COMPREHENSIVE APPRAISAL NARRA TlVE SUMMARY REPORT fileA common access drive is shared with the apartment complex to the west, Longbranch Apartments, which apparently is an identical

COMPREHENSIVE APPRAISAL NARRA TlVE SUMMARY REPORT

Brady's Cove 1,1425 and 1429 Longbranch Avenue Brady's Cove 11,1435 and 1439 Longbranch Avenue

Grover Beach, CA 93433

Exhibit R, Appraisal Brady's Cove Page 1 of 74

COMPREHENSIVE APPRAISAL NARRA TlVE SUMMARY REPORT

Brady's Cove 1,1425 and 1429 Longbranch Avenue Brady's Cove 11,1435 and 1439 Longbranch Avenue


BRUCE BERUDOIN ~ RSSOCIRTES. INC.

Bruce A. Beaudoin, MAl. SRn

Real Estate Appraisers l} Consultants 659 Mulligan lane· Arroyo Grande • CA • 934.29

TEL (B95) 413-2699 • FAH (B95) 413-9191

May 24,2011

Mr. Paul Baker, Account Manager Re: File # 11191: Appraisal Community West Bank 445 Pine Avenue Goleta, CA 93117-3709

Dear Mr. Baker:

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue Grover Beach, CA 93433

In response to your request, I initially inspected the exterior of the 30-unit apartment complex referred to above on May 23, 2011. On June 3, 2011 I subsequently inspected the interior of seven of the thirty tmits.

The Pwpose, Intended Use, Intended Users and Scope of this appraisal, as well as property rights appraised, are summarized on Pages 12-15 of the enclosed report.

As a result of my investigation, it is my opinion the "as is" value of the fee simple estate in the surface rights of the apartment complex under analysis as of June 3,2011 is the sum of:

$3,261,000 (THREE MILLION TWO HUNDRED SIXTY-ONE THOUSAND DOLLARS)

The interior of units at 1429A, B, and 1435A, E, G, Hand 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to include profitindirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.

A common access drive is shared with the apartment complex to the west, Longbranch Apartments, which apparently is an identical complex extending west to 14th Street. In this regard, it is assumed that there is a corresponding reciprocal access and maintenance agreement with a current verifying title report recommended.


BRUCE BERUDOIN ~ RSSOCIRTES. INC.

Bruce A. Beaudoin, MAl. SRn

Real Estate Appraisers l} Consultants 659 Mulligan lane· Arroyo Grande • CA • 934.29

TEL (B95) 413-2699 • FAH (B95) 413-9191

May 24,2011

Mr. Paul Baker, Account Manager Re: File # 11191: Appraisal Community West Bank 445 Pine Avenue Goleta, CA 93117-3709

Dear Mr. Baker:

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue Grover Beach, CA 93433

In response to your request, I initially inspected the exterior of the 30-unit apartment complex referred to above on May 23, 2011. On June 3, 2011 I subsequently inspected the interior of seven of the thirty tmits.

The Pwpose, Intended Use, Intended Users and Scope of this appraisal, as well as property rights appraised, are summarized on Pages 12-15 of the enclosed report.

As a result of my investigation, it is my opinion the "as is" value of the fee simple estate in the surface rights of the apartment complex under analysis as of June 3,2011 is the sum of:

$3,261,000 (THREE MILLION TWO HUNDRED SIXTY-ONE THOUSAND DOLLARS)

The interior of units at 1429A, B, and 1435A, E, G, Hand 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to include profitindirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.


Community West Bank Goleta, CA 93711-3709 -2- May 24,2011

A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal and/or remediation and its effect on value have not been considered.

Value conclusions are the result ofa comprehensive appraisal issued as a narrative summary report to which your attention is directed.

Sincerely,

~~aJL Bruce A. BeaudOIn, MAL, SRA

Lie. #AG002047

BAB:aa

Encl.


Community West Bank Goleta, CA 93711-3709 -2- May 24,2011

A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal and/or remediation and its effect on value have not been considered.

Value conclusions are the result ofa comprehensive appraisal issued as a narrative summary report to which your attention is directed.

Sincerely,

~~aJL Bruce A. BeaudOIn, MAL, SRA

Lie. #AG002047

BAB:aa

Encl.

TABLE OF CONTENTS

PHOTOGRAPHS ................................................................... .

SUMMARY OF SALIENT FACTS AND CONCLUSIONS .................................. 7

ASSUMPTIONS AND LIMITING CONDITIONS ......................................... 9

PURPOSE OF APPRAISAL ........................................................ " 12

INTENDED USE AND [NTENDED USERS OF APPRAISAL .............................. 13

SCOPE OF APPRAISAL ............................................................ 13

REGIONAL ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15

COMMUNITY ANALYSIS .......................................................... 21

NEIGHBORHOOD ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23

PROPERTY DATA ............................................................... " 24 TITLE AND RECORD DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24

Legal Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 Assessments and Taxes ................................................. 24

Easements-Surface Restrictions ................................................. 25 Owner of Record ........................................................... " 25 Property History ............................................................. 25

SITE ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25

IMPROVEMENT DESCRIPTION ..................................................... 27

HlGHEST AND BEST USE .......................................................... 29

METHOD OF VALUATION ......................................................... 30

INCOME APPROACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30

SALES COMPARISON APPROACH .................................................. 40

RECONCILIA TION AND CONCLUSION .............................................. 55 Reasonable Exposure Time .................................................... 55

CERTIFICATION .................................................................. 57

ADDENDA

Appraiser's Qualifications ...................................................... , I Engagement Letter and Correspondence ........................................... 2 Preliminary Title Report ........................................................ 3 Income and Expense Statements, 2006-20 J 0 ....................................... , 4


TABLE OF CONTENTS

PHOTOGRAPHS ................................................................... .

SUMMARY OF SALIENT FACTS AND CONCLUSIONS .................................. 7

ASSUMPTIONS AND LIMITING CONDITIONS ......................................... 9

PURPOSE OF APPRAISAL ........................................................ " 12

INTENDED USE AND [NTENDED USERS OF APPRAISAL .............................. 13

SCOPE OF APPRAISAL ............................................................ 13

REGIONAL ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15

COMMUNITY ANALYSIS .......................................................... 21

NEIGHBORHOOD ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23

PROPERTY DATA ............................................................... " 24 TITLE AND RECORD DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24

Legal Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 Assessments and Taxes ................................................. 24

Easements-Surface Restrictions ................................................. 25 Owner of Record ........................................................... " 25 Property History ............................................................. 25

SITE ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25

IMPROVEMENT DESCRIPTION ..................................................... 27

HlGHEST AND BEST USE .......................................................... 29

METHOD OF VALUATION ......................................................... 30

INCOME APPROACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30

SALES COMPARISON APPROACH .................................................. 40

RECONCILIA TION AND CONCLUSION .............................................. 55 Reasonable Exposure Time .................................................... 55

CERTIFICATION .................................................................. 57

ADDENDA

Appraiser's Qualifications ...................................................... , I Engagement Letter and Correspondence ........................................... 2 Preliminary Title Report ........................................................ 3 Income and Expense Statements, 2006-20 J 0 ....................................... , 4

COMPREHENSIVE APPRAISAL NARRATIVE SUMMARY REPORT

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue


For

Mr. Paul Baker, Special Assets Account Manager Community West Bank

445 Pine Avenue Goleta, CA 93117-3709

As of

June 3, 2011

Prepared by

Bruce A. Beaudoin, MAl, SRA Bruce Beaudoin and Associates, Inc.

Real Estate Appraisers and Consultants 650 Mulligan Lane

Arroyo Grande, CA 93420 Ph. (805) 473-2600 FAX (805) 473-9101


COMPREHENSIVE APPRAISAL NARRATIVE SUMMARY REPORT

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue


For

Mr. Paul Baker, Special Assets Account Manager Community West Bank

445 Pine Avenue Goleta, CA 93117-3709

As of

June 3, 2011

Prepared by

Bruce A. Beaudoin, MAl, SRA Bruce Beaudoin and Associates, Inc.

Real Estate Appraisers and Consultants 650 Mulligan Lane

Arroyo Grande, CA 93420 Ph. (805) 473-2600 FAX (805) 473-9101


File # 11191

II PHOTOGRAPHS as of May 23, 2011 II

I. Street scene facing east towards Longbranch Avenue

2. Looking west towards Longbranch Avenue


Fi le # 111 91

II PHOTOGRAPHS as of May 23, 2011 II

I . Street scene facing east towards Longbranch Avenue

2. Looking west towards Longbranch A venue

File # 11191

3. Facing northeast towards southerly building at 1425 Longbranch Avenue

4. Looking northwest towards the southerly building

2 Exhibit R, Appraisal Brady's Cove Page 8 of 74

File 11 1119 1

3. Facing northeast towards southerl y building at 1425 Longbranch Avenue

4. Looking northwest towards the southerly building

2

File #11191

'.

5. Rear view of southerly building

6. Looking northeast towards southerly center building at 1429 Longbranch A venue


Filc #11191

:'. '

5. Rear view of southerly building

6. Looking northeast towards southerly center building at 1429 Longbranch A venue

3

File #11191

7. Facing northeast towards northerly building at 1439 Longbranch Avenue

8. Facing south towards common access drive for the subj ect complex and the complex to the west, Longbranch Apartments, further summari zed as Rental Comparison I in thi s appraisal


File #11191

7. Facing northeast towards northerly building at 1439 Longbranch Avenue

8. Facing south towards common access drive for the subject complex and the complex to the west, Longbranch Apartments, further summari zed as Rental Comparison I in this appraisal

4

File #1 1191

II . View of typical bath, 1429 B Longbranch Avenue

12. View of master bedroom, typical unit, 1429 B Longbranch Avenue

6


File # 11191

11 . View oflypical bath, 1429 B Longbranch Avenue

12. View ofmasler bedroom, typical unit, 1429 B Longbranch Avenue

6

File#11191

II SUMMARY OF SALIENT FACTS AND CONCLUSIONS II

CLIENT

OWNERS OF RECORD

TYPE OF APPRAISAL

DATES OF INSPECTION

PROJECT LOCATION

MAP REFERENCE

CENSUS TRACT

INTEREST APPRAISED

PURPOSE AND INTENDED USE

SITE SIZE

ZONING

FLOOD ZONE

TOXlC WASTE INFORMATION

HIGHEST AND BEST USE

Community West Bank

Larry Moriarty and Linda Moriarty, husband and wi fe, as to an undivided 59.59% interest and Kerry Moriarty, a married man as his sole and separate property, as to an undivided 40.41 % interest

Comprehensive appraisal, narrative summary report

May 23,2011 and June 3, 201]

1425, 1429, 1435 & 1439 Longbranch Avenue, Grover Beach, CA 93433

Thomas Guide: 714 F-5

120.00

Fee simple estate

'''As Is" value relative to mortgage underwriting and decision-making purposes on existing financing by Community West Bank

1.12 Acres

R-3: Multi-Residential

Zone HC," area of minima1 flooding

A Phase 1 Environmental Assessment was unavailable. For purposes of this appraisal, it is assumed that no hazardous-toxic contamination has occurred. Therefore, the cost of cleanup andlor remediation and its effect on value have not been considered.

As Vacant - Multi-residential development, likely, to a lesser density at ten to twenty units per acre in consideration of current zoning.

As Improved - Continued use as a 30-unit apartment complex

7


File#11191

II SUMMARY OF SALIENT FACTS AND CONCLUSIONS II

CLIENT

OWNERS OF RECORD

TYPE OF APPRAISAL

DATES OF INSPECTION

PROJECT LOCATION

MAP REFERENCE

CENSUS TRACT

INTEREST APPRAISED

PURPOSE AND INTENDED USE

SITE SIZE

ZONING

FLOOD ZONE

TOXlC WASTE INFORMATION

HIGHEST AND BEST USE

Community West Bank

Larry Moriarty and Linda Moriarty, husband and wi fe, as to an undivided 59.59% interest and Kerry Moriarty, a married man as his sole and separate property, as to an undivided 40.41 % interest

Comprehensive appraisal, narrative summary report

May 23,2011 and June 3, 201]

1425, 1429, 1435 & 1439 Longbranch Avenue, Grover Beach, CA 93433

Thomas Guide: 714 F-5

120.00

Fee simple estate

'''As Is" value relative to mortgage underwriting and decision-making purposes on existing financing by Community West Bank

1.12 Acres

R-3: Multi-Residential

Zone HC," area of minima1 flooding

A Phase 1 Environmental Assessment was unavailable. For purposes of this appraisal, it is assumed that no hazardous-toxic contamination has occurred. Therefore, the cost of cleanup andlor remediation and its effect on value have not been considered.

As Vacant - Multi-residential development, likely, to a lesser density at ten to twenty units per acre in consideration of current zoning.

As Improved - Continued use as a 30-unit apartment complex

7

File #11191

IMPROVEMENT DESCRIPTION This is a 30-unit complex in four buildings. All are 2-story, Class "e" construction on concrete slab foundations with wood frame stucco exteriors and gable-type composition roofs. The front and rear buildings are identical but reversed and include attached divided 2-car garages and six units each. The center buildings are identical, but again reversed and include nine units each with three 4-car builtin garages with units over them and remaining units ground floor and second floor of similar size and floor plans to those included with the front and rear buildings. Units over the garages are slightly larger units, but all are 2-bedroom, 2 bath. Area components are summarized as follows:

VALUATION SUMMARY

INCOME APPROACH

N.O.I.

O.A.R.

Cap. Value

Less Deferred Maintenance

"As Is" Value

Round to

VALUE AS OF JUNE 3, 2011

24 - Two-bedroom, 2 bath units @ 872 sq. ft. = 20,928 sq. ft. 6 - Two-bedroom, 2 bath units @ 908 sq. ft. = 5,448 sq. ft.

Two Laundries @ 160 sq. ft. =

Total Building Area: Garages - 4 @ 390 sq. ft. =

Garages - 6 @ 800 sq. ft. = Total Garage Area:

Total 26,376 sq. ft. 320 sq. ft.

26,696 sq. ft. 1,560 sq. ft. 4,800 sq. ft. 6,360 sq. ft.

SALES COMPARISON APPROACH

$209,894 Building Size 26,696

6% Value/Sq.Ft. $140.00

$3,498,233 Total $3,737,440

($317,000) 30 Units @ $] 20,0001Unit $3,600,000

$3,18],233 Effective Gross Income Multiplier $360,810 x 10 = $3,608,100 Value as Renovated $3,608, I 00

Reconciled Value $3,656,596

Less Deferred Maintenance ($317,000)

"As Is" Value by the Sales $3,339,596 Comparison Approach

$3,181,000 Round to $3,340,000

$3,261,000

EFFECTIVE DATE OF APPRAlSAL: June 3, 2011

REASONABLE EXPOSURE TIME Four to eight months from inception of listing to close of escrow

8


File #11191

IMPROVEMENT DESCRIPTION This is a 30-unit complex in four buildings. All are 2-story, Class "e" construction on concrete slab foundations with wood frame stucco exteriors and gable-type composition roofs. The front and rear buildings are identical but reversed and include attached divided 2-car garages and six units each. The center buildings are identical, but again reversed and include nine units each with three 4-car builtin garages with units over them and remaining units ground floor and second floor of similar size and floor plans to those included with the front and rear buildings. Units over the garages are slightly larger units, but all are 2-bedroom, 2 bath. Area components are summarized as follows:

VALUATION SUMMARY

INCOME APPROACH

N.O.I.

O.A.R.

Cap. Value

Less Deferred Maintenance

"As Is" Value

Round to

VALUE AS OF JUNE 3, 2011

24 - Two-bedroom, 2 bath units @ 872 sq. ft. = 20,928 sq. ft. 6 - Two-bedroom, 2 bath units @ 908 sq. ft. = 5,448 sq. ft.

Two Laundries @ 160 sq. ft. =

Total Building Area: Garages - 4 @ 390 sq. ft. =

Garages - 6 @ 800 sq. ft. = Total Garage Area:

Total 26,376 sq. ft. 320 sq. ft.

26,696 sq. ft. 1,560 sq. ft. 4,800 sq. ft. 6,360 sq. ft.


$209,894 Building Size 26,696

6% Value/Sq.Ft. $140.00

$3,498,233 Total $3,737,440

($317,000) 30 Units @ $] 20,0001Unit $3,600,000

$3,18],233 Effective Gross Income Multiplier $360,810 x 10 = $3,608,100 Value as Renovated $3,608, I 00

Reconciled Value $3,656,596

Less Deferred Maintenance ($317,000)

"As Is" Value by the Sales $3,339,596 Comparison Approach

$3,181,000 Round to $3,340,000

$3,261,000

EFFECTIVE DATE OF APPRAlSAL: June 3, 2011

REASONABLE EXPOSURE TIME Four to eight months from inception of listing to close of escrow

8

File #11191

VALIDATIONS The interior of units at 1429A, 1435A, E, G, H and 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to inel ude profit-indirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.


A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlorremediation and its effect on value have not been considered.

9


File #11191

VALIDATIONS The interior of units at 1429A, 1435A, E, G, H and 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to inel ude profit-indirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.


A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlorremediation and its effect on value have not been considered.

9

File #11191

II ASSUMPTIONS AND LIMITING CONDITIONS II

This appraisal, which is confined to setting forth analyses, opinions and conclusions of the property described herein, is subject to the following contingent and limiting conditions:

1. The date of value to which the conclusions and opinions expressed in this report apply, is set forth in the letter of transmittal. Further, the dollar amount of any value opinion rendered is based upon the purchasing po\ver of the American dollar existing on that date.

2. The appraiser assumes no responsibility for economic or physical factors which may affect the opinions in this report which occur after the date of the letter transmitting this report.

3. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.

4. The appraiser reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available.

5. No opinion as to title is rendered. Data related to ownership and legal description was obtained from San Luis Obispo County Assessor's Office 2010-11 tax roll records and is considered reliable. Title is assumed to be marketable and free and clear of aI1 liens and encumbrances, easements and restrictions, except those specifically discussed in the report. The property is appraised assuming it to be under responsible ownership and competent management, and available for its highest and best use.

6. The appraiser assumes no responsibility for hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for arranging for engineering studies that may be required to discover them.

7. The property is appraised assuming it to be in full compliance with all applicable tederal, state, and local regulations and laws, unless otherwise stated.

8. The property is appraised assunling that all applicable zoning and use regulations and restrictions have been complied with, unless otherwise stated.

9. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based, unless otherwise stated.

10. No engineering survey has been made by the appraiser. Except as specifically stated, data relative to size and area was taken from sources considered reliable and no encroachment of real property improvements is considered to exist.

10


File #11191

II ASSUMPTIONS AND LIMITING CONDITIONS II

This appraisal, which is confined to setting forth analyses, opinions and conclusions of the property described herein, is subject to the following contingent and limiting conditions:

1. The date of value to which the conclusions and opinions expressed in this report apply, is set forth in the letter of transmittal. Further, the dollar amount of any value opinion rendered is based upon the purchasing po\ver of the American dollar existing on that date.

2. The appraiser assumes no responsibility for economic or physical factors which may affect the opinions in this report which occur after the date of the letter transmitting this report.

3. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.

4. The appraiser reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available.

5. No opinion as to title is rendered. Data related to ownership and legal description was obtained from San Luis Obispo County Assessor's Office 2010-11 tax roll records and is considered reliable. Title is assumed to be marketable and free and clear of aI1 liens and encumbrances, easements and restrictions, except those specifically discussed in the report. The property is appraised assuming it to be under responsible ownership and competent management, and available for its highest and best use.

6. The appraiser assumes no responsibility for hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for arranging for engineering studies that may be required to discover them.

7. The property is appraised assuming it to be in full compliance with all applicable tederal, state, and local regulations and laws, unless otherwise stated.

8. The property is appraised assunling that all applicable zoning and use regulations and restrictions have been complied with, unless otherwise stated.

9. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based, unless otherwise stated.

10. No engineering survey has been made by the appraiser. Except as specifically stated, data relative to size and area was taken from sources considered reliable and no encroachment of real property improvements is considered to exist.

10

File#Il19I

11. No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated.

12. Maps, plats and exhibits included in this part are for illustration only, as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

13. No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers.

14. The distribution, ifany, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

15. That possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event only with proper written qualification and only in its entirety.

16. Unless otbelWise stated in this report, the existence of toxic or hazardous material, which mayor may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances, such as asbestos, urea-fonnaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

17. No detailed soil studies covering the subject property were available to the appraiser. Therefore, any premises as to soil qualities employed in this report are not conclusive but have been discussed with the client and considered consistent with infonnation available to the appraiser.

18. Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance.

19. The appraiser has personally inspected the subject property and finds no obvious evidence of structural deficiencies, except as stated in this report; however, no responsibility for hidden defects or conformity to specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes can be assumed without provision of specific professional or governmental inspections.

11


File#Il19I

11. No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated.

12. Maps, plats and exhibits included in this part are for illustration only, as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

13. No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers.

14. The distribution, ifany, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

15. That possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event only with proper written qualification and only in its entirety.

16. Unless otbelWise stated in this report, the existence of toxic or hazardous material, which mayor may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances, such as asbestos, urea-fonnaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

17. No detailed soil studies covering the subject property were available to the appraiser. Therefore, any premises as to soil qualities employed in this report are not conclusive but have been discussed with the client and considered consistent with infonnation available to the appraiser.

18. Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance.

19. The appraiser has personally inspected the subject property and finds no obvious evidence of structural deficiencies, except as stated in this report; however, no responsibility for hidden defects or conformity to specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes can be assumed without provision of specific professional or governmental inspections.

11

File # 11191

20. No consideration has been given in this appraisal as to the value of the property located on the premises considered by the appraiser to be personal property, nor has he given consideration to the cost of moving or relocating such personal property; only the real property has been considered. Specifically, real property includes the site, buildings, attached fixtures, builtin appliances, refrigerators and window coverings.

II PURPOSE OF APPRAISAL II

The objective of this appraisal is to estimate the "as is" value of the tee simple estate for the 30-unit apartment complex under analysis as of May 23,2011.

According to Federal Reserve System 12 CFR, Parts 208 and 225, (Regulation H, Regulation Y; Docket No. R-0685) Appraisal Standards for Federally Related Transactions, Section 225.62 Definitions, [f], market value is defined as follows:

"Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

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

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

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

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

The fee simple estate relates to all of the rights of absolute ownership, unencwnbered by any other interest or estate, of real property subject to governmental control relative to zoning and other healthsafety standards, as well as the power of condemnation, escheat and taxation, and in consideration of easements-surface restrictions relative to the right of use of others.

On the other hand, the leased fee estate consists of the ownership interest held by the landlord with the right of use and occupancy conveyed by a lease to others, usually. consisting of the right to receive rent and the right of repossession at the termination of the lease.

12


File # 11191

20. No consideration has been given in this appraisal as to the value of the property located on the premises considered by the appraiser to be personal property, nor has he given consideration to the cost of moving or relocating such personal property; only the real property has been considered. Specifically, real property includes the site, buildings, attached fixtures, builtin appliances, refrigerators and window coverings.

II PURPOSE OF APPRAISAL II

The objective of this appraisal is to estimate the "as is" value of the tee simple estate for the 30-unit apartment complex under analysis as of May 23,2011.

According to Federal Reserve System 12 CFR, Parts 208 and 225, (Regulation H, Regulation Y; Docket No. R-0685) Appraisal Standards for Federally Related Transactions, Section 225.62 Definitions, [f], market value is defined as follows:

"Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

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

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

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

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

The fee simple estate relates to all of the rights of absolute ownership, unencwnbered by any other interest or estate, of real property subject to governmental control relative to zoning and other healthsafety standards, as well as the power of condemnation, escheat and taxation, and in consideration of easements-surface restrictions relative to the right of use of others.

On the other hand, the leased fee estate consists of the ownership interest held by the landlord with the right of use and occupancy conveyed by a lease to others, usually. consisting of the right to receive rent and the right of repossession at the termination of the lease.

12

File #11191

Reportedly, this complex is affected by month to month rental agreements. Therefore, only the value of the fee simple estate has been considered relative to easements and restrictions reflected in the preliminary title report as shown in the Addenda.

II INTENDED USE AND INTENDED USERS OF APPRAISAL Ii

Community West Bank. is considering existing financing on the property under analysis. Therefore, intended use relates to mortgage lending, underwriting and deCIsion making purposes by the client. The bank has requested an appraisal with an adequate and appropriate scope of work as a narrative summary report. This report in its entirety is Copyright 2011 by Bruce Beaudoin & Assoc., Inc., a California Corporation. All rights of reproduction are prohibited unless pennission is granted in writing. Without the written consent of the appraiser, this appraisal should not be used for any other purpose or by any other person or entity other than the client to which it is addressed. The appraiser has no liability, obligation, or responsibility to anyone but the client. The client has requested a comprehensive appraisal with adequate and appropriate scope of work, narrative summary report, which has been prepared and completed in conformance with the Uniform Standards of Professional Appraisal Practice (US PAP), as last revised by the Appraisal Standards Board of the Appraisal Foundation, minimum appraisal standards mandated by Title XI of the Federal Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA), Ethics and Standards of the Appraisal Institute, requirements of the Office of the Comptroller of Currency and requirements of Community West Bank. This appraisal was not based on a requested minimum, a specific valuation or the approval of a loan. Emphasis has been given to valuation on a cash or equivalent basis.

