RESOLUTION NO. 22-9080
A RESOLUTION OF THE CITY OF SANTA CLARA, CALIFORNIA
TO ESTABLISH THE AVERAGE PER-ACRE LAND VALUES
IN ORDER TO SET THE PARKLAND IN LIEU FEE SCHEDULE
FOR NEW RESIDENTIAL DEVELOPMENT IN ACCORDANCE
W ITH CHAPTER 17.35 ("PARK AND RECREATIONAL
LAND") OF TITLE 17 ("DEVELOPMENT") OF THE CODE OF
THE CITY OF SANTA CLARA
BE IT RESOLVED BY THE CITY OF SANTA CLARA AS FOLLOWS:
W HEREAS, the City of Santa Clara is the Government entity responsible for providing public parks, recreation and open space facilities within the City of Santa Clara; W HEREAS, the 2010-2035 General Plan includes a goal that new parks, open space and recreation be provided with new development so that existing facilities are not over- burdened;
W HEREAS, the report entitled "Public Facilities Impact Fee Study" dated June 25, 2014 ("Nexus Study"), was prepared by Willdan Financial Services, Inc. and approved by Council inJune 2014;
W HEREAS, on July 15, 2014, the City Council adopted Ordinance No. 1928, which added Chapter 17.35 to the City Code, and requires new residential developments to provide adequate community and neighborhood park land for active recreational uses, and/or under certain conditions to pay a fee in lieu of parkland dedication; W HEREAS, on February 24, 2015, the City Council adopted Ordinance No. 1937, adding duplex dwellings to the types of developments subject to the parkland dedication requirement, and removing the one (1) acre minimum parkland dedication prior to a developer being able to receive financial credit for private recreational amenities and open space; //
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Resolution/ Fees Due In Lieu of Parkland Dedication for New Residential Development FY 2022/23 Page 1 of 5 Rev: 11 /22/17
WHEREAS, on August 27, 2019, Council approved Resolution No. 19-8749 which included the statutory findings required pursuant to the California Quimby Act (Quimby) and Mitigation Fee Act (MFA), including the report entitled "Santa Clara Park and Recreation Facilities Impact Fee Update Study" dated April 9, 2019 ("Nexus Study Update") prepared by Willdan Financial Services, Inc., and the professional land valuation appraisal report with a valuation date of December 31, 2017, and the park improvements replacement costs with values as of 2017; W HEREAS, on October 29, 2019 Council approved Resolution No. 19-8769 to establish the Parkland In Lieu Fee Schedule for New Residential Development in Accordance with Chapter
17.35 of the Code of the City of Santa Clara, and directed staff to phase in the 2018 Park Improvement Costs over four years and to use the annual Land Valuation Appraisal Report at 100% of cost recovery in the calculation of annual fees; W HEREAS, in 2020, due to the global COVID19 pandemic, and through the regular adoption of the Municipal Fee Schedule process, only the Park Improvement Cost portion of the Parkland In Lieu Fees were raised using 50% of the Park Improvement Costs and the City continued to use the Land Valuation Appraisal Report with a valuation date of December 31, 2018 in the calculation of annual fees;
W HEREAS, on June 10, 2021, Council approved Resolution No. 21-8970 to establish the Parkland In Lieu Fee Schedule for New Residential Development in Accordance with Chapter
17.35 of the Code of the City of Santa Clara, which used 75% of the Park Improvement Costsand used the annual Land Valuation Appraisal Report with a valuation date of December 31, 2020 at 100% of cost recovery in the calculation of annual fees; //
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Resolution/ Fees Due In Lieu of Parkland Dedication for New Residential Development FY 2022/23 Page 2 of 5 Rev: 11 /22/17
WHEREAS, pursuant to SCCC Chapter 17.35, the City has surveyed land values and sales records, and has conducted a professional appraisal with a valuation date of December 31, 2021 to determine the fair market value of property in the City, and the City posted the AppraisalReport on the City website from April 4, 2022 to April 18, 2021 for public review and comment, the Council now wishes to use the applicable values for calculating the fees due in lieu of parkland dedication and to adopt the updated fee schedule for parkland in lieu fees; W HEREAS, on April 4, 2022, a copy of the Annual Land Valuation Report was placed on the City website;
W HEREAS, the City received written and verbal comments regarding the delays in the adoption of the Patrick Henry Drive Specific Plan and the effects that the increase of land values will have on the parkland in lieu fee for residential development projects that are currently being planned; and,
W HEREAS, the City Council adopted staff recommendation for the average per acre land values in the Zip Code Areas of 95050, 95051, 95054, and directed staff to leave the Patrick Henry Drive Specific Plan Area land values at the current value ($4,830,000 as of appraisal date December 31, 2020) for one fiscal year (July 1, 2022 through June 30, 2023) due to the aforementioned delays to allow for the Patrick Henry Drive Specific Area Plan projects to submit applications under the existing fee schedule. Upon expiration of the one year, the land values for Patrick Henry Drive Specific Plan will be increased to the then appraised values by ZIP Code.
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Resolution/ Fees Due In Lieu of Parkland Dedication for New Residential Development FY 2022/23 Page 3 of 5 Rev: 11 /22/17
NOW THEREFORE, BE IT FURTHER RESOLVED BY THE CITY OF SANTA CLARA AS FOLLOWS:
1. Findings and Purpose. That the City Council hereby finds and declares that the land valuation component will be subject to the updated annual land value appraisal report and supplemental instructions as adopted by Council June 7, 2016 with valuation dates of December31 of each calendar year for use in calculating the following (next) fiscal year's fee update.
2. Land Valuation Appraisal. An independent real estate appraisal firm, Frank Schmidt & Associates, was retained to provide a "Fair Market Value" opinion (valuation date of December 31, 2021) conforming to Uniform Standards of Professional Appraisal Practice and using the City's Supplemental Instructions for an average acre of land (hypothetical, rectangular, useable site) for property in each of the three existing City of Santa Clara Zip Codes 95050, 95051, 95054. The data set included all property types: Single Family (low and very low density), High Density Residential, Medium Density Residential, Commercial/Retail, Industrial, Lots and Land. Excluded were transactions considered not "arms-length", having encumbered or clouded title, environmentally impaired sites, or more than three (3) years old. An inflation factor was computed and applied to comparable sales over one year old based on reasonable and rational considerations such as sales and rental trends or other appropriate methods. The weighted average of each property type was based on the percentage of land area in the sales transactions.
3. Land Valuation Appraisal Findings. Based on the findings of the Appraisal Report, the City Council hereby sets the average per acre land value for each ZIP Code area as of December 31, 2021, as: $5.715 million per acre ($131.20/sfl in 95050; $6.000 million per acre ($137.74/sfi~ in 95051; and, $5.495 million per acre ($126.15/sf~ in 95054. If a developer objects to this determination of fair market value, the developer may elect to have the value established by appraisal, in conformance with City Code Section 17.35.040(b)(2). //
Resolution/ Fees Due In Lieu of Parkland Dedication for New Residential Development FY 2022/23 Page 4 of 5 Rev: 11 /22/17
4. Patrick Henry Drive Specific Plan Area. For the fiscal year commencing on July 1, 2022 through June 30, 2023, the City Council hereby sets the average per acre land value as $4,830,000 million per acre ($110.88/sfl for the land within the Patrick Henry Drive Specific Plan, adopted June 10, 2021 (Resolution No. 21-8970). On July 1, 2023, the Patrick Henry Drive Specific Plan Area land's per acre land value shall be set as the same value as the applicable ZIP Code area of 95054.
5. Effective date. This resolution shall become effective immediately.
HEREBY CERTIFY THE FOREGOING TO BE A TRUE COPY OF A RESOLUTION PASSED
AND ADOPTED BY THE CITY OF SANTA CLARA, CALIFORNIA, AT A REGULAR MEETING THEREOF HELD ON THE 19T" DAY OF APRIL, 2022, BY THE FOLLOWING VOTE:
AYES: COUNCILORS: Becker, Chahal, Hardy, Jain, and Park, and Mayor Gillmor
NOES: COUNCILORS: None
ABSENT: COUNCILORS: Watanabe
ABSTAINED: COUNCILORS: None
ATTEST:
NORA PIMENTEL, MMC
ASSISTANT CITY CLERK
CITY OF SANTA CLARA
Attachments incorporated by reference:
1. Santa Clara Land Valuation Appraisal Report 12-31-2021 Resolution/ Fees Due In Lieu of Parkland Dedication for New Residential Development FY 2022/23 Page 5 of 5 Rev: 11 /22/17
ANNUAL LAND VALUATION APPRAISAL REPORT
VALUATION OF
The Average per Acre Land Value of High-Density Residential, Medium-Density Residential, Low-Density Residential, Very Low-Density Residential, Commercial, &Industrial Properties Located in Three Zip Codes (95050, 95051, and 95054)
City of Santa Clara, California
Santa Clara County
PREPARED FOR
M t•. James Teixeira, Director of Parks and Recreation
City of Santa Clara
1500 Warburton Avenue
Santa Clara, CA 95050
PREPARED BY
Frank E. Schmidt, MAI, SRA
Funk Schmidt ~ Associates
EFFECTIVE DATE OF VALUE OPINION
December 31, 2021
Apt•il 1, 2022
M r. James Teixeira, Dit•ector of Parks and Recreation
City of Santa Clara
1500 Warburton Avenue
Santa Clara, CA 95050
Re: Annual Land Valuation Appraisal Report
Average Value of Three Hypothetical 1-Acre Lots,
One for Each Zip Code Comprising 95050, 95051, and 95054 Santa Clara, California, U.S.A.
Dear Mr•. Teixeira:
Pursuant to your request, I have completed the annual land valuation appraisal to aid the City of Santa Clara in establishing park impact fees. Following this letter of transmittal is my appraisal and analysis opining the value of a hypothetical 1-acre lot in each of the City's three zip codes.
In June 2016 the City of Santa Clat•a City Council approved Supplemental Instructions for the Appraisal of the Fair Market Value of land used in the Parkland Dedication In-Lieu Fee. These supplemental instructions and guidelines for the Appraisal are displayed in the Addenda. One of the supplemental instt•uctions was that the valuation date occurs each year on December 31.
Since the date of my opinion of value, December 31, 2021 precedes the date I wt~ote and transmitted this appraisal by about 3 months, this is considered a retrospective appraisal as defined by the Uniform Standards of Professional Appraisal Practice. Since this is a retrospective value, it is important to note that I only considered data that was available and/or public as of the date of value. The exception to this was the 2021 land area data provided by Old Republic Title Company which was not available until March 2022, and some brokerage reports published in January 2022, but containing 2021 data.
I have appraised the subject of this appraisal numerous times since 2014, and most recently with a date of opinion of December 31, 2021. Based on land area, in 2020 about 43% of all the transactions sold in the preceding 12 months were categorized as industrial and commercial, and the other 57% were categorized as residential. In 2021, approximately 42% of ali transactions sold in the preceding 12 months were industrial and commercial, while 58%were categorized as t~esidential. Because residential unit values are greater than commercial and industrial, this resulted in higher concluded values for each zip code in 2021 compared to 2020.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected]
Real Estate Appraised: Three Hypothetical One-Acre Lots, One fol• Each Zip Code, Santa Clat•a, CA To complete this appraisal, I conducted an investigation, gathered data, and made the analyses necessary to enable me to fulfill the purpose of this assignment, which was to estimate the fair market value of a hypothetical 1-acre lot comprising components of high-density residential, medium-density residential, low-density residential, very low-density residential, commercial, and industrial, to form and report the average value pet acre of land in the three existing Zip Codes in the City of Santa Clara consisting of 95050, 95051, and 95054. The average value was established using the weighted average of these different property types, based on the percentage of total land area associated with the different pt•operty types that sold in the City of Santa Clara in the 12 months prior to the date of value and based on land area data provided by Old Republic Title Company.
I understand that this Appraisal Report is intended for use by the Client, the City of Santa Clara, for assistance in determining park impact fees.
The COVID-19 pandemic had various affects on local real estate Inarlcets in 2021. The December 9, 2021 UCLA Anderson Forecast states that "Since March 2020, the state of the COVID-19 pandemic has determined the course of the economy nationally and across California. With each successive wave, the economy has grown more resilient to the effects of the virus, but by the end of 2020, it became clear that consumer behavior, not govetmnent restrictions, had the greatest effect on economic outcomes." Further discussion of the COVID-19 effects are presented throughout this report.
Hypothetical Conditions, Extraordinary Assumptions, and Contingencies Hypothetical Condition is defined as "a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser• to exist on the effective date of the assignment t•esults, but is used for• the purpose of analysis."~I supposed the following hypothetical conditions:
➢ The fair market value was estimated based on different land value components applied to a hypothetical lot. It was a hypothetical condition of this appraisal that the subject lot was a finished lot and rated average in all other physical, locational, and legal aspects. ➢ Since the hypothetical lot will be comprised of different land value components and it is unlikely the City's land use ordinances would allow the different property types on the wine lot, it was necessary to apply a hypothetical condition that each of the following uses would be permitted on the subject lot: high-density residential, medium-density residential, low and very low-density residential, commercial, and industrial. 2020-2021 Uniform Standards of Professional Appraisal Practice (USA, The Appraisal Foundation,2020) Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 2
Real Estate Appraised: Three Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Clara, CA Extraordinary Assumption is defined as "an assignment-specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser's opinions or conclusions."2
➢ In this appraisal, land areas provided by Old Republic Title Company were used to estimate the weighted average of all the sale transactions that occurred in the City of Santa Clara in 2021. It was an extraordina►y assumption of this appraisal that the land areas provided by Old Republic were accurate.
The trse of these hypothetical conditions and exti~aorclina~y ussun~ptio» might l~ai~e affected t7~e ussignr~aent r•esarlts.
There are general assumptions and limiting conditions set forth in this report.
Based on the investigation and analyses undertaken, I formed the opinion that the aveeage value per acre on December 31, 2021, the effective date of opinion, for each zip code was:
Zip Code 2021 Average Value per Acre
95050 $5,715,000
95051 $6,000,000
95054 $5,495,000
Sincerely,
Frank E. Schmidt, MAI, SRA
22020-2021 Uniform Standards of Professio~u~l Appraisal Practice (USA, The Appraisal Foundation,2020) F rank Schmidt &Associates Phone: 510-468-9219 [email protected] 3
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for• Each Zip Code, Santa Clara, CA
TABLE OF CONTENTS
EXECUTIVE SUMMARY 5
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS 6
CERTIFICATION g
SCOPE OF THE ASSIGNMENT 9
DEFINITIONS 11
REAL PROPERTY, REAL ESTATE, AND PERSONAL PROPERTY APPRAISED 12 PREVIOUS APPRAISALS 13
REGION &CITY DESCRIPTION 13
M ARKET CONDITIONS 1 ~
LAND USE ORDINANCES 40
HIGHEST AND BEST USE 41
APPRAISAL PROCESS 42
AVERAGE VALUE ESTIMATE IN 95050 ZIP CODE 43
AVERAGE VALUE ESTIMATE IN 95051 ZIP CODE 65
AVERAGE VALUE ESTIMATE IN 95054 ZIP CODE 68
RECONCILIATION AND OPINION OF AVERAGE VALUES 72
ADDENDA 73
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 4
Real Estate Appraised: Tlvee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
EXECUTIVE SUMMARY
CLIENT
LOCATION
City of Santa Clara
City of Santa Clara, California
PROPERTY TYPES Very Low-Density Residential, Low-Density Residential, Medium-Density Residential, High-
Density Residential, Commercial, and Industrial
Land
SITE AREA
FLOOD HAZARD STATUS
Each Hypothetical Lot is One Acre
Zone X; the hypothetical lots are outside ally
flood zones
EARTHQUAKE FAULT ZONE
GENERAL PLAN, &
HIGHEST AND BEST USE
The hypothetical lots are not located in an
Earthquake Fault Zone as designated under the
Alquist-Priolo Earthquake Fault Zoning Act.
Use of Hypothetical Lot General Plan Highest &Best Use
Very Low Density Residential Very Low Density Residential Very Low Density Residential Low Density Residential Low Density Residential Low Density Residential Medium Density Residential Medium Density Residential Medium Density Residential High Density Residential High Density Residential High Density Residential Commercial Regional Commercial Hold for Development of a Commercial Building Industrial Light Industrial Light Industrial Building
LFFECTIV~ DATE OF VALUE
PROPERTY RIGHTS APPRAISED
December 31, 2021
Fee Simple Estate
AVERAGE VALUE CONCLUSIONS
Zip Code 2021 Average Value per Acre
95050 $5,715,000
95051 $6,000,000
95054 $5,495,000
Frank Schmidt &Associates Phone: 510-468-9219 fsct►[email protected] 5
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal and 1•eport were made applying these general assumptions:
1. No responsibility was assumed foi• the legal description oz• for• matters including legal oi• title considerations. Title to the Irypothetical properties was assumed to be good and marketable and free and clear of all liens, encumbrances, easements, and restrictions except those specifically addressed in this report;
3. Responsible ownership and competent property management were assumed; ~. The information furnished by the Client and others was believed to be reliable. However, no warranty is given for its accuracy;
5. All engineering was assumed corc•ect. Plot plans or any other• illustrative material in this report were included only to assist the reader in visualizing the pt•operty;
6. It was assumed that there are no hidden or unapparent conditions in the hypothetical properties that render them more or less marketable or valuable. No responsibility is assumed for such conditions or for arranging for• engineering st~idies that may be required to discover• them;
7. Unless otherwise stated in this report, the existence of hazardous material, toxic waste, and/or other environmental impairments which may or may not be present on or in the hypothetical properties, was not investigated by this consultant.
As real estate consultants, we ai•e not qualified to properly investigate this property for• any discharge, spillage, uncontrolled loss, seepage, filtration, or storage of hazardous substances which may adversely affect the value of this property. Neither are we qualified to detect the presence of substances such as asbestos, urea-formaldehyde foam insulation, nor• other tnatei•ials that could ct~eate an environmental impairment to the subject prope3•ty or to other• property caused by conditions present at the subject propet-ty. Our opinions) were pc•edicated on the assumption that there is no such material on oi• in the property that would affect market value. No responsibility was assumed for any such conditions or for• any expertise or engineering knowledge required to discover and/or cot•rect them;
8. It was assumed that there is full compliance with all applicable federal, state, a~1d local envii•omnental regulations and laws unless non-compliance is stated, defined, and considered in the report;
9. It was assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in the appraisal and reported in the report; and
Frank Schmidt &Associates Phone: 510-468-9219 fschmidt a valuationconsultant.net 6
Real Estate Appraised: Three Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Clai•a, CA
10. It was assumed that all i~equir•ed licenses, certificates of occupancy, consents, or other• legislative or• administrative authority from any local, state, or national governmental or private entity or oc•ganization have been or• can be obtained or renewed for any use on which the value estimate or other opinion contained in this report ate based;
This report has been made with the following limiting conditions:
1. Possession of the report, or a copy thereof, does not carry with it the right of publication or use. It may not be used for airy purpose by ally person other than the Client(s), for the Intended Use specified in the engagement agt~eement and/or report;
2. The consultant is not required to give further consultation, testimony, or attend court for matters involving the subject property unless ai•t•angements have been previously made; and
3. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the Consultant, or the firm with which the Consultairt is connected) shall be disseminated to the public through advertising, public relations, news sales, or' other media without prior written consent and approval of the Consultant.
Reader Note:
There tnay be other appropriate and more specific limitations on our opinions or conclusions identified in the cover• letter or report as Hypot7~etical Condztio~7s, Ext~~aordznaryAssunzptio~~s, oi~ Continge~7cies.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 7
Real Estate Appraised: Ttu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clai•a, CA
CERTIFICATION
I certify that, to the best of my knowledge a►td belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the repo►~ted assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.
4. I previously appraised the subject of this report for the same Client on several occasions, most recently in an appraisal report transmitted March 26, 2021 and having a date of value of DecemUer 31, 2020.
