City Council and Authorities Concurrent
April 19, 2022

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

Mr. 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
Frank Schmidt & Associates

EFFECTIVE DATE OF VALUE OPINION

December 31, 2021

Frank Schmidt & Associates Phone: 510-468-9219 [email protected]

April 1, 2022

Mr. James Teixeira, Director 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 Clara 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 instructions 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 wrote 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 all transactions sold in the preceding 12 months were industrial and commercial, while 58% were categorized as residential. 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.

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] 2

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 per 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 property 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 markets 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 government 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 results, but is used for the purpose of analysis.”1I 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 same 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.

12020-2021Uniform Standards of Professional Appraisal Practice (USA, The Appraisal Foundation,2020) 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] 3

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 extraordinary assumption of this appraisal that the land areas provided by Old Republic were accurate.

The use of these hypothetical conditions and extraordinary assumption might have affected the assignment results.

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 average value per acre on December 31, 2021, the effective date of opinion, for each zip code was:

Sincerely,

Frank E. Schmidt, MAI, SRA

22020-2021Uniform Standards of Professional Appraisal Practice (USA, The Appraisal Foundation,2020)

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] 4

TABLE OF CONTENTS

EXECUTIVE SUMMARY 5
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS 6
CERTIFICATION 8
SCOPE OF THE ASSIGNMENT 9
DEFINITIONS 11
REAL PROPERTY, REAL ESTATE, AND PERSONAL PROPERTY APPRAISED 12 PREVIOUS APPRAISALS 13
REGION & CITY DESCRIPTION 13
MARKET CONDITIONS 17
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

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] 5

EXECUTIVE SUMMARY

CLIENT : City of Santa Clara

LOCATION : 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 : Each Hypothetical Lot is One Acre

FLOOD HAZARD STATUS : Zone X; the hypothetical lots are outside any flood zones

EARTHQUAKE FAULT ZONE : The hypothetical lots are not located in an Earthquake Fault Zone as designated under the
Alquist-Priolo Earthquake Fault Zoning Act.

GENERAL PLAN, &
HIGHEST AND BEST USE :

EFFECTIVE DATE OF VALUE : December 31, 2021

PROPERTY RIGHTS APPRAISED : Fee Simple Estate

AVERAGE VALUE CONCLUSIONS :

Use of Hypothetical Lot General Plan Highest & Best UseVery Low Density ResidentialVery Low Density Residential Very Low Density ResidentialLow Density ResidentialLow Density Residential Low Density ResidentialMedium Density ResidentialMedium Density Residential Medium Density ResidentialHigh Density ResidentialHigh Density Residential High Density ResidentialCommercialRegional Commercial Hold for Development of a Commercial BuildingIndustrialLight Industrial Light Industrial Building

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] 6

GENERAL ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal and report were made applying these general assumptions:

1. No responsibility was assumed for the legal description or for matters including legal or title considerations. Title to the hypothetical 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;

4. 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 correct. Plot plans or any other illustrative material in this report were included only to assist the reader in visualizing the property;

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 studies 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 are 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 materials that could create an environmental impairment to the subject property or to other property caused by conditions present at the subject property. Our opinion(s) were predicated on the assumption that there is no such material on or 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 correct them;

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

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] 7

10. It was assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate or other opinion contained in this report are 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 any purpose by any person other than the Client(s), for the Intended Use specified in the engagement agreement and/or report;

2. The consultant is not required to give further consultation, testimony, or attend court for matters involving the subject property unless arrangements 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 Consultant 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 may be other appropriate and more specific limitations on our opinions or conclusions identified in the cover letter or report as Hypothetical Conditions, Extraordinary Assumptions, or Contingencies.

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] 8

CERTIFICATION

I certify that, to the best of my knowledge and 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 reported 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 December 31, 2020.

5. I have no bias with respect to the property that is the subject of this report or to the parties 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 the Uniform Standards of Professional Appraisal Practice (USPAP).

9. I have not inspected the property that is the subject of this report since the subject lots are hypothetical.

10. Under my direction, Mr. Dennis Moredock verified 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 has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Practice of the Appraisal 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 program for Designated Members of the Appraisal Institute.

April 1, 2022
Frank E. Schmidt, MAI, SRA Date

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] 9

SCOPE OF THE ASSIGNMENT

Information Provided to the Appraisers

The Client provided excerpts from the Parks and Recreation Facilities Fee Study completed by Willdan 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 Parks provided us the Park Impact Fee Ordinance (No. 1928).

