Alessandro_Alley_3_Lots-_Appraisal_Report.pdf

LAND (TASK 2 – THREE ASSESSOR PARCELS)

PALM DESERT VACANT LAND

44889 SAN CLEMENTE CIR

PALM DESERT, CALIFORNIA 92260

APPRISE FILE # | 24.WC.16596 002

Please direct inquires to

STEVEN EVANS, MAI, CCIM, MRICS

stevans@apprise.us | 702-355-5713

APPRISE BY WALKER & DUNLOP | 2010 MAIN STREET, SUITE 1100 IRVINE, CA 92614

A Real Property Prepared For

APPRAISAL REPORT CITY OF PALM DESERT

November 22, 2024

L. Todd Hileman | City Manager City of Palm Desert 73-510 Fred Waring Palm Desert, CA 92260-2578

An Appraisal Report of Palm Desert Vacant Land Located at 44889 San Clemente Cir Palm Desert, Riverside County, California 92260

Apprise File No: 24.WC.16596 002 City of Palm Desert File No: Contract No. A45900

Dear Mr. Hileman:

Per the request and authorization of our above-mentioned client, Apprise has prepared the following appraisal report outlining the findings, conclusions, and market value estimates of the referenced property. The following report and addenda detail our findings, analyses, and pertinent supporting documentation. Maps, charts, photographs, and other visuals that are considered material to report conclusions are dispersed herein. Assumptions, Conditions, and Certification are located at the back of this document.

It is our intent to comply with the following regulatory sources: 12 CFR, Subpart C - Subsection 34.42(g), Department of the Treasury, Office of the Comptroller of the Currency; the Uniform Standards of Professional Appraisal Practice (USPAP); the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. This report is also intended comply the provided appraisal regulations of Walker & Dunlop, LLC. The undersigned have experience appraising similar properties in the market area, and therefore comply with the competency rule as mandated in USPAP. This report is the sole property of Apprise and the intended user(s) stipulated herein. Apprise is not liable for recipient’s disbursement to any third parties and/or use for any purposes other than the specified intended use.

The subject of this report consists of three assessor parcels with sizes ranging from 0.14 to .38 acres in size (6,098 SF to 16,552 SF). All three assessor parcels are vacant land located in an established residential area with frontage along San Antonio Circle and San Clemente Circle in Palm Desert, California. All three subject properties have all utilities to the site and are located with street access. The subject properties are not contiguous. We have been asked to estimate the as is market value of the three parcels as one entity. The properties could potentially be sold separately, as they are separate legal entities.

The purpose of this appraisal is to develop an opinion of the As-Is Market Value (Fee Simple Interest). The following table conveys the final opinion of value that is developed in this appraisal:

MARKET VALUE CONCLUSION

VALUATION SCENARIO INTEREST APPRAISED EXPOSURE TIME EFFECTIVE DATE VALUE

As-Is Market Value Fee Simple Interest 9 Months November 20, 2024 $650,000

Apprise.us

The Appraisal is for the sole use of the Client; however, Client may provide only complete, final copies of the Appraisal report in its entirety (but not component parts) to third parties who shall review such reports in connection with loan underwriting or securitization efforts. APPRISE is not required to explain or testify as to appraisal results other than to respond to the Client for routine and customary questions. Please note that our consent to allow the Appraisal prepared by APPRISE or portions of such Appraisal, to become part of or be referenced in any public offering, the granting of such consent will be at our sole and absolute discretion and, if given, will be on condition that APPRISE will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to APPRISE by a party satisfactory to APPRISE. APPRISE does consent to your submission of the reports to rating agencies, loan participants or your auditors in its entirety (but not component parts) without the need to provide APPRISE with an Indemnification Agreement and/or Non-Reliance letter.

APPRISE hereby expressly grants to Client the right to copy the Appraisal and distribute it to other parties in the transaction for which the Appraisal has been prepared, including employees of Client, other lenders in the transaction, and the borrower, if any.

This report conforms to the current Uniform Standards of Professional Appraisal Practice (USPAP).

EXTRAORDINARY ASSUMPTIONS

The use of an extraordinary assumption(s) may have impacted the results of the assignment. The subject property is vacant land with no specific plans for development. A variety of uses and densities is possible. Based on our conversations with Anna Dan of the Palm Desert planning department, the subject property is zoned DEO, downtown Edge Transition, which permits a variety of uses. Multifamily is permitted with an FAR of 2.0 and a density that could range from 12 to 40 units. Our analysis is based on the extraordinary assumption that a prospective buyer would maximize density and we have threfore based on conclusions on the assumption of a density in the very upper end of the allowable range.

HYPOTHETICAL CONDITIONS

No Hypothetical Conditions were made for this assignment.

If you have any questions or concerns regarding the Appraisal Report contained herein, please reach out to the person(s) below.

STEVEN EVANS, MAI, CCIM, MRICS | SENIOR DIRECTOR

State Certified General Real Estate Appraiser AG006318 stevans@apprise.us 702-355-5713

CASEY MERRILL, MAI, ASA, FRICS | REGIONAL MANAGING

DIRECTOR

State Certified General Real Estate Appraiser AG 003330 cmerrill@apprise.us 760-848-7899

CONTENTS

24.WC.16596 002 Palm Desert Vacant Land

Executive Summary

Photographs

Introduction

Neighborhood

Site

Site

Taxes

Highest and Best Use

As Vacant Analysis ................................................................................................... Error! Bookmark not defined.

