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Home My WebLink About20211992.tiffCOUNTY BOARD OF EQUALIZATION WELD COUNTY Single County Schedule Number: R0296201 STIPULATION (As To Tax Year 2021 Actual Value) RE PETITION OF : NAME: JDM II SF NATIONAL LLC ADDRESS: ONE STATE FARM PLAZA BLOOMINGTON, IL Petitioner (s) and the Weld County Assessor hereby enter into this Stipulation regarding the tax year 2021 valuation of the subject property, and jointly move the Board of Equalization to enter its order based on this Stipulation. Petitioner (s) and Assessor agree and stipulate as follows: 1. The property subject to this Stipulation is described as: GR PROM L4A PROMONTORY EXC BEG ON S R/W LN HWY 34 BUS RTE AT N -S C/L SEC TH SODW 649.96' N89D08'W 767.09' N45D30'E 428' 2. The subject property is classified as commercial. 3. The County Assessor originally assigned the following actual value to the subject property for the tax year 2021 : Total: $48,020,390 4. After further review and negotiation, Petitioner (s) and Weld County Assessor agree to the following tax year 2021 actual value for the subject property: Total: $45,200,000 5. The valuation, as established above, shall be binding only with respect to tax year 2021 . 6. Brief narrative as to why the reduction was made: After a review of the approaches to value, an adjustment was indicated. 7. Both parties agree that: The hearing scheduled before the Board of Equalization on 08/04/2021 at 1:00 pm be vacated. IlA hearing has not yet been scheduled before the Board of Equalization. R0296201 1 oi-199D ^So loci DATED this 27 day of July , 2021 . / Petitioner(s) or Agent or Attorney Address: 1999 Broadway Suite 4100 80202 Telephone: 303-222-1845 R0296201 (Assistant) County Attorney for Respondent, Weld County Board of Commissioners Address: 1150 "O" Street P.O. Box 758 Greeley, CO 80632 Telephone:(970) 336-7235 dnc6, Uon co County Assessor Address: 1400 N.17th Avenue Greeley, CO 80631 Telephone: (970) 400-3650 2 R0296201 J D M I I SF NATIONAL LLC Final Audit Report 2021-07-27 Created: 2021-07-27 By: SUE GUNDRY (sgundry@co.weld.co.us) Status: Signed Transaction ID: CBJCHBCAABAARs55MwOmChh_O8ZgZOKyYDOHAVOtpmL_ "R0296201 JDM II SF NATIONAL LLC" History t Document created by SUE GUNDRY (sgundry@co.weld.co.us) 2021-07-27 - 1:33:58 PM GMT- IP address: 204.133.39.9 Ell, Document emailed to SUE GUNDRY (sgundry@co.weld.co.us) for approval 2021-07-27 - 1:34:00 PM GMT b4 Document approved by SUE GUNDRY (sgundry@co.weld.co.us) Approval Date: 2021-07-27 - 1:39:16 PM GMT - Time Source: server- IP address: 204.133.39.9 Ey Document emailed to Jason Marini (jmarini@co.weld.co.us) for approval 2021-07-27 - 1:39:17 PM GMT t Email viewed by Jason Marini (jmarini@co.weld.co.us) 2021-07-27 - 1:40:03 PM GMT- IP address: 24.9.7.170 C56 Document approved by Jason Marini (jmarini@co.weld.co.us) Approval Date: 2021-07-27 - 4:05:38 PM GMT - Time Source: server- IP address: 204.133.39.9 E2D, Document emailed to Brenda Dones (appeals@weldgov.com) for signature 2021-07-27 - 4:05:39 PM GMT .5 Email viewed by Brenda Dones (appeals@weldgov.com) 2021-07-27 - 6:07:56 PM GMT- IP address: 204.133.39.9 dQ Document e -signed by Brenda Dones (appeals@weldgov.com) Signature Date: 2021-07-27 - 6:08:28 PM GMT - Time Source: server- IP address: 204.133.39.9 E Document emailed to Matt Poling (matt.poling@ryan.com) for signature 2021-07-27 - 6:08:30 PM GMT .5 Email viewed by Matt Poling (matt.poling@ryan.com) 2021-07-27 - 6:16:35 PM GMT- IP address: 165.225.10.224 Adobe Sign 656 Document e -signed by Matt Poling (matt.poling@ryan.com) Signature Date: 2021-07-27 - 6:18:48 PM GMT - Time Source: server- IP address: 165.225.10.224 4 Document emailed to Karin McDougal (weld-cboe@weldgov.com) for signature 2021-07-27 - 6:18:49 PM GMT ...€ Email viewed by Karin McDougal (weld-cboe@weldgov.com) 2021-07-27 - 8:12:48 PM GMT- IP address: 204.133.39.9 too Document e -signed by Karin McDougal (weld-cboe@weldgov.com) Signature Date: 2021-07-27 - 8:13:09 PM GMT - Time Source: server- IP address: 204.133.39.9 O Agreement completed. 2021-07-27 - 8:13:09 PM GMT Adobe Sign Thank you for submitting an appeal to the Weld County Board of Equalization. We will review the information submitted and you will receive a date to appear before the board. Contact Information: Contact Name: Ethan Horn Contact Email: ethan.horn@ryan.com Contact Phone: 303-222-1853 Appeal Submitted: 11:23 AM July 13, 2021 Appeal submitted for: R0296201 - JDM II SF NATIONAL LLC 1555 PROMONTORY CIR, GREELEY Legal: GR PROM L4A PROMONTORY EXC BEG ON S R/W LN HWY 34 BUS RTE AT N -S C/L SEC TH SODW 649.96 N89D08 W 767.09 N45D30 E 428 N53D46 E 572.57 TO POB Reason: Value Too High - The subject property is valued in excess of fair market value based on the three approaches to value; cost, market and income. In addition, the property is valued in excess of other similarly situated properties. Estimate of Value: $42,997,000.00 Document(s) Submitted: Account: All Accounts - State Farm CO PT 2021 Greeley Regional Office Weld 2021-05-301.pdf You have selected the following Date Preferences: The Appeal process can take several weeks for us to complete. You will receive a written decision on your appeal within five (5) working days of your hearing. We thank you for your submittal. Weld County Board of Equalization 2021-1992 ASOto9 y LO CONTACT INFO it 0 1.1 O WELD COUNTY, CO Real/Business Personal Property Appeal Appeal has been submitted Successfully! You will receive an email confirmation of your submission. Please remember to check your junk mail. You may submit another appeal or return to the Assessor's Homepae. Between May 1 and June 2, per C.R.S. §39-5-122(1), you may appeal your real property value. Between June 15 and June 30, per C.R.S. §39-5-122(1), §39-5-122(4), §39-6-111.5, §39-7-102.5, you may appeal your business personal property and/or oil and gas value. To appeal the value of your property online, please have the following information available prior to beginning your appeal: • Owner Name • Contact Phone Number • Email Address • Account/Schedule Number (found on Notice of Valuation) • Reason for Appeal • Supporting Documentation in an electronic format to be attached • Agent Authorization in an electronic format to be attached (This is required if you are acting as an agent and you are appealing an account that is not under your name as ownership) Once you have the required documentation, you can begin the appeal process by entering your emailaddress below. Upon submission of your appeal, you will receive an email confirmation that your appeal has been received. Weld County Assessors Office (970) 400-3650 Email Address: Begin Appeal Contact Information Weld County Offices: Weld County Colorado 1 150 O ST. Greeley, CO 80631 Mailing Address: Weld County Colorado PO Box 758, Greeley, CO 80632 Phone: (970) 400-4000 lOr '�-- `vim --- •••••" Useful Links • Elected Officials • Discover Weld County • Pay My Taxes • Weld County Budget • Sign Up for Emergency Alerts • Property Information • Contact Weld County • Weld County Code .z Privacy Policy & Disclaimer I Accessibility Information Social Media Commenting Policy f ,. i R 1 1 \ \\V l� i ' y?� y�.L� CAtt-. __. _-.-may_ ...� ��_...+.".r �� SFr Weld County Valuation Protest Information Submission Assessment Year: 2021 For: State Farm State Farm Campus 155E Promontory Circle Greeley, Colorado Schedule No. R0296201 Assessor's Actual Value: $48,020,390 Taxpayer's Opinion of Value: $42,997,000 Analysis Completed 5/30/2021 Prepared by: Matt Poling Ryan, LLC Phone Number: (303) 222-1845 Al - 1 Ryan*) 2021 Property Tax Assessment Appeal Weld County Property Summary Property Name: Client Name: Assessee Name: Parcel Number: Site Address: City, State: County: Submarket: Site Class: Land AC: Year Built: Stories: Square Feet: State Farm Campus State Farm JDM II SF National LLC R0296201 1555 Promontory Circle Greeley, Colorado Weld County Weld County Office 55.48 2001 3 Story Class A Regional HO Building - 3 Buildings 451,444 2020 County Value: Value Per SF: $50,350,000 $111.53 2021 County Value: Value Per SF: $48,020,390 $106.37 -4.6% Primary Issues of Concern • Work -From -Home trends threaten a permanent decline in demand for office space and pose a severe risk to property values • In 2Q 2020, Metro Denver posted negative net absoportion of office space for the first time in 13quarters • Sublease availability in the Denver metro increased 33% from 01 to Q2 2020 and drove total availability to 17.8% • Denver office sublease availability is at a 20 -year high and office vacancy is at an 8 -year high • 3.7 million sq ft of new office development space was underway in O2 2020 with only 21% being preleased • Office investment sales halted in O2 2020 as investors struggle to underwrite properties due to the uncertainty brought on by COVID-19 • Denver office leasing activity has fallen to its lowest point in a decade • Sublease availablity and vacancy are pressuring landlords to grant increased concessions. Tenants have ample options and room for negotiation. • While asking rates have held flat, achieved rates have declined Valuation Notes • Effective Rent reflects a -10% adjustment to account for increased concessions r Al - 4 State Farm Campus Market Pro Forma Ryano Property Summary Site Address: Parcel Number: Site Class: Square Feet: 1555 Promontory Circle R0296201 Office 451,444 Assumptions Face Rent $23.00 Vacancy 20.0% Expenses $5.80 Cap Rate 10.23% Pro Forma % PGI Per SF Revenue Potential Gross Income -Office (68,738sf) Vacancy & Collection Loss Parking Income Effective Gross Income Operatinj Expenses Non -Recoverable Expenses Total Expenses Net Operating Income Capitalization Rate Effective Tax Rate Loaded Rate Stabilized Value Less Deferred Maintenance Less Rent Loss / Lease Up LIndicated Value: $42,997,000 - -a�-�--'_. _ — �� _r ��e...--41.._-, .........A. a -- - moo - - — �a- w ►..� - ��a�_. f. _ .. _ti .— C.— ��y-.4r� .-.r, _ _ _ $9,344,891 $1,868,978 $0 $7,475,913 $2,708,664 $2,708,664 $4,767,249 10.231 20.0% $20.70 $4.14 $16.56 EGI Per SF 10.23% $46,601,000 $0 $3,604,021 29.0% 36.2% 63.8% (8% OAR) Vale Per SF: $95.24 $6.00 $6.00 $10.56 2021 County Value: $48,020,390 Value Per SF: $106.37 Al - 5 Discount For Rent Loss PROPERTY NAME NET LEASABLE AREA PRESENT OCCUPANCY STABILIZED OCCUPANCY STABILIZED OCCUPANCY SPACE TO BE ABSORBED ABSORPTION PERIOD ESTIMATED ABSORPTION/MONTH ESTIMATED ABSORPTION/YEAR LEASING COMMISSIONS GROSS RENT LOSS/SQ.FT. TENANT FINISH ALLOWANCE/SQ.FT DISCOUNT RATE PRESENT VALUE OF LEASEUP COST SPACE MONTH AVAILABLE YEAR1 1 2021 2 3 4 5 6 7 8 9 10 11 12 YEAR 2 13 2022 14 15 16 17 18 19 20 21 22 23 24 YEAR 3 25 2023 26 27 28 29 30 31 32 33 34 35 36 81,260 77,874 74,488 71,102 67,717 64,331 60,945 57,559 54,173 50,787 47,402 44,016 40,630 37,244 33,858 30,472 27,087 23,701 20,315 16,929 13,543 10,157 6,772 3,386 0 0 0 0 0 0 0 0 0 0 0 0 State Farm Campus 451,444 SQ.FT. 62.0% 80.0% 361,155 SQFT. 81/260 SQ.FT. 24 MONTHS 3,386 SQ.FT. 40,630 7.00% $20.70 PER SQ.FT. $25.00 PER SQ.FT. 9.00% $3,604,021 RENT LOSS $140,173 $134,333 $128,492 $122,652 $116,811 $110,971 $105,130 $99,289 $93,449 $87,608 $81,768 $75,927 $70,087 $64,246 $58,406 $52,565 $46,724 $40,884 $35,043 $29,203 $23,362 $17,522 $11/681 $5/841 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 FINISH ALLOWANCE COMMISSIONS $84,646 $84,646 $84,646 $84,646 $84,646. $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $84/646 $84,646 $84,646 $84,646 $84,646 $84,646 $84,646 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,906 $4,906 $4/906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4/906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $4,906 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 PRESENT VALUE $228,015 $220,564 $213,211 $205,955 $198,795 $191,731 $184,761 $177,884 $171/099 $164,405 $157,802 $151,287 $144,861 $138,522 $132,270 $126,103 $120,020 $114,021 $108,105 $102,270 $96,517 $90,843 $85/248 $79,732 $0 so $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 A 1 6 CBRE - Second Half 2019 Survey Stabilized Class AA Class A Class B Class C CBD 5.00% 5.50% 6.50% 8.50% Suburban 5.75% 6.75% 7.63% 9.25% Value -Add Class AA Class A Class B Class C CBD 6.38% 7.00% 8.75% Suburban 7.50% 8.13% 10.13% CBRE - Summer 2020 Survey* Stabilized Class AA Class A Class B Class C CBD 5.50% 6.00% 7.00% 9.00% Suburban 6.00% 7.00% 7.88% 9.50% Value -Add Class AA Class A Class B Class C CBD 6.88% 7.50% 9.25% Suburban 7.75% 8.38% 10.38% *2020 Survey provided rates for Class A CBD & Class A Suburban *Class A CBD increased 50bps *Class A Suburban increased 25bps *50 bps upward adjustments were made to all CBD class types *25 bps upward adjustments were made to all Suburban class types iv 41444. ., argro4 a. INF 0141440: 1040 Ii If U.S. • a • r . Nikki NAN 41, ,fts; 40 04 go sie se oe CAP RATE SU Q3 2020 1$ steel N •g#04 A survey of CBRE investment and valuation professionals conducted between August 12, 2020 and August 26, 2020 I • 21 (OIL VEY SPECIAL REPORT CBRE CBRE RESEARCH STABILIZED CAP RATES • The COVID-related decline in investment sales and disruption to net operating income for many properties have created challenges in assessing average capitalization rates. To best ensure accuracy, hotels were excluded from this survey and retail cap rates were collected only for grocery -anchored properties. To supplement the cap rate data, CBRE capital markets and valuation professionals were also surveyed on current investment market conditions. • Although liquidity and investor sentiment remain strong in some segments of the market, investment volume is down significantly across all property types relative to levels prior to COVID-19. With the market still cautious,. most of the cap rate compression recorded in this survey is not a reflection of rising asset values. Instead, assets are being underwritten with lower year -one income assumptions, resulting in lower cap rates (because cap rates are calculated as NOl/acquisition price). • Cap rates for Class A properties as of August 2020 differed minimally from rates at the end of 2019. For all surveyed property types except retail, the largest share of markets reported flat cap rates. The rest reported increases or decreases of between approximately 25 and 50 basis points (bps). • The suburban multifamily sector had the most markets (36%) reporting cap rate decreases, while both the CBD and suburban office sectors had the most markets (each roughly one-third) reporting cap rate increases. • 76% of markets reported unchanged industrial cap rates. Industrial was the only sector with no markets reporting increases from H2 201 9. • A majority of survey respondents expect cap rates to remain unchanged through year-end 2020, as the cautious resumption of investment activity will continue to delay extensive price discovery. �-' CBRE RESEARCH INVESTMENT MARKET CONDITIONS • CBRE professionals report that a disconnect between buyer and seller expectations has emerged, with more than 60% of buyers looking for discounts from pm -pandemic prices versus 9% of sellers willing to offer them. • One-third of survey respondents were underwriting with the same rental income assumptions as in cal, with the remaining two-thirds adopting more conservative assumptions. Half of those with unchanged underwriting assumptions were industrial -focused respondents. • CBRE professionals indicate that investors are placing greater importance on certain investment criteria than before the pandemic, particularly tenant credit quality (cited by 85% of respondents), length of remaining lease term (64%) and building occupancy (64%). • Roughly two-thirds of survey respondents believe that investment activity will recover to pre -pandemic levels within one year. 2 U.S. CAP RATE SURVEY I Q3 2020 I LO I S U.S. OFFICE I CC Y I `'. 1 I 4 A AP RAT cs FOR¶STkPILIZE • • 4 1 Iii 4.) PROPERTIES MARKET Atlanta Austin Baltimore Boston Charlotte Chicago Dallas/Ft. Worth Denver Houston Minneapolis/St. Paul Nashville N. CA: Oakland N. CA: San Francisco N. CA: San Jose NY: New York City CLASS A CBD OFFICE RATES (%) H2 2019 5.50 - 6.50 5.50 - 6.00 7.50 - 8.50 4.25 - 5.25 6.00-7.00 5.50 - 6.75 6.00 - 7.25 125 - 5/5 6.25 - 6.75 5.75 - 6.75 6.00 - 6.50 SUMMER 2020 6.00 - 7.00 5.75-6.25 7.50 - 8.50 4.50-5.00 6.25-7.25 6.00 - 7.00 5.25 - 6.25 5.75 - 6.25 6.00 - 6.50 5.75 - 7.00 6.50 - 7.00 4.50--5.50 4.50-5.00 4.50 -5.00 6.00-7.00 4.50 - 4.75 A INCREASE V DECREASE 4.25 - 5.00 5.50 - 6.50 4.25 - 4.50 -I!). STABLE CLASS A SUBURBAN OFFICE RATES (%) CHANGE H2 2019 SUMMER 2020 CHANGE �► 6.00-7.00 A 6.50-7.25 7.50 -- 8.50 6.75 -- 8.00 6.25-7.00 7.25 - 8.25 6.50 - 7.50 6.50-7.00 • 6.50-7.00 6.75 - 7.75 6.25 - 7.00 6.00 - 7.00 6.75 - 7.50 �► 7.50 - 8.50 6.75-8.00 6.75--7.75 A 7.50 - 8.50 �► 6.00 - 6.75 V 6.75-7.25 .