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HomeMy WebLinkAboutCRE-2024-0373 Pecan Creek Trail - Appraisal Report Appraisal of Real Property PECAN CREEK TRAIL FM 426 Denton, Texas 76208 Prepared For: The City of Denton Internal File #: CRE-2024-0373 Effective Date: September 30, 2024 Date of Report: October 10, 2024 Prepared By: M. Colt Jones, MAI, SRA, R/W-AC Sunny Starrett, RWA, RW/AC PECAN CREEK TRAIL FM 426, Denton, Texas 76208 110 S. Walnut Street Weatherford, TX 76086 +1 (817) 550-6666 October 10, 2024 Mark Mastroleo City of Denton 401 N. Elm Street Denton, TX 76201 RE: Appraisal Report Pecan Creek Trail FM 426 Denton, Texas 76208 Cultivate Real Estate File No: CRE-2024-0373 Mr. Mastroleo: In accordance with your request, we have prepared an Appraisal Report to estimate the As Is - The Whole (Fee Simple Estate), As Is - The Acquisition (Fee Simple Estate), and As Is - The Remainder (Fee Simple Estate) in the subject property. The intended use of this appraisal is to develop an opinion of just compensation due to the landowner as a result of the partial acquisition. The City of Denton is the only intended user of this report. The appraisal is intended to conform with the Uniform Standards of Professional Appraisal Practice (USPAP), the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute; The Texas Property Code and any other applicable state appraisal regulations, and the appraisal guidelines of The City of Denton is the only intended user of this report. The subject property, located on the south side of FM 426, Denton, TX, is a residential tract of land located in the Denton County submarket. The purpose of the appraisal is to develop an opinion of real property compensation due to the property owner, which includes the market value of the part to be acquired, plus any applicable damages to the remainder property, as of the effective date of the appraisal. Market value is based upon analysis of the underlying fee simple interest in the property. In some assignments, the market value of permanent or temporary easement interest(s) are required. The appraisal is valid only as of the stated effective date or dates. Summary of Compensation It is my opinion the total compensation for the acquisition of the herein described property is as shown in the table that follows, and as of the date indicated. This conclusion is based upon my independent appraisal and the exercise of my professional judgment. On the date indicated herein, I personally inspected in the field the property herein appraised. The compensation comprises the value of the partial acquisition (land and improvements, if any), damages/enhancements to the Remainder resulting from the acquisition (if any), and cost to cure (if any). A table showing the Just Compensation estimate follows: The exposure time preceding September 30, 2024 would have been 12 months or less. Extraordinary Assumptions The use of an Extraordinary Assumption(s) may have impacted the results of the assignment. • We have relied on tax records for the whole property size and assume this size is correct for the purposes of this report. • We have relied upon the client-provided survey for the size of the acquisition area and assume this size is correct for the purposes of this report. • Because of the numerous mathematical calculations that are inherent for partial acquisition valuations, very little rounding of value estimates are made in this report. Value estimates are not exact, but opinions of approximate value only. Hypothetical Conditions The conditional value reported herein is based on the use of a Hypothetical Condition(s) directly impacting the results of the assignment. • The remainder after is valued under the hypothetical condition that the property has been acquired. Jurisdictional Exceptions USPAP defines a Jurisdictional Exceptions as, “an assignment condition established by applicable law or regulation, which precludes an appraiser from complying with a part of USPAP”. If any part of the Uniform Standards of Professional Appraisal Practice is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction. As a matter of law, any enhancements caused by the public project are not to be considered. Additionally, in this appraisal of the remainder, it has been assumed that the public roadway improvements are in place and completed as of the effective date of value. This/These assumptions are permitted by the Jurisdictional Exception portion of USPAP. If there are any specific questions or concerns regarding the attached appraisal report, or if Cultivate Real Estate can be of additional assistance, please contact the individuals listed below. Respectfully Submitted, M. Colt Jones, MAI, SRA, R/W-AC Managing Partner Certified General Real Estate Appraiser Texas License No. 1380107 Expiration Date 11/30/2025 +1 (817) 550-6666 colt@cultivatere.net Sunny Starrett, RWA, RW/AC Real Estate Appraiser Trainee Texas License No.1341361 - Trainee Expiration Date 5/31/2025 +1 (817) 550-6666 sunny@cultivatere.net Certification Pecan Creek Trail - CRE-2024-0373 We certify that, to the best of our knowledge and belief:  The statements of fact contained in this report are true and correct.  The reported analyses, opinions, and conclusions of the signers are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.  The signers of this report have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.  M. Colt Jones, MAI, SRA, R/W-AC nor Sunny Starrett, RWA, R/W-AC have performed no services, specifically as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.  The signers are not biased with respect to the property that is the subject of this report or to the parties involved with this assignment.  The engagement in this assignment was not contingent upon developing or reporting predetermined results.  The compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.  The reported analysis, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and the Uniform Standards of Professional Appraisal Practice, as set forth by the Appraisal Standards Board of the Appraisal Foundation.  M. Colt Jones, MAI, SRA, R/W-AC and Sunny Starrett, RWA, R/W-AC inspected the property that is the subject of this report.  No one provided significant real property appraisal assistance to the appraisers signing the certification.  The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.  As of the date of this report, M. Colt Jones, MAI, SRA, R/W-AC has completed the continuing education program for Designated Members of the Appraisal Institute. Certification (Continued) Pecan Creek Trail - CRE-2024-0373 October 10, 2024 M. Colt Jones, MAI, SRA, R/W-AC Certified General Real Estate Appraiser State of Texas License No. 1380107 Expiration Date 11/30/2025 Date October 10, 2024 Sunny Starrett, RWA, RW/AC Real Estate Appraiser Trainee State of Texas License No.1341361 - Trainee Expiration Date 5/31/2025 Date Table of Contents Pecan Creek Trail - CRE-2024-0373 LETTER OF TRANSMITTAL Certification Photographs of the Subject Property 1 General Assumptions And Limiting Conditions 2 Introduction Executive Summary 5 Identification of Appraisal Assignment 7 Scope of Work 9 Descriptions & Exhibits Regional Analysis 12 Neighborhood Analysis 15 Site Description Before The Acquisition 22 Taxes 30 Highest & Best Use Analysis 31 Appraisal Methodology Land Valuation – Whole Property 35 Reconciliation of Value Conclusions – Whole Property 42 Part to be Acquired and Remainder Before 42 Reconciliation of Value Conclusions - Part to Be Acquired 44 Remainder After Valuation 44 Reconciliation of Value Conclusions – Remainder After 48 Compensation Summary 48 Addenda General Definitions 49 Comparable Datasheets Qualifications of Appraiser & Appraiser License Property Information and Project Survey Photographs of the Subject Property Pecan Creek Trail - CRE-2024-0373 1 Looking west towards the acquisition area from the neighboring subdivision. Looking northwest towards the whole property from the neighboring subdivision. Looking southwesterly towards the whole property from FM 426/E. McKinney Street. Looking south toward the whole property from FM 426/E. McKinney Street near the NWC and the private drive. Looking southeasterly along FM 46/E. McKinney Street from the whole property’s northwest corner. Looking northwesterly along FM 46/E. McKinney Street from the whole property’s northwest corner. General Assumptions and Limiting Conditions Pecan Creek Trail - CRE-2024-0373 2 This appraisal report is subject to the following general assumptions and limiting conditions: 1. No investigation has been made of, and no responsibility is assumed for, the legal description or for legal matters including title or encumbrances. Title to the property is assumed to be good and marketable unless otherwise stated. The property is further assumed to be free and clear of liens, easements, encroachments and other encumbrances unless otherwise stated, and all improvements are assumed to lie within property boundaries. 2. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable, but has not been verified in all cases. No warranty is given as to the accuracy of such information. 3. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been, or can readily be obtained, or renewed for any use on which the value estimates provided in this report are based. 4. Full compliance with all applicable federal, state and local zoning, use, occupancy, environmental, and similar laws and regulations is assumed, unless otherwise stated. 5. No responsibility is taken for changes in market conditions and no obligation is assumed to revise this report to reflect events or conditions, which occur subsequent to the appraisal date hereof. 6. Responsible ownership and competent property management are assumed. 7. The allocation, if any, in this report of the total valuation among components of the property applies only to the program of utilization stated in this report. The separate values for any components may not be applicable for any other purpose and must not be used in conjunction with any other appraisal. 