CTR054972_Contractor_Proposal.pdf

A RETROSPECTIVE APPRAISAL REPORT OF

A 43,734 SQUARE FOOT, FEE SIMPLE ACQUISITION, OF A SITE USED FOR

PARKING FOR A 52,882 SQUARE FOOT RELIGIOUS FACILITY

LOCATED AT

555 WEST GLENDALE AVENUE

PHOENIX, MARICOPA COUNTY, ARIZONA

PREPARED FOR

JENNIFER A. CRANSTON

ATTORNEY AT LAW

GALLAGHER & KENNEDY

2575 EAST CAMELBACK ROAD, SUITE 1100

PHOENIX, ARIZONA 85016

IN THE MATTER OF

CITY OF PHOENIX V. CHURCH OF THE BEATITUDES OF PHOENIX

CV2018-000014

EFFECTIVE DATE OF THE APPRAISAL

JANUARY 3, 2018

PREPARED BY

SELL & ASSOCIATES, INC.

4625 SOUTH LAKESHORE DRIVE

TEMPE, ARIZONA 85282-7127

WWW.SELLASSOC.COM

(480) 345-4500

FILE NUMBER

T18-0059 http://www.sellassoc.com/

4625 SOUTH LAKESHORE DRIVE, TEMPE, ARIZONA 85282-7127

480-345-4400 (main) 480-345-4500 (direct) 480-345-4455 (fax)

770 E. WHITE MOUNTAIN BLVD., SUITE 500, PINETOP, ARIZONA 85935

928-367-8999 (main) 928-367-2883 (fax) www.sellassoc.com (website)

November 6, 2018

Ms. Jennifer A. Cranston Attorney at Law Gallagher & Kennedy 2575 East Camelback Road, Suite 1100 Phoenix, Arizona 85016

Re: A retrospective appraisal report of a 43,734 square foot, fee simple acquisition of a site used for parking for a 52,882 square foot religious facility, situated on a 210,635 square foot site, located at 555 West Glendale Avenue, in Phoenix, Maricopa County, Arizona.

City of Phoenix V. Church of the Beatitudes of Phoenix; CV2018-000014 Sell & Associates, Inc. File Number T18-0059

Dear Ms. Cranston:

At your request, we have completed an appraisal report for the above-referenced real property. The objective of this appraisal report is to provide our opinion of the Recommended Just Compensation for the property rights to be acquired from the subject property.

As a result of our investigation and analysis, and subject to the Extraordinary Assumptions and Hypothetical Conditions stated on Page 2 of this letter, it is our opinion that the Recommended Just Compensation for the property rights to be acquired from the larger parcel, as of the retrospective date, January 3, 2018, was:

ONE MILLION, SIX HUNDRED EIGHTY THOUSAND DOLLARS

($1,680,000)*

*The Recommended Just Compensation value includes the acquisition of the 43,734 square foot site including the improvements of the parking lot, cost-to-cure and additional severance damages to the remainder of the larger parcel.

http://www.sellassoc.com/

Jennifer A. Cranston

This value estimate does not include any tangible or intangible personal property. The subject property has no significant natural, cultural, or scientific value. The market value estimates are based upon an exposure time of up to twelve months.

*Extraordinary Assumptions

1. In forming our opinion of value, we have disregarded any increase or decrease in the estimated market value of the real property to be acquired, prior to the effective date of the appraisal, caused by the project for which the property is to be acquired, or by the likelihood that the property would be acquired for such project, other than due to any physical change within the owner’s reasonable control. In the case of a partial acquisition, using the before and after method of valuation, our opinion of the value of the remaining not-to-be-acquired portion of the property shall reflect any increase or decrease in value attributable to the project.

2. The effective date of the appraisal is January 3, 2018 (retrospective). This appraisal report is based on the Extraordinary Assumption that the physical characteristics and condition of the property was similar, as of the effective date of the appraisal and the date of inspection.

3. That the information provided by the client regarding the subject’s parking before and after the acquisition is accurate.

4. That the description of the property improvements are not materially different than described.

*Hypothetical Conditions

1. The “After” analysis is based upon the Hypothetical Condition that the acquisition and the completion of the project has occurred as of the effective date of the appraisal.

2. The “Before” and “After” the acquisition analysis is based upon the Hypothetical Condition that the parking area on the southwest portion of the Church Site had not been constructed, which was installed by the property owners in anticipation of the acquisition and was needed to accommodate the loss in parking from the acquisition.

The use of the Extraordinary Assumptions and the Hypothetical Conditions might have affected the results of this assignment.

The intended user(s) of this report are Gallagher & Kennedy, Church of the Beatitudes of Phoenix, and other parties associated with the acquisition/condemnation process.

The intended use of this report is to assist with the acquisition/condemnation process for use in the acquisition negotiations and possible condemnation of the property by the City of Phoenix. This report may not be used for any other reason, nor is it intended for use by any other entity than the intended users.

Accordingly, we assume that any undisclosed restrictions that may exist are typical for such properties and, do not conflict with either the current or highest and best use of the subject property.

