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2018 CON Frank and Deborah Safley- 302 West 19th Street
PURCHASE AND SALE AGREEMENT (302 West 19th Street) THIS PURCHASE AND SALE AGREEMENT (302 West 19th Street) ("Agreement") dated as of the 5th day of February, 2018, by and between Frank Safley and Deborah Safley, husband and wife (collectively, the "Seller"), and the City of National City ("Purchaser"). RECITALS A. The Seller owns the fee interest in that certain real property generally located at 19th Street and Harding Avenue, with an address of 302 West 19th Street in the City of National City, County of San Diego, California, which is legally described on Exhibit A attached hereto and made a part hereof ("Property"). Seller and Purchaser desire for Seller to sell the Property to Purchaser at fair market value, and for Purchaser to purchase the Property from Seller. B. The Seller agrees to sell the Property to Purchaser for an amount equal to its current fair market value of Nine Hundred Five Thousand and No/100 Dollars ($905,000.00), which amount shall be payable by Purchaser to Seller in cash at Closing. C. Seller's sale of the Property to Purchaser and Purchaser's purchase of the Property are in the vital and best interest of the City of National City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements. AGREEMENT FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are acknowledged, Purchaser and Seller hereby agree as follows: 1. Effectiveness of Agreement and Purchase and Sale. (a) Effectiveness of Agreement. This Agreement shall be effective and binding upon all parties hereto concurrently with the last to occur of the following: (i) this Agreement has been duly executed by Purchaser and delivered by Purchaser to Seller; (ii) this Agreement has been formally approved by resolution of the Purchaser's board; and (iii) this Agreement has been duly executed by Seller and delivered by Seller to Purchaser. Under no circumstances will this Agreement be effective before all of the preceding have occurred. (b) Purchase and Sale of the Property. In consideration of the mutual covenants set forth in this Agreement, and on the terms and conditions set forth herein, Seller agrees to sell the Property to Purchaser, and Purchaser agrees to purchase the Property from Seller on the terms and conditions set forth herein, provided the various conditions to Closing set forth in this Agreement are satisfied or waived as provided herein. At Closing, Seller shall convey to Purchaser title to the Property by recordation of the Grant Deed. The Escrow Agent shall issue the Title Policy (as defined below) to the Purchaser at Closing. 1 (c) Possession of the Property. The Seller shall deliver possession of the Property to Purchaser at Closing. Possession of the Property shall be delivered to Purchaser subject only to the Property Documents, the Tenant Agreements and the Permitted Exceptions. 2. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Agreement" means this Purchase and Sale Agreement between the Seller and the Purchaser. "Business Day". means any day other than a Saturday, Sunday or any other day on which Purchaser or Escrow Agent is not open for business. In the event any date, deadline or due date set forth in this Agreement falls on a day that is not a Business Day, then such deadline or due date shall automatically be extended to the next Business Day. "Close" or "Closing" means the close of Escrow as provided herein, which shall occur on the Closing Date. "Closing Date" means the close of Escrow as provided herein, which shall be one (1) Business Day after the latest of: (i) the date all of the Conditions Precedent for the Benefit of the Seller have been satisfied; and (ii) the date all of the Conditions Precedent for the Benefit of the Purchaser have been satisfied. The Closing shall occur on or before March 31, 2018. "Conditions Precedent for the Benefit of the Seller" shall have the meaning set forth in Section 5 of this Agreement. "Conditions Precedent for the Benefit of the Purchaser" shall have the meaning set forth in Section 6 of this Agreement. "Deposit" shall have the meaning set forth in Section 3(a) of this Agreement. "Due Diligence Period" means the period of time commencing on the Effective Date and ending at 5:00 p.m. Pacific time on March 15, 2018. "Effective Date" means February 5, 2018, which may or may not be the date this Agreement was executed and delivered by the Seller or the Purchaser. "Escrow" means the escrow depository and disbursement services to be performed by Escrow Agent pursuant to the provisions of this Agreement. "Escrow Agent" means Della DuCharme at Chicago Title Company, 701 B Street, Suite 1120, San Diego, California 92101. 2 "Grant Deed" means a duly executed and acknowledged grant deed conveying fee simple title to the Property from Seller to Purchaser. "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United State Government. Provided, however, the term "Hazardous Materials" shall not include substances typically used in the ordinary course of developing, operating and maintaining apartment complexes in California or small amounts of chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of occupants in other similar properties, provided that such substances are used in compliance with applicable laws. "Immediately Available Funds" means a bank wire transfer or a certified bank or cashier's check. "Permitted Exceptions" means (i) the printed exceptions and exclusions in the Title Policy; (ii) the exceptions to title set forth in Schedule B to the Title Report (as defined in Section 4(e) below) which are approved by Purchaser in writing, or deemed approved by Purchaser, as provided in Section 4(e) below; (iii) real property taxes and assessments which are a lien but not yet payable; (iv) any title exceptions caused, consented to or preapproved by Purchaser; and (v) all applicable building, zoning and use restrictions and/or regulations of any municipality, township, county or state; (vii) defects that would be shown by an inspection or by a survey of the Real Property; and (viii) any reserved oil, water and/or mineral rights. "Property" means that certain real property generally located at 302 West 19th Street in the City of National City, County of San Diego, California, which is legally described on Exhibit A attached hereto and made a part hereof. "Property Documents" means a current delinquency report, property tax bills, capital contracts, site maps, floorplans, business licenses and permits, permits and approvals from the City or County and any governing authorities, conditions imposed by any governmental authorities which affect the development or use of the Property, soils reports, engineering studies or surveys, studies and reports concerning the possibility of hazardous, contaminated or toxic materials on or near the Property, active contracts, drawings, plans, specifications, with respect to the Property that are in Seller's possession. "Purchase Price" shall have the meaning set forth in Section 3 of this Agreement. "Purchaser" means the City of National City. "Rent Roll" means the rent roll and security deposit report for the Project. "Seller" means collectively, Frank Safley and Deborah Safley, husband and wife. 3 "Tenant Agreements" means all leases and all other rental or occupancy agreements with the tenants listed on the Rent Roll as of the Effective Date. "Title Policy" means a CLTA Owner's Policy of Title Insurance in the amount of the Purchase Price, insuring that title to the fee interest in the Property is vested in the Purchaser subject only to the Permitted Exceptions, which Title Policy shall be obtained through the Escrow Agent. Seller shall pay the cost of the CLTA Owner's Policy of Title Insurance. Purchaser shall pay the cost of any endorsements it desires. Purchaser may obtain an ALTA Owner's Policy of Title Insurance in which event Purchaser shall pay the cost difference between the cost of the ALTA Owner's Policy of Title Insurance and the cost of a CLTA Owner's Policy of Title Insurance. 3. Purchase Price. The purchase price to be paid by the Purchaser for all of the Property shall be Nine Hundred Five Thousand and No/l00 Dollars ($905,000.00) ("Purchase Price"). (a) Deposit. Purchaser shall make a deposit into Escrow of Immediately Available Funds in the amount of Twenty -Five and No/100 Dollars ($25,000.00) (the "Deposit") within three (3) Business Days of the Effective Date. The Deposit shall be refundable until the expiration of the Due Diligence Period. If the Purchaser elects to terminate this Agreement prior to expiration of the Due Diligence Period, as set forth in Section 4, below, then upon receipt of written notice from the Seller and the Purchaser, the Escrow Agent shall return the Deposit to the Purchaser, plus any interest earned thereon. Provided, however, all fees and costs charged by the Escrow Agent shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Purchaser. Notwithstanding anything to the contrary set forth herein, the Deposit and any other deposits made by the Purchaser shall be fully refundable to the Purchaser until such time as this Agreement has been approved by resolution of the City Council of the City of National City, in its sole discretion. The Seller hereby acknowledges that the Purchaser is prohibited by law from purchasing the Property, without the approval of the City Council of the City of National City. (b) LIQUIDATED DAMAGES. THE DEPOSIT SHALL BE REFUNDABLE TO THE PURCHASER AS MAY BE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT. IF ESCROW FAILS TO CLOSE AS A RESULT OF PURCHASER'S DEFAULT HEREUNDER, THE SOLE REMEDY OF THE SELLER SHALL BE TO TERMINATE THIS AGREEMENT BY GIVING WRITTEN NOTICE THEREOF TO PURCHASER AND ESCROW AGENT, WHEREUPON THE SELLER SHALL RETAIN THE DEPOSIT(S) AND ALL INTEREST THEREON AS LIQUIDATED DAMAGES (AND, THE SELLER WAIVES ANY RIGHT TO SPECIFICALLY ENFORCE THIS AGREEMENT SET FORTH IN CALIFORNIA CIVIL CODE SECTION 1680 OR 3389). THEREAFTER, NO PARTY HERETO SHALL HAVE ANY FURTHER LIABILITY OR OBLIGATION TO ANY OTHER PARTY HERETO EXCEPT FOR: (i) THE SELLER'S RIGHT TO RECEIVE AND RETAIN SUCH LIQUIDATED DAMAGES; (ii) THE OBLIGATION OF THE PARTIES TO PAY AMOUNTS INTO ESCROW TO PAY THE FEES AND COSTS OF ESCROW; AND (iii) ATTORNEYS' FEES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE SELLER'S ACTUAL DAMAGES IN THE EVENT OF PURCHASER'S DEFAULT HEREUNDER ARE UNCERTAIN IN AMOUNT AND DIFFICULT TO ASCERTAIN, AND THAT SUCH AMOUNT OF LIQUIDATED DAMAGES IS REASONABLE UNDER THE PROVISIONS 4 OF CALIFORNIA CIVIL CODE SECTION 1671 ET SEQ., CONSIDERING ALL OF THE CIRCUMSTANCES EXISTING ON THE DATE HEREOF INCLUDING, WITHOUT LIMITATION, THE RELATIONSHIP OF SUCH AMOUNT TO THE RANGE OF POTENTIAL HARM TO THE SELLER THAT CAN REASONABLY BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL DAMAGES RESULTING FROM SUCH DEFAULT WOULD BE COSTLY AND INCONVENIENT. EACH PARTY HERETO SPECIFICALLY CONFIRMS THE ACCURACY OF THE FOREGOING AND THE FACT THAT SUCH PARTY HAS BEEN REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION. THE PROVISIONS OF THIS SECTION 3(B) SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT. PURCHASER SELLER (c) Delivery of Remainder of Purchase Price into Escrow. Not less than one (1) Business Day prior to the Closing Date, the Purchaser shall cause Immediately Available Funds to be delivered to the Escrow Agent in an amount equal to the Purchase Price, minus the Deposit and any interest earned on the Deposit, and plus or minus any adjustments for prorations and expenses required under this Agreement. (d) Disbursement to the Seller. Immediately after the Closing, the Escrow Agent shall disburse to the Seller the funds that the Seller is entitled to receive hereunder. 4. Due Diligence. (a) Due Diligence Period. During the Due Diligence Period the Purchaser may determine in the Purchaser's sole and absolute discretion, whether to proceed with the purchase of the Property. During the Due Diligence Period, the Purchaser may terminate this Agreement' for any reason or for no reason at all by delivering written notice of such termination to the Seller and Escrow. After expiration of the Due Diligence Period, the Purchaser's right to terminate this Agreement for any reason, or for no reason at all, shall expire and the Deposit shall become nonrefundable. If this Agreement is terminated during the Due Diligence Period, then: (i) all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately terminate, except for rights and liabilities that specifically survive such termination; (ii) Escrow Agent shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser, less any fees and costs charged by the Escrow Agent; and (iii) Escrow Agent shall return to the Seller all funds or other things deposited in Escrow by the Seller. (b) Due Diligence Deliveries. Not later than three (3) Business Days after execution and delivery of this Agreement to the Escrow Agent, the Seller shall provide, the Purchaser with true and correct copies of the Rent Roll, Tenant Agreements, Property Documents and all plans and specifications for the Property (including a set of current as -built plans and specifications, if any) if any, to the extent the same are in the Seller's possession, by any of the following methods 5 provide physical copies or digital copies (e.g. a pdf, of or jpg file) by email or on a memory medium. (c) Tenant Estoppel Certificates. Seller shall provide to Purchaser a Tenant Estoppel Certificate from each Tenant in a form approved by the Seller least five (5) days, but not more than fifteen (15) days, prior to the Closing. (d) Access to the Property. During the Due Diligence Period, Purchaser and its representatives, consultants and attorneys shall have access to the Property. Purchaser shall defend and shall indemnify the Seller and the Seller's agents and employees and the Property from and against, and shall hold the Seller, the Seller's agents and employees and the Property harmless from, any actions, losses, costs, damages, claims and/or liabilities, including but not limited to, mechanics' and materialmen's liens and attorney fees, proximately caused by the actions of Purchaser and/or its contractors or agents upon the Property. The Purchaser shall repair any damage caused to the Property by the Purchaser or its agents, employees or contractors. The Purchaser shall not permit any mechanic's, materialman's, contractor's, subcontractor's or other lien arising from any work done by the Purchaser or its agents pursuant to this Agreement to stand against the Property. If any such lien shall be filed against the Property, the Purchaser shall cause the same to be discharged or bonded by payment, deposit, bond or otherwise, within thirty (30) days after actual notice of such filing. The Purchaser's obligations under this Section 4(d) shall survive the termination or expiration of this Agreement. If Purchaser desires to do any invasive testing at the Property, the Purchaser may do so only after obtaining Seller's prior written consent to the same, which consent may be withheld or granted on conditions in Seller's reasonable discretion. The Purchaser shall promptly restore the Property to the condition the Property was in immediately prior to any such tests, at the Purchaser's sole cost and expense. The Purchaser shall provide the Seller with a complete set of plans, drawings and specifications ("Invasive Testing Plans") that define to the sole satisfaction of the Seller the invasive testing to be performed on the Property and the names of all environmental and other consultants, contractors and subcontractors who will be performing such invasive testing (collectively "Purchaser's Consultants"). The Purchaser shall deliver the names of the Purchaser's Consultants and the Invasive Testing Plans to the Seller concurrently with its request to the Seller that the Purchaser desires to perform invasive testing. (e) Title. Purchaser's obligation to purchase the Property is contingent upon Purchaser's approval of all matters affecting title to or use of the Real Property (collectively, "Title Matters"). The intent of this Section 4(e) is to allow the parties to have certainty regarding the condition of title and the Title Matters which are acceptable to the Purchaser. The procedure set forth in this Section 4(e) shall not affect or otherwise limit the Purchaser's right to terminate this Agreement for any reason or no reason at all as set forth in Section 4, above. Seller shall use commercially reasonable efforts to cause the Title Company to deliver to Purchaser within three (3) Business Days of the Effective Date, a current preliminary title report for the Real Property and, to the extent possible, legible copies of all documents referred to therein ("Title Report"). Purchaser shall have ten (10) Business Days thereafter, to approve or object to any items disclosed by the Title Report. If Purchaser does not give written notice to Seller of Purchaser's approval or disapproval of any items disclosed by the Title Report within said time period, then Purchaser shall be deemed to have approved the items disclosed by the Title Report. If 6 Purchaser gives written notice to Seller of Purchaser's disapproval of any items disclosed by the Title Report within said time period and Seller does not give written notice to Purchaser within five (5) Business Days thereafter of either: (i) Seller's elimination of or agreement to eliminate those disapproved matters prior to the close of Escrow; or (ii) Seller's agreement to provide at Seller's sole expense such title insurance endorsements relating thereto as are acceptable to Purchaser in Purchaser's sole discretion prior to the close of Escrow (each, a "Cure Notice"), then this Agreement shall terminate immediately, unless Purchaser affirmatively agrees in writing within five (5) Business Days thereafter that this Agreement will remain in full force and effect and that the previously disapproved items disclosed by the Title Report are approved by Purchaser. If the Title Company issues a supplemental title report prior to the close of Escrow showing additional exceptions to title ("Title Supplement"), Purchaser shall have five (5) Business Days from the date of receipt of the Title Supplement and a copy of each document referred to in the Title Supplement in which to give Seller written notice of disapproval as to any additional exceptions; provided, however, Purchaser may not disapprove any exceptions that were contained in the original Title Report or are otherwise Permitted Exceptions. Purchaser's failure to deliver any such written notice of disapproval of the Title Supplement within such five (5) Business Day period shall be deemed to mean that Purchaser has approved all such additional exceptions. If Purchaser disapproves any additional exception shown in the Title Supplement, then Purchaser and Seller will have the same rights and obligations set forth above in this Section regarding Purchaser's original review and approval of the Title Report. Notwithstanding the foregoing, Seller shall cause all Title Matters which are mechanics' liens or deeds of trust to be eliminated as exceptions to title on the Title Policy at Seller's sole expense prior to the close of Escrow, and shall not record any documents against the Property from and after the Effective Date without Purchaser's prior written consent. 5. Conditions Precedent for the Benefit of the Seller. The Seller's obligation to Close shall be conditioned upon the satisfaction or emailed or written waiver by the Seller of all of the conditions precedent ("Conditions Precedent for the Benefit of the Seller") set forth in this Section 5. Any of the Conditions Precedent for the Benefit of the Seller may be waived by the Seller unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is expressly waived by Seller by either: (i) email from the Seller to the Purchaser and Escrow Agent; or (ii) in a writing signed by the Seller and delivered to the Purchaser and Escrow Agent. If the Conditions Precedent for the Benefit of the Seller set forth in this Section 5 are not satisfied by the deadlines or expressly waived, the Seller (provided the Seller is not in default hereunder) may provide emailed or written notice of the Seller's conditional termination of this Agreement to the Purchaser and Escrow Agent. After receipt of such notice of conditional termination, the Purchaser shall have ten (10) Business Days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten (10) Business Day period, then this Agreement Instructions shall terminate at the close of business on such tenth (10th) Business Day. In the event of termination of this Agreement (and by operation of law the Escrow) pursuant to this Section 5, then: (w) as set forth in the liquidated damages provision of Section 3(b), above, all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately terminate except those which specifically survive such termination; (x) Escrow Agent shall deliver the Deposit and all interest thereon to the Seller and shall return to the Seller all funds or other things deposited in 7 Escrow by the Seller; (y) Escrow Agent shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser, less the Deposit and all interest thereon, and less all fees and costs charged by the Escrow Agent. Notwithstanding the preceding clause (w) of this Section 5, in the event of termination of this Agreement pursuant to this Section 5, the Seller and the Purchaser shall cooperate with one another, execute all documents reasonably necessary and take all reasonable steps as may be required by Escrow Agent in order to accomplish the purposes of this Section 5. The Conditions Precedent for the Benefit of the Seller are: (a) Purchaser making the Deposit into Escrow, as set forth in Section 3(a), above. (b) The delivery by the Purchaser into Escrow, at least one (1) Business Day prior to Closing of Immediately Available Funds equal to the Purchase Price (less the Deposit and plus or minus expenses and prorations) as required by Section 3(c) above. (c) The delivery by the Purchaser into Escrow at least one (1) Business Day prior to Closing of all other documents and instruments required by this Agreement or reasonably required by Escrow to complete the Closing. (d) Purchaser not being in default of any of its representations or warranties under this Agreement, or any other material terms or conditions related to Purchaser, and all of the Purchaser's representations and warranties under this Agreement being true and correct as of the Closing Date. (e) As of the Closing Date, the Purchaser has not made an assignment for the benefit of creditors, filed a bankruptcy petition, been adjudicated insolvent or bankrupt, petitioned a court for the appointment of any receiver of, or trustee for, the Purchaser, or commenced any proceeding relating to the Purchaser under any reorganization, arrangement, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or later in effect. 6. Conditions Precedent for the Benefit of the Purchaser. The Purchaser's obligation to Close shall be conditioned upon the satisfaction or emailed or written waiver by the Purchaser of all of the conditions precedent ("Conditions Precedent for the Benefit of the Purchaser") set forth in this Section 6. Any of the Conditions Precedent for the Benefit of the Purchaser may be waived by the Purchaser unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is expressly waived by email from the Purchaser to the Seller and Escrow Agent or in writing signed by the Purchaser and delivered to the Seller and Escrow Agent. If the Conditions Precedent for the Benefit of the Purchaser are not satisfied by the deadlines set forth in this Section 6 or expressly waived, the Purchaser (provided the Purchaser is not in default hereunder) may provide emailed or written notice of the Purchaser's conditional termination of this Agreement to the Seller and Escrow Agent. After receipt of such notice of conditional termination, the Seller shall have ten (10) Business Days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten (10) Business Day period, then this Agreement shall terminate at the close of business on such tenth (10t) Business Day. In the event of termination of this Agreement (and by operation of law the Escrow) pursuant to this Section 6, then: (w) the same 8 shall be a default by the Seller; (x) Escrow Agent shall return to the Seller all funds or other things deposited in Escrow by the Seller; (y) Escrow Agent shall upon receipt of unilateral notice from the Purchaser, return to the Purchaser all funds or other things deposited in Escrow by the Purchaser; and (z) all fees and costs charged by the Escrow Agent shall be paid by the Seller. Purchaser is not waiving any default by the Seller and nothing contained in this Section 6, including, without limitation, the immediately foregoing sentence shall be a waiver of any right of Purchaser to recover damages from the Seller for any default by Seller hereunder. Notwithstanding the foregoing clause (w) of this Section 6, in the event of termination of this Agreement pursuant to this Section 6, the Purchaser and the Seller shall cooperate with one another, execute all documents reasonably necessary and take all reasonable steps as may be required by Escrow Agent in order to accomplish the purposes of this Section 6. The Conditions Precedent for the Benefit of Purchaser are: (a) The deposit by the Seller into Escrow at least one (1) Business Day prior to Closing of the Grant Deed, duly executed and acknowledged, conveying fee simple title to the Property to the Purchaser. (b) The deposit by the Seller into Escrow at least one (1) Business Day prior to Closing of the Assignment, duly executed, conveying title to the Personal Property to the Purchaser. (c) The deposit by Seller into Escrow at least one (1) Business Day prior to Closing of a duly executed affidavit in the form prescribed by federal regulations that Seller is not a foreign person and is a "United States Person" as such term is defined in Section 7761(a)(30) of the Internal Revenue Code of 1986, as amended. (d) The deposit by Seller into Escrow at least one (1) Business Day prior to Closing of a duly executed California Form 593(c) or other evidence that withholding of any portion of the Purchase Price is not required by the Revenue and Taxation Code of California with respect to Seller. (e) The deposit by the Seller into Escrow at least one (1) Business Day prior to Closing of all additional documents and instruments as are reasonably required by the Escrow Agent to complete the Closing. (f) The Escrow Agent is prepared and obligated to issue the Title Policy in Purchaser's favor, upon the recordation of the Grant Deed and there are no exceptions to the Title Policy, except for the Permitted Exceptions. (g) As of the Closing Date, there exists no lease, tenancy or occupancy agreement affecting the Property, except for the Tenant Agreements, Property Documents. (h) Seller not being in default of any of its representations or warranties under this Agreement, or any other material terms or conditions related to Seller, and all of Seller's representations and warranties under this Agreement being true and correct as of the Closing Date. 9 (i) As of the Closing Date there is not pending, or threatened to be pending, any action or proceeding by any person or before any government authority, the outcome of which could prohibit the use of the Property as intended by the Purchaser. (j) The Escrow Agent is prepared and obligated to issue the Title Policy in Purchaser's favor, upon the recordation of the Grant Deed and there are no exceptions to the Title Policy, except for the Permitted Exceptions. 7. Representations, Warranties and Covenants; Waivers and Releases. When making the representations and warranties set forth in this Section 7, each party making a representation and/or warranty represents that the same are true, correct and complete as of the date hereof and shall be and are true, correct and complete as of the Closing Date. The representations and warranties shall survive the Closing. (a) Representations and Warranties Regarding Authority. The Seller and the Purchaser each hereby represents and warrants to the other that this Agreement and all documents or instruments executed by them which are to be delivered at or prior to the Closing are, or on the Closing Date will be, duly authorized, executed and delivered by the Seller or the Purchaser, as applicable. (b) Representations and Warranties Regarding Enforceability of Agreement. The Seller and the Purchaser each hereby represents and warrants to the other that this Agreement and all documents required hereby to be executed by them shall be valid, legally binding obligations of, and enforceable against, the Seller or the Purchaser, as applicable, in accordance with their terms. (c) Representations and Warranties Pertaining to Legal Matters. The Seller hereby represents and warrants to the Purchaser that: (1) The Seller is the sole owner of the fee title interest to the Real Property. (2) To the current actual knowledge of Seller, there is no pending or threatened proceeding in eminent domain or otherwise, which would adversely affect the Property, or any portions thereof. (d) Seller Representations and Warranties Pertaining to Options. As of the Effective Date, Seller hereby represents and warrants to the Purchaser that no person has any option or right of first refusal to purchase Seller's interest in the Property or any parts thereof. (e) Seller Representation and Warranty Pertaining to Rent Roll. The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Rent Roll and all other documents required to be delivered to Purchaser are true and correct in all material respects as of the dates set forth thereon. 