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HomeMy WebLinkAboutP11 AppraisalForm ROW-A-5 (Rev. 08/2011) 1 REAL ESTATE APPRAISAL REPORT - TEXAS DEPARTMENT OF TRANSPORTATION Address of Property: 8444 N I35, Denton, Texas 76266 District: N/A Property Owner: NDMAC, LTD. Parcel No.: 074 -11 WWE Address of Property Owner: 5601 S I-35E, Corinth, TX 76210 ROW CSJ: N/A Occupant’s Name: Vacant Land Federal Project No: N/A Whole: ☐ Partial: ☒ Acquisition Highway: Interstate 35 Frontage Road County: Denton County Purpose of the Appraisal The purpose of this appraisal is to estimate the market value of the fee simple title to the real property to be acquired, encumbered by any easements not to be extinguished, less oil, gas and sulphur. If this acquisition is of less than the whole property, then any special benefits and /or damages to the remainder property must be included in accordance with the laws of Texas. Market Value Market value is defined as follows: “Market Value is the price which the property would bring when it is offered for sale by one who desires, but is not obliged to sell, and is bought by one who is under no necessity of buying it, taking into consideration all of the uses to which it is reasonably adaptable and for which it either is or in all reasonable probability will become available within the reasonable future.” Certificate of Appraiser I hereby certify: That it is my opinion the total compensation for the acquisition of the herein described property is $59,941 as of June 23, 2022, based upon my independent appraisal and the exercise of my professional judgment; That on June 23, 2022, and other dates, I personally inspected in the field the property herein appraised; that I afforded the property owners or representative the opportunity to accompany me during the inspection; that the property did not respond to requests for inspection, and an inspection was performed from the right-of-way and surrounding public areas. That the comparables relied upon in making said appraisal were as represented by the photographs contained in the appraisal report and were inspected on June 23, 2022; That I have not revealed and will not reveal the findings and results of such appraisal to anyone other than the proper officials of the Texas Department of Transportation or officials of the Federal Highway Administration until authorized by State officials to do so, or until I am required to do so by due process of law, or until I am released from this obligation by having publicly testified to such findings; That my compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of The appraiser has considered access damages in accordance with Section 21.042(d) of the Texas Property Code, as amended by SB18 of the Texas 82nd Regular Legislative Session and finds as follows: 1.Is there a denial of direct access on this parcel? No 2.If so, is the denial of direct access material? N/A 3.The lack of any access denial or the material impairment of direct access on or off the remaining property affects the market value of the remaining property in the sum of $N/A. I certify to the best of my knowledge and belief: That the statements of fact contained in this report are true and correct; That the reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions; That I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved; That my analyses, opinions and conclusions were developed, and this report has been prepared in conformity with the appropriate State laws, regulations, and policies and procedures applicable to the appraisal of right of way for such purposes, and that to the best of my knowledge no portion of the value assigned to such property consists of items which are noncompensable under the established law of said State, and any decrease or increase in the fair market value of subject real property prior to the date of valuation caused by the public improvement for which such property is to be acquired, or by the likelihood that the property would be acquired for such improvement, other than that due to the physical deterioration within the reasonable control of the owner, has been disregarded in estimating the compensation for the property. To the best of my knowledge, the value does not include any items which are not compensable under State law. Appraiser Signature 1380471-G Certification Number August 2, 2022 Date Reviewing Appraiser Date 08/03/2022 General Assumptions And Limiting Conditions 1.1 This appraisal report is subject to the following general assumptions and limiting conditions: 1. No investigation has been made of, and no responsibility is assumed for, the legal description or for legal matters including title or encumbrances. Title to the property is assumed to be good and marketable unless otherwise stated. The property is further assumed to be free and clear of liens, easements, encroachments and other encumbrances unless otherwise stated, and all improvements are assumed to lie within property boundaries. 2. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable, but has not been verified in all cases. No warranty is given as to the accuracy of such information. 3. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been, or can readily be obtained, or renewed for any use on which the value estimates provided in this report are based. 4. Full compliance with all applicable federal, state and local zoning, use, occupancy, environmental, and similar laws and regulations is assumed, unless otherwise stated. 5. No responsibility is taken for changes in market conditions and no obligation is assumed to revise this report to reflect events or conditions, which occur subsequent to the appraisal date hereof. 6. Responsible ownership and competent property management are assumed. 7. The allocation, if any, in this report of the total valuation among components of the property applies only to the program of utilization stated in this report. The separate values for any components may not be applicable for any other purpose and must not be used in conjunction with any other appraisal. 8. Areas and dimensions of the property were obtained from sources believed to be reliable. Maps or sketches, if included in this report, are only to assist the reader in visualizing the property and no responsibility is assumed for their accuracy. No independent surveys were conducted. 9. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that affect value. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 10. No soil analysis or geological studies were ordered or made in conjunction with this report, nor was an investigation made of any water, oil, gas, coal, or other subsurface mineral and use rights or conditions. 11. Neither Kroll REAG nor any individuals signing or associated with this report shall be required by reason of this report to give further consultation, to provide testimony or appear in court or other legal proceedings, unless specific arrangements thereto for have been made. 12. This appraisal has been made in conformance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice. 13. We have not been engaged nor are we qualified to detect the existence of hazardous material, which may or may not be present on or near the property. The presence of potentially hazardous substances such as asbestos, urea- formaldehyde foam insulation, industrial wastes, etc. may affect the value of the property. The value estimate herein is predicated on the assumption that there is no such material on, in, or near the property that would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client should retain an expert in this field if further information is desired. 14. The date of value to which the conclusions and opinions expressed in this report apply is set forth in the opinion letter at the front of this report. Our value opinion is based on the purchasing power of the United States' dollar as of this date. 15. The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. We 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 along with a detailed General Assumptions And Limiting Conditions (Continued) 1.2 study of ADA requirements could reveal that the property is not in compliance with the act. If so, this would have a negative effect on the property value. We were not furnished with any compliance surveys or any other documents pertaining to this issue and therefore did not consider compliance or noncompliance with the ADA requirements when estimating the value of the property. 16. In accordance with our agreement, this report is limited to the value of the subject property. One or more additional issues may exist that could affect the Federal tax treatment of the subject property with respect to which we have prepared this report. This report does not consider or provide a conclusion with respect to any of those issues. With respect to any significant Federal tax issue outside the scope of this report, this report was not written, and cannot be used, by anyone for the purpose of avoiding Federal tax penalties. Extraordinary Assumptions When a value opinion is subject to an extraordinary assumption or hypothetical condition, the appraiser must state that condition so that its effect on the value opinion or conclusion is clear. An extraordinary assumption is an assumption that is directly related to a specific assignment, which if found to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. An extraordinary assumption may be used in an assignment only if:  It is required to properly develop credible opinions and conclusions;  The appraiser has a reasonable basis for the extraordinary assumption;  Use of the extraordinary assumption results in a credible analysis; and  The appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions. The use of an Extraordinary Assumption(s) may have impacted the results of the assignment.  