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oe CHILDERS ASSOCIA Tien gsi A Ms. Trshanda L. Treadwell Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachiree Center Avenue, NE Allants, Georgio 30303, ‘September 11,2013 Re: Appraisal ofthe Underground Atlant Entetsinment Complex 50 Upper Alaboma Street ‘Alanis, Georzia (Childers Associates File No, 100-13 Dear Ms. Treadwell: In accordance with your request, we have inspected the above referenced property for te purpose of estimating the market value ofthe fe simple interest ofthe land and improvements, We ls estimate the market value of the leasehold interest held by the Ciy of Ata and the subleaseold interest eld by CV Underground, LLC. Attacked is our report suramarizing the data and analysis used for his assignment. The date of valuation is our most recent dae of inspection, September 6, 2013. Based on the analysis presented herein, th estlmated market value othe subjest as improved is: Fitty-One Millon, Nine Hundred Seventeen Thousand Dollars (651,917,000.00) “The above market value is allocated as $51,605,000 for the subject land and the remsining '5312,000 for the subject improvements. We estimate the market value of the leasehold intrest, held by the City of Atlanta, at $51,917,000 which is equivalent tothe reversionary value of the property in fe stated above, and we estime the market value ofthe subleaschod interest, held by CV ‘Underground, LLC, asthe total of the remaining liquid assets in theie operating company of $773,000. CV Underground, LLC is estimated to have no subleasehold value in the operating real state, Page? Ms. Trsanda L, Treadwell Sepiember 11,2013 @ {hus been a pleasure to serve you in this mater, Ifyou have any questions concerning the tached appraisal, please donot hesitate to contaet me. Sincerely, y lke David W. Childers, MAL CCenified General Real Property Appraiser State of Georgia No. CGCO1481 Grmpens Assocucres @ Project Name: Property Owner: Tax Parcel Numbers Inspection Dates: Report Date: Effective Date Highest and Best Use Opinion: (Current Zoning (Current Use: Future Land Use: Land Value: EXECUTIVE SUMMARY Market Valuation of Underground Atlanta Entertainment Complex Dowatown Development Authority ~ Leised Fee City of Atlanta ~ Leasehold CV Underground, LLC Subleaschold 14-0077-0003-097 14-0077-0004-086, 14-0077-0013-002, 14-0077-0014-002, 14-0077-0014-004 14-0077-0015-002 ‘August 27, 2013 and September 6, 2013, September 11, 2013 September 6, 2013, ‘As Vacant: Intensive highrise development ‘As Improved: Demolition of existing rel and ofice improvements for future intensive high rise ‘development; the parking improvements contribute significant value tothe subject and should continue in ‘operation; one subdivided retail building end one subleased retail space within an adjoining property should continue in operation. SPI, SubcAreas 1 and 6 ‘Underground Atlante Entertainment Complex ‘consisting of retail, office, and parking uses Intensive igh rise retail, residential, office, and institutional we $51,605,000 ‘Cupers Assoaares ——I Ingrovt Veve $51917900=ngrovetincang land a 2 Se any perry rene ee mcr 00'er epane sere tsS buns fect Salo dealin oe Taya cm tanner rer er a ae Leaschold Value, City of Atlanta ‘$51,917,000 realestate value Subleaschold Value, CV Underground, LLC: ‘No real estate value; but $773,000 of remaining liquid assets of the operating cormpany {rapes Assocrares — . TABLE OF CONTENTS BASIC ASSUMPTIONS AND LIMITING CONDITIONS (QUALIFICATIONS - DAVID W. CHILDERS CERTIFICATION PROPERTY IDENTIFICATION Explanation of Sources Used Conclusions as to Real Estate Property Rights Ownership Division PROPERTY HISTORY CONTACT WITH PROPERTY OWNER AND INSPECTION PURPOSE, USE AND DATE OF APPRAISAL, SCOPE OF THE APPRAISAL AREA DESCRIPTION RECORD DATA, Zoning Taxes PROPERTY DESCRIPTION Land Improvements HIGHEST AND BEST USE Land As Though Vacant Property as Improved METHOD OF VALUATION LAND VALUATION Page # 19 20 2 (Compens AssociATEs ‘TABLE OF CONTENTS VALUATION AS IMPROVED ‘Valuation of Parking Decks Sales Comparison Approach Sale Twa Sale Five ale One Sale Six Sale Four Conclusion Income Approach ‘Operating History Market Rent Market Occupancy Effective Gross Income Operating Expenses [Net Operating Income Capitalization Reconciliation and Final Value Estimate ‘Concluded Total Value as improved LEASEHOLD VALUATIONS ADDENDA. EXHIBIT B — LAND SALES DATA EXHIBIT C— RETAIL SALES DATA EXHIBIT D- RETAIL RENTAL DATA EXHIBIT E - SUBJECT PHOTOGRAPHS EXHIBIT E ~ PARKING DECK SALES DATA, EXHIBIT F - SUBIECT OPERATING HISTORY DATA EXHIBIT A - SUBJECT IDENTIFICATION DOCUMENTS Le comers Assocrar es @ @ ) 1 2 BASIC ASSUMPTIONS AND LIMITING CONDITIONS ‘The estimate of value contained in this appraisal report is based upon the following conditions ‘and assumptions: ‘The legal description fumished, if any, is assumed to be correct. {assume no responsibility for matters legal in characte, nor do we render any ‘opinion as to title, whichis assumed to be marketable. All exiting liens, ‘encumbrances and assessments have been disregarded andthe property is appraised as though free and clear, under responsible ownership and ‘competent management, xcept as noted inthe attached report. ‘Any sketches, plats or énwings included inthis report ar included as assist the reader in visualizing he property. Ihave made no survey ofthe property and assume no responsibility in connection with such matters. Unless otherwise noted herein, it is assumed that there are no encroachments, zoning restrictions or visiatons existing in the subject property, Information, estimates rd opinions contained in this report are obtained fom sources considered reliable, however, no liability for information provided by others can be assumed by the appraiser am not required give testimony orto stend court by reason ofthis apprsisal, with reference to the property in question, unless arrangements have ‘been made previously therefore tis assumed thet there ae no structural defosts hidden by floor or wall coverings or any other hidden or unapperent conditions of the property that all mechanical equipment and appliances are in good condition; and that all electrical components and the roofing are in good condition unless otherwise ‘noted in the report. the client has any questions regarding these items it isthe client's responsibilty to order the appropriate inspections. The appraiser does not have the skill or expertise needed to make such inspections. The appraiser sssumes no responsibility for these items. ‘The ‘of the land ad improvement value estimated herein is applicable ‘only under the program o utlization shown, These separate valuations are invalidated by any other pplication Comupens AssociaTes ee BASIC ASSUMPTIONS AND LIMITING CONDITIONS (cont.) 9. The signaory ofthis appraisal report is a member of the Appraisal Institute. The Bylavs and Regulations of the Institute require each member te control the use end distribution of each appraisal report signed by such member. "Therefore, except as hereinafter provided, the party for whom this ayprasal report was prepared may disteibute copies ofthis appraisl report it it tnirety, tb such third partes as may be selected by the party for whom this Appraisl “eport was prepared; however, portions of ths appraisal report shall fot be given to third partes without the prior written consent ofthe signatory (ofthis appraisal report. Further, neither all nor any part of this appmisal ‘eport shal be disseminated to the general public by the use of advertising or ‘ther mecia, publi relations medi, new media, sales media or other media for public communications without the prior written consent of the signatory of this appraisal report. 10, The value estimated applies only tothe entire property and cannot te prorated to individual porions oF fractional interests. Any proration or division of interest wil invalidate the value estimate, unless such proration or division of interes et frth in the report. 11, Unless otterwis stated in tis report, the existence of hazardous material, Which mey or may not be present on the property, was not observed by the appraiser The appraiser has no knowledge ofthe existence of such materials ‘onorin te property. The appraiser, however, is not qualified to detect such bubstanees, ‘The presence of substances such &s asbestos, ures formaldehyde foam insulation, or other potentially hazardous materials may aff: the value ofthe prperty. ‘The value estimate is predicated on the assumptior that there {sno such material on or in the property that would cause a loss in value, No esponsitility in assumed for any such condition, or for any expertise oF ‘engineering knowledge required to discover them, The client is urged to rain an expert inthis el, if desired. 12, The apprsisel report is prepared for the sole and exclusive use ofthe appraiser’ clients, Ms, Trishanda L, Treadwell and Mr. Kenneth H. Kraft of Parker, Hudson, Rainer & Dobbs, LLP representing the City of Atlnia, No third pares are authorized to rely upon this report without the express writen consent f the appraiser, —__ campsns Assocurres Education: ‘Experience QUALIFICATIONS - DAVID W. CHILDERS BLE, (Industrial Engineering), Georgia Institute of Technology, Atlanta, Georgia, M.S.EM, (Engineering Management), University of Alaska, ‘Anchorage, Alaska, Credit fo ll course required for designated mornburchip inthe Appraica Institute and eleive courses in Industrial, Litigation and Business Valuation. Licensed realestate agent inthe State of Georgia, Approved faculty member, ‘Appraisal Institue; national instructor since 1986. Courses taught include Resl Eslate Appraisal Principles, Basic Valuation Procedures, and Capitalization ‘Theory and Techniques Part A Chairman, Admissions Committee, Georgia Chapter 21 “Member, Nations! Curriculum Committe, Course Development Subcommittee, ‘American Institue of Real Estate Appraisers 1989 and 1990 and General Appraisal Board Curriculum Division ofthe Appraisal Institute 1994 and 195. 1998 Chapter President, Atlanta Area Chapter of the App National Director forthe Appraisel Institute 2001 through 2003. Presented with the 2003 Legion of Leaders award by the Atlanta Ares Chapter ofthe Apprisel Insitute Presented “Selecting an Appraiser” continuing education session for the Eminent Dorin Section ofthe State Bar of Georgia, Febniary 2009 Engaged exclusively as an appraiser/consultant in the realestate feld since 1978. Thave prepared appraisal, consulting, feasibility and market study assignments for banks, government agencies, attomeys, corporations and individuals inthe Metropolitan Atlanta area and the southeastern United States. ‘Assignments include a broad variety of properties inchuding land of all types, residences, office buildings, public buildings such as courthouses and convention centers, shopping centers, subdivisions, motels, service station, industrial facilities and apartments. Special purpose properties eppraised include laboratorss, sanitary landfills, cemeteries, experimental cropland, prisons and sewenge treatment facilities. Extensive experience in valution for litigation purposes and served as expert witness on real estate valuation matters in the Superior Ceurts of Fulton, Fayette, Troup, Hall, Taylor, Henry, Carroll, CCobls, Newton and Douglas Couaties of Georgia end in Federal Cours. Professional Affiliations: Member, Appraisal Institute, (MAT) Certified General Real Property Appraiser, State of Georgia, No, 001481 (Cum.pens AssocinTEs CERTIFICATION {cen thao tho best of my knowledge and boi 1. thestatements of fat contained inthis report are tv nd correct. 2. the reported analyzes, opinions nd coelusons are inte only by the reported assumptions ta liting condone eta are my personal, impartl, and unbiased profesional analyse, Spinions and eonclusios. 3. have no resent or prospective interes the propery tat isthe subject ofthis report, and no personal terest with respect othe parts involved. 4. Thavenot performed any valuation sevicesinvlvitg the subject ofthis report within the previous ie yet. 5. {haven bias with repost othe property that isthe subject ofthis report oF othe parties involved with thi assignment 6. sy engugerentin tis assignment wae not coatingext upon developing or reporting predetermined results, 7. my compensation for completing this assignment snot contingent up the development ot ‘onting ofa predetermined valu or direston it value tat favors the ease ofthe eit the ‘Tout ofthe valve opinion, the atsinment of igulted rex, othe occurence of & ‘Mbequent vent Sively related ote ntnded use of his appraisal. 4. my analyses, options end conclusions were developed, and ths report has been prepared in ‘uafonnty withthe Uniform Standards of Profesinal Appraisal Practice andthe Code of Professional Ethie and the Standards of Professional Appraisal Practice of the Appraisal Testu 9, Thavemade« personel, exterior only inspection off property tha isthe subject ofthis epert 10, John P, Murray provided significant professional sistance tothe person signing this repo. 11, Tent hat the use ofthis report is subjet othe requirements ofthe Appraisal inwitute ‘elating to review by is daly authored representatives 12 asofthe date of this report, have completed the requirements ofthe continuing eduction programs of the Appraisal instiie 13. te api aignent wes ot nc on ete mininu vaon, a pei alin crtie appeal ofan hg St Chey Deis W. Childers, MAL Cerifed General Resl Property Appraiser Sute of Georgia CG001481 Le copes Associxrtzs —— ® PROPERTY IDENTIFICATION Explanation of Sources Used ‘The subject ofthis apps isthe Underground Atlant entertainment complex owned by the Dowatown Development Authority, leased to the ity of Atlanta, and subleased to CV Underground, LLC. The complex is located inthe downtown, Central Busines Distt ofthe City of Atlan, one city block south of historic Five Points, The subject land consist of 40 individual, small land tracts assemble into three separate larger parcels ‘Thirty-six ofthe 40 tracts are contiguous and form the mainland tract supporting the ‘Underground Atlenta development, This assemblage encompasses potions of four ty blocks and two public rights of way and collectively crete a argo, unified land tract. For the purposes of this repo, we will eer to this parcel a the Main Tract. The Main Tracts located onthe four city blocks bounded by Martin Luther King, Jr, (MLK) Drive tthe southwest, Peachtree Stet to he northwest, Wall Steet to the northeast, and Central Avenue tothe southeast. Two ofthe remsining lad tracts appraised ar ocstd northwest ofthe Main Trac at the intersection of Broad and Alabama Steets. This combination of two parcels is on block removed ffom the Main Trac aa is considered an independent lad tract, We will fer tots pel as the Northwest Tract. The final two appraised parcels ae located southest ofthe Main Tract along MLK Drive, between Central Avenue and Washington Steet. These two combine parcels are also sparted fom the Main Tract and are considered a single, independent tract. We will refer to these wo combined parcels as the Southeast Tract, ‘Cuutpens Associxres —— 2 (Our client provided ws with several documents pertinent tothe subject that are used to ‘elp us identify the real estate and real property rights appraised. We also use the provided documents to define and value the various rights ofthe leasehold and sub-easchold interests, Copies ofthe documents used to identify the aubject re included in Exhibit A. A discussion of pertinent documents follows, “The first document used to identify the realestate included in the subject is lease agreement between the Downtown Development Authority (DA) andthe City of Atlanta (City) dated August 1, 1986, The agrement sates the DDA andthe City wil oiaty purchase several land tacts forthe purpose of developing an entertainment complex known 8s Underground Atlanta, The agreement futher stats tht the DDA will issue revenue bonds to finance the development and the City will repay the bond in the Form of rent on the project. “The legal description included in the document identities 36 land tracts that are considered the leased land, Our analysis ofthese land tracts reveals 30 of the tats — Tracts One through 29 and Trac 33 ~ ae included inthe appraised subject. The remining sx tacts ~Tracts 30 through 36 excluding Tract 33 ~ have been tansered to the State Properties Commission and are not appraised as part of this ssigument. “The 30 appraised tracts are shown on the following cing page sketch depicting the entire subject property. The legal descriptions fr the rac didnot state specific land area but dia provide general dimensions foreach parcel. Using a mapping program, we sketched each ofthe 30 tracts o estimate the total land ara. Based on our sketches, the 30 appraised tts total 252,236 square fet or about §.79 acres. $$ cunpsrs associares 3 ‘The next document used to identify the subject i a survey dated December 11, 1987. ‘The survey was obtained from the Fulton County public resords and identifies the entre city ‘ck bounded! by Wall Stet othe northeast, Pryor Street the southeast, Alabama Stes to te southwest, and Peachtree Street othe northwest. The survey divides the block into four tracts based on ownership and use. The southem half of th black consists of two land tracts one owned by the DDA measuring 0.717 acre ad the second owned by the Metropolitan Atlanta Rapid Transit Authority (MARTA) measuring 0.446 sere. These two tracts corespond to Tract 28 of he previous document. According tothe suwey, the tracts total 1.163 acres hile our sketch ofthe land based on the legal description indicates a total sizeof 50,788 square feet or shout 1.166 acres. The two indications therefore generally support one another. ‘The northem portion ofthe city block is identified cn the survey as Plaza Way andthe State of Georuia Air Rights Lease. The survey states thea: rights lease potion of the block measures 0,60 acre wile implying the Plaza Way portion measures 0.136 ace (calculated by deducting the total land areas stated above from the stated tll size ofthe block of 1.899 scree), The total size ofthe northem portion ofthe block istherefore 0.736 are. This northem portion ofthe city block i not identified as part ofthe lease document discussed above but is refered to in the following sublease agreement discussed below. We believe, based on our snalysis ofthe following document and our inspection ofthe subject thatthe argh ofthe northem portion ofthe block ae included in the subject s fart ofthe entertainment complex. ‘We therefore identify this tract as Tract D on the following facing page sketch. Using 8 ‘mapping program, we sketched the metes and bounds description of the tact included on the survey and estimated the land measures 32,606 square fet cr about 0,749 aere. Our sketch indicates lightly larger Ind size compared tothe implied aren from the survey. Our sketch Crmpens ASiOCIATES ‘relies on the metes and bounds description from the survey and matches the depicted boundaries ofthe tract. In our opinion, the larger, 32,606 square fect is most reliable and is sed in our analysis “The net document considered inthis analysis isan agreement forthe exchange of el state between the State Properties Commission forthe State of Georgia andthe City of ‘Alana, The agreement is doted July 6, 1988, and involves soveral tacts of land throughout the broader Adlanta ares, Of the numerous propeties discussed in the document, two ~the Depot Plaza Tract end the CVC Tract are pertinent o this analysis, The document states tht the Depot Plaza ‘Tract and the CVC Tract are owed bythe State Properties Commission while several other rct are owned by the City. The agreement indicates the State will exchange the (CVC Tract for other properties, reverting ownership ofthe tract tothe City. The State retains ownership of the Depo Plaza Tract. To identity each ofthe two tacts, the document refers 9 a survey dated March 8, 1988, nciudd in Exhibit C ofthe agreement, The agreement defines the Depot Plaza Trac s Tracts One, Four, and Five onthe survey while the CVC Tracts defined as Tracts Two and Thee oa the survey, Our analysis of the included survey revels the CVC Tract als 0.516 sore or about 2,477 square fet and is the Southeest Tract ofthe appmaised property. We will therefore rly on his indication of land are forthe Southeast “Tract. We also note that the Depot Plaza Tract comesponds to Tracts 30 through 36 (excluding “Tract 3) from the lease document discusod above. This land area is exclude fom our apprsisal. (Cu.peRs ASSOCIATES: 2 The next document used to