5. I have no bias with respect to the property that is the subject of this report or to the pa~~ties involved with this assignment.
6. My engagement in this assignment was not contingent upon developing or reporting predetermined results.
7. 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.
8. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with tl~e Uniform Standards of P~•ofessional Appraisal Practice (USPAP).
9. I have not inspected the property that is the subject ofthis report since the subject lots are hypothetical.
10. Under my direction, Mr. Dennis Moi•edock vec•ified the comparable data, performed analysis, and wrote the first draft of the appraisal report.
11. The reported analyses, opinions, and conclusions were developed, and this report leas Veen prepared, in conformity with the requirements of the Code of Professional Ethics &Standards of Professional Practice of the App~•aisal Institute.
12. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
13. As of the date of this report, I am completing the continuing education prog►•am for Designated Members of the Appraisal Institute.
/~~
D~
Frank E. Schmidt, MAI, SRA
April 1, 2022
Date
F t•ank Schmidt &Associates Phonc: 510-468-9219 [email protected] 8
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
SCOPE OF THE ASSIGNMENT
Information Provided to the Appraisers
The Client provided excerpts from the Parlcs and Rect•eation Facilities Fee Study completed by W illdan Financial Services. Old Republic Title Company provided Santa Clara sales statistics of land areas to assist us in estimating the weighted average of all the sale transactions that occurred in the City of Santa Clara in the 12 months preceding the date of value. We were also provided the "Supplemental Instructions for Appraisal" approved by Santa Clara City Council on June 7, 2016, which are displayed in the Addenda. Lastly, in previous appraisals, City Pat~lcs provided us the Park Impact Fee Ot•dinance (No. 1928).
Extent of Research into Physical Factors
W e drove several streets throughout Santa Clara over the past several years including various times in 2016, 2017, 2020, and 2021. We note changes that are occurring or have occuc•red, pat•ticularly regarding new development. We gathered data about land use ot•dinances for each hypothetical lot and the comparables from the websites of the appropriate municipalities.
Extent of Research Into Economic Factors
W e gathered, analyzed, and applied macro-economic information gleaned from many sources, including:
• The Wall Street Journal
• 12t~' District Beige Boolc
• G1obeSt.com
o Costar News
• The Kiplinger Letter•
• Cot•eLogic
W e gathered, analyzed, and applied data about market conditions and other micro-economic information from:
• Websites of Colnmeicial Brokerages
• Commercial and/or t•esidential multiple listing services • Silicon Valley Business Jout~nal
• San Jose Met•cury News
o Discussions with agents active in the subject market
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 9
Real Estate Appt~aised: Three Hypothetical One-Acre Lots, One fot• Each Zip Code, Santa Clara, CA W e talked to the buyers, sellers, and agents whose names we discovered on signage in the neighborhood and during comparable verification. We learned about additional market data from these people.
Extent of Comparable Data Research
W e used a variety of sources and subscription services to gather comparable data, including:
o Verified Data Files from Other Appraisals
e Costar Group
• DataTree
~ MLSlistings.com
• LoopNet
• Commercial Real Estate Brokerage Websites
Verification
The most appropriate data that we discovered was verified with a party to the transaction. When that was not possible, we discuss and/or state the verification source(s), using public record data, subscription services, MLS, etc. in the Analysis section.
Among the comparables selected we studied copies of the assessor's parcel maps, public record summary, aerial maps, records of survey, and other data such as stt•uctural, geological, or environmental repot•ts, subdivision maps, title reports, etc. We also reviewed planning proposals/approvals and permit histories where appropriate.
Type and Extent of Analysis Applied
The data is summat~ized on spreadsheets displayed in the Analysis sections following. The analysis was comparative, iterative, qualitative, and quantitative.
Compliance
It was the intent of this appraisal to comply with the t•equirements of:
• The Uniform Standards of Professional Appraisal Pt•actice (USPAP) including the Ethics and Competency Provisions as promulgated by the Appraisal Standards Board of the Appraisal Foundation.
F1'anlc Schmidt &Associates Phone: 510-468-9219 [email protected] 10
Real Estate Appraised: Tht~ee Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Claea, CA • The Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute.
• The City of Santa Clara's "Supplemental Instructions for Appraisal"
DEFINITIONS
According to the California Code of Civil Procedure, Section 1263.320 defines Fair Market Value as:
"(a) the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing, and able to buy but under no particular• necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is r•easonabiy adaptable and available.
(b) The fair market value of property taken for which there is no relevant, comparable mat~ket is its value on the date of valuation as determined by any method of valuation that is just and equitable."
Revised federal definitions in the Uniform Act identify the definitions of "market value" and "fair market value" as one and the same. These terms are used interchangeably in this repot•t.
W eighted Average means an average resulting from the multiplication of each component by a factor reflecting its importance or• cont~•ibution.
Average Value means a value that is calculated by adding values together and then dividing the total by the number of values.
Fee Simple Estate means 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."3
3 Appraisal Institute, TI~e Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) F rank Schmidt &Associates Phone: 510-468-9219 [email protected] 11
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
REAL PROPERTY, REAL ESTATE, AND PERSONAL PROPERTY APPRAISED Real Property is defined as all of the interests, benefits, and rights in the ownership of the physical real estate, that is, the bundle of tights with which the ownership of the real estate is endowed. Real estate is defined as physical land and appurtenances attached to the land.
Real Property Rights Appraised
The subject properties are hypothetical unimproved lots and the fee simple estate is appraised.
Real Estate Appraised
It is an assumption of this appraisal that the subject's hypothetical finished lot is graded and level, all utilities and services are stubbed to the site, is ready for building improvement, and defined as follows:
Area One acre
Shape &Frontage Shape is rectangular with typical frontage along one street.
Topography Level, at street grade
Drainage Adequate
Utilities &Services The municipality provides water, electrical, and sewer service. A private contractor provides garbage service.
Local utility companies provide telephone and cable. All utilities are piped and wired onto the hypothetical lot.
Easements Typical public utility easements along frontage presumed.
Soil Conditions It is a general assumption of this appraisal that the hypothetical site is suitable for any legally permissible and physically possible use.
Environmental
Impairment Issues It is a general assumption of this appraisal that there are no environmental issues that affect the market value of the hypothetical lots.
F~•ank Schmidt &Associates Phone: 510-468-9219 [email protected] 12
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Off-Site Improvements Street is fully improved and maintained by the City; it is asphalt paved with streetlights, curbs, gutters, and
sidewalks.
Street Access Rates average in comparison to competing properties.
Exposure/Visibility Rates average in comparison to competing properties for each hypothetical use.
Flood Hazard Status Hypothetical lot is presumed to be within Zone X, which denotes at•eas of minimal flood hazard, usually depicted on FIRMS as above the 500-year flood level.
Earthquake Fault Zone The hypothetical lot is not located in an Earthquake Fault Zone as designated under the Alquist-Priolo Earthquake
Fault Zoning Act.
Improvements None
Personal Property Appraised
W e did not appraise any personal property.
PREVIOUS APPRAISALS
The author pt•eviously appraised the subjects) of this report for the City of Santa Clat~a on several occasions, most recently in an Appraisal Report transmitted Match 21, 2021 with an effective date of opinion of December 31, 2020. The next most recent appraisal of the subject was transmitted June 11, 2020 with an effective date of opinion of December 31, 2019. The intended use of all appraisals was the same: to assist the City in determining park impact fees.
REGION &CITY DESCRIPTION
The County of Santa Clara is located at the southern end of San Francisco Bay. It encompasses about 1,304 square miles of land with 15 incorporated cities and towns. According to California Department of Finance (CDF), on July 1, 2021, the county had a population of 1,974,827, an inct•ease of 0.06 percent fi•otn the July 2020 estimate. Over the past several years, Santa Clara County had been experiencing strong employment conditions. Prior to the COVID-19 pandemic, FPank Schmidt &Associates Phone: 510-468-9219 [email protected] 13
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA unemployment was at historical lows and essentially reflected full employment conditions.
According to statistics published by the State of California Employment Development Department (EDD), the Santa Clara County unemployment rate was 4.0% in December 2021, based on a labor force of 1,042,900. This is an increase from the March 2020 unemployment rate of 3.4%, poor to COVID-19. It is however lower compared with the one-year prior unemployment rate of 5.9%, based on a labor force of 1,040,900 jobs. However, the County's unemployment rate peaked at 11.7% in Apri12020 and has gradually declined since.
Santa Clara County, which makes up the bulk of Silicon Valley, is highly dependent on technology employment, including Adobe, Apple, Applied Materials, Cisco, eBay, Flextronics, Google (Alphabet), HP, Intel, Intuitive Surgical, Lockheed Martin Space Systems, Microsoft, Netapp, Oracle, PayPal, and Tesla.
The City of Santa Clara covers about 18.4 square miles and is surrounded by San Jose on the north, east, and south, and is adjacent to Sunnyvale and Cupertino on the west. The City of Santa Clam's population estimate was 130,746 as of January 1, 2021, according to the CDF, about
2.7% higher than 12 months earlier. Employment conditions in Santa Clara followed a similar trend as seen in Santa Clara County. Unemployment, according to the EDD, was reported at a rate of 2.6% in the city of Santa Clara as of February 2022, based on a labor force of 72,900. The unemployment rate has generally followed a downward trend since peaking in April 2020 at
9.5%. Still, the current rate is far above the year ago rate of 5.3 percent in December 2020.
An aerial of the City of Santa Clara (outlined in red) and surrounding areas is shown below:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 14
Real Estate Appraised: Three Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Clara, CA The two largest employers in the City of Santa Clara are Intel and Applied Materials. Other high- tech companies, such as AMD, Nvidia, Palo Alto Netwot•lcs, Sun Microsystems, ServiceNow, and Agilent Technologies have headquarters in the City. Other large employers include California's Great America, Avaya Inc., Santa Clara City Hall, EMC Corporation, Macy's, and Santa Clat•a University. The City of Santa Clara is the supplier for the City's water and electric power, which it claims can save small industries almost 50% on their utility costs.
Levi's Stadium, the home of the San Francisco 49ers, opened over the summer of 2014 in the northern pot•tion of the city, adjacent to Great America Theine Pat•lc and the existing 49ers practice facility. The Santa Clara Convention Center is also nearby and offers about 302,000 square feet of meeting space.
The opening of Levi's Stadium spurred an increase in demand for nearby properties. There are several projects under construction throughout the city and several proposals in progress that are anticipated to add thousands of square feet of new t•etail, office and residential. The largest proposal is froth Related California and is named Related Santa Clara. The project is a 240-act•e mixed use development located across from the street from Levi's Stadium. It would include
9.16 million gross SF of office, residential units, retail and entertainment facilities, hotel rooms, and surface and structured parking facilities. The first development phase is approved and was slated to open to the public in 2023 but was delayed by the pandemic. The Lake Park office development project is a 4.05 acre project site that has received appt•ovals fora 150,000 SF office development located at 3001 Tasman Drive. The Kylli mixed use development project is currently pending review and is located at 3005 Democracy Way. This project is a 46 acre site that proposes 3,000,000+- SF of commercial office/lab space, 100,000+- SF of neighborhood retail, 1,800+- new multi-family residential, a child care facility, and indoor and otiitdoor community spaces. The Santa Clara Square development project (The Irvine Company) encompasses appt~oximately 93 acres and includes 1,862,000 SF of office, 178,000 SF of retail, and up to 1,840 units of residential apartment units. This project is at 2600 Augustine Drive. The NVIDIA project is under construction and is located at 2600, 2788 and 2800 San Tomas Expressway. The 35.6 acre site will have 1,950,000 SF of office/research and development (R&D) space within three buildings. The Lawrence Station Pt•oject — Kifer Road (Summerhill) is at 3505 Kifet• Road and is currently under construction. This 29.4 acre project is part of the Lawrence Station Area Plan. The project is a 988 residential unit, four-story, multi-family development with 39,225 SF of retail/amenity space. Additional development in the City includes several new stt•uctures on the Santa Clara University campus and continued residential build-out of the Lawrence Station area.
Frank Schmidt & Associates Phone: 510-468-9219 [email protected] 15
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA The City's median household income was estimated by the U.S. Census Bureau at $126,006 in 2019 and the per• capita income was about $53,986. The United States Census Quick Facts for 2015-2019 indicated the following demographics in Santa Clara:
Total Households 44,669
Owner Occupied Housing Unit Rate 42.9%
Average Household Size 2.74
Bachelor's Degree or Highej~ 59.9%
In Civilian Laboi• Fot~ce 69.2%
The City is home to Santa Clara University, Mission College, a junior college, and Golden State Baptist College. The City is primarily served by Santa Clara Unified School District, which includes 19 schools spanning transitional kindergarten through high school. The southwest cornet of the City is served by Cupertino schools.
The City of Santa Clara and Santa Clara County benefit from a nuinbet• of freeways, arterials, and expressways that provide access to most areas of the region, including three interstate highways, I-280, I-880, and I-680 in addition to several federal and state highways, US-101, CA- 85, CA-87, CA-17, and CA-237. Caltt•ain, Amtrak, and ACE rail transportation, light rail, and VTA bus services provide mass transit for the city, connecting Santa Clara to the greater Bay Area. Located adjacent the City's eastern border is the Norman Y Mineta San Jose International Airpot•t, with service to about 30 destinations.
There are tht•ee primacy zip codes within the city, which are shown on the following map as the color-coded areas within the black-outlined city limit boundaries. Note that the 95053 zip code applies to Santa Clara University, which is located within the Santa Clara city limits, but was not included as part of this appraisal.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 16
Real Estate Appraised: Tlvee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Conclusion
~~
tiurl~
All locations within Santa Clara are proximate to nearby job centers, retail, housing, and linkages, contributing to the long-term demand for sites within the city.
M ARKET CONDITIONS
The December 9, 2021 UCLA Ande~~son Forecast expects encouraging economic news to be forthcoming. "The December Fot•ecast assumes the likelihood of a winter surge in COVID-19 cases and predicts that consumers will temporarily cut back their spending on in-person services.
But Anderson Forecast economists expect the impact on the economy to be relatively short term, writing that consumer spending may dip over the next quarter and then rebound quickly." Frank Schmidt &Associates Phone: 510-468-9219 fschmidt ~uvaluationconsultant.net 17 Sotn•ce: zipmap.nel
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA "California home prices continue to climb, and a lack of affordability has become increasingly important in both the policy sphere and for• forecasting the Golden State's economic growth." "For the curt~ent quarter, UCLA Anderson Forecast senior economist Leo Feler, author of the national report, forecasts growth of 6.9%, which would be the highest growth rate for 2021, as the economy rebounds fi•om the wave of cases caused by the delta vat•iant. Feler notes that the omicron variant emerged too late to have much effect on the quarter's average growth t•ate." "Overall, the national. forecast is for continued strong economic gt•owth and labor market recovery, with a lessening of supply constraints and inflation. A more severe COVID-19 wave caused by the omicron variant could temporarily derail the forecast, but it's still too soon to tell." The Winter 2022 Allen Matkins/UCLA Ander•son~ Forecast California Commercial Real Estate Survey `'was taken as the Delta/Omicron phase of the pandemic was raging and was slowing the return of consumers to the purchase of services, to the office, and to vacation travel." Multi- fatnily housing has rapidly bounced back from a "falling-rent" hiatus and is also in for a run of new project development. Though the last two Surveys suggested a turn in office and retail market, it has happened sooner• than expected."
Following we present some statistics and comments regarding the market conditions for each land use we are appraising. Land market conditions for each of these uses are not typically tracked by any ~t~ms that we are aware of; it has been my experience and historically as reported by market participants that the land market for these uses typically shadow the improved markets, oftentimes leading. We report on the sale, rental, and construction trends of the respective markets, in estimating the appropriate mat~ket conditions adjustments used in our following analysis.
Regional Economic Conditions
Costar Group, Inc. is a multinational pt•ovider of information, analytics, and marketing services to the commercial real estate industry. According to a Costar Group report on economic conditions in the greater San Jose/Silicon Valley market area:
TI~e coronavi~°us parrde~nic crbru~tly ended ti~~hnt hack been the longest econo»~ic expa~~sion in U.S. history, acrd disrupted Scn~ Jose's streak of above-average job g~~otivth.
California and Bcry Ar~ecr cozrnties inclzrding Sa3~ta Clcn•a ai^e takij~g a cazctioars approach to reopening economic activity, and businesses are sz~ey~i~~g from tl~e clow~~tu~~~n in commerce.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 18
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA According to San Jose think-tank Joint Venture Silicon Valley (JVSV), "Employment is back to p1•e-pandemic levels, though more concentrated in tech. Silicon Valley gained back most of the jobs lost early on in the pandemic by mid-2021, and the rest in the second half of the year. The recovery is uneven, however, due to rapid gt•owth in the tech sector; for• the first time in decades the proportion of lower-skill and lower-wage jobs nudged downward. Most of the tech jobs are concentrated in a handful of companies, with 13 percent at Google and Appie alone." "Silicon Valley's innovation engine is red hot. Despite pandemic-related restrictions, the region's technology companies broke t~ecords, with the aggregate mat~ket cap of Silicon Valley and San Francisco's public companies teaching $14 trillion (doubling the mat•ket low of February 2020). Venture capital reached an all-time high at $95 billion in 2021, fueled by a recot•d 257 megadeals. These deals brought the region's count of unicorn and decacorn companies to 230, more than any point in history. There were more IPOs (32) than any year in this century, and companies took advantage of other means to go public including direct listings and special-purpose acquisition company (SPAC) mergers, with the latter driving more M&A activity than in a decade."
"Commercial development continues at a break-neck pace. The major tech companies such as M eta, Google, NetApp, and Apple have continued to build new space and execute leases for growth and expansion in the region, and Silicon Valley has seen an unprecedented amount of new commercial development gaining planning approvals (21.5 million square feet of new space across 135 sites). Much of the growth is planned for' San Jose (62 percent), with large developments in the pipeline in Santa Clara and Sunnyvale as well." Commercial Market Conditions
Commercial properties typically include office and retail uses. We discovered that office propet~ties ate generally being built in the central business districts and in light industrial locations. Research and development (R&D) properties have historically been a subcategory of industrial. However, R&D can rival office space in terms of finishes and quality and we elected to include a discussion of the R&D submarket as part of the commercial market. Many of the traditional retail corridors in this region, El Camino Real in particular, have land use ordinances that allow for residential mixed-uses.
In this market, real estate brokerages track office and retail statistics by city or submarket; they are not broken out by zip code. Following we present the relevant statistics pertaining to the Santa Clara inarlcet and provide comments from market participants regarding the perceived differences in each of the Santa Clat•a zip codes that the three hypothetical lots being appraised are located.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 19
Real Estate Appraised: Tfu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Office Market
The Silicon Valley office market from early 2017 through 4Q-2021 was generally characterized by increasing vacancy rates, positive net absorption, and overall increasing average asking rental rates. The next table displays data from the Cushman &Wakefield's 4Q-2021 Silicon Valley M arlcetbeat Office Snapshot and predecessor• reports and includes statistics from the Silicon Valley market, the subject's submarlcet (Santa Clara), and the adjacent Sunnyvale submarlcet.
OFFICE STATISTICS
Averege Asking Rate &Vacancy Rete Office Market
szoo as ox
$&00
Ss.ao
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$3.00
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$200
$1.00
Sam
,~'~'' ~'~' ,P'a"' ~'~j1,o'~'' ,P'~'' ,P'~'~ ~a.'~'`,Q'~'' 1r.'~p'' ,a'~'' ~'~' ,a'~ ~.'~,P.'~' ~P'~°,o~'~' ~'~' ,Q'~' w'~' Source: Cushman &Wakefield Marketbeat Office Snapshot
The data indicates that the office vacancy rate in Santa Clara generally increased from Q1-2020 through Q4-2021. This elevated vacancy rate is due to several large office buildings having significant vacancy. The Silicon Valley market has been overall more stable with vacancy reported at 15.3% for Q4-2021, up from the 15.2% rate in the third quarter. The region's availability represents 13.7 million square feet of vacancy in 4Q-2021. Cushman &Wakefield reports that the City of Santa Clara has some of the largest subleases on the market including Citrix (311,000s fl. Key 2021 lease transactions in the City of Santa Clara's include 85,995sf at 3075 Olcott Stteet in Q2-2021 aided by a 116,103 square foot renewal by Ampere at 4655 Gteat America in Q3-2021 and a sublease of 31,250 square feet by Quotient at 2755 Augustine Drive in Q3-2021.
