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Home My WebLink About24-539 MW - 1201 Parvin Denton TX APPRAISAL REPORT FRANK BORMAN ELEMENTARY SCHOOL AND DENIA PARK 1201 Parvin Street Denton, Texas 76205 Report Date: November 25, 2024 Prepared For Mark Mastroleo City of Denton 401 North Elm Street Denton, Texas 76201 Prepared By Richard McBride Pyles Whatley 16910 Dallas Parkway, Suite 100 Dallas, Texas 75248 16910 Dallas Parkway, Suite 100  Dallas, Texas 75248 Ofc: 214.340.5880  www.PylesWhatley.com  Appraisals@pyleswhatley.com November 25, 2024 Mr. Mark Mastroleo City of Denton 401 North Elm Street Denton, Texas 76201 Re: An appraisal of a surveyed portion of Frank Borman Elementary School and Denia Park located at 1201 Parvin Street, Denton, Denton County, Texas 76205. Dear Mr. Mastroleo: At your request, we submit this appraisal report to estimate the market value of the above referenced property. We have made an on-site inspection of the property and considered factors pertinent to and indicative of value including the Denton area characteristics, market area data and trends, locational amenities, highest and best use, and other elements of value. This report conforms to USPAP standards. The appraisal problem, as applied to the subject, is to determine the property’s market value. “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.” The Appraisal of Real Estate, 15th Edition, 2020, Appraisal Institute, Chicago, Illinois This appraisal provides an appraisal report in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP), as provided by the Appraisal Foundation. Our opinion of value for the subject is effective as of November 23, 2024, and the methodology and terminology used throughout the report includes the following: Market Value, As Is on the Appraisal Date – An opinion of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date the appraisal is prepared. Page 2 Mr. Mark Mastroleo November 25, 2024 Our opinion of the market value for the subject is as follows: Market Value Opinion Fee Simple, As Is (Land - Elementary School)$1,545,000 Fee Simple, As Is - Real Estate (Elementary School)$18,510,000 Fee Simple, As Is (Surplus Land - Park)$1,140,000 The following report sets forth a description of the subject property, along with a summary of the market data considered and the conclusions derived from such data. Your attention is directed to the general assumptions and limiting conditions of this appraisal. EXTRAORDINARY ASSUMPTIONS At the request of the client and for purposes of this appraisal, the interior inspection of subject was limited to observations made through various windows and glass doors. The entirety of the interior improvements are assumed to be in the same conditions as those observed from the exterior of the building. This appraisal assumes that all of the information obtained for analysis is accurate; this information has been verified to the extent possible by the appraiser. HYPOTHETICAL CONDITIONS None If you should have questions concerning any portion of this appraisal, please contact our office. Respectfully submitted, PYLES WHATLEY Richard McBride State of Texas License # TX-1380335-G SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Subject Property Location Denton, Denton County, Texas Total Land Area (Surveys of two tracts)368,866 SF or Zoning Gross Building Area 80,045 SF Number of Buildings 1 Occupancy Year of Construction 1985 Reasonable Exposure Time 12 months Market Value Indicators As Is -Upon Cost Approach $18,510,000 $0 $7,360,000 Sales Comparison Approach N/A -- Income Capitalization Approach N/A $5,429,000 ######### Market Value Opinion Fee Simple, As Is (Land - Elementary School - 4.729 acres)$1,545,000 Fee Simple, As Is - Real Estate (Elementary School)$18,510,000 Fee Simple, As Is (Surplus Land - Park - 3.739 acres)$1,140,000 Date of Appraisal Value Date of Inspection Date of Appraisal Report Frank Borman Elementary School and Denia Park 1201 Parvin Street 8.468 AC PF - Public Facilities (Field Measurements) 100%; owner occupied November 25, 2024 November 23, 2024 November 23, 2024 TABLE OF CONTENTS LETTER OF TRANSMITTAL SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS PAGE SCOPE OF WORK........................................................................................................................2 DEFINITION OF MARKET VALUE .........................................................................................6 GENERAL ASSUMPTIONS AND LIMITING CONDITIONS ...............................................7 EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS................10 DEFINITIONS AND TERMS ....................................................................................................11 DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS ......................................14 REGIONAL MAP ........................................................................................................................23 SUBJECT AREA ANALYSIS ....................................................................................................24 LOCATION MAP ........................................................................................................................31 SURVEY - ELEMENTARY SCHOOL .....................................................................................32 SURVEY - PARK ........................................................................................................................33 AERIAL PHOTOGRAPHS ........................................................................................................35 SUBJECT PROPERTY...............................................................................................................36 PARCEL MAP .............................................................................................................................36 FLOOD MAP ...............................................................................................................................38 ZONING MAP .............................................................................................................................39 SUBJECT PHOTOGRAPHS .....................................................................................................44 REAL ESTATE TAX ANALYSIS .............................................................................................47 HIGHEST AND BEST USE ANALYSIS ..................................................................................48 APPRAISAL PROCEDURE ......................................................................................................52 REASONABLE EXPOSURE TIME..........................................................................................54 LAND VALUATION ...................................................................................................................55 COST APPROACH .....................................................................................................................68 SALES COMPARISON APPROACH ......................................................................................73 INCOME CAPITALIZATION APPROACH ...........................................................................74 RECONCILIATION ...................................................................................................................75 APPRAISER’S CERTIFICATE ................................................................................................77 QUALIFICATIONS OF APPRAISER ......................................................................................78 ADDENDA TAX INFORMATION ENGAGEMENT LETTER STATE CERTIFICATE SCOPE OF WORK PYLES WHATLEY 24-539 2 Purpose of the Appraisal SCOPE OF WORK The purpose of this appraisal is to render an opinion of the market value of the subject property. The report complies with the requirements of the Uniform Standards of Professional Appraisal Practice, the Code of Ethics of the Appraisal Institute, and Texas Appraiser Licensing and Certification Board rules. The appraisal problem, as applied to the subject, is to determine the property’s market value. “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.” The Appraisal of Real Estate, 15th Edition, 2020, Appraisal Institute, Chicago, Illinois Effective Date of the Appraisal The subject property is being appraised as of November 23, 2024, and is subject to the market influences and economic conditions, which existed on that date. This date is also known as the effective date and is the date of the opinions and conclusions found in this report. The property was also inspected and photographed on November 23, 2024, which included a visual observation of the site and any improvements. The date of this appraisal report is November 25, 2024. Property Rights Appraised Property rights are an enforceable, legal claim to title of or interest in property. Three primary property rights may typically be appraised. The rights are fee simple estate, leased fee estate, and leasehold estate, which are defined as follows: Fee Simple Estate - Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. Leased Fee Estate - The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires. Leasehold Estate - The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. In this report, we develop a market value opinion of the fee simple interest in the real property. SCOPE OF WORK PYLES WHATLEY 24-539 3 Subject Identification & Legal Description Property Type: Elementary School Ownership: Denton ISD and the City of Denton Subject Property Location: 1201 Parvin Street Denton, Denton County, Texas Zip Code: 76205 Legal Description: Being located in the Asa Hickman Survey, Abstract No. 521, City of Denton, Denton County, Texas. Subject History The subject is comprised of two tracts. The main subject is a 4.729-acre or 206,000 square-foot portion of Frank Borman Elementary School, including the improvements. According to public records, the current owner of Frank Borman Elementary School is the Denton ISD. The school property, comprised of 10.005 acres, was transferred to Denton ISD from J. Newton Rayzor on January 9, 1965, as recorded in Volume 518, Page 89, Deed Records of Denton County, Texas. The second tract is a 3.739-acre or 162,866 square-foot portion of Denia Park which abuts the school to the east. According to public records, the current owner of Denia Park is the City of Denton. The park, comprised of 23.044 acres, was transferred to the City of Denton from J. Newton Rayzor on October 14, 1964, as recorded in Volume 514, Page 579, Deed Records of Denton County, Texas. Details regarding the transactions are not known. Sale prices are not a matter of public record in Texas; the appraiser attempted to obtain the purchase price and other terms of the transaction without success. The properties are not currently listed for sale, nor are they under contracts for sale. According to public records, there have been no transfers of the properties within the past three years. Please note that this information is included only to satisfy the requirements of USPAP. It is not intended as a guarantee to the chain of title and a title search should be performed by a title company should a definitive abstract be desired. SCOPE OF WORK PYLES WHATLEY 24-539 4 Intended Use, Intended User, and Client The intended use of this report is for internal decision-making and analyses for City of Denton’s officers, administrators, employees, assignees, and appropriate regulatory agencies. The intended user, City of Denton, is also the client. Denton ISD is also an intended user. Any other user or uses are not intended or authorized. Use of this appraisal for any other use or by another user or appraisal date may invalidate the findings and conclusions. Data Researched For this report, the subject market was researched for all pertinent data relating to the appraisal problem including collecting and confirming data through brokers, appraisers, property owners, lessees/lessors, and others familiar with the real estate market. The information provided by these sources is deemed reliable but is not guaranteed. In addition, verifiable third-party sources were utilized including Costar Realty Information, LoopNet, and the Multiple Listing Service (MLS). Additional market data were extracted from market reports and data circulated and purchased from Robert G. Watts/RealtyRates.com, Real Estate Research Corporation, Price Waterhouse Coopers Investor Survey, and M/PF Yieldstar. The information provided by these sources is deemed reliable but is not guaranteed. Competency The appraisers involved in this assignment have considerable experience in appraising this property type. The appraisers are actively engaged in appraisal work in the geographical area of the subject property. The company maintains a database on this area for similar properties. We have adequate knowledge of the property type and location to meet the competency requirements of the Uniform Standards of Professional Appraisal Practice. In addition, other appraisers in the market would perform similar actions in the appraisal process to fulfill the scope of work in this assignment and the appraisal meets or exceeds the expectations of parties who are regularly intended users for similar assignments. SCOPE OF WORK PYLES WHATLEY 24-539 5 Scope of Work Richard McBride performed all aspects of this report, which included the following: - Communicated with Mark Mastroleo, of the City of Denton, regarding the appraisal assignment; a narrative appraisal report meets the client’s requirements. - Communicated with the Craig Martin and facilities managers, regarding the history and the condition of the subject. - Researched the public records for data on the subject property, including zoning, assessments, taxes, acreage, buildings and site improvements, and maps. - A preliminary search of all available resources was made to determine market trends, influences, and other significant factors pertinent to the subject property. The property is identified previously in this report. - Matthew Wilbanks inspected the subject and the subject neighborhood on November 23, 2024; Richard McBride made a personal inspection of the subject on a subsequent date; photographs were taken of the subject and the comparable sales. The owner or owner's representative was not present during the inspection. Although due diligence was exercised while inspecting the property, the appraiser is not an expert in such matters as soils, structural engineering, hazardous waste, etc., and no warranty is given as to these