# TAB A

# Real Estate Appraisal Report

Prepared For:


## Mr. Stelios Makrides Santa Monica Airport

– Manager 3223 Donald Douglas Loop South Santa Monica, CA 90405 

# 2800 Airport Avenue945 Fou r th Avenue, Suite 310 | San Diego, California 92101 | www.thedoregroup.com

September 16, 2016

Mr. Stelios Makrides Santa Monica Airport

– Manager 3223 Donald Douglas Loop South Santa Monica, CA 90405

Re: Real Estate Appraisal Report 2800 Airport Avenue Santa Monica, CA 90405

File Name: TDG 2016 0 5 8

Dear Mr. Makrides :

Pursuant to your request, we performed an appraisal of the above referenced property as mor e particularly described in an appraisal report to follow. More specifically, the subject property (“ 2800 Airport Avenue ”) consists of a main building with 21,285 square feet (including 8,094 square feet of basement area) and a separate 3,801 square foot structure . The subject has both legal and physical access via Airport Avenue . It is currently utilized as a satellite campus of Santa Monica College. The subject structures are situated on Santa Monica Airport property o n a 94,380 square foot (2.17 + acres) site comprised of portions of Assessor’s Parcels 4272

- 02 5

- 901
and 4272

- 026

- 902. The site is defined per lease agreement, and is not a separate or legal parcel and is not currently zoned

.

This report was prepared for Santa Monica Airport and is intended only for the client’s specified

use

. The intended use of t his appraisal is to assist the client in due diligence and consultation

. As per the scope of work for this assignment, we have prepared fair market values and rental rates as of the effective date of this analysis (current), as well as retrospective values and rental rates for years 2010, 2011, 2012, 2013, 2014 and 2015.945 Fou r th Avenue, Suite 310 | San Diego, California 92101 | www.thedoregroup.com

Mr. Makrides Santa Monica Airport

– Manager September 16, 2016 Page 2

Please reference page 16 6 of this report for important information regarding the scope of research and analysis for this appraisal, including property identification, inspection, highest and best use analysis and valuation methodology.

This appraisal was prepared in conformance with the Uniform Standards of Professional Appraisal Practice (U.S.P.A.P.)

, Federal Aviation Administration (FAA) appraisal criteria and guidelines, and the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute

.

Your attenti on is directed to the Hypothetical Conditions, Extraordinary Assumptions, and General Conditions and Assumptions sections of this report (beginning on page 11 ). Acceptance of this report constitutes an agree ment with these conditions and assumptions. In particular, we note the following:

Hypothetical Conditions:

 We are aware that the 94,380 square feet of land underlying the subject buildings and allocate d per lease agreement in support of its use as an educational facility is not a separate or legal individual parcel. However, this analysis is based on a hypothetical condition that the 94,380 square feet of land area defined in the Master Lease Agreement is a distinct improved parcel with fee simple rights of ownership and transfer.

Extraordinary Assumptions:

 There are no Extraordinary Assumptions for this appraisal.

Based on the appraisal descr ibed in the accompanying report, subject to the Hypothetical Conditions

, Extraordinary Assumptions

, and General Conditions & Assumptions
, we have made the following value conclusion(s):



## Current and Retro spective Fair Market Value s The Current M arket V alue as of September 12, 2016, and Retrospective Market Values as of 2010, 2011, 2012, 2013, 2014 and 2015 of the Leased Fee estate of the property are :945 Fou r th Avenue, Suite 310 | San Diego, California 92101 | www.thedoregroup.com

Mr. Makrides Santa Monica Airport

– Manager September 16, 2016 Page 3

The market exposure time 1 preceding September 12 , 201 6 would have been 4 months a nd the estimated marketing period 2 as of September 12 , 201 6 is 4 months

.



## Current and Retrospective Market Rental Rates
The Current Market Rent as of September 12, 2016, and Retrospective Market Rent as of 2010, 2011, 2012, 2013, 2014 and 2015 of the property are :

1 Exposure Time: see definition in the Addenda.

2 Marke ting Time: see definition in the Addenda.945 Fou r th Avenue, Suite 310 | San Diego, California 92101 | www.thedoregroup.com

Mr. Makrides Santa Monica Airport

– Manager September 16, 2016 Page 4

We certify that we have no present or contemplated future interest in the property beyond this estimate of value. We have completed reviews of previous appraisals for the client which have included the subject property as a component of their analyses, however we have not previously provided a separate value for the subject property within the three year period preceding acceptance of this assignment.

Thank you for the opportunity of submitting this appraisal. If we can be of further service, please do not hesitate to call.

Respectfully submitted, The Doré Group

Lance Doré

, MAI , FRICS President / CEO
AG 002464 lwdore@thedoregroup. com945 Fou r th Avenue, Suite 310 | San Diego, California 92101 | www.thedoregroup.com 

## T ABLE OF 

## C ONTENTS

Summary of Salient Facts & Conclusions

................................ ................................ ........................ 7
Definitions of Fair Market Value

................................ ................................ ................................ . 9 Hypothetical Conditions and Extraordinary Assumptions

................................ ............................ 11 General Conditions And Assumptions

................................ ................................ ........................... 12 Scope of Work

................................ ................................ ................................ ............................... 16 Neighborhood Map

................................ ................................ ................................ ................... 19 Regional Descriptio n
– Los Angeles County

................................ ................................ .................. 20 City Description

– Santa Monica

................................ ................................ ................................ ... 28 Market Overview CoStar’s Office Report

– Los Angeles: 2 nd Quarter 2016

................................ .. 33 Subject Submarket

– Santa Monica

................................ ................................ .......................... 40 Property Description

................................ ................................ ................................ ..................... 44 Lease Summary

................................ ................................ ................................ ......................... 46 Zoning

................................ ................................ ................................ ................................ ............ 51
Assessment and Taxes

................................ ................................ ................................ ................... 54 Improvements Description

................................ ................................ ................................ ............ 55 Subject Photographs

................................ ................................ ................................ ................. 57 Highest and Best Use

................................ ................................ ................................ ..................... 64 Valuation Methodology

................................ ................................ ................................ ................. 68 Income Approach

................................ ................................ ................................ .......................... 69 Current Lease Comparable Summary Table

................................ ................................ ............. 70 Current Lease Comparable Map

................................ ................................ ............................... 71 Current Lease Comparable Photographs

................................ ................................ .................. 72
Current Market Rent Reconciliation

................................ ................................ ......................... 74 Retrospective Lease Comparable Summary Table

................................ ................................ .... 75 Retrospective Lease Comparable Map

................................ ................................ ..................... 76 Retrospective Lease Comparable Photographs

................................ ................................ ........ 77 Retrospective Market Rent Reconciliation

................................ ................................ ............... 79
Poten tial Gross Income

................................ ................................ ................................ ............. 80 Current Capitalization Rates Summary

................................ ................................ ..................... 82 Retrospective Capitalization Rates Summary

................................ ................................ ........... 83 Capitalization to Value

................................ ................................ ................................ .............. 84 Direct Capitalization Analysis Conclusion

................................ ................................ ................. 85 Per Year Valuation Analysis

................................ ................................ ................................ ....... 85 Per Year Market Rent Analysis

................................ ................................ ................................ .. 87
Final Reconciliation

................................ ................................ ................................ ........................ 88
Certification Statement

................................ ................................ ................................ ................. 90
Addenda

................................ ................................ ................................ ................................ ........ 92
Definitions

................................ ................................ ................................ ................................ . 93TDG 2015 022 7 

## S UMMARY OF 

## S ALIENT 

## F ACTS 

## & C ONCLUSIONS

G ENERAL

SUB JECT: 2800 Airport Avenue 2800 Airport Avenue
, Santa Monica
, Los Angeles County, California 90405

OWNER: City of Santa Monica

LEGAL DESCRIPTION: Lengthy

– Retained in File

ASSESSOR PARCEL NUMB ER: Portions of APNs 4272

- 025

- 901 and 4272

- 026

- 902 *NOTE: The subject buildings are located on portions of city owned airport property; there is no specific or legal parcel associated with the subject buildings se parate from the larger airport parcels which support a variety of aviation
and non

- aviation uses. The site analyzed in association with the subject buildings for purposes of this analysis is defined per lease agreement, and is 94,380 square feet in size,
h owever this site does not have its own APN.

DATE OF VALUE: September 12, 2016

DATE OF REPORT: September 16, 2016

DATE OF INSPECTION: September 12, 2016

INTENDED USE: The intended use of this appraisal is to assist the client in due diligence and c onsultation.

INTENDED USER(S): Santa Monica Airport

HIGHEST AND BEST USE
SITE:
AS IMPROVED: Indeterminable (See Highest and Best Use Analysis) Continued use “as is”; educational facilit yTDG 2015 022 8

HYPOTHETICAL CONDITI ONS: We are aware that the 94,380 square feet of land underlying the subject buildings and allocated per lease agreement in support of its use as an educational facility is not a separate or legal individual parcel. However, this

an alysis is based on a hypothetical condition that the 94,380 square feet of land area defined in the Master Lease Agreement is a distinct improved parcel with fee simple rights of ownership and transfer.

EXTRAORDINARY
ASSUMPTIONS: There are no Extraordinary Assumptions for this appraisal.

SALE HISTORY: The subject has not sold in the last three years, according to public records.

CURRENT LISTING / CONTRACT(S): To the best of our knowledge, t h e subject is not currently listed for sale, or under contract for sale

.



## P ROPERTY

LAND AREA: Total: 2.17 + acres; 94,380 square feet *NOTE: Land area is based on lease documents provided by the client which specify portions of the airport parcels allocated to support lessees’ use of the subject buildings as an educational facility

.

ACCESS / EXPOSURE: Frontage along Airport Avenue / Exposure is deemed average for the area

UTILITIES: All public utilities are readily available

ZONING None

– The parcels upon which the subject buildings are located are City owned, operated as an airport and not currently zoned.

IMPROVEMENTS:
Year Built: 19 55 ±

Renovations: Unknown
Condition: Average
Number of Stories: 1.00TDG 2015 022 9 Gross Building Area (GBA): Main Building

– 21,285 square feet (includes 8,094 square feet of basement area)

Garage Buildi ng
– 3,801 square feet

Property Totals: GBA*

25,086 square feet

*See area definitions in the Addenda

.



## V ALUE 

## I NDICATIONS

RECONCILED VALUE(S): Current Retro Retro Retro Retro Retro Retro Value Conclusion(s) $9,000,000 $7,815,000 $7,243,000 $6,783,000 $5,780,000 $4,903,000 $4,965,000 Effective Date(s) 9/12/2016 2015 2014 2013 2012 2011 2010 Property Rights Leased Fee Leased Fee Leased Fee Lease d Fee Leased Fee Leased Fee Leased Fee



## D EFINITION S OF 

## F AIR 

## M ARKET 

## V ALUE
“The price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable
knowl edge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. (IRS Regulation §20.2031

- 1.)” 3

Property Rights Appraised: The property right of ownership ap praised was the leased fee
interest . The leased fee interest can be defined as follows:

“ A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord

- tenant relationship (i.e., a lea se) .” 4

A lease can be defined as follows:

“ A contract in which the rights to use and occupy land or structures are transferred by the owner to another for a specified period of time in return for a specified rent. ” 5

3 Appraisal Institute, The Dictionary of Real Estate Appraisal , 5 th Edition (AI, Chicago: 2010), p75

4 Appraisal Institute, The Dictionary of Real Estate Appraisal , 5 th Edition (AI, Chicago: 2010 ). p111

5 Appraisal In stitute, The Dictionary of Real Estate Appraisal , 5 th Edition (AI, Chicago: 2010 ). p111TDG 2015 022 10

Current Market Value: The estimate of the market value of the real property in its current physical condition, use and zoning as of the appraisal date. 3

Please refer to the Definitions section in the Addenda for additional definitions.TDG 2015 022 11 

## H YPOTHETICAL 

## C ONDITIONS

AND 

## E XTRAORDINARY 

## A SSUMPTIO NS

Acceptance of and/or use of this report constitutes acceptance of the indicated Hypothetical Conditions and Extraordinary Assumptions; these can only be modified in a written document(s) executed by both parties.



## H YPOTHETICAL 

## C ONDITIONS

A h ypothetical condition is defined as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purposes of analysis.” 6

The following hypot hetical conditions apply to this specific appraisal assignment:

 We are aware that the 94,380 square feet of land underlying the subject buildings and allocated per lease agreement in support of its use as an educational facility is not a separate or legal individual parcel. However, this analysis is based on a hypothetical condition that the 94,380 square feet of land area defined in the Master Lease Agreement is a distinct improved parcel with fee simple rights of ownership and transfer.



## E XTRAORDINARY 

## A S SUMPTIONS
An extraordinary assumption is defined as “an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.” 7

The foll owing Extraordinary Assumptions apply to this specific appraisal assignment :

 There are no Extraordinary Assumptions for this appraisal.

6 U niform S tandards of P rofessional A ppraisal P ractice, 201 4

- 1 5 ed ition.

7 Ibid.TDG 2015 022 12 

## G ENERAL 

## C ONDITIONS 

## A ND 

## A SSUMPTIONS

The appraisal has been completed subject to the following General Conditions and A ssumptions:

 This appraisal was completed per the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP) and those additional requirements expected of a member of the Appr aisal Institute. The development process used was a complete analysis that is documented in this self

- contained appraisal report.

 By use of this appraisal r eport , each party that uses this r eport agrees to be bound by all of the Hypothetical Conditions an d Extraordinary Assumptions stated herein. The opinions are only as of the date stated in the appraisal r eport. Changes since that date in external and market factors

, or in the subject p roperty itself

, can significantly affect the conclusions presented in the appraisal r eport.

 This appraisal is to be used only for the purpose stated herein. While distri bution of this appraisal in its entirety is at the discretion of the client, individual sections shall not be distributed as this report is intended to be used in whole and not in part.

 All files, work papers and documents developed in connection with this assignment are the property of The Doré Group

. No part of this appraisal, its value estimates

, or the identity of the firm or the appraiser(s) may be communicated to the public through advertising, public relatio ns, media sales, or other media without The Doré Group 's prior written consent. If the appraisa l r eport is referred to or included in any offering material or prospectus, the r eport shall be deemed referred to or included for informational purposes only and The Doré Group , its employees

, and the a pp raiser (s) have no liability to such recipients. The Doré Group disclaims any and all liability to any party other than the party that retained The Doré Gro up to prepare the appraisal r eport.

 The information contained in th is appraisal r eport , or upon which the r eport is based

, has been gathered from sources the a ppraiser (s) assumes to be reliable and accurate. The owner of the subject p roperty may have pro vided some of such information. Neither the a ppraiser (s), nor The Doré Group

, shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, di mensions, sketches, exhibits, and factual matters. Any authorized user of the appraisal

r eport is obligated to bring to the attention of The Doré Group any inaccuracies or errors that it believes are conta ined in the r eport. Any p lans provided are intended to assist the client in visualizing the property; no other use of these plans is intended or permitted. Appraisals are based on the data available at the tim e the assignment is completed. Amendments/modif ications to appraisals based on new information made available after the appraisal was completed will be made, as soon as reasonably possible, for an additional fee.