8. Areas and dimensions of the property were obtained from sources believed to be reliable. Maps or sketches, if included in this report, are only to assist the reader in visualizing the property and no responsibility is assumed for their accuracy. No independent surveys were conducted. 9. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that affect value. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 10. No soil analysis or geological studies were ordered or made in conjunction with this report, nor was an investigation made of any water, oil, gas, coal, or other subsurface mineral and use rights or conditions. 11. Neither this company nor any individuals signing or associated with this report shall be required by reason of this report to give further consultation, to provide testimony or appear in court or other legal proceedings, unless specific arrangements thereto for have been made. 12. This appraisal has been made in conformance with, and is subject to, the requirements of the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice. 13. We have not been engaged nor are we qualified to detect the existence of hazardous material, which may or may not be present on or near the property. The presence of potentially hazardous substances such as asbestos, urea-formaldehyde foam insulation, industrial wastes, etc. may affect the value of the property. The value estimate herein is predicated on the assumption that there is no such material on, in, or near the property that would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client should retain an expert in this field if further information is desired. General Assumptions and Limiting Conditions (Continued) Pecan Creek Trail - CRE-2024-0373 3 14. The date of value to which the conclusions and opinions expressed in this report apply is set forth in the opinion letter at the front of this report. Our value opinion is based on the purchasing power of the United States' dollar as of this date. 15. The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property along with a detailed study of ADA requirements could reveal that the property is not in compliance with the act. If so, this would have a negative effect on the property value. We were not furnished with any compliance surveys or any other documents pertaining to this issue and therefore did not consider compliance or noncompliance with the ADA requirements when estimating the value of the property. 16. In accordance with our agreement, this report is limited to the value of the subject property. One or more additional issues may exist that could affect the Federal tax treatment of the subject property with respect to which we have prepared this report. This report does not consider or provide a conclusion with respect to any of those issues. With respect to any significant Federal tax issue outside the scope of this report, this report was not written, and cannot be used, by anyone for the purpose of avoiding Federal tax penalties. Extraordinary Assumptions When a value opinion is subject to an extraordinary assumption or hypothetical condition, the appraiser must state that condition so that its effect on the value opinion or conclusion is clear. An extraordinary assumption is an assumption that is directly related to a specific assignment, which if found to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. An extraordinary assumption may be used in an assignment only if: • It is required to properly develop credible opinions and conclusions; • The appraiser has a reasonable basis for the extraordinary assumption; • Use of the extraordinary assumption results in a credible analysis; and • The appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions. The use of an Extraordinary Assumption(s) may have impacted the results of the assignment. • We have relied on tax records for the whole property size and assume this size is correct for the purposes of this report. • We have relied upon the client-provided survey for the size of the acquisition area and assume this size is correct for the purposes of this report. • Because of the numerous mathematical calculations that are inherent for partial acquisition valuations, very little rounding of value estimates are made in this report. Value estimates are not exact, but opinions of approximate value only. General Assumptions and Limiting Conditions Pecan Creek Trail - CRE-2024-0373 4 Hypothetical Conditions Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. A hypothetical condition may be used in an assignment only if: • Use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison; • Use of the hypothetical condition results in a credible analysis; and • The appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions. The conditional value reported herein is based on the use of a Hypothetical Condition(s) directly impacting the results of the assignment. • The remainder after is valued under the hypothetical condition that the property has been acquired. Jurisdictional Exceptions USPAP defines a Jurisdictional Exceptions as, “an assignment condition established by applicable law or regulation, which precludes an appraiser from complying with a part of USPAP”. If any part of the Uniform Standards of Professional Appraisal Practice is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction. As a matter of law, any enhancements caused by the public project are not to be considered. Additionally, in this appraisal of the remainder, it has been assumed that the public roadway improvements are in place and completed as of the effective date of value. This/These assumptions are permitted by the Jurisdictional Exception portion of USPAP. Case Law and Legislative Precedents For right-of-way projects in the State of Texas, there are also several cases that may establish compensable and non-compensable elements resulting from a project. For example, regarding the compensation for landscaping, the Texas Supreme Court stated in the case of White vs. Natural Gas that “in eminent domain proceedings our courts have consistently held that the landowner cannot recover for damage to crops, loss of trees, ornamental shrubs, etc., as separate items. These features can be taken into consideration in determining compensation only insofar as they affect the market value of the land, as land.1” 1 White v. Natural Gas Pipeline Company of America, 444 S.W.2d 298, 301 (Tex. 1969) Executive Summary Pecan Creek Trail - CRE-2024-0373 5 Aerial Photograph Pecan Creek Trail - CRE-2024-0373 6 Identification of Assignment Pecan Creek Trail - CRE-2024-0373 7 Property Identification The subject property, located on the south side of FM 426, Denton, TX, is a residential tract of land located in the Denton County submarket. The Denton Appraisal District’s Parcel Number is: R0038423. Legal Description Approximately 80.800 acres of land situated in the G. Walker Survey, Abstract No. 1330A, Old DCAD Tract 6A, City of Denton, Denton County, Texas. Client/Intended Use/Users The intended use of this appraisal is to assist the client in their determination of adequate compensation due to the property owner, in compliance with the Texas Constitution, Article 1, Section 17, to be paid for the acquisition of Real Property interest for a public purpose as described herein. Others may receive a copy of this report due to legal requirements of disclosure, but the report is not intended for any other use or user (i.e., mortgage lending, tax assessment, etc.). The client of this specific assignment is City of Denton. The intended use of this appraisal is to develop an opinion of just compensation due to the landowner as a result of the partial acquisition. The City of Denton is the only intended user of this report. Although the appraisal is not intended for any other use or user, the client may designate use of this report to an outside entity to assist in the project, which may use or rely on the information, opinions, and conclusions contained in this report. Purpose The appraisal develops an opinion of real property compensation due to the property owner, which includes the market value of the part to be acquired, plus any applicable damages to the remainder property, as of the effective date of the appraisal. The purpose of this appraisal is to develop opinions of the As Is - The Whole (Fee Simple Estate), As Is - The Acquisition (Fee Simple Estate), and As Is - The Remainder (Fee Simple Estate). Definition Of Market Value Market Value is defined by City of Austin v. Cannizzo, 267 S.W. 2d 808 (Tex 1954) as being: “The price the property would bring when offered for sale by one who desires to sell, but is not obliged to sell, and is bought by one who desires to buy, but is under no necessity of buying, 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.” Property Rights Appraised The property rights appraised constitute the fee simple estate interest. Identification of Assignment (Continued) Pecan Creek Trail - CRE-2024-0373 8 Fee Simple Interest Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.2 Non-Discrimination Statement This appraisal has been completed without regard to race, color, religion, national origin, sex, marital status or any other prohibited basis, and does not contain references which could be regarded as discriminatory. Personal Property & Business Intangible There is no personal property (FF&E) or business intangible value included in this appraisal. Property And Sales History Current Owner The subject title is currently recorded in the name of Kamy Real Property Trust who acquired title to the property from Khosrow Sadeghian on August 30, 2020, under a Correction Instrument as recorded in the Denton County Deed Records, Document Number 2020-123697. The Correction Instrument was filed to correct the Grantee's Name. The Original Deed for the above transaction was a Special Warranty Deed dated April 11, 2014, recorded in the name of Kamy Real Estate Trust who acquired title to the property from Khosrow Sadeghian, for an undisclosed sale price as recorded in the Denton County Deed Records, Document Number 2014-44836. Current Pending Sale/Under Contract According to county records there has been no transfer of ownership for the subject property in the past three years and there is no known pending sale or listing of the subject. 