Real Estate Appraisal Appraisal Report North Building of Downtown Main Public Library 900 Vine Street Cincinnati, Hamilton County, Ohio 45202 Special-Use, Five-Story Building Totaling 132,500 Square Feet As Is Market Value as of September 13, 2017 Prepared For: Ms. Molly DeFosse Chief Finance and Facilities Officer The Public Library of Cincinnati and Hamilton County 800 Vine Street Cincinnati, OH 45202 File #: 506506517 Prepared By: Eric J. Gardner, MAI, CCIM September 28, 2017 Ms. Molly DeFosse Chief Finance and Facilities Officer The Public Library of Cincinnati and Hamilton County 800 Vine Street Cincinnati, OH 45202 Re: Real estate appraisal of North Building of Downtown Main Public Library – 900 Vine Street, Cincinnati, Hamilton County, Ohio 45202. Dear Ms. DeFosse: As you requested, I have made an investigation and appraisal of the real estate located at 900 Vine Street, Cincinnati, Hamilton County, Ohio 45202. The property being appraised is the North Building of the Downtown Main Public Library. It is improved with a special-use five-story structure with a basement and mechanical penthouse that was constructed in 1996. The improvements total 132,500 square feet. It is the appraiser’s understanding that the floor plates each total 29,000 square feet with a 2,500 square foot cutout for an open atrium/light well. The improvements are user-specific and serve a variety of uses including administrative offices, library space open to the public, and two (2) floors of internal storage for library materials that has built-in shelving and tracking. The purpose of the appraisal was to offer an opinion of the as is market value of the fee simple interest of the subject property. A personal tour of the property was performed, and the analyses used to form an opinion of value are contained in the following appraisal report. The intended use of the appraisal is to be used by Ms. Molly DeFosse, The Public Library of Cincinnati and Hamilton County for internal valuation purposes. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). This assignment has been prepared by a Certified General Appraiser in an impartial, objective, and independent manner. Ms. Molly DeFosse Page Two September 28, 2017 In approaching this assignment and arriving at our conclusions, it is important to reiterate that the subject property is a special-use type of commercial real estate and was developed and constructed with the intent of being user-specific for the Public Library of Cincinnati and Hamilton County. Special-use assets often require special consideration and analysis when opining value. Thus, the use of hypothetical conditions are a critical and necessary ingredient in reaching reasonable and practical value conclusions. As is the case with complex properties the valuation involves a combination of the sales comparison approach, income capitalization approach, and a modified market data approach which have all been recognized as being commercially reasonable under the circumstances. Due to changes in technology, the manner and volume in which library materials are used has changed significantly in the past 20 years since the subject improvements were constructed. This has contributed to what is considered early obsolescence or external obsolescence for the subject improvements in its current use. According to the Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015), external obsolescence is defined as follows: “A type of depreciation; a diminution in value caused by negative external influences and generally incurable on the part of the owner, landlord, or tenant. The external influence may be either temporary or permanent.” Therefore, from a market perspective, it is the opinion of the appraiser that highest and best use of the subject improvements is a mixed-use redevelopment. This takes into account the subject property’s location, zoning, market supply and demand, and the surrounding property uses. Market comparable sales and rentals of the subject’s present use do not exist. Therefore, to arrive at an as is value for the subject property we have applied the hypothetical condition that the subject will be redeveloped into a mixed-use property with office, retail and warehouse/storage components. This is how most developers and investors in the market would approach a property such as the subject. The focus of this report and analysis is on the as is market value of the existing land and improvements. This report does not include any type of potential for future air rights agreements. Providing a detailed architectural and structural building analysis to determine the potential feasibility of creating an air rights agreement is beyond the scope of this assignment. However, we would urge the client to explore this option as current market trends indicate a strong demand for residential housing downtown. Ms. Molly DeFosse Page Three September 28, 2017 Two (2) scenarios were considered in our analysis to arrive at an as is opinion of value. In the first scenario we first opined a prospective market value upon stabilization and deducted a series of cost-to-cure items to arrive at an as is value opinion. In the second scenario we considered the property as is and considered comparable sales that were vacant and/or not stabilized at the time of sale. Our conclusions are as follows: Opinion of Market Value Status Effective Date Whole $ $/Unit Units Scenario I: Sales Comparison Approach As Stabilized October 1, 2019 $7,860,000 $59 /SF Income Capitalization Approach As Stabilized October 1, 2019 $7,600,000 $57 /SF Final Opinion of Stabilized Market Value As Stabilized October 1, 2019 $7,700,000 $58 /SF Less Cost to Cure Items/Rent Loss: Rent Loss ($1,262,901) ($10)/SF Tenant Improvements to be Completed ($1,669,500) ($13)/SF Leasing Commissions to be Paid ($582,142) ($4)/SF Capital Improvements (Roof) ($275,000) ($2)/SF Total Cost to Cure ($3,789,543) ($29)/SF Total Cost to Cure - Rounded ($3,800,000) ($29)/SF Opinion of Market Value - Scenario I (Deducting Cost to Cure) As Is September 13, 2017 $3,900,000 $29 /SF Scenario II: Sales Comparison