elements. - Research and collection of data (land sales, escrow sales, and listings) were performed as present in the market area and of sufficient quality to express an opinion of value as defined herein. The appraiser examined data from the Costar Realty Information, Roddy Information Services, LoopNet, Multiple Listing Service (MLS), county records, and owner interviews. - An analysis of the highest and best use was completed. - Gathered and analyzed the market data to reach an estimate of market value for the fee simple interest of the subject, using the cost, approaches to value. - Assembled and wrote the narrative report, complete with maps, photos, and supporting addenda. DEFINITION OF MARKET VALUE PYLES WHATLEY 24-539 6 The definition of market value is: Definition of Market Value “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress." * * The Appraisal of Real Estate, 15th Edition, 2020, Appraisal Institute, Chicago, Illinois, p. 48 GENERAL ASSUMPTIONS AND LIMITING CONDITIONS PYLES WHATLEY 24-539 7 The Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute require the appraiser to "set forth all assumptions and limiting conditions that affect the analyses, opinions, and conclusions in the report.” In compliance therewith, and to assist the reader in interpreting this report, such general assumptions and limiting conditions are set forth below. Specific assumptions, if any, are referred to in the transmittal letter and their location in the report detailed. General Assumptions and Limiting Conditions Title is assumed to be marketable, free, and clear of all liens and encumbrances, easements, and restrictions except those specifically discussed in the report. The property is appraised assuming it to be under responsible ownership and competent management and available for its highest and best use. No opinion is intended to be expressed for legal matters or that would require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers, notwithstanding the fact that such matters may be discussed in the report. No opinion is expressed on the value of subsurface oil, gas or mineral rights, water rights, or whether the property is subject to surface entry for the exploration or removal of such, except as expressly stated. The date of value to which the opinions expressed in this report apply is set forth in the letter of transmittal. The appraiser assumes no responsibility for economic or physical factors occurring at some later date, which may affect the opinions herein stated. The opinion of value is considered reliable only as of the date of the appraisal. The valuation is reported in dollars of U.S. currency prevailing on the date of the appraisal. Maps, plats, and exhibits included herein are for illustration only as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose unless specifically identified as such. All information and comments pertaining to this, and other properties included in the report represent the personal opinion of the appraiser, formed after examination and study of the subject and other properties. While it is believed the information, estimates and analyses are correct, the appraiser does not guarantee them and assumes no liability for errors in fact, analysis, or judgment. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the firm with which he is connected, or any reference to the Appraisal Institute or to the MAI or SRA designation) shall be disseminated to the public through advertising media, public relations media, sales media, or any other public means of communication without written consent and approval of the undersigned. The appraiser is not required to give testimony or to appear in court by reason of this appraisal unless prior arrangements have been made. GENERAL ASSUMPTIONS AND LIMITING CONDITIONS PYLES WHATLEY 24-539 8 The distribution of the total valuation in this report between land and improvements applies only under the existing or proposed/completed program of utilization. The separate valuations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. Certain information concerning market and operating data were obtained from others. This information is verified and checked, where possible, and is used in this appraisal only if it is believed to be accurate and correct. However, such information is not guaranteed. Opinions of value contained herein are opinions only. There is no guarantee, written or implied, that the subject property will sell for such amounts. Prospective values are based on market conditions as of the effective date of the appraisal. The appraiser is not responsible if unforeseeable events alter market conditions subsequent to the effective date of the appraisal. As a personal opinion, valuation may vary between appraisers based on the same facts. No responsibility for hidden defects or conformity to specific governmental requirements, such as fire, building and safety, earthquake, or occupancy codes can be assumed without provision of specific professional or governmental inspections. While the general conditions of the property were observed, no guarantee can be made concerning the individual components of the structures including but not limited to the heating system, plumbing, electrical services, roof, possible termite damage or building foundation. This appraiser is not qualified to make a complete inspection of any well or septic system, consequently, it was beyond the scope of this report and no statements can be made concerning the adequacy or condition of these or other systems. No investigation - unless presented in other sections of this report - was made by the appraiser to determine if asbestos, fiberglass, or synthetic mineral fiber products are present in improved properties. The existence of such products, if any, would have to be determined by a qualified inspector. It is assumed that there is no asbestos, fiberglass, synthetic mineral fiber products, nor other contaminates present that would materially affect value. The Americans with Disabilities Act (ADA) became effective January 26, 1992. I have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative effect upon the value of the property. Since I have no direct evidence relating to this issue, I did not consider possible noncompliance with the requirements of ADA in estimating the value of the property. No investigation - unless presented in other sections of this report - was made by the appraiser to determine if any toxic materials are present on the subject tract. The existence of such materials, if any, would have to be determined by a qualified inspector. It is assumed that no toxic materials are present that would materially affect value or development costs. A reasonable investigation was made to determine the existence of any underground storage tanks (UST) on the subject site. If USTs are present on the subject site details are provided in other sections of this report. GENERAL ASSUMPTIONS AND LIMITING CONDITIONS PYLES WHATLEY 24-539 9 In the event the appraisal is based upon proposed improvements, it is assumed that the improvements will be completed in substantial conformity with plans and specifications, which have been furnished to the appraiser, and with good materials and workmanship. It is also assumed that the proposed foundation and construction techniques are adequate for the existing sub-soil conditions. Due to the multiplicity of mathematical calculations used in standard appraisal practice, rounded values, e.g., rounded to whole dollars or whole units of measure such as linear feet or square feet, may result in inexact sums of components. The typical difference in such cases does not materially affect the value conclusions of this appraisal report or the total compensation due to the property owner. Personal property, fixtures, or intangible items that are not real property, which are included in the appraisal, are identified as Furniture, Fixtures and Equipment, or FF&E. EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS PYLES WHATLEY 24-539 10 Extraordinary Assumptions and Hypothetical Conditions: The Uniform Standards of Professional Appraisal Practice require the disclosure of hypothetical conditions and extraordinary assumptions when employed in the development of an appraisal. As defined in the Uniform Standards of Professional Appraisal Practice, an extraordinary assumption is “an assignment- specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions.” As defined in the Uniform Standards of Professional Appraisal Practice, a hypothetical condition is “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results but is used for the purpose of analysis.” The following extraordinary assumptions and hypothetical conditions are set forth for appraisal purposes and no legal reasoning is intended. The reader should be aware that, in the event that any of the assumptions or conditions proves false or improperly applied, the conclusions of this appraisal could be changed or invalidated. EXTRAORDINARY ASSUMPTIONS At the request of the client and for purposes of this appraisal, the interior inspection of subject was limited to observations made through various windows and glass doors. The entirety of the interior improvements is assumed to be in the same conditions as those observed from the exterior of the building. This appraisal assumes that all of the information obtained for analysis is accurate; this information has been verified to the extent possible by the appraiser. HYPOTHETICAL CONDITIONS None DEFINITIONS AND TERMS PYLES WHATLEY 24-539 11 Various terms and symbols are used throughout the appraisal report. The following are definitions of the terms and explanations of the symbols used: Anticipation – The perception that value is created by the expectation of benefits to be derived in the future. DEFINITIONS AND TERMS Business Enterprise Value – The value contribution of the total intangible assets of a continuing business enterprise such as marketing and management skill, an assembled workforce, working capital, trade names, franchises, patents, trademarks, contracts, leases, customer base, and operating agreements. Deferred Maintenance – Items of wear and tear on a property that should be fixed now to protect the value or income-producing ability of the property. These items are almost always curable. Excess Land – Land that is not needed to serve or support the existing use. Excess land has the potential to be sold separately and is valued separately. Going Concern, Market Value of the – The market value of an established and operating business including the real property, personal property, financial assets, and the intangible assets of the business. Grantee – A person to whom property is transferred by deed or to whom property rights are granted by a trust instrument or other document. Grantor – A person who transfers property by deed or grants property rights through a trust instrument or other document. Highest and Best Use – The reasonably probable use of property that results in the highest value. Interim Use – The use contemplated by the market participants that the subject real estate can be put to while waiting for certain subsequent factors to occur. Many times, these are used to defray holding cost expenses. Investment Value – The value of a property to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market. Lessee – One who has the right to occupancy and use the property of another for a period of time according to a lease agreement. Lessor - One who conveys the rights of occupancy and use to others under a lease agreement. Market Rent - The most probable rent that a property should bring in a competitive and open market under all conditions requisite to a fair lease transaction, the lessee and lessor each acting prudently and knowledgeably, and assuming the rent is not affected by undue stimulus. DEFINITIONS AND TERMS PYLES WHATLEY 24-539 12 Market Value - See Definition of Market Value section. Present Value - The value of a future payment or series of future payments discounted to the current date or to time period zero. Price - The amount asked, offered, or paid for a property. Once stated, price is a fact, whether it is publicly disclosed or retained in private. Because of the financial capabilities, motivations, or special interests of a given buyer or seller, the price paid for a property may or may not have any relation to the value that might be ascribed to that property by others. Property Rights – An enforceable, legal claim to title of or interest in property. The rights may be in real property or personal property. Property Rights Adjustment – An adjustment made to the indicated property value if the value of the property is not at market rent, market occupancy, or lease basis. Surplus Land – Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel. Utility – The ability of a product to satisfy a human want, need, or desire. Abbreviations SF = square feet PSF or /SF = per square foot FF = front feet LF = lineal feet AC = acres ROW = right of way RR = railroad CBD = central business district GI = gross income EGI = effective gross income NOI = net operating income PV = present value OAR or Ro = overall capitalization rate EDR or RE = equity dividend rate UA = usable area GBA = gross building area RA = rentable area ± = plus, or minus from amount stated Source of Definitions: The Dictionary of Real Estate Appraisal, Seventh Edition, Appraisal Institute, Chicago, Illinois, 2022. DEFINITIONS AND TERMS PYLES WHATLEY 24-539 13 STAGES OF VALUE During the real estate development process, a property typically progresses from a state of unimproved land to construction of improvements to stabilized occupancy. In general, the market value associated with the property increases during these stages of development. After reaching stabilized occupancy, ongoing forces affect the property during its life, including physical wear and tear, changing market conditions, etc. These factors continually influence the property’s market value at any given point in time. Opinions of value are developed on the basis of one or more of the following: Market Value, As Is on the Appraisal Date – An opinion of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date the appraisal is prepared. Market Value, As If Complete on the Appraisal Date – The market value of a property with all construction, conversion, or rehabilitation hypothetically completed, or under other specified hypothetical conditions as of the date of appraisal. With regard to properties wherein anticipated market conditions indicate that stabilized occupancy is