� 6.50 - 7.00• 6.75 - 8.00 6.75 - 7.25 A 7 6.00-6.50 6.00-6.50 �r 6.00 6.75 7 - NIA • 5.25 - 6.50 V MARKET NY: N. New Jersey Orlando Philadelphia Phoenix Portland Raleigh -Durham S. CA: Los Angeles S. CA; Orange County S. FL: Miami Sacramento San Diego Seattle Tampa Washington, D.C. Note: Survey conducted during August 2020. Change is from H2 2019. Changes less than 15 bps considered stable. Source: CBRE Research, September 2020. CBRE RESEARCH 3 CLASS A CBD OFFICE RATES (%) H2 2019 6.50 - 6.75 6.25 - 6.75 5.75 - 6.75 5.00 - 6.00 6.00 - 6.50 4.50 - 5.50 4.50 - 5.50 4.75 - 6.25 6.00-7.00 5.75 - 6.25 4.75 - 5.25 6.50 - 7.00 125 - 5.75 SUMMER 2020 7.00 - 7.25 6.25 - 6.75 5.75 - 6.75 5.00 - 6.25 5.50 - 6.50 4.75 - 6.00 4.75 - 6.00 4.70 - 5.25 6.00 - 7.25 5.75 - 6.25 4.75 - 5.50 6.50 - 7.00 5.25 - 5.75 CLASS A SUBURBAN OFFICE RATES (%) CHANGE H2 2019 SUMMER 2020 CHANGE 7.00 - 7.50 7.00 - 7.50 7.00 - 7.50 7.00 - 7.50 6.00 - 7.00 it 6.25 --- 7.50 6.25-6.50 i 5.25 - 6.75 5.50 - 6.50 5.50 - 6.25 6.50-7.00 6.25 - 6.75 5.75--6.25 7.25-,7.75 6.50 - 7.25 7.50 - 8.00 A 7.00 -- 7.50 5.50 - 6.50 7 6.00-7.50 .1:- 5.50--6.50 5.50 - 7.00 �. 6.00-6.75 A 5.75--7.75 A 6.50 - 7.00 6.25 - 6.75 5.75 - 6.50 7.25-7.75 6.50 - 7.25 Il U.S. CAP RATE SURVEY 103 2020 Denver Office Market Tenants are at the top of the priority list for investors in the Den- ver office market. "We plan to work with our tenants' requests for rent deferments and minimize rent loss in our income stream," confirms an investor. • • "Keeping our tenants and employees safe within our proper- ties is one of our main goals," remarks another. At -9.3%, Denver posts the second -lowest average forecast value change rate among the Survey's 19 city -specific office markets this quarter. This market's average overall cap rate rises 55 basis points to 6.87% this quarter. Over the next six months, 80.0% of investors foresee cap rates increasing. FORECAST VALUE CHANGE [NEXT 12 MONTHS]: Range: (25.0%) - 0.0% Average: (9.3%) KEY 2020 SURVEY STATS* Tenant Retention Rate: Average 60.0% V Range 50.0% to 70.0% Months of Free Rent(1): Average 8 A Range 2 to 12 % of participants using 100.0% Average Overall Cap Rates: Market (as a whole) CBD Suburbs 6.87% 6.31% 7.42% * V, Al = change from prior quarter (1) on a ten-year lease r A A A Table 12 DENVER OFFICE MARKET Second Quarter 2020 DISCOUNT RATE (IRR)a Range Average Change (Basis Points) OVERALL CAP RATE (OAR)a Range Average Change (Basis Points) RESIDUAL CAP RATE Range Average Change (Basis Points) MARKET RENT CHANGEb Range Average Change (Basis Points) EXPENSE CHANGEb Range Average Change (Basis Points) MARKETING TIME Range Average Change (V, A, =) CURRENT LAST QUARTER 1 YEAR AGO 3 YEARS AGO 5 YEARS AGO 6.25% - 11.00% 6.25% - 10.00% 6.25% ---• 10.00% 6.75% -11.00% 6.50% -11.00% 7.99% 7.41% 7.67% 7.98% 7.93% + 58 +32 +1 +6 5.50% -10.00% 5.00% - 8.75% 6.87% 6.32% + 55 5.50% -10.00% 5.50% - 9.00% 7.17% 6.87% + 30 0.00%-2.00% 0.30% 0.00% - 4.00% 2.40% 2-12 6.1 2.00% - 4.50% 3.10% - 280 5.00% - 9.00% 6.44% + 43 5.50% - 9.00% 6.92% + 25 0.00% - 5.00% 3.20% - 290 3.00% - 10.00% 2.00% - 4.00% 3.80% 3.00% - 140 - 60 2-6 4.3 A 2-6 3.8 1 5.00% - 9.00% 6.56% +31 5.75% - 9.50% 7.32% - 15 2.00% - 4.00% 2.80% - 250 2.00% - 3.00% 2.90% - 50 1-6 3.7 A a. Rate on unleveraged, all -cash transactions b. Initial rate of change c. In months 2 7 I PwC Real Estate Investor Survey This report provided to Ryan, as a subscriber, for its use only. 4.50% - 9.00% 6.57% + 30 6.00% - 9.50% 7.33% - 16 2.00% - 5.000 3.60% - 330 2.00% - 3.00% 2.80% - 40 1-6 3.9 Looking forward Over the next six months, sur- veyed investors foresee overall cap rates holding steady in most markets (see Exhibit 1). At the same time, however, they expect overall cap rates to increase in 13 markets — unanimously for regional mall and net lease. Breakout of Key Indicators Overall cap rates, discount rates, and residual cap rates for the CBD and suburban submarkets of each individual office market are presented in Exhibit 2. As shown, average overall cap rates remain lower for all CBD submarkets than for their subur- ban counterparts since higher barriers to entry and a lack of land for new development tend to keep supply and demand a bit more balanced in a market's CBD. As a result, CBD assets typically maintain higher rental rates and occupancy levels. In addition, downtown cores tend to provide better forms of mass transportation and embody 18- or 24 -hour, live -work life- styles that appeal to many indi- viduals and firms. As a result, C B D assets are generally per- ceived as providing less invest- ment risk to the owner — less risk, lower overall cap rate. Exhibit 2 BREAKOUT OF KEY INDICATORS Second Quarter 2020 CBD of Atlanta Austin Boston Charlotte Chicago Dallas Denver Houston Los Angeles Manhattan Pacific Northwest Philadelphia Phoenix San Diego San Francisco Seattle Southeast Florida Washington, DC Nat'l Secondary Office DISCOUNT RATE Range 6.00% 6.00% 5.50%© 6.25% 6.00% 6.00% 6.25% 7.00% 5.00% 5.00% 5.75% 6.00% 7.00% 6.50% 5.00% 5.75% 6.00% 5.00% 7.00% - 10.00% - 9.00% - 8.00% -9.50% - 10.00% - 8.50% - 10.00% -12.00% - 10.00% - 8.00% - 8.50% - 9.00% - 10.50% - 10.00% - 8.00% - 8.50% - 10.00% -9.50% -10.50% Average 7.79% 7.25% 6.50% 7.65% 7.83% 7.43% 7.75% 8.43% 7.88% 6.55% 6.92% 7.95% 8.33% 8.00% 6.28% 7.13% 7175% 6.50% 8.93% OVERALL CAPITALIZATION RATE Range 5.00% 5.00% 4.25% 5.00% 4.75% 5.00% 5.50% 5.75% 4,50% 3.00%© 4.50% 4.50% 5.50% 5.50% 3.50% 4.50% 5.00% 4.50% 6.00% - 7.50% - 7.00% - 6.50% - 7.00% - 8.00% - 8.00% -8.00% - 8.00% - 8.50% - 7.00% - 8.00% - 8.00% - 7.50% - 7.00% - 7.00% - 8.00% - 8.00% - 7.50% - 9.00% Average 6.29% 5.83% 5.15% 6.04% 6.50% 6.00% 6.31% 6.75% 5.90% 5.15% 5.42%© 6,50% 6.17% 6.25% 4.98% 5.48% 6.31% 5.38% 7.16% RESIDUAL CAPITALIZATION RATE Range 5.00% 5.00% 4.75% 5.00% 5.50% 6.00% 5.50% 6.00% 5.00% 3.00% 5.00% 5.50% 5.50% 5.50% 4,75% 5.00% 4.50% 5,00% 6.00% - 7,75% - 7.25% - 7.50% - 7.50% 9.00% - 8.00% - 9,00% - 9.50% - 8.00% - 6.50% -9.00% - 7.50% - 8.50% -7.50% - 8.00% -9.00% - 10.00% - 8.00% - 9.00% Average 6.61% 6.35% 5.78% 6.33% 6.95% 6.95% 6.78% 7.18% 6.54% 5,33% 6.11% 6.78% 6.58% 6.38% 5.75% 6.25% 6.63% 5.95% 7.26% Suburbs of Atlanta Austin Boston Charlotte Chicago Dallas Denver Houston Los Angeles Northern Virginia Pacific Northwest Philadelphia Phoenix San Diego San Francisco Seattle Southeast Florida Nat'l Secondary Office DISCO Range 6.75% 6.75% 6.50% 6.00% 8.00% 6.75% 6,50% 8.00% 6.50% 6.00% 6.75% 7.00% 7,25% 6.00% 6.00% 6.75% 7.00% 8.00% UNT RATE - 10.50% - 9.50% - 10.00% -10.00% - 12.00% 9.00% - 11.00% - 13.00% - 10.50% - 9.50% - 10.00% - 10.00% - 11.00% - 10.00% - 9.50% - 9.00% - 11.00% - 14.00% Average 8.52% 7.98% 8.00% 8.08% 10.13% 8.23% 8.23% 9.83% 8.54% 7.65% 7.98% 8.95% 8.63% 7.59% 7.28% 7,88% 8.80% 1013% OVERALL CAPITALIZATION RATE Range 5.75% 5.10% 5.25% 5.50% 7.00% 3,80% 5.70% 6.75% 4.50% 6.00% 5.00% 5.00% 5.50% 5.25% 5.00% 5.00% 6.50% 7.50% - 8.50% - 8.00% - 9.50% - 7.50% 12.00%© - 8.50% - 10.00% 10.00% - 8.50% - 8.00% - 9.00% - 8.50% - 8.50% - 8.00% - 8.00% - 10.00% - 9,50% - 9.50% Average 7.18% 6.71% 6.85% 6.65% 9.05% 6.29% 7.42% 8.02% 6.44% 6.69% 6.19% 7.40% 6.85% 6.60% 6.03% 6.25% 7.50% 8.20% RESIDUAL CAPITALIZATION RATE Range 5.75% 5.75% 5.75% 6.00% 7.50% 5.75% 6.00% 7.00% 5.50% 6.00% 5.00% 6.00% 6.00% 5.75% 5.00% 5.00% 6,00% 7.00% Source: PwC Real Estate Investor Survey 4 I PwC Real Estate Investor Survey This report provided to Ryan, as a subscriber, for its use only. - 9.00% 8.00% - 10.00% - 7.75% - 10.00% - 9.00% -10.00% - 10.00% - 8.25% - 8.50% - 10.00% - 8,50%© - 8.50% - 8.50% - 9.00% - 10.00% - 10.50% - 9,50% Average 7.39% 6.98% 7.30% 6.88% 9.03% 7.25% 7.55% 8.44% 6.94% 7.08% 6.94% 7.60% 7.18% 6.69% 6.59% 6.78% 7.95% 8.18% Denver Office Market This quarter, the average overall cap rate for the Denver office market dips seven basis points to 6.44% while its average ini- tialifear market rent change rate rises for the fourth consecu- tive quarter to 3.20% (see Table 12). • Over the next six months, most Survey participants foresee overall cap rates holding steady in this market. While investors view market conditions as neutral — equally favoring buyers and sellers, they are evenly split between believing this market is fairly priced or overpriced. In preparation for the next phase of the real estate cycle, one investor is "pruning smaller -sized assets with limited upside" while another is "proceeding very cautiously?' FORECAST VALUE CHANGE [NEXT 12 MONTHS]: Range: 0.0% — 5.0% Average: 2.5% KEY 2Q19 SURVEY STATS* Tenant Retention Rate: Average 65.0% V Range 50.0% to 75.0% Months of Free Rent(1): Average 6 Range 1 to 10 % of participants using 100.0% Average Overall Cap Rates: Market (as a whole) CBD Suburbs 6.44% V 5.81% 7.07% V * Y, A, = change from prior quarter (1) on a ten-year lease Table 12 DENVER OFFICE MARKET Second Quarter 2019 DISCOUNT RATE (IRR)8 Range Average Change (Basis Points) OVERALL CAP RATE (OAR)a Range Average Change (Basis Points) RESIDUAL CAP RATE Range Average Change (Basis Points) MARKET RENT CHANGE Range Average Change (Basis Points) EXPENSE CHANGEb Range Average Change (Basis Points) MARKETING TIME Range Average Change (V, A, _) CURRENT LAST QUARTER 1 YEAR AGO 3 YEARS AGO 5 YEARS AGO 6.25% - 10.00% 6.25% -11.00% 6.50% -11.00% 6.50% - 11.00% 6.50% -11.00% 7.67% 7.97% 8.10% 7.98% 7.92% - 30 -43 -31 -25 5.00% 9.00% 6.44% 5.50% - 9.00% 6.92% 0.00% - 5.00% 3.20% 2.00% -4.00% 3.00% 2-6 3.8 5.00% - 9.00% 6.511% - 7 5.50% - 9.00% 7.05% - 13 0.00% - 5.00% 3.10% +10 2.00% - 4.00% 3.00% 0 2-6 3.8 5.00%-9.00% 6.56% - 12 5.50%-9.50% 7.34% - 42 0.00% - 3.00% 2.40% + 80 2.00% - 3.00% 2.90% +10 2-6 4.0 V 5.00% - 9.00% 6.45% - 1 5.75% --• 9.50% 7.22% - 30 3.00% - 5.00% 3.67% - 47 2.00% - 5.00% 3.00% 0 1-6 4.1 V 5.00% - 9.00% 6.77% -33 6.25% - 9.50% 7.52% -60 2.00% - 8.00% 4.20% -100 2.00%-3,00% 2.90% +10 1-6 3.9 T a. Rate on unleveraged, all -cash transactions b. Initial rate of change c. In months 2 6 ] PwC Real Estate Investor Survey As a subscriber, you may not distribute this report, in part or in whole, without the prior whiten permission of PwC. Looking Forward Over the next six months, most investorsforesee overall cap rates holding steady in 27 mar- kets (see Exhibit 1). Most fore- cast increases for only the na- tional power center, national strip shopping center, and Chicago office markets. Breakout of Key Indicators Overall cap rates, discount rates, and residual cap rates for the CBD and suburban submarkets of each individual office market are presented in Exhibit 2. As shown, average overall cap rates remain lower for all CBD submarkets than for their sub- urban counterparts since higher barriers to entry and a lack of land for new development tend to keep supply and demand a bit more balanced in a market's CBD. As a result, CBD assets typically maintain higher rental rates and occupancy levels. In addition, downtown cores tend to provide better forms of mass transportation and em- body 18- or 24 -hour, live -work lifestyles that appeal to many in- dividuals and firms. As a result, CBD assets are generally per- ceived as providing less invest- ment risk to the owner less risk, lower overall cap rate. Exhibit 2 BREAKOUT OF KEY INDICATORS Second Quarter 2019 CBD of Atlanta Austin Boston Charlotte Chicago Dallas Denver Houston Los Angeles Manhattan Pacific Northwest Philadelphia Phoenix San Diego San Francisco Seattle Southeast Florida Washington, DC Nat'l Secondary Office DISCOUNT RATE Range 6.50% 5.50% 5.50% 6.25% 6.00% 6.00% 6.25% 6.00% 5.00% 5.50% 5.50% 6.00% 7.00% 6.50% 5.00% 5.50% 6.00% 5.00% 7.75% - 9.50% - 8.00% - 8.00% - 9.00% - 10.00% - 8.75% - 9.50% -12.00% - 9.50% - 8.00% - 8.50% -10.00% - 10.50% - 10.00% - 8.00% - 8.50% - 10.00% - 8.00% -11.00% Average 7.73% 6.72% 6.53% 7.46% 7.80% 7.38% 7.31% 8.08% 7.46% 6.58% 6.68% 8.10% 8.50% 8.00% 6.35% 6.63% 7.88% 6.23% 8.98% OVERALL CAPITALIZATION RATE Range 5.00% 5.00% 4.25% 5.00% 4.75% 5.00% 5.00% 5.50% 4.00% 3.00% 4.00% 4.50% 5.50% 5.25% 3.50% 4.00% 5.00% 4.25% 5.00% -7.50% - 6.00% - 6.50% -7.00% -8.00% - 8.00% - 7.00% - 8.00% - 8.00% - 6.00% - 8.00% - 8.00% -8.00% - 7.00% -7.00% - 8.00% - 8.00% - 6.50% - 9.50% Average 6.29% 5.47% 5.14% 6.04% 6.33% 5.85% 5.81% 6.60% 5.65% 4.59% 5.25% 6.65% 6.66% 6.16% 4.93% 5.23% 6.31% 5.15% 7.09% RESIDUAL CAPITALIZATION RATE Range 5.25% 5.25% 5.00% 5.00% 5.25% 5.75% 5.50% 6.00% 5.00% 3.00% 5.00% 5.50% 6.00% 5.25% 4.75% 5.00% 5.00% 5.00% 6.00% - 8.00% - 6.50% - 7.50% - 7.50% -8.50% - 8.00% - 7.50% - 9.50% - 7.50% - 6.50% - 9.00% - 9.25% - 8.00% - 7.50% -8.00% - 9.00% - 10.00% - 7.00% 9.00% Average 6.71% 5.94% 5.75% 6.35% 6.83% 6.73% 6.41% 7.06% 6.31% 5.20% 6.02% 7.05% 6.81% 6.38% 5.75% 6.08% 6.81% 5.65% 7.31% Suburbs of Atlanta Austin Boston Charlotte Chicago Dallas Denver Houston Los Angeles Northern Virginia Pacific Northwest Philadelphia Phoenix San Diego San Francisco Seattle Southeast Florida Nail Secondary Office DISCO Range 7.00% 6.25% 6.50% 7.00% 8.00% 6.50% 6.75%. 6.50% 6.25% 6.00% 5.50% 7.00% 7.25% 6.00% 5.50% 5.50% 7.00% 8.00% UNT RATE - 10.00% - 10.00% -10.00% - 9.50% - 12.00% - 9.00% -10.00% - 13.00% -11.00% - 9.50% - 10.00% - 11.00% - 11.00% - 10.00% - 9.50% - 9.00% - 11.0O% - 14.00% Average 8.45% 7.75% 8.09% 8.21% 9.73% 8.09% 8.03% 8.93% 8.17% 7.63% 7.63% 9.05% 8.63% 7.56% 7.16% 7.28% 8.75% 9.93% OVERALL CAPITALIZATION RATE Range 6.00% 5.25% 5.25% 5.50% 7.00% 5.00% 5.50% 6.50% 4.25% 4.25% 5.00% 5.00% 5.50% 5.25% 5.00% 5.00% 6.50% 7.00% - 8.50% -7.25% - 9.50% - 8.50% - 10.00% - 8.50% - 9.00% -10.00% - 8.00% - 8.50% - 7.75% -10.00% - 8.50% - 8.00% - 8.00% - 6.50% - 9.50% - 9.50% Average 7.06% 6.20% 6.88% 6.79% 8.68% 6.53% 7.07% 7.68% 6.31% 6.46% 6.14% 7.70% 6.90% 6.65% 5.97% 5.81% 7.55% 7.95% RESIDUAL CAPITALIZATION RATE Range 6.00% 6.00% 6.50% 6.25% 7.50% 6.00% 5.75% 6.50% 5.25% 5.00% 5.00% 6.00% 6.00% 5.75% 5.00% 5.00% 6.00% 7.00% - 9.00% - 8.50% - 10.00% - 8.50% -10.00% - 9.00% - 9.00% - 10.00% - 8.00% - 8.00% - 8.00% - 10.00% - 8.50% - 8.50% - 9.00% - 7.50% -10.50% - 9.50% Average 7.33% 6.80% 7.53% 7.19% 8.95% 7.28% 7.43% 7.80% 6.69% 6.68% 6.63% 7.95% 7.13% 6,75% 6.66% 6.31% 7.95% 8.05% Source: PwC Real Estate Investor Survey 4 f PwC Real Estate investor Survey As a subscriber, you may not distribule this report, in part or in whole, without the prior written permission chi PwC. SUMMER 2020 BURBACH & ASSOCIATES, INC. REAL ESTATE INVESTMENT SURVEY WEST/CENTRAL UNITED STATES JAMES R. BURBACH, MAI r Burbach & Associates, Inc. is pleased to present the results of our Summer 2020 Real Estate Investment Survey, Provided is a summary of the respondents' perceptions of the real estate market in the West/Central United States. ANALYSIS METHODS We asked what type of valuation technique they most heavily relied upon. As expected, the Sales/Market Approach and the Capitalized Income or Direct Capitalization Approaches were predominant. Cost Approach Sales/ Market Approach Capitalized Income Discounted Cash Flow Primary Seconda-y, Rarely 16% 63% 21% 0% 0% 11% 0% 21% 100% 89% 21% 58% In Discounted Cash Flow (DCF) analyses, the holding period ranged from 5 to 10 years, trending towards 10 years. MARKETING TIME We again asked the respondents about marketing times for properties. The first question asked how many months typically elapsed between the time a property was listed for sale and the time it was placed under contract, assuming the property was reasonably priced to begin with. A marketing time of up to 12 months was possible by 100% of the respondents, similar to the last survey. Additionally, 92% of the respondents indicated the marketing time could be within six months, up from 79% in the last survey. The differences can be attributable to pricing, location, and/or property type. The second question pertained to the time between contract and actual closing. The typical range was from two to six months; 65% of the respondents indicated closing could occur within three months, with 100% of the respondents indicating the process could also be completed within six months from the contract date. Comparing "Same Store" respondents from the last survey, increases in capitalization rates have also been offset a bit with some decreases, depending on the property