II SCOPE OF APPRAISAL Ii

In acceptance of this assignment, I have determined I have the necessary knowledge and experience to complete this appraisal. In the past, I have completed numerous appraisals on apartment complexes in San Luis Obispo and Northern Santa Barbara Counties. This would include a prior appraisal on the subject complex as of August 15, 2008, almost three years ago.

This appraisal was authorized by engagement letter acknowledged April 18, 2011 as shown in the Addenda. Concurrently, the client forwarded an appraisal submission form, rental rolls and partial income and expense reports by email dated May 11, 2011. Full income and expense reports were forwarded for 2009 and 2010. However, income and expense statements were only available for the first seven months 0[2008. Relative to the former appraisal, income and expense reports were also available for the 2006 and 2007. The partial statement for 2008 has been prorated to an annual basis resulting in an income and expense history for the last five years.

Initially, Kerry Moriarty, one of the owners, was contacted by phone to inspect the property in early May. However, there were no return phone calls. Consequently, the offsite manager, Jerry Jones, was contacted at (805) 441-0387 on May 9, 2011. He noted he is a commercial fishennan and was committed to related activities during that week but would attempt to notify tenants on approximately six units so that these could be inspected later that week. However, when he was recontacted, he indicated he had contacted Mr. Moriarity who was unaware an appraisal had been ordered by Community West Bank. By email dated May 10,2011, the client was advised, "Also, apparently Kerry Moriarty, one of the owners, is unaware of your appraisal request. Please clarify."

13


File #11191

Reportedly, this complex is affected by month to month rental agreements. Therefore, only the value of the fee simple estate has been considered relative to easements and restrictions reflected in the preliminary title report as shown in the Addenda.

II INTENDED USE AND INTENDED USERS OF APPRAISAL Ii

Community West Bank. is considering existing financing on the property under analysis. Therefore, intended use relates to mortgage lending, underwriting and deCIsion making purposes by the client. The bank has requested an appraisal with an adequate and appropriate scope of work as a narrative summary report. This report in its entirety is Copyright 2011 by Bruce Beaudoin & Assoc., Inc., a California Corporation. All rights of reproduction are prohibited unless pennission is granted in writing. Without the written consent of the appraiser, this appraisal should not be used for any other purpose or by any other person or entity other than the client to which it is addressed. The appraiser has no liability, obligation, or responsibility to anyone but the client. The client has requested a comprehensive appraisal with adequate and appropriate scope of work, narrative summary report, which has been prepared and completed in conformance with the Uniform Standards of Professional Appraisal Practice (US PAP), as last revised by the Appraisal Standards Board of the Appraisal Foundation, minimum appraisal standards mandated by Title XI of the Federal Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA), Ethics and Standards of the Appraisal Institute, requirements of the Office of the Comptroller of Currency and requirements of Community West Bank. This appraisal was not based on a requested minimum, a specific valuation or the approval of a loan. Emphasis has been given to valuation on a cash or equivalent basis.

II SCOPE OF APPRAISAL Ii

In acceptance of this assignment, I have determined I have the necessary knowledge and experience to complete this appraisal. In the past, I have completed numerous appraisals on apartment complexes in San Luis Obispo and Northern Santa Barbara Counties. This would include a prior appraisal on the subject complex as of August 15, 2008, almost three years ago.

This appraisal was authorized by engagement letter acknowledged April 18, 2011 as shown in the Addenda. Concurrently, the client forwarded an appraisal submission form, rental rolls and partial income and expense reports by email dated May 11, 2011. Full income and expense reports were forwarded for 2009 and 2010. However, income and expense statements were only available for the first seven months 0[2008. Relative to the former appraisal, income and expense reports were also available for the 2006 and 2007. The partial statement for 2008 has been prorated to an annual basis resulting in an income and expense history for the last five years.

Initially, Kerry Moriarty, one of the owners, was contacted by phone to inspect the property in early May. However, there were no return phone calls. Consequently, the offsite manager, Jerry Jones, was contacted at (805) 441-0387 on May 9, 2011. He noted he is a commercial fishennan and was committed to related activities during that week but would attempt to notify tenants on approximately six units so that these could be inspected later that week. However, when he was recontacted, he indicated he had contacted Mr. Moriarity who was unaware an appraisal had been ordered by Community West Bank. By email dated May 10,2011, the client was advised, "Also, apparently Kerry Moriarty, one of the owners, is unaware of your appraisal request. Please clarify."

13

File #11191

By email dated May 20, 2011, the appraiser was advised, '''Apparently Mr. Moriarty has been contacted and is now ready for you to set the appointment with him. If you are still meeting up with some resistance please let me know." Mr. Baker was advised by email dated the same day, "According to the Manager, Jerry Jones (805-441-0387, he talked to Kerry Moriarty yesterday. He indicated that Mr. Moriarty is out of town until Tuesday and cannot be reached by phone. After that, he has requested that Mr. Jones not set an appointment without his authorization. With your approval, I can continue to complete the appraisal with or without an interior inspection." Therefore, the exterior of the property \-vas inspected on May 23,2011. By email datedJuneI.2011.Mr. Baker indicated, Mr. Moriarty is amenable to inspection for the properties. Subsequently, Mr. Moriarty advised Mr. Jones to notice the tenants. However, only seven of the tenants were home the afternoon of June 6, and corresponding units, as already discussed, were inspected. These units were in average condition and for purposes of this appraisal, it is assumed that the remaining 23 units that were not inspected are in similar condition. Mr. Moriarty also furnished a current rent roll.

A common access drive is shared with the complex to the west, Longbranch Apartments, which apparently is an identical complex extending west to 14th Street. In this regard, it is assumed that there is a corresponding reciprocal access and maintenance agreement with a current verifying title report recommended. The complex appears to be in similar condition as to the last date of inspection, almost three years ago when deferred maintenance, renovation and reconditioning to include profit-indirect cost and overhead was estimated at $371,000. In this regard, a verifying cost estimate is recommended.

A Phase I Environmental Assessnlent was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlor remediation and its effect on value have not been considered. Please let me know how to proceed." No response was received, and as this appraisal is to be completed on or about May 27, 2011, the complex was inspected from the exterior only as of May 23, 2011. At that time, it appeared the exterior of the complex had not been painted, fence had not been replaced and landscaping was consistent with the last appraisal. As the interior cannot be inspected, it is assumed that similar reconditioning and renovation is required. Consequently, the complex has been appraised under the extraordinary assumption that total cost for deferred maintenance, renovation and reconditioning will not exceed the last estimate at $317,000 with further verification recommended.

As this complex was constructed in the mid-1980's, it is legaJIy non-conforming as to zoning. According to Janet Reese, City of Grover Beach Community Development Department, current R-3 Multi-Family Residential zoning now pennits a maximum of28 units. She further noted legal nonconforming use can continue as long as it is not discontinued for more than one year and that the complex can be reconstructed if it is destroyed by fire or other calamity. As such, the subject benefits from a slight density bonus which could enhance its site value. However, there have been no recent sales of multi-residential sites in Grover Beach, and effective age of this complex is estimated at 22 years. Therefore, depreciation would be difficult, at best, to measure. Consequently, the Cost Approach to value is not applicable and emphasis has been given to the Income and Sales Comparison Approaches. In this regard, rent rolls as of May 3 I , 201 I denote monthly rent totaling $30,730 or $1 ,024 Paso Robles unit which is close to market as indicated by comparison. Expenses have been estimated on the basis of 5-year averages as well as reasonable industry norms to arrive at net income which is capitalized into a value estimate by the Income Approach, adjusted for deferred maintenance, renovation and reconditioning costs.

14


File #11191

By email dated May 20, 2011, the appraiser was advised, '''Apparently Mr. Moriarty has been contacted and is now ready for you to set the appointment with him. If you are still meeting up with some resistance please let me know." Mr. Baker was advised by email dated the same day, "According to the Manager, Jerry Jones (805-441-0387, he talked to Kerry Moriarty yesterday. He indicated that Mr. Moriarty is out of town until Tuesday and cannot be reached by phone. After that, he has requested that Mr. Jones not set an appointment without his authorization. With your approval, I can continue to complete the appraisal with or without an interior inspection." Therefore, the exterior of the property \-vas inspected on May 23,2011. By email datedJuneI.2011.Mr. Baker indicated, Mr. Moriarty is amenable to inspection for the properties. Subsequently, Mr. Moriarty advised Mr. Jones to notice the tenants. However, only seven of the tenants were home the afternoon of June 6, and corresponding units, as already discussed, were inspected. These units were in average condition and for purposes of this appraisal, it is assumed that the remaining 23 units that were not inspected are in similar condition. Mr. Moriarty also furnished a current rent roll.

A common access drive is shared with the complex to the west, Longbranch Apartments, which apparently is an identical complex extending west to 14th Street. In this regard, it is assumed that there is a corresponding reciprocal access and maintenance agreement with a current verifying title report recommended. The complex appears to be in similar condition as to the last date of inspection, almost three years ago when deferred maintenance, renovation and reconditioning to include profit-indirect cost and overhead was estimated at $371,000. In this regard, a verifying cost estimate is recommended.

A Phase I Environmental Assessnlent was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlor remediation and its effect on value have not been considered. Please let me know how to proceed." No response was received, and as this appraisal is to be completed on or about May 27, 2011, the complex was inspected from the exterior only as of May 23, 2011. At that time, it appeared the exterior of the complex had not been painted, fence had not been replaced and landscaping was consistent with the last appraisal. As the interior cannot be inspected, it is assumed that similar reconditioning and renovation is required. Consequently, the complex has been appraised under the extraordinary assumption that total cost for deferred maintenance, renovation and reconditioning will not exceed the last estimate at $317,000 with further verification recommended.

As this complex was constructed in the mid-1980's, it is legaJIy non-conforming as to zoning. According to Janet Reese, City of Grover Beach Community Development Department, current R-3 Multi-Family Residential zoning now pennits a maximum of28 units. She further noted legal nonconforming use can continue as long as it is not discontinued for more than one year and that the complex can be reconstructed if it is destroyed by fire or other calamity. As such, the subject benefits from a slight density bonus which could enhance its site value. However, there have been no recent sales of multi-residential sites in Grover Beach, and effective age of this complex is estimated at 22 years. Therefore, depreciation would be difficult, at best, to measure. Consequently, the Cost Approach to value is not applicable and emphasis has been given to the Income and Sales Comparison Approaches. In this regard, rent rolls as of May 3 I , 201 I denote monthly rent totaling $30,730 or $1 ,024 Paso Robles unit which is close to market as indicated by comparison. Expenses have been estimated on the basis of 5-year averages as well as reasonable industry norms to arrive at net income which is capitalized into a value estimate by the Income Approach, adjusted for deferred maintenance, renovation and reconditioning costs.

14

REGIONAL MAP

T,t i .1\, I . -r---'-!, );


REGIONAL MAP

File #11191

Investigation within Southern San Luis Obispo County yielded six sales of somewhat similar complexes during the last three years. Two are in the inunediate community of Grover Beach, one in Los Osos, an unincorporated coastal community, and three in San Luis Obispo. These transactions have been verified by buyer, seller or agent to determine sales price and physical characteristics. Applicable units of comparison include sales price per square foo~ sales price per unit and effective gross income multipliers. Most of the comparisons were in overall good condition and therefore value indications have been adjusted downward for the related cost associated with the subject.

Value indications by the two approaches are then reconciled to a final value conclusion. The following report provides the factual basis for this appraisal.

II REGIONAL ANALYSIS II

Location - The apartment complex ooder consideration is located in Grover Beach in Southern San Luis Obispo County, California. The county is approximately 230 miles north of Los Angeles and 205 miles south of San Francisco in an area known as the "Central Coastal Region of California." Primary access to the area is via U.S. Highway 101, which runs north and south the full length of the county. The county is bounded on the north by Monterey County and on the south by Santa Barbara County. To the east is San Joaquin Valley, and to the west is the Pacific Ocean. The county encompasses 3,316 square miles and is bisected north to south into two distinct climatic zones by the Santa Lucia Mountain Range. The range separates the relatively wet coastal areas and the dry inland areas. Daytime temperatures along the 85-mile coastline average 60-75° year-round, where rainfall averages 22 inches per year. Inland area temperatures are more extreme, with common winter lows of 20-30°, and daytime swnmer highs over 100°.

Population - According to a recent article in the San Luis Obispo Tribune, March 9, 2011, County Gained 23,000, Mostly in the North,

-"In the past decade, the county's population grew by 9.3 percent, or about 23,000 people. That nearly mirrors the state's growth rate. In just 10 years, the county population grew from 246,681 to 269,637.

The North County was the epicenter of the county's population expansion, with the highest increase centered in Paso Robles. In fact, Paso Robles grew so much it overtook Atascadero as the county's second largest city in 2005. A trio of North County population centers - Templeton, Atascadero and Paso Robles -jumped in combined population by more than 10,000. Even little Shandon and San Miguel grew.

The South County's population change, while a mixed bag overall, was close on the heels of the North County in terms of growth.

Nipomo experienced the second-highest increase in the county - growing by 4,088. Nipomo and Arroyo Grande saw their population grow by 5,489 combined. Grover Beach, meanwhile, had an increase of 89 people. Pismo Beach topped the county in population loss with 896 fewer people in 2010 than in 2000. The central parts of the county saw anemic growth or losses."

15


File #11191

Investigation within Southern San Luis Obispo County yielded six sales of somewhat similar complexes during the last three years. Two are in the inunediate community of Grover Beach, one in Los Osos, an unincorporated coastal community, and three in San Luis Obispo. These transactions have been verified by buyer, seller or agent to determine sales price and physical characteristics. Applicable units of comparison include sales price per square foo~ sales price per unit and effective gross income multipliers. Most of the comparisons were in overall good condition and therefore value indications have been adjusted downward for the related cost associated with the subject.

Value indications by the two approaches are then reconciled to a final value conclusion. The following report provides the factual basis for this appraisal.

II REGIONAL ANALYSIS II

Location - The apartment complex ooder consideration is located in Grover Beach in Southern San Luis Obispo County, California. The county is approximately 230 miles north of Los Angeles and 205 miles south of San Francisco in an area known as the "Central Coastal Region of California." Primary access to the area is via U.S. Highway 101, which runs north and south the full length of the county. The county is bounded on the north by Monterey County and on the south by Santa Barbara County. To the east is San Joaquin Valley, and to the west is the Pacific Ocean. The county encompasses 3,316 square miles and is bisected north to south into two distinct climatic zones by the Santa Lucia Mountain Range. The range separates the relatively wet coastal areas and the dry inland areas. Daytime temperatures along the 85-mile coastline average 60-75° year-round, where rainfall averages 22 inches per year. Inland area temperatures are more extreme, with common winter lows of 20-30°, and daytime swnmer highs over 100°.

Population - According to a recent article in the San Luis Obispo Tribune, March 9, 2011, County Gained 23,000, Mostly in the North,

-"In the past decade, the county's population grew by 9.3 percent, or about 23,000 people. That nearly mirrors the state's growth rate. In just 10 years, the county population grew from 246,681 to 269,637.

The North County was the epicenter of the county's population expansion, with the highest increase centered in Paso Robles. In fact, Paso Robles grew so much it overtook Atascadero as the county's second largest city in 2005. A trio of North County population centers - Templeton, Atascadero and Paso Robles -jumped in combined population by more than 10,000. Even little Shandon and San Miguel grew.

The South County's population change, while a mixed bag overall, was close on the heels of the North County in terms of growth.

Nipomo experienced the second-highest increase in the county - growing by 4,088. Nipomo and Arroyo Grande saw their population grow by 5,489 combined. Grover Beach, meanwhile, had an increase of 89 people. Pismo Beach topped the county in population loss with 896 fewer people in 2010 than in 2000. The central parts of the county saw anemic growth or losses."

15

File #11191

Retail Trade: According to an article published in the UCSB Economic Forecast Project, 2010,

~'San Luis Obispo is proving resilient in this market segment and, for all intents and purposes, has 'dodged the bullet.' Box stores, which have gone vacant, have been quickly backfilled. For example: Forever 21 replaced approximately 100,000 sq. ft. of Gottschalks, New Frontiers is soon to be moving into Circuit City's 30,300 sq. ft., Kohl's is backfilling Mervyn's at the Madonna Plaza, and T J Maxx is replacing the 28,400 sq. ft. Linen and Things. For this market these are big spaces being refilled.

Contrary to the general feeling and media coverage regarding weak retail markets, the retail sector reduced vacancy from six months ago. Vacancy actually declined from 7.7% six months ago to 5.6% today, but still remains higher than last year for the overall market. Although the data is optimistic it does not necessarily reflect attitudes of merchants coping with lackluster sales. There are roughly 192,600 sq. ft. of retail space available within the San Luis Obispo market.

There are annexations and big projects in the works: the Dalidio property along the freeway is back on the planning books after yet another judicial ruling; and tbe property across from the Home Depot and Costco along Los Os os Valley Road, known as 'the gap property,' is in annexation with Target being identified as the major tenant."

Employment - According to an article published in the The Tribune on April 2, 2011, Joblessness Drops in County to 9.8 Percent

"San Luis Obispo County's unemployment rate fell to 9.8 percent in February, the first time in three months that it has dropped below the 10 percent mark.

The February figure compares to a 10.3 percent unemployment rate in January and 10.3 percent recorded in the same month a year ago, according to the latest data from the California Employment Development Department. The data are not seasonally adjusted.

-The local community with the higbest unemployment rate was Oceano at 18 percent, followed by Nipomo and Paso Robles, with rates at 12.9 percent and 11.6 percent respectively.

The communities of Shandon (4.9 percent), Cayucos (5.7 percent) and Cambria (6.9 percent) had the lowest unemployment rates in February.

San Luis Obispo County's rate was below the 12.3 percent for California, which dropped for the second month in a row, but above the 9.5 percent for the nation during that period."

16


File #11191

Retail Trade: According to an article published in the UCSB Economic Forecast Project, 2010,

~'San Luis Obispo is proving resilient in this market segment and, for all intents and purposes, has 'dodged the bullet.' Box stores, which have gone vacant, have been quickly backfilled. For example: Forever 21 replaced approximately 100,000 sq. ft. of Gottschalks, New Frontiers is soon to be moving into Circuit City's 30,300 sq. ft., Kohl's is backfilling Mervyn's at the Madonna Plaza, and T J Maxx is replacing the 28,400 sq. ft. Linen and Things. For this market these are big spaces being refilled.

Contrary to the general feeling and media coverage regarding weak retail markets, the retail sector reduced vacancy from six months ago. Vacancy actually declined from 7.7% six months ago to 5.6% today, but still remains higher than last year for the overall market. Although the data is optimistic it does not necessarily reflect attitudes of merchants coping with lackluster sales. There are roughly 192,600 sq. ft. of retail space available within the San Luis Obispo market.

There are annexations and big projects in the works: the Dalidio property along the freeway is back on the planning books after yet another judicial ruling; and tbe property across from the Home Depot and Costco along Los Os os Valley Road, known as 'the gap property,' is in annexation with Target being identified as the major tenant."

Employment - According to an article published in the The Tribune on April 2, 2011, Joblessness Drops in County to 9.8 Percent

"San Luis Obispo County's unemployment rate fell to 9.8 percent in February, the first time in three months that it has dropped below the 10 percent mark.

The February figure compares to a 10.3 percent unemployment rate in January and 10.3 percent recorded in the same month a year ago, according to the latest data from the California Employment Development Department. The data are not seasonally adjusted.

-The local community with the higbest unemployment rate was Oceano at 18 percent, followed by Nipomo and Paso Robles, with rates at 12.9 percent and 11.6 percent respectively.

The communities of Shandon (4.9 percent), Cayucos (5.7 percent) and Cambria (6.9 percent) had the lowest unemployment rates in February.

San Luis Obispo County's rate was below the 12.3 percent for California, which dropped for the second month in a row, but above the 9.5 percent for the nation during that period."

16

File#11191

Service Industries account for approximately 250/0 of all employment and is the leading source of employment. This includes medical and health related services, perceived to be driven by the steady in-migration of seniors and retired persons into the county.

Agriculture: According to an article published in The Tribune April 2, 2011, SLO County Crops Set New Record,

"Crop values rose 14 percent in San Luis Obispo County in 2010, setting a new record despite the sluggish economy.

The total crop value was a little more than $712.8 million, compared to just less than $623.1 million for 2009, according to statistics released Friday by the San Luis Obispo County Department of Agriculture.

'Overall, with the downturn in the economy, this is reassuring,' said Marty Settevendemie, county agricultural commissioner.

Settevendemie attributed the rise in value to increased acreage and high returns for strawberries as well as mild year-round temperatures and plenty of rainfall.

But he pointed out the annual crop report only provides gross values and does not take into account rising production costs that affect profits.

Winegrapes remained at the top of agriculture's economic heap. Valued at nearly 173.6 million, they represent 24 percent of the county's combined agriculture value, Settevendemie said.

Mild weather helped increase red varietals' tonnage by 18 percent over 2009 totals, with cabernet sauvignoD and merlot yields far higher than statewide averages, Settevendemie said.

The strawberry industry which is heavily entrenched in southern San Luis Obispo County, expanded by 525 acres to a total of 2,418 acres.

'Generally, what we're seeing is a kind of cODversion of vegetable crops to strawberries,' Settevendemie said. He attributed that trend to growers moving in from the southern counties who are drawn by good land prices as well as strawberries' higher market value.

The combined value for fresh and processing strawberries was just under $123.5 million, an increase of approximately 69 percent over 2009, while prices for fresh market strawberries rose 74 percent."

According to the an article in The Tribune on February 2, 2011, Cornucopia/or County Farmers in 2010,

17


File#11191

Service Industries account for approximately 250/0 of all employment and is the leading source of employment. This includes medical and health related services, perceived to be driven by the steady in-migration of seniors and retired persons into the county.

Agriculture: According to an article published in The Tribune April 2, 2011, SLO County Crops Set New Record,

"Crop values rose 14 percent in San Luis Obispo County in 2010, setting a new record despite the sluggish economy.

The total crop value was a little more than $712.8 million, compared to just less than $623.1 million for 2009, according to statistics released Friday by the San Luis Obispo County Department of Agriculture.

'Overall, with the downturn in the economy, this is reassuring,' said Marty Settevendemie, county agricultural commissioner.

Settevendemie attributed the rise in value to increased acreage and high returns for strawberries as well as mild year-round temperatures and plenty of rainfall.

But he pointed out the annual crop report only provides gross values and does not take into account rising production costs that affect profits.

Winegrapes remained at the top of agriculture's economic heap. Valued at nearly 173.6 million, they represent 24 percent of the county's combined agriculture value, Settevendemie said.

Mild weather helped increase red varietals' tonnage by 18 percent over 2009 totals, with cabernet sauvignoD and merlot yields far higher than statewide averages, Settevendemie said.

The strawberry industry which is heavily entrenched in southern San Luis Obispo County, expanded by 525 acres to a total of 2,418 acres.

'Generally, what we're seeing is a kind of cODversion of vegetable crops to strawberries,' Settevendemie said. He attributed that trend to growers moving in from the southern counties who are drawn by good land prices as well as strawberries' higher market value.

The combined value for fresh and processing strawberries was just under $123.5 million, an increase of approximately 69 percent over 2009, while prices for fresh market strawberries rose 74 percent."

According to the an article in The Tribune on February 2, 2011, Cornucopia/or County Farmers in 2010,

17

File#11191

"San Luis Obispo County's crop values reached a record high of nearly $713 million in 2010, and increased wine grape sales contributed about a quarter of that total, according to the agricultural commissioner's annual report.

Last year's gross sales compared with about $623 million in 2009, according to Agricultural Commissioner Marty Settevendemie.

'The mild summer and winter temperatures and ample rainfall provided idea) growing conditions in 2010 for many county crops,' Steetvendemie said.

Wine grapes accounted for roughly $173 million in sales.

Stra\vberries also saw a significant rise in yields and sales. The fruit earned about $123 million in 2010, compared with $73 million in 2009.

'Increased acreage and bigh returns for strawberries and other crops helped keep the local economy strong, reflected in tbe record-breaking combined value,' Settevendemie said.

-Coastal Hass avocados rebounded from hot weather conditions during 2009 and the freeze damage tbat hit growers hard in 2008."

Tourism: According to an article appearing in the Tribune, March 21, 2010, The Carlton and The Inn at Morro Bay Face Cash Problems,

The hotel industry bas been bit bard by dwindling travel. In San Luis Obispo County, occupancy was down 14.7 percent in January from the same month a year ago. Tbe revenue par rate - rooms sold divided by rooms available -dropped 14.5 percent in tbat time period, according to data from Smitb Travel Research, a Nashville-based company that tracks supply and demand for tbe botel industry. Figures for February are not yet available.

-In addition to the Inn at Morro Bay and The Carlton, tbe Mission Inn in Pismo Beach also had a notice of default in April 2009, according to Alan Reay, founder of Atlas Hospitality group. According to Atlas Hospitality Group, the 120-room hotel is owned by developer Ed Dorfman in Arroyo Grande.