not likely as of the date of completion, this opinion of value should reflect the market value of the property as if complete and prepared for occupancy by tenants. Prospective Future Value Upon Completion of Construction – The prospective future value of a property on the date construction is completed, based upon market conditions forecast to exist as of that completion date. The value estimate at this stage of value is stated in current dollars unless stated otherwise. Prospective Future Value Upon Reaching Stabilized Occupancy – The prospective future value of a property at a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. The opinion of value at this stage of value is in current dollars unless stated otherwise. Retrospective Value, As of Appraisal Date – An opinion of the market value of a property that is likely to have applied as of a specific historic date and as it physically and legally existed without hypothetical conditions, assumptions, or qualifications as of the specific historic date. The opinion of value at this stage of value is in current dollars unless stated otherwise. The stages of value utilized in this report are as follows: market value, as is on the appraisal date. DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 14 The subject property in this report is located in the Dallas/Fort Worth Metropolitan Area, one of the major financial and population centers in the nation. Therefore, an overview of the Metroplex is appropriate. DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS Downtown Dallas Downtown Fort Worth Photograph Courtesy of the Dallas Convention & Visitors Bureau CLASSIFICATION The classifications represented in the Dallas/Fort Worth area are: Metropolitan Statistical Area (MSA) and Metropolitan Division (MD) With a population of over 7.99 million in 2023, Dallas/Fort Worth and the surrounding area is the fourth largest MSA under this classification. The DFW MSA is comprised of two Metropolitan Divisions: Dallas-Plano-Irving (or Dallas MD) on the east and Fort Worth-Arlington (or Fort Worth MD) on the west. The Dallas MD includes Collin, Dallas, Denton, Ellis, Hunt, Kaufman, and Rockwall Counties with a 2023 estimated population of over 5.38 million. Fort Worth MD is comprised of Johnson, Parker, Tarrant, and Wise Counties with a 2023 estimated population of over 2.61 million. The DFW MSA has grown 20.0% since 2010, with Collin, Denton, Kaufman, and Rockwall experiencing the greatest growth. = Dallas-Fort Worth Arlington MSA Fort Worth-Arlington Metropolitan Division Dallas-Plano-Irving Metropolitan Division DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 15 Demographics/Population The DFW MSA is the fourth largest metro area in the nation and larger than 33 US states. Dallas is the third largest city in Texas and ninth in the nation. Dallas County is the eight most populous county in the nation at 2,634,796 persons. Fort Worth ranks as the fifth largest city in the state of Texas and thirteenth in the United States. The city serves as the county seat for Tarrant County which consists of a 2020 population of 2,108,659. The Dallas-Fort Worth-Arlington metropolitan population is estimated at 7,607,031, according to the U.S. Census Bureau’s 2020 population estimates. The MSA has more than 2,750,000 households. The breakdown of growth by the four major counties of the MSA is as follows: Source: Texas A&M University Collin County 355,969 27% Dallas County 244,175 18% Denton County 245,534 18% Tarrant County 299,399 22% All Others 197,755 15% 2010 -2020 Share of Population Growth by County DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 16 The subsequent table illustrates growth trends, in total numbers and annualized percentages, of all the major cities, suburbs, and statistical regions from 1990 to 2020 estimate, with a 2023 estimate. AREA 2023 (est.)2010-2020 Change DFW MSA 3,984,349 5,156,410 6,366,542 7,637,387 7,986,356 20.0% Dallas MD 2,616,281 3,444,276 4,230,520 5,129,966 5,381,738 21.3% Collin County 264,079 491,676 782,341 1,064,465 1,169,881 36.1% Dallas County 1,848,177 2,219,132 2,368,139 2,613,539 2,598,864 10.4% Denton County 276,586 430,999 662,614 906,422 987,504 36.8% Ellis County 85,126 111,294 149,610 192,455 214,708 28.6% Hunt County 64,353 76,602 86,129 99,956 109,682 16.1% Kaufman County 52,355 71,493 103,350 145,310 175,592 40.6% Rockwall County 25,605 43,080 78,337 107,819 125,507 37.6% Fort Worth MD 1,368,068 1,712,134 2,136,022 2,507,421 2,604,618 17.4% Johnson County 97,189 126,822 150,934 179,927 197,889 19.2% Parker County 64,749 88,447 116,927 148,222 168,353 26.8% Tarrant County 1,171,454 1,448,085 1,809,034 2,110,640 2,162,241 16.7% Wise County 34,676 48,780 59,127 68,632 76,135 16.1% Allen 20,202 41,942 84,246 112,483 120,042 33.5% Arlington 265,420 334,292 365,438 424,718 439,852 16.2% Carrollton 81,605 111,272 119,097 149,246 156,481 25.3% Dallas 1,005,904 1,182,168 1,197,816 1,347,927 1,389,035 12.5% Denton 66,807 84,147 113,383 151,452 159,978 33.6% Desoto 30,508 37,482 49,047 54,867 56,420 11.9% Euless 37,990 44,311 51,277 59,644 61,795 16.3% Flower Mound 16,893 51,414 64,669 87,817 93,116 35.8% Fort Worth 457,068 545,356 741,206 866,418 897,232 16.9% Frisco 8,766 35,022 116,989 157,469 167,621 34.6% Garland 179,932 214,822 226,876 252,013 259,113 11.1% Grand Prairie 98,558 126,730 175,396 198,258 204,324 13.0% Irving 154,084 191,011 216,290 240,742 247,525 11.3% Lewisville 45,229 77,544 95,290 127,901 135,514 34.2% Mansfield 15,579 27,239 56,368 65,658 68,026 16.5% McKinney 22,205 54,953 131,117 174,577 186,216 33.1% Mesquite 101,162 125,619 139,824 155,314 159,701 11.1% North Richland Hills 47,785 56,244 63,343 73,138 75,786 15.5% Plano 128,980 223,856 259,841 345,144 368,315 32.8% Richardson 76,953 92,063 99,223 116,859 121,586 17.8% Rowlett 24,312 44,474 56,199 64,567 66,742 14.9% Southlake 6,927 20,464 26,575 31,148 32,305 17.2% Wylie 9,182 16,540 41,427 55,594 59,317 34.2% POPULATION ANNUALIZED GROWTH RATES Source: EASIDemographics.com DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 17 EMPLOYMENT AND ECONOMIC BASE According to the Texas Workforce Commission, the following exhibit summarizes the labor statistics for the DFW MSA related to employment, unemployment, and labor force. Recent decreases in unemployment are a direct result of the recovery from the COVID-19 pandemic. Prior to the onset of the pandemic, the area was experiencing stable growth. DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 18 DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 19 DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 20 Local Companies The metropolitan area boasts an extensive list of national and international corporate headquarters, with many major companies relocating to DFW in the past twenty years. The availability of reasonably priced land, lower living cost for employees, favorable climate, and reasonable housing are great incentives. In 2020, DFW MSA is now home to 24 of the Fortune 500 Companies. The Metroplex is the fourth highest-ranking headquarters metro area behind New York, Chicago, and Houston. 72 major companies have moved their corporate HQ to Dallas since 2010 including Toyota North America, Liberty Mutual Insurance, Omnitracts, Ameriflight LLC, Topgolf, MoneyGram, HMS Holdings, and Six Flags Entertainment. Below are the top ten employers located in North Texas: Dallas/Fort Worth Top Ten Employers No. of Local Employees Baylor Scott & White Health 23,865 Texas Health Resources 23,466 Lockheed Martin 22,200 University of Texas Southwestern Medical Center 17,000 Medical City Healthcare 14,500 University of North Texas System 13,620 Bank of America 13,500 City of Dallas 13,114 Parkland Health and Hospital System 12,879 JPMorgan Chase 12,554 Source: Dallas Business Journal 2020 Book of Lists Below are the top ten public-sector companies located in North Texas as rated by their 2019 revenues: Dallas/Fort Worth Top Ten Employers 2019 Revenue (billion) Exxon-Mobil Corp. $264.94 McKesson Corp. . $214.32 AT&T, Inc. $181.19 Energy Transfer Equity LP $54.21 American Airlines Group Inc. $45.77 Southwest Airlines Co. $22.43 Tenet Healthcare Corp. $18.48 Kimberly-Clarke Corp. $18.45 D.R. Horton Inc. $18.09 HollyFrontier Corp. $17.49 Source: Dallas Business Journal 2020 Book of Lists DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 21 Dallas/Fort Worth International Airport The Dallas/Fort Worth International Airport, which opened January 1974, has had an enormous impact on the economy of the DFW Metroplex. Located roughly 16 miles northwest of the Dallas CBD, 19 miles northeast of the Fort Worth CBD, and employs approximately 60,000 people, the 17,183-acre space is the second largest airport facility in the nation. DFW is currently ranked as “best large airport in America” by the Airports Council International. The airport has 5 terminals, 7 runways, 182 gates, and 260 destinations, being 193 domestic destinations and 67 international destinations. DFW Airport includes 12 instrument landing approaches and 3 control towers giving it the capacity of the three New York airports combined. DFW is the only airport where four planes can land simultaneously. Twenty-five passenger airlines operate out of DFW, of which ten are commuter airlines, and fifteen are foreign flag airlines. DFW International Airport ranks eighth in the world, serving 75,066,956 passengers in 2019, 9,469,924 of which were international travelers. DFW also ranks 4th in the world in terms of operations and 15th busiest airport in the world for passengers. Approximately 205,663 passengers travel daily through DFW Airport. DFW Airport recently completed a $2.7 billion "Terminal Renewal and Improvement Program" (TRIP), which encompassed renovations of three of the original four terminals (A, B, and E). Terminal A was the first terminal to undergo these renovations, which were completed in January 2017 at a cost of about $1 billion. Subsequently, the completion of Terminal E in August 2017 and Terminal B in December 2017. In May 2019, DFW airport (along with American Airlines) announced plans to build a sixth terminal. The proposed project is estimated to cost $3.5 billion and expected to finish by 2025. Along with the addition of up to 24 new gates to Terminal F, renovations of Terminal C are planned to take place, being the final terminal requiring updating. The goal of the new terminal is to "provide the region with the growth it needs to compete with international business centers," according to CEO of DFW Airport, Sean Donohue. American Airlines has its largest hub at DFW Airport, with 67% of the passenger volume. DFW Airport also provides an impressive global distribution center with several cargo carriers, 2.6 million square feet of cargo facilities, and a foreign trade zone with direct highway access. Covering more than 250 acres, this area is developing into a full-service free trade zone. Approximately $39 billion dollars across North Texas is attributable to airport traffic. DALLAS/FORT WORTH METROPOLITAN AREA ANALYSIS PYLES WHATLEY 24-539 22 CONCLUSIONS The foregoing city data and local area economic base activity are presented to establish growth and income patterns, which materially affect real estate development, real estate sales volume and value. The Dallas/Fort Worth area, based upon past performances and reasonable forecasts, should continue an upward growth trend, both in population and employment, particularly in the suburban cities. As population in the suburban communities continues to increase, and as traffic in and around the Central Core becomes more congested, both residents and local firms are beginning to look toward new, outlying employment centers. The growth is especially seen in North Dallas along the LBJ Freeway/Dallas Parkway Corridors, as well as master planned areas such as Las Colinas and Legacy Business Park. The DFW economy continued to post stable numbers through 2020 and into 2021, with the unemployment rate continuing to decline. Housing continued to grow in 2023, with the DFW new- home sales staying solid but were not as frantic as earlier in 2022. Homebuilders noted that tight lot supply and shortages of labor and materials have elongated building-cycle times and are restraining activity. The metroplex remains one of the busiest markets in single-family construction among large U.S. metros due to the population growth being seen in the area. REGIONAL MAP PYLES WHATLEY 24-539 23 REGIONAL MAP SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 24 A market area, as defined in The Dictionary of Real Estate Appraisal, 7th Edition, copyrighted 2022, is: SUBJECT AREA ANALYSIS “The geographic region from which a majority of demand comes and in which the majority of competition is located.” When analyzing value influences, the focus is on the market area. A market area is defined in terms of the market for a specific category of real estate and thus, is the area in which alternative, similar properties effectively compete with the subject property in the minds of probably, potential purchasers, and users. A market area can encompass one or multiple neighborhoods or districts. MARKET AREA INFLUENCES The subject property is located in Denton, Texas, situated in Denton County. The subject market is influenced by two universities – The University of North Texas and Texas Women’s University, a thriving downtown “Square” area with retail businesses, restaurants, and night spots, also by its location, access via traffic routes, and surrounding land uses. Area analyses and subject vicinity are presented in the following pages. LOCATION Denton County is located in the northern quadrant of the state of Texas, comprising the northern portion of the Dallas/Fort Worth/Arlington Metropolitan Statistical Area. The locale is approximately thirty miles northwest of the Dallas CBD and thirty miles northeast of the Fort Worth CBD, with the Dallas/Fort Worth International Airport eighteen miles south. Adjoining suburban neighborhoods are similar as to make-up and land uses. These include the suburban cities of Lewisville and Flower Mound. Properties in the area compete with other similar market areas. The accessibility and location amenities of the above-delineated general area have been significant in its development, redevelopment, and sustenance of commerce in the area. The general area is well serviced by major freeways, benefits from high intensity commercial as well as residential development, and is convenient to both the Dallas CBD and the Fort Worth CBD. Traffic Routes The traffic system is efficient