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HomeMy WebLinkAbout20180530 An Appraisal Report 128Acres128.95-Acres of Vacant Land South Side of Gerald Ford Drive, West of Portola Avenue, City of Palm Desert, Riverside County, CA. Appraisal Report Market Value Fee Simple Estate, As -Is Prepared For: The City of Palm Desert Attn: Ms. Cora Gaugush 73-510 Fred Waring Drive Palm Desert, CA 92260 78100 Main Street, Suite 202, la Ouinta, Ca 92253 Effective Date of Appraisal: April 30, 2018 CRA File No. 18-4436 78100 Main Street, Suite 202, to Quetta, Ca 92253 May 15, 2018 The City of Palm Desert Attn: Ms. Cora Gaugush 73-510 Fred Waring Drive Palm Desert, CA 92260 RE: The Market Value of the Fee Simple Estate in 131.95-Acres of Vacant Land, Located Along the South Side of Gerald Ford Drive, West of Portola Avenue, City of Palm Desert, Riverside County, CA; Otherwise Known as APNs: 694-300-001, 2, 5, 14, 15; 694-310- 002, 3, and 6, Riverside County, CA Dear Ms. Gaugush, At your request and authorization, I have prepared this appraisal report, setting forth my opinion of the market value of the fee simple estate in the subject property as of April 30, 2018. Per your request, the following market value estimates are provided: 4- Market Value "As Is" The intended use of the report is for internal use. The intended user is the Client. No other use or users are intended. My report identifies the subject property and its market area, and presents the market data and analysis leading to the final estimate of value. This report is subject to the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. The appraisal report is intended to comply with the appraisal guidelines of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1898 ("FIRREA"), and the Uniform Standards of Appraisal Practice ("USPAP"), adopted by the Appraisal Standards Board of the Appraisal Foundation. I have personally inspected the subject property. I have located and reviewed current sales and listings of comparable properties in the subject neighborhood and competing areas and have analyzed the data in order to arrive at my estimate of market value. Based upon the available data, I conclude that the market value of the fee simple estate in the subject property as of April 30, 2018 is as follows: $7,135,000 Seven Million One Hundred Thirty -Five Thousand Dollars The market value estimate in this appraisal report is based upon the following Extraordinary Assumptions and Hypothetical Conditions: Extraordinary Assumptions: 4- None Hypothetical Conditions: 4- None The use of the above captioned Extraordinary Assumptions and Hypothetical Conditions if any, might have affected the assignment results. The undersigned have no personal interest either present or contemplated in the subject property and certify that no fee received or to be received for the employment of my services is in any way contingent upon the opinions reported herein. I hope you find the details of the appraisal report relevant to your decisions. Thank you for the opportunity to be of service. Respectfully Submitted CAPITAL REALTY ANALYSTS Michael A. Scarcella, MAI 78100 Main Street, Suite 202 La Quinta, CA 92253 (760) 564-6222 mike@reaItyadvisor.com State Certification No. AG019463 Expiration Date: October 24, 2019 Summary of Important Facts and Conclusions Table of Contents Tableof Contents............................................................................................................................ 4 Certification..................................................................................................................................... 5 Summary of Important Facts and Conclusions............................................................................... 6 Identification of Client and Intended Users.............................................................................. 10 Statementof Intended Use....................................................................................................... 10 Identification of the Subject Real Estate.................................................................................. 10 PropertyRights Appraised........................................................................................................ 10 Definitionof Market Value....................................................................................................... 10 Effective Date of Value Opinion................................................................................................ 11 ExtraordinaryAssumptions....................................................................................................... 11 HypotheticalConditions............................................................................................................ 11 General Assumptions and Limiting Conditions......................................................................... 11 Scopeof Work........................................................................................................................... 14 Personal Property or Other Items that are Not Real Property ................................................. 15 History, Including Prior Sales and Current Offers or Listings .................................................... 15 Market Area, City, Neighborhood, and Location Data................................................................. 15 RegionalAnalysis....................................................................................................................... 15 CityData.................................................................................................................................... 19 LandDescription....................................................................................................................... 23 ImprovementDescription............................................................................................................. 30 Taxesand Assessment Data...................................................................................................... 30 MarketAnalysis............................................................................................................................. 31 Highestand Best Use.................................................................................................................... 36 SalesComparison Approach......................................................................................................... 39 Estimateof Exposure Time....................................................................................................... 48 Addendum ©Capital Realty Analysts, 2018 Page 4 Summary of Important Facts and Conclusions Certification I certify to the best of my knowledge and belief: The statements of fact contained in this report are true and correct 4V 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. I have no present or prospective interest in property that is the subject of this report and no personal interest with respect to the parties involved. 1 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. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. A� My engagement in this assignment was not contingent upon developing or reporting predetermined results. 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 the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. My analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice. I have made a personal inspection of the property that is the subject of this report. - — No one provided significant your property appraisal assistance to the person signing the certification. 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. 41- The use of this report is subject to the requirements of the Appraisal Institute relating to review by it's duly authorized representatives. 4- As of this report, I Michael A. Scarcella, MAI have completed the continuing education program of the appraisal institute. 4- 1 have previously appraised the property that is the subject of this report. Michael A. Scarcella, MAID 78100 Main Street, Suite 202 La Quinta, CA 92253 (760) 564-6222 mike@realtyadvisor.com State Certification No. AG019463 Expiration Date: October 24, 2019 ©Capital Realty Analysts, 2018 Page 5 Summary of Important Facts and Conclusions Summary of Important Facts and Conclusions Client: The City of Palm Desert Attn: Ms. Cora Gaugush 73-510 Fred Waring Drive Palm Desert, CA 92260 Intended The City of Palm Desert Users: Attn: Ms. Cora Gaugush 73-510 Fred Waring Drive Palm Desert, CA 92260 Intended Use: The intended use of the report is for internal use Property Type: Vacant Land Location: South side of Gerald Ford Drive, west of Portola Avenue, Palm Desert, CA. Identification: APN: 694-300-001, 2, 5, 14, 15; 694-310-002, 3, and 6: Riverside County, CA Zoning: According to the Zoning Map of the City of Palm Desert, the subject parcels are zoned P.R.; Planned Residential. A zoning map is included in the Site Data section of this report. General Plan: According to the General Plan Map of the City of Palm Desert, the subject parcels have a general plan designation of Town Center neighborhood. A general plan map is included in the Site Data section of this report. Site Description: According to the Riverside County Assessor's data, the site size of the subject property is 128.95-acres. A breakdown of the site by parcel is included in the Site Data section of this analysis. Improvement None Description: Highest and Hold for investment until such time as speculative development becomes Best Use As financially feasible. Vacant: ©Capital Realty Analysts, 2018 Page 6 Summary of Important Facts and Conclusions Highest and N/A, the subject