10 (f) Seller Representation and Warranty Pertaining to Tenant Agreements. The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Tenant Agreements constitute all of the oral and written agreements or understandings concerning the leasing or occupancy of the Property by which the Purchaser would be bound following the Closing. (g) Seller Representation and Warranty Regarding Operation of the Property. The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Property Documents and the Permitted Exceptions constitute all of the oral and written agreements or understandings concerning the Property by which the Purchaser would be bound following the Closing other than the Tenant Agreements. (h) Seller Representations and Warranties Regarding Discovery of New Information. The Seller hereby represents and warrants to the Purchaser that if the Seller discovers any information or facts prior to Closing that would materially change any of the foregoing representations and warranties or cause any of the foregoing representations and warranties to be untrue or misleading in any respect, the Seller will promptly give the Purchaser notice of those facts and information. (i) AS IS CONDITION. PURCHASER HEREBY ACKNOWLEDGES, REPRESENTS, WARRANTS, COVENANTS AND AGREES THAT AS A MATERIAL INDUCEMENT TO SELLER TO EXECUTE AND ACCEPT THIS AGREEMENT AND IN CONSIDERATION OF THE PERFORMANCE BY SELLER OF ITS DUTIES AND OBLIGATIONS UNDER THIS AGREEMENT THAT, EXCEPT FOR SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7 OF THIS AGREEMENT, THE SALE OF THE PROPERTY HEREUNDER IS AND WILL BE MADE ON AN "AS IS, WHERE IS" BASIS, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, FUTURE OR OTHERWISE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE PROPERTY, INCLUDING BUT NOT LIMITED TO: (1) THE EXISTENCE OF HAZARDOUS MATERIALS OR MOLD UPON THE PROPERTY OR ANY PORTION THEREOF; (2) GEOLOGICAL CONDITIONS, INCLUDING, WITHOUT LIMITATION, SUBSIDENCE, SUBSURFACE CONDITIONS, WATER TABLE, UNDERGROUND WATER RESERVOIRS, LIMITATIONS REGARDING THE WITHDRAWAL OF WATER AND FAULTING; (3) WHETHER OR NOT AND TO THE EXTENT TO WHICH THE PROPERTY OR ANY PORTION THEREOF IS AFFECTED BY ANY STREAM (SURFACE OR UNDERGROUND), BODY OF WATER, FLOOD PRONE AREA, FLOOD PLAIN, FLOODWAY OR SPECIAL FLOOD HAZARD; (4) DRAINAGE; (5) SOIL CONDITIONS, INCLUDING THE EXISTENCE OF INSTABILITY, PAST SOIL REPAIRS, SOIL ADDITIONS OR CONDITIONS OF SOIL FILL, OR SUSCEPTIBILITY TO LANDSLIDES, OR THE SUFFICIENCY OF ANY UNDERSHORING; (6) USES OF ADJOINING PROPERTIES; (7) THE VALUE, COMPLIANCE WITH THE PLANS AND SPECIFICATIONS, SIZE, LOCATION, AGE, USE, DESIGN, QUALITY, DESCRIPTION, DURABILITY, STRUCTURAL INTEGRITY, OPERATION, TITLE TO, OR PHYSICAL OR 11 FINANCIAL CONDITION OF THE PROPERTY OR ANY PORTION THEREOF, OR ANY RIGHTS OR CLAIMS ON OR AFFECTING OR PERTAINING TO THE PROPERTY OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, WHETHER OR NOT THE IMPROVEMENTS COMPLY WITH THE REQUIREMENTS OF TITLE III OF THE AMERICANS WITH DISABILITIES ACT OF 1990, 42 U.S.C. §§ 12181-12183, 12186(B) - 12189 AND RELATED REGULATIONS; (8) THE PRESENCE OF HAZARDOUS MATERIALS IN OR ON, UNDER OR IN THE VICINITY OF THE PROPERTY; (9) THE SQUARE FOOTAGE OF THE PROPERTY OR THE IMPROVEMENTS THEREON; (10) IMPROVEMENTS AND INFRASTRUCTURE, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE ROOF, FOUNDATION, FIXTURES, AND PERSONAL PROPERTY, IF ANY; (11) DEVELOPMENT RIGHTS AND EXTRACTIONS; (12) WATER OR WATER RIGHTS; (13) THE DEVELOPMENT POTENTIAL FOR THE PROPERTY; (14) THE ABILITY OF PURCHASER TO REZONE THE PROPERTY OR CHANGE THE USE OF THE PROPERTY; (15) THE ABILITY OF PURCHASER TO ACQUIRE ADJACENT PROPERTIES; (16) THE EXISTENCE AND POSSIBLE LOCATION OF ANY UNDERGROUND UTILITIES; (17) THE EXISTENCE AND POSSIBLE LOCATION OF ANY ENCROACHMENTS; (18) WHETHER THE IMPROVEMENTS ON THE PROPERTY WERE BUILT, IN WHOLE OR IN PART, IN COMPLIANCE WITH APPLICABLE BUILDING CODES; (19) THE STATUS OF ANY LIFE -SAFETY SYSTEMS IN THE IMPROVEMENTS ON THE PROPERTY; (20) THE CHARACTER OF THE NEIGHBORHOOD IN WHICH THE PROPERTY IS SITUATED; (21) THE CONDITION OR USE OF THE PROPERTY OR COMPLIANCE OF THE PROPERTY WITH ANY OR ALL PAST, PRESENT OR FUTURE FEDERAL, STATE OR LOCAL ORDINANCES, RULES, REGULATIONS OR LAWS, BUILDING, FIRE OR ZONING ORDINANCES, CODES OR OTHER SIMILAR LAWS; AND/OR (22) THE MERCHANTABILITY OF THE PROPERTY OR FITNESS OF THE PROPERTY FOR ANY PARTICULAR PURPOSE (PURCHASER AFFIRMING THAT PURCHASER HAS NOT RELIED ON SELLER'S SKILL OR JUDGMENT TO SELECT OR FURNISH THE PROPERTY FOR ANY PARTICULAR PURPOSE, AND THAT SELLER MAKES NO WARRANTY THAT THE PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE). NOTWITHSTANDING THE FOREGOING OR ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, SELLER IS NOT RELEASED FROM ANY LIABILITY TO PURCHASER FOR FRAUD OR BREACH OF ANY EXPRESS COVENANT, REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT. PURCHASER ACKNOWLEDGES THAT AS OF THE EXPIRATION OF THE DUE DILIGENCE PERIOD, PURCHASER SHALL HAVE COMPLETED ALL PHYSICAL AND FINANCIAL EXAMINATIONS RELATING TO THE ACQUISITION OF THE PROPERTY HEREUNDER (IT BEING ACKNOWLEDGED AND AGREED THAT PURCHASER SHALL BE DEEMED TO HAVE INSPECTED EACH APARTMENT UNIT WITHIN THE PROPERTY) AND WILL ACQUIRE THE SAME SOLELY ON THE BASIS OF SUCH EXAMINATIONS AND THE TITLE INSURANCE PROTECTION FOR THE PROPERTY AFFORDED BY THE TITLE POLICY, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, AND SUBJECT TO SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7 OF THIS AGREEMENT. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED 12 OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT THE SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, AND SUBJECT TO SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT. SELLER SHALL NOT BE LIABLE FOR ANY NEGLIGENT MISREPRESENTATION OR FAILURE TO INVESTIGATE THE PROPERTY NOR SHALL SELLER BE BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS, APPRAISALS, ENVIRONMENTAL ASSESSMENT REPORTS, OR OTHER INFORMATION PERTAINING TO THE PROPERTY OR THE OPERATION THEREOF, FURNISHED BY SELLER, OR ANY REAL ESTATE BROKER, AGENT, REPRESENTATIVE, EMPLOYEE, SERVANT OR OTHER PERSON ACTING ON SELLER'S BEHALF EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7 OF THIS AGREEMENT. IT IS ACKNOWLEDGED AND AGREED THAT THE PROPERTY IS SOLD BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO THE FOREGOING. NOTWITHSTANDING THE FOREGOING OR ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, SELLER IS NOT RELEASED FROM ANY LIABILITY TO PURCHASER FOR FRAUD OR BREACH OF ANY COVENANT, REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT. PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT PURCHASER IS FULLY AWARE OF THE AGE OF THE PROPERTY, THAT OVER TIME VARIOUS EVENTS MAY HAVE OCCURRED ON THE PROPERTY WHICH EVENTS MAY BE TYPICAL AND/OR ATYPICAL OF EVENTS OCCURRING TO OTHER PROPERTIES OF SIMILAR AGE TO THE PROPERTY AND SIMILARLY LOCATED IN THE CITY OF SAN DIEGO AND/OR THE COUNTY OF SAN DIEGO, CALIFORNIA, AND THAT SUCH EVENTS MAY INCLUDE, WITHOUT LIMITATION, SLAB LEAKS, MOLD, FIRE, SHIFTING, AND VIOLATIONS OF LAWS, ORDINANCES, RULES, REGULATIONS, PERMITS, APPROVALS, LICENSES AND/OR ORDERS OF GOVERNMENTAL AGENCIES WITH JURISDICTION OVER THE PROPERTY. THE CLOSING OF THE PURCHASE OF THE PROPERTY BY PURCHASER HEREUNDER SHALL BE CONCLUSIVE EVIDENCE THAT: (A) PURCHASER HAS FULLY AND COMPLETELY INSPECTED (OR HAS CAUSED TO BE FULLY AND COMPLETELY INSPECTED) THE PROPERTY; AND (B) PURCHASER ACCEPTS THE PROPERTY AS BEING IN GOOD AND SATISFACTORY CONDITION AND SUITABLE FOR PURCHASER'S PURPOSES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT FOR RELIANCE ON THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, PURCHASER SHALL PERFORM AND RELY SOLELY UPON ITS OWN INVESTIGATION CONCERNING ITS INTENDED USE OF THE PROPERTY, AND THE PROPERTY'S FITNESS THEREFOR. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT SELLER'S COOPERATION WITH PURCHASER WHETHER BY 13 PROVIDING DOCUMENTS RELATING TO THE PROPERTY OR PERMITTING INSPECTION OF THE PROPERTY, SHALL NOT BE CONSTRUED AS ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OF ANY KIND WITH RESPECT TO THE PROPERTY, OR WITH RESPECT TO THE ACCURACY, COMPLETENESS, OR RELEVANCE OF THE DOCUMENTS PROVIDED TO PURCHASER BY SELLER IN RELATION TO THE PROPERTY, PROVIDED THAT THE FOREGOING SHALL NOT BE A LIMITATION OR MODIFICATION OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT. 8. Condemnation of the Property. (a) Condemnation. If between the Effective Date and the Closing Date, any condemnation or eminent domain proceedings are commenced that will result in the taking of any part of the Property, Purchaser may, at Purchaser's election, either: (1) Terminate this Agreement by giving written or emailed notice to the Seller and the Escrow Agent (in which event all remaining funds or other things deposited in Escrow by Purchaser, including without limitation, the Deposit, shall be returned to the Purchaser immediately from Escrow, together with any interest earned thereon and all fees and costs charged by the Escrow Agent shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Purchaser); or (2) Proceed with the Closing and have Seller assign to Purchaser all of Seller's right, title and interest to any award made for the condemnation or eminent domain action. (b) Notice. If Seller obtains notice of the commencement of or the threatened commencement of eminent domain or condemnation proceedings with respect to the Property, Seller shall notify the Purchaser in writing. 9. Broker's Commission. Seller and Purchaser each hereby represents and warrants to one another that neither of them has engaged the services of any real estate agent or broker. Seller and Purchaser each agree that, to the extent any real estate commission or brokerage and/or finder's fee shall be earned or claimed in connection with this Agreement or the Closing, the payment of such fee or commission, and the defense of any action in connection therewith, shall be the sole and exclusive obligation of the party who requested the services of the broker and/or finder. In the event that any claim, demand or cause of action or brokerage and/or finder's fee is asserted against the party to this Agreement who did not request such services, the party through whom the broker or finder is making the claim shall indemnify, defend (with an attorney of the indemnitee's choice) and hold harmless the other from and against any and all such claims, demands and causes of action and expenses related thereto, including (without limitation) attorneys' fees and costs. 14 10. Assignment. The Purchaser may assign this Agreement to an entity in which the Purchaser has a controlling or majority interest without the prior written consent of the Seller. Except as set forth in the immediately preceding sentence, no party shall assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other party hereto. Any attempted assignment or delegation of this Agreement by the Purchaser or Seller in violation of this Section 10 shall be void. 11. Notices. All notices under this Agreement shall be in writing and sent (a) by certified or registered mail, return receipt requested, in which case notice shall be deemed delivered three (3) Business Days after deposit, postage prepaid in the United States Mail, (b) overnight by a nationally recognized overnight courier such as UPS Overnight, or FedEx, in which case notice shall be deemed delivered one (1) Business Day after deposit with that courier, (c) by personal delivery, in which case notice shall be deemed delivered upon the actual date of delivery, or (d) by email, in which case notice shall be deemed delivered upon the actual date of delivery. All notices shall be delivered to the following addresses (unless changed by written notice to the other persons given in accordance with this Section 11: To Purchaser: Copy to: To Seller: City of National City 1243 National City Boulevard National City, California 91950 Attn: Brad Raulston Email: braulston(nationalcityca.gov Office of the City Attorney 1243 National City Boulevard National City, California 91950 Attn: Roberto M. Contreras Email: rcontreras@,nationalcityca.gov Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, California 92101 Attn. Walter F. Spath, Esq. Email: wfs@candslaw.net Frank Safley and Deborah Safley 111 12th Street Del Mar, California 92014 Email: fdsafleyAgmail.com 12. Prorations. Real property taxes and assessments, utility costs, rents, service and maintenance contract payments for contracts that are being assumed by the Purchaser (which assumption shall be of all service and maintenance and similar type contracts with regard to the Property to the extent same are assignable), and other expenses of operating the Property (provided, however, no proration shall be made with regard to any capital improvements, as determined in accordance with generally accepted accounting principles) shall be prorated as of 15 the close of Escrow. Sellers shall pay all real property taxes and assessments applicable to the period prior to the close of Escrow, and if any such taxes are unpaid after the close of Escrow, then Sellers shall pay them promptly and in any event within ten (10) days after Purchaser's request (which shall include a copy of the relevant tax bill). Sellers shall have the right, but not the obligation, to pursue after the close of Escrow collection from tenants of any rents due at the close of Escrow which are unpaid; provided, however, Sellers shall not have the right to bring any eviction proceedings against any such tenants. Purchaser shall use commercially reasonable efforts to collect rents after the close of Escrow which are applicable to time periods prior to the close of Escrow and shall promptly remit same to Sellers, provided, however: (i) any rents collected by Purchaser shall be applied to any rents then due and owing which apply to any time periods after the close of Escrow before being applied to any pre -close of Escrow delinquent rents; and (ii) Purchaser shall not be required to bring any lawsuit to collect any pre -close of Escrow delinquent rents. Notwithstanding anything in this Agreement to the contrary, the provisions of the previous two (2) sentences and this sentence of this Section 12 shall survive the close of Escrow. 13. General Provisions. (a) Governing Law. This Agreement shall be interpreted and construed in accordance with California law. (b) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (c) Captions. The captions in this Agreement are inserted for convenience of reference and in no way define, describe or limit the scope or intent of this Agreement or any of the provisions of this Agreement. (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors, heirs and permitted assigns. (e) Modifications; Waiver. No waiver, modification, amendment, discharge or change of this Agreement shall be valid unless it is in writing and signed by the party against which the enforcement of the modification, waiver, amendment, discharge or change is sought. (f) Entire Agreement. This Agreement contains the entire agreement between the parties relating to Purchaser's acquisition of the Property from Seller and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are superseded. (g) Partial Invalidity. Any provision of this Agreement which is unenforceable, invalid, or the inclusion of which would adversely affect the validity, legality, or enforcement of this Agreement shall have no effect, but all the remaining provisions of this Agreement shall remain in full effect. 16 (h) Survival; No Merger. This Agreement, including without limitation, all representations, warranties, covenants, agreements, indemnities and other obligations of Seller and Purchaser in this Agreement, shall survive the Closing of this transaction and will not be merged into the Grant Deed or any other document. (i) No Third -Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and their respective successors and assigns, any rights or remedies. (j) Time Of Essence. Time is of the essence in this Agreement. (k) Attorneys' Fees. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Agreement shall be entitled to their reasonable expert witness fees, if any, as part of their costs of suit, and attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") Section 1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP Section 998. All claims, disputes, causes of action or controversies shall be subject solely to the jurisdiction of the San Diego Superior Court, Downtown Branch. (1) Relationship. Nothing contained in this Agreement shall be deemed or construed by the parties or by any third person to create a relationship of principal and agent or partnership or a joint venture between Purchaser and Seller or between either or both of them and any third party. (m) Recording. This Agreement shall not be recorded. (n) Purchaser Approval. Where this Agreement refers to an action or approval of the Purchaser, it shall mean the approval of the Executive Director of the Purchaser, or designee, unless otherwise provided. (o) Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. (p) Independent Counsel. Seller and Purchaser each acknowledge that: (i) they have been given the opportunity to be represented by independent counsel in connection with this Agreement; (ii) they have executed this Agreement with the advice of such counsel, if such counsel was retained; and (iii) this Agreement is the result of negotiations between the parties hereto and the advice and assistance of their respective counsel, if such counsel was retained. The fact that this Agreement was prepared or negotiated by Purchaser's or Seller's counsel as a matter of convenience shall have no import or significance. Any uncertainty or ambiguity in this Agreement shall not be construed against either party due to the fact that Purchaser's or Seller's counsel prepared or negotiated this Agreement in its final form. 17 (q) Capacity and Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, represent and warrant to the other party that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. PURCHASER: City of National City APPROVED AS TO FORM: Angil P. Morris -Jones City Attorney ob1- i Con + eras ty City Attorney [SIGNATURES CONTINUED ON FOLLOWING PAGE] 18 SELLER: Frank Safley Deborah Safley 19 Exhibit A Legal Description of the Property All that certain real property situated in the City of National City, County of San Diego, State of California, described as follows: Lots 19 through 22 of National City Refiled Map No. 348, plus adjacent closed alley, in the City of National City, County of San Diego, State of California 20 RESOLUTION NO. 2018 — 37 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY RATIFYING THE PURCHASE AND SALE AGREEMENT EXECUTED ON FEBRUARY 7, 2018; AUTHORIZING THE PURCHASE OF REAL PROPERTY LOCATED AT 302 WEST 19TH STREET IN ORDER TO SAVE ON SUBSTANTIAL SEWER INFRASTRUCTURE IMPROVEMENTS FOR THE EXPANSION OF PARADISE CREEK PARK, FROM FRANK SAFLEY FOR A TOTAL SALE PRICE OF $905,000 AND THE PAYMENT OF CLOSING COSTS NOT TO EXCEED $4,000; AND AUTHORIZING THE ESTABLISHMENT OF AN APPROPRIATION NOT TO EXCEED $909,000 BASED ON THE AVAILABLE FUND BALANCE OF THE SEWER SERVICE FUND WHEREAS, the City desires to purchase real property located on a rectangular parcel located at 302 West 19th Street in order to save on substantial sewer infrastructure improvements for the expansion of Paradise Creek Park (the "Park"); and WHEREAS, the current sewer service to 302 West 19th Street is being provided by a temporary pump station that was installed because the previous sewer connection, which ran under Paradise Creek onto the WI-TOD housing site, was abandoned and capped to allow for construction of Paradise Creek Apartments; and WHEREAS, the temporary pump station is located in the center of the proposed expansion to the Park and needs to be removed in order to expand the Park; and WHEREAS, estimated costs to reroute the sewer is approximately $1,000,000 and no other feasible alternatives for providing permanent sewer service to this property have been identified due to site constraints and potential environmental impacts; and WHEREAS, the acquisition of this parcel would eliminate the need to reroute the sewer service and is essential in creating proper access to the Park and facilitating street and parking improvements. WHEREAS, after negotiations with the property owner, the City entered into a Purchase and Sale Agreement on February 7, 2018, contingent on City Council approval; and WHEREAS, an appropriation not -to -exceed $909,000 based on the available fund balance of the Sewer Service Fund is necessary. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby ratifies the Purchase and Sale Agreement executed on February 7, 2018; authorizing the purchase of real property located at 302 West 19th Street, in order to save on substantial sewer infrastructure improvements for the expansion of Paradise Creek Park, from Mr. Frank Safley for a total sales price of $905,000 and the payment of closing costs not to exceed $4,000. BE IT BE FURTHER RESOLVED that the City Council of the City of National City hereby authorizes the establishment of an appropriation not -to -exceed $909,000 based on the available fund balance of the Sewer Service Fund. [Signature Page to Follow] Resolution No. 2018 — 37 Page Two PASSED and ADOPTED this 6th day of March, 2018. ATTEST: ti Mic :el R. Dalla, Cif Clerk APPROVED AS TO FORM: LY. f r A or is- one Attorney Rcbr(Morrison, Mayor Passed and adopted by the Council of the City of National City, California, on March 6, 2018 by the following vote, to -wit: Ayes: Councilmembers Cano, Mendivil, Morrison, Rios, Sotelo-Solis. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: RON MORRISON Mayor of the City of National City, California / A lerk of the / CityCity o/National City, California By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2018-37 of the City of National City, California, passed and adopted by the Council of said City on March 6, 2018. City Clerk of the City of National City, California By: Deputy CITY OF NATIONAL CITY, CALIFORNIA COUNCIL AGENDA STATEMENT MEETING DATE: March 6, 2018 AGENDA ITEM NO. 1.7 rEM TITLE: Resolution of the City Council of the City of National City ratifying the Purchase and Sale Agreement executed on February 7, 2018; authorizing the purchase of real property located at 302 W. 19th Street, in order to save on substantial sewer infrastructure improvements for the expansion of Paradise Creek Park, from Mr. Frank Safely for a total sales price of $905,000 and the payment of closing costs not to exceed $4,000; and authorizing the establishment of an appropriation not -to -exceed $909,000 based on the available fund balance of the Sewer Service Fund. PREPARED BY: Gregory Rose, Property Agent DEPARTMENT: Housing & Economic Delopment PHONE: 619.336.4266 APPROV EXPLANATION: See Attachment No. 1 INANCIAL STATEMENT: APPROVED: ACCOUNT NO. 125-409-500-598-1596 WITOD Improvements APPROVED: The appropriation of $909,000 to the capital outlay project expenditure account no. 125-409-500-598- 1596 will come from the Sewer Service Fund based on the available fund balance of the Sewer Service Fund. Finance MIS ENVIRONMENTAL REVIEW: Approval of the property transfer is not a "Project" under section 15378 of the California Environmental Quality Act ("CEQA") guidelines because the proposed action consists of an administrative activity that will not result in direct or indirect physical changes to the environment. ORDINANCE: INTRODUCTION: FINAL ADOPTION: STAFF RECOMMENDATION: Adopt the Resolution. BOARD / COMMISSION RECOMMENDATION: n/a ATTACHMENTS: 1. Background Report 2. PPC Letter 3. Purchase and Sales Agreement 4. Property Appraisal 5. Resolution RQ�. 9-611(-34- Attachment No. 1 Background Report This property the City is proposing to purchase is located on a rectangular parcel located 302 W 19th street. The current sewer service to 302 W. 19th Street is being provided by a temporary pump station which requires City sewer crews to empty and dispose of their sewage on a daily basis. The temporary pump station is located in the center of the proposed expansion to Paradise Creek Educational Park ("Park") and needs to be removed in order to build the park. The temporary pump station was installed as the previous sewer connection, which ran under the Paradise Creek onto the WI-TOD housing site was abandoned and capped to allow for construction of Paradise Creek Apartments. No other feasible alternatives for providing permanent sewer service to this property have been identified due to site constraints and potential environmental impacts. This is the only property affected by the sewer disconnect. Estimated costs to reroute the sewer for this building is approximately $1,000,000 (see attachment No. 2). The property sticks out into an area that will be part of the 4.4 acre expansion of the Park. The acquisition of this parcel would eliminate the need to reroute the sewer service and be key in creating proper access to the new park and facilitating street and parking improvements. The property was not listed for sale. City staff presented the opportunity to purchase the property in closed session on October 17, 2017 and City Council provided direction in closed session on October 17, 2017 to begin negotiations and secure the purchase and sale of the property subject to City Council approval. The City approached the property owner and made an unsolicited offer of $825,000 based on an appraisal of the property by Brad Woodall, MAI, dated 9/19/2017, contingent on City Council approval of the purchase and sale of the property. The property owner countered with an asking price of $925,000. The City countered with $900,000 and finally agreed to $905,000. On February 7, 2018 the City entered into a purchase and sale agreement contingent on City Council approval. The property has a two story structure on it. Currently, it has a two residential rental units on the top floor, and a commercial space on the ground floor. The structure is planned to be demolished to allow for the new community park improvements and alleviate the need to reroute the sewer service. A relocation plan will be required for the residential and commercial tenants to be relocated. A consultant will prepare the relocation plan and the cost of relocation will be requested from the Sewer Service Fund. The relocation plan will be put into place before closing on the sale escrow. Attachment No. 2 1 PROJECT PROFESSIONALS CORPORATION August 3, 2017 Stephen Manganiello, Director of Public Works/City Engineer City of National City 1243 National City Boulevard National City, CA 91910 RE: Proposed Sewer Main Service for 302 W 19th Street, National City, CA Mr. Manganiello, I reviewed the proposed plans prepared by Harris & Associates to provide a new sewer main to service 302 W 19th Street in National City. It is my opinion that the plan to provide a new sewer main to this parcel is not feasible for several reasons. First, the cost to accomplish the work to service this single lot is estimated at about $1,000,000. Although the cost to install this main alone is high, it is made higher still due to the required handling of the contaminated soil. It is our opinion that this cost likely exceeds that value of the parcel. Secondly, the new route designed by Harris & Associates is the most direct route to a local sewer main and its design slope is one-half of one percent. That is extremely flat for a sewer main that has such low flow as it services only one parcel. This will present maintenance issues for the life of the sewer main that will require continual service by City forces. We have not estimated the annual cost for these additional services but it is not good engineering practice or advisable to install a new sewer main that we know will cost the City significantly higher maintenance costs than normal. Additionally, since the sewer main will not function properly you can expect excessive odors to emanate from the manholes located within the new park. Finally, the proposed new sewer main location transverses the lot currently slated for the third and final part of the Paradise Creek Educational Park. This entire lot contains very high concentrations of lead in the soil and is currently under scrutiny of the California Department of Toxic Substance Control (DTSC). We cannot excavate on this site without DTSC review and approval of a soil management plan that would take up to a year to obtain and would disrupt the current process that is well under way for the current plan to develop a park. Sincerely, __Dicer ck Anderson, PE Vice President, Principal Civil Engineer 4499 Ruffin Road, Suite 250 ppc-sd.com telephone 858.634.8180 San Diego, California 92123 facsimile 858.634.8184 Attachment No. 3 PURCHASE AND SALE AGREEMENT (302 West 19th Street) THIS PURCHASE AND SALE AGREEMENT (302 West 19th Street) ("Agreement") dated as of the 5th day of February, 2018, by and between Frank Safley and Deborah Safley, husband and wife (collectively, the "Seller"), and the City of National City ("Purchaser"). RECITALS A. The Seller owns the fee interest in that certain real property generally located at 19th Street and Harding Avenue, with an address of 302 West 19th Street in the City of National City, County of San Diego, California, which is legally described on Exhibit A attached hereto and made a part hereof ("Property"). Seller and Purchaser desire for Seller to sell the Property to Purchaser at fair market value, and for Purchaser to purchase the Property from Seller. B. The Seller agrees to sell the Property to Purchaser for an amount equal to its current fair market value of Nine Hundred Five Thousand and No/100 Dollars ($905,000.00), which amount shall be payable by Purchaser to Seller in cash at Closing. C. Seller's sale of the Property to Purchaser and Purchaser's purchase of the Property are in the vital and best interest of the City of National City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements. AGREEMENT FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are acknowledged, Purchaser and Seller hereby agree as follows: I . Effectiveness of Agreement and Purchase and Sale. (a) Effectiveness of Agreement. This Agreement shall be effective and binding upon all parties hereto concurrently with the last to occur of the following: (i) this Agreement has been duly executed by Purchaser and delivered by Purchaser to Seller; (ii) this Agreement has been formally approved by resolution of the Purchaser's board; and (iii) this Agreement has been duly executed by Seller and delivered by Seller to Purchaser. Under no circumstances will this Agreement be effective before all of the preceding have occurred. (b) Purchase and Sale of the Property. In consideration of the mutual covenants set forth in this Agreement, and on the terms and conditions set forth herein, Seller agrees to sell the Property to Purchaser, and Purchaser agrees to purchase the Property from Seller on the terms and conditions set forth herein, provided the various conditions to Closing set forth in this Agreement are satisfied or waived as provided herein. At Closing, Seller shall convey to Purchaser title to the Property by recordation of the Grant Deed. The Escrow Agent shall issue the Title Policy (as defined below) to the Purchaser at Closing. Attachment No. 3 (c) Possession of the Property. The Seller shall deliver possession of the Property to Purchaser at Closing. Possession of the Property shall be delivered to Purchaser subject only to the Property Documents, the Tenant Agreements and the Permitted Exceptions. 2. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Agreement" means this Purchase and Sale Agreement between the Seller and the Purchaser. "Business Day" means any day other than a Saturday, Sunday or any other day on which Purchaser or Escrow Agent is not open for business. In the event any date, deadline or due date set forth in this Agreement falls on a day that is not a Business Day, then such deadline or due date shall automatically be extended to the next Business Day. "Close" or "Closing" means the close of Escrow as provided herein, which shall occur on the Closing Date. "Closing Date" means the close of Escrow as provided herein, which shall be one (1) Business Day after the latest of: (i) the date all of the Conditions Precedent for the Benefit of the Seller have been satisfied; and (ii) the date all of the Conditions Precedent for the Benefit of the Purchaser have been satisfied. The Closing shall occur on or before March 31, 2018. "Conditions Precedent for the Benefit of the Seller" shall have the meaning set forth in Section 5 of this Agreement. "Conditions Precedent for the Benefit of the Purchaser" shall have the meaning set forth in Section 6 of this Agreement. "Deposit" shall have the meaning set forth in Section 3(a) of this Agreement. "Due Diligence Period" means the period of time commencing on the Effective Date and ending at 5:00 p.m. Pacific time on March 15, 2018. "Effective Date" means February 5, 2018, which may or may not be the date this Agreement was executed and delivered by the Seller or the Purchaser. "Escrow" means the escrow depository and disbursement services to be performed by Escrow Agent pursuant to the provisions of this Agreement. "Escrow Agent" means Della DuCharme at Chicago Title Company, 701 B Street, Suite 1120, San Diego, California 92101. 