APPRAISAL REPORT - Maricopa County, Arizona

APPRAISAL REPORT 1.13 NET ACRES (VACANT LAND) WEST OF NWC MCDOWELL ROAD & 92ND STREET MESA, MARICOPA COUNTY, ARIZONA APN: 219-30-011H PROJECT NAME: SPOOKHILL ADMP BASINS & CHANNELSPROJECT NO: 300.01.12 ITEM NO: A014.006EX DATE OF REPORT: JUNE 10, 2019

DATE OF VALUE: »MARKET VALUE – MAY 14, 2019 PREPARED FOR STEPHANIE TORIGIAN REAL PROPERTY ASSISTANT MARICOPA COUNTY REAL ESTATE DEPARTMENT 2801 WEST DURANGO STREET PHOENIX, ARIZONA 85009 PREPARED BY

June 10, 2019

Maricopa County Real Estate Department 2801 West Durango Street Phoenix, AZ 85009

Attn: Stephanie Torigian Real Property Assistant

RE: 1.13 Net Acres (Vacant Land) West of NWC McDowell Road & 92nd Street Mesa, Maricopa County, Arizona 85383 APN: 219-30-011H Project Name: Spookhill ADMP Basins & Channels Project No: 300.01.12 Item No: A014.006EX

At your request and for the purpose of forming an opinion of value, I have made relevant investigations and have inspected the above-referenced property. My opinion of value for the fee simple interest in the subject parcel is provided under the following premise:

market value as observed on date of inspection

The property is legally and otherwise described in the attached report containing data and discussions from which, together with my experience as an appraiser, the value conclusion was formed. This report has been prepared in accordance with the appraisal reporting guidelines of the Uniform Standards of Professional Appraisal Practice, 2018-2019 (USPAP) as established by the Appraisal Foundation and the Standards of Professional Practice as defined by the Appraisal Institute. This report is also intended to comply with Arizona Revised Statutes (Title 12, Section 12-1122 and Title 28, Sections 28-7091 & 7097), Arizona case law and the appraisal guidelines of the Maricopa County Real Estate Department.

The intended use of the attached appraisal report is to assist the Maricopa County Real Estate Department and Maricopa County Flood Control District (my client and the intended user) with the marketing of the property, its disposition and/or leasing decisions. Use of this report, its analyses, opinions or conclusions by others, or for any other use, is not authorized by the appraiser.

The subject is a vacant land parcel that totals 49,205 net square feet (or 1.13 net acres) located 78 feet west of 92nd Street on McDowell Road in unincorporated Maricopa County and within the City of Mesa’s planning area.

The parcel is undeveloped desert land with a rectangular shape and generally sloping, level topography in a low-density residential area. It is zoned R1-35 by Maricopa County and designated for low density residential uses by the City of Mesa’s general plan.

Maricopa County Real Estate Department June 10, 2019 Page Two Available utilities to the parcel in support of a single-family residential use include power and water. Access to the property is from McDowell Road. The Maricopa County Flood Control District (MCFCD) intends to offer the parcel for sale in a public auction.

Market Value Conclusion –

After considering all the facts available to me, subject to the underlying assumptions and limiting conditions contained herein, it is my opinion that the fee simple interest in the 1.13 net acre subject parcel had a market value on May 14, 2019 of

$143,000 (One Hundred Forty-Three Thousand Dollars)

[$2.91 per SF Net Land Area] Exposure and Marketing Periods: The market value conclusion reflects an exposure period equal to a forecast marketing period of 12 months based on current market conditions and the historical marketing periods of competing properties.

Extraordinary Assumptions & Hypothetical Conditions: None

This transmittal letter, by itself, is not intended to serve as an appraisal report, nor should it be considered as such. Please refer to the attached appraisal report for the data, analyses and conclusions that were used in the appraisal process to develop the appraiser’s opinion of value. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if can be of further assistance, please contact us. Respectfully Submitted,

EXECUTIVE SUMMARY

i

EXECUTIVE SUMMARY Property Identity: A 1.13 net-acre parcel on McDowell Road west of 92nd

Street in Maricopa County just outside the city limits of Mesa, Arizona.

Project Name: Spook Hill ADMP Basins & Channels Project No: 300.01.12 Item No: A014.006EX

Land Areas:

Net land area based on MCFCD survey

Assessor’s Parcel No: 219-30-011H

Date of Report: June 10, 2019 Date of Inspection: May 14, 2019 Date of Value: May 14, 2019

Interest Valued: Fee Simple

Intended Use/User of Report: Assist the MCRED and MCFCD (the client and the intended user) with the marketing of the property, its disposition and/or leasing decisions.

Zoning: R1-35 (Rural), Maricopa County

Highest & Best Use: Single-Family Residential Development

Onsite Improvements: None (virgin desert land)

Utilities: Utilities to the parcel in support of a single-family residential use include water and electricity.

Flood Zone: Zone X500, not a flood hazard area (per FEMA) Personal Property: None

Market Value Conclusion:

Exposure Time Forecast: 12 Months Marketing Time Forecast: 12 Months


Description Net SF Net Acres

T1N, R7E, Sec 4 (por) 49,205 1.13

Parcel SizeSummary of Subject

Date of Description Interest Net SF Net Acres Value Per NET SF Total

T4N, R1E, Sec 4 Fee 49,205 1.13 5/14/52019 2.91$ 143,000$

Source:

Market Value ConclusionMARKET VALUE CONCLUSION

Parcel Size

EXECUTIVE SUMMARY

ii

SUBJECT – Aerial & Photographs

Looking north along the western boundary of the subject from McDowell Road

Subject

Looking north along the eastern boundary of the subject from McDowell Road

TABLE OF CONTENTS

1

TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................................. I

INTRODUCTION ............................................................................................................................ 2

PROPERTY IDENTIFICATION AND STATUS ........................................................................... 2

CLIENT, INTENDED USER AND USE OF THE APPRAISAL ..................................................... 2

PROPERTY RIGHTS APPRAISED ............................................................................................ 2

PURPOSE OF THE APPRAISAL ................................................................................................ 2

DEFINITION OF MARKET VALUE ............................................................................................. 7

SCOPE OF WORK...................................................................................................................... 8

PROPERTY OWNERSHIP AND RECENT HISTORY ................................................................ 9

AREA ANALYSIS ......................................................................................................................... 12

NEIGHBORHOOD ANALYSIS ..................................................................................................... 27

SITE DATA AND ANALYSIS ....................................................................................................... 30

PROPERTY TAX AND ASSESSMENT DATA ............................................................................ 32

ZONING ........................................................................................................................................ 33

APPRAISAL METHODOLOGY .................................................................................................... 37

MARKET VALUATION ................................................................................................................. 38

MARKET VALUE CONCLUSION ................................................................................................ 48

CERTIFICATION .......................................................................................................................... 49

UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS .................................................. 50

ADDENDA .................................................................................................................................... 51

O SUBJECT PHOTOGRAPHS .................................................................................................... 51

O GLOSSARY OF TERMS ......................................................................................................... 51

O LEGAL DESCRIPTION .......................................................................................................... 51

O FLOOD MAP ....................................................................................................................... 51

O APPRAISER QUALIFICATIONS ............................................................................................... 51

O APPRAISER STATE CERTIFICATION ...................................................................................... 51

INTRODUCTION

2

INTRODUCTION

PROPERTY IDENTIFICATION AND STATUS

The subject is a vacant land parcel that totals 49,205 net square feet (or 1.13 net acres) on McDowell Road 78 feet west of 92nd Street in Maricopa County, Arizona near the border of the City of Mesa and falls within the planning area of the City of Mesa.

The parcel is undeveloped desert land with a rectangular shape and gently sloping, level topography in a low-density residential area. It is zoned R1-35 by Maricopa County and designated for low density residential uses by the City of Mesa’s general plan.

Utilities to the parcel in support of a single-family residential use include water and electricity. Access to the property is from McDowell Road.

The Maricopa County Flood Control District (MCFCD) intends to offer the parcel for sale in a public auction. LEGAL DESCRIPTION

The legal description and corresponding survey (provided by the client) dated February 28, 2017 are on the third and fourth following pages. The subject is also known as Maricopa County Assessor parcel 219-30-011H. A copy of the assessor’s plat with the subject area marked is on the second following page. CLIENT, INTENDED USER AND USE OF THE APPRAISAL

The intended use of this appraisal report is to assist the Maricopa County Real Estate Department and Maricopa County Flood Control District (my client and the intended user) with the marketing of the property, its disposition and/or leasing decisions. Use of this report, its analyses, opinions or conclusions by others, or for any other use, is not authorized by the appraiser. PROPERTY RIGHTS APPRAISED

The interest appraised in the property is the fee simple. PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to form an opinion of value for the subject under the following premise:

market value as observed on date of inspection DATE OF VALUE

The date of market value is May 14, 2019.

INTRODUCTION

3

DATE OF INSPECTION

The appraiser last inspected the property on May 14, 2019. DATE OF REPORT

This report was prepared as of June 10, 2019.

PERSONAL PROPERTY

The value conclusion does not include the contributing value of any personal property, furniture, fixtures or equipment. FRACTIONAL INTEREST

The subject’s real property rights include a complete holding of its fee simple interest. BUSINESS ENTERPRISE

The value conclusion does not include any contributing value associated with an intangible business enterprise.

INTRODUCTION

4

AERIAL PHOTOGRAPH –

Subject

INTRODUCTION

5

SURVEY OF SUBJECT PROPERTY (1 of 2)

INTRODUCTION

6

SURVEY OF SUBJECT PROPERTY (2 of 2)

INTRODUCTION

7

DEFINITION OF MARKET VALUE

Market value as applied in this appraisal assignment is premised on the definition of market value from Arizona Revised Statute § 28-7091 in combination with Federal guidelines in § 49. CFR Part 24 in the Federal Register (Uniform Relocation Assistance and Real Property Acquisition for Federal and Federally-Assisted Programs), Arizona Revised Statutes Title 28, and Arizona case law.

Market Value, as defined by Arizona Revised Statute § 28-7091, is:

Market Value: The most probable price estimated in terms of cash in United States dollars or comparable market financial arrangements that the property would bring if exposed for sale in the open market, with reasonable time allowed in which to find a purchaser, buying with knowledge of all of the uses and purposes to which it was adapted and for which it was capable.

OTHER TERMS AND DEFINITIONS

Definitions of terms that may be used in this report are included in the Glossary of Terms in the Addenda. EXPOSURE TIME

Overall, my experience coupled with the input of numerous land brokers suggest that market conditions relating to land parcels similar to the subject parcel should continue to hold steady with ongoing improvement through the foreseeable future. In my opinion, a reasonable exposure period associated with my market value conclusion is up to one year.

My exposure period forecast for the property (market value) of 12 months means that in my opinion, the subject could have been offered on the market for 12 months prior to the consumption of a sale at a price consistent with my conclusion. MARKETING TIME

Assuming present market indicators to be the best predictors of future performance, market data indicates that under the condition described above, the required marketing time associated with my market value conclusion is 12 months.

INTRODUCTION

8

SCOPE OF WORK

This is an appraisal assignment presented as an appraisal report, which is intended to comply with the reporting requirements set forth under Standards Rule 2(a) of the USPAP.

The development of this appraisal required the investigation of sufficient data relative to the subject to derive an opinion of value. The following steps were completed by

for this assignment.