 No part of the appraisal r eport shall be used in conjunction with any other analyses.
Re ference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the appraisal r eport may not be used by any person(s) other than the party(ies) to whom it is addressed or for purpos esTDG 2015 022 13 other than that for which it was prepared. Any authorized user(s) of this appraisal r eport who provides a copy to, or permits reliance thereon by, any person or entity not authorized by The Doré Group i n writing to use or rely thereon, hereby agrees to indemnify and hold The Doré Group , its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all dama ges, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the appraisal

r eport by any such unauthorized person(s) or entity(ies).

 If the appraisal r eport is submitted to a lender or investor with the prior approval of The Doré Group , such party should consider this r eport as only one factor, together with its independent investment cons iderations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Hypothetical Conditions and Extraordinary Assumptions incorporated in this appraisal

r eport.

 The appraiser ( s ) may not divulge the material (evaluation) contents of the report, analytical findings, or conclusions, or give a copy of the report to anyone other than the client, legal authorities via subpoena, or the Appraisal Institute.

 The appraisal r eport is based on the assum ption of: (a) responsible ownership and competent management of the subject p roperty; (b) no hidden or unapparent conditions of the subject p roperty, subsoil or structures that render the p roperty more or less valuable (no responsibility is assum ed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the appraisal r eport is based.

 The physical condition of the improvements considered by the appraiser(s) is based on visual inspection by the a ppraiser (s)

. The Doré Group assumes no responsibility for the soundness of structural components or for t he condition of mechanical equipment, plumbing or electrical components.

 The presence of hazardous substances may affect the value of the subject property

. No hidden or unapparent conditions of the subject property, subsoil or structure, including withou t limitation

, asbestos, formaldehyde foam insulation, polychlorinated biphenyl, petroleum leakage, or agricultural chemicals

, which would make the property more or less valuable, were discovered by or made known to the appraiser(s). The appraiser (s) is
not qualified to test for such substances and n o responsibility is assumed for such conditions or engineeri ng necessary to discover them. Unless otherwise stated, th e apprais er(s) assume d there wa s no existence of hazardous materials or conditions, in any for m, on or near the subject property.TDG 2015 022 14

 No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real es tate appraiser. T itle to the subject property was presum ed to be good and merchantable and t he property was appraised assuming there were no adverse easements

, encroachments

, liens, encumbrances, special assessments, or other restrictions

.

 The appraised value was based on the assumption that there were no tax liens affecting the subject property. Unless otherwise noted, the subject property was found to be current in the payment of real estate taxes as of the date of value according to the San Diego C ount y treasurer

- tax collector

. It was assumed that any special assessments affecting the subject property are typical and appropriate for the area and do not have an impact on the value conclusion in this report and that any outstanding bonds have been paid.

 Unless stated herein, the subject property is assumed to be outside of areas where flood hazard insurance is mandatory. Maps used by public and private agencies to determine these areas are limited with respect to accuracy. Due diligence has been exercised in interpreting these maps, but no responsibility is assumed for misinterpretation.

 No opinion is expressed with regard to potential seismic impact and it was assumed that the subject’s potential risks are similar to those shared by most properties throu ghout the region. The Doré Group makes no warranty as to the seismic stability of the subject land. The assumption was made that any future development of the property, if any, would occur in accordance wi th all appropriate regulations and ordinances regarding grading, fill, and applicable building codes.

 Except as may be otherwise stated in the letter of engagement, the a ppraiser (s) shall not be required to give testimony in any court or administrative pr oceeding relating to the subject p roperty or the a ppraisal. If the appraiser ( s ) is subpoenaed pursuant to a court order, the client agrees to pay The Doré Group ’s regular per diem rate plus
expenses.

 In t he event of a claim against The Doré Group

, its affiliates

, their respective officers or employees

, or the a ppraiser ( s ) in connection with or in any way relating to this appraisal

r eport or this engagement , the maximum damages recoverable shall be the amount of the monies actually collected by The Doré Group or its affiliates for this appraisal r eport and under no circumstances shall any claim for consequen tial damages be made.

 Necessary licenses, permits, consents, legislative or administrative authority from any local, state

, or f ederal government

, or private entity
, are assumed to be in place or reasonably obtainable.

 A civil rights act passed by Congre ss , known as Americans with Disabilities Act (ADA) of 1990, guarantee s individuals with disabilities equal opportunity in public accommodations, employment, transportation, government services, andTDG 2015 022 15 telecommunications. Statutory deadlines bec a me effective o n various dates between 1990 and 1997. The Doré Group has not made a determination regarding the subject’s ADA compliance or non

- compliance. Non

- compliance could have a negative impact on value, however th is has not been considered or analyzed in this appraisal.TDG 2015 022 16 

## S COPE OF 

## W ORK

According to the Uniform Standards of Professional Appraisal Practice , it is the appraiser’s responsibility to develop and report a scope of work that results in credible results that are appropriate for the appraisal problem and intended user(s). Therefore, the appraiser must identify and consider:

● the client and intended users; ● the intended use of the report; ● the type and definition of value; ● the effective date of value; ● assignment conditions; ● typical client expectations; and ● typical appraisal work by peers for similar assignments.

In preparing this report, we investigated numerous land and improved sales and listings, as well as market rent comparables, from the area, and confirmed all data with buyers, sellers, brokers, property developers, leasing agents, and public officials when possible

. We col lected, confirmed, and reported data that were applicable in the valuation process. Data collection involved the use of various sources including the Multiple Listing Service, RealQuest, Dataquick, Inc. (data collection services), Los Angeles County deed r ecords, and in

- house materials. The data collected and confirmed have been reported to an extent sufficient for the particular appraisal problem involved.

This appraisal is prepared for Mr. Stelios Makrid es, Manager of the Santa Monica Airport

. The problem to be solved is to estimate the current fair market value and market rent for the subject as of the valuation date of September 12 , 2016 , as well as retrospective ma rket values
and rents for years 2015, 2014, 2013, 2012, 2011 and 2010. The intended use is to assist the client in due diligence and consultation

. This appraisal is intended for the use of the Santa Monica Airport

.

S COPE OF W ORK

REPORT TYPE: This is an appraisal report as defined by Uniform Standards of Professional Appraisal Practice. This format provides a summary of the appraisal process, subject and market data and valuation analyses.

PROPERTY IDE NTIFICATION : The subject has been identified b y the legal description, assessors' parcel number s and documents supplied by the client.TDG 2015 022 17

INSPECTION: A comple te interior and exterior observation of the subject property has been made, and photographs taken. The property was last inspected on September 12 , 201 6 , with photographs taken on this same day. Observations of the interior and exterior portions of the subject property were made

.

MARKET AREA AND ANAL YSIS OF
MARKET CONDITIONS: A complete analysis of market conditions has been ma de. The appraiser maintains and has access to comprehensive databases for this market area and has reviewed the market for sales and listings relevant to this analysis.

HIGHEST AND BEST USE
ANALYSIS: A complet e as vacant and as improved highest and best use analysis for the subject has been made. Physically possible, legally permissible and financially feasible uses were considered, and the maximally productive use was concluded.

VALUATION ANALYSES : Cost A pproach: A cost approach was not applied as the actual age of the subject's improvements makes physical depreciation difficult to accurately measure , and there are no legal parcels specifically and separately associated with the subject improvements

.
Sales Comparison Approach: A sales approach was not applied as there w a s not sufficient data to develop a value estimate due to the unique nature of the subject's location on Airport land, close proximity to frequent flight operations, as well as the additional FAA regulations which govern use of and any improvements or alte rations to the subject buildings.

Income Approach: An income approach applied as the subject is an income producing property, and there is adequate data to develop a value estimate with this approach.TDG 2015 022 18

DOCUMENTATION: The Doré Group w as provided with the document(s) listed below. Unless noted, the document(s) did not indicate any unusual or detrimental conditions that have an impact on value. These documents were assumed to be accurate and were relie d upon in the valuation of the subject property.

 1998 Plot Plan

 2010

– 2016 Rent Rolls

 1998 Rental Analysis

 2008 Lease Term Sheet

 Master Lease Agreement (#5201)

No responsibility is assumed for any missing pertinent data contained within these documents and the reconciled value does not reflect knowledge of their content.TDG 2015 022 19



## N EIGHBORHOOD 

## M APTDG 2015 022 20 

## R EGIONAL 

## D ESCRIPTION 

## – L OS 

## A NGELES 

## C OUNTY

One of California’s oldest counties, Los Angeles County
is situated in the southwest corner of the state and is
border ed by Kern County (north), 70 miles of the Pacific Ocean coastline and Orange County (south), Ventura County (west), and San Bernardino County (east). With a land area of 4,752 square miles, it is home to 88 incorporated cities and is the most populous cou nty in the U.S. Most of the population
resides in the south ern and southwest ern portions of the county , with major population centers also located in the Los Angeles Basin, San Fernando Valley, and San Gabriel Valley and secondary centers in the Santa Clar ita Valley, Crescenta Valley, and Antelope Valley. The county is divided into the following m ajor areas:

 EAST: Eastside, San Gabriel Valley, Pomona Valley

 WEST: Westside, Beach Cities

 SOUTH: South Bay, Palos Verdes Peninsula, South Los Angeles, Gateway Cities, Los Angeles Harbor Region

 NORTH: San Fernando Valley, portions of the Conejo Valley and Antelope Valley, Santa Clarita Valley

 CENTRAL: Downtown Los Angeles, Mid

- Wilshire



## T RANSPORTATION

An extensive and well

- developed freeway system provides access to, from and throughout Los Angeles County. Primary freeways include Interstates 5, 105, 405, 605, 10, 110, 210, and 710. There are also numerous state highways and a vast urban and suburban street network. All thoroughfares are impacted by moderate to se vere traffic congestion during commute hours and freeway

- to

- freeway interchanges regularly rank in the top ten most congested in the nation. Bus service is provided by Los Angeles Metro and numerous municipal operators. Los Angeles International Airport, one of the busiest airports in the world, is the primary commercial airport serving the region . Additional airports include Long Beach Municipal Airport (Long Beach), Bob Hope Airport (Burbank), and LA/ Palmdale Regional Airport (Palmdale), as well as nume rous smaller scale commercial and non

- commercial facilities.

Los Angeles is a major freight railroad transportation hub due to large volumes of freight arriving/departing out of the county's port facilities and industrial hubs; Union Pacific and Burlingt on Northern Santa Fe provide freight rail service. Amtrak, Los Angeles Metro Rail, and Metrolink provide commuter and long

- distance passenger rail service; Amtrak also runs several intercity passenger rail lines from Los Angeles’ Union Station, including t he Pacific Surfliner, the Coast Starlight, the Southwest Chief, and the Sunset Limited. California High

- Speed Rail is a highTDG 2015 022 21

speed rail system currently under construction. The p roposed line w ill connect Los Angeles with San Francisco by 2029 , with f uture extensions to San Diego and Sacramento. Due to the project's nearly $70 billion cost and large scope , it is surrounded by much controversy and will likely face significant delays

.

The county has two main seaports

– the Ports of Los Angeles and Long Beach

– which handle over a quarter of all container traffic entering the U .S., making the complex the largest and most
i mportant port in the country and the third

- largest port in the world in shipping volume. The Port of Los Angeles is also the largest cruise ship center on the West Coast, handling in excess of a million passengers annually.



## S ERVICES
Los Angeles County offers a complete array of services to residents and visitors. The Los Angeles Department of Water & Power and Southern California Gas Company provide the majority of residents with water, gas and electricity. Law enforcement and fire protection are provided by the Los Angeles County Sheriff and Fire Departments, as well as individual city police and fire departments. There are approximately 78 p ublic school districts overseen by the Los Angeles County Office of Education. The county is home to three world

- class research institutions and 118 public and private colleges and universities

– including several California State Universities (Long Beach, Northridge, and Los Angeles) and University of Southern California.



## R ECREATION 

## | T OURISM
Los Angeles is one of the nation’s top tourist destinations due to its wide variety of recreational attractions, including numerous beaches, major amusement parks, golf courses, and a multitude of historical, cultural and sporting venues and events. Primary attractions include Venice and Malibu Beaches, Six Flags (Hurricane Harbor and Magic Mountain), Universal Studios, Raging Waters, Hollywood and Beverly Hills, the Queen Mary, and the Los Angeles Zoo. The Los Angeles Convention Center has 720,000 square feet of exhibition space and 147,000 square feet of meeting space and hosts several major annual conventions . The 4,300 acre Griffith Park is the most visited city p ark in the county. There are a host of other natural attractions, including the
Santa Monica and San Gabriel Mountains

, Angeles and Los Padres National Forests

, Santa
Catalina and San Clemente Islands

, Castaic L ake , the Los Angeles, Rio Hondo, Santa Clara, and
San Gabriel Rivers , and the Mojave Desert, providing for outdoor recreation.

In 201 5 , Los Angeles County recorded 4 5

. 5 million visitors (day and overnight), an increase of

2

. 8 % from 2014 making 2015 the fifth consecutive year in which the County pos ted record levels
of visitor volume. The Los Angeles Tourism and Convention Board report ed that business and leisure travelers spent more than $ 19.6 billion in 201 4 , a nother record and an increase of 6

. 8 %
from 201 3, which was also a record high

.TDG 2015 022 22



## P OPULATIO N 

## | D EMOGRAPHICS
As mentioned, Los Angeles County is the most populous county in the U.S. and is home to 88 incorporated cities , the largest being Los Angeles ( 4,030,904 ), Long Beach ( 484,958 ), and Glendale ( 201,668 ). The city of Los Angeles is the county seat of government

, the largest city in the state, and second largest in the U.S. behind New York City.

The California Department of Finance estimated the county’s population at 10,241,335 as of January 201 6 , an increase of 0. 8 % from 201 5
, 4.3 % from the 2010 Census ( 9
, 818
, 605 ), and 7.6 %
from the 2000 Census ( 9
, 519
, 338 ). This population comprises close to one

- quarter of the state’s total population. Population growth is expected to slow slightly this year and next, with the rate of growth at approximately 0.6% this year and 0.4% in 2017. Even at such low growth rates, the county will increase by over 100,000 residents during that time period. Most of the recent population growth in Los Angeles County has been due to natural increase (births outnumbering
de aths), while net migration was slightly negative again last year. The county’s high cost of living and lack of affordable housing units for low and middle

- income households are contributing to the slowdown in population growth.

A ccording to the latest Census data, Los Angeles County had 3,241,204 households with 2.98 persons per household. The median age was 35.9 years.



## R EGIONAL 

## E CONOMY 8

Trends in employment are a key indicator of economic health and strongly correlate with real estate demand. Los Ang eles is known as the capital of e ntertainment, m anufacturing , and
i nternational t rade in the U.S., but its economic base is broad and also driven by the aerospace, automotive, biotechnology, and fashion industries. Two busy seaports, the busiest airport

, t hree
world

- class research institutions , and 118 colleges and universities contribute significantly to the region’s $584 billion of annual economic activity

.

Like the nation and state, Los Angeles County experienced broad

- based job gains in 2015, adding ap proximately 95,000 jobs last year. Job gains were seen in most of the county’s major industries, with records reached in seven (out of 17) and two more poised to surpass their pre

recession peaks in 2016. The largest job gains occurred in health care and s ocial assistance (21,800 jobs), followed by leisure and hospitality (19,600 jobs) and government (10,000 jobs).