classification. Many responses were unchanged, with no overall trend. Some downward tendency was still observed in the industriallwarehouse, and mini- warehouse/self-storage sectors. An increasing tendency in rates was observed in the sit down/family restaurant, hotel/motel, suburban/low rise office, and free standing retail sectors; likely related to the Coronavirus issue. In some cases there were subtle changes in the indicated rate ranges from the prior survey. Other respondents indicated some increases of generally 25 to 50 basis points depending on property classification. SALES/CLOSING COSTS We also asked the respondents to estimate on a percentage basis the total closing costs for a seller of real estate including brokerage commissions, legalltitle work and other closing costs. The averages are summarized as follows: Sale Price Up to $1.0 Million $1.0 To $2.499 Million $2.5 To $4,999 Million $5,0 To $9.999 Million $10.0 Million & Over Vacant Land 6.0% 5.7% 5.4% 4,8% 4.1% Improved Commercial Properties 6,3% 6.O% 5.1% 4.3% 3.5% We look forward to continuing the survey with a Winter 2020/2021 issue. Let us know if you have an interest in becoming a respondent. • BURBACH & ASSOCIATES, INC, " REAL ESTATE INVESTMENT SURVEY - SUMMER 2020 REAL ESTATE APPRAISERS AND CONSULTANTS Park Tower, 710 Buffalo Street, Suite 509, Corpus Christi, TX 78401 / (361) 884-6449 / www.burbachandassociates.com Respondents by Business and Location Property Type Stabilized Cap Rate Reversion or Discount/Yield Anticipated Growth Anticipated Growth Holding Period Terminal Cap Rate Rate (IRR) Rate Income Rate Expenses (Years) Commercial Brokerage Grand Junction, CO 2. Valuation/Consulting Denver; CO 3. Valuation/Consulting Denver, CO 4. Valuation/Consulting San Antonio, TX Multi -Family Apartments Suburban/Low Rise Office CBD/Class A Office Regional Retail Neighborhood/Community Retail Industrial/Warehouse Truck/Distribution Terminals Mobile Home/RV Parks Mini-Warehouse/Self-Storage Medical Office Buildings Golf Course Multi -Family Apartments Suburban/Low Rise Office CBD/Class A Office Regional Retail Neighborhood/Community Retail Free Standing Retail Big Box Retail Ind ustrial/Wareh ouse Free Standing Restaurants - Sit Down/Family Free Standing Restaurants - Fast Food Mobile Home/RV Parks Medical Office Buildings Hotels/Motels Multi -Family Apai trnents Suburban/Low Rise Office CBD/Class A Office Regional Retail Neighborhood/Community Retail Free Standing Retail Big Box Retail Industrial/Warehouse Free Standing Restaurants - Sit Down/Family Free Standing Restaurants - Fast Food Mobile Home/RV Parks Medical Office Buildings Convenience Stores Farm/Ranch 7.0% 8.0% 7.0% 7.0% 8.0% 8.0% 8.0% 8.0% 8.0% 7.0% 12.0% - 13.0% 5.0% - 6.5% 8.5% - 9.0% 4.5%-5.5% 7..0% -7.5% 7.0% - 7.5% 6.5% - 7.0% 6,5% - 7.0% 6.0%-7.0% 7.5%-8.5% 7.0% - 7.5% 5.0% 8.0% 5.54%6.5% 7.0% - 9.0% 7.0% - 9.0% 7.0% - 9.0% 5.5% 8.0% 6.5% - 801% 7.0% 9.0% 7.0%-9.0% 7.0% - 9.0% 7.0% - 9.0% 6.0% - 8.0% 5.0% - 8.0% 6M%-8.0% 6.0% - 8.{1°'10 6.0% 8.0% 7.0% - 12.0% 14.0%-15.0% 6.0% - 7.0% 9.0%-9.5% 5.5% - 6.5% 8,0% - 8.5'010 7.5% - 8.0% 7.5% - 8.0% 7.0% - 7.5% 65% - 7.0% 8.0%-9.0% 7.5% - 8.0% 5.5%0-8.5% 6.0% - 7.0% 3% each year 17.0%-18.0% 3%eachyear 7.0% - 7.5% 9.0% - 9.5% 6.0% - 6.5% 8r0%o - 8.5% 7.5%-8.0% 8.0%0-8.5% 7.5% - 8.0% 7.5% - 8.0% 9M% - 9.5% 8.0% - 8.5% 7.0%-7.5% 3% each year 3% each year 4% each year 3% each year 3% each year 10 5 10 10 BURBACH & ASSOCIATES, INC. REAL ESTATE 'INVESTMENT SURVEY a SUM:VIER 2020 REAL ESTATE APPRAISERS AND CONSULTANTS Park Tower, 710 Buffalo Street, Suite 509, Corpus Christi, TX 78401 / (361) 884-6449 / w ww.burbachandassociates.corn Respondents by Business and Location 5, Regional Commercial. Bank Denver, CO 6. RE/MAX of Pueblo Commercial Brokerage Pueblo, CO 7. Stouffer & Associates Val cation/Consulting Austin, TX Property Type Stabilized Cap Rate Reversion or Discount/Yield Anticipated Growth Anticipated Growth. Holding Period Terminal Cap Rate Rate (J t) Rate Income Rate Expenses (Years) 8. Regional Commercial Bank Denver, CO 9. Stouffer & Associates Valuation/Consulting San Antonio, TX Subutanll ow Rise Office Neighborhood/Community Retail Free Standing Retail Industrial/Warehouse Mini-Warehouse/Self-Storage Medical Office Buildings Multi -Family Apartments Suburban/Low Rise Office Regional Retail Neighborhood/Community Retail Free Standing Retail Medical Office Buildings CED/Class A Office Regional Retail Neighborhood/Community Retail IndustrialiWarebouse Hotels/Motels Multi -Family Apartments Suburban/Law Rise Office CBS/Class A Office Regional Retail Neighborhood/Community Retail Free Standing Retail Industrial/Warehouse Free Standing Restaurants - Sit Down/Family Free Standing Restaurants - Fast Food Golf Course Mini-Warehouse/Self-Storage Nursing Homes Medical Office Buildings Convenience Stores Residential - Raw Land Residential - Raw Land Residential - Finished Lots Residential - Finished Lots Commercial Land Commercial Land Suburban/Low Rise Office Industrial/Warehouse Free Standing Restaurants - Fast Food Convenience Stores 6.5% - .8.5% 6.5% - 8.5% 6.5% - 8.5% 63% - 8.5% 6.0% - 7.5% 6.5% - 8.5% 8.0% 10.0% 8.0% 8.0% 7.0% 6.0% - 8.0% 5.0% - 6.0% 6.0% - 7.5% 6.0%-7.5% 6.0% - 7.0% 7,5% - 9.0% 5.0% - 6.0% 6,0% - 8.0% 5.5%-7.5°1 7.0% - 8.0% 5.5% - 8.0% 5.5% - 8.0% 5.510-7.0% 6.0% - 8.0% 5.0%-6.0410 11.4% -12.0% 6.0%-7.5% 9.00% 11.0% 5.5% - 7.5% 5.0% - 7.0% 7.5% - 8.0% 5.5% 5.0% - 7.0% 10% - 7.0% +50 - ] 25 basis points higher than stabilized rate 7.5% - 8.5% 8.0% - 9.5% 6.25%- 8.5% 6.0% - 8.0% 7.0%-8.0% 6.0% - 8,5% 6.0% - 7.5% +100 - 250 2,5%-3% each year 2.2-3% each year basis points higher 8,0% - 9.0% 9.01% -12.0% 8.0% - 12.0% 8.0% - 10,0% 8.0% - 10.0% 7.0% - 10..0% 7.0% -10.0% 20.0% - 30.0% Includes Profit 10.0% - 18.0% Plus Profit 12.0% - 20.0% Includes Profit 5.0% - 12.0% Plus Profit 110% - 25.0% Includes Profit 8.0% -15.0% Plus Profit 3% each year 2%-3% each year 2%-3% each year 1.5% each year 2% each year 2%-3% each year 2%-3% each year 1.5% each year 10 10 10 BURBACH & ASSOCIATES, INC. - REAL ESTATE INVESTMENT URVEY SUMMER 2020 REAL ESTATE APPRAISERS AND CONSULTANTS Park Tower, 710 Buffalo Street, Suite 509, Corpus Christi, TX 78401 1(361) 884-6449 / www.burbachandassaciates.com Respondents by Business and Location Property Type 10, Valuation/Consulting Mountain Resort, CO 11. Valbridge Property Advisors Dugger, Canaday, Grafe, Inc. - Valuation/Consulting San Antonio, TX 12. East West Econometrics Valuation/Consulting Denver. CO Stabilized Cap Rate Hotels/Motels 7.a +o 8,0% Multi -Family Apartments Suburban/Low Rise Office Neighborhood/Community Retail Industrial/Warehouse Mini-Warehouse/Self-Storage Convenience Stores Residential - Finished Lots Residential - Finished Lots Hotels/Motels Multi -Family Apartments Suburbana.ow Rise Office Neighborhood/Community Retail Free Standing Retail Industrial/Warehouse Free Standing Restaurants - Sit Down/Family Mini-Warehouse/Self-Storage Medical Office Buildings Convenience Stores Farm/Ranch Residential - Raw Land Residential - Finished Lots Commercial Land Hotels/Motels Multi -Family Apartments Suburban/Low Rise Office Regional Retail Neighborhood/Community Retail Free Standing Retail Big Box Retail Industrial/Warehouse Food Processing Facilities Free Standing Restaurants - Sit Down/Family Free Standing Restaurants - Fast Food Mobile HomefRV Parks Mini arehouse/SeIt Storage Medical Office Buildings Convenience Stores Fami/Ranch Residential - Raw Land Residential - Finished Lots Commercial Land Reversion or Discount/Yield Terminal Cap Rate Rate (TRR) 4.0% - 5.0% 5.0% - 6.0% 4.0% - 10% 5.0% - 6.0% 5.0% - 6,0% 5.0%-7,0% 9.75% 4.5% 7.5% 7.0% 8.0% 6.75% 8.0% 6,0% 8.0% 8.0/0 2.5% 10.0% 5.5% 6.5% 6.5% 7.0% 6.5% 6.5% 6.5% 6.0% 8.0% 5.0% 9.0% 7.0% 6,5% 6.0% 3.0% 10.25% 5.0% 7.75% 7.5% 7.25% 6.25% 8.0% - 1.0.0% 6.0% 6.0% - 7.0% 7,0% Anticipated Growth Anticipated Growth Holding Period Rate Income Rate Expenses (Years) 5 7.0% - 9.0% 6.0% - 8.0% 8,0% - 10.0% Plus Profit 20.0% - 25,0% Includes Profit 11.25% 6.25% 8.5% 8.5% 8.25% 7,75% 15.0% Includes Profit 15.0% Includes Profit 15.0% Includes Profit 16.0% Includes Profit 15.0% Includes Profit 17.0% Includes Profit 2% each year 1 %-2% each year 2.5% each year 3% each year 2.5% each year 3.5% each year 10 5 BURBACH ASSOCIATES, INC. - REAL ESTATE IN E T1MENT SURVEY - SUMIV ER 2020 REAL ESTATE APPRAISERS AND CONSULTANTS Park Tower, 710 Buffalo Street, Suite 509, Corpus Christi, TX 78401 / (3 51) 884-6449 / www.burbachandassociates.com Respondents by Business and Location 13_ Regional Commercial Bank Colorado Western Slope Grand Junction, CO 14. Valuation/Consulting Northern Colorado 15. Valuation/Consulting Colorado Western. Slope Grand Junction, CO 16. Valuation/Consulting Denver, CO 17_ Valuation/Consulting Denver, CO Property Type Stabilized Cap Rate Reversion or Discount/Yield Anticipated Growth Anticipated Growth Holding Period Terminal Cap Rate Rate (IRR) Rate Income Rate Expenses (Years) Hotels/Motels Multi -Family Apartments Suburban/Low Rise Office Neighborhood/Community Retail Industrial/Warehouse 7.5% - 9.51% 5.0% - 8.5% 5.75% - 7.75% &0% - 8.5% 6.0%-8.0%a 1(x.0% -1 2.0% Convenience Stores - Going Concern 12.0% -13.0% Residential - Finished Lots 16.0% - 22.5% Includes Profit Multi -Family Apartments Industrial/Warehouse Free Standing Restaurants - Sit Down/Family Mobile Ilome/RV Parks Mini-Warehouse/Self-Storage Medical Office Buildings HIotels/Motels Multi -Family Apartments Suburban/Low Rise Office CBD/CIass A Office Regional Retail Industrial/Warehouse Medical Office Buildings Automobile Dealerships Residential - Raw Land Residential - Finished Lots Suburban/Low Rise Office Neighborhood/Community Retail Industrial/Warehouse Mini-Warehouse/Self-Storage Residential - Raw Land Residential - Finished Lots Commercial Land Multi -Family Apartments Suburban/Low Rise Office CBD/Class A Office Regional Retail Neighborhood/Community Retail Free Standing Retail Big Box Retail Industrial/Warehouse Free Standing Restaurants Free Standing Restaurants Medical Office Buildings Convenience Stores - Sit Down/Family - Fast Food 4,0% - 5.0% 6,0%-7.d% 6.0% - 7.0% 6.5% - 8.0% 7.0% - 8.0% 6.0%-7.0% 6.75% 7.5% 7.5% 7.0% 7,5% 7.5% 6.75% 7,0% 6.75%- 7.25% 7.0% - 8.0% 6.25% - 7.0% 5.0%-6.0% 45% - 6.5% 7,0%- 9.0% 7,0% - 8.0% 6.5% - 8.0% 7.0% - 8.0% 5.5% - 7.4% 5.0%- 7.0% 7.0% - 9.0% 5.0% - 6.5% 6.0% 7.5% 10% - 6.5% 5.0% - 7.0% 7.5%-9.5% 8.0%0-9.0%0 7.0% - 8_0% 8.0%a 6.0% - 7.0% 7.0% - 8.0% 25.0% Includes Profit 20.0% Includes Profit 20.0% - 30.0% Includes Profit 10.0% - 2(1.0% Includes Profit 10.0% - 20.0% Includes Profit 6.0% - 7.0% 9.5%-10.0% 9.0% - 10.0% 9.0%-9.5% 9.0% 8.0% - 9.0% 8.0% - 9.0% 2% each year 0% Year 1 2% Year 2 3% Thereafter 2% each year 2% Year 1 3% Thereafter 5 7 BURBACH & ASSOCIATES, INC. - REAL ESTATE INVESTMENT SURVEY - SUMMER 2020 REAL ESTATE APPRAISERS AND CONSULTANTS Park Tower, 710 Buffalo Street, Suite 509, Corpus Christi, TX 78401 / (361) 884-6449 / www.bu rbacbandassociiates.eom Respondents by Business and Location Property Type Stabilized Cap Rate 17, Valuation/Consulting Denver, CO (Continued) 18. ValuationiConsulting Northern Colorado 19. Valuation/Consulting Denver, CO 20, Valuation/Consulting Northern Colorado 21_ Valuation/Consulting Corpus Christi, TX S Residential - aw d Residential - Finished Lots Commercial Land Hotels/Motels Multi -Family Apartments SuburbanfLow Rise Office Neighborhood/Community Retail IndustnaUWarebouse Mini-Warehouse/Self-Storage Hotels/Motels - Limited Service - 1-3 Star Multi -Family Apartments Suburban/Low Rise Office Neighborhood/Community Retail Free Standing Retail Industrial/Warehouse Free Standing Restaurants Sit Down/Family Style Restaurants Fast Food Restaurants Independent Restaurants Mini-Warehouse/Self--Storage Residential - Raw Land Residential - Finished Lots Commercial Land Residential - Raw Land Residential - Finished Lots Residential - Finished Lots Commercial Land Commercial Land Hotels/Motels Suburban/Low Rise Office Neighborhood/Community Retail Industrial/Warehouse Residential - Finished Lots 9.0%-9.5% 5.75% - 8,0% 7.0% - 8.5% 6.S%-7.5% 7,0% - 9,0% 6.5%-6,75% 10.0% - 15.0% 4.5% - 6.0% 8.0% -11.0% 7.0i% -1 2.0% 4.5% - 8.0% 4.5% - 8.0% 4.5% - 6.0% 8.0% - 15.0% 1 4,5% i .0% 10.0% -12.0% 5.0% - 8.0% 9.0% - 10.0% 8.25%-9.4% 7.5% - 9.0% 9.0% -10.0% Reversion or Discount/Yield Anticipated Growth Anticipated Growth Holding Period Terminal Cap Rate Rate OR.R) Rate Income Rate Expenses (Years) 20. fo 30.0% Inclu es Profit 110% o 22,0% Includes Profit 15.0% - 210% Includes Profit 2%-3% each year 3% each year 7.0% - 9.0% 12..0% -15.0% 10.0% - 15.0% 7.0% - 10.0% 9,0% - 12.0% 6.0% - 110% Plus Profit 6.0% -10.0% Plus Profit 12,0% - 15.0% Plus Profit 12.0% Plus Profit 1( 0% Plus Profit Profit 18%-25% 12.0% -14.0% Plus Profit Profit 12%-20% 15.0% Includes Profit 3% each year 3% each year 5-7 10 10 Every effort has been made to ensure accuracy in tabulating the responses, however, no guarantee is made as to accuracy of the information. Permission for reproduction of this material is granted with credits to Burbach & Associates, Inc. James R. Burbach, MAI 870.00 Annual Subscription Price Contact James R. Burbach, MAI for Subscription Information. - 361-884-6449/jburbach@att.net/www_burbachandassociates.com CBRE MARKETVIEW Denver Office, Q2 2020 Market activity stalls as sub ease availability rises i Total Vacancy Rate 13.6% Lease Rate $28.81 FSG Figure 1: Total Vacancy and Lease Rate Total Vacancy (%) 20 18 16 14 12 10 0 Net Absorption Under Construction Completions (84,706) seq. ft. 3.7 million sq. ft 0 seq. ft. *Arrows indicate change from previous quarter. Direct Asking Lease Rate (S) 40 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 02 2020 Total Vacancy Rate 'Direct Asking Lease Rate Source: BRE Research, 02 2020. • Metro Denver posted 84,706 sq. ft. of negative net absorption in Q2 2020 —the first time in 13 quarters the market has seen negative absorption activity. • The average direct asking lease rate remained stable at $28.81 per sq. ft. FSG. • Total vacancy increased 55 bps quarter - over -quarter to 13.6%. • Sublease availability increased 33,3% quarter -over -quarter to 3.4 million sq. ft. This uptick drove total availability to 17.8%, a 91 bps increase from last quarter. • The total construction volume reached 3.7 million sq. ft., up 49.8% year -over -year. 35 30 25 20 15 10 The Denver office market felt the impact of the recession brought on by the COVID-19 pandemic, posting negative net absorption of 84,706 sq. ft. in Q2 2020. Class A buildings recorded positive net absorption of 113,241 sq. ft., while both Class B and Class C properties posted negative net absorption of 134,552 sq. ft. and 64,395 sq. ft. respectively. Despite the negative absorption activity this quarter, the year- to-date absorption remained positive at 330,649 sq. ft. Total availability increased 91 basis points (bps) to 17.8%, driven by the 33.3% increase in available sublease space this quarter. Total vacancy climbed 55 bps to 13.6%. The direct average asking lease rate was steady quarter -over -quarter, decreasing $0.01 to $28.81 per sq. ft. full service gross (FSG). The Denver market saw no completions in Q2 2020 but construction activity remained strong with 3.7 million sq. ft. currently underway. Q2 2020 CBRE Research © 2020 CBRE, Inc. I Al — 21 CBRE MARKETVIEW DENVER OFFICE Figure 2: Denver Market Statistics Submarket Net Rentable Area (NRA) (Sq. Ft.) Direct Vacancy Rate (%) Net Absorption (Sq. Ft.) Under Construction (Sq. Ft.) Average FSG Lease Rate (/SF/Yr) Availability Rate (%) Sublease Availability (Sq. Ft.) Aurora Boulder Capitol Hill Chevy Creek Colorado Blvd/Midtown Downtown Longmont North Northeast Northwest River North Southeast Southwest West West Hampden/Alameda 5,890, 941 6,503,852 2,374,643 2,634,917 6,430, 508 29,405,593 935,425 2,983,078 1,021,245 8,230,236 1,732,414 36,353,004 5,482,276 6,946,824 1,262,833 Metro Denver 118,187,789 Source: CBRE Research, 02 2020, 9.7 7.3 7.7 9.7 12.6 14.7 3.4 10.6 13.7 12.9 11.6 12.3 8.8 12.2 10.4 12.1 530 (9,679) (52,364) (26,307) (47,548) (143,228) (7,680) 19,910 (10,487) 261,446 10,910 (26,952) (1,347) (36,919) (14,991) (84,706) ECONOMIC/EMPLOYMENT Office -using employment -including jobs in the information, financial activities, professional and business services, and government sectors accounted for roughly two-thirds of all jobs created in the metro Denver area (Denver -Aurora and Boulder MSAs) through May 2020. These sectors added 7,000 jobs on an average year-to-date basis of the 11,400 jobs created overall in the same period. Job growth in these sectors was stunted in April and May as stay-at-home orders resulting from the COVID-19 pandemic shuttered businesses, but strong growth in the first three months of the year buoyed the year-to-date average. Professional and business services experienced the largest growth of 2%, an additional 6,300 new jobs, the most of all office -using industries in absolute terms. The metro area's unemployment rate rose to 10.2%n in May, driven by pandemic -related job losses that are mostly expected to be temporary, below that of the U.S., which clocked in at 13.3%. 