Hemet City Council
May 28, 2024

23.B.

The Property is ideally suited for economic development in the Downtown Hemet Specific Plan area, which aligns with the City’s objectives. The current market conditions present a favorable opportunity for this acquisition.

The purchase price for the 204-208 E. Florida Avenue and 108 N. Harvard Street property has been negotiated to not exceed $1,500,000, which represents a reasonable market value. The property as assessed by Capital Realty Analysts is estimated to have a fee simple estate value of $1,545,000 as of April 30, 2024 in their report dated May 13, 2024. This acquisition is expected to be funded through General Fund Reserves which have a projected June 30, 2024 balance of $53 million.

The purchase price for the 222 E. Florida Avenue property has been negotiated to not exceed $350,000. The property as assessed by Capital Realty Analysts is estimated to have a fee simple estate value of $190,000 as of April 30, 2024 in their report dated May 20, 2024. This acquisition is expected to be funded through General Fund Reserves which have a projected June 30, 2024 balance of $53 million.

Although the negotiated purchase price for one property is below the appraised fair market value and the other is above, the appraised value is merely one measure of assuring a commensurate public benefit is received by the City. Staff recommends that the City Council find that both purchases serve a public purpose and provide tangible benefits to the community, as discussed below:

Economic Development: The purchases could stimulate local economic growth, attract new businesses, increase employment opportunities, and enhance the downtown area's vibrancy.

Community Revitalization: The acquisitions are part of a broader downtown revitalization aimed at improving property values, reducing blight, and enhancing the overall quality of life for residents.

Cultural and Recreational Facilities: The properties could serve a future use as cultural, educational, or recreational facilities, serving or complementing the existing cultural and recreational facilities in downtown like the theater.

Preventing Speculative Investment: Acquiring the parcels will assist in preventing speculative investments by private entities that have resulted in blight and vacant commercial parcels in downtown.

The appraisal reports are attached to this report.

STRATEGIC PLAN INTEGRATION:

GOAL TWO: ECONOMIC OPPORTUNITY
To ensure that Hemet is a hub, with access to quality jobs, shopping options, and a varied and sustained tax base.

Objective 1: Develop business practices that welcome new development by streamlining processes.

Objective 2: Provide resources for new businesses to enhance the customer service experience.

FISCAL IMPACT:

The City's General Fund has projected reserve balance of $53 million as June 30, 2024.

23.B.

ALTERNATIVE(S):

Provide alternate direction to the City Manager.

ATTACHMENT(S):

Attachment 1 - Resolution Approving Purchase of Property Attachment 2 - Letter from Hemet Theatre
Attachment 3 - 204-208 E Florida Avenue and 108 N Harvard Appraisal Attachment 4 - 222 E Florida Avenue Appraisal

23.B.

CITY OF HEMET RESOLUTION NO. 2024-XXX 1
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CITY OF HEMET

HEMET, CALIFORNIA
RESOLUTION NO. 2024-xxx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF HEMET, CALIFORNIA, APPROVING THE PURCHASE
OF REAL PROPERTY LOCATED AT 204-208 E. FLORIDA
AVENUE AND 108 N. HARVARD STREET (APN 443-323-
007) IN AN AMOUNT NOT TO EXCEED ONE MILLION
FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) AND
222 E. FLORIDA AVENUE (APN 443-232-009) IN AN

AMOUNT NOT TO EXCEED THREE HUNDRED FIFTY
THOUSAND DOLLARS ($350,000)
The City Council of the City of Hemet, California (hereafter referred to as the “City Council”) does resolve as follows:

WHEREAS, the City Council of the City of Hemet, California, desires to acquire the real property located at 204-208 E. Florida Avenue and 108 N. Harvard Street with APN443-323-007 and the real property located at 222 E. Florida Avenue (the “Property”); and
WHEREAS, the acquisition of the Property has been reviewed by the City Council and staff in accordance with the California Environmental Quality Act (“CEQA”) and the CEQA Guidelines, and it has been determined that the adoption of this resolution is exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HEMET FINDS, DETERMINES, ORDERS AND RESOLVES AS FOLLOWS:

SECTION 1. ACTIONS.

23.B.

CITY OF HEMET RESOLUTION NO. 2024-XXX 2
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(A) The City Council hereby approves the purchase of the Property located 204-208 E. Florida Avenue and 108 N. Harvard Street in an amount not to exceed ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000).
(B) The City Council hereby approves the purchase of the Property located at 222 E. Florida Avenue in an amount not to exceed THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000).
(C) The City Council authorizes the City Manager to approve additional expenditures in an amount not to exceed FIFTY THOUSAND DOLLARS ($50,000) for the reasonable and ordinary costs of the transaction.
(D) The City Manager is authorized to negotiate and execute all such documents which are necessary for the purchase of the Property, in a form approved by the City Attorney.

SECTION 2. CEQA FINDINGS - The City Council hereby finds that in accordance with the California Environmental Quality Act (“CEQA”) and the CEQA Guidelines, the adoption of this Resolution is exempt from CEQA pursuant to Section 15061(b)(3)
SECTION 3. EFFECTIVE DATE - This Resolution shall become effective on adoption.

23.B.

CITY OF HEMET RESOLUTION NO. 2024-XXX 3
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PASSED, APPROVED AND ADOPTED this 28th day of May, 2024. ____________________________
Joe Males, Mayor
ATTEST:
_____________________________
John Paul Maier, City Clerk

23.B.

CITY OF HEMET RESOLUTION NO. 2024-XXX 4
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State of California )
County of Riverside )
City of Hemet )
I, John Paul Maier, City Clerk of the City of Hemet, do hereby certify that the foregoing resolution was adopted by the Hemet City Council on the 28th day of May, 2024, and was passed by the following vote:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:
_____________________________
John Paul Maier, City Clerk

23.B.

Dear Hemet Mayor, City Council and City Manager,
The Hemet Theatre respectfully requests the City of Hemet pursue the acquisition of the two adjacent parcels to the Hemet Theatre in an effort to revitalize the downtown. These two properties have not been available for purchase simultaneously for multiple decades. Along with the theatre property and parking in the rear, this block is key to revitalizing the downtown and could serve as the spark.

John Loomis of Thirtieth Street Architects, a renowned
historical architect currently involved with the Lido Theatre in Newport Beach and the Hollywood Theatre has been hired by the Hemet Theatre to design a renovation and expansion of the Theatre to expand seating and performance space.

We believe embracing this unique timing of property availability, the forward-looking Mayor, Council and City staff, and
successful Theatre Board and General Manager, will make great things happen for Hemet.

Our board welcomes collaboration with the City of Hemet.

Andrew Kotyuk
Board Vice President
951-658-5950

23.B.

±14,514-ft² Multi-tenant Commercial Property
204-208 E Florida Avenue & 108 N Harvard Street,
Hemet, CA 92543
Appraisal Report
Market Value Estimate
Fee Simple Estate – As-Is
Prepared For: Date of Appraisal Report:

The City of Hemet May 13, 2024
C/o Mr. Steven Pacifico Graham, Esq. Date of Value:

Cole Huber LLP April 30, 2024
2855 East Guasti Road CRA File #: 24-2540
Ontario, CA 91761

23.B.

May 13, 2024
The City of Hemet
C/o Mr. Steven Pacifico Graham
Cole Huber LLP
2855 East Guasti Road
Ontario, CA 91761
RE: A Market Value Estimate of the Fee Simple Estate, As-Is, of a ±14,514-ft² Commercial Property Located at 204-208 E Florida Avenue and 108 N Harvard Street, Hemet, CA 92543. Also Known as Riverside County Assessor’s Parcel Number 443-232-007.

Mr. Graham:

With client and property owner authorization, the following is a prepared Appraisal Report presenting a market value estimate opinion of the subject property's fee simple estate, as-is, on a date of value of April 30, 2024. The Appraisal Report utilizes three valuation models, and the analysis and subsequent value estimates presented in the Appraisal Report adhere to the appraisal guidelines established by the 2024 Uniform Standards of Professional Appraisal Practice. The depth and scope of reporting are consistent with the intended use of the Appraisal Report.

The subject property is a ±15,682-ft² commercially zoned parcel located in the Downtown Village District of Hemet, CA. The site is improved with a ±14,514-ft², single-story, commercial building originally constructed around 1928. As of the date of value, the concrete masonry building is 100% occupied by two tenants. The site has access from the east side of N Harvard Street and the north side of E Florida Avenue. The property is in average condition with an effective age of ±30 years and a remaining economic life of ±25 years. Based on the age and history of the subject property, the structure is considered to have historical significance and would likely be preserved by the community.

The title to the property is vested with Hemet Temecula LLC. The current owner or a related entity acquired the property in June 2005 for a recorded $875,000. The property has a 2023 assessed value of $1,172,297 or ±$80.77 PSF. As of the date of value, the subject property is an active listing with Rosenthall & Excell Commercial Real Estate Services for an asking price of $1,500,000. On the date of value, the property is considered readily marketable.

The requested value estimate is the fee simple estate in the as-is condition on a date of value of April 30, 2024. The property owner supplied copies of the leases only. For this Appraisal Report, I have applied the cost, sales comparison, and income models in this appraisal assignment. The scope of the analysis is appropriate in relation to the significance of the appraisal problem.

23.B.

May 13, 2024

It is my objective that the presented appraisal analysis, along with the opinions and conclusions, be those of a disinterested third party. The Appraisal Report was performed in conformance with acceptable principles and techniques in the valuation of real property in accordance with applicable California State law. All appropriate data deemed pertinent to solving the appraisal problem was collected, confirmed, and reported in compliance with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics of the Appraisal Institute.

I have based this Appraisal Report on current economic conditions as of the date of value. The report identifies the subject property and the market area. It explains the market data and analysis, leading to my estimates of value. It cannot be completely understood without the Assumptions and Limiting Conditions section of this report. The intended users of this report should read this section before relying on any information or analysis presented in this report.

This report is subject to the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP).

Based on the available data, it is my opinion that the requested fee simple estate value estimate of the subject property, as-is, on a date of April 30, 2024, is as follows:

I have no personal interest in the subject property, either past, present, or contemplated, and I certify that my employment was not dependent upon producing a particular value or value within a given range. No fee received or receivable in the future for the employment of services is in any way contingent on the opinions reported herein.

If the intended users of this report have any questions concerning the conclusions or analysis presented, please contact me directly, and thank you for the opportunity to be of service.

Respectfully submitted,
Capital Realty Analysts, Inc
James Dingman
State Certification No.: AG025869
Expiration Date: March 2, 2025
Market Value Estimates DOV Cost Approach Sales Comparison Income Approach Final Value As-Is 30-Apr-24 $1,690,000 $1,485,000 $1,225,000 $1,545,000 Marketing/Exposure DOV Exposure Time Marketing Time
Market Value, As-Is 30-Apr-24 12 Months 6-12 Months

23.B.

Table of Contents
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SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS ............................................................................................ 5 SCOPE OF THE APPRAISAL.................................................................................................................................................. 7 APPRAISAL PROBLEM....................................................................................................................................................................................7 SPECIAL ASSUMPTIONS .................................................................................................................................................................................8 HISTORY OF THE SUBJECT PROPERTY.........................................................................................................................11 LEGAL DESCRIPTION ..........................................................................................................................................................12 REGIONAL ANALYSIS – SAN JACINTO VALLEY, CA.....................................................................................................13 CITY ANALYSIS – HEMET, CA............................................................................................................................................17 NEIGHBORHOOD – MARKET ANALYSIS........................................................................................................................20 SITE ANALYSIS ......................................................................................................................................................................26 IMPROVEMENT DESCRIPTION.........................................................................................................................................33 HIGHEST AND BEST USE....................................................................................................................................................43 APPRAISAL PROCESS ..........................................................................................................................................................47 COST APPROACH..................................................................................................................................................................49 DATA POINT 1 – LAND SALE..................................................................................................................................................................... 52 DATA POINT 2 – LAND SALE..................................................................................................................................................................... 54 DATA POINT 3 – LAND SALE..................................................................................................................................................................... 56 DATA POINT 4 – LAND SALE..................................................................................................................................................................... 58 DATA POINT 5 – LAND SALE..................................................................................................................................................................... 60 CONCLUSION – AS-IF-VACANT.................................................................................................................................................................. 65 CONCLUSION AS-IS ..................................................................................................................................................................................... 71 SALES COMPARISON APPROACH ....................................................................................................................................72 DATA POINT 1 – BUILDING SALE ............................................................................................................................................................. 75 DATA POINT 2 – BUILDING SALE ............................................................................................................................................................. 78 DATA POINT 3 – BUILDING SALE ............................................................................................................................................................. 81 DATA POINT 4 – BUILDING SALE ............................................................................................................................................................. 84 DATA POINT 5 – BUILDING SALE ............................................................................................................................................................. 87 CONCLUSION – AS-IS .................................................................................................................................................................................. 93 INCOME APPROACH ............................................................................................................................................................95 CONCLUSION – AS-IS ................................................................................................................................................................................100 RECONCILIATION AND FINAL VALUE ESTIMATES ................................................................................................. 101

23.B.

Summary of Important Facts and Conclusions
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Client: The City of Hemet
Intended Users: Client, city council, city attorney
Property Description: Multi-tenant commercial property
Location: 204-208 E Florida Avenue & 108 N Harvard Street, Hemet, CA 92543
Location Coordinates: 33°44’52.14"N 116°58’12.71"W
Size: ±0.36 acres ±15,682-ft²
Elevation/Flood Zone: 1,601’ above sea level Zone X (shaded) APN: 443-232-007, Riverside County, CA
Census Tract: 43401/2033
Type of Report: Appraisal Report
Purpose of the Appraisal: Market value estimates of the fee simple estate, as-is Intended Use: The intended use of this appraisal is for potential acquisition and internal decision-making purposes.

Date of Valuation Date of Inspection Date of Report
April 30, 2024 April 30, 2024 May 13, 2024
Owner of Record: Hemet Temecula LLC
Ownership History: The current owner or a related entity acquired the property in June 2005 for a recorded $875,000. The property is
currently an active listing for $1,500,000.

Subject Property

23.B.

Summary of Important Facts and Conclusions
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Existing Improvements: ±14,514-ft² multi-tenant commercial building Proposed Improvements: None
Topography: Level, at street grade
Zoning: DV, Downtown Village, City of Hemet SP 16-001
Land Use: Mixed Use
Utilities: All available
Easements & Encumbrances: No title report for the subject property was presented for review. This report assumes there are no atypical
easements, conditions, title exceptions or encumbrances that would have an adverse impact on the marketability, functional utility, or sale of the subject site. A legal opinion could be obtained from a qualified title expert as to the actual marketability of the subject’s title.

Highest and Best Use: To remain as-is
Final Value Estimate: Based on the available data, it is my opinion that the requested value estimates of the subject property, as-is, on a date of value of April 30, 2024, are as follows:

Picture 1 – Viewing east across N Harvard Street to the subject property Market Value Estimates DOV Cost Approach Sales Comparison Income Approach Final Value As-Is 30-Apr-24 $1,690,000 $1,485,000 $1,225,000 $1,545,000 Marketing/Exposure DOV Exposure Time Marketing Time
Market Value, As-Is 30-Apr-24 12 Months 6-12 Months

23.B.

Scope of the Appraisal
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Appraisal Problem
The subject property is a ±15,682-ft² commercially zoned parcel located in the Downtown Village District of Hemet, CA. The site is improved with a ±14,514-ft², single-story, multi-tenant commercial building originally constructed in 1928. As of the date of value, the concrete masonry building is 100% occupied by two tenants. The property is considered physically stabilized. The site has access from the east side of N Harvard Street and the north side of E Florida Avenue. The property is in average condition with an effective age of ±30 years and a remaining economic life of ±25 years.

The title to the property is vested with Hemet Temecula LLC. The current owner or a related entity acquired the property in June 2005 for a recorded $875,000. The property has a 2023 assessed value of $1,172,297 or ±$80.77 PSF. As of the date of value, the subject property is an active listing with Rosenthall & Excell Commercial Real Estate Services for an asking price of $1,500,000. On the date of value, the property is considered readily marketable.

The client has requested the value estimate of the fee simple estate in the as-is condition. The intended use of this appraisal report is for potential acquisition and internal decisions regarding the subject property. On April 30, 2024, a property inspection occurred, which consisted of an interior and exterior walk-through of the site and building. For this Appraisal Report, I have applied the cost, sales comparison, and income valuation models in the appraisal assignment.

The scope of the analysis is appropriate in relation to the significance of the appraisal problem.

It is my objective that the presented appraisal analysis, along with the opinions and conclusions, be those of a disinterested third party. The Appraisal Report was performed in conformance with acceptable principles and techniques in the valuation of real property in accordance with applicable California State law. All appropriate data deemed pertinent to solving the appraisal problem was collected, confirmed, and reported in compliance with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics of the Appraisal Institute. This report is subject to the requirements of the Code of Professional Ethics and Uniform Standards of Professional Appraisal Practice of the Appraisal Institute.

Scope of Work
In preparing the appraisal, I performed the following steps and applied these special assumptions and limiting conditions:

Intended Users: Client, legal counsel, and city council Intended Use: The intended use of this appraisal is for potential acquisition and internal decision-making purposes.

Inspection: The physical inspection occurred on April 30, 2024.

Information: I have gathered information on land sales, building costs, comparable property sales, and yield rates in the marketplace.

I have supplemented the analysis as necessary with marketbased information.

Confirmation: I have confirmed all comparable data points used in this analysis with parties involved in the related transaction.

23.B.

Scope of the Appraisal
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Analysis: I have analyzed the researched data and applied the cost, sales comparison, and income approach models to arrive at my
opinion of market value for the subject property.

Special Assumptions

1. Given that the subject property is ±96 years old and no soils report was provided, the valuation herein is based solely on a physical inspection without the benefit of a detailed,
professional assessment. Such an inspection could reveal critical issues regarding the building’s safety, habitability, and structural integrity that were not apparent during the initial appraisal inspection.

Effective Age and Economic Life: The estimated effective age and remaining economic life of the building are derived from a visual inspection and an evaluation of its functional utility. This assessment is inherently subjective and could be refined or altered with additional information about the physical
condition of the building.

Compliance with Modern Standards: Originally constructed according to the building codes and standards of its time, the property likely does not meet today's more stringent safety and efficiency requirements. Significant updates and
renovations may be necessary to bring the property into compliance with current building regulations, enhancing its functionality and safety.

Recommendation for Professional Inspection: It is strongly recommended that a licensed professional be engaged to
conduct a comprehensive inspection of the property. This inspection should thoroughly assess the building's condition, including its seismic integrity, and identify any necessary repairs or updates. Such a professional evaluation is essential to fully understand and mitigate potential risks associated with the property’s age and construction.

Assumptions and Limitations: The conclusions of this
valuation assume the absence of any unusual physical or hazardous conditions that could impact the property’s value. It is also assumed that there are no toxic or hazardous materials present. Given that the appraiser is not qualified to detect hazardous materials, conducting environmental assessments is advisable to verify these assumptions and ensure a complete understanding of the property’s condition.

23.B.

Scope of the Appraisal
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Reservation of Rights: I reserve the right to update this analysis and the value conclusions should additional
information be provided in the future, particularly if it pertains to the client's needs concerning this date of value.

This reservation ensures that the valuation is conducted with due diligence, recognizing the limitations of the initial inspection and the necessity of further professional evaluation to protect the interests of all parties involved.

2. An environmental site assessment was not made available for this analysis. I am not qualified to detect hazardous waste or toxic material. Any comments that might suggest the
possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous wastes or toxic material. Such determination requires investigation by a qualified expert in the field of environmental assessment.

3. Cultural and archaeological artifacts for the subject property were not made available for review. This analysis assumes there are no cultural or archaeological impacts associated with the subject property that would impact the utility,
marketability, or market value estimate of the subject
property.

Hypothetical Conditions: None
Extraordinary Assumptions: None

23.B.

Scope of Work – Definitions
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Market Value
The most probable price that 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:

Ø Buyer and seller are typically motivated;
Ø Both parties are well informed or well advised, and acting in what they consider their best interests;
Ø A reasonable time is allowed for exposure on the open market; Ø Payment is made in terms of cash in U.S. dollars or in terms of financial arrangement comparable thereto; and
Ø 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.1 Fee Simple Estate
“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.”2
Leased Fee Estate
“An ownership interest held by a landlord with the rights of use an occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease.”3
Leasehold Estate
“The interest held by the lessee (tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.”4 Market Rent
“The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs)."5
1 [Title XI, FIRREA, 34.42 (f)]
2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 3 Ibid 4 Ibid
5 Ibid

23.B.

Introduction – Description of the Subject Property
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Picture 2 – Viewing across E Florida Avenue to the subject property The subject property is a ±15,682-ft² commercially zoned parcel located in the Downtown Village District of Hemet, CA. The site is improved with a ±14,514-ft², single-story, multi-tenant commercial building. The building is divided into two units, which are occupied by a party supply store and a bakery. It could be further divided into two additional spaces.

The Downtown Village District is Hemet's historic commercial core. The subject property is sandwiched between two notable historic resources within the city: the historic Hemet Theater, constructed in 1921 and one of the oldest movie theaters in the nation, and the Bank of Hemet building, constructed in 1918. The subject property was originally designed as a food storage and distribution building. Constructed in 1928, the building has been identified as a potentially historic-period structure.

As of the date of value, the concrete masonry building is 100% occupied by two tenants. The property is considered physically stabilized. The site has access from the east side of N Harvard Street and the north side of E Florida Avenue. The property is in average condition with an effective age of ±30 years and a remaining economic life of ±25 years.

The title to the property is vested with Hemet Temecula LLC. The current owner or a related entity acquired the property in June 2005 for a recorded $875,000. The property has a 2023 assessed value of $1,172,297 or ±$80.77 PSF. As of the date of value, the subject property is an active listing with Rosenthall & Excell Commercial Real Estate Services for an asking price of $1,500,000. The property has been on the market since July of 2023 with no change in pricing.

On the date of value, the property is considered readily marketable.

23.B.

Introduction – Description of the Subject Property
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Legal Description
Por Lots 12, 13 & 14 Blk 14 Mb 015/702 Sd Hemet
Assessor’s Parcel Number / Total Parcel Size
APN 443-232-007, Riverside County, CA ±0.36 acres / ±15,682-ft² Census Tract Number
43401/2033
Statement of Ownership
According to public records, the title to the subject property is vested with Hemet Temecula LLC.

Easements and Encumbrances
No title report for the subject property was presented for review. This report assumes there are no atypical easements, conditions, title exceptions or encumbrances that would have an adverse impact on the marketability, functional utility, or sale of the subject site. A legal opinion could be obtained from a qualified title expert as to the actual marketability of the subject’s title.

Zoning
According to the City of Hemet’s Planning Department, the subject property is zoned DV, Downtown Village, with a land use designation of Mixed Use.

Assessment and Taxation
In California, Proposition 13, ratified in June 1978,
regulates real property taxation. The tax rate is set at 1% of the assessed value, with an additional 0.25% for
previously voter-approved debts. For properties
acquired post-March 1, 1975, assessments hinge on
the market value at purchase. Assessed values have a
yearly inflation cap of 2%. The assessment of the
subject property, based on its condition and utility,
appears below market value but aligns with
Proposition 13's guidelines. The tax rate is consistent with similar properties in this section of Riverside
County, CA.

APN 443-232-007
Land Value $214,355
Improvement Value $957,942
Personal Property $0
Total $1,172,297
Basic Property Taxes %
Basic 1% (Prop 13/AB8) Taxes $11,722.97 1.00%
HEMET UNIFIED SCHOOL $1,406.76 0.12%
MWD EAST 1301999 $41.03 0.00%
MT SAN JACINTO JR COLLEGE $154.74 0.01%
Total Basic Property Taxes $13,325.50 1.14%
Fixed Charges %
FLD CNTL STORMWATER/CLEANWATER $15.74 0.00%
EMWD INFRASTRUCTURE AVAIL CHG $10.00 0.00%
MWD STANDBY EAST $6.94 0.00%
HEMET LANDSCAPE DIST 19 $43.24 0.00%
HEMET LTG DIST 19 $163.10 0.01%
Total Fixed Charges $239.02 0.02%
Total Taxes $13,564.52 1.16%

23.B.

Regional Analysis – San Jacinto Valley, CA
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San Jacinto Valley
The San Jacinto Valley is located in Riverside County ±80 miles east of Los Angeles, ±320 miles west of Phoenix, and ±105 miles north of the Mexican border. The valley is at the base of the San Jacinto Mountains to the east and the Santa Rosa Hills to the south. San Gorgonio Pass is to the north. The San Jacinto River traverses the valley which is a part of the larger Inland Empire region of Southern California. The valley includes two incorporated cities, Hemet and San Jacinto, along with the unincorporated communities of East Hemet, Gilman Hot Springs, Green Acres, Homeland, Soboba Hot Springs, Valle Vista, and Winchester.

History
For over 1,000 years, Serrano and Cahuilla tribes occupied the area near springs and streams which flowed from the San Jacinto Mountains. The first Spanish explorers entered the San Jacinto Valley in the early 1770s. In 1774 and 1775, Colonel Juan Bautista de Anza led two expeditions from Mexico, crossing the Colorado River at Yuma and continuing across the Borrego Desert and into Coyote Canyon. For a few years, the Valley was on the main overland route to California. In the early 19th century, the area became a cattle ranch for the Spanish Mission San Luis Rey, which is located in the modern-day city of Oceanside. The area was known as Rancho San Jacinto. When the missions were broken up by the Mexican government, the land was given to José Antonio Estudillo in 1842.