2 Attachment No. 3 "Grant Deed" means a duly executed and acknowledged grant deed conveying fee simple title to the Property from Seller to Purchaser. "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United State Government. Provided, however, the term "Hazardous Materials" shall not include substances typically used in the ordinary course of developing, operating and maintaining apartment complexes in California or small amounts of chemicals, cleaning agents and the like commonly employed in routine household uses in a manner typical of occupants in other similar properties, provided that such substances are used in compliance with applicable laws. "Immediately Available Funds" means a bank wire transfer or a certified bank or cashier's check. "Permitted Exceptions" means (i) the printed exceptions and exclusions in the Title Policy; (ii) the exceptions to title set forth in Schedule B to the Title Report (as defined in Section 4(e) below) which are approved by Purchaser in writing, or deemed approved by Purchaser, as provided in Section 4(e) below; (iii) real property taxes and assessments which are a lien but not yet payable; (iv) any title exceptions caused, consented to or preapproved by Purchaser; and (v) all applicable building, zoning and use restrictions and/or regulations of any municipality, township, county or state; (vii) defects that would be shown by an inspection or by a survey of the Real Property; and (viii) any reserved oil, water and/or mineral rights. "Property" means that certain real property generally located at 302 West 19th Street in the City of National City, County of San Diego, California, which is legally described on Exhibit A attached hereto and made a part hereof. "Property Documents" means a current delinquency report, property tax bills, capital contracts, site maps, floorplans, business licenses and permits, permits and approvals from the City or County and any governing authorities, conditions imposed by any governmental authorities which affect the development or use of the Property, soils reports, engineering studies or surveys, studies and reports concerning the possibility of hazardous, contaminated or toxic materials on or near the Property, active contracts, drawings, plans, specifications, with respect to the Property that are in Seller's possession. "Purchase Price" shall have the meaning set forth in Section 3 of this Agreement. "Purchaser" means the City of National City. "Rent Roll" means the rent roll and security deposit report for the Project. "Seller" means collectively, Frank Safley and Deborah Safley, husband and wife. 3 Attachment No. 3 "Tenant Agreements" means all leases and all other rental or occupancy agreements with the tenants listed on the Rent Roll as of the Effective Date. "Title Policy" means a CLTA Owner's Policy of Title Insurance in the amount of the Purchase Price, insuring that title to the fee interest in the Property is vested in the Purchaser subject only to the Permitted Exceptions, which Title Policy shall be obtained through the Escrow Agent. Seller shall pay the cost of the CLTA Owner's Policy of Title Insurance. Purchaser shall pay the cost of any endorsements it desires. Purchaser may obtain an ALTA Owner's Policy of Title Insurance in which event Purchaser shall pay the cost difference between the cost of the ALTA Owner's Policy of Title Insurance and the cost of a CLTA Owner's Policy of Title Insurance. 3. Purchase Price. The purchase price to be paid by the Purchaser for all of the Property shall be Nine Hundred Five Thousand and No/I00 Dollars (S905,000.00) ("Purchase Price"). (a) Deposit. Purchaser shall make a deposit into Escrow of Immediately Available Funds in the amount of Twenty -Five and No/100 Dollars ($25,000.00) (the "Deposit") within three (3) Business Days of the Effective Date. The Deposit shall be refundable until the expiration of the Due Diligence Period. If the Purchaser elects to terminate this Agreement prior to expiration of the Due Diligence Period, as set forth in Section 4, below, then upon receipt of written notice from the Seller and the Purchaser, the Escrow Agent shall return the Deposit to the Purchaser, plus any interest earned thereon. Provided, however, all fees and costs charged by the Escrow Agent shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Purchaser. Notwithstanding anything to the contrary set forth herein, the Deposit and any other deposits made by the Purchaser shall be fully refundable to the Purchaser until such time as this Agreement has been approved by resolution of the City Council of the City of National City, in its sole discretion. The Seller hereby acknowledges that the Purchaser is prohibited by law from purchasing the Property, without the approval of the City Council of the City of National City. (b) LIQUIDATED DAMAGES. THE DEPOSIT SHALL BE REFUNDABLE TO THE PURCHASER AS MAY BE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT. IF ESCROW FAILS TO CLOSE AS A RESULT OF PURCHASER'S DEFAULT HEREUNDER, THE SOLE REMEDY OF THE SELLER SHALL BE TO TERMINATE THIS AGREEMENT BY GIVING WRIT FEN NOTICE THEREOF TO PURCHASER AND ESCROW AGENT, WHEREUPON THE SELLER SHALL RETAIN THE DEPOSIT(S) AND ALL INTEREST THEREON AS LIQUIDATED DAMAGES (AND, THE SELLER WAIVES ANY RIGHT TO SPECIFICALLY ENFORCE THIS AGREEMENT SET FORTH IN CALIFORNIA CIVIL CODE SECTION 1680 OR 3389). THEREAFTER, NO PARTY HERETO SHALL HAVE ANY FURTHER LIABILITY OR OBLIGATION TO ANY OTHER PARTY HERETO EXCEPT FOR: (i) THE SELLER'S RIGHT TO RECEIVE AND RETAIN SUCH LIQUIDATED DAMAGES; (ii) THE OBLIGATION OF THE PARTIES TO PAY AMOUNTS INTO ESCROW TO PAY THE FEES AND COSTS OF ESCROW; AND (iii) ATTORNEYS' FEES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE SELLER'S ACTUAL DAMAGES IN THE EVENT OF PURCHASER'S DEFAULT HEREUNDER ARE UNCERTAIN IN AMOUNT AND DIFFICULT TO ASCERTAIN, AND THAT SUCH AMOUNT OF LIQUIDATED DAMAGES IS REASONABLE UNDER THE PROVISIONS 4 Attachment No. 3 OF CALIFORNIA CIVIL CODE SECTION 1671 ET SEQ., CONSIDERING ALL OF THE CIRCUMSTANCES EXISTING ON THE DATE HEREOF INCLUDING, WITHOUT LIMITATION, THE RELATIONSHIP OF SUCH AMOUNT TO THE RANGE OF POTENTIAL HARM TO THE SELLER THAT CAN REASONABLY BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL DAMAGES RESULTING FROM SUCH DEFAULT WOULD BE COSTLY AND INCONVENIENT. EACH PARTY HERETO SPECIFICALLY CONFIRMS THE ACCURACY OF THE FOREGOING AND THE FACT THAT SUCH PARTY HAS BEEN REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION. THE PROVISIONS OF THIS SECTION 3(B) SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT. PURCHASER SELLER (c) Delivery of Remainder of Purchase Price into Escrow. Not less than one (I ) Business Day prior to the Closing Date, the Purchaser shall cause Immediately Available Funds to be delivered to the Escrow Agent in an amount equal to the Purchase Price, minus the Deposit and any interest earned on the Deposit, and plus or minus any adjustments for prorations and expenses required under this Agreement. (d) Disbursement to the Seller. Immediately after the Closing, the Escrow Agent shall disburse to the Seller the funds that the Seller is entitled to receive hereunder. 4. Due Diligence. (a) Due Diligence Period. During the Due Diligence Period the Purchaser may determine in the Purchaser's sole and absolute discretion, whether to proceed with the purchase of the Property. During the Due Diligence Period, the Purchaser may terminate this Agreement for any reason or for no reason at all by delivering written notice of such termination to the Seller and Escrow. After expiration of the Due Diligence Period, the Purchaser's right to terminate this Agreement for any reason, or for no reason at all, shall expire and the Deposit shall become nonrefundable. If this Agreement is terminated during the Due Diligence Period, then: (i) all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately terminate, except for rights and liabilities that specifically survive such termination; (ii) Escrow Agent shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser, less any fees and costs charged by the Escrow Agent; and (iii) Escrow Agent shall return to the Seller all funds or other things deposited in Escrow by the Seller. (b) Due Diligence Deliveries. Not later than three (3) Business Days after execution and delivery of this Agreement to the Escrow Agent, the Seller shall provide, the Purchaser with true and correct copies of the Rent Roll, Tenant Agreements, Property Documents and all plans and specifications for the Property (including a set of current as -built plans and specifications, if any) if any, to the extent the same are in the Seller's possession, by any of the following methods 5 Attachment No. 3 provide physical copies or digital copies (e.g. a pdf, of or jpg file) by email or on a memory medium. (c) Tenant Estoppel Certificates. Seller shall provide to Purchaser a Tenant Estoppel Certificate from each Tenant in a form approved by the Seller least five (5) days, but not more than fifteen (15) days, prior to the Closing. (d) Access to the Property. During the Due Diligence Period, Purchaser and its representatives, consultants and attorneys shall have access to the Property. Purchaser shall defend and shall indemnify the Seller and the Seller's agents and employees and the Property from and against, and shall hold the Seller, the Seller's agents and employees and the Property harmless from, any actions, losses, costs, damages, claims and/or liabilities, including but not limited to, mechanics' and materialmen's liens and attorney fees, proximately caused by the actions of Purchaser and/or its contractors or agents upon the Property. The Purchaser shall repair any damage caused to the Property by the Purchaser or its agents, employees or contractors. The Purchaser shall not permit any mechanic's, matcrialman's, contractor's, subcontractor's or other lien arising from any work done by the Purchaser or its agents pursuant to this Agreement to stand against the Property. If any such lien shall be filed against the Property, the Purchaser shall cause the same to be discharged or bonded by payment, deposit, bond or otherwise, within thirty (30) days after actual notice of such filing. The Purchaser's obligations under this Section 4(d) shall survive the termination or expiration of this Agreement. If Purchaser desires to do any invasive testing at the Property, the Purchaser may do so only after obtaining Seller's prior written consent to the same, which consent may be withheld or granted on conditions in Seller's reasonable discretion. The Purchaser shall promptly restore the Property to the condition the Property was in immediately prior to any such tests, at the Purchaser's sole cost and expense. The Purchaser shall provide the Seller with a complete set of plans, drawings and specifications ("Invasive Testing Plans") that define to the sole satisfaction of the Seller the invasive testing to be performed on the Property and the names of all environmental and other consultants, contractors and subcontractors who will be performing such invasive testing (collectively "Purchaser's Consultants"). The Purchaser shall deliver the names of the Purchaser's Consultants and the Invasive Testing Plans to the Seller concurrently with its request to the Seller that the Purchaser desires to perform invasive testing. (e) Title. Purchaser's obligation to purchase the Property is contingent upon Purchaser's approval of all matters affecting title to or use of the Real Property (collectively, "Title Matters"). The intent of this Section 4(e) is to allow the parties to have certainty regarding the condition of title and the Title Matters which are acceptable to the Purchaser. The procedure set forth in this Section 4(e) shall not affect or otherwise limit the Purchaser's right to terminate this Agreement for any reason or no reason at all as set forth in Section 4, above. Seller shall use commercially reasonable efforts to cause the Title Company to deliver to Purchaser within three (3) Business Days of the Effective Date, a current preliminary title report for the Real Property and, to the extent possible, legible copies of all documents referred to therein ("Title Report"). Purchaser shall have ten (10) Business Days thereafter, to approve or object to any items disclosed by the Title Report. If Purchaser does not give written notice to Seller of Purchaser's approval or disapproval of any items disclosed by the Title Report within said time period, then Purchaser shall be deemed to have approved the items disclosed by the Title Report. If 6 Attachment No. 3 Purchaser gives written notice to Seller of Purchaser's disapproval of any items disclosed by the Title Report within said time period and Seller does not give written notice to Purchaser within five (5) Business Days thereafter of either: (i) Seller's elimination of or agreement to eliminate those disapproved matters prior to the close of Escrow; or (ii) Seller's agreement to provide at Seller's sole expense such title insurance endorsements relating thereto as are acceptable to Purchaser in Purchaser's sole discretion prior to the close of Escrow (each, a "Cure Notice"), then this Agreement shall terminate immediately, unless Purchaser affirmatively agrees in writing within five (5) Business Days thereafter that this Agreement will remain in full force and effect and that the previously disapproved items disclosed by the Title Report are approved by Purchaser. If the Title Company issues a supplemental title report prior to the close of Escrow showing additional exceptions to title ("Title Supplement"), Purchaser shall have five (5) Business Days from the date of receipt of the Title Supplement and a copy of each document referred to in the Title Supplement in which to give Seller written notice of disapproval as to any additional exceptions; provided, however, Purchaser may not disapprove any exceptions that were contained in the original Title Report or are otherwise Permitted Exceptions. Purchaser's failure to deliver any such written notice of disapproval of the Title Supplement within such five (5) Business Day period shall be deemed to mean that Purchaser has approved all such additional exceptions. If Purchaser disapproves any additional exception shown in the Title Supplement, then Purchaser and Seller will have the same rights and obligations set forth above in this Section regarding Purchaser's original review and approval of the Title Report. Notwithstanding the foregoing, Seller shall cause all Title Matters which are mechanics' liens or deeds of trust to be eliminated as exceptions to title on the Title Policy at Seller's sole expense prior to the close of Escrow, and shall not record any documents against the Property from and after the Effective Date without Purchaser's prior written consent. 5. Conditions Precedent for the Benefit of the Seller. The Seller's obligation to Close shall be conditioned upon the satisfaction or emailed or written waiver by the Seller of all of the conditions precedent ("Conditions Precedent for the Benefit of the Seller") set forth in this Section 5. Any of the Conditions Precedent for the Benefit of the Seller may be waived by the Seller unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is expressly waived by Seller by either: (i) email from the Seller to the Purchaser and Escrow Agent; or (ii) in a writing signed by the Seller and delivered to the Purchaser and Escrow Agent. If the Conditions Precedent for the Benefit of the Seller set forth in this Section 5 are not satisfied by the deadlines or expressly waived, the Seller (provided the Seller is not in default hereunder) may provide emailed or written notice of the Seller's conditional termination of this Agreement to the Purchaser and Escrow Agent. After receipt of such notice of conditional termination, the Purchaser shall have ten (10) Business Days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten (10) Business Day period, then this Agreement Instructions shall terminate at the close of business on such tenth (10111) Business Day. In the event of termination of this Agreement (and by operation of law the Escrow) pursuant to this Section 5, then: (w) as set forth in the liquidated damages provision of Section 3(b), above, all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately terminate except those which specifically survive such termination; (x) Escrow Agent shall deliver the Deposit and all interest thereon to the Seller and shall return to the Seller all funds or other things deposited in 7 Attachment No. 3 Escrow by the Seller; (y) Escrow Agent shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser, less the Deposit and all interest thereon, and less all fees and costs charged by the Escrow Agent. Notwithstanding the preceding clause (w) of this Section 5, in the event of termination of this Agreement pursuant to this Section 5, the Seller and the Purchaser shall cooperate with one another, execute all documents reasonably necessary and take all reasonable steps as may be required by Escrow Agent in order to accomplish the purposes of this Section 5. The Conditions Precedent for the Benefit of the Seller are: (a) Purchaser making the Deposit into Escrow, as set forth in Section 3(a). above. (b) The delivery by the Purchaser into Escrow, at least one (1) Business Day prior to Closing of Immediately Available Funds equal to the Purchase Price (less the Deposit and plus or minus expenses and prorations) as required by Section 3(c) above. (c) The delivery by the Purchaser into Escrow at least one (1) Business Day prior to Closing of all other documents and instruments required by this Agreement or reasonably required by Escrow to complete the Closing. (d) Purchaser not being in default of any of its representations or warranties under this Agreement, or any other material tenns or conditions related to Purchaser, and all of the Purchaser's representations and warranties under this Agreement being true and correct as of the Closing Date. (e) As of the Closing Date, the Purchaser has not made an assignment for the benefit of creditors, filed a bankruptcy petition, been adjudicated insolvent or bankrupt, petitioned a court for the appointment of any receiver of, or trustee for, the Purchaser, or commenced any proceeding relating to the Purchaser under any reorganization, arrangement, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or later in effect. 6. Conditions Precedent for the Benefit of the Purchaser. The Purchaser's obligation to Close shall be conditioned upon the satisfaction or emailed or written waiver by the Purchaser of all of the conditions precedent ("Conditions Precedent for the Benefit of the Purchaser") set forth in this Section 6. Any of the Conditions Precedent for the Benefit of the Purchaser may be waived by the Purchaser unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is expressly waived by email from the Purchaser to the Seller and Escrow Agent or in writing signed by the Purchaser and delivered to the Seller and Escrow Agent. If the Conditions Precedent for the Benefit of the Purchaser are not satisfied by the deadlines set forth in this Section 6 or expressly waived, the Purchaser (provided the Purchaser is not in default hereunder) may provide emailed or written notice of the Purchaser's conditional termination of this Agreement to the Seller and Escrow Agent. After receipt of such notice of conditional termination, the Seller shall have ten (10) Business Days to cure any non -satisfaction of a condition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten (10) Business Day period, then this Agreement shall terminate at the close of business on such tenth (10`h) Business Day. In the event of termination of this Agreement (and by operation of law the Escrow) pursuant to this Section 6, then: (w) the same 8 Attachment No. 3 shall be a default by the Seller; (x) Escrow Agent shall return to the Seller all funds or other things deposited in Escrow by the Seller; (y) Escrow Agent shall upon receipt of unilateral notice from the Purchaser, return to the Purchaser all funds or other things deposited in Escrow by the Purchaser; and (z) all fees and costs charged by the Escrow Agent shall be paid by the Seller. Purchaser is not waiving any default by the Seller and nothing contained in this Section 6, including, without limitation, the immediately foregoing sentence shall be a waiver of any right of Purchaser to recover damages from the Seller for any default by Seller hereunder. Notwithstanding the foregoing clause (w) of this Section 6, in the event of termination of this Agreement pursuant to this Section 6, the Purchaser and the Seller shall cooperate with one another, execute all documents reasonably necessary and take all reasonable steps as may be required by Escrow Agent in order to accomplish the purposes of this Section 6. The Conditions Precedent for the Benefit of Purchaser are: (a) The deposit by the Seller into Escrow at least one (1) Business Day prior to Closing of the Grant Deed, duly executed and acknowledged, conveying fee simple title to the Property to the Purchaser. (b) The deposit by the Seller into Escrow at least one (1) Business Day prior to Closing of the Assignment, duly executed, conveying title to the Personal Property to the Purchaser. (c) The deposit by Seller into Escrow at least one (1) Business Day prior to Closing of a duly executed affidavit in the form prescribed by federal regulations that Seller is not a foreign person and is a "United States Person" as such term is defined in Section 7761(a)(30) of the Internal Revenue Code of 1986, as amended. (d) The deposit by Seller into Escrow at least one (1) Business Day prior to Closing of a duly executed California Form 593(c) or other evidence that withholding of any portion of the Purchase Price is not required by the Revenue and Taxation Code of California with respect to Seller. (c) The deposit by the Seller into Escrow at least one (1) Business Day prior to Closing of all additional documents and instruments as are reasonably required by the Escrow Agent to complete the Closing. (f) The Escrow Agent is prepared and obligated to issue the Title Policy in Purchaser's favor, upon the recordation of the Grant Deed and there are no exceptions to the Title Policy, except for the Permitted Exceptions. (g) As of the Closing Date, there exists no lease, tenancy or occupancy agreement affecting the Property, except for the Tenant Agreements, Property Documents. (h) Seller not being in default of any of its representations or warranties under this Agreement, or any other material terms or conditions related to Seller, and all of Seller's representations and warranties under this Agreement being true and correct as of the Closing Date. 9 Attachment No. 3 (i) As of the Closing Date there is not pending, or threatened to be pending, any action or proceeding by any person or before any government authority, the outcome of which could prohibit the use of the Property as intended by the Purchaser. (j) The Escrow Agent is prepared and obligated to issue the Title Policy in Purchaser's favor, upon the recordation of the Grant Deed and there are no exceptions to the Title Policy, except for the Permitted Exceptions. 7. Representations, Warranties and Covenants; Waivers and Releases. When making the representations and warranties set forth in this Section 7, each party making a representation and/or warranty represents that the same are true, correct and complete as of the date hereof and shall be and are true, correct and complete as of the Closing Date. The representations and warranties shall survive the Closing. (a) Representations and Warranties Regarding Authority. The Seller and the Purchaser each hereby represents and warrants to the other that this Agreement and all documents or instruments executed by them which are to be delivered at or prior to the Closing are, or on the Closing Date will be, duly authorized, executed and delivered by the Seller or the Purchaser, as applicable. (b) Representations and Warranties Regarding Enforceability of Agreement. The Seller and the Purchaser each hereby represents and warrants to the other that this Agreement and all documents required hereby to be executed by them shall be valid, legally binding obligations of, and enforceable against, the Seller or the Purchaser, as applicable, in accordance with their terms. (c) Representations and Warranties Pertaining to Legal Matters. The Seller hereby represents and warrants to the Purchaser that: (1) The Seller is the sole owner of the fee title interest to the Real Property. (2) To the current actual knowledge of Seller, there is no pending or threatened proceeding in eminent domain or otherwise, which would adversely affect the Property, or any portions thereof. (d) Seller Representations and Warranties Pertaining to Options. As of the Effective Date, Seller hereby represents and warrants to the Purchaser that no person has any option or right of first refusal to purchase Seller's interest in the Property or any parts thereof. (e) Seller Representation and Warranty Pertaining to Rent Roll. The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Rent Roll and all other documents required to be delivered to Purchaser are true and correct in all material respects as of the dates set forth thereon. 10 Attachment No. 3 (f) Seller Representation and Warranty Pertaining to Tenant Agreements. The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Tenant Agreements constitute all of the oral and written agreements or understandings concerning the leasing or occupancy of the Property by which the Purchaser would be bound following the Closing. (g) Seller Representation and Warranty Regarding Operation of the Property. The Seller hereby represents and warrants to the Purchaser that to the current actual knowledge of Seller, the Property Documents and the Permitted Exceptions constitute all of the oral and written agreements or understandings concerning the Property by which the Purchaser would be bound following the Closing other than the Tenant Agreements. (h) Seller Representations and Warranties Regarding Discovery of New Information. The Seller hereby represents and warrants to the Purchaser that if the Seller discovers any information or facts prior to Closing that would materially change any of the foregoing representations and warranties or cause any of the foregoing representations and warranties to be untrue or misleading in any respect, the Seller will promptly give the Purchaser notice of those facts and information. (i) AS IS CONDITION. PURCHASER HEREBY ACKNOWLEDGES, REPRESENTS, WARRANTS, COVENANTS AND AGREES THAT AS A MATERIAL INDUCEMENT TO SELLER TO EXECUTE AND ACCEPT THIS AGREEMENT AND IN CONSIDERATION OF THE PERFORMANCE BY SELLER OF ITS DUTIES AND OBLIGATIONS UNDER THIS AGREEMENT THAT, EXCEPT FOR SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7 OF THIS AGREEMENT, THE SALE OF THE PROPERTY HEREUNDER IS AND WILL BE MADE ON AN "AS IS, WHERE IS" BASIS, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, FUTURE OR OTHERWISE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE PROPERTY, INCLUDING BUT NOT LIMITED TO: (1) THE EXISTENCE OF HAZARDOUS MATERIALS OR MOLD UPON THE PROPERTY OR ANY PORTION THEREOF; (2) GEOLOGICAL CONDITIONS, INCLUDING, WITHOUT LIMITATION, SUBSIDENCE, SUBSURFACE CONDITIONS, WATER TABLE, UNDERGROUND WATER RESERVOIRS, LIMITATIONS REGARDING THE WITHDRAWAL OF WATER AND FAULTING; (3) WHETHER OR NOT AND TO THE EXTENT TO WHICH THE PROPERTY OR ANY PORTION THEREOF IS AFFECTED BY ANY STREAM (SURFACE OR UNDERGROUND), BODY OF WATER, FLOOD PRONE AREA, FLOOD PLAIN, FLOODWAY OR SPECIAL FLOOD HAZARD; (4) DRAINAGE; (5) SOIL CONDITIONS, INCLUDING THE EXISTENCE OF INSTABILITY, PAST SOIL REPAIRS, SOIL ADDITIONS OR CONDITIONS OF SOIL FILL, OR SUSCEPTIBILITY TO LANDSLIDES, OR THE SUFFICIENCY OF ANY UNDERSHORTNG; (6) USES OF ADJOINING PROPERTIES; (7) THE VALUE, COMPLIANCE WITH THE PLANS AND SPECIFICATIONS, SIZE, LOCATION, AGE, USE, DESIGN, QUALITY, DESCRIPTION, DURABILITY, STRUCTURAL INTEGRITY, OPERATION, TITLE TO, OR PHYSICAL OR 11 Attachment No. 3 FINANCIAL CONDITION OF THE PROPERTY OR ANY PORTION THEREOF, OR ANY RIGHTS OR CLAIMS ON OR AFFECTING OR PERTAINING TO THE PROPERTY OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, WHETHER OR NOT THE IMPROVEMENTS COMPLY WITH THE REQUIREMENTS OF TITLE III OF THE AMERICANS WITH DISABILITIES ACT OF 1990, 42 U.S.C. §§ 12181-12183, 12186(B) - 12189 AND RELATED REGULATIONS; (8) THE PRESENCE OF HAZARDOUS MATERIALS IN OR ON, UNDER OR IN THE VICINITY OF THE PROPERTY; (9) THE SQUARE FOOTAGE OF THE PROPERTY OR THE IMPROVEMENTS THEREON; (10) IMPROVEMENTS AND INFRASTRUCTURE, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE ROOF, FOUNDATION, FIXTURES, AND PERSONAL PROPERTY, IF ANY; (11) DEVELOPMENT RIGHTS AND EXTRACTIONS; (12) WATER OR WATER RIGHTS; (13) THE DEVELOPMENT POTENTIAL FOR THE PROPERTY; (14) THE ABILITY OF PURCHASER TO REZONE THE PROPERTY OR CHANGE THE USE OF THE PROPERTY; (15) THE ABILITY OF PURCHASER TO ACQUIRE ADJACENT PROPERTIES; (16) THE EXISTENCE AND POSSIBLE LOCATION OF ANY UNDERGROUND UTILITIES; (17) THE EXISTENCE AND POSSIBLE LOCATION OF ANY ENCROACHMENTS; (18) WHETHER THE IMPROVEMENTS ON THE PROPERTY WERE BUILT, IN WHOLE OR IN PART, IN COMPLIANCE WITH APPLICABLE BUILDING CODES; (19) THE STATUS OF ANY LIFE -SAFETY SYSTEMS IN THE IMPROVEMENTS ON THE PROPERTY; (20) THE CHARACTER OF THE NEIGHBORHOOD IN WHICH THE PROPERTY IS SITUATED; (21) THE CONDITION OR USE OF THE PROPERTY OR COMPLIANCE OF THE PROPERTY WITH ANY OR ALL PAST, PRESENT OR FUTURE FEDERAL, STATE OR LOCAL ORDINANCES, RULES, REGULATIONS OR LAWS, BUILDING, FIRE OR ZONING ORDINANCES, CODES OR OTHER SIMILAR LAWS; AND/OR (22) THE MERCHANTABILITY OF THE PROPERTY OR FITNESS OF THE PROPERTY FOR ANY PARTICULAR PURPOSE (PURCHASER AFFIRMING THAT PURCHASER HAS NOT RELIED ON SELLER'S SKILL OR JUDGMENT TO SELECT OR FURNISH THE PROPERTY FOR ANY PARTICULAR PURPOSE, AND THAT SELLER MAKES NO WARRANTY THAT THE PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE). NOTWITHSTANDING THE FOREGOING OR ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, SELLER IS NOT RELEASED FROM ANY LIABILITY TO PURCHASER FOR FRAUD OR BREACH OF ANY EXPRESS COVENANT, REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT. PURCHASER ACKNOWLEDGES THAT AS OF THE EXPIRATION OF THE DUE DILIGENCE PERIOD, PURCHASER SHALL HAVE COMPLETED ALL PHYSICAL AND FINANCIAL EXAMINATIONS RELATING TO THE ACQUISITION OF THE PROPERTY HEREUNDER (IT BEING ACKNOWLEDGED AND AGREED THAT PURCHASER SHALL BE DEEMED TO HAVE INSPECTED EACH APARTMENT UNIT WITHIN THE PROPERTY) AND WILL ACQUIRE THE SAME SOLELY ON THE BASIS OF SUCH EXAMINATIONS AND THE TITLE INSURANCE PROTECTION FOR THE PROPERTY AFFORDED BY THE TTTLE POLICY, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, AND SUBJECT TO SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7 OF THIS AGREEMENT. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED 12 Attachment No. 3 OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT THE SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, AND SUBJECT TO SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT. SELLER SHALL NOT BE LIABLE FOR ANY NEGLIGENT MISREPRESENTATION OR FAILURE TO INVESTIGATE THE PROPERTY NOR SHALL SELLER BE BOUND IN ANY MANNER BY ANY VERBAL OR WRI t 1hN STATEMENTS, REPRESENTATIONS, APPRAISALS, ENVIRONMENTAL ASSESSMENT REPORTS, OR OTHER INFORMATION PERTAINING TO THE PROPERTY OR THE OPERATION THEREOF, FURNISHED BY SELLER, OR ANY REAL ESTATE BROKER, AGENT, REPRESENTATIVE, EMPLOYEE, SERVANT OR OTHER PERSON ACT1NG ON SELLER'S BEHALF EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7 OF THIS AGREEMENT. IT IS ACKNOWLEDGED AND AGREED THAT THE PROPERTY 1S SOLD BY SELLER AND PURCHASED BY PURCHASER SUBJECT TO THE FOREGOING. NOTWITHSTANDING THE FOREGOING OR ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, SELLER IS NOT RELEASED FROM ANY LIABILITY TO PURCHASER FOR FRAUD OR BREACH OF ANY COVENANT, REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT. PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT PURCHASER IS FULLY AWARE OF THE AGE OF THE PROPERTY, THAT OVER TIME VARIOUS EVENTS MAY HAVE OCCURRED ON THE PROPERTY WHICH EVENTS MAY BE TYPICAL AND/OR ATYPICAL OF EVENTS OCCURRING TO OTHER PROPERTIES OF SIMILAR AGE TO THE PROPERTY AND SIMILARLY LOCATED IN THE CITY OF SAN DIEGO AND/OR THE COUNTY OF SAN DIEGO, CALIFORNIA, AND THAT SUCH EVENTS MAY INCLUDE, WITHOUT LIMITATION, SLAB LEAKS, MOLD, FIRE, SHIFTING, AND VIOLATIONS OF LAWS, ORDINANCES, RULES, REGULATIONS, PERMITS, APPROVALS, LICENSES AND/OR ORDERS OF GOVERNMENTAL AGENCIES WITH JURISDICTION OVER THE PROPERTY. THE CLOSING OF THE PURCHASE OF THE PROPERTY BY PURCHASER HEREUNDER SHALL BE CONCLUSIVE EVIDENCE THAT: (A) PURCHASER HAS FULLY AND COMPLETELY INSPECTED (OR HAS CAUSED TO BE FULLY AND COMPLETELY INSPECTED) THE PROPERTY; AND (B) PURCHASER ACCEPTS THE PROPERTY AS BEING IN GOOD AND SATISFACTORY CONDITION AND SUITABLE FOR PURCHASER'S PURPOSES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT FOR RELIANCE ON THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, PURCHASER SHALL PERFORM AND RELY SOLELY UPON ITS OWN INVESTIGATION CONCERNING ITS INTENDED USE OF THE PROPERTY, AND THE PROPERTY'S FITNESS THEREFOR. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT SELLER'S COOPERATION WITH PURCHASER WHETHER BY 13 Attachment No. 3 PROVIDING DOCUMENTS RELATING TO THE PROPERTY OR PERMITTING INSPECTION OF THE PROPERTY, SHALL NOT BE CONSTRUED AS ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OF ANY KIND WITH RESPECT TO THE PROPERTY, OR WITH RESPECT TO THE ACCURACY, COMPLETENESS, OR RELEVANCE OF THE DOCUMENTS PROVIDED TO PURCHASER BY SELLER IN RELATION TO THE PROPERTY, PROVIDED THAT THE FOREGOING SHALL NOT BE A LIMITATION OR MODIFICATION OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT. 8. Condemnation of the Property. (a) Condemnation. If between the Effective Date and the Closing Date, any condemnation or eminent domain proceedings are commenced that will result in the taking of any part of the Property, Purchaser may, at Purchaser's election, either: (1) Terminate this Agreement by giving written or emailed notice to the Seller and the Escrow Agent (in which event all remaining funds or other things deposited in Escrow by Purchaser, including without limitation, the Deposit, shall be returned to the Purchaser immediately from Escrow, together with any interest earned thereon and all fees and costs charged by the Escrow Agent shall be paid one-half (1 /2) by the Seller and one-half (1/2) by the Purchaser); or (2) Proceed with the Closing and have Seller assign to Purchaser all of Seller's right, title and interest to any award madc for the condemnation or eminent domain action. (b) Notice. If Seller obtains notice of the commencement of or the threatened commencement of eminent domain or condemnation proceedings with respect to the Property, Seller shall notify the Purchaser in writing. 9. Broker's Commission. Seller and Purchaser each hereby represents and warrants to one another that neither of them has engaged the services of any real estate agent or broker. Seller and Purchaser each agree that, to the extent any real estate commission or brokerage and/or finder's fee shall be earned or claimed in connection with this Agreement or the Closing, the payment of such fee or commission, and the defense of any action in connection therewith, shall be the sole and exclusive obligation of the party who requested the services of the broker and/or finder. In the event that any claim, demand or cause of action or brokerage and/or finder's fee is asserted against the party to this Agreement who did not request such services, the party through whom the broker or finder is making the claim shall indemnify, defend (with an attorney of the indemnitee's choice) and hold harmless the other from and against any and all such claims, demands and causes of action and expenses related thereto, including (without limitation) attorneys' fees and costs. 14 Attachment No. 3 10. Assignment. The Purchaser may assign this Agreement to an entity in which the Purchaser has a controlling or majority interest without the prior written consent of the Seller. Except as set forth in the immediately preceding sentence, no party shall assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other party hereto. Any attempted assignment or delegation of this Agreement by the Purchaser or Seller in violation of this Section 10 shall be void. 11. Notices. All notices under this Agreement shall be in writing and sent (a) by certified or registered mail, return receipt requested, in which case notice shall be deemed delivered three (3) Business Days after deposit, postage prepaid in the United States Mail, (b) overnight by a nationally recognized overnight courier such as UPS Overnight, or FedEx, in which case notice shall be deemed delivered one (1) Business Day after deposit with that courier, (c) by personal delivery, in which case notice shall be deemed delivered upon the actual date of delivery, or (d) by email, in which case notice shall be deemed delivered upon the actual date of delivery. All notices shall be delivered to the following addresses (unless changed by written notice to the other persons given in accordance with this Section 11: To Purchaser: Copy to: To Seller: City of National City 1243 National City Boulevard National City, California 91950 Attn: Brad Raulston Email: braulston(i nationalcityca.gov Office of the City Attorney 1243 National City Boulevard National City, California 91950 Attn: Roberto M. Contreras Email: rcontreras@nationalcityca.gov Christensen & Spath LLP 550 West C Street, Suite 1660 San Diego, California 92101 Attn. Walter F. Spath, Esq. Email: wfs@candslaw.net Frank Safley and Deborah Safley 111 12th Street Del Mar, California 92014 Email: fdsafley@gmail.com 12. Prorations. Real property taxes and assessments, utility costs, rents, service and maintenance contract payments for contracts that are being assumed by the Purchaser (which assumption shall be of all service and maintenance and similar type contracts with regard to the Property to the extent same are assignable), and other expenses of operating the Property (provided, however, no proration shall be made with regard to any capital improvements, as determined in accordance with generally accepted accounting principles) shall be prorated as of 15 Attachment No. 3 the close of Escrow. Sellers shall pay all real property taxes and assessments applicable to the period prior to the close of Escrow, and if any such taxes are unpaid after the close of Escrow, then Sellers shall pay them promptly and in any event within ten (10) days after Purchaser's request (which shall include a copy of the relevant tax bill). Sellers shall have the right, but not the obligation, to pursue after the close of Escrow collection from tenants of any rents due at the close of Escrow which are unpaid; provided, however, Sellers shall not have the right to bring any eviction proceedings against any such tenants. Purchaser shall use commercially reasonable efforts to collect rents after the close of Escrow which arc applicable to time periods prior to the close of Escrow and shall promptly remit same to Sellers, provided, however: (i) any rents collected by Purchaser shall be applied to any rents then due and owing which apply to any time periods after the close of Escrow before being applied to any pre -close of Escrow delinquent rents; and (ii) Purchaser shall not be required to bring any lawsuit to collect any pre -close of Escrow delinquent rents. Notwithstanding anything in this Agreement to the contrary, the provisions of the previous two (2) sentences and this sentence of this Section 12 shall survive the close of Escrow. 13. General Provisions. (a) Governing Law. This Agreement shall be interpreted and construed in accordance with California law. (b) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (c) Captions. The captions in this Agreement are inserted for convenience of reference and in no way define, describe or limit the scope or intent of this Agreement or any of the provisions of this Agreement. (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors, heirs and permitted assigns. (e) Modifications; Waiver. No waiver, modification, amendment, discharge or change of this Agreement shall be valid unless it is in writing and signed by the party against which the enforcement of the modification, waiver, amendment, discharge or change is sought. (f) Entire Agreement. This Agreement contains the entire agreement between the parties relating to Purchaser's acquisition of the Property from Seller and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are superseded. (g) Partial Invalidity. Any provision of this Agreement which is unenforceable, invalid, or the inclusion of which would adversely affect the validity, legality, or enforcement of this Agreement shall have no effect, but all the remaining provisions of this Agreement shall remain in full effect. 16 Attachment No. 3 (h) Survival; No Merger. This Agreement, including without limitation, all representations, warranties, covenants, agreements, indemnities and other obligations of Seller and Purchaser in this Agreement, shall survive the Closing of this transaction and will not be merged into the Grant Deed or any other document. (i) No Third -Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and their respective successors and assigns, any rights or remedies. (j) Time Of Essence. Time is of the essence in this Agreement. (k) Attorneys' Fees. The parties agree that the prevailing party in litigation for the breach and/or interpretation and/or enforcement of the terms of this Agreement shall be entitled to their reasonable expert witness fees, if any, as part of their costs of suit, and attorneys' fees as may be awarded by the court, pursuant to California Code of Civil Procedure ("CCP") Section 1033.5 and any other applicable provisions of California law, including, without limitation, the provisions of CCP Section 998. All claims, disputes, causes of action or controversies shall be subject solely to the jurisdiction of the San Diego Superior Court, Downtown Branch. (I) Relationship. Nothing contained in this Agreement shall be deemed or construed by the parties or by any third person to create a relationship of principal and agent or partnership or a joint venture between Purchaser and Seller or between either or both of them and any third party. (m) Recording. This Agreement shall not be recorded. (n) Purchaser Approval. Where this Agreement refers to an action or approval of the Purchaser, it shall mean the approval of the Executive Director of the Purchaser, or designee, unless otherwise provided. (o) Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. (p) Independent Counsel. Seller and Purchaser each acknowledge that: (i) they have been given the opportunity to be represented by independent counsel in connection with this Agreement; (ii) they have executed this Agreement with the advice of such counsel, if such counsel was retained; and (iii) this Agreement is the result of negotiations between the parties hereto and the advice and assistance of their respective counsel, if such counsel was retained. The fact that this Agreement was prepared or negotiated by Purchaser's or Seller's counsel as a matter of convenience shall have no import or significance. Any uncertainty or ambiguity in this Agreement shall not be construed against either party due to the fact that Purchaser's or Seller's counsel prepared or negotiated this Agreement in its final form. 17 Attachment No. 3 (q) Capacity and Authority. All individuals signing this Agreement for a party which is a corporation, limited liability company, partnership or other legal entity, or signing under a power of attorney, or as a trustee, guardian, conservator, or in any other legal capacity, represent and warrant to the other party that they have the necessary capacity and authority to act for, sign and bind the respective entity or principal on whose behalf they are signing. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. PURCHASER: City of National City By: Leslie Deese, City Manager APPROVED AS TO FORM: Angil P. Morris -Jones City Attorney By: Roberto M. Contreras Deputy City Attorney [SIGNATURES CONTINUED ON FOLLOWING PAGE1 18 Attachment No. 3 SELLER: Frank a ey 15.--"-) 19 `t5eborah Safley Attachment No. 3 Exhibit A Legal Description of the Property All that certain real property situated in the City of National City, County of San Diego, State of California, described as follows: Lots 19 through 22 of National City Refiled Map No. 348, plus adjacent closed alley, in the City of National City, County of San Diego, State of California 20 Attachment No. 4 APPRAISAL REPORT An Existing 3,403 SF Industrial/Residential Building Located at: 302 West 19th Street National City, California 91950 APPRAISED FOR Mr. Gregory Rose City of National City Property Agent Housing & Economic Development Department 140 East 12th Street, Suite B National City, CA 91950 DATE OF VALUATION September 19, 2017 DATE OF REPORT September 29, 2017 APPRAISED BY Brad C. Woodall, MAI 9922 Winecrest Road San Diego, CA 92127 (858) 876-2510 Attachment No. 4 BRAD C. WOODALL, MAI 9922 Winecrest Road • San Diego, CA 92127 • Telephone: (858) 876-2510 September 29, 2017 Mr. Gregory Rose City of National City Property Agent Housing & Economic Development Department 140 East 12th Street, Suite B National City, CA 91950 Mr. Rose: This appraisal report has been prepared for the purpose of estimating the "as is" fair market value of the fee simple interest of the property located at 302 West 19th Street, National City, California. The subject consists of an existing concrete block and wood frame and stucco mixed -use industrial/residential building containing 3,403 square feet on a 12,505 gross square foot lot. The first floor of the building is a single suite built -out for industrial use with office and storage space, while the second floor of the building has two two-bedroom/one-bath residential units. As of the date of value, the property was 100% occupied by three tenants. "As Is" Fair Market Value Based on analysis of recent market activity, it was concluded that the "as is" fair market value of the fee simple interest in the subject as of September 19, 2017 was: EIGHT HUNDRED TWENTY-FIVE THOUSAND DOLLARS $825,000 The estimated exposure time is nine months and the estimated marketing time is also nine months. The appraised value does not include any personal property items. This letter is only a part of the narrative appraisal report which follows (including the Addenda). For a brief summary of findings, please refer to the Summary of Salient Facts on page 1 of the report. This appraisal is for the exclusive use of the City of National City for loan underwriting. It may be used in connection with the acquisition, disposition, and financing of the sale of the property. No other use of the appraisal is authorized by the appraiser. Attachment No. 4 Page two Mr. Rose September 29, 2017 The value conclusion was developed subject to certain assumptions and limiting conditions which are listed later in the report. Subsequent changes in the assumptions may result in a different value conclusion. For that reason, the reader is strongly urged to review all of the assumptions and limiting conditions under which this appraisal was prepared. Thank you for this opportunity to be of service. Respectfully submitted, Brad C. Woodall, MAI CA Certification No. AG015729 Expiration date 2/12/19 Brad C. Woodall, MAI Attachment No. 4 TABLE OF CONTENTS INTRODUCTION Letter of Transmittal 1 Summary of Salient Facts 1 Subject Property Photographs 2 Assumptions and Limiting Conditions 4 Identification of the Subject Property 7 Identification of the Property Rights to be Valued 7 Function of the Appraisal 7 Type and Definition of Market Value 7 Date of the Value Estimate 8 Scope of the Appraisal 8 Property and Ownership History 9 FACTUAL DESCRIPTIONS Regional Description 11 City Description 14 Industrial Market Conditions 17 Apartment Market Conditions 21 Tax and Assessment Information 26 Site Description 28 Improvements Description 31 ANALYSIS OF DATA AND OPINIONS OF THE APPRAISER Highest and Best Use 34 Highest and Best Use As if Vacant 34 Highest and Best Use As Improved 35 Introduction to Valuation 37 Sales Comparison Approach 38 Income Approach 54 Reconciliation 71 Exposure Time and Marketing Time 73 ADDENDA Certification of Value A2 Comparable Improved Sale Photographs & Data Sheets A3 Comparable Lease/Rental Photographs & Data Sheets A14 Floor Plans A24 Qualifications of the Appraiser A25 Brad C. Woodall, MAI Attachment No. 4 SUMMARY OF SALIENT FACTS LOCATION: 302 West 19th Street, National City, California 91950 CENSUS TRACT: 219 LAND AREA: Four lots containing approximately 12,505 gross square feet. IMPROVEMENT DESCRIPTION: A concrete block and wood frame and stucco industrial/residential building which contains 3,403 gross square feet. HIGHEST AND BEST USE: INCOME: As if Vacant: Hold for future development As Improved: The existing improvements represent the highest and best use as improved. Potential Gross Income: $30,122 Less Vacancy & Collection Loss: ($602) Effective Gross Income: $29,520 Expenses: ($7,535) Net Operating Income: $21,985 CAPITALIZATION RATE: 6.25% VALUE INDICATIONS: Sales Comparison Approach: $835,000 Income Approach: $820,000 "AS IS" FAIR MARKET VALUE: $825,000 DATE OF VALUE: September 19, 2017 VALUE SOUGHT: "As Is" fair market value INTEREST APPRAISED: Fee simple interest EXPOSURE TIME: Nine months MARKETING TIME: Nine months Brad C. Woodall, MAI 1 Attachment No. 4 SUBJECT PROPERTY PHOTOGRAPHS VIEWING SOUTHWEST TO THE SUBJECT VIEWING NORTHWEST TO THE SOUTH SIDE OF THE SUBJECT VIEWING SOUTHEAST TO THE WEST SIDE OF THE SUBJECT VIEWING NORTHWEST TO THE SUBJECT VIEWING SOUTHEAST TO THE NORTH SIDE OF THE SUBJECT VIEWING SOUTH TO THE NORTH SIDE OF THE SUBJECT Brad C. Woodall, MAI 2 Attachment No. 4 SUBJECT PROPERTY PHOTOGRAPHS INTERIOR VIEW OF OFFICE AREA IN INDUSTRIAL SUITE VIEW OF RESTROOM IN INDUSTRIAL SUITE INTERIOR VIEW OF KITCHEN IN RESIDENTIAL UNIT INTERIOR VIEW OF STORAGE AREA IN INDUSTRIAL SUITE INTERIOR VIEW OF LIVING ROOM IN RESIDENTIAL UNIT INTERIOR VIEW OF BATHROOM IN RESIDENTIAL UNIT Brad C. Woodall, MAI 3 Attachment No. 4 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal was made under the following general and specific assumptions. The reader is cautioned that subsequent changes in any of the assumptions may result in a different value con- clusion, and the appraiser reserves the right to modify the appraisal should there be any such changes. 1. No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated. 2. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 3. Responsible ownership and competent property management are assumed. 4. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. 5. All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property. 6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 7. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report. 8. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined and considered in the appraisal report. 9. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 10. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. Brad C. Woodall, MAI 4 Attachment No. 4 11. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, ureaformaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. 12. The appraiser is not a property inspector or engineer and is not qualified to detect deficiencies in the structural and mechanical components of the improvements. Unless otherwise stated in the report, it is assumed that the improvements have no structural or mechanical problems and that all mechanical systems including electrical, plumbing and HVAC are in proper working condition. 13. The Americans with Disabilities Act (ADA) became effective January 26, 1992. This appraiser is not qualified to perform a specific compliance survey or to determine whether the subject is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in conformance with one or more of the requirements of the Act. If so, this fact could have a negative impact upon the value of the property. 14. It is assumed that all necessary building permits were obtained to construct the improvements and the square footage figure utilized for the appraisal is the legal permitted square footage area. This appraisal is made under the following general limiting conditions: 1. Any allocation of the total value estimated in this report between land and improvements applies only under the stated program of utilization. The separate values allocated to the land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 2. Possession of this report, or a copy thereof, does not carry with it the right of publication. 3. The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made. 4. Neither all, nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) Brad C. Woodall, MAI 5 Attachment No. 4 shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser. 5. Any value estimates provided in the report apply to the entire property, and any proration or division of the total into fractional interests will invalidate the value estimate, unless such proration or division of interests has been set forth in the report. 6. The forecasts, projections, or operating estimates contained herein are based upon market conditions as of the date of value, anticipated short-term supply and demand factors, and a continued stable economy. These forecasts are, therefore, subject to changes in future conditions. Extraordinary Assumptions 1. A rent roll and copies of leases were requested from the property owner, but were not provided. Therefore, the fee simple interest was appraised and an extraordinary assumption is made that there are no leases impacting the subject property. Hypothetical Conditions None It should be noted that the use of extraordinary assumptions and/or hypothetical conditions may affect the assignment results. Brad C. Woodall, MAI 6 Attachment No. 4 INTRODUCTION Identification of the Subject Property The subject of this appraisal report is the existing industrial/residential property located at 302 West 19th Street, National City, California. A partial legal description, taken from public records is as follows: Lots 19 through 22 of National City Refiled Map No. 348 plus adjacent closed alley, in the City of National City, County of San Diego, State of California. Identification of the Property Rights to be Valued The property rights appraised are those of the fee simple estate. The definition of fee simple is: "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."' There are three tenants occupying the subject property. A rent roll and copies of leases were requested from the property owner, but were not provided. Therefore, the fee simple interest was appraised and an extraordinary assumption is made that there are no leases impacting the subject property. Personal property items are not included as a part of this valuation. Function of the Appraisal/Intended Use This appraisal is for the exclusive use of the City of National City for potential acquisition purposes. No other use of the appraisal is authorized by the appraiser. Client/Intended Users The City of National City is the client and the only intended user of the report. Type and Definition of Fair Market Value The City of National City is attempting to purchase the subject property and could potentially need to use eminent domain authority. Therefore, the subject property is appraised under the threat of condemnation which requires the following definition of fair market value: 'The Dictionary of Real Estate Appraisal, Fifth Edition, p. 78. Brad C. Woodall, MAI 7 Attachment No. 4 (a) The fair market value of the property taken is the highest price on the date of value that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. (b) The fair market value of the property taken for which there is no relevant, comparable market is its value on the date of valuation as determined by any method of valuation that is just and equitable.' Definitions Market Value "As Is" - is an estimate of the market value of a property in its current physical condition, use, and zoning as of the appraisal date? Date of the Value Estimate The effective date of value is September 19, 2017 and the date of the report is September 29, 2017. Scope of the Appraisal This appraisal report is intended to conform with FIRREA, the current Code of Professional Ethics of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of The Appraisal Foundation. The appraiser meets the requirements of the Competency Provision of the current Uniform Standards of Professional Appraisal Practice. The client has requested the appraiser provide one value estimate, "as is" fair market value of the fee simple interest. The appraisal process included, but was not limited to, the following steps. Regional and local demographics were studied and analyzed as they pertain to the subject. The report includes a market analysis of the industrial market which discusses inventory, absorption and vacancy in the subject's market area. Additionally land inventory, building sale prices and lease rates are analyzed. A visit to the subject property was made, from which data was gathered for the site and improvement description sections of the report. 2California Code of Civil Procedure, Title 7, Chapter 9, Article 4, Paragraph § 1263.320. 3Interagency Appraisal and Evaluation Guidelines Brad C. Woodall, MAI 8 Attachment No. 4 In the Highest and Best Use section of the report, a highest and best use as vacant and as improved was completed. For the highest and best use as vacant analysis, the maximally productive use of the site is estimated from the uses that are physically possible, legally permissible, and financially feasible; assuming the site is vacant. In the Highest and Best Use as Improved analysis, the maximally productive use of the property in its existing condition as of the date of value is estimated from the options that are physically possible, legally permissible, and financially feasible. A determination is made as to whether the existing improvements are the maximally productive use or whether some other use or modification of the existing improvements is the maximally productive use. Following the Highest and Best Use analysis is the valuation of the property in which both the Sales Comparison and Income Approaches to value were undertaken. In this case, the Cost Approach was not utilized because of the lack of recent land sales in the market area. In the Sales Comparison Approach, comparable sales were researched and confirmed with a party involved in the transaction to determine the important details of the transaction. The most relevant characteristics of the sale comparables are then compared directly with the subject on a price per square foot basis. In the Income Approach, lease data is researched and verified by property managers, leasing brokers or owners. The most relevant characteristics of the comparable leases are then compared directly with the subject in order to derive an estimate of market rent for the subject. For the industrial component, a vacancy and collection loss factor is derived by analysis of the for -lease market and determining vacancy and collection loss factors utilized by investors in the market. Operating expenses are then estimated by analysis of the subject's historical expenses, comparable properties, and expense surveys. The net operating income is then capitalized by a market derived capitalization rate which is extracted from comparable sales. For the residential component, a gross income multiplier was utilized to estimate value. After the Income Approach is a reconciliation of the approaches to value where a final estimate of market value is made. Property and Ownership History According to public records, the current owners of record are Frank and Deborah Safley, who acquired the property on March 15, 2006 per Document No. 06-0177299. The purchase price was reported to be $275,000. There have been no transfers in ownership of the subject property in the three years prior to the date of appraisal according to public records. To the appraiser's knowledge, the subject property is not currently listed for sale, nor is it in escrow. Brad C. Woodall, MAI 9 DELORME •)p Pendleton re Corps Base DeLorme AS�tt�ee�i teiPatsN3Si® 2011 rFal�brrook �7• ne San -Luis Rey L Vista • \ ` Encinitas •. `\ rdHf by theSea �--Aaancho Santa Fe nsall REGIONAL MAP jSan Marcos \ Sohn Eleachh) ♦ Del Mar r La Jolla • AL IIrak ok Hai GP ♦ m • \—. Palomar c' Mm o ain SP Palomar Mountain • Pauma Valley Valley Center San .u• Bat .' d State Histonc Park Poway ♦ EI Centro Naval Air Facility �GL•a1lNesa Lemon Grove, •Five Points t iL.c San _Subject ED IQ • tia a(A. Ea Data use subject to license. © DeLorme. DeLorme Street Atlas USA® 2011. www.delorme.com $g, er Str.' SSta' Bea • Santee veland NF Ramona Spring alley ationai c ty Lincoln Acres ♦ Bonita • `VW ilk oma Imperial Beach oe cp • ED 7 - Lakeside Wa•r Xiter Jamul ♦. Otav Reserir)ir e Henshow Alpine m Scale 1 400,000 1"=6.31 mi Data Zoom 9-0 10 Attachment No. 4 REGIONAL DESCRIPTION Location The subject property is located in San Diego County, California. San Diego County is located in the southwestern corner of the United States and is bordered on the west by the Pacific Ocean, and on the east by Imperial County. Riverside and Orange Counties form the northern boundary and Mexico is to the south. Population The California Department of Finance reports a population of 3,316,192 persons for San Diego County as of January 1, 2017. That represents an increase of 474,779 persons, or 17.9%, from the April 2000 census amount of 2,813,833. Since 2000 the county has grown at a compound rate of 1.0% per year. The county growth rate into the year 2020 is projected to increase to about 2.2% per year. The population of the City of San Diego was estimated at 1,406,318 persons as of January 1, 2017, or 42% of the total county population. The average compound annual growth rate for the City of San Diego has been 0.8% since 2000, and is projected to increase to 3.1% into the year 2020. Economic Base As San Diego has grown in size, the economic base of the region has grown in diversity. The educational & health sector showed the largest percentage increase of employed persons between 1990 and 2010 with an increase of 74.9% or 63,000 workers. Over the last year (August 2016 to August 2017), the "Other Services" sector showed the largest percentage increase in employment with 5,000 new jobs, a 9.0% increase. High technology employment has helped transform the San Diego Economy. Emerging growth areas include telecommunications, computers and software, biotechnology and medical instruments. Qualcomm has established San Diego as the nation's leading telecommunications technology center. It is the county's largest high technology employer with over 12,000 people employed. As of August 2017, the unemployment rate in San Diego was 4.7%. Income Levels The median household income in San Diego County was $47,360 in 2000. The County's median household income increased by 46.9% to $69,595 in 2016. Brad C. Woodall, MAI 1 1 Attachment No. 4 Housing Based on a housing value survey conducted by independent appraisers for the San Diego Chamber of Commerce and the Real Estate Research Council, the average price of a single family home in San Diego was generally declining in the first half of the 1990's. For example, the average home price in the survey declined from $233,300 in 1990 to $203,900 in 1995. From 1996 to 2005, the average home price in the survey was steadily rising, but declined from 2006 to 2011. As of October 2016, the average home price in the survey was $663,965, an increase of 7.8% from the prior year and an increase of 12.0% from October 2014. The number of residential building permits and permitted units have declined substantially from the mid-1980's when the total number of permitted residential units ranged between 18,813 and 43,561 per year. Permits for residential units fell to 5,594 in 1993, which was the lowest level on record for the county since the 1940s. Permit activity reached 18,314 units in 2003, the highest since 1989. From 2004 to 2009 residential permits have decreased in each year, reaching the lowest permit level on record in 2009 with only 2,989 units. Multi -family unit permits increased in 2015 going from 4,329 units in 2014 to 6,852 units in 2015. Single family permits also increased between 2014 and 2015 going from 2,257 to 3,123 units. Conclusion San Diego County's population has shown large increases in population in the 1990's, but has most recently began to slow down. Based on historical trends and forecasts, this gradual growth trend is expected to continue in the near future. Growth in the economy is expected to resume, but further diversification is needed. Continued expansion is forecast in service -related fields, tourism and foreign trade. The education and health sector has recently been the fastest growing sector in terms of new employment on a year over year basis. Continued increases in high technology and the service sectors will help broaden the economy and provide a more stable environment for real estate investment in properties. Overall, the outlook for San Diego County's economy is positive on a long term basis. The residential home market is showing moderate appreciation over the last year. The industrial, office and retail markets are also showing signs of strength with declining vacancy factors over the last two years. Brad C. Woodall, MAI 12 DeLorme Stt ee irlds Us)1® 2011 S,? �0aE�2 PVE 7clb r pVE % 'If OGp,pvAE� O`yN,c B0„ota,14;9 4d t)d T3�� AVA 543 a p Q7 ,�o si 7 Cb� >bvc�d6�' bN1d 63 s10 °bbd\QW 1s?j,o p\ad r R AVE �150s a 0 5-1 TSHEEL1M1 A WAY pikt HAE1-AVJ15 N185 S J�da co y r BRYANVIEW CIR )P)P0,0 Ns. VEsit.isiSa1ONA3810.p41 NC�0.1°1. co S QP 3AValiM3$ I--1 MANN AVE WYCONDA WAY WYSTONE DR T LS VIb019 any SN es„ 60' , 0VE N d AVE 6 dw w O OW' CA HELEN C10.