'There's still more to go, unfortunately,' Reay said. 'The number of foreclosures and defaults will climb substantially in 2010. People are saying tbat we're turning a corner, but this is going to be a tougb year for hotel owners and lenders, and it will continue into 2011.' "

Residential Housing Market: In an article published in the The Tribune, February 21, 2010, Turnaround May Be Near For Housing,

"With favorable interest rates, a first-time homebuyer tax credit and local home prices lower than they have been since the start of the decade, some buyers looking for bargains are slowly returning to tbe market.

18


File#11191

"San Luis Obispo County's crop values reached a record high of nearly $713 million in 2010, and increased wine grape sales contributed about a quarter of that total, according to the agricultural commissioner's annual report.

Last year's gross sales compared with about $623 million in 2009, according to Agricultural Commissioner Marty Settevendemie.

'The mild summer and winter temperatures and ample rainfall provided idea) growing conditions in 2010 for many county crops,' Steetvendemie said.

Wine grapes accounted for roughly $173 million in sales.

Stra\vberries also saw a significant rise in yields and sales. The fruit earned about $123 million in 2010, compared with $73 million in 2009.

'Increased acreage and bigh returns for strawberries and other crops helped keep the local economy strong, reflected in tbe record-breaking combined value,' Settevendemie said.

-Coastal Hass avocados rebounded from hot weather conditions during 2009 and the freeze damage tbat hit growers hard in 2008."

Tourism: According to an article appearing in the Tribune, March 21, 2010, The Carlton and The Inn at Morro Bay Face Cash Problems,

The hotel industry bas been bit bard by dwindling travel. In San Luis Obispo County, occupancy was down 14.7 percent in January from the same month a year ago. Tbe revenue par rate - rooms sold divided by rooms available -dropped 14.5 percent in tbat time period, according to data from Smitb Travel Research, a Nashville-based company that tracks supply and demand for tbe botel industry. Figures for February are not yet available.

-In addition to the Inn at Morro Bay and The Carlton, tbe Mission Inn in Pismo Beach also had a notice of default in April 2009, according to Alan Reay, founder of Atlas Hospitality group. According to Atlas Hospitality Group, the 120-room hotel is owned by developer Ed Dorfman in Arroyo Grande.

'There's still more to go, unfortunately,' Reay said. 'The number of foreclosures and defaults will climb substantially in 2010. People are saying tbat we're turning a corner, but this is going to be a tougb year for hotel owners and lenders, and it will continue into 2011.' "

Residential Housing Market: In an article published in the The Tribune, February 21, 2010, Turnaround May Be Near For Housing,

"With favorable interest rates, a first-time homebuyer tax credit and local home prices lower than they have been since the start of the decade, some buyers looking for bargains are slowly returning to tbe market.

18

File#11191

But real estate economists and others turned in to the industry disagree on whether 2010 will be the year the housing market bounces back.

As the economy tries to climb out of recession, consumer confidence - while up in January for the third consecutive month - remains tentative, job losses continue and California's budget mess is far from over. Anyone of those factors, some experts say, could hinder a recovery.

'We're not out of this yet,' said Keith Byrd, an agent with Century 21 Hometown Realty who tracks local real estate trends.

'If this month's pace keeps up, pending sales activity will take a bump up from last February,' he said. 'It's aU probably going to equal itself out, and we'll track close to where we were last year.'

Still, Byrd said higher inventory levels (10 months' worth in January, the highest level since May 2009), interest rates increasing and the federal first-time homebuyer tax credit expiring are unknowns that put the market in a fragile position. The $8,000 tax credit program applies to eligible buyers who enter into a contract to buy a principal residence on or before April 30 and close on the home by June 30.

An increasing number of foreclosures, he said, could also be a drag on the market. Last year, 2,603 notices of default, the first step in the foreclosure process, were filed, a nearly 39 percent increase from 2008, when 1,877 were recorded, according to data from All-American Foreclosure Service in San Luis Obispo.

-'The good news is we've been saved thus far from a big percentage like some other cities and counties have, but the amount we have is causing the values to go down - period,' Byrd said. 'We're almost down to 2002 levels in most cities. The question is, can it drop down much more?'

The all-home median price in January was $366,750, according to DataQuick, according to DataQuick, a 2.2 percent decrease from the $375,000 median price recorded in the same month a year ago. The all-home median in January fell nearly 6 percent from tbe December 2009 median which stood at $390,000.

-Beacon Economics, the Los Angeles-based firm that presented the county's 2010 outlook for the UC Santa Barbara Economic Forecast Project, predicted in November that the median home price is expected to drop an additional $45,000, or about 12 percent, by 2011.

Brad Kemp, director of regional research for Beacon, said that prices would then start to return to a reasonable and sustainable growth rate, unlike the double-digit appreciation seen in the earlier part of the decade."

19


File#11191

But real estate economists and others turned in to the industry disagree on whether 2010 will be the year the housing market bounces back.

As the economy tries to climb out of recession, consumer confidence - while up in January for the third consecutive month - remains tentative, job losses continue and California's budget mess is far from over. Anyone of those factors, some experts say, could hinder a recovery.

'We're not out of this yet,' said Keith Byrd, an agent with Century 21 Hometown Realty who tracks local real estate trends.

'If this month's pace keeps up, pending sales activity will take a bump up from last February,' he said. 'It's aU probably going to equal itself out, and we'll track close to where we were last year.'

Still, Byrd said higher inventory levels (10 months' worth in January, the highest level since May 2009), interest rates increasing and the federal first-time homebuyer tax credit expiring are unknowns that put the market in a fragile position. The $8,000 tax credit program applies to eligible buyers who enter into a contract to buy a principal residence on or before April 30 and close on the home by June 30.

An increasing number of foreclosures, he said, could also be a drag on the market. Last year, 2,603 notices of default, the first step in the foreclosure process, were filed, a nearly 39 percent increase from 2008, when 1,877 were recorded, according to data from All-American Foreclosure Service in San Luis Obispo.

-'The good news is we've been saved thus far from a big percentage like some other cities and counties have, but the amount we have is causing the values to go down - period,' Byrd said. 'We're almost down to 2002 levels in most cities. The question is, can it drop down much more?'

The all-home median price in January was $366,750, according to DataQuick, according to DataQuick, a 2.2 percent decrease from the $375,000 median price recorded in the same month a year ago. The all-home median in January fell nearly 6 percent from tbe December 2009 median which stood at $390,000.

-Beacon Economics, the Los Angeles-based firm that presented the county's 2010 outlook for the UC Santa Barbara Economic Forecast Project, predicted in November that the median home price is expected to drop an additional $45,000, or about 12 percent, by 2011.

Brad Kemp, director of regional research for Beacon, said that prices would then start to return to a reasonable and sustainable growth rate, unlike the double-digit appreciation seen in the earlier part of the decade."

19

File #11191

Trend - According to an article appearing May 21, 2010 in the Tribune, County Business Is On The Upswing,

·'San Luis Obispo County businesses are on the rebound, slowly moving beyond the painful recession that dealt a tough blow to the local economy.

Some business owners are expanding or revamping their operations; others are hiring again in anticipation of increased business. The worst, they say, appears to be behind them.

'Everybody is starting to see a turnaround,' said Bob Dumouchel, owner of Systems and Marketing Solutions and administrator for a regional roundtable of CEOs. 'It's more positive now. A year ago, it was so negative that it was ridiculous. So it's just bouncing back.'

Dumouchel, who leads a monthly meeting of local business leaders, says that a majority of business owners have shifted from cutting costs to supporting growth in a smart and sustainable way. That means growing carefully, not throwing extra overhead onto a business that doesn't need it and hiring the right employees for the job.

-Despite a positive outlook, local business leaders say that fear about the economy persists.

'The worst may be behind us, but the doesn't mean that all the bad is behind us,' said Brad Kemp, regional economist for Beacon Economics, who will present a mid-year county economic forecast on June 2 in Paso Robles.

The county is in for a slow recovery, Kemp said, and there are several factors in play that present risks for the economy, including the fragile housing market, rising deficits and the potential for inflation. Job growth, too, will be slow. While Kemp predicts continued job gains this year, the unemployment rate in the county has reached record levels and was 10.6 percent in March (the latest month for which statistics were available), according to the federal Bureau of Labor Statistics.

-In addition to declines in operating profits, a few of the key issues for businesses have been a deterioration of collateral and difficulty securing financing from community banks, he said.

-'One thing that has been important to remember is that no matter what's going on in the economy, you need to focus on what you do best and continue to do best' Neilson-Howard said.

Dumouchel, leader of the CEO group, said that type of can-do attitude has served the business leaders he's affiliated with well. He's not aware of any of the roundtable participants closing up shop during the recession.

20


File #11191

Trend - According to an article appearing May 21, 2010 in the Tribune, County Business Is On The Upswing,

·'San Luis Obispo County businesses are on the rebound, slowly moving beyond the painful recession that dealt a tough blow to the local economy.

Some business owners are expanding or revamping their operations; others are hiring again in anticipation of increased business. The worst, they say, appears to be behind them.

'Everybody is starting to see a turnaround,' said Bob Dumouchel, owner of Systems and Marketing Solutions and administrator for a regional roundtable of CEOs. 'It's more positive now. A year ago, it was so negative that it was ridiculous. So it's just bouncing back.'

Dumouchel, who leads a monthly meeting of local business leaders, says that a majority of business owners have shifted from cutting costs to supporting growth in a smart and sustainable way. That means growing carefully, not throwing extra overhead onto a business that doesn't need it and hiring the right employees for the job.

-Despite a positive outlook, local business leaders say that fear about the economy persists.

'The worst may be behind us, but the doesn't mean that all the bad is behind us,' said Brad Kemp, regional economist for Beacon Economics, who will present a mid-year county economic forecast on June 2 in Paso Robles.

The county is in for a slow recovery, Kemp said, and there are several factors in play that present risks for the economy, including the fragile housing market, rising deficits and the potential for inflation. Job growth, too, will be slow. While Kemp predicts continued job gains this year, the unemployment rate in the county has reached record levels and was 10.6 percent in March (the latest month for which statistics were available), according to the federal Bureau of Labor Statistics.

-In addition to declines in operating profits, a few of the key issues for businesses have been a deterioration of collateral and difficulty securing financing from community banks, he said.

-'One thing that has been important to remember is that no matter what's going on in the economy, you need to focus on what you do best and continue to do best' Neilson-Howard said.

Dumouchel, leader of the CEO group, said that type of can-do attitude has served the business leaders he's affiliated with well. He's not aware of any of the roundtable participants closing up shop during the recession.

20

AREA MAP

LLI]S

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AREA MAP

LLI]S

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File #11191

II

'It's almost impossible to run a business as a pessimist,' he said. 'You have to be upbeat. Otherwise, the whole organization would feed on the negativity and coUapse on itself.' "

COMMUNITY ANALYSIS II

Location - The property is within the coastal community of Grover Beach with a January, 20 10 population of 13,156 people. It is part of the Five Cities area to include Arroyo Grande, Pismo Beach of which Shell Beach is a part, and the unincorporated community of Oceano to the south with a greater population of approximately 55,000 people. The community is accessed by W. Grand A venue, a primary arterial extending to Highway 101 in Arroyo Grande to the east and providing beach access to the west. Intensive commercial development is evident on both sides of Grand A venue to include retail stores, small neighborhood shopping centers, large community centers, office buildings and restaurants. Consequently, related frontage is zoned Central Business District, Visitor Services, Coastal Visitor Services, Shopping Center or Planned Commercial as shown on the zoning map facing Page 26 with multi-residential or mixed use buffers to the north and south extending to a less intensive residential development.

Economic Base - The economic base is diverse to incJ ude agriculture, retail service, towist activities and manufacturing. Prime farmland abuts the southerly end of the community with drive-on access to the beach west of Highway 1. The community includes two industrial areas. One is off Front Street north of W. Grand Avenue extending west to the railroad tracks, east of Highway 1. Commercial service businesses predominate in this area where Forde Development Company completed an approximately 50,000 sq. ft. tilt-up concrete multi-tenant office-warehouse complex for which rents are at, or above, $.80/sq. ft. dependent on the degree of tenant improvements. 4th

Street provides access to a heavier industrial area extending east of 13 th Street, south of Farroll Road to Highland Way. Retail, cocktail lounges and restaurants are concentrated along W. Grand A venue with older motels to the north and south. Significant infiJI multi-residential development has occurred north of Grand A venue from Oak Park Boulevard west to 10th Street. A number of sites have also been acquired along W. Grand Avenue for mixed use projects.

The City has approved two motel projects. The first is a Hilton Garden Inn off Highway 1 at 4th

Street. According to an article published in The Tribune on July 11, 2008, Hurdle Cleared For Hilton Hotel In Grover,

"The proposed Hilton Garden Inn in Grover Beach can move forward after the California Coastal Commission announced Thursday at its meeting in San Luis Obispo that it had withdrawn an appeal of the project.

The pending development of the 134-room hotel at the Highway 101 offramp at Fourth Street and EI Camino Real is considered a major step toward improving the city's economy.

The project may generate about $300,000 to $320,000 in annual bed-tax revenue and create 50 to 60 jobs in Grover Beach, city officials said.

The Hilton Garden Inn has been in the planning stages for about three years.

21


File #11191

II

'It's almost impossible to run a business as a pessimist,' he said. 'You have to be upbeat. Otherwise, the whole organization would feed on the negativity and coUapse on itself.' "

COMMUNITY ANALYSIS II

Location - The property is within the coastal community of Grover Beach with a January, 20 10 population of 13,156 people. It is part of the Five Cities area to include Arroyo Grande, Pismo Beach of which Shell Beach is a part, and the unincorporated community of Oceano to the south with a greater population of approximately 55,000 people. The community is accessed by W. Grand A venue, a primary arterial extending to Highway 101 in Arroyo Grande to the east and providing beach access to the west. Intensive commercial development is evident on both sides of Grand A venue to include retail stores, small neighborhood shopping centers, large community centers, office buildings and restaurants. Consequently, related frontage is zoned Central Business District, Visitor Services, Coastal Visitor Services, Shopping Center or Planned Commercial as shown on the zoning map facing Page 26 with multi-residential or mixed use buffers to the north and south extending to a less intensive residential development.

Economic Base - The economic base is diverse to incJ ude agriculture, retail service, towist activities and manufacturing. Prime farmland abuts the southerly end of the community with drive-on access to the beach west of Highway 1. The community includes two industrial areas. One is off Front Street north of W. Grand Avenue extending west to the railroad tracks, east of Highway 1. Commercial service businesses predominate in this area where Forde Development Company completed an approximately 50,000 sq. ft. tilt-up concrete multi-tenant office-warehouse complex for which rents are at, or above, $.80/sq. ft. dependent on the degree of tenant improvements. 4th

Street provides access to a heavier industrial area extending east of 13 th Street, south of Farroll Road to Highland Way. Retail, cocktail lounges and restaurants are concentrated along W. Grand A venue with older motels to the north and south. Significant infiJI multi-residential development has occurred north of Grand A venue from Oak Park Boulevard west to 10th Street. A number of sites have also been acquired along W. Grand Avenue for mixed use projects.

The City has approved two motel projects. The first is a Hilton Garden Inn off Highway 1 at 4th

Street. According to an article published in The Tribune on July 11, 2008, Hurdle Cleared For Hilton Hotel In Grover,

"The proposed Hilton Garden Inn in Grover Beach can move forward after the California Coastal Commission announced Thursday at its meeting in San Luis Obispo that it had withdrawn an appeal of the project.

The pending development of the 134-room hotel at the Highway 101 offramp at Fourth Street and EI Camino Real is considered a major step toward improving the city's economy.

The project may generate about $300,000 to $320,000 in annual bed-tax revenue and create 50 to 60 jobs in Grover Beach, city officials said.

The Hilton Garden Inn has been in the planning stages for about three years.

21

File #11191

..• The hotel, which wouJd cost between $22 million and $25 million to construct, wi)) take up about 2 acres of the 5-acre parcel.

The developer is San Diego-based American Property Management Inc .

... The city also is moving forward with its proposed Beachfront Lodge. The project, at Highway 1 and West Grand Avenue, is in a much earlier planning phase of working out contract language with the developer.

Beachfront Lodge would include between 135 and 150 rooms and also generate an estimated $350,000 in tax revenue.

The state, which owns the site, would get about 30 percent of those revenues because ofa partnership that includes the lease of the land to Grover Beach for 50 years."

Reportedly, the Mission Inn, which has recently been acquired, will be franchised as a Hilton Garden Inn and, consequently, the hotel in Grover Beach will need to be re-branded and possibly fe-designed to accommodate another major hotel or motel. This project, likely, will not be completed in the near future.

The second is a smaller 20-suite condominium hotel at the northwest corner of Highway 1 and Grand A venue. According to an article appearing August 19, 2008 in The Tribune, $15 Million Grover Hotel Project Jvloves Ahead,

"The California Coastal Commission has approved a permit on the $15 million Pacific Coast Highway Hotel, a hotel/condominium, retail, office and restaurant project in Grover Beach.

Developer Ron Perkins of IGIT Inc. said the commission approved the project unanimously Aug .. 7 .

... Perkins said the project is expected to begin construction by spring 2009.

The 30,OOO-square foot building is the second of Perkins' three large, mixed-use projects in Grover Beach's redevelopment zone .. The first project was the $7 million Ocean View Terrace Condominiums at 176 S. Fourth Street completed in 2006. The third is a $6 miUion, 30,000 square foot commercial and residential building on Fourth Street and Grand Avenue called The Colonnade."

..• The project is proposed to include 20 suites, seven commercial units and 37 underground parking spaces."

According to Janet Reese, City of Grover Beach Community Development Department, construction is not eminent on this project. However, ajoint development agreement has been reached with the city, state and Pacific Coast, Developer, on a 50-year ground lease to be developed to a major convention facility and accessory activities on a 13.4 acre site. 8.3 Acres will include the ISO-room hotel lodge with food services and convention center. The remaining 5.1 acres would be State park facilities to include the existing golf course, restaurant and re-aligned parking lot. The

22


File #11191

..• The hotel, which wouJd cost between $22 million and $25 million to construct, wi)) take up about 2 acres of the 5-acre parcel.

The developer is San Diego-based American Property Management Inc .

... The city also is moving forward with its proposed Beachfront Lodge. The project, at Highway 1 and West Grand Avenue, is in a much earlier planning phase of working out contract language with the developer.

Beachfront Lodge would include between 135 and 150 rooms and also generate an estimated $350,000 in tax revenue.

The state, which owns the site, would get about 30 percent of those revenues because ofa partnership that includes the lease of the land to Grover Beach for 50 years."

Reportedly, the Mission Inn, which has recently been acquired, will be franchised as a Hilton Garden Inn and, consequently, the hotel in Grover Beach will need to be re-branded and possibly fe-designed to accommodate another major hotel or motel. This project, likely, will not be completed in the near future.

The second is a smaller 20-suite condominium hotel at the northwest corner of Highway 1 and Grand A venue. According to an article appearing August 19, 2008 in The Tribune, $15 Million Grover Hotel Project Jvloves Ahead,

"The California Coastal Commission has approved a permit on the $15 million Pacific Coast Highway Hotel, a hotel/condominium, retail, office and restaurant project in Grover Beach.

Developer Ron Perkins of IGIT Inc. said the commission approved the project unanimously Aug .. 7 .

... Perkins said the project is expected to begin construction by spring 2009.

The 30,OOO-square foot building is the second of Perkins' three large, mixed-use projects in Grover Beach's redevelopment zone .. The first project was the $7 million Ocean View Terrace Condominiums at 176 S. Fourth Street completed in 2006. The third is a $6 miUion, 30,000 square foot commercial and residential building on Fourth Street and Grand Avenue called The Colonnade."

..• The project is proposed to include 20 suites, seven commercial units and 37 underground parking spaces."

According to Janet Reese, City of Grover Beach Community Development Department, construction is not eminent on this project. However, ajoint development agreement has been reached with the city, state and Pacific Coast, Developer, on a 50-year ground lease to be developed to a major convention facility and accessory activities on a 13.4 acre site. 8.3 Acres will include the ISO-room hotel lodge with food services and convention center. The remaining 5.1 acres would be State park facilities to include the existing golf course, restaurant and re-aligned parking lot. The

22


File # 11191

environmental impact report on this project, \vhich would be north and west of the smaller hotel is set for public hearing. After that it will be forwarded to the Coastal Commission with construction not anticipated for at least three years.

I( NEIGHBORHOOD ANALYSIS Ii

Location - This is the first of a two-phase 60-unit project at the northeast comer of Longbranch Avenue and Fourteenth Street, two blocks south of W. Grand A venue, a primary arterial connector tenninating at beach access west of Highway 1 and extending through Arroyo Grande to Highway 101. Municipal offices are on the west side of Ninth Street, five blocks to the west with Ramona Park and recreation center one block to the north of Grand A venue at Tenth Street. Grover Beach Elementary School is two blocks to the west at Twelfth Street south of Longbranch A venue. The Welfare Department and Courthouse is immediately to the east extending to Sixteenth Street. Shopping and other public conveniences are within walking distance concentrated on both sides of Grand Avenue. Grover Beach Elementary School is within walking distance two blocks to the southwest.

Surrounding Use - Central Business District zoning extends on both sides of Grand Avenue north to Ramona and south to Rockaway A venue from Eighth to Eleventh Street as shown on the zoning map facing Page 26. Mixed use development zoning is west of Fourteenth Street from Grand A venue south to Longbranch A venue. A neighborhood shopping center is directly to the north extending from Fourteenth to Sixteenth Street. A larger center occupied by a Von's extends south of Grand A venue between Sixteenth Street and Oak Park Boulevard as shown on the facing page aerial. A Rite Aid is at the northwest comer of Oak Park Boulevard and Grand A venue with the city limits for Arroyo Grande extending east of Oak Park Boulevard.

As shown on the facing page aerial photo, a single family residential subdivision extends along the south side of Longbranch Avenue between 14th and 16th Street. An older mobile home park is on the west side of 14th Street north of Longbranch Avenue extending to Grand Avenue. Apartment complexes extend to the west between Longbranch and Rockaway Avenue, Tracts 730 and 751, a a 78-unit planned unit development, extends south of Longbranch A venue to Manhattan A venue between Sixteenth Street and Oak Park Boulevard. It was completed in 1978 and 1979 and includes seven floor plans ranging from 1,076-1,386 sq. ft. During the last year, two of the largest units at 1,324-1,386 sq. ft. sold at prices ranging from $189,000-195,000, down trending since 2007 when prices ranged from $300,000-325,000. Other apartment projects have been completed in the area on multi-residentially zoned land with R-] zoning extending south of Longbranch Avenue between Twelfth Street and Oak Park Boulevard and R-2, Duplex residential zoning extending south of the school and Manhattan A venue as shown on the zoning map facing Page 26.

Trend - Aside from Oceano, Grover Beach generally serves as an affordable housing alternative to Arroyo Grande to the east and Pismo Beach to the north. In this regard, home prices have been down trending but many potential buyers still do not qualifY for financing. Rental rates have declined slightly, but occupancy rates for apartments in the area remain relatively high. Even so, expenses are increasing resulting in declining net income. Most investors are requiring higher rates of return and, consequently, prices for large apartment complexes such as the subject have declined during the last three years by a half to as much as one percent. It is uncertain \vhen the market will stabilize.


File # 11191

environmental impact report on this project, \vhich would be north and west of the smaller hotel is set for public hearing. After that it will be forwarded to the Coastal Commission with construction not anticipated for at least three years.

If NEIGHBORHOOD ANALYSIS Ii

Location - This is the first of a two-phase 60-unit project at the northeast comer of Longbranch Avenue and Fourteenth Street, two blocks south of W. Grand A venue, a primary arterial connector tenninating at beach access west of Highway 1 and extending through Arroyo Grande to Highway 101. Municipal offices are on the west side of Ninth Street, five blocks to the west with Ramona Park and recreation center one block to the north of Grand A venue at Tenth Street. Grover Beach Elementary School is two blocks to the west at Twelfth Street south of Longbranch A venue. The Welfare Department and Courthouse is immediately to the east extending to Sixteenth Street. Shopping and other public conveniences are within walking distance concentrated on both sides of Grand Avenue. Grover Beach Elementary School is within walking distance two blocks to the southwest.

Surrounding Use - Central Business District zoning extends on both sides of Grand Avenue north to Ramona and south to Rockaway A venue from Eighth to Eleventh Street as shown on the zoning map facing Page 26. Mixed use development zoning is west of Fourteenth Street from Grand A venue south to Longbranch A venue. A neighborhood shopping center is directly to the north extending from Fourteenth to Sixteenth Street. A larger center occupied by a Von's extends south of Grand A venue between Sixteenth Street and Oak Park Boulevard as shown on the facing page aerial. A Rite Aid is at the northwest comer of Oak Park Boulevard and Grand A venue with the city limits for Arroyo Grande extending east of Oak Park Boulevard.

