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CT 04-10A; POINSETTIA PLACE; SUMMARY APPRAISAL REPORT; 2012-01-24
SUMMARY APPRAISAL REPORT VACANT RESIDENTIAL LAND SOUTHEAST QUANDRANT OF POINSETTIA LANE & CASSIA ROAD CARLSBAD, CA APPRAISED FOR Mr. Marshall Plantz Senior Civil Engineer City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 DATE OF VALUATION January 11, 2012 DATE OF REPORT January 24, 2012 APPRAISED BY Anderson & Brabant, Inc. 353 West Ninth Avenue Escondido, California 92025-5032 No. 12-001 ANDERSON & BRABANT, INC. REAL ESTATE APPRAISERS AND CONSULTANTS 353W. NINTH AVENUE ESCONDIDO, CALIFORNIA 92025-5032 TELEPHONE (760) 741-4146 FAX (760) 741-1049 January 24, 2012 Mr. Marshall Plantz Senior Civil Engineer City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 RE: Vacant Residential Land Poinsettia Lane & Cassia Road Carlsbad, CA Dear Mr. Plantz: At your request, we have personally inspected and appraised the above referenced property from which it is proposed that a right of way for theextension of Poinsettia Lane be acquired. The values reported in this appraisal express the fair market value of the fee simple interest in the subject property, as well as for the rights to be acquired, as of January 11, 2012. The following appraisal has been prepared in conformance with the Code of Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, which incorporates the requirements of the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation. The written report has been prepared in a "Summary" format. As such, it is intended to comply with the reporting requirements for summary reports set forth under Standards Rule 2-2(b) of USPAP. The opinions of value reported represent the value of the subject property in a hypothetical physical and legal condition, subject to certain assumptions and limiting conditions. This is a proposed partial acquisition of the appraised property and as such opinions have been developed for the value of the parcel to be acquired and for severance damages and benefits, if any. It is noted that the opinions and conclusions included in the appraisal report that follows are based I on information available and/or discovered as of the date of the appraisal. The appraiser reserves the right to change those opinions and conclusions if additional information that is in any way pertinent becomes available and/or is discovered subsequent to the appraisal date. I Based on a complete analysis of the market data, we have arrived at the following conclusions of fair market value for the subject property. I Mr. Marshall Plantz Senior Civil Engineer City of Carlsbad January 24, 2011 Page 2 SUMMARY OF VALUE CONCLUSIONS r I Kal~ofth 2 Value of Parcel to be Acquired: $250,000 3 Value of Remainder as part of 8850 the Whole: Value ofof the Remainder Before $8,850,000 Consideration of Benefits 5 Severance Damages (3-4) 4 $0 .7 Value of the Remainder After $8,850,000 Consideration of Benefits (6-4) 7 Benefits (6-4) $0 8 lNet Damages (5-7) $0 1Total Value of the Acquisition 9 Parcel and Net Severance $250,000 Damages (2+8) $250,000 10 Total Just Compensation (Rounded) The opinions of value expressed herein are subject to certain Assumptions and Limiting Conditions as set forth in the attached report. This letter is a part of the attached appraisal and the opinions of value reported in this letter cannot be relied on without the attached appraisal report. Respectfully submitted, ANDERSON & BRABANT, INC. /€t /:;~- Z,----a Gilbert F. Kunkel, MAT State Certification No. AGO02101 Benjamin F. Kunkel State Certification No. AG044835 Poinsettia Lane, Carlsbad TABLE OF CONTENTS I APPRAISER'S CERTIFICATE .............................................................................................................. 1 EXECUTIVESUMMARY.......................................................................................................................2 ASSUMPTIONS AND LIMITING CONDITIONS..............................................................................3 INTRODUCTION Identificationof the Property ............................ . ............................................................................................. 5 Purposeof the Assignment............................................................................................................................5 IntendedUse and Intended Users ..................................................................................................................5 PropertyRights Appraised.............................................................................................................................5 ValuationPremise ............................................................................................................................................ 6 Dateof Value .................................................................................................................................................6 Dateof Report................................................................................................................................................6 Extraordinary Assumptions .......................................................................................... .................................. 6 HypotheticalConditions.................................................................................................................................6 OtherDefinitions ............................................................................................................................................ 6 USPAPCompetency Provision ............... . ..................................................................................................... 7 Scopeof Work ................................................................................................................................................ 7 Sales History of the Subject Property............................................................................................................9 PriorAppraisal Service..................................................................................................................................9 LocationMap ...............................................................................................................................................10 AreaDescription ..........................................................................................................................................11 LocationDescription....................................................................................................................................12 MarketConditions........................................................................................................................................13 SUBJECT PROPERTY DESCRIPTION SubjectProperty Photographs......................................................................................................................14 PlatMap .......................................................................................................................................................18 SiteDescription............................................................................................................................................19 SiteDevelopment Plan.................................................................................................................................21 AssessmentData .......................................................................................................................................... 22 ProjectDescription.......................................................................................................................................22 Parcelto Be Acquired..................................................................................................................................22 Remainder Parcel Description.....................................................................................................................22 VALUATION Highestand Best Use ................................................................................................................................... 25 Methodology................................................................................................................................................26 MarketData Map.........................................................................................................................................27 Value of Parcel to be Acquired....................................................................................................................31 Value of Remainder Parcel as Part of the Whole........................................................................................32 Value of Remainder Before Consideration of Benefits ..............................................................................32 Calculation of Severance Damages.............................................................................................................33 Value of Remainder After Consideration of Benefits ................................................................................. 33 Calculationsof Benefits ............................................................................................................................... 33 Calculation of Net Severance Damages ......................................................................................................34 Summaryof Conclusions.............................................................................................................................35 ADDENDA Market Data Photos Appraiser's Qualifications I I Poinsettia Lane, Carlsbad APPRAISER' S CERTIFICATE I We do hereby certify that, to the best of my knowledge and belief: 1. The statements of fact contained in this report are true and correct. I 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions and conclusions. 3. We have no present or prospective future interest in the property that is the subject of this report. I 4. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. I 5. Our compensation is not contingent upon the reporting of a predetermined value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. The appraisal assignment was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. We did not base, either partially or completely, my analysis and/or the estimate of value on the race, I color, religion, sex, handicap, familial status, health, or national origin of either the present or prospective owners, occupants, or users of the subject property or the present or prospective owners, occupants, or users of the properties in the vicinity of the subject property. I 8. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. I 9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 10. We have made a personal inspection of the property that is the subject of this report. I 11. No one provided real property assistance to the persons signing this certification. We have performed no services, as an appraiser or in any other capacity, regarding the property that I is the subject of this report within the three-year period immediately preceding acceptance of this assignment. January 24, 2012 I . Date Benjamin F. Kunkel State Certification No. AG044835 As of the date of this report, I have completed the continuing education program of the Appraisal Institute. I January 24, 2012 I Date Gilbert F. Kunkel, MAI State Certification No. AGO02101 I Anderson & Brabant, Inc. Poinsettia Lane, Carlsbad EXECUTIVE SUMMARY Property Location: Poinsettia Lane, Carlsbad, CA Assessor's Parcel No.: 215-020-23 Thos. Bros. Map Code: 1127-D5 Owner of Record: Shea Homes Inc. Land Description: 19.23 acres, 6.6 acres of which are entitled for 82 multi-family residential units along with approximately 11.55 acres of open space and approximately 0.4 acres of remainder parcels of no economic value. As of the date of value, the site has been partially graded in preparation for development with the approved 82 dwelling units. In addition, grading for the construction of the Poinsettia Lane extension across the site has been partially completed. Improvements: None Land Use:. The zoning of the subject is "RD-M" Residential Density-Multiple Zone. The site is fully entitled for the construction of 82 multi-family dwelling units. Interest Appraised: Fee simple and easement Flood Hazard: None noted Seismic Hazard: None known Highest and Best Use: As Vacant: Ultimate residential development As Improved: NA Date of Value: January 11, 2012 Date of Report: January 24, 2012 Parcel to be Acquired: A 0.781 acre roadway easement. Summary of Value Conclusions: Value of the Larger Parcel: Land Value: $9,100,000 Improved Value: NA Value of the Parcel to be Acquired: Total Just Compensation: Hypothetical Conditions: $250,000 $250,000 See Report Anderson & Brabant, Inc. 2 Poinsettia Lane, Carlsbad ASSUMPTIONS AND LIMITING CONDITIONS I This appraisal is subject to the following special assumptions and limiting conditions: This is a "Summary Appraisal Report" which is intended to comply with the reporting I requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice for a Summary Appraisal Report. As such, it presents summary discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the appraiser's I opinion of value. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraisers are not responsible for unauthorized use of this report. The opinions and conclusions included in this appraisal are based on information available and/or discovered as of the date of the appraisal. The appraiser reserves the right to change those opinions and conclusions if additional information which is in any way pertinent, such as items specific to the property or additional market data, becomes available and/or is discovered subsequent to the appraisal date. The concept of value as used in this report is qualified to the extent that the subject property has been appraised in the before condition in compliance with California Code of Civil Procedure Section 1263.330 which states that "The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following: (a) The project for which the property is taken. (b) The eminent domain proceedings in which the property is taken." We have relied on materials provided by the City of Carlsbad, including the site development plan for the subject, to determine the area of the subject as well as the area of the acquisition. Should further or contrary information become available, it may affect our opinion of value. 4. The subject property, as of the date of value, is undergoing significant grading and site development. However, we have made use of a hypothetical condition in our analysis and appraised the property as if it no site grading has been completed and that the acquisition area is in a partially disturbed state. The subject property has an approved tentative subdivision map creating entitlement for the construction of 82 attached dwelling units. Partial site grading was complete as of the date of site inspection. In addition, grading was underway for the construction of Poinsettia Lane extension across the site. As a condition of map approval, Poinsettia Lane right of way was to be dedicated to the City of Carlsbad. The following hypothetical conditions apply to this appraisal. (1) The subject property has been appraised without regard to the dedication requirement. (2) The Poinsettia Lane right of way is a usable portion of the subject site, subject to physical characteristics and constraints affecting buildable site area and allowable densities. (3) Absent the dedication requirement, the subject has additional development potential. Anderson & Brabant, Inc. 3 Poinsettia Lane, Carlsbad - This appraisal is subject to the following general assumptions and limiting conditions: I 1. It is assumed that information furnished to us by our client and the property owner, including maps, cost estimates, legal descriptions, and property income and operating expense information is substantially correct. No responsibility is assumed for matters legal in character, nor do we render an opinion as to title, which is assumed to be held in fee simple interest as of the date of valuation unless otherwise I specified. It is assumed that the property is readily marketable, free of all liens and encumbrances except any specifically discussed herein, and under responsible ownership and management. 1 4. Photographs, plats, and maps furnished in this appraisal are to assist the reader in visualizing the property. No survey of the property has been made and no responsibility has been assumed in this I matter. It is assumed that there are no legitimate environmental or ecological reasons that would prevent orderly development of the land to its highest and best use under economically feasible I conditions. Soils engineering studies have not been provided to your appraisers. It is therefore assumed I that there are no hidden or unapparent conditions of the property such as hazardous or toxic wastes and/or other subsoil conditions, which would render it more or less valuable. No responsibility is assumed for such conditions or for engineering, which might be required to discover such factors. I 7. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraisers. The appraisers have no knowledge I of the existence of such materials on or in the property. The appraisers, however, are 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. The value I estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, I if desired. Disclosure of the contents of this appraisal report is governed by the by-laws and regulations of the Appraisal Institute. Neither all nor any part of the contents of this report (especially reference to the Appraisal Institute or the MAT designation) shall be disseminated to the public through advertising media, public relations media, news media, sales media, or any other public means of communication I without prior written consent and approval of Anderson & Brabant, Inc. The submission of this report constitutes completion of the services authorized. It is submitted on the condition that the client will provide the appraiser customary compensation relating to any I subsequent required depositions, conferences, additional preparation or testimony. The valuation estimate is of surface rights only and the mineral rights, if any, have been I disregarded. ii. No warranty is made as to the seismic stability of the subject property. Anderson & Brabant, Inc. 4 I I Poinsettia Lane, Carlsbad INTRODUCTION I IDENTIFICATION OF THE PROPERTY The subject of this appraisal is, according to the site development plan, a 19.23 acre vacant parcel located at the northeast corner of the intersection of Poinsettia Lane and Cassia Road in I Carlsbad, California. Legal Description I The subject property is described briefly as, the north half of the southwest quarter of the southwest quarter of Section 23, Township 12 South, Range 4 West, San Bernardino I Meridian, in the County of San Diego, State of California. The subject property can also be identified as Assessor Parcel No. 215-020-23. The subject property comprises City of Carlsbad Tract No. 04-10(A). I Ownership Title to the subject property is currently vested in the name of Shea Homes, Inc., a I Delaware corporation. PURPOSE OF THE ASSIGNMENT I The purpose of this appraisal is to provide an estimate of the fair market value of the subject property and form an opinion as to the value of the parcel to be acquired, as well any severance damages or benefits resulting from the acquisition of the road right of way and construction of the I project as proposed. As used in this report, Fair Market Value is defined as follows: "The highest price on the date of valuation that would be agreed to by a seller, being I willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes I for which the property is reasonably adaptable and available. The fair market value of the property taken for which there is no relevant market is its I value as of the date of valuation as determined by any method of valuation that is just and equitable." I