HomeMy WebLinkAbout9/15/2015 - STAFF REPORTS - 3.C. OVERSIGHT BOARD
FOR THE SUCCESSOR AGENCY TO THE
PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY
BOARD REPORT
MEETING DATE: September 15, 2015 NEW BUSINESS
TITLE: APPROVING THE SALE OF THE PLAZA THEATRE, LOCATED AT
128 SOUTH PALM CANYON DRIVE TO THE CITY OF PALM SPRINGS,
IN THE AMOUNT OF $1.00 SUBJECT TO CONDITIONS
INITIATED: JAMES THOMPSON, BOARD CLERK/SECRETARY
RECOMMENDATION:
Adopt Resolution No. 37, "A RESOLUTION OF THE OVERSIGHT BOARD OF THE
SUCCESSOR AGENCY TO THE PALM SPRINGS COMMUNITY REDEVELOPMENT
AGENCY, APPROVING THE SALE OF THE PLAZA THEATRE LOCATED AT
128 SOUTH PALM CANYON DRIVE, TO THE CITY OF PALM SPRINGS, IN THE
AMOUNT OF $1.00, SUBJECT TO CONDITIONS, PURSUANT TO THE PROVISIONS
OF THE LONG-RANGE PROPERTY MANAGEMENT PLAN."
BACKGROUND AND ANALYSIS:
On September 23, 2014, the Oversight Board adopted Resolution No. 30, approving the
sale of the historic Plaza Theatre to the City of Palm Springs in the amount of $1.00,
pursuant to the property management plan.
Rosenow Spevacek Group, the Successor Agency's property management plan
consultant, determined the value of the property at zero. The Department of Finance
rejected the zero value and the Long Term Property Management Plan was amended
by the Oversight Board to list the property on the Plan, at the carrying value of
$1,543,483.
Subsequently the Successor Agency obtained an appraisal of the property prepared by
Capital Realty Analysts, as disclosed to the Board on September 23, 2014, who
determined the value of the property at $1.00.
The Oversight Board action was submitted and approved by the Department of Finance
on January 9, 2015. The Department of Finance approved the sale of the property to
the City in the amount of $1.00 subject to the understanding the historic nature of the
property and it cannot be demolished, the City will assume the financial responsibility of
the renovations after the acquisition and is in the process of partnering with the Palm
Oversight Board Report
September 15, 2015— Page 2
Sale of the Plaza Theatre
Springs International Film Festival to operate the facility, the City will secure a new
operator, and the property will be maintained as an historic structure and arts venue.
During this process, the City Attorney has realized that staff had overlooked the 10-day
public notice as required by California Health and Safety Code Section 34181.
City staff determined the prudent course of action would be for the Oversight Board to
affirm its previous findings and actions, along with the inclusion of the Conditions
pursuant to the Department of Finance approval of the sale. City staff provided public
notice on Thursday, September 3, 2015.
The Oversight Board action will be resubmitted to the Department of Finance for
approval.
Attachments:
Proposed Resolution
Board Report September 23, 2014
Resolution No. 30
DOF Approval Letter
Public Notice/Affidavit
RESOLUTION NO. 37
A RESOLUTION OF THE OVERSIGHT BOARD OF THE
SUCCESSOR AGENCY TO THE PALM SPRINGS
COMMUNITY REDEVELOPMENT AGENCY, RATIFYING
AND APPROVING THE SALE OF THE PLAZA THEATRE
LOCATED AT 128 SOUTH PALM CANYON DRIVE, TO
THE CITY OF PALM SPRINGS, IN THE AMOUNT OF
$1.00, SUBJECT TO CONDITIONS, PURSUANT TO THE
PROVISIONS OF THE LONG-RANGE PROPERTY
MANAGEMENT PLAN.
WHEREAS, the Successor Agency for the Palm Springs Community
Redevelopment Agency received its finding of completion from the California
Department of Finance on January 2, 2014, pursuant to the Dissolution Act; and
WHEREAS, on September 23, 2014, the Oversight Board adopted Resolution
No. 30, approving the sale of the historic Plaza Theatre, located at 128 South Palm
Canyon Drive, to the City of Palm Springs, in the amount of$1.00; and
WHEREAS, on January 9, 2015, the California Department of Finance approved
the Oversight Board adoption of Resolution No. 30, pursuant to conditions; and
WHEREAS, a Notice of Public Meeting pursuant to the sale was posted on
September 3, 2015, pursuant to California Health and Safety Code Section 34181, and
included on the Successor Agency's web page.
NOW, THEREFORE BE IT RESOLVED, THE OVERSIGHT BOARD FOR THE
SUCCESSOR AGENCY TO THE PALM SPRINGS COMMUNITY REDEVELOPMENT
AGENCY HEREBY FINDS, RESOLVES AND APPROVES AS FOLLOWS:
SECTION 1 . The foregoing recitals are true and correct and incorporated herein.
SECTION 2. The Oversight Board ratifies and affirms its previous findings and
actions, on September 23, 2014, and the adoption of Resolution No. 30.
SECTION 3. All legal prerequisites to the adoption of this Resolution have been
satisfied.
SECTION 4. The Oversight Board approves the sale of Property No. 7 in the
Long-Range Property Management Plan, the Plaza Theatre, located at 128 South Palm
Canyon Drive, to the City of Palm Springs for the appraised value of $1.00, subject to
the following conditions:
a. The City of Palm Springs will assume the financial responsibility of
the property after the acquisition.
Resolution No. 37
Page 2
b. The City of Palm Springs will secure a new operator, with
conditions the property will be maintained as an historic structure and performing
arts venue.
SECTION 5. This Resolution shall become effective in accordance with
California Health and Safety Code Section 34179(h), which authorizes the California
Department of Finance to review all actions taken by the Oversight Board.
PASSED, APPROVED AND ADOPTED BY THE SUCCESSOR AGENCY TO
THE PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY ON THIS 15T" DAY
OF SEPTEMBER, 2015.
LISA HOWELL
OVERSIGHT BOARD CHAIR
ATTEST:
JAMES THOMPSON, CLERK/SECRETARY
Resolution No. 37
Page 3
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, Oversight Board
Clerk/Secretary hereby certify that Resolution No. 37 is a full, true and correct copy, and
was duly adopted at a special meeting of the Oversight Board for the Successor Agency
to the Palm Springs Community Redevelopment Agency, on September 15, 2015, by
the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
JAMES THOMPSON, CITY CLERK
City of Palm Springs, California
Oversight Board Clerk/Secretary
OVERSIGHT BOARD
FOR THE SUCCESSOR AGENCY TO THE
PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY
BOARD REPORT
MEETING DATE: September 23, 2014 NEW BUSINESS
TITLE: APPROVING THE SALE OF THE PLAZA THEATRE TO THE CITY OF
PALM SPRINGS
INITIATED: Department of Community& Economic Development
RECOMMENDATION:
1. Adopt Resolution No. , "A RESOLUTION OF THE OVERSIGHT BOARD
OF THE SUCCESSOR AGENCY TO THE PALM SPRINGS COMMUNITY
REDEVELOPMENT AGENCY APPROVING THE SALE OF THE PLAZA
THEATRE TO THE CITY OF PALM SPRINGS UNDER THE PROVISIONS OF
THE LONG-RANGE PROPERTY MANAGEMENT PLAN"
BACKGROUND AND ANALYSIS:
The Dissolution Act calls for the Successor Agency, under the direction of the Oversight
Board, to dispose of real property it received from the Dissolved RDA either for limited
public uses, or for disposition into the private market expeditiously and with a view
toward reasonably maximizing value, with the disposition proceeds ultimately made
available for distribution to the affected taxing entities.
The Successor Agency holds a total of 12 properties (consisting of 19 parcels in total)
from the Dissolved RDA, including the Plaza Theatre.
These include sites assembled for future redevelopment, public parking lots and other
real property. Disposition of these properties could not occur until the Department of
Finance ("DOF") issued a finding of completion and approved a long-range property
management plan, which includes an inventory of these properties and other pertinent
information. The Successor Agency received its finding of completion from DOF on
January 2, 2014 and submitted its Long Range Property Management Plan ("LRPMP')
simultaneously. The DOF began to review the PMP in late January and began to
request additional information, documents and clarification.
The LRPMP was prepared in collaboration with a qualified dissolution and real estate
consultant and contained detailed information on each property, such as the date and
purpose of acquisition, parcel characteristics, estimate of the current value and any
lease, rental or other revenues, histories of environmental contamination, a description
of each property's potential for transit-oriented development and the advancement of
ITEM NO.
Oversight Board Report
September 23, 2014
Page 2—Approval of Sale of Plaza Theatre
the City's planning objectives, and previous development proposals. In most cases,
estimates of value were derived from recent comparable sales of like properties in the
area since appraisals are not required for the LRPMP. Most importantly, the LRPMP
addresses the intended disposition of each property. Permissible uses include retention
for governmental use, retention for future development, sale of the property, or use of
property to fulfill an enforceable obligation.
Thus, the LRPMP outlined that the Successor Agency would sell all 12 properties.
DOF, however, struggled with understanding the property values listed for a number of
the properties, particularly the downtown parking lots and the Plaza Theatre (together,
properties 7 through 12 in the LRPMP). Rosenow Spevacek Group ("RSG"), the
Agency's consultant that prepared the LRPMP, determined that the likely value for each
of those six properties was $0.00 (zero).
RSG's rationale on the downtown parking lots was based on land use and parking
economics. In terms of the Plaza Theatre, it was somewhat easier for DOF to
understand the zero value. The then-current tenant has received rent concessions over
the past several years and yet still closed after 23 years due to economic factors. Even
with relatively strong interest from prospective users in the building, the process to
select a new user for the building depends on the timetable for the renovation and
conversion of the building. While the City remains hopeful that a new user would have
the ability to pay a substantial monthly rent, it is unknown who the tenant would be,
what the use would be, or what a feasible rent would be at this time.
Plus, the building is nearly 80 years old. It went through a substantial remodel when the
former RDA acquired the property in 1989, but with a single tenant in the building for 23
years it was time to examine the structure and all the major building systems for
renovation or replacement. In 2013, the Agency commissioned a physical assessment
of the building by Interactive Design Corporation of Palm Springs, and while there are
no hard dollar figures in the report, the overall impact of the report is that millions of
dollars would be necessary to bring the building into compliance with new building
codes as well as remedy some of its mechanical deficiencies. The combination of the
potentially weak rental stream and the significant capital needs suggests that even a
value of zero for the property is probably generous.
Nevertheless, when DOF reviewed the LRPMP, they balked at the zero values for half
the properties. They did not raise any issues on the other six properties. DOF has not
yet approved a LRPMP that contained "zero" values and indicated they would be
unlikely to do so.
The City proposed that DOF approve the LRPMP with the condition that each of the
properties with a zero value be appraised prior to any actual sale. What DOF required
instead was to assign a value to each of the property, with the Successor Agency
retaining the option of appraising each of the properties to determine the true market
value of the property prior to an individual sale.
02
Oversight Board Report
September 23, 2014
Page 3—Approval of Sale of Plaza Theatre
The Dissolution Act does not require that properties be appraised at the time of the
preparation or adoption of the LRPMP. Any value assigned to the properties would
have to have an economic basis (i.e. an appraisal) or, alternatively, be the historic value
of each of the properties. Under GASB, all public agencies carry real property on their
books at their historic cost basis (the "Carrying Value"). Over time, the carrying values
can sometimes get disconnected from market value because they are not escalated
with inflation. On the other hand, the carrying value on certain former RDA properties
can be significantly higher than market value, even years later, because they often
reflect the Agency acquiring and renovating a structure for public benefit rather than
economic return.
I
The Carrying Value of the Plaza Theatre is significantly higher than what the City would
want to acquire the property for under the LRPMP:
_.
Site Name Assessors Parcel Carrying Value
Numbers)
7 Plaza Theater 513-144-010 1,543,483
L-- ----- _ _ .. . ........ - -_
The Oversight Board approved a resolution adopting the Carrying Value as the "values"
for each of properties 7 through 12 in the LRPMP on February 25, 2014. The other
properties in the LRPMP remain unchanged. In addition, the resolution allowed the
Successor Agency to appraise any of the six properties if it seeks to convey or acquire
any of these properties for a value other than the Carrying Value. It does not obligate
the City or any other buyer to pay these values for the property if a different market
value is established by an appraisal.
In June, 2014, the City hired Capital Realty Analysts of La Quinta, California to
undertake an appraisal of the property. Because of the historic nature of the property,
the appraiser was asked to assume some continued operation of the theater and not a
true "highest and best use" that would include demolishing the property for a new
retail/commercial use. Such an assumption on an economically obsolete building
creates an appraisal problem:
Appraisal Problem
"The subject property includes a 024-acre land parcel, improved with a
vacant, historic theatre building. In light of the fact that the
improvements were constructed new in the 1930's, and are functionally
and economically obsolete, the primary appraisal problem for this
analysis involves the determination of the highest and best use of the
property: and estimating the costs that a buyer may incur in order to
place the property back in service with the limitations imposed by
current code standards and the Class 1 historic designation. As a
03
Oversight Board Report
September 23, 2014
Page 4—Approval of Sale of Plaza Theatre
historic, special use property, I also encountered challenges in acquiring
and analyzing comparable sales.... The sales comparison based value
estimate provides support for the cost-based value estimate, which is the
main technique typically applied to special purpose properties such as the
subject. Additional information in this regard is included in the Market
Analysis section and within the approaches to value."
The appraiser further found:
"For at least the last 4 years of The Follies run, the Lessee was unable to
pay rent. After the show closed, the Lessee held a sale to dispose of the
personal property contained within the Theatre. This includes all
lighting, sound and stage equipment, etc. Seating remained in place,
although it appeared to be at the end of its economic life. In these
regards, the subject property presents a challenging marketing prospect,
since significant sums will be required to bring the property back to an
acceptable operating condition or altemative use."
Conclusion
"...The Client indicated that their consultants estimate this cost at $3MM -
$4MM. It is virtually certain that a market buyer would not expend these
kind of funds, as even The Follies, which by all accounts was a well-
managed and produced show, failed to generate sufficient net income to
remain viable in this location. Consequently, in addition to the functionally
obsolete nature of the building, the specialty use is now economically
obsolete.
"Historic Theatres of this type, much like parks, churches, museums and
the like, rarely generate sufficient net income to be viable real estate
investments....
"However, the very significant capital required to return this venue to
operational status is far beyond the value of the property at completion.
To demonstrate, assuming a best-case cost of $3MM, the property
investment would be $201.30 PSF, assuming the purchase price was $0.
As described in the sales table [included in the appraisal], only 2 sales
exceeded $200 PSF, and both of these venues were operational and not
economically obsolete. Furthermore, neither required material capital
improvements. if the subject were not historic and could be demolished,
the market value of the property would likely be equal to the current land
value, less the cost to remove the improvements."
04
Oversight Board Report
September 23, 2014
Page 5—Approval of Sale of Plaza Theatre
The value of the property, as determined by the appraiser, is $1.00. The City proposes
to pay the $1.00 to the Successor Agency and then bear the financial responsibility of
the renovations, as well as undertake the process of securing a new operator.
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RESOLUTION NO. 30
A RESOLUTION OF THE OVERSIGHT BOARD TO THE
PALM SPRINGS COMMUNITY REDEVELOPMENT
AGENCY APPROVING THE SALE OF THE PLAZA
THEATRE LOCATED AT 128 SOUTH PALM CANYON
DRIVE TO THE CITY OF PALM SPRINGS UNDER THE
PROVISIONS OF THE LONG-RANGE MANAGEMENT
PLAN
WHEREAS, the Community Redevelopment Agency of the City of Palm Springs
("Redevelopment Agency") was a redevelopment agency in the City of Palm Springs
("City"), duly created pursuant to the California Community Redevelopment Law
(Part 1 (commencing with Section 33000) of Division 24 of the California Health and
Safety Code) ("Redevelopment Law"); and
WHEREAS, AB X1 26 and AB X1 27 were signed by the Governor of California on
June 28, 2011, making certain changes to the Redevelopment Law, including adding
Part 1.8 (commencing with Section 34161) and Part 1.85 (commencing with Section
34170) to Division 24 of the California Health and Safety Code which dissolves the
Redevelopment Agency ("Dissolution Act"); and
WHEREAS, under the Dissolution Act, the term "successor agency" was defined to
refer to the dissolved redevelopment agency's sponsoring community (the city, county
or city and county that formed the Dissolved RDA), unless the sponsoring community
adopted a resolution electing not to serve in that capacity; and
WHEREAS, pursuant to Health & Safety Code Section 34191.5(b), successor
agencies are required to send long-range property management plans to the oversight
board and State Department of Finance no later than six months following the issuance
of the finding of completion; and
WHEREAS, staff and consultants to the Successor Agency of the Palm Springs
Community Redevelopment Agency prepared a Long Range Property Management
Plan, in accordance with the provisions of Section 34191.3 of the Dissolution Act,
indicating the intended disposition and use of the real property assets of the former
Redevelopment Agency; and
WHEREAS, The Successor Agency received its finding of completion from DOF on
January 2, 2014; and
WHEREAS, pursuant to Health & Safety Code Section 34191.5(b), the Long-Range
Property Management Plan was submitted for review and approval to the Oversight
Board and Department of Finance on December 16, 2013; and
Resolution No. 30
Page 2
WHEREAS, in its review of the LRPMP, the DOF required the Successor Agency to
assign the Carrying value to each property, but did not object to the Successor Agency
retaining the option of appraising each property to determine the true market value of
the property prior to an individual sale; and
WHEREAS, in June, 2014, the City hired Capital Realty Analysts of La Quinta,
California to undertake an appraisal of the property, and the appraiser concluded that
based on a number of unique market and site conditions, the Plaza Theatre's value is
$1.00.
