Larger Parcel Analysis – As Vacant Present Value of 421A Real … P… · The estimated 8% discount rate is estimated at approximately 400 basis points over the safe rate of 2%±

13-190

GOODMAN-MARKS ASSOCIATES, INC. 101

estate tax savings for a proposed use that requires rezoning, such as the development of a

residential apartment building. The estimated 8% discount rate is estimated at

approximately 400 basis points over the safe rate of 2%±.

The present value of the tax savings have been added to the indicated present

value of the cash flows to arrive at a residual value under each development scenario as

discussed in the highest and best use section of this appraisal report.

The following are the calculations for the 421A Real Estate Tax Savings, for the

potential apartment building development, under the highest and best use as vacant

analysis.

Larger Parcel Analysis – As VacantPresent Value of 421A Real Estate Tax Savings – Apartment Building Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(8% Rate)

Present

Value

RETX

Savings

$ 47,253 $47,253 0.925926

$ 48,671 $48,671 0.857339

$ 50,131 $50,131 0.793832

$ 51,635 $51,635 0.735030

$ 53,184 $53,184 0.680583

$ 54,779 $54,780 0.630170

$1,216,791 $56,423 0.583490

1 $2,506,589 $58,116 $2,448,473 100% $2,448,473 0.540269 $1,322,834

2 $2,581,787 $59,859 $2,521,928 100% $2,521,928 0.500249 $1,261,592

3 $2,659,241 $61,655 $2,597,586 100% $2,597,586 0.463193 $1,203,185

4 $2,739,018 $63,505 $2,675,513 100% $2,675,513 0.428883 $1,147,482

5 $2,821,189 $65,410 $2,755,779 100% $2,755,779 0.397114 $1,094,358

6 $2,905,825 $67,372 $2,838,453 100% $2,838,453 0.367698 $1,043,693

7 $2,993,000 $69,393 $2,923,607 100% $2,923,607 0.340461 $ 995,374

8 $3,082,790 $71,475 $3,011,315 100% $3,011,315 0.315242 $ 949,292

9 $3,175,274 $73,619 $3,101,655 100% $3,101,655 0.291890 $ 905,344

10 $3,270,532 $75,828 $3,194,704 100% $3,194,704 0.270269 $ 863,429

11 $3,368,648 $78,103 $3,290,545 100% $3,290,545 0.250249 $ 823,456

12 $3,469,707 $80,446 $3,389,261 80% $2,711,409 0.231712 $ 628,266

13 $3,573,798 $82,859 $3,490,939 60% $2,094,563 0.214548 $ 449,385

14 $3,681,012 $85,345 $3,595,667 40% $1,438,267 0.198656 $ 285,720

15 $3,791,442 $87,905 $3,703,537 20% $ 740,707 0.183941 $ 136,246

16 $3,905,185 $90,542 $3,814,643 0% $ 0 0.170315 $ 0

Total RETX Savings $38,344,504 $13,109,656

Present Value of RETX Savings (Rounded) $13,100,000

13-190


Washington Street Roadbed – As an Individual Zoning LotPresent Value of 421A Real Estate Tax Savings – Apartment Building Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(8% Rate)

Present

Value

RETX

Savings

$ 11,170 $11,170 0.925926

$ 11,505 $11,505 0.857339

$ 11,850 $11,850 0.793832

$ 12,206 $12,206 0.735030

$ 12,572 $12,572 0.680583

$ 12,949 $12,949 0.630170

$ 361,318 $13,337 0.583490

1 $ 744,308 $13,737 $ 730,571 100% $730,571 0.540269 $394,705

2 $ 766,637 $14,149 $ 752,488 100% $752,488 0.500249 $376,431

3 $ 789,636 $14,573 $ 775,063 100% $775,063 0.463193 $359,004

4 $ 813,325 $15,010 $ 798,315 100% $798,315 0.428883 $342,384

5 $ 837,725 $15,460 $ 822,265 100% $822,265 0.397114 $326,533

6 $ 862,857 $15,924 $ 846,933 100% $846,933 0.367698 $311,416

7 $ 888,743 $16,402 $ 872,341 100% $872,341 0.340461 $296,998

8 $ 915,405 $16,894 $ 898,511 100% $898,511 0.315242 $283,248

9 $ 942,867 $17,401 $ 925,466 100% $925,466 0.291890 $270,135

10 $ 971,153 $17,923 $ 953,230 100% $953,230 0.270269 $257,628

11 $1,000,288 $18,461 $ 981,827 100% $981,827 0.250249 $245,701

12 $1,030,297 $19,015 $1,011,282 80% $809,026 0.231712 $187,461

13 $1,061,206 $19,585 $1,041,621 60% $624,973 0.214548 $134,087

14 $1,093,042 $20,173 $1,072,869 40% $429,148 0.198656 $ 85,253

15 $1,125,833 $20,778 $1,105,055 20% $221,011 0.183941 $ 40,653

16 $1,159,608 $21,401 $1,138,207 0% $ 0 0.170315 $ 0



13-190


Water Meter Testing Facility Site – As an Individual Zoning LotPresent Value of 421A Real Estate Tax Savings – Apartment Building Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(8% Rate)

Present

Value

RETX

Savings

$ 23,871 $23,871 0.925926

$ 24,587 $24,587 0.857339

$ 25,325 $25,325 0.793832

$ 26,084 $26,085 0.735030

$ 26,867 $26,868 0.680583

$ 27,673 $27,674 0.630170

$ 351,291 $28,504 0.583490

1 $ 723,649 $29,359 $ 694,290 100% $694,290 0.540269 $375,103

2 $ 745,358 $30,240 $ 715,118 100% $715,118 0.500249 $357,737

3 $ 767,719 $31,147 $ 736,572 100% $736,572 0.463193 $341,175

4 $ 790,751 $32,081 $ 758,670 100% $758,670 0.428883 $325,381

5 $ 814,474 $33,043 $ 781,431 100% $781,431 0.397114 $310,317

6 $ 838,908 $34,034 $ 804,874 100% $804,874 0.367698 $295,950

7 $ 864,075 $35,055 $ 829,020 100% $829,020 0.340461 $282,249

8 $ 889,997 $36,107 $ 853,890 100% $853,890 0.315242 $269,182

9 $ 916,697 $37,190 $ 879,507 100% $879,507 0.291890 $256,720

10 $ 944,198 $38,306 $ 905,892 100% $905,892 0.270269 $244,834

11 $ 972,524 $39,455 $ 933,069 100% $933,069 0.250249 $233,500

12 $1,001,700 $40,639 $ 961,061 80% $768,849 0.231712 $178,152

13 $1,031,751 $41,858 $ 989,893 60% $593,936 0.214548 $127,428

14 $1,062,704 $43,114 $1,019,590 40% $407,836 0.198656 $ 81,019

15 $1,094,585 $44,407 $1,050,178 20% $210,036 0.183941 $ 38,634

16 $1,127,423 $45,739 $1,081,684 0% $ 0 0.170315 $ 0



13-190


DOT Paint Shed Site – As an Individual Zoning LotPresent Value of 421A Real Estate Tax Savings – Apartment Building Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(8% Rate)

Present

Value

RETX

Savings

$ 12,212 $12,212 0.925926

$ 12,578 $12,578 0.857339

$ 12,956 $12,955 0.793832

$ 13,344 $13,344 0.735030

$ 13,745 $13,744 0.680583

$ 14,157 $14,156 0.630170

$ 14,582 $14,581 0.583490

$ 15,019 $15,018 0.540269

$ 534,897 $15,469 0.500249

1 $1,101,889 $15,933 $1,085,956 100% $1,085,956 0.463193 $503,008

2 $1,134,946 $16,411 $1,118,535 100% $1,118,535 0.428883 $479,720

3 $1,168,994 $16,903 $1,152,091 100% $1,152,091 0.397114 $457,511

4 $1,204,064 $17,410 $1,186,654 100% $1,186,654 0.367698 $436,330

5 $1,240,186 $17,932 $1,222,254 100% $1,222,254 0.340461 $416,130

6 $1,277,392 $18,470 $1,258,922 100% $1,258,922 0.315242 $396,865

7 $1,315,714 $19,024 $1,296,690 100% $1,296,690 0.291890 $378,491

8 $1,355,185 $19,595 $1,335,590 100% $1,335,590 0.270269 $360,969

9 $1,395,841 $20,183 $1,375,658 100% $1,375,658 0.250249 $344,257

10 $1,437,716 $20,788 $1,416,928 100% $1,416,928 0.231712 $328,319

11 $1,480,847 $21,412 $1,459,435 100% $1,459,435 0.214548 $313,119

12 $1,525,272 $22,054 $1,503,218 80% $1,202,574 0.198656 $238,898

13 $1,571,030 $22,716 $1,548,314 60% $ 928,988 0.183941 $170,879

14 $1,618,161 $23,397 $1,594,764 40% $ 637,906 0.170315 $108,645

15 $1,666,706 $24,099 $1,642,607 20% $ 328,521 0.157699 $ 51,808

16 $1,716,707 $24,822 $1,691,885 0% $ 0 0.146018 $ 0



13-190


In our analysis of the subject larger parcel as vacant under current zoning, the

property would be eligible for an ICAP. Therefore, added to the value estimate under

this approach is the estimated 25-year ICAP real estate tax savings, which are calculated

as follows.

Larger Parcel Analysis – As VacantPresent Value of ICAP Real Estate Tax Savings – One-Story Retail Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(8% Rate)

Present

Value

RETX

Savings

$ 47,253 $ 47,253 0.961538

$111,497 $ 48,671 0.924556

1 $229,672 $ 50,131 $179,541 100% $179,541 0.888996 $159,611

2 $236,562 $ 51,635 $184,927 100% $184,927 0.854804 $158,076

3 $243,659 $ 53,184 $190,475 100% $190,475 0.821927 $156,557

4 $250,969 $ 54,780 $196,189 100% $196,189 0.790315 $155,051

5 $258,498 $ 56,423 $202,075 100% $202,075 0.759918 $153,560

6 $266,253 $ 58,116 $208,137 100% $208,137 0.730690 $152,084

7 $274,241 $ 59,859 $214,382 100% $214,382 0.702587 $150,622

8 $282,468 $ 61,655 $220,813 100% $220,813 0.675564 $149,173

9 $290,942 $ 63,505 $227,437 100% $227,437 0.649581 $147,739

10 $299,670 $ 65,410 $234,260 100% $234,260 0.624597 $146,318

11 $308,660 $ 67,372 $241,288 100% $241,288 0.600574 $144,911

12 $317,920 $ 69,393 $248,527 100% $248,527 0.577475 $143,518

13 $327,458 $ 71,475 $255,983 100% $255,983 0.555265 $142,138

14 $337,282 $ 73,619 $263,663 100% $263,663 0.533908 $140,772

15 $347,400 $ 75,828 $271,572 100% $271,572 0.513373 $139,418

16 $357,822 $ 78,103 $279,719 100% $279,719 0.493628 $138,077

17 $368,557 $ 80,446 $288,111 90% $259,300 0.474642 $123,075

18 $379,614 $ 82,859 $296,755 80% $237,404 0.456387 $108,348

19 $391,002 $ 85,345 $305,657 70% $213,960 0.438834 $ 93,893

20 $402,732 $ 87,905 $314,827 60% $188,896 0.421955 $ 79,706

21 $414,814 $ 90,542 $324,272 50% $162,136 0.405726 $ 65,783

22 $427,258 $ 93,258 $334,000 40% $133,600 0.390121 $ 52,120

23 $440,076 $ 96,056 $344,020 30% $103,206 0.375117 $ 38,714

24 $453,278 $ 98,938 $354,340 20% $ 70,868 0.360689 $ 25,561

25 $466,876 $101,906 $364,970 10% $ 36,497 0.346817 $ 12,658

26 $480,882 $104,963 $375,919 0% $ 0 0.333477 $ 0



13-190


Larger Parcel Analysis – If Retain Existing Meter BuildingPresent Value of ICAP Real Estate Tax Savings – One-Story Retail Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(8% Rate)

Present

Value

RETX

Savings

$ 47,253 $ 47,253 0.961538

$139,427 $ 48,671 0.924556

1 $287,196 $ 50,131 $237,065 100% $237,065 0.888996 $210,750

2 $295,812 $ 51,635 $244,177 100% $244,177 0.854804 $208,724

3 $304,686 $ 53,184 $251,502 100% $251,502 0.821927 $206,716

4 $313,827 $ 54,780 $259,047 100% $259,047 0.790315 $204,729

5 $323,242 $ 56,423 $266,819 100% $266,819 0.759918 $202,761

6 $332,939 $ 58,116 $274,823 100% $274,823 0.730690 $200,810

7 $342,927 $ 59,859 $283,068 100% $283,068 0.702587 $198,880

8 $353,215 $ 61,655 $291,560 100% $291,560 0.675564 $196,967

9 $363,811 $ 63,505 $300,306 100% $300,306 0.649581 $195,073

10 $374,725 $ 65,410 $309,315 100% $309,315 0.624597 $193,197

11 $385,967 $ 67,372 $318,595 100% $318,595 0.600574 $191,340

12 $397,546 $ 69,393 $328,153 100% $328,153 0.577475 $189,500

13 $409,472 $ 71,475 $337,997 100% $337,997 0.555265 $187,678

14 $421,756 $ 73,619 $348,137 100% $348,137 0.533908 $185,873

15 $434,409 $ 75,828 $358,581 100% $358,581 0.513373 $184,086

16 $447,441 $ 78,103 $369,338 100% $369,338 0.493628 $182,316

17 $460,864 $ 80,446 $380,418 90% $342,376 0.474642 $162,506

18 $474,690 $ 82,859 $391,831 80% $313,465 0.456387 $143,061

19 $488,931 $ 85,345 $403,586 70% $282,510 0.438834 $123,975

20 $503,599 $ 87,905 $415,694 60% $249,416 0.421955 $105,242

21 $518,707 $ 90,542 $428,165 50% $214,083 0.405726 $ 86,859

22 $534,268 $ 93,258 $441,010 40% $176,404 0.390121 $ 68,819

23 $550,296 $ 96,056 $454,240 30% $136,272 0.375117 $ 51,118

24 $566,805 $ 98,938 $467,867 20% $ 93,573 0.360689 $ 33,751

25 $583,809 $101,906 $481,903 10% $ 48,190 0.346817 $ 16,713

26 $601,323 $104,963 $496,360 0% $ 0 0.333477 $ 0



13-190


Washington Street Roadbed – As an Individual Zoning LotPresent Value of ICAP Real Estate Tax Savings – One-Story Retail Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(4% Rate)

Present

Value

RETX

Savings

$ 11,170 $11,170 0.961538

$ 32,811 $11,505 0.924556

1 $ 67,590 $11,850 $ 55,740 100% $ 55,740 0.888996 $ 49,553

2 $ 69,618 $12,206 $ 57,412 100% $ 57,412 0.854804 $ 49,076

3 $ 71,707 $12,572 $ 59,135 100% $ 59,135 0.821927 $ 48,605

4 $ 73,858 $12,949 $ 60,909 100% $ 60,909 0.790315 $ 48,137

5 $ 76,074 $13,337 $ 62,737 100% $ 62,737 0.759918 $ 47,675

6 $ 78,356 $13,737 $ 64,619 100% $ 64,619 0.730690 $ 47,216

7 $ 80,707 $14,149 $ 66,558 100% $ 66,558 0.702587 $ 46,763

8 $ 83,128 $14,573 $ 68,555 100% $ 68,555 0.675564 $ 46,313

9 $ 85,622 $15,010 $ 70,612 100% $ 70,612 0.649581 $ 45,868

10 $ 88,191 $15,460 $ 72,731 100% $ 72,731 0.624597 $ 45,428

11 $ 90,837 $15,924 $ 74,913 100% $ 74,913 0.600574 $ 44,991

12 $ 93,562 $16,402 $ 77,160 100% $ 77,160 0.577475 $ 44,558

13 $ 96,369 $16,894 $ 79,475 100% $ 79,475 0.555265 $ 44,130

14 $ 99,260 $17,401 $ 81,859 100% $ 81,859 0.533908 $ 43,705

15 $102,238 $17,923 $ 84,315 100% $ 84,315 0.513373 $ 43,285

16 $105,305 $18,461 $ 86,844 100% $ 86,844 0.493628 $ 42,869

17 $108,464 $19,015 $ 89,449 90% $ 80,504 0.474642 $ 38,211

18 $111,718 $19,585 $ 92,133 80% $ 73,706 0.456387 $ 33,638

19 $115,070 $20,173 $ 94,897 70% $ 66,428 0.438834 $ 29,151

20 $118,522 $20,778 $ 97,744 60% $ 58,646 0.421955 $ 24,746

21 $122,078 $21,401 $100,677 50% $ 50,339 0.405726 $ 20,424

22 $125,740 $22,043 $103,697 40% $ 41,479 0.390121 $ 16,182

23 $129,512 $22,704 $106,808 30% $ 32,042 0.375117 $ 12,019

24 $133,397 $23,385 $110,012 20% $ 22,002 0.360689 $ 7,936

25 $137,399 $24,087 $113,312 10% $ 11,331 0.346817 $ 3,930

26 $141,521 $24,810 $116,711 0% $ 0 0.333477 $ 0

Total RETX Savings $1,560,051 $924,409

Present Value of RETX Savings (Rounded) $900,000

13-190


Water Meter Testing Facility Site – As an Individual Zoning LotPresent Value of ICAP Real Estate Tax Savings – One-Story Retail Renovate Existing Building