8 “ 2016

- 2017 Economic Forecast & Industry Outlook,” The Kyser Center for Economic Resea rch.TDG 2015 022 23

The fastest growing sectors in percentage terms were construction (5.9%), leisure and hospitality (4.2%), wholesale trade (3.5%), and health car e and social assistance (also 3.5%). Private sector job losses occurred in manufacturing, information, finance and insurance, and the
natural resources sector.



### E MPLOYMENT 

### | U NEMPLOYMENT 

### R ATE According to the California Employment Development Department , the county had a labor force
of 5,041,800 in June 201 6
, an increase of 1.9% from the previous year. Of this total, 4,781,600 were employed. The county added 94,700 jobs in 2015, equivalent to a 2.2% annual increase. A majority of the county’s major indus tries added jobs last year, as broad

- based growth pushed wage and salary jobs to a record high. Los Angeles County should continue to add jobs at a 1.7% annual rate this year, followed by a 1.0% annual rate in 2017. Along with job growth, the unemployment rate fell to 6.9%, the lowest rate of the post

- recession period. The unemployment rate should further improve to 6.2% this year and 5.9% in 2017.



### P ERSONAL 

### | H OUSEHOLD 

### I NCOME

With the onset of the recession in late 2008, income s began to decline . According to the latest
C ensus figures

, Los Angeles County had a per capita income of $ 27,987 , as compared to the state’s income of $ 29,906 . Median household income was $ 55,870 , compared to $ 61,489 in the
state. 1 8

. 4 % of the county ’s population live d be low the pove rty level, which is higher than the state (1 6

. 4 %). The countywide homeownership rate was 46.4%, lower than the state (54.8%).

Total personal income increased by 4.5% in 2015, and is expected to maintain its trajectory this year with anticipated gains of 4.4%, followed by a gain of 5.3% in 2017. Now that the economy is back to full employment, upward pressure on wages, a strong dollar, and weak inflation may lead to significant gains in household purchasing power this year. Per capita income growth,
which held relatively steady with a 3.6% gain in 2015, should respond to accelerating wage growth to rebound to 3.9% this year and accelerate to 4.9% in 2017. Since much of the gain inTDG 2015 022 24

income is expected to be spent, local spending as measured by total taxable s ales is expected to increase by 5.5% this year and 6.8% the next after a lackluster 2.9% increase in 2015. This means local sales and use tax revenues will climb, putting local government agencies on a sounder financial footing.



## R EAL 

## E STATE 

## D EVELOPMENT 9

L os Angeles County has a wide range of property types and limited vacant land in the populated areas, typical of a large metropolitan area. The recent recession resulted in a significant slowdown across all real estate market sectors. Currently, the region joins the nation in a recovery, which has renewed optimism in regard to real estate sales, leasing and development.



### R ESIDENTIAL Similar to the entire Southern California region, home prices in Los Angeles County peaked in
the mid

- 2000s, stimulating more t han 25,000 permits for new housing units. With the fallout over the subprime lending and national financial crisis in 2008

- 09, prices of both resale and new homes plummeted and new home construction bottomed out. In 2009, only 5,653 housing unit permits we re issued. As a result of an improving economy, cautious optimism began to take hold in 2012, resulting in the 11,000 new housing unit permits followed by 15,800 in 2013. The market stumbled in 2014, largely a result of traditional first

- time buyers not f illing the void left by the reduction in institutional investors, restrictive mortgage lending standards , and reduced affordability

. The median price for all homes was $ 53 0,000 in June 2016, +6

. 1 % from June 2015.

S ince the end of the recession, multi

- family has been the most active area of new residential
construction , a result of job growth enabling younger people to create new households, continued difficulty in obtaining financing, and increased demand for student and senior rental housing . Vacancy rates are low

, rent s are rising, and despite new construction, supply is still lagging behind demand, especially for more affordable units. This trend is poised to increase

even more in the next few years. A s more apartment units become available, vacancy rates will

9 “ 2016

- 2017 Economic Forecast & Industry Outlook,” The Kyser Center for Economic Research.TDG 2015 022 25

rise and slow increases in rental rates. According to Loopnet, the average asking price for multi

family properties in Los Angeles County as of May 2016 was $ 257,168.01 per unit, an increase of
0.5% from three months earlier and 13.1% from the previous year.



### O FFICE Although the Los Angeles County office market has lagged behind other major cities in the past several years, it appears to be surging upward, with some indicators even surpassing prerecession levels. This is primarily a result of emp loyment gains in the financial and professional business services sectors, coupled with limited new construction. In a number of submarkets, t ech is the primary driver behind the increased demand. The primary office areas in Los Angeles County are West Lo s Angeles, Downtown Los Angeles, South Bay, Burbank/ Glendale/Pasadena and Mid

- Wilshire. According to Loopnet, the average asking price for office properties in Los Angeles County as of May 2016 was $ 339.74 per square foot , a n increase of
4.2% from three m onths earlier and an increase of 14.7% from the previous year.



### R ETAIL Los Angeles is a major retail hub in the state of California, with strong support from both residents and tourists. The primary retail areas in Los Angeles County are South Bay, San G abriel Valley, Burbank/Glendale/Pasadena, San Fernando Valley and Mid

- Cities. According to Loopnet, the average asking price for retail properties in Los Angeles County as of May 201 6 was $286.30 per square foot, an increase of 3

. 9 % from three months earli er and 2

. 6 % from the previous year.TDG 2015 022 26



### I NDUSTRIAL Los Angeles County is the largest manufacturing center in the U.S., in large part due to its two deep water ports and well

- developed transportation network. The primary industrial areas in the county are Cen tral Los Angeles, Mid

- Counties LA, San Fernando Valley East, Vernon Area, Lower San Gabriel Valley, and Carson/Rancho Dominguez. According to Loopnet, the average asking price for industrial properties in Los Angeles County as of May 2016 was $ 193.36 per square foot , an increase of 3.6% from three months earlier and 19.2% from the previous year.TDG 2015 022 27

The outlook for the industrial sector is positive, especially for warehouse / distribution facilities,
data centers

, and research and development centers. Continu ed improvement in vacancy and asking rents depend largely on increases in international trade, industrial production and e

commerce.



## C ONCLUSION

The national economic downturn of 2008

- 2009 h it the Los Angeles region relatively hard, but

recovery has taken a firm hold. Over the long term, the county will be positively impacted by a
slow and s teadily increasing population base , a relatively strong GDP , a well

- developed distribution network, and its established reputation as a thriving metropolitan and
manufac turing area and touristic destination

. It is anticipate d that the regional economy will continue to improve and employment will increase , strengthening the demand for real estate.TDG 2015 022 28 

## C ITY 

## D ESCRIPTION 

## – S ANTA 

## M ONICA



## L OCATION

Santa Monica is a beachfront cit y in western Los Angeles County, California, United States. Situated on Santa Monica Bay, it is bordered on three sides by the city of Los Angeles

– Pacific Palisades to the north, Brentwood on the northeast, Sawtelle on the east, Mar Vista on the southeas t, and Venice on the south. The city of Santa Monica rests on a mostly flat slope that angles down towards Ocean Avenue and towards the south. High bluffs separate the north side of the city from the beaches.



## T RANSPORTATION
The Santa Monica Freeway (Inter state 10) begins in Santa Monica near the Pacific Ocean and heads east. The Santa Monica Freeway between Santa Monica and downtown Los Angeles has the distinction of being one of the busiest highways in all of North America. State Route 2 (Santa
Monica Bou levard) begins in Santa Monica, barely grazing State Route 1 at Lincoln Boulevard, and continues northeast across Los Angeles County, through the Angeles National Forest, crossing the San Gabriel Mountains as the Angeles Crest Highway, ending in Wrightwood . Santa Monica is also the western (Pacific) terminus of historic U.S. Route 66. Close to the eastern boundary of Santa Monica, Sepulveda Boulevard reaches from Long Beach at the south, to the northern end of the San Fernando Valley. Just east of Santa Mon ica is Interstate 405, the "San Diego Freeway", a major north

- south route in Los Angeles County and Orange County,
California.

The city of Santa Monica runs its own bus service, the Big Blue Bus, which also serves much of West Los Angeles and the Univers ity of California, Los Angeles (UCLA). A Big Blue Bus was featured prominently in the action movie Speed. The city is also served by the Los Angeles County Metropolitan Transportation Authority's (Metro) bus lines. Metro also complements Big Blue service, as when Big Blue routes are not operational overnight, Metro buses make many Big Blue Bus stops, in addition to MTA stops.

As for light rail, design and construction on the 6.6

- mile extension (10.6 km) of the Expo Line from Culver City to Santa Monica sta rted in September 2011, with service beginning on May 20, 2016. Santa Monica Metro stations include 26th Street/Bergamot, 17th Street/Santa Monica College, and Downtown Santa Monica. Travel time between the downtown Santa Monica and the downtown Los Angele s termini is approximately 47 minutes.TDG 2015 022 29

The city owns and operates a general aviation airport, Santa Monica Airport, which has been the site of several important aviation achievements. Commercial flights are available for residents at Los Angeles Internatio nal Airport, a few miles south of Santa Monica.



## P OPULATION 

## / D EMOGRAPHICS
According to the California Department of Finance, Santa Monica had a population of 93,640 as of January 2016, making it the 19 th largest city in Los Angeles County. This is an incre ase of 0.6% from the January 2015 population of 93,093 and 4.4% from the 2010 Census population of 89,736.

According to the latest available U.S. Census data, the city of Santa Monica had 46,917 households with 1.87 persons per household. The median age w as 40.3 years, which is about 5 years older than the state median. The homeownership rate was 27.1%, compared to 56% in California. A total of 11.3% of the population was living below the poverty level, compared to
15.3% in the state.



## S ERVICES 

## / R ECREATION
The City provides a full range of services, including police protection, water and wastewater utilities, street maintenance, public transportation, parking, parks and recreation, planning, and building and safety. Gas, electric and telephone services are provided by private utility companies. The Santa Monica

- Malibu School District operates eight elementary, one middle, and one high school, and there are several private schools in the city. Santa Monica Community College, a two

- year, public community colle ge is also located in the city. Two major hospitals are within the Santa Monica city limits, UCLA Santa Monica Hospital and St. John's Hospital. There are four fire stations providing medical and fire response within the city staffed with 6 Paramedic Engin es, 1 Truck company, 1 Hazardous Materials team and 1 Urban Search & Rescue team. Santa Monica Fire Department has its own Dispatch Center. Ambulance transportation is provided by AmeriCare Ambulance Services. The Los Angeles County Department of Health
Se rvices operates the Simms/Mann Health and Wellness Center in Santa Monica. The Department's West Area Health Office is in the Simms/Mann Center.

The Santa Monica Looff Hippodrome (carousel) is a National Historic Landmark. It sits on the
Santa Monica Pier , which was built in 1909. The La Monica Ballroom on the pier was once the largest ballroom in the US and the source for many New Year's Eve national network broadcasts. The Santa Monica Civic Auditorium was an important music venue for several decades and hosted the Academy Awards in the 1960s. McCabe's Guitar Shop is still a leading acoustic performance space as well as retail outlet. Bergamot Station is a city

- owned art gallery compound that includes the Santa Monica Museum of Art. The city is also home to the California Heritage Museum and the Angels Attic dollhouse and toy museum.TDG 2015 022 30

Santa Monica has three main shopping districts, Montana Avenue on the north side of the city, the Downtown District in the city's core, and Main Street on the south end of th e city. Each of these districts has its own unique feel and personality. Montana Avenue is a stretch of luxury boutique stores, restaurants, and small offices that generally features more upscale shopping.
The Main Street district offers an eclectic mix of clothing, restaurants, and other specialty retail. The Downtown District is the home of the Third Street Promenade, a major outdoor pedestrian

only shopping district that stretches for three blocks between Wilshire Blvd. and Broadway (not
the same Broadwa y in downtown and south Los Angeles). Third Street is closed to vehicles for those three blocks to allow people to stroll, congregate, shop and enjoy street performers. Santa Monica Place, featuring Bloomingdale's and Nordstrom in a three

- level outdoor

env ironment, is located at the south end of the Promenade. After a period of redevelopment, the mall reopened in the fall of 2010 as a modern shopping, entertainment and dining complex with more outdoor space.

The oldest movie theater in the city is the Maje stic. Also known as the Mayfair Theatre, the theater which opened in 1912 has been closed since the 1994 Northridge earthquake. The Aero Theater (now operated by the American Cinematheque) and Criterion Theater were built in the
1930s and still show movies . The Santa Monica Promenade alone supports more than a dozen
movie screens.

Palisades Park stretches out along the crumbling bluffs overlooking the Pacific and is a favorite walking area to view the ocean. It includes a totem pole, camera obscura, artwor k, benches, picnic areas, pétanque courts, and restrooms. Tongva Park occupies 6 acres between Ocean Avenue and Main Street, just south of Colorado Avenue. The park includes an overlook, amphitheater, playground, garden, fountains, picnic areas, and restro oms.



## L OCAL 

## E CONOMY 

## / I NCOME
The national economy continues to recover modestly. After annual growth of just over 2% for the last four years, many economists are projecting growth in the 3% range annually over the 2014

- 2016 time period. Unemployment, whi ch has been dropping for more than five years, fell to 5.8% in November. The strong recovery in the housing market has begun to level off, while inflation is expected to remain relatively low through at least 2016. Unemployment continues to fall as more pr ivate sector jobs have now been added than were lost during the recession, housing sales and median prices have been strong, and the commercial real estate market continues to show lower vacancy rates and higher asking rents.TDG 2015 022 31

Personal income and taxable sa les are expected to continue to show consistent moderate growth, assisting in the continued stabilization of the State’s budget. Santa Monica tends to weather economic downturns better and recover faster than other jurisdictions, due in large part to its g eographic location and to its diversified tax revenue base, which generally protects the City from downturns that impact one or a limited number of sectors of the economy. The City’s major tax revenues have recovered significantly and have exceeded pre

- rec ession levels.



### E MPLOYMENT 

### | U NEMPLOYMENT According to the California Employment Development Department, the city of Santa Monica had a total labor force of 56,300 as of June 2016, of which 4.4% were unemployed. According to the 2014 American Community Surv ey, the city had a median household income of $74,534, up from $68,842 in 2010. This is considerably higher than the U.S. ($53,482), California ($61,489) and Los Angeles County ($55,870). Approximately 11.3% of all city residents and 5.2% of all
families l ive below the poverty level, which compares to the U.S. (15.6% and 11.5%, respectively) and is lower than California (16.4% and 12.3%, respectively).



## R EAL 

## E STATE 

## D EVELOPMENT



## R ESIDENTIAL
According to the 2014 American Community Survey
, the city had a tot al of 50,454 housing
units. Of this total, 18.6% were single family detached homes, 4.1% were single family attached homes, 77% were multi

- family units, and 0.3% were mobile homes. CoreLogic reported a median home price of $1,411,500 in June 2016, up 38.8% from $1,017,000 in June 2015, and a total of 61 sales during the month.