2 The Dictionary of Real Estate Appraisal, Seventh Edition, Appraisal Institute, Chicago, Illinois, 2022 Scope of Work Pecan Creek Trail - CRE-2024-0373 9 According to the Uniform Standards of Professional Appraisal Practice, it is the appraiser’s responsibility to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem and intended user(s). Therefore, the appraiser must identify and consider: • The client and intended users • The intended use of the report • The type and definition of value • The effective date of value • Assignment conditions • Typical client expectations • Typical appraisal work by peers for similar assignments The client of this specific assignment is the City of Denton. The intended use of this appraisal is to develop an opinion of just compensation due to the landowner as a result of the partial acquisition. The City of Denton is the only intended user of this report. Use of this report by Third-Parties and other unintended users is not permitted. This report must be used in its entirety. Reliance on any portion of the report independent of others, may lead the reader to erroneous conclusions regarding the property values. Unless approval is provided by the authors no portion of the report stands alone. The scope of work for this assignment was based on the needs and prior communications with the Client. The purpose of this assignment—which was prepared as an Appraisal Report in accordance with USPAP Standards Rule 2-2a, with the analysis stated in the document and representing a summarized level of analysis—is to form an opinion of the As Is - The Whole (Fee Simple Estate), As Is - The Acquisition (Fee Simple Estate), and As Is - The Remainder (Fee Simple Estate) for the subject property, as of the most recent date of inspection (September 30, 2024). Specifically, the scope of work and report content herein is commensurate with the relative risk that is associated with this particular transaction as determined by the Client, the City of Denton. The type and extent of our research and analysis is detailed in individual sections of the report. In general, the following steps were taken to perform this assignment: • Physically inspected the subject property and the surrounding market area. The inspection of the property is limited to those things readily observable without the use of special testing or equipment. • Collected factual information about the property and the surrounding market and confirmed the information with various sources. • Performed a highest and best use analysis of the subject site as vacant and as improved when applicable. • Gathered market information relevant to the valuation of the subject. Data on comparables were confirmed with at least one of the parties to the transaction. • Analyzed market information and developed indications of value under the necessary approaches to value for a credible assignment result. The market information was analyzed for an appraisal of the Whole Property, the Part to be Acquired and the value of the Remainder Before and Remainder After the acquisition. Scope of Work (Continued) Pecan Creek Trail - CRE-2024-0373 10 o In certain partial right-of-way acquisitions, if it has been determined that the proposed acquisition will not result in permanent damages to the remainder property, the opinion of compensation can be limited to the valuation of the land and affected site improvements. The valuation of the unaffected improvements is not necessary in some cases for a credible assignment result. In this case, the subject improvements are removed and not impacted by the proposed project. This valuation is limited to the land only plus site improvements affected by the proposed acquisition. o The appraisal of real estate typically employs three traditional valuation methods: the sales comparison approach, the cost approach, and the income approach. The subject is appraised as vacant land and as such, the valuation is limited to the Sales Comparison Approach for land and plus the Cost Approach to address any impacted site improvements. o Because of the numerous mathematical calculations that are inherent for partial acquisition valuations, very little rounding of value estimates is made in this report. Value estimates are not exact, but opinions of approximate value only. • Partitioned the Whole Property value opinion between the Part to be Acquired and the Remainder Before the acquisition. In this case, the part to be acquired and remainder before estimates are prorated allocations of the whole property (e.g., If the whole property is 100% and the part to be acquired is 10%, the remainder before the acquisition is 90%). • Performed a highest and best use analysis on the Remainder After with consideration to the impact on the residual property as a result of the proposed acquisition. The appraisal of a remainder property is performed as though the proposed public or private improvements are complete as of the effective date of valuation. If necessary, the cost to cure and restore the functional utility of the remainder after was estimated. • Derived an estimate of the total compensation due to the owner of the property as the result of a proposed acquisition by summation of the part to be acquired and any damages. Permanent damages were calculated based on the difference in the value opinion for the remainder before and remainder after. • Prepared an appraisal report summarizing our analyses, opinions and conclusions. Other elements of the scope of work undertaken to perform this assignment are outlined throughout the narrative of the report. We have not provided prior professional services regarding the subject property, in the capacity as appraisers or otherwise, within a three-year period immediately preceding the date of acceptance of this assignment. Unless otherwise noted in this appraisal, area measurements were taken from the information made available to us that was provided from the Client and site surveys or other sources. These figures have been cross-checked to the extent possible with public records. However, in no event—unless otherwise noted in this report—have we conducted measurements of the specific areas (these figures are taken solely from the information provided by the Client, site surveys or other sources). The authors of this report are aware of the Competency Rule of USPAP and meet the standards. Scope of Work (Continued) Pecan Creek Trail - CRE-2024-0373 11 Sources of Information The following sources were contacted to obtain relevant information: The lack of unavailable items could affect the results of this analysis. As part of the general assumptions and limiting conditions, the subject is assumed to have no adverse easements, significant items of deferred maintenance, or be impacted by adverse environmental conditions. Subject Property Inspection Owner Contact The owner(s) of the subject property was not contacted by the appraisers and the subject property was inspected from the rights of way. Exposure Time Exposure time are both influenced by price. That is, a prudent buyer could be enticed to acquire the property in less time if the price were less. Hence, the time span cited below coincides with the value opinion(s) formed herein. USPAP Standard rule 1-2(c)(iv) requires an opinion of exposure time, not marketing time, when the purpose of the appraisal is to estimate market value. In the recent past, the volume of competitive properties offered for sale, sale prices, and vacancy rates have fluctuated little. Sale concessions have not been prevalent. The following information is used to estimate exposure time for the subject: Conclusion Given the analysis we have analyzed the exposure time as 12 months or less. Regional Analysis Pecan Creek Trail - CRE-2024-0373 12 Introduction We have analyzed demographic and economic information as it relates to the interaction of real estate market’s supply and demand. This market analysis provides a tool to predict a property’s market position and to estimate current and future occupancy and rental rates. Furthermore, a market analysis provides a basis for determining highest and best use of the subject property. Overall market conditions, as well as the property’s ability to compete in its market segment, influence income and occupancy performance. Market conditions are influenced by a variety of factors; we have focused on the historical and projected trends for a.) gross domestic product; b.) population; c.) employment; d.) personal income; e.) consumer spending; and, f.) housing. The subject market’s economic performance and the property’s ability to maintain its market position is a result of its specific attributes, including overall quality, amenities, location and reputation in the marketplace. To evaluate the factors that influence a property’s income potential over a projection term, the market has been analyzed at two levels: first from a broad market perspective (Regional Overview) without specific consideration of the subject property; second from a more narrowly defined market perspective with regards to the subject’s neighborhood influences (Neighborhood Analysis). The subject property is located in Denton, Texas. The map presented below illustrates the subject property location relative to the Dallas-Fort Worth-Arlington, TX MSA metropolitan area. Regional Analysis (Continued) Pecan Creek Trail - CRE-2024-0373 13 Regional Analysis Pecan Creek Trail - CRE-2024-0373 14 Unemployment The following graphs charts the trailing 18 months and trailing 10 years unemployment rate for the United States, South Region, Texas, Dallas-Fort Worth-Arlington, TX MSA, and Denton County. Employment The following chart shows the trailing 10 years employment for the state of Texas, Dallas-Fort Worth- Arlington, TX