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Public_Service__Educational__Rexburg__25-1084__Appraisal_RE
(Bus) (208)233-4132 P.O. Box 2503 Pocatello, Idaho 83206 Kirkhamappraisal@gmail.com AN APPRAISAL REPORT OF School Building LOCATED AT 60 W Main Street Rexburg, Idaho 83440 CLIENT Madison School District #321 P.O. Box 2503 Pocatello, Idaho 83206 (Bus) (208)233-4132 April 07, 2025 Mr. Randy Lords Madison School District #321 60 W Main Street Rexburg, Idaho 83440 Re: 60 W Main Street Rexburg, Idaho 83440 Dear Randy Lords, At your request, we have appraised a real property interest for the above real estate. Our objective was to form one or more opinions about the market value for a 100% ownership interest in the subject property's fee simple estate assuming no liens or encumbrances other than normal covenants and restrictions of record. The subject property physically consists of a slightly irregular, corner parcel constituting 249,337+/- square feet. It is improved with a school building that contains 68,275+/- square feet above grade and a basement that contains 18,043+/- square feet. The county does not have a reported construction date on the subject, and it is assumed to be around 70+ years of age. The building has been utilized as a school in the past, and now as an administrative building. The building contains classrooms, office space for staff, bathrooms, locker rooms, cafeteria, and a gymnasium. There is an additional building on the parcel that is near the end of its economic life and contributes minimal value to the parcel overall. Since the building could be leased as storage to offset demolition costs, no demolition costs are considered. A school is a special purpose facility that is constructed for a specific purpose, and many of the sales data found indicate a repurposing of the buildings into residential uses, houses of worship, and office facilities. The subject is located within the “CC-T” City Center Transect zoning district and the “MS-T” Main Street Transect zoning district by the City of Rexburg. This valuation contains analyses, opinions, and conclusions along with market data and reasoning appropriate for the scope of work detailed later herein. It was prepared solely for the intended use and intended user(s) explicitly identified in the attached report. Unauthorized users do so at their own risk. The appraisal is communicated in the attached document, which conforms to the version of the Uniform Standards of Professional Appraisal Practice (USPAP) in effect on this report's preparation date of April 07, 2025. This letter is not an appraisal report hence it must not be removed from the attached 112-page document. If this letter is disjoined from the attached appraisal report, then the value opinions set forth in this letter are invalid because the analyses, opinions, and conclusions cannot be properly understood. In general, valuation of the subject property involves no atypical issues. All value opinions are affected by all the information, extraordinary assumptions, hypotheses, general limiting conditions, facts, descriptions, and disclosures stated in the attached appraisal report. After careful consideration of all factors pertaining to and influencing value, the data and analysis thereof firmly supports the following final value opinion(s) for the subject property as of April 1, 2025: $8,100,000 Market Value “As Is” Thank you for your business. Let us know how we may further serve you. Brian Kirkham, MAI Certified General Appraiser Idaho License CGA-3486 License Expiration Date: 5/9/2025 Table of Contents Overview ........................................................................................................ 1 Salient Information ..................................................................................................... 1 Noteworthy Issues ...................................................................................................... 2 Scope of Work ............................................................................................... 3 Scope of Work ............................................................................................................ 3 Introduction ........................................................................................................... 3 Assignment Elements ............................................................................................. 3 Relevant Characteristics ........................................................................................ 5 Extent of Services Provided ................................................................................... 6 Other Intended Use Considerations ....................................................................... 6 Miscellaneous Matters ........................................................................................... 6 Appraisal Development.......................................................................................... 7 Concept Explanations ............................................................................................ 9 Scope of Work Limitation ........................................................................................ 10 Report Reliance & Use Restrictions .......................................................................... 10 Scope of Work Exclusion - Insurable Value ............................................................. 11 Extraordinary Assumptions & Disclosures................................................................ 12 Hypothetical Conditions ........................................................................................... 12 Personal Property & Intangibles ............................................................................... 13 Definition of Market Value ....................................................................................... 14 Definition of Real Property Estates ........................................................................... 15 Non-Disclosure State ................................................................................................ 17 Assemblage .............................................................................................................. 17 Disclosures ................................................................................................... 18 Professional Standards .............................................................................................. 18 Competency .............................................................................................................. 18 Area Data ..................................................................................................... 19 Regional Map ........................................................................................................... 19 Regional Data ........................................................................................................... 20 Proximity Features .................................................................................................... 33 Nearby Land Uses .................................................................................................... 33 Market Conditions .................................................................................................... 34 Definition of Product and Market Segmentation ................................... 37 Subject Property ......................................................................................... 39 Identification of the Property .................................................................................... 39 Legal Description ..................................................................................................... 39 Aerial View .............................................................................................................. 40 Building Sketch “First Floor” ................................................................................... 42 Building Sketch “Second Floor” ............................................................................... 43 Building Sketch “Basement”..................................................................................... 44 Sale History .............................................................................................................. 49 Flood Hazard ............................................................................................................ 49 Real Estate Taxes...................................................................................................... 49 Zoning ...................................................................................................................... 49 Zoning Map .............................................................................................................. 52 Environmental Risks ................................................................................................. 53 Subject Descriptions ................................................................................................. 54 Subject Site ............................................................................................................... 54 Description of Existing Improvements ...................................................................... 55 Effective Age & Life Estimates ................................................................................ 56 Analyses & Conclusions ............................................................................. 57 Value Introduction .................................................................................................... 57 Real Estate Cycles .................................................................................................... 58 Highest and Best Use ................................................................................................ 59 Land Value ............................................................................................................... 66 Introduction ......................................................................................................... 66 Summary of Land Sales........................................................................................ 72 Land Sales Location Map .................................................................................... 74 Analysis & Conclusions ....................................................................................... 75 Value Indication .................................................................................................. 76 Cost Approach .......................................................................................................... 78 Introduction ......................................................................................................... 78 Depreciation ........................................................................................................ 78 Sales Comparison Approach ..................................................................................... 81 Introduction ......................................................................................................... 81 Summary of Improved Sales ................................................................................. 87 Sales Location Map ............................................................................................. 89 Analysis & Conclusions ....................................................................................... 90 Value Indication .................................................................................................. 92 Income Approach ..................................................................................................... 93 Reconciliation ........................................................................................................... 94 Exposure Time.......................................................................................................... 95 Contingent and Limiting Conditions ......................................................................... 96 Certification ............................................................................................................ 103 Addenda ..................................................................................................... 105 Digital Images ........................................................................................................ 105 Technical Qualifications ......................................................................................... 106 Engagement Letter .................................................................................................. 107 Copyright Protection ............................................................................................... 112 End of Report ......................................................................................................... 112 25-1084 Kirkham Appraisals Inc. Page 1 ♦ Overview • • • Salient Information Property Type School Building Real Estate Appraised 60 W Main Street Rexburg, Idaho 83440 County Madison Estate Valued 100% of the Fee Simple Estate Client Madison School District #321 Client File Number 25-1084 Most Likely Buyer Builder-Developer Effective Value Date (point in time that the value applies) April 01, 2025 Report Date (date the report is transmitted to client) April 07, 2025 Census Tract 9502.00 Land Size 249,337+/- square feet Building Size 86,318+/- square feet Flood Hazard Zone X Zoning Classification CC-T & MS-T by the City of Rexburg Highest & Best Use As Though Vacant As Now Improved Commercial As Is Value Indication(s) Land Value Cost Approach Sales Comparison Income Approach $2,990,000 $8,865,000 $7,335,000 Not Applicable Final Value Conclusion(s) $8,100,000 “As Is” 25-1084 Kirkham Appraisals Inc. Page 2 Noteworthy Issues The subject property physically consists of a slightly irregular, corner parcel constituting 249,337+/- square feet. It is improved with a school building that contains 68,275+/- square feet above grade and a basement that contains 18,043+/- square feet. The county does not have a reported construction date on the subject, and it is assumed to be around 70+ years of age. The building has been utilized as a school in the past, and now as an administrative building. The building contains classrooms, office space for staff, bathrooms, locker rooms, cafeteria, and a gymnasium. There is an additional building on the parcel that is near the end of its economic life and contributes minimal value to the parcel overall. Since the building could be leased as storage to offset demolition costs, no demolition costs are considered. A school is a special purpose facility that is constructed for a specific purpose, and many of the sales data found indicate a repurposing of the buildings into residential uses, houses of worship, and office facilities. The subject is located within the “CC-T” City Center Transect zoning district and the “MS-T” Main Street Transect zoning district by the City of Rexburg. No atypical factors significantly affect value. The real estate appraised is generally typical for this type of property in this locale. 25-1084 Kirkham Appraisals Inc. Page 3 ♦ Scope of Work • • • Scope of Work Introduction The Uniform Standards of Professional Appraisal Practice (USPAP) defines scope of work as “the type and extent of research and analysis in an assignment". Scope of work includes, but is not limited to: ➢ the extent to which the property is identified; ➢ the extent to which tangible property is observed; ➢ the type and extent of data researched; and ➢ the type and extent of analyses applied to arrive at opinions or conclusions. Assignment Elements The purpose of this assignment (the problem to be solved) is to form one or more opinions about value. This purpose necessitates identification of seven assignment elements listed below. 1. Client Information Client's Name ** Client's Company Name Mr. Randy Lords Madison School District #321 Appraiser(s) Engaged By The Client Client's Interest In Property Appraised Owner 2. Other Intended Users None 3. Intended Use Of Report (To aid) Decisions By Ownership 4. Value Opinion(s) Developed Market value Standard / Definition Of Value Used To Form The Value Opinion(s) Advisory Opinion 30 of USPAP, which is the same definition as the one in FIRREA. ** The client is always an intended user. 25-1084 Kirkham Appraisals Inc. Page 4 Scope of Work Assignment Elements 5. Key Dates Effective Value Date (point in time the value applies) April 01, 2025 Date Property Appraised Was Observed By One Or More Appraisers Signing This Report Land & Building Observed April 01, 2025 6. Assignment Conditions Extraordinary Assumptions One Or More Apply, Detailed Later Herein Hypothetical Conditions None Used Jurisdictional Exceptions None Used Expected Public or Private On-Site or Off- Site Improvements Affect Value Not Expected Assemblage of Estates or Component Parts Affects Value Not Expected Other None Used 25-1084 Kirkham Appraisals Inc. Page 5 Scope of Work Relevant Characteristics The seventh assignment element is relevant characteristics about the property appraised. These characteristics are typically categorized as physical, legal, and economic. Physical attributes of the property appraised are presented later in the Subject section of this report. Some characteristics are identified below. Atypical issues are listed in the Noteworthy Issues section and may be further detailed elsewhere herein. Unless specifically stated otherwise, the estate appraised (listed below) assumes no adverse leases, liens or encumbrances other than normal covenants and restrictions of record. 