The average office asking rent in 4Q-2021 for the City of Santa Clara was $4.43/SF/Month on a Full Service expense basis, whereby taxes, insurance, maintenance, utilities, and janitorial expenses ate bundled into the base rent. This is slightly more than the $4.38/SF/Month asking rate from one year ago.
Santa Clar> Va <ancy pate yvale A{~irg Rate
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1~ t'~ttic Schtnldt & ASSOCIates Plione: 510-468-9219 [email protected] 20
Real Estate Appraised: Ttu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA M arcus & Millichap's 4Q-2021 Market Report stated that in the San Jose Metro area, which includes Santa Clara, office vacancy increased 80 basis points in this year's spring period as local tech companies reevaluated their space requirements. At midyear, vacancy was 15.1 percent. Class A vacancy rose 340 basis points in the last 12 months to 15.4 percent while Class B/C vacancy climbed 460 basis points. Asking rents in the San Jose Metro increased 0.8% year- over-year to $4.28/SF/Month.
M arcus & Millichap reported the following trends in the San Jose Metro:
Supply and Demand Sales Trends
~ Average Price Average Cap Rate
~ Completiorra NetAbaorption Vacancy Rate
0 9 ie.0%
8 15.5!6
;~ A
~ 3
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~ 13.096 a`~3
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M at~cus & Millichap's report states that "Development surges this year after construction was slowed during the downturn in 2020. Supply is on pace to increase by 3.8 percent in 2021, though most of the new space has preleasing commitments." Over the past 12 months, developers will have completed 4.7 million square feet of space. "Investors returned to the market after pausing during the height of the downturn. In the third quarter of this year, the new record in office sales was established, including at least five deals valued over $200 million.
Buyers seeking discounted properties will be challenged to find those opportunities. Buyers never lost faith in the long-term health of the San Jose office market. During the 12-month period ending at midyear, the average price of an office property increased 3 percent to $575 per square foot. Since Google owns a sizable share of the office inventory, particularly in Mountain View, investors have limited options. Few markets had a decrease in the average cap rate dut•ing the year-long period ending in June, but the South Bay is an exception. During that time, the average rate dipped 10 basis points to 4.9 percent. Little pressure on first-year returns are expected until more clarity on office reoccupation is available." There ate several office developments under construction in Silicon Valley and Santa Clara.
Notable developments previously discussed in the City of Santa Clara include: Related California, Lake Park, Kylli, Santa Clara Square, and NVIDIA.
F1'anl~ Schmidt & AssoClates Pl~onc: 510-468-9219 [email protected] 21
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA The Marcus & Millichap's 4Q-2021 San Jose Metro Area report states "Delay in reopening pauses office recovery. Both Google and Apple pushed back their windows for workers to come back to offices until early next year due to the delta variant. The return of these anchor tenants will likely precede smaller firms that rely on contracts with Big Tech. As a result, a wider reopening is unlikely to occur until the first few months of 2022. Nonetheless, both Google and Apple do plan to bring most of thee• employees back onto their campuses. Each company has a large real estate presence in the South Bay and both have reported in-person collaboration is paramount to the success of their operations. Therefore, the recovery in San Jose should outpace San Francisco, where the large tech firms have already committed to significant remote work options.'
Research and Development (R&D) Market
The next table displays data from Colliers International's 4Q-2021 Silicon Valley R&D Mai•1<et Snapshot and its predecessor reports:
R&D Average Asking Rate ~ Vacancy Rate
ia.00s~
iz.00s~
io.aor
s.oa~
6.00 4.00
2.00 0,00%
o5anta Clara Vacancy Rate Sunnyvale Vacancy Rate ~ SIIIcon Valley Vacancy Rate Santa Clara Asking Rate Sunnyvale Asking Rate Silicon Valley Asking Rate Source: Colliers International
sa.00
Ss.so
$a.00
$2.50
$2.00
$1.50
The next tables display data from Cushman &Wakefield's Marlcetbeat 4Q-2021 Silicon Valley R&D Market:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 22 1Q201S 2Q2018 3Q2018 4Q2018 1Q2019 2Q2019 342019 4QZ019 1Q2020 2Q2020 3Q2020 4Q2020 iQZ021 2Q2021 3Q2021 4Q2021
Real Estate Appraised: Tluee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA OVERALL VACANCY 8 ASKING RENT ASIaNG RENT CQINPARISON
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1260
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51.50 5~ ~
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14K
1PY.
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s~.ao
$6.00
$5.00
$-0.00
$3.00
$2.00
$1.00
50.00 $4.77
54.25x}.14$3.U3 $3.44
1' 52.86 x .47
a~38;2.18
■ ~ ~ X
51.73 81.81 51.35
~ Asldrp R~~l,{P8F ~ Vacancy Rota P~ I~IV Cep Sun MP Naw 6C NSJ WS Mil Frc SSJ A1FY011 Source: Cushman &Wakefield
As shown above, Silicon Valley's R&D market experienced an overall stable vacancy rate within about 100 basis points of 10.0% from 1 Q-2018 to 2Q-2020 before increasing to 12.1 % in 4Q- 2021. Meanwhile, asking rents have increased from $2.46/SF/month in 3Q-2020 to $2.77/SF/month in 4Q-2021 on a NNN expense basis, despite the pandemic. A NNN expense basis in this market means the landlord is only paying for management of the account and reserves for replacement, while the tenant pays all other operating expenses.
Since 3Q-2018 the average asking rate in the City of Santa Clara increased from $2.10/SF/month NNN to $2.87/SF/Mo ending the 3Q-2020 or 0.99%/month. Over the last twelve months the asking R&D rental rate decreased to $2.49/SF/Mo ending the 4Q-2021. Investor demand for R&D and office product remains above average, especially for well-located, modern buildings with long-term tenants in place. However, the R&D vacancy rate trend shows a different narrative as in Santa Clara the vacancy rate experienced a cycle low of 5.0% in 2Q-2019 before registering 15.7% in 4Q-2021, the highest since Q4-2017. Part of the jump was due to the renovations at Mission Tech campus (at 2421-2451 Mission College Blvd), which resulted in 426,255 SF of vacancy coming online.
Cushman &Wakefield reported in their Marketbeat 4Q-2021 Silicon Valley R&D Market a net absorption of negative 1,009,477 SF of R&D space within Silicon Valley and ayear-to-date total of negative 3,444,244 SF. The report notes that there is 2,775,991 SF of new R&D product under construction throughout all of Silicon Valley.
Retail Market
According to Marcus & Millichap's Third Quarter 2021 San Jose Metro Area Retail Report, the long-term outlook remains bright, though the migration of many highly paid workers is delaying a stronger recovery in the retail arena. Furthermore, the emergence of the COVID-19 variants is giving pause to some to the local economy's anchors. Google, Apple and Facebook have all pushed reopening into eat~ly 2022 as the current wave of positive cases needs to pass.
Nonetheless, tech companies in the South Bay do plan on bring all or a majority of their• workers F~•anlc Schmidt &Associates Phone: 510-468-9219 [email protected] 23 2018 MIB 2020 2021
Real Estate App►•aised: Three Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Clai•a, CA back to their expansive campuses, which will boost retail spending next year and into the future.
N ew retailers will follow workers into the mett~o in 2022, filling up space that was left dark by other• tenants that were unable to survive the recession. Investors stepped back during the 12- month period ending at midyear as buyers awaited more clarity regarding the work-from -home model. Single-tenant dear fl ow dipped about 30 pet•cent during that trine as acquisitions fell across all product types except convenience stores. Buyers paid an average of $743 per square foot for single-tenant-properties in the yearlong period ending in the second quarter. Pt•ices were 8 percent above the prior year rate as investors retrenched and targeted high-credit tenants. The average cap rate remained steady at 4.7 percent year over year. Multi -tenant pt~operties faced i ncreased due diligence during the health crisis as operators weighed the possibility of having to refill in-line space following the downturn. The average price climbed 4 percent to $593 per• square foot during the yearlong period ending at midyear.
Some retail categories have managed well during the pandemic while others have not. Drive-thru fast food and fast-casual restaurants generally did fine, pai-ticulat•ly those with drive-throughs.
Sit-down t•estaurants, particularly those without outdoor seating have not done as well. Essential services, such as grocery, drug, and convenience stores have been stable.
Within Santa Clara, Westfield Valley Fair Mall completed a $1.1 billion expansion in 2020.
M ost of the new retail berng pt~oposed in this market is part of larger mixed -use projects.
Spending Patte~~~zs
Genet~al market conditions for the retail real estate segment can be indicated by taxable retail sales. Typically, a market where taxable t•etail sales are increasing would be supportive of additional retail development as existing retailers are willing to expand and new retailers ai•e interested in entering the market. The converse is true when taxable retail sales are declining.
Over the course of 2019 (the most recent statistics available), taxable retail sales in Santa Clara County totaled approximately $47,001,964,265, or more than $47 billion dollars. This represents an increase of approximately 3.9 percent over the total taxable retail sales reported over the course of 2018.
A ve~•uge Asking Retail Re~tul Rates a`zd Yucancy Rates Cushman &Wakefield is a brokerage arm that publishes quarterly reports for• the retail market in the San Jose metro area. They reported in theit~ Q4-2021 Marketbeat Silicon Talley Retail that the economic fundamentals and the retail business in Silicon Valley showed continued i mprovement in the last quarter of 2021 despite some challenges, such as the supply chain shortage, inflation and rising of COVID-19 cases due to the Omicron variant in the last weeks of F rank Schmidt &Associates Phone: 510-468-9219 fschmidt cr valuationconsultant.net 24
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA December. At the end of 2021, Silicon Valley recorded an employment rate of 4.5% down from
6.2 %one year ago. Increasing population, job growth, high incomes and strong consumer spending continued to strengthen the performance of retail sector in Silicon Valley. At the end of 2021, the vacancy rate for Silicon Valley's shopping centers remained the lowest in the Bay Area at 5.2%, with approximately 1.9 million square feet of vacant retail space. Santa Clara continued to record the lowest vacancy rate in the region at 3.9%. The quarterly net absorption continued in the positive territory. There was no new retail space completed in the fourth quarter of 2021 and the total retail inventory remained at 37.4 million square feet.
The chart below displays the average asking rental rate and vacancy for the Santa Clara submarlcet, Sunnyvale/Cupertino submac•ket, and Santa Clara County taken from Cushman W akefield and its predecessor retail reports fi•oin 3Q-2017 onwards:
Retail Asking Rates and Vacancy
Saz.00 ~.o~
Sao.00 6.0%
Z
Z $38.00
~
S.OS'o
$36.00
$34.00 4.0%
c
Y
532.00 3.0%
Q $30.00
~ 2.OYo
~a $28.00
Q
$26.00
1.0%
$24.00 O.O~Y
340 17 1R~~I8 3~~~18 1Q1pI9 3Rzp19 IQzpIO 3Q~~10 1Q~~Il 3R~~z1 ~ ~Downtown Sl Vacancy rSflicon Valley Vacancy III~~Santa Clara Vacancy t~Sunnyvale/Cupertino Vacancy -Downtown Sl Askfng Rent -Silicon ValleyAskfng Rent - Santa Clare Asking Rent -Sunnyvale/Cupertino Asktng Rent As indicated in the table above, tl~e Santa Clara County retail market had an average asking rent of $2.96/SF/Mo NNN in 4Q-2021 which is a slight decrease compared to $3.01/SF/Mo NNN in 4Q-2020. Neighborhood and community centers account for most of the vacancies in the market.
In 4Q-2021 asking cents averaged $2.71/SF/Mo NNN in the subject's Santa Clara submarket which is a decrease compared to $3.02/SF/Mo NNN in 4Q-2020. In 4Q-2021 the retail vacancy rate in Santa Clara was reported at 3.9%with no new retail under construction. Vacancy rates in the subject's submarl<et declined from 5.7% from one-year ago. Asking rental rates in Santa Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 25
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for• Each Zip Code, Santa Clara, CA Clara had generally been stable since Q1-2018 before a sharp increase in Q4-2020 and a decline starting in the final two quarters of 2021.
According to Marcus & Millichap's Hospitality Report for Fourth Quarter 2021, "The U.S. lodging sector entered the autumn season having made up substantial ground during the spring and summer months. Loosened capacity restrictions, vaccine availability and pent-up travel demand led to a marked increase in trips taken and rooms occupied. By the end of July foot traffic through airport check-points had recovered to about 80 pet•cent of 2019 volumes, driven largely by leisure travelers, while hotel occupancy had roughly doubled from where it began in 2021. Hotels in popular vacation destinations are projected to perform best next year, including those neat• beaches and parkland. Hotels that cater to business travelers will continue to face hurdles next year. Travel for business purposes has so far lagged leisure trips in recovery. While vaccines and test are widely available, the potential for new coronavirus variants presents ongoing safety concerns that will prompt many employers to minimize staff travel. Barring a significant reversion in the health crisis, more conventions and trade shows should take place in 2022, with greater emphasis on physical attendance, prompting greater professional travel.
Hotels in major urban centers and frequent convention markets will see improved operation in 2022 but will remain the most troubled segment. The problem is compounded in the country's largest gateway markets that typically cater to numerous international visitors, including New Yorlc and San Francisco. The retut•n of certain health precautions in theses metros may dissuade some visitation to the area until the pandemic notably improves. Overall, a prolonged drought in demand in many densely packed locales extends the road to recovery." Industrial Market Conditions
W e referenced industrial (manufacturing) and warehouse market data from brokerages Cushman & Walcefield and Colliers International; we also interviewed local market participants for this report. Cushman &Wakefield reported in its Mar~ketbeaZ Silico~~ Malley Indust~~ial Q4-2021, that vacancy for industrial product in Silicon Valley decreased in 4Q-2021 to 33%from 5.3% in 4Q- 2020. Colliers International reported that warehousing vacancy decreased to 2.2% from 6.1% in the prior year•. The Central Silicon Valley industrial submarlcet, which includes Santa Clara, San Jose, Campbell, and Sunnyvale, had an overall vacancy rate of 3.0°/o and an average asking rate of $1.29/SF/Month NNN at the end of 4Q-2021. The average asking rental rate in the subject's Santa Clara submarlcet was reported at $1.48/SF/Month NNN and a vacancy rate of 1.7% was reported. The subject's Santa Clara submaricet represents a moderate sized industrial submaiket in the region with a total industrial inventory reported at approximately 15,498,884 square feet, or roughly 23 percent of the total Silicon Valley industrial inventory.
In theit~ Q4 2021 Sun Jose Silicon Valley Research &Forecast Report for industrial/warehouse properties, Collier's International reported An accelerated shift to e-commerce coz~plec~ 1a~ith Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 26
Real Estate Appraised: Tlu~ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clai•a, CA supply chain woes bolstered demand for industrial real estate. Silicon Valley saw indzrstyiul occupancy gains amoz~nt to 115, 000 square feet in the fourth quarter and 2.0 million for the frill year, making the indzrstrial sector the fastest growing commercial property sector• in 2021.
Silicon Valley's indzrst~~ial vacancy rate dipped below 2.0 percent in the frnal garcn~tet• of 2021, limiting tenant mobility and new c~eal volzrme. Gross absorption tot~rled jarst 1.0 million square feet, down 18.2 percent year'-over year. Nuro, an autonomozrs vehicle company, subleased 64,900 sgarare feet at 3100 Molinaro Sheet in Santa Cla~•a. At the end of 2021, the indzrstrial availability rate stands at 3.8 percent, down 1 SO basis points year'-over year ~~hile the vacancy space rate is at 1.9, down 110 basis points over the same period. Not surprisingly, asking rents continzred to rise and reached a new peak, averaging $1.32 NNN, $0.08 higher than a year ago.
The next chart shows industrial rental rate and vacancy trends since 1 Q-2018 based on data from Colliers International. The chart shows generally stable to increasing vacancy rates and stable rental rates, Sunnyvale being the exception.
Industrial Average Asking Rate &Vacancy Rate
$4.00 10.0%
$3.50
9.0%
8.0%
Z $3.00
z 7.0%LL
N
v
v
~2.5~ 6.0% o
~ 5.0% ~
c
$2.00
a 4.~ >
v $1.So
~ 3.09G
Q $1,00
2.0°k
50.50 - 'I 1.90
$o.00 t'
o.oso-
1Q201a 3QZ018 1p~019 3Q1~~9 1Q202~ 3 020 1~p21 3~,p21
Santa gara Vacancy ~ San Jose Vacancy Rate Sunnyvale Vacancy Silicon Valley Vacancy - Santa Clara Asking Rate -San Jose Asking Rate --_ •Sunnyvale Asking Rate -Silicon Valley Asking Rate Vacancy rates for manufacturing were generally stable in Silicon Valley between the start of 2015 and 1 Q-2020, before increasing to the high-three percent range. A similar trend has played out in the Santa Clara submarket with a generally increasing trend in manufacturing vacancy rates since 2Q-2018. However, manufacturing rental rates in Santa Clara continue to increase; the asking rental rate rose from $1.47/SF/month NNN in 3Q-2018 to $1.85/SF/month in 4Q- 2021. Within Silicon Valley, the average asking rate for warehouse was $1.43/SF/month in 4Q- 2021compared to last year's rate of $13 8/SF/month.
Frank Schmidt &Associates Yl~onc: 510-468-9219 [email protected] 27
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA W arehouse data collected from Colliers International's Silicon Valley Research &Forecast Report Q4 2021 and its predecessor• reports are displayed in the next chant:
W arehouse Average Asking Rate &Vacancy Rate
zz
z
s i.~o - ia.oi
12.0%LL
$1.50
='
Y
$1,30 10.0%
\ y
~
$1.10
H.O ~0 y
~m m
Y - 6.0% m
C $0.90 ~
~ 4.0%
m
$0.70 2.0%
a
$o.so 0.03'0
01~ O~~
'y0~' 'LOS"
O,~ O, ~ O, ~ O,~
' >i0~' DOS' 'ti0~" ' LOS"
O, ~ O,~ O~~ 01~
' ~i0~' ~O~' 'y0~ ' LOS"
O~~ O~~ O~1 O~y O~y O~~
' ~i0~' 00~' 'YOB' 'LOS' '~i0~" b0~"
t~ Santa Clara Vacancy o San Jose Vacancy r. - ~ Silicon Valley Vacancy — SantaClara Asking Rate —San Jose Asking Rate =-Silicon Valley Asking Rate W arehouse vacancy rates in Silicon Valley had been declining for several years before increasing in 2018 and 2019, and then decreasing in 2021. Warehouse rental rates in Santa Clara decreased; the asking rental rate declined from $1.59/SF/month in 3Q-2020 to $1.29/SF/month in 4Q-2021. Within Silicon Valley, the average asking rate for warehouse generally increased to $1.24/SF/month in 4Q-2021 compared to last year's rate of $1.14/SF/month.
Data centers are one of the largest industrial occupancy groups in Santa Clara, due mostly to Silicon Valley Power, which has lower rates than elsewhere in the Bay Area. The rise of remote working reinforced the need and demand for data centers. We discovered several expansion plans and construction occurring on existing sites, notably from Prime Data Centers. There have been several land sales in recent years in Santa Clara that are proposed for new data centers.
M arket participants report that data center operators will pay a premium for a larger site in Santa Clara and that the ideal site will be about six acres; however Prime is planning to build on a site as small as 1.68 acres. Two (data center) sites in Santa Clara were sold in 2021 (see Industrial Land Comparables I-1 and I-2, these are the most recent industrial sales that we uncovered).