Extent of Research into Physical Factors

We 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 occurred, particularly regarding new development. We gathered data about land use ordinances for each hypothetical lot and the comparables from the websites of the appropriate municipalities.

Extent of Research Into Economic Factors

We gathered, analyzed, and applied macro-economic information gleaned from many sources, including:

 The Wall Street Journal
 12th District Beige Book
 GlobeSt.com
 CoStar News
 The Kiplinger Letter
 CoreLogic

We gathered, analyzed, and applied data about market conditions and other micro-economic information from:

 Websites of Commercial Brokerages
 Commercial and/or residential multiple listing services  Silicon Valley Business Journal
 San Jose Mercury News
 Discussions with agents active in the subject market

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] 10 We 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

We used a variety of sources and subscription services to gather comparable data, including:

 Verified Data Files from Other Appraisals
 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 structural, geological, or environmental reports, 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 summarized 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 requirements of:

 The Uniform Standards of Professional Appraisal Practice (USPAP) including the Ethics and Competency Provisions as promulgated by the Appraisal Standards Board of the Appraisal Foundation.

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] 11  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 reasonably adaptable and available.

(b) The fair market value of property taken for which there is no relevant, comparable market 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 report.

Weighted Average means an average resulting from the multiplication of each component by a factor reflecting its importance or contribution.

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, The Dictionary of Real Estate Appraisal, 6th ed., (Chicago: Appraisal Institute, 2015) 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] 12

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 rights 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.

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] 13 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 areas 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

We did not appraise any personal property.

PREVIOUS APPRAISALS

The author previously appraised the subject(s) of this report for the City of Santa Clara on several occasions, most recently in an Appraisal Report transmitted March 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 increase of 0.06 percent from the July 2020 estimate. Over the past several years, Santa Clara County had been experiencing strong employment conditions. Prior to the COVID-19 pandemic, 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] 14 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%, prior 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 April 2020 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 Clara’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:

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] 15

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 Networks, 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 Clara 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 portion of the city, adjacent to Great America Theme Park 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 retail, office and residential. The largest proposal is from Related California and is named Related Santa Clara. The project is a 240-acre 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 approvals for a 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 outdoor community spaces. The Santa Clara Square development project (The Irvine Company) encompasses approximately 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 Project – Kifer Road (Summerhill) is at 3505 Kifer 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 structures on the Santa Clara University campus and continued residential build-out of the Lawrence Station area.

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] 16 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 Higher 59.9%
In Civilian Labor Force 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 corner of the City is served by Cupertino schools.

The City of Santa Clara and Santa Clara County benefit from a number 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. Caltrain, 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 Airport, with service to about 30 destinations.

There are three primary 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.

Real Estate Appraised: Three Hypothetical One

Frank Schmidt & Associates
Source: zipmap.net

Conclusion

All locations within Santa Clara are proximate to nearby job centers, retail, housing, and linkages, contributing to the long

MARKET CONDITIONS

The December 9, 2021 UCLA Anderson Forecast
forthcoming. “The December Forecast
cases and predicts that consumers will temporarily cut back their spending on in But Anderson Forecast economists
writing that consumer spending may dip over the next quarter and then rebound quickly.”

Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Schmidt & Associates Phone: 510-468-9219 [email protected]

zipmap.net
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.

UCLA Anderson Forecast expects encouraging economic news to be “The December Forecast assumes the likelihood of a winter surge in COVID cases and predicts that consumers will temporarily cut back their spending on in sts 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.” Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected] 17
All locations within Santa Clara are proximate to nearby job centers, retail, housing, and expects encouraging economic news to be
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. 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.” 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] 18 “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 current 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 from the wave of cases caused by the delta variant. Feler notes that the omicron variant emerged too late to have much effect on the quarter’s average growth rate.”

“Overall, the national forecast is for continued strong economic growth 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 Anderson 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- family 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 firms 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 market conditions adjustments used in our following analysis.

Regional Economic Conditions

CoStar Group, Inc. is a multinational provider 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:

The coronavirus pandemic abruptly ended what had been the longest economic expansion in U.S. history, and disrupted San Jose’s streak of above-average job growth.

California and Bay Area counties including Santa Clara are taking a cautious approach to reopening economic activity, and businesses are suffering from the downturn in commerce.

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] 19 According to San Jose think-tank Joint Venture Silicon Valley (JVSV), “Employment is back to pre-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 growth 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 Apple alone.”

