3338 StCharles Appraisal

BORDERS BOOKS 3338 St. Charles Avenue New Orleans, Orleans Parish, Louisiana CBRE File No.
07-361HO-2695 Client Reference No. 040-2104
Self Contained Appraisal Report
Prepared for:
George Gose Underwriter ARTESIA MORTGAGE CAPITAL CORPORATION Its Successors and/or Assigns 1180 NW Maple Street, Suite 202 Issaquah, Washington 98027 Artesia Mortgage Capital Corporation its successors and/or assigns may read and rely upon the findings and conclusions of this report
VALUATION & ADVISORY SERVICES

2007 CB Richard Ellis, Inc.
VALUATION & ADVISORY SERVICES
2700 Post Oak Blvd., Suite 250 Houston, Texas 77056 T (713) 840-6625 F (713) 840-6649 www.cbre.com
June 20, 2007
George Gose Underwriter ARTESIA MORTGAGE CAPITAL CORPORATION 1180 NW Maple Street, Suite 202 Issaquah, Washington 98027 RE: Appraisal of Borders Books 3338 St. Charles Avenue New Orleans, Orleans County, Louisiana CBRE File No 07-361HO-2695 Client Reference No 040-2104
Dear Mr. Gose: At your request and authorization, CB Richard Ellis (CBRE) has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following Self Contained Appraisal Report. The subject will be a 24,000-square-foot, two-story, single tenant retail building located at 3338 St. Charles Avenue in New Orleans. The property is currently improved with a two-story building that has been used as Bultman Funeral Home for over 123 years. Bultman hosted services for numerous historical figures ranging from Confederate President Jefferson Davis to 1950s actress Jayne Mansfield. In recent years, funerals included those of oil tycoon Patrick Taylor and poet and painter Stan Rice, the husband of author Anne Rice. The property, which sustained damage during Hurricane Katrina, is currently under the ownership of Alderwoods Group, Inc. of Toronto which is in the process of being acquired by Service Corporation International (SCI) of Houston. As a result, the company is selling off several of its Katrina damaged properties and consolidating operations at its flagship home located on Canal Street. The funeral home closed in September of 2006 and has been under purchase negotiations with the proposed buyer, Stirling Forterra, LLC, since that time. The buyer plans to retain a portion of the existing building, primarily the faade but all other areas of the building will be essentially new. Estimated completion and rent commencement is expected to be May 1, 2008. Upon completion, the building will be 100.0% occupied by Borders Books and will be considered to be in excellent condition. The building will be situated on a 0.931-acre site. It is considered to be a Class A property in this market. The subject is more fully described, legally and physically, within the enclosed report.
George Gose June 20, 2007 Page 2 Upon completion of the building, the property will be stabilized. Therefore, the As Complete and As Stabilized market values are one in the same. Based on the analysis contained in the following report, the market value of the subject is concluded as follows. It is noted that the As Is market value is land value:
MARKET VALUE CONCLUSION
Appraisal Premise As Is As Complete & Stabilized As Complete & Stabilized
Compiled by CBRE
Interest Appraised Fee Simple Estate Leased Fee Interest Fee Simple Estate
Date of Value July 12, 2007 May 1, 2008 May 1, 2008
Value Conclusion $2,800,000 $10,400,000 $6,250,000
Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter. The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and Title XI Regulations. It is understood that Artesia Mortgage Capital Corporation will rely, in part, on the Report in deciding to make a loan evidenced by a promissory note secured by the Mortgaged Property (collectively the Note), and that Rating Agencies and prospective purchasers of the Note or related securities will also rely on the Report. The report is for the sole use of the client; however, client may provide only complete, final copies of the appraisal report in its entirety (but not component parts) to third parties who shall review such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CBRE or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors in its entirety (but not component parts) without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter.
George Gose June 20, 2007 Page 3
CBRE hereby expressly granted to Client the right to copy this report and distribute it to other parties in the transaction for which this report has been prepared, including employees of Client, other lenders in the transaction, and the borrower, if any. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE can be of further service, please contact us. Respectfully submitted, CBRE - VALUATION & ADVISORY SERVICES
Cindy K. Latham, MAI Senior Real Estate Analyst Certification No. TX - 1323775-G Phone: Fax: Email: 713.888.4765 713.840.6649 cindy.latham@cbre.com
Stephen D. Duplantis, MAI Senior Managing Director Texas Certification No. 1321138-G Phone: Fax: E-mail: (713) 840-6625 (713) 888-4709 steve.duplantis@cbre.com
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CERTIFICATION OF THE APPRAISAL
CERTIFICATION OF THE APPRAISAL We certify to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment. 4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 5. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 6. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the approval of a loan. 7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of Louisiana. 8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. 9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 10. As of the date of this report, Cindy K. Latham, MAI and Stephen D. Duplantis, MAI have completed the continuing education program of the Appraisal Institute. 11. Cindy K. Latham, MAI has and Stephen D. Duplantis, MAI has not made a personal inspection of the property that is the subject of this report.
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CERTIFICATION OF THE APPRAISAL
12. No one provided significant real property appraisal assistance to the persons signing this report. 13. Valuation & Advisory Services operates as an independent economic entity within CBRE. Although employees of other CBRE divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy are maintained at all times with regard to this assignment without conflict of interest.
Cindy K. Latham, MAI Texas Certification No. TX - 1323775-G
Stephen D. Duplantis, MAI Texas Certification No. 1321138-G
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SUBJECT PHOTOGRAPHS
SUBJECT PHOTOGRAPHS
AERIAL VIEW iii

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SUBJECT PHOTOGRAPHS
TYPICAL EXTERIOR VIEW OF THE SUBJECT
TYPICAL EXTERIOR VIEW OF THE SUBJECT iv