As shown on the facing page aerial photo, a single family residential subdivision extends along the south side of Longbranch Avenue between 14th and 16th Street. An older mobile home park is on the west side of 14th Street north of Longbranch Avenue extending to Grand Avenue. Apartment complexes extend to the west between Longbranch and Rockaway Avenue, Tracts 730 and 751, a a 78-unit planned unit development, extends south of Longbranch A venue to Manhattan A venue between Sixteenth Street and Oak Park Boulevard. It was completed in 1978 and 1979 and includes seven floor plans ranging from 1,076-1,386 sq. ft. During the last year, two of the largest units at 1,324-1,386 sq. ft. sold at prices ranging from $189,000-195,000, down trending since 2007 when prices ranged from $300,000-325,000. Other apartment projects have been completed in the area on multi-residentially zoned land with R-] zoning extending south of Longbranch Avenue between Twelfth Street and Oak Park Boulevard and R-2, Duplex residential zoning extending south of the school and Manhattan A venue as shown on the zoning map facing Page 26.

Trend - Aside from Oceano, Grover Beach generally serves as an affordable housing alternative to Arroyo Grande to the east and Pismo Beach to the north. In this regard, home prices have been down trending but many potential buyers still do not qualifY for financing. Rental rates have declined slightly, but occupancy rates for apartments in the area remain relatively high. Even so, expenses are increasing resulting in declining net income. Most investors are requiring higher rates of return and, consequently, prices for large apartment complexes such as the subject have declined during the last three years by a half to as much as one percent. It is uncertain \vhen the market will stabilize.

ASSESSOR'S MAP

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File#11191

II PROPERTY DATA II

TITLE AND RECORD DATA

Legal Description - The property which is the subject of this appraisal consists of two parcels, each further described as follows:

BRADY'S COVE J

PARCEL 2 OF PARCEL MAP NO. G-S4-227 IN THE CITY OF GROVER CITY, COUNTY OF SAN LU IS OBISPO, STATE OF CALIFORNIA, ACCORDING TO MAP RECORDED DECEMBER 19, 1984 IN BOOK 36, PAG E 33 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEI)T ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES ANDIOR MINERALS IN OR UNDER SAID L .. \.ND AS RESERVED BY GUY MCKINNEY A.~D ETHEL DAISY MCKINNEY, HUSBAND AND WIFE BY DEED RECORDED JULY 16, 1959 IN BOOK 1011, PAGE 544 OF OFFICIAL RECORDS.

THE RIGHT OF SURFACE AND SUBSURFACE ENTRY WERE RELINQUISHED BY A QUITCLAIM DEED RECORDED APRIL 29,1968 IN BOOK 704 OF OFFICIAL RECORDS.

PARCEL B

AN EASEMENT FOR PUBLIC UTILITY PURPOSES AND INGRESS AND EGRESS. AS AN APPURTENANCE TO PARCEL A ABOVE, OVER THE WEST 10 FEET OF PARCEL 3 AND THE EAST 10 FEET OF PARCELS I AND 2 AS SHOWN ON PARCEL MAP G-85-184 RECORDED JANUARY 10, 1986 IN BOOK 38, PAGE 67 OF PARCEL MAPS.

BRADY'S COVE IJ

PARCEL 3 OF PARCEL MAP NO. G-85-184 IN TilE CITY 01-' GROVER CITY, COUNTY 01-' SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO MAP RECORDED JANUARY 10, 1986 IN BOOK 36, PAGE 67 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES ANDIOR MINERALS IN OR UNDER SAID LAND AS RESERVED BY GUY MCKINNEY AND ETIlEr. DAJSY MCKINNEY, HUSBAND AND WIFE BY DEED RECORDED JULY 16,1959 IN BOOK 1011, PAGE 544 OF OFFICIAL RECORDS.

THE RIGHT OF SURFACJt: AND SUBSURFACE ENTRY WERE RELINQUISHED BY A QUITCLAIM DEJo:n RECORDED APRIL 29, 1968 IN BOOK 704 OF OFFICIAIJ RECORDS.

AN EASEMENT FOR PUBLIC UTILITY PURPOSES AND INGRESS AND EGRESS, AS AN APPURTENANCE TO PARCEL A ABOVE, OVER THE WEST 10 FEET OF PARCEL 3 AND THE EAST 10 FEET OF PARCELS] AND 2 AS SHOWN ON PARCEL MAP G-85-184 RECORDED .JANUARY 10, 1986 rN BOOK 38, PAGE 67 OF PARCEL MAPS.

Assessments and Taxes - The property is assessed by the San Luis Obispo County Assessor's Office. Assessments and taxes are summarized for the 2010-11 fiscal year as follows:

I ASSESSMENTS AND TAXES I Assessor's Parcel Nos, 060-301-006 and 009

Ta'( Code Area 005-000

Tax Rate/$l 00 Valuation $1.04 176/$100 Value

Full Cash Value

Land $508,145

Improvements $1,845,119

Total $2,353,264

Taxes $24,515.36

Total Tax Liability $24,515.36

NOTE: The property has been under the same ownership for an extended period of time. Consequently. full cash value as shown above bears no relationship to aClllal value. Upon sale or transfer. the property will be reassessed and taxes increased accordingly.

24


File#11191

II PROPERTY DATA II

TITLE AND RECORD DATA

Legal Description - The property which is the subject of this appraisal consists of two parcels, each further described as follows:

BRADY'S COVE J

PARCEL 2 OF PARCEL MAP NO. G-S4-227 IN THE CITY OF GROVER CITY, COUNTY OF SAN LU IS OBISPO, STATE OF CALIFORNIA, ACCORDING TO MAP RECORDED DECEMBER 19, 1984 IN BOOK 36, PAG E 33 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEI)T ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES ANDIOR MINERALS IN OR UNDER SAID L .. \.ND AS RESERVED BY GUY MCKINNEY A.~D ETHEL DAISY MCKINNEY, HUSBAND AND WIFE BY DEED RECORDED JULY 16, 1959 IN BOOK 1011, PAGE 544 OF OFFICIAL RECORDS.

THE RIGHT OF SURFACE AND SUBSURFACE ENTRY WERE RELINQUISHED BY A QUITCLAIM DEED RECORDED APRIL 29,1968 IN BOOK 704 OF OFFICIAL RECORDS.

PARCEL B

AN EASEMENT FOR PUBLIC UTILITY PURPOSES AND INGRESS AND EGRESS. AS AN APPURTENANCE TO PARCEL A ABOVE, OVER THE WEST 10 FEET OF PARCEL 3 AND THE EAST 10 FEET OF PARCELS I AND 2 AS SHOWN ON PARCEL MAP G-85-184 RECORDED JANUARY 10, 1986 IN BOOK 38, PAGE 67 OF PARCEL MAPS.

BRADY'S COVE IJ

PARCEL 3 OF PARCEL MAP NO. G-85-184 IN TilE CITY 01-' GROVER CITY, COUNTY 01-' SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO MAP RECORDED JANUARY 10, 1986 IN BOOK 36, PAGE 67 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES ANDIOR MINERALS IN OR UNDER SAID LAND AS RESERVED BY GUY MCKINNEY AND ETIlEr. DAJSY MCKINNEY, HUSBAND AND WIFE BY DEED RECORDED JULY 16,1959 IN BOOK 1011, PAGE 544 OF OFFICIAL RECORDS.

THE RIGHT OF SURFACJt: AND SUBSURFACE ENTRY WERE RELINQUISHED BY A QUITCLAIM DEJo:n RECORDED APRIL 29, 1968 IN BOOK 704 OF OFFICIAIJ RECORDS.

AN EASEMENT FOR PUBLIC UTILITY PURPOSES AND INGRESS AND EGRESS, AS AN APPURTENANCE TO PARCEL A ABOVE, OVER THE WEST 10 FEET OF PARCEL 3 AND THE EAST 10 FEET OF PARCELS] AND 2 AS SHOWN ON PARCEL MAP G-85-184 RECORDED .JANUARY 10, 1986 rN BOOK 38, PAGE 67 OF PARCEL MAPS.

Assessments and Taxes - The property is assessed by the San Luis Obispo County Assessor's Office. Assessments and taxes are summarized for the 2010-11 fiscal year as follows:

I ASSESSMENTS AND TAXES I Assessor's Parcel Nos, 060-301-006 and 009

Ta'( Code Area 005-000

Tax Rate/$l 00 Valuation $1.04 176/$100 Value

Full Cash Value

Land $508,145

Improvements $1,845,119

Total $2,353,264

Taxes $24,515.36

Total Tax Liability $24,515.36

NOTE: The property has been under the same ownership for an extended period of time. Consequently. full cash value as shown above bears no relationship to aClllal value. Upon sale or transfer. the property will be reassessed and taxes increased accordingly.

24

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"".

File # 11191

Easements-Surface Restrictions - As shown in the Addenda, a title report was available from the last appraisal dated August 13,2008 on the southerly parcel, Assessor's Parcel No. 060-301-006 only. For purposes of this appraisal, it is assumed that items of record affect both parcels and that the access easement described as Parcel B under legal description is in favor of both. According to the Preliminary Title Report as completed by First American Title Insurance Co. as shown in the Adden~ Itenls 1 and 2 refer to taxes and supplemental assessments. Item 3 refers to water rights which have been disregarded under the assumption that the complex has water availability from the City of Grover Beach. Item 4 refers to Covenants, Conditions and Restrictions recorded in 1927, a copy of which was not furnished the appraiser. As the complex was completed in 1986 and has an extended history of use as apartments, it is assumed to be in conformance. Item 5 is an easement for ingress and egress for a common access drive shared in common with Phase II to the west under the ownership of Leon Van Buerden, further summarized as Rental Comparison 1 in this appraisal. Item 6 is a fonner deed of trust on the southerly parcel to Washington Mutual Banle An updated title report on both parcels is recommended. For purposes of this appraisal, it is assumed access is reciprocal and that each owner would share in related maintenance cost for the common drive.

Owner of Record - Larry Moriarty and Linda Moriarty, husband and wife, as to an undivided 59.590/0 interest and Kerry Moriarty, a married man as his sole and separate property, as to an undivided 40.4 I % interest.

Property History - Both parcels appear to have been acquired by quitclaim deeds in 1999 under separate ownerships with subsequent title transfers but no sales since acquisition. Furthermore, the property is not listed or offered for sale.

II SITE ANALYSIS I,

Access-Public Improvements - The combined site fronts approximately 167.5' along the north side of Longbranch A venue, an asphalt paved roadway with landscaped center divider with openings close to the easterly side of the site and a common access drive extending north providing access for rear buildings for the subject complex and the complex to the west as shown in Photo 8. Frontage along Longbranch A venue is improved to curb, gutter and sidewalk, and the drive includes concrete curbing around landscaped planters.

Environmental Issues - A Phase I Environmental Assessment was unavailable. Roofs were recently replaced, and it is assumed new shingles and any residual material did not include asbestos. Acoustic plaster ceilings have been removed in two units and are planned for gradual removal in the remainder and, again, are assumed not to include asbestos. Further, for purposes of this appraisal, it is assumed that no hazardous-toxic contamination has occurred. Therefore, the cost of encasement, removal, and/or remediation and its effect on value have not been considered.

In this regard, it should be emphasized that the appraiser is not qualified to detect hazardous waste or toxic materials. Any comments by the appraiser that might suggest the possibility of presence of such substances should not be taken as confirmation of presence of hazardous waste or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment.

25


File # 11191

Easements-Surface Restrictions - As shown in the Addenda, a title report was available from the last appraisal dated August 13,2008 on the southerly parcel, Assessor's Parcel No. 060-301-006 only. For purposes of this appraisal, it is assumed that items of record affect both parcels and that the access easement described as Parcel B under legal description is in favor of both. According to the Preliminary Title Report as completed by First American Title Insurance Co. as shown in the Adden~ Itenls 1 and 2 refer to taxes and supplemental assessments. Item 3 refers to water rights which have been disregarded under the assumption that the complex has water availability from the City of Grover Beach. Item 4 refers to Covenants, Conditions and Restrictions recorded in 1927, a copy of which was not furnished the appraiser. As the complex was completed in 1986 and has an extended history of use as apartments, it is assumed to be in conformance. Item 5 is an easement for ingress and egress for a common access drive shared in common with Phase II to the west under the ownership of Leon Van Buerden, further summarized as Rental Comparison 1 in this appraisal. Item 6 is a fonner deed of trust on the southerly parcel to Washington Mutual Banle An updated title report on both parcels is recommended. For purposes of this appraisal, it is assumed access is reciprocal and that each owner would share in related maintenance cost for the common drive.

Owner of Record - Larry Moriarty and Linda Moriarty, husband and wife, as to an undivided 59.590/0 interest and Kerry Moriarty, a married man as his sole and separate property, as to an undivided 40.4 I % interest.

Property History - Both parcels appear to have been acquired by quitclaim deeds in 1999 under separate ownerships with subsequent title transfers but no sales since acquisition. Furthermore, the property is not listed or offered for sale.

II SITE ANALYSIS I,

Access-Public Improvements - The combined site fronts approximately 167.5' along the north side of Longbranch A venue, an asphalt paved roadway with landscaped center divider with openings close to the easterly side of the site and a common access drive extending north providing access for rear buildings for the subject complex and the complex to the west as shown in Photo 8. Frontage along Longbranch A venue is improved to curb, gutter and sidewalk, and the drive includes concrete curbing around landscaped planters.

Environmental Issues - A Phase I Environmental Assessment was unavailable. Roofs were recently replaced, and it is assumed new shingles and any residual material did not include asbestos. Acoustic plaster ceilings have been removed in two units and are planned for gradual removal in the remainder and, again, are assumed not to include asbestos. Further, for purposes of this appraisal, it is assumed that no hazardous-toxic contamination has occurred. Therefore, the cost of encasement, removal, and/or remediation and its effect on value have not been considered.

In this regard, it should be emphasized that the appraiser is not qualified to detect hazardous waste or toxic materials. Any comments by the appraiser that might suggest the possibility of presence of such substances should not be taken as confirmation of presence of hazardous waste or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment.

25

ZONING MAP


ZONING MAP

File#11191

No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraiser's descriptions and resulting comments are the result of the routine observations made during the appraisal process.

Seismic Conditions - The project is not in an Alquist-Priolo Special Studies Zone. Relative to earthquake hazards associated with California, the city requires all new construction meet current code requirements.

Size. Shape and Topography - The two parcels form one rectangular site at 1.12 acres. Topography is classed as level to gently sloping. According to Leon Van Buerden, Real Estate Broker and owner of the adjoining 30 units to the west which were completed as Phase II of an overall 60-unit development, the common access drive was recently replaced to eliminate any drainage problems. Further, according to the Federal Emergency Management Agency's FIRM Flood Insurance Rate Map, Community Panel No. 060306-0001 C dated November 5, 1997, the complex is within a Zone HC," area of minimal flooding.

Utilities - Electricity is from Pacific Gas and Electric Company and gas from Southern Calitornia Gas Company. Telephone is from SBC. Water and sewer are from the City of Grover Beach and trash collection is from South County Sanitary Service.

Zoning-Present Use - As already discussed, the combined site is zoned Multi-Residential District (R-3). This district is "Intended to provide areas that promote small family and individual living with small private outdoor open space for each unit and a larger common outdoor use area for the entire development. The District is intended as an area for development of attached dwelling units and one or two-story buildings at allowable density of ten (10) to twenty (20) dwelling units per gross acre. Apartment developments of eleven or more units require a use permit." A copy of the current ordinance is shown in the Addenda. According to Janet Reese of the Planning Department, gross area is measured from the center of the street to determine density permitted today at 28 units. Consequently, the complex is legally non-confonning to zoning at 30 units .

. Current parking requirements are set at two open spaces per unit plus one space per two units for guest parking or a total of 75 spaces. The complex includes 32 garage and 28 open spaces or a total of 60 spaces. Consequently, it is deficient by 15 spaces and does not meet current parking requirements. However, it met fonner requirements, and additional onsite parking is pennitted on Longbranch Avenue with overall parking adequate and competitive with complexes in the immediate neighborhood.

In summary, the complex is legally non-conforming as to density and parking, but this use can continue as long as it is not discontinued for more than one year, however, a non-confonning use cannot be enlarged or extended. Subject to first obtaining a use pennit, a non-conforming building destroyed by fire, explosion or other casualty or act of God can be restored according to the zoning ordinance.

Relative to parking, ""Any additions to multi-family dwellings require approval of a use permit by the Planning Commission." and the existing use "May continue without providing additional parking spaces on the site.

26


File#11191

No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraiser's descriptions and resulting comments are the result of the routine observations made during the appraisal process.

Seismic Conditions - The project is not in an Alquist-Priolo Special Studies Zone. Relative to earthquake hazards associated with California, the city requires all new construction meet current code requirements.

Size. Shape and Topography - The two parcels form one rectangular site at 1.12 acres. Topography is classed as level to gently sloping. According to Leon Van Buerden, Real Estate Broker and owner of the adjoining 30 units to the west which were completed as Phase II of an overall 60-unit development, the common access drive was recently replaced to eliminate any drainage problems. Further, according to the Federal Emergency Management Agency's FIRM Flood Insurance Rate Map, Community Panel No. 060306-0001 C dated November 5, 1997, the complex is within a Zone HC," area of minimal flooding.

Utilities - Electricity is from Pacific Gas and Electric Company and gas from Southern Calitornia Gas Company. Telephone is from SBC. Water and sewer are from the City of Grover Beach and trash collection is from South County Sanitary Service.

Zoning-Present Use - As already discussed, the combined site is zoned Multi-Residential District (R-3). This district is "Intended to provide areas that promote small family and individual living with small private outdoor open space for each unit and a larger common outdoor use area for the entire development. The District is intended as an area for development of attached dwelling units and one or two-story buildings at allowable density of ten (10) to twenty (20) dwelling units per gross acre. Apartment developments of eleven or more units require a use permit." A copy of the current ordinance is shown in the Addenda. According to Janet Reese of the Planning Department, gross area is measured from the center of the street to determine density permitted today at 28 units. Consequently, the complex is legally non-confonning to zoning at 30 units .

. Current parking requirements are set at two open spaces per unit plus one space per two units for guest parking or a total of 75 spaces. The complex includes 32 garage and 28 open spaces or a total of 60 spaces. Consequently, it is deficient by 15 spaces and does not meet current parking requirements. However, it met fonner requirements, and additional onsite parking is pennitted on Longbranch Avenue with overall parking adequate and competitive with complexes in the immediate neighborhood.

In summary, the complex is legally non-conforming as to density and parking, but this use can continue as long as it is not discontinued for more than one year, however, a non-confonning use cannot be enlarged or extended. Subject to first obtaining a use pennit, a non-conforming building destroyed by fire, explosion or other casualty or act of God can be restored according to the zoning ordinance.

Relative to parking, ""Any additions to multi-family dwellings require approval of a use permit by the Planning Commission." and the existing use "May continue without providing additional parking spaces on the site.

26

I BUILDING SKETCH I

37

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File # 11191

II IMPROVEMENT DESCRIPTION II

Age. Condition and Utility - This complex was completed in 1986. Relative to the last appraisal, the common access drive had recently been replaced as had the roof. According to Leon Van Buerden, one of the owners of the complex to the west known as the Longbranch Apartments, both complexes were completed by Don McHaney, real estate broker, as part of a four-lot development at 15 units per lot or a total of 60 units as Phases I and II. Each of the phases, the subject easterly phase and Phase II, the westerly phase, are under separate ownership but include a reciprocal access drive. Otherwise, both are identical as to the number of units, unit type and include attached and built-in garages. Consequently, the only distinguishing factor is the difference in ownership. The westerly phase is further summarized as Rental Comparison 1 in this appraisal. The subject phase appears to be in overall average condition. As already discussed, only the exterior was inspected. Jerry Jones, the offsite manager, indicates there have been no significant changes in physical characteristics or the condition of the property since the last appraisal. Formerly, to create a separate appearance, the owner had planned renovation and modernization. This was to include painting the exterior, replacing fence, which is somewhat deteriorated, and re-landscaping to include irrigation system. One of the units has already been renovated and a second is under renovation. Remaining units will be renovated to include removal of acoustic plaster ceiling, retexturing, painting of interior, replacement offloor covering, re-facing cabinets with new Formica tops and removal of dishwashers with microwaves to be installed as vacancies occur. Related cost is summarized as follows:

I DEFERRED MAINTENANCE I Exterior Paint ($18,000)

Replace Fence ($12,000)

Re-Landscape ($13,500)

Recondition and Renovate Units 29 Units @ $6,000IUnit ($174,000)

MiscelJaneous ($20,000)

Total Direct Costs ($237,500)

Profit-Indirect Cost & Overhead $237,50017 5% x 25% ($79,167)

Total Cost for Deferred Maintenance, Renovation and Reconditioning ($316,667)

Round to ($317,000J

In summary, upon rehabilitation, etlective age in relationship to units of similar utility and condition is estimated at 22 years. With typical life expectancy at 50 years, remaining economic life would be 28 years. Units are reasonably functional as to design and layout. Upon renovation, effective age would be 15 years which will increase remaining economic life to 35 years.

Construction Type - The northerly and southerly buildings are identical except they are reversed as shown on the aerial photo facing Page 1. Both are two story, Class "0" construction with wood frame stucco exterior, gable-type builtup COlllposition roofs. Each includes eight two bedroom, two bath ground floor and second floor units accessed by stairways. The two center buildings are also identical, but again, reversed. Each includes three builtin four-car garages with one adjoining unit including a two-car garage and other units, one-car garages. Eight second floor units extend over the garages, again accessed by exterior stairways and somewhat larger than the standard units included in the northerly and southerly buildings and the remainder of the central buildings as ground floor and second floor units also accessed by stairways. All units include wall furnace with single pane windows. The extent of insulation is unknown.

27


File # 11191

II IMPROVEMENT DESCRIPTION II

Age. Condition and Utility - This complex was completed in 1986. Relative to the last appraisal, the common access drive had recently been replaced as had the roof. According to Leon Van Buerden, one of the owners of the complex to the west known as the Longbranch Apartments, both complexes were completed by Don McHaney, real estate broker, as part of a four-lot development at 15 units per lot or a total of 60 units as Phases I and II. Each of the phases, the subject easterly phase and Phase II, the westerly phase, are under separate ownership but include a reciprocal access drive. Otherwise, both are identical as to the number of units, unit type and include attached and built-in garages. Consequently, the only distinguishing factor is the difference in ownership. The westerly phase is further summarized as Rental Comparison 1 in this appraisal. The subject phase appears to be in overall average condition. As already discussed, only the exterior was inspected. Jerry Jones, the offsite manager, indicates there have been no significant changes in physical characteristics or the condition of the property since the last appraisal. Formerly, to create a separate appearance, the owner had planned renovation and modernization. This was to include painting the exterior, replacing fence, which is somewhat deteriorated, and re-landscaping to include irrigation system. One of the units has already been renovated and a second is under renovation. Remaining units will be renovated to include removal of acoustic plaster ceiling, retexturing, painting of interior, replacement offloor covering, re-facing cabinets with new Formica tops and removal of dishwashers with microwaves to be installed as vacancies occur. Related cost is summarized as follows:

I DEFERRED MAINTENANCE I Exterior Paint ($18,000)

Replace Fence ($12,000)

Re-Landscape ($13,500)

Recondition and Renovate Units 29 Units @ $6,000IUnit ($174,000)

MiscelJaneous ($20,000)

Total Direct Costs ($237,500)

Profit-Indirect Cost & Overhead $237,50017 5% x 25% ($79,167)

Total Cost for Deferred Maintenance, Renovation and Reconditioning ($316,667)

Round to ($317,000J

In summary, upon rehabilitation, etlective age in relationship to units of similar utility and condition is estimated at 22 years. With typical life expectancy at 50 years, remaining economic life would be 28 years. Units are reasonably functional as to design and layout. Upon renovation, effective age would be 15 years which will increase remaining economic life to 35 years.

Construction Type - The northerly and southerly buildings are identical except they are reversed as shown on the aerial photo facing Page 1. Both are two story, Class "0" construction with wood frame stucco exterior, gable-type builtup COlllposition roofs. Each includes eight two bedroom, two bath ground floor and second floor units accessed by stairways. The two center buildings are also identical, but again, reversed. Each includes three builtin four-car garages with one adjoining unit including a two-car garage and other units, one-car garages. Eight second floor units extend over the garages, again accessed by exterior stairways and somewhat larger than the standard units included in the northerly and southerly buildings and the remainder of the central buildings as ground floor and second floor units also accessed by stairways. All units include wall furnace with single pane windows. The extent of insulation is unknown.