and provides average access amenities to the area. Interstate Highway-35 which travels north to south, is a six-lane freeway connecting the Denton area to the cities of Dallas and Fort Worth. The other major freeway that services the neighborhood is US Highway 380 (University Drive), a six-lane undivided roadway, which is the main east-west highway through the city of Denton connecting Interstate 35, U.S. 377, and Loop 288. The primary north-south traffic route near the subject is Loop 288, a six-lane divided roadway. Additional north-south traffic routes include Teasley Lane and Dallas Drive. East to west traffic routes include Shady Oaks Drive and Morse Street. SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 25 Population and Economics Denton is a larger medium sized city with a 2022 population of 148,164 people, and 25 constituent neighborhoods. Denton is the 20th largest community in Texas. The projected population for the city of Denton in 2023 is 160,564 and in 2029 is 204,000. Denton is currently growing at an average rate of 4.11% annually. The most prevalent occupations for people in the area are a mix of both white- and blue-collar jobs. Overall, the city is a mix of professionals, sales and office workers, and service providers. Approximately 13.01% work in office and administrative support, 10.86% in sales jobs, and 10.57% in the teaching profession. The aggregate U.S. unemployment rate was 3.4% in May 2023. In comparison, the Bureau of Labor Statistics reported an unemployment rate of 4.1% for the state of Texas, 3.8% for the Dallas/Fort Worth MSA, 3.6% for Denton County, and 3.6% for the city of Denton. The outbreak of the Coronavirus (COVID-19) had reaching effects worldwide since the onset of the pandemic beginning March 2020 in the US. While a slight setback was experienced, overall, the United States as a whole and specifically the Texas economy has seen significant economic recovery from the COVID-19 pandemic. The metropolitan area boasts a long list of national and international corporate headquarters, with many major companies relocating to DFW in the past twenty years. The availability of reasonably priced land, lower living cost for employees, favorable climate, and reasonable housing are great incentives. Education The schood district’s student population has grown by almost 28 percent since the 2007 bond election. The current estimated student population is 30,265 with a student teacher ratio of 13:1. The school district ranks in the top 20% of public schools in the state of Texas. SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 26 In addition to 24 elementary schools, eight middle schools, four high schools, the district has two early childhood centers, an advance technology complex, and an alternative high school. Higher education facilities include University of North Texas, Texas Woman’s University, and North Central Texas College. University of North Texas, with a current student population of 38,081, is a public research university, with eleven colleges, two schools, and offers 38 doctoral degree programs. Texas Woman’s University, with a current student population of 15,472, is a private co- educational university with two health science center branches in Dallas and Houston. The school has a Carnegie classification as a comprehensive research and doctoral university. Medical In addition to private practices, Denton County is served by numerous medical facilities which includes The Heart Hospital Baylor Denton. The center offers comprehensive surgical and interventional, noninvasive, diagnostic cardiac and vascular services, and cardiovascular rehabilitation services to Denton County and the fast-growing North Texas region. Additional facilities include Texas Health Presbyterian Hospital Denton, Medical City Denton and Select Rehabilitation Hospital-Denton. Rayzor Ranch Development Rayzor Ranch is a 410-acre master planned community located in Denton, Denton County, Texas, at the intersection of Interstate Highway 35 and State Highway 380. The development was started in 2008 and is currently still being developed as a cohesive, pedestrian friendly area inspired by historical Texas Architecture. The development includes large anchor tenants such as Walmart, and Sam’s Club, as well as, other large retail, junior anchors, specialty retailers, restaurant and financial institutions. When completed, it will be the largest super-regional retail development between Dallas, Texas and Oklahoma City, Oklahoma. SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 27 AREA DEMOGRAPHICS The following Market Profile provided by the Site-To-Do Business provides demographic and income data for a 1-mile, 3-mile, and 5-mile radii centered on the subject’s location. SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 28 SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 29 SUBJECT AREA ANALYSIS PYLES WHATLEY 24-539 30 CONCLUSIONS The transportation network in the area is good and surrounding land uses are considered to be compatible and homogenous. The subject area is in a growth phase of development and in proximity to employment centers and quality schools and services. Most developments in the immediate area were constructed in the 1970’s to 1980’s. New developments are centered around Rayzor Ranch, a 410-acre master planned community located at the intersection of Interstate Highway 35 and State Highway 380. The development was started in 2008 and is currently still being developed as a cohesive, pedestrian friendly area inspired by historical Texas Architecture. The development includes large anchor tenants such as Walmart, and Sam’s Club, as well as, other large retail, junior anchors, specialty retailers, restaurant, and financial institutions. When completed, it will be the largest super-regional retail development between Dallas, Texas and Oklahoma City, Oklahoma. No noticeable nuisances or hazards are in the area and the majority of improvements are in the early to middle stages of economic life, and sufficient area services are accessible to service the community. The long-term prospects for the area and the subject property are positive. LOCATION MAP PYLES WHATLEY 24-539 31 LOCATION MAP SURVEY - ELEMENTARY SCHOOL PYLES WHATLEY 24-539 32 SURVEY - ELEMENTARY SCHOOL SURVEY –PARK PYLES WHATLEY 24-539 33 SURVEY - PARK BUILDING SKETCH PYLES WHATLEY 24-539 34 Building sketch AERIAL PHOTOGRAPH PYLES WHATLEY 24-539 35 AERIAL PHOTOGRAPHS Source: Google Maps (Imagery date: 2023) Red shading - approximate subject property boundary – appraiser’s estimate. Source: Google Maps (Imagery date: 2023) SUBJECT - SCHOOL SUBJECT - PARK SUBJECT - PARK SUBJECT - SCHOOL SUBJECT PROPERTY PYLES WHATLEY 24-539 36 The subject is an elementary school, located on the southern side of Parvin Street at the southern terminus of Mercedes Road, Denton, Denton County, Texas. SUBJECT PROPERTY SITE DATA Dimensions/Frontage According to Denton Central Appraisal District records, the subject tracts are irregular in shape and are comprised of a 4.729-acre or 206,000 square-foot tract and a 3.739-acre or 162,866 square- foot. The school fronts the southern line of Parvin Street for approximately 464 linear feet. The surveyed portion of the park does not have any frontage directly along Parvin Street. Parvin Street is a two-lane, undivided roadway. The surveyed portion of the school property is approximately 461 feet deep along the eastern line. The surveyed portion of Denia Park is 532 feet along the eastern line. PARCEL MAP Source: Denton County Appraisal District Mapping System SUBJECT - SCHOOL SUBJECT - PARK SUBJECT PROPERTY PYLES WHATLEY 24-539 37 Access/Abutting uses Access (ingress and egress) to the site is available via the southern line of Parvin Street. The subject abuts single-family residential development across Parvin Street to the north and the west, and Denia Park to the south and east. Viewing westerly along Parvin Street; subject on the left Viewing easterly along Parvin Street; subject on the right Topography The topography of the tract is mostly level and slightly above street grade along Parvin Street, sloping downward toward the southern boundary; the topography of the subject is not problematic to development. Utilities/Community Services Electricity, water, telecommunications, and sewer services are available to the subject. City of Denton provide electricity and telecommunication services in the area. Atmos Energy supplies natural gas services. Water and wastewater services are provided by the City of Denton. Police and fire protection are provided by the City of Denton. The property is located within the Denton Independent School District. Soils, Development Limitation, and Productivity This report assumes the soil is capable of supporting the structures, as numerous improvements are located within the subject area and adjoining area. A study of the development, limitations, and productivity were not completed in this appraisal report, as it is not necessary to the scope of the appraisal. SUBJECT PROPERTY PYLES WHATLEY 24-539 38 Flood Plain According to FEMA flood hazard map, 48121C0360G dated April 18, 2011, the subject is determined to be outside the 100-year floodplain, being within Zone 'X'. Drainage of the site appears graded and improved. No guaranty is made that the site will or will not flood. A hydrological study or survey is required for confirmation of flood-designated boundaries. Reference the subsequent exhibits for a copy of the area flood map. FLOOD MAP Source: FEMA Environmental Hazards To my knowledge, a Phase I Environmental Site Assessment has not been completed for the subject property as of the date of inspection. The subject is appraised predicated on the absence of detrimental environmental conditions. Should contaminants be present the conclusions in the report would be invalidated. SUBJECT - PARK SUBJECT - SCHOOL SUBJECT PROPERTY PYLES WHATLEY 24-539 39 Zoning The site is zoned PF - Public Facilities by the City of Denton. The purpose of the PF - Public Facilities district to provide adequate lands for public and quasi-public community uses and services, including but not limited to fire stations, schools, libraries, community centers, hospitals, civic buildings, open space, parks, utilities, and other public-related facilities. Additional zoning information can be referenced in the addenda. Based on the inspection, the improvements appear to be a legal and conforming use under the current zoning requirements. Elementary schools and parks are allowed in this zoning district. ZONING MAP Source: Denton Zoning Department SUBJECT - SCHOOL SUBJECT - PARK SUBJECT PROPERTY PYLES WHATLEY 24-539 40 Easements A survey of the site is available for analysis. This valuation concludes that utility and access easements typical of this property type are present and that no detrimental easement conditions exist. This should not be considered as a guaranty or warranty; however, adverse easements do not exist. Were the property to have any easements detrimental to the subject, the opinion of value concluded herein may be invalid. Deed Restrictions To my knowledge, no deed restrictions affect or limit the use of the property; however, this should not be considered as a guaranty or warranty that no such restrictions exist. Deed restrictions are a legal matter: normally discoverable only by a title search by a title attorney. It is recommended that a title search be made if any questions regarding deed restrictions arise. Wetlands No visual evidence was observed to indicate whether wetlands exist on the subject site. Wetlands, as defined by Section 404 of the Clean Water Act, are those areas that are inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Swamps, bogs, fens, marshes, and estuaries are subject to federal environmental law. SUBJECT PROPERTY PYLES WHATLEY 24-539 41 SUBJECT IMPROVEMENTS Design/Construction The improvements consist of an 80,045-square foot elementary school with associated site improvements. Exterior Year Built 1985 Type Class C Building Size - Gross 80,045 square feet (Field Measurements) Foundation Reinforced concrete slab Walls Glass; brick veneer Roof Flat; built-up on steel decking HVAC Complete system (roof-mounted); 100% Fire Suppression 100% sprinkled (wet); high-pressure Doors/Loading One loading dock Quality Good Condition Average Interior Stories (Floors)One Rooms Offices,cafeteria,classrooms,break room,library, gymnasium, and restrooms Flooring Vinyl tile, ceramic tile, and sealed concrete Walls Painted/textured gypsum board Exposed, insulated metalCeilingAcoustical ceiling panels; suspension system Exposed, insulated beamLightingStandard commercial fixtures Quality Good Condition Average ELEMENTARY SCHOOL SUBJECT PROPERTY PYLES WHATLEY 24-539 42 Site Improvements Site improvements include an concrete paving and drives, concrete walkways along the building, monument signage, pole-mounted lighting, dumpster enclosure, playground, and landscaping. Parking The subject has 103 delineated parking spaces, including handicap accessible spaces. Physical Condition The subject improvements (elementary school) were built in 1985; the improvements are in average condition. Overall, the design and construction quality of the improvements are considered typical of similar buildings of the age of the subject improvements. Based on the subject's condition and maintenance, the effective age is estimated at 20 years; the remaining economic life is anticipated to be 25 years. According to the facilities manager, the interior of the building was refreshed approximately fifteen years ago. No items of deferred maintenance were noted at the inspection. Functional Utility Defined as the ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards. The subject is an elementary school. The improvements are functionally adequate given the architectural style, design and layout, traffic patterns, and the size and configuration of the improvements for this property type. External Obsolescence External obsolescence is considered to be the loss in value of the property resulting from an influence of negative forces not inherent with the property. It can be caused by the exertion of detrimental external forces upon the area or property itself. Specific examples are significant fluctuations in the local economy, noise from nearby expressways or airports, excessive taxes, supply and demand imbalances, special assessments or certain other governmental actions, the lack of financial liquidity in the marketplace, or the infiltration of unharmonious groups or land uses. This