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(4% Rate)

Present

Value

RETX

Savings

$ 23,871 $23,871 0.961538

1 $113,534 $24,587 $ 88,947 100% $ 88,947 0.924556 $ 82,237

2 $116,940 $25,325 $ 91,615 100% $ 91,615 0.888996 $ 81,445

3 $120,448 $26,085 $ 94,363 100% $ 94,363 0.854804 $ 80,662

4 $124,061 $26,868 $ 97,193 100% $ 97,193 0.821927 $ 79,886

5 $127,783 $27,674 $100,109 100% $ 100,109 0.790315 $ 79,118

6 $131,616 $28,504 $103,112 100% $ 103,112 0.759918 $ 78,357

7 $135,564 $29,359 $106,205 100% $ 106,205 0.730690 $ 77,603

8 $139,631 $30,240 $109,391 100% $ 109,391 0.702587 $ 76,857

9 $143,820 $31,147 $112,673 100% $ 112,673 0.675564 $ 76,118

10 $148,135 $32,081 $116,054 100% $ 116,054 0.649581 $ 75,386

11 $152,579 $33,043 $119,536 100% $ 119,536 0.624597 $ 74,662

12 $157,156 $34,034 $123,122 100% $ 123,122 0.600574 $ 73,944

13 $161,871 $35,055 $126,816 100% $ 126,816 0.577475 $ 73,233

14 $166,727 $36,107 $130,620 100% $ 130,620 0.555265 $ 72,529

15 $171,729 $37,190 $134,539 100% $ 134,539 0.533908 $ 71,831

16 $176,881 $38,306 $138,575 100% $ 138,575 0.513373 $ 71,141

17 $182,187 $39,455 $142,732 90% $ 128,459 0.493628 $ 63,411

18 $187,653 $40,639 $147,014 80% $ 117,611 0.474642 $ 55,823

19 $193,283 $41,858 $151,425 70% $ 105,998 0.456387 $ 48,376

20 $199,081 $43,114 $155,967 60% $ 93,580 0.438834 $ 41,066

21 $205,053 $44,407 $160,646 50% $ 80,323 0.421955 $ 33,893

22 $211,205 $45,739 $165,466 40% $ 66,186 0.405726 $ 26,853

23 $217,541 $47,111 $170,430 30% $ 51,129 0.390121 $ 19,947

24 $224,067 $48,524 $175,543 20% $ 35,109 0.375117 $ 13,170

25 $230,789 $49,980 $180,809 10% $ 18,081 0.360689 $ 6,522

26 $237,713 $51,479 $186,234 0% $ 0 0.346817 $ 0



13-190


Water Meter Testing Facility Site – As an Individual Zoning LotPresent Value of ICAP Real Estate Tax Savings – One-Story Retail Demolish Existing Building

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(4% Rate)

Present

Value

RETX

Savings

$ 23,871 $23,871 0.961538

1 $ 62,482 $24,587 $37,895 100% $37,895 0.924556 $35,036

2 $ 64,357 $25,325 $39,032 100% $39,032 0.888996 $34,699

3 $ 66,288 $26,085 $40,203 100% $40,203 0.854804 $34,366

4 $ 68,277 $26,868 $41,409 100% $41,409 0.821927 $34,035

5 $ 70,325 $27,674 $42,651 100% $42,651 0.790315 $33,708

6 $ 72,435 $28,504 $43,931 100% $43,931 0.759918 $33,384

7 $ 74,608 $29,359 $45,249 100% $45,249 0.730690 $33,063

8 $ 76,846 $30,240 $46,606 100% $46,606 0.702587 $32,745

9 $ 79,151 $31,147 $48,004 100% $48,004 0.675564 $32,430

10 $ 81,526 $32,081 $49,445 100% $49,445 0.649581 $32,119

11 $ 83,972 $33,043 $50,929 100% $50,929 0.624597 $31,810

12 $ 86,491 $34,034 $52,457 100% $52,457 0.600574 $31,504

13 $ 89,086 $35,055 $54,031 100% $54,031 0.577475 $31,202

14 $ 91,759 $36,107 $55,652 100% $55,652 0.555265 $30,902

15 $ 94,512 $37,190 $57,322 100% $57,322 0.533908 $30,605

16 $ 97,347 $38,306 $59,041 100% $59,041 0.513373 $30,310

17 $100,267 $39,455 $60,812 90% $54,731 0.493628 $27,017

18 $103,275 $40,639 $62,636 80% $50,109 0.474642 $23,784

19 $106,373 $41,858 $64,515 70% $45,161 0.456387 $20,611

20 $109,564 $43,114 $66,450 60% $39,870 0.438834 $17,496

21 $112,851 $44,407 $68,444 50% $34,222 0.421955 $14,440

22 $116,237 $45,739 $70,498 40% $28,199 0.405726 $11,441

23 $119,724 $47,111 $72,613 30% $21,784 0.390121 $ 8,498

24 $123,316 $48,524 $74,792 20% $14,958 0.375117 $ 5,611

25 $127,015 $49,980 $77,035 10% $ 7,704 0.360689 $ 2,779

26 $130,825 $51,479 $79,346 0% $ 0 0.346817 $ 0

Total RETX Savings $1,022,700 $653,595

Present Value of RETX Savings (Rounded) $700,000

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DOT Paint Shed Site – As an Individual Zoning LotPresent Value of ICAP Real Estate Tax Savings – One-Story Retail Development

Benefit

Year

Full

RETX

(3% Inflation)

Estimated

Base RETX

(3% Inflation)

RETX

Exemption

Percentage

Savings

RETX

Savings

Present

Value

Factor

(4% Rate)

Present

Value

RETX

Savings

$ 12,212 $12,212 0.961538

$ 46,077 $12,578 0.924556

1 $ 94,919 $12,955 $ 81,964 100% $ 81,964 0.888996 $72,866

2 $ 97,767 $13,344 $ 84,423 100% $ 84,423 0.854804 $72,165

3 $100,700 $13,744 $ 86,956 100% $ 86,956 0.821927 $71,471

4 $103,721 $14,156 $ 89,565 100% $ 89,565 0.790315 $70,785

5 $106,833 $14,581 $ 92,252 100% $ 92,252 0.759918 $70,104

6 $110,038 $15,018 $ 95,020 100% $ 95,020 0.730690 $69,430

7 $113,339 $15,469 $ 97,870 100% $ 97,870 0.702587 $68,762

8 $116,739 $15,933 $100,806 100% $100,806 0.675564 $68,101

9 $120,241 $16,411 $103,830 100% $103,830 0.649581 $67,446

10 $123,848 $16,903 $106,945 100% $106,945 0.624597 $66,798

11 $127,563 $17,410 $110,153 100% $110,153 0.600574 $66,155

12 $131,390 $17,932 $113,458 100% $113,458 0.577475 $65,519

13 $135,332 $18,470 $116,862 100% $116,862 0.555265 $64,889

14 $139,392 $19,024 $120,368 100% $120,368 0.533908 $64,265

15 $143,574 $19,595 $123,979 100% $123,979 0.513373 $63,648

16 $147,881 $20,183 $127,698 100% $127,698 0.493628 $63,035

17 $152,317 $20,788 $131,529 90% $118,376 0.474642 $56,186

18 $156,887 $21,412 $135,475 80% $108,380 0.456387 $49,463

19 $161,594 $22,054 $139,540 70% $ 97,678 0.438834 $42,864

20 $166,442 $22,716 $143,726 60% $ 86,236 0.421955 $36,388

21 $171,435 $23,397 $148,038 50% $ 74,019 0.405726 $30,031

22 $176,578 $24,099 $152,479 40% $ 60,992 0.390121 $23,794

23 $181,875 $24,822 $157,053 30% $ 47,116 0.375117 $17,674

24 $187,331 $25,567 $161,764 20% $ 32,353 0.360689 $11,669

25 $192,951 $26,334 $166,617 10% $ 16,662 0.346817 $ 5,779

26 $198,740 $27,124 $171,616 0% $ 0 0.333477 $ 0



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ZONING MAP

Zoning Map – Subject Area

Zoning Map – Immediate Subject Area

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ZONING EXCERPT

The Washington Street Roadbed is part of a demapped roadbed and is not a part of

any zoning lot and does not contain a zoning designation. According to the statement of work

for this appraisal assignment, “the portion of this street proposed for abandonment must be

hypothetically appraised as if free of all street right-of-way restrictions. This abandonment

does not include utility easements (if any)." Furthermore, a representative of the client of this

appraisal report indicated that “in terms of applicable zoning and tax lot status, the appraiser

through research should determine the likelihood of what zoning the city would assign and the

risk and time for the purchaser to accomplish getting that done. Rather than the appraiser

determining the potential of a change from one zoning district to another, he/she should

determine to which zoning the property will be subject from its current position of none. The

appraisal should not merely assume a zoning from the adjacent property.”

Therefore, in the valuation of the subject property as available to its highest and best

use, a highest and best use analysis was performed to determine the effects on value of

different zoning districts, the approval process and the level of risk.

The Water Meter Testing Facility site and the DOT Paint Shed Facility site are

situated within an M3-1 Manufacturing district, as mapped by the City of New York. Each of

these sites is a separate zoning lot19. M3 zoning districts are designed for areas with heavy

industries that generate noise, traffic or pollutants. Uses with potential nuisance effects are

required to conform to minimum performance standards. No new residential uses are

permitted.

19Zoning lotA "zoning lot" is either:(a) a lot of record existing on December 15, 1961 or any applicable subsequent amendment thereto;(b) a tract of land, either unsubdivided or consisting of two or more contiguous lots of record, located within a single block, which, onDecember 15, 1961 or any applicable subsequent amendment thereto, was in single ownership;(c) a tract of land, either unsubdivided or consisting of two or more lots of record contiguous for a minimum of ten linear feet, locatedwithin a single block, which at the time of filing for a building permit (or, if no building permit is required, at the time of the filing fora certificate of occupancy) is under single fee ownership and with respect to which each party having any interest therein is a party ininterest (as defined herein); or(d) a tract of land, either unsubdivided or consisting of two or more lots of record contiguous for a minimum of ten linear feet, locatedwithin a single block, which at the time of filing for a building permit (or, if no building permit is required, at the time of filing for acertificate of occupancy) is declared to be a tract of land to be treated as one zoning lot for the purpose of this Resolution. (Source:New York City Department of City Planning Zoning Text).

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The subject property is also situated within a Waterfront Area and is subject to the

special regulations as per the New York City Zoning Resolution. The special regulations were

designed to guide development along the City's waterfront and in so doing to promote and

protect public health, safety and general welfare. These general goals include, among

others, the following purposes:

(a) to maintain and reestablish physical and visual public access to and along thewaterfront;

(b) to promote a greater mix of uses in waterfront developments in order to attract thepublic and enliven the waterfront;

(c) to encourage water dependent uses along the City's waterfront;

(d) to create a desirable relationship between waterfront development and the water'sedge, public access areas and adjoining upland communities;

(e) to preserve historic resources along the City's waterfront; and

(f) to protect natural resources in environmentally sensitive areas along the shore.

According to Chapter 2 of the zoning regulation, a waterfront block or waterfront

zoning lot is a block or zoning lot in the waterfront area having a boundary at grade

coincident with or seaward of the shoreline. For the purposes of this Chapter:

(a) a block within the waterfront area shall include the land within a street that is notimproved or open to the public, and such street shall not form the boundary of ablock;

(b) a block within the waterfront area that abuts a public park along the waterfront shallbe deemed to be part of a waterfront block; and

(c) a zoning lot shall include the land within any street that is not improved or open tothe public and which is in the same ownership as that of any contiguous land.

The provisions of this Chapter shall not be deemed to supersede or modify the

regulations of any State or Federal agency having jurisdiction on affected properties.

It is noted that the subject’s two existing zoning lots and the Washington Street

roadbed may be merged. To merge a zoning lot an owner of the properties files a notice

of zoning lot merger with the New York City Department of Finance. The requirements

for a lot merger are as follows:

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1) Completed application for Merger2) Deed on record showing common ownership. (If the deed lacks a metes and bounds description

but refers only to a filed map, please provide a current metes and bounds description, prepared bya licensed surveyor.)

3) Outstanding taxes, charges or tax liens for prior tax years must be satisfied.4) Real estate taxes for the current year must be up-to-date.5) Payment of fees6) Merging of exempt parcels with non-exempt parcels is not allowed.

There are no additional requirements in a waterfront area. This process is not

viewed at presenting undue risk to a developer.

The subject property is mapped in an M3-1 zoning district and major regulations of

this district in conjunction with the waterfront area district are presented on the following

pages.

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Permitted Uses: M3-1

Convenience retail or service establishments such as: bakeries, provided that floor areaused for production shall be limited to 750 square feet per establishment, barber shops,beauty parlors, drug stores, dry cleaning limited to 2,000 square feet of floor area perestablishment; eating or drinking establishments, including those which provide outdoortable service or have music for which there is no cover charge and no specifiedshowtime, and those which have accessory drive-through facilities; food stores,including supermarkets, grocery stores, meat markets, or delicatessen stores, hardwarestores, laundry establishments, hand or automatic self-service, liquor stores, postoffices, shoe or hat repair shops, stationery stores, tailor or dressmaking shops, varietystores, limited to 10,000 square feet of floor area per establishment; offices, business,professional including ambulatory diagnostic or treatment health care, or governmental;veterinary medicine for small animals; antique stores, art galleries, commercial, artists'supply stores, automobile supply stores, with no installation or repair services; banks,including drive-in banks; bicycle sales, book stores, candy or ice cream stores, carpet,rug, linoleum or other floor covering stores, limited to 10,000 square feet of floor areaper establishment; cigar or tobacco stores, clothing or clothing accessory stores, limitedto 10,000, square feet of floor area per establishment; dry goods or fabrics stores,limited to 10,000 square feet of floor area per establishment; eating or drinkingestablishments with entertainment/musical entertainment, but not dancing, with acapacity of 200 persons or fewer; florist shops, frozen food lockers, furniture stores,limited to 10,000 square feet of floor area per establishment; furrier shops, gift shops,interior decorating establishments, provided that floor area used for processing,servicing or repairs shall be limited to 750 square feet per establishment; jewelry or artmetal craft shops, leather goods or luggage stores, photographic equipment or supplystores, photographic studios; newsstand, public service establishments; wholesaleestablishments with not more than 1,500 square; amusements, including billiard parlorsor pool halls, bowling alleys, limited to not more than 16 lanes per establishment, modelcar hobby center, including racing, limited to not more than 8,000 square feet of floorarea per establishment; theaters -in order to prevent obstruction of street areas, a newmotion picture theater, in a new or existing building, shall provide a minimum of foursquare feet of waiting area within the zoning lot for each seat in such theater (requiredwaiting space shall be either in an enclosed lobby or open area that is covered orprotected during inclement weather and shall not include space occupied by stairs orspace within 10 feet of a refreshment stand or of an entrance to a public toilet), ; publicparking garages or public parking lots with capacity of 150 spaces or less; children'samusement parks, provided that the total area of the zoning lot shall not exceed 10,000square feet and that no amusement attractions shall be located within 20 feet of aResidence District boundary, circuses, carnivals or fairs of a temporary nature, golfdriving ranges, miniature golf courses, outdoor roller skating rinks, outdoor skateboardparks, provided that the total area of the zoning lot, excluding the area used foraccessory off-street parking spaces, shall not exceed two acres, and provided furtherthat temporary enclosure of the skating runs, such as air supported structures, shall notbe permitted, outdoor skating rinks; bicycle rental and repair shops; depositories forstorage of office records, microfilm or computer tapes, or for data processing.