Within the scope of this report, the cost, sales comparison and income approaches to value were considered. The data collected by us and used in the valuation is referenced in the report. The sources of the data and confirmation are also referenced. The degree of reliance, as well as the significance of the data and each approach, is also presented.

Any departure from this practice is addressed herein.

We are not qualified to determine the presence of hazardous substances as they affect the site. This would include, but not be limited to, toxic chemicals, asbestos, radon gas, methane, etc. Unless otherwise stated, the site is assumed to be unaffected by these substances.

The degree of reliance, as well as the significance of the data and each approach, is also presented. Any departure from this practice is addressed herein. The value opinions are based on the attached report and all of the assumptions and limiting conditions contained therein, including the understanding that we have no control of the use to which the report may be put by a subsequent reader of this report.

We do hereby certify, to the best of our knowledge and behalf, that:

1. The statements of fact contained in this appraisal report are true and correct, and the information upon which the opinions expressed herein are based are correct, subject to the limiting conditions stated herein.

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

3. We have no direct or indirect present or prospective interest in the property that is the subject of this report or in any benefit from the acquisition of such property appraised, and no personal interest or bias with respect to the parties involved.

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

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

6. Our compensation for completing this assignment was 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 report.

7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice 2018-2019 (USPAP),

8. This report has been made in conformity with the appropriate laws, regulations, and policies and procedures applicable to the appraisal of property for such uses, and no portion of the value assigned to such property consists of items which are non-compensable under established law.

9. That any increase or decrease in the market value of the real property before the effective date of the appraisal caused by the project, other than that due to physical deterioration within the reasonable control of the owner, was disregarded in this report.

10. Jan A. Sell and James W. Hogan made an onsite inspection of the subject property on various dates, including May 24, 2018 and subsequent dates in 2018.

Furthermore, we have inspected the comparable sales utilized within this report.

11. That we did have a representative of the property owner to accompany us during our inspection of the property.

12. No one provided significant real property appraisal or consulting assistance to us in the preparation of this report.

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

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

15. As of the date of this report, Jan A. Sell has completed the continuing education program for Designated Members of the Appraisal Institute.

16. To the best of our knowledge and belief, we have performed no services, as appraisers, or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding the acceptance of this assignment.

17. Our opinion of the value of the partial acquisition and its effects on the remainder, as of the effective date of the appraisal, January 3, 2018 (retrospective), was $1,680,000. Our opinion of the market value was subject to a certain Extraordinary Assumptions and Hypothetical Conditions as set forth on Page 2 of the letter.

The opportunity to assist you has been appreciated.

Jan A. Sell, MAI, SR/WA, AI-GRS, SRA, CCIM Certified General Real Estate Appraiser Certificate No. 30120, State of Arizona Expires August 31, 2020

James W. Hogan Certified General Real Estate Appraiser Certificate No. 31678, State of Arizona Expires October 31, 2020

TABLE OF CONTENTS

SUMMARY OF REPORT

UNDERLYING ASSUMPTIONS AND CONTINGENT CONDITIONS

SCOPE OF THE REPORT

INTRODUCTION

PHOENIX METROPOLITAN AREA ANALYSIS

MARKET AREA ANALYSIS

SITE DESCRIPTION

IMPROVEMENT DESCRIPTION

TAX AND ASSESSMENT DATA AND ANALYSIS

HIGHEST AND BEST USE ANALYSIS

VALUATION PROCESS

COST APPROACH

SALES COMPARISON APPROACH

RECONCILIATION AND FINAL OPINION OF VALUE

PARTIAL ACQUISITION

ACQUISITION VALUATION

VALUE OF THE REMAINDER AFTER THE ACQUISITION

VALUE OF THE REMAINDER AFTER THE COST TO CURE

ADDENDA

SUBJECT PHOTOGRAPHS

APPRAISERS’ QUALIFICATIONS

© Sell & Associates, Inc. File No. T18-0059 Page 1

SUMMARY OF REPORT

Type of Property: A 43,734 square foot, fee simple acquisition, of a non-contiguous site used for parking for a 52,882 square foot religious facility situated on a 210,635 square foot site.

Location: 555 West Glendale Avenue, Phoenix, Maricopa

County, Arizona 85021

Assessor's Parcel Numbers:

Church Site: 161-29-068, 035, 036 and 037 Parking Lot Site: 157-10-032H

Site Area:

Church Site: 210,635 Square feet (4.84 acres) Parking Lot Site: 43,734 Square feet (1.00 acre) Larger Parcel (Before): 254,369 Square feet (5.84 acres)

Proposed Acquisition: 43,734 Square feet (1.00 acres)

Remainder Larger Parcel (After): 210,635 Square feet (4.84 acres)

Proposed Acquisition: The acquisition being acquired from the larger parcel consists of 43,734 square foot (1.00 acre) non-contiguous site, which is used as a parking lot for a religious facility and is located at the northwest corner of 7th Avenue and Glendale Avenue.