MSA, and Denton County. Neighborhood Analysis Pecan Creek Trail - CRE-2024-0373 15 The project addressed within this report is in the northern portion of the City of Denton in the Dallas-Fort Worth-Arlington, TX, MSA. The Texas Almanac Denton County map follows. The City of Denton is the county seat of Denton County. Subject Neighborhood Analysis (CONTINUED) Pecan Creek Trail - CRE-2024-0373 16 Demographics Access and Linkages Below is an image of the 2022 thoroughfare plan identified by the City of Denton. As shown above, major thoroughfares into and out of the immediate market area include Loop 288, IH-35, and US 380. The primary mode of transportation in this area is the automobile. Subject Neighborhood Analysis Pecan Creek Trail - CRE-2024-0373 17 Public Services The market is served by Denton ISD. Police and fire protection are provided by the City of Denton and Denton County. Demand Generators ▪ The University of North Texas (UNT) is a public university founded in 1890 and located in Denton. With an enrollment of 37,000 students (including graduate students), UNT is one of Texas’ largest universities. The university offers 100 undergraduate programs, 83 master’s and 37 doctoral degree programs. The university employs a faculty and staff of more than 4,000. The University of North Texas is known for its music and fine arts departments and counts several notable musicians, such as The Eagles and Norah Jones, as alumni. The campus has recently expanded with the construction of a new 87,000 square foot Life Sciences Complex, an 180,000 square foot Business Leadership Building and a $78 million eco-friendly football stadium that seats 30,000 spectators.3 ▪ Texas Woman’s University (TWU) is a public university, founded in 1901. Texas Woman’s University is known for its health and education programs. With campuses in Denton, Dallas and Houston, the university has a total enrollment of approximately 15,000. The faculty is comprised of more than 900 full-time instructors and more than 400 part-time instructors. The university has a staff of more than 750 employees. TWU offers 46 undergraduate programs, 62 master’s programs and 22 doctoral programs.4 ▪ Rayzor Ranch is a mixed-use development on 412 acres at the intersection of Interstate 35 and US Highway 380 in Denton. Rayzor Ranch features residential, retail, hotel, office, medical facilities, public parks and entertainment venues. The development includes a 900,000 square foot power center anchored by a Walmart Supercenter and Sam’s Club. Additionally, a 68-acre residential component includes multi-family units and single-family homes, as well as an adult living campus and retirement center. Rayzor Ranch also offers a 30-acre medical and office park and 15 acres of public parks and walking trails.5 ▪ Texas Health Presbyterian Hospital Denton is a 255-bed, full-service acute care facility featuring more than 43 specialties. Texas Health Denton is located on North Interstate 35 in the City of Denton and is accredited by The Joint Commission and is distinguished as a Bariatric Center of Excellence. Texas Health.6 3 University of North Texas, www.unt.edu 4 Texas Woman’s University, www.twu.edu 5 Rayzor Ranch, www.rayzorranch.com 6 Texas Health Presbyterian Hospital Denton, https://www.texashealth.org/denton/Pages/default.aspx Neighborhood Analysis (CONTINUED) Pecan Creek Trail - CRE-2024-0373 18 ▪ Denton Regional Medical Center is a 208-bed, full service acute care hospital located on South Interstate 35 in Denton. Denton Regional has more than 850 employees on staff and over 300 physicians. Denton Regional specializes in bariatrics, cancer care, general surgery, vascular surgery, diabetes care, imaging, emergency services, cardiovascular, occupational medicine, orthopedic and sports medicine and women and children’s care.7 ▪ Downtown Denton is a 60-block area which serves as the historic central business district of Denton, with Courthouse Square as the focal point. Downtown Denton is located south of University Drive, north of Eagle Drive, west of Mingo Road and east of Carroll Boulevard. Downtown Denton provides a link between UNT and TWU and is known as a local destination for shopping, dining and entertainment. Since 1989, over $47 million has been reinvested in the downtown area to improve the streets, sidewalks and facades. There are currently over 50 shops, 26 restaurants and 12 entertainment venues in Downtown Denton.8 ▪ Texas Motor Speedway is the country’s second-largest outdoor sporting venue and is located along the west side of Interstate 35W and Highway 114. The oval tract is 1.5 miles long and the facility offers permanent seating for almost 155,000, in addition to an infield capacity of 53,000.9 ▪ Alliance Retail developments include the Tanger Outlet Malls and Buc-ee’s on SH-114 near Texas Motor Speedway. There are approximately 70+/- stores within the mall. Surrounding the Mall and the Buc-ee’s development is an In-N- Out Burger, Panda Express, Starbucks, Chick-Fil-A, Olive Garden, What-A- Burger, Smoothie King, and a Buffalo Wild Wings. 7 Denton Regional Medical Center, www.dentonregional.com 8 Denton Economic Development Partnership, www.dentonedp.com 9 Texas Motor Speedway, http://www.texasmotorspeedway.com/Home.aspx Neighborhood Analysis Pecan Creek Trail - CRE-2024-0373 19 Market Conditions The Cycle The real estate cycle is a recurring pattern of booms and busts that characterize the real estate market. It typically consists of four phases: expansion, hypersupply, recession, and recovery. 1. Expansion: During this phase, the real estate market experiences growth and increasing demand for properties. Prices rise, construction activity increases, and investors are optimistic about the market. Gross Domestic Product (GDP) typically stabilizes to normal levels, job growth is steady, housing is balanced in supply and demand, rental rates are increasing, and new construction is also increasing. 2. Hypersupply: The peak of the real estate cycle is marked by high prices, excessive speculation, and saturation of the market. Demand begins to slow down, and the market reaches its highest point before starting to decline. Rental rates remain higher while the demand starts to decrease. Job growth, GDP, and interest rates remain stable as real estate pricing peaks just before entering market decline. 3. Recession: In the contraction phase, the market experiences a downturn as demand decreases and prices start to fall. Sales slowdown, construction activity decreases, and investors become more cautious. Most property owners will suffer from lower rents, especially as tenants may demand rent concessions or reductions. Default rates on mortgages, loans, and credit cards increase. Businesses close, unemployment rises, and foreclosures also increase. 4. Recovery: The recovery stage (also known as the trough) is the lowest point of the real estate cycle, characterized by low prices, high vacancies, and a lack of demand. The market is typically stagnant during this phase as investors wait for signs of recovery. Occupancy levels are typically at their lowest point (with higher-than-normal vacancy levels), with low demand for spaces and minimal leasing activity. There may also be minimal new construction underway and rental growth may be negative or flat. After the recovery stage, the real estate cycle starts over with a new expansion phase, and the cycle continues to repeat itself over time. Various factors, such as economic conditions, interest rates, and government policies, can influence the real estate cycle and its timing. Neighborhood Analysis Pecan Creek Trail - CRE-2024-0373 20 The following cycle estimates are presented by Glenn R. Mueller, PhD of the University of Denver Daniels College of Business: As shown above, Dr. Mueller identifies Industrial (flex), retail (factory outlet), retail (neighborhood/community), retail (1st tier regional malls), retail (power center), and hotels (hospitality) to all be within the Expansion Stage at this time on a national level. Apartments are currently within a Hypersupply Stage at a national level along with Industrial (warehouse). Suburban and Downtown offices are currently within the Recession Stage at a national level. Investor Activity During the Expansion Stage, consumer confidence is high and investment activities are typically higher. Those investors who purchased properties at lower levels during the Recovery Stage are now ready to sell their properties to create arbitrage opportunities. This stage is also witness to an increase in strategy of development. This is the ideal time to develop or redevelop properties, especially if the timeline for the project and sale of the property lines up with the expected duration of economic expansion. During the Hypersupply Stage some investors may decide to sell properties ahead of the coming decline in property values and a more challenging leasing market. Otherwise, investors will prepare or seek opportunities to prepare for the coming economic decline. For example, a core property with high occupancy and stabilized occupancy with lease terms lasting for more than five years may perform well during an economic downturn as it is locked into these leases for a term long enough to possibly make it through the cycle. Neighborhood Analysis (Continued) Pecan Creek Trail - CRE-2024-0373 21 During the Recession Stage investors will be presented with the ideal time to buy distressed assets at discounts when compared to previous cycle prices. This is also the best time to acquire distressed assets for repositioning the asset as movement to the Recovery and Expansion Stages are made. The Recovery Stage is similar to that of the Recession Stage as it represents the most opportunistic time period to buy bargain-priced properties at the bottom or trough of the real estate cycle. The subject property is rural land and Dr. Mueller does not provide specific estimates for land assets. Market Condition Adjustment Derivation The following data and information sources from national, regional, and local