NOW, THEREFORE, BE IT RESOLVED BY THE OVERSIGHT BOARD OF THE
SUCCESSOR AGENCY OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE
CITY OF PALM SPRINGS AS FOLLOWS;
Section 1. The Oversight Board hereby finds and determines that the foregoing
recitals are true and correct, and incorporates them herein by reference.
Section 2. The Oversight Board approves the sale of Property No. 7 in the Long-
Range Property Management Plan, the Plaza Theatre, to the City of Palm Springs for
the appraised value of$1.00.
Section 3. At such time as the Successor Agency receives proceeds from the sale
of the property, the Successor Agency shall comply with applicable statutes regarding
the distribution of these proceeds to the County Auditor Controller for dissemination to
the affected taxing agencies.
Section 4. This Resolution shall take effect three business days after its adoption.
ADOPTED THIS 23" DAY OF SEPTEMBER, 2014.
OMAS FLAW, Chairman
ATTEST:
MES THOMPSON, City Clerk
Oversight Board Clerk/Secretary
Resolution No. 30
Page 3
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS)
I, James Thompson, Secretary of the Oversight Board of the Successor Agency
of the Palm Springs Community Redevelopment Agency hereby certify that Resolution
No. 30 was adopted by the Oversight Board at a Special Meeting held on the 23'd day of
September, 2014, by the following vote:
AYES: Board Member Foat, Board Member Ready, Board Member Van Horn,
and Chair Flavin
NOES: None
ABSENT: Board Member Arthur, Board Member Marshall, and Vice Chair Howell
ABSTAIN: None
AMES THOMPSON, CLE IUSECRETARY
ANT 0R
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r DEPARTMENT OF EDMuND G. BROWN JR. • GOVERNOR
C1UEDa�P F I N A N C E 91 5 L STREET ■ SACRAMENTO CA ■ 95S 14-3706 ■WWW.DOY.CA.GOV
January 9, 2015
Mr. John Raymond, Director of Community and Economic Development
City of Palm Springs
3200 East Tahquitz Canyon Way
Palm Springs, CA 92262
Dear Mr. Raymond:
Subject: Approval of Oversight Board Action
The City of Palm Springs Successor Agency(Agency) notified the California Department of
Finance (Finance)of its September 23, 2014 Oversight Board (OB) resolution on
September 26, 2014. Pursuant to Health and Safety Code (HSC) section 34179 (h), Finance
has completed its review of the OB action.
Based on our review and application of the law, OB Resolution No. 30, approving sale of the
Plaza Theatre located at 128 South Palm Canyon Drive (Plaza Theatre)to the City of Palm
Springs (City), is approved.
This property was listed on the Agency's Long-Range Property Management Plan (LRPMP),
which was approved by Finance on March 25, 2014. The sale of the Plaza Theatre authorized
with the OB resolution No. 30 is consistent with the disposition of the property approved in the
LRPMP.
In addition, our approval is based on our understanding that the Plaza Theater has a historic
designation and cannot be demolished. The City will assume the financial responsibility of the
renovations after the acquisition and will secure a new operator with conditions that the property
will be maintained as a historic structure and performing arts venue.
Please direct inquiries to Beliz Chappuie, Supervisor, or Satveer Ark, Lead Analyst at
(916)445-1546.
Sincerely,
1 TYN HpWARD
Acti Pr or,gm Budget Manager
cc: Mr. Geoffrey Kahl, Director of Finance, City of Palm Springs
Ms. Pam Elias, Chief Accountant Property Tax Division, Riverside County
Ms. Elizabeth Gonzalez, Bureau Chief, Local Government Audit Bureau, California State
Controller's Office
California State Controller's Office
CITY OF PALM SPRINGS
PUBLIC NOTIFICATION
a
Meeting Date: Oversight Board September 2, 2015
Subject: Sale of the Plaza Theatre, 128 South Palm Canyon Drive
AFFIDAVIT OF POSTING
I, JAMES THOMPSON, City Clerk, of the City of Palm Springs, California, do
hereby certify that a copy of the attached Notice of Public Meeting was posted at City
Hall, 3200 E. Tahquitz Canyon Drive, on the exterior legal notice posting board, and in
the Office of the City Clerk, and the Oversight Board website, at or about 6:00 p.m., on
Thursday, September 3, 2015.
1 declare under penalty of perjury, pursuant to the State of California, that the
foregoing is true and correct.
AMES THOMPSON
City Clerk, City of Palm Springs
Oversight Board Clerk/Secretary
NOTICE OF PUBLIC MEETING
OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO THE
PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY
PROPOSED SALE OF THE HISTORIC PLAZA THEATRE, LOCATED AT
128 SOUTH PALM CANYON DRIVE, TO THE CITY OF PALM SPRINGS
NOTICE IS HEREBY GIVEN pursuant to Cal. Health and Safety Code
Section 34181, the Oversight Board of the Successor Agency to the Palm
Springs Community Redevelopment Agency will hold a public meeting on
Tuesday, September 15, 2015. The Oversight Board meeting begins at
4:30 P.M., in the Council Chamber, Palm Springs City Hall, 3200 East Tahquitz
Canyon Way, Palm Springs.
The purpose of the Oversight Board Meeting is to consider a resolution to
affirm its previous findings and actions, and approve the sale of the historic Plaza
Theatre, located 128 South Palm Canyon Drive, to the City of Palm Springs, in
the amount of $1.00 pursuant to the Successor Agency Long Range Property
Management Plan, approved by the Oversight Board and the California
Department of Finance. The sale will be conditioned upon the historic status of
the property, cannot be demolished, and remain a performing arts venue.
REVIEW OF INFORMATION: The staff report and other supporting
documents are available for public review at City Hall between the hours of
8:00 a.m. and 6:00 p.m., Monday through Thursday, on or after Thursday,
September 10, 2015. Please contact the Office of the City Clerk at
(760) 323-8204 if you would like to schedule an appointment to review these
documents.
PUBLIC COMMENTS: Response to this notice may be made verbally at
the Public Meeting and/or in writing before the meeting. Written comments may
be made to the Oversight Board by letter (for mail or hand delivery) to:
James Thompson, City Clerk
Oversight Board Clerk/Secretary
3200 East Tahquitz Canyon Way
Palm Springs, CA 92262
Si necesita ayuda con esta carta, porfavor Ilame a la Ciudad de Palm
Springs y puede hablar con Felipe Primera telefono (760) 323-8253.
MES THOMPSON
City Clerk
Oversight Board Clerk/Secretary
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An Appraisal Report
r Of
jemyoftbW' scam The Historic Plaza Theatre
1 Prepared For: Location:
The City of Palm Springs 128 South Palm Canyon Drive, Palm
Attn: Mr. David H. Ready, Esq., Springs, CA 92262-6330; Otherwise
r Ph.D., City Manager Known As APN: 513-144-010;
P.O. Box 2743 Riverside County, CA.
Palm Springs, CA 92263-2743
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Date of Report: July 10, 2014 Date of Value: June 18, 2014
' Capital Realty Analysts File No.: 14-3994
CAPITAL REALTY ANALYSTS
MICHAEL A. SCARCELLA,MAI
78015 MAIN STREET, SUITE 207
LA QUINTA,CA 92253
t PHONE: (760)564-6222
FAX:(888)985-9994
EMAIL: MIKEna,REALTYADVISOR.COM
CAPITAL REALTY ANALYSTS
July 10, 2014 REAL ESTATE APPRAISERS♦ANALYSTS 0 ADVISORS
78.015 MAIN STREET,SUITE 207
LA QuINTA,CA 92253-8962
The City of Palm Springs CW
Attn: Mr. David H. Ready, City Manager PM
P.O. Box 2743
' Palm Springs, CA 92263-2743
RE: The Historic Plaza Theatre: 128 South Palm Canyon Drive, Palm
' Springs, CA. 92262-6330: Otherwise Known As APN: 513-144-010:
Riverside County, CA.
1 Dear Mr. Ready:
At your request and authorization, I have prepared this appraisal report,
1 setting forth my opinion of the market value of the fee simple estate in the
subject property, as of June 18, 2014. Per your request, the following market
value estimates are provided for the subject property:
4 Market Value "As Is"
' My report identifies the subject property and its market area and presents the
market data and analysis leading to the final estimate of value. This report is
subject to the requirements of the Code of Professional Ethics and Standards of
' Professional Appraisal Practice of the Appraisal Institute. The appraisal report
is intended to comply with the appraisal guidelines of Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the
Uniform Standards of Professional Appraisal Practice ("USPAP"), adopted by the
Appraisal Standards Board of the Appraisal Foundation.
1 I have personally inspected the subject property. I have located current sales
and listings of comparable properties in the subject market and competing
areas, and have analyzed this data in order to arrive at my estimates of value of
the subject property. Based upon the available data, I conclude that the market
value of the fee simple estate in the subject property as is, as of June 18, 2014
is as follows:
$1
(One Dollar)
Phone:(760)564.6222
' Fax:(888)985-9994
Email:mike@realtyadvisor.com
. . ._..____..
1
1 �
July 10, 2014
Capital Realty Analysts / Mr. David H. Ready
The undersigned have no personal interest either present or contemplated in
the subject property and certify that my employment was not dependent upon
producing a specific value, or a value within a given range. No fee, received or
to be received for the employment of my services is in any way contingent on
the opinions reported herein. I hope you find the details of this appraisal report
relevant to your decisions. Thank you for the opportunity to be of service.
' Respectfully submitted,
CAPITAL REALTY ANALYS�TS
Michael A. Scarcella, MAI
State.Certification No.: AG019463
Expiration Date: October 24, 2015
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Table of Contents
Summary of Important Facts and Conclusions...... .'........................................ 5
Aerial Photo of the Subject (Source: Riverside County GIS) ......................... 10
Introduction / History of the Subject..................:a...................................... 11
Definition of Fee Simple Estate................................................................... 13
Definition of Market Value ......................................................................... 13
' Definition of"As Is" Value ................................... ...................................... 13
AppraisalProblem...................................................................................... 14
Scopeof Work............................................................................................ 14
' Legal Description ....................................................................................... 15
Assessment & Taxation.............................................................................. 15
Regional Analysis- Coachella Valley ............................................................. 17
MarketAnalysis ............................................................................................ 25
SiteAnalysis ................................................................................................. 32
Improvement Description .............................................................................. 45
' Highest and Best Use Analysis ...................................................................... 54
AppraisalProcess.......................................................................................... 58
CostApproach .......................................................:...................................... 60
Sales Comparison Approach.......................................................................... 74
Reconciliation and Final Estimate of Value.................................................... 87
Certification .................................................................................................. 88
Assumptions and Limiting Conditions...........................................................91
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1
Summary of Important Facts and Conclusions
Client: The City of Palm Springs
Attn: Mr. David H. Ready, City Manager
P.O. Box 2743
Palm Springs, CA 92263-2743
Intended Users: The Client
Intended Use: This report is intended for use by the Client to
' establish a current value for the subject property.
Property Type: The subject of this appraisal report is a vacant,
' historic theatre building. Additional details are
included in the Introduction and Improvement
Description sections of the report.
' Location: 128 South Palm Canyon Drive, Palm Springs, CA.
Identification: APN: 513-144-010: Riverside County, CA.
Thomas Brothers Page 786 Grid D2
Guide Reference:
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C9d0 2014 CAPITAL RP.ALTY ANALYSTS Page 5
Summary of Important Facts and Conclusions '
Census Tract Number: Tract 0446.06
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Report Format: Appraisal Report
Purpose of the The purpose of this appraisal is to estimate the r
Appraisal: market value of the fee simple estate in the
subject property, under the following conditions;
4 Market Value "As Is"
in accordance with the definition of market value
described in the body of this Report.
Date of Valuation: June 18, 2014
Date of Appraisal: July 10, 2014
Owner of Record: A Preliminary Title Report was not submitted or
examined. According to public records, title to the
subject property is vested with Community
Redevelopment Agency, City of Palm Springs.
C'M ®2014 CAPITAL REALTY ANA -IM Page 6
Summary of Important Facts and Conclusions
Site: According to Riverside County Assessor's Plat
Map, the site size of the subject site is .24-acres,
' or 10,454 SF.
Zoning: According to the zoning map of City of Palm
' Springs, the subject parcel is zoned CU, Civic Use
District Zone. In light of the municipal ownership
and Class 1 Historic Designation, the subject's
' zoning is conisde4rds reasonable and appropriate.
A Zoning Map is located in the Site Analysis
section of this report.
General Plan: According to the general plan map of City of Palm
Springs, the subject parcel is designated Central
Business District. The General Plan designation is
considered reasonable and appropriate. A General
Plan Map is located in the Site Analysis section of
this report.
Improvements: The subject property is a .24-acre land parcel,
improved with the Plaza Theatre, a 2-story, Class
' 1 historic building. The improvements consist of a
cast in place concrete foundation, walls and floor
with concrete masonry unit upper walls
supporting segmented wood trusses. The
improvements were constructed new in 1936, and
were observed to be in fair condition on the date
' of value. Additional details are included in the
Introduction and Improvement Description
sections of the report.
' Highest And Beat Use, Develop commercial use
"As Vacant":
' Highest And Best Use, Cure functional obsolescence, deferred
"As Improved": maintenance and building safety issues, and
continue with theater use.
Property Rights Fee Simple Estate
' Appraised:
' `'?Ad ®2014 CAPITAL REALTYANALYM Page 7
Summary of Important Facts and Conclusions
Extraordinary 1. The subject land is assumed to be free and
Assumptions: clear of all soil contamination.
Hypothetical 'None
Conditions:
Personal Property: $0
Marketing Period: 12 Months
Exposure Period: 12 Months
Final Value Estimate:
$1
(One Dollars)
Cad 0 2014 CAPUAL REAL ANALYM Page 8
Photographs Relating to the Subject Property
The subject property viewing E from Lobby area
S. Palm Canyon Drive.
The basement has been in use as a The theater interior viewing E from
dressing room. the balcony.
The balcony viewing N Street scene viewing N along S. Palm
Canyon Drive; subject at right.
J Page 9
' C4d®2014 CAPITAL REALTY APALVSTS
Aerial Photo of the Subject (Source: Riverside County GIS)
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Cad C 2014 CAPITAL REALTY ANALYSTS Page 10
C
Introduction / History of the Subject
1
The subject property is a .24-acre land parcel; improved with the Plaza
Theater, a historic theater building located at 128 S. Palm Canyon Drive,
Palm Springs, CA. The Plaza Theatre is a 2-story Class 1 historic
building. The improvements consist of a cast in place concrete
' foundation, walls and floor with concrete masonry unit upper walls
supporting segmented wood trusses. The improvements were constructed
new in 1936 as a component of the La Plaza mixed-use complex. La Plaza
' originally included an underground garage, second story apartments over
commercial spaces - all in arcaded buildings that defined a central
parking plaza. In addition, bungalows were located behind the main
plaza commercial buildings. The Theatre hosted a number of musicals
and radio shows in its early years, helping to draw attention to Palm
Springs. Subsequently, the property was used as a 2-screen movie
theater.
The Theatre was active until 1989, when it became home to the Fabulous
Palm Springs Follies (The Follies). When the property was remodeled in
' 1989 to accommodate The Follies, a fire suppression system was
installed; along with a projection booth, house lights and some interior
finishes. In 1990, production facilities and a screen hoist & stage pit
' were added. In 1991, the HVAC and electrical systems were upgraded. In
1996, the basement and pit were remodeled, and a stage extension was
installed.
Cod Page 11
®2014 CAPITAL REALTY ANALYSTS
Introduction / History of the Subject (cont'd)
In 1998, the building was acquired by the Community Redevelopment
Agency of Palm Springs, who continued to lease the property to The
Follies. The Plaza Theatre is landlocked: surrounded by existing
buildings, and the subject building exterior envelop is co-terminus with
the parcel. This greatly impacts simple access by the public, fire exiting,
access by maintenance personnel, staging and access by performance
personnel and equipment. To address the needs for access and trash
easements, lease agreements have been executed with two adjacent
property owners. The basic lease agreements are between the respective
property owners and the Community Redevelopment Agency of the City
of Palm Springs ("Agency"). Subsequent sub-leases were executed and
amended between the "Agency" and the Partnership for the Performing
Arts, L.P. The following shows the layout of La Plaza with ownership:
_ TAHauITZ CA troy WAY tt
we Nway
Laray
_. (CRY) T J ( Fwnla That)
Plaza Las Flores
cxy of Pon socc
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m 9 v Plaza wasa � � � w Plaza East
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Ste Plan.Ownership of a Oaten builOu+gs
When the City Redevelopment Agency acquired the property, the initial
lease rate was 10% of gross income. The lease was subsequently modified
to $14k per month. In approximately 2000, the lessee became unable to
e to produce the show. In May 2014 the producer
pay rent, but continued p y
retired the show and the property is currently vacant.