Building Area:

Sanctuary Building: 9,984 Square feet Office/Fellowship Hall Building: 17,962 Square feet Chapel/Education Building: 7,413 Square feet Youth Center Building: 4,550 Square feet Two-Story Classroom Building: 12,973 Square feet Total: 52,882 Square feet

Current Use: Religious facility

Current Occupancy: 100%

© Sell & Associates, Inc. File No. T18-0059 Page 2

Land-to-Building Ratio:

Before Acquisition: 4.81:1 (254,369 square feet of land and 52,882 square feet of building area)

After Acquisition: 3.98:1 (210,635 square feet of land and 52,882 square feet of building area)

Site Coverage:

Before Acquisition: 20.4% (52,882 square feet of building area and

254,369 square feet of site area)

After Acquisition: 25.1% (52,882 square feet of building area and

210,635 square feet of site area)

Parking Ratio:

Before Acquisition: 4.63 per 1,000 square feet of building area

After Acquisition: 2.29 per 1,000 square feet of building area

Legal Description: Lengthy, see Addenda

Zoning Classification:

Church Site: R1-10 (Single-Family Residence District), City of

Phoenix

Parking Lot Site: R-3 (Multi-Family Residence District), City of Phoenix

Flood Zone: Flood Zone "X" per FEMA FIRM 04013C1740LF, October 16, 2013

Owner: Church of the Beatitudes of Phoenix

Client: Gallagher & Kennedy

Intended User(s): Gallagher & Kennedy, Church of the Beatitudes of

Phoenix, and other parties associated with the acquisition and condemnation process.

Intended Use: For use in the acquisition negotiations and possible condemnation of the property by the City of Phoenix, in the City of Phoenix V. Church of the Beatitudes of Phoenix; CV2018-000014.

© Sell & Associates, Inc. File No. T18-0059 Page 3

Report Objective: To provide an opinion of the Recommended Just

Compensation of the property rights to be acquired.

Property Rights Appraised: Fee simple interest Highest and Best Use:

As If Vacant

Before Acquisition: Development of a residential use

After Acquisition: Development of a residential use

As Improved

Before Acquisition: Continued use as a religious facility

After Acquisition: Continued use as a religious facility

Final Conclusions:

Opinion of Recommended Just Compensation for the Property Rights to be Acquired: $1,680,000

Date of Inspections: May 24, 2018 including prior and subsequent dates in

Effective Date of the Appraisal: January 3, 2018 (retrospective)

Date of the Report: November 6, 2018

© Sell & Associates, Inc. File No. T18-0059 Page 4

UNDERLYING ASSUMPTIONS AND CONTINGENT CONDITIONS

1. The legal description for the subject property obtained from public records is assumed to be accurate and the subject property is correctly identified as indicated in this report.

2. We were not provided with a preliminary title report; however, a site survey for the church site was provided by the property owner.

3. Title to the property is marketable, free, and clear of all liens.

4. The fee simple estate in the property contains the sum of all fractional interests that may exist.

5. The property is appraised as if owned in fee simple title without encumbrances, unless otherwise mentioned in this report.

6. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined and considered in this report.

7. Responsible ownership and competent management exist for the property, unless otherwise stated.

8. We are not responsible for the accuracy of the opinions furnished by others and contained in this report, nor are we responsible for the reliability of government data used in the report.

9. Compensation for services is dependent only upon the production of this report and is not contingent upon the values estimated.

10. This report considers nothing of a legal character, is not considered to be a legal document and the appraisers assume no responsibility for matters of a legal nature.

11. Testimony or attendance in court may be required by reason of this report.

12. Problems with subsoil conditions are not our responsibility.

13. Information furnished by the client and property owner are correct as received.

14. Neither this report, nor any of its contents, may be used for the sale of shares or similar units of ownership in the nature of securities. No part of this report may be reproduced without our permission.

© Sell & Associates, Inc. File No. T18-0059 Page 5

15. Neither all nor any part of the contents of this report (especially any conclusions as to value, our identity, or the firm with which we are associated), shall be disseminated to the public through advertising, public relations, news sales, or other media.

16. Possession of this report or a copy thereof does not carry with it the right of publication. It may not be used for any use or by any person other than the client and intended users without our written consent.

17. This report is the confidential and private property of the client and the appraisers.

Any person other than the appraisers, the client, and intended users, who obtains and/or uses this report or its contents for any use not so authorized by us or the client is hereby forewarned that all legal means to obtain redress may be employed against them.

18. Utility services are available, as detailed in this report, for the subject property and they will continue to be so in the foreseeable future, unless otherwise noted in this report.

19. Subsurface rights (mineral, oil, etc.) and their potential impact upon value were considered in this report, however, there was no value specifically associated with such and were considered within the whole.

20. The subject property is not, nor will it be, in violation of the National Environmental

Policy Act, the State Environmental or Clean Air Act, or any and all similar government regulations or laws pertaining to the environment.