parcels are vacant Best Use As Improved: Property Rights Fee Simple Estate Appraised: Final Value $7,135,000 Estimate: Introduction The subject property consists of 8 legal parcels of vacant land, totaling 128.95-acres. The parcels are owned by the Successor Agency of the Redevelopment Agency of the City of Palm Desert. All of the parcels were acquired over 3-years prior to the date of value. As a consequence of the dissolution of Redevelopment Agencies in California, the City put out an RFQ/P in May of 2015, requesting proposals to acquire the subject property. The successful respondent was Lewis Group of Companies; who had been negotiating a development agreement with the City to acquire and develop the property. Interestingly, one of the conditions of sale of the property was for the buyer to develop 200-units of low income housing on an approximately 10-acre portion of the site. However, Lewis withdrew, and the property is currently planned to be sold at a sealed bid auction to be held on May 14, 2018. attended the pre -bid meeting on 5/12/18 and discovered that the requirement to develop the low-income units no longer exists. However, the successful bidder will be required to designate at least 10-acres of land to support future development of 200-units of very low to low income housing units. Currently, the City is preparing to sell the parcels via sealed bid auction, which generated the requirement for this analysis. All photos were taken by the appraiser on the date of value, unless otherwise noted. The report format generally follows the report format suggested by The Appraisal of Real Estate, 14th Edition (figure 31.2, p. 658). ©Capital Realty Analysts, 2018 Page 7 Summary of Important Facts and Conclusions Aerial Photo of the Sub, south The Subject Property viewing NW from near the center of the site ©Capital Realty Analysts, 2018 Page 8 Summary of Important Facts and Conclusions Street scene viewing east along Gerald Ford Drive; Subject at right ©Capital Realty Analysts, 2018 Page 9 Part II — Identification of the Appraisal Problem and the Scope of Work Identification of Client and Intended Users The Client and Intended Users of this report are as follows: The City of Palm Desert Attn: Ms. Cora Gaugush 73-510 Fred Waring Drive Palm Desert, CA 92260 Statement of Intended Use The intended use of the report is for internal use. Identification of the Subject Real Estate The following table shows the Riverside County Assessor's Parcel Number, and short legal description for the subject parcels: APN Size (AC) Legal Description 694-300-001 5.00 5.00 Acres In POR NE 1/4 of SEC 32 T4S HE 694-300-002 4.69 4.69 Acres In POR NE 1/4 of SEC 32 T4S HE 694-300-005 4.83 4.83 Acres In POR NE 1/4 of SEC 32 T4S HE 694-300-014 4.91 4.91 Acres In POR NE 1/4 of SEC 32 T4S HE 694-300-015 3.86 3.86 Acres In POR NE 1/4 of SEC 32 T4S R6E 694-310-002 40.47 40.47 Acres M/L In POR NE 1/4 of SEC 32 T4S R6E 694-310-003 40.46 40.46 Acres M/L In POR SE 1/4 of SEC 32 T4S HE 694-310-006 24.73 24.73 Acres M/L In POR NE 1/4 of SEC 32 T4S HE Total 128.95 Property Rights Appraised The property rights appraised for this analysis are those of the Fee Simple Estate. The definition of Fee Simple Estate (Interest) for this appraisal is as follows: "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."' Definition of Market Value The definition of market value for this appraisal is as follows: 1 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015 ) ©Capital Realty Analysts, 2018 Page 10 Part II — Identification of the Appraisal Problem and the Scope of Work "The most probable price that 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; Buyer and seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their best interests; 4- A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and 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."' Effective Date of Value Opinion April 30, 2018 Extraordinary Assumptions This appraisal report has been prepared based upon the following extraordinary assumptions: 4- None Hypothetical Conditions This appraisal report has been prepared based upon the following hypothetical conditions: �- None General Assumptions and Limiting Conditions This appraisal has been made with the following general assumptions; No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. Responsible ownership and competent property management are assumed. z (12 C.F.R. Part 34.42(g); 55 Federal Register 29499, June 7, 1994) ©Capital Realty Analysts, 2018 Page 11 Part II — Identification of the Appraisal Problem and the Scope of Work Information furnished by others is believed to be reliable but no warranty is given for its accuracy. 4- All engineering studies are assumed to be correct. The plot plans and illustrative material in this report are included only to help the reader visualize the property. - It is assumed that there're no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. - It is assumed that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance stated in the appraisal report. It is assumed that the property conforms to all applicable zoning and use regulations and restrictions unless a nonconformity has been described in the appraisal report. It this assumed that all required licenses, certificates of occupancy, consents, other legislative or administrative authority from any local, state, or national government or private entity or organization have or can be obtained or renewed for any use on which the opinion of value contained in this report is based. It is assumed that the use of the land and improvements is confined within the boundaries for property lines of the property described that there is no encroachment or trespass unless noted in the report. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea — formaldehyde foam insulation, and other potentially hazardous materials may affect the value of the property. The value estimated 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 such conditions or for any expertise or engineering knowledge required to discover them. The intended user is urged to retain an expert in this field, if desired. The forecasts, projections, or operating estimates contained herein are based on current market conditions, anticipated short-term supply and demand factors, and a continued stable economy. These forecasts are, therefore, subject to changes with future conditions. This appraisal has been made with the following general limiting conditions; Any allocation of the total value is estimated in this appraisal report between the land and improvements applies only under the stated program of utilization. The separate ©Capital Realty Analysts, 2018 Page 12 Part II — Identification of the Appraisal Problem and the Scope of Work values allocated to the land and buildings must not be used in conjunction with any other appraisal and/or invalid if they are. ©Capital Realty Analysts, 2018 Page 13 Part II — Identification of the Appraisal Problem and the Scope of Work Scope of Work The Scope of work for this appraisal assignment required three steps. These are as follows; 1. Identify the problem to be solved; 2. Determine and perform the scope of work necessary to develop credible assignment results; and 3. Disclose the scope of work in the report. For this analysis each of the required steps is described separately as follows: Appraisal Problem In this case, the subject property consists of 128.95-acres of vacant land. The property is comparatively large, and in a strong location in the northern part of Palm Desert. The property has a 200-unit affordable housing component. Consequently, the primary appraisal problems I encountered during the performance of this assignment, was acquiring a sufficient amount of comparable sales data, and quantifying the impact of the affordable housing component. Otherwise, I encountered no other atypical problems or difficulty in the valuation of the subject property. Scope of Work Necessary to Develop Credible Assignment Results In order to perform this appraisal, I performed the following steps; I collected a factual data from the client; - I inspected the subject property on April 30, 2018; I searched for comparable sales data from both public and private data sources; 4- 1 interviewed the key brokers who work in the subject market area; I analyzed the data collected; 1 performed the relevant approaches to value; 4- 1 prepared a written appraisal report detailing factual information about the subject property, the comparable data applied, the analysis of the data and the reconciled final value estimates for the subject property; - I transmitted the appraisal report to the client ©Capital Realty Analysts, 2018 Page 14 Part III — Presentation of Data Personal Property or Other Items that are Not Real Property None History, Including Prior Sales and Current Offers or Listings The current owner acquired the property over 3-years prior to the date of value for an unknown sale price. The property was offered for sale via an RFQ/P, dated May 1, 2015. Market Area, City, Neighborhood, and Location Data Regional Analysis The subject property is located in the Coachella Valley regional area. The following is a map of the regional area: The Coachella Valley region is located in southern California. The regional area extends for approximately 45 miles in Riverside County, southeast from the San Bernardino Mountains to the northern shore of the Salton Sea. The Coachella Valley is the northernmost extent of the vast trough; which includes the Salton Sea, the Imperial Valley and the Gulf of California. It is approximately 15 miles wide along most of its length. The region is bounded on the west by the San Jacinto and Santa Rosa