identify the appraised subject i an amended and restated sublease agreement dated April 5, 1999. The original commercial facilities sublease was dated September 7, 1988, and is includod in this report by reference. The agrooment was between the DDA, the City, and Underground Festival, Ine. (UPI. In 1999, the City acquired the UFT interests in the subject. The acquisition included the fee simple ile tothe and and improvements described in Exhibit C ofthe sublease, the sublease interest inte project ‘originally leased to UFI, and the leasehold estate of UF in the adjacent hotel prope. The purpose ofthis amended and restated sublease i to asign the original UF interest to CV Underground, LLC (CY). This document therfore creates a new sublease agreement between the City (a sub-lessr) and CV (as subtest) “The sublease document establishes he current ownership interests i the subject, This cument is used to identity the oa estat appraised as well as to idemify and allocate the ownership interests ofthe Cty and CV, We focus first onthe portions ofthe document used to identity the realestate appraised. A more detailed analysis ofthe document to exablish the ‘various ownership interests in the subjects included later in this section. ‘The subleases relied upon to identi four ofthe apprised land tracts, Thre ofthe four tacts ae identified in legal descriptions included in Exhibit C which reflects property Acquired in fee by the City while the fourth tract is dented in Exhibit P ‘The four tracts are identified onthe following facing page sketch a Tracts A,B, C, and 27%. The legal Aeseritionsincoded in the document do nt state peste land cise forthe four wast but do provide the dimensions ofeach, Using our mapping program, we sketched each ofthe tacts and estimated the land ares at 9,502 square fet for Tract A, 12,994 square feet for Tract B, 13,877 square fet for Tract C, and 96 square fet for Tract 27*. We note that Exhibit B ofthe (Compes AssoctATES 6 sublease provides sketches of «portion ofthe land and improvements leased and located within the Underground Atlanta complex. The sketches depict the various tenant spaces in the complex and illustte the general layout ofthe development but do ot provide any legible identifying information. We therefore place ile reliance on this portion ofthe sublease document “The final document used to identify the appeised tracts is the Fulton County tx pat sketch, Using te tax plat we identified he rights of ways and public alleyways believed included in the apprised subject. Our analysis ofthe plt revealed three sections of two public right of ways ~ Alabama Street and Pryor Stoot~ as well as three public alleyways, The six tracts re identified as Tracts E, FG, and K. Tract Eis ls allocated betwesn surface only (Tract E-1) and fe simple rights owned (Tract £-2). We also note thi Tract the Pryor Stet right of way ~ involves surface rights only beneath the viaduct Using combination of the tax pt, dimensions obtained from the previous laa! eseriptions, and our own measurements ofthe righ of way widths, we estimated the siz of the included sights of ways andthe public alleyways. The ighs of ways Tracts EF, and G ar estimated using 60-foo widths snd the size ofthe alleyways ~ Tract IJ and K ~are cetimated using 30-oot widths. The resulting estimated land sizes forthe six ets ~ slong wth remainder ofthe subject ~is shown onthe following chart, The chart corespods with the sketch ofthe subject shown on the following facing page. (cnet associa: — SW Atte, Be Por? Cat '8W Ada, Bt Pr Coin 'W Alana Bo Pr Cos SEC Aston! Pose SE Poon Bi MUR Abana Seer Bar MUR / Alba Stor MUR Abe ‘AbgLX SE ofPoor [Aowg MLK SEotPoer ‘ASW a ey Ay NWEN MUR Poe NW ie cforms A) NiWaaeof Poe SW Aiba, Bo Pee ‘SW CN ofa Atbara 5 Asher, Boe Po Cri 'W Abbe, Bee Por Cet '5W Ata ee Pr Cee SW Abana Bo rns SW Albans, Bo ree '5W Alben: Boo Poor Poe [NEA Poe Pose SEON oP Attar SE yor MLK Abant ‘Aba NW of Pre Pew Se) [Anbar 5. SEefPmer NW aeeFPoer NW adecfent APRs Oy 1D NE/nifotAh Poe Wall Pyer Bik Stace Right Oy El Abtune SAW of Pra Sie On) © PrerStei (ice ae On) Tea Lan Are of Sabet SP) Re~"Wom>UeReE ERY B SET TEE SHE See vousenH Summa oSct Land Aras Ne Dssepb Laces sm Maistre Norns Tet. Fre Single Owes 4) Soaeaet Tet Bao 3) NEML, SoCo 4025 NEMLC socom Wage Nant nae ‘ATR On Sate Rigs oie Note Pe Sep) a0 Seen Tact Fe Se) sans ‘Tu Lied Area (CHILDERS ASSOCIATES om m8 Sees) sana mane 26356 an aisars @ Concslon so Rel Estate The jet costs oF 415,875 aque tor sou 935 ce ofan wean oa. As shown on the previous acing pages, dh ej vide ino ee spt potions spuming puts fic books. The Norwest an Southeast Tats ae salle pres ced in sip nine nour apis ue siilar owners; but hese ats st gener conred puto the Underground Alana compe, The Northwest Tract tmeasres 7,152 aqua fet nthe Soutes Tet measures 2,47 square fe. ‘The largest coined cis the Main Trt ated tween he Norhvet nd Souhes: Trac, This Mein Tet lone spans fou city backs and includes and ares owned in ee simple—wher al clevations rinsed ~as wel as some land reas with vided ‘ownership besed on elevation. The fee simple portion ofthe Main Tract measures 327,344 Oo square fet while the aras with subdivided ownership measure 32,606 square feet (air rights only owned) and 26,296 square feet surface rights only). The total land size forthe Main ‘Treo is 386,246 squarefeet, The Main Tracts improved withthe main, Underground Allanta complex. em (Guutpens AssoGIATES Property Rights Ownership Division ‘A major consideration of this aprasal i he division of ownership within the subject “While the above land seas identify the real estate appraised, we must also consider the division ofownership ofthe realestate between the leeehold interest ~ owned by the City of Atlanta nd the subleaschol interest owned by CV Underground, LLC, The ownership interests are ete in various documents provided us by our client. The most pertinent document isthe amended and rested comercial Facilities sublease document discussed above. This document establishes he sublaschold interest and details the various cash lows the interest, receives for managernent and ownership in the property. The document also details the bligaions ofthe leasehold interest nthe operation ofthe property, A detailed analysis and iscussion of this document is therefore warranted and included below. Amended and Restated Commercial Facilities Sublease Agreement: Start Date April 5, 1999 End Date: ‘December 31, 2048 Tem: 49,75 years; Note: we understand the sublease has been extended to run through December 31, 2086, but we have not beea provided a copy ofthe sublease extension. Parties: Downtown Development Authority ~ Lessor City of Atlanta — Lessee / Sublessor ‘Undergrouad Festival, Inc. ~ Original Sublessee CCV Underground, LLC ~ Current Sublessee Rent $100,000 per year (Base rent) LL. cunupns associates ——" © Summary As stated above, the purpose ofthe sublease document isto assign the original UFT interest to CV and erste anew sublease agreement between the City and CV. The sublease document details the cash flows paid othe sublease aswell s the cbligations ofthe City under the agreement. As the cash lows paid and ceived are dretly related tothe value of cach interest, detailed analysis ofthe required payments flows ‘The document sats the rent pid tothe Cty for the ground lease is $933,333.34 annually (called Fixed Priority Ren) as long es CV receives the “DDA Funds in accordance ‘ith the Sublssee Organizational Agreement. We were unable to obtain a copy ofthis sereement and find no referee othe epreement in any ofthe provided operating history locuments. The sublease states the Fixed Priority Rent is reduced to $100,000 annually if these DDA Funds are rot paid. Based on our a sis of the operating staternents provided by ‘ur client, the annual rent payment has equaled $100,000 foresch ofthe las three years provided. This rental rite therefore reflects the base rent paid by CV tothe City under the terms ofthe sublease agreement ‘The sublease ageement also provides for Additonal Rent paid tothe city after CV ‘receives certain, specified cash flows from operating the facility. In this regard, the cash flows received by CV and the potential addtional rent owed tothe City are intertwined. After the Fixed Priority Ren is psd, the next annual cash flow is paid to CV in the form of the Sublessee Preferred Return. The SPR is an amount equal to $330,250 plus 13.21% of any outstanding investments made inthe property by CV. According to the operating histor, the subject has ‘not generated enough net revenue to pay the base portion ofthe SPR ($330,250) in any ofthe previous four years provided, We also have not identified repayment of any investments made Cimpens Associates " ine propery ing histine. Wench bse aban o CV haben penadon | @ the operating history asa below the line expense paid out af Members’ Equity. A discussion of the Members’ Equity is inluded later in this sestion ‘Ate the SPR is pid the next cash low pi isthe repayment ofthe Sub-essee ‘Adkitona! Investment (SAD) Thats ifany sna faves ment i made by CV int the subject projec, they would recoup the principal amount ofthe investment if eash flow is available after ‘payment of the Fixed Priority Rent andthe Sublessee Prefered Return. As mention above, cour analysis ofthe provided operating history doesnt identify any repayment ofthe SAL, We therefore do not believe CV has made any investments ino the propery inthe recent history. [Afterall ofthe ove cash flows ae paid out, the remaining revenue generate by tho projects disbursed as Additional Rent othe City. Accostng tothe sublesse agresment, ifthe ing rovenue isles than $400,000, the citys paid the eatie amount. If however, the @ revenues greater than $400,000, the Additional Rent ($400,000) is pad tothe City and the exces (eventhing over $400,000) a split even betwees the City and CV. ‘We note that the order of payment is prioritized wit the City receiving its Fixed Priority Rent it, then CV receiving its Sublesce Prefered Return olowed by the repayment to CV of the Sublessee Additional Investment and finaly the Adkitional Rent paid to the City and the excess rent split between CV andthe City. All ofthe above distributions are ‘i ou ofthe remaining cash ows afterall operating css are pad from operating revees, “Therefore ifthe subject doesnot generate suficint revenue afer operating expenses, the City and CV will ot receive ther ful allotment of distributions (cans associates — a the operating history reveals the base portion of the SPR has been paid (Our anal 'o CV out ofa Members’ Equity fund over the previous four years provided. The payment ‘came out ofthis fund because the subject retail complex has not generated exough net revenue {o pay CV its $330,250 distribution. Note: The actual amount ofthe distribution was reported ‘on the operating history 3s $333,550 which included the base fee paid to CV and an additional, $3,300 paid to the DDA. According to our analysis ofthe operating history and the sublease ‘agreement, we believe the Members’ Equity consists of cash, accounts receivable, property and ‘equipment, deposits into capital expenditure and tenant improvement fund, and other aset, ‘We believe the Members’ Equity originated from contibutions by CV and the Downtown. Development Authority slong with some deposits from operating revenues in previous years ‘Accorting to te operating history, the Members’ Equity value in 2011 (the most recent @ ‘operating year provided) was $4,106,793. Our analysis ofthe provided data revealed about $1,352,073 ofthe equity is in the form of liquid assets that can be wed to pay the annual SPR Aistributions This implies the Members’ Equity fund ~ absent en increase i operating revenue ‘generated by the subject retail facility — will be sufficient to continue the prescribed SPR payment of $330,250 per year (plus $3,300 paid to the DIA) for about 4.05 years after 2011 ‘This implies that the equity funds will sustain the operation as now committed for about two years, four months beyond our date of value for this appraisal of September 9, 2013. ‘Campens AssocistEs ——1 1B “The document states tha the rent payments above ae “absolutely net tothe ity” with the sublesace responsible forall taxes, insurance, ulties, and maintenance expenses. The responsibilities ofthe City include maint ing the public facilites which include the parking fects, mall faites, plazas, sidewalks, curbs, gutters, and similar structures. Tae document sates thatthe Cty shall continuously operate and manage the Pubic Feites but then specifically excludes the mal faites and tates thatthe sublesse shell manage them. “The mal facilities redefined as Lower Alsbama Street, Lower Pryor Street, and Kenny" Alley The mll also includes ll adjacent enclosed entrance structures, escalators, and levators. The cos of maintaining the pubic icles (exterior eommon area maintenance on the operating history) i incurred by CV and reimbursed by the City, According tothe operating history the City pays CV around $900,000 pe yer for exterior common area roaatenace reimbursements. “The City conveys the right to use and operate the Mal Facilities to CV, butexpressly precludes any transfer of ownership to CV, The document also states CV ls the right to create nd enforce its own rues and regulations within the Mall Facilities and thatthe City support enforcement ofthese rules and regulations as necessary. (Coupes AssociaTES @ @ 4 ‘The document also references parking facilites. While it appears the City beats the responsibilty of operating the parking fice, the document allows the sublesse to specity ‘he quantity of parking reserved for daily use. According othe document, a maximum of 450 Parking spaces can be reserved for office ser. Up to 1€0 spaces can be reserved fr the hoe The agreement also specifies a est 800 spaces must boavalabe at al times fr daly, shor- {erm parking. ‘The parking rtes are not specifically quantified, but are required to be competitive so aso promote daily parking wse. And 10 prking spaces must be reserved for ‘employees of CV. ‘The document also stats the sublease will emai in ful force in the event thatthe City buys out the origina lease agreement with the DDA. In tht event, the City will assume the leased fe interest and CV will assume the leasehold intsest, However, buying out he DA ‘ease will ot terminate the sublease agreement. The document specifically states the City \rrans thatthe Amended and Restated Sublease will bea valid and enforceable obligation of the City thoughout the entire tem, (Our understanding ofthe sublease document indicates tho agreement creates a substantial obligation forthe Cty to pay the operating costs forthe exterior common areas (round $900,000 per year) while receiving only the $100,000 rent payment from the operation ofthe fcily. Converely, CV receives the $330,250 annul SPR distbation without paying ‘out eny cash flows tothe City. While the operation of the aubjet complex appears to be fating, CV's poston inthe sublease appears beneficial as long asthe property genertes sufficient income o provide the anus distbtion, Without this positive income ftom the ‘operation ofthe facility, the CV interest iste ret tothe amount of remsining equity CV ‘has in the property Compens AssocINTES Is Considering all ofthe above, we beliove the City of Atlanta's leasehold position isa signteant burden under the current ters of the sgreement asthe City annually pays out considerably more $600,000 ~ for exterior maintenance than ther Fixed Priority Rent $100,000 — indicating a net oss forthe City of around $800,000 por year. From the sub- leaschoi's perspective, the agreement is equally burdensome asthe propery fils o generate sulicint revenue to pay the base portion of the Sublessee's Prefered Return, $330,250 annuely, While the sublesee i not responsible for paying reat cel tothe City (the rent payment i made ou of operating cas lows), there remains insufficient net income to pay the requized dstbution forcing the sublesses to pay the disbursement out of ts own equity ‘We were also proved management agreements forthe subject parking facies. The agreements stated the City hired the DDA to manage the parking flies for a one year erm beginning April 2002 and expiring March 2003, Atte same ime, the DDA transfered its management rights to CV. The management agreement specifies a base fe of $27,000 per ‘year to manage the deck pls an incentive fe of 3% ofall net revenues ver $1,100,000, Aocoeding tothe operating history forthe parking facilites, te incentive fe bas not been paid in the previous seven years. We sso note the management agreerent has besn conducted on ‘month by month bass sno it expired in March 2003, We do nt believe the management ‘agreement establishes any significant ownership interest inthe parking feiltes for CV. LD cms assoctares —— > > @ PROPERTY HISTORY ‘The subject history dates back tothe founding ofthe City of Atlanta with the development ofthe railroad transportation system; the reason forthe location ofthe ety. The ‘ail system remains in operation and traverses the subject in an east west direction paralleling ama Stret right of way. As the city grew around the railroad andthe mod of the roads crossing the railroad were raisod onto Vinduets to separate the vehicular trafic from the tain traffic, This bridging ofthe original railroad gulch through the heart ofthe downtown area occured beginning in 1928. Asa result ‘ofthe mised viaducts, the orginal, ground level building structures are on grade with the entrance atthe ralrood “undergroun” and the second Moors ofthe buildings became the m ‘exposed, vadet level. ‘The somewhat preserved architecture ofthe orginal, ground floor buildings was rediscovered inthe 1960's by two Georgia Tech graduates, Stoven H. Fle, J. and Jack R. Patterson who then planned «private development known as Underground Atlanta, Construction forthe original Underground Atlanta development commenced in November 1968 and te ity officially opened on Api 8, 1969. The complex eventually included sumerous resturants, store and nighchibs and was a succesful entertainment venue, Bu the success lsted only tothe most profitable yar, 1972, As other competing entrainment facilities were developed elsewhere the atendance snd popularity of Underground Allanta ‘began to wane. The constuction of the MARTA east ine began in 1975 and eliminated several blocks of clubs and parking ares used as part ofthe complex. Criminel activity also On-site Considerations 38 ‘The subject is improved with the Underground Atlanta Enteriginment Complex. The complex consists of below grade retail space, viaduct level retail space, office space, and supporting parking Iaciities. The etl and office components of the complex appetr in good physical condition but are no longer economically vile and represent significant encumbrance on the land. AS discussed later in this report, we believe the improvements should be dernolished and the land redeveloped to # more viable and better supported Portions of the ste have been subdivided between surface and ar rights. The portions ofthe subject located beneath the Pryor Steet viaduct (Tract G) and the extreme western edge ofthe Alabama Swreot viaduct (Tract E-1) are surface rights only ‘The extreme northem portion ofthe subject along, Upper WallStreet (Tract D) is ac rights only ‘The subject consists of three separate land parcels, ‘The Northwest and Southeast Tracts enjoy good size, shape, typical topography, and excellent access and exposure, These tract ae believed physically suitable for low to mid-riee ‘development as desired, The subject's Main Tract suffers an irregular shape but enjoys excellent avcess and exposure along five major fronting roadways. The most appealing characteristic of the tract sits considerable size. Messuring 327,344 square feet or about 7.51 acres, the tract represents one ofthe largest contiguous land parcels in the downtown submarket. The large land size coupled with its excallent access, and ‘exposure substantially enhances the parcel’s appeal. The tract also enjoys an excellent location bounded by the expanding Georgia State University campus to the north and northeast and the prominent governmental dstict to the south Inour opinion, the subjct’s Main Trac is physically very well suited for regionally, significan, intensive high ris, integrated development capitalizing on its size and prominent location, (Comers Associares a 39 Improvements “The subject is improved with the Underground Alania entertainment complex consisting of retail office, and parking uses. The ex ing teal complex was developed