As-Improved Analysis .............................................................................................. Error! Bookmark not defined.

Approaches to Value

Site Valuation

Reconciliation

Certification

Qualifications of Appraiser

Land Sale Comparable Data Sheets Letter of Engagement

EXECUTIVE SUMMARY

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PROPERTY IDENTIFICATION

SITE DESCRIPTION

QUALITATIVE ANALYSIS

HIGHEST & BEST USE

EXPOSURE & MARKETING TIME

VALUE CONCLUSION

VALUATION SCENARIOS AS-IS MARKET VALUE

Interest Fee Simple Interest Exposure Time 9 Months Effective Date November 20, 2024 Site Value $650,000 Cost Approach Not Presented Sales Comparison Approach $650,000 Income Capitalization Approach Not Presented

FINAL VALUE CONCLUSION $650,000

AERIAL PHOTOGRAPH

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SUBJECT PROPERTY PHOTOGRAPHS

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Subject Property

Street Scene

INTRODUCTION

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THE PROPERTY

The subject of this report consists of three assessor parcels with sizes ranging from 0.14 to .38 acres in size (6,098 SF to 16,552 SF). All three assessor parcels are vacant land located in an established residential area with frontage along San Antonio Circle and San Clemente Circle in Palm Desert, California. All three subject properties have all utilities to the site and are located with street access. The subject properties are not contiguous. We have been asked to estimate the as is market value of the three parcels as one entity. The properties could potentially be sold separately, as they are separate legal entities.

IDENTIFICATION

• Physical Address: 44889 San Clemente Cir, Palm Desert, Riverside County, California 92260

• The assessor parcel Numbers are: 627-071-071, 627-071-065, 627-071-070.

OWNERSHIP HISTORY

Current Owner The subject property is currently under the ownership of City of Palm Desert, according to the Riverside County records.

Three-Year Sales History According to county records there has been no transfer of ownership for the subject property in the past three years nor has it been listed for sale in the last 12 months.

CLIENT IDENTIFICATION

The client of this specific assignment is City of Palm Desert.

INTENDED USER

City of Palm Desert is the only intended user of this report.

INTENDED USE

The intended use of this appraisal is to assist the client in making internal business decisions related to this asset.

PURPOSE

The purpose of this appraisal is to develop an opinion of the As-Is Market Value (Fee Simple Interest).

FF&E

No personal property or intangible items are included in this valuation.

MARKETING TIME & EXPOSURE PERIOD

TYPE AND DEFINITION OF VALUE

The type of value analyzed in this appraisal is market value at highest and best use. The definition of value employed in this report is Market Value as defined in 12 CFR - Part 34.42 (FIRREA), Department of the Treasury, Office of the Comptroller of the Currency. Market Value means: the most probable price which a property should bring in a competitive and open market

INTRODUCTION (CONTINUED)

24.WC.16596 002 Palm Desert Vacant Land p. 5 under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• Buyer and seller are typically motivated;

• Both parties are well informed or well advised, and acting in what they consider their own best interests;

• A reasonable time is allowed for exposure in the open market;

• Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and

• The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

INTEREST APPRAISED

The property rights appraised constitute the fee simple interest.

Fee Simple Interest 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.1

VALUE SCENARIOS

As-Is Market Value The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.2

SCOPE OF WORK

In order to develop the opinion of value, the Apprise employed the relevant and commonly accepted appraisal methods and principles to derive a credible value conclusion. The appraisers thoroughly performed an appraisal process, as set forth in Standard 1 by the Uniform Standards of Appraisal Practice. The scope of the assignment relates to the manner and extent to which research is conducted, data is accumulated, and analysis is conducted. In preparing this appraisal, the appraisers did the following:

• Analyzed the national, regional and local area economic trends as appropriate, including but not limited demographic, employment and real estate trends. The local area was analyzed and the immediate market area was observed to consider potential influences on the subject.

• Interviewed market participants, some of which could include local property owners, property managers and others familiar with competitive area real estate

• Obtained various information from surrounding jurisdictions and reporting entities regarding comparable data, demographics, zoning, property taxes, deed history, flood zones, utilities, transit, planned developments, income and expense data, etc.

• Estimated the market value using the Land Sales Comparison Approach. The inclusion or exclusion of approaches to value was determined by solely by the appraiser and not the intended user

• The appraisal includes a Multifamily market analysis for the Inland Empire market and Palm Springs submarket using vacancy, absorption, supply and rent data. Conclusions were drawn for the subject’s competitive position given its physical and locational features, current market conditions and external influences.

• The appraisal includes a Highest and Best Use analysis and conclusions have been completed for the highest and best use of the subject property As Vacant and As Improved. Subject is vacant land and multifamily is considered most probable use. The analysis considered legal, locational, physical and financial feasibility characteristics of the subject site and existing improvements.

Please refer to the assignment conditions section for the basic and extraordinary assumptions, as well as the limiting and hypothetical conditions upon which our value conclusions are made.

