface Water

27

ASSESSED VALUATION AND TAXES

According to the City of New York Bureau of Real Property Assessment, the subject's

assessed value for the 2014/2015 tax year (extending from July 1, 2014 to June 30,

2015), is as follows:

BLOCK 6733, LOT 35, BOROUGH OF BROOKLYN

TYPE LAND BUILDING TOTAL

Transitional $769,500 $1,422,990 $2,192,490

Actual $769,500 $1,486,800 $2,256,300

The city reassesses each property annually as of January 5, the “taxable status date”.

The new assessment is designated as the “actual” amount, and the prior year’s actual

amount is phased up to the new actual figure in 20% increments over a five-year period

(up to four simultaneous phase-in schedules can be occurring in any tax year). The City

of New York Real Property Assessment Bureau classifies properties into four categories

for taxation purposes:

Class 1: One, two, and three-family homes; residential condominiums of threedwelling units or less; residential condominiums of three stories or lessoriginally constructed as condominiums; certain vacant land zoned forresidential use, or adjoining improved Class 1 property. This descriptionIncludes subcategories designated as Class 1A, Class 1B, and Class 1C.

Class 2: All other primarily residential properties not in Class 1, includingcooperatives and all residential condominiums.

Class 3: Real estate of utility corporations and special franchise properties.

Class 4: All other properties such as stores, warehouses, hotels, office buildings,and vacant land not classified as Class 1.

State law requires that the Department of Finance assess properties in each class at the

same percentage of value, called the assessment ratio. For Class 1 properties, the

assessment ratio is six percent (for example, a property estimated to be worth $100,000

would have an assessment of $6,000); for Class 2-4 properties, the assessment ratio is

45 percent. State law also requires that assessors follow certain rules unless the change


28

in value is due to physical change resulting from construction, renovation, and/or

demolition; for Class 1 properties, the assessment cannot be increased more than 6%

per year, or more than 20 percent in five years. For Class 2 properties, the assessment

on properties with less than 11 units cannot be increased more than 8% each year, or

more than 30% in five years; assessment changes on properties with over 10 units must

be phased-in over five years. A history of tax rates in New York City is presented below:

HISTORIC TAX RATES

TAX YEAR

(7/1 - 6/30)

CLASS 1

(1A,1B,1C)% CHANGE

CLASS 2

(2A, 2B)

%

CHANGECLASS 3

%

CHANGECLASS 4

%

CHANGE

2001/2002 11.609 0.00% 10.792 0.00% 10.541 0.00% 9.712 0.00%

2002/2003 14.16 21.97% 12.517 15.98% 12.565 19.20% 11.580 19.23%

2003/2004 14.55 2.75% 12.62 0.82% 12.418 -1.17% 11.431 -1.29%

2004/2005 15.094 3.74% 12.216 -3.20% 12.553 1.09% 11.558 1.11%

2005/2006 15.746 4.32% 12.396 1.47% 12.309 -1.94% 11.306 -2.18%

2006/2007 16.118 2.36% 12.737 2.75% 12.007 -2.45% 10.997 -2.73%

2007/2008 15.434 -4.24% 11.928 -6.35% 11.577 -3.58% 10.059 -8.53%

2008/2009 16.787 8.77% 13.053 9.43% 12.577 8.64% 10.612 5.50%

2009/2010 17.088 1.79% 13.241 1.44% 12.743 1.32% 10.426 -1.75%

2010/2011 17.364 1.62% 13.353 0.85% 12.631 -0.88% 10.312 -1.09%

2011/2012 18.205 4.84% 13.433 0.60% 12.473 -1.25% 10.152 -1.55%

2012/2013 18.569 2.00% 13.181 -1.88% 12.477 0.03% 10.288 1.34%

2013/2014 19.191 3.35% 13.145 -0.27% 11.902 -4.61% 10.323 0.34%

2014/2015 19.157 -0.18% 12.855 -2.21% 11.125 -6.53% 10.684 3.50%

The compound annual rate of change in the tax rate for each class of property for the

fiscal years 2001/2002 to 2014/2015 has been as follows:

PROPERTY CLASS ANNUAL COMPOUND CHANGE

Class 1 1.98%

Class 2 0.36%

Class 3 -1.01%

Class 4 -0.56%

The subject is designated as property is designated as Class 4 by the assessor, with an

applicable tax rate of $10.684 per $100 of assessed value for the 2014/15 tax year.


29

Taxes, which are based on the lower of the transitional and actual assessments, are as

follows:

CALCULATION OF TAX LIABILITY

BLOCK/LOT ASSESSED VALUATION TAX RATE/100 TAX LIABILITY

6733/35 $2,192,490 10.684 $234,246

In order to estimate the subject’s tax liability following reassessment as a completed

structure, the tax liability of recently erected multi-story commercial buildings throughout

Brooklyn was examined, and presented in the following table:

ADDRESSBLDG

AREAYR BLT ASSESSMENT

TAX

LIABILITYTAXES/SF

118 NOSTRAND AVENUE 27328 2008 $1,074,510 $114,801 $4.20

1810 VOORHIES AVENUE 19600 2011 $1,330,475 $142,148 $7.25

1575 EAST 19 STREET 18000 2004 $934,650 $99,858 $5.55TH

1517 VOORHIES AVENUE 14300 2001 $577,349 $61,684 $4.31

127 8 STREET 73132 2006* $2,272,042 $242,745 $3.32TH

$3.32

$7.25

$4.93

*year renovated

Based on the above comparables, and considering that the subject will be renovated

rather than newly built, we estimate that the tax burden for the completed subject

property, if fully assessed, will be $4.00/SF, or $252,000 (63,000 GSF above grade x

$4.00/SF). According to ownership, tax benefits will not be filed for, since the subject is

proposed to be occupied by a non-profit organization which will be fully exempt from tax

liability.


30

HIGHEST AND BEST USE ANALYSIS

The Appraisal Institute defines Highest and Best Use as follows:

"The reasonably probable and legal use of vacant land or an improvedproperty, which is physically possible, appropriately supported,financially feasible, and which results in the highest value."4

In estimating highest and best use, there are four aspects to be considered:

1. Physically Possible. What uses are physically appropriate to the site in question?

2. Legally Permissible. What uses are permitted by zoning, deed restriction, etc. onthe site in question?

3. Financially Feasible. Which possible and permissible uses will produce a netreturn to the owner of the site?

4. Maximally Productive. Among the feasible uses, which use will produce thehighest present worth?

The highest and best use of a site, considered as if vacant, may be different from the

highest and best use of the entire property as improved at the date of appraisal. The

existing use may then be considered an economically justified interim use until land value

alone exceeds the value of the property as improved, plus demolition costs. Factors

which must be considered in estimating highest and best use include accessibility and

transportation, local facilities and services available, the physical attributes of the site, the

effect of taxes and zoning, and the broader concept of environmental harmony within the

neighborhood. The use must be reasonably probable, legally permitted, and logical; if

a use is merely possible but is remote in time and likelihood, it cannot be considered

highest and best use. In addressing the four aspects of highest and best use, the

following is noted:

Highest and Best Use Considerations

1. Physically possible: The site is level at street grade, and is without subsurface fault

3 [American Institute of Real Estate Appraisers, “The Appraisal of Real Estate”, 11th ed. (Chicago: American

Institute of Real Estate Appraisers, 1996), p. 297.]


31

to our knowledge. It can support a variety of development types, including single andmulti-story buildings. No physical impediments to development are known to exist.

2. Legally permissible: Uses permitted by zoning include a wide variety of lightindustrial development types, as well as commercial (office or retail) use, and communityfacilities. Zoning regulations do not appear to represent a significant impediment to usepotential.