We have relied on information provided by the client as well as from public records as it relates to building size, year of construction, land size, and other physical, financial, and economic characteristics. It is an extraordinary assumption of this appraisal that this information is accurate and was not misrepresented. Hypothetical Conditions Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. A hypothetical condition may be used in an assignment only if:  Use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison;  Use of the hypothetical condition results in a credible analysis; and  The appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions. The Before and After Method of Valuation involves the use of a hypothetical condition in both scenarios. When developing an opinion of market value for the subject whole property, any impact the project may have is disregarded. As a result, we have prepared the appraisal analysis of the subject property in the before condition under the hypothetical condition that the project activities have no effect on the value conclusions stated in this appraisal report. In the after scenario, the valuation is based on the hypothetical condition that the proposed project for which this appraisal report was prepared, is complete. Use of the hypothetical condition may have affected the assignment results.  The client has requested a value for the remainder property as if the proposed project is complete as of the effective date of value. As this is contrary to know fact, the value(s) as if completed are subject to a hypothetical condition. General Assumptions And Limiting Conditions (Continued) 1.3  In the appraisal of property for eminent domain, numerous court cases and statutes have established that project influence (both positive and negative) should be disregarded in the value of the property before the acquisition. Therefore, the appraiser has excluded consideration of any effect the project may have on the property. This requires the appraiser to analyze the property based on a condition that is contrary to what currently exists but is accepted appraisal practice.  Certain elements of damage cannot be considered in the appraisal of the remainder although these elements may reduce the value of the remainder tract. This is in accordance with State v. Schmidt, 867 S.W. 2d 769, 781 (Tex. 1993), wherein the Supreme Court ruled that damages due to diversion of traffic, circuitry of travel, increased noise, reduced visibility to passers byes, and inconvenience due to construction activities are non- compensable and are thus not considered in the valuation of the remainder. See also Texas Property Code, Chapter 21, Subchapter C, Section 21.041 (d). Jurisdictional Exceptions USPAP defines a Jurisdictional Exceptions as, “an assignment condition established by applicable law or regulation, which precludes an appraiser from complying with a part of USPAP”. If any part of the Uniform Standards of Professional Appraisal Practice is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction. As a matter of law, any enhancements caused by the public project is not to be considered. Additionally, the appraisal of the remainder assumes the public roadway improvements are in place and completed as of the effective date of value. These assumptions are permitted by the Jurisdictional Exception portion of USPAP. Executive Summary 1.4 Aerial Photograph 1.5 SUBJECT Identification of Assignment 1.6 Property Identification The subject property consists of 107.23 acres of vacant land located at 8444 Interstate 35, Denton, TX. The assessor parcel numbers are: R297205, R37056. Legal Description Part of the John Ayers Survey, Abstract No. 2, Denton County, Texas Client/Intended Use/Users The client of this specific assignment is the City of Denton, through a subcontract with Cobb, Fendley & Associates Inc. The purpose of this appraisal is to develop an opinion of just compensation due to the landowner as a result of the partial acquisition of right-of-way. The City of Denton is the only intended user of this report. Reliance Language Use of this report by Third-Parties and other unintended users is not permitted. This report must be used in its entirety. Reliance on any portion of the report independent of others, may lead the reader to erroneous conclusions regarding the property values. Unless approval is provided by the authors no portion of the report stands alone. Purpose The purpose of this appraisal is to estimate the total compensation due to the property owner based on the market value of the whole property, acquisition, remainder, and any temporary easements or curative costs. Definition Of Market Value Market Value is the price which the property would bring when it is offered for sale by one who desires, but is not obliged to sell, and is bought by one who is under no necessity of buying it, taking into consideration all of the uses to which it is reasonably adaptable and for which it either is or in all reasonable probability will become available within the reasonable future.1 Property Rights Appraised The property rights appraised constitute the fee simple interest as well as an easement interest. Fee Simple Interest 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.2 Easement The right to use another’s land for a stated purpose.3 1 Texas Supreme Court, City of Austin v. Cannizzo, 267 S.W.2d 808 (Tex. 1954). 2 The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015 3 The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, Chicago, Illinois, 2015 Identification of Assignment (Continued) 1.7 Non-Discrimination Statement This appraisal has been completed without regard to race, color, religion, national origin, sex, marital status or any other prohibited basis, and does not contain references which could be regarded as discriminatory. Personal Property & Business Intangible There is no personal property (FF&E) or business intangible value included in this appraisal. Property And Sales History Current Owner According to Denton County Public Records, legal title to the subject property is held by NDMAC, LTD. A portion of the subject property was transferred from Milam County, INC., to NDMAC, LTD on March 6, 2006. Another portion of the subject property was transferred from Geesling Gassaway County, INC. to NDMAC, LTD. on August 4, 2008. These transactions are recorded under Document Number 2006-30852 and 2008-87393 of the Public Records of Denton County. This transfer of ownership is believed to be Arm's Length transaction. Five-Year Sales History According to county records there has been no transfer of ownership for the subject property in the past five years. The subject property is currently under contract to be sold. The listing broker for this transaction was unable to disclose the contract price of the sale and expects it to close in December of 2022, at the earliest. Additionally, TxDOT acquired 11.975 acres off of the frontage along IH-35 in November of 2021, for the purpose of expanding the highway. Details are further described in the Lis-Pendens which is included in the addenda. Scope of Work 1.8 According to the Uniform Standards of Professional Appraisal Practice, it is the appraiser’s responsibility to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem and intended user(s). Therefore, the appraiser must identify and consider:  The client and intended users  The intended use of the report  The type and definition of value  The effective date of value  Assignment conditions  Typical client expectations  Typical appraisal work by peers for similar assignments The client of this specific assignment is the City of Denton. The purpose of this appraisal is to develop an opinion of just compensation due to the landowner as a result of the partial acquisition of right-of-way. The City of Denton is the only intended user of this report. Use of this report by Third-Parties and other unintended users is not permitted. This report must be used in its entirety. Reliance on any portion of the report independent of others, may lead the reader to erroneous conclusions regarding the property values. Unless approval is provided by the authors no portion of the report stands alone. The scope of work for this assignment was based on the needs and prior communications with the Client. The purpose of this assignment—which was prepared as an Appraisal Report in accordance with USPAP Standards Rule 2-2a, with the analysis stated in the document and representing a summarized level of analysis—is to form an opinion of the As- Is Market Value (Fee Simple) for the