CBRE's U.S. Data Center Trends report for the 1H 2021 indicated the following market changes in Silicon Valley's data center market:
Frank Schmidt &Associates Phonc: S10-468-9219 [email protected] 28
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Historical Supply Growth Historical Demand Growth
MW
30 ~0
30 10
10 0
UndaCo~sirudloo fle:eosed NewDe'freies `~:,.,r~y Yamnry 1(196
845
6%
49b
2%
f,~
70 —
60 —
50 —
10-
30 10
,o-0
Absa~tlon
Source: CBRE Research, CBRE Data Center Solutions, H1 2021. Souroe: CBRE Research, CBRE Data Center Solutions, Hl 2D21.
Vamory
12%
l0%
8%
d%
~%
296
o~
The CBRE report notes that wholesale collocation data centers across primacy U.S markets — Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New Yorlc Tri-State, and Atlanta recorded 142.7 megawatts (MW) of positive net absorption in the first half of 2021, 3.4% more than H1 2020's level. Total inventory across primary markets topped 3 gigawatts (GW), as supply grew 7%, ot• 214.3 MW, during H1 2021. More than 527.6 MW of capacity was under construction in primary markets at the midway point of 2021, up 42% year-over-year, of which over half was located in Northern Virginia. Investors remained focused on top-tier assets —those with strong underlying tenancy and significant remaining lease term. Fewer deals were signed in H1 2021 than the previous six months, but the average size of user requirements was larger.
Vacancy rates reached historically low levels in several markets, led by Silicon Valley with a nationwide-low 1.6% of inventory available as of the end of H1 2021. Some users are moving away from acloud-first approach to a hybrid IT structure, citing hidden fees and fluctuating costs by cloud service providers, latency issues and incompatibility of applications.
Silicon Valley's total market inventory surpassed 300 MW in H1 2021. Leasing activity increased and was dominated by hyperscale companies. Cloud service providers continue to prelease large blocks of capacity, triggering construction activity. Though new supply came online in 2021, the vacancy rate continued to drop to a U.S. wide low of 1.6%, representing only
4.8 MW of availability. Silicon Valley's construction pipeline grew another 35 MW during H1 2021, with the percent of space pieleased increasing to 82%. Tight market conditions will continue until the development pipeline moves forward after entitlements, permitting and municipal delays. The development process will continue to take longer and uncertainty remains high. NTT signed 5 MW worth of deals with multiple enterprise companies fully subscribing Phase 1 of their new Santa Clara facility. Prime Data Centers purchased a 9-MW, fully entitled development site in Santa Clara with plans to build speculatively.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 29 IN16 2H16 iN17 2H17 1H18 1H1B 1H19 2H19 1N20 2H29 1H21 2015 2016 2UI1 2018 2019 2020 HI 2021
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clai•a, CA Residential Market Conditions
The Housing Ma~~ket Index, based on a survey by the National Association of Home Builders, reported "Despite inflation concerns and ongoing production bottlenecks, builder confidence edged higher foe the fourth consecutive month on strong consumer demand and limited existing inventory. Builder sentiment in the market for newly built single-family homes moved one point higher to 84 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This ties the highest reading of the year that was posted in Febtuary."
"The most pressing issue for the housing sector c•emains lack of inventory," said NAHB Chief Economist Robet~t Dietz. "Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24%higher• than the pre-Gourd 2019 level, we expect higher interest rates in 2022 will put a damper• on housing affordability."
The Califot~nia Association of Realtors (C.A.R.) published their December Home Sales and Price Report in mid-January 2022. The report notes that "Closed escrow sales of existing, single- family detached homes in California totaled a seasonally adjusted annualized rate of 429,860 in December, according to information collected by C.A.R. from more than 90 local REALTOR ° associations and MLSs statewide. The statewide annualized sales figure represents what woilld be the total number of homes sold during 2021 if sales maintained the December pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales."
December's sales pace was down 5.4 percent on a monthly basis from 454,450 in November and was down 15.7 percent from a year ago, when 509,750 homes were sold on an annualized basis. Despite the sixth straight year-over-year sales dect~ease, for the year as a whole, annual home sales rose to a preliminary 444,520 closed escrow sales in California, up 7.9 percent from 2020's pace of 411,870.
"Despite signs of moderating in the second half of the year, California's housing market continued to outperform last year's level and t•einained competitive even as home prices rose at a double-digit pace — a testament to the imbalance of high demand and not enough homes on the market for sale," said 2022 C.A.R. Pt•esident Otto Catril~a, a Bay Area real estate broker and REALTOR °. "For the year as a whole, the market turned in its best pet•formance in more than a decade, as buyers took advantage of histot•ically low interest rates and continued to value the benefits of homeownership amid another year of the pandemic.
California home prices remained below the $800,000 benchmark for the third straight month as the seasonal slowdown continued. Despite a decelet•ation in growth at the end of the year, the statewide median price rose to $796,570 in December, up 1.8 percent from November's Flank Schmidt &Associates Phone: 510-468-9219 [email protected] 30
Real Estate Appraised: Tl~u•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA $782,480 and up 11.0 percent from the $717,930 recoc•ded in December• 2020. The double-digit annual price gain was the 17t" consecutive month with more than a 10 percent increase since the summer of 2020. The annual increase was also the smallest since July 2020 as the share of high- end homes continued to moderate since July 2021. For the year as a whole, California set a new annual record median price of $786,750, improving 19.3 percent from the prior year." "The state's housing market is expected to perform solidly this year as the economy recovers further and consumers' desire to buy remains elevated," said C.A.R. Vice President and Chief Economist Jordan Levine. "However', with COVID cases surging and inventory constraints remaining an issue, the housing market will see headwinds of ongoing high inflation, which will put pressure on the Fed to raise rates sooner than previously expected. These factors will increase the cost of borrowing and put more affordability burden on potential homebuyers who want to purchase in 2022."
Regional Housing Market
The Standard &Poor/Case-Shiller Home Price Index measures the average change in value of residential real estate given a constant level of quality and reflects single-family housing. It is sometimes referred to as a repeat sale index. The next chart indicates that the index for the subject's San Francisco Metropolitan Area increased about 33% from 263.868 in December 2018 to 349.751 in December 2021, ot• about 0.92%/month. Over the twelve months between December 2020 and December 2021 the increase was about 1.61%/month, echoing the builder confidence evident in the Housing Market Index.
FREQ ~ — 53PlGase-Shille~CA-San Franci6co Home Prtce Index ~o
~o
~o
g ~zo
§ ~,o
~o
~, ~o
260
270
260
250
22018 Q32018 412019 U22019 032019 ~I2020 ~2202Q X92020 ~1 T02f X22021 Q3I021 Shatled areas Indkate U.S. re[esslons. Source: S8P Dow Jones Intlkes LLC fretl.stloulsfetl.org Source: S&P Dow Jones Indices LLC
The State of California Department of Finance (DOF) compiles statistics on total housing units in both the cities and counties of California. Based on DOF statistics, Santa Clara County had a total housing supply of 680,298 units as of January 1, 2021. This represents an increase of 5,740 I'ranlc Schmidt &Associates Phone: 510-468-9219 fschmidtcrvaluationconsultant.uet 31
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for• Each Zip Code, Santa Clara, CA units over the 674,558 units as of January 1, 2020. Extending further back in time, the DOF estimates the total supply of housing units in Santa Clara County at 631,920, as of January 2010.
This indicates that over the ten-year period between 2010 and 2020, the housing supply in Santa Clara County increased by a total of 42,638 units, equivalent to a compounded annual increase of
0.655 percent or an average of 4,264 units per year.
According to the Association of Bay Area Governments (ABAG) 4 Projections 2040 repot-t (most recent report), in 2015, Santa Clara County had a total of 648,900 households. ABAG projects that in 2030, the number of Santa Clara County households will have inct•eased by a compounded annual increase of 1.04 percent, to 757,690 or an average of 7,253 households pei• year. As such, the demand for housing (i.e. households) is projected to increase at a considerably higher pace than that of housing supply.
In the City of Santa Clara, the DOF reported a total of 51,041 housing units as of January 2021.
This represents an increase of 2,066 units from the 48,975 housing units as of January 2020.
Housing is being built at a faster rate in Santa Clara than the County as a whole.
According to ABAG's Projections 2040 report, in 2015, the City of Santa Clara had a total of 49,685 housing units. This statistic is projected to increase to 52,675 housing units by 2030, a compounded annual rate of 0.39°/o, or an average increase of 199 housing units per year. Based on the most recent two year and 10-year periods, the City has exceeded ABAG's projections.
Local Multifamily Market
According to Integra Realty Resources Viewpoint 2021 San Jose Multifamily Mid-Year Report, Gr•o~vth zn Zhe information tech»ology industry over' the past decade has sh~ongly if~creased demand for housing in the Silicon Talley market. There has been limited netiv single family home co»str•uction and developers responded with substantial netia, molt family constr~zaction to satisfy demand. Research reports indicate roughly 2, 000 to 3, 800 nzultifaf~zily u»its ~t~ej°e completed each yecrf~ in 2018 th~~ough 2020, with over 6,300 Zcnits zrnder const~~uction as of the encl of 2020.
Pi°ior to the coroncn~ir^us outbT•eak, vacancy i~•ernairred lo~v as new units were absorbed quickly and rental rates continued to increase moderately, particularly in core szrbmcn•kets near co~por•ate campuses and hig1~-end suburban n~c~r•kets,. h7 Necent year's, ienemployment reached the lo~a~est level since the late 1990's and even at fill employment, job growth leas positave in the region. Howevet~, in April 2020, unemployment jumped Zcp and a significant number of jobs were lost following stay-crt-home mandates and no~~-essential bz~siness closures. The g-~•eatest impact has been in fhe Leisure/Hospitality anc~ Trade/Tr'anspor'tation/Utilities secto~•s. Ma~~ket conditions began to moderate dan~ing the second gircrrter 2020 as cr r~esz~lt of these policies enacted to sloly the spread of tl~e coi°onavir~ars. Tlacancy in the multifamily market inc~°eased as a `~ Association of'Bay Area Goverumeuts is the official comprehensive planning agency for the San Francisco Bay Area region.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 32
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA result of the economic c~owntcrrn, job losses, and changes in bz~si»ess operations which allo~~~s employees to move to ~nor•e affor~c~able locations crud 1a~or~k fi°om home. Also contributing is the continued increase in supply fi~om neti-v develop»7ent but tivith slotiver• lease-up pet•iods. Overall vacancy has increased each gzrar~ter in 2020 crnc~ is above the yecrr~ ago estimate. Rental ~~ate gt•o~~th hacl been declining prior to the pandemic and asking i°ent t~^ends had ab~eady begz~n to show the effects of the coronavirtrs ut the end of the first gtrat•ter, with the typical seasonal pattern of rent growth being c~isr~zrpted. Forecasting f°ent gr~oivth is highly zrncer~tain at this time; hoti-never, it is expected that the economic decline combined ~~~ith significant supply growth fr~o~aa delive~~ies over the next seve~•al years will r•esarlt in fur~the~° declines in average asking ~°ental yates.
Integra Realty Resources Viewpoint 2021 San Jose Multifamily Mid-Year Report summary is displayed in the following chants:
FI•ank Schmidt &Associates Phone: 510-468-9219 [email protected] 33
Real estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Market Rate Indicators (Y/Y)
Categories Class A Class B
Going In Cap Rate (%) ~ ~
Asking Rent (~lUni[) ~ ~
Vacancy Rate (°io) ~ ~
Going In Cap Rate Comparisons (%)
8.00Y
6.009'0
4.00% ~R $t yr~~
2.00% ~ ~ ~ ~n ~ ~ ~ _"
0.00%
Urban Class Suburban Urban Class Suburban
A Class A B Class B
■SanJose,CA West Region ■National
Asking Rents ($Knit)
S4A00
S1,o00
5!.000
SI,000
~i s
Class A ClassB
■ San Jose,CE1 West Region ■National
Vacancy Rates (%)
s.oro
s.o~i
a.o~;a
zo;~
~ ~ ~,o.o,a Class A Class B
■ San Jose, CA West Region ■National
Values for multifamily properties are projected to increase over the next 12 months, according to I ntegra's report. Asking rents over the next 12 months are projected to increase.
According to a Costar report on the local multifamily market, the "Santa Clara submarket is an i mportant job center, with some prominent companies malting the city their home. The submarket is the second largest in the metro, with nearly 20,000 units in its inventory. The economic effects of the coronavirus pandemic and changing demand trends are weighing on submarket occupancy rates. Vacancies are decreasing for Class A units and increasing for Class B units. Prior to the pandemic, job growth around the metro had kept demand high, and absorption was able to keep pace with rapid supply increases over the past decade. Strong demand for housing, particularly near transit, was a driving force for rent gains in recent years.
The coronavirus pandemic has quickly changed market trends and created significant uncertainty Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 34
Real Estate Appraised: Tht~ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clat•a, CA in the mac•lcet. But the expectation is for transaction activity to pull back as mat•ket participants take stock of the changing economic and commercial real estate landscape." "Vacancy in Santa Clara has been volatile since 2016, with large scale construction projects driving the variability. In total, the submatket has added over 3,700 units since 2010. The submarket had previously been able to absorb the new units at a healthy t•ate, with the vacancy rate consistently normalizing just a few quarters after pt•oject delivet•ies. But the economic effects of the coronavirus are stressing near term occupancy rates. Remote working trends have allowed renters to look further afield to meet housing needs, reducing demand, and job losses are putting further• pressure on apartment occupancies. As a t•esult of the reduced apartment demand, existing units are experiencing move-outs, and new projects are facing longer lease-up times." The Marcus & Millichap's 3Q-2021 Multifamily San Jose Metro Area Market Report stated that the apartment market in the South Bay had a strong second quarter and was poised for continued momentum as Appie, Facebook and Google made plans to have their employees return to their campuses. However, the emergence of the delta variant and the rise in COVID-19 cases encouraged bath Apple and Faceboolc to delay recalling employees until January of next year and Google to push back its full office opening until rnid- October while also mandating vaccines for workers. Although the extensions will make the improvement in vacancy and rents mote measured in the second half of 2021, the eventual return of employees to these economic anchors will pt•ompt smaller fit•ms to bring workers back to their offices.
Local Single-Family Market
According to the City of Santa Clara General Plan, an estimated 28,500 new jobs will be created and the population will grow by 32,135 people in the City between 2010 and 2035. The General Plan forecasts that 13,222 new housing units will be needed during that same period, based on an estimated household size of 2.5 people. The General Plan also states that household growth in the City has been much slower than the rest of Santa Clara County due to the lack of vacant residential land. Therefore, in order to meet future housing needs, construction of new housing will primarily occur through the redevelopment of existing sites.
Among the 51,041 housing units in Santa Clat•a, as reported by the DOF, the single-family (attached and detached) market represents about 19,510 or about 38% of the total housing units in Santa Clara.
Cot•eLogic is a national real estate, mortgage, consumer, and specialized business data provider.
They tracked the annual median home price for all homes (single-family, condo, and townhouse), including new construction, in the City's three ZIP code areas through 2021:
Frank Schmidt &Associates Phone: 510-468-9219 fsclimidt cr valuationconsultant.net 35
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA The data above indicates that zip code 95051 consistently has the highest median price among Santa Ciara's zip codes. Zip code 95050 had the second highest median in most years. The $/SF indicator shows that 95051 has higher prices than 95050, which both have higher prices than 95054. The data indicates that median prices were increasing in 2018, stabilizing in 2019 and 2020, and increasing in 2021. Overall median prices were higher in 2021. By the end of 2021, median prices had increased about 7.5% per year in 95050, increased about 6.4% per year in 95051 and about 6.8%per year in 95054.
The $/SF indicators showed an overall increasing trend from 2020 to 2021. The total number of sales indicator showed an overall increasing rate from 2020 to 2021 in 95050, 95051 and in the 95054 zip code. Total citywide sales were 1,049 in 2018, 955 in 2019, 1,075 in 2020 and 1,538 in 2021. Overall, thet•e were more sales transacted in Santa Clara in 2021 compared to 2018, 2019, and 2020 suggesting an increase in demand during the pandemic.
The following tables depict the median price trend by zip code over the 37 months ending December 2021 for single family homes and common interest developments (townhouse/condos) in the three zip codes of the City of Santa Clara using closed sale data obtained by M LSlistings.com:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 36
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Median Sales Prtce &Median Days to Sell
For Single-Family Units by Zip Code
sz,000,000 - -- -- - ioo
Si,aoo,000 — so
~$1.fi00.000
$1,g00,000
~
'.
80 70
$1,200,000 60.~ --.
D
$0o $1,000,000
~ I ~ 4U ~$800.000
I 30$600,000 I ~
~ `$400.000 '-__'_
$200,000 '~
20 10
0$0
95050 Medlan prtce 95051 MedWn Price 95054 Medlan Price - -95050 Median Days W5e11 ~-95051MedWn Days bSell 95054 Medlan Dayz to5ell M edian Sales Price &Median Days to Sell
Townhouse/Condominum
si,aoo.aoo ~ - lzo
Si,zoo,000 'I 100
$1,000,aa0
-
•~'
Y w
~ Z
$600.000
w Y1•'8 $600,000
~ I /` 1 1 M
$400,000
/N ~ ~ ~ ~► "f~ N~~ ~ ~~5~00.~
So 0
~' ~~~a ~~~"a ~#~~a .Pa ~#~~a 9a g ~~~a~ $ ~~`~~~~ a ~~ p ~A ~~~~ 95050 R1MIan 5V —95051 Med1an 5V —95115<MdYn SP
X95050MedWn Wys to Sell —~%OS1Median Days to5ell --9505<MedYn Days WSell As shown above, market data derived from the local MI,S shows that prices were bending downward in 2018, and oscillated up and down in 2019 and 2020. Similarly, townhouses and condominiums oscillated up and down in 2021. However, prices for single family homes were generally trending upwards in 2021.
We note that CoreLogic data includes resales and new construction, while MLS typically does not include all new construction. This is because builders often do not use MLS to market their homes. The following tables show the annual and 2-year change for• all housing types over the l ast three Decembers, according to the MLS:
F rank Schmidt &Associates Phone: 510-468-9219 fsclimidt@valuationco►~s~ilt~~nt.uet 37
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Housing Type Zip Code December-19 December-20 December-21 %Change per Month Last 12 Months
%Change per Month
Last 2 Years
95050 $1,210,000 $1,265,000 $1,230,000 -0.23% 0.07%
SFR, Condo, & 85051 $1,425,000 $1,415,000 $1,575,000 0.94%a 0.44% Townhouse
95054 $1,202,500 $1,128,000 $1,450,000 2.38% 0.86%
Source: Local MLS
The data in the above table supports the opinion that 95050 and 95054 generally rate inferior to 95051. The data also indicates that median selling prices are higher over the past two years, but higher in 95051, higher in 95054, and lower in 95050 over the last 12 months. The median throughout the entire city, encompassing the three zip codes, increased 8.3%over the 12 months ended December 2021 from $1,305,000 to $1,413,000.
The next table using MLS statistics shows the monthly median change in selling prices in Santa Clara, adjacent Sunnyvale, and the larger Santa Clara County market since the start of 2018:
Median Sales Price For All Residential
sz,000,000
$1,800,000
$1,600,000
c $1,400,000 --'~
$1,200,000
$1,000,000 -
$800,000 ,--r—~~~ —~ r~
N ~r~ 'r~ ~v~ M~ h~ ~v~' ^~ h W~ ~ h~ ~1r~ h~ N~ ti~ h~ N M1~ h~ N~ N~ ~ ~Y~ ~~p~ ~o` ~m'~ ~~ ~d Zo ~q~ gym` Fmi ~~ ~d Zo ~~o~ gym` ems ~~ ~a Zo ~m~ gym` ~,m~ ~~ ~d =o — Sa nta Clara - Sunnyvale Santa Clara County
As the table above indicates, median selling prices peaked in the spring of 2018, receded until early 2019, were more stable through the end of 2019, but then increased sharply in the early part of 2020 through the spring of 2020. Prices were generally stable over remainder of 2020 in Santa Clara and Santa Clara County but declined in Sunnyvale. The median selling prices for each of these three areas generally increased throughout 2021.
