Merritt Crossing 4Q09 - TASE...440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page ii...

575 Lexington Avenue, New York, New York 10022

Tel: 212.935.9191 Fax: 212.935.5935

Appraisal of

Merritt Crossing 440 Wheelers Farms Road Milford, Connecticut 06460

575 Lexington Avenue, New York, NY 10022

T E L 212.935.9191 • F A X 212.935.5935

January 1, 2010 Brian Szczapa SOVA Management, LLC 2009 Avenue M Brooklyn, New York 11210 Re: Merritt Crossing 440 Wheelers Farms Road Milford, Connecticut 06460

KTR Job#: 09-1-10-00135D Dear Szczapa : In accordance with our agreement dated May 6, 2009, KTR Real Estate Advisors LLC (“KTR”) has performed an appraisal of the above referenced property. The purpose of the appraisal is to determine the Leased Fee Interest in the subject property as of January 1, 2010. A staff member of KTR inspected the subject property on February 9, 2010. The subject property, known as Merritt Crossing, consists of an 11.86 acre parcel improved with a four-story Class “A” office building. The improvements were constructed in 1988 and have a rentable area of 176,276 square feet. The property is located on the west side of Wheelers Farms Road between East Rutland Road and Southwick North Court in Milford, Connecticut. As of the date of the appraisal, the subject property was 87.3 percent occupied and is more fully described, legally and physically, within the attached appraisal report. Based upon the analysis contained in the attached report, the Market Value of the Leased Fee Interest in the subject property as of January 1, 2010 is:

TWENTY ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($21,700,000)

The attached report, in its entirety, including all assumptions and limiting conditions, which is an integral part of, and inseparable from, this transmittal letter, contains the data, information, analyses and calculations upon which the value conclusion indicated herein are based. The report was prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) as set forth by the Appraisal Foundation and in accordance with the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. In addition, the appraisal was written in conformance with FIRREA, OCC and OTS guidelines.

SOVA Management, LLC 440 Wheelers Farms Road

January 1, 2010 Page 2

It has been a pleasure to be of service to you. Please do not hesitate to call with any questions you may have regarding our assumptions, observations or conclusion. Very truly yours, KTR REAL ESTATE ADVISORS LLC

By: Terence Tener, MAI, ASA By: Michael A. Robinson Managing Partner Appraiser

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page i

KTR Real Estate Advisors LLC

TABLE OF CONTENTS Title Page Letter of Transmittal Table of Contents .......................................................................................................................................... i Certificate of Value ...................................................................................................................................... ii Basic Assumptions and Limiting Conditions............................................................................................... iii Subject Photograph ....................................................................................................................................... v Location Map............................................................................................................................................... vi

APPRAISAL DATA Summary of Important Conclusions ............................................................................................................ 1 Premises of the Appraisal ............................................................................................................................ 2 Area Economic Analysis............................................................................................................................... 5 Neighborhood Analysis ................................................................................................................................ 8 Site Analysis ............................................................................................................................................... 10 Zoning Analysis .......................................................................................................................................... 12 Real Estate Assessments and Taxes............................................................................................................ 14 Description of the Improvements................................................................................................................ 16 Office Market Analysis............................................................................................................................... 18 Market Rent Analysis ................................................................................................................................. 23 Highest and Best Use .................................................................................................................................. 26

VALUATION Valuation Procedure.................................................................................................................................... 27 Income Capitalization Approach ................................................................................................................ 29 Sales Comparison Approach....................................................................................................................... 38 Reconciliation and Final Value Conclusion................................................................................................ 45

ADDENDA Additional Subject Photographs Engagement Letter Qualifications of the Appraisers

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page ii


CERTIFICATE OF APPRAISAL

We, Terence Tener, MAI, ASA and Michael A. Robinson certify that to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. Michael A. Robinson has made a personal inspection of the property that is the subject of this report. Terence Tener, MAI, ASA has not made a personal inspection of the property that is the subject of this report. This appraisal was not prepared in conjunction with a request for a specific value or a value within a given range or predicated upon loan approval. The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. As of the date of this appraisal, Terence Tener, MAI, ASA has completed the requirements under the continuing education program of the Appraisal Institute and has been duly certified to transact business as a Real Estate General Appraiser. Terence Tener, MAI, ASA has been duly certified to transact business and is in good standing as a Real Estate General Appraiser (CT certification RCG0000593). Terence Tener, MAI, ASA and Michael A. Robinson have extensive experience in the appraisal of similar properties. Terence Tener, MAI, ASA and Michael A. Robinson have appraised or provided other services relative to the subject property in the past three years. KTR REAL ESTATE ADVISORS LLC

By: Terence Tener, MAI, ASA By: Michael A. Robinson Managing Partner Senior Appraiser

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page iii


BASIC ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal report is subject to the following assumptions and limiting conditions: 1. No responsibility is assumed for legal or title considerations. Title to the property is assumed to

be good and marketable unless otherwise stated in this report. 2. The property is appraised free and clear of any or all liens and encumbrances unless otherwise

stated in this report. 3. Responsible ownership and competent property management are assumed unless otherwise stated

in the report. 4. The information furnished by others is believed to be reliable, however, no warranty is given for

its accuracy. 5. All engineering is assumed to be correct. Any plot plans and illustrative material in this report

are included only to assist the reader in visualizing the property. 6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil or

structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

7. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in this report.

8. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined and considered in this appraisal report.

9. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based.

10. Any sketch in this report may show approximate dimensions and is included to assist the reader in visualizing the property. Maps and exhibits found in this report are provided for reader reference purposes only. No guarantee as to accuracy is expressed or implied unless otherwise stated in this report. No survey has been made for the purpose of this report.

11. It is assumed that the utilization of the land and improvements is within the boundaries or property described and that there is no encroachment or trespass unless otherwise stated in this report.

12. The appraiser is not qualified to detect hazardous waste and / or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste/or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment. The presence of substances such as asbestos, urea-formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The appraisers’ value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraiser’s descriptions and resulting comments are the result of the routine observations made during the appraisal process.

13. Unless otherwise stated in this report, the subject property is appraised without a specific compliance survey having been conducted to determine if the property is or not in conformance with the requirements of the Americans with Disabilities Act. The presence of architectural and communications barriers that are structural in nature that would restrict access by disabled individuals may adversely affect the property’s value, marketability or utility.

14. The distribution, if any, of the total valuation in this report between land and improvements

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page iv


applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

15. Possession of this report or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than by the party to whom it is addressed without the written consent of the appraiser, and in any event, only with proper written qualification and only in its entirety.

16. Neither all nor any part of the contents of this report (especially conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser.

17. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. The appraiser has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property given the conversion of the property. The appraiser did not consider possible non-compliance with the requirements of the ADA in estimating the value of the property.

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page v


SUBJECT PROPERTY PHOTOGRAPH

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page vi


LOCATION MAP

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page 1


SUMMARY OF IMPORTANT CONCLUSIONS Date of Value January 1, 2010 Date of Inspection February 9, 2010 Property Address Merritt Crossing 440 Wheelers Farms Road Milford, Connecticut Property Location The subject is located on the west side of Wheelers Farms Road between

East Rutland Road and Southwick North Court in Milford, Connecticut. Block/Lot Block 915, Lot 11. Purpose of the Appraisal To estimate the Market Value of the Leased Fee Interest in the subject

property, free and clear of financing, based on market conditions as of January 1, 2010, the effective date of appraisal.

Site Size 11.86 Acres (516,622 square feet) Zoning DO-25, Designated Office Zoning District. Improvements The subject property is improved with a four-story Class “A” office

building containing 176,276 square feet of rentable area. Real Estate Tax Assessment $16,434,420 Highest and Best Use As Vacant Office development. As Improved Continued use as an office facility. APPROACHES TO VALUE Income Capitalization $21,700,000 Sales Comparison $21,200,000 Cost Not Applicable APPRAISED VALUE $21,700,000



PREMISES OF THE APPRAISAL Identification The subject site is an 11.86-acre parcel located on the west side of Wheelers

Farms Road between East Rutland Road and Southwick North Court in Milford, Connecticut. It is improved with a 176,276 square foot, four-story Class “A” office building. It is commonly known as Merritt Crossing, with an address of 440 Wheelers Farms Road. The property is further identified on the Milford Tax Maps as Block 915, Lot 11.

Intended Use/Users of the Appraisal This appraisal has been prepared at the request of SOVA Management,

LLC to provide valuation for asset management purposes. Purpose of the Appraisal The purpose of the appraisal is to estimate the Market Value of the

Leased Fee Interest in the subject property, as of January 1, 2010. The property was inspected on February 9, 2010.

Scope Of Work The following steps were undertaken in the preparation of this appraisal:

(1) Performed an inspection of the subject property and its environs. (2) Analyzed relevant leases, sales, operating expenses and

capitalization rates. (3) Compiled and analyzed relevant property data (zoning and

taxes). (4) Reviewed market and economic data. (5) Utilized appropriate appraisal methodology to derive estimates

of value. (6) Reconciled the estimates of value into a single value conclusion.

To develop an opinion of value, KTR performed an appraisal as defined by the Uniform Standards of Professional Appraisal Practice. The scope of work did not include the Cost Approach. This appraisal includes presentation of the data, analyses and conclusions utilized in formulating the estimate of value.

