comprehensive appraisal narra tlve summary...

COMPREHENSIVE APPRAISAL NARRA TlVE SUMMARY REPORT

Brady's Cove 1,1425 and 1429 Longbranch Avenue Brady's Cove 11,1435 and 1439 Longbranch Avenue

Grover Beach, CA 93433

Exhibit R, Appraisal Brady's Cove of 74

COMPREHENSIVE APPRAISAL NARRA TlVE SUMMARY REPORT

Brady's Cove 1,1425 and 1429 Longbranch Avenue Brady's Cove 11,1435 and 1439 Longbranch Avenue


Case 9:11-bk-11059-RR Doc 427-18 Filed 08/01/13 Entered 08/01/13 16:44:34 Desc Exhibit R (part 1): Appraisal Bradys Cove Apartments Page 1 of 25

BRUCE BERUDOIN ~ RSSOCIRTES. INC.

Bruce A. Beaudoin, MAl. SRn

Real Estate Appraisers l} Consultants 659 Mulligan lane· Arroyo Grande • CA • 934.29

TEL (B95) 413-2699 • FAH (B95) 413-9191

May 24,2011

Mr. Paul Baker, Account Manager Re: File # 11191: Appraisal Community West Bank 445 Pine Avenue Goleta, CA 93117-3709

Dear Mr. Baker:

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue Grover Beach, CA 93433

In response to your request, I initially inspected the exterior of the 30-unit apartment complex referred to above on May 23, 2011. On June 3, 2011 I subsequently inspected the interior of seven of the thirty tmits.

The Pwpose, Intended Use, Intended Users and Scope of this appraisal, as well as property rights appraised, are summarized on Pages 12-15 of the enclosed report.

As a result of my investigation, it is my opinion the "as is" value of the fee simple estate in the surface rights of the apartment complex under analysis as of June 3,2011 is the sum of:

$3,261,000 (THREE MILLION TWO HUNDRED SIXTY-ONE THOUSAND DOLLARS)

The interior of units at 1429A, B, and 1435A, E, G, Hand 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to include profitindirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.

A common access drive is shared with the apartment complex to the west, Longbranch Apartments, which apparently is an identical complex extending west to 14th Street. In this regard, it is assumed that there is a corresponding reciprocal access and maintenance agreement with a current verifying title report recommended.


BRUCE BERUDOIN ~ RSSOCIRTES. INC.

Bruce A. Beaudoin, MAl. SRn

Real Estate Appraisers l} Consultants 659 Mulligan lane· Arroyo Grande • CA • 934.29

TEL (B95) 413-2699 • FAH (B95) 413-9191

May 24,2011

Mr. Paul Baker, Account Manager Re: File # 11191: Appraisal Community West Bank 445 Pine Avenue Goleta, CA 93117-3709

Dear Mr. Baker:

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue Grover Beach, CA 93433

In response to your request, I initially inspected the exterior of the 30-unit apartment complex referred to above on May 23, 2011. On June 3, 2011 I subsequently inspected the interior of seven of the thirty tmits.

The Pwpose, Intended Use, Intended Users and Scope of this appraisal, as well as property rights appraised, are summarized on Pages 12-15 of the enclosed report.

As a result of my investigation, it is my opinion the "as is" value of the fee simple estate in the surface rights of the apartment complex under analysis as of June 3,2011 is the sum of:

$3,261,000 (THREE MILLION TWO HUNDRED SIXTY-ONE THOUSAND DOLLARS)

The interior of units at 1429A, B, and 1435A, E, G, Hand 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to include profitindirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.



Community West Bank Goleta, CA 93711-3709 -2- May 24,2011

A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal and/or remediation and its effect on value have not been considered.

Value conclusions are the result ofa comprehensive appraisal issued as a narrative summary report to which your attention is directed.

Sincerely,

~~aJL Bruce A. BeaudOIn, MAL, SRA

Lie. #AG002047

BAB:aa

Encl.


Community West Bank Goleta, CA 93711-3709 -2- May 24,2011

A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal and/or remediation and its effect on value have not been considered.

Value conclusions are the result ofa comprehensive appraisal issued as a narrative summary report to which your attention is directed.

Sincerely,

~~aJL Bruce A. BeaudOIn, MAL, SRA

Lie. #AG002047

BAB:aa

Encl.


TABLE OF CONTENTS

PHOTOGRAPHS ................................................................... .

SUMMARY OF SALIENT FACTS AND CONCLUSIONS .................................. 7

ASSUMPTIONS AND LIMITING CONDITIONS ......................................... 9

PURPOSE OF APPRAISAL ........................................................ " 12

INTENDED USE AND [NTENDED USERS OF APPRAISAL .............................. 13

SCOPE OF APPRAISAL ............................................................ 13

REGIONAL ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15

COMMUNITY ANALYSIS .......................................................... 21

NEIGHBORHOOD ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23

PROPERTY DATA ............................................................... " 24 TITLE AND RECORD DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24

Legal Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 Assessments and Taxes ................................................. 24

Easements-Surface Restrictions ................................................. 25 Owner of Record ........................................................... " 25 Property History ............................................................. 25

SITE ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25

IMPROVEMENT DESCRIPTION ..................................................... 27

HlGHEST AND BEST USE .......................................................... 29

METHOD OF VALUATION ......................................................... 30

INCOME APPROACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30

SALES COMPARISON APPROACH .................................................. 40

RECONCILIA TION AND CONCLUSION .............................................. 55 Reasonable Exposure Time .................................................... 55

CERTIFICATION .................................................................. 57

ADDENDA

Appraiser's Qualifications ...................................................... , I Engagement Letter and Correspondence ........................................... 2 Preliminary Title Report ........................................................ 3 Income and Expense Statements, 2006-20 J 0 ....................................... , 4


TABLE OF CONTENTS

PHOTOGRAPHS ................................................................... .

SUMMARY OF SALIENT FACTS AND CONCLUSIONS .................................. 7

ASSUMPTIONS AND LIMITING CONDITIONS ......................................... 9

PURPOSE OF APPRAISAL ........................................................ " 12

INTENDED USE AND [NTENDED USERS OF APPRAISAL .............................. 13

SCOPE OF APPRAISAL ............................................................ 13

REGIONAL ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15

COMMUNITY ANALYSIS .......................................................... 21

NEIGHBORHOOD ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23

PROPERTY DATA ............................................................... " 24 TITLE AND RECORD DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24

Legal Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 Assessments and Taxes ................................................. 24

Easements-Surface Restrictions ................................................. 25 Owner of Record ........................................................... " 25 Property History ............................................................. 25

SITE ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25

IMPROVEMENT DESCRIPTION ..................................................... 27

HlGHEST AND BEST USE .......................................................... 29

METHOD OF VALUATION ......................................................... 30

INCOME APPROACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30

SALES COMPARISON APPROACH .................................................. 40

RECONCILIA TION AND CONCLUSION .............................................. 55 Reasonable Exposure Time .................................................... 55

CERTIFICATION .................................................................. 57

ADDENDA

Appraiser's Qualifications ...................................................... , I Engagement Letter and Correspondence ........................................... 2 Preliminary Title Report ........................................................ 3 Income and Expense Statements, 2006-20 J 0 ....................................... , 4


COMPREHENSIVE APPRAISAL NARRATIVE SUMMARY REPORT

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue


For

Mr. Paul Baker, Special Assets Account Manager Community West Bank

445 Pine Avenue Goleta, CA 93117-3709

As of

June 3, 2011

Prepared by

Bruce A. Beaudoin, MAl, SRA Bruce Beaudoin and Associates, Inc.