Subject Property

23.B.

Regional Analysis – San Jacinto Valley, CA
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In the late 1860s, the Estudillo family began selling portions of their San Jacinto ranch, and the first American settlers moved into the Valley. The lands sold by the Estudillo family eventually became the towns of San Jacinto and Hemet.

By the 1870s, the Valley's economy had moved from cattle ranching to horticulture. Early ranchers grew grain, then apricots, walnuts, peaches, olives and citrus production came to dominate the area. Turkey ranching and dairy farming became prominent in the 1930s. Besides agriculture, several local lime kilns added to the local economy before World War I.

Beginning around 1900, tourism began impacting the Valley. Natural hot springs along the north side of the Valley stimulated the development of several tourist resorts with hotels, guest cabins and bath houses. Gilman Hot Springs was the best-known resort. It was originally developed in the 1880s, and was acquired in 1913 by the Gilman family, who ran the resort for 65 years.

Soboba Hot Springs was also popular, with its Indian-style cottages scattered along the hillside.

Further west was Eden Hot Springs which, at its height in the 1940s, was 654 acres with a hotel, bathhouse, cottages, and swimming pool. All these resorts had closed by the late 1970s.

Today, the San Jacinto Valley maintains a reputation as a working-class, agricultural area, and it is considered a tourism destination in Southern California. The Valley has seen substantial residential development as a result of population growth and housing demand in the Inland Empire. There are extensive outdoor recreational opportunities within both mountainous and desert terrain along with several lakes. Additionally, the area hosts several seasonal and multicultural events such as the Ramona Pageant, the San Jacinto Agricultural Festival, and the Annual Soboba Inter-Tribal Pow Wow.

Demographics
According to the California Department of Finance, the population of the incorporated cities of the San Jacinto Valley is estimated at ±143,201, a 0.11% increase from the 2020 figure. Annual growth patterns in the area have generally been on an upward trend. The combined valley population is estimated to be ±195,000. The median age of valley residents is ±34 years.

The median income of the valley is ±$62,440, below the state median of ±$91,905 and the county median of ±$84,505. There is an average of ±3.23 persons per household with ±27% being under the age of 18. The average poverty rate in the San Jacinto Valley is ±16%.

Economy
Education and healthcare, retail, construction, tourism, and manufacturing are the main industries in the San Jacinto Valley. As of March 2024, the regional unemployment rate was reported to be 6.7%. Out of all the communities in the region, Hemet had the highest level of unemployment at 7.2%, and Winchester had the lowest level of unemployment at 4.1%. The region’s economy is heavily dependent upon tourism, and business closures resulting from the COVID-19 pandemic significantly increased unemployment. Most areas have reached prepandemic unemployment levels. The table below is an overview of the San Jacinto Valley’s labor market for March 2024.

23.B.

Regional Analysis – San Jacinto Valley, CA
Ó2024 Capital Realty Analysts Inc. Page 15 of 108
The number of total workers in the San Jacinto Valley is somewhat undefinable as illegal immigrants make up a large portion of the labor market. More than 70,000 illegal workers are estimated to be participating in Riverside County’s work force. In the San Jacinto Valley, this segment of the workforce is considered vital to the hospitality, construction, agricultural, and landscaping industries.

The San Jacinto Valley is located within District 5 of Riverside County. This district has launched several programs to address labor shortages. The programs offer monetary incentives for businesses to hire local residents, senior citizens, and veterans. One program, the District 5 Employer Connect Program, provides hiring assistance, retention support and up to $9,600 in wage reimbursement. The programs are administered through the Riverside County Workforce Development Board.

There are two active chambers of commerce in the valley: The Hemet San Jacinto Valley Chamber of Commerce and the Greater San Jacinto Valley Chamber of Commerce. Their goals are to attract, develop, promote, and retain local businesses through communication, networking, training, and program development and to influence public policy and advocate for legislative issues that promote local business and job growth.

Several areas within the San Jacinto Valley are opportunity zones where investors can receive tax benefits. East Hemet, Hemet, Homeland, Winchester, and San Jacinto make up several of the 49 opportunity zones throughout Riverside County. According to the Riverside County Office of Economic Development, one of the top priorities for the valley is to improve infrastructure availability for business attraction. Planned improvements to State Highway 79 will help provide an impetus for development in the region.

The one sector of the San Jacinto Valley economy that has continued growth despite the deep recession and slow recovery has been healthcare. Healthcare is an important economic driver in that much of the funding comes from insurance policies and federal programs like Medicare.

There are nine hospitals and clinics and a range of senior living communities in the neighboring cities of Hemet and San Jacinto. An increase of retirees in the region will continue to place demands on the healthcare network.

Agriculture, irrigated by the nearby Colorado River, has traditionally been an important component of the Valley’s economy. According to the Riverside County 2022 Agricultural Production report, annual crop production increased to $167 million, up from $166 million in 2021.

East Hemet 9,100 8,500 600 7.1%
Hemet 31,000 28,800 2,200 7.2%
Homeland 2,900 2,700 200 6.5%
San Jacinto 20,800 19,400 1,400 7.0%
Valle Vista 8,300 7,800 400 5.2%
Winchester 1,300 1,300 100 4.1%
San Jacinto Valley 73,400 68,500 4,900 6.7%
Area Name Labor Force Employed Unemployed Unemployment
Rate

23.B.

Regional Analysis – San Jacinto Valley, CA
Ó2024 Capital Realty Analysts Inc. Page 16 of 108
Riverside County is the 14th largest agricultural county in the state, with a gross value of $1.49 billion. Of the four agricultural districts within the county, the San Jacinto Valley accounted for 11% of countywide production in 2022.

Housing
Despite the regional economic damage caused by the COVID-19 pandemic, the housing market has held up fairly well. Median home prices in the San Jacinto Valley reached new highs during 2021 and 2022 driven by pandemic-induced demand for housing in less populated regions.

Despite the small region, the housing market is robust and provides lower priced homes in Riverside County. The median home price within the valley increased 9.2% year-over-year in April 2024. Within the San Jacinto Valley, Hemet saw the largest year-over-year increase in median home prices in April 2024. Winchester reported the only year-over-year decrease at -3.4%. As with many locations throughout California, the market remains undersupplied.

Conclusion
The San Jacinto Valley’s economy relies on a mix of industries. The region is projected to continue to grow rapidly (in relation to neighboring regions) over the next few decades as demand for affordable housing continues and the large Baby Boomer demographic is now entering retirement age. Some areas within the San Jacinto Valley have historically attracted retirees as it is relatively affordable. The region continues to enhance its appeal with multiple demographics by configuring planned housing developments ranging from upper middle to high-end offering amenities such as parks, community centers, and recreational facilities. With additional growth in the population and planned infrastructure improvements, the economy will continue to diversify.

As with other less populated areas, the San Jacinto Valley experienced a pandemic-induced real estate boom. In the post-pandemic economy, the San Jacinto Valley is positioned for a modest growth forecast as stabilization of the residential and labor markets continue to take hold.

San Jacinto Valley 199 $488,544 $447,500 9.2
Hemet 103 $445,000 $420,250 5.9
Homeland 11 $560,990 N/A N/A
San Jacinto 32 $465,000 $454,495 2.3
Winchester 53 $597,500 $618,447 -3.4
San Jacinto Valley Median Home Sale Prices
Region No. Sold
Median Price
April 2024
Median Price
April 2023
▲% Y-O-Y

23.B.

City Analysis – Hemet, CA
Ó2024 Capital Realty Analysts Inc. Page 17 of 108
Overview
Hemet, California, located in central Riverside County at the southern end of the San Jacinto Valley, is ±88 miles east of Los Angeles and ±70 miles northwest of San Diego. Hemet nestles against the foothills of the San Jacinto Mountains, the highest portion of the Peninsula Ranges that run southward into Mexico. The often snow-capped ±10,804-foot San Jacinto Peak rises above Hemet and provides a scenic backdrop to the desert floor. Hemet is almost surrounded by mountain vistas in all directions, with the Palomar Mountains to the west and the Santa Rosa and Cahuilla Mountains to the southeast. Hemet is one of two population centers in the San Jacinto Valley, the other being the City of San Jacinto. Hemet has an area of ±29 square miles which is about half of the San Jacinto Valley.

The City began developing in 1858 as a farm settlement. In 1887, two settlers formed the Lake Hemet Water Company and the Lake Hemet Land Company to establish a reliable water supply and for speculative land development. Between 1891 and 1895 the Hemet Dam was constructed and brought more settlers who worked on the dam. By 1894, there were several general stores, hotels, numerous businesses, and a newspaper, and many farmers had established alfalfa, fruit orchards, and row crops in their fields. In 1910, the city incorporated. With a railroad spur running from Riverside, Hemet became a trading center for San Jacinto Valley agriculture. The Hemet Turkey Show was established in 1936 which eventually became the Agricultural District Farmer’s Fair of Riverside County. During WWII, the Ryan School for Aeronautics trained about 6,000 pilots for the Army Air Force. Hemet Ryan Airport exists today at the site of the original Ryan Flight School.

Subject Property

23.B.

City Analysis – Hemet, CA
Ó2024 Capital Realty Analysts Inc. Page 18 of 108
Since 1923, one of the valley's chief claims to fame has been the annual Ramona Pageant. The incident which inspired Helen Hunt Jackson to write Ramona occurred in the valley, and the production of a pageant based on the story was discussed for a number of years as a method of promoting the valley. From 1923 onward, with only brief interruptions during the Depression and during World War II, the people of Hemet and San Jacinto have joined to stage this outdoor pageant each spring.

The character of Hemet began to change dramatically in the early 1960s with the development of Sierra Dawn, the country's first "mobile home subdivision" in which individual lots were sold.

Other mobile home parks and retirement housing developments followed, and Hemet became well known as a retirement community. Hemet today retains much of its retirement orientation but is also becoming home to significant numbers of younger families who provide services to the senior population or who are simply fleeing the more urbanized areas of Southern California.

Demographics
According to the California Department of Finance, the 2024 population of Hemet is estimated at ±89,663. This is a slight increase of ±0.46% from the 2020 US Census and a ±14.0% increase from the 2010 Census figure. The median age of Hemet is ±39. The median household income is ±$49,901 with an average household size of ±2.87.

Governance
Hemet, California, operates under a council-manager form of government. The City Council consists of five members elected at large by the voters of Hemet. The council members serve staggered four-year terms, with elections held every two years for either two or three seats. The Mayor of Hemet is chosen by the City Council from among its members. The city manager is appointed by the City Council.

Education
The Hemet Unified School District serves students in Hemet as well as several neighboring communities. It operates 16 elementary schools, 8 middle schools, 5 high schools, and 4 alternative education programs. The district also has specialized programs and schools focusing on areas such as arts, sciences, and career and technical education.

Transportation
Hemet is accessible via ground. Two California state highways cross the city: State Route 74 is the main east-west corridor which follows Florida Avenue, and State Route 79, a north-south highway which follows Florida Avenue for a few miles in the city. Hemet does have an airport, the Hemet-Ryan Airport, though it does not provide commercial service.

The primary public transportation provider in Hemet is the Riverside Transit Agency, which operates bus services throughout Riverside County. RTA offers fixed-route buses, paratransit services for individuals with disabilities, commuter services, and on-demand service within Hemet and San Jacinto. The bus system serves key areas within Hemet and connects to neighboring communities.

23.B.

City Analysis – Hemet, CA
Ó2024 Capital Realty Analysts Inc. Page 19 of 108
Economy
The primary employment sectors in Hemet are education and health services, hospitality and tourism, retail trade, and finance and real estate. The unemployment rate Hemet as of March 2024 was 7.2%. This compares to a county unemployment rate of 5.2% and a state unemployment rate of 5.3%.

23.B.

Neighborhood – Market Analysis
Ó2024 Capital Realty Analysts Inc. Page 20 of 108
Overview
The purpose of a market analysis is to give an overview of the competitive environment in which the subject property is located. The goal is to quantify the marketing and exposure periods for the subject property if offered in the market at a market value price. The first steps in this process are to delineate and describe the subject market area, identify the various components of the subject, and review the history of the submarket
The subject property is located along E Florida Avenue, east of N Harvard Street inside the city limits of Hemet, CA. The subject property is a multi-tenant commercial property initially developed in the 1928. The property is located in the Downtown Village District, bounded by Devonshire Avenue on the north, Buena Vista Street on the east, Kimball Avenue on the south, and Inez Street, State Street, and the railroad on the west. The neighborhood is part of the larger Downtown Specific Plan which includes older residential neighborhoods, the revitalized Hemet Stock Farm, the Civic Center, Santa Fe Education Center, Hemet Elementary, and Weston Park.

The Downtown Village District is the historic commercial core of the City of Hemet, and includes many of the City’s historic commercial buildings, a traditional grid street pattern, and the Civic Center. Traditional architecture and buildings oriented to the street make the Downtown Village District a vital area for pedestrian-oriented shopping, entertainment and civic activities. Sensitive infill development in encourages that maintains and enhances the District’s “main street” character, and retailing and civic functions.

Subject Property

23.B.

Neighborhood – Market Analysis
Ó2024 Capital Realty Analysts Inc. Page 21 of 108
Commercial Development Activity
Hemet has been engaged in community revitalization efforts for just over a decade. In 2012, the city completed an update to the General Plan, which included a major focus on the downtown area and the implementation of the Downtown Hemet Specific Plan. The intent is to strengthen the economic vitality and aesthetic character of the downtown area, and as such, all new buildings, structural additions, and façade improvements are subject to review by the Planning Department.

One major revitalization project in the downtown area has been the Historic Hemet Theater. In 2013, the Historic Hemet Theater Foundation took over the building and began revitalization efforts. Among their project impacts are the historic preservation of the 1921 movie house (one of the oldest in the nation), cultural enrichment through performing arts and educational programming, and economic revitalization of Hemet's historic downtown district. Their efforts have brought over 35,000 fans to tribute concerts hosted by the theater.

Currently, the City of Hemet has 24 commercial projects in the planning or construction phases.

Of the total, there are 16 commercial, 7 industrial, and 1 mixed-use projects, 2 of which are under construction. The remaining commercial projects are awaiting approval from the city’s planning commission.

Two commercial projects under construction or pending approval are hotels representing 173 rooms approved for the Hemet submarket. The mixed-use project is slated for a 61-unit apartment complex along with a gas station and convenience store. Most of the smaller commercial projects are service stations, car washes, and restaurants. Of note is that Hemet is slated for the development of almost 3.4 million square feet of warehouse space.

Data Collections
For the first part of this analysis, I researched land sales from the broader San Jacinto Valley market area. The data provides a comprehensive view of market activity since 2014. Following this data, I narrowed the analysis to a five-mile radius of the subject. The focused submarket analysis is intended to provide general insight into the price points and sales volume statistics.

For commercial land, clear market trends are difficult to discern due to the limited number of transactions that have occurred during the sample period. The research is based on a combination of Costar Information, the Desert Area MLS system, and private brokerage sources.

While this data does not include all the market transactions, its primary purpose is to illustrate a trend in the market as it relates to the most comparable submarkets.

The San Jacinto Valley submarket gives a broad perspective of the volume of commercial land acquisitions over the past ten years. Over the past ten years, there have been 176 sales with a moving average of $24,078,332. Generally, the data sample illustrates stable sales activity. The early part of the sampling period demonstrated upward trending statistics which dropped in 2018, when dollar volume abruptly dipped ±63% from 2017.

23.B.

Neighborhood – Market Analysis
Ó2024 Capital Realty Analysts Inc. Page 22 of 108
Despite the onset of the COVID-19 pandemic in 2020, unit sales and volume were both up over the 2019 values. Year-ending 2022 saw the dollar volume high, which concluded a 4-year run of year-over-year dollar volume increases. Median per-square-foot prices passed the $6 mark in 2022 for the second year of the sampling period after several years of depressed values. There were 16 land sales in 2023 with an average per square foot price of $4.35 and $4.72 on a median basis. Dollar and unit volumes dropped slightly in 2023 as high interest rates and construction costs sidelined many buyers. There have been 2 sales in 2024 with average and median PSF prices well above the moving average statistics.

As of the date of value, there are ±59 parcels for sale and 6 under contract with a total anticipated volume of ±$164 million. The indicated average and median per square foot land values for the active listings are $5.09 and $7.76, respectively, which are 70% and 106% above the moving averages; the pending sales have values much higher. The average parcel size being marketed is ±11.5 acres, which represents a ±17% decrease from the moving average. These combined metrics are indicative of stable demand for raw commercial land acquisitions.

Residential Land Sales – Hemet (5 Mi Radius)
Narrowing the analysis to within a 5-mile radius of the subject property, the statistics illustrate a significant decrease in both volume indicators. The annualized moving average for dollar volume during the sample period is ±$13,526,632, with the average number of annual sales coming in at ±13. The average number of acres per transaction is ±9.7 which includes properties that were acquired for further subdivision. No sales have occurred YTD 2024.

23.B.

Neighborhood – Market Analysis
Ó2024 Capital Realty Analysts Inc. Page 23 of 108
The localized land sales activity demonstrates somewhat cyclical sales activity through the sampling period. The dollar volume low occurred in 2019 which has been followed by several years of generally normal sales activity. The unit high was seen in 2020 while the dollar volume high was experienced in 2023 after a 190% spike over the 2022 value. Average and median PSF prices jumped in 2022 by 167% and 111%, respectively, and these values softened in 2023 despite the increase in sales volume. Even so, average and median per-square-foot prices were 20% and 30%, respectively, above the moving average statistics. Consistent with the broader market, there appeared to be stable demand in 2023 not seen in other larger markets which have experienced pull backs in construction starts.

Currently, there are 50 properties available on the market with an anticipated volume of ±$73M.

The average number of acres per listing is ±5.5 acres with an average price point of $6.11 per square foot and an indicated median price per square foot of $8.63, or $266,325 per acre and $376,086 per acre on a median basis.

Commercial Building Sales
The following key metrics are based on the past five years of commercial buildings within the San Jacinto Valley market area.

23.B.

Neighborhood – Market Analysis
Ó2024 Capital Realty Analysts Inc. Page 24 of 108

23.B.

Neighborhood – Market Analysis
Ó2024 Capital Realty Analysts Inc. Page 25 of 108
Conclusion
Up until the COVID-19 pandemic, the economic indicators demonstrated a stabilized pattern.

Through 2021 and 2022, sales volume increased in the commercial sector within the region. The Federal Reserve’s intervention to stave off inflation has now impacted commercial building sales, with total volume for 2023 dropping considerably from 2022. Q1 2024 had the lowest quarter volume since Q1 2014. However, vacancy rates in the area have been in a downward trend for several years, and the demand for raw commercial land remains stable.

Shifts in AI technology are forcing retailers to rethink store design and consumer engagement.

Many retailers are trending away from larger floorplans and are in favor of small-format stores to reduce operational costs. In the office sector, more modern constructed buildings continue to lease at a steady rate, though still below pre-pandemic levels. With fewer office properties coming online, demand for newer, more contemporary office properties is expected to remain steady. That said, the overall outlook for the office sector is negative, while retail is expected to carry late 2023 sales momentum into 2024.

The Downtown district of Hemet is experiencing a wave of revitalization with positive changes in the retail and commercial end-user demand and investor interest. Property values will continue to show modest increases over the next several quarters barring any abrupt changes in the broader market economy.

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 26 of 108
Picture 3 – Satellite view; subject property is outlined in yellow Picture 4 – Parcel map; subject is highlighted in red

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 27 of 108
Location: The subject property is located on north side of E Florida Avenue, east of N Harvard Street, in Hemet, CA. The legal addresses included on the site are 204-208 E Florida Avenue and 108 N Harvard Street, Hemet, CA 92543.

Identification: APN 443-232-007, Riverside County, CA
Size: ±0.36 acres ±15,682-ft²
Latitude / Longitude: 33°44’52.14"N 116°58’12.71"W
Elevation/Topography: 1,601’ above sea level Level, at street grade Flood Zone: According to the Flood Insurance Rate Map, Community Panel Number 06065C2105G, dated August 28, 2008, the subject
property is located in an area determined to be Flood Zone X (shaded).

Critical Habitat /
Conservation Easements:

There is no final critical habitat for any federally listed endangered or threatened species on the subject property.

There are no conservation easements or protected lands on the subject property.

Accessibility: The site has access from the north side of E Florida Avenue and the east side of N Harvard Street.

Soils: I was not provided with a soils report for the subject property. A physical inspection of the subject site was made for this analysis.

This report assumes that no toxic or hazardous materials are present on any section of the subject property and recommend a soils engineer be consulted.

Subject Property

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 28 of 108
Utilities: All utilities are available at the subject property site. The following public utility companies have jurisdiction over the site:

Water: City of Hemet
Sewer: City of Hemet
Electricity: Southern California Edison
Gas: Southern California Gas Company
Telephone: Verizon
Cable Service: Frontier Communications
School District: Hemet Unified School District
Topography: Level, at street grade
Off-Site Improvements: Two lane roadway, underground utilities Frontage: E Florida Avenue, N Harvard Street
Maintenance: Public
Curb and Gutter: Yes
Sidewalks: Yes
Hazards: This analysis assumes there are no hidden or unapparent conditions to the soil or subsoil that would render the parcel more or less valuable.

Earthquake Hazard: The site is not currently noted for being within an Alquist-Priolo Special Studies Zone. According to the State Division of Mines & Geology, this map may not show all faults that have the potential for surface fault or rupture, either within the special studies zones or outside their boundaries.

Improvements: ±14,514-ft² multi-tenant commercial property Zoning: DV, Downtown Village, Hemet, CA
Land Use: Mixed Use
Coastal Zone: No
Unit of Comparison: The subject property is valued as improved land for commercial use. The marketplace typically utilizes a price per square foot when evaluating similar properties. Based on the market preference, the price per square foot is applied in this analysis.

Functional Adequacy: The shape and size of the site are adequate to support the uses suggested in the Highest and Best Use section of this Appraisal Report.

Adjoining Properties:

North: Improved Commercial
South: Improved Commercial
East: Improved Commercial
West: Improved Commercial

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 29 of 108
Zoning Map/Ordinance
Downtown Village (DV) Zone. The DV Zone is the historic core of Downtown Hemet and is intended to preserve and enhance the economic stability of the retail commercial core. Standards established for this zone support retail, restaurant and entertainment uses in a “main street” environment, while also promoting infill mixed use development. It is important to maintain the pedestrian nature of the Downtown Village Zone by encouraging retail uses that attract passerby or frequent customer visits to locate in first floor commercial spaces that have display windows facing a public sidewalk. The regulations for this zone support the goals and design principles of the General Plan, and are intended to promote retail uses in a mixed use environment in order to maintain the vitality of the heart of the City.

Subject Property

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 30 of 108
Land Use Map
MU – Mixed Use. The MU-Mixed Use designation provides for a mix of residential and compatible office and retail/ service uses integrated as a cohesive development, or such uses developed sideby-side in a manner that encourages interaction between uses. Density and intensity ranges vary based on location. There are six mixed-use areas identified for this General Plan and which are discussed in more detail later in the Land Use Element.

Subject Property

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 31 of 108
Topographical Map
Subject Property

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 32 of 108
Flood Map
According to the Flood Insurance Rate Map, Community Panel Number 06065C2105G, dated August 28, 2008, the subject property is located in an area determined to be Flood Zone X (shaded). Properties in Zone X are subject to 0.2% Annual Chance Flood Hazard, Areas of 1% annual chance flood with average depth less than one foot or with drainage areas of less than one square mile.

23.B.

Improvement Description
Ó2024 Capital Realty Analysts Inc. Page 33 of 108
204-208 E Florida Avenue & 108 N Harvard Street
In the as-is condition, the subject property is a ±15,682-ft² parcel improved with a ±14,514-ft², single-story, multi-tenant retail building. The improvements were originally constructed in 1928 on a slab foundation. The building is a concrete masonry construction currently divided into two units. The Harvard Street unit has access from the west side of the structure only. The East Florida unit has access from the north side of East Florida and the rear alleyway. Interior floor coverings are a combination of carpet, concrete, and tile. The building exterior features decorative tile awnings. The building has been remodeled through the years and is in average condition. The property has an effective age of ±30 years with a remaining economic life of ±25 years. There are signs of deferred maintenance within the units, though none that is atypical.

Based on the Marshall & Swift classification, the improvements are defined as Average Class C structures. Fronting on one of the major thoroughfares of downtown Hemet, the subject is a highly visible commercial property. It is located between two historic structures and is identified as a possible historic resource within the city of Hemet.

The site has no landscaping or on-site customer parking, though a few employee parking spaces are located on the north side of the building accessible from an alleyway at the northeast portion of the site. Pedestrian access is available to the site from the east side of Harvard Street and the north side of Florida Avenue.

The major improvement components of the subject are discussed on the following page.

23.B.