form of obsolescence is rarely, if ever, curable. The subject regional area is currently experiencing stable rental rates and occupancy levels. Based upon the stable market conditions within the extended area the property does not appear to suffer from external obsolescence. SUBJECT PROPERTY PYLES WHATLEY 24-539 43 CONCLUSIONS The subject is an elementary school, with adequate frontage and access via the southern line of Parvin Street. As improved, the property appears to be a legal and conforming use. Our opinion of the improvements effective age is 20 years, which is less than the actual age. According to Marshall & Swift Valuation Service, the typical economic life span for buildings of the same construction class and design as the subject is typically 45 years. Therefore, the subject improvements are said to have a remaining economic life of 25 years (45 years less the effective age of 20 years). Please refer to the subsequent exhibits and addenda for additional details. SUBJECT PHOTOGRAPHS PYLES WHATLEY 24-539 44 PHOTOGRAPHED ON NOVEMBER 23, 2024 SUBJECT PHOTOGRAPHS Viewing at front of elementary school Viewing southwesterly at the subject Viewing south along eastern parking lot Viewing westerly across parking lot at school Viewing eastern entrance and bus-drop off area Viewing northwesterly at rear of school SUBJECT PHOTOGRAPHS PYLES WHATLEY 24-539 45 Viewing north at playground and rear entrance to school Viewing south across rear parking lot and basketball courts Viewing northeast at rear of school Viewing south along western property line Viewing northeast at western face of school Viewing southeast at front of school SUBJECT PHOTOGRAPHS PYLES WHATLEY 24-539 46 Viewing south along western line of surveyed portion of the park Viewing west across middle of surveyed portion of the park Viewing north along eastern line of surveyed portion of the park Viewing northwest across park at school Viewing south at surveyed portion of the park REAL ESTATE TAX ANALYSIS PYLES WHATLEY 24-539 47 Real estate taxes in Texas and this jurisdiction represent ad valorem taxes, meaning a tax applied in proportion to value. Property assessments are based on market value. The composite rate is based on a total of several taxing entities’ individual rates. REAL ESTATE TAX ANALYSIS In Denton County, the Denton Central Appraisal District is responsible for ad valorem tax appraisals of all real estate within the county. Based on the ad valorem tax appraisal, various tax districts levy annual taxes on property located within their respective districts. Typical taxing jurisdictions include assessments from the county, city, and school districts in which the property is located. The total ad valorem tax burden is the sum of the assessments for the various taxing authorities. The subject property falls within the taxing jurisdictions listed in the following table. Pertinent 2023 tax rates for the subject are detailed below. City of Denton 0.560682$ Denton County 0.189485$ Denton ISD 1.159200$ Total 1.909367$ 2023 TAX RATES (per $100) The Denton Central Appraisal District account for 2024 is summarized as follows: Account Number Land Improvements Total 148773 6,199,111$ 7,502,151$ 13,701,262$ Based on the preceding assessed value and pertinent tax rates, the subject's annual tax liability is calculated as follows: Assessed Value Tax Rate $13,701,262 x $0.01909367 Indicated Tax Liability 261,607= $ The assessed value equates to $13,701,262 to the building improvements, or $171.17 per square foot of building area. The assessed value is below the concluded market value in this appraisal. This difference is typically due to the valuation methods of the appraisal district. As the subject is owned by a public school district, it is exempt from property taxation. HIGHEST AND BEST USE ANALYSIS PYLES WHATLEY 24-539 48 One of the basic elements of real estate valuation is the theory of highest, best, and most profitable use. HIGHEST AND BEST USE ANALYSIS As defined in The Dictionary of Real Estate Appraisal, 7th Edition (Copyright 2022) and the Appraisal of Real Estate, 15th Edition (Copyright 2020), highest and best use is defined as that reasonably probable use of property that results in the highest value. These definitions recognize that in cases where a site has existing improvements on it, the highest and best use may very well be determined to be different from the existing use. The existing use will continue, however, unless and until land value in its highest and best use exceeds the total value of the property in its existing use. Because the use of land can be limited by the presence of improvements, highest and best use is determined separately for the land or site as though vacant and available to be put to its highest and best use, and for the property as improved. In appraisal practice, highest and best use analysis not only identifies the use of the property expected to produce the maximum net present value, but also helps the appraiser select comparable properties. Four basic criteria are examined in estimating the Highest and Best Use of a property both as vacant and as improved. These stages of analysis are as follows: a) Physically Possible Use - the uses to which it is physically possible to put on the site in question. b) Legally Permissible Use - the uses that are permitted by zoning and deed restrictions on the site in question. c) Financially Feasible Use - the possible and permissible uses that will produce any net return to the owner of the site. d) Maximumly Productive Use - among the feasible uses, the use that will produce the highest net return on the highest present worth. The highest and best use of a specific parcel of land is not determined through subjective analysis by the property owner, the developer, or the appraiser; rather, highest, and best use is shaped by the competitive forces within the market where the property is located. Therefore, the analysis and interpretation of highest and best use is an economic study of market forces focused on the subject property. Market forces also shape market value, so the general data that are collected and analyzed to derive an opinion of market value are also used to formulate an opinion of the property’s highest and best use as of the appraisal date. HIGHEST AND BEST USE ANALYSIS PYLES WHATLEY 24-539 49 SITE, AS THOUGH VACANT According to the Denton Central Appraisal District, the subject tracts are irregular in shape and comprised of 368,866 square feet or 8.468 acres. A 4.729-acre or 206,000 square-foot portion of Frank Borman Elementary School and a 3.739-acre or 162,866 square-foot portion of Denia Park which abuts the school to the east. The subject fronts the southern line of Parvin Street for approximately 464 linear feet. The subject abuts single-family residential development across Parvin Street to the north and the west, and Denia Park to the south and east. Physically Possible In arriving at our opinion of highest and best use for the subject site, it was first necessary to determine if the physical characteristics of the site - such as soil conditions, topography, shape, and frontage were favorable for development. Soil conditions in the region are adequate for development provided appropriate engineering, design, and construction. According to FEMA flood hazard map, 48121C0360G dated April 18, 2011, the subject is determined to be outside the 100-year floodplain, being within Zone 'X'. No guaranty is made that the site will or will not flood. A hydrological study or survey is required for confirmation of flood-designated boundaries. The tract is of sufficient size to be economically adaptable for development and benefits from adequate frontage and accessibility. Thus, the physical characteristics impose no limitations on possible development. Legally Permissible The site is zoned PF - Public Facilities by the City of Denton. The purpose of the PF - Public Facilities district to provide adequate lands for public and quasi-public community uses and services, including but not limited to fire stations, schools, libraries, community centers, hospitals, civic buildings, open space, parks, utilities, and other public-related facilities. Additional zoning information can be referenced in the addenda. Financially Feasible As defined in The Dictionary of Real Estate Appraisal, Seventh Edition, 2022, financial feasibility is “the capability of a physically possible and legal use of property to produce a positive return to the land after considering risk and all costs to create and maintain the use”. The surrounding properties and land uses are considered for compatibility in determination of feasible use. Based on the land usage pattern of the surrounding area, the layout, location, and frontage/visibility of the site, the most feasible use is considered to be for single-family residential development. HIGHEST AND BEST USE ANALYSIS PYLES WHATLEY 24-539 50 Maximally Productive The financially feasible use of the subject site would be for single-family residential development. Based upon the location in Denton, and nearby uses, single-family residential development is considered most logical. Therefore, the maximally productive use of the subject, as vacant, would be for single-family residential development. SUMMARY OF HIGHEST AND BEST USE, AS THOUGH VACANT The highest and best use of the subject would be for single-family residential development, as demand warrants. Use: single-family residential development Timing: as demand warrants Market Participants: User: owner Most Probable Buyer: investor, developer SITE, AS IMPROVED The subject improvements consist of an 80,045-square foot elementary school and associated site improvements. Physically Possible The subject improvements were built in 1985 and intended for use as an elementary school. The design of the improvements is typical for the area. No items of deferred maintenance were noted at the inspection. The physical characteristics and accompanying amenities of the subject improvements are not readily adaptable to other uses and are specific in design for use as an elementary school. Legally Permissible The site is zoned PF - Public Facilities by the City of Denton. Elementary schools and parks are allowed in this zoning district. Financially Feasible As defined in The Dictionary of Real Estate Appraisal, Seventh Edition, 2022, financial feasibility is “the capability of a physically possible and legal use of property to produce a positive return to the land after considering risk and all costs to create and maintain the use”. Financially feasible uses for the subject property include continued use as an elementary school. This use will produce a positive return to the subject site. HIGHEST AND BEST USE ANALYSIS PYLES WHATLEY 24-539 51 Maximally Productive The improvements add value to the subject site, and they also represent the maximally profitable use of the site, as improved. Additional land area exists for future expansion as demand warrants. The preceding analysis indicates the improvements to be feasible based on current market parameters. Thus, it is concluded that the maximally productive use of the subject, as improved, is continued use as an elementary school. SUMMARY OF HIGHEST AND BEST USE, AS IMPROVED opinion of the highest and best use of the subject is a continued use as an elementary school. Use: continued use as an elementary school Timing: current Market Participants: User: owner Most Probable Buyer: owner, user APPRAISAL PROCEDURE PYLES WHATLEY 24-539 52 DATA COLLECTION PROCESS For the purposes of this report, the subject market was researched for all pertinent data relating to the appraisal problem as stated below. This process typically includes collecting and confirming data through local real estate brokers, appraisers, property owners, lessee/lessors, and others familiar with the local real estate market. The information provided by these sources is deemed reliable but is not guaranteed. APPRAISAL PROCEDURE The rendered opinion of market value of a property that is being appraised is accomplished by the comparison and analysis of as many appraisal techniques as are appropriate. The following approaches are generally used to produce value indications. Cost Approach: The value indication by this approach is accomplished by estimating the Reproduction (or Replacement) Cost New of the improvements and deducting accrued depreciation from all causes, if any. The value of the land (by comparison) is then added to this depreciated cost figure. The cost approach is based on the premise that the value of a property can be indicated by the current cost to construct a reproduction or replacement for the improvements minus the amount of depreciation evident in the structures from all causes plus the value of the land and entrepreneurial profit. This approach to value is particularly useful for appraising new or nearly new improvements. Sales Comparison Approach: The comparison of similar properties, which have sold in the marketplace, is used to produce an indication of value. The comparison may be either direct or indirect with commonly accepted units or elements of comparison. The sales comparison approach is founded upon the principle of substitution, which holds that the cost to acquire an equally desirable substitute property without undue delay ordinarily sets the upper limit of value. At any given time, prices paid for comparable properties are construed to reflect the value of the property appraised. The validity of a value indication derived by this approach is heavily dependent upon the availability of data on recent sales of properties similar in location, size, and utility to the appraised property. Income Capitalization Approach: This approach to value is applicable to properties capable of producing a net income stream. The net income stream is translated into a value indication through the capitalization process. The income capitalization approach is based on the principle of anticipation, which recognizes the present value of the future income benefits to be derived from ownership in a particular property. The income capitalization approach is most applicable to properties that are bought and sold for investment purposes and is considered very reliable when adequate income and expense data are available. Since income producing real estate is most often purchased by investors, this approach is valid and is generally considered the most applicable when the property being appraised was designed for, or is easily capable of, producing a satisfactory rental income. APPRAISAL PROCEDURE