“Silicon Valley’s innovation engine is red hot. Despite pandemic-related restrictions, the region’s technology companies broke records, with the aggregate market cap of Silicon Valley and San Francisco’s public companies reaching $14 trillion (doubling the market low of February 2020). Venture capital reached an all-time high at $95 billion in 2021, fueled by a record 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 Meta, 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 properties are 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 market and provide comments from market participants regarding the perceived differences in each of the Santa Clara zip codes that the three hypothetical lots being appraised are located.

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] 20 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 Marketbeat Office Snapshot and predecessor reports and includes statistics from the Silicon Valley market, the subject’s submarket (Santa Clara), and the adjacent Sunnyvale submarket.

OFFICE STATISTICS

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 (311,000sf). Key 2021 lease transactions in the City of Santa Clara’s include 85,995sf at 3075 Olcott Street in Q2-2021 aided by a 116,103 square foot renewal by Ampere at 4655 Great 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 are bundled into the base rent. This is slightly more than the $4.38/SF/Month asking rate from one year ago.

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] 21 Marcus & 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.

Marcus & Millichap reported the following trends in the San Jose Metro:

Marcus & 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 during 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 are 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.

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] 22 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 their 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 Market Snapshot and its predecessor reports:

Source: Colliers International

The next tables display data from Cushman & Wakefield’s Marketbeat 4Q-2021 Silicon Valley R&D Market:

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] 23

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 1Q-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 a year-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 early 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

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] 24 back to their expansive campuses, which will boost retail spending next year and into the future.

New retailers will follow workers into the metro 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 deal flow dipped about 30 percent during that time 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. Prices 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 properties faced increased 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, particularly those with drive-throughs.

Sit-down restaurants, 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.

Most of the new retail being proposed in this market is part of larger mixed-use projects.

Spending Patterns

General market conditions for the retail real estate segment can be indicated by taxable retail sales. Typically, a market where taxable retail sales are increasing would be supportive of additional retail development as existing retailers are willing to expand and new retailers are 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.

Average Asking Retail Rental Rates and Vacancy Rates

Cushman & Wakefield is a brokerage firm that publishes quarterly reports for the retail market in the San Jose metro area. They reported in their Q4-2021 Marketbeat Silicon Valley Retail that the economic fundamentals and the retail business in Silicon Valley showed continued improvement 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 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] 25 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 submarket, Sunnyvale/Cupertino submarket, and Santa Clara County taken from Cushman Wakefield and its predecessor retail reports from 3Q-2017 onwards:

As indicated in the table above, the 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 rents 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 submarket declined from 5.7% from one-year ago. Asking rental rates in Santa

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] 26 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 percent 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 near 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 York and San Francisco. The return 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

We referenced industrial (manufacturing) and warehouse market data from brokerages Cushman & Wakefield and Colliers International; we also interviewed local market participants for this report. Cushman & Wakefield reported in its Marketbeat Silicon Valley Industrial Q4-2021, that vacancy for industrial product in Silicon Valley decreased in 4Q-2021 to 3.3% 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 submarket, which includes Santa Clara, San Jose, Campbell, and Sunnyvale, had an overall vacancy rate of 3.0% 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 submarket was reported at $1.48/SF/Month NNN and a vacancy rate of 1.7% was reported. The subject’s Santa Clara submarket represents a moderate sized industrial submarket 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 their Q4 2021 San Jose Silicon Valley Research & Forecast Report for industrial/warehouse properties, Collier’s International reported An accelerated shift to e-commerce coupled with 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] 27 supply chain woes bolstered demand for industrial real estate. Silicon Valley saw industrial occupancy gains amount to 115,000 square feet in the fourth quarter and 2.0 million for the full year, making the industrial sector the fastest growing commercial property sector in 2021.

Silicon Valley’s industrial vacancy rate dipped below 2.0 percent in the final quarter of 2021, limiting tenant mobility and new deal volume. Gross absorption totaled just 1.0 million square feet, down 18.2 percent year-over-year. Nuro, an autonomous vehicle company, subleased 64,900 square feet at 3100 Molinaro Street in Santa Clara. At the end of 2021, the industrial availability rate stands at 3.8 percent, down 150 basis points year-over-year while the vacancy space rate is at 1.9, down 110 basis points over the same period. Not surprisingly, asking rents continued 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 1Q-2018 based on data from Colliers International. The chart shows generally stable to increasing vacancy rates and stable rental rates, Sunnyvale being the exception.

Vacancy rates for manufacturing were generally stable in Silicon Valley between the start of 2015 and 1Q-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 $1.38/SF/month.

