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HomeMy WebLinkAboutCB24US073713_401 N Elm Street 401 N ELM STREET DENTON, TEXAS 76201 CBRE FILE NO. CB24US073713-1 CLIENT: CITY OF DENTON APPRAISAL REPORT CBRE VALUATION & ADVISORY SERVICES © 2024 CBRE, Inc. VALUATION & ADVISORY SERVICES 500 West 2nd Street, Suite 1700 Austin, TX 78701 T 512-499-4900 F 512-499-4999 www.cbre.com Date of Report: September 16, 2024 Mr. Mark Mastroleo Real Estate Specialist City of Denton 401 N Elm St Denton, Texas 76201 RE: Appraisal of: 401 N Elm Street Denton, Denton County, Texas 76201 CBRE, Inc. File No. CB24US073713-1 Dear Mr. Mastroleo: At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following Appraisal Report. The subject is a 28,334-square foot mixed (flex space) facility located at 401 N Elm Street in Denton, Texas situated on a 3.21-acre site. The improvements were constructed in 1970 as a grocery store and were reportedly converted to its current use as flex/cubicle office space in 2021. At the request of the client, we have provided a fee simple market value for the subject on an As Is basis. Based on the analysis contained in the following report, the market value of the subject is concluded as follows: MARKET VALUE CONCLUSION Appraisal Premise Interest Appraised Date of Value Value Conclusion As Is Fee Simple Estate August 12, 2024 $5,300,000 * Compiled by CBRE *As will be further discussed on page 18 of this appraisal, the Fee Simple Value Conclusion of $5,300,000 includes an allocation of the Fixtures, Furniture, and Equipment (FF&E) which has been estimated to be between approximately $0.00 and $80,371, or less than 2% of the total fee simple value. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter. The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The © 2024 CBRE, Inc. September 16, 2024 Page 2 analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), and the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. The appraisal problem, as applied to the subject, is to determine the property’s 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 obligated 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.” City of Austin v. Cannizzo, 267 S.W.2d 808 (Tex. 1954) The intended use and user of our report are specifically identified in our report as agreed upon in my contract for services and/or reliance language retained in the appraiser’s workfile. As a condition to being granted the status of an intended user, any intended user who has not entered into a written agreement with CBRE in connection with its use of our report agrees to be bound by the terms and conditions of the agreement between CBRE and the client who ordered the report. No other use or user of the report is permitted by any other party for any other purpose. Dissemination of this report by any party to any non-intended users does not extend reliance to any such party, and CBRE will not be responsible for any unauthorized use of or reliance upon the report, its conclusions or contents (or any portion thereof). The report is not the appraisal but is the reporting of the appraisal to the named client or named intended user. Anyone else who attempts to rely on an appraisal report that is not a named user may be misled by the report. If you are not the client, you have no way of knowing if a later appraisal was done that replaces this report. Any changes will result in a different report date. Accordingly, this document may no longer contain the appraisers’ opinions. Any subsequent reports, with a later report date, voids this document even to the client or intended user. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE can be of further service, please contact us. Respectfully submitted, CBRE - VALUATION & ADVISORY SERVICES Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC Executive Vice President TX-1336636-G Phone: 512-499-4911 Fax: 512-499-4999 Email: cathy.thomas@cbre.com © 2024 CBRE, Inc. Certification i Certification I certify to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial and unbiased professional analyses, opinions, and conclusions. 3. I have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment. 4. My engagement in this assignment was not contingent upon developing or reporting predetermined results. 5. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 6. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of Texas. 7. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 8. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 9. As of the date of this report, Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC has completed the continuing education program for Designated Members of the Appraisal Institute. 10. Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC has made a personal inspection of the property that is the subject of this report. 11. Stacy Brown, RWA (License No. TX-1343526-Trainee) provided real property appraisal assistance to the person signing this report by gathering subject property data, gathering comparable data, and assisting with the analysis and report writing. 12. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc. Although employees of other CBRE, Inc. divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy were maintained at all times with regard to this assignment without conflict of interest. 13. Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC has not provided any 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. Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC TX-1336636-G © 2024 CBRE, Inc. Subject Photographs ii Subject Photographs Aerial View © 2024 CBRE, Inc. Subject Photographs iii Primary improvements, facing southeast from interior of subject Primary improvements, facing northeast from SWC of subject Primary improvements facing southwest from NEC of subject Parking lot and primary improvements facing southwest from Parkway Street Building common area Building common area © 2024 CBRE, Inc. Subject Photographs iv Office area Office area Break room Break room Conference/training room Breakout meeting room © 2024 CBRE, Inc. Subject Photographs v Entryway Public bathroom Hallway Exercise room Mother’s room Storage room © 2024 CBRE, Inc. Executive Summary vi N Elm Street, facing north, subject on left, SEC of subject W Parkway Street, facing west, subject on left, NEC of Subject Bolivar Street, facing south, subject on left, NWC of subject W McKinney Street, facing east, subject on left, SWC of subject © 2024 CBRE, Inc. Executive Summary vii Executive Summary EXECUTIVE SUMMARY Location Parcel Number(s) Client Highest and Best Use As If Vacant As Improved Property Rights Appraised Date of Inspection Estimated Exposure Time Estimated Marketing Time Primary Land Area 3.21 AC 139,959 SF Zoning Improvements Property Type Industrial Number of Buildings Number of Stories Gross Building Area Percent Office Year Built 1970 Renovated:2021 Effective Age 25 Years Remaining Economic Life 25 Years Condition Buyer Profile Financial Indicators Current Occupancy 100.0% Stabilized Occupancy 95.0% Stabilized Credit Loss 1.0% Overall Capitalization Rate 7.00% Pro Forma Operating Data Total Per SF Effective Gross Income $494,291 $17.44 Operating Expenses $131,860 $4.65 Expense Ratio 26.68% Net Operating Income $362,431 $12.79 VALUATION Total Per SF Market Value As Is On August 12, 2024 Sales Comparison Approach $5,400,000 $190.52 Income Capitalization Approach $5,200,000 $183.46 CONCLUDED MARKET VALUE Appraisal Premise Interest Appraised Value As Is Fee Simple Estate $5,300,000 * Compiled by CBRE 6 Months 6 Months MD - Mixed Use Downtown Core Date of Value August 12, 2024 1 28,344 SF August 12, 2024 Fee Simple Estate Mixed Use (Flex-Space) Mixed Use 401 N Elm Street Denton, Denton County County, TX 76201 City of Denton 33705, 76166 (Flex Space) 100.0% Developer or Investor Good 1 *The Fee Simple Value Conclusion of $5,300,000 includes an allocation of the Fixtures, Furniture, and Equipment (FF&E) which has been estimated to be between approximately $0.00 and $80,371, or less than 2% of the total fee simple value. © 2024 CBRE, Inc. Executive Summary viii STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT) Strengths/ Opportunities • The subject is in good condition; • The subject was reportedly renovated in 2021; • The subject benefits from frontage along N Elm Street, W McKinney Street, Bolivar Street, and W Parkway Street and its proximity to I-35E and Loop 288, both major thoroughfares in the Denton market area; • The subject is located in downtown Denton proximate to supporting commercial development. Weaknesses/ Threats Commercial real estate market conditions have deteriorated at the macro level. The significant recent increase in the cost of capital and reduced volume of transaction activity is impacting price discovery and creating an increase in uncertainty. Increasing interest rates and subdued economic growth will continue to weigh on commercial real estate fundamentals and investment transaction volumes. This creates a higher degree of uncertainty in general, though the impacts may vary by market and asset class/type. MARKET VOLATILITY We draw your attention to a combination of inflationary pressures (leading to higher interest rates) and recent failures/stress in banking systems which have significantly increased the potential for constrained credit markets, negative capital value movements and enhanced volatility in property markets over the short-to-medium term. Experience has shown that consumer and investor behavior can quickly change during periods of such heightened volatility. Lending or investment decisions should reflect this heightened level of volatility and the potential for deteriorating market conditions. It is important to note that the conclusions set out in this report are valid as at the valuation date only. Where appropriate, we recommend that the valuation is closely monitored, as we continue to track how markets respond to evolving events. Capitalization Rate Conclusion We have also considered recent events and prevailing market conditions with respect to capitalization rates. This includes a combination of inflationary pressures and higher cost of capital (considering interest rates as well as risk spreads). While the overall long-term outlook for commercial real estate remains positive, the full effect of these factors may not yet be reflected in transactional data. Overall, we view uncertainty and the higher cost of capital to have an upward influence on capitalization rates which is considered with respect to our conclusion herein. © 2024 CBRE, Inc. Executive Summary ix Investment Properties For the subject property, we have identified the most likely buyer as an investor, or owner/user. Most commercial real estate investors for this asset type include some form of debt to achieve a desired leveraged return. The cost of commercial real estate debt has changed dramatically over the past year. This has a significant impact on pricing if an investor is seeking to maintain a constant leveraged return on their equity investment, which can be expressed in a higher capitalization rate. EXTRAORDINARY ASSUMPTIONS An extraordinary assumption is defined as “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.” 