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Permitted Uses: Waterfront Area

Waterfront-Enhancing (WE) uses include: art galleries, non-commercial, libraries,museums and schools; community center; outdoor ice skating rinks, playgrounds orprivate parks; non-commercial recreation centers; outdoor tennis courts; transienthotels; antique stores, commercial art galleries; artist supply stores, automotive supply;banks including drive-in; bicycle sales; book, candy, ice cream, cigar and tobaccostores; clothing or clothing accessory stores, limited to 10,000 square feet of floor areper establishment; eating or drinking establishments with entertainment/musicalentertainment, but not dancing, with a capacity of 200 persons or fewer; cateringestablishments and banquet halls; eating or drinking places, without restrictions onentertainment or dancing but limited to location to hotels; eating or drinkingestablishments without entertainment or dancing; amusement establishments includingarcades, children’s amusement parks with no limitation on floor area per establishment;animal exhibits; ferris wheels or similar open midway attractions.

Height, Area and Bulk Requirements

M3-1 Waterfront AreaMaximum Floor Area Ratio (FAR): 2.00 2.00Maximum Base Height: 60 feet or 4 stories 60 feet or 4 stories, with a

maximum building height of110 feet after a 15 footsetback

Minimum Initial Setback: 20 feet – narrow street15 feet – wide street

20 feet – narrow street15 feet – wide street

Minimum Lot Area: None None

Minimum Yard Requirements

Front: NoneSides: None; however, if an open area extending along a side lot

line is provided, it shall be at least 8 feet wide.Rear: 20 feet

Off-Street Parking Requirements: Manufacturing or Commercial Use – one space for each1,000 sq. ft. of floor area

Places of Assembly –i.e. Banquet Hall – one space per 8persons

Retail Use – food stores - one space for each 200 sq. ft. offloor area; general retail or service (including cateringestablishments) - one space for each 300 sq. ft. of floor area

Commercial Amusements – one space for each 500 sq. ft. oflot area

If the above calculations result in 15 or fewer parkingspaces, parking is not required.

It should be noted that in high density areas such as the subject location,

developers tend to provide only the minimum required parking because there is low

demand for parking as a result of high pedestrian traffic and access to mass transit.

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It is noted that any change from one as-of-right use 20 to another does not trigger a

prolonged approval process or present risk.

The following chart includes a breakdown of the land and building areas

achievable (in terms of FAR21) on the Replacement Property (assuming the properties are

treated as one zoning lot), Washington Street Roadbed, Water Meter Testing Facility and

the DOT Paint Shed (as separate zoning lots) as available to their highest and best use

under the M3-1 zoning regulations. This assumes the Washington Street Roadbed was

assigned an M3-1 zoning.

Replacement

Property

Larger Parcel

Washington

Street Roadbed

Water Meter

Testing Facility

Block 7, part of Lot 21

DOT Paint Shed


Total Land (Sq. Ft.) 37,617 11,170 10,860 15,587

Max GBA Permitted (Sq. Ft.) 23,540 5,540 9,585 7,780

Sq. Ft. Required per Parking Space 300 300 300 300

Number of Parking Spaces Required 78 18 32 26

Waive spaces – Existing Water Meter Testing Facility 32 N/A 32 N/A

Required Spaces, less Spaces Waived 46 18 0 26

Land Area Required for Parking (Sq. Ft.) 13,800 5,400 N/A 7,800

Total Land Area Required for Building & Parking (Sq. Ft.) 37,340 10,940 10,860 15,580

It is noted that the Water Meter Testing Facility site does not have any on-site

parking but is not considered a non-conforming use.22 It should also be noted that the

20 As-of-right DevelopmentAn as-of-right development complies with all applicable zoning regulations and does not require any discretionary action bythe City Planning Commission or Board of Standards and Appeals. Most developments and enlargements in the city are as-of-right. (Source: New York City Department of Planning, Zoning and Land Use (ZOLA) website)21 Floor Area Ratio (FAR)"Floor area ratio" is the total floor area on a zoning lot, divided by the lot area of that zoning lot. If two or more buildings are locatedon the same zoning lot, the floor area ratio is the sum of their floor areas divided by the lot area. (For example, a zoning lot of 10,000square feet with a building containing 20,000 square feet of floor area has a floor area ratio of 2.0, and a zoning lot of 20,000 squarefeet with two buildings containing a total of 40,000 square feet of floor area also has a floor area ratio of 2.0). (Source: New YorkCity, Department of City Planning zoning text.)22 Non-conforming, or non-conformityA "non-conforming" use is any lawful use, whether of a building or other structure or of a zoning lot , which does not conform toany one or more of the applicable use regulations of the district in which it is located, either on December 15, 1961 or as a result ofany subsequent amendment thereto. A non-conforming use shall result from failure to conform to the applicable district regulationson either permitted Use Groups or performance standards. A non-conformity is a failure by a non-conforming use to conform toany one of such applicable use regulations. However, no existing use shall be deemed non-conforming , nor shall a non-conformity be deemed to exist, solely because of any of the following:(a) the existence of less than the required accessory offstreet parking spaces or loading berths; (b) the existence of non-conformingaccessory signs ; or (c) the existence of conditions in violation of the provisions of either Sections 32-41 and 32-42, relating toSupplementary Use Regulations, or Sections 32-51 and 32-52 relating to Special Provisions Applying along District Boundaries, orSections 42-41, 42-42, 42-44 and 42-45, relating to Supplementary Use Regulations and Special Provisions Applying along DistrictBoundaries.

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adjacent property (Water Meter Testing Facility) has used the Washington Street

Roadbed for parking. This has no implication for the future uses of the site as it creates

no rights or obligations for future owners of either property. Despite the fact that the

Washington Street Roadbed was being used for parking and was fenced off, it is currently

a mapped street and could not have been used to satisfy on-site parking requirements for

an adjacent property. For the site, as improved, any as-of-right use within the M3-1

would also not be required to provide parking. If the site were vacant, any new

development would require parking according to use.

Any planned construction that will create a new building, or will result in a

change of use, egress, or occupancy for an existing building, a new or amended

Certificate of Occupancy is necessary. A final Certificate of Occupancy will be issued

when the completed work complies with the submitted plans and applicable laws, all

paperwork is completed, all necessary approvals have been obtained from other

appropriate City agencies, all fees owed to the Department are paid, and all relevant

violations are resolved. A new building cannot be legally occupied until either a final or

a temporary Certificate of Occupancy has been issued. Any as-of-right use is not

anticipated to require a prolonged process for the issuance of a Certificate of Occupancy.

Over the past several years, sections of DUMBO have been rezoned south of John

Street at the east side of the Manhattan Bridge and south of Water Street along the west

side of the Manhattan Bridge (last rezoning effective June 10, 2009). These areas were

up-zoned to permit residential uses within manufacturing-zoned areas. Many of the

former industrial loft/manufacturing buildings have been converted to include either

residential or office development. This up zoning helped meet the growing demand for

residential and office uses in this market.

Based on neighborhood conformity a rezoning to C6-2A or R8A is a likely

consideration. The C6-2A Commercial District permits a wide range of commercial uses.

Residential uses are permitted based on an R8A Residential District equivalent. C6-2A is a

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contextual district with maximum building heights. We have also considered an R8A zoning

district. The following are the zoning regulations under the R8A and C6-2A zoning districts.

C6-2A and Waterfront Area Major Regulation and Uses

Permitted Uses: C6-2ATransient accommodations, retail and service establishments; offices (business &professional); C6 districts are designed to provide for a wide range of retail,office, eating or drinking establishments with entertainment/musicalentertainment, but not dancing, with a capacity of 200 persons or fewer; publicservice establishments; wholesale establishments; amusements (billiard parlorsetc.); theaters; large retail establishments (i.e. department stores); custommanufacturing establishments; large entertainment facilities (i.e. bowling alleys,eating or drinking establishments with entertainment and a capacity of more than200 persons, or establishments of any capacity with dancing.

Quality housing; multi-family housing, with FAR bonus with InclusionaryHousing Program.

Zoning: C6-2A Waterfront Area

Maximum Commercial FAR: 6.0 6.0

Maximum Residential FAR: 6.02; increase in FAR withInclusionary Housing Program bonus

6.02

Minimum Lot Area: 1,700 sq. ft.

Minimum Lot Width: 18 feet

Minimum Required Open Space Ratio:

Maximum Height of Front Wall: 85 feet or 6 stories; whichever is less

Sky planeNarrow street - 2.7 to 1Wide street - 5.6 to 1

Lot Coverage of Towers on smallzoning lots:Area of zoning lot – 10,501 to 11,500square feet – 49% lot coverage

Min. /Max. Base Height:60 ft./85 ft.Max. Heights of Buildings:120 feet

Maximum Lot Coverage:70%


Minimum Yard Requirements

Front: NoneSides: 8 feetRear: 20 feet

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C6-2A and Waterfront Area Major Regulation and Uses

(continued)

Off-Street Parking Requirements:Commercial Use – one space for each 1,000 sq. ft. of floor area

Retail Use – food stores - one space for each 200 sq. ft. of floor area; general retailor service (including catering establishments) - one space for each 300 sq. ft. offloor area

Commercial Amusements – one space for each 500 sq. ft. of lot area

R8A and Waterfront Area Major Regulation and Uses

Permitted Uses: R8AQuality housing; multi-family housing, with FAR bonus with InclusionaryHousing Program.

Zoning: R8A Waterfront Area

Maximum Commercial FAR: N/A N/A

Maximum Residential FAR: 6.02; increase Inclusionary Housingdesignated area bonus

6.02

Minimum Lot Width: 18 feet

Maximum Height of Front Wall: 85 feet or 6 stories; whichever is less

Sky planeNarrow street - 2.7 to 1Wide street - 5.6 to 1

Lot Coverage of Towers on smallzoning lots:Area of zoning lot – 10,501 to 11,500square feet – 49% lot coverage

Min. /Max. Base Height:60 ft./85 ft.Max. Heights of Buildings:120 feet

Maximum Lot Coverage:70%


Minimum Yard RequirementsFront: NoneSides: NoneRear: 30 feet

Off-Street Parking Requirements: 40% of the units (1 space per every 2.5 units)

The Uniform Land Use Review Procedure (ULURP) establishes a

standardized procedure whereby applications affecting the land use of the city would

be publicly reviewed. As per the City Charter, actions requiring a Uniform Land Use

Review Procedure (ULURP) are: Changes to the City Map, Mapping of subdivisions

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or platting of land into streets, avenues or public places, Designation or change of

zoning districts, Special Permits within the Zoning Resolution requiring approval of

the City Planning Commission (CPC), Site selection for capital projects, Revocable

consents, requests for proposals and other solicitations or franchises, and major

concessions, Improvements in real property the costs of which are payable other than

by the City, Housing and urban renewal plans and project pursuant to city, state and

federal laws, Sanitary or waterfront landfills, Disposition of city owned property, and

Acquisition of real property by the city. The Charter also established mandated time

frames within which application review must take place. Key participants in the

ULURP process are now the Department of City Planning (DCP) and the City

Planning Commission (CPC), Community Boards, the Borough Presidents, the

Borough Boards, the City Council and the Mayor.

The following is a flow and time chart of the Uniform Land Use Review

Procedure (ULURP) process.

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We have spoken with the Director of the Brooklyn Office of the Department of

City Planning to gain insight into a hypothetical change in zoning of the subject site.

Through this conversation we obtained an overview of the process that a private

developer must undertake prior to certification of a Uniform Land Use Review Procedure

(“ULURP”) application, which commences the formal land use review process. We also

obtained information regarding the ULURP process itself. We were informed that a

developer initially submits basic information concerning the proposed project facilitated

by the rezoning, as well as its land use setting to City Planning. This is followed up with

submission of more detailed information including a pre-application statement and

relevant maps, plans, and drawing. During the pre-ULURP phase, City Planning does not

decide the merits of the proposed project and associated changes in zoning, but rather

considers how the project relates to surrounding land use (i.e., conformity of bulk and

height), the rationale of the project in term of its compatibility and how it fits into the

neighborhood, and whether the requested zoning makes sense in terms of land use and

zoning policy. City Planning can provide insight to the developer into the needs and

issues of the neighborhood and encourages the developer to reach out to the Community

Board(s) affected by the project. The pre-ULURP process is fluid, the developer may

modify its original project plans several times either of its own accord or in response to

City Planning or community comments and concerns. This pre ULURP process can take

as little as a few months or several years; depending on the issues raised by this initial

outreach and the developer’s response to them. There may be instances in which the

developer either decides not to proceed with the project or to modify it substantially to

address the anticipated concerns. If the project is to move forward in the process,

Department of City Planning must certify, that the ULURP application is complete,

which includes the application and all related documents, plans and environmental

review. The complexity of environmental review and, in particular, the need in some

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cases to prepare an Environmental Impact Statement can significantly alter the timetable

for ULURP certification.

Certification commences the review of the application on its merits; a decision by

City Planning that the application is complete and ready for review does not constitute a

determination that the project should be approved. The City Charter mandated ULURP

procedure is a 7 month public review and approval process (please refer to previously

presented flow chart). By the l50th day of the process following advisory review by the

Community Board and Borough President, the City Planning Commission either

approves, modifies or disapproves the application. Disapprovals of zoning changes are

final. If the application is approved, or approved with modifications it is filed with the

City Council which may either vote to approve, approve with modification or disapprove.

The Council acts within 50 days, but this time frame is extended to 65 days if the Council

proposed modifications prior to final action. The mayor may veto the Council action, and

the Council may override the Mayor's veto by a 2/3 vote; however, vetoes and overrides

are rare. Once approval is in place, the developer may submit the plans to the City

Buildings Department for approval. The length of the Buildings Department process is a

function of the complexity of the plans, and an iterative process of objections and

modifications to drawings to comply both with code and zoning issues is commonplace;

however, unlike the ULURP process, which allows the decision makers considerable

discretion with regard to whether approve a zoning application, the Buildings Department

process is ministerial in nature.

The Director of the Brooklyn Office of the Department of City Planning provided

insight into situations where the approval process can become prolonged and contentious.

The development project opposite the Empire Stores/Tobacco Warehouse property at 60

Water Street at Dock Street is one such example. In 2004 the initial proposed residential

project was withdrawn. At issue were the community's concerns about the views of the

Brooklyn Bridge and the open space. Five years later (2009), the City Council finally

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approved a l7-story residential tower with a 300-seat school. The scaled down

improvement included a narrow tower that would not obscure the view of the bridge.

Construction finally began in the summer 2012, following litigation challenging the

legality of the approvals.

Another prolonged proposed development is the Domino Sugar site in

Williamsburg, Brooklyn. It went through a lengthy and contentious public review process

that resulted in a modified project being approved by the City Planning Commission and

City Council in 2009. The modifications included reduction in building heights and other

changes to the site plan. However, the site now has a new developer who may resubmit

project plans with major modifications. The original version of the project was also the

subject of litigation.

As evident, the process to change zoning may be prolonged and increases the risk

for a proposed project with a prerequisite of a zoning change.

The following is our analysis of the subject property in terms of FAR for the

Larger Parcel, Water Meter Testing Facility, DOT Paint Shed site and the Washington

Street roadbed assuming that the roadbed were assigned an C6-2A or R8A zoning by the

City of New York and the other two sites were rezoned to C6-2A/R8A (FAR 6.02).

Development Potential Under C62A/R8A Rezoning

Replacement

Property

Larger Parcel

Washington

Street Roadbed

Water Meter

Testing Facility


DOT Paint Shed


Total Land (Sq. Ft.) 37,617 11,170 10,860 15,587

Maximum FAR 6.02 6.02 6.02 6.02


Parking Required (% of Units) 40% 40% 40% 40%


Average Size of Parking Space 300 300 300 300

Land Area Required for Parking (Sq. Ft.) 27,300 8,100 11,400 7,800

* Under the current zoning code, structured parking would not be considered part of FAR as long it does not exceed a height

of 23 feet. Since the parking would be located at grade level for this potential development, it would not be considered part

of FAR.

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The subject Washington Street roadbed is located adjacent to the Brooklyn Bridge

Park and the properties located directly adjacent to the subject property are located in the

M3-1 zoning district along the waterfront of the East River and M1-2 / R8A and C6-2A

surrounding the subject property. Based on the existing waterfront zoning and to maintain

conformity, it is highly likely that the City of New York would assign an M3-1 zoning. With

the three parcels zoned M3-1 it is reasonable to assume that a private developer would request

a zoning lot merger of the three parcels. This process does not present an undue risk.