3. Financially feasible: Financially feasible uses tend to occur naturally in free marketenvironments, and are evident on direct observation of the marketplace. Examination ofthe subject area reveals occasional new construction of community facilities wheredevelopment sites can be found. In M-zoned areas, the value of existing improvedproperties is often exceeded by land value for this use, since the allowable FAR forcommunity facility use, at 2.4, far exceeds the 1.0 allowable FAR for ordinary industrialor commercial use. Community facility developers can often outbid other types ofdevelopers for vacant land for this same reason. Based on area demand, surroundingdevelopment, zoning constraints, and the particular characteristics of the subject site, itis our opinion that if the site were vacant today, development with a community facilitytype structure would be a financially feasible use.

4. Maximally productive uses are also most obviously identified by examination of themarketplace. Based on the particular characteristics of the subject site and immediatelocality, it is our opinion that if the site were vacant, community facility type developmentwould represent the maximally productive use.

Highest and Best Use of the Property As Improved

The existing improvement is a high-ceilinged one-story building occupying nearly the

entire site, constructed of durable materials. While interior condition is currently only fair,

this structure can be improved with the addition of full interior floors to create an

improvement with much greater usable area. On this premise, the existing structure will

continue to contribute to property value, and the economic lifespan of the property will be

extended indefinitely. We note that since the renovated structure will have an area

approximately equal to an FAR of 2.4, use of this structure will be limited by zoning to

community facility occupancy. The highest and best use of this property, as improved,

is therefore estimated to be for conversion of the existing structure to multi-story

community facility use, as proposed.


32

THE APPRAISAL PROCESS

Three methods are commonly relied upon by appraisers in the valuation of real property:

the Cost, Sales Comparison, and Income Capitalization Approaches.

The Cost Approach is based upon the premise that the value of a property is

approximated by the investment necessary to replace that property. This typically

includes land acquisition, the cost of site and building improvements, and an allowance

for the developer's profit, minus depreciation. The Cost Approach is most reliable in the

valuation of new or nearly new properties where depreciation incurred has been minimal,

and in the valuation of special purpose properties.

The Sales Comparison Approach is based upon an analysis of sales of properties

similar to the subject, each of which is compared to the property appraised and adjusted

to reflect the estimated value influence of dissimilar characteristics. The Sales

Comparison Approach is most applicable where ample market evidence exists involving

arms-length transactions of properties similar to the subject.

The Income Capitalization Approach is based upon the premise that a relationship

exists between the net income that a property is capable of producing, and the value of

that property. This relationship is expressed as an overall rate, gross income multiplier,

yield rate, or other term. The Income Capitalization Approach is most reliable in the

valuation of properties typically purchased for investment purposes, and when investment

criteria can reasonably be identified.

The Cost Approach was not relied upon in this appraisal due to inaccuracies introduced

in estimates of land value in this fully developed district. This approach is also academic

in nature, and is least relied on by market participants. Each of the remaining

approaches to value will be developed in this appraisal.


33

SALES COMPARISON APPROACH

The Sales Comparison Approach to value involves the gathering and analysis of

comparable sale data. Each sale is compared with the property being appraised, and

adjustments are applied to reflect dissimilar characteristics.

An investigation was undertaken for the purpose of identifying recent sales of good

quality office buildings throughout the subject area. Summaries of the comparable sales

are presented on the following pages, with analysis on the basis of price per square foot

of building area. Since this approach presents functioning, occupied properties, the

indication of this method will be designated as “value at stabilized occupancy”.


34

IMPROVED SALE NO. 1

LOCATION: 1810 Voorhies Avenue, Brooklyn, NY

DESCRIPTION: Three-story professional office building erected in 2011,containing 19,600 square feet, plus basement level parking for 15vehicles (attended).

GRANTOR: 1810-1812 Voorhies Avenue, LLC

GRANTEE: 1810-1812 Voorhies Realty, LLC

BLOCK/LOT: 8772/3

LAND AREA: 7,000 square feet

ZONING: R4 / C1-2 (residential/commercial)

SALE DATE: October 16, 2014

DOCUMENT NO.: 369691

SALE PRICE: $7,235,000

PRICE/SF: $369.13

SOURCE: Propertyshark.com; ACRIS

COMMENTS: This building has a 15-year tax abatement. Tenants pay utilities,CAM, trash removal, tax increases, and maintenance. Thebuilding had a reported NOI of approximately $435,000 at thetime of sale, implying a capitalization rate of 6%.


35

IMPROVED SALE NO. 2

LOCATION: 561 Court Street, Brooklyn, NY

DESCRIPTION: Four-story office building erected circa 1931, containing20,300 square feet.

GRANTOR: Narco Freedom, Inc.

GRANTEE: Court Holdings, LLC

BLOCK/LOT: 481/1


ZONING: M1-1 (Industrial)

SALE DATE: January 16, 2014

DOCUMENT NO.: 41287


PRICE/SF: $315.27

SOURCE: PropertyShark.com; ACRIS


36

IMPROVED SALE NO. 3

LOCATION: 1575 East 19 Street, Brooklynth

DESCRIPTION: Five story plus cellar and sub-cellar office building erected in2004, containing 18,000 SF, with five office units.

GRANTOR: 1575 East 19 Street Corp.th

GRANTEE: Hosae Management Corp.

SALE DATE: December 17, 2013

BLOCK/LOT: 6766/73

DOCUMENT NO.: 93952

LAND AREA: 4,000 SF

ZONING: R7A (residential)


PRICE/SF: $316.67

SOURCE: Propertyshark.com, ACRIS


37

IMPROVED SALE NO. 4

LOCATION: 125 8 Street, Brooklyn, NYth

DESCRIPTION: Three-story office building erected as a warehouse circa 1910,and converted to office use in 2006, containing 73,132 squarefeet.

GRANTOR: Sunset Park Manufacturing and Design Center

GRANTEE: 293 Church Realty, LLC

BLOCK/LOT: 996/21

SALE DATE: July 9, 2013


SALE PRICE: $15,300,000

PRICE/SF: $209.21

SOURCE: PropertyShark.com; ACRIS


38

IMPROVED SALE NO. 5

LOCATION: 1517 Voorhies Avenue, Brooklyn

DESCRIPTION: Four story office building erected in 2001, containing 14,300SF, with 6 tenants and 3 parking spaces.

GRANTOR: 1517 Realty, LLC

GRANTEE: 1517 Voorhies Ave, LLC

SALE DATE: June 26, 2013

BLOCK/LOT: 7459/59


LAND AREA: 3,200 SF

ZONING: C4-2 (Commercial)


PRICE/SF: $302.45


COMMENTS: This building has a 25-year tax abatement. Tenants pay utilities, tax increases, and maintenance. The building had a reportedNOI of $335,000 at the time of sale, implying a capitalizationrate of 7.7%.


39

IMPROVED SALE NO. 6

LOCATION: 4809 13 Avenue, Brooklynth

DESCRIPTION: Four-story commercial building erected circa 1923, andrenovated in 1984, containing 28,800 square feet, with 7,200 SFof ground floor retail space and 21,600 SF of upper floor officespace.

GRANTOR: M.D.R. Realty, Inc.