1 • None noted HYPOTHETICAL CONDITIONS A hypothetical condition is defined as “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 purposes of analysis.” 2 • None noted OWNERSHIP AND PROPERTY HISTORY OWNERSHIP SUMMARY Item Current Current Ownership Owner:City of Denton Transaction Date:October 29, 2019 Legal Reference:2019-139120 County/Locality Name:Denton County Comments:No change in ownership in past 3 years Pending Sale Under Contract:No Listing Currently Listed For Sale:No Compiled by CBRE CBRE is unaware of any arm’s length ownership transfers of the property within three years of the date of appraisal. Further, the property is not reportedly being offered for sale or under contract as of the current date. 1 The Appraisal Foundation, USPAP, 2024 2 The Appraisal Foundation, USPAP, 2024 © 2024 CBRE, Inc. Executive Summary x EXPOSURE/MARKETING TIME Current appraisal guidelines require an estimate of a reasonable time period in which the subject could be brought to market and sold. This reasonable time frame can either be examined historically or prospectively. In a historical analysis, this is referred to as exposure time. Exposure time always precedes the date of value, with the underlying premise being the time a property would have been on the market prior to the date of value, such that it would sell at its appraised value as of the date of value. On a prospective basis, the term marketing time is most often used. The exposure/marketing time is a function of price, time, and use. It is not an isolated estimate of time alone. In consideration of these factors, we have analyzed the following: The following table presents the information derived from these sources. EXPOSURE/MARKETING TIME DATA Exposure/Mktg. (Months) Investment Type Range Average PwC Flex/R&D National Data 1.0 -0.0 4.1 Local Market Professionals 3.0 -12.0 6.0 CBRE Exposure Time Estimate CBRE Marketing Period Estimate Source: PwC Real Estate Survey 6 Months 6 Months © 2024 CBRE, Inc. Table of Contents xi Table of Contents Certification ......................................................................................................................... i Subject Photographs ............................................................................................................ ii Executive Summary ............................................................................................................ vii Table of Contents ................................................................................................................ xi Scope of Work ..................................................................................................................... 1 Area Analysis ...................................................................................................................... 5 Neighborhood Analysis ....................................................................................................... 7 Site Analysis ...................................................................................................................... 12 Improvements Analysis ...................................................................................................... 15 Fixtures, Furniture, and Equipment Analysis ....................................................................... 18 Zoning .............................................................................................................................. 20 Tax and Assessment Data .................................................................................................. 21 Highest and Best Use ........................................................................................................ 22 Sales Comparison Approach ............................................................................................. 24 Income Capitalization Approach ........................................................................................ 29 Reconciliation of Value ...................................................................................................... 38 Assumptions and Limiting Conditions ................................................................................ 39 ADDENDA A Improved Sale Data Sheets B Rent Comparable Data Sheets C Qualifications © 2024 CBRE, Inc. Scope of Work 1 Scope of Work This Appraisal Report is intended to comply with the real property appraisal development and reporting requirements set forth under Standards Rule 1 and 2 of USPAP. The scope of the assignment relates to the extent and manner in which research is conducted, data is gathered, and analysis is applied. INTENDED USE OF REPORT The appraisal is to be used to assist the client in estimating purchase price. CLIENT The client is City of Denton. INTENDED USER OF REPORT This appraisal is to be used by City of Denton. No other user(s) may rely on our report unless as specifically indicated in this report. Intended users are those who an appraiser intends will use the appraisal or review report. In other words, appraisers acknowledge at the outset of the assignment that they are developing their expert opinions for the use of the intended users they identify. Although the client provides information about the parties who may be intended users, ultimately it is the appraiser who decides who they are. This is an important point to be clear about: The client does not tell the appraiser who the intended users will be. Rather, the client tells the appraiser who the client needs the report to be speaking to, and given that information, the appraiser identifies the intended user or users. It is important to identify intended users because an appraiser’s primary responsibility regarding the use of the report’s opinions and conclusions is to those users. Intended users are those parties to whom an appraiser is responsible for communicating the findings in a clear and understandable manner. They are the audience. 3 PURPOSE OF THE APPRAISAL The purpose of this appraisal is to develop an opinion of the market value of the subject property. 3 Appraisal Institute, The Appraisal of Real Estate, 15th ed. (Chicago: Appraisal Institute, 2020), 50. © 2024 CBRE, Inc. Scope of Work 2 DEFINITION OF VALUE The appraisal problem, as applied to the subject, is to determine the property’s 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 obligated 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.” City of Austin v. Cannizzo, 267 S.W.2d 808 (Tex. 1954). INTEREST APPRAISED The value estimated represents the Fee Simple Estate as defined below: 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. 4 Extent to Which the Property is Identified The property is identified through the following sources: o postal address o assessor’s records o legal description Extent to Which the Property is Inspected Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC inspected the interior and exterior of the subject, as well as its surrounding environs on the effective date of appraisal. This inspection was considered adequate and is the basis for our findings. The site was not surveyed and the improvements were not measured by CBRE. Type and Extent of the Data Researched CBRE reviewed the following: • applicable tax data • zoning requirements • flood zone status • demographics • comparable data 4 Appraisal Institute, The Dictionary of Real Estate Appraisal, 7th ed. (Chicago: Appraisal Institute, 2022), 73. © 2024 CBRE, Inc. Scope of Work 3 Type and Extent of Analysis Applied The appraisal was undertaken jointly by Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC and Stacy Brown, RWA. Under the direction of Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC, Stacy Brown gathered subject property data and comparable data, and assisted with the analysis and report writing. Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC provided oversight with respect to appraisal methodology, data selection, analytical processes and report review. The final report is the result of this collective effort. CBRE, Inc. analyzed the data gathered through the use of appropriate and accepted appraisal methodology to arrive at a probable value indication via each applicable approach to value. The steps required to complete each approach are discussed in the methodology section. Data Resources Utilized in the Analysis DATA SOURCES Item:Source(s): Site Data Size Denton County Deed Records Improved Data Building Area Denton Central Appraisal District Area Breakdown/Use On-Site Inspection No. Bldgs.On-Site Inspection Parking Spaces Appraiser Estimate via Aerial Inspection Year Built/Developed Denton Central Appraisal District Economic Data Income Data:Rent Comparables Expense Data:Expense Comparables Other Floodplain FEMA Zoning City of Denton Easements Denton County Deed Records Compiled by CBRE © 2024 CBRE, Inc. Scope of Work 4 APPRAISAL METHODOLOGY In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. Cost Approach The cost approach is based on the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements that represent the highest and best use of the land, or when it is improved with relatively unique or specialized improvements for which there exist few sales or leases of comparable properties. Sales Comparison Approach The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences, with the final estimate derived based on the general comparisons. Income Capitalization Approach The income capitalization approach reflects the subject’s income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over a period of time. The two common valuation techniques associated with the income capitalization approach are direct capitalization and the discounted cash flow (DCF) analysis. Methodology Applicable to the Subject In valuing the subject, only the sales comparison and income capitalization approaches are applicable and have been used. The cost approach is least relevant due to the lack of market data regarding land sales in the City of Denton Downtown market, as well as the age of the improvements. The majority of market participants give consideration to the sales comparison approach and the income capitalization approach; therefore, these approaches have been fully developed herein. The exclusion of the cost approach is not considered to compromise the credibility of the results rendered