Identified and inspected the subject property and surrounding area. Developed an understanding of the intended use of this report. Searched public records to ascertain current and historical assessment and ownership

data regarding the property and other similar properties in the area. Reviewed a Survey titled “Parcel No. 219-30-011H, Spookhill ADMP Basins and Channels

Project No. 442.04.031, Item No. A014.006EX dated 2/28//2017; a Title Commitment issued by Security Title Agency Inc. Dated April 12, 2019 and other data from public records and other sources.

Examined the market area to determine existing and proposed inventory, demand and the marketability of properties comparable to the subject.

Researched, confirmed, inspected and analyzed recent sales of similar properties (as applicable) using CoStar, ARMLS, LoopNet, public records and other third-party data available for our review.

Applied appropriate appraisal methodologies. Analyzed the comparable data as seen through the eyes of the hypothetical “most

probable” buyer to arrive at a probable range of value via each approach to value used in this report.

Reconciled the results of the applied approach into a reasonable and defensible final conclusion of value for the subject, as defined herein.

Opined to a reasonable exposure time and marketing time associated with the final value conclusion.

In the process of completing this report, the appraiser and/or his associate had discussions owners or representatives of other properties and market participants.

The depth of the analysis was intended to be appropriate in relation to the significance of the appraisal problem and reflective of the due diligence expected of professional real estate appraisers in the course of performing appraisal services.

The scope of work included a sales comparison approach only as this is the predominant approach used by typical market participants in similar land purchase decisions. The cost approach and income approach are not applicable as the parcel is vacant land with no proposed project. Their exclusion does not undermine the reliability or credibility of my findings or conclusions.

This report has been prepared in accordance with the appraisal reporting guidelines of the Uniform Standards of Professional Appraisal Practice, 2018-2019 (USPAP) as established by the Appraisal Foundation and the Standards of Professional Practice as defined by the Appraisal Institute. This report is also intended to comply with Arizona Revised Statutes (Title 12, Section 12-1122 and Title 28, Sections 28-7091 & 7097), Arizona case law and the appraisal guidelines of Maricopa County Real Estate Department

INTRODUCTION

9

PROPERTY OWNERSHIP AND RECENT HISTORY The current owner of record is: Maricopa County Flood Control District

The Maricopa County Flood Control District (MCFCD) has held title to the property since December of 2004 [DOC 04-0449385]. The parcel was obtained through (eminent domain judgement) court order from Darola B. Stutler Trust for $118,000. The prior owner (or a related party) obtained title of the parcel in May 1998 [DOC 98-0398677] through a Warranty Deed for $51,000 from Thomas F Osha.

The parcel is currently not listed for sale. I am unaware of any recent or pending offers to list, purchase or sale the parcel (other than the intended use of this appraisal). EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS: None

AREA ANALYSIS

10

AREA MAP

Subject

AERIAL PHOTOGRAPH

11

AERIAL PHOTOGRAPH

Subject

AREA ANALYSIS

12

AREA ANALYSIS The subject is directly influenced by the economic development and growth of Metropolitan Phoenix, an area that is essentially synonymous with Maricopa County and is noted as one of the largest and most populated counties in the nation. The following discussion addresses the social, economic, governmental and environmental forces that act on metro Phoenix.

Phoenix is the capital of Arizona, the sixth largest state in the union in terms of physical size with nearly 114,000 square miles of land area. In terms of population, Arizona ranks 15th nationally with a 2017 base in excess of 7.0 million residents. Most of its residents live in the state’s three largest cities; Phoenix, Tucson, and Mesa, with the balance scattered among rural communities. Phoenix is the 6th largest city by population in the nation. The state’s largest counties are, in order, Maricopa, Pima, and Pinal, and they comprise 87% of the state’s population.

Although a large state in terms of its size, only 17% of the state’s land is privately owned. The largest landowner is the U.S. Government (42%), followed by the collective Native American Tribes (28%) and the state itself with the remaining 13%.

Arizona has historically been one of the nation’s fastest growing states, with assets that include its moderate climate, job growth, retirement, education and recreational opportunities. Only about twenty-five percent of Arizona’s residents are native-born. Most residents come from other states including California, Illinois, New York, Ohio, and Michigan. Despite its heavy concentrations of retirees, the mean age of Arizona residents is approximately 37.5 years, and indication that is up from 34.2 years in 2000. Both indications are among the lowest in the country and reflect the demographic character of the state’s newcomers as mostly young people. The largest employer in the state is the state itself, followed in the private sector by Banner Health.

Arizona industries have historically grown much faster than the national average, with most growth in manufacturing, construction, finance, insurance and real estate. The largest industry by sector is finance. The government sector has also grown, but paralleled the growth of government employment nationally. Although the state’s overall growth moderated during 2009 and 2010, there has been new expansion albeit moderate and slow in the following five years. 2016 and 2017 were solid years for economic growth and expansion although they were not considered breakout years. Economic growth looks positive for 2018 and beyond. SOCIAL INFLUENCES Population Trends

Growth in Maricopa County’s population between 1990 and 1995 was stable at approximately 64,000 per year. For 1996 through 2000, population growth averaged 107,000 per year. This figure increased to 138,000 per year between 2000 and year-end 2005. From 2005 through 2009, the population increase slowed to a trickle with a net loss in 2010 of 199,273 but then turned upward with the average annual increase through 2015 of 46,614. In 2016 there was an increased population of 77,267 over 2015 followed by a gain of 130,379 in 2017. Continued growth through the long term is currently anticipated by most economists.

AREA ANALYSIS

13

Over 60% of the Metropolitan Phoenix population growth since 2010 is attributed to net migration.

Overall local population growth is anticipated to continuing at a pace that is well above the national average.

The influx of new residents is attributed to the area’s mild weather, overall quality of life, and a cost of living that is substantially lower than other major cities in the country. Job Growth

The Phoenix-Mesa MSA ranked second in the nation for job growth in 2000 when it enjoyed the ninth year of a positive growth cycle. Job growth was strong between 2002 and 2007, averaging a net gain of 64.1 thousand jobs per year (or 3.7% per annum). However, from 2007 through 2010 Arizona experienced average job losses of 95 thousand jobs per year.

Activity reversed itself with average gains for 2011 through 2015 of 51.6

thousand jobs per annum for all of Arizona with similar average gains for Metropolitan Phoenix of 63.6 thousand additional jobs per year, noting that both indications were higher than national averages. Metropolitan Phoenix added 71,600 jobs in 2015, 52,300 jobs in 2016 and 52,000 in 2017 noting that it was also ranked 4th nationally in 2017 (for job growth) among large cities. Ongoing growth is anticipated.

Year Maricopa CountyAnnual % Change

ArizonaAnnual % Change

1990 2,130,400 - 3,680,800 -

1995 2,454,525 3.04% 4,228,900 2.98%

2000 3,072,149 5.03% 5,130,632 4.26%

2001 3,192,125 3.91% 5,319,785 3.69%

2002 3,296,250 3.26% 5,470,720 2.84%

2003 3,406,170 3.33% 5,642,725 3.14%

2004 3,537,630 3.86% 5,845,250 3.59%

2005 3,681,300 4.06% 6,077,740 3.98%

2006 3,792,675 3.03% 6,305,210 3.74%

2007 3,907,492 3.03% 6,500,194 3.09%

2008 3,987,942 2.06% 6,629,455 1.99%

2009 4,023,331 0.89% 6,683,129 0.81%

2010 3,824,058 -4.95% 6,401,569 -4.21%

2011 3,843,370 0.51% 6,438,178 0.57%

2012 3,884,705 1.08% 6,498,569 0.94%

2013 3,944,859 1.55% 6,581,054 1.27%

2014 4,008,651 1.62% 6,667,241 1.31%

2015 4,076,438 1.69% 6,758,251 1.37%

2016 4,137,076 3.20% 6,835,518 2.52%

2017* 4,221,684 2.05% 6,965,897 1.91%

Population Figures

Source: AZ Dep of Adminis tra tion Office of Empoyment and Popula tion Statis tics annua l l y as of July

1, (*NOTE due to a change in calcuation methods the 2017 population numbers may have discrepancies

from other reporting methods and agancies)

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Employ

men

t (Tho

usan

ds of Jobs)

Source: Bureau of Labor Statistics

Wage and Salary Employment Trends

Phx‐Mesa MSA

Arizona

Year Phx-Mesa MSA% Annual Change Arizona

% Annual Change

2001 1,598.1 - 2,265.4 -

2002 1,596.1 -0.13% 2,265.1 -0.01%

2003 1,619.8 1.48% 2,296.4 1.38%

2004 1,683.7 3.94% 2,381.3 3.70%

2005 1,787.7 6.18% 2,508.8 5.35%

2006 1,884.1 5.39% 2,634.5 5.01%

2007 1,914.8 1.63% 2,673.7 1.49%

2008 1,866.3 -2.53% 2,616.3 -2.15%

2009 1,719.6 -7.86% 2,426.4 -7.26%

2010 1,693.1 -1.54% 2,388.5 -1.56%

2011 1,666.1 -1.59% 2,412.1 0.99%

2012 1,706.6 -8.56% 2,463.5 -5.84%

2013 1,862.7 9.15% 2,548.0 3.43%

2014 1,912.5 12.06% 2,602.2 5.63%

2015 1,984.1 19.09% 2,670.1 10.70%

2016 2,036.4 2.64% 2,736.6 2.49%

2017 2,088.4 9.20% 2,795.1 7.41%

2018 2,092.0 5.44% 2,823.4 5.74%

Wage and Salary Employment Trends(In Thousands of Jobs)

Source: Bureau of Labor Stati s ti cs

AREA ANALYSIS

14

Year Metro Phoenix Arizona U.S.A.

2000 3.3% 4.1% 4.0%

2001 4.2% 4.7% 4.7%

2002 5.6% 6.0% 5.8%

2003 5.3% 5.7% 6.0%

2004 4.5% 5.0% 5.5%

2005 4.1% 4.7% 5.1%

2006 3.6% 4.1% 4.6%

2007 3.3% 3.8% 4.6%

2008 5.3% 6.1% 5.8%

2009 9.1% 9.9% 9.3%

2010 9.2% 10.4% 9.6%

2011 8.7% 9.5% 8.9%

2012 7.3% 8.3% 8.1%

2013 6.2% 7.4% 6.7%

2014 5.6% 6.8% 5.6%

2015 4.7% 6.0% 5.0%

2016 4.1% 5.7% 4.7%

2017 4.2% 4.9% 4.4%

Average Annual Unemployment Rate Trends

Source: Arizona Dept. of Commerce, Research Administration, in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics (BLS).

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Percent

Average Annual Unemployment Rate Trends

Metro Phoenix

Arizona

U.S.A.

Tourism as an industry in Arizona employs more than 300,000 residents. Maricopa County has a relatively high percentage of jobs within the restaurant and food industries, each of which is tied to the region’s tourism. Metropolitan Phoenix is also rated as one of the top hotel/resort destinations in the United States.

Credit card processing is a major industry to the local economy. Arizona passed a bill in 1989 deregulating the state’s credit card industry. The market establishes rates and fees on credit cards based here without artificial fee or price constraints. Besides having regulations that allow for a market driven, credit card fee structure, Arizona’s cost of living and operating cost are much lower than its neighboring state, California. Unemployment Metropolitan Phoenix has traditionally followed national trends in unemployment in terms of direction, but not with the same severity.

In recent years, both the Metropolitan Phoenix and national unemployment rates have improved from their most recent highs in 2010.