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SUMMARY OF SALIENT FACTS

Property Name Location Client Reference Number Assessors Parcel Number Highest and Best Use As Vacant As Improved Property Rights Appraised Land Area Improvements Property Type Number of Buildings Number of Stories Gross Leasable Area Year Built Condition Major Tenants Borders Books Estimated Exposure Time Financial Indicators Current Occupancy Stabilized Occupancy Stabilized Credit Loss Overall Capitalization Rate Discount Rate Terminal Capitalization Rate Pro Forma Operating Data Effective Gross Income Operating Expenses Expense Ratio Net Operating Income 100.0% 100.0% 0.0% 6.75% 8.00% 7.00% Total $744,000 $17,280 2.32% $726,720 $30.28 Per SF $31.00 $0.72 24,000 SF 9 Months Retail 1 2 24,000 SF 2008 Excellent (Misc. Freestanding Retail) Retail Retail Leased Fee Interest 0.93 AC 40,534 SF Borders Books 3338 St. Charles Avenue, New Orleans, Orleans Parish, Louisiana 040-2104 614226901
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VALUATION Land Value Market Value As Stabilized On Cost Approach Sales Comparison Approach Income Capitalization Approach Insurable Value May 1, 2008
Total $2,800,000
Per SF $69.08
$9,400,000 $10,245,000 $10,600,000 $4,250,000
$391.67 $426.88 $441.67 $177.08
CONCLUDED MARKET VALUE Appraisal Premise As Is As Complete & Stabilized As Complete & Stabilized
Compiled by CBRE
Value $2,800,000 $10,400,000 $6,250,000
EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS The value herein is based on the Lease Agreement provided by Stirling Forterra, LLC. If not, the value conclusion is subject to change. The value assumes the improvements will be constructed in a good workmanlike manner based on the information provided by the developer. If not, the value conclusion is subject to change.
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TABLE OF CONTENTS
TABLE OF CONTENTS CERTIFICATION OF THE APPRAISAL .............................................................................................i SUBJECT PHOTOGRAPHS ......................................................................................................... iii SUMMARY OF SALIENT FACTS.................................................................................................... v TABLE OF CONTENTS.............................................................................................................. vii INTRODUCTION ...................................................................................................................... 1 AREA ANALYSIS......................................................................................................................... 6 NEIGHBORHOOD ANALYSIS .................................................................................................... 9 MARKET ANALYSIS .................................................................................................................. 13 FLOOD MAP........................................................................................................................... 24 SITE ANALYSIS ........................................................................................................................ 26 IMPROVEMENTS ANALYSIS ...................................................................................................... 29 ZONING ................................................................................................................................ 34 TAX AND ASSESSMENT DATA .................................................................................................. 35 HIGHEST AND BEST USE ......................................................................................................... 36 APPRAISAL METHODOLOGY ................................................................................................... 39 LAND VALUE........................................................................................................................... 40 COST APPROACH................................................................................................................... 44 INSURABLE VALUE................................................................................................................... 49 SALES COMPARISON APPROACH............................................................................................ 51 INCOME CAPITALIZATION APPROACH.................................................................................... 58 GO DARK ANALYSIS ............................................................................................................ 79 RECONCILIATION OF VALUE .................................................................................................. 82 ASSUMPTIONS AND LIMITING CONDITIONS .......................................................................... 84 ADDENDA A Glossary of Terms B Land Sale Data Sheets C Improved Sale Data Sheets D Rent Comparable Data Sheets E Purchase Agreement F Lease G Construction Costs H Prcis METRO Report - Economy.com, Inc. I Required Client Information J Qualifications K Engagement Letter vii
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INTRODUCTION
INTRODUCTION PROPERTY IDENTIFICATION The subject will be a 24,000-square-foot, two-story, single tenant retail building located at 3338 St. Charles Avenue in New Orleans. The property is currently improved with a two-story building that was previously used as a funeral home. The prospective buyer plans to retain a portion of the existing building, primarily the faade but all other areas of the building will essentially be new. Estimated completion is expected to be May 1, 2008. Upon completion, the building will be 100.0% occupied by Borders Books and will be considered to be in excellent condition. The building will be situated on a 0.931-acre site. It is considered to be a Class A property in this market described, legally and physically, within the enclosed report. OWNERSHIP AND PROPERTY HISTORY Title to the property is currently vested in the name of Alderwoods (Louisiana), Inc. who acquired title to the property in March of 1996, as improved for an undisclosed amount. The transaction included the business as well as the real estate. The property is currently improved with a two-story building that has been used as Bultman Funeral Home for over 123 years. Bultman hosted services for numerous historical figures ranging from Confederate President Jefferson Davis to 1950s actress Jayne Mansfield. In recent years, funerals included those of oil tycoon Patrick Taylor and poet and painter Stan Rice, the husband of author Anne Rice. The property, which sustained damage during Hurricane Katrina, is currently under the ownership of Alderwoods Group, Inc. of Toronto which is in the process of being acquired by Service Corporation International (SCI) of Houston. As a result, the company is selling off several of its Katrina damaged properties and consolidating operations at its flagship home located on Canal Street. The funeral home closed in September of 2006 and has been under purchase negotiations with the proposed buyer, Stirling Forterra, LLC, since that time. The property is under contract for $2,800,000 or approximately $69.07 PSF of site area. The transaction appears to be arms length and market oriented based upon our concluded market value of $2,800,000 for the subject site. The prospective buyer plans to construct a 24,000 square foot, single-tenant retail building on the property and will retain a portion of the existing building, primarily the faade but all other areas of the building will essentially be new. Estimated completion is expected to be May 1, 2008. Upon completion, the building will be 100.0% occupied by Borders Books and will be considered to be in excellent condition. The subject is more fully
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INTRODUCTION
PREMISE OF THE APPRAISAL/RELEVANT DATES The following table illustrates the various dates associated with the valuation of the subject and the valuation premise(s):
PREMISE OF THE APPRAISAL/RELEVANT DATES

Date of Report: Date of Inspection: Dates of Value As Is: As Complete & Stabilized
Compiled by CBRE
July 20, 2007 July 12, 2007 July 12, 2007 May 1, 2008
PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to estimate the market value of the subject property. The current economic definition of market value agreed upon by agencies that regulate federal financial institutions in the U.S. (and used herein) is as follows: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or 1 creative financing or sales concessions granted by anyone associated with the sale.
TERMS AND DEFINITIONS

The Glossary of Terms in the addenda provides definitions for additional terms that are, and may be used in this appraisal.
Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C Appraisals, 34.42 (g); Office of Thrift Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago: Appraisal Institute, 2002), 177-178. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the example referenced in the Uniform Standards of Professional Appraisal Practice (USPAP).
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INTRODUCTION
INTENDED USE AND USER OF REPORT

This appraisal is to be used by the client for internal decision making by the client, Artesia Mortgage Capital Corporation.
PROPERTY RIGHTS APPRAISED

The interest appraised represents the leased fee interest.
SCOPE OF WORK
The scope of the assignment relates to the extent and manner in which research is conducted, data is gathered and analysis is applied, all based upon the following problem-identifying factors stated elsewhere in this report: Client Intended use Intended user Type of opinion Effective date of opinion Relevant characteristics about the subject Assignment conditions
This appraisal of the subject has been presented in the form of a Self-Contained Appraisal Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of USPAP. That is, this report incorporates, to the fullest extent possible, practical explanation of the data, reasoning and analysis that were used to develop the opinion of value. This report also includes thorough descriptions of the subject and the market for the property type. CBRE completed the following steps for this assignment: Extent to Which the Property is Identified CBRE collected the relevant information about the subject from the owner (or representatives), public records and through an inspection of the subject. The property was legally identified through its postal address, assessors records, legal description and title report. Economic characteristics of the subject were identified via an analysis of leases and/or lease briefs between the lessor and lessee, recent rent roll, and historical operating statements. Extent to Which the Property is Inspected CBRE inspected both the interior and exterior of the subject, as well as its surrounding environs on the effective date of appraisal.
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INTRODUCTION
Type and Extent of the Data Researched CBRE reviewed the micro and/or macro market environments with respect to physical and economic factors relevant to the valuation process. This process included interviews with regional and/or local market participants, available published data, and other various resources. CBRE also conducted regional and/or local research with respect to applicable tax data, zoning requirements, flood zone status, demographics, income and expense data, and comparable listing, sale and rental information. Type and Extent of Analysis Applied CBRE analyzed the data gathered through the use of appropriate and accepted appraisal methodology to arrive at a probable value indication via each applicable approach to value. Approaches to value used include Cost, Sales Comparison and Income Capitalization. The steps required to complete each approach are discussed in the methodology section. CBRE then correlated and reconciled the results into a reasonable and defensible value conclusion, as defined herein. A reasonable exposure time and marketing time associated with the value estimate presented has also been concluded.
SPECIAL APPRAISAL INSTRUCTIONS

There have been no special appraisal instructions for this assignment.
EXPOSURE/MARKETING TIME
Current appraisal guidelines require an estimate of a reasonable time period in which the subject could be brought to market and sold. This reasonable time frame can either be examined historically or prospectively. In a historical analysis, this is referred to as exposure time. Exposure time always precedes the date of value, with the underlying premise being the time a property would have been on the market prior to the date of value, such that it would sell at its appraised value as of the date of value. On a prospective basis, the term marketing time is most often used. The exposure/marketing time is a function of price, time, and use. It is not an isolated estimate of time alone. In consideration of these factors, we have analyzed the following: exposure periods for comparable sales used in this appraisal; marketing time information from the CBRE National Investor Survey; and the opinions of market participants.
The following table presents the information derived from these sources.
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INTRODUCTION
EXPOSURE TIME INFORMATION