1 The Dictionary of Real Estate Appraisal, Seventh Edition, Appraisal Institute, Chicago, Illinois, 2022 2 The Dictionary of Real Estate Appraisal, Seventh Edition, Appraisal Institute, Chicago, Illinois, 2022

INTRODUCTION (CONTINUED)

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SOURCES OF INFORMATION

The following sources were contacted to obtain relevant information:

INFORMATION PROVIDED

Property Assessment & Tax Riverside County Assessor Zoning & Land Use Planning City of Palm Desert Zoning Site Size Riverside County Assessor Supply & Demand CoStar Flood Map FEMA Demographics STDB On-Line Comparable Information MLS | Public Records | Confirmed by Local Agents Legal Description Not Provided Purchase & Sale Document Client Physical Inspection Report Not Provided Title Not Provided Phase I Environmental Report Not Provided

SUBJECT PROPERTY INSPECTION

PROPERTY INSPECTION

APPRAISER INSPECTED EXTENT DATE ROLE

Steven Evans, MAI, CCIM, MRICS Yes Roadside (Vacant Land) November 20, 2024 Primary Appraiser Casey Merrill, MAI, ASA, FRICS No N/A N/A Appraiser

REGION

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ECONOMIC & DEMOGRAPHIC PROFILE

The following profile of the greater region was provided by Moody’s Analytics, whose core assets of proprietary editorial and research content as well as economic and financial databases are a source of information on national and regional economies, industries, financial markets, and demographics.

Moody’s Analytics approach to the analysis of the U.S. economy consists of building a large-scale, simultaneous-equation econometric model, which they simulate and adjust with local market information, creating a model of the U.S.

macro economy that is both top-down and bottom-up. In this model, those variables that are national in nature are modeled nationally while those that are regional in nature are modeled regionally. Interest rates, prices, and business investment are modeled as national variables; key sectors such as labor markets (employment, labor force), demographics (population, households, and migration), and construction activity (housing starts and sales) are modeled regionally and then aggregated to national totals. This approach allows local information to influence the macroeconomic outlook. Therefore, changes in fiscal policy at the national level (changes in tax rates, for example) are translated into their corresponding effects on state economies. At the same time, the growth patterns of large states, such as California, New York, and Texas, play a major role in shaping the national outlook. In addition, on a regional basis, the modeling system is explicitly linked to other states through migration flows and unemployment rates. Moody’s Analytics model structure also takes into account migration between states.

REGION (CONTINUED)

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NEIGHBORHOOD

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NEIGHBORHOOD (CONTINUED)

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LOCATION

The subject property is located in the Palm Desert area of the Coachella Valley submarket. The immediate area of the subject is characterized by industrial uses with residential and commercial uses in the surrounding area.

The following map presents the city boundary. The subject is located in the south central section of the city limits.

The following aerial presents the subject and surrounding land uses.

Demographics The following information reflects the demographics for the subject’s area.

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LOCAL AREA DEMOGRAPHICS

DESCRIPTION 1 MILE 3 MILE 5 MILE DESCRIPTION 1 MILE 3 MILE 5 MILE

POPULATION TOTAL HOUSEHOLDS

2010 Census 8,842 39,108 64,774 2010 Census 3,807 18,715 32,002 2020 Census 8,339 38,737 66,761 2020 Census 3,693 18,817 32,979 2024 Estimate 8,303 38,883 68,548 2024 Estimate 3,714 18,914 33,834 2029 Projection 8,420 39,351 70,841 2029 Projection 3,790 19,261 35,064

Δ 2010-2020 (5.69%) (0.95%) 3.07% Δ 2010-2020 (2.99%) 0.55% 3.05% Δ 2020-2024 (0.43%) 0.38% 2.68% Δ 2020-2024 0.57% 0.52% 2.59% Δ 2024-2029 1.41% 1.20% 3.35% Δ 2024-2029 2.05% 1.83% 3.64%

Total Daytime Population 18,644 64,450 100,066 HOUSEHOLDS BY INCOME (2024 ESTIMATE)

HOUSING UNITS <$15,000 12.5% 9.2% 9.2%

Total (2024 Estimate) 4,881 27,648 51,530 $15,000 - $24,999 10.3% 6.5% 5.9%

Owner Occupied 31.3% 44.3% 45.9% $25,000 - $34,999 8.0% 6.7% 6.5% Renter Occupied 44.8% 24.1% 19.7% $35,000 - $49,999 13.7% 10.7% 9.5% Vacant Housing Units 23.9% 31.6% 34.3% $50,000 - $74,999 14.4% 13.2% 12.5%

Total (2029 Projection) 4,986 28,105 53,119 $75,000 - $99,999 11.0% 11.4% 10.4% Owner Occupied 32.7% 45.3% 46.6% $100,000 - $149,999 12.6% 15.6% 16.2% Renter Occupied 43.3% 23.2% 19.4% $150,000 - $199,999 10.4% 10.7% 11.3% Vacant Housing Units 24.0% 31.5% 34.0% $200,000+ 7.2% 15.9% 18.5%

AVERAGE HOUSEHOLD INCOME AVERAGE HOUSEHOLD SIZE

2024 Estimate $91,848 $128,763 $138,925 2024 Estimate 2.21 2.01 1.99 2029 Projection $107,098 $149,403 $160,514 2029 Projection 2.19 2.00 1.99