Approach As Is September 13, 2017 $3,600,000 $27 /SF Opinion of Market Value - Scenario II (No Cost to Cure Deduction) As Is September 13, 2017 $3,600,000 $27 /SF Final Opinion of As Is Market Value As Is September 13, 2017 $3,900,000 $29 /SF A typical exposure time for the subject property is estimated to be 12 months or less based on analysis of relevant market data. A typical marketing time for the subject is also estimated to be 12 months or less. This assumes professional brokers are used, and the opinion of market value derived herein is the selling price. The reported value conclusion is subject to the assumptions and limiting conditions set forth in the body of the report. Our final value conclusion is subject to the following extraordinary assumptions and hypothetical conditions: 1 – The as is market value conclusion is subject to the hypothetical condition that the subject could be redeveloped into a mixed-use property with office, retail and warehouse/storage components. 2 – Within our analysis we have made the extraordinary assumption that the Library will remove and relocate the specialized shelving and tracking on Floors C & D and incur any associated costs. Ms. Molly DeFosse Page Four September 28, 2017 This letter is not the appraisal, but is followed by an appraisal report setting forth the identification of the property, pertinent facts about the area and the subject property, comparable market data, and the results of the investigations and analyses leading to the value conclusions. Respectfully submitted, Eric J. Gardner, MAI, CCIM Senior Vice-President State of Ohio Certified General Appraiser Certificate #419444 Table of Contents Page Appraisal Report Title Page Letter of Transmittal Table of Contents Summary of Important Facts and Conclusions ......................................................................... 7 Intended Use of the Appraisal ................................................................................................... 11 Definition of Market Value and Interest Appraised ................................................................. 12 Appraisal Scope and Reporting Process ................................................................................. 14 Identification of Property ............................................................................................................ 16 Ownership and Taxes ................................................................................................................. 16 History of Property Being Appraised & Five Year Sales History .......................................... 17 Neighborhood Description ......................................................................................................... 18 Site Data ....................................................................................................................................... 28 Improvement Description ........................................................................................................... 31 Highest and Best Use ................................................................................................................. 34 Sales Comparison Approach ..................................................................................................... 36 Income Approach ........................................................................................................................ 65 Reconciliation and Final Value Opinion ................................................................................... 81 Photographs of Subject Property .............................................................................................. 85 Certification ................................................................................................................................ 115 Assumptions and Limiting Conditions .................................................................................... 117 Addenda Photographs of Subject Property Ohio License Certification Assumptions and Limited Conditions Appraiser Qualifications Appraiser Disclosure Statement APPRAISAL REPORT Summary of Important Facts and Conclusions Summary of Important Facts and Conclusions Identification of Property Location The subject property is located on the north side of E. 9th Street east of Vine Street and west of Walnut. Street Address 900 Vine Street, Cincinnati, Hamilton County, Ohio 45202 Ownership Public Library of Cincinnati & Hamilton County Auditor’s Reference No. 076-0002-0247-00 Objective of the Appraisal Purpose The purpose of the appraisal was to offer an opinion of the as is market value of the fee simple interest of the subject property. Intended Use The intended use of this report is for internal valuation purposes. This report is not intended for any other use. The appraiser is not responsible for unauthorized use of this report. Intended User The intended user of this report is Ms. Molly DeFosse, The Public Library of Cincinnati and Hamilton County. Site Size and Shape The subject site is rectangular in shape and totals 1.283 acres or 55,887 square feet. Zoning Data The real estate being appraised is located within the zoning jurisdiction of the City of Cincinnati. The site is zoned DD-C, Downtown Support. Flood Data According to Federal Flood Rate Map Community Panel No. 39061C0332F with an effective date of February 16, 2012, the subject is located in a Flood Zone X. Zone X areas are defined as areas outside the 500 year flood plain. A copy of the subject’s flood zone map is provided in the Site Data section of this report. Improvements The property being appraised is the North Building of the Downtown Main Public Library. It is improved with a five-story structure with a basement and mechanical 506506517 7 APPRAISAL REPORT Summary of Important Facts and Conclusions penthouse that was constructed in 1996. The improvements total 132,500 square feet. It is the appraiser’s understanding that the floor plates each total 29,000 square feet with a 2,500 square foot cutout for an open atrium/light well. The improvements are user-specific and serve a variety of uses including administrative offices, library space open to the public, and two (2) floors of internal storage for library materials that has built-in shelving and tracking. Highest and Best Use As If Vacant Multi-story, mixed-use development As Improved Mixed-use redevelopment Effective Date of Value September 13, 2017 Site Visit Date September 13, 2017 Marketing Time A typical marketing time for the subject property is estimated to be 12 months or less based on analysis of relevant market data. Exposure Time A typical exposure time for the subject property is estimated to be 12 months or less based on analysis of relevant market data. Extraordinary Assumptions Our final value conclusion is not subject to any extraordinary assumptions. 