Improvement Description
Ó2024 Capital Realty Analysts Inc. Page 34 of 108
Location: 204-208 E Florida Ave & 108 N Harvard Str, Hemet, CA Building Classification: Average Quality Class C Commercial Building Size: ±14,514-ft² GBA
Use: Retail Commercial
Effective Age: ±30 years
Foundation: Concrete slab
Joists: Wood frame
Exterior Walls: Concrete masonry
Interior Walls: Painted drywall
Roof: Flat / rock
Ceiling: T-bar acoustical
Insulation: N/A
Floors: Concrete / carpet / tile
Windows & Coverings: Tempered and glazed / vinyl and wood frames Interior Lighting: Fluorescent
Doors: Wood and glass
Plumbing: Four bathrooms (2 not working)
Electrical: 2 meters – 120/240 V
HVAC: A/C units / forced air heat
Fire Protection: Smoke detectors
Landscaping: None
Exterior Lighting: Building exterior
Condition: Average
Parking: Street
Land-to-Building Ratio: 1.08:1
Comments:

The location has good visibility and competitive appeal for the Downtown Village area. The building is adjacent to the Historic Hemet Theater to the east and surrounds the historic Bank of Hemet building, currently occupied by a jewelry and clock store. The bakery provides a retail storefront on the Harvard Street commercial corridor. From a locational standpoint, the subject property is a key component of the Downtown Village commercial district.

The interior tenant improvements are of below-average quality; however, they meet the standards for their intended use and current occupancy.

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 35 of 108
Picture 5 – Viewing north across East Florida Avenue to the subject property Picture 6 – Viewing east across Havard Street to the bakery access and storefront

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 36 of 108
Picture 7 – Viewing northeast across Havard Street to the bakery access and storefront Picture 8 – Viewing west at the rear access to the subject property

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 37 of 108
Picture 9 – Viewing south along the alleyway access to the subject property Picture 10 – Interior view of the bakery at 108 N Harvard Street

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 38 of 108
Picture 11 – Interior view of the bathroom at 108 N Harvard Street Picture 12 – Interior view of the retail area of 108 N Harvard Street

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 39 of 108
Picture 13 – Interior view of 204–208 E Florida Avenue
Picture 14 – Interior view of 204–208 E Florida Avenue

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 40 of 108
Picture 15 – Interior view of 204–208 E Florida Avenue (alleyway access point) Picture 16 – Interior view of 204–208 E Florida Avenue

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 41 of 108
Picture 17 – Interior view of 204–208 E Florida Avenue (bathroom) Picture 18 – Interior view of 204–208 E Florida Avenue

23.B.

Improvement Description – Photographs
Ó2024 Capital Realty Analysts Inc. Page 42 of 108
Picture 19 – Interior view of 204–208 E Florida Avenue
Picture 20 – Interior view of 204–208 E Florida Avenue

23.B.

Highest and Best Use
Ó2024 Capital Realty Analysts Inc. Page 43 of 108
Highest and Best Use is defined as:
“The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value.”6
“The analysis of relevant data to develop a market value opinion requires two important steps in the evaluation process before the applicable approaches to value are applied. Market analysis begins the process of narrowing the focus of the analysis from a broader macroeconomic view to data that is especially pertinent to the subject property. Highest and best use analysis relies on that analysis to then identify the most profitable, competitive use to which the subject property can be put.”7
In estimating highest and best use, there are essentially four stages of the analysis:

Legally Permissible: What uses are permitted by zoning and deed restrictions for the subject site?
Physically Possible: What are the physically possible uses for the subject site? Financially Feasible: What physically possible and legally permissible uses will produce a net return to the owner of the site?
Maximally Productive: Among the financially feasible uses, which use will produce the highest net return or the highest present worth?
The concept of highest and best use applies to land as the value of the improvements has a contributory impact on the overall property value. The theoretical emphasis of a highest and best use analysis in on the potential uses of the land as though vacant. In reality, the market reflects the contribution of the existing improvement value and recognizes the impact of any possible alteration of those improvements. Consequently, the highest and best use of a property as improved is equally important in developing an opinion of market value.

As Vacant
“Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements.”8
As Vacant – Legally Permissible
The subject property is a single, legal ±15,682-ft² parcel located on the north side of Florida Avenue in the historic downtown district of Hemet, CA. The subject is zoned DV, Downtown Village, with a land use designation of Mixed Use as defined by the City of Hemet’s Planning Department and detailed in the Downtown Specific Plan.
6 Appraisal Institute, The Appraisal of Real Estate Appraisal, 15th ed., (Chicago: Appraisal Institute, 2020) 7 Ibid 8 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Highest and Best Use
Ó2024 Capital Realty Analysts Inc. Page 44 of 108
The DV Zone is the historic core of Downtown Hemet and is intended to preserve and enhance the economic stability of the retail, and commercial core. Standards established for this zone support retail, restaurant, and entertainment uses in a “main street” environment while also promoting infill mixed-use development. It is important to maintain the pedestrian nature of the Downtown Village Zone by encouraging retail uses that attract passersby or frequent customer visits to be located in first-floor commercial spaces that have display windows facing a public sidewalk. The regulations for this zone support the goals and design principles of the General Plan and are intended to promote retail uses in a mixed-use environment in order to maintain the vitality of the heart of the City.

The MU-Mixed Use designation provides for a mix of residential, compatible office, and retail/ service uses integrated as a cohesive development or such uses developed side-by-side in a manner that encourages interaction between uses. Density and intensity ranges vary based on location. There are six mixed-use areas identified in the General Plan.

The subject property meets and exceeds the minimum lot size requirements. The legal constraints of the subject site are reasonable and appropriate and do not impair the site's highest and best use development potential.

As Vacant – Physically Possible
The subject is a level parcel located on the north side of Florida Avenue with additional frontage along Harvard Street in the historic downtown district. The site has good visibility and access from both fronting streets. The site is an irregular shape; accessibility, availability of utilities, other necessary infrastructure, and the site size are typical for this area of Hemet. The physical characteristics of the site do not impair its ability for potential development and represent the highest and best use as-if-vacant.

The subject is in an area designated as Flood Zone X (shaded). Properties in Zone X are subject to

0.2% Annual Chance Flood Hazard, Areas of 1% annual chance flood with an average depth of less than one foot or drainage areas of less than one square mile.

This analysis assumes that there are no hazardous materials affecting value or inhibiting the development of the site to its highest and best use. All utilities are available to the subject. The physical characteristics of the site do not impair its ability for potential development and represent the highest and best use as-if-vacant. Therefore, the highest and best use of the subject is not limited by any physical restraints or conditions.

As Vacant – Financially Feasible
The estimation of financial feasibility is a simple comparison of costs and benefits. If the cost to construct a proposed development exceeds the present value of the cash flow derived from the development, the prospective use is not considered feasible. Alternatively, if the present value of the anticipated income stream exceeds the cost to produce the proposed development, the use is financially feasible. A test of financial feasibility is accomplished with the comparison of the cost, income, and sales comparison models.

23.B.

Highest and Best Use
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A specific development model is not part of this analysis. The subject does have legal access and is large enough for development under the existing guidelines. The exact costs concerning development under current conditions are unknown. While these costs would likely not preclude the site from achieving financial feasibility for any one specific development plan, the typical buyer would subtract these accumulated costs from the indicated market value. It is beyond the scope of this analysis to calculate the financial feasibility of a specific or hypothetical development. The cost structure of most approvable developments that would utilize the site is considered beyond the normal market development risks, given the current market conditions.

As the market has shifted, the most speculative developments have stopped or slowed with the increased raw material and labor costs. Most developments occurring remain owner-user based projects.

Using the market analysis as a guideline, typical commercial development on the subject site is considered not financially feasible as of the date of value. However, this lack of financial feasibility does not preclude the property from being developed as an owner-user project or other specialpurpose development.

As Vacant – Maximally Productive
The physically possible and legally permissible uses for the subject property are present in the subject region. Other similar properties have been successfully developed and absorbed; however, modeling a financially feasible development is not probable for most applicable commercial uses, indicating that the most maximally productive use of the site, as-is, is to hold for future development and price appreciation.

As-Improved
“The use that should be made of a property as it exists. An existing property should be renovated or retained as-is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.”9
As-Improved – Legally Permissible Uses
As improved, the subject property represents a legally conforming use. The current zoning is considered reasonable and appropriate, and no changes in zoning are projected for the subject property. Based on my analysis, stabilizing the existing improvements generates enough rental income to establish a reasonable and market-based return on investment. Therefore, in the asis condition, the legally permissible aspects of the subject property do not limit the property to operating to a standard acceptable to the current owner.

As-Improved – Physically Possible
The subject site is large enough to provide a typical level of functional utility for mixedcommercial improvements. 9 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Highest and Best Use
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In addition to the building's design characteristics, the improvement quality, access, and site visibility complement the building and any potential tenant or owner-user. The surrounding demographics are also considered positive physical attributes. The revitalization of the Downtown Village area of Hemet will continue to support the subject property's potential uses.

The current owner’s investment plan for the subject property was to hold the asset for appreciation, not to redevelop or reposition the building. During the 20 years, the property has been held essentially with no major changes occurring.

As-Improved – Financially Feasible and Maximally Productive The subject improvements were built in 1928. Based on the property’s dated construction and deferred maintenance, the improvements are in fair/average condition for a 96-year-old property. The overall size of the subject property presents an occupancy issue under current market conditions. However, with a more active management profile, the subject property could attract a number of mixed-use tenants or a menagerie of retail uses in this location. The overall market occupancy levels in Hemet indicate that if priced and presented to acceptable market levels, there will be increased product demand for the property.

In my opinion, the highest and best use of the subject property is to reposition and remodel both the interior and exterior of the building, providing a more contemporary retail development and positioned product.

23.B.

Appraisal Process
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age 47 of 108
In this appraisal assignment, I estimate the market value of the fee simple estate of the subject property in the as-is condition as of April 30, 2024. The subject property is a multi-tenant, commercial building situated at 204-208 E Florida and 108 N Harvard Street in Hemet, CA. As of the date of value, the property is 100% occupied by two tenants.

Having identified the subject property and the type of value estimates required, my objective is to deliver well-supported value estimates through the appraisal process. The market data, analysis, and conclusions outlined in the Appraisal Report are expected to be adequately detailed so that a reasonable person would arrive at similar findings.

Three traditional approaches are commonly utilized to estimate fair market value for similar properties: the cost approach, the sales comparison approach, and the income approach. In this case, all three methods are considered relevant and suitable for inclusion in the Appraisal Report.

The depth and breadth of the analysis and reporting are tailored to meet this Appraisal Report's specific needs and purposes.

The valuation is based on a physical inspection and review of the subject property's existing use and tenancy. The analysis will value the improvements and supporting land. The effective age of the improvements is estimated based on a physical inspection of the subject property, and the condition of the improvements is taken into consideration.

The necessary value indications are identified, and so the appraisal problem has been defined.

The following paragraphs describe the methodologies for estimating market value in the subject property.

Cost Approach
“A set of procedures through which a value indication is derived for the fee simple estate by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive or profit; deducting depreciation from the total cost; and adding the estimated land value. Adjustments may then be made to the indicated value of the fee simple estate in the subject property to reflect the value of the property interest being appraised.”10
The cost approach has the best potential for accuracy when market conditions are such that the typical buyer will realize similar yields by acquiring an existing property or building new. The highest and best use for commercial development cannot be modeled to create a maximally productive use. That said, the as-isimprovements represent adequate returns to the capital basis of the land and improvements.

Based on the type of construction of the subject property, the cost approach provides a reliable indication of value when coupled with the underlying land value. Land sales of commercial properties in the subject’s market are limited, though adequate, to provide a reliable conclusion.

The improvement cost data utilized in the analysis is based on data from the Marshall and Swift Cost estimating service.
10 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Appraisal Process
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age 48 of 108
Sales Comparison Approach
“The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available.”11 The sales comparison approach is considered a reliable method for estimating the market value of vacant land if there is sufficient data on comparable sales available. When it comes to multitenant commercial properties like the subject property, the sales comparison approach remains a dependable valuation method if there are similar circumstances in terms of building design and market appeal. The sales comparison model is considered a moderately reliable estimate of the subject property's value in the current condition as-is.

Income Approach
“A set of procedures through which an appraiser derives a value indication for an incomeproducing property by converting its anticipated benefits (cash flows and reversion) into property value. This conversion can be accomplished in two ways. One years’ income expectancy can be capitalized at a market-derived capitalization rate or at a capitalization rate that reflects a specified income pattern, return on investment, and change in the value of the investment.

Alternatively, the annual cash flows for the holding period and the reversion can be discounted at a specified yield rate.”12
Mixed-commercial properties similar to the subject property are most commonly developed and held for their income-producing ability. However, as discussed, the subject property has been held for ±19 years by the current property owner, with no major renovations or additional capital investment. The two existing tenants have remained in the building for the entire investment hold period.

For this appraisal report, a direct capitalization model is applied for the requested fee simple value estimate. Based on its existing occupancy and physical condition, the direct capitalization income valuation model is considered the least reliable valuation technique for the subject property.
11 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 12 Ibid

23.B.

Cost Approach
Ó2024 Capital Realty Analysts Inc. Page 49 of 108
The cost approach is an analytical process that involves five separate steps to arrive at an indication of value for the subject property. They are:

1. Estimation of land value by direct sales comparison as-if-vacant and put to its highest and best use.

2. Estimation of reproduction or replacement cost new of the improvements.

3. Estimation of accrued depreciation from physical deterioration, functional obsolescence, and external obsolescence.

4. The estimation and deduction of accrued depreciation from all causes from the replacement cost new.

5. Summation of land value and the depreciated cost of the improvements.

The first section of the cost approach models a value estimate of the subject’s as-if-vacant, ±0.36- acre commercial site. Following the land value conclusion is a replacement cost new analysis of the building improvements developed along with the depreciated as-is value estimate of the property. The as-is value estimate combines the depreciated cost estimate of the existing buildings and associated infrastructure with the as-if-vacant land value. I have organized the analysis as follows:

As-if-Vacant Value
Land Data Point Grid/Map
Land Data Point Data Sheets
Land Data Point Analysis and Conclusion
Conclusion – Fee Simple Estate As-if-Vacant
As-Is Value Estimate
Marshall Valuation Service Calculator Cost Approach
Conclusion by the Cost Approach
The subject property's improvement composition includes a single building divided into two spaces. The Harvard Street store area is estimated at ±714-ft² and the E Florida Avenue store area is reported to total ±13,800-ft². The E Florida Avenue store also includes two basement areas and a mezzanine area, which are not included in the calculation of gross square footage.

The existing zoning and land use indicate a commercial or mixed-use highest and best use development for the subject site in an as-if-vacant condition. Because of the age of the existing improvements, the costs associated with the initial development, if available, would be irrelevant to a current cost-based valuation model. As such, I have developed a Marshall and Swift Valuation model for the replacement cost new and depreciated cost estimate in the as-is condition.

Limited sales activity of commercial land exists in the Hemet market area. From the available comparable data points and market activity, I have selected five comparable data points from the broader Hemet market area for the model. This selected data best illustrates the market activity of this market segment. The table on the following page summarizes the land data points utilized in this portion of the cost approach analysis.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 50 of 108
Land Sales Grid
Land Data Point Overview
The data selection includes five closed transactions, all located in the Hemet market area.

Adjustments are applied for dissimilar conditions in comparison to the subject’s analyzed vacant condition. Each of the comparable data points will be adjusted for the known or estimated costs associated with the as-acquired condition. The valuation model uses comparable data points with similar highest and best uses for future development. The zoning of the comparable data points varies slightly, although the land use designations and surrounding functional utility of the sites are comparable to the subject property.

The locational attributes vary within the data set. The selected data points represent the most current and confirmable sales information in the immediate and broader Hemet market.

Data Sale Size Size Sale Price Per
Point Location Date Acres SF Price SF
1 NS W Florida Avenue, E of N Cawston Avenue 6/1/22 1.59 69,260 C-2 $1,250,000 $18.05 Hemet, CA
2 201 S Palm Avenue 2/21/19 0.39 16,988 CM $180,000 $10.60 Hemet, CA
3 2880 W Florida Avenue 7/31/23 0.63 27,443 C-2 $1,300,000 $47.37 Hemet, CA
4 2788 W Florida Avenue 6/15/23 2.20 95,832 C-2 $1,900,000 $19.83 Hemet, CA
5 NS E Florida Avenue, W of New Chicago Avenue 12/11/23 0.61 26,572 CPS $400,000 $15.05 Hemet, CA
Subject 222 E Florida Ave N/A 0.18 7,841 C2 N/A N/A
Hemet, CA
Zoning

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 51 of 108
Land Data Point Map

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 52 of 108
Data Point 1 – Land Sale
Location: NS W Florida Avenue, E of N Cawston Avenue, Hemet, CA Identification: APN 448-250-005, Riverside County, CA
Date of Sale: June 1, 2022
Documentation: Grant Deed # 250439, Riverside County, CA Grantor: Navy Federal Credit Union
Grantee: Hemet Quack 22 LLC
Sale Price: $1,250,000
Financing: None
Exchange: No
Cash Equivalency: $1,250,000
Zoning: C-2, Hemet, CA
Flood Zone: Zone X
Site Size: ±1.59 acres / ±69,260-ft²
Utilities: All available
Lot Position: Interior
Improvements: None
Topography: Mostly level
Indicated Price Per SF: $18.05

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 53 of 108
Verification/History: Buyer’s broker – The seller acquired the property in April 2008 for a recorded $1,475,000. The property was on the market for 1,028 days at an asking price of $1,400,000.

Parcel Map: 448-25, Riverside County, CA
Data Point 1 is the June 2022 sale of a ±69,260-ft² commercial site located in Hemet, CA. The sale price of $1,250,000 represents an unadjusted price per square foot of $18.05. At the time of acquisition, the site was vacant. The buyer intends to use the site for a car wash and fast-food restaurants. The site is considered to be in a similar location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 54 of 108
Data Point 2 – Land Sale
Location: 201 S Palm Avenue, Hemet, CA
Identification: APNs 442-093-017 & 018, Riverside County, CA Date of Sale: February 21, 2019
Documentation: Grant Deed # 59523, Riverside County, CA Grantor: Da Lei
Grantee: Alan Rivera
Sale Price: $180,000
Financing: 50% seller financing @ 4.40%
Exchange: No
Cash Equivalency: $180,000
Zoning: CM, Hemet, CA
Flood Zone: Zone X
Site Size: ±0.39 acres / ±16,989-ft²
Utilities: All available
Lot Position: Corner
Improvements: ±1,046-ft² SFR
Topography: Mostly level
Indicated Price Per SF: $10.60

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 55 of 108
Verification/History: Listing broker – The seller acquired the property in September 2010 for a recorded $99,000. The property was on the market for 16 days at an asking price of $182,000.

Parcel Map: 442-09, Riverside County, CA
Data Point 2 is the February 2019 sale of a ±16,989-ft² commercial site located in Hemet, CA. The sale price of $180,000 represents an unadjusted price per square foot of $10.60. At the time of acquisition, the site included an older SFR that was boarded up and in need of complete rehabilitation as well as being under a code enforcement case by the City of Hemet. The buyer of the property performed a complete remodel of the improvements and sold the property in 2023.

The site is considered to be in a similar location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 56 of 108
Data Point 3 – Land Sale
Location: 2880 W Florida Avenue, Hemet, CA
Identification: APN 448-310-021, Riverside County, CA
Date of Sale: July 31, 2023
Documentation: Grant Deed # 221725, Riverside County, CA Grantor: J. Shamloo LLC
Grantee: Basraon LLC
Sale Price: $1,300,000
Financing: None
Exchange: No
Cash Equivalency: $1,300,000
Zoning: C-2, Hemet, CA
Flood Zone: Zone X
Site Size: ±0.63 acres / ±27,443-ft²
Utilities: All available
Lot Position: Interior
Improvements: Previously developed lot
Topography: Mostly level
Indicated Price Per SF: $47.37

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 57 of 108
Verification/History: Public Record/Buyer’s Agent – The seller acquired the property in March 2017 for a recorded $1,400,000.

Parcel Map: 448-31, Riverside County, CA
Data Point 3 is the July 2023 sale of a ±27,443-ft² commercial site located in Hemet, CA. The sale price of $1,300,000 represents an unadjusted price per square foot of $47.37. The property is the former location of a Long John Silver’s restaurant which was demolished in 2022. The buyer’s intentions are unknown. The site is considered to be in a superior location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 58 of 108
Data Point 4 – Land Sale
Location: 2788 W Florida Avenue, Hemet, CA
Identification: APN 438-240-039, Riverside County, CA
Date of Sale: June 15, 2023
Documentation: Grant Deed # 172056, Riverside County, CA Grantor: Brandon Choi and Jeanie Sim
Grantee: GTY Auto Service, LLC
Sale Price: $1,900,000
Financing: None
Exchange: No
Cash Equivalency: $1,900,000
Zoning: C-2, Hemet, CA
Flood Zone: Zone X
Site Size: ±2.20 acres / ±95,832-ft²
Utilities: All available
Lot Position: Interior
Improvements: None
Topography: Mostly level
Indicated Price Per SF: $19.83

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 59 of 108
Verification/History: Public Record/Buyer’s agent – The seller acquired the property in August 2020 for a recorded $200,000.

Parcel Map: 438-24, Riverside County, CA
Data Point 4 is the June 2023 sale of a ±95,832-ft² commercial site located in Hemet, CA. The sale price of $1,900,000 represents an unadjusted price per square foot of $19.83. At the time of acquisition, the property was entitled for the development of a car wash, though the permit expiration was set for June 29, 2023. The site considered to be in a similar location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 60 of 108
Data Point 5 – Land Sale
Location: NS E Florida Avenue, W of New Chicago Avenue, Hemet, CA Identification: APN 549-090-034, Riverside County, CA
Date of Sale: December 11, 2023
Documentation: Grant Deed # 367020, Riverside County, CA Grantor: Urban Affiliates, LLC
Grantee: Lecangs LLC
Sale Price: $400,000
Financing: None
Exchange: No
Cash Equivalency: $400,000
Zoning: CPS, Riverside County, CA
Flood Zone: Zone X
Site Size: ±0.61 acres / ±26,572-ft²
Utilities: All available
Lot Position: Interior
Improvements: Paved parking lot, retail pad
Topography: Level
Indicated Price Per SF: $15.05

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 61 of 108
Verification/History: Listing broker – The seller held the property for more than 10 years.

Parcel Map: 549-09, Riverside County, CA
Data Point 5 is the December 2023 sale of a ±26,572-ft² commercial site located in Hemet, CA.

The sale price of $400,000 represents an unadjusted price per square foot of $15.05. At the time of acquisition, the property was improved with a paved parking lot and retail pad as part of the shopping center anchored by Stater Bros. The site considered to be in an inferior location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 62 of 108
Adjustments
Adjustments to data points are required for significant differences that affect value. The modeling follows a sequence of adjustments in each sales comparison model. Using this sequence, I obtain intermediate price figures and apply subsequent adjustments to each previously adjusted price. These adjustments reflect the property's superiority or inferiority in terms of real property rights conveyed, financing, conditions of sale, market conditions, locational and physical characteristics. A standard method for extracting adjustments among comparable sales is matched-pairs' analysis, which aims to obtain market-based adjustments.

This involves isolating an adjustment feature among two or more sales, where the difference in adjusted prices represents the market's value perception for that feature.

In some cases, adjustment features cannot be isolated due to limited comparable data, unique property traits, or other factors. When this happens, alternative adjustment techniques are used, including cost-based adjustments, adjustments based on a market survey, adjustments based on published data, and quantitative adjustments. The following is a discussion of relevant adjustment factors.

Property Rights Conveyed
All comparable data points reflect the transfer of fee simple estates; therefore, no property rights adjustments appear warranted or applied.

Financing Terms
Four of the five completed data point sales are transferred for cash or cash equivalency, and no adjustments are necessary. Data Point 2 transfer with seller short-term financing reported at market levels and no adjustment is applied.

Conditions of Sale
The five completed sales are confirmed as arm’s-length transactions and do not require adjustments for conditions of sale.

Market Conditions
Adjustments for market conditions are crucial for reflecting shifts in real estate prices over time.

In this analysis, sales data range from the earliest in February 2019 to the most recent in December 2023. The market analysis indicates a decrease in transaction volume, but based on the available data, there hasn't been a noticeable decline in pricing.

Given this context, Data Point 2, representing a transaction from approximately five years ago, requires special consideration. To align this older sale with current market conditions, I have applied a subjective upward adjustment of 15%. This adjustment accounts for the general increase in property values observed over this period, ensuring that the valuation reflects more recent market trends.

I have decided against making market condition adjustments for the other data points, which are based on more recent transactions.

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 63 of 108
Their transfer dates are close enough to the current date to assume that they already reflect prevailing market values without the need for further modification. This approach ensures that the analysis remains both current and relevant, providing a balanced and accurate assessment of the property's value.

Location
The subject property enjoys a unique and strategic location in the core of the Historic Downtown Village, right next to the restored 1921 Historic Hemet Theatre. This proximity enhances its cultural and historical value, potentially attracting more visitors and interest. Moreover, the property benefits from its access to the east side of the Harvard Street commercial corridor, allowing for a notable retail presence.

This area has weathered multiple economic cycles, yet it continues to receive community support, which is crucial for sustained economic viability. Recent significant investments and ongoing planning efforts are aimed at enhancing the area's appeal as a lifestyle and tourist retail destination. These developments not only add to the location's desirability but also suggest potential for future growth in foot traffic and consumer interest, which could positively impact the property's value and business opportunities.