7a. Physical Existing Property Use School Building Property Use Reflected In One Or More Value Opinions Continued Use As Is Sources of Information About the Property Appraised Included Interior And Exterior Observation; Online Public Records; Public Records In Government Office; School District 7b. Legal Category Of Property Appraised Real Property Estate(s) Appraised Fee Simple Legal Issues Considered No Atypical Legal Issues Environmental Concerns No Known Environmental Concerns 7c. Economic Effect Of Lease(s) On Value No Leases Hence Not Applicable Cost Information Type of Reconstruction Cost Used Replacement Cost Source of Reconstruction Cost Information Marshall & Swift Cost Services 25-1084 Kirkham Appraisals Inc. Page 6 Scope of Work Extent of Services Provided Number of Final Value Opinions Developed One Value Opinion(s) Reflect The Worth Of the Property Appraised As Is Extent Of Report Preparation An Appraisal Report Other Reporting Requirements Not Applicable Extent Of Data Research Extensive Data Sources Local MLS; Private Data Provider Service; Public Records at Gov’t Office(s); Public Records on Gov’t Website(s); Online Public Records; Other Appraisers; Real Estate Sales Agents; Buyers and / or Sellers; Landlords and / or Tenants Documents Considered Drawings Data Verification Direct and Indirect Methods Extent Of Subject Observation By One Or More Appraisers Signing Report Adequate Interior and Exterior Specifics of this viewing, if any, are detailed in the Extraordinary Assumptions & Disclosures section of this report. Other Intended Use Considerations Client's Prior Engagement Of Appraisal Services Never Loan To Value Ratio Not Applicable Atypical Issues No Atypical Issues Assignment Complexity Somewhat Complex FIRREA Compliance FIRREA Not Applicable Insurable Value Insurable Value Is Not An Intended Use Miscellaneous Matters Scope of Work Agreement Agreement in Addenda 25-1084 Kirkham Appraisals Inc. Page 7 Scope of Work Appraisal Development Appraisal development is the extent of research and analyses that produce one or more credible opinions of value for one or more specifically identified intended users and an explicitly stated intended use. In this context, credible is defined as "worthy of belief". Depending upon the intended use, intended users, and agreements between the appraiser and the client, the appraisal development process may include several, but not necessarily all of the following tasks. ➢ observation of the property appraised ➢ research for appropriate market data ➢ data verification ➢ consideration of influential market area, physical, economic, and governmental factors ➢ determination of the subject’s highest and best use(s), if appropriate ➢ development of one or more applicable approaches to value ➢ reconciliation of value indications ➢ preparation of this report In most cases, the core valuation process begins with a highest and best use analysis. This is essential because it establishes a framework for the proper selection of comparables. Cited comparables should have the same highest and best use as the property appraised. 25-1084 Kirkham Appraisals Inc. Page 8 Scope of Work Appraisal Development If some property modification like new construction is contemplated, a feasibility analysis may be appropriate. In some cases, feasibility may simply be justified by inferred market evidence like low vacancy or rising rents. According to USPAP, all approaches that are applicable to the interest being appraised and necessary to produce credible results must be developed. The type of highest and best use; extent of feasibility considered; and the relevance of each major approach are listed below. Highest and Best Use An Inferred Demand Analysis Feasibility Analysis (a more detailed study separate from highest & best use) Separate Feasibility Analysis Not Developed Cost Approach Applicable And Included In Report Sales Comparison Applicable And Included In Report Income Approach Not Applicable And Not Included In Report Quoting "The Appraisal of Real Estate" Thirteenth Edition published by the Appraisal Institute, page 186 says "Highest and best use analysis and feasibility analysis are interrelated, but feasibility analysis may involve data and considerations that are not directly related to highest and best use determinations. Such analyses may be more detailed than highest and best use analysis, have a different focus, or require additional research." Applicable and necessary approaches were selected for development after consideration of available market data, intended use, and intended user(s). An approach considered not applicable was omitted because this methodology is not appropriate for the property interest being appraised, or sufficient data to properly develop the approach was not available. Any approach judged not applicable, yet included in this report, was developed solely at our client’s request. Data used to develop an inapplicable but included approach has a low to nil degree of comparability to the subject. Hence, no emphasis was given an approach deemed not applicable but included. Furthermore, no liability or responsibility is assumed for an approach considered not applicable but included at the client's request. 25-1084 Kirkham Appraisals Inc. Page 9 Scope of Work Concept Explanations Intended use and all intended user(s) should be weighed heavily during the scope of work decision. A single intended user who frequently engages appraisal services is likely very knowledgeable about the appraisal process. For this type user, the appraisal development and reporting for less complex property types might be toward the lower end of the spectrum. By contrast, multiple intended users, especially those with opposing motivations, likely need extensive appraisal development and reporting. Litigation is a prime example when a thorough appraisal development and detailed reporting is warranted. A loan to value ratio reflects risk. For commercial-grade loans, ratios over 75% are generally regarded as risky. If a contemplated loan is viewed as risky, then the extent of appraisal development and the level of report detail should be more comprehensive. Similarly, more complex properties generally warrant more thorough analyses and more extensive report details. Prior engagement of appraisal services by a client implies a level of awareness about the appraisal process. A greater awareness may justify a less thorough level of report detail whereas the opposite is true for an individual who has never engaged an appraisal. A Jurisdictional Exception is an assignment condition, which voids a portion of USPAP that is contrary to law or public policy. When a Jurisdictional Exception applies, only the contrary portion is void. The remainder of USPAP remains in full force and effect. Jurisdiction Exceptions always shrink USPAP, not expand it. Data verification affects reliability. Direct data verification confirms information used in the report with one or more parties who have in-depth knowledge about physical characteristics for the property being appraised, or related financial details. Indirect verification employs information obtained from a secondary source like a data reporting service, a multiple listing service, or another appraiser. Direct verification is generally more time- consuming and costly, but also more reliable. Information from all data sources was examined for accuracy, is believed reliable, and assumed reasonably accurate. However, no guaranties or warranties for the information are expressed or implied. No liability or responsibility is assumed by Kirkham Appraisals Inc. or the appraiser(s) for any inaccuracy from any seemingly credible information source. 25-1084 Kirkham Appraisals Inc. Page 10 Scope of Work Concept Explanations A statement about observation of the subject property by the appraiser(s) is listed above. If the subject was observed, this viewing was not as thorough as a professional property inspection. A professional inspector determines the precise physical condition, remaining useful life, and operability of major building components like the structural system, roof cover, electrical system, plumbing, and heating plant. Inspectors typically do not ascertain size of the building, or characteristics of the land. By contrast, an appraiser commonly ascertains both land and building size. Ordinarily, appraisers do not determine operability, or remaining useful life of building systems. An appraiser typically views real estate to determine only general attributes like physical condition of the building as a whole, site topography and access, building size, construction quality, floor plan, and functionality of the property as a whole. For this appraisal, no probes, investigations, or studies were made to discover unapparent, adverse physical features. Highest and best use analyses can be categorized into two groups - inferred and fundamental. A fundamental analysis is quantified from broad demographic and economic data such as population, household size, and income. Supply is inventoried. Subject specific characteristics are considered. Then, the relationship between supply and demand is weighed to determine a specific highest and best use for the subject. An inferred analysis uses local trends and patterns to infer a general highest and best use for the subject. For an inferred analysis, market dynamics that might be considered include prices, market exposure times, rents, vacancy, and listings of similar real estate. Inferred analyses emphasize historical data while fundamental analyses are based on future projections. The kind of highest and best use analysis utilized in this assignment is listed above. Scope of Work Limitation All readers of this report should be aware the foundation, for conclusions communicated herein, was based on and limited to an inferred market analysis, not a fundamental market study. Our scope of work agreement with our client does not include a detailed fundamental analysis. A fundamental analysis forecasts demand from broad demographic and economic data like population and income. Existing supply is inventoried. Then the relationship of supply and demand is weighed to determine net demand. An inferred analysis is based on local trends and patterns from which inferences are made. Sales, listings, marketing intervals, and/or price change for other similar land infer there is adequate demand for the subject parcel at a price level congruous with this data. If the client desires an in-depth analysis regarding the subject’s marketability, potential alternate uses, or a numeric demand analysis, it is suggested a detailed fundamental market analysis be prepared. Report Reliance & Use Restrictions No liability is assumed, expressed, or implied by Kirkham Appraisals Inc., or the appraiser(s) for unauthorized use of this report. Only those persons, parties, entities, companies, corporations, partnerships, associations, or groups that are explicitly identified as an intended user on page 3 may rely on, and use this report. There are no implied, suggested, inferred, consequential, or indirect intended users of this report. Unauthorized users should not use, or rely on any portion of this document. Unauthorized users do so at their own risk and peril. 25-1084 Kirkham Appraisals Inc. Page 11 Scope of Work Exclusion - Insurable Value The cost approach may or may not have been developed herein. Unless explicitly stated otherwise, the cost approach was developed solely to support the subject's market value. Use of this appraisal, in whole or part, for another purpose is not an expected intended use. Nothing in this appraisal should be used, or relied upon to determine the amount or type of insurance coverage to be placed on the subject property. The signatory / signatories to this report assume no liability for, and do not guarantee that any insurable value inferred from this report will result in the subject property being adequately insured for any loss that may be sustained. Since labor costs, material costs, building codes, construction intervals, and governmental regulations are constantly changing, the cost approach may not be a reliable indication of replacement or reproduction cost for any date other than this report's effective value date. 25-1084 Kirkham Appraisals Inc. Page 12 Extraordinary Assumptions & Disclosures An extraordinary assumption is defined by the Uniform Standards of Professional Appraisal Practice (USPAP) to be “an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinion or conclusions”. Extraordinary assumptions presume as fact otherwise uncertain information. In other words, this type assumption involves uncertainty about an underlying premise. An example is a survey that displays a lot size. If the lot size is later found to be much smaller, then the value conclusion may be negatively affected. USPAP Standard Rule 1-2(f) requires the identification of all extraordinary assumptions that are necessary for credible assignment results. This appraisal employs the following extraordinary assumptions. ➢ Features of the subject site such as legal description, dimensions, size, etc. were obtained from publicly available sources. All information taken therefrom is assumed reasonably correct. ➢ Details of the improvements thereon including yet not limited to floor plans, construction materials, dimensions, etc. were obtained from personal observation and/or measurement. All are assumed reasonably correct. ➢ Observation of the subject property was limited to the entire site, none of the roof (not visible from the ground), most exterior walls (as visible from the ground), most of the basement, most common areas like halls, porches, or stairs, and most of the interior. Unseen spaces are assumed to have physical condition and construction quality similar to that in observed spaces. It is further assumed the subject has no hidden defects. The appraiser(s) did not attempt to study, dig, probe, investigate, detect, remove materials, or discover unfavorable physical features. ➢ Real estate tax information for the subject was obtained from a reputable online source, so it is assumed reasonably correct. All information from any credible source is assumed reasonably correct. Moreover, this information is assumed the most recent that is expeditiously available to the public. ➢ A public water system and public sewer main are connected to the subject structure, or available near the subject's lot lines. This appraisal assumes these systems possess sufficient capacity to serve the intended use of the subject improvements, if any. This appraisal also assumes the water is potable and non-contaminated. If these systems were inadequate to serve the subject's intended use, then the subject's value and marketability would be adversely affected. ➢ Assumptions and presumptions discussed in the Noteworthy Issues section of this report, if any, are incorporated by way of reference into these Extraordinary Assumptions & Disclosures. ➢ A recently issued title policy was not furnished to the appraiser(s). If a value-impairment is identified or suggested in a title policy, another professional report, or some other document, this appraisal does not address issues that are significantly atypical for a valuation of this type property unless specifically identified in the Scope of Work and/or Noteworthy Issues section of this report. The above extraordinary assumptions as well as other assumptions anywhere herein are integral premises upon which the conclusions in this document are based. If any of these assumptions are later found to be materially untrue or inaccurate, then this report’s assignment results may or may not be affected. Hypothetical Conditions USPAP defines a hypothetical condition as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis." 25-1084 Kirkham Appraisals Inc. Page 13 Hypothetical conditions assume conditions that are contrary to known fact. An illustration is the current valuation of a proposed home. For the purpose of a rational analysis, it is assumed the home exists on the effective value date, but it is known the home is nonexistent. Another example is a new zoning classification, that a property does not have today, but the new zoning is assumed for the purpose of a logical current valuation. Uncertainty is not involved with a hypothetical condition. An essential premise underlying the valuation is known not to exist on the effective value date. USPAP Standard Rule 1-2(g) requires the identification of all hypothetical conditions that are necessary for a credible value opinion. This appraisal employs no hypothetical conditions. Personal Property & Intangibles Personal property is movable and not permanently affixed to the real estate. Examples of personal property are freestanding ranges, refrigerators, tables, desks, chairs, beds, linen, silverware, hand tools, and small utensils. An intangible is a nonphysical asset like franchises, trademarks, patents, goodwill, and mineral rights. Personal and intangible property included in this appraisal's value opinion, if any, is considered typical for this type real estate, yet insignificant to the value opinion. Therefore, non-realty is not itemized or valued herein. Moreover, this report’s final value conclusion(s) excludes unaffixed equipment, detached trade fixtures, and chattel unless specifically stated to the contrary. 