1 – Within our analysis we have made the extraordinary assumption that the Library will remove and relocate the shelving and tracking on Floors C & D for future use elsewhere and incur any associated costs. We have not applied a cost-to-cure figure for this item within our analysis. Hypothetical Conditions Our final value conclusion is subject to the following hypothetical conditions: 1 – The value conclusion is subject to the hypothetical condition that the subject will be redeveloped into a mixed-use property with office, retail and warehouse/storage components. 506506517 8 APPRAISAL REPORT Summary of Important Facts and Conclusions Market Value and Conclusions Opinion of Market Value Status Effective Date Whole $ $/Unit Units Scenario I: Sales Comparison Approach As Stabilized October 1, 2019 $7,860,000 $59 /SF Income Capitalization Approach As Stabilized October 1, 2019 $7,600,000 $57 /SF Final Opinion of Stabilized Market Value As Stabilized October 1, 2019 $7,700,000 $58 /SF Less Cost to Cure Items/Rent Loss: Rent Loss ($1,262,901) ($10)/SF Tenant Improvements to be Completed ($1,669,500) ($13)/SF Leasing Commissions to be Paid ($582,142) ($4)/SF Capital Improvements (Roof) ($275,000) ($2)/SF Total Cost to Cure ($3,789,543) ($29)/SF Total Cost to Cure - Rounded ($3,800,000) ($29)/SF Opinion of Market Value - Scenario I (Deducting Cost to Cure) As Is September 13, 2017 $3,900,000 $29 /SF Scenario II: Sales Comparison Approach As Is September 13, 2017 $3,600,000 $27 /SF Opinion of Market Value - Scenario II (No Cost to Cure Deduction) As Is September 13, 2017 $3,600,000 $27 /SF Final Opinion of As Is Market Value As Is September 13, 2017 $3,900,000 $29 /SF Significant Market and Property Specific Factors Influencing the Subject Property The top positive (+) factors influencing the subject property are: • Well-located within the Cincinnati CBD • Increased demand for office, retail, and residential space within the Cincinnati CBD and peripheral areas in recent years spurred by new developments, growing and/or expanding downtown amenities, and growing downtown population and labor force. • Subject improvements constructed in 1996 and have been well-maintained in good condition. Improved structures within the Cincinnati CBD that are +/- 20 years old or less are very rare. • Institutional grade construction • Site is located within close proximity to the newly-developed streetcar line • The existing structure may have the ability to create air rights that could support adding additional floors (this option is beyond the scope of this report). The most negative (-) or risk factors affecting the subject property are: • Subject property is a special-use type of commercial real estate and was developed and constructed with the intent of being user-specific for the Public Library of Cincinnati and Hamilton County. Special-use assets often require special consideration and analysis when opining value. • Due to changes in technology, the manner and volume in which library materials are used has changed significantly in the past 20 years since the subject improvements were constructed. This has contributed to what is considered early obsolescence or external obsolescence for the subject improvements in its current use. 506506517 9 APPRAISAL REPORT Summary of Important Facts and Conclusions • There are numerous forms of functional obsolescence throughout the building which may require a cure to in order to be considered functional in a potential redevelopment. • The subject improvements have a stand-alone boiler for heat; however, the HVAC system is shared with the Main Library Building. In the event that the subject property is redeveloped the HVAC system will need to be separated. • There is an existing four (4) story skywalk connecting the North Building and the Main Library Building over E. 9th Street. In the event that the subject property is redeveloped, this connector will need to be removed or an easement/mutual operating agreement will need to be developed. • Floors C & D are considered non-typical office/commercial space. These floors have uncommonly low ceiling heights (7-8’ feet), no exterior windows, and have built-in user- specific shelving and tracking for storage and indexing of library materials. It is the opinion on the appraiser that these floors are not marketable for anything other than some form of storage. • The floorplates have a 2,500 square foot cutout that serves as an open atrium/light well. Open areas such as these can create challenges in space planning and higher operating expenses. • There is limited on-site parking. The only on-site parking associated with the property is a small surface lot on the east end of the property at the northeast corner of E. 9th Street & Walnut with a total of 18 surface spaces. • It is our understanding that the roof is at the end of its useful life. Jeff Gerrein, Facilities Operations Manager, communicated to the appraiser during the tour of the property that cost estimate to replace the roof is between $250,000 - $300,000. We were not provided with any contractor quotes or inspection/condition reports regarding the roof. • Currently the subject is exempt from real estate taxes. A sale to a private party developer would most likely result in the loss of the tax exemption status. 506506517 10