From within the comparison model, all of the data points reflect general commercial locations that have been traded by investors and end users. As stated, the Hemet market is limited, and the sales represent the best available data for this model. I have made subjective adjustments to Data Points 3 and 5 based on superior and inferior influences.

Utilities
In the as-if-vacant condition, the subject property has access to all utilities, but services are not established. All the comparable sales have similar access to utilities. No adjustments for utilities are required.

Improvements
In the model, the subject property is considered a vacant site. Four of the five sales are vacant properties, and no adjustments are applied. Data Point 2 included an older, ±1,045-ft² SFR with limited contributory value. For the analysis, a downward adjustment reflecting the contribution is applied and then divided by the unit of comparison.

Site Size
The size of a property affects the uses it will support, and the buyers it will attract. Size adjustments are generally based upon the concept of “marginal utility”. Marginal utility is defined as follows.
“The increment of total utility added by the last unit of a good at any given point of consumption.

In general, the greater the number of items, the lower the marginal utility, i.e., a greater supply of an item or product lowers the value of each item.”13 13 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 64 of 108
The concept of marginal utility holds true for vacant commercial land parcels in the subject market. While larger sites can support a wider variety of uses as well as larger projects, the cost of development, occupancy stabilization, and management increases risk. Additionally, the available buyer pool typically decreases as the total site size increases.

The subject property type and size are wide in comparison to this data set, necessitating an adjustment analysis. Using a matched-pairs analysis with each of the sales, I extrapolated adjustment factors for each pair that presented a range of factors, which were averaged at the adjustment for the model. I have used this adjustment factor based on the difference between the subject’s size and the size of the comparable data points. The adjustments are considered modest and address the size differential and associated discounts.

The following table illustrates the adjustments applied to the data group and the value conclusions.

Element Subject DP-1 DP-2 DP-3 DP-4 DP-5
Sale Price $1,250,000 $180,000 $1,300,000 $1,900,000 $400,000 Size (SF) 15,682 69,260 16,988 27,443 95,832 26,572
Unit of Comparison $/SF $/SF $/SF $/SF $/SF $/SF
Sales Price Per SF $18.05 $10.60 $47.37 $19.83 $15.05
Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Terms Cash Seller Cash Cash Cash
Cash Equivalency $0.00 $0.00 $0.00 $0.00 $0.00
Conditions of Sale Arm's-Len Arm's-Len Arm's-Len Arm's-Len Arm's-Len Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Date of Value 4/30/24
Date of Sale 4/30/24 6/1/22 2/21/19 7/31/23 6/15/23 12/11/23 Adjustment $0.00 $1.59 $0.00 $0.00 $0.00
Sub Total $18.05 $12.18 $47.37 $19.83 $15.05
Location Similar Similar Superior Similar Inferior
Adjustment $0.00 $0.00 ($11.84) $0.00 $2.26
Utilities Similar Similar Similar Similar Similar
Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Use Similar Similar Similar Similar Similar
Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Improvements Vacant SFR Vacant Vacant Vacant
Adjustment $0.00 ($2.94) $0.00 $0.00 $0.00
Size (SF) 15,682 69,260 16,988 27,443 95,832 26,572
Adjustment $1.61 $0.04 $0.35 $2.40 $0.33
Adjusted 8.91% -12.41% -24.26% 12.13% 17.17%
Sale Price Per SF $19.66 $9.28 $35.88 $22.23 $17.64
Average Per SF Value $20.94
Median Per SF Value $19.66

23.B.

Cost Approach – As-if-Vacant
Ó2024 Capital Realty Analysts Inc. Page 65 of 108
Conclusion – As-if-Vacant
I have performed a weighted average indication based on the net adjustments of the sales. The primary influence is placed on Data Point 1, with reduced equal secondary weight applied to Data Points 3, 4, and 5. Tertiary model influence is ascribed to Data Point 2. The following table illustrates the results of the weighted averaging.

Weighted DP-1 DP-2 DP-3 DP-4 DP-5
Average $19.66 $9.28 $35.88 $22.23 $17.64
$21.97 30% 10% 20% 20% 20%
Based on the available data, it is my opinion that the market value of the fee simple estate in the subject property, as-if-vacant, on April 30, 2024, is as follows:
$21.97/ft² x 15,682-ft² = $344,534
$345,000 (Rounded)
(Three Hundred Forty-Five Thousand Dollars)

23.B.

Cost Approach – As-Is
Ó2024 Capital Realty Analysts Inc. Page 66 of 108
Having obtained an as-if-vacant land value estimate, the cost approach is extended to include the as-is value of the buildings associated with the subject property. As of the date of value, the subject property is fully occupied and considered physically stabilized. Based on the lack of specific detail associated with the capital improvements and the time frame of the investment, the valuation model utilizes a Marshall Valuation Cost Calculator Model. The construction costs and expenses applied in the model include all hard costs, soft costs, and entrepreneurial incentives.

Typically, using the developer’s cost estimate is the preferred method because the lack of specific engineering detail makes a Marshall Valuation-style bulk estimate somewhat speculative.

However, in the case of the subject property, the basic construction method and existing effective age of the improvements make the Marshall and Swift Cost Calculation a reliable indication of value.

The next step in the cost approach is to estimate the depreciated reproduction, or replacement cost, of the existing improvements. I have defined the reproduction and replacement cost in the following paragraphs.

Reproduction Cost
“The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and obsolescence of the subject building.”14 Replacement Cost
“The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design, and layout.”15
The cost approach is most reliable when the improvements are comparatively new and represent the highest and best use of the site. For older improvements that continue to represent the highest and best use of the site, the various forms of depreciation are estimated with a greater degree of subjectivity. The reproduction cost estimate is based on the actual costs necessary to produce an exact replica of the improvements. Therefore, the reproduction cost estimate will embody all of the functional obsolescence present for the property, if any. The replacement cost method is used to estimate the cost to construct a functionally equivalent (but not identical) set of improvements.

The as-is value is estimated by adding the cost of the existing improvements to the as-if-vacant land value. The costs include all hard and soft costs, including entrepreneurial incentives.

Typically, there are three methods to estimate existing construction costs. 14 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 15 ibid

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Cost Approach – As-Is
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These methods include comparing the costs directly to those of competing projects, using a Marshall Valuation-style calculator to estimate the costs, and applying current bids and costs specific to the existing improvements.

The subject property consists of a site area totaling ±15,682-ft² of DV, Downtown Village zoned commercial land in the Downtown Village commercial district of Hemet, CA. The subject structure, developed around 1928, appears to be a blend of construction techniques using concrete blocks, steel, and wood. This period marked significant advancements in construction, particularly in earthquake-prone areas like Hemet, California. The integration of steel reinforcement into concrete blocks during the 1920s was a crucial development, enhancing the material's tensile strength and making buildings more resistant to seismic activity.

Given the historical context and the substantial earthquake that struck the area in 1899, it's noteworthy that the adjacent Hemet Theater was rebuilt using similar construction techniques after its destruction in the earthquake. This indicates that the subject property's construction methods were not only aligned with but also represented some of the most advanced engineering practices of the time, specifically designed to increase durability and safety in seismic zones. While detailed construction specifics of the subject property are not fully documented, the use of reinforced concrete blocks likely provided significant structural integrity pertinent to its longevity and historical value.

Based on the subject property’s simple functional design and current basic condition, the aggregate age of the subject property is estimated at ±30 years, with a remaining economic life of ±25 years.

General Calculator Notes
The estimated costs used are considered final costs to the owner and include the following:
average architect’s and engineer’s fees, plan check fees, building permits, survey, interest on construction funds, sales tax on materials, normal site prep, including grading and backfill, contractor’s overhead and profit, including supervision, insurance equipment, temporary facilities, and security.

The Calculator costs do not contain the costs of buying and assembling land, atypical design, and permitting fees, financing charges, yard improvements, landscaping, personal property, and marketing costs to create the first occupancy.

Base Improvement Costs and Lump Sum Adjustments
Based on the scope of this cost analysis valuation model, the improvement costs for the subject are taken from the Marshall Valuation Service Commercial Cost Estimator, April 2024. The improvements are defined as Average Quality Class C commercial/industrial improvements.

Additional lump sum adjustments are applied to the model. These adjustments include interior and site improvements associated with the development of the building. Another lump sum adjustment applied to this analysis is the cost of first occupancy. This cost includes leasing commissions. The amount applied is estimated as a 5% commission at market rental rates on the 36-month term for the building.

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Cost Approach – As-Is
Ó2024 Capital Realty Analysts Inc. Page 68 of 108
Depreciation
Depreciation is the loss in value due to any cause. It is generally divided into three categories:
physical deterioration, functional obsolescence, and external obsolescence. Physical deterioration and functional obsolescence are further divided into curable and incurable components. External obsolescence is considered incurable. The forms of depreciation are defined as follows.

Physical Deterioration – Incurable
“A form of physical deterioration that cannot be practically or economically corrected as of the effective date of appraisal.”16
Physical Deterioration – Curable
“A form of physical deterioration that can be practically and economically corrected as of the date of appraisal; excludes vandalism and damage, which are curable conditions but are not accounted for in an estimate of replacement or reproduction cost.”17 Functional Obsolescence – Incurable
“An element of depreciation; a defect caused by a deficiency or superadequacy in the structure, materials, or design that cannot be practically or economically corrected as of the effective date of the appraisal.”18
Functional Obsolescence – Curable
“An element of depreciation; a curable defect caused by a flaw in the structure, materials or design, which can be practically and economically corrected.”19 External Obsolescence
“A type of depreciation; a diminution in value caused by negative external influences and generally incurable on the part of the owner, landlord, or tenant. The external influence may be either temporary or permanent.”20
Physical Deterioration – Curable
As defined above, curable physical deterioration consists primarily of deferred maintenance items. The improvements were originally designed circa 1928 as a mixed commercial building.

The building presents as an above-average quality for its age. That being said, the subject improvements are basic, with large, expansive open areas and numerous smaller office/ workshop areas that were important to the original occupants. For the most part, the building resembles more of a warehouse-style design than a more typical retail commercial store. There are signs of deferred maintenance, although none atypical for the age of the building. 16 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 17 Ibid 18 Ibid
19 Ibid
20 Ibid

23.B.

Cost Approach – As-Is
Ó2024 Capital Realty Analysts Inc. Page 69 of 108
Given the property's condition, I will address depreciation in a single category, such as the incurable. Consequently, no curable physical deterioration will be charged in this analysis.

Physical Deterioration – Incurable
Incurable physical deterioration is the most common type of depreciation, generally caused by the physical aging of the improvements. The improvements are in average dated condition, with an estimated effective age of ±30 years and an estimated remaining economic life of ±25 years.

The charge for incurable physical deterioration is based on the Marshall & Swift depreciation tables and applied at approximately 54.55%.

External Obsolescence
The subject’s improvements do not suffer from external obsolescence.

Functional Obsolescence – Curable
The pace of technological change suggests that the improvements’ contribution to the overall property value in any property is likely to decline at a disproportionate rate. In theory, this accelerated change damages the capital return on real estate investments, and if real rental growth or inflation is high, this depreciation damage becomes more transparent. The subject’s improved technological design is consistent with market standards and its intended use in the Hemet submarket. No curable obsolescence is applied.

Functional Obsolescence – Incurable
Incurable functional obsolescence includes items that do not contribute to value yet have an associated cost. Many super-adequacies fall into this category. In this case, the subject represents the standard of acceptability for facilities of this size and type in this sub-market. Consequently, no adjustment for incurable functional obsolescence is applied.

Depreciation Conclusion
In its current as-is condition, the subject property can be considered dated improvements.

Clearly, some renovations have happened through the years, although none within the past 10 to 15 years. The renovations mostly appear to be related to the current occupancy, with drop in T-bar ceilings and floor coverings. There is a tile floor acceptable for fast food service within the bakery area. Two of the bathrooms are nonfunctional in the main building, although overall, the property appears to be adequately supplied with plumbing and electrical features.

Based on a physical inspection, I have calculated the property's aggregate physical deterioration to be approximately 54.55%.

Entrepreneurial Incentive
The entrepreneurial incentive calculation is based on interviews with developers and realized entrepreneurial profit seen from similar developments. Unfortunately, entrepreneurial profit information is dated and considered difficult to predict in today’s marketplace. Based on existing yield rates, the base expected return in a 10-year investment model aligns with the 10-year

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Cost Approach – As-Is
Ó2024 Capital Realty Analysts Inc. Page 70 of 108
Treasury. The following table illustrates the current 10-year Treasury yield rate and forecast for the next six months.
10 Year US Treasury Bond Yield Forecast
Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24
Value 4.54% 4.50% 4.66% 4.53% 4.85 % 4.48 % 4.13%
Adding to the base 10-year yield rate would be the risk premium associated with the development profile. Using an investor survey for retail properties, the maximum risk premium related to similar developments comes in at ±5.88%, with the minimum coming in at ±0.72%. The average risk premium comes in at about ±3.25%. Adding the risk premium along with the 10-year Treasury rate and the current inflation rate of 3.00% would indicate an entrepreneurial incentive calculation of ±10.79%. Looking at the broader equity dividend rates for real estate investments, the average equity return comes in at ±12.8%. For this analysis, I have utilized a rate slightly above the average of the two primary indicators and applied a 12% entrepreneurial incentive to the cost analysis model.

The table presented on the following page illustrates the Marshall & Swift worksheet for the subject property.

23.B.

Cost Approach – As-Is
Ó2024 Capital Realty Analysts Inc. Page 71 of 108
Conclusion As-Is
Based on the available data, it is my opinion that the market value of the fee simple estate of the subject property, as derived from the cost analysis model, as-is, on April 30, 2024, is as follows:
$1,690,000 (Rounded)
(One Million Six Hundred Ninety Thousand Dollars)
Square Foot Adjustments Cost Replacement
Component Area Reference Cost New
Building Area 14,514 $115.50 $1,676,367
$1,676,367
Interior Finish 14,514 $10.00 $145,140
Fees/Permits/Soft Costs 1.00 $273,226 $273,226
Subtotal Lump Sum Adjustments $418,366
Subtotal Base Building Structure $2,094,733
Yard Improvements
Cost Replacement
Component Area Reference Cost New
Site Improvements 15,682 $3.50 $54,887
Landscaping 1.00 $0 $0
Paving/Driveway 1,168 $2.85 $3,329
Total Site Improvements $58,216
Subtotal $2,152,949
Current Cost Multiplier 0.98
Local Cost Multiplier 1.24
Total Estimated Replacement Cost New $2,616,263
Total Economic Life (Years) 55
Remaining Economic Life 25
Effective Age 30
Plus Entrepreneurial Incentive 12.00% $258,354
Less Accrued Depreciation 54.55% ($1,567,973)
Deferred Maintenance $0 $0
Depreciated Replacement Cost $1,306,644
Cost of First Occupancy $37,882
Land Value $344,534
Indicated Subject Value $1,689,059
Indicated Subject Value (Rounded) $1,690,000
204-208 E Florida Ave (Marshall Valuation Service, April 2024) Subtotal Square Foot Adjustments
Lump Sum Adjustments

23.B.

Sales Comparison Approach
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Based upon the principle of substitution, the sales comparison approach demonstrates that the value of a property in the market tends to be set by the cost of acquiring an equally desirable substitute property. When substitute properties are not available in the market, the reliability of the sales comparison approach may be less than that of alternative valuation models. While the subject’s size, design, occupancy, and location limit exact comparisons, market activity in the immediate and surrounding submarkets is enough for developing a reliable value estimate from the comparison model.

In the sales comparison approach, I evaluate the subject property with comparisons to commercial properties that have sold recently or to active listings where prices are public. The comparisons demonstrate a probable price at which the subject property would sell if offered on the market. The Dictionary of Real Estate Appraisal defines the sales comparison approach as follows:
“The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available.”21 To obtain data on recent comparable data points, a field investigation, a search of public records, and discussions with active market participants were conducted. The primary selection criteria applied in the analysis are similar use, location, and date of transaction. As described in previous sections, the subject is a ±14,514-ft² multi-tenant commercial building positioned on ±0.36 acres.

The subject property, fully occupied by two tenants, is currently utilized for retail purposes. Given its size and flexible design, the building can accommodate a variety of commercial uses that the market might demand. Presently, the building is in average condition, and the highest and best use is determined to be as-improved, continuing its current commercial functions.

A notable challenge for the property is its size relative to its location in the historic Downtown Village are of Hemet, which could potentially limit the types of tenants it attracts due to spatial constraints typical of core commercial areas. To ensure an accurate and relevant comparison in the appraisal process, it is critical to select comparable data points from within the immediate market. Thus, while the comparables are all smaller-sized buildings, they are strategically chosen from within the same Hemet, CA, marketplace to maintain continuity and reflect true market conditions, ensuring the appraisal reflects a realistic valuation grounded in local market dynamics.

The analysis begins with a summary of these comparable properties and their respective market locations. It then researches the details of each, identifying and quantifying key comparative elements that influence value, such as market conditions, size, physical features, and location.

This process involves breaking down the subject property and the comparables into a uniform unit of comparison to assess how these elements impact value. 21 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Sales Comparison Approach
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Similar commercial properties trade in the marketplace using a per-square-foot of gross building area as a unit of comparison. Therefore, I have applied a price-per-square-foot unit of comparison for this analysis. The following table summarizes the comparable sales used in this analysis.

Building Data Points
Data Overview
For this analysis, I have included five closed sales from the competitive Hemet, CA submarket.

The collected data represents the most recent confirmable and comparable sales available. All of the comparable data points selected for this analysis have a similar highest and best use as the subject property. As stated, given the limited size of the Hemet marketplace, I was unable to bracket the size of the subject property. The transaction dates for the closed sales range from October of 2019 to August of 2022. There were no comparable active listings available during the research.

The locational attributes are varied, and the buildings represent similar retail or commercial office buildings. The lack of exact comparisons requires the analysis to roughly bracket an adjusted value, with the intent to narrow this range into a reliable adjusted value indication on a per-square-foot basis.

Data Sale Year Effective Size Sale Sale Improvement
Item Address Date Built Age SF Price PSF Location Condition 1 215 E Florida Ave 12/7/20 N/A 35 3,400 $280,000 $82.35 Similar Fair Hemet, CA
2 418 E Florida Ave 11/1/19 1970 30 2,537 $365,000 $143.87 Similar Average Hemet, CA
3 811 E Florida Ave 2/14/22 1954 35 6,700 $565,000 $84.33 Similar Average Hemet, CA
4 124 S Harvard Street 5/15/20 1955 30 3,750 $475,000 $126.67 Similar Average Hemet, CA
5 211 N State Street 12/7/20 1998 25 10,817 $950,000 $87.82 Inferior Average Hemet, CA
Subject 204-208 E Florida 4/30/24 1928 30 14,514 N/A N/A N/A Average Hemet, CA

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Sales Comparison Approach
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Data Point Map

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 75 of 108
Data Point 1 – Building Sale
Name/Location: 215 E Florida Avenue, Hemet, CA
Identification: APN 443-282-004, Riverside County, CA
Date of Sale: December 7, 2020
Documentation: Grant Deed # 619389, Riverside County, CA Grantor: AK LP
Grantee: Ramon Alatorre Lopez
Sale Price: $280,000
Sale Price PSF: $72.92
Terms: 75% seller financing @ 2.80%
Cash Equivalent Sales Price: $280,000
Site Description: Size: ±3,485-ft²
Shape: Rectangular
Frontage: Florida Avenue
Zoning: DV, Hemet, CA
Lot Position: Interior
Utilities: All available
Street Improvements: Four lane / asphalt
Topography: Level, at street grade
Functional Utility: Equivalent

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Sales Comparison Approach
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Improvement Description: Construction Type: Concrete Masonry Building Class: Average Class C
Designed Occupancy: Multi-tenant retail
Year Built: N/A
Effective Age: ±35 years
Stories: 2
Gross Building Area: ±3,840-ft²
Number of Units: 2
Sprinklers: No
Parking Spaces: Street
Improvement Ratio: 55.2%
Land to Building Ratio: 1.03:1
Parking Ratio: N/A
Floor Area Ratio: 0.98:1
Building Condition: Fair
Income Data: Recon / Market:

History: Data Point 1 was acquired by the seller in October 2017 for a recorded $112,000. The sale was an off-market
transaction between the buyer and the seller.

Verified: Public record / market comments
Comparable Data Point 1 is the sale of a ±3,840-ft² retail building located in the downtown core of Hemet, CA. The Data Point sold on December 7, 2020, for $280,000 or $72.92 per square foot with 75% seller financing at 2.80%. At the time of acquisition, the property was vacant. The property was previously used as a shoe store. The effective age of the improvements is estimated at ±35 years. The property location is considered similar compared to the subject based on surrounding economic demographics. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

Gross Income $34,560 100%
Vacancy $3,456 10%
Collection & Credit Loss $691 2%
EGI $30,413 88%
Expenses $11,557 38%
Reserves $608 2%
NOI $18,248 53%
Cap Rate 6.52%
Rental Rate PSF $0.75

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Sales Comparison Approach
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Data Point 1 – Street and Plat Map

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Sales Comparison Approach
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Data Point 2 – Building Sale
Name/Location: 418 E Florida Avenue, Hemet, CA
Identification: APN 443-234-015, Riverside County, CA
Date of Sale: October 31, 2019
Documentation: Grant Deed # 444879, Riverside County, CA Grantor: Central County United Way, Inc
Grantee: Atoosa and Associates LLC
Sale Price: $365,000
Sale Price PSF: $143.87
Terms: All cash to seller
Cash Equivalent Sales Price: $365,000
Site Description: Size: ±6,970-ft²
Shape: Rectangular
Frontage: Florida Avenue
Zoning: DV, Hemet, CA
Lot Position: Interior
Utilities: All available
Street Improvements: Four lane / asphalt
Topography: Level, at street grade
Functional Utility: Equivalent

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Sales Comparison Approach
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Improvement Description: Construction Type: Wood frame/steel Building Class: Average Class D
Designed Occupancy: Single tenant retail
Year Built: 1970
Effective Age: ±25 years
Stories: 1
Gross Building Area: ±2,537-ft²
Number of Units: 1
Sprinklers: No
Parking Spaces: 4
Improvement Ratio: 88.9%
Land to Building Ratio: 2.75:1
Parking Ratio: 1.58/1000
Floor Area Ratio: 0.36:1
Building Condition: Average
Income Data: Recon / Market:

History: Data Point 2 was acquired by the seller in May 2003 for a recorded $310,300. The property was on the market for
226 days at an asking price of $395,000.

Verified: Listing broker/public record
Comparable Data Point 2 is the sale of a ±2,537-ft², single tenant, retail building located in the downtown core of Hemet, CA. The Data Point was sold on October 31, 2019, for $365,000, or $143.87 per square foot, in an owner-user sale. At the time of acquisition, the property was 100% occupied. Originally constructed in 1970, the effective age of the improvements is estimated at ±25 years. The property location is considered similar compared to the subject based on surrounding economic demographics. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

Gross Income $28,922 100%
Vacancy $1,446 5%
Collection & Credit Loss $578 2%
EGI $26,897 93%
Expenses $2,152 8%
Reserves $538 2%
NOI $24,208 84%
Cap Rate 6.63%
Rental Rate PSF $0.95

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Sales Comparison Approach
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Data Point 2 – Street and Plat Map

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Sales Comparison Approach
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Data Point 3 – Building Sale
Name/Location: 811 E Florida Avenue, Hemet, CA
Identification: APN 443-294-003, Riverside County, CA
Date of Sale: February 14, 2022
Documentation: Grant Deed # 73829, Riverside County, CA Grantor: Hemet Blue Plaza LLC
Grantee: Luke and Linda Choi Family Trust
Sale Price: $565,000
Sale Price PSF: $84.33
Terms: All cash to seller
Cash Equivalent Sales Price: $565,000
Site Description: Size: ±7,841-ft²
Shape: Rectangular
Frontage: Florida Avenue
Zoning: DC, Hemet, CA
Lot Position: Interior
Utilities: All available
Street Improvements: Four lane / asphalt
Topography: Level, at street grade
Functional Utility: Equivalent
Improvement Description: Construction Type: Concrete Masonry Building Class: Average Class C

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Sales Comparison Approach
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Designed Occupancy: Multi-tenant retail
Year Built: 1954
Effective Age: ±35 years
Stories: 1
Gross Building Area: ±6,700-ft²
Number of Units: 2
Sprinklers: No
Parking Spaces: 4
Improvement Ratio: 88.5%
Land to Building Ratio: 1.17:1
Parking Ratio: 1.58/1000
Floor Area Ratio: 0.85:1
Building Condition: Average
Income Data: Recon / Market:

History: Data Point 3 was acquired by the seller in March 2014 for a recorded $275,000. The property was on the market for 450 days at an asking price of $700,000.