sources are identified in an effort to recognize and adopt a market condition adjustment which is applied in our valuation analysis presented herein. Source Delta Bureau of Economic Analysis 2nd Qtr. 2024 – Real GDP 2.80% Consumer Price Index – August 2024 – National 2.50% Consumer Price Index – July 2024 – DFW 4.10% Turner Construction Cost Index – 2nd Qtr. 2024 2.86% CoStar DFW Multifamily Analytics Market Rent Change – October 2024 (0.90%) CoStar DFW Retail Analytics Market Rent Change – October 2024 5.20% CoStar DFW Industrial Analytics Market Rent Change – October 2024 6.20% CoStar DFW Office Analytics Market Rent Change – October 2024 1.30% Marketviewer DFW Residential Existing Market Statistics Median Price Change – August 2024 2.40% Marketviewer DFW Residential New Construction Market Statistics Median Price Change – August 2024 (5.10%) As shown in the table above, there are two negative growth factors, one is for multifamily rent levels and the other is for new construction single-family residential sales. As previously identified Apartments are in the Hypersupply Stage on a national level and therefore it stands to reason that rental rates would be declining some in the regional area. Furthermore, single-family residential local is likely within the Hypersupply to Recession Stage, which is characterized by the builder’s offering incentives and lower selling price points to move inventory. This is represented by the decline in median price points for new construction houses in the preceding table. The remaining asset classes coupled with other measurements such as the GDP, CPI, and construction costs reveal a range of 1.30% to 6.20% per annum (positive only), with an average of 3.42%. This average declines to 2.14% when the two negative sources are considered. Thus, for purposes of this report we reconcile to a market conditions adjustment of 3% per annum, which is what is used in our valuation analysis presented herein. Local Area Summary The area is in the growth stage of its life cycle. Given the history of the area and the growth trends, it is anticipated that property values will continue to remain stable and/or increase over the long-term future. Site Description Before the Acquisition Pecan Creek Trail - CRE-2024-0373 22 The following summaries the salient characteristics of the subject site prior to acquisition: Address South side of FM 426, Denton, Texas. Location The subject property is located on the southside of FM 426/E. McKinney Street, west of the Townsend Green Subdivision. Census Tract 48-121-021415 Adjacent Properties North Agricultural/Rural Residential South Agricultural/Rural Residential East Single-Family Residential Subdivision West Vacant Land Accessibility Access to the subject site is considered average overall. Exposure & Visibility Exposure of the subject is average. Site Description Before the Acquisition Pecan Creek Trail - CRE-2024-0373 23 Zoning Residential (R4); The R4 district is intended to accommodate a variety of housing types on lots designed to encourage walking to neighborhood- serving retail and other amenities such as parks and school facilities. This zoning district will ensure existing neighborhood character is maintained while also serving as a transition area between established single-family neighborhoods and mixed-use neighborhoods, commercial areas, and key corridors. Flood Plain Zone AE. This is referenced by Panel Numbers 48121C0380G and 48121C0387H, dated April 18, 2011 and June 19, 2020, respectively. Zone AE is a High Risk Special Flood Hazard Area (SFHA). Special Flood Hazard Areas represent the area subject to inundation by 1% annual chance flood. Structures located within the SFHA have a 26% chance of flooding during the life of a standard 30-year mortgage. Federal floodplain management regulations and mandatory flood insurance purchase requirements apply in these zones. Areas subject to inundation by the 1% annual chance flood event determined by detailed methods. BFEs are shown within these zones. (Zone AE is used on new and revised maps in place of Zones A1–A30.) The whole property is encumbered with approximately 4% Zone AE Floodway. Easements A preliminary title report was not available for review. During the property inspection, no adverse easements or encumbrances were noted. This appraisal assumes that there are no adverse easements present. If questions arise, further research is advised. There are natural gas pipelines easements near the northwest corner of the subject property. One of the natural gas pipelines bisects the property from northwest to southeast on the northern portion of the whole property. Soils A detailed soils analysis was not available for review. Based on the development of the subject, it appears the soils are stable and suitable for a variety of improvements. Site Description (Continued) Pecan Creek Trail - CRE-2024-0373 24 Hazardous Waste We have not conducted an independent investigation to determine the presence or absence of toxins on the subject property. If questions arise, the reader is strongly cautioned to seek qualified professional assistance in this matter. Please see the Assumptions and Limiting Conditions for a full disclaimer. Site Rating Overall, the subject site is considered average as a land site in terms of its location, exposure and access to employment, education and shopping centers, based on its location along a minor arterial. Site Conclusion In conclusion, the site’s physical characteristics appear to be supportive of the subject’s current use and there were no significant detriments discovered that would inhibit development in accordance with its highest and best use. Zoning Map Pecan Creek Trail - CRE-2024-0373 25 Subject Acquisition Survey Pecan Creek Trail - CRE-2024-0373 26 Topography Map Pecan Creek Trail - CRE-2024-0373 27 Flood Map Pecan Creek Trail - CRE-2024-0373 28 Easement Map Pecan Creek Trail - CRE-2024-0373 29 Taxes Pecan Creek Trail - CRE-2024-0373 30 Current Taxation & Assessment Description Since the 2024 taxes and assessments have not been completed, the real estate assessments below are estimates for the preliminary 2024 tax year with the 2023 tax rates and are summarized in more detail in the following table. As shown in the table above, the most recent total assessment for the subject is $4,548,271. The subject property enjoys an agricultural exemption that is in place and totals $4,471,711. In this instance, the Assessed (taxable) value is $76,560. The overall assessment, prior to the agricultural exemption, appears to the low considering our concluded value herein. Highest & Best Use Pecan Creek Trail - CRE-2024-0373 31 The theory of highest and best use is fundamental to the concept of value. Highest and best use analysis identifies the most profitable, competitive use to which the property can be put. The highest and best use of a property is based on the competitive forces within the market and submarket and provides the foundation for a detailed investigation of the competitive position of the subject property in the minds of market participants. Highest and best use may be defined as: “The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.” The four criteria the highest and best use must meet are 1) legally permissible, 2) physically possible, 3) financially feasible and 4) maximally productive. In arriving at the estimate of highest and best use, the subject was analyzed as vacant and as improved as of the date of value. In each of the previous sections of the report including the Market Analysis, Site Description, Improvement Description, Real Estate Taxes and Zoning we have identified factors that influence value. These factors shape our conclusions for the Highest and Best Use as Vacant and As Improved. This section develops the highest and best use of the subject property As-Vacant and As Improved. As Vacant Analysis In this section the highest and best use of the subject as vacant is concluded after acquisition into consideration financial feasibility, maximal productivity, marketability, legal, and physical factors. Legally Permissible Private restrictions, zoning, building codes, historic district controls, and environmental regulations are considered, if applicable to the subject site. The legal factors influencing the highest and best use of the subject site are primarily government regulations such as zoning ordinances. Permitted uses of the subject property’s Residential (R4) zoning includes a variety of housing types projects. Zoning change is not likely; therefore, uses outside of those permitted by the R4 zoning are not considered moving forward in the as- vacant analysis. Physical Possible The test of what is physically possible for the subject site considers physical and locational characteristics that influence its highest and best use. In terms of physical features, the subject site totals 80.800-acres (3,519,648 SF), it is irregular in shape and has a level to sloping topography. The site has average exposure and average overall access. The property is encumbered with approximately 4% Zone AE Floodway. Additionally, there are natural gas pipelines easements near the northwest corner of the whole property. One of the natural gas pipelines bisects the property from northwest to southeast on the northern portion of the whole property. There are no other physical limitations that would prohibit development of any of the by-right uses on the site. Financial Feasibility Based on the analysis of the subject’s market and an examination of costs, there is currently adequate demand for residential properties in the subject’s area. It appears that a newly developed residential development would likely have a value commensurate with its cost. Therefore, residential use is likely financially feasible. Highest & Best Use (Continued) Pecan Creek Trail - CRE-2024-0373 32 Maximum Productivity There is only one use that creates value and at the same time conforms to the requirements of the first three tests. Financial feasibility, maximal productivity, marketability, legal, and