\'S. �0 G 00. rJ, S 47TH. ST. 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DeLorme Street Atlas USA@ 2011 Data Zoom 13-0 co o csi Attachment No. 4 CITY DESCRIPTION Location The subject property is located in National City which is approximately three miles southeast of downtown San Diego. National City is bounded by the City of San Diego on the north, the City of San Diego and the County of San Diego on the east, the City of Chula Vista on the south and San Diego Bay on the west. Population The total population in the City of National City as of January 2017 was approximately 61,210 according to the California Department of Finance. Growth in National City was lower than the county -wide rate in the 2000's. Between 2000 and 2017 National City grew at a rate of 12.8%, while the county grew at a rate of 17.95% over the same time period. SANDAG projects National City's population to be 62,058 by the year 2020, which is an approximate 0.5% annual increase from the 2017 population figure. Demographic Information In terms of household income, National City had a median household income of $40,763 as of 2016 as compared to a regional median of $69,595. As of January 1, 2016, there were 16,851 housing units in National City and 3.50 persons per household. The number of housing units increased 8.4% from 2000. The median age of National City's residents was 31.1 years, lower than the region's median age of 35.5 years. Housing National City has a wide range of housing product ranging from 500± square foot homes on lots of 5,000 to 10,000 square feet, to old Victorian homes of 3,000+ square feet on 1.0+ acre lots. Detached resale housing prices have ranged from $202,000 to $527,000 over the last six months in National City with a median price of $397,500 and an average price of $392,938 according to the Multiple Listing Service (MLS). A total of 90 homes sold in National City through the MLS over the last six months and had an average marketing time of 32 days. Attached resale housing prices have ranged from $135,000 to $369,000 over the last six months in National City with a median price of $259,000 and an average price of $263,000 according to the Multiple Listing Service (MLS). A total of 11 homes sold in National City through the MLS over the last six months and had an average marketing time of 66 days. Brad C. Woodall, MAI 14 Attachment No. 4 Employment As of August 2017, total employment in National City was approximately 23,400 and unemployment was approximately 1,500 people or 6.0%. The average annual employment figure in 2016 was 23,300, an increase of 0.9% over the average annual employment figure in 2015. Average annual unemployment in the city has remained fairly stable over the last two years at between 5.9% and 6.6%. There is a fairly large industrial district in the city which provides employment for many of the city residents. The United States Navy is a large employer in the area with the Naval base at 32' Street, about two miles northwest of the subject. Transportation and Access Primary access to National City is provided by Interstates 5 and 805. Interstate 5 runs north along the coast through San Diego County from the Mexican border. Interstate 805 parallels Interstate 5 and is located approximately two miles east of Interstate 5. From south to north, freeway access points in National City from Interstate 5 are at 24th Street, Civic Center Drive and Eighth Street. Freeway access points in National City from Interstate 805 are at Sweetwater Road, Plaza Boulevard and Division Street. Major surface streets include National City Boulevard, Highland Avenue, Sweetwater Road, Division Street, Eighth Street, Plaza Boulevard, Civic Center Drive, 18th Street, and 24th Street. National City Boulevard, Highland Avenue and Plaza Boulevard are the primary commercial strips in the city. National City has a light rail trolley system which extends from the U.S./Mexican border through the city limits and into downtown San Diego. There are two trolley stations in National City, one at the northeast quadrant of Interstate 5 and 24th Street, and the other at the northeast corner of Eighth Street and Harbor Drive. Public Services The City of National City has its own municipal police force for police protection. Fire protection service is currently provided from two fire stations, the closest is located about one-half mile to the northeast of the subject on East 16`h Street. The City of National City does not provide a solid waste collection service. Private collectors are issued permits which allow the services to collect solid waste in the city. Telephone and cable television are also available. Nine elementary, two junior high, and one senior high school serve the city. Paradise Valley Hospital serves the health care needs of National City's residents. Brad C. Woodall, MAI 15 Attachment No. 4 Shopping National City Boulevard, Highland Avenue and Plaza Boulevard are the major commercial strips in the city, where there are older free-standing retail buildings and several strip centers. The nearest regional shopping center is Plaza Bonita, located about 2.5 miles southeast of the subject property. South Bay Plaza and Sweetwater Town and Country are large community shopping centers located in National City. The National City Mile of Cars is located on National City Boulevard between 18th Street and 33rd Street. The "Mile of Cars" is one of the largest centers of automobile sales in the county and is also the largest generator of sales tax revenue for the City of National City. Immediate Area of the Subject The subject is located on the south side of West 19th Street, one lot east of Harding Avenue in an area consisting a mixture of residential and industrial buildings. Adjacent uses include a vacant lot to the south, single family residences to the west and an open space lot to the east. Across West 19th Street to the north is Kimball Elementary School. The vacant lots to the south and east are owned by the City of National City. The lot to the east is utilized as an open space park. Further to the east of the park is a drainage channel. Brad C. Woodall, MAI 16 Attachment No. 4 INDUSTRIAL MARKET CONDITIONS Regional Industrial Market The regional industrial market has recently been showing signs of improvement over the last two years with a declining vacancy rate. Colliers International reports that the overall industrial vacancy rate in San Diego was 4.8% at the end of the second quarter of 2017. The following table shows the trend in vacancy in the regional industrial market over the last two years by quarter. REGIONAL INDUSTRIAL VACANCY Period Vacancy 2"d Qtr. 2015 5.3% 3'd Qtr. 2015 5.2% 4t Qtr. 2015 5.0% lid Qtr. 2016 5.0% 2"d Qtr. 2016 4.8% 3`d Qtr. 2016 4.4% 4* Qtr. 2016 4.7% 1" Qtr. 2017 4.9% 2°d Qtr. 2017 4.8% As shown in the table, the vacancy rate was declining from the second quarter of 2015 to the third quarter of 2016 going from5.3% to 4.4%. There were slight increases in the vacancy rate in fourth quarter 2016 and first quarter 2017 and the vacancy rate as of second quarter 2017 was 4.8% which is near the two-year low. With 189,345,706 square feet of inventory in the Colliers International study, approximately 9,088,594 square feet of space was reported to be vacant. The overall county market is now operating at a stabilized level, and there are several sub -markets where new construction may be justified. The following table shows construction activity and absorption figures for the prior two years according to Colliers International. Brad C. Woodall, MAI 17 Attachment No. 4 REGIONAL INDUSTRIAL CONSTRUCTION AND ABSORPTION Period SF Under Construction Net Absorption Average Asking Rate 2nd Qtr. 2015 1,412,043 1,517,634 $1.01 3rd Qtr. 2015 1,366,008 444,786 $1.01 4t Qtr. 2015 1,419,377 1,019,651 $1.00 1' Qtr. 2016 1,831,268 13,247 $1.01 2' Qtr. 2016 1,698,858 294,137 $1.02 3rd Qtr. 2016 1,773,039 988,226 $1.02 4th Qtr. 2016 1,360,194 572,928 $1.03 1' Qtr. 2017 905,184 548,193 $1.03 2nd Qtr. 2017 598,583 546,504 $1.03 In 2011, net absorption was 761,848 square feet, and increased substantially in 2012 to 3,062,786 square feet. In 2013 there was net absorption of 2,924,405 square feet, and in 2014 net absorption was 3,079,525 square feet which is just slightly above the figure achieved in 2013. In 2015, net absorption increased to 4,333,577 square feet, and in 2016, there was 1,868,538 square feet of net absorption, the lowest net absorption since 2011. There was 598,583 square feet of industrial space under construction in the second quarter of 2017. The average asking lease rate for industrial space in San Diego has been fairly stable over the last two years ranging between $1.00 and $1.03 per square foot per month on a triple net basis. As of second quarter 2017 the average asking rate was $1.03 per square foot, triple net The available inventory of finished lots has decreased dramatically over the last few years. Industrial building sale prices have been increasing over the last two years after having been stable for the year before that. Demand for owner/user properties is reported to be good. Institutional investor interest is reported to be strong for large multi -tenant properties, as well as for smaller local investor properties. National City Industrial Market The National City market contains about 2.0% of the total industrial space in the county. Industrial space in National City is quite varied and ranges in size from 1,000 to over 100,000 square feet. Construction type varies from metal, concrete block and concrete tilt -up with the older buildings being of metal and concrete block construction and the newer buildings generally are of concrete tilt - up construction. Brad C. Woodall, MAI 18 Attachment No. 4 Vacancy, Inventory and Absorption Trends According to Costar, as of the end of the second quarter of 2017, the National City industrial market contained 3,834,094 square feet of industrial space and had a vacancy rate of 1.6%. The following table presents a summary of inventory, vacancy, absorption and the average asking lease rate in the National City industrial market over the last two years based on information from Costar. NATIONAL CITY INDUSTRIAL INVENTORY AND ABSORPTION Period Inventory Vacancy Rate Net Absorption Average Lease Rate 2nd Qtr. 2015 3,834,094 3.0% (24,139) $0.72 3`d Qtr. 2015 3,834,094 3.4% (13,886) $0.67 4`h Qtr. 2015 3,834,094 3.0% 14,165 $0.68 1" Qtr. 2016 3,834,094 2.2% 31,830 S0.76 2' Qtr. 2016 3,834,094 2.3% (3,102) $0.71 3rd Qtr. 2016 3,834,094 1.6% 26,914 $0.76 4th Qtr. 2016 3,834,094 1.9% (12,915) $0.79 1" Qtr. 2017 3,834,094 1.8% 1,815 $0.75 2"d Qtr. 2017 3,834,094 1.6% 5,043 $0.68 Industrial inventory has remained constant at 3,834,094 square feet over the last two years. The vacancy rate has been very low over the last two years ranging between 1.6% and 3.4%, and as of second quarter 2017 was 1.6%. Net absorption has ranged from negative 24,139 square feet to positive 26,914 square feet over the last nine quarters. There was 21,547 square feet of negative net absorption in 2015, and 42,727 square feet of positive net absorption in 2016. Second quarter 2017 net absorption was 5,043 square feet. Planned Construction and Available Land Inventory It is reported by Costar that there was no industrial space under construction in the National City market as of the end of the second quarter of 2017. Additionally, there is not much vacant land inventory in National City available for immediate industrial development. As a result, there is likely to be minimal additional inventory added to the market place which is a positive for the market. The district is estimated to be about 95% built -out. Brad C. Woodall, MAI 19 Attachment No. 4 Market Rental Rates and Building Sale Prices Lease rates for typical industrial space in National City are generally in the range of $0.90 to $1.00 per square foot per month on an industrial gross basis. Older, less desirable buildings or large distribution space may lease at lower rates, while newer, smaller space may lease at higher rates. Concessions are no longer common due to the low vacancy rate and a shortage of available space. According to Costar, the average asking lease rate for industrial space in National City has declined from $0.72 per square foot per month on a triple net basis in second quarter 2015 to $0.67 per square foot, triple net as of second quarter 2017. Conventional industrial buildings in the market area are generally selling in the $130 to $170 per square foot price range for owner/user buildings in the 5,000 to 25,000 square foot size range. Small buildings with low coverage will command much higher price per square foot prices. Summary County -wide, the industrial market vacancy rate has declined in the last two years, but has been fairly stable over last year. Vacancy for all industrial inventory has declined from 5.3% at the end of the second quarter of 2015 to 4.8% at the end of the second quarter of 2017. Net absorption has been positive in every quarter over the last two years. Despite low vacancy and strong absorption, the amount of new buildings under construction is at its lowest level in the last two years. The National City industrial market had a second quarter 2017 vacancy rate of 1.6%, and there was no industrial space under construction as of the date of the appraisal. An additional positive factor is that there is minimal finished lot inventory in National City for new construction. Brad C. Woodall, MAI 20 Attachment No. 4 APARTMENT MARKET CONDITIONS In this section of the report, historic market activity for the apartment market is analyzed beginning with apartment sales activity. Sale Activity According to information taken from Co -Star for apartment buildings, the number of apartment transactions has averaged about 367 transactions over the last ten years. The largest number of transactions since 2007 was 574 in 2015, while the lowest number of transactions was in 2009 with 176 transactions. The following table shows the number of annual apartment transactions in San Diego County over the last ten years. APARTMENT TRANSACTIONS Year No. of Transactions % Change 2007 320 - 2008 220 -31.25% 2009 176 -20.00% 2010 202 14.77% 2011 307 51.98% 2012 409 33.22% 2013 452 10.51% 2014 484 7.08% 2015 574 18.60% 2016 530 -7.67% As can been seen from the preceding table, the number of transactions has been increasing since 2010 at rates of 7.1 % to 52.0%. The exception was a 7.7% decline in 2016. From 2007 to 2009, the trend in the number of transactions was generally declining. Price Trends The following table shows the average sale price per unit for apartments over the last ten years. Brad C. Woodall, MAI 21 Attachment No. 4 APARTMENT AVERAGE PRICE PER UNIT Year Average Price per Unit % Change 2007 $158,636 - 2008 $128,634 -18.91% 2009 $114,415 -11.05% 2010 $143,173 25.13% 2011 $143,208 0.02% 2012 $134,734 -5.92% 2013 $169,236 25.61% 2014 $165,506 -2.20% 2015 $190,168 14.90% 2016 $197,212 3.70% From 2007 to 2009, the price per unit decreased in each year to a low of $114,415 per unit in 2009. Prices declined between 11.1 % and 18.9% per year between 2007 and 2009. In 2010, prices began to increase and have increased in all but two years through 2015. Price increases ranged between 0.02% and 25.6% per year in 2010 through 2016 with the largest price increase of 25.6% occurring in 2013. There were two years in that time period (2012 and 2014) that showed slight declines of 2.2% to 5.9%. Building Permits Multi -family building permits increased exponentially during the 1980s as developers attempted to capture a share of the profitable market and pre-1986 investment tax credits. By 1996, multi -family building permits decreased to 1,052 units valued at $87 million. Multi -family building permits increased by approximately 2000 units in 1997 and then stabilized in 1998. From 2007 to 2016, the number of multi -family permits was within a range of 1,092 to 7,563 units with a value range of $128 to $1,205 million. The majority of new apartment construction has continued to be for luxury complexes in the last five years. In 2010, permits were at a ten-year low in terms of the number of new permits and the value of the permits. Permit activity has been increasing since 2011 at rates of 10.4% to 171.8%. The only exception was in 2014 when the number of permits declined by 25.8% In 2016 permit activity increased by 10.4% over 2015 figures. The following table shows the number of multi -family permits issued and the value of the permits over the last ten years. Brad C. Woodall, MAI 22 Attachment No. 4 BUILDING PERMITS Year No. of New Permits % Change Value of Permits ($1,000,000) "„ ('ha❑gc 2007 3,942 - 485 - 2008 2,802 -28.92% 319 -34.23% 2009 1,204 -57.03% 132 -58.62% 2010 1,092 -9.30% 128 -3.03% 2011 2,968 171.79% 369 188.28% 2012 4,089 37.77% 613 66.12% 2013 5,835 42.70% 883 44.05% 2014 4,329 -25.81% 618 -30.01% 2015 6,852 58.28% 1,016 64.40% 2016 7,563 10.38% 1,205 18.60% Vacancy According to Costar, the county -wide apartment vacancy rate was 3.7% as of the end of second quarter 2017. That is slightly lower than second quarter 2016 when vacancy was 3.9%, and lower than second quarter 2015 when vacancy was 4.6%. According to Costar, apartment vacancy in the county has ranged between 3.7% and 5.0% on a quarterly basis over the last five years. The third quarter 2011 vacancy rate was the highest in the last five years at 4.0%, while second quarter 2017 was the lowest in the last five years at 3.7%. Vacancy in National City was reported at 2.4% as of second quarter 2017, which is lower than second quarter 2016 vacancy at 2.6%, and second quarter 2015 vacancy of 3.1 %. According to Costar, apartment vacancy in National City has ranged between 2.4% and 4.9% on a quarterly basis over the last five years. The second quarter 2012 vacancy rates were the highest in the last five years at 4.9%, while second quarter 2017 was the lowest in the last five years at 2.4%. The following table shows quarterly vacancy rates over the last two years based on data from Costar. Brad C. Woodall, MAI 23 Attachment No. 4 APARTMENT VACANCY RATES Quarter San Diego County Vacancy % Change National City Vacancy % Change 2ed Qtr. 2015 4.6% - 3.1% - 3`d Qtr. 2015 4.5% -2.17% 3.1% 0.00% 4th Qtr. 2015 4.1% -8.89% 3.0% -3.23% 1" Qtr. 2016 3.9% -4.88% 2.8% -6.67% 2°d Qtr. 2016 3.9% 0.00% 2.6% -7.14% 3`d Qtr. 2016 3.8% -2.56% 2.5% -3.85% 4th Qtr. 2016 3.9% 2.63% 2.5% 0.00% 1" Qtr. 2017 3.9% 0.00% 3.0% 20.00% 2°d Qtr. 2017 3.7% 0.00% 2.4% 0.00% The county -wide apartment vacancy rate as well as National City's vacancy rate should remain fairly stable into the immediate future. Construction activity has been modest over the last two years and the amount of new inventory added to the market has had little impact on vacancy rates and represents a small fraction of the existing inventory in the County. The biggest concern for the rental market is the current economy and job losses which have the potential to impact the vacancy rate in the near term. Recently there has been positive news with a declining unemployment rate which is beneficial to the apartment market. Rental Rates The following table shows the average rental rates for apartment units in San Diego County and National City according to Costar over the last two years. APARTMENT RENTAL RATES Quarter San Diego County Rental Rates % Change National City Rental Rates % Change 2"d Qtr. 2015 $1,409 - $1,024 - 3'dQtr. 2015 $1,438 2.06% $1,034 0.98% 4th Qtr. 2015 $1,435 -0.21% $1,041 0.68% 1' Qtr. 2016 $1,452 1.18% $1,049 0.77% 2"d Qtr. 2016 $1,486 2.34% $1,056 0.67% 3'd Qtr. 2016 $1,504 1.21% $1,064 0.76% 4'h Qtr. 2016 $1,497 -0.47% $1,073 0.85% 1' Qtr. 2017 $1,527 2.00% $1,068 -0.47% 211dQtr.2017 $1,560 2.16% $1,088 1.87% Brad C. Woodall, MAI 24 Attachment No. 4 The table shows the average rent in the county increased from $1,409 in the second quarter of 2015 to $1,560 in the second quarter of 2017, an increase of 10.7% or 0.4% per month. The average rental rate in National City increased from $1,024 in second quarter 2015 to $1,088 in second quarter 2017. That is an increase of 6.3% or 0.3% per month. Capitalization Rates Capitalization rates are now in the range of 4.5% to 5.50% for most conventional apartment properties in the County. However, capitalization rates tend to be much lower in the most desirable areas, such as coastal locations, Downtown, Midtown and Hillcrest and can be below 4.0% for the most desirable locations. Additionally, newer, high quality properties will have lower than typical capitalization rates. The price per unit indicator is also used as benchmark unit of comparison in the apartment market. Price per unit indicators have generally ranged between $100,000 to $175,000 in most areas of the county depending primarily upon unit mix, quality, condition and the income characteristics. Coastal properties tend to sell at much higher price per unit indicators and tend to start in the $175,000 per unit range and are generally above $200,000 per unit. That is also the case for very small two to four unit properties. Brad C. Woodall, MAI 25 Attachment No. 4 TAX AND ASSESSMENT INFORMATION The subject is identified as Assessor Parcel Numbers 559-104-05, 11, 14 & 15. The 2016-17 assessed value is distributed as follows: 2016-17 ASSESSED VALUE APN Land Improvements Total Taxes 559-104-05 $85,338 $0 $85,338 $990.32 559-104-11 $85,338 $0 $85,338 $990.32 559-104-14 $152,378 $169,525 $321,903 $4,196.52 559-104-15 $82,451 $0 $82,451 $957.66 Totals: $405,505 $169,525 $575,030 $7,134.82 The subject is in tax rate area 06037 which has a tax rate of $1.13115 per $100 of the total assessed value. Property taxes for the 2016-17 fiscal year total $7,134.82 and include the following special assessments: SPECIAL ASSESSMENTS Special Assessment 559-104-05 559-104-11 559-104-14 559-104-15 Totals Vector Disease Control $1.24 $1.24 $2.50 $1.24 $6.22 Mosquito Surveillance $2.28 $2.28 $2.28 $2.28 $9.12 Sewer Service Charge $0.00 $0.00 $529.04 $0.00 $529.04 MWD - Water Standby $11.50 $11.50 $11.50 $11.50 $46.00 CWA - Water Availability $10.00 $10.00 $10.00 $10.00 $40.00 Totals $25.02 $25.02 $555.32 $25.02 $630.38 There are no bond assessments. The special assessments are fixed charges with an indefinite time period. The special assessments are not significant in terms of the valuation of the property and would probably not warrant consideration from potential buyers. The sewer service charge is on the tax bill rather than the water bill as in many other areas of the county. According to the tax collector, there are no delinquent taxes on the property. Brad C. Woodall, MAI 26 Attachment No. 4 ASSESSOR'S PLAT 1 1 1 22 2I i41-20 1918 24123)- 18 o.ee AC I7 102 16_ 15 )2 3 4 5 6 )io eo isCID 18 17 16 15 14 N 13 „3 148 ST 90 „s �� „s 1 22 - �— — 3 21 —1 N h --1 V BLK 4_1 �9 110 5-1 118 6 17 1.93 AC °o HARKING 7 10 16 /Is 0 -J 0 ST „a > log - 14 22 0 2 �5 2 I 3 �� i� 20 19 5 3 III 18 — --- --a 6 1 J !0 17 7 BLK1 I10_9 16 _ 8 15 g 1 14 —I 10 ,..5 lie rol 13 „6 ti ST W 0 0 40 Brad C. Woodall, MAI 27 Attachment No. 4 SITE DESCRIPTION Location South side of West 19th Street, one lot east of Harding Avenue, National City, CA. Size and Shape The site consists of four lots containing approximately 12,505 gross square feet according to dimensions taken from the assessor's plat. There are sloping unusable areas on the south and west sides of the site and the net usable site is estimated to be approximately 9,705 square feet. The shape of the site is nearly rectangular. Topography and Drainage The site is level to about 15 feet below street grade and is mostly usable. There are small sloping unusable areas on the south and west sides of the site which total approximately 2,800 square feet. It is assumed drainage has been properly engineered and directed away from the improvements. Soil and Subsoil A geotechnical investigation was not provided for review. The appraisal is made under the assumption that there are no soil or subsoil conditions that would impair the utility of the site to the point of affecting its market value. Utilities All public utilities including gas, electricity, telephone, water and sewer are connected to the site. Access From Interstate 5, access to the site is provided by the Mile of Cars Way exit east for one block, then north on Wilson Avenue for four blocks, then east on West 19th Street for two blocks to the subject. Access on to the site is possible from one curb cut on West 19th Street and from a paved area to the east of the subject. Street Improvements West 19th Street is a public street which has two lanes of bi-directional traffic. It is an asphalt -paved road improved with concrete curbs, gutters and sidewalks along the subject's frontage. Brad C. Woodall, MAI 28 Attachment No. 4 Environmental Hazards The appraiser is not qualified to detect the existence of environmental or hazardous waste conditions. This appraisal is made under the assumption that there are no environmental or hazardous waste conditions on the site or nearby that would affect value. If there is a concern regarding environmental or hazardous waste conditions, the client is encouraged to have a Phase 1 environmental report prepared. Flood Hazard Area The subject is not within a flood zone, but is within 100 feet of a flood zone. A drainage channel is located about 260 feet east of the subject. The subject is in Zone X of FEMA panel 06037C 1911 G dated May 16, 2012. Most of the property is identified to be in an area of 0.2% annual chance flood, areas of 1% annual change flood with average depths of less than one foot or within areas less than one square mile. The owner reports that the property has never flooded in the time frame that he has owned it. Geologic Hazard The subject property is not located in an Alquist Priolo special studies zone. Easements and Encroachments A title report was not provided for review. It is assumed that there are no easements that have a negative impact on value of the subject property. Visibility and Exposure The site is located on a secondary street and visibility and exposure is average for an industrial and residential site. Adjacent Uses Adjacent uses include a vacant lot to the south, single family residences to the west and an open space lot to the east. Across West 19th Street to the north is Kimball Elementary School. On -site Improvements Existing site improvements include concrete and asphalt paving, concrete walkways, fencing, and landscaped areas consisting of a few shrubs, trees and lawn area. Brad C. Woodall, MAI 29 Attachment No. 4 Site Utility The site has all of the physical characteristics required by industrial and residential users including functional dimensions, mostly level topography, and good access to the freeway system. Zoning The subject property is within the Westside Specific Plan and is designated MCR-2 (Mixed -use Commercial -Residential). Allowed uses in the MCR-2 zone include retail, office and residential. Maximum building height in the MCR-2 area is five stories or 65 feet. The maximum FAR is 0.60 and the maximum density is 60 units per acre. There is a minimum density of 24 units per acre. Off- street parking of 2.0 spaces per 1,000 square feet of building area are required for existing industrial uses. Multi -family uses require 1.0 spaces per unit. On -site parking requirements are met by the current parking layout. The existing industrial use is considered a legal non -conforming use. If the site was currently vacant, an industrial use would not be permitted. However, existing industrial uses are "grand fathered" and are allowed to continue on the property, even with a change in ownership. General Plan Designation According to the National City General Plan, the subject property is in a Specific Plan Area. The general plan and zoning designation are consistent and permit similar uses. No changes are antici- pated in the plan that would impact the subject. Private Restrictions The appraisal is made under the assumption that there are no private restrictions that would adversely impact the site to the point of affecting value. Conformance The subject lots are legal conforming lots, but the improvements do not appear to conform to zoning regulations because industrial buildings are no longer allowed to be constructed on vacant sites with the MCR-2 designation. Conclusion and Summary Dimensions of the site provide adequate street frontage and access. All utilities are available and connected to the site and topography is mostly level. The site has all of the necessary characteristics required for commercial and residential users. Brad C. Woodall, MAI 30 Attachment No. 4 IMPROVEMENTS DESCRIPTION The subject improvements consist of a two-story concrete block and wood frame and stucco industrial/residential building. Public records indicate the building contains 3,360 square feet. The measured area was slightly larger at 3,403 square feet. The measured building area will be utilized in the appraisal. An assumption is made that the existing improvements were constructed with building permits and no illegal additions have been made. The building is configured for three -tenant occupancy. The entire first floor is for one industrial tenant and contains approximately 1,793 square feet. It has an approximate 1,266 square foot office area and an approximate 527 square feet storage area. The office build -out equates to 71 % of the building area. The second floor of the building contains two two -bedroom, one -bath residential units. Following are the construction