Mountains, and in the north and east by the Little San Bernardino Mountains. The San Andreas Fault crosses the valley from the Chocolate Mountains in the ©Capital Realty Analysts, 2018 Page 15 Part III — Presentation of Data southeast corner of the region. The fault is easily visible along its northern leg as a strip of greenery against an otherwise barren Mountain. The Coachella Valley connects with the greater Los Angeles area to the west via San Gorgonio Pass, a major transportation corridor that includes interstate 10 and the Union Pacific Railroad. Populated by nearly 600,000 people, the Coachella Valley is part of the 13th largest metropolitan area in the United States, the Inland Empire. The following table shows the population growth trends of the Coachella Valley and the rest of Riverside County (source: California Department of Finance/US Census Bureau): :e tf 370,000 360,000 - 350,000 340,000 330,000 320,000 Coachella Valley Population Trend 2007 2008 2009 2010 2011 2012 2013 2014 2015 The regional area generally attracts a high percentage of retirees due to the favorable climate in the fall, winter, and spring seasons. Summers are hot, resulting in a seasonal population base. Development has generally been moving from west to east through the region. Consequently, the eastern cities in the region has the highest growth rates over the past several years. The following table shows the growth rate of the cities in the region, from west to east: ©Capital Realty Analysts, 2018 Page 16 Part III - Presentation of Data City 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Indio 77,146 80,962 82,325 75,122 77,165 78,065 78,298 85,663 86,683 88,058 Cathedral City 52,115 51,972 52,508 51,037 51,603 51,952 52,108 53,437 53,859 54,261 Palm Desert 49,752 50,686 51,570 48,132 49,111 49,471 49,619 51,202 48,835 49,335 Palm Springs 46,858 47,019 47,653 44,385 45,002 45,279 45,414 46,854 46,204 46,654 Coachella 38,486 40,317 41,043 40,464 41,502 41,904 42,030 44,132 45,001 45,407 La Quinta 41,092 42,743 43,830 37,307 37,836 38,075 38,190 39,964 39,311 39,977 Desert Hot Springs 23,544 25,939 26,584 25,852 27,383 27,638 27,721 28,164 28,794 29,048 Rancho Mirage 16,944 16,975 16,938 17,168 17,463 17,504 17,556 17,982 17,920 18,070 Indian Wells 4,942 5,000 5,099 4,941 5,010 5,035 5,050 5,219 5,336 5,412 10-Yr Avg.Yr Gain/Loss % Change 10,912 1.41% 2,146 0.41 % -417 -0.08% -204 -0.44% 6,921 1.80% -1,115 -0.27% 5,504 2.34% 1,126 0.66% 470 0.95% Desert Hot Springs and Coachella have the highest overall growth rates and the lowest median housing prices, reflecting the generally poor economic conditions that have prevailed in the region over the past several years. Tourism, retail, healthcare, construction and agriculture are the main industries in the Coachella Valley. The following table shows the employment distribution by sector: UXW t CA 1 Wt*YWkt 0(W0"Nr 0t.ik V4Ni buswwss Services (3 S% - 4599) FmAns/1t (4 0% - &257) Drttnbutron (51% - 67W) Constructon (S 10A - & 702) E6AMiao (7 2% • 9.462) 1, sms" Sodas (75% - 9.BS6) Other' Serest» (a9%-11.&M) Asncstt. (9 2%-12,090) it kW (241% - 31.00) F WWAnam (15.0-16.19A2) r N"Ith (104% -11"7) As shown, retail hotel with their related services historically have been the driving force in the local economy. Close driving proximity to Los Angeles, Orange county, and San Diego metro areas yields over 3.5 million tourists per year. The area attracts a significant retiring base; yielding a high percentage of healthcare employment. ©Capital Realty Analysts, 2018 Page 17 Part III — Presentation of Data Historically, the Coachella Valley tended to underperform the Inland Empire's economy in bad times; and outperform it in good times. Thus, the areas job growth was negative in the early 1990s recession, but grew faster than the region in the late 1990s recovery. It was slower in the 2001 recession but was faster to recover in the mid-2000's. In 2007 the pattern reversed due to the severe recession. This is largely due to the increased prominence of the local construction sector. Thus, the Valley grew slower than the Inland region in 2005 — 2006 boom years, and matched it during the 2007 — 2009 recession. It fell much more than the Inland region in 2010 (-3.3% versus-1.5%). In 2011 both grew slightly. In terms of new -home absorption, the table below illustrates the trend for the regional area: Absorbtion Trends 6,000 5,000 4,000 3,000 2,000 1,000 0+� -Attached Units -Detached Units - Shown in table above, regional new -home absorption declined sharply in 2005 through 2008. Small upticks in 2011 and 2012 were followed by a comparatively strong showing in 2013/2014. Although absorption has tapered off, the Coachella Valley appears to have a general positive outlook, at least in the short run. Employment has almost fully recovered to its pre -recession peak. Comparatively speaking, unemployment rates for the regional area are low. Conclusion, Regional Analysis The Coachella Valley economy has historically been seasonal, tied to the Winter/Spring influx of tourists and seasonal residents. Additionally, the Coachella Valley has historically attracted the baby boomer and relatively affluent retiree segments. The region is projected to continue to grow rapidly in relation to neighboring regions over the next few decades as the large baby boomer demographic Is now entering retirement age. The region continues to enhance its appeal with this demographic by configuring shopping, entertainment venues, planned housing developments ranging from upper middle to high end products geared to the segment. The regional economy is now trending up after several years of difficult economic conditions. This trend is likely to continue through the short term; with some potential for stronger midterm growth as the current economic cycle continues to mature. ©Capital Realty Analysts, 2018 Page 18 Part III — Presentation of Data City Data The subject property is located in the City of Palm Desert. The following map shows the subject City; Introduction Palm Desert California is located in the central portion of the Coachella Valley region. The city is bounded by Indian Wells to the east, Rancho Mirage to the west, the Santa Rosa Mountains to the south and Interstate 10 to the north. Access to Palm Desert is considered good via Monterey Ave., Cook Street and Washington Street: direct routes to the Interstate 10 freeway. State Highway 111, the major commercial corridor in the region roughly bisects the city of Palm Desert, running from west to east. Palm Springs International Airport is the nearest regional airport, located approximately 18 miles west of the city in the city of Palm Springs. Bermuda Dunes Airport, a general aviation facility is located immediately east of the city in an unincorporated area known as Bermuda Dunes. Although Southern Pacific operates rail facilities parallel to the Interstate 10 freeway along the northern border of the city, rail spur access is not available within the city limits. The city was incorporated in 1973 and includes a total land area ©Capital Realty Analysts, 2018 Page 19 Part III — Presentation of Data of 26.96 mi.'. Historically, Palm Desert has had a reputation and one is as one of the best run cities in the subject region. Several good -quality master -planned communities have been developed in Palm Desert. Some of these include Bighorn, Ironwood, Desert Falls, Palm Valley and Indian Ridge. In addition, Palm Desert has attracted high quality retail development. El Paseo is the region's premier pedestrian retail core door, generally attracting the highest retail rents in the region. Tenants on El Paseo include Sak's, Tiffany's, Coach, Tommy Bahamas and designers such as Louis Vuitton, Gucci, and Ralph Lauren. Westfield Shoppingtown (formerly known as the Palm Desert Town Center), a regional mall located in Palm Desert sold in 1999. This facility is the largest in both size and sales volume among the four regional malls in the Coachella Valley region. The facility completed a major renovation in the mid-2000's and again in 2014, which brought in new retailers and food court tenants. Population As shown in the tables in the Regional Analysis, the population of Palm Desert has grown approximately 90% in the past decade, to over 50,000 permanent residents. Current estimates put the seasonal population of the city at over 70,000. The city's growth has been enhanced with quality developments, including the City's Desert Willow project Marriott's Desert Springs resort and a number of excellent quality retail projects. The northern part of the city includes hundreds of acres available for new residential and commercial development. Business and Economy The fact the Palm Desert has a substantial retail and service -based economy makes for a comparatively high percentage of year-round population. Although the absorption rate for new home sales remains relatively weak, the fact that the North Sphere area includes a significant amount of available residential land inventory suggests that as the market cycle matures, Palm Desert is poised to garner 100% market penetration in new home sales. The City Economic Development Department published an Economic Development Strategic Plan, that includes a SWOT analysis. The following exhibit shows the SWOT Analysis for the City of Palm Desert: ©Capital Realty Analysts, 2018 Page 20 Part III — Presentation of Data Strengths opportunities + Central valley location * Work with hoteliers to increase • Available land for development room occupancy Accessible to large drive market • Develop a stronger downtown • Attractive second home presence for El Paseo markettaffordable residential • Work on zoning for mixed use/live + Natural