21. This report assumes that the subject, has no historical or archaeological significance. The value estimates are predicated on the assumption that no such condition exists. Should the client have a concern over the subject’s status, he or she is urged to retain the services of a qualified independent specialist to determine the extent of either significance, if any, and the cost to study the condition or the benefit or detriment such a condition brings to the property. The cost of the inspection and study must be borne by the client or owner of the property. Should the development of the property be restricted or enhanced in any way, the appraisers reserve the right to modify the opinion of value if so indicated by the market.

22. Unless otherwise stated in this report, we did not observe the existence of hazardous materials, which may or may not be present on or below the property.

The appraisers have no knowledge of the existence of such materials on or in the property. The appraisers, however, are not qualified to detect such substances as asbestos, PCB transformers, toxic, hazardous, or contaminated substances and/or underground storage tanks (containing hazardous materials). The value estimates are predicated on the assumption that there are no such materials on, or in, the property that would cause a loss in value. No responsibility is assumed for such

© Sell & Associates, Inc. File No. T18-0059 Page 6 conditions, or for any expertise or engineering knowledge required to discover them.

23. That the value opinions expressed herein are as if unaffected by any such cause and/or substance. Should the client have concern over the existence of such substances, he or she is urged to retain the services of a qualified independent environmental specialist to determine the extent of contamination, if any, and the cost of treatment or removal. The cost of detection, treatment or removal and permanent storage must be borne by the client or owner of the property.

© Sell & Associates, Inc. File No. T18-0059 Page 7

SCOPE OF THE REPORT

This is an Appraisal Report, which is intended to comply with the reporting requirements set forth under the Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice (USPAP) and the Appraisal Institute’s Code of Professional Ethics and Standards of Valuation Practice. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraisers’ file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated herein. The appraisers are not responsible for unauthorized use of the report.

The City of Phoenix plans to expand the existing fire station located on the adjacent parcel to the west of the subject’s parking lot. Because of such, the subject’s parking lot (a non-contiguous portion of the subject’s larger parcel) is being acquired for expansion of the fire station. The appraisal problem to be solved is to provide the client with our opinion of the Recommended Just Compensation for the property rights being acquired from the larger parcel by the City of Phoenix for the Phoenix Fire Department. The term subject property is meant to refer to the larger parcel and the remainder parcel, whenever applicable.

The larger parcel consists of two non-contiguous parcels totaling 254,369 square feet (5.84 acres) of land improved with five buildings totaling 52,882 square feet and utilized as a religious facility. As discussed, the larger parcel reflects two non-contiguous parcels consisting of a 210,635 square foot (4.84 acres) parcel of residential zoned land located at the southeast corner of 7th Avenue and Glendale Avenue and a 43,734 square foot (1.00 acre) of multi-family zoned land located at the northwest corner of 7th Avenue and Glendale Avenue. The property is located at 555 Glendale Avenue in Phoenix, Maricopa County, Arizona. The partial acquisition being acquired from the larger parcel consists of a 43,734 square foot (1.00 acre), fee simple acquisition of the non-contiguous site used as a parking lot and located at the northwest corner of 7th Avenue and Glendale Avenue. This parking is vital to the use of the property as a religious facility and constitutes the larger economic property.

This report has been prepared for our client, Gallagher & Kennedy, Church of the Beatitudes of Phoenix, and other parties associated with the acquisition/condemnation process. The intended use is for use in the acquisition negotiations and possible condemnation of a portion of the larger parcel by the City of Phoenix. The scope of this report was developed to solve the appraisal problem and for that intended use. As part of this process, we have made several independent investigations and analyses concerning both the subject property and its market area. We have relied on several different data sources in each section, and documented or referenced those sources as completely as possible. Furthermore, the contents, analysis and conclusions may not be fully understood by individuals not familiar with the valuation of interests associated with a partial acquisition process. Following is an outline of the steps taken to accomplish this task. Additional details regarding each step is contained within the report.

The scope of this analysis included the following:

© Sell & Associates, Inc. File No. T18-0059 Page 8

Identification of the larger parcel;

An on-site interior and exterior inspection of the subject property on May 24, 2018 and subsequent dates in 2018;

Examination of the subject’s ownership;

Analyzed the subject's general market area characteristics;

Site and Improvement Description;

Research and analysis of the supply and demand for the market area;

Determined highest and best use for the subject property;

Utilization of appropriate approaches to value;

Researched comparable property;

Reconciled all the data and arrived at a final opinion of the market value of the larger subject property, and;

Valued the property rights to be acquired for the proposed acquisition.

Numerous independent data sources were relied upon in each section of the report and we have referenced these sources in the report. Market data was provided by various publications as well as by agents, brokers, and investors.

Data provided by the client included but was not limited to miscellaneous property data, letters of intent and a previous appraisal report of the northwest corner parcel (parking lot) prepared by Gerald N. Zaddack, MAI, CRE of Strategic Valuation Group, dated September 29, 2017. We assume this information is correct and accurate as confirmed by our on-site inspection.

Area Analysis (Phoenix Metropolitan): The analysis of the subject’s market area is included to demonstrate the impact of prevailing market conditions and competition on the subject’s value and marketability. This section is based on an inspection of the area along with various published information sources. Sources that were used are specifically noted within each of these sections, and may include the following:

Arizona Department of Economic Security;

The Bureau of Census;

Site to Do Business;

Arizona Economic Indicators published by the University of Arizona;

The inspection of the market area;

Maricopa County records, and;

Arizona State University.