25-1084 Kirkham Appraisals Inc. Page 14 Definition of Market Value The definition of market value is used in all federally regulated transactions that exceed a minimum amount. This definition is mandated by Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. The exact same definition was published in the Federal Register several times by different federal agencies. Some printings are: 12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; and 59 Federal Register 29499, June 7, 1994.) Federal agencies publishing the exact same definition include the • Office of the Comptroller of the Currency (OCC) as 12 CFR 34, subpart C • Federal Reserve Board (FRB) as 12 CFR 225, Subpart G • Federal Deposit Insurance Corporation (FDIC) as 12 CFR 323.2, Definition (g) in 55 Federal Register, 33,888 August 20, 1990, Effective September 19, 1990. • Office of Thrift Supervision (OTS) as 12 CFR 564 • National Credit Union Administration (NCUA) as 12 CFR 722 The exact same definition was again published jointly by the OCC, OTS, FRS, and FDIC on page 61 of the “Interagency Appraisal and Evaluation Guidelines". These guidelines were published in the Federal Register on December 10, 2010 as Volume 55, page 77472. All the above citations defined market value as: “the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: • buyer and seller are both typically motivated; • both parties are well informed or well advised, and acting in what they consider their own best interests; • a reasonable time is allowed for exposure in the open market; • payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and • the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." Virtually the same definition is also cited in Advisory Opinion 30 in the Uniform Standards of Professional Appraisal Practice (USPAP). 25-1084 Kirkham Appraisals Inc. Page 15 Definition of Real Property Estates One or more of the following underlined legal estates or interests are valued in this report. Definitions of three estates, quoted immediately below, are from The Dictionary of Real Estate Appraisal, 6th Edition; published by the Appraisal Institute, copyright 2015. • Fee Simple Estate "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." • Leased Fee Estate "The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires." • Leasehold Estate "The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease." The words "Leased Fee Estate" constitute a real estate term. This term is not defined in Black's Law Dictionary, the Deluxe Eight Edition. However, leased fee estate is defined by USLegal.com as: "an ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; usually consists of the right to receive rent and the right to repossession at the termination of lease." In effect, the definitions of "lease fee estate" by the Appraisal Institute and USLegal.com are equivalent. Chicago Title Insurance Company, one of the largest in the country, does not use the term "Lease Fee Estate" in their title insurance policies. Chicago Title does insure the "Fee Simple Estate Subject to the Leases". For all practical purposes, the terms "Leased Fee Estate" and "Fee Simple Estate Subject to the Leases" are equivalent. Market value of the leased fee estate represents the worth of real property to the landlord (the lessor) as encumbered by terms set forth in one or more leases. A leasehold estate is the tenant’s (the lessee's) interest in real property. A lease is an encumbrance because it limits or precludes the landlord’s right of use. If a property is unencumbered, then usage of the term "fee simple estate" could be strictly or narrowly interpreted to mean the property is not encumbered by lease. If there are no leases for a multitenant facility, then the building has no lease income. Under this interpretation, the value of the fee simple (VFS) would be less than the value of the leased fee (VLF). Accordingly, the VFS < VLF because lease-up costs must be paid by a buyer to find tenants. In effect, total lease-up cost would constitute a penalty to the property's value imposed by a buyer. Components of a total lease-up cost include leasing commissions, rent loss, concessions, tenant improvements, any other cash expenditures, and buyer incentive to undertake the risk of lease-up. 25-1084 Kirkham Appraisals Inc. Page 16 Definition of Real Property Estates According to the Appraisal Institute course General Appraiser Income Approach, Part 2 - page 231, there are two interpretations of the term "fee simple estate". A second interpretation for fee simple estate is a value-oriented definition used by many real estate appraisers. For valuation purposes, market value of the fee simple is the worth of the property assuming it is already leased at market rent to a level of stabilized occupancy. Under this interpretation, the VFS ≥ VLF because lease-up costs to find tenants are already paid. An extremely important concept in the valuation of leases is the relationship between market rent or income (IFS) and contract rent, the rent stated in a lease (ILF). If the contract rent is below market rent (ILF < IFS), the tenant enjoys an advantageous position called a positive leasehold interest. Then, the value of the leased fee is usually less than the value of the fee simple (VLF < VFS). If contract rent exceeds market rent (ILF > IFS), then the landlord has an advantage while the tenant has an unfavorable position called a negative leasehold interest. When contract rent equals market rent, then the numerical value of these two estates is equal but the rights of each estate are distinctly different. In essence, the difference interpretations for the fee simple estate involve lease-up costs. If fee simple is interpreted to mean no leases encumber the property, then a buyer of a multitenant facility would incur lease-up costs. These costs would likely be substantial so a prospective buyer would penalize the property by the amount of the total lease-up cost, which is detailed above. If fee simple is interpreted to mean the value of real property already leased up to stabilized occupancy at market rent, then no lease-up is necessary so no lease-up penalty is appropriate. For valuation purposes in this report, three estates are defined below. • Market value of the fee simple estate for a single-user property like a one-user building or vacant land represents the worth to the most probable buyer via the sales comparison approach. Income generation on a rental basis is not an important factor to this buyer. Property suitability for the buyer's own use or use control are the primary purchasing criteria. Lease-up costs are not relevant. In this context, fee simple means the property is not encumbered by lease. • The fee simple estate for a multiple-tenant facility is different from the one immediately above. A different interpretation is appropriate for a building designed to generate real estate rental income like a shopping center or apartment building. This estate for this type property is defined as the worth to the most probable buyer assuming the property is already leased to a level of stabilized occupancy at normal market terms including market rent. Lease-up costs are assumed already paid so a lease-up penalty is not appropriate. • An investment grade, leased, single-user building is best valued in a fashion that is similar to a multiple- tenant property. Hence, the interpretation for fee simple in the immediately preceding paragraph is best for an investment grade, leased, single-user building. • Market value of the leased fee estate is defined as the worth of real property to its current owner as encumbered by terms specified in one or more leases. • Lastly, a leasehold estate is defined as one tenant’s interest in real property as defined by a lease. These definitions are crucial valuation concepts in this report. 25-1084 Kirkham Appraisals Inc. Page 17 Non-Disclosure State Idaho is a non-disclosure state. This means essential information like grantor, grantee, sale prices and sale dates for real estate transactions are not listed in public records. Hence, appraisers must gather key details from parties involved who have no incentive to cooperate. Often appraisers are compelled to obtain the information from secondary sources. This lessens reliability of the data and lengthens the time required to complete a proper appraisal. Kirkham Appraisals Inc. discloses it made reasonable attempts, within the context of the scope of work, to obtain all key information from seemingly reliable sources; but common sense suggests some data may not be completely accurate. Assemblage USPAP Standard Rule 1-4(e) requires an analysis of the assemblage of various estates or component parts that affect value. In this case, no assemblage is expected so value is not affected. 25-1084 Kirkham Appraisals Inc. Page 18 ♦ Disclosures • • • Professional Standards All leading professional appraisal organizations, the U.S. Congress, all state legislatures, and numerous legal jurisdictions recognize the Uniform Standards of Professional Appraisal Practice (USPAP), promulgated by the Appraisal Foundation. Revised biennially to keep it contemporary, these standards set forth ethical practices and proper procedures for a competent appraisal. This appraisal fully complies with all relevant portions of the USPAP version in effect on the report date. It also complies with the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), a federal law. The report date is shown in the Salient Information. Competency The person signing this report is licensed to appraise real property in the state the subject is located. I affirm I have the experience, knowledge, and education to value this type property. I have previously appraised similar real estate. 25-1084 Kirkham Appraisals Inc. Page 19 ♦ Area Data • • • Regional Map 25-1084 Kirkham Appraisals Inc. Page 20 Regional Data 25-1084 Kirkham Appraisals Inc. Page 21 25-1084 Kirkham Appraisals Inc. Page 22 25-1084 Kirkham Appraisals Inc. Page 23 25-1084 Kirkham Appraisals Inc. Page 24 25-1084 Kirkham Appraisals Inc. Page 25 25-1084 Kirkham Appraisals Inc. Page 26 25-1084 Kirkham Appraisals Inc. Page 27 25-1084 Kirkham Appraisals Inc. Page 28 25-1084 Kirkham Appraisals Inc. Page 29 25-1084 Kirkham Appraisals Inc. Page 30 25-1084 Kirkham Appraisals Inc. Page 31 25-1084 Kirkham Appraisals Inc. Page 32 Environmental Issues A visual inspection of the property did not reveal any apparent environmental issues or concerns. While the appraiser has inspected the subject property, he is not qualified to detect hazardous substances whether by visual inspection or otherwise, nor qualified to determine the effect, if any, of known or unknown substances present. The final value estimate is based on the subject being free of hazardous waste contamination. Parties desiring more precise and reliable information may wish to engage a professional environmental consultant to conduct an environmental assessment. Should such an assessment indicate an adverse condition is present that has not been addressed by this appraisal, the conclusion of this appraisal may need revision. General Area Data and Trends Rexburg is located in southeast Idaho and is part of the Rexburg Micropolitan Statistical Area. It is situated in the west-central region of Madison County. The city is at an altitude of 4,900 feet in the western foothills of the Rocky Mountains near the Oregon Trail. Rexburg contains one main railway, and Highway 20 borders the west and north end of the town. Rexburg City has a four-season climate that is sunny and dry with less than fourteen inches of precipitation annually, below the national average. Summers are dry and warm with cool nights and an average temperature in July of 72 degrees. The winter temperatures average 28 degrees, with several months of snow. According to The US Census Bureau, as of 2023, Rexburg City’s population was estimated at approximately 41,500 persons, reflecting continued growth since the 2020 census. The total population for Madison County in 2023 was estimated at 55,000 persons living in 472 square miles. The growth for Madison County between 2020 and 2023 was approximately 3.94% overall. The cost of living in Rexburg remains below the national average for groceries, housing, utilities, and transportation. The median-priced home in Rexburg has risen to $365,000 as of 2023. The chief sources of income in Madison County are agriculturally based, with the median household income now at $58,200. Regional industry includes the Idaho National Laboratory (INL), which is located 30 miles west of Idaho Falls, approximately 20 miles south of Rexburg City. INL continues to be a significant employer in the region, with over 13,000 individuals employed as of 2023. Rexburg houses other major employers in the area, which include Artco, AMET, AMX International, Melaleuca, and BYU-Idaho. Rexburg City has 7 elementary schools, 1 middle school, 1 junior high, and 1 high school. The district maintains a solid reputation for providing quality education in grades K-12. There is also an alternative school in Rexburg City. Rexburg City has 4 city parks and a community library. Most shopping and recreation can be found in Rexburg, but the main economic base in the region is located 20 miles south in Idaho Falls. BYU-Idaho continues to be one of the fastest-growing private university institutions of higher education in the State of Idaho. Approximately 19,000 students were enrolled for the 2023 school year per a BYU-Idaho report. Formerly known as Ricks College, the institution transitioned to BYU-Idaho on August 10, 2001. The university remains a leading factor in the growth rate of Rexburg and Madison County over the past two decades. Environmental Issues A visual inspection of the property did not reveal any apparent environmental issues or concerns. While the appraiser has inspected the subject property, he is not qualified to detect hazardous substances whether by visual inspection or otherwise, nor qualified to determine the effect, if any, of known or unknown substances present. The final value estimate is based on the subject being free of hazardous waste contamination. Parties desiring more precise and reliable information may wish to engage a professional environmental consultant to conduct an environmental assessment. Should such assessment indicate an adverse condition is present that has not been addressed by this appraisal; the conclusion of this appraisal may need revision. 25-1084 Kirkham Appraisals Inc. Page 33 Proximity Features Expected Changes in Economic Base Protection from Adverse Conditions Demand for Real Estate Like Subject Potential Additional Supply Like Subject Building Age Range {excluding extremes} Oversupply of Property Like Subject General Appearance of Properties Location Land Use Change Police & Fire Protection Expressway Access Employment Centers Property Compatibility Overall Appeal to Market None Average Strong Minimal Potential 0 to 75 Years None Average Average, Urban Not Likely Average Under a mile Under a mile Average Average Nearby Land Uses Single-Unit Residential Multiple-Unit Residential Retail / Commercial Office Industrial Agriculture Vacant Land Other ---------------- Total 10% 30% 30% 10% 20% 0% 0% 0% ------ 100% Other Description: The subject is located at 60 West Main Street, and is located close to retail and office uses. 25-1084 Kirkham Appraisals Inc. Page 34 Market Conditions Introduction The market area is the physical area where similar properties effectively compete. It can also be envisioned as the area that contains the all the primary competition, and in certain cases, some secondary competition. Market areas may contain one or more neighborhoods, districts, cities, counties, or states. Market Area Boundaries North Madison County East Madison County South Madison County West Madison County Demographics Physical Area Madison County Recent Population Level About stable near 54,547 Household Income About stable near $58,259 Local Unemployment Physical Area Madison County Recent Pattern Stable Approx. Current Percent 3.0% Financing (for real estate like subject) General Loan Availability Ample availability; requirements mildly difficult Interest Rate Range 6.00% to 10.00% Typical Loan-to-Value Ratio 70% to 75% Typical Amortization Years 15 to 20 years Loan Maturity / Balloon 5 to 10 years 25-1084 Kirkham Appraisals Inc. Page 35 Market Conditions Local Housing Local housing is a good barometer of general consumer confidence. If residents are bidding up home prices, then they are confident about their jobs and the economy. Non-residential real estate often experiences price movement in the same direction. Physical Area Madison County Foreclosures & Short Sales Shrinking portion of all sales New Construction Some In real estate, average sale price is often greater than the median. If the ratio of the average sale price to the median price (shown in last column) significantly changes from prior periods, the distribution of sales may be the real cause of the price change, and not true price appreciation or depreciation. Further analysis is necessary. Expected Near Future Price Change Remain mostly stable depending on larger economic effects occurring across the nation. Overall Supply & Demand of Housing Near equilibrium 25-1084 Kirkham Appraisals Inc. Page 36 Market Conditions Real Estate Like Subject Rental Market Inventory of Competing Property for Rent Minimal Rent Controls None Rent Concessions Not Prevalent Expected Near Future Rent Change Expected to remain about stable Sales Market New Construction North End and around the University Inventory of Competing Property for Sale Near equilibrium Expected Near Future Price Change Expected to remain about stable Marketing Times Stable Overall Market Conditions Stable 25-1084 Kirkham Appraisals Inc. Page 37 Market Trends Definition of Product and Market Segmentation In the following paragraphs, we describe the competitive qualities of the subject and the market segment in which it competes. Property Type The subject is a school/activity building. Demographic information As detailed in the neighborhood analysis, population in the trade area suggests that the neighborhood is semi-rural and is experiencing a large population increase since 2000. Supply and Demand Trends The subject is a special purpose property, a school/activity building. To our knowledge, there are no public market trend surveys of properties of this type, but there are observable market trends occurring that influence this type of real estate. In the Rexburg region, due to increasing and shifting population bases, schools, churches, etc. have either been closed or built to accommodate the micro demographic trends in the region. For example, a new High School was built around 2010, after which the old high school building became the junior high and other school transitions occurred. Across Idaho and around the nation, school buildings have been purchased by a growing number of charter schools. Charter schools have become very popular due to their ability, at times, to outperform public schools. Not all charter schools succeed, however, and often they are at odds with public schools and their political power. Other buyers in the market for school buildings have been education or religious oriented groups. Other school districts wishing to expand special services have also been buyers of these properties. While this group of buyers has focused on continuation of use, in other instances these types of properties have been sold or converted into other uses; commercial, multi-family or industrial, depending upon location and zoning. Location and zoning are significant factors in the redevelopment of these properties as they both outline feasible and permitted alternate uses. While the property type is special purpose, there has, historically, been enough buyers, to acknowledge that the available sales are market value oriented, however, in most instances, the sale prices are substantially less than the cost of construction unless there is a lease involved that allows for feasibility. 