PYLES WHATLEY 24-539 53 The strengths and weaknesses of each approach used are weighed in the final analysis. The approach or approaches offering the greatest quantity and quality of supporting data are typically emphasized, and the final opinion of value is correlated. Under the parameters of this assignment, the following approaches to value were considered and used in this appraisal: Approach Considered Used Cost Yes Yes Sales Comparison Yes No Income Capitalization Yes No A preliminary survey of the property indicates the following: - Sales of similar land use in the area are required. Sufficient data are available to arrive at an indicated value of the land of the subject by market comparison. - The cost approach is most applicable when a property is new or proposed and when the development represents the highest and best use of the site. The age of the improvements is estimated at 20 years. Overall, the cost approach is a reliable valuation method for this analysis. - Due to the subject being a special-use property, limited market data are available for comparison via the sales comparison and income approaches as improved, therefore these approaches are not utilized. Secondary sources of market data and investor criteria were utilized including Real Estate Research Corporation’s Real Estate Report (RERC), Price Waterhouse Coopers Real Estate Investor Survey, Real Estate Investment Services (REIS), M/PF, ALN Systems, Cushman Wakefield Market Reports, Marcus Millichap Market Reports, CB Richard Ellis Market Reports, Insignia Market Reports, Jones Lang LaSalle Market Reports, and other industry publications. APPRAISAL PROBLEM The appraisal problem, as applied to the subject, is to determine the market value of the fee simple interest in the subject property. In addressing this problem, the principles of utility, substitution, and anticipation are considered in the following valuation. REASONABLE EXPOSURE TIME PYLES WHATLEY 24-539 54 When the purpose of an assignment is to develop an opinion of market value, the appraiser must also develop an opinion of reasonable exposure time linked to the value opinion. REASONABLE EXPOSURE TIME Reasonable exposure time is one of a series of conditions in most market-value definitions. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time, as defined by the Uniform Standards of Professional Appraisal Practice, is an opinion, based on supporting market data, of the length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. The fact that exposure time is always presumed to occur prior to the effective date of the appraisal is substantiated by related facts in the appraisal process, i.e. supply/demand conditions as of the effective date of the appraisal, the use of current cost information, the analysis of historical sales information (sold after exposure and after completion of negotiations between the seller and the buyer), and the analysis of future income expectancy projected from the effective date of the appraisal. The opinion of the time period for reasonable exposure is not intended to be a prediction of a date of sale or a one-line statement. Instead, it is an integral part of the analyses conducted during the appraisal assignment. The opinion may be expressed as a range and can be based on one or more of the following: • Statistical information about days on market • Information gathered through sales verification. • Interviews of market participants Related information garnered through this process may include the identification of typical buyers and sellers for the type of property involved and typical equity investment levels and/or financing terms. The reasonable exposure period is a function of price, time, and use, not an isolated opinion of time alone. The answer to the question “what is reasonable exposure time?” should always incorporate the answers to the question “for what kind of property at what value range?” rather than appear as a statement of an isolated time period. A reasonable exposure time for the subject property at the market value definition and market value conclusion in this appraisal was developed by discussions with local market participants. According to local brokers, appraisers, and informed market participants, the reasonable exposure time for properties similar to the subject, is considered to be 12 months. LAND VALUATION PYLES WHATLEY 24-539 55 Land value is directly related to highest and best use. The relationship between the highest and best use and land value may indicate whether an existing use is the highest and best use of the land. LAND VALUATION Land valuation can be accomplished by six procedures. These include sales comparison, allocation, extraction, subdivision development, land residual, and ground rent capitalization. Sales Comparison – Sales of similar, vacant parcels are analyzed, compared, and adjusted to provide a value indication for the land being appraised. Allocation – Either sales of improved properties are analyzed, and the prices paid are allocated between the land and the improvements, or comparable sites under development are analyzed and the costs of the finished properties are allocated between the land and improvements. Extraction – Land value is indicated by subtracting the estimated value of the depreciated improvements from the known sale price of the property. This procedure is frequently used when the value of the improvements is relatively low or easily calculated. Ground Rent Capitalization – This procedure is used when land rents and land capitalization rates are readily available, e.g., for appraisals in well-developed areas. Net ground rent, the net amount paid for the right to use and occupy the land, is calculated, and divided by a land capitalization rate. Either actual or estimated rents can be capitalized using rates that can be supported in the market. Land Residual Technique – The land is assumed to be improved to its highest and best use. The income attributable to the return on and of the capital invested in the improvements is deducted from the net operating income. The result is the income attributable to the land. This income is capitalized to derive an opinion of land value. Subdivision Development – The total value of undeveloped land is indicated as if the land were subdivided, developed, and sold. Development costs, incentive costs, and carrying charges are subtracted from the estimated proceeds of sale, and the net income projection is discounted over the period required for market absorption of the developed sites. The sales comparison method is the best method of developing an opinion of value of the subject. In this method, known sales of similar use land in the market area are compared to the subject to arrive at an indication of value. In arriving at value conclusions, the tracts are compared as to the rights conveyed, financing terms, sale conditions, market conditions, location, and physical characteristics. This approach is used to value land that is vacant or considered vacant for appraisal purposes. The market was carefully researched for recent sales, leases, listings, or other transactions, which would provide a valid basis for developing an opinion of the market value of the subject by comparison. After reviewing and analyzing the sales, four sales were extracted from this sample and utilized for the land valuation. These sales are detailed on the following pages. LAND VALUATION PYLES WHATLEY 24-539 56 LAND SALES MAP LAND VALUATION PYLES WHATLEY 24-539 57 Land Sale No. 1 Location S/s of Country Club Road, 700 feet east of David Fort Road Denton ETJ, Denton County, Texas Legal Description Being Tract 21, Fairway Acres Subdivision, Denton County, Texas Grantor LKCBSS Investments, LLC Grantee Davenport Living Trust Record Data Date of Sale July 3, 2023 Document No.2023-129083 Consideration $900,000 Terms of Sale Cash (or cash equivalent) to the seller Conditions of Sale Arm's-length Land Area Acres 3.000 Square Feet 130,680 Price Per SF $6.89 Zoning Unzoned Topography Level; at street grade Utilities Electricity, water, and telecommunications available, septic system needed for sewer service Shape Mostly Rectangular Frontage ±125 LF - Country Club Road Comments The tract is irregularly shaped and is not located in a designated flood zone.The surrounding uses are mainly single-family residences and agricultural uses. LAND VALUATION PYLES WHATLEY 24-539 58 Land Sale No. 2 Location Adjacent to the southwest corner of McCormick Street and IH35E frontage road Denton, Denton County, Texas Legal Description Being all that certain tract or parcel of land situated in the Eugene Puchalski Survey, Abstract No. 996, Denton County, Texas Grantor Rebecca Jean Ginnings Grantee Knights Court, LLC Record Data Date of Sale May 10, 2023 Document No.2023-48221 Consideration $900,000 Terms of Sale Cash (or cash equivalent) to the seller Conditions of Sale Arm's-length Land Area Acres 3.06 Square Feet 133,280 Price Per SF $6.75 Zoning MN (Mixed-Use Neighborhood) Topography Level; at grade; 100% Zone 'X' Utilities All available Shape Irregularly shaped Frontage ±120 LF - Mesa Drive Comments The sale consist of three adjoining tracts of land wrapping the southwest corner of McCormick Street and Interstate Highway 35E frontage road.The tract has approximately 175 feet of frontage along the western line of McCormick Street, approximately 150 feet of frontage along the eastern line of Knight Street,and approximately 100 feet of frontage along the southern line of Greenlee Street. LAND VALUATION PYLES WHATLEY 24-539 59 Land Sale No. 3 Location E/s of Fallmeadow Street, ±340 feet north of Gardenview Street Denton, Denton County, Texas Legal Description Being a tract of land situated in the B.B.B.&C.R.R.CO.Survey, Abstract No. 186, Denton County, Texas Grantor Short Family Partnership Grantee MSW Partners, LLC Record Data Date of Sale November 23, 2022 Document No. Consideration $1,344,000 Terms of Sale Cash (or equivalent cash) to the seller Conditions of Sale Arm's-Length Land Area Acres 4.115 Square Feet 179,245 Price Per SF $7.50 Zoning R7 (Residential) Topography Level; at street grade; 100% Zone 'X' Utilities All available Shape Rectangular Frontage ±427 LF - Fallmeadow Street Comments The property is located on the east side of Fallmeadow Street, approximately 340 feet north of Gardenview Street.Surrounding uses are multifamily.The property is zoned R7,which is a residential zone in the City of Denton. LAND VALUATION PYLES WHATLEY 24-539 60 Land Sale No. 4 Location W/s of East Sherman Drive, ±500 feet south of Chateau Court Denton, Denton County, Texas Legal Description Being a 3.778 acre tract of land situated in the J. Carter Survey, Abstract No. 268, in the City of Denton, Denton County, Texas Grantor Walker Builders, LLC Grantee Domus Sherman Village, LLC Record Data Date of Sale April 21, 2021 Document No. Consideration $700,000 Terms of Sale Cash (or equivalent cash) to the seller Conditions of Sale Arm's-Length Land Area Acres 3.78 Square Feet 164,657 Price Per SF $4.25 Zoning MN (Mixed-Use Neighborhood) Topography Mostly level; at street grade; 100% Zone 'X' Utilities All available Shape Irregularly Shaped Frontage ±50 LF - East Sherman Lane Comments The property is located on the west side of East Sherman Drive, approximately 500 feet south of Chateau Court.The property is zoned Mixed-Use Neighborhood,which allows a variety of different property types.The lot was purchased for investment purposes. LAND VALUATION PYLES WHATLEY 24-539 61 SF AC 1 S/s of Country Club Road, 700 feet east of David Fort Road 130,680 3.000 6.89$ Jul-2023 2 Adjacent to the southwest corner of McCormick Street and IH35E frontage road 133,280 3.060 6.75$ May-2023 3 E/s of Fallmeadow Street, ±340 feet north of Gardenview Street 179,245 4.115 7.50$ Nov-2022 4 W/s of East Sherman Drive, ±500 feet south of Chateau Court 164,657 3.780 4.25$ Apr-2021 Subject 1201 Parvin Street 205,995 4.729 LAND SALES SUMMARY Sale No. Location Size Price Per SF Date of Sale The sales in the sample were selected from a larger group as being most similar in overall physical characteristics as compared to the subject. The land sales occurred between April 2021 to July 2023, range in size from 3.000 acres to 4.115 acres, and range in price from $4.25 to $7.50 per square foot. These sales represent the most recent, similar activity in proximity to the subject. The first step in any comparative analysis is to identify which elements of comparison affect property values in the subject market. Each of the basic elements of comparison must be analyzed to determine whether an adjustment is required. If sufficient information is available, a quantitative adjustment can be made. Adjustments for differences are made to the price of each comparable property to make that property equivalent to the subject in market appeal on the effective date of the opinion of value. The magnitude of the adjustment made for each element of comparison depends on how much that characteristic of the comparable property differs from the subject property. We have considered all appropriate elements of comparison in the following discussions. In the following analysis, consideration is given for rights conveyed, financing, sale and market conditions, location, and physical characteristics. Property rights conveyed and financing are basic components of sale. The rights conveyed should be identical and financing should be on a cash equivalent basis. Sale conditions require analysis to determine any unusual characteristics. Consideration of market conditions is necessary because of the cyclical nature of the real estate market and continuous economic change. The location adjustment considers factors such as type, compatibility, quality, desirability, and accessibility of area development. Comparison of utility considers such factors as zoning, size, and frontage. These adjustments are not intended as exact measurements but are used to define accurately the range of values indicated by the market. LAND VALUATION – ELEMENTARY SCHOOL (4.729 ACRES) PYLES WHATLEY 24-539 62 RIGHTS CONVEYED, FINANCING, SALE, MARKETING CONDITIONS, AND LOCATION Rights Conveyed When property rights are sold, they may be the sole subject of the contract or the contract may include other rights, less than all of the real property rights, or even another property or properties. Before the price of a comparable sale property can be used in sales comparison analysis, the appraiser must first ensure that the sale price of the comparable property applies to property rights that are similar to