Unemployment trended downward between 2003 and 2007 but reversed its direction beginning in 2008. Unemployment increases peaked in 2010 and then followed a decline that continued through 2016.

The Metropolitan Phoenix’s average unemployment rate leveled in 2017 to an average unemployment rate of 4.2%, a statistic that reflected nearly eight years of continued decline. Many economists currently anticipate unemployment levels to remain near their current levels through the foreseeable future.

Overall, unemployment in Metropolitan Phoenix has typically remained below the national and the Arizona rates for the same periods.

AREA ANALYSIS

15

A factor that is not revealed by total employment figures is Maricopa County’s limited number of corporate headquarters. Very few of the region’s major private sector employers, particularly in manufacturing and business/financial services, are headquartered in Arizona. Instead, it has been considered a good location for regional or branch operations. With U.S. Airway’s moving to Texas after the merger with American Airlines, and PetSmart being bought out by private investors, this leaves the Phoenix area with just four Fortune 500 company headquarters.

The remaining four are Avnet, an electronics components distributor; Freeport-McMoran Copper & Gold; Republic Services, which manages waste; and Insight Enterprises, which sells electronics components. Diversification of employment is the key to the economy of the Phoenix area, although the economy is in a transition from manufacturing to a more service-oriented base.

Major Employers

The State of Arizona leads all employers with 36,310 jobs. Major non-government Valley employers include, Banner Health Systems, Wal-Mart, Wells Fargo Bank, Arizona State University and Honor Health. The top three sectors are Government, Health Care, and Education.

A recent summary of the top 20 employers in Metropolitan Phoenix and their number of full time equivalent employees is included in the table to the right. Education

The top 25 institutions of higher learning in Metropolitan Phoenix cater to more than 235,000 students. Of these, eleven are universities, eleven are community colleges, and the rest are technical schools. Statistically, Metropolitan Phoenix has a proven academic track record.

A total of 59% of the adults in Metropolitan Phoenix have attended college, of these approximately 44% have graduated with some form of degree or certification, and many having continued to graduate school.

Company No. of FTE Business Sector

State of Arizona 36,310 Government

Banner Health 34,776 Healthcare

Wal‐Mart Stores 34,090 Retail

Wells Fargo 14,818 Financial Services

City of Phoenix 13,776 Government

Maricopa County 12,939 Government

Arizona State University 12,715 Education

Honor Health 11,296 Healthcare

Dignity Health 11,182 Healthcare

Intel Corp. 11,000 Electronic Equipment

JPMorgan Chase & Co. 10,600 Financial Services

Bank of America 10,000 Financial Services

University of Arizona 9,442 Education

American Airlines Group Inc. 8,056 Airline

Honeywell Aerospace 7,918 Aerospace Contractor

Freeport McMoRan Copper & Gold 7,630 Mining

U.S.Postal Service 7,338 Package & Comm. Delivery

American Express Co. 7,321 Financial Services

United Helathcare of Arizona 7,076 Health Insurance

Mayo Clinic 6,800 HealthcareSource: The Phoenix Business Journal ‐ Book of Lists 2017‐18

Summary of the 20 Largest Employers in Phoenix-Mesa MSA

AREA ANALYSIS

16

Arizona State University is the largest education center with an estimated enrollment in excess of 100,000 students (online, satellite and main campus) for 2017-2018 school year. The size and scope of this educational facility has had a profound impact on the nature of uses in the surrounding areas. ASU’s four largest campus’ (Tempe, West, Polytechnic, and Downtown Phoenix) now comprise the largest number of university undergraduate students in the nation.

Cultural & Recreational Features

Metropolitan Phoenix is the home to several professional sports teams and sports facilities, including the Phoenix Suns (basketball); the Arizona Cardinals (football); the Phoenix Coyotes (hockey); the Arizona Diamondbacks (baseball); the Arizona Rattlers (arena football); The Phoenix Rising FC (soccer); the Phoenix and Firebird International Raceways and Turf Paradise (horse racing). There are also numerous casinos operated by various Native American tribes on nearby reservations.

Due to the warm weather, the community is heavily oriented toward outdoor activities such as golf (185 courses), tennis, jogging, bicycling, hiking, swimming, and other amateur sports. City maintained parks populate the area, which is recognized nationally for having one of the largest park systems in the country.

Popular recreational attractions include lakes, several rivers, and mountainous regions within a two-hour drive. ECONOMIC INFLUENCES

Income Levels

The median household income for residents in Metropolitan Phoenix decreased slightly at an annual rate of 0.23% between 1995 and 2000. The increase over the subsequent eight years was much higher, at an average of 2.4% per annum, reaching its peak growth in 2006 with a rate of 7.73%.

The increases slowed to 4.21% during 2007 and 3.25% in 2008 when the record median income of $56,511 was reached. In 2009 the median household income started to decline, falling to a low of $50,424 in 2010. The average income rose slightly to $50,785 in 2011, $51,442 in 2012 and $52,066 during 2013 as the economy improved. 2014 and 2015 saw larger increases in income levels to $53,449 and $55,547 respectively. Ongoing marginal growth occurred in 2016 (latest available) with annual average income at $55,676. Continued growth is anticipated through 2018 and beyond. Significant increases in the construction sector are also occurring.

YearAnnual Income

Annual % Change

Annual Income

Annual % Change

Annual Income

Annual % Change

1995 $47,583 - $31,736 - $34,076

2000 $47,024 -0.23% $40,437 5.48% $41,990 4.64%

2001 $45,921 -2.35% $41,403 2.39% $42,228 0.57%

2002 $46,038 0.25% $40,724 -1.64% $42,409 0.43%

2003 $46,376 0.73% $41,963 3.04% $43,318 2.14%

2004 $48,304 4.16% $43,696 4.13% $44,334 2.35%

2005 $48,752 0.93% $44,402 1.62% $46,326 4.49%

2006 $52,522 7.73% $47,315 6.56% $48,201 4.05%

2007 $54,733 4.21% $49,923 5.51% $50,233 4.22%

2008 $56,511 3.25% $51,009 2.18% $50,303 0.14%

2009 $53,284 -5.71% $48,711 -4.51% $49,777 -1.05%

2010 $50,424 -5.37% $46,787 -3.95% $49,276 -1.01%

2011 $50,785 0.72% $46,710 -0.16% $50,054 1.58%

2012 $51,442 1.29% $47,796 2.32% $51,371 2.63%

2013 $52,066 1.21% $48,504 1.48% $52,250 1.71%

2014 $53,449 2.66% $50,094 3.28% $53,713 2.80%

2015 $55,547 3.93% $51,492 2.79% $55,775 3.84%

2016 $55,676 0.23% $51,340 -0.30% $55,322 -0.81%

Maricopa county Arizona United States

Median Household Income

Source: U.S. Census Bureau, (ACS Survey)

AREA ANALYSIS

17

Year (fiscal) Maricopa County% Annual

ChangeArizona

% Annual

Change

2000 ‐ ‐ $36,404 ‐

2001 ‐ ‐ $38,282 5.2%

2002 $26,169 ‐ $38,433 0.4%

2003 $26,584 1.6% $39,409 2.5%

2004 $28,753 8.2% $42,409 7.6%

2005 $31,571 9.8% $46,378 9.4%

2006 $36,474 15.5% $53,148 14.6%

2007 $37,802 3.6% $55,009 3.5%

2008 $35,593 ‐5.8% $52,627 ‐4.3%

2009 $30,719 ‐13.7% $46,174 ‐12.3%

2010 $28,606 ‐6.9% $42,914 ‐7.1%

2011 $30,990 8.3% $45,899 7.0%

2012 $32,257 4.1% $48,179 5.0%

2013 $34,797 7.9% $51,276 6.4%

2014 $37,984 9.2% $55,257 7.8%

2015 $40,358 6.3% $58,464 5.8%

2016 $42,848 6.2% $61,614 5.4%

2017 $44,564 4.0% $63,922 3.7%

Source: State of Arizona, Department of Revenue Annual Report

Retail Sales Trends(Millions of Current Dollars)

Retail Sales Activity

The economic strength of Metropolitan Phoenix in part can be measured by its retail sales growth. Total retail sales experienced large annual increases during the late 1990’s. Growth continued between 2000 and 2005 at an average annual rate of 6.2%.

A major reversal followed as total retail sales growth dropped from a gain of 15.5% in 2006 to 3.6% in 2007. Growth turned to losses beginning in 2008 noting three years of consecutive losses that averaged 8.1% per annum.

Retail sales activity turned positive in 2011 with a net gain of 8.3%. A net gain of 7.9% in 2013 was followed by a higher gain of 9.2% in 2014. 2015 gained a bit more with 6.3% by the end of the fiscal year and 2016 followed with a similar 6.2% growth rate. In 2017 the retail sales growth was still positive but slowed to 4.0% gain over the prior year. More moderate growth is forecasted to continue through 2018. Overall, the future is promising as the economy continues to expand. Standard of Living

The standard of living is a comparison of the cost of living relative to income levels in an area. Housing costs, a significant component of the total cost of living are a similar proportion to income in Phoenix as they are nationally. As a result, the standard of living for Phoenix residents, at least in terms of housing, is considered close to normal. In excess of 60% of the households in Metropolitan Phoenix are homeowners noting that this ratio has declined in recent years. GOVERNMENTAL INFLUENCES

The City of Phoenix government and most neighboring communities in Metropolitan Phoenix have city council forms of government with a mayor and a city manager. The Valley’s municipalities have a history of working well together to solve some of the major problems. Most of the major issues currently facing these city governments relate to problems caused by rapid growth, such as: air and ground water pollution, freeway construction, annexations and urban sprawl, preserving residential neighborhoods, ensuring an adequate water supply, flood control, traffic congestion, and mass transit alternatives.

AREA ANALYSIS

18

ENVIRONMETAL INFLUENCES Land Transportation

Street patterns within Metropolitan Phoenix are generally in a north/south, east/west “grid-like” orientation with nearly every mile developed as a major arterial road. This major arterial grid system (which is illustrated on the map of Metropolitan Phoenix) carries the bulk of every-day traffic.

The area benefits from several freeways that provide convenient access to the high population areas of the city and state as well as to Southern California, Colorado, Nevada, New Mexico, and Texas. Metropolitan Phoenix is also served by two freight rail lines (the Southern Pacific Railroad and the Atchinson, Topeka and Santa Fe Railroad).

The primary modes of public transportation are the Phoenix Transit System, an intercity bus system through Phoenix and many of the surrounding communities and the expanding light rail system. Map of Metropolitan Phoenix Freeway System

AREA ANALYSIS

19

Most growth in the Metropolitan Phoenix area has occurred along a northwest/southeast diagonal due to physical features and availability of undeveloped land. Much of the growth in Metropolitan Phoenix has been fueled by the expanding freeway corridors that will ultimately provide access to the major growth areas. A map showing the regional freeway system and its current development status is displayed above. The completion of this freeway system and expanding air traffic systems are important to Metropolitan Phoenix as it continues to expand its importance as a major regional transportation hub.

METRO Light Rail System

A project that will have a long term impact on the area is the recently completed METRO light rail system that will eventually span Phoenix and surrounding communities. The first segment of this long-term project was the 20.3 mile route that extended from Main and Dobson Roads in Mesa through Tempe and central Phoenix to its terminus in northwest Phoenix near Camelback Road and 19th Avenue. Development of the first segment started in 2005 and the system began operating in early 2009. In 2012, Mesa received approval to start the expansion from downtown Mesa, east to Gilbert Rd. The new route is under development and expected to open in 2019. An additional 40 miles of light/rail transit routes are in the planning stages and currently scheduled to be completed in varying stages by 2034.

