HomeMy WebLinkAbout2023-103-Land, 1166 Higuera St, San Luis Obispo, CA
AN APPRAISAL REPORT OF
A 0.496-Acre Site
LOCATED AT
1166 Higuera St
San Luis Obispo, San Luis Obispo County, California 93401
Assessor’s Parcel Number 002-436-022
PREPARED FOR
Mr. Nick Tompkins
NKT Commercial, LLC
684 Higuera St, Suite B
San Luis Obispo, California 93401
EFFECTIVE DATE OF VALUE
August 29, 2023
DATE OF REPORT
September 26, 2023
PREPARED BY
Andrew J. Johnson, MAI, SRA, ASA, MBA, CVA, CMEA
Valuation Source
7 West Figueroa Street, Suite 300
Santa Barbara, California 93101
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September 26, 2023
Mr. Nick Tompkins
NKT Commercial, LLC
684 Higuera St, Suite B
San Luis Obispo, California 93401
Re: An Appraisal Report of
A 0.496-Acre Site
1166 Higuera St
San Luis Obispo, San Luis Obispo County, California 93401
Assessor’s Parcel Number 002-436-022
Dear Mr. Tompkins:
According to your request, I have personally inspected and made the necessary analysis to appraise
the above referenced property. The attached report provides essential data and reasoning employed
in reaching my opinion of value.
The purpose of the following report is to develop an opinion of the fair market value of the fee simple
interest in the property as of August 29, 2023, a current date of value.
NKT Commercial, LLC is the client for this appraisal , care of Mr. Nick Tompkins. The intended use
of the report is for purchase negotiations and/or purchase price support. The client is the sole
intended user and no others.
Existing improvements include approximately 3,250 square feet of retail space which no longer
contributes to value. The property is situated at the northwest corner of Higuera St and Toro St , in
San Luis Obispo, San Luis Obispo County, California 93401. The subject’s assessor’s parcel number
is 002-436-022. The fee simple interest is appraised.
This appraisal has been prepared in conformity with the Uniform Standards of Professional
Appraisal Practice (USPAP) of the Appraisal Foundation and the Code of Professional Ethics and
Standards of Professional Appraisal Practice of the Appraisal Institute.
This appraisal is qualified by certain definitions, limiting conditions, and certifications that are set
forth in the attached report. The analysis contained in the report that follo ws is presented in an
appraisal report format. Based on my analysis, the opinion(s) of the market value of the subject
property, as set forth, documented, and qualified in the attached report under conditions prevailing
on the effective valuation date(s), was:
The afore mentioned values are for the real estate only and exclude consideration of water or
mineral/subsurface rights (if any), personal property or goodwill, and are subject to the following
extraordinary assumptions and/or hypothetical conditions:
Perspective Type Date Interest Conclusion
Current Fair Market Value 8/29/2023 Fee Simple $4,720,000
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Extraordinary Assumptions:
There are no extraordinary assumptions used in this appraisal.
Hypothetical Conditions:
There are no hypothetical conditions used in this appraisal.
I appreciate the opportunity to be of service to you. If you have any further questions or concerns,
please don’t hesitate to call or email me.
Sincerely,
Andrew J. Johnson, MAI, SRA, ASA, MBA, CVA, CMEA
Owner, Valuation Source
Real Estate. Businesses. Machinery & Equipment.
California Certified General Appraiser License 3002458
License Expires: August 7, 2024
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Table of Contents
Subject Photographs ................................................................................................................................... 5
Summary of Important Facts and Conclusions ........................................................................................ 8
Introduction................................................................................................................................................ 10
San Luis Obispo County Map ................................................................................................................... 14
Summary of San Luis Obispo County ..................................................................................................... 15
Submarket Area Map ................................................................................................................................ 25
Submarket Area Description .................................................................................................................... 26
Submarket Retail Analysis – Downtown SLO ......................................................................................... 28
Submarket Office Analysis – Northwest SLO ......................................................................................... 35
Site Description and Analysis .................................................................................................................. 41
Property Taxes & Assessment Analysis .................................................................................................. 50
Highest and Best Use ................................................................................................................................ 52
The Valuation Process .............................................................................................................................. 56
Sales Comparison Approach.................................................................................................................... 58
Certification ................................................................................................................................................ 66
Assumptions and Limiting Conditions .................................................................................................... 67
Addenda ..................................................................................................................................................... 69
Legal Description ....................................................................................................................................... 70
Appraiser’s Qualifications ........................................................................................................................ 72
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Subject Photographs
Aerial View - Close
Aerial View - Far
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Inspection Photographs
Typical view across the site Typical view across the site
Typical view across the site Typical view across the site
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Inspection Photographs – Street Scenes
Toro St – looking north Toro St – looking south
Higuera St – looking east Higuera St – looking west
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Summary of Important Facts and Conclusions
Property Name: N/A
Property Address: 1166 Higuera St, San Luis Obispo, San Luis Obispo County,
California 93401
Property Location: The northwest corner of Toro St and Higuera St
Assessor’s Parcel Number: 002-436-022
Census Tract Number: 0111.01
Property Latitude: 35.282844
Property Longitude: -120.658442
Date of Value Opinion: August 29, 2023
Date of Inspection: August 29, 2023
Date of Report: September 26, 2023
Property Rights Appraised: Fee Simple
Site: 0.496 net acres or 21,607 net square feet
Client: NKT Commercial, LLC c/o Mr. Nick Tompkins
Purpose of the Appraisal: Develop an opinion of the fair market value of the fee simple
interest in the property as of August 29, 2023, a current date of
value.
Intended Use: The intended use of the report is for purchase negotiations
and/or price support.
Intended User(s): The client is the sole intended user and no others.
Zoning: CR, Commercial Retail
Planned Land Use/General Plan: General Retail
Overlays/Other: N/A
Planning/Zoning Jurisdiction: City of San Luis Obispo
Highest and Best Use:
As Vacant: Commercial and/or mixed-use development
As Improved: Commercial and/or mixed-use development
Value Identification: Current Fair Market Value
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Final Value Opinions: See transmittal letter
Exposure Time: 0 to 12 months
Marketing Time: 0 to 12 months
Extraordinary Assumptions:
There are no extraordinary assumptions used in this appraisal.
Hypothetical Conditions:
There are no hypothetical conditions used in this appraisal.
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Introduction
Property Type: Land for future development
Property Name: N/A
Property Address: 1166 Higuera St, San Luis Obispo, San Luis Obispo County,
California 93401
Property Location: The northwest corner of Toro St and Higuera St
Assessor’s Parcel Number: 002-436-022
Legal Description: Lengthy-see addenda
Legal Description Source: Preliminary Report from Fidelity National Title Company dated
August 5, 2020
Use on Effective Date: Vacant retail building and parking lot (no contributory value)
Use Reflected in Appraisal: Highest and best use ‘as is’ is represented by the site as though
vacant
Property History:
Current Owner: 1166 Higuera Street, LLC
Transfers in Past Three Years: No
Prior Sale/Transfer Date: February 22, 2019
Transfer Type: Arm’s length sale
Prior Sale/Transfer Price: $3,550,000
Other Prior Sales/Transfers: Non-arm’s length transfer to a related entity (LLC) with no
consideration via Recorded Document 2019007914 (March 7,
2019)
Comments on Sale History: There have been no sales or transfers of the subject property
in the past three years. The last recorded sale was in February
2019 for a recorded price of $3,550,000. At the time of the prior
sale, there was a pending ground lease on the property. It is
also noted the subject required environmental/soil remediation
which has since been completed at the expense of the property
owner.
Currently Listed for Sale: No
Currently Under Contract: No
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List Price/History: The subject is not currently listed or offered for sale . However,
I am aware of possible purchase negotiations involving the City
or County of San Luis Obispo. I was provided with a Letter of
Intent for the subject property from the City of San Luis Obispo
for a possible purchase price of $5,287,515. The LOI price is
above my current market value opinion which is well supported
by recent sales of comparable properties.
Other Comments: None
Appraisal Premise Type of Value Date of Value Interest Appraised
Current Fair Market
Value
August 29, 2023 Fee Simple
Inspection Date: August 29, 2023
Report Date: September 26, 2023
Client: NKT Commercial, LLC c/o Mr. Nick Tompkins
Intended Use: The intended use of the report is for purchase negotiations
and/or price support.
Intended User(s): The client is the sole intended user and no others.