Δ 2024-2029 16.60% 16.03% 15.54% Δ 2024-2029 (0.90%) (0.50%) 0.00%

MEDIAN HOUSEHOLD INCOME MEDIAN HOME VALUE

2024 Estimate $57,712 $81,401 $88,881 2024 Estimate $589,228 $671,014 $679,754 2029 Projection $69,830 $94,818 $104,122 2029 Projection $703,815 $797,033 $803,269

Δ 2024-2029 21.00% 16.48% 17.15% Δ 2024-2029 19.45% 18.78% 18.17%

PER CAPITA INCOME AVERAGE HOME VALUE

2024 Estimate $41,732 $62,826 $68,619 2024 Estimate $607,187 $733,223 $754,468 2029 Projection $48,981 $73,324 $79,489 2029 Projection $808,722 $912,098 $922,225

Δ 2024-2029 17.37% 16.71% 15.84% Δ 2024-2029 33.19% 24.40% 22.24%

CONCLUSION

Based on our observation and the data provided by ESRI, it is perceived that the income and population demographics for the subject neighborhood exhibit above average characteristics in terms of reported population growth and income levels. As previously mentioned, the population growth for the subject’s 3 mile radius has increased 0.97% since 2020 and based on the projections provided by ESRI, it is expected to continue to increase another 1.24% during the next 5 years. Lastly, we perceive that, since average household incomes are above the national average ($126,291, for the subject’s 3 mile radius) and given that the area is well-populated (20,218 households in a 3 mile radius), developments like the subject should be adequately supported.

SURROUNDING LAND USES

The following tables and maps highlight the development in and around the subject.

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The land use in the subject’s immediate neighborhood consists of a significant amount of commercial property, comprising of a mix of many property types. Commercial uses in the area include the Regional malls and many other larger-sized multitenant retail centers, medium-sized retail/industrial/distribution-type properties, small- to- medium sized freestanding office and retail properties, as well as service-related uses, restaurants, gas stations/convenience stores and banks. The following chart illustrates the high concentration of multifamily and retail compared to industrial and office properties.

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Proposed Based on CoStar's research, there appears to be about 1 project that is proposed for construction. This project is perceived to be within 0.8 miles of the subject. The size of proposed developments is 60,000 SF.

The following table details our findings:

ECONOMIC INFLUENCES

The local area economic status is important to recognize as the measurement of income levels provides an indication of the ability of the area population to buy, rent and maintain property. The economic status of an area also provides an indication of the population’s appetite for goods and services. Relevant economic information includes income levels, property ownership

vs. rent, property rent levels, rent level trends, property vacancy and new construction.

The vast majority of the housing units within the area are owner occupied, which contrasts with relative similarity to other parts of Palm Desert.

GOVERNMENT INFLUENCE

Governmental considerations relate to zoning, building codes, regulations, flood plain restrictions, special assessment, property tax and empowerment zones.

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Zoning in the area is mixed, including commercial, residential and industrial designations. Zoning code is enforced by the municipality and enforcement in all areas of City of Palm Desert is considered to be strong. Rezoning is typically discouraged and requires public input in all municipalities. Building codes are in force and require a certain standard of construction quality and design. This is a typical influence on properties similar to the subject and falls in line with the zoning classification.

Property taxes in the area are established by Riverside County and are assessed based on valuation. Considering broad authority of the county administration, the assessments in the neighborhood are similar to other neighborhoods in the metropolitan area. There are no known special assessments that affect property in the neighborhood.

ACCESS/PUBLIC TRANSPORTATION

The streets within the neighborhood are laid out in a grid pattern with major streets generally along the section and ½ section lines. The major north/south streets in the neighborhood include Monterey Avenue and San Pablo Avenue. The major east/west streets include Fred Waring Drive and the 111 Highway. With the existing transportation system, most areas of metropolitan Palm Desert are accessible from the subject neighborhood and access is considered for the metropolitan area. Public bus service is available throughout the area. Overall, access within the neighborhood is average for the metropolitan area.

ENVIRONMENTAL INFLUENCES

The subject area is considered to be a typical neighborhood with average building size and density. There are no extraordinary topographical features, nuisances of hazards. Public utilities are available in most all areas in quantities from public and private sources. The area has both public and private schools in adequate supply and quality.

LOCAL AREA SUMMARY

The market benefits from a diverse blend of residential, commercial, and community uses and close proximity to many recreational activities.

SITE

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OVERVIEW

The subject of this report consists of three assessor parcels with sizes ranging from 0.14 to .38 acres in size (6,098 SF to 16,552 SF). All three are level sites with street, curb and gutter in place. The sites are located in a D-E-O zone area that permits high density residential (an FAR of 2.0 which is reported to be a range of 12 to 40 units per acre). We have been asked to estimate the value of the four sites as one entity. Each site is a separate assessor parcel and a separate legal entity and could, if desired, be sold separately.

Address 44889 San Clemente Cir, Palm Desert, California.

Census Tract 06-065-045127

Adjacent Uses North Single-Family Homes South Retail East Vacant Land West Vacant Land and Retail

Flood Plain Zone X (Unshaded). This is referenced by Panel Number 06065C2207H, dated April 19, 2017. Zone X (unshaded) is a moderate and minimal risk area. Areas of moderate or minimal hazard are studied based upon the principal source of flood in the area. However, buildings in these zones could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in a community’s flood insurance study. The failure of a local drainage system can create areas of high flood risk within these zones. Flood insurance is available in participating

SITE (CONTINUED)

24.WC.16596 002 Palm Desert Vacant Land p. 24 communities, but is not required by regulation in these zones. Nearly 25% of all flood claims filed are for structures located within these zones. Minimal risk areas outside the 1% and 0.2% annual chance floodplains. No BFEs or base flood depths are shown within these zones. (Zone X (unshaded) is used on new and revised maps in place of Zone C.)