Investment Type Comparable Sales Data National Regional Mall Market National Power Center Market National Strip Shopping Center Market National Net Lease Market CBRE Estimate
Korpacz Real Estate Investor Survey, 1st Quarter 2007
Exposure Time (Months) Range Average 3.0 3.0 3.0 2.0 1.0 9.0 9.0 6.0 9 Months 6.0 7.2 5.7 6.1 3.6 - 12.0 - 12.0
In general, the improved sales indicate exposure times in the lower to middle portion of the range indicated by the investor survey. In addition to the sales and survey data, we have also reviewed the assumptions and conclusions reached, particularly the income estimates and rates of return and there potential impact on exposure/marketing time. Based on these analyses, we have concluded an exposure/marketing time of 9 months or less would be considered reasonable for the subject. This exposure/marketing time reflects current economic conditions, current real estate investment market conditions, the terms and availability of financing for real estate acquisitions, and property and market-specific factors. It assumes that the subject is (or has been) actively and professionally marketed. The marketing/exposure time would apply to all valuation premises included in this report.
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AREA ANALYSIS
AREA ANALYSIS
Economy.com provides the following New Orleans metro area economic summary as of March 2007. The full Economy.com report is presented in the Addenda.
NEW ORLEANS ECONOMIC ANALYSIS
Indicators
Gross Metro Product, C$B % Change Total Employment (000) % Change Unemployment Rate Personal Income Growth Population (000) Single-Family Permits Multifamily Permits Existing Home Price ($Ths) Mortgage Originations ($Mil) Net Migration (000) Personal Bankruptcies Source: Economy.com
1999
44.3 -6.9 617.7 0.2 4.7 5.5 1,315.7 3,475 692 111.6 3,386 -8.0 6,648
2000
43.5 -1.9 618.7 0.2 4.9 6.7 1,311.2 3,499 939 117.0 6,136 -10.5 8,198
2001
43.1 -0.9 608.4 -1.7 5.5 1.6 1,311.7 4,326 1,057 122.5 7,121 -5.6 7,808
2002
43.5 0.9 611.4 0.5 5.5 2.5 1,312.4 5,357 772 130.1 11,046 -4.6 8,085
2003
45.0 3.4 614.8 0.6 5.1 5.7 1,314.8 5,698 702 137.1 7,426 -3.5 7,584
2004
41.2 -8.5 554.6 -9.8 8.0 -35.4 1,314.6 4,488 293 158.9 6,614 -6.3 8,792
2005
34.0 -17.4 479.8 -13.5 5.4 45.0 913.0 5,246 737 172.4 6,529 -406.6 2,841
2006
36.8 8.3 527.8 10.0 2.0 8.1 1,165.6 7,864 3,837 160.5 5,786 247.1 1,301
2007
38.4 4.2 536.0 1.5 1.9 3.6 1,134.0 9,331 5,051 162.8 5,361 -37.2 1,403
2008
39.1 1.9 541.3 1.0 1.9 4.3 1,136.7 7,760 4,486 167.7 5,488 -2.8 1,518
2009
39.7 1.6 545.9 0.8 1.8 4.3 1,138.1 5,023 3,098 173.5 5,678 -4.1 1,663
2010
40.3 1.4 550.0 0.8 1.8 4.0 1,139.7 4,839 3,178 179.7 5,848 -4.0 1,782
RECENT PERFORMANCE
More than 18 months after Hurricane Katrina, the New Orleans economy is slowly emerging from its lull. Benchmark revisions were very positive for New Orleans, revealing fewer jobs lost and a stronger
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AREA ANALYSIS
rebound. The metro area still has a very long road back as total employment is still almost 15% below its pre-Katrina level. However, one way to gauge New Orleans recovery is to measure the labor markets progress since Hurricane Katrina rather than focusing on its pre-storm level. Since September 2005, New Orleans has reclaimed roughly 35,000 jobs. As expected, construction is leading the way. More encouraging is the strong rebound in professional/business services, which is currently just shy of its pre-Katrina employment level. Strong hiring in this sector suggests that New Orleans displaced businesses are indeed returning, which bodes well for the outlook.
POPULATION
The release of the Census Bureaus midyear 2006 population figures provides insight into how many residents New Orleans lost in the wake of Hurricane Katrina. The data show that the metro area lost roughly 290,000 residents, or 22% of its population base. Of the seven parishes that comprise the New Orleans metro area, four recorded declines in their population while three experienced an increase. As expected, the largest population declines were in the hardest hit parishes namely, Orleans and St. Bernard. St. Tammany experienced the largest increase in its population, adding roughly 11,000 residents, or 5%. Looking ahead, the slow recovery in the metro areas labor force to date suggests a weak rebound in New Orleans population this year. Nevertheless, we do not expect the metro areas population to ever return to its pre-Katrina level.
REBUILDING
The lack of affordable housing is a major obstacle in New Orleans recovery effort. Prices soared immediately following Hurricane Katrina due to a supply shortfall, pushing affordability to one of its lowest levels in 20 years. As such, the massive rebuilding effort is dependent upon the issuance of checks from the states Road Home Program, which provides financial assistance for rebuilding. Through mid-March, there have been over 115,000 applications statewide and only 3,000 closings. This is the primary reason why, despite the clear need, housing starts in New Orleans have yet to surpass their pre-Katrina level. Additional building is essential to curbing house prices, boosting affordability, and enabling more residents to return to, or remain in, New Orleans.
HURDLES
Despite numerous recent positive developments, there remain a number of challenges. The slow arrival of checks from the Road Home Program will significantly strain New Orleans labor market. Issuance of aid is expected to increase over the next few months, which will spark the long awaited and much anticipated rebuilding boom. However, the current labor short gage is a severe constraint on the number of housing projects that are undertaken. Another obstacle is the slow opening of
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AREA ANALYSIS
public schools, hospitals and the re-establishment of public transportation. These are necessary in promoting economic growth and enticing displaced households to return.
CONCLUSION
Despite positive benchmark revisions, the contours of the baseline forecast for New Orleans are unchanged. Hiring will accelerate this year as the massive rebuilding effort will support job gains in construction and services. The magnitude of the rebuilding effort will be limited by political red tape, available labor and the amount of funding issued to residents. Therefore, the lack of affordable housing will limit the supply of labor and the repopulation of the metro area. A permanently lower population will be a major long-term impediment. Job growth will slow toward the end of the decade as federal funding for rebuilding begins to fade, ensuring that New Orleans will not reach its prehurricane employment level for several decades.
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NEIGHBORHOOD ANALYSIS
LOCATION
The neighborhood is located in the city of New Orleans and is considered a suburban location. The city of New Orleans is located in Orleans Parish. The subject neighborhood is located within an area described as the garden district.
BOUNDARIES
The neighborhood boundaries are detailed as follows: North: South: East: West: Airline Drive/Tulane Avenue Mississippi River Central Business District Mississippi River
LAND USE
Land uses within the subject neighborhood consist primarily of residential properties, office buildings and hotels. The Uptown area and the Central Business District in New Orleans are the focal points of the area. In addition, Tulane University and Loyola University are in the immediate area. Tulane University was founded in 1834 and is one of the foremost independent national research universities
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in the United States. Tulane's schools and colleges offer undergraduate, graduate and professional degrees in the liberal arts and sciences, architecture, business, engineering, law, social work, medicine, and public health and tropical medicine. Loyola University New Orleans is a Catholic institution and is one of 28 Jesuit colleges and universities in the United States. Loyola is located in the Uptown section of New Orleans, one of the city's most prestigious residential neighborhoods and 15 minutes away from downtown and the French Quarter. Loyola University New Orleans has a total enrollment of 5,900 students, including 3,800 undergraduates. The geographical diversification consists of representatives from all 50 states, the District of Columbia, Puerto Rico, and 46 foreign countries. In recent years, Loyola has consistently ranked among the top regional colleges and universities in the South and one of the top 60 in the United States by U.S. News & World Report's special issue "America's Best Colleges." Loyola also has been named one of "America's 300 Best Buys" in Barron's Best Buys in College Education, and ranks in the top seven percent of the 1,500 colleges and universities ranked by Barron's.
GROWTH PATTERNS
Growth within the central business district is driven primarily by tourism and the oil and gas industry. New Orleans is one of the top convention and tourist destinations in the United States. The Citys hotel/motel sales rose, displacements reaching an all time high, and employment in the tourisminfluenced service sector led the area in terms of net job growth in 1999. In 2001, New Orleans had 3,008 meetings and conventions attended by over 1.5 million guests. The Morial Convention Center, which was last expanded in 1999, ranks as one of the largest single-level exhibition halls in the nation, totaling 1.1 million square feet. Louisiana has been responsible for the production of 90% of the United States offshore gas and 70% of the United States offshore oil over the last 40 years. Almost half of all the producing offshore wells in the world are still located off Louisiana's coast, and Louisiana ranks second only to Texas with approximately 17% of the nations oil refining capacity. Approximately 40% of Louisianas oil refineries and over 50% of its oil refining capacity are located in the New Orleans region. New Orleans is also the southern anchor of the Louisiana petrochemical corridor, which produces nearly a quarter of all U.S. chemicals and refines a significant amount of the nation's gasoline.
ACCESS
The subject propertys location offers excellent ingress/egress from New Orleans extensive highway network, with convenient access to I-10 and Route 90. St. Charles Avenue and Josephine Street border the subject tract. Other nearby roadways include Jackson Avenue, which provides north/south access and Magazine Street which provides east/west access. The subject is centrally located with easy access to the New Orleans Downtown CBD, Uptown, the French Quarter, the convention center, the Riverwalk entertainment complex, Medical Centers and Universities. 10
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Easy direct routes connect the site with the expressway system and from there to Jefferson Parish, the West Bank and New Orleans East. St. Charles Avenue and nearby Magazine Street make Uptown an easy commute, while the Greater New Orleans Mississippi River Bridge and the Canal Street ferry are just a short drive away. And, since St. Charles Avenue and Canal Street are major arteries for the city's public transit system, the subject enjoys highly cost-efficient transportation service to all parts of New Orleans, with the Regional Transit Authority trolley and buses stopping at the subject. The following items are considered major strengths and weaknesses of the neighborhood. Strengths Well developed infrastructure, including strategic port facilities for domestic and international trade Tourist hot spots are up and running again following Hurricane Katrina, helping provide a better than anticipated turnout for Mardi Gras The subjects immediate area, while sustaining some damage from the recent hurricanes, did not sustain any prolonged flooding from the levee breaches Weaknesses Below average per capita income High poverty rate
Low rate of insurance holders may hinder reconstruction
DEMOGRAPHICS
Selected neighborhood demographics in a one-, three-, and five-mile radius from the subject are shown in the following table:
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SELECTED NEIGHBORHOOD DEMOGRAPHICS