Real Estate Appraisers and Consultants 650 Mulligan Lane

Arroyo Grande, CA 93420 Ph. (805) 473-2600 FAX (805) 473-9101


COMPREHENSIVE APPRAISAL NARRATIVE SUMMARY REPORT

Brady's Cove I, 1425 and 1429 Longbranch Avenue Brady's Cove II, 1435 and 1439 Longbranch Avenue


For

Mr. Paul Baker, Special Assets Account Manager Community West Bank

445 Pine Avenue Goleta, CA 93117-3709

As of

June 3, 2011

Prepared by

Bruce A. Beaudoin, MAl, SRA Bruce Beaudoin and Associates, Inc.

Real Estate Appraisers and Consultants 650 Mulligan Lane

Arroyo Grande, CA 93420 Ph. (805) 473-2600 FAX (805) 473-9101


File # 11191

II PHOTOGRAPHS as of May 23, 2011 II

I. Street scene facing east towards Longbranch Avenue

2. Looking west towards Longbranch Avenue


Fi le # 111 91

II PHOTOGRAPHS as of May 23, 2011 II

I . Street scene facing east towards Longbranch Avenue

2. Looking west towards Longbranch A venue


File # 11191

3. Facing northeast towards southerly building at 1425 Longbranch Avenue

4. Looking northwest towards the southerly building

2 Exhibit R, Appraisal Brady's Cove of 74

File 11 1119 1

3. Facing northeast towards southerl y building at 1425 Longbranch Avenue

4. Looking northwest towards the southerly building

2


File #11191

'.

5. Rear view of southerly building

6. Looking northeast towards southerly center building at 1429 Longbranch A venue


Filc #11191

:'. '

5. Rear view of southerly building

6. Looking northeast towards southerly center building at 1429 Longbranch A venue

3


File #11191

7. Facing northeast towards northerly building at 1439 Longbranch Avenue

8. Facing south towards common access drive for the subj ect complex and the complex to the west, Longbranch Apartments, further summari zed as Rental Comparison I in thi s appraisal


File #11191

7. Facing northeast towards northerly building at 1439 Longbranch Avenue

8. Facing south towards common access drive for the subject complex and the complex to the west, Longbranch Apartments, further summari zed as Rental Comparison I in this appraisal

4


File #1 1191

II . View of typical bath, 1429 B Longbranch Avenue

12. View of master bedroom, typical unit, 1429 B Longbranch Avenue

6


File # 11191

11 . View oflypical bath, 1429 B Longbranch Avenue

12. View ofmasler bedroom, typical unit, 1429 B Longbranch Avenue

6


File#11191

II SUMMARY OF SALIENT FACTS AND CONCLUSIONS II

CLIENT

OWNERS OF RECORD

TYPE OF APPRAISAL

DATES OF INSPECTION

PROJECT LOCATION

MAP REFERENCE

CENSUS TRACT

INTEREST APPRAISED

PURPOSE AND INTENDED USE

SITE SIZE

ZONING

FLOOD ZONE

TOXlC WASTE INFORMATION

HIGHEST AND BEST USE

Community West Bank

Larry Moriarty and Linda Moriarty, husband and wi fe, as to an undivided 59.59% interest and Kerry Moriarty, a married man as his sole and separate property, as to an undivided 40.41 % interest

Comprehensive appraisal, narrative summary report

May 23,2011 and June 3, 201]

1425, 1429, 1435 & 1439 Longbranch Avenue, Grover Beach, CA 93433

Thomas Guide: 714 F-5

120.00

Fee simple estate

'''As Is" value relative to mortgage underwriting and decision-making purposes on existing financing by Community West Bank

1.12 Acres

R-3: Multi-Residential

Zone HC," area of minima1 flooding

A Phase 1 Environmental Assessment was unavailable. For purposes of this appraisal, it is assumed that no hazardous-toxic contamination has occurred. Therefore, the cost of cleanup andlor remediation and its effect on value have not been considered.

As Vacant - Multi-residential development, likely, to a lesser density at ten to twenty units per acre in consideration of current zoning.

As Improved - Continued use as a 30-unit apartment complex

7


File#11191

II SUMMARY OF SALIENT FACTS AND CONCLUSIONS II

CLIENT

OWNERS OF RECORD

TYPE OF APPRAISAL

DATES OF INSPECTION

PROJECT LOCATION

MAP REFERENCE

CENSUS TRACT

INTEREST APPRAISED

PURPOSE AND INTENDED USE

SITE SIZE

ZONING

FLOOD ZONE

TOXlC WASTE INFORMATION

HIGHEST AND BEST USE

Community West Bank

Larry Moriarty and Linda Moriarty, husband and wi fe, as to an undivided 59.59% interest and Kerry Moriarty, a married man as his sole and separate property, as to an undivided 40.41 % interest

Comprehensive appraisal, narrative summary report

May 23,2011 and June 3, 201]

1425, 1429, 1435 & 1439 Longbranch Avenue, Grover Beach, CA 93433

Thomas Guide: 714 F-5

120.00

Fee simple estate

'''As Is" value relative to mortgage underwriting and decision-making purposes on existing financing by Community West Bank

1.12 Acres

R-3: Multi-Residential

Zone HC," area of minima1 flooding

A Phase 1 Environmental Assessment was unavailable. For purposes of this appraisal, it is assumed that no hazardous-toxic contamination has occurred. Therefore, the cost of cleanup andlor remediation and its effect on value have not been considered.

As Vacant - Multi-residential development, likely, to a lesser density at ten to twenty units per acre in consideration of current zoning.

As Improved - Continued use as a 30-unit apartment complex

7


File #11191

IMPROVEMENT DESCRIPTION This is a 30-unit complex in four buildings. All are 2-story, Class "e" construction on concrete slab foundations with wood frame stucco exteriors and gable-type composition roofs. The front and rear buildings are identical but reversed and include attached divided 2-car garages and six units each. The center buildings are identical, but again reversed and include nine units each with three 4-car builtin garages with units over them and remaining units ground floor and second floor of similar size and floor plans to those included with the front and rear buildings. Units over the garages are slightly larger units, but all are 2-bedroom, 2 bath. Area components are summarized as follows:

VALUATION SUMMARY

INCOME APPROACH

N.O.I.

O.A.R.

Cap. Value

Less Deferred Maintenance

"As Is" Value

Round to

VALUE AS OF JUNE 3, 2011

24 - Two-bedroom, 2 bath units @ 872 sq. ft. = 20,928 sq. ft. 6 - Two-bedroom, 2 bath units @ 908 sq. ft. = 5,448 sq. ft.

Two Laundries @ 160 sq. ft. =

Total Building Area: Garages - 4 @ 390 sq. ft. =

Garages - 6 @ 800 sq. ft. = Total Garage Area:

Total 26,376 sq. ft. 320 sq. ft.

26,696 sq. ft. 1,560 sq. ft. 4,800 sq. ft. 6,360 sq. ft.