subject property, as of the most recent date of inspection (June 23, 2022). Specifically, the scope of work and report content herein is commensurate with the relative risk that is associated with this particular transaction as determined by the Client, City of Denton. We have conducted primary research and-wherever possible-we have verified and/or re-verified applicable tax data, zoning requirements, flood zone status, demographics, and comparable listing, sale and rental information which was gathered via: a) public records, b) comments from local brokers and market participants, c) third party data such as CoStar, Reis, LoopNet, Real Quest, etc., d) other sources such as related or previous appraisal projects; and e) observations of the micro and/or macro market environments with respect to physical and economic factors relevant to the valuation process. Then we analyzed, correlated and reconciled the results with the use of appropriate and accepted appraisal methodology to arrive at a reasonable and defensible value conclusion via the Land Sales Comparison approach and Cost Approach to value. The appraisal analyzes the regional and local area profiles including employment, population, household income and real estate trends. The local area was inspected to consider external influences on the subject. The appraisal analyzes legal and physical features of the subject including site size, improvement size, flood zone, seismic zone, site zoning, easements, encumbrances, site access and site exposure. We have estimated a reasonable exposure time and marketing time associated with the value estimate presented. The appraisal includes a Highest and Best Use analysis and conclusions have been completed for the highest and best use of the subject property As Vacant only, as the main improvements are not impacted by the proposed project. The analysis considered legal, locational, physical and financial feasibility characteristics of the subject site and existing improvements. Reporting of this appraisal is the combination of the A-5 Appraisal Report format required by TxDOT, as required by the client, and supplemental material utilized to comply with those minimum requirements established in USPAP under Standard Rule 2: Real Property Appraisal, Reporting. The appraiser’s analysis and conclusions are summarized within this document. Scope of Work (Continued) 1.9 We have not provided prior professional services regarding the subject property, in the capacity as appraisers or otherwise, within a three-year period immediately preceding the date of acceptance of this assignment. We did not attempt to detect any physical issues with the site area that would not be readily observable without removal of fixtures or fixed elements or any foliage at the site. As well, we did not attempt to detect any environmental hazards at the subject that were not readily observable during our on-site visitation, nor did we conduct any off-site research into potential environmental hazards which might impact the subject. Unless otherwise noted in this appraisal, area measurements were taken from the information made available to us that was provided from the Client and site surveys or other sources. These figures have been cross-checked to the extent possible with public records. However, in no event—unless otherwise noted in this report—have we conducted measurements of the specific areas (these figures are taken solely from the information provided by the Client, site surveys or other sources). The author of this report is aware of the Competency Rule of USPAP and meets the standards. Sources of Information The following sources were contacted to obtain relevant information: As part of the general assumptions and limiting conditions, the subject is assumed to have no adverse easements, significant items of deferred maintenance, or be impacted by adverse environmental conditions. Subject Property Inspection A letter was sent to the property owner via certified mail. The letter was not returned, and the appraiser was otherwise unable to establish contact with the owner or representative, and an inspection was performed from the right-of-way and surrounding public areas. Exposure & Marketing Time Marketing time and exposure time are both influenced by price. That is, a prudent buyer could be enticed to acquire the property in less time if the price were less. Hence, the time span cited below coincides with the value opinion(s) formed herein. USPAP Standard rule 1-2(c)(iv) requires an opinion of exposure time, not marketing time, when the purpose of the appraisal is to estimate market value. In the recent past, the volume of competitive properties offered for sale, sale Scope of Work (Continued) 1.10 prices, and vacancy rates have fluctuated little. Sale concessions have not been prevalent. The following information is used to estimate exposure time and marketing time for the subject: Conclusion Given the analysis I have analyzed the exposure time as three to six months. Further, My marketing time of three to six months is estimated for the subject. Form ROW-A-5 (Rev. 08/11) 2.0 PHOTOGRAPHS OF SUBJECT PROPERTY Include Each Major Improvement Parcel No: 074 -11 WWE Local Address: 8444 N I35, Denton, Texas 76266 Date Taken: June 23, 2022 Taken By: T.J. Smith 1. Point from which taken: Near western portion of site Looking: East across site 2. Point from which taken: Near NWC of site Looking: East across site Form ROW-A-5 (Rev. 08/11) 2.1 PHOTOGRAPHS OF SUBJECT PROPERTY Include Each Major Improvement Parcel No: 074 -11 WWE Local Address: 8444 N I35, Denton, Texas 76266 Date Taken: June 23, 2022 Taken By: T.J. Smith 3. Point from which taken: Near NWC of site Looking: South at TxDOT acquisition 4. Point from which taken: Near northern portion of site Looking: South across subject Form ROW-A-5 (Rev. 08/11) 2.2 PHOTOGRAPHS OF SUBJECT PROPERTY Include Each Major Improvement Parcel No: 074 -11 WWE Local Address: 8444 N I35, Denton, Texas 76266 Date Taken: June 23, 2022 Taken By: T.J. Smith 5. Point from which taken: IH-35 frontage road Looking: North; subject to the right 6. Point from which taken: IH 35 frontage road Looking: South; Subject to the left Neighborhood Analysis 2.3 Introduction A property is an integral part of its surrounding and must not be treated as an entity separate and apart from its surroundings. The value of a property is not found exclusively in its physical characteristics. Physical, economic, political and sociological forces found in the area interact to give value to a property. In order to determine the degree of influence extended by these forces on a property, their past and probable future trends must be analyzed in depth. Therefore, in order to determine the value of a property, a careful and thorough analysis must be made of the area in which the property under study is found. The area is commonly referred to as a neighborhood. “The productivity of real estate is strongly influenced by its economic and physical location. Analyzing economic location goes beyond identification of the physical position of one property in relation to another. The analysis of economic location begins with identification of the economic activities in the neighborhood or trade area, which is delineated by physical, political and socioeconomic boundaries or by time-distance relationships represented by travel times to and from common destinations.” Therefore, in order to estimate the value of a property, a careful and thorough analysis must be made of the area in which the property under study is found. The area is commonly referred to as a neighborhood. A neighborhood can be a portion of a city, a community or an entire town. It is usually considered to be an area which exhibits a fairly high degree of homogeneity as to use, tenancy and certain other characteristics. Therefore, in real estate terminology, a homogeneous neighborhood is one in which property use types are similar. Thus, a neighborhood is more or less a unified area with somewhat definite boundaries. The objective of a neighborhood analysis is to determine perceivable patterns of growth, structure and change that may detract from or enhance property values. The analysis provides a framework or context in which the property values are estimated. A neighborhood map is presented below, followed by a discussion of the subject’s neighborhood. Subject Neighborhood Delineation While a certain level of subjectivity exists in attempting to quantify the limits of a property’s neighborhood, based upon our observations of road patterns and the competition, we believe the subject’s neighborhood is defined by US 380 as the southern border, FM 156 as the western and northern border and FM 428 as the eastern border. The subject property is centrally located within the neighborhood along IH-35. Neighborhood Analysis 2.4 Location The subject property is located along N I35, in the northwestern portion of the City of Denton, in Denton County, Texas. Neighborhood Analysis 2.5 Access & Linkages Primary road access to the subject property is provided by N I35. Traffic counts along these roads average around 75,000 vehicles per day. There are two major airports within an hour-drive of the subject