beauty/open space and work/parking standards + Weather • Redevelop HWY 111 Corridor Strong K-12, higher education • Promotelexpand aspects of culture + Cultural amenities/ Recreation and recreation • Shopping mix • Expanding educational + Accessible activities for tourists opportunities with healthcare • Strong brand + Look at zoning in north sphere for + Fiscally strong local government entertainment opportunities • Accessible medical facilities * Development of hotel/timeshare at • Quality of life Desert Willow and area • Sense of community surrounding El Paseo Weaknesses Threats + isolated from large population • Funding opportunities for economic + Weak labor pool development • Lack of middle class/professional * Regional competition for jobs destination retail • High utility costs • Slow housing recovery/weak + Seasonal tourism & business property values decrease revenues + Limited higher education/majors * Competing visions impede new • Limited diversity development • Limited activities for 20-30 age + Resurgence of competitive valley + Hotel product dated & limited to cities mid -range + Heavily weighted toward golf • Mall & Hwy 111 need renovation • No defined downtown • Lack of public transportation Overall unemployment is currently 3.30% in Palm Desert and is trending down as of the date of value. The following chart shows the trend: ©Capital Realty Analysts, 2018 Page 21 Part III — Presentation of Data For advanced charting, view our full-featuad Fundamental Chart 2010 2016 2018 10.00% 6.00% 6.00% 4.00% Like the other Coachella Valley cities, Palm Desert's economic base is the tourism, construction and retail industries. Palm Desert has the largest destination resort in the Coachella Valley. The Marriott's Desert Springs resort represents almost 50% of the City's over 1,800 hotel rooms. A 400% increase in hotel room sales has occurred since 1986 to over approximately $80 million. The recession and subsequent housing downturn impacted the construction industry in Palm Desert. However, the average permit value is comparatively high, and trending up. Conclusion Palm Desert has been one of the top economic performers in the regional area. Well -managed growth and a realistic municipal approach, combined with relatively wide economic diversity have created a comparatively stable community. The city administration has done a good job of anticipating and adjusting to changes occurring through its own growth and the growth of the surrounding communities. These trends are projected to continue through at least the midterm. ©Capital Realty Analysts, 2018 Page 22 Part III — Presentation of Data Land Description Plat Map 694-30 Plat Map E i0R NE 114. SEC. 32, US R6E I uurxe} 694-30 _ CRY OF PALM DESERT , 1 ------ ----FORMA—.._,._A, I ---- - \� � i 11{ff�f KTAA tlUY �.SIiGRtWNMg11-� �OtnM.RRe". tiH 4-31 RCR. SEC 32, US R&E nue.sm+ 694-31 .HOC iL w H �m{fc�1mlYM.c:• � • A� Ys � qn - M.aM4WilN ©Capital Realty Analysts, 2018 Page 23 Part III — Presentation of Data Location: South side of Gerald Ford Drive, west of Portola Avenue, Palm Desert, CA. Identification: APN: 694-300-001, 2, 5, 14, 15; 694-310-002, 3, and 6: Riverside County, CA Site Size: According to the Riverside County Assessor's data, the site size of the subject property is 128.95-acres. The following table shows the breakdown of the site by parcel: APN Size (AC) 694-300-001 5.00 694-300-002 4.69 694-300-005 4.83 694-300-014 4.91 694-300-015 3.86 694-310-002 40.47 694-310-003 40.46 694-310-006 24.73 Total 128.95 Shape: Irregular, See Plat Maps Dimensions: See Plat Maps Frontage: South side of Gerald Ford Drive, west side of Portola Avenue Topography: Very gently sloping downward from northwest to southeast Flood Zone: According to the Flood Insurance Rate Map, Community Panel No. 06065C 1595G, dated 8/28/08, the subject is located in Flood Zone X. Flood Zone X is defined as follows: "Areas of 0.2% annual chance flood; areas of 1% annual chance flood with average depths of less than 1 foot or with drainage areas less than one square mile; and areas protected by levees from 1% annual chance flood." Fault Zone: The subject property is not located within % mile of a known fault Liquefaction Moderate Potential: Subsidence: Susceptible ©Capital Realty Analysts, 2018 Page 24 Part III — Presentation of Data Access: The subject property has average access along the south side of Gerald Ford Drive, and along the west side of Portola Avenue Visibility: Average Soils: I was not provided with the soils report for the subject property. My physical inspection of the subject property did not reveal any obvious evidence of toxic waste or atypical hazardous materials on the subject property. This report assumes that no toxic or hazardous materials are present upon the subject property. The appraiser is not qualified to make a determination as to the existence or nonexistence but hasn't materials on the subject property, recommend a qualified engineer be consulted, if required. Utilities: Electricity: Southern California Edison Gas: The Gas Company Water: Coachella Valley Water District Sewer: Coachella Valley Water District Hazards: My physical inspection of the subject property did not reveal any atypical hazards. am not qualified to evaluate the site for toxic waste or hazardous substances. This report assumes that there are no hidden or apparent conditions to, or on the soil or subsoil that render the property more or less valuable. Zoning: According to the Zoning Map of the City of Palm Desert, the subject parcels are zoned P.R, Planned Residential. A zoning map is included at the end of this section of this report. General Plan: According to the General Plan Map of the City of Palm Desert, the subject parcels have a general plan designation of Town Center Neighborhood. A general plan map is included at the end of this section of this report. Special The course of normal data gathering, and analysis and a visual inspection of the Resources: subject did not reveal any evidence of natural, cultural, recreational or scientific resources present on the subject site. Easements A preliminary title report for the subject property was not submitted or Encumbrances examined. Consequently, other than those items specifically noted, the subject property is being appraised based upon the assumption that there are no atypical easements or encumbrances that may have a negative impact on the marketability or market value of the subject property. ©Capital Realty Analysts, 2018 Page 25 Part III — Presentation of Data Functional Typical Adequacy of the Site: Relationship Homogeneous Adjoining Properties: Units of The market typically applies a price per acre as the metric to value land such as Comparison: the subject property. The price per acre will be applied as the unit of comparison to value the site for this analysis. ©Capital Realty Analysts, 2018 Page 26 Part III — Presentation of Data Zoning Map 353 R Dlnan Shore D De Sen Island CountryClub w rt is larxl Gall :ountry Club StanforrJ Dr Country Ct 67 sunrise ountryClub ©Capital Realty Analysts, 2018 Page 27 Subject Part III — Presentation of Data Flood Zone Map ©Capital Realty Analysts, 2018 Page 29 Part III — Presentation of Data Improvement Description None, the subject parcels are vacant Taxes and Assessment Data Real property taxation in the state of California is governed by Proposition 13, which was passed by the voters in June 1978. The basic elements of proposition 13 are as follows: 1. The tax rate was limited to 1% of the assessed value plus an additional %% to cover the payment of debts previously approved by voters. 2. The assessed value of the property purchased prior to March 1, 1975 was fixed at that property's market value as of March 1, 1975. For a property purchase after March 1, 1975, the law requires the assessment to be based on the market value at the time of sale. 3. All assessed values can increase no more than 2% per year for inflation. All of the subject parcels are owned by the Successor Agency to the City of Palm Desert Redevelopment Agency, a tax-exempt entity. Consequently, I have no basis for estimating the reasonableness of the assessed value or effective tax rates for the subject parcels. ©Capital Realty Analysts, 2018 Page 30 Part IV —Analysis of Data and Conclusions Market Analysis The Market Analysis is intended to describe the supply and demand characteristics of the subject market area. The subject property includes 8 contiguous parcels of vacant land. The property is zoned for residential development and includes a 200-unit low income housing component. The property is located in the North Sphere sub -market area of the City of Palm Desert. The following map of the sub -market area shows the subject in relation to some competing land parcels in the immediate area: The North Sphere are of Palm Desert has been among the last to develop in the City, as the Freeway corridor is a wind belt; making it less desirable as a residential location. However, as development has moved north through the City, the North Sphere area has become active with some new developments and some prominent parcels have recently sold. The PSUSD site is an 80-acre parcel with an approved tract map for SFR development. The PSUSD previously declared the property surplus and marketed the property for sale unpriced. While several bids were received, the District Board decided to continue to hold the property for future sale or development. Pulte (Del Webb) has acquired approximately 142-acres of a 309-acre +/- site located at the SWC of Ramon Road & Bob Hope Drive for a new SFR project. The property is planned for an active adult community, that may not be directly competitive with future ©Capital Realty Analysts, 2018 Page 31 Part IV —Analysis of Data and Conclusions development on the subject property. The property sold on May 18, 2017. The sale price was reported to be $10,012,778, or $70,513 per acre. The following shows a site plan for the project. Additional details are included in the Sales Comparison Approach. 