### O FFICE According to the Costar Office Market Report for Los Angeles County, as of the 2nd Quarter 2016, there were a total of 569 office buildings totaling 15,430,128 square feet in the Santa Monica submarket. Vacancy was 11.2%, slightly higher than the 10.6% average for the entire Los Angeles County. Year

- to

- date net absorption totaled a negative (91,046) square feet. No new space was delivered during the quarter, but 22,837 square f eet were still under construction. The average rental rate was $54.61 per square foot, substantially higher than the county’s average office rental rate of $32.23. 10

10 The Costar Office Report (Second Quarter 2016)

– Los Angeles County, Costar Group.TDG 2015 022 32



### R ETAIL According to the Costar Retail Market Report for Los Angeles County, as of the 2nd Quarter 2016, there were a total of 695 retail buildings totaling 4,813,336 square feet in the Santa Monica submarket. Vacancy was 3.0%, lower than the 3.4% average for the entire Los Angeles County. Year

- to

- date net absorption totaled a negative 19,41 2 square feet. Only 675 square feet of new space were delivered during the quarter and there was no space under construction. The average rental rate was $62.50 per square foot, substantially higher than the county’s average office rental rate of $31.69. 11



## C ONCLUSION
In the short term, the city of Santa Monica is expected to continue to recover from the recent recessionary economy along with the rest of the county, state and nation. The established reputation of the city resulting in a strong tourism base, t he year

- round mild climate, and overall quality of life, are the primary reasons why the city is expected to continue to thrive over time.

11 The Costar Retail Report (Second Quarter 2016)

– Los Angeles County, Co star Group.TDG 2015 022 33 

## M ARKET 

## O VERVIEW 

## C O 

## S TAR 

## ’ S 

## O FFICE 

## R EPORT 

## – L OS 

## A NGELES 

## : 2 ND 

## Q UARTER 

## 2016

According to The CoSt ar Office Report , Los Angeles’ office market showed continued stability and strength during the 2 nd Quarter 2016. Vacancy decreased slightly to 10.6% and, total net absorption was a positive 1,280,416 square feet, vacant sublease space decreased to 1,396,0 87 square feet. Rental rates increased, ending the quarter at $32.23 per square foot per year. Seven new buildings, totaling 163,212 square feet, were delivered to the market during the quarter, and there were 3,337,163 square feet still under construction

.



## S UPPLY
Key indicators of supply include existing inventory and new construction. Since 2005, Los Angeles’ existing office inventory has increased steadily every year, however the sector’s most significant growth occurred between 2005 and 2009. Between 2005 and 2009, Los Angeles’ existing office inventory increased 416,867,206 (17,433 buildings) to 426,315,310 (17,853 buildings) square feet. During this time period, new space delivered bottomed out at 2,253,749 (2005) and peaked at 4,020,321 (2009) squar e feet. Between 2005 and 2009, a total of 15,701,067 square feet were delivered which represents nearly two thirds of the total space delivered since 2005 to date. As the 2008 economic downturn settled in, the rate of new construction significantly decreas ed, and remain well below pre

- recession levels. A total of 634,287 square feet in 14 buildings have been delivered year

- to

- date in 2016, 7 in the 1 st
Quarter and 7 in the 2 nd Quarter. Throughout the remainder of this year, new construction is expected to r emain conservative as confidence in the economy increases. A detailed discussion of regional office supply indicators (overall and by building class ) follows

.TDG 2015 022 34



### I NVENTORY Los Angeles County had a total office inventory of 431,034,561 square feet (18,013 bu ildings) at
the end of the 2 nd Quarter. Of this space, 69,872,747 square feet (708 buildings) were in the central business district and 361,161,814 square feet (17,305 buildings) were in suburban
submarkets. Class A space accounted for 182,082,939 square f eet (990 buildings), Class B space accounted for 161,513,787 square feet (5,699 buildings), and Class C space accounted for 87,437,835 square feet (11,324 buildings)

.



### N EW 

### C ONSTRUCTION During the 2 nd Quarter, seven office buildings totaling 163,212 square feet were delivered to the Los Angeles region. Seven new buildings were delivered in the 1 st Quarter totaling 471,075 square feet, 15 buildings totaling 857,496 square feet were delivered in the 4 th Quarter 2015, and 19 buildings totaling 271,406 square f eet were delivered in the 3 rd Quarter.
Notable deliveries in the 2 nd Quarter 2016 are as follows:

 a 64,000 square foot building at 925 N La Brea Ave (Mid

- Wilshire submarket) was 75% occupied at the end of the quarter;

 the 60,466 square foot Westlake Park Place

– Phase II

– Bldg D (Ventura South submarket) was 100% occupied at the end of the quarter;

 a 26,400 square foot building at 3515 Eastham Dr (West Los Angeles submarket) was 100% occupied at the end of the quarter.

There were 46 office buildings (to taling 3,337,163 square feet) still under construction at the end of the quarter. This pending space was primarily dispersed among three submarkets

– Downtown Los Angeles (1,106,141 square feet), Mid

- Wilshire (649,601 square feet), and the West Los Angeles (593,382 square feet). The three largest projects under construction were:

 Los Angeles Federal Courthouse ( Downtown Los Angeles submarket) consisting of 60 0,000 square feet, 100% pre

- leased, with delivery expected in the 4 th Quarter 201 6 ;

 Office Plaza at Wilshire Grand (Downtown Los Angeles submarket) consisting of 356,141 square feet, 0% pre

- leased, with delivery expected in the 2 nd Quarter 201 7 ; and,

 Sunset Bronson Studios

- Icon ( Mid

- Wilshire submarket) consisting of 323,273 square foot, 10 0%

pre

- lease d, with delivery expected in the 1 st Quarter 201 7

.



## D EMAND
Key indicators of demand include absorption, vacancy, lease rates and sales activity. Between 2005 and 2007, demand for office space throughout the region was strong with a peak average annual posi tive net absorption of 9,602,257 square feet (2005) and a low of 534,433 square feet (2007). During this time period, average annual vacancy rates peaked at 8.1% in 2005, and bottomed out at 7.6% in 2007. Average annual rental rates were at their lowest ($ 25.52 per square foot) in 2005, and a high of $31.08 in 2007. In 2008, the downturn in the national economy impacted real estate markets everywhere, driving absorption and rental rates down and vacancies up. While the average rental rate rose slightly in 2 008 to $31.24, net absorptionTDG 2015 022 35

took a significant downward turn with negative (6,420,587) square feet absorbed in that year which resulted in a significant increase in vacancy at 9.7%, an increase of over 2 percent over the prior year. Negative net absorpti on, increasing vacancy and declining rental rates continued through 2009 and 2010. Vacancy peaked in 2011 at 12.6% for the region, although net absorption turned positive in that year with a positive 42,042 square feet absorbed. Recovery
ensued in 2012 as vacancy began to decline and has remained on a downward trend ever since, net absorption rates have remained positive, and rental rates have steadily increased; these trends are expected to continue for the remainder of 2016. A detailed discussion of regio nal office demand indicators (overall and by building class ) follows

.



### N ET 

### A BSORPTION In 2005 and 2006, Los Angeles’ office market absorption was strong with 9,602,257 square feet absorbed in 2005 and 4,539,882 square feet absorbed in 2006. Net absorption remained positive in 2007, albeit at a tempered pace with a net positive of 534,433 square feet. The 2008 economic decline caused a dramatic decrease in demand resulting in total negative net absorption of (6,420,587) square feet by year

- end. In 2009 and 2010, absorption still struggled, with negative net absorption of (5,893,894) square feet in 2009 and (2,424,409) square feet in 2010. In 2011, there was an uptick in demand, increasing absorption to 42,042 square feet. Increasing absorption continued in 2 012, 2013 and 2014 ending each year at net positive levels of 1,742,016, 1,714,238, and 3,261,379 square feet, respectively. The 1 st and 3 rd Quarters of 2015 posted negative absorption of (333,200) and (355,526) respectively, however the year ended positiv e overall with 2,903,976 total square feet absorbed. Net absorption rates have continued to be positive in the first two quarters of 2016 with 688,452 square feet in the 1 st Quarter and 1,280,416 in the 2 nd Quarter. Absorption is expected to continue conse rvatively increasing as confidence in the economy continues to improve.

The following tenants moved out of large blocks of space in 2016:

 Twenty

- First Century Fox, Inc. vacated 168,302 square feet at 407 North Maple;

 Warner Brothers vacated 43,014 square feet at 15301 Ventura Blvd ;

 SoCal Edison vacated 26,826 square feet at 2440 S Sepulveda Blvd

.
The following tenants moved into large blocks of space:

 City of Hope occupied 137,936 square feet at 1218 S 5 th Ave;

 DaVita, Inc. occupied 131,144 square feet at 2175 E Park Place;

 WeWork occupied 93,464 square feet at The Gas Company Tower.

Net absorption in Los Angeles’ central business district was a positive 457,027 square feet in the
2 nd Quarter, preceded by 81,922 in the 1 st Q uarter , positive 106,933 in the 4 th Q uarter 2015
, and positive 1,670,488 in the 3 rd Q uarter 2015

. Los Angeles’ suburban markets had posi tive net absorption of 823,389 square feet in the 2 nd Quarter, preceded by positive 606,530 square feet
in the 1 st Q uarter , positive 1,670,488 in the 4 t h Q uarter 2015
, and nega tive (505,994) in the 3 rd
Q uarter.TDG 2015 022 36

L A RGES T L EAS E S I GN ING S The largest lease signings occurring in 2016 were:

 a 155,000 square foot lease signed by the FAA, located at 777 S Aviation Blvd in the South Bay
market ;

 a 128,267 square fo ot lease signed by Disney , located at Media Studios North Phase 5 in the Burbank/Glendale/Pasadena market ;

 a 123,221 square foot lease signed by Netflix , located at Sunset Bronson Studios

– Icon in the
Mid

- Wilshire market

.



### V ACANCY
At year

- end 2005, Los An geles’ regional office vacancy rate was 8.1%. In 2006, vacancy again declined to 7.4% before increasing slightly in 2007 to 7.6%. Between 2008 and 2011, vacancy steadily and significantly increased from 9.7%% to 12.6%. In 2012, vacancy began a slow but

st eady decline from 12.4% to the current rate of 10.6% in the 2 nd Quarter 2016. It is expected to decrease slightly throughout the remainder of 2016, as demand continues to slightly exceed existing inventory and new deliveries.

The amount of vacant sublease space has fluctuated over the past several quarters. At the end
of the 2 nd Quarter, there were 1,396,087 square feet vacant, a decrease from 1,467,143 in the

1 st Quarter. Prior to that, there were 1,201,419 square feet vacant at the end of the 4 th Quarter 2015, a decrease from 1,249,656 square feet in the 3 rd Quarter. Los Angeles’ central business district had 267,951 square feet vacant at the end of the 2 nd Quarter, up from 218,816 in the 1 st Quarter and 178,380 in the 4 th Quarter 2015. The region’s subur ban markets had 1,128,136 square feet of vacant sublease space at the end of the 2 nd Quarter, down from 1,248,327 in the

1 st Quarter and 1,023,039 in the 4 th Quarter 2015.
Vacancy in Los Angeles’ central business district decreased from 12.6% in the 1 st Q uarter to 11.9% at the end of the 2 nd Quarter. Prior to this, vacancy had been 12.7% in the 4 th Quarter
2015 and 12.4% at the end of the 3 rd Quarter. Vacancy in the suburban markets decreased slightly from 10.6% in the 1 st Quarter to 10.4% in the 2 nd Quart er. Prior to this, vacancy had been
at 10.7% in the 4 th Quarter 2015 and 11.1% at the end of the 3 rd Quarter

.



### A NNUAL 

### R ENTAL 

### R ATES

At the end of the 2 nd Quarter, the average quoted asking rental rate for all classes of space in the Los Angeles office market was $32.23 per square foot per year, a 0.6% increase from $32.06 in
the 1 st Quarter. Los Angeles’ central business district had an average quoted annual asking
rental rate of $ 36.04 per square foot in the 2 nd Quarter, up slightly from $35.59 in the 1 st
Q u arter . The suburban markets had an average quoted annual asking rental rate of $31.60 per square foot in the 2 nd Quarter, up from $31.46 in the 1 st Quarter.TDG 2015 022 37



### S ALES 

### A CTIVITY The total dollar volume of office sales (buildings 15,000 + square feet in size) in the region
decreased between the 4 th Quarter 2015 and the 1 st Quarter 2016. I n the 1 st Quarter
, 32
transactions closed with a total volume of $ 819,425,845 ( $ 329.47 per square foot); in the 4 th
Q uarter , there were 63 transactions with a total dollar volume of $ 1,433,476,100 ( $ 294.53 per square foot). Total office building sales activity in 2016 was down compared to 2015. In the first three months of 2016, there were 32 office transactions with a total volume of $819,425,845 ($329.47 per square foot). During the same time period in 2015, there were 35 transactions totaling $1,139,798,636 ($379.49 per square foot).

One of the largest transactions that occurred within the last four quarters is the sale of 400 S Hope Street, a 701,535 square foot office building that sold at a 4.90% cap rate on May 20, 2016, for $313,636,000 ($447.07 per square foot). Cap rates have been stable to slightly higher
in 2016 , averaging 5

. 78 % as compared to 5.75% in the same time period in 2015. Throughout the remainder of 2016, sales activity and cap rates are expected to remain stable as the economy shows continued strength and improvement.



### S UMMARY The following table summarizes pertinent statistics for office space in the Los Angeles region segregated by market. The subject is in th e West Los Angeles submarket cluster, which includes the following submarkets: Beverly Hills, Brentwood, Century City, Culver City, Marina Del Rey/Venice, Olympic Corridor, Pacific Palisades/Malibu, Santa Monica, Santa Monica Mountains, West Los Angeles an d Westwood.TDG 2015 022 38



## O FFICE 

## M ARKET 

## S ECTORS



### C LASS 

### A O FFICE 

### S PACE According to CoStar, C lass A office buildings are deemed “ extremely desirable investment

- grade properties ” and lease and sell at the highest levels in a given market. Location, floor plans and

t enant layouts

, quality, architectural standards, mechanical system s , as well as maintenance and
management , are all top quality. The following tables provide pertinent statistics for Class A office space in the Los Angeles region:

At the end of the 2 n d Quarter, the Los Angeles region had 182,082,939 square feet in 990 Class A buildings. During the quarter, the Class A sector recorded positive net absorption of 621,031 square feet, up from a positive 242,237 in the 1 st Quarter, positive 916,873 in the 4 th Q uarter 2015, and negative (274,710) in the 3 rd Quarter. Overall, vacancy in Class A office projects has been declining since 2011, when it peaked at 16.5%. By the end of the 2 nd Quarter 2016, vacancy was down to 13.7%, a decrease from 11.0 % in the 1 st Quarter. There were 1,050,228 square feet of vacant Class A sublease space at the end of the 2 nd Quarter, as compared to 1,021,702 in the

1 st Quarter, 855,813 in the 4 th Quarter 2015, and 859,952 in the 3 rd Quarter. The Class A sectorTDG 2015 022 39

had an average annual quoted rental rate of $35.43 per square foot at the end of the 2 nd Quarter, an increase from $35.11 in the 1 st Quarter.