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HIGHEST AND BEST USE

Highest and Best Use 23

“The reasonably probable and legal use of vacant land or an improved property, that is

physically possible, appropriately supported, financially feasible, and that results in the highest

value. The four criteria the highest and best use must meet are legal permissibility, physical

possibility, financial feasibility, and maximum productivity. Alternatively, the probable use of

land or improved property, specific with respect to the user and timing of the use, that is

adequately supported and results in the highest present value.”

To determine the highest and best use of the site, we have considered the physically

possible, legally permitted, economically feasible and maximally productive uses of the

subject property both as vacant and as improved.

LARGER PARCEL

Highest and Best Use of Larger Parcel, As Vacant 24

“Among all reasonable, alternative uses, the use that yields the highest present land

value, after payments are made for labor, capital and coordination. The use of a property

based on the assumption that the parcel of land is vacant or can be made vacant by

demolishing any improvements.”

As vacant, the determination of the potential development of a site as one zoning lot or

multiple zoning lots does not have an impact on the analysis since the same FAR is permitted

under both scenarios.

Legally Permitted

The subject Water Meter Testing Facility and the DOT Paint Shed sites are mapped

in an M3-1 zoning district within a Waterfront Area. For our analysis we have assumed that

the City of New York would assign an M3-1 zoning to the Washington Street Roadbed. The

legally permitted broad category uses include non-noxious industrial uses; offices;

23 The Dictionary of Real Estate Appraisal – Fifth Edition, Appraisal Institute, Chicago, IL, 2010, p. 93.24 Ibid., p. 93.

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convenience stores, retail and service establishments (certain users limited to 10,000± square

feet per establishment); amusement (i.e. billiard parlor, pool halls, bowling alley, etc.);

transient hotel; eating and drinking establishments, with and without entertainment/musical

entertainment (dancing limited to location in a hotel); catering establishments and banquet

halls; outdoor recreation (i.e. skating rink, driving range, etc.); art galleries; antique stores; and

museums. The subject’s M3-1 zoning with an FAR of 2.0 and the Waterfront Area

encourages a lower sky plane and retains a visual corridor to the Brooklyn Bridge Park,

the bridges (Brooklyn and Manhattan) and the East River waterfront.

Surrounding uses to the subject on Plymouth and Washington Streets include

renovated 1- to 15-story loft buildings that have been converted to commercial office space,

commercial retail or luxury residential on a rental or condominium form of ownership. A new

construction site on Water Street opposite the Empire Stores and Tobacco Warehouse site is

underway for a school, residential apartments and retail (60 Water Street).

The permitted broad categories of industrial; offices; convenience stores, retail and

service establishments; eating and drinking establishments; catering establishments and

banquet halls; outdoor recreation and amusement; art galleries; antique stores; and museums

are likely uses for the subject site.

Over the past several years, sections of DUMBO have been rezoned south of John

Street along the east side of the Manhattan Bridge and south of Water Street along the

west side of the Manhattan Bridge (last rezoning effective June 10, 2009). These areas

were up-zoned to permit residential uses within manufacturing-zoned areas. Many of the

former industrial loft/manufacturing buildings have been converted to include either

residential, commercial or office development. This up zoning addressed the lack of

demand for the existing stock of manufacturing and loft buildings in the area and the

reuse of the buildings to meet the growing demand for residential, commercial and office

uses in this market.

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The subject property is located in the DUMBO section of Brooklyn, which is

comprised of the M3-1 zoning district along the waterfront of the East River and M1-2 / R8A

and C6-2A surrounding the subject property. Within the vicinity of the subject property,

the Manufacturing districts have predominately been up zoned to include the uses and

regulations of the R8A zoning or the commercial uses of the C6-2A. All of these zoning

changes have occurred south of Water, Plymouth and John Streets. The contextual

quality housing regulations are mandatory under the R8A zoning and permitted uses are

multi-family housing. Permitted uses for the C6-2A district include the office, retail and

amusement uses already included in the M3-1 zoning, but also include large retail

establishments (i.e. department store), large eating and drinking establishments with

entertainment and a capacity of more than 200 persons.

Based on the principle of conformity within a neighborhood, it is likely that a

private developer of the subject property may consider rezoning the subject site to

accommodate a residential and/or commercial office/retail development.

In the zoning section of this report, we have summarized the permitted uses and

regulations for the C6-2A and R8A zoning districts. We have also presented a flow chart

of the process and time frame to achieve a rezoning for a project. It is noted that a project

based on a change in zoning has a high risk level as opposed to a project based on the

“as-of-right” uses within its zoning district that inherently has nominal risk.

Since Superstorm Sandy, the subject has been mapped in the FEMA Post Hurricane

Sandy Advisory Base Flood Elevation Map 407317 and is within the Special Flood Hazard

Area (SFHA). This area is where the National Flood Insurance Program’s (NFIPs) Floodplain

Management Regulations must be enforced and the area where the mandatory purchase of

flood insurance applies. All development, including buildings and other structures, is

subject to construction regulations if it occurs within a SFHA. Any new structure or

structure that is substantially improved or substantially damaged by any cause is subject

to floodplain development regulations. The subject site’s proximity to the East River has

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a negative influence on the site in terms of building design challenges and these

burdensome restrictions increase the cost of construction and create additional risk to a

project.

The DOT Paint Shed Facility site is located under the Manhattan Bridge. The New

York City Department of Transportation has confirmed that they do not have any specific

regulations or height restrictions on building under bridges and deal with development under

bridges on a case-by-case basis. The height of the bridge over the replacement property

has been reported by the DOT to be approximately 115 feet.

Physically Possible

The physically possible uses are determined by the size, topography and configuration

of the subject site. The subject property is basically a level, interior parcel containing 243.72±

feet of frontage on the north side of Plymouth Street and 147.52± feet along the west boundary

of the subject Washington Street Roadbed, which abuts the Brooklyn Bridge Park, with an

aggregate land area of 37,617± square feet. The subject’s extensive street frontage provides

adequate access and exposure to the site. The subject’s land area size is sufficient to provide a

positive attribute for a development site in terms of design potential. The subject land parcel

is very irregular in shape and its configuration does present development challenges in terms

of placement of potential improvement on the site. The subject’s most eastern site (DOT Paint

Shed) is under the Manhattan Bridge and the Meter Testing Facility site in partially in the

shadows of the bridge. We have been informed that the bridge has a height at the subject’s

location of 115± feet. The New York City Department of Transportation has confirmed that

they do not have any specific regulations or height restrictions on building under bridges and

deal with development under bridges on a case-by-case basis. The proximity of the bridge

presents major design challenges for the site. The bridge and the configuration of the site

directly hinder the utility of the site in terms of layout and design. The proximity of the bridge

requires a design that optimizes views of the park and river, while at the same time

minimizing visual exposure to the bridge structure and footings. Another design challenge is

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the noise level the bridge generates from overhead vehicles and how it can be diminished

(construction materials) or externally camouflaged (i.e. landscape including running water

foundation).

The subject is adjacent at its north boundary to the Brooklyn Bridge Park and the East

River at the north boundary of the park. To the west of the subject is the Brooklyn Bridge.

The subject is situated at the east end of the park and there is an entrance trail that starts a

Plymouth Street that abuts the southwest corner of the subject Washington Street Roadbed

site. There is also a pedestrian trail at Adams Street just east of the DOT Paint Shed site that

provides similar access to the park. The open space of the park affords visual access in a

westerly direction to the East River and the Manhattan skyline. Although the proximity of the

park entrance provides additional pedestrian foot traffic for the site, the bridge structure is

massive and overshadows the site.

As previously stated in the “Property Description” section of this report, the subject’s

proximity to the East River has a negative influence on the site as was evident during

Superstorm Sandy in October 2012. During this superstorm, the East River at this location

overflowed and engulfed the subject site with four to five feet of water. The stigma of a site

in a floodplain increases the risk of a project as it reduces the potential use of a site and

the pool of potential users.

The subject site’s physical characteristics do present some major design and

development challenges stemming from its proximity to the Manhattan Bridge and the

potential for flooding from the East River. However, overall the subject parcel has

sufficient utility to support the permitted uses under its M3-1 zoning. Furthermore, if the

subject site were rezoned to C6-2A commercial zoning district or R8A residential zoning

district, the subject site can support the discussed likely permitted uses within these

zoning districts. It is noted that the subject’s physical and location influences have a

direct bearing on the achievable for the site.

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Financially Feasible

The feasible uses that are legally permissible and physically possible under the

current M3-1 and Waterfront area zoning regulations include industrial, office and

commercial retail uses; including eating and drinking establishments, amusement and

recreation. We have also considered the potential to rezone the subject site to R8A and

C6-2A. The feasible uses under the R8A zoning are residential multi-family apartment

units, on a rental or condominium ownership basis. The feasible uses for the C6-2A

district include the office and retail uses already included in the subject M3-1 and

Waterfront area regulations, but also include large retail establishments (i.e. department

store) and large eating and drinking establishments with entertainment and a capacity of

more than 200 persons.

The subject property is located within the DUMBO section of Brooklyn, where there

is a strong demand for commercial and residential uses. The analysis of financial feasibility

will focus on which potential uses are likely to produce an income (or return) equal to or

greater than the amount needed to satisfy operating expenses, financial obligations, and capital

amortization of the investment. A crucial element of this analysis is the timing for a specific

use including when the improvements would be built and the future expectations of

occupancy and rent levels.

To this goal, we estimated the future gross income that can be expected from each

use. Vacancy and collection losses and operating expenses are then subtracted from each

gross income to obtain the likely net operating income from each use. A rate of return on the

invested capital was then calculated for each use. If the net revenue capable of being

generated for a use is sufficient to satisfy the required market rate of return on the investment,

the use is financially feasible.

In the Income Capitalization Approach section of this approach, we have presented

support for our various conclusions of the key components for this analysis (please refer to

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comparable rentals, vacancy and collection loss, operating expenses, and rates of return

within the section).

A financial feasibility test was conducted for the uses permitted under the current

M3-1/Waterfront zoning as well as any proposed rezoning into the R8A or C62A zoning

districts.

The permitted uses tested include industrial, retail, office, and residential apartment.

Uses such as restaurant, catering, pool halls, billiards, etc. are included in the retail category.

The maximum buildable area for each type of use was estimated based on the type of

construction required for each and parking requirements.

Industrial uses require loading doors at grade with the majority of the building area

located on the ground floor. The second floors of typical industrial buildings include

ancillary office space; however, they typically do not contain industrial space. Therefore, a

feasibility analysis was conducted for an industrial building, which would be constructed

subject to the current parking requirements and all other zoning requirements under the M3-

1/Waterfront area districts. The following is the projected maximum buildable area and

grade level required for parking for the subject property, which meets the current zoning

requirements for an industrial building under the M3-1/Waterfront area.

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Estimate of Potential Maximum Building AreaBased on Zoning Parking Requirements – Industrial Use

Use IndustrialTotal Land 37,617Max GBA Permitted 28,915Max Achievable FAR 0.769

Square Feet of GBA per Space 1,000# of Parking Spaces Required 29Average Size of Parking Space (Sq. Ft.) 300

Land Area Required for Parking 8,700Total Land Area Bldg & Parking 37,615

Note: The maximum building area permitted takes into consideration

the parking required for the specific use. A larger building would

require additional parking, which cannot be accommodated by the

subject site. Therefore, this is the maximum building area permitted

on the site for this specific use.

The total subject land area of 37,617± square feet can accommodate an industrial

building containing 28,915± square feet of building area, which will require 29 parking

spaces. A structured parking could satisfy the parking requirement without reducing the

maximum allowable FAR for a new industrial development. However, industrial users place

a higher value on ground floor space for loading docks and storage as opposed to second

floor space. Second floor industrial space is not economically feasible because the current

achievable industrial rents are below the breakeven point required due to the additional

construction costs for upper level load bearing floors and for a means of transporting

materials to a second floor.

The following analysis indicates what the financially feasible rent would be for an

industrial building constructed at the subject site that is constructed based on the preceding

zoning requirements.

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Test of Financial Feasibility – Industrial Use

Construction Cost $96.77 /sq. ft. Building Size/FAR 28,915 Sq. Ft.

Land Cost $115.00 /sq. ft. Land Area Required for Parking 8,700 Sq. Ft.

Operating Expense Land Size 37,617 Sq. Ft.

Real Estate Taxes* $1.50 /sq. ft. % Bldg. Rented 100%

Insurance $1.00 /sq. ft. Concluded Market Rent $15.00 Sq. ft.

Structural Repairs & Reserves $0.25 /sq. ft.

Management & Professional Fees 3% of EGI

Current Overall Rate 7%

Normal Vacancy 5%

Calculations of Required Rent Size (Sq. Ft.) $ / Sq. Ft. $ Amount

Calculation of Total Cost

Construction Cost 28,915 x $ 96.77 = $2,798,105

Land Cost 37,617 x $115.00 = $4,325,955

Total Cost $7,124,060

Calculation of Feasibility Rent

Required NOI $7,124,060 x 7.0% = $ 498,684

Add Operating Expenses:

Real Estate Taxes 37,617 x $1.50 = $ 56,426

Insurance 28,915 x $1.00 = $ 28,915

Structural Repairs & Reserves 28,915 x $0.25 = $ 7,229

Subtotal Expenses $ 92,570

Management & Professional Fees $ 18,286

(NOI + Exp/(1 - Mgmt%) - NOI + Exp)

Total All Expenses $ 110,856

Effective Gross Income $ 609,540

Vacancy and Collection Loss $ 32,081

Potential Gross Income $ 641,621

Calculation of Required Rent for New Construction PGI ÷ Rentable Area

$641,621 ÷ 28,915 = $22.19

*Current real estate taxes based on land area.

Based on the trend over the past few decades to convert existing industrial and

industrial loft properties, an industrial development on the subject site is precluded given the

achievable rent and the cost of construction. The above analysis indicates the market-derived

industrial rent of $15.00 per square foot is below the required rent for new construction of

$22.19 per square foot; therefore, industrial use is not an economically feasible use of the

subject property.

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Retail uses in the subject area are all at grade level and do not contain upper floor

retail space. Therefore, any new construction retail use would be required at grade level, with

consideration to the parking requirements under the M3-1/Waterfront area districts. A

feasibility analysis was conducted for a retail building, which would be constructed subject to

the current parking requirements and all other zoning requirements under the M3-

1/Waterfront area districts. The following is the projected maximum buildable area and

grade level required for parking for the subject property, which meets the current zoning

requirements for a retail building under the M3-1/Waterfront area.

Estimate of Potential Maximum Building AreaBased on Zoning Parking Requirements – Retail Use

Use RetailTotal Land 37,617Max GBA Permitted 18,745Maximum Achievable FAR 0.50

Square Feet of GBA per Space 300# of Parking Spaces Required 62Average Size of Parking Space (Sq. Ft.) 300

Land Area Required for Parking 18,600Total Land Area Bldg & Parking 37,345

Note: The maximum building area permitted takes into consideration

the parking required for the specific use. A larger building would

require additional parking, which cannot be accommodated by the

subject site. Therefore, this is the maximum building area permitted

on the site for this specific use.

The total subject land area of 37,617± square feet can accommodate a retail building

containing 18,745± square feet of building area, which will require 62 parking spaces. A

structured parking could satisfy the parking requirement without reducing the maximum

allowable FAR for a new retail development. However, retail users and patrons place a

higher value on ground floor space for street access and visibility as opposed to second floor

space.

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The following analysis indicates what the financially feasible rent would be for a

retail building constructed at the subject site that is constructed based on the preceding zoning

requirements.

Test of Financial Feasibility – Retail Use


Land Cost $115.00 /sq. ft. Land Area Required for Parking 18,600 Sq. Ft.

Operating Expense Land Size 37,617 Sq. Ft.

Real Estate Taxes* $1.50 /sq. ft. % Bldg. Rented 100%

Insurance $1.00 /sq. ft. Concluded Market Rent $40.00 Sq. ft.



Current Overall Rate 5.8%

Normal Vacancy 5%



Construction Cost 18,745 x $147.89 = $2,772,198

Land Cost 37,617 x $115.00 = $4,325,955



Required NOI $7,098,153 x 5.8% = $ 411,693



Insurance 18,745 x $1.00 = $ 18,745

Structural Repairs & Reserves 18,745 x $0.25 = $ 4,686

Subtotal Expenses $ 79,857




Effective Gross Income $ 507,753


Potential Gross Income $ 533,424


$533,424 ÷ 18,745 = $28.46


The above analysis indicates the market-derived retail rent of $40.00 per square foot

is above the required rent for new construction of $28.46 per square foot; therefore, retail use

is an economically feasible use of the subject property.