The rail system uses electricity from overhead wires that are suspended from poles or buildings with its power being disbursed through feeder cables from electrical substations built specifically to power the light rail system. The trains have steel wheels that roll on steel rails typically imbedded in the center pavement when traveling along existing roadways.

In terms of capacity, the system initially has the ability to carry the equivalent of one arterial lane of traffic but can be expanded to a passenger capacity equivalent to a six-lane highway with additional light rail vehicles.

Existing and Proposed Light Rail and Proposed Streetcar Routes (Source: Valley Metro)

AREA ANALYSIS

20

Air Transportation

Primary air transportation facilities are located at Sky Harbor International Airport, which is host to over 20 commercial airlines, as well as private and corporate aircraft. It is ranked among the nation’s ten busiest airports for domestic and among the world’s top 40 busiest airports for international travel. Current plans for the replacement of terminals 2 and 3 with one mega-terminal over the next decade are well underway. The PHX Sky Train is currently operational 24 hours a day connecting the valley metro system with the airport terminals and parking areas.

A secondary commercial airport in the east valley is the Phoenix-Mesa Gateway Airport which functioned from 1941 to 1993 as a military base until its conversion in 1994. It has two major commercial airlines, Allegiant Air and WestJet serving 46 cities and over 1.3 million travelers per year. The airport has 3 runways with plans to construct a 4th and plans to add another terminal with 14 gates. It currently covers approximately 3,000 acres. Natural Resources & Climate

National forests and some of the country’s largest county and city parks and preserves provide an abundance of outdoor activities. Much of Metropolitan Phoenix’ growth, as well as its tourist industry is attributable to its climate, scenery and recreational opportunities. Water sports at several man-made lakes, and snow skiing are available within a few hours’ drive.

The Phoenix area is characterized by a dry climate with a wide range between minimum and maximum temperatures. June and July are the hottest months with an average maximum temperature of 106.4F. December is the coldest month with an average minimum temperature of 42.8F. February and March provide the most ideal temperatures and are the peak tourist months. The average annual minimum temperature is 63.1F while the average maximum temperature is 86.9F.

Annual precipitation averages 8.4 inches. Water is a precious commodity in the desert, but Phoenix has sufficient supplies to support its continued growth. As more agriculture is eliminated, the net demand for water decreases even with the burgeoning growth in population. One acre of typical residential growth requires about one-third of the water of one acre of agricultural land.

El lsw

or th

Rd

d

AREA ANALYSIS

21

Water and the Central Arizona Project

Water usage in Metropolitan Phoenix (and surrounding areas) is governed by the Ground Water Management Act of 1980. This state legislation instituted a comprehensive ground water conservation and management program in Arizona that restricts the amount of water that may be withdrawn for existing and future uses to strict conservation requirements. Currently, subdividing land without a proven 100-year supply of water is not allowed.

The Central Arizona Project is a 335-mile long aqueduct that delivers approximately 1.5 million acre feet of Colorado River water each year from Lake Havasu on Arizona’s western border into Maricopa, Pinal and Pima Counties. Water traveling within the CAP is allocated to 85 users, classified as municipal or industrial entities, 12 Native American Communities and 23 agricultural districts.

The controls of the Ground Water Management Act and the success of the CAP have helped to establish an assured water supply to Metropolitan Phoenix despite its desert environment and long-term growth forecast. The Metropolitan Phoenix area recently suffered a prolonged draught that has nearly depleted many of its reserves. Nevertheless, the long-term supply (relative to other desert communities in the region) remains solid. Commercial Markets

Summarized in the table below are recent data on the Metropolitan Phoenix retail, office and industrial markets. The industrial market continues to show the greater strength among the three sectors.

Summary of Commercial Market Sector Activity

DescriptionPeriod as of

Qtr. 4SF Inventory % Vacant

Qtr 4 Under

Construction

Annual Net SF

Absorption

2017 225,800,489 8.4% 1,409,096 1,815,166

2016 222,521,135 8.8% 1,227,017 2,149,971

2015 219,842,586 9.3% 904,560 1,790,702

2014 216,309,190 9.8% 427,089 2,019,402

2013 215,580,105 10.4% 156,210 3,476,438

2012 217,060,959 11.2% 526,332 2,737,984

2011 213,184,091 12.1% 215,844 642,325

2010 209,118,765 12.1% 499,765 (227,405)

2009 200,276,478 11.9% 367,051 (2,978,946)

2017 88,090,687 16.4% 1,810,631 2,839,559

2016 86,178,470 17.4% 1,694,021 3,219,853

2015 85,133,315 19.3% 2,453,462 3,779,324

2014 81,369,487 21.1% 3,148,270 1,966,411

2013 80,261,581 22.4% 725,623 1,712,366

2012 80,297,147 23.9% 208,866 2,020,529

2011 79,323,865 25.5% 225,000 1,857,433

2010 75,953,171 26.2% 0 233,670

2009 74,167,551 24.5% 1,429,553 (667,329)

2017 309,208,881 6.8% 6,559,152 9,424,801

2016 302,220,641 8.0% 5,147,721 9,497,677

2015 296,446,712 10.3% 4,004,070 4,639,447

2014 293,117,563 11.0% 4,158,036 6,214,680

2013 286,326,250 11.4% 2,980,022 8,783,982

2012 277,423,679 11.0% 6,039,818 7,405,168

2011 274,064,955 12.4% 3,621,631 7,745,111

2010 288,576,965 15.5% 108,597 4,909,145

2009 269,659,716 16.1% 1,811,015 (4,649,352)

Retail / Office / Industrial Data

Sources: Retail (COSTAR Group, Inc); Office (CB Richard Ellis Phoenix Office Market Survey); Industrial (CB Richard Ellis Phoenix Industrial Market Survey)

Industrial

Office

Retail

AREA ANALYSIS

22

Retail

The retail market absorbed approximately 5.86 million square feet of space during 2006 and 7.58 million square feet during 2007. Net absorption declined during 2008 to only 1.68 million square feet as the economic slowdown advanced. Market deterioration continued into 2009 with a net loss of nearly 3 million square feet followed by additional losses of 227,405 square feet in 2010 although gains have occurred in subsequent periods. Total absorption hit a net gain of 3.476 million square feet in 2013 and leveled to 2.02 million square feet in 2014. In 2015 absorption dipped slightly to 1.79 million square feet but rebounded in 2016 to 2.15 million square feet of absorption by years end. Absorption for 2017 stood at 1.82 million square feet. Overall, growth was stable in 2017 and more of the same is anticipated through 2018.

Total space under construction declined from 2.1 million square feet at year-end 2008 to a low of 156,210 square feet in 2013. A total of 427,089 million square feet was under construction as of the fourth quarter of 2014, increasing to over 900,000 square feet during 2015, 1,227,017 square feet in 2016 with 1,409,096 square feet of new space under construction at year end 2017. Ongoing expansion is anticipated through 2018 and beyond.

Overall vacancy increased from 6.0% at year-end 2006 to a high of 12.1% at year-end 2011 and 2012. Total average vacancy since that time has trended downward ending at 8.8% in 2016 and 8.4% at year-end 2017, the lowest levels in nine years.

The majority of retail development during the mid-2000’s had been in large neighborhood, power centers with large percentages of anchored space and smaller strip retail buildings. The market had reached its saturation with power centers in most areas thus the most recent focus shifted to the construction of neighborhood centers. Overall, the retail sector is still making a comeback from its historical highs and is expected to show additional improvement in the months ahead although most expansion is following the path of proven demand. Office

Average vacancy in the office section has remained above 20% since 2008. The average hit its recent high of 26.2% in 2010 although it has dropped annually since then. Year-end vacancy hit 17.4% at year-end 2016 and was 16.4% at year-end 2017.

Total absorption reached a nominal gain of 234,000 SF in 2010 following several years of net losses. A sizable increase occurred beginning in 2011 noting that annual absorption averaged 1.9 million square feet per year during the following four years and totaled 2.01 thousand square feet in 2014. Total absorption in 2015 almost double to 3,779,324 square feet and stood at 3,219,853 square feet in 2016 and 2,839,558 square feet in 2017. The market has responded to this improvement in demand with new construction jumping from 725,000 in the fourth quarter of 2013 to more than 2.4 million square feet in 2015. The total office space under construction totaled 1.7 million square feet in 2016 and 1.8 million square feet in 2017.

Overall, the office sector is getting stronger with most activity occurring for space in better projects as tenants continue to upgrade at competitive rents that do not quite support new construction. Still, ongoing improvement is anticipated through the foreseeable future.

AREA ANALYSIS

23

Building Permits

Annual Change

Building Permits

Annual Change

Building Permits

Annual Change

Maricopa County

Annual Change

2001 34,675 - 697 - 7,701 - 43,073 -

2002 39,862 15% 502 -28% 6,809 -12% 47,173 10%

2003 46,591 17% 739 47% 6,837 0% 54,167 15%

2004 57,360 23% 1,606 117% 6,293 -8% 65,259 20%

2005 54,313 -5% 828 -48% 7,476 19% 62,617 -4%

2006 36,282 -33% 1,496 81% 6,502 -13% 44,280 -29%

2007 26,404 -27% 1,112 -26% 9,756 50% 37,272 -16%

2008 12,657 -52% 463 -58% 5,413 -45% 18,533 -50%

2009 8,598 -32% 60 -87% 614 -89% 9,272 -50%

2010 7,212 -16% 84 40% 1,004 64% 8,300 -10%

2011 7,297 1% 98 17% 1,686 68% 9,081 9%

2012 11,931 64% 337 244% 3,699 119% 15,967 76%

2013 12,959 9% 329 -2% 5,449 47% 18,737 17%

2014 11,692 -10% 215 -35% 8,445 55% 20,352 9%

2015 16,621 42% 354 65% 5,427 -36% 22,402 10%

2016 18,433 11% 571 61% 9,579 77% 28,583 28%

2017 20,551 11% 504 -12% 8,598 -10% 29,653 4%

Source: US Census Bureau

Residential Building Permit Activity (Metropolitan Phoenix)

Single FamilyMultifamily

(5+Units / Structure)Total Permits

Town Homes (2-4 Unit / Structure)

Year

Industrial

The industrial market’s vacancy at year-end 2015 stood at 10.3%, an indication that is down significantly from its recent high of 16.1% at year-end 2009. Vacancy decreased to 8.0% in 2016 and 6.8% by year-end 2017. The lowest vacancy is currently found among freestanding industrial buildings followed by general industrial space. The highest vacancies are within the market’s multi-tenant sector.

Net absorption has been strong since 2009 when it dropped substantially to a net loss of over 4.6 million square feet. The loss rebounded to a net gain of 4.9 million square feet in 2010, 7.7 million square feet in 2011, and leveled off at 7.4 million square feet in 2012. Net gains continued into 2013 with about 8.7 million square feet of absorption. Total net absorption stood at 4.6 million square feet in 2015 but exploded in 2016 and 2017 to almost 9.5 million square feet of net demand. More of the same is anticipated through 2018.

Overall, the industrial market has shown the greatest signs of resurging strength among the three commercial sectors. The near-term forecast for this sector is stabilized growth where economically feasible. Effective rents are anticipated to increase in most submarkets.