herein. © 2024 CBRE, Inc. Area Analysis 5 Area Analysis POPULATION Compiled by CBRE; Source: Esri The subject is located in the Denton County.Key information about the area is provided in the following tables. The area has a population of 1,029,075 and a median age of 36,with the largest population group in the 40-49 age range and the smallest population in the 80+ age range. Population has increased by 367,143 since 2010,reflecting an annual increase of 3.20%. Population is projected to increase by an additional 121,971 by 2029,reflecting 2.27% annual population growth.661,932 1,029,075 1,151,046 0 500,000 1,000,000 1,500,000 2010 2024 2029 POPULATION BY YEAR 0 50,000 100,000 150,000 200,000 -79 80+ AREA POPULATION BY AGE © 2024 CBRE, Inc. Area Analysis 6 INCOME EDUCATION EMPLOYMENT Compiled by CBRE; Source: Esri The area includes a total of 568,086 employees and has a 3.1% unemployment rate.The top three industries within the area are Prof/Scientific/Tech Services, Retail Trade and Health Care/Social Assistance, which represent a combined total of 33% of the population. The area features an average household income of $144,023 and a median household income of $108,671. Over the next five years, median household income is expected to increase by 11.4%, or $2,468 per annum. A total of 51.5%of individuals over the age of 24 have a college degree,with 34.3%holding a bachelor's degree and 17.2%holding a graduate degree. $108,671 $121,009 $100,000 $105,000 $110,000 $115,000 $120,000 $125,000 2024 2029 MEDIAN INCOME BY YEAR 34.3% 17.2% 48.5% POPULATION BY DEGREE Bachelor's Degree Graduate Degree Other 0%2%4%6%8%10%12% Other Services (excl Publ Adm) Construction Transportation/Warehousing Accommodation/Food Services Manufacturing Finance/Insurance Educational Services Health Care/Social Assistance Retail Trade Prof/Scientific/Tech Services CONCLUSION In summary, the area is forecasted to experience an increase in population, an increase in household income, and an increase in household values. © 2024 CBRE, Inc. Neighborhood Analysis 7 Neighborhood Analysis © 2024 CBRE, Inc. Neighborhood Analysis 8 LOCATION The subject is located in the City of Denton, situated approximately 30 miles northeast of central Fort Worth and 35 miles northwest of Central Dallas. BOUNDARIES The neighborhood boundaries are detailed as follows: North: Highway 380 South: I-35E East: Loop 288 West: I-35 LAND USE Land uses within the subject neighborhood consist of a mixture of commercial, residential, and industrial development. The immediate area surrounding the subject is an established area of development, consisting primarily of commercial uses with residential uses along the minor neighborhood carriers. Much of the residential development was built during between 1970 and 1979. The majority of the single-family residential development within a one-mile radius of the subject may be described as homes in the $300,000 to $400,000 price range. The median home value within a one-mile radius is about $314,350. Major commercial developments in the neighborhood include Golden Triangle Mall, University of North Texas, Texas Women’s University, Embassy Suites Hotel & Convention Center, WinCo Foods, Denton Regional Medical Center, Peterbilt Assembly Plant, the Woodlands Apartments, Denton Towne Center, Denton Towne Crossing, Walmart Supercenter, UNT Discovery Park, Aldi Distribution Center, United Copper Plant, and Texas Presbyterian Health Hospital. In addition, there are a number of regional and national free-standing retail buildings, fast food restaurants, gas stations, retail strip centers, bank branches, neighborhood and community shopping centers, grocery anchored shopping centers, and various other retail and commercial uses along the major roadways within the subject’s neighborhood. GROWTH PATTERNS Growth patterns have occurred primarily along major commercial thoroughfares such as Interstate Highway 35W, Interstate Highway 35E, US Highway 377, State Loop 288, and US Highway 380. Growth patterns have also occurred along secondary commercial thoroughfares within the neighborhood such as Mayhill Road, Woodrow Lane, McKinney Street, Locust Street, Elm Street, Mingo Road, and Sherman Drive. © 2024 CBRE, Inc. Neighborhood Analysis 9 ACCESS The subject neighborhood is served by five national/regional highways: Interstate Highway 35W, Interstate Highway 35E, US Highway 377, State Loop 288, and US Highway 380. These arterials provide primary access to the neighborhood and provide good connectivity with the greater highway network throughout the Dallas/Fort Worth area. Secondary access is provided by various primary neighborhood carriers such as Mayhill Road, Woodrow Lane, McKinney Street, Locust Street, Elm Street, Mingo Road, and Sherman Drive. DEMOGRAPHICS Selected neighborhood demographics in Denton County, the Dallas-Fort Worth-Arlington TX MSA, and a 5-mile radius from the subject are shown in the following table: 401 N Elm Street Denton, TX 76201 Population 2029 Total Population 150,307 8,811,074 1,151,046 2024 Total Population 140,219 8,195,415 1,029,075 2010 Total Population 108,258 6,366,547 661,932 2000 Total Population 86,523 5,156,282 431,925 Annual Growth 2024 - 2029 1.40% 1.46%2.27% Annual Growth 2010 - 2024 6.68% 6.52%11.66% Annual Growth 2000 - 2010 2.27% 2.13%4.36% Households 2029 Total Households 59,762 3,228,215 425,742 2024 Total Households 54,790 2,978,430 376,367 2010 Total Households 40,661 2,296,412 240,045 2000 Total Households 32,979 1,878,990 158,452 Annual Growth 2024 - 2029 1.75% 1.62%2.50% Annual Growth 2010 - 2024 7.74% 6.72%11.90% Annual Growth 2000 - 2010 2.12% 2.03%4.24% Income 2024 Median Household Income $68,497 $88,391 $108,671 2024 Average Household Income $94,157 $123,641 $144,023 2024 Per Capita Income $37,021 $44,980 $52,705 2024 Pop 25+ College Graduates 36,375 2,239,250 347,838 Age 25+ Percent College Graduates - 2024 42.4% 41.3%51.5% Source: ESRI SELECTED NEIGHBORHOOD DEMOGRAPHICS Dallas-Fort Worth-Denton County5 Mile Radius CONCLUSION The subject is well-positioned within the central portion of the City of Denton. As shown above, the population within the subject neighborhood has experienced an increase over the past several years. The neighborhood is expected to experience population growth over the next five years. As a result, the demand for existing developments is expected to be average to good. The neighborhood appears to be well established and favorably accepted. © 2024 CBRE, Inc. Site Analysis 10 FLOODPLAIN MAP According to the floodplain map, approximately 40% of the subject is encumbered by floodplain (Zone AE) and 10% encumbered by floodway (Zone AE). Further, the primary improvements are observed to be almost fully contained within the floodplain/floodway comprised of approximately 98% floodplain (Zone AE) and 2% floodway (Zone AE). The floodplain map further indicates the flood level to be at +/-628 feet MSL, while the ground level of the flood encumbered area ranges from 624 feet to 628 feet, as shown in the topography map on the following page; therefore, the subject is noted to be up to +/- 4 feet deep in the floodplain/floodway. © 2024 CBRE, Inc. Site Analysis 11 TOPOGRAPHY MAP © 2024 CBRE, Inc. Site Analysis 12 Site Analysis The following chart summarizes the salient characteristics of the subject site. SITE SUMMARY AND ANALYSIS Physical Description Gross Site Area 3.21 Acres 139,959 Sq. Ft. Primary Road Frontage N Elm Street Secondary Road Frontage W McKinney Street Additional Road Frontage W Parkway Street Additional Road Frontage Bolivar Street Average Depth 390 Feet Shape Topography Parcel Number(s) Zoning District Flood Map Panel No. & Date 48121C0360G 18-Apr-11 Flood Zone Zone AE Approx. 40 % Floodplain, 10% Floodway Comparative Analysis Visibility Functional Utility Traffic Volume Adequacy of Utilities Landscaping Drainage Utilities Availability Water Yes Sewer Yes Electricity Yes Other Yes No Unknown Detrimental Easements X Encroachments X Deed Restrictions X Source: Various sources compiled by CBRE Adequate Average Provider City of Denton Assumed Adequate City of Denton Various Providers Rating Superior Average Average Irregular Level, At Street Grade MD - Mixed Use Downtown Core 33705, 76166 INGRESS/EGRESS Ingress and egress is available to the site via N Elm Street, W McKinney Street, W Parkway Street, and Bolivar Street. N Elm Street, at the subject, is a one-way north/south minor arterial roadway with three lanes of traffic. Street improvements include asphalt paving, concrete curbs and gutters, sidewalks, and street lighting. Street parking is permitted. © 2024 CBRE, Inc. Site Analysis 13 W McKinney Street, at the subject, is an east/west neighborhood carrier with two lanes of traffic in each direction. Street improvements include asphalt paving, concrete curbs and gutters, sidewalks, and street lighting. W Parkway Street, at the subject, is an east/west neighborhood carrier with two lanes of traffic in each direction. Street improvements include asphalt paving, concrete curbs and gutters, sidewalks, and street lighting. Bolivar Street, at the subject, is a north/south minor neighborhood carrier with one lanes of traffic in each direction. Street improvements include asphalt paving, concrete curbs and gutters, sidewalks, and street lighting. TOPOGRAPHY AND FLOOD ZONE We are not experts in determining flood zone elevations and we were not provided with a flood zone certificate for the subject. The reader is encouraged to consult with a professional engineer to determine the subject's actual flood zone status. The topography of the subject is generally level and is not seen as in impediment to the development of the property; however, based on our review of FEMA Flood Panel No. 48121C0360F, approximately 40% of the subject is encumbered by floodplain (Zone AE) with 10% encumbered by floodway (Zone AE). Further, the primary improvements are observed to be almost fully contained within the floodplain comprised of approximately 98% floodplain (Zone AE) and 2% floodway (Zone AE). The floodplain map further indicates the flood level to be at +/-628 feet MSL, while the ground level of the flood encumbered area ranges from 624 feet to 628 feet; therefore, the subject is noted to be up to +/- 4 feet deep in the floodplain/floodway. The deeper portion of the flood encumbrance is noted to be at the north property line, in the vicinity of the floodway, and slope supward out of the floodplain toward the south section of the property. Therefore, the flood depth decreases as it approaches the central section of the property, where the flood depth and the ground depth "zero out" at 628 feet MSL. Zones AE and A1-A30 are the flood insurance rate zones used for the 1-percent-annual-chance floodplains that are determined for the