GRANTEE: 4801-13 Holdings, LLC

BLOCK/LOT: 5635/7


SALE DATE: January 14, 2013

DOCUMENT NO.: 33323

SALE PRICE: $7,500,000; mortgage of $5,250,000 from NYCB

PRICE/SF: $260.42




COMPARABLE SALES MAP

0 mi 1 2 3

40

SUMMARY AND ANALYSIS OF COMPARABLE IMPROVED SALES

Subject Data:Address: 1268 East 14 Street, Brooklyn th

Valuation Date: July 1, 2017 (“at stabilized occupancy”)Building Area: 63,000 SFCondition: Excellent; new renovationParking: 75 spaces; 1.19 spaces per 1,000 SF of building area

SALE NO. 1 2 3 4 5 6

LOCATION1810 Voorhies

Avenue

561 Court

Street

1575 East

19 Streetth

127 8th

Street

1517

Voorhies

Avenue

4809 13th

Avenue

SALE DATE 10/14 1/14 12/13 7/13 6/13 1/14/13

SALE PRICE $7,235,000 $6,400,000 $5,700,000 $15,300,000 $4,325,000 $7,500,000

BUILDING SIZE 19,600 20,300 18,000 73,132 14,300 28,800

PARKING SPACES

(per 1,000 SF/GBA)

0.76 None None None 0.21None

PRICE/SF $369.13 $315.27 $316.67 $209.21 $302.45 $260.42

ADJUSTMENTS

TIME 2.0% 11.0% 12.0% 17.0% 18.0% 23.0%

SIZE -10.0% -10.0% -10.0% 5.0% -10.0% -5.0%

LOCATION 5.0% -15.0% 0.0% -5.0% 5.0% -20.0%

CONDITION -10.0% 15.0% -5.0% 20.0% -5.0% 15.0%

PARKING 5.0% 10.0% 10.0% 10.0% 7.5% 10.0%

NET ADJUSTMENT -8.0% 11.0% 7.0% 47.0% 15.5% 23.0%

ADJ’D. PRICE/SF $339.60 $349.95 $338.83 $307.54 $349.33 $320.31

MARKET DATA CONCLUSION

Six sales of office buildings in the subject area were identified, and analyzed on the basis

of price per square foot. The sales involving structures similar to the proposed subject

in utility and appeal, , and present a realistic value range for this type of property in our

experience. Adjustments were applied for the following influences:

Time:

The sales occurred between January, 2013 and October, 2014. Based on our


41

observation of the market, the value of this type of property is estimated to have

increased in this period, aided by continuing low interest rates, unattractive rates of return

for fixed rate investments, and a strengthening local and regional economy. Adjustment

of +12% per year (1%/month) was applied for time to reflect a current valuation date; at

the conclusion of this valuation approach, we will further adjust the value conclusion to

reflect the fact that the market is anticipated to strengthen moderately in the period from

a current date, to the July 1, 2017 date of stabilized occupancy, a 2.5 year period.

Size:

The subject will consist of a three-story and cellar building containing 63,000 SF above

grade, which is at the upper end of the range shown by the comparable sales. Size was

adjusted for based on the commonly observed phenomenon that small commercial

improvements typically sell for more, per square foot, than otherwise similar larger

properties, and vice versa.

Location:

The subject occupies a mid-block site on East 14 Street, in a mixed use district of ath

densely populated and desirable residential area, with good access to public

transportation. Adjustment for location was applied based on our inspection of the

surrounding area of each sale, in comparison with the subject locality, on the premise of

office occupancy.

Condition:

Adjustments were applied for condition based on our observation of each sale property,

in comparison with the subject. The subject will be fully renovated, with the interior to be

newly erected, and is anticipated to be in excellent condition. Adjustments for condition

were applied based on our inspection of each sale, as far as could be determined from

exterior observation. Sales 1, 3, and 5 are recently erected “ground up” developments,

considered superior to the subject, with moderate negative adjustment applied. Sales 2,

4, and 6 are older buildings, and received positive adjustment; Sale 4 was converted from


42

warehouse use, with only moderate quality finishes, with more substantial adjustment

applied. Finally, we considered the extent of parking available in each sale, with all of the

comparables possessing either no parking or an inferior parking ratio; positive adjustment

was applied to each to reflect this feature.

After adjustment, the sales exhibit a range of $307.54 to $349.95 per square foot, an

expected range for good quality office properties in Brooklyn. Based on this data, placing

greatest reliance on the more recently erected comparables, the subject is estimated to

possess a current market value of $340 per square foot, or $21,420,000 ($340/SF x

63,000 square feet), rounded to $21,400,000. As noted earlier, this represents value as

of a current date; we trended this figure at 5% per year, based on our perception of the

market trend, yielding a value of $23,600,000 (rounded) as of the stabilized occupancy

date of July 1, 2017.

SALES COMPARISON APPROACH INDICATION (AT STABILIZED OCCUPANCY)$23,600,000


43

INCOME CAPITALIZATION APPROACH

The Income Capitalization Approach is based upon the premise that a relationship exists

between the net income that a property is capable of producing, and the value of that

property. This approach is most applicable in the valuation of investment-type property

which is purchased to yield a periodic income stream, plus a reversion at the time of

future sale. The Income Capitalization Approach is developed in four steps, presented

in the following pages:

1) estimating of gross rental income for the initial year of projected operation;

2) estimating expenses for that year;

3) selecting a proper capitalization technique and rate;

4) capitalizing the net income stream to yield a present value estimate.

Gross Income Estimate

The subject will contain 63,000 square feet above grade when complete, built out for

single-tenant (owner) occupancy. On the premise of sale to an investor, however, it is

much more likely that a buyer would anticipate leasing the subject to a variety of tenants.

As mentioned earlier, all would be required by zoning to qualify as “community facility”

uses; this encompasses a wide variety of uses including nonprofit corporations of all

types, schools or day care centers, churches, synagogues, or other religious uses,

medical uses including hospital outreach or private professional practices, etc. Our

examination of floor plans suggests that the property is suitable for subdivision into a

wide range of space size and configuration. Floor plates range from 18,000 to 23,000

SF, and while the cost of subdivision is substantial, a higher rental can also be achieved

from smaller tenancies. Elevator and stairway locations suggest that a division into 3

tenant areas per floor is realistic, with an average unit size of 6,475 SF; this figure is

based on an estimated net rentable area of 58,275 SF, deducting 7.5% for common

areas such as hallways, etc. The 75 parking spaces are assumed to be allocated to

tenants equally, a significant incentive in this congested area.


44

Market Rental Survey

Market rental for this property has been estimated based on the following comparable

data:

No. Location Tenant Lease

Date

Term

(Years)

Area

(SF)

Rent/SF Comments

1 1494 Ocean Avenue Available N/A N/A 6,000 $30.00 New space. Asking NNN terms.

2 1915 ocean Avenue Available N/A N/A 2,000 $27.00 Older space. Asking NNN terms.

31810 Voorhies Avenue,

Brooklyn Leopold Laufer 6/14 8 2,353 $30.60

Tenant pays 3%/yr increases, gas,

electric, mtnce, 13% of tax increase

beginning in option period.

4292 Court Street,

BrooklynLePort Schools 4/14 n/a 16,000 $31.25

Terms undisclosed.

5

340 Fourth Avenue,

Brooklyn NY Methodist 7/14 15 6,176 $39.67

Tenant to pay utilities, 33% of

taxes, CAM. Work letter provided,

capped at $155,000.

6

1 Metrotech Center,

BrooklynBrooklyn Friends

School11/13 20 45,000 $30.00

Tenant pays a portion of operating

expenses and increases in taxes

over a base year.

7

1 Metrotech Center,

Brooklyn NYU 11/13 20 na $31.00

Tenant pays a portion of operating

expenses and increases in taxes

over a base year.

811 Wycoff Street,

Brooklyn

Carmelo the

Science Fellow7/13 14 5,000 $30.00

Tenant pays 50% of RET over

2013/14 base year plus all utilities.

9485 Kings Highway Undisclosed 2/13 NA 5,300 $35.00 Tenant pays utilities, and a prorata

share of increases in R.E. taxes.

10 2625 East 14 Streetth Confidential

(upper floor)Q4 2013 NA 1,815 $27.00

Owner paid for the interior

buildout. Heat/AC are included in

the rent. Tenant pays electric.

11 545 BroadwaySkyline

Management5/13 5 2,500 $25.00

Tenant pays utilities, prorata share

of tax increases. 5-year lease with

one 5 year option.

12 260 BroadwayBrooklyn AIDS

Task Force1/13 3 3,500 $28.39

Tenant pays utilities, 3-year lease

with 4%/yr. increase.

13 2565 E. 17 Street Confidential 1/2012 3 2,500 $27.60 Tenant pays electric onlyth

14 4525 16th Avenue Madison Health 7/11 5 2,500 $29.00 Tenant pays utilities.

151623 Kings Highway Interborough

Development

6/11 15 9,491 $28.00 Tenant pays utilities, p/r share of

taxes, mtnce, 4%/yr.increases.

