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Fire Station appraisal 12.2.24
Appraisal Report Fire Station Site, Glen Loma Ranch 1330 West Luchessa Avenue Gilroy, Santa Clara County, California 95020 Report Date: December 2, 2024 Approximate boundaries shown in red FOR: Glen Loma Corp. John Filice 7888 Wren Avenue, Suite D-143 Gilroy, California 95020 Valbridge Property Advisors | Northern California 3160 Crow Canyon Place, Suite 245 San Ramon, CA 94583 925.327.1660 phone Valbridge File Number: 408-279-3428 fax CA03-24-0549 valbridge.com © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA 3160 Crow Canyon Place, Suite 245 San Ramon, CA 94583 925.327.1660 phone 408-279-3428 fax valbridge.com December 2, 2024 Josh Fronen, MAI 408.279.1520 ext. 7102 jfronen@valbridge.com John Filice Glen Loma Corp. 7888 Wren Avenue Gilroy, California 95020 RE: Appraisal Report Fire Station Site, Glen Loma Ranch 1330 West Luchessa Avenue Gilroy, Santa Clara County, California 95020 Dear Mr. Filice: In accordance with your request, an appraisal of the above referenced property was performed. This appraisal report sets forth the pertinent data gathered, the techniques employed, and the reasoning leading to the value opinions. This letter of transmittal does not constitute an appraisal report and the rationale behind the value opinion(s) reported cannot be adequately understood without the accompanying appraisal report. The subject property, as referenced above, is generally located on the southeast side of West Luchessa Avenue and Miller Avenue and is further identified as tax parcel 808-58-004. The fire station site is part of a larger master planned community known as Glen Loma Ranch. On October 21, 2024, the subject owner signed a “Fourth Operating Memorandum to Development Agreement -Glen Loma Ranch,” effectively donating the fire station site to the City of Gilroy. Given the subject location and proposed and actual proximate residential uses, we opine the fire station site could have been developed residentially, but for the donation to the City of Gilroy. Given the intended use of this report and per our client’s request, we have appraised the fire station site as of October 21, 2024 for a residential underlying land use. The date of value is October 21, 2024, which was essentially the date of the gift of the fire station parcel and its development rights to the City of Gilroy. Other sites in Glen Loma Ranch are currently proposed for residential development. Our scope of work in this assignment is solely to value the fire station parcel and its gifted development rights to the City of Gilroy as of October 21, 2024. John Filice Glen Loma Corporation © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA The analyses, opinions, and conclusions were developed, and this report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute; and the requirements of our client. The client in this assignment is John Filice with Glen Loma Corporation and the intended user of this report is John Filice with Glen Loma Corporation and no others. The intended use is for a donation of the fire station site to the City of Gilroy. The value opinions reported herein are subject to the definitions, assumptions, limiting conditions, and certifications contained in this report. The findings and conclusions are further contingent upon the following extraordinary assumptions and/or hypothetical conditions, the use of which might have affected the assignment results: Extraordinary Assumptions: • It is an extraordinary assumption of this report that the land acreage is accurate. If the actual subject property acreage is different our concluded results may be impacted. Hypothetical Conditions: • None Based on the analysis contained in the following report, our value conclusions are summarized as follows: Respectfully submitted, Valbridge Property Advisors | Northern California Josh Fronen, MAI Managing Director California Certified License #AG028548 License Expires 12-18-2025 Value Conclusion Component As Is Value Type Fair Market Value Real Property Interest Fee Simple Effective Date of Value October 21, 2024 Value Conclusion $1,315,000 Value per SF of Land $22.04 psf FIRE STATION SITE, GLEN LOMA RANCH TABLE OF CONTENTS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 4 Table of Contents Cover Page Letter of Transmittal Table of Contents ...................................................................................................................................................................... 4 Summary of Salient Facts ....................................................................................................................................................... 5 Aerial and Front Views ............................................................................................................................................................. 6 Location Map .............................................................................................................................................................................. 7 Introduction ................................................................................................................................................................................. 8 Scope of Work ......................................................................................................................................................................... 11 Regional and Market Area Analysis ................................................................................................................................. 13 City and Neighborhood Analysis ..................................................................................................................................... 19 Site Description – Fire Station Site .................................................................................................................................. 26 Subject Photographs – taken November 29, 2024 ................................................................................................... 34 Assessment and Tax Data ................................................................................................................................................... 35 Market Analysis ....................................................................................................................................................................... 37 Highest and Best Use Analysis .......................................................................................................................................... 39 Land Valuation – Fire Station Site .................................................................................................................................... 40 Reconciliation ........................................................................................................................................................................... 59 Exposure Time and Marketing Period ....................................................................................................................... 59 General Assumptions and Limiting Conditions .......................................................................................................... 61 Certification – Josh Fronen, MAI ....................................................................................................................................... 66 Addenda .................................................................................................................................................................................... 67 Glossary ................................................................................................................................................................................. 68 Qualifications ...................................................................................................................................................................... 75 Valbridge Property Advisors Information / Office Locations ........................................................................... 77 FIRE STATION SITE, GLEN LOMA RANCH SUMMARY OF SALIENT FACTS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 5 Summary of Salient Facts Property Identification Property Name Fire Station Site, Glen Loma Ranch Property Address 1330 W Luchessa Avenue Gilroy, Santa Clara County, California 95020 Latitude & Longitude 36.990958, -121.587327 Tax Parcel Number 808-58-004 Property Owner Filice Family Estate and Christopher, Donald c/ Christopher Family Partnership Site Zoning Residential and supportive uses (Glen Loma Ranch Special District) FEMA Flood Map No.06085C0752H Flood Zone D Valuation Opinions Highest & Best Use - As Vacant Residential development Reasonable Exposure Time 6 to 12 months Reasonable Marketing Time 6 to 12 months Value Indications Approach to Value As Is Sales Comparison $1,315,000 Cost Not Developed Income Capitalization Not Developed Value Conclusion Component As Is Value Type Fair Market Value Real Property Interest Fee Simple Effective Date of Value October 21, 2024 Value Conclusion $1,315,000 Value per SF of Land $22.04 psf FIRE STATION SITE, GLEN LOMA RANCH AERIAL AND FRONT VIEWS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 6 Aerial and Front Views AERIAL VIEW FRONT VIEW – TAKEN NOVEMBER 29, 2024 FIRE STATION SITE, GLEN LOMA RANCH LOCATION MAP © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 7 Location Map FIRE STATION SITE, GLEN LOMA RANCH INTRODUCTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 8 Introduction Client and Intended Users of the Appraisal The client in this assignment is John Filice with Glen Lomp Corporation and the intended user of this report is John Filice with Glen Loma Corporation. Under no circumstances shall any of the following parties be entitled to use or rely on the appraisal or this appraisal report: i. The borrower(s) on any loans or financing relating to or secured by the subject, ii. Any guarantor(s) of such loans or financing; or iii. Principals, shareholders, investors, members or partners in such borrower(s) or guarantors. Intended Use of the Appraisal The intended use of this report is for a donation of the fire station site to the City of Gilroy. Appraiser Declaration We understand that our appraisal will be used in connection with a return or claim for refund. We also understand that, if there is a substantial or gross valuation misstatement of the value of the property claimed on the return or claim for refund that is based on our appraisal, we may be subject to a penalty under IRC Section 6695A, as well as other applicable penalties. We affirm that we have not been at any time in the three-year period ending on the date of the appraisal barred from presenting evidence or testimony before the Department of the Treasury or the IRS pursuant to 31 U.S.C. Section 330(c).” Competency Statement We are aware of no areas in which our appraisal expertise is deficient for the purpose of competently completing this assignment. Please refer to the qualifications as found within this report. Real Estate Identification The subject property is located at the southeast corner of West Luchessa and Miller Avenue, Gilroy, Santa Clara County, California 95020. The property is further identified by the tax parcel numbers 808- 58-004. Legal Description We were not provided with a legal description of the subject. We assume the legal description corresponds to its address and Assessor Parcel Numbers (APN). Use of Real Estate as of the Effective Date of Value As of the effective date of value, the subject was vacant land. Use of Real Estate as Reflected in this Appraisal The as is opinion of value for the subject property reflects use as vacant land. Ownership of the Property According to the Fourth Operating Memorandum to Development Agreement -Glen Loma Ranch, the owners are Filice Family Estate, a California limited partnership, The Christopher Family Partnership, a FIRE STATION SITE, GLEN LOMA RANCH INTRODUCTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 9 California limited partnership, Christopher Ranch LLC, a California limited liability company, and D Christopher & Sons LLC, a California limited liability company. History of the Property Ownership of the property has not changed within the past three years. Type and Definition of Value The appraisal problem is to develop an opinion of the Fair Market Value of the subject property. Fair Market Value for a Charitable donation is defined by IRS Publication 561-1 as: Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.” The value conclusions apply to the value of the subject under the market conditions presumed on the effective date of value. Please refer to the Glossary in the Addenda section for additional definitions of terms used in this report. Valuation Scenarios, Property Rights Appraised, and Effective Dates of Value Opinions of value for the subject were developed under the following valuation scenarios: Date of Report The date of this report is December 2, 2024. List of Items Requested but Not Provided • Preliminary Title Report • Environmental Report • ALTA Survey Assumptions and Conditions of the Appraisal This appraisal assignment and the opinions reported herein are subject to the General Assumptions and Limiting Conditions contained in the report and the following extraordinary assumptions and/or hypothetical conditions, the use of which might have affected the assignment results. Extraordinary Assumptions • It is an extraordinary assumption of this report that the land acreage is accurate. If the actual subject property acreage is different our concluded results may be impacted. Valuation Scenario Effective Date of Value As Is Fair Market Value of the Fee Simple Interest October 21, 2024 FIRE STATION SITE, GLEN LOMA RANCH INTRODUCTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 10 Hypothetical Conditions • None FIRE STATION SITE, GLEN LOMA RANCH SCOPE OF WORK © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 11 Scope of Work The elements addressed in the Scope of Work are (1) the extent to which the subject is identified, (2) the extent to which the property is inspected, (3) the type and extent of data researched, (4) the type and extent of analysis applied, (5) the type of appraisal report prepared, and (6) the inclusion or exclusion of items of non-realty in the development of the value opinion. These items are discussed below. Extent to Which the Property Was Identified The three components of the property identification are summarized as follows: • Legal Characteristics - The subject was legally identified via an address provided by our client, Assessor Parcel Numbers (APN), and public records. • Economic Characteristics - The subject’s economic characteristics were identified via information provided by our client, market data, and discussions with active market participants. • Physical Characteristics - The subject property physical characteristics were identified via an inspection by Josh Fronen, MAI. Extent to Which the Property Was Inspected An appraisal inspection of the subject property was completed in 2023, November 20, 2024, and November 29, 2024. Type and Extent of Data Researched The following data was researched and analyzed: (1) market area data, (2) property -specific market data, (3) zoning and land-use data, and (4) current data on comparable listings and transactions. Professionals familiar with the subject market/property type were also interviewed. This report was prepared with the assistance of full-time analyst, Heidi Fielding, who performed and assisted in many tasks of the report under full appraiser’s supervision, including defining the problem, purpose of the appraisal, scope of work, research and data collection, market/economic analysis, highest and best use analysis, application of value approaches, reconciliation and written appraisal report. Josh Fronen, MAI supervised and verified these steps. Type and Extent of Analysis Applied (Valuation Methodology) Surrounding land use trends, the condition of any improvements, demand for the subject property, and relevant legal limitations were observed in the process of concluding a highest and best use for the subject. The property was then valued based on the highest and best use conclusion. There are four primary methods available to develop a land value estimate: (1) sales comparison, (2) land residual method, (3) ground rent capitalization, and (4) subdivision development method (discounted cash flow). While other methods, such as extraction and allocation, are