Flood Insurance Study (FIS) by detailed methods of analysis. In most instances, Base Flood Elevations (BFEs) derived from the detailed hydraulic analyses are shown at selected intervals in this zone. Mandatory flood insurance purchase requirements apply. AE zones are areas of inundation by the 1-percent-annual-chance flood, including areas with the 2-percent wave runup, elevation less than 3.0 feet above the ground, and areas with wave heights less than 3.0 feet. These areas are subdivided into elevation zones © 2024 CBRE, Inc. Site Analysis 14 with Base Flood Elevations (BFEs) assigned. The AE zone will generally extend inland to the limit of the 1-percent-annual-chance Stillwater Flood Level (SWEL). EASEMENTS AND ENCROACHMENTS A current title commitment was not provided. There are no known easements or encroachments impacting the site that are considered to affect the marketability or highest and best use. It is recommended that the client/reader obtain a current title policy outlining all easements and encroachments on the property, if any, prior to making a business decision. COVENANTS, CONDITIONS AND RESTRICTIONS A current title commitment was not provided. There are no known covenants, conditions or restrictions impacting the site that are considered to affect the marketability or highest and best use. It is recommended that the client/reader obtain a copy of the current covenants, conditions and restrictions, if any, prior to making a business decision. ENVIRONMENTAL ISSUES Although CBRE was not provided an Environmental Site Assessment (ESA), a tour of the site did not reveal any obvious issues regarding environmental contamination or adverse conditions. The appraiser is not qualified to detect the existence of potentially hazardous material or underground storage tanks which may be present on or near the site. The existence of hazardous materials or underground storage tanks may affect the value of the property. For this appraisal, CBRE, Inc. has specifically assumed that the property is not affected by any hazardous materials that may be present on or near the property. CONCLUSION The site is suitable for uses commensurate with the surrounding neighborhood. The site is well- located and is afforded superior visibility and frontage along N Elm Street, W McKinney Street, W Parkway Street, and Bolivar Street. The size of the site is typical for the area and there are no known detrimental uses in the immediate vicinity; however, approximately 40% of the subject is encumbered by floodplain (Zone AE) with 10% encumbered by floodway (Zone AE). In addition, the primary improvements are almost fully contained with the floodplain/floodway. The subject is up to +/- 4 feet deep in the floodplain/floodway. Other than the discussed flood encumbrance, there are no known factors which are considered to prevent the site from development to its highest and best use, as vacant. © 2024 CBRE, Inc. Improvements Analysis 15 Improvements Analysis The following chart shows a summary of the improvements. The subject is a 28,334-square foot mixed (flex space) facility located at 401 N Elm Street in Denton, Texas situated on a 3.21-acre site. The improvements were constructed in 1970 as a grocery store and were reportedly converted to its current use as flex/cubicle office space in 2021. IMPROVEMENTS SUMMARY AND ANALYSIS Industrial 1970 Renovated:### Building Number Improvement Type % A/C Size (SF) Year Built/ Renovated Subject Property Flex Building 100%28,344 1970/2021 Total/Average:100%28,344 Source: Various sources compiled by CBRE 4.94 : 1Land-to-Building Ratio 20.3%Site Coverage Parking Improvements 50 Years Year Built 54 Years Typical Open Total Economic Life Parking Spaces: Functional Utility Remaining Economic Life Actual Age Age/Life Depreciation Effective Age 204 25 Years 50.0% 25 Years 1 28,344 SF 1 Office Area Number of Buildings Number of Stories Gross Building Area (Flex Space) (100.0% of Total) Property Type 28,344 SF IMPROVEMENT DESCRIPTION & RATING Improvement Summary Description Comparative Rating Foundation Reinforced Concrete Average Frame Concrete Tilt-Up Average Exterior Walls Stucco Tilt-Up Concrete Average Interior Walls Painted Drywall Average Roof Flat Average Ceiling Suspended Ceiling Tiles Average HVAC System Roof Mounted HVAC Units Average Exterior Lighting Parking Lot Floodlights Average Interior Lighting Recessed Florescent Fixtures Average Flooring Laminate and Carpet Average Plumbing Assumed Adequate Average Stairwells Yes Average Elevators None --- Smoke Detectors Yes Average Sprinkler System Yes --- Furnishings Assorted Office Fixtures, Furniture, and Equipment Average Parking Concrete Paved Open Parking Average Landscaping Grass, Gravel, Trees, and Bushes Average Source: Various sources compiled by CBRE © 2024 CBRE, Inc. Improvements Analysis 16 CONSTRUCTION CLASS Building construction class is as follows: C - Masonry/concrete ext. walls & wood/steel roof & floor struct., exc. concrete slab on grade The construction components are assumed to be in working condition and adequate for the building. The overall quality of the facility is considered to be average for the neighborhood and age. However, CBRE, Inc. is not qualified to determine structural integrity and it is recommended that the client/reader retain the services of a qualified, independent engineer or contractor to determine the structural integrity of the improvements prior to making a business decision. PARKING The property includes surface parking, with an overall parking ratio of 7.20/1,000 SF. HVAC The HVAC system is assumed to be in good working order and adequate for the building. ELECTRICAL The electrical system is assumed to be in good working order and adequate for the building. PLUMBING The plumbing system is assumed to be in good working order and adequate for the building. LANDSCAPING Landscaping is considered to be in average condition and well maintained. FUNCTIONAL UTILITY The overall layout of the property is considered functional in utility and provides adequate accessibility and visibility to the individual office spaces. ADA COMPLIANCE All common areas of the property appear to have handicap accessibility. The client/reader’s attention is directed to the specific limiting conditions regarding ADA compliance. FURNITURE, FIXTURES AND EQUIPMENT As will be discussed further, the allocation of the real estate for the of fixtures, furniture, and equipment has been estimated herein. © 2024 CBRE, Inc. Improvements Analysis 17 ENVIRONMENTAL ISSUES CBRE, Inc. is not qualified to detect the existence of any potentially hazardous materials such as lead paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous construction materials on or in the improvements. The existence of such substances may affect the value of the property. For the purpose of this assignment, we have specifically assumed there are no hazardous materials that would cause a loss in value to the subject. DEFERRED MAINTENANCE No deferred maintenance was observed during inspection. ECONOMIC AGE AND LIFE CBRE, Inc.’s estimate of the subject improvements effective age and remaining economic life is depicted in the following chart: ECONOMIC AGE AND LIFE Actual Age 54 Years Effective Age 25 Years MVS Expected Life 50 Years Remaining Economic Life 25 Years Accrued Physical Incurable Depreciation 50.0% Compiled by CBRE The remaining economic life is based upon our on-site observations and a comparative analysis of typical life expectancies as published by Marshall and Swift, LLC, in the Marshall Valuation Service cost guide. While CBRE, Inc. did not observe anything to suggest a different economic life, a capital improvement program could extend the life expectancy. CONCLUSION The subject is a 3.21-acre, 28,344 SF freestanding mixed (flex space) building. The improvements are in good overall condition. Overall, there are no known factors that adversely impact the marketability of the improvements. © 2024 CBRE, Inc. Fixtures, Furniture, and Equipment 18 Fixtures, Furniture, and Equipment Analysis Based on our inspection, the subject’s interior is furnished with an assortment of office related fixtures, furniture, and equipment which were reportedly put into service in January 2021; therefore, these items are approximately 3.5 years old as of the effective date of value. A Cost New value of $803,473 was provided by the client. According to local market participants knowledgeable about purchasing bulk used furniture, 80% of the Cost New of the FF&E is diminished immediately upon purchase. Based on this commentary, the reported $803,473 Cost New was immediately depreciated to $160,695 upon delivery in January 2021. According to the IRS, the economic life of office furniture is seven years; thus, the remaining $160,695 of value (20% of the Cost New) would depreciate over a seven-year economic life at an average of +/-14% per year, or an average of $22,956 per year. With less than 3.5 years of economic life remaining as of the effective date, the annual depreciation of $22,956 per year has been multiplied by 3.5 as a reasonable estimate of the fixtures, furniture, and equipment for a value of +/- $80,371, as demonstrated in the following tables. This indicates that the value of the FF&E has virtually no contributory value to the market value of the real estate, at less than 2% of the concluded market value of the property. Furthermore, discussions with local market participants indicate that due to the saturation of the used office furniture market, along with its high depreciation, the cost of labor to remove the furniture generally offsets its value indicating that a realistic resell value of the furniture is estimated between $0.00 and $80,371. As such, the FF&E contributory allocation of the fee simple value is estimated to be between approximately $0.00 and $80,371, or less than 2% of the concluded market value of the property. FF&E - DEPRECIATION AT PURCHASE Cost New Depreciation Total Depreciation Value $803,473 x 80%=$642,778 $160,695 Compiled by CBRE FF&E -REMAINING DEPRECIATION Cost New Depreciation/Yr.Number of Years Value $160,695 x 14.29%x 3.5 =$80,371 Compiled by CBRE © 2024 CBRE, Inc. Zoning 19 ZONING MAP Subject © 2024 CBRE, Inc. Zoning 20 Zoning The following chart summarizes the subject’s zoning requirements. ZONING SUMMARY Current Zoning MD - Mixed Use Downtown Core Legally Conforming Yes Uses Permitted The MD district is provided to allow for a variety of uses contributing to the economic viability of Downtown Denton. This district allows for moderate- and high- density residential, commercial, office, entertainment, and other uses tailored to encourage a greater level of activity while protecting the scale and strengthening the character of Downtown and Denton's historic core. This district