Estimate Exposure Time: 0 to 12 months
Estimated Marketing Time: 0 to 12 months
Extraordinary Assumptions: There are no extraordinary assumptions used in this appraisal
Hypothetical Conditions: There are no hypothetical conditions used in this appraisal
Purpose of the Appraisal
The purpose of the appraisal is to develop an opinion of the current fair market value of the fee
simple interest in the property, assumed free and clear of all liens and any other encumbrances as
of a current valuation date.
Definition of Fair Market Value
Fair market value is defined in IRS Revenue Ruling 59-60, as:
“The price at which the property would change hands between a willing buyer and a willing seller
when the former is not under any compulsion to buy and the latter is not under any compulsion to
sell, both parties having reasonable knowledge of relevant facts.”
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The Scope of the Appraisal Report
For an appraisal assignment, an appraiser must identify the problem to be solved, determine, and
perform the scope of work necessary to develop credible assignment results; and disclose the scope
of work in the report. The scope of this work for this appraisal assignment was as follows:
The Extent to Which the Property is Identified
The subject property has been identified by its San Luis Obispo County Assessor’s Parcel number
and legal description found in San Luis Obispo County public records, as well as a personal
inspection. When possible, a more detailed legal description is obtained from a recorded deed or
survey of the property. The subject property is also identified using San Luis Obispo County
Assessor’s Parcel Maps and San Luis Obispo County GIS data.
The Extent to Which Tangible Property is Inspected
I personally visited the subject property and took photographs on August 29, 2023, which is
consistent with the effective date of valuation. The site visit consisted of a casual walk-through of
the site and exterior viewing of the existing improvements.
The Type and Extent of Data Researched
• Legal and physical characteristics regarding the subject property were identified using one
or more of the following sources:
San Luis Obispo County public records, San Luis Obispo County GIS data, recorded deeds
(if available), recorded surveys (if available), and a site visit
• Economic characteristics regarding the subject property were ide ntified through analysis of
an LOI from the City of San Luis Obispo and competitive similar properties throughout the
market area and/or comparable/similar market areas
• Data regarding national, regional, and local economic conditions was obtained from one or
more of the following sources:
The Appraisal Journal, Costar Comps demographic data, Site to do Business, public records,
local newspapers, journals, or magazines; local real estate professionals
• Data regarding comparable sale and/or lease transactions was obtained from one or more
of the following sources:
Costar, Realquest, Loopnet, Realquest, California Regional MLS, San Luis Obispo County
public records, and/or communications with market participants, real estate professionals,
or other reliable sources of information
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The Type and Extent of Analyses Applied to Arrive at Opinions or Conclusions
Three standard approaches to value include the Cost Approach, Income Approach, and Sales
Comparison Approach. Since the highest and best use is represented by the site as though vacant,
only the sales comparison approach (to vacant land) was developed. The cost approach and income
approach were not developed.
Approach(es) developed: Sales Comparison Approach
Approach(es) not developed: Cost Approach, Income Approach
Type of Appraisal and Report Option
This is an Appraisal Report as defined by the Uniform Standards of Professional Appraisal Practice
under Standards Rule 2-2a.
USPAP Competency Provision
I have appraised numerous similar vacant land properties and ground leases throughout California,
Nevada, and Arizona since 2005 and am competent to appraise the subject property.
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San Luis Obispo County Map
Subject
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Summary of San Luis Obispo County
Executive Summary
San Luis Obispo (SLO) County is a popular drive destination that covers an area of 3,316 square
miles and is located at the approximate midpoint between San Francisco and Los Angeles. Farms
and small towns characterize the county, as a large portion of the land is utilized for agricultural
purposes. With a fairly diverse workforce and relatively isolated location, San Luis Obispo is better
positioned to weather the fluctuations in the economic cycle as evidenced by the hotel market’s
performance during the last recession. In addition to these sectors of the economy, the excellent
coastal location attracts visitors from throughout the inland region and also serves as a rest stop for
tourists traveling along the coast. Hearst Castle an d the numerous local wineries have also served
to make the area a destination for domestic and international travelers. The area’s natural amenities
such as the weather and attractive coastal characteristics continue to attract overnight visitors to the
area.
Throughout the economic recovery, San Luis Obispo County’s growth profile has been different
from the state in that it has been relatively insulated from most fluctuations in the economy. The
county is not seen as a rapidly growing economy, but rath er a stable one that is characterized by
lower than average unemployment rates and a diverse workforce.
The county’s economy is largely based on tourism and education; as a result, services, government,
and retail trade are the dominant industries. Local hotel average daily room rates as well as
occupancy have increased over the past year, indicating that more visitors are looking to travel to
the county as well as pay more to do so. Jobs have also been increasing steadily in the county since
exiting the recession. Many of the jobs that have been created during this growth have also
generated more taxable sales for the county, mainly in the booming wine industry. Cal Poly
University, the County of San Luis Obispo, and Diablo Canyon are the largest employer s in the
County.
The seven incorporated cities included within the MSA are San Luis Obispo, Atascadero, Grover
beach, Morro Bay, Paso Robles, Pismo Beach, and San Luis Obispo.
Commercial air service to San Luis Obispo County Regional Airport is provided by US Airways
Express and Skywest/United Express. According to the San Luis Obispo County Regional Airport,
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approximately 20 total inbound and outbound flights are processed per day. Although direct flights
from Los Angeles, San Francisco, and Phoenix are available, direct service from other Pacific States,
the mid-West, and East Coast is not. Service to Sacramento and Las Vegas was once provided by
these airlines as well, but flights to these destinations have since ceased.
On March 17, 2015, the San Luis Obispo County Airport received authorization from the County’s
board of supervisors to begin looking for designs bids for the airport’s new passenger terminal.
According to the preliminary scope for the terminal, it will be approximately 48,500 square feet, and
include two separate buildings. The buildings are to house all the necessities for a passenger
terminal including check-in area, baggage claim, security screenings area, restrooms, administrative
offices, parking lot, and rental car lot. The airport is currently seeking bids for the terminal.
Tourism is a significant part of the SLO economy. According to representatives of the San Luis
Obispo County Visitors and Conference Bureau (SLO County VCB), vehicular traffic generates the
majority of visitors to the area, and approximately 82 percent of all visitors to the area arrive by
automobile. The origin of these visitors is primarily Southern California, Bakersfield, and Fresno, via
Highways 101 and 46. Owing to increased marketing and publicity effort s by the SLO County VCB
and the relative affordability of the area compared to competitive destinations such as Monterey,
the number of visitors from Northern California is also on the rise. The county continues to build
awareness among key drive markets as well as nationally through the collective marketing and
public relations outreach efforts by the county and community tourism partners. International travel
will be an area of growth for San Luis Obispo County, especially with visitors looking for an act ive
environment to play and seek out adventure.
San Luis Obispo County is also home to the award-winning “Savor the Central Coast” food and wine
event. The four-day event held throughout San Luis Obispo County, started in 2011, features dozens
of local chefs, hundreds of wineries, and several special events. Places featured as part of the event
include Santa Margarita Ranch, Hearst Castle, Pismo Pier, San Luis Obispo Mission Plaza, Paso
Robles Downtown Square, the coastline from Cambria to Morro Ba y to Avila Beach and area
artisanal farms and wineries.
Pismo Beach
The Pismo Beach sub-market consists of properties located along the scenic coast spanning from
Pismo Beach to Avila Beach, as well as the adjacent communities of Grover Beach and San Luis
Obispo. Pismo Beach is the only oceanfront community on U.S. Highway 101 between Santa
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Barbara and San Francisco, and because it faces directly west, the sunsets a re spectacular. Popular
activities on its expansive beaches north of Grand Avenue include beach -combing, jogging,
sunbathing, surfing, scuba diving, kayaking, and surf fishing. Wildlife sightings in the area are also
common. Sea otters and sea lions are often spotted in the protected coves and kelp beds, and whales
can also be seen during their migration south between December and March. For those desiring to
shop, Downtown Pismo Beach offers a variety of surf and gift shops, art galleries, antique stores
restaurants, and local wine tasting rooms. The combination of diverse landscapes, pleasant weather
and a plethora of activities creates an oceanfront destination that appeals to the leisure crowd.
Tourism is a major component of the Pismo Beach area econom y. Demand in Pismo Beach is almost
entirely leisure driven, although several hotels derive some group meetings demand from their
respective meeting facilities. Leisure visitors enjoy a myriad of activities including wine tasting,
golfing, bicycling, walking through the Monarch Butterfly Grove, tennis, horseback riding, scuba
diving, bowling, hiking, miles of beautiful and clean beaches, exploring tide pools, coves, and caves,
as well as relaxing on the 1,200 foot Pismo Pier. In addition, the city is also accessible to various
other attractions located in San Luis Obispo County such as Hearst Castle and Morro Bay via
Highway 101 as well as California State Route 1 (also referred to as Pacific Coast Highway).