Residential Markets

Both single-family and multi-family construction in Metropolitan Phoenix has fluctuated over the past two decades. Both sectors have made a comeback following several years of decline trough 2010 as demonstrated in the table below and in the chart to the right. Residential Building Permit Activity

AREA ANALYSIS

24

Single Family Market

Single family permits increased for many years at an unprecedented rate to a high of 57,360 single family home permits issued in 2004. The advent of a major economic downturn however caused annual single family permits to plummet to a low of 7,212 units in 2010. The number of annual permits issued has since increased although they leveled around 12,000 units during 2012, 2013 and 2014. 2015 and 2016 saw an increase in new permits to 16,621 and 18,433 respectively. 2017 issued 20,551 new permits reflecting an 11% increase over 2016. Most market participants anticipate ongoing improvement in the single-family sector through 2018 and beyond at an increased pace noting that current activity is still well below the highs of 2004/2005.

Townhouse Market

The townhouse sector saw new permits issued in a typical range of 500 to 800 units per year although 2006 was a stellar year with total permits issued reaching 1,606. The sector however reached its low a few years later as only 60 units were issued in 2009. While activity has since improved, the sector issued only 295 new permits per annum (on average) during the following three years noting that only 215 permits were issued in 2014 followed by 354 permits in 2015 and 571 permits in 2016. Total permits issued in 2017 stood at 504 units. Ongoing, moderate growth is anticipated for the townhouse sector by most market participants. Multifamily Market

As noted in the previous table, multifamily development remained relatively strong with between 5,000 and 10,000 permits until 2009. Permit activity dropped to below 700 units per annum in 2009 then stabilized at around 1,000 permits in 2010. The multifamily market has since improved returning to over 8,000 unit permits issued annually. Notably, total permits issued jumped from 5,449 units in 2013 to 8,445 units in 2014. 2015 moderated to 5,427 permits although total permits issued jumped to 9,579 units in 2016. Total permits issued in 2017 dropped slightly to 8,598 units. Continued expansion is anticipated although questions of possible overbuilding in some sectors are now occurring.

Vacancy in the multifamily sector (among its stabilized units) hit a high of 13.4% in the fourth quarter of 2009, but dropped to 8.3% in the fourth quarter of 2012. All units (including those in lease-up) hit a higher average vacancy of 15.6% in the second quarter of 2009 but dropped to an average of 8.8% during the fourth quarter of 2012. The average vacancy for all units (including those in lease-up) trended lower to 7.9% by year-end 2014 with the vacancy for stabilized units at 6.2% (per Real Data). In 2015 the average vacancy for all units (including those in lease-up) dropped again to 7.7%, with the vacancy for stabilized units at 5.72% (per Real Data). The 2016 average vacancy for all units (including those in lease-up) was steady at 7.75% with the vacancy for stabilized units rising slightly to 6.03% (per Real Data). The 2017 average vacancy for all units (including those in lease-up) remained at 7.73% with the average vacancy for stabilized units dropping slightly to 5.72% (per Real Data).

Overall, the multifamily sector has been in a strong recovery mode for several years and is by far the most dynamic sector in Metropolitan Phoenix area. Continued strength is anticipated although some are beginning to question the sustainability of its current rate of expansion.

AREA ANALYSIS

25

ECONOMIC FORECAST

Looking back, the greater Phoenix economy ended its fifth year of a recovery cycle during 2007 following its previous recession period that ended officially around November of 2002. A major economic slowdown emerged during late 2006 and early 2007 as the single-family residential market crumbled due to the failure of the sub-prime mortgage market and a shake-out in home prices that became artificially inflated between 2005 and 2006. A national credit crunch added to the local economy’s difficulties in 2008 leading to a deep recession.

Currently, most market participants expect the local economy to continue its steady improvement through 2018 and beyond. Job growth averaged a steady 4% to 5% per annum increase from 2012 through 2017 and more of the same is also anticipated through 2018 and beyond. The current economic improvement has kept Phoenix in the top 15 municipalities nationally in job growth.

Most economists expect retail sales to improve due to the increase in job prospects, lower unemployment, and growth of the housing market. Prior to the downturn, nearly $1 out of every $3 in retail sales generated in the local economy was tied to the single-family residential market. With housing heading in a positive direction, it will have a huge impact on the local economy. The single-family housing market had been soft for years, noting that fewer than 9,000 permits per annum were issued during 2009, 2010 and 2011. Welcomed relief occurred as approximately 12,000 permits were issued in 2012, 2013 and 2014 with greater expansion in 2015, 2016 and 2017 at 16,621, 18,433, and 20,551 permits issued, respectively for single family homes. The total residential permits (including multifamily) increased to 22,402 permits in 2015 and then 28,583 in 2016 and most recently to 29,653 permits for 2017. More of the same is anticipated through 2018 although no one anticipates a return to the robust years of 2001 to 2005 (when new permits averaged over 39,000 units per annum) anytime soon.

While commercial construction continued to boom in 2008, the sector slowed significantly between 2009 and 2011, but rebounded in 2012 through 2017 for the retail and industrial sectors. There is an anticipation of the same through 2018.

Overall, local authorities anticipate the Metropolitan Phoenix commercial real estate market to continue to improve in all sectors into 2018 and beyond as job gains, population growth and retail spending grow. Still, leading local economists are generally of the opinion that a continued slow growth cycle is occurring for both Metropolitan Phoenix and Arizona. Long term population and job growth are still expected. CONCLUSION

The area’s mild winter climate, proximity to several major southwest cities, and the area’s availability of water and developable land has enabled metro Phoenix to become one of the fastest growing metropolitan areas in the country. The economy is relatively diverse, relying primarily on service, trade, manufacturing and government sectors as major employers.

Metropolitan Phoenix is enjoying sustained momentum as it continues its economic rebound and is still forecast to be among the stronger U.S. cities in terms of long-term real estate performance.

NEIGHBORHOOD ANALYSIS

26

NEIGHBORHOOD MAP

Subject


27


The subject is in a Maricopa County island within a developing neighborhood approximately 23 miles east of downtown Phoenix, 18 miles east of the Sky Harbor International Airport, ten miles northeast of downtown Mesa. Neighborhood boundaries are generally identified as Recker Road and the Loop 202 Red Mountain Freeway to the west, the Usery Mountain Recreation Area and Meridian Road to the east, Tonto National Forest to the north and Main Street/Apache Trail to the south. The entire neighborhood is heavily influenced by the City of Mesa. The mixed-use neighborhood can be characterized as a low density residential core and surrounding residential subdivisions in a largely undisturbed Sonoran desert environment and adjoining wilderness preserve. The character of the neighborhood can be illustrated by the assemblage of the land use plan for the City of Mesa on the next page. As noted the primary land use is low density residential. Usery Mountain Park One of the major draws to the area is the Usery Mountain Regional Park. This county-maintained park incorporates 3,648 acres at the western end of the Goldfield Mountains and adjoins the Tonto Nation al Forest to the east. The park contains a large variety of plants and animals in a Sonoran Desert terrain environment.

Las Sendas Las Sendas is a Sonoran Desert Uplands community comprising approximately 1,800 acres. It the neighborhood’s primary master-planned community with 1,800 acres. The community has 28 acres of parks and other community service areas including an 18-hole golf course. Residential units are priced in a broad range from $200,000 to in excess of $1+ million. Other residential developments include Red Mountain Ranch and Mountain Bridge, among others.


28

Land Use Plan – City of Mesa

Subject


29

Demographics

The subject’s market area caters to a primary population base of 45,696 that is projected to experience a 7.5% growth over the next five years. The immediate area comprises primarily middle class households with average household incomes around $109,635. Pertinent data on the neighborhood are included in the table to the right.

Immediate Neighborhood The subject’s immediate surroundings are as follows: North –Single Family Residential Uses, then National Forest

South – Across McDowell Road, Single Family Residential Uses, Religious Facility then Developing Single Family Residential Uses

East – Vacant Residential Land, across Ellsworth Road (aka Usery Pass Road), Single Family Residential, then the Usery Mountain Recreation Area and the National Forest

West – Vacant Residential Land, across McDowell Road, Single Family Residential, Single Family Residential and Vacant Land, then the Loop 202 Red Mountain Freeway Neighborhood Conclusion In summary, the subject competes in a mostly rural neighborhood characterized by Sonoran desert terrain and residential uses. The completion of the Red Mountain (Loop 202) Freeway in 2008 along with new residential subdivision development, have been key stimulants to its ongoing expansion. Ongoing growth is anticipated.

DemographicsPopulation (2019)Households (2019)5-Year GrowthMedian Housing Value (2019)Avg Household IncomeMedian Household IncomeMedian Age% Homeowners

DEMOGRAPHIC DATA - 92nd Street & McDowell Road

source: CoStar Comps

1 Mile Radius4,2571,42211.9%

$480,819$150,723$123,103

44.7093.3%

3 Mile Radius45,69616,2637.5%

$315,413$109,635$90,45542.7087.7%

5 Mile Radius140,95058,7487.5%

$198,898$76,339$56,81246.8078.7%

SITE DATA AND ANALYSIS

30


ADDRESS/LOCATION: The subject is located 78 feet west of 92nd Street on the north side of McDowell Road in Maricopa County just outside the Mesa City limits.

ASSESSOR’S PARCEL NO: 219-30-011H

UTILITIES: Electricity and water are available to the parcel. LAND AREA:

*Net Land area based on MCFCD Survey

EASEMENTS: My site inspection and review of public documents including a title report (dated April 12, 2019) did not reveal any obvious easements or encroachments that would have any adverse impact on the marketability or development potential of the subject parcel.

ONSITE IMPROVEMENTS: The subject parcel has no onsite improvements.

ACCESS/FRONTAGE: The parcel has frontage and access along McDowell Road that aligns southern boundary of the parcel.

147.44 feet of frontage: McDowell Road

(based on MCFCD Survey)

VISIBILITY: The parcel offers generally good visibility from surrounding properties and areas.

VIEWS: Mountain views

SHAPE/FUNCTIONAL UTILITY: The parcel is a rectangular shaped parcel that would provide functionality for most allowable uses.

TOPOGRAPHY & DRAINAGE: The parcel is native desert land that is typically level although gently downward sloping to the southwest.

FLOOD ZONE: The Flood Insurance Rate Map is identified as Panel 4013C of 2285L which was last revised October 16, 2013, prepared by the National Flood Insurance Program, designates the subject as being in Zone X500. This zone is not defined as a special flood hazard area. A copy of the flood map and panel are included in the Addenda.

Description Net SF Net Acres

T1N, R7E, Sec 4 49,205 1.13

Parcel SizeSummary of Subject


31

SPECIAL ASSESSMENTS: To my knowledge there are no bonds or significant

special assessments encumbering the parcel.

SEISMIC DATA: The parcel to the best of my knowledge, is not in a recognized earthquake zone. Generally, the landscape of Arizona reflects relative tectonic stability.

SOIL CONDITIONS: My inspection did not reveal any obvious soil conditions that would prohibit the parcel’s development. However, a soils report was not available for my review. Note that I am not an expert in the analysis of soil conditions nor qualified to inspect for unusual conditions. As such it is assumed that no soil conditions exist that would render the subject to be something other than fully developable.

ENVIRONMENTAL OBSERVATIONS: An environmental site assessment was not available for

my review. No further investigative effort was made by the appraiser to identify potential environmental contamination, nor is the appraiser qualified to detect such substances.

I am unaware of any physical or governmental restraints that would deter the property from being utilized to its highest and best use. For purposes of this report, the opinion of value is predicated on environmentally unimpaired property.