Seismic The subject is in a low risk area.

INGRESS | EGRESS

SOILS

A detailed soils analysis was not available for review. Based on the development of the subject, it appears the soils are stable and suitable for the existing improvements.

ENVIRONMENTAL HAZARDS

We have not conducted an independent investigation to determine the presence or absence of toxins on the subject property.

If questions arise, the reader is strongly cautioned to seek qualified professional assistance in this matter. Please see the Assumptions and Limiting Conditions for a full disclaimer.

We were not provided with a copy of the Phase I Environmental Assessment for review.

EASEMENTS | ENCROACHMENTS

A preliminary title report was not available for review. During the property inspection, no adverse easements or encumbrances were noted. This appraisal assumes that there are no adverse easements present. If questions arise, further research is advised.

SITE (CONTINUED)

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ZONING

ZONING CONCLUSION

The current use for the subject property is retail and is a permitted use based on the current zoning guidelines. No zoning change is believed to be imminent. Based on our conversations with Anna Dan of the Palm Desert planning department, the subject property is zoned DEO, downtown Edge Transition, which permits a variety of uses. Multifamily is permitted with an FAR of 2.0 and a density that could range from 12 to 40 units. Our analysis is based on a density in the upper end of the range.

CONCLUSION

In the final analysis of the site, no significant detriments were discovered which would be inhibit development accordingly with its highest and best use. The site is vacant and displays adequate accessibility and locational features for potential multi-family development. The site’s physical and legal characteristics appear to be supportive of and suitable for a potential multifamily use sometime in the future.

TAXES

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In California, Proposition 13 establishes that annual increases of assessed value of real property should not exceed 2% per year except in cases of a change in ownership, completion of new construction, and/or in the case of a value restoration due to a prior year decline in value (Proposition 8) assessment.

Real property in Riverside County in the State of California is re-assessed every year. Real estate taxes are due March 31st of each year. However, if taxes are paid by November 30th, a property owner can realize a 4% discount in the total liability. The discount is reduced by 1% each month after November 30th until the full liability is due in March. Our analysis assumes a prudent investor would take advantage of this discount.

County Assessor’s offices tend to be more conservative in terms of increasing assessments despite ongoing improvements in the multifamily sector. This is attributed to limited staff and cost of defending tax appeals and the change in 2009 from the Assessor having the Presumption of Correctness to the Preponderance of Evidence, requiring the assessor to have a much greater burden to support assessments if contested. Assessment levels are impacted by the following primary factors:

• Re-assessment without a transaction

MARKET PARTICIPANTS

We discussed expectation of increases in the real estate tax assessment, and thus, real estate tax liability, with investors and brokers active in the marketplace. It was reported that they are generally anticipating increases in assessment levels to 70%

- 85% of the contract price, depending on the asset and location. Additionally, these increases are typically reflected in the in-place capitalization rates reported by market participants.

CURRENT TAXATION & ASSESSMENT

CONCLUSION

In our conclusion, we considered the re-assessment process within the State of California as well as investor and market participant expectations. The subject is owned by a public entity, which is exempt from property taxes. We note that the impact of re-assessment can vary somewhat significantly depending on the timing of acquisition, County re-set of the assessment the following year and future increases in the assessment level over the holding period.

MARKET ANALYSIS

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PALM SPRINGS (COACHELLA VALLEY) SUBMARKET OVERVIEW

Absorption in Palm Springs is running positive in 2024 for the first time in over two years, boosted by the lease up on new supply. Vacancy reached a seven-year high in late 2023 but remains relatively compressed at 5.3% as of the fourth quarter of 2024. Recent vacancy expansion was more dramatic across all other submarkets across the Inland Empire, and market vacancy measures 6.7% in comparison.

Palm Springs is a high-end resort community, although workforce housing exists in the city, Palm Desert, Indio, and Coachella.

Due to stronger demand, rent growth has historically exceeded the market average, as it has in the post-pandemic era. Rent growth moderated to less than 1% in 2023 as vacancy rose and is heading for a similar increase in 2024 as growing demand chips away at the area's elevated vacancy rate.

MARKET ANALYSIS (CONTINUED)

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VACANCY

Demand for apartments in Palm Springs finally turned positive in the first quarter of 2024, following ten consecutive quarters of contraction. Vacancy has ticked slightly lower to 5.3%. Affordability is improving as wages catch up to elevated rent costs, and absorption has been recently boosted by renters moving into new supply. Demand faltered from 2022-23 due to deteriorated affordability and slower in-migration following an early pandemic-driven surge.

The Palm Springs Submarket has the highest concentration of older residents in the metro, with a median age over 40. The area remains a haven for retirees and second-home owners fleeing cold weather. Population growth will likely be concentrated among older residents rather than primer renter-age cohorts.