27

File #11191

Interior Finish and Equipment - Interior finish and equipment is summarized as follows:

I INTERIOR ROOM DESCRIPTION I ROOM FLOOR CEILING WALLS EQUIPMENT

COVERING

24 Standard Two-Bedroom Units

Living Room Carpet Ac. Plaster Drywall Wall Furnace

Dining Area Carpet Ac. Plaster Drywall

Kitchen Sheet Vinyl Drywall Drywall Formica Top Wood Cabinets, BI'S Gas Range/Oven, Disposal and Dishwashers in Some Units

Hall Carpet Ac. Plaster Drywall

Full Bath Sheet Vinyl Drywall Drywall Fiberglass Shower, Formica Top Cabinets, Sink, Toilet

Bedroom Carpet Ac. Plaster Drywall Closet


Bath Sheet Vinyl Drywall Drywall Fiberglass Tub, Sink. Toilet

Six Larger Two-Bedroom Units


Kitchen Sheet Vinyl Drywall Drywall Formica Top Wood Cabinets, 81'S Gas Range/Oven


Bath Sheet Vinyl Drywall Drywall Tub, Sink, Toilet



Bath Sheet Vinyl Drvwall D_fYwall Sink. Toilet

Building Size-Site Improvements - The standard two-bedroom, two bath units measure 23' x 37' and includes a 2' x 10.5' offset for 872 sq. ft. The larger two-bedroom units over garages measure 22' x 40' and include a 2' x 14' offset for 908 sq. ft. Additionally, there are two laWldries measuring 8' x 20' or 160 sq. ft. resulting in the following combined building area:

24 Two-Bedroom Units @ 872 Sq. ft. = 6 Larger Two Bedroom Units @ 908 Sq. ft. =

Total Apartment Units Two Laundries @ 160 Sq. ft. each =

Total Building Area

20,928 Sq. ft. 5,448 Sq. ft.

26,376 Sq. ft. 320 Sq. ft.

26,696 Sq. ft.

Additionally, there are four two-car attached garages at 390 sq. ft. and six built-in garages at 800 sq. ft. for a total of 6,360 sq. ft.

Additional site improvements include asphalt paving, average landscaping-sprinklers and board fence, a portion of which is above 4' concrete block walls.

28


File #11191

Interior Finish and Equipment - Interior finish and equipment is summarized as follows:

I INTERIOR ROOM DESCRIPTION I ROOM FLOOR CEILING WALLS EQUIPMENT

COVERING

24 Standard Two-Bedroom Units


Dining Area Carpet Ac. Plaster Drywall

Kitchen Sheet Vinyl Drywall Drywall Formica Top Wood Cabinets, BI'S Gas Range/Oven, Disposal and Dishwashers in Some Units


Full Bath Sheet Vinyl Drywall Drywall Fiberglass Shower, Formica Top Cabinets, Sink, Toilet



Bath Sheet Vinyl Drywall Drywall Fiberglass Tub, Sink. Toilet

Six Larger Two-Bedroom Units


Kitchen Sheet Vinyl Drywall Drywall Formica Top Wood Cabinets, 81'S Gas Range/Oven


Bath Sheet Vinyl Drywall Drywall Tub, Sink, Toilet



Bath Sheet Vinyl Drvwall D_fYwall Sink. Toilet

Building Size-Site Improvements - The standard two-bedroom, two bath units measure 23' x 37' and includes a 2' x 10.5' offset for 872 sq. ft. The larger two-bedroom units over garages measure 22' x 40' and include a 2' x 14' offset for 908 sq. ft. Additionally, there are two laWldries measuring 8' x 20' or 160 sq. ft. resulting in the following combined building area:

24 Two-Bedroom Units @ 872 Sq. ft. = 6 Larger Two Bedroom Units @ 908 Sq. ft. =

Total Apartment Units Two Laundries @ 160 Sq. ft. each =

Total Building Area

20,928 Sq. ft. 5,448 Sq. ft.

26,376 Sq. ft. 320 Sq. ft.

26,696 Sq. ft.

Additionally, there are four two-car attached garages at 390 sq. ft. and six built-in garages at 800 sq. ft. for a total of 6,360 sq. ft.

Additional site improvements include asphalt paving, average landscaping-sprinklers and board fence, a portion of which is above 4' concrete block walls.

28

File #1 ] 191

/1 HIGHEST AND BEST USE II

Highest and best use as taken from the American Institute of Real Estate Appraiser's publication, "Appraisal Tenninology and Handbook" 2nd Edition, is "the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value." The four criteria the highest and best use must meet are:

1. Legally permissible 2. Physically possible 3. Financially feasible 4. Maximally profitable

As Vacant

Legally Permissible: The subject consists of two legal lots apparently with reciprocal access. As a whole, current zorung permits lesser density at ten to twenty units per acre and current parking requirements would result in a total of75 spaces. This would result in a smaller development either to apartments or condominiums to eleven units per lot or a total of 22 units.

Physically Possible: The common access drive results in an equal pavement width for the subject and the adjoining complex to the west and ensures access for the full length of each parcel and therefore is not detrimental to either. There are no other significant easements. Full utility availability is conducive to multi-residential development.

FinanciaUy Feasible: As already discussed, very limited sales activity in Grover Beach is evident on multi-residential sites during the last five years. In consideration of current construction costs, most developers are holding land in anticipation offuture development when rent increases to a level to justify. During the interim, little new construction is foreseen.

Maximally Profitable: Maximum profitability cannot be assured without alternate development proposals which is beyond the scope of this appraisaL

In summary, optimum use, as vacant, likely the subject site would be held for investment until the market improves to warrant development.

As Improved

Legally Permissible: The existing use is legally non-conforming as to density and parking, but likely to continue in consideration of the current rental market for apartments in Grover Beach. As such, the property benefits from a density bonus above that permitted by current zoning but competitive to similar projects within the immediate neighborhood. Many were constructed prior to or shortly thereafter under similar requirements with similar density and parking availability.

Physically Possible: All the units are two bedroom, two bath, and most potential tenants could not distinguish between the smaller and larger units. Furthennore, all the larger units are second floor above builtin garages. Floor plans are functional, and renovation appears prudent to upgrade this complex in comparison to others within the immediate neighborhood and distinguish it from units that were originally part of a larger complex but are now under separate ownership to the west.

29


File #1 ] 191

II HIGHEST AND BEST USE II

Highest and best use as taken from the American Institute of Real Estate Appraiser's publication, "Appraisal Tenninology and Handbook" 2nd Edition, is "the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value." The four criteria the highest and best use must meet are:

1. Legally permissible 2. Physically possible 3. Financially feasible 4. Maximally profitable

As Vacant

Legally Permissible: The subject consists of two legal lots apparently with reciprocal access. As a whole, current zorung permits lesser density at ten to twenty units per acre and current parking requirements would result in a total of75 spaces. This would result in a smaller development either to apartments or condominiums to eleven units per lot or a total of 22 units.

Physically Possible: The common access drive results in an equal pavement width for the subject and the adjoining complex to the west and ensures access for the full length of each parcel and therefore is not detrimental to either. There are no other significant easements. Full utility availability is conducive to multi-residential development.

FinanciaUy Feasible: As already discussed, very limited sales activity in Grover Beach is evident on multi-residential sites during the last five years. In consideration of current construction costs, most developers are holding land in anticipation offuture development when rent increases to a level to justify. During the interim, little new construction is foreseen.

Maximally Profitable: Maximum profitability cannot be assured without alternate development proposals which is beyond the scope of this appraisaL

In summary, optimum use, as vacant, likely the subject site would be held for investment until the market improves to warrant development.

As Improved

Legally Permissible: The existing use is legally non-conforming as to density and parking, but likely to continue in consideration of the current rental market for apartments in Grover Beach. As such, the property benefits from a density bonus above that permitted by current zoning but competitive to similar projects within the immediate neighborhood. Many were constructed prior to or shortly thereafter under similar requirements with similar density and parking availability.

Physically Possible: All the units are two bedroom, two bath, and most potential tenants could not distinguish between the smaller and larger units. Furthennore, all the larger units are second floor above builtin garages. Floor plans are functional, and renovation appears prudent to upgrade this complex in comparison to others within the immediate neighborhood and distinguish it from units that were originally part of a larger complex but are now under separate ownership to the west.

29

RENT AL ROLL - BRADY'S COVE I - 1425-1429 LONGBRANCH AVENUE

Brady's Cove 1 1425-1429 Longbranch, G roycr Beach 5/31/Z0 II

linit#

1425-/\ 1425-B 1-t25-C 1425-D 14~5-E

1425-F

1429-A 1429-13 I-t29-C 1429-D

1429-E

1429-F 1429-G

\4~9-H

1429-1

Tenant Nllmc

f kdgt.:. Paul

Barnell. Pamda r.{yers, Oary

Scott. rv1 il:hael Dcsrosil:!rs. Sky & Iverson. Nick Brc\vcr. K & Thompson. L

Nguyen. Tuyen

\Volf. Alicia ivtiller. Ivlendibles & \Veatherly

C urt.is. Del i lah Belcher. Meg Olafsson. Kari Bogle. Bryce E1150n. Phyllis Abbott. J l)hn

Current/Scheduled Rent Sl.OOO.OO $1.050.00 $ I J)25.00 $1 J)25.00

$1.050.00 $1.050.00

$1.050.00 $<)85.00

$1.200.00

$1.025.00

$1.000.00 $1.000.00 S I .()50.00

$850.00

$1.000.00

S 15~360.00

RENTAL ROLL - BRADY'S COVE I - 1435-1439 LONGBRANCH AVENUE

Brady's Covc IJ 1435-1439 Longbranch, Grover Bench 5/31 f20 11

llnit#

1435-A \-U5-B I-J35-C 1435-D

1435-F l-t35-}:

1435-(;

I-D5-I-J 1435-1

14J<)-;\

1439-13

I-U9-C

1.+39-D I .. D9-E

1439-1-'

Tenant N~lmc

CvlcKinlI:!Y. Cynthia Forrest/Tindal Scully. Diana KiJnbal1. Kristi Stanley. C & 'W·right. D Galvez. Corali~

Valdez. iVl:.lrio & Nlatilda Luna. ivlelissa Desciscido. J & Barrera. \1

Chevoya. I,ori

PC'rdu~. \lary Ramo. Rudy Brimhall. Rl)bcrt

Sween. Joan

~tarqllc/ & Billingsky

Current/Scheduled Rent

$1.000.00 $975.00

$1.100.00

$ 1.000.00

$1.050.00

$1.050.00

$1.000.00

$1.000.00

$1.035.00

$1.025.00

$985.00 $1.000.00

$1.0~5.00

$1.015.00 $1.100.nO

S 15.370.00


RENT AL ROLL - BRADY'S COVE I - 1425-1429 LONGBRANCH AVENUE

Brady's Cove 1 1425-1429 Longbranch, G roycr Beach 5/31/Z0 II

linit#

1425-/\ 1425-B 1-t25-C 1425-D 14~5-E

1425-F

1429-A 1429-13 I-t29-C 1429-D

1429-E

1429-F 1429-G

\4~9-H

1429-1

Tenant Nllmc

f kdgt.:. Paul

Barnell. Pamda r.{yers, Oary

Scott. rv1 il:hael Dcsrosil:!rs. Sky & Iverson. Nick Brc\vcr. K & Thompson. L

Nguyen. Tuyen

\Volf. Alicia ivtiller. Ivlendibles & \Veatherly

C urt.is. Del i lah Belcher. Meg Olafsson. Kari Bogle. Bryce E1150n. Phyllis Abbott. J l)hn

Current/Scheduled Rent Sl.OOO.OO $1.050.00 $ I J)25.00 $1 J)25.00

$1.050.00 $1.050.00

$1.050.00 $<)85.00

$1.200.00

$1.025.00

$1.000.00 $1.000.00 S I .()50.00

$850.00

$1.000.00

S 15~360.00

RENTAL ROLL - BRADY'S COVE I - 1435-1439 LONGBRANCH AVENUE

Brady's Covc IJ 1435-1439 Longbranch, Grover Bench 5/31 f20 11

llnit#

1435-A \-U5-B I-J35-C 1435-D

1435-F l-t35-}:

1435-(;

I-D5-I-J 1435-1

14J<)-;\

1439-13

I-U9-C

1.+39-D I .. D9-E

1439-1-'

Tenant N~lmc

CvlcKinlI:!Y. Cynthia Forrest/Tindal Scully. Diana KiJnbal1. Kristi Stanley. C & 'W·right. D Galvez. Corali~

Valdez. iVl:.lrio & Nlatilda Luna. ivlelissa Desciscido. J & Barrera. \1

Chevoya. I,ori

PC'rdu~. \lary Ramo. Rudy Brimhall. Rl)bcrt

Sween. Joan

~tarqllc/ & Billingsky

Current/Scheduled Rent

$1.000.00 $975.00

$1.100.00

$ 1.000.00

$1.050.00

$1.050.00

$1.000.00

$1.000.00

$1.035.00

$1.025.00

$985.00 $1.000.00

$1.0~5.00

$1.015.00 $1.100.nO

S 15.370.00

File #11191

Financially Feasible: Although this complex has been appraised "as is," the Income Approach considers the potential for increased rent. The differential between increased rent and existing rent should provide an adequate return to offset cost which has been considered as a deduction relative to "as is" value. Consequently, the planned renovation program appears prudent, but the existing rental program would result in sufficient income whether or not it is completed.

Maximally Profitable: As already discussed, the planned renovation program should maximize potential income in consideration of related cost.

In summary, as improved, optimum utilization relates to continued use as a 30-unit complex that is legally non-confonning as to zoning and parking availability but benefits from a density bonus as compared to that required for new projects. It is also competitive in relationship to existing complexes in the immediate neighborhood that were fonnerly developed under less restrictive density requirements. Renovation cost is not significant at less than 10% of "as is" value. It should result in a reduction of maintenance expense w·hich has been relatively high, particularly in the last two years. Further, it should result in a slight increase in rent for all but the largest unit at $50 per month. Consequently, it should be considered to distinguish this project from other complexes in the immediate neighborhood, most of which have not been renovated.

II METHOD OF VALUATION II

As already discussed under Scope of Appraisal, the Cost Approach is not applicable. Consequently, only the Income and Sales Comparison Approaches have been considered, adjusted downward for the renovation cost, and further summarized as follows:

Income Approach: This approach is premised upon anticipated future benetits of property ownership. Gross income is projected on the basis of rent established for the property, in consideration of rents for similar space. Allowances are made for vacancies in relationship to rates considered customary in the surrounding area. Effective gross income is processed into net income by deduction of applicable landlord expenses. Resultant net income is capitalized or converted into a value estimate on the basis of overall rates, as demonstrated from sales of similar properties.

Sales Comparison Approach: This approach relies on the sales of similar apartment complexes to that under analysis. These transactions are verified to determine sales price as well as physical characteristics. Applicable units of comparison to includes sales price per square foot, sales price per unit and effective gross income multipliers are then considered to arrive at a value indication. Each of the approaches are summarized as follows:

II INCOME APPROACH II

Current Rental Income - Rental rolls as of 5-31- I 1 are summarized on the facing page at $15,360 and $15,370 per month or a total of$30,730/month. This results in an average rent at $1,024/unit. The highest rent is for the largest unit, 1429-C Longbranch at $ 1,200 per month. Rents for the remaining 28 units range from $850-1,050 per month and average $1,018 per month. The lowest rents appear to be attributed to long-term tenants with most of the rents at a level of $1,000-1,100 per month. As already discussed under Highest and Best Use, upon renovation, potential exists for slightly higher rents.

Comparative Rental Data - Existing rents relate to the following comparisons:

30


File #11191

Financially Feasible: Although this complex has been appraised "as is," the Income Approach considers the potential for increased rent. The differential between increased rent and existing rent should provide an adequate return to offset cost which has been considered as a deduction relative to "as is" value. Consequently, the planned renovation program appears prudent, but the existing rental program would result in sufficient income whether or not it is completed.

Maximally Profitable: As already discussed, the planned renovation program should maximize potential income in consideration of related cost.

In summary, as improved, optimum utilization relates to continued use as a 30-unit complex that is legally non-confonning as to zoning and parking availability but benefits from a density bonus as compared to that required for new projects. It is also competitive in relationship to existing complexes in the immediate neighborhood that were fonnerly developed under less restrictive density requirements. Renovation cost is not significant at less than 10% of "as is" value. It should result in a reduction of maintenance expense w·hich has been relatively high, particularly in the last two years. Further, it should result in a slight increase in rent for all but the largest unit at $50 per month. Consequently, it should be considered to distinguish this project from other complexes in the immediate neighborhood, most of which have not been renovated.

II METHOD OF VALUATION II

As already discussed under Scope of Appraisal, the Cost Approach is not applicable. Consequently, only the Income and Sales Comparison Approaches have been considered, adjusted downward for the renovation cost, and further summarized as follows:

Income Approach: This approach is premised upon anticipated future benetits of property ownership. Gross income is projected on the basis of rent established for the property, in consideration of rents for similar space. Allowances are made for vacancies in relationship to rates considered customary in the surrounding area. Effective gross income is processed into net income by deduction of applicable landlord expenses. Resultant net income is capitalized or converted into a value estimate on the basis of overall rates, as demonstrated from sales of similar properties.

Sales Comparison Approach: This approach relies on the sales of similar apartment complexes to that under analysis. These transactions are verified to determine sales price as well as physical characteristics. Applicable units of comparison to includes sales price per square foot, sales price per unit and effective gross income multipliers are then considered to arrive at a value indication. Each of the approaches are summarized as follows:

II INCOME APPROACH II

Current Rental Income - Rental rolls as of 5-31- I 1 are summarized on the facing page at $15,360 and $15,370 per month or a total of$30,730/month. This results in an average rent at $1,024/unit. The highest rent is for the largest unit, 1429-C Longbranch at $ 1,200 per month. Rents for the remaining 28 units range from $850-1,050 per month and average $1,018 per month. The lowest rents appear to be attributed to long-term tenants with most of the rents at a level of $1,000-1,100 per month. As already discussed under Highest and Best Use, upon renovation, potential exists for slightly higher rents.

Comparative Rental Data - Existing rents relate to the following comparisons:

30

File # 11191

Owner: No. Units: Type: Unit Sizes: Rent: Rent/Sq. ft.:

Rental Comparison I 1409 -1415 Longbranch Avenue, Grover Beach

Leon Van Buerden 30 Two Bedroom, 2 Bath 872 and 908 Sq. ft. $995

Vacancy Rate: $1. 1 0-1.14/Sq. ft. 0%

Landlord Obligations: All except e lectricity and gas

Remarks:

Source:

This is the adjoining 30-unit complex immediately to the west. According to Leon Van Buerden, one of the owners, it is identical to the subject with the access drive and parking area repaved at a cost of $45,000 three years ago. All roofs were also replaced at that time. This is the second phase built in 1989 for an overall project of 60 units to include the subject. Mr. Van Buerden further indicates that rents have been reduced s lightly to $995 per month to ensure full occupancy. When vacancy occurs, units are rented and carpet replaced as necessary, but otherwise, units and the exterior have not been renovated.

Leon Van Buerdcn (805) 528- 11 33

31


Fi le #111 9 1


Rental Comparison 1 1409 -1415 Longbranch Avenue, Grover Beach

Leon Van Buerdcn 30 Two Bedroom, 2 Bath 872 and 908 Sq . ft. $995

Vacancy Rate: $ 1.1 0- 1.14/Sq. ft. 0%

Landlord Obligations: All except e lectricity and gas

Remarks:

Source:

This is the adjo in ing 30-unit complex immediately to the west. According to Leon Van Buerden, one of the owners, it is identical to the subject with the access dri ve and parking area repaved at a cost of $45,000 three years ago. All roofs were also replaced at that time. This is the second phase built in 1989 for an overall project of 60 units to include the subject. Mr. Van Buerden further indicates that rents have been reduced s lightly to $995 pcr month to ensure fu ll occupancy. When vacancy occurs, units are rented and carpet replaced as necessary, but otherwise, uni ts and the exterior have not been renovated.

Leon Van Buerdcn (805) 528- 1 133

3 1

File # 11191


Rental Comparison 2 665-681 Rockaway Avenue, Grover Beach

Stephen and Beverly Morse 8 Two Bedroom, 1 Bath 800 sq. ft. $910 $1.14/Sq. ft.

Vacancy Rate: 0% Landlord Obligations: All except electricity and gas

Remarks:

Source:

This is an average quality two-story 8-unit complex including 2-bedroom units with carports but no garages. It is in overall average condition. Rents have been reduced slightly to ensure full occupancy.

Hector, Cal-West Management (805) 489-940 I

32


File #111 91

Owner: No. Units: Type: Unit Sizes: Rent: RcnUSq. ft.:

Rental Comparison 2 665-681 Rockaway Avenue, Grover Beach

Stephen and Beverly Morse 8 Two Bedroom, I Bath 800 sq. ft. $9 10 $1. 14/Sq . ft .


Remarks:

Source:

This is an average quality two-story 8-unit complex including 2-bedroom units with carports but no garages. It is in overall average condition. Rents have been reduced slightly to ensure full occupancy.

Hector, Cal-West Management (805) 489-940 I

32

File #1 I 191


Rental Comparison 3 857 Manhattan Avenue, Grover Beach

John L. Pearson 4 Two Bedroom, I Bath 800 sq . ft . $899

Vacancy Rate: $ I. I 2/Sq. ft. 0%

Landlord Obligations: All except electricity and gas

Remarks:

Source:

This is an average quality two-story four-plex including two-bedroom units with carports but no garages. Overall condition is average.

Hector, Cal-West Management (805) 489-940 1

33


File # 111 91

Owoer: No. Units : Type: Unit Sizes: Rent: Rent/Sq. ft.:

Rental Comparison 3 857 Manhattan Avenue, Grover Beach

John L. Pearson 4 Two Bedroom. I Bath 800 sq. ft . $899

Vacancy Rate: $ I. I 2/Sq. ft. 0%

Landlord Obligations: All except electricity and gas

Remarks:

Source:

This is an average quality two-story four-plex including two-bedroom units with carports but no garages. Overall condition is average.

Hector, Cal-West Management (805) 489-940 1

JJ

File # 11191


Rental Comparison 4 1389 Nice Avenue, Grover Beach

Elizabeth F. Howard Trust 8 Two Bedroom, 1 y, Bath 800 sq. ft. $899 $1.12/Sq. ft.


Remarks:

Source:

This is an average quality two-story complex with carports but no garages. It does include a laundry. Rents have been at the same level for at least two years. Units are in overall average condition.

Aaron, Pope Management (805) 481-6999

34


File#11191


Rental Comparison 4 1389 Nice Avenue, Grover Beach

Eli zabeth F. Howard Trust 8 Two Bedroom, 1 y, Bath 800 sq. ft. $899 $1.12/Sq. ft.


Remarks:

Source:

This is an average quality two-story complex with carports but no garages. It does include a laundry. Rents have been at the san1e level for at least two years . Units are in overall average condition.

Aaron, Pope Management (805) 481-6999

34

File#11191

Owner: No. Units: Type:

Unit Sizes: Rent: Rent/Sq. ft.:

Rental Comparison 5 1685 Ramona Avenue, #1 - #16, Grover Beach

Takken Investments Properties, LLC 16 Eight large two bedroom, 11', bath town homes, 900 sq. ft. and a two bedroom I bath tlats ranging from 720-776 sq. ft. Townhomes - 900 Sq. ft. ; Two Bedroom Flats - 720 Sq. ft. Two-Bedroom Townhomes - $935; Two Bedroom Flats - $705 Townhomes - $1.04/Sq. ft.; Two Bedroom Flats - $.98/Sq. ft.


Remarks:

Source:

This complex is further summarized as Listing I in this report. It includes four 4-plexes with one-car garages for each unit. Units were built in 1972 and are in overall average condition

Kevin King, (805) 541-5464

35


Fi le#11191

Owner: No. Units : Type:

Unit Sizes: Rent: Rent/Sq. ft. :

Rental Comparison 5 1685 Ramona Avenue, #1 - #16, Grover Beach

Takken Investments Properties, LLC 16 Eight large two bedroom, I Y:z bath town homes, 900 sq. ft. and a two bedroom I bath Bats ranging from 720-776 sq. ft . Townhomes - 900 Sq. ft .; Two Bedroom Flats - 720 Sq . ft . Two-Bedroom Townhomes - $935 ; Two Bedroom Flats - $705 Townhomes - $1.04/Sq. ft.; Two Bedroom Flats - $.98/Sq. 1'1.

Vacancy Rate: 0% Landlord Obligations: All except electric ity and gas

Remarks:

Source:

This complex is further summarized as Listing 1 in this report. It includes four 4-plexes with one-car garages for each unit. Units were built in 1972 and are in overal l average condition

Kevin King, (805) 541-5464

35

RENTAL COMPARlSON MAP

PISMJ

\ STAiE


RENTAL COMPARlSON MAP

PIS/1O

STAiE

, i

'.

File #11191

I RENTAL COMPARISON SUMMARY l Rental Address No. Units Type Unit Size Monthly Rent/Sq. ft. Compo Rent

1 1409-1415 Longbranch Ave. 30 2-Bedroom 872/908 $995 $1.10-1.14

2 665-681 Rockaway A venue 8 2-Bcdroom 800 $910 $1.14

3 857 Manhattan Avenue 4 2-Bedroom 800 $899 1.12

4 1389 Nice Avenue 8 2-Bedroom 800 $899 1.12

5 1685 Ramona A venue 16 2-Bedroom 9001720 $935/$705 $1.04; $.98

All the complexes surveyed were fully occupied. Rental Comparison 1 is directly applicable and includes an identical complex originally involving a larger project of which the subject was a part. It appears to be in similar condition but is not planned for renovation. In this regard, it requires a slight upward adjustment as this cost is considered separately for the subject.