INTENDED USE AND INTENDED USER This appraisal report is for the use of the City of Carlsbad in the process of acquiring a 0.781 I acre road right of way. There are no other known intended users. PROPERTY RIGHTS APPRAISED I The interest appraised is the fee simple estate, subject to covenants, conditions and restrictions of record, if any, as well as easement rights. Fee Simple Estate is defined as follows: 'California Code of Civil Procedures, Title 7, Sec. 1263.320 Anderson & Brabant, Inc. 5 Poinsettia Lane, Carlsbad "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 to the four powers of government."2 An Easement is defined as follows. "An interest in real property that conveys use, but not ownership, of a portion of an owner's property." VALUATION PREMISE The focus of the current appraisal is on the market value of the subject property in an "As if' condition as of the date of value. Our value is based on an "as if' condition of no grading having been done, a hypothetical condition. The concept of value as used in this report is qualified to the extent that the subject property has been appraised in the before condition in compliance with California Code of Civil Procedure Section 1263.330 which states that "The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following: (a) The project for which the property is taken. (b) The eminent domain proceedings in which the property is taken." DATE OF VALUE The date of value for this analysis is January 11, 2012. DATE OF REPORT The date of this report is January 24, 2012. EXTRAORDINARY ASSUMPTIONS An extraordinary assumption is something that is assumed to be true, but is not certain. No extraordinary assumptions were considered in this analysis. However, this appraisal is subject to certain special and general assumptions as outlined at the beginning of this report. HYPOTHETICAL CONDITIONS Hypothetical conditions are known to be false, but are presumed to be true for the purpose of reasonable analysis. On the date of value, an area has been graded in preparation for development of residential units and the acquisition area was disturbed as a result of grading for the road improvement project. Our value is based on an "as if' condition of no site grading completed and that the acquisition area is in a partially disturbed state. The subject property has an approved tentative subdivision map creating entitlement for the construction of 82 attached dwelling units. Partial site grading was complete as of the date of site inspection. In addition, grading was underway for the construction of Poinsettia Lane extension across the site. As a condition of map approval, Poinsettia Lane right of way was to be dedicated to 2 The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993 p. 140 The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993, p. 110 Anderson & Brabant, Inc. 6 I I Poinsettia Lane, Carlsbad the City of Carlsbad. The following hypothetical conditions apply to this appraisal. (1) The subject I property has been appraised without regard to the dedication requirement. (2) The Poinsettia Lane right of way is a usable portion of the subject site, subject to physical characteristics and constraints affecting buildable site area and allowable densities. (3) Absent the dedication requirement, the i subject has additional development potential. OTHER DEFINITIONS I . The following definitions are pertinent to the appraisal that follows the "Introduction" section of the report. The definitions are from the Dictionary of Real Estate Appraisal. I .Highest and Best Use: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. I Larger Parcel: In condemnation, the portion of a property that has unity of ownership, contiguity, and unity of use, the three conditions that establish the larger parcel for the I consideration of severance damages. USPAP COMPETENCY PROVISION We, the offices of Anderson & Brabant, Inc., and specifically Gilbert F. Kunkel, MAI, have the knowledge and experience to complete this appraisal assignment and have appraised this property type before. SCOPE OF WORK The appraisal development process reflected in this report is intended to be appropriate for I the property type and the intended use of the report. This is a "Summary" appraisal report as defined by USPAP. It is a written report prepared in accordance with Standards Rule 2-2(b) relating I to a Summary Appraisal performed under Standard 1. A Summary Report presents summary discussions of all data, reasoning, and analyses used in the appraisal process to develop the opinion of value. I This assignment deals with the analysis of a property located in the City of Carlsbad, County of San Diego. A portion of the property is to be acquired by the City of Carlsbad for roadway purposes. This assignment requires the analysis of the property in the before condition, without I consideration of the proposed project, an analysis of the value of the parcel to be acquired, and analyses of any severance damage or benefits. I . The subject property is approximately 19.23 acres in size, of which approximately 6.6 acres are developable and approximately 11.55 acres are dedicated open space. The balance of the property includes a 0.781 acre portion intended for the Poinsettia Lane right of way. The site also I includes two small remainder parcels, totaling approximately 0.4 acres, created by the site layout of the residential development, which are considered to be of no economic value. The property is entitled for 82 multi-family residential units. I The subject property was purchased by a national home builder, Shea Homes, in April 2011. The sale price for the land was $6,800,000. In addition, under the terms of the purchase contract the Anderson & Brabant, Inc. 7 Poinsettia Lane, Carlsbad seller will retain a 0.65 acre parcel upon which Shea Homes will build 14 apartment units. Title to the land and the 14 units will be held by the seller. The cost to build the apartment units, per Shea Homes, is $2,300,000 resulting in a total compensation of $9,100,000 to the seller. Of the 82 total units Shea Homes will retain 68 units along with 18.58 acres, resulting in a cost of approximately $133,824 per unit. In addition, both buyer and seller anticipated additional compensation from the City of Carlsbad as reimbursement for the roadway acquisition for the extension of Poinsettia Lane that is the subject of this appraisal. I As a condition of receiving approval of the final map, the buyer must dedicate a portion of the property for a road way easement allowing the continuation of Poinsettia Lane. The seller, while pursuing entitlements for the subject, was fully aware of this condition and designed the project I outside the future acquisition area. The buyer was also fully aware of the need for future roadway dedication and considered this factor in the decision to purchase, as reported by a representative of Shea Homes. Both buyer and seller reportedly expected reimbursement for the right of way area to be acquired based on the Area 21 Development Agreement with the City of Carlsbad and other area developers. A representative from Shea Homes provided us with an appraisal of the acquisition I area, conducted on behalf of the seller, Carlsbad Poinsettia Land Company, LLC and dated July 2010. The appraisal is based on the premise that, absent the right of the way, the area could be put to use expanding the eventual residential development. The concluded value for the acquisition I area, at the time of the appraisal thought to be 1.1 acres in size, was between $500,000 and $600,000. This was based on the idea that either additional residential units could be built, or the existing project expanded, allowing for larger units that would sell for a higher price. I The subject property is then best understood as consisting of three separate areas. One area is the approximately 11.55 acres of dedicated open space. The second area is the developable portion of the property, approximately 6.6 acres in size, upon which a final map for 82 multi-family I residential units has been approved and as of the date of value, grading and site work have begun. The third area is 0.781 acres in size and is to be acquired for roadway purposes and for the I construction of Poinsettia Lane. The parcel to be acquired is irregular in shape and includes an area totaling 0.781 acres. After the acquisition the larger parcel will be 18.45 acres in size. In our appraisal we have analyzed I the property as vacant residential land. The acquisition area, as of the date of value, has been disturbed as a result of grading. It is a hypothetical condition of this analysis that the acquisition area is in a raw, undisturbed state. I The scope of this appraisal required collecting primary and secondary market data relative to the subject property. The depth of the analysis was intended to be appropriate in relation to the I significance of the appraisal problem. These data have been analyzed and confirmed leading to the value conclusion set forth in this report. The valuation process involved the utilization of all techniques and procedures considered appropriate to the assignment. I The first step in the analysis was to conduct a preliminary survey of the subject property and surrounding area in order to more accurately define the appraisal problem and identify the methods - and techniques necessary to accomplish the objective of this appraisal report. Anderson & Brabant, Inc. 8 Poinsettia Lane, Carlsbad The general area was inspected for the purpose of identifying those specific boundaries within which data that could be considered relevant to this analysis would most likely be located. The intent of this inspection was also to identify physical conditions, neighborhood development trends, and other factors that affect real property value. We have examined the general economy of the region and community to determine trends in population, housing, employment, financing, and market which influence the real estate environment. The subject property was inspected to ascertain its physical features such as topography, access, drainage, street