Frank Schmidt &Associates Plione: 510-168-9219 [email protected] 38
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Conclusions
The overall long-term outlook for the economy remains bright, though the migration of many highly paid workers is delaying a stronger recovet•y in the retail arena. Furthet•more, the emergence of the COVID-19 variants is giving pause to some to the local economy's anchors.
Google, Apple and Faceboolc have all pushed reopening into early 2022 as the current wave of positive cases needs to pass. The unemployment rate began declining and detached single-family buyers showed greater interest in the market as they fled more urban areas such as San Francisco and smaller housing types and were looking for more space in less dense environments. The work-from-home dynamic kept pressure on delivery services and data center operators to keep up with demand, which in turn kept up demand for• industrial properties storing product.
Essential retailers generally fated okay during 2021, particulat•ly grocery stores, home improvement stores, drive-thru fast food, and quick serve t•estaurants. However, fine dining, hospitality, entertainment, and shopping malls, to name a few, were impacted by the pandemic.
As the vaccine was distributed in the community, restrictions were lifted, businesses reopened, and employment numbers gradually improved. Demand for most real estate is forecast to continue to return to pre-pandemic levels.
Commercial (retail and office) properties exhibited mixed indications due to the pandemic in 2021. Some retail is doing fine, but the hospitality/leisure/entertainment industries remain depressed. Office demand appears in limbo as many employees may or may not fully return to offices, particularly among tech companies. Furthermore, the emergence of the COVID-19 variants is giving pause to Borne to the local economy's anchors. Google, Apple and Faceboolc have all pushed reopening into early 2022 as the current wave of positive cases needs to pass.
During 2021 office buildings experienced stable to increasing vacancy despite increasing asking rental rates. The rental rate increases were due in pant to newer, better space becoming available as tenants migrated from nearby higher cost markets. The trend was generally the same for retail, whereby vacancy ticked down slightly over the second half of 2021, with Santa Clara continued to record the lowest vacancy rate in the region at 3.9%. Average asking rents were also down slightly at the end of the year. There is limited new retail construction occurring; most is part of mixed-use developments. Office construction is occurring, but it is mostly located in downtown San Jose and the Bayside portions of the county where larger blocks of land can be found and generally comprises high-intensity, four or more story buildings. Based on discussions with market participants, general market conditions and the sales data we analyzed, we applied a market conditions rate of change to the commercial land sale compat•ables used following of negative 0.75% per• month from the start of April 2020 through 4Q-2020. From the date of sale through 4Q-2021 prices wet•e more stable for commercial and did not warrant adjustment.
Over the past couple of years, industrial (and warehouse) market statistics indicated that rental rates have been trending upwards, while vacancy rates generally stabilized near 5%. Market Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 39
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clac•a, CA participants opined that selling prices at•e also increasing, especially for large sites suitable for• data centers. The increase in industrial value is supported by an improved pained sale at 3600 Peterson Way in Santa Clara that sold in October 2016 for $30 million and again in June 2019 for $371nillion, which indicates astraight-line increase of about 0.72% pet month for this 75,800 square foot building on an approximate 5.42-acre site. 1623 S 10~~' Street in San Jose sold for $3,000,000 in August 2018 and again fot~ $3,801,000 in October• 2020, indicating astraight-line increase of about 1.0% per month. Based on increasing rents and prices, we concluded that competing industrial land prices were increasing at the rate of about 0.75% per month from the date of sale of the comparables through December 2020, with no additional adjustment in 2021.
Santa Clara (and the Bay Area in general) is an undersupplied housing market. Demand for housing is expected to continue in the long-tet•m, with increased demand for higher density housing options, a result of the scarcity of developable land and the more affordable nature for prospective buyers/renters.
M arket data and market participants report that residential prices declined in the latter part of 2018 and were stable overall during 2019. In 2020, the residential market showed different trends depending on property type. The market generally saw greater demand for detached residential over the course of 2020 and 2021 as buyers looked to have more indoor/outdoor space since they began spending a greater proportion of time at home. Meanwhile, condominiums and apartments experienced a slower market during 2021. Based on the market reports cited above, sales data analyzed, and market participant interviews, for the very low-density residential land sales used in the following analysis we applied an increasing rate of change of 0.25% per month from the start of 2020 through the fourth quarter 2020 and an increasing rate of change of 1.00% per month from the start of 2021 tht•ough the fourth quattet~ 2021. Fot• the high-density land sales, median sale prices oscillated somewhat and multifamily rents stagnated or declined dut•ing 2021.
So, no market change is applied dut•ing 2019, 2020 and 2021 for this pt•operty type.
LAND USE ORDINANCES
Since we are analyzing hypothetical lots, we supposed that each use would be based on its appropriate General Plan designation. The appropriate zoning category for each hypothetical use was not a critical factor as the General Plan is the long-term planning tool used by the City.
Furthermore, comparable land sale transactions typically sell based on their intended use, which is supported by the General Plan in almost all cases. The City's Phase II Land Use map is in effect and is intended to guide land uses for the years 2015-2025. Compared to Phase I, it expands the at~eas within the city where mixed-uses and higher•-density t~esidential is allowed. We supposed the following General Plan designations for• each hypothetical use:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 40
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Use of Hypothetical Lot General Plan
Very Low Density Residential Very Low Density Residential Low Density Residential Low Density Residential
High Density Residential High Density Residential
Medium Density Residential Medium Density Residential
Commercial Regional Commercial
Industrial Light Industrial
HIGHEST AND BEST USE
W e studied the legally permissible, physically possible, financially feasible, and maximally productive uses of each hypothetical lot. We considered prevailing market conditions and recent development trends. As indicated in the market conditions section, except for retail/hospitality/office, each product type is generally experiencing increasing or stable prices and stabilizing vacancy rates. These ate indications that the highest and best use is to construct the legally permissible product for each respective property type. However, for the commercial use, since many retail and office projects are on hold, construction would not likely be undei~talcen until the market improves, unless preleased or a build-to-suit is procured. Therefore, the highest and best use for the hypothetical commercial use would be to hold for future development of a commercial building until the market improves, unless preleased or a build-to- suit. We concluded to the following components of property uses for the highest and best use of the hypothetical lot based on the overall market and the instruction of the Client:
Use of Hypothetical Lot Highest &Best Use
Very Low Density Residential Very Low Density Residential Low Density Residential Low Density Residential
M edium Density Residential Medium Density Residential
High Density Residential High Density Residential
Commercial Hold for Development of a Commercial Building Industrial Light Industrial Building
We applied a hypothetical corrditio~a that each of these uses was allowed on the hypothetical subject lot.
For this analysis and based on the market and the City's General Plan, we concluded the most reasonable density to suppot~t the residential uses was about the midpoint or nearer the high end of the allowed density ranges (based on ever-increasing density proposals/approvals):
Fj~anlc Schmidt &Associates Phone: 510-~68-9219 [email protected] 41
Real Estate Appraised: Three Hypothetical One-Ache Lots, One for Each Zip Code, Santa Clara, CA • 13 dwelling units per gross acre (DU/AC) for Low-Density Residential; • 26-30 DU/AC for Medium-Density Residential; and
• 45 DU/AC for High-Density Residential.
For Very Low-Density Residential, which allows up to 10 DU/AC, we concluded that the most Iilcely subdivision for a hypothetical one acre of land would support a subdivision at the high of this range, or 10 DU/AC. This is because the scarcity of land requires ever increasing densities to make projects financially feasible.
The likely commercial use would be an office building, but only if preleased or a build-to-suit.
The likely industrial use would be a data center, flex, light industrial building or some type of interim contractor storage yard with minimal building improvements.
APPRAISAL PROCESS
The appraisal profession has generally relied upon three traditional approaches in estimating the market value of real property. These are the Income Capitalization Approach, the Sales Comparison Appi°oacl~, and the Cost Approach. While all three approaches are always considered in a valuation assignment, all three are not always applied. The quantity and quality of available data and the applicability of each approach relative to the value being sought are important factors in reconciling to an opinion of value.
M arket value was estimated using the sales comparison approach. The income capitalization approach is seldom used when valuing land. The cost approach did not offer substantial insight into this estimate of market value since there are no building improvements. Sellers, buyers, and our peers in this market rarely rely on the cost and income capitalization approaches when offering, purchasing, or valuing properties similar to the hypothetical subject lots. Therefore, we did not undet~take a cost or income capitalization approach.
Following we estimated the value of a hypothetical one-acre lot under each use scenario described above, as if located within the 95050 zip code, since the most data was discovered in this zip code. Next, we applied the weighted average of the highest and best land use component, based on the percentage of total land area associated with the different property types (as described above) that sold in the City of Santa Clara in the 12 months prior to the date of value (as reported by Old Republic Title Company). Lastly, we applied any necessat•y locational differences from the 95050 zip code conclusion to arrive at the appropriate average lot value in the 95051 and 95054 zip codes.
F1'ank Schmidt & Associates Phone: 510-468-9219 [email protected] 42
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA AVERAGE VALUE ESTIMATE IN 95050 ZIP CODE
Very Low-Density Land Value
The writers examined data that was discovered by: talking to brokers, agents, property owners, and market participants from within the subject market; reviewing DataTree.com, M LSlistings.com, and CoStar.com databases for recent sales; and searching Loopnet.coin and broker databases for current listings. We also reviewed development reports provided by the planning departments of Santa Clara and other nearby cities.
As stated above, for the very low-density value component, we assumed a density of 10 dwelling units per acre, at the high end of the allowed range under the Very Low-Density General Plan designation, which allows up to 10 dwelling units per acre. We searched for competing sales and listings of properties throughout Santa Clat•a and adjacent cities which were intended for development with residential densities less than 25 dwelling units per acre and that closed escrow over the last three years. We first analyze the subject hypothetical one-acre site located in zip code 95050 since more appropriate sales from this zip code were discovered. The sales we found most comparable are displayed on the following adjustment grid. The adjustment grid serves two purposes. First, it presents data, analysis, and conclusions about the subject and comparables in a way that facilitates comparison. Second, it presents the data in a format whereby the reader can follow the writers' adjustment process.
A parcel snap for each comparable sale is displayed in the Addenda. Selling pt•ices were verified using our summary transcript of the public record and conversations with selling and listing brokers/agents, sellers, and/or buyers when possible. A map showing the location of these comparabies is displayed in the Addenda.
F1•ank Schmidt &Associates Phone: 510-468-9219 [email protected] 43
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
VERV LOW DENSITY COMPARABLE LAND SALES
ELEMENT OF ADNSTMENT SUBJECT COMPARABLE VLD-I COEdPARABLE VLD•2 COMPARABLE VLR3 COMPARABLE VLD-1 COMPARABLE VLD~S Average Street 4254 Cheeney S[ 159 Brookside Avenue 3159 Butte Street 1334 Miller Ave 1348 MillerAveADDRESS Santa Clara Sarda Clara Sarda Clara Santa Clara San Jose San Jose qpN 1 d1-12-031 303-22-028 290-0M1-044 375-25-053 375-25-055 SELLER Lawrance L FargharTnast Domingo 1992 Revocable Trust Wallis 1983 FemilyTrust Steven K. Doi 2011 Trust Li Shaoliang BUYER B S & L S Schulman Trust Ranjan Trust, et al Cheng C &Tsai L Chen Zhang Taa Ke Lun DOCUMENT NUMBER 24770884 24597855 24420940 2a96fi46s 2a 965471 SALE ! USTJNG PRICE ;s25,000 ;1,325,000 ;1,600,000 ~,100,00o Ss,2a2,000 SALE /OFFERING PRICE PER SF 5123.33 396.72 5110.92 5139.87 5146.82 TRANSACTIONAL ADJUSTMENTS $308,333 $882,500 $800,000 $1,033,333 $1,077,333 REAL PROPERTY RIGHTS CONVEYED Fee Simple Fee Simple (M-t-M leases) Fee Simple Fee Simple Fee Simple Fee Simple gp,J(J$7'/ygJyr o.00% 0.00% 0.009b 0.00% O.00%
FlNANCING TERMS All Cash Camentlonal AJI Cash All Cesh All Cash ADJUS71UgM 0.00% 0.00% 0.00% 0.00% 0.00%
CONDITIONS OF SALE Motivated Seller Artn's~engfh Arm's-LengthAmprwement Value Arm's-Length Mn's~ength ADJUS71VgM 10.009u 0.00% -9.38% 0.00% 0.00%
IXPENDITURESAFTERSALE Demoli6onOffset DemolilionOffset Nane OemolitionOffset DemolitianOffset an~usrn~nrr o.00% o.aa% o.00~ a.ao% o.00%
CLOSE OF ESCROW Decemher 31, 2020 September 2, 2020 March 4, 2020 Mey 19, 2021 May 18.2021 TIME OF SALE/MARKET CONDITION ~ecember31,2021 November2~20 Fwgust2020 February 2020 March 2021 March 2021 MONT}iS FROM START 1Q-2021 THROUGH 4Q-2021 12 12 12 9 9 ADJUS7IV~M~% PERIVIOMH t.aa% 12.ao% 12oa~ X2.00% s.oa% 9.aa% MONTHS FROM START 1 Q-2(124 THROUGH 4Q-262Q 1 4 10 0 0
ADJUS7IV~M %PER MOMH 0259'0 0.25% 1.00% 2.50% 0.00% o.00% ADJ PRICE PER SF AFTER TRANSACTIONAL ADJS 5162.33 5109.40 5115.40 5162.46 5168.96 LOCATIONAL ADJUSTIV~NTS
Average Similar Similar Similar Similar SimilarIXPOSURE 7 VISIBILITY ACCESS Average Similar Similar Similar Slmiler Similar
APPEAUSITE INFLUENCES Average Inferior InferiorlSan Tomas Ecpy Superior Superior Superior ZIP CODE 95050 95054 95050 95051 95129 95129
OVERALLLOCATIONALRATING Inferior Inferior Su erior Su xior Su erior
PHYSICAL ADJUSTMENTS
1.0~ ~.t7 0.31 0.33 0.51 0.51SITE SIZE (ACRES)
SITE SIZE (SF) 43,560 7,500 13,700 14,425 22,164 22,164 UTILIIY/TOPOGRAPHY Rectangular/1 StreetFron[Rectangular/1Stree[Front R3-18D
Rectangular/1 Street Front
R 1-BL
Sllrregular/1StreetFront
R 1 ~6 L
RectangularllStreetFron[
R 1-8
Rectangular/1Stree[Front
R 1~
USFJZQNING ADJUSTf~NTS
ZONING
GENERAL PLAN Very Law Density Res Very Law Density Res Very Low Density Res vo_ry Law Density Res Residential Neighborhood Residential Neighborhood NUMBER OF UNITS to 3.0 1.5 i.5 3.0 3.0
ESTIMATED !PROPOSED DU/ACRE fo.o 17.4 a.e 4.5 5.9 ;.9
INTENQED USE Residential Triplex SFD+ADU Residentlal +ADU 3 ReSidentiai Units 3 Residerdiel Units AFFORDABLEHOUSMGCOMPONENT Yesl1Unit(10%) Na No No No No PARK FEE COMPONENT PER UNIT $4,588 SuperiorMone SuperiorMone SuperiarMone $27,300 $27,300 ENTITLEMENT STATUS HasZonin &GP HadZonin and GP HadZonin and GP HadZonin and GP HasZonin &GP HasZoninaBGP OVERALL PHYSICAL & USEJZONING RATING Su erior Inferior Inferior Su erior Su erior
OVERALL RATING-SUBJECT SHOULD SELL FOR LESS MORE MORE LESS LESS Frank Schmidt& Associates Phone: 510-468-9219 [email protected] 44
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Adjustment Process
Ti•an~saction~~il adjatsttnents were made sequentially for property tights conveyed, financing terms, conditions of sale/motivation of participants, expenditures incurred by the buyer after the sale, i.e. demolition costs, and market conditions since the sale date.
Comparable VLD-1 is the December 2020 closing of a parcel in anoff-market transaction. Based on a conversation with the buyer•, the seller was in poor health and was motivated to sell. The existing rents for this triplex were well below market and the agreed upon selling price was close to land value. The buyer is a builder who may renovate or• demolish; he has not yet decided. If demolished, he estimated that another triplex would be built, but possibly a fouiplex. After making all other adjustments first, an upward adjustment is concluded for motivation on the part of the seller, as shown above. Since this comparable is expected to support three units again, the developer of this comparable will not pay park impact fees since there will be no net new units.
Comparables VLD-2 is the sale of single-family lot impt•oved with an older home. The buyer of Comparable VLD-2 intends to demolish the home and construct a new two-story dwelling and add a 748 square foot detached additional dwelling unit (ADU). This comparable will not pay park impact fees since ADU's are exempt under the Santa Clara City Code (17.35.090).
Comparable VLD-3 was the sale of an improved lot that could support two lots or a SFD and an ADU. The listing brolcei• opined that the existing improvements needed a lot of work, but that the buyer intended to move into the home, which dated from the 1940s. Based on the expected utilization of the improvements, we concluded that a downward adjustment was warranted for their contributory value. The amount of adjustment was estiTnated based on our observations, input from the listing broker, and a good fit for the data. A downward adjustment of $150,000 for this element of comparison was applied to the comparable on the Conditions of Sale line.
Comparables VLD-4 and VLD-5 are the sales of two single-family lots improved with older homes. These comparables were offered together by separate ownerships. The compat•ables were offered as a development site and a four lot conceptual site plan was included with the listings.
Instead of a four• lot subdivision, the buyer intends to demolish both of the homes and subdivide the two existing lots into six lots and one common access lot. These comparables were selected to help bracket size.
Comparable VLD-1 continued to be rented following close of escrow; we concluded that the cost of demolition was offset by the rents that could continue to be received. The seller of Comparable VLD-2 was given some time to lease back following close of escrow; again, we concluded that the cost of demolition would be offset by rental income. The sellers of Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 45
Real Estate Appraised: Three Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Clat•a, CA Comparables VLD-4 and VLD-5 were each given a shoirt time to lease back following close of escrow; again, we concluded that the cost of demolition would be offset by rental income..
As discussed in the preceding material, market conditions adjustments ate applied from the start of the first quarter 2020 through the end of the fourth quarter 2021.
Locational adjust~zents were broken into elements that reflect the property's identity to potential tenants or buyers (exposure, visibility), access (to freeways and amenities), and overall desirability of the location based on neighborhood factors such as age and condition of neat•by properties, pt•oximity to enhancing or detrimental factors, or an identifiable valuation element relating to address (locational appeal, zip code). Locational adjustments were warranted for the elements of comparison as summarized on the grid. As will be discussed in the following matei•iai, residential land values in the 95050 zip code rated superior to the 95054 zip code but inferior to the 95051. zip code; thus, the 95054-located comparable is adjusted upward and the 95051-located comparable is adjusted downward. Although Comparable VLD-2 backs to a public park, beyond the park is San Tomas Expressway, which is within about 200 feet of this comparable and is not separated by a sound wall, rating inferior to the subject; an ovet•all upward adjustment is concluded for this element of comparison. Comparable VLD-4 and VLD-5 are considered to be in a superior• location with a higher median sales price and are therefore rated as overall superior to subject.
Physical and Use/Zo~zing adjustme~its were broken into elements that reflect property size, utility/topography, allowed land uses and density, intended use/development density, affordable housing component, park fees, and entitlement status.