3338 St. Charles Avenue New Orleans, Louisiana Population 2012 Population 2007 Population 2000 Population 1990 Population Growth 2007 - 2012 Growth 2000 - 2007 Growth 1990 - 2000 1990 Population 1990 Households 1990 Families 1990 Housing Units 1990 Population, Age 0 - 4 1990 Population, Age 5 - 9 1990 Population, Age 10 - 14 1990 Pop, Age 15 - 17 1990 Population, Age 25 - 34 1990 Pop, Age 50 - 54 1990 Population, Age 65 - 74 2000 Median HH Inc in 1999 2000 Avg HH Inc in 1999 1990 Population, Age 85+ Age 25+ Percent College Graduates - 2007
Source: CBRE
Radius 1.0 Mile 30,736 29,025 38,317 41,359 5.89% -24.25% -7.36% 56 37 74 7 51.35% -50.00% 957.14% $21 $6 $9 $65,309 $77,628 183 223.2%
Radius 3.0 Miles 151,465 130,704 186,535 191,893 15.88% -29.93% -2.79% 940 620 1,269 123 51.61% -51.14% 931.71% $359 $99 $176 $61,912 $82,680 3,305 271.3%
Radius 5.0 Miles 361,267 306,062 432,673 440,730 18.04% -29.26% -1.83% 3,353 2,317 4,458 596 44.71% -48.03% 647.99% $1,649 $347 $599 $69,511 $88,039 12,782 251.0%
CONCLUSION
As shown above, the population within the subject neighborhood has shown negative growth over the past several years. The neighborhood currently has a moderate to low-income demographic profile. The outlook for the neighborhood is for slow to moderate performance with limited improvement over the next several years. As a result, the demand for existing developments is expected to be moderate. It is important to note that these demographic trends do not take into account the post Hurricane Katrina natural disaster. The greater New Orleans region was heavily evacuated into surrounding cities. This factor has caused a tremendous upward pricing and occupancy trend on all facets of real estate in surrounding markets.
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MARKET ANALYSIS
MARKET ANALYSIS
The market analysis forms a basis for assessing market area boundaries, supply and demand factors, and indications of financial feasibility. Primary data sources utilized for this analysis includes REIS, 4th Quarter 2006, the most recent available. Due to the impact of Hurricane Katrina on the New Orleans metro, the time periods from Third Quarter 2005 through Second Quarter 2006 are unavailable. According to Reiss New Orleans Update 3rd Quarter 2006, ten months after Hurricane Katrina made landfall on the Louisiana coast and the levees protecting New Orleans failed, there is considerable uncertainty about the long-term outlook for the city. Reis economists highlight the progress made in rebuilding in the past few months and the results of Reiss continuing coverage of this market in transition. The retail sector continues to experience great uncertainty. Reis's intensive survey of commercial properties in New Orleans, conducted during the 1st and 2nd quarter of 2006, showed that rehabilitation efforts for properties in East Orleans have lagged compared to buildings in other sections of the metro. Due in part to the extent of the flooding in the area, water lingered in some parts of East Orleans for some time after other sections of the city had dried. The latest US Geological Survey report shows that the largest share of total land in New Orleans lost due to Hurricane Katrina was in East Orleans, in the section of wetlands south of the St. Bernard hurricane levees, east of the Mississippi River (Associated Press, October 2006). As much as 40% of the stock of rental apartment units was either destroyed or heavily damaged in this section of the metro area.
DEMOGRAPHIC ANALYSIS
Demand for additional retail property is a direct function of population change and household income. Retail properties are products of a clearly definable demand relating directly to population shifts and income patterns. Housing, Population and Household Formation The following table illustrates the population and household changes for the subject neighborhood:
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MARKET ANALYSIS
POPULATION AND HOUSEHOLD PROJECTIONS

3338 St. Charles Avenue New Orleans, Louisiana Population 2012 Population 2007 Population 2000 Population 1990 Population Growth 2007 - 2012 Growth 2000 - 2007 Growth 1990 - 2000 1990 Population 1990 Households 1990 Families 1990 Housing Units 1990 Population, Age 0 - 4 1990 Population, Age 5 - 9 1990 Population, Age 10 - 14 1990 Pop, Age 15 - 17
Source: CBRE
Radius 1.0 Mile 30,736 29,025 38,317 41,359 5.89% -24.25% -7.36% 56 37 74 7 51.35% -50.00% 957.14%
Radius 3.0 Miles 151,465 130,704 186,535 191,893 15.88% -29.93% -2.79% 940 620 1,269 123 51.61% -51.14% 931.71%
Radius 5.0 Miles 361,267 306,062 432,673 440,730 18.04% -29.26% -1.83% 3,353 2,317 4,458 596 44.71% -48.03% 647.99%
As shown, the subjects neighborhood is experiencing slight decreases in both population and households. Income Distributions Household income available for expenditure on consumer items is a primary factor in determining the retail supply and demand levels in a given market area. In the case of this study, a projection of household income identifies (in gross terms) the market from which the subject submarket draws. The following table illustrates estimated household income distribution for the subject neighborhood.
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MARKET ANALYSIS
HOUSEHOLD INCOME DISTRIBUTION