16 238 55th Street Lutheran Hospital 4/11 n/a 1,500 $26.75 Tenant pays utilities.

17 902 Quentin Road Vitrea Retina 1/11 10 5,000 $30.00 Tenant pays utilities.

18 161 Kings Highway Bk Care, Inc Current 10 8,826 $29.43 Tenant pays utilities, repairs

Minimum Rental/SF $25.00

Maximum Rental/SF $35.00

Average Rental/SF $28.62


45

Market Rental Value Conclusion

Details of two “current availables” and 16 leases in Brooklyn were identified, and

analyzed on the basis of annual rental per square foot. The leases typically require the

tenant to pay the cost of utilities, annual percentage increases in base rent, and a pro-

rata portion of real estate tax increases, as well as ordinary interior repair costs. The

comparables demonstrate a range of $25 to $35/SF, averaging $28.62/SF. The subject

will benefit from the appeal of new renovation, an attractive amenity for office users, and

the availability of parking will add roughly $2/SF to rental value in our opinion. The

restriction to “community facility” occupancy will restrict the universe of potential tenants,

although eligible renters include nonprofit corporations of all types, schools or day care

centers, churches, synagogues or other religious uses, medical uses including hospital

outreach or private professional practices, etc. - many of which are large space users.

The average subject unit is projected to be 6,475 SF, which is well within the range

shown by the comparables. Finally, while the subject is easily accessible via public

transportation, available on-site parking is a substantial amenity.

Based on the comparable data, and considering that asking rents throughout the borough

average slightly over $37/SF at this time, the subject’s market rental is estimated to be

$34/SF if available at this time. We incremented this approximately 4% per year to

$36.75/SF, anticipating continuing market strength during the renovation and construction

period, and also incremented this by $2/SF to $38.75/SF reflect parking spaces to be

allocated to each unit (equivalent to $130/space per month, a nominal amount for on-site

parking availability). As stated earlier, we project that the structure will contain a net

rentable area of 58,275 SF after deducting 7.5% for common areas; based on this,

potential gross income is estimated at $2,258,156 ($38.75 /SF x 58,275 rentable SF).

POTENTIAL GROSS INCOME ESTIMATE$2,260,000 (rounded)


46

Vacancy and Collection Loss

The subject is located in a high-quality residential neighborhood, with strong demand for

community facility services. The vacancy rate for office space of all types in New York’s

outer borough market is approximately 6% according to brokerage sources. We estimate

vacancy/collection loss of 6% for this property over the long term, based on the subject’s

particular characteristics and market appeal; estimation of all rents fully at market; and

on our observation of the commercial strength of the local market.

Annual Operating Expenses

Based on prevailing lease terms in this market, ownership is anticipated to be responsible

for base year taxes, non-occupant type insurance coverage, labor cost, management

cost, reserve cost, and legal and audit cost. In order to aid in estimating these expenses,

a summary of comparable expenses, extracted from office buildings in the subject area,

was identified, summarized as follows:

ADDRESSBLDG.

AREAYRB INSUR/SF ELEC/SF REPAIRS/SF

320 SCHERMERHORN STREET 31,131 1949 $0.40 $0.00 $1.66

96 FLATBUSH AVENUE 35,580 1928 $0.75 $0.00 $1.51

540 ATLANTIC AVENUE 76,928 1924 $0.76 $2.16 $2.79

507 FLATBUSH AVENUE 29,000 1930 $0.59 $0.00 $0.52

2384 ATLANTIC AVENUE 28,716 1920 $0.25 $0.00 $0.20

25 FLATBUSH AVENUE 30,000 1925 $1.23 $0.17 $3.48

105 FT GREENE PLACE 29,900 1960 $0.16 $0.00 $0.00

41 BOX STREET 34,750 1931 $0.43 $1.52 $2.13

268 NORMAN AVENUE 46,415 1900 $0.35 $0.50 $1.01

1102 CONEY ISLAND AVENUE 64,600 1993 $0.54 $1.48 $0.67

1083 MC DONALD AVENUE 44,900 1957 $1.07 $0.00 $0.69

1523 AVENUE M 28,911 2009 $0.47 $0.27 $0.70

1720 AVENUE Z 28,700 1927 $1.38 $0.11 $4.03

2701 EMMONS AVENUE 41,000 1984 $0.47 $0.00 $0.00

MINIMUM $0.16 $0.00 $0.00

MAXIMUM $1.38 $2.16 $4.03

AVERAGE $0.63 $0.44 $1.39

Based on these expenses, and on our experience with similar properties, the following

expenses are estimated for the subject during the initial year of a holding period assumed


47

to begin at the date of stabilized occupancy:

Real Estate Taxes: These were input at $272,563, representing the subject’s tax liabilityif fully assessed, as estimated in the report section "Assessed Valuation and Taxes",incremented 8% to reflect an approximate 2-year period before leasup.

Insurance: Estimated at $37,800 (approximately $0.60/SF) for non-occupant typecoverage, a sufficient amount based on the comparable data, which ranges from $0.16to $1.63 PSF, averaging $0.63/SF.

Labor: Estimated at $60,000 total, a sufficient amount for a full time parking attendant(required to maximize the 75 parking spaces available), plus a part time porter to handlebasic chores such as common area cleaning, snow removal, etc. Tenants will beresponsible for their own interior cleaning and trash disposal, typical for this market.

Common Area Electric: Estimated at $12,600 ($0.20/SF), a sufficient amount based on our experience with similar properties.

Repairs and Maintenance: Estimated at $.50/SF ($31,500), considering the subject’snewly built/renovated condition, which should minimize this cost in the foreseeable future. Costs associated with initial leasup, including brokerage, and tenant work letterallowances, will be deducted at the conclusion of this report section.

Reserves for Replacement of Longer-Lived Items: Estimated at 2% of effective grossincome based on our experience, for periodic replacement of longer lived componentsincluding the roof, boiler, sidewalk and facade maintenance, etc.

Legal/Accounting: Estimated at $7,500, the usual cost of this item for a multiple tenantproperty of this type, in our experience.

Management: Estimated at 2% of effective gross income, the usual cost of this item forsimilar properties, considering the limited number of tenants, and largely net lease terms.

The following table summarizes income and expenses projected for the subject during

the initial year of a holding period commencing at the date of stabilized occupancy:


48

1268 EAST 14TH STREET, BROOKLYN

PROJECTED INCOME AND EXPENSES (4/2017 - 4/2018)

GROSS INCOME

TOTAL INCOME: $2,260,000

Less Vacancy/Collection Loss @ 6% 135,600

Effective Gross Income $2,124,400

EXPENSES

Real Estate Taxes 272,563

Insurance 37,800

Labor 60,000

Common Area Electric 12,600

Repairs/Maintenance 31,500

Reserves (@ 1.5% of EGI) 31,866

Legal/Accounting 7,500

Management (@ 2% of EGI) 42,488

Total Expenses $496,317

NET OPERATING INCOME $1,628,083

Capitalization Rate Selection

The method of capitalization employed in this report is the mortgage-equity technique,

commonly referred to as the Ellwood method. This method derives a capitalization rate

reflecting the requirements of the two investors typically involved in the purchase of an

income producing property (the institutional lender, and the equity investor), and then

adjusts the rate calculation to reflect mortgage amortization, and change in property

value, during the holding period. The following parameters are necessary in order to

estimate a capitalization rate for the subject property:

Loan Terms - Lending institutions typically lend at a 65% to 75% loan to value ratio in the

current environment. Interest rates currently range from 3.5% to 5.5% depending

primarily on the type of property, with payments calculated based on 25 to 30 year payout

schedules. We selected a 75% loan to value ratio, a 4.5% interest rate, and a 30-year


49

payout in developing a capitalization rate.

Holding Period - Most investors/purchasers intend to hold a property for five to fifteen

years, due to the diminishing effect of tax benefits (depreciation) beyond that time. We

selected a period of ten years in our rate development.

