valuation consultants - loopnet...valuation consultants 4200 cannoli circle, las vegas, nevada...

Valuation Consultants

4200 Cannoli Circle, Las Vegas, Nevada 89103-5404

Telephone (702) 222-0018 Fax (702) 222-0047

An Appraisal Report Of

The Proposed Treehouse Las Vegas

Located At

1018 & 1026 Main Street Las Vegas, Clark County, Nevada 89101

Clark County Assessor’s Parcel Numbers (APNs) 139-33-811-008 & -009

Prepared For

ARTS DISTRICT HOLDINGS, LLC

197 East California Street Las Vegas, Nevada 89104

Prepared By

Valuation Consultants Keith Harper, MAI

File Number RT-18-06

Date of Report

April 10, 2018

Date of “As Is” Market Value

April 3, 2018

April 10, 2018 ARTS DISTRICT HOLDINGS, LLC 197 East California Street Las Vegas, Nevada 89104 RE: An Appraisal Report of the proposed Treehouse Las Vegas, located at 1018 & 1026 Main

Street, Las Vegas, Clark County, Nevada 89101. This property is also identified as Clark County Assessor’s Parcel Numbers (APNs) 139-33-811-008 & -009.

Art District Holdings, LLC: At your request, I have visited the property and appraised the above-referenced property. The purpose of this appraisal report is to form opinions of the following valuation scenarios:

“As Is” Market Value - Fee Simple Estate Prospective Market Value “As Complete” - Leased Fee Interest

According to documents provided, the subject is the proposed Treehouse Las Vegas, a multi-purpose entertainment venue including a bar/tavern, restaurant, lounge, pool, and rooftop deck areas, which will contain a reported 16,307 square feet. The expected construction start date is reported to be on or around May 1, 2018 and the completion of construction is anticipated to be on or around December 1, 2018. I was provided with a Triple Net Lease Agreement between Arts District Holdings, LLC (Landlord) and Treehouse Lounge Holdings (Tenant) dated October 12, 2017, and two additional lease addendums. The first lease addendum is dated November 2017 and the second lease addendum is dated March 2018. The lease commencement date will be upon completion of construction of the improvements and the issuance of a certificate of occupancy for the interior improvements of the Premises. The lease has an initial term of 15 years and has five (5) option periods of five (5) years each. According to the original lease, dated October 12, 2017, the rentable building area is to be 11,200 square feet and the initial monthly base rent is $32,100 per month, or $2.87 per square foot per month. The rent is to include the improvements, including the pool and any remaining lot area. However, according to the first lease addendum, dated November 2017, the tenant will pay rent in the amount of $1.25 per square foot per month based on the additional square footage being added to the commercial lease space. This is presently planned for 5,107 square feet. This will increase the base rent in the amount of $6,383.75 (5,107 SF x $1.25 = $6,383.75). Therefore, the overall monthly base rent is increased to $38,493.75 ($32,100 + $6,383.75= $38,493.75), or $2.36 per square foot per month, based on an overall building size of 16,307 square feet (11,200 SF + 5,107 SF).

Art District Holdings, LLC April 10, 2018 Page ii

The subject property will be two stories which the first level will include restaurant/dining space, a speakeasy, a main bar, a separate gaming bar along with the pool/lounge area with outdoor seating and cabanas. The second story will include additional rooftop dining area and additional rooftop event space. Upon completion, the subject property will be a unique gaming bar/nightclub/lounge/restaurant which will include a pool with outdoor seating and patio areas. The Treehouse concept will be very unique to the immediate area and be a new concept not seen in the immediate redevelopment area, known as the Arts District, including other bar/restaurants/lounges. The improvements will be situated on two adjacent parcels totaling 0.36 net acres or 15,682 square feet of land. There will be no on-site parking. With the subject being located within the 18B Las Vegas Arts District within the Downtown Las Vegas master plan, the subject is not required to provide any on-site parking. However, it is noted the tenant/operator will eventually be leasing some adjacent lot space to the south, which is not a part of this appraisal. Currently, the northern parcel is improved with a commercial building which was originally built in 1956. The building has sat vacant for years and is beyond the age of repair. The building has no contributory value and will be razed in order to construct the proposed improvements. According to Erin with the City of Las Vegas Planning and Zoning, the subject site has been approved for a liquor establishment (Tavern) – SUP-7270 and a night club – SUP-7271. Erin indicates the full liquor and tavern licenses allows for up to 15 gaming devices on the subject site. Along with the two-special use permits above, the side development review - SDR-72172 for both uses has been approved along with a variance – VAR-72169 to allow for a roof sign to extend 14 feet above the top of the wall and to allow such sign to be up to 672 square feet. These permits were approved on January 10, 2018. The tenant/operator will be responsible to pursue all necessary business, liquor, gaming licenses or other permits in order to operate the business. The date of this appraisal is April 10, 2018, which is the date that the appraisal was prepared. The effective date of the “As Is” Market Value of the fee simple estate is April 3, 2018, which is the date of the most recent property visit. The effective date of the Prospective Market Value “As Complete” of the leased fee interest is December 1, 2018. The intended use of the appraisal report is to assist in the internal decision-making process. The intended user of the appraisal is Arts District Holdings, LLC. This report has no other intended use or intended users other than what has been stated herein. To develop the opinions of value, I have performed an Appraisal Report as defined by the 2018-2019 Edition of the Uniform Standards of Professional Appraisal Practice (USPAP). This is an appraisal report, which is intended to comply with the reporting requirements set under Standards Rule 2-2 (a) of the 2018-2019 Edition of USPAP for an Appraisal Report. We are not responsible for unauthorized use of this report.

Art District Holdings, LLC April 10, 2018 Page iii

After considering all of the available facts and subject to the underlying assumptions and limiting conditions contained herein, it is my opinion that the respective values of the subject property, as of the effective dates are as follows:

Valuation Scenario

Ownership Interest

Date of Value

Value Conclusion

“As Is” Market Value Fee Simple April 3, 2018 $940,000

Prospective Market Value “As Complete” Leased Fee December 1, 2018 $7,300,000 (1) (2) (3)

1. This is the value of the real estate only. It does not include any Furniture, Fixtures and

Equipment (FF&E), Business Enterprise or Personal Property. EXTRAORDINARY ASSUMPTION: an assignment - specific assumption, as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions for trends; or the integrity of data used in an analysis. (Source: Uniform Standards of Professional Appraisal Practice, 2018 – 2019 Edition, Effective January 1, 2018)

2. The Prospective Market Value "As Complete" is based on the extraordinary assumptions that a) the construction costs that have been provided are accurate, b) the construction of the improvements will be completed per the plans and specifications that have been provided and will meet current building codes and c) all lease and other information provided over the course of the appraisal assignment is accurate.

3. The overall square footage used herein is taken from the first lease addendum dated January 11, 2018. This size was also confirmed by the client. The Prospective Market Value "As Complete" is based on the extraordinary assumptions that this building size is correct, and I reserve the right to modify this appraisal if any other plans or surveys are provided which indicates a different size.

If these extraordinary assumptions, which are directly related to this specific assignment, are found to be false, it could alter the final opinion or conclusion of the Prospective Market Value.

Art District Holdings, LLC April 10, 2018 Page iv

Thank you for the opportunity to complete this assignment. If I may be of further assistance, please contact me at your convenience. Sincerely, VALUATION CONSULTANTS

__________________________ Keith Harper, MAI Certified General Appraiser License Number A.0000604-CG State of Nevada Expires: March 31, 2020

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EXECUTIVE SUMMARY Location: The subject is located at 1018 & 1026 Main Street, Las

Vegas, Clark County, Nevada 89101. The subject is located within the 18B Las Vegas Arts District within the Downtown Las Vegas Masterplan Area.

Assessor’s Parcel Nos. (APNs): 139-33-811-008 & -009 Site Area: 0.36 net acres or 15,682 square feet Improvements: According to documents provided, the subject is the

proposed Treehouse, a multi-purpose entertainment venue including a bar/tavern, restaurant, lounge, pool, and rooftop deck areas, which will contain a reported 16,307 square feet. The expected construction start date is reported as May 1, 2018 and the completion of construction is anticipated on or around December 1, 2018.

Highest and Best Use: As Vacant: Future Commercial Development per the

Downtown Las Vegas masterplan land uses.

As Improved, As Proposed: Development of the proposed Treehouse Night Club

Purpose of Appraisal: The purpose of this appraisal report is to form opinions

of the following valuation scenarios:

“As Is” Market Value– Fee Simple Estate Prospective Market Value “As Complete” –

Leased Fee Interest Intended Use/User of Appraisal: The intended use of the appraisal report is to assist in the

internal decision-making process. The intended user of the appraisal is Arts District Holdings, LLC. This report has no other intended use or intended users other than what has been stated herein.

Dates of Opinions: Date of Report: April 10, 2018

“As Is” Market Value: April 3, 2018 Prospective Market Value December 1, 2018

Interest Appraised: Fee Simple Estate and Leased Fee Interest Zoning: C-M, Commercial Industrial District, City of Las Vegas

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Summary of Final Values

Valuation Scenario Ownership

Interest

Date of Value

Value Conclusion

“As Is” Market Value Fee Simple April 3, 2018 $940,000

Prospective Market Value “As Complete” Leased Fee December 1, 2018 $7,300,000 (1) (2) (3)

1. This is the value of the real estate only. It does not include any Furniture, Fixtures and

Equipment (FF&E), Business Enterprise or Personal Property. EXTRAORDINARY ASSUMPTION: an assignment - specific assumption, as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions for trends; or the integrity of data used in an analysis. (Source: Uniform Standards of Professional Appraisal Practice, 2018 – 2019 Edition, Effective January 1, 2018)




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TABLE OF CONTENTS

Subject Property Photographs – Taken on April 3, 2018 ................................................... 1 Property Introduction .......................................................................................................... 6 Las Vegas Area Analysis .................................................................................................. 14 Downtown Las Vegas Market Area Data ......................................................................... 39 Property Taxes and Assessor’s Values ............................................................................. 57 Site Data ............................................................................................................................ 59 Description of the Proposed Improvements ...................................................................... 66 Highest and Best Use Analysis ......................................................................................... 79 Method of Valuation ......................................................................................................... 83 “As Is” Market Value ........................................................................................................ 84 Sales Comparison Approach ............................................................................................. 85 Reconciliation of the “As Is” Market Value of the 0.36 Net Acres of Land .................... 92 Exposure Time and Marketing Time ................................................................................ 93 Prospective Market Value “As Complete” ....................................................................... 95 Cost Approach ................................................................................................................... 96 Sales Comparison Approach ........................................................................................... 100 Income Capitalization Approach..................................................................................... 115 Reconciliation of the Prospective Market Value “As Complete” ................................... 130 Assumptions and Limiting Conditions ........................................................................... 132 Certification .................................................................................................................... 135 Addenda

Valuation Consultants File No. RT-18-06

1

PHOTOGRAPHS OF THE SUBJECT PROPERTY – Taken on April 3, 2018


2

Viewing Northwest Across Subject Property, Standing Along Main Street

Viewing West Along Subjects Northern Boundary, Standing on Main Street


3

Viewing West Across Subject’s Southern Boundary, Standing on Main Street

Viewing North Along Main Street, Subject to the Left


4

Viewing Southeast Towards Subject Property, Standing on Commerce Street

Viewing East Along Subject’s Northern Boundary, Standing on Commerce Street


5

Viewing East Along Subject’s Southern Boundary, Standing on Commerce Street

Viewing South Along Commerce Street, Subject to the Left


6

PROPERTY INTRODUCTION

Subject Identification

According to documents provided, the subject is the proposed Treehouse Las Vegas, a multi-purpose entertainment venue including a bar/tavern, restaurant, lounge, pool, and rooftop deck areas, which will contain a reported 16,307 square feet. The expected construction start date is reported to be on or around May 1, 2018 and the completion of construction is anticipated to be on or around December 1, 2018. I was provided with a Triple Net Lease Agreement between Arts District Holdings, LLC (Landlord) and Treehouse Lounge Holdings (Tenant) dated October 12, 2017, and two additional lease addendums. The first lease addendum is dated November 2017 and the second lease addendum is dated March 2018. The lease commencement date will be upon completion of construction of the improvements and the issuance of a certificate of occupancy for the interior improvements of the Premises. The lease has an initial term of 15 years and has five (5) option periods of five (5) years each. According to the original lease, dated October 12, 2017, the rentable building area is to be 11,200 square feet and the initial monthly base rent is $32,100 per month, or $2.87 per square foot per month. The rent is to include the improvements, including the pool and any remaining lot area. However, according to the first lease addendum, dated November 2017, the tenant will pay rent in the amount of $1.25 per square foot per month based on the additional square footage being added to the commercial lease space. This is presently planned for 5,107 square feet. This will increase the base rent in the amount of $6,383.75 (5,107 SF x $1.25 = $6,383.75). Therefore, the overall monthly base rent is increased to $38,493.75 ($32,100 + $6,383.75= $38,493.75), or $2.36 per


7

square foot per month, based on an overall building size of 16,307 square feet (11,200 SF + 5,107 SF). The subject property will be two stories which the first level will include restaurant/dining space, a speakeasy, a main bar, a separate gaming bar along with the pool/lounge area with outdoor seating and cabanas. The second story will include additional rooftop dining area and additional rooftop event space. Upon completion, the subject property will be a unique gaming bar/nightclub/lounge/restaurant which will include a pool with outdoor seating and patio areas. The Treehouse concept will be very unique to the immediate area and be a new concept not seen in the immediate redevelopment area, known as the Arts District, including other bar/restaurants/lounges. The improvements will be situated on two adjacent parcels totaling 0.36 net acres or 15,682 square feet of land. There will be no on-site parking. With the subject being located within the 18B Las Vegas Arts District within the Downtown Las Vegas master plan, the subject is not required to provide any on-site parking. However, it is noted the tenant/operator will eventually be leasing some adjacent lot space to the south, which is not a part of this appraisal. Currently, the northern parcel is improved with a commercial building which was originally built in 1956. The building has sat vacant for years and is beyond the age of repair. The building has no contributory value and will be razed in order to construct the proposed improvements. According to Erin with the City of Las Vegas Planning and Zoning, the subject site has been approved for a liquor establishment (Tavern) – SUP-7270 and a night club – SUP-7271. Erin indicates the full liquor and tavern licenses allows for up to 15 gaming devices on the subject site. Along with the two-special use permits above, the side development review - SDR-72172 for both uses has been approved along with a variance – VAR-72169 to allow for a roof sign to extend 14 feet above the top of the wall and to allow such sign to be up to 672 square feet. These permits were approved on January 10, 2018. The tenant/operator will be responsible to pursue all necessary business, liquor, gaming licenses or other permits in order to operate the business. Property Ownership and History According to Clark County public records, ownership of the subject is currently vested in Arts District Holdings, LLC. The entity recently acquired 1026 South Main Street from Main Street Lots, LLC on March 13, 2017, for $236,600, as recorded in Document Number 20170313:00727 of the Official Records of Clark County, Nevada. Reportedly, this property was a part of a legal settlement and the overall sales price did not represent market value. Previously, Main Street Lots, LLC held ownership of the parcel since December 2016. Arts District Holdings acquired 1018 South Main Street from Arts District Partners 1, LLC on October 26, 2015, for $950,000, as recorded in Document Number 20151026:00770 of the Official Records of Clark County, Nevada. Previously, Arts District 1, LLC held ownership of the parcel since December 2013. Additionally, the subject property is not in escrow or being marketed for sale.


8

Legal Description A title report was not provided for this assignment. Following is the legal description for each subject parcel as taken from the most recent Grant Bargain and Sale Deeds which were discussed above in the property ownership section. APN: 139-33-811-008

APN: 139-33-811-009

Purpose of the Appraisal The purpose of this appraisal report is to form opinions of the following valuation scenarios:

“As Is” Market Value - Fee Simple Estate Prospective Market Value “As Complete” - Leased Fee Interest

Intended Use/User of the Appraisal The intended use of the appraisal report is to assist in the internal decision-making process. The intended user of the appraisal is Arts District Holdings, LLC. This report has no other intended use or intended users other than what has been stated herein. “As Is” Market Value is defined as, “The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.” (Source: The Dictionary of Real Estate Appraisal, 6th ed. [Chicago: Appraisal Institute, 2015] page 13)


9

Market Value Defined Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and acting in what they consider their

own best interests; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or

creative financing or sales concessions granted by anyone associated with the sale. (Source: Code of Federal Regulations; Title 12 – Banks and Banking; Chapter I – Comptroller of the Currency, Department of the Treasury; Part 34 – Real Estate Lending and Appraisals; Subpart C – Appraisals; Sec. 34.42 – Definitions [g]; Revised as of May 16, 2016) Prospective Opinion of Value means, “a prospective market value may be appropriate for the valuation of a property interest related to a credit decision for a proposed development or renovation project. According to USPAP, an appraisal with a prospective market value reflects an effective date that is subsequent to the date of the appraisal report. Prospective value opinions are intended to reflect the current expectations and perceptions of market participants, based on available data. Two prospective value opinions may be required to reflect the time frame during which development, construction, and occupancy will occur. The prospective market value – as completed – reflects the property’s market value as of the time that development is expected to be completed. The prospective market value – as stabilized – reflects the property’s market value as of the time the property is projected to achieve stabilized occupancy. For an income-producing property, stabilized occupancy is the occupancy level that a property is expected to achieve after the property is exposed to the market for lease over a reasonable period of time and at comparable terms and conditions to other similar properties.” (Source: The Dictionary of Real Estate Appraisal, 6th ed. [Chicago: Appraisal Institute, 2015] pg. 179-180.) Prospective Market Value “Upon Completion” as it is used herein means a forecast of market value expected to occur at the estimated date when all improvements have been physically constructed. Market Value “Upon Stabilization” as it is used herein means a forecast of market value expected to occur at the estimated date of stabilized occupancy. This is the market value of the property at a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy.


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Exposure Time is defined as, “Estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. (Source: 2018-2019 Edition of USPAP, page U-2) Marketing Time is defined as, “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 an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal.” (Source: The Dictionary of Real Estate Appraisal, 6th ed. [Chicago: Appraisal Institute, 2015] page 140) Site Visit Date The subject property was visited on April 3, 2018. Effective Date of Valuation The date of this appraisal is April 10, 2018, which is the date that the appraisal was prepared. The effective date of the “As Is” Market Value of the fee simple estate is April 3, 2018, which is the date of the most recent property visit. The effective date of the Prospective Market Value “As Complete” of the leased fee interest is December 1, 2018. Date of Report The date of this report is April 10, 2018. Property Rights Appraised The Fee Simple Estate and the Leased Fee Interest is being appraised in this report. Fee Simple Estate is defined as, “Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.” (Source: The Dictionary of Real Estate Appraisal, 6th ed. [Chicago: Appraisal Institute, 2015] page 90) Leased Fee Interest is defined as, “The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.” (Source: The Dictionary of Real Estate Appraisal, 6th ed. [Chicago: Appraisal Institute, 2015] page 128) Type of Report To develop the opinions of value, I have performed an Appraisal Report as defined by the 2018-2019 Edition of the Uniform Standards of Professional Appraisal Practice (USPAP). This is an appraisal report, which is intended to comply with the reporting requirements set under Standards Rule 2-2 (a) of the 2018-2019 Edition of USPAP for an Appraisal Report. We are not responsible for unauthorized use of this report.


11

Scope of the Appraisal The scope of work required investigating sufficient data relative to the subject property to derive an opinion of value. The depth of the analysis was intended to be appropriate in relation to the significance of the appraisal problem.

Extent of documentation provided for this report – For this assignment, the client provided construction costs, a lease with two addendums, building plans, and other verbal details regarding the overall project.

Extent to which the property is identified – – I did not receive an ALTA/NSPS Land

Title Survey or a title report for the subject. In lieu of a survey, I relied on the Clark County Assessor records for an accurate reflection of the size and shape of the subject parcels, as well as the history of the property. I reserve the right to modify the final conclusion based upon surveys or other studies that reflect different sizes or dimensions than used in this appraisal. Because I was not provided with a copy of a preliminary title report, I am unaware of any easements or encroachments that may be on the property. A title search or survey of the subject property was not performed.

Extent to which tangible property is inspected – On April 3, 2018, I, Keith Harper, MAI visited the subject property in order to develop impressions of physical characteristics based on visual observations of apparent, not unapparent conditions. I walked a portion of the site and obtained photographs of the subject property at that time. Said photographs are contained herein. This appraisal is not a property condition report and should not be relied upon to disclose any conditions present in the property, and it does not guarantee the property to be free of defects. I am not a licensed inspector, and I did not make an “inspection” of the property.

I am not qualified to detect or identify hazardous substances, which may, or may not, be present on, in, or near the subject property. The presence of hazardous materials may negatively affect market value. I have no reason to suspect the presence of hazardous substances, and value the subject assuming that none are present. No responsibility is assumed for any such conditions or for any expertise or engineering required to detect or discover them. I urge the user of this report to obtain the services of specialists for the purpose of conducting inspections, engineering studies, or environmental audits. While it is noted that the subject does not lie within the 100-year flood plain and I refer to FEMA flood maps, I am not a surveyor and not qualified to make flood plain determinations, and it is recommended that a qualified party be consulted before any investment-type decision is made.

The type and extent of data researched – Sales and lease data was obtained through researching COMPS service, the Loop Net data service, PropertyLine and public records. Attempts were made to contact brokers to confirm sales and leases. The comparable properties were analyzed with consideration of such differences as legal encumbrances, conditions of sale, financing terms, market conditions, location, physical characteristics, availability of utilities, zoning, and highest and best use.