San Luis Obispo City
The City of San Luis Obispo serves as the commercial, governmental and cultural hub of California’s
Central Coast. One of California’s oldest communities, it began with the founding of Mission San
Luis Obispo de Tolosa in 1772 by Father Junípero Serra as the fifth mission in the California chain
of 21 missions. The mission was named after Saint Louis, a 13th Century Bishop of Toulouse, France.
While San Luis Obispo grew relatively slowly during most of the 19th century, the coming of
Southern Pacific Railroad in 1894 opened up the area to the rest of California. The city’s distance
from major metropolitan areas to the north (San Francisco Bay Area) and south (Los Angeles) have
allowed the area to retain its historic and scenic qualities.
Paso Robles
The Paso Robles sub-market includes properties in the cities of Paso Robles and Atascadero. Paso
Robles is a small inland community in San Louis Obispo County surrounded by the rolling hills of
the Central Coast. Paso Robles is located approximately 28 miles north of San Luis Obispo along
Interstate 101. For years, Paso Robles was known as the half -way stop for motorists traveling
between Northern and Southern California. However, the increased popularity of this award-winning
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wine region has caused the city to become a destination unto itself. The city was originally the Paso
Robles Rancho, a 25,993 acre plot of land granted to Pedro Narvaez. The land passed through several
owners who realized the potential of the area’s hot springs, reputed to relieve various ailments. The
area continued to develop, and was eventually incorporated in 1889. For a brief time, the town was
known as the “Almond City” for its local almond growers. Presently, much of the surrounding land
is occupied by thriving vineyards, which have become popular among tourists.
With over 180 wineries, the City of Paso Robles thrives on its wine production and the tourism
related to this booming industry. The Paso Robles wine industry has become a well -respected wine-
destination, much more so than many of its regional counterpart s within California. In 1797, Father
Junipero Serra planted 1,000-grapevines to make sacramental wines. Later, French and Italian
immigrants brought European vine cuttings. Today, the area contains nearly 29,000 vineyard acres.
Tourists throughout the region visit Paso Robles for wine tasting tours amidst the beauty of the
Central Coast, with most wineries being located immediately off Route 46. The eastern half of the
Paso Robles American Viticulture Area (AVA) tends to be warmer and drier. Wineries in this section
of the AVA typically produce full bodied wines with rich fruit character. These wines often have
softer tannins and lower acidity compared to the west, making them more approachable in their
youth.
The Chamber of Commerce works with local wine g rowers in planning events throughout the year
to promote tourism. The Paso Robles Wine Country Alliance is a non -profit organization dedicated
to the marketing and promotion of this world-class wine region. This cooperative marketing alliance
consisting of wineries, vineyards, and related businesses is committed to attracting tourists and
generating traffic through the Paso Robles wine region. The booming wine industry has led to the
beginnings of a viable destination, in particular the downtown area. Currently, a myriad of
restaurants, wine-tasting rooms, and cheese shops line the sidewalks in downtown. Furthermore,
notable restaurants such as the Artisan and Villa Creek have received both local and regional
recognition.
Additionally, there are four major wine-related events held annually in Paso Robles which attract
both enthusiasts and newcomers alike. BlendFest on the Coast, which started in 2015, is hosted just
north of Paso Robles in San Simeon and provides guests with beautiful coastal views while they
taste wines from 30 of Paso Robles’ wineries. Vintage Paso: Zinfandel Weekend is held during the
third week of March and is the second largest Zinfandel tasting in the state. This weekend event also
includes special events happening at area wineries, suc h as winemaker dinners, special tastings,
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seminars, and open house events. Held in May, the Paso Robles Wine Festival is one of the largest
outdoor wine festivals in California. The weekend event at the Paso Robles City Park features
winemaker dinners, live music, newly released wines, and open house festivities at area wineries.
The Harvest Wine Weekend, which is held in the third week of October, allows guests to enjoy
activities such as winemaker dinners, barrel samples, seminars, barbeques, live music, and winery
tours.
North Coastal
The North Coastal sub-market is comprised primarily of lodging facilities in Morro Bay and Cambria.
The City of Morro Bay was incorporated in 1964 and is located on the Pacific Coast of California
about half way between San Francisco and Los Angeles near Hearst Castle and the Big Sur Coast.
The city’s name came from its famous landmark, Morro Rock, named by Juan Rodriguez Cabrillo
when he first charted this coast during his 16th Century voyage of discovery. South of the City of
Morro Bay is the expansive Morro Bay State Park, spread over 1,905 acres of winding landscape and
lush vegetation. The park is laid out around an 18-hole golf course. The vast grounds cover a portion
of the Morro Bay Estuary and tree-shaded camping and picnic grounds. Morro Rock, the landmark
581 square feet-high rock formation that covers 50 feet at its base, sits at the center of the park and
is the westernmost volcano in a chain of seven volcanic peaks reaching to the City of San Luis
Obispo. Other park attractions include a natural history museum dedicated to local wildlife and the
environment, as well as a small boat harbor that provides launching facilities, boat rentals, a fishing
tackle and supplies shop, and a café.
Cambria, a small unincorporated coastal community, was founded in 1862 and is located
approximately 34 miles north of San Luis Obispo and six miles south of the famous Hearst Castle
along popular highway 1. Cambria covers an area of approximately three square miles at an
elevation approximately 200 feet above sea level. The small coastal town attracts a large degree of
retirees and vacationers who appreciate the area’s undisturbed atmosphere. The area depends
primarily on tourism and agricultural businesses. Commercially, the town of Cambria can be divided
into three distinct areas: East and West Village and Moonstone Beach Drive. Much of Cambria’s
commercial buildings and older converted homes can be foun d in the East and West Village area.
Also of note in the East Village are several areas designated for historic preservation. The East
Village is also home to a large number of the community’s upscale restaurants. In the last twenty
years commercial development has spilled over to the West Village due to the availability of space
and its proximity to State Highway 1. The third distinct area of Cambria is Moonstone Beach Drive,
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which is located one mile north of the East and West Village Districts. The Moonstone Beach area is
home to several lodging and restaurant facilities.
Cambria offers an ideal setting for a range of outdoor activities including hiking, jogging, and biking
along the dramatic coastline. Many visitors enjoy swimming, surfing, kayaking, an d other ocean
activities. Local fruit farms offer ‘pick your own’ activities and many visitors choose to taste wines
at nearby vineyards and wineries. One of the most popular destinations for visitors is the famous
Hearst Castle, which is located in San Simeon. One of the largest of approximately 5,000 historic
house museums in the U.S., Hearst Castle features 56 bedrooms, 61 bathrooms, 19 sitting rooms,
and provides one of the most sophisticated guided tour programs in the country. The estate's
magnificent main house, “Casa Grande,” and three guest houses are of the Mediterranean Revival
style, while the imposing towers of Casa Grande were inspired by a Spanish cathedral. Art treasures
can be found in every room of Hearst Castle and include antique ceilings, ancient Greek vases, rare
oriental rugs, and a variety of work originating primarily from Spain and Italy. The grounds and
formal gardens of the 127-acre estate are ornamented with tiled pools, fountains and statuary.
Economy
San Luis Obispo County is located between the state's two major population centers along
California's Central Coast. The metro overall is highly educated, with 35% of residents having a
bachelor's degree or higher. Cost of living is lower than the Bay Area and Southern California.
Tourism-related jobs are at the highest risk of long-term displacement, as global travel remains slow.
The metro is now one of the largest producers of wine in California, behind only Sonoma and Napa
counties. The local wine industry promotes tourism by op erating dozens of wine tasting shops but
also tours of vineyards and wine processing facilities. Prior to the pandemic, tourism had been one
of the metro's key industries supporting small to mid-sized hotels across the county.
Tech is another major industry in San Luis Obispo, attracted by the large student base at Cal Poly
San Luis Obispo. Major employers include Mindbody, Amazon, and Rosetta.
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Conclusion
Overall, the area offers average competition relative to other nearby markets. Population, income,
and business growth in the market area is anticipated to be steady going forward. The inflationary
environment and recent hike in interest rates may severely impact the regio nal and local economy
in coming months.
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Submarket Area Map
Subject
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Submarket Area Description
Location/Description
The City of San Luis Obispo serves as the commercial, governmental and cultural hub of California’s
Central Coast. One of California’s oldest communities, it began with the founding of Mission San
Luis Obispo de Tolosa in 1772 by Father Junípero Serra as the fifth mission in the California chain
of 21 missions. The mission was named after Saint Louis, a 13th Century Bishop of Toulouse, France.
