4. Tax Equalization board convenes

I have included several spreadsheets that indicate the economics that would be required to support the assessor's value. The sheet titled "Back into Cap" shows the cap rate required to support the assessor's value. Based on a reasonable rental rate of $4.00 the cap rate would need to be 5.542 % which is far below any cap rate levels indicated by the market. The sheet titled "Back into Rent" shows the rental rate that would be required at a cap rate of 8.5%. The rental rate is $6.14 per square foot. Again this is outside any of the market rent indicators for anchor department stores performing at the $125 per square foot in sales level. Finally, and most impressively the main indicator of market rent in anchor department stores is gross sales. The sheet titled "Income Required to Support Assessor's Value" shows the gross sales that would be required at this location to support the value the assessor has placed on the property. This indicates that the store would need to have gross sales of $245.39 per foot. The store sales for the last fiscal year were $125.38 per foot, just over half the amount required to support the assessor's valuation. 1'n summary, we believe a more appropriate approach to value would be to use either a percentage of gross sales approach to determine the real estate rental rate for an anchor department store or a more realistic flat rental rate. Typical department store arrangements would be a base rental rate with a percentage rent over the sales needed to support that rental rate. As outlined on the spreadsheet titled "Tiered Rent," one way to arrive at this is to apply a percentage of 3% to the first $150 per foot in sales, 2% to the next $SO in sales and I% on all sales over $200. Based on that approach and the subject properties gross sales of $125.38 per foot, the indicated rental rate would be $3.76 per foot versus the estimated assessor's rate of $6.14 per foot. Using the same income formula (5% vacancy 5% expenses 8.5% Cap rate) with the new rental rate of $3.76 would arrive at an indicated value of $4,190,000. Using a flat rate rental rate of $4.00 per foot and 5% vacancy and collections and 5% expenses and an 8.5% cap rate the indicated value is $4,450,000. I have attached tables of data analyzed by an appraisal firm Ramsland and Vigen extracted from the Dollars and Cents of Shoppin CR enter to support the rental rates of anchor department stores which lends more support for our rental rate assumptions. The latest average rental rate for anchor department stores is $3.35 per foot and the average sales per foot are $163.99 I have also attached excerpts from the RealtyRates.com Investor Survey for the 1st Quarter 2009 (4~' Quarter 2008 Data). This data is included to support the cap rate assumptions made in our income analyis. Our concern in this case is that the property values continue to decline based on the sales performance of the store. Retail sales have fallen at this location by 7.5% in the last two years. We hope that the assessor will recognize the loss of value indicated by this loss in revenue. Finally, I have included an improved sale summary. The average sales price per foot is about $43.00 per foot for the transactions summarized.