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The type and extent of analysis applied – Per the client’s request, this is an appraisal report of the property, located at 1018 & 1026 Main Street, Las Vegas, Nevada 89101. The opinion of the “as is” market value of the subject property will be provided through the completion of the Sales Comparison Approach using sales of vacant commercial parcels of land in the area. In developing the indication of the Prospective Market Value “As Complete” of the Leased Fee Interest, I will utilize the three usual approaches to value. The subject property will be completed and stabilized on or around December 1, 2018. I was provided with the projected construction costs and I have used the Cost Approach to value the subject property. I have also used the Sales Comparison Approach and the Income Capitalization Approach.

This appraisal report is intended to be an "appraisal assignment". That is the intention that the appraisal service be performed in such a manner that the results of the analysis, opinion, or conclusion be that of a disinterested third party. Environmental Issues Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyl, petroleum leakage, or agricultural chemicals, which may or may not be present on the subject property, or other environmental conditions were not called to my attention, nor did I become aware of such during my property visit. The presence of hazardous materials may negatively affect the final “as is” opinion of value. I have not been provided with a Phase I Environmental Site Assessment. I have no knowledge of the existence of such materials on, in, or near the subject property, and I am not qualified to detect or identify hazardous substances, which may, or may not, be present on, in, or near this property. I was not provided with environmental studies relative to the subject property. The presence of hazardous materials may negatively affect market value. If the presence of such substances, such as asbestos, urea formaldehyde foam insulation, or other hazardous substances or environmental conditions including asbestos, may affect the value of the property, then this appraisal is based on the assumption that there are no such conditions on or in the property, or in such proximity thereto, that it would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to detect or discover them. I urge the user of this report to retain an expert in this field, and I reserve the right to modify my conclusions based on the results of such a report. Extraordinary Assumptions EXTRAORDINARY ASSUMPTION: an assignment - specific assumption, as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions for trends; or the integrity of data used in an analysis. (Source: Uniform Standards of Professional Appraisal Practice, 2018 – 2019 Edition, Effective January 1, 2018)


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1. The Prospective Market Value "As Complete" is based on the extraordinary assumptions

that a) the construction costs that have been provided are accurate, b) the construction of the improvements will be completed per the plans and specifications that have been provided and will meet current building codes and c) all lease and other information provided over the course of the appraisal assignment is accurate.


If these extraordinary assumptions, which are directly related to this specific assignment, are found to be false, it could alter the final opinion or conclusion of the Prospective Market Value. Hypothetical Conditions None


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LAS VEGAS AREA ANALYSIS

Geographic Orientation Las Vegas is situated at the southern tip of Nevada in the Great Basin – the western region between the Sierra Nevada and Wasatch Mountain ranges, which contains isolated mountains. Known as the most populous city in Nevada, it was established in 1905 and officially became a city in 1911. The name Las Vegas is often applied to the unincorporated areas of Clark County that surround the city, especially the resort areas on and near the Las Vegas ‘Strip’. This 6-mile stretch of Las Vegas Boulevard is mostly outside of the Las Vegas city limits, in the unincorporated town of Paradise.

Market Area Map

Subject


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Forces of Demand & Value

The principal forces of demand fall into the broad categories of population, employment and income. Changes within these metrics impact the need for more or less office, industrial, retail and residential space and consequently the demand for land. Of the general forces that affect value, the trends in population would fall into the category of social forces. Populations change in terms of their number but also in terms of their quality such as their makeup based on age and family composition and character. In the category of economic forces, basic trends in employment have a direct impact on the overall quantity of product and services that are demanded. Trends in overall income as a characteristic of employment have significant effects on the quality of these products and services. In terms of basic environmental and/or geographic forces, the overall location of the region or individual property and their relationship to surrounding areas or property affects value and examples of this would be the overall quality of transportation as evidenced by the availability of adequate primary linkages such as highways and arterials. In a city such as Las Vegas which is hundreds of miles from other similarly sized cities, air transportation has an outsized impact. This is logically exaggerated when the base economy is footed in tourism. The fact that Nevada has a very favorable tax climate would be an example of governmental forces that affect value. Following is a discussion on trends in population, employment, tourism and gaming, trends in air transportation, visitor volumes and Nevada’s tax advantages as these are the factors that have the greatest degree of saliency in terms of impacting the demand for and impact on the commercial real estate markets of Las Vegas. Population Historically, the growth of Clark County has been very strong. The following chart illustrates the historical population growth in Clark County based on U.S. Census Bureau data. From 1960 to 2010, the Clark County population grew at a compounded 57.7% per decade. The improvements are projected to continue through 2017 and there are projections that the population of Clark County will grow an additional 425,000 people between 2015 and the year 2035.


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Historical Clark County Population

1,951,269

127,016

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1960 1970 1980 1990 2000 2010

Year

Pop

ula

tion

Each year, the Regional Transportation Commission of Southern Nevada (RTC), the Southern Nevada Water Authority (SNWA), the Southern Nevada Regional Planning Coalition (SNRPC), the Center for Business and Economic Research (CBER) at the University of Nevada, Las Vegas, and a group of community demographers and analysts work together to provide a long-term forecast of economic and demographic variables influencing Clark County's population growth. The resulting long-term forecast predicts positive population growth throughout the range of the forecast. By 2035, CBER predicts that Clark County’s population will reach approximately 2.72 million and by 2050, it will reach nearly 2.89 million. This represents a long-term convergence to the national average annual population growth rate. Using an average of the population forecasts from a report published by the State Demographer, Nevada County Population Projections 2016 to 2035, published in October 2016 and those of the Center for Business and Economic Research – UNLV (CBER) May 2016 publication Population Forecasts: Long Term Projections for Clark County, Nevada 2016-2050, and using 2016 as a baseline, from 2017 to 2021 Clark County is projected to grow at an average 1.55, 1.65, 1.60, 1.55 and 1.25%. Starting in 2022, the population growth rate for Clark County is projected to range decelerating from 1.20 to 0.85% during the next five years. This reflects a 1.57% average annual growth rate for the first 5 years (starting in 2017) and a projected population growth expectation for the following 5 years that averages 1.03% annually. This results in a total 5-year non-compounded growth of 7.60% for the first 5-year period and 5.05% for the following 5 years and a total 5-year compounded growth of 7.83% for the first 5-year period and 5.15% for the following 5 years. The following chart illustrates the forecasted population growth in Clark County based on data published by the State Demographer, Center for Business and Economic Research’s (CBER) and calculated based on the average growth rate of these projections.


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1,900,000

2,000,000

2,100,000

2,200,000

2,300,000

2,400,000

2,500,000

2,600,000

Po

pu

lati

on

Year

Averaged Clark County Population Forecast

CBER

Averaged Estimate based onAvg. Growth Rate

State Demographer

(Source: Prepared from data reported by the State Demographer in Nevada County Population Projections 2016 to 2035, October 2016 and CBER’s Population Forecasts: Long Term Projections for Clark County,

Nevada 2016-2050, May 2016)

In projecting population growth for Clark County an average of the estimates by the State Demographer and those of the Center for Business and Economic Research would be the likely basis for any residual demand projection. According to an article titled “Nevada, Utah, Idaho were fastest growing states from 2016-17” published on December 21, 2017 on www.lasvegassun.com, “The U.S. Census Bureau says the fastest growing states in the nation last year were Idaho, Nevada and Utah. Idaho's population increased 2.2 percent to 1.7 million from July 2016 and July 2017, followed by Nevada's increase of 2 percent to just shy of 3 million. Utah was next with 1.9 percent growth to 3.1 million. Luke Rogers, chief of the bureau's Population Estimates Branch, says domestic migration drove changes in Idaho and Nevada while Utah's growth was due primarily to more births than deaths over the 12-month period. The overall U.S. population grew 0.7 percent over the year, an increase of 2.3 million to 325.7 million. States in the South and West continue to lead in population growth. In 2017, 38 percent of the nation's population lived in southern states and 23.8 percent lived in the West.” With the projected population growth over the next several years, Clark County will continue to be one of the strongest areas and a popular area for people to relocate. Employment / Unemployment Nevada was the most negatively affected state during the recession that emerged in late 2008. This was mostly due to the significant loss of jobs in the construction industry because the demand for new construction basically stopped in late 2008/2009. Also, the State’s reliance on tourism and gaming affected the unemployment rate because most of the major resorts contracted their work forces during the recession. However, this has greatly changed. Nevada’s unemployment rate as of December 2017, remained at 5.0 percent (seasonally adjusted) – the lowest unemployment rate since November 2007.


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With the release of December 2017 employment data, we now have preliminary information for the full year of 2017. The Silver State added 40,900 jobs over the twelve-month period, compared to 2016. This represents a growth of 3.1 percent. Turning specifically to the month of December 2017, the Silver State’s employment growth remained strong in the final weeks of 2017, with the addition of 7,600 jobs from November, seasonally adjusted. The State was expected to lose 5,100 jobs in December, based upon historical trends, but actually added 2,500, resulting in the seasonally-adjusted gain. The private sector added 6,700, while the public sector added 900. The following chart illustrates Nevada’s job growth during the two-year time frame of 2016 through 2017.

Nevada Job Growth (SA)

(Source: http://www.nevadaworkforce.com \ Nevada Economy in Brief\January 2018)

Overall, Nevada’s job growth statistics as illustrated in the following chart are better than the national average and job growth is increasing. This has led to improvements in most aspects of the Las Vegas economy, specifically in the real estate markets. Clearly, the economic situation is improving in Nevada.

(Source: http://www.nevadaworkforce.com \Nevada Economy in Brief\January 2018)


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The following chart illustrates that in December 2017, Nevada had a 5.0% unemployment rate which was unchanged from October through December and down 0.1% from one year ago. At the same time the U.S. reflected a 4.1% unemployment rate which was unchanged from October through December and down 0.6% from one year ago. There was a 0.9% difference between Nevada and the U.S. in December 2017 as compared to a 4.4% difference at the height of the recession.

(Source: http://www.nevadaworkforce.com \Nevada Economy in Brief\January 2018)

Following is a the most recent summary chart of the largest employers in Clark County as of as published by the Las Vegas Global Economic Alliance. The fact that the majority of the largest employers in the region are casino hotels is no surprise. Historically, the economic base of Las Vegas has been driven by gaming and tourism.


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Largest Employers in Clark County

(Source: https://www.lvgea.org/market-information/major-employers/)

According to Bill Anderson, who was Chief Economist with the Department of Employment, Training and Rehabilitation, he was quoted saying in the January 2018 Labor Market Overview “December labor market results are especially encouraging. Jobs are up 7,600 relative to November, and stand 43,800 higher relative to a year ago. In 2017, job gains were recorded in almost all industries. In addition to leisure/hospitality and construction, industries such as professional services, healthcare, trade/transportation, and manufacturing also made notable contributions to the Silver State's job base. At the end of the year, Nevada's unemployment rate came in at five percent, compared to 13.7 percent at the height of the recession. Recently, downward pressure on the jobless rate has been limited due to an expanding labor force. As potential job-seekers become more confident in their employment prospects, large numbers are entering the labor force in search of work, which acts to prop up the unemployment rate”. According to the January Sub-State Press Release, dated January 23, 2018, an assessment of labor market conditions shows that 2017 was a solid year throughout the Silver State, rounding out our seventh year of economic recovery. For the entire year, jobs were up in each of the


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State’s three metro areas. In fact, job levels in both Las Vegas and Reno stood at a record-high in December. Each of the State’s 17 counties registered declines in the unemployment rate during the year, relative to 2016. Initial claims for unemployment insurance are also trending down. Looking forward, our expectations are for continued improvement in labor market conditions through 2018. Statewide, we are looking for jobs to increase by around 40,000 over the course of the year, enough to put further slight downward pressure on jobless rates throughout Nevada. Tourism & Gaming The Las Vegas Convention Center, the primary convention facility, is the largest convention complex in the United States with a total square footage of 3.2 million. The Las Vegas Convention Center now features approximately 2 million square feet of net exhibit space and 250,000 square feet of net meeting room space, accommodating 170 meeting rooms with seating capacities from 20 to 7,500. The Sands Hotel Expo and Convention Center has an additional 1,200,000 square feet of exhibition space. Along with the other facilities along The Strip and throughout the Las Vegas Valley, the total meeting and exhibition space is more than 10,000,000 square feet, more than any other city in the nation. Las Vegas welcomed 42,208,200 visitors in 2017, which is down 1.72% from 2016. The visitation generated more than $35.5 billion in economic impact for the local economy in 2017. The December 2017 year-end statistics, released by the Las Vegas Convention and Visitors Authority (LVCVA), pointed to continued recovery for Las Vegas tourism with increases in convention attendees, air passengers, and gaming revenues. Following is a monthly and year over year Executive Summary, as published by the Las Vegas Convention and Visitors Authority, which reports some key economic indicators.


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(Source: http://www.lvcva.com /Stats & Facts / Visitor Statistics / January 2018 Executive Summary)

While the number of conventions and meetings held, visitor volume, and gaming revenues are slightly down from year to date, the average daily rate (ADR), air passengers, and average daily auto traffic is up over the same period. John Restrepo, principal of Las Vegas-based RCG Economics, stated "growth in visitor counts might be slower this year due to an undersupply of rooms and convention space." Further, LVCVA analysts said shifts in convention dates hurt January numbers. Downtown’s International Market Center, a home decor trade show, which drew 50,000 people, and Surfaces, a flooring show that brought in 24,000 attendees, moved from January to February this year. Also, Giant CES, Southern Nevada’s largest trade show with about 175,000 conventioneers, affected weekend occupancy because it moved from a Thursday-through-Sunday schedule to a Tuesday-through-Friday format this year. Lastly, Chinese New Year festivities began in January last year, but this year the celebrations were held entirely in February.


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Several high profile mega projects have been announced and initiated. The Las Vegas Convention and Visitors Authority (LVCVA) has announced plans for a $1.4 billion expansion. The Las Vegas Convention Center District Project is a major expansion and renovation of the Las Vegas Convention Center to accommodate current customer needs and capture future trade show opportunities. Phase One of the program was completed in January 2017 and included the acquisition of the Riviera Hotel property, the subsequent demolition of all structures associated with the hotel and the development of an outdoor exhibit space and parking area for the LVCVA’s trade show customers. Phase Two will include the development of a new exhibit hall and its ancillary spaces on the existing LVCC Gold Lot and the Riviera Hotel property. Phase Three will be the renovation of the existing Convention Center. This project is planned for the next six years and will include a new 600,000-square-foot exhibition hall, 150,000 square feet of new meeting rooms and corridors to connect them and existing halls together as well as a plan to upgrade the facility’s technology. The upgrade will include the installation of digital services kiosks across the campus that will have the capability of reading a computer chip embedded in name badges printed out for every convention and trade show that will assist people with finding their way around the entire convention center and associated facilities. The building and opening of the new exhibition hall is expected to be completed by the end of 2020, then work on the additions and renovations are planned between the end of 2019 to the end of 2022. The plan is to move shows into the new building, then work on the four other halls in six-month increments over 2021 and 2022, shutting down the central hall in early 2021, the north hall in late 2021, the top floor of the south hall in early 2022 and the lower floor in late 2022. This ambitious schedule by the LVCVA is to make sure shows don’t move elsewhere, even for a year. By the end of construction, the Las Vegas Convention Center will have 2.6 million square feet of exhibit space. With the Las Vegas Sands’ Expo and Convention Center and the recently expanded Mandalay Bay Convention Center, Las Vegas is the clear leader for convention space in the United States. There are positive aspects in Clark County including some new development and improvements to existing properties along the Strip that will create new jobs. Data and discussions confirm that Las Vegas has recovered after the significant negative effect of the global, national and local recession that emerged in late 2008. The most improvement has been experienced in the gaming and tourist related sectors that are the major components of the Las Vegas economy. Over the last year, gaming, tourism, convention and meeting attendance, and other economic factors have been reporting positive trends, but at a slower rate than before the economic collapse. Experts in the local market project that since the economy has recovered, the growth in all sectors will continue to be at a steady, positive rate. Las Vegas Stadium Proposal/Las Vegas Convention Center Expansion In October 2016, Nevada Lawmakers approved Senate Bill 1 (SB1), which authorized a $750 million tax incentive to build a 65,000-seat domed stadium to entice the National Football League's Oakland Raiders to move to Las Vegas. The total cost of the stadium is projected at $1.9 billion, with the Raiders contributing $500 million and Bank of America financing the


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remainder. In March 2017, NFL owners approved the Raiders request to move to Las Vegas from Oakland. The new stadium would also house the UNLV Rebels football team. There were several sites in the running for the new stadium, but the final decision was to purchase an approximately 62-acre site along the west side of Interstate 15 at the northeast corner of West Russell Road and South Polaris Avenue. According to the Clark County Recorder’s Office, the team paid $77.5 million for the 62 acres and closed the transaction on May 1, 2017. Construction has started with completion by August 2020 in order to start the inaugural NFL season of the Las Vegas Raiders. SB1 also approved an additional $1.4 billion expansion and renovation of the Las Vegas Convention Center. The funding would be bonded out over a 30-year period. The expansion would primarily be on the site formerly improved with the Riviera Hotel, which was imploded in June 2016. The $750 million is the largest public contribution to a stadium in history. It would be funded via a 0.88% increase in the room tax, while another $400 million was approved via a 0.5% increase in the room tax for the convention center expansion. The economic benefit of the proposed stadium is strongly debated. Proponents argue the stadium could host as many as 50 events annually drawing an estimated 450,000 incremental visitors to Las Vegas. Convention Sports & Leisure International estimated that a Las Vegas stadium hosting 26 events could produce a total economic output of $785.6 million and $49.4 million in new tax revenue yearly. Separately a sports economist working with UNLV estimated the total economic output of the stadium hosting 20 events would be $908.9 million and would generate $61.7 million in new tax revenue annually. The positive near future effect of the Raiders moving to Las Vegas and the construction of the stadium is the increase in construction jobs. This will have an immediate effect on the local economy. National Hockey League (NHL) Team - Vegas Golden Knights/T-Mobile Arena In addition to the Las Vegas Raiders, in the Fall of 2017 the Vegas Golden Knights began their inaugural season as an NHL expansion team. They are the first major league professional team in Las Vegas and are playing their home games at the T-Mobile Arena. Additionally, since opening, T-Mobile Arena has hosted several entertainment events such as concerts, combat sports events, and other annual sporting events with 100 to 150 events annually. The arena is accessed by an open-air, pedestrian-friendly shopping and entertainment area known as The Park between and connecting the New York-New York and Monte Carlo resorts. Transportation & Visitor Traffic Clark County overall has excellent transportation facilities. Three major highways directly connect Las Vegas to Los Angeles, Phoenix, Salt Lake City and Reno. Interstate 15 extends between Los Angeles and Las Vegas and handles approximately 50% of the total incoming


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motor vehicle traffic. The most significant regional transportation improvement and expansion currently underway is Project Neon by the Nevada Department of Transportation (NDOT). Interstate Highway 15 (I-15) which travels north and south through the market area has for the last eight to 10 years been slowly upgraded in an effort to accommodate the significant growth of the Las Vegas community and those that travel through it. These various projects have not kept pace with the growth of the Las Vegas region. I-15 links Southern California to Salt Lake City, Utah and continues north to Canada, serving the entire southwest and as local traffic volumes increased, congestion, safety and delays undermined its utility. The $1.4 to $1.8 billion 3.7-mile Project Neon project undertaken by NDOT will provide improvements to the I-15/U.S. Highway 95 system interchange, colloquially referred to as the ‘Spaghetti Bowl’, and numerous roadways and bridges at several arterial intersections to its south. This billion-dollar endeavor is planned to take three to five years and when completed will significantly enhance transportation throughout the Las Vegas market and to and from the surrounding region. Below is the most recent air passenger traffic information published by McCarran International Airport, as of January 2018. In January 2018, total passengers were up 2.7% from a year ago with the 2017 YTD figures also up at 2.2%.

(Source: http://www.mccarran.com /Find/News and Public Affairs)

According to a news release by McCarran International Airport, Las Vegas "Welcomed 48.5 million arriving and departing passengers last year, making 2017 the busiest year in the airport’s nearly 70-year history. For a seventh consecutive year the commercial airport serving Southern Nevada posted a year-over-year increase with the 2017 total marking a 2.2 percent upturn from the year prior. The previous passenger record was set in 2007 at 47.7 million passengers." McCarran International Airport is ranked as the eighth busiest in the nation but ranks second only to LAX in Los Angeles for the number of passengers actually getting on or off a plane. The airport has two terminals, 1 and 3, with Terminal 3 serving international travelers. In keeping with the image of Las Vegas, there are over 1,300 gaming terminals located throughout the airport. Housing Market For a look into the current single-family and condominium housing markets, the February 22, 2018 edition of The Las Vegas Housing Market Letter as published by Home Builders Research, Inc., has been analyzed. They state that “Many believe the rising mortgage rates have been a primary factor, as “fence sitters” purchase and try to beat further rate increases. Of course, home prices also are rising so the present housing market is experiencing a “double whammy” to the


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affordability issue. The conventional rates presently sit around 4.5 percent (FHA is at 4.3 percent), but most of the “signals” are suggesting additional upward movement." There were 704 new home recorded sales in January 2018. This is the largest number of new home closings in the month of January in the last 10 years. Further, the median price of the January 2018 new home closings was $352,984. It is a year to year change of $22,989, or 7 percent. The new home January median price backed off a little from the prior 4 months’ increases, as displayed in the following graph, but we have little doubt that this will be a short respite from continued upward pricing pressure, at least for most of 2018.