property. The closest is Dallas/Fort Worth International Airport (DFW) which is located southeast of the subject property. It is approximately 30 minutes via car to this airport, which is a hub for American Airlines. Dallas Love Field (DAL) is located approximately 50 minutes southeast of the subject property and it is a hub for Southwest Airlines and serves primarily regional flyers. The subject neighborhood also benefits from its location north of the DFW metroplex. This area is accessible for commuters living in Fort Worth, Dallas, and the surrounding suburbs. Given all these factors, the subject neighborhood has excellent access and linkage characteristics which has a positive factor for the commercial submarket. Land Uses The subject property is located along N I35, northwest of the City of Denton. Land uses are predominately commercial in the vicinity of the subject; however, the larger neighborhood includes a mix of residential, multi-family, and commercial uses. Larger uses include several auto dealers, Medical City Denton, and The University of North Texas. Denton is home to the University of North Texas, Texas Women's University, and many other large employers such as Peterbilt Motors, Texas Health Presbyterian Hospital Denton, Medical City Denton, Josten's, Inc., Sally Beauty Supply, Inc., among others Neighborhood Analysis 2.6 The following tables and maps highlight the development in and around the subject. Neighborhood Analysis 2.7 Neighborhood Analysis 2.8 Neighborhood Analysis 2.9 Neighborhood Analysis 2.10 Land uses within the subject neighborhood consist of a mixture of commercial and residential land uses. The immediate area surrounding the subject is an area of development consisting primarily of residential uses with much of the development being built after 1970. The largest retail development in the area is the Golden Triangle Mall, situated just at the northwestern quadrant of Interstate Highway 35 and State Highway Loop 288. Golden Triangle Mall has over 90 stores and restaurants with approximately 760,000 square feet of gross leasable area. The mall currently reports anchor tenants Barnes & Noble, DSW Shoe Warehouse, Dillard’s, JCPenney, Macy’s, Ross, Sears and Silver Cinemas. The immediate area surrounding the subject property is made up primarily of vacant land and commercial and industrial properties servicing the heavy consumer traffic traveling to, from and upon Interstate 35. Neighborhood Analysis 2.11 Demand Generators University of North Texas The University of North Texas (UNT) is a four-year state university located within the Denton City Limits. Enrollment at the university is over 36,000, representing the fourth-largest University in the State of Texas. The subject is located about 3-4 miles southeast from the campus. TEXAS WOMAN’S UNIVERSITY Texas Woman’s University (TWU) is located within the Denton City Limits and has an enrollment of over 12,000 students. TWU serves features the largest Nursing school in the state and has admitted men along with women since 1972. The subject is located about three miles south from the campus. Growth patterns have occurred primarily along primary commercial thoroughfares such as State Highway Loop 288, Interstate Highway 35E, Spencer Road, US Highway 77 and Colorado Boulevard are all primary thoroughfares in the subject area and have generally been the sites of most of the recent commercial growth in the neighborhood. State Highway Loop 288 is a primary traffic artery providing access to Interstate 35 East. State Highway Loop 288 frontage has been the location of a large amount of the most recent retail development within the subject submarket. As stated, the largest retail development in the area is the Golden Triangle Mall and it is the epicenter of retail growth in the neighborhood. Neighborhood Analysis 2.12 Demographics The following information reflects the demographics for the subject’s area. Population The estimate provided by ESRI for the current 2021 population within the subject neighborhood’s 3 mile radius is 7,850 representing a 66.38%change since 2010. ESRI’s 2020 population estimate for the subject’s 5 mile radius is 54,380, which represents a 22.76% change since 2010. Looking forward, ESRI estimates that the population within the subject neighborhood’s 3 mile radius is forecasted to change to 9,174 by the year 2026. As for the broader area, ESRI forecasts that the population within the subject’s 5 mile radius will change to 61,121 over the next five years. The population estimates for the next five years within the subject’s 5 mile radius represents a 12.40% change as well as a 17.44% change within the subject’s 1 mile radius for the same period. Households The estimates provided by ESRI indicate that the number of households within the subject neighborhood’s 3 mile radius is 2,759, which is a 71.79% change since 2010. Within the subject’s broader 5 mile radius, ESRI estimates that the number of households is 21,081, a 23.10% change over the same period of time. Neighborhood Analysis 2.13 By the year 2026, the estimates provided by ESRI indicate that the number of households within the subject neighborhood’s 3 mile radius will change by 17.04% to 3,229 households. Additionally, ESRI’s estimate for total households over the next five years within the subject’s broader 5 mile radius indicates an expected change of 12.76% which will result in a total household estimate of 23,771. Looking back, the number of households in the subject neighborhood’s 3 mile radius changed 76.10% during the ten- year period of 2000 to 2010. Since then it has changed by 71.79%. Income Income estimates provided by ESRI for the subject neighborhood’s 3 mile radius indicates that the median household income is $73,397 and that the average household income is $82,147. Further, the estimates provided by ESRI indicate that, for the subject’s broader 5 mile radius the median household income is $57,490, and the average household income is $73,426. Given that there are reportedly 21,081 households in the subject’s 5 mile radius, it is estimated that the local effective buying income is around $1,547,893,506. Conclusion Based on our observation and the data provided by ESRI, it is perceived that the income and population demographics for the subject neighborhood exhibit above average characteristics in terms of reported population growth and income levels. As previously mentioned, the population growth for the subject’s 3 mile radius has increased 66.38% since 2010 and based on the projections provided by ESRI, it is expected to continue to increase another 16.87% during the next 5 years. Lastly, we perceive that, since average household incomes are above the national average ($82,147, for the subject’s 3 mile radius) and given that the area is well-populated (2,759 households in a 3 mile radius), developments like the subject should be adequately supported. Overall Neighborhood Characteristics & Conclusions The subject neighborhood is considered to be a prime area for a mix of property uses. As previously mentioned, there is commercial and residential development mixed with office, hotel and street-level retail properties. There are excellent linkages highways which connect the subject neighborhood to the greater Dallas/Fort Worth metroplex. Site Description 2.14 The following summaries the salient characteristics of the subject site: Address 8444 N I35, Denton, Texas. Location The subject property is located along N I35, south of Milam Road. Adjacent Properties North Vacant Land South Vacant Land East Vacant Land West Vacant Land Accessibility Access to the subject site is considered average overall. Flood Plain Zone X (Unshaded). This is referenced by Panel Number 48121C0220G, dated April 18, 2011. Zone X (unshaded) is a moderate and minimal risk area. Areas of moderate or minimal hazard are studied based upon the principal source of flood in the area. However, buildings in these zones could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in a community’s flood insurance study. The failure of a local drainage system can create areas of high flood risk within these zones. Flood Site Description (Continued) 2.15 insurance is available in participating communities, but is not required by regulation in these zones. Nearly 25% of all flood claims filed are for structures located within these zones. Minimal risk areas outside the 1% and 0.2% annual chance floodplains. No BFEs or base flood depths are shown within these zones. (Zone X (unshaded) is used on new and revised maps in place of Zone C.) Easements According to the title report provided by the client, a pipeline easement runs along the southern border of subject property and an ingress/egress easement runs between the two parcels that comprise the subject property. Soils A detailed soils analysis was not available for review. Based on the development of the subject, it appears the soils are stable and suitable for the existing improvements. Hazardous Waste We have not conducted an independent investigation to determine the presence or absence of toxins on the subject property. If questions arise, the reader is strongly cautioned to seek qualified professional assistance in this matter. Please