Change in Value - Property appreciation over the holding period was forecast at a

moderate 2% per year, equivalent to 22% over the holding period, when compounded,

anticipating possible fluctuation in values over the long term.

Equity Yield - This is a desired rate of return reflecting the inherent risks, illiquidity, and

potential benefits, of property ownership relative to prospective rates of return available

for alternative investment opportunities. A yield rate has been selected through

examination of financial and real estate market information, involving a search for the

minimum prospective rate of return necessary to attract long-term investment capital.

The search for a yield rate begins in the financial markets, which demonstrates rates

currently being offered for alternative investment instruments. Investors typically require

a rate of return from investment property which is greater than the “safe” or relatively

"risk-free" rates offered for long-term treasury notes and bonds, or high-grade corporate

bonds. The difference between the investor's required rate of return and the “safe rate”

is a premium, compensating the investor for the added risks of inflation, management

burden, and lack of liquidity inherent in a real estate investment. The following rates

demonstrate current market returns offered by relatively risk-free investments (Federal

Reserve Statistical Release Web Site, December 1, 2014):


50

SURVEY OF COMPETITIVE RATES

Instruments Rate

Federal Funds Rate 0.09%

Prime Rate 3.25%

10-year Treasury Notes 2.18%



Corporate Bonds (Aaa) 3.83%

Corporate Bonds (Baa) 4.70%

Municipal Bonds (AAA) 3.97%

The Federal Funds Rate represents the cost of funds loaned by Federal Reserve banks

to depository institutions. The Prime Rate is a base rate posted by large banks for loans

to major corporations. Corporate Bonds and Utility Bonds are long-term securities

guaranteed by the strong creditworthiness of the issuer. Municipal Bonds are free of tax

liability, and therefore return less than taxable instruments.

Direct evidence of investor expectations from the ownership of real estate are published

by the Real Estate Research Corporation Investment Survey, and the Korpacz Real

Estate Investment Survey. These surveys present yield rates, “going-in” capitalization

rates, reversionary rates, and expected income and expense growth rates, from a

sample of institutional investors currently active in the marketplace. The following desired

rates of return are reported for office properties (referring to suburban office properties,

superior as a surrogate indicator to “CBD” offices in our opinion):

Source Period Type Yield Rate Range Average

R.E.R.C. 2nd Quarter 2014 National Suburban Office 7.0% - 10.5% 8.40%

PWC 3rd Quarter 2014 National Suburban Office 6.25% - 11.0% 7.97%

Yield rates (alternatively known as “internal rates of return”, or IRR) are influenced by

numerous risk factors, including the following:

(a) Location: the better the location, the lower the IRR. The subject is located in theMidwood section of Brooklyn, a well-populated and desirable area with consistentdemand for office and community facility space.


51

(b) Physical Characteristics of the Subject Property: the newer the property, thehigher the quality of construction and finishes, and the better the design andlayout of the physical plant, the lower the IRR. The subject will be extensivelyrenovated, and in excellent condition when complete.

(c) Degree of Forecasted Cash Flow Growth: the greater the growth forecasted, thehigher the risk of nonperformance, hence the higher the IRR. We assumed anominal 2% per year appreciation in the subject’s value over the holding period.

(d) Extent of Equity Investment Required: the greater the required equityinvestment (that portion of the total acquisition cost not funded by conventionalfinancing), the higher the IRR. The subject would be anticipated to sell with atypical extent of equity investment.

(e) Length of Projection Period: the longer the projection period necessary toproduce the required yield, the higher the IRR. Our projection assumes a 10-yearholding period, typical for this type of property in our experience.

(f) Type of Investment: the greater the investment risk inherent in a particular typeof real estate, the higher the IRR. The subject is a relatively large, single tenantoffice property (although adaptable to multiple tenancy). With consistent demandin the area for community facility space, this would be considered a moderate riskproperty in our opinion

In selecting an appropriate yield rate, we considered the published yield expectations, as

well as the subject’s location, age, and condition relative to competing properties.

Consideration was also given to risk, illiquidity, and the time and expense of asset

management inherent in a purchase of the subject. Based on these considerations,

recognizing that the published rates reflect the requirements of institutional investors

seeking prime properties nationwide, it is our opinion that a yield rate of 12% would be

necessary to attract investment capital to a purchase of the subject property. The Ellwood

method of capitalization rate development is presented as follows:

ASSUMPTIONS UNDERLYING CAPITALIZATION RATE DEVELOPMENT

Loan to value ratio 75%

Interest Rate 4.500%

Term (years payout) 30 years

Annual Constant 0.0608

Equity Yield Rate 12.00%

Holding Period 10

Annual Appreciation 2.00%

Appreciation Over Term 22%


52

DEVELOPMENT OF CAPITALIZATION RATE

Mortgage Funds 0.75 x 0.0608 = 0.0456

Equity Funds 0.25 x 0.12 = 0.0300

Weighted Rate 0.0756

Less Adjustment for Mortgage Amortization

0.1991 x 0.75 x 0.0570 = -0.0085

Less Adjustment for Appreciation

0.22 x 0.0570 = -0.0125

Capitalization Rate 0.0546

(rounded to) 5.5%

Surveys of Going-in Capitalization Rates

In addition to the rate derived above, a direct, market-based source of going-in

capitalization rates is provided by the Peter Korpacz and Real Estate Research

Corporation's investment surveys, which present going-in capitalization rates sought by

actual investors. These are presented below, referring to the suburban rate survey as

a surrogate indicator, as above:

Source Period Type Cap Rate Range Average

R.E.R.C. 2 Quarter 2014 National Suburban Office 5.5% - 8.0% 6.80%nd

PWC 3rd Quarter 2014 National Suburban Office 5.0% - 9.0% 6.72%

The above surveys represent investor requirements for retail and office properties

throughout the United States. Based on the subject’s particular location and market, and

considering the subject’s location and extensive renovation, but also considering that

rents are estimated fully at market, a capitalization rate of 6% appears reasonable in this

instance. This rate will be used to capitalize projected net operating income into value,

as follows:

CAPITALIZATION

NET OPERATING INCOME CAPITALIZATION RATE VALUE ROUNDED TO

$1,628,083 6.00% $27,134,717 $27,130,000


53

RECONCILIATION OF “AT STABILIZED OCCUPANCY” VALUE INDICATIONS

The approaches to value utilized have yielded the following value conclusions for the

subject “at stabilized occupancy”:

APPROACH VALUE INDICATION

Sales Comparison $23,600,000

Income Capitalization $27,130,000

The methods utilized demonstrate a 15% range. The Sales Comparison Approach is

based on the evidence of six sales of well located office properties in Brooklyn, and

presents the most direct evidence of actual market activity. The Income Capitalization

Approach is based on market supported estimates of income, with a realistic

capitalization rate applied, providing a valid indication to an investment motivated

purchaser. We placed greatest reliance on the income-based approach in our value

conclusion, since the subject is an investment property which would be purchased based

on its actual income and expense characteristics.

Estimated Value at the Date of Project Completion

From the above value estimate, we deducted rent loss during an anticipated 12-month

lease-up period (resulting in 6 months rent loss assuming gradual leaseup, or

$1,130,000, and considering that marketing of space will likely begin during the latter

stages of the renovation); holding expenses estimated during the period of vacancy

during leasup ($250,000, rounded, referring to the proforma presented); brokerage cost

at 20% of the total annual rental ($450,000); and “work letter” allowances of $40/SF, or

$2,330,000 ($40/SF x 58,275 rentable SF), anticipated to be necessary to prepare space

for occupancy by initial tenants, yielding an “as complete” value as shown on the

following page:


54

Value “at stabilized occupancy” $27,130,000

Losses during leaseup $1,130,000

Holding costs during leasup $250,000

Brokerage cost $450,000

Work Letter Cost $2,330,000

Total deductions: $4,160,000

“As Complete” Value $22,970,000

“AS IS” VALUE ESTIMATE

From the above value estimate, we deducted an allowance for the developer’s profit,

estimated at 15% of “at stabilized” value ($4,070,000, reduced from the typical 20% profit

allowance estimated for “ground up” construction, to reflect the lower risk involved in

renovating an existing property), and renovation cost ($9,425,000) yielding an “as is”

value of $9,475,000 ($22,970,000 - $4,070,000 - $9,425,000).