6ATlD ENT' G!YRTMMai BtaT Dawe" RANCHO MIRAGE O Na�TN •+r s.� a�.a.r. V LM NMI W It The Eagle property is the last full section of viable development land currently undeveloped on the Valley floor, in the core developed area of the region. This country club site had fractured ownership that has been unable to bring a project to the market. The property recently sold for $75,000,000 and is currently being planned for a resort/residential project with some commercial components. The following is a preliminary concept plan for the site: ©Capital Realty Analysts, 2018 Page 32 Part IV —Analysis of Data and Conclusions KEY LAND USE FEATURES k-aaa ft a NOW • r+r. rrs SeNatfagfk NotN • i Mru.f Mn Mwre•ww 1RSNNM aead� tab •� �s�r..raw..r..u.,....�w..w-ar ts,aaSohereaR.W. NNelahhwh.6 tee,nx Ur ►revive .,me+wneo�www. �+.rr+r.wna.. • •.w �... r o.. o o a w. e..,. w.. v WCanxnadM �4er�Y W H lot 1.0Y W v,� 4 /�•�a4lwww��wlN NY+,'Kw' LlOASWAkVBM Preliminary Concept Plan T H E E A G L E Rancho Mirage, California ow a \„/ The common elements planned for this site will likely take the retail pricing well above that available to the subject property. Consequently, the project will not likely be directly competitive with the subject. Additional details regarding the land sale are described in the Sales Comparison Approach section of the report. D.R. Horton acquired the remaining subdivision land located immediately north of the subject from Ponderosa Homes. This project is most competitive with the subject but will be fully developed by the time any units become available at the subject. ©Capital Realty Analysts, 2018 Page 33 Part IV —Analysis of Data and Conclusions Millennium is a master planned community, which includes a significant residential portion. The site plan for the project is shown at right. The project will be a primary SFR competitor for the subject property, but likely at a slightly higher price point. CO�ROAL 12 ACM a,anar rx� � unnr>..cr i University Park, which is located immediately west of the subject MUD" property recently sold to isarei..xmos/: cauacxw f .-.. g BlackRock for $20,000,000. Although R the property had been mapped for over 600 SFR lots, the owner is revising the map and is reportedly going to submit new development plans in the short term. This property will reportedly include primary housing that will be directly competitive with the subject property. However, with virtually all required backbone infrastructure already developed, the site appears to have a significant head start on any development to take place at the subject. In terms of current new home absorption, sales rates have been generally flat to slightly increasing. Alternatively, retail pricing is trending up as shown in the following table: ©Capital Realty Analysts, 2018 Page 34 Part IV —Analysis of Data and Conclusions Coachella Valley Median Detached Home Price Median Price Mar 2002 - Mar 2018 $450,000 $392,000 $400,000 $3e6,2ss $350,000 $300,000 $250,000 $200,000 $150,000 SP "P NN 4''ti Nt. 43 ,gym 41 4a -*-Media Detached Price —4% Growth Curve Conclusion The subject land is a prominent parcel in the North Sphere area of Palm Desert. The property is surrounded by existing development and the locational quality of the property is considered good. However, there are a significant number of lots remaining for development in the immediate area, and consequently, absorption may be a challenge. The requirement to designate land for 200 low income housing units on the site will also weigh on the current value in 2 ways. First, the most likely buyer would not likely place any value on the land ascribed for low income housing, as the cost to develop the property would be likely be greater than the value at completion. Secondly, the fact that 200 low income units will be located on the site may limit the retail price potential available to the remaining lots of the project. Despite these features, the highest demand in the market is for lower priced units, which is what is likely to prove most appropriate for the subject property. Consequently, it appears that the market perception is that the subject would have average or better marketability, but the market value will need to reflect the limited retail housing price potential available to the site. ©Capital Realty Analysts, 2018 Page 35 Part IV —Analysis of Data and Conclusions chest and Best Use Highest and best use is defined as follows: 1. The reasonably probable use of the 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 or 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)3 Implied in this definition, and the definitions of highest and best use as vacant, and highest and best use as improved, is that the determination of the highest and best use takes into account the contribution of a specific use to the community and community development goals as well as the benefits of that use to individual property owners. Hence, in certain situations, the highest and best use of land may be for Parks, green belts, preservation, conservation, wildlife habitats, and the like. The four stages of analysis are further described as follows: Legally Permissible: what uses are permitted by zoning and deed restriction for the subject site? 4- Physically Possible: what are you physically possible uses for the subject site? -jV Financially Feasible: what physically possible and legally permissible uses will produce a net return to the owner of the site? Maximally Productive: I'm on the highest net return or the highest present worth? These four tests are applying the subject property in the asked vacant condition, as well as the house improved condition. The following describe the analysis: Highest and Best Use of Land or Site as Though Vacant The highest and best use of land or a site as though vacant is defined as follows: 3 Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) ©Capital Realty Analysts, 2018 Page 36 Part IV —Analysis of Data and Conclusions "Among all reasonable, alternative uses, that use that yields the highest present value, after payments are made for labor, capital, and coordination.114 Legally Permissible — As Vacant The legal restrictions that apply to the subject are the public restrictions of the city of Palm Desert's P.R. zoning ordinance and Town Center Neighborhood general plan designations. Other similar parcels have been developed on similarly zoned parcels, with no apparent legal constraints. However, the requirement to set aside land for low income housing will weigh on the current market value of the property. Consequently, I conclude that the subject's legal constraints will impair development of the parcels to their highest and best use as vacant. Physically Possible — As Vacant The subject site is comparatively large. All utilities are available to the site; which has average+ access and visibility. The topographical conditions are generally level to gently sloping, providing a typical level of physical viability for the legally permissible uses for the property. In my opinion, the physical aspects of the subject property would not impair the potential for the parcels to be developed to their highest and best use as vacant. Financially Feasible — As Vacant The legally permissible and physically possible qualities of the subject parcels lend them to residential subdivision development. While SFR development on the property would be homogeneous and existing competitors are currently developing homes in the immediate area. In addition, a large number of units are being planned for this area. In light of the fact that both lenders and developers are currently risking debt and equity on new residential development in the North Palm Desert sub -market, I conclude that development of the subject property with an SFR subdivision may prove financially feasible as of the date of value. Maximally Productive — As Vacant The physically possible and legally permissible uses for the subject property are present in the subject region. Other similar parcels have been successfully developed in immediate area of the subject property. As financial feasibility for development may exist, it is my opinion at the market perception is that the most maximally productive use of the subject parcels as vacant, is to begin the entitlement process to develop the property with a SFR subdivision. 4 Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010) ©Capital Realty Analysts, 2018 Page 37 Part IV —Analysis of Data and Conclusions Highest and Best Use of the Property As Improved The highest and best use of the property as improved is defined as follows: "They use that should be made of the property as it exists. An existing improvement should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from the new improvement would more than offset the cost of demolishing the existing building and constructing a new one.: The subject parcels are vacant. Consequently, there is no highest and best use as improved analysis. Land or Site Value As the subject parcels lack improvements with an associated cost or income earning ability, the Cost and Income Approaches are not considered relevant. Land value will be estimated via direct comparison to other parcels that have sold in the market; which calls for a Sales Comparison Approach. ©Capital Realty Analysts, 2018 Page 38 Part IV —Analysis of Data and Conclusions Sales Comparison Approach The sales comparison approach is defined as follows: "The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market — derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available." 