Definition of Market Value The definition of Market Value used in this appraisal report is taken from

the Appraisal Institute’s The Dictionary of Real Estate Appraisal, Fifth Edition, Chicago, Illinois, Appraisal Institute, 2010, which states:

“The most probable price that a property should bring in a competitive

and open market under all conditions requisite to a fair sales, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:



1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised, and acting in what

they consider their best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of

financial arrangements comparable thereto; and 5. The price represents the normal consideration for the property sold

unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

Property Rights Appraised The interest being appraised is the Leased Fee Interest. Leased Fee

Interest is defined in The Dictionary of Real Estate Appraisal, Fifth Edition, Chicago, Illinois, Appraisal Institute, 2010, as:

An ownership interest where the possessory interest has been granted to another party by creation of a contractual landlord tenant relationship, i.e. a lease. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.

Sales History of the Subject Property The subject property is currently owned by SOVA Merritt, LLC. They

have owned the property since July 24, 2007 when they purchased it from Merritt Acquisition, LLC for $27,150,000. Merritt Acquisition, LLC had owned the property since September 2004 when they purchased it from F 440 Wheelers Farms Road, LLC for a consideration of $22,900,000. Other than these transactions, the subject has not transferred ownership since 1997.

Exposure Time According to the previously stated definition of Market Value, the

property must be allowed a reasonable time to be exposed in the open market to achieve the appraised value. Exposure is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, Fifth Edition, Chicago, Illinois, Appraisal Institute, 2010, as:

“The time a property remains on the market. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market.”



Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions.

A review of influencing area transfer records suggests that prior to September 2008 there was a very active investor market for office buildings in Connecticut. Although the tightening of the credit markets beginning in September 2007 reduced the quantity, there were still various sales instituted, financed and closed up through September 2008. After September 2008, credit markets seized up, making it extremely difficult to obtain financing. Market research has identified relevant sales that appear to be arms-length transactions which suggest the presence of an active investor market, although at a significantly reduced level from that prior to September 2008. The marketing time frame for comparable properties have been lengthened as potential buyers have increased challenges obtaining financing; however, these recent market corrections are opportunities for financially stable buyers with long-term investment strategy.

Accordingly, if exposed to the market for a reasonable time prior to the effective date of appraisal, which we consider to be 12 months, the subject property would transfer at an appropriate price, that is to say, the appraised value. The exposure period is based upon the market data that was researched as well as discussions with knowledgeable real estate professionals and participants in the market.



AREA ECONOMIC ANALYSIS Regional Overview The subject property is located in New Haven County, within the south

central portion of Connecticut. New Haven County is bordered on the west by Fairfield County, Hartford County to the north, Litchfield County to the northwest, Middlesex County to the east and the Long Island Sound to the south. The County consists of 862 square miles and is part of the New York metropolitan area. Because the metropolitan region extends from New York State into Connecticut and New Jersey, it is frequently identified as “the Tri-State Region”. The New York metropolitan region encompasses smaller cities that, though somewhat “urban”, are “suburban” within a regional context. New Haven fits into this category.

New Haven County also falls within the New Haven Labor Market Area (the “LMA”). The New Haven LMA’s economy has long been a service-driven economy with many large companies, drawn by the area’s proximity to Manhattan, headquartered in the region. The region's economy is helped by excellent transportation and distribution resources, abundant and affordable utilities, progressive banking and financial institutions and a skilled and well-educated work force. The regional economy has been impacted by the economic recession affecting the entire country.

Population The 2000, 2009 and 2014 population estimates for New Haven County and

the State of Connecticut and presented in the following table.

AREA POPULATION ESTIMATES % change 2000 2009 2014 2009-2014New Haven County 824,008 846,073 847,327 0.1%Connecticut 3,405,565 3,497,344 3,485,132 -0.3%

Source: DemographicsNow.com As the table shows, both the County and the State have experienced an overall population growth between 2000 and 2009. This growth is expected to level off with slight growth expected in the County and decreases expected in the State between 2009 and 2014.

Income Demographicsnow.com, a national demographic data collection and

reporting agency has provided the appraiser with household income estimates for New Haven County, as presented in the following table:



NEW HAVEN COUNTY INCOME ESTIMATES AND PROJECTIONS

2000 2009 2014 Annual HH Income % of Total % of Total % of TotalLess than $15,000 14.5% 11.1% 10.5% $15,000 - $24,999 10.9% 9.2% 8.5% $25,000 - $34,999 10.6% 8.3% 7.8% $35,000 - $49,999 15.1% 12.6% 11.4% $50,000 - $74,999 20.3% 18.1% 17.8% $75,000 - $99,999 12.9% 14.2% 13.6% $100,000 - $149,999 10.3% 16.0% 17.7% $150,000+ 5.4% 10.5% 12.6% Median Household Income $48,896 $61,329 $65,566 Avg. Household Income $62,220 $78,552 $87,497 Per Capita Income $24,090 $31,029 $34,723

Source: Demographicsnow.com Demographicsnow.com projects that the county will witness an increase in all income levels above the $100,000 level and decreases in all levels below the $100,000 level between 2009 and 2014.

Conclusion The regional economy began to experience a slowdown in growth in the

Fourth Quarter 2007 due to the turmoil in the credit markets and national economy. The problems associated with the credit markets began a reversal of previous local growth trends beginning in the First Quarter of 2008. Given the current state of the economy projecting the near term outlook is uncertain whereas the future outlook remains positive.



REGIONAL MAP



NEIGHBORHOOD ANALYSIS Introduction The subject property is located in the City of Milford, on the west side of

Wheelers Farms Road. The subject is approximately 1.0 mile north of Interstate 95 and 0.3 of a mile south of the Merritt Parkway, two major highways that provide transportation links from Northern Connecticut to New York City.

Population Within Milford there was slight population growth exhibited between

2000 and 2009; however, there is a projected decrease in population between 2009 and 2014. The following table illustrates the population trends for Milford compared to New Haven County and the State of Connecticut.

MILFORD POPULATION TRENDS

% changeRegion 2000 2009 2014 2009 to 2014Milford 50,627 52,301 51,511 -1.5%New Haven County 824,008 846,073 847,327 0.1%Connecticut 3,405,565 3,497,344 3,485,132 -0.3%

Source: DemographicsNow.com Income Demographicsnow.com, a national demographic data collection and

reporting agency has provided the appraiser with household income estimates for Milford, as presented in the following table:

MILFORD HOUSEHOLD INCOME ESTIMATES AND PROJECTIONS

2000 2009 2014 Annual HH Income % of Total % of Total % of Total Less than $15,000 7.6% 5.3% 4.7% $15,000-$24,999 8.7% 6.9% 5..6% $25,000-$34,999 7.6% 6.7% 6.5% $35,000-$49,999 15.0% 10.8% 8.7% $50,000-$74,999 23.4% 19.7% 18.1% $75,000-$99,999 18.2% 16.6% 15.5% $100,000-$149,999 13.6% 21.4% 23.6% $150,000+ 5.9% 12.7% 17.4% Median HH Income $61,120 $75,874 $84,925 Average HH Income $71,404 $85,443 $97,748 Per Capita Income $28,421 $33,704 $37,769

Source: DemographicsNow.com



Demographicsnow.com projects that the county will witness an increase in all income levels above the $100,000 level and decreases in all levels below the $100,000 level between 2009 and 2014.

Surrounding Improvements The subject property is situated on the west side of Wheelers Farms Road. Directly across the street, on the east side of Wheelers Farms Road, is a private farm. To the north of the subject on Wheelers Farms Road is the Crown Corporate Campus, a five building Class “A” office park. This property is deemed to be most similar and competitive to the subject property. To the south along Wheelers Farms Road are single-family residential homes.

Conclusion The subject property is well located in the City of Milford, in proximity

to office buildings, retail stores and restaurants. The subject’s close proximity to Interstate 95 and the Merritt Parkway make it desirable for employees traveling from Connecticut and Westchester County. The area is expected to remain an affordable alternative office market within the larger New Haven County market with no new office developments planned in the immediate area.

NEIGHBORHOOD MAP



SITE ANALYSIS

Property Identification Merritt Crossing 440 Wheelers Farms Road Milford, Connecticut Block/Lot Block 915, Lot 11. Site Size 11.86 Acres (516,622 square feet) Topography The site is generally level at grade. Site Improvements The subject property is improved with a four-story Class “A” office

building with grade level surface parking containing a total rentable area of 176,276 square feet.

On-Site Parking 520 spaces including handicap spaces situated on an open air parking lot.

It is noted that the majority of the parking is located on an adjacent vacant parcel that has granted the subject permission to use the land for parking.

Access Access to the subject is considered very good. Wheelers Farms Road is a

two-way thoroughfare carrying traffic north and south. It connects with both Interstate 95 (1.0 mile south) and Merritt Parkway (0.3 miles north).

Flood Zone Map FEMA Map Panel 0900820004D, indicating flood Zone X, dated July 2,

1987 and are areas characterized by minimal flooding. Land Use Restrictions We were not provided with a title report for review, however, we are not

aware of any easements, encroachments or restrictions that would adversely affect the site’s utility.

Subsoil Conditions We were not provided with an engineer’s report for review, however, no

adverse subsoil or drainage conditions were evident at the time of inspection.

Utilities All utilities are available to the site. Conclusions The subject site is considered fully capable of supporting the existing

improvements. All of the bounding streets are macadam and improved with curbs and street lights. The bounding streets are wide enough to permit the flow of moderate truck and vehicular traffic.



SITE MAP

FLOOD MAP



ZONING ANALYSIS Zoning District The subject property is situated within the zoning jurisdiction of the City

of Milford. According to the current zoning map, the subject site is situated in a DO-25, Designated Office Zoning District. The DO-25 zone is designated for office building uses.