see the Assumptions and Limiting Conditions for a full disclaimer. Site Rating Overall, the subject site is considered average as a land site in terms of its location, exposure and access to employment, education and shopping centers, recognizing its location along minor arterial. Site Conclusion In the final analysis of the site, no significant detriments were discovered which would inhibit development according to its highest and best use. The site displays adequate accessibility and locational features for development. Assessor’s Map 2.16 Assessor’s Map (Continued) 2.17 Survey 2.18 SUBJECT Flood Map 2.19 Zoning 2.20 The subject is located in the Residential Rural (RR) zoning area. The RR district is intended to provide and maintain areas of rural use within the city. Application of this district will ensure that farming, forest, environmental, and scenic areas are protected from incompatible development. This district includes farms and ranches as the predominant use with large lot rural residential and rural commercial uses. The RR district may be used as an interim zoning district for annexed property. Zoning Conclusion The current use for the subject property is vacant land and is a permitted use based on the current zoning guidelines. A zoning change for the subject does appear likely. Recent developments within the near proximity of the subject property indicate a transition to commercial and industrial development. Based on this it is reasonable to conclude that a zoning change in the future is likely. Zoning Map (Continued) 2.21 Subject Form ROW-A-5 (Rev. 08/2011) PVS 3.0 Appraisal Methodology 3.1 The theory of highest and best use is fundamental to the concept of value. Highest and best use analysis identifies the most profitable, competitive use to which the property can be put. The highest and best use of a property is based on the competitive forces within the market and submarket and provides the foundation for a detailed investigation of the competitive position of the subject property in the minds of market participants. Highest and best use may be defined as: “The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.” The four criteria the highest and best use must meet are 1) legally permissible, 2) physically possible, 3) financially feasible and 4) maximally productive. In arriving at the estimate of highest and best use, the subject was analyzed as vacant and as improved as of the date of value. In each of the previous sections of the report including the Market Analysis, Site Description, Improvement Description, Real Estate Taxes and Zoning we have identified factors that influence value. These factors shape our conclusions for the Highest and Best Use as Vacant and As Improved. This section develops the highest and best use of the subject property As-Vacant and As Improved. As Vacant Analysis In this section the highest and best use of the subject as vacant is concluded after taking into consideration financial feasibility, maximal productivity, marketability, legal, and physical factors. Legally Permissible Private restrictions, zoning, building codes, historic district controls, and environmental regulations are considered, if applicable to the subject site. The legal factors influencing the highest and best use of the subject site are primarily government regulations such as zoning ordinances. Permitted uses of the subject’s Residential Rural (RR) include farms, ranches, large lot rural residential and rural commercial. projects. A zoning change is considered likely; therefore, uses outside of those permitted by the RR zoning are considered moving forward in the as-vacant analysis. Physical Possible The test of what is physically possible for the subject site considers physical and locational characteristics that influence its highest and best use. In terms of physical features, the subject site totals 107.2300-acres (4,670,939 SF), it is l- shaped and has a mostly level topography. The site has average exposure and average overall access. Other than typical utility easements around the perimeter of the site, there are no other physical limitations that would prohibit development of any of the by-right uses on the site. Financial Feasibility Based on the analysis of the subject’s market and an examination of costs, a newly constructed building similar to the subject would likely have a value commensurate with its cost; however, a speculative build is not prudent and the site should only be developed for an identified user. Maximum Productivity There is only one use that creates value and at the same time conforms to the requirements of the first three tests. Financial feasibility, maximal productivity, marketability, legal, and physical factors have been considered and the highest and best use of the subject site as-vacant concluded to be commercial use. As Improved Analysis The subject property is vacant land, therefore, a highest and best use analysis as improved has not been performed. Most Probable Buyer Based on the type of property and the income generating potential of the improvements, it is our opinion that the most probable buyer for the subject would be a local or regional investor. Appraisal Methodology (Continued) SCA 3.2 In traditional valuation theory, the three approaches to estimating the value of an asset are the cost approach, sales comparison approach, and income capitalization approach. Each approach assumes valuation of the property at the property’s highest and best use. From the indications of these analyses, an opinion of value is reached based upon expert judgment within the outline of the appraisal process. Site Valuation The site value is a specific scope requirement of this assignment. Characteristics specific to the subject property warrant that a site value is developed. Within the Site Valuation section, the subject is valued as one marketable economic site. Cost Approach The cost approach considers the cost to replace the proposed improvements, less accrued depreciation, plus the market value of the land. The cost approach is based on the understanding that market participants relate value to cost. The value of the property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation in the structure from all causes. Profit for coordination by the entrepreneur is included in the value indication. The Cost Approach is not a specific scope requirement of this assignment. Characteristics specific to the subject property do warrant that this valuation technique is developed, in a limited scope. Only the site improvements within the acquisition were included in this analysis. The contributory value of the affected site improvements is estimated using the Cost approach. Sales Comparison Approach The sales comparison approach estimates value based on what other purchasers and sellers in the market have agreed to as price for comparable properties. This approach is based upon the principle of substitution, which states that the limits of prices, rents, and rates tend to be set by the prevailing prices, rents, and rates of equally desirable substitutes. In conducting the sales comparison approach, I gather data on reasonably substitutable properties and make adjustments for transactional and property characteristics. The resulting adjusted prices lead to an estimate of the price one might expect to realize upon sale of the property. The Sales Comparison Approach is not a specific scope requirement of this assignment. Characteristics specific to the subject property do not warrant that this valuation technique to be developed. Based on this reasoning, the Sales Comparison Approach is not presented within this appraisal. Income Capitalization Approach The income capitalization approach simulates the reasoning of an investor who views the cash flows that would result from the anticipated revenue and expense on a property throughout its lifetime. The net income developed in our analysis is the balance of potential income remaining after vacancy and collection loss, and operating expenses. This net income is then capitalized at an appropriate rate to derive an estimate of value or discounted by an appropriate yield rate over a typical projection period in a discounted cash flow analysis. Thus, two key steps are involved: (1) estimating the net income applicable to the subject and (2) choosing appropriate capitalization rates and discount rates. The appropriate rates are ones that will provide both a return on the investment and a return of the investment over the life of the particular property. The Income Approach is not a scope requirement for this assignment. The subject property type is not typically analyzed on an income basis by buyers and sellers, reducing the applicability of this valuation technique. Therefore, the Income Approach is not developed. Appraisal Methodology (Continued) SCA 3.3 Correlation and Conclusion Based on the agreed upon scope with the client, the subject’s specific characteristics and the interest appraised, this appraisal developed the Land Sales Comparison approach and Cost approach. The values presented represent the As- Is Market Value (Fee Simple). Form ROW-A-5 (Rev. 08/2011) SCA 3.4 For the explanation of Adjustments with Reconciliation, please see the following pages. SCA 3.5 SCA 3.6 SCA 3.7 SCA 3.8 SCA 3.9 Land Valuation-Whole Property 3.10 Land Sales Location Map Land Valuation-Whole Property (Continued) 3.11 This section values the subject site by comparing it with substitute land sales or listings within the local market area or in competitive areas throughout the region. Land value is influenced by a number of factors; most notably development and use potential. These factors, as well as others, are factored in the following analysis. We have estimated the market value of the underlying land at its highest and best use as vacant via the sales comparison approach. The sales comparison approach is based on the premise that the buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the sales comparison approach.  