SALES COMPARISON APPROACH

$209,894 Building Size 26,696

6% Value/Sq.Ft. $140.00

$3,498,233 Total $3,737,440

($317,000) 30 Units @ $] 20,0001Unit $3,600,000

$3,18],233 Effective Gross Income Multiplier $360,810 x 10 = $3,608,100 Value as Renovated $3,608, I 00

Reconciled Value $3,656,596

Less Deferred Maintenance ($317,000)

"As Is" Value by the Sales $3,339,596 Comparison Approach

$3,181,000 Round to $3,340,000

$3,261,000

EFFECTIVE DATE OF APPRAlSAL: June 3, 2011

REASONABLE EXPOSURE TIME Four to eight months from inception of listing to close of escrow

8


File #11191

IMPROVEMENT DESCRIPTION This is a 30-unit complex in four buildings. All are 2-story, Class "e" construction on concrete slab foundations with wood frame stucco exteriors and gable-type composition roofs. The front and rear buildings are identical but reversed and include attached divided 2-car garages and six units each. The center buildings are identical, but again reversed and include nine units each with three 4-car builtin garages with units over them and remaining units ground floor and second floor of similar size and floor plans to those included with the front and rear buildings. Units over the garages are slightly larger units, but all are 2-bedroom, 2 bath. Area components are summarized as follows:

VALUATION SUMMARY

INCOME APPROACH

N.O.I.

O.A.R.

Cap. Value

Less Deferred Maintenance

"As Is" Value

Round to

VALUE AS OF JUNE 3, 2011

24 - Two-bedroom, 2 bath units @ 872 sq. ft. = 20,928 sq. ft. 6 - Two-bedroom, 2 bath units @ 908 sq. ft. = 5,448 sq. ft.

Two Laundries @ 160 sq. ft. =

Total Building Area: Garages - 4 @ 390 sq. ft. =

Garages - 6 @ 800 sq. ft. = Total Garage Area:

Total 26,376 sq. ft. 320 sq. ft.

26,696 sq. ft. 1,560 sq. ft. 4,800 sq. ft. 6,360 sq. ft.

SALES COMPARISON APPROACH

$209,894 Building Size 26,696

6% Value/Sq.Ft. $140.00

$3,498,233 Total $3,737,440

($317,000) 30 Units @ $] 20,0001Unit $3,600,000

$3,18],233 Effective Gross Income Multiplier $360,810 x 10 = $3,608,100 Value as Renovated $3,608, I 00

Reconciled Value $3,656,596

Less Deferred Maintenance ($317,000)

"As Is" Value by the Sales $3,339,596 Comparison Approach

$3,181,000 Round to $3,340,000

$3,261,000

EFFECTIVE DATE OF APPRAlSAL: June 3, 2011

REASONABLE EXPOSURE TIME Four to eight months from inception of listing to close of escrow

8


File #11191

VALIDATIONS The interior of units at 1429A, 1435A, E, G, H and 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to inel ude profit-indirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.


A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlorremediation and its effect on value have not been considered.

9


File #11191

VALIDATIONS The interior of units at 1429A, 1435A, E, G, H and 1439E were inspected. For purposes of this appraisal, it is assumed the remaining 23 units, which were not inspected, are in similar physical condition. Overall, this complex appears to be in similar condition to the last date of inspection almost three years when deferred maintenance, renovation and reconditioning costs to inel ude profit-indirect cost and overhead was estimated at $371,000. Today, little change would be indicated in cost and consideration of current economic conditions. However, a verifying cost estimate is recommended.


A Phase I Environmental Assessment was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlorremediation and its effect on value have not been considered.

9


File #11191

II ASSUMPTIONS AND LIMITING CONDITIONS II

This appraisal, which is confined to setting forth analyses, opinions and conclusions of the property described herein, is subject to the following contingent and limiting conditions:

1. The date of value to which the conclusions and opinions expressed in this report apply, is set forth in the letter of transmittal. Further, the dollar amount of any value opinion rendered is based upon the purchasing po\ver of the American dollar existing on that date.

2. The appraiser assumes no responsibility for economic or physical factors which may affect the opinions in this report which occur after the date of the letter transmitting this report.

3. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.

4. The appraiser reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available.

5. No opinion as to title is rendered. Data related to ownership and legal description was obtained from San Luis Obispo County Assessor's Office 2010-11 tax roll records and is considered reliable. Title is assumed to be marketable and free and clear of aI1 liens and encumbrances, easements and restrictions, except those specifically discussed in the report. The property is appraised assuming it to be under responsible ownership and competent management, and available for its highest and best use.

6. The appraiser assumes no responsibility for hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for arranging for engineering studies that may be required to discover them.

7. The property is appraised assuming it to be in full compliance with all applicable tederal, state, and local regulations and laws, unless otherwise stated.

8. The property is appraised assunling that all applicable zoning and use regulations and restrictions have been complied with, unless otherwise stated.

9. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based, unless otherwise stated.

10. No engineering survey has been made by the appraiser. Except as specifically stated, data relative to size and area was taken from sources considered reliable and no encroachment of real property improvements is considered to exist.

10


File #11191

II ASSUMPTIONS AND LIMITING CONDITIONS II

This appraisal, which is confined to setting forth analyses, opinions and conclusions of the property described herein, is subject to the following contingent and limiting conditions:

1. The date of value to which the conclusions and opinions expressed in this report apply, is set forth in the letter of transmittal. Further, the dollar amount of any value opinion rendered is based upon the purchasing po\ver of the American dollar existing on that date.

2. The appraiser assumes no responsibility for economic or physical factors which may affect the opinions in this report which occur after the date of the letter transmitting this report.

3. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.

4. The appraiser reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available.

5. No opinion as to title is rendered. Data related to ownership and legal description was obtained from San Luis Obispo County Assessor's Office 2010-11 tax roll records and is considered reliable. Title is assumed to be marketable and free and clear of aI1 liens and encumbrances, easements and restrictions, except those specifically discussed in the report. The property is appraised assuming it to be under responsible ownership and competent management, and available for its highest and best use.

6. The appraiser assumes no responsibility for hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for arranging for engineering studies that may be required to discover them.

7. The property is appraised assuming it to be in full compliance with all applicable tederal, state, and local regulations and laws, unless otherwise stated.

8. The property is appraised assunling that all applicable zoning and use regulations and restrictions have been complied with, unless otherwise stated.

9. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based, unless otherwise stated.

10. No engineering survey has been made by the appraiser. Except as specifically stated, data relative to size and area was taken from sources considered reliable and no encroachment of real property improvements is considered to exist.

10


File#Il19I

11. No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated.

12. Maps, plats and exhibits included in this part are for illustration only, as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

13. No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers.

14. The distribution, ifany, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

15. That possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event only with proper written qualification and only in its entirety.

16. Unless otbelWise stated in this report, the existence of toxic or hazardous material, which mayor may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances, such as asbestos, urea-fonnaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

17. No detailed soil studies covering the subject property were available to the appraiser. Therefore, any premises as to soil qualities employed in this report are not conclusive but have been discussed with the client and considered consistent with infonnation available to the appraiser.

18. Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance.

19. The appraiser has personally inspected the subject property and finds no obvious evidence of structural deficiencies, except as stated in this report; however, no responsibility for hidden defects or conformity to specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes can be assumed without provision of specific professional or governmental inspections.

11


File#Il19I

11. No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated.

12. Maps, plats and exhibits included in this part are for illustration only, as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report.

13. No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers.

14. The distribution, ifany, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

15. That possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event only with proper written qualification and only in its entirety.

16. Unless otbelWise stated in this report, the existence of toxic or hazardous material, which mayor may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances, such as asbestos, urea-fonnaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

17. No detailed soil studies covering the subject property were available to the appraiser. Therefore, any premises as to soil qualities employed in this report are not conclusive but have been discussed with the client and considered consistent with infonnation available to the appraiser.

18. Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance.

19. The appraiser has personally inspected the subject property and finds no obvious evidence of structural deficiencies, except as stated in this report; however, no responsibility for hidden defects or conformity to specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes can be assumed without provision of specific professional or governmental inspections.

11


File # 11191

20. No consideration has been given in this appraisal as to the value of the property located on the premises considered by the appraiser to be personal property, nor has he given consideration to the cost of moving or relocating such personal property; only the real property has been considered. Specifically, real property includes the site, buildings, attached fixtures, builtin appliances, refrigerators and window coverings.

II PURPOSE OF APPRAISAL II

The objective of this appraisal is to estimate the "as is" value of the tee simple estate for the 30-unit apartment complex under analysis as of May 23,2011.

According to Federal Reserve System 12 CFR, Parts 208 and 225, (Regulation H, Regulation Y; Docket No. R-0685) Appraisal Standards for Federally Related Transactions, Section 225.62 Definitions, [f], market value is defined as follows:

"Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what they consider their own best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

5. the price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

The fee simple estate relates to all of the rights of absolute ownership, unencwnbered by any other interest or estate, of real property subject to governmental control relative to zoning and other healthsafety standards, as well as the power of condemnation, escheat and taxation, and in consideration of easements-surface restrictions relative to the right of use of others.

On the other hand, the leased fee estate consists of the ownership interest held by the landlord with the right of use and occupancy conveyed by a lease to others, usually. consisting of the right to receive rent and the right of repossession at the termination of the lease.

12


File # 11191

20. No consideration has been given in this appraisal as to the value of the property located on the premises considered by the appraiser to be personal property, nor has he given consideration to the cost of moving or relocating such personal property; only the real property has been considered. Specifically, real property includes the site, buildings, attached fixtures, builtin appliances, refrigerators and window coverings.

II PURPOSE OF APPRAISAL II

The objective of this appraisal is to estimate the "as is" value of the tee simple estate for the 30-unit apartment complex under analysis as of May 23,2011.

According to Federal Reserve System 12 CFR, Parts 208 and 225, (Regulation H, Regulation Y; Docket No. R-0685) Appraisal Standards for Federally Related Transactions, Section 225.62 Definitions, [f], market value is defined as follows:

"Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what they consider their own best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

5. the price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

The fee simple estate relates to all of the rights of absolute ownership, unencwnbered by any other interest or estate, of real property subject to governmental control relative to zoning and other healthsafety standards, as well as the power of condemnation, escheat and taxation, and in consideration of easements-surface restrictions relative to the right of use of others.

On the other hand, the leased fee estate consists of the ownership interest held by the landlord with the right of use and occupancy conveyed by a lease to others, usually. consisting of the right to receive rent and the right of repossession at the termination of the lease.

12


File #11191

Reportedly, this complex is affected by month to month rental agreements. Therefore, only the value of the fee simple estate has been considered relative to easements and restrictions reflected in the preliminary title report as shown in the Addenda.

II INTENDED USE AND INTENDED USERS OF APPRAISAL Ii

Community West Bank. is considering existing financing on the property under analysis. Therefore, intended use relates to mortgage lending, underwriting and deCIsion making purposes by the client. The bank has requested an appraisal with an adequate and appropriate scope of work as a narrative summary report. This report in its entirety is Copyright 2011 by Bruce Beaudoin & Assoc., Inc., a California Corporation. All rights of reproduction are prohibited unless pennission is granted in writing. Without the written consent of the appraiser, this appraisal should not be used for any other purpose or by any other person or entity other than the client to which it is addressed. The appraiser has no liability, obligation, or responsibility to anyone but the client. The client has requested a comprehensive appraisal with adequate and appropriate scope of work, narrative summary report, which has been prepared and completed in conformance with the Uniform Standards of Professional Appraisal Practice (US PAP), as last revised by the Appraisal Standards Board of the Appraisal Foundation, minimum appraisal standards mandated by Title XI of the Federal Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA), Ethics and Standards of the Appraisal Institute, requirements of the Office of the Comptroller of Currency and requirements of Community West Bank. This appraisal was not based on a requested minimum, a specific valuation or the approval of a loan. Emphasis has been given to valuation on a cash or equivalent basis.

II SCOPE OF APPRAISAL Ii

In acceptance of this assignment, I have determined I have the necessary knowledge and experience to complete this appraisal. In the past, I have completed numerous appraisals on apartment complexes in San Luis Obispo and Northern Santa Barbara Counties. This would include a prior appraisal on the subject complex as of August 15, 2008, almost three years ago.

This appraisal was authorized by engagement letter acknowledged April 18, 2011 as shown in the Addenda. Concurrently, the client forwarded an appraisal submission form, rental rolls and partial income and expense reports by email dated May 11, 2011. Full income and expense reports were forwarded for 2009 and 2010. However, income and expense statements were only available for the first seven months 0[2008. Relative to the former appraisal, income and expense reports were also available for the 2006 and 2007. The partial statement for 2008 has been prorated to an annual basis resulting in an income and expense history for the last five years.

Initially, Kerry Moriarty, one of the owners, was contacted by phone to inspect the property in early May. However, there were no return phone calls. Consequently, the offsite manager, Jerry Jones, was contacted at (805) 441-0387 on May 9, 2011. He noted he is a commercial fishennan and was committed to related activities during that week but would attempt to notify tenants on approximately six units so that these could be inspected later that week. However, when he was recontacted, he indicated he had contacted Mr. Moriarity who was unaware an appraisal had been ordered by Community West Bank. By email dated May 10,2011, the client was advised, "Also, apparently Kerry Moriarty, one of the owners, is unaware of your appraisal request. Please clarify."

13


File #11191

Reportedly, this complex is affected by month to month rental agreements. Therefore, only the value of the fee simple estate has been considered relative to easements and restrictions reflected in the preliminary title report as shown in the Addenda.

II INTENDED USE AND INTENDED USERS OF APPRAISAL Ii

Community West Bank. is considering existing financing on the property under analysis. Therefore, intended use relates to mortgage lending, underwriting and deCIsion making purposes by the client. The bank has requested an appraisal with an adequate and appropriate scope of work as a narrative summary report. This report in its entirety is Copyright 2011 by Bruce Beaudoin & Assoc., Inc., a California Corporation. All rights of reproduction are prohibited unless pennission is granted in writing. Without the written consent of the appraiser, this appraisal should not be used for any other purpose or by any other person or entity other than the client to which it is addressed. The appraiser has no liability, obligation, or responsibility to anyone but the client. The client has requested a comprehensive appraisal with adequate and appropriate scope of work, narrative summary report, which has been prepared and completed in conformance with the Uniform Standards of Professional Appraisal Practice (US PAP), as last revised by the Appraisal Standards Board of the Appraisal Foundation, minimum appraisal standards mandated by Title XI of the Federal Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA), Ethics and Standards of the Appraisal Institute, requirements of the Office of the Comptroller of Currency and requirements of Community West Bank. This appraisal was not based on a requested minimum, a specific valuation or the approval of a loan. Emphasis has been given to valuation on a cash or equivalent basis.

II SCOPE OF APPRAISAL Ii

In acceptance of this assignment, I have determined I have the necessary knowledge and experience to complete this appraisal. In the past, I have completed numerous appraisals on apartment complexes in San Luis Obispo and Northern Santa Barbara Counties. This would include a prior appraisal on the subject complex as of August 15, 2008, almost three years ago.