0 349,226 62,342 64,000 1,476,571 18.50 33.35 28.73 36.58 26.70 35.00 21.82 19.86 20.95 212,322 27.73 353,333 36.20 1,154,811 26.87 28.73 24.14 15.36 3,734,605 28.81 Figure 3: Office -Using Employment Growth Jabs Added (000's) 20 15 - 10 5 -5 14.0 15.8 9.9 12.4 16.5 20.4 5.8 15,614 254,908 41,657 29,945 30,943 1,689,066 13.2 50,314 18.9 19.1 131,685 11.1 14,951 18.5 973,011 21.2 10,824 16.8 124,157 10.5 17.8 3,367,075 2016 2017 2018 2019 YoY YTD May a Government • Financial Activities 2020 ■ Professional & Business Services ■ Infarmatian *Employment figures based on average year-to-date comparisons from January to May 2019 and 2020. Source: U.S. Bureau of Labor Statistics, May 2020. Q2 2020 CBRE Research 2020 CBRE, Inc. I A 1 — 22 CBREMARKETVIEW DENVER OFFICE CONSTRUCTION Development activity in metro Denver reached over 3.7 million sq. ft. in Q2 2020. Speculative (spec) office construction totaled 3.0 million sq. ft. 81.4% of the total development footprint. Overall, Downtown projects totaled 1.5 million sq. ft. (39.5%) and suburban construction totaled 2.3 million sq. ft. (60.5%) of all development activity. Two projects broke ground this quarter, the 64,000-sq.-ft. office building at 240 St. Paul St in Cherry Creek and the 43,500-sq.-ft. adaptive reuse project, Emily's Office in the Downtown submarket. There were no office completions in metro Denver this quarter, but several projects are slated to deliver in the coming months. • Of the 1.4 million sq. ft. of office buildings underway Downtown, spec projects include Block 162 (595,000 sq. ft.), One Platte (250,400 sq. ft.), The Link (224,000 sq. ft.), McGregor Square (208,400 sq. ft.) and Market Station (95,400 sq. ft.). Just 7.5% of the spec office projects were preleased at quarter end. In the suburban submarkets, notable builds are 6900 Layton (Southeast, 370,800 sq. ft.), 4899 S Quebec St (Southeast, 334,000 sq. ft.), Rev360 (RiNo, 130,000 sq. ft.) and REVE Boulder (Boulder, 118,000 sq. ft.). At the end of Q2 2020, 21.0% of spec projects metrowide were preleased. LEASING ACTIVITY The technology sector continued to lead leasing activity with 1.4 million sq. ft., or 23.5% leased over the past four quarters. The financial services industry followed, representing 11.8% of the total volume. Activity was fueled by SurveyGizmo's sublease at 168 Centennial Pkwy in Louisville for 26,500 sq. ft., Agility Recovery Solutions' 22,000-sq.- ft. lease at 17th Street Plaza downtown and a 20,200 sq. ft. deal by The Trade Desk at 1595 Wynkoop St also located downtown. Another notable transaction was NGL Energy Partners' lease at 9th & Colorado for 48,000 sq. ft., in the Colorado Blvd submarket. Other significant deals this quarter included Somalogic's renewal for 30,900 sq. ft. at 2945 Wilderness PI in Boulder, Kilpatrick Townsend's renewal of 28,600 sq. ft. at. 1400 Wewatta downtown and Bank of Colorado preleased 18,700 sq. ft. at McGregor Square, the first office lease signed at the project currently under construction. Figure 4: Speculative Preleased Construction 3.0MSF Speculative Under Construction 79.0% • Preleased Sq. Ft. Source: CBRE Research, Q2 2020. 21.0% • Available Sq. Ft. Figure 5: Leasing Activity by Industry Type (03 2419-Q2 2020) s Technology • Healthcare & insurance ■ Other • Financial Services • Business & Legal Services ■ Energy ■ Government & Nan -profits • Manufacturing Source: CBRE Research, 02 2020 • Aerospace & Defense Creative Industries • Telecommunications Life Sciences 02 2020 CBRE Research O 2020 CBRE, Inc. I A 1 — 3 CBRE MARKETVIEW DENVER OFFICE VACANCY/AVAILABILITY Total vacancy reached 13.6%, a 55 bps change from Q2 2020. Class B buildings saw the largest increase of 104 bps to 14.7%. Direct vacancy increased 48 bps quarter -over -quarter to 12.1% in Q2 2020, this also represented a 15 bps uptick year -over -year. Downtown Denver saw a spike in direct vacancy, up 34 bps from Q1 2020 to 14.7%. Direct vacancy in the Southeast submarket climbed 101 bps to 12.3% in Q2 2020. Total availability also increased by over 1.0 million sq. ft. or 91 bps quarter -over -quarter to 17.8%. Availability in the Downtown submarket rose to 20.4%, up 185 bps quarter -over -quartet The Southeast submarket dipped 26 bps from Q1 2020 to 18.5%. Overall sublease availability increased 33.3% to 3.4 million sq. ft. as many companies have had to conduct layoffs and are re-evaluating space requirements moving forward. Class B space saw the largest uptick, increasing over 697,000 sq. ft. or 78.5%. to 1.6 million sq. ft of sublease space. Class A followed, climbing 137,600 sq. ft. quarter -over - quarter to 1.7 million sq. ft. available. Downtown sublease availability rose to 1.7 million sq. ft. —a 34.7% increase in sublease space quarter -over - quarter. The Southeast market saw a 30.0% increase from last quarter to 973,000 sq. ft. ABSORPTION Metro Denver posted negative 84,706 sq. ft. of absorption in Q2 2020, the first time in 13 quarters that negative absorption has been recorded. Class B and Class C buildings drove this activity, logging a cumulative negative 197,947 sq. ft. of net absorption. A few sizable occupancies in Class A space helped offset the negative activity, the asset class posted 113,241 sq. ft. of positive net absorption in Q2 2020. The Northwest submarket led net absorption activity, recording over 261,000 sq. ft. Crocs occupied 88,300 sq. ft. at ATRIA, Blue Canyon Technologies moved into 80,100 sq. ft. at 2550 Crescent and Bail Aerospace took 97,800 sq. ft. at Westmoor Technology Park. Negative net absorption activity was driven by numerous mid- sized tenants closing and the space going direct. Despite the negative absorption in Q2 2020, the year-to-date absorption volume remained elevated, with 330,649 sq. ft. of positive net absorption. Figure 6: Sublease Availability Sublease Available Sq. Ft. (000's) 4,000 3,500 3,000 2,500 — 2,000 — 1,500 — 1,000 _.. 500 0 01 2019 02 2019 03 2019 04 2019 01 2020 02 2020 • Downtown Sublease Available ■ Southeast Sublease Available ▪ Other Sublease Available Source: CBRE Research, Q2 2020. Figure 7: Net Absorption vs. Lease Rate Net Absorption (000's) Direct Asking Lease Rate (6) 3,500 _ • - - 30 3,000 29 2,500 28 2,000 _ L 27 1,500 26 1,000 _ 25 500 — 24 0 23 -500 22 2016 2017 2018 2019 2020 01 02 Q3 mei 04 • YID Total nAsking Lease Rate Source: CORE Research, 02 2020 O2 2020 CBRE Research 2020 CBRE, Inc. I A 1 — 24 CBRE MARKETVIEW DENVER OFFICE AVERAGE ASKING LEASE RATES The average direct asking lease rate for the metro Denver area remained stable quarter -over -quarter, decreasing $0.01 to $28.81 per sq. ft. FSG, Class A buildings saw the largest decrease of $0.38 to $31.46 per sq. ft. FSG. Adversely, asking rates in Class B buildings increased $0.51 to $27.98 per sq, ft. FSG and Class C rates saw a slight increase of $0,06 to $23.65 per sq. ft. FSG. The lease rate change is attributed to the uptick in availability in Class B and Class C buildings. Due to the increase in activity, the overall sublease asking lease rate climbed $1.52 from Q1 2020 and a staggering $3.55 on the year to $29.57 per sq. ft. FSG. This was driven by the sublease availability in the Downtown submarket which consistently demands premium rents. The Downtown submarket direct average asking rates fell $0.21 to $35.00 per sq. ft. FSG. The Downtown sublease asking rate increased $0.71 from Q1 2020 and $1.53 year -over -year to $34.44 per sq. ft. FSG. The Southeast submarket direct asking rate saw an increase of $0.10 to $26.87 per sq, ft. FSG. Sublease asking rates in the area also spiked to $23.99 per sq, ft, FSG— a $0.58 increase from Q1 2020 and $1.12 on the year. INVESTMENT TRENDS Office investment sales halted in Q2 2020 as investors struggle to underwrite properties due to the uncertainty brought on by COVID-19. One office sale took place in metro Denver this quarter bringing the year-to-date volume up to $871.9 million, a 44.9% decrease from the first half of 2019. Matador Equity Partners purchased 3200 Cherry Creek Dr in the Cherry Creek submarket for $44 million or $336,77 per sq. ft. Figure 8: Average Asking Lease Rate Average Direct Asking Lease Rate (S) 35 30 25 20 2016 2017 2018 Class A Class B Source: CBRE Research, 02 2020. Figure 9: Lease Rate vs. Availability Availability Rate (We) 20 18 - 16 - 14 2019 02 2020 att Direct Asking Lease Rate Average Asking Lease Rate (S) 35 02 2019 03 2019 04 2019 Direct Availability Rate -Direct Asking Lease Rate Source: CBRE Research, 02 2020. Figure 10: Investment Sales Investment Sales (5100 Millions) 10.0 8.0 6.0 4.0 2.0 0.0 30 25 20 01 2020 02 2020 Sublease Availability Rate Sublease Asking Lease Rate Price per Sq. Ft () 400 300 200 100 02 2019 03 2019 04 2019 01 2020 02 2020 Suburban Downtown isMetro Average Price Per Sq. Ft. Source: CBRE Research, 02 2020. Q2 2020 CBRE Research O 2020 CBRE, Inc. I Al - 2 5 CBREMARKETVIEW DENVER OFFICE CONTACTS Layne Voorhees Research Analyst ±1 303 583 2016 layne.voorhees a cbre.corn Sue Selle Associate Research Director f1 303 628 1760 sue. selle®cbre. corn To learn more about CBRE Research or to access additional research reports, please visit the Global Research Gateway at www. dire. com/researchgateway. MARKET OUTLOOK Virology, not the business cycle, has dictated the course of the world's economy this year. COVID-19 forced a nationwide shutdown of most economic activity in March, with the largest economic centers, especially the Northeast and Pacific coast, facing the strictest lockdowns. The economic fallout proved severe, pushing unemployment to over 15% and likely causing the economy to contract by more than 30% per annum in the second quarter. These morbid economic conditions inspired many governors to ease lockdowns, especially in Sunbelt states where the case count was less severe than in more densely populated regions. These re- openings have energized activity. Several high - frequency indicators, such as hotel occupancies, restaurant traffic and hours worked, suggest the US economy bottomed in April and has been trending slightly upward since. This has renewed demand for labor as many hard-hit sectors, such as hospitality and healthcare, began to bring back furloughed workers in May. CBRE OFFICES Downtown Denver 1225 17th Street, Suite 3200 Denver, CO 80202 Denver Tech Center 5455 Landmark Place, Suite C102 Greenwood Village, CO 80111 Boulder 1805 11th St, Unit A Boulder, CO 80302 Colorado Springs 121 South Tejon Street, Suite 1111 Colorado Springs, CO 80903 Fort Collins 3003 East Harmony Road, Suite 300 Fort Collins, CO 80528 Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by ORE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of ORE. Al — 26 CBRE MARKETVI EW Denver office, Q2 2020 Market activity sta Is as sublease availability rises Total Vacancy Rate Lease Rate 13.6% $28.81 FSG 0 Net Absorption (84,706) seq. it. Under Construction 0 3.7 million sq. ft. Completions 0 sq. ft. Figure 1: Total Vacancy and Lease Rate Total Vacancy (%) 20 18 16 14 12 10 8 *Arrows indicate change from previous quarter. Direct Asking Lease Rate ($) sass awe r...wra- - . . wiY s-. e* t .-s 4*It# tM •+.•--0t"__ •a•? • V. -+sere Pn-.'►RI moo ...w..T1wV. ~..a --a Ora greti•O ern** I VS Oa Sr re oaair se • en .41 • -• st.M.(aM N-• t1 .••••• .4 .f{•••••••w-...w.-.••.waM• .sammereses4A4.De nse .a. a......r....r...•.. F.ar•i4•.• ••••-••-••••-•-1-111.-4 .r• ..a..• a...a.a•uaaso.ra.-...f.•«••••.. ..-.•.•..•-a-. a . ..•.•ar+ours•4 aa.i is u. rir.rt+e0wtewt..• ...... a.. sa....ra• .a .«.......a -.•.saaarse .ra. -II• se an... Ma •. •A ba...f 4 IJ .aY• 114 44- ••-•.. •!Tv.••• ..•a. w..1.1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 02 2020 moo Total Vacancy Rate - inked Asking Lease Rate Source: ORE Research, 02 2020. ▪ Metro Denver posted 84,706 sq. ft. of negative net absorption in Q2 2020 —the first time in 13 quarters the market has seen negative absorption activity. • The average direct asking lease rate remained stable at $28.81 per sq. ft. FSG. • Total vacancy increased 55 bps quarter - over -quarter to 13.6%. • Sublease availability increased 33.3% quarter -over -quarter to 3.4 million sq, ft, This uptick drove total availability to 17.8%, a 91 bps increase from last quarter. • The total construction volume reached 3.7 million sq. ft., up 49.8% year -over -year. 40 35 30 25 20 15 10 The Denver office market felt the impact of the recession brought on by the COVID-1Y pandemic, posting negative net absorption of 84,706 sq. ft. in QZ 2020. Class A buildings recorded positive net absorption of 113,241 sq. ft., while both Class B and Class C properties posted negative net absorption of 134,552 sq. ft. and 64,395 sq. ft. respectively. Despite the negative absorption activity this quarter, the year- to-date absorption remained positive at 330,649 sq. ft. Total availability increased 91 basis points (bps) to 17.8%, driven by the 33.3% increase in available sublease space this quarter. Total vacancy climbed 55 bps to 13.6%. The direct average asking lease rate was steady quarter -over -quarter, decreasing $0.01 to $28.81 per sq. ft. full service gross (FSG). The Denver market saw no completions in Q2 2020 but construction activity remained strong with 3.7 million sq. ft. currently underway. Q2 2020 CBRE Research a 2020 CBRE, Inc. l 1 Al — 27 i i CBRE MARKETVIEW DENVER OFFICE Figure 2: Denver Market Statistics Subrnrarkel Nei Rentable Area (NRA) (Sq. Ft.) Direct Vacancy Rale (%) Net Absorption (Sq. Ft.) Under Construction (Sq. Ft.) Average FSG Lease Rale (S/S F/Yr ) Availability Rate (%) Sublease Availability (Sq. Ft.} Aurora Boulder Capitol Hill Cherry Creek Colorado Blvd/Midtown Downtown Longmont North Northeast Northwest River North Southeast Southwest 5,890,941 6,503,852 2,374,643 2,634,917 6,430,508 29,405,593 935,425 2,983,078 1,021,245 8,230,236 1,732,414 36,353,004 5,482,276 West 6,946,824 West Hompden/Alameda 1,262,833 Metro Denver 118,187,789 Source: CBRE Research, 02 2020. 9.7 530 7.3 (9,679) 7.7 (52,364) 9.7 (26,307) 0 349,226 62,342 64,000 12.6 (47,548) 14.7 (143,228) 1,476,571 3.4 (7,680) 10.6 19,910 13,7 (10,487) 12.9 261,446 212,322 11.6 10,910 353,333 12.3 (26,952) 1,154,811 8.8 (1,347) 12.2 (36,919) 10,4 (14,991) 12.1 (84,706) 3,734,605 ECONOMIC/EMPLOYMENT Office -using employment ---including jobs in the information, financial activities, professional and business services, and government sectors accounted for roughly two-thirds of all jobs created in the metro Denver area (Denver -Aurora and Boulder MSAs) through May 2020. These sectors added 7,000 jobs on an average year-to-date basis of the 11,400 jobs created overall in the same period. Job growth in these sectors was stunted in April and May as stay-at-home orders resulting from the COVID-19 pandemic shuttered businesses, but strong growth in the first three months of the year buoyed the year-to-date average. Professional and business services experienced the largest growth of 2%, an additional 0,300 new jobs, the most of all office -using industries in absolute terms. The metro area's unemployment rate rose to 10.2% in May, driven by pandemic -related job losses that are mostly expected to be temporary, below that of the J.S., which clocked in at 13.3%. 18.50 33.35 28.73 36.58 26.70 35.00 21.82 19.86 20.95 27.73 36.20 26.87 28.73 24.14 15.36 28.81 Figure 3: Office -Using Employment Growth Jobs Added (000's) 20 15 10 0 -5 14.0 15.8 9,9 12.4 163 20.4 5.8 15,614 254,908 41,657 29,945 30,943 1,689,066 13.2 50,314 18.9 19.1 131,685 11.1 14,951 18.5 973,011 21.2 10,824 16.8 124,157 10.5 17.8 3,367,075 2016 2017 • Government • Financial Activities 2018 2019 YoY YID May 2020 • Professional & Business Services • Information *Employment figures based on average year-to-date comparisons from January to May 2019 and 2020. Source: U.S. Bureau of Labor Statistics, May 2020. Q2 2020 CBRE Research . ,r. .. •- 2020 CBRE, Inc. I 2 Al - 28 CBRE MARKETVIEW DENVER OFFICE eLestilLailLes_t CONSTRUCTION Development activity in metro Denver reached over 3.7 million sq. ft. in Q2 2020. Speculative (spec) office construction totaled 3.0 million sq. ft. 81.4% of the total development footprint. Overall, Downtown projects totaled 1.5 million sq. ft. (39.5%) and suburban construction totaled 2.3 million sq. ft. (60.5%) of all development activity. Two projects broke ground this quarter, the 64,000-sq.