Cad 0 2024 CAPITAL REALTY ANALYSTS Page 12
Introduction / History of the Subject (cont'd)
As described further on in the Improvement Description section of the
report, the property suffers from legal constraints along with very
significant functional and economic obsolescence. The dissolution of the
' Redevelopment Agency of the City of Palm Springs and the subsequent
legislative requirement to transfer title to the Theatre generated the
requirement for this analysis.
' Definition of Fee Simple Estate
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat.
I.
' Definition of Market Value
The definition of Market Value for this Appraisal is as follows:
"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably, and assuming the
' price is not affected by undue stimulus. Implicit in this definition are 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 on 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.
' Definition of"As Is" Value
For the purposes of this analysis, the "As Is" value is defined as the
market value of the subject property in its current state (as of the date of
value).
(The Dictionary of Real Estate Appraisal,3xd Edition,Appraisal Institute,Chicago,Illinois,Page 140.(
Cod 02014 CAPITAL REALTY ANALY5fS
Page 13
t
Appraisal Problem
The subject property includes a .24-acre land parcel, improved with a
vacant, historic theatre building. In light of the fact that the
improvements were constructed new in the 1930's, and are functionally
and economically obsolete, the primary appraisal problem for this
analysis involves the determination of the highest and best use of the
property: and estimating the costs that a buyer may incur in order to
place the property back in service with the limitations imposed by
current code standards and the Class 1 historic designation. As a
historic, special use property, I also encountered challenges in acquiring
and analyzing comparable sales. Interestingly, I found that the [
combination of municipal and/or non-profit ownership of older [
downtown area theatre buildings is not unique. However, the specific
nuances of the functional and economic problems of the subject are
unique. While I was able to overcome this problem by selecting sales in
as close an effective age and condition to the subject as possible, all of
the sales and the subject are unique, and have a specialized fit in their
respective sub-market areas. The sales comparison based value estimate
provides support for the cost-based value estimate, which is the main
technique typically applied to special purpose properties such as the
subject. Additional information in this regard is included in the Market
Analysis section and within the approaches to value.
Scope of Work
This appraisal report is intended to be an appraisal assignment as
defined in the Uniform Standards of Appraisal Practice (USPAP). It is my
intent that the appraisal service be performed in such a manner that the
results of the analysis, opinions, and conclusions be that of a
disinterested 3rd party. It is also my intent that all appropriate data
deemed pertinent to the solution of the appraisal problem be collected,
confirmed and reported in conformance with USPAP and the Code of
Professional Ethics of the Appraisal Institute. The scope of the analysis is
intended to be appropriate in relation to the significance of the appraisal
problem. In preparing this appraisal report, the appraiser performed the
following steps:
Inspection
I have physically inspected the subject property as of the date of
value. E
Information [
I searched for comparable data from a variety of sources. These
include published data services, the Desert Area MLS, the County
Tax Roll, and personal interviews with local brokers, lenders and
developers.
Page 14
Cad®Z014 CAPITAL REALTY ANALYSTS
1
1
Scope of Work (cont'd)
1 Confirmation
Unless otherwise noted, all comparable data applied in this report
' has been confirmed with at least 1 party to the transaction. A party
to the transaction may include 1 or more of the following; buyer,
seller, broker, lender, attorney, accountant, title officer, escrow
' officer. Inspections of out of town comparables were performed via
aerial map and computerized street views.
' Analysis
I have analyzed the data and applied the appropriate techniques
available to arrive at my opinion of market value for the subject
' property.
Legal Description
' A Preliminary Title Report for the subject property was not submitted or
examined. The short legal description for the subject parcel is included
on the Property Profile Report, included in the Addendum
' Assessment & Taxation
Real property taxation in the State of California is governed by
' Proposition 13, which was passed by the voters in June 1978. The basic
elements of Proposition 13 are as follows:
1. The tax rate was limited to 1% of the assessed value plus an
additional 1/4% to cover the payment of debts previously approved
by voters.
' 2. The assessed value of a property purchased prior to March 1, 1975
was fixed at that property's market value as of March 1, 1975. For
a property purchased after March 1, 1975, the law requires the
assessment to be based on the market value at the time of sale.
3. All assessed values can increase no more than 2% per year for
' inflation.
The following table shows the current assessed value for the subject
' property: I
' 1 513-144-010 IINS 10,464 395,263 27,369 - $ 422,632 - 0.00%
' /'M 0 2014 CAPITAL REAI, YANALYSTs Page 15
Assessment & Taxation (cont'd)
The assessed value of the subject property exceeds the current market
value of the property. Consequently, I conclude that the assessed value
of the subject property' is not reasonable. The subject property is
currently owned in fee by a tax-exempt entity. Consequently, I have no
basis for estimating the reasonableness of the effective tax rate for the
subject property.
Easements and Encumbrances
A Preliminary Title Report for the subject parcel was not submitted or
examined. Consequently, the subject is being appraised as though there
are no atypical easements and/or encumbrances that may have a
negative impact on the prospective market value or marketability of the
subject property: other than those specifically noted. Any user of this
analysis is advised to make an independent assessment of the condition
of title, prior to utilizing this analysis. The property does have a known
access easement, providing a pedestrian corridor from South Palm
Canyon Drive to the theatre entrance.
'lrL�0 2014 CAmIT REAL ANA *STS Page 16
Ronal Analysis - Coachella Valle
Coachella Valley Alap
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' The Coachella Valley is a valley in Southern California which extends for
approximately 45 mi (72 km) in Riverside County southeast from the San
Bernardino Mountains to the northern shore of the Salton Sea. It is the
' northernmost extent of the vast trough; which includes the Salton Sea,
the Imperial Valley and the Gulf of California. It is approximately 15 mi
(24 km) wide along most of its length, bounded on the west by the San
Jacinto Mountains and the Santa Rosa Mountains and on the north and
east by the Little San Bernardino Mountains., The San Andreas Fault
crosses the valley from the Chocolate Mountains in the southeast corner
and along the centerline of the Little San Bemardinos. The fault is easily
visible along its northern length as a strip of greenery against an
otherwise bare mountain.
' The Coachella Valley connects with the Greater Los Angeles area to the
west via the San Gorgonio Pass, a major transportation corridor that
includes I-10 and the Union Pacific Railroad. Populated by nearly
600,000 people, the Coachella Valley is part of the 13th-largest
metropolitan area in the United States, the Inland Empire.
t
Cad®2014 CAPITAL REALTY ANALYSTS Page 17
1
Regional Analysis- Coachella Valley
The following table shows the growth trend of the regional area (source:
CA Department of Finan& / U.S. Census Bureau):
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
$ $ $ $ $ o 0 0 0 m m m m m m m m m m o
.-I ei .-i ei ei eY ,-1 •1 rl ei N N N N N N N N N N N N N N
The regional area generally attracts a high percentage of retirees due to
the favorable climate in the fall, winter and springs seasons. Summers
are hot, resulting in a seasonal population base. Development has
generally been moving from west to east through the region.
Consequently, the eastern cities in the region have had the highest s
growth rates over the past several years. The following table shows the �[
growth rates of the cities in the region, from west to east:
City 9-Yr
Indio 66,539 72,142 77,146 80,962 82,325 75,122 77,165 78,065 78,298 11,759
Cathedral City 50,957 51,435 52,115 51,972 52,508 51,037 51,603 51,952 52,108 1,151
Palm Desert 49,595 49,879 49,752 50,686 51,570 48,132 49,111 49,471 49,619 24
Palm Springs 46,000 46,754 46,858 47,019 47,653 44,385 45,002 45,279 45,414 (586)
Coachella 30,964 35,449 38,486 40,317 41,043 40,464 41,502 41,904 42,030 21,066
La Quinta 36,377 38,604 41,092 42,743 43,830 37,307 37,836 38,075 38,190 11813
Desert Hot Springs 19,507 22,163 23,544 25,939 26,584 25,852 27,383 27,638 27,721 8,214
Rancho Mirage 16,520 26,793 16,944 16,975 16,938 17,168 17,463 17,504 17,556 1,036
Desert Hot Springs and Coachella had the highest overall growth rates
and the lowest median housing prices, reflecting the generally poor
economic conditions that have prevailed in the region over the past
approximately 7-years.
Old®2014 CAPrrA Re LT AIA ISTS Page 18
1
Regional Analysis — Coachella Valley
Economy
Tourism, retail, healthcare, construction and agriculture are the main
' industries in the Coachella Valley. The following table shows the
employment distribution by sector:
' f9LRC[UDNhOYM[Nlfi(Y[IdM(ATDDAtTM[Nt
9�fMr Lrvips(1.SCL.l,M9) R
' ConNrrcLan(4S%•5,707) (
■ Dinnb.lien lS,o%.Gx71 41N(iEA%-50,771) ■
%�`�,,, [OuU(NM C7A%•l.716) NotEVAttL>I6(t5,9%•19,9n) ■
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■Sm lSe%n(7,3%-9,774)
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' As shown, retail and hotel with their related services historically has
been the driving force in the local economy. Close driving proximity to
the Los Angeles, Orange County and San Diego metro areas yields over
3.5 million tourists per year. The area attracts a significant retiree base;
yielding a high percentage of healthcare employment.
' Historically, the Coachella Valley has tended to underperform the Inland
Empire's economy in bad times and out-perform it in good times. Thus,
' the area's job growth was negative in the early 1990s recession but grew
faster than the region in the late 1990s recovery. It was slower in the
2001 recession but was faster in the upturn, until 2005. Since then, that
t pattern reversed. This is largely due to the increased prominence of the
local construction sector. Thus, the valley grew slower than the inland
region in the 2005-2006 boom years and matched it during the 2007-
2009 recession. It fell much more than the inland region in 2010 (-3.3%
v. -1.5%). In 2011 both grew slightly, 0.5% in the Coachella Valley v 0.4%
for the Inland Empire. The Valley's growth was 2.8% in 2012 v. 2.0% for
the IE.
1
`-?{J®2OS4 CAPITAL REALTY ANALYSTS Page 19
}
Regional Analysis - Coachella Valley
Economy (cont'd)
In terms of new home absorption, the „W,, ^M ,
table at right shows the regional trend.
The absorption pattern shown at right
followed closely along the same pattern as
the home price trend through 2009. From
2010 through 2013, the average home
price increased from $248,444 to
$334,044; or 34%. The fact that the lower
priced foreclosure absorption percentage
is decreasing sharply is a factor in the
sharp average retail price,increase. Several
of the public homebuilders (Toll, Lennar,
D.R. Horton, etc.) are now constructing
new homes in the region; which suggests a
moderation of the retail price percentage
growth rate, and an uptick in new home 1 1 1 1 1 1 1 1 l l x R x €
absorption counts. Other economic
indicators include the following:
41 2012 Taxable Retail Sales - $5.313
* 2012 Bank Deposits - $6.48B
* 2013 Assessed Value - $56.613
46 Crime Rate Per 1,000 Residents- 45.0
4 2012 Average Job Pay - $35,689
Conclusion
The Coachella Valley's economy has historically been seasonal, tied to
the winter/spring influx of tourists and seasonal residents. Additionally,
the Coachella Valley has historically attracted the baby boomers and
relatively affluent retiree segments. The region is projected to continue to
grow rapidly in relation to neighboring regions over the next few decades
as the large baby boomer demographic is now entering retirement age.
The region continues to enhance its appeal with this demographic by
configuring shopping, entertainment venues and planned housing
developments ranging from upper middle to high-end products geared to
the segment. With additional growth in the permanent population, the
economy is likely to become less vulnerable to seasonality. The regional
economy is now trending up after several years of difficult economic
conditions. This trend is likely to continue through the short term; with
some potential for stronger mid-term growth as the current economic
cycle continues to mature.
��d 0 2014 C" n, Rc wANAL. srs Page 20
City Analysis: Palm Springs, CA
R� t. ✓ d•
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' Location
Palm Springs California is located 120 miles southeast of Los Angeles
' and 135 miles northeast of San Diego. It is in the western portion of the
Coachella Valley. The gateway to the desert resort communities, Palms
Springs is the original and most identifiable, resort city. The City's
' reputation was popularized in the early 1920's by the then sprouting
movie industry. The City has easy access to Highway 111 and several
direct routes to Interstate 10 via, Ramon Road, Gene Autry Trail, North
Palm Canyon Drive and Indian Avenue.
' Population f
Palm Springs is the original resort city in the Coachella Valley and is the
most recognized name of the valley's communities. About 1.6 million
visitors a year come to the City, as it is located' 2 hours drive from the
San Diego and Los Angeles metro areas.
1 / J
`�L� ®2014 CAPITAL REALTY.ANALYSTS Page 21
City Analysis; Palm Sprints, California
Population (cont'd)
In addition to the approximately 30,000 seasonal residents, the City has
a current permanent population of approximately 45,000. The following
table shows the population growth trend for the City:
Population Trend
50,000
48,000
46,000
44,000 ■■■
42,000
40,000
38,000
36,000
O "� N M O I!1 StD 1� 00 •.01 ,0 •ti 'N M C N � n W m O ti N �.
m m m m m gi m m m m o 0 0 0 0 0 0 0 0 0 0 0
,y e1 rl ei rl rl 'i e4 '1 e4 N N N N N N ry N N N N N N
Palm Springs is the third largest City, based on population in the Valley.
However, population growth percentage has lagged relative to La Quinta,
Indio and Coachella, which had much higher growth rates due to the
availability of land in the eastern area of the region.
Business & Economy
Interstate 10 runs through the valley from west to the east, with exits for
Palm Springs at White Water, Indian Avenue, N Gene Autry Trail, Date
Palm Drive and Ramon Road. Highway 111 is the main arterial through
the desert cities. The core Downtown area of Palm Springs is located at
the corner of Tahquitz Canyon Drive and Palm Canyon Drive. This area
supports a large pedestrian retail corridor, anchored by the Museum
Market Plaza site and The Agua Caliente Casino. The City passed a bond
measure in part, to assist in funding redevelopment of the property. The
majority of existing structures have been demolished. The developer
reports that he is seeking funding to develop a Kimpton Hotel to anchor
the property.
Cod 0 2014 CAPITAL REALTY ANALYSTS Page 22
City Analysis; Palm Springs, California
Business & Economy (cont'd)
Like the other Coachella Valley Cities, Palm Springs' economic base is
' centered on the tourism industry. The city has over 60% of the hotels
and almost 50% of the 16,000 hotel rooms in the Coachella Valley. These
hotels produce almost $90 million dollars in room sales, creating
' approximately $10 million in tax revenue for the city.
Much of the key residentially zoned land in Palm Springs has been fully
developed. Consequently, new home sales numbers lag most of the
eastern Cities, where growth rates are higher. Alternatively, re-sale
trading is active. The following table shows the trends in unit sales and
average price in the City:
Home Sales in Palm Springs, CA
' COL" Pie R
700 f350,000
' 600-- S300,Ooo
' 500 $250,000
cd,.If
400—"` K s200,000 Home Sales
' per Q4arler
300- — — — — — — $150,000
' 200- — — — — — — — — — s100,000
bra
' 100- — — $ — — — — — — 7 — —$K000 Medan Pro-
0 s0
01 Q2 03 04 01 02 03 04 01 02 03 Q4
2011 2012 2013 NINE
' Current unemployment is similar to the State average. The most common
industries are (in order) accommodation and food service, construction,
retail, heath care, real estate, arts / entertainment / recreation and
' professional services.
I
®2014 CAPITAL WALTY ANALYSTS Page 23
I
City Analysis; Palm Springs, California
Conclusion
As the original resort City, Palm Springs has a significant number of
historic buildings, mid-century architecture and a long history as a
popular resort getaway. The lack of developable residential land has
limited growth in the residential segment and thus, population growth.
Alternatively, the City has successfully re-established its position as a
hip destination resort city with superior nightlife and the typical
signature desert resort amenities; including Indian gaming.
Redevelopment of the Museum Market Plaza and Spa Hotel site are likely
to prove to be key positive elements for growth in taxable sales in the
City in the future. In light of the positive trends in the key tourism and
service segments, and assuming the Museum Market Plaza re-
development succeeds, the City seems likely to remain a viable economic
performer for the foreseeable future.
i
L
Cad ®2014 CAMALREALiYANALYSn Page 24
Market Analysis
AirportMuseum Mar et
Subject AV
� .