Comparable VLD-3 is located at the elbow of two streets and thus has an irregular pie-slice shape; an upward adjustment is concluded for inferior utility. For this analysis, upward adjustment was warranted for the lower densities of Comparables VLD-2, and VLD-3. Each comparable warrants downward adjustment for having either no park fees or for having lower pat•k fees than the hypothetical subject lot.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 46
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Conclusion
Following adjustment for the elements summarized on the grid, we concluded to the overall ratings displayed at the bottom of the sales grid. Bracketed by the comparable ratings, giving most weight to the sale comparables located in Santa Clara, we concluded to the following unit value of unentitled very low-density residential land in the 95050 zip code:
Unit. $/SF x Land Area (SF) = Indicated Value
$125 x 43,560 = $5,445,000
Estimated Market Value of a 1-Acre
Very Low-Density Residential Lot in 95050 Zip Code: $5,445,000 Low Density Land Value
For the low-density value component, the City's land use classification cites a loes-density range of 8-19 dwelling units/acre (DU/Acre), which is greater than the maximum 10 DU/Acre allowed in the very low-density classification. We assumed a density of 13 DU/Acre, about the mid-point of the density range. In the market, the primary value difference between very low and low- density land relates to density. The density adjustment was estimated based on the relationship between price pet• SF and density, as evidenced by the comparables. In the chart below, we plotted the preceding very-low density comparables and the high-density cotnparables used in the following high-density value scenario.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 47
Real Estate Appraised: Tlvee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Comparable Price per Square Foot vs. Proposed DU/Ac
szao.00
$zzo.00
.~
m
~ Szoo.00o.
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a $180.00
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`m
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a
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m 512a.00
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5ioo.00
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Proposed Dwelling Units per Acre
As shown in the chant above, the price per square foot of land increases with increasing density.
This is congruent with our observations in the market that as density increases, price per SF of land typically increases. The difference in pricing for changing densities is clear when comparing the lowest to the higher densities. And the price/SF difference is less when comparing the median to higher densities. We concluded there is a difference in value/SF between the preceding very low density and low-density residential which has a higher density. The trendline in the chart above indicates that the appropriate unit value based on a density of 13 dwelling units per acre would be about $132 per square foot. However, by graphing only the very low density sales, the following occurs:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 48
0.00 20.00 40.00 fi0.00 80.00 100.00 120.00 140.00 160.00 180.00
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA 2021 Comparable Price per Square Foot vs. Proposed DU/Ac $sss.00
Slso.00
S14s.00
.~~ $i4o.00m
n. $135.00mu
m $130.00
c
E $szs.00
0y $120.00m
A $115.00
m
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m $105.00
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$90.00
$55.00
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0.00 The chart above showing just the low density comparables indicates that the appropt•iate unit value based on a density of 13 dwelling units per acre would be in the range of about $135 to $140 per square foot.
Based on the comparable data, with a density of 13 dwelling units pet acre for the low-density residential land use, we concluded to $136/SF.
Conclusion
W e concluded to the following Low-Density residential value in the 95050 zip code for 1-acre of land:
Unit $/SF x Land Area (SF) = Indicated Value
$136 x 43,560 = $5,924,160
Estimated Market Value of a 1-Acre
Low-Density Residential Lot in 95050 Zip Code: $5,924,160 Frank Schmidt & Associates Phone: 510-468-9219 [email protected] 49
5.00 10.00 15.00 20.00
Proposed Dwelling Units per Acre
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clat•a, CA High Density Land Value
Similar to the preceding very low-density land search, we searched data sout•ces for high and medium-high density residential land transactions and examined data that was discovered by talking to bt•okers, agents, pt•operty owners, and market participants from within the subject market. We also reviewed development reports provided by the planning departments of Santa Clara and other nearby cities.
As stated above, for the high-density value component, we assumed a density of 45 dwelling units per acre, a little higher than the midpoint of the allowed range under the High Density General Plan designation, which allows 37-50 dwelling units per acre. The sales we found most comparable are displayed on the next grid. A map showing the location of these comparables is displayed in the Addenda. A parcel map for each comparable sale is also displayed in the Addenda. Selling prices were verified using our summary transcript of the public record and conversations with selling and listing bc•okers/agents, sellers, and buyers. We were unable to confirm the details of Comparable HD -2 with a party to the transaction. We relied on published data, city records, subscription service data, news at~ticles, and information available from a summary transcript of the public record for• transaction details regarding these compat•ables.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 50
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5~ ~Sil i].560 32.b25 6L<31 15.700 m.996 93,Zf8
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ccncnu viar Hyn oen.iry neyemue comm~~,n rai..e ur co~wurr ca~e,ew c~m~~~ry ~.~e uK High OertmY Nnlaentuf „fin onw~v n.Yiaeowi 4l1DWE0 OE115RY~mrMng uM[f pHaoe) )T-50 N/A WA 2836 Minunum lll~ Minimum l00 NUMB[R OI IINrtS d5 ]5 ~Vro Nap) SI9 59 ]0] Sri
6 TIfW1TF0 /RIOCO5ED9U/KftE 05.0 693 BlC 100.0 300.0 ]]3A WiEN~m USE Ne51Ee~ry~1 MklEytl CpMp[Nb gehll AHoNaCf MOufN` ~HaO]CM HOUSNp 0.W0l~4]I pp{Iy~Oy ONOAO{E HOUSMG mM00NEM 30%a ~Mlau 10%m IMileu rit / ]00% Yei /100% In-Il~u G~~ IMIp~ fpe vApK FEL COMPpNGIi RR UNrt y36,908 5)2K8B $33058 513,516 :2f,LS} $3pq~y CNTRILMEHTSfATUS Mx7enlnQ&4P Ha~G~nanl Clan NrE[ZanN anAGn~eral %an NaU Genwal Pin NN InMn $GP MUZanln LGO OV014LLR/YAC11L i UX/2pNWG RMING SIl6T~ly Supefio~ SIIghW Sup[ild 91g~tlY wC~'~Oi SLgMIY InIMa $Iig1~W Sugfiw OVEAILLLRIITNG-SUlIECT SMOlM1USELL iOR l£55 l[p tls MDPE !HS Trank Schmidt& Associates Phone: 510-468-9219 [email protected] 51
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clat•a, CA Adjustment Process
Ti•ans~ictiof~al adjustments were made sequentially for property rights conveyed, financing terms, conditions of sale/motivation of participants, expenditures incurred by the buyer after the sale, i.e. demolition costs, and tnaricet conditions since the sale date.
Comparable HD -1 was purchased as part of an assemblage—the buyer had recently purchased two adjacent properties. Similarly, Comparables HD -4, and HD -5 were also purchased as part of an assemblage. Based on the data, a downwat•d adjustment is warranted for motivation on the part of the buyer.
Comparables HD -1, HD -3, HD -4, and HD -5 required the demolition of existing improvements before their new, intended use could be realized. We concluded this expense was offset by the interim income from the improvements. So, no additional adjustment was warranted for• this element of comparison.
Comparable HD -2 is a closed transaction of an infill site improved with a vacant 30,000 square foot office building. This building will require demolition prior to redevelopment, estimated at $200,000, based on our observation and cost data. This element of comparison is shown as an upward adjustment on the Expenditures After Sale line.
Locatioyial a~ljatstm~ents were broken into elements that reflect the pt•operty's identity to potential tenants or buyers (exposure, visibility), access (to freeways and amenities), and overall desirability of the location based on neighborhood factors such as age and condition of nearby pt~opel~ties, proximity to enhancing or detrimental factors, or an identifiable valuation element t•elating to address (locational appeal, zip code). Locational adjustments were warranted for the elements of comparison summarized on the grid.
Physical a~ad Use/Zoning adjustments were broken into elements that reflect property size, utility/topography, allowed land uses and density, intended use/development density, affordable housing component, park fees, and entitlement status. Physical and use/zoning adjustments were warranted as summarized on the grid.
Comparable HD -1 and HD -3 both had two street frontages, allowing for gt•eater design flexibility, rating superior utility, and warranting downward adjustment. Comparables HD -4, and HD-5 both are zoned Transit Neighborhood and have a minimum density of 100 dwelling units per act•e. Comparable HD -3 will have 100% affordable housing and was given a 15% credit on the pat•lc fees. Comparable HD -4 has been given a credit of $1,290,000 for park fees in exchange for 14,000sf of dedicated park space and private amenities. The comparables proposed building densities/acre bracket the subject; the highest densities warrant downward adjustment and the F1'ank Schmidt &Associates Phone: 510-468-9219 [email protected] 52
Real Estate Appraised: Thl•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA lower densities warrant an upward adjustment. Comparables HD -1 and HD -2 will require a zoning change or general plan amendment to allow for residential and an upward adjustment is warranted for this element of comparison. The comparables with approved entitlements rated superior to the subject's unentitled status and are adjusted downwat•d. Parlc impact fees varied somewhat based upon the use and timing of the fee.
Conclusion
Following adjustment for the elements summarized on the grid, we concluded to the overall ratings displayed at the bottom of the grid. The compat•ables were analyzed based on a price per square foot and a price per unit units of comparison. The range of adjusted values is more consistent on a price/SF basis rather than aprice/density unit basis; therefore, the price/SF is utilized as the pt~imaiy comparison of value. Bracketed by the comparable ratings, the following value of unentitled high-density 45 DU/Acre residential land in the 95050 zip code is concluded:
Unit $/SF x Land Area (SI+~ = Indicated Value
$195 x 43,560 = $8,494,200
Estimated Market Value of a 1-Acre
High-Density Residential Lot in 95050 Zip Code: $8,494,200 M edium Density Land Value
For• the medium-density value component, a density of 30 dwelling units per acre is assumed, slightly above the midpoint of the allowed range under the Medium Density General Plan designation, which allows 19-36 dwelling units pet acre, because buyers typically build to the higher end of allowed density. In the market, the primary difference between the medium-density land value and high-density land value relates to density. The density adjustment was estimated based on the relationship between price per SF and densrty, as evidenced by the comparables. In the chart below, we plotted the preceding high-density comparables and the very-low density comparables used in the preceding low-density value scenario. We graphed the change in land value per square foot versus the change in density.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 53
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Comparable Price per Square Foot vs. Proposed DU/Ac
szao.00
Szzo.00
.~
a
~O Szoo.00a
xm
m $180.00
E
a
10 $160.00
m
m
x
N Slao.oaa
a
a $120.00
vQ
$100.00
$80.00
As stated in the preceding material, the data shows the price per square foot of land increases with increasing density, which is congruent with our observations in the market. The difference in pricing for changing densities is clear when comparing the lowest to the higher densities. The chant above indicates that at a density of about 30 dwelling units per acre, the indicated price pet square foot is about $140 to $145, but is somewhat skewed by the cluster• of low density sales.
The next chart removes the low density comparables and includes only the higher density comparables:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 54
0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 180.00 Proposed Dwelling Units per Acre
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for• Each Zip Code, Santa Clara, CA 2021 Comparable Price per Square Foot vs. Proposed DU/Ac i Szao.00
S~zs.00
$zzo.ao
5tis.00
i a Suo.00
i m Szos.00
Szoo.00
Si9s.00 ~
W Sieo.00
$ias.ao
' ~, Siso.00~ a
i u ,5175.00 ~
a`
m $170.00,', ~
~ $165.00
6 $160.00
$155.00
$150.00
20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 110.00 120.00 130.00 140.00 SSQ.00 160.00 170.00 180.00 190.00 Proposed Dwelling Units per Acre
The chant above indicates that at a density of about 30 DU/acre, the indicated price per square foot is about $200 to $205 per square foot. This is slightly more than the high density value concluded above, which may be due in part to the higher cost of underground parking typically found in more dense projects. Based on the preceding comparable data, giving gt•eater weight to the more comparable similar density range and the higher density sales chart above, with a density of 30 DU/acre for the medium-density land use, a unit value of $200/SF is concluded.
Conclusion
W e concluded to the following medium-density value in the 95050-zip code for 1-acre of land:
Unit $/SF X Land Area (SF) = Indicated Value
$200 x 43,560 = $8,712,000
Estimated Mai•lcet Value of a 1-Acre
M edium-Density Residential Lot in 95050 Zip Code: $8,712,000 Commercial Land Value
Like the search for residential land sales data, we searched similar data sources and examined data that was discovered by talking to brokers, agents, property owners, and market participants Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 55
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA from within the subject market. We seat•ched for recent sales of competing retail and office properties throughout Santa Clara and nearby cities. Those we found most comparable are displayed on the grid on a following page. A map showing the location of these coinparabies is displayed in the Addenda.
Frank Schmidt &Associates Phone: 510-468-9219 fschmidt rr valuationconsultant.net 56
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA COdL~iERCL~IL, L.i~~ COQ ~It~.BLE S.aI.ES
TT ~~T OF ~DJ[; 511i~T StiBJEC? Comyanbk C-1 Compuabk C-I Co~uable C~ Comparnbk C-1 Comparable C-F .E55 ii75 F]CamoPra] 33'BIICacm Re~L Il'S Cd~.ls~e 855EHamestidRmd 1?^O Oa]mmdpky. c•~Q.v~a Sa~¢C7ri San Q.a-a Smlau ' tiak S~ynlc
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Atv~x Sopenart~ SaW.~e CamcS~.rim'A6c 5,ffila 5~*+,~••_YPOSURE ~ L~L-iL'EICFS'AC'GE55 ,irca~ Sm¢la Si~7r S~aJa'Acttss Sffila Stir CODE 950W ?SOT 95051 95110 9i0S7 9i0L5
LOG~TIQ`7,~L C0][PPARISOY Svp~ior SQL: Stela S~lv Smlr
PH£SIC.~I. S LSE•ZO~'L~G hDJC5TA~7S
1.071 1.6x0 0.57'7 1.873 [.130 0910pARL3.51g (Acc)
STffiSIF A~aaae Smmir Smmlr '~ r Stela Sffilar
0~3TEID~IDPA[£~.'IS FititMdIn[ SxNa: Ss¢lr Sxula ^.~.r Sxnlar .:AI.~:GGz~.~I.PL~L1 CT%4pmalC~aaa] CT+C~ty\tmhUu Cf rC~n•arskUu e1(PD?`Coabi~eel~6Com o~'vD rc~e•~~ Ms:i~stial 7ROPOSE)UgC~ C~¢cil Rern7m~ler7~ Retsl lnNen-7~ ~Ea~lad OdceaRescLod Eotrl PHYSTCTL J~PSE20\'MG COSS.IRSOS S~aioc SISKima S~e~or S~ri~ SKrda SUBJECT SHOLID SEI3. FOR Lr: SI Lr.: Lec: Le^ Lr.:
Frank Schmidt& Associates Phone: 510-468-9219 [email protected] 57
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Adjustment Process
The adjustment methodology was similar as above for the residential land sales.
Trar~sactio~2al adjustments were warranted. As described above, due to a lack of commercial land sales, some unproved sales were utilized for which the improvements contributed little to the overall selling price. Comparables C-1, G2, C-4, and C-5 wet•e improved.
Comparable C-1 was maticeted as a development site; the eventual buyer planned to continue the retail uses. Based on a discussion with the listing broker, our observations, and the age and condition of these improvements, which comprised about 25,150 SF, the contributory value was estimated at about $60 per square foot of building area, or about 15% of the selling price as shown on the adjustment grid. This is shown as a downward adjustment. Similarly, the sale of Comparable G2 included about 7,800 square feet of improvements dating from the late 1950s; each contributed to the overall selling prices. Based on our obset•vations and discussions with the broker, the contributory value for each of these buildings was estimated at about $75 per• square foot of building area, or about 11%and 16%, respectively of the selling prices as shown on the adjustment grid. These are shown as downward adjustments.
Comparable C-4 included a 6,295 square foot restaurant building originally constructed in 1972.
This site was being sold for land value and the restaurant was leased month-to-month. We concluded that the cost of demolition would be offset by rental income.
Comparable GS included a 5,515 square foot restaut•ant building. The building was vacant at the trine of sale, but could have been leased on a month-to-month basis. We concluded that the cost of demolition would be offset by rental income.
M arket conditions adjustments were applied from the contract date through the date of opinion using the degree of adjustments) discussed in the Market Conditions section.
Locutional adjustments were broken into elements that reflect the hypothetical pt•operty's identity to potential tenants, buyers, or occupants (exposure, visibility), access (to freeways and amenities), and overall desirability of the location based on neighborhood factors such as age and condition of nearby properties, proximity to enhancing or dett~imental factors, or an identifiable valuation element relating to address (locational appeal). Locationai adjustments were warranted as summarized on the grid. Note that Comparable G3 does not face Coleman Ave despite its Coleman Ave addt•ess.
Physical a~ad Use/Zoning atljustnzents were considered for size, utility, off-site improvements, zoning/Genet~al Plan, and planning/entitlement status. Within the range of the comparables, larger Comparables C-1 and C-3 warranted upward adjustment. Among the differences in land use ordinances, those of Comparables C-1 and C-2 were more favorable and warranted a Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 58
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA downward adjustment. Comparable C-3 sold entitled for a hotel development and warranted a downward adjustment for this element of comparison.
Conclusion
Bracketed by the comparables, we concluded to the following for commercial land in zip code 95050:
Unit $/SF x Land Area (SF) = Indicated Value
$95 43,560 $4,1.38,000
Estimated Market Value of a 1-Acre
Commercial Lot in Zip Code 95050: $4,138,000
Industrial Land Value
W e searched the same databases listed above and reviewed other data discovered by talking to brokers, agents, property owners, and market participants from within the industrial market. We searched for recent sales of competing industrial properties throughout Santa Clara and nearby cities with similar industrial markets. We also searched for recent improved sales with improvements that were neat•ing the end of their economic lives or that contributed little to the overall sale price. Those we found most comparable are displayed on the following grid. A map showing the location of these comparables is displayed in the Addenda.
W e are awat•e of additional sales data in this inarlcet described below but were not selected as comparables:
• The Fujitsu campus at 1200-1280E. Atques Avenue on the Santa Clat•a border with Sunnyvale sold in October 2020 to Lane Partners. This campus includes six buildings on about 26 acres. The purchase price was recorded at $104 million, but we discovered that there was an additional $15 million spent on lease buyouts. Based on a total purchase of about $119 million, the equivalent land value is indicated at about $104 per square foot.
The site is expected to be redeveloped and allowed uses could include R&D, office, and data center. The large size precluded use as a comparable. We were unable to confirm the details of Comparable I-1 with a party to the transaction. We relied on published data, city records, subscription service data, and information available from a summary transcript of the public recot~d for transaction details regarding this comparable. • There was an unproved sale at 2170 Martin Avenue that closed escrow in November• 2020, but based on a discussion with the listing and buying broker this was effectively a Frank Schmidt &Associates Plione: 510-468-9219 [email protected] 59
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for• Eacli Zip Code, Santa Clara, CA distressed sale as the seller's business had dried up due to the pandemic. Furthermore, the buyer and seller had a previous relationship and the broker represented both sides. For these reasons, it was not appropriate to use as a compat•abie.