Zoning Bulk Regulations DO-25 Zone Minimum Lot Acreage: 2 Acres Minimum Setbacks Front Yard: 50 Feet Side Yard Width 50 Feet Rear Yard: 50 Feet Minimum Devoted to Parking 1 per 1,000 Sq. Ft. of net office floor areaMaximum Height Stories: No Limit Feet 60 Feet Maximum Building Area 30.00% Maximum FAR: 0.35

Source: City of Milford; Compiled by KTR Subject Lot Size 11.86 Acres (516,622 square feet) Maximum Buildable Area The maximum FAR in the DO-25 district is 0.35. Applying the

maximum commercial FAR of 0.35 to the subject property’s 516,622 square foot site indicates a maximum allowable bulk of 180,818 square feet (0.35 x 516,622).

Parking The subject property affords of 520 open air parking spaces (including

handicapped spaces). This is above the required parking set forth by the zoning ordinance (176,276 square feet/1,000 = 176 parking space required by zoning).

Conclusion As per the City of Milford’s Zoning Regulations, the subject property is

a legal conforming use with super-adequate parking.



ZONING MAP

SUBJECT



REAL ESTATE ASSESSMENTS AND TAXES

Introduction The subject property is identified on the City of Milford’s tax maps as Block 915 Lot 11. The Milford fiscal year runs from October 1st through September 30th with taxes paid in July and January. The tax rate for the 2009/10 year is $27.50 per $1,000. According to the assessor, the new tax rate will not be released until the middle of the Second Quarter 2010. The subject property is designated as a commercial property and the assessment is detailed as follows:

SUBJECT PROPERTY

REAL ESTATE TAX ASSESSMENTS Parcel # 2010/11 915/11 $16,434,420

Source: City of Milford Assessor Compiled by KTR

In addition to the Real Estate Taxes there is also Water and Sewer Taxes levied on the property. For the 2009/10 tax year the Water and Sewer Tax was $6,594. Discussions with the Milford Assessor reveal that typically this tax burden has nominal increases; therefore, the current Water and Sewer Tax will be processed in the analysis.

Comparable Assessments A survey of similar properties in the vicinity of the subject property was

conducted to ascertain the reasonableness of the subject’s assessment. The comparable properties are located in the subject property’s market area and are considered to have a similar use and condition. Based on the current real estate tax assessment, the following table illustrates that the subject property’s assessment falls within the range exhibited by the comparables.

COMPARABLE ASSESSMENTS

Size AssessmentAddress Block/Lot (Sq. Ft.) Assessment PSFSubject Property 915/11 176,276 $16,748,110 $93.23 470-88 Wheelers Farms Road 915/12 320,242 $33,425,000 $104.37

612 Wheelers Farms Road 902/2 104,500 $9,423,750 $90.18 185 Plains Road 939/35 144,000 $12,235,970 $84.97

Source: City of Milford Assessor’s office, compiled by KTR Tax Policy/Rate Milford’s policy is to calculate the real estate taxes payable by

multiplying the assessed value by the tax rate. According to the assessor, the 2009/10 mill rate is $27.50 per $1,000. This represents a slight decrease from the prior rate of $28.23 per $1,000. The decrease in the tax rate is attributed to this being the last year of a five year phase in.

Real Estate Tax Projection We have utilized the 2009/10 mill rate of $27.50 per $1,000 along with

the 2010/11 tax assessment of $16,434,420. It is the customary policy to



calculate the tax burden by multiplying the assessed value by the tax rate; therefore, a tax burden of $451,947 ($16,434,420 x $27.50 per $1,000 mill rate) has been processed. Going forward, taxes are assumed to grow with inflation.

Water & Sewer Tax Projection As previously discussed, the 2009/10 water and sewer tax is not expected

to change and has therefore been processed in the amount of $6,594. Projected Taxes $458,541 ($451,947 RE Taxes + $6,594 Water and Sewer Tax)



DESCRIPTION OF THE IMPROVEMENTS

Date Inspected An inspection of the subject property was conducted by a staff member of KTR on February 9, 2008. The following description is based upon our inspection of the subject property, public information and information provided by management.

GENERAL DESCRIPTION Building Type The subject property is improved with a four-story Class “A” office

building. Parking is located at grade within an open air parking lot. The improvements contain a rentable area of 176,276 square feet.

Year Built 1988 Tenancy The subject property is currently 87.3 percent occupied. There are eight

tenants occupying 153,907 square feet of the total 176,276 square feet. The major tenant in the building is EDR who occupies a portion of the first floor and the entire fourth floor (61,460 square feet).

CONSTRUCTION Structure The subject is constructed of steel frame with a poured reinforced

concrete foundation. Exterior Walls Roseate and gray exposed aggregate pre-cast concrete panels and

grey/green tinted windows. Windows Grey/green tinted deal pane insulated windows in black anodized

aluminum frames. Roof The roof is a Carlisle ballasted single-ply rubber membrane system. Parking There are 520 parking spaces including handicapped spaces. Landscaping There are landscaped areas along the perimeter of the site. LAYOUT Building The subject property is a “U” shaped building with two entrances located

at the east/west end of the building. The lobby is finished with a mixture of carpet/granite floors and wood paneling/marble walls. Common corridors consist of carpet and tile floors and vinyl covered/painted sheetrock walls. Office areas are finished with vinyl covered/painted sheetrock walls, carpeted/tile floors and suspended acoustic tile ceilings with florescent light fixtures.

Elevator There are a total of four Montgomery hydraulic elevators with 2,500

pound capacity. The elevators serve all four floors. MECHANICAL SYSTEMS HVAC The facility is served by an “all air” heating, ventilating and air

conditioning system. There are four 114-ton rooftop units.



Electrical Service Power is provided by United Illuminating through a step-down transformer located at the rear of the property. The building is served by a 3,000 amp 277/480 volts, 3 phase service. Power is distributed to the tenants by two 1,200-amp bus ducts located near the north and south stair towers.

Fire Prevention A full standpipe sprinkler system with zone control valves and tamper

alarm flow switches protect all levels. Complete alarm system with smoke detectors, elevator recall, voice alarm and signaling for smoke evacuation.

INTERIOR FINISHES Floors Granite/Carpet Lighting Fluorescent Lighting Ceiling Acoustical tile Walls Vinyl wall covering and painted sheetrock CONDITION/MAINTENANCE Exterior Very Good Interior Very Good FUNCTIONAL UTILITY Very Good



OFFICE MARKET ANALYSIS Overview The overall Westchester/Southern Connecticut office market in which the

subject property is located is divided into 49 sub-markets as follows:

Ansonia Fairfield North Stratford Bethel Fishkill North Haven Trumbull Branford Greenwich Northeast Wallingford Brewster Guilford Northwest Waterbury Bridgeport Hamden Norwalk West Haven Bronx Meriden Orange West I-287 Brookfield Middlebury Ridgefield Westport Carmel Milford Seymour White Plains CBD Cheshire Monroe Shelton Wilton Danbury Naugatuck Southbury Woodbridge Darien New Canaan Southeast East Haven New Haven Southwest East I-287 Newtown Stamford

The subject property is located in the Milford submarket. The market

analysis contained within this section profiles the past, present and forecasted supply, demand and absorption components of the Westchester/Southern Connecticut office market and the Milford sub-market.

The following table illustrates inventory by building Class for the Westchester/Southern Connecticut office market as well as the Milford office sub-market.

WESTCHESTER/SOUTHERN CONNECTICUT AND MILFORD

FOURTH QUARTER 2009 INVENTORY BY CLASS Total Inventory Class "A" Inventory Class "B" Inventory Class "C" Inventory Market Bldgs Total RBA Bldgs Total RBA Bldgs Total RBA Bldgs Total RBA Westchester/Southern Connecticut 6,142 158,157,371 382 58,081,810 1,829 60,162,427 3,931 39,913,134 Milford 167 2,194,959 8 876,997 32 555,429 127 762,533

Source: CoStar; Compiled by KTR OFFICE SUPPLY ANALYSIS Inventory The Westchester/Southern Connecticut office market consists of

approximately 158.2 million square feet within 6,142 buildings. Included in this inventory are all Class “A”, “B” and “C” office buildings. The inventory of Class “A” space includes 382 buildings with 58.1 million square feet. The Class “B” inventory includes 1,829 buildings with 60.2 million square feet. The Class “C” inventory includes 3,931 buildings with approximately 39.9 million square feet of space. As illustrated, Class “A” office space accounts for 36.7 percent of the total



inventory despite the fact that 93.8 percent of the buildings are classified as Class “B” or “C”.

The subject property is specifically located within the Milford submarket, which contains 167 buildings with 2.2 million square feet. The inventory of Class “A” space includes eight buildings, which according to CoStar contains 876,997 square feet. The Class “B” inventory includes 32 buildings with 555,429 square feet. The Class “C” inventory includes 127 buildings with 762,533 square feet of space.

OFFICE DEMAND ANALYSIS Vacancy Trends The vacancy rate in the Westchester/Southern Connecticut office market is

currently reported by CoStar to be 10.7 percent of all existing space, up from 10.3 percent one year ago. The current vacancy rate for the Class “A” segment of the market is 12.8 percent., the Class “B” segment of the market indicates a current vacancy rate of 11.5 percent, while Class “C” buildings indicate a vacancy rate of 6.4 percent. Historical vacancies for all space are summarized below, followed by current vacancies by building Class for the Westchester/Southern Connecticut office market.