' The purpose of the Market Analysis section in this appraisal report is to
identify the positive and negative features of the subject property in
relation to its peers, and to assess supply and demand characteristics for
' that market segment. The Market Analysis section is organized as
follows:
' Market Analysis
6 Introduction
rl The Subject Property
4� Theatre Sales Data & Analysis
46 Conclusion
' C9d®2014 CAPITAL REALTY ANALYSTS Page 25
Market Analysis
Introduction
The subject property is improved with the Plaza Theatre, a 2-story Class
1 historic building. The improvements consist of a cast in place concrete
foundation, walls and floor with concrete masonry unit upper walls
supporting segmented wood trusses. The improvements were constructed
new in 1936, and were °observed to be in fair condition on the date of
value. The Plaza Theatre'' cludes 847-seats in its current configuration.
alue � gu
As a special purpose Property with a 1936 construction date, the
property has significant -functional problems that will be detailed in the
following section. Despite the significant functional issues, the property
had somewhat successfully supported (from a physical standpoint) the
Fabulous Palm Springs Follies, which ran from October through May for
the past 23-years. By all accounts, the relative success of the production
in this functionally obsolete space was due to the managerial expertise of
the producer, Mr. Riff Markowitz. The following is the Wikipedia
description of Fabulous Palm Springs Follies:
CadJ
0 2014 CAPITAL REALTY ANALYSTS Page 26
Market Analysis
Introduction (cont'd)
"The Fabulous Palm Springs Follies was a Ziegfeld Follies style dance and
' musical review show that played at the historic Plaza Theatre in Palm
Springs, California, United States, seasonally from November to mid-May.
The Follies was founded in 1990 by Riff Markowitz and Mary Jardin.
' Impresario Markowitz also served as the show's Managing Director and
Emcee. The show was often credited with helping to revitalize and
maintain the downtown area by bringing in patrons from around the
globe. The Follies was unique in that it only featured performers 55 and
older and holds Guinness World Records for this claim to fame. It was
the subject of a short documentary titled Still Kicking: The Fabulous Palm
' Springs Follies which was nominated at the 70th Academy Awards for
Best Short Subject Documentary. A segment that aired on Seattle
television station KOMO-TV that featured the Follies received an Emmy
' in 1997. The shows attracted approximately 170,000 attendees yearly.
On June 5, 2013, co-founders Markowitz and Jardin announced they
would close the Follies on May 18, 2014."
For at least the last 4-years of The Follies run, the Lessee was unable to
pay rent. After the show closed, the Lessee held a sale to dispose of the
' personal property contained within the Theatre. This includes all
lighting, sound and stage equipment, etc. Seating remained in place,
although it appeared to be at the end of its economic life. In these
regards, the subject property presents a challenging marketing prospect,
' since significant sums will be required to bring the property back to an
acceptable operating condition or alternative use.
The Subject Property
The Client supplied an Assessment of Current Conditions report,
prepared by Interactive Design Corporation. The Assessment of Current
' Conditions report outlines the major elements of the building, and
generally how they must be adapted for successful continued use, and
what will, be mandated by current codes. Unless otherwise noted,
' passages in quotes are taken directly from the Assessment of Current
Conditions report.
' The subject property is an interior parcel. Access to the property is via a
pedestrian easement leading from South Palm Canyon Drive to the Plaza
Theatre entry. Additionally, the subject leases space from the
' neighboring property owners for office space, access to Indian Canyon
Drive and restrooms.
1
' C3d®2014 CAPITAL REALTY ANALYSTS - Page 27
1
Market Analysis
The Subject Property (cont'd)
As previously described, lighting and sound systems are key elements
required to restore the property to an operational performance venue.
However, the stage wings, scenery grid and fly scenery space is limited
and there is limited opportunity to expand these spaces. All interior
finishes house lighting and seating are dated non-code compliant and
� g g P
worn. The stage itself, exit corridors and seating areas are the only areas
that meet the current requirements for a theater of this size. The Lobby
and restrooms, performers' facilities (dressing rooms, green room), the
production/technical facilities (workshop and storage), and production
management and administration offices are inadequate or non-existent.
Creative negotiations kith adjacent property owners may provide
adequate space for expansion to serve basic needs.
The stoutness of the basic structure, while appropriate for such an
important building, presents problems with retrofits: the entire structure
is inflexible. Therefore renovation and retrofit efforts are costly and
limited in their outcome. This is clearly relevant to the accessibility
deficiencies identified in the accessibility survey done by Disability
Access Consultants in 2013. Throughout the building, deficiencies in
clearances are identified (door widths and heights, stairway widths,
corridor widths, stair and ramp clearances and heights). Even were cost
not an issue correcting such deficiencies are not possible given the
structural system and :the fixed limit of the exterior envelope. For
example, stairs that are identified as being too narrow simply cannot be
widened because the enclosing walls are CIP concrete and are essential
to the overall structural integrity of the building."
In addition to the elements noted above, the Assessment of Current
Conditions report goes on to list significant deficiencies in the HVAC,
electrical and plumbing systems. Clearly, the subject property is going to
require significant capital costs to re-establish the property as a
performance venue. In light of the comparable data presented in the next
section, it is clear that the cost to retrofit this property to conform to
current codes will be significantly in excess of the value of the property at
completion. In addition,' there are elements of the property, such as a
lack of storage, administration, green & dressing rooms, and audience
restrooms can only be, overcome by leasing space form neighboring
property owners. While this arrangement has worked in the past, there is
no assurance that these arrangements will be made available to the next
owner/occupant, thus adding to the risk of investment, and decreasing
the current marketability of the property.
C9d C 2014 CAPITAL REALTY ANALYSTS Page 28
Market Analysis
' Theatre Sales Data & Analysis
In order to begin the analysis of the market for older theatre structures, I
' attempted to located structures of this type and research their histories.
As a specialty use, I focused on the larger City's, most likely to have
comparable buildings. I found that the metro San Francisco area, by
virtue of its age and size, had the most historic theatre buildings. In the
1940s, at the height of the theater age, San Francisco had over a
hundred theatres. As people began acquiring televisions in the '50s,
' theaters became unprofitable and began to close. Cinema Treasures, a
non-profit that tracks these buildings lists 20 of the city's theaters as
demolished, 65 as closed, and only one, the Pagoda in North Beach, as
' currently under renovation. On Mission Street, the Tower (shown as
Comparable Sale no. 7 in the Sales Comparison Approach) was the final
theater to shut its doors in 1998.
' In light of the unique nature of the Plaza Theatre, there are no
functionally equivalent substitutes in the market. Alternatively, I found
several older theatre building sales within the State. The following table
shows a portion of the sales data I was able to locate and verify:
Data Sale Sale Size
No Location Date Price (S F) $/SF
' 1 3721 University Ave.,San Diego,CA 4/30/14 $ 510,000 6,990 $ 72.96
2 474 W. Orange Stow Rd., San Bernardino,CA 2/13114 $ 590,000 17,224 $ 34.25
3 23955 Lika Dr.,CreaMM,CA 6/24/13 $ 101,000 5,025 $ 20.1.0
' 4 6714 ve C Blvd.,Hunfimg1axi Park M 6/7113 $ 1,".000 8,9M $179.33
0 2465 3CRAiM St.,£Pan 1+ranrbM,CA 4125113 $ 350,000 8,922 $ 39.23
6 1440 Ea bnmAve.,WmWra,CA 2/24/12 't$ 3,650,000 25,626 ;1i0,24
7 19091Y TopWW Ca q=EIvb ,Topaegs.CA 7/27/11 $ W,000 3,100 $206.46
' s 2M Marion Street.3x;*WW4,CA 7/22/11 # 190,ti00 8,120 $ 23.40
9 626W. Main St,AU akua,CA, 6126111 $11,000,000 211,308 S 52,06
30 2466 Mlsa4m St.,San Fhm dsro,CA 10/26/10 $ 750,000 8,922 $ 84.06
11 45175 Fargo St,lndt,CA 11/22/05 $ 2,600,000 35,594 $ 73.05
' 12 45 E, Hip/a street,MoeApark,CA 8/1/05 $ 1,250,000 6,861 $182.19
15 3463&erra Avenue,F=4mR,CA 8/81/04 $ 652,000 6,481 # 94.75
14 451 W,Hume=Fsd.,Dzaard,C.R. 10/21/03 $ 959,000 20,376 $ 47.56
1t4 45175 F&:,j u 8t.,Endia,CA 12121/01 $ "O,WO M,594 $ 12."
' 10 "I W.MmIenx its.,Qmwrl,CA. 10/11/01 $ 9W,000 20,376 $ 46.62
1T 45 B. Wgh Sftwt, ldo dgmk,CA 6/23/01 $ 275,000 6,861 $ 40.06
IS 375 911r6ftle Dr.,Nvt Hueme,CA 4/3100 $ 1,100AW 17,360 $ 63.40
is 2A s.tateatnut,Ventura,fZA X2/14J99 : 2,800AW 23,461 $208.16
' :m 1GrA M Mein Street,venture.CA 12/22/98 $ 390,000 9„240 4 42.21
21 $463 Worm Avtvluc,Fontana,CA 6/3/98 $ mo,060 6,881 11 50se
22 4670MaguaaAve.,Rlvessidn CA 2/17/9.1 4 250,000 14,OW 4 17.76
ds 3&"75 N.Nato.Street,Corona,CA 1/9/92 4 748,000 4,600 $162.61
' 24 491 N.E Street,flan Eerr ar&rIo,CA 1 t/28/90 410,000 34,320 $ 1.1.95
29 36 5-375 14.Maht stint,Corona,CA 12/15189 $ 500,0W 4,600 0106.70
26 1828 Csak 8t.,Loa Aogei.a,CAA Lisrog N/A 88,000 N/A
' C-1102014 CAPITAL REALTY ANALYSTS - Page 29
I �
Market Analysis
A review of the sales data shows a comparatively wide variety of PSF
pricing. The highest priced properties were those that were in operational
condition and/or acquired by a municipality for non-market reasons.
The lowest price PSF sales were those from older buildings that were
non-operational and required significant rehabilitation costs. The listing
is included as it is the only historic theatre building listing I could locate.
The broker reported that the property was not priced as they anticipate
competing bidding.
Conclusion
The subject property is a historic building with a wealth of charm. The
poured in place concrete construction is very solid and typical of the kind
of buildings that were developed in the 1930's that were made to last.
Unfortunately, these same traits also impair the ability of the property to
operate to its highest and best use. The property is going to require
significant capital to refit to operational condition. The Client indicated
that their consultants estimate this cost at $3MM - $4MM. It is virtually
certain that a market buyer would not expend these kind of funds, as
even The Follies, which by all accounts was a well-managed and
produced show, failed to generate sufficient net income to remain viable
in this location. Consequently, in addition to the functionally obsolete
nature of the building, the specialty use is now economically obsolete.
Historic Theatres of this type, much like parks, churches, museums and
the like, rarely generate sufficient net income to be viable real estate
investments. However, the property is historic and something of an icon
in the Palm Springs sub-market. The comparatively high market
acceptance of the subject suggests sufficient public demand to continue
the theatre use; most likely in a multi-use format similar to that of other
older theatre buildings that now support a mix of performance related
uses. The most likely buyer, other than the municipality, would be a
developer or live performance producer, seeking a public / private
partnership. L
However, the very significant capital required to return this venue to
operational status is far beyond the value of the property at completion.
To demonstrate, assuming a best-case cost of $3MM, the property
investment would be $201.30 PSF, assuming the purchase price was $0.
As described in the sales table, only 2 sales exceeded $200 PSF, and
both of these venues were operational and not economically obsolete.
Furthermore, neither required material capital improvements. If the
subject were not historic and could be demolished, the market value of
the property would likely be equal to the current land value, less the cost
to remove the improvements.
CIA 0 2014 Clmll Rllli ANALYSTS Page 30
1
1
' Market Analysis
Conclusion (cont'd)
Since the improvements are not available to be demolished, and because
the cost to restore the property to operational condition will exceed its
value at completion by a wide margin, there is a strong case for ascribing
' negative value to the subject. However, I think the most likely scenario
for the subject is for the property to be boarded up, much like the vast
majority of comparable historic theatre buildings from the 1930's: unless
and until significant municipal support were acquired.
In this regard, the current marketability of the property at any price is
' virtually nil. The neighboring property owner, who is a very experienced
developer, indicated that they would not be willing to acquire the subject
property at any price including $0, as the liability for restoration was not
1 feasible. However, I think that the market perception is that if the City
were to restore the property to an operational-condition, or nearly so,
there may be buyers at a token sale price who would attempt economic
operation. Even without assurances of municipal participation at the
t outset, there is still potential that a buyer may acquire the subject and
its associated liability for a token price, speculating that at some point in
the future, public assistance funds may be made available.
s
' �'��®2014 CAPITAL REALTY ANALYSTS Page 31
Site Analysis
Plat Map, APN: 513-14; Riverside County, CA
MR no 15i49 F6E T-
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cuC 2014 CAPITAL RLALTY ANALYSTS Page 32
1
Site Analysis
Site Plan (Source: Interactive Design Corporation'Assessment of Current
Conditions Report)
TAFK"TZ CANYON WAY �
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Mao Las Floras
(NMrlrn Frniy TNaq
City of Palm Springs
1 Z - - z
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La Mara Nkst I La Plaza East
(Plaallnsa611nn1 OpmPeny) -- I (PIIaa PnPn:stnaat
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'Site Plan-Paooship d atlwa b "n '
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1
' `IAI C 2014 CAPITAL REALTY ANALYSTS - Page 33
Site Analysis
Location: 128 South Palm Canyon Drive, Palm Springs, CA.
Identification: APN: 513-144-010: Riverside County, CA.
Site Size: According to Riverside County Assessor's Plat
Map, the site size of the subject site is .24-acres,
or 10,454 SF.
Shape: Irregular, nearly rectangular
Dimensions: See Plat Map
Frontage: None, an easement exists to South Palm Canyon
Drive.
Topography: Level at curb grade.
Flood Zone: According to the Flood Insurance Rate Map,
Community Panel Number 06065C 1566G,
revised August 28th, 2008, the subject property is
located in Flood Zone X. Zone X is defined as
follows:
Ann Duce tlY t won w...�eerie buaAn.ens.a la wIM1YI a�Yv
ww r eeany wn..u.pe a.prr m rr ern I eel rYe a t a emw
a.C.rwi drnorr..m llmiVirri.a»mmasy Jt.q r..rr�elnl qrn
me.w wu.P.YOeC/mm RY 1 a r1r.r1 a.eo em p YVN.W w
1 Fbee EMHIerY w d(Or m OK.n wOM Ow mn. Fr1fY1lY pYc1.Y.rcl
Access: The subject has public access along the E side of
South Palm Canyon Drive, Palm Springs, CA.
Visibility: Average
Utilities: Utilities available to the subject site are as follows:
Electricity: Southern California Edison
Gas: The Gas Company
Telephone: Verizon
Water: Desert Water Agency
Sewer: City,of Palm Springs
OU ®2014 CAPITAL REALTY ANALYSTS Page 34
Site Analysis
Hazards: There are numerous elements of the property that
no longer meet existing codes. The likely presence
' of asbestos and lead paint will be costly to
remediate. Ingress and egress corridors are
insufficient to serve the building. The building
' also lacks sufficient restrooms. The fact that the
improvements are at or near the end of their
physical life also suggests a number of structural
' hazards are likely. I am not qualified to evaluate
the site for toxic waste or hazardous substances.
This report assumes that there are no hidden or
unapparent conditions to, or on the soil or subsoil
that would render the property more or less
valuable.
' Improvements: The subject property is improved with the Plaza
Theatre, a 2-story Class 1 historic building. The
' improvements consist of a cast in place concrete
foundation, walls and floor with concrete masonry
unit upper walls supporting segmented wood
trusses. The improvements were constructed new
in 1936, and were observed to be in fair condition
on the date of value. The property has been in
continuous use as an 847-seat theater since its
' inception. Additional details are included in the
Introduction and Improvement Description
sections of the report.
Zoning: According to the zoning map of City of Palm
Springs, the subject parcel is zoned CU, Civic Use
District Zone. In light of the municipal ownership
and Class 1 Historic Designation, the subject's
zoning is conisde4rds reasonable and appropriate.
' A Zoning Map is located in the Site Analysis
section of this report.
General Plan: According to the general plan map of City of Palm
Springs, the subject parcel is designated Central
Business District. The General Plan designation is
' considered reasonable and appropriate. A General
Plan Map is located in the Site Analysis section of
this report.
' JJ
Cad 02014 Cnrit�REALTY ANALYSTS Page 35
a
Site Analysis
Earthquake According to the Riverside County Fault Zone
Hazard: Maps, the subject parcel is located within a lh
mile of a designated fault zone. A Fault Zone Map
is located at the end of this section.
Special On 11/6/91, the subject was designated as a
Resources: Class 1 historic site.
Easements and A Preliminary Title Report for the subject parcel
Encumbrances: was not submitted or examined. Consequently,
the subject is being appraised as though there are
no atypical easements and/or encumbrances that
may, have a negative impact on the prospective
market value or marketability of the subject
property other than those specifically noted. Any
user•of this analysis is advised to make an
independent assessment of the condition of title,
prior to utilizing this analysis.
Functional Significantly impaired. Additional comments in
Adequacy of the this regard are located in the Highest and Best
Site: Use and valuation sections of the report.
Relationship to North: Welwood Murray Library / Plaza Las Flores
Adjoining South: La Plaza East & West
Properties: East: Pitts Building
West: Access Easement to South Palm Canyon
Drive & outdoor dining areas for neighboring
buildings.
Units of In the subject marketplace, land parcels of the
Comparison: subject's size and type are typically purchased
based upon a price per SF. The price per SF will
be applied to estimate site value for this analysis.