55

VALUE CONCLUSION

Based upon our examination of the subject and market analysis, we estimate that the

Market Value of 1268 East 14th Street, Brooklyn, New York is:


Value as of April 1, 2016 (anticipated completion date) $22,970,000

Value as of April 1, 2017 (at stabilized occupancy) $27,130,000



56

CERTIFICATION

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

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

-The reported analysis, opinions, and conclusions are limited only by the reportedassumptions and limiting conditions, and are our personal, professional analyses,opinion, and conclusions. -We have no present or prospective interest in the subject property, nor have weprovided services of any type with respect to this property within the past three years.

-Our compensation is not contingent upon any action or event resulting from theanalysis, opinions, or conclusions within, or use of, this report.

-Our analysis, opinions, and conclusions were developed, and this report has beenprepared in conformity with the requirements of the Code of Professional Ethics and theStandards of Professional Practice of the Appraisal Institute, and with FIRREAregulations.

-The use of this report is subject to the requirements of the Appraisal Institute relatingto review by its duly authorized representatives.

-The subject property was inspected by Isaac Benshabat on December 8, 2014. William E. Shubert, MAI has not personally inspected this property.

-No one other than the undersigned provided significant professional assistance in thepreparation of this appraisal report.

-William E. Shubert is currently certified under the voluntary continuing educationprogram of the Appraisal Institute, and possesses the necessary knowledge andexperience necessary to competently complete this appraisal.

-This appraisal assignment was not based on a requested minimum valuation, aspecific valuation, or on the approval of a loan.

____________________ _______________William E. Shubert, MAI Isaac BenshabatCertified General R.E. Appraiser Certified General R.E. AppraiserNY (No. 46-3156), NJ NY (No. 46-49712)


57

ASSUMPTIONS AND LIMITING CONDITIONS

This report is made subject to the following assumptions and limiting conditions:

No responsibility is assumed for matters legal in nature, including the effect of easementsfor utilities, rights of way for access, or other restrictions limiting the use of the property. Property title is assumed to be good and marketable. No liens, encumbrances, or specialassessments against the property were considered unless noted.

No survey of the subject property was made by the appraiser. Measurements,specifications, and other data including zoning and assessments have been obtainedfrom sources believed to be reliable, but no warranty for their accuracy is made. Photographs, diagrams, and sketches appearing in this report are for illustrative purposesonly.

No current test borings or reports of subsoil conditions have been obtained by theappraiser. Except as noted, this appraisal assumes the land to be free of adverse subsoilconditions.

By reason of this appraisal, we are not required to render additional services such aspre-trial conferences, depositions as expert witness, testimony, or court except aspreviously agreed.

This report may not be used for any purpose by a person, corporate or individual, otherthan the client specified in the report without our written consent, and in any event onlywith proper written qualification and only in its entirety.

Neither all nor any part of the contents of this report (especially any conclusions as tovalue, the identity of the appraisers or the firm with which they are connected, or anyreference to the Appraisal Institute or to the MAI designation) shall be disseminated toa third party, or to the public through advertising media, public relations media, newsmedia, sales media or any other public means of communication, without the prior writtenconsent and approval of the authors.

The appraiser's responsibility consists solely of the performance of the defined valuationassignment.

No professional survey has been undertaken to detect the existence of potentiallyhazardous material within the subject property including asbestos, urea formaldehydeinsulation, radon gas, or toxic waste. Unless specifically noted, none of these conditionsis assumed to exist in such measure as may adversely influence value.

We have not made a specific compliance survey and analysis of this property todetermine whether or not it is in conformity with the various detailed requirements of the Americans with Disabilities Act (ADA). It is possible that a compliance survey of theproperty, together with a detailed analysis of the requirements of the ADA, could revealthat 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 we haveno direct evidence relating to this issue, we did not consider possible non-compliancewith the requirements of the ADA in estimating the value of the property.


ADDENDA


QUALIFICATIONS OF WILLIAM E. SHUBERT

EDUCATIONThe City College of New YorkBrooklyn Technical High School

ADDITIONAL COURSES COMPLETED

Appraisal Institute Courses:Real Estate Appraisal PrinciplesBasic Valuation ProceduresCapitalization Theory and Techniques, pt. 1, 2, 3Case Studies in Real Estate ValuationValuation Analysis and Report WritingStandards of Professional PracticeReal Estate and Recent Tax Legislation

New York University School of Real Estate:Principles of Mortgage FinancingInvestment Opportunities in Growth Areas

PROFESSIONAL AFFILIATIONSMember, Appraisal Institute (MAI designation)Regional Ethics and Counseling Committee, Appraisal InstituteMortgage Bankers AssociationRegional Plan AssociationReal Estate Board of New YorkCertified General Real Estate Appraiser: New York, New Jersey

EXPERIENCETwenty-three years of valuation experience in the New York area and nationwide.President of Wm. Shubert & Co., Inc., a real estate appraisal and consulting firmproviding valuation services to all segments of the real estate community. Formerlymanager of appraisal services for the New York region of Dorman & Wilson, Inc., one ofthe nation's largest mortgage banking firms; senior real property appraiser with DouglasElliman - Knight Frank, Inc., of New York City; and staff appraiser with Brown, Harris,Stevens Inc., John A. Munro Associates, Inc., and O.R. Colan Associates, Inc., of NewYork City and Fort Lauderdale, Florida.

Mr. Shubert has appraised major office buildings, shopping centers, hotels, industrialproperties, residential buildings, vacant land, and a wide variety of special purposeproperties. Assignments have been completed for acquisition, sale, mortgage financing,development feasibility, syndication, estate tax valuation, certiorari, and condemnationpurposes. He has acted as an advisor to major corporations, and has testified as anexpert witness in state and federal courts.


QUALIFICATIONS OF ISAAC Y. BENSHABAT

Isaac Benshabat is a Certified General appraiser with over 8 years of experience in appraising residential homes and commercial properties throughout New York City. Mr. Benshabat completed his Baccalaureate degree in Finance and is a member of Who’s Who of American College Students, and the Sigma Beta Delta International Business Honors Society.

Mr. Benshabat has completed courses USPAP, R-1, R-2, R-3, R-4, AQ-1, G-1,2, and 3, and is current with continuing education requirements. He has over 6,000 hours of appraisal experience and is licensed as a Certified General Appraiser by The State of New York under license No. 46-49712.

Isaac Benshabat has appraised apartment developments, industrial buildings, retail and office structures, and special purpose properties throughout the New York region, and has completed assignments in several New York counties. He is in his fifth year of association with Wm. Shubert & Co., Inc.


RECENT ASSIGNMENTS COMPLETED BY WM. SHUBERT & CO., INC.