Renters have several options in Palm Springs, from single-family homes to affordable apartments and mobile homes. The submarket is diverse demographically, with affordable areas primarily located in Indio and Coachella and luxurious residences in Palm Springs and Palm Desert. Palm Springs restricted short-term rentals to 20% of neighborhood supply in late 2022, which could prompt some single-family homeowners to rent their houses annually, thereby increasing options for resident renters.

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MARKET RENT

Apartment affordability in Palm Springs was stretched following a 15% increase in 2021 and a 7% increase in 2022. In response to renter outflows and rising vacancy, rent levels nearly stabilized in 2023 with growth moderating to less than 1%. Rent growth on a trailing year basis registers 0.3% as of the fourth quarter of 2024. Apartment rents average $1,760/unit, well below the Inland Empire market average of $2,060/unit. The submarket caters to lower-income renters who work in service industries.

Limited supply additions and historically low vacancies typically provide landlords leverage in Palm Springs. Rent growth remains moderate but could improve in the upcoming year as new properties gain occupancy. Growing leisure and hospitality employment should generate interested renters, but affordability issues and alternative rental options are biting into demand.

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CONSTRUCTION

Following a decade of inactivity, market-rate apartment development activity ramped up recently, with developers initiating several projects over the past three years. Although construction loan rates are higher, projects are more feasible following the pandemic-era boost in rent potential. There are 390 units under construction in the submarket as of the fourth quarter of 2024. In the Palm Desert, a 330-unit Millenium Village Apartments Homes at 74699 Technology Drive is underway.

In the third quarter of 2023, Shopoff Realty Investments and Argosy Real Estate Partners completed construction of SolTerra, a 131-unit single-family build-to-rent community in La Quinta currently in lease-up. The 3 and 4-bedroom units at the complex command effective rents of nearly $3,300/unit and $4,100/unit after move-in concessions, although rental rates at the property

24.WC.16596 002 Palm Desert Vacant Land p. 31 have declined in recent quarters. The property is surrounded by La Quinta Resort & Club, the Rancho La Quinta Golf Club, and Lake La Quinta, and also features a commercial space and a hotel.

There is a proposal to build a 242-unit complex called Coachella Village adjacent to Rancho Las Flores Park and Event Venue, which holds multiple soccer fields for recreational use.

The first ever Storyliving by Disney community, a residential for-sale development key to continued economic growth in the area, is under construction in Rancho Mirage in the Coachella Valley. Designed by Disney Imagineers and DMB Development, home sales at the 618-acre mixed-use development are expected to begin in 2024, and the project is scheduled to be completed by 2040.

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MARKET INTERVIEWS

As part of this analysis, recent transactions and trends were discussed with knowledgeable local brokers, agents, and owners.

Of the participants that were interviewed, the majority pointed to a bottoming in pricing in the residential and the commercial markets in the immediate area and was optimistic of new activity and recently completed transactions.

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CONCLUSION

Overall, investors would recognize these general multifamily conditions and the subject’s positioning in the immediate market area as having a positive overall influence when contemplating purchase of the subject.

HIGHEST AND BEST USE

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The highest and best use is the ultimate authority upon which opinions of property value are based. All four criteria must be met sequentially in order to derive a property’s highest and best use:

ANALYSES

The two types of highest and best use analyses are of the site as [though] vacant and of the property as improved. The highest and best use of an undeveloped site assumes that the parcel is vacant or can feasibly be made vacant by demolishing improvements thereon.

The highest and best use of an improved property is determined under the consideration of its existing improvements. It can either remain unchanged as is, or be renovated, added onto, or razed for either a different type or intensity of use. So long as there is positive return on invested capital and the subsequent value created therefrom is over and above that of any alternative use, the improvements should, in theory and at a minimum, not be razed.

This section develops the highest and best use of the subject property As-Vacant.

AS VACANT ANALYSIS

In this section the highest and best use of the subject as vacant is concluded after taking into consideration financial feasibility, maximal productivity, marketability, legal, and physical factors.

Legally Permissible Private restrictions, zoning, building codes, historic district controls, and environmental regulations are considered, if applicable to the subject site. The legal factors influencing the highest and best use of the subject site are primarily government regulations such as zoning ordinances. Permitted uses of the subject’s Downtown Edge Transition Overlay (D.E. -O) include permitted uses within this district include 1-3 story residential and retail uses. projects. Zoning change is not likely; therefore, uses outside of those permitted by the D.E. -O zoning are not considered moving forward in the as-vacant analysis.

Physical Possible The test of what is physically possible for the subject site considers physical and locational characteristics that influence its highest and best use. In terms of physical features, the subject site totals 1.1900-acres (51,835 SF), it is irregular in shape and has a level topography. The subject consists of four separate assessor parcels in a residential neighborhood. The sites are level with street access and utilities available. The site has average exposure and average overall access. There are no physical limitations that would prohibit development of any of the by-right uses on the site.

Financial Feasibility Based on the analysis of the subject’s market and an examination of costs, a newly constructed building similar to the subject would likely have a value commensurate with its cost; however, a speculative build is not prudent and the site should only be developed for an identified user. The subject has no specific approved development plan proposed or approved. A specific unit density, other than indicated by zoning, has not been established nor approved.

Maximum Productivity There is only one use that creates value and at the same time conforms to the requirements of the first three tests. Financial feasibility, maximal productivity, marketability, legal, and physical factors have been considered and the highest and best use of the subject site as-vacant concluded to be multi-family.