25-1084 Kirkham Appraisals Inc. Page 38 The subject property is owned by the Madison School District #321. The Madison School District is a small, semi- rural public-school district that spans portions of Madison County. The school district currently serves approximately 5,002 students. Within the school district the Madison County School District #321 serves students from Kindergarten to 12th Grade. The subject building is currently utilized as an administrative building, but still contains features that are common in school buildings like classrooms, office space for staff, gymnasium, cafeteria, etc.. The exact date of the school construction is unknown, but is estimated at around 1950. Conclusions In summary, there have been a number of former schools marketed across the Mountain West states. A more recent trend has been for some of these facilities to be purchased by a growing market of private and charter school groups offering alternatives to the public-school system. We expect that the trend will continue. In the subject’s instance I would expect the building to continue to be utilized as a school, administrative use, or repurposed to other legal uses. I do warn the client that if the subject no longer served the school district or an alternate educational user were not available, the market value of the subject property would likely be impaired. The subject is located on a busy street, which could increase possible uses into commercial development, or its close proximity to the BYU-Idaho University could increase its potential into a large multi-family project. 25-1084 Kirkham Appraisals Inc. Page 39 ♦ Subject Property • • • Identification of the Property This real estate appraised is situated on the north side of West Main Street between South Center Street and South 1st West, within Rexburg, Idaho 83440. Its common address is 60 W Main Street, Rexburg, Idaho 83440. Legal Description A professional surveyor and / or legal counsel should verify the following legal description before relying upon, or using it as part of any conveyance, or any other document. This legal description was obtained from public records and is assumed accurate. 25-1084 Kirkham Appraisals Inc. Page 40 Aerial View 25-1084 Kirkham Appraisals Inc. Page 41 25-1084 Kirkham Appraisals Inc. Page 42 Building Sketch “First Floor” 25-1084 Kirkham Appraisals Inc. Page 43 Building Sketch “Second Floor” 25-1084 Kirkham Appraisals Inc. Page 44 Building Sketch “Basement” 25-1084 Kirkham Appraisals Inc. Page 45 Photographs of Subject 25-1084 Kirkham Appraisals Inc. Page 46 25-1084 Kirkham Appraisals Inc. Page 47 25-1084 Kirkham Appraisals Inc. Page 48 25-1084 Kirkham Appraisals Inc. Page 49 Sale History On-line public records and / or a private data-reporting service were used to search for prior sales of the subject real estate. This research discovered no recorded conveyance of the subject during the three-years preceding this report's effective value date. Our client indicated the property did not convey. Moreover, the subject was not offered "For Sale" in the local MLS or other major data-reporting services during this same period. No sale or option agreements are now pending. Subject’s Current Ownership Owner Information Source Madison School District #321 Assessor's Records Flood Hazard According to the appropriate Federal Emergency Management Agency (FEMA) flood map, which is identified below, the subject property is not located in a zone "A" special flood hazard. Flood Map Number 16065C0020D Flood Map Date 06/03/91 Flood Zone X Flood Maps published by FEMA are not precise. If anyone desires a precise determination of the subject's flood hazard classification, a professional engineer, licensed surveyor, or local governmental authority should make an exact determination. Real Estate Taxes Throughout Madison County, the Total Assessed Value is supposed to represent 100% of market value for all property types. County Madison Parcel ID # RPRRXB10320131 Tax Year 2024 Total Assessed Value Exempt Total Tax Dollars Exempt Real estate taxes are a primary mechanism used by local government to gather the monies needed to fund operations. Too little funds can limit governmental services. Excessive tax burden can hinder real estate values. For the subject, taxes are not unduly burdensome. Zoning The subject property is zoned "CC-T" City Center Transect District and “MS-T” Main Street Transect by the City of Rexburg. 25-1084 Kirkham Appraisals Inc. Page 50 25-1084 Kirkham Appraisals Inc. Page 51 25-1084 Kirkham Appraisals Inc. Page 52 The existing subject structure does not conform to the zoning ordinance. This classification does not permit a school use. Presently, the subject has a school use. Since the subject structure was erected prior to the enactment of the ordinance, or because the site was a lot of record before the adoption of the ordinance, the subject real estate is likely a legal, non-conforming usage due to grandfathering. If grandfathered, the subject's value and marketability would not be diminished because numerous non-conforming uses exist throughout this vicinity. The only way to accurately determine whether the subject has been granted legal, non-conforming status is have the property owner(s), or their attorney, make a written request for a legal determination from the governmental entity empowered with zoning authority. This request process would probably be very lengthy. Zoning Map 25-1084 Kirkham Appraisals Inc. Page 53 Environmental Risks Disclosure During the course of this appraisal, the appraiser(s) did not detect or attempt to discover any environmental hazard on, under, above, or within the subject real estate. No overt evidence of any environmental hazard is apparent to the untrained eye. It should be known the appraiser(s) did not view the subject property with the intent of detecting any environmental hazard. It is beyond the expertise of the appraiser(s) to detect or determine the chemical nature of any substance or gas. No effort was made to dismantle or probe any part of the property to discover enclosed, encased, or concealed hazards. No effort was exerted to ascertain the presence of any environmental hazard including but not limited to the following. Asbestos Urea-formaldehyde insulation Underground storage tanks Soil contamination or deficiencies Lead-based paint Toxic mold Radon PCB Chemical spills Fire resistant treated plywood (FRTP) Flood hazards are detailed elsewhere in this report. Except as enumerated herein, the appraiser(s) were not given the results of any environmental testing on or near the property being appraised. Neither observation of the subject property, or research conducted as part of a typical real estate appraisal suggest the presence of any hazardous substance or detrimental environmental condition affecting the subject. Nearby sites were not investigated to determine whether they are contaminated. Public information and other Internet sources were not researched to determine the presence of hazardous substances or detrimental environmental conditions in the subject's vicinity. Federal, State, and local laws concerning any hazardous substance or gas are sometimes contradictory. Therefore, any needed clean up should comply with the most stringent laws. The appraiser(s) are not informed or trained in environmental legalities. It is assumed no hazardous substance or gas adversely affects the subject real estate. If the subject is adversely influenced by a hazardous condition, then the subject's market value would be impaired. Recommendation The presence of any hazardous condition usually diminishes market value. The value opinion formed in this report assumes there is no environmental hazard affecting the subject real estate. No responsibility is assumed by the appraiser(s) or Kirkham Appraisals Inc. for any hazard, or for any expertise required to discover any environmentally hazardous condition. Our client is urged to retain an expert in this field, if desired. Asbestos No tests were made to determine the presence of asbestos. Superseding all other comments to the contrary regarding asbestos, the building may or may not contains asbestos. Our scope of work does not include any research, study, or other effort to detect the presence of asbestos. No research, study or other effort was conducted to determine the value loss, if any, caused by asbestos. This valuation assumes the subject is not adversely affected, in any way, by asbestos. 25-1084 Kirkham Appraisals Inc. Page 54 Subject Descriptions Subject Site Dimensions See Legal Size 249,337+/- Sq. Ft. Easements Typical utility type Encroachments None known; none assumed Shape Mildly Irregular Topography Generally level Curbs & Gutters Concrete curbs, concrete gutters Water & Sanitation Public water, public sewer Rear Alley None Access Access Points on Main Street, South 1st West, and N 2nd Street Street Paving Asphalt Sidewalks Concrete Natural Gas Public Adjacent Road(s) 2-lane, 2-way Nearby Land Uses Retail and Office Use Electric Provided by public companies at prevailing rates Major Flaws None Overall Features The land has typical features as compared to similar alternatives. Its overall locational attributes are average relative to competitive parcels. 25-1084 Kirkham Appraisals Inc. Page 55 Description of Existing Improvements Property Use School Total Units 86,318+/- Square Feet Actual Age Estimated at 70+ Years Const Quality Average Bldg Height 2 Story General Design Typical Foundation Type & Material 38% Basement 62% Slab-type foundation Poured concrete foundation walls. Predominant Exterior Materials Roof Cover Walls Windows Membrane. Concrete Block and Brick Predominantly fixed or push out, double pane in metal frames. Predominant Interior Materials Ceilings Partitions Floor Cover Trim Doors Bsmt Finish 2' x 4' suspended acoustical panels Painted drywall and brick Carpet and Tile Painted wood; Painted wood Similar to Above Grade Description of Existing Improvements Restrooms Mostly average quality with white plumbing fixtures, wall-hung sinks, and tile floor cover. Generally not ADA compliant. Heating A central system with one gas fired, hot water boiler warms the entire building. Mostly original. Cooling Ductless Systems Electrical System Circuit distribution is controlled by circuit breakers.. Most illumination provided by incandescent fixtures. Protections Fire alarm with central monitoring; Intrusion alarm with central monitoring; Smoke detectors; No sprinkler system On-Site Parking Ample asphalt paved outdoor spaces. Landscaping Typical for area Needed Major Repairs None Noted Recent Replacements Unknown Atypical Aspects None Functionality Adequate for intended use. . No functional obsolescence. Overall Features Structural Soundness Building Systems Adequate Not checked, but believed operable 25-1084 Kirkham Appraisals Inc. Page 56 Functional Efficiency Physical Condition Visual Appearance Adequate About the norm relative to its competition About the norm as compared to most nearby buildings Effective Age & Life Estimates Actual Age Estimated at 70+ Years Effective Age 40 years Remaining Economic Life 10 years Total Economic Life 50 years 25-1084 Kirkham Appraisals Inc. Page 57 ♦ Analyses & Conclusions • • • Value Introduction For real estate consisting of land and building(s), there are three primary valuation methods - the cost approach, sales comparison approach, and income approach. Unless stated otherwise, only those considered applicable and necessary to produce credible results are developed in this report. 25-1084 Kirkham Appraisals Inc. Page 58 Real Estate Cycles Real estate generally has four market cycles. "Understanding where the market is and forecasting the extent of duration of the cycle are important in projecting the pattern of future income."1 These cycles are depicted below. The red arrow depicts the appraiser(s) opinion of the subject's position in the market cycle. Segment Name Characteristics AB Expansion Growing demand, rental rates climbing above replacement cost, decreasing vacancy, concessions not prevalent, high profit potential stimulating much new construction BC Contraction Stable to weakening demand, stable to weakening vacancy, small concessions beginning to occur, rents stable to mildly weakening, profit potential shrinking so new construction slowing CD Recession Stagnant to declining demand, vacancy growing, rental rates falling, significant concessions prevalent, new construction virtually halted DA Recovery Demand strengthening, vacancy shrinking, rental rates starting to climb, concessions shrinking, new construction beginning to occur Time until the next major point 1 to 2 years 1 Advanced Concepts & Case Studies, pg 253, Appraisal Institute, copyright 2010 25-1084 Kirkham Appraisals Inc. Page 59 Highest and Best Use Introduction A highest and best use identifies the most reasonably probable and appropriately supported use of the property appraised. Since market conditions change, a property's highest and best use may change as well. This analysis is an essential step in the determination of market value. Market dynamics determines a property's use and an appraisal values that use. Practically speaking, a highest and best use analysis forms a framework for the proper selection of comparables. The “Dictionary of Real Estate Appraisal”, 6th edition, copyright 2015 by the Appraisal Institute defines this term on page 93 as: 1. The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. 2. The use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset’s existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid. (IVS) 3. [The] highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. (Uniform Appraisal Standards for Federal Land Acquisitions)." There are two types of highest and best use. The first is highest and best use of land as though vacant. If a building already exists, the second variety is highest and best use as though now improved. The later considers whether the existing building should be retained as is, demolished, remodeled, renovated, repaired, enlarged, or converted to an alternate use. Both types require separate analyses. Current usage may or may not be different from the near future highest and best use. The concept of Highest and Best Use is based upon four major criteria, which are summarized below: 1. Legally Permissible The use must be legal or probable. That is, the use must conform to existing zoning restrictions, or there must be a reasonable likelihood a rezoning or variance may be granted. Private agreements like deed restrictions and leases must also be considered. 2. Physically Possible Physical attributes of the land that must be considered include size, access, shape, orientation, soil conditions, potential hazards, topography, and utilities. Physical attributes of the building that must be analyzed include design, size, efficiency, mechanical systems, floorplan, construction materials, quality, and physical condition. 3. Financially Feasible Land may be developed with different uses. Only those uses, which produce a positive net return over time with acceptable risk, are deemed financially viable. This use must not depress surrounding property values. 4. Maximum Productivity Of all uses that survive the first three tests, there is only one use, which produces the greatest return with the least risk. This single use represents the property’s Highest and Best Use. Supply and demand are constantly fluctuating, so it is common for a property’s highest and best use to change. 25-1084 Kirkham Appraisals Inc. Page 60 Highest and Best Use Introduction Demand analyses can be categorized into two different levels of detail - Inferred and Fundamental. A fundamental analysis forecasts future demand from projections of broad demographic and economic data, specifically population, income, and employment. Existing supply is inventoried. Then, the relationship of supply and demand is weighed to determine residual demand. If residual demand is positive, more of that property type is needed. Of course, the opposite is also true. An inferred analysis is based on local trends and patterns from which inferences are made. This type analysis presumes that recent past trends will continue for the near future. Sale prices, number of competitive listings, marketing intervals, and / or price changes for other similar properties infer there is adequate demand for the subject at a price level congruous with the available data. An inferred analysis emphasizes historical data while a fundamental analysis is based on expected future occurrences. This appraisal's highest and best use was based, in part, on an inferred demand analysis. Following below are detailed considerations used to form a highest and best use determination for the property appraised. Buyer Types The most likely buyer type is crucial to highest and best use. Different buyer types have different motivations and different perceptions of risk. The buyer type must be identified to better understand applicable approaches and the selection of cap rates and yield rates. Different buyer types are identified below. 