APARTMENT BUILDINGS

306 W est 116 Street, Manhattanth

2072 Eighth Avenue, Manhattan

40 East 78 Street, Manhattanth

110 Post Avenue, Manhattan

161-171 Seaman Avenue, Manhattan



158 W est 23 Street, Manhattanrd

56 W alker Street, Manhattan

112-116 Hudson Street, Manhattan

58 Hamilton Place, Manhattan


546-548, 550,552 W est 146 Street, Manhattanth

165-167 East 111 Street, Manhattanth

1070 Elder Avenue, Bronx

942 Avenue Saint John, Bronx

2121 Paulding Avenue, Bronx

1403-1405 Rosedale Avenue, Bronx

3209 Radcliff Avenue, Bronx

2173-2175 Muliner Avenue, Bronx

1075 Grand Concourse, Bronx

2000 Prospect Avenue, Bronx

3600 Fieldston Road, Bronx

2124 Ellis Avenue, Bronx

2260 W ashington Avenue, Bronx

1075 Hall Place, Bronx (Proposed)

2755 Morris Avenue, Bronx

1439-1447 Doris Street, Bronx (Proposed)

2 Bayard Street, Brooklyn (Proposed)

153 Avenue O, Brooklyn

789 and 791 Flushing Avenue, Brooklyn

55 Eckford Street, Brooklyn

185 20th Street, Brooklyn

4015 Atlantic Avenue, Brooklyn

335 W arren Street, Brooklyn

550 Manhattan Avenue, Brooklyn

700 Pacific Street, Brooklyn

112 Greenpoint Avenue, Brooklyn

20 Oliver Street, Brooklyn (Proposed)

1458 East 14th Street, Brooklyn

405-415 Leonard Street, Brooklyn

647-649 W ashington Avenue, Brooklyn

39-31 24th Street, Queens

54-01 Roosevelt Avenue, Queens

132-35 Sanford Avenue, Queens

63-70 Austin Street, Queens

94-06 Jamaica Avenue, Queens

187-35 Hillside Avenue, Queens


Pembroke Square Coop, Lindenwood

103-13 Metropolitan Avenue, Queens

109-29 Sutphin Boulevard, Queens

525 Bronxville Road, Bronxville

640 Van Cortlandt Park Avenue, Yonkers

1-3 Remsen Road, Yonkers

45 Popham Road, Scarsdale

5 Hudson Street, Yonkers

77 Saratoga Avenue, Yonkers

679 and 709 W arburton Avenue, Yonkers

545 South Street, Peekskill

INDUSTRIAL PROPERTIES

437 W est 16th Street, Manhattan

688-690 Broadway, Manhattan

511-515 W est 36th Street, Manhattan

612-618 W est 52nd Street, Manhattan

2350 12th Avenue, Manhattan


820-830 W ashington Street, Manhattan

1303 Herschell Street, Bronx

429, 433 and 447 Bruckner Boulevard, Bronx

1164 East 156th Street, Bronx

456 East 173rd Street, Bronx

2370 Lorillard Place, Bronx

5 Canal Place, Bronx

1776 81st Street, Brooklyn


12 Rewe Street, Brooklyn

5801-5823 Avenue J, Brooklyn

7 Saint Nicholas Avenue, Brooklyn


60-70 Grand Avenue, Brooklyn

233 Norman Avenue, Brooklyn



60-01 and 60-15 56th Street, Queens

11-02 37th Avenue, Queens

248-18 Brookville Boulevard, Queens


11-22 45th Road, Queens


50 Yellowston Avenue, W hite Plains

122,136,139, W estmoreland Ave, W hite Plains

836-840 Nepperhan Avenue, Yonkers

500 Fifth Avenue, Pelham

521 East 3rd Street, Mount Vernon

8 and 9 Kendall Avenue, Sleepy Hollow

COMMERCIAL AND RETAIL PROPERTIES

440 East 57th Street (1A/1B), Manhattan

120 Liberty Street, Manhattan

512, 514, 516 W est 29th Street, Manhattan



COMMC’L AND RETAIL PPTIES, CONT’D.

2414 Amsterdam Avenue, Manhattan

26 Federal Plaza, Manhattan

63-65 W est 36th Street, Manhattan

820-830 W ashington Street, Manhattan


63 W est 125th Street, Manhattan (Proposed)

22 W est 21st Street, Manhattan

99 Hudson Street (12A), Manhattan


80 South Street, Manhattan

8-14 W est 8 Street, Manhattanth


208-220 W est 125 Street, Manhattanth

2050 Amsterdam Avenue, Manhattan

39 Union Square W est, Manhattan

296 Bleecker Street, Manhattan

66 John Street, Manhattan


515 Broadway (1B/1E) Manhattan

64 North Moore Street, (1R) Manhattan

230 W est 41 Street, Manhattanst


440 East 57 Street (1A/B), Manhattanth

261 East Fordham Road, Bronx

2330 Eastchester Road, Bronx

3601 W hite Plains Road, Bronx

3030 Godwin Terrace, Bronx


2708 Briggs Avenue, Bronx

331-335, 337-345 East Fordham Road, Bronx

4301 Bronx Boulevard, Bronx

1704-14 University Avenue, Bronx

3860 East Tremont Avenue, Bronx

1426 Atlantic Avenue, Brooklyn

45 Remsen Avenue, Brooklyn



4601 New Utrecht Avenue, Brooklyn

98 Fourth Street, Brooklyn

1226 Flushing Avenue, Brooklyn

2360 Fulton Street, Brooklyn

3330 Surf Avenue, Brooklyn

71-06 Park Avenue, Queens

110-42 Guy R. Brewer Boulevard, Queens

82-20 Astoria Boulevard, Queens

9846-9848 Queens Boulevard, Queens

92-15 69th Avenue Queens

97-20 and 97-22 147th Place, Queens

61-80 W oodhaven Boulevard, Queens

1526 Central Avenue, Queens


47-46 Vernon Boulevard, Queens

73-02/14 Roosevelt Avenue, Queens

1026 41st Avenue, Queens

145 East Service Road, Staten Island

1839 North Railroad Avenue, Staten Island

42 Fingerboard Road, Staten Island

3044 Amboy Road, Staten Island

5105 Amboy Road, Staten Island

Heckscher Plaza, 300 Montauk Hwy, Islip

33 Newtown Lane, East Hampton

101-109 North W ellwood Avenue, Linden

6160 Jericho Turnpike, Commack

189 Caleb's Path, Islip

50 Atlantic Avenue, Lynbrook

207-215 East Post Road, W hite Plains

836 W ashington Avenue, Peekskill

665-667 North Broadway, W hite Plains

Somers Main PO, 110 Market Plaza, Somers

30 Dew Avenue, W hite Plains

280 North Central Park Avenue, Hartsdale

110 W ashington Avenue, Pleasantville

705 Bronx River Road, Yonkers

500 5th Avenue, Pelham

320 Yonkers Avenue, Yonkers

SPECIAL PURPOSE PROPERTIES

205 East 57 Street, Manhattan (theatre)th

160 East 34 Street, Manhattan (theatre)th

126 2 Avenue, Manhattan (theatre)nd

18 Minetta Lane, Manhattan (theatre)

647 Fulton Street, Brooklyn (theatre)

610 Lexington Avenue, Manhattan (YW CA)

500 City Island Avenue, Bronx (restaurant)

56 East Mount Eden Avenue, Bronx (caterer)

2330 Eastchester Road, Bronx (radiology)

300 East 204 Street, Bronx (McDonald’s)th

2343-2361 Utica Ave., Brooklyn (Burger King)

171-195 Udall Road, W est Islip (Nursery)

600 Davenport Ave., New Rochelle (caterer)

601 Columbus Ave., Valhalla (Garden Ctr.)

1340 East Bay Avenue, Bronx (auto shredder)

1570 60 Street, Brooklyn (Bowling Alley)th

610-14 W est 175 Street, Manhattan (church)th

2757 Morris Avenue, Bronx (church)

4500 Matilda Avenue (convent)

110-25 Guy Brewer Boulevard, Queens (church)

330 South Oyster Bay Road, Syosset (church)

665-667 North Broadway, W hite Plains (church)

FAA Building No. 111, Kennedy Airport, Queens

521 City Island Avenue, Bronx (former marina)

76 Shore Road, Glen Cove (marina)

Great Kills Harbor, Staten Island (Riparian rights)



SPECIAL USE PROPERTIES, CONT’D.