While San Luis Obispo grew relatively slowly during most of the 19th century, the coming of
Southern Pacific Railroad in 1894 opened up the area to the rest of California. The city’s distance
from major metropolitan areas to the north (San Francisco Bay Area) and south (Los Angeles) have
allowed the area to retain its historic and scenic qualities.
California Polytechnic State University or California Polytechnic State University, San Luis Obispo,
also known as Cal Poly San Luis Obispo or Cal Poly, is a public university located in San Luis Obispo,
California, United States. Founded in 1901 as a vocational high school, it is currently one of only two
polytechnic universities in the 23-member California State University system. Comprising six distinct
colleges, the university offers 64 bachelor's degrees, 32 master's degrees, and 7 teaching
credentials. The university does not currently grant doctoral degrees. Cal Poly is a member of the
American Association of State Colleges and Universities (AA SCU) and the Association of Public and
Land-grant Universities. Cal Poly is known for its "learn by doing" educational philosophy that
encourages students to solve real-world problems by combining classroom theory with experiential
laboratory exercise. The most prevalent major at Cal Poly is Business Administration, followed by
Mechanical Engineering and Biological Sciences. Cal Poly is one of four California State Universities
that participate in the Big West Conference in athletics. The Cal Poly Master Plan calls to increase
student population from approximately 17,000 students to 20,900 students by the year 2020 –2021.
To maintain the university's "Learn by Doing" philosophy and low -class sizes, the master plan calls
for an increase in classrooms, laboratories, and professors.
Roadways, Transportation, and Access
U.S. Route 101 and California State Route 1 are the major north-south highways in San Luis Obispo,
linking the city to the rest of the Central Coast region, San Francisco to the north, and Los Ang eles
to the south. Both enter the city from the south as a concurrency. As they head north, Highway 1
then splits towards the coast to Morro Bay, while Highway 101 stays more inland to Atascadero and
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Paso Robles. California State Route 227 provides an alternate route to Highway 101 from San Luis
Obispo south to Arroyo Grande. Most streets are asphalt-paved and freeway access is good.
Public Services
Public and emergency services are adequate in San Luis Obispo. Adequate schools, police and fire
protection, emergency services, and public services are noted.
Utilities
Utility services are available and at an adequate capacity for the market area. Water and sewer are
provided by City of San Luis Obispo. Power is provided by Pacific Gas and Electr ic, and natural
gas is provided by Southern California Gas. Solid waste is provided by San Luis Garbage.
Telephone and/or internet service providers include various providers.
Utility Service Providers
Water City of San Luis Obispo
Power Pacific Gas and Electric
Sewer City of San Luis Obispo
Gas Southern California Gas
Telephone/Internet Various Providers
Solid Waste San Luis Garbage
External Influences/Nuisances
There are no known negative external influences impacting the market area.
Conclusion
Overall, the market area offers average competition relative to other submarkets in the MSA. The
inflationary environment and recent hike in interest rates may severely impact the regional and local
economy in coming months.
Valuation Source Page | 28
Submarket Retail Analysis – Downtown SLO
Overview
Vacancy in the Downtown SLO office submarket is 3.1% and has increased by 0.3% over the past 12
months. Meanwhile, the rate of increase in the broader San Luis Obispo market was 1.0%.
During this period, there has been 3,700 SF of negative absorption and no net deliveries. Total
availability, which includes sublease space, is 4.3% of all inventory.
Space rated 1 & 2 Star is the most dominant subtype, with 850,000 SF in this category. There is
280,000 SF of 3 Star space and 6,000 SF of 4 & 5 Star space.
Rents are around $32.00/SF, which is a 1.5% increase from where they were a year ago. In the past
three years, rents have increased a cumulative 9.4%. This is also an expensive submarket, relative
to San Luis Obispo as a whole, where average rents are $28.00/SF.
There is nothing under construction, and the submarket is 1,200 SF smaller than it was three years
ago. There have been 7 sales over the past year.
Over the past three years, there have been 25 sa les, which have traded for approximately $30.3
million. The market cap rate for Downtown SLO is 8.0%, moderately above its trailing three-year
average of 7.4%.
Buyers have shown some interest in Downtown SLO office buildings and have scooped up assets
over the years. In the past 12 months, 7 office properties have been acquired. Annual sales volume
has averaged $10.2 million over the past five years, and the 12 -month high in investment volume
hit $21.4 million over that stretch. In the past 12 months specifically, $11.5 million worth of assets
sold.
Valuation Source Page | 29
The market price, which is derived from the price movement of all office properties in the submarket,
now sits at $291/SF. That price has stumbled on a year -over-year basis, although that did little to
change the pricing disparity with the overall region. It still sits well ahead of the San Luis Obispo
average. The market cap rate has edged up in the past 12 months to 8.0%. This is the highest cap
rate that has been seen in the past five years, and it's fairly similar to the metro average.
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Conclusion
Overall, the submarket retail market has a current vacancy rate of 3.9%, which is a slight increase
from 3.6% one year ago. Average market rent is $2.91/SF and has increased 4.4% in the past 12
months. 0 square feet of new product was delivered into the submarket in the past 12 months and
0 square feet is currently under construction. The inflationary environment and recent hike in interest
rates may severely impact the regional and local retail market in coming months.
Valuation Source Page | 35
Submarket Office Analysis – Northwest SLO
Vacancy in the Downtown SLO office submarket is 3.1% and has increased by 0.3% over the past 12
months. Meanwhile, the rate of increase in the broader San Luis Obispo market was 1.0%.
During this period, there has been 3,700 SF of negative absorption and no net deliveries. Total
availability, which includes sublease space, is 4.3% of all inventory.
Space rated 1 & 2 Star is the most dominant subtype, with 850,000 SF in this category. There is
280,000 SF of 3 Star space and 6,000 SF of 4 & 5 Star space.
Rents are around $32.00/SF, which is a 1.5% increase from where they were a year ago. In the past
three years, rents have increased a cumulative 9.4%. This is also an expensive submarket, relative
to San Luis Obispo as a whole, where average rents are $28.00/SF.
There is nothing under construction, and the submarket is 1,200 SF smaller than it was three years
ago. There have been 7 sales over the past year.
Over the past three years, there have been 25 sales, which have traded for approximately $30.3
million. The market cap rate for Downtown SLO is 8.0%, moderately above its trailing three-year
average of 7.4%.
Buyers have shown some interest in Downtown SLO office buildings and have scooped up assets
over the years. In the past 12 months, 7 office properties have been acquired. Annual sales volume
has averaged $10.2 million over the past five years, and the 12 -month high in investment volume
hit $21.4 million over that stretch. In the past 12 months specifically, $11.5 million worth of assets
sold.
Valuation Source Page | 36
The market price, which is derived from the price movement of all office properties in the submarket,
now sits at $291/SF. That price has stumbled on a year -over-year basis, although that did little to
change the pricing disparity with the overall region. It still sits well ahead of the San Luis Obispo
average. The market cap rate has edged up in the past 12 months to 8.0%. This is the highest cap
rate that has been seen in the past five years, and it's fairly similar to the metro average.
Valuation Source Page | 37
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Conclusion
Overall, the submarket office market has a current vacancy rate of 3.1%, which is a slight increase
from 2.8% one year ago. Average market rent is $2.68/SF and has increased 1.5% in the past 12
months. 0 square feet of new product was delivered into the submarket in the past 12 months and
0 square feet is currently under construction. The inflationary environment and recent hike in interest
rates may severely impact the regional and local office market in coming months.
Valuation Source Page | 41
Site Description and Analysis
The following site description is based upon information obtained from sources, including San Luis
Obispo County Assessor records, GIS data, San Luis Obispo County Assessor’s Parcel Maps, as well
as information provided by the client, property owner, real estate professionals, and/or other reliable
sources.
Location/Address:
The subject property is located at the northwest corner of Toro St and Higuera St . The physical
address is 1166 Higuera St, San Luis Obispo, San Luis Obispo County, California 93401.
Assessor’s Parcel Number:
The subject is identified as San Luis Obispo County Assessor’s Parcel Number 002-436-022.
Area:
The total site area is 21,607 gross square feet, or 0.50 gross acres; 21,607 net square feet, or 0.50
net acres. There are no noted roadway dedications impacting the subject property; therefore,
the gross and net area are the same.
Shape:
The site is mostly rectangular, being normative and functional.
Topography:
The site topography is mostly level, with grading consistent with the neighborhood topography .