2000 HUs, 1 Unit Attached 2000 HUs, 2 Units 2000 HUs, 3 - 19 Units 2000 HUs, 20 - 49 Units 2000 HUs, 50+ Units 2000 HU, Mobile home 2000 HUs, Other 2000 HUs, Built 1999 to March 2000 2000 HUs, Built 1995 to 1998 2000 HUs, Built 1990 to 1994 2000 HUs, Built 1980 to 1989
Source: CBRE
Radius 1.0 Mile 5.41% 59.46% 32.43% 13.51% 13.51% 5.41% 127.03% 100.00% 54.05% 43.24%
Radius 3.0 Mile 4.52% 22.90% 5.48% 3.23% 39.52% 9.52% 36.61% 59.68% 35.97% 83.55%
Radius 5.0 Mile 5.14% 19.90% 5.83% 4.83% 30.90% 4.96% 45.62% 77.60% 48.08% 83.00%
Outlook Based on this analysis, the immediate area surrounding the subject is projected to experience moderate, positive growth relative to households, population, income levels and retail expenditures into the near future. Given the area demographics, it appears that demand for both comparable surrounding area retail properties and the subject will continue to be favorable.
MARKET OVERVIEW
The following discussion illustrates some general observations in the surrounding retail market. Market Summary Market statistics for the New Orleans area and the subject submarket are shown in the following table:
RETAIL MARKET STATISTICS

Category Existing Supply (SF) Average Occupancy All Classes Average Rent PSF All Classes Date of Survey
Source: REIS 4th Quarter 2006
New Orleans Area 3,442,000 89.6% $11.88 4th Qtr 2006
Local Submarket 917,041 91.5% $14.76
As shown above, the average occupancy rate for the subject submarket is higher than that of the overall market area. In addition, the average rental rate for the submarket is also above the overall 15
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MARKET ANALYSIS
market. The subject submarket is considered an upper tier submarket as compared to the other submarkets in the overall market area. Absorption is projected to be positive, however, the overall area is well occupied and new construction is projected to be minimal. Well occupied properties with good locations, such as the subject, should continue to experience stable occupancy rates over the near term. Market Trends The table below presents the quarterly trends in rental rates and occupancy for the New Orleans area and local submarket over the past several years:
RETAIL MARKET TRENDS

New Orleans Area Date 4th Qtr. 2003 4th Qtr. 2004 2nd Qtr. 2005 4th Qtr. 2006
Source: REIS 4th Quarter 2006
Local Submarket Rent PSF $14.17 $14.23 $14.34 $14.76 Occupancy 94.4% 93.0% 93.2% 91.5%
Rent PSF $12.87 $13.03 $13.03 $11.88
Occupancy 91.2% 84.0% 91.4% 89.6%
Over the past three years, the overall market area and the local submarket have generally maintained stabilized occupancy rates. The average occupancy rate and average rental rate for the subject submarket are both higher than that of the overall market area, indicating the relative strength of the subjects market area. During the same time frame, rental rates in the submarket have outperformed the overall market.
LOUISIANA POST-KATRINA
Katrina has proved to be "the largest challenge this company has ever faced in its 100-year history," said Walgreens Drug Stores spokeswoman Tiffani Bruce. Even though most national retail chains have had experience rebounding from disasters in other states, few have ever faced a situation like the one they're dealing with in New Orleans. Despite the challenges, national chains have kept a strong presence in the local market. More than 75 percent of the local stores run by the nation's largest retail chains have reopened, and though none will release specific sales figures, experts and retail industry officials say business is strong. "The Wal-Marts, the Home Depots (and) apparel sales (are booming) as people replace their wardrobes" and household items, said Don Randon of Don Randon Real Estate Inc., a real estate broker specializing in large retail transactions.
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MARKET ANALYSIS
Consumers are replacing everything from clothes to appliances that were lost in the storm. "It's a good environment for the big (retailers)," said Richard Stone, senior vice president of Latter & Blum Inc. Realtors. "Traffic has definitely been above normal," said Tricia Thriffiley, spokeswoman for Lakeside Shopping Center. "Our stores are still reporting sales 50 to 100 percent" above last year. Even Dillard's, a Lakeside anchor store that still is partially closed for storm repairs, is seeing increased sales figures, Thriffiley said. The story's the same at The Esplanade in Kenner. "Based on preliminary data for the first quarter, sales at stores at The Esplanade are up double digits over the same period last year," said marketing director Anne Mialaret Reed. "We expect to maintain and improve upon this trend as more stores reopen." The strong sales at The Esplanade come even though one of the mall's anchors, Macy's Department Store, has not reopened. A second anchor at the mall, Mervyn's, closed earlier this year when the chain pulled out of Louisiana. Sales at home improvement chains like Home Depot and Lowes Home Improvement are obviously strong because of the robust home improvement market. Both companies have reopened most of their pre-Katrina stores and have even announced new stores. But there have been some less obvious signs of retail strength as well. Several weeks ago Walgreens reopened its first store in St. Bernard. "It's turned out to be our best performing store in the (metro) market," said Bruce, the chain's spokeswoman. The strong sales, according to Bruce, are due to the fact that competition from other retailers is still miniscule in St. Bernard. But it hasn't been easy for the large corporate chains to get their local stores up and running. A lack of housing has made it difficult for Walgreens employees who evacuated to other regions to come home, Bruce said. To get replacement workers, companies often have to pay higher wages. Sav-ACenter sites are operating with only about 80 percent of their pre-Katrina work force, and the company has increased starting wages 10 percent, said Glenn Dickson, Sav-A-Center's vice president of operations for the region. The chain is a subsidiary of Great Atlantic & Pacific Tea Co. Jobs that require special skills, such as meat cutters, chefs and cake decorators, have been especially hard to fill, Dickson said. Some of the chain retail locations that are still closed are in shopping centers that were damaged and shuttered by the storm. The Oakwood Center in Terrytown, for example, was severely damaged by fire and looters in the days after Hurricane Katrina and remains closed. J.C. Penny's, Dillard's, Mervyn's and Sears were all anchor stores in the mall. Only Sears has reopened. Brian Lade, general manager for General Growth Properties, owner of the Oakwood Center, said interior demolition of the mall is complete and an opening date will be announced in the next few months. General Growth also owns the Riverwalk in New Orleans, which has gotten about 55 percent of its retail space back in operation but is feeling the effects of a slowdown in tourism. Meanwhile, Lake
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MARKET ANALYSIS
Forest Plaza Mall in eastern New Orleans, which was anchored by Dillard's, was inundated with flood waters and has not reopened. Other stand-alone stores remain shuttered because they are in neighborhoods that were hard-hit by Katrina's floodwaters, like eastern New Orleans, Chalmette and Arabi. Retailers with locations in those areas are coping with damaged stores and waiting for the local population to recover. Home Depot, for example, still has two metro area locations -- in Chalmette and eastern New Orleans -- that remain closed. Similarly, CVS Corp. has yet to reopen two of its 19 area stores. Those stores are in the hard-hit communities of Arabi and Chalmette. The post-Katrina population shifts have presented unprecedented challenges for retail chains. In other states that have been battered by hurricanes, like Florida, storms have forced the population to temporarily evacuate. But the evacuation and the permanent displacement of some storm victims in the New Orleans area represented an extreme shuffling of the customer base. Barriers to Entry Labor costs and material costs in the general area have increased as much as 140% since Katrina. Zoning tends to limit new construction. Combined with the overall lack of quality developable sites in the subjects immediate area also tends to limit new development. Demand Generators The subject has a good location within the New Orleans area. It is located near major traffic arteries that carry a significant amount of traffic and are primary connectors in the area. Although population and household estimates are forecast to decline discount stores such as Wal-Mart and home improvement stores in New Orleans like Lowes and Home Depot are doing well. Sale of clothing/apparel as well as construction and household items and appliances are booming as people gradually seek to replace their wardrobes and household items that were lost in the storm. The area is a suburban area of New Orleans and a large portion of the demand for the area is being derived by the New Orleans MSA. Tourism is a major demand factor for the central business district of New Orleans along with the oil and gas business for the State of Louisiana. Investment Trends Investment trends within the area have been favorable. According to Capital Trends Monthly January 2007 published by Real Capital Analytics, sales of significant retail properties totaled $46.7 billion in 2006, a 7% decrease in volume compared to 2005. The fall in activity results largely from fewer deals for regional malls and portfolio transactions. Portfolio activity was sluggish throughout most of the year but picked up substantially in Q4. Totaling only $12 billion in closed transactions last year,
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MARKET ANALYSIS
almost $9 billion of portfolios were already in contract and scheduled to close in early 2007. One-off sales of retail properties were flat in 2006 and totaled over $35 billion. Retail properties have appreciated nearly 90% since the end of 2000, outpacing gains made by other property types and prices continued to rise throughout 2006. Cap rate compression also continued through 2006, but at a slower pace. Rising interest rates in the first half of 2006 exerted upward pressure on cap rates, but yields on retail property acquisitions are still 3040 bps lower than a year ago. The following shows the national strip center market activity according to the January 2007 issue of Retail Capital Trends Monthly published by Real Capital Analytics.
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MARKET ANALYSIS
$250 $225 $200 $175 $150 $125 $100 $75