WESTCHESTER/SOUTHERN CONNECTICUT OFFICE MARKET

CURRENT AND HISTORICAL VACANCY Existing Inventory Vacancy Period # of Bldgs. Total RBA Direct SF % Total SF % 4Q 2009 6,142 158,157,371 15,824,341 10.0% 16,891,688 10.7%4Q 2008 6,120 157,372,221 15,205,933 9.7% 16,186,329 10.3%2007 (Avg.) 6,095 156,302,439 15,382,117 9.8% 16,462,733 10.5%


CURRENT VACANCY BY CLASS Existing Inventory Vacancy Class # of Bldgs. Total RBA Direct SF % Total SF % Class “A” 382 58,081,810 6,556,445 11.3% 7,455,120 12.8%Class “B” 1,829 60,162,427 6,786,142 11.3% 6,900,429 11.5%Class “C” 3,931 39,913,134 2,481,754 6.2% 2,536,139 6.4% Total 6,142 158,157,371 15,824,341 10.0% 16,891,688 10.7%

Source: CoStar; Compiled by KTR The vacancy rate in the Milford office submarket is currently reported by CoStar to be 12.0 percent of all existing space, up slightly from 11.9 percent one year ago. The vacancy rate for the Class “A” market is 14.6 percent, the Class “B” space indicates a vacancy rate of 17.4 percent and the Class “C” buildings indicate an overall vacancy rate of 4.9 percent. Historical vacancies for all space are summarized below, followed by current vacancies by building Class for the Milford office submarket.



MILFORD OFFICE SUBMARKET CURRENT AND HISTORICAL VACANCY

Existing Inventory Vacancy Period # of Bldgs. Total RBA Total SF % 4Q 2009 167 2,194,959 262,565 12.0% 4Q 2008 167 2,194,959 261,583 11.9% 4Q 2007 167 2,194,959 318,931 14.5%

MILFORD OFFICE SUBMARKET CURRENT VACANCY BY CLASS

Existing Inventory Vacancy Class # of Bldgs. Total RBA Total SF % Class “A” 8 876,997 128,264 14.6% Class “B” 32 555,429 96,625 17.4% Class “C” 127 762,533 37,676 4.9% Total 167 2,194,959 262,565 12.0%

Source: CoStar; Compiled by KTR Construction According to CoStar, there were eight office buildings with a total of

736,264 square feet currently under construction in the Westchester/Southern Connecticut office market. None of these buildings are located in Milford or the surrounding areas.

Absorption The Westchester/Southern Connecticut office market realized positive

absorption of 79,791 square feet in 2009. The market experienced over 1.0 million square feet of positive absorption annually between 2006 and 2008. The following table illustrates net absorption for the Westchester/Southern Connecticut office market between 2006 and 2009.


CURRENT AND HISTORICAL ABSORPTION Year All 2009 79,791 2008 1,346,186 2007 1,001,727 2006 2,012,855

Source: CoStar; Compiled by KTR



The Milford office market realized negative absorption of 982 square feet in 2009. The market experienced positive absorption annually between 2006 and 2008. The following table illustrates net absorption for the Milford office market between 2006 and 2009.

MILFORD OFFICE SUBMARKET

CURRENT AND HISTORICAL ABSORPTION Year All 2009 -982 2008 57,348 2007 102,995 2006 26,144

Source: CoStar; Compiled by KTR Asking Rental Rates As of the Fourth Quarter of 2009, CoStar’s overall quoted rate for office

buildings in the Westchester/Southern Connecticut office market was $27.04 per square foot and was $21.08 per square foot for the Milford sub-market. Class “A” quoted rates were $33.16 per square foot for the market as a whole and $24.57 per square foot for Milford. Class “B” rates were $24.12 per square foot for the market and $15.66 per square foot in Milford. Class “C” quoted rates were $20.89 per square foot for the entire market and $19.73 per square foot in Milford. It is noted that the Class “C” market has a higher quoted rental rate than Class “B” buildings in Milford, a trend which is atypical to most markets. The following table summarizes the rental rates by building class for office space in the Westchester/Southern Connecticut office market and Milford sub-market.

QUOTED RATES BY BUILDING CLASS Westchester Milford Southern Connecticut A $24.57 $33.16 B $15.66 $24.12 C $19.73 $20.89 Total $21.08 $27.04 Source: CoStar; Compiled by KTR

Micro Sub-Market Overview The subject’s micro sub-market consists of eight Class “A” office

buildings (inclusive of the subject property) located within Milford. Although the degree of competition varies from building to building, the subject competes primarily with the buildings located in the micro-market.



All of the competitive properties sign leases on a gross basis, while the subject property signs leases on a net basis. Discussions with leasing agents for the competitive properties revealed that total operating expenses in the comparables range from $8.50 to $9.00 per square foot plus taxes. A $9.00 operating expense has been utilized to convert the comparable leases from gross to net. Out of the eight Class “A” buildings in Milford, five are located in the Crown Corporate Campus, located directly north of the subject property on Wheelers Farms Road. These buildings are deemed to be most comparable to the subject. All five buildings are three-stories and range in size from 74,412 square feet to 97,045 square feet. Occupancy rates in the five buildings range from approximately 63.5 percent to 100.0 percent with three of the buildings having an occupancy of at least 86.0 percent. Discussions with the leasing agent for this comparable indicate that they have not attempted to lease up a building at a time, rather they lease based on the needs of the prospective tenants. Asking rents in the building are $23.50 per square foot gross including electric which typically is $1.75 per square foot on a modified gross lease basis. 612 Wheelers Farms Road, is a Class “A” five-story building containing 104,500 square feet of rentable area. The building is located approximately 0.4 of a mile north of the subject. The property is 90.3 percent occupied with asking rents of $21.50 including electric on a modified gross basis. Electric expenses traditionally range from $1.25 to $1.75 per square foot. Lastly, 185 Plains Road in the Milford Place Corporate Center, is a Class “A” three-story building containing 144,000 square feet of rentable area. The building is located approximately 1.6 miles south of the subject and is currently 88.9 percent occupied. Asking rents in the building are $21.50 including electric on a modified gross basis. Similar to 612 Wheelers Farms Road electric expenses traditionally range from $1.25 to $1.75 per square foot.

Conclusion Merritt Crossing is a Class “A” office building that is in very good

condition and well-located within its respective sub-market. The subject is currently 87.3 percent occupied. Overall, the subject offers space and amenities that are comparable within its competitive set. With effective management, the subject should continue to maintain a stabilized occupancy that out performs the sub-market and represents a viable asset into the foreseeable future.



OFFICE MARKET RENT ANALYSIS Introduction The subject property consists of a four-story Class “A” office building

located in the Milford sub-market of the Westchester/Southern Connecticut Office Market. Recent leasing activity suggests that demand exists for office space in the local market. It is a fundamental characteristic of real estate that each property is unique. For this reason, the best indicators of market rent for a given property will generally be recent leases that have been negotiated within the subject itself.

Subject Leases In the subject there have been three recent leases signed, two of which

are renewals. The two renewals commenced in January and February 2010. The February renewal was with Cox Radio to renew their 20,739 square foot space for a 10 year term. The base rental rate is $14.00 per square foot on a net basis increasing to $15.00 per square foot at the mid-point of the lease. This space was awarded a $5.00 per square foot workletter with no free rent. The second renewal was with Aliquant, to renew their 12,605 square foot space for six months. The rental rate is $13.25 per square foot on a net basis. No free rent or workletter was allotted to this space given the shorter term. The most recent new lease commenced in June 2009 with Perimeter. They occupy, 14,487 square feet of space for a five year term. The base rent is $13.96 per square foot. The space was awarded one month free rent and no workletter. The subject’s recent leasing activity is further summarized as follows:

RECENT SUBJECT LEASES

Size Term Tenant Floor (Sq. Ft.) (Yrs.) Lease Date Rent/PSF Comments Cox Radio 3 20,739 10 Feb-10 $14.00 Rent increases: $15.00 PSF in Nov 2015 Renewal Free Rent: None Tenant Improvement Allowance: $5.00 PSF RE Tax: Net Op Exp: Net Renewals: None Aliquant 1 12,605 0.5 Jan-10 $13.25 Rent increases: None Renewal Free Rent: None Tenant Improvement Allowance: None RE Tax: Net Op Exp: Net Renewals: None Perimeter 2 14,487 5 Jun-09 $13.96 Rent increases: $14.92 PSF in May 2014 Free Rent: 1 Month Tenant Improvement Allowance: None RE Tax: Net Op Exp: Net Renewals: None

Source: Owner Provided Information



Comparable Office Leases Our survey identified six office leases within the competitive area; three of which are current offerings. The buildings selected are similar to the subject in terms of age/condition, amenities and the level of finishes. The comparable leases were signed on a gross basis. The three signed leases commenced between May and August 2009 and are detailed as follows:

COMPARABLE OFFICE LEASES

Size Term LeaseAddress/Tenant (Sq. Ft.) (Yrs.) Date Rent/PSF Comments

Asking 3,963 - 31,149 N/A Asking $23.50 Plus electric, space is subdivided472-88 Wheelers Farms Rd among the five buildings in the office park. Milford, CT Free Rent: Neg.

Leasing Comissions: 4.0%TI: Neg.

