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Both the Project and the Industrial Prototype yield significant positive RLV under current market conditions. Market <br />demand for new residential, retail, and industrial properties in the regional market of the Site suggest that both <br />projects are financially feasible at buildout. These RLV estimates include costs of demolition of existing land uses but <br />exclude land acquisition costs. <br />Detailed pro-formas for both the Project and Industrial Prototype are shown in Appendix A and a short explanation of <br />sources and assumptions follows. <br />Capitalization Rate <br />The capitalization rate (cap rates) is the rate of return on a real estate investment, calculated by dividing the Net <br />Operating Income (NOI) by the current market value. Cap rates for multifamily, retail, and industrial land uses are <br />based on CBRE H1 2019 estimates for the Orange County market. A cap rate of 6.5 was assumed for retail, while a <br />cap rate of 4.0 was assumed for both multifamily and industrial. <br />Rent <br />Commercial rent was estimated based on comparative analysis of recent lease agreements for comparative new <br />(since 2017) mixed -use residential/retail and industrial properties in Santa Ana and the adjacent areas of Irvine and <br />Tustin. AECOM assumed an annual Triple Net Lease (NNN) Rent per SF of $30 for retail space and $11 for industrial. <br />Construction Costs <br />Direct costs for the pro -forma models draw from other recent studies of comparable construction in Orange County <br />and comparable areas of Los Angeles including IRS Means 2019 construction cost estimates. Indirect costs are <br />largely based on either ratios of direct costs or per square foot allocations typically used in planning -level cost <br />estimation. <br />To verify the assumptions and market value of the pro-formas, AECOM surveyed recent sales transactions of <br />representative properties to compare the price per SF or unit of The Project and Industrial Prototype. The pro -forma <br />for the Project estimated a market price of $721/SF of Land and approximately $449,000 per unit. The pro -forma for <br />the Industrial Prototype estimated a market price of $117/SF of Land and approximately $234/SF of building area <br />(RBA). Table 16 shows comparable recent transactions of comparable developments. <br />Table 16: Recent Sales Transactions <br />Recent Sales Transactions for Industrial and Multifamily Properties <br />Industrial <br />Address <br />Acres <br />RBA <br />Price/RBA <br />Price/Land <br />Date <br />9300 Toledo Way, Irvine <br />75.22 <br />1,193,692 <br />$233 <br />$85 <br />Jul-19 <br />1730 S Anaheim Way, Anaheim <br />6.93 <br />143,930 <br />$230 <br />$110 <br />May-18 <br />15025 Proctor Ave, Industry <br />5.91 <br />257,440 <br />$225 <br />$113 <br />Nov-18 <br />4278 N Harbor Blvd Fullerton <br />8.66 <br />212,202 <br />$186 <br />$105 <br />Jan-19 <br />Multifamily <br />Address <br />Acres <br />Units <br />Price/Unit <br />Price/Land <br />Date <br />17321 Murphy Ave, Irvine <br />3.63 <br />280 <br />$423,214 <br />$749.42 <br />Nov-18 <br />251 Orangefair Ave, Fullerton <br />6.38 <br />323 <br />$405,573 <br />$471.37 <br />Jun-18 <br />1105 E Katella Ave, Anaheim <br />4.25 <br />386 <br />$341,192 <br />$711.39 <br />Jan-19 <br />1091 E 1st St, Santa Ana <br />5.07 <br />264 <br />$371,212 <br />$443.74 <br />Jun-19 <br />Source: Costar, AECOM <br />Comparable transactions reveal that the estimated market prices for both The Project and Industrial Prototype are <br />either within the range of recent transactions or slightly above reported sales prices. For new construction in a <br />desirable location, estimated prices represent a reasonable future value of the developments. <br />Images and details of Industrial Prototype are included in Appendix A. <br />75C-648 <br />