Research analyst with Home Builders Research believe there isn’t a good reason to think that new home prices will stop going up in the near future. They state consumer demand is still strong and expect it to make a smooth transition throughout 2018. Land prices are not receding. The supply of new products and active new home subdivisions is steady and there is currently no sign of over-building new products. Home Builders Research reported "There were 907 new home permits pulled in January 2018. This is the largest number of January permits since 2007, or the last 11 years. This is an increase of 283 permits, or 45 percent from what home builders pulled one year ago. We believe the monthly permits will soften going forward into 2018; don’t think they will consistently remain near the 900 level per month. Even though sales currently are still on the “plus side” there has been a softening trend in February. For now, the level of demand peaked in late January. The change coincided with 30-year fixed mortgage rates going over the 4 percent threshold." According to data from the Mortgage Bankers Association, new mortgage applications to purchase a new home in the United States declined 6.2 percent (and refinance applications went down 7.1 percent) in the week ending February 16th. It is notable because this was the largest drop since 2017. There were 3,399 recorded resales in January 2018. This was a year to year increase of 257 transactions or 8 percent from January 2017. The weekly SFR (single family) closings from the MLS (per Residential Resources) are a little softer than those reported during the same period of


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time in 2017. Again, it’s most likely due to the tight supply of the active SFR listings, specifically those under $300,000. Nationally, the data appears to be the same. According to The Housing Research Center (HRC), in January 2018 the existing home sales came in lower than the expectations. Year to year on an unadjusted basis, the sales figures were down 1.9 percent. According to HRC, nationally in absolute terms the year to year inventories were down 9.5 percent and the months’ supply dropped to a 3.4 months versus 3.6 months a year ago. (Remember, Las Vegas has been at less than a 2 months’ supply for more than a year.) According to HRC, “rapidly rising mortgage rates is the biggest threat to the housing recovery in our view. We believe the rapid rise in rates we have seen so far this year is troubling for the health of the recovery and the housing market … this could derail the recovery in our view if they continue to rise too fast.” The median price of the January resales was $237,600, which is a year to year increase of $32,600 or 16 percent. It’s no surprise that resale prices continue rising at a steady clip as reports keep pointing out the tight supply of available listings. For months most realtors have been lamenting the lack of available properties to show their clients. In Las Vegas, this is primarily the issue for those homes priced under $300,000. As the low supply of affordable homes continues to be conveyed, many homeowners are pushing their prices higher, a natural phenomenon due to the existing supply and demand. The very latest data from February 18, 2018 from Residential Resources exhibits a very slight uptick in the SFR unsold listing inventory (now 1.9 months), but it is still at historic lows. Presently, the number of available SFR listings is about half of what it was 2 years ago, and a 37 percent change from last year in mid-February. Looking back into our historical data, it is interesting to note that the current level is very similar to figures from 2011-2013, during the last housing recession/depression in Las Vegas. However, there is still an ongoing problem with the labor shortage in various construction trades, which will require constant awareness and could result in more delays in home production and transaction processing in 2018. The terrible tragedies that have hit the gulf coast, the southeast coast, and now California will be the focus of huge rebuilding efforts for the home builders and contractors of all types and sizes. Short supplies of some construction materials could “trickle down” to our local housing production efforts. According to Greater Las Vegas Association of Realtors (GLVAR), there were a total of 551 condo units sold in January 2018. This is an 5.8% decrease from December 2017, but a 3.8% increase from a year ago in January 2017. The median price of local condos and townhomes sold in January was $149,888, up 32.1 percent from the same time last year. Further, 634 condos/townhomes listed without offers in January 2018 represented a 21.8 percent drop from January 2017. Overall, even though the housing market is still on the mend, all segments show year over year improvement and are pointing in the right direction. Furthermore, job growth is very strong in Las Vegas and unemployment in Las Vegas is low, around 5.0%. Additionally, the area’s population growth is also up. Analyst believe the single-family housing market will be in good shape throughout 2018. Multi-Family Housing Market


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In terms of the multi-family housing market, according to the latest market rental survey by CB Richard Ellis, 4th Quarter 2017, it is stated that "The Las Vegas area has continued to be very active in the multifamily sector throughout 2017. Acquisitions, new deliveries and renter demand fuel the continued desire of many to participate in the Las Vegas apartment market. From year end 2016 to year end 2017 average rents have risen steadily throughout Las Vegas. Investors continue to seek opportunities to invest capital throughout the valley, evidenced by the increase in multifamily transactions year to year, and the volume of new construction. New deliveries were just over 7,000 units in 2017, and Las Vegas experienced an increase of just over 25,000 jobs for the calendar year." The Henderson submarket continues to lead the Las Vegas Valley in rent levels, as it has since 2013. Meanwhile, the Southwest, West, and North submarkets exceeded the $1,000 average rental rate levels. Each submarket saw an increase in rents over the previous quarter, with the Southwest (14.02%), the Central (10.5%), and the North (8.74%) experiencing the highest growth. The following charts illustrate the performance of the Las Vegas Apartment Market for 3rd Quarter 2017 (latest market survey)

(Source: CB Richard Ellis 3rd Quarter Rent Survey)


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(Source: CB Richard Ellis 3rd Quarter Rent Survey)

Each class of apartments experienced growth both year-over-year, and quarter-to-quarter. Year-over-year, Class B apartments demonstrated the highest increase in rental rates (9.66%), followed by Class C (7.82%), and then Class A apartments (5.08%). When viewing quarter-over-quarter increases, Class C properties showed the highest percentage increase (3.28%), followed by Class A (1.75%), and then Class B apartments (0.56%). In general, the Las Vegas multi-family market is strong and is projected to continue to show an increase in rents throughout 2018. With the increase in rents, new construction of apartment complexes has been in demand with new projects recently being completed and currently under construction throughout the Las Vegas Valley. Commercial Real Estate Market Segments The region’s growth in population, improving employment and increases in tourism and gaming as well as overall visitorship are reflected in the following discussions of the principal commercial real estate market segments, represented by the office, retail and industrial markets. The Office Market CB Richard Ellis’ 4th Quarter Las Vegas Quarterly Office Market Report survey indicates "The Las Vegas office market hit the ground running in 2017. It started off with a strong first half and only continued to pick up momentum, which culminated into four consecutive quarters of positive net absorption. Strong demand and very limited amount of new construction triggered an escalation in the lease rates throughout 2017. The 4th Quarter demonstrated the highest average asking lease rate of $2.06 per square foot since Q2 2011. The increase in demand and the low supply of new office space also had an impact on the overall market vacancy. Over the last 6-years the overall market vacancy has gradually declined to 15.1% by year-end 2017. This shows a strong correlation to the improved local employment conditions as it relates to the demand for office space, particularly Class A and high Class B space. The tenants for these spaces are largely comprised of professional and business services, and financial related jobs."


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The following graph illustrates the gross activity and net absorption for the Las Vegas office market since 4th Quarter 2016.

Las Vegas office net absorption for 4Q 2017 was 212,956 square feet, rendering 4Q 2017 the 4th consecutive quarter of positive absorption, which also exemplifies 2017 as the strongest net absorption in almost a decade. Much of the strong net absorption can be attributed to the lack of construction activity which has also resulted in lower vacancies. The following graph illustrates the average asking lease rates for the Las Vegas office market since 4th Quarter 2016.

At the end of Q4 2017 the full-service asking lease rate for the Las Vegas office market was $2.06 per sq. ft. on a monthly basis, representing an increase of 3.5% year-over-year. It remained unchanged, from the previous quarter. This is the market’s highest average asking lease rate since Q2 2011. In the Q4 2017, Class A and B average asking lease rates registered changes of 1.9% and 2.2% from the same period one year ago to $2.72 per square foot, and $1.88 per square foot FSG-(monthly), respectively.


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Amidst the limited amount of space under construction coupled with an increased demand, it is anticipated that the overall market vacancy rate will continue to decrease which would place downward pressure on vacancies while sustaining higher rental rates.

The following graph illustrates the vacancy rates for the Las Vegas office market since 4th Quarter 2016.

Vacancy rates have steadily declined since 2011, and by year-end 2017 the vacancy rate fell to 15.1% for the overall market. This marks a decrease of 60 basis points (bps) from the previous quarter and a 390 bps decrease year-over-year. Q4 2017 witnessed decreased vacancy rates in seven of the nine submarkets, while the Airport and Downtown submarkets experienced increases in their vacancy rates reaching, 15.7% and 20.2% respectively. Emulating the previous quarter, the North Las Vegas submarket had the lowest vacancy rate at 7.5%, followed by the West at 9.6% and the Southwest submarket at 10.6%. Office Market Outlook Amidst the limited amount of space under construction coupled with an increased demand, it is anticipated that the overall market vacancy rate will continue to decrease which would place upward pressure on lease rates. An uptick in construction will likely continue throughout 2018, particularly along the Southern beltway and within close proximity to master-planned communities such as Summerlin and others located in the West, Southwest and Southeast submarkets. These submarkets have fueled the demand for Class A and high Class B office space and are the areas where most of the new construction projects are located. The Retail Market CB Richard Ellis’ 3rd Quarter Las Vegas Quarterly Retail Market Report survey indicates that as a result of continued economic growth, the Las Vegas retail market performed well during 3rd Quarter 2017, highlighted by positive absorption and a decline in vacancy. During the quarter, gross activity totaled 483,153 square feet, and vacancy ended the quarter down 20 basis points at 8.7%. The market wide average asking lease rate remained steady during the third quarter ending


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at $1.50 per square foot per month on a triple net basis, the same rate posted one year prior in 3rd Quarter 2016. The following graph illustrates the net absorption for the Las Vegas office market since 3rd Quarter 2014.

The Las Vegas market recorded approximately 133,499 square feet of positive net absorption and 483,153 square feet of fross abosrption during the third quarter 2017. Much of the postive absorption can be attrivuted to demand for big box spaces fuelled by furniture stores, discount retailers, and fitness centers. The North and Central West submarkets saw notable amounts of postive absorption with approximately 111,455 square feet and 47,443 square feet, respectively. Meanwhile, the Southeast, Central East, West, and Northwest submarkets posted negative absorption in the 3rd quarter. The following graph illustrates the average asking lease rates for the Las Vegas retail market since 3rd Quarter 2016.


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By the end of the 3rd Quarter 2017, the Las Vegas retail market’s average asking lease rate remained unchanged quarter-over-quarter and year-over-year at $1.50 per square foot per month, triple net. Despite the slow yet steady decrease in vacancy, a large amount of supply remains in the market that keeps the average asking lease rates unaffected. Retail Market Outlook Looking ahead, the outlook for the Las Vegas market will be impacted by healthy economic conditions and the “evolution of retail”, there are many positive factors that will continue to support demand for retail real estate including a strengthening labor market, robust population growth and a strong national economy. Tenant demand will be focused on the Southwest, Southeast, and West Submarkets where land is readily available and hew housing developments are located. Market activity is expected to be driven by grocery, entertainment and person services (salons, etc.). Still, the evolution of retail will continue to shape market dynamics as retailers respond to changing consumer preferences, technological disruption and demographic shifts. The Industrial Market CB Richard Ellis’ 4th Quarter Las Vegas Quarterly Industrial Market Report survey indicates the Las Vegas industrial market fundamentals improved throughout 2017 and was a record year for both new supply and demand. At year-end, developers added more than 7.9 million square feet of new space- the previous record of new construction was in 2005 when 5.3 million square feet was constructed. The main result of demand for modern bulk distribution space, pre-leasing and build-to-suits, for the newly constructed space, pushed net absorption into record territory with more than 8.2 million square feet of space absorbed. More than 75% of the total net absorption was a result of leasing activity in newly constructed buildings. Most of that activity occurred in the North Las Vegas submarket accounting for 70% of the total net absorption. With demand outpacing new supply, the vacancy dropped to 3.5%. this is the second lowest vacancy rate in Las Vegas' history when the rate was 3.4 in Q4 2006. Heading into 2018, CBRE


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professionals anticipate that over the next 12-months vacancy rates are likely to continue to decrease because tenant demand will continue to be strong and there will be fewer new buildings constructed next year. The following graphs illustrate net absorption, new completions, and vacancy.

The market wide average asking lease rate, as of the end of 4th Quarter 2017, was $0.59 per square foot per month, triple net. This was up $0.02 per square foot on a quarter-over-quarter basis. Year to date, the market average lease rate has dropped $0.04 per square foot. This was due to a high level of new distribution space constructed in the North Las Vegas submarket, which has weighed on the market's average asking rate throughout 2017. The average asking lease rates since Q4 2016 is illustrated as follows:

Industrial Market Outlook Looking ahead, demand is expected to continue to be strong and new construction will not reach the levels of 2017. As a result of the continued tenant demand, vacancy rates are expected to decrease to record lows. As vacancy rates decrease lease rates will increase over the next 12-


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months. North Las Vegas will continue to lead the market for new construction, particularly in the speedway area- however land availability and escalating construction costs will limit new construction. Conclusion of Commercial Markets Overall, for all of the commercial markets, rents which were increasing during the beginning of the last real estate building cycle, stalled, fell and reached a new equilibrium. The office market has moved past a persistent bottoming out and evidence suggests further declines are unlikely. As economically occupied but physically underutilized space continues to be “absorbed” as well as limited new inventory, the office market reflects office employment based strength. National retail and industrial real estate markets already demonstrate improvement and within the local retail and industrial markets vacancies have declined and average changes in rent are in positive territory. Space utilization metrics suggest that the Las Vegas retail and industrial commercial marketplaces are moving in tandem with national trends, although industrial inventory narrowly outpaced absorption in the last quarter. In conclusion, the outlook for the office, retail and industrial markets is positive and all three segments are projected to be strong with continued demand for some new construction. The retail and industrial markets will continue to have strong, stabilized occupancies and rents are projected to increase throughout 2018. Office space is projected to continue to be absorbed leading to some demand for limited new construction in the best locations, such as Downtown Summerlin. The Land Market Given the fundamentals in the market, the pricing for speculative land sales is heading towards historical records. According to Collier's International "Southern Nevada’s land market saw 54 sales in the third quarter of 2017. A total of 904 acres were sold with sales volume of $90.7 million and an average price per square foot of $2.30. Sales volume was done on a quarter-over-quarter basis, despite more acres being sold in the third quarter than the second quarter. The jump in acres sold was due to the sale of a large industrial parcel, which was also the cause of the average price per square foot falling from $11.10 in the second quarter of 2017. Compared to one year ago, sales, acres sold and sales volume were all up, and price per square foot was down. With the end of the year in sight, 2017 appears likely to equal 2015 in terms of overall sales activity but fall behind 2016. This is not necessarily something to worry about, as 2016’s sales activity was boosted by large sales of industrial land at Apex, the type of sales that do not occur every year. Some of that Apex land was slated for the manufacture of electric vehicles, a factory that will not now be constructed and therefore a sale that will not likely begin a trend of large parcel sales for manufacturing. Ignoring oddball 2016, we see a general trend of reduced sales activity year-over-year. 2017 looks as though it will continue this trend in all respects except one, price per square foot. It is certainly possible that higher asking prices by land owners are depressing land sales by developers, investors and users, though this is not necessarily the case. Large, contiguous spaces are less common than they were before, necessarily increasing the price per square foot of land in the Valley.


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(Source: Colliers International-Land Market Fourth Quarter 2017)

We have seen a trend over the past three years of declining sales activity in the land market. Development in 2017, especially of industrial and residential projects is working its way through land purchased and held over the past decade by developers. Signs now point to continued strong development of industrial and multifamily projects in 2018. Improvements in the professional and medical office markets, coupled with renewed population growth on the fringes of the Valley, could boost commercial development next year. Strong development in 2018 will further erode the land held by developers and could lead to stronger land sales in 2018 to pave the way for commercial, industrial and residential growth over the next five years in Southern Nevada. In the following two charts, the history of land sales is illustrated. Note that although the average price per acre has risen from 2013, that the aggregate volume of acreage recorded during that period has declined.


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(Source: Colliers International-Land Market Fourth Quarter 2017)

Taxation In comparison to neighboring western states, Nevada residents and businesses enjoy a significant tax advantage. Nevada has no personal income, inheritance, state, gift, or inventory/floor taxes. Taxes are kept low primarily due to tax revenues generated from tourist-related and gaming expenditures. Nevada has a Freeport law allowing goods to escape taxation while warehoused, assembled, or repackaged in the state. Las Vegas has been designated as a foreign trade zone where firms can store, manufacture, assemble, or repair goods for shipping to other destinations without paying a tax or duty. Government Clark County is operated as an independent political entity and is administered by a County Manager who is supervised by a seven-member board of County Commissioners. The City of Las Vegas government consists of an elected mayor, a City Council and a City Manager. The


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city’s governing bodies and those of Henderson and North Las Vegas, work together to promote growth of the areas’ tourism industries as well as diversification of the local economic base. With the exception of Boulder City, no residential, commercial or industrial moratoriums, rent control statutes or similar measures are in effect. Area Conclusion Population growth within the Las Vegas area market has been historically very strong. Within the next 15 years the population is projected to increase by approximately 650,000 persons. Although Nevada currently lags behind the nation in terms of its unemployment rate, its rate of job growth has surpassed that of the nation and based on the number and size of local mega developments and the remodeling of existing resorts, the unemployment rate is projected to continue to descend and the amount of local total employment is estimated to be positively impacted. The construction industry has improved during the past year with a number of new construction projects underway including Project Neon and the new Raiders Stadium. The improvements in this sector has created the demand for jobs and positively affected the unemployment rate. As Las Vegas continues to reinvent itself through significant new tourism and expanded conventioneer centric offerings, the current and expanding transportation systems are projected to accommodate this growth. The positively trending principal forces of demand, supported by an attractive tax structure, are anticipated to have a long term positive affect on the region and the subject property. Although there are still issues in the office market due to the vacancy rate, the majority of the Class A and superior office properties in the Las Vegas Valley are showing significant absorption. There has not been any significant new office space developed in the past 10 years. However, with the success of The Gramercy, which was previously a partially completed project that was stopped during the recession as well as the new construction of some Class A space at Downtown Summerlin, there are positive signs in the office market. Although land prices have increased to levels that may hinder the construction of new office space, there will be demand for new space in some areas. Also, the typical, traditional office space layout is being replaced by open-space types of office set-ups that can accommodate more employees. This has created parking issues for some of the older properties. Some developers and existing office building owners have anticipated this issue and built parking structures to accommodate the demand. The retail, multi-family and industrial markets are all healthy and stable. The demand for e-commerce companies has created the need for the construction of new warehouses and distribution centers. Southern Nevada is drawing attention for these types of businesses due to its favorable transportation costs, business-friendly environment, labor pool and tax structure. In conclusion, there is demand for commercial real estate in Southern Nevada and all segments of the market are projected to continue to improve throughout 2018.


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DOWNTOWN LAS VEGAS MARKET ANALYSIS

Downtown Las Vegas is the central business district and historic center of Las Vegas, Nevada. It is the original townsite and was the gambling district of Las Vegas prior the “Strip,” and the area still incorporates downtown gaming. As the urban core of the Las Vegas Valley, it features a variety of hotel and business, high rises, cultural centers, historical buildings and government institutions, as well as residential and retail developments. Downtown is located in the center of the Las Vegas Valley and just north of the Las Vegas “Strip,” centered on Fremont Street, the Fremont Street Experience and Fremont East. The City defines the area as bounded by I-15 on the west, Washington Avenue on the north, Maryland Parkway on the east and Sahara Avenue on the south. The subject property is located along the west side of Main Street, just north of Charleston Boulevard. The subject is located within the 18B Art’s District, one of the featured districts of the Downtown Las Vegas masterplan area.

Last year, over 20 million people came to downtown Las Vegas. Located in the center of the Las Vegas Valley and including the original Las Vegas settlement, Downtown Las Vegas now functions as the region’s central business district. Downtown is not only the City’s earliest gaming district but also the cultural center for visitors and residents, with Symphony Park and 18B Las Vegas Arts District, and numerous world renown events such as Life is Beautiful (a 3-day music and food event) and Helldorado (Las Vegas’ own rodeo).