those being appraised. To do so, adjustments may be required before specific differences in the physical real estate can be compared. The sales were evaluated and no adjustments for rights conveyed are considered necessary for the comparable sales. Financing The transaction price of one property may differ from that of an identical property due to different financing arrangements. The cost of financing includes the interest rate and any points, discounts, equity participations, or other charges that the lender requires to increase the effective yield of the loan. The cost and availability of credit for real estate financing influences both the quantity and quality of real estate demanded and supplied. Additional financing adjustments could be made based on owner financing, favorable financing terms, or assumptions. The sales were purchased with cash, or third-party financing which requires no adjustment. Sale Conditions Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. Sales, where the conditions significantly affect transaction prices, are labeled non-arm’s length transactions. Any sales that reflect unusual sale conditions are adjusted accordingly and the circumstances of these non-arm’s length transactions are detailed on the sale summary pages. The sales were evaluated and no adjustments for sale conditions are considered necessary for the comparable sales. Market Conditions The sales occurred between April 2021 and July 2023. Adjustments for market conditions are applied if property values have increased or decreased since the transaction dates. Based on our observations and analysis, real estate has appreciated approximately 5% annually. Each sale is adjusted accordingly for time. Location An adjustment for location within a market area may be required when the locational characteristics of a comparable property are different from those of the subject property. Most comparable properties in the same market area have similar locational characteristics, but variations may exist within that area of analysis. A property’s location is analyzed in relation to the location of other similar properties. The sales are not adjusted, having similar locational appeal as the subject. LAND VALUATION – ELEMENTARY SCHOOL (4.729 ACRES) PYLES WHATLEY 24-539 63 PHYSICAL CHARACTERISTICS Access Access has a bearing on real estate in the market. Access is defined as the points, or number of points available for ingress/egress to the subject site or ease of access to the site from abutting roadways. Sale properties are adjusted based on their inferiority/superiority as compared with the subject. The subject is accessible from the southern line of Parvin Street. All the sales are similar to the subject in access and are not adjusted. Frontage Frontage is the number of feet of frontage along the subject roadway or roadways. Sale properties are adjusted based on their inferiority/superiority as compared with the subject. Sales 1 and 3 are considered similar to the subject in access and are not adjusted. Sales 2 and 4 are inferior in frontage as compared to the subject and are each adjusted +5%. Size The subject site is comprised of 4.729 acres or 206,000 square-feet. The size adjustment is based on the premise that, in general, the larger the tract, the less its selling price on a per unit basis. Recent experience with other properties utilizing a linear regression analysis indicates a 5% - 15% adjustment for each doubling/halving (100%) in size. A 5% adjustment is used for this analysis. Sales 1, 2, 3, and 4 are adjusted -3%, -3%, -1%, and -1%, respectively for size. Zoning The site is zoned PF - Public Facilities by the City of Denton. Having similar development potential based on the zoning and highest and best use, the comparable sales are not adjusted. Utilities Water, sanitary sewer, electricity, and phone services are available to the subject. Sales 2, 3, and 4 are similar in the available utilities as compared to the subject and do not warrant adjustment. Sale 1 does not have access to city sewer services and is adjusted +5% for inferior utilities. Topography The subject is mostly level and slightly above street grade along Parvin Street; the subject is determined to be outside the 100-year floodplain. The sales are similar in topography as compared to the subject and are not adjusted. LAND VALUATION – ELEMENTARY SCHOOL (4.729 ACRES) PYLES WHATLEY 24-539 64 SUMMARY OF ADJUSTMENTS These adjustments for differences are applied to the comparable sales, when compared to the subject property, in the following table: Sale No.1 2 3 4 No. of Acres 3.000 3.060 4.115 3.780 Size SF 130,680 133,280 179,245 164,657 Sale Date Jul-23 May-23 Nov-22 Apr-21 Sale Price $900,000 $900,000 $1,344,000 $700,000 Sale Price Per SF $6.89 $6.75 $7.50 $4.25 Rights Conveyed -0--0--0--0- Financing -0--0--0--0- Sale Conditions -0--0--0--0- Immediate Expenditures -0--0--0--0- Market Conditions 7%8%10%18% Adjusted Price $7.37 $7.29 $8.25 $5.02 Location -0--0--0--0- Access -0--0--0--0- Frontage -0-5%-0-5% Size -3%-3%-1%-1% Zoning -0--0--0--0- Utilities 5%-0--0--0- Topography -0--0--0--0- Net Adjustment 2%2%-1%4% Adjusted Price/SF $7.52 $7.44 $8.17 $5.22 LAND SALES ADJUSTMENTS LAND VALUE CONCLUSION After adjustments, the comparables range in price from $5.22 to $8.17 per square foot, with an adjusted mean of $7.09 per square foot and an adjusted median of $7.48 per square foot. These comparable sales are representative of land activity in the area. Considering the adjusted sales and giving emphasis to the Sale 1, being the most recent, the indicated value of the subject site is $7.50 per square foot or $1,545,000, rounded. No. of Square Feet $/SF Indicated Value 206,000 x $7.50 =1,545,000$ Rounded 1,545,000$ Total Land Area - Frank Borman Elementary School LAND VALUATION – DENIA PARK (3.739 ACRES) PYLES WHATLEY 24-539 65 RIGHTS CONVEYED, FINANCING, SALE, MARKETING CONDITIONS, AND LOCATION Rights Conveyed When property rights are sold, they may be the sole subject of the contract or the contract may include other rights, less than all of the real property rights, or even another property or properties. Before the price of a comparable sale property can be used in sales comparison analysis, the appraiser must first ensure that the sale price of the comparable property applies to property rights that are similar to those being appraised. To do so, adjustments may be required before specific differences in the physical real estate can be compared. The sales were evaluated and no adjustments for rights conveyed are considered necessary for the comparable sales. Financing The transaction price of one property may differ from that of an identical property due to different financing arrangements. The cost of financing includes the interest rate and any points, discounts, equity participations, or other charges that the lender requires to increase the effective yield of the loan. The cost and availability of credit for real estate financing influences both the quantity and quality of real estate demanded and supplied. Additional financing adjustments could be made based on owner financing, favorable financing terms, or assumptions. The sales were purchased with cash, or third-party financing which requires no adjustment. Sale Conditions Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. Sales, where the conditions significantly affect transaction prices, are labeled non-arm’s length transactions. Any sales that reflect unusual sale conditions are adjusted accordingly and the circumstances of these non-arm’s length transactions are detailed on the sale summary pages. The sales were evaluated and no adjustments for sale conditions are considered necessary for the comparable sales. Market Conditions The sales occurred between April 2021 and July 2023. Adjustments for market conditions are applied if property values have increased or decreased since the transaction dates. Based on our observations and analysis, real estate has appreciated approximately 5% annually. Each sale is adjusted accordingly for time. Location An adjustment for location within a market area may be required when the locational characteristics of a comparable property are different from those of the subject property. Most comparable properties in the same market area have similar locational characteristics, but variations may exist within that area of analysis. A property’s location is analyzed in relation to the location of other similar properties. The sales are not adjusted, having similar locational appeal as the subject. LAND VALUATION – DENIA PARK (3.739 ACRES) PYLES WHATLEY 24-539 66 PHYSICAL CHARACTERISTICS Access Access has a bearing on real estate in the market. Access is defined as the points, or number of points available for ingress/egress to the subject site or ease of access to the site from abutting roadways. Sale properties are adjusted based on their inferiority/superiority as compared with the subject. The surveyed portion of the park is not accessible from Parvin Street. Access is only available from the larger park entrances to the north and east, or from access agreements with the school. All the sales are superior to the subject in access and are each adjusted -5%. Frontage Frontage is the number of feet of frontage along the subject roadway or roadways. Sale properties are adjusted based on their inferiority/superiority as compared with the subject. The surveyed portion of the park does not have frontage along Parvin Street. The sales are considered superior to the subject in frontage and are each adjusted -5%. Size The site is comprised of 3.739 acres or 162,866 square-feet. The size adjustment is based on the premise that, in general, the larger the tract, the less its selling price on a per unit basis. Recent experience with other properties utilizing a linear regression analysis indicates a 5% - 15% adjustment for each doubling/halving (100%) in size. A 5% adjustment is used for this analysis. Sales 1, 2 and 3 are adjusted -1%, -1%, and +1%, respectively for size. Sale 4 is not adjusted for size difference. Zoning The site is zoned PF - Public Facilities by the City of Denton. Having similar development potential based on the zoning and highest and best use, the comparable sales are not adjusted. Utilities Water, sanitary sewer, electricity, and phone services are available to the subject. Sales 2, 3, and 4 are similar in the available utilities as compared to the subject and do not warrant adjustment. Sale 1 does not have access to city sewer services and is adjusted +5% for inferior utilities. Topography The site is level and is determined to be outside the 100-year floodplain. The sales are similar in topography as compared to the subject and are not adjusted. LAND VALUATION – DENIA PARK (3.739 ACRES) PYLES WHATLEY 24-539 67 SUMMARY OF ADJUSTMENTS These adjustments for differences are applied to the comparable sales, when compared to the subject property, in the following table: Sale No.1 2 3 4 No. of Acres 3.000 3.060 4.115 3.780 Size SF 130,680 133,280 179,245 164,657 Sale Date Jul-23 May-23 Nov-22 Apr-21 Sale Price $900,000 $900,000 $1,344,000 $700,000 Sale Price Per SF $6.89 $6.75 $7.50 $4.25 Rights Conveyed -0--0--0--0- Financing -0--0--0--0- Sale Conditions -0--0--0--0- Immediate Expenditures -0--0--0--0- Market Conditions 7%8%10%18% Adjusted Price $7.37 $7.29 $8.25 $5.02 Location -0--0--0--0- Access -5%-5%-5%-5% Frontage -5%-5%-5%-5% Size -1%-1%1%-0- Zoning -0--0--0--0- Utilities 5%-0--0--0- Topography -0--0--0--0- Net Adjustment -6%-11%-9%-10% Adjusted Price/SF $6.93 $6.49 $7.51 $4.52 LAND SALES ADJUSTMENTS LAND VALUE CONCLUSION After adjustments, the comparables range in price from $4.52 to $7.51 per square foot, with an adjusted mean of $6.36 per square foot and an adjusted median of $6.71 per square foot. These comparable sales are representative of land activity in the area. Considering the adjusted sales and giving emphasis to Sale 1, being the most recent, the indicated value of the subject site is $7.00 per square foot or $1,140,000, rounded. No. of Square Feet $/SF Indicated Value 162,866 x $7.00 =1,140,062$ Rounded 1,140,000$ Land Area - Denia Park No. of Square Feet $/SF Indicated Value 206,000 x $7.50 =1,545,000$ 162,866 x $7.00 =1,140,000$ Total Land Area COST APPROACH PYLES WHATLEY 24-539 68 The purpose of the cost approach is to develop an opinion of the cost to construct a reproduction of, or replacement for, the existing structure and then deduct all accrued depreciation in the property being appraised from the cost new of the reproduction or replacement structure. When the value of the land and an entrepreneurial profit, if appropriate, are added to this figure, the result is an indication of the value of the fee simple interest in the property. COST APPROACH When applicable, the cost approach reflects market thinking by recognizing that market participants relate value to cost. Investors tend to judge the value of an existing structure by considering the prices and rents of similar buildings and the cost to create a new building with optimal physical and functional utility. Investors adjust the prices they are willing to pay by estimating the costs to bring an existing structure up to the level of physical and functional utility they desire. The cost approach is based on the estimated replacement cost of the improvements less depreciation from all causes, to which is added the market value of the land based on comparable sales. The concept of highest and best use is fundamental to real property value. In one application of the concept, land is valued as though vacant and available for its highest and best use; in the other application, the highest and best use of the property as improved is estimated. Thus, a site may have one highest and best use as though vacant, and the existing combination of site and improvements may have another highest and best use. Existing improvements have a value equal to the amount they contribute to the site, or they penalize value by an amount equal to the cost to remove them from the site. Existing improvements that do not develop the land to its highest and best use are usually worth less than their reproduction or replacement cost. REPLACEMENT COST The cost estimates in the following tables are abstracted from the Marshall Valuation Service. The Marshall Valuation Service is a national cost index providing cost data for determining replacement costs of buildings and other improvements, and is published by Marshall & Swift, LP. COST APPROACH PYLES WHATLEY 24-539 69 For building structure and components, the