-ft. office building at 240 St. Paul St in Cherry Creek and the 43,50O-sq.-ft. adaptive reuse project, Emily's Office in the Downtown submarket. There were no office completions in metro Denver this quarter, but several projects are slated to deliver in the coming months. Of the 1.4 million sq. ft. of office buildings underway Downtown, spec projects include Block 162 (595,000 sq. ft.), One Platte (250,400 sq. ft.), The Link (224,000 sq. ft.), McGregor Square (208,400 sq. ft.) and Market Station (95,400 sq. ft.). Just 7.5% of the spec office projects were preleased at quarter end. In the suburban submarkets, notable builds are 6900 Layton (Southeast, 370,800 sq. ft.), 4899 S Quebec St (Southeast, 334,000 sq. ft.), Rev3 60 (RiNo, 130,000 sq. ft.) and REVE Boulder (Boulder, 118,000 sq. ft.). At the end of Q2 2020, 21.0% of spec projects metrowide were preleased. LEASING ACTIVITY The technology sector continued to lead leasing activity with 1.4 million sq. ft., or 23.5% leased over the past four quarters. The financial services industry followed, representing 11.8% of the total volume. Activity was fueled by SurveyGizmo's sublease at 168 Centennial Pkwy in Louisville for 26,500 sq. ft., Agility Recovery Solutions' 22,000-sq.- ft. lease at 17th Street Plaza downtown and a 20,200 sq. ft deal by The Trade Desk at 1595 Wynkoop St also located downtown. Another notable transaction was NGI1 Energy Partners' lease at 9th & Colorado for 48,000 sq. ft., in the Colorado Blvd submarket. Other significant deals this quarter included Somalogic's renewal for 30,900 sq. ft. at 2945 Wilderness P1 in Boulder, Kilpatrick Townsend's renewal of 28,600 sq. ft. at 1400 Wewatta downtown and Bank of Colorado preleased 18,700 sq. ft. at McGregor Square, the first office lease signed at the project currently under construction. Figure 4: Speculative Preleased Construction 79 0h 3,0 MSF Speculative Under Construction ■ Preleased Sq. Ft. Source: CBRE Research, Q2 2020. 21 01!to a Available Sq. Ft. Figure 5: Leasing Activity by Industry Type (03 2019-02 2020) ■ Technology ■ Healthcare &insurance PI other • Government & Non -profits ■ Financial Services ■ Business & Legal Services ▪ Energy • Manufacturing Source: CBRE Research, Q2 2020 • Aerospace & Defense Creative Industries ■ Telecommunications Life Sciences Q2 2020 CBRE Research 2020 CBRE, Inc. j 3 Al - 29 CBRE MARKETVIEW DENVER OFFICE r , VACANCY/AVAILABILITY Total vacancy reached 13.6%, a 55 bps change from Q2 2020. Class B buildings saw the largest increase of 104 bps to 147%. Direct vacancy increased 48 bps quarter -over -quarter to 12.1% in QZ 2020, this also represented a 15 bps uptick year -over -year. Downtown Denver saw a spike in direct vacancy, up 34 bps from Q1 2020 to 147%. Direct vacancy in the Southeast submarket climbed 101 bps to 12.3% in Q2 2020. Total availability also increased by over 1.0 million sq. ft. or 91 bps quarter -over -quarter to 17.8%. Availability in the Downtown submarket rose to 20.4%, up 185 bps quarter -over -quarter, The Southeast submarket dipped 26 bps from Q1 2020 to 18.5%. Overall sublease availability increased 33.3% to 3.4 million sq. ft. as many companies have had to conduct layoffs and are re-evaluating space requirements moving forward. Class B space saw the largest uptick, increasing over 697,000 sq. ft. or 78.5% to 1.6 million sq. ft of sublease space. Class A followed, climbing 137,600 sq. ft. quarter -over - quarter to 1.7 million sq. ft. available. Downtown sublease availability rose to 1.7 million sq. ft. —a 34.7% increase in sublease space quarter -over - quarter. The Southeast market saw a 30.0% increase from last quarter to 973,000 sq. ft. ABSORPTION Metro Denver posted negative 84,706 sq. ft.. of absorption in Q2 2020, the first time in 13 quarters that negative absorption has been recorded. Class B and Class C buildings drove this activity, logging a cumulative negative 19 7, 947 sq. ft. of net absorption. A few sizable occupancies in Class A space helped offset the negative activity, the asset class posted 113,241 sq. €t. of positive net absorption in QZ 2020. The Northwest submarket led net absorption activity, recording over 261,000 sq. ft. Crocs occupied 88,300 sq. ft. at ATRIA, Blue Canyon Technologies moved into 80,100 sq. ft. at 2550 Crescent and Ball Aerospace took 97,800 sq. ft. at Westmoor Technology Park. Negative net absorption activity was driven by numerous mid- sized tenants closing and the space going direct. Despite the negative absorption in Q2 2020, the year-to-date absorption volume remained elevated, with 330,649 sq. ft. of positive net absorption. Figure 6: Sublease Availability Sublease Available Sq. Ft. (000's) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 012019 02 2019 03 2019 04 2019 01 2020 02 2020 • Downtown Sublease Available • Southeast Sublease Available • Other Sublease Available Source: ORE Research, 02 2020. Figure 7: Net Absorption vs. Lease Rate Net Absorption (000's) 3,500 3,000 2,500 2,000 1,500 1,000 50O 0 -500 2016 01 03 • YID Total Source: CBRE Research, 02 2020 Direct Asking Lease Rate (5) 30 2017 2018 2019 2020 02 04 sAsking lease Rate 29 28 27 26 25 24 23 22 Q2 2020 CBRE Research O 2020 CBRE, Inc. I 4 Al — 30 CBRE AVERAGE ASKING LEASE RATES The average direct asking lease rate for the metro Denver area remained stable quarter -over -quarter, decreasing $0.01 to $28.81 per sq. ft. PSG. Class A buildings saw the largest decrease of $0.38 to $31.46 per sq. ft. FSG. Adversely, asking rates in Class B buildings increased $0.51 to $27.98 per sq. ft. FSG and Class C rates saw a slight increase of $0.06 to $23.65 per sq. ft. FSG. The lease rate change is attributed to the uptick in availability in Class B and Class C buildings. Due to the increase in activity, the overall sublease asking lease rate climbed $1.52 from Q1 2020 and a staggering $3.55 on the year to $29.57 per sq. ft. FSG. This was driven by the sublease availability in the Downtown submarket which consistently demands premium rents. The Downtown submarket direct average asking rates fell $0.21 to $35.00 per sq. ft. FSG. The Downtown sublease asking rate increased $0.71 from Q1 2020 and $1.53 year -over -year to $34.44 18 per sq. ft. PSG. The Southeast submarket direct asking rate saw an increase of $0.10 to $26.87 per sq. ft. FSG. Sublease asking rates in the area also spliced to $23.99 per sq. ft. FSG— a $0.58 increase from Q1 2020 and $1.12 on the year. INVESTMENT TRENDS Office investment sales halted in QZ 2020 as investors struggle to underwrite properties due to the uncertainty brought on by COVID-19. One office sale took place in metro Denver this quarter bringing the year-to-date volume up to $871.9 million, a 44.9% decrease from the first half of 2019. Matador Equity Partners purchased 3200 Cherry Creek Dr in the Cherry Creek submarket for $44 million or $336.77 per sq. ft. Figure 8: Average Asking Lease Rate Average Direct Asking Lease Rate (5) 35 30 25 20 2016 2017 2018 2019 02 2020 Class A Class B - — Direct Asking Lease Rate Source: ORE Research, 02 2020. Figure 9: Lease Rate vs. Availability Availability Rate (%) 20 16 14 Average Asking Lease Rate (S) iwe.FalY11v1i.44e.ti..n.wt. Y.+i4K4. 14-44414-11.... a• 0•11.4 111-Velet 44 1041 4 See 444 • r 4-.444 44 • ....an " se • rrawarann .*...44414.•..ari4.444rsans ••••rrtea wag ea .- . 4 rV4e.m.....a. as II 4444 35 30 25 20 02 2019 03 2019 04 2019 012020 Q2 2020 Direct Availability Rate Ewa Sublease Availability Rate raw' Direct Asking Lease Rate Sublease Asking Lease Rate Source: ORE Research, 02 2020, Figure 10: Investment Sales Investment Sales ($100 MilUions) 10.0 8.0 6.0 4,0 2.0 0.0 Price per Sq. Ft. ($) 400 300 200 100 02 2019 Q3 2019 Q4 2019 Ql 2020 02 2020 Suburban Downtown ahMetra Average Price Per Sq. Ft. Source: ORE Research, 02 2020. O2 2020 CBRE Research O 2020 CBRE, Inc. I 5 Al - 31 CBRE MARKETVIEW DENVER OFFICE r• r Boulder Longmont Northwest North CONTACTS Layne Voorhees Research Analyst +1 303 583 2016 layne.voorhees a, cbre,com Sue Selle Associate Research Director +1 303 628 1760 sue.selle(a cbreecom /7‘'1/41 l To leant more about CBRE Research or to access additional research reports, please visit the Global Research Gateway at www. core. cornlresearchgateway. MARKET OUTLOOK Virology, not the business cycle, has dictated the course of the world's economy this year. COVID-19 forced a nationwide shutdown of most economic activity in March, with the largest economic centers, especially the Northeast and Pacific coast, facing the strictest lockdowns. The economic fallout proved severe, pushing unemployment to over 15% and likely causing the economy to contract by more than 30% per annum in the second quarter. These morbid economic conditions inspired many governors to ease lockdowns, especially in Sunbelt states where the case count was less severe than in more densely populated regions. These re - openings have energized activity. Several high - frequency indicators, such as hotel occupancies, restaurant traffic and hours worked, suggest the US economy bottomed in April and has been trending slightly upward since. This has renewed demand for labor as many hard-hit sectors, such as hospitality and healthcare, began to bring back furloughed workers in May. CBRE OFFICES Downtown Denver 1225 17th Street, Suite 3200 Denver, CO 80202 Denver Tech Center 5455 Landmark Place, Suite 0102 Greenwood Village, CO 80111 Boulder 1805 11th St, Unit A Boulder, CO 80302 Colorado Springs 121 South Tejon Street, Suite 1111 Colorado Springs, CO 80903 Fort Collins 3 003 East Harmony Road, Suite 300 Fort Collins, CO 80528 Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representafion about it. It is your responsibility to confirm independently its accuracy and completeness. This informofion is presented exclusively for use by ORE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of BBRE. Al — 32 3/11/2021 Stress Tests Reveal Office Values Could Fall 50% if WFH Sticks I GlobeSt low NOT FOR REPRINT Click to print or Select 'Print' in your browser menu to print this document. Page printed from: https.//www globest.com/2021/2021/03/11/stress-tests-reveal-ofoe-values-could-fall-50-it wfh-sticks/ Stress Tests Reveal Office Values Could Fall 50% if WFH Sticks Fitch ran various stress scenarios to determine how telework would impact demand, rent and net cash flow on 201 2-2020 vintage office CMBS transactions. By Les Shaver I March 11, 2021 If work -from -home trends stick after the pandemic, it could cause a permanent decline in demand for space and have a severe impact on property values, according to Fitch Ratings. Fitch ran various stress scenarios to determine how telework would impact demand, rent and net cash flow on 2012-2020 vintage office CMBS transactions. Under scenarios of moderate and severe stresses, it found that 4.4% and zero, respectively, of 114 US CMBS office single- asset/single-borrower bonds maintain their current ratings. Under its moderate stress scenario, Fitch assumes that employees will work remotely 1.5 days per week. That would result in a 20% decline in office workers and a 10% decline in office space demand. Fitch's severe scenario doubles these assumptions. It assumes that rents decline at 1.25 times the reduction in space. In this occurrence, increased vacancies magnify declines in rent levels. Under the moderate and severe scenarios, net cash flow declines 15% and 30%, respectively. Fitch assumes cap rates from its most recent surveillance review of 7.23% on average with these two scenarios. Those rates are significantly higher than the 4.73% appraisal cap rates at loan origination. Using those assumptions, Fitch saw average market -value declines from at -origination appraised values of approximately 44% and 54%, respectively, for moderate and severe scenarios. If those declines occurred, 25% and 55% of investment -grade bonds could potentially fall below investment -grade under the moderate and severe scenarios, respectively. Already, property values fell by 38% on average in Fitch's current rating analysis. For comparison, office property values fell approximately 43% during the 2008 Great Recession. They recovered over three years. With a possible secular shift to working from home, values could take a lot longer to recover following this recession. What ultimately determines if values will fall and how much is whether workers return to the office. (https://www.globest.com/2021/03/11 /the- > future-of-the-office-its-still-tb a/`) It https://www.globest. com12021 /03111 /stress-tests-reveal-office-val u es-could-fall-50-if-wfh-stinks/"? printer -friendly Ui Ui 3/11/2021 Stress Tests Reveal Office Values Could Fall 50% if WFH Sticks I GlobeSt In a segment on CNBC"s 'Squawk on the Street,' Brett White, Cushman & Wakefield's CEO and executive chairman, said the number of people working from home could double from 5% to 10%. An additional 30% of office workers were allowed to work from home one or two days a week. White thinks that number will jump 50% to 60% after the pandemic. Additionally, 3 million workers lost their jobs in March and April and only 1.8 million have been rehired. Overall, he could see companies with these agile workforces reduce their footprint by 10%, 15% or even 30%. "A lot of employers should and will think of creative ways to use their space more efficiently," White says. "And that's going to be a drag on occupancy." Copyright 2021. ALM Media Properties, LLC. All rights reserved. I' I hftps://www.g lobest.com/2021/03/111stress-tests-reveaI-office-values-could-faII-50-if wfh-sticks/"sprinter-friendly Ui iN 5/11/2021 Denver Office Market Struggles Through Pandemic' GlobeSt Lisk"a; NOT FOR REPRINT Click to print or Select 'Print' in your browser menu to print this document, Page printed from: https://wwwgiobest corm/2020/2020/11/04/denver-office-market-strugg/es-through-pandemic/ Denver Office Market Struggles Through Pandemic Leasing volume has fallen to its lowest point in a decade, and more than 1 million square feet of sublease space has come to the market. By l elsi Maree Borland J November 04, 2020 The Denver office market has struggled through the pandemic. The latest stats from Savills' third quarter report show that leasing activity has fallen by 1 million square feet, the lowest point in a decade, and 1 million square feet of sublease space has come to the market, bringing the total to 4.6 million square feet. In addition, the office vacancy rate in the market has increased to 21.6%, the highest in eight years. "We see the availability rate as a more useful metric, that includes all sublease space and new buildings that are under construction," Rick Schuham, director at the Denver office at Savills, tells GiobeSt.com. "That number for downtown Denver is 27.5% and that is what tenants care about. What are my choices? What can I negotiate a lease on? The vacancy number is relevant for both landlords and investors and that is why our competitors are tied to that metric." In many cases, this is good news for tenants, who have ample options and room for negotiation on lease terms. "I had an out-of-town client that recently came to Denver to look at options that would provide space for 200-500 jobs," says Schuham. "This specific client only wanted to look at sublease space and we had 19 unique locations to view, In many cases, it was suggested that we could write our deal as we saw fit. This availability puts pressure on all categories of space owners both direct to landlord and sublease." Downtown Denver has the highest vacancy rate in the market at 27.5%. In addition, the market has nearly half of the sublease space in the greater market at 2.1 million square feet. Companies across the board are placing sublease space on the market. "There is no limitation on sectors that are experiencing pressure downtown," says Schuham. "Largely it is the energy and tech sectors that are putting their space on the market." Downtown Denver has a high concentration of energy business and technology business, which are driving the sublease supply. In addition, the submarket has several large developments that are delivering downtown mostly unleased. While the vacancy rate in the market has skyrocketed, rents have not meaningfully adjusted yet. In fact, according to the report, overall asking rents increased slightly to $29.83 per square foot from $28.18 per square foot." 