MISCELLANEOUS: The parcel is not in an agricultural preserve and there are no possible wetland areas on the properties.

SITE DATA CONCLUSION:

The subject is characterized as undeveloped desert land with a rectangular shape and generally level topography in a low density residential area. It has frontage and access along McDowell Road. All essential public utilities are available to the subject parcel.

PROPERTY TAXES

32

PROPERTY TAX AND ASSESSMENT DATA

The parcel is owned by the Maricopa County Flood Control District noting that no tax data information exists for land that is publicly owned. Tax Rate Trend

Tax rates for Maricopa County have remained relatively steady in recent years. The 2019 tax rates are anticipated to be similar to the 2018 primary and secondary rates. Real Estate Tax Liability

As a government-owned parcel the subject is tax exempt. Once in private ownership, the parcel would likely face a typical tax liability. Delinquent Tax Liability and Special Assessments

In light of the preceding, the parcel is not subject to any delinquent tax liability and is not currently subject to any special assessments. Conclusion

The parcel has no tax assessments and is not subject to taxation (while under government ownership).

ZONING

33

ZONING

The parcel is in a designated Residential Single Family zoning district (R1-35) by Maricopa County. The following chart summarizes the use criteria for the zoning designation that is applicable to the subject. A copy of a zoning map is included on the following page. The subject’s current zoning is consistent with surrounding uses. Conclusion

The parcel is zoned by Maricopa County for low density residential uses noting that this zoning category is consistent with the City of Mesa, of which the subject falls into the planning area. The Maricopa County general plan identifies the parcel in an area designated for rural residential uses.

Current Zoning R1-35, RS Residential Single-Family Dwelling

Legally Conforming Yes

Purpose and Permitted Uses

conserve,protect, and encourage sustainable single-family residential development where minimum lots of not less than 35,000 square feet in area are suitable and appropriate taking into consideration existing conditions, including present use of land, present lot sizes, future land use needs, and the availability of public utilities. Principal uses permitted in this zoning district include single-family dwellings, churches, schools, parks,

Pending Zoning Change? none

Category Zoning RequirementMinimum Lot Area 35,000'Maximum Building Height: 30'Maximum Lot Coverage: 20%Setbacks:

Front 40' minimumInterior side 20' miminumRear 40' minimum

ZONING SUMMARY

Source: Maricopa County

ZONING

34

ZONING MAP (Maricopa County)

Subject

HIGHEST AND BEST USE

35


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:

Highest and Best Use Criteria

Legally Permissible Of the possible uses, which uses are permitted by zoning and deed restrictions?

Physically Possible What uses are physically possible?

Financially Feasible Which possible and permissible uses will produce a net return to the owner of the site?

Maximally Productive Among the feasible uses, which use will produce the highest net return or the highest present value?

Highest and best use involves assessing the subject both as if vacant and as improved. It must be legal and probable, not speculative or conjectural. A demand for the use must exist and it must yield the highest net return to the land for the longest period.

The highest and best use of the land as if vacant and available for use may be different from the highest and best use of the improved property. This may be true when the improvement is not an appropriate use, but it makes a contribution to the total property value in excess of the value of the site. Legally Permissible

The parcel is zoned R1-35 by Maricopa County, a category allows low density residential uses. The Maricopa County general plan identifies the parcel in an area designated for mixed uses.

There are no known easements, deed restrictions or other legal barriers that would prohibit the development of the parcel’s ultimate use potential. The land uses are also impacted by the City of Mesa general plan that calls for low density single-family residential uses on the subject (and adjoining) parcels. Physically Possible

The parcel is undeveloped desert land with a rectangular shape and gently sloping, level topography in a low density residential area. The parcel has frontage along the McDowell Road. It is not impacted by special flood hazard issues.

Direct access to the parcel is from McDowell Road, an asphalt-paved section line arterial in the immediate subject area. Public utilities including water and power are available to the parcel.


36

Financially Feasible

The parcel is situated in unincorporated Maricopa County and within the City of Mesa’s planning area. Market conditions are stable and growth oriented.

The parcel is zoned for low density single-family uses. Its frontage along McDowell Road has little impact on the parcel that does not have any obvious or probably commercial use potential. Current demand for single-family lots is strong and steady. Continued area growth and expansion is anticipated through the foreseeable future.

Maximally Productive

In light of the preceding, it is my opinion that the highest and best use of the parcel is its near to intermediate term development with a single-family residence that compliments surrounding uses and aligns with allowable uses permitted by relevant land use plan and zoning guidelines. Basis for Valuation

The valuation analysis that follows assumes the subject parcel is targeted to an owner-user seeking to purchase the property for a single family residential use. All of the most relevant land sales discovered and considered in the valuation analysis are similarly zoned properties in the subject’s immediate area that were also purchase by owner/users for near-term development of a single-family residence.

APPRAISAL METHODOLOGY

37

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. A brief explanation of application of each approach follows: COST APPROACH

The cost approach is based upon the premise that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. Using a set of procedures this approach estimates the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation (i.e., deterioration and obsolescence) in the structures from all causes. An opinion of the land’s market value is then added to provide a market value indication.

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 relatively unique or specialized improvements are located on the site and for which there exists 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 unit 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 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 the 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. APPLIED METHODOLOGY

Only the sales comparison approach is used in my valuation analysis noting that it is the most common approach used in valuating vacant land. The exclusion of the cost approach and income approach do not undermine the credibility or reliability of my findings and conclusions.

MARKET VALUATION

38

MARKET VALUATION Summarized in the table and on the map on the following page is comparable land data used to render an opinion of the market value for the subject parcel on a direct comparison basis.

ANALYSIS OF LAND SALES

Note to the reader: for this analysis, I have determined the best unit of comparison to be price per square foot of net land area. Net land area excludes any existing or anticipated public right-of-ways, but includes onsite easements.

The summarized comparables include five sales of land parcels sized from .94 to 1.84 net acres in the subject’s immediate area that were acquired for single-family resident-related uses. The parcels sold within the prior ten months and indicate unadjusted prices in a range of $2.62 to $3.39 per square foot of net land area. All of the sales were cash transactions for parcels that are zoned for similar low density single-family residential uses. The transactions were confirmed with a party to the transaction, ARMLS, public records and/or other sources.

Data sheets for each of the five comparables begin on the following second page. They are followed by a discussion of the applied adjustments and an adjustment grid.

MARKET VALUATION

39

Summary of Comparable Land Sales

Comparable Land Sales Map

1.0144,213

1.8479,934

1.6370,785

1.5969,352

0.9440,961

1.130

49,205 Source: ARMLS, public record,

4 Dec-18 3233 N 88th Street Mesa, AZ 85207

219-33-020+

219-24-212N

R1-35

R1-35

1

2

3

Jul-18

Oct-18

Summary of Comparable Vacant Land Sales

Sale No

Sale Date

Address APN Zoning Sales PriceNet Acres

SFPer

Total SF Per Total

Acre

Nov-18

2904 N 90th Street Mesa, AZ 85207

2915 N 89th Street Mesa, AZ 85207

2856 N 92nd Street Mesa, AZ 85207

$185,000

$235,000

$127,095

$125,338

$113,846

$147,604

$129,000

$230,000

$2.61

$3.39

$2.92

$2.88

Subject 219-30-011H - -W of NWC 92nd St & McDowell Rd Mesa, AZ 85207

-

5 Feb-19 9008 E Omega Street Mesa, AZ 85207

219-33-033 R1-35 $114,500 $121,765 $2.80

R1-35

R1-35

R1-35219-33-023K

219-33-022D

MARKET VALUATION

40

Sale 1 is the July 2018 purchase of a 1.01 net-acre or 44,213 SF residential parcel at 2904 N 90th Street in Mesa less than 1/2 mile northwest of the subject. The purchase price of $129,000, cash equates to $127,095 per net acre and $2.92 per square foot of net land area. Sales Summary Data Grantor: The Reese’s Living Trust Grantee: Jared Palmer and Julianna Palmer Date of Sale: July 2018 Document No.: 18-0577048 APN: 219-33-023K Parcel Size SF (net) 1.01 net acres or 44,213 net square feet Sale Price: $129,000 Price per SF (net): $127,095 per net acre or $2.92 per net SF Terms: Cash Conditions of Sale: Typical Offsite Improvements: In place along 90th Street, no sidewalks or gutters Onsite Improvements: City water service and power onsite; no sewer service Zoning: R1-35 Topography: Native desert, generally level Flood Hazard Issues: None Sales History: The parcel sold in September 2015 for $110,000 or $2.48/net SF DOC [15-0643396]. No other sales within prior 3 years Comparison to the Subject No specific adjustments are warranted. The applicable unit price indication for the subject is $2.92 per square foot of net land area.

Looking west across 90th Street Aerial photo of comparable Source: MCA 2019 Aerials

MARKET VALUATION

41

Sale 2 is the October 2018 purchase of a 1.84 net-acre or 79,934 SF residential parcel at 2915 N 89th Street in Mesa less than 1/2 mile northwest of the subject. The purchase price of $230,000 cash equates to $125,338 per net acre and $2.88 per square foot of net land area. Sales Summary Data Grantor: Sheryl J. Kirkpatrick Living Trust Grantee: Jared A. Hare Date of Sale: October 2018 Document No.: 18-06899 APN: 219-33-022D Parcel Size SF (net) 1.84 net acres or 79,934 net square feet Sale Price: $230,000 Price per SF (net): $125,338 per net acre or $2.88 per net SF Terms: Cash Conditions of Sale: Typical Offsite Improvements: In place along 89th Street, no sidewalks, gutters, or streetlights Onsite Improvements: Shared well onsite, no sewer service; power onsite Zoning: R1-35 Topography: Native desert, generally level Flood Hazard Issues: None Sales History: The parcel sold in November 2002 for $185,000 or $2.31 /net SF DOC [02-1241634]. There were no other arm’s length sales discovered

in the last three years.

Comparison to the Subject No specific adjustments are warranted. The applicable unit price indication for the subject is $2.88 per square foot of net land area.

Looking SE from 89th Place Aerial photo of comparable

Source: MCA 2019 Aerials

MARKET VALUATION

42

Sale 3 is the November 2018 purchase of a 1.63 net-acre or 70,785 SF residential parcel at 2856 N 92nd Street in Mesa about 1/3 mile north of the subject. The purchase price of $185,000, cash equates to $113,846 per net acre and $2.61 per square foot of net land area. The existing residential improvements contributed no value to the land and will be demolished at the buyer’s expense. Sales Summary Data Grantor: Jayne Walker Grantee: The Waters Family Trust Date of Sale: November 2018 Document No.: 18-0818167 & 0818075 APN: 219-33-014 & 219-33-020 Parcel Size SF (net) 1.63 net acres or 70,785 net square feet Sale Price: $185,000 Price per SF (net): $113,846 per net acre or $2.61 per net SF Terms: Cash Conditions of Sale: Typical Offsite Improvements: In place along 92nd Street, no sidewalks gutters, or streetlights Onsite Improvements: Water service onsite, no sewer service, power is available 1,620 SF residence built in 1962, & 290 SF outbuilding built 1950 Zoning: R1-35 Topography: Native desert, generally level Flood Hazard Issues: None Sales History: No other sales discovered within prior 3 years Comparison to the Subject The data support an upward adjustment for demolition costs. The adjusted indication for the subject is $2.82 per square foot of net land area.