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] 28 Warehouse data collected from Colliers International’s Silicon Valley Research & Forecast Report Q4 2021 and its predecessor reports are displayed in the next chart:

Warehouse 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-2021compared 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.

Market 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:

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] 29

The CBRE report notes that wholesale collocation data centers across primary U.S markets – Northern Virginia, Dallas, Silicon Valley, Chicago, Phoenix, New York 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%, or 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 a cloud-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 preleased 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.

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] 30 Residential Market Conditions

The Housing Market Index, based on a survey by the National Association of Home Builders, reported “Despite inflation concerns and ongoing production bottlenecks, builder confidence edged higher for 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 February.”
“The most pressing issue for the housing sector remains lack of inventory,” said NAHB Chief Economist Robert 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-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.”

The California 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 would 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 decrease, 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 remained 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. President Otto Catrina, a Bay Area real estate broker and REALTOR®. “For the year as a whole, the market turned in its best performance in more than a decade, as buyers took advantage of historically 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 deceleration 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 Real Estate Appraised: Three Hypothetical One

Frank Schmidt & Associates
$782,480 and up 11.0 percent from the $717,930 recorded in December 2020. The double annual price gain was the 17th consecutive month with more than a 10 percent increase since the summer of 2020. The annual increase was
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 Economist Jordan Levine. “However, with
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 poten 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 sometimes referred to as a repeat sale index. The next chart indicates that the subject’s San Francisco Metropolitan
2018 to 349.751 in December 2021
December 2020 and December 2021 the increase was about 1.61 confidence evident in the Housing Market Index.

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
Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Schmidt & Associates Phone: 510-468-9219 [email protected] $782,480 and up 11.0 percent from the $717,930 recorded in December 2020. The double 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. 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 ining 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 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. sometimes referred to as a repeat sale index. The next chart indicates that the subject’s San Francisco Metropolitan Area increased about 33% from 263.868 in December 349.751 in December 2021, or about 0.92%/month. Over the twelve months between er 2021 the increase was about 1.61%/month, echoing the builder confidence evident in the Housing Market Index.

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 units as of January 1, 2021. This represents an increase of Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected] 31
$782,480 and up 11.0 percent from the $717,930 recorded in December 2020. The double-digit consecutive month with more than a 10 percent increase since the 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.” market is expected to perform solidly this year as the economy recovers C.A.R. Vice President and Chief
COVID cases surging and inventory constraints
ining 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 tial homebuyers who want to
Shiller Home Price Index measures the average change in value of family housing. It is
sometimes referred to as a repeat sale index. The next chart indicates that the index for the % from 263.868 in December
lve months between
echoing the builder

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 . This represents an increase of 5,740

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] 32 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 report (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 increased by a compounded annual increase of 1.04 percent, to 757,690 or an average of 7,253 households per 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%, 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, Growth in the information technology industry over the past decade has strongly increased demand for housing in the Silicon Valley market. There has been limited new single-family home construction and developers responded with substantial new multifamily construction to satisfy demand. Research reports indicate roughly 2,000 to 3,800 multifamily units were completed each year in 2018 through 2020, with over 6,300 units under construction as of the end of 2020.

Prior to the coronavirus outbreak, vacancy remained low as new units were absorbed quickly and rental rates continued to increase moderately, particularly in core submarkets near corporate campuses and high-end suburban markets,. In recent years, unemployment reached the lowest level since the late 1990’s and even at full employment, job growth was positive in the region. However, in April 2020, unemployment jumped up and a significant number of jobs were lost following stay-at-home mandates and non-essential business closures. The greatest impact has been in the Leisure/Hospitality and Trade/Transportation/Utilities sectors. Market conditions began to moderate during the second quarter 2020 as a result of these policies enacted to slow the spread of the coronavirus. Vacancy in the multifamily market increased as a

4 Association of Bay Area Governments is the official comprehensive planning agency for the San Francisco Bay Area region.

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] 33 result of the economic downturn, job losses, and changes in business operations which allows employees to move to more affordable locations and work from home. Also contributing is the continued increase in supply from new development but with slower lease-up periods. Overall vacancy has increased each quarter in 2020 and is above the year ago estimate. Rental rate growth had been declining prior to the pandemic and asking rent trends had already begun to show the effects of the coronavirus at the end of the first quarter, with the typical seasonal pattern of rent growth being disrupted. Forecasting rent growth is highly uncertain at this time; however, it is expected that the economic decline combined with significant supply growth from deliveries over the next several years will result in further declines in average asking rental rates.