'e have seen some adjustments. Concessions are up substantially, and in many cases, rents are already down. Asking rates and taking rates are quite different," says Schuham. "Tenants who have the flexibility to make decisions and are financially capable are in control." There won't likely be a change in these trends through the end of the year. Schuham predicts limited activity. "Only the clear visionaries are making big -picture real estate decisions and they are being handsomely rewarded with long-term low occupancy costs," says Schuham. "We will continue to see more companies kicking the tires for relocating to metropolitan Denver from the coasts and large urban centers across the country. The pandemic has changed everything, not just for decision makers, but more importantly the broader educated skilled workforce. Quality of life and access to the outdoors has never been more important. Colorado checks all the boxes." https://wwvveglobest.com/2020/11/04/denver-office-market-struggles-through-pandemic/?printer-friendly A11/2- 3 5 7/10/2020 What will happen to office lease rates? - Colorado Real Estate Journal What will happen to office lease rates? By CREJ June 15, 2020 --arsit .� _ _ -_- -- --- - I et s. The volume of office leases being signed in Denver is so low that judging the market it difficult It's not fair to say that the market is declining, rising or even staying steady - it's only fair to say that the market has disappeared for the moment. David Shirazi Vice president, tenant representation, .ILL Are office lease rates dropping? I get some version of this question every day, from clients and colleagues as well as from friends and family who generally have little interest in the commercial real estate market. It seems like it should be a given, right? Unemployment is sky high, the stock market is down, many companies have not returned to the workplace yet and may not do so for some time, and, to top it off, oil and gas companies are facing unprecedented headwinds. So, have office lease rates in Denver crashed as well? As it sits today, it's not fair to say that the market is declining, rising or even staying steady - it's only fair to say that the market has disappeared for the moment. The market is only as good as the https:/lcrej.caminews/what-will-happen-ta-office-lease-rates/ A11/4- 36 7/10/2020 What will happen to office lease rates? Colorado Real Estate Journal latest transactions tell us it is, and right now the volume of office leases being signed in Denver is so low that defining the "market rate" is just not feasible. What transactions that are being consummated are mostly short-term extensions on existing leases. Landlords and tenants seem to be coming to the table so that both sides can have more time to make long-term leasing decisions. What does history tell us on this topic? You might be surprised at the amount of lag time between a stock market crash and the corresponding decline in Denver office rental rates. After the dot -corn bust in 2001, office rates in Denver didn't hit their low for 15 quarters, and they didn't make a full recovery for over seven years. When the economy crashed in 2008, rates did not hit their low for nine quarters and didn't fully recover for five years. $34 $30 $26 $ $18 $14 $10 Denver office market rfon total vacancy (R) avg asking rent (L) $21.99 i an $31.10.4.. 2002 2004 2006 2008 2010 2012 2014 2016 2018 2000 2020 22.0% 18.0% 14.0% 10.0% 6,0% 2.0% After the dot -corn bust in 2001, office rates in Denver didn't hit their low for 15 quarters and didn't make a full recovery for over seven years. When the economy crashed in 2008, rates did not hit their low for nine quarters and didn't fully recover for five years. As of now, there just isn't enough evidence to say how far rates have dropped or how far they will drop, but you'd be hard pressed to find someone in the industry who doesn't see rates declining in the coming months. To give some perspective, we need to understand what ultimately drives lease rates down: An increase in vacancy. It's only been about 75 days since most of us left our offices and started working from home, not enough time for tenants and landlords to really evaluate their situations. Smaller companies still may be enjoying the benefits of their Paycheck Protection Program loans, and using those funds to pay rent, but that money will run out soon. Some other companies have withheld rent (or have been unable to pay rent), but Gov. Jared Polls' temporary ban on evictions is artificially keeping vacancy low for the moment. There is one major indicator that points toward a decline in Denver's office lease rates — the amount of sublease space coming onto the market. Today, we have over 1.5 million sf of office space on the sublease market in the central business district alone. This is more sublease space on the market than we've had for at least 20 years, up from just over 1 million square feet at the beginning of 2020. Sublease opportunities traditionally offer tenants the ability to secure a below -market lease rate, and, indeed, most sublease opportunities on the market right now are quoting rates that are below the rate that the building owner is asking for — sometimes far below. The sheer volume of available sublease space is going to force landlords to compete at rates lower than they'd like. From the tenant point of view, there will be good options in the marketplace right now, and you'll probably get a better deal today than pre-COViD-19, but there almost certainly is an advantage for those who can wait a little longer before transacting. Tenants should be keeping an eye on the "total vacancy" figures. At the end of the first quarter, total vacancy in Denver's CBD was 14%; once that figure creeps up to 18% most landlords are going to become significantly more aggressive. https://crej.com/news/what-will-happen-to-office-lease-rates/ A 12/0 3 7 Colorado Assessor's Study of the effects of the Covid-19 Pandemic on Non -Residential Property Valuation Adams County Arapahoe County Boulder County Broomfield County Denver County Douglas County Eagle County Jefferson County Larimer County Mesa County Routt County Weld County Executive Summary Introduction Covid-19 was declared a global health crisis by the World Health Organization on March 11, 2020. On March 11, 2020, Colorado Governor Jared Polls reacted to the pandemic by declaring a Disaster Emergency due to the presence of Covid-19 in Colorado (D 2020-003). The Governor and CDPHE subsequently issued orders closing all public gathering places such as bars, restaurants, theaters, gymnasiums, casinos, ski resorts, and public/private elementary and secondary schools statewide. On March 22, 2020, the Governor ordered all non -essential Colorado employers to reduce their in -person work forces to 50%. The Governor's Stay at Home Order (D 2020-017) was issued on March 25, 2020 and was immediately followed by Public Health Order 20-24 from the Colorado Department of Public Health and Environment (CDPHE). These orders mandated Coloradans to stay at home, addressed self -isolation measures, limitations on public/private outdoor gatherings, business restrictions, travel restrictions, and provided social distancing requirements. The Covid-19 pandemic led to substantial economic, social and market occurrences, including: • Disaster declarations were issued at the federal, state and local levels • A statewide stay at home order was issued by the Governor of Colorado, along with many related Executive Orders that had significant social and economic impacts • Downturns were observed in some -but not all commercial sectors • Loss and/reductions in rental income for some commercial properties Prior to the March shutdown, the Colorado economy was exceptionally healthy, and outperforming most of the Country, however beginning in April it followed the rest of the United States into the pandemic recession. These events made it clear to County Assessors in Colorado that potential impact on commercial real estate values merited investigation. Property valuation and assessment for ad valorem purposes varies from state to state, and on an international basis, from country to country. In the State of Colorado, County Assessors value all real property in their jurisdictions every two years in odd numbered years. This requirement is dictated by Colorado Statute, along with methodology by which this is to be accomplished. Real property is valued as of a specific date, known as the "valuation date", which is always June 30th of the year preceding the reappraisal, and is June 30, 2020 for the upcoming 2021 general reassessment. Assessors are to consider data from the preceding 18 months, known as the "study► period", and rely heavily on transactions of real property to perform their valuation analysis. This said, it is important to acknowledge that most Assessors avail themselves of the statutory option to increase the study period in six-month increments for a total 24 -month study period. According to the State Constitution, only sales of similar properties can be used to value residential property, however non-residential property valuation is valued with due consideration given to the Cost, Sales Comparison, and Income approaches to value. In addition, Assessors are required by law to adjust all property sales to the June 30th valuation date, which is commonly known as "time trending". This is accomplished through a thorough review of market evidence, particularly sales activity. As it sounds, sale prices are adjusted up from the date of sale to account for an appreciating market and adjusted down if the market is declining as of the valuation date. This time trending step is critical to the valuation process and is specifically analyzed as part of the annual State Board of Equalization audit process to ensure accurate and uniform valuations throughout Colorado. The timing of Covid-19 global pandemic caused great concern to Colorado Assessors with respect to time trending --or adjusting sales. Sales activity was occurring with a typical volume of transactions throughout Colorado until the Covid-19 crisis emerged in March 2020. While a significant decrease in residential transactions was observed, commercial real estate transactions fundamentally ceased to occur between the onset of the pandemic in March, and the valuation date of June 30, 2020. The primary concern of the assessment community is that without transactions between the Covid-19 shutdown and the valuation date, it is very difficult to determine what, if any, impact the pandemic had on commercial property values as of the valuation date. In a proactive effort to determine the impacts of the pandemic on the commercial real estate market in Colorado, a group of County Assessors came together and dedicated staff to conduct a comprehensive study on six commercial real estate sub -markets: Office; Retail; Warehouse; Apartments; Commercial Condominiums; and Lodging. Additionally, it was important for each team of Commercial Appraisers to identify► sub -markets that required separate research and analysis and provide suitable recommendations. This report is the result of that exhaustive effort and contains specific recommendations and methodologies where adjustment may be appropriate to commercial property values for the 2021 revaluation. We are grateful for the efforts of the County Assessors and Appraisers who have contributed to this important endeavor. This will have several outcomes, the greatest being a consistency in our recognition of the pandemic on commercial property valuation for tax years 2021 and 2022. This effort has been unprecedented in the history of the state of Colorado, and we credit those leaders and future leaders for the knowledge, skill and experience they have lent to this study. Al - 40 Executive Summary The following information is summarized findings from each of the six, study groups. Recommendations are general in nature and specific local market information should always be relied on most heavily. Office A property that sold prior to the start of the pandemic may not have sold for that same amount on June 30, 2020. Therefore, a sale that occurred before the pandemic may need an adjustment to account for changes in market conditions that were present on the date of value. Sales data is very limited, and it is difficult to extract reliable market wide conclusions from such a small sample. The various aspects of the income approach did provide some indication. of changes in the market that could be used to calculate an adjustment to the pre -pandemic sales. The recommended range of impact is summarized below. Each county should review their individual markets and determine how it applies to them. Rental Rates Concessions vacancy Collection Loss Expenses Cap Rates No adjustment recommended. Depends on the individual market. In markets where 4-6 months free rent on a 64 to 66 - month lease are common this represents a 6% to 9% reduction in revenue. Depends on the individual market. Most markets saw 0.7-2.0% increase in vacancy. Other markets saw no change. No adjustment recommended. An increase of 3-5% in expenses is supported. This may also be reported as 0.25-$0.50 per square foot. Depends on the individual market. An adjustment of 0-3% is supported. Once a county has determined what adjustments apply to their markets, they should apply these adjustments to their base period sales for an adjusted sales price reflective of the market as of 6/30/2020. This adjusted sales price could then be used to support market values. Retail Small Retail, Restaurants & Entertainment Uses A Covid-19 adjustment of approximately -11% should be made to the estimated income values for sit-down restaurants, bars, taverns, and entertainment venues. An adjustment for salons, barbershops, daycares, and fitness centers may also be appropriate when county -specific data reflects a measurable decrease in the income generating potential for these property types. am 3 Al - 41 Anchored & Non -Anchored Shopping Centers The most reliable data available for both the pre-Covid and post-Covid tirneframes is most relevant to the Income Approach method of valuation, which is also the most common method used by market participants for Group B properties. The movement of lease, vacancy and cap rates is slight as of the date of valuation. As of the date of valuation, lease rates were slightly decreasing, vacancy rates were slightly increasing, and capitalization rates had increased approximately 50 basis points. The combination of these factors potentially results in slight decreases in value for Group B properties. While a common myth is that retail property values plunged as impacted by Covid-19, the data does not support a drastic decrease in Group B retail property values as of June 30, 2020. In terms of market sales activity and comparable sales data, this data also does not support a drastic decrease in retail property values. Sales data shows that sale prices and unit prices per square foot did not decrease on an overall basis. Investors continue to look for properties to purchase; although it is noted that the pool of potential buyers is smaller as lending requirements are more stringent, which is offset by fewer properties available for sale. The drop in the number of sales during the Covid-19 period is not attributed to decreasing property values, but rather to the uncertainty of market conditions moving forward. This is illustrated in the slight increase in capitalization rates reflecting the perceived inherent risk of future unknowns regarding Covid-19, including the unknown time frame when it will no longer negatively impact social and business activity. Overall, our analysis found the following: • Slight downward movement of lease and vacancy rates • Slight increase of capitalization rates around 50 basis points • No measurable change in sales prices or unit prices per square foot We recommend as an alternative to paired sales analysis for pre -pandemic and post -pandemic sales that