Page 36
M®2014 CAPITAL REALTY ANALYSTS
C
1
Site Analysis
' Fault Zone Map - Source: Riverside County GIS
1 RIVERSIDE COUNTY GIS
tt
z
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Riverside County TLMA GIS
tSNecttd prgY(S)
513-144-010
FAULT ZONES
' SELECTED PARCEL INTERSTATES NHOFWAYS FArCLL6
L3 CITY
' IMPORTANT'
Maps are data we to be used for reference purposes orty.Map features are apptoRhret&and are nol mom*accurate to wrveyhg or engineering
standards.The County of Rkaside makes homer"or guarantee asto the content(the source Is often thrd party),accuracy,t"Iness,a
corroeterese of anf oftha data provided,and asetmes ro legal resporelatty fortre Irfurnallon contalned on this map.AM use ofthe product wlh
respect to mcvacy and proclslon shat be the We responddRry ofthe user.
1
' C9d C 2014 CAPITAL REALTY ANALYSTS Page 37
r
Site Analysis
Flood Map - Source: Riverside County GIS
RIVERSIDE COUNTY GIS
W TA HOU RZ CAhYDN WAY ETAM UITZ NYON WAY
x
g_ 1 I
_ A2EN0.S R] •��'
Riverside County-LMA GIS
I:
Selected parcel(s): �.
- 913-'44-C'C
FLOOD ZONES
SELECTED PARCEL N INrERSTATEB N HIGHWAYS Q CITY
PARCELS FLOOD ZONES
IMPORTANT"
Maps and data are to be used for reference puposes ardy.M W features are approx"e,and are nut necessrly actuate 10 surveying or engineering i
aandards The County of Riverside makes no warranty or guarantee as to the content(the souce Is plan Ind early),accuracy,lerellness,a
comgetenass of any of the data prwioeq and asunes no Iegal respo W bilty for the Information contained on the rrap.Am use ofthis product with
rasped to accuracy and precision shal be the Sole responsIbily ofthe user.
L�
E
`-?Aj C 2014 CAPITAL REALTY ANALYSTS Page 38
Site Analysis
Liquefaction Map - Source: Riverside County GIS
RIVERSIDE COUNTY GIS
cn
a11x�'�T
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r '
r o '
a I
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W TAHOURrZGANY ON WAY ETAH WTZ ANYONWV y
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Riverside County TLMA GIS ; ;, r
' Selected parcel(s):
513-144-01D
LIQUEFACTION
SELECTED PARCEL 1 INrERSTATES "IV HIGI-WAYS ®CITY
PARCELS Moderate
1MPORdNP
Maps and dataarer be Riv for reference purposes only.Map neeeas are content(I m are not necessarily
rcipam,acwa ,th-AwNeying s,engineering
9ai�tla Thefany oohs dataide prvideck and assrnsantr or legal
reBlyetothe oortent(Illymute Nttaind an party),p.Am ,lk fthis as,or
namedto ccofaMnthe data prpridae the sole
resprobgal refine nsmlN for the IrYprmatlpn omblratl on this map.Am use pfih5 prptluctwth
IaspeQ to mcwary and precision alai Q?me me reapaTNtlIN orihe user.
0 2014 CAPITAL REALTY ANALYSTS Page 39
i
Site Analysis
Subsidence Map - Source: Riverside County GIS
RIVERSIDE COUNTY GIS
i
` z
f o Jf1 J ��-x°•.
AHO Ufrd QANYDN WAY ET ITZ N N W
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ANENAg Np
Riverside County TLMA GIS
` Selected parcd)si:
513-144-010
LIQUEFACTION
9MPORTANr' '
Maps and data wato be used for referencepurposee 0*..Map features are eppmximate,and are not necesrarly acurateto Slneyhg or engineering
slwdwde The County of RNerside makes no warranty or guarantee Salo true content(the Source Is onentrand party),accuracy,t"IMSs,Of
completeness of arty of the data prwldK and asspnes re legal responsibility for the info Melon contained on this map.Art,uee ofthe product with
respect to accuracy and preclslon snal be the sole respomoilN ofthe user.
CqA 0 2014 CAPITAL REALTY ANALYsTs Page 40
1
Site Analysis
Topographical Map - Source: Riverside County GIS
RIVERSIDE COUNTY GIS
rw
z
z
`AA b$0 _
TA Rd •ANYON WAY ETAH12UITZ NrON way -Y
u ,•:t
I
r a
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' '
Riverside County TLMA GIS - -% AXEXAS Rn
Selected parcel)s):
513-144-ulo
ELEVATION-CONTOUR
SELECTED PARCEL N CONTOUR LINES N INTERSTATES N HOFAYIYB
PARCELS
IMPORTANT'
Maps and data we to be Used for reference puposes ony.Map features are appm "a,and are not necessarily arcuate to wneyingor angrewing
slandards.The Carty of Riverside makes nowananty or guanantse as Io the content(the educe Is ollenlMrd pity),accuracy,threllness,a
completeness of arM ofthe data provided,and assures no,legal responsioNty for the Inforrnabon contained on trAs map.Any use of this pmductwlh
leaped to actuary and precision steal he the We responsdlfty ofthe user.
i
' C4d 0 2014 CAPITAL REALTY ANALVSTS Page 41
Site Analysis
Zoning Map - City of Palm Springs
•
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a. oro coD •RA 3 e
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CBD1 • RED
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Cad ®2014 CAPUAL REALTY ANALY STS Page 42 '
I,
1
1
Site Analysis
' General Plan Map - City of Palm Springs
od
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1
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1 CACIS
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a�
Cod C 2014 CAP11ALHEALT}'ANALYSTS Page 43
t
i
Site Analysis
Flood Map - Source: FEMA
rsaP SME s- . of
>t /�
FIRM
RpA M9IMINEF IWL W �•
NI�'[NYIn![I URIC.
tttLLLL°°°YYY�yy�yfiii ��ALIR18^=A
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auralatea'
(p;y� awaelsso..
�a=yl1�e..'r'/ nrKrns wlF
w61Jsr s aNs
I sheet ow flooding
weroea average
epws lblamU , Ifoot. l%*ofI lellffria ■
�.afseel flow lbodnp where evercoe deems arc 4ee tMn ! foot.free of 1%fnnwl !`
9,C,frsd X I chertce stream floodirq whers the ooMributnp dmirvge are@ Is lam men t sdWre
1 Tee.or areas protected from the 1%annuel Uanee food by Ievees No Bast
Flood Elsyslrons or depth-are shown wehln this W. I.,anos purctuN Is I,ot
regl d in Ih*"zones
l
Cad 0 2014 CAPITAL REALTY ANALYSTS Page 44
Improvement Description
The subject property is a .24-acre land parcel "in
oved with the Plaza
Theatre, a 2-story, Class 1 historic theatre buAing. In order to prepare
' the Improvement Description, I performed a physical inspection of the
subject property, interviewed a number of local sources and examined
the Client supplied Assessment of Current Conditions report, prepared
by Interactive Design Corporation. In addition, I examined a set of Client
supplied plans, prepared for the 1989 Follies tenant improvement
remodel of the property. Plan exhibits are included at the end of this
section.
The Assessment of Current Conditions report is comprehensive, and
includes significant details regarding the subject property and its
improvements. Much of the information in this section of the report is
summarized from the Assessment of Current Conditions report. In light
of the significant amount of functional obsolescence of this property, I
recommend that any user of this analysis who seeks detailed
improvement information, review a complete copy of the Assessment of
Current Conditions report.
The following sections outline the major components of the
improvements:
I J
' `U 0 2014 CAPITAL Rf.A1 ANALYSTS ' Page 45
1
Improvement Description
Type of Use: Theatre, performance hall
Tenant Spaces: 1
Number of Stories: 2-story structure
Year Built: 1936
Building Area: Main Floor- 11,130 SF
Balcony - 3,080 SF
Basement- 693 SF
Total 14,903 SF
Seating: Auditorium - 640
Balcony - 207
Total - 847
Floor Slab: Concrete
Exterior Walls: Concrete, CMU
Structural Frame: Concrete with wood beam room trusses
Roof Covering: Flat with a concrete file mansard
Floor Coverings: Carpet, ceramic file
Restrooms: 4 + 1 basement cast restroom
Fire Sprinklers: A fire sprinkler system was installed in 1989. The
double detector check valve is on Indian Canyon Drive and the service
entry is on the east wall between the exit doors and stage access doors.
Heating and Air Conditioning: The HVAC system, installed in 1991, is r
comprised of two sets of three (3) heat pumps at the high roof (above [
stage) that provide cooling to two air handlers located on lower roof
portions over the stage wings. Each air handler distributes to half of the
building (north/south) through ducts running within the attic alongside
the north and south exterior walls. The heat pumps, in each system, are
controlled to allow one; two or three heat pumps to provide varying
demands of cooling. The air volume remains constant, but the air
temperature differential differs, which is not an efficient way to modulate
air temperature throughout the building. Replacement is likely required.
CRAJ®2014 CAPITAL REALTY ANAL ySTS Page 46
i E
1
1
Improvement Description
' Plumbing: The plumbing system includes public bathrooms located at
the main level and balcony level. In the basement a sump and waste lift
' pump allows three toilets and several lavatories to serve the performers
dressing rooms. Stormwater from roofs is collected from the flat roof
areas and conveyed through surface-mounted water leaders to a below-
grade discharge out to Indian Canyon Drive.
Electrical: The electrical service was upgraded in 1991. The service
' entry, main switchgear, distribution sub-panels and dimmer panels are
located in the stage-right wing. The theatre is .supplied by a 2000-AMP
main disconnect from a vault on Indian Canyon.
' Performance Systems: Lighting and sound systems are technology-
driven. The existing fixtures, equipment and controls were proprietary to
The Follies, and were removed when they closed. New distribution panels
and conduits, and a basic "house" system will be the main elements
needed to create a new "plug-and-play" backbone for future use of this
property as a live performance venue.
Stage and Wings: The stage itself is adequate for many productions, but
the wings, scenery grid and room for fly scenery is very limited. There is
' limited opportunity to increase the space and height.
Finishes and Fixtures: Basically the finish surfaces, plumbing and
' house light fixtures, and seating should fall to a "clean-house" approach.
They are dated, non-code compliant and worn. .
' Support and Ancillary Space: The stage itself, exit corridors and seating
areas are the only areas that meet the current requirements for a theater
of this size. The Lobby and restrooms, performers' facilities (dressing
' rooms, green room), the production/technical facilities (workshop and
storage), and production management and administration offices are
inadequate or non-existent. Creative negotiations with adjacent property
' owners may provide adequate space for expansfdn to serve basic needs.
Landscaping: None
' Land to Building Ratio: .70:1
' Estimated Effective Age/Remaining Useful Life: 45 Years / 5 Years
CIAJ C 2014 CAPITALRLALTV ANALYSTS Page 47
Improvement Description
Parking: There is no parking for the subject property, other than street
parking and a City-owned parking garage located along Indian Canyon
Drive.
Comments
The subject property has nearly reached the end of its useful life. The
code standards applied for this property were those of 1927.
Consequently, there are significant code deficiencies such as non-
compliant ingress and egress issues, the requirement for a complete
seismic retrofit, insulation and other energy related issues. The property
will require house lighting and sound systems. HVAC will require new
heat pumps and duct leakage repair/replacement. In addition, the
subject property likely includes hazardous material in duct linings, pipe
insulation, paint, floor material and drywall. These elements will have to
be removed or encapsulated.
In light of the foregoing, it is clear that a very significant capital cost will
be required to restore this property to a code compliant operational
condition. This is the reason that most theatre buildings developed in the
1930's have now been demolished or are boarded up and not operational.
However, the physical constraints of the property limit the ability to cure
all functional issues, thus limiting the prospective future income and
consequently, value; that could potentially be generated from this venue.
Page 48
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Improvement Description
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Improvement Description
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Improvement Description
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Improvement Description ,
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1 C'M ®2014 CAPITAL REALTY ANALYSTS Page 53
1
J
Highest and Best Use Analysis
Highest and Best Use is defined as:
1. The reasonable and probable use that supports the highest present
value of vacant land or improved property, as defined, as of the
date of appraisal.
2. The reasonably probable and legal use of land or sites as though
vacant, found to be physically possible, appropriately supported,
financially feasible, and that results in the highest present land
value.
3. The most profitable use.
Implied in these definitions is that the determination of highest and best
use takes into account the contribution of a specific use to the
community and community development goals as well as the benefits of
that use to individual property owners. Hence, in certain situations, the
highest and best use of land may be for parks, greenbelts, preservation,
conservation, wildlife habitats, and the like.
In estimating the highest and best use, there are essentially four stages
of analysis:
i
1. Legally Permissible: What uses are permitted by zoning and
deed restriction for the subject site?
2. Physically Possible: What are the physically possible uses
for the subject site?
3. Financially Feasible: What physically possible and legally
permissible uses will produce a net return to the owner of
the site?
4. Maximally Productive: Among the financially feasible uses,
which use Will produce the highest net return or the
highest present worth?
The following tests must.--be met in estimating the highest and best use:
The use must be legal. 'The use must be probable, not speculative or
conjectural. There must be a profitable demand for such use and it must
return to the land the highest net return for the longest period of time.
To estimate the highest and best use, these tests are applied to the
subject property (1) as if vacant and available for development, and (2) as F
presently improved. 1
% American Institute of Real Estate Appraisers, The Dictionary of Real Estate Avnraisal (Chicago Illinois:
American Institute of Real Estate Appraisers, 1984),Page 152
C$d®2014 CAPITAL REALTY ANALYSTS
Page 54
r
r
Highest and Best Use Analysis
r "As If Vacant"
Legally Permissible
' The legal restrictions that apply to the subject are the public
restrictions of the City of Palm Springs CU zoning ordinance and
Central Business District General Plan designation. The CU zoning
is a consequence of the current municipally owned, historic theatre
use. If the property were vacant, the historic use would not exist
and the controlling general plan designation of Central Business
r District would set the legal parameters for development. A large
number of similarly designated parcels have been developed in the
immediate area of the subject property with no atypical legal
conditions. Consequently, I conclude that the legal constraints of
r the subject are reasonable and appropriate and would not impair
the ability of the property to be developed to its highest and best
' use, assuming it were vacant on the date of value.
Physically Possible
' The subject parcel is typical in size and shape as compared with
other parcels located in the immediate area. However, the property
is landlocked and requires easements and leases to provide access
r to the property. The property occupies a key location in the heart of
the core Downtown area. Visibility is good. The fact that the
property is surrounded by existing building structures limits the
physically possible developmental potential of the property. This
r element limits the ability of the property to be developed to its
highest and best use, assuming it were vacant on the date of value.
' Financially Feasible
The legally permissible and physically possible qualities of the
subject parcel lend it to commercial development. Financial
' feasibility for development of this type is typically estimated with a
simple comparison of costs and benefits. If the cost to construct a
prospective development exceeds the present value of the cash flows
' (including the reversion, if applicable), estimated for the proposed
use, the proposed use is not considered feasible. Alternatively, if the
present value of the expected income stream exceeds the cost to
' produce the proposed development, the use is considered financially
feasible.
1
1
' M1 02014 CAPITAL REA WANALYSTS Page 55
1
Highest and Best Use Analysis
"As If Vacant" '
Financially Feasible (cont'd)
In light of the fact that other owners/lenders/developers are
currently risking new debt and equity on new and remodeled
structures in the immediate area of the subject property, I conclude
that demand is likely sufficient to support speculative commercial
development on the subject property, assuming it were vacant on
the date of value.
Maximally Productive
The physically possible and legally permissible uses for the subject
property are present in the subject region. Other similar properties
in the subject region have been successfully developed. As sufficient
demand exists to support financially feasible speculative
development, it is my opinion that the market perception is that the
most maximally productive use of the subject property "As Vacant"
is to develop the land with a commercial use.
"As Improved"
The use that should be made of a property, as it exists. An existing
property should be renovated or retained as is as long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing
the existing building and constructing a new one.a
Legally Permissible Uses
"As Improved", the subject is 1930's construction and fails to meet
current codes. The current general plan is considered reasonable
and appropriate. No changes in the general plan are projected for
the subject property: although this factor does impair the subject's
ability to operate to its highest and best use "As Improved". The {
property has been designated as a Class 1 Historic Site. i
Consequently, the property is subject to the regulations for Historic
Preservation, outlined in Chapter 8.05 of The Code. The restrictions
prevent modification of the structure without Board approval. This
feature is significant, as the inability to modify the exterior of the
building will pose challenges for any potential reconfiguration, as
described in previous sections.
a The Dictionary of Real Estate Appraisal, Fourth Edition,Appraisal Institute,2002(Chicago,Illinois)
frill 0 2014 CAPITAL RP.ALTYANALYSTs Page 56
Highest & Best Use Analysis
' "As Improved"
Legally Permissible Uses (cont'd)
' As the City has indicated that they prefer this historic building to
remain a theatre, and because the inability to modify the exterior
will make continued theatre use difficult, I conclude that the legal
' constraints of the property do impact the ability of the property to
be developed to its highest and best use.
' Physically Possible
As in the "As Vacant" section, the interior location of the property
and historic designation presents a physical limitation that may
' not be overcome. The property has beefs designed as a theatre,
which is a costly and challenging layout to modify for alternate
uses. Clearly, a reuse of the property will require significant capital
' and creative planning to make the most out of the property with its
physical limitations. Clearly, the physical elements of the property
impair the potential of the property to operate to its highest and
best use.