Market Area Analysis: Within this section, the market forces were evaluated, especially supply and demand. An understanding of market behavior is essential to the concept of highest and best use. Market forces create market value; therefore, the interaction between market forces and highest and best use is of crucial importance.

Information relied upon was obtained from various market reports.

© Sell & Associates, Inc. File No. T18-0059 Page 9

Site Description and Improvement Analysis: This section describes the subject’s site characteristics and existing improvements as they relate to the subject’s value and are based on public records, location maps, aerial photographs and a copy of the legal description obtained by public records and the property owner. The subject is in the City of Phoenix in Maricopa County, Arizona.

Where information is required, certain sources were relied upon including:

City of Phoenix Planning Department, general plan, zoning map and applicable zoning ordinances;

HUD Special Flood Agency Maps from the Federal Emergency Management Agency;

Maricopa County Assessor’s and Treasurer’s Offices;

Legal description and various data obtained from public records, and;

Site areas including descriptions of all physical attributes were obtained from our inspection, and from public records.

Highest and Best Use: Within this section, we have evaluated the subject as vacant land and as improved and have examined those uses that would be: physically possible, legally permissible, financially feasible, and maximally productive. Among these potential uses, we have selected the highest and best use.

Valuation Analysis: Within the scope of this report, three approaches to value were considered; however, only the cost and sales comparison approaches are utilized. The site was improved with five buildings totaling 52,882square feet and other miscellaneous improvements, for use as a religious facility. Based upon our analysis of the acquisition, the buildings are not located within the acquisition area but are adversely affected by the acquisition. Because of this, the report addresses the valuation of the land and improvements, both Before and After the proposed acquisition.

The analysis encompasses historical demand levels and current supply, as well as future potential demand and supply additions. The data collected and used in the valuation section is referenced in the report and the sources of the data and confirmation are also referenced. The degree of reliance, as well as the significance of the data and each approach, is also presented. Information has been gathered from the following sources:

CoStar, Loopnet, Real Quest;

Multiple Listing Service (ARMLS);

Local business and real estate related newspapers and magazines;

Direct contact with listing/sales brokers, appraisers and owners;

Sell & Associates, Inc. files, and;

Maricopa County public records.

The Cost Approach is based on estimating the cost of developing a property equivalent to the subject. It is considered reliable for new construction but is relatively unreliable

© Sell & Associates, Inc. File No. T18-0059 Page 10 when there is significant accrued depreciation. Given the special use of this property, a cost approach is utilized and is considered relatively reliable.

Within the Sales Comparison Approach, data on recent sales of properties considered comparable to the subject were obtained. We have analyzed these sales based on appropriate value indicators to provide an opinion of the subject’s market value.

The Income Approach, is based on the market rents of similar properties by estimating the subject’s potential gross income based on current rental rates of comparable properties. The subject property is a special-use property and there was a lack of comparable rental data and the majority of properties with similar attributes to the subject are owner-occupied; therefore, the income approach was not utilized.

After the presentation of the approaches used in the report, the indicated market value by each approach to value is presented and discussed in the section entitled Reconciliation and Final Value Opinion. In this section, the relative merits of each approach are considered, and a final opinion of value is reached.

Acquisition Valuation: The value of the proposed acquisition is concluded for the larger parcel, including a Before and After analysis of the Remainder. For the partial acquisition analysis, we relied on acquisition data provided by the client. The “State Rule” was utilized for providing our opinion of Market Value or Recommended Just Compensation for the property rights to be acquired.

Partial Acquisition Valuation Analysis

The steps to value the proposed acquisition is as follows:

1. Determine the Larger Parcel.

2. Describe the Project.

3. Determine the subject’s highest and best use.

4. Estimate the value of the whole parcel before the partial acquisition.

5. Estimate the value of the partial acquisition as part of the larger, whole parcel.

6. Estimate the value of the remainder as a part of the whole (before the estimation of severance damages and special benefits) by subtracting the value of the partial acquisition from the value of the whole parcel.

7. Describe the effect of the project on the property’s highest and best use.

8. Estimate the value of the remainder, before special benefits. The result is preliminary severance damages. Preliminary severance damages is before consideration of the offset of special benefits and cost to cure.

9. Estimate the value of the remainder, after special benefits. The result is special benefits which will offset all or part of preliminary severance damages.

10. Consider and estimate cost-to-cure to offset some or all of preliminary severance damages. Cost-to-cure can be equal to or less than preliminary severance damages lessened by special benefits.

© Sell & Associates, Inc. File No. T18-0059 Page 11

11. Deduct special benefits and cost-to-cure from preliminary severance damages to arrive at permanent severance damages.

12. Estimate value of minor improvements (if any).

13. Estimate minor cost-to-cure (if any).

14. The sum indicates the value of the partial acquisition and its effects on the remainder:

Value of the land and improvements within the partial acquisition

Cost-to-cure

Permanent severance damages

Presented at the end of the report is a table that presents the results of this process, resulting in an opinion of the Recommended Just Compensation.