Integra Realty Resources Viewpoint 2021 San Jose Multifamily Mid-Year Report summary is displayed in the following charts:

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] 34

Values for multifamily properties are projected to increase over the next 12 months, according to Integra’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 important job center, with some prominent companies making 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

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] 35 in the market. But the expectation is for transaction activity to pull back as market 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 submarket has added over 3,700 units since 2010. The submarket had previously been able to absorb the new units at a healthy rate, with the vacancy rate consistently normalizing just a few quarters after project deliveries. 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 result 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 Apple, 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 both Apple and Facebook to delay recalling employees until January of next year and Google to push back its full office opening until mid- October while also mandating vaccines for workers. Although the extensions will make the improvement in vacancy and rents more measured in the second half of 2021, the eventual return of employees to these economic anchors will prompt smaller firms 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 Clara, 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.

CoreLogic 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:

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] 36

The data above indicates that zip code 95051 consistently has the highest median price among Santa Clara’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, there 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 MLSlistings.com:

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] 37

As shown above, market data derived from the local MLS shows that prices were trending 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 last three Decembers, according to the MLS:

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] 38

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:

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.

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] 39 Conclusions

The overall long-term outlook for the economy 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 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 fared okay during 2021, particularly grocery stores, home improvement stores, drive-thru fast food, and quick serve restaurants. 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 some to the local economy’s anchors. Google, Apple and Facebook 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 part 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 comparables 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 were 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 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] 40 participants opined that selling prices are also increasing, especially for large sites suitable for data centers. The increase in industrial value is supported by an improved paired sale at 3600 Peterson Way in Santa Clara that sold in October 2016 for $30 million and again in June 2019 for $37 million, which indicates a straight-line increase of about 0.72% per month for this 75,800 square foot building on an approximate 5.42-acre site. 1623 S 10th Street in San Jose sold for $3,000,000 in August 2018 and again for $3,801,000 in October 2020, indicating a straight-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-term, 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.

Market 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 through the fourth quarter 2021. For the high-density land sales, median sale prices oscillated somewhat and multifamily rents stagnated or declined during 2021.

So, no market change is applied during 2019, 2020 and 2021 for this property 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 areas within the city where mixed-uses and higher-density residential is allowed. We supposed the following General Plan designations for each hypothetical use:

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] 41

HIGHEST AND BEST USE

We 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 are 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 undertaken 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:

We applied a hypothetical condition 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 support the residential uses was about the midpoint or nearer the high end of the allowed density ranges (based on ever-increasing density proposals/approvals):

Use of Hypothetical Lot General PlanVery Low Density ResidentialVery Low Density Residential Low Density ResidentialLow Density ResidentialHigh Density ResidentialHigh Density ResidentialMedium Density ResidentialMedium Density ResidentialCommercialRegional CommercialIndustrialLight Industrial Use of Hypothetical Lot Highest & Best UseVery Low Density ResidentialVery Low Density Residential Low Density ResidentialLow Density ResidentialMedium Density ResidentialMedium Density ResidentialHigh Density ResidentialHigh Density ResidentialCommercialHold for Development of a Commercial BuildingIndustrialLight Industrial Building 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] 42  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 likely 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 Approach, 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.

Market 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 undertake 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 necessary locational differences from the 95050 zip code conclusion to arrive at the appropriate average lot value in the 95051 and 95054 zip codes.

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] 43 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, MLSlistings.com, and CoStar.com databases for recent sales; and searching Loopnet.com 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 Clara 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 map for each comparable sale is displayed in the Addenda. Selling prices 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 comparables is displayed in the Addenda.

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] 44

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] 45 Adjustment Process

Transactional 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 market conditions since the sale date.

Comparable VLD-1 is the December 2020 closing of a parcel in an off-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 fourplex. 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 improved 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 broker 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 estimated 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 comparables 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 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] 46 Comparables VLD-4 and VLD-5 were each given a short 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 are applied from the start of the first quarter 2020 through the end of the fourth quarter 2021.

Locational adjustments 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 nearby properties, proximity 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 material, 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 overall 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/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.

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 park fees than the hypothetical subject lot.

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] 47 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 low-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 per SF and density, as evidenced by the comparables. In the chart below, we plotted the preceding very-low density comparables and the high-density comparables used in the following high-density value scenario.

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] 48

As shown in the chart 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:

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] 49

The chart above showing just the low density comparables indicates that the appropriate 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 per acre for the low-density residential land use, we concluded to $136/SF.

Conclusion

We 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

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] 50 High Density Land Value

Similar to the preceding very low-density land search, we searched data sources for high and medium-high density residential land transactions and examined data that was discovered by talking to brokers, agents, property 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 brokers/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 articles, and information available from a summary transcript of the public record for transaction details regarding these comparables.