Pier 94, Manhattan (convention center)

2825 Flatbush Avenue, Brooklyn (marina)

131 W est 23 Street, Manhattan (hotel)rd

318 W est 51 Street, Manhattan (hotel)st

19 W est 103 Street, Manhattan (Youth Hostel)rd

1630 Lakeland Avenue, Bohemia (motel)

326 Front Street, Greenport (motel & spa)

2405 E. Tremont Ave., Bronx (nursing home)

3260 H. Hudson Pkwy., Bronx (nursing home)

946 East 211 Street, Bronx (nursing home)th

6200 Beach Channel Drive, Queens

6180 W oodhaven Boulevard, Queens

Route 347 at W illis Road, South Setauket

FDR Veterans Hospital, Montrose

SCHOOLS

225 Park Ave. So. (Day Care Ctr.), Manhattan

3990 Hillman Avenue, Bronx

1083 Allerton Avenue, Bronx

3030 Godwin Terrace, Bronx


3101 Eastchester Road, Bronx

1122 East 180 Street, Bronxth

1150 Carwell Street, Brooklyn

120 W est 9 Street, Brooklyn (Head Start)th

565 Baltic Street, Brooklyn (Head Start)

265 Marcus Garvey Blvd, Brooklyn (Head Start)

127 Pennsylvania Ave., Brooklyn (Head Start)

280 Livonia Avenue, Brooklyn (Head Start)

5 Quincy Street, Brooklyn

869 Cypress Avenue, Queens

VACANT LAND


147 W est 143 Street, Manhattanrd


121-125 East 110 Street, Manhattanth


396 5 Avenue, Manhattanth

423 W est Street, Manhattan

116 W est 22 Street, Manhattannd



107 Avenue A, Manhattan

2068 Jerome Avenue, Bronx

447 Bruckner Boulevard, Bronx

600-602 Clarence Avenue, Bronx

1439-1447 Doris Street, Bronx

946 College Avenue, Bronx

941 Garrison Avenue, Bronx

1323-25 Prospect Avenue, Bronx

544 East 183 Street, Bronxrd

764 East 176 Street, Bronxth

100 Featherbed Lane, Bronx

1750 Davidson Avenue, Bronx

100 Verona Street, Brooklyn

113-15 Flatbush Avenue, Brooklyn

20 Tiffany Place, Brooklyn

4601 New Utrecht Avenue, Brooklyn

Saratoga Square Urban Renewal Area

761 East 42 Street, Brooklynnd

59-63 Conselya Street, Brooklyn

189-191 Franklin Avenue, Brooklyn

78 Ten Eyck Street, Brooklyn

212-216 Broadway, Brooklyn

864 Driggs Avenue, Brooklyn

320 and 322 Dean Street, Brooklyn

13 Chester Street, Brooklyn

East NY In-Place Industrial Park Area, Bklyn

118-20 Ocean Promenade, Queens

45-46 42 Street, Queensnd

110-08 Guy R. Brewer Boulevard, Queens

110-15 Union Hall Street, Queens

82-20 Astoria Boulevard, Queens

9415 Rockaway Boulevard, Queens

84-17/19 Queens Boulevard, Queens

151-17 to 151-21 6 Road, Queensth

30-01 Harper Street, Queens

60-01 to 60-15 56 Street, Queensth

248-18 Brookville Boulevard, Queens

Mill Road Estate Devel. Sites, Staten Island

2-12 Beech Street, W hite Plains

10 W est Main Street, Hastings-on-Hudson

139 W estmoreland Avenue, W hite Plains

543 North MacQuesten Parkway, Mount Vernon

1305-1337 East Boston Post Road, W hite Plains

North Main Street, Stewartsville, New Jersey


PARTIAL LIST OF CLIENTS OF WM. SHUBERT & CO., INC.

BANKS AND FINANCIAL INSTITUTIONS

Allied Capital Corp.

American Community Bank

Amerasia Bank

Banco Popular North America

Bank Midwest

Bank United

BPD Bank

Brooklyn Federal Savings Bank

Builder’s Bank

Business Loan Express

Capital Investment, Inc.

Carver Federal Savings Bank

CIT Small Business Lending

Citibank, NA

Columbia Equities, Inc.

Community Capital Bank

Cross River Bank

Doral Bank

Dormitory Authority, State of NY

Dime Savings Bank

Doral Savings Bank

East W est Bank

European Americal Bank

First American International Bank

First Central Savings Bank

First Nationwide Bank

First Union Bank

Flatbush Federal Savings Bank

Fleet Bank

GE Capital Corp.

Global Bank

Gotham Bank

Grand Bank

Habib American Bank

Hanover Community Bank

HSBC Bank

Hudson Valley Bank

Independence Community Savings Bank

Independence Bank

Intervest Bank

Jamaica Saving Bank

JP Morgan Chase

Key Bank

LFC Nationwide

Manufacturer’s & Traders Trust Company

Maspeth Federal Savings Bank

Merchants Bank

Meridian Capital Bank

MetroBank for Savings

Metropolitan Funding

New York Community Bank

New York National Bank

Niagara Asset Corporation

Northfield Bank

Oritani Bank

Park Avenue Bank

PC Bank

Provident Bank

Queens County Bank

Reliance Bank

Ridgewood Savings Bank

Signature Bank

Spencer Savings Bank

Sterling National Bank

The Bank of East Asia

The Bank of New York

The Berkshire Bank

The Home Loan Bank

The United Bank of Kuwait, PLC

The Bank of America

Trust Company of New Jersey

UMB Bank & Trust Company

United Jersey Bank

Unity Bank

US Bank

US Trust Company

Valley National Bank

W achovia Bank

W ashington Mutual Bank

W ebster Bank

W ells Fargo Bank

CORPORATIONS

23 Realty Associates

Abyssinian Development Corp.

Amoco Oil Co.

Bell Mortgage Banking

Braverman & Assoc.

Breed, Abbott, Morgan

Brown, Harris, Stevens Inc.

Cadwalader, W ickersham & Taft

Charles H. Greenthal, Inc.

Cimco, Inc.

CMC Corporation of America

Commercial Capital Corp.

Consolidated Edison Co.

Consolidated Asset Recovery Corporation

Dana Investment Corporation

Deloitte & Touche

Exxon Company, USA

Firestone Tire & Rubber Corporation

Friedland, LLP

GCP Captial Corporation

Gemini Asset Managers

Gluck, W itkoff, and Katz

Gluck, Spencer Realty

Grace Industries


PARTIAL LIST OF CLIENTS OF WM. SHUBERT & CO., INC.

CORPORATIONS, CONTINUED:

Hamilton Mortgage Corporation

Lafayette Kings Corporation

Liberty Lending

Marubeni America

McDonald Corp.

Northmarq Capital

Northway

PCV Mercor

Pearce, Urstadt, Mayer and Greer

Pechter Field Bakery, Inc.

Penson Corporation

Phoenix Realty

Price W aterhouse Coopers

Project Services, Inc.

Regal Cinemas

Rite Aid, Inc.

Sinnreich and W asserman

Sun Refining & Marketing Corporation

The Kash Group

The Hotel Group, Inc.

Toyota Motor Co.

Trafalgar House Realty

Trust Company of New York

United Equities Corporation

United Homes

W alter & Samuels, Inc.

W ells Fargo Bank

Yuco Management, Inc.

PUBLIC AGENCIES

Federal Deposit Insurance Corporation

New York Business Development Corp.

NYC Department of General Services

NYC Economic Development Corporation

NYC Law Department

Off-Track Betting Corporation

US General Services Administration

US Depart. of Housing and Urban Dvpmt.

US Postal Service

US Internal Revenue Service

Veteran’s Administration

NON-PROFIT ORGANIZATIONS

9/11 W idows and Victims Assoc.

ACS Head Start

Archdiocese of New York

City University of New York

Community Preservation Corporation

East Harlem Renewal Agency, Inc.

Family Support Systems, Ltd.

Fordham University

H.E.L.P. Project, Inc.

Hire, Inc.

Church of the Latter Day Saints

Nat.l Fed. of Comm. Dev. Credit Unions

Settlement Housing Fund

The Greystone Foundation

The Salvation Army

The Community Service Society, Inc.

Tollentine-Zeiser Community Life Center

Uniformed Firefighters Association

W est Side Foundation for Senior Housing


Documents

APPRAISAL OF 1268 EAST 14TH STREET BROOKLYN, NEW YORK appraisal Jan 1… · The purpose of this appraisal is to estimate the market value of the subject property as of December 8,