contributes to a vibrant environment for pedestrians, bicyclists, and other modes of travel. Zoning Change Not likely Category Zoning Requirement Minimum Lot Size None Minimum Lot Width None Maximum Height 100 Feet Minimum Setbacks Front Yard None Street Side Yard None Interior Side Yard None Rear Yard None Maximum Bldg. Coverage 100% Subject's Actual FAR 0.20 : 1 Source: Planning & Zoning Dept. • ANALYSIS AND CONCLUSION Based on the flood encumbrance previously discussed, the improvements are considered grandfathered and represent a legally-nonconforming use and, if damaged, may require a special permit application in order to be restored. Additional information may be obtained from the appropriate governmental authority. For purposes of this appraisal, CBRE has assumed the information obtained is correct. © 2024 CBRE, Inc. Tax and Assessment Data 21 Tax and Assessment Data The following summarizes the local assessor’s estimate of the subject’s market value, assessed value, and taxes, and does not include any furniture, fixtures or equipment. The CBRE estimated tax obligation is also shown. AD VALOREM TAX INFORMATION Parcel Assessor's Parcel No.Acres 2024 1 33705 2.703 6,745,634 2 76166 0.051 888,640 Subtotal $7,634,274 Assessed Value @ 100% 7,634,274 General Tax Rate (per $100 A.V.)1.909367 Total Taxes $145,766 Source: Assessor's Office Under the Texas Property Tax Code, assessed value is supposed to represent 100% of market value via the use of all three approaches to value. However, this rarely happens. First, Texas is a non-disclosure state, and the sales price is not on any public document and does not have to be divulged. Second, property owners have the ability to protest a property valuation in any tax year, regardless of whether the assessment has increased. The local Assessor’s methodology for valuation is fee simple market value. Notifications of preliminary assessed value as of January 1st are mailed in March and April and the Appraisal District has to be notified of a value protest by June 1. Tax rates, set by the individual taxing authorities, are determined by September 30 of that year. Based on the subject being owned by a municipality, it is not subject to an ad valorem tax assessment. © 2024 CBRE, Inc. Highest and Best Use 22 Highest and Best Use In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria the highest and best use must meet are: Legal permissibility; Physical possibility; Financial feasibility; and Maximum productivity. The highest and best use analysis of the subject is discussed below. AS IF VACANT Legal Permissibility The legally permissible uses were discussed in the Site Analysis and Zoning Sections. Physical Possibility The subject is adequately served by utilities, and has an adequate shape and size, sufficient access, etc., to be a separately developable site; however, approximately 40% of the subject is encumbered by floodplain (Zone AE) and approximately 10% is encumbered by floodway (Zone AE). As previously noted, the primary improvements are observed to be almost fully contained within the floodplain/floodway. Further, the subject is noted to be up to +/- 4 feet deep in the floodplain/floodway with the deepest section located along the north property line. Other than the noted floodplain encumbrance, there are no known physical reasons why the subject site would not support any legally probable development (i.e., it appears adequate for development). Existing structures on similar sites provides additional evidence for the physical possibility of development. Financial Feasibility Consideration to existing land use trends has been given in determining feasible uses. The determination of financial feasibility is dependent primarily on the relationship of supply and demand for the legally probable land uses versus the cost to create the uses. The immediate area is scattered with commercial, retail, and industrial uses along with residential uses along minor roadways. Considering the size of the subject as a whole, other surrounding land uses, its location attributes, and zoning restrictions, it is our opinion that a mixed use on the site would have a value commensurate with its cost. Therefore, a mixed use is financially feasible. Maximum Productivity - Conclusion The final test of highest and best use of the site as if vacant is that the use be maximally productive, yielding the highest return to the land. Based on the information presented above and upon information contained in the market and neighborhood analysis, the highest and best use of the subject, as if vacant, is a mixed use development. Analysis of the subject and its respective © 2024 CBRE, Inc. Highest and Best Use 23 market characteristics indicate the most likely buyer, as if vacant, would be a developer or investor. AS IMPROVED Legal Permissibility The site has been improved with a mixed-flexible use development that is a legal, conforming use. Physical Possibility The layout and positioning of the improvements are considered functional for mixed (flex-space) use. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design of the improvements, the use of the property for continued mixed (flex- space) uses would be the most functional use. Financial Feasibility The financial feasibility of a mixed (flex-space) property is based on the amount of rent which can be generated, less operating expenses required to generate that income; if a residual amount exists, then the land is being put to a productive use. Based upon the income capitalization approach conclusion, the subject is producing a positive net cash flow and continued utilization of the improvements for mixed (flex-space) purposes is considered financially feasible. Maximum Productivity - Conclusion As shown in the applicable valuation sections, buildings that are similar to the subject have been acquired or continue to be used by office owners/tenants. Based on the foregoing, the highest and best use of the property, as improved, is consistent with the existing mixed (flex-space) use. The most likely buyer for the subject property is an investor or owner/user. © 2024 CBRE, Inc. Sales Comparison Approach 24 Sales Comparison Approach The following map and table summarize the comparable data used in the valuation of the subject. A detailed description of each transaction is included in the addenda. SUMMARY OF COMPARABLE SALES YOC /GBA Percent Percent Actual Sale Adjusted Sale Price NOI No.Property Name Type Date Reno'd (SF) Office Air Cond. Price Price 1 Per SF 1 Per SF OAR 1 Freestanding Commercial Facility, 1605 Dallas Drive (South IH-35E Frontage/US-77) Denton, TX 76205 Under Contract Jul-24 1991 20,374 0.0% 100.0% $3,305,000 $3,305,000 $162.22 2 Festival Turf LLC,3601 Dividend DriveGarland, TX 75042 Sale Oct-23 1970 / 2023 7,920 9.4% 9.4% $1,437,500 $1,858,155 $234.62 3 4880 Alpha Road, 4880 Alpha Road Farmers Branch, TX 75244 Sale Jul-23 1977 47,708 31.2% 31.2% $6,700,000 $6,700,000 $140.44 $12.20 8.69% 4 Valwood I, 13801 Hutton Drive Farmers Branch, TX 75234 Sale Mar-23 1985 28,603 79.0% 100.0% $5,234,532 $5,234,532 $183.01 5 Rescue Heating and Air, 9639 Greenville Avenue Dallas, TX 75243 Sale Aug-22 1993 / 2023 28,885 47.0% 47.0% $4,158,840 $5,533,840 $191.58 6 1500 IH-35W, 1500 IH-35W Denton, TX 76207 Sale May-21 1972 / 2016 48,803 72.0% 72.0% $6,960,000 $6,960,000 $142.61 $9.00 6.31% Subj.Pro Forma 401 N Elm Street,401 N Elm Street Denton, TX 76201 ------1970 / 2021 28,344 100.0% 100.0%--------- --- --- 1 Adjusted sale price for cash equivalency, lease-up and/or deferred maintenance (where applicable) Compiled by CBRE Transaction Owner-User Owner-User Owner-User Owner-User © 2024 CBRE, Inc. Sales Comparison Approach 25 The sales utilized represent the best data available for comparison with the subject. DISCUSSION/ANALYSIS OF IMPROVED SALES Based on our comparative analysis, the following sections describe the adjustments warranted to each comparable. CONDITIONS OF SALE/FINANCING All sales were indicated to be cash-to-seller transactions or financed by a third party at market terms, and none appeared to occur under duress. As such, no adjustments for cash equivalency were necessary. All of the comparables reflected arm’s length transactions; therefore, no other adjustments for conditions of sale were warranted. MARKET CONDITIONS According to area brokers and our analysis of land sales in this market, appreciation rates had been trending upward prior to Federal interest rate increase which began in March 2022. An upward adjustment at a rate of 5% per year until March 2022, with 0% growth thereafter, has been applied to the comparables in accordance with their sale date to account for market conditions. LOCATION The subject property is located in downtown Denton with a mixture of uses including residential, retail, and commercial/industrial uses. Comparables 2, 3, 4, and 5 are located closer to the DFW metroplex and are considered superior to the subject with regard to location, warranting downward adjustments. Comparables 1 and 6 are located in areas with less development and are considered inferior compared to the subject with regard to location, warranting upward adjustments. SIZE Typically, there is an inverse relationship between unit price and size, as larger properties generally sell for less per acre than smaller tracts. The subject is approximately 28,344 square feet. Comparable 2 is smaller than the subject and is considered superior with regard to size, warranting a downward adjustment. Comparables 3 and 6 are larger than the subject, warranting upward adjustments. All remaining comparables are similar to the subject with regard to size and are not adjusted. AGE/CONDITION The subject improvements were built in 1970 and was reportedly renovated in 2021. The improvements are in good condition. Comparables 1, 3, and 4 have not been renovated and are considered inferior to the subject with regard to age/condition, warranting upward adjustments. All remaining comparables are considered similar with regard to age/condition and no adjustments were warranted. © 2024 CBRE, Inc. Sales Comparison Approach 26 QUALITY OF CONSTRUCTION All comparables are considered similar with regard to quality of construction compared to the subject and no adjustments were warranted. CLEAR HEIGHT All comparables are considered similar with regard to quality of clear height compared to the subject and no adjustments were warranted. % OFFICE FINISH The subject is approximately 100.0% office finish. Comparables 2 and 3 are considered inferior for % office finish compared to the subject, warranting upward adjustments. All remaining comparables are considered similar with regard to % office finish and are not adjusted. % CLIMATE CONTROLLED The subject is approximately 100.0% climate controlled. Comparables 