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Land Uses The “Fremont Street Experience” and shops along with Container Park are located further northwest of the subject. The northern portion of the neighborhood consists of well-established, historic resort casino hotels, commercial retail buildings, law offices, government offices, courthouses and low-income apartment complexes. The southern portion consists predominantly of numerous low-income apartment complexes, commercial and retail uses along major mile arterials and light industrial uses along the Union Pacific Railroad situated in the western portion of the neighborhood. The Clark County government complex is located to the west of the Union Pacific railroad, north of Charleston within the Parkway Center planned unit development The northern portion of the neighborhood is improved with large casino resort hotels situated predominantly along Fremont Street. The Fremont Street Experience is located approximately one mile northwest of the subject. Major casinos in the downtown area include the Golden Nugget, Binion’s Horseshoe, Main Street Station, and the California. In addition, there are numerous older small hotels in the area. Many of the older downtown area hotels are 50 to 70 years old. Most of the larger hotels feature Fremont Street frontage. The residential areas are concentrated in the eastern and southern portion of the neighborhood. Many of these complexes cater to downtown and Strip casino service workers. Most of these complexes were built in the 1970’s. Newer projects include the 16-story, 120-unit Soho Lofts complex located at Hoover and Las Vegas Boulevard, the 168-unit Newport Lofts located at the northeast corner of Hoover and Casino Center Boulevard; the 22-story, 275-unit Streamline Tower located at the southeast corner of Las Vegas Boulevard and Ogden Avenue, the 428-unit Allure Condos located west of the northwest corner of Sahara Avenue and Las Vegas Boulevard and the 341-unit Juhl (City Mark), a mixed-use project located at the southwest corner of Bonneville Avenue and Fourth Street. These mid and highrise condominium developments were announced in the early to mid-2000s and were completed in the mid to late 2000s. There is a well-established retail area situated between Interstate 15 Highway and the west side of Grand Central Parkway. This area includes the Las Vegas Premium Outlet Mall, which was developed in 2003 by the Chelsea Property Group. A major expansion of the mall was completed in 2015. The “Fremont Street Experience” and shops are located to the west of the subject. The Crown Theaters, Jillian’s, Mickie Finnz, and Seven Comedy Club are all located in and around the Fremont Street Experience area. To the west of the core downtown area, the City of Las Vegas has plans to develop and is developing a property on approximately 40-acres of land known as Symphony Park. Symphony Park is a mixed-use planned development with a combined area of approximately 40-acres and will include an office/medical district, residential district, Symphony Park district, and a hotel/retail/entertainment district. The most recent large development in the area and within Symphony Park is the Smith Center for the Performing Arts just east of the I-15 interstate. The Smith Center, with its dazzlingly ostentatious architectural ambition, very much in keeping with the nothing-is-too-extravagant spirit of Las Vegas, has set out to change the flavor of downtown Las Vegas. The center cost $470 million and took 33 months to build. A delegation of Las Vegas civic leaders toured concert halls around the world; La Scala in Milan, the Opera House in


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Budapest, and Carnegie Hall in New York, in search of inspiration as they conceived their dream hall, which is now the Smith Center for the Performing Arts. Current Development Trends Over the last few years the downtown area has been undergoing a revitalization lead by Zappos owner Tony Hsieh. In January of 2012, it was announced that he was putting $350 million into the downtown project and would fund new businesses in an economically depressed part of the city. He also wanted to create a tech hub in a city better known for gambling and tourism. Hsieh’s money has already made a big splash downtown, where the downtown project has begun to alter the 60 acres Hsieh bought. There’s Container Park, an outdoor hangout space and shopping center made out of shipping containers, new restaurants, a new independent bookstore, and several new independent businesses. While there are still boarded-up buildings some owned by the Downtown Project, there are also new restaurants and bars opening, and more planned throughout the spring. However, they're not all funded by Hsieh. Other business owners have opened bars called Park on Fremont, and Commonwealth, nearby, for example, and the area is slowly becoming one of the “hippest” in the city. A sample of the current development trends is summarized below: Fremont 9 Apartments - 901 East Fremont Street

The Fremont 9, a mixed-use, podium style residential/commercial development. Upon completion in late 2018, the property will feature 230 mid-rise units with ground level commercial space containing 15,000 SF (shops & restaurants) and an underground parking garage. The property is next to Atomic Liquors on Fremont Street, and features 230 studio, one-, two- and three-bedroom units. Pre-leasing should begin in July. About 500 prospective tenants are on the interest list, according to Amber Huntley-Ruiz of the Wolf Co. The first move-ins are expected in October of this year.

Apartments will include quartz countertops, under-mounted sinks, custom tile backsplashes and stainless-steel appliances. Additionally, the complex will feature a resident lounge and pool.


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Eureka - 520 Fremont Street

After building owner IKE Gaming (El Cortez) decided to go in another direction with the Emergency Arts building, Eureka restaurant was brought in to occupy the space formerly occupied by The Beat Coffeehouse & Records on the first floor of the building.

Work crews are gutting the interior to begin the reconstruction phase of the 4,200-square-foot space, which will feature 130 seats inside and 40 seats on a new patio. Construction on the interior is expected to begin in September, according to Paul Frederick, chief discovery officer for Eureka.

Two Bald Brothers Mediterranean Cuisine - 616 E. Carson Ave., Suite 140

Two friends, Roei Klein and Yitzhak Maydan, who aren’t actually brothers, took over the 1,330-square-foot spot formerly occupied by Zydeco Po-Boys in March to offer Mediterranean cuisine.


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Arts District Plaza - First Street and Main Street (Located Across Main Street from Subject)

Located just across Main Street from the subject property and Tucked away behind the popular Artifice and Crown & Anchor Pub in the Arts District, a new complex is beginning to accept tenants with space for restaurants, retail and offices.

Developer Michael Boscia of Dapper Companies said that the only confirmed tenant at the Arts District Plaza is the Burlesque Museum, but several other companies are in negotiations. One of the spaces designated for a restaurant features a rooftop deck, a rare feature in the area.

The development was designed to encourage people to walk through and mingle among other tenants and customers. This property is located directly across the subject on Main Street.

The Charleston - 201 E. Charleston Ave.

The Charleston is a 15,600-square-foot mixed-use building in the heart of the Las Vegas Arts District.

Plans call for a three-floor structure with flexible floor plans and high ceilings on each floor, with suites ranging from 1,350–6,700 square feet, according to a lease brochure released by One Realty, the developer on the project.


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There are several areas for tenant signage on the side facing Charleston Boulevard, which sees upward of 40,000 motorists a day.

The building has a covered patio area on ground level for a lounge/bistro/coffee shop-style tenant. There are 40 private parking spaces planned for the site.

The Charleston is tentatively scheduled to open later this year, according to the leasing brochure, but it’s likely that date gets pushed back.

Downtown redevelopment has been a focus of the city of Las Vegas Economic and Urban Development Department for decades with significant revitalization occurring in the last five years and the 2016 completion of a Downtown Master Plan that sets the course for area development for the next 30 years. Other recent downtown development highlights include the expansion of the Las Vegas Medical District (LVMD) where the new UNLV School of Medicine welcomed its first class in July 2017 and the establishment of an Innovation District to encourage the development of technology solutions. Symphony Park is part of both Districts. Other recent developments include the completion of a new $50+ million Federal Justice Tower; the opening of a new Nevada Supreme Court building; the opening of a 72,000-square-foot, entertainment complex offering eight luxury movie theaters, an ultra-lounge and two restaurants; and ongoing retail and residential development in the area. Expanded Downtown Master Plan In its rebound from the great recession, Downtown Las Vegas is experiencing resurgence and a building boom. Three key fundamentals are driving growth: (1) The “funky charm” of downtown’s historic building stock and gaming legacy, (2) Smart communications infrastructure throughout downtown, and (3) A low tax, business-friendly climate. Emerging niche industries in high tech, medical training and services, fashion, art and design, and food and beverage services are clustering throughout downtown. With business comes more residents who are better-educated and more diverse, with high expectations for an urban quality of life; efficient services, amenities for couples and families; lots of things to do and see. Downtown is also confronting a series of challenges that cannot be solved by “market forces” alone. These include high land costs, lack of affordability, too little local-serving retail and services, too few parks and open spaces, overabundance of vacant and underutilized land, and an auto oriented mobility pattern. On June 15th, 2016 the Las Vegas City Council adopted a new 30-year master plan for the downtown area. The new master plan has been two years in the making and replaces the existing master plan that was created in the early 2000’s. The new plan extends the boundaries of the area to include the Medical District on Charleston Boulevard, the historic West Las Vegas neighborhood, the area surrounding Cashman Center and the Fremont East entertainment district. The vision is to make downtown a better place to live, work and visit by improving economic opportunities, residential options, transportation and overall aesthetics. The development plan also proposes creating mixed-use hubs along a potential light-rail or rapid bus transit routes.


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The purpose of the Vision 2045 Downtown Plan (the Plan) is to craft a better, more inclusive downtown for those who live in and visit Las Vegas. It defines objectives toward a better quality of life, lays out a strategic plan for the outlay of city resources, establishes an implementation timeline for much needed improvements, and sets goals to track success for the next 30 years. The master plan’s purpose is to encourage the Downtown real estate recovery, define new opportunities, leverage recent and attract new private investment, and strategically plan for the outlay of scarce city resources. It is intended to provide a clear description of what the citizenry want for their Downtown, while establishing a framework for public and private decision making, including public allocation of funds and ordinance updates that will provide needed improvements, stimulate investment, and support desired development. In summary, the Vision 2045 Downtown Las Vegas Masterplan provides an overall vision, policy direction, and implementation strategy that support the ongoing recovery and revitalization of Downtown.

At 13.2 square miles, The Planning area is more than four times the size of the previous plan (the Downtown Centennial Plan) area. This was done by design; a result of the community goal to make the plan as inclusive as possible. The plan now includes several key subareas; the Downtown Planning Area and Peripheral downtown areas (roughly 4.3 square miles, combined) and Sphere of Influence areas (roughly 8.9 square miles). Expansion of the Study Area allows the plan to 1) maintain and strengthen historic neighborhoods within Downtown core, 2) provide new amenities and services impossible without scale, 3) identify and connect new developments in the key growth areas adjacent to the traditional downtown, and 4) create sphere of influence


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with a meaningful impact through street improvements and key gateway development along major corridors.


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Expanded Master Plan – Primary Land Uses According to the expanded Master Plan, the subject is located at the boundary lines of the Commercial & Employment, and the Open Space Land Use classifications as outlined in the Master Plan.


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The Downtown District Concept Twelve Districts with unique characteristics are identified in the Downtown area. Six districts are within the Downtown core inhabiting the traditional grid structure of Downtown accommodating various functions including tourism, government uses business and professional offices; while the other six districts are at the peripheral of Downtown showing great potentials to encompass new economic opportunities such as medical, green tech, and design and new growth needs of residential and office spaces in the future.

The subject is located within the 18B Las Vegas Arts District. An excerpt from about the 18B Las Vegas Arts District, together with the other core districts, is illustrated on the following pages.


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PROPERTY TAXES AND ASSESSOR’S VALUES

Assessment Introduction Nevada employs a millage structure for real estate taxation. Nevada Revised Statutes require that all property be valued every five years based on a "Replacement Cost" approach. The Assessor's Office determines the cost necessary to replace the property, less depreciation. The land value is finally included, based upon market sales. During non-reevaluation years, the values are updated every year by an Index computed by the State Department of Taxation. Current Nevada law requires that all property be factored each year to reflect the increased cost of construction. This factor varies by location and type of property. The assessment ratio is 35% as defined in NRS 361.225. In addition, each property also has a "Computed Taxable" value that cannot exceed the full cash value. The State of Nevada operates on a fiscal basis with a fiscal year, which begins on July 1st and ends on June 30th of the following calendar year. Taxes are paid in arrears and are due by July of every


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year. However, the taxes can be paid in four installments. In Clark County, there are a number of tax districts. The tax rates for the respective districts are based on the amount of monies budgeted to them for the necessary maintenance and improvements of their facilities and services. Tax Rate Information The subject is located in Tax District 203. The current tax rate for this district for the 2017/2018 tax year is $3.2782 per $100 of assessed value. Subject Assessment The following is a summary of the assessed taxes based on the Clark County records:

According to the Clark County Treasurer’s Office website the most recent March 2018 installment payment is late and there are some tax penalty fees. The total back taxes are to bring the subject property current is $796.96 (APN 139-33-811-008) and $271.41 (APN 139-33-811-009), for a total of $1,0684. Assessment Bonds or Special Assessments There are no known assessment bonds or special assessments pending for the subject property.


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PARCEL MAP FLOODPLAIN MAP


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Subject


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Subject


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Subject


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SITE DATA

The subject is located at 1018 and 1026 South Main Street, Las Vegas, Nevada 89101. The subject is located within the 18B Las Vegas Arts District within Downtown Las Vegas. See Aerial Photograph for visual representation.

Clark County Assessor’s Parcel Numbers (APNs):

139-33-811-008 & -009

Size:

0.36 net acres or 15,682 square feet

Shape:

Rectangular

Visibility: Excellent

Soils and Subsoil:

I was not provided with a soils report, which revealed any soils issues that would adversely affect the development of the property. However, I am not an expert in such matters and this appraisal report assumes that the subject site is not adversely affected by any soils hazards.

Easements and Encroachments

Based on an aerial photograph and a site visit of the property, there do not appear to be any easements that adversely affect the utility of the subject property.

Street Improvements and Access:

The subject site has frontage along the west side of Main Street and the east side of Commerce Street. Both roadways are currently being re-constructed to be one-way roadways. Commerce which was recently completed is a one-way southbound arterial and Main Street will be a one-way north bound arterial. These roadway improvements are a part of a $36 million project that calls for narrowing Commerce and Main Street to make way for protected “green lane” bicycle paths, landscaping and widened sidewalks. The construction is anticipated to be completed by Summer 2018. Access to the site will be good having frontage along both a one way northbound and one-way southbound arterial.

Subject Property


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Utilities:

Public utilities are readily available. Since the northern portion of the site has been previously development, it is assumed that the utilities are available and to the site. An engineer and/or utility representative should be consulted in order to determine capacity for the proposed use.

Environmental Observations: No adverse conditions were noted at the time of the site visit. However, I am not an expert in such matters and this appraisal report assumes that the subject site is not adversely affected by any on-site or off-site environmental hazards.

Zoning Zoning Jurisdiction City of Las Vegas

Zoning C-M, Commercial Industrial District.

Master Planned Land Use According to the Master Planned Land Use – the subject land is situated at the boundary line of Open space and Commercial and Employment.


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Zoning (cont.) According to Erin with the City of Las Vegas Planning and Zoning, the subject site has been approved for a liquor establishment (Tavern) – SUP-7270 and a night club – SUP-7271. Erin indicates the full liquor and tavern license allows for up to 15 gaming devices on the subject site. Along with the two-special use permits above, the side development review -SDR-72172 for both uses has been approved along with a variance – VAR-72169 to allow for a roof sign to extend 14 feet above the top of the wall and to allow such sign to be up to 672 square feet has been approved. These permits were approved on January 10, 2018. The tenant/operator will be responsible to pursue all necessary business, liquor, gaming licenses or other permits in order to operate the business. The privileged licenses for the gaming, night club, and the serving of liquor can remain in operation at the subject location as long as the holder of the licenses is deemed suitable and meets all requirements of operation. The legal right to operate up to 15 gaming devices on the subject site with the gaming license in place adds value to the real estate. In the City of Las Vegas, a specific location has to go through a suitability determination and obtain approval to operate gaming and sell liquor. This suitability determination is site and location specific. If the suitability determination is granted, then the individual owners/tenants have to go through the approval process with the State of Nevada Gaming Control Board in order to receive a gaming license. The gaming, night club, and liquor licenses are considered to be “privileges” granted by the respective governing authorities to individuals. These privileges can be canceled or revoked if the owners violate any laws or do not pay the appropriate fees and taxes. The individuals who hold the gaming and liquor licenses cannot relocate them to another owner and/or location.

Conclusion In conclusion, the subject’s characteristics are such to accommodate a commercial development. The site is functionally adequate for a commercial development. The site has been approved with the proper zoning and entitlements to allow for a night club and a bar/tavern inclusive of a gaming and liquor license.


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DESCRIPTION OF THE PROPOSED IMPROVEMENTS

According to documents provided, the subject is the proposed Treehouse Las Vegas, a multi-purpose entertainment venue including a bar/tavern, restaurant, lounge, pool, and rooftop deck areas, which will contain a reported 16,307 square feet. The expected construction start date is reported to be on or around May 1, 2018 and the completion of construction is anticipated to be on or around December 1, 2018. The following summarizes the description of the proposed improvements. Shown below is information taken from the Visual Showcase Package which was included for this assignment. The entire package is included in the addenda of this report. Concept & Inspiration The design and décor of the venue is a new fresh and earthy feel for Vegas with full height indoor and outdoor trees in a plush green environment combined with various exotic woods and finishes. Core Strategy The external marketing message we want to put out is a chic place to be scene with a cool, trendy fee, yet with a fun and relaxed anything go’s environment. Core Elements

Restaurant/Bar/Lounge Bar/Sports Bar Gaming Room (poker machines) Rooftop Outdoor Bar Area Private Function Facilities/Speakeasy Day Club/Pool Party/Live Music Concert Facilitates/Outdoor Beer Garden Night Club Valet Parking Lot

Floorplan A first of its kind for Vegas, Treehouse encompasses various aspect of entertainment all in one venue including a 300-seat restaurant, Indoor and Outdoor lounge areas, Sports Bar, Nightclub, Day Club with pool, Rooftop Bar and Lounge, Mezzanine private dining room, multiple function/convention room facilities and gaming (poker machine) room. Spacious & Elegant Architecture The design and layout inspiration come from creating an equally practical yet beautiful space with multi-use capabilities. The layout caters for all weather conditions with indoor and outdoor areas yet maximizes outdoor space which has been proved to be immensely popular with locals


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and tourists alike. The venue has many different rooms and areas to ensure all patrons will find an area that enriches their experience. Type of Improvement: Bar/tavern/lounge/night club Number of Buildings:

One

Number of Stories:

Two

Year Built:

2018

Building Area Summary

16,307 Square Feet

Furniture, Fixtures, and Equipment (FF&E): The valuation excludes all personal property. The building is appraised with the basic tenant improvements in place, identified as realty items. All inventory, display equipment, office equipment, etc. are excluded as personal property. Environmental Considerations This report assumes that there are not any environmental issues that adversely affect the subject improvements. Construction Class/Economic Life According to the Marshall Valuation cost reference manual, the subject is classified as an Good Class “C” Cocktail Lounge. The life expectancy tables on Page 6 in Section 97, indicate an economic life of approximately 40 years. Effective Age/Condition Construction is expected to be completed by December 1, 2018. As such, the improvements will be in new condition upon completion. Therefore, the subject property will have an effective age of zero years upon completion of construction. Functional Utility The subject improvements will be considered to be functionally adequate upon completion. Overall, the proposed improvements will be a unique concept to the immediate area, but it is anticipated to have very good market acceptance. Based on the preceding information and analysis, it is my opinion that the utility of the improvements will be good. Economic Utility Based upon my analysis of the area, there are no adverse external influences affecting the subject at this time.


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HIGHEST AND BEST USE ANALYSIS

Highest and best use, as used in this report, is defined as follows: “The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.” (Source: The Dictionary of Real Estate Appraisal, 6th ed. [Chicago: Appraisal Institute, 2015] page 109) Highest and best use identifies the most profitable, competitive use to which a property can be put. A property's highest and best use is determined by the competitive forces in the market in which the property is located. It may or may not reflect the current or proposed use. The four criteria the highest and best use must meet are physically possible, legally permissible, financially feasible and maximally productive. In this analysis, the highest and best use of the property as though vacant, and as improved are addressed. Highest and Best Use of the Site, As Vacant Physically Possible The site is basically rectangular in shape and contains a total of 0.36 Net Acres. The dimensions are such to provide adequate utility to a variety of commercial users. The site has good access and visibility along both Commerce Street and Main Street. The topography and site characteristics are similar to other parcels in the immediate vicinity. Full utility services are available and at adequate capacity to accommodate development. The soil conditions appear capable of supporting a range of developments. The site is not located in a designated flood plain. Legally Permissible The site is located within the City of Las Vegas and as such is subject to its zoning regulations. The site is zoned C-M, Commercial Industrial District. Furthermore, the site is located within the newly expanded Downtown Master Plan. A variety of mixed uses including the subject’s proposed use of a Bar/Tavern/Lounge Night Club is consistent with the overall land Master Plan land uses. This type of use would blend well with the existing current and proposed development within the immediate market area. The implementation of the newly expanded master plan allows for greater development flexibility of the parcels located within the designated planning areas. Considering the subject’s identification as being situated in the Primary Cultural Hub and its corresponding allowable land uses per the expanded Master Plan (open space and commercial uses) it is reasonable to assume that the subject as though vacant could be developed with a mixed-use development.


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Financially Feasible To determine the financial feasibility of the site as though vacant requires the analysis of uses which have potential both physically and legally. Although a variety of commercial uses are physically possible and legally permissible, the subject’s location within the 18B Las Vegas Arts District within the Downtown Master Plan is best suited for development of an open space or mixed use. Furthermore, the subject’s immediate area and the whole Downtown Las Vegas area is experiencing resurgence and a building boom. Three key fundamentals are driving growth: (1) The “funky charm” of downtown’s historic building stock and gaming legacy, (2) Smart communications infrastructure throughout downtown, and (3) A low tax, business-friendly climate. Emerging niche industries in high tech, medical training and services, fashion, art and design, and food and beverage services are clustering throughout downtown. The housing market in Las Vegas has recovered and there are signs that the commercial market is improving to a point to allow for some limited, new construction. Although underwriting and credit rules have tightened and there are no more sub-prime lending products that were driving the boom in the housing market in 2005/2006, demand for new homes has increased and the median home prices for both existing and new homes have increased since 2011. Homebuilders are actively purchasing vacant sites that are zoned for the construction of new homes and in many cases, have bought properties and downzoned them for single-family development. The macro and micro economic factors have improved in 2016 and 2017 and are projected to continue to improve through 2018. In many areas, vacancies have been declining and rental rates appear to have stabilized. Another positive sign is that over the last year or two, more and more lenders have become much more active in financing various real estate products in the Las Vegas area. The market conditions have improved to allow feasible development on the subject site. There are positive aspects in the Las Vegas market including some new development and improvements to existing properties along the Strip that will create new jobs. The demand for the new construction of commercial projects is still limited. However, with the lease being signed for the Treehouse Las Vegas project build-to-suit, the proposed project for the site is feasible and should be developed as planned. As will be shown later in this appraisal, the Sales Comparison Approach and Income Capitalization Approach for each subject property, will show that it is currently feasible to develop the proposed improvements. When the Sales Comparison Approach and Income Approach for each property are compared to the respective Cost Approach, it shows that the proposed improvements are financially feasible. Maximally Productive The final step in projecting the subject’s highest and best use is to project the maximally productive use. This is a projection of the total building areas that could be developed on the parcel based on the physically possible, legally permissible, and financially feasible uses. As evidenced in the marketplace, site coverage ratios are typically very high due to the immediate area does not require on-site parking. The maximally productive use of the site would appear to be for a mixed-use development with very high site coverage.