Frank Schmidt& Associates
Real Estate Appraised:
& Associates Phone: 510
Real Estate Appraised: Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Phone: 510-468-9219

Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected]
51 51

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] 52 Adjustment Process

Transactional 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 market 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 downward 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.

Locational adjustments 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 nearby properties, proximity 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 summarized on the grid.

Physical and 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 greater 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 acre. Comparable HD-3 will have 100% affordable housing and was given a 15% credit on the park 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 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] 53 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 downward. Park 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 comparables 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 a price/density unit basis; therefore, the price/SF is utilized as the primary 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 (SF) = 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

Medium 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 per 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 density, 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.

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] 54

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 chart above indicates that at a density of about 30 dwelling units per acre, the indicated price per 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:

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] 55

The chart 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 greater 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

We 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 Market Value of a 1-Acre
Medium-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

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] 56 from within the subject market. We searched 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 comparables is displayed in the Addenda.

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] 57

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] 58 Adjustment Process

The adjustment methodology was similar as above for the residential land sales.

Transactional adjustments were warranted. As described above, due to a lack of commercial land sales, some improved sales were utilized for which the improvements contributed little to the overall selling price. Comparables C-1, C-2, C-4, and C-5 were improved.

Comparable C-1 was marketed 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 C-2 included about 7,800 square feet of improvements dating from the late 1950s; each contributed to the overall selling prices. Based on our observations 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 C-5 included a 5,515 square foot restaurant building. The building was vacant at the time 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.

Market conditions adjustments were applied from the contract date through the date of opinion using the degree of adjustment(s) discussed in the Market Conditions section.

Locational adjustments were broken into elements that reflect the hypothetical property’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 detrimental factors, or an identifiable valuation element relating to address (locational appeal). Locational adjustments were warranted as summarized on the grid. Note that Comparable C-3 does not face Coleman Ave despite its Coleman Ave address.

Physical and Use/Zoning adjustments were considered for size, utility, off-site improvements, zoning/General 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 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] 59 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 $4,138,000

Estimated Market Value of a 1-Acre
Commercial Lot in Zip Code 95050: $4,138,000

Industrial Land Value

We 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 nearing 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.

We are aware of additional sales data in this market described below but were not selected as comparables:

 The Fujitsu campus at 1200-1280E. Arques Avenue on the Santa Clara 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 record for transaction details regarding this comparable.

 There was an improved 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 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] 60 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 comparable.

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] 61

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] 62 Adjustment Process

Adjustments were considered for and applied in a similar manner as above for the commercial sales. Because there are few industrial land sales in this market, we used two sales that were improved with buildings that contributed value to the selling price: Comparables I-4 and I-5. To estimate the residual land value of these transactions, we estimated and deducted the contributory value of the building improvements based on our observations, feedback from the verifying broker(s), and the adjustment that was a good fit for the data. Additionally, data center land sales (see Industrial Land Comparables I-1 and I-2) are the most recent industrial sales that we uncovered.

Comparable I-5 was purchased 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 part of the buyer.

Market conditions adjustments were applied at the rate concluded to in the Market Conditions section. As stated in the preceding material, industrial property in the City of Santa Clara (and Silicon Valley in general) 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 warranted adjustments are summarized on the grid.

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] 63 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.

We concluded to the following for industrial 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 was an extraordinary assumption of this appraisal that the land areas 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 commercial sales, 26 industrial sales, 731 residential 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 for 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 market trends over the last year.

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] 64 The total number of land square feet (SF) sales (broken out by property type) is reflected in the next table:

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 industrial, 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 next table, the appropriate weighted values are summed to produce the average value of a hypothetical 1-acre lot in the 95050 zip code:

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] 65

Average Value of a Hypothetical 1-Acre
Lot in the 95050 Zip Code: $5,715,000 (Rounded)

AVERAGE VALUE ESTIMATE IN 95051 ZIP CODE

We estimated the value of 1 acre of land for zip code 95050 above. Following we apply any differences in value between the 95051and 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/rents for the commercial and industrial uses, and compared median selling prices and rents for the residential uses.

Residential Difference

Market 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 headquarters 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 rendering 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:

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] 66

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 supports the opinions of market participants that 95050 rates inferior to 95051.

In the next table, based on data reported by MLS 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.