Frank Schmidt &Associates Plione: 510-468-9219 [email protected] 60
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
INDUSTRIAL LAND COMPARABLE SALES
ELESff\T OF?iDJIi5I1lEVI SIIBJEGT CO\IP.~R.~BLEI-1 CO]1P.~R.~IBLEI-?COlIP:iR9BLEI3 COSiP:1R~IBLEI-I CO]ffaR~IELE~S ~SDDuSs ARraFe Sceet ~~'~\fatia Atx ?i75 bfatinAce F535 Sc 1575Iadu-¢ia1Ati 565 Reed St 930 divan A~ae Swn Qan Sacs Clara Sam Clra SmJa< Sma C]ua Smh Csi
APN '?410.119 ~~3.10.115 X37-30-0 0 & 0?5 ?30-3?-105 ~~5~-010 m r-r~ Projecr33IZC LV?3 ~a <,L.or_ FrmIc J1.saS-FIe~-"~A Feed Sneer A:.aciatr: 9801ia~:.scesue LI.0 BL'2F ~??51~Latin?avpaty IS.021?3 E1a:da AcpatvLI.0L3.\ RCi C ~Sl'm-°' Propaoc:Cap u~t~~-1LLC 4Lvk &Sslly4e~LLC~°~C CSTFPRI~i 5'..9'!0.000 533.900.000 S1~SD0,000 55353.000 5~?OO.ODO D()CObffS7IN~'2~~9EF ?5195561 JO?0311 ?390?3?3 24T_I853 ?4381016 BODIDS A.SSSTAfrD?SF $0.00 50.00 50.00 $0.00 50.00
TOT.aL COST TO BL'FEF.'SF ~ SL{'.Q3 5189.93~ 5911? 5103.?0 510937 7R91 S:~CTIO\ iL ADJliST~t~~'fS
Fw S~pL Fie Sim~L F Suap2~ F« SQL F« 5~3e Fay S~ql~R&iL PT~OPER7Y FIGHLS CANVETID .an.rz~sn~7 0.00~~. a.~: o.00^: o.00^: o.oa:
FLVi.NCINGTERER\f5 Com~mtional i.II Cam Commtiacat A21 Ca:h Com•mtiooal .annsrig.T o.00^: o.ow% o.o~~: o.00^a o.oa:
CONDIIIONS OF SAIs Affi':-r~~ .lxm'~I.ea5th ,'itm':.t~wx ice:-i.~~. P~vehlr 7ryTm~xt .mnsn~~7 0.00^: aoo^: o.oas: o.oa: -io.oa:
ADDIII0.VAi. COSTS'IO SiJ1F1. Dema!mrm OEzt Ihmoliri~ O at Desa?ieoc 0E1: Nye Nme .1DJLS7_1~T 0.00'. O.W'.: 0.005: 0.00°.: 0.00°:
CONTRIBUTOn "VJZ~L di L*+fP&OV ~I~1~~Z'S Nam Vane None TG^_3.135 g YG~4.000 SF _~tDlLTI.I~~T 0.00!: 0.0696 0.00°5 ?^.539: •13.63!e
CLOS-c OF ESCROR' ~ 12`ISnO'_3 7~?_D'_3 1'1.~0?1 11^_y'_0'_0 1.35^0?0 '1II~lsE OF SiiL'c!\L:RSEI CO`.'DIIION Deccber 3l. ?0~1 ?ID 7ffie?0'_I SeptemSe 20?0 SepmmLc?020 No~~bei^_019 bS0'S FFOhf SALE TfiatOCGH Dec 31.2926 0 0 3 3 13
0.75':_1DJC'ST.1~~T~u °o PER 110TH 0.007. 0.07-: ' _?5'-: ??5!: 9.75'> .~.DJCSTED PRICE ~ SF k SL'?.03 SIS991 533.00 53.91 S9~a5 LOCATIO\ ~1L..~aDJ[:ST~t~~TS
htCiE! SI9i~]T Spa S9?•~F'y ~]ffi~]i ~~ 1^~ ~S~Z'~~8..~ 11~~.S.S I~ltl3]G! ~lffi~]T ~f9L~II .S~]T S~3 .SIID~]!
NF3GFIIORFIOOD A4Pc~1I. A~aax Se~lr Simla 7aSmar Semlar Solar Z.TP CODE 93050 ~ 95050 95050 9515 95D50 95030
O\FFALI.LOC ~TIO~~I. R~SL~G I SimiL~r Stela Ixfexfa S~9u c:...:a,.
PHFSIC.~1L. S L5ElZO\'L\G _1DJIIS1ltE\ZS
1.00 ~t.13 1.63 3.6'_ 1.17 0.37PAF~. SQE (:.QtFS)
PAR~.SQE(~ 43,Sfi0 179.903 73,Ifi1 157.6 51.1-0 ?0,300
iJIlLII~' Armye Simla Solar Si~Lir Simm~~r Sails
OFF-STIES Fmi:hed La Si~]a: Solar Si~7.ir Sim~lu Sim~ar LVIEUID USE Iodus~~l T~~••••:•~ Fam~ial L^rhitim; CxmetQ Yard ZO~G iieayIo2¢~tiat Lida Io3~-trial Li;~cla~-niit SearyFa~aial Li,~2t r,,,:,••,•:•t FienyIa~al GE~R~7L PL1N litdu7~a-viiiI.aw ln•mn Offie.~nS~DLeaeTat airy Offic.~R&D H.a yIedv~aial L~t2ncsanl H.ac.•Induaial O~'ERdLL PHfSIC.~I. S I SE:ZO~Z~G R~I'L~G I Sisular Snpaioz 7~eriar 7afesics 7ufesio:
Ol'EF.~L.L R~17Z~G SCBJECT SHOULD SELL FOR: V SL~III_.~R LESS MORE \LORE MORE F rank Schmidt& Associates Phone: 510-468-9219 [email protected] 61
Real Estate Appraised: Tht~ee Hypothetical One-Acre Lots, One foi• Each Zip Code, Santa Clara, CA Adjustment Process
Adjustments were considered for and applied in a similar manner as above for the commercial sales. Because thet•e ate few industrial land sales in this market, we used two sales that were improved with buildings that contributed value to the selling pt•ice: Compat•ables I-4 and I-5. To estimate the residual land value of these transactions, we estimated and deducted the contt•ibutoty value of the building improvements based on our observations, feedback from the verifying brolcer(s), and the adjustment that was a good ~t fot~ the data. Additionally, data center land sales (see Industrial Land Comparables I-1 and I-2) ai•e the most recent industrial sales that we uncovered.
Comparable I-5 was ptu~chased by the tenant and based on the data, a downward adjustment was warranted for buyer motivation. After making all other adjustments first, a downward adjustment was warranted for motivation on the pant of the buyer.
M arket conditions adjustments were applied at the rate concluded to in the Macicet Conditions section. As stated in the preceding material, industrial property in the City of Santa Clara (and Silicon Valley in genet~al) continues to be in demand, supported by rising asking rental rates, generally stable vacancy rates, and the opinions of market participants.
Like the commercial sales grid, locational adjustments were considered for exposure, visibility, access (to freeways and amenities), and overall desirability of the location, including zip code.
Sale I-3 was adjusted downward for its inferior San Jose location. Locational adjustments are warranted as summarized on the grid.
Physical and use/zoning adjustments were considered for size, utility, intended use, zoning, general plan land use designation, and off-site improvements. Both I-1 and I-2 were purchased by Prime Data Centers. For I-1 the buyer plans to develop a 207,000 square foot data center with a 32MW capacity. For I-2 the buyer plans to develop a three story 80,000 square foot data center with a reported 9MW capacity. The selling agent report that the property sold entitled and has a "will serve letter' from Silicon Valley Power. These sales were adjusted downward for the entitlements. Within the range of the comparables, only Comparable I-5 rated superior for its smaller site size, warranting a downward adjustment. Any other wart•anted adjustments are summarized on the grid.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 62
Real Estate Appraised: Three Hypothetical One-Ache Lots, One foi• Each Zip Code, Santa Clara, CA Conclusion
Following the adjustments discussed above and considering the overall rating comparison for each comparable, the unit values of the most recent comparables suggested a land value in the $130 to $135 per• square foot range.
W e concluded to the following for industt•ial land in the 95050 zip code:
Unit $/SF x ;Land Area (SF) = Indicated Value
$130 43,560 $5,662,800
Estimated Market Value of a 1-Acre
Industrial Lot in Zip Code 95050: $5,662,800
Average Value Estimate in 95050 Zip Code
The average value was estimated by applying a weighted average based on the land area of the total sales in Santa Clara in 2021 by property type. The information was obtained from Old Republic Title Company (ORTC). It ~t~as an exh~ao~~c~inary assLtmption of this appf~aisal that the land of°eas provided by Old Republic Title Company were accurate.
ORTC reported a total of 1,442 sale transactions in Santa Clara in calendar year 2021. These included 31 comrnet•cial sales, 26 industrial sales, 731 t•esidential single-family sales, 50 2-4 residential unit sales, and 587 medium to high-density residential sales which comprised residential unit sales greater than 5 units, condominiums, and townhomes. This compares to 922 total transactions reported in 2020 by ORTC.
Residential transactions included single family, townhomes, and condominiums, 2 to 4 unit, and residential units greater than 5 units. Of the total residential sales, and similar to the 2016, 2017, and 2020 data, single family transactions comprised the most land area, as shown in the next table, in 2021. In 2019, commercial and industrial sales comprised about half of the total land area in the city by area. In both 2020 and 2021, a greater percentage of land area sold in the city was residential. This will result in higher 2021 values fot~ the hypothetical 1-acre lot because residential land in this market transacts at higher unit prices than commercial and industrial. This is congruent with overall mat•lcet trends over the last year.
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Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clai•a, CA The total number of land square feet (SF) sales (broken out by property type) is reflected in the next table:
2021 City of Santa Clara Sales
Sale Type Land SF Total Percent
Commercial 1,197,542 11.25%
Industrial 3,275,752 30.76%
Very Low Density Residential 4,654,623 43.71%
Low Density Residential 394,618 3.70%
Medium to High Density Residential 1,126,563 10.58%
Total 10,649,098 100.00%
Source: Old Republic Title Company
Old Republic Title Company provided the data depicted in the preceding table, segregated by property type. The single-family sales were grouped into very low density, 2-4 residential sales were grouped into low-density, the townhome and condominium data were grouped into the medium to high-density residential, retail and office was grouped into commercial, and industt•ial, R&D, and manufacturing was designated industrial. As shown in the table, within the city limits of Santa Clara, commercial/industrial sales accounted for about 42.01% of the total while residential sales accounted for about 57.99% of the total.
Conclusion
The Total Percent in the previous table was applied to the appropriate categories for• each property type. Since the data provided by the title company did not segregate medium and high- density residential, we split the total percentage evenly between the two densities (10.58% /2 =
5.290% to each). As shown in the nett table, the appropriate weighted values are summed to produce the average value of a hypothetical 1-acre lot in the 95050 zip code:
Frank Schmidt &Associates Phone: 510-468-9219 fschmidt a valuationconsultant.net 64
Real Estate Appraised: Tlu~ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA 2021 VALUES FOR 95050 ZIP CODE SUMMARY
Land Use Price per SF Price per Acre x Weighted Average =Weighted Value Very Low Density Residential $125 $5,445,000x 43.71% _ $2,380,010 Low Density Residential $136 $5,924,160x 3.70% _ $219,194 M edium Density Residential $200 $8,712,000x 5.290% _ $460,865 High Density Residential $195 $8,494,200x 5.290% _ $449,343 Commercial $95 $4,138,200x 11.25% _ $465,548
Industrial $130 $5,662,800x 30.76% _ $1,741,877
TOTAL AVERAGE VALUE $5,716,837
Average Value of a Hypothetical 1-Acre
Lot in the 95050 Zip Code: $5,715,000 (Rounded)
AVERAGE VALUE ESTIMATE IN 95051 ZIP CODE
W e estimated the value of 1 acre of land for zip code 95050 above. Following we apply any differences in value between the 95051 and 95050 zip codes to estimate the average value of one acre of land in 95051.
Estimating Differences Between Zip Codes
Differences between the 95050 and 95051 zip code for each use was based upon market feedback and anecdotal information. We also considered differences in values/tents for the commercial and industrial uses, and compared median selling prices and rents for the residential uses.
Residential Difference
M arket participants and selling prices provided support that residential prices in the 95051 zip code are generally higher compared to the 95050 zip code. Some brokers believed that the 95050 area was slightly better due to Santa Clara University and a larger upper-middle class. Others pointed to the fact that the 95051 includes an area of the city close to Apple's headquat~ters and also within the Cupertino Union School District, a higher rated school district, which commands residential price premiums. Several brokers reported that some of the nicest neighborhoods in the City are in and around San Tomas Expressway, which bisects 95050 and 95051.One market participant opined that the neighborhoods in 95051 were generally safer and that insurance premiums were lower tendering 95051 to be more desirable. Recent residential yearly-summary median prices/SF and Year End 2021 median prices/SF between the 95050 and 95051 zip codes, as reported by CoreLogic, indicated the following:
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 65
Real Estate Appraised: Tl~u•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA The chart above indicates that the median selling price/SF has historically been higher in zip code 95051, corroborating the general consensus among market participants. In 2018 the median price per square foot was about 5.3% higher in 95051 than 95050. In 2019, the difference was about 2.7% and it was 4.1% in 2020. In 2021 the difference was 6.3%. The CoreLogic data indicated that the aggregate median selling price in 95051 was 14.6% higher than 95050 in 2018,
8.3% higher in 2019 and 16.7% higher in 2020. In 2021 the median selling price was 15.5% higher. This data suppot•ts the opinions of market participants that 95050 rates inferior to 95051.
In the next table, based on data reported by MI,S the median price in 95051 has historically been higher than zip code 95050. In the most recent year 95051 was about 28% higher in December than 95050, however this appears to be an anomaly in the zip code 95050 as the fourth quarter had some of the lowest median selling prices reported in 2021. However, unlike CoreLogic which reports all recorded sales transaction, MLS only reports listings marketed on MLS, which often does not include all new construction. This is because builders, in the current market environment, often market their product in-house without using MLS, which is probably more cost effective and garners more marketing control to the builder.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 66
Real Estate Appraised: Tlu~ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Ho.usingType Zip Code December-19 Qecember-ZO December-21 95050 $1,210,C}LaS1,2b5,000 $1,230,000OFF;, Condo, & 85451 ~7.,425,OOa 1,415,000 $1,575,000i o~.vnhouse 9~C5u $I,202,50D $1,128,000 $1,450,000
Source: Local MLS
Based on market feedback, historical norms, and giving more weight to the CoreLogic data, which includes all recorded transactions, supported by MLS data, we concluded 2021 residential prices in zip code 95051 were 10.0% higher than zip code 95050.
Commercial Difference
W e discovered that commercial land values are generally similar among commercial uses located along El Camino Real and Stevens Creek Blvd. within the 95050 and 95051 zip codes, which are the primacy commercial corridors in Santa Clara. A comparison of the 3-year average asking rental rate (2018-2020), as compiled by Costar, revealed that the average rents (for office and retail combined) between these zip codes were $4.53/SF/Month in 95050 vs. $3.49/SF/Month in 95051, or a difference of about 29.8% higher in 95050. This metric is skewed somewhat by newer retail construction over the last several years in 95050. The 4Q 2021 average rents for retail only between these zip codes were $2.39/SF/Month in 95050 vs. $3.05/SF/Month in 95051. A comparison of the 3-year average asking rental rate (2018-2020) among office properties as reported by Costar was $3.70/SF/Month in 95050 vs. $3.83/SF/Month in 95051, or about 3.5% higher in 95051. Additionally, Costar reported a lower vacancy rate in 95051 over the same period (2.14% vs. 6.00% among all office and retail). The 4Q 2021 average rents for office only between these zip codes were $4.78/SF/Month in 95050 vs. $4.08/SF/Month in 95051. The average selling price per square foot among these two zip codes was within 6% of each other over the last three years (2018-2020), $451 in 95050 vs $478 in 95051 for both office and retail properties. Based on market data, rental rates differences, selling price differences, and vacancy rate differences we concluded that commercial land values in 95051 rated 15% inferior to 95050.
Industrial Difference
Among industrial properties, much of the product in the 95051 zip code is built as, or allows for R&D and higher intensity office uses, and greater floor area ratios, rating superior to 95050.
Furthermore, about 65 acres of industrial lands in the 95051 zip code, around Kifer Rd and Lawrence Expressway, are converting to residential uses, reducing the supply of industrial properties, and pushing increasing demand and value for industrial at the same time. A comparison of the average rental rate per SF, as compiled by Costar, showed that the average Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 67
Real Estate Appraised: Tlu~ee Hypothetical One-Acre Lots, One for• Each Zip Code, Santa Clara, CA rental rates were equal in 95051 during 2021 ($2.21/SF vs. $2.21/SF). The rental rates ac•e pat~tly skewed because there are a greater number of older buildings in 95050 and many of those buildings are more warehouse in nature, which command lower rental rates. The average selling price per square foot among these two zip codes was within about 6% over the last three years (2018-2020), $325 in 95050 vs $345 in 95051, according to Costar. Costar reported that investors were not active in 95051 during 2021 and therefore an accurate comparison cannot be made in 2021. Again, the difference in prior years is partly explained by the type of product within each zip code, with 95050 having older and generally lower quality finishes/build-out: A discussion with a local industrial broker felt that all areas of the city were generally comparable.
After consideration for differences in asking rents, sale prices, and the opinions of the market, we concluded that industrial land prices rated about equal in 95051 compared to 95050.
Conclusion of Value in 95051 Zip Code
Based on the above, we concluded residential uses in zip code 95051 rated 10.0% superior, while commercial values rated 15% inferior, and industrial values rated similar. In the next table, the adjusted price per acre for each land use in the 95051 zip code was adjusted and the appropriate weighted values are summed to produce the average value of a hypothetical 1-acre lot in the 95051 zip code:
95051 ZIP CODE LAND USE VALUES &AVERAGE VALUE PER ACRE
Land Use 95050 Average
price/Acre Weighted x
Adjustment
Factor
95051 Average
Price per Acre
Very Low Density Residential $2,380,010 x 110.0% _ $2,618,011 Low Density Residential $219,194 x 110.0% _ $241,113
M edium Density Residential $460,865 x 110.0% _ $506,952 High Density Residential $449,343 x 110.0% _ $494,277
Commercial $465,548 x 85,0% _ $395,716
Industrial $1,741,877 x 100,0% _ $1,741,877
TOTAL AVERAGE VALUE PER ACRE $5,997,946
Average Value of Hypothetical 1-Acre
Lot in the 95051 Zip Code: $6,000,000 (Rounded)
AVERAGE VALUE ESTIMATE IN 95054 ZIP CODE
W e utilize the same weighted land values from zip code 95050 and apply any differences in value between the 95054 and 95050 zip codes.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 68
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Estimating Differences Between Zip Codes
For 95054 value conclusions, we applied the same methodology used above to estimate the value differences between the 95050 and 95051 zip codes.
Residential Difference
Median and average selling prices provided support that the residential prices in the 95054 zip code were generally similar or a little inferior when compared to the 95050 zip code. Brokers active in the market reported a range of opinions, that generally these two zip codes are not much different, but that 95054 tends to rate a little inferior. The 95054 zip code is affected by airport noise and has a higher concentration of higher-density housing units; there is less single-family selection and therefore fewer traditional residential neighborhoods with detached units. Recent yearly-summary median prices/SF for the 95050 and 95054 zip codes, as reported by CoreLogic, indicated the following:
The median selling prices/SF has been historically higher in the 95050 zip code. The CoreLogic data indicated that the aggregate median price in 95054 was 5.0% lower' in 2019 and about 2.1 Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 69
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA lower in 2020. In 2021 the difference was about 2.7% lower. This data supports the opinions of market participants that 95054 generally rates inferior to 95050.
The next table is the same MLS data displayed above. In this data set the median price in 95050 ranged from about 12.1 %more in 2020 and about 15% less in 2021 than in 95054 in the most recent year. However this appears to be an anomaly in the zip code 95050 as the fourth quarter had some of the lowest median selling prices reported in 2021. Again, unlike CoreLogic which reports all recorded sales transaction, MLS only reports listings marketed on MI,S, which often does not include all new construction.
Housing Type Zip Code December-18 December-19 December-20 95050 $1,074,000 $1,210,000 $1,265,000SFR, Condo, & 95051 $1,275,000 $1,425,000 $1,415,000Townhouse 95054 $1,025,000 $1,202,500 $1,128,000 Source Local MLS
Based on market data, the opinions of market participants, and giving more weight to the CoreLogic price differences, which includes new and resale residential construction, we concluded that residential land prices in zip code 95054 were lower than zip code 95050, on the order of 5%.
Commercial Difference
M ost of the new commercial planned or proposed for the 95054 zip code comprises office and hotel uses, however, there are several mixed-use projects in process, notably Related Santa Clara. This area of Silicon Valley includes the Golden Triangle and has historically supported higher• intensity uses and properties offering freeway visibility (U.S. 101 and CA-237). The addition of Levi's Stadium and the draw of Great America theme park and the Santa Clara Convention Center• create additional synergies for this zip code. The greatest concentration of Class A office is located within this zip code and more is planned. As noted above, there are several mixed-use projects in process, which if built-out, will add both retail and new residential customers.