counties look at changes in the components of their submarket Income Approach parameters as a method of adjusting pre -pandemic study period sales. Big Box Retail and Regional Malls Big Box retailers were generally considered Critical businesses and did not close during the pandemic and by all accounts appear to have fared well through the study period. Thus, in general, we do not believe an adjustment to value is merited due to the pandemic. Nevertheless, there may be some properties within this category that were not considered critical that specifically experienced hardships related to the closure, we recommend that counties consider these properties during the protest period based upon the specific information provided by the property owner during the appeal process. For Regional Malls we recommend focusing on the key components of the Income and/or Cost Approaches for the 2021 re -appraisal. Since the Income Approach parameters are highly variable from mall to mall, we believe that the valuation analyses should be based on the geographic and economic climate of each property. Special attention should be given to vacancy/collection losses and capitalization rates when using the Income Approach and determining if economic obsolescence is apparent in the marketplace when evaluating depreciation within the context of the Cost Approach. r41 Al - 42 Warehouse First, regional sales data was gathered and combined from the participating counties to explore trends over the base period, and specifically, to identify any sudden changes after the pandemic started in March 2020. While there was a precipitous drop in sales volume, the sales rebounded in June 2020 to a level consistent with the overall trend observed from most of the base period data, from July 2018 to Feb 2020.. Further stratification of this regional data to small and large warehouse properties, defined by building size, produced the same results as the entire data file, overall, this analysis provided no basis for an adjustment based on warehouse sales. The next two research and analysis sections focused on the variables pertinent to the income approach to value, cap rates, vacancy, and rent rates. To examine these variables, data was collected from CoStar and available research reports from national brokerage firms. Like the sales analysis, data was analyzed over the base period to measure trends occurring pre and post pandemic, as well as any abrupt changes after the pandemic began. Data from these analyses provided no clear indication of an immediate or measurable change directly related to the pandemic. To summarize, no adjustment specific to the impact of the Covid-19 pandemic is recommended for the warehouse subclass from this report. It is recommended that each county verify the results of this report with county -specific data to validate and confirm similar conclusions. Apartments The Covid-19 pandemic's effect on values of apartments in Colorado was minimal as of the appraisal date, June 30th, 2020. With a moratorium on evictions and high unemployment, one would expect values to decline more severely. Government assistance to typical renters is a possible explanation for the minimal effect on values. On March 20, 2020, the Governor's executive order D2020-012 allocated $3 million from the Disaster Emergency Fund to provide short-term rental and mortgage assistance to low-income households facing financial hardship due to Covid-19. The US Congress passed H.R. 748, the CARES act, which provided an additional 13 weeks of unemployment benefits through December 31, 2020, and an additional $600 per week per individual. The benefit included workers not traditionally eligible for unemployment benefits (self- employed, independent contractors, etc.) who were unable to work because of Covid-19 issues. In addition, the CARES act created an advanced tax refund of $1,200 per individual, $2,400 per couple, and an additional $500 per child. These measures appeared to allow tenants to pay rents through June 30th, 2020 and in turn keep apartment values from plummeting. On April 24th, the Paycheck Protection Program and Health Care Enhancement Act became law which provided additional lending authority for the Small Business Administration to respond to payroll needs created by the Covid-19 outbreak. Apartments are not out of the woods, in fact the modest decline in some areas of Colorado is indicative of the uncertainty looming due to eviction moratoriums and the eventual expiration of government assistance. Additionally, there are trends beginning to emerge including tenants migrating from downtown Denver to more affordable areas, teleworkers needing apartments with office space, and multiple households are coalescing which is creating a need for larger apartments. ET57-1 Al - 43 Commercial Condominiums in reviewing all of the data in the Multi -County study, the main conclusion is that commercial condominiums, regardless of type (Industrial, Office, Retail and Warehouse), had an increase in value from the previous base period; with the pandemic having little if any effect upon the property class value. While the volume of sales in the last quarter of the base period declined once the pandemic and lock down were in full effect, caution must be used in drawing conclusions about the impact of the pandemic. The majority of sales that did occur followed similar value increases and trends from the previous 7 quarters, with values increasing over the two- year data collection period as a whole. Post-Covid trends in average sales prices for all property types vary between counties with Mesa, Weld, Larimer and Douglas showing a flattening out after March 2020, while Arapahoe, Eagle and Boulder Counties show ongoing growth in sales prices. Though some county condominium sales didn't increase in value as much as some of the other counties surveyed, a distinct rise in sales prices by June 30, 2020 was clear and evident, and: followed the study's increasing trend of value overall for commercial condominiums through the two- year data collection period. As a check of reasonableness, a review of post study period sales indicates that there is a continuation of the increasing trend in sates prices and sale price per square foot in the surveyed counties. Lodging The adjustments summarized below provide a range of typical value adjustments resulting from the pandemic for three stratifications of lodging properties. The notion here is that hotel owners experienced this loss in value from December 2019 to June 2020 and does not reflect a reduction in the Assessor's Actual Value from the prior reassessment (June 30, 2018). To summarize, value reductions are more intensive in convention hotels and other group travel business properties. In addition, some of the typically strongest leisure travel properties have experienced the greatest value loss resulting from the collapse in the travel industry. Conversely, economy and midscale properties located in rural, mountain, suburban and drive -to destinations did not experience the same drop in average daily rate (ADR), occupancy, or revenue per available room (RevPar), and from a forward -looking point of view, are believed to have a greater chance of recovering in a shorter timeframe. The simple fact that lodging property performance is so directly tied to location, even without a pandemic in play, requires a specific analysis of the submarkets in each county. Lodging property performance has always been highly dependent on location. As a result, Colorado Assessors must evaluate their local markets to determine the specific effects of the pandemic on their market of hotels. Group A Group B Group C Scale Location Service Adjustment Economy, Midscale Rural, Mountain, Suburban, Drive -to Limited, Extended 0-20% Upper Midscale, Upscale Rural, Mountain, Suburban, Drive -to Upper Upscale, Luxury Urban, Large City, CBD, Fly -to destinations Limited, Select, Extended Full Service, Convention 10-30% 20-30% 6A1 - 44 FOR PROPERTY TAX REPRESENTATION JDM II SF National LLC Property Owner R0296201 And 1555 Promontory Cir Subject Property Weld County, CO Jurisdiction and State 2021/2022 Year This letter authorizes Ryan, LLC and its affiliate, Ryan Tax Compliance Services, LLC to represent the above -named property as its property tax agent in the jurisdiction and state named above. This authorization includes but is not limited to: filing property renditions or returns; signing and filing appeals; examining property tax records; and, appearances before the assessor, boards of equalization or review, or other governmental agencies responsible for the assessment of property. If there are any questions concerning this authorization, please contact the following: Matt Poling, (720) 52.4 0022, Matt.Poling@ryan.com A copy of any application or appeal attached to this authorization has been provided to the undersigned property owner. A facsimile or scanned image of a signature below shall constitute an original signing of this authorization and the document containing the original signature will be submitted upon request. This authorization shall remain effective as long as permitted by law or until revoked in writing by the owner. The person signingbelow certifies that they are a duly appointed officer, representative or agent of the owner and that they have the legalcapacity to execute this authorization. Property Owner: Signature � ry Title -4-:(-t -Pr tr-V•• Printed Nam Sworn and subscribed before me this State Farm 1655 Promontory Circle _day of N Lary P lic My commission expires: C ,.t;t ,2021. EFUN0A Ml H . Notary Public, State ot Arizona Marioopa County Commission # 554693 My Commission Expires L- November 44, 2022 July 15, 2021 Petitioner: JDM II SF NATIONAL LLC CIO STATE FARM MUTUAL AUTO ONE STATE FARM PLAZA BLOOMINGTON, IL 61710-0001 CLERK TO THE BOARD PHONE (970) 400-4226 FAX (970) 336-7233 WEBSITE: www.weldgov.com 1150 O STREET P.O. BOX 758 GREELEY CO 80632 Agent (if applicable): RYAN LLC ETHAN HORN 1999 BROADWAY STE 400 DENVER, CO 80202-3025 RE: THE BOARD OF EQUALIZATION 2021, WELD COUNTY, COLORADO NOTIFICATION OF HEARING SCHEDULED Docket 2021-1992, AS0109 Appeal 2008230176 Hearing 8/4/2021 1:00 PM Account(s) Appealed: R0296201 Dear Petitioner(s): The Weld County Board of Equalization has set a date of August 4, 2021, at or about the hour of 1:00 PM, to hold a hearing on your valuation for assessment. This hearing will be held at the Weld County Administration Building, Assembly Room, 1150 O Street, Greeley, Colorado. You have a right to attend this hearing and present evidence in support of your petition. The Weld County Assessor or his designee will be present. The Board will make its decision on the basis of the record made at the aforementioned hearing, as well as your petition, so it would be in your interest to have a representative present. If you plan to be represented by an agent or an attorney at your hearing, prior to the hearing you shall provide, in writing to the Clerk to the Board's Office, an authorization for the agent or attorney to represent you. If you do not choose to attend this hearing, a decision will still be made by the Board by the close of business on August 5, 2021, and mailed to you within five (5) business days. Because of the volume of cases before the Board of Equalization, most cases shall be limited to 10 minutes. Also due to volume, cases cannot be rescheduled. It is imperative that you provide evidence to support your position. This may include evidence that similar homes in your area are valued less than yours or you are being assessed on improvements you do not have. Please note: The fact that your valuation has increased cannot be your sole basis of appeal. Without documented evidence as indicated above, the Board will have no choice but to deny your appeal. If you wish to discuss your value with the Assessor's Office, please call them at (970) 400-3650. If you wish to obtain the data supporting the Assessor's valuation of your property, please submit a written request directly to the Assessor's Office by emailing assessor@weldgov.com or sending a fax to (970) 304-6433. Upon receipt of your written request, the Assessor will notify you of the estimated cost of providing such information. Payment must be made prior to the Assessor providing such information, at which time the Assessor will make the data available within three (3) working days, subject to any confidentiality requirements. Please advise me if you decide not to keep your appointment as scheduled. If you need any additional information, please call me at your convenience. Very truly yours, BOARD OF EQUALIZATION Gee Esther E. Gesick Clerk to the Board Weld County Board of Commissioners and Board of Equalization cc: Brenda Dones, Assessor July 15, 2021 Agent: RYAN LLC ETHAN HORN 1999 BROADWAY STE 400 DENVER, CO 80202-3025 CLERK TO THE BOARD PHONE (970) 400-4226 FAX (970) 336-7233 WEBSITE: www.weldgov.com 1150 O STREET P.O. BOX 758 GREELEY CO 80632 Petitioner: JDM II SF NATIONAL LLC C/O STATE FARM MUTUAL AUTO ONE STATE FARM PLAZA BLOOMINGTON, IL 61710-0001 RE: THE BOARD OF EQUALIZATION 2021, WELD COUNTY, COLORADO NOTIFICATION OF HEARING SCHEDULED Docket 2021-1992, AS0109 Appeal 2008230176 Hearing 8/4/2021 1:00 PM Account(s) Appealed: R0296201 Dear Petitioner(s): The Weld County Board of Equalization has set a date of August 4, 2021, at or about the hour of 1:00 PM, to hold a hearing on your valuation for assessment. This hearing will be held at the Weld County Administration Building, Assembly Room, 1150 O Street, Greeley, Colorado. You have a right to attend this hearing and present evidence in support of your petition. The Weld County Assessor or his designee will be present. The Board will make its decision on the basis of the record made at the aforementioned hearing, as well as your petition, so it would be in your interest to have a representative present. If you plan to be represented by an agent or an attorney at your hearing, prior to the hearing you shall provide, in writing to the Clerk to the Board's Office, an authorization for the agent or attorney to represent you. If you do not choose to attend this hearing, a decision will still be made by the Board by the close of business on August 5, 2021, and mailed to you within five (5) business days. Because of the volume of cases before the Board of Equalization, most cases shall be limited to 10 minutes. Also due to volume, cases cannot be rescheduled. It is imperative that you provide evidence to support your position. This may include evidence that similar homes in your area are valued less than yours or you are being assessed on improvements you do not have. Please note: The fact that your valuation has increased cannot be your sole basis of appeal. Without documented evidence as indicated above, the Board will have no choice but to deny your appeal. If you wish to discuss your value with the Assessor's Office, please call them at (970) 400-3650. If you wish to obtain the data supporting the Assessor's valuation of your property, please submit a written request to assessor@weldgov.com. Upon receipt of your written request, the Assessor will notify you of the estimated cost of providing such information. Payment must be made prior to the Assessor providing such information, at which time the Assessor will make the data available within three (3) working days, subject to any confidentiality requirements. Please advise me if you decide not to keep your appointment as scheduled. If you need any additional information, please call me at your convenience. Very truly yours, BOARD OF EQUALIZATION Esther E. Gesick Clerk to the Board Weld County Board of Commissioners and Board of Equalization cc: Brenda Dones, Assessor August 5, 2021 Petitioner: JDM II SF NATIONAL LLC CIO STATE FARM MUTUAL AUTO ONE STATE FARM PLAZA BLOOMINGTON, IL 61710-0001 CLERK TO THE BOARD PHONE (970) 400-4226 FAX (970) 336-7233 WEBSITE: www.weldclov.com 1150 O STREET P.O. BOX 758 GREELEY CO 80632 Agent (if applicable): RYAN LLC ETHAN HORN 1999 BROADWAY STE 400 DENVER, CO 80202-3025 RE: THE BOARD OF EQUALIZATION 2021, WELD COUNTY, COLORADO NOTICE OF DECISION Docket 2021-1992 Appeal 2008230176 Hearing 8/5/2021 Dear Petitioner: On the day indicated above, the Board of County Commissioners of Weld County Colorado convened and acting as the Board of Equalization, pursuant to C.R.S. §39-8-101 et seq., considered petition for appeal of the Weld County Assessor's valuation of