physical factors have been considered and the highest and best use of the subject site as-vacant concluded to be residential development. As Improved Analysis No improvements are situated near the acquisition on the subject. Therefore, a highest and best analysis as improved is not applicable. Most Probable Buyer Based on the type of property, it is our opinion that the most probable buyer for the subject would be a local developer or investor. Appraisal Methodology Pecan Creek Trail - CRE-2024-0373 33 In traditional valuation theory, the three approaches to estimating the value of an asset are the cost approach, sales comparison approach, and income capitalization approach. Each approach assumes valuation of the property at the property’s highest and best use. From the indications of these analyses, an opinion of value is reached based upon expert judgment within the outline of the appraisal process. Site Valuation Considering the subject property's improvements are not affected by the proposed acquisition, we appraise this property as if it were vacant. As such, the inclusion to estimate the vacant land value is deemed appropriate. Therefore, a valuation of the subject site has been provided herein. Cost Approach The cost approach considers the cost to replace the proposed improvements, less accrued depreciation, plus the market value of the land. The cost approach is based on the understanding that market participants relate value to cost. The value of the property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation in the structure from all causes. Profit for coordination by the entrepreneur is included in the value indication. Characteristics specific to the subject property do not warrant that this valuation technique is developed. Based on the preceding information, the Cost Approach will not be presented. Sales Comparison Approach The sales comparison approach estimates value based on what other purchasers and sellers in the market have agreed to as price for comparable properties. This approach is based upon the principle of substitution, which states that the limits of prices, rents, and rates tend to be set by the prevailing prices, rents, and rates of equally desirable substitutes. In conducting the sales comparison approach, we gather data on reasonably substitutable properties and make adjustments for transactional and property characteristics. The resulting adjusted prices lead to an estimate of the price one might expect to realize upon sale of the property. Characteristics specific to the subject property do not warrant that this valuation technique be developed. Based on this reasoning, the Improved Sales Comparison Approach is not presented within this appraisal. Income Capitalization Approach The income capitalization approach simulates the reasoning of an investor who views the cash flows that would result from the anticipated revenue and expense on a property throughout its lifetime. The net income developed in our analysis is the balance of potential income remaining after vacancy and collection loss, and operating expenses. This net income is then capitalized at an appropriate rate to derive an estimate of value or discounted by an appropriate yield rate over a typical projection period in a discounted cash flow analysis. Thus, two key steps are involved: (1) estimating the net income applicable to the subject and (2) choosing appropriate capitalization rates and discount rates. The appropriate rates are ones that will provide both a return on the investment and a return of the investment over the life of the particular property. Appraisal Methodology (Continued) Pecan Creek Trail - CRE-2024-0373 34 The subject property is being appraised as vacant land and vacant land is not typically analyzed on an income basis by buyers and sellers, reducing the applicability of this valuation technique. Therefore, the Income Approach is not developed. Correlation and Conclusion Based on the agreed upon scope with the client, the subject’s specific characteristics and the interest appraised, this appraisal developed Land Sales Comparison Approach. The values presented represent the As Is - The Whole (Fee Simple Estate), As Is - The Acquisition (Fee Simple Estate), and As Is - The Remainder (Fee Simple Estate). Land Valuation – The Whole Before Acquisition Pecan Creek Trail - CRE-2024-0373 35 This section values the subject site by comparing it with substitute land sales or listings within the local market area or in competitive areas throughout the region. Land value is influenced by a number of factors; most notably development and use potential. These factors, as well as others, are factored in the following analysis. We have estimated the market value of the underlying land at its highest and best use as vacant via the sales comparison approach. The sales comparison approach is based on the premise that the buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the sales comparison approach. • The market in which the subject property competes is investigated; comparable sales, contracts for sale and current offerings are reviewed. • The most pertinent data is further analyzed, and the quality of the transaction is determined. • The most meaningful unit of value for the subject property is determined. • Each comparable sale is analyzed and where appropriate, adjusted to account for differences the subject property. • The value indication of each comparable sale is analyzed, and the data reconciled for a final indication of value via the sales comparison approach. We have researched five comparables for this analysis; these are documented on the following pages followed by a location map and analysis grid. Unit of Comparison The most relevant unit of comparison for competing land is the $/Acres. All of the comparable sales presented in this section were reported on this basis. Adjustments Adjustments to the comparable sales were considered and made when warranted for expenditures after purchase, property rights transferred, conditions of sale, financing terms, and market conditions. 1. Property Rights - All of the sales comparables were fee simple sales reflecting the property rights appraised herein per the agreed upon scope of work. 2. Financing - The sales all reflected typical cash equivalent, lender-financed transactions and no adjustments were required for financing terms. 3. Sale Conditions - None of the comparables required a condition of sale adjustment, as all were confirmed to be arm’s length transactions. 4. Expenditures After Sale - Expenses that the buyer incurs after purchase (demolition, cleanup costs, etc.). Land Sale No. 4 was given an upward adjustment for the demolition cost of the existing improvements. 5. Market Conditions (Time) - Based on research and interpretation of value trends, the analysis applies an upward market conditions adjustment of 3% annually is applied on an annual basis reflecting the relatively consistent appreciation that occurred between the oldest comparable sale date up through the effective valuation date. This is based on the previous analysis presented in the Market Conditions section of this report. Land Valuation – The Whole Before Acquisition (Continued) Pecan Creek Trail - CRE-2024-0373 36 Quantitative Adjustment Process Quantitative percentage adjustments are also made for location and physical characteristics such as size, location quality, access, exposure, as well as other applicable elements of comparison. Where possible the adjustments applied are based on paired data or other statistical analysis. It should be stressed that the adjustments are the professional judgement of the appraiser and are meant to illustrate the logic in deriving a value opinion for the subject property by the Land Sales Comparison Approach. Comparable Selection A thorough search was made for similar land sales in the area. The parameters of the survey were highest and best use, zoning, proximity to the subject, size, and date of sale. In selecting comparables, emphasis was placed on confirming recent sales of sites that are similar to the subject property in terms of location and physical characteristics. Overall, the sales used represent the best comparables available for this analysis. Presentation The following Land Sales Comparison Table, location map and exhibits summarize the sales data. Following these items, the sales are adjusted for applicable elements of comparison and the site value is concluded. Land Valuation – The Whole Before Acquisition (Continued) Pecan Creek Trail - CRE-2024-0373 37 Land Valuation – The Whole Before Acquisition (Continued) Pecan Creek Trail - CRE-2024-0373 38 Land Valuation – The Whole Before Acquisition (Continued) Pecan Creek Trail - CRE-2024-0373 39 Land Valuation Exhibits Land Valuation – The Whole Before Acquisition Pecan Creek Trail - CRE-2024-0373 40 Land Sales Adjustment Discussion The comparable land sales indicate an overall unadjusted value range from $54,927/Acre to $95,382/Acre, and average of $73,813/Acre. After adjustments, the comparables indicate a narrower range for the subject site between $70,273/Acre and $82,016/Acre with an average of $77,743/Acre. The adjustment process is described below. Land Sale 1 ($82,016/Acre Adjusted) – Vacant residential property with rolling terrain and a small surface tank. The property was sold for investment purposes. It was on the market for 318 days prior to selling. This comparable was given downward adjustments for its superior location and superior exposure with higher traffic counts when compared to the subject property. An upward adjustment was applied for its inferior surface water when compared to the subject property. Land Sale 2 ($77,548/Acre Adjusted) – This property is vacant with level to sloping topography. It is heavily treed with cleared areas. Electric and water are available. A septic system would be required for vertical improvements. The property is encumbered with approximately 24% Flood Zone A. It has a large pond near the northwestern area of the property. It