HIGHEST AND BEST USE (CONTINUED)

24.WC.16596 002 Palm Desert Vacant Land p. 35

The legal factors influencing the highest and best use of the subject property are primarily governmental regulations such as zoning and building codes. The subject is vacant land with no specific plans for development. The subject sites are level with good access, visibility and the surrounding residential uses indicate the probable compatibility with a residential use would be most suitable. The subject zoning of DEO allows for high density and, from our conversations with city representatives, a multi family use, with potential affordable component, would be greeted favorably. As noted in the market overview, the multifamily market is performing well with vacancy at 5.3% and effective rents for top tier product at $2,534 per month in rent. Single family development is also a possibility under the zoning and from a market perspective. The subject consists of four separate lots that could potentially be developed as individual single family homes (home prices in the immediate area range from $600,000 to over $1,000,000. The current market conditions suggest that a residential use would be most likely, either single family or multifamily. A specific development plan recommendation or conclusion is beyond the scope of this report. A specific feasibility study would be required to determine the precise development plan.

MOST PROBABLE BUYER

Based on the type of property to be developed and the income generating potential of the subject vacant site with development, it is our opinion that the most probable buyer for the subject would be local or regional developer or investor.

APPROACHES TO VALUE

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In traditional valuation theory, the three approaches to estimating the value of an asset are the cost approach, sales comparison approach, and income capitalization approach. Each approach assumes valuation of the property at the property’s highest and best use. From the indications of these analyses, an opinion of value is reached based upon expert judgment within the outline of the appraisal process.

SALES COMPARISON APPROACH

The sales comparison approach estimates value based on what other purchasers and sellers in the market have agreed to as price for comparable properties. This approach is based upon the principle of substitution, which states that the limits of prices, rents, and rates tend to be set by the prevailing prices, rents, and rates of equally desirable substitutes. In conducting the sales comparison approach, we gather data on reasonably substitutable properties and make adjustments for transactional and property characteristics. The resulting adjusted prices lead to an estimate of the price one might expect to realize upon sale of the property.

The sales comparison approach was employed and vacant land sales were analyzed.

INCOME CAPITALIZATION APPROACH

The income capitalization approach (“income approach”) simulates the reasoning of an investor who views the cash flows that would result from the anticipated revenue and expense on a property throughout its lifetime. The net income developed in our analysis is the balance of potential income remaining after vacancy and collection loss, and operating expenses. This net income is then capitalized at an appropriate rate to derive an estimate of value or discounted by an appropriate yield rate over a typical projection period in a discounted cash flow analysis. Thus, two key steps are involved: (1) estimating the net income applicable to the subject and (2) choosing appropriate capitalization rates and discount rates. The appropriate rates are ones that will provide both a return on the investment and a return of the investment over the life of the particular property.

The Income Approach is not a scope requirement for this assignment. The subject property is vacant land. Therefore, the Income Approach is not developed. 0

SITE VALUATION

The site value is a specific scope requirement of this assignment. Considering the subject property's underlying redevelopment potential and noting the subject is vacant land, the inclusion of estimate of vacant land value is deemed appropriate. Therefore, a valuation of the subject site has been provided herein.

COST APPROACH

The cost approach considers the cost to replace the proposed improvements, less accrued depreciation, plus the market value of the land. The cost approach is based on the understanding that market participants relate value to cost. The value of the property is derived by adding the estimated value of the land to the current cost of constructing a reproduction or replacement for the improvements and then subtracting the amount of depreciation in the structure from all causes. Profit for coordination by the entrepreneur is included in the value indication.

The Cost Approach is not a specific scope requirement of this assignment. Characteristics specific to the subject property do not warrant that this valuation technique is developed. Based on the preceding information, the Cost Approach will not be presented.

APPROACHES USED

Based on the agreed upon scope with the client, the subject’s specific characteristics and the interest appraised, this appraisal developed Land Sales Comparison Approach. The values presented represent the As-Is Market Value (Fee Simple Interest) This appraisal does not develop the Cost and Income Approaches, the impact of which is addressed in the reconciliation section.

SITE VALUATION

24.WC.16596 002 Palm Desert Vacant Land p. 37

UNIT OF COMPARISON

The most relevant unit of comparison for competing land is the $/SF. All of the comparable sales presented in this section were reported on this basis.

ADJUSTMENTS

Adjustments to the comparable sales were considered and made when warranted for expenditures after purchase, property rights transferred, conditions of sale, financing terms, and market conditions.

• Property Rights - All of the sales comparables were fee simple sales reflecting the property rights appraised herein per the agreed upon scope of work.

• Financing - The sales all reflected typical cash equivalent, lender-financed transactions and no adjustments were required for financing terms.

• Sale Conditions - None of the comparables required a condition of sale adjustment, as all were confirmed to be arm’s length transactions.

• Expenditures After Sale - Expenses that the buyer incurs after purchase (demolition, cleanup costs, etc.). No adjustments are warranted based on review of the land sales.

• Market Conditions (Time) - Based on the analysis performed, which includes research and interpretation of value trends of the comparable land sales presented herein, a market conditions adjustment of 0% is applied on an annual basis reflecting the relatively consistent appreciation that occurred between the oldest comparable sale date up through the effective valuation date. Over the past five years the local Coachella Valley market has varied in appreciate rates. We did not find compelling evidence to support a market conditions adjustment.