The site is at or near street level with Higuera St and nearby properties and is above grade to Toro
St.
Street/Road Frontage:
The subject property has 197.85’ of direct frontage along the north side of Higuera St. Higuera St
is a 65’ wide fully improved east-west thoroughfare near the subject, being improved with
asphalt-paving, curbs, gutters, sidewalks, and streetlights. Higuera St is two westbound lanes at
the subject. The subject has 121.87’ of direct frontage along the west side of Toro St. Toro St is a
Valuation Source Page | 42
60’ wide north-south thoroughfare near the subject, being improved with paving, curbs, gutters,
sidewalks, and streetlights. Toro St is one lane in each direction at the subject.
Visibility/Exposure:
The overall visibility and exposure for the subject site is rated good, having direct frontage along
Higuera St and Toro St.
Offsite Improvements:
Offsite improvements include asphalt-paving, curbs, gutters, sidewalks, and streetlights along the
frontage streets.
Drainage:
No drainage issues were apparent based upon casual visual observation. Drainage is assumed
to be adequate.
Soil/Subsoil Conditions:
There was noted to have formerly been soil remediation conducted on the subject property;
however, it is indicated to have been completed. It is assumed there are no further soil or subsoil
conditions that may cause a loss in marketability or value.
Seismic Hazard:
According to the State of California Department of Conservation Division of Mines and Geology
Seismic Hazard Zones map database:
• The subject is not within an Earthquake Fault Zone.
• The subject has not been evaluated by CGS for liquefaction hazards.
• The subject has not been evaluated by CGS for seismic landslide hazards.
Access:
Access to the subject site is average, being primarily available from along Higuera St.
Valuation Source Page | 43
Utilities
All typical public utilities are available and connected to the subject site. This includes power
provided by Pacific Gas and Electric, sewer provided by City of San Luis Obispo, water provided
by City of San Luis Obispo, and natural gas provided by Southern California Gas Company.
Telephone and data service is available from various providers. Solid waste removal is provided
by San Luis Garbage.
Electricity: Pacific Gas and Electric
Sewer: City of San Luis Obispo
Water: City of San Luis Obispo
Natural Gas: Southern California Gas Company
Telephone/Data: Various
Other: San Luis Garbage
Nuisances/Hazards:
There are no known nuisances or hazards impacting the site. See environmental issues below.
Environmental Issues (Hazardous Materials/Toxic Conditions):
There are no known soil contamination issues impacting the site. I am not an expert regarding the
detection of adverse environmental factors and am not qualified to determine environmental
condition. I therefore take no responsibility to the existence of any known or unknown
environmental hazards or conditions that may exist on the subject property.
Flood Zone
The subject is not in a flood zone. According to FEMA Map Number 06079C1066G, dated
November 16, 2012, the subject is within Zone ‘X’. Zone X is an area that is determined to be
outside the 100- and 500-year floodplains.
Zone Identification: Zone ‘X’
Zone Description: The subject is not in a flood zone.
Percentage in Flood Zone: 0%
FEMA Map Number: 06079C1066G
Valuation Source Page | 44
Effective Date: November 16, 2012
Easements/Encroachments:
No adverse easements or encroachments were apparent during the site visit. The subject is
appraised assuming a clear, marketable title. The reader is referred to the general assumptions
and limiting conditions included in this report regarding the assumed condition of title. No
adverse easements or encroachments were referenced in this report and none are assumed to
exist.
CC&R’s:
There are no known private restrictions or CC&R’s impacting the subject property.
Zoning:
The subject is zoned C-R, Retail Commercial, by the City of San Luis Obispo. The C-R zone is
intended to provide for a wide range of retail sales, business, personal and professional services,
as well as recreation, entertainment, transient lodging, and some residential uses. The land uses
allowed in this zone will generally serve the entire community and the region, as well as tourists
and travelers. The C-R zone implements and is consistent with the general retail land use category
of the general plan and is intended to be applied primarily to areas with more public exposure on
arterial streets than those reserved for manufacturing.
The property development standards for the C-R zone are as follows:
A. Maximum density: Thirty-six units per net acre for all dwellings, including dwelling units in
hotels and motels, but not including other hotel or motel units (see also Section 17.16.010).
B. Maximum street and other yards: See Section 17.16.020.
C. Maximum height: Forty-five feet (see also Sections 17.16.020 and 17.16.040).
D. Maximum coverage: One hundred percent.
E. Maximum floor area ratio: The ratio of gross building floor area to site area shall not exc eed
3.0; except, that in the downtown as mapped in the general plan land use element, a site which
receives transfer of development credit for open space protection shall have a ratio not to exceed
4.0.
F. Standard Lot Dimensions.
1. Minimum lot area: Nine thousand square feet.
Valuation Source Page | 45
2. Minimum lot width: Sixty feet.
3. Minimum lot depth: One hundred feet.
4. Minimum street frontage: Forty feet.
G. Parking requirements: See Section 17.16.060.
H. Maximum building size: No retail establishment (commercial build ing) shall exceed sixty
thousand square feet of gross floor area, unless excepted by subsection (I) of this section and
Section 17.16.035.
I. A retail establishment may be allowed up to one hundred forty thousand square feet of gross
floor area, if the planning commission determines that it meets the following standards:
1. The proposed use will serve the community, in whole or in significant part, and the nature of
the use requires a larger size in order to function.
2. The building in which the use is to be located is designed in discrete elements that respect the
scale of development in the surrounding area.
3. The new building is designed in compliance with the city’s design guidelines for large -scale
retail projects. (Ord. 1500 § 3, (part), 2007; Ord. 1405 § 3 (part), 2001; Ord. 1365 § 3 (part), 2000:
Ord. 1006 § 1 (part), 1984; Ord. 941 § 1 (part), 1982: prior code § 9203.9(B))
Source: Zoning Code
The zoning allows for various commercial and mixed -use developments. Multifamily and other
developments are allowed with special use permits or director’s approvals.
Planned Land Use/General Plan Designation:
The general plan land use designation for the subject property is ‘General Retail’. This designation
provides for goods and services adequate to meet mo st of the needs of the city and nearby county
residents. This designation is applied to Downtown, the intersection of Madonna Road and
Highway 101, and the area around Highway 101 and Los Osos Valley Road. Uses include specialty
stores, department stores, warehouse stores, discount stores, restaurants, banks and other
services, and public and quasi-public uses. Maximum density is 36 du/acre; maximum FAR is 3.0
or 3.75 in the Downtown area and 4.0 in the Downtown Core with a TDC or a density bonus .
Maximum Permitted Development:
Maximum permitted development depends on the type of use, residential adjacency issues, and
overlay areas. Max permitted development is speculative.
Valuation Source Page | 46
Title Policy/Land Use Restrictions:
The reader is referred to the general assumptions and limiting conditions regarding title
assumptions. There are no known title exceptions, rent restrictions and covenants, or growth
control measures which would have an adverse impact on the marketability or value of the
property.
Overall Functional Utility:
Considering the preceding locational and physical factors regarding the subject site, overall
functional utility is average.
Conclusion
Overall, the subject site conforms well to surrounding parcels and has average functional utility and
given its zoning and surrounding land use patterns, is suitable for a commercial or mixed-use
development. The current development is legally permissible.
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San Luis Obispo County Assessor’s Parcel Map
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Site Plan (with adjusted site size)
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Flood Map Excerpt
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Property Taxes & Assessment Analysis
Tax Process
Real estate tax assessments are administered at the county level, and are estimated by jurisdiction
on a county basis for the subject. The property is subject to the property tax rules o f the State of
California, which control the activities and policies of local assessment jurisdictions. These laws
were significantly modified on June 7, 1978, when the State's voters passed Proposition 13,
amending Article XIII of the State Constitution.
Proposition 13 eliminated the practice of periodic reassessment of properties based on market value
appraisals. Instead, real property is subject to reassessment (i.e., revaluation at full or partial current
market value) only with a change in ownership or new construction. Otherwise, increases in
assessed value are limited to 2% per year. The basic tax rate is 1% plus the rates needed to service
any bonded indebtedness. Special assessments can also be added, and are often related to the
installation of public infrastructure.
Tax Rates
The assessed values in the subject county are based upon the current conversion assessment rate
of 100% of the Assessor’s market value. The subject property is within Tax Area No. 003-000, which
has a tax area rate of 1.06225%. If the subject sells for the value estimate indicated in this report, a
reassessment at that value will occur.
Subject Taxation
The assessed values are based upon the current conversion assessment rate of 100% of the
Assessor’s market value. Below we have summarized the pertinent information with regard to the
subject’s historical (where available) and current assessment and real estate taxes. Additional
discussion and detail will be provided as deeded in the section which follows.