The market in which the subject property competes is investigated; comparable sales, contracts for sale and current offerings are reviewed.  The most pertinent data is further analyzed, and the quality of the transaction is determined.  The most meaningful unit of value for the subject property is determined.  Each comparable sale is analyzed and where appropriate, adjusted to account for differences the subject property.  The value indication of each comparable sale is analyzed, and the data reconciled for a final indication of value via the sales comparison approach. We have researched five comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. Unit of Comparison The most relevant unit of comparison for competing land is the $/SF. All of the comparable sales presented in this section were reported on this basis. Adjustments Adjustments to the comparable sales were considered and made when warranted for expenditures after purchase, property rights transferred, conditions of sale, financing terms, and market conditions. 1. Property Rights - All of the sales comparables were fee simple sales reflecting the property rights appraised herein per the agreed upon scope of work. 2. Financing - The sales all reflected typical cash equivalent, lender-financed transactions and no adjustments were required for financing terms. 3. Sale Conditions - None of the comparables required a condition of sale adjustment, as all were confirmed to be arm’s length transactions. 4. Expenditures After Sale - Expenses that the buyer incurs after purchase (demolition, cleanup costs, etc.). No adjustments are warranted based on review of the land sales. 5. Market Conditions (Time) - Based on the analysis performed, which includes research and interpretation of value trends of the comparable land sales presented herein, a market conditions adjustment of 5% is applied on an annual basis reflecting the relatively consistent appreciation that occurred between the oldest comparable sale date up through the effective valuation date. Quantitative Adjustment Process Quantitative percentage adjustments are also made for location and physical characteristics such as size, location quality, access, exposure, as well as other applicable elements of comparison. Where possible the adjustments applied are based on paired data or other statistical analysis. It should be stressed that the adjustments are subjective in nature and are meant to illustrate the logic in deriving a value opinion for the subject property by the Land Sales Comparison Approach. Land Valuation-Whole Property (Continued) 3.12 Comparable Selection A thorough search was made for similar land sales in the area. The parameters of the survey were highest and best use, zoning, proximity to the subject, size, and date of sale. In selecting comparables, emphasis was placed on confirming recent sales of sites that are similar to the subject property in terms of location and physical characteristics. Overall, the sales used represent the best comparables available for this analysis. Land Sales Adjustment Discussion The comparable land sales indicate an overall unadjusted value range from $2.25/SF to $3.26/SF. After adjustments, the comparables indicate a range for the subject site between $1.82/SF and $2.94/SF with an average of $2.51/SF. The adjustment process is described below. Land Sale 1 ($1.82/SF Adjusted) – - This comparable represents the sale of 34.50 AC (gross) at the NWC of I-35W and Corbin Rd., in Denton, Texas. Approximately 15 acres are located within the floodplain and are considered unusable. The remaining 19.5 AC are developable. The unit price is calculated on the net usable acreage. The buyer intends to develop a cold-storage facility. This comparable received a negative adjustment for size, reflecting the inverse relationship between site size and unit value. A negative adjustment was applied for zoning/use, as the site has superior zoning when compared to the subject. No adjustment was applied for the floodplain on the comparable sale since the unit value is calculated net of floodplain. Land Sale 2 ($2.83/SF Adjusted) – - This comparable represents the sale of a tract of land located at the southwest corner of SH 1173 and IH 35 in Denton, TX. The proposed use is for an industrial complex. A negative adjustment was applied for zoning/use, as the site has superior zoning when compared to the subject. Land Sale 3 ($2.70/SF Adjusted) – - This comparable represents the sale of 23.62 acres located in the northwest quadrant of IH 35 and Barthold Road in Denton. The site consists of two parcels that were combined and sold together. The buyer intends to develop a cold storage facility. This comparable received a negative adjustment for size, reflecting the inverse relationship between site size and unit value. A negative adjustment was applied for zoning/use, as the site has superior zoning when compared to the subject Land Sale 4 ($2.25/SF Adjusted) – - This comparable represents the sale of 30 acres, situated along IH 35 in Denton, Texas. The buyer plans to develop the site for personal use, including an office/warehouse and a laydown yard. This comparable received a negative adjustment for size, reflecting the inverse relationship between site size and unit value. A negative adjustment was applied for zoning/use, as the site has superior zoning when compared to the subject Land Sale 5 ($2.94/SF Adjusted) – - This comparable represents the sale of 31.01 acres located at the northwest corner of IH-35 and Windsor Drive. The site is rectangular and has been partially developed for multi-family use. This comparable received a negative adjustment for size, reflecting the inverse relationship between site size and unit value. A negative adjustment was applied for zoning/use, as the site has superior zoning when compared to the subject. Land Valuation-Whole Property (Continued) 3.13 Land Value Conclusion The comparables indicate a unit value, based on a general bracketing analysis, between $1.82/SF and $2.94/SF. Generally equal consideration was given to all land sales. Based on the subject’s overall locational and physical features, a unit value conclusion of $2.50/SF is supported. WHOLE PROPERTY LAND VALUE Unit Price ($/SF) $2.60 Land Area (SF) x ############## Concluded Land Value $1,299,727 WHOLE PROPERTY LAND VALUE Unit Price ($/SF)$2.50/SF Land Area (SF) x 4,670,939 SF Concluded Land Value $11,677,348 Form ROW-A-5 (Rev. 08/11) CA 3.14 For furnished sources of cost data, please see the following pages. Cost Approach 3.15 The Cost Approach is based on the principle of substitution, using the cost to construct a similar property as a reasonable alternative. Unless stated otherwise, this approach values the subject based on a replacement cost analysis, which is defined by the 15th Edition of the Appraisal of Real Estate as: The estimated cost to construct, at current prices as of the effective appraisal date, a substitute for the building being appraised, using modern materials and current standards, design, and layout. Cost Estimates The sources for each cost estimate are summarized below. The steps of the Cost Approach applied in this analysis are as follows:  Estimate the market value of the site as though vacant and available to be put to the highest and best use as of the date of value.  Estimate the reproduction or replacement cost of the building and site improvements including direct costs, indirect costs and entrepreneurial profit/overhead. Profit is typically based on a percentage of the replacement cost and land value, generally 10% to 20%, depending upon project size, location, and marketability. Based on the subject’s characteristics, an entrepreneurial profit and overhead of 15% is applied in this analysis.  Estimate the total amount of accrued depreciation in the improvements, including physical deterioration, functional and external obsolescence.  Deduct the total amount of accrued depreciation from the reproduction or the replacement cost of the improvements to estimate the depreciated replacement cost.  