### C LASS 

### B O FFICE 

### S PACE According to CoStar, C lass B office buildings are deemed “ a more speculative investment ” and
lease and sell for lo wer levels as they lack the prestige of Class A properties and must rely on lower prices to attract tenants and investors. Architectural design tends to be utilitarian and ordinary, and quality, mechanical system s , maintenance
, management , and tenants tend to be average to very good. The following tables provide pertinent statistics for Class B office space in the Los Angeles region:

There were a total of 161,513,787 square feet in 5,699 Class B buildings in the Los Angeles region at the end of the 2 nd Quarter. There was positive net absorption of 525,154 square feet during the quarter, up from positive 454,997 in the 1 st Quarter, positive 672,588 in the 4 th Quarter 2015, and negative (108,896) in the 3 rd Quarter. Vacancy in Class B projects has decline d steadily over the past four quarters, ending the 2 nd Quarter at 10.6%, down from 11.0 % in the 1 st Quarter, 11.3% in the 4 th Quarter 2015, and 11.6% in the 3 rd Quarter

. The amount of vacantTDG 2015 022 40

sublease space at the end of the 2 nd Quarter totaled 277,335 squa re feet, down from 371,935 in
the 1 st Quarter. Sublease vacancy totaled 285,440 in the 4 th Quarter 2015, and 304,308 in the 3 rd
Quarter. At the end of the 2 nd Quarter, the average Class B annual rental rate was $29.61 per square foot, up slightly from $ 29. 55 in the 1 st Quarter.



### C LASS 

### C O FFICE 

### S PACE According to CoStar, C lass C office buildings are deemed as having “no frills” and lease and sell for lower levels than other buildings in the same market. There is very little, if any, attention paid to archite ctural design and quality, mechanical system s , maintenance
, management , and tenants tend to be below average. The following table provides pertinent statistics for Class C office space in the Los Angeles region:

The Los Angeles region had 87,437,835 squa re feet in 11,324 Class C buildings at the end of the
2 nd Quarter

. The Class C office sector posted a positive net absorption of 134,231 square feet during the quarter, up from negative (8,782) in the 1 st Quarter. Vacancy in Class C projects was 4.3% at th e end of the 2 nd Quarter, down slightly from 4.4% in the 1 st Quarter and 4 th Quarter 2015, and down from 4.6% in the 3 rd Quarter. Class C projects experienced a decrease in vacant sublease space, going from 73,506 to 68,524 square feet between the 1 st and 2 nd Quarters. Class
C space had an average annual rate of $ 26.60 per square foot at the end of the 2 nd Quarter, up from $25.84 in the 1 st Quarter

.



## S UBJECT 

## S UBMARKET 

## – S ANTA 

## M ONICA The subject property is a Class C flex/light industrial building utilized as an educational facility within the Santa Monica submarket. According to CoStar, there were 278 Class C office buildings
in this submarket as of the end of the 2 nd Quarter. The following table provides summary statistics for in the Los Angeles region separ ated by submarket:TDG 2015 022 41TDG 2015 022 42



### A BSORPTION CoStar’s survey of the Santa Monica submarket indicated a total of 44,745 square feet available
for lease as of the 2 nd Quarter. Net absorption within the submarket was negative (17,948) square feet at the end of the 2 nd Qu arter, however with an overall vacancy rate of 1.9% it is evident demand is very strong, and suggests this space will be reabsorbed in the near term. With very limited inventory, it is likely absorption within this submarket will undulate between negative and positive totals in the near to mid

- term, although these fluctuations will likely be relatively nominal with little bearing on overall vacancy.



### V ACANCY AND 

### R ENTAL 

### R ATES According to CoStar, the 278 office buildings in the Santa Monica submarket had a va cancy rate of 1.9% at the end of the 2 nd Quarter, indicating a high demand and stable market. Annual rental rates averaged $53.66 per square foot , the highest Class C office rates in the region.
A market survey indicated monthly rental rates (both contrac t and asking) ranging from $2.10 to $6.00 per square foot . This wide range in rates reflects a wide range of property condition and types with the lower end representing older office and/or flex/industrial buildings with deferred
maintenance and limited in terior improvements. The upper end of the range is indicative of higher end creative office space, typically closer to the beach areas. The strong market has put pressure on tenants to find affordable space, and thus many are seeking opportunities to

repur pose older flex/industrial spaces into creative office space. Much of the demand is being driven by the high tech and entertainment industries which have demonstrated a strong appetite for the creative office spaces prevalent in West Los Angeles and the So uth Bay. One broker active in this market discussed the rising rental rates in the submarket noting that many venture capital backed high tech startups in the area have not been the most price conscious space consumers. However, the broker also noted that these consumers are recently becoming more conscious of lease rates as the rising rates are accelerating their funding burn rates. The broker has recently begun to see slightly longer marketing times, but does not anticipate significant changes in vacancy or lease rates in the near term. Other notable trends in the market include a higher prevalence of triple net (NNN) expense terms in recent years resulting in higher NOIs for landlords, reduced concessions, and many tenants funding their own TIs. All
of th ese are indications of an owner driven market, and this is expected to remain so at least in
the near term.



## C ONCLUSION

The subject property is an existing flex/light industrial building utilized as an educational facility
with a mixture of office and clas sroom uses therein, and consists of 25,086 square feet of gross building area (GBA) including 8,094 square feet of basement area. As of the date of value, it was 100% occupied. The nature of the subject’s improvements lends itself to being competitive

amon g low end creative office spaces as well as flex/industrial spaces within its relevant market

area.TDG 2015 022 43 The CoStar Office Report is based on CoStar Group’s database of existing and under construction office buildings (including office, office condominium, offi ce loft, office medical, all classes and all sizes, and both multi

- and single

- tenant renter and owner occupied buildings) in the Los Angeles market. To obtain a copy of their informative report, visit www.costar.com.TDG 2015 022 44 

## P ROPERTY 

## D ESCRIPTION



## S ITE

LOCAT ION: The subject is located at 2800 Airport Avenue , San ta Monica
, California. This site has average exposure along a two

- lane road
between 23 rd Street and Bundy Drive

.

CURRENT USE: Santa Monica College s atellite campus

SITE SIZE: Total: 2.17 + acres; 94,380 square feet *NOTE: Land area is based on lease documents provided by the client which specify portions of the airport parcels allocated to support lessees’ use of the subject buildings as an educationa l facility

.

The entire site is usable

SHAPE: The site is irregular in shape

FRONTAGE / ACCESS : The subject property has Average access with front age as follows:

 Airport Avenue : 640 + feet

VISIBILITY: Average

TOPOGRAPHY: The subject site is mostly level and usable

.

SOIL CONDITIONS: The so il conditions observed at the subject appear to be typical of the region and adequate to support development.

HAZARDOUS
SUBSTANCES: We did not observe any evidence of toxic or hazardous substances during inspection of the site, however we have no expertise in evaluating toxic or hazardous site conditions and cannot make substantiated remarks in this field of study. The subject is not listed as a hazardous site per the Hazardous Waste and Substances Sit es List compiled by the California Environmental Protection Agency.
The Doré Group was not provided with a Phase I Environmental Assessment Report or any other reports addressing potentially
hazardous mate rials on or near the subject property. No warranty is made as to the condition of the property relative to hazardous chemicals or toxic wastes. The client is urged to retain an expert inTDG 2015 022 45 this field if the existence of such materials is suspected. This anal ysis was based on the assumption that no hazardous chemical contamination of any kind exists at the subject land.

Site Improvements:  City Street Lights

 Concrete Sidewalks

 Concrete Curbs

 The landscaping consists of concrete paths, small lawn areas, small shrubs and mature trees.

UTILITIES: Electricit y: Southern California Edison Sewer: City sewer Water: City water Natural Gas: SoCal Gas

Adequacy: The sub ject's utilities are typical and adequate for the market area.

Flood Zone: The subject is located in an area mapped by the Federal Emergency Management Agency (FEMA). The subject is located in FEMA flood

zone X , which is not classified as a flood hazard area.

FEMA Map Number: 06037C

- 1590F FEMA Map Date: September 26, 2008

The subject is not in a flood zone. Flood zone X is identified with areas that have a corresponding one percent chance of an annual flood event. Flood insurance is not mandatory, but available for purchase.

ENVIRONMENTAL
ISSUES: There are no known adverse environmental conditions on the subject site. Please reference Limiting Conditions and Assumptions.

ENCUMBRANCE /

EASEMENTS: There no known ad verse encumbrances or easements. We have not reviewed the preliminary title report. However, we noted upon inspection that there were easements for utility access. Please reference Limiting Conditions and Assumptions.

SITE COMMENTS: This site has average exposure and access from its primary and secondary roads. The parcel is of adequate size and shape to support a variety of commercial, residential and mixed uses.TDG 2015 022 46



## L EASE 

## S UMMARY

The lease between the Santa Monica Community College District (Lessee) and the City of Santa Monica (Lessor) originally commenced on July 1, 1988 with a 10

- year term. With first right of refusal granted to the Lessee by the Lessor, an additional 10

- year term was signed by the L essee in 1998, and in 2008 a 7 year extension was signed which expired June 30, 2015. Currently the subject lease is assumed to be on a month

- to

- month basis. According to the Santa Monica City Council Airport Leasing and Licensing Policy, Section B: Terms and Conditions , “Lease terms may
be month

- to

- month or longer. However, no lease shall have a term that goes beyond June 30, 2018.” Since no lease documents citing a lease term beyond June 30, 2015 were provided by the client, it is assumed the lease agreem ent defaulted to a month

- to

- month basis upon expiration of the July 1, 2008 to June 30, 2015 term. We have provided an abstract of th e lease (terms and conditions) as per the Master Lease Agreement which are as follows:

Landlord: City of Santa Monica

Te nant: Santa Monica Community College District and the Board of Trustees

Commencement: July 1, 1988

Expiration: June 30, 20 15*

*Note: The subject has remained in use by the Santa Monica Community College District since the expiration of the most recent signed lease extension. As per the Santa Monica City Council Airport Leasing and Licensing Policy , it is assumed the subject is currently leased on a month

- to

- month basis upon expiration of the most recent lease extension term of July 1, 2008 to June 30,

2 015.

Time Remaining: Unknown (month

- to

- month)

Duration: Initial term wa s 1 0 years with first right of refusal granted to the tenant upon

expiration of any given lease term.

Current Rent: As of the date of value, the base r ent reported was $ 385,395 an nually, or

$ 32,116.25 monthly

. This equates to approximately $ 1.28 per square foot of gross building area per month , or approximately $0.34 per square foot of gross site area per month

.

Annual
Escalations: According to the Master Lease Agreement, “The Ba se Rent shall be adjusted

annually by any increases in the Consumer Price Index (All Urban Consumers: Los Angeles

- Anaheim

- Long Beach).”TDG 2015 022 47 Expenses: Triple Net Lease (NNN)

- All expenses are paid by Tenant (Lessee), including

real estate taxes, insurance, utilities, and main tenance for the leased premises during the term of the lease.

Improvements: The tenant has the right to maintain, remodel, or construct improvements on

the leased land. However, any such improvements must comply with policies establis hed in the Master Lease Agreement, as well as FAA Part 77 notification and review policies.

Comments: The use of the leased premises is subject to both Santa Monica and FAA

airport operation regulations, and the lease itself is subordinate to “the provis ions and requirements of any existing or future agreement between Lessor and the United States, relative to the development, operation, or maintenance of the Airport”, as per Section 20 of the Master Lease Agreement.TDG 2015 022 48



## P ARCEL 

## M AP 

## ( APN 4272

- 025

- 9 01)TDG 2015 022 49



## P ARC EL 

## M AP 

## (APN 4272

- 026

- 902)TDG 2015 022 50



## 2800 A IRPORT 

## A VENUE 

## P LOT 

## P LANTDG 2015 022 51 

## Z ONING

L AND U SE C ONTROLS

ZONING CODE : Santa Monica Airport (Not Zoned)

ZONING DESCRIPTION : N/A

CURRENT USE LEGALLY
CONFORMING : Current use conforms to allowable uses stipulated within the Master Lease Agreement and those outlined in the Santa Monica City Council Airport Leasing and Licensing Policy.

ZONING CHANGE LIKELY : A zoning change is not likely in the foreseeable future.

ZONING COMMENTS : As of the date of this analysis, there is no zoning pertaining to the land underlying the subject property. As such, there is no adopted municipal regulatory framework which defines allowable uses or development standards of the land which comprises the Santa Monica Airport including the non

- a viation portion of the property where the subject buildings are situated. Due to the historical and current use of the land as a municipal airport, any new development and/or alterations to existing structures on Airport land are subject to compliance with Federal Aviation Administration (FAA) regulations, more specifically, Federal Regulation Title 14 Part 77 which establishes Federal standards for “Safe, Efficient Use and Preservation of the Navigable Airspace”. 12 In sum, Part 77
establishes what constitut e obstacles to navigable airspace on and around Airport property, height restrictions for permanent and mobile structures thereon, applicable impact areas, and protocols for notification and review of any proposed construction or alterations to Airport pro perty. A comprehensive analysis of all FAA regulations which may affect all owable uses on Airport land, new construction or alterations of existing structures on Airport property, including Part 77, is beyond the scope of this analysis. For purposes of thi s assignment, we defer to the Santa Monica City Council Airport Leasing and Licensing Policy

, as well as the subject’s master lease, for guidance on applicable FAA regulations as they pertain to the non

- aviation portions of the Santa Monica Airport,
allowa ble uses thereon, and height restrictions relevant to the subject property.

12 Reference, By. "ECFR

— Code of Federal Regulations." ECFR

— Code of Federal Regulations. N.p., n.d. Web. 06 Sept. 2016.TDG 2015 022 52

ZONING COMMENTS (CONTINUED): According to Section A of the Santa Monica City Council Airport Leasing and Licensing Policy , “authorized uses include: (a) low intensity uses that a re compatible with surrounding uses, serve the adjacent community, and are consistent with the City’s environmental goals and policies. Examples of uses in category (a) include, but are not limited to: parks and open space, arts/cultural, creative space, p rofessional theaters, museums, artist studios, art galleries, photograph studios, uses customary or incidental to the production or distribution of motion pictures, educational facilities, professional and general offices, public or private schools existin g prior to September of 1984, warehouses, self

- storage/public mini

warehouses, and restaurants with 500 square feet of floor area or less; and b) uses required by law.” Regarding building height and alteration guidelines relevant to the subject buildings, the subject’s master lease states “Lessee agrees to comply with the notification and review requirements covered in Part 77 of the Federal Aviation Regulations in the event of any planned modification or alteration of any present or future building or stru cture situated on the leased Property. Lessee, by accepting this Lease, expressly agrees for itself, its successors and assigns that it will not erect nor permit the erection of any structure or object, nor permit the growth of any
tree on the land leased hereunder above the mean sea level
elevation 208 feet.” According to Santa Monica Airport’s website, the Airport’s field elevation is 177 feet above mean sea level (MSL) 13 ; as such, it is evident that any structure on the leased premises cannot exceed a hei ght of 31 feet.

Further complicating the discussion regarding use of the Santa Monica Airport land is a lengthy legal battle between the City and the FAA regarding the City’s legal autonomy in regulat ing
, mitigat ing or eliminat ing air traffic operations o n the property.

13 "SMO: Santa Monica Municipal Airport." SMO: Santa Monica Municipal Airport. N.p., n.d. Web. 06 Sept. 2016.TDG 2015 022 53

ZONING COMMENTS (CONTINUED) : At the core of this debate are questions of whether or not the City has the authority to curtail air traffic volume through noise and/or emissions ordinances, increase aircraft usage fees, further restrict

t he types of aircraft which utilize the Airport, and ultimately whether the City’s fee ownership of the land underlying the Airport grants sufficient authority to close Airport operations entirely and redevelop the land to uses more amenable to and compatib le with the surrounding neighborhoods, particularly those residential in

nature. Three current lawsuits are central to current and future uses of Santa Monica Airport land:

1) City of Santa Monica v FAA in the matter of title to the airport property. Case Nu mber 2:13:CV:8046

- JFW (VBWx) 2) Part 16 Grant Assurance Litigation Case Number 16

- 14

- 04 3) National Business Aviation Association Part 16

For further details regarding these court cases, refer to the City of
Santa Monica website

.