5 A field investigation was made in order to obtain data on recent, comparable sales transactions. The primary selection criteria for the comparable sales applied in this analysis are as follows; current sales, similar locational quality, similar physical qualities, etc. The typical unit of comparison for vacant land parcels of the subject's size and type is the price per acre. In this report, the price per acre foot will be applied as the unit of comparison. The sales comparison approach is organized as follows: Land Sales Map Land Sales Grid Land Sales Analysis Land Sales Adjustment Matrix 4- Reconciliation and Conclusion 5 Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) ©Capital Realty Analysts, 2018 Page 39 Part IV —Analysis of Data and Conclusions Land_ Sales Map & Grid Sale Sale Land Sale $ Per $ Per No. Location Date Area (AC) Units Price Acre Unit 1 SEC of Gerald Ford Dr.& Portola Avenue Palm Desert, CA 8/4/17 167.47 839 $ 20,000,000 $ 119,424 $ 23,838 2 NEC of Bob Hope Drive & Frank Sinatra Drive Rancho Mirage, CA 3/27/18 618.00 N/A $ 75,000,000 $ 121,359 N/A 3 NEC of Dinah Shore Dr. & Los Alamos Road Rancho Mirage, CA 5/18/17 142.00 N/A $ 10,012,778 $ 70,513 N/A 4 E Side of Portola Ave., S of Frank Sinatra Drive Palm Desert, CA 2/5/16 15.52 112 $ 2,020,000 $ 130,155 $ 18,036 ©Capital Realty Analysts, 2018 Page 40 Part IV —Analysis of Data and Conclusions Comparable Sale No. 1 Comparable sale number one is the August 2017 sale of the 167.47-acre University Park project site. The property is located at the SEC of Gerald Ford Drive & Portola Avenue, Palm Desert, CA. The sale price of $20,000,000 equates to an otherwise unadjusted sale price of $119,424 per acre. This property was selected for comparison as the sale date is very recent, and the property is located immediately east of the subject property. However, significant downward adjustment will be required of this sale as the property had significant improvements on the sale date. Although a CFD bond assisted in financing the development of offsite and onsite improvements, the seller reports having spent over $100,000,000 to acquire the land and get the property to where it was when it sold. In addition, the City of Palm Desert redeemed approximately $52M of the bond, thus bringing the effective tax rate on the property down significantly. The owner reports that the entire project area will be re -mapped, and a new submission is planned for May 2018. Overall comparability is considered fair as significant downward adjustment will be required for infrastructure. Comparable Sale No. 2 Comparable sale number two is the March 2018 sale of the 618-acre Eagle site, located at the NEC of Bob Hope Drive & Frank Sinatra Drive, Rancho Mirage, CA. The sale price of $75,000,000 equates to an unadjusted sale price of $121,359 per acre. This sale was selected for comparison as it is the most recent sale of a larger master -planned community site, located in close proximity to the subject that I could locate and verify. The site is located % mile west of the subject. This land is being planned for development of a resort -oriented project to include 76-acres of resort & commercial uses, along with 1,316-units of residential development of varying types and densities. The project also includes a 102.3-acre lagoon, which is planned to be the focal point of the project. The fact that this land will support resort oriented commercial development is a positive element that will require significant downward adjustment. In addition, the Rancho Mirage address will support significantly higher retail price points than what is available at the subject. This feature will also require a material downward locational adjustment. In light of the adjustments required, overall comparability is considered fair. Comparable Sale No. 3 Comparable sale number three is the May 2017 sale of a 142-acre portion of the 309+/--acre Del Webb Rancho Mirage project, located at the NEC of Dinah Shore Drive & Los Alamos Road, Rancho Mirage, CA. The sale price of $10,012,778 equates to an unadjusted sale price of $70,513 per acre. In addition, the sale price reportedly requires payments to the seller for excess sale prices over a specified minimum when residential units are developed and sold. Interestingly, the property has a comparatively high density, no golf, and is planned for relatively low unit pricing. While the age restriction will be a point of difference between this project and the subject, the available price point may be similar. Overall comparability is considered fair. ©Capital Realty Analysts, 2018 Page 41 Part IV —Analysis of Data and Conclusions Comparable Sale No. 4 Comparable sale number four is the February 2016 sale of a 15.52-acre land parcel located along the east side of Portola Ave., South the Frank Sinatra Drive, Palm Desert California. The sale price of $2,020,000 equates to an unadjusted sale price of $130,155 per acre. This property was selected for comparison, as the land is located in very close proximity to the subject, and one of few sales available in the North Sphere area. The significantly smaller site size will require downward adjustment. In addition, the fact that the property will support resort -residential development suggests a significantly higher retail price potential; which will also require downward adjustment. Overall comparability is considered fair. Other Market Data In addition to the sales selected for direct comparison, I reviewed a number of additional data points. The fact that the subject is likely to support primary housing at the lower end of the market is a factor, as the existing sales in the area of the subject are generally resort -residential oriented parcels that will require significant downward adjustment. Because of this feature, all of the sales are rated as fair in terms of overall comparability. However, I was able to locate other sales of primary housing sites that are not located in the area of the subject, and/or have other features that limit their applicability to this analysis. However, the following table is included to demonstrate the per acre prices being paid for primary housing sites located in other areas of the region; which may be useful in testing the reasonableness of the adjustments to the sales applied, and thus, the final per acre value estimate for the subject property: ©Capital Realty Analysts, 2018 Page 42 Part IV —Analysis of Data and Conclusions Data Name Sale Sale No. Location Date Price (Ac.) $/AC Lots $/Lot DU/AC 1 NWC of Washington St. & 11/14/17 $ 2,800,000 28.330 $ 98,835 74 $ 37,838 2.61 Avenue 48, La Quinta, CA 2 Monte Vina / Richland 7/7/14 $ 8,880,000 79.150 $ 112,192 296 $ 30,000 3.74 S Side of 44th Avenue, W of Harrison Street, Indio, CA 3 Affreso 9/14/15 $ 2,800,000 34.290 $ 81,656 148 $ 18,919 4.32 NWC of Jackson Street & Coachella Canal, Indio, CA 4 Serenata 7/14/16 $ 1,210,100 39.530 $ 30,612 140 $ 8,644 3.54 SEC of 44th Avenue & Harrison Street, Indio, CA 5 Bellaseno / True Life 7/28/15 $ 10,300,000 80.820 $ 127,444 320 $ 32,188 3.96 SEC of Monroe Street & Avenue 60, La Quinta, CA 6 Ballare at Shadow Hills E side of Monroe Street, N/S Listing $ 2,850,000 41.430 $ 68,791 139 $ 20,504 3.36 of Avenue 41, Indio, CA 7 Eagle falls Listing $ 6,500,000 90.000 $ 72,222 295 $ 22,034 3.28 S of Avenue 44, E/W of Harrison Street (ext.), Coachella, CA 8 Mirasera Listing $ 20,000,000 186.000 $ 107,527 N/A N/A N/A S Side of Varner Road, E of 38th Avenue Riverside County, CA 9 Northgate Crossing Listing $ 4,600,000 25.810 $ 178,225 115 $ 40,000 4.46 E & W of Jefferson St., S of Indio Blvd., Indio, CA 10 N Side of Avenue 50, E of Listing $ 4,000,000 44.500 $ 89,888 N/A N/A N/A Jefferson St., Indio, CA 11 Rancho Bella Listing $ 5,750,000 36.680 $ 156,761 115 $ 50,000 3.14 NWC of Ramon Road & Rattler Road Rancho Mirage, CA Adjustments Adjustments to each of the sales are required for significant differences that affect value. The appraiser adheres to a sequence of adjustments in all sales comparison analysis. Using the sequence, the appraiser obtains intermediate price figures and applies succeeding adjustments to each previously adjusted sale price. The adjustments applied to the price of a comparable ©Capital Realty Analysts, 2018 Page 43 Part IV —Analysis of Data and Conclusions property reflect the comparable sales superiority or inferiority in regard to the real property rights conveyed, financing, conditions of sale, market conditions, locational and physical characteristics. A common method of extracting adjustments among the comparable sales is a technique called matched pairs analysis. The goal of matched pairs analysis is to obtain market - based adjustments. The basic premise of matched pairs is to isolate a particular adjustment feature among two or more sales, where the difference in adjusted prices would yield the markets value perception for that feature. Generally, the appraiser follows the sequence of adjustments, attempting to isolate market -based adjustments from intermediate adjusted sale prices. In many cases, adjustment features cannot be isolated. Limited comparable data, unique property traits or other factors may cause this. When adjustment features cannot be isolated, matched pairs analysis is supplemented with other techniques to adjust the comparable data. These other techniques typically include cost - based adjustments, adjustments based upon a market survey, adjustments based upon published data, and subjective adjustments. The following is a discussion of the