Looking SW across 92nd Street Aerial photo of comparable Source: MCA 2019 Aerials

MARKET VALUATION

43

Sale 4 is the December 2018 purchase of a 1.59 net-acre or 69,352 SF residential parcel at 3233 N 88th Street in Mesa less than 1 mile northwest of the subject. The purchase price of $235,000, cash equates to $147,604 per net acre and $3.39 per square foot of net land area. Sales Summary Data Grantor: Keith K Krein & Gayle P Krein Trust Grantee: Scott P Maston & Paula A Maston Date of Sale: December 2018 Document No.: 18-0950289 APN: 219-24-212J now 219-24-212N Parcel Size SF (net) 1.59 net acres or 69,352 net square feet Sale Price: $235,000 Price per SF (net): $147,604 per net acre or $3.39 per net SF Terms: Cash Conditions of Sale: Typical Offsite Improvements: In place along 88th Street, no sidewalks, gutters, or streetlights Onsite Improvements: No well, no sewer service; power is available nearby Zoning: R1-35 Topography: Native desert, generally level Flood Hazard Issues: None Sales History: ½ the parcel sold in February 2015 for $86,000 DOC [15-0071712] as

parcel 219-24-212M, the other ½ was purchased in July 2010 as parcel 212-24-212J for $49,000 DOC [10-0616108]. As combined, there were no other arm’s length sales discovered in the last three years.

Comparison to the Subject

A downward adjustment for the comparable’s superior location influence (next to Thunder Mountain & upscale homes) is partially offset by upward consideration for its inferior utilities access. The adjusted unit price indication for the subject is $3.22 per square foot of net land area.

Looking SE from 88th Street Aerial photo of comparable


MARKET VALUATION

44

Sale 5 is the February 2019 purchase of a .94 net-acre or 40,961 SF residential parcel at 9008 E Omega Street in Mesa less than 1/2 mile northwest of the subject. The purchase price of $114,500, cash equates to $121,765 per net acre and $2.80 per square foot of net land area.

Sales Summary Data Grantor: Jerry R Martinson, Holly L Martinson Grantee: Brad B Hjalmarson, Sara A Steffen Hjalmarson Date of Sale: February, 2019 Document No.: 19-0105232 APN: 219-33-033 Parcel Size SF (net): 0.94 net acres or 40,961 net SF Sale Price: $114,500 Price per SF (net): $121,765 per net acre or $2.80 per net SF Terms: Cash Conditions of Sale: Typical Offsite Improvements: In place along 90th Street, no sidewalks, gutters, or streetlights Onsite Improvements: City water service and power onsite; no sewer service Zoning: R1-35 Topography: Native desert, generally level Flood Hazard Issues: None Sales History: The parcel sold in August 2017 for $110,000 or $2.68 /net SF DOC [17-0641535]. No other sales within prior 3 years

Comparison to the Subject

No specific adjustments are warranted. The applicable unit price indication for the subject is $2.80 per square foot of net land area.

Looking west from 90th Street Aerial photo of comparable


MARKET VALUATION

45

DISCUSSION OF ADJUSTMENTS

The following adjustments, while presented on a quantitative basis are largely the results of a qualitative analysis. The applied adjustments should not be view as absolutes rather as expressions of relative relationships between the summarized comparable properties and the subject as of the date of value.

All of the adjustments below are made to the comparable indications on a price per net square foot of land area basis. Property Rights Conveyed The interest being valued is the fee simple. Since none of the sales involve ground leases, no adjustments are necessary.

Financing All of the sales were cash transactions to the seller. No adjustments are indicated.

Conditions of Sale Adjustments for conditions of sale are made when the buyer or seller had atypical motivations. All of the sales are arms-length agreements; no adjustments are needed.

Expenditures Made Immediately After Purchase To my knowledge, Sales 1, 2, 4 and 5 did not required additional expenditures after the close of escrow whereas the buyer of Sale 3 incurred demolition costs associated with the existing residential improvements (mature) that offered no contributing value. The data support an upward adjustment of 8% to Sale 3 but no specific adjustments to the other four sales under this category.

Market Conditions The sales occurred within the past ten months. No specific adjustments are needed.

Location Demand for parcels similar to the subject is typically impacted by the magnitude and quality of the surrounding amenities and improvements. In this case, all five sales are located in the subject’s immediate area. No adjustments are warranted.

Site Improvements/Utilities/Amenities The subject has access to electricity and water but no sewer noting that Sales 1, 2, 3 and 5 sold with immediate access to electricity and water, but no sewer amenity. Sale 4 had electricity but sold without sewer and water amenities. As such, no adjustments are warranted to Sales 1, 2, 3 or 5 while an upward 5% adjustment is warranted to Sale 4 for its lack of water.

Size/Configuration The subject parcel totals 1.13 net acres, a size that is bracketed by the five sales that are sized from .94 to 1.84 net acres. Many times sizable larger parcels indicate lower unit prices relative to smaller parcels thus, adjustments may be warranted. My review of the summarized sales data provided no support for a specific adjustment.

The configurations of the five sales (like the subject) are also developable. No adjustments are warranted.

MARKET VALUATION

46

Easements/Flood Zone/Topography The subject and all five summarized sales share similar easements and topography and are not impacted by special flood zone issues. No specific adjustments are needed.

Access/Frontage/Views This category best addresses the quality of access of the comparables relative to the subject noting that all of the sales have subdivision street frontage/access that is similar to the subject. Their views are also similar. Consequently, no specific adjustments are warranted.

Use Potential (Zoning)/Entitlements/Buyer Motivation The subject is zoned R1-35 (a low-density residential designation) as are all five sales. All of the comparables were purchased for an ultimate single-family use, an orientation that aligns with the subject’s highest and best use. No specific adjustments are needed.

Land Sales Adjustment Grid

A summary of my applied adjustments is presented in the adjustment grid below.

Comparable Number SUBJECT 1 2 3 4 5Sale Date - Jul-18 Oct-18 Nov-18 Dec-18 Feb-19

Adjusted Sales Price - $129,000 $230,000 $185,000 $235,000 $114,500 Size (Net Acres) 1.13 1.01 1.84 1.63 1.59 0.94

Net Size (SF) 49,205 44,213 79,934 70,785 69,352 40,961 Allow able/Planned Use Residential Residential Residential Residential Residential Residential

Zoning R1-35 R1-35 R1-35 R1-35 R1-35 R1-35Price per SF of Net Land Area - $2.92 $2.88 $2.61 $3.39 $2.80

Property Rights Fee Simple 1.00 1.00 1.00 1.00 1.00Financing Cash Equiv. Cash Cash Cash Cash Cash

Conditions of Sale Market 1.00 1.00 1.00 1.00 1.00Expenditures After Purchase None 1.00 1.00 1.08 1.00 1.00

Market Conditions Stable 1.00 1.00 1.00 1.00 1.00Adjusted Price /SF of Net Land Area - $2.92 $2.88 $2.82 $3.39 $2.80

Location - 1.00 1.00 1.00 0.90 1.00 Physical Characteristics -

Site Improvements / Utilities / Amenities - 1.00 1.00 1.00 1.05 1.00 Size / Configuration - 1.00 1.00 1.00 1.00 1.00

Easements / Flood Zone / Topography - 1.00 1.00 1.00 1.00 1.00 Access / Frontage / View s - 1.00 1.00 1.00 1.00 1.00

Use Potential (Zoning) / Entitlements / Buyer Motivation - 1.00 1.00 1.00 1.00 1.00 Total Net Adjustments - 1.00 1.00 1.00 0.95 1.00

Indicated Value per SF of Net Land Area - $2.92 $2.88 $2.82 $3.22 $2.80

Land Sales Adjustment Grid

Source:

MARKET VALUATION

47

Discussion

In summary I interpret the comparable data to support adjusted price indications for the subject’s total NET land area of 49,205 square feet of $2.80 to $3.22 per square foot. The central tendency (excludes high and low indications) is a tight range of $2.82 to $2.92 per net square foot. The most direct comparison is provided by Sales 1 and 5 at adjusted indications of $2.92 and $2.80 per net square foot. Reconciliation In summary, I have reconciled the indications to a rounded range of $2.80 to $2.95 per square foot of net land area.

Applying my reconciled unit price range of $2.80 to $2.95 per square foot to the subject’s net parcel size of 49,205 square feet provides total indications (as summarized in the table below) of $137,774 to $145,155. Summary of Land Value Indications My reconciled conclusion is in the upper range at $143,000 or $2.91 per square foot of net land area. This conclusion also equates to $126,549 per net acre. Market Value Conclusion In conclusion it is my opinion, subject to the underlying assumptions and limiting conditions that the fee simple interest in the subject parcel had a market value as of May 14, 2019 of $143,000. The unit value conclusion equates to $2.91 per square foot of net land area and $126,549 per net acre.

Land Value Vacant Conclusion $ Per Square Foot of NET Land Area

SUBJECT - Net Land Area Market Value Indications

Low High $ 2.80 X 49,205 SF $137,774

$ 2.95 X 49,205 SF $145,155

Reconciled Market Value Conclusion $143,000 Per Square Foot of Net Land Area $2.91 / sf

Per Net Acre [1.13 Acres] $126,549 / acre

Source:

MARKET VALUE CONCLUSION

48

MARKET VALUE CONCLUSION Based on the foregoing, my market value conclusion for the subject parcel under the premise presented herein is as follows:

Exposure Time Forecast: 12 Months Marketing Time Forecast: 12 Months


Date of Description Interest Net SF Net Acres Value Per NET SF Total

T4N, R1E, Sec 4 Fee 49,205 1.13 5/14/52019 2.91$ 143,000$

Source:

Market Value ConclusionMARKET VALUE CONCLUSION

Parcel Size

CERTIFICATION

49

CERTIFICATION

I certify that, to the best of my knowledge and belief:

The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported

assumptions and limiting conditions, and is my personal, impartial, and unbiased professional analyses, opinions, and conclusions.

I 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.

I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

My engagement in this assignment was not contingent upon developing or reporting predetermined results.

My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

made a personal inspection of the property that is the subject of this report.

provided significant professional assistance to the person signing this report. assisted in all sections of the appraisal report and property inspection except the valuation analysis. The value conclusion is solely that of the appraiser.

I certify that I am competent to complete the appraisal assignment. The reader is referred to the appraiser’s summary of qualifications.

I certify that, to the best of my knowledge and belief, 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 the Standards of Professional Appraisal Practice of the Appraisal Institute.

I certify that 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, has completed the requirements of the continuing education program for Designated Members of the Appraisal Institute.

I have 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.

UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS

50

UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS 1. That title to the property is good and merchantable. 2. That no liability is assumed on account of inaccuracy or errors in any information

furnished by others whom this appraiser contacted at the site or elsewhere and which has been used in making this appraisal.

3. That no responsibility is assumed for legal matters affecting the property, such as title

defects, liens, overlapping boundaries, etc. 4. That no survey has been made of the property for purposes of this report. 5. That no right is given to publish this report or any part thereof without the written consent

of the writer. 6. That the valuation estimates contained herein apply as of the date of this appraisal only. 7. That we do not authorize the out-of-context quoting from or partial reprinting of this

appraisal report. Further, neither all nor any part of this appraisal report shall be disseminated to the general public by the use of media for public communication without the prior written consent of the appraiser signing this appraisal report, particularly as to valuation conclusions, the identity of the appraiser or firm with which he is connected, or any reference to the Appraisal Institute, or the MAI designation.