1 Owner-User Acquires real estate mostly for its use or control. Vacancy & investment yield are not primary criteria. Property suitability is the major objective. Typically, a medium to long-term owner. 2 Secure Income Investor Seeks an established, secure income stream; normally does not change the property in any meaningful way. Usually favors a long-term ownership. 3 Developer Acquires real estate to physically or legally change it in some significant fashion; accepts substantial risk so expects major reward over a short-to-medium holding period. 4 Speculator Buys real estate solely as an investment with most of the reward at termination. Property use is not a primary consideration; medium-to-long-term holding period; Usually buys during very weak market conditions, so accepts huge risk. Mantra: buy low, sell high. 5 Value Growth Investor Buys real estate mostly for price appreciation. Property use is usually not a major consideration. Typically buys during conditions of rapidly increasing prices; prefers a short-to-medium ownership period. 25-1084 Kirkham Appraisals Inc. Page 61 Highest and Best Use Most Likely User The most likely user is also important. Clearly, users of an age-restricted, multiunit residential structure have needs and preferences that are much different from young married couples with small children. Similarly, the most likely buyer of a handicap accessible home is a handicap person. This most-likely buyer would perceive the special physical features as beneficial, not detrimental. Preferences and needs of the most likely user affect value, so the most likely user should be identified to judge the extent that existing or proposed improvements fulfill those preferences or needs. Timing of Use A crucial component of a highest and best use is timing. If the timing of a use is not now, when is it? When timing for a specific use cannot be identified, then that use is not the best. If the highest use is not within a decade, then the time-value of money usually precludes that use. When the timing of a use is within a few years, what is the interim use? Remaining dormant is a legitimate interim use. Ideal Improvement Identification of the "ideal improvement" is an essential element of highest and best use. If the property appraised is vacant land, the ideal describes what should be built. If the existing improvements (one or more buildings and site improvements) have the same or similar attributes as the ideal, then the existing improvements have no or minimal depreciation. Obviously, the opposite also applies. The described ideal improvement is as specific as market data will allow. The ideal improvement is the physical use of the land as though vacant. 25-1084 Kirkham Appraisals Inc. Page 62 As Though Now Vacant Land If subject parcel were vacant, how would it be used? This question is answered by applying the four tests of highest and best use. Legally Permissible Legal restrictions fall into two main categories - private and public. Private restrictions are agreements imposed by previous owners. Examples include access easements, use limitations, and leases. Public constraints include zoning, right-of-way easements, historic districts, and utility easements. Unless specifically stated otherwise, there are no known atypical private or public restrictions. Zoning permits a variety of commercial uses. Physically Possible Physical attributes commonly considered include size, shape, access, flood potential, topography, and availability of utilities. Characteristics that may be significantly detrimental but the appraiser(s) are not trained to detect or determine environmental hazards or soil conditions. There are no known environmental concerns or adverse soil conditions. The land is not located in a FEMA special flood hazard. Sewer and water connections are proximate and access is convenient. The subject’s large 5.72-acre size, Main Street Frontage, and efficient shape are adequate for a variety of uses. Its location along a heavily traveled roadway is very beneficial for a commercial use. In summary, the subject’s physical attributes are conducive for a myriad of legal commercial uses. Financially Feasible Uses that are impossible or improbable physically and legally are first eliminated. Those uses that remain are then tested to determine whether they produce sufficient net income to fully pay for all operating expenses and provide adequate compensation for all invested capital. Commercial is a permitted use. Rexburg has grown extensively over the past two decades, mainly due to BYU-Idaho’s growth. Over the past decade Rexburg has transformed and grown around Main Street, the University, and along 2nd East. This growth has brought several new commercial buildings as well as large student housing complexes. Commercial space has a low vacancy rate and increases in rental rates have occurred with the increase in construction costs. Commercial sales are commensurate with commercial construction costs. Currently, a commercial development is financially feasible. Maximum Productivity Maximum productivity is considered only if more than one use survives the first three tests. This concept holds land will be developed with the use that returns the greatest positive reward over time assuming it is appropriately supported. However, the numerical return should not be the sole determinant. The numerical reward must be weighted within the context of risk. When a use is expected to produce a very attractive return but the risk is very high, that use is often eliminated. A commercial use is the only use that survives the first three tests. Hence, a commercial use is the only possible highest and best use of the land as though vacant. 25-1084 Kirkham Appraisals Inc. Page 63 Highest and Best Use Conclusion As Though Now Vacant Physical Use A New Commercial Building or Development Timing of Physical Use Interim Use Immediately develop with the physical use No Interim Use Market Participants Most Likely Buyer Most Likely User An owner-user or Builder/Developer An owner-user or local tenant 25-1084 Kirkham Appraisals Inc. Page 64 As Though Now Improved Two major questions must be answered throughout this analysis. When the value of land, as though vacant, exceeds the value of the land and building together, then the structure should be razed. Should the subject building be retained or demolished? If the structure should be kept, is it economically viable to remodel, alter in size, renovate, repair, or convert it to an alternate use? Legally Possible Several questions may be germane. Is it legally possible to enlarge the existing building? Can the existing building be legally demolished or does a historic element preclude this? The existing subject does not comply with the intent of the zoning ordinance. However, it is grandfathered use hence legally permissible. Physically Possible Several pertinent questions may apply. Are the site sufficiently large and the existing building appropriately positioned to enlarge the existing building? Should the building be demolished, renovated, repaired, or converted to another use? Land size and/or another physical attribute are sufficient to support significant building expansion. The building is a positive value contribution so it should not be razed. The building is suitable for its current use. Renovation or major repair is not necessary. However, a buyer may look at repurposing the building into several different uses. Financially Feasible Relevant queries include - Is it financially feasible to expand or alter the subject structure? Is it feasible to convert it to another use? Many other older buildings like the subject have been repurposed, but costs would be needed to indicate the feasibility. Maximum Productivity Only one use survives the first three tests. The sole surviving use is its current use. Conclusion As Though Now Improved Physical Use Its current use Timing of Physical Use Interim Use Immediate No Interim Use Market Participants Most Likely Buyer Most Likely User An owner-user The buyer The subject land “as though now vacant” has a market value that is less than the worth of the land and building together. This proves the improvements positively contribute to value. These improvements were designed to serve its current use; they are compatible with nearby uses. Local costs, prices, and rents do not justify major building alterations. Therefore, the improvements should be retained and used "as is". Considering the foregoing highest and best use determinations, land and building comparables were selected with the same or similar highest and best use. This data is very influential while forming a value opinion for the property appraised. 25-1084 Kirkham Appraisals Inc. Page 65 Land Value “As Is” 25-1084 Kirkham Appraisals Inc. Page 66 Land Value Introduction The best method of valuing vacant land is the sales comparison approach. Sales of similar sites are gathered and compared to the parcel being appraised. Differences affecting value are noted. Adjustments to compensate for dissimilarities are applied applicable transactions. Adjusted comparables produce an indication of value for the subject parcel. Any factor can affect value. Those considered during this appraisal’s land valuation process included yet are not limited to prominence of location, date of sale, size, shape, availability of utilities, zoning, topography, and access. Numerous sales were reviewed; however, only those deemed most comparable were selected for detailed analysis. All conveyed on an “arm’s length” basis except if specifically noted otherwise. Land sales shown herein are presented on a dollar per square foot basis as a common denominator. Abbreviations Used in Some Tables SEC NWC Loc Fea = Southeast Corner = Northwest Corner = Locational Features Sim Inf Sup = Similar = Inferior = Superior Since this vicinity has been fully developed for several years, there are few, if any, conveyances of truly similar land. Therefore, an opinion of the subject's land value was developed after consideration of scarce sales, which hinders the sales comparison process. Moreover, the allocation method of land valuation was also considered. 25-1084 Kirkham Appraisals Inc. Page 67 Land Sale #1 25-1084 Kirkham Appraisals Inc. Page 68 Land Sale #2 25-1084 Kirkham Appraisals Inc. Page 69 Land Sale #3 25-1084 Kirkham Appraisals Inc. Page 70 Land Sale #4 25-1084 Kirkham Appraisals Inc. Page 71 Land Sale #5 25-1084 Kirkham Appraisals Inc. Page 72 Land Value Summary of Land Sales Sale # Location Sale Date Size (SF) Zoning Purchase Price Price/SF 1. 328 N 2nd East, Rexburg 11/21 309,711+/- CBC $3,000,000 $9.69 2. 1110 Golden Beauty, Rexburg 03/23 34,238+/- CBC $670,000 $19.57 3. 310 N 2nd East, Rexburg 02/19 47,350+/- CBC $900,000 $19.01 4. 885 W Main Street, Rexburg 06/23 34,848+/- CBC $750,000 $21.52 5. 1025 Yellowstone Highway, Rexburg 05/22 43,996+/- CBC $720,000 $16.37 Subj. 60 W Main Street, Rexburg - 249,337+/- CC-T & MS-T - - 25-1084 Kirkham Appraisals Inc. Page 73 Land Value Quantitative Adjustment Grid SUMMARY OF COMPARABLES Subj.1 2 3 4 5 Date of Sale 11/21 03/23 02/19 06/23 05/22 Zoning CC-T & MS-T CBC CBC CBC CBC CBC Utilities All All All All All All Sale Price $3,000,000 $670,000 $900,000 $750,000 $720,000 Size (SF)249,337 309,711 34,238 47,350 34,848 43,996 Price/Square Foot $9.69 $19.57 $19.01 $21.52 $16.37 ADJUSTMENTS ----- Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Adjusted Price/Foot $9.69 $19.57 $19.01 $21.52 $16.37 Cond/Terms ----- Adjusted Price/Foot $9.69 $19.57 $19.01 $21.52 $16.37 Market (Time) Adj.----- Adjusted Price/Foot $9.69 $19.57 $19.01 $21.52 $16.37 Location ----- Zoning ----- Size $2.41 ($8.60)($8.08)($8.58)($8.21) Utilities ----- Shape/Topography ----- Frontage/Access ----$3.27 Other ----- ADJUSTED VALUE $12.10 $10.96 $10.93 $12.94 $11.42 Gross Adjustment $0.00 $0.00 $0.42 $1.42 $0.42 Range of Values $10.93 to $12.94 Mean Land/Site Adjustment Grid $11.67 25-1084 Kirkham Appraisals Inc. Page 74 Land Value Land Sales Location Map 25-1084 Kirkham Appraisals Inc. Page 75 Land Value “As Is” Analysis & Conclusions The subject and all cited comparable sales share several characteristics. They are all located in Rexburg and have similar potential uses. These commonalities justify inclusion of these transactions in this analysis. Often there are differences between the property appraised ("the subject") and a comparable sale. When the dissimilarity affects value, an adjustment to the sale price of the comparable is necessary. Property Rights Agreements or laws create partial interests in real estate. A deed restriction or life estate usually reduces rights and value. If the subject is not affected by these limitations and a comparable is, then the comparable's sale price needs an upward property rights adjustment. In another situation, unfavorable leases eliminate a landlord's right to collect market rent, so the real estate sells for a below-market price. If the property appraised has no lease adversities and a comparable does have unfavorable leases, then the comparable requires upward adjustment. Unless stated otherwise, property rights are virtually the same for the subject and all cited conveyances. Hence, no adjustments are necessary for this element of comparison. Financing Sub-market financing is a common technique used to finance the acquisition of real estate during periods of high interest rates. When non-market financing is used, the financing may be favorable to the buyer, so the sale price is inflated. The escalated price can be envisioned as a composite of the worth of real estate plus the value of advantageous financing. Since value created by financing is not real property, the contribution of the advantageous financing must be deducted from total sale price to derive market value for just the realty. On the opposite hand, there are instances where the buyer assumes unfavorable financing, so the sale price is diminished. In the latter case, an upward adjustment must be applied to the sale price of the comparable thusly deriving the market value of the real estate. Unless a statement is made to the contrary, non-market financing was not used to acquire any comparable sale cited in this report. Therefore, no compensations are needed for financing. Conditions of Sale An adjustment for conditions of sale is necessary when a criterion of market value is violated. It could compensate for unusual buyer or seller motivations. For instance, when a seller gives a buyer an atypical rebate, discount, credit, or something of value to induce a conveyance, the sale price is usually inflated. In this case, it is logical to deduct the worth of the giveback from the sale price. Residual sums represent the property's market value. In another scenario, a buyer may pay a premium to facilitate an assemblage. In this instance, the premium must be deducted from the sale price to derive market value for that conveyance. Unless stated otherwise, no adjustments are necessary for conditions of sale. Expenditure Post Sale This is a situation when a buyer is compelled to invest additional money into a property immediately after acquisition for some atypical reason. Post-sale invested sums are appropriately added to a comparable’s sale price thereby producing an adjusted sale price. Examples are demolition costs or building -code compliance costs. Unless a contrary statement is made, no adjustments are necessary for post-sale expenditures. Market Conditions Adjustments for market conditions are commonly referred to as time adjustments, but this is misleading. Value does not change due to the passage of time; sometimes it remains stable. Often real estate values fluctuate due to changes in supply and demand, interest rates, employment, or inflation. This type of adjustment compensates for change in market conditions between a sale’s transaction date and a later point in time. All cited comparables conveyed between February 2019 and this report’s effective value date. The data utilized does not indicate a difference in market conditions between any of the sales utilized, so no adjustment is made. Location Each property was rated to the subject for locational aspects such as value growth potential, access, and general desirability. Those transactions with superior locations were adjusted downward and vice versa. All sales are from Rexburg and have similar overall locational influences. Physical Attributes A myriad of physical characteristics can affect land value. Some examples are lot size, shape, site orientation, availability of utilities, and soil conditions. Those sales with superior physical qualities warrant downward adjustment and vice versa. 