Asking 15,984 N/A Aking $21.50 Plus electric185 Plains Rd Free Rent: Neg.Milford, CT Leasing Comissions: 4.0%

TI: Neg.Asking 10,150 N/A Asking $21.50 Plus electric612 Wheelers Farms Rd Free Rent: Neg.Milford, CT Leasing Comissions: 4.0%

TI: Neg.Shock Systems 6,600 5 Aug-09 $24.00 Plus electric2 Corporate Dr New (Average) Free Rent: 3 monthsShelton, CT Leasing Comissions: 4.0%

TI: $25 PSFN/A 7,700 5 Jun-09 $19.00 Plus electric99 Hawley Ln Renewal (Average) Free Rent: 3 monthsStratford, CT Leasing Comissions: 4.0%

TI: As IsPerma Green 4,700 5.4 May-09 $19.50 Plus electric99 Hawley Ln New (Average) Free Rent: 4 MonthsStratford, CT Leasing Comissions: 4.0%

TI: $15 PSF As illustrated above, the signed leases range from $19.50 to $24.00 per square foot and the asking rents range from $21.50 to $23.50 per square foot. The high end of the signed leases is located in Shelton, which is deemed a superior office market compared to Milford. As mentioned above, the comparable leases were signed on a gross basis whereas the subject rents are on a net basis

Market Rent Conclusions As previously discussed, the competitive properties exhibited total

operating expenses ranging from $8.50 to $9.00 per square foot plus taxes. A $9.00 operating expense has been utilized to convert the comparable leases from gross to net. Based upon the preceding information, the signed comparable leases on a net basis would translate to a range of approximately $10.00 to $15.00 per square foot and the asking comparables would translate to a range $12.50 per square foot to



$14.50 per square foot on a net lease basis. Tenant Improvement allowances range from none to $15.00 per square foot. As such, a tenant improvement allowance of $15.00 per square foot for new tenants has been processed. According to local brokers tenant improvements for renewal tenants are typically one third to one half of the allowance for new tenants. Accordingly we have processed $5.00 per square foot in Tenant Improvements for renewal tenants. Free Rent ranges from 0 to 3 months in the comparable leases; therefore, we have processed three months of free rent for the subject. Leasing commissions for the comparables are 4.0 percent. This has been processed in the analysis. Discussions with local brokers indicate that leasing commissions for renewal tenants is half of the new tenant leasing commissions, therefore, 2.0 percent has been processed for such. All operating expenses in the subject are on a pro-rata share triple net basis and have been processed as such.

Market Rent Assumptions Market rent was determined as follows: Market Rent $13.50 per square foot Term 5 years Rent Steps 3.0% annually Free Rent 3 months Workletter $15.00 for new tenants Workletter $5.00 for renewals Operating Expenses Net R.E. Tax Net Utilities Net Leasing Commissions 4.0% for new tenants Leasing Commissions 2.0% for renewals



HIGHEST AND BEST USE ANALYSIS Introduction Highest and Best Use is defined by the Appraisal Institute in The

Dictionary of Real Estate Appraisal, Fifth Edition, Chicago, Illinois, Appraisal Institute, 2010, which states:

That reasonably probable and legal use of vacant land or an improved property, which 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.

There are typically two Highest and Best Use scenarios: the Highest and Best Use of the property as vacant and the Highest and Best Use of the site as if improved.

Highest and Best Use As If Vacant The subject site can accommodate a wide variety of appropriately scaled

uses. Zoning regulations permit a variety of commercial uses, including office. The maximum value of a property is typically realized when a reasonable degree of homogeneity is present, thus conformity in use is a highly desirable aspect of real property, since it creates and/or maintains value. The immediate area is predominately comprised of commercial buildings. Based on the principal of conformity and the subject’s commercial zone, the highest and best use of the subject, if vacant, is commercial development.

Highest and Best Use As Improved The subject site is improved with a Class “A” office building. The

improvements contribute to the total property value and neither demolition nor conversion to an alternate use would be financially justified. Accordingly, the highest and best use of the subject, as improved is for its continued use.



VALUATION PROCEDURE Overview There are three traditional approaches that can be employed in

establishing the market value of the subject property. These approaches and their applicability to the valuation of the subject property are summarized as follows:

The Income Capitalization Approach The theory of the Income Capitalization Approach is based on the premise

that a value indication for a property is derived by converting anticipated benefits into property value. Anticipated benefits include the present value of the net income and the present value of the net proceeds resulting from the re-sale of the property.

There are two methods of accomplishing this: (1) direct capitalization of

the first year's income by an overall capitalization rate and; (2) the discounted cash flow in which the annual cash flows and reversionary value are discounted to a present value for the remainder of the property’s productive life or over a reasonable holding (ownership) period. This report will utilize the discounted cash flow method.

The Sales Comparison Approach The Sales Comparison Approach is an estimate of value based upon a

process of comparing recent sales of similar properties in the surrounding or competing areas. Inherent in and central to this approach is the principle of substitution.

The application of this approach consists of comparing the subject

property to similar properties of the same general type, which have been sold recently or currently are available for sale in competing areas. This comparative process involves judgment as to the similarity of the subject property and the comparable sales with respect to various factors. The value estimated through this approach represents the probable price at which a willing seller would sell the subject property to a willing and knowledgeable buyer as of the date of value.

The reliability of this technique is dependent upon the availability of

comparable sales data, the verification of the sales data, the degree of comparability and extent of adjustment necessary for differences and the absence of atypical conditions affecting the individual sale prices. Research revealed limited sales since the Third Quarter of 2008. The perceived decline in market value over the last year (particularly in the absence of non-distressed sales) reduces the reliability of the value indication derived via the Sales Comparison Approach. Accordingly, reduced emphasis has been placed on this approach.



The Cost Approach The Cost Approach was not included within the scope of this appraisal as the appraisal addresses the Leased Fee Estate and the Cost Approach is only useful in the determination of the Fee Simple Estate.

Reconciliation The valuation procedure is concluded via a review of the approaches to

value employed. The reliability of the market data utilized and the overall applicability of each approach are re-examined. Based upon this analysis, the value indications are reconciled and a final estimate is concluded.



THE INCOME CAPITALIZATION APPROACH Methodology The Income Capitalization Approach is based on the assumption that

value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over a period of time. The two most common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis.

A number of factors are considered in evaluating the appropriateness of the direct capitalization method and/or the DCF technique. These considerations include the occupancy status of the property, the structure of the existing leases, the existence of above or below market rents and the preferences of purchasers/investors in the local market for the subject’s property type. The discounted cash flow analysis considers the projected performance of the property as affected by lease expirations and subsequent lease-up periods. Accordingly, the Discounted Cash Flow method has been employed.

Discounted Cash Flow Investors in income producing properties typically make a forecast of net

operating income and cash flow over a period of time ranging from five to fifteen years and then determine a purchase price that will provide a return on and of the investment and justify the degree of risk inherent therein.

The major tasks involved in such an approach to valuing the subject are enumerated as follows:

1. Analysis of the projected contract rental income stream, projection of

future annual revenues for a typical holding period, probable lease rollovers at market rates, and probable vacancy and credit losses.

2. Analysis of projected expense recoveries including operating expenses, insurance and real estate taxes.

3. A derivation of the most probable annual net operating income to be generated by the property over the projection period by subtracting all property expenses from the effective gross income.

4. Projection of capital expenses such as structural reserves, leasing commissions, and tenant allowances.

5. Conversion of the projected net operating income to an annual cash flow by deducting the capital expenses.

6. Estimation of a resale price at the end of the investment period by applying an appropriate reversionary capitalization rate to the forecast 11th year net operating income and deducting the appropriate selling costs.

7. Determination of a discount rate (yield rate) which would attract a prudent investor to invest in a similar situation with comparable degrees of risk, non-liquidity and management responsibilities.

8. Conversion of the pre-tax cash flows into a present value by discounting at the proper discount rate.



The results of this analysis provide an estimate of value free and clear of financing. The property’s before tax annual income is contained in the accompanying cash flow.

Projection Period The subject’s estimated value by a discounted cash flow analysis is based

on a cash flow projection over a specified number of years. Since a typical investor is concerned not only with the return on capital but also with the return of capital, the analysis takes into account the re-sale of the property at the termination of the holding period.

The cash flow commences January 2010 and represents a 10-year holding period with the 11th year net operating income used in developing the subject’s future reversionary value.

Net Rentable Area The subject property contains a net rentable area of 176,276 square feet. Contract Rent According to the submitted rent roll, the subject property is currently

87.3 percent leased. Contract rent has been utilized for all existing leases with market rent applied upon rollover.

Expense Reimbursements Expense reimbursements as detailed in the submitted information and

according to the noted market rent parameters have been processed in the analysis. Expense reimbursements for current tenants include a pro rata share of all operating expenses including real estate taxes.

Absorption of Vacant Space The subject is currently 12.7 percent vacant with 22,369 square feet of

vacant office space. Based on discussions with local brokers, the vacant space is estimated to be leased within the first nine months of the cash flow.



Market Rent Assumptions As detailed in the Market Rent Analysis section of this report, the following market leasing assumptions have been processed in the analysis: SUMMARY OF MARKET OFFICE RENT ASSUMPTIONS

Market Rent $13.50 per square foot (net) Term 5 years Rent Steps 3.0% annually Free Rent 3 months Workletter $15.00 for new tenants Workletter $5.00 for renewals Operating Expenses Net R.E. Tax Net Utilities Net Leasing Commissions 4.0% for new tenants Leasing Commissions 2.0% for renewals Renewal Probability A renewal probability of 70.0 percent has been processed, which is

supported by the Korpacz Real Estate Investor Survey: Fourth Quarter 2009, in which investors indicate a renewal probability between 60.0 and 70.0 percent for the National Suburban Office Market.

Vacancy Between Leases This analysis assumes that leases average six months vacancy upon lease

expiration and non-renewal. This is supported by the Korpacz Real Estate Investor Survey: Fourth Quarter 2009, in which most investors indicate vacancy between leases ranging from six to 12 months for the National Suburban Office Market.