Rental Comparison 2 includes a lesser quality complex with no garages. It requires upward adjustments for both factors.

Likewise Rental Comparison 3 is of lesser quality and, again, includes carports but no garages.

Rental Comparison 4 includes only 1 ~ baths with carports. It requires upward adjustments in comparison to the subject for both factors.

Rental Comparison 5 includes older units of slightly lesser quality with the largest units including only 1 ~ baths and the smaller units, one bath. Rents for the larger units would set the lower limit for the subject.

Projected Market Rent - Comparisons provide direct support for market rent, as renovated, at $1,050 per month and for the unit with a two-car garage at $1,200 per month as follows:

Two-Bedroom Unit: I Unit @ $1 ,200/Month Two-Bedroom Unit: 29 Units @ $1 ,0501M0nth

$ 1,200 $30,450

Total Monthly Rent Annual Income

$31,650 $379,800

Vacancy-Collection Loss: All the comparisons surveyed indicate full occupancy at slightly lower rents than those anticipated for the subject. When the complex was reinspected on June 3,20 11, two of the 30, or 6.67%, appear to be vacant. However, the rent roll as of5-31-11 indicates all units were rented. With turnover, periodic vacancy would be expected, realistically at 50/0.

Other Income: Other income would relate to laundry and retained deposits projected at 1 % of effective gross income or $3,608.

36


File #11191

I RENTAL COMPARISON SUMMARY l Rental Address No. Units Type Unit Size Monthly Rent/Sq. ft. Compo Rent

1 1409-1415 Longbranch Ave. 30 2-Bedroom 872/908 $995 $1.10-1.14

2 665-681 Rockaway A venue 8 2-Bcdroom 800 $910 $1.14

3 857 Manhattan Avenue 4 2-Bedroom 800 $899 1.12

4 1389 Nice Avenue 8 2-Bedroom 800 $899 1.12

5 1685 Ramona A venue 16 2-Bedroom 9001720 $935/$705 $1.04; $.98

All the complexes surveyed were fully occupied. Rental Comparison 1 is directly applicable and includes an identical complex originally involving a larger project of which the subject was a part. It appears to be in similar condition but is not planned for renovation. In this regard, it requires a slight upward adjustment as this cost is considered separately for the subject.

Rental Comparison 2 includes a lesser quality complex with no garages. It requires upward adjustments for both factors.

Likewise Rental Comparison 3 is of lesser quality and, again, includes carports but no garages.

Rental Comparison 4 includes only 1 ~ baths with carports. It requires upward adjustments in comparison to the subject for both factors.

Rental Comparison 5 includes older units of slightly lesser quality with the largest units including only 1 ~ baths and the smaller units, one bath. Rents for the larger units would set the lower limit for the subject.

Projected Market Rent - Comparisons provide direct support for market rent, as renovated, at $1,050 per month and for the unit with a two-car garage at $1,200 per month as follows:

Two-Bedroom Unit: I Unit @ $1 ,200/Month Two-Bedroom Unit: 29 Units @ $1 ,0501M0nth

$ 1,200 $30,450

Total Monthly Rent Annual Income

$31,650 $379,800

Vacancy-Collection Loss: All the comparisons surveyed indicate full occupancy at slightly lower rents than those anticipated for the subject. When the complex was reinspected on June 3,20 11, two of the 30, or 6.67%, appear to be vacant. However, the rent roll as of5-31-11 indicates all units were rented. With turnover, periodic vacancy would be expected, realistically at 50/0.

Other Income: Other income would relate to laundry and retained deposits projected at 1 % of effective gross income or $3,608.

36

File #11191

Income and Expense History: As already discussed under Scope of Appraisal, income and expense history is summarized for the last five years as follows:

------- ---

INCOME AND EXPENSE STATEMENT 2006 - JULY, 2008 I I I Income I 2006 I 2007 I 7-2008 I Adj. 2008 I 2009 I 2010 I 5-Yr. Ave. I

Rental Income $322,630 $344,270 $202,236 $346,690 $343,660 $357,388 $342,928

Laundry $2,711 $2,788 $650 $1,114 $2,241 $3,097 $2,390

Miscellaneous $7,061 $11,243 $1,589 $2,724 $12,189 $18,301 $10,304

Total Income $332,402 $358,301 $204,475 $350,528 $358,090 $378,786 $355,622

Expenses

Advertising ($2,390) ($429) ($541) ($927) ($1,332) $0 ($1,016)

Bank Charges ($78) ($200) ($1,123) ($1,925) ($4,007) ($25) ($1,247)

Cleaning ($792) ($180) ($249) ($1,260) ($1,695) ($835)

Credit Check $0 $0 $0 ($223) ($1) ($45)

Insurance ($5,978) ($6,181) ($3,492) ($5,986) ($4,827) ($7,326) ($6,060)

Landscaping ($7,334) ($7.734) ($2,836) ($4,862) ($5,123) ($6,539) ($6,318)

Leasing Bonus ($650) ($580) ($343) ($1,100) ($1,000) ($735)

I Licenses and Permits ($120) ($463) $0 $0 $0 ($165) ($150)

Maintenance ($36,585) ($88,751) ($16,198) ($27,768) ($104,305) ($61,399) ($63,762)

Management Fee ($19,475) ($20,000) ($13,840) ($23,726) ($23,500) ($24,000) ($22,140)

Miscellaneous $0 ($7,349) ($1,162) ($1,992) ($2,595) ($6,518) ($3,691)

Office ($3,612) ($3,750) ($2,007) ($3,441) ($2,300) ($2,656) ($3,152)

Property Taxes ($15,750) ($36,330) ($12,614) ($23,478) ($19,775) ($25,772) ($24,221)

Site Manager Fees ($13,025) ($13,200) ($3,202) ($5,489) ($13,675) ($14,025) ($11,883)

Supplies $0 $0 ($2,799) ($2,400) ($1,040)

Trash ($5,560) ($5,679) ($3,526) ($6,045) ($5,810) ($6,301) ($5,879)

Utilities $0

Gas & Electric ($1,996) ($1,735) ($1,028) ($1,762) ($2,757) ($2,512) ($2,152)

Water ($7,562) ($14,347) ($5,908) ($10,128) ($13,738) ($16,593) ($12,474)

Other Utilities ($3,540) $0 ($170) ($291) $0 $0 ($766)

Total Expenses ($124,447) ($206,908) ($67,647) ($118,412) ($209,126) ($178,927) ($167,566)

Expense Ratio -37.44% -57.75% -33.25% -33.78% -58.40% -47.24% -47.12%

Net Income $207,955 $151,393 $136,483 $232,116 $148,964 $199,859 $188,056

Note: Net income in 2007 has been adjusted for the roof cost at $65,000 to $216,393. Adjusted income for 2008 is based on the seven-month average plus property taxes for the 2007-2008 fiscal year at $23,478. During the five-year period, total income ranged from $332,402-378,786 and has been gradually increasing with a 5-year average at $355,622. Expenses have ranged widely from $118,412-209,126 with a weighted average at $167,564. This results in corresponding expense ratios from 33.25-58.40/0 with a weighted average at 47.12%. Based on past history and reasonable industry nonns, expenses are projected as follows:

37


I

File #11191

Income and Expense History: As already discussed under Scope of Appraisal, income and expense history is summarized for the last five years as follows:

INCOME AND EXPENSE STATEMENT 2006 - JULY, 2008

I Income I 2006 I 2007 I 7-2008 I Adj. 2008 I 2009 I 2010 I 5-Yr. Ave.

Rental Income $322,630 $344,270 $202,236 $346,690 $343,660 $357,388 $342,928

Laundry $2,711 $2,788 $650 $1,114 $2,241 $3,097 $2,390

Miscellaneous $7,061 $11,243 $1,589 $2,724 $12,189 $18,301 $10,304

Total Income $332,402 $358,301 $204,475 $350,528 $358,090 $378,786 $355,622

Expenses

Advertising ($2,390) ($429) ($541) ($927) ($1,332) $0 ($1,016)

Bank Charges ($78) ($200) ($1,123) ($1,925) ($4,007) ($25) ($1,247)

Cleaning ($792) ($180) ($249) ($1,260) ($1,695) ($835)

Credit Check $0 $0 $0 ($223) ($1) ($45)

Insurance ($5,978) ($6,181) ($3,492) ($5,986) ($4,827) ($7,326) ($6,060)

Landscaping ($7,334) ($7.734) ($2,836) ($4,862) ($5,123) ($6,539) ($6,318)

Leasing Bonus ($650) ($580) ($343) ($1,100) ($1,000) ($735)

Licenses and Permits ($120) ($463) $0 $0 $0 ($165) ($150)

Maintenance ($36,585) ($88,751) ($16,198) ($27,768) ($104,305) ($61,399) ($63,762)

Management Fee ($19,475) ($20,000) ($13,840) ($23,726) ($23,500) ($24,000) ($22,140)

Miscellaneous $0 ($7,349) ($1,162) ($1,992) ($2,595) ($6,518) ($3,691)

Office ($3,612) ($3,750) ($2,007) ($3,441) ($2,300) ($2,656) ($3,152)

Property Taxes ($15,750) ($36,330) ($12,614) ($23,478) ($19,775) ($25,772) ($24,221)

Site Manager Fees ($13,025) ($13,200) ($3,202) ($5,489) ($13,675) ($14,025) ($11,883)

Supplies $0 $0 ($2,799) ($2,400) ($1,040)

Trash ($5,560) ($5,679) ($3,526) ($6,045) ($5,810) ($6,301) ($5,879)

Utilities $0

Gas & Electric ($1,996) ($1,735) ($1,028) ($1,762) ($2,757) ($2,512) ($2,152)

Water ($7,562) ($14,347) ($5,908) ($10,128) ($13,738) ($16,593) ($12,474)

Other Utilities ($3,540) $0 ($170) ($291) $0 $0 ($766)

Total Expenses ($124,447) ($206,908) ($67,647) ($118,412) ($209,126) ($178,927) ($167,566)

Expense Ratio -37.44% -57.75% -33.25% -33.78% -58.40% -47.24% -47.12%

Net Income $2071955 $151,393 $136,483 $232,116 $148,964 $199,859 $188,056

Note: Net income in 2007 has been adjusted for the roof cost at $65,000 to $216,393. Adjusted income for 2008 is based on the seven-month average plus property taxes for the 2007-2008 fiscal year at $23,478. During the five-year period, total income ranged from $332,402-378,786 and has been gradually increasing with a 5-year average at $355,622. Expenses have ranged widely from $118,412-209,126 with a weighted average at $167,564. This results in corresponding expense ratios from 33.25-58.40/0 with a weighted average at 47.12%. Based on past history and reasonable industry nonns, expenses are projected as follows:

37

I I

File#11191

Projected Expenses

Insurance - During the last five years, premiums have ranged from $3,492-7,326 with a weighted average at $6,060. The premium for last year is most applicable at $7,326.

Property Taxes - Property taxes are projected at the current rate of 1.04176% times appraised value of $3,261 ,000 or $33,972/year.

Operating:

Administrative, Legal and Accounting - This expense is not shown on past statements but nonnally would be 1 % oftota! income or $3,644/year.

Advertising - This expense has ranged from $0 last year to as high as $2,390 and is stabilized at $1,OOO/year based on the 5-year average.

Bank. Charges - This expense has ranged widely from $25-4,007 and is stabilized based on the 5-year average at $1 ,200/year.

Cleaning - This expense has ranged from $180-1,695/year and is stabilized at $100/month or $1 ,200/year.

Landscaping and Sweeper Service - This expense has ranged from $4,862-7,734 per year and is stabilized at $500/month or $6,000/year.

Maintenance - This expense has ranged widely from adjusted 2008 at $27,768-104,305 in 2009. Weighted average at $63,762 is relatively high at almost 18% of effective gross income. Exclusive of reserves for replacement, reasonable allowance would be 10% of effective gross income.

Management - Typical management fee in the Five Cities area is 5% of effective gross income.

Office - This expense has ranged from $2,300-3,750/year and is stabilized at $250/month or $3,OOO/year.

Trash - This expense has ranged from $5,560-6,310 and is stabilized at $500/month or $6,000/year.

Utilities - This expense has ranged trom $12,181-19,1 05/year and is stabilized at $1 ,500/month or $18,OOO/year.

Miscellaneous - Unforeseen expense would include leasing bonus, licenses, pennits and supplies estimated at 1 % of effective gross income or $3,644/year.

38


File#11191

Projected Expenses

Insurance - During the last five years, premiums have ranged from $3,492-7,326 with a weighted average at $6,060. The premium for last year is most applicable at $7,326.

Property Taxes - Property taxes are projected at the current rate of 1.04176% times appraised value of $3,261 ,000 or $33,972/year.

Operating:

Administrative, Legal and Accounting - This expense is not shown on past statements but nonnally would be 1 % oftota! income or $3,644/year.

Advertising - This expense has ranged from $0 last year to as high as $2,390 and is stabilized at $1,OOO/year based on the 5-year average.

Bank. Charges - This expense has ranged widely from $25-4,007 and is stabilized based on the 5-year average at $1 ,200/year.

Cleaning - This expense has ranged from $180-1,695/year and is stabilized at $100/month or $1 ,200/year.

Landscaping and Sweeper Service - This expense has ranged from $4,862-7,734 per year and is stabilized at $500/month or $6,000/year.

Maintenance - This expense has ranged widely from adjusted 2008 at $27,768-104,305 in 2009. Weighted average at $63,762 is relatively high at almost 18% of effective gross income. Exclusive of reserves for replacement, reasonable allowance would be 10% of effective gross income.

Management - Typical management fee in the Five Cities area is 5% of effective gross income.

Office - This expense has ranged from $2,300-3,750/year and is stabilized at $250/month or $3,OOO/year.

Trash - This expense has ranged from $5,560-6,310 and is stabilized at $500/month or $6,000/year.

Utilities - This expense has ranged trom $12,181-19,1 05/year and is stabilized at $1 ,500/month or $18,OOO/year.

Miscellaneous - Unforeseen expense would include leasing bonus, licenses, pennits and supplies estimated at 1 % of effective gross income or $3,644/year.

38

File #1119 I

Reserves for Replacement

Asphalt Resealing - I O~OOO Sq. ft. of asphalt will need to be resealed every six years at a cost of $.35/sq. ft. or $3,500 resulting in an annual requirement of $583.

Floor Covering - 2,964 Yards oft1oor covering will need to be replaced every ten years at a cost of $22/yd. or $65,208. This results in an annual requirement of $6,521.

Roofs - 33,056 Sq. ft. of roof will need to be replaced every 20 years at a cost of $2.50/sq. ft. or $82,640. This results in an annual requirement of $4, I 62.

Ranges. Ovens and Refrigerators - These expense is estimated at $2,000/unit every 15 years or a total of $4,OOO/year.

Projected Operating Statement - This results in the following projected operating statement:

I PROJECTED OPERATING STATEMENT I APPRAISER'S CALCULATIONS APPRAJSER'SES~TE

INCOME Monthly Rental Income 1 Unit @ $1 ,2001M0.l29 Units @ $1 ,050IMo. $31,650

Annual Rental Income $379,800

Less: Vacancy-Collection Loss @5% ($18,990)

Effective Gross Income $360,810

Other Income @I% $3,608

Total Income $364,418

ANNUAL EXPENSES Fixed Expenses

Insurance 20 I 0 Premium ($7,326) Property Taxes $3,261,000 x 1.04176% ($33,972) Total Fixed: ($41,298)

Operating Expenses:

Administrative, Legal & Acctg. 1% of Effective Gross Income ($3,644) Advertising $1,OOONear ($1,000) Bank Charges $1,200Near ($1,200) Cleaning $100fMonth ($1,200)

Landscaping & Sweeper Service $500/Month ($6,000) Maintenance @ 10% ($36,081)

Management 5% of Effective Gross Income ($18,221) Office $250fMonth ($3,000) Trash $500fMonth ($6,000) Utilities $1,500IMonth ($18,000) Miscellaneous I % of Effective Gross Income ($3,644)

Total Operating Expenses: ($97,990) Reserves for Replacement

Asphalt 10,000 Sq. ft. @ $.35/Sq. ft. = $3,500/6 Yrs. ($583) Floor Covering 2,964 Yds. @ $22Nd. = $65,208/10 Years ($6,521) Roof 33,056 Sq. ft. @ $2.50/Sf. = $82,640/20 Yrs. ($4,132) Ranges, Ovens, Refrigerators $60,000/15 Years ($4,000)

Total Reserves ($15,236)

TOTAL EXPENSES: ($154,524)

NET OPERATING INCOME: $209,894

39


File #1119 I

Reserves for Replacement

Asphalt Resealing - I O~OOO Sq. ft. of asphalt will need to be resealed every six years at a cost of $.35/sq. ft. or $3,500 resulting in an annual requirement of $583.

Floor Covering - 2,964 Yards oft1oor covering will need to be replaced every ten years at a cost of $22/yd. or $65,208. This results in an annual requirement of $6,521.

Roofs - 33,056 Sq. ft. of roof will need to be replaced every 20 years at a cost of $2.50/sq. ft. or $82,640. This results in an annual requirement of $4, I 62.

Ranges. Ovens and Refrigerators - These expense is estimated at $2,000/unit every 15 years or a total of $4,OOO/year.

Projected Operating Statement - This results in the following projected operating statement:

I PROJECTED OPERATING STATEMENT I APPRAISER'S CALCULATIONS APPRAJSER'SES~TE

INCOME Monthly Rental Income 1 Unit @ $1 ,2001M0.l29 Units @ $1 ,050IMo. $31,650

Annual Rental Income $379,800

Less: Vacancy-Collection Loss @5% ($18,990)

Effective Gross Income $360,810

Other Income @I% $3,608

Total Income $364,418

ANNUAL EXPENSES Fixed Expenses

Insurance 20 I 0 Premium ($7,326) Property Taxes $3,261,000 x 1.04176% ($33,972) Total Fixed: ($41,298)

Operating Expenses:

Administrative, Legal & Acctg. 1% of Effective Gross Income ($3,644) Advertising $1,OOONear ($1,000) Bank Charges $1,200Near ($1,200) Cleaning $100fMonth ($1,200)

Landscaping & Sweeper Service $500/Month ($6,000) Maintenance @ 10% ($36,081)

Management 5% of Effective Gross Income ($18,221) Office $250fMonth ($3,000) Trash $500fMonth ($6,000) Utilities $1,5001M0nth ($18,000) Miscellaneous I % of Effective Gross Income ($3,644)

Total Operating Expenses: ($97,990) Reserves for Replacement

Asphalt 10,000 Sq. ft. @ $.35/Sq. ft. = $3,500/6 Yrs. ($583) Floor Covering 2,964 Yds. @ $22Nd. = $65,208/10 Years ($6,521) Roof 33,056 Sq. ft. @ $2.50/Sf. = $82,640/20 Yrs. ($4,132) Ranges, Ovens, Refrigerators $60,000/15 Years ($4,000)

Total Reserves ($15,236)

TOTAL EXPENSES: ($154,524)

NET OPERATING INCOME: $209,894

39

File#11191

Note: Expenses are projected at $5.79/sq. ft. or 42.400/0 of effective gross income. The overall expense ratio appears reasonable on the basis of past operating history in consideration of the renovation program.

Overall Capitalization Rates - Overall rates as a relationship between net income and sales price for sales comparisons shown in this report are swnmarized as follows:

I OVERALL CAPITALIZATION RATES I I Address I Date I Sales Price I NOI I Overall Rate I Sale 1: 875 Santa Ysabel. Los Osos 3-6-08 $2.350.000 $139,600 5.94%

Sale 2: 341 N. 3rd St., Grover Beach 7-22-08 $1.595,000 $94.221 5.9]%

Sale 3: 3350 Bullock St.. San Luis Obispo 10-7-08 $5.600.000 $348,452 6.22%

Sale 4: 1110 Orcutt Road, San Luis Obispo 8-22-09 $2,404,000 $181,562 7.55%

Sale 5: 865 Morro Street, San Luis Obispo 5-10-10 $2,770,000 $132,837 4.80%

Sale 6: 941 Manhattan Ave., Grover Beach 12-1-10 $1,000.000 $66.556 6.66%

Capitalized Value - Overall rates range widely from 4.8-7.55% with a weighted overall rate at 6.27%. The extremes relate to Sales 4 and 5 in San Luis Obispo. Remaining comparisons show a more consistent range from 5.91-6.66%. Exclusive of Sale 1, which is affected by additional assessments, Sales 2, 3 and 6 denote a range from 5.91-6.66%. Additionally, Listing 1 at a reduced sales price would indicate an overall rate of6.06%. Consequently, an overall rate of6% is realistic resulting in the following capitalized value less renovation cost as follows:

II

1) 2) 3) 4) 5) 6)

Net Operating Income: Indicated Overall Rate: Capitalized Value: Less Renovation Cost: "'As Is" Value by the Income Approach: Round to:

$ 209,894 6.00%

$3,498,233 ($ 317.000)


$3,181,233 $3,181,000

I,

As already discussed under Scope of Appraisal, this approach is premised on six sales of apartment complexes that have occurred in Southern San Luis Obispo County during the last three years as well as one listing, further detailed as follows:

40


File#11191

Note: Expenses are projected at $5.79/sq. ft. or 42.400/0 of effective gross income. The overall expense ratio appears reasonable on the basis of past operating history in consideration of the renovation program.

Overall Capitalization Rates - Overall rates as a relationship between net income and sales price for sales comparisons shown in this report are swnmarized as follows:

I OVERALL CAPITALIZATION RATES I I Address I Date I Sales Price I NOI I Overall Rate I Sale 1: 875 Santa Ysabel. Los Osos 3-6-08 $2.350.000 $139,600 5.94%

Sale 2: 341 N. 3rd St., Grover Beach 7-22-08 $1.595,000 $94.221 5.9]%

Sale 3: 3350 Bullock St.. San Luis Obispo 10-7-08 $5.600.000 $348,452 6.22%

Sale 4: 1110 Orcutt Road, San Luis Obispo 8-22-09 $2,404,000 $181,562 7.55%

Sale 5: 865 Morro Street, San Luis Obispo 5-10-10 $2,770,000 $132,837 4.80%

Sale 6: 941 Manhattan Ave., Grover Beach 12-1-10 $1,000.000 $66.556 6.66%

Capitalized Value - Overall rates range widely from 4.8-7.55% with a weighted overall rate at 6.27%. The extremes relate to Sales 4 and 5 in San Luis Obispo. Remaining comparisons show a more consistent range from 5.91-6.66%. Exclusive of Sale 1, which is affected by additional assessments, Sales 2, 3 and 6 denote a range from 5.91-6.66%. Additionally, Listing 1 at a reduced sales price would indicate an overall rate of6.06%. Consequently, an overall rate of6% is realistic resulting in the following capitalized value less renovation cost as follows:

II

1) 2) 3) 4) 5) 6)

Net Operating Income: Indicated Overall Rate: Capitalized Value: Less Renovation Cost: "'As Is" Value by the Income Approach: Round to:

$ 209,894 6.00%

$3,498,233 ($ 317.000)


$3,181,233 $3,181,000

I,

As already discussed under Scope of Appraisal, this approach is premised on six sales of apartment complexes that have occurred in Southern San Luis Obispo County during the last three years as well as one listing, further detailed as follows:

40

SALES COMPARlSON MAP - LOS OSOS

, i I

MORRO

BAY

\ \ \ \

. "

MORRO BAY "

".~

--\


SALES COMPARISON MAP - LOS OSOS

MORRO BAY ........ '____.

,\~

-- \

).

File # 111 9 1

Ref. No. 08-36 APN 038-121-00 I County San Luis Obispo Date 3-6-08 Use Multi-Residential

Size 16,560 Sq. n. Units 18 Street 875 Santa Ysabel Avenue City Los Osos Zip Code 93402

RECORDING DATA

APN : 038-121-001 Date of Deed : 3-6-08

I nsl. #: 08-022844 Date Recorded: 5-2-08

Doc. Tax: $2,200.00

Grantor: Deborah L. Friend, a Single Woman and Michele R. Miller, a Married Woman Grantee: Ellen T. Knill , a Married Woman as Her Sole and Separate Property Legal: Lots I- II and 48, Block 37 of Wood 's revised map ofEI Moro, County of San Lui s Obispo,

State of California

SALES DATA

Sales Price: Temls: Cash Eguiv. Price:

Price/Sq.Ft.: PricelUnit: GIM :

$2,350,000 Cash to a $ 1.6 million loan fTom Tamalpais Bank $2,000,000 + Sewer Assessment, $310,000 + Sewer Hookup Fee, $40,000 or $2,350,000 $ 141.9 1 $ 130,556 11.07

4 1


File # 111 9 1

Ref. No. Use Size

08-36 Multi-Residentia l 16,560 Sq. fi .