8. That the distribution of value between land and building applies only under the present

program of utilization and does not apply under any other premise. 9. That there are no hidden or unapparent conditions of the property, subsoil, potential

flooding hazards, hydrology, chemical contamination or structures, which would render it more or less valuable.

10. The appraiser has noted in the appraisal report any adverse conditions (such as needed

repairs, depreciation, the presence of hazardous wastes, toxic substances, etc.) observed during the inspection of the subject or that he or she became aware of during the normal research involved in performing the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent conditions of the property or adverse environmental conditions (including the presence of hazardous wastes, toxic substances, etc.) that would make the property more or less valuable, and has assumed that there are no such conditions and makes no guarantees or warranties, express or implied, regarding the condition of the property. The appraiser will not be responsible for any such conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because the appraiser is not an expert in the field of environmental hazards, the appraisal report must not be considered as an environmental assessment of the property.

ADDENDA

51

ADDENDA ITEMS INCLUDED:

o Subject Photographs o Glossary of Terms o Legal Description o Flood Map o Appraiser Qualifications o Appraiser State Certification

SUBJECT PHOTOGRAPHS

ADDENDA

Aerial View (subject outlined by

red line)

Looking north along the west boundary of the

subject from the SWC

Looking east along the southern

boundary of the subject from

the SWC

SUBJECT PHOTOGRAPHS

ADDENDA

Looking westalong the northern


the NEC

Looking southalong the western boundary of the

subject from the NWC

Looking east along the northern


the NWC

SUBJECT PHOTOGRAPHS

ADDENDA

Looking southalong the eastern boundary of the

subject from the NEC

Looking westalong the southern


the SEC

Looking northalong the eastern boundary of the

subject from the SEC

SUBJECT PHOTOGRAPHS

ADDENDA

Street View

Looking northeast from across

McDowell Road

Street View

Looking east along McDowell Road

Street View

Looking west along McDowell Road

ADDENDA

GLOSSARY OF TERMS AND DEFINITIONS

Appraisal

1. The act or process of developing an opinion of value.*,** 2. An opinion of value*,**

Appraisal Review

The act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal, appraisal review, or appraisal consulting. *,**

Appraiser

One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.*,**

“As Is” Market Value

The estimate of market value of real property in its current physical condition, use, and zoning as of the appraisal date.*

Assumption

That which is taken to be true.*,**

Bulk Sale Value

The value of multiple units, subdivided lots, or properties in a portfolio as though sold to a single buyer in one transaction. Sometimes called bulk sale value. *

Cash Equivalency

Ananalyticalprocessinwhichthesalepriceofatransactionwithnonmarketfinancing orfinancingwithnonmarketfinancingorfinancingwithunusualconditionsorincentives is converted into a price expressed in terms of cash. *.

ADDENDA

GLOSSARY OF TERMS AND DEFINITIONS - Continued

Cash Flow

The periodic income attributable to the interests in real estate. *

Client

Thepartyorpartieswhoengageanappraiser(byemploymentorcontract)inaspecific assignment. *,**

Contiguity

The quality or state of being contiguous. ***Cost

The amount required to create, produce or obtain a property. *,**

Credible

Worthy of belief. “Credible” assignment results require support, by relevant evidence and logic, to the degree necessary for the intended use.*,**

Easement

“Nonpossessory interest in landed property (real estate) conveying use, but not ownership, of a portion of that property. *

Economic Unit

“The “economic unit” is a portion of a larger (parent) parcel, vacant or improved, that can be described and valued as a separate and independent parcel. Physical characteristics such as location, access, size, shape, existing improvements, and current use are considered when identifying an economic unit. The economic unit should reflectmarketability characteristics similar to other properties in themarketarea.Inappraisal,theidentificationofeconomicunitsisessentialinhighestandbestuse analysis of a property. *

Itcanalsobedefinedasthesmallest,marketable,andsustainableportionofalargerproperty. ****

ADDENDA


Extraordinary Assumption

An assumption, 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. *,**

Exposure Time

1. The time a property remains on the market. *2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. *

Fee Simple Estate

An 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. *

Highest and Best Use

The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value. *

Hypothetical Condition

That which is contrary to what exists but is supposed for the purpose of analysis. 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. *,**

Intended Use

The manner in which the intended users expect to employ the information contained in a report. *

ADDENDA


Intended User

The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser based on communication with the client at the time of the assignment. *,**

Influence of the property on just compensation

§ 28-7097 provides in part: “The appraiser shall disregard any decrease in the market value of the real property before the date of valuation caused by the public project for which the property is to be acquired or by the likelihood that the property would be acquired for he project shall be disregarded. ****

Larger Parcel

In governmental land acquisitions, the tract or tracts of land that are under the beneficial control of a single individual or entity and have the same, or integrated, highest and best use. Elements for consideration by the appraiser is marking a determination in this regard are contiguity, or proximity, as it bears on the highest and best use of the property, unity of ownership, and unity of highest and best use. *

Leased Fee Estate

A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease). *

Leasehold Interest

A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease). *

Leasehold Estate

The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions. *

ADDENDA


Market Value (Definitionusedby ,unlessotherwisestated)

MarketValue,asdefinedbyArizonaRevisedStatute§28-7091,isasfollows:

The most probable price estimated in terms of cash in United States dollars orcomparablemarketfinancialarrangementsthatthepropertywouldbringifexposedforsaleintheopenmarket,withreasonabletimeallowedinwhichtofindapurchaser,buying with knowledge of all of the uses and purposes to which it was adapted and for which it was capable. ****

Marketing Time

An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effectivedateofanappraisal.Markettimediffersfromexposuretime,whichisalwayspresumedtoprecedetheeffectivedateofvalue.*,**

Overall Capitalization Rate

Anincomerateforatotalrealpropertyinterestthatreflectstherelationshipbetweena single year’s net operating income expectancy and the total property price or value; used to convert net operating income into an indication of overall property value. *

Price

Theamountasked,offered,orpaidforaproperty.Oncestated,priceisafact,whetherit ispubliclydisclosedor retained inprivate. Becauseof thefinancial capabilities,motivations, or special interests of a given buyer or seller, the price paid for a property may or may not have any relation to the value that might be ascribed to the property by others. *,**

Project Influence

ArizonaRevisedStatue§28-7097stipulatesthat“Inacquiringpropertyfortransportationpurposes pursuant to this article, when determining the market value of the property to be taken and the market value of the remainder, if any, in the “before” condition, a decrease or increases in the market value of the real property before the date of valuation caused by the public project for which the property is to be acquired or by the likelihood that the property would be acquired for the project shall be disregarded.” ****

ADDENDA


Prospective Opinion of Value

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 achieved sellout or a stabilized level of long-term occupancy. *

Real Estate

An identified parcel or tract or land, including improvements, if any. *,**

Real Property

The interests, benefits, and rights inherent in the ownership of real estate.*,**

Replacement Cost The estimated cost to construct, at current prices as of the effective appraisal date, a substitute for the building being appraised, using modern materials and current standards, design and layout. *

Reproduction Cost

The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all of the deficiencies, super adequacies and obsolescence of the subject improvements. *

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. *,**

Right-of-way

“A right to pass over land in some particular path; a strip of land used for transportation such as streets and roads, railroads, utility lines, and for other public or private transportation uses.” *

ADDENDA


Scope of Work

The type and extent of research and analyses in an assignment. *,**

Sources:

* The Dictionary of Real Estate Appraisal, Sixth edition. (Chicago, Illinois: Appraisal Institute, 2015

** Uniform Standards of Professional Appraisal Practice (USPAP) 2018-19 edition

*** Merriam-Webster On-Line Dictionary 2018

**** Arizona Revised Statute § 12-1122 in combination with § 28-7091 and Arizona case law

The Appraisal of Real Estate, 15th Edition, Appraisal Institute, 2016

ADDENDA

FLOOD MAP

SUBJECT

ADDENDA

LEGAL DESCRIPTION provided by Client

ADDENDA

APPRAISER’S QUALIFICATIONS

2001- Present

SUMMARY OF QUALIFICATIONS

Specialize in commercial real estate valuations, ad valorem valuations, litigation support, site acquisition and development consultations, highest and best use studies, feasibility analyses, redevelopment and alternative ‐use studies on underperforming real estate. Practice includes all real estate varieties of office, industrial, retail, subdivision, raw land and multi‐family residential properties.

1992 - 2001 Phoenix, Arizona

Principal - Commercial Real Estate Advisor / AnalystProfessional experience:

Responsible for Bank of America's appraisal process of commercial real estate properties throughout Arizona and New Mexico. Responsibility included all real estate varieties of office, industrial, retail, subdivision, multi‐family residential and hospitality properties individually valued to in excess of $150 million. Specific duties included management of Phoenix office, valuation and market data liaison to Bank of America executives and oversight of the engagement, production, review and policy compliance of all real estate appraisal assignments.

1986 - 1992

1986 ‐ 2016

Tempe, Arizona ‐ 1979Bachelor of Science [Majored in Marketing] ‐ Graduated Magna Cum Laude

Researched and authored real estate appraisal reports, typically complex assignments, on all property types including industrial, office, retail, multi‐family residential, single‐family subdivisions, business parks, master‐planned communities, hospitality and senior‐living facilities, golf courses and "going concern" properties. Specialized in discounted cash flow and fundamental research analyses. One of the firm's top producers.

1985 - 1986 Phoenix, Arizona

Prepared business plans and market studies for small business operators.

Arizona State University

Phoenix, Arizona

]

Education:

Professional memberships:

Professional activities:

2000:1996 ‐ 2001:1996 ‐ 2000:1994 ‐1999:

Various courses and seminars sponsored by real estate affiliates

Community involvement:

]

Member, Appraisal Institute [MAI], continuing education is current

Teaching Certificate, Maricopa County Community Colleges

University of Oregon Eugene, Oregon ‐ 1981Masters in Business Administration [MBA] ‐ Emphasis in Finance

ADDENDA

APPRAISER’S CERTIFICATION

Sig

ned

in th

e S

uper

inte

nden

t’s

offi

ce a

t N

, Sui

te, i

n th

eC

ity

of P

hoen

ix, S

tate

of

Ari

zona

, thi

s

Rob

ert D

. Cha

rlto

n S

uper

inte

nden

t

Thi

s do

cum

ent

is e

vide

nce

that

:

h

as c

ompl

ied

wit

h th

e pr

ovis

ions

of

Ari

zona

Rev

ised

Sta

tute

s, r

elat

ing

to th

e es

tabl

ishm

ent a

nd o

pera

tion

of

a:

and

that

the

Sup

erin

tend

ento

fF

inan

cial

Inst

itut

ions

of

the

Sta

teof

Ari

zona

has

gran

ted

this

lice

nse

to tr

ansa

ct th

e bu

sine

ssof

a

Thi

s li

cens

e is

sub

ject

to

the

law

s of

Ari

zona

and

wil

l re

mai

n in

ful

l fo

rce

and

effe

ct u

ntil

sur

rend

ered

, re

voke

d or

sus

pend

ed a

s pr

ovid

ed b

y la

w.

Cer

tifie

dG

ener

alR

ealE

stat

eA

ppra

iser

Cer

tifie

dG

ener

alR

ealE

stat

eA

ppra

iser

Dec

embe

r31,

2020

14th

day

ofD

ecem

ber,

2018

.

Expi

ratio

n D

ate

:

APPRAISAL REPORT - Maricopa County, Arizona

Documents

Transcript of APPRAISAL REPORT - Maricopa County, Arizona