your property described above, for the year 2021. Account # Decision The Assessment and valuation is set as follows: Actual Value as Actual Value as Set by Determined by Assessor Board R0296201 Stipulated - Approved Stipulated Value $48,020,390 $45,200,000 A denial of a petition, in whole or in part, by the Board of Equalization must be appealed within thirty (30) days of the date the denial is mailed to you. You must select only one of the following three (3) options for appeal: 1. Appeal to Board of Assessment Appeals: You have the right to appeal the County Board of Equalization's decision to the Colorado Board of Assessment Appeals. A hearing before that Board will be the last time you may present testimony or exhibits or other evidence, or call witnesses in support of your valuation. If the decision of the Board of Assessment Appeals is further appealed to the Court of Appeals pursuant to C.R.S. §39-8-108(2), only the record of proceedings from your hearing before the Board of Assessment Appeals and your legal brief are filed with the appellate court. All appeals to the Board of Assessment Appeals filed after August 10, 2021, MUST comply with the following provisions of C.R.S. §39-8-107,(5): (5)(a)(I) On and after August 10, 2021, in addition to any other requirements under law, any petitioner appealing either a valuation of rent -producing commercial real property to the Board of Assessment Appeals pursuant to C.R.S. §39-8-108(1) or a denial of an abatement of taxes pursuant to C.R.S. §39-10-114 shall provide to the County Board of Equalization or to the Board of County Commissioners of the County in the case of an abatement, and not to the Board of Assessment Appeals, the following information, if applicable: (A) Actual annual rental income for two full years including the base year for the relevant property tax year; (B) Tenant reimbursements for two full years including the base year for the relevant property tax year; (C) Itemized expenses for two full years including the base year for the relevant property tax year; and (D) Rent roll data, including the name of any tenants, the address, unit, or suite number of the subject property, lease start and end dates, option terms, base rent, square footage leased, and vacant space for two full years including the base year for the relevant property tax year. (II) The petitioner shall provide the information required by subsection (5)(a)(I) of this paragraph (a) within ninety days after the appeal has been filed with the Board of Assessment Appeals. (b)(I) The Assessor, the County Board of Equalization, or the Board of County Commissioners of the County, as applicable, shall, upon request made by the petitioner, provide to a petitioner who has filed an appeal with the Board of Assessment Appeals not more than ninety days after receipt of the petitioner's request, the following information: (A) The primary method used by the county to determine the value of the subject property; and (B) The rates used by the county to determine the value of the subject property under the method identified in accordance with subsection (5)(b)(l)(A) of this section. (II) The party providing the information to the petitioner pursuant to subparagraph (I) of this paragraph (b) shall redact all confidential information contained therein. (c) If a petitioner fails to provide the information required by subparagraph (I) of paragraph (a) of this subsection (5) by the deadline specified in subparagraph (II) of said paragraph (a), the County may move the Board of Assessment Appeals to compel disclosure and to issue appropriate sanctions for noncompliance with such order. The motion may be made directly by the County Attorney and shall be accompanied by a certification that the County Assessor or the County Board of Equalization has in good faith conferred or attempted to confer with such petitioner in an effort to obtain the information without action by the Board of Assessment Appeals. If an order compelling disclosure is issued under this paragraph (c) and the petitioner fails to comply with such order, the Board of Assessment Appeals may make such orders in regard to the noncompliance as are just and reasonable under the circumstances, including an order dismissing the action or the entry of a judgment by default against the petitioner. Interest due the taxpayer shall cease to accrue as of the date the order compelling disclosure is issued, and the accrual of interest shall resume as of the date the contested information has been provided by the taxpayer. Appeals to the Board of Assessment Appeals must be made on forms furnished by that Board, and must be mailed or delivered within thirty (30) days of the date the denial by the Board of Equalization is mailed to you. The address and telephone number of the Board of Assessment Appeals are: Board of Assessment Appeals 1313 Sherman Street, Room 315 Denver, Colorado 80203 Telephone Number: (303) 864-7710 Email: baa@state.co.us Fees for Appeal to the Board of Assessment Appeals: A taxpayer representing himself is not charged for the first two (2) appeals to the Board of Assessment Appeals. A taxpayer represented by an attorney or agent must pay a fee of $101.25 per appeal. OR 2. Appeal to District Court: You have the right to appeal the decision of the Board of Equalization to the District Court of the county wherein your property is located: in this case that is Weld County District Court. A hearing before The District Court will be the last time you may present testimony or exhibits or other evidence, or call witnesses in support of your valuation. If the decision of the District Court is further appealed to the Court of Appeals pursuant to C.R.S. §39-8-108(1), the rules of Colorado appellate review and C.R.S. §24-4-106(9), govern the process. OR 3. Binding Arbitration: You have the right to submit your case to binding arbitration. If you choose this option, the arbitrator's decision is final and you have no further right to appeal your current valuation. C.R.S. §39-8-108.5 governs this process. The arbitration process involves the following: a. Select an Arbitrator: You must notify the Board of Equalization within 30 days that you will pursue arbitration. You and the Board of Equalization will select an arbitrator from the official list of qualified people. If you cannot agree on an arbitrator, the District Court of the county in which the property is located (i.e. Weld) will select the arbitrator. b. Arbitration Hearing Procedure: Arbitration hearings are held within sixty (60) days from the date the arbitrator is selected, and are set by the arbitrator. Both you and the Board of Equalization are entitled to participate in the hearing. The hearing is informal. The arbitrator has the authority to issue subpoenas for witnesses, books, records documents and other evidence pertaining to the value of the property. The arbitrator also has the authority to administer oaths, and determine all questions of law and fact presented to him. The arbitration hearing may be confidential and closed to the public if you and the Board of Equalization agree. The arbitrator's decision must be delivered personally or by registered mail within ten (10) days of the arbitration hearing. c. Fees and Expenses: The arbitrator's fees and expenses are agreed upon by you and the Board of Equalization. In the case of residential real property, the fees may not exceed $150.00 per case. For cases other than residential real property, the arbitrator's total fees and expenses are agreed to by you and Board of Equalization, but are paid by the parties as ordered by the arbitrator. If you have questions concerning the above information, please call me at (970) 400-4226. Very truly yours, BOARD OF EQUALIZATION Esther E. Gesick Clerk to the Board Weld County Board of Commissioners and Board of Equalization cc: Brenda Dones, Weld County Assessor August 5, 2021 Agent: RYAN LLC ETHAN HORN 1999 BROADWAY STE 400 DENVER, CO 80202-3025 Petitioner: CLERK TO THE BOARD PHONE (970) 400-4226 FAX (970) 336-7233 WEBSITE: www.weldgov.com 1150 O STREET P.O. BOX 758 GREELEY CO 80632 JDM II SF NATIONAL LLC C/O STATE FARM MUTUAL AUTO ONE STATE FARM PLAZA BLOOMINGTON, IL 61710-0001 RE: THE BOARD OF EQUALIZATION 2021, WELD COUNTY, COLORADO NOTICE OF DECISION Docket 2021-1992 Appeal 2008230176 Hearing 8/5/2021 Dear Petitioner: On the day indicated above, the Board of County Commissioners of Weld County Colorado convened and acting as the Board of Equalization, pursuant to C.R.S. §39-8-101et seq., considered petition for appeal of the Weld County Assessor's valuation of your property described above, for the year 2021. Account # Decision The Assessment and valuation is set as follows: Actual Value as Actual Value as Set by Determined by Assessor Board R0296201 Stipulated - Approved Stipulated Value $48,020,390 $45,200,000 A denial of a petition, in whole or in part, by the Board of Equalization must be appealed within thirty (30) days of the date the denial is mailed to you. You must select only one of the following three (3) options for appeal: 1. Appeal to Board of Assessment Appeals: You have the right to appeal the County Board of Equalization's decision to the Colorado Board of Assessment Appeals. A hearing before that Board will be the last time you may present testimony or exhibits or other evidence, or call witnesses in support of your valuation. If the decision of the Board of Assessment Appeals is further appealed to the Court of Appeals pursuant to C.R.S. §39-8-108(2), only the record of proceedings from your hearing before the Board of Assessment Appeals and your legal brief are filed with the appellate court. All appeals to the Board of Assessment Appeals filed after August 10, 2021, MUST comply with the following provisions of C.R.S. §39-8-107(5): (5)(a)(I) On and after August 10, 2021, in addition to any other requirements under law, any petitioner appealing either a valuation of rent -producing commercial real property to the Board of Assessment Appeals pursuant to C.R.S. §39-8-108(1) or a denial of an abatement of taxes pursuant to C.R.S. §39-10-114 shall provide to the county Board of Equalization or to the Board of County Commissioners of the County in the case of an abatement, and not to the Board of Assessment Appeals, the following information, if applicable: (A) Actual annual rental income for two full years including the base year for the relevant property tax year; (B) Tenant reimbursements for two full years including the base year for the relevant property tax year; (C) Itemized expenses for two full years including the base year for the relevant property tax year; and (D) Rent roll data, including the name of any tenants, the address, unit, or suite number of the subject property, lease start and end dates, option terms, base rent, square footage leased, and vacant space for two full years including the base year for the relevant property tax year. (II) The petitioner shall provide the information required by subsection (5)(a)(I) of this paragraph (a) within ninety days after the appeal has been filed with the board of assessment appeals. (b)(I) The Assessor, the County Board of Equalization, or the Board of County Commissioners of the County, as applicable, shall, upon request made by the petitioner, provide to a petitioner who has filed an appeal with the Board of Assessment Appeals not more than ninety days after receipt of the petitioner's request, the following information: (A) The primary method used by the county to determine the value of the subject property; and (B) The rates used by the county to determine the value of the subject property under the method identified in accordance with subsection (5)(b)(l)(A) of this section. (II) The party providing the information to the petitioner pursuant to subparagraph (I) of this paragraph (b) shall redact all confidential information contained therein. (c) If a petitioner fails to provide the information required by subparagraph (I) of paragraph (a) of this subsection (5) by the deadline specified in subparagraph (II) of said paragraph (a), the County may move the Board of Assessment Appeals to compel disclosure and to issue appropriate sanctions for noncompliance with such order. The motion may be made directly by the County Attorney and shall be accompanied by a certification that the County Assessor or the County Board of Equalization has in good faith conferred or attempted to confer with such petitioner in an effort to obtain the information without action by the Board of Assessment Appeals. If an order compelling disclosure is issued under this paragraph (c) and the petitioner fails to comply with such order, the Board of Assessment Appeals may make such orders in regard to the noncompliance as are just and reasonable under the circumstances, including an order dismissing the action or the entry of a judgment by default against the petitioner. Interest due the taxpayer shall cease to accrue as of the date the order compelling disclosure is issued, and the accrual of interest shall resume as of the date the contested information has been provided by the taxpayer. Appeals to the Board of Assessment Appeals must be made on forms furnished by that Board, and must be mailed or delivered within thirty (30) days of the date the denial by the Board of Equalization is mailed to you. The address and telephone number of the Board of Assessment Appeals are: Board of Assessment Appeals 1313 Sherman Street, Room 315 Denver, Colorado 80203 Telephone Number: (303) 864-7710 Email: baa@state.co.us Fees for Appeal to the Board of Assessment Appeals: A taxpayer representing himself is not charged for the first two (2) appeals to the Board of Assessment Appeals. A taxpayer represented by an attorney or agent must pay a fee of $101.25 per appeal. OR 2. Appeal to District Court: You have the right to appeal the decision of the Board of Equalization to the District Court of the county wherein your property is located: in this case that is Weld County District Court. A hearing before The District Court will be the last time you may present testimony or exhibits or other evidence, or call witnesses in support of your valuation. If the decision of the District Court is further appealed to the Court of Appeals pursuant to C.R.S. §39-8-108(1), the rules of Colorado appellate review and C.R.S. §24-4-106(9), govern the process. OR 3. Binding Arbitration: You have the right to submit your case to binding arbitration. If you choose this option, the arbitrator's decision is final and you have no further right to appeal your current valuation. C.R.S. §39-8-108.5 governs this process. The arbitration process involves the following: a. Select an Arbitrator: You must notify the Board of Equalization within 30 days that you will pursue arbitration. You and the Board of Equalization will select an arbitrator from the official list of qualified people. If you cannot agree on an arbitrator, the District Court of the county in which the property is located (i.e. Weld) will select the arbitrator. b. Arbitration Hearing Procedure: Arbitration hearings are held within sixty (60) days from the date the arbitrator is selected, and are set by the arbitrator. Both you and the Board of Equalization are entitled to participate in the hearing. The hearing is informal. The arbitrator has the authority to issue subpoenas for witnesses, books, records documents and other evidence pertaining to the value of the property. The arbitrator also has the authority to administer oaths, and determine all questions of law and fact presented to him. The arbitration hearing may be confidential and closed to the public if you and the Board of Equalization agree. The arbitrator's decision must be delivered personally or by registered mail within ten (10) days of the arbitration hearing. c. Fees and Expenses: The arbitrator's fees and expenses are agreed upon by you and the Board of Equalization. In the case of residential real property, the fess may not exceed $150.00 per case. For cases other than residential real property, the arbitrator's total fees and expenses are agreed to by you and Board of Equalization, but are paid by the parties as ordered by the arbitrator. If you have questions concerning the above information, please call me at (970) 400-4226. Very truly yours, BOARD OF EQUALIZATION Esther E. Gesick Clerk to the Board Weld County Board of Commissioners and Board of Equalization cc: Brenda Dones, Weld County Assessor Hello