© Sell & Associates, Inc. File No. T18-0059 Page 12

INTRODUCTION

Property Identification

Property Type

The larger parcel reflects two non-contiguous parcels totaling 254,369 square feet (5.84 acres) of residential zoned land improved with five buildings totaling 52,882 square feet and utilized as a religious facility.

The partial acquisition being acquired from the larger parcel consists of the 43,734 square foot (parking lot) site, located at the northwest corner of Glendale Avenue and 7th Avenue.

Location

The property is located at the southeast and northwest corners of Glendale Avenue and 7th Avenue in Phoenix, Maricopa County, Arizona.

Municipal Address

555 West Glendale Avenue, Phoenix, Maricopa County, Arizona 85021

Assessor’s Parcel Numbers

161-29-035, 036, 037 and 068, and 157-10-032H

Legal Description

Parcels 161-29-035, 036, 037 and 068 (Church Site):

A parcel of land located in the Northwest quarter of Section 8, Township 2 North, Range 3 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona more particularly described as follows:

Lot 1 of “Church of the Beatitudes”, a subdivision recorded in Book 306, Page 39, MCR together with Lots 1, 2 and 3 of “Palms Manor”, a subdivision recorded in Book 49, Page 14 MCR.

Parcel 157-10-032H (Parking Lot Site):

Tract “A” Glenwood Estates, according to the plat of record in the office of the Maricopa County Recorder in Book 53 of Maps, page 2, Except the West 100 feet of the South 140 feet, thereof.

© Sell & Associates, Inc. File No. T18-0059 Page 13

Definition of Fee Simple Estate

Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.1

Definition of Retrospective Value Opinion

A value opinion effective as of a specified historical date. The term retrospective does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., “retrospective market value opinion”.

Definition of Market Value

Pursuant to Arizona Revised Statute 28-7091, formerly 28 -1865, market value is defined as:

“The most probable price estimated in terms of cash in United States dollars or comparable market financial arrangements which the property would bring if exposed for sale in the open market, with reasonable time allowed in which to find a purchaser, buying with knowledge of all the uses and purposes to which it was adapted and for which it was capable”.3

Owner and Ownership History

According to the records of Maricopa County, the subject property is currently owned by Church of the Beatitudes, which has owned the property for a number of years prior to the effective date of the appraisal.

No other sales of the subject property were identified in public records in the five years prior to the date of the report.

According to the client, the subject’s 43,734 square foot site located at the northwest corner of 7th Avenue and Glendale Avenue was previously listed for sale or for ground lease with Phoenix Commercial Advisors. The property was marketed in September 2016 to May 2017 with a listing price of $35.00 per square foot of site area. The seller terminated the listing in anticipation of the proposed condemnation of the site by the City of Phoenix.

Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015), page 90 2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015), page 201 3 Arizona Revised Statute §28-7091.

© Sell & Associates, Inc. File No. T18-0059 Page 14

The property owner had received three letters of intent all contingent upon approval of a zoning change for a commercial use. The following table summarizes the three letters of intent.

LETTERS OF INTENT

Date Offeror Price Comments

October 2016 Eisenberg Company $33.00 Contingent upon C-2 zoning approval

October 2016 Klusman Family Holdings $35.00 Contingent upon commercial zoning approval

April 2017 Retail Investment Group $35.00 Contingent upon commercial zoning approval

To the best of our knowledge and belief, the subject property is not currently under contract or listed for sale.

Exposure Time

Exposure Time is defined as the estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale market value on the effective date of the appraisal.

Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market.4

Most of the comparable sales used in the Sales Comparison Approach had the exposure times of less than twelve months. Based on the exposure times of these comparables and others retained in our files, it is our opinion that an appropriate exposure time for the subject property is up to twelve months. This exposure time assumes that the subject property is marketed slightly above the value estimated in this report.

The Appraisal Foundation. (2016), USPAP 2016-2017 Edition, Appraisal Standards Board

© Sell & Associates, Inc. File No. T18-0059 Page 15

PHOENIX METROPOLITAN AREA MAP

SUBJECT

© Sell & Associates, Inc. File No. T18-0059 Page 16

PHOENIX METROPOLITAN AREA ANALYSIS

Physical Characteristics

General Description

The Phoenix area is located in the south-central portion of the State of Arizona and is called the “Valley of the Sun” by area residents because it is situated in a broad valley just below the point where the Salt River winds into the desert from the mountains to the north and east. In the Greater Phoenix Area, six major cities (Phoenix, Mesa, Tempe, Scottsdale, Glendale, and Chandler) contain more than 80% of the area’s total population. Other outlying suburbs, including Gilbert, Peoria, Goodyear and Buckeye, are growing rapidly and are also becoming major centers of population. The rural areas of Maricopa and Pinal Counties are sparsely populated and contain less than one percent of the area’s total population.