Many of the former loft buildings in the subject area have been converted to office

use. Although many of the existing buildings do not contain parking, any new construction

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office building would require on-site parking, based on the M3-1/Waterfront area districts.

Many of the office buildings in the area with on-site parking contain lower-level parking

garages with street grade retail uses. However, these buildings are not of new construction

and predate the existing zoning code and were constructed prior to the current flood zone.

Any new construction office building at the subject location would not be able to be

developed with lower-level parking, due to its location proximate to the East River, and its

location within a major designated flood area. Since parking will be required at grade level,

any new construction can be developed above the grade level parking structure. As

previously discussed, retail uses in the subject area are located at grade level and an upper

floor retail use would not be viable in the subject market. Therefore, if the subject property

were developed with an office building, any new construction office development could not

contain grade level retail space.

A feasibility analysis was conducted for an office building, which would be

constructed subject to the current parking requirements and all other zoning requirements

under the M3-1/Waterfront area districts. The following is the projected maximum buildable

area and grade level required for parking for the subject property, which meets the current

zoning requirements for an office building under the M3-1/Waterfront area.

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Estimate of Potential Maximum Building AreaBased on Zoning Parking Requirements – Office Use

Use OfficeTotal Land 37,617Max GBA Permitted 75,234Max Achievable FAR 2.00

Square Feet of GBA per Space 1,000# of Parking Spaces Required 75Average Size of Parking Space 300Land Area Required for Parking Space* 22,500

Land Area Available for ParkingManeuverability and Ramps

37,617

Stories Required for Parking 1.00

* Under the current zoning regulations, structured parking would not

be counted toward the maximum allowable FAR under zoning as

long as the structured parking does not exceed a height of 23 feet.

Since the parking would be located at grade level for this potential

development, it would not be counted towards FAR.

The total subject land area of 37,617± square feet can accommodate an office

building containing 75,234± square feet of building area, which will require 75 parking

spaces.

The following analysis indicates what the financially feasible rent would be for an

office building constructed at the subject site that is constructed based on the preceding

zoning requirements.

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Test of Financial Feasibility – Office Use


Parking Cost $ 93.96 /sq. ft. Structured Parking Area 37,617 Sq. Ft/

Land Cost $115.00 /sq. ft. Land Size 37,617 Sq. Ft.

Operating Expense % Bldg. Rented 100%

Real Estate Taxes* $1.50 /sq. ft. Concluded Market Rent** $22.00 Sq. ft.

Insurance $1.00 /sq. ft.




Normal Vacancy 5%




Parking Cost 37,617 x $ 93.96 $ 3,534,493

Land Cost 37,617 x $115.00 = $ 4,325,955



Required NOI $28,458,765 x 7.35% = $ 2,091,719



Insurance 75,234 x $1.00 = $ 75,234

Structural Repairs & Reserves 75,234 x $0.25 = $ 18,809Subtotal Expenses $ 150,469




Effective Gross Income $ 2,311,534


Potential Gross Income $ 2,433,194


$2,433,194 ÷ 75,234 = $32.34


**Please refer to the Conclusion of Office Market Rents and Terms within the Income Approach section of this report.

The above analysis indicates the market-derived office rent of $22.00 per square foot

is below the required rent for new construction of $32.34 per square foot; therefore, office

use is not an economically feasible use of the subject property.

Many of the former loft buildings in the subject area have been converted to

residential use and there have been several new construction projects in the areas that are

zoned for residential development, including the R8A and C6-2A zoning districts. The

analysis of the subject property, under the hypothetical assumption that the subject property

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is vacant and available for redevelopment, is based on the assumption that a developer would

seek rezoning to either the R8A or C6-2A zoning district.

Although many of the existing buildings do not contain parking, any new

construction apartment building would require on-site parking, based on the zoning

regulations. Many of the residential buildings in the area with on-site parking contain lower-

level parking garages with street grade retail uses. However, these buildings are not of new

construction and predate the existing zoning code and were constructed prior to the current

flood zone. Any new construction residential building at the subject location would not be

able to be developed with lower-level parking, due to its location proximate to the East River,

and its location within a major designated flood area. Since parking will be required at grade

level, any new construction can be developed above the grade level parking structure. As

previously discussed, retail uses in the subject area are located at grade level and an upper

floor retail use would not be viable in the subject market. Therefore, if the subject property

were developed with a residential apartment building, any new construction residential

apartment development could not contain grade level retail space.

A feasibility analysis was conducted for a residential apartment building, which

would be constructed subject to the current parking requirements and all other zoning

requirements as if rezoned under the R8A of C6-2A zoning districts. The following is the

projected maximum buildable area and grade level required for parking for the subject

property, which meets the current zoning requirements for residential apartment building

under a proposed rezoning.

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Estimate of Potential Maximum Building AreaBased on Zoning Parking Requirements – Residential Apartment Use

Use Residential Apartment

Total Land 37,617

Max GBA Permitted 226,454

Max Achievable FAR 6.02

Average Unit Size 1,000

Average # of Units 226

Parking Required (% of Units) 40% (1 space/2.5 units)

# of Parking Spaces Required 91

Average Size of Parking Space 300

Land Area Required for Parking Space* 27,300

Land Area Available for ParkingManeuverability and Ramps

37,617

Stories Required for Parking 1.00

* Under the current zoning regulations, structured parking would not

be counted toward the maximum allowable FAR under zoning as

long as the structured parking does not exceed a height of 23 feet.

Since the parking would be located at grade level for this potential

development, it would not be counted towards FAR.

The total subject land area of 37,617± square feet can accommodate a residential

apartment building containing 226,454± square feet of building area, which will require 91

parking spaces.

The following analysis indicates what the financially feasible rent would be for a

residential apartment building constructed at the subject site that is constructed based on the

preceding zoning requirements.

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Test of Financial Feasibility – Residential Apartment Use


Parking Cost $ 93.96 /sq. ft. Structured Parking Area 37,617 Sq. Ft/

Land Cost $190.00 /sq. ft. Land Size 37,617 Sq. Ft.

Operating Expense % Bldg. Rented** 85%

Real Estate Taxes* $1.50 /sq. ft. Concluded Market Rent $38.00 Sq. ft.

All Other Operating Expenses 25% of EGI


Normal Vacancy 5%




Parking Cost 37,617 x $ 93.96 $ 3,534,493

Land Cost 37,617 x $190.00 = $ 7,147,230



Required NOI $74,072,991 x 5.25% = $ 3,888,832



All Operating Expenses @ 25% $ 1,315,086

Total All Expenses $ 1,371,512

Effective Gross Income $ 5,260,344


Potential Gross Income $ 5,537,204

Calculation of Required Rent for New Construction PGI ÷ Rentable Area**

$5,537,204 ÷ 192,486 = $28.77


** A proposed residential apartment building would have an efficiency ratio of 85%. Therefore, the rentable area is 192.486± sq. ft.

(226,454± sq. ft. of GBA x 85%).

The above analysis indicates the market-derived residential apartment rent of $38.00

per square foot is above the required rent for new construction of $28.77 per square foot;

therefore, residential apartment use is an economically feasible use of the subject property.

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Financial Feasibility – Condominium Ownership Apartment Use

With respect to the financial feasibility of an apartment building on a condominium

form of ownership, we have research the historical sellout rate of new construction or

renovated residential condominium offerings in DUMBO over the past several years and the

results are as follows:

Historical Residential Condominium Sales

100 Jay Street Year # of Units Sold # of Months Units/Month266 Total Units 2007 149 9 16.56

C of O 4/29/10 2008 23 12 1.92

2009 8 12 0.67

2010 11 12 0.92

2011 12 12 1.00

2012 19 12 1.58

2013 5 4 1.25

133 Water Street Year # of Units Sold # of Months Units/Month52 Total Units 2007

C of O 10/17/07 2008

2009

2010

2011

2012 18 12 1.50

2013 5 4 1.25

205 Water Street Year # of Units Sold # of Months Units/Month65 Total Units 2012 51 8 6.38

C of O 4/27/12 2013 4

206 Front Street Year # of Units Sold # of Months Units/Month31 Total Units 2007 36 6 6.00

C of O 5/10/07 2008 1 12 0.08

2009 2 12 0.17

2010

2011 3

2012 4 12 0.33

2013 1 4 0.25

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Historical Residential Condominium Sales(continued)

30 Main Street Year # of Units Sold # of Months Units/Month87 Total Units 2003 34 11 3.09

C of O 5/30/03 2004 7 12 0.58

2005 2 12 0.17

2006 2 12 0.17

2007 9 12 0.75

2008 5 12 0.42

2009 5 12 0.42

2010 7 12 0.58

2011 6 12 0.50

2012 6 12 0.50

2013 1 4 0.25

37 Bridge Street Year # of Units Sold # of Months Units/Month45 Total Units 2012 18 9 2.00

C of O 2/27/12 2013 0 4 0.00

50 Bridge Street Year # of Units Sold # of Months Units/Month56 Total Units 2004 41 4 10.25

C of O 3/29/04 2005 13 12 1.08

2006

2007

2008

2009

2010

2011

2012 3 12 0.25

2013 1 4 0.25

42 Main Street Year # of Units Sold # of Months Units/Month21Total Units 2003 8 2 4.00

C of O 1/16/04 2004 1 12 0.08

2005 1 12 0.08

2006 3 12 0.25

2007 3 12 0.25

2008 2 12 0.17

2009

2010

2011 3 12 0.25

2012

2013

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Historical Residential Condominium Sales(continued)


C of O 2/8/07 2007 5 12 0.42

2008 1 12 0.08

2009 2 12 0.17

2010 2 12 0.17

2011 3 12 0.25

2012 5 12 0.42

2013 1 4 0.2570 WashingtonStreet Year # of Units Sold # of Months Units/Month259Total Units 2005 43 5 8.60

C of O 8/2/06 2006 65 12 5.42

2007 34 12 2.83

2008 11 12 0.92

2009 5 12 0.42

2010 17 12 1.42

2011 19 12 1.58

2012 24 12 2.00

2013 14 4 3.50

79 Bridge Street Year # of Units Sold # of Months Units/Month37Total Units 2003 15 5 3.00

C of O 12/1/03 2004 2 12 0.17

2005 3 12 0.25

2006 2 12 0.17

2007 5 12 0.42

2008 1 12 0.08

2009 2 12 0.17

2010 13 12 1.08

2011 2 12 0.17

2012

2013 1 12 0.08


C of O 11/14/06 2007 8 12 0.67

2008 4 12 0.33

2009 3 12 0.25

2010 4 12 0.33

2011 9 12 0.75

2012 6 12 0.50

2013 1 4 0.25

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The data for these 12 condominium developments indicates that sales activity was

active prior to 2009, with diminished sellout after thereafter. In the more recent past,

2012 through 2013 to date, two small scale condominium apartment projects have been

completed and the individual units were available for sale. 205 Water Street is a luxury

condominium building developed by Toll Brothers City Living and contains 65 units,

with a total of 51 units sold (according to public records) during the 8 months of 2012

(6.38 units per month). However, there have not been any recorded sales during the first

quarter of 2013. It is noted that the website for this building currently has an

announcement that all units are sold. Assuming the balance of the unsold units are in

contract, then the project has a sellout average of 5.42 units per month. Another project,

37 Bridge Street, is a former turn of the century loft building that has been renovated to

luxury condominiums. It contains a total of 45 units and according to public records 18

units sold during 9 months 2012, or 2 units per month. During the first quarter 2013,

there have been no unit sales within this project according to public records, but the

website for this project reports 80% of the units have sold. The 80% is equal to 36 units,

resulting in an average of 3 units per month (with unit sales commencing in March 2012).

Both of these projects are situated east of the Manhattan Bridge.

In our analysis, we have estimated the subject site could accommodate 696±

apartment units. Using the sellout rate of 5.42± units per month for the 205 Water Street

luxury new condominium construction, the proposed 696± units for the subject would

take 10 years to sellout on a worst case scenario based on the premise that some years

will have more robust sales activity than others.

We have considered the fact that residential development requires a change in

zoning and the high level of risk associated with this process. Furthermore at this time, a

large scale residential development with a condominium form of ownership puts

additional risk on the project that eliminates the feasibility. Although the DUMBO

market exhibits some of the highest residential condominium sales price per square foot

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in Brooklyn, the sales activity of the residential condominiums is sluggish. Similar to the

rental market, the subject’s location and views are desirable to potential purchasers and

reduce risk to a certain degree. The property specific risk factor due to the proximity to

the river and potential for flooding has an additional risk. Added to this risk is that there

may be limits to the pool of potential DUMBO condominium buyers willing to consider

purchasing a property this close to the water. Based on this reasoning, we have not

considered a residential development on a condominium form of ownership as financially

feasible.

The subject DUMBO market is not an employment center nor does it contain an

exhibit/cultural center such as Barclay’s Center to attract regional visitors to the area. Due to

the lack of neighborhood influences, the demand for a hotel is not likely. It is noted that the

60 Water Street site originally proposed a hotel on the site which was withdrawn from

consideration. We have not considered a hotel to be among the financially feasible uses of the

subject property.

Communities that have outdoor amusement and recreation typically have an area

where there is a confluence of similar uses (i.e. tennis courts, skating rinks, driving ranges,

miniature golf, etc.) to create a destination for the public and an economically viable project

for a developer. Although the subject is adjacent to a park and waterfront, an outdoor

amusement/recreation use is not likely because the subject site is not sufficient in size to

support a multi-faceted center. Small scale recreation and amusement uses generally

produce a lower income than a recreation/amusement complex. We have not considered

an amusement or outdoor recreation use as financially feasible uses for the subject site.

Based on all of the above, we have determined that retail and residential rental

apartment uses are financially feasible for the subject property.

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Maximum Productivity

Of the financially feasible uses, the highest and best use is the use that produces the

highest residual land value consistent with the market’s accepted risk and with the rate of

return warranted by the market for that use given the associated risk.

In the income capitalization approach section of this report a residual discounted

cash flow models were completed for each of the indicated financially feasible uses.

Under this analysis a key element is the risk level of each of the uses. The use with the

least risk is retail because it is an as-of-right permitted use under the existing zoning and

is projected at one-story in height and such a development is not anticipated to have any

undue delay. Furthermore, retail use is in high demand in the subject’s submarket as

evidence by its current 7.2% vacancy rate, which is skewed by large (greater than 3,000±

square feet) blocks of available space. Local brokers report that the vacancy rate for

small retail units (less than 3,000± square feet) is much lower than the 7.2% because

these smaller units are in high demand and there is a limited supply available. The

subject’s location in a residential/commercial neighborhood abutting the Brooklyn Bridge

Park proximate to the Brooklyn Bridge and the East River attracts a greater pool of

potential users drawn by the exposure afforded by the park and the bridge and views of

the New York City skyline. The one risk factor is the subject’s proximity to the East

River and the uncertainty of future flooding as well as the additional operating costs (i.e.

insurance including mandatory flood insurance) and potential increased construction

costs due to possible stricter construction guidelines.

Residential use requires a change in zoning for the Water Meter Testing Facility

and DOT Paint Shed sites. The Washington Street Roadbed site could be assigned this

zoning by the City of New York but this assignment is viewed as having a lesser

probability than a M3-1 zoning. As previously discussed this process can be long and

contentious as evidenced by the protracted delays and revisions experienced by the 60

Water Street project (opposite the subject) that took well over 5-years to finally achieve

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approvals for a 17-story, 289-unit apartment building with a 300-seat school. Mitigating

the risk to some degree is the strong rental apartment market in the area. DUMBO

exhibits some of the highest rents in Brooklyn for all unit types. Furthermore, DUMBO

is one of the Brooklyn neighborhoods that have noteworthy rent appreciations. The

subject’s location abutting the Brooklyn Bridge Park, with views of the Brooklyn Bridge,

the East River and the Manhattan skyline are locational attributes deemed desirable by

market participants. Again, a risk factor that is not particularly tied to the use but to the

property itself is the proximity to the East River and the potential of flooding and the

costs (operating and construction) as previously discussed.

In the income capitalization section of this report we have presented supporting

documentation and the land residual models for the financially feasible uses. The

following are the indicated land values based on the productivity of the feasible uses.