25-1084 Kirkham Appraisals Inc. Page 76 A trend analysis was performed after all other adjustments were made for the size adjustment. I was able to find sales to bracket the subject’s size and the trend was as expected with a decrease in price per square foot with larger size parcels. The following trend analysis was utilized for the adjustments: Frontage and access is probably the most important aspect to commercial land sale values. Sales with superior frontage and access command higher prices and sales with inferior frontage and access command lower sales prices. Sale 5 is located along Yellowstone Highway with lower traffic counts and surrounded by vacant land. This sale was adjusted upward for its inferior frontage. Value Indication The appraiser is well aware the cited conveyances are less than ideal comparisons. However, sales of more comparable properties were not discovered during our research. Selected transactions were chosen for analysis because they are all moderately priced, parcels like the subject. Needed adjustment considerations were explained above. These adjustments have been qualitative and quantitative and are shown in the prior table. Some of these adjustments are based upon the appraisers' professional judgment when data was insufficient to enable market extraction. This adjusted data varies from $10.93 to $12.94 per square foot with a $11.67 per square foot central tendency. Near the central tendency is considered reasonable. After consideration of all factors pertaining to and influencing land values, the following is selected as the most fitting value indication for the subject parcel as though vacant. Accordingly, Subject Parcel(s) 249,337 Sq. Ft. @ $12.00 Per Sq. Ft. = $2,992,044 Indicated Market Value of Subject Land “As Is” Via Sales Comparison, Say $2,990,000 25-1084 Kirkham Appraisals Inc. Page 77 Land & Building Value “As Is” 25-1084 Kirkham Appraisals Inc. Page 78 Cost Approach Introduction The cost approach is a multi-step process that is detailed below. ➢ Preparation of a current reproduction or replacement cost estimate for all the subject's physical improvements. This cost can be attained from former appraisals of similar new buildings, a professional cost estimator, knowledgeable contractor, or cost estimating reporting services. ➢ From total cost new, an amount must be deducted for depreciation. Depreciation is a loss in value due to any cause. It can be classified into three main types - physical deterioration, functional obsolescence, or external obsolescence. ➢ The depreciated value or contributory worth of site improvements, like paving, fencing, and sidewalks, is next estimated. ➢ Land value is then approximated, usually via sales comparison. ➢ Finally, land value, the depreciated cost of the main improvements, and the depreciated worth of the site improvements are totaled to derive a value estimate via the cost approach. Depreciation Depreciation was estimated via the market extraction method - an intricate procedure that pulls out total depreciation from sales of other similar real estate. This methodology reflects market behavior because it uses market conveyances. Since the results are expressed as a single ratio, determination of depreciation types is not discernible without calculations that are more elaborate. When the total accrued depreciation is subtracted from the cost estimate new, the resulting figure is the depreciated value of the improvements. This should represent the contributory value of the improvements, in total, to the overall property value. To the depreciated value of the improvements, the land value estimate as developed by typical methods is added. In the appraisal of a site, it is important to consider zoning, deed restrictions, and the potential for alternative uses. In addition, a site should be valued at its highest and best use, which is use as a special-use property (such as a school) if the improvements are deemed an adequate expression of the highest and best use. It is not unusual for a site value to approach or surpass the value of the property as improved in total, as occurs with some downtown or central business district schools. Such an analysis should be carefully studied to determine whether the improvements are an adequate expression of the highest and best use. Assuming the site's highest and best use is as a school or similar use, the site value is then added to the depreciated value of the improvements. The resulting figure is a market value estimate derived by the cost approach. It should be noted, however, that several potential deficiencies exist within the cost approach that tend to hinder its reliability. These deficiencies primarily concern the difficulty in accurately estimating depreciation from sales data. 25-1084 Kirkham Appraisals Inc. Page 79 Sale 1 2 3 4 5 Sales Price 4,500,000$ 3,750,000$ 11,800,000$ 6,350,000$ 6,890,000$ Less Land Value 760,000$ 1,250,000$ 3,495,000$ 1,000,000$ 1,168,000$ Contributory Value of Improvements 3,740,000$ 2,500,000$ 8,305,000$ 5,350,000$ 5,722,000$ Estimated Cost New of Improvements 8,822,776$ 10,205,364$ 17,468,919$ 9,709,353$ 11,163,590$ Total Depreciation 5,082,776$ 7,705,364$ 9,163,919$ 4,359,353$ 5,441,590$ Total Depreciation as a Percent 58%76%52%45%49% Effective Age Based on 50 Year Economic Life 28.80 37.75 26.23 22.45 24.37 Rounded 29 38 26 22 24 Market Economic Life from Marshall and Swift 50 Market Depreciation The subject is most similar in age to sales 1, 2, and 3. Based on this data we believe the subject is approximately 70% depreciated (which accounts for all forms of depreciation). This is common in school properties that are built for a specific user, and then at resale are highly discounted. The land value is extremely difficult to arrive at for the sales used, so judgement was used in places where data was not available. Functional obsolescence is relatively rare in school facilities. Typically, these facilities are built for their intended use and thus their design is consistent with the needs of the school district. Further, while additions to existing facilities are generally the rule rather than the exception, they are designed to fulfill a particular need and do not normally appear to represent functional obsolescence. Some measurable external obsolescence does exist in many cases, however. External obsolescence in schools and religious facilities can be caused by economic factors, environmental factors, and neighborhood demographic factors, among others. Site Improvements The subject’s site improvements are completed by using aerial or satellite imagery. Based on the subject’s current site improvements, I have utilized Marshall and Swift to arrive at depreciated site improvements for the subject property. The site improvements are approximately $3.00 per square foot of land, which is common for this type of property. Asphalt Parking Sidewalks, Curb & Gutter Utilities Landscape Total$772,356 Site Improvements $79,890 $50,000 $561,635 $80,831 Entrepreneurial Profit The total direct and indirect costs of physically constructing the improvements to a site do not represent all of the true economic costs incurred in this type of analysis. Just like any other manufacturer, real estate developers must also be reasonably rewarded for their entrepreneurial efforts or there would be no financial incentives to initiate the venture. A favorable spread between the total amount of capital invested in the property and the amount which the developer can expect to receive in the sale of the finished product must be accounted for. 25-1084 Kirkham Appraisals Inc. Page 80 Thus, entrepreneurial incentive represents the return to the developer for taking the construction and lease-up risk. Based on our discussions with developers in the local market, this figure tends to range between 5 to 25 percent of total direct and indirect costs. Because of the type of construction (School) a lower than typical entrepreneurial incentive was utilized as these building are typically constructed with the user in mind, and they often sell well below construction costs if they go dark or are vacated. Cost Approach Cost Data From Marshall & Swift Depreciation Information Section/Page 18/9 Effective Age (Yrs)35 Quality Average Economic Life (Yrs)50 Class C Physical depreciation 70.00% Occupancy High School/Middle School Building Sq.Ft.Base Cost Current Multiplier Local Multiplier RCN Above Grade 68,275 $200.00 1.03 1.04 $14,627,236.00 Basement 18,043 $123.00 1.03 1.04 $2,377,302.38 Total RCN $17,004,538.38 Less Total Depreciation $11,903,176.86 Total Contributory Value $5,101,361.51 SUMMARY OF COST APPROACH ANALYSIS Contributory Value Building $5,101,361.51 Site Improvements (Landscaping, Sidewalk, Curb&Gutter, Utilities)$772,356.28 Entrepreneurial Incentive $0.00 Plus Land Value $2,990,000.00 Total Combined Value $8,863,717.79 Indicated Market Value “As Is” Via Cost Approach, say $8,865,000 25-1084 Kirkham Appraisals Inc. Page 81 Sales Comparison Approach Introduction The sales comparison approach is based upon the Principle of Substitution. This principle contends an informed buyer would pay no more for a property than the price of acquiring an equally desirable substitute in an open, competitive market. In an appraisal, the real estate being appraised is referred to as the “subject” or “subject property”. Properties possessing characteristics that are physically and locationally similar to the subject are called “comparables” or “comparable sales”. This approach compares prices, terms, and features of similar properties that have sold. Differences are noted. Dissimilarities between the subject and comparables are categorized into elements of comparison. To compensate for dissimilarities, adjustments are applied the sale prices of the comparable sales. Then, a value opinion for the subject is reconciled from the range in adjusted sale prices. The resultant opinion of worth is called "Market Value" or "Value in Exchange.” Some of the following transactions may have employed favorable financing. As used herein, the term favorable financing means some type of debt arrangement the buyer could not reasonably have obtained from a disinterested third-party lender. Those transactions utilizing favorable financing were adjusted to a cash basis. Cash equivalency adjustments are required by USPAP. All sales conveyed on an “arm’s length” basis unless specifically noted otherwise. An “arm’s length” transaction is an agreement between unrelated parties with typical motivations in a competitive market. Numerous conveyances were considered on a preliminary basis. Those cited in this appraisal report were judged most comparable. They are presented to exhibit their sale prices per square foot of building area including the land. 25-1084 Kirkham Appraisals Inc. Page 82 Comparable Sale #1 25-1084 Kirkham Appraisals Inc. Page 83 Comparable Sale #2 25-1084 Kirkham Appraisals Inc. Page 84 Comparable Sale #3 25-1084 Kirkham Appraisals Inc. Page 85 Comparable Sale #4 25-1084 Kirkham Appraisals Inc. Page 86 Comparable Sale #5 25-1084 Kirkham Appraisals Inc. Page 87 Sales Comparison Approach Summary of Improved Sales Sale Location Date Sale Price Size (sf) Effective Age/ Condition Land-to- Building Ratio Overall Price/SF 1. 2511 W Cherry Lane, Meridian, ID 04/20 $4,500,000 40,000+/- 29 Years Average 3.82:1 $112.50 2. 8120 Groby Road, Saint Louis, MO 04/21 $3,750,000 42,700+/- 38 Years Average 5.81:1 $87.82 3. 4890 Carr Street, Arvada, CO 04/23 $11,800,000 75,584+/- 26 Years Average 7.71:1 $156.12 4. 4905 W 60th Ave, Arvada, CO 07/24 $6,350,000 44,316+/- 22 Years Average 1.94:1 $143.29 5. 1600 E Oakey Blvd., Las Vegas, NV 06/24 $6,890,000 50,000+/- 24 Years Good 3.34:1 $137.80 Subject 60 W Main Street, Rexburg - - 86,318+/- 35 Years Average 2.89:1 - 25-1084 Kirkham Appraisals Inc. Page 88 Sales Comparison Approach Quantitative Adjustment Grid SUMMARY OF COMPARABLES Subject #1 #2 #3 #4 #5 Date of Sale 04/20 04/21 04/23 07/24 06/24 Effective Age (Years)35 29 38 26 22 24 Quality Average Average Average Average Average Average Condition Average Average Average Average Average Average Land to Building Ratio 2.89:1 3.82:1 5.81:1 7.71:1 1.94:1 3.34:1 Sales Price $4,500,000 $3,750,000 $11,800,000 $6,350,000 $6,890,000 GBA Size (SF)86,318 40,000 42,700 75,584 44,316 50,000 Price/SF $ 112.50 $ 87.82 $ 156.12 $ 143.29 $ 137.80 ADJUSTMENTS ----- Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Leased Fee Adjusted Price/SF $ 112.50 $ 87.82 $ 156.12 $ 143.29 $ 137.80 Property Rights ----- Cond/Terms ----- Market (Time) Adj.----- Adjusted Price/SF $ 112.50 $ 87.82 $ 156.12 $ 143.29 $ 137.80 Location (5.63)(8.78)(15.61)(14.33)(13.78) Size (11.25)(8.78)-(14.33)(13.78) Effective Age (11.22)3.51 (19.78)(31.39)(25.18) Utilities ----- Quality ----- Condition ----- Other ----- Land to Building Ratio -(4.39)(15.61)-- ADJUSTED INDICATORS $ 84.41 $ 69.38 $ 105.12 $ 83.24 $ 85.06 Net Adjustment (22.47)(9.66)(35.39)(45.72)(38.96) Value Range 69.38$ 105.12$ Mean to $85.44 25-1084 Kirkham Appraisals Inc. Page 89 Sales Comparison Approach Sales Location Map 25-1084 Kirkham Appraisals Inc. Page 90 Sales Comparison Approach Analysis & Conclusions The subject and all cited comparable sales share several characteristics. They are all special purpose schools or former school buildings found in the United States. Historically, most school buildings are owner user or built to suit, so they never reach the open market. For this reason, sales data is extremely scarce which may reduce the credibility of the approach. When the dissimilarity affects value, an adjustment to the sale price of the comparable is necessary. Property Rights Agreements or laws create partial interests in real estate. A deed restriction or life estate usually reduces rights and value. If the subject is not affected by these limitations and a comparable is, then the comparable's sale price needs an upward property rights adjustment. In another situation, unfavorable leases eliminate a landlord's right to collect market rent, so the real estate sells for a below-market price. If the property appraised has no lease adversities and a comparable does have unfavorable leases, then the comparable requires upward adjustment. Unless stated otherwise, property rights are virtually the same for the subject and all cited conveyances. Hence, no adjustments are necessary for this element of comparison. Financing Sub-market financing is a common technique used to finance the acquisition of real estate during periods of high interest rates. When non-market financing is used, the financing may be favorable to the buyer, so the sale price is inflated. The escalated price can be envisioned as a composite of the worth of real estate plus the value of advantageous financing. Since value created by financing is not real property, the contribution of the advantageous financing must be deducted from total sale price to derive market value for just the realty. On the opposite hand, there are instances where the buyer assumes unfavorable financing, so the sale price is diminished. In the latter case, an upward adjustment must be applied to the sale price of the comparable thusly deriving the market value of the real estate. Unless a statement is made to the contrary, non-market financing was not used to acquire any comparable sale cited in this report. Therefore, no compensations are needed for financing. Conditions of Sale An adjustment for conditions of sale is necessary when a criterion of market value is violated. It could compensate for unusual buyer or seller motivations. For instance, when a seller gives a buyer an atypical rebate, discount, credit, or something of value to induce a conveyance, the sale price is usually inflated. In this case, it is logical to deduct the worth of the giveback from the sale price. Residual sums represent the property's market value. In another scenario, a buyer may pay a premium to facilitate an assemblage. In this instance, the premium must be deducted from the sale price to derive market value for that conveyance. Unless stated otherwise, no adjustments are necessary for conditions of sale. Expenditure Post Sale This is a situation when a buyer is compelled to invest additional money into a property immediately after acquisition for some atypical reason. Post-sale invested sums are appropriately added to a comparable’s sale price thereby producing an adjusted sale price. Examples are demolition costs or building -code compliance costs. Unless a contrary statement is made, no adjustments are necessary for post-sale expenditures. Market Conditions Adjustments for market conditions are commonly referred to as time adjustments, but this is misleading. Value does not change due to the passage of time; sometimes it remains stable. Often real estate values fluctuate due to changes in supply and demand, interest rates, employment, or inflation. This type of adjustment compensates for change in market conditions between a sale’s transaction date and a later point in time. Since this type of property seldom transfers a matched pair analysis of market conditions was not possible, and it appears that with special use properties like the subject that market conditions are not as applicable as properties that trade more often. No adjustments were utilized. Location Each property was rated to the subject for locational aspects such as value growth potential, access, and general desirability. Most students will come within a 10-mile radius from schools. I have compiled data for the subject and each comparable to determine population base within 10-miles of the sales. I have adjusted all sales downward based on the following data: 25-1084 Kirkham Appraisals Inc. Page 91 Current Data from Site to Do Business Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Population 10-Mile Radius 61,986 558,460 928,863 1,128,976 1,248,684 1,538,240 Comparison to Subject NA Superior Superior Superior Superior Superior Physical Attributes A myriad of physical characteristics can affect value. Some examples are lot size, building size, physical condition of the building, functionality, and visual appeal. Those sales with superior physical qualities warrant downward adjustment and vice versa. There can be an inverse relationship between price and building size caused primarily by economies of scale associated with construction. That is, price per square foot tends to diminish as size increases. The sales utilized did not indicate a similar trend, so no adjustments were made. Effective age took into consideration the condition of the comparables in relation to the subject. Better maintained or more modern buildings command higher prices. Each analyzed transaction was compared to the subject for physical condition and effective age based on that condition. The comparable sales are adjusted at 2.00% of the sales prices per year they differ from the subject. This percentage is based off a 50-year economic life and the effective age adjustments are based on the age-life method of depreciation excluding the land. Item Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Gross Building Area 40,000 42,700 75,584 44,316 50,000 Estimated Effective Age 29 38 26 22 24 Difference in Effective Age -6 3 -9 -13 -11 Sale Price $4,500,000 $3,750,000 $11,800,000 $6,350,000 $6,890,000 Estimated Land Value $760,000 $1,250,000 $3,495,000 $1,000,000 $1,168,000 % of Land to Overall Value 16.89%33.33%29.62%15.75%16.95% Improvement Value $3,740,000 $2,500,000 $8,305,000 $5,350,000 $5,722,000 Improvement Value/SF $93.50 $58.55 $109.88 $120.72 $114.44 Per Year Depreciation %2.00%2.00%2.00%2.00%2.00% Effective Age % Adjustment -12.0%6.0%-18.0%-26.0%-22.0% Effective Age Adj/SF ($11.22)$3.51 ($19.78)($31.39)($25.18) The land to building ratio (L:B) is an index that reflects land use intensity. A large index signals more land is available for building expansion, parking, green space, or storage, hence often contributes more to value than a small index. Sales 2 & 3 have a larger ratio and are adjusted downward. 