A comparison of the 3-year average rental rate (2018-2020) compiled by Costar, revealed that the average rents between these zip codes was slightly lower in 95054, $4.33/SF vs. $4.53/SF in 95050, a difference of about 4.4% based on office and retail uses. The 4Q 2021 average rents for office only between these zip codes were lower in 95054, $4.27/SF vs. $4.78/SF in 95050. As before, the 95050 rental rate is influenced by newer retail construction which typically commands higher rental rates. A comparison of office cents indicates that the 3-year average Flank Schmidt &Associates Phone: 510-468-9219 [email protected] 70
Real Estate Appraised: Three Hypothetical One-Ache Lots, One foi• Each Zip Code, Santa Clara, CA (2018-2020) of $4.35/SF/Month in 95054 is about 14.9% higher than the $3.70/SF/Month in 95050. And the average selling price per square foot in the 95054 zip code was 15.5% higher over the last three yeat•s (2018-2020) compared to 95050 ($451 in 95050 vs $521 in 95054) for office and retail sales. Based on the data, including broker estimates and rental rate differences in each zip code, and considering that there is a greater• proportion of office uses compared to retail uses, we concluded that an upward adjustment of 10% was warranted for 95054 for higher commercial land value.
Industrial Difference
Among industrial properties, much of the product rn the 95054 zip code is built as, or allows for R&D and higher intensity office uses, rating superior to 95050. This also allows for greater floor area ratios in 95054. Most market participants reported higher pt~ices in 95054 due pt~imarily to superior freeway access and fewer heavy-industrial uses. A comparison of the average rental rate per SF, as compiled by Costar, showed that the average rental rates wet~e slightly lower in 95054 during 2021 ($2.21/SF in 95050 vs. $2.16/SF in 95054). The average selling price per square foot in the 95054 zip code was about 26% higher over the prior three years compared to 95050 ($325 in 95050 vs $410 in 95054) based on industrial sales reported by Costar. 2021 average selling prices were ($725 in 95050 vs $229 in 95054), these numbers do not appear to be representative of the market as 95050 had a 525,000 square foot building that sold for $1,027 per square foot. Again, the difference in rental rates and selling prices is partly explained by the type of product within each zip code, with 95050 having older and generally lower• quality finishes/build-out compared to 95054. After consideration for differences in asking rents, sale prices, and the opinions of the market, we concluded that industrial land prices rated about equal the 95054 zip code compared to 95050.
Conclusion of Value in 95054 Zip Code
Based on the above data and analysis, the adjusted price per acre for each land use in the 95054 zip code was adjusted and the appropriate weighted values are summed to produce the average value of a hypothetical 1-acre lot in the 95054 zip code:
Frank Schmidt & Associates Phone: 510-468-9219 [email protected] 71
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA 95054 ZIP CODE LAND USE VALUES &AVERAGE VALUE PER ACRE
Land Use 95050 Average
Price/Acre Weighted
X Adjustment _
Factor
95054 Average
Price per Acre
Very Low Density Residential $2,380,010 x 95.0% _ $2,261,010 Low Density Residential $219,194 x 95.0% _ $208,234
High Density Residential $460,865 x 95.0% _ $437,822
Medium Density Residential $449,343 x 95.0% _ $426,876
Commercial $465,548 x 90.0% _ $418,993
Industrial $1,741,877 x 100.0% _ $1,741,877
TOTAL AVERAGE VALUE PER ACRE $5,494,812
Average Value of a Hypothetical 1-Acre
Lot in the 95054 Zip Code: $5,495,000 (Rounded)
RECONCILIATION AND OPINION OF AVERAGE VALUES
The sales comparison approach was the appropriate value approach for each land use. Total sales statistics revealed that about 42% of the total sales in the city by land area were commercial and industrial transactions and the other 58% were residential. This represents a slightly greater percentage of residential sales than in 2020. Because residential unit values are greater than commercial and industrial, this resulted in higher concluded values for each zip code in 2021 compared to 2020. Industrial sales in 2021 comprised 30.76% of the total land sold, much higher than the 15.59% reported in 2020 by Old Republic Title Company. Additionally, industrial land values are much higher in 2021 due in pant to the influence of data center land sales. All these factors resulted in higher 2021 values for the hypothetical one-acre lots.
We concluded to the following average value for each zip code on December 31, 2021, the effective date of value opinion:
Opinion of Average Value of a 1-Acre
Lot in the 95050 Zip Code: $5,715,000
(Five Million Seven Hundred Fifteen Thousand Dollars)
Opinion of Average Value of a 1-Acre
Lot in the 95051 Zip Code: $6,000,000
(Six Million Dollars)
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 72
Real Estate Appraised: Tht•ee Hypothetical One-Act•e Lots, One for Each Zip Code, Santa Clai•a, CA Opinion of Average Value of a 1-Acre
Lot in the 95054 Zip Code: $5,495,000
(Five Million Four Hundred Ninety Five Thousand Dollars)
ADDENDA
• Old Republic Title Company 2021 Sales data in City of Santa Clara (on file) e City of Santa Clara Supplemental Instructions for the Appraisal of the Fair Market Value of Land
• Maps of the Sale Comparables
• Land Sale Comparable Parcel Maps
• Brokerage Reports (on file)
• Qualifications of Appraiser
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 73
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA ' M~~cur~cy ~
~' `- City of
5 4~ y1"1O~~t ` Santa ClaraThe Center of What's Passible Attachment A
Supplemental Instiv coons
for the Appraisal of the Fair Market Value of Land
The following information and instructions will be used by the City when setting the land value used in the formula for determining the impact fees due in lieu of park and ►•ecreational land dedication pursuant to Santa Clara City Code 17.35. (App~•oved by Santa Clara City Council June 7, 2016) Background.
On July 15, 2014, Council added Chapter 17.35 "Park and Recreational Land" to the Santa Clara City Code to ensure that new residential development provides adequate community and neighborhood park land for active ►•ecreational uses and/or pays a fee in-lieu of parkland dedication to mitigate the impacts of the new g►•owth pursuant to the California Quimby Act and/or Mitigation Fee Act.
17.35.040 Formula for calculation of fee in lieu of land dedication. (a) When a fee is required to be paid in lieu of pa►•kland dedication, the maximum amount of such fee shall be determined by the fair market value of the amount of land that would otherwise be requn•ed to be dedicated pursuant to SCCC 17.35.030, as set forth below. The date of valuation of the property for in-lieu fee purposes shall be the date that the City determines that the developer's application for a parcel map or tentative subdivision map, or application for projects not involving a subdivision, is complete. (b) Fair Market Value.
(1) Tlie City shall determine the fair market value of the property by using the average per acre l and value for property in the City of Santa Clara, based upon a survey of land values and sale records in the City. The City Council shall set a minimum of tivee such average values, one for each of the three existing Zip Codes in the City (95050, 95051, 95054). The City Council may, at its discretion, set average values for additional subregions of the City. The City Council shall review the fair market values not less than annually and set the values in a Council resolution. (2) If the developer objects to this determination of fair market value, the developer may elect to have the value established by appraisal. If the developer chooses this option, tine developer shall deposit with the City an amount sufficient to cover the cost of an appraisal, which the City shall conduct. The appraisal shall be completed prior to approval of the tentative or parcel map or, for developments not involving a subdivision, p►•io►• to the issuance of a building pe►•mit. (c) Based on the determination of fair market value set forth in subsection (b)(1) of this section, for each of the dwelling unit categories, the City Council shall set the amount of fees to be paid in lieu of parkland dedication in a Council resolution, which the Council shall review annually. (Ord. 1928 Attachment A—Supplemental Instructions for Appraisal Page 1 of 3 Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 74
Real Estate Appraised: Tht~ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Guidelines for Appraises
a App~•aiser is to provide a "Fain Market Vahre " fa' an average acre of land (hypothetical, rectarrgtda~; useable site) fa' p~•oper•ty ifs each of the three existing Ciry of Santa Clara Zip Codes 95050, 95051, 9505=1. The opiniof~ will conform to Unifo~•rrr Standards of Professional Appraisal Practice. b. Valuation Date: December 31 of each year•.
c. Location &Property Sales Data Set Boundaries: Data set 1a~ill begr~a lvith sales data front lt~ithin Santa Cla~~a C llj~ 177947tS.
rl. Data Set Date Range: Use datafi~ona Jancra~y IS'to December 31S` of each year. Example: Janara~y 1, 2015 to December 31, 201 S for "December 31, 201 S Italuatio~~ Date. "See contingencies below. e. Property Types: Use al! of the following property types: Single Family (lo~v and very lo»> densit}~), High De~~sity Residential, Mediarm Densit~~ Residential, Ca7snaercial, Indusb~ial, Lots and Land. f. Cou6ngencies for' Limited Data Set of each Pf•opet•ty Type: Ifthere ar•e instr rcient, credible data poi~zts or~ sales of a par•ticzrlar property type, then appraiser hill explore a~7d use comparable sales fr•on~ the local competitive market area, adjacent to City of Santa Clara. A fuzed distance from Cite of ~Sarzta Clara city limit is not given, holnever a co»apelling, rational basis for the selection of the competitive market area mzrst be given by the appraiser i~a the report. Preference is for closer, more recent, and comparable; discretion is give~~ to the appraiser.
g. Sales Transactions Data not to be used: Do riot use transactions if they are not an arms-length transaction, hcn~e errcarrrabe~•ed/cloerded title, are e~n~ironr~zentally impaired site, or are more than three (3) years old. h. Inflation factors for Comparable beriveen 1 and 3 years: An deflation factor ~>>ill be co~nparted and applied to co»apar~able sales over' of~e year based on reasonable a»d rational consideratio~as szrcla as sales and rental t~~ends or• othe~~ appropriate methods.
i. Sales Transactions Data that may be included: May use real estate sales h~ansactions by the City of Santa Clarafo~~ additional neighborhood or conunzrnity parkland. j. Data Values excluded: No valcres or set of values at tl~e high o~~ lo~v end of t1~e data set are to be exclarded fi~on~ consideration i~ the m~erage >>alzres on the sole basis of being relatively high or lo~v; holvever~, a c7~eck for consistency a»~o»g comparable vah~es hill be do~~e, a~~d a ratiorrcrl basis should be provided for' credible coirrparuble transactions if not used
Attachment A—Supplemental Instructions for Appraisal Page 2 of 3 Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 75
Real Estate Appraised: Tht•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA /~ Research Factors to be considered foi~ Comparable sales: The factors to be zrsed to compare property valaies if~clzrde, but are foot limited to physical factors, economic factors, market conditions ver~catio» to parcel maps, perblic records, Costar data bank. Additional factors may be arsed provided there is a rational basis for doing so.
1. Reconciliation of value differences: The approach 1t~i11 be comparative, iterative, garalitative and ga~antitative, and will be ~r~ade ut the appraiser's discretion. ~rz Weight to be applied to Property Types: The 1~~eighted crveruge of each property tyke hill be bused on the percentage of land area in the sales b•ansactions, fo1~ example, if 25% of total acreage is l~igla density residential, then the relative height of that property type will be 2S%. (7'he weight will not be done by the gerantity of sales of each t~~pe or tlae percent of value of sales of each type). n. Reporting: A draft valuation 1•eport will be gef~erated by March I5. City 1~nill providz for a t~vo week circa~lation and comment period. The valaratioias inclarded the fr~~al valzration report will be used in the calculation formula for fees prepared by staff to be reviel>>ed by Council us part of the annual City budget process and M unicipal Fee Schedade adoption by Jarne 30. Fees 1~~i11 be ir~~tplementecl ova or after Ja~ly 1 depe»ding upon Qcrirnby Actor Mitigation Fee Act p~~ovisions of tl~e Coarncil r•esolzrtion.
Attachment ~1-Scrppleme~rta! Lzstrarctions for Parkla»d Dedicatio~~ h~ Liear Fee Process a~ad Schedule 2016 Attachment A—Supplemental Instructions for Appraisal Page 3 of 3 Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 76
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Frank Schmidt ~ Associates Phone: 510-468-9219 [email protected] 77
VERY LOW -DENSITY RESIDENTIAL SALE COMPARABLE LOCATION MAP
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 78
HIGH -DENSITY RESIDENTIAL SALE COMPARABLE LOCATION MAP
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa. Clara, CA Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 79 COMNN~RCIAL SALE COMPARABLE LOCATION MAP
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 80
INDUSTRIAL SALE COMPARABLE LOCATION MAP
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA t
1 COMPARABLE LAND SALE PARCEL MAPS
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F rank Schmidt &Associates Phone: 510-468-9219 [email protected] 81
Real Estate Appraised: Tluee Hypothetical One-Acc•e Lots, One for Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
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Very Low Density Land Comparable Sale VLD 3
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~'cr~ Lo~~~ Density Land Co~uparable Sale VLD =1
Ft•ank Schmidt &Associates Phone: 510-468-9219 [email protected] 82
Real Estate Appraised: Tluee Hypothetical One-Acre Lots, One fot• Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
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Ve~-~~ Lo«~ Densit~~ Land Comparable Sale VLll ~
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 83
Real Estate Appraised: Tluee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA ~ I
70 BI A.R6w B.1NR.5 ~.
COMPARABLE LAND SALE PARCEL MAPS
O ~~IG! (• COI V~+ •.SS [i50~ 5~4~~ Ct A~F COYNi ~~ C~lIF011~iA ~c0( ~~Of 269 20
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High Density Land Comparable Sale HD 2
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 84
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
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High Density Land Comparable Sale HD 4
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Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 85
Real Estate Appraised: Tl~u•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
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Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 86
Real Estate Appraised: Tlu•ee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
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Commercial Land Comparable Sale C 1
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F rank Schmidt &Associates Phone: 510-468-9219 [email protected] 87
Real Estate Appraised: Tluee Hypothetical One-Acre Lots, One for• Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
O ffICE Of COVNIY ASSf 55011 SANTA CLAgA COYN tT, C~LI/ORNI• ~~~ ~ ~.a LI ~ J~ ~.~_- ~ --~ ~ 230 46
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Commercial Land Comparable Sale C 4
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 88
Real Estate Appraised: Tluee Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA I
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Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 89
COMPARABLE LAND SALE PARCEL MAPS
G F OF COUNTY h3 SL 5501 SAMT~ CLAMA COUN 11. C1 LIfOFhI~
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA
COMPARABLE LAND SALE PARCEL MAPS
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Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 92
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara, CA f~
FRANK E. SCHMIDT, MAI, SRA
CURRICULUM VITAE, January 2022
Valuation Consulting, Forensic and General Appraisal, Expert Testimony MAI and SRA MEMBER oJtlte APPRAISAL INSTITUTE, No. 11933 fschmidtCg~valuationconsultant.net (510) 468-9219
San Francisco Bay Area
For more than four decades, Mr. Schmidt has been a real estate appraiser and consultant with a practice primarily in Northern California and the San Francisco Bay Area. He began his career as a residential appraiser, earning the coveted SRA designation from the Appraisal Institute in 1989, 'and the prestigious MAI designation in 2002. In 1995, he partnered with Wayne Prescott to form tl~e Schmidt-Prescott Group, a commercial appraisal firm of which he was president until its dissolution in 2017.
During his career, Ivu•. Schmidt has appraised a wide variety of real estate including residential, commercial, industrial, caw land, and special purpose properties for various property rights. His experience includes litigation support and testifying as an expert witness for both plaintiffs and defendants. Mr. Schmidt's client list includes attorneys, municipalities, private entities, lenders, and publicly traded companies. He was engaged as a diminution in value consultant on PG&E cases involving the destruction of thirty-eight homes in the 2010 San Bruno gas-line rupture fires. 1~L•. Schmidt was recently retained by the City of Santa Clara as an expe~~t to assist the city's task force in the process of setting Parkland Dedication fees.
Mr. Sclunidt has sewed on several professional committees throughout his career, including the International Right-of- Way Association and the Appraisal Institute. He currently serves on the Santa Clara County Assessment Appeals Board, of which he was elected Chairperson in 2017.
Expert Witness Testimony
U.S. District Court, Santa Clara County Superior Court, San Joaquin County Superior Court, San Francisco County Superior Court, Public Utility Commission of the State of CA, American Arbitration Association, Standard of Ca►•e, Eminent Domain Professional Affiliations
M embership in: Appraisal Institute [MAI (2002) and SRA Member (1989)] Work Experience
1/2019 to Present: Frank Sclunidt &Associates, President San Francisco Bay Area
2018 Carneghi-Nakasako, Appraiser Consultant
San Jose, CA
2/95 to 12/2017: The Schmidt-Prescott Group, President
San Jose, California
4/78 to 2/95: Schmidt &Associates, Inc., President
San Jose and Fremont, CA
6/76 to 4/78: Senior Supervising Appraiser, Mercury Savings &Loan Cupertino, CA
1/76 to 6/76: Staff Appraiser, American Savings &Loan
San Jose, CA
2/75 to 12/75: Real Estate Appraiser and Consultant,
B.A. Ericson Appraisal Co., San Jose, CA
Formal Education
B.S. Business Management, 1997 University of Phoenix
Graduated with Honors San Jose, CA
F rank Schmidt &Associates Phone: 510-468-9219 [email protected] 93
Real Estate Appraised: Three Hypothetical One-Acre Lots, One fol• Each Zip Code, Santa Clara, CA Erratum: Tlie following cot~t~ections to errors in. the document as~e lre~~eby made afzd appended to the Report.
• Page 25 -the word should be "unemployment" and not "employment." "At the end of 2021, Silicon Valley recorded an [irn]employment rate of 4.5% down from
6.2 %one year• ago. Increasing population, job growth, high incomes and strong consumer spending continued to strengthen the performance of retail sector in Silicon Valley. At the end of 2021, the vacancy rate for Silicon Valley's shopping centers remained the lowest in the Bay Area at 5.2%, with approximately 1.9 million square feet of vacant retail space. Santa Clara continued to record the lowest vacancy rate in the region at 3.9%. The quarterly net absorption continued in the positive territory. There was no new retail space completed in the fourth quarter of 2021 and the total retail inventory remained at 37.4 million square feet."
• Page 36 -- the CoreLogic table below was referenced in the narrative but not visible in the blank space at the top of page 36.
2018 Year End Summary Sales
Community Zip Sates %Chg Median Price %Chg High Price $/SgFt % Chg Santa Clara 95050 380 -0.5% $1,184,500 24.4% $2,609,400 $959 20,3% Santa Clare 95051 484 -16.6% $1,358,000 17.0% $2,800,000 $1,043 13.2 Santa Clara 95054 185 -25.4% $1,250,000 23.3% $2,400,000 $823 14.5% 2019 Year End Summary Sales
Community Zip Sales ~ Chg Median Price % Chg High Price $/SgFt % Chg Santa Clara 95050 332 -12.6% $1,200,000 1.3% $2,350,000 $910 -5.1% Santa Clara 95051 461 -4.8% $1,300,000 -4.3% $2,400,000 $973 -6.7% Santa Clara 95054 162 -12.4% $1,140,000 -8.8% $2,450,000 $782 -5.0% 2020 Year End Summary Sales
community Zip Sales %Chg Median Price ~6 Chg High Price $/SgFt %Chg Santa Clara 95050 301 -9,3% $1,200,000 0.0% $2,780,000 $834 0.9% Santa Clara 95051 614 33.2% $1,400,000 7.7% $2,200,000 $869 2.3% Santa Clara 95054 160 -1.2% $1,175,000 3.1% $2,090,000 $774 3.5% 2021 Year End Summary Sales
Community Zip Sales %Chg Median Price l Chg High Price $/SgFt %Chg Santa Clara 95050 441 46.5% $1,289,500 7.5% $3,218,500 $858 2.9% Santa Clara 95051 855 39.3% $1,490,000 6.4% $3,180,000 $912 5.0'0 Santa Clara 95054 242 51.3% $1,255,000 6.8% $2,900,000 $794 2.6% • Page 39 -the word should be "while" and not "with".
• Page 39 -the word "following" should be removed.
Frank Schmidt &Associates Phone: 510-468-9219 [email protected] 1