Verified: Listing broker
Comparable Data Point 3 is the sale of a ±6,700-ft², multi-tenant, retail building located in the downtown core of Hemet, CA. The Data Point sold on February 14, 2022, for $565,000, or $84.33 per square foot, in an investment sale. At the time of acquisition, the property was ±50% occupied with one tenant. Originally constructed in 1954, the effective age of the improvements is estimated at ±35 years. The property location is considered similar compared to the subject based on surrounding economic demographics. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

Gross Income $76,380 100%
Vacancy $7,638 10%
Collection & Credit Loss $1,528 2%
EGI $67,214 88%
Expenses $25,541 38%
Reserves $1,344 2%
NOI $40,329 53%
Cap Rate 7.14%
Rental Rate PSF $0.95

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Sales Comparison Approach
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Data Point 3 – Street and Plat Map

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Sales Comparison Approach
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Data Point 4 – Building Sale
Name/Location: 124 S Harvard Street, Hemet, CA
Identification: APN 443-282-009, Riverside County, CA
Date of Sale: August 19, 2022
Documentation: Grant Deed # 365566, Riverside County, CA Grantor: Bell Family Enterprises, Inc
Grantee: Simon Chu And Kiki Chu 2006 Family Trust
Sale Price: $528,000
Sale Price PSF: $140.80
Terms: Buyer assumed existing debt of ±$435,000, paid
difference in cash to seller.

Cash Equivalent Sales Price: $528,000
Site Description: Size: ±6,534-ft²
Shape: Rectangular
Frontage: Harvard Street
Zoning: DV, Hemet, CA
Lot Position: Interior
Utilities: All available
Street Improvements: Two lane / asphalt
Topography: Level, at street grade
Functional Utility: Equivalent

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Sales Comparison Approach
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Improvement Description: Construction Type: Concrete Masonry Building Class: Average Class C
Designed Occupancy: Multi-tenant retail
Year Built: 1939
Effective Age: ±30 years
Stories: 1
Gross Building Area: ±3,750-ft²
Number of Units: 1
Sprinklers: No
Parking Spaces: 7
Improvement Ratio: N/A
Land to Building Ratio: 1.74:1
Parking Ratio: 1.87/1000
Floor Area Ratio: 0.57:1
Building Condition: Average
Income Data: Recon / Market:

History: Data Point 4 was acquired by the seller in May 2020 for a recorded $475,000. Prior to that sale, the property
transferred in April 2020 for a recorded $422,000. The sale was an off-market transaction between the buyer and the seller.

Verified: Public record
Comparable Data Point 4 is the sale of ±3,750-ft², single-tenant, retail building located in the downtown core of Hemet, CA. The Data Point was sold on August 19, 2022, for $528,000 or $140.80 per square foot. The buyer assumed the existing debt on the building, which was estimated at ±$435,000. The difference between the purchase price and the debt was paid to the seller. This sale could not be confirmed with either buyer or seller and represents information attained from public records.

Originally constructed in 1939, the effective age of the improvements is estimated at ±30 years.

Based on surrounding economic demographics, the property location is considered similar to the subject’s. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

Gross Income $51,750 100%
Vacancy $5,175 10%
Collection & Credit Loss $1,035 2%
EGI $45,540 88%
Expenses $17,305 38%
Reserves $911 2%
NOI $27,324 53%
Cap Rate 5.18%
Rental Rate PSF $1.15

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Sales Comparison Approach
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Data Point 4 – Street and Plat Map

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Sales Comparison Approach
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Data Point 5 – Building Sale
Name/Location: 211 N State Street, Hemet, CA
Identification: APN 443-194-024, Riverside County, CA
Date of Sale: December 7, 2020
Documentation: Grant Deed # 619114, Riverside County, CA Grantor: Mendoza Family 2011 Revocable Trust
Grantee: Merrick Kim and Marina Kheang Lynn
Sale Price: $950,000
Sale Price PSF: $87.82
Terms: ±32% seller financing @ 2.80%
Cash Equivalent Sales Price: $950,000
Site Description: Size: ±21,780-ft²
Shape: Rectangular
Frontage: State Street, Latham Street
Zoning: DC, Hemet, CA
Lot Position: Corner
Utilities: All available
Street Improvements: Two lane / asphalt
Topography: Level, at street grade
Functional Utility: Equivalent
Improvement Description: Construction Type: Wood frame

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Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 88 of 108
Building Class: Average Class D
Designed Occupancy: Multi-tenant office
Year Built: 1998
Effective Age: ±25 years
Stories: 2
Gross Building Area: ±10,817-ft²
Number of Units: 20
Sprinklers: No
Parking Spaces: 31
Improvement Ratio: 70.0%
Land to Building Ratio: 2.01:1
Parking Ratio: 2.87/1000
Floor Area Ratio: 0.50:1
Building Condition: Average
Income Data: Recon / Market:

History: Data Point 5 was acquired by the seller or a related entity in December 2005 for a recorded $1,150,000. The sale was a market-based transaction.

Verified: Listing broker
Comparable Data Point 5 isthe sale of ±10,817-ft², multi-tenant, office building located in Hemet, CA. The Data Point sold on December 7, 2020, for $950,000, or $87.82 per square foot, in an investment sale. At the time of acquisition, the property was occupied by twelve tenants.

Originally constructed in 1998, the effective age of the improvements is estimated at ±25 years.

The property location is considered similar compared to the subject based on surrounding economic demographics. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

Gross Income $129,804 100%
Vacancy $12,980 10%
Collection & Credit Loss $2,596 2%
EGI $114,228 88%
Expenses $43,406 38%
Reserves $2,285 2%
NOI $68,537 53%
Cap Rate 7.21%
Rental Rate PSF $1.00

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 89 of 108
Data Point 5 – Street and Plat Map

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 90 of 108
Adjustments
Adjustments to data points are required for significant differences that affect value. The modeling follows a sequence of adjustments in each sales comparison model. Using this sequence, I obtain intermediate price figures and apply subsequent adjustments to each previously adjusted price. These adjustments reflect the property's superiority or inferiority in terms of real property rights conveyed, financing, conditions of sale, market conditions, locational and physical characteristics. A standard method for extracting adjustments among comparable sales is matched-pairs' analysis, which aims to obtain market-based adjustments.

This involves isolating an adjustment feature among two or more sales, where the difference in adjusted prices represents the market's value perception for that feature.

In some cases, adjustment features cannot be isolated due to limited comparable data, unique property traits, or other factors. When this happens, alternative adjustment techniques are used, including cost-based adjustments, adjustments based on a market survey, adjustments based on published data, and quantitative adjustments. The following is a discussion of relevant adjustment factors.

Property Rights Conveyed
The subject property and the five data points are leased fee or market-based fee simple estates.

No adjustments have been applied to these data points.

Financing Terms
Seller financing often plays a role in transactions involving higher-risk real estate assets. It can facilitate sales by offering buyers more flexible financing options than those available through traditional lenders. In this analysis, three out of the five data points involved some level of seller financing, which is an important consideration as it can affect the reported sale price.

During the verification process, it was clarified that two of the transactions were cash sales. The remaining three, where seller financing was involved, featured market-based interest rates applicable to short- or medium-term loans. For Data Point 4 specifically, the buyer assumed existing debt from a previous sale. Given that these financing arrangements were reported to reflect market conditions and did not offer unusually favorable terms to the buyers, no adjustments to the financing terms are deemed necessary for these sales.

Conditions of Sale
The five comparable sales are identified as arm's-length transactions, and therefore, no adjustments to their values are required.

Market Conditions
The dataset encompasses five sales with closing dates ranging from October 2019 to August 2022. Market conditions were generally on an upward trend line until the end of 2021. A market conditions adjustment of 3% annually is applied to the sales that occurred prior to this date.

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 91 of 108
After the end of 2021, the market has remained under pressure from rising interest rates. That said, this real estate asset class is already valued at below replacement cost, and as such, no adjustments are applied after the year-end of 2021.

Effective Age & Condition
The effective age and condition of the improvements may affect the sale price. Typically, older improvements in inferior condition would command a lower price as the prospective buyer would deduct the cost of the needed repairs and alterations from the perceived market value.

Matched pairs are not relevant in this instance, as no pairs exist that can be used to isolate the adjustment factor for age/condition.

I have elected to apply a cost-based adjustment to the data. In the as-is condition, the subject is in average condition with an effective age of ±30 years. All the data points have varying effective ages and require adjustments. Given the simplistic design and equivalent functional utility of these commercial properties, effective age has an impact on their ability to attract rent and service end-user needs. The cost-based adjustment is based on the generalized aggregate vertical construction cost of ±$135/ft². The average expected improvement life is 55 years, as obtained from the Marshall and Swift depreciation tables.

I then compare each data point’s effective age to the subject, and the percentage difference is multiplied by the $135/ft² base cost. Since the unit of comparison is based on a price per square foot, no further conversion to the adjustment is necessary.

Location
Four of the five data points are located within immediate proximity of the subject property in the East Florida Avenue commercial corridor. No adjustments are applied to these data points.

Data Point 5 is situated in a less desirable part of Hemet on the northwest corner of State Street and E Latham Avenue. Despite having similar visibility, the site suffers from inferior access and reduced pedestrian utility compared to the subject property. To adjust for these deficiencies and align the value more closely to the subject’s location, a subjective upward adjustment of 20% is applied.

Building Size and Design
The design and size of commercial buildings significantly influence their suitability for prospective tenants. Based on tenant configuration, these buildings can generally be classified into two categories: multi-tenant and single-tenant configurations.

As noted earlier, the subject property is designed to accommodate multiple tenants. Within the set of comparables, three out of five are also multi-tenant buildings, and the variations in design among these comparables do not significantly affect the valuation, minimizing the need for adjustments based on design differences.

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 92 of 108
The subject property features a gross building area of ±14,514-ft². This is an atypically large building for the historic Downtown Village area. That said, the building has been managed primarily as an asset hold for future redevelopment. The property could have easily been subdivided into multiple smaller units.

Nevertheless, the building is large, requiring increased management and risk associated with stabilization. A downward 10% adjustment is made to Data Points 1, 2, and 4 due to size differentials relative to the subject. A 5% downward adjustment is applied to Data Point 3 and no adjustment is applied to Data Point 5 based on its ±10,817-ft² size.

Floor Area Ratios and Parcel Size
At ±15,682-ft², the calculated floor area percentage of the subject is 92.55%. In general, this is a high floor area ratio. However, this type of floor area ratio is typical for core commercial districts, especially in older portions of California. The comparable data set ranges between 36.40% floor area percentage to a high of 110.19% associated with Data Point 1 on E Florida Avenue. Based on the influences that parking has on occupancy for commercial retail buildings, I have elected to apply a site size adjustment to each of the data points in comparison to the subject. Four of the five data points have a lower FAR than the subject. The variance between these data points and the subject are differences is open space and onsite parking components. These components provide increased flexibility to the potential tenants but do not necessarily increase overall occupancy quality or other relevant factors when dealing with similar commercial buildings. This is not a significant difference among the data set but should be taken into consideration. Applying a 25% contributory value to the underlying land value, I have developed a surplus land adjustment for the model.

Using the difference between the subject’s FAR and the comparable data point and then multiplying this percentage difference by the size of the comparable site, I can calculate the surplus land advantage/disadvantage as it relates to the data point. The difference is then multiplied by the indicated land value, or $5.00 PSF. The gross adjustment is then divided by the GBA of the data point to obtain an adjustment in the appropriate unit of comparison.

The table on the following page illustrates the data matrix for the model.

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 93 of 108
Conclusion – As-Is
The subject has a competitive location in the marketplace and provides an average level of functional utility for the East Florida Avenue commercial corridor. The similarities between the subject and the comparables are the generalized locations and commercial retail use. The subject property is a functional design with good curb appeal.

Because of the number of data points, listings, age, and a lack of genuinely comparable buildings, I have performed a weighted average indication based on the overall comparability of the sales.

The following table illustrates the results.

Weighted DP-1 DP-2 DP-3 DP-4 DP-5
Average $80.89 $116.16 $91.87 $122.91 $91.17
$102.22 20% 20% 25% 25% 10%
Element Subject DP-1 DP-2 DP-3 DP-4 DP-5
Sale Price $280,000 $365,000 $565,000 $528,000 $950,000 Size (SF) 14,514 3,840 2,537 6,700 3,750 10,817
Unit of Comparison SF SF SF SF SF SF
Sales Price Sq. Ft. $72.92 $143.87 $84.33 $140.80 $87.82 Property Rights Fee Simple Leased Fee Leased Fee Fee Simple Fee Simple Fee Simple Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Terms Seller Cash Eq. Cash Eq. Seller Seller
Cash Equivalency $0 $0 $0 $0 $0
Conditions of Sale Arm's-Len Arm's-Len Arm's-Len Arm's-Len Arm's-Len Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Date of Value 4/30/24
Date of Sale 12/31/21 12/7/20 10/31/19 2/14/22 8/19/22 12/7/20 Adjustment $2.36 $9.50 $0.00 $0.00 $2.85
Subtotal $75.28 $153.37 $84.33 $140.80 $90.67
Effective Age / Condition 30 35 25 35 30 25
Adjustment $12.27 ($12.27) $12.27 $0.00 ($12.27)
Location Similar Similar Similar Similar Inferior
Adjustment $0.00 $0.00 $0.00 $0.00 $18.13
Building Size / Design 14,514 3,840 2,537 6,700 3,750 10,817 Adjustment ($7.53) ($15.34) ($4.22) ($14.08) $0.00
Parcel Size 15,682 3,485 6,970 7,841 6,534 21,780
FAR. Ratio 92.55% 110.19% 36.40% 85.45% 57.39% 49.66%
Adjustment $0.86 ($9.58) ($0.52) ($3.81) ($5.36)
Adjusted 10.93% -19.25% 8.94% -12.70% 3.81%
Sale Price Per Sq.Ft. $80.89 $116.17 $91.87 $122.91 $91.17 Average $ Sq.Ft $100.60
Median $ Sq.Ft. $91.87

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 94 of 108
In the weighting of the sales, the primary equal influence is given to Data Points 3 and 4 based on closing dates. Equal secondary influence is applied to Data Points 1 and 2, with minimal influence applied to Data Point 5 based on location. I have selected a value point indication aligned with the weighted average.

Using the results from these indicators, it is my opinion that the fee simple estate market value of the subject property, as-is, from the sales comparison valuation model as of April 30, 2024, is as follows:
±14,514-ft² @ $102.22 PSF = $1,483,621
Rounded $1,485,000
(One Million Four Hundred Eighty-Five Thousand Dollars)

23.B.

Income Approach
Ó2024 Capital Realty Analysts Inc. Page 95 of 108
The subject property, spanning ±14,514-ft², is zoned DV, Downtown Village, with a Mixed-Use land use designation. Traditionally operated with retail uses, it was fully occupied by two tenants on the date of value. As discussed in the highest and best use, the current owner has essentially held the property for future redevelopment or general asset appreciation without recapitalization. The existing tenants have maintained occupancy in the building for ±20 years, mostly because of below-market rental rates and asset size. The rental rates for the tenants have fluctuated through the years, and as of the date of value, the current rent roll is as follows:

The property owner did not provide income and expense information, and as illustrated in the rent roll, the bakery tenant maintains a leasehold encumbrance through November 2027. For this reason, the income and expense analysis will analyze the subject property as a fee-simple estate using market rent and market-based expense ratios for the reconstructed income and expense model.

For commercial properties, there are two main income-based valuation methods. These are direct capitalization and discounted cash flow analysis (DCF). The definitions of these two techniques are as follows:

Direct Capitalization
"A method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, either by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor. A capitalization technique that employs capitalization rates and multipliers extracted from sales. Only the first year's income is considered. Yield and value change are implied but not identified."22 In direct capitalization, and the overall capitalization rate is applied against the next year's projected NOI to yield a value estimate. This method typically works best for commercial properties when capitalization rates are available from comparable sales. The second primary technique, the discounted cash flow analysis (DCF), is defined as follows.

Discounted Cash Flow Analysis (DCF)
"Discounted Cash Flow Analysis (DCF): The procedure in which a discount rate is applied to a set of projected income streams and a reversion. The analyst specifies the quantity, variability, timing, and duration of the income streams as well as the quantity and timing of the reversion and discounts each to its present value at a specified yield rate."23 The DCF is typically considered the best technique for larger, investment-grade properties with multiple and complex leases. The subject property is modeled in an as-is condition. 22 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 23 Ibid Building - As-Is 204-208 E Florida Avenue, 108 N Harvard Street Suite # Tenant Lease Start Lease End SF Month Rent Type PSF Est. CAM/Mo. % Total SF Rpt Total Rent 108 Bakery Jan-04 Nov-27 714 $1,088.00 MG $1.52 $0.00 4.92% $1,088.00 204-208 Ballons and Things Apr-05 M-T-M 13,800 $3,744.00 MG $0.27 $0.00 95.08% $3,744.00 Building Total 14,514 $4,832.00 $0.33 $0.00 100.00% $4,832.00

23.B.

Income Approach
Ó2024 Capital Realty Analysts Inc. Page 96 of 108
Most acquisitions in the marketplace reflect similar buyers, and as such, the application of a DCF would result in a similar value estimate as that of the direct capitalization method given the requested fee simple estate value estimate. Based on the subject's existing condition, the direct capitalization method is selected as the appropriate income-based valuation method for this analysis.

Direct capitalization involves three major steps in the analysis: estimating gross income, deducting applicable expenses, and capitalizing net income into value.

Direct Capitalization Model Summary
Gross Income Estimate - Market Rent Overall Capitalization Rate Vacancy and Collection Loss Conclusion, Direct Capitalization Projected Expenses
Gross Income Estimate
From a market perspective, the existing bakery lease contract aligns with the current market. The renewal was signed in November 2022 and reflects a market-based agreement between a willing lessor and lessee. This represents a continuation of a long relationship, which will be used in the reconstructed income and expense model for this analysis.

For the remaining ±13,800-ft² space, the current occupancy agreement is based on a month-tomonth term. Based on my inspection of the space, the current tenant has adapted to the building with little regard for practicality or functional utility. The existing rental rate is ±$0.27 PSF plus reimbursements for trash services. This rental rate is so substantially below market that it clearly represents the property owner’s desire just to maintain occupancy until a new owner can be found, allowing the buyer to decide on use.

Using a market analysis of the broader inland area of Riverside County, I was able to extrapolate 24 leases that have occurred in the past several years. The parameters of the lease transactions were a minimum of 10,000-ft² and a maximum of 20,000-ft². The results of this analysis are illustrated in the table below.

23.B.

Income Approach
Ó2024 Capital Realty Analysts Inc. Page 97 of 108
The effective rent for properties within these parameters is ±$8.96 annually or ±$0.75 psf monthly. This rate aligns with the general rental rates of older spaces within the Hemet marketplace and is substantially below the rental rates associated with storage.

The income approach is a valuation model that reflects the property's potential to generate income, assuming it is managed effectively to achieve both physical and financial stability. For the 204-208 E Florida Avenue ±13,800-ft² space of the subject property, there is versatility in its potential configurations. It could be transformed into an indoor co-op shared by multiple tenants or divided into three distinct, smaller spaces, depending on what would be most effective in the market and feasible for the layout.

For this analysis, I will adopt an effective rent of $0.75 PSF based on a modified gross lease. This rental rate is based on the market analysis and assumes that the property will be actively managed to optimize its income potential. This rent assumes a proactive management strategy that not only attracts but also retains tenants, ensuring a steady revenue stream.

Stabilized gross potential income for the subject property is illustrated as follows:

The illustrated gross rental amount will be utilized in the reconstructed income and expense statement.

Vacancy and Collection Loss
A survey of market participants indicates that
a current vacancy rate of 7% is appropriate for
the Hemet submarket for retail buildings.

Because of the stabilized valuation
reconstructed income and expense model, I
will calculate the vacancy based on this rate,
which includes a collection loss component.

Projected Expenses
The subject's expenses are based on market expense data reported by comparable property owners and third-party data sources. The estimated market rent for the building is ±$0.79 PSF.

As previously discussed, I will develop a single direct capitalization model illustrating the subject in a stabilized fee simple condition.

Under the commercial building modified gross lease operating format, the property owner is responsible for all expenses related to the property except utilities, with no additional reimbursements for property taxes, insurance, or exterior maintenance of the building being applied.

Building - Market 204-208 E Florida Avenue, 108 N Harvard Street Suite # Tenant Lease Start Lease End SF Month Rent Type PSF Est. CAM/Mo. % Total SF Rpt Total Rent 108 Harvard Bakery Jan-04 Nov-27 714 $1,088.00 MG $1.52 $0.00 4.92% $1,088.00 204-208 E Florida Market Apr-05 M-T-M 13,800 $10,350.00 MG $0.75 $0.00 95.08% $10,350.00 Building Total 14,514 $11,438.00 $0.79 $0.00 100.00% $11,438.00

23.B.

Income Approach
Ó2024 Capital Realty Analysts Inc. Page 98 of 108
Reserves for replacement and capital items are the owner’s sole expense. The following section describes the assumptions applied to create the reconstructed operating statement expenses for the subject property.

Real Estate Taxes
Property taxes for the subject are calculated based upon the assumption that the subject is sold on the date of value for its estimated market value. In order to calculate the tax expense in the model, the following formula is applied: NOI (less taxes) / OAR + (tax rate) x the tax rate. The results of this calculation are shown as real estate tax expense. As illustrated, the effective tax rate for the subject property is estimated at ±1.14%. Based on public information, the annual fixed charges associated with the subject property total $239.02. This amount is added to the ±1.14% real property assessment.

Insurance
For the purposes of this analysis, I have applied a regional insurance cost of a rounded ±$0.40 PSF annually, or $5,806, based on a GBA of ±14,514-ft².

Services
Basic building services are provided for the building. I have applied a monthly $300, which includes pest control and other basic inspections.

Repair & Maintenance
The property owner is responsible for all property maintenance, interior and exterior. Based on the condition of improvements, construction technique, and components, ongoing maintenance is projected as average. For the purposes of the model, I will apply a market average of $0.55/ft² annually; this amount aligns with regional averages reported for similar properties.

Management
Historically, commercial properties of this type utilize a property management company. For this analysis model, the property owner manages the property, and the average management cost, including labor and contract services, comes in at ±4%. For the model, the amount of the administration and marketing expenses are based on regional averages of 4% of the effective gross income of the property.

Utilities
The subject property has separate meters for electrical, gas, and water. Each tenant is responsible for their own utilities. An annual utility charge of $1,500 is applied to the property owner, reflecting the potential vacancy and cost outside of those paid by the individual tenants.

Reserves
Reserves provide for the replacement of long-lived building components such as the roof, HVAC, floor coverings, parking resurfacing, etc. The property owner is responsible for 100% of the reserve expense items, which is typical in the market.

23.B.

Income Approach
Ó2024 Capital Realty Analysts Inc. Page 99 of 108
Based on the age-life method of depreciation, market reserves are currently in the 1% to 5% of EGI range for similar buildings. Given the age and construction technique, the reserves would align with the average of the range for the market or correlate at 3% of EGI.

Income and Expense – Conclusion
The building is in the Downtown Village commercial district of Hemet. In the review of the broader market comparables, the projected operating costs are reconcilable and aligned with market averages for other similar properties. In my opinion, the utilized expense projections should provide for a reliable analysis.

Overall Capitalization Rate
The final required component of the income analysis, and certainly the most influential, is the overall capitalization rate (OAR). There are two main methods of estimating an OAR, extraction from the market and extraction from investor surveys. Typically, the best and most reliable method of getting the correct OAR is extraction from the market. The following table illustrates the capitalization rates from the sales comparison data set.

As illustrated by the
capitalization rates, the Hemet
market area has average
investor demand, as the
indicated capitalization rates reflect lower risks than broader market indices. All of the sales were older transactions and there was limited financial information available. The demand and occupancy levels surrounding the subject are average, and the risks associated with the property are above average, mostly due to its size.

Under current market conditions, capitalization rates could be lower than current interest rates, but in practice, this rarely happens. Since capitalization rates measure a property's return on investment, if the capitalization rates are lower than the interest rates, it indicates that the property's return on investment is lower than the cost of borrowing money to acquire it, which would indicate a lack of financial feasibility.

Nevertheless, multiple influences determine investors’ motivations regarding acquiring similar assets. These include owner use, depreciation, alternative investment opportunities, and the amount of financing associated with the acquisition. In principle, this analysis assumes no financing and that the acquisition is based on cash equivalent acquisition. Clearly, recorded capitalization rates have not emerged in the sales data, indicating adjustments are required.

Using the Prime Rate as the benchmark of change, real interest rates have increased by 500 basis points since the 2nd quarter of 2020. Using the commercial rate of 6.54% as the trailing rate, an indicated rounded capitalization rate of 7.00% is considered appropriate. The table on the following page illustrates the direct capitalization model for the subject property in an as-if stabilized condition.

Capitalization Rates DP-1 DP-2 DP-3 DP-4 DP-5

6.52% 6.63% 7.14% 5.18% 7.21%
Average 6.54%
Median 6.63%

23.B.

Income Approach
Ó2024 Capital Realty Analysts Inc. Page 100 of 108
Conclusion – As-Is
Based on the available data, it is my opinion that the market value estimate of the fee simple estate, as derived from the income approach for the subject property as-is, on April 30, 2024, is as follows:
$1,225,000 (Rounded)
(One Million Two Hundred Twenty-Five Thousand Dollars)
204-208 E Florida Avenue, 108 N Harvard Street As Stabilized Size Subject Market $/SF
(SF) Rent/Mo. Rent/Yr. Annually
Rental Income 14,514 $11,438.00 $137,256 $9.46
Potential Gross Income $137,256 $9.46
Vacancy & Collection Loss 7.00% $9,608 $0.66
CAM Reimbursement $0
Effective Gross Income $127,648 $8.79
Expenses Lessee Lessor Total
Real Estate Taxes $0 $14,183 $14,183 $0.98
Insurance $0 $5,806 $5,806 $0.40
Services $0 $3,600 $3,600 $0.25
Repair & Maintenance $0 $8,000 $8,000 $0.55
Management $0 $5,106 $5,106 $0.35
Utilities $0 $1,500 $1,500 $0.10
Reserves $0 $3,829 $3,829 $0.26
Total Expenses $0 $42,024 $42,024 $2.90
$/SF/Mo $0.00 $0.24 $2.90
Net Operating Income $85,624 $5.90
Overall Capitalization Rate 7.00%
Value Estimate $1,223,195
Value Estimate, PSF $84.28
Space

23.B.