details of the improvements based on the site visit on September 19, 2017. It should be noted that interior of one of the residential units was not viewed. The owner reports that both units are identical. An assumption is made that the condition of the unit not viewed is similar to the unit which was viewed. Construction Details Exterior Description Substructure: Concrete slab on grade Superstructure: Concrete block and wood frame with stucco exterior. The building is approximately 18 feet high and the clear height in the storage area is approximately eight feet. Roof Structure and Cover: Windows and Doors: Wood roof structure with composition single cover. The roof was not inspected. Windows are sliding in aluminum frames. The main entry doors are solid core wood and retail glass. Entrance to the industrial suite is on the east side of the building and entrances to the residential units are on the north side of the building. There is one 11' x 7' grade level door on the south side of the building. Interior Description Interior Walls: Textured and painted drywall partitions. Brad C. Woodall, MAI 31 Attachment No. 4 Ceilings and Lighting: Acoustic tile ceilings with recessed fluorescent lighting in the industrial suite. The residential units have blown acoustic ceilings with ceiling mount lighting. The restrooms have drywall ceilings with ceiling or wall mount lighting. Doors: Interior solid core and hollow core wood doors with average quality hard- ware. Floor Cover: Restrooms: Layout: Ceramic tile and commercial grade carpet in office area of industrial suite. Restrooms have ceramic tile and sheet vinyl flooring. The storage area has concrete flooring. Residential units have sheet vinyl flooring throughout the units. There is one two-fixtured restroom in the industrial suite. The residential units each have one restroom with cultured marble sinks/counters on wood vanities and fiberglass tub/showers. The building is configured for three -tenant occupancy with the industrial suite on the first floor and the two residential units on the second floor. The industrial suite has a large private yard area on the south side of the building. Elevator/Stairs: There are exterior wood stairs which provide access to the second floor. Equipment and Mechanical Systems Plumbing System: Copper, Steel, ABS and PVC plumbing; average quality fixtures Electrical System: Electrical panels were not accessible. It is assumed electrical service is to code and adequate for the building. HVAC System: Radiant heat Fire Protection: The building does not have a fire sprinkler system. Condition Survey The appraiser is not a property inspector or engineer and is not qualified to detect deficiencies in the structural and mechanical components of the improvements. Unless otherwise stated in the report, it is assumed that the improvements have no structural or mechanical problems and that all mechanical systems including electrical, plumbing and HVAC are in proper working condition. Items of Deferred Maintenance: The property is in average condition and no deferred maintenance was noted. Functional Utility: The improvements were designed as a mixed -use property and functions adequately for its intended use. Brad C. Woodall, MAI 32 Attachment No. 4 Actual Age: Effective Age: Remaining Economic Life: Site Plan Function: Public records indicate the improvements were built in 1959. Therefore, the improvements are 58 years old. The improvements are in average condition overall. The effective age is estimated to be approximately 40 years. In the appraiser's opinion, the remaining economic life of the building is approximately 20 years. The economic life could be significantly extended with proper maintenance and remodeling. The subject site is located on the south side of West 19`b Street with good access. There is not a circular pattern around the building, but there is adequate room for truck loading and unloading from the roll -up door for trucks. There is a fenced yard on the south side of the building. Overall, the site plan functions adequately for a typical industrial use. Residential uses are on the second floor with walk-up access which is typical in the market area. Parking for the residential units is at the northwest corner of the site. Coverage Ratio: The coverage ratio is 18% on the net usable site area. Floor Area Ratio: The floor area ratio (FAR) is 0.35 on the net usable site area. Parking: There are two parking spaces on the west side of the building for the residential units and room for several parking spaces in the yard area on the south side of the building. There is sufficient area on site to meet off-street parking requirements. Personal Property: This appraisal does not include any personal property items. Brad C. Woodall, MAI 33 Attachment No. 4 HIGHEST AND BEST USE Highest and best use is defined as: "The reasonably probable and legal use of vacant land or an improved property, that is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Alternatively, the probable use of land or improved property -specific with respect to the user and timing of use -that is adequately supported and results in the highest present value ".4 Two highest and best use analyses are performed. The first is done under the premise that the land is vacant and available to be put to its highest and best use. The second type takes into account the fact that the land is improved. The process of identifying the highest and best use of a site under both premises involves filtering out the unlikely alternative uses which cannot meet at least one of the four tests of highest and best use. Those tests are: 1) that the use is physically possible upon the site, 2) that the use is legally permissible, 3) that the use is financially feasible, and 4) that the use is the maximally productive use among the alternatives. Highest and Best Use as if Vacant Physically Possible The subject site is mostly level, nearly rectangular in shape and contains12,505 gross square feet. Its size, shape and topography do not create any building design limitations. The site has adequate visibility and accessibility, and all utilities are available to the site. It does not have any physical characteristics that would inhibit development. Potential physical uses of the property would include any market -driven development. Legally Permissible The subject property is within the Westside Specific Plan and is designated MCR-2 (Mixed -use Commercial -Residential). Allowed uses in the MCR-2 zone include retail, office and residential. Maximum building height in the MCR-2 area is five stories or 65 feet. The maximum FAR is 0.60 and the maximum density is 60 units per acre. There is a minimum density of 24 units per acre. 4The Dictionary of Real Estate Appraisal, Fifth Edition, page 93 Brad C. Woodall, MAI 34 Attachment No. 4 According to the National City General Plan, the subject property is in a Specific Plan Area. The general plan and zoning designation are consistent and permit similar uses. In addition to zoning regulations, legal permissibility is affected by private restrictions such as CC&Rs. It is assumed that there are no private restrictions which impact the allowed uses on the site. Financial Feasibility There are three primary uses that are physically possible and legally permissible for the subject property; retail, office and residential use. It is beyond the scope of this appraisal assignment to determine the financial feasibility of each of those use types. Because the majority of uses in the immediate area are residential in nature, a residential use would be more compatible with surrounding development than a retail or office use. Additionally, the subject is not located on a primary commercial corridor and the site does not have all of the characteristics typically required by retail users. There are very few if any office uses in the immediate area, so office use does not fit the character of land use. Financial feasibility is marginal for any of the three physically possible and legally permissible uses. Maximally Productive & Conclusion The Westside Specific Plan area where the subject is located is in transition with a recent zoning change. Existing land uses are predominately residential and industrial and despite the zone change, there has been minimal redevelopment. Of the uses permitted by zoning, residential use fits the current land use pattern best. Developers report that new apartment development is marginally feasible and sites would have to be required a very low prices to make new development feasible. The areas that are predominately residential in nature on the east side of the city appear to have some demand by apartment developers. However the areas with a mixture of industrial and residential uses such as the subject area have not seen much interest in redevelopment. Because of the uncertainty in the future development pattern of the immediate area, it is the appraiser's opinion that the maximally productive use is to hold the site for future development. Highest and Best Use as Improved Physically Possible There are four physically possible options for the property as improved: 1) Demolish all or a portion of the existing improvements in favor of constructing a new building; 2) Remodel the interior and/or exterior of the building; 3) Construct a building addition; or 4) Maintain the building in its current configuration. Brad C. Woodall, MAI 35 Attachment No. 4 Legally Permissible Each of the four physically possible options discussed in the preceding paragraph are legally permissible for the subject, except for a building addition. Due to the fact that industrial improvements are no longer an allowed use, it is unlikely that a building addition would be legally permissible unless the use was changed. Financially Feasible While it would be physically possible and legally permissible to demolish all or a portion of the building, the building contributes to the overall value of the property. The value of the property as improved is greater than the value as vacant. Demolition of all or a portion of the building would not be a financially feasible alternative. The mixed -use nature of the property and the current configuration of the building would not make it a good candidate for conversion to 100% residential use. The building was built in 1958 and there has been some remodeling over the years. Overall, the property is in average condition. The building has a functional design as a mixed -use property. Interior and/or exterior remodeling is not necessary at this time and is probably not financially feasible because the cost would exceed any increase in property value. Maximally Productive & Conclusion Of the four scenarios that are physically possible and legally permissible, one is financially feasible. That is to maintain the property in its current configuration. Therefore, it is the appraiser's opinion that the maximally productive use is to maintain the property in its existing condition. At some point in the future, redevelopment to a 100% residential development likely be the maximally productive use. At the maximum density allowed by zoning, a maximum of 17 units would be permitted, but the maximum FAR is more restricting and would only allow for a 7,503 square foot building. Assuming an average unit size of 600 square feet for a one -bedroom unit and 800 square feet for a two -bedroom unit approximately ten residential units could be constructed with 50% being one - bedroom units and 50% being two -bedroom units. Most Likely Buyer The most likely buyer for mixed -use property which is rented to three tenants would be an investor. Brad C. Woodall, MAI 36 Attachment No. 4 INTRODUCTION TO VALUATION The purpose of this appraisal is to estimate the"as is" fair market value of the subject property. Two approaches to value are utilized in the valuation analysis; the Sales Comparison Approach and the Income Approach. The Cost Approach is not included because of the lack of recent land sales. In the Sales Comparison Approach, comparable sales are compared directly with the subject and adjustments are made to the sales for differing property characteristics. The adjusted value indicators from each of the sales are reconciled into an estimate of value for the subject property. In the Income Approach, the market rent of the property is estimated by comparison with similar properties that have recently been leased. After deriving a gross income estimate, a market supported vacancy and collection loss allowance is deducted and operating expenses are deducted to provide an estimate of the net operating income. Finally, the net operating income is capitalized at a market derived rate for a value indication by the Income Approach. As a mixed -use property, it would be ideal to locate sales of similar mixed -use properties. The subject is a unique mixed -use property which consists of an industrial component and two residential units. No similar mixed -used sales were located. The proper valuation methodology in this case is to value each component separately as appropriate for that property type in each approach. Then the values of each component are added to indicate a value of the property as a whole. That methodology was confirmed as the most appropriate by brokers and market participants in the event there are no similar mixed use sales. Following the two approaches to value is a reconciliation of the value indications from each approach to value. In the reconciliation, the accuracy, appropriateness, and quantity of data is analyzed and an estimate of market value is presented. Brad C. Woodall, MAI 37 Attachment No. 4 SALES COMPARISON APPROACH The Sales Comparison Approach is based on the premise that a property's value can be estimated by comparing it with properties of similar utility that have recently sold in the market. As in the Cost Approach, the principle of substitution provides a key relationship in the Sales Comparison Approach. Applied to the Sales Comparison Approach, the principle of substitution holds that a prudent buyer would not pay more for a property than the amount for which a property having similar utility could be purchased for in the open market. When substitute properties are not available in the market, the reliability of the Sales Comparison Approach may be inferior to the Cost or Income Approaches to value. The Sales Comparison Approach involves a five -step process. First, research is undertaken to locate recent sales of properties with similar physical characteristics to the subject. After selecting the most similar sales data from those under consideration, the details of the sales are verified with one of the participants in the transaction. The next step in the Sales Comparison Approach is the selection of the appropriate units of comparison. In this case, the price per square foot of building area is the unit of comparison used most frequently in the market for industrial properties. For residential units, the price per unit and price per square foot units of comparison are utilized. Each of the sales are compared with the subject, and adjustments are made to the data to reflect the different characteristics which may have an effect on market value. Finally, the adjusted indications of value from each of the sales are reconciled into a single indication of value. Since no similar mixed -use comparables were located, two separate analysis will be completed in the Sales Comparison Approach, one for the industrial portion of the subject and one for the residential portion of the subject. First the industrial portion of the subject will be valued, then the residential portion will be valued. Following is a summary of the sales data considered to be the most helpful in estimating the market value of the subject property. Data sheets with photographs of each sale are located in the Addenda. Brad C. Woodall, MAI 38 !)t LC)RME: DeLorme §Stteh1-9Sras9SA® 2011 Data use subject to license. © DeLorme. DeLorme Street Atlas USA® 2011. www.delorme.com Data Zoom 14-0 39 Attachment No. 4 SUMMARY OF COMPARABLE SALES Sale No. 1 2 3 4 5 Address 1200 Harbor Drive, National City 1840 Wilson Avenue, National City 1640 Coolidge Avenue, National City 221 West 33rd Street, National City 225-231 West 16th Street, National City Thomas Bros. Map 1309 G-2 8/2/03 1309 H-2 1309 J-4 1309 H-2 Recording Date 3/8/17 10/14/16 5/26/16 2/26/16 6/17/15 Cash equivalent Sale Price $970,000 $785,000 $437,000 $1,344,000 $709,000 Rentable SF 6,485 4,664 2,700 8,400 5,275 Price per SF $149.58 $168.31 $161.85 $160.00 $134.41 Building Age 50+ Years 39 Years 43 Years 46 Years 24 Years Office Percentage 15% 7% 19% 15% 10% Clear Height 18' 18' 12' 18' 18' Power 200 amp 200 amp 200 amp 1,200 amp 200 amp Roll -up doors 6 Grade 0 Dock 2 Grade 0 Dock 1 Grade 0 Dock 2 Grade 0 Dock 2 Grade 0 Dock Floor Area Ratio 0.46 0.69 0.48 0.49 0.60 Potential Gross Income N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Vacancy & Collection Loss N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Effective Gross Income N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Expenses N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Net Operating Income N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. NOI per SF/Year N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. G.I.M. N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. O.A.R. N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Expenses per SF N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Expenses as % of EGI N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. Brad C. Woodall, MAI 40 Attachment No. 4 Units of Comparison The most appropriate unit of comparison within the Sales Comparison Approach for industrial buildings is usually the price per square foot of building area. It is the most applicable unit of comparison within the Sales Comparison Approach. The comparable sales are adjusted for all observable differences having an impact on value. Support for adjustments is provided in the following paragraphs. Property Rights Conveyed The fee simple interest in the subject property is appraised. All five of the sales involved the transfer of the fee simple interest and no adjustments for property rights conveyed are required. Financing Terms Sales 1, 3, 4 and 5 were purchased with market rate institutional loans with the sellers receiving all cash, while Sale 2 as an all cash sale. No adjustments for atypical financing terms are required. Conditions of Sale Each of the sales were arm's length market transactions with no unusual conditions of sale. No adjustments for conditions of sale are required. Market Conditions The sales went into escrow between April 2015 and January 2017. According to brokers interviewed during the course of the appraisal, there is not much inventory of available buildings in the subject size range and there is good demand for industrial buildings like the subject. Most reported prices have been increasing over the last two years. According to data from Costar, the median sale price per square foot for industrial buildings in the 0 to 25,000 square foot range in San Diego County increased 20.9% between second quarter 2015 and second quarter 2017. That equates to a 0.9% per month increase. The average sale price per square foot for industrial buildings in the 0 to 25,000 square foot range in San Diego County increased 30.3% between second quarter 2015 and second quarter 2017. That equates to a 1.3% per month increase. Also considered in the analysis is the trend in average asking lease rates which has only increased 2.0% between second quarter 2015 and second quarter 2017. That equates to 0.1% per month increase. An upward market conditions adjustment of 0.75% per month will be applied to the comparable sales from the time escrow opened to the end of second quarter 2017. Brad C. Woodall, MAI 41 Attachment No. 4 Bond Assessments - The subject is not encumbered with any bond assessments nor are any of the sales. No adjustments for bond assessments are necessary. Age/Condition The subject is 58 years old and in average condition. The actual age of Sale 1 is unknown, but is estimated at approximately 50+ years. It was in below average condition at the time of sale and the buyer had intended to remodel the improvements at a cost of $100,000. Additionally, there were some un-permitted canopies that had to be removed which the listing broker stated was estimated to cost an additional $10,000. An upward adjustment of $110,000 is applied to Sale 1 for age/condition. Sale 2 was 39 years old at the time of sale and in average to good condition. It is adjusted downward by 4.75% for age which is based on a 0.25% adjustment for each year difference in age between the subject and the sale. Sale 3 was 43 years old at the time of sale and in average condition except for some required roof repairs that were estimated at $3,000. A downward adjustment of 3.75% is applied for age and an upward adjustment of $3,000 is applied to Sale 3 for deferred maintenance. Sale 4 was 46 years old and in average condition with no reported deferred maintenance. It is adjusted downward by 3.00% for age. Sale 4 was 24 years old at the time of sale and was reported to be in average condition with no deferred maintenance. It is adjusted downward by 8.50% for age/condition. Location The subject is located in National City. All five sales are located in National City within one mile of the subject. No adjustments are required for location. Size The industrial component of the subject contains 1,793 gross square feet. The comparables range in size from 2,700 to 8,400 gross square feet. After all adjustments are applied, the sales indicated a very close range with one exception, Sale 5 which is a 5,275 square foot building. The fact that Sales 1 and 4 indicate such a close range indicates a size adjustment is not required. While the subject is smaller than all of the comparables, that is somewhat offset by the fact that it is not a single tenant building like the other sales. No size adjustments will be applied. Tenant Improvements The subject has an office build -out of 71 %, while the sales' office build -outs range from 7% to 19%. It has been found through paired sales analysis that in many cases buildings with very high second generation office build -outs sell for about the same on a price per square foot basis as buildings with Brad C. Woodall, MAI 42 Attachment No. 4 much lower office build -outs. While there are cases in which buildings with high build -outs do sell at a premium, in more cases than not, no premiums are supported for higher than typical build -outs. An adjustment for office build -out will not be applied to the sales. Building Characteristics The industrial component of the subject is of concrete block construction with a clear height of approximately eight feet. It has one grade level door and is assumed to have adequate power. The subject's clear height, power and loading doors are adequate for a building of its size and intended use. Sales 1 and 3 are metal buildings which have 12 to 18 foot clear heights, 200 amp power and one to six grade level doors. Both of those sales are adjusted upward by 5.0% for metal construction which is less desirable than a concrete block building like the subject. Sales 2, 4 and 5 are concrete block buildings that have clear height of 18 feet, power ratings of 200 to 1,200 amps and adequate loading doors. Those three sales are larger than the subject and have adequate clear height, power and loading doors for buildings of their size. They do not require adjustments for building characteristics. Floor Area Ratio Floor area ratio (FAR) is an extremely important characteristic in the industrial market. Some users require large yard areas and are willing to pay a premium for properties with larger than typical yard areas. Generally buildings with lower FARs sell at a premium in the industrial market due to the desirability of the additional yard area. The usable land area for the industrial component at the subject includes area under the building as well as the level portion of the fenced yard area to the south of the building. The estimated FAR on the usable area is approximately 0.20. The sales have FARs of 0.46 to 0.69. All five of the sales require downward adjustments for FAR. The FAR adjustment is derived by calculating the land area that the comparable would require to have the same FAR as the subject. The surplus or deficient area is then multiplied by $10.00 per square foot of land area and then divided by the sale price to arrive at the adjustment. While it is recognized that the land value of the subject is higher than $10.00 per square foot, it must be recognized that the adjustment is for surplus land that is not a separate fee simple site that could be sold off if desired. The following table shows the calculations for FAR adjustments. Brad C. Woodall, MAI 43 Attachment No. 4 Sale 1 Sale 2 Sale ; Sale 4 Sale 5 Sale Price $970,000 $785,000 $437,000 $1,344,000 $709,000 Building Size 6,485 4,664 2,700 8,400 5,275 Net Lot Size 14,104 6,730 5,663 16,988 8,847 FAR 0.46 0.69 0.48 0.49 0.60 Subject's FAR 0.20 0.20 0.20 0.20 0.20 Land Size Required 32,425 23,320 13,500 42,000 26,375 Land Size Difference 18,321 16,590 7,837 25,012 17,528 Land Value $10.00 $10.00 $10.00 $10.00 $10.00 Adjustment S183,210 $165,900 $78,370 $250,120 $175,280 Fenced Yard The subject has a fenced yard area which is an important feature for many industrial uses. Sales 1, 3, 4 and 5 have fenced yard areas and do not require adjustments for this category. Sale 2 does not have a fenced yard area and is adjusted upward by 2.5%. Other No other adjustments are required. The following table shows the process of adjusting the comparable market data for differences with the subject that impact value: Brad C. Woodall, MAT 44 Attachment No. 4 IMPROVED SALE ADJUSTMENT CHART Sale No. Subject 1 2 3 4 5 Sale Price N/Ap. $970,000 $785,000 $437,000 $1,344,000 $709,000 Escrow Date N/Ap. 1/17 9/16 3/16 12/15 4/15 Size (SF) 1,793 6,485 4,664 2,700 8,400 5,275 Price per SF N/Ap. $149.58 $168.31 $161.85 $160.00 $134.41 Adjustments: Property Rights Fee Simple $0 $0 $0 $0 $0 Adjusted Price N/Ap. $970,000 $785,000 $437,000 $1,344,000 $709,000 Financing Market $0 $0 $0 $0 $0 Cash Equiv. Price N/Ap. $970,000 $785,000 $437,000 $1,344,000 $709,000 Conditions of Sale None 0.00% 0.00% 0.00% 0.00% 0.00% Cash Equiv. Price N/Ap. $970,000 $785,000 $437,000 $1,344,000 $709,000 Market Conditions Current 3.75% 6.75% 11.25% 13.50% 19.50% Adjusted Price N/Ap. $1,006,375 $837,987 $486,163 $1,525,440 $847,255 Bond Assessments None 0.00% 0.00% 0.00% 0.00% 0.00% Age/Condition 58/Avg 10.93% -4.75% -3.13% -3.00% -8.50% Location National City 0.00% 0.00% 0.00% 0.00% 0.00% Size 1,793 0.00% 0.00% 0.00% 0.00% 0.00% Tenant Improv. Average 0.00% 0.00% 0.00% 0.00% 0.00% Building Char. Average 5.00% 0.00% 5.00% 0.00% 0.00% FAR 0.54 18.21% 19.80% 16.12% 16.40% 20.69% Fenced Yard Yes 0.00% 2.50% 0.00% 0.00% 0.00% Other None 0.00% 0.00% 0.00% 0.00% 0.00% Net Adjustment 34.14% 17.55% 17.99% 13.40% 12.19% Adjusted Price N/Ap. $1,349,944 $985,033 $573,624 $1,729,797 $950,518 Adjusted Price/SF N/Ap. $208.16 $211.20 $212.45 $205.93 $180.19 Brad C. Woodall, MAI 45 Attachment No. 4 Conclusion of Value by Direct Sales Comparison The adjusted value range on a price per square foot basis is from $180.19 to $212.45. Sales 1, 2, 3 and 4 indicate a very close range at $205.93 to $212..45per square foot. Sale 5 is the most dated transaction and its indicator is not consistent with the other four sales' indicators. Based on the preceding analysis, a value within the range indicated by Sales 1 through 4 is appropriate for the subject. A value of $210.00 per square foot is estimated for the subject by direct sales comparison. The resulting product is: 1,793 SF x $210.00 = $376,530 Rounded to: $375,000 Following is a location map and a table summarizing the residential sales data considered to be the most helpful in estimating the market value of the subject property. Photographs and data sheets for each sale are in the Addenda. Brad C. Woodall, MAI 46 ' DELORME NORDICA ST COMPARABLE IMPROVED SALES MAP 6. m G� G. A ▪ °• a $ 0 yG Yd 2°1H 51 snl 2155 51 Subject ` '',,11 25� SZ W 26SH 5Y m 61tk Sale 6\\ EA1H9 v m 3 VA r ETIH51 yG m E -rH 51 „...--- \\ tti 1Cl ,...:;,._IV ym rm CII. 0 E15SH51 vm E205� •' E 215t $C �i t `Z E22NO5'} DeLorme SVeetriMs USA® 2011 5S 560 E 9TM 5T y T SASH SS jtA5T y • El./1H Data use subject to license. © DeLorme. DeLorme Street Atlas USA® 2011. www.delorme.com MN (11.6'EI ,,'Sale 7; r 1L OLIVEW000 DR 1" = 1,066.7 ft Data Zoom 14-0 47 Attachment No. 4 SUMMARY OF COMPARABLE SALES Sale No. Subject 6 7 8 9 Address 302 West 19' Street, National City 445 M Avenue, National City 918-20 East 16th Street, National City 2004 I Avenue, National City 1805 C Avenue, National City Thomas Bros Map Code 1309 J-2 1289 J-7 1309 J-2 1309 J-2 1309 J-2 Recording Date - 5/12/17 5/9/17 4/19/17 10/20/16 Cash equivalent Sale Price - $485,000 $490,000 $430,000 $440,000 No. Of Units 2 2 2 2 2 Rentable SF 1,610 1,643 1,632 1,324 1,401 No. Of Bdrms/Unit 2.00 2.00 2.00 2.00 2.00 Age (Years) 58 59 70 60f 67 Average Unit Size 805 822 816 662 701 Price per Unit - $242,500 $245,000 $215,000 $220,000 Price per SF - $295.19 $300.25 $324.77 $314.06 Potential Gross Income - $35,340 $33,900 $33,600 $30,000 G.I.M. - 13.72 14.45 12.80 14.67 Brad C. Woodall, MAI 48 Attachment No. 4 Units of Comparison The most appropriate unit of comparison within the Sales Comparison Approach for small residential income properties is usually the price per unit and price per square foot of rentable building area. Property Rights Conveyed The fee simple interest in the subject property is appraised. Each of the sales involved the transfer of the fee simple interest and no adjustments are required for property rights conveyed. Financing Sales 6, 8 and 9 were purchased with market rate institutional financing, while Sale 7 was an all cash sale. No adjustments are required for atypical financing. Conditions of Sale All of the sales were arm's-length, open market transactions with no atypical conditions of sale. None of the sales require adjustments for unusual conditions of sale. Market Conditions The comparable sales went into escrow between September 2016 and April 2017. According to MLS data, the average price per unit for 2-4 unit residential properties in National City increased from $202,178 in third quarter 2016 to $204,250 in second quarter 2017. That is an increase of 1.0% over a nine month period which indicates a relatively stable market. A market conditions adjustment will not be applied to the comparable sales. Condition The subject is in average condition with no deferred maintenance. No deferred maintenance was reported at any of the sales. The comparables are rated similar to the subject in terms of condition and no adjustments will be applied for condition. Location The subject is located on West 19th Street in National City. Each of the sales are located in National City within 1.5 miles of the subject. No adjustments are required for location. Unit Mix/Average Unit Size The number of bedrooms per unit at the subject is 2.00 and it has an average unit size of 805 square feet. Sales 6 and 7 have 2.0 bedrooms per unit and average unit sizes of 816 to 822 square feet. Brad C. Woodall, MAI 49 Attachment No. 4 Those two sales do not require adjustments for unit mix/average unit size. Sales 8 and 9 also have 2.0 bedrooms per unit, but have slightly smaller average unit sizes at 662 to 701 square feet. Those two sales are adjusted upward by 2.5% for their smaller average unit size. Density/Yard The subject units are on about 2,651 square feet of the subject site. That equates to a density of one unit per 1,325 square feet. Importantly, there is no yard area for either of the units. The comparables have densities of one unit per 2,079 square feet to one unit per 3,180 square feet and each have some yard area for the units. A downward adjustment of 5.0% is applied to each of the comparables for their lower density which allows for small yard areas. Age The subject units are approximately 58 years old. The comparables ranged in age from 59 to 70 years. All have been remodeled since originally constructed. In this case, an adjustment for age is not required. Complex Size The subject contains two residential units. The comparables all contain two units and an adjustment for complex size is not necessary. Following is an adjustment chart which summarizes the adjustments applied to the comparable sales. Brad C. Woodall, MAI 50 Attachment No. 4 Sale No. 6 7 8 9 Sale Price $485,000 $490,000 $430,000 $440,000 Escrow Date 3/17 4/17 3/17 9/16 No. of Units 2 2 2 2 Net Rentable SF 1,643 1,632 1,324 1,401 Price per Unit $242,500 $245,000 $215,000 $220,000 Price per SF $295.19 $300.25 $324.77 $314.06 Adjustments: Property Rights $0 $0 SO SO Adjusted Price $485,000 $490,000 $430,000 $440,000 Financing $0 $0 $0 $0 Adjusted Price $485,000 $490,000 $430,000 $440,000 Conditions of Sale $0 $0 $0 $0 Cash Equiv. Price $485,000 $490,000 $430,000 $440,000 Market Conditions 0.00% 0.00% 0.00% 0.00% Adjusted Price $485,000 $490,000 $430,000 $440,000 Condition $0 $0 $0 $0 Location $0 $0 $0 $0 Unit Mix $0 $0 $10,750 $11,000 Density ($24,250) ($24,500) ($21,500) ($22,000) Age $0 $0 $0 $0 Complex Size $0 $0 $0 $0 Adjusted Price $460,750 $465,500 $419,250 $429,000 Adjusted Price/Unit $230,375 $232,750 $209,625 $214,500 Adjusted Price/SF $280.43 $285.23 $316.65 $306.21 Price per Unit The adjusted range of values on a per unit basis is from $209,625 to $235,750. Sales 1 and 2 indicate values at the upper end of the range at $230.375 to $232,750 per unit, while Sales 3 and 4 indicate values at the lower end of the range at $209,625 to $214,500 per unit. Consistent with the definition of fair market value, a value at the high end of the range is concluded for the subject. A Brad C. Woodall, MAI 51 Attachment No. 4 value of $230,000 per unit is estimated for the subject. The value indicated by the price per unit analysis is $460,000 (2 units x $230,000). Price per Rentable Square Foot The comparables' adjusted range on a price per square foot basis is from $280.43 to $316.65. Typically, properties with the largest average unit sizes tend to have the lowest prices per square foot. A comparison of the price per square foot and average unit size is made in the following table, in which the sales are displayed in ascending order of average unit size. COMPARABLE SALES' ADJUSTED PRICE PER RENTABLE SQUARE FOOT Sale No. Adjusted Price/SF Average Unit Size (SF) 8 $316.65 662 9 $306.21 701 Subject ?? 