Total Tax Year Rate 1.06225%
Tax Rate Area 003-000
2023/24
Valuation Source Page | 51
Subject Tax Analysis
In California, under Proposition 13, properties are only assessed at sale. Thus a comparison between
the subject and other properties is unnecessary. An estimate of property taxes, based upon the
current assessed values and special/direct assessment, is as follows:
Since properties are reassessed upon a sale of the property, I have also assumed a sale of the subject
property on the date of value. Taxes are estimated by multiplying the market value of the subject by
the tax rate and adding in direct assessments. I have analyzed the assessment and taxation based
my ‘as is’ market value estimate.
Conclusion
Upon a sale of the property at market value, property taxes are anticipated to adjust based on the
most recent sale price.
Tax Year 2023/24
Assessor's Parcel Number:002-436-022
Total Taxable Value:$3,806,314
Tax Rate (%):1.062250%
Total Taxes Before Special Assessments:$40,432.57
Special Assessment:$0.00
Total Taxes:$40,432.57
Subject Property Tax Calculations
Market Approach Value Tax Rate Taxes Special Assessment Total Taxes
$4,290,000 1.062250%$45,570.53 $0.00 $45,570.53
Estimated Subject Taxes
Valuation Source Page | 52
Highest and Best Use
A highest and best use analysis is an economic study based on four main criteria that is intended t o
determine the reasonably probable use of property that results in the highest value. The four major
tests of highest and best use include:
1. Legally permissible
2. Physically possible
3. Financially feasible
4. Maximally productive
According to the Dictionary of Real Estate Appraisal, 7th Edition, the most probable use is “the use
to which a property will most likely be put based on market analysis and the highest and best use
conclusion” and serves as the basis for the most probable selling price of a property. Highest and
Best Use is defined in the Dictionary of Real Estate Appraisal, 7th Edition, as follows:
“The reasonably probable and legal use of vacant land or an improved property that is physically
possible, appropriately supported, financially feasible, and that results in the highest value. The
four criteria the highest and best use must meet are legal permissibility, physical possibility,
financial feasibility, and maximum productivity. Alternatively, the probable use of land or
improved property—specific with respect to the user and timing of the use—that is adequately
supported and results in the highest present value.”
Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 7th ed. (Chicago: Appraisal
Institute), 2022.
The four major tests of highest and best use serve as an elimination process to determine the most
probable use that results in the highest value. Many uses can be eliminated from reasonably
probable consideration by investigating legal permissibility, physical pos sibility, financial feasibility,
and maximum profitability. The Appraisal Institute recognizes the concept of highest and best use
as being distinguished between the highest and best use of the land as if vacant and unimproved
and the highest and best use of the property as presently improved. The highest and best use is an
opinion supported rather than an absolute fact to be discovered. Different possible highest and best
Valuation Source Page | 53
uses "as if vacant" and "as improved" can occur when a property is developed to a use other than
its highest and best use.
Highest and Best Use of a Site as though Vacant
The following analysis presents our analysis of the physically possible, legally permissible,
financially feasible, and maximally productive use of the subject property as though vacant.
Legally Permissible
The following table contains a summary of the pertinent factors relating to the legally permissible
test of highest and best use for the subject property.
Legal Permissibility Test
Zoning: CR, Commercial Retail
Planned Land Use: General Retail
Overlays/Other: None
Jurisdiction: City of San Luis Obispo
Private Restrictions: None known
Other Regulations/Restrictions: None known
Immediate Environs:
North: Offices and Retail
South: Offices and Retail
East: Offices and Retail
West: Offices and Retail
Zone Change Likely: Not in near future
Land Use Change Likely: Possible other Mixed-Use Developments
Legally Permissible Uses: Various Uses
Given the preceding information, the subject’s zoning allows various commercial or mixed-use
development options.
Physically Possible
The following table contains a summary of the pertinent factors relating to the physically possible
test of highest and best use for the subject property.
Valuation Source Page | 54
Physical Possibility Test
Site Size (Gross): 21,607 sq. ft. or 0.496 acres
Site Size (Net): 21,607 sq. ft. or 0.496 acres
Relative Size: Average/Typical
Shape: Mostly Rectangular; Normative and Functional
Frontage: Direct, along Higuera St/Toro St
Access: From Higuera St
Utilities: Water, sewer, gas, electricity, telephone/cable
Topography: Mostly level
Soils: Assumed typical and adequate to support
development
Environmental Factors: Known soil contamination
Easements: No adverse easements known
Physically Possible Uses: Mixed-Use Development is possible
The subject site could physically accommodate a retail or mixed-use development. Surrounding
development patterns are conducive to mixed-use development. Commercial or mixed-use
development is physically possible.
Financially Feasible
According to retail and office market data available as of the effective date, the retail and office
market is characterized by stable conditions, with vacancy rates being at a reasonable/frictional level.
Commercial or mixed-use development is financially feasible.
Maximally Productive
It was previously determined that the most financially feasible use of the subject is for commercial
or mixed-use development. This is also the maximally productive use at this time.
Highest and Best Use As Though Vacant Conclusion
Considering the preceding analysis of the subject’s legally permissible, physically possible,
financially feasible, and maximally productive use, the highest and best use is for commercial or
mixed-use development.
Valuation Source Page | 55
Highest and Best Use As Improved
The highest and best use as improved considers the use that should be made of a property as it
exists or considering the current improvements.
Existing improvements include approximately 3,250 square feet of retail space which no longer
contributes to value. The ‘as is’ site value (less demolition and remediation costs) significantly
exceeds the value in continued use. T he highest and best use is represented by the site as though
vacant. The existing improvements do not contribute to value.
1. Retain the improvements
2. Modify the improvements in some way, such as conversion, renovation, or alteration
3. Demolish the improvements and redevelop the land
The highest and best use as improved is to demolish the existing improvements for new commercial
or mixed-use development.
Highest and Best Use As Improved Conclusion
The highest and best use as improved is to demolish the existing improvements for new commercial
or mixed-use development. The most probable buyer is a developer or investor. The most probable
users include possible future tenants.
Valuation Source Page | 56
The Valuation Process
Overview
The valuation process for the appraisal of real estate is typically comprised of three approaches: the
cost approach, the sales comparison approach, and the income capitalization approach. Land
valuation for the site as though vacant and unimproved typically precedes the cost approach.
Land Valuation
The land valuation involves the valuation of the subject property as though vacant and unimproved.
In this analysis, (usually) sales of land with similar legal, locational, and physical attributes and
highest and best use are compared to the subject to develop a well-supported opinion of land value.
Land values can also be determined using extraction or allocation technique s or ground rent
capitalization techniques.
Cost Approach
The principle of substitution is basic to the cost approach. This principle affirms that a
knowledgeable buyer would pay no more for a property than the cost to acquire a similar site and
construct improvements of equivalent desirability and utility without undue delay. T he cost
approach involves developing an opinion of replacement cost or reproduction cost of the existing
(or proposed) improvements as of the effective valuation date (or dates). By comparison,
replacement cost is the cost to construct (at current prices as of the effective date) a substitute for
the subject improvements using modern materials and current standards, design, and layout
whereas reproduction cost is the estimated cost to construct an exact duplicate or replica using the
same materials, construction standards, design, layout, and quality of workmanship. Reproduction
cost embodies all deficiencies, super-adequacies, and obsolescence of the subject improvements.
Cost approach estimates include direct and indirect costs as well as entrepreneurial incentive (or
profit). Then depreciation from all sources: curable and incurable physical depreciation, curable and
incurable functional obsolescence, and external obsolescence; are deducted for an estimate of the
depreciated cost new. The land value is then added for an estimate of value via the cost approach.
Sales Comparison Approach
In the sales comparison approach, the appraiser develops an opinion of value by analyzing closed
sales, listings, or pending sales of properties that are similar to the subject property. A major premise
of the sales comparison approach is that an opinion of the market value of a property can be
Valuation Source Page | 57
supported by studying the market’s reaction to comparabl e and competitive properties. The selected
comparable sales, listings, or pending sales are compared to the subject based on various elements
of comparison which may include variations in property rights, financing terms, market conditions,
and physical characteristics and/or economic characteristics, among others. As a result of the
comparisons, the subject is usually reconciled to a unit value, such as price per square foot, price
per unit, or another appropriate unit of comparison. The reconciled unit va lue is then multiplied by
the number of subject units for an indication of value via the sales comparison approach.