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Conclusion of Highest and Best Use, “As Vacant” Based on the legally permissible, physically possible, financially feasible and maximally productive characteristics, the highest and best use of the subject as though vacant would be for a mixed-use development containing both open space and commercial uses as indicated by the newly expanded Downtown Master Plan. The subject’s proposed use of a Bar/Tavern/Lounge Night Club is consistent with the overall land Master Plan land uses. This type of use would blend well with the existing current and proposed development within the immediate market area. Highest and Best Use – “As Improved, As Proposed” The discussions that follow examine the highest and best use of the subject site given the proposed building improvements. The same factors used to analyze the highest and best use as vacant (i.e. physically possible, legally permissible, financially feasible, and maximally productive) are considered. Physically Possible The proposed Treehouse Las Vegas is planned to be a 16,307 square foot mixed-use venue including restaurant, bar/tavern, day and night club, pool area, and rooftop dining and deck areas. A review of the construction plans of the proposed subject improvements indicates that the project is physically possible at the subject location. The subject will be constructed within the property boundary of the development site. Therefore, the proposed improvements are considered to be a physically possible use of the development site. The site design review of the proposed uses has also been approved by the City of Las Vegas. Legally Permissible As noted earlier, the development site is within the jurisdiction of the City of Las Vegas and also located within the Downtown Las Vegas Master Plan area. As stated earlier in this report, the subject site is not encumbered with any known easements that adversely affect the development site. I know of no other land use restrictions other than those under the CM zoning designation and Downtown Las Vegas Master Plan. Additionally, the site has been approved for the proposed project. According to Erin with the City of Las Vegas Planning and Zoning, the subject site has been approved for a liquor establishment (Tavern) – SUP-7270 and a night club – SUP-7271. Erin indicates the full liquor and tavern licenses allows for up to 15 gaming devices on the subject site. Along with the two-special use permits above, the side development review - SDR-72172 for both uses has been approved along with a variance – VAR-72169 to allow for a roof sign to extend 14 feet above the top of the wall and to allow such sign to be up to 672 square feet. These permits were approved on January 10, 2018. The tenant/operator will be responsible to pursue all necessary business, liquor, gaming licenses or other permits in order to operate the business.


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Financially Feasible There are few feasible uses to which the property as proposed could be converted or used. The overall development site will not be vacant but will be improved with the Treehouse Las Vegas mixed-use venue. The proposed improvements represent the highest and best use of the overall development site because these proposed improvements will add contributory value to the overall development site. Maximally Productive The maximally productive use will be to continue operating the Treehouse Las Vegas mixed-use venue. The structure, associated site improvements and the existing equipment will maximize the development site and provide adequate use for the property “as improved”, as proposed. Conclusion of Highest and Best Use – “As Improved, As Proposed” Based on the above considerations, the proposed development of the Treehouse Las Vegas mixed-use venue is considered the highest and best use “as improved, as proposed”.


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METHOD OF VALUATION

Valuation Approaches There are three standard approaches to valuing properties. These are the cost approach, the sales comparison approach, and the income capitalization approach. The type and age of the property and the quantity and quality of data affect the applicability of each approach for a specific appraisal problem. The cost approach is based upon the principle that an informed purchaser would pay no more than the cost to produce a substitute property with the same utility as the subject property. It is particularly applicable when the property being appraised involves relatively new improvements, which represent the highest and best use of the land, or when specialized improvements are involved and limited comparable sale data is available. The sales comparison approach utilizes prices paid in actual market transactions of similar properties to provide an opinion of the value of the subject. This appraisal technique is dependent upon analyzing truly comparable sales, which have occurred recently enough to reflect market conditions relative to the time period of the subject appraisal. The income approach is widely applied in appraising income-producing properties. Anticipated net operating income is converted to a present worth through the capitalization process. The income approach relies upon market data to establish current market rents and expense levels to arrive at an expected net operating income. The resulting indications of value from the three approaches are correlated into a final opinion of value for the subject property. It is not always possible or practicable to use all three approaches to value. The nature of the property being appraised, and the amount, quality, and type of data available dictates the use of each of the three approaches. Subject Valuation Scenario

The opinion of the “as is” market value of the subject property will be provided through the completion of the Sales Comparison Approach using sales of vacant commercial parcels of land in the area.

In developing the indication of the Prospective Market Value “As Complete” of the Leased Fee Interest, I will utilize the three usual approaches to value. The subject property will be completed and stabilized on or around December 1, 2018. I have been provided with the projected construction costs and we have used the Cost Approach to value the subject property. I have also used the Sales Comparison Approach and the Income Capitalization Approach.


83

“AS IS” MARKET VALUE


84

LAND VALUATION

“As Is” Market Value of the 0.36 Net Acres In completing the Sales Comparison Approach, I have gathered and analyzed recent sales that are located within the subject’s general and immediate area. Specifically, the sales are all located within the Downtown market area. They represent similarly zoned parcels and have many similar characteristics in comparison to the subject with regards to locational and physical attributes. The sales included for analysis are presented in detail below.


85

Comparable 1 2 3 4 5 6

Address

West side of 7th

Street, South of

Stewart Ave

East side of S 6th

Street, South of

Bridger Ave

East side of 8th

Street, South of

Bonneville Ave

East side of Las

Vegas Blvd, North of

Bonanza Rd

SEC Main St &

Colorado Ave

SEC Garces Ave & S

4th Street

Las Vegas, NV Las Vegas Las Vegas, NV Las Vegas, NV Las Vegas, NV Las Vegas, NV

APN 139‐34‐512‐028 139‐34‐701‐013 139‐34‐810‐048

&049 139‐27‐812‐011 162‐03‐110‐084

139‐34‐410‐152

&153

Transaction Type Sale Sale Sale Sale Sale Sale

Transaction Date 3/24/2017 11/22/2017 6/23/2017 1/3/2017 6/20/2017 4/6/2016

Total Size ( Net

Acres) 0.33 0.23 0.32 0.27 0.32 0.32

Total Size (SF) 14,375 10,019 13,939 11,761 13,939 13,939

List/Sale Price $1,000,000 $325,000 $650,000 $800,000 $975,000 $700,000

Price Per SF $69.57 $32.44 $46.63 $68.02 $69.95 $50.22

Buyer IKEDT LV SF 601 LLC Thomas Schoeman Neon Museum Gary Creagh Oaktree Capital

Seller J Henry Properties DEVO, LLC 609 South 8th

Street Shebah Trust

Peter Eliades

Trust CR Corp

Document No. 20170324:00001904 20171122:00002704 20170623:00003385 20170103:00001142

20170620:000003

63

20160715:00002202

Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple

Conditions of Sale None None None None None None

Zoning C‐2 C‐2 R‐1 C‐2 C‐M C‐2 Master Planned

Land Use Commercial Commercial Multi‐Family Commercial Commercial Commercial

Topography Level Level Level Level Level Level

Utilities Available to the site Available to the site Available to the site Available to the site Available to the

site Available to the site

Off‐Sites Complete Complete Complete Complete Complete Complete

Confirmation

Property Line &

Deeds, Recorded

Documents

Property Line &

Deeds, Recorded

Documents

Property Line &

Deeds, Recorded

Documents

Property Line &

Deeds, Recorded

Documents

Property Line &

Deeds, Recorded

Documents

Property Line &

Deeds, Recorded

Documents

Comments

The site was once

improved with a

motel that was razed

in the spring of 2006.

This property was

vacant at the time of

sale. However, it is

currently improved

with asphalt paving.

This site was once

improved with 2

multi‐ tenant

buildings that were

razed in the fall of

2008. As of the

current sale date,

the site is vacant.

However the

northern portion is

improved with

asphalt paving.

This sale was listed

on the market for

less than 2 months

prior to the

consummation of

the sale. The site

has not been

previously

developed

The property was

improved with a

commercial

structure that has

since been razed.

No value was

attributed to the

structure. The site

was purchased for

the underlying land.

The initial list price

was $882,090.

This site was one

improved with 2

commercial

structures that

were razed in the

spring of 2008.

The site was

vacant at the

time of the

current sale. It is

currently

improved with

asphalt paving.

The current sale

is also an REO

This site was not

previously

developed and was

vacant at the time of

the most recent

sale. It is currently

improved with

asphalt paving.

COMPARABLE LAND SALES


86

COMPARABLE SALES MAP

1

2

3

4

5

6

Subject


87

COMPARABLE LAND SALE #1



88




89




90

Analysis of Land Sales

Six comparable vacant land sales have been researched and analyzed. The vacant tracts are located within close proximity to the subject with the Downtown market area. The comparable sales closed between the time frame of November 2017 and April 2016. The sales provide a good indication of what buyers are willing to pay for tracts of land in the Downtown Las Vegas area. Several attributes have been analyzed for comparison with the subject, including property rights conveyed, financing, conditions of sale, and various physical characteristics. The attributes that affect the values of the sales as compared to the subject were given primary consideration in this analysis. After all of the comparisons are completed, each of the sales is rated on an overall basis. The purpose of this overall rating system is to bracket the subject and narrow the range of the value opinion. Property Rights Conveyed No adjustments were necessary for property rights conveyed. Terms of Sale Each sale transpired on an all cash basis or a cash equivalency basis. Therefore, adjustments for the terms of sale are not needed. Conditions of Sale On confirmation of the sales with the respective parties, there were no unusual conditions of sale affecting the various transactions disclosed and each was reported to be an arm's-length transaction. Therefore, no adjustments are applied. Market Conditions I do not believe a market conditions adjustment is warranted in this particular case with regards to this data set. The sales all occurred between November 2017 and April 2016 and reflect current market conditions. Summary of Sales & Qualitative Rankings Sale One is located along the west side of South 7th Street, south of Stewart Avenue. The site sold on March 24, 2017 for $69.57/SF. It was vacant at the time of sale. However, it was once improved with a motel that was eventually razed in the spring of 2006 and was subsequently improved with asphalt paving. Since the site was previously developed, utility lines have been stubbed to the property. This comparable has been rated similar to the subject for location, similar for size, similar for access/frontage, similar for zoning/master planned land use, and rated inferior for not having


91

been approved for similar entitlements such as the subject. On an overall basis, this comparable has been rated inferior to the subject property. Sale Two is located along the east side of South 6th Street, south of Bridger Avenue. The site sold on November 22, 2017 for $32.44/SF. It was vacant at the time of sale. However, it was once improved with two (2) multi-tenant buildings that were eventually razed in the fall of 2008, and the northern portion of this site was subsequently improved with asphalt paving. Since the site was previously developed, utility lines have been stubbed to the property. This comparable has been rated similar to the subject for location, similar for size, similar for access/frontage, similar for zoning/master planned land use, and rated inferior for not having been approved for similar entitlements such as the subject. On an overall basis, this comparable has been rated inferior to the subject property. Sale Three is located along the east side of South 8th Street, south of Bonneville Avenue. The site sold on June 23, 2017 for $46.63/SF. It was vacant at the time of sale and was never previously developed. It is unclear whether utilities are stubbed at the property. This comparable has been rated similar to the subject for location, similar for size, similar for access/frontage, slightly inferior for zoning/master planned land use, and rated inferior for not having been approved for similar entitlements such as the subject. On an overall basis, this comparable has been rated inferior to the subject property. Sale Four is located along the east side of Las Vegas Boulevard, north of Bonanza Road. The site sold on January 3, 2017 for $68.02/SF. The property was improved with a commercial structure that was in extremely poor condition. No value was attributable to the structure at the time of sale and the site was purchased for land value. The structure has since been razed. Since the site was previously developed, utility lines have been stubbed to the property. This comparable has been rated similar to the subject for location, similar for size, similar for access/frontage, similar for zoning/master planned land use, and rated inferior for not having been approved for similar entitlements such as the subject. On an overall basis, this comparable has been rated inferior to the subject property. Sale Five is located at the southeast corner of Main Street and Colorado Avenue. The site sold on June 20, 2017 for $69.95/SF. It was vacant at the time of sale. However, it was once improved with two (2) commercial structures that were eventually razed in the spring of 2008. This site was subsequently improved with asphalt paving. Since the site was previously developed, utility lines have been stubbed to the property. This comparable has been rated similar to the subject for location, similar for size, similar inferior for access/frontage, similar for zoning/master planned land use, and rated inferior for not having been approved for similar entitlements such as the subject. On an overall basis, this comparable has been rated inferior to the subject property. Sale Six is located at the southeast corner of Garces Avenue and South 4th Street. The site sold on April 6, 2016 for $50.22/SF. It was vacant at the time of sale and was never previously developed. It is unclear whether utilities are stubbed at the property.


92

This comparable has been rated similar to the subject for location, similar for size, similar for access/frontage, similar for zoning/master planned land use, and rated inferior for not having been approved for similar entitlements such as the subject. On an overall basis, this comparable has been rated inferior to the subject property. The comparable sales are detailed together with their respective rankings in the following grid.

Comparable 1 2 3 4 5 6

Transaction Date 3/24/2017 11/22/2017 6/23/2017 1/3/2017 6/20/2017 4/6/2016

Total Size (Acres) 0.33 0.23 0.32 0.27 0.32 0.32

Total Size (SF) 14,375 10,019 13,939 11,761 13,939 13,939

Sale Price $1,000,000 $325,000 $650,000 $800,000 $975,000 $700,000

Price Per Unit $69.57 $32.44 $46.63 $68.02 $69.95 $50.22

Property Rights 0% 0% 0% 0% 0% 0%

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

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

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

Subtotal $69.57 $32.44 $46.63 $68.02 $69.95 $50.22

Location Similar Similar Similar Similar Similar Similar

Size Similar Similar Similar Similar Similar Similar

Access/Frontage Similar Similar Similar Similar Similar SimilarZoning/Master Plan Use Similar Similar Similar Similar Similar SimilarSuitability Determination Inferior Inferior Inferior Inferior Inferior Inferior

Overall Rating Inferior Inferior Inferior Inferior Inferior Inferior

Indicated Value/SF $69.57 $32.44 $46.63 $68.02 $69.95 $50.22

COMPARABLE SALES RATINGS GRID

Reconciliation of the “As Is” Market Value of the 0.36 Net Acres of Land Six comparable sales have been gathered and analyzed. They are all located within the Downtown Las Vegas area and provide a good indication of what a buyer is willing to pay in the current market for land within the downtown area. With the exception of Sales Three and Six, all of the sales were previously developed parcels with improvements that were either razed prior to the sale or shortly after the close of escrow. Sales Three and Six have not been previously developed. However, there does not appear to be any correlation value-wise between developed sites and vacant sites with regards to the stubbing of utilities. With the subject property having an existing building (which will eventually be razed), the subject is considered similar to the comparables for the extension and stubbing of utilities. Furthermore, none of the sales have any entitlements similar to what the subject has and are all rated inferior for the suitability determination factor. The comparable land sales have unit values ranging from $32.44 to $69.95 per square foot. Each of the sales has been rated on a qualitative basis for differing attributes, i.e. location, size, zoning, site improvements, etc. Again, the sales were generally rated similar for most physical characteristics other than lacking the suitability determination.


93

Based on the data and considering the subject’s locational and physical characteristics, it is my opinion that the subject has a unit value of $60 per square foot, which is towards the top of the overall range. This considers the site off-sites being completed and the site having suitability determination to allow for 15 gaming devices and the serving of liquor along with the night club use. Therefore, based on all the information discovered and considered herein, and subject to the assumptions and limiting conditions outlined within the report, the “As Is” Market Value of the Fee Simple Estate of the 0.36 net acres of land, as of April 3, 2018 is as follows:

Land Size (SF) 15,682

Unit Value Per SF X $60.00

Value Indication $940,896

Rounded $940,000

Recent Purchase of Subject As was stated earlier in the Property History, the subject’s southern parcel, 0.18 net acres, was recently purchased, as vacant land, on March 13, 2017, for $236,600 or $30.08 net acres. However, it was reported to me that this property was part of a settlement and the overall sales price was below market value. Therefore, little to no weight was applied to this transaction. Additionally, the higher “as is” market value is based on improving market conditions, as well as the entitlement process and that has been completed adding value to the property. Exposure Time and Marketing Time A reasonable exposure time is projected to be 12 months. Based on the market activity and recognizing the economic climate on both a national and local level, the marketing time is also projected to be approximately 12 months. The credit markets have improved in the past 12 to 18 months and there are more lending sources and opportunities as compared to the past few years. Real estate transactions are occurring more often and are beginning to reach the peak years of the mid-2000s. Given the fundamentals in the market as of the effective date of this appraisal report, speculative commercial properties are in demand and there is planned new construction in all segments. The recovery of the commercial market lagged slightly behind the recovery in the residential market but has gained momentum and is showing signs of improvement that has led to some new construction. Credit markets and sources of loans have improved which has also helped to spur new construction. The major concerns regarding the overall economic climate on both a national and local level have been alleviated and the Las Vegas economy continues to improve with job growth and an increase in population. Some speculative new construction has occurred and is continuing to occur in the commercial markets. Specifically, there is some new construction in the industrial market due to


94

the demand as well as in the multi-family and retail markets. There is also some limited new construction in the office market with the majority of it being for owner occupancy. The national economy started to improve in 2015 and continued to improve through 2017. This trend has also been true in the Las Vegas economy. All segments of the local real estate market have shown signs of improvement after they started to stabilize in 2013. The Las Vegas market improved in 2015, 2016 and through 2017. The improvements are projected to continue through 2018. There are projections that the population of Clark County will grow an additional 425,000 people by the year 2035 with the Clark County population adding 47,800 residents in 2016. The local economy has seen improvement in job growth and the lowering of the unemployment rate. Other positive news is that the residential market has significantly improved in the past year and is projected to continue to improve with increasing median home values. This is based on an increase in the prices being paid for both existing and new homes, the activity of builders purchasing vacant lots and land and the increase in the number of permits that builders are pulling for the construction of new homes in Las Vegas. There are signs that the overall real estate market is in a growth phase and the concerns regarding the overall economic climate on both a national and local level due to the recession that began in late 2008 are a thing of the past.


95

PROSPECTIVE MARKET VALUE “AS COMPLETE”


96

COST APPROACH In order to provide complete building cost estimates, direct and indirect costs must be considered. Both are essential in a reliable replacement cost estimate. An incentive sufficient to induce an entrepreneur to undertake the risk associated with building the project is also estimated. Direct construction costs include the costs of material and labor as well as the contractor's profit required to construct the improvements on the effective appraisal date. Indirect costs are other costs not included in the direct construction of the improvements. Subject Cost Budget For this assignment, I was provided with a construction cost budget, dated January 18, 2018. According to the construction budget, the overall construction costs for the proposed project totals $3,639,800. These construction costs include soft costs but do not include land acquisition costs or entrepreneurial incentive. Furthermore, these costs exclude the tenant interior decoration FF&E’s and tenant working capital. The overall project budget costs are located in the Addenda of this appraisal. Marshall Valuation Costs The Marshall and Swift Publication Company issue a nationally recognized cost manual. The published costs include all direct costs for the base structure and interior finish, as well as indirect costs of plans, specifications, and building permits, including engineers and architect’s fees, normal fees and interest on construction funds during the construction period, sales tax on materials, contractor's overhead and profit, including workers compensation, fire and liability insurance, and unemployment insurance. According to the Marshall Valuation Service, the subject building is considered a Good Class “C” Cocktail Lounge in Section 13, page 13 of the Handbook, with a base cost projected at $144.03 per square foot. Added is the cost of sprinklers, estimated at $3.00 per square foot, or $147.03 per square foot. The adjusted base cost is further adjusted for a current cost multiplier of 1.05 and a local cost multiplier of 1.10, resulting in a total base cost of $205.43 per square foot. The following subject parameters are taken from the Marshall Valuation Service Manual and used for this analysis:

Good Class "C" Cocktail Lounge /Section 13/Page 13 Per SF

144.03$

3.00$

1.05

1.10

Adjusted Base Cost 169.82$

Local Cost Multiplier

Base Cost

Sprinklers

Current Cost Multiplier


97

In addition to the direct cost estimate for the building improvements, an allowance for site improvements and indirect costs are needed. The on-site improvements include grading, landscaping, striping, curbs, gutters, etc. The subject’s costs also include the razing the existing building on site along with a pool and installing larger trees for the subject’s proposed Treehouse concept. Although Marshall and Swift detail these items, more specific data is available from local developers. According to the costs provided by, site work totals $397,500, or $25.35 per square foot. I am of the opinion that the site costs are reasonable considering the added pool, unique landscape design and the costs to demo the existing building and will project a total of $25 per square foot, or a total of $392,000 for the site costs. Indirect costs are other costs not included in the direct construction of the improvements – e.g., professional fees, financing costs, and carrying charges such as leasing commissions, sales commissions, and absorption expenses during the lease-up or sellout period. These costs can range from 10 to 50 percent of the base cost. Based on the actual overall indirect costs that were provided of $797,000, the costs equate to an indirect cost of 22% ($797,000 ÷ $3,639,800= 0.22 or 22%). I am of the opinion that the indirect costs of 22% are reasonable and will be applied to the building and on-site improvement costs.