improvements, utilities, and condition. The Sales Comparison Approach was considered to have applicability in the valuation of the subject property. Current market data, which included land sales in the area of the subject property, were gathered and analyzed on the basis of their overall degree of comparability to the appraised property. These data were confirmed with principals, their representatives, or agents. Sources of data included the County Recorder's office, various market data services, published reports, our appraisal files and personal contacts. The final step entailed the organization and drafting of the appraisal report. I For the purpose and use of this appraisal it was considered appropriate to analyze the property as improved based on Direct Sales Comparison. The other approaches to value, the Income Approach and the Cost Approach, are not typically used in the valuation of vacant land. I SALES HISTORY OF THE SUBJECT PROPERTY I The subject property was purchased by a national home builder, Shea Homes, from Carlsbad Poinsettia Land Corporation in April 2011. The sale price for the land was $6,800,000. In addition, under the terms of the purchase contract the seller will retain a 0.65 acre parcel upon which Shea I Homes will build 14 apartment units. The cost to build the apartment units, according to Shea Homes, is $2,300,000, resulting in a total compensation of $9,100,000 to the seller for a 5.95 acre area of land on which 68 units can be constructed. The area purchased also includes the 0.781 acre area for the Poinsettia Lane right of way. PRIOR APRAISAL SERVICE I We have performed no 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. Anderson & Brabant, Inc. 9 Poinsettia Lane, Carlsbad DeLorme Street Atlas USA® 2010 Location Map Subject Lakt jlOdRe4 Fe Del Mar Data use subject to license. ml © DeLorme. DeLorme Street Atlas USA® 2010. 0 1 2 3 4 www.delorme.com MN (12.1 E) Data Zoom 10-4 Anderson & Brabant, Inc. 10 Poinsettia Lane, Carlsbad - AREA DESCRIPTION I The subject property is located in the City of Carlsbad in the northwestern part of San Diego County. The County is in the extreme southwesterly corner of the United States and is bordered by the Pacific Ocean to the west, the CalifomialMexico border to the south, Orange and Riverside Counties I to the north, and Imperial County to the east. San Diego County is the second largest county in the State of California, based on population. It includes the State's second most populous city; and offers such geographic features as mountainous regions of the Cleveland National Forest, the Anza Borrego I Desert, the International Border with Mexico, and over 50 miles of Pacific Ocean coast line. These features, and the area's temperate year-round climate, are among the County's major attractions. Most of the County's population is located along the coastal region, inland valleys, and foothills, within approximately 25 to 35 miles of the ocean. The mountains and deserts are only sparsely developed and populated. I Once primarily thought of as a Navy town, San Diego now has a very diverse economy with expanding service and retail sectors. These two employment sectors account for approximately 60 percent of the civilian work force in San Diego County, versus less than 41 percent in 1970, and I slightly less than 50 percent in 1985. Manufacturing has declined as a source of employment over the past 25 years, with this sector providing approximately 17 percent of civilian employment in 1970, approximately 14 percent in 1985, and currently less than 10 percent. In the early 1970's, non-military I government employment in the county was approximately 25 percent of the civilian work force; this declined to 16 percent in 1985, and has stabilized around 17 percent. Although the economy has become more diversified in the county, military employment is still one of the most significant contributors to the County's financial well being. Local military employment totals. nearly 130,000 and defense sector of the economy contributes $13.5 billion annually. This is second only to the $15.0 billion contribution by manufacturing and is well above the $5.0 billion derived from tourism. In addition, San Diego has benefited from ongoing military base closures and re-alignment as new commands and ships are assigned to the area. The expansion and re- alignment of the military presence in the county took place in 2005 and 2006. The San Diego region has enjoyed steady population growth. Between 1985 and 1990, the population increased 19.21 percent. This increase slowed dramatically between 1990 and 1995 to only 9.71 percent. Annual population growth rates between 1984 and 1991 were in the range of 2.3 to 3.8 percent annually while between 1992 and 2010, annual growth rates increased by more than 2.1 percent in only one annual period. The following table provides information on annual increases in population in the County over the past 25 years. Anderson & Brabant, Inc. 1] Poinsettia Lane, Carlsbad ANNUAL POPULATION ESTIMATES - SAN DIEGO REGION Date Total Population Percent Increase January 1, 1984 2,033,600 2.6% January 1, 1985 2,080,343 2.3% January 1, 1986 2,148,907 3.3% January 1, 1987 2,223,649 3.5% January 1, 1988 2,300,758 3.5% January 1, 1989 2,388,707 3.8% January 1, 1990 2,480,072 3.8% January 1, 1991 2,551,759 2.9% January 1, 1992 2,604,546 2.1% January 1, 1993 2,646,816 1.6% January 1, 1994 2,687,811 1.5% *January 1, 1995 2,658,600 N/A *January 1, 1996 2,690,000 1.2% *January 1, 1997 2,724,400 1.3% *January 1, 1998 2,795,800 2.6% *January 1, 1999 2,853,300 2.1% **January 1, 2000 2,813,833 NA **January 1, 2001 2,864,539 1.8% "January 1, 2002 2,920,806 2.0% "January 1, 2003 2,970,899 1.7% "January 1, 2004 3,007,285 1.2% **January 1, 2005 3,034,388 0.9% "January 1, 2006 3,058,413 0.8% **January 1, 2007 3,088,891 1.0% "January 1, 2008 3,131,552 1.4% "January l,2009 3,173,407 1.3% **January 1, 2010 3,224,432 1.6% I * Population estimates between 1995 and 1999 reflect a revised procedure and population for these years cannot be compared to that of previous years. * * Population estimates reflect revised totals based on the year 2000 census. LOCATION DESCRIPTION The subject parcel is located near the northern boundary of the city of Carlsbad at 2333 State Street, in the northern portion of the Carlsbad Village downtown area. The current population of Carlsbad, as of January 1, 2010, is 106,804. I Retail facilities serving Carlsbad are located at Highway 78 and El Camino Real, (Camino Real Shopping Center) at the north side of the city, along Paseo Del Norte north of Palomar Airport Road (Carlsbad Car Country and Carlsbad Company Stores) to the west of the subject along I Anderson & Brabant, Inc. 12 Poinsettia Lane, Carlsbad Interstate 5, in the downtown area toward the northwest corner of the corporate boundaries along Carlsbad Village Drive west of Interstate 5, and in other neighborhood shopping locations throughout the city. Major industrial development in Carlsbad is focused along Palomar Airport Road, in the vicinity of McClellen-Palomar Airport and the intersection of El Camino Real, a short distance to the southeast of the subject property and approximately three miles east of Interstate 5. Industrial development started in this area in 1975 on land near the McClellen-Palomar Airport and was originally oriented to general warehousing. The development of the area was interrupted originally by a Carlsbad sewer moratorium and later by poor economic conditions. However, by the early to mid-1980's, development in the area was progressing rapidly, and the area continues to be a focal point for industrial development in the County today. MARKET CONDITIONS The San Diego region has not been immune to the effects of a global financial crisis, considered the worst of its kind since the Great Depression. It became prominently visible in 2008 with the failure, merger or conservatorship of several large United States-based financial firms. The underlying causes leading to the crisis had been reported in business journals with commentary about the financial stability of leading United States and European investment banks, insurance firms and mortgage banks consequent to the subprime mortgage crisis that commenced in 2007. The failures of large financial institutions in the United States and Europe led to dramatic declines in various stock indexes and significant reductions in the market-value of equities (stock) and commodities worldwide. The crisis led to a liquidity problem and the de-leveraging of financial institutions, especially in the United States and Europe, which further accelerated the liquidity crisis. World political leaders, national ministers of finance, and central bank directors coordinated their efforts to reduce fears, but the crisis is ongoing and continues to change. The economic downturn has been reflected in several other important economic indicators. Based on data from the California Employment Development Department, the unemployment rate in San Diego County in November 2011 was 9.2%, compared to 10.6% a year earlier. The State unemployment level for February 2011 was reported to be 10.9% and the December 2011 national level was 8.5%. Unemployment rates for the San Diego area have fluctuated during the past year and many predict local and national unemployment to continue to remain high through 2012. A federal economic stimulus plan was approved by congress in early 2009 with the intent of infusing funds into the economy through tax reductions, credit market support and spending on public projects. Because of the depth of the economic problems the stimulus appeared to merely slow the pace of the downturn. However, recent economic data report an increase in jobs and a slight, but steady decline in the unemployment rate. Many prognosticators are still predicting a recovery process that will be long and slow but recent data may indicate a gradual improvement of economic conditions. At the least, concern over the possibility of a double-dip recession appears to have abated. There have recently been