Land Use Patterns

Current land use in the Phoenix area is tied to historic development patterns which are best described by dividing the overall area into four quadrants: Northeast, Southeast, Southwest and Northwest.

The Northeast Area is the most affluent portion of the metropolitan area and includes Northeast Phoenix (and the Biltmore area), Paradise Valley, Scottsdale and Cave Creek/Carefree. This area is predominantly characterized by residential growth, elegant shopping centers and light industrial development, which are concentrated around the Scottsdale Airpark. It also contains the majority of the area’s resort hotels, with the City of Scottsdale distinguished as a nationally ranked resort destination.

The Southeast Area includes the suburban Cities of Mesa, Tempe, Gilbert, Queen Creek and Chandler. This area is characterized by residential growth, including numerous, large, master-planned residential developments, and commercial and industrial developments along the various freeways. The Southeast area’s economic base has developed a separate identity which includes various major industrial employers and allows it to compete aggressively with the major industrial and commercial office districts of Phoenix.

The Northwest Area was historically a topographically flat area of farming and moderate-quality housing; however, the outlying northwest suburbs have experienced a substantial amount of new growth, including numerous master-planned residential districts with golf courses, lake amenities, up-scale retail development and luxury homes in the outlying areas. The Northwest Area includes northwest Phoenix, Peoria, Glendale, Surprise and Sun City.

The Southwest Area is a relatively flat, industrial and agricultural district which is gradually being developed with a variety of residential, commercial and industrial uses.

The outlying suburbs include Avondale, Goodyear, Buckeye and Litchfield. Most of the

© Sell & Associates, Inc. File No. T18-0059 Page 17 new development extends along the I-10 Freeway, where there are various master-planned developments with attractive housing and upscale retail uses.

The transportation system, along with other geographical and economic factors, helps to determine the shape of a metropolitan area. A mile-square grid pattern of major streets, perhaps more than any other factor, has contributed to the low-density, omni-directional pattern of growth in the Phoenix area. On surface streets, private automobiles comprise approximately 95 percent of the traffic volume.

Historically, developed freeways in the Phoenix area have been mostly extensions of the Interstate highways connecting the Phoenix area to other distant areas. Interstate 10 enters Phoenix from the west, passes through central Phoenix and then generally goes southeasterly to the Tucson area and beyond. Interstate 17 enters the Phoenix area from the north, extending south through north central Phoenix, where it turns east and connects with Interstate 10. US 60 enters the Phoenix area from the east, passing through Apache Junction, Mesa and Tempe, where it connects with Interstate 10.

The other freeways throughout the Phoenix area provide linkages from local neighborhoods to these primary freeways. The Loop 101 Freeway encircles most of Metro-Phoenix forming an irregular ¾ circle. The Loop 202 Freeway encircles most of the southeast suburbs. The layout of area transportation has had a significant impact on land use patterns throughout the Phoenix area. Commercial land uses are located mostly along section-line arterials, especially at arterial intersections, and residential uses are located more often along feeder streets. Extensive industrial uses and large office projects have been developed along the freeways, especially Interstates 10 and 17.

Area Resources

The greater Phoenix area provides a variety of economic resources including a young and skilled labor force, an abundant supply of water and energy, adequate educational and technical schools, a relatively low cost of living due to low housing costs, a variety of year-round recreational/entertainment activities and an abundance of vacant land.

Demographic Characteristics

The following are historic and projected demographic and income characteristics of the Phoenix-Mesa-Glendale metropolitan statistical area (Maricopa and Pinal Counties) from 2010 through 2022:

© Sell & Associates, Inc. File No. T18-0059 Page 18

© Sell & Associates, Inc. File No. T18-0059 Page 19

© Sell & Associates, Inc. File No. T18-0059 Page 20

Economic Characteristics

Both the US and the Phoenix area entered a recession in early 2008. Although there has been economic growth over the last few years, the growth has been significantly slower than in prior recoveries. According to Elliott Pollack of Elliott D. Pollack & Co., “The Greater Phoenix Blue Chip real estate panel continues to believe that the forecast for both 2017 and 2018 will remain in the same general range that they have been forecasting for the last several quarters. This suggests that real estate markets in the Greater Phoenix area are displaying a high degree of stability and that no new major factors, either positive or negative, are affecting the market. For example, the forecast for single family permits for 2017 and 2018 is now 21,400 and 24,100 respectively. Last quarter, it was 21,900 and 24,700. The range of forecasts is narrow. For 2017, the range is 19,000 on the low side and 23,200 on the high side with all but two panelists in the 21,000 – 23,200 range. For 2018, the range is wide – 19,500 to 28,000. As for apartments, about 7,200 multi-family permits are expected this year and 6,800 next.

This compares to 6,600 and 6,500 permits forecasted last quarter. Absorption is expected to be 6,100 units and 5,700 units respectively. Vacancy rates are expected to rise to 5.9% at year - end 2017 and to 6.2% at year - end 2018. This is still a relatively modest level of vacancy by historic standards.