Reconciliation and Final Value Estimates
Ó2024 Capital Realty Analysts Inc. Page 101 of 108
For the subject’s as-is condition, I applied three primary models to obtain fee simple estate value indications for the subject property. These include the cost approach, sales comparison approach, and income approach-direct capitalization. The results of these models on April 30, 2024, are as follows:

The following is an analysis of the strengths and weaknesses of the approaches.

Cost Approach
The cost approach theory is the depreciated replacement cost of the improvements, combined with the fee simple value estimate of the as-if-vacant land value, yields a cost-based value indication. Typically, the cost approach is most relevant when the market is such that a typical buyer would consider the option of buying an existing property or building a new property.

Another situation where the cost approach warrants emphasis is for historical improvements.

Based on the chronological age, location and current condition, the cost approach provides reliable and supportive insight into the market value estimate, especially for a community looking to preserve traditional commercial components of specific historic districts.

The land value component of the subject property is well-supported and disproportionately high in relation to the overall property value. This conclusion gives additional weight to the cost analysis. The cost approach is given 55% emphasis in the selection of the final value estimate.

Sales Comparison Approach
The sales comparison model is most accurate when comparable improvements with similar uses and locations are available. The subject property improvements are competitively positioned for the Hemet marketplace. The subject's negative influence in comparison to the data set is its size.

At ±14,514-ft² , the subject is an atypically large building for this commercial section of Hemet.

Undoubtedly, the property will need to be subdivided into small units, or a distinctive reuse of the building will need to be applied such as convention, event, or other large gathering purposes.

The sales comparison model provides a supportive indication of the as-is condition because of the subjective nature of the building’s utility. I have given the sales comparison model 25% influence in the final value estimate.

Income Approach
A direct capitalization model was developed as the income-based indicator for the fee simple estate under the hypothetical stabilized condition to arrive at the as-is condition. Based on my inspection, the property will require a remodel and active management to stabilize economically.

The risk associated with that process is above market-based incentives, as financing and material costs are at a 20-year high.

Market Value Estimates DOV Cost Approach Sales Comparison Income Approach Final Value As-Is 30-Apr-24 $1,690,000 $1,485,000 $1,225,000 $1,545,000 Marketing/Exposure DOV Exposure Time Marketing Time
Market Value, As-Is 30-Apr-24 12 Months 6-12 Months

23.B.

Reconciliation and Final Value Estimates
Ó2024 Capital Realty Analysts Inc. Page 102 of 108
The risk components associated with the subject property are its lack of operating history and its underlying physical condition. The income approach accurately illustrates the subject property as an investment, which is not the most probable buyer. From a valuation standpoint, I have given the income approach model the least influence of 20% in the final value estimate with the cost approach and sales comparison models.

Marketing Time
Marketing time is defined as follows: “The estimated period of time it might take to sell the interest being appraised at the estimated market value level during the period immediately after the effective date of an appraisal.”24
Marketing times are increasing for properties similar to the subject. Typically, the marketing times of the comparable sales and the opinions expressed by owners, brokers, and developers range from 6 months to 12 months for this property type within the Hemet submarket. For this analysis, a 6-12-month marketing time is applied.

Exposure Time
Exposure time is defined as follows: “The estimated length of time 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; a retrospective opinion based on an analysis of past events assuming a competitive and open market.”25 In the as-is condition, the subject property would be acquired based on the cost and sales comparison models. Although the current days-on-market are 6-12 months, they are increasing.

Based on the property type, location, and external influences, a 12-month exposure period would be required.
24 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 25Ibid

23.B.

Ó2024 Capital Realty Analysts Inc. Page 103 of 108
Certification
I certify that, to the best of my knowledge and belief… The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions.

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

I have performed no 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.

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

My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of 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 this appraisal.

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 Uniform Standards of Professional Appraisal Practice of the Appraisal Institute.

My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

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

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

As of the date of this report, I James Dingman, have completed the Standards and Ethics Education Requirements for Practicing Affiliates of the Appraisal Institute.

I have made a personal inspection of the property that is the subject of this report.

No one has provided significant professional help in the preparation of this appraisal report.

James Dingman
State Certification No.: AG025869
Expiration Date: March 2, 2025

23.B.

Ó2024 Capital Realty Analysts Inc. Page 104 of 108
Addendum

23.B.

Ó2024 Capital Realty Analysts Inc. Page 105 of 108
James Dingman
General Experience
1996-Present CEO – Capital Realty Analysts
1993-1996 Appraiser – MacKenzie and Associates
1990-1993 Director of Food & Beverage Operations – Breckenridge Ski Corp., Breckenridge Co., Mt Hutt Ski & Alpine Co., Methven, New Zealand 1988-1990 Director of Operations, The Broe Co., San Diego, CA, Denver, CO 1984-1986 General Manager – Radisson Hotel, San Jose, CA 1979-1983 General Manager – Crown Colony Country Club, Lufkin, TX Education
1975-1977 University of New Hampshire, Berlin
Continuing Education
USPAP Update 2020/2023 Technical Inspection of Real Estate Special Purpose Properties Standards Part C
Advanced Sales & Cost Approaches Expert Witness
Automated Valuation Models Appraisal Procedures
Basic Income Capitalization Real Estate Appraisal Principles Standards of Professional Practice Real Estate Economics Real Estate Principles California Real Estate Law
Real Estate Finance Advanced Market Analysis / Highest and Best Use UASFLA-Yellow Book Advanced Applications & Case Studies Solar Photovoltaic Valuation
Licensing
State of California Certified General Real Estate Appraiser License Office of Real Estate Appraisers Appraiser Identification No. AG025869 California Real Estate Salesperson License Inactive
Representative List of Clients
Public Sector Private Sector Institutional Sector
United States of America Canyon Development Wells Fargo Bank Department of the Interior Westar Development Union Bank Small Business Administration Pulte Homes JP Morgan Chase Bureau of Indian Affairs UNOCAL 76 1st Bank
City of La Quinta Prudential Real Estate Montecito Bank & Trust City of Rancho Mirage Best Best & Krieger Bank of the West City of Palm Desert Guralnick & Gilliland US Bank Corp
City of Palm Springs Towbes Group East West Bank
Town of Yucca Valley Hotel Resort Properties Community West Bank County of Riverside Selzer, Ealy, Hephill & Blasdel Pacific Western Bank P.S. Unified School District Agua Caliente Band of Cahuilla Indians

23.B.

General Assumptions and Limiting Conditions
Ó2024 Capital Realty Analysts Inc. Page 106 of 108
Standards Rules (“S.R.”) 2-1 of the “Standards of Professional Appraisal Practice of the Appraisal Institute” requires the appraiser to “clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects the appraisal and indicate its impact on value”. While intended to be complete, inclusive, and relevant to this analysis, the report is subject to additional assumptions and conditions as presented within the body of the report where stated.

The following items are essential to completely understand the analysis and conclusions presented in this report.

1. No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated.

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

3. Responsible ownership and competent property management are assumed as expected by the complexity of the defined subject property.

4. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. The appraiser reserves the right to make adjustments to the analyses, opinions, and conclusions in this report, as may be required by consideration of additional or revised data that may become available.

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. If more current and complete information relevant to the subject property becomes available, the appraiser reserves the right to review such information and adjust the analysis and conclusions.

7. 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 obtaining the engineering studies that may be required to discover them.

8. It is assumed that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report.

9. It is assumed that the property conforms to all applicable zoning and use regulations and restrictions unless nonconformity has been identified, described, and considered in the appraisal report.

10. It is assumed that all required licenses, certificates of occupancy, consents, and other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based.

23.B.

General Assumptions and Limiting Conditions
Ó2024 Capital Realty Analysts Inc. Page 107 of 108

11. It is assumed that the utilization of the land and improvements is confined within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report.

12. Unless otherwise stated in this report, the appraiser did not observe the existence of hazardous materials, which may or may not be present on the subject property. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation, and other potentially hazardous materials may affect the value of the property. The value estimated is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. The intended user is urged to retain an expert in this field, if desired.

13. Any allocation of the total value estimated in this report between the land and the improvements applies only under the stated program of utilization. The separate allocations for land and building must not be used in conjunction with any other appraisal and are invalid if so used.

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

15. The appraiser herein by reason of this appraisal is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made.

16. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser.

17. Improved Properties – The American with Disabilities Act (ADA) became effective January 26, 1992. I (we) have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since I (we) have no direct evidence relating to this issue I (we) did not consider possible non-compliance with the requirements of ADA in estimating the value of the property.

18. Existing and proposed improvements and their subsequent value estimates in this report are subject to the improvements being completed in the manner represented to the appraiser(s) and described in the Improvement Description section of this report.

23.B.

General Assumptions and Limiting Conditions
Ó2024 Capital Realty Analysts Inc. Page 108 of 108

19. The legal descriptions, site sizes, dimensions, and/or other surveys provided to the appraiser, including County Tax Plats, are assumed to be accurate. Should a survey prove these characteristics inaccurate it may be necessary for the appraisal to be adjusted.

20. The forecasts, projections, or operation estimates contained herein are based upon current market conditions, anticipated short-term supply and demand facts, and a continued stable economy. These forecasts are, therefore, subject to change in the future.

21. It is assumed that all entitlements required for development of this property, if applicable, have been or can be obtained within a reasonable timeframe.

22. The appraiser undertaking this assignment warrants that he is competent in properly identifying the appraisal problem and has the necessary knowledge and experience to complete the assignment.

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

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

25. The property, which is the subject of the appraisal, is within a geographic area prone to earthquakes and other seismic disturbances. Except as specifically indicated in the report, no seismic or geologic studies have been provided to the appraiser concerning the geologic and/or seismic condition of the subject properties. The appraiser assumes no responsibility for the possible effect on the subject properties of seismic activity and/or earthquakes.

26. No consideration has been given in this appraisal as to the value of the property located on the premises considered by the appraiser to be personal property (unless otherwise stated), or has the appraiser given consideration to the costs of moving or relocating such personal property; only the real property has been considered in this appraisal.

27. Copyright of this material belongs exclusively to Capital Realty Analysts, Inc. This copy is intended for private use as defined in the body of the report for the designated client only.

No person or entity is permitted to reproduce this material, in whole or in part, for distribution either free of charge or for “commercial purposes”, unless that person or entity has a signed license agreement with Capital Realty Analysts, Inc. Reproduction for commercial purposes is reproduction for the purposes of sale, rent, trade, or distribution, or posting it on the Internet or on electronic bulletin boards.

23.B.

±7,841-ft² Vacant Commercial Property
222 E Florida Avenue, Hemet, CA 92543
Appraisal Report
Market Value Estimate
Fee Simple Estate – As-Is
Prepared For: Date of Appraisal Report:

The City of Hemet May 20, 2024
C/o Mr. Steven Pacifico Graham, Esq. Date of Value:

Cole Huber LLP April 30, 2024
2855 East Guasti Road CRA File #: 24-2539
Ontario, CA 91761

23.B.

May 20, 2024
The City of Hemet
C/o Mr. Steven Pacifico Graham
Cole Huber LLP
2855 East Guasti Road
Ontario, CA 91761
RE: A Market Value Estimate of the Fee Simple Estate, As-Is, of a ±7,841-ft² Vacant Commercial Property Located at 222 E Florida Avenue, Hemet, CA 92543. Also Known as Riverside County Assessor’s Parcel Number 443-232-009.

Mr. Graham:

With client and property owner authorization, the following is a prepared Appraisal Report presenting a market value estimate opinion of the subject property's fee simple estate, as-is, on a date of value of April 30, 2024. The Appraisal Report utilizes a single valuation model, and the analysis and subsequent value estimates presented in the Appraisal Report adhere to the appraisal guidelines established by the 2024 Uniform Standards of Professional Appraisal Practice. The depth and scope of reporting are consistent with the intended use of the Appraisal Report.

The subject property is a ±7,841-ft², commercially zoned parcel located on the northwest corner of E Florida Avenue and N Carmelita Street in the Downtown Village District of Hemet, CA.

According to the City of Hemet, the subject property is zoned DV, Downtown Village, with a land use designation of Mixed Use. The site is a vacant parcel adjacent to other commercial uses in the historic commercial core. The property was previously developed, and it is currently enclosed with a chain-link fence. The site has access from the west side of N Carmelita Street and the north side of E Florida Avenue.

The title to the property is vested with Sheriff Issa. The current owner or a related entity acquired the property in June 2004 for a recorded $333,500. The property has a 2023 assessed value of $86,908 or ±$11.08 PSF. As of the date of value, the subject property is an active listing with Coleman and Associates for an asking price of $350,000. On the date of value, the property is considered readily marketable.

The requested value estimate is the fee simple estate in the as-is condition on a date of value of April 30, 2024. For this Appraisal Report, I have applied the sales comparison model in this appraisal assignment. The scope of the analysis is appropriate in relation to the significance of the appraisal problem.

It is my objective that the presented appraisal analysis, along with the opinions and conclusions, be those of a disinterested third party. The Appraisal Report was performed in conformance with acceptable principles and techniques in the valuation of real property in accordance with applicable California State law. All appropriate data deemed pertinent to solving the appraisal problem was collected, confirmed, and reported in compliance with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics of the Appraisal Institute.

23.B.

May 20, 2024

I have based this Appraisal Report on current economic conditions as of the date of value. The report identifies the subject property and the market area. It explains the market data and analysis leading to my estimates of value. It cannot be completely understood without the Assumptions and Limiting Conditions section of this report. The intended users of this report should read this section before relying on any information or analysis presented in this report.

This report is subject to the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP).

Based on the available data, it is my opinion that the requested fee simple estate value estimate of the subject property, as-is, on a date of April 30, 2024, is as follows:
$190,000
(One Hundred Ninety Thousand Dollars)
I have no personal interest in the subject property, either past, present, or contemplated, and I certify that my employment was not dependent upon producing a particular value or value within a given range. No fee received or receivable in the future for the employment of services is in any way contingent on the opinions reported herein.

If the intended users of this report have any questions concerning the conclusions or analysis presented, please contact me directly, and thank you for the opportunity to be of service.

Respectfully submitted,
Capital Realty Analysts, Inc
James Dingman
State Certification No.: AG025869
Expiration Date: March 2, 2025

23.B.

Table of Contents
Ó2024 Capital Realty Analysts Inc. Page 4 of 58
SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS ............................................................................................ 5 SCOPE OF THE APPRAISAL.................................................................................................................................................. 7 APPRAISAL PROBLEM....................................................................................................................................................................................7 SPECIAL ASSUMPTIONS .................................................................................................................................................................................8 HISTORY OF THE SUBJECT PROPERTY.........................................................................................................................10 LEGAL DESCRIPTION ..........................................................................................................................................................11 REGIONAL ANALYSIS – SAN JACINTO VALLEY, CA.....................................................................................................12 CITY ANALYSIS – HEMET, CA............................................................................................................................................16 NEIGHBORHOOD – MARKET ANALYSIS........................................................................................................................19 SITE ANALYSIS ......................................................................................................................................................................23 HIGHEST AND BEST USE....................................................................................................................................................32 APPRAISAL PROCESS ..........................................................................................................................................................35 SALES COMPARISON APPROACH............................................................................................................................................................... 35 SALES COMPARISON APPROACH ....................................................................................................................................36 DATA POINT 1 – LAND SALE..................................................................................................................................................................... 39 DATA POINT 2 – LAND SALE..................................................................................................................................................................... 41 DATA POINT 3 – LAND SALE..................................................................................................................................................................... 43 DATA POINT 4 – LAND SALE..................................................................................................................................................................... 45 DATA POINT 5 – LAND SALE..................................................................................................................................................................... 47 CONCLUSION – AS-IF-VACANT.................................................................................................................................................................. 52

23.B.

Summary of Important Facts and Conclusions
Ó2024 Capital Realty Analysts Inc. Page 5 of 58
Client: The City of Hemet
Intended Users: Client, legal counsel, and city council Property Description: Vacant commercial property
Location: 222 E Florida Avenue, Hemet, CA 92543
Location Coordinates: 33°44’52.42"N 116°58’10.93"W
Size: ±0.18 acres ±7,841-ft²
Elevation/Flood Zone: 1,597’ above sea level Zone X (shaded) APN: 443-232-009, Riverside County, CA
Census Tract: 43401/2007
Type of Report: Appraisal Report
Purpose of the Appraisal: Market value estimates of the fee simple estate, as-is Intended Use: The intended use of this appraisal is for potential acquisition and internal decision-making purposes.

Date of Valuation Date of Inspection Date of Report
April 30, 2024 April 30, 2024 May 20, 2024
Owner of Record: Sheriff Issa
Ownership History: The current owner or a related entity acquired the property in June 2004 for a recorded $333,500. The property is
currently an active listing for $350,000.

Existing Improvements: None—previously developed lot
Subject Property

23.B.

Summary of Important Facts and Conclusions
Ó2024 Capital Realty Analysts Inc. Page 6 of 58
Proposed Improvements: None
Topography: Level, at street grade
Zoning: DV, Downtown Village, City of Hemet SP 16-001
Land Use: Mixed Use
Utilities: All available
Easements & Encumbrances: No title report for the subject property was presented for review. This report assumes there are no atypical
easements, conditions, title exceptions or encumbrances that would have an adverse impact on the marketability, functional utility, or sale of the subject site. A legal opinion could be obtained from a qualified title expert as to the actual marketability of the subject’s title.

Highest and Best Use: To remain as-is
Final Value Estimate: Based on the available data, it is my opinion that the requested value estimate of the subject property, as-is, on a date of value of April 30, 2024, is as follows:
$190,000
(One Hundred Ninety Thousand Dollars)
Picture 1 – Viewing southeast across the subject property

23.B.

Scope of the Appraisal
Ó2024 Capital Realty Analysts Inc. Page 7 of 58
Appraisal Problem
The subject property is a ±7,841-ft², commercially zoned parcel located on the northwest corner of E Florida Avenue and N Carmelita Street in the Downtown Village District of Hemet, CA.

According to the City of Hemet, the subject property is zoned DV, Downtown Village, with a land use designation of Mixed Use. The site is a vacant parcel adjacent to other commercial uses in the historic commercial core. The property was previously developed, and it is currently enclosed by a chain-link fence. The site has access from the west side of N Carmelita Street and the north side of E Florida Avenue.

The title to the property is vested with Sheriff Issa. The current owner or a related entity acquired the property in June 2004 for a recorded $333,500. The property has a 2023 assessed value of $86,908 or ±$11.08 PSF. As of the date of value, the subject property is an active listing with Coleman and Associates for an asking price of $350,000. On the date of value, the property is considered readily marketable.

The client has requested the value estimate of the fee simple estate in the as-is condition. The intended use of this Appraisal Report is for potential acquisition and internal decisions regarding the subject property. On April 30, 2024, a property inspection occurred, which consisted of a walk-around of the site and photographs. For this Appraisal Report, I have applied the sales comparison model in the appraisal assignment. The scope of the analysis is appropriate in relation to the significance of the appraisal problem.

It is my objective that the presented appraisal analysis, along with the opinions and conclusions, be those of a disinterested third party. The Appraisal Report was performed in conformance with acceptable principles and techniques in the valuation of real property in accordance with applicable California State law. All appropriate data deemed pertinent to solving the appraisal problem was collected, confirmed, and reported in compliance with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics of the Appraisal Institute. This report is subject to the requirements of the Code of Professional Ethics and Uniform Standards of Professional Appraisal Practice of the Appraisal Institute.

Scope of Work
In preparing the appraisal, I performed the following steps and applied these special assumptions and limiting conditions:

Intended Users: Client, legal counsel, and city council Intended Use: The intended use of this appraisal is for potential acquisition and internal decision-making purposes.

Inspection: The physical inspection occurred on April 30, 2024.

Information: I have gathered information on comparable property sales in the marketplace. I have supplemented the analysis as
necessary with market-based information.

Confirmation: I have confirmed all comparable data points used in this analysis with parties involved in the related transaction.

23.B.

Scope of the Appraisal
Ó2024 Capital Realty Analysts Inc. Page 8 of 58
Analysis: I have analyzed the researched data and applied the sales comparison model to arrive at my opinion of market value for the subject property.

Special Assumptions

1. The appraiser was not provided with a soils report for the subject property. A physical inspection of the subject site was made for this analysis. The conclusions assume that no toxic or hazardous materials are present on any section of the subject property. The appraiser is not qualified to make a
determination as to the existence or nonexistence of
hazardous material on the subject property.

2. An environmental site assessment was not made available for this analysis. I am not qualified to detect hazardous waste or toxic material. Any comments that might suggest the
possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous wastes or toxic material. Such determination requires investigation by a qualified expert in the field of environmental assessment.

3. Cultural and archaeological artifacts for the subject property were not made available for review. This analysis assumes there are no cultural or archaeological impacts associated with the subject property that would impact the utility,
marketability, or market value estimate of the subject
property.

Hypothetical Conditions: None
Extraordinary Assumptions: None

23.B.

Scope of Work – Definitions
Ó2024 Capital Realty Analysts Inc. Page 9 of 58
Market Value
The most probable price that 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:

Ø Buyer and seller are typically motivated;
Ø Both parties are well informed or well advised, and acting in what they consider their best interests;
Ø A reasonable time is allowed for exposure on the open market; Ø Payment is made in terms of cash in U.S. dollars or in terms of financial arrangement comparable thereto; and
Ø 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.1 Fee Simple Estate
“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.”2
Leased Fee Estate
“An ownership interest held by a landlord with the rights of use an occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease.”3
Leasehold Estate
“The interest held by the lessee (tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.”4 Market Rent
“The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs)."5
1 [Title XI, FIRREA, 34.42 (f)]
2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 3 Ibid 4 Ibid
5 Ibid

23.B.

Introduction – Description of the Subject Property
Ó2024 Capital Realty Analysts Inc. Page 10 of 58
Picture 2 – Viewing south across the subject property
The subject property is a ±7,841-ft², commercially zoned parcel located on the northwest corner of E Florida Avenue and N Carmelita Street in the Downtown Village District of Hemet, CA.

According to the City of Hemet, the subject property is zoned DV, Downtown Village, with a land use designation of Mixed Use. The site is a vacant parcel adjacent to other commercial uses in the historic commercial core. The property was previously developed, and it is currently surrounded by a chain-link fence. The site has access from the west side of N Carmelita Street and the north side of E Florida Avenue.

The Downtown Village District is Hemet's historic commercial core. The subject property is adjacent to the historic Hemet Theater, which was constructed in 1921 and is one of the oldest movie theaters in the nation.

The title to the property is vested with Sheriff Issa. The current owner or a related entity acquired the property in June 2004 for a recorded $333,500. The property has a 2023 assessed value of $86,908 or ±$11.08 PSF. As of the date of value, the subject property is an active listing with Coleman and Associates for an asking price of $350,000. On the date of value, the property is considered readily marketable.

23.B.

Introduction – Description of the Subject Property
Ó2024 Capital Realty Analysts Inc. Page 11 of 58
Legal Description
Lot 16 Blk 14 Mb 015/702 Sd Hemet
Assessor’s Parcel Number / Total Parcel Size
APN 443-232-009, Riverside County, CA ±0.18 acres / ±7,841-ft² Census Tract Number
43401/2007
Statement of Ownership
According to public records, the title to the subject property is vested with Sheriff Issa.

Easements and Encumbrances
No title report for the subject property was presented for review. This report assumes there are no atypical easements, conditions, title exceptions or encumbrances that would have an adverse impact on the marketability, functional utility, or sale of the subject site. A legal opinion could be obtained from a qualified title expert as to the actual marketability of the subject’s title.

Zoning
According to the City of Hemet’s Planning Department, the subject property is zoned DV, Downtown Village, with a land use designation of Mixed Use.

Assessment and Taxation
In California, Proposition 13, ratified in June 1978,
regulates real property taxation. The tax rate is set at 1% of the assessed value with an additional 0.25% for
previously voter-approved debts. For properties
acquired post-March 1, 1975, assessments hinge on
the market value at purchase. Assessed values have a
yearly inflation cap of 2%. The assessment of the
subject property, based on its condition and utility,
appears below market value but aligns with
Proposition 13's guidelines. The tax rate is consistent with similar properties in this section of Riverside
County, CA.

APN 443-232-009
Land Value $74,843
Improvement Value $12,065
Personal Property $0
Total $86,908
Basic Property Taxes %
Basic 1% (Prop 13/AB8) Taxes $869.08 1.00%
HEMET UNIFIED SCHOOL $104.29 0.12%
MWD EAST 1301999 $3.04 0.00%
MT SAN JACINTO JR COLLEGE $11.47 0.01%
Total Basic Property Taxes $987.88 1.14%
Fixed Charges %
FLD CNTL STORMWATER/CLEANWATER $8.10 0.01%
EMWD INFRASTRUCTURE AVAIL CHG $10.00 0.01%
MWD STANDBY EAST $6.94 0.01%
HEMET LANDSCAPE DIST 19 $17.82 0.02%
HEMET LTG DIST 19 $67.22 0.08%
Total Fixed Charges $110.08 0.13%
Total Taxes $1,097.96 1.26%

23.B.