It is worth noting that the Sa nta Monica Airport is discussed in the City’s most recent General Plan document, the 2010 Land Use and Circulation Element (LUCE) adopted in 2010 and revised/updated in 2015. However, no land use changes for the Airport and neighboring Business Park are pr oposed in the LUCE due to the above noted highly complex and litigious debate between the City of Santa Monica and the FAA regarding authority to regulate use of Airport land. While the City has undertaken the creation of a potential Airport/Business Park Specific Plan to guide future use and development of Airport land through a three

- phase “Visioning Process” 14 , the City’s authority to enact such standards on Airport land remains in question. As such, the existing use of Airport land is effectively fixed i n its current state, and future uses of Airport property are uncertain.

14 "Airport Do cuments and Studies."

- SMO: Santa Monica Municipal Airport. N.p., n.d. Web. 06 Sept. 2016.TDG 2015 022 54 

## A SSESSMENT AND 

## T AXES

California taxation law requires a 1% of market value tax rate ( plus additional assessments ) determined through individual communities’ bond indebtedness (Prop osition 13). Actual assessments are typically based on the fair market value as determined by the most recent acquisition price. Future assessments are based upon the most recent acquisition price until additional improvements (land and/or homes) are const ructed onsite or a subsequent change of ownership of the property or portions thereof. Subsequent annual tax increases are limited to a maximum of 2% per year. Disposition of the property, as of the date of appraisal, would place the subject under Proposit ion 13 guidelines. Recent trends in property taxation laws seem to be of similar nature with no immediate changes anticipated.

COMMENTS : The parcels underlying the subject property (APNs 4272

- 025

- 901 and 4272

- 026

- 902) are part of the Santa Monica Airport, owned by the city of Santa Monica, and are tax exempt. Based on these parcels’ tax exempt status, no property taxes are levied against them.TDG 2015 022 55 

## I MPROVEMENT S 

## D ESCRIPTION

S UMMARY

PROJECT : Santa Monica College

– Airport Arts Campus

PROPERTY TYPE: Mixed Office and Industrial

OVERVIEW: A free

- standing office building with basement and detached garage/workshop

G ENERAL

BUILDING DESCRIPTION : One free

- standing flex/industrial building with a basement that is used by a local community college as a satellite campus with classrooms and offices ; one fre e

- standing garage building that is utilized as a workshop and additional classroom space

.

BUILDING CLASS: C

– Reinforced Concrete, concrete tilt

- up

CONSTRUCTION: Concrete

CONSTRUCTION QUALITY: Average

YEAR BUILT: 19 55 ±

RENOVATIONS: Unknown

EFFECTIVE AGE: 40 years

REMAINING USEFUL
LIFE: 5 to 1 0 Years

CONDITION: Fair to Avera ge

APPEAL / APPEARANCE: Average

GROSS BUILDING AREA: Number of Stories: 1.00 Gross Building Area: 25,086 ± square feet

*NOTE: The subjec t’s GBA was derived from documents supplied by the client. However, during the inspection, measurements were taken to confirm accuracy.TDG 2015 022 56 BUILDING D ESCRIPTION

FOUNDATION: Basement and Poured concrete slab

EXTERIOR: Stucco

WINDOWS: Metal Frame Fixed Casement and Single Hung

ROOF / COVER: Flat Roof / Tar and Felt , Low Pitch Metal Roof

INTERIOR LAYOUT: Typical layout for educational facilit y

INTERIOR CONDITION: Fair to Average receiving periodic maintenance but with some signs of deferred maintenance

P ROPERTY A NALYSIS

DESIGN & FUNCTIONAL
UTILITY: Adequate de sign and functional utility for a n educational facility

DEFERRED
MAINTENANCE: No significant deferred maintenance noted , some minor instances of deferred maintenance noted

.

COMMENTS: Overall , this building adequate ly serves as a n educational facility

. The basement was not accessible during this appraiser’s observation of the subject property, and thus was not viewed by the appraiser. Photos of the subject’s basement area were provided by the Client. Per Client, the basement is used for storage purposes only.TDG 2015 022 57



## S UBJECT 

## P HOTOGRAPHS

Aerial View of Subject

Aerial View of Subject NeighborhoodTDG 2015 022 58 Exterior view

– Front of Main Building

Exterior view

– Front of Main B uildingTDG 2015 022 59 Exterior View

– NE Profile of Main Building

Exterior view

– SW Profile of Ceramics BuildingTDG 2015 022 60 Exterior View

– N E Profile of Ceramics Building

Street view

– looking NE along Airport AvenueTDG 2015 022 61 Street view

– looking SW along Airport A venue

Typical Interior View

– Main BuildingTDG 2015 022 62 Typical Interior View

– Shop Building

Typical Interior View

– Shop BuildingTDG 2015 022 63 Typical Interior View

– Main Building Basement

Typical Interior View

– Mechanicals in Main Building BasementTDG 2015 022 64 

## H IGHEST AND 

## B EST 

## U SE

Highest and best use may be defined as:

The reasonably probable use of property that results in the highest value. 15 To be reasonably probable, a use must be:

1. Legally Permissible : What uses are permitted by zoning and other legal restrictions?

2. Phys ically Possible : To what use is the site physically adaptable?

3. Financially Feasible : Which possible and permissible use will produce any net return to the owner of the site?

4. Maximally Productive. Among the feasible uses which use will produce the highes t net return, (i.e., the highest present worth)?



## H IGHEST AND 

## B EST 

## U SE OF THE 

## S ITE



### L EGALLY 

### P ERMISSIBLE As noted within the Zoning Comments of this analysis, the Santa Monica Airport land underlying the subject buildings is not zoned, and thus there is no ad opted municipal regulatory framework which defines legal uses or development standards of this land beyond its current designation as a municipal airport . Furthermore, in light of contentious and prolonged legal proceedings
between the c ity of Santa Monica and the FAA regarding the City’s autonomy in regulatory matters involving use of the Airport land, it is evident the City does not currently possess the legal sovereignty to utilize this land for anything other than a municipal airport. While non

aviation uses are allowed on certain portions of Airport land and within existing structures per agreement with the FAA 16 , these uses and structures must comply with requirements of the agreement and applicable FAA regulations. Within this context, legal uses of th e Santa Monica Airport land as vacant are unknown, including those leased portions allocated in support of the subject building s and their current use as an educational facility

.

Given the current lack of zoning on the parcels which comprise the Airport l and, possibilities for alternative uses to its current municipal airport use are unlimited, albeit entirely hypothetical and highly speculative as of the date of this analysis. Should the City prevail in its objective of shutting down the Airport, redevelo pment of the land would likely compliment or reflect the

s urrounding area

. A djacent uses to the Airport on three sides are residential in nature (east, west and south) with the Santa Monica Business Park located immediately to the north ; these
areas are lo w to moderate density in character with primarily single family residential development and low

- rise offices

. However, any use of this land beyond its current use as a

15 The Appraisal of Real Estate 1 4 th Edition, Page 332 , (Chicago: Appraisal Institute, 201 3 ).

16 https://www.smgov.net/uploadedFiles/Departments/Airport/About/1984_Agreement.pdfTDG 2015 022 65

municipal airport

, and those limited non

- aviation uses allowable per agreement with the FAA
, is only conceptual in nature and highly speculative.



### P HYSICALLY 

### P OSSIBLE

The subject site is physically able to support various types of development considering available utilities and surrounding infrastructure. Based on its adequate size, terrain, s hape, frontage, and depth , the subject’s site could potentially support a variety of low to moderate density alternative uses to its current municipal airport use

.



### F INANCIALLY 

### F EASIBLE 

### / M AXIMALLY 

### P ROFITABLE The financial feasibility of the legally permiss ible and physically possible uses is dependent on many variables including available construction financing, construction costs and impact fees, affordable and available land at price levels appropriate in the market, and overall sufficient
demand. However , in the unique instance of the subject property, the subject’s lack of zoning and the continuing legal debate regarding alternative uses of the land render the question of financially feasibility and maximally productive uses among the legally permissible and physically possible uses indeterminable.



## H IGHEST AND 

## B EST 

## U SE AS 

## I MPROVED
In the analysis of the highest and best use as if improved, a determination is made as to the optimal use of the site and the improvements. The improvements must be analyzed to
determine whether they should be expanded, renovated, conver ted , continued use, or
demolished.



### L EGALLY 

### P ERMISSIBLE 

### / P HYSICALLY 

### P OSSIBLE As noted, the subject site is currently improved with two free

- standing single

- level buildings currently utilized a s educational facilities

. The subject’s usable site ( 2.17 + acres; 94,380 square feet) is legally and physically able to support the existing improvement. Currently, the agreement with the FAA and the Santa Monica City Council Leasing and Licensing Polic y allow for this type of land use

, and it is complimentary to surrounding neighborhood uses. Therefore, the existing improvement i s considered legally permissible and p hysically possible.



### F INANCIALLY 

### F EASIBLE 

### / M AXIMALLY 

### P ROFITABLE In addition to legal, p hysical and location considerations, analysis of the subject property "as improved" requires the treatment of alternative uses for the property. The five possible alternative treatments of the property are demolition, expansion, renovation, conversion, and
continued use "as is".

Demolition and conversion were not considered vi able alternative options as any new construction or modifications or alterations to existing structures are subject to FAA Part 77 notification and review requirements and height res trictions. Further, given the uncertaintyTDG 2015 022 66

surrounding future use of the Santa Monica Airport land, allocating substantial City funds towards significant capital improvements to non

- aviation uses is considered entirely too speculative at this time to be con sidered a reasonable or likely alternative. Expansion and/or renovation were considered possible options given the subject’s current condition and low intensity of the existing development (0.27 + FAR). However, again due to the uncertainty surrounding the Airport’s future, substantial contributions of City funds towards significant capital improvements to non

- aviation uses is considered too speculative at this time to be considered a reasonable or likely alternative. Furthermore, given the subject buildings ’ age near the end of their economic lives, if the City were to prevail in its desire to cease airport operations and redevelop the Airport land, these structures would likely be demolished and replaced, and thus any expansions or renovations would likely have little to no contributory value under a different regulatory structure. As such, the maximally profitable use of the subject site as improved is considered continued use “as is” given the current regulatory structure, the highly speculative nature of future regulatory structures , profitable nature of the existing use, and minimal contributory value significant alterations to the existing structure would have in a
different land use environment

.

Of note, under the hypothetical condition that the subjec t’s allocated land of 94,380 square feet is a legal parcel separate from the Airport land, we researched recent land sales in similar areas surrounding municipal and international airports to evaluate whether the subject’s value was
greater as vacant or as improved. Holding all else the same (i.e. adjacent to an airport, associated low to moderate intensity development standards due primarily to height restrictions, and uses typical of airport proximate development) we analyzed the sales
summarized on the f ollowing page. The sales analyzed were located within close proximity to Los Angeles International Airport (LAX) or John Wayne Airport in Orange County , and with in zones which allow for a mixture of uses including but not limited to office, light industria l, select retail, and multi

- family residential at low to moderate densities, typically 1 to 1.5 FARs or less. These sales support a value range of approximately $64 to $83 per square foot of land area . As will be shown later in this analysis, our income ap proach to value relating to the subject’s existing use as improved support a slightly higher value of $95 per square foot of land area.

The above analysis was conducted relative to current market conditions. A similar analysis was attempted for the 2010 t ime frame, however due to the economic recession at that time, there was an insufficient number of land or redevelopment sales within the relevant market area to perform a meaningful analysis.TDG 2015 022 67



### C ONCLUSION We considered multiple alternatives for the subje ct site as improved. Continued use “as is” with the existing use was deemed the best alternative , as a n inter im use until resolution is reached regarding the future use of the Airport land

.



## M OST 

## P ROBABLE 

## B UYER
Taking into account all of the physical and i nvestment characteristics of the subject property, the likely buyer is a governmental, or quasi

- public agency that requires an owner/user profile or ancillary income potential for redeveloping, or repurposing the uses for creative office, artists’ studios, light industrial, research and development, educational or institutional, or some combination of these and/or similar uses.TDG 2015 022 68 

## V ALUATION 

## M ETHODOLOGY

Three basic approaches may be used to arrive at an estimate of market value. They are:

1. The Cost Approach
2. Th e Income Approach 3. The Sales Comparison Approach



## C OST 

## A PPROACH

The Cost Approach is summarized as follows:

Cost New

- Depreciation + Land Value = Value



## I NCOME 

## A PPROACH
The Income Approach converts the anticipated flow of future benefits (income) to a prese nt value estimate through a capitalization and or a discounting process.



## S ALES 

## C OMPARISON 

## A PPROACH
The Sales Comparison Approach compares sales of similar properties with the subject property. Each comparable sale is adjusted for its inferior or superior c haracteristics. The values derived from the adjusted comparable sales form a range of value for the subject. By process of correlation and analysis, a final indicated value is derived.



## F INAL 

## R ECONCILIATION
The appraisal process concludes with the final rec onciliation of the values derived from the approaches applied for a single estimate of market value. Different properties require different means of analysis and lend themselves to one approach over the others.



## M ETHODOLOGIES 

## A PPLIED
The Cost Approach was considered and was not developed because the actual age of the subject's improvements makes physical depreciation difficult to accurately measure , and there
are no le gal parcels specifically and separately associated with the subject improvements

. The Sales Comparison Approach was considered and was not developed because there was not sufficient data to develop a value estimate due to the unique nature of the subject's location on airport land, close proximity to frequent flight operations, as well as the additional FAA regulations which govern use of and any improvements or alt erations to the subject buildings. The Income Approach was considered and was developed because the subject is an income producing property and there is adequate data to develop a value estimate with this appro ach.TDG 2015 022 69



## I NCOME 

## A PPROACH

The Income Approach to value is based on the present worth of the future rights to income. This type of analysis considers the property from an investor's point of view, the basic premise being that the amount and quality of the inco me stream are the basis for value of the property.



## D IRECT 

## C APITALIZATION 

## A NALYSIS
The steps involved in capitalizing the subject’s net operating income are as follows:



##  Develop the subject’s Potential Gross Income (PGI) through analysis of the subject’s

a ctual historic income and an analysis of competitive current market income rates.



##  Estimate and deduct vacancy and collection losses to develop the Effective Gross Income (EGI).



##  Develop and subtract operating expenses to derive the Net Operating Income (NOI ).



##  Develop the appropriate capitalization rate (Ro).



##  Divide the net operating income by the capitalization rate for an estimate of value through the income approach.



## M ARKET 

## R ENT



### C URRENT AND 

### R ETROSPECTIVE 

### M ARKET 

### L EASE 

### C OMPARABLES

I have researched seven cur rent leases and eight retrospective leases for stabilized market lease rates; these are documented on the following pages by a summary grid, location map, photographs, and an analysis grid. All comparables have been researched through numerous sources, ins pected

, and verified by a party to the transaction to the extent possible within the scope of this assignment

. Where verification by a party to the transaction was not possible, asking rental rates were utilized with as much detail provided as available th rough data sources such as CoStar, Loopnet, and public records.