Building Component Area Cost/SF Total Cost

Subject Building 16,307 169.82$ 2,769,249$

Site Improvements 15,682 25.00$ 392,000$

Subtotal 3,161,249$

Indirect Cost @22% 695,475$

Total 3,856,724$

The total costs using the Marshall Valuation Service were $3,856,724, which is a less than 5% more of a difference from the subject’s actual costs of $3,639,800. Based on the subject’s concept and design features, it is my opinion that the subject’s actual development costs are considered reasonable and will be used herein. Therefore, I have placed more weight on the actual construction costs and project the direct cost to be $3,650,000.

Total Replacement Cost New Conclusion - $3,650,000


98

Entrepreneurial Profit This is defined as: “1. A market-derived figure that represents the amount an entrepreneur receives for his or her contribution to a project and risk; the difference between the total cost of a property (cost of development) and its market value (property value after completion), which represents the entrepreneur’s compensation for the risk and expertise associated with development. An entrepreneur is motivated by the prospect of future value enhancement (i.e., the entrepreneurial incentive). An entrepreneur who successfully creates value through new development, expansion, renovation, or an innovative change of use is rewarded by entrepreneurial profit. Entrepreneurs may also fail and suffer losses. 2. In economics, the actual return on successful management practices, often identified with coordination, the fourth factor of production following land, labor, and capital” (Source: The Dictionary of Real Estate Appraisal, 6th Edition, 2015; page 76-77). This essentially involves payment for the time and expertise of the developer. Typically, properties similar to the subject are developed by owner/users. These types of developers build with the intent of holding the property for several years. The value of their time and effort is rarely factored into their perception of development costs. Developer's profit is a market-derived figure that reflects the amount of risk associated with a specific property. The appropriate level of profit may be measured as a percentage of:

Direct Costs Direct and Indirect Costs Direct and Indirect Costs plus land value The value of a completed project

The determination of the appropriate level of developer's profit is a difficult assessment. Typically, three methods can be employed. The first is to abstract the profit level by analyzing recent sales of similar properties. Theoretically, the total of direct, indirect, and land costs can be subtracted from the sale's price of a comparable to provide an indication of profit. Interviews with participants during times when projects were being developed revealed an expected profit range from 10% to 50% of total direct and indirect costs. With improvements in the overall economy the market has shown gains and developers are starting to emerge. For this analysis, an allowance of 35% is included for profit. Accrued Depreciation There are three forms of depreciation, including physical depreciation, economic obsolescence, and functional obsolescence. The improvements will be in new condition and have an effective age of zero upon completion. Furthermore, review of the Las Vegas MSA real estate market generally indicates that market conditions are improving, and no external obsolescence is not present for the subject project. No depreciation will be applied in this analysis.


99

Cost Approach Conclusion Based on the discussions and analyses presented on the previous pages, the opinion of the Prospective Market Value "As Complete" of the proposed subject property, via the Cost Approach, as of December 1, 2018, is as follows:

Subtotal of Direct and Indirect Costs 3,650,000$

Plus: Entrepreneurial Profit @ 35% 1,277,500$

Subtotal 4,927,500$

Less: Physical Depreciation ‐$

Less: External Obsolescence ‐$

Subtotal 4,927,500$

Plus: Land Value 940,000$

Prospective Market Value "As Complete" 5,867,500$

Rounded To: 5,900,000$

COST APPROACH CONCLUSION


100

SALES COMPARISON APPROACH

The sales comparison approach requires the assembly of recent sales data for comparison. In order to gather the comparable sale data, contact was made with brokers and investors active in the area, and sales leads acquired from COMPS, Inc., a monthly comparable data service published by CoStar, and Property Line and Loop Net data services, were pursued. After the selection of the sales, a comparative analysis of relevant factors that influence value was undertaken to adjust the data to the subject property based on the actions and preferences demonstrated by participants in the marketplace. The methodology that has been used in the sales comparison approach is the sale price per square foot of building area. The basis of this methodology is comparison of the individual sale comparables to the subject property whereby adjustments may be extracted and applied to account for variances in the significant characteristics between the comparables and the subject. Various factors were considered such as market conditions at the time of sale, location, age (based on the year of construction), construction quality, building size, overall appeal, etc. The improved bar/tavern sales are presented below. A location map and detailed abstracts are located on the following pages.

COMPARABLE IMPROVED BAR/TAVERN SALES

Sale Number 1 2 3 4 5 6 Date of Sale 3/29/2018 07/21/2017 05/11/2017 04/24/2017 12/20/2016 01/05/2016

Sale Price $5,550,000 $2,500,000 $6,800,000 $1,900,000 $3,000,000 $4,000,000

Price Per SF $732.96 $639.88 $850.74 $539.77 $608.40 $673.17 Location

9580 W.

Flamingo Road

3835 West

Martin Avenue

1341 West

Warm Springs Road in Henderson

1810 South Rainbow

Boulevard

7155 North

Durango Drive

2135 East Centennial Parkway

Building SF 7,572 SF 3,907 SF 7,993 SF 3,520 SF 4,931 SF 5,942 SF Year Built 2003

(Remodeled in 2016)

2008 (Remodeled in

2017)

2007 1978 2006 2007

Condition Excellent Good Excellent Good Good GoodOAR +/-6.00% 6.00% 6.24% 6.84% 6.00% 6.25%


101

2

3

4

5

SUBJECT

1

6


102

IMPROVED SALE 1

Project Data

Project Name: Sierra Gold Address: 9580 West Flamingo Road, Las Vegas, Nevada 89147

Location: At the northeast corner of West Flamingo Road, and the Flamingo/I-215 full interchange.

Assessor’s Parcel Number 163-18-817-003

Physical Data

Land Size (SF): 59,242 Land-to-Building Ratio: 7.82:1.0 Total Building Size (GBA): 7,572 Coverage Ratio: 13% Buildings: 1 Construction Date: 2003. Remodeled in 2016 Stories: 1

Basic Construction: Wood frame, flat built-up roof system with painted stucco exterior.

Transaction Data

Sale Date: 3/29/2018 Document Number: 20180329:0129 Buyer: PF Properties S G, LLC & MF/CI Properties S G, LLC Seller: Flamingo Investments, LLC Verification: Deed, Public Records, and Appraisal Files

Price & Valuation Indicators

Sales Price: $5,550,000

Cash Equivalent Price (CE):

$5,550,000

CE Sales Price PSF: $732.96 Overall Capitalization Rate:

+/-6.00%

Comments: This comparable represents a 7,572-square-foot restaurant/bar and is situated on a 1.36-acre parcel at 9580 West Flamingo Road, Las Vegas, Nevada 89147. The improvements were originally constructed in 2003. Flamingo Investments, LLC (Golden Entertainment, Inc.) previously purchased the property in December 2015 for $2,300,000, or $303.75 per square foot. At that time, they completely remodeled and rebranded the property from a Sedona Restaurant and Lounge to a Sierra Gold’s Bar. The SG Bar re-opened in September 2016. It has been reported that at the close of escrow of the 2015 transaction, the tenant, Sierra Gold Flamingo 7 LLC, signed a brand new 10-year lease with 3 (5-year) option periods. Several attempts were made to contact the listing broker but none were successful. The approximate cap rate is taken from the original listing brochure which was based on the list price. The property was previously listed at $5,842,000, approximately 5% above the actual sale price.


103

IMPROVED SALE 2

Project Data

Project Name: PT’s Gold (Former BJ’s Cocktail Lounge) Address: 3835 West Martin Avenue, Las Vegas, Nevada 89118

Location: Along the south side of West Martin Avenue, west of South Valley View Boulevard


Physical Data

Land Size (SF): 25,265 Land-to-Building Ratio: 6.47:1 Total Building Size (GBA): 3,907 Coverage Ratio: 15% Buildings: 1 Construction Date: 2008 (Remodeled

in 2017) Stories: 1


Transaction Data

Sale Date: 07/21/2017 Document Number: 20170721:02095 Buyer: Ligon Properties, LLC Seller: Lucca Real Property IX, LLC (Golden Entertainment, Inc.) Verification: CoStar Comps, Public Records, Centennial Real Estate Marketing

Brochure and John Mendoza – Centennial Real Estate, 702-271-2600 KH




$2,500,000


6.00%

Comments: Lucca Real Property IX, LLC (Golden Entertainment, Inc.) purchased the property on February 15, 2017 for $1,400,000 and completely remodeled the property from a BJ’s Cocktail Lounge to a PT’s Gold. At the close of escrow Golden Entertainment, Inc. signed at 15-year lease with three (3) five (5) year options. Mr. Mendoza confirmed the selling price, the annual income of $150,000, and the 6.00% cap rate. The confirming source indicated that he did not know the renovation budget. It should be noted that the property sold for the full asking price.


104

IMPROVED SALE 3

Project Data

Project Name: Sierra Gold Address: 1341 West Warm Springs Road, Henderson, Las Vegas, Nevada 89014

Location: Along the south side of West Warm Springs Road, approximately 615 feet east of North Stephanie Street


Physical Data

Land Size (SF): 61,420 Land-to-Building Ratio: 7.68:1.0 Total Building Size (GBA): 7,993 Coverage Ratio: 13% Buildings: 1 Construction Date: 2007 Stories: 1


Transaction Data

Sale Date: 05/11/2017 Document Number: 20170511:000655 Buyer: Pacific Properties Northwest L.L.C., a Nevada limited liability company Seller: Lucca Real Property IV, LLC (Golden Entertainment, Inc.) Verification: CoStar Comps, Public Records, Centennial Real Estate Marketing Brochure

and John Mendoza Listing broker with Centennial Real Estate, 702-271-2600, KH




$6,800,000


6.24%

Comments: This was a sale/leaseback that was the buyers’ upleg in a 1031 exchange. The sellers executed a new, absolute triple net lease with a 10-year (120 months) initial term that will begin on August 3, 2017 and will expire as of August 2, 2027. The lease includes the option to extend for two, additional five-year periods on the same terms and conditions set forth in the initial lease with 2% rent increase every five years. So, the first rent increase will be on August 3, 2022. The sale was for the real estate only and the FF&E and business enterprise belongs to the seller/tenant. The asking price was $7,069,000 and the property was on the market for 77 days before it sold for the price of $6,800,000, a 3.81% discount from the asking price. The NOI is $424,128.84 for Year 1.


105

IMPROVED SALE 4

Project Data

Project Name: Mr. D’s Address: 1810 South Rainbow Boulevard, Las Vegas, Nevada 89146

Location: At the southeast corner of South Rainbow Boulevard and West Oakey Boulevard


Physical Data

Land Size (SF): 22,651 Land-to-Building Ratio: 6.43:1.0 Total Building Size (GBA): 3,520 Coverage Ratio: 16% Buildings: 1 Construction Date: 1978 Stories: 1


Transaction Data

Sale Date: 04/24/2017 Document Number: 20170424:02412 Buyer: Jeffrey Clark Solomon and Linda Naomi Solomon, Trustee of the Jeffrey Clark

Solomon and Linda Naomi Solomon Revocable Trust Seller: SLK, LLC Verification: CoStar Comps, Public Records, Sun Commercial Marketing Brochure and Roy

Fritz Listing broker with Sun Commercial Real Estate, 702-968-7322, DB




$1,900,000 (see comments)


6.83%

Comments: According to the confirming source the sale was an arm’s length transaction and was straight forward with no unusual conditions of sale. The sale was a sale leaseback where the tenant executed a 20-year absolute triple net lease at the close of escrow. The lease agreement has 2% annual increases. Therefore, the sale was for the real estate only and the FF&E and business enterprise belongs to the tenant. It was reported that the sale price was $1,900,000 as the recorded sale price of $1,950,000 had negotiated broker fees on the buyer’s side. Mr. Fritz could not give recent renovations costs, but indicated they were not major and more just upkeep of the property. Property was in good condition for its age at time of sale.


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IMPROVED SALE 5

Project Data

Project Name: Shuck’s Gaming & Oyster Bar Address: 7155 North Durango Drive, Las Vegas, Nevada 89149

Location: Along the west side of North Durango Drive, approximately 280 feet south of Elkhorn Drive


Physical Data

Land Size (SF): 31,363 Land-to-Building Ratio: 6.36:1 Total Building Size (GBA): 4,931 Coverage Ratio: 16% Buildings: 1 Construction Date: 2006 Stories: 1

Basic Construction: Wood frame, flat built-up roof system with decorative brick, wood and metal siding.

Transaction Data

Sale Date: 12/20/2016 Document Number: 20161220:00922 Buyer: Global Nevada Investments, LLC Seller: Lucca Real Property VII, LLC Verification: Public Records, Centennial Real Estate Marketing Brochure,

Appraisal File and Vince Listing broker with, Centennial Real Estate, 702-489-2350 Ext 2, ECG


Asking Sales Price: $3,000,000


$3,000,000

Asking Sales Price PSF: $608.40 Overall Capitalization Rate:

6.00%

Comments: According to Mr. Germain the property is a sale leaseback. The confirming source and the marketing brochure indicated that a 10-year lease with three (3) five-year options was signed in April 2016. The confirming source indicated that there was nothing unusual with the transaction.


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IMPROVED SALE 6

Project Data

Project Name: PT’s Gold Address: 2135 East Centennial Parkway, North Las Vegas, Nevada 89081

Location: Along the south side of East Centennial Parkway, east of Lawrence Street


Physical Data

Land Size (SF): 48,787 Land-to-Building Ratio: 8.21:1 Total Building Size (GBA): 5,942 Coverage Ratio: 12% Buildings: 1 Construction Date: 2007 Stories: 1


Transaction Data

Sale Date: 01/05/2016 Document Number: 20160105:00692 Buyer: SDS Real Estate Development, Inc. Seller: Lucca Real Property A&C, LLC Verification: CoStar Comps, Public Records, Joe Stone, Chief Financial Officer/VP

Finance with Sartini Enterprises, 702-891-4288, and Appraisal File, ECG




$4,000,000


6.25%

Comments: According the confirming source the property was leased, and the FF&E and Business Enterprise belongs to the tenant. The property was purchased for investment purposes and sold for an approximate 6.25% overall capitalization rate. Based on the appraisal file, the terms and the lease rate are very strong for this property. The property is located within the Shadow Creek Marketplace retail development that is anchored by a Smith’s Grocery Store.


108

Price Per Square Foot Analysis The unit of comparison used for this analysis is the Sales Price Per Square Foot of Building Area. This is the most common unit of comparison for bars/restaurants such as the subject and the comparable sales. To arrive at a value conclusion for the subject, comparable bar/restaurant/tavern sales throughout Las Vegas were researched. The most comparable transactions were outlined on the previous pages. The sales warrant consideration of several attributes. As will be seen, the adjusted values will provide a reasonable market value conclusion for the subject. I analyzed the sales comparables from the viewpoint of a prospective buyer. In other words, the appeal of the physical attributes, including quality of construction materials used in the completion of the structures, and current condition of the buildings were compared to the subject in order to determine what factors a buyer would consider when selecting one building over another. The appeal factor also considers the rent levels that each of the comparables and the subject can achieve. The overall rating is based on the various physical characteristics that attract investors to retail building properties similar to the subject and the sale comparables. Consequently, an overall rating that reflects the physical characteristics considered by investors has been utilized. Following is a discussion of the various value affecting characteristics of the comparables. The sequence of comparing each sale to the subject is as follows:

- Property Rights Conveyed - Financing Terms (Cash Equivalency) - Conditions of Sale - Market Conditions (Time) - Property Characteristics

Property Rights Conveyed

The subject's market value is based on the leased fee interest. All six sales reflect the leased fee interest and upon confirmation, each comparable was sold and/or was leased at market levels and neither the tenants nor landlords were in favorable positions. Therefore, no adjustment is necessary in this particular case. Financing Terms (Cash Equivalency) The market value opinion for the subject is based on all cash financing or terms that are considered to be comparable to a cash sale. The cash equivalent sales price for Sale Four of $1,900,000 is being used in this analysis. As was explained on the abstract for this sale, it was reported that the sale price was $1,900,000 as the recorded sale price of $1,950,000 had negotiated broker fees on the buyer’s side. As will be shown on the Improved Sales Adjustment Grid, the sales price of $1,900,000 is being used for Sale Four. The other five sales, Numbers One, Two, Four, Five and Six, all sold at cash equivalent prices and a financing terms adjustment was not necessary.


109

Conditions of Sale Adjustments for conditions of sale are necessary when unusual motivations are present for the seller and/or buyer. For instance, a sale may be transacted at a below market price if the seller needs liquidity. Related business entities may record a transaction at a non-market price to serve their needs. Some arm's length transactions may also reflect atypical motivations, such as unusual tax considerations, lack of exposure on an open market or impending eminent domain proceedings. Sale Three was the buyers’ upleg in a 1031 exchange. Although the agreed upon sales price of $6,800,000 is a discount of 3.81% from the asking price of $7,069,000, buyers involved in 1031 exchanges are typically motivated since they have a limited time to identify a property to purchase under the terms of the exchange. I have applied a 10% downward adjustment to account for these conditions of sale. Upon confirming the other five sales with the respective parties, there were no unusual conditions of sale affecting the remaining transactions and each was reported to be an arm’s-length transaction. As a result, the remaining sales, Numbers One, Two, Four, Five and Six, were not adjusted for conditions of sale. Market Conditions The comparable bar/tavern sales closed during the time frame between January 2016 and March 2018. As discussed previously in the Las Vegas Area Analysis and in the Immediate Subject Market Data the market has shown signs of improvement relatively across the board. At this point in time, a market conditions adjustment would be very subjective. Based on the recent time frame of the closed sales, I am of the opinion that the sales utilized in this analysis are representative of the current market conditions and are representative of the positive economic signs that have been observed in the market. Therefore, I have not made any adjustments for market conditions to any of the comparable sales. Following is a comparative discussion of the sales’ physical characteristics to the subject’s and an overall rating of these characteristics. Location The first attribute that required an adjustment is for the location differences of the sales in comparison to the subject. Although the subject is located within the Downtown Las Vegas Market area with redevelopment happening throughout, the subject’s immediate area is older and is rated inferior to majority of the sales, which are located along major thoroughfares with newer surrounding commercial developments and higher surrounding demographic characteristics. However, Sale Two is located within a strictly industrial area and is rated similar overall when compared to the subject. Therefore, Sales One. Three, Four, Five, and Six are adjusted downward accordingly.


110

Building Size The subject will be a free-standing, two story building totaling 16,306 square feet. All of the sales are free-standing, single-story structures which are all smaller when compared to the subject. Sales One and Three consist of 7,572 and 7,993 square feet and are rated superior to the subject for size. Therefore, these sales are adjusted downward 15% for size. The remaining sales are much smaller ranging from 3,520 to 5,942 square feet and are adjusted downward 20% for size. Age/Condition/Quality The last attribute that required consideration is for the overall age/condition of the comparables in relation to the subject. The subject will be brand new construction with added features and amenities. Sales One and Two were completely remodeled and re-branded as a Sierra Gold and PT’s Gold, both part of Golden Gaming. These sales are rated slightly inferior and is adjusted upward 5%. Sales Three, Five and Six were built from 2006-2007 and rated slightly inferior and adjusted upwards 10%. Sales Four was built in 1978 but was reported to be in good condition at the time of sale as it has undergone several remodels over the years. Sale Number Four is rated slightly inferior and is adjusted upward 20%. Functional Utility The subject will not have any on-site parking and there will be very limited street parking near the subject. All of the sales have additional site area with ample parking for their respective sites. Therefore, the sales are rated superior and adjusted downward 10%. Adjustment Summary The following summarizes the adjustments applied to the comparable bar/tavern sales.


111

Comparable Number 1 2 3 4 5 6Transaction Type Sale Sale Sale Sale Sale SaleTransaction Date 7/21/2017 7/21/2017 5/11/2017 4/24/2017 12/20/2016 1/5/2016

Year Built2008

(Remodeled in 2016)2008

(Remodeled in 2017)2007 1978 2006 2007

Building Size 7,572 3,907 7,993 3,520 4,931 5,942 Sale Price $5,550,000 $2,500,000 $6,800,000 $1,900,000 $3,000,000 $4,000,000 Price Per Square Foot $732.96 $639.88 $850.74 $539.77 $608.40 $673.17

Overall Capitalization Rate 6.00% 6.00% 6.24% 6.83% 6.00% 6.25%Property Rights Conveyed 0% 0% 0% 0% 0% 0%Conditions of Sale 0% 0% -10% 0% 0% 0%Market Conditions (Time) 0% 0% 0% 0% 0% 0%Subtotal $732.96 $639.88 $765.67 $539.77 $608.40 $673.17

Location -20% 0% -10% -10% -10% -10%Size -15% -20% -15% -20% -20% -20%Age/Condition/Quality 5% 5% 10% 20% 10% 10%Functional Utility -10% -10% -10% -10% -10% -10%Total Adjustment -40% -25% -25% -20% -30% -30%Indicated Value Per Unit $439.78 $479.91 $574.25 $431.82 $425.88 $471.22

IMPROVED BAR/TAVERN SALES ADJUSTMENT GRID

Comparable Listing I have researched current listings of similar uses in the area and found one current listing in the immediate area.