Income Approach
The income capitalization approach consists of methods used to estimate the subject property’s
ability to generate monetary (and typically reversionary) benefits, and then convert the future
benefits to a present value. Anticipation is fundamental to the income approach, as future benefits
are converted to a value indication as of a spec ified effective date of value.
The two prevalent methodologies for converting expected future monetary benefits into a present
value indication are direct capitalization and yield capitalization. In direct capitalization, a single
period’s anticipated income is converted to a value indication using a market-derived capitalization
rate or factor (multiplier). With yield capitalization, anticipated income for more than one period is
converted to a value indication using a discount rate, and typically involves a reversion, or a lump
sum benefit that an investor expects to receive upon the termination of an investment (or at the end
of the holding period).
Method of Valuation
The sales comparison approach (to vacant land) is developed in accordance with the highest and
best use. The cost approach is not applicable, and the income approach is not applicable since
vacant land does not have prices driven based on rental income.
Valuation Source Page | 58
Sales Comparison Approach
Overview
The subject land value (‘as is’ value) was estimated through development of the sales comparison
approach. To develop this approach, the market area (or greater applicable area) was searched to
locate sales, pending sales, or listings of vacant land properties that are comparable to the subject
property.
In developing a sales comparison approach for vacant land, comparable land properties can be
compared to the subject either directly or based upon an appropriate unit of comparison, such as
price paid per gross (or net) acre, price paid per gross (or net) square foot, or other less common
units of comparison such as price paid per buildable unit, price paid per linear foot of frontage, etc.
Given the available market data, similar land to the subject typically sells based upon price per net
square foot of land area, which was determined to be the most appropriate unit of comparison in
this analysis and valuation. Therefore, I have utilized the site areas for both the subject and
comparable land sales and compared the land sales to the subject based upon price paid per net
square foot.
The following pages within this section contain a map depicting the locations of the various
comparable land sales (or pending sales or listings), as well as a summary table outlining pertinent
and relevant identifying, locational, physical, and/or other pertin ent features for the subject and
comparable land properties. After the summary table are included aerial maps and additional
comments for the comparable land properties, followed by a discussion of qualitative or quantitative
adjustments made for the elements of comparison, as well as a summary table depicting the
adjustments. Finally, the comparable land properties value indications are reconciled to a unit value
for the subject, then multiplied by the appropriate subject units for an indication of value v ia the
sales comparison approach. Due to the lack of recent comparable sales in the Downtown San Luis
Obispo area, the search was expanded to include other similar Central Coast communities.
Valuation Source Page | 59
Land Sales Summary Table
Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Sale 6
Identification
Physical Address 1166 Higuera St 1185 Monterey St 564 Higuera St 1404 & 1440
Chorro St
297 E. Main St 316-320 Front St 418-508 Front St
Location NWC Higuera
St/Toro St
SWC Monterey
St/Toro St
NS Higuera St,
W. of Nipomo St
SEC Chorro
St/Pismo St
NWC E. Main
St/N. Palm St
NEC Front
St/Laurel St
ES Front St, N. of
Laurel St
Parcel Number(s)002-436-022 002-436-007 002-402-048 003-537-024 & -
025
071-0-194-070 005-151-29-000 &
005-151-43-000
005-151-50-000+
City/Town San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo Ventura Santa Cruz Santa Cruz
County/State San Luis
Obispo/CA
San Luis
Obispo/CA
San Luis
Obispo/CA
San Luis
Obispo/CA
Ventura/CA Santa Cruz/CA Santa Cruz/CA
Property Rights Fee Simple Leased Fee Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple
Transaction
Status Subject Sold Sold Sold Sold Sold Sold
Sale or Analysis Date 8/29/2023 6/13/2019 8/29/2022 4/14/2022 1/25/2022 1/4/2022 12/20/2021
Sale or Analysis Price -$2,200,000 $2,525,000 $1,700,000 $3,500,000 $2,500,000 $15,000,000
Grantor -SLOQ Properties,
LLC
GOM Properties,
LLC
Cielo Obisbo, LLC Downtown
Ventura Props III,
LLC
Allen J. & Janet
W. Martin
SC Riverfront,
LLC
Grantee -Montorosa, LLC SLO
Management, LLC
Mitchell M. &
Phoebe Lipari
Anacapa Court,
LLC
SCFS Venture,
LLC
Boz SC Riverfront
Owner, LLC
Document #-022663 34628 16591 8500 239 61173
Financing -Cash/New Loan All Cash All Cash Cash/New Loan Cash/New Loan All Cash
Conditions of Sale -Normal Normal Normal Normal Normal Normal
Marketing Time -276 Days 360 Days 355 Days 301 Days N/Avail.N/Avail.
Source/Verification -Costar,
Realquest,
Anderson
Commercial
(Listing
Brokerage); 805-
Costar,
Realquest,
CRMLS#
PI21187753,
Richardson
Sotheby's
Costar,
Realquest,
CRMLS#
SC21089496
Costar,
Realquest, Real
Investments
(Listing
Brokerage); 805-
985-1000
Costar, Realquest Costar, Realquest
Physical Attributes
Sq. Ft.21,607 12,496 22,216 16,509 21,845 13,504 44,823
Sq. Ft. (Net)21,607 12,496 22,216 16,509 21,845 13,504 44,823
Acres 0.496 0.287 0.510 0.379 0.501 0.310 1.029
Acres (Net)0.496 0.287 0.510 0.379 0.501 0.310 1.029
Shape Mostly
Rectangular
Rectangular Flag-Shaped Rectangular Rectangular Rectangular Rectangular
Frontage Direct/Paved Direct/Paved Limited/Set Back Direct/Paved Direct/Paved Direct/Paved Direct/Paved
Utilities To Site To Site To Site To Site To Site To Site To Site
Off-Site
Improvements
Full Full Full Full Full Full Full
On-Site
Improvements
Obsolete
Improvements
Obsolescent
Improvements
None/Vacant None/Vacant None/Vacant Obsolescent
Improvements
Obsolescent
Improvements
Topography Mostly Level Mostly Level Mostly Level Uneven/Above
Grade with
Mostly Level Mostly Level Mostly Level
Easements None known None known None known None known None known None known None known
Encumbrances None known None known None known None known None known None known None known
Zoning CR, Commercial
Retail
C-R, Commercial
Retail
C-D, Downtown
Commercial
R-4, High Density
Residential
T6, Urban Core CBD, Central
Business District
CBD, Central
Business District
Unit Prices
Sale Price -$2,200,000 $2,525,000 $1,700,000 $3,500,000 $2,500,000 $15,000,000
Price/Sq. Ft. (Net)-$176.06 $113.66 $102.97 $160.22 $185.13 $334.65
Valuation Source Page | 60
Land Sales Map
Valuation Source Page | 61
Land Sale Aerial Photographs
Land Sale 1 Aerial Photograph Land Sale 2 Aerial Photograph
Land Sale 3 Aerial Photograph Land Sale 4 Aerial Photograph
Sale 5 Aerial Photograph Sale 6 Aerial Photograph
Valuation Source Page | 62
Land Sales Adjustment Summary Table
Subject Sale 1 Sale 2 Sale 3 Sale 4 Sale 5 Sale 6
Identification
Physical Address 1166 Higuera St 1185 Monterey St 564 Higuera St 1404 & 1440
Chorro St
297 E. Main St 316-320 Front St 418-508 Front St
Location NWC Higuera
St/Toro St
SWC Monterey
St/Toro St
NS Higuera St,
W. of Nipomo St
SEC Chorro
St/Pismo St
NWC E. Main
St/N. Palm St
NEC Front
St/Laurel St
ES Front St, N. of
Laurel St
Parcel Number(s)002-436-022 002-436-007 002-402-048 003-537-024 & -
025
071-0-194-070 005-151-29-000 &
005-151-43-000
005-151-50-000+
City/Town San Luis Obispo San Luis Obispo San Luis Obispo San Luis Obispo Ventura Santa Cruz Santa Cruz
County/State San Luis
Obispo/CA
San Luis
Obispo/CA
San Luis
Obispo/CA
San Luis
Obispo/CA
Ventura/CA Santa Cruz/CA Santa Cruz/CA
Property Rights Fee Simple Leased Fee Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple
Sale or Analysis Date 8/29/2023 6/13/2019 8/29/2022 4/14/2022 1/25/2022 1/4/2022 12/20/2021
Sale or Analysis Price -$2,200,000 $2,525,000 $1,700,000 $3,500,000 $2,500,000 $15,000,000
Sq. Ft.21,607 12,496 22,216 16,509 21,845 13,504 44,823
Unit Prices
Sale Price -$2,200,000 $2,525,000 $1,700,000 $3,500,000 $2,500,000 $15,000,000
Price/Sq. Ft. (Net)-$176.06 $113.66 $102.97 $160.22 $185.13 $334.65
Price/Acre (Net)-$7,669,014 $4,950,891 $4,485,553 $6,979,171 $8,064,277 $14,577,338
Selected Unit of Comparison
Price/Sq. Ft. (Net)$176.06 $113.66 $102.97 $160.22 $185.13 $334.65
Adjustments
Transaction Adjustments
Property Rights
Terms/Financing
Conditions of Sale
Expenditures After Purchase
Market Conditions 8/29/2023 +
Property Adjustments
Location ++
Size
Shape/Utility +
Topography +
Utilities
Offsite Improvements
Onsite Improvements
Zoning/Land Use Plan +-
Total Number of Adjustments:1 1 3 1 0 1
Relative Comparison to Subject:Inferior Inferior Inferior Inferior Similar Superior
Valuation Source Page | 63
Land Sales Analysis and Conclusion of Value
Six (6) land sales were selected for analysis and comparison to the subject (site valuation) based
upon price paid per net square foot of site area. The land sales were compared to the subject based
upon various elements of comparison. Transactional elements of comparison include: property
rights, terms/financing, conditions of sale, and expenditures after purchase. Following market
conditions, property elements of comparison include: location, size, shape/utility, top ography,
utilities & offsite improvements, onsite improvements, and zoning/land use plan.