signs of activity in high demand markets, such as coastal areas like Carlsbad. Residential development in Carlsbad, and the purchase of land for future residential development, has resumed at a subdued pace. Residential demand remains depressed in most markets and whether the activity in Carlsbad and other high-demand markets represents the first stages in a sustained recovery remains to be seen. Anderson & Brabant, Inc. 13 Poinsettia Lane, Carlsbad SUBJECT PROPERTY PHOTOGRAPHS View of subject looking south along Cassia Road. View looking east toward subject along Poinsettia Lane. (Photo taken by Anderson & Brabant, Inc. 1/11/12) Anderson & Brabant, Inc. 15 Poinsettia Lane, Carlsbad SUBJECT PROPERTY PHOTOGRAPHS View of portion of subject acquisition area. View from subject's southwest corner of site area. (Photo taken by Anderson & Brabant, Inc. 1/1 1/12) Anderson & Brabant, Inc. 16 Poinsettia Lane, Carlsbad SUBJECT PROPERTY PHOTOGRAPHS View of portion of subject acquisition area prior to grading work. (Provided by City of Carlsbad) Another view of acquisition area prior to site grading work. (Provided by City of Carlsbad) Anderson & Brabant, Inc. 17 Poinsettia Lane, Carlsbad PLAT MAP B 724WE EL CA1[NO SH7 2 Anderson & Brabant, Inc. 18 I I Poinsettia Lane, Carlsbad SUBJECT PROPERTY DESCRIPTION I SITE DESCRIPTION Larger Parcel I The subject property is comprised of one single parcel of land located at the southeast corner of the intersection of Poinsettia Lane and Cassia Road. The 19.23 acre site is owned in fee by Shea Homes, which owns no contiguous parcels and, for purposes of this analysis, the 19.23 acre site is I considered to be the larger parcel. Surrounding Uses I The subject property is located in the City of Carlsbad. To the north is single family and multi-family residential development. To the south is a mix of agricultural land, open space and residential development. To the immediate west is multi-family residential development. To the I immediate east is undeveloped land, and to the east and southeast is a mix of commercial and residential development. I Size and Shape The subject is roughly rectangular in shape and has a total (gross) area of 19.23 acres I according to a site development plan for the property. The map (pg. 21) identifies five lots that total 18.45 acres. An additional 0.781 portion of the property is intended for the Poinsettia Lane right of way. The total of the five lots and the right of way area is 19.23 acres. The general property outline I is shown on the plat map on the facing page. The subject has approximately 975 feet of frontage along Cassia Road and can be accessed from Poinsettia Lane as well. TonoraDhv and Drainage The overall topography of an approximately 6.6 acre portion subject site is level, having been graded for the future construction of subject improvements. Prior to the site development I grading the majority of the 6.6 acres had been disturbed and cultivated. The remaining acreage is dedicated open space, with for the most part, rolling, and undisturbed topography. Flood Hazard The subject property is identified on FEMA Community Map Panel No. 06073C1032F - Map Date: 06/19/1997. According to the map, the subject property is located in zone "X". Properties located in Zone X are determined to be areas outside of the 500-year flood plain. Seismic Hazard The subject property is not located within an identified "Earthquake Fault Zone" as designated by the California State Division of Mines and Geology. However, the land is located in an area prone to seismic events, a condition that it shares with other properties located in the general southern California area. Toxic/Hazardous Substances For purposes of the current appraisal we have assumed that the subject is not impacted in any way by hazardous materials or conditions. Anderson & Brabant, Inc. 19 I Poinsettia Lane Carlsbad Soils I For purposes of the current analysis, it is assumed that the soil throughout the subject property possesses the bearing capacity that would allow for the development of the subject property to its highest and best use without incurring inordinate grading and compaction costs. I Utilities There is sewer, water, electricity, and telephone service in the subject's immediate area and all are easily accessible for property development. Streets and Access The subject has approximately 975 feet of frontage along Cassia Road and can be accessed from Poinsettia Lane as well. Cassia Road is a two lane road fully improved with curbs, gutters and sidewalks. Poinsettia Lane is a four lane thoroughfare that narrows to three lanes at the subject. It is fully improved with curbs, gutters and sidewalks. The graded portion of the site is generally at grade with Cassia Road and has vehicular access along that frontage. I Improvements The subject property is unimproved. I Easements and Encumbrances We were provided with a copy of a title report dated July 11, 2011. It describes easements I and conditions that are considered typical for a property such as the subject. In this appraisal, the assumption is made that there are no easements in place that would prevent development of the site to the highest and best use of the land. Zoning/Land Use The subject property is zoned RD-M, Residential Density-Multiple Zone. The intent and I purpose of the RD-M zone is to implement the residential medium density (RM), residential medium-high density (RMH) and residential high density (RH) land use designations of Carlsbad general plan. The subject property is entitled for 82 multi-family residential units on approximately I 6.6 acres of the site, with the balance being roadways and dedicated open space. The following page shows an image of the map from the site development plan detailing the location of the residential units. I Anderson & Brabant, Inc. 20 Poinsettia Lane, Carlsbad SITE DEVELOPMENT PLAN Anderson & Brabant, Inc. 21 Poinsettia Lane Carlsbad I ASSESSMENT DATA Assessor's Parcel No. Assessed Values 20011/12 Land Improvements Total Taxes 215-020-23 $1,000,000 $0 $1,000,000 $11,194.74 PROJECT DESCRIPTION The project is broadly described as the construction of major thoroughfare arterial street improvements in Aviara Parkway from Poinsettia Lane to Palomar Airport Road and in Poinsettia Lane from Aviara Parkway to El Camino Real. The works of improvement will include full-width grading of the roadway, paved road surface for two lanes (18 foot paved section on each side of median for a total of 36 feet paved section), transition pavement sections at major intersections, median curbs, erosion control, outside asphalt swales or berms, street drainage facilities (with the exception that drainage facilities in Aviara Parkway which are included in the City's Drainage Fee Program have been deleted), culverts, temporary drainage in parkway, design, contract administration, fee administration, construction inspection, construction engineering, mitigation measures and land acquisition. The subject property is approximately 19.23 acres in size, of which approximately 6.6 acres are developable and approximately 11.55 acres are dedicated open space with the balance consisting of roadways and remainder parcels considered to be of no economic value. As a condition of receiving approval of their final map, the buyer must dedicate a portion of the property for a road way easement allowing the continuation of Poinsettia Lane. The seller, while pursuing entitlements for the subject, was fully aware of this condition and designed the project outside the future acquisition area. The buyer was also fully aware of the need for future roadway dedication and considered this factor in the decision to purchase, as reported to this appraiser by a representative of Shea Homes. PARCEL TO BE ACQUIRED The parcel to be acquired is irregular in shape and includes an area totaling 0.781 acres. It traverses an area near the southwest corner of the property. The acquisition will extend Poinsettia Lane from the subject's western property line in a southeasterly direction to the subject's southern property line. The acquisition area is approximately 139 feet wide at the point where it intersects the western property, and approximately 127.5 feet wide at the point where it intersects with the southern property line. The acquisition area is approximately 102 feet wide. The curved path of the acquisition area results in a length of 383.33 feet along the northeasterly boundary line and a length of 238.48 feet along the southwesterly boundary line. The topography of the acquisition area, prior to grading, is based on a review of photos provided by the client. It can be described as a drainage area with rolling, raw topography. REMAINDER PARCEL DESCRIPTION The remainder parcel will be the larger parcel of 19.23 acres minus the acquisition area of 0.781 acres. The result is a remainder parcel size of approximately 18.45 acres. The remainder Anderson & Brabant, Inc. 22 Poinsettia Lane, Carlsbad parcel will be irregular in shape. The area north and east of the right of way, including open space, will be approximately 18.05 acres in size. At the southwest corner of the property is a remainder parcel 0.3 acres in size that will be separated from the balance of the property by Poinsettia Lane along with a 0.1 acre remainder parcel north of Cassia Road, neither of which contribute to overall property value. Anderson & Brabant, Inc. 23 Poinsettia Lane, Carlsbad N ELCAMNO Rf,L - C&AJA RIJ _ -I -L OABRQIA / - LANE V100Y NAP NOT TO SC/UI f / a 2U GPHIC SC i.=1w N WEST LINE.NIO. SII'(4. SW114, SEO? Ni.q. $W94 $WI!4, SEC. 22 LEND EZO INDICATES EA5E&ENT COIl PLURL.0 STRE £1 AND Pu KIC UTIUrY URPOE. ARFA =0.7111 A(Fi j INDICATES RECORD IlATA PF R MAP '10. 134. BASIS OF 01-ARNIS ThE 8A515 OF DEARIF1S FOR 1-ItS PLV IS THE WEST LIE Cf ThIF FI'12. 516VI$4. SWIM. SLC 22. I.E. FC033TE ('.EI)CFNTPIG I .I.Nr) SIIFlF'(IIG AKOMAPPr1G 21O N. CE VrRE Ciry PRKW SUITE B ESCONOI00. CL GOWO N- 76)-27-7021 FAIC 75C,7454e24 LOT 7. -= .WflR.F1.2 MAP NO 15434 CLE. - 53W 0. 