805 7 $285.23 816 6 $280.43 822 This method of analysis show a strong correlation between average unit size and price per square foot. The subject would be expected to have a price per square foot between that of Sales 7 and 9, which have price per square foot indicators of $285.23 and $306.21. The subject's average unit size is much close to Sale 7's average unit size than to Sale 9's average unit size and a price per square foot closer to Sale 7's figure would be expected. A price per square foot of $290.00 is concluded for the subject. The value indicated by the price per square foot analysis is $466,900 (1,610 SF x $290.00), rounded to $465,000. Conclusion of Value by the Sales Comparison Approach Two units of comparison are used in the Sales Comparison Approach: Price per Unit and Price per Square Foot of Rentable Area. As demonstrated in the market, these are the two methods most often applied by investors. The indications from both methods are as follows: Price per Unit: Price per Rentable Square Foot: $460,000 $465,000 The two units of comparison indicate values of $460,000 to $465,000 for the subject. Typically, the price per unit indicator is more heavily relied upon than the price per square foot indicator. Brad C. Woodall, MAI 52 Attachment No. 4 Therefore, more weight is given to the price per unit indicator and the value of the subject residential units by the Sales Comparison Approach is concluded at $460,000. The value indicated for the industrial portion of the subject was estimated at $375,000, while the value indicated for the residential portion of the of the subject was estimated at $460,000. The value for the entire property is estimated by adding the value of the industrial portion with the value of the residential portion which indicates a total value for the property at $835,000 by the Sales Comparison Approach. Value Indicated By the Sales Comparison Approach - $835,000 Brad C. Woodall, MAI 53 Attachment No. 4 INCOME APPROACH The Income Approach to value is based on the premise that the present value of a property is related to the expectation of future benefits (usually income) to be derived from ownership of the property. Purchasers of income producing properties will pay a price which reflects potential income -producing capabilities of the property. The Income Approach involves a four -step process. First, the property's potential gross income is estimated by analysis of lease rates at the subject property and recently signed leases in the market. Then, an appropriate vacancy and collection loss factor is deducted from the potential gross income to indicate an effective gross income. The next step in the Income Approach is development of the operating expenses which are deducted from the effective gross income to arrive at the net operating income. Finally, the net operating income is divided by a market derived capitalization rate for an indication of value. This process in known as direct capitalization and will be applied for the industrial portion of the property. For the residential portion, a gross income multiplier (GIM) will be utilized as that is what investors in small residential income properties typically utilize. The GIM is multiplied by the potential gross income to arrive at a value estimate. Following is the Income Approach analysis beginning with the industrial portion of the property. Current Income The industrial portion of the property is currently occupied by one tenant. A rent roll and lease document was requested from the owner, but was not provided. POTENTIAL GROSS INCOME A rental survey was undertaken within the National City district to help estimate potential gross income for the subject improvements. On the following page is a location map of the comparable leases which is followed by a table which summarizes the details of the most helpful lease comparables. Data sheets for each lease transaction (including photographs) are located in the Addenda. Brad C. Woodall, MAI 54 ' L)LLORML Data use subject to license. © DeLorme. DeLorme Street Atlas USA® 2011. www.delorme.com TN MN (,,.BE) DeLorme §VrVegri nalsrliSi® 2011 Scale 1 : 12,000 1"=1,000.0ft Data Zoom 14-1 55 Attachment No. 4 SUMMARY OF COMPARABLE LEASES Lease No. 1 2 3 4 Address 1640 Hoover Avenue, Suite A, National City 901 Coolidge Avenue, National City 1706 Hoover Avenue, National City 221 West 33rd Street, National City T.B. Map Code 1309 H-2 1309 J-4 1309 H-2 1309 J-4 Lessee National Mechanical Services Samantha Ward & Mickey Jogeleff Charter Communications Trans Cold Distribution Lease Date 3/17 2/17 11/16 3/16 Lease Size (SF) 4,000 4,300 4,000 8,400 Initial Rate/SF $0.95 $0.91 $1.00 $0.98 Expense Basis Industrial Gross Industrial Gross Industrial Gross Industrial Gross Triple Net Exp. $0.00 $0.00 $0.00 $0.00 Increases Fixed 3.0% per year Fixed 3.0% per year Fixed 3.0% per year Fixed 3.0% per year Lease Term 24 months 60 months 36 months 60 months TI Allowance $0.00 $0.00 $0.00 $0.00 Concessions None One month free None None Building Age 37 years 40 years 33 years 46 years Office % 0% 10% 20% 15% Clear Height 18' 16' 14' 18' Power 400 amps 400 amps 200 amps 1,200 amps Roll -up doors 2 Grade 0 Dock 1 Grade 0 Dock 3 Grade 0 Dock 2 Grade 0 Dock Conclusion of Potential Gross Income The following discussion relates to the analysis of the comparable leases and draws conclusions relative to their rating, either superior or inferior, to the subject property. Each major difference and justification for adjustments is explained in the following sections. Lease Concessions The following table summarizes the lease concessions and applicable adjustments for each comparable. Brad C. Woodall, MAI 56 Attachment No. 4 Comparable No. Concession Adjustment PSF 1 None $0.00 2 1 month free on 60 month term ($0.02) 3 None $0.00 4 None $0.00 Expense Basis The subject's economic rent is estimated on an industrial gross basis. Under this arrangement, the landlord is responsible for paying all operating expenses associated with the building except for utilities. All four lease comparables were leased on an industrial gross basis and no adjustments are required for this category. Market Conditions (Time Adjustment) The comparable leases were signed between March 2016 and March 2017. According to market reports by Costar, asking lease rates for industrial space in National City have been relatively stable between first quarter 2016 and first quarter 2017 going from $0.76 to $0.75 per square foot. While the average asking lease rate went down in second quarter 2017, brokers interviewed indicated that lease rates are not declining in the market area. An adjustment for market conditions will not be applied to the comparables. Location The leases are all located in the National City district within one mile of the subject. Each of the lease comparables have similar locations as compared to the subject for an industrial building. No location adjustments are necessary. Age/Condition The subject is 58 years old and in average condition. The lease comparables ranged in age from 33 to 46 years and were reported to be in average condition. While the subject is older than the comparables, it has had some remodeling in the last few years. No adjustments are applied for age/condition. Size The industrial portion of the subject contains 1,793 square feet. The comparable leases range in size from 4,000 to 8,400 square feet. Leases 1, 2 and 3 range in size from 4,000 to 4,300 square feet, Brad C. Woodall, MAI 57 Attachment No. 4 while Lease 4 is larger at 8,400 square feet. Pairing Leases 1, 2 and 3 with Lease 4 does not provide support for a size adjustment. For that reason, no adjustments will be applied for size differences. Lease Rate Adjustments Adjustments may be required for leases with atypical lease rate adjustments. Typical lease rate adjustments in the market are 3.0% to 4.0% per year or annual increases of $0.05 per square foot per month. All four of the lease comparables have typical lease rate adjustments and no adjustments are required for atypical lease rate adjustments. Tenant Improvements The subject has an office build -out of approximately 71 %, while the comparables' office build -outs range from 0% to 20%. The leasing market does not generally pay a premium for second generation tenant improvements. This is supported by examples of lease transactions which show that second generation buildings with above average build -outs lease at about the same rate as buildings with lower more typical build -outs. Brokers interviewed also verified that buildings with atypically high build -outs lease at about the same as buildings with standard build -outs. No adjustments for tenant improvements are necessary for the comparables. While Lease 1 was 100% warehouse space, the leasing broker was of the opinion that it would not have leased for any more with a 10% to 20% office build -out. Additionally, pairing that comparable with the other comparables does not support an adjustment for the lack of an office build -out. Building Characteristics The industrial portion of the subject is of concrete block construction with a clear height of approximately eight feet. It has one grade level door and power is assumed to be adequate. Its clear height, power and loading doors are adequate for a building of its size and intended use. Leases 1, 2 and 4 are concrete block buildings, while Lease 3 is a metal building. The comparables have clear heights ranging from 14 to 18 feet, power ratings of 200 to 1,200 amps and adequate loading doors. Lease 3 is inferior due to its metal construction and is adjusted upward by 5.0%. Adjustments are not necessary for the remaining comparables for building characteristics. Floor Area Ratio The usable land area for the industrial component at the subject includes area under the building as well as the level portion of the fenced yard area to the south of the building. The estimated FAR on the usable area is approximately 0.20. The comparables' FARs range from 0.40 to 0.71 on the net usable land area and require upward adjustments. Brad C. Woodall, MAI 58 Attachment No. 4 The adjustments for FAR are derived by calculating the land area that the comparable would require to have the same FAR as the subject. The surplus or deficient area is then multiplied by $0.20 per square foot of land area and then divided by the leased area to arrive at the adjustment. Lease rates for industrial yard areas are typically in the range of $0.15 to $0.20 per square foot. Fenced Yard The industrial portion of the subject has a fenced and gated yard area. The comparables are single or two -tenant buildings, which have fenced yard areas. No adjustments are required for this category. Following is an adjustment chart which summarizes the adjustments applied to each of the comparable leases. LEASE COMPARABLE ADJUSTMENT CHART Lease No. Subject 1 2 3 4 Initial Lease Rate N/Ap. $0.95 $0.91 $1.00 $0.98 Lease Date Current 3/17 2/17 11/16 3/16 Size (SF) 1,793 4,000 4,300 4,000 8,400 Adjustments: Lease Concessions None $0.00 ($0.02) $0.00 $0.00 Effective Rent/SF/Mo. N/Ap. $0.95 $0.89 $1.00 $0.98 Expense Basis Ind. Gross $0.00 $0.00 $0.00 $0.00 Adjusted Rent/ SF/Mo. N/Ap. $0.95 $0.89 $1.00 $0.98 Market Conditions Current 0.00% 0.00% 0.00% 0.00% Adjusted Rent/SF/Mo. N/Ap. $0.95 $0.89 $1.00 $0.98 Location National City $0.00 $0.00 $0.00 $0.00 Age/Condition Average $0.00 $0.00 $0.00 $0.00 Size 1,793 $0.00 $0.00 $0.00 $0.00 Lease Rate Adjustments N/Ap. $0.00 $0.00 $0.00 $0.00 Tenant Improvements Average $0.00 $0.00 $0.00 $0.00 Building Characteristics Average $0.00 $0.00 $0.00 $0.00 Floor area ratio 0.20 $0.47 $0.54 $0.38 $0.44 Fenced Yard Fenced yard $0.00 $0.00 $0.00 $0.00 Adjusted Rent/SF/Mo. N/Ap. $1.42 $1.43 $1.38 $1.42 Brad C. Woodall, MAI 59 Attachment No. 4 After adjustment, the comparable leases indicate a range of effective rental rates between $1.38 and $1.43 per square foot on an industrial gross basis. That is a very close range. Based on analysis of the comparables, a rate of $1.40 per square foot per month on an industrial gross basis is estimated for the subject. The annual potential gross income for the industrial portion of the subject is therefore calculated as follows: 1,793 SF x $1.40 = $2,510.20 per mo. x 12 = $30,122 per yr. VACANCY AND COLLECTION LOSS In the District Description section of the report it was reported that the vacancy rate in the National City industrial market was about 1.6% as of the end of second quarter of 2017 according to a report by Costar. Vacancy has ranged from 1.6% to 3.4% over the last two years and has averaged 2.2%. The subject is currently 100% owner/occupied and has been for several years. It is fairly typical for buyers of single tenant industrial buildings to utilize vacancy and collection loss factors of between 0.0% and 5.0% when the market is operating close to stabilized occupancy. The National City market is now operating at a level of occupancy typically considered to be above stabilized, and there is low potential for new inventory to be added to the market due to the built -out nature of the district. A 2.0% allowance appears appropriate to account for physical vacancy as well as collection loss over the economic life. EXPENSES The market rent estimated for the subject is on an industrial gross expense basis where the landlord pays for property taxes, insurance, and exterior maintenance and repairs, and may also incur costs for professional property management. Operating statements were requested from the owner, but were not provided. Sources for estimating expenses are: 1) historical expense data from comparable properties, and 2) published expense surveys in the market area. Since operating statements were not available to the appraiser, the expenses were estimated primarily based on historical expense data from comparable properties as well as published expense surveys. Following is an estimate of the subject's expenses. Brad C. Woodall, MAI 60 Attachment No. 4 Real Estate Taxes - are estimated at 1.13115% of the value indicated by the Income Approach for the industrial component plus special assessments of $630.38 and equate to $4,646. Property Insurance - Expense comparables are generally in the range of $0.15 to $0.25 per square foot for insurance. Insurance is estimated at $0.20 per square foot per year or $359. Grounds Maintenance - Expense comparables indicate grounds maintenance expenses of $0 to $500 per month and vary largely based on the amount of landscaping. The subject does not have much landscaping. Grounds maintenance is estimated at $50 per month or $600 per year. Maintenance & Repairs - Expense comparables indicate a range of $0.25 to $0.75 per square foot for maintenance and repairs. A figure of $0.50 per square foot or $897 per year is estimated for repairs and maintenance. Management - A management fee of 3% of the effective gross income is applied for professional property management. Utilities - under the industrial gross expense basis, the tenant pays for utilities directly to the service provider including gas, electric, water and sewer expenses. As a single tenant building, there are no utility expenses for the owner. Trash Removal - under the industrial gross expense basis the tenant pays for trash removal directly to the service provider. As a single tenant building, there are no trash removal expenses for the owner. Legal & Professional Fees - As a single tenant building leased to a single tenant, legal and professional fees are not typically incurred and are not included. Reserves - For small single tenant industrial properties such as the subject, in most cases it has been found that buyers do not make an allowance for reserves. Reserves were not included in any of the investor sale comparables summarized later in the report and an allowance for reserves will not be made. Miscellaneous Expenses - an allowance of 0.5% of effective gross income is made for miscellaneous expenses. Brad C. Woodall, MAI 61 Attachment No. 4 The following table summarizes the projected expenses for the subject. Projected Real Estate Taxes $4,646 Property Insurance 359 Grounds Maintenance 600 Maintenance & Repairs 897 Management 886 Utilities 0 Trash Removal 0 Legal & Professional 0 Reserves 0 Miscellaneous 148 Total $7,535 Per Rentable Square Foot $4.20 Projected annual operating expenses for the subject property are $7,535. That figure equates to $4.20 per square foot per year or $0.35 per square foot per month. Lease comparables in the market area have triple net expenses reported at $0.12 to $0.30 per square foot and vary primarily due to the tax basis of the property. Properties that have not transferred in many years generally have triple net expenses at the low end of the range while properties that recently transferred have triple net expenses at the high end of the range. Overall, the estimated expenses appear high based on comparison to expense comparables. However, the subject 's real estate taxes are higher than typical due to its very low FAR. RECONSTRUCTED OPERATING STATEMENT Having estimated market rent, vacancy and collection loss and operating expenses, a reconstructed operating statement is made to show the effect of these estimates on the income producing capacity of the subject property. Following is the reconstructed operating statement for the subject property. Brad C. Woodall, MAI 62 Attachment No. 4 RECONSTRUCTED OPERATING STATEMENT Potential Gross Income $30,122 Less Vacancy and Collection Loss (2%) (602) Effective Gross Income $29,520 Less Operating Expenses (7,535) Net Operating Income $21,985 CAPITALIZATION The final step in the Income Approach is the capitalization of the projected net operating income by a market derived rate. Net operating income divided by the overall capitalization rate equals total property value. One method of arriving at an overall capitalization rate is undertaken; the direct method of capitalization. In this method, the overall rate is derived from the sales transactions discussed in the Sales Comparison Approach. Since none of the sales indicated a capitalization rate, additional research was conducted to locate investor sales from which to extract capitalization rates. Following is a summary of the most similar investor sales. Capitalization rates extracted from the sales are based on actual income at the time of sale. SUMMARY OF COMPARABLE INVESTOR SALES No. Address Recording Date Size (SF) Office Pct. Price/SF Re A 2381 Boswell Road Chula Vista 2/24/17 14,811 40% $209.30 6.58% B 655 Venture Street Escondido 9/2'8/16 14,322 23% $205.98 6.70% C 11433 Woodside Avenue Santee 8/22/16 22,240 29% $101.17 6.00% D 300 N. Andreasen Dr. Escondido 4/19/16 5,300 10% $117.92 7.37% F. 8112-22 Engineer Road San Diego 2/9/16 25,265 30% $191.97 6.19% Sale A is located at 2381 Boswell Road in Chula Vista. This property consists of a 14,811 square foot, single tenant, industrial building. The building was approximately 28 years old at the time of sale and in average condition. It is improved with approximately 40% office space. The property sold in February 2017 for $3,100,000 or $209.30 per square foot. At the time of sale, it was leased Brad C. Woodall, MAI 63 Attachment No. 4 to a single -tenant and the indicated capitalization rate is 6.58%. The tenant was a local tenant and had just signed a new seven year lease. Sale B is located at 655 Venture Street in Escondido. This is a 14,322 gross square foot, single - tenant industrial building of concrete tilt -up construction. It was approximately 28 years old at the time of sale and in average condition. The property sold in September 2016 for $2,950,000 or $205.98 per square foot. The building is improved with approximately 23% office space. It was leased to a single tenant at the time of sale with seven years remaining on the lease and the capitalization rate was 6.70%. The lease rate was above market at the time of sale. Sale C is located at 11433 Woodside Avenue in Santee. This property consists of a 22,240 square foot, single tenant, industrial building. The building unit was approximately 45 years old at the time of sale and in fair to average condition. It is improved with approximately 29% office space. The property sold in August 2016 for $2,250,000 or $101.17 per square foot. At the time of sale, it was leased to a single -tenant and the indicated capitalization rate is 6.00%. The lease has approximately three years remaining on the term. The lease rate was below market at the time of sale. Sale D is located at 300 N. Andreasen Drive in Escondido. This property consists of a 5,300 square foot, single tenant, industrial building. The building unit was approximately 22 years old at the time of sale and in fair to average condition. It is improved with approximately 10% office space. The property sold in April 2016 for $625,000 or $117.92 per square foot. At the time of sale, it was leased to a single -tenant and the indicated capitalization rate is 7.37%. The lease has approximately two years remaining on the term. Sale E is located at 8112-22 Engineer Road in Kearny Mesa. This is the sale of a single tenant industrial building which contains 25,265 gross square feet. The building was 42 years old at the time of sale and in good condition. It is improved with approximately 30% office space. The property sold in February 2016 for $4,850,000 or $191.97 per square foot. This was a sale/leaseback for a ten-year term and the indicated capitalization rate was 6.19%. The capitalization rates indicated by the comparable investor sales ranged from 6.00% to 7.37%. Sale A indicates a capitalization rate of 6.58% and was leased to a local tenant that had just signed a new seven-year lease. A rate close to the indicator of Sale A is appropriate for the subject. Sale B is located in Escondido and indicated a capitalization rate of 6.70%. The lease rate was well above market at the time of sale. Because the lease rate was above market, a rate lower than indicated by Brad C. Woodall, MAI 64 Attachment No. 4 Sale B would be expected for the subject. Sale C indicates the low end of the range at 6.0%, likely due to the fact that the lease rate was well below market at the time of sale. A rate higher than indicated by Sale C would be expected for the subject. Sale D indicated the high end of the range, but only had two years remaining on the lease. Therefore, a rate lower than indicated by Sale D would be expected for the subject. Sale E indicates a rate at the lower end of the range and has a superior location with a ten-year remaining lease. A rate higher than indicated by Sale E would be expected for the subject. A final factor taken into consideration is the fact that the buyers of the investor sales did not utilize a vacancy and collection loss factor, while the NOI projected for the subject includes a 2.0% vacancy and collection loss factor. The sales' capitalization rates would be about 15 to 20 basis points lower if a 2.0% vacancy and collection loss factor was utilized. Based on analysis of the comparable sales, a capitalization rate of 6.25% is adopted for the analysis. Conclusion of Stabilized Value by the Income Approach The value indication by the Income Approach is derived by dividing the estimated net operating income by the overall capitalization rate selected above. The computation is: $21,985 _ 0.0625 = $351,756 Rounded to: $350,000 Residential A rental survey was undertaken within the subject's market area to help estimate potential gross income for the residential portion of the subject. Four comparable rentals were located which were utilized to help estimate the subject's market rent. Following is a location map and summary table of the comparable data. Photographs and data sheets for each comparable are in the Addenda. Brad C. Woodall, MAI 65 DELORME 1> MIc�� O r o 0�..- "'� m p Zci r= �3 0 P S N .� 0 i 0 7 F P 00,.�" " 7' o P 0 N, E%SISI P 2p0 St ym E yL 'O,y m L COMPARABLE RENTALS MAP yG 0 8!µ 9L _ m E 9Sµ SS `nLGEtS�"% 5�� ,."y n W l4ZK SZ `O t o 0 ��µS ut m t- Lm W 1611A Si iiits.4.: Subject VI19"SI 4429 1 1.k 'rt * 'G Data use subject to license. © DeLorme. DeLorme Street Atlas USA® 2011. www.delorme.com Kimball Pot 5t YL Lit+ m E yF c Tm „ E 41µ ST Lm v ,� ✓ m SZ` vm µ5t E11 (9t�t n E Etµ S� r E �R0.v �N Rent 1 E 9TH ST Rent 4 /M SS ,/�'/ Z E9� 51 -m� t�QP� VIEW DeLorme McarrAirats- USi® 2011 E4'tµ P P E15-CASS To r vL 7t m Natfional City po y m m 2 ey.y. r1P LV0 c ,\ E 12jµ '1 0 S 2 0 9L m E1.2SµST 'i EIgTµ51 \\ ` - 11. ey 9L ym y '4~ m m yG E �51N" OSEO," 1,655 TN E ,Stµ 5 S SS _L r0 E , 1 9 y yGE1-r(µ� /44 L m J" m Ste' .F i Afr..