• Sale 1 closed in mid-2019. Land values have generally increased since mid -2019. Upward
consideration is warranted for market conditions.
• The subject has an excellent Downtown location, being very centralized within the
Downtown core. Sale 3 is an inferior, less centralized Downtown area location and upward
consideration is warranted.
• Sale 4 is situated in the Downtown Ventura area (Ventura County). The subject is a premium
location in Downtown San Luis Obispo with nearby uses which command superior rents and
prices relative to other locations in the downtown area. Sale 4 is considered to be a slighty
inferior location. Upward consideration is warranted.
• Sale 2 has inferior shape and functional utility. Upward consideration is warranted.
• Sale 3 has inferior, uneven topography. Most of the site is significantly above grade to
frontage streets. Upward consideration is warranted.
• Sale 3 has inferior zoning allowing general inferior, less intense land uses. Upward
consideration is warranted.
• Sale 6 was entitled for high-intensity mixed-use development at its time of sale. Downward
consideration is warranted.
Conclusion of Site Value
After consideration, the subject is indicated to have a value above the indications of Sales 1, 2, 3,
and 4, below the indication of Sale 6, and similar to (or above) Sale 5.
I have also considered expenditures since acquisitions (in 2019) for the subject for engineering, soft
costs (towards possible future development), and environmental remediation . The total expenditure
after acquisition is noted to be $411,000 (rounded). It was also noted that the buyer for Sale 1
incurred significant expenditures after purchase for topography and engineering concerns (precise
expenditures not known).
Valuation Source Page | 64
After consideration, a site value of $220.00/SF is concluded for the subject.
Demolition Cost, Remediation Cost, and Profit
The subject includes approximately 3,250 square feet of building area and 17,454 square feet of
paving which must be removed prior to development. Demolition costs are summarized as follows:
I have added profit/incentive of 10%.
The site valuation is summarized as follows:
Value Summary
Only the sales comparison approach was developed in this valuation according to the highest and
best use being represented by the site as though vacant.
Subject
Building Improvements SF 3,250
x Demolition Cost/SF $5.00
Building Demolition Cost $16,250
Site Improvements SF 18,360
x Demolition Cost/SF $0.60
Site Imp. Demo Cost $11,016
Bldg & Site Impr. Demo Cost $27,266
Plus: Contingency @ 5%$1,363
Total Demolition Cost $28,629
Demolition Costs
Subject Land Area (Sq. Ft.)21,607
Value/Sq. Ft.$220.00
Indicated Site Value (As Vacant):$4,750,000
Less: Demolition Cost:-$28,627
Less: Profit (10%):-$2,863
'As Is' Value Indication:$4,718,510
Rounded to:$4,720,000
Valuation Summary
Valuation Source Page | 65
Estimated Typical Exposure/Marketing Time
The estimated typical exposure time for the subject is 0 to 12 months, based upon reported
marketing times for sales, conversations with brokers and/or market participants, and available
published data.
Valuation Source Page | 66
Certification
I certify that, to the best of my knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and
limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and
conclusions.
3. I have no present or prospective interest in the property that is the subject of this report and no personal
interest with respect to the parties involved.
4. I have provided two appraisal services on the subject property within the past three years.
5. I have no bias with respect to the property that is the subject of this report or to the parties involved
with this assignment.
6. My engagement in this assignment was not contingent upon developing or reporting predetermined
results.
7. My compensation for completing this assignment is not contingent upon the development or reporting
of a predetermined value or direction in value that favors the cause of the client, the amount of the
value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly
related to the intended use of this appraisal.
8. The reported analyses, opinions and conclusions were developed, and this report has been prepared,
in conformity with the Uniform Standards of Professional Appraisal Practice.
9. I personally inspected the property (exterior only) that is the subject of this appraisal.
10. No one provided significant professional assistance in the development of this appraisal.
11. 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, which include the Uniform Standards of
Professional Appraisal Practice (USPAP); as well as the Principles of Practice and Code of Ethics of the
American Society of Appraisers.
12. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its
duly authorized representatives.
13. As of the date of this report, I have completed the continuing education program of the Appraisal
Institute. The American Society of Appraisers has a mandatory reaccreditation program for all of its
designated members. I am in compliance with that program.
Andrew J. Johnson, MAI, SRA, ASA, MBA, CVA, CMEA
Owner, Valuation Source
Real Estate. Businesses. Machinery & Equipment.
California Certified General Appraiser License 3002458
License Expires: August 7, 2024
Valuation Source Page | 67
Assumptions and Limiting Conditions
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
The acceptance of this appraisal assignment and the completion of the appraisal report submitted
herewith are contingent upon the following general 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.
2. The property is appraised free and clear of any or all liens or encumbrances unless otherwise
stated in this report.
3. Responsible ownership and/or competent property management (if applicable) are assumed,
unless otherwise stated.
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 u napparent conditions of the property, subsoil, or
structures (if applicable) 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.
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.
9. It is assumed that all required licenses, certificates of occupancy or legislative or administrative
authority from any local, state, or national governmental or private entity organization have been
or can be obtained or renewed for any use on which the value opinions contained in this report
are based.
10. Any sketch (if applicable) may show approximate dimensions and is included to assist the reader
in visualizing the property. Maps and exhibits found are p rovided for reader reference purposes
only. No guarantee as to accuracy is expressed or implied unless otherwise stated. No survey
has been made for the purpose of this report.
11. It is assumed that the utilization of the land and improvements (if applicable) is within the
boundaries or property lines of the property described and that there is no encroachment or
trespasses unless otherwise stated.
Valuation Source Page | 68
12. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment
by the appraiser that might suggest the possibility or presence of such substances should not
be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such
determination would require investigation by a qualified expert in the field of environmen tal
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 opinions are predicated on the assumption that there is n o 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 appr aisers’ descriptions and resulting comments are the result
of the routine observations made during the appraisal process.
13. The Americans with Disabilities Act (ADA) became effective January 26, 1992. I have not made
a specific compliance survey and analysis of this property to determine whether or not it is in
conformity with 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 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. Therefore, it is assumed
that the property complies with all ADA requirements.
14. Any proposed improvements are assumed to be completed in a good workmanlike manner in
accordance with the submitted plans and specifications.
15. The distribution of any or the total valuation of this report between land and improvements
applies under the stated program of utilization. The separate allocations for land and buildings
(if applicable) must not be used in conjunction with any other appraisal and are invalid if so
used.
16. Possession of this report or a copy thereof, does not carry with it the right of p ublication. It may
not be used for any purpose by any person other than the party to whom it is addressed without
the written consent of the appraisers, and in any event, only with the properly written
qualification and only in its entirety.
17. Neither all nor any of the contents of this report (especially any 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 o ther media without prior
written consent and approval of the appraisers.
18. Prospective values (if applicable) are predicated upon stable market conditions unless otherwise
stated. The appraisers cannot be held responsible for unforeseeable events that may alter market
conditions prior to the effective date of the appraisal.
Valuation Source Page | 69
Addenda
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Legal Description
Valuation Source Page | 71
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Appraiser’s Qualifications
Valuation Source Page | 73
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