25-1084 Kirkham Appraisals Inc. Page 92 Value Indication Needed adjustments were explained above. These adjustments have been quantified and are shown in the prior table. Some of these adjustments are based upon the appraisers' professional judgment when data was insufficient to enable market extraction. The adjustments were considered large which reduces the confidence of this approach. The appraiser is well aware the cited conveyances are less than ideal comparisons. However, sales of more comparable properties were not discovered during our research. Selected transactions were chosen for analysis because they are all buildings that are or have been utilized as school type buildings in the Western United States. The adjusted data varies from $69.38 to $105.12 per square foot with an $85.44 per square foot average. Sales of similar school buildings were extremely difficult to find, so it was necessary to expand our search to across the nation which may decrease the overall reliability of the approach. A value near the central tendency of the comparables is considered reasonable. After careful consideration of all factors pertaining to, and influencing the sales comparison approach, the following is selected as the most fitting value indication. Both the per-unit and lump sum value indications reflect the worth of the subject and land value. Accordingly, Subject Structure 86,318 Sq. Ft. @ $85.00 Per Sq. Ft. = $7,337,030 Indicated Market Value “As Is” Via Sales Comparison, Say $7,335,000 25-1084 Kirkham Appraisals Inc. Page 93 Income Approach The income approach is most applicable for real estate designed and built to produce real estate rental income. It is not a useful valuation methodology for special-purpose facilities like the subject. For the case at hand, the income approach was considered for its application to the subject real estate but considered inapplicable and intentionally omitted from this report. 25-1084 Kirkham Appraisals Inc. Page 94 Reconciliation During reconciliation, strengths and weaknesses of each developed approach are considered. Adequacy and relevance of the data is weighed. Differences between approaches are examined, rationalized, and resolved when possible. From the various value indications, one is selected as most pertinent and reliable. Existing structural improvements are considered a legal, conforming use. A highest and best use analysis “as though now improved” concluded its current use yields the greatest net return to the land. Considering the three classic approaches to value, the following value indications were developed. Value Indications “As Is” Cost Approach $8,865,000 Sales Comparison $7,335,000 Income Approach Not Applicable An important component of the Cost Approach is estimating an accurate land value. There are several ways to estimate land value. The most approved and typical methodology is by utilizing comparable land sales. Other methods include allocation, or extraction from improved sales. I have utilized the most comparable land sales possible to estimate the subject’s land value. The land sales utilized were not considered perfect sales but were the best available and provided what we feel was a reasonable value range. Marshall and Swift was utilized to determine economic life, as well as support for the building. The site improvements were extracted from Marshall and Swift. Depreciation was extracted from the market and is utilized as a whole number accounting for all types of depreciation. The conclusion of value for the Cost Approach was within a reasonable range of the other approach which increases the confidence in the approach. In the sales comparison approach to value, sales of similar type properties are compared to the property being appraised. This approach is significant because it directly reflects the actions of buyers and sellers in the marketplace. It reflects economic conditions, acceptance, or rejection of various features, and trends of general desirability. This methodology is a true measure of supply and demand, accounting for all influential forces affecting the market. There were few school sales from the market area, so it was necessary to expand our search to across the United States. This reduces the confidence in the approach. The value indicated was within a reasonable range of the Cost Approach which increases the confidence. Overall, this approach was given weight. The income approach is most applicable for real estate designed and built to produce real estate rental income. It is not a useful valuation methodology for special-purpose facilities like the subject. For the case at hand, the income approach was considered for its application to the subject real estate but considered inapplicable and intentionally omitted from this report. The three approaches are both independent and interdependent. Each approach is independently processed, yet many of the same variables, like building size, are used throughout all three methods, hence the interdependence. In this report, the cost approach and sales comparison approach were both given weight. After careful consideration of all factors pertaining to, and influencing value, the data and analysis thereof firmly supports the following market value conclusion for the subject real estate: $8,100,000 Market Value “As Is” 25-1084 Kirkham Appraisals Inc. Page 95 Exposure Time Terminology abounds in the real estate appraisal profession. Two related but different concepts that are often confused are Exposure Time and Marketing Time. USPAP specifically addresses the confusion. Term Definition Explanation Exposure Time (Statement 6) “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 the appraisal". Backward looking, ends on the effective value date. Based on factual, past events Marketing Time (Advisory Opinion 7) "An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value during the period immediately after the effective date of the appraisal". Forward looking, starts on the effective value date. A forecast based on expectancies of future occurrences. Marketing time and exposure time are both influenced by price. That is, a prudent buyer could be enticed to acquire the property in less time if the price were less. Hence, the time span cited below coincides with the value opinion(s) formed herein. USPAP Standard rule 1-2(c)(iv) requires an opinion of exposure time, not marketing time, when the purpose of the appraisal is to estimate market value. In the recent past, the volume of competitive properties offered for sale, sale prices, and vacancy rates have fluctuated little. Sale concessions have not been prevalent. In light thereof, an estimated exposure time for the subject is 0 to 18 months assuming competitive pricing and prudent marketing efforts. 25-1084 Kirkham Appraisals Inc. Page 96 Contingent and Limiting Conditions 1. By this notice, all persons, companies, or corporations using or relying on this report in any manner bind themselves to accept these Contingent and Limiting conditions, and all other contingent and limiting conditions contained elsewhere in this report. Do not use any portion of this report unless you fully accept all Contingent and Limiting conditions contained throughout this document. 2. The "Subject" or "Subject Property" refers to the real property that is the subject of this report. An Appraiser is defined as an individual person who is licensed to prepare real estate appraisal-related services in the State of Idaho and affixes his / her signature to this document. 3. Throughout these Contingent and Limiting Conditions, the singular term "Appraiser" also refers to the plural term "Appraisers”. The terms "Appraiser" and “Appraisers” also refer jointly / collectively to "Kirkham Appraisals Inc.", its officers, employees, contractors, personnel, staff, shareholders, members, and affiliates. The masculine terms "he" or "his" also refer to the feminine term "she" or "her”. 4. In these Contingent and Limiting Conditions, the "Parties" refers to all of the following collectively: (a) the Appraiser(s), (b) Kirkham Appraisals Inc., (c) the client, and (d) all intended users. 5. These Contingent and Limiting Conditions are an integral part of this report along with all certifications, definitions, descriptions, facts, statements, assumptions, disclosures, hypotheses, analyses, and opinions. 6. All contents of this report are prepared solely for the explicitly identified client and other explicitly identified intended users. The liability of the Appraiser is limited solely to the client. There is no accountability, obligation, or liability to any other third party. Other intended users may read but not rely on this report. In no event, shall the Appraisers be liable for consequential, special, incidental or punitive loss, damages or expense (including without limitation, lost profits, opportunity costs, etc.) even if advised of their possible existence. If this report is placed in the hands of anyone other than the client, the client shall make such party aware of all contingent and limiting conditions, assumptions, and disclosures. Use of this report by third parties shall be solely at the risk of the third party. 7. This document communicates the results of an appraisal assignment. This communication is not an inspection, engineering, construction, legal, or architectural report. It is not an examination or survey of any kind. Expertise in these areas is not implied. The Appraiser is not responsible for any costs incurred to discover, or correct any deficiency in the property. 25-1084 Kirkham Appraisals Inc. Page 97 Contingent and Limiting Conditions 8. As part of this appraisal, information was gathered and analyzed to form opinion(s) that pertain solely to one or more explicitly identified effective value dates. The effective value date is the only point in time that the value applies. Information about the subject property, neighborhood, comparables, or other topics discussed in this report was obtained from sensible sources. In accordance with the extent of research disclosed in the Scope of Work section, all information cited herein was examined for accuracy, is believed to be reliable, and is assumed reasonably accurate. However, no guaranties or warranties are made for this information. No liability or responsibility is assumed for any inaccuracy which is outside the control of the Appraiser, beyond the scope of work, or outside reasonable due diligence of the Appraiser. 9. Appraiser and Client agree the following mutual limitation of liability is agreeable in consideration of the fees to be charged and the nature of appraisal services provided under this Agreement. Appraiser and Client agree to the fullest extent permitted by applicable law, that the Appraiser's and its Personnel's maximum aggregate and joint liability to the other party for claims and causes of action relating to this Agreement for appraisals or other services under this agreement shall be limited to $25,000 or the total of all fees and costs charged by the Appraiser for services that are subject of the claim(s) or cause(s) of action. This limit of liability extends to all types of claims or causes of action, whether in breach of contract or tort, including without limitation claims / causes of action for negligence, professional negligence, or negligent misrepresentation on the part of either party or its Personnel, but excluding claims / causes of action of intentionally fraudulent conduct, criminal conduct, or intentionally caused injury. The Personnel of each party are intended third party beneficiaries of this limitation of liability. The word "Personnel", as used in this paragraph, means the respective party's staff, employees, contractors, members, partners, affiliates, and shareholders. Appraiser and Client agree that they each were free to negotiate different terms than stated in this Agreement or contract with other parties. 10. Real estate values are affected by many changing factors. Therefore, any value opinion expressed herein is considered credible only on the effective value date. Every day that passes thereafter, the degree of credibility wanes as the subject changes physically, the economy changes, or market conditions change. The Appraiser reserves the right to amend these analyses and/or value opinion(s) contained within this appraisal report if erroneous, or more factual-information is subsequently discovered. No guarantee is made for the accuracy of estimates or opinions furnished by others, and relied upon in this report. 11. In the case of limited partnerships, syndication offerings, or stock offerings in the real estate, the client agrees that in case of lawsuit (brought by the lender, partner, or part owner in any form of ownership, tenant, or any other party), the client will hold Kirkham Appraisals Inc., its officers, contractors, employees and associate appraisers completely harmless. Acceptance of, and/or use of this report by the client, or any third party is prima facie evidence that the user understands and agrees to all these conditions. 25-1084 Kirkham Appraisals Inc. Page 98 Contingent and Limiting Conditions 12. For appraisals of multiunit residential, only a portion of all dwellings was observed. A typical ratio of observed dwellings roughly approximates 10% of the total number of units, and this ratio declines as the number of dwellings grows. It is assumed the functionality, physical condition, construction quality, and interior finish of unseen units are like the functionality, physical condition, construction quality, and interior finish of observed units. If unobserved dwellings significantly differ from those that were viewed in functionality, physical condition, quality, or finish, the Appraiser reserves the right to amend theses analysis and/or value opinion(s). 13. If the appraised property consists of a physical portion of a larger parcel is subject to the following limitations. The value opinion for the property appraised pertains only to that portion defined as the subject property. This value opinion should not be construed as applying with equal validity to other complementary portions of the same parcel. The value opinion for the physical portion appraised + the value of all other complementary physical portions may or may not equal the value of the whole parcel. 14. Unless specifically stated otherwise herein, the Appraiser is unaware of any engineering study made to determine the bearing capacity of the subject land, or nearby lands. Improvements in the vicinity, if any, appear to be structurally sound. It is assumed soil and subsoil conditions are stable and free from features that cause supernormal costs to arise. It is also assumed existing soil conditions of the subject land have proper load bearing qualities to support the existing improvements, or proposed improvements appropriate for the site. No investigations for potential seismic hazards were made. This appraisal assumes there are no conditions of the site, subsoil, or structures, whether latent, patent, or concealed that would render the subject property less valuable. Unless specifically stated otherwise in this document, no earthquake compliance report, engineering report, flood zone analysis, hazardous substance determination, or analysis of these unfavorable attributes was made, or ordered in conjunction with this appraisal report. The client is strongly urged to retain experts in these fields, if so desired. 15. If this report involves an appraisal that values an interest, which is less than the whole fee simple estate, then the following disclosure applies. The value for any fractional interest appraised + the value of all other complementary fractional interests may or may not equal the value of the entire fee simple estate. 16. If this appraisal values the subject as though construction, repairs, alterations, remodeling, renovation, or rehabilitation will be completed in the future, then it is assumed such work will be completed in a timely fashion, using non-defective materials, and proper workmanship. All previously completed work is assumed completed in substantial conformance with plans, specifications, descriptions, or attachments made or referred to herein. It is also assumed all planned, in-progress, or recently completed construction complies with the zoning ordinance, and all applicable building codes. A prospective value opinion has an effective value date that is beyond or in the future relative to this report's preparation date. If this appraisal includes a prospective valuation, it is understood and agreed the Appraiser is not responsible for an unfavorable value effect caused by unforeseeable events that occur before completion of the project. 