Financially Feasible
The same tests of feasibility described in the "As Vacant" section,
' apply in the improved condition. As described in the Market
Analysis section, the previous production failed to generate positive
net income, sufficient to pay expenses, including the lease on the
' property. Clearly, any reuse of the property is going to require very
significant capital improvements. This feature is typical of older
theatre buildings in key Downtown locations. Many similar
' structures are municipally owned, as the cost to own and operate a
facility of this type normally exceeds prospective income by a wide
margin. Consequently, I conclude that the property "As Improved"
' is not a financially feasible use.
Maximally Productive
' The determination as to what exact use and configuration is most
maximally productive is very challenging for the subject property.
Since the historic designation limits exterior modifications, and as
' the property is a special purpose design, it seems most likely that
the most maximally productive use of the property would be to
correct all possible code and functional issues, and continue to
1 operate the property has a live performance venue: possibly in a
public/private partnership.
'1 C4d®2014 CAPITAL REALTY ANALYSTS Page 57
Appraisal Process
The first step in the appraisal process is to identify the appraisal
problem. Every real property is different and there are many types of
values that can be estimated for any real property. For this appraisal
assignment, the following market value estimates are provided:
it Market Value "As Is"
The definition of market value has been defined in the Purpose of the
Appraisal section of this report. The subject property and the type of
value desired have been identified. Through the appraisal process, it is
our intent to present a properly supported value estimate for the subject
property. The market data, analysis and conclusions presented in the
appraisal report should cause a reasonable person to reach similar
conclusions. There are three traditional approaches to estimating market
value. These are the Cost Approach, the Sales Comparison Approach and
the Income Approach. The approaches to value are defined as follows;
Cost Approach
"A set of procedures through which a value indication is derived for the
fee simple interest in a property by estimating the current cost to
construct a reproduction of, or replacement for, the existing structure;
deducting accrued depreciation from the reproduction or replacement
cost; and adding the estimated land value plus an entrepreneurial profit.
Adjustments may then be made to the indicated fee simple value of the
subject property to reflect the value of the property interest being
appraised."-
The Cost Approach is considered most relevant when appraising special
purpose properties, or when the improvements are new, as depreciation
can be estimated with a reasonable degree of accuracy. Another case
when the Cost Approach works well is when market conditions are such
that the typical buyer would realize similar yields by building new or
acquiring an existing set of improvements. In this case, the subject is a
special purpose property. In light of the very unique nature of the
property, adjustments to comparables will be speculative and
consequently, the Cost Approach is applied as a key value indicator for
the subject property.
The Dictionary Of Real Estate Appraisal Third Edition,Appraisal Institute, 1993,Page 81
s
CRAI ®2014 CAPITAL REALTY ANALYSTS Page 58
Appraisal Process
' Cost Approach (cont'd) ¢
' Sales Comparison Approach
"The Sales Comparison Approach is the process in which a market value
estimate is derived by analyzing the market for similar properties and
' comparing these properties to the subject property. Estimates of market
rent, cost, depreciation, and other value parameters may be derived in
the other approaches to value using comparative techniques. Often,
' these elements are also analyzed in the sales comparison approach to
determine (estimate) the adjustments to be made to the sale prices of the
comparable properties. The comparative techniques of analysis applied in
' the sales comparison approach are fundamental to the valuation
process."-
The Sales Comparison Approach can be a strong indicator when
sufficient comparable sales data exists, and is generally the best
technique available to estimate the market value of vacant land. In this
' case, the Sales Comparison Approach is applied to yield an as is value
for the subject property.
Income Approach
' "A set of procedures through which an appraiser derives a value
indication for an income-producing property by converting its anticipated
benefits (cash flows and reversion) into property value. This conversion
' can be accomplished in 2 ways. One year's income expectancy can be
capitalized at a market-derived capitalization rate or at a capitalization
rate that reflects a specified income pattern, return on investment and
' change in the value of the investment. Alternatively, the annual cash
flows for the holding period and the reversion can be discounted at a
specified yield rate."s
Lacking comparable rents of similar properties, the Income Approach is
not applied as a direct market value indicator. Complete descriptions of
' the Approaches are included in the introductory section of each
approach. Reconciliation completes the analysis leading to a final value
estimate.,
S The Appraisal Of Real Estate,Tenth Edition,Appraisal Institute, 1992;Page 367
6 The Dictionary Of Real Estate Appraisal,Third Edition,Appraisal Institute, 1993,Page 178
' 7 Note that computerized spreadsheets may be used in this report. Numbers are typically accurate to 6
decimal points and rounded to the nearest whole dollar or 100th of a percent. Manual calculation of totals
may result in insignificant rounding errors.
'
Cod®2014 CAPITAL REALTY ANALYSTS Page 59
1
Cost Approach
The Cost Approach is an analytical process that involves five separate
steps to arrive at an indication of value for the subject property.
1. Estimation of land value by direct sales comparison as if
vacant and put to its highest and best use.
2. Estimation of reproduction or replacement cost new of the
improvements.
3. Estimation of accrued depreciation from physical
deterioration, functional obsolescence and external
obsolescence.
4. The estimation of accrued depreciation from all causes is
then deducted from the replacement cost new.
5. Summation of land value and the depreciated cost of the
improvements.
Generally, the value estimate by the Cost Approach will be valid if the
land value estimate is sound, if the reproduction or replacement cost has
been estimated accurately and if the estimation of the depreciation from
all causes is correct. In this case, the subject is a fee simple interest in a
historic theatre building. r
As the improvements are.at or near the end of their useful economic life, ■[
the various forms of depreciation will be difficult to measure. However,
the subject is located in a key Downtown location and as land value is a
component of cost, we can at least understand the land value via this
approach. Furthermore, as a special purpose property, no functionally
equivalent alternatives exist on the open market in the area of the
subject property. Consequently, the Sales Comparison-based indicator
will be challenging. Lacking comparable rents, the Income Approach will
not be applied. For these reasons, special purpose properties are
commonly valued via the Cost Approach, and a cost-based analysis will
be applied in this analysis.
The methodology applied for this Cost Approach is as follows: First, the
"As Is" land value in fee is estimated via direct comparison to other
parcels that have sold in,,the market. The "As Is" land value is then built-
up via cost-based analysis to yield a depreciated replacement cost
estimate.
Cad C 2014 CAPITAL REALTY ANALYsis Page 60
Cost Approach
' The Cost Approach is organized as follows:
' 44 Land Sales Map (City of Palm Springs Data Only)
4 Land Sales Grid
4� Land Sales Analysis
' al Land Sales Adjustment Grid
4 Conclusion, Land Value
rk Marshall Valuation Service Calculator Cost Estimate
' 4 Conclusion, Market Value "As Is"
I
(+
C 2014 CAPITAL REALTY ANALYSTS Page 61
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Cost Approach
' Land Sales Grid
' Sale Sale Size Size Bale Price Per
0 Location Data (Acres] (SF) Price SF
Current Top of the mlari et Land Sal"
1 NWC of Highway 111
' &Fred Waring Drive
Palm Desert,CA 5/4/11 1.35 58,806 $1,550,000 $ 26.36
2 SEC of Highway 111
' &Mirage Road
Rancho Mirage,CA 5/25/12 1.19 51,836 $1,500,000 $ 28.94
3 S Side of Main Street,
E of Desert Club Drive
' La Quints,CA 4/7/11 0.53 23,087 $635.000 $ 27.50
4 N Side of Highway 111,
W of Jefferson Street
' La Quints,CA Escrow 0.800 34,848 $1,000,000 $ 28.70
5 E side of Indian Canyon Drive,
S of Arenas Road
' Palm Springs,CA Escrow 1.810 78,844 $2,000,000 $ 25.37
Historical Sales From Downtown Palm Springs
6 Port Lawrence Assemblage 9/6/05 6.372 277,543 $ 10,500,000 $ 37.83
' SEC of Palm Canyon&Alejo 8/25/05 1.000 43,560 $ 4,100,000 $ 94.12
Palm Springs,CA 8/25/05 0.515 22,455 $ 2,000,000 $ 89.07
Total 7.887 343,558 $ 16,600,000 $ 48.32
' 7 NWC of Ramon Road 11/30/05 3.370 114,802 $ 6,200,000 $ 54.01
&Indian Avenue
Palm Springs,CA
8 E Side of Indian Avenue, 4/21/06 0.850 37,026 $ 3,000,000 $ 81.02
' N of Andreas Road
Palm Springs,CA
Current Listings From Downtown Palm Springs
9 E Side of Palm Canyon Drive, Listing 0.620 27,142 $ 1,620,000 $ 59.69
' N of Amado Road
Palm Springs,CA
10 W Side of Palm Canyon Drive, Listing 0.220 9,640 $ 200,000 $ 20.75
' N of Via Escuela
Palm Springs,CA
11 W Side of Palm Canyon Drive, Listing 0.120 5,227 $ 150,000 $ 28.70
N of Via Escuela
Palm Springs,CA I
12 W Side of Palm Canyon Drive, Listing 0.100 4,413 $ 100,000 $ 22.66
I N of Via Escuela
Palm Springs,CA
13 W Side of Palm Canyon Drive, Listing 0.360 15,551 $ 450,000 $ 28.94
N of W. Via olivera
Palm Springs, CA
' (�d®2014 CAPITAL REALTY ANALYSTS Page 63
. q
Cost Approach
Land Sales Analysis
Land sales activity of the key vacant parcels located in the core
Downtown area of Palm-Springs have been limited over the past several
years. Many of the current owners of the key parcels acquired the land at
or near the top of the market in the last cycle, and have been holding for
improving market conditions. Consequently, I sought out a wide variety
of sales data in order to gain a wider picture of current market
conditions.
Sales 1-5 represent the more current transactions of smaller commercial
land parcels located in the regional area. Sales 6-8 reflect the older sales
data from the core Downtown area. Data items 9-13 reflect the current
listings located in the Downtown area. Clearly, any buyer for the subject
land; assuming it were vacant on the date of value, would likely be
considering a similar data set.
With regard to the current sales data, the top of the current market,
among those parcels that have sold, is in the $25 - $30 PSF range.
Clearly, there are parcels in the market that would carry a significantly
higher value; but have not sold in the market. Examples include parcels
on El Paso in Palm Desert, and parcels located in the immediate area of
the subject property. While it has been years since the last core area fee
land sale, Sales 6-8 show the historical prices paid for core Downtown
area parcels. This data ranges from $37.83 PSF to $94.12 PSF. While
values have come down since the top of the last market cycle when these
parcels traded, there is still a market expectation that core Downtown
area parcels will command a top of the market price. Listings 9-13
demonstrate this feature:
Listing 9 is located in close proximity to the subject. In light of the prices
paid for core Downtown parcels in the past, this parcel would be {
expected to trade reasonably close to the listing price. Listings 10-13 are F
located well north of the core downtown area. However, even these
parcels are listed at PSF prices approximating the top of the market
current sales data; suggesting a seller expectation of a top of the market
price for Palm Canyon frontage parcels.
Adjustments
Adjustments to each of the sales are required for significant differences
that affect value. The appraiser adheres to a sequence of adjustments in
all sales comparison analysis. Using the sequence, the appraiser obtains
intermediate price figures and applies succeeding adjustments to each
previously adjusted price.
Cad 0 2024 CAPITAL REALTY ANALYSTS Page 64
1
1
Cost Approach
1 Adjustments (cont'd)
The adjustments applied to the price of a comparable property reflect the
1 comparables' superiority or inferiority in regard to the real property
rights conveyed, financing, conditions of sale,. market conditions and
locational and physical characteristics. A common method of extracting
1 adjustments among the comparable sales is a technique called "Matched
Pairs Analysis". The goal of Matched Pairs Analysis is to obtain market-
based adjustments.
1 The basic premise of Matched Pairs is to isolate a particular adjustment
feature among 2 or more sales, where the difference in adjusted prices
1 would yield the market's value perception for that feature. Generally, the
appraiser follows a sequence of adjustments, attempting to isolate
market-based adjustments from intermediate adjusted sale prices. In
' many cases, adjustment features cannot be isolated. Limited
comparable data, unique property traits or other factors may cause this.
' When adjustment features cannot be isolated, Matched Pairs Analysis is
supplemented with other techniques to adjust the comparable data.
These other techniques typically include cost based adjustments,
' adjustments based upon a market `survey, adjustments based upon
published data and subjective adjustments. The following is a discussion
of the relevant adjustment features;
' Property Rights Conveyed
Among this data set, all of the sales were fee estates and do not
require adjustment. ;
Financing Terms
All of the sales were reported to be cash equivalent sales with no
' indication of any non-market or beneficial financing that would
warrant a cash equivalency adjustment.
' Conditions of Sale
The listings all require upward adjustment to reflect the fact they
have not closed. All of the closed sales were reported to be arms-
length sales between willing and well-informed buyers and sellers
acting in their perceived best interests. However, Data No. 6, the
Port Lawrence assemblage had assemblage value to the owner.
' Downward adjustment is required.
t
' C'�d 02014 cnrrr�Ren AN. Ysn Page 65
I
Cost Approach
Adjustments (cont'd)
Market Conditions
Adjustments for market conditions reflect a change in the prices
paid for real property due to changes in markets over time. In this
case, a wide variety of sales data was applied. The market cycle top
occurred in 2006. Subsequently, a deep recession caused a severe
market decline, followed by a slow grind up to the current value
date. The sales are adjusted accordingly.
Location
As described in the Market Analysis section, the immediate area of
the subject property has historically been arguably, the highest land
value area in the region. All of those interviewed for this analysis
were in agreement, citing only El PAseo as a more desirable (and
valuable) location. Alternatively, the appeal of the subject land
parcel is impaired form a locational standpoint, due to the fact that
the property is surrounded by existing buildings, and lacks direct
fee ownership of access and frontage to both Palm Canyon Drive,
and Indian Canyon Drive.
Although the Port Lawrence assemblage land is located north of the
core Downtown area, the property is overall a superior location. The
reason is that the land has access to both Palm Canyon Drive and
Indian Canyon Drive; and is not encumbered by being `landlocked'. 4
Sales 7 and 8 are similar in overall locational quality. The sales are [C
adjusted accordingly.
Size
The size of a property affects the uses it will support, and the buyers
it will attract. Size adjustments are generally based upon the
concept of"marginal utility". Marginal utility is defined as follows;
"The increment of total utility added by the last unit of a good at any
given point of consumption. In general, the greater the number of
items, the lower the marginal utility, i.e., a greater supply of an item
or product lowers the value of each item."-
In this case, all of the sales are comparatively small, and
intermediate paring's do not suggest an adjustment would be
required for size differences among this data set; or insufficient data
is available to isolate, an adjustment for size.
e The Dictionary of Real Estate Appraisal, 3rd Edition,Appraisal Institute,Chicago,IL., 1993, p.219 .
C9d0 2014 CAPITAL REAL Y ANALYSTS Page 66
t
Cost Approach
1 Size (cont'd)
In light of the comparatively limited data available for direct
comparison, no adjustment is applied. However, I will consider the
potential for size to influence price per lot in where to place the final
value estimate among the indicated range.
' Other Physical Elements
In terms of other elements, I considered the fact that the subject is
' surrounded by existing buildings within the locational adjustment
category. Consequently, no further adjustments are required.
Conclusion, Land Value "As Vacant"
The adjusted value range is from approximately $35 PSF to
approximately $50 PSF. The fact that the subject property is landlocked
' suggests that the "investment value" (or assemblage value) to one of the
adjacent building owners could prove to be in excess of the current
"market value". As a market value estimate is the requirement for this
' analysis, a PSF value at the upper mid-range of adjusted indicators
seems to best reflect the market perception of value as of the date of
value. Based upon the available data, I conclude that the market value of
' the fee simple estate in the subject land parcel as vacant, as of the date
of value is as follows:
$45 PSF x 10,454 SF = $470,430
$470,000 (Rounded)
(Four Hundred Seventy Thousand Dollars)
The next step in the Cost Approach is to estimate the depreciated
reproduction, or replacement cost of the improvements. Reproduction
and replacement cost are defined as follows:
Reproduction Cost
"The estimated cost to construct, at current prices as of the effective
date of the appraisal, an exact duplicate or replica of the building
being appraised, using the same materials, construction standards,
design, layout, and quality of workmanship.and embodying all of the
' deficiencies, superadequacies and obsolescence of the subject
building.
The Dictionary of Real Estate Appraisal,Third Edition,Appraisal Institute, 1990, page 304
' C-M®2014 CAPITAL REALTY ANALYSTS Page 67
Cost Approach
Replacement Cost
"The estimated cost to construct, at current prices as of the effective .
appraisal date, a building with utility equivalent to the building
being appraised, using modern materials and current standards,
design and layout."-
The Cost Approach is most reliable when the improvements are
comparatively new, and represent the highest and best use of the site.
For new improvements that represent the highest and best use of the
site, the various forms of depreciation can typically be estimated with
relative ease. The reproduction cost estimate is based upon the actual
costs necessary to produce an exact replica of the improvements.
Therefore, the reproduction cost estimate will embody all of the
functional obsolescence .present for the property (if any). The replacement
cost method is used to +estimate the cost to construct a functionally
equivalent (but not identical) set of improvements.