Financially Feasible Use Indicated Residual Land Value

Multi-Tenant Retail (As-of-Right) $4,700,000.00Residential Rental Apartments (As if Rezoned) $2,400,000.00

For the highest and best use of the subject larger parcel as if vacant, we have

determined that the maximally productive use is a one-story retail building containing a gross

building area of 18,825±-square-foot building with on-site surface parking. This use satisfies

the local growing demand retail rental uses in the area.

Highest and Best Use of the Larger Parcel, as Improved 25

“The use that should be made of a property as it exists. An existing improvement

should be renovated or retained as is so long as it continues to contribute to the total market

value of the property, or until the return from a new improvement would more than offset the

cost of demolishing the existing building and constructing a new one.”

25 The Dictionary of Real Estate Appraisal – Fifth Edition, Appraisal Institute, Chicago, IL, 2010, p. 94.

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Under consideration is this analysis are whether the existing improvements on the

Water Meter Testing Facility site should be demolished and the site redeveloped, should the

existing use continue, or should the existing use be modified.

The subject property consists of a 37,617±-square-foot land parcel. The

following is a summary of each of the site characteristics of each of the subject parcels:

ParcelLargerParcel

WashingtonRoadbed Site

Water MeterSite

DOT Paint ShedSite

Land Area (Sq. Ft.±): 37,617 11,170 10,860 15,587Building Area (Sq. Ft.±) 0 0 9,585 0Frontage on Plymouth St. (Ft.) 243.72± 31.04± 102.25± 110.43±Plot configuration Very Irregular Slightly irregular

at southwestcorner

Triangular Very Irregular

The subject Water Meter Testing Facility site is improved with a one story plus

partial basement single tenant industrial/office building constructed circa 1988. The

building is constructed almost full to the lot and has a mostly triangular shape. This

parcel does not have any vehicle access to the small paved area at the rear of the site. It

is noted that the Water Meter Testing Facility site does not have any on-site parking and

any as-of-right use within the M3-1 would also not be required to provide parking since it

consists of an existing building. Under the New York City Zoning Resolution rules, a

developer would be allowed to maintain this degree of non-compliance.26 The subject

improvements cannot be expanded because parking would be required for any new space

by the Zoning Resolution. A new building containing two-stories or a greater floor area

is possible but the first floor area would be reduced to accommodate parking and the

income generating potential of any upper floors is less than that of the first floor. A

building as large as currently exists would not be permissible on this site due to required

26 Non-complying, or non-complianceA "non-complying" #building or other structure# is any lawful #building or other structure# which does not comply with any one ormore of the applicable district #bulk# regulations either on December 15, 1961 or as a result of a subsequent amendment thereto. A"non-compliance" is a failure by a #non-complying building or other structure# to comply with any one of such applicable #bulk#regulations.

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parking for new construction. The subject property is located in close proximity to the

Manhattan Bridge and as indicated in this statement of work for this appraisal report, the New

York City Department of Transportation retains a right of access to the Manhattan Bridge.

Therefore, the maximum lot coverage of any potential development of the subject property

would be affected by this restriction. Furthermore, the effect of the loss of any rights, any

associated use restrictions, and the adverse influence from the bridge (if any) must be

analyzed. Therefore, the existing improvements should not be demolished; the

improvements should be retained.

As previously shown, industrial use is not a financially feasible use in the

DUMBO market as many of the former industrial properties have been converted to

office and residential use. Therefore, a continued use as industrial is not likely. Offices

are another potential reuse of the building, however, this use was found not to be

financially feasible.

Given the subject’s location proximate to the park and residential and commercial

uses, retail, restaurant, and supermarket, uses are permissible uses under the current

zoning regulations that are reasonable for reuse of the building. The building can provide

smaller rentable areas since the subject property contains a sidewalk along the western

portion of the subject site that can provide access along the west elevation of the building

as well as access from Plymouth Street. In the analysis of the ground floor rent

comparables, typical ground floor unit sizes range between 1,000± and 6,500± square

feet. The subject building can be subdivided to units with smaller rentable area, which

are in greater demand in the local market.

In order to determine the highest and best use of the Water Meter Testing Facility

site, discounted cash flow analyses were performed for the property under three

scenarios: (1) retain the existing building and renovate it into retail use, or (2) demolish

the existing building and construct a new one-story retail building subject to the current

zoning regulations.

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The indicated residual land values for these two potential reuses for the subject

Water Meter Testing Facility are indicated as follows:

Type UseBuilding Area

Sq. Ft.±Indicated

Value

Retain Existing Building and Convert to Retail 9,585 $3,300,000.00Demolish and Redevelop with a New One-story Retail Building 5,275 $1,500,000.00

Based on these findings the maximally productive use of the subject Water Meter

Testing Facility is to renovate the existing building into a one-story retail building. The

proposed building would contain 9,585± square feet gross building area and could be

divided into several smaller retail units.

With potential reuse of the existing building to retail, a unity of use with the other

parcels is considered. The subject larger parcel as one zoning lot and as vacant can be

developed with 18,825± square feet of retail space but requires a total of 63± parking

spaces.

If the existing building improvements of the Water Meter Testing Facility site

were retained and the other two subject sites were to remain as separate zoning lots under

M3-1 zoning, then a larger retail development containing 23,540± square feet with 46±

parking spaces is possible as shown below:

Replacement

Property

Larger Parcel

Washington

Street Roadbed

Water Meter

Testing Facility


DOT Paint Shed


Total Land (Sq. Ft.) 37,617 11,170 10,860 15,587


Sq. Ft. Required per Parking Space 300 300 300 300


Waive spaces – Existing Water Meter Testing Facility 32 N/A 32 N/A

Required Spaces, less Spaces Waived 46 18 0 26

Land Area Required for Parking (Sq. Ft.) 13,800 5,400 N/A 7,800

Total Land Area Required for Building & Parking (Sq. Ft.) 37,340 10,940 10,860 15,580

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As shown, by retaining the Water Meter Test Facility building and retaining separate

zoning lots the property employs contiguity, unity of ownership and unity of highest and best

use.

This proposed development creates nominal risk to a private developer. Along the

waterfront of the East River in DUMBO, New York City has retained the M3-1 zoning. It has

been determined that New York City would likely assign an M3-1 zoning to the subject

Washington Street Roadbed to maintain conformity of land use. As proposed a developer

would not have any risk or undue delay due to zoning change. The size of the three retail

buildings can accommodate multiple units within the size range (under 3,000± square feet) in

demand within the DUMBO retail market.

Therefore, the value of the subject replacement property as improved and as three

separate zoning lots is as follows:

Replacement Property as SeparateZoning Lots and As Improved

IndicatedValue

Water Meter Testing Facility $3,300,000.00DOT Paint Shed $1,600,000.00Washington Street Roadbed $1,600,000.00Total Replacement Property $6,500,000.00

These findings indicate that the highest and best use of the subject Replacement

Property is to maintain three separate zoning lots, to retain the building on the Water

Meter Testing Facility site and convert this industrial building to a retail use, and develop

the other two subject sites with their own retail buildings. The maximally productive use

results in a value of $6,500,000.00.

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INCOME CAPITALIZATION APPROACH

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INCOME CAPITALIZATION APPROACH METHODOLOGY

The following steps were implemented in arriving at the value estimates of the fee

simple estate of the subject property, under the income capitalization approach:

1) The carrying charges were estimated and applied accordingly.

2) An absorption period was estimated for the rent-up period for the proposedsubject use(s).

3) Comparable data (rental rates, occupancy, operating costs, operating expenseratios, etc.) from similar property types was sought and applied in this analysis.

4) Information was obtained regarding the general trend of income and expenses.

5) Entrepreneurial incentive is included in the overall project yield rate and was notcalculated as a separate line item.

6) The net operating income at the end of the holding period is capitalized using theappropriate market derived rate. A transaction fee was deducted from theestimated amount of the reversion, since to realize this value, appropriatetransaction costs, (mortgage refinancing, half of the brokerage costs, legal fees,etc.) would be incurred.

7) In the discounted cash flow (DCF) method, the information was processed intocash flow estimates of revenues after deductions for the appropriate costs andexpenses.

8) An appropriate discount rate was chosen and applied to the cash flow stream. Thesum of the DCF stream equals the market value estimate of the subject property.

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ANALYSIS OF THE LOCAL APARTMENT MARKET

In order to estimate the appropriate market rental rate for the subject property as if

available for development under the C6-2A or R8A we have researched the comparable

apartment lease transactions within residential buildings that are blocks from the subject

property and consist of renovated former industrial buildings that have been converted to

residential buildings or new construction residential buildings. The following is our

independent survey of the immediate local market.

Comparable Asking Apartment Rents

Asking Available Leased Area Monthly Annual

No. Location on Type Rooms (± Sq. Ft.) Rent Rent/Sq. Ft.

1 70 Washington Street Now 2 bed / 3 bath 6 1,765 $14,000 $95.18

2 30 Main Street 2.5 bed / 2.5 bath 6 2,209 $11,000 $59.76

3 1 Main Street 2 bed / 2 bath 5 1,655 $ 7,500 $54.38

4 70 Washington Street 2 bed / 2 bath 5 1,267 $ 7,000 $66.30


6 1 Main Street 2 bed / 2 bath 5 1,414 $ 6,600 $56.01

7 220 Water Street 6/1/2013 2 bed / 2 bath 5 1,340 $ 6,400 $57.31

8 70 Washington Street 4/15/2013 2 bed / 2 bath 5 1,307 $ 6,200 $56.92



11 1 Main Street 1 bed / 1.5 bath 3.5 1,293 $ 5,600 $51.97

12 50 Bridge Street 4/1/2013 3 bed / 1 bath 5 1,500 $ 5,300 $42.40


14 65 Washington Street 2 bed / 2 bath 5 846 $ 4,450 $63.12

15 65 Washington Street 1 bed / 2 bath 3.5 909 $ 4,400 $58.09

16 85 Adams Street 4/1/2013 1 bed / 1 bath 3 875 $ 3,950 $54.17

17 220 Water Street 1 bed / 1 bath 3 768 $ 3,850 $60.16

18 99 Gold Street 4/15/2013 1 bed / 1.5 bath 3.5 1,384 $ 3,750 $32.51

19 99 Gold Street 4/15/2013 2 bed / 1 bath 4 877 $ 3,600 $49.26

20 99 Gold Street 5/1/2013 1 bed / 1 bath 3 823 $ 3,575 $52.13

21 220 Water Street 5/15/2013 1 bed / 1 bath 3 788 $ 3,550 $54.06

22 100 Jay Street Now 1 bed / 1 bath 3 791 $ 3,450 $52.34

23 100 Jay Street 12/23/2013 1 bed / 1 bath 3 800 $ 3,400 $51.00


25 70 Washington Street 4/8/2013 1 bed / 1 bath 3 725 $ 3,250 $53.79

26 100 Jay Street 1 bed / 1 bath 3 801 $ 3,250 $48.69


28 70 Washington Street Now 1 bed / 1 bath 3 710 $ 3,200 $54.08

29 100 Jay Street 5/1/2013 1 bed / 1 bath 3 557 $ 2,700 $58.17

Min: 557 $ 2,700 $32.51

Max: 2,209 $14,000 $95.18

Mean: 1,113 $ 5,072 $55.60

Median: 909 $ 4,350 $54.08

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Comparable Lease Transactions for Apartment Units

Asking Unit Leased Leased Area Monthly Annual

No. Location Number On Type Rooms (± Sq. Ft.) Rent Rent/Sq. Ft.

1 99 Gold Street 2P 3/19/2013 Studio / 1 bath 2 688 $2,800 $48.84

2 99 Gold Street 1E 3/17/2013 2 bed / 1 bath 4 988 $4,000 $48.58

3 100 Jay Street 15H 3/13/2013 3 bed / 2.5 bath 6.5 1,595 $6,000 $45.14

4 99 Gold Street 4B 3/8/2013 2 bed / 1 bath 4 877 $3,600 $49.26

5 100 Jay Street 23B 3/5/2013 1 bed / 1 bath 3 791 $3,500 $53.10

6 85 Adams Street 2/26/2013 2 bed / 2 bath 4 1,157 $4,450 $46.15

7 84 Front Street 5D 2/26/2013 1 bed / 1 bath 3 729 $3,100 $51.03

8 220 Water Street HC 2/24/2013 Studio / 1 bath 2 1,065 $4,125 $46.48

9 99 Gold Street 1F 2/22/2013 1 bed / 1 bath 3 753 $3,300 $52.59

10 79 Bridge Street 4I 2/12/2013 1 bed / 1 bath 3 946 $3,400 $43.13

11 99 Gold Street 2H 1/26/2013 Studio / 1 bath 2 672 $2,450 $43.75

12 70 Washington Street 7M 1/25/2013 2 bed / 2 bath 4 1,387 $5,700 $49.32

13 99 Gold Street 4N 1/25/2013 2 bed / 1 bath 4 929 $3,900 $50.38

14 204 Front Street 3 1/7/2013 2 bed / 1 bath 4 900 $3,500 $46.67

15 70 Washington Street 6R 1/4/2013 3 bed / 3 bath 7 1,675 $7,000 $50.15

16 99 Gold Street 5H 12/21/2012 Studio / 1 bath 2 672 $2,650 $47.32

17 85 Adams Street 10C 12/5/2012 1 bed / 1 bath 3 780 $3,295 $50.69

18 31 Washington Street 4 12/4/2012 2 bed / 1.5 bath 4.5 1,758 $5,500 $37.54

19 37 Bridge Street 11/20/2012 1 bed / 1.5 bath 3.5 1,076 $4,200 $46.84

20 85 Adams Street 22A 11/19/12 2 bed / 1 bath 4 1,200 $4,800 $48.00

21 99 Gold Street 3K 11/2/2012 2 bed / 1 bath 4 1,057 $3,900 $44.28

22 100 Jay Street 21A 10/14/12 2.5 bed / 1.5 bath 4.5 1,711 $6,850 $48.04

Min: 672 $2,450 $37.54

Max: 1,758 $7,000 $53.10

Mean: 1,064 $4,230 $47.60

Median: 967 $3,900 $48.02

The comparable apartment rentals contain unit sizes between 557± and 2,209±

square feet. The asking rental rates between $32.51 and $95.18 per square foot, with a

mean of $55.60 per square foot and a median of $54.08 per square foot. The actual

leased apartment units contain rental rates between $37.54 and $53.10 per square foot.

RESIDENTIAL RENTAL APARTMENT ADJUSTMENT PROCESS

Prior to estimating the market rental value of the subject proposed apartment units, the

differences between the comparables as they relate to the subject property were considered.

On this basis, qualitative adjustments were applied to each of the rents per square foot to

reflect those differences and refine the indicated range.

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Market Conditions (Time)

The first adjustment considered was for market conditions (time). Available market

data indicates that market conditions throughout the subject market have remained relatively

stable from 2012 to 2013. Therefore, the comparable rentals did not warrant any adjustments.

Location

The subject property is located in the DUMBO section of Brooklyn, adjacent to the

eastern end of the Brooklyn Bridge Park. The subject is overshadowed by the presence of the

Manhattan Bridge, as it is partially located beneath this infrastructure. The projected subject

development will have views of the East River and the Manhattan skyline; however, it is

likely that many of the subject units will contain an undesirable direct view of the Manhattan

Bridge structure, limiting the unit’s view of other local sites. Furthermore, the traffic flow

across the bridge may generate significant noise pollution. Based on these specific subject

property characteristics, we have concluded that the subject property has an undesirable

locale in comparison to the comparable rentals and downward adjustments to the comparable

rentals were considered.

Size

Typically, smaller units lease for more on a per-square-foot basis than their larger

counterparts. This assumes a quantity discount and the diminishing number of users that

require larger spaces.

A proposed residential development of the subject property will be divided into

typical unit sizes that can be absorbed by the local market. Since the proposed units will

be similar to the comparable units within the local market, a size adjustment is not warranted.

Property Characteristics

Upon completion of the new construction project, the subject property will be in

similar condition to the comparable apartment buildings, warranting similar rental rates.

Therefore, the comparable rentals did not warrant any adjustments for this factor.

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CONCLUSION – RESIDENTIAL RENTAL APARTMENT MARKET RENTS AND TERMS

All of the comparable rentals are either new construction or renovated and having

architectural details competitive with new construction. The rentals presented are

directly competitive with the subject in the Dumbo market. The actual leased apartment

units contain rental rates between $37.54 and $53.10 per square foot.