The results expected for the office market are also about the same as the last several forecasts. For 2017, about 1.5 million square feet of spec construction is expected and for 2018, about 2 million square feet are expected. This is about the same as the first quarter results of 1.7 and 2.1 million square feet respectively. As for absorption, 3.0 million square feet is expected this year and 2.9 million next. This is about the same as in the first quarter. Year - end vacancy rates should be about 15.8% and 15.4%, respectively. This means that 2019 will likely be the year when vacancy rates move below 15%. The retail market is expected to see very little new spec construction in 2017 and 2018 with less than 1.0 million square feet expected each year. Absorption is expected to be higher than new spec construction. Thus, vacancy rates should modestly decline.

The industrial market is expected to remain strong with about 4.6 million square feet of new spec construction in 2017 and 4.8 million in 2018. Absorption is anticipated to remain strong as well.

Overall, the outlook is for a continued strong (in post - 2007 terms) single-family market, a continued strong apartment market and for continued improvement in commercial markets.”

Employment and Unemployment

The following table shows employment growth for the Phoenix-Mesa-Scottsdale MSA between 1990 and March 2018. The table indicates that employment declined from 2008 to 2010. Since 2010 employment growth has resumed, and is higher than the peak in 2008.

© Sell & Associates, Inc. File No. T18-0059 Page 21

The following table shows unemployment in the Phoenix-Mesa-Scottsdale MSA between 1992 and February 2018. The table indicates that unemployment has declined from the peak of over 10% in 2010 to the current level of 4.3%.

To analyze the current economic outlook, we have considered a five-year forecast of various economic factors, including personal income, retail sales, nonfarm employment, population and residential permits. The outlook for each of these factors is summarized in the following table:

© Sell & Associates, Inc. File No. T18-0059 Page 22

Source: Economic and Business Research Center, Eller College of Management

These projections indicate that personal income, retail sales, employment, population and residential permits will all increase between 2016 and 2021.

According to information obtained from the University of Arizona Eller College of Management Economic and Business Research Center, historic retail sales trends for the State of Arizona are summarized as follows:

© Sell & Associates, Inc. File No. T18-0059 Page 23

This graph indicates that aggregate retail sales have increased since 1994 with a pause in the recession of 2001 and a sharp decline in 2008 during the great recession. Since 2009, aggregate retail sales have increased.

Real Estate Market Conditions

Land Market Conditions

The below chart indicates that median sale prices for the three major categories of land (residential, commercial and industrial) have generally increased over the last three years with the exception of residential.

© Sell & Associates, Inc. File No. T18-0059 Page 24

According to the Phoenix Arizona Research & Forecast Report by Colliers International for land “The Greater Phoenix housing market continues to improve at a steady pace. In 2017, home prices rose by approximately 5 percent. The median price for new homes increased 4.5 percent in 2017 to approximately $314,000.

Permitting for single-family homes rose for the third consecutive year in 2017, ticking above 20,000 units. Multi-family permit issuance totaled more than 8,500 units in 2017, including an increase during the second half of the year.

Land sales accelerated in 2017, spiking by more than 30 percent from 2016 levels.

Generally, fewer land parcels traded in the second half of the year than during the first half. Sales of land for industrial development surged in the second half. The median price for land parcels increased by 8 percent from 2016 to 2017, reaching $4.21 per square foot”.

In support of these conditions for the land market, according to the Phoenix Arizona Research & Forecast Report by Colliers International for land, “the housing market in Greater Phoenix is strengthening, providing the fuel for land sales. The number of land sales has increased in each of the past few years and another uptick is likely in 2018.

The rise in transaction velocity has mirrored housing permitting trends.

Single-family housing permits have increased by approximately 10 percent per year since 2016, and a similar increase is forecast for the year ahead. The commercial real estate market is also improving, which will support land sales for commercial and industrial uses. Land sales for commercial and industrial construction each accelerated by more than 30 percent in 2017, and additional increases could be in line if the economy continues to expand and commercial vacancies tighten further.

“Sales of land parcels accelerated significantly in 2017. Total sales velocity for the year was up 33 percent from the 2016 total. Transaction activity in the second half of 2017 was up 17 percent from the first half of the year and outpaced levels from the second half of 2016 by 26 percent.

Sales prices in land transactions ticked higher in the second half of the year. The median price in the second half of 2017 was $4.21 per square foot, up 3 percent from the median price in the first half. In 2017, the median price for the full year was $4.16 per square foot, 8 percent higher than the median price in 2016.

Sales of land parcels for residential uses accounted for more than 60 percent of the total land transactions in Greater Phoenix in 2017, similar to levels in previous years.

Annual sales of land for residential uses rose by 33 percent from 2016 to 2017. Activity in land for residential uses was up 25 percent in the second half of 2017 compared to the first half of the year.

Prices of land for residential development were mixed in 2017. For the full year, the median price was $3.42 per square foot, 6 percent lower than the median price in 2016. Prices rose in the second half of the year; the median price during the second half of 2017 was $3.90 per square foot, up 25 percent from the median price in the first half.

© Sell & Associates, Inc. File No. T18-0059 Page 25

Sales of land for commercial uses slowed during the second half of the year but posted strong annual gains.