In this case, the subject is 1936 construction. Codes have changed
dramatically since the date of construction, as have costs. Lacking the
ability to do a reproduction cost, a replacement cost estimate is applied.
Note that this estimate, will eliminate the need to estimate functional
obsolescence.
Marshall Valuation Section `
The Marshall Valuation Service is applied to provide an alternate, ![
replacement cost estimate. The Marshall Valuation Service is a nationally
recognized method of calculating replacement or reproduction costs for a
wide variety of improvement types. The following sections detail the
Marshall Valuation Service Calculator Cost method:
General Calculator Notes
The actual costs used are considered final costs to the owner and
include the following; average architect's and engineer's fees, plan
check fees, building permits, survey, interest on construction funds,
sales tax on materials, normal site prep including grading,
foundation excavation and back-fill, contractor's overhead and profit
including supervision, insurance equipment, temporary facilities
and security.
10 The DictionarV of Reel Estate Appraisal,Third Edition,Appraisal Institute, 1990,page 303
CIA 1®2014 CAPITAL REALTY AWALYSTs Pape 68
Cost Approach
General Calculator Notes (cont'd)
The Calculator costs do not contain the costs of buying and
' assembling land, atypical financing charges, yard improvements,
personal property and marketing costs to create the first occupancy
(where relevant).
' Building Classification
The building classification in the Marshall Valuation Service divides
buildings into 5 basic cost groups based upon the type of framing,
walls, floors, roof structures and fireproofing. The subject property
is considered to be an "Average Quality Class C Theater: Live Stage
(Marshall Valuation Service Section 16, Page 12).
Base Building Costs
' The base building costs for the subject are taken from Section 16 of
the Marshall Valuation Service cost manual. Included in the base
building costs are interior lighting and plumbing. Package A/C is
also included in the base building cost. iThe base building costs
include a typical amount of exterior walkways and common area. All
other extras require lump sum adjustments.
Lump Sum Adjustments
Specialty improvements and personal property (if any) typically
constitute the majority of lump sum adjustments for improvements
of this type. For operational theater buildings, there are typically
significant lump sum adjustments for the various stage, sound and
lighting systems. However, all of these elements have been removed
from the subject and will not come into play for this portion of the
analysis. All personal property (which is very minimal in this case) is
excluded as this valuation is for real property only.
Depreciation
Depreciation is the loss in value due to any cause. Depreciation is
' generally divided into three categories. These are physical
deterioration, functional obsolescence and external obsolescence.
Physical deterioration and functional obsolescence are further
divided into curable and incurable components. External
obsolescence is considered incurable. The forms of depreciation are
defined as follows:
f
' `-?AJ®2014 CAPITAL REALTY ANALYSIS Page 69
I
�I
Cost Approach
Marshall Valuation Section (cont'd)
Physical Deterioration - Curable
"An element of accrued depreciation; a curable defect caused by
deferred maintenance."i,
Physical Deterioration - Incurable
"An element of accrued depreciation; a defect caused by physical
deterioration that cannot be practically or economically corrected."-
Functional Obsolescence - Curable
"An element of accrued depreciation; a curable defect caused by a
flaw in the structure, materials or design.",3
Functional Obsolescence - Incurable
"An element of accrued depreciation; a defect caused by a deficiency
or super adequacy in the structure, materials or design, which
cannot be practically or economically corrected."I<
External Obsolescence
"An element of accrued depreciation; a defect, usually incurable,
caused by negative influences outside a site and generally incurable
on the part of the owner, landlord, or tenant.
In this report, each area.of depreciation is analyzed separately as follows:
Physical Deterioration - Curable
As defined above, cut•able physical deterioration consists of deferred
maintenance items. The subject property has very significant
deferred maintenance items. In fact, the architectural firm that
prepared the site assessment suggested that the property required a
complete renovation. This includes HVAC, all seating elements,
stage elements, lighting and sound systems. Clearly, a precise
estimate of deferred maintenance of this scope is beyond the
capability of an appraiser, and fall in the realm of construction
specialists. For the purpose of this analysis, deferred maintenance
is estimated conservatively at 30% of replacement cost new.
The Dictionary of Real Estate Appraisal,Thud Edition,Appraisal Institute, 1993, page 86
"The Dictionary of Real Estate Appraisal,Third Edition,Appraisal Institute, 1993, page 180
13 The Dictionary of Real Estate Appraisal,Third Edition,Appraisal Institute, 1993,page 86
I<The Dictionary of Real Estate Appraisal,Third Edition,Appraisal Institute, 1993,page 179-180 it
I3 The Dictionary of Real Estate Appraisal,Third Edition,Appraisal Institute, 1993,page 128
CRAJ ®2014 CAPITAL REALTY ANALYSTS Page 70
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1
Cost Approach
Physical Deterioration - Incurable
Incurable physical deterioration is the most common type of
depreciation, generally caused by the physical aging of the
improvements. The subject has an actual age of 78-years, and an
effective age of 40-years, with a total economic life of 45-years;
' yielding an 88.89% charge for incurable physical deterioration.
Functional Obsolescence - Curable
' The subject suffers from severe functional gbsolescence. A summary
of these elements was presented in the Improvement Description
section of the analysis. However, the application of a replacement
cost estimate (as opposed to a reproduction cost estimate)
eliminates the need to estimate actual curable functional
obsolescence.
' Functional Obsolescence - Incurable
Incurable functional obsolescence includes items that do not
contribute to value, yet have an associated cost. Many super-
adequacies fall into this category. In this case, the fact that the
subject is landlocked CMU construction with a historic designation
' that prevents reconfiguration of exterior walls, elements such as the
lack of sufficient dressing rooms, stage fixtures, etc., that would
normally be considered curable, are clashed as incurable for this
analysis. For this analysis, the incurable functional elements will
simply be reflected via adjustment in the sales comparison
approach.
The remaining components of cost include entrepreneurial profit and the
cost to create the first occupancy (the marketing fee). As buildings of this
type are not constructed with the expectation of generating net income
from leasing, and are typically only developed for a specific purpose, no
profit or cost to create the 1s' occupancy are applied.
Conclusion
The following page contains the Marshall Valuation Service Calculator
Cost Approach Worksheet for the subject property:
`��0 2014 CAPITAL REALTY ANALYSTS Page 71
Cost Approach
Marshall Valuation Service Calculator Cost Method Worksheet
Plaza Theatre
Square Foot Adjustments Cost Replacement
Component Area Reference Cost New
Main Floor Area 11,130 $ 116.88 $1,300,874
Balcony Area °3,080 $ 48.71 $150,027
Basement Area 693 $ 68.00 $47,124
Subtotal SF Adjustments 14,903 $1,498,025
Lump Sum Adjustments
Fees/Permits 1.00 $18,725 $18,725
Architect 1.00 $65,000 $65,000
Subtotal Lump Sum Adjustments $83,725
Subtotal Base Building Structure $1,581,751
Specialty Improvements
Cost Replacement
Component Area Reference Cost New
Lobby/Box Office 1 $10,000 $10,000
Deduct for No Sound Sys 1.00 ($100,000) ($100,000)
Deduct for No Lighting 1.00 ($75,000) ($75,000)
Other 0.00 $0 $0
Total Specialty Improvements ($165,0001
Subtotal $1,416,751
Current Cost Multiplier 1.02
Local Cost Multiplier 1.16
Total Estimated Replacement Cost New $1,676,299
Total Economic Life 45 Years
Remaining Economic Life 5 Years
Effective Age 40 Years
Less Accrued Depriciation 88.89% ($1,490,043.74)
Plus Entrepenurial Profit 0.00% $0
Depreciated Replacement Cost $186,255
Land Value $470,430
Deferred Maintenance ($474,525)
Indicated Subject Value $182,160
Indicated Subject Value (Rounded) $180,000
As shown, net of any adjustment for economic obsolescence, the cost-
based value estimate cone in at $180,000. However, the subject has
proven economically obsolete as the previous occupant, which by all
accounts was a uniquely competent and skilled operator; was unable to
generate any net income even without paying any rent for the theatre.
C'id 0zo14 CAPITAL REALTY ANALYSTS
Page 72
Cost Approach
In addition, the subject property is functionally inadequate and required
leasing space from neighboring buildings and an alley in order to
facilitate use of the subject. In addition, the replacement cost fails to
consider the fact that the subject lacks sufficient restrooms,
ingress/egress, etc. Clearly, the cost to cure these elements, if they could
' be cured at all, would exceed $180k by a wide margin, suggesting a
negative cost-based value estimate. In fact, it will likely cost several
million dollars to refit this property to operational status. As described in
' the Introduction and Market Analysis sections, public demand exists and
there is some expectation that the municipal owner will continue to
provide financial support to continue the use of this facility. On the open
market, the next user; if one could be found; would likely take the
property at a token cost only if municipal` participation could be
sufficient to provide an operational facility. Consequently, rather than
' yielding a negative market value estimate, I conclude that the current
cost-based market value of the property is estimated as follows:
$1
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' �';d C 2014 CAPUALPE WANA VS" Page 73
Sales Comparison Approach
In the Sales Comparison Approach, the subject property is compared to
similar properties, which have been sold recently or for which listing
prices or offering figures are known. Data for generally comparable
properties are used and comparisons are made to demonstrate a
probable price at which the subject property would be sold if offered on
the market. The Dictionary of Real Estate Appraisal defines the Sales
Comparison Approach as follows;
"A set of procedures in which a value indication is derived by
comparing the property being appraised to similar properties that
have been sold recently, applying appropriate units of comparison,
and making adjustments to the sale prices of the comparables
based on the elements of comparison. The sales comparison
approach may be used to value improved properties, vacant land, or
land being considered as though vacant; it is the most common and
preferred method of land valuation when comparable sales data are
available.
In this case, the subject property is quite unique in that the property is a
1936 construction: functionally and economically obsolete theatre
building. Furthermore, the building has a Class 1 historical designation.
In order to prepare a sales comparison-based value estimate, I sought
out sales of older, obsolete theatre buildings in alternate locations. As
one might expect, there are no functionally equivalent substitutes for the `
subject. Interestingly, I did find 1 sale of a historic theatre building, E
which is described further on in this analysis. A significant feature of the
Sales Comparison Approach in this analysis is that significant lump sum
adjustments are required to reflect the fact that well over $1MM will be
required to restore the subject to an operational status.
The Sales Comparison Approach is organized as follows;
46 Comparable Sales Map
4, Comparable Sales Grid
dl Comparable Sales Analysis
4 Adjustments
it Conclusion, Market Value "As Is"
is The Dictionary of Real Estate Appraisal,Third Edition,Appraisal Institute, 1993, page 318 ■.
`IL✓1 0 2014 CAM11 RBALTY ANALYSTS Page 74
E
Sales Comparison Approach
Comparable Sales Map
a
1
' Comparable Sales Grid
Sale Sale/List Size Sale Price Per Year
# Name/Location Date (SF of GBA) Price SP of GBA Built
1 Perris Theater(D Street Theatre)
29 S. D Street
Perris,CA 9/3/2009 4,121 $727,000 $ 176.41 1932
2 Crest Theatre(West Coast Theatre)
481 N. E Street
San Bernardino, CA 11/28/1990 34,320 $410,000 $ 11.95 1927
3 High Street Arts Center
45 E. High Street
Moorpark, CA 8/23/2001 6,861 $275,000 $ 40.08 1930
4 Rubiwn Theatre(The Laurel Theatre)
1006 E. Main Street
Ventura, CA 12/22/1998 9,240 $390,000 $ 42.21 1923
5 Center Stage Theatre(Fontana Mummers Community Theatee)
8463 Sierra Avenue
Fontana, CA 8/31/2004 6,881 $652,000 $ 94.75 1937
6 The Warner Theatre Huntington Park
6714 Pacific Blvd.
Huntington Park, CA 6/7/2013 14,580 $1,600,000 $ 109.74 1936
7 Tower Theatre
2465 Mission Street
' San Francisco,CA 4/25/2013 8.922 $350,000 $ 39.23 1911
Subject Plaza Theatre
128 S. Palm Canyon Drive
Palm Springs, CA 14,903 1936
C'id 02014 CAPITAL REALTY ANALYSTS
Page 75
y
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 1
i �
Comparable Sale No. 1 is the September 2009 sale of the 4,121
SF Perris Theatre, located in Perris, CA. The sale price of
$727,000 equates to an otherwise unadjusted sale price of
$176.41 PSF. This data point was selected for comparison to
demonstrate the top of the market for historic theatre buildings.
The improvements were constructed new in 1932. The building
has an art deco design, and is considered historic by the buyer,
The City of Perris. Clearly, this data point had atypical conditions
of sale, but is included mainly as an informational item to
demonstrate that communities do value historic buildings, and
will spend well in excess of market value to restore and protect j
historical buildings.
The City renovated the exterior in 2011, and recently completed a t
complete renovation of all electrical and mechanical systems. The
renovation was required as the previous owner converted the
property to a 500+ seat cinema. The City sought to restore the
property back to its original use, which was for varied live
performances. The City reports spending well in excess of the sale
price renovating this property, suggesting a negative investment
value to the City. As a redevelopment project, this data point is
best considered as an informational item as opposed to a current
market value indicator.
C'?lJ 0 2014 CAPITA MALTY ANALYM Page 76
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 2
' }a
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V S6
Comparable Sale No. 2 is the November 1990 sale of the 34,320
SF Crest Theatre, originally known as the West Coast Theatre.
The property is located in San Bernardino, CA. The sale price of
$410,000 equates to an otherwise unadjusted sale price of$11.95
PSF. This data item was selected for comparison to demonstrate
the low end of the market for older historic theatre buildings. The
property was constructed in 1927, and operated as a live
performance theatre for several decades.
Fred Stein Theatres acquired the West Coast Theatre in 1960,
and the property was converted to a 2-screen cinema. As the
cinema business evolved, the Crest became functionally obsolete
and was closed in 1990 when the property sold for land value.
The building was demolished in the mid 1990's and is currently
in use as a parking lot. Overall comparability is considered fair.
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��d C 2014 C"Ur RZACTY ANALYSTS Page 77
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 3
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Comparable Sale No. 3 is the August 2001 sale of the 6,861 SF
High Street Arts Center, originally known as The El Rancho
Theatre. The property is located in Moorpark, CA. The sale price
of $275,000 equates to an otherwise unadjusted sale price of
$40.08 PSF. This data item was selected for comparison to
demonstrate a similar vintage theatre building, renovated and put
to an alternate use.
The El Rancho was built in 1930 to replace an old wooden
structure that housed a silent movie theater. The El Rancho had
the distinction of being the only "talking movie" theater in the
east end of Ventura County. Sometimes referred to as the
Moorpark Theatre, it closed as a movie house in the 1950"s and
was used for school and community productions. In 1983 it re-
opened as a "live" event theater known as the Magnificent
Moorpark Melodrgma & Vaudeville Co. Ownership changed hands
several times through the 80"s & 90"s with the doors finally
closing on the Moorpark Playhouse in 1999. In 2001 Larry Janss,
a noted, long-time local developer, bought the building with the
intent of creating a new cultural center for Moorpark.
Page 78
CUD 2014 CAPITAL REALTY ANALYSTS
9
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 3 )cont'd)
The property was completely remodeled, including lighting and
sound equipment, a new concession area, a retractable movie
' screen, new plumbing and electrical systems, and a new
marquee. The theater was renamed The Theater on High Street,
and was converted to a venue for classic film, live concerts and
' plays. The auditorium seating featured Wooden shelves, as it did
in the 20s. The costs of the renovations`were significant and well
in excess of value at completion. t
' The project did not prove financially feasible and in August of
2005 the City of Moorpark Redevelopment Agency acquired the
property in a non-arm's length sale, creating a Cultural Arts
Center for the Moorpark community. The City indicated that the
institution of a Cultural Arts Center was ancillary to bringing
' residents and visitors to the High Street area; enhancing the
Downtown street scene and benefitting adjacent restaurants and
shops, much the same as the subject Plaza Theatre did for Palm
Springs. Clearly, the City spent considerably more on this
property than its market value, demonstrating again the fact that
this property type can add value to a community, but only with
municipal funding as the property could not independently
support financially feasible operation; much like the subject.
Overall comparability is considered fair.
r
t
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' C4d V 2014CAPITA6 REALTY ANALYSTS Page 79
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 4
C
Comparable Sale No. 4 is the December 1998 sale of the 9,240 SF
Rubicon Theatre, originally known as The Laurel Theatre on
Main. The property is located in Ventura, CA. The sale price of
$390,000 equates to an otherwise unadjusted sale price of$42.21
PSF. This data item was selected for comparison to demonstrate a
similar vintage building, put to a similar use as compared to the
subject.
However, this property also includes some leased office space and f
a 2/1.5 SFR. The office space rented for apx. $1 PSF at the date
of sale, and the SFR leased for $1,000 per month. Prior to this
sale, the property had been converted from its original theatre use
to use as a church. The buyer renovated the property into a 220-
seat theatre. A theatre company now leases the facility for
production of various live shows. Overall comparability is
considered fair.