was on the property for 203 days prior to selling. The LP/SP ratio was 70%. This comparable was given upward adjustments for its inferior utility services, inferior flood zone encumbrance percentage and inferior surface water when compared to the subject property. Land Sale 3 ($81,748/Acre Adjusted) – This property is vacant with electric and water available. For vertical development, a septic system would be required. It has level to sloping topography with trees. The property has two ponds. It was on the market for 327 days prior to selling. This comparable was given a downward adjustment for its superior location when compared to the subject property. An upward adjustment was applied for its inferior utility services when compared to the subject property. Land Sale 4 ($77,128/Acre Adjusted) – This property had some improvements at the time of sale. The improvements did not contribute to the sale price. We have estimated the demolition costs and the effective sale price reflects the demolition costs and haul-off for the existing improvements. The property features rolling terrain that is approximately 27% encumbered by floodplain. Of that 27%, approximately 51% is in the 100-year floodway. All utilities are available to the site. The property is split by a railroad track encumbrance. It was on the market for 526 days prior to selling. The LP/SP ratio was 99%. This comparable was given upward adjustments for its inferior location, inferior shape, inferior flood zone/flood way, inferior easement that splits the property with a railroad track and inferior surface water when compared to the subject property. Land Sale 5 ($70,273/Acre Adjusted) – The property is a vacant tract of land in an unincorporated area with access to all utilities. It has a level-to-sloping topo and one large surface tank. The property has a preliminary plat in place that has been divided up into approximately 165 lots. The property was purchased for residential development and was on the market for 210 days prior to selling. This comparable was given a downward adjustment for its smaller size when compared to the subject property. An upward adjustment was applied for its inferior location and its superior access when compared to the subject property. Land Valuation – The Whole Before Acquisition Pecan Creek Trail - CRE-2024-0373 41 Land Value Conclusion – Before Acquisition The comparables indicate a unit value, based on a general bracketing analysis, between $70,273/Acre and $82,016/Acre. Primary weight was placed on Land Sale Nos. 2 and 3 for the least amount of gross adjustments and close proximity to the subject property. Secondary weight was placed on the remaining Land Sales and based on the subject’s overall locational and physical features, a unit value conclusion of $78,000/Acre is supported. The following table summarizes the comparable land sales analysis and applies the unit value conclusion to the site area to provide an indication of the as-vacant land value. Reconciliation of Value Conclusions – The Whole Property Pecan Creek Trail - CRE-2024-0373 42 The process of reconciliation involves the analysis of each approach to value. The quality of data applied the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. Finally, each is considered separately and comparatively with each other. Based on the agreed upon scope with the client, the subject’s specific characteristics and the interest appraised, this appraisal developed Land Sales Comparison Approach. MARKET VALUE CONCLUSION VALUATION SCENARIO INTEREST APPRAISED EXPOSURE TIME EFFECTIVE DATE VALUE As Is - The Whole Fee Simple Estate 12 Months or Less September 30, 2024 $6,302,400 Part to be Acquired and Remainder Before Pecan Creek Trail - CRE-2024-0373 43 The following portion of the appraisal process deals directly with the valuation of the subject part to be acquired. The part to be acquired is the portion of land acquired by eminent domain from the whole property. The valuation of the property is predicated on the market value of the property prior to any acquisition or partial acquisition. The part to be acquired may be valued in two different manners in Texas. If the part to be acquired can be considered an individual economic entity, then it is valued as a separate parcel. Thus, this may require that all three approaches to value and possibly, a whole new set of market data be considered, which would be more comparable to the part acquired, than just the reuse of the market data utilized in the whole property valuation. On the other hand, if the part acquired cannot be considered an individual economic entity, then its value contribution to the entire parcel is used. In this case, the value of the part to be acquired would not be independent and the part to be acquired represents the prorated value from the whole property. The value of the remainder before the acquisition is found by subtracting the value of the part to be acquired from the value of the whole property. The remaining property before the acquisition is sometimes referred to as the “residual.” Partial Acquisition Description The size of the part acquired is based upon survey maps provided by the client. The acquisition is approximately 12.960 acres of land on the southern portion of the whole property. The acquisition will include the large creek and all of the floodway encumbrance of the whole property. However, that doesn’t devalue the acquisition given that it is situated in the back of the property and its value is still a component of the whole property. The acquisition consists of a fee simple acquisition, the impact of which is discussed in the Highest and Best Use of the Remainder After property. The survey map and legal description of the part to be acquired are presented in the addenda of this report. An aerial of the proposed acquisition is presented below. Part to be Acquired and Remainder Before Pecan Creek Trail - CRE-2024-0373 44 Highest & Best Use – Part To Be Acquired In this instance, the subject part to be acquired consists of vacant land. As an integral part of the whole property, the part to be acquired shares the same physical and economic characteristics. Because the highest and best use of the part to be acquired is for use in conjunction with the whole property, the part to be acquired shares the same per unit value of land concluded in the valuation of the subject whole property. As-Vacant Analysis – Part to be Acquired Due to its size and shape, the area of the partial acquisition would likely be able to stand alone as a separate economic unit. However, it would have to be assembled with a neighboring property to have access to a public roadway. As such, the highest and best use of the partial acquisition, as vacant, is for use in conjunction with the subject whole property. Reconciliation – Part to be Acquired The part to be acquired was valued as an integral component of the whole property. The value is based on its pro-rata contribution to the whole. As previously mentioned, the per-unit value for the land was previously calculated in the whole property valuation section of this appraisal and are applied in the valuation of the part to be acquired as follows. Remainder Before In order to determine the value of the remainder before the proposed acquisition, we have subtracted the value of the part acquired from the whole property value. The remainder before value is calculated as follows: Remainder After Valuation Pecan Creek Trail - CRE-2024-0373 45 Remainder After Valuation The value of the remainder after the acquisition is an estimate of the market value taking into consideration the effect that the proposed easement or right-of-way will have on the remainder. This valuation is based upon a new site analysis, highest and best use analysis, as well as the consideration of the three approaches to value. Damages or benefits to the remainder are found by subtracting the value of the remainder after the acquisition from the value of the remainder before the acquisition. If positive, damages exist. Likewise, if the figure is negative, benefits are present (enhancement). The State of Texas through legislative prescription and case law provide some direction with regard to the estimation of damages specific to a remainder property. The highest and best use of the remainder after the acquisition is the same as that of the remainder with the part to be acquired. After the acquisition, the remainder will be like the whole property, except that it will no longer have a large creek. However, in the remainder after the unit value will remain the same. Because there is no impact to the functional utility of the site, we conclude that the highest and best use of the remainder after the acquisition is the same as that of the whole property. No damages to the remainder result from the proposed acquisition. Aerial Overlay – Remainder After Land Valuation Remainder After Pecan Creek Trail - CRE-2024-0373 46 Valuation Methodology – Remainder After The remainder after property will be smaller in size, have most of the same physical characteristics, and highest and best use as the subject whole property. As such, the valuation of the remainder after property is valued below and on the following pages. Presentation The following Land Sales Comparison Table summarize the sales data for the Remainder After. Following these items, the sales are adjusted for applicable elements of comparison and the site value is concluded. The Remainder will have the same land sales and the same adjustments applicable for the Whole Property are applicable for the remainder with the exception of the surface water. In the remainder, the whole property will not have access to the large creek. Therefore, the adjustments for surface water will not be the same as in the Whole Property. In the Whole Property analysis, Land Sale Nos. 2 and 4 will be given upward adjustments for inferior surface water when compared to the subject property remainder. For an explanation of other Adjustments with Reconciliation, please see the