asa public ~ private joint venture in 1987, The entertainment complex consists of a collection of two and three-story retail buildings located predominantly along the Alebama Strect viaduct, “The Fiat floors ofthe buildings are situated on Lower Alsbama Street (ground level) andthe second flor is situated along the viaduct level above. A mall aren is created by enclosing the ower levels beneath the Alabama and Pryor Stret viaducts, The retail complex also inches one five story office building (two floors of retail and three upper levels of office space) and two supporting parking decks. The northwestern tracts improved with a similar retail building asthe larger complex, but the southwestern tract is improved withthe former World of Coes Cola pavilion now vacant For our analysis, we were not provided a detailed set of building plans to help describe the improvements nor were we permitted to conduct a thorough inspection of the subject. We therefore bese our description of the improvements on ou limited inspection ofthe public portions ofthe property and our analysis of provided subject documents such asthe curent ent roll summary end limited floor plan sketch included in the subject sublease. A brief discussion ofthe improvements follows. (Our inspection ofthe subject improvements revealed they vary in constrution with some structures appearing of masonry constriction while other buildings are reinforced concrete, The building exteriors are fairly uniform with masonry facades and glass storefronts While we didnot conduct a dele inspection ofthe tenant interior spaces, hey appear to include typical retail finishes. ‘The lower level common areas of the property ~ beneath the (cots asserts — @ 40 viaducts —have desorative brick paving with raised concrete sidewalks with the exposed vinduet above serving a the ceiling. Tho upper level exterior commen ares ince pedestrian plazas and walkways along the Upper Alabama Stet right of way and within the norinwestem portion ofthe subject (on Tracts 28 and Don the previous sketch, These upper level common areas are improved wit decoraive brick paving and coneete walkways, conerete planters and with decorative landscaping, pedestrian benches, anda water fountain, According tothe subject ent rll, the ttl lessable building ara forthe complex is 266,854 square feet. We believe this area is allocated as 243,375 square fet of retail space and 24,379 square fet of office space. The retail component is futher allocated as 94,792 square feet of viaduct level rt withthe remaining 148,583 square fet of retail space located within ‘he ground level mall aes, We assume for appraisal purposes the building seas reported on the enroll are accurate, We note that 4500 square fet ofthe ret spaces located in the adjacent hotel property atthe southeast comer of Peachtree Stet and Alabama Steet and 5,855 square feo ofthe space i located inthe retail bulng included onthe Northwest Tract. ‘And according to tox records the former Coca-Cola Museum on the southwestem tract has 50,804 square fee of buiing aes. This building i not owned by the ity nor leased as part of ‘Underground Atanta an isnot included in the sated ital leased are ‘The subject retail complex is supported by two mullevel parking stactures. One parking deck — identified as Perking Deck A is located along the norteastem side of MLK Driv, between Pryor Street and Central Avenue. The eigh-try, enforced concrete deck provides 745 parking spaces. The deck has a double helix design with one-way trafic throughout the structure. The parking spaces are designed tan epproximate TOdogree ange. ‘Aceest to the deck is provided by two driveways —a main entrance and exit on MLK Drive and ‘Compens Assoctares 4 ‘secondary entrance and exit to Pryor Steet, The Pryor Stret driveway is accessed vie year only while the MLK Drive driveway is nerve by a cashier's boots. The deck is served by two elevators providing acess toa levels. Pedestrian acces is available fom Pryor Steet and MLK Drive and aditional pedestrian acess is also provided diesly to 8 portion ofthe subject real improvements to the north ofthe deck, The parking structure is also supported by typicel parking equipment such as keyeard acces pads, ruitpe electronic security gates ticket machines end two attendant booths “The second parking structure ~ identified s Parking Deck B is located atthe northwest come of th intersection of MLK Drive and Pryr Street. The reinforced concrete eck has sven parking level and provides $28 parking spaces, The structure is designe for twoovay traffic and provides 90-degre parking stalls. Access to the deck is provided to both fronting road, but the deck’ orientation limits the MLK Drive access o ingress only. The parking deck is served by two elevator bays providing cces oll parking levels. The deck also provides direct pvestian access tthe subject retail complex on the ground level. The parking sructureis supported by similar parking equipment as described above. “The subject entertainment complex consists predominantly of real and public eommon areas with supporting packing ses as desribod. The improvements were renovated and consructed in 1986 and ae therefore about 27 years old, Our inspection of the improvements indicted they have bean well maintained andar in good physical condition. Functionally, the ‘improvements appear well designed with good layout for a retail mall use. We note however the subject appear to suf from high vacaney a8 well as lack of maket suppor. During our multiple inspections ofthe subject, we continually observed the lnk of patronage ofthe existing retail tenents. We believe the isue withthe subject improvements is not with their {Gattis Associates ——t © a ‘design or physical condition nor the management an operation of the facility, butrather with their tocation in proximity to the pedestrian mall along Peachtree and Broad Street in Proximity ofthe Five Points MARTA Station. The perception of the public is that the locaton is unsafe and therelore unattractive, ‘The subject improvements suffer from signfizant external ‘obsolescence duc tothe market's rejection ofthe entertainment venue use inthis lecaion, end wo believe the Underground AClanta entertainment improvements should be demoished to make way fora market supported, reuse ofthe land. Compzns Assocares 8 HIGHEST AND BEST USE Highest and best use is defined by the Appraisal Inttute as bein: "het reasonable and probable use that will support the highest present valu, 28 defined, as ofthe effective date of the appraisal." tis alo defined a hat use om among reasonable and probable legal alternate uses, found to be physically posible, appropriately supported, financially feasible, ann which resulls inthe highest land value." Land As Though Vacant “The entre property is zed for intensive use bythe City of Atlanta, The existing ering flows high-ie, mined use development with no height restrition and places minimal restrictions onthe posible development ofthe land, The allowed legal uses forthe propery are likly the most intensive within the City of Atant “The most significant etritons on the use ofthe subject would involve property eights Portions ofthe subject consist of surface rights ony, bene an overhead viaduct, and it rights only believed at viaduct evel and above. Both ofthese potions ofthe subject re wsfel ‘however, in tht the surce rights beneath the Pryor Street viaduct serve to connect the western and eastem portions of the contiguous subject land tect, end he ar rights portion of he property inludes land adjacent to Poschiree Steet and suitable for intensive development om vidvt level upward. We also consider that two, smaller portions ofthe land consist of separate parcels not connected othe gr, contiguous tract and best sited fr independent tse, The larger contiguous land tact is judged legally suitable for intensive development Physically, the subject land is typically wel below te surounding, aise, viaduct supported road system as previously described. This topographical challenges of litle consequence under the circumstances, however, the proposed use forthe Ind would be intensive high-tise mixed use development which typically includes below grade levels for (campers associates — @ e@ o a parking and uility uses. The topography of the subject for this use may actually represen an ‘advantage as less excavation is required prior to development. ‘The subject contiguous act has some irregularity in shape and is subdivided by the Pryor Stret viaduct; bu, the propery is of significant size and all portions are believed developable and connected wit he surface eights includ beneath Pryor Stee. The two smaller portions ofthe subject re reasonably square shaped and are also suitable for reasonably intensive us, though lacking the potent for regionally importent development as afforded forthe subject contiguous tract ‘Our research ofthis market revealed numerous sles of land tats within the Central Business Distt purchased fora variety of uses ranging ftom speculative hong to high-rise ‘ited use development. The greatest demend fr land tract i in proximity of insttonl srs, significant transportation feciites, and atractivercretion end tours faites. The institutional drivers in ths market include the Georgia Sate University immediately nrheast ofthe subject andthe various local, tte and federal governmental entities immediately southwest ofthe subject. The transportation fies strcting development include the ‘downtown connector expressway system east ofthe subject and the newly improved Ivan Alle, J. Boulevard across the nothem portion ofthe distict. The primary entertainment liste for the downtown area include the Centennial Olympic Pack to the northwest othe subjct and the Georgia Dome, Georgia World Congress Cente, Philips Arena an the Georgia Aquarium in proximity of Centennial Park. As illustrate in the land valuation section ofthe report, these areas have attracted concentrations of land sales and new development. ‘Cumpens AssociaTes ieee ein eet mat win nt ie eed @ depo estas sb mae itso! wernt rk omit ste 05 eng ot th nd he rere it oe oh, The be well Theszet he propety pve gt esti ndeopnest ane en rote dectpnn fe etn coignou tol aa nmi at snptinotte oa Tie pry ober foil aces te MARTA — he devote nj dpi pareewanape' i po. Ob weak of te nate ve ony oe oe oper nth ovo mike of «lege size than the subject (Land Sale 21); but, this tansaction represents an approximate sixyear assemblage proces pir to obtaining that size, The subject already represents an assemblage suitable for regional development potential tthe histori focal point and beginning pont ofthe cere Atlanta region. The potential uses for such a property are varied and require imagination and foresight. “The subject land is beloved suitable fran intensive, mixed use redevelopment of & regional consequence. The most ikely uses are the ajining university tothe north ax the governments othe south, but the size ofthe propery could act «vel of ther developers, The property is not without challenges with less tractive retail uses in proximity snd dectning demand fr intensive offices i this dsr, but the instittional users in proximity ofthe property remain steadfast end expanding. We fel thatthe highest and best use ofthe land es through vacant would likely be development by one ofthese adjoining @ {rare Assoctares —— 46 institutional users such as the expanding GSU campus, and the subject could represent amajor expansion and significantly large contiguous land tract for a variety of eampus uses. The two smaller subject land tracts are suitable for continued retail commercial use forthe northwestern Property and less intensive, offce/governmental institutional use for the southeastem property. Property as Improved ‘The subject is improved with two parking decks, a variety of low-rise, retail commercial improvements designed for use as the Underground Atlanta entertainment complex and an office tng as previously described, The complex dates fom the previous reconstruction and developmen snow commited which opened in 1990. The complex was financed and developed withthe cooperation and support ofthe City of Anta andi belived «legal, conforming use under zoning. The development also conforms othe property rights ‘esrctons with surface rights beneath he viaduts used fr access and less intensive retail use, and the rights developed witha pedestrian plaza and single story retail wes Physically, the propery appears well constructed and reasonably well maintained. The complex appears well managed and litle significant deferred maintenance was observed ‘The key issue in determining the highest end best use ofthe property as improved sits ‘economic viability, We were provided somewhat limited financial operating histories forthe ‘Underground Attanta operation and slightly more detailed operating histories forthe two subject parking decks, To determine the viability of the property a commited, we have summarized and anlyzed the available infomation, We include the provide financial statements as Exhibit Fat the end ofthis report. Chapes Associares a ‘Our summary ofthe Underground Atlanta entertainment venue real estate operation is presented onthe facing page, The pertinent information from this compilation for this highest and best use enlyssis the continuing decline in total revenue forthe property over the entire five yea time period summarized which averages about 7.2% pet year and the erat and generally declining net operating income forthe facility. Is also noted that while the total operating expenses forthe complex have also declined at an average rate of 4.8% per year, the reported expenses donot include an appropriate realestate tax expense ashe property i tax excmpt, Its apparent from te summary the the Underground Atlanta realestate operation a not economically viable ‘We also analyze rental income, ental collections and occupancy statistics for the facility. The available information for these items i summarized as follows: ‘Surmary of Occupancy and Income Year 2010 2020122013 Contracted Resta Income $4,668,107 $4,117,833 $4,123,510 $3,468,588 (Cceupind SF 212,80 198,030 185,139 157,463 ‘Average Contracted Rental ate $2194 $20.79 $2227 $22.03 Effie Gross Renal come $3,904 297 $3,631,383, Tedizated Colton Loss $763,810 $486,450 % Colketon Loss 164% 11.8% ‘fective Renal Rate (S$ /Occupied SF) $1835 $18.34 “otal Square Footage 265,854 266,854 266,854 266,854 % Occupied Th — 2% — 68.4% 59.0% fective Gross Income ($/ SF) S1463 $1361 CCrtLpEns AssocATES: @ Cu ona roms eng to moire ‘ota cone soon myo oy AMO ISI SNILVaRIO LoaraaS @ @ e CO 48 “The summary shows that while average contracted rental rate for the occupied retail areas hs been recently table the collected rent for years 2010 and 2011 are significantly below the reported contacted rental incomes indicating significant colletin loss of 164% for 2010 and 11.8% for 2011. ‘The estimated occupancy rate forthe Fc hs been desing precipitously fem 78.7% in 2010 to $9.0% in 2013, The actual eecsive gross income forthe toial rentable area ranges from only $14.63 to $13.61 per square foot per year for 2010 an 2011, AloF these measures indicate that the Underground Asana fait sing “The subject Underground Atlanta improvements were specially designed and constructed as a epionsl, entertainment venue. The operton hes not succeeded as lustated by the operating history. The City of Atanta ad the Downtown Development Authority os the supporting and financing entities forthe development along withthe original develope, the Rouse Compeny andthe curent operator, CV Underground, LLC, have aempted in every may to populsize the fly, to attract good tenants, and ofl he complex with paying gusts “These attempts have filed and the property i not generating suficent incomes to justify the investment ort justify continued operation, “The shove is in contrast tothe subject parking deck operation, We summarize the operating history forthe parking decks on the facing page. We have included an estimated property tax for velustion purposes, ad an appropriate charge for supplies and for insurance ‘which were aot incuded inthe operating history. Even with these additonal, estimated expenses, the parking desk operation generates significant net operating incomes over the cntie seven year time period reported, As futher deal in ur valuation of he parking decks, we consider that his operation is economically viable and tha he improvements contribute significant value (CHnLpEns ASSOCIATES: eee yews 3 ‘SLUT TOV ONDA L9STaIAS JO AWOASTH ONILVHIIO ” “The subject low rise office building located on the comer of Pryor and Alabama Streets isalso a consideration. The building contins an estimated 24,379 square feet of above grade ie apace, This improvement appear in good physical condition and functions though locking a standard ofice lobby entrance, but is an anomaly within the broader Underground Ailanta comples. The office has no particular atrection or fneton for genera office use in ‘he broader market, and the location ofthe property in the approximate center of the main subject contiguous trot would interfere withthe proposed reevelopment of this larger tract. Another alternative reuse forthe subject improvements was considered, The subjects tocated adjacent oan active retail commercial district serving the surounding offic end instatonal tennts, bt als sizable pedestrian trade brought to the dst by the MARTA rail sytem, The etal component ofthe subject at viaduct levels theoretically competitive withthe older rei commercial buildings fronting on Peachtree Steet in proximity of the subject. ‘The subject has historically focused on upscale ret tenants atroctve to the proposed clientele forthe Underground Atlanta entertainment complex and as not atempted to compete inthe itferen real market surounding the MARTA Rail Station, An elterative use forthe iadut level retail spaces forthe subject would be to compet inthis market seceping tenants simula to those prevalent in the neighboring feiltes which ce not typically name rad esi ‘outlets, but loo shops and restaurants catering tothe pedestrian trade served by MARTA, CCuLpERs AssocuATES @ @ S 50 ‘We investigated this market obtaining comparable rentals fr first floor retail spaces in the immediate viinity, The rental included as Exhibit D. A map of the location ofthe ‘ental is on the Facing page and a bref tabulation of the pertinent information is as follows: ‘Retail Rental Tabulation Reta Esinated Flor Net Renal Rental Sie Rate No. se) (per SF per Yea) 1 3600 suse 2 3,000 2.0 3 Real 2130 and 2,559 ast 3Resuuart "2,763 33.06 4 300and 1,200 21.80- 15.80 5 202s 717 13.10 ‘The rentals are lost in the immediate area ofthe subject es shown on the map. The rental lo sutound the MARTA Rail Station and the subject adjoins this tation. The locaton ofthe rentals inthis market are believed of significant importance asthe market shows that while serving podesrian trade, proximity to the ral station and a reduced walking times paramount “The sizes ofthe remals are eaively smal. This mate is dominated by small nant spaces consisting of whole fit lors for sal buildings o subdivided boots in lerget buildings. The subject tenant spaces ae not relly constructed for this use as thoy are designed for ager, name brand tenants desiring a more prominent and expansive tenet space, The subject spaces could be converted for smaller tenant se, however asthe neighboring larger buildings have been converted. Cin.oens Assocaris WwW WERT @ We have adjusted the ret rat to a consistent, ne rental basis with the tenant responsible forall operating expenses with the exception of management, lasing and structural ‘maintenance, The resulting range in rentals broed from $7.17 per square foot pe year to $93.06, The highest rents found in our srvay ar for Renal Thre immediately adjoining the MARTA Rail Station end involving spaces finished for resturant use. The lowest entals found are for those spaces mot distant from the ri station, Rentals One, Two and Five. (Our research of this market sso revealed significant vacancy, Those properties ‘roxinte tothe rai station were typically well occupancy, but the occupancy level declined rapidly with greater distance from te station. Rentals One and Two most distant from the station ar ony minimally occupied. Our observation indicate that this tetal market was economically viable for only about «one block distance from the rail station, This extreme limitation in location indicates that only part ofthe subject Underground Atlanta complex is adequately located to compete in this market esentilly consisting of thse retail spaces footing on Alabama Stet and Peachtree Stret within one block of the MARTA Staton, ‘The reported rental rates for properties most proximate tothe rail station are atactive sn are sufficiently larg to justify a relatively high and valu as estimated for the subject ater inthis report. The problem with pursuing this possible, patil use ofthe subject's limprovemens is that it would involve using only relatively smal! prt ofthe tol improvement are forthe ubjet at visdut level only and within a one block distance from the rail sation, The vast majority ofthe subject building improvements would remain unused and 4 drain on operating revenue. This use would also eliminate ell possibilty of entertainment use forthe underground portions ofthe subjeet development as his retail use would be incompatible with the curent operation. A partial se ofthe existing retail space as proposed ‘Would also prevent the fll edevelopmentof the larger, contiguous lad trect which snot a Viable altemative, So while the subject adjoins an operating, local retail district as described, (Cumpens Associares 32 ands lable fr integration into this district in pat, this rouse ofthe property docs not acres the larger problem, and isnt believed viable. The portion ofthe subjet onthe comer of Alabama and Broad Streets, however, is separated from the larger contiguous at, ityproved for fst oor rt se andi key best used in this manner, The highest and best use of this smaller portion ofthe property would be integration ato the existing rei commercial market and continued wae ofthe existing improvements. The 4500 square foot subleased retail space within the adjoining hotel property on the southeastera comer of Peachtre Steet and Alebam Street is lso suitable for integration into the adjoining retail markt. As discussed further in the following valuation section itis our opinion tha the Underground Adant entertainment venue portion of th propery should be closed and the propety made evailable for redevelopment, The existing entertainment venue improvements and the office building are considered animpiment to he land requiring removal allow reuse ofthe land, The two subjet parking decks, however, are supported by packing demand generated by the adjoining governmental complexes primarily and appear to function well (Our valuation ofthis potion of the property indicates tha the parking deck improvements contribute sigufiant value and shoul cominuein operation. The smal retail biking loented con he come of Alabama and Broad Stress could continue in operation es commited as his land tet sseparte fom the large, contiguous land tract and the existing improvements on this pre! are considered to contribute value, and the subleased reall area within fe first oor ofthe adjoining hotel on the comer of Peachtree and Alabama Sizeets can also coxtinue as commited. The improvements onthe Coca-Cola pavilion property tothe southeast ofthe contguows tract do not lend themselves to any practical reuse and should ls ike’ be demolished as predicted forthe Underground Atlanta improvement. (camer associat —— 3 METHOD OF VALUATION ‘The subject market value is judged to primarily conist of land value as the majority of the improvements are proposed for demolition and the land o be reused for diferent purpose. ‘The land vali estimated by a sles comparison approach using an extended data base of lan sales inthe subject downtown area, We also consider improved sas inthe immediate a by extracting the estimated, contributory price pad forthe improvements to derive an indicated price psd forthe and only. The sles are compared to the subject to support an ‘timated unit value forthe subjet lind. And we consider the important differences in Property rights in our valuation as well To value the property as improved, we value the sujeet parking decks by standard sues comparison and income approaches as these portions ofthe subject improvements are believed ‘o contribute significant value and are appropriate for comtiaued use, The northwestem tract forthe subject improved witha real building is also believed to include some improvement ‘value as wel, and this contributory value is estimated by ou previous extraction methodology explained in the land valuation section and confirmed by the improved sales used in that 2 tallow reuse ofthe analysis. The remaining improvements are belived to require demolit land as proposed and we estimate a demolition cst by use ofthe Marshall Valuation Service ‘cost manual to deduct from the value in tot CHILDERS ASSOCIATES 54 “The focus ofthis appraisal isthe allocation ofthe value among the owning interests of the City of Ailanta as leasehold and CV Underground, LLC as subleaschold. We accomplish this tlocation by an analysis ofthe respective esh lows to these two positions generated by the el estate operation. We expand this analysis to conse the liquid assets available tothe operating company which are now used to cover payments the owning interests, We analyze thee scenarios fo iguidating the Underground Ailania operation and slet the most logical scenario to estimate the values forthe two interests. (Compens AssociATES @ 55 LAND VALUATION ‘Ourextended research for land sales within the Atlanta Cental Business District revealed 44 transections. The land soles data are included as E it B. The locations and shape ofthe sale properties ae illustrated onthe facing page map. A brief tabulation ofthe information ison the fllowing page, (Campens Associares » * 2 Sit se Pale Soe ke 5 522500 1a 328430 "owe 2250000 401 280000 * oa 140000 aes 700000 ea ome 202 3s00s00 5 tao e250 "tain ten ais4a00 202 1240400 5 ono nar ooo 6775000 203" srigon 1203 «2sn00 os o.00 "nee La 14 ora sess 2175458 ‘sos 78700 97120300 407450800 fis 00300 106 {00am coos “aa7s00 eo 715000 Tons 22000 2605 154,00 ans spangoo 50s 148300 oer 3215809 40s 1500800 608 Sponse0 fume 2son0c0 ato 17a0n00 2138400 hing 79e0000| ws 144saco vei212ope0 wiz 000500 wiz aasooe ons sn 21998 Me ee 2003 26993 3507 wmsst aor 1383 asst 7288 3s tznpes 38 986 74577 130 0 aisars sos wn Pred mss sua 237 toe san 357 veo * mat ope oe oa of ein eg (Sm soewed nt pce ‘bee ata oan ay see adit pope. Aj ri te cnn of one ie 56 (CHILDERS ASSOCIATES. @ ® LAND SALES MAP Se 37 serv teal into pce rn fama s2023 sae | 14 to $178.06 for Sale 37. To facilitate a further analysis ef these dat, we tabulate the sles in order of unit price on the following page @ © Sik Oye Patan Sie Ne tite Pe GE ve Taka seanaransae "on “50m 21994 ows ts000 7308" 5 OoT AeA 95595 Beanz 1sasco 3 alas “esoamm 11935 1 TBS 1483600 39477 Movs eongen 41481 M7 0500 tannieo 34267 13 iar aaa ans 32 ons ang600 a9 7 mor "anno “921 12 obos az00 1688 20 aioe Ganga tants 2118306 2i7I9A68 046 sono 677Sp00 248% os 350900 74387 2 on ison. 6400 268 e BB 2333 3 ose onass 2 a106 aan 27 oo 67s 6 Be Tass 8 ar 13s 8 00a ssn 2 0st usr 2 BoD sss «quar a8 a own nae 3 100 66 line 08 0 200 ses 31 aan ante Ber aso “Tare 3 tao r7one00 10580, Sibi cons sats 5 02 na ste st yaa ne 257 oat 34 a9 1600" 706 1 Add peo alco of en tn 1 Add pce rec of re ai, (ese hd oa oy, hie fe prey Campers AssocixTEs 9 Te sales can be generally characterized by location, ‘The most valued location characteristic in this downtown distit is Frontage and address along Peachitee Street, But only limited sales activity has oecured along Peachtree Street in recent years as only Fimited, high-ise office and hotel development has occurred in the market, ‘Another attractive location is Centennial Olympic Park. A significant grouping of surround or are in proximity ofthe park which isin the northwest central portion ofthe downtown district as shown on the map. A large assemblage of properties represented by Land Sele 2t occured between 1998 and 2004 inthis area which was a significant adtion to the pak and includes sites forthe Atlanta Aqusriam and the World of Coca-Cola mseum. Considerable development hes occured tothe north and east ofthis assemblage an the park has ls tracted developmen nd speculation a its southem end. This southern grouping of sale are in proximity of Andrew Young intematonal Boulevard andthe major entertsinment ‘vermes at the south end ofthe pak such as the World Congress Center, the Georgia Dome sand Philips Arena. ‘Another grouping of sles s tothe northeast ofthe subject and consis primarily of properties purchased by Georgia State University forthe expansion end consolidation a its campus and relted facilites inthis rea, One ofthe mos recent sles found in ou esearch, Land Sale 38 is inthis area bu isto private develope. The sale involves the development of student housing to be marketed to Georgia State University students. {cps Associares 60 ‘The other grouping of sales isto the west and southwest of the subject, These sales, include some specialized transactions involving prepedies within the raoad gulch area _roximate to the subject, but primarily consist o speculative purchases of land fr less intensive parking or olfice use somewhat removed from the more prestigious loatons inthe Contra Business Distt. ‘There is lack of comparable sales in the subjes's immediate are as shown on our ‘ap. Fortis reason, we consider some sles of improved propetcs inthe immediate area end ‘extract an improvement price pad to support an indication of land value a explined ltr in this sation. ‘The data vary in date of transaction fom as early as 1994 for on, specialized land sale within the ard gulch in proximity ofthe subject, Land Sale 19, as recent as about August 2013. We include the broad spectrum of data to show the pattems of development inthe Central Business District and to assist in certs valuation requirements fr tis assignment as in Land Sale One, and to illustrate the unususl nature othe subject in comparison to typical land transaction in this market. The subjects relatively large, mostly contiguous land tact enjoying Poschiree Stee frontage and situstd between the two most prominent and expanding institutional uses in the Cental Business District. Fors valuation we focus on the most recent sales occurring inthe market, but ae aware ofthe history ofthe ditt illustrated by the toad spectrum of dat. ‘The sales vary in size from about 6,375 square fet fr Sele 27 to 420,696 square fet {or the major assomblage discussed as Land Sale 21, Tae ubjet, with an estimate total contiguous land area owned in fe simple of 327,344 aaare fee is therefore atthe upper end ofthe range with few sales approsching this size. Tn fit, only one sale inthe tabulation, Sale (Cums Associares 6 15, involves e single se for a and tract including 290,454 square fet which approaches the size ofthe subject. We have a larger transaction, Sale 21, but this sale represents 8 combination of many transactions over an extended time period required to assemble a larger test than the subjest. The subjet is therefore a signficanly large contiguous and tac inthis market which is viewed as an advantage. A large development suc as envisioned forthe subject and must typically pay premium to assemble numerous smaller rcs. For the suhjeo, this assemblage has already ben accomplished. We consider this advantage in our analysis ofthis sales as a size adjustment. Considering ll ofthe available data, we consider the best indication of current and ‘al is provided by three ofthe more recent and most proximate properties purchased by Georgia State Univesity ust north ofthe subject, Land Sales 37,39 and 41, We also consider two more proximate, improved sales, Improved Sales One and Six ws discussed Intern this section. ‘We analyze the data ona price per square foot of and area basis, We fist adjust for improvements as most properties sod within th Central Business Distict nce existing Improvements which may be demolished subsequent othe sl to allow redevelopment ofthe Iund, One ofthe land sales provided specifi information conceming the required demolition cost which is epplied as an adjustment to derive a unit cos forthe land as cleared, Cutupens AssociaTes ® a ‘We then consider qualitative adjustments forthe other significant elements of comparison, We reorder the data into columnar fashion inorder of adjusted pice fo land only fom let to right. The qualitative adjustments are syabolized as an equal signif the sale {is reasonably equivalent othe suben, «negative sign i sles judged superior othe subject requiring a downward adjustment, and a pls sign the sale is judged inferior requiring snupward adjustment, Our conclusion as tothe overl dietion of ajustmentis depicted scrss the botom row ofthe analysis and these conclusions then bracket te estimated uit value forthe subject land. This analysis is summarized as follows: Land Vahe Arabs Sure Improved Land Improved Land Land Stk Saw Sak Sale Sale Number 1 41 6 39 37 Date of Sale oot 08282 za Sake Price {$750,000 1,240,000 $640,000 $7,900,000 $17,800,000 Lan Area (SF) SA7L 1278 4,028 64,049 105,580 Unit Price (SSF of Land) 8137.09 $10995 $158.89 $123.34 $168.59 Adjustment: Uni Price (SSF of Land) SI37.09 $109.95 $15889 $123.34 $168.59 Iprovemerts* 41.00 000-4057 00g? ‘Adjusted Price fr Land 59009 $109.95 $1832 $12334 $178.06 Market Conditions Date of Sale = + : + + Contions of Sale = : 5 5 : Location + + + + 5 Sloe + + + + + Frontage'Shape - + - + + Cortanizatons 5 5 5 5 sity + + - + Overall Direction of Adjustment + + + + 5 * Estimated conrbutory vahe of improvements to deduct, or cast of demotion 1 add. ‘Cumpens Associares 6 Land Sale 37 is located about five blocks northeast ofthe subject, This 105,580 square ‘oat and tract sold in December 2010 for about $168.59 per square fot of and area. The property was improved wit «surface paved parking lot and a smal stuctred parking deck: “The property was purchased by Georgia Sate Univesity fr planned redevelopment ofthe land, however, andthe site will be developed with business and law schoo buildings. The purchaser stated tha about $1,000,00 wil be spent demolishing the existing improvements oc othe redevelopment. Th indicated upward adjustment for improvements i about $9.47 per square foot of land indicating an adjusted price for the cleared site of about $178.06 per square foot “The sale property fons slong Peaches Center Avenue to the est, Pak Place to the west and Pryor Place to the south, The property is across Woodruff Park from Peaches Steet ands « prominent location, The sl price was determined by agreement among the partes and based on tree appraisals ofthe property. The pats involved were convinced that the price represents matket valu, but we ae skepiel in thatthe eal represen the highest uit rice found inthe market Comparing Sale 37 tothe subject, we first adjust upward for market conditions in tht the economy and the rel estat markt are believed improving overtime since the date of his sale, A downward adjustment forconiton of ses considered inthe purchase was essentially foc assemblage purposes snd the pice appears high. Additonal upward adjustments ae aproprste, however, for size as previously discussed and for frontage asthe sale doesnot front slong Peachtree Sire, and we adjust upward for overall lity asthe sale doesnot have the regional development potential as envisioned forthe subject. But we also apply a Crmpens AssocuxTES: downward adjustment fr location in amore prestigious portion of the Central Business District. The overall direction of adjustment is believed downward Land Sale 39 ocumedin November 2012 andi stated onthe northwest comer ofthe intersection of Courtland Sweet and John Wesley Dobbs Avenue, This location is aout five blocks norheas ofthe subject. The property was purchased bya private developer to create @ student housing residential complex to serve the neighboring GSU students, The overall development wil include 251 residential units, a 340 space parking garage and some supporting fist Noor etal space. ‘The propery was improve with hol building, «single tory real building and 2 rmid-rse parking structure atthe time of sale. The single story building andthe parking structure were subsequently demolished to make way forthe proposed new development. The existing hotel consisted of shell atthe time of sale and wil be reconstructed with residential. units, The purchaser wanted to demolish the hotel as well, bt the cost of demolition was « deterrent. We believe, ll things considered thatthe transection consists essentially of land ‘value, Dividing the purchase price of $7,900,000 by the 6,049 square fet of land area involved indicates «unit price psd of about $128.34 per square fot of land area. ‘Comparing Sale 39 to the subject, we apply no adjustment fr improvements as we suspect ta the ational cost for demolition of thse movements removed from the site likely offset any contributory value ofthe building shell oused, We adjust upward for market coniitions asthe market has ikely improved slighty since the date of sale. Aditional upward adjustments ar appropriate for locaton, size and inferior frontage, The overall direction of sajustment is believed upward ‘Cumpens Associares 6 {Land Sale 41 involves a relatively small, 11,278 square foot land tract located along the ix blocks west side of Piedmont Avenuc, just north of Auburn Avenue, This propery is sbou roreast ofthe subject. The land was purchesod in August 2012 by Georgi State University for assemblage wih an adjoining, lage ract othe west. This larger tract was purchased on the same dey ands included in our data a Land Sale 42. Both ofthese sale propenies have office building improvements which wll be reused bythe purchaser for a variety of parposes. “The two sles are not believed motivated by these improvements, however, a the combined tand tracts within the growing campus area for GSU and proximate to their newly developed student housing complex immediatly to the northeast Sale 4 indicates «unit pice based on land ealy of $109.95 per square foo of land area “This unit price isin line wit other data found in our research and is believed indicative of prices paid for suitable land tects for assemblage and future redevelopment as proposed forthe subject. The existing improvements ae relatively small an only partially rset a thre story height which is an unde improvement, We consider the uni price as an indication of land vale. Comparing Sel 4 to the subject, we make no adjustment for contributory improvement value in tha the proposed curent continue use ofthe buildings wil ikely offset @ required demolition costo clear the land. We next adjust upward for market conditions, A downward adjustment for conditions of sae is appropriate in thatthe land was purchased for assemblage, But addtional upward adjustments are applied for loation, size and for inferior road frontage. ‘The overall ditestion of adjustment is believed upward, Carnes AssociaTEs 66 Duc tothe limited land sales data in the immediate area of the subject and the broad ‘vatiation in unit prices, we sso analyz improved als to derive an indication of land value Six sles of weil commercial properties in the immediate subject commercial distict were researched. ‘The sles re included as Retail Improved Sales One trough Six in Exhibit “The locations ofthe sales ae on the following facing page map and «bref abuaton ofthe data i a follows: Improved Sales Tabulation Tal Adi Date Bug. Fist Other Land Price! Pie! Et Lan Stk of Sa Se For Fhor Area SFof SFof Tme Imp, Pros! No. Sak Pine (SF) (GF) (SF) (SF) Bg Land Factor Prbe* SF 06113 $750,000 16,413. 5.471 10,942 5,471 $45.70 $137.08 1.000 $257,137 $9009 63 200,000 11,070 3,690 7,380 3,759 1807 5321 L000 173430 7.07 O12 750,000 37,195 10,825 26,370 11,050 20.16 67.87 0.958 487.405 23.76 Ott 22500 4,374 2,099 2.275 2,850 5144 8824 0910 89,774 53.03, 12/1 1,425,000 123,240 26,114 97,126 26,642 11.86 $3.49 0.932 1,143,898 10.55 1208 640.000 13,398 3,885 9,513 40028 47.77 158.89 0.895 163,423 118.32 Five ofthe sx sales ae located within the immediate subject retail commercial distct, Within two blocks souh of te subject. These five sales front along Peachtree Steet in a similar manner asthe subjet. The sole exception is Sale Two which fronts along Broad Stet two blocks southwest ofthe subject. Te sls are therefore in the immediate area ofthe subject ‘Cum.pens AssociaTes q oa ‘The sale propetics include improvements constructed over atime frame from about 1890 10 1951, Several of the properties include floors above the ground level and basements, but in most cases only the frst floor, eal space is occupied. The exception are Sales Three an Five which are most proximate othe neighboring Fulton County Administrative Building. Some oie uses for upper levels ofthe buildings are in evidence in these cases, The predominant use inthe marke, however, appears retail us of the fist floor only with direct exposute and accesso the fronting stroet. Our conclusion is that while some ofthe buildings sa relatively large the actual improvement aes contributing valve is relatively small and confined primarily to the single lor on grade with Peachiree Stet or comparable commercial thoroughfares. The typical investment scenarios tha the purchase pice is primarily for land, ‘but includes some contributory value forthe existing improvements asthe are intended 10 We ansize the sles in thee ways as detailed i the previous tabulation. We first ‘consider the indicated unit price pe square fot of total building area which indicates a range {fom $11.56 for Sale Five to $51.44 for Sale Four. The over variation in this range is about 545% which is considerably higher thn our next analysis focusing on land area. This implies ‘hat while the total building area is tkely a consideration, the focus ofthe transactions snot on total building ee, but ikelyconcentzated on land area andthe most usable portion of the improvements on grade withthe fronting tect. (Campers Associates 6 (Our next analysis calculates the indicated unit price based on land area only. This price per square fot of land area varies from $53.21 for Sale Two to $158.89 for Sale Six. The ‘over! variation is about 199%, We believe that he majority ofthe price pad for these ropetes is ettributable to and snd tha is why the variation in unit price is Tes, The improvements involved are uniformly of old constuction with an aray of physical and functional problems. And the market plies that only portions ofthe improvements are considered sable. ‘The smaller variation nun price indicate by this analysis supports that conelsion ‘We lsly analyze the sles onan extacion basis. This involves estimating a possible contibuory price forthe improvements by a cost analysis, We subtract the estimated contibutory price forthe improvements from the ttl sle price, and then divide bythe land ea to derive an indicated uit land price “To atimate the contributory prive forthe improvements, we estimate the replacement oot new by use ofthe Marshall Valuation Service cost manual, The typical improvements in this market are of brick masonry constuction. Seton 13, Page 26 of the cost manual states & tase cost for «good, clas C, retail store of about $97.64 per square foot. Typically, the sale properties are purchased in anticipation of extensive renovations of the interior ofthe buildings ‘which includes demolishing the iatrior back to the building shell and replacing the interior finish, Section 13, Page 38 ofthe cost manual states a curent cost frre store interior finish of about $51.20 per square foot. Th implied unit cost forthe building shel only is $46.44 per square fot, We adjust this unit cost for ime an location fo an adjusted unit cost of $46.77 or shout $47.00 per square fot for this analysis. ‘CaILDERS ASSOCIATES. @ o In our opinion, a reasonable allocated curent price paid forthe improvements for these sales would be about $47.00 per square foot ofthe first lor area ony. The other Noa, including he basement and upper floors, ee typically not used or only marginally occupied, ‘The estimated contibutory price of $47.00 per squere foot of first floor aea reflects a current price and we adjust for time where appropriate to estimate a unit price as ofthe dat of sale for the da, We derive the adjustment factors by use ofthe Compartive Cost Multipliers included in Section 98, Page 21 ofthe cost manu Applying the resulting estimated unit pric for the firs floor retail area forthe various buildings, deducting that price from the total sale price and diving the resulting estimated ‘roe paid forthe lend only results ina broad range of unit prises fr the land from $7.07 per square fot fr Sale Two to $11.32 for Sale Six. The wide variation in indicated unit price ‘would discredit this analysis; ut, we fel that these variations can be explained and the analysis does provide valid insight ito land value in the subject's immediate are. The best indication of land valu in proxiity of the subject is judsed provided by Improved Sales One and Six. These two transection are most proximate to the subject, footing along Peachtree Street just south of the subject, and irvolve ative, st floor eal uses judged the highest and best use for this market, Most emphasis is therefore placed on Improved Sales One and Six. Improved Sale One fonts along the southeast side of Peachtree Stes ess than one half ‘oc south ofthe subject. This smal, narrow shaped property sold recently in une 2013 for $575,000. The property was purchased for owner occupied, rail use. The improvements include two stories above Peachtree Steet nde fill basemen, but the purchaser is essentially ‘occupying only the firs floor. The masonry construction building dates from the late 1800s ‘CumpeRs AssociaTes 70 and includes a decorative stone and brik front fagade along the Peachtree Street frontage, The frst oor real space now occupied by the purchaser was reportedly in good contin al the Lime of ale quiring ony minor renovations. The property inchides about 5471 square et of land area andthe building essentially covers the entire site “The sale price of $750,000 equetes to about $137.09 per squae fot of land area Decietng our estimated contibutory value forthe improvements base onthe ground floor ae slone indicates an extracted improvernnt price of about $257,197. The remaining land price equates to about $90.09 per square foot of lad ert. ‘nour opinion, this sale is one ofthe best indications of probable land vale inthe immediate area ofthe subject. The sales recent and belived at arm's length and representative of market value, The purchaser intends to continue wing the property as improved implying « significant improvement value, but our analysis of this markt implies thatthe majority ofthe price paid is fr land. The improvements are over 100 years old and though atvactive in historic sense, do not represent modern, functional etal sore improvements. Our extraction analysis recognizes these conditions andthe resulting estimated nit price psd for land at $90.09 per square foots believed reasonable and indicative of caren ivestor logic. Comparing the extracted unit land price for Improved Sale One tothe subject, we would ‘adjust slightly upward for location further removed from the MARTA Station and significantly ‘upward for size and ity in thatthe 3 is of insufficient size for more intensive, mid and high-rise development as proposed for the subject. L$ cms associa: — . » n {Improved Sale Six also fronts along Peachtree Ste les than one half lock southwest ofthe subject. The 4,028 square foot rectangular shaped lt sold in December 2008 for about ‘5158.89 per square foot of land area. The propery is improved with a two story, row style commercial building, The building now appears in reasonably good condition. The first flor retail are is reparttioned ino sm |, rea enant bays alorg a common area aisle. The property is essentially used a ‘min retsil mall which i prevent we inthis market, We were unable to confirm tis ale with the partes involved, but the tansecton appears between two local and knowledgeable investors andi believed at ams leagh. Our extraction analysis indicate unit land pve uf about $118.2 per square foot Comparing Improved Sale Six tothe subject, we aust downward for market conditions as we suspect tat the subject retail commercial istct was btter occupied atthe time of sle in comparison to present. We adjust slightly upward for location, but significantly “upward for size and uty. We believe the overall direction ofedjustnent is upward ‘Our analysis indicates thatthe estimated adjusted rit pic pid for land for Land Sales 39 and 41 and Improved Sales One and Six are overall infor tothe subject and range upward innit price to $123.34 for Land Sale 39, Land Sale 37 wits unit price fr land of $178.06 er square foots judged overall superior tothe subject. Aessonsbe ni value fr the subject land is believed contained within this cated rang end isjudged toward the lower qual of the range or about $135.00 per square fot ofland are, The subject and consists primarily of large, contiguous tract ovmed essentially in fee simple but also includes some surface rights ares beneath adjoining viaducts which assist in ‘connecting the property, and some air rights areas clevated shove i and parking faites at the surfice level as previously described. Land Sele One in our data involves a sale of surface Cumpens AssociaTes n rights which were being reassembled with the air rights the grantee owned. The sale price was ‘based on an allocation of property value of one half'for sufae rights and one half for ar rights hich is used for this valuation. The contiguous portions ofthe subject owned in fee simple are therefore valued a $135.00 pe square foo of land area while the contiguous surface and air ight portions are valued atone haf this fe simple urit val or $67.50 per square fot The subject ls includes two smaller land tts that re not contiguous with the lerger propenty as previously deserved. The store building property located onthe southeast corner of Alabama and Broad Streets contains 7,152 que fox of land owned essentially in {ee simple, but not contiguous with the larger tact. We beiove that his tract enjoys a reasonably similar ult asthe larger tract considering its excellent proximity to the MARTA ‘Train Station, A similar unit value of $135.00 per square foot is estimted. “The second smaller tract involves the site frthe Coca-Cola Pavilion slong Martin Luther King Je, Drive. This smal parcel is believed moe similar fo our Land Sele 4 analyzed shove wih «unit price of $109.95 pe square fot of lan area. A similar wit value fortis portion othe subjects estimated or about $110.00 per square fot. “The resting eotimated otal marke! vale for thesubject land as though vacant is summarized onthe following page. o oO Land Vale Summary Usic Market Lad Type Sx Value Vahue Fee Simple, Comins 327,344 SF@ $135.00 SF= $44,191,440 Fee Simple, AlmamafBroad Steets7,152SF@ $135.00/SF= 965,520 Fee Simpl, MLK Coke Pevilon 22,477 SF@ $110.00/SF= 2,472,470 Surface Rigs 26296 SF @ $6750 /SF= 1,774,930 Air Rigs 32,605 SF@ —$6750/SF= 2200,905, Toa! 415875 SF $51,605,315 cmprrs assocures B " VALUATION AS IMPROVED “The property is considered to include only two parts which have significant improvement value, The principal part ofthe improvement value involves the to parking decks located along the southern edge ofthe contiguous land tract. But we els consider hat the rel store building located onthe southeast comer ofthe intersection of Alama and Brod Streets als likely contributes vale in that this potion ofthe property isnot contiguous withthe mai, contiguous land tact and would likely remain improved and used a single story ruil building. The subject alo includes the sublease agreement numbering a first ‘Noor retail commercial space within the adjoining hotel property at Peachtree and Alabama sirees. We do nochavesuficent information concering this lense to inchade any possible contibutory value tha could be crested by this contract, but we fel tht this value would likely be nominal, The remaining improvements on the subject consisting of the operating, ‘Underground Atlanta complex andthe associated office buldng ar considered of 0 conbutory value nd in act ar detriment o value with the diminution in valve equivalent to an estimated cost to remove the improvements allow redevelopment ofthe and “Te rental store building onthe comer of Alabama end Broad Streets i «minor potion ofthe ttl subject property. The contributory value ofthese improvement is judged similar 9 ‘ous previously estimated building value used in our extraction analysis in the land valuation section, This contibatory value was eximated as about $47.00 per square fot of fist floor tulding area. The subject building contains about 5,855 square feet of building are, Applying ou estimated nit value indicates an improvement value of $275,185, Adding this contibulory value for the improvements tothe previously estimated land vale for this portion ofthe subject et $135.00 per square foot times 7,152 square fet of land area or $965,520 Comers AssociATES. @ 15 increases the total value for this portion ofthe property to $1,240,705. This equates to about $3173.48 per square foot of land. This unit value is slighty above the range of unit prices indicated for our sx ret improved sees previously analyzed on this basis, but is believed ited considering the subject's excellent location adjacent the MARTA ral station, Fall redevelopment of the contiguous subject land and the Coca-Cola Pavilion land tact, 1s proposed would require demolition ofthe existing improvements. We estimate an epproximate demolition costo clear the property by use ofthe Marshall Valuation Service cost ‘mara, Section 66, Page 11. An approximate uit cost to demolish and remove class © constuction ass typical forthe subject is estimated et about $475 pe square fot of building area, Applying this unit costo tbe approximate 256499 square fet of subject building arc, 50,804 square feet of Coca-Cola Pavilion area, and an approximate 62,414 square fet of road Viaduct area tobe removed indicates «demolition cost of abou $1,756,156, rounded to $1,800,000. Cuin.pens Associares 16 Valuation of Parking Decks Sales Comparison Approach Cur research ofthe subject market revealed sx sles of pking stature properties sed for ths analysis, "The sles data ate included as Exhibit, The sles are allocated within an approxinate eight ity block radius ofthe ubjet as shown on the facing page map. The tabulation below summarizes the details ofthe transactions PARKING DECK SALES SUMMARY, ate No Laat Land tie Ont Sle ‘Of Sek Yew See Ave’ Retail cone? Epa NOW Cap, Pre! No. Sik Prk Specs Buti (SF) Spon Srces Spece Sp Spice Rae Sc po ss70pq00 450.1941 TES ITS No BUSTS SEB SING 9.79% 12667 2 baas Aa0gt83 + S04 1990 366s 67 Yes HOR RID SAS HHH Ht 3 det 1956 112942 Yes 852307 SAS 7.78% 7.008 4 55 20030664) Yeu = ONA 81 NANA 27D 5 Sor 1626006 47 Yo 16-8 LISD 10S LODNS ‘ Tad 1880 17320 126 No S464 TH 2679 708% 15714 She 873 Dek A “WS 1986 66763 52-No SAS STL SAD Deka a Teal an nce eotton ot ant ied va of aed eet mt puch ‘Secu eae whe oft el bgs ela nb me “The six transactions oocurred between September 1999 and April 2009, The time period forthe data is broad, but «broad time period was required to obtain suicient data for this specialized use. We believe these data are the totality of available market evidence in the downtown Adanta submarket forthe time period studied, (Cumpens AssocuaTEs COMPARABLE PARKING DECK SALES MAP (Cmn.pERs AssocuTEs n “The sles range size rom 140 parking spaces forthe mos recent Sale Six to 755, spaces for Sale Four, Te subjet consists of two decks ~ Deck A with 745 spaces and Deck B with 28 spaces ~ totaling 1.273 spaces. The individual structures are conned within the indicted range of dts but toward the upper end, Smaller parking decks may ansuet t biter nit prices, but cur data is ambivalent in his regard. We wil, however, consider @ ‘ypieal size adjustment forthe analysis. “The patking decks range in date of construction fom 1941 for Sale One to 2001 for Sele Four, Aside from the newest Sle Four, the remaining fve decks were all constructed uring or rior to 1990, While te decks are all in good physial condition and function well, we believe the older properties sue greater depreciation an likely transact at lower unit proes, The subject decks, constructed in 1986, ar in good condition and are generally of similar age asthe comparables, An adjustment forage and condition wil be considered “The amount of and are supporting each puking space Is elso of importance dv tothe igh cost of lnd inthis market, The calculated ratios of land area per parking spece forthe six les range brosly from 40 square fect of land per space forthe most intensively developed, Sle Four, to 175 for Sle One which includes considerable amount of less intensive, suraee parking. The subject decks are supported by 82 square fet of land per parking space which is well bracketed by the deta and appears reasonably typical. An adjustment for this characteristic is considered {____— camzpis assocrares —— ‘Another consideration inthis analysis sinc of euilary coal tenants in the decks, Retail tenants erate additional ash lows fo the property owner, enhancing the net ‘operating income forthe properties and increasing value, Four ofthe sles, Sales Two, Thre, Four, and Five, enjoy this ditional income generator and ste blioved more valuble asa ‘esul, Sales One end Six, long wi the subject, donot include retail tent bays, An agjutment is considered The mos significant consideration inthe valuation of «commercial parking deck, however is the income generate by the faiity. The net operating incomes per space forthe comparables vary broadly from $585 for Sale Thr to $2,679 for Sale Six. In the following {income approach analysis, the subject net income per space is projected as about $549 which is coniined within the range forthe data, but toward the lower end. The unit prices pad forthe comparables appear to sean fill na consistent pattem in corelation with these reported income levels. An adjustment for this overall measure of performance is considered inthe analysis ‘The sx ales range broadly in nit price from $7,008 per parking space for Sal Ths 10 $23,179 fr Sale Four. All six sales are considered forthe valuation. To analyze and compare the sls to the subjet, we reconfigure the data fom the lowest to the highest price er parking space and apply qualitative adjustments to bracket a reasonsble estimated unit Value forthe subject, The adjustments are symbolized as explained forthe previous land valuation section, A summary of our analysis is shown onthe following page, Campers Associates Pp Sates. at Grd Sie Stle Se Sak Sake Sake Sujet 32S 1 oo6 4 Date of Sake oon 0408 0408 0406 099 O49 0507 Parking Spaces 1273 264 $04 $67,450 140.85. ‘Year Bud 19861956 1990 1956 194119802001, Lard AreuSpace 2 67 ATE Ret Space No Yes Yes Yee Ne No Ye NetOperatngloomelSpace «$649 $545. $595 $1153 $1,236 $2,679 NA Unt Pre ($/ Spice) $7,008 $8,548 $10,935 $12667 $15,714 $23,179 Adjustments ‘Market Contins cmt + + + toe oe Location Belt + + + toe oe Sie (# of Spaces) wn; : : ‘AgeConitinefInprovennts Good + = + 2 Land Area per Space + : ’ ‘Resa Spaces Noe = = 5 6 NetOperatinglicome'Space S49 # He Sas Over See a Sale Three ‘Sale Thre aw 264-space, seven-story parking dec located two city blocks west of he subject onthe sautheastem comer ofthe intersection of Martin Luther King, Dive end Forsyth Stret. The property was purchased ia combination with two retail uilings in April 2008 for $2,850300. The purchaser allocated the prices $1,850,000 forthe parking stroctare and $1,000,000 forthe reall buildings. The located unit price fr the puking deck is therfore $7,008 per space, The llocstd land are supporting the deck is abou 42 square feet per spece. The purchaser stated thatthe price was based on a projected ne\ income of about ‘$545 per space end a capitalization rte of 7.78%. The deck was builtin 1956 but is in good ‘overll condition. One retail tenant bay i located within the deck. ( caarzners Asscixt2s —— "0 ‘Comparing Sale Thre tothe subjoct, an upward ad siment for market conditions is fist applied. While downward adjustments for size and the inclusion ofthe retail space are ‘warranted, significant upward adjustments are also necessary for inferior location, age and condition of the improvements inferior land area ratio, and inferior nt income per space Overal,an upward adjustment is believed reasonable, Sale Two Sale Two occured in Apri! 2008 and involves a seven-story, 504-space parking structure built in 1990, The deck wes purchased for $3,200,000 witha reported $200,000 spent subsequent othe sale for renovation. The property consis of tree separate land tacts totaling 3,665 square fet. The price paid reflets the purchase ofthe fee simple interes in one tact andthe leasehold interests inthe reeuining two tc. Based onthe details of ach lease provided by the property owner and discussed inthe ales summary included in Exhibit E ofthis report), weestimate the vue ofthe reining leied fe interests inthe two tracts et 908,183. Adding this maining vue fo the adjusted purchase price plus renovation costs indicates an implied value fr the fe simple intrest in the etre property of $4,208,183, or about $8,548 per space The parking deck is supported by 67 square feet of land pr parking space and enjoys cone retal tenant bay. ‘The buyer reported the property was purchased based on projected net ‘operating income of about $595 per space and sn implied capitalization rate of 6.96%, ‘CHmLpERs AssocuaTEs 31 ‘Comparing Sale Two tothe subject, an upward adjustment for market conditions is necessary. Additional upward adjustments for inferior location and sigh inferior net income re also required. Downward adjustments are warranted for numberof spaces, fend are rai, andthe inclusion of a retail tenant space. The sales consderedoveral sight superior tothe subject. Sale Five Sale Five sa 567-spce, nine-story parking structure located thee ety block northeast ofthe subject along the southern side of Hurt Plaza. The deck was purchase in Api! 2006 in conjuction with the neighboring Hurt Building office building. The allocted price psd for the parking strveture equtes to about $10,935 pr space. The parking deck is used predominantly in suppor of the adjacent Hurt Building, a multistory, malitenan office building. The deck was constructed in 1956 and was reportedly in god overall condition at the time of sale. Th improvement are supported by 47 square feet of land per parking space nd include one retail tenant space, The purchaser state that the net income afer the sle was about S153 per space indicating a capitalization rat of about 10.55%, Comparing Sale Five to the subject, an upoverd adjustment for market condition is fist ppled, An editions, slight upward adjustment for age and contin of the deck is also ‘warranted, Downward adjustments for slightly superior location, smaller size, retalenant, and higher nt income are alo required. The sale is judged overall superior tothe subject Cumupens AssocuATES oe @ Sale One ‘This sale involves a combination, three-story parking deck and adjoining surface parking lot located about seven city blocks north oF the subject on the southeastern comer of the imtersection of Harris Street and Centennial Olympic Park Drive. The 450-space parking Property was purchased in September 1999 for $5,70,000 or about $12,667 per space. The aking stustre, bul in 1941, appears in good overall condition and functions well. The Property s supported by 78,539 square feet of land indicating a aio of 175 square feet of land aa per parking space. The grantee reported tha the property was purchased based on a Projected nt income of ehou! $1,236 por space indleatng a ceptalization rte of 9.79%. the property doesnot include any retail tenant space ‘Comparing Sale One tothe subject, large upward adjustment for market conditions is first applied. While additional upward adjustments for location and inferior age and condition ofthe improvements, downward adjustments for size, land aree ratio, and superior net income ‘are also warranted. Overall, the sale is judged considerably superior tothe subject, Campers Assocures ee B Sale Six Sale Six isthe most recent transaction obtained inthe market oecurring in April 2009. “The propery ia located two city blocks northens of the subject tthe easter comer of the intersection of Lower Wall Stet and Kimball Avenue. The 140espace, three-story deck was purchased for about $15,714 per pace, The improvements bul in 1980, er consiered in average overall condition and are supported by 17,320 square feet of land or about 124 square feet perspace. The purchase stated tha the price was determined through capitalization of he projected net operating income. The purchase used a projeed net income of $2,679 pe space nd capitalization ate of 17.05%. The buyer reported th the income projection was applicable in atypical market. The adjustment forthe economic recession at tho time of sale vas considered inthe igh capitalization rt comparing Sele Six othe subject, an upward ajusiment for market conditions i rst ‘pplied. Additional upward adjustments for locaton and inferior age end physical condition of the deck are also warranted. Downward adjustments are applied for numberof spaces, land are ati, and superior anticipated net income. ‘The adjustment for income rat snot proportional to the actual difference betwesn the sale andthe subject, however, as the income projestion fr the sale eflet a significantly higher risk level than type nthe maset, The overall direction of adjustment is believed downward @ a Sale Four This sale occured in May 2007 and involves the most cently constructed deck in the ‘ta, The 11-story,755-sace parking structure was builtin 2001 and is considered in «excellent condition. The propety was purchased for about $23,179 per space, The deck is located eight ity blocks northeast ofthe subject along the eastem side of Peaches Cener ‘Avene and the southern side of Harris Stet, The deck ha two retail tenant bays and is supported by about 4 square fect of land per parking space. Only an indication of expanse ‘ato was provided. This clit is in a superior location in proximity of prestigious office buildings along Peachtree Street and ly generates superior income, ‘Comparing Sale Four to the subject, «downward adjustment for market condition is spplied asthe sale ocurred just prior othe recent economic recession. An upward adjustment for land area per space is applied, but additional downward adjustments for superior location, a smaller siz, superior age and condition of improvement, the presence of eal tenant space ‘and for likely superior income are judged appropriate, large overall downward adjustment is Cumipes Associates fo Cenclusion Sale Thre, at $7,008 per space, is judged overall inferior tothe subject while Sales ‘One, Two, Fou, Five, and Six are judged overall superior to the subject and range downward in uit price to Sele-Two at $8,548 per parking space, A reasonable nit market value fr the subjest parking deck is believed contained witin his indicated range between Sales Two and “Tee. As Sale Two was judged only slighty superior to the subject,» unit value atthe top of the indieated range, about $8,500 per parking space is chosen, Applying this unit value to the subjet’s 1.273 parking spaces indicates 8 market value fortis portion ofthe subject as improved of $10820,500. Income Approach “The subject parking Facilities consist of two sep parking strates totaling 1273 patking spaces, Parking Deck A provides 745 parking spaces an Parking Deck B provides 528 spaces, Thetwo decks aein good physical condition and appear to fnetion well. We ‘consider the desks well ated in immediate proximity of the main governmental distin downtown Atlanta as wel as indirect conection with he subject real complex. We vale the parking structures by the income approach considering the limited operating history ofthe decks provided ty our client in conjunction with etal and expensed obtained from simile properties in themarket, (cunts associvr2s: ——I Operating History (Our cen provided us with brief operating history ofthe two subject parking deck facilities. The documents included a general summary of income and expenses fr operating _yesrs 2006 through 2010 and more detailed income and expense statement fbr operating years 2011 and 2012, The statements donot allocate the data between the two decks and we astume {or tis analysis tat the reported revenues and expenses reflect the combined parking use of 1.273 total parking spaces. The data provided by the clentis included in ExhbitF of this report. A summary ofthe data is shown onthe facing page ‘The data provided are sorted to income categories and expense catpaie as shown, ‘Wiile some of the provided daa was quite detailed and esly placed int thes categorie, ‘other data was rly generl and required some allocation. We used our best julgment to allocte te various expenses into the appropriate expense catories. The chart reflects our bost understanding ofthe historical incomes and expenses forthe subject parking use, In cases ‘where a specific expense item was omited from the provided history, an appropriate charge ‘was etimated en is shown in red onthe chart. A brief dseusion ofthe subject operating history is inludet below. ‘The total income forte subjects allosted between monthly parking dsily or rasient parking, special erent parking, and other income, The subject reports monthly parking income ranging ftom $397 per space in2011 to $469 per space in 2006. The monthly pecking income has generally declned over the previous six operating years, Daring the most recent 2012 the Income was report at $403 per space. The average income for monthly parking over the centre period is $422 per space and the median is $417. $A cotmens Associates srapotey ste) 1 soon SELTID VT Suna LaTaS 20 AWOASIN SNILVHHIO 87 ‘The duly or transient parking income isthe majority ofthe revenue generated by the parking use. The daily parking income ranges from $966 per space during the most recent year, 2012, to $1,302 per space eported in 2007. The average is about $1,157 per space and ‘he median is $1,178, The operating history indicates the subjects daily parking income hes declined steadily ‘he highpoint in 2007, ‘The special event parking and oer income generated by the subject parking decks we «minor potion ofthe over income. Special evet parking income ranges from $5 per space in tho moat cont 2012 to $146 per space in 2007, The average income fur thi use i S67 for space andthe median s $50. Other income generated by the subject appears somewhat isolated as five ofthe seven years reported no oer income while two years~ 201] and 2012 ~ ‘eport $10 per space and $21 per space respectively. ‘The efective gross income reported forthe subject ranges from S1,890 per spac in 12007 to $1,393 during 2012, This income measure has also decreased steadily over the previous years. The average i $1,651 pe space andthe medin is lightly higher at $1,691. We note that our observations ofthe subject deck indict that they are well occupied and shouldbe generating significant income, A discussion of the dek’s rental rates snd generated income in comparison to sina parking falitesin the markets included leer in this section, Chupens Associaris 88 ‘Operating expenses are sorted info nine main accounts and summarized on the previous facing paye. ‘The operating expenses include labor, management, maintenance and repair, administrative, utilities, and security foreach ofthe seven years reported. A charge for insurance was also provided for 2011 and 2012. As shown onthe previous facing page, We the insurance have estimated the approprite charge fr supplies and property taxes os well expense for yours 2006 trough 2010, A detiled discussion of each expense account along with en explanation of ou calculated charges fr supplies, taxes, and insurance is nchded tater in this seton. “The total adjusted operting expense reported forte subject ranges from $1,074 per space in 2007 to $1,146 in 2012, The overall expense has generally inereased every operating ‘year forthe past seven years. The average expense i 1,106 pr space and the median is 51,102, The adjusted net operating income forthe subject ranges from $246 per space in 2012 10 $793 in 2007 and averages $545 per space. The median is $589 per space, Later inthis section, we compare the subject operating history wth operating data frm competing facilites inthe marke and estimate a projeted income and expense statement forthe subject. To Aetermine te appropriateness ofthe reported subject income, we fist compare the subject etal rales tothe market. ® @ ark Ret The subjects improved with an income generating parking structure which capitalizes on the parking demand created by the surrounding office and retail uses. The deck generates ‘minimal income fom special events nd other sources. The primary income potential forthe property —and the focus ofthis analysis is on monthly and daily parking sources. To estimate a marke ent fr the subject spaces, we surveyed seven, king decks proximate 10 {he subject. The locaton ofthe competing parking facilites is shown on the facing page map. ‘A summary of th: rental dat is as follows: vaste e iE 2 PP DPT ra oe “The compurable decks are located in th imamediate area ofthe subject and compete withthe subject for monthly and transient parking. Six ofthe seven decks ~ all excluding Deck Six ~ offer monty parking while all seven properties offer diy or transient parking The decks are believed the best indication of competing properties inthe market and offer the most reliable indications of market rates forthe subject facilites, @ Hct ens ssoctats ——I PARKING DECK RENTAL MAP_ @ 0 ‘The sinas ofthe decks mnge broadly from 140 spaces for Deok Six to 1,273 spaces for ‘he combined subject shown as Deck One. Excluding the subject, the emining six properties range fom 140 spaces 748 spaces for Deck Five. The subject consists of two decks ~ one with 745 spaces and the secone with 528 spaces ~ ad as such ae bracketed in size by the comparable dat and the subject ager size snot considered significant diference ‘The monthly rental rates range broadly from S70 per month for Deck Four which is located west ofthe subject at th intersection of Forsyth treet and MLK Drive to $110 per ‘month for Deck Two located two blocks nor of the subject docks athe intersection of| “Marit and Peachtree Strats. A reasonable monthly rental rate forthe subjects believed best supported by an analysis of tee ofthe most proximate decks, Decks Two, Thre, and Four, and the reported rental in‘eemation forthe subject, Dec One. Deck One isthe subjet docks with a monthly rental ate of $85 por space. The deck s ‘in good physical condition and functions well as commited, ‘The deck enjoys a good location immetatly noth of the majorFulton County governmental center and in reasonable proximity ofthe federal office tilings othe west. The decks ar, however, removed fiom any significant private sector office uses. Deck Two, with a monthly rental rate of $110 per space, slcated two blocks north of the subject tthe intersection of Marita and Peachttee Streets, The parking deck apears in reasonably good physical condion and Funetions wel, The deck enjoys an excellent location in proximity ofthe Georgia State University campus and within walking distances of private sector office uses along Peachre and Marieta Streets. In our opinion, the parking deck is superior tothe subjct in location, EN ermoens associates ——! 31 Deck Three is cated three city blocks northeast ofthe subject along Hurt Plaza, The eck i leased on a monthly basis for $100 per spa The parking deck appears in good plysea condition and enjoys» lation immediately adjacent to 8 major office building, Hurt Plaza, ‘The parking deck and oie building have common ownership with the parking deck. providing the primary parking facilites for office tenants, With lt in den for parking resulting from this adjecent oie se the deck is eonsidered superior to the subject ‘Deck Fourislnsed ata monthly rate of $70 per space. The deck is located two city blocks west ofthe subject decks atthe intersection of Forsyth Stet and MLK Drive, The dak appears somewhat older than the subject andi judged in average physical condition. The parking structre also suffers froma slighty inferior location removed from significant private sector office uses, The deck is located immediatly adjacent to two federal office buildings — the Same Nunn Feder! Building andthe MLK. Building but federel parking is provided for ‘workers ofthe buildings in osteo surrounding parking structures, In our opinion the desks {nfesior to the subject. {nour opinion the most likely market supported monthly packing rae forthe subject eck ses than te superior Decks Two aad Three which range downward to $100 per space ‘perronth but more thn the inferior Deck Four at $70. The current subject at of 85 is toward the mile ofthis range and is beloved reasonable market rent “The rate structure for transient parking varies between the seven comparable decks, “Two ofthe decks, Deck Five an Six, offer Fixed daily rates ofS and 37 per venice respectively ropardless of ngth of sty. The remaining five decks, Decks One, Two, Three, Four, and Seven, provide a varied rate structure dependent on the amount of time spent inthe ‘deck. The subject Deck One offers such a varied rate structure whichis judged appropriate as (Cups AssociaTEs 7] > 2 the dec eaters to large transient population visiting the adjacent Fulton County governmental buildings. As parker ikely visit the govemmenial buildings for varying lengths, a varied rate structure is judged most appealing to attract the highest volume of users, We therefore focus on this rate structure for Decks One, Two, Thee, and Four for this analysis. ‘The rate structure for the subject Deck One i $2.00 forthe frst 30 minates and $1.00 for every 30 minutes thereafter. The maximum daly rate fr the deck i $8 pr vehicle. For Deck Two, the tes range fom $4.50 forthe firs 30 minutes to a maximum of S12 per vehicle for any stay over four hours. Deck Three ranges from an average of $1.50 per vehicle for 30 ‘minute oecupeney toa maximum of $10 foal stays over four hours, Finally, Deck Four ranges ffom $3 forthe ist hour to $7 per vehicle for en time over en hour Inthe previous discussion ofthe monthly patking rate, location in proximity to office Workers was a significant consideration. Fo diy parking, we believe location proximate to high volume uses ~ such as retail, governmental, or other service orented uses — is ideal. Of the our decks, two — Decks Two and hres ~ae located in the middle ofthe Georgi Sate ‘Univesity campus and therefore cen accommodate high volume of stunt parkers that may sit campus for a shor timeframe, In this regerd these decks may be slightly superior tothe subject, Deck Four is removed from this campus ands alo removed from many ofthe typical rex ot local governmental uses and is judged interior to the subject in this regard. In our opinion, the subject is well located in proximity ofthe loeal goverment uses that acta igh volume of dsily user, (Comers Associaves 3 Considering the locational characteristis ofthe subject and the competing facilities, we beove the subject rates shouldbe higher than the rates for Deck Four and more ine withthe rates charge by Decks Two and Three. The subject deck ctarges rates that are slightly higher than Deck Thee and slighty lower than Decks One and Four, In our opinion, the subject rates are generally in Line with dhe market end likey indicative of markt ent for daily parking users. A more detailed analysis ofthe parking rat structureand occupancy by ime frame i rot conducted due to the limited data provided forthe subject deck. For this analysis, we assume he rate structure shown for the subject ~ andthe conesponng gross income generated for daily parking use ~is indicative of market ates, Market Occupancy ‘We were not provided with any occupancy data fr te subject parking decks. Our analysis ofthe occupancy and operation ofthe deck i therfore somewhat Limited. According tothe operating history forthe subject, the majority ofthe income generated by the parking fa es ~ abou 69% in the mot recent 2012 operating yer is tibtablet diy parking tse, This lrg contribution is expected asthe subject sublease agreement requires that & minimum of 800 spaces ~ 63% ofthe total parking capacity —be dedicated to daily parking use ‘Our observation of the subject decks ~ based on numerous visits to the facilities ~is hey are ‘very well occupied. Using the income generated by the decks over the previous seven years andthe reported ental tes for he monly and daily parking wes, we created the following chart to summatize the potential occupancy ofthe decks. We note that our chart assumes the monthly parking rte of $85 per space has beon fury consstent overtime and tha the average ily rte for transient parkers i spout one-half ofthe daily rate, or about $4 per vehicle. Crmpens Associates ~ » 94 Saar ln Oe it Man a Da tg mame ey eis ‘atte seals ssu.ee sone ssn sane ae S28) ‘eaten 85 oe sa "sige “sign “atmo “Sao “Higm “Rie tig suasiaa seins stam si4seaue nian siznsaor teatime aS —aUSIg— hae tReet) er On ver ese eS ONS ite ony ecu nas ona ‘uta noe a ver the previous seven yeas, the monthy parking occupancy appeas fil stable ‘anging fom 39% (495 parker) in 2011 to 46% (SRS parkers) in 2006, The average monthly parking occupancy forthe timeframe is $27 prkers and the median is 520. Both indications of ceil tendency equate to about 4% ofthe total deck capacity. The daily parking use reflects ‘larger variance anging from 66% occupancy (840 dil ses) in 2012 to 89% (1135 users) in 2007. The average ofthe rngeis 79% occupancy or sbout 1,009 users snd the median is 181% or about 1,027 uses. For each operating year, the otal occupancy for monthly