2 and 3 are considered inferior for % of climate controlled area compared to the subject, warranting upward adjustments. All remaining comparables are considered similar with regard to % of climate controlled area and are not adjusted. LAND: BUILDING RATIO All other comparables are considered similar with regard to quality of land: building ratio compared to the subject and no adjustments were warranted. © 2024 CBRE, Inc. Sales Comparison Approach 27 SUMMARY OF ADJUSTMENTS Based on our comparative analysis, the following chart summarizes the adjustments warranted to each comparable. SALES ADJUSTMENT GRID Comparable Number 1 2 3 4 5 6 Subj. Pro Forma Transaction Type Under Contract Sale Sale Sale Sale Sale --- Transaction Date Jul-24 Oct-23 Jul-23 Mar-23 Aug-22 May-21 --- Year Built/Renovated 1991 1970 / / 2023 1972 / 2016 1970 / 2021 Property Subtype Misc. Freestanding Retail Flex Space Flex Space Flex Space Flex Space Flex Space Flex Space GBA (SF)20,374 7,920 47,708 28,603 28,885 48,803 28,344 Percent Office 0.0%9.4%31.2% 79.0% 47.0% 72.0%100.0% Percent Air Cond.100.0% 9.4%31.2% 100.0% 47.0% 72.0%100.0% Land to Bldg. Ratio 3.69 : 1 4.34 : 1 2.25 : 1 3.74 : 1 4.7 : 1 6.36 : 1 4.94 : 1 Actual Sale Price $3,305,000 $1,437,500 $6,700,000 $5,234,532 $4,158,840 $6,960,000 --- Adjusted Sale Price 1 $3,305,000 $1,858,155 $6,700,000 $5,234,532 $5,533,840 $6,960,000 --- Price Per SF 1 $162.22 $234.62 $140.44 $183.01 $191.58 $142.61 --- Occupancy 0%0%100%35%0%100%95% NOI Per SF Owner-User Owner-User $12.20 Owner-User Owner-User $9.00 $12.79 OAR 8.69%6.31%--- Adj. Price Per SF $162.22 $234.62 $140.44 $183.01 $191.58 $142.61 Property Rights Conveyed Financing Terms 1 Conditions of Sale Market Conditions (Time)4% Subtotal - Price Per SF $162.22 $234.62 $140.44 $183.01 $191.58 $148.31 Location 10%-5%-5%-5%-5%10% Size -10%5%5% Age/Condition 5%10%5% Quality of Construction Clear Height % Office Finish 10%5% % Climate Controlled 10%5% Land:Bldg Ratio Total Other Adjustments 15%5%20%0%-5%15% Indicated Value Per SF $186.55 $246.35 $168.53 $183.01 $182.00 $170.56 Absolute Adjustment 15%35%30%10%5%19% 1 Adjusted for cash equivalency, lease-up and/or deferred maintenance (where applicable) Compiled by CBRE © 2024 CBRE, Inc. Sales Comparison Approach 28 SALE PRICE PER SQUARE FOOT CONCLUSION The comparables present an adjusted range of $168.53 per SF to $246.35 per SF, with a mean and median of $189.50 per SF and $184.78 per SF, respectively. Comparables 1, 2, and 4 were given primary consideration. Secondary consideration was given to the remaining comparables. In conclusion, a reconciled value slightly above the central tendency of the overall range was most appropriate for the subject improvements in consideration of the preceding adjustments. The following chart presents the valuation conclusion: SALES COMPARISON APPROACH GBA (SF)X Value Per SF =Value 28,344 X $180.00 =$5,101,920 28,344 X $200.00 =$5,668,800 VALUE CONCLUSION Indicated As Value $5,400,000 Compiled by CBRE © 2024 CBRE, Inc. Income Capitalization Approach 29 Income Capitalization Approach The following map and table summarize the primary comparable data used in the valuation of the subject. A detailed description of each transaction is included in the addenda. SUMMARY OF COMPARABLE RENTALS No. Property Name and Location YOC / Reno'd Property Subtype Occ. Lease Area (SF) Lease Date Lease Term Base Rent Reimbursements 1 2022 Misc. Freestanding Retail 100% 7,453 Oct-22 15.0 Yrs.$19.32 PSF NNN 2 2014 Flex Space 100% 15,894 Dec-23 3.0 Yrs.$14.25 PSF NNN 24,706 Apr-23 5.0 Yrs.$11.50 PSF NNN 3 2008 Flex Space 100% 49,505 Apr-24 10.3 Yrs.$10.75 PSF NNN 4 2006 Flex Space 100% 48,500 Jul-22 3.0 Yrs.$10.50 PSF NNN 5 2006 Flex Space 100% 8,965 Jan-22 2.8 Yrs.$10.50 PSF NNN 6 2005 Flex Space 100% 12,765 May-21 5.3 Yrs.$13.05 PSF NNN Subj.401 N Elm Street 401 N Elm Street, Denton, Texas 1970 / 2021 Flex Space ------ Compiled by CBRE O'Reilly Auto Parts 1850 South Shiloh Road, Garland, TX 75042 Vista Point South - Building 6 611 East State Highway 121, Coppell, TX 75019 MLRP Park West Crossing LLC - Bldg. A 910 South Freeport Parkway, Coppell, TX 75019Bethel Business Center 1122-1144 W. Bethel Road, Coppell, TX 75019DAL01402 Flower Mound 2 1200 Lakeside Parkway, Flower Mound, TX 75028 Flower Mound 3 1200 Lakeside Parkway, Flower Mound, TX 75028 The rentals utilized represent the best data available for comparison with the subject. © 2024 CBRE, Inc. Income Capitalization Approach 30 DISCUSSION/ANALYSIS OF RENT COMPARABLES The rent comparables include office properties with office tenants. The comparables range in size from 7,453 to 49,505 square feet and were constructed from 2005 to 2022. The comparables indicate rental rates ranging from $10.50 to $19.32 per square foot, triple net, unadjusted, and $9.45 to $16.42 after adjusting for market conditions, location, size, age/condition, % office, and % climate controlled. Lease terms ranged from 3 to 10.3 years and annual escalations were typical on multi-year lease terms. SUBJECT RENTAL INFORMATION The subject is currently occupied by the City of Denton; thus, it is currently owner-occupied. Our market rent estimate of $14.00 per square foot for this property was based on the comparable market data. Based upon market data, it appears most retail and flex-space leases in the area are leased on a 5-year lease term with 3% annualized escalations. MARKET RENT CONCLUSIONS The following chart shows the market rent conclusions for the subject: MARKET RENT CONCLUSIONS Category Flex Space Gross Building Area (SF)28,344 Percent of Total SF 100.0% Market Rent ($/SF/Yr.)$14.00 Reimbursements NNN Average Lease Term 60 Months Compiled by CBRE POTENTIAL RENTAL INCOME CONCLUSION Within this analysis, potential rental income is estimated based upon: POTENTIAL RENTAL INCOME Year Total $/SF CBRE Estimate $396,816 $14.00 Compiled by CBRE OPERATING HISTORY The subject is existing, but historical and budgeted expenses were not provided for our consideration. However, market expense structures in the area are typically triple net (NNN) lease expense structures; therefore, that is the expense basis utilized herein. © 2024 CBRE, Inc. Income Capitalization Approach 31 VACANCY Occupancy – Market and Submarket Important characteristics of the DFW Market and Denton Retail Submarket, as reported by CoStar, are summarized below: OCCUPANCY: DENTON RETAIL MARKET * Future Projected Data according to Costar Source: Costar, 2nd Quarter 2024 95.5% 94.0% 94.7% 95.5%95.6% 95.1% 95.5%95.5%95.5%95.5%95.4% 96.2% 94.5% 94.3% 94.5% 94.1% 93.8% 95.6%95.6%95.5%95.5%95.5% 92.5% 93.0% 93.5% 94.0% 94.5% 95.0% 95.5% 96.0% 96.5% 2023 2024*2025*2026*2027*2028*2029* Market Submarket OCCUPANCY: FLEX-SPACE MARKET * Future Projected Data according to Costar Source: Costar, 2nd Quarter 2024 94.3%94.0% 95.2%95.0% 95.1% 94.2% 93.6%93.2%92.8%92.4%92.2% 97.0%97.2% 98.2% 97.4% 96.6% 96.1% 94.0%94.1%94.2%94.1%94.2% 89.0% 90.0% 91.0% 92.0% 93.0% 94.0% 95.0% 96.0% 97.0% 98.0% 99.0% 2023 2024*2025*2026*2027*2028*2029* Market Submarket As presented in the Occupancy: Denton Retail Market chart, the DFW Market and Denton Submarket retail occupancy rates are projected to be 95.1% and 93.8%, respectively, at the end of the current year, which represents a decrease from the previous year's retail market occupancy of 95.6% and 94.1%. Retail occupancy for next year is projected to be 95.5% in the DFW Market and 95.6% in the Denton Submarket, reflecting an increase from the current year. © 2024 CBRE, Inc. Income Capitalization Approach 32 As presented in the Occupancy: Flex-Space Market chart, the DFW Market and Denton Submarket flex-space occupancy rates are projected to be 94.2% and 96.1%, respectively, at the end of the current year, which represents a decrease from the previous year's flex-space market occupancy of 95.1% and 96.6%. Flex-space occupancy for next year is projected to be 93.6% in the DFW Market and 94.0% in the Denton Submarket, reflecting a decrease from the current year. Further, occupancy rates of the comparable sales presented in this report range from 0% to 100% with a mean of 47% while the occupancy rates of the rent comparables presented report 100% occupancy. Taking into consideration the submarkets analyzed, along with the sales comparables and rent comparables utilized in our analysis, we have utilized a 5% vacancy rate for our analysis. The subject’s vacancy is detailed as follows: VACANCY Year Total % PGI CBRE Estimate $19,841 5% Compiled by CBRE Since the property will likely be occupied by a single tenant, it has the potential for wide swings in vacancy. It will either be 100% leased or 100% vacant. The inclusion of a factor for vacancy and collection loss is not intended to account for the actual vacancy at any specific point in time but rather, the average vacancy over an extended holding period. CREDIT LOSS The credit loss estimate is an allowance for nonpayment of rent or other income. The subject’s credit loss is detailed as follows: CREDIT LOSS Year Total % PGI CBRE Estimate $3,968 1.0% Compiled by CBRE EXPENSE REIMBURSEMENTS Industrial leases in the market are typically based on a triple net basis with pass through of all operating expenses except some Non-Reimbursable expenses and structural repairs. Those expenses considered to be eligible for reimbursement are as follows: © 2024 CBRE, Inc. Income Capitalization Approach 33 EXPENSES ELIGIBLE FOR REIMBURSEMENT Real Estate Taxes Property Insurance Common Area Maintenance Management Fee Compiled by: CBRE The subject’s expense reimbursements are detailed as follows: EXPENSE REIMBURSEMENTS Year Total $/SF CBRE Estimate $129,026 $4.55 Compiled by CBRE © 2024 CBRE, Inc. Income Capitalization Approach 34 EFFECTIVE GROSS INCOME The subject’s effective gross income is detailed as follows: EFFECTIVE GROSS INCOME Year Total $/SF CBRE Estimate $494,291 $17.44 Compiled by CBRE OPERATING EXPENSE ANALYSIS Expense Comparables The following chart summarizes expenses obtained from recognized industry publications and/or comparable properties. EXPENSE COMPARABLES Comparable Number 1 2 3 4 Subject Location DFW DFW DFW DFW Denton, TX GBA (SF)28,603 26,153 19,680 23,833 28,344 Effective Gross Income $9.36 $11.28 $12.93 $12.01 $17.44 Expenses Real Estate Taxes $1.44 $1.18 $1.41 $2.11 $0.43 Property Insurance 0.59 0.40 0.55 0.25 0.50 Common Area Maintenance 1.70 0.90 2.40 0.90 2.00 Management Fee ¹0.39 0.28 0.38 0.33 0.52 Nonreimbursable Landlord Expense 0.01 - - 0.09 - Operating Expenses $4.13 $2.76 $4.74 $3.68 $4.65 Operating Expense Ratio 44.1% 24.5% 36.7% 30.6% 26.7% ¹ (Mgmt. typically analyzed as a % of EGI)4.2%2.5%2.9%2.7%3.0% Compiled by CBRE The comparable data and projections for the subject are summarized as follows: OPERATING EXPENSES Year Total $/SF Expense