applicable under limited conditions, one or more of these approaches are used in most circumstances to derive an indication of land value. FIRE STATION SITE, GLEN LOMA RANCH SCOPE OF WORK © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 12 • Sales Comparison Approach - In the sales comparison approach, value is indicated by recent sales and/or listings of comparable properties in the market, with the appraiser analyzing the impact of material differences in both economic and physical elements between the subject and the comparables. • Direct Capitalization: Land Residual Method - The land residual methodology involves estimating the residual net income to the land by deducting from total potential income the portion attributable to the improvements, assuming development of the site at its highest and best use. The residual income is capitalized at an appropriate rate, resulting in an indication of land value. • Direct Capitalization: Ground Rent Capitalization – A market derived capitalization rate is applied to the net income resulting from a ground lease. This can represent the leased fee or fee simple interest, depending on whether the income potential is reflective of a lease in place or market rental rates. • Yield Capitalization: Subdivision Development Method – Also known as discounted cash flow analysis (DCF), the methodology is most appropriate for land having multiple lot development in the near term as the highest and best use. The current site value is represented by discounting the anticipated cash flow to a present value, taking into consideration all necessary costs of development, maintenance, administration, and sales throughout the absorption period. All of these approaches to value were considered. The availability of data and applicability of each approach to value within the context of the characteristics of the subject property, along with the needs and requirements of the client, were assessed. Based on this assessment, the sales comparison approach was developed. The Cost Approach and Income Capitalization Approach are not applicable when valuing vacant land. The sales comparison approach is the most applicable approach to value unentitled land. The exclusion of these approaches does not weaken the validity of the appraisal conclusions. The specific methods and analysis of each approach are further discussed in the respective valuation sections. Appraisal Conformity and Report Type The analyses, opinions, and conclusions were developed and this report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute; and the requirements of our client. This is an Appraisal Report as defined by the Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2a. Personal Property/FF&E All items of non-realty are excluded from this analysis. The opinion of market value developed herein is reflective of real estate only. FIRE STATION SITE, GLEN LOMA RANCH REGIONAL AND MARKET AREA ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 13 Regional and Market Area Analysis REGIONAL MAP Overview The property is located in the San Francisco Bay Region, an area which is comprised of the nine counties bordering the San Francisco Bay. According to the State of California Department of Finance, the area had a combined population of approximately 7.58 million as of January 1, 2024. The Department of Finance characterizes the San Francisco Bay Area by a moderate climate, diversified economy and one of the highest standards of living in the United States. Population Santa Clara County is the most populous of the nine counties comprising the San Francisco Bay Region, with an estimated 1,903,198 residents as of January 1, 2024 according to the State of California Department of Finance. This remained unchanged from the previous year. San Jose is the largest city in the county. According to ESRI projections, presented below, the county’s population is expected to increase annually 0.32% between 2024 and 2029, while Gilroy will increase approximately 0.33% annually over the same period. FIRE STATION SITE, GLEN LOMA RANCH REGIONAL AND MARKET AREA ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 14 Transportation Excellent transportation routes and linkages to all major cities within the region and throughout the state are primary reasons for the advancement of business activity in the Bay Area, including Santa Clara County. Air service in the area is provided by Norman Y. Mineta San Jose International Airport, which accommodated more than 15 million passengers from April 2019 to March 2020. Although passenger counts dropped significantly in the pandemic, airline activity is rebounding. As of January 2024, the total number of passengers served over the past year was approximately 12 million passengers, which represents a 3.8% increase from the prior year. San Francisco and Oakland airports are within an hour’s drive from most portions of the county. The area has a well-developed freeway system although traffic congestion is unquestionably one of the negative aspects. The county’s transportation network also includes multiple expressways, which provide streamlined access to most interior locations. Lawrence Expressway, San Tomas Expressway and Foothill Expressway run north-south, while Central Expressway and Montague Expressway run roughly east-west. Employment High-technology employment and a skilled workforce translate into relatively high-income levels, and Santa Clara County is one of the most affluent metropolitan regions in the nation. Silicon Valley’s economy is stable, although its narrow range of driving industries has kept recent growth very slow. Significant employment sectors within Santa Clara County include professional, scientific, and technical services; manufacturing; health care and social assistance; educational services; and retail. Some of the largest employers are associated with the computer industry and Internet such as Adobe, Apple, Alphabet, Inc., and Applied Materials; hospitals such as the Lucille Packard Children’s Hospital and the Population Compound Annual ∆ Compound Annual ∆ Area 2020 - 2024 2024 - 2029 United States 331,449,520 335,707,897 0.32%343,238,675 0.44% California 39,538,223 39,530,491 0.00%39,717,178 0.09% San Jose-Sunnyvale-Santa Clara, CA (MSA)2,000,468 1,990,196 -0.13%2,025,583 0.35% Santa Clara County 1,936,259 1,920,843 -0.20%1,951,485 0.32% Gilroy city 59,520 59,609 0.04%60,591 0.33% Source: ESRI (ArcGIS) Census Population (2020) Current Population (2024) Projected Population (2029) FIRE STATION SITE, GLEN LOMA RANCH REGIONAL AND MARKET AREA ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 15 Palo Alto Veteran’s Medical Center; space and aerotech including NASA and Lockheed Martin; and educational facilities such as the Stanford University School of Medicine. Unemployment The unemployment rate in Santa Clara County is currently less than the rate of the state but higher than the nation. The County unemployment rate was 4.5% as of September 2024 (most recent available). The State of California was at 5.9% while the Nation was at 3.9% for the same time period. Employment by Industry for Santa Clara County - Source: ESRI (ArcGIS) 0%2%4%6%8%10%12%14%16%18%20% Agriculture/Forestry/Fishing/Hunting Mining/Quarrying/Oil & Gas Extraction Construction Manufacturing Wholesale Trade Retail Trade Transportation/Warehousing Utilities Information Finance/Insurance Real Estate/Rental/Leasing Professional/Scientific/Tech Services Management of Companies/Enterprises Admin/Support/Waste Management Services Educational Services Health Care/Social Assistance Arts/entertainment/Recreation Accommodation/Food Services Other Services (excl Public Administration) Public Administration Unemployment Rates Area YE 2019 YE 2020 YE 2021 YE 2022 YE 2023 2024¹ United States 3.7%8.1%5.3%3.6%3.6%3.9% California 4.1%10.1%7.3%4.3%4.8%5.9% San Jose-Sunnyvale-Santa Clara, CA (MSA)2.6%7.2%4.9%2.8%3.6%4.5% Santa Clara County, CA 2.5%7.1%4.8%2.7%3.5%4.5% Gilroy city, CA 3.0%9.1%6.3%3.6%3.8%4.7% Source: www.bls.gov data not seasonally adjusted; ¹September - most recent for US, others lag by 1-2 mos.) FIRE STATION SITE, GLEN LOMA RANCH REGIONAL AND MARKET AREA ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 16 National Economic Overview The national economy continues a path of moderate expansion in 2024. The recovery post-COVID has been marked by increased demand for labor and wage growth, while the Federal Reserve’s monetary policy has aimed to manage inflation and stabilize financial markets. In 2023, the economy experienced varying Gross Domestic Product (GDP) growth rates, with a notable spike of 4.9% in the third quarter, driven largely by consumer spending and government investments. Overall, GDP increased by 2.5% in 2023. For 2024, the U.S. economy expanded at an annual rate of 2.8% for the second quarter, surpassing both the 1.4% growth in the first quarter and a projected 2.1% growth rate. Employment growth continues to be strong, except in the technology sector. As of August 2024, the inflation rate increased by 2.5% from the previous year. The rate of inflation has decelerated over the past two years and remains slightly above the Fed’s targeted 2% range. Federal Reserve Chairperson, Jerome Powell has stated, “The upside risks of inflation have diminished, and the downside risks to employment have increased. The time has come for policy to adjust.” Federal Funds Rate Beginning in March 2022, the Federal Reserve initiated interest rate increases to temper rapid inflation. The initial increase was by 25 basis points. By mid-2022, inflation had surged to an all-time high of 9.1%, prompting the Fed to make eleven interest rate hikes through 2022 and 2023. Since July 2023, the Federal Funds Rate has remained within a range of 5.25% to 5.5%. Challenges in the banking sector, including the collapses of Silicon Valley Bank, Signature Bank, and First Republic Bank, have tightened credit conditions. On September 18, 2024, the Federal Reserve reduced its benchmark interest rate by half a percentage point, which had been highly anticipated by real estate market participants. Prior to the announcement, the 10-Year Treasury bond and lending rates were down. The new benchmark interest rate now stands between 4.75% to 5.0%. The Federal Reserve projects that by year-end, the rate will decrease to 4.5%, with a further decline to 3.5% anticipated by the end of 2025. Commercial Real Estate (CRE) Loans and Foreclosures Elevated interest rates add to an increase in the cost of debt, which in turn has put pressure on new real estate development projects and has partially contributed to a decline in market activity of commercial real estate. Specific segments, such as the office sector, were further affected by high vacancies driven by remote working. The CRE sector faces increased risks, particularly in the office and retail segments, where high volumes of refinancing are due soon. Approximately $1.6 trillion of commercial real estate debt is expected to mature in the next two years, with a significant portion held by banks and commercial mortgage- backed securities. This situation is exacerbated by stricter lending standards and a reduction in private equity fundraising, further restricting funding availability for the sector. The California Forecast The California economy is currently outpacing national growth, characterized by job creation in key sectors such as healthcare, social services, education, construction, leisure and hospitality, and durable FIRE STATION SITE, GLEN LOMA RANCH REGIONAL AND MARKET AREA ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 17 goods manufacturing. Construction and durable goods manufacturing sectors offer higher average wages. Total statewide unemployment (yearly average rate) for 2023 was at 4.8% and is forecasted to be at 4.5% in 2024, and at 3.8% in 2025. Real income was forecasted to overall decrease by 0.2% in 2023 but increase by 1.2% and 2.0% respectively in 2024 and 2025. Risks to the forecast, as in the national forecast, are political and geopolitical. Concluding Remarks Overall, the U.S. economy is navigating a challenging landscape characterized by declining inflation, tighter monetary policies, and moderating growth. While the labor market remains strong, concerns over a potential recession linger as the Federal Reserve aims to achieve a soft landing. While the labor market remains resilient, the growth in job creation may slow as the economy seeks a new equilibrium. The transition towards a more balanced economic growth trajectory reflects a cautious optimism among economists and market observers, considering the undercurrents of global geopolitical tensions and domestic policy adjustments. This delicate balance underscores the importance of vigilance and adaptability in economic policy and market strategies as we navigate through the uncertainties of 2024. In conclusion, the CRE market for the remainder of 2024 is poised at a critical juncture, with interest rates playing a pivotal role in shaping its direction. Investors and developers are navigating a challenging environment, with higher debt costs, property valuation pressures, and regulatory readiness concerns. It is expected that the initial interest rate cut in September 2024, and further cuts, either at the end of the year, or by early 2025, will help investors. Opportunities for recovery and growth remain, particularly in sectors with strong fundamentals and as the economy potentially shifts towards more favorable conditions later in 2025. Median Household Income Total median household income for the region is presented in the following table. Overall, the subject’s MSA and county compare favorably to the state and the country. Income 2024 Median 2024 Average 2024 Per Capita Area HH Income HH Income Income United States $72,233 $104,831 $41,000 California $97,646 $139,308 $48,206 San Jose-Sunnyvale-Santa Clara, CA (MSA)$158,995 $211,117 $72,086 Santa Clara County $160,847 $213,011 $73,008 Gilroy city $122,584 $163,935 $48,717 Source: ESRI (ArcGIS) FIRE STATION SITE, GLEN LOMA RANCH REGIONAL AND MARKET AREA ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 18 Conclusions Historically, the Santa Clara County region has been considered a desirable place to both live and work. Physical features and a strong local economy attract both businesses and residents. It is a worldwide leader in technology and a regional employment center with an increasingly diversified economy. While traffic congestion will continue to be a problem, residents remain among the most affluent in the country. The regional outlook includes declining populations in most counties. Out-migration during the pandemic coupled with continued increases in housing costs are trends that are likely to continue to keep local populations from growing substantially. Household incomes are increasing at the fastest pace since the 1980s; however, inflation is outpacing those gains, leaving households with increasing debt to keep pace. On the more positive side, inflation subsided in early 2023. However, in July 2023, the interest rate was increased ¼ percentage point. While business travel and conventions have yet to recover fully from the pandemic, personal travel has normalized, and the travel industry is regaining strength. Supply chain disruptions continue to impact various sectors of the economy, but many businesses are recovering. With respect to commercial and residential real estate, increasing interest rates began to stifle transaction volumes in mid-2022, a trend that has continued without much change into 2024. Banks and institutional lenders have not been active for some time, leaving financing to private money lenders and cash buyers. Loan interest rates, where loans are available, have essentially doubled, leaving buyers to demand higher rates of return. While some distress is emerging, particularly in the office segment, sellers are mostly unwilling to transact at lower prices, keeping market participants in a wait and see posture. Reports indicate that once inflation has stabilized and interest rates can be projected with more certainty, transaction volumes will likely increase. In any case, the historic reasons for growth in the region remain the same, and, thus, the expectation is that normal growth will resume over time. FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 19 City and Neighborhood Analysis NEIGHBORHOOD MAP Overview Nestled between the Diablo and Santa Cruz mountains in the Santa Clara Valley, Gilroy is situated in South Santa Clara County at the crossing of U.S. Highway 101 and State Highway 152. Gilroy is located in the southern portion of Santa