APN 038-1 2 1-00 1 County San Luis Obispo Date 3-6-08 Units 18

Street 875 Santa Ysabel Avenue C ity Los Osos Zip Code 93402

RECORDING DATA

APN: 038-12 1-001 Date of Deed: 3-6-08

I nst. #: 08-022844 Date Recorded: 5-2-08

Doc. Tax: $2,200.00

Granlor: Deborah L. Friend, a Single Woman and Michele R. Miller, a Married Woman Grantee: Ellen T. Knill , a Married Woman as Her Sole and Separate Property Legal: Lots I - II and 48, Block 37 of Wood's revised map o r EI Moro, County of San Luis Obispo,

State of Cali fomi a

SALES DATA

Sales Price: Temls: Cash Eguiy. Price:

Price/Sg.Ft. : PricelUnit : GIM :

$2,350,000 Cash to a $ 1.6 million loan from Tamalpai s Bank $2.000,000 + Sewer Assessment, $310,000 + Sewer Hookup Fee, $40,000 or $2.350,000 $ 141.9 1 $ 130,556 11 .07

4 1

File #11191

SITE DATA

Size: 37,505 Sq. ft. Shape: Rectangular Access: Asphalt paved Santa Ysabel A venue and 7th Street Curb. Gutters and Sidewalk: None Topography: Level Comments: Full utility availability

BUILDING DATA

Zoning: Residential Multi-Fam.

Year Built: 1985 Est. Eff. Age: 20 Years Size: 16,560 Sq. ft. Condition: Average * % Fin.: 1000/0 Parking Capacity: I Space *Def. Main. Est. @ $3,000IUnit Per Unit or 18 Spaces Construction Type: Average quality Class "D" building, gable roof with composition shingle cover Description: I8-Unit apartment complex with onsite laundry, radiant electric heating

INCOME INFORMATION

Mo. Rentallncome: Gr. Annual Income: Vacancy Rate: Efr. Gross Income: Expense Ratio: Expenses: Net Oper. Income: Eff. G.I.M.: Indic. Overall Rate:

$18,623 $223,476 50/0 $212,302 34.24% $72,692 $139,610 I 1.07 5.940/0

GENERAL REMARKS: This is a well maintained 12-unit conlplex in S. Grover Beach. At the time of sale, rents were slightly below market with annualized gross now at $140:050. Consequently, no allowance for vacancy is considered.

SOURCE: PHONE NO. DATE VERIFIED:

Thomas Swem, Real Property Investment (805) 544-4422 8-26-08

42


File #11191

SITE DATA

Size: 37,505 Sq. ft. Shape: Rectangular Access: Asphalt paved Santa Ysabel A venue and 7th Street Curb. Gutters and Sidewalk: None Topography: Level Comments: Full utility availability

BUILDING DATA

Zoning: Residential Multi-Fam.

Year Built: 1985 Est. Eff. Age: 20 Years Size: 16,560 Sq. ft. Condition: Average * % Fin.: 1000/0 Parking Capacity: I Space *Def. Main. Est. @ $3,000IUnit Per Unit or 18 Spaces Construction Type: Average quality Class "D" building, gable roof with composition shingle cover Description: I8-Unit apartment complex with onsite laundry, radiant electric heating

INCOME INFORMATION

Mo. Rentallncome: Gr. Annual Income: Vacancy Rate: Efr. Gross Income: Expense Ratio: Expenses: Net Oper. Income: Eff. G.I.M.: Indic. Overall Rate:

$18,623 $223,476 50/0 $212,302 34.24% $72,692 $139,610 I 1.07 5.940/0

GENERAL REMARKS: This is a well maintained 12-unit conlplex in S. Grover Beach. At the time of sale, rents were slightly below market with annualized gross now at $140:050. Consequently, no allowance for vacancy is considered.


Thomas Swem, Real Property Investment (805) 544-4422 8-26-08

42

SALES COMPARISON MAP - GROVER BEACH


SALES COMPARISON MAP - GROVER BEACH

(C!\BF

File # 11191

Ref. No. Use Size Street

08-37 Multi-Residential 9,072 Sq. ft. 34 1 N. J'd StTeet

RECORDING DATA

APN: 060-135-018 Date of Deed: 7-22-08

APN 060-135-018

Q!y Grover Beach

Inst. t1: 08-049205 Date Recorded : 10-2-08

County San Luis Obispo Date 7-22-08 Units 13 Zip Code 93433

Doc. Tax: $ 1,644.60

Grantor: Mark E. Daniel s, a Single Man Grantee: Peter G. And Christine D. Burtness, Trustees Legal: Lots 9, I 0, 17 & 18, Block 36, Beckett 's Resubdivi sion , C ity of Grover Beach, County of San

Luis Obispo, State of Cal ifornia

SALES DATA

Sales Price: Terms:

Cash Equiv. Price: Price/Sq .Ft.: PricelUnit: GIM:

$1 ,495 ,000 Cash to new conventional loan. Prope rty priced for immediate sale $ 100,000 below market $1 ,595,000 $175.82 $ 122,692 10.16

43


File # 11191


08-37 Multi-Residential 9,072 Sq. ft. 34 1 N. 3,d Street

RECORDING DATA

APN: 060-135-018 Date of Deed: 7-22-08

APN 060-135-018

Qty Grover Beach

Inst. fI: 08-049205 Date Recorded : I 0-2 -08

County San Luis Obispo Date 7-22-08 Uni ts 13 Zip Code 93433

Doc. Tax: $1 ,644.60

Grantor: Mark E. Danie ls, a Single Man Grantee: Peter G. And Christine D. Burtness, Trustees Legal: Lots 9, I 0, 17 & 18, Block 36, Beckett's Resubdivision , City of Grover Beach, County of San

Luis Obispo, State of California

SALES DATA

Sales Price: Tenns:

Cash Eguiv. Price: Price/S9·Ft.: PricelUnit: GIM:

$1 ,495 ,000 Cash to new conventiona l loan . Property priced for immediate sa le $ 100,000 below market $1 ,595,000 $175.82 $ 122,692 10.1 6

43

File#11191

SITE DATA

Size: 30,000 Sq. ft. Shape: Rectangular Zoning: CR2: Coastal MultiFamily Residential Access: Asphalt paved

Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1959 and 1965 Condition: Average

EfT. Age: 30 Years % Fin.: 100%

Size: 9,072 Sq. ft. Parking Capacity: 19 Spaces (6 Covered, 13 Uncovered)

Construction Type: Average quality Class '~D," I-story units Description: Inline one-story units including two I-bedrooms at 520, two 2-bedrooms at 662, two

2-bedrooms at 746, one 2-bedroom at 656, two 2-bedrooms at 720 and four 2-bedrooms at 780 sq. ft. for a total of 13 units. Windows upgraded to dual pane with moveable range/ovens, refrigerators. Heating is by a wall furnace. Units are individually metered for gas and electricity.

INCOME INFORMATION

Mo. Rental Income: Gr. Annual Income: Vacancy Rate: Eff. Gross Income: Expense Ratio: Expenses: Net Oper. Income: Eff. G.I.M.: Indic. Overall Rate:

$13,775 $165,300 50ft) $157,035 40.00% $62,814 $94,221 10.16 5.910/0

GENERAL REMARKS: This property was listed 6-30-08 for $1 ,595,000. Price was then reduced to $1,495,000. Price was planned to be raised back up to $1,595,000, but there was an immediate offer "as is." Buyer is responsible for Section 1 tennite work at $38,000. Seller had acquired this complex by deed recorded 6-9-05 for $1 ,925,000 and subsequent price was definitely below market. Listing denotes, "Exceptional value. Positive cash flow now plus future development potential makes this a superior buy. Thirteen units producing excellent income on 30,000 sf (+1-) parcel (4 - 50'x150'lots). Zoned CR-2 (Coastal Med. Density) allows for 9 units per acre, but with a CUP it is possible to build 8 SFR detached PUD's.~' Net income in 2007 was reported at $97,320 but as projected above, is slightly lower due to increased property taxes.


Mark Burnes, Burnes Commercial Group (805) 556-0900 8-25-08

44


File#11191

SITE DATA

Size: 30,000 Sq. ft. Shape: Rectangular Zoning: CR2: Coastal MultiFamily Residential Access: Asphalt paved

Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1959 and 1965 Condition: Average

EfT. Age: 30 Years % Fin.: 100%

Size: 9,072 Sq. ft. Parking Capacity: 19 Spaces (6 Covered, 13 Uncovered)

Construction Type: Average quality Class '~D," I-story units Description: Inline one-story units including two I-bedrooms at 520, two 2-bedrooms at 662, two

2-bedrooms at 746, one 2-bedroom at 656, two 2-bedrooms at 720 and four 2-bedrooms at 780 sq. ft. for a total of 13 units. Windows upgraded to dual pane with moveable range/ovens, refrigerators. Heating is by a wall furnace. Units are individually metered for gas and electricity.

INCOME INFORMATION

Mo. Rental Income: Gr. Annual Income: Vacancy Rate: Eff. Gross Income: Expense Ratio: Expenses: Net Oper. Income: Eff. G.I.M.: Indic. Overall Rate:

$13,775 $165,300 50ft) $157,035 40.00% $62,814 $94,221 10.16 5.910/0

GENERAL REMARKS: This property was listed 6-30-08 for $1 ,595,000. Price was then reduced to $1,495,000. Price was planned to be raised back up to $1,595,000, but there was an immediate offer "as is." Buyer is responsible for Section 1 tennite work at $38,000. Seller had acquired this complex by deed recorded 6-9-05 for $1 ,925,000 and subsequent price was definitely below market. Listing denotes, "Exceptional value. Positive cash flow now plus future development potential makes this a superior buy. Thirteen units producing excellent income on 30,000 sf (+1-) parcel (4 - 50'x150'lots). Zoned CR-2 (Coastal Med. Density) allows for 9 units per acre, but with a CUP it is possible to build 8 SFR detached PUD's.~' Net income in 2007 was reported at $97,320 but as projected above, is slightly lower due to increased property taxes.


Mark Burnes, Burnes Commercial Group (805) 556-0900 8-25-08

44

SALES COMPARlSON MAP - SAN LUIS OBISPO

24 19

-'_.

( : 25

I

6

2

! II to

11 11 '--,

-, , ,--


SALES COMPARISON MAP - SAN LUIS OBISPO

11 11

-,

19

TJOS -- f3i3

6

File #11191


08-38 APN 053-071-017 County San Luis Obispo Date I 0-7 -08 Multi-Residential

29,688 Sq. ft. Units 49 3360 Bullock Street Ci tv San Luis Obispo l ip Code 9340 I

RECORDING DATA

APN: 053-07 1-017 Date of Deed: 10-7-08

Ins!. #: 08-051402 Doc. Tax : $6, 160.00 Date Recorded: 10-16-08

Grantor: Paul Connelly, an Unmarried Man as to an undivided 50% interest and Stacey Connelly, an Unmarried Woman as to an undivided 50% interest

Grantee: Deyl Patrick Kearin, a Married Man as hi s so le and separate property, et al Legal: Ptn. of Lot 119, San Lui s Obispo Suburban Tract, City of San Luis Obispo, County of San

Luis Obispo, State of Cali fornia

SALES DATA

Sales Price: Terms: Cash Eguiv. Price: Price/Sg.F!. : Price/Unit : EGIM:

$5,600,000 Cash to new conventional loan. $5,600,000 $ 188.63 $1 14,286 9.96

45


File #111 91


08-38 APN 053-071-017 County San Luis Obispo Date 1 0-7 -08 Multi-Residential

29,688 Sq. ft . Units 49 3360 Bullock Street Citv San Luis Obispo Zip Code 93401

RECORDING DATA

APN : 053-071-017 Date of Deed : 10-7-08

Inst. #: 08-05 1402 Doc. Tax: $6, 160.00 Date Recorded : 10-16-08

Grantor: Paul Connelly, an Unmarried Man as to an undi vided 50% interest and Stacey Connelly. an Unmarried Woman as to an undivided 50% interest

Grantee: Deyl Patrick Kearin, a Married Man as hi s so le and separate property, et al Legal: Ptn. of Lot I 19, San Luis Obispo Suburban Tract, City of San Luis Obispo, County of San

Luis Obispo, State ofCaJifornia

SALES DATA

Sales Price: Terms: Cash Eguiv. Price: Price/Sg.Ft.: PricelUnit: EGIM:

$5,600,000 Cash to new conventional loan. $5,600,000 $ 188.63 $ 11 4,286 9.96

45

File #11191

SITE DATA

Size: 60,548 Sq. ft. Shape: Trapezoidal Access: Asphalt paved, curb, gutter, sidewalk Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1976 Condition: Average-Good

Efr. Age: 25 Years % Fin.: 100%

Zoning: Multi-Family Residential (R-3)

Size: 29,688 Sq. ft. Parking Capacity: 2 Spaces for 2-Bedroom, 1 Space for I-Bedroom or 66 Spaces

Construction Type: Average-good quality two-story complex including one level unit with exterior stairways

Description: 32-0ne-bedroom, 17-Two-bedroom units with electric heating and no air condi tioning

INCOME INFORMATION

Mo. Rental Income: Gr. Annual Income: Vacancy Rate: Eff. Gross Income: Expense Ratio: Expenses: Net Oper. Income: Efr. G.I.M.: Indic. Overall Rate:

$49,300 $591,600 5% $562,020 38.00% $213~568 $348,452 9.96 6.22%

GENERAL REMARKS: This complex was listed 3-2-07, initially at $6.5 million then reduced to $5,999,500. Listing denotes, "Located off Orcutt Road in an area of new development and growth. This well maintained 49 unit complex caters to working adults and has less turnover than student complexes. Owner has completed numerous upgrades including a new 40 year roof, new fence, paint, appliances, floor and window coverings etc. Excellent investment opportunity in growing area. -Best price per square foot and per bedroom in SLOe Potential to add garages and increase income. Check with City for conversion to low income condos. Rent raises are in process which reduces GRM." According to Kirby Gordon, selling broker, current rent for 2-bedroom units is $1,300, but some are rented as low as $1,075 per month. Thirty-two one-bedroom units are close to market at $795-850 per month. Market rent for the two-bedroom units is projected at $1 ,300 and for the one-bedroom units at $850 resulting in monthly income of$49,300 as shown above. With a 5% allowance for vacancy and 380/0 for expenses, net income is well supported at $348,452 per year. Net income shown on the listing was $373,340 but, likely, this does not consider the increased property taxes upon sale or transfer.

SOURCE: PHONE NO. DA TE VERIFIED:

Kirby Gordon, Gordon & Gordon (805) 773-2610 8-25-08

46


File #11191

SITE DATA

Size: 60,548 Sq. ft. Shape: Trapezoidal Access: Asphalt paved, curb, gutter, sidewalk Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1976 Condition: Average-Good

Efr. Age: 25 Years % Fin.: 100%

Zoning: Multi-Family Residential (R-3)

Size: 29,688 Sq. ft. Parking Capacity: 2 Spaces for 2-Bedroom, 1 Space for I-Bedroom or 66 Spaces

Construction Type: Average-good quality two-story complex including one level unit with exterior stairways

Description: 32-0ne-bedroom, 17-Two-bedroom units with electric heating and no air condi tioning

INCOME INFORMATION

Mo. Rental Income: Gr. Annual Income: Vacancy Rate: Eff. Gross Income: Expense Ratio: Expenses: Net Oper. Income: Efr. G.I.M.: Indic. Overall Rate:

$49,300 $591,600 5% $562,020 38.00% $213~568 $348,452 9.96 6.22%

GENERAL REMARKS: This complex was listed 3-2-07, initially at $6.5 million then reduced to $5,999,500. Listing denotes, "Located off Orcutt Road in an area of new development and growth. This well maintained 49 unit complex caters to working adults and has less turnover than student complexes. Owner has completed numerous upgrades including a new 40 year roof, new fence, paint, appliances, floor and window coverings etc. Excellent investment opportunity in growing area. -Best price per square foot and per bedroom in SLOe Potential to add garages and increase income. Check with City for conversion to low income condos. Rent raises are in process which reduces GRM." According to Kirby Gordon, selling broker, current rent for 2-bedroom units is $1,300, but some are rented as low as $1,075 per month. Thirty-two one-bedroom units are close to market at $795-850 per month. Market rent for the two-bedroom units is projected at $1 ,300 and for the one-bedroom units at $850 resulting in monthly income of$49,300 as shown above. With a 5% allowance for vacancy and 380/0 for expenses, net income is well supported at $348,452 per year. Net income shown on the listing was $373,340 but, likely, this does not consider the increased property taxes upon sale or transfer.

SOURCE: PHONE NO. DA TE VERIFIED:

Kirby Gordon, Gordon & Gordon (805) 773-2610 8-25-08

46

File # 11191


09-23 Multi-Residential 15,510 Sq. ft. I I 10 Orcutt Road

RECORDING DATA

APN: 004-961-055 Date of Deed: 8-22-09

APN 004-961-055

City San Luis Obispo

ins!. #: 09-069908 Date Recorded: 12-22-09

County San Luis Obispo Date 8-22-09 Units 2 1 Zip Code 93401

Doc. Tax: $2,644.40

Grantor: S.M.S. Co., a Partnership, et al Grantee: Peter and Christine Burtness, Tr. Legal: Ptn. Lot 3 in Section I , T31 S, R 12E, M.D.B.M. , County of San Luis Obispo, State of

California

SALES DATA

Sales Price: Ternls: Cash Eq ui v. Price: Price/Sg.Ft.: Price/Unit: GIM:

$2,404,000 Cash to new conventional financing $2,404,000 $ 155.00 $ 114,476 8.45

47


File # 11191


09-23 Multi -Residential 15,510 Sq. ft . I I 10 Orcutt Road

RECORDING DATA

APN: 004-961-055 Date of Deed: 8-22-09

APN 004-961-055

City San Lui s Obispo

ins!. #: 09-069908 Date Recorded: 12-22-09

County San Lui s Obispo Date 8-22-09 Units 2 1 Zip Code 9340 I

Doc. Tax: $2,644.40

Grantor: S.M.S. Co., a Partnership, et al Grantee: Peter and Christine Burtness. Tr. Legal: PIn. Lot 3 in Section I , '1'31 S, R 12E, M.D.B.M. , County of San Luis Obispo. Slate or

California

SALES DATA

Sales Price: Tern1s: Cash Eq ui v. Price: Price/S9·Ft.: Price/Unit: arM:

$2,404,000 Cash to new conventional financing $2,404,000 $ 155.00 $114,476 8.45

47

File#11191

SITE DATA

Size: 56,000 Sq. tt. Shape: Irregular Access: Asphalt paved, curb, gutter, sidewalk Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1970

Zoning: Multi-Family (R-3)

Size: 15,510 Sq. ft. Parking: Adequate-21 Carport,

39 Tota] Spaces Construction Type: Average quality Class "0" one and two-story complex on concrete slab

foundation with wood-frame stucco exterior

Efr Age: 25 Years % Fin.: 100% Condition: Average

Description: 21-Unit complex in four separate buildings with a laundry room-play area and 39-space parking lot. Three 4-bedroom, 1 bath; three 3-bedroom, 1 bath; one I-Bedroom, 1 bath and nine studio units.

INCOME INFORMATION

Effective Gross Income: Expense Ratio: Expenses: Net Operating Income: Eff. O.I.M.: lodic. Overall Rate:

$284,580 36.2% $103,018 $181,562 8.45 7.550/0

GENERAL REMARKS: This complex is in southeast San Luis Obispo in an area planned for growth with the Laurel Creek project under construction to 166 houses and townhomes to the west on Orcutt Road. It was listed 5-4-09 for $2,750,000 and placed in escrow for approximately two months. The seller then completed work, and it closed approximately five months later. Reportedly, in the past, it denoted a relatively high expense ratio at 55%, but the listing broker projects reasonable expenses at approximately 36.2% which is in line with similar complexes in San Luis Obispo.


Steve R. Battaglia, Lee & Asociates (805) 680-6431 or 782-9000 8-4-09

48


File#11191

SITE DATA

Size: 56,000 Sq. tt. Shape: Irregular Access: Asphalt paved, curb, gutter, sidewalk Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1970

Zoning: Multi-Family (R-3)

Size: 15,510 Sq. ft. Parking: Adequate-21 Carport,

39 Tota] Spaces Construction Type: Average quality Class "0" one and two-story complex on concrete slab

foundation with wood-frame stucco exterior

Efr Age: 25 Years % Fin.: 100% Condition: Average

Description: 21-Unit complex in four separate buildings with a laundry room-play area and 39-space parking lot. Three 4-bedroom, 1 bath; three 3-bedroom, 1 bath; one I-Bedroom, 1 bath and nine studio units.

INCOME INFORMATION

Effective Gross Income: Expense Ratio: Expenses: Net Operating Income: Eff. O.I.M.: lodic. Overall Rate:

$284,580 36.2% $103,018 $181,562 8.45 7.550/0

GENERAL REMARKS: This complex is in southeast San Luis Obispo in an area planned for growth with the Laurel Creek project under construction to 166 houses and townhomes to the west on Orcutt Road. It was listed 5-4-09 for $2,750,000 and placed in escrow for approximately two months. The seller then completed work, and it closed approximately five months later. Reportedly, in the past, it denoted a relatively high expense ratio at 55%, but the listing broker projects reasonable expenses at approximately 36.2% which is in line with similar complexes in San Luis Obispo.


Steve R. Battaglia, Lee & Asociates (805) 680-6431 or 782-9000 8-4-09

48

Fi le #11191

Ref. No_ Use Size Street

10-25 Multi-Residential 12,800 Sq. ft .

865 Morro Street

RECORDING DATA

APN: 002-323-02 1 Date of Deed : 5-10-10

APN 002-415-020


Inst. #: 10-023559 Date Recorded: 5-21-10

County San Luis Obispo Date 5-1 0-10 Units 16 Zip Code 9340 I

Doc. Tax: $3 ,047.00

Grantor: David A. Bjerre and Debra L. Garcia, Husband and Wife as Community Property Grantee: NSHE Lomita, LLC, an Arizona Limited Liability Company Legal: Ptn. of Lots 2 and 3, Block 15, City orSan Luis Obispo, County of San Luis Obispo, State

of California

SALES DATA

Sales Price: Terms: Cash Eguiv. Price: Price/Sg .Ft.: Price/Unit: GlM:

$2,770,000 Cash to conventional loan $2,770,000 $2 16.4 1 $ 173 ,125 13.55

49


Fi le # 11191


10-25 Multi-Residential 12,800 Sq. Fe

865 Morro Street

RECORDING DATA

APN: 002-323 -02 1 Date of Deed : 5-10-10

API'! 002-415-020


Inse #: 10-023559 Dat e: Recorded: 5-21-10

County San Luis Obispo Date 5-1 0-10 Units 16 Zip Code 9340 I

Doc. Tax: $3,047.00

Grantor: David A. Bjerre and Debra L. Garc ia, Husband and Wife as Community Property Grantee: NS HE Lomita, LLC, an Arizona Limited Liabi lity Company Legal: Ptn. of Lots 2 and 3, Block 15, Ciry of San Luis Obispo, County of San Luis Obispo, Slate

of California

SALES DATA

Sales Price: Terms: Cash Equiv . Price: Price/Sq.Fe: Price/Unit: GIM:

$2,770,000 Cash to conventional loan $2.770,000 $2 16.4 1 $ 173 ,125 13.55

49

File #1119]

SITE DATA

Size: 18,560 Sq. ft. Shape: Rectangular Zoning: R-4: High Density MF Access: Asphalt paved, concrete curb, gutter and sidewalk, Mill and Morro Streets Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1941 EtT. Age: 30 Years Size: 12,800 Sq. ft. Condition: Average-good % Fin.: 100% Parking: 15 Spaces, II CP's, Construction Type: Two-story Class "D" wood frame sided, b/u compo roof. 2-2-Car Garages Description: Sixteen-Wlit apartment complex including seven studios, eight one-bedroom and one

three-bedroom apartment. Heating is electric with no air conditioning.

INCOME INFORMATION

Monthly Income: Annual Income: Vacancy-Collection Loss: Effective Gross Income: Expense Ratio: Expenses: Net Operating Income: EGIM: Overall Rate:

$17,740 $212,880 40/0 $204,365 35% $71,528 $132,837 13.55 4.800/0

GENERAL REMARKS: This property was listed 3-30-09 for $3,495,000. It was then reduced to $2,770,000 and sold shortly thereafter. Listing denotes, "Highly desirable 16 unit apartment complex located in the heart of downtown SLO! The Berkemeyer, a classic downtown apartment building, first time offered for sale. The apts. in this extremely popular complex are always in high demand. Located in beautiful downtown SLO w/outstanding views of the mtns. Shopping & restaurants are w/in walking distance." This was a short sale that required lender approval. The complex is conveniently located within the central downtown area of San Luis Obispo.


David Bjerre, Bjerre & Garcia Realty (805) 544-6060 5-21-10

50


File #1119]

SITE DATA

Size: 18,560 Sq. ft. Shape: Rectangular Zoning: R-4: High Density MF Access: Asphalt paved, concrete curb, gutter and sidewalk, Mill and Morro Streets Topography: Level to gently sloping Comments: Full utility availability

BUILDING DATA

Year Built: 1941 EtT. Age: 30 Years Size: 12,800 Sq. ft. Condition: Average-good % Fin.: 100% Parking: 15 Spaces, II CP's, Construction Type: Two-story Class "D" wood frame sided, b/u compo roof. 2-2-Car Garages Description: Sixteen-Wlit apartment complex including seven studios, eight one-bedroom and one

three-bedroom apartment. Heating is electric with no air conditioning.