114 01 223 - SOUTH LNE. N12. / SC1T LOT I CF L I1T1PR(1N. P L S. 71124 - DATE SICET i or i -. EASEMEI'F F(T2R FLJ6LIL S I kEEtAND PUBUC UTILITY PURPOSES A?O.TIOF OF 11E FITFI HALF (IF THE SQU I I UUAP.TC1 OF THE SOUII IYET QUARTER OF 5EC0II fl 1 0YA48H IP12 SCtJTII, RAACTE 4 DATE. D7IO1 W!T, SAN BER?ADtNO \IERIrAN. IN HE C7 JUN fl I 01- AN C4EGO, STATE A.P.: 215-Wo-2a OF cAuroRA ACCORD NCTC) THE QFFIOLtIL FLAT fl-!EQF. EXHIBITS' Anderson & Brabant, Inc. r 24 I I Poinsettia Lane, Carlsbad I VALUATION ANALYSIS HIGHEST AND BEST USE I Highest and Best Use is an important concept in real estate valuation as it represents the premise upon which value is based. As used in this report, Highest and Best Use is defined as follows: "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that I results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability."' The conclusion of highest and best use is determined by social, economic, governmental and physical forces. The concept addresses the question of legally allowable, physically possible, I economically feasible, and maximally productive uses. Potential alternative uses of the property must be considered in the highest and best use analysis. Once the legally allowable and physically possible uses have been identified, the economic viability of the various uses must be determined. I The use is financially feasible if it provides a positive return to the land. The highest and best use is that use that provides the highest overall return. Before Condition As of the date of value, the subject property consists of a 19.23 acre parcel of land that is zoned Residential Density Multiple. The intent and purpose of the RD-M zone is to implement the residential medium density (RM), residential medium-high density (RMH) and residential high density (RH) land use designations of Carlsbad general plan. The subject property is unimproved but is entitled for 82 residential units and grading has begun on the site. The highest and best use of the subject is to continue with the residential development of the site. The highest and best use of the subject, in the before condition, is to continue with the current use. Absent the property acquisition, it is possible that the proposed development could have been expanded to cover more area or construct more units. After Condition The subject property is essentially unchanged in the after condition, as easement rights are to be acquired over a relatively small portion of the property that is outside the construction zone and will not affect development of the site to its highest and best use. Further development of the land beyond the approved project is not considered to be a reasonable prospect. The approved 82 unit map is representative of after condition highest and best use. 4The Dictionary of Real Estate Appraisal, 3d ed. (Chicago: Appraisal Institute, 1993), p. 149 Anderson & Brqbant, Inc. 25 Poinsettia Lane, Carlsbad - METHODOLOGY U The appraisal process is an orderly program in which the data used to estimate value are acquired, classified, analyzed, and presented. The following sections include descriptions and analyses of the data used in the valuation process. Three different, but interrelated methods of I estimating market value may be considered in the appraisal of real property. These three approaches include the Cost Approach, Sales Comparison Approach, and Income Approach. The Sales Comparison Approach was considered to have applicability in the valuation of the subject property as vacant. Current market data, which included land sales in the area of the subject property, were gathered and analyzed on the basis of their overall degree of comparability to the appraised property. These data were confirmed with principals, their representatives, or agents. Sources of data included the County Recorder's office, various market data services, published reports, our appraisal files and personal contacts. The final step entailed the organization and drafting of the appraisal report. For the purpose and use of this appraisal it was considered appropriate to analyze the property solely by the Sales Comparison Approach. The Cost and Income Approaches to value are not typically utilized in the appraisal of vacant land. Sales Comparison Approach This approach to value involves the comparison of the subject property with sales of comparable properties, and the isolation of pertinent units of comparison that can be applied to the subject. Typical units of comparison considered in the analysis of parcels of land suitable for residential development are the price paid per usable acre, square foot, or price per residential unit. In this analysis, the unit of comparison is the price unit. The price per unit is compared to the data in order to arrive at an indication of total property value. A search was made for recent sales of comparable properties. Because of the characteristics of the subject property we have focused on the sales of land suitable for multi-family residential development. A summary of the land sale data is included on page 28 and a market data location map is on page 27. Anderson & Brabant, Inc. 26 Poinsettia Lane, Carlsbad DeLorme Street Atlas USA® 2010 ,s-OL Market Data Map Subject Lak& Hdg Fer Del Data use subject to license. * mi IS DeLorme. DeLorme Street Atlas USA® 2010- Q 1 2 3 4 www.delorme.com MN (12.1 E) Data Zoom 10-3 Anderson & Brabant, Inc. 27 Poinsettia Lane, Carlsbad Summary of Market Data Comp No 1 2 3 4 5 6 7 (Subject) N. Vulcan Ave El Camino Real 258 Bougher Road W. 10750W Ocean Air La Costa Ave 255 Grapevine Rd Address /APN Poinsettia Lane Encinitas Carlsbad San Marcos Drive Carlsbad Vista Carlsbad San Diego 166-080-16, 18, 19, 65, 79, APN's 215-020-23 256-100-56 215-050-73 220-233-09,22 307-452-45 216-300-17 thru 20 & 80 166-100-40 & 41 Map Code 1127-D4 1147-135 1109-C7 I208-133 1147-HI I087-D7 Sale Date Apr-Il Nov-10 Dec-10 Apr-II May-II Aug-fl Current escrow Doc No 228115 666528 723719 183214 412235 419167 NA Buyer Shea Homes Shea Homes Limited City Ventures Tn Pointe Homes LLC Coast Income Properties La Costa Bluffs LLC Bridge Housing Partnership Homebuilding LLC Seller Meadow Vista Holdings Vulcan Townhomes Bride Norcal LLC Brandywine Development Eli Lily & Co . Legacy Development Hall Land Co, Inc LLC Corporation. LLC Land Area (Ac) 20.40 1.08 14.15 7.17 10.73 1.23 9.03 Net Usable (Ac) 6.00 1.08 3.00 7.00 4.30 1.23 9.03 Utilities All available All available All available All available All available All available All available Topography Nearly level Level Rolling Sloping Graded Sloping Gently sloping with gully Yield (Units) 68 20 53 58 85 20 94 Density (DU/Ac) 3.33 18.52 3.75 8.09 7.92 16.26 10.41 Sale/List Price $9,100,000 $2,300,000 $3,700,000 $2,077,272 $5,171,500 $975,000 $5,000,000 Price/Acre (Net) $1,516,667 $2,129,630 $1,233,333 $296,753 $1,202,674 $792,683 $553,710 Price/SF(Gross) $10.24 $48.89 $6.00 $6.65 $11.06 . $18.20 $12.71 Price/SF (Net) $34.82 $48.89 $28.31 $6.81 $27.61 $18.20 $12.71 Price/Unit $133,824 $115,000 $69,811 $35,815 $60,841 $48,750 $53,191 Approved TM for 94 Entitled for 82 units. $9.1 Partial ocean view with attached units. Buyer is mil includes cost to build freeway noise. Zoning investigating ability to 14 rental units on the site Will be impro d ve Approximately Approved for 50 attached allows for multi-family Located on sloping lot develop with affordable Comments to be conveyed to seller as with low-income $73,000 per unit in and 8 single family development. Property on busy street. Buyer units. Broker indicated part ofconsideration. housing units grading costs. Sold homes. Prior sale w/o is located adjacent received approval for deal may be weak and that Grading costs estimated to with entitlements, entitlements at $1,450,000 Interstate 5. No 20 apartment units. price would have been be approximately entitlements. about one-half if sold as a $322,0000. market (non-affordable) project. Anderson & Brabant, Inc. - 28 Poinsettia Lane, Carlsbad - Discussion of Land Sales I Market Datum No. 1 is the April 2011 sale of the subject property. The reported sale price was $6,800,000 for 6.6 net acres and entitlements for 82 multi-family units. The buyer, Shea Homes, will build 14 rental units for the seller at a reported cost of $2,300,000 resulting in a total I cost of $9,100,000 for 68 net residential units. The per unit cost is therefore almost $134,000. The buyer and developer, Shea Homes, intends to sell the finished townhomes, with an average size of approximately 1,400 square feet, for between $418,000 and $480,000 per unit. Site grading cost is I reported to be approximately $323,000 or $3,939 per dwelling unit. Market Datum No. 2 is the November 2010 purchase of a 1.08 acre site on Vulcan Avenue in I Encinitas. The buyer, Shea Homes, plans to build 20 low-income housing units on the site. This will fulfill their requirement to build low-income housing on three other projects. However, a representative from Shea Homes stated that the project would work as for sale product as well, and I that it was after purchase that they were able to negotiate the site as low-income credit for other projects. The sale price was $2,300,000 or $115,000 per unit. Though located in a desirable beach community, the location is considered inferior to the subject due to its proximity to a railroad right I of way and a mobile home park. Market Datum No. 3 the December 2010 transfer of a 14 acre site located at the intersection I of El Camino Real and Dove Lane in Carlsbad, less than one mile southeast of the subject. The buyer, City Ventures, plans to construct 53 townhomes on the site. The sale price was $3,700,000 and included some entitlements, however they were considered of limited value and the buyer spent I an additional 10 months pursuing permits. The end product will be townhomes with an average size of 1,750 square feet and an anticipated average sale price of $435,000. Site topography of Sale No. 3 is rough and usable area is approximately three acres. I Grading, expected to start in spring 2012, is estimated to cost $73,000 per unit. This results in site development costs of $3,869,000 before construction can even begin. As