This appraisal was authorized by engagement letter acknowledged April 18, 2011 as shown in the Addenda. Concurrently, the client forwarded an appraisal submission form, rental rolls and partial income and expense reports by email dated May 11, 2011. Full income and expense reports were forwarded for 2009 and 2010. However, income and expense statements were only available for the first seven months 0[2008. Relative to the former appraisal, income and expense reports were also available for the 2006 and 2007. The partial statement for 2008 has been prorated to an annual basis resulting in an income and expense history for the last five years.

Initially, Kerry Moriarty, one of the owners, was contacted by phone to inspect the property in early May. However, there were no return phone calls. Consequently, the offsite manager, Jerry Jones, was contacted at (805) 441-0387 on May 9, 2011. He noted he is a commercial fishennan and was committed to related activities during that week but would attempt to notify tenants on approximately six units so that these could be inspected later that week. However, when he was recontacted, he indicated he had contacted Mr. Moriarity who was unaware an appraisal had been ordered by Community West Bank. By email dated May 10,2011, the client was advised, "Also, apparently Kerry Moriarty, one of the owners, is unaware of your appraisal request. Please clarify."

13


File #11191

By email dated May 20, 2011, the appraiser was advised, '''Apparently Mr. Moriarty has been contacted and is now ready for you to set the appointment with him. If you are still meeting up with some resistance please let me know." Mr. Baker was advised by email dated the same day, "According to the Manager, Jerry Jones (805-441-0387, he talked to Kerry Moriarty yesterday. He indicated that Mr. Moriarty is out of town until Tuesday and cannot be reached by phone. After that, he has requested that Mr. Jones not set an appointment without his authorization. With your approval, I can continue to complete the appraisal with or without an interior inspection." Therefore, the exterior of the property \-vas inspected on May 23,2011. By email datedJuneI.2011.Mr. Baker indicated, Mr. Moriarty is amenable to inspection for the properties. Subsequently, Mr. Moriarty advised Mr. Jones to notice the tenants. However, only seven of the tenants were home the afternoon of June 6, and corresponding units, as already discussed, were inspected. These units were in average condition and for purposes of this appraisal, it is assumed that the remaining 23 units that were not inspected are in similar condition. Mr. Moriarty also furnished a current rent roll.

A common access drive is shared with the complex to the west, Longbranch Apartments, which apparently is an identical complex extending west to 14th Street. In this regard, it is assumed that there is a corresponding reciprocal access and maintenance agreement with a current verifying title report recommended. The complex appears to be in similar condition as to the last date of inspection, almost three years ago when deferred maintenance, renovation and reconditioning to include profit-indirect cost and overhead was estimated at $371,000. In this regard, a verifying cost estimate is recommended.

A Phase I Environmental Assessnlent was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlor remediation and its effect on value have not been considered. Please let me know how to proceed." No response was received, and as this appraisal is to be completed on or about May 27, 2011, the complex was inspected from the exterior only as of May 23, 2011. At that time, it appeared the exterior of the complex had not been painted, fence had not been replaced and landscaping was consistent with the last appraisal. As the interior cannot be inspected, it is assumed that similar reconditioning and renovation is required. Consequently, the complex has been appraised under the extraordinary assumption that total cost for deferred maintenance, renovation and reconditioning will not exceed the last estimate at $317,000 with further verification recommended.

As this complex was constructed in the mid-1980's, it is legaJIy non-conforming as to zoning. According to Janet Reese, City of Grover Beach Community Development Department, current R-3 Multi-Family Residential zoning now pennits a maximum of28 units. She further noted legal nonconforming use can continue as long as it is not discontinued for more than one year and that the complex can be reconstructed if it is destroyed by fire or other calamity. As such, the subject benefits from a slight density bonus which could enhance its site value. However, there have been no recent sales of multi-residential sites in Grover Beach, and effective age of this complex is estimated at 22 years. Therefore, depreciation would be difficult, at best, to measure. Consequently, the Cost Approach to value is not applicable and emphasis has been given to the Income and Sales Comparison Approaches. In this regard, rent rolls as of May 3 I , 201 I denote monthly rent totaling $30,730 or $1 ,024 Paso Robles unit which is close to market as indicated by comparison. Expenses have been estimated on the basis of 5-year averages as well as reasonable industry norms to arrive at net income which is capitalized into a value estimate by the Income Approach, adjusted for deferred maintenance, renovation and reconditioning costs.

14


File #11191

By email dated May 20, 2011, the appraiser was advised, '''Apparently Mr. Moriarty has been contacted and is now ready for you to set the appointment with him. If you are still meeting up with some resistance please let me know." Mr. Baker was advised by email dated the same day, "According to the Manager, Jerry Jones (805-441-0387, he talked to Kerry Moriarty yesterday. He indicated that Mr. Moriarty is out of town until Tuesday and cannot be reached by phone. After that, he has requested that Mr. Jones not set an appointment without his authorization. With your approval, I can continue to complete the appraisal with or without an interior inspection." Therefore, the exterior of the property \-vas inspected on May 23,2011. By email datedJuneI.2011.Mr. Baker indicated, Mr. Moriarty is amenable to inspection for the properties. Subsequently, Mr. Moriarty advised Mr. Jones to notice the tenants. However, only seven of the tenants were home the afternoon of June 6, and corresponding units, as already discussed, were inspected. These units were in average condition and for purposes of this appraisal, it is assumed that the remaining 23 units that were not inspected are in similar condition. Mr. Moriarty also furnished a current rent roll.

A common access drive is shared with the complex to the west, Longbranch Apartments, which apparently is an identical complex extending west to 14th Street. In this regard, it is assumed that there is a corresponding reciprocal access and maintenance agreement with a current verifying title report recommended. The complex appears to be in similar condition as to the last date of inspection, almost three years ago when deferred maintenance, renovation and reconditioning to include profit-indirect cost and overhead was estimated at $371,000. In this regard, a verifying cost estimate is recommended.

A Phase I Environmental Assessnlent was unavailable. It is assumed that acoustic plaster ceilings, a portion of which have been removed, did not include asbestos and, for purposes of this appraisal, it is assumed there is not any other related hazardous-toxic contamination. Consequently, the cost of cleanup, encasement, removal andlor remediation and its effect on value have not been considered. Please let me know how to proceed." No response was received, and as this appraisal is to be completed on or about May 27, 2011, the complex was inspected from the exterior only as of May 23, 2011. At that time, it appeared the exterior of the complex had not been painted, fence had not been replaced and landscaping was consistent with the last appraisal. As the interior cannot be inspected, it is assumed that similar reconditioning and renovation is required. Consequently, the complex has been appraised under the extraordinary assumption that total cost for deferred maintenance, renovation and reconditioning will not exceed the last estimate at $317,000 with further verification recommended.

As this complex was constructed in the mid-1980's, it is legaJIy non-conforming as to zoning. According to Janet Reese, City of Grover Beach Community Development Department, current R-3 Multi-Family Residential zoning now pennits a maximum of28 units. She further noted legal nonconforming use can continue as long as it is not discontinued for more than one year and that the complex can be reconstructed if it is destroyed by fire or other calamity. As such, the subject benefits from a slight density bonus which could enhance its site value. However, there have been no recent sales of multi-residential sites in Grover Beach, and effective age of this complex is estimated at 22 years. Therefore, depreciation would be difficult, at best, to measure. Consequently, the Cost Approach to value is not applicable and emphasis has been given to the Income and Sales Comparison Approaches. In this regard, rent rolls as of May 3 I , 201 I denote monthly rent totaling $30,730 or $1 ,024 Paso Robles unit which is close to market as indicated by comparison. Expenses have been estimated on the basis of 5-year averages as well as reasonable industry norms to arrive at net income which is capitalized into a value estimate by the Income Approach, adjusted for deferred maintenance, renovation and reconditioning costs.