25-1084 Kirkham Appraisals Inc. Page 99 Contingent and Limiting Conditions 17. This valuation may or may not include an observation of the appraised property by an Appraiser. The extent of any observation is disclosed in the Scope of Work section of this report. Any observation by an Appraiser is not a professional property inspection. Viewing of the subject was limited to components that were not concealed, clearly observable, and readily accessible without a ladder on the property observation date. As used herein, readily accessible means within the Appraiser's normal reach without the movement of any man made or natural object. Comments or descriptions about physical condition of the improvements are based solely on a superficial visual observation. These comments are intended to familiarize the reader with the property in a very general fashion. 18. The allocation of value between the subject's land and improvements, if any, represents our judgment only under the existing use of the property. A re-evaluation should be made if the improvements are removed, substantially altered, or the land is utilized for another purpose. 19. The Client and all intended users agree to all the following. (A) This appraisal does not serve as a warranty on the physical condition or operability of the property appraised. (B) All users of this report should take all necessary precautions before making any significant financial commitments to or for the subject. (C) Any estimate for repair or alternations is a non-warranted opinion of the Appraiser. 20. Electric, heating, cooling, plumbing, water supply, sewer or septic, mechanical equipment, and other property systems were not tested. No determination was made regarding the operability, capacity, or remaining physical life of any component in, on, or under the real estate appraised. All building components are assumed adequate and in good working order unless stated otherwise. Private water wells and private septic systems are assumed sufficient to comply with federal, state, or local health safety standards. No liability is assumed for the soundness of structural members since structural elements were not tested or studied to determine their structural integrity. The roof cover for all structures is assumed water tight unless otherwise noted. This document is not an inspection, engineering or architectural report. If the client has any concern regarding structural, mechanical, or protective components of the improvements, or the adequacy or quality of sewer, water or other utilities, the client should hire an expert in the appropriate discipline before relying upon this report. No warranties or guarantees of any kind are expressed or implied regarding the current or future physical condition or operability of any property component. 21. Any exhibits in the report are intended to assist the reader in visualizing the subject property and its surroundings. The drawings are not surveys unless specifically identified as such. No responsibility is assumed for cartographic accuracy. Drawings are not intended to be exact in size, scale, or detail. 22. Value opinions involve only real estate, and inconsequential personal property. Unless explicitly stated otherwise, value conclusions do not include personal property, unaffixed equipment, trade fixtures, business- good will, chattel, or franchise items of material worth. 25-1084 Kirkham Appraisals Inc. Page 100 Contingent and Limiting Conditions 23. All information and comments concerning the location, market area, trends, construction quality, construction costs, value loss, physical condition, rents, or any other data for the subject represent estimates and opinions of the Appraiser. Expenses shown in the Income Approach, if used, are only estimates. They are based on past operating history, if available, and are stabilized as generally typical over a reasonable ownership period. 24. No liability is assumed for matters of legal nature that affect the value of the subject property. Unless a clear statement to the contrary is made in this report, value opinion(s) formed herein are predicated upon the following assumptions. (A) The real property is appraised as though, and assumed free from all value impairments including yet not limited to title defects, liens, encumbrances, title claims, boundary discrepancies, encroachments, adverse easements, environmental hazards, pest infestation, leases, and atypical physical deficiencies. (B) All real estate taxes and assessments, of any type, are assumed fully paid. (C) It is assumed ownership of the property appraised is lawful. (D) It is also assumed the subject property is operated under competent and prudent management. (E) The subject property was appraised as though, and assumed free of indebtedness. (F) The subject real estate is assumed fully compliant with all applicable federal, state, and local environmental regulations and laws. (G) The subject is assumed fully compliant with all applicable zoning ordinances, building codes, use regulations, and restrictions of all types. (H) All licenses, consents, permits, or other documentation required by any relevant legislative or governmental authority, private entity, or organization have been obtained, or can be easily be obtained or renewed for a nominal fee. 25. Conversion of the subject's income into a market value opinion is based upon typical financing terms that were readily available from a disinterested, third party lender on this report’s effective date. Atypical financing terms and conditions do not influence market value, but may affect investment value. 26. This appraisal was prepared by Kirkham Appraisals Inc. and consists of trade secrets and commercial or financial information, which is privileged, confidential, and exempt from disclosure under 5 U.S.C. 522 (b) (4). 27. The Appraiser is not required to give testimony or produce documents because of having prepared this report unless arrangements are agreed to in advance. If the Appraiser is subpoenaed pursuant to court order or required to produce documents by judicial command, the client agrees to compensate the Appraiser for his appearance time, preparation time, travel time, and document preparation time at the regular hourly rate then in effect plus expenses and attorney fees. In the event the real property appraised is, or becomes the subject of litigation, a condemnation, or other legal proceeding, it is assumed the Appraiser will be given reasonable advanced notice, and reasonable additional time for court preparation. 25-1084 Kirkham Appraisals Inc. Page 101 Contingent and Limiting Conditions 28. Effective January 26, 1992, the Americans with Disabilities Act (ADA) - a national law, affects all non- residential real estate or the portion of any property, which is non-residential. The Appraiser has not observed the subject property to determine whether the subject conforms to the requirements of the ADA. It is possible a compliance survey, together with a detailed analysis of ADA requirements, could reveal the subject is not fully compliant. If such a determination was made, the subject's value may or may not be adversely affected. Since the Appraiser has no direct evidence, or knowledge pertaining to the subject's compliance or lack of compliance, this appraisal does not consider possible noncompliance or its effect on the subject's value. 29. Kirkham Appraisals Inc. and the Appraiser have no expertise in the field of insect, termite, or pest infestation. We are not qualified to detect the presence of these or any other unfavorable infestation. The Appraiser has no knowledge of the existence of any infestation on, under, above, or within the subject real estate. No overt evidence of infestation is apparent to the untrained eye. However, we have not specifically inspected or tested the subject property to determine the presence of any infestation. No effort was made to dismantle or probe the structure. No effort was exerted to observe enclosed, encased, or otherwise concealed evidence of infestation. The presence of any infestation would likely diminish the property's value. All value opinions in this communication assume there is no infestation of any type affecting the subject real estate or the Appraiser is not responsible for any infestation or for any expertise required to discover any infestation. Our client is urged to retain an expert in this field, if desired. 30. All opinions are those of the signatory Appraiser based on the information in this report. No responsibility is assumed by the Appraiser for changes in market conditions, or for the inability of the client, or any other party to achieve their desired results based upon the appraised value. Some of the assumptions or projections made herein can vary depending upon evolving events. We realize some assumptions may never occur and unexpected events or circumstances may occur. Therefore, actual results achieved during the projection period may differ from those set forth in this report. Compensation for appraisal services is dependent solely on the delivery of this report, and no other event or occurrence 31. No warrantees are made by the Appraiser concerning the property's conformance with any applicable government code or property covenant including but not limited to all laws, ordinances, regulations, agreements, declarations, easements, condominium regulations, restrictions, either recorded or unrecorded. The client is urged to engage the services of a licensed attorney to confirm any legal issue affecting the property appraised. No liability or responsibility is assumed by the Appraiser to determine the cost of replacing or curing any supposedly defective physical component. 32. In the event of an alleged claim due to some defective physical component, the client must notify Kirkham Appraisals Inc. and allow its representatives and experts to examine and test the alleged defective component before any repairs or modifications are made. If any type of repair or modification is made without the knowledge of the Appraisers, the Appraiser is released from all liability, real or alleged. 25-1084 Kirkham Appraisals Inc. Page 102 Contingent and Limiting Conditions 33. The client and all explicitly identified intended users agree to notify in writing Kirkham Appraisals Inc., within one year of this report's preparation date, of any claim relating to or arising from this report regardless of any statute of limitations. If Kirkham Appraisals Inc. does not receive this written notification within the year period defined in the paragraph, then the claimant releases the Appraiser from all claims arising from or related to this report. 34. The client and all explicitly identified intended users acknowledge that any claim relating to this report shall be settled in accordance with the commercial arbitration rules of the American Arbitration Association with the Parties each paying an equal share of all associated costs. 35. Any alleged claim must be filed in the Circuit Court for the County that encompasses most of or all of Pocatello, Idaho 83206 where the Appraiser's business office is located. If a court of law voids any portion of these Contingent and Limiting Conditions, then the remainder remains in full force and effect. The claimants(s) agree not to contest the venue set forth herein and to submit to, and not contest, the exercise of personal jurisdiction over them by the foregoing court. The claimant(s) waive all rights concerning the exercise of personal jurisdiction of them by the foregoing courts and all claims of or concerning forum non - conveniences in the foregoing forum. 36. Superseding all comments to the contrary regardless of the date, this report may not be transferred or assigned without the prior written consent of Kirkham Appraisals Inc., the copyright holder. 37. No part of this report shall be published or disseminated to the public by advertising media, public relations media, news media, sales media, electronic devices, or other media without the prior written consent of Kirkham Appraisals Inc.. This restriction applies particularly as to analyses, opinions, and conclusions; the identity of the Appraiser; and any reference to the Appraisal Institute or its MAI, SRPA, or SRA designations. Furthermore, no part of this report may be reproduced or incorporated into any information retrieval system without prior written permission from Kirkham Appraisals Inc., the copyright holder. 25-1084 Kirkham Appraisals Inc. Page 103 Certification The appraiser signing this report make the following certifications to the best of his / her knowledge and belief. ➢ The statements of fact contained in this report are true and correct. ➢ Reported analyses, opinions, and conclusions are limited only by the assumptions and limiting conditions contained within this report, and are the appraiser's personal, impartial, and unbiased professional analyses, opinions, and conclusions. ➢ The appraiser has 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. ➢ The appraiser has no bias with respect to the property that is the subject of this report, or to the parties involved with this assignment. ➢ This engagement is not contingent upon developing or reporting predetermined results. ➢ Compensation paid to the appraiser is not contingent upon the development or reporting of a predetermined value, or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal. ➢ Reported analyses, opinions, and conclusions were developed, and this report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) ➢ A statement regarding observation of the subject property by the appraiser is listed below. The appraiser is not a professional property inspector. Furthermore, the appraiser has no formal training in the use of tools or instruments as part of a professional property inspection. Observations by the appraiser, if any, was limited to just those physical features and attributes that are not hidden or obscure in any fashion by any object or weather condition. The appraiser did not used any tools or instruments, beyond those typically used by appraisers to probe, study, investigate, detect, or discover any physical feature or attribute that was not clearly visible on the date the property was observed. Appraiser Observations Brian Kirkham, MAI Adequate Interior (from previous inspection) and Exterior ➢ No one provided significant real property appraisal assistance to the appraiser(s) signing this certification. ➢ I have completed other appraisal assignments on the subject property as of August 28, 2023 (Date of Transmittal). I have engaged in no other appraisal services or services of any kind on the subject property other than listed above in the three years preceding the engagement of this appraisal service. 25-1084 Kirkham Appraisals Inc. Page 104 Certification ➢ Use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Brian Kirkham, MAI has completed continuing education that is required by the Appraisal Institute. ➢ After careful consideration of all factors pertaining to and influencing value, the data, and analysis thereof firmly supports the following final value opinion(s) for the subject property as of April 1, 2025: $8,100,000 Market Value “As Is” Brian Kirkham, MAI Certified General Appraiser Idaho License CGA-3486 License Expiration Date: 5/9/2025 25-1084 Kirkham Appraisals Inc. Page 105 ♦ Addenda • • • Digital Images Our world is rapidly shifting to a global economy in which technology and e-commerce play major roles. Digitized signatures and digital photographs are key elements of this shift. This appraisal may contain digital photographs, which are true and accurate representations. Brightness and/or contrast of these images may have been adjusted to enhance visibility when lighting conditions were too light or too dark. However, the content of these images was not altered or augmented in any way. Digital signatures may be affixed to this document. Statement 8 of USPAP recognizes and addresses the proper use of digitized signatures. In this document, a digital signature is a reproduction of the appraiser's actual signature. Software used for the affixation has a password security feature, which controls its usage. 25-1084 Kirkham Appraisals Inc. Page 106 Technical Qualifications 25-1084 Kirkham Appraisals Inc. Page 107 Engagement Letter 25-1084 Kirkham Appraisals Inc. Page 108 25-1084 Kirkham Appraisals Inc. Page 109 25-1084 Kirkham Appraisals Inc. Page 110 25-1084 Kirkham Appraisals Inc. Page 111 25-1084 Kirkham Appraisals Inc. Page 112 Copyright Protection © Copyright 2025 Kirkham Appraisals Inc. Pocatello, Idaho 83206 All Rights Reserved. No part of this document may be reproduced, nor may any portion be incorporated into any information retrieval system without written permission from Kirkham Appraisals Inc., the copyright holder. The descriptions, analyses, and conclusions stated herein are intended for the exclusive use of our client, Madison School District #321, and other explicitly identified intended users, if any. This report should only be used for the intended use stated herein. Kirkham Appraisals Inc. retains all rights, title, and interests in all trademarks, trade names, trade secrets, data, conclusions, opinions, valuations, and other information included in, arising out of, or in any way related to this appraisal. No person or entity shall be entitled to break down, strip out, mine, or disseminate any component or portion of this report, including, but not limited to any valuations, opinions, data compilations, or conclusions. This report and all its contents are a culmination of intellectual and professional experiences, education, personal investigations, and know-how, which shall at all times remain the property of Kirkham Appraisals Inc., its sole owner. End of Report