112

IMPROVED LISTING

Project Data

Project Name: The Venue Address: 750 Fremont Street, Las Vegas, Nevada 89101


Physical Data

Land Size (SF): 27,878 Land-to-Building Ratio: N/A Total Building Size (GBA): 40,000 Coverage Ratio: N/A Buildings: 1 Construction Date: 2015 Stories: 3

Basic Construction: Wood frame/Concrete block with stone accents, flat built-up roof system

Transaction Data

Sale Date: TBD (Listing) Document Number: TBD Buyer: TBD Seller: Valley of the Sun Las Vegas Verification: Costar, Public Records, and Las Vegas Review Journal (see comments)


List Price: $18,900,000


$18,900,000


N/A

Comments: The following is taken from the costar report broker comments: We are proud to present this one of a kind World Class Events Center. This amazing 40,000 square foot, three story building with VIP roof top lounge was designed and built sparing no expense. This property offers a very versatile venue customizable to any size group in an unparalleled setting. The property includes with a full modern catering kitchen and state-of-the-art audio/visual equipment including premium audio, video production, and lighting. This building provides guests breathtaking views of Las Vegas. The possibilities are endless for this property; from elegant weddings, dinner parties and extravagant galas to corporate events and rock concerts seating up to 2,000 guests.


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Additionally, the following was taken from a November 10, 2017 Las Vegas Review Journal Publication: The Venue, at 750 Fremont St., was listed for sale on Oct. 31. The $18.9 million asking price includes the events business and its three-level, 40,000-square-foot building, said listing broker Mounir Bousaid of First Choice Business Brokers. Perrillo, founder of The Venues Group, operates a similar facility in Scottsdale, Arizona, and Bousaid said he’s trying to sell that one, too, for $12.9 million. According to Bousaid, Perrillo has decided to go in a different direction with his career but hasn’t disclosed his next move. Further in the article, it stated “Downtown Project “feels it would be inappropriate to comment” on Perrillo’s sales effort but said the developer is “current” on his loan, according to a statement from Downtown Project PR rep Megan Fazio of Neon Public Relations”.


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When compared to the subject, the listing is much larger than the subject. However, the interior and exterior build-out and is very extensive. Overall, based on the location, overall age/condition and size, the subject would command a unit indicator at or slightly above this listing. Reconciliation of Value via Sales Comparison Approach Six closed bar/tavern sales have been used for this analysis. Variances between the subject and the comparable sales were examined and adjustments were applied. Before the adjustment process, the sales had prices that range from $539.77 to $850.74 per square foot. After the adjustment process, the adjusted prices range from $425.88 to $574.25 per square foot. The central tendency of the six adjusted values is approximately $470 per square foot. In the final reconciliation, consideration is given to all of the comparables and it is my opinion that a unit value towards the middle of the adjusted range indicated by the six adjusted values is reasonable and well-supported. This value accounts for the location, larger size but also the brand-new construction. For the purpose of this analysis, I have projected a unit value of $460 per square foot. Therefore, based on all the information discovered and considered herein, and subject to the assumptions and limiting conditions outlined within the report, the subject’s Prospective Market Value "As Complete" of the Leased Fee Interest, via the Sales Comparison Approach, as of December 1, 2018, is as follows:

Square Footage 16,307

Unit Value X $460.00

Value Indication $7,501,220

Rounded $7,500,000

* This is the value of the real estate only. It does not include any Furniture, Fixtures and Equipment (FF&E), Business Enterprise or Personal Property.


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INCOME CAPITALIZATION APPROACH The income capitalization approach to value is based upon analysis of the income-producing potential of a property. This approach assumes that the purchaser of an investment type property will pay a price which bears a relationship to the net operating income which the property is capable of producing. Method There are two recognized methodologies in the income capitalization approach: direct capitalization and discounted cash flow analysis. In direct capitalization, one year’s net operating income is divided by an overall capitalization rate which is derived from available market data. The Discounted Cash Flow (DCF) analysis analyzes the projected change in income and expenses over an anticipated holding period. For the purposes of this analysis, only the direct capitalization technique will be used. Subject Property I was provided with a Triple Net Lease Agreement between Arts District Holdings, LLC (Landlord) and Treehouse Lounge Holdings (Tenant) dated October 12, 2017, and two additional lease addendums– the first lease addendum dated November 2017 and the second lease addendum dated March 2018. The lease commencement date will be upon completion of construction of the improvements and the issuance of a certificate of occupancy for the interior improvements of the Premises. The lease has an initial term of 15 years and has five (5) option periods of five (5) years each. According to the original lease, dated October 12, 2017, the rentable building area is to be 11,200 square feet and the initial monthly base rent is $32,100 per month, or $2.87 per square foot per month. The rent is to include the improvements and any remaining lot area. However, according to the first lease addendum, dated November 2017, the tenant will pay rent in the amount of $1.25 per square foot per month, as and for additional square footage being added to the commercial lease space, presently planned for 5,107 square feet. This will increase the base rent in the amount of $6,383.75 (5,107 SF x $1.25 = $6,383.75). Therefore, the overall monthly base rent is increased to $38,493.75 ($32,100 + $6,383.75= $38,493.75), or $2.36 per square foot per month, based on an overall building size of 16,307 square feet (11,200 SF + 5,107 SF). Competitive Analysis From a competitive standpoint, I observed very little night club competition in the immediate area. There are several restaurants and even bars in the immediate 18B Las Vegas Arts District area and more planned with some under construction. However, there is little to no similar concepts which tie in the mixed-use venues as the subject which will include restaurant/dining, cocktail lounge, limited gaming, day and night clubs, pool facilities, and rooftop area. From a survey of the very immediate area during the property visit, the subject property appears to have below average competition.


116

Most of the small night clubs or bars/taverns in Las Vegas are owner occupied. The rental data for similar night clubs and bars/taverns is limited. These types of facilities all have full liquor licenses and restricted gaming licenses that allow a maximum of 15 gaming machines, which is similar to the subject’s license and will be considered in the market rental rate. In order to determine the subject’s market rent, I have researched and gathered rent comparables of similar tenant uses located throughout Las Vegas The rent comparables are detailed on the following pages.


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MAP OF BAR/TAVERN RENTS

Subject

4

5

36

7

2

2


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BAR TAVERN RENTAL 1

Project Data

Project Name: Sierra Gold Address: 6515 S. Jones Boulevard, Las Vegas, Nevada 89118

Location: Southwest corner of S. Jones Boulevard and W. Sunset Road Assessor’s Parcel Number 176-02-511-003

Physical Data

Land Size (SF): 62,291 Land-to-Building Ratio: 5.39:1 Total Building Size (GBA):

11,563 Coverage Ratio: 11%

Buildings: 1 Construction Date: 2005 Stories: 2

Basic Construction: Wood frame construction with painted stucco and stone accents finish, aluminum framed, glass storefronts and built-up roof system

Survey Data

Verification: Appraisal Files


Base Rent: $2.77 Expense Basis Triple Net Adjusted Rent (See text): $2.77 CAM Fee (PSF Month): N/A Lease Term: 7 Years Escalation: 1.75% Annually Available Space (SF): 0 Occupancy: 100%

Improvement Allowance: N/A Comments: The tenant, Sierra Gold Tavern, which is Golden

Entertainment’s flagship tavern, has been in place since August 2015 and originally signed a 10-year lease. The tenant recently signed a lease amended which extends the lease term an additional seven years to December 31, 2032. The current monthly rent is $32,001 per month, which increased on January 1, 2018. The rental rate escalates 1.75% annually.


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BAR TAVERN RENTAL 2

Project Data

Project Name: PT’s Gold – Oso Blanca Address: 7550 Oso Blanca Road, City of Las Vegas, Clark County, Nevada

89149. Location: Along the east side of Oso Blanca Road, approximately 700 feet

northwest of North Durango Drive within the Oso Blanca Pavilions. Assessor’s Parcel Number 125-17-314-003

Physical Data




Basic Construction: Wood frame construction with painted stucco finish, rock accents, glass storefronts and built-up roof system

Survey Data

Verification: Review of lease, Appraisal File, 11/2017 KH


Base Rent: $3.25 Expense Basis Triple Net Adjusted Rent (See text): $3.25 CAM Fee (PSF Month): N/A Lease Term: 15 years Escalation: 10.06% in Years 6 and

11 Available Space (SF): 0 Occupancy: 100%

Improvement Allowance: N/A Comments: The Lease Agreement is for 15 years with three (3) five (5) year option

periods. The contract rental rate for the first 5 years is reported at $3.25 per square foot per month or $17,355.00 based on a building size of 5,340 square feet. The lease was executed on September 1, 2016 but commenced on or around October 1, 2017. The lease features 10.06% increases in Years 6 and 11 and in Years 16, 24 and 26 in the option periods if they are exercised.


120

BAR TAVERN RENTAL 3

Project Data

Project Name: Fireside Address: 1785 East Cactus Avenue, Las Vegas, Nevada 89183

Location: Along the south side of East Cactus Avenue, west of Spencer Street


Physical Data




Basic Construction: Wood frame construction with painted stucco finish, aluminum framed, glass storefronts and built-up roof system

Survey Data

Verification: Public Records, Offer Memorandum 777 Advisors, and Michael Swecker Listing broker with 777 Advisors, 702-489-5777, ECG


Base Rent: $2.69 Expense Basis Triple Net Adjusted Rent (See text): $2.69 CAM Fee (PSF Month): N/A Lease Term: 15 years Escalation: 1.5% Annually Available Space (SF): 0 Occupancy: 100%

Improvement Allowance: N/A Comments: The tenant, Golden-PT’s Pub Fireside 59, LLC (dba: Fireside

Restaurant & Tavern), executed a 15-year term lease that commenced on December 10, 2014. The lease features 1.5% increases throughout the initial term and 1.5% rental increase for any and all option periods that are exercised. The current lease rate is $17,254 per month which increased on December 10, 2017.


121

BAR TAVERN RENTAL 4

Project Data

Project Name: PT’s Gold Address: 61 West Horizon Ridge Parkway, City of Henderson, Nevada

89012Location: Along the west side of West Horizon Ridge Parkway, north of

West Horizon Drive Assessor’s Parcel Number 179-19-401-006

Physical Data





Survey Data

Verification: Public Records, Offer Memorandum 777 Advisors, Michael Swecker Listing broker with 777 Advisors, 702-489-5777, and Appraisal File, ECG



Improvement Allowance: N/A Comments: The tenant, Golden-PT’s Horizon 33, LLC (dba: PT’s Gold),

executed a 15-year term lease that commenced on February 1, 2014. The lease features 2.0% increases throughout the initial term and 1.5% rental increase for any and all option periods that are exercised. The current lease rate is $17,509.93 per month, which increased on August 1, 2017.


122

BAR TAVERN RENTAL 5

Project Data

Project Name: Mountain Side Address: 1442 East Lake Mead Parkway, Henderson, Nevada 89015

Location: Along the south side of East Lake Mead Parkway, east of Athens Avenue


Physical Data





Survey Data

Verification: Public Records, Offer Memorandum 777 Advisors, Michael Swecker Listing broker with 777 Advisors, 702-489-5777, ECG



Improvement Allowance: N/A Comments: The tenant, Golden-PT’s Pub Mountainside 60, LLC (dba:

Mountainside Restaurant & Tavern), executed a 15-year term lease that commenced on December 10, 2014. The lease features 1.5% increases throughout the initial term and 1.5% rental increase for any and all option periods that are exercised. The current lease rate is $18,300 per month which increased on December 10, 2017.


123

BAR TAVERN RENTAL 6

Project Data

Project Name: Goldfinger’s Bar & Grill Address: 1115 East Pyle Avenue, Las Vegas, Nevada 89183

Location: Along the south side of East Pyle Avenue, west of South Maryland Parkway


Physical Data





Survey Data

Verification: Public Records, Marcus & Millichap Marketing Brochure and Ray Germain Listing broker with Marcus & Millichap, 702-215-7153, ECG


Base Rent: $2.40 Expense Basis Triple Net Adjusted Rent (See text): $2.40 CAM Fee (PSF

Monthly): N/A

Lease Term: 15 years Escalation: 2.0% Available Space (SF): 0 Occupancy: 100%

Improvement Allowance: N/A Comments: According to the confirming source the real estate sold on

October 14, 2015 and a new lease was signed at closing of the property. The contract rent has scheduled annual increases of 2%. The lease rate at the time of sale was $2.31. The effective rent which is inclusive of the 2% annual bumps, as of October 14, 2017, is $2.40 per square foot per month.


124

BAR TAVERN RENTAL 7

Project Data

Project Name: Shuck’s Gaming & Oyster Bar Address: 7155 North Durango Drive, Las Vegas, Nevada 89149

Location: Along the west side of North Durango Drive, approximately 280 feet south of Elkhorn Drive


Physical Data




Basic Construction: Wood frame, flat built-up roof system with decorative brick, wood and metal siding.

Survey Data

Verification: Public Records and Appraisal File, ECG


Base Rent: $3.25 Expense Basis Triple Net Adjusted Rent (See text): $3.25 CAM Fee (PSF

Monthly): N/A

Lease Term: 10 years Escalation: 3.0% Available Space (SF): 0 Occupancy: 100%

Improvement Allowance: N/A Comments: According to the appraisal file, the initial lease term is for 10

years and has three (3) option periods of five (5) years. The lease commenced on June 15, 2015 and the contract rent is reported at $15,500 per month and will increase by 3% annually at the beginning of year 2, and thru each renewal option exercised. The initial contract rental rate is calculated at $3.14 per square foot per month based on a building size of 4,931 square feet. As of June 15, 2017, the effective rent is $3.23 per square foot per month.


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SUMMARY OF COMPARABLE BAR/TAVERN RENTS

Comparable Number

Size (SF)

Rental Rate Per SF

Per Month

Expense Basis

1 11,563 $2.77 Triple Net

2 5,340 $3.25 Triple Net

3 6,425 $2.61 Triple Net

4 5,820 $3.01 Triple Net

5 4,969 $3.68 Triple Net

6 3,976 $2.40 Triple Net

7 4,931 $3.25 Triple Net

Market Rental Rate

The rent comparables indicate rental rates that range from $2.40 to $3.68 per square foot for bar/taverns. All of the rents have a triple net expense basis. Rent Comparable Analysis Rent Comparable One was built in 2005 and is rated inferior for the age attribute. It is adjusted upward 10%. Rent One is located within the Southwest Las Vegas submarket and has very good visibility from the Las Vegas Beltway. It is rated superior and is adjusted downward 20%. Rent Comparable One contains a total of 11,563 square feet and is rated similar for size. Overall, Rent Comparable One is rated superior and is adjusted downward 10%. Rent Comparable Two was built in 2017 and is rated similar for the age/condition attribute. Rent Two is rated slightly superior and is adjusted 10% downward. Rent Comparable Two contains a total of 5,340 square feet and is rated superior and is adjusted 20% downward. Overall, Rent Comparable Two is rated superior and is adjusted downward 30%. Rent Comparable Three was built in 2006 and is rated inferior for the age attribute. It is adjusted upward 10%. Rent Three is rated slightly superior for location and is adjusted 10% downward. Rent Comparable Three contains a total of 6,425 square feet and is rated superior and is adjusted downward 15%. Overall, Rent Comparable Three is rated is rated superior in overall terms and is adjusted downward a total of 15%.

Rent Comparable Four was built in 2005 and is rated inferior for the age attribute. It is adjusted upward 10%. Rent Four is rated slightly superior for location and is adjusted 10% downward. Rent Comparable Rent Four contains a total of 5,820 square feet and is rated superior and is adjusted 20% downward. Overall, Rent Comparable Four is rated superior and is adjusted downward 20%.


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Rent Comparable Five was built in 2008 and is rated inferior for the age attribute. It is adjusted upward 10%. Rent Five is located in an area that does not have any competition from other bar/taverns and is near Lake Las Vegas, the under-development Cadence master planned community and Tuscany. This factor offsets the remote location in the eastern portion of the Las Vegas Valley and Rent Five is rated similar for the location attribute. Rent Comparable Five contains a total of 4,969 square feet and is rated superior and is adjusted downward 20%. Overall, Rent Comparable Five is rated superior and will be adjusted downward a total of 10%. Rent Comparable Six was built in 2002 and is rated inferior for the age attribute and will be adjusted upward 15%. Rent Six is rated superior for location and is adjusted downward 10%. Rent Comparable Six contains a total of 3,976 square feet and is rated superior and is adjusted downward 20%. Overall, Rent Six is rated superior and is adjusted downward 15%. Rent Comparable Seven was built in 2006 and is rated inferior for the age attribute. It is adjusted upward 10%. Rent Seven is rated superior for location and is adjusted downward 10%. Rent Comparable Seven contains a total of 4,931 square feet and is rated superior and is adjusted 20% downward. Overall, Rent Comparable Seven is rated superior and is adjusted downward 20%.

Comparable Number

Size (SF)

Rental Rate Per SF

Per Month

Adjustment Rental Rate Per SF

Per Month 1 11,563 $2.77 -10% $2.49

2 5,340 $3.25 -30% $2.28

3 6,425 $2.61 -15% $2.22

4 5,820 $3.01 -20% $2.41

5 4,969 $3.68 -10% $3.31

6 3,976 $2.40 -15% $2.04

7 4,931 $3.25 -20% $2.60

In projecting the market rent of the subject property, I have considered the location, age, size, as well as other factors. The rent comparables were based on a triple net expense basis whereby all of the expenses were paid by the tenant. The unadjusted contract rental rates range from $2.61 to $3.68 per square foot per month and the adjusted rental rates range from $2.04 to $3.31 per square foot per month. After analyzing the data, I am of the opinion that the subject’s current contract rental rate of $38,493.75 per month or $2.36 per square foot per month based on a building size of 16,307 square feet is supported by market data and will be utilized for the purpose of this analysis.


127

Potential Gross Income (PGI)

The potential gross income for the subject is $461,925 (38,493.75 per month x 12 months). Vacancy & Collection Loss According to CoStar’s 4th Quarter 2017 Las Vegas retail report, the citywide retail market indicates a vacancy rate of 6.8%. The subject property is currently leased under a long-term lease agreement. The vacancy and collection loss for the subject acknowledges that the subject is a single-tenant facility that has an initial term of 15 years and has five (5) option periods of five (5) years each. I am of the opinion that minimal vacancy is required based on the long-term lease agreement. A two percent allowance included herein. Effective Gross Income (EGI) Applying the two percent overall vacancy and collection loss to the PGI of $461,925 equates to an EGI of $452,686 ($461,925 x 0.98, or a two percent deduction). Projection of Operating Expenses The comparables contract rent is on a triple net basis with the tenant responsible for all operating expenses. The landlord would experience minimal costs, including some management, miscellaneous expenses, and reserves. Management Professional management fees generally range from about three to six percent, depending upon property type, services provided, and the necessary amount of attention required. A management fee of two to six percent would be applicable for the subject and minimal management efforts would be required. For the subject, an overall management expense is projected at two percent of the effective gross income. The total management expense is calculated to be $9,054 per year ($452,686 x 0.02). Miscellaneous Expense An expense of 1% of the Effective Gross Income is deducted to account for any miscellaneous expenses, including any expenses for periods of vacancy. The total miscellaneous expense is calculated at $4,527 per year ($452,686 x 0.02). Reserves for Replacements The replacement reserve category is an annual allowance that typically provides a liquid reserve account with the funds to be used in the replacement of those items whose useful life is shorter than that of the building. These short-lived items deteriorate and will eventually need to be replaced.


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Reserves may or may not be a line item on a typical operating statement because different owners/managers tend to handle this category in different ways. Some property owners may actually set up a reserve account to handle a replacement of major items. Other owners pay for the items as they need to be replaced. If an item is replaced as the need arises, the expense is typically accounted for as a capital improvement in the repair and maintenance category. In theory, funds should be set aside every year or every month to build up a reserve account for the replacement of short-lived items. Most properties do not have a reserves expense as it is typically handled through the general maintenance and repairs category. Since reserves were considered in the overall rates derived from the improved sales, reserves must be deducted when calculating the subject’s net operating income. The expense is typically $0.10 to $0.20 per square foot of building area and we have used an expense of $0.10 per square foot for a total expense of $1,631 (16,307 SF X $0.10 per SF = $1,631). Total Operating Expenses

The operating expenses projected herein are summarized as follows:

Management $ 9,054 Miscellaneous $ 4,527 Reserves $ 1,631 Total Operating Expenses $15,212

Net Operating Income Conclusion With all income and expenses projected, a reconstructed operating statement is presented below. This statement has been derived by utilizing the contract rent from comparables and projected operating expenses.

Total Potential Gross Income: $461,925 Less: Vacancy & Collection Loss (2%): <$ 9,239> Effective Gross Income: $452,686 Less: Operating Expenses: <$ 15,212> Net Operating Income: $437,474


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Overall Capitalization Rate Estimate Capitalization is the process of converting a net income stream into an indication of value. There are several types of capitalization methods that can be utilized to derive a value via the Income Approach. The Direct Capitalization Method converts a single year’s net operating income estimate into a value indication by applying an overall capitalization rate. Cap rates can be derived from various techniques. These include deriving a rate from the comparable building sales and/or utilizing a band of investment with a mortgage and equity components as well as using a debt coverage formula. For the purposes of this analysis, the direct capitalization method will be employed.

All the Comparable Improved Sales used earlier in the Sales Comparison Approach indicated overall capitalization rates which ranged from 6.00% to 6.83%. I have also considered the range of overall capitalization rates published in the PwC Real Estate Investor Survey, conducted by PricewaterhouseCoopers (PwC) – First Quarter 2018. Based on the First Quarter 2018 PwC Real Estate Investor Survey, overall rates for the National Net Lease Market range from 5.50% to 8.50% with an average of 6.60%. Based on the data, I have concluded a capitalization rate for the subject property of 6.00 percent. This is well supported by the local data, the Korpacz Report, recent local market participant interviews, and is considered reasonable based on the subject’s proposed use as well as the fact that the subject will be brand new construction. Valuation Indication Via Direct Capitalization The indicated value of the subject property via direct capitalization is calculated as follows:

Net Operating Income = $437,474 = $7,291,233 Capitalization Rate 0.060

Rounded To: $7,290,000

SEVEN MILLION TWO HUNDRED NINETY THOUSAND DOLLARS

$7,290,000*

*This is the value of the real estate only. It does not include any Furniture, Fixtures and Equipment (FF&E), Business Enterprise or Personal Property which includes the tenant’s decorating FF&E and the $500,000 working capital the tenant has provided into the overall construction fund.