C90 ®2014 CAPITAL REALTY ANALYSTS Page 80
i
Sales Comparison Approach
Comparable Sales Analysis
' Comparable Sale No. 5
1
. R
Comparable Sale No. 5 is the August 2004 sale of the 6,881 SF
Center Stage Theatre. The property is located in Fontana, CA. The
sale price of $652,000 equates to an otherwise unadjusted sale
price of $94.75 PSF. This data item was selected for comparison
to demonstrate a sale of a fully restored and operational, 1930's
construction art deco theatre building.
' The property was previously in use by the Fontana Mummers.
The property was designed by the Boller Brothers in 1937 to look
like Frank Lloyd Wright's Midway Gardens in Chicago. The
original design was for a movie theatre. The cinema use was
abandoned in the early 1950's and had been used for a variety of
purposes including an Elks lodge, a skating rink and retail stores.
One of the theater's notable features is its free-standing Art Deco
marquee. The property was purchased by the Fontana Mummers
Community Theatre, a non-profit corporation, in 1999 and
underwent restoration. The Mummers sold the building in 2004.
The theatre was re-opened in July 2008 as Center Stage Theatre
' for live performances. Overall comparability is considered fair.
r
' `U O 2014 CAPITAL RC LTY ANALYSTS page 81
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 6
i.
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Comparable Sale No. 6 is the June 2013 sale of the 14,580 SF
Warner Theatre Huntington Park. The property is located in
Huntington Park; CA. The sale price of $1,600,000 equates to an
otherwise unadjusted sale price of $109.74 PSF. This data item
was selected for comparison to demonstrate another sale of a fully
restored and operational, 1930's construction art deco theatre
building. I I
The property was originally designed for Warner Bros. as a 1,468-
seat theatre. After Warner Bros. divested, the theatre was
operated by Stanley Warner Corp. and from 1968 on, by Pacific
Theatres. The balcony was walled off in the 1980's by Pacific
Theatres and the twin was called Pacific's Warner 2. In later
years the theatre ran Spanish language and Spanish subtitled }
films in what was then a vibrant business area. f`
C'?d O 2014 CAPTTAL REALTY ANALYsn Page 82
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 6 (cont'd(
The City of Huntington Park declared the theatre a historic
landmark in 2007. The property is currently vacant and for lease.
The broker indicated that no listing price was set as the historic
designation may limit uses and consequently, rental rates.
' However, the balcony was opened up and a 2nd floor area of
approximately 7,500 SF is available, making the property total
approximately 22,500 SF. Overall comparability is considered
' fair.
1
Cad C 2014 CAPUAL REALTY ANALYSTS Page 83
Sales Comparison Approach
Comparable Sales Analysis
Comparable Sale No. 7
s
�as :r
Comparable Sale No. 7 is the April 2013 sale of the 8,922 SF
Tower Theatre. The property is located in San Francisco, CA. The
sale price of $350,000 equates to an otherwise unadjusted sale
price of $39.23 PSF. This data item was selected for comparison
to demonstrate a sale of an operational, 1930's construction
theatre building.
The original building, known as the Majestic Theater was opened
in April 1912. The property was completely remodeled in a
Streamline Moderne style by architect S. Charles Lee in 1937.
Some detail still remains of the old Streamline Moderne styled
Tower Theater. The property acquired landmark designation in
the early 2000's. The building was acquired in 2003 by Gus
Murad while in use as a church. The landmark designation
prevented the property from being redeveloped as an educational
J campus after the Church vacated in 2007.
Cad 0 2014 CAPITAL RE TYANALVSTS Page 84
Sales Comparison Approach
' Comparable Sales Analysis
' Comparable Sale No. 7 (cont'd)
The property was then listed for sale for several years at
$2,495,000 while the owner tried unsuccessfully to gain
entitlements to redevelop the property as a theatre with
residential units above. The property sold to a speculative
investor in this 2013 transaction for $350,000; which was
' reported to be land value. The property has extensive deferred
maintenance. Overall comparability is considered fair.
' Adjustments
After considerable research, I conclude that the subjective nature of any
adjustments that could be made to these sales would simply amount to
' speculation and add nothing to the ability to understand current market
value for the subject. Consequently, I sought to include a range of sales
that would demonstrate the high, average, and low value ranges for
I 1930's construction theatre buildings. In this case, a simple analysis of
the value ranges provides a clear picture of how these buildings typically
trade.
' At the top of the market are Redevelopment Agency acquisitions. Sale 1
is an example of the municipality paying a ;premium for a historic
building. The desire of the community to preserve the property is the key
factor influencing the non-economic price. The municipal buyer intends
for the acquisition and subsequent on-going investment to add value to
the community in excess of the sale price. I think most buyers and
' sellers agree that this is a legitimate function of local government.
However, the dissolution of Redevelopment Agencies has in most cases,
put a stop to this kind of investment. As the subject is already
municipally owned, the opportunity to sell the subject property at a non-
market price to a municipality seeking to enhance the area of the
property does not exist; suggesting that the current market value of the
' subject will be found elsewhere.
Next in the price PSF range are the fully renovated and/or operational
and not economically obsolete theatre buildings, such as Sales 5 and 6.
These buildings trade in the $100 PSF range and are characterized by
the fact that they will support a current economic use and/or could be
' leased on the open market. The subject is not available to support a
current economic use; nor would it be expected to lease on the open
market in its as is condition. Consequently, the current market value of
' the subject will not be found among this value range.
' C4d 0 2014 CAPITAL REALTY ANALYSIS Page 85
Sales Comparison Approach
Adjustments (cont'd)
At the lowest end of the range are the obsolete theatre buildings such as
Sales 2, 3, and 7. These improvements are characterized by the
functionally and economically obsolete nature of the property. Sale 2 has
a significant advantage over the subject because the building was not
historic, and was available for demolition. Consequently, the property
sold for land value and was converted to a paring lot. Sale 3 was
operational, but needed. renovation. A noted local developer took this
project on, but ultimately did not succeed financially, at which point the
property sold to the City's Redevelopment Agency. Sale 7 is interesting
because the building is a landmark and not available for demolition. The
price was reported to reflect land value, and the acquisition was
speculative. The property remains vacant with extensive deferred
maintenance.
Conclusion
If the subject property were available for demolition, it would likely carry
a market value in the range of the lowest tier sales: approximately $10
PSF to approximately $40 PSF. Similarly, the property might carry a
value in this range if the property could support economic use occupancy
for less than approximately $596,120 (14,903 SF x $40 PSF). However,
the subject is not available for demolition, and in order to support any
public use, the subject will require several million dollars in renovation;
which is well in exces's of what the property could command at
completion. While there is a strong case for ascribing a negative market
value estimate to the subject, I was unable to find any case of an owner
paying to be relieved of a historic theatre building.
I think that a more likely scenario would be a token sale price to a
prospective operator who may be willing to expend renovation funds in
partnership with the seller. Consequently, I conclude that the market
value of the fee simple estate in the subject property by the sales
comparison approach is as follows:
$1
(One Dollar)
Cad0 2014 CAPITAL REALTY ANALYSTS Page 86
1
Reconciliation and Final Estimate of Value
' Two methods were used to obtain value indications for the subject
property. These methods are the Cost Approach and the Sales
' Comparison Approach. Both methods yielded a market value estimate of
$1. Clearly, the cost to bring this property back to operational condition
will exceed its value at completion by a wide margin. This is a typical
' feature of 1930's era theatre buildings. While some of these older historic
theatres continue to be supported by their municipalities and/or non-
profit theater companies; the vast majority have been demolished, or
' simply remain vacant for very extended periods of time. If the City of
Palm Springs is unwilling or unable to continue to provide financial
assistance to this property, it will likely join the ranks of the long-term
' vacancy group. All of those interviewed for_ this analysis were in
agreement that the property would be difficult or impossible to market in
the as is condition, as the economics of a retrofit would not yield a value
' in excess of cost.
Consequently, but for the expectation of continued public assistance, the
subject property (much like contaminated parcels, for example) would be
highly likely to carry a negative market value. However, the expectation
of current and/or future public assistance enhances the marketability of
the subject to the point where a token value would likley generate a
current market sale. Based upon the available`data, I conclude that the
market value of the fee simple estate in the subject property as of the
date of value is as follows:
$1
(One Dollar)
MAJ 0 2014 CAPITAL REALTY ANALYSTS Page 87
Certification
I certify that, to the best of my 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 is my personal,
unbiased professional analyses, opinions and conclusions.
I have no present or prospective interest in the property that is the
subject of this Report, and I have no personal interest or bias with
respect to the parties involved.
My engagement in this assignment was not contingent upon developing
or reporting predetermined results.
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.
My analysis, opinions and conclusions were developed, and this Report
has been prepared, in' conformity with the Uniform Standards of
Professional Appraisal Practice (USPAP) adopted by the Appraisal
Standards Board of the Appraisal Foundation, except that the Departure
Provision of the USPAP shall not apply to federally related transactions.
I have no bias with respect to the property that is the subject of this
report or to the parties involved with this assignment.
I certify that the use of this Report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized E
representatives. t
As of the date of this Report, I have completed the requirements of the
continuing education program of the Appraisal Institute.
I have made a personal inspection of the property that is the subject of
this Report.
No other person provided significant professional assistance to the
person(s) signing this Report. �.
CU C 2014 CAPITAL REALTY ANALYSTS Page 88
f
Certification (cont'd)
This Appraisal assignment was not based on a requested minimum
valuation, a specific valuation or the approval of`a loan.
' I certify that, to the best of my knowledge and belief, 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.
I have not previously appraised the property that is the subject of this
report.
Michael A. Scarcella, MAI
State Certification No.: AGO 19463
Expiration Date: October 24, 2015
1
1
1
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' C4d 0 2014 CAPITAL REALTY ANALYSTS Page 89
Addendum
P
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C-d 0 2014 CAPITAL REALTY All"I 5 Page 90
1
Assumptions and Limiting Conditions
This appraisal report has been made with the following general
assumptions and limiting conditions:
1. No responsibility is assumed for the legal description or for matters
including 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.
3. Responsible ownership and competent property management are
' assumed.
4. The information furnished by others is believed to be reliable.
' However, no warranty is given for its accuracy. The appraiser
reserves the right to make adjustments to the analyses, opinions
and conclusions in this report, as may be required by
' consideration of additional or revised data that may become
available.
5. All engineering is assumed to be correct. The 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
' obtaining the engineering studies that may be required to discover
them.
' 7. It is assumed that the property is in full compliance with all
applicable federal, state, and local environmental regulations and
laws unless noncompliance is stated, defined, and considered in
' the appraisal report.
8. It is assumed that the property conforms to all applicable zoning
' and use regulations and restrictions unless nonconformity has
been identified, described and considered in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy,
consents, and other legislative or administrative authority, from
any local, state, or national government or private entity or
' organization have been or can be obtained or renewed for any use
on which the value estimate contained in this report is based.
C9d0 2014 CAPITAL AP.AI.TY ANALYSTS Page 91
Assumptions and Limiting Conditions
10. It is assumed that the utilization of the land and improvements is
confined within the boundaries or property lines of the property
described and that there is no encroachment or trespass unless
noted in the report.
11. Unless otherwise stated in this report, the existence of hazardous
materials, which may or may not be present on the subject
property, was not observed by the appraiser. The appraiser has no
knowledge of the existence of such materials on or in the property.
The appraiser, however, is not qualified to detect such substances.
The presence of substances such as asbestos, urea-formaldehyde
foam insulation and other potentially hazardous materials may
affect the value of the property. The value estimated is predicated
on the assumption that there is no such material on or in the
property that would cause a loss in value. No responsibility is
assumed for such conditions or for any expertise or engineering
knowledge required to discover them. The intended user is urged to
retain an expert in this field, if desired.
12. Any allocation of the total value estimated in this report between
the land and the improvements applies only under the stated
program of utilization. The separate allocations for land and
building must not be used in conjunction with any other appraisal
and are invalid if so used.
13. Except for use in the Official Statement as required for bond
issuance, 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 the party to whom it is
addressed without the written consent of the appraiser, and in any
event only with properly written qualification and only it its
entirety.
14. The appraiser herein by reason of this appraisal is not required to [
give further consultation, testimony, or be in attendance in court t
with reference to the property in question unless arrangements
have been previously made.
15. Neither all nor any part of the contents of this report (especially
any conclusions as to value, the identity of the appraiser, or the f
firm with which the appraiser is connected) shall be disseminated f
to the public through advertising, public relations, news, sales, or
other media without the prior written consent and approval of the
appraiser. tt
CVAJ C 2014 CAMAL REAL ANALYSn Page 92 ■
Assumptions and Limiting Conditions
16. Improved Properties - The Americans with Disabilities Act ("ADA")
became effective January 26, 1992. I (we) have 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. Since I
(we) have no direct evidence relating to this issue, I (we) did not
consider possible non-compliance with the requirements of ADA in
' estimating the value of the property.
17. Improvements, Proposed Improvements - The value estimates in
' this report are subject to the improvements being completed in
the manner represented to the Appraiser(s), and described in the
Improvement Description section of this report.
' 18. The legal descriptions, site sizes, dimensions and/or other surveys
provided to the appraiser, including County Tax Plats, are
assumed to be accurate. Should a survey prove these
' characteristics inaccurate, it may be necessary for the appraisal to
be adjusted.
' 19. The forecasts, projections, or operation estimates contained herein
are based upon current market conditions, anticipated short-term
supply and demand factors, and a continued state economy. These
' forecasts are therefore, subject to change in the future.
20. The appraiser undertaking this assignment warrants that he is
' competent in properly identifying the appraisal problem and has
the necessary knowledge and experience to complete the
assignment.
` 21. Provision of an insurable value by the appraiser does not change
the intended user or intended purpose of the appraisal. The
' appraiser assumes no liability for, and does not guarantee that any
estimate or opinion will result in the subject property being fully
insured for any possible loss that may be sustained. The appraiser
recommends that an insurance professional be consulted.
' Cali ®2014 CAMAL REALTY ANALYSIS Page 93
1
Assumptions and Limiting Conditions
22. Copyright of this material belongs exclusively to Michael A.
Scarcella, Inc., and/or Capital Realty Analysts, Inc. This copy is
intended for private use as defined in the body of the report for the
designated client only. No person or entity is permitted to
reproduce this material, in whole or in part, for distribution either
free of charge or for 'commercial purposes', unless that person or
entity has a signed license agreement with Michael A. Scarcella,
Inc. and/or Capital Realty Analysts, Inc. Reproduction for
commercial purposes is reproduction for the purposes of sale, rent,
trade or distribution, or posting it on the Internet or on electronic
bulletin boards.
CRAJ®2014 CAPITAL REALTY ANALYSTS Page 94
E'
1 '!
AUCHAEL A.SCARCELLA,N1Pll
Education
1982 B.S., Business, University of Nevada, Las Vegas
' All required Appraisal Institute sponsored courses required to attain the MAI
designation, along with Appraisal Institute sponsored courses, seminars and
on-line forums required for continuing education
' Professional Organizations/Licensing
Member of the Appraisal Institute - MAI Member Number 11072
Licensed by the State of California as a "Certified General Real Estate
' Appraiser". 13
Office of Real Estate Appraisers, Appraiser Identification Number AG 019463.
Appraisal Institute - So. Cal. Chapter, 1997, 1998, 2001 Experience Review
' Committee; 1999, 2000, 2005 So. Cal. Chapter Ethics Committee
General Experience
1997 to Current Capital Realty Analysts - President
' 1991 to 1996 - MacKenzie and Associates - Staff Appraiser
1982 to 1991 - Hotel, Construction / Development Controller
Qualified as an expert real estate witness, United States Bankruptcy Court
' Qualified as an expert real estate witness, Riverside County Superior Court
i
Representative List of Clientsr•
Public Sector Private Sector ?,,j Institutional Lenders
United States Of America Price Waterhouse Bank of America
Bureau of Land Mgt Merrill Lynch Rabobank N.A.
' Bureau of Indian Affairs CB Commercial Wells Wells Fargo Bank
FDIC Textron Pacific Western Bank
Dept. of Justice Bechtel Corporation Washington Mutual Bank
' State of California KSL Recreation Corp. Bank Midwest
State of Arizona United States Filter Pacific National Bank
Riverside County Sunrise Company Pacific Premier Bank
City of Palm Springs Trust for Public Land Sterling Bank
' City of Coachella Mojave Desert Land Trust Pacific Mercantile Bank
City of Desert Hot Springs Habitat for Humanity Banc One
City of Cathedral City Lennar Homes Fidelity Federal Bank
City of Rancho Mirage Temple Construction Bankers Trust Company
' City of Palm Desert Santa Fe Pacific First Bank
City of Indian Wells Takenaka Corporation Union Bank
City of Indio Betty Ford Center Commerce Federal Svgs
City of La Quinta Heart Inst. of the Desert Great American Bank
' Palm Springs Unified SD Basic Capital Management Mitsubishi Bank
Desert Sands Unified SD Annenberg Foundation First Citizens Bank
Coachella Valley Unified SD Estate of Frank Sinatra Northern Trust
' Public Utilities Wessman Development El Paseo Bank
CV Assn. of Governments Attorneys Community Valley Bank
Eisenhower Memorial Hsp. Developers Bank Six
Desert Hospital Accountants Alliance Bank
I
' C4d®2e14 CArnu.RE�rrnnncrsrs Page 95
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