Add the estimated value of the site to the depreciated value the improvements to arrive at an indicated value via the cost approach for the subject. Cost Approach Conclusion The Cost Approach analysis and conclusion are presented in the following table. REPLACEMENT COST NEW SOURCES IMPROVEMENT COST NEW SOURCE Barbed Wire Fencing Arrowhead Screen & Fencing (972) 921-5139 COST APPROACH CONCLUSION Land $11,677,348 Plus: Depreciated Value of Improvements + $280 CONCLUDED VALUE VIA COST APPROACH $11,677,628 Form ROW-A-5 (Rev. 08/11) SCA 3.16 The Sales Comparison Approach - Improved is not applicable in the valuation of the Whole Property. Form ROW-A-5 (Rev. 08/11) IA 3.17 The Income Capitalization Approach is not applicable in the valuation of the Whole Property. Reconciliation of Value Conclusions-Whole Property 3.18 The process of reconciliation involves the analysis of each approach to value. The quality of data applied the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. Finally, each is considered separately and comparatively with each other. Based on the agreed upon scope with the client, the subject’s specific characteristics and the interest appraised, this appraisal developed Land Sales Comparison approach and Cost Approach. The values presented represent the As-Is Market Value (Fee Simple). RECONCILIATION - WHOLE PROPERTY Sales Comparison (Land) $11,677,348 Cost Approach $11,677,628 Sales Comparison (Improved) N/A Income Approach N/A CONCLUSION $11,677,628 Form ROW-A-5 (Rev. 08/11) 4.0 The concluded unit value for the part acquired represents a 50% easement encumbrance, as described in the following pages. Form ROW-A-5 (Rev. 08/11) 4.1 The concluded unit value for the part acquired represents a 50% easement encumbrance, as described in the following pages. Part to be Acquired and Remainder Before 4.2 Part To Be Acquired The following portion of the appraisal process deals directly with the valuation of the subject part to be acquired. The part to be acquired, is the portion of land taken by eminent domain from the whole property. The valuation of the property is predicated on the market value of the property prior to any taking or partial acquisition. Partial Acquisition Description The partial acquisition is irregular in shape and consists of 1.0895 acres (47,460 SF) of land. Tract 1 of the easement generally follows the new property boundary following the recent TxDOT right-of-way acquisition, Tract 2 encumbers a portion of the northwest corner of the subject property, as illustrated in the following image. Part to be Acquired and Remainder Before (Continued) 4.3 Proposed Easement Tract 2 TxDOT ROW Line Proposed Easement Tract 1 Part to be Acquired and Remainder Before (Continued) 4.4 Highest & Best Use – Part To Be Acquired Highest and best use may be defined as the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value. The four tests, applied in order, to develop adequate support for an opinion of highest and best use are legal permissibility, physical possibility, financial feasibility and maximum productivity. Due to its limited size and shape, the area of the partial acquisition would likely not stand alone as a separate economic unit. The partial acquisition’s use is essentially limited to use in conjunction with the subject whole property. As such, the highest and best use of the partial acquisition, as vacant, is for use in conjunction with the subject whole property. Valuation Methodology In this instance, the subject part to be acquired consists of land only. As an integral part of the whole property, the part to be acquired shares the same physical and economic characteristics. Because the highest and best use of the part to be acquired is for use in conjunction with the subject whole property, the part to be acquired shares the same per unit value of land concluded in the valuation of the subject whole property. Land Value – Part Acquired Since the acquisition is an easement and not a fee taking, it does not represent the complete bundle of rights associated with a fee acquisition. Therefore, we have applied a discount to the concluded unit value to represent the limited portion of the bundle of rights included in the easement acquisition. Tract 1, a permanent acquisition, is located along the western boundary of the subject Whole Property, Tract 2, a permanent acquisition, is located in the northwest portion of the whole property. The acquisition consists of a utility easement that will likely preclude development of building improvements within the easement area, although this area is typically reserved by building setbacks imposed by zoning regulations, and site improvements are typically allowed on this type of easement. Based on the location, existing encumbrances, and physical characteristics of the proposed easement and considering the existing utility of the area within the proposed easement, I have concluded that 50% of the fee value is reasonable and adequately represents the portion of the total bundle of rights acquired. Reconciliation – Part to be Acquired The part to be acquired was valued as an integral component of the whole property. The value is based on its pro-rata contribution to the whole. As previously mentioned, the per-unit value for the land was previously calculated in the whole property valuation section of this appraisal and is applied in the valuation of the part to be acquired as follows. Remainder Before In order to determine the value of the remainder before the taking, we have subtracted the value of the part taken from the whole property value. The remainder before value is calculated as follows: Form ROW-A-5 (Rev. 08/11) PVS 5.0 The concluded unit value for the part acquired represents a 50% easement encumbrance, as described in the following pages. Remainder After Valuation 5.1 Remainder After Valuation Following the acquisition, the remainder property will consist of 107.2300 acres (4,670,939 SF) of land. The remainder after tract will have similar shape, frontage, and other physical characteristics as the subject whole property; however, it will be encumbered by a new utility easement. Highest & Best Use – Remainder After Highest and best use may be defined as the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value. The four tests, applied in order, to develop adequate support for an opinion of highest and best use are legal permissibility, physical possibility, financial feasibility and maximum productivity. As-Vacant Analysis –Remainder After Legal Permissibility: The proposed easement will not change the legally permissible uses of the site that were available before the acquisition. Physical Possibility: The remainder site has the same shape and size as the whole property and is physically suited to the uses that were available prior to the acquisition. Financial Feasibility: Regarding financial feasibility of development in the area, development patterns suggest that a broad range of commercial development is financially feasible given the existing uses in the local area. Financial feasibility factors generally support commercial development of the subject remainder site. Maximum Productivity: The test of maximum productivity is applied to the uses that have passed the first three tests. The maximally productive use of a site is the use that results in the highest residual land value. This can be tested by subtracting development costs from the value as improved for a particular use. Alternatively, market evidence such as sale data can directly indicate the maximally productive use. The only use that has passed the three tests is Commercial. As-Vacant Conclusion – Remainder After Based on the previous discussion, the highest and best use of the remainder property, as vacant, is considered to be Commercial. Valuation Methodology – Remainder After The remainder after property will have similar size, physical characteristics, and highest and best use as the subject whole property. As such, the valuation of the remainder after property uses the same fundamental data as the subject whole property valuation. The remainder after property is valued on the following pages. Form ROW-A-5 (Rev. 08/11) SCA 5.2 The Remainder will have the same general locational and physical characteristics as existed in the Whole Property. The same land sales and adjustments applicable for the Whole Property are applicable for the remainder. For an explanation of Adjustments with Reconciliation, please see Section 3 for land sale adjustment discussion which is applicable for the remainder after. REMAINDER AFTER LAND VALUE AREA NAME UNIT VALUE X AREA (SF) X % OF FEE = VALUE 074-11-WWE $2.50 47,460 50%$59,325 Remainder Fee Area $2.50 4,623,479 100% $11,558,698 Concluded Land Value $11,618,023 Form ROW-A-5 (Rev. 08/11) CA 5.3 The Cost Approach is not applicable in the valuation of the Remainder After. Form ROW-A-5 (Rev. 08/11) SCA 5.4 The Sales Comparison Approach - Improved is not applicable in the valuation of the Remainder After. Form ROW-A-5 (Rev. 08/11) IA 5.5 The Income Capitalization Approach is not applicable in the valuation of the Remainder After. Reconciliation of Value Conclusions – Remainder After 5.6 Reconciliation – Remainder After Property The Reconciliation of Value Conclusions is the final step in the appraisal process and involves the weighing of the individual valuation techniques in relationship to their substantiation by market data, and the reliability and applicability of each valuation technique to the subject property. Understanding the profiles of potential buyers and their typical reliance on each