Clara County (also known as the South County area), approximately 25 miles south of central San Jose, and approximately 77 miles south of San Francisco. The city is within a short driving distance of Monterey Bay, Santa Cruz, San Jose, the San Joaquin Valley, and the San Francisco Bay Area. The city is reached via Highway 101 from the north and south, Highway 152 from the east and west, and the old Monterey Highway. Highway 101 connects Gilroy with San Francisco to the north and Los Angeles to the south. State Highway 152 connects Gilroy with Highway 1, which travels along the Pacific Ocean coastline, and with Interstate 5 in California’s Central Valley. Monterey Highway is also known as El Camino Real, California’s first major thoroughfare, and is a major commercial arterial rather than a true highway. The city is rail-served by Union Pacific Railroad and Del Monte and CalTrans passenger trains. The San Jose International Airport is 30 miles north, and the South County Airport, which serves general aviation exclusively, is five miles north. Historically, the city’s economy has centered on agriculture. While a variety of crops find prosperous growth in the Gilroy area, the city is most well-known for its garlic production and processing. Garlic product development and processing are major employers for the city’s residents. However, over the last 20 years, with the rapid growth of San Jose to the north, the character of Gilroy has begun to change. Gilroy has become more of a bedroom community for people employed in the North County area. The population of the South Valley cities of Gilroy and Morgan Hill grew rapidly FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 20 during the 1970s and 1980s. Although it has stabilized over the last few years, Gilroy and Morgan Hill continue to have increases in population. Located in the Silicon Valley region, about one-third of Gilroy residents commute to work in the myriad of high tech industries for which the region is named. The skilled, informational-related technology labor of Gilroy is supplemented by the manufacturing trade and a strong local retail community. The labor market in the Gilroy area is divided between a number of market areas with four areas competing for the largest share of the labor force. Manufacturing, retail, trade and services all have approximately the same percentage of the labor force. Agricultural, which includes migrant farmworkers and is more seasonal, competes also with those categories. The majority of recent residential development has been in the western portion of Gilroy, in particular, the northwest quadrant. The largest residential development within the City of Gilroy is “Eagle Ridge” which is located in the southwest quadrant of the city. The project includes 853 residential units and an 18-hole golf course. The housing market in the Gilroy area, as throughout the Bay Area and the Country was affected by the sub-prime mortgage crisis. As a result, housing prices decreased significantly over course of 2008 through 2010. However, the housing market has become robust again over the past three years. Gilroy has 1,110 acres of land zoned for light or heavy industrial use. Of this, 600 acres (54%) are vacant and available in parcels ranging in size from 0.5 to 100 acres. Terrain is generally level and drainage excellent. Subsoil is firm and piling is not generally required. Industrial growth in the South County area was comparatively slow until the early 1980s. However, from 1980 to 1990, development intensified. As of 1982, there were no R&D buildings in this area. Today, there are five major business parks containing approximately 40 R&D and light industrial buildings. The South County area has experienced a large amount of retail growth over the past ten years. Historically, the retail product was located along First Street. In the early 2000s new development on the east side of Highway 101 began, south of the Gilroy Outlets. Constructed in phases, the Gilroy Premium Outlet Center consists of over 145 outlet stores and has been very successful to date. This center is located on the east side of Highway 101 and draws customers from throughout the Bay Area. Gilroy Crossing is a 472,515-square-foot power retail center located at the southeast quadrant of Highways 152 and 101. Anchor tenants include Target and Kohl’s. There are several restaurants in this Center as well. Gilroy Crossings has a regional draw with a radius of approximately 10 miles, which includes the City of Hollister to the southeast and Morgan Hill to the north. Neighborhood Location and Boundaries The subject neighborhood is located in the Glen Loma Ranch section of Gilroy. The area is suburban in nature. The neighborhood is bounded by Uvas Creek to the north, Greenfield Drive to the east, Santa Teresa Boulevard to the south, and Santa Teresa Boulevard to the west. FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 21 Transportation Access Within the immediate area of the subject, transportation access helps define the character of its development. Major travel and commuter routes within the area of the property include West Luchessa Avenue and Santa Teresa Boulevard. To the north, Santa Teresa Boulevard connects with State Route 152 which has on/off ramps to U.S. Highway 101. To the east, West Luchessa Avenue connects with Monterey Highway which also has on/off ramps to U.S. Highway 101. Access to the area is considered average. Valley Transportation Authority (VTA) is working on the extension of Santa Teresa Boulevard, south of the subject, as part of an interchange improvement project at Highway 25. Construction is expected to take place between 2025 and 2027. Neighborhood Land Use The subject neighborhood is located in an area with primarily residential and undeveloped land uses. Land Use Trends The neighborhood is experiencing a change in land use from undeveloped land to residential. Nearby uses follow: A new townhome development by KB Homes adjacent to the southeast corner of the subject, called Ascent at Glen Loma Ranch was recently completed and sold out. Within the past couple of years, KB Homes also built and sold off new homes adjacent to the western side of the subject along Vintner Court. Located northwest of the subject, Brix at Glen Loma Ranch by Tri Pointe Homes is offering new homes for sale in the $1.3 million to $1.6 million+ range. Further northwest is the new Palomino at Glen Loma Ranch by KB Homes offering townhouse duets for $950,000 to $985,000+ and single-family detached homes starting at $1.1 million to $1.2 million. The Eagle Ridge gated neighborhood includes an 18-hole golf course amongst 1,100 homes constructed during the early 2000s with completion around 2013. It is located across the street from the subject on the western side of Santa Teresa Boulevard. Ren Fu Villas is also planned for the immediate area at the south side of Santa Teresa Boulevard and Miller Avenue. The applicant proposes a Zoning Map amendment (Z 22-03) to rezone the property to RH (Residential Hillside), consistent with the 2040 General Plan Hillside Residential land use designation, and a Tentative Map (TM 22-02) to subdivide the site into 54 lots. Future applications would be submitted to construct a single-family residence on each lot. The project would also include a private club house that would be located on the western side of the site. Also on the western side of Santa Teresa Boulevard are newer homes than Eagle Ridge, located across Uvas Creek but south of State Route 152 in the Heartland neighborhood. FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 22 The residential neighborhood across Uvas Creek to the north and east of Glen Loma Ranch was built out many years ago and includes Gilroy High School. On the southern side of Uvas Creek, east and south of Glen Loma Ranch are small pockets of residential neighborhoods built between the 1970s and 2015 with agricultural land uses further east. Development to the southwest of Glen Loma Ranch is constrained by the Santa Cruz Mountains. Demographics The following table depicts the area demographics in Gilroy within a one-, three-, and five-mile radius from the subject. Neighborhood Demographics Radius (Miles)1 Mile 3 Mile 5 Mile Trade Area (Sq. Mi.)3.14 28.27 78.54 Trade Density (Pop/Sq. Mi.)2,976 2,044 829 Population Census Population (2010)6,177 48,496 54,430 Census Population (2020)8,258 57,631 65,172 Current Population (2024)9,343 57,768 65,104 Projected Population (2029)10,021 58,688 66,088 Compound Annual Growth 2010 - 2020 2.9%1.7%1.8% 2020 - 2024 3.1%0.1%0.0% 2024 - 2029 1.4%0.3%0.3% Households Census Households (2010)1,894 14,059 15,853 Census Households (2020)2,470 17,019 19,254 Current Households (2024)2,817 17,109 19,292 Projected Households (2029)3,062 17,611 19,840 Compound Annual Growth 2010 - 2020 2.7%1.9%2.0% 2020 - 2024 3.3%0.1%0.0% 2024 - 2029 1.7%0.6%0.6% Average Household Size (2024)3.31 3.34 3.34 Source: ESRI (ArcGIS)(Lat: 36.990958, Lon: -121.587327) FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 23 The population is 57,768 within a three-mile radius of the subject property with a projected annual growth rate of 0.3%. There were 18,236 housing units within the three-mile radius. Most housing is owner-occupied. The median household income was $120,094 within a three-mile radius of the subject property. The median household income figures suggest residents were within the middle income brackets. Nuisances & External Obsolescence Neighborhood properties have adequate levels of maintenance. No adverse or unfavorable factors were observed. Neighborhood Life Cycle Most neighborhoods are classified as being in four stages: growth, stability, decline, and renewal. Overall, the subject neighborhood is in the growth stage of its life cycle. Immediate Area Uses The below aerial photo exhibits the uses located in the subject’s immediate vicinity. Neighborhood Demographics (cont.) Radius (Miles)1 Mile 3 Mile 5 Mile Trade Area (Sq. Mi.)3.14 28.27 78.54 Trade Density (Pop/Sq. Mi.)2,976 2,044 829 2024 Housing Units Median Home Value $926,883 $904,737 $947,879 Median Year Built 1988 1988 1989 Total Housing Units 3,012 18,236 20,552 Owner-Occupied Housing %69.7%56.3%57.7% Renter-Occupied Housing %23.9%37.5%36.1% Vacant Housing %6.5%6.2%6.1% 2024 Employment Total Establishments 64 1,895 2,091 Total Employees 439 23,367 26,129 Average Commute Time n/a n/a n/a % College Graduates 34.0%30.0%31.3% 2024 Income Summary Median Household Income $125,784 $120,094 $124,354 Average Household Income $166,611 $161,377 $166,256 Avg Spending/Household $45,588 $43,770 $45,084 Per Capita Income $50,437 $47,803 $49,308 Source: ESRI (ArcGIS)(Lat: 36.990958, Lon: -121.587327) FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 24 IMMEDIATE AREA USES Source: Google Maps Uses along Santa Teresa Boulevard in the vicinity of the subject are primarily residential in nature. Recognized uses in the immediate area of the subject include single-family and multifamily residential, a golf course, schools, parks, agriculture, undeveloped land, and open space preserves. As shown above, the density of uses in the area is sporadic with some vacant land remaining available in the area. Glen Loma Ranch Development The Glen Loma Ranch has been identified via a specific plan for the potential development of ±1,643 residential units on approximately 359 acres. The number of proposed units was later revised downward to 1,467. The ranch is entirely within the City of Gilroy and the specific plan addresses land uses and development opportunities within the project site. A mix of single-family, multifamily, senior, and affordable housing is planned, some of which is already built. Dating back to the earliest settlements in California, the Glen Loma Ranch was originally part of a Spanish land grant. Henry Miller, known as the “Cattle King,” added this ranch to his portfolio of California land. The current owners acquired this ranch in the 1930s and planted vineyards for their San Martin Winery. The owners have worked closely with the community to develop the property into ±17 residential subdivisions, with fewer than 100 homes each, and supporting uses. The projects of Canyon Creek, Rocky Knoll, Town Center Flex, and Malvasia II (not part of this appraisal) represent that last phase of development at Glen Loma. Located at the base of the western foothills of Gilroy at the southern end of the Silicon Valley, sections of the natural habitat will be preserved including oak woodlands, coastal scrub, olive trees, fruit trees, FIRE STATION SITE, GLEN LOMA RANCH CITY AND NEIGHBORHOOD ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 25 sycamores, black walnut, Madrone, Monterey Pine, Arizona cypress, and redwood trees and riparian drainage corridors. In addition to roadways, pedestrian and bicycle-friendly trails will be included. Two new schools have already been constructed in the ranch: Las Animas Elementary School (grades K-5) and Solorsano Middle School (grades 6-8). Students from the Glen Loma Ranch neighborhood will attend Gilroy High School, located just across Uvas Creek, east of the ranch. West 10th Street is planned to be extended over Uvas Creek to provide a more direct route to the high school from the ranch. The public and open spaces within the development will be maintained and managed by the Glen Loma Ranch Master Homeowners Association. Per a March 10, 2022, Planning Commission Staff Report for the tentative map application for Canyon Creek and Rocky Knoll, the developer has already met the affordable housing requirements for the anticipated Glen Loma build out. Analysis and Conclusions Overall, the area is expected to experience continued growth over time, although potentially slower than previous trends. Much of the growth will occur in the western sections of Gilroy, such as Glen Loma Ranch, which are not fully built out already. The reasons that grew Gilroy as a suburb of the Bay Area remain, including workers from southern Silicon Valley seeking affordable homes within a reasonable commute. Land values in the immediate area are typically lower than land values in San Jose to the north. Also, the location has good access to Highway 101 and is in proximity to commercial services and amenities. Residential and supplemental use development is supported at the site. FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 26 Site Description – Fire Station Site The subject site is located at the southeast corner of West Luchessa Avenue and Miller Avenue (APN 808-58-004). The characteristics of the site are summarized as follows: Site Characteristics Gross Land Area: ±59,677 SF Shape: Irregular Average Depth: N/a Topography: Mostly level to slightly sloped Drainage: None developed Grade: Mostly at street grade Utilities: All available to the site Off-Site Improvements: Sidewalks, curbs, gutters, streetlights, signage, roundabouts, and landscaping Interior or Corner: Corner Signalized Intersection: No Street Frontage / Access Frontage Road Primary Secondary Street Name: West Luchessa Avenue Miller Avenue Street Type: Collector Local Traffic Count (Cars/Day): Not available Not available Additional Access Alley Access: No Water or Port Access: No Rail Access: No Flood Zone Data Flood Map Panel/Number: 06085C0752H Flood Map Date: 05-18-2009 Portion in Flood Hazard Area: Undetermined Flood Zone: Zone D D: Areas with possible but undetermined flood hazards. No flood hazard analysis has been conducted. Flood insurance rates are commensurate with the uncertainty of the flood risk. FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 27 Other Site Conditions Soil Type: We have not been provided a geotechnical report for the subject property. Based on our physical inspection, soil conditions appear stable. Environmental Issues: We make no representations as to the presence of toxins and hazardous materials on the subject site. We are appraising the site as if clean. If this is of concern to any reader of this report, it is our recommendation that an environmental report be obtained from the appropriate professionals qualified to issue such opinions. Easements/Encroachments: A Preliminary Title Report was not provided to the appraiser for review. We assume that there are no easements or encumbrances that would materially affect the value of the subject, either positively or negatively. Earthquake Zone: The property is not located in an Alquist-Priolo Special Studies Zone for earthquake hazard. Earthquake hazard is typical for the overall area. Adjacent Land Uses North: Affordable apartments South: Undeveloped land and townhouses East: Undeveloped land and single-family