The time frames researched were as follows:

Current Leases

- September 2014 through September 2016 (two years from the data of value) Retrospective Leases

– January 2009 through December 201 0 Year by Year Trend Analysis

– 2010 through 2016TDG 2015 022 70



## C URRENT 

## L EASE 

## C OMPARABLE 

## S UMMARY 

## T ABLETDG 2015 022 71



## C URRENT 

## L EASE 

## C OMPARABLE 

## M APTDG 2015 022 72



## C URRENT 

## L EASE 

## C OMPARABLE 

## P HOTOGRAPHS

Lease Comparable 1 Lease Comparable 2

Lease Comparable 3 Lease Comparable 4

Lease Comparable 5 Lease Comparabl e 6TDG 2015 022 73 Lease Comparable 7

Note: CoStar photos were utilized for purposes of this report. The appraiser has driven past these properties and through the neighborhoods in which they are located.TDG 2015 022 74



## C URRENT 

## M ARKET 

## R ENT 

## R ECONCILIATION

The current marke t rent comparables selected for this analysis reflected higher quality flex/industrial spaces or lower quality office spaces, and located within the subject’s competitive market area. Overall, these comparables reflect or bracket the subject in terms of ag e, condition, quality, size, access and exposure. The subject’s parking ratio of 9 spaces per 1,000 square feet of gross building area was not bracketed, however this is considered atypically high for the area; comparable 3 is considered reasonably similar to the subject in this respect as it too has a relatively high parking ratio of 6. The subject’s actual current base rent lease rate of $32,116.25 per month, or $1.28 per square foot of gross building area (GBA), is considered below market based on the co mparables analyzed herein. As shown below, comparables 1 through 7 have lease rates ranging from $1.80 to $3.00 per square foot per month. Qualitative comparisons between the comparables and the subject property were made which resulted in ranking the subj ect just below the mid

- point of the selected range. Comparables 1 and 2 were considered inferior in quality and/or condition, and both were inferior in terms of parking accommodations. Comparables 3 and 4 were considered overall similar to the subject refl ecting similar quality and/or condition; comparable 3 was the most similar to the subject in parking. Comparables 5, 6, and 7 were considered slightly superior or superior to the subject in overall quality and/or condition, although all were inferior in pa rking. Based on comparisons to the most similar and recent lease comparables available, a lease rate of $2.25 per square foot per month is considered reasonable and well
support ed by the comparables analyzed.
It is worth noting that there are currently 7 o ffice spaces on the north side of the Airport property at 2772

– 2800 Donald Douglas Loop with asking lease rates of $3.25 to $3.95 per square foot per month. However, these spaces are improved as creative office spaces and are significantly superior to th e subject in terms of quality and condition. As such, these spaces were not analyzed as comparables in this analysis.

The reconciled lease rate of $2.25 only applies to the combined above grade GBA of 16,992 square feet. The subject’s basement area, totali ng 8,094 square feet, is allocated a reduced monthly rate of $1.125 per square foot, or 50% of the current market lease rate for the above grade GBA. No lease rates specific to basement areas were found in our research as basements

are not typical in Calif ornia. The applied 50% discount recognizes the area’s utility for storage purposes, but reflects its lower quality finishes and limited overall utility. A comparative analysis of the lease comparables is summarized below:TDG 2015 022 75



## R ETROSPECTIVE 

## L EASE 

## C OMPARABLE 

## S UMMARY 

## T ABLETDG 2015 022 76



## R ETROSPECTIVE 

## L EASE 

## C OMPARABLE 

## M APTDG 2015 022 77



## R ETROSPECTIVE 

## L EASE 

## C OMPARABLE 

## P HOTOGRAPHS

Lease Comparable 1 Lease Comparable 2

Lease Comparable 3 Lease Comparable 4

Lease Comparable 5 Lease Comparable 6TDG 2015 022 78 Lease Comparable 7 Lease Comparable 8

Note: CoStar photos were utilized for purposes of this report. The appraiser has driven past these properties and through the neighborhoods in which they are located.TDG 2015 022 79



## R ETROSPECTIVE 

## M ARKET 

## R ENT 

## R ECONCILIATION

The retros pective market rent comparables selected for this analysis reflected higher quality flex/industrial spaces, and located within the subject’s competitive market area. Overall, these comparables reflect or bracket the subject in terms of age, condition, qual ity, size, access and exposure. The subject’s parking ratio of 9 spaces per 1,000 square feet of gross building area was not bracketed, however this is considered atypically high for the area. The subject’s actual base rent lease rate in 2010 of $ 21,410.83 per month, or approximately $ 0.85 per square foot of gross building area (GBA) , i s considered to have been below market based on the comparables analyzed herein. As shown below, comparables 1 through 8 have lease rates ranging from $1. 25 to $ 2 .00 per squa re foot per month. Qualitative comparisons between the comparables and the subject property were made which resulted in ranking the subject near the mid

- point of the selected range. Comparabl es 1, 2 and 3 were considered inferior in quality and/or conditio n. Comparables 4 and 5 were considered overall similar to the subject reflecting similar quality and/or condition. Comparables 6
, 7 , and 8 were considered slightly superior or superior to the subject in overall quality and/or condition. Based on comparison s to the most similar and recent lease comparables available, a 2010 retrospective lease rate of $ 1.50 per square foot per month is considered reasonable and well supported by the comparables analyzed. The reconciled lease rate of $ 1.50 only applies to the combined above grade GBA of 16,992 square feet. The subject’s basement area, totaling 8,094 square feet, is allocated a reduced monthly rate of $ 0.75 per square foot, or 50% of the 2010 market lease rate for the above grade GBA. No lease rates specific to basement areas were found in our research as basements are not typical in California. The applied 50% discount recognizes the area’s utility for storage purposes, but reflects its lower quality finishes and limited overall utility.
A comparative analysis of the lease comparables is summarized below:TDG 2015 022 80



## P OTENTIAL 

## G ROSS 

## I NCOME

For the current potential gross income, we applied the current market rental rate of $2.25 to the 16,992 square feet of combined above grade building area, and the reduced rate of $1. 125 to the 8,094 square feet of basement area/storage space. This results in annual rents of $458,784 for above grade area, $109,269 for below grade area, and a combined total of $568,053 per year; this equates to an overall blended monthly rate of $ 1.89 f or the total GBA of 25,086 square feet

.

For the 2010 retrospective potential gross income, we applied the current market rental rate of $1.50 to the 16,992 square feet of combined above grade building area, and the reduced rate of $0.75 to the 8,094 squar e feet of basement area/storage space. This results in annual rents of $305,856 for above grade area, $72,846 for below grade area, and a combined total of $378,702 per year; this equates to an overall blended monthly rate of $1.26 for the total GBA of 25, 086 square feet.



## V ACANCY AND 

## C OLLECTION 

## L OSS
The subject has been leased by the same tenant on a long term basis since 1988, and thus it is reasonable to assume the tenant will continue its use of the premises for the foreseeable future despite currently l easing the property on a month to month basis and not under a long term

contract. Also of note, in 2010 the subject was contracted under a 7

- year extension which commenced in July of 2008. With limited vacancy risk, a nominal 2% vacancy and collection loss
factor wa s applied to both current PGI and retrospective PGI to derive Effective Gross Income (EGI) for purposes of this analysis.



## L ANDLORD 

## E XPENSES
The estimate of market rent concluded upon in the preceding section was based on a standard Triple Net (NN N) lease structure typical of office and flex/industrial lease agreements in this
market . Under the NNN lease terms, all of the Operating and Building Expenses are recoverable from the tenant including real estate taxes, building insurance, building mainte nance, utility expenses, and common area maintenance (CAM). Expenses borne by the owner are typically limited to property management expenses.

In the current and retrospective analys e s we have estimated landlord expenses at 3% of EGI for
property manageme nt. All other expenses are considered recoverable from the tenant based on the NNN lease agreement.



## C APITALIZATION 

## R ATE
The next step in the Income Capitalization Approach is capitalization of net income into an expression of value. Direct capitalization i s a method used to convert a single year's income estimate into a value indication. This conversion is accomplished by dividing the incomeTDG 2015 022 81

estimate by an appropriate income capitalization rate. The capitalization rate is the factor that
converts the stabil ized net operating income (NOI) to a present value. It is the ratio of net income to value or sale price.

While the subject is not currently a legally distinct property capable of being transferred independent of the Airport land upon which it is situated , it is in many ways analogous to a property encumbered under a long term lease with redevelopment potential at some point in
the future. Prospective buyers in the market for such a property would likely include governmental, or quasi

- public agenc ies that requires an owner/user profile or ancillary income potential for redeveloping, or repurposing the uses for creative office, artists’ studios, light industrial, research and development, educational or institutional, or some combination of these and/or simi lar uses. As such, the overall rate that could be expected for the subject property would be dictated by the rates being paid for other similar real estate investments. The overall rate utilized to capitalize our estimate of stabilized net operating income for the subject into an estimate of stabilized market value is based on our review of typical capitalization rates currently found in the market as reflected by recent office and flex/industrial building sales in Los Angeles County.

We have reviewed the CoStar data for sales of office and flex/industrial b uildings containing 5,000 to 100,000 square feet or less for the entirety of Los Angeles County that sold during the
24 months preceding the date of value. We have also reviewed the CoStar data under the same parameters, but for sales during the time period of 1/1/2009 to 12/31/2010 in order to establish capitalization rates for our 2010 retrospective value of the subject property. The capitalization rates reflected by those sales are summarized below.TDG 2015 022 82



## C URRENT 

## C APITALIZATION 

## R ATES 

## S UMMARY

More than 200 sales were discovered through the CoStar data base for office and flex/industrial building sales in Los Angeles County, between 5,000 and 100,000 square feet, from September
2014 to September 201 6, and with reported incomes and cap rates. The 43 sales reflected above are those located within the Western Los Angeles and South Bay submarkets. The overall range of the cap rates is 3.10 % to 7.50 %. The overall average cap rate for the entire 24 month period is 5.36 %. Overall the above sales demonstrate relatively stable trend with regard to investors’ price tolerances relative to current net operating income. In the final analysis we have formed the opinion that a 6.00% overall capitalization rate would be ap propriate in the subject’s direct capitalization analysis.TDG 2015 022 83



## R ETROSPECTIVE 

## C APITALIZATION 

## R ATES 

## S UMMARY

Forty seven sales were discovered through the CoStar data base for office and flex/industrial building sales in Los Angeles County, between 5,000 and 1 00,000 square feet, from January 2009 to December 2010, and with reported incomes and cap rates. The overall range of the cap rates is 4.08% to 9.88%. The overall average cap rate for the entire 24 month period is 6.79%.
Overall the above sales demonstrate relatively stable trend with regard to investors’ price tolerances relative to net operating income within the retrospective time frame analyzed. In the final analysis we have formed the opinion that a 7.25% overall capitalization rate would be appropriat e in the subject’s direct capitalization analysis.TDG 2015 022 84



## C APITALIZATION TO 

## V ALUE
The following chart summarizes our opinion of income and expenses for the subject property for

one year of stabilized operation under current market rate and 2010 retrospective mar ket rate
lease terms. The first chart addresses current market rent capitalized at a 6.00% capitalization
rate as discussed above. The second chart addresses 2010 retrospective market rent capitalized at a 7.25% capitalization rate as discussed above

.TDG 2015 022 85



## D IRECT 

## C APITALIZATION 

## A NALYSIS 

## C ONCLUSION
Based on the above analysis detailed above, as of September 12, 2016 , we have reconciled to a direct capitalization approach value as stabilized of:

$ 9,000,000

Nine Million Dollars

Based on the above analysis detailed above, in our 2010 retrospective analysis, we have reconciled to a direct capitalization approach value as stabilized of:

$ 4,965,000

Four Million Nine Hundred Sixty Five Thousand Dollars



## P ER 

## Y EAR 

## V ALUATION 

## A NALYSIS
As part of the scope of this analysis, we are to establish market values for the subject property in 2010, 2011, 2012, 2013, 2014, 2015 and current market value as of the effective date of this report, September 12, 2016. As discussed above, we have researched and analyzed market dat a and lease rates relevant to the current market and the 2010 retrospective market. Based on these analyses we concluded market values of $9,000,000 (current) and $4,965,000 (2010 retrospective). In order to determine values for the subject property in the interim years
between these two points in time (2011, 2012, 2013, 2014, and 2015) we have surveyed economic and real estate market trend data for office and flex/industrial property across Los Angeles County from 2010 to 2016 year to date

, and with 5,000 to 100,000 square feet of gross building area (GBA)

. This time frame spans the tail end of the economic recession through the recovery years into the current and relatively stabilized market. Within this context, we analyzed a variety of data points and ye ar over year changes to gauge overall market activity and pricing trends in Los Angeles County. Price per square foot of GBA was the metric considered most applicable to this analysis, and the best indicator of pricing trends in this sector. Beginning in

2 010, the average price per square foot of GBA reflected in our survey was $130.01; this declined slightly in 2011 to $128.36, but has increased every year since. The following chart reflects year over year changes in price per square foot of GBA reflected in our survey which contained a sample of more than 7,200 transactions.TDG 2015 022 86

Once we established an overall market trend for the relevant time period of 2010 to 2016, we applied these metrics to the subject property. Using our 2010 retrospective value of $4, 965,000, or $197.94 per square foot of GBA as a starting point, we applied the year over year percent changes reflected above to determine our interim values. As seen in the chart below, carrying these calculations through to 2016, we arrived at a 2016 val ue of $9,096,000 which represents only a 1% variance from our current reconciled market value of $9,000,000.TDG 2015 022 87

Correlating this price trend data to the subject property as shown above, we have concluded values for the interim years of 2011, 2012, 2013, 2 014, and 2015 as follows:

2011: $4,903,000

2012: $5,780,000

2013: $6,783,000

2014: $7,243,000

2015: $7,815,000



## P ER 

## Y EAR 

## M ARKET 

## R ENT 

## A NALYSIS
As part of the scope of this analysis, we are to establish market r ental rates for the subject property in 2010, 2011, 2012, 2013, 2014, 2015 and current market value as of the effective date of this report, September 12, 2016. As discussed above, we have researched and analyzed
market dat a and lease rates relevant to the current market and the 2010 retrospective market. Based on these analyses we concluded market r ental rates of $ 27.00 per square foot annually, or $2.25 per square foot per month (current)

, and $ 18.00 per square foot annually, or $1.50 per square foot per month (2010 retrospective). As noted in our Market Rent Reconciliations, these rates apply to the combined above grade GBA; a 50% reduced rate was applied t o the below grade basement area. In order to determine m a rket rents for the subject property in the interim years between these two points in time (2011, 2012, 2013, 2014, and 2015) we have surveyed economic and real estate market trend data for office and flex/industrial property across Los Angeles County from 2010 to 2016 year to date

, and with 5,000 to 100,000 square feet of gross building area (GBA)

. This time frame spans the tail end of the economic recession through the recovery years into the current and relatively stabilized market. Within this context, we analyzed annual trends in capitalization rates depicting relationships between income and pri cing trends.