Whole Property Before The Acquisition for the land sale adjustment discussion. Land Valuation – Remainder After (Continued) Pecan Creek Trail - CRE-2024-0373 47 Land Value Conclusion – After The comparables indicate a unit value, based on a general bracketing analysis, between $70,273/Acre and $81,748/Acre. Land Sale Nos. 2 and 3 are given primary weight because of their smaller overall adjustments. Secondary weight is given to the remainder of the Land Sales. Based on the subject’s overall locational and physical features, a unit value conclusion of $78,000/Acre is supported. The following table summarizes the comparable land sales analysis and applies the unit value conclusion to the site area to provide an indication of the as-vacant land value. Reconciliation of Value Conclusions – Remainder After Pecan Creek Trail - CRE-2024-0373 48 Reconciliation – Remainder After Property The Reconciliation of Value Conclusions is the final step in the appraisal process and involves the weighing of the individual valuation techniques in relationship to their substantiation by market data, and the reliability and applicability of each valuation technique to the subject property. Understanding the profiles of potential buyers and their typical reliance on each approach to value strongly influences the weighting process. The remainder is being appraised as vacant land and as such, only the sales comparison approach is relevant and utilized. Presentation Of Value Conclusions The previous data has been considered for an indication of permanent damages or enhancements to the subject property. No damages are expected to be accrued to the subject property. The following table summarizes our final opinion of the remainder after value. The effective date of valuation concluded in this report is as of September 30, 2024. Compensation Summary Pecan Creek Trail - CRE-2024-0373 49 Compensation Summary Addenda Pecan Creek Trail - CRE-2024-0373 50 General Definitions Assessed value A value set on real estate and personal property by a government as a basis for levying taxes. (IAAO) The monetary amount for a property as officially entered on the assessment roll for purposes of computing the tax levy. Assessed values differ from the assessor's estimate of actual (market) value for three major reasons: fractional assessment ratios, partial exemptions, and decisions by assessing officials to override market value. The process of gathering and interpreting economic data to provide information that can be used by policymakers to formulate tax policy. (IAAO) Easement The right to use another’s land for a stated purpose. Effective date The date to which an appraiser’s analyses, opinions, and conclusions apply; also referred to as date of value. (USPAP, 2024 ed.) Fee simple estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. Floor area ratio (FAR) The relationship between the above-ground floor area of a building, as described by the zoning or building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area. Identified intangible assets (IIA) Intangible assets that can be quantified separately from the business as a whole and can be bought and sold, rented, or acquired through legal or contractual rights. Examples include patents, copyrights, licenses, formulas, franchises, and trademarks. Land-to-building ratio The proportion of land area to gross building area; one of the factors determining comparability of properties. Leased fee interest The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires. Leasehold interest The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease. Market rent The most probable rent that a property should bring in a competitive and open market under all conditions requisite to a fair lease transaction, the lessee and lessor each acting prudently and knowledgeably, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the execution of a lease as of a specified date under conditions whereby: Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 51 Lessee and lessor are typically motivated. Both parties are well informed or well advised, and acting in what they consider their best interests. Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and The rent reflects specified terms and conditions typically found in that market, such as permitted uses, use restrictions, expense obligations, duration, concessions, rental adjustments and revaluations, renewal and purchase options, frequency of payments (annual, monthly, etc.), and tenant improvements (TIs). Marketing time An opinion of the amount of time to sell a property interest at the concluded market value or at a benchmark price during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which precedes the effective date of an appraisal. (Advisory Opinion 7 and Advisory Opinion 35 of the Appraisal Standards Board of The Appraisal Foundation address the determination of reasonable exposure and marketing time.) Negative easement An easement preventing a property owner from certain, otherwise permitted, uses of the land, e.g., agreeing not to do something such as building a wall or fence blocking an adjoining property’s view. Personal property Tangible or intangible objects that are considered personal, as opposed to real property. Examples of tangible personal property include furniture, vehicles, jewelry, collectibles, machinery and equipment, and computer hardware. Examples of intangible personal property include contracts, patents, licenses, computer software, and intellectual property. Any tangible or intangible article that is subject to ownership and classified as real property, including identifiable tangible objects that are considered by the general public as being “personal,” such as furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment, and intangible property that is created and stored electronically such as plans for installation art, choreography, emails, or designs for digital tokens. (USPAP, 2024 ed.) Prospective value opinion A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. Rentable area For office or retail buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the building that penetrate through the floor to the areas below. The rentable area of a floor is computed by measuring to the inside finished surface of the dominant portion of the permanent building walls, excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to local practice. Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 52 Restricted appraisal report A written report prepared under Standards Rule 2-2(b), 8-2(b), or 10-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP, 2024 ed.) Appraisal report The final communication, written or oral, of an appraisal or review transmitted to the client. Finality is evidenced by the presence of the valuer’s signature in a written report or a statement of finality in an oral report. All communications to the client prior to the final communication must be conspicuously designated as such. (SVP, CPE) Any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client upon completion of an assignment. (USPAP, 2024 ed.) Use value The value of a property based on a specific use, which may or may not be the property’s highest and best use. If the specified use is the property’s highest and best use, use value will be equivalent to market value. If the specified use is not the property’s highest and best use, use value will be equivalent to the property’s market value based on the hypothetical condition that the only possible use is the specified use. Usable area For office buildings, the actual occupiable area of a floor or an office space; computed by measuring from the finished surface of the office side of the corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Sometimes called net building area or net floor area. The area that is actually used by the tenants measured from the inside of the exterior walls to the inside of walls separating the space from hallways and common areas. Value “as is” The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; relates to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning. Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 53 Addendum A Comparable Datasheets Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 54 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 55 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 56 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 57 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 58 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 59 Addendum B Appraiser Qualifications Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 60 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 61 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 62 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 63 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 64 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 65 Addendum C Property Information and Project Survey Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 66 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 67 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 68 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 69 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 70 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 71 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 72 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 73 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 74 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 75 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 76 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 77 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 78 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 79 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 80 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 81 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 82 Addendum D Engagement Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 83 Addenda (Continued) Pecan Creek Trail - CRE-2024-0373 84