The subject units will be a new luxury rental apartment building, adjacent to the

Brooklyn Bridge Park and some units will have views of the East River and the

Manhattan skyline, while others will have undesirable direct views of the Manhattan

Bridge structure. All of the units will be affected by the noise pollution of the overhead

traffic from the bridge. All of the comparable rentals are superior to the subject proposed

development because they have a view that is not hindered by the Manhattan Bridge

structure nor the noise pollution that the subject would encounter. Based on these factors,

the market apartment rental for the subject property would fall at the low end of the

comparable range in order to maintain its share of market participants. We have

estimated an overall rental rate for the subject property at $38.00 per square foot on a gross

rental basis, with the tenants responsible for tenant electric and cooking gas.

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COMPARABLE APARTMENT RENTALS LOCATION MAP

1 1 Main Street 11 50 Bridge Street

2 100 Jay Street 12 57 Front Street

3 109 Gold Street 13 65 Washington Street

4 204 Front Street 14 70 Washington Street

5 206 Front Street 15 79 Bridge Street

6 220 Water Street 16 81 Washington Street

7 25 Washington Street 17 84 Front Street

8 30 Main Street 18 85 Adams Street

9 31 Washington Street 19 99 Gold Street

10 37 Bridge Street

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PHOTOGRAPHS OF COMPARABLE APARTMENT RENTALS

1 Main Street

100 Jay Street

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109 Gold Street

204 Front Street

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206 Front Street

220 Water Street

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25 Washington Street

30 Main Street

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37 Bridge Street

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50 Bridge Street

57 Front Street

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79 Bridge Street


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84 Front Street

85 Adams Street

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99 Gold Street

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NEW YORK CITY OUTER BOROUGHS OFFICE MARKET OVERVIEW

According to CoStar Group, Inc., the New York Outer Boroughs Office market

ended the fourth quarter 2012 with a vacancy rate of 6.5%. The vacancy rate was down

over the previous quarter, with net absorption totaling positive 413,749 square feet in the

fourth quarter. Vacant sublease space decreased in the quarter, ending the quarter at

344,634 square feet. Rental rates ended the fourth quarter at $27.84, a decrease over the

previous quarter. A total of one building delivered to the market in the quarter totaling

3,556 square feet, with 421,735 square feet still under construction at the end of the

quarter.

The following information is excerpted from the 4th Quarter 2012 CoStar Market

Report.

Absorption

Net absorption for the overall New York Outer Boroughs office market was

positive 413,749 square feet in the fourth quarter 2012. That compares to positive

204,709 square feet in the third quarter 2012, negative (17,344) square feet in the second

quarter 2012, and positive 371,604 square feet in the first quarter 2012.

Some of the notable move outs occurring in 2012 include: JetBlue Airways

Corporation moving out of (194,934) square feet at Forest Hills Tower; Visiting Nurse

Regional Health Care System moving out of (35,145) square feet at 15 Metrotech Ctr.,

and Cooperative Home Care Associates moving out of (15,000) square feet at 349 E

149th St.

Some of the notable move in’s occurring in 2012 include: New York City Human

Resources Administration moving into 400,000 square feet at 470 Vanderbilt Ave;

Federal Emergency Management Agency moving into 239,295 square feet at Forest Hills

Tower; and General Services Administration (GSA) moving into 120,000 square feet at

two Metrotech Ctr.

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The Class-A office market recorded net absorption of positive 269,096 square feet

in the fourth quarter 2012, compared to positive 34,996 square feet in the third quarter

2012, positive 145,680 in the second quarter 2012, and positive 255,332 in the first

quarter 2012.

The Class-B office market recorded net absorption of positive 164,856 square feet

in the fourth quarter 2012, compared to positive 251,141 square feet in the third quarter

2012, positive 27,970 in the second quarter 2012, and positive 135,345 in the first quarter

2012.

The Class-C office market recorded net absorption of negative (20,203) square

feet in the fourth quarter 2012 compared to negative (81,428) square feet in the third

quarter 2012, negative (190,994) in the second quarter 2012, and negative (19,073) in the

first quarter 2012.

Vacancy

The office vacancy rate in the New York Outer Boroughs market area decreased

to 6.5% at the end of the fourth quarter 2012. The vacancy rate was 7.0% at the end of

the third quarter 2012, 7.1% at the end of the second quarter 2012, and 7.1% at the end of

the first quarter 2012.

Class-A projects reported a vacancy rate of 6.0% at the end of the fourth quarter

2012, 7.5% at the end of the third quarter 2012, 7.3% at the end of the second quarter

2012, and 8.1% at the end of the first quarter 2012.

Class-B projects reported a vacancy rate of 5.8% at the end of the fourth quarter

2012, 6.2% at the end of the third quarter 2012, 6.7% at the end of the second quarter

2012, and 6.8% at the end of the first quarter 2012.

Class-C projects reported a vacancy rate of 7.8% at the end of the fourth quarter

2012, 7.7% at the end of third quarter 2012, 7.4% at the end of the second quarter 2012,

and 6.8% at the end of the first quarter 2012.

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Notable Lease Signings

Some of the notable lease signings occurring in 2012 included: the239,295-

square-foot lease signed by Federal Emergency Management Agency at Forest Hills

Tower in the Queens market; the 187,115-square-foot deal signed by New York City

Human Resources Administration at 210 Livingston St in the Brooklyn market; and the

75,060-square-foot lease signed by Mt Sinai Medical Center at One Pierrepont Plaza in

the Brooklyn market.

Sublease Vacancy

The amount of vacant sublease space in the New York Outer Boroughs market

decreased to 344,634 square feet by the end of the fourth quarter 2012, from 485,481

square feet at the end of the third quarter 2012. There was 483,206 square feet vacant at

the end of the second quarter 2012 and 559,952 square feet at the end of the first quarter

2012.

New York Outer Boroughs’ Class-A projects reported vacant sublease space of

304,195 square feet at the end of fourth quarter 2012, down from the 453,992 square feet

reported at the end of the third quarter 2012. There were 453,992 square feet of sublease

space vacant at the end of the second quarter 2012, and 530,738 square feet at the end of

the first quarter 2012.

Class-B projects reported vacant sublease space of 35,464 square feet at the end

of the fourth quarter 2012, up from the 26,514 square feet reported at the end of the third

quarter 2012. At the end of the second quarter 2012 there were 26,514 square feet, and at

the end of the first quarter 2012 there were 26,514 square feet vacant.

Class-C projects reported no vacant sublease space from the third quarter 2012 to

the fourth quarter 2012. Sublease vacancy went from 4,975 square feet to 4,975 square

feet during that time. There was 2,700 square feet at the end of the second quarter 2012,

and 2,700 square feet at the end of the first quarter 2012.

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Rental Rates

The average quoted asking rental rate for available office space, all classes, was

$27.84 per square foot per year at the end of the fourth quarter 2012 in the New York

Outer Boroughs market area. This represented a 0.1% decrease in quoted rental rates

from the end of the third quarter 2012, when rents were reported at $27.86 per square

foot.

The average quoted rate within the Class-A sector was $32.16 at the end of the

fourth quarter 2012, while Class-B rates stood at $28.77, and Class-C rates at $23.88. At

the end of the third quarter 2012, Class-A rates were $33.90 per square foot, Class-B

rates were $28.78, and Class-C rates were $24.34.

The following is a summary of the New York City Outer Boroughs office market

and the Brooklyn office market statistics.

NEW YORK CITY OUTER BOROUGHS OFFICE MARKET STATISTICS

(2003 – 4th QUARTER 2012)

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OFFICE MARKET STATISTICS –BROOKLYN SUBMARKET

(1st QUARTER 2009 – 4th QUARTER 2012)

Deliveries and Construction

During the fourth quarter 2012, one building totaling 3,556 square feet were

completed in the New York Outer Boroughs market area. This compares to five

buildings totaling 124,576 square feet that were completed in the third quarter 2012,

nothing completed in the second quarter 2012, and 262,100 square feet in five buildings

completed in the first quarter 2012.

There were 421,735 square feet of office space under construction at the end of

the fourth quarter 2012.

Some of the notable 2012 deliveries include: 745 64th St, a 137,800-square-foot

facility that delivered in first quarter 2012 and is now 85% occupied, and 423 E 138th St,

a 78,400-square foot building that delivered in first quarter 2012 and is now 62%

occupied.

The largest projects underway at the end of fourth quarter 2012 were Metro

Center Atrium, a 261,645-square-foot building with 0% of its space pre-leased, and 325

Avenue Y, a 44,000-square-foot facility that is 27% pre-leased.

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Inventory

Total office inventory in the New York Outer Boroughs market area amounted to

86,280,610 square feet in 4,144 buildings as of the end of the fourth quarter 2012. The

Class-A office sector consisted of 17,680,151 square feet in 54 projects. There were

1,512 Class-B buildings totaling 41,000,856 square feet, and the Class-C sector consisted

of 27,599,603 square feet in 2,578 buildings.

Within the Office market there were 107 owner-occupied buildings accounting for

2,001,937 square feet of office space.

Sales Activity

Tallying office building sales of 15,000 square feet or larger, New York Outer

Boroughs office sales figures rose during the third quarter 2012 in terms of dollar volume

compared to the second quarter of 2012.

In the third quarter, six office transactions closed with a total volume of

$502,870,000. The six buildings totaled 1,601,326 square feet and the average price per

square foot equated to $314.03 per square foot. That compares to four transactions

totaling $97,558,000 in the second quarter 2012. The total square footage in the second

quarter was 722,656 square feet for an average price per square foot of $135.00.

Total office building sales activity in 2012 was up compared to 2011. In the first

nine months of 2012, the market saw 16 office sales transactions with a total volume of

$627,124,175.

The price per square foot averaged $231.51. In the same first nine months of

2011, the market posted nine transactions with a total volume of $487,340,000. The price

per square foot averaged $542.71.

Cap rates have been higher in 2012, averaging 6.61% compared to the same

period in 2011 when they averaged 5.90%.

One of the largest transactions that has occurred within the last four quarters in

the New York Outer Boroughs market is the sale of NE Court Square I in Long Island

City. This 1,485,000-square-foot office building sold for $481,000,000, or $323.91 per

square foot. The property sold on 7/18/2012, at a 7.25% cap rate.

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ANALYSIS OF THE LOCAL OFFICE MARKET


renovated to include office units on the upper floors of the subject buildings, an analytic report

was compiled using information provided by CoStar Group, Inc.

A historic CoStar Vacancy Report was created for the subject submarket which

includes all office buildings within a 0.50-mile radius from the subject property located

within Brooklyn. The historical CoStar Vacancy Report for the immediate subject office

submarket indicates a total of 149 properties, containing a total office rentable area of

7,027,690± square feet, with a current total vacancy of approximately 2.1% with an

average rental rate of $33.67 per square foot per annum.

The following is a summary of the immediate submarket Aggregate Historical

Vacancy and Aggregate Absorption reports from the 3rd Quarter 2010 to the 1st Quarter 2013,

including the current period.

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Aggregate Historical Vacancy Report – 0.50-Mile Radius from Subject

Aggregate Absorption Report – 0.50-Mile Radius from Subject

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Snapshot of the Subject Submarket – 0.50-Mile Radius from Subject

Vacancy Rate Chart – 0.50-Mile Radius from Subject

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The local CoStar analytic market report indicates that typical office rental rates in

the subject market range between $28.00 and $58.99 per square foot, with a mean of

$33.67 per square foot.

However, this range is for the area within 0.50 miles from the subject property. In

order to have a better understanding of the subject’s immediate area, we have researched

the comparable office lease transactions within office buildings that are blocks from the

subject property and consist of renovated former industrial buildings that have been

converted to office buildings. The following is our independent survey of the immediate

local market.

Comparable Office Rents

Leased Gross

Rent Lease Move In Area Annual Rent/

No. Location Date Date (Sq. Ft. ±) Rent Sq. Ft.

1 10 Jay Street 6/24/11 9/23/11 1,300 $21,593 $16.61

2 10 Jay Street 4/28/11 4/28/11 1,000 $24,000 $24.00

3 10 Jay Street 4/28/11 4/28/11 850 $21,599 $25.41

4 10 Jay Street 4/21/11 6/1/11 900 $29,997 $33.33

5 10 Jay Street 3/28/11 4/27/11 4,000 $42,000 $10.50

6 10 Jay Street 3/28/11 3/28/11 900 $14,400 $16.00

7 10 Jay Street 3/28/11 4/27/11 1,300 $25,194 $19.38

8 10 Jay Street 3/3/11 3/3/11 900 $14,400 $16.00

9 20 Jay Street 1/29/13 2/28/13 1,606 $43,201 $26.90

10 20 Jay Street 8/27/12 9/26/12 3,089 $61,780 $20.00

11 20 Jay Street 7/16/12 8/15/12 1,136 $31,206 $27.47

12 20 Jay Street 7/2/12 8/1/12 1,393 $35,995 $25.84

13 20 Jay Street 6/20/12 8/1/12 1,956 $51,893 $26.53

14 20 Jay Street 6/1/12 7/1/12 1,486 $41,994 $28.26

15 20 Jay Street 5/3/12 6/15/12 3,152 $76,594 $24.30

16 20 Jay Street 4/11/12 5/11/12 1,958 $48,186 $24.61

17 20 Jay Street 3/30/12 5/1/12 1,641 $43,208 $26.33

18 20 Jay Street 3/2/12 4/1/12 1,958 $48,852 $24.95

19 20 Jay Street 3/2/12 3/15/12 583 $ 8,762 $15.03

20 20 Jay Street 3/2/12 3/2/12 567 $ 9,021 $15.91

21 20 Jay Street 2/7/12 3/8/12 1,109 $14,395 $12.98

22 20 Jay Street 2/7/12 2/7/12 572 $ 8,757 $15.31

23 20 Jay Street 2/1/12 3/2/12 888 $13,586 $15.30

24 20 Jay Street 1/19/12 2/18/12 2,257 $54,010 $23.93

25 20 Jay Street 1/19/12 2/18/12 1,486 $37,195 $25.03

26 20 Jay Street 1/15/12 2/15/12 1,641 $42,010 $25.60

27 20 Jay Street 1/6/12 2/5/12 2,460 $58,253 $23.68

28 20 Jay Street 1/2/12 2/1/12 2,459 $55,598 $22.61

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Comparable Office Rents(continued)

Leased Gross

Rent Lease Move In Area Annual Rent/

No. Location Date Date (Sq. Ft. ±) Rent Sq. Ft.

29 20 Jay Street 12/9/11 1/8/12 3,141 $ 77,991 $24.83

30 20 Jay Street 12/9/11 1/8/12 1,486 $ 37,195 $25.03

31 20 Jay Street 12/9/11 1/8/12 2,500 $ 60,000 $24.00

32 45 Main Street 1/29/13 1/29/13 872 $ 51,439 $58.99

33 45 Main Street 12/4/12 1/3/13 1,429 $ 52,201 $36.53

34 45 Main Street 8/27/12 10/1/12 2,536 $ 69,588 $27.44

35 45 Main Street 8/27/12 9/26/12 2,345 $ 65,707 $28.02

36 45 Main Street 6/20/12 8/1/12 3,430 $114,013 $33.24

37 45 Main Street 5/31/12 5/31/12 505 $ 18,902 $37.43

38 45 Main Street 5/31/12 6/30/12 2,382 $ 69,197 $29.05

39 45 Main Street 5/31/12 6/30/12 1,615 $ 45,075 $27.91

40 45 Main Street 5/31/12 6/30/12 2,600 $ 77,532 $29.82

41 45 Main Street 5/31/12 6/30/12 4,749 $132,212 $27.84

42 45 Main Street 5/11/12 4/11/12 1,344 $ 43,855 $32.63

43 45 Main Street 4/11/12 5/11/12 1,615 $ 45,721 $28.31

44 45 Main Street 4/1/12 5/1/12 557 $ 20,046 $35.99

45 45 Main Street 3/16/12 4/15/12 1,410 $ 40,495 $28.72

46 45 Main Street 2/1/12 7,692 $214,299 $27.86

47 45 Main Street 1/31/12 3/1/12 2,244 $ 63,595 $28.34

48 45 Main Street 1/19/12 2/18/12 4,951 $137,984 $27.87

49 45 Main Street 1/2/12 2/1/12 1,400 $ 42,000 $30.00

50 55 Washington Street 2/27/13 3/1/13 910 $ 38,784 $42.62

51 55 Washington Street 10/16/12 11/15/12 1,249 $ 40,792 $32.66











180 Min: $10.50

7,692 Max: $58.99

1,737 Mean: $25.83

Median: $26.33

* The office leases at 10 Jay Street were confirmed with a leasing agent at Safdi Plaza Realty Inc. (718-643-6100).