residential West: Undeveloped land Site Ratings Access: Average Visibility: Average Zoning Designation Zoning Jurisdiction: City of Gilroy Zoning Classification: Glen Loma Ranch Special District, Residential and supporting uses General Plan Designation: Glen Loma Ranch Special District Permitted Uses: Residential and supporting uses Zoning Comments: The subject property is under the jurisdiction of the City of Gilroy and is zoned Glen Loma Ranch Special District. The General Plan land use designation is also Glen Loma Ranch Special District. The intent of the Special District is the development of 1,643 residential units on approximately 359 acres of the Glen Loma Ranch. The total number of planned units has been revised lower to 1,467, as stated. Permitted uses include a variety of residential uses including single-family and multifamily projects. Also, permitted are supportive uses including schools, commercial, a fire station, parks, and open space. FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 28 We were able to confirm with the City Planning Department that the development of the subject can take place without the need to build the 10th Street Bridge, which is a local proposed project. The fire station site could physically support new development, and the 10th Street Bridge is not needed in order for development to be approved. If it were to be a residential development, we opine the most likely density would be consistent with and similar to the abutting Town Center Flex, proposed for single family attached (duplex/duet) with a density in the range of ±6.0 to ±7.0 dwelling units per gross acre, based on the Tentative Map, though no final approvals are in place as of the value date. Commercial space is not required to be built. FIRE STATION SITE AND ABUTTING TOWN CENTER FLEX SITE PER TENTATIVE MAP Fire station site FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 29 TAX PLAT 808-58-004 FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 30 FLOOD MAP FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 31 TOPOGRAPHIC MAP FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 32 GENERAL PLAN MAP FIRE STATION SITE, GLEN LOMA RANCH SITE DESCRIPTION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 33 ZONING MAP FIRE STATION SITE, GLEN LOMA RANCH SUBJECT PHOTOGRAPHS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 34 Subject Photographs – taken November 29, 2024 Fire Station Site Fire Station Site and abutting Town Center Flex site FIRE STATION SITE, GLEN LOMA RANCH ASSESSMENT AND TAX DATA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 35 Assessment and Tax Data Assessment Methodology The State of California has provided for a unified system to assess real estate for property taxes. Assessment Districts are established on a county basis to assess real estate within the county. The appraised property falls under the taxing jurisdiction of Santa Clara County and is subject to both general taxes and direct assessments. The subject property is currently under the ownership of Filice Family Estate and Christopher, Donald c/ Christopher Family Partnership and is not tax exempt. Assessed Values and Property Taxes The property’s assessed values, applicable tax rates and total taxes including direct assessments are shown in the following table: General Taxes The amount of General Taxes due is quantified by multiplying the assessed value by the tax rate. In the State of California, real estate is assessed at 100% of market value as determined by the County Assessor’s Office. The tax rate consists of a base rate of 1% plus any bonds or fees approved by the voters. The County Tax Rate for the property is 1.2235%. Direct Assessments Direct assessments are tax levies that are not dependent upon the assessed value of the property. They are levied regardless of assessment. According to the Santa Clara County Tax Collector’s Office, the direct assessments for the subject are as follows: Santa Clara Valley Water District flood and safe clean water assessments, Santa Clara County mosquito vector control assessments, Santa Clara County library assessment, San Francisco Bay Restoration Authority assessment, and Santa Clara County weed abatement. Current and Future Taxes Proposition 13 was passed by voters in June 1978 and substantially changed the taxation of real estate in California. This constitutional amendment rolled back the base year for assessment purposes to the tax year 1975-1976. Annual increases in assessed value are limited to 2 percent per year, regardless of the rate of inflation. Real estate is subject to re-appraisal to current market value upon a change in ownership or new construction. Property assessments in years subsequent to a change of ownership or new construction are referred to as factored base values. Proposition 8, which passed in November 1978, states that the Assessor shall lower tax roll values to fair market value whenever the assessed value exceeds fair market value. It mandates that the lower of fair market value or factored base value be placed on the assessment roll. When fair market values are Tax Schedule Parcel Assessor's Appraised Assessor's Appraised Assessed Effective Special Tax Tax Year Number Value - Land Value - Imp.Value Tax Rate Assessments Expense 1 2024 808-58-002 $65,806 $0 $65,806 1.223500%$69 $874 3 2024 808-58-004 $77,644 $0 $77,644 1.223500%$643 $1,593Total$2,855,576 $0 $2,855,576 $18,217 $53,155 FIRE STATION SITE, GLEN LOMA RANCH ASSESSMENT AND TAX DATA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 36 enrolled, the Assessor reassesses the property annually until such time as fair market value again equals or exceeds the factored base year value. For properties that have been owned for several years, the assessed value may not reflect the current fair market value. Furthermore, due to adjustments following a Prop 8 reduction, increases in assessed value can increase substantially more than 2% per year until the assessment again matches the factored base year value. Conclusions According to the Santa Clara County Tax Assessor the subject’s property taxes are paid as of the date of value. The assessed value of the subject is less than the market value of the subject. An appeal of the assessed value is not recommended. FIRE STATION SITE, GLEN LOMA RANCH MARKET ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 37 Market Analysis MARKET MAP Residential Land Market Residential land values are directly tied to supply and demand of current housing product. Land values vary depending on location, size, permitted uses, and allowable density. Unfortunately, there are no meaningful statistics for residential land values in Santa Clara County and the subject’s submarket of Gilroy. However, with the prices of homes going up in the long term, land prices have also experienced a notable upward trend over the past years. The Bay Area and Santa Clara County have experienced tremendous growth in the last decade, in large part due to the various tech companies located in the area, and, thus, these areas command some of the highest home prices in the region. As seen in the graph below, the upward trend in home prices peaked in mid-2022 when the interest rate hikes started to negatively impact the residential market. Higher interest rates resulted in declining home values, with the home price index for December 2022 down to the same level as August 2021. The index bottomed out in February 2023 and has gradually increased since then. FIRE STATION SITE, GLEN LOMA RANCH MARKET ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 38 Residential land is typically purchased contingent on project approval or with entitlements (tentative or final map) in place. When contingent upon approvals, the risk to a developer is significantly reduced, putting upward pressure on the price. Prices for land purchased without this contingency are typically lower than for land purchased on a contingency. The price differential is especially large as the risk increases. We note that citizen participation in planning activities is very high in certain municipalities; thus, the approval process for residential projects can become political, long and arduous. It is not uncommon for new projects to take three to four years for development approval. The value of entitlements depends on the risk, cost and time to get them. In some cities, for example Los Gatos and Palo Alto, the approval process is excruciating. On the other hand, Milpitas and San Jose are fairly developer friendly. Buyer types range from the individual developer to large-scale national builders, depending on the size of the site. Small-scale developers are typical buyers for sites less than five acres in size who will purchase a single-family site and develop a home for their own residence. The South County area is a more affordable market, but overall, less desirable than the rest of the Santa Clara County. Morgan Hill, also an affordable option, is more desirable than Gilroy, due to its closer proximity to the rest of the Bay Area. Nonetheless, a site with entitlements is overall much more desirable than speculative land. Listing times for speculative land typically exceed two years. However, entitled and allocated sites can sell more quickly; significant activity has been noted in the previous years for fully entitled sites and finished sites, or lots that are ready to be built. Residential land in the density ranged suited for the subject is priced at near $15-$20 per square foot of land area. Finished residential product in Glen Loma is selling for between $950,000 and $985,000+ for new duets and $1.1 million to $1.6+ million for new detached single family residential product. There are no new multiunit building townhomes currently for sale; however, several resales in Ascent at Glen Loma Ranch, built 2022-2023, have sold recently for $755,000 to $890,000. Overall, the residential real estate market was showing solid signs of improvement during the pandemic years, and the City of Gilroy had overall fared well. Starting in mid-2022, increased interest rates and inflated construction costs resulted in a weakening of the market. The market has stabilized, and gradual growth has resumed. Gilroy is a secondary housing market; however, it is desirable given its proximity to Silicon Valley and its more affordable housing prices. FIRE STATION SITE, GLEN LOMA RANCH HIGHEST AND BEST USE ANALYSIS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 39 Highest and Best Use Analysis The Highest and Best Use of a property is the use that is legally permissible, physically possible, and financially feasible which results in the highest value. An opinion of the highest and best use results from consideration of the criteria noted above under the market conditions or likely conditions as of the effective date of value. Determination of highest and best use results from the judgment and analytical skills of the appraiser. It represents an opinion, not a fact. In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The primary determinants of the highest and best use as though vacant are (1) Legal permissibility, (2) Physical possibility, (3) Financial feasibility, and (4) Maximum productivity. Legally Permissible The subject site is zoned Glen Loma Ranch Special District, which controls the general nature of permissible uses and is appropriate for the location and physical elements of the subject property, providing for a consistency of use with the general neighborhood. The location of the subject property is appropriate for the uses allowed, as noted previously, and a change in zoning is unlikely. There are no known easements, encroachments, covenants or other use restrictions that would unduly limit or impede development. Given the subject location and proposed and actual proximate residential uses, we opine the fire station site could have been developed residentially, but for the donation to the City of Gilroy. As such, we have appraised the fire station site as of October 21, 2024 for a residential underlying land use. Physically Possible The physical characteristics of the subject site are presented in the Site Description and allow for a number of potential uses. Elements such as size, shape, availability of utilities, known hazards (flood, environmental, etc.), and other potential influences were considered. No physical attributes materially limit legally permissible and appropriate development. The most probable use of the site is for residential subdivision development, which conforms to the pattern of land use in the immediate area. Financially Feasible A review of published yield, rental and occupancy rates suggests that there is an undersupply of residential subdivision and demand is sufficient to support construction costs and timely absorption of additional inventory in this market. Therefore, near-term speculative development of the subject site is financially feasible. Maximally Productive Among the financially feasible uses, the use that results in the highest value (the maximally productive use) is the highest and best use. Considering these factors, the maximally productive use is for residential development. Highest and Best Use Conclusion The conclusion of the highest and best use is for residential development. Most Probable Buyer As of the date of value, the most probable buyer of the subject property is a developer. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 40 Land Valuation – Fire Station Site Methodology The Site Value is most often estimated using the sales comparison approach. This approach develops an indication of market value by analyzing closed sales, listings, or pending sales of properties similar to the subject, focusing on the difference between the subject and the comparables using all appropriate elements of comparison. This approach is based on the principles of supply and demand, balance, externalities, and substitution, or the premise that a buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. Unit of Comparison The unit of comparison depends on land use economics and how buyers and sellers use the property. The unit of comparison in this analysis is price per square foot. Elements of Comparison Elements of comparison are the characteristics or attributes of properties and transactions that cause the prices of real estate to vary. The primary elements of comparison considered in sales comparison analysis are as follows: (1) property rights conveyed, (2) financing terms, (3) conditions of sale, (4) market conditions, (5) location, and (6) physical characteristics. Comparable Sales Data To obtain and verify comparable sales of land properties, we conducted a search of public records, field surveys, interviews with knowledgeable real estate professionals in the area, and a review of our internal database. The following is a table summarizing each sale comparable and a map illustrating the location of each in relation to the subject. Details of each comparable follow the location map. We have researched and analyzed various land sales. We have relied on the best available data and our research/analysis and judgement in forming an opinion of value. Land Sales Summary Comp.Close Gross Sales Price Per No.of Escrow Sq. Ft.Location Zoning Actual Sq. Ft. 1 May-21 624,650 West Middle Avenue Morgan Hill, California RR-5Ac $2,100,000 $3.36 2 November-21 1,353,845 7120 Rece Lane Gilroy, California Glen Loma Ranch Special District $27,000,000 $19.94 3 June-23 503,989 SE corner Santa Teresa Blvd and Club Dr Gilroy, California Glen Loma Ranch Special District $10,000,000 $19.84 4 March-22 157,252 9130 & 9160 Kern Avenue Gilroy, California R-3/PUD $3,457,000 $21.98 5 November-20 146,928 Royal Way Gilroy, California R3 $3,175,000 $21.61 6 January-24 47,916 Edes Street Morgan Hill, California MU-F $1,500,000 $31.30 FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 41 FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 42 LAND COMPARABLE 1 Property Identification Property Name Land Property Address West Middle Avenue City County State Zip Morgan Hill, Santa Clara County, California 95037 MSA San Jose Submarket Morgan Hill Tax ID 779-05-054 VPA Property/Sale ID 11268348/1612847 Transaction Data Sale Status Recorded Close of Escrow May 13, 2021 Grantor/Seller Matsumoto Fam L Trust Grantee/Buyer Creative Center of Los Altos (Oakwood School) Recording Number 24999889 Property Rights Fee Simple Financing Typical Conditions of Sale Typical Days on Market 23 Sales Price $2,100,000 Adjusted Sales Price Indicators Price per Gross Acre $146,444.00 Price per Gross SF $3.40 Property Description Proposed Use Hold for future development Gross Land Area 14.34 Acres/624,650 SF Usable Land Area 14.19 Acres/618,116 SF Frontage Feet 200 Depth 970 No. of Lots 1 Rail Access No Water/Port Access No Visibility Average Corner/Interior Interior Shape L-Shaped Topography Level Utilities PG&E onsite; public water, sewer, and gas at the street. Drainage Assumed adequate Flood Hazard Zone D Zoning Code RR-5Ac Rural Residential General Plan Rural Residential FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 43 Remarks This property consists of a single parcel of rural residential land located along the southeast side of West Middle Avenue in Morgan Hill. The site has a generally L-shape and an interior lot configuration with approximately 200 feet of frontage along West Middle Avenue and a maximum depth of 970 feet. PG&E is onsite, and public water, sewer, and gas are available at the street. The site topography is level. The site has good access to commercial amenities in Morgan Hill. The underlying site contains 14.34 gross acres and 14.19 net acres. The property zoning and General Plan land use designation are Rural Residential. The property is a land site that was marketed as a possible subdivision site. The site was sold from Matsumoto Fam L Trust to Creative Center of Los Altos for $2,100,000 or $147,950 per acre with a close of escrow in June 2021. The purchase is for a long-term hold for future market rate housing. However, LAFCO is unlikely to allow annexation in the near term so future developments could be five to 15 years away. This sale is given minimal weight as it is a long-term development project, whereas the subject fire station site could be developed in the near term under the subject appraisal premise. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 44 LAND COMPARABLE 2 Property Identification Property Name Brix at Glen Loma Ranch (Nebbiolo II) Address 7120 Rece Lane City County State Zip Gilroy, Santa Clara County, California 95020 MSA San Jose Submarket Gilroy Tax ID 808-18-024 and (a portion of) 808-18-025 VPA Property/Sale ID 11330357/1656088 Transaction Data Sale Status Recorded Close of Escrow November 4, 2021 Grantor/Seller Filice Family Estate Grantee/Buyer Nebbiolo II - Gilroy, L.P. Recording Number 25154815 Property Rights Fee Simple Financing Cash Conditions of Sale Typical Sales Price $27,000,000 Adjusted Sales Price Indicators Price per Gross Acre $868,726.00 Price per Gross SF $19.94 Property Description Proposed Use 67 Single Family Lots Gross Land Area 31.08 Acres/1,353,845 SF Usable Land Area 31.08 Acres/1,353,845 SF Frontage Feet 704 No. of Lots 67 Proposed Units 67 Density (Units/Acre) 2.16 Rail Access No Water/Port Access No Visibility Average Corner/Interior Interior Shape Irregular Topography Rolling Utilities All available to the site Drainage Assumed adequate Flood Hazard Zone Zone D Zoning Code Glen Loma Ranch Special District residential and supportive uses General Plan Glen Loma Ranch Special District FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 45 Remarks These two contiguous parcels were undeveloped land with rolling topography and all utilities to the site. The original parcel numbers were 808-18-024 and (a portion of) 808-18-025 and the new parcel number after the 2021 transaction is 808-18-031. As of 2023, Tri Pointe Homes is currently building 67 single-family homes called the Brix at Glen Loma Ranch on 31.08 acres resulting in a density of 2.16 dwelling units per acre. Filice Family Estates sold two contiguous parcels in Glen Loma Ranch to Nebbiolo II - Gilroy, L.P. on November 4, 2021 for $27,000,000 or $19.94 per square foot of land area. There was a final map for 67 homesites at the time of sale. This equates to $402,985 per lot. The property was in contract for over 6 months. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 46 LAND COMPARABLE 3 Property Identification Property Name Palomino and McCutchin Creek Address Southeast corner Santa Teresa Blvd and Club Dr City County State Zip Gilroy, Santa Clara County, California 95020 MSA San Jose Submarket Gilroy Tax ID 808-43-009 and 808-43-010 VPA Property/Sale ID 11330286/1656048 Transaction Data Sale Status Recorded Close of Escrow June 15, 2023 Grantor/Seller Filice Family Estate Grantee/Buyer KB Home South Bay Inc Recording Number 0025490020 Property Rights Fee Simple Financing Cash Conditions of Sale Typical Sales Price $10,000,000 Adjusted Sales Price Indicators Price per Gross Acre $864,304.00 Price per Gross SF $19.84 Property Description Proposed Use 63 Single Family Lots Gross Land Area 11.57 Acres/503,989 SF Usable Land Area 11.57 Acres/503,989 SF Frontage Feet 530 No. of Lots 63 Proposed Units 63 Density (Units/Acre) 5.45 Rail Access No Water/Port Access No Visibility Good Corner/Interior Double Corner Shape Irregular Topography Gently sloping Utilities All available to the site Flood Hazard Zone Zone D Zoning Code Glen Loma Ranch Special District residential and supportive uses General Plan Glen Loma Ranch Special District FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 47 Remarks These are two contiguous parcels of undeveloped land in the Glen Loma Ranch master planned community. Parcel 808-43-010 is significantly larger than parcel 808-43-009. The combined area of these two parcels is 11.57 acres or 503,989 square feet. A creek impacts a portion of the site. The site is mostly level to gently sloping and utilities are available to the site. This double corner site is adjacent to the Solorsano Middle School and is located on a major thoroughfare in southwestern Gilroy. The Filice Family Estate sold two contiguous parcels in the Glen Loma Ranch master planned community to KB Homes in June 2023 for $10,000,000. This equates to $$158,730 per lot or $19.84 per square foot of land area. The contract began August 2022 with a close of escrow scheduled for June 15, 2023. KB Homes plans to build 63 single-family homes on the 11.57 acre site resulting in a density of 5.45 dwelling units per acre. The price per lot is lower than the Nebbiolo II (now called Brix at Glen Loma Ranch) transaction because there are high onsite development costs including a creek that needs to be relocated. Also, the buyer has to pay Filice $2,000,000 for a park fee reimbursement. If these factors did not exist, then the seller estimated the sale price would have been closer to $15,000,000 or $238,095 per lot. The final map was approved prior to the close of escrow. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 48 LAND COMPARABLE 4 Property Identification Property Name Medium Density Land Address 9130 & 9160 Kern Avenue City County State Zip Gilroy, Santa Clara County, California 95020 MSA San Jose Submarket Gilroy Tax ID 790-17-002 and 003 VPA Property/Sale ID 10695255/1605357 Transaction Data Sale Status Recorded Close of Escrow March 29, 2022 Grantor/Seller Crc Kern Investors LLC Grantee/Buyer DR Horton Bay Inc. Recording Number 0025272529 Property Rights Fee Simple Financing Cash to Seller Conditions of Sale Typical Sales Price $3,457,000 Adjusted Sales Price Indicators Price per Gross Acre $957,615.00 Price per Gross SF $21.98 Property Description Proposed Use Single-family residential subdivision Gross Land Area 3.61 Acres/157,252 SF Usable Land Area 3.61 Acres/157,252 SF No. of Lots 2 Proposed Bldg SF 0 Proposed Units 29 Density (Units/Acre) 8.03 Street Access Average Rail Access No Water/Port Access No Visibility Average Corner/Interior Interior Shape Generally Rectangular Topography Rolling Utilities All typical utilities are available to the site. Drainage Assumed adequate Flood Hazard Zone D Zoning Code R-3/PUD Medium Density Residential / Planned Unit Development General Plan Neighborhood District FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 49 Remarks The property consists of two contiguous parcels of vacant land located along the east side of Kern Avenue in Gilroy. The sites have a generally rectangular shape and an interior lot configuration with uneven and somewhat rolling topography. The property is located on the border of a residential neighborhood and an area of undeveloped vacant land. All utilities are available on the site. There are no off-site improvements, and there appears to be a drainage easement or culvert extending through the property. The underlying site contains 157,252 gross square feet or 3.61 gross acres. The property is zoned Medium Density Residential / Planned Unit Development, and the General Plan is Neighborhood District. DR Horton Bay Inc purchased this property in March 2022 from Crc Kern Investors LLC. The sale price was $3,457,000 or $21.98 per square foot of land. The buyer plans to develop the site with multifamily dwellings. The property was sold contingent on approvals. The buyer had been working on entitlements since 2020, and they had submitted a vesting tentative map for 29 single family residences in October 2020. Per the listing broker, the deal was extended an additional year due to an the Army Corp of Engineers and a puddle onsite which could have been natural habitat. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 50 LAND COMPARABLE 5 Property Identification Property Name Residential Subdivision Land Address Royal Way City County State Zip Gilroy, Santa Clara County, California 95020 MSA San Jose Submarket Gilroy Tax ID 799-44-093, 799-44-094, 799- 44-095, 799-44-096, 799-44- 097, 799-44-098, 799-44-101, 799-44-109, and 799-44-110 VPA Property/Sale ID 10770980/1532414 Transaction Data Sale Status Recorded Close of Escrow November 10, 2020 Grantor/Seller Elite Development Inc. Grantee/Buyer EHOF Fund II Acquisitions LLC Recording Number 24696045 Property Rights Fee Simple Financing Cash to Seller Conditions of Sale Typical Sales Price $3,175,000 Adjusted Sales Price Indicators Price per Gross Acre $941,299.00 Price per Gross SF $21.61 Property Description Proposed Use Residential Development Gross Land Area 3.37 Acres/146,928 SF Usable Land Area 3.37 Acres/146,928 SF Frontage Feet 360 Depth 330 No. of Lots 1 Proposed Units 65 Density (Units/Acre) 19.27 Street Access Average Rail Access No Water/Port Access No Visibility Average Corner/Interior Interior Shape Irregular Topography Level Utilities All available to the site Drainage Assumed adequate Flood Hazard Zone Zone X (unshaded) % in Flood Hazard 0.00% Zoning Code R3 Medium Density Residential General Plan Medium Density Residential FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 51 Remarks This property consists of nine contiguous parcels of vacant residential land located along the south side of Royal Way in Gilroy. The site has an irregular shape and an interior lot configuration with approximately 360 feet of frontage along Royal Way and a depth of 330 feet. The property abuts the Debell Uvas Creek bicycle/ walking path to the south and Gilroy High School to the west. The underlying site contains 146,928 gross square feet or 3.37 gross acres. The property zoning and General Plan land use designation are Medium Density Residential. EHOF Fund II Acquisitions LLC purchased this property in November 2020 from Elite Development Inc. The property sold above the asking price of $3,000,000. The sale price was $3,175,000 or $21.61 per square foot of land. The broker reported the seller had d iscussions with the City of Gilroy regarding development of the site with up to 65 units. The zoning of the property is R-3 that allows for 9 to 18 units per acre. Additional units would be approved for affordable housing. The seller had acquired the property in January 2016 for $1,800,000 or $12.25 per square foot. According to the broker the seller, a developer, has three other projects going and will develop the property next year if it does not sell. That is why he is not interested in waiting 9 to 18 months for entitlements. Although there were three full price offers, as of April 2019, all had various degrees of permitting/entitlement levels before closing. The property had previously been approved for 61 residential units of which a few were affordable units. The buyer is proposing to develop the site with a mix of duplexes, townhomes, and SFRs with a density of around 55 units per acre. At the time of sale, there were no approvals for the buyer's proposed project. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 52 LAND COMPARABLE 6 Property Identification Property Name Entitled Residential Land Address Edes Street City County State Zip Morgan Hill, Santa Clara County, California 95037 MSA San Jose Tax ID 767-18-046 VPA Property/Sale ID 11143697/1532260 Transaction Data Sale Status Recorded Close of Escrow January 18, 2024 Grantor/Seller Raymond and Richard Alcini Grantee/Buyer True Life Homes Recording Number 0025590903 Property Rights Fee Simple Financing Cash Conditions of Sale Typical Sales Price $1,500,000 Adjusted Sales Price Indicators Price per Gross Acre $1,363,636.00 Price per Gross SF $31.30 Price per Usable Acre $1,363,636 Price per Usable SF $31.30 Price per Unit $71,429 Property Description Gross Land Area 1.10 Acres/47,916 SF Usable Land Area 1.10 Acres/47,916 SF Frontage Feet 104 Depth 462 No. of Lots 1 Proposed Units 21 Density (Units/Acre) 19.09 Street Access Average Rail Access No Water/Port Access No Visibility Average Corner/Interior Interior Shape Rectangular Topography Level Utilities All available to the site Drainage Assumed adequate Flood Hazard Zone AE Zoning Code MU-F Mixed Use Flex General Plan Mixed Use Flex Edes St Plat FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 53 Remarks This property consists of a single parcel of vacant land located along the north side of Edes Street just off the west side of Monterey Road in Morgan Hill. The site has a long rectangular shape and an interior lot configuration one parcel west of Monterey Road. The site has approximately 100 feet of frontage along Edes Street and an average depth of 450 feet. The property is approximately one mile south of downtown Morgan Hill and the Morgan Hill Caltrain Station. The site contains 47,916 gross square feet or 1.10 gross acres. The property is zoned Mixed Use Flex and the General Plan land use designation is Mixed Use Flex (7 -24 du/ac); however, the site can be developed with certain commercial uses. According to the broker, the purchase price was negotiated years ago around 2020. The purchase was contingent upon the buyer receiving entitlements, which took years to acquire. The entitlement process took so long because there were some issues involving the site (specifics are unknown). The property sold with a tenant map in place for 21 townhome style condominium units. The broker also mentioned that he felt that the market value of the property, with entitlements in place, at the time of sale would have been closer to $2,300,000 or $110,000 per unit. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 54 Land Sales Comparison Analysis We analyzed the sales and made adjustments for differences in the elements of comparison previously listed. The comparable sales are adjusted to the subject: if the comparable sale was superior to the subject, we applied a negative adjustment to the comparable sale. A positive adjustment to the comparable property was applied if it was inferior to the subject. A summary of the elements of comparison follows. Transaction Adjustments Transaction adjustments include: (1) real property rights conveyed, (2) financing terms, and (3) conditions of sale. These items, which are applied prior to the market conditions and property adjustments, are discussed as follows: Real Property Rights Conveyed Real property rights conveyed influence sale prices and must be considered when analyzing a sale comparable. In the case of the subject property, the fee simple interest is considered. All the sale comparables conveyed the fee simple interest and no adjustment was warranted since the sites were purchased for land value. Financing Terms The transaction price of one property may differ from that of an identical property due to different financial arrangements. Sales involving financing terms that are not at or near market terms require adjustments for cash equivalency to reflect typical market terms. A cash equivalency procedure discounts the atypical mortgage terms to provide an indication of value at cash equivalent terms. All of the comparable sales involved cash transactions, therefore, no adjustments for this category were required. Conditions of Sale Atypical conditions of sale may result in a price that is higher or lower than a normal transaction. Such atypical conditions of sale often occur in conjunction with sales between related parties or those in which one of the parties is atypically motivated to complete the transaction. No adjustments were warranted for this element of comparison. Market Conditions Adjustment Market conditions change over time because of inflation, deflation, fluctuations in supply and demand, or other factors. Changing market conditions may create a need for adjustment to comparable sale transactions completed during periods of dissimilar market conditions. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 55 As shown in the table above, housing values increased from 2020 to the summer 2022, declined until winter 2023, and have increased gradually since then. Upward adjustments are made to the comparables. Physical Adjustments Physical adjustments are usually expressed quantitatively as percentages or dollar amounts that reflect the differences in value attributable to the various characteristics of the property. In some instances, however, qualitative adjustments are used. These adjustments are based on locational and physical characteristics and are applied after the application of transaction and market conditions adjustments. Location/Access/Views Location adjustments may be required when the locational characteristics of a comparable are different from those of the subject. These characteristics can include general neighborhood characteristics, freeway accessibility, privacy, views, neighboring properties, and other factors. Comparables Four and Five are adjusted upward for the subject’s superior locational characteristics. The remaining comparables are considered to be similar and are not adjusted. Size The size adjustment considers the size of the buyer pool for a property where a smaller investment will have more competition in comparison to a larger investment. The subject buyer type and investment size is considered in the size adjustment. Comparables One through Five are adjusted upward for the subject’s smaller size. Comparable Six is a similar size, thus no adjustment was given. Density The subject potential density is ±6.0 to 7.0 units per gross acre. Comparables One and Two are adjusted upward for the subject’s higher potential density. Comparable Six was adjusted down for the subject’s lower potential density. No other adjustments are warranted for this element of comparison. Approvals The subject does not have any approvals or land use entitlements. Comparables Two, Three, Four, and Six are adjusted downward for the subject’s lower level of approvals. No other adjustments are warranted for this element of comparison. FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 56 Topography Comparable Three is adjusted upward for the subject’s superior topography as the developer for Comparable Three would need to incur high creek relocation costs. Other This element of comparison considers items not yet adjusted for. Comparable One is adjusted upward for the subject’s superior development timeline. Comparables Two through Six are not adjusted for development timeline. An adjustment grid is presented below. Comparable Sale Number Subject 1 2 3 4 5 6 Date of Sale (Close of Escrow)Oct-24 May-21 Nov-21 Jun-23 Mar-22 Nov-20 Jan-24 Sale Price $2,100,000 $27,000,000 $10,000,000 $3,457,000 $3,175,000 $1,500,000 Land (SF)59,677 624,650 1,353,845 503,989 157,252 146,927 47,916 Price/SF $3.36 $19.94 $19.84 $21.98 $21.61 $31.30 Adjustments Property Rights Conveyed 0 0 0 0 0 0 Financing 0 0 0 0 0 0 Conditions of Sale 0.0%0.0%0.0%0.0%0.0%0.0% Normal Sale Price $2,100,000 $27,000,000 $10,000,000 $3,457,000 $3,175,000 $1,500,000 Market Conditions Adjustment Months Since Sale 42 36 17 32 48 9 Total Adjustment 10.58%9.04%4.23%8.04%12.08%2.31% Dollar Adjustment $222,075 $2,441,250 $423,333 $278,000 $383,646 $34,625 Time Adjusted Price $2,322,075 $29,441,250 $10,423,333 $3,735,000 $3,558,646 $1,534,625 Elements of Comparison Location/Access/Visibility 0.0%0.0%0.0%5.0%5.0%0.0% Size 15.0%15.0%15.0%5.0%5.0%0.0% Density 10.0%10.0%0.0%0.0%0.0%-10.0% Approvals 0.0%-25.0%-25.0%-20.0%0.0%-20.0% Topography 0.0%0.0%10.0%0.0%0.0%0.0% Other 50.0%0.0%0.0%0.0%0.0%0.0% Total % Adjustment 75.0%0.0%0.0%-10.0%10.0%-30.0% Adjusted Value $4,063,631 $29,441,250 $10,423,333 $3,361,500 $3,914,510 $1,074,238 Indicated Price Per SF of Land $6.51 $21.75 $20.68 $21.38 $26.64 $22.42 Comp #1 2 3 4 5 6 COMPARABLE LAND SALES ADJUSTMENT GRID: Fire Station Site FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 57 Conclusion Most of the comparables indicate a range from $20.68 to $26.64 per square foot, except Comparable One, which is an outlier due to its long development timeline. Most weight is given to Comparables Two through Six, which are most similar to the subject. These five comparables range from $20.68 to $26.64 per square foot with a median of $21.75. Overall, we have concluded to a unit value of $22.00 per square foot of gross land area. Based on this analysis, the value indication is summarized as follows: Future Fire Station Site: Sales Comparison Approach Conclusion 59,677 x $22.00 psf =$1,312,894 (Rounded)$1,315,000 FIRE STATION SITE, GLEN LOMA RANCH LAND VALUATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 58 Price per Unit Cross-check We have performed a cross-check for reasonableness. With the potential density range of ±6.0 to 7.0 units per gross acre, the number of dwelling units would be ±8 or 9 units for the subject site. Using 9 units, the implied price per unit is, therefore, ±$146,000, or $1,315,000 / 9 units. The comparables range from ±$70,000 to $400,000 per unit. Our value estimate is within the implied range of the data, and is reasonable. FIRE STATION SITE, GLEN LOMA RANCH RECONCILIATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 59 Reconciliation Summary of Value Indications The indicated values from the approaches used and our concluded market values for the subject property are summarized in the following table. To reach a final opinion of value, the reliability and relevance of each value indication was considered based upon the quality of the data and applicability of the assumptions underlying each approach. Given the availability and reliability of data within the Sales Comparison Approach, this approach was given primary weight in reconciling to the final value conclusions. Furthermore, land properties such as the subject are typically purchased by developers, who primarily rely upon the methods employed by the Sales Comparison Approach. We have considered whether a bulk discount is warranted and considering the likely buyer type and overall property legal, physical and value characteristics, we have concluded a bulk discount is not warranted. The findings and conclusions are further contingent upon the following extraordinary assumptions and/or hypothetical conditions, the use of which might have affected the assignment results: Extraordinary Assumptions: • It is an extraordinary assumption of this report that the land acreage is accurate. If the actual subject property acreage is different our concluded results may be impacted. Hypothetical Conditions: • None Exposure Time and Marketing Period Based on statistical information about days on market, escrow length, and marketing times gathered through national investor surveys, sales verification, and interviews of market participants, marketing Value Indications Approach to Value As Is Sales Comparison $1,315,000 Cost Not Developed Income Capitalization Not Developed Value Conclusion Component As Is Value Type Fair Market Value Real Property Interest Fee Simple Effective Date of Value October 21, 2024 Value Conclusion $1,315,000 Value per SF of Land $22.04 psf FIRE STATION SITE, GLEN LOMA RANCH RECONCILIATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 60 and exposure time estimates of 6 to 12 months and 6 to 12 months, respectively, are considered reasonable and appropriate for the subject. FIRE STATION SITE, GLEN LOMA RANCH GENERAL ASSUMPTIONS & LIMITING CONDITIONS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 61 General Assumptions and Limiting Conditions This appraisal is subject to the following general assumptions and limiting conditions: 1. The legal description – if furnished to us – is assumed to be correct. 2. No responsibility is assumed for legal matters, questions of survey or title, soil or subsoil conditions, engineering, availability or capacity of utilities, or other similar technical matters. The appraisal does not constitute a survey of the property appraised. All existing liens and encumbrances have been disregarded and the property is appraised as though free and clear, under responsible ownership and competent management unless otherwise noted. 3. Unless otherwise noted, the appraisal will value the property as though free of contamination. Valbridge Property Advisors | Northern California will conduct no hazardous materials or contamination inspection of any kind. It is recommended that the client hire an expert if the presence of hazardous materials or contamination poses any concern. 4. The stamps and/or consideration placed on deeds used to indicate sales are in correct relationship to the actual dollar amount of the transaction. 5. Unless otherwise noted, it is assumed there are no encroachments, zoning violations or restrictions existing in the subject property. 6. The appraiser is not required to give testimony or attendance in court by reason of this appraisal, unless previous arrangements have been made. 7. Unless expressly specified in the engagement letter, the fee for this appraisal does not include the attendance or giving of testimony by Appraiser at any court, regulatory or other proceedings, or any conferences or other work in preparation for such proceeding. If any partner or employee of Valbridge Property Advisors | Northern California is asked or required to appear and/or testify at any deposition, trial, or other proceeding about the preparation, conclusions or any other aspect of this assignment, client shall compensate Appraiser for the time spent by the partner or employee in appearing and/or testifying and in preparing to testify according to the Appraiser’s then current hourly rate plus reimbursement of expenses. 8. The values for land and/or improvements, as contained in this report, are constituent parts of the total value reported and neither is (or are) to be used in making a summation appraisal of a combination of values created by another appraiser. Either is invalidated if so used. 9. The dates of value to which the opinions expressed in this report apply are set forth in this report. We assume no responsibility for economic or physical factors occurring at some point at a later date, which may affect the opinions stated herein. The forecasts, projections, or operating estimates contained herein are based on current market conditions and anticipated short -term supply and demand factors and are subject to change with future conditions. Appraiser is not responsible for determining whether the date of value requested by Client is appropriate for Client’s intended use. 10. The sketches, maps, plats and exhibits in this report are included to assist the reader in visualizing the property. The appraiser has made no survey of the property and assumed no responsibility in connection with such matters. 11. The information, estimates and opinions, which were obtained from sources outside of this office, are considered reliable. However, no liability for them can be assumed by the appraiser. FIRE STATION SITE, GLEN LOMA RANCH GENERAL ASSUMPTIONS & LIMITING CONDITIONS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 62 12. Possession of this report, or a copy thereof, does not carry with it the right of publication. Neither all, nor any part of the content of the report, or copy thereof (including conclusions as to property value, the identity of the appraisers, professional designations, reference to any professional appraisal organization or the firm with which the appraisers are connected), shall be disseminated to the public through advertising, public relations, news, sales, or other media without prior written consent and approval. 13. No claim is intended to be expressed for matters of expertise that would require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers. We claim no expertise in areas such as, but not limited to, legal, survey, structural, environmental, pest control, mechanical, etc. 14. This appraisal was prepared for the sole and exclusive use of the client for the function outlined herein. Any party who is not the client or intended user identified in the appraisal or engagement letter is not entitled to rely upon the contents of the appraisal without express written consent of Valbridge Property Advisors | Northern California and Client. The Client shall not include partners, affiliates, or relatives of the party addressed herein. The appraiser assumes no obligation, liability or accountability to any third party. 15. Distribution of this report is at the sole discretion of the client, but third-parties not listed as an intended user on the face of the appraisal or the engagement letter may not rely upon the contents of the appraisal. In no event shall client give a third-party a partial copy of the appraisal report. We will make no distribution of the report without the specific direction of the client. 16. This appraisal shall be used only for the function outlined herein, unless expressly authorized by Valbridge Property Advisors | Northern California. 17. This appraisal shall be considered in its entirety. No part thereof shall be used separately or out of context. 18. Unless otherwise noted in the body of this report, this appraisal assumes that the subject property does not fall within the areas where mandatory flood insurance is effective. Unless otherwise noted, we have not completed nor have we contracted to have completed an investigation to identify and/or quantify the presence of non-tidal wetland conditions on the subject property. Because the appraiser is not a surveyor, he or she makes no guarantees, express or implied, regarding this determination. 19. The flood maps are not site specific. We are not qualified to confirm the location of the subject property in relation to flood hazard areas based on the FEMA Flood Insurance Rate Maps or other surveying techniques. It is recommended that the client obtain a confirmation of the subject property’s flood zone classification from a licensed surveyor. 20. If the appraisal is for mortgage loan purposes 1) we assume satisfactory completion of improvements if construction is not complete, 2) no consideration has been given for rent loss during rent-up unless noted in the body of this report, and 3) occupancy at levels consistent with our “Income and Expense Projection” are anticipated. 21. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures which would render it more or less valuable. No responsibility is assumed for such conditions or for engineering which may be required to discover them. FIRE STATION SITE, GLEN LOMA RANCH GENERAL ASSUMPTIONS & LIMITING CONDITIONS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 63 22. Our inspection included an observation of the land and improvements thereon only. It was not possible to observe conditions beneath the soil or hidden structural components within the improvements. We inspected the buildings involved, and reported damage (if any) by termites, dry rot, wet rot, or other infestations as a matter of information, and no guarantee of the amount or degree of damage (if any) is implied. Condition of heating, cooling, ventilation, electrical and plumbing equipment is considered to be commensurate with the condition of the balance of the improvements unless otherwise stated. Should the client have concerns in these areas, it is the client’s responsibility to order the appropriate inspections. The appraiser does not have the skill or expertise to make such inspections and assumes no responsibility for these items. 23. This appraisal does not guarantee compliance with building code and life safety code requirements of the local jurisdiction. It is assumed that all required licenses, consents, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value conclusion contained in this report is based unless specifically stated to the contrary. 24. When possible, we have relied upon building measurements provided by the client, owner, or associated agents of these parties. In the absence of a detailed rent roll, reliable public records, or “as-built” plans provided to us, we have relied upon our own measurements of the subject improvements. We follow typical appraisal industry methods; however, we recognize that some factors may limit our ability to obtain accurate measurements including, but not limited to, property access on the day of inspection, b asements, fenced/gated areas, grade elevations, greenery/shrubbery, uneven surfaces, multiple story structures, obtuse or acute wall angles, immobile obstructions, etc. Professional building area measurements of the quality, level of detail, or accuracy of professional measurement services are beyond the scope of this appraisal assignment. 25. We have attempted to reconcile sources of data discovered or provided during the appraisal process, including assessment department data. Ultimately, the measurements that are deemed by us to be the most accurate and/or reliable are used within this report. While the measurements and any accompanying sketches are considered to be reasonably accurate and reliable, we cannot guarantee their accuracy. Should the client desire more precise measurement, they are urged to retain the measurement services of a qualified professional (space planner, architect or building engineer) as an alternative source. If this alternative measurement source reflects or reveals substantial differences with the measurements used within the report, upon request of the client, the appraiser will submit a revised report for an additional fee. 26. In the absence of being provided with a detailed land survey, we have used assessment department data to ascertain the physical dimensions and acreage of the property. Should a survey prove this information to be inaccurate, upon request of the client, the appraiser will submit a revised report for an additional fee. 27. If only preliminary plans and specifications were available for use in the preparation of this appraisal, and a review of the final plans and specifications reveals substantial differences upon request of the client the appraiser will submit a revised report for an additional fee. FIRE STATION SITE, GLEN LOMA RANCH GENERAL ASSUMPTIONS & LIMITING CONDITIONS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 64 28. Unless otherwise stated in this report, the value conclusion is predicated on the assumption that the property is free of contamination, environmental impairment or hazardous materials. Unless otherwise stated, the existence of hazardous material was not observed by the appraiser and 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-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required for discovery. The client is urged to retain an expert in this field, if desired. 29. The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. We have not made a specific compliance survey of the property to determine if it is in conformity with the various requirements of the ADA. It is possible that a compliance surv ey of the property, together with an analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible noncompliance with the requirements of ADA in developing an opinion of value. 30. This appraisal applies to the land and building improvements only. The value of trade fixtures, furnishings, and other equipment, or subsurface rights (minerals, gas, and oil) were not considered in this appraisal unless specifically stated to the contrary. 31. No changes in any federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated, unless specifically stated to the contrary. 32. Any income and expense estimates contained in the appraisal report are used only for the purpose of estimating value and do not constitute prediction of future operating results. Furthermore, it is inevitable that some assumptions will not materialize and that unanticipated events may occur that will likely affect actual performance. 33. Any estimate of insurable value, if included within the scope of work and presented herein, is based upon figures developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage. This analysis should not be relied upon to determine insurance coverage and we make no warranties regarding the accuracy of this estimate. 34. The data gathered in the course of this assignment (except data furnished by the Client) shall remain the property of the Appraiser. The appraiser will not violate the confidential nature of the appraiser- client relationship by improperly disclosing any confidential information furnished to the appraiser. Notwithstanding the foregoing, the Appraiser is authorized by the client to disclose all or any portion of the appraisal and related appraisal data to appropriate representatives of the Appraisal Institute if such disclosure is required to enable the appraiser to comply with the Bylaws and Regulations of such Institute now or hereafter in effect. FIRE STATION SITE, GLEN LOMA RANCH GENERAL ASSUMPTIONS & LIMITING CONDITIONS © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 65 35. You and Valbridge Property Advisors | Northern California both agree that any dispute over matters in excess of $5,000 will be submitted for resolution by arbitration. This includes fee disputes and any claim of malpractice. The arbitrator shall be mutually selected. If Valbridge Property Advisors | Northern California and the client cannot agree on the arbitrator, the presiding head of the Local County Mediation & Arbitration panel shall select the arbitrator. Such arbitration shall be binding and final. In agreeing to arbitration, we both acknowledge that, by agreeing to binding arbitration, each of us is giving up the right to have the dispute decided in a court of law before a judge or jury. In the event that the client, or any other party, makes a claim against Valbridge Property Advisors | Northern California or any of its employees in connections with or in any way relating to this assignment, the maximum damages recoverable by such claimant shall be the amount actually received by Valbridge Property Advisors | Northern California for this assignment, and under no circumstances shall any claim for consequential damages be made. 36. Valbridge Property Advisors | Northern California shall have no obligation, liability, or accountability to any third party. Any party who is not the “client” or intended user identified on the face of the appraisal or in the engagement letter is not entitled to rely upon the contents of the appraisal without the express written consent of Valbridge Property Advisors | Northern California. “Client” shall not include partners, affiliates, or relatives of the party named in the engagement letter. Client shall hold Valbridge Property Advisors | Northern California and its employees harmless in the event of any lawsuit brought by any third party, lender, partner, or part-owner in any form of ownership or any other party as a result of this assignment. The client also agrees that in case of lawsuit arising from or in any way involving these appraisal services, client will hold Valbridge Property Advisors | Northern California harmless from and against any liability, loss, cost, or expense incurred or suffered by Valbridge Property Advisors | Northern California in such action, regardless of its outcome. 37. The Valbridge Property Advisors office responsible for the preparation of this report is independently owned and operated by San Francisco Bay Area | East Bay | Oakland | Walnut Creek. Neither Valbridge Property Advisors, Inc., nor any of its affiliates has been engaged to provide this report. Valbridge Property Advisors, Inc. does not provide valuation services, and has taken no part in the preparation of this report. 38. If any claim is filed against any of Valbridge Property Advisors, Inc., a Florida Corporation, its affiliates, officers or employees, or the firm providing this report, in connection with, or in any way arising out of, or relating to, this report, or the engagement of the firm providing this report, then (1) under no circumstances shall such claimant be entitled to consequential, special or other damages, except only for direct compensatory damages, and (2) the maximum amount of such compensatory damages recoverable by such claimant shall be the amount actually received by the firm engaged to provide this report. 39. This report and any associated work files may be subject to evaluation by Valbridge Property Advisors, Inc., or its affiliates, for quality control purposes. 40. Acceptance and/or use of this appraisal report constitutes acceptance of the foregoing general assumptions and limiting conditions. FIRE STATION SITE, GLEN LOMA RANCH CERTIFICATION © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 66 Certification – Josh Fronen, MAI I certify that, to the best of my knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. 4. The undersigned has performed services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. 5. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 6. My engagement in this assignment was not contingent upon developing or reporting predetermined results. 7. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value opinion, the attainment of a stipulated result, or th e occurrence of a subsequent event directly related to the intended use of this appraisal. 8. My analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 9. Josh Fronen has personally inspected the subject property. 10. Heidi Fielding provided significant real property appraisal assistance to the person signing this certification. Specific details as to the assistance provided is included in the Scope of Work section of this report. 11. The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 12. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 13. As of the date of this report, the undersigned has completed the continuing education program for Designated Members of the Appraisal Institute. Josh Fronen, MAI Managing Director California Certified License #AG028548 License Expires 12-18-2025 FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 67 Addenda Glossary Qualifications • Josh Fronen, MAI - Managing Director Information on Valbridge Property Advisors Office Locations FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 68 Glossary Definitions are taken from The Dictionary of Real Estate Appraisal, 7th Edition (Dictionary), the Uniform Standards of Professional Appraisal Practice (USPAP), and Building Owners and Managers Association International (BOMA). Absolute Net Lease A lease in which the tenant pays all expenses including structural maintenance, building reserves, and management; often a long-term lease to a credit tenant. (Dictionary) Amortization The process of retiring a debt or recovering a capital investment, typically through scheduled, systematic repayment of the principal; a program of periodic contributions to a sinking fund or debt retirement fund. (Dictionary) As Is Market Value The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Interagency Appraisal and Evaluation Guidelines) Note that the use of the “as is” phrase is specific to appraisal regulations pursuant to FIRREA applying to appraisals prepared for regulated lenders in the United States. The concept of an “as is” value is not included in the Standards of Valuation Practice of the Appraisal Institute, Uniform Standards of Professional Appraisal Practice, or International Valuation Standards. (Dictionary) Base Rent The minimum rent stipulated in a lease. (Dictionary) Base Year The year on which escalation clauses in a lease are based. (Dictionary) Building Common Area In office buildings, the areas of the building that provide services to building tenants but that are not included in the office area or store area of any specific tenant. These areas may include, but shall not be limited to, main and auxiliary lobbies, atrium spaces at the level of the finished floor, concierge areas or security desks, conference rooms, lounges or vending areas, food service facilities, health or fitness centers, daycare facilities, locker or shower facilities, mail rooms, fire control rooms, fully enclosed courtyards outside the exterior walls, and building core and service areas such as fully enclosed mechanical or equipment rooms. Specifically excluded from building common area are floor common areas, parking space, portions of loading docks outside the building line, and major vertical penetrations. (BOMA) Building Rentable Area The sum of all floor rentable areas. Floor rentable area is the result of subtracting from the gross measured area of a floor the major vertical penetrations on that same floor. It is generally fixed for the life of the building and is rarely affected by changes in corridor size or configuration. (BOMA) Bulk Value The value of multiple units, subdivided plots, or properties in a portfolio as though sold together in a single transaction. (Dictionary) Certificate of Occupancy (COO) A formal written acknowledgment by an appropriate unit of local government that a new construction or renovation project is at the stage where it meets applicable health and safety codes and is ready for commercial or residential occupancy. (Dictionary) Common Area Maintenance (CAM) The expense of operating and maintaining common areas; may or may not include management charges and usually does not include capital expenditures on tenant improvements or other improvements to the property. (Dictionary) The amount of money charged to tenants for their shares of maintaining a [shopping] center’s common area. The charge that a tenant pays for shared services and facilities such as electricity, security, and maintenance of parking lots. Items charged to common area maintenance may include cleaning services, parking lot sweeping and maintenance, snow removal, security, [amenities,] and upkeep. (ICSC – International Council of Shopping Centers, 4th Ed.) Condominium An attached, detached, or stacked unit within or attached to a structure with common areas that are held as tenants in common (an undivided interest) with other owners in the project. The units can be residential, commercial, industrial, or parking spaces or boat docks. These units are commonly defined by state laws in their locations. Because units can be stacked on top of other units, these units can be defined both vertically and horizontally. (Dictionary) Conservation Easement An interest in real estate restricting future land use to preservation, conservation, wildlife habitat, or some FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 69 combination of those uses. A conservation easement may permit farming, timber harvesting, or other uses of a rural nature as well as some types of conservation-oriented development to continue, subject to the easement. (Dictionary) Contributory Value A type of value that reflects the amount a property or component of a property contributes to the value of another asset or to the property as a whole. The change in the value of a property as a whole, whether positive or negative, resulting from the addition or deletion of a property component. Also called deprival value in some countries. (Dictionary) Debt Coverage Ratio (DCR) The ratio of net operating income to annual debt service (DCR = NOI÷Im), which measures the relative ability of a property to meet its debt service out of net operating income; also called debt service coverage ratio (DSCR). A larger DCR typically indicates a greater ability for a property to withstand a reduction of income, providing an improved safety margin for a lender. (Dictionary) Deed Restriction A provision written into a deed that limits the use of land. Deed restrictions usually remain in effect when title passes to subsequent owners. (Dictionary) Depreciation In appraisal, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the value of the improvement on the same date. In accounting, an allocation of the original cost of an asset, amortizing the cost over the asset’s life; calculated using a variety of standard techniques. (Dictionary) Disposition Value The most probable price that a specified interest in property should bring under the following conditions: 1. Consummation of a sale within a specified time, which is shorter than the typical exposure time for such a property in that market. 2. The property is subjected to market conditions prevailing as of the date of valuation; 3. Both the buyer and seller are acting prudently and knowledgeably; 4. The seller is under compulsion to sell; 5. The buyer is typically motivated; 6. Both parties are acting in what they consider to be their best interests; 7. An adequate marketing effort will be made during the exposure time; 8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto; and 9. 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. This definition can also be modified to provide for valuation with specified financing terms. (Dictionary) Double Net (Net Net) Lease An alternative term for a type of net lease. In some markets, a net net lease is defined as a lease in which the tenant is responsible to pay both property taxes and premiums for insuring the building(s). (Valbridge) (The market definition of a double net lease varies depending on the market) Easement The right to use another’s land for a stated purpose. (Dictionary) EIFS Exterior Insulation Finishing System. This is a type of exterior wall cladding system. Sometimes referred to as dry-vit. Effective Date 1. The date on which the appraisal opinion applies. (SVP) 2. The date to which an appraiser’s analyses, opinions, and conclusions apply; also referred to as date of value. (USPAP, 2020-2021 ed.) 3. The date that a lease goes into effect. (Dictionary) Effective Gross Income (EGI) The anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income. (Dictionary) Effective Rent Total base rent, or minimum rent stipulated in a lease, over the specified lease term minus rent concessions; the rent that is effectively paid by a tenant net of financial concessions provided by a landlord. (TIs). (Dictionary) EPDM Ethylene Propylene Diene Monomer Rubber. A type of synthetic rubber typically used for roof coverings. FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 70 Escalation Clause A clause in an agreement that provides for the adjustment of a price or rent based on some event or index. e.g., a provision to increase rent if operating expenses increase; also called escalator clause, expense recovery clause or stop clause. (Dictionary) Estoppel Certificate A signed statement by a party (such as a tenant or a mortgagee) certifying, for another’s benefit, that certain facts are correct, such as that a lease exists, that there are no defaults, and that rent is paid to a certain date. (Black’s) In real estate, a buyer of rental property typically requests estoppel certificates from existing tenants. Sometimes referred to as an estoppel letter. (Dictionary) Excess Land Land that is not needed to serve or support the existing use. The highest and best use of the excess land may or may not be the same as the highest and best use of the improved parcel. Excess land has the potential to be sold separately and is valued separately. (Dictionary) Excess Rent The amount by which contract rent exceeds market rent at the time of the appraisal; created by a lease favorable to the landlord (lessor) and may reflect unusual management, unknowledgeable or unusually motivated parties, a lease execution in an earlier, stronger rental market, or an agreement of the parties. (Dictionary) Expense Stop A clause in a lease that limits the landlord’s expense obligation, which results in the lessee paying operating expenses above a stated level or amount. (Dictionary) Exposure Time 1. The time a property remains on the market. 2. An opinion, based on supporting market data, of the length of time that 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. (USPAP, 2020-2021 ed.) Extraordinary Assumption An assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trends; or the integrity of data used in an analysis. (USPAP) Fee Simple Estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. (Dictionary) Floor Common Area In an office building, the areas on a floor such as washrooms, janitorial closets, electrical rooms, telephone rooms, mechanical rooms, elevator lobbies, and public corridors which are available primarily for the use of tenants on that floor. In essence, floor common area represents all of the area on the floor that is common to that respective floor with the exception of those areas that penetrate through the floor, such as the elevator shaft and stairwell. The significant point to be made is that floor common area is not part of the tenant’s usable area. (BOMA) Full Service (Gross) Lease A lease in which the landlord receives stipulated rent and is obligated to pay all of the property’s operating and fixed expenses; also called a full service lease. (Dictionary) Furniture, Fixtures, and Equipment (FF&E) Business trade fixtures and personal property, exclusive of inventory. (Dictionary) Going-Concern Value An outdated label for the market value of all the tangible and intangible assets of an established and operating business with an indefinite life, as if sold in aggregate; more accurately termed the market value of the going concern or market value of the total assets of the business. (Dictionary) Gross Building Area (GBA) 1. Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved. 2. Gross leasable area plus all common areas. 3. For residential space, the total area of all floor levels measured from the exterior of the walls and including the superstructure and substructure basement; typically does not include garage space. (Dictionary) Gross Measured Area The total area of a building enclosed by the dominant portion (the portion of the inside finished surface of the permanent outer building wall which is 50 percent or more of the vertical floor-to-ceiling dimension, at the given point being measured as one moves horizontally along the wall), excluding parking areas and loading docks (or portions of same) outside the building line. It is FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 71 generally not used for leasing purposes and is calculated on a floor by floor basis. (BOMA) Gross Up Method A method of calculating variable operating expenses in income-producing properties when less than 100% occupancy is assumed. Expenses reimbursed based on the amount of occupied space, rather than on the total building area, are described as “grossed up.” (Dictionary) Gross Sellout Value (Sum of the Retail Values) The sum of the separate and distinct market value opinions for each of the units in a condominium, subdivision development, or portfolio of properties, as of the date of valuation. The aggregate of retail values does not represent the value of all the units as though sold together in a single transaction; it is simply the total of the individual market value conclusions. An appraisal has an effective date, but summing the sale prices of multiple units over an extended period of time will not be the value on that one day unless the prices are discounted to make the value equivalent to what another developer or investor would pay for the bulk purchase of the units. Also called the aggregate of the retail values, aggregate retail selling price or sum of the retail values. (Dictionary) Ground Lease A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor at the end of the lease term. (Dictionary) Ground Rent The rent paid for the right to use and occupy land according to the terms of a ground lease; the portion of the total rent allocated to the underlying land. (Dictionary) HVAC Heating, ventilation, air conditioning (HVAC) system. A unit that regulates the temperature and distribution of heat and fresh air throughout a building. (Dictionary) Highest and Best Use 1. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. 2. The use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset’s existing use of for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid. (IVS) 3. [The] highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. (Uniform Appraisal Standards for Federal Land Acquisitions) (Dictionary) Hypothetical Condition 1. A condition that is presumed to be true when it is known to be false. (SVP) 2. A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP) Insurable Value (Replacement Cost for Insurance Purposes) The estimated cost, at current prices as of the effective date of valuation, of a substitute for the building being valued, using modern materials and current standards, design, and layout for insurance coverage purposes guaranteeing that damaged property is replaced with new property (i.e., depreciation is not deducted). (Dictionary) Investment Value 1. The value of a property to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market. (Dictionary) 2. The value of an asset to the owner or a prospective owner given individual investment or operational objectives (may also be known as worth). (IVS) Just Compensation In condemnation, the amount of loss for which a property owner is compensated when his or her property is taken. Just compensation should put the owner in as good a position pecuniarily as he or she would have been if the property had not been taken. (Dictionary) Leased Fee Interest The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires. (Dictionary) FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 72 Leasehold Interest (Leasehold Estate) The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. (Dictionary) See also Positive Leasehold and Negative Leasehold. Lessee (Tenant) One who has the right to occupancy and use of the property of another for a period of time according to a lease agreement. (Dictionary) Lessor (Landlord) One who conveys the rights of occupancy and use to others under a lease agreement. (Dictionary) Liquidation Value The most probable price that a specified interest in property should bring under the following conditions: 1. Consummation of a sale within a short time period. 2. The property is subjected to market conditions prevailing as of the date of valuation. 3. Both the buyer and seller are acting prudently and knowledgeably. 4. The seller is under extreme compulsion to sell. 5. The buyer is typically motivated. 6. Both parties are acting in what they consider to be their best interests. 7. A normal marketing effort is not possible due to the brief exposure time. 8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto. 9. 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. (Dictionary) Loan to Value Ratio (LTV) The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage. (Dictionary) Major Vertical Penetrations Stairs, elevator shafts, flues, pipe shafts, vertical ducts, and the like, and their enclosing walls. Atria, lightwells and similar penetrations above the finished floor are included in this definition. Not included, however, are vertical penetrations built for the private use of a tenant occupying office areas on more than one floor. Structural columns, openings for vertical electric cable or telephone distribution, and openings for plumbing lines are not considered to be major vertical penetrations. (BOMA) Market Rent The most probable rent that a property should bring in a competitive and open market under all the conditions requisite to a fair lease transaction, the lessee and the lessor each acting prudently and knowledgeably, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the execution of a lease as of a specified date under conditions whereby: 1. Lessee and lessor are typically motivated; 2. Both parties are well informed or well advised, and acting in what they consider their best interests; 3. Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and 4. The rent reflects specified terms and conditions, such as permitted uses, use restrictions, expense obligations, duration, concessions, rental adjustments and revaluations, renewal and purchase options, and tenant improvements (TIs). (Appraisal Institute) Market Value The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States: The most probable price that 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 United States dollars or in terms of financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (Dictionary; 12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994) Marketing Time An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 73 from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of the Appraisal Foundation) Master Lease 1. A lease in which a part or the entire property is leased to a single entity (the master lessee) in return for a stipulated rent. The master lessee then subleases the property to multiple tenants. 2. The first lease in a sandwich lease. (Dictionary) Modified Gross Lease A lease in which the landlord receives stipulated rent and is obligated to pay some, but not all, of the property’s operating and fixed expenses. Since assignment of expenses varies among modified gross leases, expense responsibility must always be specified. In some markets, a modified gross lease may be called a double net lease, net net lease, partial net lease, or semi-gross lease. (Dictionary) Negative Leasehold A lease situation in which the market rent is less than the contract rent. (Dictionary) Operating Expense Ratio The ratio of total operating expenses to effective gross income (TOE/EGI); the complement of the net income ratio, i.e., OER = 1 – NIR (Dictionary) Option A legal contract, typically purchased for a stated consideration, that permits but does not require the holder of the option (known as the optionee) to buy, sell, or lease real estate for a stipulated period of time in accordance with specified terms; a unilateral right to exercise a privilege. (Dictionary) Partial Interest Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common or easement. (Dictionary) Pass Through A tenant’s portion of operating expenses that may be composed of common area maintenance (CAM), real property taxes, property insurance, and any other expenses determined in the lease agreement to be paid by the tenant. (Dictionary) Percentage Lease A lease in which the rent or some portion of the rent represents a specified percentage of the volume of business, productivity, or use achieved by the tenant. (Dictionary) Positive Leasehold A lease situation in which the market rent is greater than the contract rent. (Dictionary) Potential Gross Income (PGI) The total income attributable to property at full occupancy before vacancy and operating expenses are deducted. (Dictionary) Prospective Opinion of Value A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. (Dictionary) Replacement Cost The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout. (Dictionary) Reproduction Cost The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all of the deficiencies, superadequacies, and obsolescence of the subject building. (Dictionary) Retrospective Value Opinion A value opinion effective as of a specified historical date. The term retrospective does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., “retrospective market value opinion.” (Dictionary) Sandwich Leasehold Estate The interest held by the sandwich leaseholder when the property is subleased to another party; a type of leasehold estate. (Dictionary) Sublease An agreement in which the lessee in a prior lease conveys the right of use and occupancy of a property to another, the sublessee, for a specific period of time, which may or may not be coterminous with the underlying lease term. (Dictionary) FIRE STATION SITE, GLEN LOMA RANCH ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 74 Subordination A contractual arrangement in which a party with a claim to certain assets agrees to make that claim junior, or subordinate, to the claims of another party. (Dictionary) Surplus Land Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel. (Dictionary) TPO Thermoplastic polyolefin, a resilient synthetic roof covering. Triple Net (Net Net Net) Lease An alternative term for a type of net lease. In some markets, a net net net lease is defined as a lease in which the tenant assumes all expenses (fixed and variable) of operating a property except that the landlord is responsible for structural maintenance, building reserves, and management; also called NNN lease, net net net lease, or fully net lease. (Dictionary) (The market definition of a triple net lease varies; in some cases tenants pay for items such as roof repairs, parking lot repairs, and other similar items.) Usable Area The measured area of an office area, store area, or building common area on a floor. The total of all the usable areas for a floor shall equal floor usable area of that same floor. (BOMA) Value-in-Use 1. The amount determined by discounting the future cash flows (including the ultimate proceeds of disposal) expected to be derived from the use of an asset at an appropriate rate that allows for the risk of the activities concerned. (FASB Accounting Standards Codification, Master Glossary) 2. Formerly used in valuation practice as a synonym for contributory value or use value. (Dictionary) VTAB (Value of the Total Assets of a Business) The total amount that the real property, tangible personal property, and intangible property assets of a business would sell for in an asset-based transaction. (Dictionary) LANDS OF GLEN LOMA ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 75 Qualifications LANDS OF GLEN LOMA ADDENDA © 2024 VALBRIDGE PROPERTY ADVISORS | NORTHERN CALIFORNIA PAGE 76 Valbridge Property Advisors Information / Office Locations