Comparable 1 N/A $4.13 Expense Comparable 2 N/A $2.76 Expense Comparable 3 N/A $4.74 CBRE Estimate $131,860 $4.65 Compiled by CBRE The subject’s per square foot operating expense pro forma is in line with the total per square foot operating expenses indicated by the expense comparables. © 2024 CBRE, Inc. Income Capitalization Approach 35 NET OPERATING INCOME CONCLUSION The comparable data and projections for the subject are summarized as follows: NET OPERATING INCOME Year Total $/SF CBRE Estimate $362,431 $12.79 Compiled by CBRE DIRECT CAPITALIZATION Direct capitalization is a method used to convert a single year’s estimated stabilized net operating income into a value indication. The following subsections represent different techniques for deriving an overall capitalization rate. Comparable Sales The overall capitalization rates (OARs) confirmed for the comparable sales analyzed in the sales comparison approach are as follows: COMPARABLE CAPITALIZATION RATES Sale Sale Price Sale Date $/SF Occupancy OAR 2 Oct-23 $234.62 0%n/a 3 Jul-23 $140.44 100% 8.69% 4 Mar-23 $183.01 35% 5.60% Indicated OAR:94%5.60%-8.69% Compiled by: CBRE The overall capitalization rates for these sales were derived based upon the actual or pro-forma income characteristics of the property. The comparables are representative of fee simple sales and present capitalization rates ranging from 5.60% to 8.69% with an average of 6.93%. © 2024 CBRE, Inc. Income Capitalization Approach 36 Published Investor Surveys The results of the most recent investor surveys are summarized in the following chart. OVERALL CAPITALIZATION RATES Investment Type OAR Range Average RealtyRates.com Industrial 5.78%-13.19% 9.47% Warehouse/Distribution 5.78%-11.53% 8.52% R&D/Flex 6.45%-13.19% 9.64% Climate Controlled/Manufacturing 6.12%-12.48% 8.73% Retail 5.82%-14.16% 9.82% Anchored 5.82%-12.86% 10.02% Un-Anchored 6.28%-14.16% 10.71% Free Standing 6.10%-13.51% 10.37% Indicated OAR:8.52%-10.71% Compiled by: CBRE The subject is considered to be a Class C property. Because of the subject’s age, location, and tenancy, an OAR near the middle of the range indicated in the preceding table is considered appropriate. Capitalization Rate Conclusion The following chart summarizes the OAR conclusions. OVERALL CAPITALIZATION RATE - CONCLUSION Source Indicated OAR Comparable Sales 5.60%-8.69% Comparable Sales (Secondary)6.66%-7.33% Published Surveys 8.52%-10.71% Market Participants 6.50%-8.00% CBRE Estimate 7.00% Compiled by: CBRE Overall, an OAR in the middle portion of the range is considered appropriate for the following reasons: • The subject is in good condition; • The subject was reportedly renovated in 2021; • The subject is located in downtown Denton, proximate to supporting commercial development; • The subject benefits from frontage along N Elm Street, W McKinney Street, Bolivar Street, and W Parkway Street and its proximity to I-35E and Loop 288, both major thoroughfares in the Denton market area. © 2024 CBRE, Inc. Income Capitalization Approach 37 We have also considered prevailing market conditions with respect to capitalization rates. This includes a combination of inflationary pressures, higher cost of capital (considering interest rates as well as risk spreads), and the current inflationary environment. While the overall long-term outlook for mixed-use real estate remains positive, the full effect of these factors may not yet be reflected in transactional data. Overall, we view uncertainty and the higher cost of capital to have an upward influence on capitalization rates which is considered with respect to our conclusion herein. Direct Capitalization Summary A summary of the direct capitalization is illustrated in the following chart. DIRECT CAPITALIZATION SUMMARY Income $/Door/Mo.$/SF/Yr Total Potential Rental Income $33,068 $14.00 $396,816 Vacancy 5.00%(1,653) (0.70)(19,841) Credit Loss 1.00%(331) (0.14)(3,968) Net Rental Income $31,084 $13.16 $373,007 Expense Reimbursements 10,752 4.55 129,026 Vacancy & Credit Loss 6.00%(645) (0.27)(7,742) Effective Gross Income $41,191 $17.44 $494,291 Expenses Real Estate Taxes $0.43 $12,159 Property Insurance 0.60 17,006 Common Area Maintenance 3.00 85,032 Management Fee 3.00%0.52 14,829 0.10 2,834 Operating Expenses $4.65 $131,860 Operating Expense Ratio 26.68% Net Operating Income $12.79 $362,431 OAR ÷ 7.00% Indicated Stabilized Value $5,177,587 Rounded $5,200,000 Deferred Maintenance - Lease-Up Discount - Indicated As Is Value $5,177,587 Rounded $5,200,000 Value Per SF $183.46 Compiled by CBRE © 2024 CBRE, Inc. Reconciliation of Value 38 Reconciliation of Value The value indications from the approaches to value are summarized as follows: SUMMARY OF VALUE CONCLUSIONS As Is on August 12, 2024 Sales Comparison Approach $5,400,000 Income Capitalization Approach $5,200,000 Reconciled Value $5,300,000 Compiled by CBRE In the sales comparison approach, the subject is compared to similar properties that have been sold recently or for which listing prices or offers are known. The sales used in this analysis are considered highly comparable to the subject, and the required adjustments were based on reasonable and well-supported rationale. In addition, market participants are currently analyzing purchase prices on similar properties as they relate to available substitutes in the market. Therefore, the sales comparison approach is considered to provide a reliable value indication and has been given primary emphasis in the final value reconciliation. The income capitalization approach is applicable to the subject since it is an income producing property leased in the open market. Market participants are primarily analyzing investment properties based on their income generating capability. Therefore, the income capitalization approach is considered a reasonable and substantiated value indicator and has been given secondary emphasis in the final value estimate. Based on the foregoing, the market value of the subject has been concluded as follows: MARKET VALUE CONCLUSION Appraisal Premise Interest Appraised Date of Value Value Conclusion As Is Fee Simple Estate August 12, 2024 $5,300,000 * Compiled by CBRE *The Fee Simple Value Conclusion of $5,300,000 includes an allocation of the Fixtures, Furniture, and Equipment (FF&E) between approximately $0.00 and $80,371, or less than 2% of the total fee simple value. © 2024 CBRE, Inc. Assumptions and Limiting Conditions 39 Assumptions and Limiting Conditions 1. CBRE, Inc. through its appraiser (collectively, “CBRE”) has inspected through reasonable observation the subject property. However, it is not possible or reasonably practicable to personally inspect conditions beneath the soil and the entire interior and exterior of the improvements on the subject property. Therefore, no representation is made as to such matters. 2. The report, including its conclusions and any portion of such report (the “Report”), is as of the date set forth in the letter of transmittal and based upon the information, market, economic, and property conditions and projected levels of operation existing as of such date. The dollar amount of any conclusion as to value in the Report is based upon the purchasing power of the U.S. Dollar on such date. The Report is subject to change as a result of fluctuations in any of the foregoing. CBRE has no obligation to revise the Report to reflect any such fluctuations or other events or conditions which occur subsequent to such date. 3. Unless otherwise expressly noted in the Report, CBRE has assumed that: (i) Title to the subject property is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE has not examined title records (including without limitation liens, encumbrances, easements, deed restrictions, and other conditions that may affect the title or use of the subject property) and makes no representations regarding title or its limitations on the use of the subject property. Insurance against financial loss that may arise out of defects in title should be sought from a qualified title insurance company. (ii) Existing improvements on the subject property conform to applicable local, state, and federal building codes and ordinances, are structurally sound and seismically safe, and have been built and repaired in a workmanlike manner according to standard practices; all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; and the roof and exterior are in good condition and free from intrusion by the elements. CBRE has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. CBRE appraisers are not engineers and are not qualified to judge matters of an engineering nature, and furthermore structural problems or building system problems may not be visible. It is expressly assumed that any purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. (iii) Any proposed improvements, on or off-site, as well as any alterations or repairs considered will be completed in a workmanlike manner according to standard practices. (iv) Hazardous materials are not present on the subject property. CBRE is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater, mold, or other potentially hazardous materials may affect the value of the property. (v) No mineral deposit or subsurface rights of value exist with respect to the subject property, whether gas, liquid, or solid, and no air or development rights of value may be transferred. CBRE has not considered any rights associated with extraction or exploration of any resources, unless otherwise expressly noted in the Report. (vi) There are no contemplated public initiatives, governmental development controls, rent controls, or changes in the present zoning ordinances or regulations governing use, density, or shape that would significantly affect the value of the subject property. (vii) 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 be readily obtained or renewed for any use on which the Report is based. (viii) The subject property is managed and operated in a prudent and competent manner, neither inefficiently, nor super-efficiently. (ix) The subject property and its use, management, and operation are in full compliance with all applicable federal, state, and local regulations, laws, and restrictions, including without limitation environmental laws, seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, and licenses. (x) The subject property is in full compliance with the Americans with Disabilities Act (ADA). CBRE is not qualified to assess the subject property’s compliance with the ADA, notwithstanding any discussion of possible readily achievable barrier removal construction items in the Report. © 2024 CBRE, Inc. Assumptions and Limiting Conditions 40 (xi) All information regarding the areas and dimensions of the subject property furnished to CBRE are correct, and no encroachments exist. CBRE has neither undertaken any survey of the boundaries of the subject property, nor reviewed or confirmed the accuracy of any legal description of the subject property. Unless otherwise expressly noted in the Report, no issues regarding the foregoing were brought to CBRE’s attention, and CBRE has no knowledge of any such facts affecting the subject property. If any information inconsistent with any of the foregoing assumptions is discovered, such information could have a substantial negative impact on the Report and any conclusions stated therein. Accordingly, if any such information is subsequently made known to CBRE, CBRE reserves the right to amend the Report, which may include the conclusions of the Report. CBRE assumes no responsibility for any conditions regarding the foregoing, or for any expertise or knowledge required to discover them. Any user of the Report is urged to retain an expert in the applicable field(s) for information regarding such conditions. 