Leasing Commissions Full leasing commissions, applied to space leased to non-renewal tenants

is based upon a brokerage fee calculated on the following percentage of annual contract rent: 4.0 percent for new leases and 2.0 percent for renewal leases. All leasing commissions attributable to the existing tenants are assumed to been paid.

Vacancy and Credit Loss The Korpacz Real Estate Investor Survey: Fourth Quarter 2009 details

underlying vacancy and credit loss of 2.0 to 12.5 percent with most survey respondents reporting between 2.0 and 8.0 percent for the National Suburban Office Market. The subject has maintained occupancy levels greater than 87.0 percent over the past few years. A 7.5 percent vacancy and credit loss is considered appropriate and has been processed in the analysis.

Operating Expenses Historical information for the subject property from 2008 and 2009 was available for review. These figures were provided by the current owner; who also manages the property. The historical operating expenses are detailed as follows:



SUBJECT PROPERTY HISTORICAL & PROJECTED OPERATING STATEMENTS

KTR 2008 PSF 2009 PSF Projected PSF Insurance $20,228 $0.11 $20,545 $0.12 $21,150 $0.12 Payroll & Benefits $241,067 $1.37 $260,803 $1.48 $268,600 $1.52 Gen. & Administrative $77,365 $0.44 $77,288 $0.44 $79,600 $0.45 Cleaning $201,269 $1.14 $201,762 $1.14 $200,061 $1.13 Legal & Professional $5,658 $0.03 $21,352 $0.12 $22,000 $0.12 Repairs & Maintenance $166,060 $0.94 $163,251 $0.93 $168,150 $0.95 Utilities $984,155 $5.58 $877,044 $4.98 $869,852 $4.93 Management $136,028 $0.77 $126,336 $0.72 $122,586 $0.70 Miscellaneous $47,981 $0.27 $46,046 $0.26 $47,500 $0.27 Total Op Exp $1,879,811 $10.66 $1,794,427 $10.18 $1,799,499 $10.21 RE Taxes $465,477 $2.64 $460,680 $2.61 $458,541 $2.60 Total Op Exp $2,345,288 $13.30 $2,255,107 $12.79 $2,258,040 $12.81

Source: Submitted Operating Statements Compiled by KTR Reserves for Replacements This category represents the mechanical and structural repairs necessary

to operate and maintain the subject properties. It also includes non-cash charges for the future replacement of the subject property’s main components. Typically, an allowance of $0.15 to $0.25 per square foot is appropriate. Based upon the subject property condition and age, we have processed reserves for replacement of $0.20 per square foot or $35,255.

Total Operating Expenses The estimated operating expenses for the subject property, before real

estate taxes and reserves are $1,799,499, which equates to $10.21 per square foot. Although the projected operating expenses are above the noted range in the area; that is $8.50 and $9.00 per square foot plus taxes; they appear to be appropriate based upon the subject’s age, condition, level of services offered and that tenant electric is not directly billed to the tenants; therefore, the total operating expenses have been processed.

GROWTH RATE ASSUMPTIONS Market Rental Growth Rate Market rent is projected to remain flat in the first year of the analysis. An

average growth rate of 1.0 percent in year two, 2.0 percent in year three and 3.0 percent per thereafter has been applied.

Operating Expense Growth Rate Operating expenses are anticipated to grow at 3.0 percent per year.

Real Estate Tax Growth Rate Real estate taxes are assumed to increase at an average inflationary rate of

3.0 percent year. Cash Flow Projection The table at the end of this section contains our projection of the anticipated

revenues, expenses, net operating income, capital expenses and cash flow



from the property over the 11-year period beginning January 1, 2010 and ending December 31, 2020.

Discount Rate Selection In selecting a discount rate to apply to annual cash flows projected over

the holding period and to the reversion upon resale, we have reviewed surveys of investor sentiment and considered yields on various investment alternatives. As an aid in gauging investor sentiment, we have utilized investor surveys that review the investment criteria and analytic approaches of market participants. It should be noted that the data yielded by these surveys, including discount rates ("IRRs"), overall rates and residual capitalization rates, tend to reflect the assumptions used in evaluating current holdings or hypothetical deals rather than actual transactions. Yield criteria of individual participants in the surveys varied considerably and appear to depend on assumptions regarding projected cash flows.

Investor required rates of return appear to have increased slightly over the last 12 months. These rates are determined by investors based upon the relative risk of a particular investment in relation to other investment vehicles. Recent published surveys of major investors' criteria have been reviewed, however, the participants of this survey generally respond with a range of IRRs. The lower end of each investor’s range generally being indicative of where deals are being done in the market, and is reflective of the investment criteria currently applied by prospective buyers of high quality investment grade properties with credit quality tenants. The high end of the range reflects the criteria most applicable to borderline investment grade property (whether due to risks associated with location, condition, tenant quality, or market and contractual lease rate projections). The responses of the eight survey participants indicate that all of the participants are most likely active buyers within the market. The following data is based upon interviews conducted among many of the nation's leading life insurance companies, commercial banks, investment banking firms, thrift institutions, and syndicators. This survey provides guidelines currently being utilized in the market. The table presented below summarizes the highlights of the report for the National Suburban office market.



INVESTOR SURVEY - FOURTH QUARTER – 2009 NATIONAL SUBURBAN OFFICE MARKET

Low High Avg. Internal Rate of Return 7.25% to 14.00% 10.02% Overall Capitalization Rate 6.75% to 12.00% 8.75% Terminal Capitalization Rate 7.00% to 11.50% 8.76% Annual Revenue Growth Rate -20.00% to 3.00% -2.35% Annual Expense Growth Rate 1.00% to 4.00% 2.77%

Source: “Korpacz Real Estate Investor Survey (Fourth Quarter 2009)” Conclusion The subject benefits from a relatively good location on Wheelers Farms

Road proximate to both Interstate 95 and the Merritt Parkway. Based on the location and amenities offered, the subject is considered one of the most desirable office buildings in the area. Examination of the projected income stream details a cash flow that remains nearly flat during the majority of the investment period. As indicated in the previous chart, the National Suburban Office Market had an IRR range of 7.25 and 14.0 percent; with an average of 10.02 percent in the Fourth Quarter 2009. Based on the relatively risky projection of flat rent growth (relative to investors projecting negative spikes), an IRR near the reported average, or 9.75 percent is deemed appropriate and has been processed.

Reversion At the end of the projection period, the property is assumed to be resold based on the following years net operating income, capitalized at 8.25 percent. The indicated reversionary capitalization rate is considered appropriate based upon the average risk associated with the resale of the subject property.

Costs associated with the sale have been estimated at 3.5 percent of the

gross sales proceeds. Conclusion Based on the application of the indicated discount rate to the projected

cash flow over the 10-year holding period and to the net reversion in the 11th year, the Market Value of the Leased Fee Interest in the subject property, as indicated by the Discounted Cash Flow method of the Income Capitalization Approach, is $21,706,938.

Accordingly, the Market Value of the Leased Fee Interest in the subject property, as of January 1, 2010, free and clear of financing, is rounded to:

TWENTY ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS

($21,700,000)



440 WHEELERS FARMS ROAD

CASH FLOW

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6For the Years Ending Dec-2010 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015

___________ ___________ ___________ ___________ ___________ ___________Potential Gross Revenue Base Rental Revenue $2,348,884 $2,317,992 $2,406,877 $2,435,815 $2,515,392 $2,575,392 Absorption & Turnover Vacancy (177,250) (15,354) (21,262) (57,525) (141,115) Base Rent Abatements (88,259) (6,909) (35,741) (39,864)

___________ ___________ ___________ ___________ ___________ ___________ Scheduled Base Rental Revenue 2,083,375 2,317,992 2,384,614 2,414,553 2,422,126 2,394,413

Expense Reimbursement Revenue Insurance 19,575 21,785 22,297 22,916 23,278 23,227 Payroll 248,594 276,658 283,172 291,035 295,625 294,979 General & Admin 73,671 81,987 83,919 86,249 87,610 87,419 Cleaning 185,160 214,035 218,387 224,210 226,179 222,198 Legal & Prof 20,363 22,661 23,193 23,838 24,213 24,160 Repairs & Maint 155,626 173,195 177,273 182,195 185,069 184,665 Utilities 805,063 930,606 949,537 974,844 983,409 966,097 Management Fee 113,452 132,282 135,196 137,734 137,836 134,273 Miscellaneous 43,960 48,923 50,077 51,468 52,279 52,163 RE Taxes 424,387 472,297 483,419 496,841 504,677 503,574 Adjacent Parcel Taxes 67,023 74,588 76,346 78,465 79,701 79,528

___________ ___________ ___________ ___________ ___________ ___________ Total Reimbursement Revenue 2,156,874 2,449,017 2,502,816 2,569,795 2,599,876 2,572,283

___________ ___________ ___________ ___________ ___________ ___________Total Potential Gross Revenue 4,240,249 4,767,009 4,887,430 4,984,348 5,022,002 4,966,696 General Vacancy (154,062) (357,526) (352,355) (354,159) (323,440) (241,971)

___________ ___________ ___________ ___________ ___________ ___________Effective Gross Revenue 4,086,187 4,409,483 4,535,075 4,630,189 4,698,562 4,724,725

___________ ___________ ___________ ___________ ___________ ___________Operating Expenses Insurance 21,150 21,785 22,438 23,111 23,805 24,519 Payroll 268,600 276,658 284,958 293,506 302,312 311,381 General & Admin 79,600 81,988 84,448 86,981 89,591 92,278 Cleaning 200,061 214,034 219,765 226,113 231,294 234,552 Legal & Prof 22,000 22,660 23,340 24,040 24,761 25,504 Repairs & Maint 168,150 173,195 178,390 183,742 189,254 194,932 Utilities 869,852 930,605 955,522 983,122 1,005,652 1,019,818 Management Fee 122,586 132,284 136,052 138,906 140,957 141,742 Miscellaneous 47,500 48,925 50,393 51,905 53,462 55,066 RE Taxes 458,541 472,297 486,466 501,060 516,092 531,575 Adjacent Parcel Taxes 72,416 74,588 76,826 79,131 81,505 83,950