QUANTITATIVE ADJUSTMENT PROCESS

Quantitative percentage adjustments are also made for location and physical characteristics such as size, location quality, access, exposure, as well as other applicable elements of comparison. Where possible the adjustments applied are based on paired data or other statistical analysis.

COMPARABLE SELECTION

A thorough search was made for similar land sales in the area. The parameters of the survey were highest and best use, zoning, proximity to the subject, size, and date of sale. In selecting comparables, emphasis was placed on confirming recent sales of sites that are similar to the subject property in terms of location and physical characteristics. Overall, the sales used represent the best comparables available for this analysis.

SITE VALUATION (CONTINUED)

24.WC.16596 002 Palm Desert Vacant Land p. 38

LAND SALES COMPARISON TABLE

SUBJECT COMP 1 COMP 2 COMP 3 COMP 4 COMP 5 COMP 6

Name Palm Desert Vacant Land

San Jacinto Avenue Land

San Luis Drive Land

Royal Palm Drive Land

San Jose Land San Jose Land Palm Desert Land

Address 44889 San Clemente Cir

44841 San Jacinto Ave

44082 San Luis Dr

73345 Royal Palm Dr

San Jose Avenue

San Jose Avenue 74375 Goleta

City Palm Desert Palm Desert Palm Desert Palm Desert Palm Desert Palm Desert Palm Desert State CA CA CA CA CA CA CA Zip 92260 92260 92260 92260 92260 92260 92260 County Riverside Riverside Riverside Riverside Riverside Riverside Riverside

SALE INFORMATION

Transaction Price $160,000 $235,000 $220,000 $250,000 $225,000 $165,000

Transaction Price $/SF $20 $17 $23 $32 $26 $18 Property Rights ¹ Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Financing ² Cash Cash - Cash Cash Cash Sale Conditions ³ None None None Approvals (15%) None None Expenditures After Sale ⁴ $0 $0 $0 $0 $0 $0 Market Conditions ⁵ 1/1/2023 11/22/2022 10/3/2022 9/1/2022 8/5/2022 11/16/2024 Sale Status Recorded Recorded Recorded Recorded Recorded Recorded Total Transactional Adjustments $0 0% $0 0% $0 0% ($5) (16%) $0 0% $0 0% Adjusted $/SF $20 $17 $23 $27 $26 $18

PHYSICAL INFORMATION

Square Feet 29,619 7,840 (5%) 13,503 (5%) 9,583 (5%) 7,840 (5%) 8,712 (5%) 9,148 (5%) Acres 0.6800 0.1800 0.3100 0.2200 0.1800 0.2000 0.2100 Units 12 to 40 Units 12 to 40 12 to 40 8 to 10 12 to 40 12 to 40 -

FAR 2.0 FAR 2.00 2.00 N/A 2.00 2.00 2.00

Location Average Average Average Average Average Average Average Access Average Average Average Average Average Average Average Exposure Average Average Average Average Average Average Average Total Physical Adjustments ($1) (5%) ($1) (5%) ($1) (5%) ($1) (5%) ($1) (5%) ($1) (5%) Adjusted $/SF $19 $16 $22 $26 $25 $17

24.WC.16596 002 Palm Desert Vacant Land p. 39

COMPARABLE LABEL ADDRESS MILES FROM SUBJECT

COMPARABLE 1 1 44841 San Jacinto Ave, Palm Desert, CA, 92260 0.8 COMPARABLE 2 2 44082 San Luis Dr, Palm Desert, CA, 92260 0.5 COMPARABLE 3 3 73345 Royal Palm Dr, Palm Desert, CA, 92260 0.2 COMPARABLE 4 4 73850 Alessandro Dr, Palm Desert, CA, 92260 0.7 COMPARABLE 5 5 73850 Alessandro Dr, Palm Desert, CA, 92260 0.7 COMPARABLE 6 6 74375 Goleta, Palm Desert, CA, 92260 1.3

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LAND SALE EXHIBITS

LAND SALES ADJUSTMENT ANALYSIS

The adjustment process is described below.

Land Sale 1 ($19/SF Adjusted) –

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This comparable is smaller and was adjusted down for size. We note the subject consists of four separate parcels, that could potentially be sold separately. We have been asked to estimate one value for the four subject parcels and therefore as a group they represent a larger sized entity. In consideration of bulk discounts and the general principle of size economics (smaller sites general achieve a higher indicator) we have adjusted the five sales down for size. A minor downward adjustment is applied to the smaller sales. The six sales are all located within close proximity and have similar locational aspects and are considered very good indicators for location.

Land Sale 2 ($16/SF Adjusted) –

This comparable is smaller and was also adjusted down for size for the reasons noted above.

Land Sale 3 ($22/SF Adjusted) –

This comparable is smaller and was also adjusted down for size for the reasons noted above.

Land Sale 4 ($26/SF Adjusted) –

This comparable is smaller and was also adjusted down for size for the reasons noted above. It was reported that this property seller had incurred costs for pre entitlement and these costs were passed along to the buyer. A downward adjustment was applied.

Land Sale 5 ($25/SF Adjusted) –

This comparable is smaller and was also adjusted down for size for the reasons noted above.

Land Sale 6 ($17/SF…