INCOME INFORMATION

Monthly Income: Annual Income: Vacancy-Collection Loss: Effective Gross Income: Expense Ratio: Expenses: Net Operating Income: EGIM: Overall Rate:

$17,740 $212,880 40/0 $204,365 35% $71,528 $132,837 13.55 4.800/0

GENERAL REMARKS: This property was listed 3-30-09 for $3,495,000. It was then reduced to $2,770,000 and sold shortly thereafter. Listing denotes, "Highly desirable 16 unit apartment complex located in the heart of downtown SLO! The Berkemeyer, a classic downtown apartment building, first time offered for sale. The apts. in this extremely popular complex are always in high demand. Located in beautiful downtown SLO w/outstanding views of the mtns. Shopping & restaurants are w/in walking distance." This was a short sale that required lender approval. The complex is conveniently located within the central downtown area of San Luis Obispo.


David Bjerre, Bjerre & Garcia Realty (805) 544-6060 5-21-10

50

File # 11191


10-119 APN 060-284-021 Multi-Residential 7,020 Sq . ft. 941 Manhattan Ave. City Grover Beach

RECORDI NG DATA

APN: 060-284-021 Date of Deed: 12-1-10 Grantor: Maria M. Blute, Trustee

Inst. #: 10-065108 Date Recorded: 12-2 1- 10

Countv San Luis Obispo Date 12-1-10 Units 9 Zip Code 93433

Doc. Tax : $1 ,100.00

Grantee: Beckman Enterprises, LLC, a Cali forn ia Limitcd Liability Company Legal: Lots 7- 10, Block 122, Town of Grover, City of Grover City, County of San Luis Obispo,

State of California

SALES DATA

Sales Price : Tenns: Cash Equiv. Price: Price/S9· Ft.: Price/Unit: GIM:

$ 1,000,000 Cash $ 1,000,000 $ 142.45 $1 11 , II I

9.47

5 1


File # 111 9 1


10-119 APN 060-284-02 1 Mul ti-Residential 7,020 Sq. fi. 94 1 Manhattan Ave. Cit)' Grover Beach

RECORDI NG DATA

APN: 060-284-021 Date of Deed: 12- 1-1 0 Grantor: Maria M. Blute, Trustee

Inst. II: 10-065 108 Date Recorded: 12-2 1- 10

County San Luis Obispo Date 12-1-1 0 Units 9 Zip Code 93433

Doc. Tax: $1 , I 00.00

Grantee: Beckman Enterprises, LLC, a Californ ia Limited Liabi li ty Company Legal: Lots 7-1 0, Block 122. Town of Grover, City of Grover City, County of San Luis Obispo,

State of California

SALES DATA

Sales Price : Terms: Cash Eq ui v. Price: Price/S9·Ft.: Price/Unit: GIM:

$ 1.000,000 Cash $ 1.000,000 $ 142.45 $ 111 , 111 9.47

5 1

File #11191

SITE DATA

Size: 13,750 Sq. ft. Shape: Rectangular Access: Asphalt paved, curb, gutter, sidewalk Topography: Level Comments: Full utility availability

BUILDING DATA

Zoning: R-2: Multi-Family Res.

Year Built: Est. 1975 EfT. Age: 25 Years Size: 7,020 Sq. ft. Condition: Good % Fin.: 100% Parking:Onsite Parking Construction Type: Average quality Class "D" one-story building, gable roof with composition

shingle cover Description: Nine 2-bedroom one bath units with onsite parking spaces but no garages.

INCOME INFORMATION

Monthly Rental Income: Effective Gross Income: Vacancy-Collection Loss: Effective Gross Income: Expense Ratio: Expenses: Net Operating Income: Eft: O.I.M.: Indic. Overall Rate:

$8,983.33 $107,800 2% $105,644 37% $39,088 $66,556 9.47 6.66%

GENERAL REMARKS: This complex was listed 10-4-10 for $1,170,000. Listing denotes, ~49 Units Grover Beach. This is a perfect example of pride of ownership. What every apartment owner would be happy to have in their portfolio. Well maintained. Well managed apartments within a strong rental area. Long teml residents. Excellent stability. All 2 Br. I bath units $975-1,000 each. Larger comer lot, single level, pitched roof. Individual hot water heaters. Units individually metered for gas and electric." This complex was placed in escrow almost immediately as a 1031 Exchange. Listing further indicates that roofs were replaced 12 years ago, and this complex has a low turnover rate.


Pamela Bliss, Farrell Smyth Real Estate (805) 543-2172 or 904-9423 12-21-10

52


File #11191

SITE DATA

Size: 13,750 Sq. ft. Shape: Rectangular Access: Asphalt paved, curb, gutter, sidewalk Topography: Level Comments: Full utility availability

BUILDING DATA

Zoning: R-2: Multi-Family Res.

Year Built: Est. 1975 EfT. Age: 25 Years Size: 7,020 Sq. ft. Condition: Good % Fin.: 100% Parking:Onsite Parking Construction Type: Average quality Class "D" one-story building, gable roof with composition

shingle cover Description: Nine 2-bedroom one bath units with onsite parking spaces but no garages.

INCOME INFORMATION

Monthly Rental Income: Effective Gross Income: Vacancy-Collection Loss: Effective Gross Income: Expense Ratio: Expenses: Net Operating Income: Eft: O.I.M.: Indic. Overall Rate:

$8,983.33 $107,800 2% $105,644 37% $39,088 $66,556 9.47 6.66%

GENERAL REMARKS: This complex was listed 10-4-10 for $1,170,000. Listing denotes, ~49 Units Grover Beach. This is a perfect example of pride of ownership. What every apartment owner would be happy to have in their portfolio. Well maintained. Well managed apartments within a strong rental area. Long teml residents. Excellent stability. All 2 Br. I bath units $975-1,000 each. Larger comer lot, single level, pitched roof. Individual hot water heaters. Units individually metered for gas and electric." This complex was placed in escrow almost immediately as a 1031 Exchange. Listing further indicates that roofs were replaced 12 years ago, and this complex has a low turnover rate.


Pamela Bliss, Farrell Smyth Real Estate (805) 543-2172 or 904-9423 12-21-10

52

File # 1 I 191

Ref. No. MLS Listing Owner APN Street Listing Date Ask ing Price Anti cipated Ultimate Sales Price Price/Sq. ft. Price/Unit Effect ive Gross Income Multip lier

Listing 1

11-34 # 172864 Takken Investment Properties LLC 060- I 82-060 1685 Ramona Avenue, # 1- I 6, Grover Beach I -19- I I $ 1,995,000 $ I ,795,000 $136. 15 $ 11 2,2 I 9 10.55

GENERAL REMARKS: This property was listed I - I 9- 1 I at $ I ,995,000. Ultimate sales price is estimated at 10% less than ask ing price or $ 1,795,000. Li sting denotes, " I 6-Unit complex in good Grover Beach location, right off of Oak Park and a block up from Grand. All un its are 2-bedroom with 8 large 2 bed/J.5 bath 900 sq. ti. townhomes and 8 2-bed/J bath flats rangi ng from 720 sq. ft. to 776 sq. ft. The complex sits up and has some views, each unit has a garage, inside laundry hook-ups, patios." Monthl y rental income is $ I 4,4 70 resulting in annual gross rent of$ I 73,640. With 2% vacancy and 38% expenses, net income is estimated at $ I 03 ,393 in relationship to ultimate anticipated sales price. This results in an overall rate of5.76%.


Kevin King, King Propert ies (805) 54 I -5464 I - I 9- I I

53


File #11191

Ref. No. MLS Listing Owner APN Street Listing Date Asking Price Anti cipated Ultimate Sales Price Price/Sq. ft . Price/Unit Effective Gross Income Multiplier

Listing I

11-34 # 172864 TakJ(en Investment Propert ies LLC 060-182-060 1685 Ramona /\ vcnuc, # 1- 16. Grover Beach 1-1 9- 1 I $1,995,000 $1 ,795,000 $136.15 $112,219 10.55

GENERAL REMARKS: This property was li sted 1-1 9-11 at $ 1,995,000. Ultimate sales price is estimated at 10% less than asking price or $1,795,000. Listing denotes, " 16-Unit complex in good Grover Beach location, right offofOak Park and a block up from Grand. All units are 2-bedroom with 8 large 2 bed/ 1.5 bath 900 sq. ft . townhomes and 8 2-bedll bath flats ranging from 720 sq. ft. to 776 sq. ft. The complex si ts up and has some views, each unit has a garage, inside laundry hook-ups, patios." Monthly rental income is $14,470 resulting in annual gross rent of$ I 73,640. With 2% vacancy and 38% expenses. net income is estimated at $103.393 in re lationship to ultimate anticipated sales price. This resu lts in an overall rate of5.76%.

SOURCE: PHONE NO. DATE VERJFIED:

Kevin King, King Properti es (805) 54 1-5464 1-1 9-11

53

I Sale

1

2

3

4

5

6

L-1

File # 11191

SUMMARY OF SALES COMPARISONS

Address Deed/List Cash Equiv. Building Average Price/Sf No. of Price/Unit Date Sales Price Size Unit Size Including Site Units

875 Santa Ysabel Avenue, Los Osos 3-6-08 $2,350,000 16,560 920 $141.91 18 $130,556

341 N. 13111 Street, Grover Beach 7-22-08 $1,595,000 9,072 698 $175.82 13 $122,692

3360 Bullock St.. San Luis Obispo 10-7-08 $5,600,000 29,688 606 $188.63 49 $114,286

1110 Orcutt Road, San Luis Obispo 8-22-09 $2.404,000 15.510 739 $155.00 21 $114,476

865 Morro Street, San Luis Obispo 5-10-10 $2,770,000 12.800 800 $216.41 16 $173.125

941 Manhattan Avenue, Grover Beach 12-1-10 $1,000,000 7,020 780 $142.45 9 $111.111

1685 Ramona Avenue, Grover Beach 1-19-11 $1,995,000 13,184 824 $136.15 16 $112,219

Prices range from $136.19-216.41 Isq. ft. with a weighted average at $170.60/sq. ft. Sale 6 sets the upper limit for an older complex in the central downtown area of San Luis Obispo. A definite downward adjustment would be required for location. Remaining comparisons show a more consistent range in unadjusted prices from $$136.19-188.63/sq. ft. Average unit size for the subject is 890 sq. ft. substantially larger than that for Sa~es 2-4 and 6 at 606-780 sq. ft. Typically~ as average unit size increases, price per square foot decreases. This is further indicated by Sale 1 and Listing I which are closest to the subject as to average unit size at prices ranging from $136.19-141.91/sq. ft. Consequently, the subject has been valued at $140.00/sq. ft. resulting in the following value indication:

26,696 Sq. ft. @ $140.00/Sq. ft. = $3,737,440

Prices per unit range from $112,219-173,125 with a weighted average at $ 123,342/unit. Again, Sale 5 sets the upper limit with remaining comparisons showing a range from $111, 111-130,556/unit with prices generally declining downward for time. Again, Sales 2-4, 6 and Listing 1 are most applicable in valuation of the subject complex at $120,000 per unit as follows:

30 Units @ $120,000/Unit = $3,600,000

Effective gross income multipliers range from 11.07-13.54 and average 10.44 times annual rental income. Exclusive of Sale 5 which sets the upper limit, a more consistent range from 8.45-11.07 is indicated. Again, Sales 2-4, 5 and Listing 1 are most applicable at a range from 8.45-10.55. Sales 2,6 and Listing 1 are in Grover Beach at 9.47-10.55 times annual income. These transactions are most applicable in detennining an effective gross income multiplier of 10 times effective rental income as follows:

$360,810 x 10 = $3,608, I 00

Prior to consideration of renovation cost~ value indications range from $3,600,000-3,737,440. Most buyers assign considerable weight to price per square foot and sales price per unit as the effective gross income multiplier is a less refined indication than that by the Income Approach. Consequently, the latter two indications have been assigned 40% and the effective gross income multiplier indication 20% weight in arriving at the following value indication by the Sales Comparison Approach in consideration of renovation cost:

54

I GIM

11.07

10.16

9.96

8.45

13.55

9.47

10.55


I Sale

1

2

3

4

5

6

L-1

File # 11191

SUMMARY OF SALES COMPARISONS

Address Deed/List Cash Equiv. Building Average Price/Sf No. of Price/Unit Date Sales Price Size Unit Size Including Site Units

875 Santa Ysabel Avenue, Los Osos 3-6-08 $2,350,000 16,560 920 $141.91 18 $130,556

341 N. 13111 Street, Grover Beach 7-22-08 $1,595,000 9,072 698 $175.82 13 $122,692

3360 Bullock St.. San Luis Obispo 10-7-08 $5,600,000 29,688 606 $188.63 49 $114,286

1110 Orcutt Road, San Luis Obispo 8-22-09 $2.404,000 15.510 739 $155.00 21 $114,476

865 Morro Street, San Luis Obispo 5-10-10 $2,770,000 12.800 800 $216.41 16 $173.125

941 Manhattan Avenue, Grover Beach 12-1-10 $1,000,000 7,020 780 $142.45 9 $111.111

1685 Ramona Avenue, Grover Beach 1-19-11 $1,995,000 13,184 824 $136.15 16 $112,219

Prices range from $136.19-216.41 Isq. ft. with a weighted average at $170.60/sq. ft. Sale 6 sets the upper limit for an older complex in the central downtown area of San Luis Obispo. A definite downward adjustment would be required for location. Remaining comparisons show a more consistent range in unadjusted prices from $$136.19-188.63/sq. ft. Average unit size for the subject is 890 sq. ft. substantially larger than that for Sa~es 2-4 and 6 at 606-780 sq. ft. Typically~ as average unit size increases, price per square foot decreases. This is further indicated by Sale 1 and Listing I which are closest to the subject as to average unit size at prices ranging from $136.19-141.91/sq. ft. Consequently, the subject has been valued at $140.00/sq. ft. resulting in the following value indication:

26,696 Sq. ft. @ $140.00/Sq. ft. = $3,737,440

Prices per unit range from $112,219-173,125 with a weighted average at $ 123,342/unit. Again, Sale 5 sets the upper limit with remaining comparisons showing a range from $111, 111-130,556/unit with prices generally declining downward for time. Again, Sales 2-4, 6 and Listing 1 are most applicable in valuation of the subject complex at $120,000 per unit as follows:

30 Units @ $120,000/Unit = $3,600,000

Effective gross income multipliers range from 11.07-13.54 and average 10.44 times annual rental income. Exclusive of Sale 5 which sets the upper limit, a more consistent range from 8.45-11.07 is indicated. Again, Sales 2-4, 5 and Listing 1 are most applicable at a range from 8.45-10.55. Sales 2,6 and Listing 1 are in Grover Beach at 9.47-10.55 times annual income. These transactions are most applicable in detennining an effective gross income multiplier of 10 times effective rental income as follows:

$360,810 x 10 = $3,608, I 00

Prior to consideration of renovation cost~ value indications range from $3,600,000-3,737,440. Most buyers assign considerable weight to price per square foot and sales price per unit as the effective gross income multiplier is a less refined indication than that by the Income Approach. Consequently, the latter two indications have been assigned 40% and the effective gross income multiplier indication 20% weight in arriving at the following value indication by the Sales Comparison Approach in consideration of renovation cost:

54

I GIM

11.07

10.16

9.96

8.45

13.55

9.47

10.55

File # 11191

Value by the Sales Comparison Approach: Less Deferred Maintenance: "As Is" Value by the Sales Comparison Approach

$3,657,000 ($ 317,000) $3,340,000

I( RECONCILIATION AND CONCLUSION

Value indications are summarized as follows:

INCOME APPROACH SALES COMPARISON APPROACH

$3,181,000 $3,340,000

II

"As Is" value indications range fron1 $3,181,000-3,340,000. Reliability of the Income Approach is influenced by the accuracy ofprojected market rent. In tlns instance, market rent is well supported by comparison, slightly higher than current level in consideration of renovation. Allowance for vacancy is reasonable, and expenses are well supported by past operating history and reasonable industry nonns. Further, the expense ratios are in the upper level of comparisons which appears reasonable in consideration of past maintenance cost. The overall rate of capitalization is well supported by direct sales comparisons as well as Listing 1. Therefore, the value indication by the Income Approach is very applicable.

Reliability of the Sales COlnparison Approach is influenced by the degree of comparability between the complex under analysis and those that have sold. In this instance, it was possible to obtain information on six sales, two of which are in Grover Beach as well as an additional listing. Units of comparison are within a reasonable range and therefore the value indication by the Sales Comparison Approach is also directly applicable.

In the final analysis, equal \veight has been assigned to each indication in arriving at a final "as is" value for the complex under analysis as of June 3, 2011 at $3,261,000.

Reasonable Exposure Time - According to the Dictionary of Real Estate Appraisal Fourth Edition, exposure time is defined as,

"The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market."

Sale 1 was listed 7-24-07 and closed 5-2-08. The extended marketing period often months was due to initial overpricing at $2,685,000. Sale 2 was listed 6-30-08 and closed 10-2-08 resulting in a total marketing time of just over three months. Sale 3 was listed 3-2-07 and closed 10-7-08, seven months later. The extended marketing time was due to initial overpricing at $6.5 million compared to ultimate price at $5.6 million. Sale 4 was listed 5-4-09 and closed 12-22-09 almost eight months later. It was subject to seller work requirements which delayed escrow. Sale 5 was listed 3-30-09 for $3,495,000. After price was reduced to $2,770,000 it sold shortly thereafter. However, overall marketing time was excessive at 15 months. Sale 6 was listed 10-4-10 and closed 1 ~ months later as a result of a 1031 Exchange.

55


File # 11191

Value by the Sales Comparison Approach: Less Deferred Maintenance: "As Is" Value by the Sales Comparison Approach

$3,657,000 ($ 317,000) $3,340,000

I( RECONCILIATION AND CONCLUSION

Value indications are summarized as follows:

INCOME APPROACH SALES COMPARISON APPROACH

$3,181,000 $3,340,000

II

"As Is" value indications range fron1 $3,181,000-3,340,000. Reliability of the Income Approach is influenced by the accuracy ofprojected market rent. In tlns instance, market rent is well supported by comparison, slightly higher than current level in consideration of renovation. Allowance for vacancy is reasonable, and expenses are well supported by past operating history and reasonable industry nonns. Further, the expense ratios are in the upper level of comparisons which appears reasonable in consideration of past maintenance cost. The overall rate of capitalization is well supported by direct sales comparisons as well as Listing 1. Therefore, the value indication by the Income Approach is very applicable.

Reliability of the Sales COlnparison Approach is influenced by the degree of comparability between the complex under analysis and those that have sold. In this instance, it was possible to obtain information on six sales, two of which are in Grover Beach as well as an additional listing. Units of comparison are within a reasonable range and therefore the value indication by the Sales Comparison Approach is also directly applicable.

In the final analysis, equal \veight has been assigned to each indication in arriving at a final "as is" value for the complex under analysis as of June 3, 2011 at $3,261,000.

Reasonable Exposure Time - According to the Dictionary of Real Estate Appraisal Fourth Edition, exposure time is defined as,

"The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market."

Sale 1 was listed 7-24-07 and closed 5-2-08. The extended marketing period often months was due to initial overpricing at $2,685,000. Sale 2 was listed 6-30-08 and closed 10-2-08 resulting in a total marketing time of just over three months. Sale 3 was listed 3-2-07 and closed 10-7-08, seven months later. The extended marketing time was due to initial overpricing at $6.5 million compared to ultimate price at $5.6 million. Sale 4 was listed 5-4-09 and closed 12-22-09 almost eight months later. It was subject to seller work requirements which delayed escrow. Sale 5 was listed 3-30-09 for $3,495,000. After price was reduced to $2,770,000 it sold shortly thereafter. However, overall marketing time was excessive at 15 months. Sale 6 was listed 10-4-10 and closed 1 ~ months later as a result of a 1031 Exchange.

55

File #11191

In summary, marketing times range widely from 1.5 to almost 15 months. Exclusive of Sales 5 and 6, marketing times range from 3-8 months for Sales 1-4. These transactions are most applicable in detennining reasonable exposure time for the subject complex at four to eight months from inception of listing to close of escrow at appraised value.

56


File #11191

In summary, marketing times range widely from 1.5 to almost 15 months. Exclusive of Sales 5 and 6, marketing times range from 3-8 months for Sales 1-4. These transactions are most applicable in detennining reasonable exposure time for the subject complex at four to eight months from inception of listing to close of escrow at appraised value.

56

File # 11191

II CERTIFICATION II I certify that, to the best of my knowledge and belief, '"

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

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions. and are my personal, impartial and unbiased professional analyses, opinions, and conclusions, and this report has been prepared in confonnity with the requirements of the Code of Professional Ethics & Standards of Proiessional Practice of the: Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

3. I have no present or prospective interest in the property that is the subject ofthis report, and I have no personal interest with respect to the parties involved.

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

5. My engagement/compensation is not contingent upon reporting o1'a predetennined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result or the occurrence of a subsequent event directly related to the intended use of this appraisal.

6. The reported analyses. opinions. and conclusions were developed, and this report has been prepared, in contonnity with the requirements of the Code of Protessional Ethics and the Standards of Professional Practice of the Appraisal Institute.

7. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representati yes.

8. As of the date of this report, I, Bruce A. Beaudoin, have completed requirements of the continuing education prognun of the Appraisal lnstitute. 1 am also a Certified General Appraiser. per the Office of Real Estate Appraisers, 1.0. #CA AG002047.

9. I have made a personal inspection of the property that is the subject of this report.

10. No one provided significant professional assistance to the person signing this report.

II. This appraisal report has been made in conJonnity with and is subject to the requirements of Title XI of the Federal Financial institutions Refonn, Recovery, and Enforcement Act of 1989 and regulations adopted by the Office of the Comptrollerofthe Currency and Unifonn Standards ofProtessional Appraisal Practice (with the exclusion ofthc Departure Provision of the Unifonn Standards ofProtessional Appraisal Practice).

12. This appraisal assignment was not based on a requested minimum valuation. a specitic valuation or the approval of a loan.

13. The appraisal assignment was not dependent upon reaching a certain value or tuture employment. The amount oflhe tce is not contingent upon reporting a predctcnnined value or upon the amount ofthe value estimate.

Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the finn with which he is connected, or any reference to the above appraisal organizations and designations) shall be disseminated to the public through advertising media, public relations media, news media, sales media or any other public means of communication, or to any other third parties, without the prior written consent and approval of the undersigned.

'~)~b&~. B ce A. BeaudOIn, MAl, SRA California License #AG002047

BAB:aa

57


File # 11191

II CERTIFICATION II I certify that, to the best of my knowledge and belief, '"

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

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions. and are my personal, impartial and unbiased professional analyses, opinions, and conclusions, and this report has been prepared in confonnity with the requirements of the Code of Professional Ethics & Standards of Proiessional Practice of the: Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

3. I have no present or prospective interest in the property that is the subject ofthis report, and I have no personal interest with respect to the parties involved.

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

5. My engagement/compensation is not contingent upon reporting o1'a predetennined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result or the occurrence of a subsequent event directly related to the intended use of this appraisal.

6. The reported analyses. opinions. and conclusions were developed, and this report has been prepared, in contonnity with the requirements of the Code of Protessional Ethics and the Standards of Professional Practice of the Appraisal Institute.

7. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representati yes.

8. As of the date of this report, I, Bruce A. Beaudoin, have completed requirements of the continuing education prognun of the Appraisal lnstitute. 1 am also a Certified General Appraiser. per the Office of Real Estate Appraisers, 1.0. #CA AG002047.

9. I have made a personal inspection of the property that is the subject of this report.

10. No one provided significant professional assistance to the person signing this report.

II. This appraisal report has been made in conJonnity with and is subject to the requirements of Title XI of the Federal Financial institutions Refonn, Recovery, and Enforcement Act of 1989 and regulations adopted by the Office of the Comptrollerofthe Currency and Unifonn Standards ofProtessional Appraisal Practice (with the exclusion ofthc Departure Provision of the Unifonn Standards ofProtessional Appraisal Practice).

12. This appraisal assignment was not based on a requested minimum valuation. a specitic valuation or the approval of a loan.

13. The appraisal assignment was not dependent upon reaching a certain value or tuture employment. The amount oflhe tce is not contingent upon reporting a predctcnnined value or upon the amount ofthe value estimate.

Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the finn with which he is connected, or any reference to the above appraisal organizations and designations) shall be disseminated to the public through advertising media, public relations media, news media, sales media or any other public means of communication, or to any other third parties, without the prior written consent and approval of the undersigned.

'~)~b&~. B ce A. BeaudOIn, MAl, SRA California License #AG002047

BAB:aa

57

Documents

COMPREHENSIVE APPRAISAL NARRA TlVE SUMMARY REPORT fileA common access drive is shared with the apartment complex to the west, Longbranch Apartments, which apparently is an identical