14


REGIONAL MAP

T,t i .1\, I . -r---'-!, );


REGIONAL MAP Case 9:11-bk-11059-RR Doc 427-18 Filed 08/01/13 Entered 08/01/13 16:44:34

Desc Exhibit R (part 1): Appraisal Bradys Cove Apartments Page 20 of 25

File #11191

Investigation within Southern San Luis Obispo County yielded six sales of somewhat similar complexes during the last three years. Two are in the inunediate community of Grover Beach, one in Los Osos, an unincorporated coastal community, and three in San Luis Obispo. These transactions have been verified by buyer, seller or agent to determine sales price and physical characteristics. Applicable units of comparison include sales price per square foo~ sales price per unit and effective gross income multipliers. Most of the comparisons were in overall good condition and therefore value indications have been adjusted downward for the related cost associated with the subject.

Value indications by the two approaches are then reconciled to a final value conclusion. The following report provides the factual basis for this appraisal.

II REGIONAL ANALYSIS II

Location - The apartment complex ooder consideration is located in Grover Beach in Southern San Luis Obispo County, California. The county is approximately 230 miles north of Los Angeles and 205 miles south of San Francisco in an area known as the "Central Coastal Region of California." Primary access to the area is via U.S. Highway 101, which runs north and south the full length of the county. The county is bounded on the north by Monterey County and on the south by Santa Barbara County. To the east is San Joaquin Valley, and to the west is the Pacific Ocean. The county encompasses 3,316 square miles and is bisected north to south into two distinct climatic zones by the Santa Lucia Mountain Range. The range separates the relatively wet coastal areas and the dry inland areas. Daytime temperatures along the 85-mile coastline average 60-75° year-round, where rainfall averages 22 inches per year. Inland area temperatures are more extreme, with common winter lows of 20-30°, and daytime swnmer highs over 100°.

Population - According to a recent article in the San Luis Obispo Tribune, March 9, 2011, County Gained 23,000, Mostly in the North,

-"In the past decade, the county's population grew by 9.3 percent, or about 23,000 people. That nearly mirrors the state's growth rate. In just 10 years, the county population grew from 246,681 to 269,637.

The North County was the epicenter of the county's population expansion, with the highest increase centered in Paso Robles. In fact, Paso Robles grew so much it overtook Atascadero as the county's second largest city in 2005. A trio of North County population centers - Templeton, Atascadero and Paso Robles -jumped in combined population by more than 10,000. Even little Shandon and San Miguel grew.

The South County's population change, while a mixed bag overall, was close on the heels of the North County in terms of growth.

Nipomo experienced the second-highest increase in the county - growing by 4,088. Nipomo and Arroyo Grande saw their population grow by 5,489 combined. Grover Beach, meanwhile, had an increase of 89 people. Pismo Beach topped the county in population loss with 896 fewer people in 2010 than in 2000. The central parts of the county saw anemic growth or losses."

15


File #11191

Investigation within Southern San Luis Obispo County yielded six sales of somewhat similar complexes during the last three years. Two are in the inunediate community of Grover Beach, one in Los Osos, an unincorporated coastal community, and three in San Luis Obispo. These transactions have been verified by buyer, seller or agent to determine sales price and physical characteristics. Applicable units of comparison include sales price per square foo~ sales price per unit and effective gross income multipliers. Most of the comparisons were in overall good condition and therefore value indications have been adjusted downward for the related cost associated with the subject.

Value indications by the two approaches are then reconciled to a final value conclusion. The following report provides the factual basis for this appraisal.

II REGIONAL ANALYSIS II

Location - The apartment complex ooder consideration is located in Grover Beach in Southern San Luis Obispo County, California. The county is approximately 230 miles north of Los Angeles and 205 miles south of San Francisco in an area known as the "Central Coastal Region of California." Primary access to the area is via U.S. Highway 101, which runs north and south the full length of the county. The county is bounded on the north by Monterey County and on the south by Santa Barbara County. To the east is San Joaquin Valley, and to the west is the Pacific Ocean. The county encompasses 3,316 square miles and is bisected north to south into two distinct climatic zones by the Santa Lucia Mountain Range. The range separates the relatively wet coastal areas and the dry inland areas. Daytime temperatures along the 85-mile coastline average 60-75° year-round, where rainfall averages 22 inches per year. Inland area temperatures are more extreme, with common winter lows of 20-30°, and daytime swnmer highs over 100°.

Population - According to a recent article in the San Luis Obispo Tribune, March 9, 2011, County Gained 23,000, Mostly in the North,

-"In the past decade, the county's population grew by 9.3 percent, or about 23,000 people. That nearly mirrors the state's growth rate. In just 10 years, the county population grew from 246,681 to 269,637.

The North County was the epicenter of the county's population expansion, with the highest increase centered in Paso Robles. In fact, Paso Robles grew so much it overtook Atascadero as the county's second largest city in 2005. A trio of North County population centers - Templeton, Atascadero and Paso Robles -jumped in combined population by more than 10,000. Even little Shandon and San Miguel grew.

The South County's population change, while a mixed bag overall, was close on the heels of the North County in terms of growth.

Nipomo experienced the second-highest increase in the county - growing by 4,088. Nipomo and Arroyo Grande saw their population grow by 5,489 combined. Grover Beach, meanwhile, had an increase of 89 people. Pismo Beach topped the county in population loss with 896 fewer people in 2010 than in 2000. The central parts of the county saw anemic growth or losses."

15


File #11191

Retail Trade: According to an article published in the UCSB Economic Forecast Project, 2010,

~'San Luis Obispo is proving resilient in this market segment and, for all intents and purposes, has 'dodged the bullet.' Box stores, which have gone vacant, have been quickly backfilled. For example: Forever 21 replaced approximately 100,000 sq. ft. of Gottschalks, New Frontiers is soon to be moving into Circuit City's 30,300 sq. ft., Kohl's is backfilling Mervyn's at the Madonna Plaza, and T J Maxx is replacing the 28,400 sq. ft. Linen and Things. For this market these are big spaces being refilled.

Contrary to the general feeling and media coverage regarding weak retail markets, the retail sector reduced vacancy from six months ago. Vacancy actually declined from 7.7% six months ago to 5.6% today, but still remains higher than last year for the overall market. Although the data is optimistic it does not necessarily reflect attitudes of merchants coping with lackluster sales. There are roughly 192,600 sq. ft. of retail space available within the San Luis Obispo market.

There are annexations and big projects in the works: the Dalidio property along the freeway is back on the planning books after yet another judicial ruling; and tbe property across from the Home Depot and Costco along Los Os os Valley Road, known as 'the gap property,' is in annexation with Target being identified as the major tenant."

Employment - According to an article published in the The Tribune on April 2, 2011, Joblessness Drops in County to 9.8 Percent

"San Luis Obispo County's unemployment rate fell to 9.8 percent in February, the first time in three months that it has dropped below the 10 percent mark.