___________ ___________ ___________ ___________ ___________ ___________Total Operating Expenses 2,330,456 2,449,019 2,518,598 2,591,617 2,658,685 2,715,317

___________ ___________ ___________ ___________ ___________ ___________Net Operating Income 1,755,731 1,960,464 2,016,477 2,038,572 2,039,877 2,009,408

___________ ___________ ___________ ___________ ___________ ___________Leasing & Capital Costs Tenant Improvements 540,070 56,219 110,262 636,682 324,355 Leasing Commissions 112,511 12,537 29,162 156,326 72,332 Reserves 35,255 36,313 37,402 38,524 39,680 40,870

___________ ___________ ___________ ___________ ___________ ___________Total Leasing & Capital Costs 687,836 36,313 106,158 177,948 832,688 437,557

___________ ___________ ___________ ___________ ___________ ___________Cash Flow Before Debt Service $1,067,895 $1,924,151 $1,910,319 $1,860,624 $1,207,189 $1,571,851& Taxes =========== =========== =========== =========== =========== ===========



440 WHEELERS FARMS ROAD CASH FLOW (CONTINUED)

Year 7 Year 8 Year 9 Year 10 Year 11

For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 ___________ ___________ ___________ ___________ ___________

Potential Gross Revenue Base Rental Revenue $2,654,772 $2,734,417 $2,818,708 $2,947,513 $3,058,581 Absorption & Turnover Vacancy (17,800) (55,856) (267,284) (90,421) Base Rent Abatements (24,347) (8,010) (146,167) (18,511)

___________ ___________ ___________ ___________ ___________ Scheduled Base Rental Revenue 2,630,425 2,708,607 2,762,852 2,534,062 2,949,649

Expense Reimbursement Revenue Insurance 25,254 25,850 26,281 25,149 27,596 Payroll 320,721 328,276 333,761 319,394 350,465 General & Admin 95,047 97,285 98,910 94,654 103,863 Cleaning 248,125 253,173 255,749 236,146 267,188 Legal & Prof 26,269 26,888 27,338 26,160 28,704 Repairs & Maint 200,780 205,509 208,943 199,948 219,401 Utilities 1,078,828 1,100,775 1,111,977 1,026,739 1,161,713 Management Fee 151,731 155,146 156,711 140,558 164,844 Miscellaneous 56,717 58,053 59,024 56,482 61,976 RE Taxes 547,522 560,415 569,782 545,255 598,298 Adjacent Parcel Taxes 86,467 88,504 89,986 86,110 94,487

___________ ___________ ___________ ___________ ___________ Total Reimbursement Revenue 2,837,461 2,899,874 2,938,462 2,756,595 3,078,535

___________ ___________ ___________ ___________ ___________Total Potential Gross Revenue 5,467,886 5,608,481 5,701,314 5,290,657 6,028,184 General Vacancy (410,091) (404,171) (375,932) (149,562) (368,474)

___________ ___________ ___________ ___________ ___________Effective Gross Revenue 5,057,795 5,204,310 5,325,382 5,141,095 5,659,710

___________ ___________ ___________ ___________ ___________Operating Expenses Insurance 25,254 26,012 26,792 27,596 28,424 Payroll 320,722 330,344 340,254 350,462 360,976 General & Admin 95,047 97,898 100,835 103,860 106,976 Cleaning 248,124 254,767 260,723 259,114 275,200 Legal & Prof 26,269 27,057 27,869 28,705 29,566 Repairs & Maint 200,780 206,803 213,007 219,398 225,980 Utilities 1,078,826 1,107,711 1,133,607 1,126,611 1,196,552 Management Fee 151,734 156,129 159,761 154,233 169,791 Miscellaneous 56,717 58,419 60,172 61,977 63,836 RE Taxes 547,522 563,948 580,866 598,292 616,241 Adjacent Parcel Taxes 86,468 89,063 91,734 94,486 97,321

___________ ___________ ___________ ___________ ___________Total Operating Expenses 2,837,463 2,918,151 2,995,620 3,024,734 3,170,863

___________ ___________ ___________ ___________ ___________Net Operating Income 2,220,332 2,286,159 2,329,762 2,116,361 2,488,847

___________ ___________ ___________ ___________ ___________Leasing & Capital Costs Tenant Improvements 198,108 65,173 1,189,317 150,615 Leasing Commissions 44,178 14,534 265,220 33,587 Reserves 42,097 43,359 44,660 46,000 47,380

___________ ___________ ___________ ___________ ___________Total Leasing & Capital Costs 284,383 123,066 44,660 1,500,537 231,582

___________ ___________ ___________ ___________ ___________Cash Flow Before Debt Service $1,935,949 $2,163,093 $2,285,102 $615,824 $2,257,265& Taxes =========== =========== =========== =========== ===========



Unleveraged Present Value Analysis

For the Annual PV of CFAnalysis Period Year End Cash Flow @ 9.75%Year 1 Dec-10 1,067,895 973,025Year 2 Dec-11 1,924,151 1,597,460Year 3 Dec-12 1,910,319 1,445,082Year 4 Dec-13 1,860,624 1,282,450Year 5 Dec-14 1,207,189 758,146Year 6 Dec-15 1,571,851 899,464Year 7 Dec-16 1,935,949 1,009,398Year 8 Dec-17 2,163,093 1,027,635Year 9 Dec-18 2,285,102 989,156Year 10 Dec-19 615,824 242,891

Total Cash Flow 16,541,997 10,224,707Resale @ 8.25% 29,111,968 11,482,231

Total Present Value $21,706,938Per Sq. Ft. $123.14

Percentage Value DistributionAssured Income 25.67%Prospective Income 21.43%Prospective Property Resale 52.90%Total 100.00%



THE SALES COMPARISON APPROACH Introduction The Sales Comparison Approach is the process in which an estimate of

value is derived by analyzing recent transactions of similar properties in the market and comparing these properties to the subject property. The estimated value derived through this approach represents the probable price at which the subject property would be sold by a willing seller to a willing buyer as of the date of value. Substitution is the underlying principle affecting the choice of buyers and sellers and implies that a prudent person will not pay more to buy a property than it would cost to buy a comparable substitute property. The price a typical purchaser pays is usually the result of a comparison process of various alternatives.

The subject property is a four-story, 176,276 square foot Class “A” office

building constructed in 1988. As of the date of inspection, the subject was approximately 87.3 percent occupied by multiple tenants. A survey of the subject’s immediate market revealed limited relevant sales during the past year; however, several arms-length sales of office buildings occurred in 2007 and early 2008. Three sales between May 2007 and April 2008 have been analyzed. Based on such, the Sales Comparison Approach would lend minimal insight into the value of the subject although it has been presented as support for the value conclusion via the Income Approach.

The comparative process involves judgment as to the similarity between

the subject and the comparable sale property with regard to a variety of factors affecting value. Among the specific adjustment factors, the following have been considered.

Financing The comparable sales were either all cash sales or financed at market

rates. As such, no adjustments have been made for financing. Ownership Interest No adjustment for ownership interest was required. Market Conditions Comparable sales that occurred under different market conditions than

those applicable to the subject property as of the effective date of appraisal require adjustment for any differences that affect their values. The comparable sales occurred between May 2007 and April 2008. The market was relatively flat during 2008, however, property values decreased in September due to the problems associated with the credit market. Given trends in the marketplace, downward adjustments of approximately 1.0 percent per month subsequent to September 2008. September 15, 2008 is viewed by most market analysts as the turning point in the commercial real estate market when concerns over the severity of the credit crisis were confirmed with the bankruptcy of Lehman Brothers and the government takeover of Fannie Mae and Freddie Mac. Significant market value decline was evidenced after this date. The level of decline varied by market and property type, however virtually all asset types were impacted. It is noted that between January 2007 and 2008, there were upward market conditions of 1.0 percent per month.



Location An adjustment for location is appropriate when the location

characteristics of a comparable property are different from those of the subject. Adjustments have been made on an individual basis taking into account the desirability and appeal for office space in each location.

Occupancy The comparables were between 63.0 and 93.0 percent leased at the time

of sale. The sales have been adjusted for occupancy on an individual basis.

Age The comparables were built between 1986 and 1989. The subject was

constructed in 1988 and therefore no adjustment for age has been processed.

Condition Adjustments for the condition of each building have been considered on

an individual basis. Physical Characteristic Adjustments for the physical configuration of each building (i.e. the size

of floor plates, number of floors), functional utility and appearance have been considered on an individual basis.

The following is a brief description of the relevant building sales

considered pertinent in the valuation of the subject property.



Comparable Sale No. 1 Address: 375 Bridgeport Avenue Shelton, CT Parcel ID: Block 77, Lot 14 Sale Date: April 2008 Grantor: SR 2, LLC Grantee: 375 Bridgeport Prop., LLC Occupancy at Sale: 63.0% Building Size: 45,885 square feet (RBA) Consideration: $3,850,000 Price per Square Foot: $83.91 per square foot

Analysis: A downward adjustment for market conditions has been processed

resulting in a time adjusted price of $71.32 per square foot. The location of this sale is considered inferior given the subject’s proximity to major highways, therefore an upward location adjustment is required. The comparable property was 63.0 percent leased at the time of sale, therefore an upward adjustment for occupancy has been applied. No age adjustment was processed. A positive adjustment is warranted for condition as this property is considered to be inferior compared to the subject. Additionally, the comparable is considered to be inferior in terms of physical characteristics. As such, an upward adjustment is required. Overall, an upward adjustment to the market adjusted unit price is warranted.