Regional Analysis – San Jacinto Valley, CA
Ó2024 Capital Realty Analysts Inc. Page 12 of 58
San Jacinto Valley
The San Jacinto Valley is located in Riverside County ±80 miles east of Los Angeles, ±320 miles west of Phoenix, and ±105 miles north of the Mexican border. The valley is at the base of the San Jacinto Mountains to the east and the Santa Rosa Hills to the south. San Gorgonio Pass is to the north. The San Jacinto River traverses the valley which is a part of the larger Inland Empire region of Southern California. The valley includes two incorporated cities, Hemet and San Jacinto, along with the unincorporated communities of East Hemet, Gilman Hot Springs, Green Acres, Homeland, Soboba Hot Springs, Valle Vista, and Winchester.

History
For over 1,000 years, Serrano and Cahuilla tribes occupied the area near springs and streams which flowed from the San Jacinto Mountains. The first Spanish explorers entered the San Jacinto Valley in the early 1770s. In 1774 and 1775, Colonel Juan Bautista de Anza led two expeditions from Mexico, crossing the Colorado River at Yuma and continuing across the Borrego Desert and into Coyote Canyon. For a few years, the Valley was on the main overland route to California. In the early 19th century, the area became a cattle ranch for the Spanish Mission San Luis Rey, which is located in the modern-day city of Oceanside. The area was known as Rancho San Jacinto. When the missions were broken up by the Mexican government, the land was given to José Antonio Estudillo in 1842.

Subject Property

23.B.

Regional Analysis – San Jacinto Valley, CA
Ó2024 Capital Realty Analysts Inc. Page 13 of 58
In the late 1860s, the Estudillo family began selling portions of their San Jacinto ranch, and the first American settlers moved into the Valley. The lands sold by the Estudillo family eventually became the towns of San Jacinto and Hemet.

By the 1870s, the Valley's economy had moved from cattle ranching to horticulture. Early ranchers grew grain, then apricots, walnuts, peaches, olives and citrus production came to dominate the area. Turkey ranching and dairy farming became prominent in the 1930s. Besides agriculture, several local lime kilns added to the local economy before World War I.

Beginning around 1900, tourism began impacting the Valley. Natural hot springs along the north side of the Valley stimulated the development of several tourist resorts with hotels, guest cabins and bath houses. Gilman Hot Springs was the best-known resort. It was originally developed in the 1880s, and was acquired in 1913 by the Gilman family, who ran the resort for 65 years.

Soboba Hot Springs was also popular, with its Indian-style cottages scattered along the hillside.

Further west was Eden Hot Springs which, at its height in the 1940s, was 654 acres with a hotel, bathhouse, cottages, and swimming pool. All these resorts had closed by the late 1970s.

Today, the San Jacinto Valley maintains a reputation as a working-class, agricultural area, and it is considered a tourism destination in Southern California. The Valley has seen substantial residential development as a result of population growth and housing demand in the Inland Empire. There are extensive outdoor recreational opportunities within both mountainous and desert terrain along with several lakes. Additionally, the area hosts several seasonal and multicultural events such as the Ramona Pageant, the San Jacinto Agricultural Festival, and the Annual Soboba Inter-Tribal Pow Wow.

Demographics
According to the California Department of Finance, the population of the incorporated cities of the San Jacinto Valley is estimated at ±143,201, a 0.11% increase from the 2020 figure. Annual growth patterns in the area have generally been on an upward trend. The combined valley population is estimated to be ±195,000. The median age of valley residents is ±34 years.

The median income of the valley is ±$62,440, below the state median of ±$91,905 and the county median of ±$84,505. There is an average of ±3.23 persons per household with ±27% being under the age of 18. The average poverty rate in the San Jacinto Valley is ±16%.

Economy
Education and healthcare, retail, construction, tourism, and manufacturing are the main industries in the San Jacinto Valley. As of March 2024, the regional unemployment rate was reported to be 6.7%. Out of all the communities in the region, Hemet had the highest level of unemployment at 7.2%, and Winchester had the lowest level of unemployment at 4.1%. The region’s economy is heavily dependent upon tourism, and business closures resulting from the COVID-19 pandemic significantly increased unemployment. Most areas have reached prepandemic unemployment levels. The table below is an overview of the San Jacinto Valley’s labor market for March 2024.

23.B.

Regional Analysis – San Jacinto Valley, CA
Ó2024 Capital Realty Analysts Inc. Page 14 of 58
The number of total workers in the San Jacinto Valley is somewhat undefinable as illegal immigrants make up a large portion of the labor market. More than 70,000 illegal workers are estimated to be participating in Riverside County’s work force. In the San Jacinto Valley, this segment of the workforce is considered vital to the hospitality, construction, agricultural, and landscaping industries.

The San Jacinto Valley is located within District 5 of Riverside County. This district has launched several programs to address labor shortages. The programs offer monetary incentives for businesses to hire local residents, senior citizens, and veterans. One program, the District 5 Employer Connect Program, provides hiring assistance, retention support and up to $9,600 in wage reimbursement. The programs are administered through the Riverside County Workforce Development Board.

There are two active chambers of commerce in the valley: The Hemet San Jacinto Valley Chamber of Commerce and the Greater San Jacinto Valley Chamber of Commerce. Their goals are to attract, develop, promote, and retain local businesses through communication, networking, training, and program development and to influence public policy and advocate for legislative issues that promote local business and job growth.

Several areas within the San Jacinto Valley are opportunity zones where investors can receive tax benefits. East Hemet, Hemet, Homeland, Winchester, and San Jacinto make up several of the 49 opportunity zones throughout Riverside County. According to the Riverside County Office of Economic Development, one of the top priorities for the valley is to improve infrastructure availability for business attraction. Planned improvements to State Highway 79 will help provide an impetus for development in the region.

The one sector of the San Jacinto Valley economy that has continued growth despite the deep recession and slow recovery has been healthcare. Healthcare is an important economic driver in that much of the funding comes from insurance policies and federal programs like Medicare.

There are nine hospitals and clinics and a range of senior living communities in the neighboring cities of Hemet and San Jacinto. An increase of retirees in the region will continue to place demands on the healthcare network.

Agriculture, irrigated by the nearby Colorado River, has traditionally been an important component of the Valley’s economy. According to the Riverside County 2022 Agricultural Production report, annual crop production increased to $167 million, up from $166 million in 2021.

East Hemet 9,100 8,500 600 7.1%
Hemet 31,000 28,800 2,200 7.2%
Homeland 2,900 2,700 200 6.5%
San Jacinto 20,800 19,400 1,400 7.0%
Valle Vista 8,300 7,800 400 5.2%
Winchester 1,300 1,300 100 4.1%
San Jacinto Valley 73,400 68,500 4,900 6.7%
Area Name Labor Force Employed Unemployed Unemployment
Rate

23.B.

Regional Analysis – San Jacinto Valley, CA
Ó2024 Capital Realty Analysts Inc. Page 15 of 58
Riverside County is the 14th largest agricultural county in the state, with a gross value of $1.49 billion. Of the four agricultural districts within the county, the San Jacinto Valley accounted for 11% of countywide production in 2022.

Housing
Despite the regional economic damage caused by the COVID-19 pandemic, the housing market has held up fairly well. Median home prices in the San Jacinto Valley reached new highs during 2021 and 2022 driven by pandemic-induced demand for housing in less populated regions.

Despite the small region, the housing market is robust and provides lower priced homes in Riverside County. The median home price within the valley increased 9.2% year-over-year in April 2024. Within the San Jacinto Valley, Hemet saw the largest year-over-year increase in median home prices in April 2024. Winchester reported the only year-over-year decrease at -3.4%. As with many locations throughout California, the market remains undersupplied.

Conclusion
The San Jacinto Valley’s economy relies on a mix of industries. The region is projected to continue to grow rapidly (in relation to neighboring regions) over the next few decades as demand for affordable housing continues and the large Baby Boomer demographic is now entering retirement age. Some areas within the San Jacinto Valley have historically attracted retirees as it is relatively affordable. The region continues to enhance its appeal with multiple demographics by configuring planned housing developments ranging from upper middle to high-end offering amenities such as parks, community centers, and recreational facilities. With additional growth in the population and planned infrastructure improvements, the economy will continue to diversify.

As with other less populated areas, the San Jacinto Valley experienced a pandemic-induced real estate boom. In the post-pandemic economy, the San Jacinto Valley is positioned for a modest growth forecast as stabilization of the residential and labor markets continue to take hold.

San Jacinto Valley 199 $488,544 $447,500 9.2
Hemet 103 $445,000 $420,250 5.9
Homeland 11 $560,990 N/A N/A
San Jacinto 32 $465,000 $454,495 2.3
Winchester 53 $597,500 $618,447 -3.4
San Jacinto Valley Median Home Sale Prices
Region No. Sold
Median Price
April 2024
Median Price
April 2023
▲% Y-O-Y

23.B.

City Analysis – Hemet, CA
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Overview
Hemet, California, located in central Riverside County at the southern end of the San Jacinto Valley, is ±88 miles east of Los Angeles and ±70 miles northwest of San Diego. Hemet nestles against the foothills of the San Jacinto Mountains, the highest portion of the Peninsula Ranges that run southward into Mexico. The often snow-capped ±10,804-foot San Jacinto Peak rises above Hemet and provides a scenic backdrop to the desert floor. Hemet is almost surrounded by mountain vistas in all directions, with the Palomar Mountains to the west and the Santa Rosa and Cahuilla Mountains to the southeast. Hemet is one of two population centers in the San Jacinto Valley, the other being the City of San Jacinto. Hemet has an area of ±29 square miles which is about half of the San Jacinto Valley.

The City began developing in 1858 as a farm settlement. In 1887, two settlers formed the Lake Hemet Water Company and the Lake Hemet Land Company to establish a reliable water supply and for speculative land development. Between 1891 and 1895 the Hemet Dam was constructed and brought more settlers who worked on the dam. By 1894, there were several general stores, hotels, numerous businesses, and a newspaper, and many farmers had established alfalfa, fruit orchards, and row crops in their fields. In 1910, the city incorporated. With a railroad spur running from Riverside, Hemet became a trading center for San Jacinto Valley agriculture. The Hemet Turkey Show was established in 1936 which eventually became the Agricultural District Farmer’s Fair of Riverside County. During WWII, the Ryan School for Aeronautics trained about 6,000 pilots for the Army Air Force. Hemet Ryan Airport exists today at the site of the original Ryan Flight School.

Subject Property

23.B.

City Analysis – Hemet, CA
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Since 1923, one of the valley's chief claims to fame has been the annual Ramona Pageant. The incident which inspired Helen Hunt Jackson to write Ramona occurred in the valley, and the production of a pageant based on the story was discussed for a number of years as a method of promoting the valley. From 1923 onward, with only brief interruptions during the Depression and during World War II, the people of Hemet and San Jacinto have joined to stage this outdoor pageant each spring.

The character of Hemet began to change dramatically in the early 1960s with the development of Sierra Dawn, the country's first "mobile home subdivision" in which individual lots were sold.

Other mobile home parks and retirement housing developments followed, and Hemet became well known as a retirement community. Hemet today retains much of its retirement orientation but is also becoming home to significant numbers of younger families who provide services to the senior population or who are simply fleeing the more urbanized areas of Southern California.

Demographics
According to the California Department of Finance, the 2024 population of Hemet is estimated at ±89,663. This is a slight increase of ±0.46% from the 2020 US Census and a ±14.0% increase from the 2010 Census figure. The median age of Hemet is ±39. The median household income is ±$49,901 with an average household size of ±2.87.

Governance
Hemet, California, operates under a council-manager form of government. The City Council consists of five members elected at large by the voters of Hemet. The council members serve staggered four-year terms, with elections held every two years for either two or three seats. The Mayor of Hemet is chosen by the City Council from among its members. The city manager is appointed by the City Council.

Education
The Hemet Unified School District serves students in Hemet as well as several neighboring communities. It operates 16 elementary schools, 8 middle schools, 5 high schools, and 4 alternative education programs. The district also has specialized programs and schools focusing on areas such as arts, sciences, and career and technical education.

Transportation
Hemet is accessible via ground. Two California state highways cross the city: State Route 74 is the main east-west corridor which follows Florida Avenue, and State Route 79, a north-south highway which follows Florida Avenue for a few miles in the city. Hemet does have an airport, the Hemet-Ryan Airport, though it does not provide commercial service.

The primary public transportation provider in Hemet is the Riverside Transit Agency, which operates bus services throughout Riverside County. RTA offers fixed-route buses, paratransit services for individuals with disabilities, commuter services, and on-demand service within Hemet and San Jacinto. The bus system serves key areas within Hemet and connects to neighboring communities.

23.B.

City Analysis – Hemet, CA
Ó2024 Capital Realty Analysts Inc. Page 18 of 58
Economy
The primary employment sectors in Hemet are education and health services, hospitality and tourism, retail trade, and finance and real estate. The unemployment rate Hemet as of March 2024 was 7.2%. This compares to a county unemployment rate of 5.2% and a state unemployment rate of 5.3%.

23.B.

Neighborhood – Market Analysis
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Overview
The purpose of a market analysis is to give an overview of the competitive environment in which the subject property is located. The goal is to quantify the marketing and exposure periods for the subject property if offered in the market at a market value price. The first steps in this process are to delineate and describe the subject market area, identify the various components of the subject, and review the history of the submarket.

The subject property is located on the northwest corner of E Florida Avenue and N Carmelita Street inside the city limits of Hemet, CA. The subject property is a vacant commercial property that has been previously developed and is easterly adjacent the Historic Hemet Theater. The property is located in the Downtown Village District, bounded by Devonshire Avenue on the north, Buena Vista Street on the east, Kimball Avenue on the south, and Inez Street, State Street, and the railroad on the west. The neighborhood is part of the larger Downtown Specific Plan which includes older residential neighborhoods, the revitalized Hemet Stock Farm, the Civic Center, Santa Fe Education Center, Hemet Elementary, and Weston Park.

The Downtown Village District is the historic commercial core of the City of Hemet, and includes many of the City’s historic commercial buildings, a traditional grid street pattern, and the Civic Center. Traditional architecture and buildings oriented to the street make the Downtown Village District a vital area for pedestrian-oriented shopping, entertainment and civic activities. Sensitive infill development in encourages that maintains and enhances the District’s “main street” character, and retailing and civic functions.

Subject Property

23.B.

Neighborhood – Market Analysis
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Commercial Development Activity
Hemet has been engaged in community revitalization efforts for just over a decade. In 2012, the city completed an update to the General Plan, which included a major focus on the downtown area and the implementation of the Downtown Hemet Specific Plan. The intent is to strengthen the economic vitality and aesthetic character of the downtown area, and as such, all new buildings, structural additions, and façade improvements are subject to review by the Planning Department.

One major revitalization project in the downtown area has been the Historic Hemet Theater. In 2013, the Historic Hemet Theater Foundation took over the building and began revitalization efforts. Among their project impacts are the historic preservation of the 1921 movie house (one of the oldest in the nation), cultural enrichment through performing arts and educational programming, and economic revitalization of Hemet's historic downtown district. Their efforts have brought over 35,000 fans to tribute concerts hosted by the theater.

Currently, the City of Hemet has 24 commercial projects in the planning or construction phases.

Of the total, there are 16 commercial, 7 industrial, and 1 mixed-use projects, 2 of which are under construction. The remaining commercial projects are awaiting approval from the city’s planning commission.

Two commercial projects under construction or pending approval are hotels representing 173 rooms approved for the Hemet submarket. The mixed-use project is slated for a 61-unit apartment complex along with a gas station and convenience store. Most of the smaller commercial projects are service stations, car washes, and restaurants. Of note is that Hemet is slated for the development of almost 3.4 million square feet of warehouse space.

Data Collections
For the first part of this analysis, I researched land sales from the broader San Jacinto Valley market area. The data provides a comprehensive view of market activity since 2014. Following this data, I narrowed the analysis to a five-mile radius of the subject. The focused submarket analysis is intended to provide general insight into the price points and sales volume statistics.

For commercial land, clear market trends are difficult to discern due to the limited number of transactions that have occurred during the sample period. The research is based on a combination of Costar Information, the Desert Area MLS system, and private brokerage sources.

While this data does not include all the market transactions, its primary purpose is to illustrate a trend in the market as it relates to the most comparable submarkets.

The San Jacinto Valley submarket gives a broad perspective of the volume of commercial land acquisitions over the past ten years. Over the past ten years, there have been 176 sales with a moving average of $24,078,332. Generally, the data sample illustrates stable sales activity. The early part of the sampling period demonstrated upward trending statistics which dropped in 2018, when dollar volume abruptly dipped ±63% from 2017.

23.B.

Neighborhood – Market Analysis
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Despite the onset of the COVID-19 pandemic in 2020, unit sales and volume were both up over the 2019 values. Year-ending 2022 saw the dollar volume high, which concluded a 4-year run of year-over-year dollar volume increases. Median per-square-foot prices passed the $6 mark in 2022 for the second year of the sampling period after several years of depressed values. There were 16 land sales in 2023 with an average per square foot price of $4.35 and $4.72 on a median basis. Dollar and unit volumes dropped slightly in 2023 as high interest rates and construction costs sidelined many buyers. There have been 2 sales in 2024 with average and median PSF prices well above the moving average statistics.

As of the date of value, there are ±59 parcels for sale and 6 under contract with a total anticipated volume of ±$164 million. The indicated average and median per square foot land values for the active listings are $5.09 and $7.76, respectively, which are 70% and 106% above the moving averages; the pending sales have values much higher. The average parcel size being marketed is ±11.5 acres, which represents a ±17% decrease from the moving average. These combined metrics are indicative of stable demand for raw commercial land acquisitions.

Residential Land Sales – Hemet (5 Mi Radius)
Narrowing the analysis to within a 5-mile radius of the subject property, the statistics illustrate a significant decrease in both volume indicators. The annualized moving average for dollar volume during the sample period is ±$13,526,632, with the average number of annual sales coming in at ±13. The average number of acres per transaction is ±9.7 which includes properties that were acquired for further subdivision. No sales have occurred YTD 2024.

23.B.

Neighborhood – Market Analysis
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The localized land sales activity demonstrates somewhat cyclical sales activity through the sampling period. The dollar volume low occurred in 2019 which has been followed by several years of generally normal sales activity. The unit high was seen in 2020 while the dollar volume high was experienced in 2023 after a 190% spike over the 2022 value. Average and median PSF prices jumped in 2022 by 167% and 111%, respectively, and these values softened in 2023 despite the increase in sales volume. Even so, average and median per-square-foot prices were 20% and 30%, respectively, above the moving average statistics. Consistent with the broader market, there appeared to be stable demand in 2023 not seen in other larger markets which have experienced pull backs in construction starts.

Currently, there are 50 properties available on the market with an anticipated volume of ±$73M.

The average number of acres per listing is ±5.5 acres with an average price point of $6.11 per square foot and an indicated median price per square foot of $8.63, or $266,325 per acre and $376,086 per acre on a median basis.

Conclusion
Up until the COVID-19 pandemic, the economic indicators demonstrated a stabilized pattern.

Though sales volume has been sporadic since the pandemic, the demand for raw commercial land remains stable. The Downtown district of Hemet is experiencing a wave of revitalization with positive changes in the retail and commercial end-user demand and investor interest. Property values will continue to show modest increases over the next several quarters barring any abrupt changes in the broader market economy.

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 23 of 58
Picture 3 – Satellite view; subject property is outlined in yellow Picture 4 – Parcel map; subject is highlighted in red

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 24 of 58
Location: The subject property is located on northwest corner of E Florida Avenue and N Carmelita Street in Hemet, CA. The legal address of the site is 222 E Florida Avenue, Hemet, CA 92543.

Identification: APN 443-232-009, Riverside County, CA
Size: ±0.18 acres ±7,841-ft²
Latitude / Longitude: 33°44’52.42"N 116°58’10.93"W
Elevation/Topography: 1,597’ above sea level Level, at street grade Flood Zone: According to the Flood Insurance Rate Map, Community Panel Number 06065C2105G, dated August 28, 2008, the subject
property is located in an area determined to be Flood Zone X (shaded).

Critical Habitat /
Conservation Easements:

There is no final critical habitat for any federally listed endangered or threatened species on the subject property.

There are no conservation easements or protected lands on the subject property.

Accessibility: The site has access from the north side of E Florida Avenue and the west side of N Carmelita Street.

Soils: I was not provided with a soils report for the subject property. A physical inspection of the subject site was made for this analysis.

This report assumes that no toxic or hazardous materials are present on any section of the subject property and recommend a soils engineer be consulted.

Subject Property

23.B.

Site Analysis
Ó2024 Capital Realty Analysts Inc. Page 25 of 58
Utilities: All utilities are available at the subject property site. The following public utility companies have jurisdiction over the site:

Water: City of Hemet
Sewer: City of Hemet
Electricity: Southern California Edison
Gas: Southern California Gas Company
Telephone: Verizon
Cable Service: Frontier Communications
School District: Hemet Unified School District
Topography: Level, at street grade
Off-Site Improvements: Two lane roadway, underground utilities Frontage: E Florida Avenue, N Carmelita Street
Maintenance: Public
Curb and Gutter: Yes
Sidewalks: Yes
Hazards: This analysis assumes there are no hidden or unapparent conditions to the soil or subsoil that would render the parcel more or less valuable.

Earthquake Hazard: The site is not currently noted for being within an Alquist-Priolo Special Studies Zone. According to the State Division of Mines & Geology, this map may not show all faults that have the potential for surface fault or rupture, either within the special studies zones or outside their boundaries.

Improvements: None – vacant land
Zoning: DV, Downtown Village, Hemet, CA
Land Use: Mixed Use
Coastal Zone: No
Unit of Comparison: The subject property is valued as improved land for commercial use. The marketplace typically utilizes a price per square foot when evaluating similar properties. Based on the market preference, the price per square foot is applied in this analysis.

Functional Adequacy: The shape and size of the site are adequate to support the uses suggested in the Highest and Best Use section of this Appraisal Report.

Adjoining Properties:

North: Partially Improved Commercial
South: Improved Commercial
East: Partially Improved Commercial
West: Improved Commercial

23.B.

Site Analysis
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Zoning Map/Ordinance
Downtown Village (DV) Zone. The DV Zone is the historic core of Downtown Hemet and is intended to preserve and enhance the economic stability of the retail commercial core. Standards established for this zone support retail, restaurant and entertainment uses in a “main street” environment, while also promoting infill mixed use development. It is important to maintain the pedestrian nature of the Downtown Village Zone by encouraging retail uses that attract passerby or frequent customer visits to locate in first floor commercial spaces that have display windows facing a public sidewalk. The regulations for this zone support the goals and design principles of the General Plan, and are intended to promote retail uses in a mixed use environment in order to maintain the vitality of the heart of the City.

Subject Property

23.B.

Site Analysis
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Land Use Map
MU – Mixed Use. The MU-Mixed Use designation provides for a mix of residential and compatible office and retail/ service uses integrated as a cohesive development, or such uses developed sideby-side in a manner that encourages interaction between uses. Density and intensity ranges vary based on location. There are six mixed-use areas identified for this General Plan and which are discussed in more detail later in the Land Use Element.

Subject Property

23.B.

Site Analysis
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Topographical Map
Subject Property

23.B.

Site Analysis
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Flood Map
According to the Flood Insurance Rate Map, Community Panel Number 06065C2105G, dated August 28, 2008, the subject property is located in an area determined to be Flood Zone X (shaded). Properties in Zone X are subject to 0.2% Annual Chance Flood Hazard, Areas of 1% annual chance flood with average depth less than one foot or with drainage areas of less than one square mile.

23.B.

Site Analysis - Photographs
Ó2024 Capital Realty Analysts Inc. Page 30 of 58
Picture 5 – Viewing south along Carmalita Street, the subject is seen on the right.

Picture 6 – Viewing southwest across the subject property.

23.B.

Site Analysis - Photographs
Ó2024 Capital Realty Analysts Inc. Page 31 of 58
Picture 7 – Viewing west across N Carmalita Street to the subject property.

Picture 8 – Viewing north to the subject from E Florida Street

23.B.

Highest and Best Use
Ó2024 Capital Realty Analysts Inc. Page 32 of 58
Highest and Best Use is defined as:
“The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value.”6
“The analysis of relevant data to develop a market value opinion requires two important steps in the evaluation process before the applicable approaches to value are applied. Market analysis begins the process of narrowing the focus of the analysis from a broader macroeconomic view to data that is especially pertinent to the subject property. Highest and best use analysis relies on that analysis to then identify the most profitable, competitive use to which the subject property can be put.”7
In estimating highest and best use, there are essentially four stages of the analysis:

Legally Permissible: What uses are permitted by zoning and deed restrictions for the subject site?
Physically Possible: What are the physically possible uses for the subject site? Financially Feasible: What physically possible and legally permissible uses will produce a net return to the owner of the site?
Maximally Productive: Among the financially feasible uses, which use will produce the highest net return or the highest present worth?
The concept of highest and best use applies to land as the value of the improvements has a contributory impact on the overall property value. The theoretical emphasis of a highest and best use analysis in on the potential uses of the land as though vacant. In reality, the market reflects the contribution of the existing improvement value and recognizes the impact of any possible alteration of those improvements. Consequently, the highest and best use of a property as improved is equally important in developing an opinion of market value.