The February figure compares to a 10.3 percent unemployment rate in January and 10.3 percent recorded in the same month a year ago, according to the latest data from the California Employment Development Department. The data are not seasonally adjusted.

-The local community with the higbest unemployment rate was Oceano at 18 percent, followed by Nipomo and Paso Robles, with rates at 12.9 percent and 11.6 percent respectively.

The communities of Shandon (4.9 percent), Cayucos (5.7 percent) and Cambria (6.9 percent) had the lowest unemployment rates in February.

San Luis Obispo County's rate was below the 12.3 percent for California, which dropped for the second month in a row, but above the 9.5 percent for the nation during that period."

16


File #11191

Retail Trade: According to an article published in the UCSB Economic Forecast Project, 2010,

~'San Luis Obispo is proving resilient in this market segment and, for all intents and purposes, has 'dodged the bullet.' Box stores, which have gone vacant, have been quickly backfilled. For example: Forever 21 replaced approximately 100,000 sq. ft. of Gottschalks, New Frontiers is soon to be moving into Circuit City's 30,300 sq. ft., Kohl's is backfilling Mervyn's at the Madonna Plaza, and T J Maxx is replacing the 28,400 sq. ft. Linen and Things. For this market these are big spaces being refilled.

Contrary to the general feeling and media coverage regarding weak retail markets, the retail sector reduced vacancy from six months ago. Vacancy actually declined from 7.7% six months ago to 5.6% today, but still remains higher than last year for the overall market. Although the data is optimistic it does not necessarily reflect attitudes of merchants coping with lackluster sales. There are roughly 192,600 sq. ft. of retail space available within the San Luis Obispo market.

There are annexations and big projects in the works: the Dalidio property along the freeway is back on the planning books after yet another judicial ruling; and tbe property across from the Home Depot and Costco along Los Os os Valley Road, known as 'the gap property,' is in annexation with Target being identified as the major tenant."

Employment - According to an article published in the The Tribune on April 2, 2011, Joblessness Drops in County to 9.8 Percent

"San Luis Obispo County's unemployment rate fell to 9.8 percent in February, the first time in three months that it has dropped below the 10 percent mark.

The February figure compares to a 10.3 percent unemployment rate in January and 10.3 percent recorded in the same month a year ago, according to the latest data from the California Employment Development Department. The data are not seasonally adjusted.

-The local community with the higbest unemployment rate was Oceano at 18 percent, followed by Nipomo and Paso Robles, with rates at 12.9 percent and 11.6 percent respectively.

The communities of Shandon (4.9 percent), Cayucos (5.7 percent) and Cambria (6.9 percent) had the lowest unemployment rates in February.

San Luis Obispo County's rate was below the 12.3 percent for California, which dropped for the second month in a row, but above the 9.5 percent for the nation during that period."

16


File#11191

Service Industries account for approximately 250/0 of all employment and is the leading source of employment. This includes medical and health related services, perceived to be driven by the steady in-migration of seniors and retired persons into the county.

Agriculture: According to an article published in The Tribune April 2, 2011, SLO County Crops Set New Record,

"Crop values rose 14 percent in San Luis Obispo County in 2010, setting a new record despite the sluggish economy.

The total crop value was a little more than $712.8 million, compared to just less than $623.1 million for 2009, according to statistics released Friday by the San Luis Obispo County Department of Agriculture.

'Overall, with the downturn in the economy, this is reassuring,' said Marty Settevendemie, county agricultural commissioner.

Settevendemie attributed the rise in value to increased acreage and high returns for strawberries as well as mild year-round temperatures and plenty of rainfall.

But he pointed out the annual crop report only provides gross values and does not take into account rising production costs that affect profits.

Winegrapes remained at the top of agriculture's economic heap. Valued at nearly 173.6 million, they represent 24 percent of the county's combined agriculture value, Settevendemie said.

Mild weather helped increase red varietals' tonnage by 18 percent over 2009 totals, with cabernet sauvignoD and merlot yields far higher than statewide averages, Settevendemie said.

The strawberry industry which is heavily entrenched in southern San Luis Obispo County, expanded by 525 acres to a total of 2,418 acres.

'Generally, what we're seeing is a kind of cODversion of vegetable crops to strawberries,' Settevendemie said. He attributed that trend to growers moving in from the southern counties who are drawn by good land prices as well as strawberries' higher market value.

The combined value for fresh and processing strawberries was just under $123.5 million, an increase of approximately 69 percent over 2009, while prices for fresh market strawberries rose 74 percent."

According to the an article in The Tribune on February 2, 2011, Cornucopia/or County Farmers in 2010,

17


File#11191

Service Industries account for approximately 250/0 of all employment and is the leading source of employment. This includes medical and health related services, perceived to be driven by the steady in-migration of seniors and retired persons into the county.

Agriculture: According to an article published in The Tribune April 2, 2011, SLO County Crops Set New Record,

"Crop values rose 14 percent in San Luis Obispo County in 2010, setting a new record despite the sluggish economy.

The total crop value was a little more than $712.8 million, compared to just less than $623.1 million for 2009, according to statistics released Friday by the San Luis Obispo County Department of Agriculture.

'Overall, with the downturn in the economy, this is reassuring,' said Marty Settevendemie, county agricultural commissioner.

Settevendemie attributed the rise in value to increased acreage and high returns for strawberries as well as mild year-round temperatures and plenty of rainfall.

But he pointed out the annual crop report only provides gross values and does not take into account rising production costs that affect profits.

Winegrapes remained at the top of agriculture's economic heap. Valued at nearly 173.6 million, they represent 24 percent of the county's combined agriculture value, Settevendemie said.

Mild weather helped increase red varietals' tonnage by 18 percent over 2009 totals, with cabernet sauvignoD and merlot yields far higher than statewide averages, Settevendemie said.

The strawberry industry which is heavily entrenched in southern San Luis Obispo County, expanded by 525 acres to a total of 2,418 acres.

'Generally, what we're seeing is a kind of cODversion of vegetable crops to strawberries,' Settevendemie said. He attributed that trend to growers moving in from the southern counties who are drawn by good land prices as well as strawberries' higher market value.

The combined value for fresh and processing strawberries was just under $123.5 million, an increase of approximately 69 percent over 2009, while prices for fresh market strawberries rose 74 percent."

According to the an article in The Tribune on February 2, 2011, Cornucopia/or County Farmers in 2010,

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"San Luis Obispo County's crop values reached a record high of nearly $713 million in 2010, and increased wine grape sales contributed about a quarter of that total, according to the agricultural commissioner's annual report.

Last year's gross sales compared with about $623 million in 2009, according to Agricultural Commissioner Marty Settevendemie.

'The mild summer and winter temperatures and ample rainfall provided idea) growing conditions in 2010 for many county crops,' Steetvendemie said.

Wine grapes accounted for roughly $173 million in sales.

Stra\vberries also saw a significant rise in yields and sales. The fruit earned about $123 million in 2010, compared with $73 million in 2009.

'Increased acreage and bigh returns for strawberries and other crops helped keep the local economy strong, reflected in tbe record-breaking combined value,' Settevendemie said.

-Coastal Hass avocados rebounded from hot weather conditions during 2009 and the freeze damage tbat hit growers hard in 2008."