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] 67

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

We 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 primary 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

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] 68 rental rates were equal in 95051 during 2021 ($2.21/SF vs. $2.21/SF). The rental rates are partly 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:

Average Value of Hypothetical 1-Acre
Lot in the 95051 Zip Code: $6,000,000 (Rounded)

AVERAGE VALUE ESTIMATE IN 95054 ZIP CODE

We utilize the same weighted land values from zip code 95050 and apply any differences in value between the 95054 and 95050 zip codes.

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] 69 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%

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] 70 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 MLS, which often does not include all new construction.

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

Most 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 rents indicates that the 3-year average Housing Type Zip Code December-18 December-19 December-2095050$1,074,000 $1,210,000 $1,265,00095051$1,275,000 $1,425,000 $1,415,00095054$1,025,000 $1,202,500 $1,128,000Source Local MLSSFR, Condo, & Townhouse 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] 71 (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 years (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 in 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 prices in 95054 due primarily 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 were 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:

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] 72

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 part 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)

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] 73 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)  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

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] 74

Attachment A Supplemental Instructions 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 recreational land dedication pursuant to Santa Clara City Code 17.35. (Approved 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 recreational uses and/or pays a fee in-lieu of parkland dedication to mitigate the impacts of the new growth 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 parkland dedication, the maximum amount of such fee shall be determined by the fair market value of the amount of land that would otherwise be required 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) The City shall determine the fair market value of the property by using the average per acre land 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 three 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, the 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, prior to the issuance of a building permit. (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 § 3, 7-15-14).

Attachment A—Supplemental Instructions for Appraisal Page 1 of 3

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] 75 Guidelines for Appraiser: a. Appraiser is to provide a “Fair Market Value” 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 opinion will conform to Uniform Standards of Professional Appraisal Practice. b. Valuation Date: December 31 of each year. c. Location & Property Sales Data Set Boundaries: Data set will begin with sales data from within Santa Clara City limits. d. Data Set Date Range: Use data from January 1st to December 31st of each year. Example: January 1, 2015 to December 31, 2015 for “December 31, 2015 Valuation Date.” See contingencies below. e. Property Types: Use all of the following property types: Single Family (low and very low density), High Density Residential, Medium Density Residential, Commercial, Industrial, Lots and Land. f. Contingencies for Limited Data Set of each Property Type: If there are insufficient, credible data points or sales of a particular property type, then appraiser will explore and use comparable sales from the local competitive market area, adjacent to City of Santa Clara. A fixed distance from City of Santa Clara city limit is not given, however a compelling, rational basis for the selection of the competitive market area must be given by the appraiser in the report. Preference is for closer, more recent, and comparable; discretion is given to the appraiser. g. Sales Transactions Data not to be used: Do not use transactions if they are not an arms-length transaction, have encumbered/clouded title, are environmentally impaired site, or are more than three (3) years old. h. Inflation factors for Comparable between 1 and 3 years: An inflation factor will be computed and applied to comparable sales over one year based on reasonable and rational considerations such as sales and rental trends or other appropriate methods. i. Sales Transactions Data that may be included: May use real estate sales transactions by the City of Santa Clara for additional neighborhood or community parkland. j. Data Values excluded: No values or set of values at the high or low end of the data set are to be excluded from consideration in the average values on the sole basis of being relatively high or low; however, a check for consistency among comparable values will be done, and a rational basis should be provided for credible comparable transactions if not used. Attachment A—Supplemental Instructions for Appraisal Page 2 of 3

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] 76 k. Research Factors to be considered for Comparable sales: The factors to be used to compare property values include, but are not limited to physical factors, economic factors, market conditions verification to parcel maps, public records, CoStar data bank. Additional factors may be used provided there is a rational basis for doing so. l. Reconciliation of value differences: The approach will be comparative, iterative, qualitative and quantitative, and will be made at the appraiser’s discretion. m. Weight to be applied to Property Types: The weighted average of each property type will be based on the percentage of land area in the sales transactions, for example, if 25% of total acreage is high density residential, then the relative weight of that property type will be 25%. (The weight will not be done by the quantity of sales of each type or the percent of value of sales of each type). n. Reporting: A draft valuation report will be generated by March 15. City will provide for a two week circulation and comment period. The valuations included the final valuation report will be used in the calculation formula for fees prepared by staff to be reviewed by Council as part of the annual City budget process and Municipal Fee Schedule adoption by June 30. Fees will be implemented on or after July 1 depending upon Quimby Act or Mitigation Fee Act provisions of the Council resolution. Attachment A-Supplemental Instructions for Parkland Dedication In Lieu Fee Process and Schedule 2016 Attachment A—Supplemental Instructions for Appraisal Page 3 of 3