4. CBRE has assumed that all documents, data and information furnished by or on behalf of the client, property owner or owner’s representative are accurate and correct, unless otherwise expressly noted in the Report. Such data and information include, without limitation, numerical street addresses, lot and block numbers, Assessor’s Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any error in any of the above could have a substantial impact on the Report and any conclusions stated therein. Accordingly, if any such errors are subsequently made known to CBRE, CBRE reserves the right to amend the Report, which may include the conclusions of the Report. The client and intended user should carefully review all assumptions, data, relevant calculations, and conclusions of the Report and should immediately notify CBRE of any questions or errors within 30 days after the date of delivery of the Report. 5. CBRE assumes no responsibility (including any obligation to procure the same) for any documents, data or information not provided to CBRE, including, without limitation, any termite inspection, survey or occupancy permit. 6. All furnishings, equipment and business operations have been disregarded with only real property being considered in the Report, except as otherwise expressly stated and typically considered part of real property. 7. Any cash flows included in the analysis are forecasts of estimated future operating characteristics based upon the information and assumptions contained within the Report. Any projections of income, expenses and economic conditions utilized in the Report, including such cash flows, should be considered as only estimates of the expectations of future income and expenses as of the date of the Report and not predictions of the future. This Report has been prepared in good faith, based on CBRE's current anecdotal and evidence-based views of the commercial real estate market. Although CBRE believes its views reflect market conditions on the date of this Report, they are subject to significant uncertainties and contingencies, many of which are beyond CBRE's control. In addition, many of CBRE's views are opinion and/or projections based on CBRE's subjective analyses of current market circumstances. Actual results are affected by a number of factors outside the control of CBRE, including without limitation fluctuating economic, market, and property conditions. Actual results may ultimately differ from these projections, and CBRE does not warrant any such projections. Further, other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE's current views to later change or be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change. 8. The Report contains professional opinions and is expressly not intended to serve as any warranty, assurance or guarantee of any particular value of the subject property. Other appraisers may reach different conclusions as to the value of the subject property. Furthermore, market value is highly related to exposure time, promotion effort, terms, motivation, and conclusions surrounding the offering of the subject property. The Report is for the sole purpose of providing the intended user with CBRE’s independent professional opinion of the value of the subject property as of the date of the Report. Accordingly, CBRE shall not be liable for any losses that arise from any investment or lending decisions based upon the Report that the client, intended user, or any buyer, seller, investor, or lending institution may undertake related to the subject property, and CBRE has not been compensated to assume any of these risks. Nothing contained in the Report shall be construed as any direct or indirect recommendation of CBRE to buy, sell, hold, or finance the subject property. 9. No opinion is expressed on matters which may require legal expertise or specialized investigation or knowledge including, but not limited to, environmental, social, and governance principles (“ESG”), beyond that customarily employed by real estate appraisers. Any user of the Report is advised to retain experts in areas that fall outside the scope of the real estate appraisal profession for such matters. © 2024 CBRE, Inc. Assumptions and Limiting Conditions 41 10.CBRE assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 11.Acceptance or use of the Report constitutes full acceptance of these Assumptions and Limiting Conditions and any special assumptions set forth in the Report. It is the responsibility of the user of the Report to read in full, comprehend and thus become aware of all such assumptions and limiting conditions. CBRE assumes no responsibility for any situation arising out of the user’s failure to become familiar with and understand the same. 12.The Report applies to the property as a whole only, and any pro ration or division of the title into fractional interests will invalidate such conclusions, unless the Report expressly assumes such pro ration or division of interests. 13.The allocations of the total value estimate in the Report between land and improvements apply only to the existing use of the subject property. The allocations of values for each of the land and improvements are not intended to be used with any other property or appraisal and are not valid for any such use. 14.The maps, plats, sketches, graphs, photographs, and exhibits included in this Report are for illustration purposes only and shall be utilized only to assist in visualizing matters discussed in the Report. No such items shall be removed, reproduced, or used apart from the Report. 15.The Report shall not be duplicated or provided to any unintended users in whole or in part without the written consent of CBRE, which consent CBRE may withhold in its sole discretion. Exempt from this restriction is duplication for the internal use of the intended user and its attorneys, accountants, or advisors for the sole benefit of the intended user. Also exempt from this restriction is transmission of the Report pursuant to any requirement of any court, governmental authority, or regulatory agency having jurisdiction over the intended user, provided that the Report and its contents shall not be published, in whole or in part, in any public document without the written consent of CBRE, which consent CBRE may withhold in its sole discretion. Finally, the Report shall not be made available to the public or otherwise used in any offering of the property or any security, as defined by applicable law. Any unintended user who may possess the Report is advised that it shall not rely upon the Report or its conclusions and that it should rely on its own appraisers, advisors and other consultants for any decision in connection with the subject property. CBRE shall have no liability or responsibility to any such unintended user. © 2024 CBRE, Inc. Addenda © 2023 CBRE, Inc. ADDENDA © 2024 CBRE, Inc. Addenda © 2023 CBRE, Inc. Addendum A IMPROVED SALE DATA SHEETS © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. Addenda © 2023 CBRE, Inc. Addendum B RENT COMPARABLE DATA SHEETS © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. © 2024 CBRE, Inc. Addenda © 2023 CBRE, Inc. Addendum C QUALIFICATIONS © 2024 CBRE, Inc. 1 ©2022 CBRE, INC. PROFILES RIGHT OF WAY APPRAISAL TEAM LEAD / TEXAS Catherine A. Thomas, MAI, SRA, AI-GRS, R/W-AC Director, Austin, TX T +1 512 499 4911 E cathy.thomas@cbre.com Lic. TX 1336636 G Professional Experience Catherine Thomas is an Executive Vice President with CBRE’s Valuation & Advisory Services group in Austin, Texas and co-manages the Texas Right of Way Appraisal Team. Ms. Thomas has over twenty years of real estate appraisal and consulting experience with the majority of her experience being in right-of-way. Her appraisal background includes analysis and appraisal of properties for litigation, right-of-way and other purposes under eminent domain, as well as lending. She is a MAI, SRA and AI-GRS designated member of the Appraisal Institute and holds the Right-of-Way Appraiser certification (R/W-AC) of the International Right of Way Association (IRWA). Ms. Thomas has served on the board of directors for IRWA Austin Chapter 74 since 2014, being elected Chapter Secretary in 2021, Chapter Treasurer in 2022 and Chapter Vice President in 2023; she currently serves as Chapter President 2024-2025. Ms. Thomas is well versed in providing litigation support for ongoing cases and has provided expert testimony in numerous special commissioners’ hearings across Texas; her eminent domain experience includes appraisal of full and partial fee and easement acquisitions for numerous utility providers, municipalities and governmental entities, as well as property owners, throughout Texas. Awards IRWA Chapter 74 Professional of the Year (2020) Pro Affiliations / Accreditations ‒ Certified General Appraiser, State of Texas ‒ Appraisal institute, Designated Member (MAI, SRA, AI-GRS) ‒ International Right of Way Association (R/W-AC) ‒ Certified Department of Transportation Appraiser, State of Texas ‒ American Taekwondo Association, 3rd Degree Black Belt Education ‒ St. Edward’s University, Master of Arts in Human Services ‒ The University of Texas at Austin, Bachelor of Arts ‒ Continuing Education, various Appraisal Courses © 2024 CBRE, Inc. Appraiser: Catherine A Thomas License #: TX 1336636 G License Expires: 01/31/2025 Chelsea BuchholtzCommissioner Certified General Real Estate Appraiser Having provided satisfactory evidence of the qualifications required by the Texas Appraiser Licensing and Certification Act, Occupations Code, Chapter 1103, authorization is granted to use this title: Certified General Real Estate Appraiser For additional information or to file a complaint please contact TALCB at www.talcb.texas.gov. CATHERINE A THOMAS 500 W 2ND STREET, SUITE 1700 AUSTIN, TX 78701 © 2024 CBRE, Inc.