a contrast, grading costs for the subject are reported to be approximately $323,000, or $3,939 per unit or approximately I $69,000 less per unit. Sale No. 4 is the April 2011 transfer of 258 Bougher Road in San Marcos. The property sold I with entitlements to build 50 attached homes and 8 single family residences. The 7 acre site sold for $2,077,272 or $35,515 per unit. Location is notably inferior to the subject, as San Marcos is less desirable than the subject's Carlsbad location. There are some older residential improvements on I site considered to be of little to no value. Site topography is rolling, and will likely require significant after-purchase grading. The property transferred earlier in April 2011, without entitlements, for $1,450,000, with the difference attributable primarily to the value added by the I entitlements. The difference in sale prices reflects a value enhancement of 43 percent due to the entitlements. Market Datum No. 5 is the May 2011 transfer of 10750 West Ocean Air Drive in San Diego, just east of Interstate 5. The 10.73 site is graded, resulting in a net area of only 4.30 acres. Development in the area is a mix of office/industrial and residential. The buyer is reportedly planning to improve the site with 85 multi-family units. The sale price was $5,171,500 or Anderson & Brabant, Inc. 29 Poinsettia Lane, Carlsbad approximately $60,841 per unit. As of the date of sale the site had no entitlements for residential development. I Market Datum No. 6 is the August 2011 sale of four lots totaling 1.23 acres located along the north side of La Costa Avenue in Carlsbad. The buyer secured permits to build 20 apartment units I which are currently under construction. Site topography is sloping and the location, along a busy street, is notably inferior to the subject. Sale price was $975,000. I Market Datum No. 7 is a recently failed escrow involving a 9.03 acre parcel located at the west side of Vista at 255 Grapevine Road. The negotiated price of this parcel was $3,290,000 or $35,000 per unit based on an approved map for development with 94 attached units. The buyer had I intended to develop the site with for-rent units. A former escrow at a higher price also failed as the buyer was unable to gain assurance that affordable housing entitlements could be obtained. When compared with the subject, Comparable No. 7 is inferior for location and site condition. The sale properties vary as to parcel size, date of sale, location and specific land use potential. All of the data shed light on the value of the subject. Sale No. 2 is inferior to the subject for location, and would be expected to transfer for less on a per unit basis. Sale No. 3 will require significant site work. Market Datum No. 4 is notably inferiof for location, as is Market Datum No. 7. Sale No. 6 was purchased for the construction of apartment units and is located along a busy street. Therefore, despite its Carlsbad location it would be expected for the site to transfer for far less on a per unit basis than the subject due to the inferior location and inferior end product. We were not able to contact the buyer of Sale No. 5 and confirm his plans for development of the site so less emphasis is placed on this datum. The subject property transferred for a total compensation package equal to $9,100,000 or $133,824 per unit. Sale No. 2 transferred at sale price of $115,000 per unit and Sale No. 3 transferred for $69,811 per unit, with an additional roughly $70,000 per unit in grading costs when compared to the subject. Sales No. 2 and 3 support a subject value notably higher than $115,000 per unit and somewhere between $130,000 and $140,000 per unit. Based on our analysis of the data we have concluded that current subject value is consistent with the April 2011 purchase price of $9,100,000. Open Space As discussed previously, the subject property consists of three distinct zones of value. There are also two small remainders parcels, totaling approximately 0.4 acres, which are considered to be of no economic value. In order to determine the value of the approximately 11.55 acres of dedicated open space we have examined sales of other open space properties. A grid below summarizes the data. Anderson & Brabant, Inc. 30 Poinsettia Lane, Carlsbad SUMMARY OF LAND SALE DATA Sale No [ 1 2 [ 3 Highway 76 Highway 76 North River Rd Location at Ramona l)r, East of Grid Rd at Sleeping Indian Rd Bonsall Bonsai! Oceanside APN 123-381-07 124-150-23&25; 122-100-57,58, & 59 124-351-69 Buyer County of San Diego State of California Granite Construction Company Seller Vessels Family Trust MMJK Properties, LLC Fischer Family Partnership Date of Sale 06/04/08 01/31/08 11/15/06 Parcel Size (Ac) 142.90 136.62 28.72 Topography Riverbed and uplands Riverbed and uplands Riverbed and uplands Sale Price $5,001,500 $4,770,000 $1,015,200 Price/Acre $35,000 $34,914 $35,348 Purchased by Caltrans for Purchased for offsite mitigation Acquired for offsite preservation and requirements in arms mitigation requirements Comments inclusion in the San this length open market for proposed sand and Rey River Park. transaction without threat gravel mining operation of condemnation Though limited for direct comparison purposes, the data above show a consistent price per acre paid for open space land. Based on the smaller size of the subject's approximately 11.55 acre I open space area when compared to the market data, it is reasonable to attribute a higher per acre value to the subject's area. Based on the data, we have determined that the subject's open area, approximately 11.55 acres in size, should be value at $40,000 per acre. The concluded value, for the I open space zone of the subject property, is then $462,000 ($40,000 x 11.55 acres). If $462,000 of total larger parcel value is attributable to the open space area, the value attributable to the net buildable area of 6.6 acres is $8,638,000 ($9,100,000 less $462,000). This corresponds to a per acre I value of $1,308,789 and aper square foot value of $30.05. VALUE OF PARCEL TO BE ACQUIRED I The acquisition area (see page 24) is the third zone of value. The parcel to be acquired consists of land that features sloping topography and is outside the approved building site. The I installation of a roadway will have a limited impact on the residential project, as construction and normal maintenance is to be completed without disturbing the building site. As mentioned previously, the dedication of the acquisition area was a condition of approval of the final project map. Anderson & Brabant, Inc. 31 Poinsettia Lane, Carlsbad - This was a condition of approval to which buyer and seller were fully aware at the time of transfer in I April 2011. The buyer purchased the property anticipating reimbursement for the acquisition area and the seller represented future reimbursement for the acquisition area. The approved project, 82 multi-family units, is to be constructed on the usable portion of the subject property north of the I acquisition area. Absent the acquisition area, it is possible that the proposed development could have been expanded to cover more area or construct more units. Approximately one third of the larger parcel is being developed; the rest is left as open space. If we assume that absent the right of way the same proportion, approximately one third of the acquisition area, could be developed; it results in an area suitable for potential development of 0.26 acres (0.781/3) or 11,340 square feet. However, as noted previously the topography of the I acquisition area, prior to grading, was rolling and much less developable than the 6.6 acre portion of the site. In addition, it borders an area of dedicated open space and absent the right of way it is safe to assume that some portion of the acquisition area may have been included in the open space area. I This reduces the portion of the acquisition area that could be developed to less than one third, closer to one quarter (8,505 square feet) or one fifth (6,804 square feet). If the per square foot value of $30.05 (pg. 31) is applied to this area it results in a value for the acquisition area of between I $255,575 (8,505 x $30.05) and $204,460 (6,804 x $30.05). The balance of the acquisition area is considered to be open space and valued the same as the I larger 11.55 acre open space area. If the total acquisition area is 34,020 (0.781 x 43,560) square feet and the developable portion of the acquisition area is between 8,505 and 6,804 square feet then the open space area is between 25,515 (34,020 less 8,505) and 27,216 (34,020 less 6,804) square feet. I The value of the open space portion of the acquisition area is $40,000 per acre or $0.92 per square foot, which is then combined with the value of the acquisition area considered to be developable. I The table below summarizes this range. 25% Developable 8,505 SF x $30.05 = $255,575 I [i5,515SFx$0.92=$23,474 + =j$279,049 I 20% Developable 6,804 SF x $30.05 = $204,460 27,216 SF x $0.92 = $25,039 ± I - =1$229,499 We have reconciled near the midpoint of this range and conclude that the value of the I acquisition area is $250,000. VALUE OF REMAINDER AS PART OF THE WHOLE I The value of the remainder as part of the whole is derived by subtracting the value of the parcel to be acquired from the value of the larger parcel in the before condition. The value of the I remainder as part of the whole and before consideration of benefits is calculated as follows with calculations applied to the both the value of the land as if vacant and the value of the total property as improved. Anderson & Brabant, Inc. 32 I Poinsettia Lane Carlsbad I Value of the Larger Parcel: $9,100,000 I Value of Parcel to be Acquired: $ 250,000 Value of Remainder as part of the Whole: $8,850,000 I VALUE OF REMAINDER BEFORE CONSIDERATION OF BENEFITS Next consideration was given to the impact on value to the remainder parcel resulting from the acquisition and construction in the manner proposed, before consideration of benefits, provides an indication of any loss in value accruing to the remainder due to the acquisition or project I construction. Damages might occur if the acquisition resulted in diminished utility of the remainder parcel or resulted in higher development costs. The proposed project can also have a negative impact on the value of the remainder parcel by altering its suitability for the uses that were appropriate for I the site in the before condition. Factors considered in an analysis of damages include, but are not limited to, the following. Change in highest and best use Use/Use intensity Noise/fumes I Development costs Utility Shape Street frontage Visibility Access I The proposed acquisition will have no measurable effect on the current use and value of the subject in excess of the value of the rights to be acquired. The acquisition and project do not restrict the current use or increase operating costs. There will be no change is size, shape, use intensity or I external influences. The property is approved for development with residential product and further development of the land beyond the approved project is not considered to be a reasonable prospect. The remainder parcel, as currently entitled, will be fundamentally unchanged by the acquisition of the proposed easement rights. The acquisition area will not disturb the approved project, and will not require any changes to the approved map. The proposed acquisition will not alter the current use, nor will it make any changes to current operating expenses. The impact of the proposed easement on the value of the remainder parcel is considered to be negligible. The value of the remainder parcel (as vacant and as improved) is no less in the after condition than the value of the remainder parcels as part of the whole. CALCULATION OF SEVERANCE DAMAGES Severance damages result if the value of the remainder before consideration of benefits is less than the value of the remainder as part of the larger parcel and are calculated as follows. Value of Remainder as part of the Whole: $8,850,000 Remainder Parcel Value-Before Condition: $8,850,000 Indicated Severance Damages: $ 0 VALUE OF REMAINDER AFTER CONSIDERATION OF BENEFITS Benefits accrue to the remainder property when there is an increase in the value of the remainder parcel after construction and as a result of the public use of the improvement. The Anderson & Brabant, Inc. 33 Poinsettia Lane, Carlsbad enhancement could result from a change to a better use; reduction in development costs; greater convenience of access to the remainder; and increased site prominence, or some other factor that in turn increases the value of the remainder. The proposed acquisition does not result in any measurable benefit to the subject property. The subject may benefit in some general manner due to improved service capabilities resulting from the project; however, those benefits are considered to be minimal and have not been quantified. CALCULATION OF BENEFITS Benefits accrue to the property if the value of the property after consideration of benefits is greater than the value of the property before consideration of benefits. Benefits are considered to be minimal and have not been calculated. CALCULATION OF NET SEVERANCE DAMAGES Net severance damages result if damages are greater than benefits. Net severance damages are calculated as follows. Indicated Severance Damages: $0 Indicated Benefits: Not Calculated Indicated Net Severance Damages: $0 SUMMARY OF CONCLUSIONS Total just compensation is the sum of the value of the parcel to be acquired and the net severance damages. Due to the relatively limited impact of the proposed acquisition it has been concluded that there are no damages. Benefits will be minimal and have not been calculated. The summary of value conclusions is shown on the following page. I Anderson & Brabant, Inc. 34 Poinsettia Lane, Carlsbad SUMMARY OF VALUE CONCLUSIONS 1 t Value of the Larger Parcel: -- - $9,100,000 2 Value of Parcel to be Acquired: $250,000 3 Value of Remainder as part of 8850 ,000 the Whole: 4 Value of the Remainder Before I Consideration of Benefits $8,850,000 5 Severance Damages (3-4) $0 6 Value of the Remainder Alter Consideration of Benefits (6-4) 7 Benefits (6-4) $0 8 Net Damages (5-7) $0 Total Value of the Acquisition 9 Parcel and Net Severance $250,000 Daniages(2+8) jTotal Just Compensation 10 I(Rounded) $250,000 Anderson & Brabant, Inc. 35 Poinsettia Lane, Carlsbad ADDENDA Anderson & Brabant, Inc. Datum No. 2 Datum No. 3 Poinsettia Lane, Carlsbad MARKET DATA PHOTOS Anderson & Brabant, Inc. Datum No. 6 Datum No. 7 I Poinsettia Lane, Carlsbad MARKET DATA PHOTOS I Anderson & Brabant, Inc. Poinsettia Lane, Carlsbad QUALIFICATIONS OF THE APPRAISER Gilbert F. Kunkel, MAI Resident of San Diego County since 1946 Educational Background: Graduate of the University of California at Riverside with a degree in Economics in 1968 Professional Education Completed: I 1. Appraisal Institute Single Family Appraisal - Course VIII, 1974 Investment Analysis - Course VI, 1975 Case Studies in Real Estate Valuation - Course 2-2, 1983 I d. Valuation and Report Writing, 1984 Standards of Professional Practice, 1985 Standards of Professional Practice, Part B, 1993 I 2. Society of Real Estate Appraisers: a. Real Estate Appraisal -Course 101, 1974 I b. Real Estate Appraisal - Course 201, 1974 3. Seminars (Partial List) Valuation of Lease Interests - Part 1, 2/89 I Investment Analysis, 2/89 Subdivision Analysis, 2/89 Lotus 1-2-3 Templates, 9/89 I Apartment Seminar, 4/90 Standards of Prof. Practice Update, 6/90 Litigation Seminar, 12/90, 11/93, 11/95 Appraisal Regulation, 5/91 I Condemnation Valuation, 11/92 Discounted Cash Flow Analysis, 3/93 Apartment Appraisal, 9/93 I 10/02 Subdivision Analysis, 9/93 Real Estate Forecast, 9/93 Accrued Depreciation, 11/93 I Understanding Limited Appraisals, 7/94 Fair Lending and the Appraiser, 9/94 11/03 Partial Acquisition Appraisal, 9/94 Easement Valuation, 3/95 Federal Laws & Regulations, 3/96 Changing Markets and New Research Methods, 7/96 Apartment Seminar Update, 10/97 San Diego Retail Property, 3/98 Loss Prevention, 3/98 III. Professional Affiliations: Anderson & Brabant, Inc. Appraisal of Partial Interests, 6/98 Technical Inspection of Real Estate, 8/98 Market Trends in So. California, 8/98 Mock Assessment Appeal, 8/98 Valuation of Detrimental Cond., 9/98 Annual Litigation Seminar, 11/98 Internet Search Strategies for Real Estate Appraiser, 12/98 Standards of Prof. Practice Part C, 12/98 Land Development Seminar, 3/99 Case Update & Courtroom Strategies, Apartment & Housing Seminar, 1/03 What A Client Wants, 3/03 Dynamics of Subdivision Appraising, 4/03 Analyzing Operating Expenses, 11/03 Feasibility, Market Value, Option Value, USPAP Update, 12/03 Business Practice and Ethics, 12/03 Introduction to GIS Applications, 12/03 Condemnation Appraising, 8/04 2006 San Diego Economic Forecast, 2/06 2006 USPAP Update, 10/06 Poinsettia Lane, Carlsbad Member, Appraisal Institute, MA! (6/87) Member, International Right of Way Association State of California Community College, Limited Service Credential Past Member, Appraisal Institute Admissions Committee Past Member, Appraisal Institute Review and Counseling Committee Certified General Real Estate Appraiser, State of California (AGO 02101) Teaching Experience: Palomar College, San Marcos, California - "Real Estate Appraisal" Appraisal Experience: Co-Owner - Anderson & Brabant, Inc., Since 1990 Associate - Anderson & Brabant, Inc., 1979— 1990 Vice President and Appraisal Manager - Financial Appraisals, Inc., 1977 - 1979. Staff Appraiser - Financial Appraisals, Inc., 1972 - 1977 Assistant Right of Way Agent, California Division of Highways, 1968 - 1971 Expert Witness: Superior Court, San Diego County Bankruptcy Court of U.S. District Court, Southern District Types of Appraisals: Residential: Single-Family, Residential Subdivision, Condominiums, Apartments, Mobile Home Parks, Existing and Proposed Properties Commercial: Office Buildings, Shopping Centers, Medical Offices, Existing and Proposed Industrial: Existing and Proposed Vacant Land: Industrial, Commercial, Residential, and Rural Agricultural: Avocado and Citrus Groves Other: Leaseholds, Fractional Interest, Easements, Partial Acquisitions Partial List of Appraisal Clients: Government A2encies and Municipalities Law Firms California Department of Transportation City of Carlsbad City of Chula Vista City of Encinitas City of Escondido City of Laguna Niquel City of Oceanside City of San Diego City of San Marcos City of Vista Carlsbad Municipal Water District Carlsbad Unified School District Anderson & Brabant, Inc. David Boss Carlyle & McDonough Daley & Heft Best, Best and Kreiger McDougal & Associates McDougal, Love, Eckis and Smith Foley & Lardner Glenn, Wright, Jacobs, & Shell David Wilkerson Franzel, Share, Robbins, Caplan & Bloom Pillsbury, Madison & Sutro Singer & Crawford Poinsettia Lane, Carlsbad Escondido Elementary School District Escondido Union High School District Metropolitan Transit Development Board North County Transit District Olivenhain Municipal Water District Poway Unified School Districts Rincon Del Diablo Municipal Water District San Diego County Water Authority United States Postal Service United States Marshall's Service Valley Center Municipal Water District Banks/Savings & Loans Bank of America Bank of San Diego Bank of the West California Commerce Bank Citicorp City National Bank Continental Bank Downey Savings Fallbrook National Bank First international Bank First Interstate Bank First Republic Bank Grossmont Bank Independence Bank Palomar Savings & Loan PFF Bank & Trust Scripps Bank Union Bank U.S. Bancorp Wells Fargo Bank White & Bright Michael Pines Marks & Golia Gary M.Koston Lounsbery, Ferguson, Altona & Peak Others Argonaut Realty (General Motors) Casino Realty Carltas Company Chicago Title CIBC Oppenheimer Circle K Stores FEDCO First American Title insurance Company Fluidmaster Corporation Fraser Engineering Otay Ranch Development Pactel Cellular Palomar YMCA Republic Realty Mortgage Corporation Retlaw Enterprises St. Paul Title insurance Company The Festival Companies William Lyon Homes Techbilt Construction Anderson & Brabant, Inc.