As Vacant
“Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements.”8
As Vacant – Legally Permissible
The subject property is a single, legal ±7,841-ft² parcel located on the northwest corner of Florida Avenue and Carmelita Street in the historic downtown district of Hemet, CA. The subject is zoned DV, Downtown Village, with a land use designation of Mixed Use as defined by the City of Hemet’s Planning Department and detailed in the Downtown Specific Plan. 6 Appraisal Institute, The Appraisal of Real Estate Appraisal, 15th ed., (Chicago: Appraisal Institute, 2020) 7 Ibid 8 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Highest and Best Use
Ó2024 Capital Realty Analysts Inc. Page 33 of 58
The DV Zone is the historic core of Downtown Hemet and is intended to preserve and enhance the economic stability of the retail commercial core. Standards established for this zone support retail, restaurant and entertainment uses in a “main street” environment, while also promoting infill mixed use development. It is important to maintain the pedestrian nature of the Downtown Village Zone by encouraging retail uses that attract passerby or frequent customer visits to locate in first floor commercial spaces that have display windows facing a public sidewalk. The regulations for this zone support the goals and design principles of the General Plan, and are intended to promote retail uses in a mixed use environment in order to maintain the vitality of the heart of the City.

The MU-Mixed Use designation provides for a mix of residential, compatible office, and retail/ service uses integrated as a cohesive development or such uses developed side-by-side in a manner that encourages interaction between uses. Density and intensity ranges vary based on location. Six mixed-use areas have been identified for this General Plan.

The subject property meets and exceeds the minimum lot size requirements. The legal constraints of the subject site are reasonable, appropriate, and do not impair the highest and best use development potential of the site.

As Vacant – Physically Possible
The subject is a level parcel located on the northwest corner of Florida Avenue and Carmelita Street in the historic downtown district. It has good visibility and access from both fronting streets. The site is rectangular in shape; accessibility, utility availability, other necessary infrastructure, and size are typical for this area of Hemet. The physical characteristics of the site do not impair its ability for potential development and represent the highest and best use as-ifvacant.

The subject is in an area designated as Flood Zone X (shaded). Properties in Zone X are subject to

0.2% Annual Chance Flood Hazard, Areas of 1% annual chance flood with an average depth of less than one foot, or drainage areas of less than one square mile.

This analysis assumes that there are no hazardous materials affecting value or inhibiting the development of the site to its highest and best use. All utilities are available to the subject. The physical characteristics of the site do not impair its ability for potential development and represent the highest and best use as-if-vacant. Therefore, the highest and best use of the subject is not limited by any physical restraints or conditions.

As Vacant – Financially Feasible
The estimation of financial feasibility is a simple comparison of costs and benefits. If the cost to construct a proposed development exceeds the present value of the cash flow derived from the development, the prospective use is not considered feasible. Alternatively, if the present value of the anticipated income stream exceeds the cost to produce the proposed development, the use is financially feasible. A test of financial feasibility is accomplished with the comparison of the cost, income, and sales comparison models.

23.B.

Highest and Best Use
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A specific development model is not part of this analysis. The subject does have legal access and is large enough for development under the existing guidelines. The exact costs concerning development under current conditions are unknown. While these costs would likely not preclude the site from achieving financial feasibility for any one specific development plan, the typical buyer would subtract these accumulated costs from the indicated market value. It is beyond the scope of this analysis to calculate the financial feasibility of specific hypothetical development.

The cost structure of most approvable developments that would utilize the site is considered beyond the normal market development risks, given the current market conditions. As the market has shifted, the most speculative developments have stopped or slowed with the increased raw material and labor costs. Most developments occurring remain owner-user-based projects.

Using the market analysis as a guideline, typical commercial development on the subject site is considered not financially feasible as of the date of value. However, this lack of financial feasibility does not preclude the property from being developed as an owner-user project or other specialpurpose development.

As Vacant – Maximally Productive
The physically possible and legally permissible uses for the subject property are present in the subject region. Other similar properties have been successfully developed and absorbed; however, modeling a financially feasible development is not probable for most applicable commercial uses, indicating that the most maximally productive use of the site, as-is, is to hold for future development and price appreciation.

As-Improved
“The use that should be made of a property as it exists. An existing property should be renovated or retained as-is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.”9
The subject property is valued as vacant land. Therefore, no highest and best use analysis asimproved is applied. 9 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Appraisal Process
Ó2024 Capital Realty Analysts Inc. Page 35 of 58
As discussed in the appraisal, the subject property is a single, ±7,841-ft² commercial parcel located on the northwest corner of Florida Avenue and Carmelita Street in the historic downtown district of Hemet, CA. For this appraisal assignment, I am estimating the market value of the fee simple estate in the as-is vacant condition. The definition of market value has been described in the Scope of the Appraisal section of this report. The subject parcel and type of value desired have been identified. Through the appraisal process, it is my intent to present a properly supported opinion of market value for the subject property. The market data, analysis, and conclusions presented in the Appraisal Report should cause a reasonable person to reach similar conclusions. There are three traditional approaches to estimating market value. These are the cost approach, the sales comparison approach, and the income approach.

In the fee-simple, as-is-vacant valuation model, the most reliable approach for this property type is a sales comparison model. The cost and income models are not applied since the subject is being valued as vacant land.

Sales Comparison Approach
“The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available.”10 The sales comparison approach is the best indicator of value when sufficient comparable sales data exists and is the best technique available to estimate the market value of vacant land. There are sufficient sales available to estimate the value of the subject property. 10 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Sales Comparison Approach
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Based upon the principle of substitution, the sales comparison model demonstrates that the value of a property in the market tends to be set by the cost of acquiring an equally desirable substitute property. When substitute properties are not available in the market, the reliability of the sales comparison model may be less than that of other approaches to value. This is not the case for the subject property as several substitute properties are available.

In the sales comparison approach, I compare the subject to recently sold similar properties and active listings where offering information is available. I analyze the data for the comparable data points and make comparisons to demonstrate a probable price at which the subject property would sell if offered on the market. The Dictionary of Real Estate Appraisal defines the sales comparison approach as follows:
"The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available."11 In summary, the subject property is a ±0.18-acre site positioned on the northwest corner E Florida Avenue and N Carmelita Street in Hemet, CA. Based on information from the County of Riverside, the subject property has a net acreage of ±0.18 acres or ±7,841-ft². Access, visibility, and utility availability are all competitive for this location. The site is defined as a mixed-use commercial site with the highest and best use to hold for price appreciation or develop with an owner-user or build-to-suit commercial development.

A field investigation, including a search of public records, is conducted to obtain data on recent comparable sales transactions or active listings. The primary selection criteria for the comparables used in this section of the analysis are current sales with competitive locational attributes. The subject is located in the East Florida Avenue commercial corridor of historic Old Town Hemet, an area with a mix of developments.

Limited commercial land sales activity exists in the Hemet market area. From the available comparable data points and market activity, I have selected five comparable data points from the broader Hemet market area for the model. This selected data best illustrates the market activity of this market segment.

The analysis begins with a summary of the selected data points and their locations in comparison to the subject property. Following this, the model describes each data point, identifying and qualifying the elements of comparison that influence value into an indicated value adjustment.

Typically, the elements of comparison that affect value include the passage of time, size, physical features, and locational differences. To analyze the degree to which the elements of contrast affect value, I reduce the subject and comparable data to a standard unit of comparison. 11 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Sales Comparison Approach
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Land Sales Grid
Land Data Point Overview
The data selection includes five closed transactions, all located in the Hemet market area.

Adjustments are applied for dissimilar conditions in comparison to the subject’s analyzed vacant condition. Each of the comparable data points will be adjusted for the known or estimated costs associated with the as-acquired condition. The valuation model uses comparable data points with similar highest and best uses for future development. The zoning of the comparable data points varies slightly, although the land use designations and surrounding functional utility of the sites are comparable to the subject property.

The locational attributes vary within the data set. The selected data points represent the most current and confirmable sales information in the immediate and broader Hemet market.

Data Sale Size Size Sale Price Per
Point Location Date Acres SF Price SF
1 NS W Florida Avenue, E of N Cawston Avenue 6/1/22 1.59 69,260 C-2 $1,250,000 $18.05 Hemet, CA
2 201 S Palm Avenue 2/21/19 0.39 16,988 CM $180,000 $10.60 Hemet, CA
3 2880 W Florida Avenue 7/31/23 0.63 27,443 C-2 $1,300,000 $47.37 Hemet, CA
4 2788 W Florida Avenue 6/15/23 2.20 95,832 C-2 $1,900,000 $19.83 Hemet, CA
5 NS E Florida Avenue, W of New Chicago Avenue 12/11/23 0.61 26,572 CPS $400,000 $15.05 Hemet, CA
Subject 222 E Florida Ave N/A 0.18 7,841 C2 N/A N/A
Hemet, CA
Zoning

23.B.

Sales Comparison Approach
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Land Data Point Map

23.B.

Sales Comparison Approach
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Data Point 1 – Land Sale
Location: NS W Florida Avenue, E of N Cawston Avenue, Hemet, CA Identification: APN 448-250-005, Riverside County, CA
Date of Sale: June 1, 2022
Documentation: Grant Deed # 250439, Riverside County, CA Grantor: Navy Federal Credit Union
Grantee: Hemet Quack 22 LLC
Sale Price: $1,250,000
Financing: None
Exchange: No
Cash Equivalency: $1,250,000
Zoning: C-2, Hemet, CA
Flood Zone: Zone X
Site Size: ±1.59 acres / ±69,260-ft²
Utilities: All available
Lot Position: Interior
Improvements: None
Topography: Mostly level
Indicated Price Per SF: $18.05

23.B.

Sales Comparison Approach
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Verification/History: Buyer’s broker – The seller acquired the property in April 2008 for a recorded $1,475,000. The property was on the market for 1,028 days at an asking price of $1,400,000.

Parcel Map: 448-25, Riverside County, CA
Data Point 1 is the June 2022 sale of a ±69,260-ft² commercial site located in Hemet, CA. The sale price of $1,250,000 represents an unadjusted price per square foot of $18.05. At the time of acquisition, the site was vacant. The buyer intends to use the site for a car wash and fast-food restaurants. The site is considered to be in a similar location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Sales Comparison Approach
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Data Point 2 – Land Sale
Location: 201 S Palm Avenue, Hemet, CA
Identification: APNs 442-093-017 & 018, Riverside County, CA Date of Sale: February 21, 2019
Documentation: Grant Deed # 59523, Riverside County, CA Grantor: Da Lei
Grantee: Alan Rivera
Sale Price: $180,000
Financing: 50% seller financing @ 4.40%
Exchange: No
Cash Equivalency: $180,000
Zoning: CM, Hemet, CA
Flood Zone: Zone X
Site Size: ±0.39 acres / ±16,989-ft²
Utilities: All available
Lot Position: Corner
Improvements: ±1,046-ft² SFR
Topography: Mostly level
Indicated Price Per SF: $10.60

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 42 of 58
Verification/History: Listing broker – The seller acquired the property in September 2010 for a recorded $99,000. The property was on the market for 16 days at an asking price of $182,000.

Parcel Map: 442-09, Riverside County, CA
Data Point 2 is the February 2019 sale of a ±16,989-ft² commercial site located in Hemet, CA. The sale price of $180,000 represents an unadjusted price per square foot of $10.60. At the time of acquisition, the site included an older SFR that was boarded up and in need of complete rehabilitation as well as being under a code enforcement case by the City of Hemet. The buyer of the property performed a complete remodel of the improvements and sold the property in 2023.

The site is considered to be in a similar location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 43 of 58
Data Point 3 – Land Sale
Location: 2880 W Florida Avenue, Hemet, CA
Identification: APN 448-310-021, Riverside County, CA
Date of Sale: July 31, 2023
Documentation: Grant Deed # 221725, Riverside County, CA Grantor: J. Shamloo LLC
Grantee: Basraon LLC
Sale Price: $1,300,000
Financing: None
Exchange: No
Cash Equivalency: $1,300,000
Zoning: C-2, Hemet, CA
Flood Zone: Zone X
Site Size: ±0.63 acres / ±27,443-ft²
Utilities: All available
Lot Position: Interior
Improvements: Previously developed lot
Topography: Mostly level
Indicated Price Per SF: $47.37

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 44 of 58
Verification/History: Public Record/Buyer’s Agent – The seller acquired the property in March 2017 for a recorded $1,400,000.

Parcel Map: 448-31, Riverside County, CA
Data Point 3 is the July 2023 sale of a ±27,443-ft² commercial site located in Hemet, CA. The sale price of $1,300,000 represents an unadjusted price per square foot of $47.37. The property is the former location of a Long John Silver’s restaurant which was demolished in 2022. The buyer’s intentions are unknown. The site is considered to be in a superior location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Sales Comparison Approach
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Data Point 4 – Land Sale
Location: 2788 W Florida Avenue, Hemet, CA
Identification: APN 438-240-039, Riverside County, CA
Date of Sale: June 15, 2023
Documentation: Grant Deed # 172056, Riverside County, CA Grantor: Brandon Choi and Jeanie Sim
Grantee: GTY Auto Service, LLC
Sale Price: $1,900,000
Financing: None
Exchange: No
Cash Equivalency: $1,900,000
Zoning: C-2, Hemet, CA
Flood Zone: Zone X
Site Size: ±2.20 acres / ±95,832-ft²
Utilities: All available
Lot Position: Interior
Improvements: None
Topography: Mostly level
Indicated Price Per SF: $19.83

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 46 of 58
Verification/History: Public Record/Buyer’s agent – The seller acquired the property in August 2020 for a recorded $200,000.

Parcel Map: 438-24, Riverside County, CA
Data Point 4 is the June 2023 sale of a ±95,832-ft² commercial site located in Hemet, CA. The sale price of $1,900,000 represents an unadjusted price per square foot of $19.83. At the time of acquisition, the property was entitled for the development of a car wash, though the permit expiration was set for June 29, 2023. The site considered to be in a similar location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 47 of 58
Data Point 5 – Land Sale
Location: NS E Florida Avenue, W of New Chicago Avenue, Hemet, CA Identification: APN 549-090-034, Riverside County, CA
Date of Sale: December 11, 2023
Documentation: Grant Deed # 367020, Riverside County, CA Grantor: Urban Affiliates, LLC
Grantee: Lecangs LLC
Sale Price: $400,000
Financing: None
Exchange: No
Cash Equivalency: $400,000
Zoning: CPS, Riverside County, CA
Flood Zone: Zone X
Site Size: ±0.61 acres / ±26,572-ft²
Utilities: All available
Lot Position: Interior
Improvements: Paved parking lot, retail pad
Topography: Level
Indicated Price Per SF: $15.05

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 48 of 58
Verification/History: Listing broker – The seller held the property for more than 10 years.

Parcel Map: 549-09, Riverside County, CA
Data Point 5 is the December 2023 sale of a ±26,572-ft² commercial site located in Hemet, CA.

The sale price of $400,000 represents an unadjusted price per square foot of $15.05. At the time of acquisition, the property was improved with a paved parking lot and retail pad as part of the shopping center anchored by Stater Bros. The site considered to be in an inferior location as the subject property. The property is considered an arm’s length transaction with no atypical conditions of sale and aligns with the definition of market value utilized in this Appraisal Report.

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 49 of 58
Adjustments
Adjustments to data points are required for significant differences that affect value. The modeling follows a sequence of adjustments in each sales comparison model. Using this sequence, I obtain intermediate price figures and apply subsequent adjustments to each previously adjusted price. These adjustments reflect the property's superiority or inferiority in terms of real property rights conveyed, financing, conditions of sale, market conditions, locational and physical characteristics. A standard method for extracting adjustments among comparable sales is matched-pairs' analysis, which aims to obtain market-based adjustments.

This involves isolating an adjustment feature among two or more sales, where the difference in adjusted prices represents the market's value perception for that feature.

In some cases, adjustment features cannot be isolated due to limited comparable data, unique property traits, or other factors. When this happens, alternative adjustment techniques are used, including cost-based adjustments, adjustments based on a market survey, adjustments based on published data, and quantitative adjustments. The following is a discussion of relevant adjustment factors.

Property Rights Conveyed
All comparable data points reflect the transfer of fee simple estates; therefore, no property rights adjustments appear warranted or applied.

Financing Terms
Four of the five completed data point sales are transferred for cash or cash equivalency, and no adjustments are necessary. Data Point 2 transferred with seller short-term financing reported at market levels and no adjustment is applied.

Conditions of Sale
The five completed sales are confirmed as arm’s-length transactions and do not require adjustments for conditions of sale.

Market Conditions
Adjustments for market conditions are crucial for reflecting shifts in real estate prices over time.

In this analysis, sales data range from the earliest in February 2019 to the most recent in December 2023. The market analysis indicates a decrease in transaction volume, but based on the available data, there hasn't been a noticeable decline in pricing.

Given this context, Data Point 2, representing a transaction from approximately five years ago, requires special consideration. To align this older sale with current market conditions, I have applied a subjective upward adjustment of 15%. This adjustment accounts for the general increase in property values observed over this period, ensuring that the valuation reflects more recent market trends.

I have decided against making market condition adjustments for the other data points, which are based on more recent transactions.

23.B.

Sales Comparison Approach
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Their transfer dates are close enough to the current date to assume that they already reflect prevailing market values without the need for further modification. This approach ensures that the analysis remains both current and relevant, providing a balanced and accurate assessment of the property's value.

Location
The subject property enjoys a unique and strategic location in the core of the Historic Downtown Village, easterly adjacent to the restored 1921 Historic Hemet Theatre. This proximity enhances its cultural and historical value, potentially attracting more visitors and interest. Moreover, the property benefits from its location near the Harvard Street commercial corridor, allowing for a notable retail presence.

This area has weathered multiple economic cycles, yet it continues to receive community support, which is crucial for sustained economic viability. Recent significant investments and ongoing planning efforts are aimed at enhancing the area's appeal as a lifestyle and tourist retail destination. These developments not only add to the location's desirability but also suggest potential for future growth in foot traffic and consumer interest, which could positively impact the property's value and business opportunities.

From within the comparison model, all of the data points reflect general commercial locations that have been traded by investors and end users. As stated, the Hemet market is limited, and the sales represent the best available data for this model. I have made subjective adjustments to Data Points 3 and 5 based on superior and inferior influences.

Utilities
In the as-if-vacant condition, the subject property has access to all utilities, but services are not established. All the comparable sales have similar access to utilities. No adjustments for utilities are required.

Improvements
In the model, the subject property is considered a vacant site. Four of the five sales are vacant properties, and no adjustments are applied. Data Point 2 included an older, ±1,045-ft² SFR with limited contributory value. For the analysis, a downward adjustment reflecting the contribution is applied and then divided by the unit of comparison.

Site Size
The size of a property affects the uses it will support, and the buyers it will attract. Size adjustments are generally based upon the concept of “marginal utility”. Marginal utility is defined as follows.
“The increment of total utility added by the last unit of a good at any given point of consumption.

In general, the greater the number of items, the lower the marginal utility, i.e., a greater supply of an item or product lowers the value of each item.”12 12 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015)

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 51 of 58
The concept of marginal utility holds true for vacant commercial land parcels in the subject market. While larger sites can support a wider variety of uses as well as larger projects, the costs of development, occupancy stabilization, and management increases risk. Additionally, the available buyer pool typically decreases as the total site size increases.

The subject property type and size are wide in comparison to this data set, necessitating an adjustment analysis. I applied a matched-pairs analysis with each of the sales. Because I was unable to bracket the subject size, the resulting analysis provided little insight into the premiums paid for smaller parcels. For the analysis, I have applied a subjective adjustment illustrating the types of premiums associated with small commercial properties. I have used this adjustment factor based on the difference between the subject’s size and the size of the comparable data points.

The following table illustrates the adjustments applied to the data group and the value conclusions.

Element Subject DP-1 DP-2 DP-3 DP-4 DP-5
Sale Price $1,250,000 $180,000 $1,300,000 $1,900,000 $400,000 Size (SF) 7,841 69,260 16,988 27,443 95,832 26,572
Unit of Comparison $/SF $/SF $/SF $/SF $/SF $/SF
Sales Price Per SF $18.05 $10.60 $47.37 $19.83 $15.05
Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Terms Cash Seller Cash Cash Cash
Cash Equivalency $0.00 $0.00 $0.00 $0.00 $0.00
Conditions of Sale Arm's-Len Arm's-Len Arm's-Len Arm's-Len Arm's-Len Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Date of Value 4/30/24
Date of Sale 4/30/24 6/1/22 2/21/19 7/31/23 6/15/23 12/11/23 Adjustment $0.00 $1.59 $0.00 $0.00 $0.00
Sub Total $18.05 $12.18 $47.37 $19.83 $15.05
Location Similar Similar Superior Similar Inferior
Adjustment $0.00 $0.00 ($11.84) $0.00 $2.26
Utilities Similar Similar Similar Similar Similar
Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Use Similar Similar Similar Similar Similar
Adjustment $0.00 $0.00 $0.00 $0.00 $0.00
Improvements Vacant SFR Vacant Vacant Vacant
Adjustment $0.00 ($2.94) $0.00 $0.00 $0.00
Size (SF) 7,841 69,260 16,988 27,443 95,832 26,572
Adjustment $3.69 $0.55 $1.18 $5.28 $1.12
Adjusted 20.42% -7.60% -22.52% 26.63% 22.47%
Sale Price Per SF $21.73 $9.79 $36.70 $25.11 $18.44
Average Per SF Value $22.35
Median Per SF Value $21.73

23.B.

Sales Comparison Approach
Ó2024 Capital Realty Analysts Inc. Page 52 of 58
Conclusion – As-if-Vacant
I have performed a weighted average indication based on the most recent sales. Equal primary influence is applied to Data Points 3, 4, and 5, with reduced secondary weight applied to Data Point 1. Tertiary model influence is ascribed to Data Point 2 based on the date of closing. The following table illustrates the results of the weighted averaging.

Weighted DP-1 DP-2 DP-3 DP-4 DP-5
Average $21.73 $9.79 $36.70 $25.11 $18.44
$24.30 15% 10% 25% 25% 25%
Based on the available data, it is my opinion that the market value of the fee simple estate in the subject property, as-if-vacant, on April 30, 2024, is as follows:
$24.30/ft² x 7,841-ft² = $190,536
$190,000 (Rounded)
(One Hundred Ninety Thousand Dollars)

23.B.

Ó2024 Capital Realty Analysts Inc. Page 53 of 58
Certification
I certify that, to the best of my knowledge and belief… The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions.

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

I have performed no 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.

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

My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of 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 this appraisal.

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 Uniform Standards of Professional Appraisal Practice of the Appraisal Institute.

My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

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

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

As of the date of this report, I James Dingman, have completed the Standards and Ethics Education Requirements for Practicing Affiliates of the Appraisal Institute.

I have made a personal inspection of the property that is the subject of this report.

No one has provided significant professional help in the preparation of this appraisal report.

James Dingman
State Certification No.: AG025869
Expiration Date: March 2, 2025

23.B.

Ó2024 Capital Realty Analysts Inc. Page 54 of 58
Addendum

23.B.

Ó2024 Capital Realty Analysts Inc. Page 55 of 58
James Dingman
General Experience
1996-Present CEO – Capital Realty Analysts
1993-1996 Appraiser – MacKenzie and Associates
1990-1993 Director of Food & Beverage Operations – Breckenridge Ski Corp., Breckenridge Co., Mt Hutt Ski & Alpine Co., Methven, New Zealand 1988-1990 Director of Operations, The Broe Co., San Diego, CA, Denver, CO 1984-1986 General Manager – Radisson Hotel, San Jose, CA 1979-1983 General Manager – Crown Colony Country Club, Lufkin, TX Education
1975-1977 University of New Hampshire, Berlin
Continuing Education
USPAP Update 2020/2023 Technical Inspection of Real Estate Special Purpose Properties Standards Part C
Advanced Sales & Cost Approaches Expert Witness
Automated Valuation Models Appraisal Procedures
Basic Income Capitalization Real Estate Appraisal Principles Standards of Professional Practice Real Estate Economics Real Estate Principles California Real Estate Law
Real Estate Finance Advanced Market Analysis / Highest and Best Use UASFLA-Yellow Book Advanced Applications & Case Studies Solar Photovoltaic Valuation
Licensing
State of California Certified General Real Estate Appraiser License Office of Real Estate Appraisers Appraiser Identification No. AG025869 California Real Estate Salesperson License Inactive
Representative List of Clients
Public Sector Private Sector Institutional Sector
United States of America Canyon Development Wells Fargo Bank Department of the Interior Westar Development Union Bank Small Business Administration Pulte Homes JP Morgan Chase Bureau of Indian Affairs UNOCAL 76 1st Bank
City of La Quinta Prudential Real Estate Montecito Bank & Trust City of Rancho Mirage Best Best & Krieger Bank of the West City of Palm Desert Guralnick & Gilliland US Bank Corp
City of Palm Springs Towbes Group East West Bank
Town of Yucca Valley Hotel Resort Properties Community West Bank County of Riverside Selzer, Ealy, Hephill & Blasdel Pacific Western Bank P.S. Unified School District Agua Caliente Band of Cahuilla Indians