approach to value strongly influences the weighting process. As the improvements are not affected by the acquisition, they have been omitted from the valuation. Thus, only the Sales Comparison Approach (land only) was developed. Presentation Of Value Conclusions The following table summarizes our final opinion of the remainder after value. The effective date of valuation concluded in this report is as of June 23, 2022. Form ROW-A-5 (Rev. 08/11) CS 6.0 Cost To Cure (Continued) 6.1 Cost To Cure The value conclusion in the Part to Be Acquired included an estimate of compensation due to the property owner(s) for the value of the improvements within the acquisition parcel. However, replacement improvements must be purchased and replaced using new construction components. The Cost to Cure is an estimate of additional financial compensation to restore the property to the same or similar functional utility as prior to the acquisition. In order to avoid double compensation, it is calculated as the difference between the replacement cost new and the previous estimate of value of the part acquired and/or damaged in the partial acquisition. The formula is as follows: Replacement Cost New – Part Acquired/Damaged = Cost to Cure This formula is applied to each of the components identified in the Part to be Acquired that need to be replaced. If the estimated value of the component included within the partial acquisition is higher than the cost to replace the component, then no further compensation is due for that component and the cost to cure is equal to $0 for that line- item component. The dollar amounts are not deducted against a cumulative total, but rather calculated on an item-by- item basis. The Remainder can be cured by fencing the northern boundary of the acquisition. The cost of the fencing was provided by Arrowhead Screens and Fencing. The following is a summary of our cost to cure estimate: COST TO CURE Item No. of Units Cost New/Unit Cost New Less Part Acquired Cost To Cure Barbed Wire Fencing 35 LF @ $16.00 $560 - $280 = $280 Cost Contingency $560 x 10% = $56 Total Cost To Cure $336 Certificate of Appraisal 7.0 We certify that, to the best of our knowledge and belief:  The statements of fact contained in this report are true and correct.  The reported analyses, opinions, and conclusions of the signers are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.  The signers of this report 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.  T.J. Smith has performed no services, as an appraiser or in any other capacity regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.  The signers are not biased with respect to the property that is the subject of this report or to the parties involved with this assignment.  The engagement in this assignment was not contingent upon developing or reporting predetermined results.  The 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.  The reported analysis, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.  T.J. Smith inspected the property that is the subject of this report.  Scott Harris, Leighton Gambill, and Joshua Ramirez provided significant real property appraisal assistance to the persons signing this certification, including market research, comparable analysis, valuation, and report writing.  The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. T.J. Smith Director State Certified General Real Estate Appraiser Texas License No. 1380471-G Expiration Date 8/31/2023 4693374413 t.j.smith@kroll.com Addenda 8.0 General Definitions4 Assessed value 1. A value set on real estate and personal property by a government as a basis for levying taxes. (IAAO) 2. The monetary amount for a property as officially entered on the assessment roll for purposes of computing the tax levy. Assessed values differ from the assessor's estimate of actual (market) value for three major reasons: fractional assessment ratios, partial exemptions, and decisions by assessing officials to override market value. The process of gathering and interpreting economic data to provide information that can be used by policymakers to formulate tax policy. (IAAO) Easement An interest in real property that conveys use, but not ownership, of a portion of an owner’s property. Access or right of way easements may be acquired by private parties or public utilities. Governments dedicate conservation, open space, and preservation easements. Effective date The date at which the analyses, opinions, and advice in an appraisal, review, or consulting service apply. 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. Floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area. Identified intangible assets Those intangible assets owned by a business (going concern) that have been separately identified and valued in an appraisal. Land-to-building ratio The proportion of land area to gross building area; one of the factors determining comparability of properties. Leased fee interest An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease. Leasehold interest The interest held by the lessee (the tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions. Market rent The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby: 1. Lessee and lessor are typically motivated. 2. Both parties are well informed or well advised, and acting in what they consider their best interests. 3. A reasonable time is allowed for exposure in the open market. 4. The rent payment is made in terms of cash in United States dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract. 5. The rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction. 4 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015). Addenda (Continued) 8.1 Marketing time 1. The time it takes an interest in real property to sell on the market sub-sequent to the date of an appraisal. 2. Reasonable marketing time is an estimate of the amount of time it might take to sell an interest in real property at its estimated market value during the period immediately after the effective date of the appraisal; the anticipated time required to expose the property to a pool of prospective purchasers and to allow appropriate time for negotiation, the exercise of due diligence, and the consummation of a sale at a price supportable by concurrent market conditions. Marketing time differs from exposure time, which is always presumed to precede the effective date of the appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions" address the determination of reasonable exposure and marketing time.) Negative easement Property that is burdened by an easement; also called servient estate. Personal property Identifiable tangible objects that are considered by the general public as being “personal,” for example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate. Personal property consists of every kind of property that is not real property; movable without damage to itself or the real estate; subdivided into tangible and intangible. Prospective value opinion A forecast of the value expected at a specified future date. A prospective value opinion is most frequently sought in connection with real estate projects that are proposed, under construction, or under conversion to a new use, or those that have not achieved sellout or a stabilized level of long-term occupancy at the time the appraisal report is written. Rentable area The amount of space on which the rent is based; calculated according to local practice. Restricted appraisal report A written appraisal report prepared under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP, 2020-2021 ed.). A restricted appraisal report sets forth the data considered, the appraisal procedures followed, and the reasoning employed in the appraisal, addressing each item in the depth and detail required by its significance to the appraisal and providing sufficient information so that the client and the users of the report will understand the appraisal and not be misled or confused. Appraisal report A written report prepared under Standards Rule 2-2(a) or 8-2(a). An appraisal report contains a summary of all information significant to the solution of the appraisal problem. The essential difference between a restricted appraisal report and an appraisal report is the level of detail of presentation. Use value In real estate appraisal, the value a specific property has for a specific use; may be the highest and best use of the property or some other use specified as a condition of the appraisal; may be used where legislation has been enacted to preserve farmland, timberland, or other open space land on urban fringes. See also exchange value; value in use. Usable area The area available for assignment or rental to an occupant, including every type of usable space; measured from the inside finish of outer walls to the office side of corridors or permanent partitions and from the centerline of adjacent spaces; includes subdivided occupant space, but no deductions are made for columns and projections. There are two variations of net area: single occupant net assignable area and store net assignable area. Value “as is” The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; relates to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning.