RESTRICTED APPRAISAL:

MULTI-TENANT OFFICE BUILDING

3111 UNICORN LAKE BOULEVARD

CITY OF DENTON, DENTON COUNTY, TEXAS

PRESENTED TO: MR. MARC MOFFIT

UNIVERSITY OF NORTH TEXAS

1155 UNION CIRCLE #311160

DENTON, TX 76203

EFFECTIVE DATE OF

VALUATION: JANUARY 1, 2014

PREPARED BY: KAYLA MURPHY

14021 SAND HILLS DR

HASLET, TX

May 5, 2014

MR. Marc MoffitUniversity of North Texas1155 Union Circle #311160Denton, TX 76203

Re: The Parks at Unicorn Lake Blk B Lot 6

Dear Mr. Moffit

Per your request, investigations and analyses have been concluded to determine a market value estimate of the leased fee estate in the subject property, "as is". It is the appraiser’s understanding that the intended use of this restricted appraisal report is to assist the client in evaluation of class assignment. The appraiser has read and attempted to comply with the Uniform Standards of Professional Appraisal Practice as approved by the Appraisal Standards Board and promulgated by the Appraisal Foundation; and believe this report is in compliance with the aforementioned.

Based upon the data, analyses and conclusions, the Market Value of the leased fee estate interest in the subject property, "as is", as of January 1, 2014, subject to the specific and general underlying assumptions and limiting conditions, set forth in this report, is:

- - TWO MILLION TWO HUNDRED THOUSAND DOLLARS - -

- - - $2,200,000 - - -

My firm appreciates the opportunity to provide this appraisal for you. If we can be of further service, please contact us.

Respectfully submitted,

KJ MURPHY LLC.

____________________________

Kayla Murphy, President Career Student 14021 Sand Hills Dr.Haslet, TX 76052(432) 425-3734

SUMMARY OF PERTINANT INFORMATION

Client/Intended user Marc Moffit (Client)

Intended Use Assist the client in evaluation of a class assignment

Identification of PropertyMulti-tenant Office building, 3111 Unicorn Lake boulevard Denton, TX

Current Use Office/Medical

Ownership History

Bushwood Properties, LLC has held ownership since January 2009. Bushwood has been the sole owner of this building since construction.

Highest and Best Use Continue in the current use as an office facility.

Real Property Interest Valued Leased Fee Estate

Purpose of Assignment

To develop an opinion of the market value as defined by the agencies that regulate financial institutions in the United States and published by the Appraisal Institute in the Dictionary of Real Estate Appraisal, 3rd Edition.

Effective Date of Value Opinion January 1, 2014

Date of Report May 5, 2014

Scope of Work

Provide a restricted appraisal in conformance with USPAP. Investigations and analysis were implemented to estimate subject property value. There is limited presentation of information in this report. Supporting documentation, adequate to prepare a Summary report, is retained in the appraiser’s file. The Cost Approach, Sales Comparison Approach and Income Approach are developed to estimate subject property value.

Report Option

This report is a Restricted Appraisal Report in accordance with Standards Rule 2-2 (c) of the Uniform Standards of Professional Appraisal Practice. As such, it presents limited discussions of the data, reasoning and analysis that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation concerning the data, reasoning and analysis is retained in the appraiser’s file.

Extra-Ordinary Assumptions None

Hypothetical Conditions None

Departures from Standard 1 None

Market Value Estimate $2,200,000

Marketing Period 1-Year

SUMMARY HIGHEST AND BEST ANALYSIS

Highest and Best Use, As Vacant

4

AREA COMMENTARY

The subject property is situated in the D/FW Region. The region experienced economic decline from 2008-2010, showing some gradual improvements in 2011-2013. Conditions in D/FW are superior to the majority other Metro areas in the U.S. Job growth remains positive, exceeding most areas of the State and Nation, solid increase noted from mid-year 2012-2013. Subsequently to most property types being over-built during the peak period of 2006-2008, new construction has slowed and absorption is positive for most property types within the region, some types and submarkets approaching equilibrium demand/supply. The subject property is located in the southern section of the community of Denton in an area of relatively new commercial and multi-family uses as well as relatively new residential communities. The area remains in the growth stage of the real estate life cycle. Stable population increases are noted and some new commercial development is evident, mainly being single-tenant/service industry/office uses. There is a major hospital across the highway it is located near (Denton Regional Hospital) that houses an entire medical complex office on its campus as well.

SITE COMMENTARY

Site Size 44,031 SF (1.1081-Acre)

Site Shape Generally Rectangular

Thoroughfare frontagePrivate drive frontage (2-lanes, concrete-paved) within close proximity to Interstate 35, a major highway.

Topography Gently rolling and above street grade.

Easements/EncroachmentsNone Detrimental. Shared access and utility easements pose no adverse impact.

Hazards Nuisances None Detrimental

Flood PlainNon-Hazardous portion of Zone X, outside of the 100-Year flood plain.

Utilities All Available

Zoning“RCC-D”, Regional Center Commercial Downtown (Allows common commercial uses).

Tax Account/Assessment Nos. 583094 Total Assessment is $46,361.25

Immediate Area Uses

The subject is near a man-made lake, additional office Facility’s and a moderate sized commercial tract that extends to Unicorn Lake Blvd. and I35, being held for future development. An office use is highly compatible with immediate area uses.

IMPROVEMENTS COMMENTARY

11,492 SF Good to Excellent Class C Office Facility. Interior finish-out is in accordance with professional office space that includes an area that has medical related finish items, as well. Condition is rated good, reflective of construction in 2009. 20,202 SF paved parking area as well as a 6,600 SF land scape that is in good condition. The L:B Ratio is 3.83:1

Legally Permissible: Those use-types that are legally permissible are studied further in regard to

physical suitability and feasibility of development. The subject property exhibits a zoning

designation that allows for common commercial uses, including office and retail.

Physically Possible: From a physical standpoint, the subject site is suited to various types of

commercial development. All utilities are available with no significant adverse characteristics noted.

Financially Feasible:The uses that are physically possible and legally permissible must be

analyzed further to determine those that are likely to produce some income, or return, greater than

the combined income needed to satisfy operating expenses, financial expenses, and capital

amortization. All uses that are expected to produce a positive return are regarded as financially

feasible.

Retail: As mentioned, common retail uses are legally permissible and physically possible on the

subject site. Even so, the subject property exhibits location rated too secondary to support a

speculative retail related use, which is a property type commonly situated along primary

thoroughfares and intersections that exhibit added traffic exposure. Taking this into consideration,

retail uses are not considered further in regard to financial feasibility.

5

Office: In assessment of office market conditions, the primary source for data was Costar

Property. Market conditions for the region, a submarket area more specific to the subject and

immediate surrounding area, are evaluated in following paragraphs.

D/FW Region: The following table summarizes office market conditions and trends in the region:

Office vacancy levels have remained above the stabilized level during the last five years. The

D/FW region has remained overbuilt with office space since the 1980’s. Solid positive net

absorption is noted from 2005 to 2008; however, demand was unable to keep pace with a large

level of new space being added. Absorption was negative in 2009 and the first part of 2010, turning

positive by a small level in 2011-2013. Office space deliveries are reduced relative to preceding

years; however, some are noted with demand keeping pace with a reduced level of new additions,

resulting in reduced vacancy relative to the last 4 years. Average rents are reported at $20.30/SF,

according to a full service lease structure. Overall, the D/FW area is over-supplied with office

space, a trend that has remained in recent decades. Speculative development is warranted only in

select submarkets and key development nodes.

6

Immediate Subject Area: The appraiser reviewed information regarding market conditions of

office properties within the community of Denton, which is considered the competitive market area

for the office property type.

Office vacancy in the Denton area at 9% is notably below that of the DFW region at 15%, which is

generally considered to be at the stabilized level. Vacancy drastically declined during the second

quarter of 2013, subsequent to peaking at approximately 10.5% in the first quarter of 2103. New

deliveries in 1Q10 resulted in an increase in vacancy but the space has subsequently absorbed.

Average rents are $19.39/SF, according to a full service lease structure. The Market has an

oversupply of office space as we can see by multiple negative Absorption dips in 2009, 2010, 2011,

2012, and even in 2013. Even so, the subject property exhibits very good competitive location

rating for an office facility. Even with the negative indications of the submarket this office is located

in an area that features new construction and seeing early market growth in a preferred location.

Maximally Productive: Those uses that are legally permissible and physically possible

include common commercial uses, such as office and medical uses. The timing for development

for office/medical use space is considered similar based on immediate area market conditions.

Competitive location rating is considered good for office and better for medical use, the property

including frontage on a thoroughfare that provides primary interior neighborhood ingress-egress,

and being located near a major medical district allows better exposure to better accommodate

medical and retail uses in the area. The subject site exhibits size that is well-suited to multiple-

7

tenant commercial uses. The typical purchaser for a site with characteristics to the subject would be

a multiple-tenant/end-user.

Giving consideration to the preceding, the highest and best use of the subject property is to market

for multiple-tenant/end-user related commercial.

HIGHEST AND BEST USE OF THE SITE, AS IMPROVED

The subject site is improved with a multi-tenant office facility. The improvements are functional in

layout and design. The value of land and improvements notably exceeds land value. Demolishing

or altering the improvements would not result in a property value exceeding the current value of

land and improvements. The subject is a good to excellent quality facility; however, it is common

for top quality facilities to be constructed in the immediate competitive area. Therefore, considering

the preceding, the highest and best use of the subject, as improved, is to continue in the current

use.

8

APPRAISAL PROCESS – SUMMARY FORMAT

The Cost Approach, Sales Comparison Approach and Income Approach are developed in order to

estimate the subject property value. The Cost Approach is developed on the basis of the cost of a

suitable replacement of the improvements with depreciation taken into account based on the

age/life method. The Sales Comparison Approach is based on similar buildings equal in use,

design and construction as the subject. Finally, the Income Approach to value analyzes property

value based on net income applied to market supported return requirements.

9

COST APPROACH – SUMMARY FORMAT

The appraisal approach utilized to estimate the value of the subject land as of the date of this report

is the Sales Comparison Approach, an approach in appraisal analysis that is predicated on the

assumption that an informed purchaser would pay no more for a property than the cost of acquiring

an equally desirable substitute in the open market.

Land Value Estimate: In order to estimate subject property land value, the appraiser reviewed

comparable sales information regarding comparably adapted properties completed during recent

years in various sections of the competitive market area. The subject property exhibits secondary

thoroughfare frontage in an area mainly composed of office related uses. The typical sales price

range for small secondary commercial tracts was determined to be approximately $8.00/SF to

$11.00/SF. The upper-end of the range is reflective of sites with added traffic exposure relative to

the subject with the lower-end being reflective of sites that have slightly inferior submarket position,

situated a greater distance from major community hospitals and areas of relatively new office

development, such as the subject location. Based on consideration of subject and physical

characteristics, a unit land value estimate of $10.00/SF is deemed reasonable for the subject

property. The concluding subject property land value estimate is provided, as follows:

$10.00/SF x 44,031 SF = $440,310

10

IMPROVEMENTS COST ANALYSIS

Replacement Cost New: The first step in determining the cost of reproduction or replacement is to

determine which cost is most applicable. Replacement cost estimates are based on substitute

materials of equal utility and allow for the benefit of changing construction standards. A summary of

replacement cost new is provided in the following table:

Improvements Quantity Unit Unit Price Total

Office Building 11,492 SF 137.21 $1,576,840Parking/Drives 20,202 SF 4.03 $81,414Landscaping 6,600 SF 4.98 $32,868Total Hard Costs $1,691,122

Estimated Total Soft Costs (Approx. 5% Hard Costs) $84,556

Enreprenurial Profit (Approx. 10% Hard Costs) $169,112

TOTAL REPLACEMENT COST NEW $1,944,790

REPLACEMENT COST NEW

Building cost is within the ranges established for good to excellent quality office space. A common

level of soft costs (5% Hard Costs) is included. Entrepreneurial profit is not typically associated with

small garden office facilities so none is applied. .

Depreciation: Physical depreciation, incurable, is defined as that loss from cost new, which is

impossible to offset or which would involve expenditure substantially in excess of the value increase

caused by the expenditure. This type of depreciation results from typical wear and tear associated

with age. The building and site improvements were constructed approximately 5 years ago with

effective age being commensurate with actual age. The effective life span for the property type is

45 years, subject effective age being commensurate with actual age. A summary of physical

incurable depreciation is provided in the table on the following page.

11

Improvements Depreciation Total

Office Building 9% $141,916Parking/Drives 20% $16,283Landscaping 20% $6,574Total Physical Incurable Depreciation $164,773

PHYSICAL INCURABLE DEPRECIATION

5 Year Effective Age / 45 Year Life Span

5 Year Effective Age /20 Year Life Span

5 Year Effective Age / 20 Year Life Span

Physical curable depreciation results from deferred maintenance. The subject is well maintained

with no deferred maintenance noted. No deduction is made for physical curable depreciation.

In addition to physical depreciation, functional and external obsolescence must be examined.

External obsolescence is the diminished utility of the building caused by negative influences such

as neighborhood decline, the property's location in a community, and/or area market conditions. No

added depreciation due to these factors are noted. Although decline in economic climate is noted

in recent years, unit price trends of small office facilities have not declined by a level that would

warrant deduction of this depreciation item.

Functional obsolescence is an element of depreciation that is caused by a deficiency or

superadequacy in the materials or design of the building. No superadequacy or deficiency in the

improvements is noted. The subject exhibits good to excellent quality construction components. It

is common to construct good to excellent quality properties in submarkets exhibiting characteristics

similar to the subject area.

12

COST APPROACH CONCLUSION

The following tables summarize cost approach value conclusions:

TOTAL COST SUMMARY

Total Replacement Cost New $1,944,790

Less: Physical Incurable Depreciation ($163,773)

Less: Physical Curable Depreciation -0-

Less: Functional Obsolescence -0-

Less: External Obsolescence -0-

Depreciated Cost of Improvements $1,781,017

Add: Land Value $440,310

Total Value Indicated Via Cost Approach $2,221,327 Rounded to $2,300,000

COST APPROACH VALUE CONCLUSION

$2,300,000

13

SALES COMPARISON APPROACH – SUMMARY FORMAT

The Sale Price Per Square Foot (SP/SF) unit of comparison is derived by dividing the sale price by

the net rentable area (NRA). This physical unit of comparison can be adjusted to account for

dissimilarities between market sales and the subject property. This unit of comparison is then

applied to the subject's net rentable area to indicate a value for the subject property. The SP/SF

Method is developed in this report. A summary of comparable sales deemed indicative of subject

property value is provided in the following table with more detailed information and photographs

provided in the Addenda section of this report.

14

CAMERON APPRAISAL GROUP

SUMMARY OF COMPARABLE IMPROVED SALES

Sale No. & Date LocationNRA (SF)L:B Ratio

Quality of ConstructionY.O.C.

SP/SF

104/13

3351 Colorado Blvd. Denton, TX

2,7116.0:1

Good-Exc Class C Medical Office Condominium

2008$193.82

210/12

1901 Wind River Lane Denton, TX

8,5764.32:1

Good Class B Medical Office Facility2005

$202.60

305/09

3321 Unicorn lake Blvd Denton, TX

5,8005.4:1

Good-Exc Class C Medical Office2008

$260.00

405/11

3303 Colorado Blvd Denton, TX

4,0619.9:1

Good Class C Office Facility2003

$198.23

508/12

3317 Unicorn Lake Blvd Denton, TX

5,500Good-Exc Class B Medical Office

Facility2009

$189.73

SP/SF ADJUSTMENT ANALYSIS15

Subject

Comp 6 & 3

Comp 5

Comp 2 & 4

Comp 1

Property Rights Conveyed: All sales transactions were reported to be common leased fee/fee

simple conveyances with no adjustments warranted.

Conditions of Sale: Buyer/seller motivation is considered typical among each of the comparable

sales with no adjustments applied.

Financing Terms: All of the comparable sales were reported to have occurred on either a cash

basis or with the grantee obtaining financing at prevailing market rates. Therefore, no adjustments

are warranted.

Market Conditions: The sales utilized in this analysis occurred between May 2009 and April 2013.

The Sales occurred during a time frame when unit sales price trends have remained generally

similar, subsequent to decline in economic climate being evident. No adjustments are applied.

Location: Sales 2, 3, and 5 are located in the immediate subject neighborhood, exhibiting

similar access/visibility, secondary thoroughfare frontage and immediate area office use intensity,

resulting in no adjustments being applied. Sales 1 and 5 exhibit similar secondary thoroughfare

frontage; however, the properties are situated in a more medical specific location nearer to the

hospital, submarket position rated very similar, no adjustments made.

Size: The subject is an 11,492 SF facility. All comps except for 2 and 3 involved facilities that are

slightly smaller and in a similar size category, ranging from 2,711 SF to 5,800 SF, warranting 10%

downward adjustment for comp 3 seeing that it was gaining a higher price per square foot. Comp 2

received only a 5% boost for size. Comp 5 also received a 10% upward adjustment.

Land to Building Ratio: The subject exhibits a 3.83:1 land to building ratio, within the common

range for the property type. All of the comparable sales exhibit a land to building ratio within the

common range noted for the property type. Sale 4 exhibits larger 9.9:1 land to building ratio;

however, a portion of the property is drainage area with useable site area having common land to

building ratio. No adjustments are applied in this category.

Construction Quality: The subject is a good to excellent quality Class C office facility that includes

professional office finish-out. All of the comps chosen display very similar Good to excellent class

16

C, or for Comp 2 class B type construction with very similar brick exterior, this warranting no

adjustments for construction quality.

Condition/Age:

Comps 1, 2, 4, and 5 involved properties built in the mid to late 2000’s, being rated generally equal

to the subject in this category with no adjustments applied. Sale 4 exhibits modestly increased

effective age, constructed in 2003 with a modest 5% upward adjustment applied. Sales 3, although

being built in 2008, displays excellent condition and age therefore this comp received a downward

-10% adjustment.

Sale No. 1 2 3 4 5

SP/SF $184.59 $202.60 $260.00 $172.37 $172.48

Conditions of Sale 0% 0% 0% 0% 0%

Adjusted SP/SF $184.59 $202.60 $260.00 $172.37 $172.48

Financing Terms 0% 0% 0% 0% 0%

Adjusted SP/SF $184.59 $202.60 $260.00 $172.37 $172.48

Market Conditions 0% 0% 0% 0% 0%

Adjusted SP/SF $184.59 $202.60 $260.00 $172.37 $172.48

Location 0% 0% 0% 0% 0%

Size 5% 0% -10% 5% 10%

Land to Building Ratio 0% 0% 0% 10% 0%

Quality of Construction 0% 0% 0% 0% 0%

Condition/Age 0% 0% -10% 0% 0%

Net Adjustment 5% 0% -20% 15% 10%

Adjusted SP/SF $193.82 $202.60 $208.00 $198.23 $189.73

Mean Adjusted SP/SF $198.47

Median Adjusted SP/SF $198.23

IMPROVED SALES ADJUSTMENT GRID

The adjusted sale price range is $189.73/SF to $208/SF with mean/median adjusted sale prices

stated above. Similar emphasis is placed on the adjusted sales price range, overall. In

reconciliation, the value estimate determined via the Sales Comparison Approach is $198.47/SF x

11,492 SF = $2,280,817.24 rounded to $2,300,000.

SALES COMPARISON APPROACH VALUE CONCLUSION

$2,300,000

17

THE INCOME CAPITALIZATION APPROACH – SUMMARY FORMAT

In order to estimate the subject property value via the Income Approach, the Direct Capitalization

Method and DCF Method are employed. The appraiser confirmed quoted and actual lease data for

similar lease space in the subject submarket area, subsequently evaluated relative to actual income

received at the subject facility.

Rental Trends: The following ranges are according to NNN lease structure, which is

common of office facilities with similar characteristics to the subject. Relatively new office facilities

in the subject competitive market area typically range from $14.00/SF to $19.00/SF. The lower-end

of the range is for professional office space positioned an added distance from area hospitals and

sections of the community that have a high concentration of relatively new office facilities.

Professional office space in areas composed primarily of relatively new office facilities commonly

exhibit a range of $15.00/SF to $17.00/SF while medical office space with good competitive location

rating typically command a range of $17.00/SF to $19.00/SF. Preceding rental rate ranges are

down $1.00/SF to $2.00/SF relative to period of peak market conditions in 2006-2007.

Actual Income/Gross Rent Revenues (GRR): The subject property rent roll is provided, as

follows:

SUMMARY OF SUBJECT RENTAL INFORMATION

Tenant Rental (SF)Current Lease

Rate/SFRental Information

Internal Medicine Assoc. (Property Owner)

3,605$20.00NNN

Lease Term: 1/1/2007-1/1/2014

Liberty Insurance 4,300$16.00NNN

Lease Term: 11/1/2011-11/1/2017Lease Rate Escalates to $16.50/SF in 1/1/2014

Dr. Smith, Cardiologist 3,587$18.00NNN

Lease Term: 11/1/2011-11/1/2018Lease Rate Escalates to $19.00/SF in 1/1/2015

These rents are in the higher and even surpassing the average market rent that is typical of this

office type facility. Being as this office is relatively new (5 years old), in excellent condition, and in

an area of town that is considered to be prime location it demands and retains rents that are topping

the market average for this area.

18

TENANT SIZE (SF) Rate/$SF Annual

Retail Space:

Internal Medicine Assoc. 3,605 20.00 $72,100Liberty Insurance 4,300 16.00 68,800Dr. Smith, Cardiologist 3,587 18.00 64,566Total GRR: 11,492 205,466

GROSS RENT REVENUES (GRR)

Reimbursement Income: In our estimation of Potential Gross Income (PGI), pass-through

income paid by the tenant for property expenses are added to the gross rental revenue. Gross

rental revenue is estimated according to NNN leases where the tenants pay pro-rata share of

property tax, insurance and common area maintenance (C.A.M). Management expense is also

commonly reimbursed for suburban office facilities in the area, included as reimbursement income

below. The additional pass-through income is summarized as follows:

Property Tax: $ 44,074

Insurance: $ 4,022

C.A.M. $ 14,365

Management $ 8,219

Total Pass-through Income: $ 70,680 ($6.15/SF)

Potential Gross Income (PGI): Pass-through income generated by tenant payment of NNN

expenses is an addition to gross income. Adding Gross Rental Revenue to Pass-through Income

results in a PGI estimate of $276,146 ($205,466 + $70,680).

Vacancy/Credit Loss: The comparable rentals commonly exhibit vacancy above the stabilized

level. Even so, all were small properties that exhibited only one or two vacant rental units with a

number of properties within the subject development and immediate neighborhood retaining full

occupancy, particularly small facilities. The subject is fully occupied, including a portion by the

owner, therefore a stabilized V/CL estimate of 9% is deemed appropriate.

Effective Gross Income (EGI): EGI is determined from subtracting V/CL from PGI with the

estimate provided in stabilized operating pro-forma provided on the following page.

Operating Expenses: Operating expenses are estimated from various sources. Sources include

actual expenses confirmed for the property. Management is estimated at 4% GRR. Maintenance

and insurance expense are in accordance with the market. A common reserve allowance is

applied, as well as a small level of miscellaneous expense to cover un-scheduled expenses. Tax

expense is according to the actual expense for 2012. The operating expenses are summarized in

the stabilized operating pro-forma below.

19

Net Operating Income (NOI): NOI is the anticipated net income remaining after deducting all

operating expenses from effective gross income. Resulting NOI from estimated income less

operating expenses is summarized in the following table:

Per SFTotal GRR: 205,466 $17.88Add: NNN Reimbursement: 70,680 $6.15

PGI: $276,146 $24.03Less: V/CL: (24,853) ($2.16)Total EGI $251,293 $21.87Less: Operating Expenses:

Expense Per SF

Property Tax 44,074 3.84 Management 8,219 0.72 Insurance 4,022 0.35 Maintenance/Repairs 14,365 1.00 Reserves 1,724 0.15 Miscellaneous 575 0.05

Total Expenses ($72,978) (6.35)

Net Operating Income $178,314 15.52

STABILIZED OPERATING PRO-FORMA

Direct Capitalization: The appraiser considers Ro ranges that are reported by market sources,

according to survey information. The main source of information is provided by Realtyrates.com,

which compiles direct capitalization rates from surveying market participants, specific to property

type. The information is as of 2Q13, summarized in the following table:

20

In reconciliation, an Ro estimate within and toward the upper-end of the range estimated from

comparable sales and similar and modestly below the average range in the table above is

considered reasonable for the subject property. The concluding Ro estimate is 9 %. The indicated

value determined by the Direct Capitalization Method is provided as follows:

$196,264 NOI ÷ 0.09 = $2,180,711, rounded to $2,200,000.

21

DISCOUNTED CASH FLOW ANALYSIS

Income Projection

The appraiser constructed a 5-year discounted cash flow (DCF) model for the subject property.

Income projection is in accordance with actual remaining lease terms associated with the subject

space. Any increases during the course of remaining lease term are reflected. Subsequent to

leases expiring, annual rent is increased 5% annually in following years, in accordance with

inflation/CPI and expense increase.

Vacancy/Collection Loss

In the DCF Model, vacancy/collection loss is projected at 9 % during the holding term. The subject

is a small facility that is currently 100% occupied, a small level of vacancy associated with periodic

tenant turn-over being considered reasonable.

Operating Expense Projection

Operating expenses are increased 2.5% annually to take inflation and increasing costs into

consideration. Management expense is projected at 4% gross rent revenues through the holding

period.

Reversion: The estimated net operating income for Year 6 is capitalized at a terminal rate of 9%.

The slightly higher direct capitalization rate associated with the reversion is reflective of added

depreciation over the holding period. Year 11 NOI is based on projected rental income increasing

in accordance with lease agreements or by 2.5% from Year 10 with 5% V/CL loss factor. A 3%

Cost of Sale estimate is deducted from the reversion sale price to reflect brokerage commission

paid by the seller.

Derivation of the Discount Rate: The rate used to discount the projected cash flows reflect

acceptable expectations of yields to be achieved by investors currently dealing with similar

properties. Yield rates differ from direct capitalization rates (such as the equity dividend rate) in that

all equity benefits, including equity reversion at the time of resale and the annual cash flow are

taken into consideration.

22

Based on alternative yield analysis, a common yield rate range of 8.35% to 11% is indicated. In

addition to alternative yield study, the appraiser referred to the Investor Survey, 3rd Quarter 2013

by RealtyRates.com (data is as of 2Q13), considered most appropriate for the property type. For

property types most similar to the subject, the discount rate range is summarized in the table on the

following page.

A discount rate estimate at the upper-end of the alternative investment range and slightly below the

average in the table above is considered reasonable for the subject. The discount rate estimate for

the subject is 9.0%.

23

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 REVERSION

Base Rental Revenue $205,466 $208,271 $208,271 $214,899 $214,899 $220,272

NNN Reimbursements: 72,967 74,698 76,357 78,322 80,066 82,067

PGI $278,433 $282,969 $284,628 $293,222 $294,965 $302,339

Less: Land Lease V/CL (25,059) (25,467) (25,616) (26,390) (26,547) (27,211)

Total EGI $253,374 $257,501 $259,011 $266,832 $268,418 $275,129

Less Expenses

Property Tax 46,361 47,520 48,708 49,926 51,174 52,453

Management 8,219 8,331 8,331 8,596 8,596 8,811

Insurance 4,022 4,123 4,226 4,331 4,440 4,551

Maintenance/Repairs 14,365 14,724 15,092 15,470 15,856 16,253

Reserves 1,724 1,767 1,811 1,856 1,903 1,950

Miscellaneous 575 589 604 619 635 651

Total OE (75,265) (77,054) (78,772) (80,798) (82,603) (84,668)

NOI: $178,108 $180,448 $180,239 $186,034 $185,815 $190,460

DCF: $161,917 $149,130 $135,416 $127,064 $115,377

Reversion Derived From Direct Capitalization of 6th Year NOI: $2,116,226

Less: Sales Commission Estimate: (63,487)

Net Sale Proceeds: $2,052,740

Present Value of Future Sale: $1,274,590

Net Present Value Of Cash Flows $688,903

Total Value Estimate: $1,963,493

SUBJECT PROPERTY VALUE ESTIMATE: (Rounded)

DISCOUNTED CASH FLOW MODEL

$2,000,000

24

INCOME APPROACH CONCLUSION

The appraiser estimated the subject property value by applying the Direct Capitalization Method

and Discounted Cash Flow Analysis. The resulting value conclusions are as follows:

Method Value Estimates

Direct Capitalization $2,200,000

DCF Analysis $2,000,000

Emphasis is placed on both methods, which had highly similar value indications, exhibiting less

than 5% variance. In reconciliation, the value estimates for the subject property determined via the

Income Approach are provided, as follows:

INCOME APPROACH VALUE CONCLUSION

$2,100,000

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FINAL RECONCILATION AND VALUE ESTIMATE

The value estimates from each approach are summarized in the following table.

SUBJECT PROPERTY VALUE ESTIMATES – IMPROVEMENTS ON UTILIZED SITE AREA

COST APPROACH $2,300,000

SALES COMPARISON APPROACH $2,300,000

INCOME APPROACH $2,100,000

The approaches utilized to estimate subject property value resulted in generally similar value

conclusions, exhibiting less than 15% variance. Most emphasis is placed on the Income

Approach considering multi-tenant property type. Remaining concluding value estimates are

similar to that determined in the Income Approach. The reconciled value estimate for the

subject is provided, as follows:

FINAL MARKET VALUE ESTIMATE

$2,200,000

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CERTIFICATION OF APPRAISER

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

- the statements of fact contained in this report are true and correct.

- the analyses, opinions, and conclusions are limited by the reported assumptions and limiting conditions set forth, and are my personal, unbiased professional analyses, opinions and conclusions.

- I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved.

- my compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event.

- the analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics established in the Uniform Standards of Professional Appraisal Practice for a Restricted Appraisal.

- I, Kayla Murphy, made a personal inspection of the property that is the subject of this report.

- No one required the appraisal assignment to be based on a minimum valuation, a specific valuation, or the approval of a loan.

- the value estimate shown on the following page is not valid unless this certification is included in the complete appraisal.

- the reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

- the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

- I, Kayla Murphy, have appraised the subject upon educational purposes set forth within classroom assignment restrictions.

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Certification of Appraiser - Continued

- Based upon the data, analyses and conclusions, the Market Value of the fee simple

estate interest in the subject property, “as is”, as of January 1 2014, subject to the

specific and general underlying assumptions and limiting conditions, set forth in this

report, is:

- - TWO MILLION TWO HUNDRED THOUSAND DOLLARS - -

- - - $2,200,000 - - -

KJ MURPHY LLC

_____________________________________ Kayla Murphy, President Career Student 14021 Sand Hills Dr.Haslet, TX 76052(432) 425-3734

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