B ased on our analysis we have concluded annual market rents per square foot for the interim years of 2011, 2012, 2013, 2014 and 2015 as follows:

Year Above Grade Rent/SF Basement Rent/SF

201 1 $17.00 $8.50

201 2 $19.50 $9.75

2013 $22.00 $11.00

2014 $22.75 $11.38

2015 $23.50 $13.50TDG 2015 022 88 

## F INAL 

## R ECONCILIATION

The process of reconciliation involves the analysis of each approach to value. The quality of data appl ied, the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. Finally, each is considered separately and comparatively with each other.



## V ALUE 

## I NDICATIONS
Income Approach: Direct Capi talization (Current Market Value) $9,000,000 Income Approach: Direct Capitalization (2010 Retrospective Market Value): $4,965,000

Trend Analysis (Current Market Value) $9,0 96 ,000 Trend Analysis ( 2015 Retrospective Market Value) $ 7,815,000 Trend Analy sis ( 2014 Retrospective Market Value) $ 7,243 ,000 Trend Analysis ( 2013 Retrospective Market Value) $ 6,783 ,000 Trend Analysis ( 2012 Retrospective Market Value) $ 5,780 ,000 Trend Analysis ( 2011 Retrospective Market Value) $4,9 03 ,000 Trend Analysis (2010 Re trospective Market Value) $4,965,000



## V ALUE 

## C ONCLUSIONS
The Income Approach to value w as utilized in this analysis to establish current and 2010 retrospective market values

. A trend analysis was utilized to established retrospective market
values for the interim years of 2011, 2012, 2013, 2014 and 2015. Due to the buyer profile which
is likely reflective of governmental, or quasi

- public agencies requiring an owner/user profile or ancillary income potential, and with consideration of the relative strengths of available data, the Income Approach is given primary consideration for the current market value and 2010 retrospective market values in the final reconciliation. Our trend analysis also demonstrated a high level of consistency with our Income Approach, and thus is considered a reliable means of developing our interim values for this analysis. Both approaches provi ded very consistent values
which indicate both approaches provide critical insights into typical behavior within the subject’s competitive mark et throughout the time frame of our analysis

. Based on the data and analyses developed in this appraisal, we have reconciled to the following value conclusion s , as of September 12, 2016 as well as years 2010, 2011, 2012, 2013, 2014 and 2015 , subject to the limiting conditions and assumptions of this appraisal:TDG 2015 022 89



## M ARKET 

## R ENT 

## C ONCLUSIONS

In order to establish market rental rates in this analysis, current and 2010 retrospective lease comparables were selected an analyzed. Trend analyses were employed in deriving market rental rates for the interim years of 20 11, 2012, 2013, 2014 and 2015. Based on the data and analyses developed in this appraisal, we have reconciled to the following m arket rent
conclusion s , as of September 1 2, 2016
, as well as years 2010, 2011 , 2012, 2013, 2014 and 2015 subject to the limiting conditions and assumptions of this appraisal:TDG 2015 022 90 

## C ERTIFICATION 

## S TATEMENT

We certify that, to the best of our knowledge and belief:

 The statements of fact contained in this report are true and correct.

 The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions and concl usions.

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

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

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

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

 Our analyses, opinions, and co nclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).

 William Moore (AR032110) provided significant real property appraisal assistance to the person(s) signing thi s certification. William Moore’s contributions to this assignment included (but were not limited to) research and verification of subject physical and legal characteristics, highest and best use analysis, market research and analysis, consideration of appl icable approaches to value, comparable sale selection and analysis, income analysis including Direct Capitalization, report writing, and final value reconciliation. Market research was conducted via sources including but not limited to public records, CoSt ar data, LoopNet, government websites and personnel, and local brokers. My contributions to this report were performed in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP), and under the supervision and guidance of Lance W. D oré, MAI, FRICS who is the signer of this certification.

 We certify sufficient competence to appraise this property through education and experience, in addition to the internal resources of the appraisal firm.

 As of the date of this report, Lance W. Doré, MAI, FRICS has completed the continuing education program for designated members of the Appraisal Institute.TDG 2015 022 91

 We have performed no services, as appraisers, regardin g the property that is the subject of this report within the three year period immediately preceding acceptance of this assignment.

 Lance W. Doré , M AI, FRICS ha s made an inspection of the subject property.

Lance Doré

, MAI , FRICS President / C EO The Doré Group
AG 002464 lwdore@thedoregroup.comTDG 2015 022 92 

## A DDENDATDG 2015 022 93



## D EFINITIONS
Fee Simple E state : Absolute ownership unencumbered by any other interest or estate, subject only to the limitations impos ed by the governmental powers of taxation, eminent domain, police power, and escheat.

Leased Fee I nterest : A freehold (ownership interest) where the possessory interest has been granted to another party by the creation of a contractual landlord

- tenant re lationship (i.e., a lease).

Marketing Time : An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of the appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of the appraisal.

Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, "Reasonable Exposure Tim e in Real Property and Personal Property Market Value Opinions" address the determination of reasonable exposure and marketing time.

Exposure Time:

1. The time a property remains on the market.

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

See Marketing Time, above.

Gross Building Area (GBA): Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above

- grade area. This includes mezzanines and basements if and when typically included in the re gion.

Rentable Area (RA): For office buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the building that penetrate through the floor to the areas below. The rentable area of a floor is computed by measuring the in side finished surface of the dominant portion of the permanent building walls, excluding any major permanent penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to local practice.

Gross Leasable A rea (GLA): Total floor area designed for the occupancy and exclusive use of tenants, including basements and mezzanines; measured from the center of joint partitioning to
the outside wall surfaces.

## LANCE W. DORÉ, MAI, FRICS

Curriculum Vitae

Lance W. Doré is the President and CEO of The Doré Group. In this role, h e directs all valuation assignments involving a wide variety of conventional and complex real propert ies
, serves as litigation support to both public and private clients , provides expert advisory services ( including forensic analys e s and market and feasibility studies )

, and manages the overall operations of The Doré Group.

Mr. Doré has been a real estate appraiser since 1983, initially working for Bank of America as a staff appraiser then as a senior appraiser with a fee appraisal firm in Del Mar, California. In 1988, he formed L.W. Doré, Real Estate Consultants and
g rew the firm through the addition of two partners forming Doré & Curry, Inc. (1990) and Doré, Curry, & Marschall, Inc. (1997). In 1999, Doré, Curry, & Marschall, Inc. became the San Diego office for Integra Realty Resources with Mr. Doré serving as Managing Director. In the fall of 2005

, Mr. Doré joined Cushman & Wakefield as the National Practice Leader of the Government Affairs and Energy division

. In 2007, he pursued an opportunity to serve as the President of European Emerging Markets and Vice Pr esident of Client Services for PGP, Inc./Colliers International

. Mr. Dor é’s unique depth of experience, coupled with his high personal standards of service, led him to found The Doré Group in 2010.


### Experience
Mr. Doré’s work experience spans a wide variety of property types with special expertise in the valuation of energy facilities, conservation land, open space corridors and ranches. In addition, he has also appraised planned

- unit developments, residential income properties, senior housing, shoppi ng centers, office, industrial, mixed

- use properties, and a multitude of special purpose properties

, including , but not limited to hotels, ski resorts, restaurants, hospitals, recreational camps, auto service and wrecking centers, equestrian facilities, an d golf courses. He regularly serves as an expert advisor conducting appraisal reviews

, forensic studies, and marketability and feasibility analyses

. In addition, Mr. Doré is uniquely qualified and experienced in litigation testimony, consultation and advisory services for all real estate related issues. His geographical valuation expertise is focused in the western United States and extends to Tokyo (Japan), Central Americ a, Mexico, Cyprus, and Moscow (Russia).


### Licenses/Certifications/Affiliations Certified General Real Estate Appraiser

– State of California (OREA No. AG002464) California Licensed Real Estate Broker & Realtor member

- San Diego Board of Realtors
C redential ed Mediator

– National Conflict Resolution Center , San Diego Member of the Appraisal Institute (MAI No. 8471) Fellow of the Royal Institute of Charter Surveyors Member of the International Right of Way Association (IR/WA), San Diego Chapter Member of the F amily Firm Institute

- FFI



### Instructor Positions National Instructor ( Real Estate Valuation Principles & Practice)

- Appraisal Institute Adjunct Professor

- Russian Federation Finance Academy National Instructor

– ( Business Development and Leadership )

– Royal Institute of Charter Surveyors National Instructor

- ( Red Book Standards )

- Royal Ins titute of Charter Surveyors



### Leadership/Committees

Past President

– Appraisal Ins t it ute , San Diego Chapte r Past member of International Relations Committee

– Appraisal Institute Past member of Ethics & Standards Committee

– Appraisal Institute

### Speaking Engagements Appraisal Institute (National Seminar Series , Los Angeles, CA )

- Land Valuation & Environmental Issues The Trust for Public Land (San Diego, CA)

- Natural Communities Conservation Plan
Pan Pacific Conference (Auckland, New Zealand)

– Valuation of Submerged Lands Government of Cyprus (Nicosia, Cyprus)

– Valuation of Golf Courses and Marinas The Russian Federation (Moscow, Russia)

- Valuation of Land and Appraisal Principles The Russian Federation (Goa, India)

- Valuation of Oil and G as and Power Plants Royal Institute of Charter Surveyors (Montego Bay, Jamaica)

– Government & Regula tory Risk Graziadio School of Business & Management , Pepperdine (Los Angeles, CA)

– 2008 U S & California Forecast Appraisal Institute (San Diego, CA)

– Unique Valuations in Real Estate Appraisal Institute (San Diego, CA)

– International Financial Reporting Standards (IFRS ) University of San Diego

– MBA program

– Guest Lecturer



### Publications Appraisal Journal (October 2001)

– “ The Valuation of Submerged Land ” Energy Pulse (March 2006)

– “ The Highest and Best Use of Power Plants ” Union of Pan America Valuers (November 2010)

– “ Impact of Public to Private Partnerships in BRICS ” Wall Street Journal (August 2001)

– “ Power Plant Owners Fight to Lower Taxes ” The Secret of Real Estate

– Revealed (2011)


### Representative Client List
Public Entities United States Department of the Interior United States Forest Service United States Department of Navy United States Department of Justice Government of Cyprus Russian Federation State of California

– Judicial Courts County of San Diego County of Riverside County of Los Angeles County of Monterey City of Riverside City of San Diego City of Monterey



### Legal Clients
Morrison & Foerster Sheppard, Mullin

, Richter & Hampton Best, Best and Krieger DLA Piper Luce, Forward, Hamilton and Scripps Cooley, LLP Ropes & Gray Faeger & Benson McKenna, Long & Aldridge Gordon & Rees Latham & Watkins Thorsnes, Bartolotta & McGuire



### Mr. Doré’s representative financial clients include numerou s national, regional and local lenders and private corporations.

# TAB BDate Monthly Rent Paid sqft Monthly Rental Rate Paid Blended

FMV Monthly Rental Rate Market Rent Variance 1% Interest on Variance Months to

9/30/16 Year Above Grade Rent/SF Basement

Rent/SF Blended

Annual FMVR Blended

Monthly FMVR

Feb-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$679.84 80 2010 $18.00 $9.00 $15.10 $1.26

Mar-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$671.34 79 2011 $17.00 $8.50 $14.26 $1.19
Apr-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$662.84 78 2012 $19.50 $9.75 $16.35 $1.36
May-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$654.34 77 2013 $22.00 $11.00 $18.45 $1.54

Jun-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$645.84 76 2014 $22.75 $11.38 $19.08 $1.59

Jul-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$637.35 75 2015 $23.50 $11.75 $19.71 $1.64
Aug-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$628.85 74 2016 $27.00 $13.50 $22.64 $1.89
Sep-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$620.35 73

Oct-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$611.85 72

Nov-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$603.35 71

Dec-10 $21,410.83 25,086 $0.85 1.26 $31,608.36 -$10,197.53 -$594.86 70

Jan-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$485.39 69

Feb-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$478.35 68

Mar-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$471.32 67 Apr-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$464.28 66 May-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$457.25 65

Jun-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$450.21 64

Jul-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$443.18 63 Aug-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$436.14 62 Sep-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$429.11 61

Oct-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$422.08 60

Nov-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$415.04 59

Dec-11 $21,410.83 25,086 $0.85 1.19 $29,852.34 -$8,441.51 -$408.01 58

Jan-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$603.54 57

Feb-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$592.95 56

Mar-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$582.36 55 Apr-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$571.78 54 May-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$561.19 53 City of Santa Monica - Calculation of Rent Shortfall and Interest on SMC's Airport Arts CampusJun-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$550.60 52

Jul-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$540.01 51 Aug-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$529.42 50 Sep-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$518.83 49

Oct-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$508.25 48

Nov-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$497.66 47

Dec-12 $21,410.83 25,086 $0.85 1.36 $34,116.96 -$12,706.13 -$487.07 46

Jan-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$645.81 45

Feb-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$631.46 44

Mar-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$617.11 43 Apr-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$602.76 42 May-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$588.41 41

Jun-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$574.05 40

Jul-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$559.70 39 Aug-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$545.35 38 Sep-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$531.00 37

Oct-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$516.65 36

Nov-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$502.30 35

Dec-13 $21,410.83 25,086 $0.85 1.54 $38,632.44 -$17,221.61 -$487.95 34

Jan-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$508.09 33

Feb-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$492.69 32

Mar-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$477.29 31 Apr-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$461.90 30 May-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$446.50 29

Jun-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$431.10 28

Jul-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$415.71 27 Aug-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$400.31 26 Sep-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$384.91 25

Oct-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$369.52 24

Nov-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$354.12 23

Dec-14 $21,410.83 25,086 $0.85 1.59 $39,886.74 -$18,475.91 -$338.73 22

Jan-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$345.28 21

Feb-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$328.84 20

Mar-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$312.39 19Apr-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$295.95 18

May-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$279.51 17

Jun-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$263.07 16

Jul-15 $21,410.83 25,086 $0.85 1.64 $41,141.04 -$19,730.21 -$246.63 15 Aug-15 $32,116.25 25,086 $1.28 1.64 $41,141.04 -$9,024.79 -$105.29 14 Sep-15 $32,116.25 25,086 $1.28 1.64 $41,141.04 -$9,024.79 -$97.77 13

Oct-15 $32,116.25 25,086 $1.28 1.64 $41,141.04 -$9,024.79 -$90.25 12

Nov-15 $32,116.25 25,086 $1.28 1.64 $41,141.04 -$9,024.79 -$82.73 11

Dec-15 $32,116.25 25,086 $1.28 1.64 $41,141.04 -$9,024.79 -$75.21 10

Jan-16 $32,116.25 25,086 $1.28 1.89 $47,412.54 -$15,296.29 -$114.72 9

Feb-16 $32,116.25 25,086 $1.28 1.89 $47,412.54 -$15,296.29 -$101.98 8

Mar-16 $32,116.25 25,086 $1.28 1.89 $47,412.54 -$15,296.29 -$89.23 7 Apr-16 $32,116.25 25,086 $1.28 1.89 $47,412.54 -$15,296.29 -$76.48 6 May-16 $32,116.25 25,086 $1.28 1.89 $47,412.54 -$15,296.29 -$63.73 5

Jun-16 $32,116.25 25,086 $1.28 1.89 $47,412.54 -$15,296.29 -$50.99 4

$1,862,742.28 $2,835,721.44 -$1,069,327.91 -$33,818.27

-$1,103,146.18 Total Variances + Interest =