'02
price pe r s quare foot

strip m all & o ther Repeat Sales Index
1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0
'03
'04
'05
'06
10.0% 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0%
cap rate s
strip m all & o ther m o rtgage rates*
'02
'03
'04
'05
'06
COMPETITIVE PROPERTIES
Comparable properties have been surveyed in order to identify the occupancy trends within the immediate submarket. The comparable data is summarized in the following table:
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MARKET ANALYSIS
SUMMARY OF COMPARABLE RETAIL RENTALS

Comp. No. Name 1 Borders Books Location 3131 Veterans Memorial Blvd, Metairie, LA 3600 McKinney Avenue, Dallas, TX 2130 Haines Avenue, Rapid City, SD 2121 N. Federal Hwy, Ft. Lauderdale, FL 3338 St. Charles Avenue, New Orleans, Louisiana Occupancy 100%
Borders Books at City Place
100%
Borders
100%
Barnes & Noble
100%
Subject Borders Books
100%
Compiled by CBRE
All of comparable properties surveyed reported occupancy rates of 100% and all are currently in average to good condition. It is noted that here are only two other book stores currently operating in the Uptown/Garden District are Garden District Book Shop and Octavia Books.
SUBJECT TRENDS AND PROJECTIONS

Occupancy Occupancy rate is the relationship between the actual income received from a property and the income that would be received if the entire space were occupied. Consequently, the occupancy rate is a product of both (1) the relationship between the amount of occupied space in a building or market (physical) and (2) the relationship between the contract rent for the occupied building or market space and the total rent estimated for all space in the building or market (economic). Subjects Historical Trends The subject is proposed construction. Upon completion, it will be 100% leased and occupied by Border Books on a long term lease. No change is anticipated.
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MARKET ANALYSIS
Conclusion Based on the foregoing analysis, CBREs conclusion of stabilized occupancy for the subject is illustrated in the following table. This estimate considers both the physical and economic factors of the market.
OCCUPANCY CONCLUSIONS
Rent Comparables Subject's Current Occupancy Subject's Stabilized Occupancy
Compiled by CBRE
100.0% 100.0% 100.0%
Although our concluded stabilized occupancy is slightly higher than the overall market and submarket, this premium appears reasonably justified for the following reasons: Upon completion, the subject will be 100% leased and occupied to a nationally recognized tenant; The subjects completed improvements will be one of the most recently developed properties and therefore highly competitive; The improvements are located within close primary to commercial thoroughfares within the area
Tenant Analysis The subject is physically considered a Class A property that will be 100% occupied by Border Books. Borders Books, which is the #2 bookstore operator in the US (after Barnes &Noble), has stores in 50 states, as well as in the UK, Australia, New Zealand, Puerto Rico, and Singapore. Its more than 1,240 retail stores include 525 Borders superstores, about 675 mall-based Waldenbooks stores, and almost 35 UK-based Books etc. shops. To lure customers, the superstores host literary events and promote an environment with comfortable seats and cafes; they also sell music, videos, and DVDs. In addition, customers can shop through each chain's Web site, which are all operated through an agreement with rival Amazon.com. For the year ending January 2006, Borders Group had sales of $4,079.2 million, a 4.5% increase from the previous year and net income of $101 million, a 23.4% decrease from the previous year. The company has 35,500 employees.
CONCLUSION
The area retail market and the local submarket are exhibiting strong occupancy levels and upward trending rental rates, while maintaining favorable absorption in recent years. Considering the recent trends in absorption and the prospects for new construction, the local market area should maintain a stabilized occupancy position. The addition of new product to the market may create minor downward pressure on occupancy and on owners ability to obtain the effective rental increases of the
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MARKET ANALYSIS
past several years. However, the long-term projection for the subject submarket is for continued growth. With respect to the subject in particular, we believe the subject is reasonably well located for a retail project. It is in reasonable proximity to both employment centers and major roadways, and the surrounding retail developments are experiencing average to above average levels of demand. Based upon our analysis, the subject should continue to enjoy good market acceptance.
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SITE ANALYSIS
FLOOD MAP
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SITE ANALYSIS
SITE ANALYSIS
The following chart summarizes the salient characteristics of the subject site.
SITE SUMMARY Physical Description

Gross Site Area Net Site Area Primary Road Frontage Secondary Road Frontage Excess Land Area Surplus Land Area Zoning District Flood Map Panel No. & Date Flood Zone
Source: Various sources compiled by CBRE
0.93 Acres 0.93 Acres Louisiana Avenue None None C-2, Commercial 2252030160E B
40,534 Sq. Ft. 40,534 Sq. Ft. 208 Feet
St. Charles Avenue 220 Feet
1-Mar-84
LOCATION
The subject is located at the southeast corner of St. Charles Avenue and Louisiana Avenue. The street address is 3338 St. Charles Avenue. Ingress and egress is available to the site via one curb cut along the south side of St. Charles Avenue and one curb cut along the east side of Louisiana Avenue.
ASSESSORS PARCEL NUMBER

The Orleans Parish Tax Assessors parcel number is as follows: 614226901.
LAND AREA
The land area size was obtained a site plan and legal description provided by the broker. The site is considered adequate in terms of size and utility. There is no unusable, excess or surplus land area.
SHAPE AND FRONTAGE

The site is L shaped and has adequate frontage along two primary thoroughfares within the neighborhood.
INGRESS/EGRESS
Ingress and egress is available to the site from one curb cut along the south side of St. Charles Avenue and one curb cut along the east side of Louisiana Avenue.
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SITE ANALYSIS
St. Charles Avenue, at the subject, is an east/west street that is improved with one lane of traffic in each direction divided by a median that has streetcars, one running in each direction. Street improvements include asphalt paving and concrete curbs, gutters and sidewalks, and street lighting. Street parking is permitted. Louisiana Avenue, at the subject, is a north/south street that is improved with two lanes of traffic in each direction. Street improvements include asphalt paving, open ditch drainage and street lighting. Street parking is permitted. Please refer to the prior site/plat exhibit for the layout of the streets that provide access to the subject.
TOPOGRAPHY AND DRAINAGE

The site is generally level and at street grade. The topography of the site is not seen as an impediment to the development of the property. During our inspection of the site, we observed no drainage problems and assume that none exist.
SOILS
A soils analysis for the site has not been provided for the preparation of this appraisal. In the absence of a soils report, it is a specific assumption that the site has adequate soils to support the highest and best use.
EASEMENTS AND ENCROACHMENTS

Based on an inspection and review of the site plan, the property does not appear to be adversely affected by any easements or encroachments. It is recommended that the client/reader obtain a current title policy outlining all easements and encroachments on the property, if any, prior to making a business decision.
COVENANTS, CONDITIONS AND RESTRICTIONS