„ ii of Rent , iii E22,g ,:_�, Irt CP 100 200 .0 Data Zoom 14-0 66 Attachment No. 4 COMPARABLE RENTAL SURVEY No. Location No. Of Units _ Unit Type Unit Size(SF) Overall % Occupancy Rent/Mo. Rent per SF/Month I Unnamed 702 R Avenue, National City 12 2Br/1Ba 910 92% $1,400 S 1.54 2 Unnamed 214-220 B Avenue, National City 4 2Br/1Ba 900 100% $1,550 S1.72 3 Unnamed 1834 K Avenue, National City 3 2Br/ 1 Ba 2Br/2Ba 3Br/2Ba 850 900 1,050 100% $1,400 $1,550 $1,800 $1.65 $1.72 $1.71 4 Unnamed 504 I Avenue, National City 5 1Br/1Ba 2Br/1Ba 4Br/1.5 600 800 1,200 100% $1,150 $1,250 $1,950 $1.92 $1.56 SI.63 The rents shown above are nominal rents. However, none of the comparables included concessions so the nominal rents are equal to the effective rental rates. Following is a discussion of appropriate adjustments to be made for the differing characteristics of the properties. Adjustments are primarily subjective. Concessions None of the comparable rentals offered free rent or move -in specials. No adjustments are necessary for concessions. Location The subject units are located on West 19th Street in National City. The comparables are all located in National City and do not require location adjustments. Utilities For appraisal purposes, it is assumed that the subject tenants pay for electric, cable and telephone and the landlord pays all other utilities. Rentals 1, 2 and 4 require the tenants to pay electric, cable telephone. No adjustments are required for utilities for those three comparables. At Rental 3, the tenant pays for all utilities including water, sewer and trash. An upward adjustment of $35 per month is applied to that comparable for utilities. Unit Size Unit size adjustments are made for differences in excess of 25 square feet. An adjustment factor of $0.30 per square foot is utilized in deriving the size adjustments. Brad C. Woodall, MAI 67 Attachment No. 4 Age/Condition The subject units were built in 1958 and were in average condition at the date of value. The rent comparables ranged in age from 39 years to 72 years and each was reported to be in average condition except for Rental 2. While Rentals 1, 3 and 4 vary substantially in age, each comparable has had some remodeling to keep the unit in a typical rent ready condition. No adjustments will be applied for age/condition for those three comparables. Rental 2 was substantially remodeled and has quartz kitchen counters, new flooring, new cabinetry and ceramic tile bathroom finishes. It is adjusted downward by $150 per month for its superior remodeled condition. Parking Parking at the subject consists of one open space per unit. Rentals 1, 2 and 4 have one open space per unit and do not require adjustments for parking. Rental 3 does not have any on -site parking, but there is sufficient parking on the street in front of the property. A adjustment for parking will not be made for Rental 3. Unit Amenities The subject has average quality unit amenities. The kitchens have wood cabinets, formica counters and average quality appliances including refrigerator and range/oven. Flooring is sheet vinyl. Bathrooms have fiberglass tub/showers and cultured marble sinks/counters. Rentals 1, 3 and 4 are rated similar to the subject in terms of unit amenities and do not require adjustments for this category. Rental 2 has similar amenities, but had been substantially remodeled with superior quality counters, flooring, and bathroom fmishes. However, that was already accounted for in the age/condition adjustment. Following is the adjustment chart which summarizes the applicable adjustments to the comparables for the subject units. Brad C. Woodall, MAI 68 Attachment No. 4 COMPARABLE RENTALS ADJUSTMENT CHART Rent No. , 1 2 3 4 Rental Rate Concessions Location Utilities Unit Size Age/Condition Parking Unit Amenities $1,400 $1,550 $1,400 $1,250 $0 $0 $0 $0 $0 $0 $0 SO $0 $0 $35 SO ($26) ($24) ($11) SO $0 ($150) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Adjustment Adjusted Rent ($26) ($174) $24 SO $1,374 $1,376 $1,424 S1,250 The comparables indicate a range of $1,250 to $1,424 per month for the subject. Rentals 1 and 2 indicates rates fo $1,374 to $1,376 per month. Rental 3 indicates a slightly higher rate at $1,424 per month, while Rental 4 indicates the low end of the range at $1,250 per month. Typically, the rental rates at the subject would be considered in the analysis, but the owner did not provide a rent roll. Market rent for the subject units is estimated at $1,375 per month. Following is the estimation of the potential gross annual income for the subject residential units: No. Of Units Market Rent Annual Rent 2 $1,375 x 12 = $33,000 The value of the residential units by the Income Approach is derived utilizing a Gross Income Multiplier (GIM), which is the most commonly utilized indicator by investors of small residential income properties. The four residential sales utilized in the Sales Comparison Approach indicated GIMs as shown in the following table. Brad C. Woodall, MAI 69 Attachment No. 4 Sale No. Recording Date G I M 6 5/12/17 13.72 7 7/2/14 14.45 8 2/13/14 12.80 9 1/24/14 14.67 The four sales indicated GIMs ranging between 12.80 and 14.67. Sale 6 indicates a GIM near the middle of the range. Sales 7 and 9 indicate GIMs at the high end of the range at 14.45 to 14.67, while Sale 8 indicates a GIM at the low end of the range at 12.80. In addition to the four comparable sales utilized in the Sales Comparison Approach, several additional two -to -four unit property sales in National City were analyzed for their GIM indicators. A total of eleven sales in the last year of two -to -four unit properties in National City were analyzed. Those sales indicated GIMs ranging between 12.50 and 16.67 with an average GIM of 14.11. Based on analysis of the sales, a GIM of 14.25 is concluded for the subject. Conclusion of Value The stabilized fee simple value indication by the Income Approach now becomes a simple matter of multiplying the estimated gross income by the GIM selected above. The computation is: $33,000 x 14.25 = $470,250 Rounded to: $470,000 The value indicated for the industrial portion of the subject by the Income Approach was estimated at $350,000, while the value indicated for the residential portion of the of the subject by the Income Approach was estimated at $470,000. The value for the entire property is estimated by adding the value of the industrial portion with the value of the residential portion which indicates a total value for the property at $820,000 by the Income Approach. Value Indicated by the Income Approach - $820,000 Brad C. Woodall, MAI 70 Attachment No. 4 RECONCILIATION Reconciliation is the final step in the appraisal. The valuation process is reviewed and the strengths and weakness of the indications of value from each approach are considered. It culminates in the final estimate of market value. The reconciliation analysis is based on three criteria: the appropriateness, accuracy and quantity of evidence. Two approaches to value were used: the Sales Comparison Approach and the Income Approach. The two approaches yielded the following indications of the "as is" fair market value of the fee simple interest: Sales Comparison Approach: S835,000 Income Approach: S820,000 Sales Comparison Approach The Sales Comparison Approach is appropriate because this is the approach used by most buyers in the owner/user market. Since the subject is rented to three tenants, and is a mixed -use property, an owner is not a likely buyer of the property. The accuracy of the Sales Comparison Approach is believed to be fairly high as the adjustments applied in the price per square foot and price per unit analyses were market supported. The quality and quantity of data used in the price per square foot and price per unit analyses is good and the estimate of value is reliable. Income Approach The Income Approach is most appropriate for income producing property. The accuracy of the Income Approach is good. The estimated market lease rates were supported by comparables in the subject's district and the vacancy and collection loss factor and operating expenses were well supported. Additionally, there were sufficient investor sales to support a capitalization rate and gross income multiplier. An investor is the most likely buyer of the property and investors typically rely on the Income Approach more than the Sales Comparison Approach. For that reason more weight is given to the Income Approach than the Sales Comparison Approach. Brad C. Woodall, MAI 71 Attachment No. 4 Based on the preceding analysis, it is concluded that "as is" fair market value of the fee simple interest as of September 19, 2017, was: EIGHT HUNDRED TWENTY-FIVE THOUSAND DOLLARS $825,000 Brad C. Woodall, MAI 72 Attachment No. 4 EXPOSURE AND MARKETING TIME Exposure time is defined as follows: "The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open marker.' The best support for estimating an appropriate exposure time for the subject is to examine the marketing times of the comparable sales. Brokers reported that the comparable sales were sold in marketing times ranging from nine days to seven months. The residential duplex sales had quick marketing times at nine days to 43 days. Most brokers reported there is good demand for industrial buildings and residential duplexes in the subject's market area. However, the fact that the subject is mixed -use property would make it more difficult to sell and a longer marketing time would be expected for the subject than any of the sales. Based on marketing times of the comparable sales and also considering input from brokers active in the market, it is estimated that a reasonable exposure time for the subject property is nine months. Marketing time is the amount of time that it would take to achieve a sale, assuming the property were to be placed on the market immediately. Since interest in properties is about the same as when the comparable sales took place, it is reasoned that the marketing time would be the same as the exposure time. A reasonable estimate of marketing time is nine months, provided the building is priced competitively. S USPAP 2016-17 Edition, The Appraisal Foundation Brad C. Woodall, MAI 73 Attachment No. 4 ADDENDA Brad C. Woodall, MAI Al Attachment No. 4 APPRAISER'S CERTIFICATION 1 hereby certify that to the best of my knowledge and belief: The statements of fact contained in the report are true and correct. 2 The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions. and are my personal, impartial, and unbiased professional analyses. opinions, and conclusions. 3 I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. 4 I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 5 My engagement in this assignment was not contingent upon developing or reporting predetermined results. 6 My compensation for completing this assignment is not contingent on the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value. the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the report. 7 The reported analyses, opinions and conclusions were developed, and the report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 8 The reported analyses, opinions and conclusions were developed, and the report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 9 The use of the report is subject to the requirements of the Appraisal Institute regarding review by its duly authorized representatives. 10 I have made a personal inspection of the property that is a subject of this report. and of the comparable sales data. 1 I. No one provided significant real property appraisal assistance to the person signing this certification. 12. This is a "certified" appraisal, under California state law. 13. This appraisal was not based on a requested minimum valuation, a specific valuation or the approval of a loan. 14 As of the date of this report, Brad C. Woodall has completed the requirements under the continuing education program of the Appraisal Institute for designated members. 15. Only a complete original copy of this report should be relied upon. Any copy of this report which is not entirely in this form is not an original and therefore should not be considered or used as a "valid" report; nor will the appraisers) accept any liability or responsibility for the use or reliance of such unauthorized copy. 16 1 have performed no services as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. Brad C. Woodall, MAI CA Certification No. AG015729 Expiration dale 2/12/19 Brad C. Woodall, MAI A2 Attachment No. 4 COMPARABLE IMPROVED INDUSTRIAL SALE PHOTOGRAPHS IMPROVED SALE COMPARABLE NO. 1 IMPROVED SALE COMPARABLE NO. 3 IMPROVED SALE COMPARABLE NO. 5 IMPROVED SALE COMPARABLE NO. 2 IMPROVED SALE COMPARABLE NO. 4 Brad C. Woodall, MAI A3 Attachment No. 4 • COMPARABLE IMPROVED SALE NO. 1 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: INTEREST TRANSFERRED: LAND AREA: FLOOR AREA RATIO: ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Vacancy & Collection Loss: Effective Gross Income: Operating Expenses: Net Operating Income: Sale Price per Square Foot: Gross Income Multiplier Overall Capitalization Rate: Expenses per Square Foot: Expenses as % of EGI: SOURCE: 1200 Harbor Drive, National City 1309 G-2 559-010-08 FC Holdings, LP Robert Patterson $970,000 $97,000 (10%) down; 1" TD loan of $535,000 and 2' TD loan of $428,000 from JP Morgan Chase Bank. March 8, 2017 17-0106490 A one-story metal industrial building which contains 6,485 gross square feet. The building was in fair to average condition at the time of sale. The buyer planned to remodel the improvements at a cost of $110,000. Age 50+ Years Office Clear Power 15% 18' 200 amp Fee Simple 14,104 SF 0.46 IMCZ (Industrial) 6 spaces; 0.93 spaces per 1,000 SF N/Ap. (Owner/user) N/Ap. N/Ap. N/Ap. N/Ap. $149.58 N/Ap. N/Ap. N/Ap. N/Ap. Chris Holder, listing broker Doors 6 grade 0 dock Brad C. Woodall, MAI A4 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 2 LOCATION: 1840 Wilson Avenue, National City THOMAS BROS. MAP PAGE: 1309 H-3 ASSESSOR'S PARCEL NO.: 559-101-02 BUYER: Paul Corriere, LP SELLER: Horn Family Trust SALE PRICE: $785,000 FINANCING: All cash RECORDED: October 14, 2016 DOCUMENT NO.: 16-0552934 IMPROVEMENT A one-story concrete block industrial building containing DESCRIPTION: 4,664 gross square feet. It was in average condition at the time of sale with no deferred maintenance. Age Office Clear Power Doors 39 Years 7% 18' 200 amp 2 grade 0 dock INTEREST TRANSFERRED: Fee Simple LAND AREA: 6,730 SF FLOOR AREA RATIO: 0.69 ZONING: CL in Westside Specific Plan PARKING: 5 1.07 spaces per 1,000 SF INCOME AND INDICATORS: Potential Gross Income: N/Ap. (Owner/user) Vacancy & Collection Loss: N/Ap. Effective Gross Income: N/Ap. Operating Expenses: N/Ap. Net Operating Income: N/Ap. Sale Price per Square Foot: $168.31 Gross Income Multiplier N/Ap. Overall Capitalization Rate: N/Ap. Expenses per Square Foot: N/Ap. Expenses as % of EGI: N/Ap. SOURCE: Eric Wiese, listing broker Brad C. Woodall, MAI A5 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 3 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: INTEREST TRANSFERRED: LAND AREA: FLOOR AREA RATIO: ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Vacancy & Collection Loss: Effective Gross Income: Operating Expenses: Net Operating Income: Sale Price per Square Foot: Gross Income Multiplier Overall Capitalization Rate: Expenses per Square Foot: Expenses as % of EGI: SOURCE: 1640 Coolidge Avenue, National City 1309 H-2 559-083-06 Brasseur Family Trust Cordov Trust $437,000 $43,700 (10%); 1°` TD loan of $218,500 and 2' TD loan of $174,800 from JP Morgan Chase Bank. May 26, 2016 16-0258985 A one-story metal industrial building containing 2,700 square feet. It was in average condition at the time of sale with the exception of approximately $3,000 in deferred maintenance. Age 43 Years Office Clear Power 19% 12' 200 amp Fee Simple 5,663 SF 0.48 Residential in Westside Specific Plan 2 0.74 spaces per 1,000 SF N/Ap. (Owner/user) N/Ap. N/Ap. N/Ap. N/Ap. $161.85 N/Ap. N/Ap. N/Ap. N/Ap. Cody Evans, listing broker Doors 1 grade 0 dock Brad C. Woodall, MAI A6 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 4 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: INTEREST TRANSFERRED: LAND AREA: FLOOR AREA RATIO: ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Vacancy & Collection Loss: Gross Income: Operating Expenses: Net Operating Income: Sale Price per Square Foot: Effective Gross Income Multiplier Overall Capitalization Rate: Expenses per Square Foot: Expenses as % of EGI: SOURCE: 221 West 33' Street, National City 1309 J-4 562-330-40 West 33`d Street, LLC West Family Trust $1,344,000 $201,600 (15%); tat TD loan of $1,142,400 from Wells Fargo Bank. February 26, 2016 16-0084769 A one-story concrete block industrial building containing 8,400 square feet. It was in average condition at the time of sale with no reported deferred maintenance. Age 46 Years Office Clear Power Doors 15% 18' 1,200 amp 2 grade 0 dock Fee Simple 16,988 SF 0.49 ML-CZ (Industrial) 15 1.79 spaces per 1,000 SF N/Ap. N/Ap. N/Ap. N/Ap. N/Ap. $160.00 N/Ap. N/Ap. N/Ap. N/Ap. Nick Price, selling broker Brad C. Woodall, MAI A7 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 5 LOCATION: 225-231 West 16th Street, National City THOMAS BROS. MAP PAGE: 1309 H-2 ASSESSOR'S PARCEL NO.: 560-066-21 BUYER: Zhongsheng Chen SELLER: Jeff & Adaline Kangas SALE PRICE: $709,000 FINANCING: $522,000 (25%) down; 1'` TD loan of $2,096,000 from Bank of America. RECORDED: June 17, 2015 DOCUMENT NO.: 15-0312032 IMPROVEMENT A one-story concrete block industrial building which DESCRIPTION: contains 5,275 gross square feet. The building was in average condition at the time of sale with no reported deferred maintenance. Age Office Clear Power Doors 24 Years 10% 18' 200 amp 2 grade 0 dock INTEREST TRANSFERRED: Fee Simple LAND AREA: 8,847 SF FLOOR AREA RATIO: 0.60 ZONING: Residential in Westside Specific Plan PARKING: 6 spaces; 1.14 spaces per 1,000 SF INCOME AND INDICATORS: Potential Gross Income: N/Ap. (Owner/user) Vacancy & Collection Loss: N/Ap. Gross Income: N/Ap. Operating Expenses: N/Ap. Net Operating Income: N/Ap. Sale Price per Square Foot: $134.41 Effective Gross Income Multiplier N/Ap. Overall Capitalization Rate: N/Ap. Expenses per Square Foot: N/Ap. Expenses as % of EGI: N/Ap. SOURCE: Nick Price, listing broker Brad C. Woodall, MAI A8 Attachment No. 4 COMPARABLE IMPROVED RESIDENTIAL SALE PHOTOGRAPHS IMPROVED SALE COMPARABLE NO. 6 IMPROVED SALE COMPARABLE NO. 8 IMPROVED SALE COMPARABLE NO. 7 IMPROVED SALE COMPARABLE NO. 9 Brad C. Woodall, MAI A9 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 6 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: NO. OF UNITS UNIT MIX INTEREST TRANSFERRED: LAND AREA: DENSITY (UNITS/SF): ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Sale Price per Unit: Sale Price per Square Foot: Gross Income Multiplier SOURCE: 445 M Avenue, National City 1289 J-7 557-012-11 Raymond Smalley 445 M, LLC $485,000 $97,000 down (20%); First Trust Deed loan of $388,000 from Franklin Loan Center. May 12, 2017 17-0213727 A one-story wood frame and stucco building which contains 1,643 rentable square feet. The building was built in 1958 and was in average condition at the time of sale. 2 Studios 1 Br/ 1 Ba 2Br/1 Ba 3Br/2Ba 0 1 0 Fee Simple 6,360 SF 3,180 Residential 4 spaces; 2.00 spaces per unit $35,340 Actual Income $242,500 $295.19 13.72 Emily Self, listing broker 1 Brad C. Woodall, MAI A10 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 7 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: NO. OF UNITS UNIT MIX INTEREST TRANSFERRED: LAND AREA: DENSITY (UNITS/SF): ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Sale Price per Unit: Sale Price per Square Foot: Gross Income Multiplier SOURCE: 918-20 East 16th Street, National City 1309 J-2 561-030-31 Mark Collins Kutzke Trust $490,000 All cash May 9, 2017 17-0207914 Two one-story wood frame and stucco buildings which contain 1,632 rentable square feet. The buildings were built in 1947 and were in good condition at the time of sale. 2 Studios 1Br/1Ba 2Br/1 Ba 3Br/2Ba 0 1 0 Fee Simple 5,309 SF 2,655 Residential 3 spaces; 1.50 spaces per unit $33,900 Actual Income $245,000 $300.25 14.45 David Andrews, selling broker 1 Brad C. Woodall, MAI All Attachment No. 4 COMPARABLE IMPROVED SALE NO. 8 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: NO. OF UNITS UNIT MIX INTEREST TRANSFERRED: LAND AREA: DENSITY (UNITS/SF): ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Sale Price per Unit: Sale Price per Square Foot: Gross Income Multiplier SOURCE: 2004 I Avenue, National City 1309 J-2 561-271-09 Mark Gawlik Elias & Arauz Rodriguez $430,000 $86,000 down (20%); First Trust Deed loan of $388,000 from Home Point Financial. April 19, 2017 17-0175821 Two one-story wood frame and stucco buildings which contain 1,324 rentable square feet. The buildings were built in 1950's and were in average condition at the time of sale. 2 Studios 1Br/1Ba 2Br/1 Ba 3Br/2Ba 0 0 2 Fee Simple 4,158 SF 2,079 Residential 2 spaces; 1.00 spaces per unit $33,600 Actual Income $215,000 $324.77 12.80 Iassac Cardona, listing broker 0 Brad C. Woodall, MAI Al2 Attachment No. 4 COMPARABLE IMPROVED SALE NO. 9 LOCATION: THOMAS BROS. MAP PAGE: ASSESSOR'S PARCEL NO.: BUYER: SELLER: SALE PRICE: FINANCING: RECORDED: DOCUMENT NO.: IMPROVEMENT DESCRIPTION: NO. OF UNITS UNIT MIX INTEREST TRANSFERRED: LAND AREA: DENSITY (UNITS/SF): ZONING: PARKING: INCOME AND INDICATORS: Potential Gross Income: Sale Price per Unit: Sale Price per Square Foot: Gross Income Multiplier SOURCE: 1805 C Avenue, National City 1309 J-2 560-222-25 Rosa & Yee Rodriquez Alejandro Lopez $440,000 $130,000 down (30%); First Trust Deed loan of $310,000 from First Bank. October 20, 2016 16-0567610 Two one-story wood frame and stucco buildings which contain 1,401 rentable square feet. The buildings were built in 1950 and were in average condition at the time of sale. 2 Studios 1Br/1Ba 2Br/1 Ba 3Br/1Ba 0 1 0 Fee Simple 5,988 SF 2,994 Residential 0 spaces; 0.00 spaces per unit $30,000 Actual Income $220,000 $314.06 14.67 Pedro Espinoza, selling broker 1 Brad C. Woodall, MAI A13 Attachment No. 4 INDUSTRIAL LEASE COMPARABLE PHOTOGRAPHS COMPARABLE LEASE NO. 1 COMPARABLE LEASE NO. 3 COMPARABLE LEASE NO. 2 i COMPARABLE LEASE NO. 4 Brad C. Woodall, MAI A14 Attachment No. 4 LEASE COMPARABLE NO. 1 LOCATION: 1640 Hoover Avenue, Suite A, National City THOMAS BROS. MAP PAGE: 1309 H-2 LESSEE: National Mechanical Services LESSOR: Alton Beauchamp DATE SIGNED: 3/17 LEASE TERM: 24 months BASE RENT/SF/MO.: $0.95 INCREASES: Fixed 3.0% per year CONCESSIONS: None 1" YEAR EFFECTIVE RENT: $0.94 TI ALLOWANCE ($/SF): $0.00 EXPENSE BASIS: Industrial Gross Who Pays: Lessor Lessee Property Taxes (x) ( ) Fire Insurance (x) ( ) Utilities ( ) (x) Repairs and maintenance Exterior (x) ( ) Interior ( ) (x) TRIPLE NET EXPENSES: $0.00 SUITE SIZE (SF): 4,000 BUILDING DESCRIPTION: An 8,000 square foot, two -tenant, concrete block industrial building of average quality and condition. Age Office Clear Power Doors 37 years 0% 18' 400 amps 2 grade 0 dock PARKING RATIO (spaces per 1.0 1,000 SF of building area): SOURCE: Phil Emery, leasing broker Brad C. Woodall, MAI A15 Attachment No. 4 LEASE COMPARABLE NO. 2 LOCATION: 901 Coolidge Avenue, National City THOMAS BROS. MAP PAGE: 1309 J-4 LESSEE: Samantha Ward & Mickey Jogeleff LESSOR: Abraham & Melba Cunanan DATE SIGNED: 2/17 LEASE TERM: 60 months BASE RENT/SF/MO.: $0.91 INCREASES: Fixed 3.0% per year CONCESSIONS: One month free 1ST YEAR EFFECTIVE RENT: $0.89 TI ALLOWANCE ($/SF): $0.00 EXPENSE BASIS: Industrial Gross Who Pays: Lessor Lessee Property Taxes (x) ( ) Fire Insurance (x) ( ) Utilities ( ) (x) Repairs and maintenance Exterior (x) ( ) Interior ( ) (x) TRIPLE NET EXPENSES: $0.00 BUILDING SIZE (SF): 4,300 BUILDING DESCRIPTION: A 4,300 square foot, single -tenant, concrete block industrial building of average quality and condition. Age Office Clear Power Doors 40 years 10% 16' 400 amps 1 grade 0 dock PARKING RATIO (spaces per 1.0 1,000 SF of building area): SOURCE: Mark Lewkowitz, leasing broker Brad C. Woodall, MAI A 16 Attachment No. 4 LEASE COMPARABLE NO. 3 LOCATION: 1706 Hoover Avenue, National City THOMAS BROS. MAP PAGE: 1309 H-2 LESSEE: Charter Communications LESSOR: West Family Trust DATE SIGNED: 11/16 LEASE TERM: 36 months BASE RENT/SF/MO.: $1.00 INCREASES: Fixed 3.0% per year CONCESSIONS: None 1ST YEAR EFFECTIVE RENT: $1.00 TI ALLOWANCE ($/SF): $0.00 EXPENSE BASIS: Industrial Gross Who Pays: Lessor Lessee Property Taxes (x) ( ) Fire Insurance (x) ( ) Utilities ( ) (x) Repairs and maintenance Exterior (x) ( ) Interior ( ) (x) TRIPLE NET EXPENSES: $0.00 BUILDING SIZE (SF): 4,000 BUILDING DESCRIPTION: A 4,000 square foot, single -tenant, metal industrial building of average quality and condition. Age Office Clear Power Doors 33 years 20% 14' 200 amps 3 grade 0 dock PARKING RATIO (spaces per 1.0 1,000 SF of building area): SOURCE: Nick Price, leasing broker Brad C. Woodall, MAI A17 Attachment No. 4 LEASE COMPARABLE NO. 4 LOCATION: 221 West 33rd Street, National City THOMAS BROS. MAP PAGE: 1309 J-4 LESSEE: Trans Cold Distribution LESSOR: West 33rd Street, LLC DATE SIGNED: 3/16 LEASE TERM: 60 months BASE RENT/SF/MO.: $0.98 INCREASES: Fixed 3.0% per year CONCESSIONS: None 1ST YEAR EFFECTIVE RENT: $0.98 TI ALLOWANCE ($/SF): $0.00 EXPENSE BASIS: Industrial Gross Who Pays: Lessor Lessee Property Taxes (x) ( ) Fire Insurance (x) ( ) Utilities ( ) (x) Repairs and maintenance Exterior (x) ( ) Interior ( ) (x) TRIPLE NET EXPENSES: $0.00 BUILDING SIZE (SF): 8,400 BUILDING DESCRIPTION: An 8,400 square foot, single -tenant, concrete block industrial building of average quality and condition. Age Office Clear Power Doors 46 years 15% 18' 1,200 amps 2 grade 0 dock PARKING RATIO (spaces per 1.8 1,000 SF of building area): SOURCE: Evan McDonald, leasing broker Brad C. Woodall, MAI A 18 Attachment No. 4 COMPARABLE RESIDENTIAL RENTAL PHOTOGRAPHS COMPARABLE RENTAL NO. 1 COMPARABLE RENTAL NO. 3 COMPARABLE RENTAL NO. 2 COMPARABLE RENTAL NO. 4 Brad C. Woodall, MAI A19 Attachment No. 4 COMPARABLE RENTAL NO. 1 NAME: LOCATION: THOMAS BROS. MAP PAGE: IMPROVEMENT DESCRIPTION: NO. OF UNITS: UNIT MIX: NO.: RENTAL RATES PER MO.: UNIT SIZE (SF): RENT/SF: VACANCY BY UNIT TYPE: OVERALL OCCUPANCY: CONCESSIONS: UTILITIES: ON -SITE PARKING: UNIT AMENITIES: HVAC: COMPLEX AMENITIES: SOURCE: Unnamed 702 R Avenue, National City 1028 E-4 A one-story, wood frame and stucco apartment building with a sloping composition shingle roof. The complex is 39 years old. 12 1Br/1Ba 2Br/1Ba 3Br/1.5Ba 12 $1,400 910 $1.54 1 92% None The landlord pays for gas, water, sewer and trash. The tenant pays for telephone, cable and electricity. One open space per unit All units have refrigerators, range/ovens and garbage disposals. Central heat Common laundry Property Manager Brad C. Woodall, MAI A20 Attachment No. 4 COMPARABLE RENTAL NO. 2 NAME: Unnamed LOCATION: 214-220 B Avenue, National City THOMAS BROS. MAP PAGE: 1027 F-2 IMPROVEMENT A two-story, wood frame and stucco apartment building DESCRIPTION: with a sloping composition shingle roof. The building is approximately 60 years old. NO. OF UNITS: 4 UNIT MIX: 1Br/1Ba 2Br/1Ba 3Br/2Ba NO.: 4 RENTAL RATES PER MO.: $1,550 UNIT SIZE (SF): 900 RENT/SF: $1.72 VACANCY BY UNIT TYPE: 0 OVERALL OCCUPANCY: 100% CONCESSIONS: None UTILITIES: The landlord pays for gas, water, sewer and trash. The tenant pays for telephone, cable and electricity. ON -SITE PARKING: One open space per unit UNIT AMENITIES: All units have refrigerators, range/ovens and garbage disposals. HVAC: Central heat COMPLEX AMENITIES: Common laundry SOURCE: Property Manager Brad C. Woodall, MAI A21 Attachment No. 4 COMPARABLE RENTAL NO. 3 NAME: Unnamed LOCATION: 1834 K Avenue, National City THOMAS BROS. MAP PAGE: 1027 F-2 IMPROVEMENT A one and two-story, wood frame and stucco apartment DESCRIPTION: building with a sloping composition shingle roof. The building is 72 years old. NO. OF UNITS: 3 UNIT MIX: 2Br/1Ba 2Br/2Ba 3Br/2Ba NO.: 1 1 1 RENTAL RATES PER MO.: $1,400 $1,550 $1,800 UNIT SIZE (SF): 850 900 1050 RENT/SF: $1.65 $1.72 $1.71 VACANCY BY UNIT TYPE: 0 0 0 OVERALL OCCUPANCY: 100% CONCESSIONS: None UTILITIES: The tenant pays all utilities including water, sewer, gas, electric and trash. ON -SITE PARKING: None UNIT AMENITIES: All units have refrigerators, range/ovens and garbage disposals. HVAC: Central heat COMPLEX AMENITIES: Common laundry SOURCE: Property Manager Brad C. Woodall, MAI A22 Attachment No. 4 COMPARABLE RENTAL NO. 4 NAME: Unnamed LOCATION: 504 I Avenue, National City THOMAS BROS. MAP PAGE: 1027 F-2 IMPROVEMENT A two-story, wood frame and stucco apartment building DESCRIPTION: with a sloping composition shingle roof. The building is 67 years old. NO. OF UNITS: 5 UNIT MIX: 1Br/1Ba 2Br/1Ba 4Br/1.5Ba NO.: 3 1 1 RENTAL RATES PER MO.: $1,150 $1,250 $1,950 UNIT SIZE (SF): 600 800 1,200 RENT/SF: $1.92 $1.56 $1.63 VACANCY BY UNIT TYPE: 0 0 0 OVERALL OCCUPANCY: 100% CONCESSIONS: None UTILITIES: The landlord pays for gas, water, sewer and trash. The tenant pays for telephone, cable and electricity. ON -SITE PARKING: One open space per unit UNIT AMENITIES: All units have refrigerators, range/ovens and garbage disposals. HVAC: Central heat COMPLEX AMENITIES: Common laundry SOURCE: Property Manager Brad C. Woodall, MAI A23 Attachment No. 4 in 0 0 First Floor Second Floor 12.5' 8' in 10TAL gosh W a 1s mode, Inc in 0 0 20' 21.5' 20' Area Calculations Summary 0 0 in First Floor Second Floor 1793.25 Sq ft 12.5x5 = 62.5' 21.5 x 80.5 = 1730.75 1610 Sq ft 80.5 x 20 = 1610 Total Living Area (Rounded): 3403 Sq ft TOTAL Sketch software by a la mode, inc. 1-800-alamade Attachment No. 4 GENERAL Principal: QUALIFICATIONS OF BRAD C. WOODALL, MAI Brad C. Woodall, MAI 9922 Winecrest Road San Diego, CA 92127 (858) 876-2510 PROFESSIONAL EXPERIENCE 01/95 to present: 08/92 to 12/94: 09/88 to 07/92: Principal Appraiser - Brad C. Woodall, MAI Associate Appraiser - Alan M. Wilson & Associates Associate Appraiser -David J. Yerke, Inc. & Dennis B. Cunningham FORMAL EDUCATION AND SPECIAL TRAINING 1986-88: B.S. Degree San Diego State University School of Business Administration Major - Real Estate 1984-86: California Polytechnic University at San Luis Obispo APPRAISAL AFFILIATIONS MAI member in the Appraisal Institute (No. 10577) Served on Appraisal Institute's San Diego Chapter Experience Review Committee State Certified General Appraiser (Certificate No. AGO15729) PROPERTY TYPES APPRAISED Commercial, residential, industrial, unimproved land and special purpose properties. SELECTED APPRAISAL INSTITUTE COURSES Real Estate Appraisal Principals Basic Valuation Procedures Uniform Standards of Professional Practice Capitalization Theory and Techniques (Part 1B-A) Capitalization Theory and Techniques (Part 1B-B) Case Studies in Real Estate Valuation Report Writing and Valuation Analysis Comprehensive Appraisal Workshop Highest and Best Use and Market Analysis New Technology for Real Estate Appraisers Using HP 12C Financial Calculator Allocating Components of Going Concern Appraisals Federal and California Statutory and Regulatory Laws Residential Design & Functional Utility Real Estate Finance, Value and Investment Performance Subdivision Valuation Dynamics of Subdivision Appraising Applying Economic Forecasts Effective Appraisal Writing Appraising From Blueprints Scope of Work Valuation of Unique Properties Evaluating Commercial Construction Business Practices and Ethics Land Appraisal Introduction to Green Buildings What Does It Cost to Operating That Building The Discounted Cash Flow Model Analyzing Distressed Real Estate A25 Attachment No. 4 APPRAISAL ASSIGNMENTS HAVE BEEN PREPARED FOR THE FOLLOWING (Some in association with other appraisers) LENDERS Bank of America Bank of California Bank of Rancho Bernardo Bank of Salinas California Bank & Trust City National Bank First Bank & Trust First Citizens Bank First Fidelity Thrift & Loan First National Bank First National Bank of North County First Pacific National Bank General Bank HomeStreet Bank Imperial Thrift & Loan Association Indymac Bank JP Morgan Chase Bank Key Bank Manufacturers Bank Nippon Credit Bank San Dieguito National Bank San Diego County Credit Union Santa Barbara Bank & Trust Torrey Pines Bank Union Bank Wells Fargo Bank GOVERNMENTAL AGENCIES CalTrans City of Del Mar City of San Diego City of Vista County of San Diego FDIC Governmental Services Agency (GSA) ATTORNEYS Anderson, Goldberg & Waldron Gibson, Dunn & Crutcher Lincoln, Gustafson & Cercos Luce, Forward, Hamilton & Scripps OTHERS Atlantic Richfield Corporation Children's Comprehensive Services GMAC Mortgage Hawthome Machinery Kaiser Permanente McMillin Companies Richmond American SDG&E A26 RESOLUTION NO. 2018 — RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY RATIFYING THE PURCHASE AND SALE AGREEMENT EXECUTED ON FEBRUARY 7, 2018; AUTHORIZING THE PURCHASE OF REAL PROPERTY LOCATED AT 302 WEST 19TH STREET IN ORDER TO SAVE ON SUBSTANTIAL SEWER INFRASTRUCTURE IMPROVEMENTS FOR THE EXPANSION OF PARADISE CREEK PARK, FROM FRANK SAFELY FOR A TOTAL SALE PRICE OF $905,000 AND THE PAYMENT OF CLOSING COSTS NOT TO EXCEED $4,000; AND AUTHORIZING THE ESTABLISHMENT OF AN APPROPRIATION NOT TO EXCEED $909,000 BASED ON THE AVAILABLE FUND BALANCE OF THE SEWER SERVICE FUND WHEREAS, the City desires to purchase real property located on a rectangular parcel located at 302 West 19th Street in order to save on substantial sewer infrastructure improvements for the expansion of Paradise Creek Park (the "Park"); and WHEREAS, the current sewer service to 302 West 19th Street is being provided by a temporary pump station that was installed because the previous sewer connection, which ran under Paradise Creek onto the WI-TOD housing site, was abandoned and capped to allow for construction of Paradise Creek Apartments; and WHEREAS, the temporary pump station is located in the center of the proposed expansion to the Park and needs to be removed in order to expand the Park; and WHEREAS, estimated costs to reroute the sewer is approximately $1,000,000 and no other feasible alternatives for providing permanent sewer service to this property have been identified due to site constraints and potential environmental impacts; and WHEREAS, the acquisition of this parcel would eliminate the need to reroute the sewer service and is essential in creating proper access to the Park and facilitating street and parking improvements. WHEREAS, after negotiations with the property owner, the City entered into a Purchase and Sale Agreement on February 7, 2018, contingent on City Council approval; and WHEREAS, an appropriation not -to -exceed $909,000 based on the available fund balance of the Sewer Service Fund is necessary. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby ratifies the Purchase and Sale Agreement executed on February 7, 2018; authorizing the purchase of real property located at 302 West 19th Street, in order to save on substantial sewer infrastructure improvements for the expansion of Paradise Creek Park, from Mr. Frank Safely for a total sales price of $905,000 and the payment of closing costs not to exceed $4,000. BE IT BE FURTHER RESOLVED that the City Council of the City of National City hereby authorizes the establishment of an appropriation not -to -exceed $909,000 based on the available fund balance of the Sewer Service Fund. [Signature Page to Follow] Resolution No. 2018 — Page Two PASSED and ADOPTED this 6th day of March, 2018. Ron Morrison, Mayor ATTEST: Michael R. Dalla, City Clerk APPROVED AS TO FORM: Angil P. Morris -Jones City Attorney CITY OF NATIONAL CITY Office of the City Clerk 1243 National City Blvd., National City, California 91950-4397 619-336-4228 Michael R. Dalla, CMC - City Clerk April 4, 2018 Mr. and Mrs. Frank Safley 111 12th Street Del Mar, California 92014 Dear Mr. and Mrs. Safely, On March 6th, 2018, Resolution No. 2018-37 was passed and adopted by the City Council of the City of National City, authorizing execution of a Purchase and Sale Agreement with Frank and Deborah Safley. We are forwarding a certified copy of the above Resolution and a fully executed original Agreement. Sincerely, Michael R. Dalla, CMC City Clerk Enclosures