Tourism: According to an article appearing in the Tribune, March 21, 2010, The Carlton and The Inn at Morro Bay Face Cash Problems,

The hotel industry bas been bit bard by dwindling travel. In San Luis Obispo County, occupancy was down 14.7 percent in January from the same month a year ago. Tbe revenue par rate - rooms sold divided by rooms available -dropped 14.5 percent in tbat time period, according to data from Smitb Travel Research, a Nashville-based company that tracks supply and demand for tbe botel industry. Figures for February are not yet available.

-In addition to the Inn at Morro Bay and The Carlton, tbe Mission Inn in Pismo Beach also had a notice of default in April 2009, according to Alan Reay, founder of Atlas Hospitality group. According to Atlas Hospitality Group, the 120-room hotel is owned by developer Ed Dorfman in Arroyo Grande.

'There's still more to go, unfortunately,' Reay said. 'The number of foreclosures and defaults will climb substantially in 2010. People are saying tbat we're turning a corner, but this is going to be a tougb year for hotel owners and lenders, and it will continue into 2011.' "

Residential Housing Market: In an article published in the The Tribune, February 21, 2010, Turnaround May Be Near For Housing,

"With favorable interest rates, a first-time homebuyer tax credit and local home prices lower than they have been since the start of the decade, some buyers looking for bargains are slowly returning to tbe market.

18


File#11191

"San Luis Obispo County's crop values reached a record high of nearly $713 million in 2010, and increased wine grape sales contributed about a quarter of that total, according to the agricultural commissioner's annual report.

Last year's gross sales compared with about $623 million in 2009, according to Agricultural Commissioner Marty Settevendemie.

'The mild summer and winter temperatures and ample rainfall provided idea) growing conditions in 2010 for many county crops,' Steetvendemie said.

Wine grapes accounted for roughly $173 million in sales.

Stra\vberries also saw a significant rise in yields and sales. The fruit earned about $123 million in 2010, compared with $73 million in 2009.

'Increased acreage and bigh returns for strawberries and other crops helped keep the local economy strong, reflected in tbe record-breaking combined value,' Settevendemie said.

-Coastal Hass avocados rebounded from hot weather conditions during 2009 and the freeze damage tbat hit growers hard in 2008."

Tourism: According to an article appearing in the Tribune, March 21, 2010, The Carlton and The Inn at Morro Bay Face Cash Problems,

The hotel industry bas been bit bard by dwindling travel. In San Luis Obispo County, occupancy was down 14.7 percent in January from the same month a year ago. Tbe revenue par rate - rooms sold divided by rooms available -dropped 14.5 percent in tbat time period, according to data from Smitb Travel Research, a Nashville-based company that tracks supply and demand for tbe botel industry. Figures for February are not yet available.

-In addition to the Inn at Morro Bay and The Carlton, tbe Mission Inn in Pismo Beach also had a notice of default in April 2009, according to Alan Reay, founder of Atlas Hospitality group. According to Atlas Hospitality Group, the 120-room hotel is owned by developer Ed Dorfman in Arroyo Grande.

'There's still more to go, unfortunately,' Reay said. 'The number of foreclosures and defaults will climb substantially in 2010. People are saying tbat we're turning a corner, but this is going to be a tougb year for hotel owners and lenders, and it will continue into 2011.' "

Residential Housing Market: In an article published in the The Tribune, February 21, 2010, Turnaround May Be Near For Housing,

"With favorable interest rates, a first-time homebuyer tax credit and local home prices lower than they have been since the start of the decade, some buyers looking for bargains are slowly returning to tbe market.

18


File#11191

But real estate economists and others turned in to the industry disagree on whether 2010 will be the year the housing market bounces back.

As the economy tries to climb out of recession, consumer confidence - while up in January for the third consecutive month - remains tentative, job losses continue and California's budget mess is far from over. Anyone of those factors, some experts say, could hinder a recovery.

'We're not out of this yet,' said Keith Byrd, an agent with Century 21 Hometown Realty who tracks local real estate trends.

'If this month's pace keeps up, pending sales activity will take a bump up from last February,' he said. 'It's aU probably going to equal itself out, and we'll track close to where we were last year.'

Still, Byrd said higher inventory levels (10 months' worth in January, the highest level since May 2009), interest rates increasing and the federal first-time homebuyer tax credit expiring are unknowns that put the market in a fragile position. The $8,000 tax credit program applies to eligible buyers who enter into a contract to buy a principal residence on or before April 30 and close on the home by June 30.

An increasing number of foreclosures, he said, could also be a drag on the market. Last year, 2,603 notices of default, the first step in the foreclosure process, were filed, a nearly 39 percent increase from 2008, when 1,877 were recorded, according to data from All-American Foreclosure Service in San Luis Obispo.

-'The good news is we've been saved thus far from a big percentage like some other cities and counties have, but the amount we have is causing the values to go down - period,' Byrd said. 'We're almost down to 2002 levels in most cities. The question is, can it drop down much more?'

The all-home median price in January was $366,750, according to DataQuick, according to DataQuick, a 2.2 percent decrease from the $375,000 median price recorded in the same month a year ago. The all-home median in January fell nearly 6 percent from tbe December 2009 median which stood at $390,000.

-Beacon Economics, the Los Angeles-based firm that presented the county's 2010 outlook for the UC Santa Barbara Economic Forecast Project, predicted in November that the median home price is expected to drop an additional $45,000, or about 12 percent, by 2011.

Brad Kemp, director of regional research for Beacon, said that prices would then start to return to a reasonable and sustainable growth rate, unlike the double-digit appreciation seen in the earlier part of the decade."

19


File#11191

But real estate economists and others turned in to the industry disagree on whether 2010 will be the year the housing market bounces back.

As the economy tries to climb out of recession, consumer confidence - while up in January for the third consecutive month - remains tentative, job losses continue and California's budget mess is far from over. Anyone of those factors, some experts say, could hinder a recovery.

'We're not out of this yet,' said Keith Byrd, an agent with Century 21 Hometown Realty who tracks local real estate trends.

'If this month's pace keeps up, pending sales activity will take a bump up from last February,' he said. 'It's aU probably going to equal itself out, and we'll track close to where we were last year.'

Still, Byrd said higher inventory levels (10 months' worth in January, the highest level since May 2009), interest rates increasing and the federal first-time homebuyer tax credit expiring are unknowns that put the market in a fragile position. The $8,000 tax credit program applies to eligible buyers who enter into a contract to buy a principal residence on or before April 30 and close on the home by June 30.

An increasing number of foreclosures, he said, could also be a drag on the market. Last year, 2,603 notices of default, the first step in the foreclosure process, were filed, a nearly 39 percent increase from 2008, when 1,877 were recorded, according to data from All-American Foreclosure Service in San Luis Obispo.

-'The good news is we've been saved thus far from a big percentage like some other cities and counties have, but the amount we have is causing the values to go down - period,' Byrd said. 'We're almost down to 2002 levels in most cities. The question is, can it drop down much more?'

The all-home median price in January was $366,750, according to DataQuick, according to DataQuick, a 2.2 percent decrease from the $375,000 median price recorded in the same month a year ago. The all-home median in January fell nearly 6 percent from tbe December 2009 median which stood at $390,000.

-Beacon Economics, the Los Angeles-based firm that presented the county's 2010 outlook for the UC Santa Barbara Economic Forecast Project, predicted in November that the median home price is expected to drop an additional $45,000, or about 12 percent, by 2011.

Brad Kemp, director of regional research for Beacon, said that prices would then start to return to a reasonable and sustainable growth rate, unlike the double-digit appreciation seen in the earlier part of the decade."

19


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