Real Estate Appraised: Three

Frank Schmidt & Associates

VERY LOW-DENSITY RESIDENTIAL SALE
Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Frank Schmidt & Associates Phone: 510-468-9219 [email protected]

DENSITY RESIDENTIAL SALE COMPARABLE LOCATION MAP
Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected] 77

COMPARABLE LOCATION MAP

Real Estate Appraised: Three

Frank Schmidt & Associates

HIGH-DENSITY RESIDENTIAL SALE COMPARABLE LOCATION MAP
Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Frank Schmidt & Associates Phone: 510-468-9219 [email protected]

DENSITY RESIDENTIAL SALE COMPARABLE LOCATION MAP
Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected] 78

DENSITY RESIDENTIAL SALE COMPARABLE LOCATION MAP

Real Estate Appraised: Three

Frank Schmidt & Associates

COMMERCIAL SALE COMPARABLE LOCATION MAP
Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Frank Schmidt & Associates Phone: 510-468-9219 [email protected]

COMMERCIAL SALE COMPARABLE LOCATION MAP

Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected] 79

Real Estate Appraised: Three

Frank Schmidt & Associates

INDUSTRIAL SALE COMPARABLE LOCATION MAP
Three Hypothetical One-Acre Lots, One for Each Zip Code, Santa Clara,

Frank Schmidt & Associates Phone: 510-468-9219 [email protected]

INDUSTRIAL SALE COMPARABLE LOCATION MAP

Acre Lots, One for Each Zip Code, Santa Clara, CA
[email protected] 80

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] 81

COMPARABLE LAND SALE PARCEL MAPS
Very Low Density Land Comparable Sale VLD 1
Very Low Density Land Comparable Sale VLD 2

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] 82

COMPARABLE LAND SALE PARCEL MAPS
Very Low Density Land Comparable Sale VLD 3
Very Low Density Land Comparable Sale VLD 4

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] 83

COMPARABLE LAND SALE PARCEL MAPS
Very Low Density Land Comparable Sale VLD 5

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] 84

COMPARABLE LAND SALE PARCEL MAPS
High Density Land Comparable Sale HD 1
High Density Land Comparable Sale HD 2

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] 85

COMPARABLE LAND SALE PARCEL MAPS
High Density Land Comparable Sale HD 3
High Density Land Comparable Sale HD 4

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] 86

COMPARABLE LAND SALE PARCEL MAPS
High Density Land Comparable Sale HD 5

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] 87

COMPARABLE LAND SALE PARCEL MAPS
Commercial Land Comparable Sale C 1
Commercial Land Comparable Sale C 2

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] 88

COMPARABLE LAND SALE PARCEL MAPS
Commercial Land Comparable Sale C 3
Commercial Land Comparable Sale C 4

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] 89

COMPARABLE LAND SALE PARCEL MAPS
Commercial Land Comparable Sale C 5

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] 90

COMPARABLE LAND SALE PARCEL MAPS
Industrial Land Comparable Sale I 1
Industrial Land Comparable Sale I 2

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] 91

COMPARABLE LAND SALE PARCEL MAPS
Industrial Land Comparable Sale I 3
Industrial Land Comparable Sale I 4

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] 92

COMPARABLE LAND SALE PARCEL MAPS
Industrial Land Comparable Sale I 5

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] 93 FRANK E. SCHMIDT, MAI, SRA
CURRICULUM VITAE, January 2022
Valuation Consulting, Forensic and General Appraisal, Expert Testimony MAI and SRA MEMBER of the APPRAISAL INSTITUTE , No. 11933 [email protected] (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 the Schmidt-Prescott Group, a commercial appraisal firm of which he was president until its dissolution in 2017.

During his career, Mr. Schmidt has appraised a wide variety of real estate including residential, commercial, industrial, raw 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.

Mr. Schmidt was recently retained by the City of Santa Clara as an expert to assist the city’s task force in the process of setting Parkland Dedication fees.

Mr. Schmidt has served 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 Care, Eminent Domain Professional Affiliations
Membership in: Appraisal Institute [MAI (2002) and SRA Member (1989)] Work Experience
1/2019 to Present: Frank Schmidt & 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

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] 1 Erratum: The following corrections to errors in the document are hereby made and appended to the Report.
• Page 25 – the word should be "unemployment" and not "employment." “At the end of 2021, Silicon Valley recorded an [un]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.
• Page 39 – the word should be "while" and not "with". • Page 39 – the word "following" should be removed.