calculator method is utilized. The improvements most closely resemble a good quality Class C Elementary School, as described in the Marshall Valuation Service Handbook, Section 18, Page 11. To the base cost, various multipliers are applied to reflect local market conditions and changes in construction costs. The base cost for the elementary school is estimated at $256.00 per square foot. The sprinkler system cost is estimated at $3.95 per square foot. DIRECT COSTS Base Building Costs Component Area Base Cost 80,045 SF 256.00$ 20,492,000$ 80,045 SF 3.95$ 316,000$ Improvements cost before adjustments for time, location, and perimeter 20,808,000$ Current Local Perimeter x 0.98 x 0.93 x 1.00 18,964,000$ Site Improvements 862,000$ 202,000$ 1,064,000$ 20,028,000$ INDIRECT COSTS @ 10%2,003,000$ 2,003,000$ 22,031,000$ Replacement Cost New (RCN)22,031,000$ Elementary School Sprinkler System Multipliers Total Base Costs $20,808,000 Parking, Drives & Sidewalks Landscaping, Signage & Lighting Total Site Improvements Total Direct Costs Architectural, Legal, Engineering Fees, Permits, etc. Total Indirect Costs Total Direct and Indirect Costs or Total Construction Costs The total replacement construction costs include contractor profit, architect fees, engineering fees and permits, but exclude land cost, and amount to $22,031,000 or $275.23 per square foot. This cost is within the range for good to very good quality construction costs for a elementary school, as estimated by the Marshall and Swift Cost Valuation Service Cost Manual (after adjustment for time and location). COST APPROACH PYLES WHATLEY 24-539 70 DEPRECIATION Appropriate items of depreciation must be deducted from the cost to replace the subject improvements as estimated above. Depreciation in this case is defined as "a loss in value from any cause". The accrued depreciation applicable is typically broken down as follows: a. Physical Depreciation Curable - refers to items of deferred maintenance. Incurable - deterioration that is not practical or economically feasible to correct. b. Functional Obsolescence - adverse effect on value resulting from defects in design, can also be caused by changes that, over time, have made some aspects of a structure, material, or design obsolete by current standards. Curable - to be curable the cost must be at least offset by the anticipated increase in value. Incurable - deficiencies or superadequacies not economically feasible to correct. c. External (Economic) Obsolescence - result of diminished utility of a structure due to negative influences from outside the site and is always incurable. The total loss in value due to such influences is allocated between the land and the improvements with only that portion attributable to the improvements deducted from the current replacement cost. Curable Physical No items of deferred maintenance were noted at the inspection. Incurable Physical A property suffers from deterioration as a result of the aging process. The method of estimating accrued depreciation utilized here is the modified economic age-life method. Briefly, this method consists of first estimating the cost to cure all curable items, deducting that figure from the replacement cost, and then applying to the remainder the deduction based on the ratio of effective age to total economic life. External and Functional Obsolescence The subject regional area is currently experiencing stable rental rates and occupancy levels. Based upon the stable market conditions within the extended area the property does not appear to suffer from external obsolescence. COST APPROACH PYLES WHATLEY 24-539 72 It was previously estimated in the subject property section that the subject has an effective age of 20 years (aggregate age of the original building and site improvements) and a remaining economic life of 25 years. Thus, the depreciation is calculated as follows: DEPRECIATION Replacement Costs - Elementary School 22,031,000$ Less: Curable Items -$ Value of Improvements 22,031,000$ Total Economic Life 45 years Remaining Economic Life 25 years Effective Age 20 years Depreciation Percentage Applied Percentage - M&S, Sec. 97, Pg. 24 ≈ 23% Less: Incurable Items $22,031,000 x 23.0%5,067,000$ Depreciated Value 16,964,000$ COST APPROACH SUMMARY Estimated Total Construction Costs 22,031,000$ Less: Curable Items -$ Less: Depreciation 5,067,000$ Total Depreciated Value of Improvements 16,964,000$ Plus: Indicated Value of Land 1,545,000$ Final Opinion of Value via the Cost Approach 18,509,000$ Rounded 18,510,000$ COST SUMMARY As the subject consists of a elementary school (totaling 80,045 square feet), the costs are applied to this property. Overall, the subject’s physical condition is average and the effective age is estimated at 20 years. The estimated value of the entire property, including land and improvements by the cost approach is $18,510,000. SALES COMPARISON APPROACH PYLES WHATLEY 24-539 73 The sales comparison approach is a method of estimating market value whereby a property is compared with similar properties that have sold recently. One premise of the sales comparison approach is that the market will determine a price for the property being appraised in the same manner that it determines the price of comparable, competitive properties. The principle of substitution is basic in this approach as it implies that a prudent person will not pay more for a property than an acceptable alternative available in the market. SALES COMPARISON APPROACH The steps of the sales comparison approach are outlined as follows: (a) Research the market to obtain information about sales, listings, and offerings of properties similar to the subject property. (b) Ascertain the nature of the conditions of sale, including the price, terms, motivating forces, and its bona fide nature. (c) Determine relevant units of comparison, e.g., sales price per square foot and develop a comparative analysis for each unit. (d) Compare each of the comparable properties' important attributes to the corresponding ones of the property being appraised, under the general categories of time, location, physical characteristics, and conditions of sale. Consider all dissimilarities and their probable effect on the price of each sale property to derive individual market indications for the property being appraised. (e) Formulate, in light of the comparison thus made, an opinion of the relative value of the subject property as a whole, or where appropriate, by applicable units, compared with each of the similar properties. In the sales comparison approach, the property appraised is compared with known prices paid for comparable properties in the open market. Typically, for most properties, the most common units of comparison used are the overall price paid per unit and sales price per square foot. Knowledgeable investors usually consider these methods, as rules of thumb, to establish a value range. To produce a highly meaningful answer, the comparable properties should be as highly similar in age and condition, operating expense ratio, and land value as possible. Sales of elementary schools are not prevalent in the market and limited data is available. Therefore, the sales comparison approach as improved is not utilized. INCOME CAPITALIZATION APPROACH PYLES WHATLEY 24-539 74 The premise of the income capitalization approach is that an indication of value can be derived by capitalizing the net income a property will produce - under prudent management - at an appropriate rate which reflects the current market conditions, trends, and investor requirements. The approach is based on the principle of anticipation of future benefits, foremost of which is the stream of annual net income for a holding period plus a capital sum at the end of that period. The mechanism by which these benefits are translated to value i.e., present worth, is the capitalization process. INCOME CAPITALIZATION APPROACH The income capitalization approach consists of the following steps: Market Analysis: Research the market to determine relevant income parameters i.e., rental rate, vacancy rates, absorption trends, escalations, allowances, and other factors. Estimate of Operations: Estimate potential gross income. Then, deduct a vacancy and collection loss allowance to derive effective gross income. Finally, estimate and deduct expenses of operation to derive net operating income. Capitalization: Select an applicable capitalization method and technique. Develop the appropriate rate or rates and capitalize the net operating income or income stream to derive an indication of value. MARKET ANALYSIS As described above, the analysis of the market includes thorough research of the market to determine relevant income parameters i.e., rental rate, vacancy rates, absorption trends, escalations, allowances, and other factors. The subject is not an income producing property and lease data for similar properties are not available in the market. Therefore, the income capitalization approach is not utilized. RECONCILIATION PYLES WHATLEY 24-539 75 In the preceding sections of this report, the area data and trends, location amenities, highest and best use, and other elements of value are discussed. The market was researched for comparable land sales and current construction cost estimates. RECONCILIATION Cost Approach $18,510,000 Sales Comparison Approach N/A Income Capitalization Approach N/A Reconciled Value $18,510,000 SUMMARY OF APPROACHES - As Is Finally, considering the approaches to value, each approach is analyzed in terms of the quantity and quality of the data used in each approach and applicability to estimate a reliable value. Cost Approach Sufficient sales of tracts of land with similar utility are available to arrive at an opinion of value of the land by market comparison. The estimated costs are compared with the Marshall Valuation Service Cost Manual. Additionally, a review of cost manuals, conversations with local building contractors and developers, and the appraiser’s experience in valuing similar properties readily support these costs. The cost approach is most applicable when a property is new or proposed and when the development represents the highest and best use of the site. The effective age of the improvements is estimated at 20 years. Overall, the cost approach is a reliable valuation method for this analysis. Sales Comparison Approach (Land) For the valuation of the subject, sufficient sales of tracts of land with similar utility are available to arrive at an opinion of value of the land by market comparison. The sales used are adjusted to reflect current market conditions and conditions of sale. Income Capitalization Approach Due to the subject being owner occupied and its highest and best use, the income capitalization approach is not as reliable as the cost and sales comparison approaches. As such, the income capitalization approach is not utilized in this appraisal. RECONCILIATION PYLES WHATLEY 24-539 76 CONCLUSIONS In conclusion, the cost approach is a reliable valuation approach, due to the age of the improvements, which represents the highest and best use of the site. The sales comparison and income capitalization approaches are the not reliable indicators due to limited availability of sale data and rental market data, and do not provide a good basis for valuation. Based on this type of property, our final opinion of the fee simple interest market value of the subject is as follows: Market Value Opinion Fee Simple, As Is (Land - Elementary School)$1,545,000 Fee Simple, As Is - Real Estate (Elementary School)$18,510,000 Fee Simple, As Is (Surplus Land - Park)$1,140,000 EXTRAORDINARY ASSUMPTIONS At the request of the client and for purposes of this appraisal, the interior inspection of subject was limited to observations made through various windows and glass doors. The entirety of the interior improvements is assumed to be in the same conditions as those observed from the exterior of the building. This appraisal assumes that all of the information obtained for analysis is accurate; this information has been verified to the extent possible by the appraiser. APPRAISER'S CERTIFICATE PYLES WHATLEY 24-539 77 The undersigned certify that, to the best of our knowledge and belief: APPRAISER’S CERTIFICATE • The statements of fact contained in this report are true and correct. • 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. • We have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. • We have performed services, as an appraiser, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. • We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • Our engagement in this assignment was not contingent upon developing or reporting predetermined results. • Our 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. • Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Practice. • The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. • As of the date of this appraisal, Richard McBride has completed the Standards and Ethics Education Requirements for Practicing Affiliates of the Appraisal Institute. • Matthew Wilbanks made a personal inspection of the property that is the subject of this report. Richard McBride made a personal inspection of the subject on a subsequent date; • Matthew Wilbanks provided significant real property appraisal assistance to the person signing this certification by attending the inspection, performing research, and assisting with writing the report. PYLES WHATLEY Richard McBride State of Texas License #: TX-1380335-G QUALIFICATIONS OF APPRAISER RICHARD C. MCBRIDE Appraisal assignments include retail centers, existing and proposed office buildings, commercial and industrial properties, self-storage facilities, automobile dealerships, single-family and multi- family residential properties, and vacant land. Additional consulting assignments include condemnation and right-of-way work, and other various consulting assignments. Experience  Appraiser with Pyles Whatley since 2007; partner in the company since 2018  Over sixteen years’ experience in appraising real property interests in Texas and Oklahoma. Education  Numerous Appraisal Courses offered by the Appraisal Institute  Right-of-way courses offered by the International Right of Way Association  Richland College o Engineering o General studies Professional  Texas Appraiser Licensing and Certification Board o Certified General Real Estate Appraiser #TX-1380335-G  Appraisal Institute o Practicing Affiliate International Right of Way Association, Chapter 36, Member ADDENDA TAX INFORMATION ZONING EXCERPT ZONING EXCERPT STATE CERTIFICATION