Comparable Sale No. 2 Address: 1000 Bridgeport Avenue Shelton, CT Parcel ID: Block 8, Lot 22 Sale Date: May 2007 Grantor: 1000 Bridgeport Realty, LLC Grantee: 1000 Bridgeport Associates, LLC Occupancy at Sale: 93.1% Building Size: 133,226 square feet (RBA) Consideration: $16,800,000 Price per Square Foot: $126.10 per square foot


resulting in a time adjusted price of $116.01 per square foot. The location of this sale is considered inferior given the subject’s proximity to major highways, therefore an upward location adjustment is required. The comparable property was 93.1 percent leased at the time of sale and as such, a downward adjustment for occupancy is required. The age/condition of the building is deemed to be similar requiring no adjustment. This sale is considered to be similar in terms of physical characteristics, requiring no adjustment. Overall, no adjustment to the market adjusted unit price is warranted.



Comparable Sale No. 3 Address: 99 Hawley Lane Stratford, CT Parcel ID: 720100 Sale Date: May 2007 Grantor: Merritt 8 Acquisitions, LLC Grantee: Phoenix Capital Partners, LLC Occupancy at Sale: 70.0% Building Size: 168,000 square feet (RBA) Consideration: $24,500,000 Price per Square Foot: $145.83 per square foot


resulting in a time adjusted price of $134.17 per square foot. The location of this sale is considered inferior given the subject’s proximity to major highways, therefore an upward location adjustment is required. The comparable property was 70.0 percent leased at the time of sale, as such an upward adjustment for occupancy is required. No age adjustment was processed. A negative adjustment is warranted for condition as this property is considered to be superior compared to the subject. Additionally, no adjustment is required for physical characteristics. Overall, an upward adjustment to the market adjusted unit price is warranted.



Analysis of Sales Before adjustments the comparable sales indicated a range of $83.91 to $145.83 per square foot. After adjustments to the comparable sales, a range of $89.15 to $147.58 per square foot is indicated. Equal reliance has been placed on all of the comparables and therefore, a unit value of $120.00 per square foot is considered reasonable. Accordingly, Market Value via the Sales Comparison Approach is calculated as follows:

176,276 square feet x $120.00 per square foot = $21,153,120

Conclusion Based on our investigation and analysis, the Market Value of the Leased

Fee Interest in the subject property, as indicated by the Sales Comparison Approach, free and clear of financing, as of as of January 1, 2010, is rounded to:

TWENTY ONE MILLION TWO HUNDRED THOUSAND DOLLARS

($21,200,000)

COMPARABLE SALES ADJUSTMENTS Sale No. Subject Property 1 2 3 Address 440 Wheelers Farms Rd 375 Bridgeport Ave. 1000 Bridgeport Ave 99 Hawley Lane Neighborhood Milford Shelton Shelton Stratford Date of Sale July-07 April-08 May-07 May-07 Year Built 1988 1986 1986 1989 Building Class A A A A Rentable Area (Sq. Ft.) 176,276 45,885 133,226 168,000 Stories 4 3 5 5 Occupancy at Sale 87% 63% 93% 70% Sale Price $3,850,000 $16,800,000 $24,500,000 Sale Price Per Sq. Ft. $83.91 $126.10 $145.83 Market Conditions -15.00% -8.00% -8.00% Adjusted Price Per Sq. Ft. $71.32 $116.01 $134.17 Location 5% 5% 5% Occupancy 10% -5% 10% Age 0% 0% 0% Condition 5% 0% -5% Physical 5% 0% 0% Total Adjustment 25% 0% 10% Adjusted Price / Sq. Ft. $89.15 $116.01 $147.58



COMPARABLE SALES MAP



RECONCILIATION AND FINAL ESTIMATE OF VALUE Review The purpose of this appraisal is to provide an estimate of the Market

Value of the Leased Fee Interest in the subject property, free and clear of financing. The date of value is January 1, 2010. The indicated Market Value estimates for the real property interest appraised are:

The Income Capitalization Approach $21,700,000 The Sales Comparison Approach: $21,200,000

The Income Capitalization Approach The theory of the Income Capitalization Approach is based on the

premise that a value indication for a property is derived by converting anticipated benefits into property value. Anticipated benefits include the present value of the net income and the present value of the net proceeds resulting from the re-sale of the property.

There are two methods of accomplishing this: (1) direct capitalization of

the first year's income by an overall capitalization rate and; (2) the discounted cash flow in which the annual cash flows and reversionary value are discounted to a present value for the remainder of the property’s productive life or over a reasonable holding (ownership) period. We have utilized the discounted cash flow method in the valuation of the subject property. Given the reduced sales activity in the current climate, greatest reliance is placed on the Income Capitalization Approach.

The Sales Comparison Approach This approach provides an estimate of value based upon the recent

activities of buyers and sellers in the marketplace. It is generally considered to be reliable in active markets where the motivations of buyers and sellers are known and the operating characteristics of the properties being transferred are available for scrutiny. Our research revealed limited current sales of similar office buildings. As such, the Sales Comparison Approach would lend minimal insight into the value of the subject although it has been presented as support for the value conclusion via the Income Approach.

The Cost Approach The Cost Approach was excluded from the scope of this assignment. Conclusion As discussed herein, considering the current investment climate in the

influencing market, greatest reliance has been placed on the Income Capitalization Approach. Based on our investigation and analysis, we are of the opinion that the Market Value of the Leased Fee Interest in the subject property, as of as of January 6, 2010, is:

TWENTY ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS

($21,700,000)

440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Addenda


ADDENDA



ADDITIONAL PHOTOGRAPHS



Lobby Parking Lot

Occupied Space Occupied Space



Occupied Space Vacant Space

Vacant Space Vacant Space



ENGAGEMENT LETTER



QUALIFICATIONS OF THE APPRAISERS



P R O F E S S I O N A L Q U A L I F I C A T I O N S

T E R E N C E T E N E R , M A I , A S A M A N A G I N G P A R T N E R

E X P E R I E N C E Mr. Tener is a founding principal of KTR Real Estate Advisors LLC. Over the

course of his career, Mr. Tener has appraised many prominent commercial properties, including the GM Building, 101 Park Avenue, 500 Park Avenue, 410 Park Avenue, 437 Madison Avenue, 475 Fifth Avenue, the Seagrams Building, 900 Third Avenue, Park Avenue Plaza and the Lever House. In addition, Mr. Tener has served as an expert witness in various federal and state courts including New York, New Jersey, Connecticut and Delaware. He has also valued such notable residential and mixed-use properties as CitiSpire, Metropolitan Tower and River Tower. He has been responsible for the valuation of hotels throughout the United States, including the New York Hilton, Washington Hilton, Pittsburgh Hilton, the American Stanhope and a chain of hotels located in Mexico, owned by Groupo Situr. In addition, Mr. Tener has consulted on the valuation of numerous retail properties, including the Smithaven Mall, Herald Center, Sony Entertainment Center in San Francisco and 730 North Michigan Avenue.

L I C E N S E S Connecticut Certified General Appraiser Massachusetts Certified General Appraiser Missouri Certified General Appraiser New Hampshire Certified General Appraiser New Jersey Certified General Appraiser New York Certified General Appraiser Vermont Certified General Appraiser Wyoming Certified General Appraiser New York Real Estate Broker

M E M B E R S H I P S Appraisal Institute – MAI Designation since 1978 American Society of Appraisers (ASA) – Senior Member and former member of the Board of Governors for the NY Chapter MBA of New York – Board of Governors Real Estate Board of New York – Appraisal Committee National Association of Real Estate Fiduciaries Long Island Board of Realtors International Council of Shopping Centers (ICSC) Mortgage Bankers Association of America Young Mortgage Bankers Association Appraisal Institute Metropolitan New York Chapter - Admissions Committee and Ethics Committee Appraisal Journal Review Committee New York’s East Side Association – Former director Cardinal’s Committee of the Archdiocese of New York



P R O F E S S I O N A L Q U A L I F I C A T I O N S

M I C H A E L A . R O B I N S O N C E R T I F I E D G E N E R A L A P P R A I S E R

E X P E R I E N C E Michael A. Robinson is a Certified General Appraiser with KTR Real Estate

Advisors LLC. He has over 12 years of commercial appraisal experience. Mr. Robinson is actively pursuing his designation as a member of the Appraisal Institute. Notable appraisal assignments include the valuation of 375 Park Avenue (Seagram Building), the retail component of the Time Warner Center as well as various other types of real estate including office, industrial, hotel, residential, and retail properties.

L I C E N S E S New York Certified General Real Estate Appraiser # 46000048936

E D U C A T I O N The American Film Institute, Los Angeles, CA - Master of Fine Arts SUNY Albany, Albany, NY – Bachelor of Science Degree - Finance Appraisal Institute:

Basic Appraisal Principles Basic Appraisal Procedures General Appraiser Income Approach/Part I General Appraiser Income Approach/Part II Advanced Income Capitalization Advanced Applications Appraisal Fair Housing USPAP

Date post:	02-Apr-2020
Category:	Documents
Upload:	others
View:	2 times
Download:	0 times

Merritt Crossing 4Q09 - TASE...440 Wheelers Farms Road January 1, 2010 Milford, Connecticut Page ii...

Documents