Carly Yosef is the leasing agent for this property.

** The office leases at 20 Jay Street, 45 Main Street and 55 Washington Street were confirmed with a leasing agent at

Two Trees Management Company (718-222-2500), who is the managing company for all three of these

comparable buildings.

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As indicated in the above chart, there are four renovated office buildings in the

immediate area of the subject property that are most similar to the proposed renovation of

the subject property. The comparable office leases contain unit sizes between 180± and

7,692± square feet, and rented for $10.50 to $58.99 per square foot.

OFFICE RENTAL ADJUSTMENT PROCESS

Prior to estimating the market rental value of the subject renovated office space, the


On this basis, qualitative adjustments were applied to each of the rents per square foot to

reflect those differences and refine the indicated range. An upward adjustment indicates that

the comparable is inferior to the subject property, while a downward adjustment indicates the

comparable to be superior.




stable from 2011 to 2013. Therefore, the comparable rentals did not warrant any adjustments.

Location


eastern end of the Brooklyn Bridge Park. The subject is overshadowed by the presence of the

Manhattan Bridge, as it is partially located beneath this infrastructure. The projected subject

development will have views of the East River and the Manhattan skyline; however, it is

likely that many of the subject units will contain an undesirable direct view of the Manhattan

Bridge structure, limiting the unit’s view of other local sites. Furthermore, the traffic flow

across the bridge may generate significant noise pollution. Based on these specific subject

property characteristics, we have concluded that the subject property has an undesirable

locale in comparison to the comparable rentals and downward adjustments to the comparable

rentals were considered.

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Size




A proposed office development of the subject property will be divided into typical

unit sizes that can be absorbed by the local market. Since the proposed units will be

similar to the comparable units within the local market, a size adjustment is not warranted.



similar condition to the comparable office buildings, warranting similar rental rates.


CONCLUSION – OFFICE MARKET RENTS AND TERMS

All of the comparable rentals are either new construction or renovated and having

architectural details competitive with new construction. The rentals presented are

directly competitive with the subject in the Dumbo market. The office rentals have a

rental range of $10.50 to $58.99 per square foot.

A proposed office development of the subject property would be adjacent to the

Brooklyn Bridge Park and some units will have views of the East River and the

Manhattan skyline, while others will have undesirable direct views of the Manhattan

Bridge structure. The rentals located within the 55 Washington Street comparable are

most competitive to the subject in terms of location. The rentals for this building range

between $14.86 and $42.62 per square foot. The data for this building indicates

clustering at two levels. One is around $14.86 to $16.67 per square foot and the other is

at $25.12 to $29.13 per square foot. The subject’s proximity to the Manhattan Bridge

structure and the noise pollution would be a hindrance to some of the proposed office

units facing the bridge and rentals for these units would fall around the low end cluster.

Those units that have unobstructed views of the park, river and Manhattan skyline would

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command rentals at the high end comparable cluster. With these considerations, a

blended overall rate for the subject of $22.00 per square foot is deemed competitive. The

projected rent is on the basis of the tenants responsible for base rent and all operating

expenses.

However, as indicated in the highest and best use section of this appraisal report, the

required rent for a new construction office building would be $32.34 per square foot, which

cannot be generated in the current office market. Therefore, office use is not an economically

feasible use of the subject property.

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COMPARABLE OFFICE RENTALS LOCATION MAP

1 10 Jay Street

2 20 Jay Street

3 45 Main Street

4 55 Washington Street

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PHOTOGRAPHS OF COMPARABLE OFFICE RENTALS

10 Jay Street

20 Jay Street

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45 Main Street


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NEW YORK CITY OUTER BOROUGHS RETAIL MARKET OVERVIEW

According to CoStar Group, Inc., the New York Outer Boroughs retail market did

not experience much change in market conditions in the fourth quarter 2012. The vacancy

rate went from 4.6% in the previous quarter to 4.6% in the current quarter. Net absorption

was positive 14,110 square feet, and vacant sublease space decreased by (1,025) square

feet. Quoted rental rates increased from third quarter 2012 levels, ending at $33.51 per

square foot per year. A total of two retail buildings with 27,705 square feet of retail space

were delivered to the market in the quarter, with 817,472 square feet still under

construction at the end of the quarter.

The following information is excerpted from the 4th Quarter 2012 CoStar Market

Report.

Absorption

Retail net absorption was basically flat in New York Outer Boroughs fourth

quarter 2012, with positive 14,110 square feet absorbed in the quarter. In third quarter

2012, net absorption was negative (92,996) square feet, while in second quarter 2012,

absorption came in at negative (446,243) square feet. In first quarter 2012, positive

735,121 square feet was absorbed in the market.

Some of the notable move out’s occurring in 2012 include: El Mundo Department

stores moving out of (42,515) square feet at 2510 Valentine Ave; Basha Furniture out of

(11,300) square feet at 3961 White Plains Rd; and Foot Locker moving out of (7,713)

square feet at 440 Fulton St.

Some of the notable move in’s occurring in 2012 include: Lowes moving into

166,000 square feet at a new facility at 2790 Arthur Kill Rd; Burlington Coat Factory

moving into 74,329 square feet at North Retail- Gateway Center; and Marshalls moving

into 26,785 square feet at 1623 Avenue Y.

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Vacancy

New York Outer Boroughs’ retail vacancy rate changed in the fourth quarter

2012, ending the quarter at 4.6%. Over the past four quarters, the market has seen an

overall increase in the vacancy rate, with the rate going from 4.1% in the first quarter

2012, to 4.5% at the end of the second quarter 2012, 4.6% at the end of the third quarter

2012, to 4.6% in the current quarter.

The amount of vacant sublease space in the New York Outer Boroughs market

has trended up over the past four quarters. At the end of the first quarter 2012, there were

36,489 square feet of vacant sublease space. Currently, there are 42,674 square feet

vacant in the market.

Notable Lease Signings

Some of the notable lease signings occurring in 2012 included: the 239,295-

square-Some of the notable lease signings occurring in 2012 included: the 28,426-square-

foot-lease signed by Michaels at 6110 188th St; the 28,417-square-foot-deal signed by

T.J. Maxx at Throgs Neck Shopping Center - Target; and the 23,406-square-foot-lease

signed by ALDI at 3785 Nostrand Ave.

Rental Rates

Average quoted asking rental rates in the New York Outer Boroughs retail market

are up over previous quarter levels, and up from their levels four quarters ago. Quoted

rents ended the fourth quarter 2012 at $33.51 per square foot per year. That compares to

$33.09 per square foot in the third quarter 2012, and $32.58 per square foot at the end of

the first quarter 2012. This represents a 1.3% increase in rental rates in the current

quarter, and a 2.78% increase from four quarters ago.

The following is a summary of the New York City Outer Boroughs retail market

and the Brooklyn retail market statistics.

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NEW YORK CITY OUTER BOROUGHS GENERAL RETAIL MARKET STATISTICS

(2006 – 4th QUARTER 2012)

GENERAL RETAIL MARKET STATISTICS –BROOKLYN SUBMARKET

(1st QUARTER 2009 – 4th QUARTER 2012)

Inventory and Construction

During the fourth quarter 2012, two buildings totaling 27,705 square feet were

completed in the New York Outer Boroughs retail market. Over the past four quarters, a

total of 473,661 square feet of retail space has been built in New York Outer Boroughs.

In addition to the current quarter, five buildings with 52,415 square feet were completed

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in third quarter 2012, seven buildings totaling 196,491 square feet completed in second

quarter 2012, and 197,050 square feet in four buildings completed in first quarter 2012.

There were 817,472 square feet of retail space under construction at the end of the fourth

quarter 2012.

Some of the notable 2012 deliveries include: Lowe’s West Shore Center, a

166,000-square-foot facility that delivered in first quarter 2012 and is now 96% occupied,

and City Point- Phase I, a 130,000-square-foot building that delivered in second quarter

2012 and is now 30% occupied.

Total retail inventory in the New York Outer Boroughs market area amounted to

168,058,123 square feet in 22,343 buildings and 326 centers as of the end of the fourth

quarter 2012.

Sales Activity

Tallying retail building sales of 15,000 square feet or larger, New York Outer

Boroughs retail sales figures fell during the third quarter 2012 in terms of dollar volume

compared to the second quarter of 2012.

In the third quarter, 11 retail transactions closed with a total volume of

$131,405,000. The 11 buildings totaled 385,767 square feet and the average price per

square foot equated to $340.63 per square foot. That compares to 12 transactions totaling

$139,190,093 in the second quarter 2012. The total square footage in the second quarter

was 405,409 square feet for an average price per square foot of $343.33.

Total retail center sales activity in 2012 was up compared to 2011. In the first nine

months of 2012, the market saw 36 retail sales transactions with a total volume of

$322,659,093. The price per square foot averaged $285.50. In the same first nine months

of 2011, the market posted 18 transactions with a total volume of $163,036,876. The

price per square foot averaged $48.75.

Cap rates have been higher in 2012, averaging 7.97% compared to the same

period in 2011 when they averaged 5.69%. One of the largest transactions that has

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occurred within the last four quarters in the New York Outer Boroughs market is the sale

of 247 Bedford Ave in Brooklyn. This 110,000 square foot retail center sold for

$66,000,000, or $600 per square foot. The property sold on 11/28/2012, at a 5.00% cap

rate.

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ANALYSIS OF THE LOCAL RETAIL MARKET


renovated to include ground floor retail, an analytic report was compiled using information

provided by CoStar Group, Inc.

A historic CoStar Vacancy Report was created for the subject submarket which

includes all retail properties within a 0.50-mile radius from the subject property located

within Brooklyn. The historical CoStar Vacancy Report for the immediate subject retail

submarket indicates a total of 67 properties, containing a total retail rentable area of

431,534± square feet. The CoStar data is inconclusive for the local retail market, since

many properties are leased through local brokers who do not list their properties online.

The following is a summary of the immediate submarket Aggregate Historical

Vacancy and Aggregate Absorption reports from the 3rd Quarter 2010 to the 1st Quarter 2013,

including the current period.

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Aggregate Historical Vacancy Report – 0.50-Mile Radius from Subject

Aggregate Absorption Report – 0.50-Mile Radius from Subject

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Snapshot of the Subject Submarket – 0.50-Mile Radius from Subject

Vacancy Rate Chart – 0.50-Mile Radius from Subject

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Since the CoStar analytic report is inconclusive, we have researched the local

subject retail market. We have researched the comparable ground floor retail lease

transactions that are blocks from the subject property and consist of renovated or new

construction buildings. The following is our independent survey of the immediate local

market.

Comparable Retail Rents

Store Lease Leased

Semi-

Gross

Rent Lease Opening Term Area Annual Rent/

No. Location/Tenant Date Date (Years) (Sq. Ft. ±) Rent Sq. Ft. Confirmed With

1 117 Front Street

Pink Berry

4th Qtr.

2012

3/27/13 10 year 1,003 $ 50,150 $50.00 Christopher Havens

Apartments & Lofts

718-907-2500

2 33 Main Street

One Girl Cookies

3rd Qtr.

2012

4th Qtr.

2012

10 year 1,434 $ 60,228 $42.00 Christopher Havens

Apartments & Lofts

718-907-2500

3 1 Main Street

Governor Restaurant

(Closed due to Sandy)

2nd Qtr.

2012

7/5/12 10 year 1,712 $ 75,328 $44.00 Christopher Havens

Apartments & Lofts

718-907-2500

4 54 Jay Street

Olympia Wine Bar

4th Qtr.

2012

2/2013 10 year 1,000 $ 62,000 $62.00 Christopher Havens

Apartments & Lofts

718-907-2500


Restaurant

4th Qtr.

2012

10 year 2,600 $130,000 $50.00 Christopher Havens

Apartments & Lofts

718-907-2500

6 257-277 Gold Street

Bike Brooklyn

12/15/12 4/1/13 10 year 6,500 $137,280 $21.12 CoStar Group, Inc.


Brooklyn Industries

11/1/10 3/1/11 10 year 2,200 $ 81,906 $37.23 Caroline Pardo

Two Trees Mgmt.

718-222-2500

8 66 Water Street

Jacques Torres Chocolate

8/1/10 10 year 4,000 $120,000 $30.00 CoStar Group, Inc.

1,000 Min: $21.12

6,500 Max: $62.00

2,556 Mean: $42.04

Median $43.00

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The most recent ground floor retail rentals in the subject’s immediate market are

listed in the above chart. The rentals are located within the most similar renovated or

new construction buildings. The comparable retail leases contain unit sizes between

1,000± and 6,500± square feet, and rented for $21.12 to $62.00 per square foot, with a

mean of $42.04 per square foot and a median of $43.00 per square foot.

Conversations with local brokers indicated that the immediate DUMBO ground

floor market contains 300,037± square feet of rentable area of which 21,630± square feet

(7.2%) is currently vacant. Of the vacant rentable area there are seven vacancies of larger

unit sizes between 3,300± and 7,000± square feet. The local brokers indicated that units

smaller than 3,000± square feet are in high demand in the local market. In addition

spaces available for food services and restaurant related uses are in greater demand than

typical consumer goods retail uses.

RETAIL RENTAL ADJUSTMENT PROCESS

Prior to estimating the market rental value of the subject renovated retail space, the


On this basis, quantative and qualitative adjustments were applied to each of the rents per

square foot to reflect those differences and refine the indicated range.




stable from 2012 to 2013. Therefore, comparable Rentals #1 to #6 did not warrant any

adjustments. Rentals #7 and #8 occurred under inferior market conditions than currently exist,

warranting a 10% upward adjustment based on analysis of historical trends and conversations

with local brokers.

Therefore as adjusted for time, the results are shown on the following chart.

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ADJUSTMENTS TO THE COMPARABLE RETAIL RENTALS

Leased Semi-Gross Market Market

Rental Lease Area Rent/ Conditions Adj.

No. Date (Sq. Ft. ±) Sq. Ft. x Adj. = Rent/Sq. Ft.

1 4th Qtr. 2012 1,003 $50.00 0% $50.00

2 3rd Qtr. 2012 1,434 $42.00 0% $42.00

3 2nd Qtr. 2012 1,712 $44.00 0% $44.00

4 4th Qtr. 2012 1,000 $62.00 0% $62.00

5 4th Qtr. 2012 2,600 $50.00 0% $50.00

6 12/15/12 6,500 $21.12 0% $21.12

7 11/1/10 2,200 $37.23 10% $40.95

8 8/1/10 4,000 $30.00 10% $33.00

Location


eastern end of the Brooklyn Bridge Park. The eastern edge of the Brooklyn Bridge Park

generates less foot traffic as compared to the central and western areas of the Park. The

subject is overshadowed by the presence of the Manhattan Bridge, as it is partially located

beneath this infrastructure. The traffic flow across the bridge may generate significant noise

pollution. Based on these specific subject property characteristics, we have concluded that

the subject property has an undesirable locale in comparison to the comparable rentals and

downward adjustments to the comparable rentals were considered.

Size




A proposed retail development of the subject property will be divided into typical

unit sizes that can be absorbed by the local market. Since the proposed units will be

similar to the comparable units within the local market, a size adjustment is not warranted.

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similar condition to the comparable retail buildings, warranting similar rental rates.


CONCLUSION – RETAIL MARKET RENTS AND TERMS

As previously discussed, the local retail market has a high demand and a limited

supply of retail space, particularly for smaller sized units (under 3,000 square feet).

Conversations with local brokers indicated that the immediate DUMBO ground floor

market contains 300,037± square feet of rentable area of which 21,630± square feet

(7.2%) is currently vacant. Of the vacant rentable area there are seven vacancies of larger

unit sizes between 3,300± and 7,000± square feet. The local brokers indicated that units

smaller than 3,000± square feet are in high demand in the local market. In addition

spaces available for food services and restaurant related uses are in greater demand than

typical consumer goods retail uses.

Any proposed retail redevelopment of the subject property could be divided into

smaller retail units containing average unit sizes of less than 3,000± square feet.

The adjusted comparable rents were as follows:

Comparables Adjusted Rent/Sq. Ft.

1 $50.002 $42.003 $44.004 $62.005 $50.006 $21.127 $40.958 $33.00

The subject’s location adjacent to the eastern edge of the Brooklyn Bridge Park, the

overshadowing presence of the Manhattan Bridge, and the noise pollution which the traffic

flow across the bridge reduce the desirability of the subject location. Therefore, the subject’s

Documents

Larger Parcel Analysis – As Vacant Present Value of 421A Real … P… · The estimated 8% discount rate is estimated at approximately 400 basis points over the safe rate of 2%±