relevant adjustment features: Property Rights Conveyed Among this data set, all of the sales were fee simple estates. Consequently, no adjustments for property rights conveyed will be applied to this dataset. Financing Terms Sales 1, 2, and 4 were reported to be cash equivalent sales with no indication of any non -market or beneficial financing that would warrant a cash equivalency adjustment. Comparable sale number three reportedly requires cash payments to the seller for unit sale prices above a threshold value PSF. Clearly, an upward adjustment is required. However, the lack of specific details and uncertainty about when the units will be developed and sold; and at what price eliminates the ability to calculate the precise cash equivalent sale price. A subjective upward adjustment is applied to Sale 3 for this feature. Conditions of Sale All of the comparable sales were reported to be arm's-length sales with no indication of any atypical conditions that would warrant an adjustment for conditions of sale. Market Conditions Adjustments for market conditions reflect a change in the prices paid for real property due to changes in markets over time. In light of the comparatively small number of relevant transactions, and the fact that significant differences exist between the sales prevents the application of matched pairs for time. ©Capital Realty Analysts, 2018 Page 44 Part IV —Analysis of Data and Conclusions As described in the Market Analysis, absorption rates are comparatively weak in the area of the subject property, and a very significant number of lots exist in this area. Consequently, land values seem likely to be softening. Alternatively, the sales that have closed do not seem to be trending down in per acre values. In light of the lack of specific evidence to suggest changes in market conditions over the time period covered by the sales, no adjustments are applied to the sales for changes in market conditions. Location The locational quality of residential land is a function of the available retail price point, and prospective absorption rate. In terms of available retail price point, the subject is a lower -range location, with retail homes values predominantly in the high $300k to approximately $550k range. However, prospective absorption is currently weak. A compounding problem is the large number of lots currently in play in the North Sphere area. Also, the fact that the subject land includes a 200- unit low-income component serves to cap the available retail price point for units to be developed on the subject land. Comparable Sale Number 1 is located immediately east of the subject property. This property has frontage along Cook Street and Portola Avenue. Additionally, the property is located immediately east of the Cal State and UC campus site. A mixed -use center occupies the NEC of the University Park project area, immediately northeast of Sale 1. These are superior locational qualities and downward adjustment is applied to Sale 1 to reflect its superior locational quality. Sale 2 is located %2 mile west of the subject property. The Eagle site is the last of the full -section master - planned community sites on the desert floor in the core area of the subject region. The Rancho Mirage location commands higher retail price points, and the property has significant frontage along Monterey Avenue, Bob Hope Drive, Frank Sinatra Drive and Gerald Ford Drive. A material downward adjustment is required of Sale 2 to reflect its superior locational quality as compared to the subject. Sale 3 is located approximately 1.25 miles NW of the subject. This property has a slightly inferior wind belt position. However, this feature is somewhat offset by the fact that the property has vastly superior visibility and is located immediately west of the Agua Caliente Casino in Rancho Mirage. A small downward adjustment is applied to Sale 3 to reflect its slightly superior locational quality as compared to the subject. Sale 4 is located within the Desert Willow complex. The fact that this property abuts the City -owned golf course is a positive locational quality as the property attracts resort -oriented residential development. Downward adjustment is applied to Sale 4 to reflect its superior locational quality as compared to the subject. Size Size adjustments are typically based upon the concept of marginal utility. Marginal utility is defined as follows: ©Capital Realty Analysts, 2018 Page 45 Part IV —Analysis of Data and Conclusions "The increment of total utility added by the last unit of a good at any given point of consumption. In general, the greater the number of items, the lower the marginal utility, I. E., A greater supply of an item or product lowers the value of each item."6 At 128.95-acres, the subject is comparatively large. Sales 1 and 3 are considered sufficiently similar in size that no adjustment is required. Interestingly, Sale 2 is much larger than the subject. However, the larger site size provides the ability to develop significant common elements that serve to enhance the retail price potential of the residential units to be developed on the property. These are offsetting factors and consequently, no size adjustment is applied to Sale 2 for this analysis. Sale 4 is significantly smaller than the subject and downward adjustment is applied. Other Physical Attributes in terms of other physical attributes, the significant difference between the subject and the comparables is the fact that the subject is not mapped, or otherwise improved. Because a large number of projects were in process when the recession stopped new development; most residential land trading activity over the past several years has been in partially developed parcels; where the improvements could be acquired at a discount from cost new. Comparable sale number 1 was mapped and all offsite improvements have been completed, along with significant onsite improvements such as the backbone roads, 2 small parks, etc. Downward adjustment is applied to Sale 1 for this feature. Sale 2 was not mapped, and no improvements were made to the site. However, the buyer/seller were able to have a deed restriction placed by a previous owner (the late Ambassador Walter Annenberg) on the land removed; which prevented commercial development. Removal of the deed restriction allowed the site to support resort style development which is significant. Downward adjustment is applied to Sale 2 for this feature. Sale 3 was acquired unimproved and no adjustments are required of Sale 3 in this adjustment category. Sale 4 was mapped by the buyer during the escrow period. However, there was no offsite exposure for this property, and the adjacent common elements were fully developed, operational and accessible to the property. Downward adjustment is applied to Sale 4 for this feature. As a final note, the subject property includes the requirement to provide land for development of 200-low income units. At the maximum density of 20-units per acre, the required land area would be 10-acres. As development of low income units would not prove financially feasible, this portion of the property would have no value to the most likely buyer for the property. In order to attract a low-income developer to this site, the land would likely need to be contributed for no compensation to entice a developer to build the project. For this reason, no value is ascribed 6 Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) ©Capital Realty Analysts, 2018 Page 46 Part IV —Analysis of Data and Conclusions to the 10-acre site, and the final value estimate will be based upon the per acre value multiplied by 118.95-acres. Conclusion, Market Value As Is The following table shows the adjustment matrix applied to the sales to yield per acre value indications for the subject property: Element Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale Price $ 20,000,000 $ 75,000,000 $ 10,012,778 $ 2,020,000 Size (Acres) 118.95 167.47 618.00 142.00 15.52 Unit of Comparison $/Acre $/Acre $/Acre $/Acre $/Acre Sale Price Per Acre $ 119,424 $ 121,359 $ 70,513 $ 130,155 Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Adjustment $ - $ - $ - $ - Terms Cash Cash Participation Cash Cash Equivalency $ - $ - $ 3,526 $ - Conditions of Sale Arm's-Length Arm's-Length Arm's-Length Arm's-Length Adjustment $ - $ - $ - $ - Date of Sale 4/30/18 8/4/17 3/27/18 5/18/17 2/5/16 Adjustment $ - $ - $ - $ - Subtotal $ 119,424 $ 121,359 $ 74,038 $ 130,155 Location Average Superior Superior SI. Superior Superior Adjustment -$ 29,856 -$ 30,340 -$ 11,106 -$ 32,539 Size 118.95 167.47 $ 618.00 $ 142.00 $ 15.52 Adjustment $ - $ - $ - -$ 26,031 Other Physical Typical Superior Superior Similar Superior Adjustment -$ 29,856 -$ 30,340 $ - -$ 13,015 Value Indications $ 59,712 $ 60,680 $ 62,932 $ 58,570 The adjusted value range is from $58,750 per acre to $62,932 per acre. The lack of truly similar sales in the immediate area of the subject property required that material percentage adjustments be applied to the sales data. Interestingly, the adjusted value range for the subject fell well below the average of primary housing sales included on the Other Market Data section. The reason for this is that the subject is located in an area with very significant competition. The ©Capital Realty Analysts, 2018 Page 47 Part IV —Analysis of Data and Conclusions very large number of lots currently competing in the North Sphere market area makes an acquisition of a larger parcel such as the subject difficult because even at 100% market penetration, absorption would be very low as of the date of value. This creates significant holding costs for a larger site such as the subject, and consequently, a prospective buyer would be factoring those costs into the purchase price. In light of these features, a market value estimate at the lower end of the adjusted value range seems to best reflect the market perception of value as of the date of value. Based upon the available data I conclude that the market value of the fee simple estate in the subject property as of April 30, 2018 by the Sales Comparison Approach is as follows: $60,000 Per Acre x 118.95-Acres = $7,137,000 $7,135,000 (Rounded) Seven Million One Hundred Thirty -Five Thousand Dollars Estimate of Exposure Time Exposure time is defined as follows: 1. "The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. (USPAP, 2016-2017 ed. )"' In light of the exposure times of the comparables, the exposure time for the subject is correlated at 24-months. Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) ©Capital Realty Analysts, 2018 Page 48 Part IV —Analysis of Data and Conclusions Qualifications of the Appraiser Michael A. Scarcella, MAI Education Bachelor of Science, Business, University of Nevada, Las Vegas —1982 All required appraisal Institute sponsored courses required to attain the MAI designation, along with appraisal Institute sponsored courses, seminars and online forums required for continuing education. Professional Organizations/Licensing Member of the Appraisal Institute, MAI member number 11072 State of California certified general real estate appraiser, AG 019463 General Experience 1997 - Current — Capital Realty Analysts, President 1991-1996 - Mackenzie and Associates, staff appraiser 1982 — 1991 - Hotel, construction/development controller Qualified as an expert real estate witness, United States Bankruptcy Court Qualified as an expert real estate witness, Riverside County Superior Court Representative List of Clients Public Sector Private Sector Institutional United States of America Trust for Public Land Bank of America BLM Annenberg Foundation Wells Fargo Bank BIA CB Commercial Pacific Western Bank FDIC Textron Washington Mutual Bank Dept. of Justice Bechtel Corporation Home Savings Bank State of California KSL Recreation Corp. Bank Midwest State of Arizona United State Filter Corp. Pacific National Bank Riverside County Sunrise Company Pacific Premier Bank City of Palm Springs Price Waterhouse Sterling Bank City of Coachella Mojave Desert Land Trust Pacific Mercantile Bank City of Desert Hot Springs Habitat for Humanity Banc One City of Cathedral city Lennar Homes Fidelity Federal Bank City of Rancho Mirage Temple Construction Bankers Trust Company City of Palm Desert Takenaka Corporation Northern Trust Bank City of Indian Wells Betty Ford Center First Bank City of Indio Heart Institute of the Desert Commerce Federal Savings City of La Quinta Basic Capital Management Great American Bank Palm Springs USD Estate of Frank Sinatra Mitsubishi Bank Desert Sands Unified SD Merrill Lynch First Citizens Bank Coachella Valley Unified SD Wessman Development El Paseo Bank Various Public Utilities Attorneys Community Valley Bank CVAG Developers Bank Six Eisenhower Memorial Hsp. Accountants Alliance Bank Desert Hospital ©Capital Realty Analysts, 2018 Page 49 Part IV —Analysis of Data and Conclusions Addendum Property Profiles ©Capital Realty Analysts, 2018 Page 50 SUCCESSOR AGENCY TO THE PALM DESERT REDEVELOPMENT AGENCY NOTICE INVITING BIDS 128 Acre Parcel Vacant Land South of Gerald Ford Drive, North of Frank Sinatra Drive and West of Portola Avenue PUBLIC NOTICE IS HEREBY GIVEN that the Successor Agency to the Palm Desert Redevelopment Agency, as Agency, invites sealed bids for the above stated project and will receive such bids in the office of the City Clerk up to the hour of 2:00 p.m., on May 16, 2018, at which time they will be publicly opened and read aloud. The property is being sold "as is". No warranties, no guarantees, no entitlements or uses other than provided for by current zoning in the General Plan and Housing Element are implied. Copies of said Bid Package may be requested by contacting the Successor Agency to the Palm Desert Redevelopment Agency, City of Palm Desert, Public Works Department, attention: Cora L. Gaugush, 73510 Fred Waring Drive, Palm Desert, California 92260; Phone:760-776-6490; Fax 760-341-7098 or by accessing the City of Palm Desert at www.cityofpaImdesert.org "Quick Links", Projects Up for Bid. Bids must be prepared on the approved bid forms in conformance with the Instructions to Bidders and submitted to the office of the City Clerk, in a sealed opaque envelope plainly marked on the outside "SEALED BID 128 ACRE VACANT PARCEL OF LAND. "DO NOT OPEN WITH REGULAR MAIL." All questions must be put in writing and must be received by the Agency no later than 2:00 p.m., May 10, 2018. Requests for clarifications, questions, and comments must be clearly labeled, "Written Questions." The Agency is not responsible for failure to respond to a request that has not been labeled as such and addressed to Cora L. Gaugush, Successor Agency to the Palm Desert Redevelopment Agency, Department of Public Works. A Pre -Bid Meeting will be held on May 2, 2018, at 9:00 a.m. in the Development Services Conference Room, City of Palm Desert. While not mandatory, attendance is highly recommended. The CITY reserves the right to reject any or all bids, to waive any irregularity, and to take all bids under advisement for a period of ninety (90) days. By submitting a bid, bidder agrees that in carrying out its responsibilities under the Agreement, it will not discriminate on the basis of race, color, creed, national origin, religion, sex, age, or disability. BY ORDER OF the Successor Agency to the Palm Desert Redevelopment Agency. Dated this 16th day of April 2018. RACHELLE D. KLASSEN, SECRETARY SUCCESSOR AGENCY TO THE PALM DESERT REDEVELOPMENT AGENCY SUCCESSOR AGENCY TO THE PALM DESERT REDEVELOPMENT AGENCY DEPARTMENT OF PUBLIC WORKS CONTRACT DOCUMENTS ADDENDUM NO. 1 128 ACRE PARCEL VACANT LAND SOUTH OF GERALD FORD DRIVE, NORTH OF FRANK SINATRA DRIVE AND WEST OF PORTOLA AVENUE ISSUED April 18, 2018 BO CHEN, P.E. CITY ENGINEER IMPORTANT NOTE: RECEIPT OF THIS ADDENDUM MUST BE ACKNOWLEDGED IN CONTRACTOR'S PROPOSAL This addendum changes the following items for the project bid documents for the above referenced project: Please replace paragraph 1 of the Notice Inviting Bids with the following: PUBLIC NOTICE IS HEREBY GIVEN that the Successor Agency to the Palm Desert Redevelopment Agency, as Agency, invites sealed bids for the above stated project and will receive such bids in the office of the City Clerk up to the hour of 2:00 pm, on May 14, 2018, at which time they will be publicly opened and read aloud. SS AMER/C 9 FirstAmerican 40 mvFirstAm® Combined Report , , CA Property Address: ,CA Combined Report , CA 04/30/2018 All information contained herein is subject to the Limitation of Liability for Informational Report set forth on the last page hereof. C2005-2018 First American Financial Corporation and/or its affiliates. All rights reserved. Pst AMER/C4 FirstAmerican /nyFirstAmo Property Profile „ CA Property Information Owner(s): Redevelopment Agency City Of Palm Desert Mailing Address: 73510 Fred Waring Dr, Palm Desert, CA 92260 Owner Phone: Unknown Property Address: , , CA Vesting Type: N/A Alt. APN: 694300001 County: Riverside APN: 694-300-001 Map Coord: Census Tract: Lot#: Block: Subdivision: Tract: Legal: 5.00 Acres In Por Ne 1/4 Of Sec 32 T4s R6e For Total Description See Assessors Maps Property Characteristics Use: Vacant Land (Nec) Year Built / Eff.: / Sq. Ft. Zoning: Lot Size Ac / Sq Ft: 5 / 217800 # of Units: Sale and Loan Information Sale / Rec Date: 10/24/2000 / 10/31/2000 *$/Sq. Ft.: 2nd Mtg.: Sale Price: $320,000 1st Loan: Prior Sale Amt: Doc No.: 430357 Loan Type: Prior Sale Date: Doc Type: Transfer Date: 10/31/2000 Prior Doc No.: Seller: Shapiro,Shirley Lender: Prior Doc Type: *$/Sq.Ft. is a calculation of Sale Price divided by Sq. Feet. _ , - , Tax Information Imp Value: Land Value: Total Value: Total Tax Amt: Exemption Type: Tax Year / Area: / 18-081 Tax Value: Improved: Property Profile , , CA 4/3012018 Page 1 (of 1) This report is only for the myFirstAm user who applied for it. No one else can rely on it. As a myFirstAm user, you already agreed to our disclaimer regarding third party property information accuracy. You can view it here: www.myfirstam.com/Security/ShowEULA. 02005-2018 First American Financial Corporation and/or its affiliates. All rights reserved. R S S A M R R C FirstAmerican /yyFirstAm® Transaction History CA Transaction History provides records for the past ten years. To request additional information, please contact your local Sales Representative, Customer Service Department, or for an additional fee you may click here . History Record # 1 : SALE/TRANSFER Buyer: Palm Desert Redevelopment Agen Seller: City Of Palm Desert Transaction Date: 11/15/2012 Sale Price: Recording Date: 12/11/2012 Sale Price Type: Recorded Doc #: 000000601613 Title Company: Document Type: Deed Transfer Vesting Type: N/A History Record # 2 : SALE/TRANSFER Buyer: City Of Palm Desert Seller: Palm Desert Redevelopment Agcy Transaction Date: 02/24/2011 Sale Price: Recording Date: 03/14/2011 Sale Price Type: Recorded Doc M 115460 Title Company: Document Type: Deed Transfer Vesting Type: N/A History Record # 3 : SALE/TRANSFER Buyer: Redevelopment Agency Palm Dese Seller: Shapiro Shirley Transaction Date: 10/24/2000 Sale Price: $320,000 Recording Date: 10/31/2000 Sale Price Type: Full Value Recorded Doc M 430357 Title Company: Fidelity National Title Document Type: Deed Transfer Vesting Type: N/A Transaction History , , CA 4/30/2018 Page 1 (of 1 ) ©2005-2018 First American Financial Corporation and/or its affiliates. All rights reserved.