and éily users exceeds the toa capacity ofthe two subject decks. Thisindicates the occupancy ofthe decks is being maximized under their current operation, For our analysis, we consider the ‘current operation ofthe subject decks indiative of market occupancy. ‘Cumpens Associares Effective Gross Income “The operation of the sujet parking cities is considered reasonably indicative of the curent market Our enlysisof he actual operating history forthe subject reveals significant income is curently generated by the parking operation, Additionally, our comparison of the subjeot ental rates tothe rates competing parking fies in he market revealed the subject operates with market rental rates, Our limited analysis of the subject occupancy revealed the propery is well o:cupied for both parking uses and the income fikely reflets he ‘maximum potemal we forthe decks. Considering the above, we conclude a reasonable expected effestive gross income for the subjet decks shouldbe similar to the histori income forthe property. As discussed proviousy, de subject's moatly parking income ranges from $397 per space o S469 per space and averages about $422 per space. The income has tended slightly downward over the previous seven yeurs. In our pinion, a resonable expectation for income generated by snonthly packing uses is slighly less than the average rate, oF about $420 per space ‘ily parking income ver the previous seven years ranges fom $968 perspec in the most recent year to $1,302 pe space in 2007 and averages $1,157. We note the diy parking revenues also trending somewhat downward over the previous years and estimate en expected income fom this patking se ofS1,100 per space, This projected income i an increase over the most recent operating yeas bt is believe justified considering the improving economic conditions. LL ________— cmonrs associates —— @ © @ 96 ‘The special event and other income sources area minor part ofthe subject's historical income. In our opinion, the deck isnot appropriately located or suited for significant increases to ithe income source. The special event income as tended downward sive 2007 and was reportedly only $5 per space inthe most recent operating year. The overall ringe for special vent parking i om $5 to $146 per space with an average of $67 per space. In our opinion, a reasonable expecied income from special events is toward the low end ofthe indicate reng, or shout $20 pee space per yar ‘The subjest reports other income inthe two most recent operating yeus only. This ‘income is fairly minimal ranging ftom $10 to $21 per space. We assume an ober income of shout S10 per space. Besed on he above projections, the toa efTetve gross income forthe subject parking ‘use 1,550 per space per yea. This ates in ne wit the histories operation ofthe subject ‘hich ranges from $1,393 per space in 2012 to S890 in 2007. ‘Asa check of reasonableness, we sso compare ou projected income with the historical incomes fortwo competing parking decks in the market. We appraised the two decks as part of a separate assignment and consider them reasonably comparable othe subject For ‘confidentiality, we will refain from specifically ident the two parking decks, but will identify them inthis eportas Parking Deck I and Parking Deck 2, Packing Dec | is a ,926- space, multilevel deck locate in the downtown Atlanta market The structures oder and less ficient than the subject, but provides «good indication of tll income and appropiate operating expenses Parking Deck 2s relatively new, mutilvel deck with 474 parking spaces. The decks very comparable to the subject decks, buts located onsite with an office "use which is judgad superior to the subject. ‘Compens Associates 7 ing histories forthe subjoct and these two competing decks ‘A compilation ofthe oper js shown on the facing page. The Parking Deck I history for2001 through 2003 and 2007 Atvogh 2010 while the Pasking Deck? history i 2005 though 2010. The subject history is for operating years 2006 trough 2012. A total of 22 operatirg years within the Une decks are shown and used in his analysis. We note that tho incomes and expenses shown in red onthe facing page have been ether estimated by us o adjusted t reflect iypicl market conivons. A discussion ofthe thre histories in comparison to the subject projection follows “The totl effective gross incomes forthe tres deces range broadly from $1,308 per space for Parking Deck? in 2006 o $1,932 per parking space for Parking Deck ?in 2009. The subject decks and Parking Dec 1 re judged most indicative of typical commercial operation aud ange from S1,358 per parking space for Parking Dexk 1 in 2008 to $1,890 forthe subject, in 2007, Our projected total effect income forte subject of $1,550 per space is 200 contained within his range. Our estimated incomes forte subject are judged reasonable and supported by the available data, ‘The indicted subject total effective gross income is si973150. Operating Expenses Reported and estimated operating expenses forth thre comparable decks and projected expenses forthe subject ere summarized inthe operating histories shown onthe facing page, We have combined the reported expenses fom each propety into 10 general categories as sted on the sutnnaris. In instances where one deck dit not quay paiva expense, we have estimated a reasonable charge for tat expense based onthe reported expenses forthe remaining swo properties. Campers Associates © CUMULATIVE OPERATING HISTORY OF SUBJECT AND TWO COMPETING PARKING FACILITIES ty Hell lll 98 labor expense. All thre decks “The iret expense item detailed in the summary i reported an expense for labor. The expense ranges frow $174 per parking spece for Perking Deck | in 2001 to $49? forthe subject dock in 2012. The labor expense includes salaries for cashior, maintenance workers, and police, along with ruyroll taxes and employee benefits. Of the ee docks, the subject incared the highest labor expense over the timeframe reported. We rote thatthe subject reflects two seperate parking decks which necessitate ational cashier workers above a single deck. Also, the deck faites ae operate in conjunetion with he Underground Atlanta retail complex and may require stead personnel costs associated with this complex. “The labor expense fo the subjest deck rages fiom $447 pe space in 2006 1 $452 in 2012 and has steadily increased overtime, Assuming the decks are operated in the market and tot directly connected to the Underground complex, ewer cos maybe justified. Stl the subject warrants cost that is higher than the competing decks because i i two separate strtures that require individual operation. Excluding the subject decks, the rang of labor cos forthe remaining two decks is from $174 to $314 er space fr Parking Deck 2 in 2010. A reasonable labor expense forthe sbjet operated asa mutket deck acility a propose is {judged slghly below th upper range ofthe two remaining decks, or about $300 per space. ‘A management expense is also incurred by the subject owner asthe deck is operted by an outside packing company. The management expenses reported on the thee propertics range from 0.4% of the efetive gross income for Parking Dck 1 in 2008 to 2.5% for Deck 1 in 2002, The subject deck ranges in management expense fom 1.1% in 2007 to 1.5% in2011 and 2012. ‘The subject’s expenses ae therefore contained within the indicated range of competing (CamDERs ASSOCIATES So © am @ 99 properties and are believed supported inthe market, A reasonable expense for the subject ina stabilized yon estimated at 1.5% ofthe effective gross come or about $23 per space ‘The supplies expense category varies from $1 per space in 2007 and 2008 for Deck 2 to SIS per space for Deck | in 2001. The subject does not revort a charge for supplies during the timeframe analyzed. ‘The average rate forthe two competing decks is about $6, In our opinion, ‘unit expense similar tothe average ofthe properties, or about $6 per parking sp reasonable Maintenance and repair expenses forthe three decks vary greatly fom alow of $27 pee space for Deck 1 in 2002 and 2003 o $92 por space forthe subject deck in 2012. Parking Deck 2s most similar physically to the subject, buts the newestof the tree comparable decks and ‘anges from about $31 per space in 2005 and 2006 to about $63 in 2011, The subject deck ranges from $65 per space in 2008 o $92 in 2012 and averages sous $7 per space. The subject deck therefore suffers consistently higher maintenance costs than the newer Deck2, In ‘ur opinion, this higher costs justi as the subject decksare older than Deck 2. A reasonable unt expense is judged higher than the reported expense for Deck 2 an smiles to the average expense ofthe subject. A unit expense rate of $75 per space is chosen Adninistative expenses range broadly emong the three decks. For Deck I, the expense ‘anges fom $3 pe parking space in 2006 o S18 per space ix 2001, For Deck 2, the ‘ministrative expense ranges from $1 per space in 2005 te $31 in 2010. For the subject, decks the expense ranges from $67 in 2006 to $85 per spacein 2007. The subject expenses are consideraby higher than citer of the two competing flies. In our opinion, te higher cost may be attributable tothe operation ofthe decks withthe Underground Atlanta retail complex and muy not reflect the sole operation of «parking structure. For this reason, we believe the (Campers AssociaTes ES 100 subject expenses are likely overstated and will project an administrative expense more in ine with the two competing fciitis which range fom $3 per space to $31 per space. While the range i broad, it reflects a more reasonable charge for administrative expense. A unit expenie toward the middle ofthe range, oF about $20 per spac, is chosen. “The utilities expense includes eletrcal, water, and telephone services. This expense category ranges from les than $1 per space reported for Deck 2 in 2009 to $39 per space for Deck | in 2010, The reported subject expenses range from $47 in 2006 to $62 in 2010 and are considerably higher than the comparable docks. We believe some ofthe difference is atsibutable to the subject having additional lighting for security asthe decks are attached tthe ‘Underground Atlante complex. The utility expense forthe subject is likely excessive in comparison toa normal, market driven operation ofthe property. A reasonable projected ‘expense would be similr tothe expenses reported by Deck 2 ranging from $7 per space (0 $10 ‘or about $10 per parking space. Real Estate taxes are also a pertinent operating expense fora typical parking structure. Only one ofthe parking decks isnot tax exempt and reports this expense, however, The subject decks and Deck 2are owned by tax exempt agencies and have no tax expense. Dec: 1 reports property tax expenses ranging from $59 per parking space in 200] to $140 in 2009. To estimate an appropriate tax expense forthe subject, we researched the curent taxes for the six comparable parking deck sales discussed inthe previous stles comparison spproach. ‘The tx data forthe properties are shown i the tabulation onthe following page. ® 101 No. Land Lind 2013 Unit 2013, 2013 of Year Sue Arca) Market Market Assessed Asan Milage 2013 Unk No. Spaces Bui (SF) Space Vabe Vahe Vahe —% Rate Taxes Takes 450 1941 78,539 175 $2,495,025 $5,522, $994,010 40% $49.17 $38,259. $85.02 504 1990 33.665 67 1,971,200 3.911" 788,480 40% 49.17 30,49 60.22 264 1956 11,129 42 1285000 $867 $14,000 40% 38.49 19.784 74.94 755 2001 30,466 40 6257,250 8,288 2,502,900 40% 49.17 81,886 108.46, S61 1956 26,726 47 5,580,000 91841 232.000 40% 49.17 73,023. 128.79, 140 1980 17320 124 1,580,350 11288 632,140 40% 49.12 31,051 221.80 Subject 1273 1986 66,76) 52 Mean $113.20 Median $96.74 The 2013 tnxes forthe six sales range from $60.22 per spuce for Sale Two to $221.80 for Sale Si ‘The average tax liability ofthe si decks is $113.20 andthe median i $96.74, In {he previous sles comparison approach analysis, we concluded that Sales One, Two, Fou, Five, and Six were superior fo the subject and Sale Three wes inferior, An appropriate market ‘value forthe subjet was judged contained within the range of unit ries for Sales One and Three, However, Sale One occured in 1999 and includes an older, antiquated parking deck witha sgnifiant amount of surface parking. While the transaction wa considered superior to the subject as a sal, the property is believed significantly inferior tothe subject es tax comparable. We therefore believe the subject tax liability shouldbe higher than Sales One and ‘Three, which range upward in axes to $85.02 for Sale One, And we believe the subject taxes should be lower than Seles Four, Five, and Six which range downward to $108.46 for Sale Four. An appropriate tox expense forthe subject judged contained within the range of Sales (One and Four. For this analysis, we choose aunt ax expense toward the upper end of the indicated range, or bout $105 per space, $$$ cries Assocrares —l 102, Property insurance expenses fr the three decks range from SB per parking pace for ‘Dock 1 in 2001 to $55 reported fr the wbjec in 2011 end 2012, We note that no insurance expense was specifically reported fr 2006 trough 2019, but we assume the expense is ily consistent ovar that timeframe. Excluding the subject, the high end ofthe range forthe two competing decks is S45 per space for Deck 2 2008. “he subject expense is therefore only slighty higher than the range of competing parking docks. In our opinion, an expense similar to the historical charge of 85 por space i reasonable {All hee ofthe decks reported an expense for security, but Deck 1 provided only one indication fr total security expense that we assume i plicable fr all of the operating years “The reported expense ranges fom $52 per space for Dec 2 in 2006 to S448 per spce for Deck 1. ‘The Deck | expense is extreordinariy high bocauseof the dec’ operation as an owner cccupie facility serving a specilized busines that requires aditional security. The deck also requires 24-hour security whch is unlike typical deck operations. In our opinion, Dec 1's security expense i justifiably higher than the maret and shoud be higher than the subject, “The Deck 2 expense ranges from $52 to $95 ands less than te indications Som the subject ranging from $228 in 2006 to $234 in 2007. The subject ange is firly consistent ais likely higher than the competing Deck 2 duc to is operation the Underground Atlanta parking fhilties, While te rates maybe slightly overtted dao othe deck’ use, we believe they reflect the most reasonably expected security charge fr the subject, We therefore rely ona mi expense similar to the historical rats, o about $230 pr space “The other expenses fr the properties range from no reported expense forthe subjext eck and for Deck 1 $6 per space for Deck 2in 2008, We rely on the subject operating history and will not apply for other expenses. (CuILDERS AssocIATES 03 [As shown on the operating history summary, the total operating expenses for the three ‘decks range From $388 per parking spece for Deck 2 in 2005 to $1,141 forthe subject in 2012 However, the Deck 1 expenses ~ ranging from $790 to $996 ~ and the subject expenses — "ranging from $1,069 to $1,141 — are believed skewed higher due tothe extraordinary security expenses for Deck | and higher aber, uilitis, and seeurty costs forthe subject discussed shove. The most reasonable, market operated indication of overall expenses is Deck 2 which ranges ftom $388 per space in 2005 to $638 in 2010. Our projection of expenses forthe subject at total of $824 per parking space is therefore contained within the range ofthis date, buttoward the extrome upper end (Our research of the subject market revealed six sales of comparable parking deck Properties used in the previous sles compsrson approsch and summarized in Exhibit E. According to our research ofthese sales, the operating expense rates forthe properties range {om $212 pr parking space for Sale Two to $786 forthe most recent Sle Six. Our projected operating expense of $824 per space is therefore slightly highor than the range, but similar to the most recent sale. Considering all ofthe above, ou projected operttng expenses are believed reasonable, The toll operating expenses shown on the previous facing page summary is 1,089,270. CHILpERs Associates 08 [Net Operating Income Deduecting th estimated operating expenses of $1,049,270 from the previously catimated total effective gross income of $1,973,150 indicates a net operating income of approximately $923,680 or about $726 pe parking space, The histories forthe thre parking decks range in net operating income from $251 per parking space the subject deck in 201210 $1,195 for Deck? in 2009, Excluding the indications forthe subject tht are influenced by the overstated labor, lites, and security costs and the Deck | indications which aren uence by the security expense the rang of Deck 2s from $871 pr space in 2006 o $1,135 in 2008. Ouresimaton of the subject's stabiliad net operating income is slightly lower than the incated range of data which is judged reasonable considering the lack of special even income forthe subject. Our projection is higher than the historical incomes fr the subject, however, to reflect the curent market conditions Capitalization ‘A reasonable capitalization mie to transform our projected net income ino val is estimated by use ofthe six parking deck sles discussed previously. Five ofthe sales provided sulci information to derive an indicated copitalization ate, The estimated rte range from ut 6 96% for Sale Two to 17.05% forthe mostrecet Sale Six. The capitalization te for Sale Six is overstated; however, a the purchaser projected the income forthe property assuming normal market conditions and then increased the capitalization rate dramatically in consideration ofthe increased risk, As our projected incomes and expenses are based onthe cearrent market conditions, the capitalization rte by Sale Six isnot relevant, The remsining four rates range fom 6.96% to 10.55% fr Sale Five andar believed mast pertinent w this analysis, The meian ofthis ary is 8.77% and the mean is 8.76%. A reasonable capitalization rate forthe subject is likely contained within the indicated range of data Le cers associates: —— ee los ‘Another indication of current capitalization rates is provided by the PrigewaterhouseCoopers Real Estate Investor Survey found inthe 2"! Quarter 2013 editionot Valuation Insights and Perspectives publication of the Appraisal Institute According to the survey, overall capitalization rates fr contel business district office uses across the nation ‘ange from 4.25% to 10.00% with an average rate of 6.63%, As the subject parking deck predominantly serves the adjacent govemmental office uses, we believe the indicated range of office rates is relevant to the subject Parking uses, however, are judged a higher risk investment compared to office uses und ‘we believe an overall capitelization rte higher than the national average for office properties is ‘ppropriste. Considering all ofthe above, «reasonable capital rate forthe subject Datkng deck is believed higher than the average oie rate from the survey and slightly lower ‘han the ications of central tendency in our parking deck sls. A rate of 8.5% is chosen. Dividing our previously estimated net operating income of $923,880 by the capitalization rate of 8.5% indicates a marke value forthe subject of $10,869,174. A summary of ou estimated market value forthe subject parking dock by the income approach ison the following page. ‘Cums AssociaTEs ce Subject Decks Tocome Monthly Daily-Tansoot Special Event Other ‘Total Income Expenses: Labor ‘Management Percent Charge Supplies Maintenance Repair ‘Adiinisaive Uses Property Taxes Insurance Security Other Expenses ‘Total Operating Expenses [Net Operating Income [Estimated Market Value: ‘Net Income Capitalized @ 8.5% Income Aporoach Summary 1,275 spaces, Subiizd —$$/SP $534,660 $420 1,400,300 1,100 25,460 20 12,730 10 $1,973,150 $1,850 $381,900 300 29,597 2 13% 7638 5 95,475, 1 25,460 20 12,730 10 133,665, 105 ‘7o015 55 292,790 2 9 « 1,049,270 se $023,880 sme $10,869,174 $8,538 106 {cranes Associates, —— 107 Recon tion and Final Value Estimate A summary of the two estimates of value is as follows ‘Seles Comparison Approach $ 10,820500 Income Approach $ 10,869,174 ‘The sales comparison and income approaches indicat funy similar estimations of ‘market value. The valuations reflect curent market conitors and typical investor logic. The ‘wo approaches support one nother and a reasonable consid market value forthe two subject paring deck faites as improved is judged ward te midpoint of the indicated range ‘oF about $10,850,000, We alloete the market value between the two filities based onthe ‘umber of spaces in each facility. Parking Deck A contains 75 parking spaces supported by 39,06 square foe of land area. Parking Deck B es 528 spaces and is supported by 27,702 sguar fect of land Parking Deck A represents about 58.5% ofthe total par ing capacity for the subject. Applying this share tothe etimsted market valu of $10,850,00 indicates an alloeted value {or Parking Deck A of $6,347,250, rounded to $6,350,000. Ths valu is Further allocated as aout $5,270,000 for land a S100,000 for improvement. Parking Deck B represents about 41.5% ofthe total parking facility. Applying this rate tothe estimated markt value ofthe ttl parking area of $10,850,000 indicates an allocated ‘market value for Deck B of $4,502,750, rounded $4,500,000. This value is Further allocated 183 about $3,740,000 for land and the remaining $760,000 for improvernents (Cimpens Associares 108 Concluded Total Value as Improved “The estimated curent market valu forte etre property asimproved consists ofthe cetimoted contiguous lad value For those portions ofthe property proposed Fr redevelopment, the land value forthe Cocs-Cola pavilion propery also proposed for redevelopment fess he ost to demolish the encambeting improvements, plus the contibuary value ofthe ‘Aabara/Boad Streets retail building, and the estimated market ako forte two parking decks to be retained. We agin include no estimated val forthe sableased portion ofthe jini hotel property due to the limited formation available fr this property sight, though we suspect is value s nominal, We organize the summary ofthe value based on land aes as te majority ofthe vale is attributable to and. The resulting total stmt value as improved is summarized onthe following page. L$ cms assocraris Valuation Summary Land Va Lands Billy Unt Market Land Type Size Value Vahe Fee Sinple, Conigous 327,344 SF @ $135.00 SF = $44,191,440 Fee Sinple, AkbamwBroad Sueets 7,152 SF@ $135.00/SF= 965,520 Fee Simpl, MLK Coke Paviion 22,477 SF@ $110.00/SF= 2,472,470 Sure Rights 26,296 SF@ $6750/9F= 1,774,980 AirRighs 32,606 SF@ 367.50/SF= 2.200905 ‘Tota Land Value 415,875 SF $51,605,315 Rounded $1,605,000 Inprovenent Vah: Fee Simpl, AlbamaBroad Streets S.855 SF @ $47.00 /SF= $275,185 Decks A and B 66,763 SF Land 1,836,995, Hotel Sublease Retail Space 4,500 SF ° Less Denon 1,800,000) Net improvement Value $312,180, Rourled $312,000 ‘Total Vale as improved 51,917,000 Campers Assocusres 10 LEASEHOLD VALUATIONS he value othe subject suleaschoi owned by CV Underground, LLC is dependent on the operating vail ofthe subject Underground Adanta opereton asthe specified payments tothe subleaschod intrest ae tobe psi fom the operating revenues ofthe propeny. The provided operating history forthe property fom years 2007 trough 2011 indicate dectining total revenues fom a high $7,179,589 in 2007 to alow fr the most recent year availabe of $5,115,674 for 2011. The rate of decline for otal revenue varies fom 149% fom year 2007 40 2008 10 34% for 2009 to 2010, The average rate of deine over the ene five year ime period is about 72% per yar. During this ame time period the rental expenses forthe ficliy have also decline, but at lesser rate averaging about 4.8% per yea for the five year ime period. The ground lease rent expense payable bythe sublesschoi has varied slg, but cover the three most recent years is consistent, $100,000 pe year asthe sublease greement requires ‘Asaresult ofthe above, the net operating income forthe failty has varied drastically from positive $609,461 in 2007 to loss of $283,748 for 2008, The nt income forthe five years in tol sa postive $411,627, but the four most recent years, 208 through 2011, indicate ane los of $197,834. “The operating history indicates that the subject as now oped is not economically ible, The net loss in income over th four most recent years shows that sth total revenue continues to decline even with some reductions in operating expenses the facility doesnot generate a suisiet net income to justify the investment orto contin in operation without significant change, We belive the complex is well managed end that appropiate efforts have ‘ben made to increase revenue without succes. We therefore conlude thatthe fail i not ‘capable of successful operation ‘Cutt.DERs ASSOCIATES @ m "The most recent operating history forthe subject indicates thatthe required rental tothe City of Atanas sublessor of $100,000 per year andthe preferred tum to the majority ‘member, the sublesse, of $330,250 per year are only affrded by depleting the remining members equity inthe comples “The financial statements forthe CB Underground, LLC forthe mos recent year ended December 31,2011, sate total member's equity remasing of $4,106,798. Parts ofthis ‘member's equity isnot liquid including such tems as prepid expenses, remaining book value for property and equipment, deferred rests which will no likely be realized with the property ‘nearing closing. and intangibles which const f the remaining book value forthe inital and subsequent equity investments inthe property. The estimated member's equity also considers liabites owed by the company including various expenses owed and tenant security deposits ‘owed to tenants We fel that an estimate ofthe etl liqu assets for CB Underground, LLC is important to this analysis as these liquid ase are esentislly proving the incomes tothe owners of the property. The facility doesnot provide a reliable net income and what incomes are generate are expected to further decline and erode inincreaingly rapid fashion over the near erm future, The remaining economic life forthe faclity therefore relies on payments from these liquid assets. The items included inthe CB Underground, LLC balance sheet judged suitable to fund payments over the immediate fur are summarized on the following Page, (Cu.pens AssociarEs Liquid Assets of CV Underground LLC sof 2812011 Cash $175,723 ‘Tenant receibles 29,559 Receivable for parking 76224 Revevable fom rebated partes 79,086 (Curren portion of notes receivable 47,110 ‘Tena secur deposits 181,485 {nal capa expendi find 103,462, Ina erartinproverent ist 780,509 Capital expeciur ae terant improvement fird 300,000 ‘Notes receive 148.230 Total uid assets $1,921,388 ‘Less curent abilities 396,624 Less teat security deposit abity 172.691 Estimated et iui assets auiabl foedsebution $1,352,073 “The above estimated net liquid assets suitable fr distribution is $1,352,075. The future operton of Underground Atlanta relies on these quid assets for payment othe owners. I the property could continu o operate ona more or less breakeven basis a during the 2008 through 2011 time perio previously summarized, the $100,000 rental payment othe City of ‘Ail could be psd ffom property operation. ‘The scheduled payment to CV Underground, {LLC of $330,250 andthe small payment tothe Downtown Development Authority would be pd fom these quid assets. These two payments fom the quid assets have evereged about $933,551 por yar forthe three mos recent years, 2009 through 2011. Dividing the estimated remaining net oud assets of 81,352,073 by a yearly required payment the leased fee and sublesseold postions of sbout $333,551 indicates that he property could operate i this manner for about four years and one month before the liquid assets were exhausted. Crmpens AssociATEs pS us We believe that this operating scenario isa possibility forthe future ofthe subject fi a8 we donot anticipate revenues to increase ann ict, expct them to rhe erode ur calculations are based ona yearend 2011 operating statement. Considering tha our date of value is September 6, 2013, or about one yes, nine montis or 21 months since our estimate of liquid assets, additional payments have likely been made ce ental payments have accrued since that time equivalent tothe ratio oF 21 months divided bythe otal remsining operating te of four years and one month or 49 months or sbout 43% of the liquid assets. As of our ate of value, only shout 28 months o two yeas, our monte of remaining possible operating ‘ime financed by the liquid aces remains. The remaining liquid asset value as of our date of ‘valuation is about $772,613 (ar conclison is thatthe subject as now operated is mt economically viable and should be closed. ts current operation is funded solely by the available remaining guid assets Which should be filly spent in about wo years, four months fom our date value, ‘The sctual ‘value of the existing subleaschold interest in the property is zo in tha the operation doesnot ‘enerate sufiient income to pay editions income tothe subteeehold interest. Any rental ‘rid such asthe required $100,000 per year ental tothe ubleso interes is ntjustified. Ona Purely real estate basis, the subleasebold intrest is of no valu, But CV Underground, LLC does have ownership ofthe remaining liquid assets inthe company, To estimate the practical value forthe subleaehold interest owned by CV Underground, LLC under their various operating agreements, we must consider the company's bitty to continue the operation by use ofthe liquid assets remsining es previously summarized, The leased fe interest in our valation owned by the Downtown Development Authority is of no real concem as their fee ownership is based on the financing provided forthe (Comps Assocutes 4 original development with payments of the bonds guaranteed by the City of Atlanta and full sans te omnes the Ciy of Alani exes inthe ea frre hen he onde ar fly pi, Te leased intrest owned bythe iyo Alana consis fe present vale of th yay ret payment forte el ext $10.00, the city’s contribution ot exterior conn ae maintenance fr he silly, and th expected eversionary vale forthe propery one th Undergo Ant operations ese andthe property aalbe for ese propond “With he bov considerations, we an evision tree possible sears, Theft scenario would become to operate the propery as thas been operating esa epic inh opersing statements fryers 2008 though 2011 The property maybe able to pert at reskoven covering the required ground las ren! expense to the cy, ut continuing national equity or covering payment tothe sblesehold rete fes, This scenario cold oly last wl the lq assets rmsning in the corporation could ove the eure paynents othe subleasehld and ese fee which weetiate two yeas four snot, Te lesehold poston ofthe iy of tanta woul receiv the $100,000 ret or he two yer, our month tine pei, but would so have o contribu the required exterior common are siteance ech yer, This expenses averaged $916,371 per year othe five years of perting istry provided. We wl use a ron S900 per year expense or carenss. The ity wold hen xy te revenion athe ed of th two year, our month petiod. CCrmLpens AssocuATES: @ us ‘To value this scenario we discount the projected payments othe sublease and leasehold postions oa present value, We do nol consider the leased fee interest as itis sominal. To estimate appropriate discount aes forthe valuation, we consult the PwC ral state investor survey contained in he second quer 2013 edition of the Valuation nsghs nd Perspectives publication ofthe Appraisal Institute. The discount aos for regional mall Properties reported inthis survey for ist quarter 2013 range rom 5.75% to 14.00% and fveraged 925%, We believe our propery is similar in ako regional mall, but key atthe extremes on citer end, We us a elaively high discount ate forthe sublesehod interest de tots short erm and considering thatthe return is funded by liquid asets rather than property income, The selected discount ates slightly above the upper end ofthe range fr the survey of 15%, The leaschold interest is believed relatively securein thatthe majority ofthe value is in the reversion and the discount petiod is relatively shor. A discount rate slighlly below the bottom ofthe range forthe survey or abou 9% per you is judged reasonable, The estimated ‘eversionary value sour previously etimatod market value forthe property as improved and svailable fr redevelopment of those portions judged bes sited for redevelopment of $51,917,000, The resulting estimated values forthe sublesstold and leeshold intrest under this scenario are on the following page. Cumpens AssocuTes Scenario One Valuation of CV Unde Reng Lig Ass Ire fen ret Ren Pres Vite Facer Pres Vik of Cth Fs ‘Pres Vab of esol Ines ‘Yaluntinn of iy of Adana Leashol Interest Yous nee fon Gro Ret sss Opening pee Renters rst Vibe Factor Prem Vaboof Cat ow Pros VabeofLeaseol ines. RoendedCoacestns Sabino Ve Teascol Ve Tol 1 smsis smo2s0 159% 08087 sania 617588 siocon0 -sogon0 Soco00 sm oss 6,905 514 58,106 stg. 000 ‘14 s.000 545206000 2 Mts se9g63 $LIZI13 300250 SLI2LI3 arses anise S276 Sia 116 2 4Monte_Reveson siogooo 533335 $51,917.00 3001000 o $800 600 $2556 831,917.000 som ossa0r ° asso -S725624 7815 546313520 (caters Associates: —— @ D ur ‘The second scenario assumes thatthe ownership partes decide to admit the operating failure ofthe property, announce the closing ofthe Faility tthe existing tenants allowing ime 10 relocate, but with he intention to wind down the operation over the time period allowed by ‘se ofthe fguid asses remaining inthe operating company. The facility would sl be suitable to operate no longer than the time period funded by tho emaning liquid assets oF about 2.3 -years. Ona straight ine basis, this would requite reduction in tnants and resulting income of round 43% per year. Reducing the revenue in yee 2011 of $5,115,674 by 43% equates tow reduction in incom of about $2,199,240 the first year which woul uly eliminate wy remaining equity inthe company during the rst yee ofthis operation. The City of Attanta \ould be required fo continue to donate the approximate $900,000 expense for external common tes maintenance tallow this one year operation, but would likely not collect he $100,000 rent duc. The reversionary value tothe city would likely become available atthe end ofthe first year. The valuation ofthis scenario is summarized as follows (Cumpens AssociarEs 118 Scenario Two Valuation of CV Underground, LLC Subleasehold Interest Years 1 Ligh Assets smR613 Income Eom Prefered Return 30 resect Vahe Factor @ 15% 0.86957 Present Vahe of Cash Flows 30 resect Vale of LascholdItrest so ion of City of Atlanta Leasehold Interest Years 1 Reversion Income fiom Ground Rent $80 $51,917,000 Les Operating Expense Reimbursements 900,000 0 -$900,000 $51,917,000 Present Vee Factor @ 5% 99508 9.98238 resent Vahe of Cash Flows $857,143 $49,444,762 Present Vabe of Leasehold Interest $48,587,619 Rounded Conclusions Subasehold Vabe 30 Leasebold Va $48,588,000 oval ‘348,588,000 CCampens AssociaTEs > 19 ‘The third scenario considered recognizes that the subject operation is nat economically ‘viable and should not continue i operation. Ths scenario assumes thatthe ownership partes come ogee and decide todo what is economically righ and close the faiity immediately. ‘Under this scenario the remaining liquid assets owned by the subleasehold intrest remain Under their ownership. It would tke a reasonable ime period to close the facility estimated at ‘one year and the subleashold interest would be pad for this lst yar of operation from the ‘remaining liquid assets. We apply no discounting inthis scenario, however, a aliquid assets valable to the subleaschold interest would be immediately available upon agreement to Aissolve the relationship and to close the property. The present value ofthe subleascold intrest inthis case is essentially the fll remaining liquid esse value under their conto ‘The leasehold interest ofthe City of Atlanta would receive no further ground rent as the {aclity would be closed and the lease agreement terminated, but the city would also not be required to contribute further operating expense embursements forthe exterior common ares maintenance, The expected revisionary value would also be essentially immediately available tothe city without discount as the marketing and planing for redevelopment ofthe propery could essentially began immediately. The valuation ofthe two interests under this scenario is summarized on the following page ‘Campers Assocures Scenario Three Years Lig Assets Icons fom Prefered Reus Renaining Liuid Assets Present Vahe Factor @ Preseut Vale of Cash Flows resent Vale of Leasehold Interest ion of City of Atlanta Leasehold Interest Yours Income from Grount Rent Less Operating Expense Reimbursements Preseot Vale Factor @ resent Vale of Cash Flows resent Val of Leasehol Interest Rounded Conclusions Sublasehold Valve Leasebold Vale Total ‘Valuation of CV Underground, LLC Subleaschold Interest s772613 851,917,000 $773,000 51,917,000 $52,690,000 1 sms 3330250 $442,363 1.00000 120 Revexion {$0 $51,917,000 0 9 80 $51,917,000 1.00000 1.00000 ‘$0 $51,927,000 Lo Coupes Associates ——! rr ‘A summary of the estimated values under the three scenarios i as follows: Scenario Ove Subleasetold Value $618,000 Leasehold Vae $48,588,000, Total 545,206,000 Two Subkasebold Vane so Leasetold Vae $48,588,000, oval $48,588,000 Thee ‘Subkaschold Vake $773,000 ‘Leasehold Valie $51,917,000 Tora $52,690,000 Scenario One yields the second highest estimated market vue for the subessehld interest in hat it continues to operate the property as curently comited, gradually paying the sublenschold interest the remaining value ofthe guid assets over arlatively short remaining lie span. This scenario results inthe lowes value fr the leasehold interest end the lowest ‘alu forthe property in total a it delays the reversion and reuse ofthe property. ‘The scenario ‘would defer whatever closing costs are involved ignores the realty ofthe station, and is {deceptive tothe existing tenants as it implies tht the facility i going to continue in operation which tis not Scenario Two takes a truthful postion of informing the tenants that the facility i filing and that there is only a shor tem of remaining operation expected, But this seenriois ‘sara ait eaves the subleaschold in the position of operating a drastically fling property and would likely destroy the emining equity value forthe subleaschold to no significant sdvantage to anyone involved. The valve othe leasehold interest is higher in that the reversion is more quickly realized, but this scenario is nota viable conclusion and representative of poor management ofthe property. (Cumpers Associates im Scenario Three is likely the most practical and market diven course of ction, Closing the propery as quickly as possible is ruil tothe tenants, and is beioved to yield the highest ‘value both ownership interests, The eublesshold interest could retin all ealable liquid asses oftheir company and realize hose asses immediatly; nt slowly paying those assets to thomselves ove a theoretical remaining operating period. The leasehold intrest coud avoid farther operating expenses and coud elie the rversonary valve immediately without iscount Considering the above its our opinion tha the subleasehold intrest of CV Underground, LLC has no practical ea stat value. Tele vale in the operon consists solely of the remaining liquid assets availabe inthe company. There no pascal purpose in delaying the liquidation ofthe company and the termination of the operation. The Leasehold intecest owned bythe City of Alana is best served by immodiatly terminating the opertion swell t appars that both parties would be best served by this dissolution an both partes should agree to this conclusion. Itis noted that he above analyses have not considered any possible interests in the property by the existing retail tenants. We were nt provided the leases for thee tenants, We ‘know fom the ret roll that some tenants have contracted lease tems for years beyond our dte ‘of valve, Prematurely teminating these leases may have economic repercussions, We are not aware of what rights the lesors have in terminating he leases, The resulting oti losing the facility, terminating the existing leases and relocating tenants is beyond the scope of our analysis, These cots will influence the values of the ownership interests, but we doubt that the cost would change te conclison aso the best cours of action which isto close the Faciity ‘immediately oF as soon as practical. (Cumipens ASsociATES oa a 13 (Our conclusion is that fair allocation of values forthe subject would be about '5773,000 or the entre remaining liquid aset value for CV Underground, LLC, the subleaschold interest and the ent fe value of the propenty availble for reuse as proposed of $51,917,000 forthe leasehold interest ofthe City of Atlante, This assumes thatthe pa involved agre to close the facility immeditely, ‘CuILpens Associares

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