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RECONCILIATION OF THE PROSPECTIVE MARKET VALUE

“AS COMPLETE”

The subject’s Prospective Market Value “As Complete” of the Leased Fee Interest was projected through the three traditional approaches to value. The conclusions from the approaches are summarized below:

Cost Approach $5,900,000Sales Comparison Approach $7,500,000Income Capitalization Approach $7,290,000

Cost Approach The cost approach to value was utilized since the proposed subject will be a new property upon stabilization. As can be seen, the cost approach opinion is lower than the other two approaches indicating that the proposed subject is a financially feasible development and should be constructed as planned. The cost approach is given the least weight because buyers and sellers in determining market value typically utilize the Income Capitalization and Sales Comparison Approaches. Sales Comparison Approach Within this approach, comparable sales were included for analysis. These sales were the most recent available and all involved bar/tavern properties. The sales were compared to the subject on a price per square foot basis and adjustments were made to account for dissimilarities. The sales utilized in this analysis provide a good indication of what investors are willing to pay for this type of property. In the final analysis, this approach is given secondary consideration as support for the Income Capitalization Approach. Income Capitalization Approach The Income Capitalization Approach is given the most consideration in this analysis. Since the subject is leased and the prospective market value “as complete” is the leased fee interest, this approach is the best indicator of value. The vacancy and expense projections were based on comparable properties. The overall capitalization rate was derived from six closed sales, local market participant interviews, and a national publication. Overall, the parameters utilized in this approach were reasonably supported through the market data. In the final analysis, this approach is given primary consideration. Reconciliation and Conclusion The Sales Comparison Approach and the Income Capitalization Approach are within 2.8 percent and indicate very consistent results. In the final analysis, I have placed more weight on the Income Approach.


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Therefore, based on all the information discovered and considered herein, and subject to the assumptions and limiting conditions outlined within the report, the Prospective Market Value “As Complete” of the Leased Fee Interest, as of December 1, 2018 is as follows:

SEVEN MILLION THREE HUNDRED THOUSAND DOLLARS

$7,300,000 (1) (2) (3)

1. This is the value of the real estate only. It does not include any Furniture, Fixtures and Equipment (FF&E), Business Enterprise or Personal Property.

EXTRAORDINARY ASSUMPTION: an assignment - specific assumption, as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions for trends; or the integrity of data used in an analysis. (Source: Uniform Standards of Professional Appraisal Practice, 2018 – 2019 Edition, Effective January 1, 2018)





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ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal report has been made with the following general assumptions:

1. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.

2. The property is appraised free and clear of any or all liens and encumbrances unless

otherwise stated in this report. 3. Responsible ownership and competent property management are assumed unless

otherwise stated in this report. 4. The information furnished by others is believed to be reliable. However, no

warranty is given for its accuracy. 5. All engineering is assumed to be correct. The plot plans and illustrative material in

this report are included only to assist the reader in visualizing the property. 6. It is assumed that there are no hidden or unapparent conditions of the property,

subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

7. It is assumed that there is full compliance with all applicable federal, state, and local

environmental regulations and laws unless otherwise stated in this report. 8. It is assumed that all applicable zoning and use regulations and restrictions have been

complied with, unless nonconformity has been stated, defined, and considered in this appraisal report.

9. It is assumed that all required licenses, certificates of occupancy consents, or other

legislative or administrative authority from any local, state, or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value opinions contained in this report are based.

10. Any sketch in this report may show approximate dimensions and is included to assist

the reader in visualizing the property. Maps and exhibits found in this report are provided for reader reference purposes only. No guarantee as to accuracy is expressed or implied unless otherwise stated in this report. No survey has been made for the purpose of this report.

11. It is assumed that the utilization of the land and improvements is within the

boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report.


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12. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment.

The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. The appraiser’s value opinions are predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report.

No responsibility is assumed for any environmental conditions, or for any expertise

or engineering knowledge required to discover them. The appraiser’s descriptions and resulting comments are the result of the routine observations made during the appraisal process.

13. Unless otherwise stated in this report, the subject property is appraised without a

specific compliance survey having been conducted to determine if the property is or is not in conformance with the requirements of the Americans with Disabilities act. The presence of architectural and communications barriers that are structural in nature that would restrict access by disabled individuals may adversely affect the property's value, marketability, or utility.

14. The proposed improvements are assumed to be completed in a good workmanlike

manner. 15. Neither Valuation Consultants, nor any of its employees has a financial interest in

the property appraised. 16. The fee for this report is not contingent upon the value reported.

17. The appraiser assumes that there are no hidden or unapparent conditions of the

property, subsoil, or structures that would render it more or less valuable. The appraiser assumes no responsibility for such conditions, or for engineering, which might be required to discover such factors.


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Extraordinary Assumptions EXTRAORDINARY ASSUMPTION: an assignment - specific assumption, as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions. Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions for trends; or the integrity of data used in an analysis. (Source: Uniform Standards of Professional Appraisal Practice, 2018 – 2019 Edition, Effective January 1, 2018)





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CERTIFICATION

I certify that, to the best of my knowledge and belief: The facts and data reported in this appraisal report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the assumptions and limiting conditions stated in this appraisal report, and are personal, unbiased professional analyses, opinions and conclusions.

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

I have not performed services as an appraiser, or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

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

Keith Harper, MAI made a personal visit of the property that is the subject of this report.

My analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the 2018-2019 Edition of the Uniform Standards of Professional Appraisal Practice (USPAP) as published by the Appraisal Foundation.

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

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

No one provided significant real property appraisal assistance to the person signing this report.

The appraiser certifies that his applicable state registrations/certifications have not been revoked, suspended, canceled, or restricted.

As of the date of this report, Keith Harper, MAI, have completed the continuing education program for Designated members of the Appraisal Institute.

VALUATION CONSULANTS

__________________________ Keith Harper, MAI Certified General Appraiser License Number A.0000604-CG State of Nevada Expires: March 31, 2020

ADDENDA

SUBJECT PROPERTY INFORMATION FROM VARIOUS ON-LINE SOURCES

CONSTRUCTION BUDGET

CLIENT: Treehouse JOB TYPE: Restaurant/Bar JOB ADDRESS: 1018 Main St 18-Jan-18

"Exhibit A" Edward Homes Inc.

Preliminary Estimate

ITEM

VERTICAL CONSTRUCTION 1 ARCHITECTUAL

a. copies 1,000.00 b. architect 120,000.00 c. structural engineer 17,000.00 d. M,P,E Engineer 24,000.00 c. civil engineer 25,000.00 e. soils engineer 5,000.00 f. kitchen consultant 12,500.00 g. dry utility consultant $4,500

2 SURVEY a. ff certs, pad corners 10,000.00

3 SITE WORK a. padwork 32,000.00 b. compaction testing & 3rd party testing 11,000.00 c. water 22,000.00 d. sewer 17,000.00 e. paving f. curb & gutter 15,000.00 e. striping and signage 1,500.00 g. fire water 14,000.00 h. demo existing building 74,000.00

4 PERMITS a. building permit 18,000.00 b. plan check 5,000.00 c. dust and swpp permits 2,000.00 d. third party inspections/vertical 13,000.00 e. SNWA Fees 29,000.00 f. sewer fees city of las vegas 56,000.00

5 INSURANCE/BONDS b. contractors general liability 12,000.00 c. builders risk/fire 8,000.00

6 SET UP

a. toilet 1,200.00 b. temporary electric 2,600.00 c. temporary fencing 1,500.00 d. temporary water 1,200.00 e. temporary trash chute f. Reachlift $8,000

7 UTILITIES a. Electric Fees $10,000 b. water city Fees c. sewer city Fees

8 FOUNDATION a. concrete pad 64,000.00 b. spoils haul off/grade 1,800.00 c. gypcrete 11,000.00

10 FRAMING a. labor & material 130,000.00 b. Steel stairs & structural posts 74,000.00

11 PLUMBING a. labor & materials 148,000.00 b. sprinklers & fire alarms 48,000.00

12 A/C & HEATING a.labor & materials 130,000.00

14 ELECTRICAL a. labor & materials 160,000.00 b. sound system c. special lighting/ light fixtures

17 WINDOW/DOORS a. windows aluminum & storefront 57,000.00 b. garage doors

18 ROOFING

a. materials & labor, 18,000.00 19 STUCCO/SIDING

a. labor & materials 24,000.00 b. masonry block exterior walls 156,000.00 c. balcony railings/ Roof deck $64,000

20 POWER TRENCH a. power, phone, cable, 12,000.00

21 INSULATION a.labor & materials 14,000.00

22 DRYWALL a. labor & materials 67,000.00 b. acoustic ceiling/acoustic drywall 17,000.00 c. kitchen FRP 8,000.00

23 INT. FINISH CARPENTRY/EXT DOORSa. material 24,000.00 b. labor 11,000.00 c. Interior Staircases

24 PAINTING a. labor & materials 55,000.00

25 CABINETS/ COUNTERTOPS a. labor & materials 21,000.00 c. bars & countertops 80,000.00

27 APPLIANCES a. kitchen/ bar equipment/install 220,000.00 b. trash chute c. labor

28 FLOORING a. ceramic tile & carpet 115,000.00 b. balcony decking waterproofing

29 FINAL CLEAN a. clean for move in 6,000.00

30 COMMON LABOR a. miscellaneous 5,000.00

31 TRASH REMOVAL a. labor & dumpsters 18,000.00

32 ELEVATOR a. labor & material 63,000.00

33 CONCRETE FLATWORK 63,000.00 a. driveway approach, sidewalks, patios

34 CONTRACTOR OVERHEAD/GENERAL CONDITIONS 65,000.00

35 LANDSCAPING/POOL a. exterior 30,000.00 b. pool $70,000 c. tree $111,000

36 PERIMETER BLOCK WALL 18,000.00 37 TRASH ENCLOSURE 8,000.00 38 SIGNAGE

a. interior b. exterior pylon/monument

39 CONSTRUCTION COSTS 2,759,800.00

40 CONTRACTOR FEES 160,000.00 41 CONTINGENCY $300,000

VOUCHER CONTROL $15,000 TOTAL CONSTRUCTION COSTS 3,219,800

Tenant Interior Decoration/FFE $200,000 Tenant Working Capital $500,000

Cost of Funds $160,000 IR $260,000

Land $600,000 TOTAL PROJECT COSTS 4,939,800

TREEHOUSE LAS VEGAS VISUAL SHOWCASE PACKAGE

LETTER OF ENGAGEMENT

QUALIFICATIONS OF THE APPRAISER

QUALIFICATIONS OF KEITH HARPER, MAI I, Keith Harper, MAI graduated with a Bachelor of Arts from the University of Texas at Austin. I am currently President/Owner of Harper Appraisal, Inc. a Nevada corporation dba Valuation Consultants located at 4200 Cannoli Circle, Las Vegas, Nevada, 89103-5404. My direct phone number is (702) 222-0018, ext. 11 and the fax number is (702) 222-0047. My email address is [email protected]. A partial resume of specific qualifications is outlined as follows: Professional Memberships and Licenses Held Designated Member of the Appraisal Institute #9262 Certified General Appraiser - Nevada, License Number A.0000604-CG, Expires March 31, 2020 Las Vegas Chapter of the Appraisal Institute 1994 – Vice President 1995 – President 1995 – Regional Representative 2010 – Nominating Committee Latter Part of 2010 – Government Relations Chair 2011 to 2015 – Government Relations Chair and/or Government Relations Committee Nevada Department of Taxation Member, State Board of Equalization – Appointed in April 2013; Term Ended on October 31, 2017 University of Nevada – Las Vegas Spring Semester 2011 – Part Time Instructor; RE 333 Real Estate Valuation Spring Semester 2012 – Part Time Instructor; RE 333 Real Estate Valuation Spring Semester 2013 – Part Time Instructor; RE 333 Real Estate Valuation Formal Education University of Texas at Austin, B.A., August 1984, Minor in Business Administration Appraisal Education

1985 The Appraisal Institute’s Course 1A1 – R.E. Appraisal Principles 1986 The Appraisal Institute’s Course 1A2 – Basic Valuation Procedures 1986 The Appraisal Institute’s Course 1BA – Cap Theory & Tech, Part A 1987 International Right of Way Association – The Appraisal of Partial Acquisitions 1987 The Appraisal Institute’s Course 1BB – Cap Theory & Tech, Part B 1987 International Right of Way Association – Skills of Expert Testimony 1987 International Right of Way Association – Easement Valuation 1988 The Appraisal Institute’s Course 022 – Valuation Analysis and Report Writing 1989 The Appraisal Institute’s Course SPP – Standards of Professional Practice 1990 International Right of Away Association – Legal Aspects of Easements 1990 The Appraisal Institute’s Course 2-1 – Case Studies in R.E. Valuation

1992 The Real Estate Exam Center’s Course – Nevada Appraisal Law 1993 Bank of California – Commercial Fee Panel Seminar 1993 The Appraisal Institute’s Course I410 – Standards of Professional Practice, Part A 1993 The Appraisal Institute’s Course II420 – Standards of Professional Practice, Part B 1994 International Right of Way Association Course 101 – Law (Principles of Land Acquisition,

Law Segment) 1994 The Appraisal Institute’s Program – Cash Equivalency 1995 The Appraisal Institute Program – Marketing for Appraisers 1997 Commercial Investment Real Estate Institute – CI 101: Financial Analysis for Commercial

Investment Real Estate 1997 The Appraisal Institute’s Program – Litigation Appraisals and Expert Testimony: Mock Trial 1997 The Appraisal Institute’s Program R600 – The FHA Appraisal 1997 The Appraisal Institute’s Program – Understanding and Using DCF Software 1998 The Appraisal Institute’s Program R6127 – Historic and Estate Homes 1999 The Appraisal Institute’s Course II430 – Uniform Standards of Professional Appraisal

Practice (USPAP) Part C 2000 The Appraisal Institute’s Course #A7478 – Attacking and Defending an Appraisal in

Litigation 2000 Nevada Appraisal Seminars – Appraising Atypical Properties 2001 The Appraisal Institute’s Program – Condemnation Appraising: Basic Principles and

Applications 2002 Course Sponsored by Gregory A. Hoefer, MAI and Approved for Continuing Appraisal

Education by The Nevada Commission of Appraisers – National USPAP 2002 Update – A7453ES 2002 The Chicopee Group – Introduction to Commercial Appraising 2002 The Appraisal Institute’s Online Course – Internet Search Strategies for R.E. Appraisers 2002 The Appraisal Institute’s Program – Appraisal Consulting 2002 The Appraisal Institute’s Course SE700 – The Appraiser as an Expert Witness: Preparation

and Testimony 2003 United States Department of the Interior BLM Workshop – SNPLMA Appraisal Compliance

Nevada Course Code A7681 2004 CLE International – Eminent Domain Conference 2004 Institute for Real Estate and Appraisal Studies – 7-Hour National USPAP Course 2005 CLE International – Eminent Domain Conference 2006 The Appraisal Institute’s Course 1400 – 7-Hour National USPAP Update 2006 Institute for Real Estate and Appraisal Studies – Highest and Best Use 2006 The Appraisal Institute’s Online Course - Analyzing Operating Expenses 2007 The Appraisal Institute’s Online Course 420 - Business Practice and Ethics 2007 The Appraisal Institute’s Program Online Course - Analyzing Distressed Real Estate 2007 The Appraisal Institute’s Online Course - Condominiums, Co-ops and PUDs 2007 The Appraisal Institute’s Online Course - Cool Tools: New Technology for Real Estate

Appraisers 2007 The Appraisal Institute’s Online Course – What Commercial Clients Would Like Appraisers

to Know 2007 The Appraisal Institute’s Online Course - Scope of Work: Expanding Your Range of

Services 2007 The Appraisal Institute’s Online Course – Apartment Appraisal, Concepts & Applications

2008 Las Vegas Chapter of the Appraisal Institute’s Seminar – Spotlight on Common Errors and Confidentiality USPAP Issues

2008 The Appraisal Institute’s Course 1400 – 7-Hour National USPAP Update 2010 The Appraisal Institute’s Seminar – Appraisal Policy Changes: Challenges & Opportunities 2010 The Appraisal Institute’s Online Course - Business Practices and Ethics 2010 The Appraisal Institute’s Online Course - Supervising Appraisal Trainees 2010 The Appraisal Institute’s Online Course - Eminent Domain and Condemnation 2010 The Appraisal Institute’s Online Course – Site Use and Valuation Analysis 2010 The Appraisal Institute’s Course – 7-Hour National USPAP Update 2010 The Appraisal Institute’s Seminar – Appraisal Regulatory Update 2010 Coalition of Appraisers in Nevada - Legislative Update 2011 Las Vegas Market Symposium 2011 2012 The Appraisal Institute’s Course – 7-Hour National USPAP Update 2012 The Appraisal Institute’s Course – Fundamentals of Separating Real Property, Personal

Property, and Intangible Business Assets

2013 Las Vegas Market Symposium – November 7, 2013 2014 The Appraisal Institute’s Course – 7-Hour National USPAP Update 2014 The Appraisal Institute’s Online Course – Comparative Analysis 2014 The Appraisal Institute’s Online Course – Data Verification Methods 2014 The Appraisal Institute’s Online Course – Business Practices and Ethics

2015 Las Vegas Market Symposium – November 5, 2015 2016 The Appraisal Institute’s Course – 7-Hour National USPAP Update 2016 The Appraisal Institute’s Online Course – Thinking Outside the Form 2016 The Appraisal Institute’s Online Course – The Discounted Cash Flow Model: Concepts,

Issues, and Applications 2016 The Appraisal Institute’s Online Course – Using Your HP12C Financial Calculator 2017 The Appraisal Institute’s Online Course – Forecasting Revenue 2018 The Appraisal Institute’s Course – 7-Hour National USPAP Update

Experience In 1985, I started my career as a commercial appraiser when I joined Trans-Texas Land Services in Austin, Texas. During 1985 to 1988, I was associated with this firm that specialized in the field of eminent domain. I was involved in their commercial appraisal and right-of-way acquisition departments. I was then associated for four years from 1988 to 1992 as a Vice President of McCluskey-Jenkins Appraisal, Inc. also in Austin. During my employment at this firm, I was involved in the analysis and valuation of commercial real estate. In March of 1992, I moved to Las Vegas and started an office as one of the three owners/partners of Morgan, Beebe & Harper, Inc. which had been legally incorporated in The State of Texas as of the effective date of February 20, 1992. This partnership was ended in late 1997, but this Texas Corporation and partnership was not legally dissolved until Articles of Dissolution were filed with The State of Texas Secretary of State on January 12, 2000. I filed Articles of Incorporation with the State of Nevada Secretary of State on December 28, 1999 in order to form a new Nevada Corporation known as Morgan, Beebe & Harper of Nevada, Inc. I am the 100 percent shareholder of this corporation. On August 28, 1998, I formed a new partnership and we filed Articles of Organization with the State of Nevada Secretary of State that formed Valuation Consultants, LLC, a Nevada limited liability company.

Valuation Consultants, LLC dba Snyder-Harper & Associates operated until this partnership was ended as of April 1, 2006. A legal Dissolution of Valuation Consultants, LLC was filed with the State of Nevada Secretary of State effective as of July 28, 2006. Since April 1, 2006 through December 31, 2012, I operated as the 100 percent owner of Morgan, Beebe & Harper of Nevada, Inc., a Nevada corporation dba Valuation Consultants. On January 1, 2013, Larry Snyder, MAI and I formed a new partnership, Harper-Snyder & Associates, LLC, a Nevada limited liability company. We operated under the legal entity of Harper-Snyder & Associates, LLC, a Nevada limited liability company dba Valuation Consultants until this LLC was dissolved on December 31, 2014. As of January 1, 2015, I am operating as the 100 percent owner of Harper Appraisal, Inc., a Nevada corporation dba Valuation Consultants. I have over 30 years of experience in the appraisal of a variety of commercial properties. Types of Properties Appraised/Services Provided Adult Use, Apartments, Condemnation (total and partial takes), Condominium Projects (High-Rise and Garden Style), Daycare Facilities, Gaming Resorts, Golf Courses, Health/Fitness Centers, Hotels, Industrial Properties, Leasehold/Leased Fee Interests, Litigation Support, Master Planned Communities (Residential and Commercial), Medical Offices, Motels, Office Buildings/Complexes, Residential Subdivisions, Retail Projects, Self-Storage Facilities, Taverns, Triple Net Properties, Vacant Land (all types). I assist companies in cases involving disputes arising from transactions involving real estate appraisals and estimated valuation opinions of real estate. I have been involved in various real estate litigations involving the application of proper appraisal standards such as FIRREA and USPAP. I help counsel evaluate real estate appraisal issues, identify key documents obtained during discovery and prepare for depositions and trial, and draft court filings. I have testified before the District Courts in Nevada and the Federal Bankruptcy Courts. I have also provided litigation consulting services on real estate appraisal matters to various parties throughout the State of Nevada. Clients Clients include banks, other lenders, insurance companies, attorneys and private parties. A list is available upon request.