There are no known covenants, conditions and restrictions impacting the site that are considered to affect the marketability or highest and best use.
UTILITIES AND SERVICES

The site is within the jurisdiction of Orleans Parish or New Orleans and is provided all municipal services, including police, fire and refuse garbage collection. All utilities are available to the site in adequate quality and quantity to service the highest and best use.
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SITE ANALYSIS
FLOOD ZONE
According to flood hazard maps published by the Federal Emergency Management Agency (FEMA), the site is within Zone B, as indicated on the indicated Community Map Panel No. 2252030160E. FEMA Zone B- This area has been identified in the community flood insurance study as an area of moderate or minimal hazard from the principal source of flood in the area. However, buildings in this zone could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the communitys Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within this rate zone. Flood insurance is available in participating communities but is not required by regulation in this zone.
ENVIRONMENTAL ISSUES
CBRE has not observed and is not qualified to detect, the existence of potentially hazardous material or underground storage tanks which may be present on or near the site. The existence of hazardous materials or underground storage tanks may affect the value of the property. For this appraisal, CBRE has specifically assumed that the property is not affected by any hazardous materials that may be present on or near the property.
ADJACENT PROPERTIES
The adjacent land uses are summarized as follows: North: South: East: West: McDonalds Retail Retail Service Station
CONCLUSION
The site is well located and afforded good access and visibility from roadway frontage. The size of the site is typical for the area and use, and there are no known detrimental uses in the immediate vicinity. Overall, there are no known factors which are considered to prevent the site from development to its highest and best use, as if vacant.
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IMPROVEMENTS ANALYSIS
The following chart depicts a summary of the improvements.
IMPROVEMENTS SUMMARY
Property Type Number of Buildings Number of Stories Gross Leasable Area Net Rentable Area Major Tenants Borders Books Site Coverage Land-to-Building Ratio Floor Area Ratio (FAR) Parking Improvements Total Spaces: Parking Ratio (per 1,000 SF GLA ) Improvement Summary Description Foundation Frame Exterior Walls Interior Walls Roof Ceiling HVAC System Exterior Lighting Interior Lighting Flooring Plumbing Elevators/Stairwells Fire Protection Furnishings Parking Landscaping Reinforced concrete Steel Painted masonry Textured and painted drywall Built-up composition Suspended acoustical tile Roof mounted HVAC units Mercury Vapor Fixtures Recessed flourescent fixtures Tile Assumed adequate None Sprinklered and smoke detectors Personal property excluded Asphalt paved open parking Grass, gravel and natural forest courtyards with irrigated planted beds 24,000 SF 29.6% 1.69 : 1 0.6 Open/Surface 38 1.58 Good Avg. X X X X X X X X X X X X X N/A X X Fair Poor Retail 1 2 24,000 SF 24,000 SF (Misc. Freestanding Retail)
Source: Various sources compiled by CBRE
As shown, the subject is a 24,000 square foot single tenant retail building that is scheduled to be completed in May of 2008. The property is currently improved with a two-story building that has been used as Bultman Funeral Home for over 123 years. The property, which sustained damage during Hurricane Katrina, is currently under the ownership of Alderwoods Group, Inc. of Toronto which is in the process of being acquired by Service Corporation International (SCI) of Houston. As a result, the company is selling off several of its Katrina damaged properties and consolidating operations at its flagship home located on Canal Street.
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The funeral home closed in September of 2006 and has been under purchase negotiations with the proposed buyer, Stirling Forterra, LLC, since that time. The buyer plans to retain a portion of the existing building, primarily the faade but all other areas of the building will be essentially new. Building plans and specifications were not provided. The following is a description of the subject improvements and basic construction features derived from data provided by the prospective owner and CBREs inspection.
YEAR BUILT
The subject will be completed in 2008. As of the date of our inspection, interior finish and tenant fixturing is required to complete the improvements for occupancy.
FOUNDATION
The foundation consists of a continuous monolithic slab poured on reinforced concrete footings.
CONSTRUCTION COMPONENTS
The construction components include a fireproof steel frame with steel beams and steel deck.
FLOOR STRUCTURE
The floor structure is summarized as follows: Ground Floor: Other Floors: Concrete slab on compacted fill Metal deck with light-weight concrete cover
EXTERIOR WALLS
The exterior wall structure is brick veneer.
ROOF COVER
The building has a flat built up roof.
INTERIOR FINISHES
The typical interior office finish of the property is summarized as follows: Floor Coverings: Walls: Tile. Textured and painted sheetrock.
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Ceilings: Lighting: Summary:
Suspended acoustical tile. Standard commercial fluorescent fixtures. The interior office areas are typical building standard office finish, and are commensurate with competitors in the area.
INTERIOR FINISHES COMMON AREAS

The interior common area finish of the property is summarized as follows: Floor Coverings: Walls: Ceilings: Lighting: Commercial grade vinyl tile over concrete . Textured and painted sheetrock. Suspended acoustical tile. Standard commercial fluorescent and recessed incandescent fixtures. The interior common areas are attractive and appear to be in excellent condition. The subjects common areas are commensurate with competitors in the area.
Summary:
ATRIUM/BALCONY/MEZZANINE AREAS
None.
ELEVATOR/STAIR SYSTEM
None.
HVAC
The HVAC system is assumed to be in good working order and adequate for the building.
ELECTRICAL
The electrical system is assumed to be in good working order and adequate for the building.
PLUMBING
The plumbing system is assumed to be in good working order and adequate for the building.
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RESTROOMS
The restrooms are adequate and are assumed built to local code.
FIRE PROTECTION
The improvements are 100% fire sprinklered via an overhead wet system that is also wired into the local fire department. It is assumed the improvements have adequate fire alarm systems, fire exits, fire extinguishers, fire escapes and/or other fire protection measures to meet local fire marshal requirements.
SECURITY
The security system is assumed to be in good working order and adequate for the building. The entire site is enclosed with wrought iron security fencing with three card reader controlled access gates.
PARKING AND DRIVES

The property features an adequate number of surface parking spaces, including reserved handicapped spaces. All parking spaces and vehicle drives are asphalt paved and considered to be in good condition. Patron parking areas are along the front and sides of the building. The number of parking spaces is legally conforming for the existing use and is typical of the market.
LANDSCAPING
Landscaping is considered to be in good condition and well maintained.
QUALITY AND STRUCTURAL CONDITION

The overall quality of the facility is considered to be good for the neighborhood and age. CBRE did not observe any evidence of structural fatigue and the improvements appear structurally sound for occupancy. However, CBRE is not qualified to determine structural integrity and it is recommended that the client/reader retain the services of a qualified, independent engineer or contractor to determine the structural integrity of the improvements prior to making a business decision.
FUNCTIONAL UTILITY
The overall layout of the property is considered functional in utility.
ADA COMPLIANCE
All common areas of the property appear to have handicap accessibility. The client/readers attention is directed to the specific limiting conditions regarding ADA compliance.
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FURNITURE, FIXTURES AND EQUIPMENT

Any personal property items contained in the property are not considered to contribute significantly to the overall value of the real estate.
ENVIRONMENTAL ISSUES
CBRE has not observed and is not qualified to detect the existence of any potentially hazardous materials such as lead paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous construction materials on or in the improvements. The existence of such substances may affect the value of the property. For the purpose of this assignment, we have specifically assumed that any hazardous materials that would cause a loss in value do not affect the subject.
DEFERRED MAINTENANCE
Our inspection of the property indicated no items of deferred maintenance.
ECONOMIC AGE AND LIFE

CBREs estimate of the subject improvements effective age and remaining economic life is depicted in the following chart:

Actual Age Effective Age MVS Expected Life Remaining Economic Life Accrued Physical Incurable Depreciation
Compiled by CBRE
0 Years 0 Years 45 Years 45 Years 0.0%
The overall life expectancy is based upon our on-site observations and a comparative analysis of typical life expectancies reported for buildings of similar construction as published by Marshall and Swift, LLC, in the Marshall Valuation Service cost guide. While CBRE did not observe anything to suggest a different economic life, a capital improvement program could extend the life expectancy.
CONCLUSION
The improvements are in good overall condition. Overall, there are no known factors that adversely impact the marketability of the improvements.
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ZONING
ZONING
The following chart summarizes the subjects zoning requirements.
ZONING SUMMARY
Current Zoning Legally Conforming Uses Permitted Zoning Change Category
Source: New Orleans Planning Dept.
C-2, Commercial Yes Retail, offices or commercial uses serving neighborhoods and community needs Not likely Zoning Requirement
ANALYSIS AND CONCLUSION

The improvements represent a legally-conforming use and, if damaged, may be restored without special permit application. If additional information is required, please contact the local planning and/or zoning office.
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TAX AND ASSESSMENT DATA
TAX AND ASSESSMENT DATA

The following summarizes the subjects market value, assessed value, and taxes, and does not include any furniture, fixtures and equipment.
AD VALOREM TAX INFORMATION

Assessor's Market Value 614226901 Land Improvements Subtotal Assessed Value Land @ 10% Improvements @ 15% 109,300 111,590 $220,890 General Tax Rate Total Taxes
Source: Assessor's Office
2006 1,093,000 743,933 1,836,933
2007 1,093,000 875,200 1,968,200 109,300 131,280 $240,580 175.190000 $42,147
Pro Forma 1,093,000 875,200 1,968,200 109,300 131,280 $240,580 175.190000 $42,147
(per $1,000 A.V.)
173.260000 $38,271
Land in Louisiana is assessed at 10% of market value while commercial improvements are assessed at 15%. The next re-assessment of the subject is scheduled for 2008, however, the sale of the property would likely initiate an immediate reassessment for the following year. The local Assessors methodology for valuation is to put a property on the tax rolls at 100% of the sales price. In this instance, the subject property is under assessed due to its proposed construction and future completion. Our estimate of the future assessed value is based on the existing assessment. As the subject lease calls for the tenant to pay real estate taxes directly, any increase in assessed value and subsequent taxes would not affect our estimate of market value.
CONCLUSION
Based on the foregoing, the total taxes for the subject have been estimated as $42,147 for the base year of our analysis, based upon an assessed value of $240,580 , or $10.02 per square foot. For purposes of this analysis we are assuming any outstanding property tax liability has been paid. CBRE assumes that all taxes are current.
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HIGHEST AND BEST USE

In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria the highest and best use must meet are: legal permissibility; physical possibility; financial feasibility; and maximum profitability.
Highest and best use analysis involves assessing the subject both as if vacant and as improved.
AS VACANT
Legal Permissibility The legally permissible uses were discussed in detail in the Site Analysis and Zoning Sections. Physical Possibility The subject is adequately served by utilities, has an adequate shape and size, sufficient access, etc., to be a separately developable site. The subject site would reasonably accept a site layout for any of the legally probable uses. There are no known physical reasons why the subject site would not support any legally probable development. The existence of the present development on the site provides additional evidence for the physical possibility of development. Financial Feasibility The determination of financial feasibility is dependent primarily on the relationship of supply and demand for the legally probable land uses versus the cost to create the uses. As discussed in the market analysis of this report, the subject retail market is generally stabilized. Development of new retail properties has occurred in the past few years. Further, within the subject market, there are no proposed or under construction retail projects in the competitive market. These factors indicate that it would be financially feasible to complete a new retail project if the site acquisition cost was low enough to provide an adequate developers profit. Maximum Profitability The final test of highest and best use of the site as though vacant is that the use be maximally productive, yielding the highest return to the land. In the case of the subject as if vacant, the analysis has indicated that a new retail project would be most appropriate.
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CONCLUSION: HIGHEST AND BEST USE AS VACANT

Based on the information presented above and upon information contained in the market and neighborhood analysis, we conclude that the highest and best use of the subject as if vacant, would be the development a retail property. Our analysis of the subject and its respective market characteristics indicate the most likely buyer, as if vacant, would be an investor (land speculation) or a developer. Based on the foregoing analysis, the highest and best use of the site, as vacant, would be for a build to suit retail project similar to the subject property.
AS IMPROVED
Legal Permissibility As discussed, the subject sites zoning and legal restrictions permit a variety of land uses. The site has been improved with a single tenant retail development. Physical Possibility The physical characteristics of the subject improvements were discussed in detail in the improvements analysis. Both the layout and positioning of the improvements are considered functional for retail use. While it would be physically possible for a wide variety of uses, based on the legal restrictions and the design of the improvements, the continued use of the property for retail users would be the most functional use. Financial Feasibility The financial feasibility of a retail property is based on the amount of rent which can be generated, less operating expenses required to generate that income; if a residual amount existing, then the land is being put to a productive use. As will be indicated in the income capitalization approach, the subject is producing a positive net cash flow and continued utilization of the improvements for retail purposes is considered financially feasible. Maximum Profitability The maximally profitable use of the subject as improved should conform to neighborhood trends and be consistent with existing land uses. Although several uses may generate sufficient revenue to satisfy the required rate of return on investment and provide a return on the land, the single use that produces the highest price or value is typically the highest and best use. As shown in the applicable valuation sections, buildings that are similar to the subject have been acquired or continue to be used by retail owners/tenants. None of the comparable buildings have been acquired for conversion to an
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alternative use. These comparables would indicate that the maximally productive use of the property is consistent with the existing use as a retail property.
CONCLUSION: HIGHEST AND BEST USE AS IMPROVED

Based on the foregoing, the highest and best use of the property, as improved, is consistent with the proposed use, as a build to suit, single tenant retail development.
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APPRAISAL METHODOLOGY
APPRAISAL METHODOLOGY
In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available.
COST APPROACH
The cost approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements that represent the highest and best use of the land, or when it is improved with relatively unique or specialized improvements for which there exist few sales or leases of comparable properties.
SALES COMPARISON APPROACH

The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences, with the final estimate derived based on the general comparisons.
INCOME CAPITALIZATION APPROACH

The income capitalization approach reflects the subjects income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over a period of time. The two common valuation techniques associated with the income capitalization approach are direct capitalization and the discounted cash flow (DCF) analysis.
METHODOLOGY APPLICABLE TO THE SUBJECT

In valuing the subject, all three approaches are applicable and have been utilized. In addition, the replacement cost has been utilized within the analysis of insurable value.
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LAND VALUE
LAND VALUE
The following map and table summarize the comparable data used in the valuation of the subject site. A detailed description of each transaction is included in the addenda.
SUMMARY OF COMPARABLE LAND SALES

No. 1 Property Location 3338 St. Charles New Orleans, LA Transaction Type Date Avenue, Contract Jun-07 Proposed Use Retail Actual Sale Price $2,800,000 Adjusted Sale Price
1
Size (SF) 40,534
Price Per SF $69.08
$2,800,000
1042 Magazine Street, New Orleans, LA 1031 Canal St., New Orleans, LA
Listing
Jun-07
Unknown
$798,000
$798,000
7,750
$102.97
Sale
May-07
Multifamily
$3,400,000
$3,400,000
40,685
$83.57
Subject 3338 St. Charles Avenue, New Orleans, Louisiana

1
---
---
Retail
---
---
40,534
---
Transaction amount adjusted for cash equivalency and/or development costs (where applicable)
Compiled by CBRE
The sales utilized represent the best data available for comparison with the subject and were selected from the greater New Orleans area within a 5 mile radius of the subject. These sales were chosen based upon their similar locations and physical characteristics. 40
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LAND VALUE
DISCUSSION/ANALYSIS OF LAND SALES

Land Sale One This comparable represents the subject, a 0.9305 acre site at 3338 St. Charles Avenue. The site has an L shape with level, at street grade topography and exhibits the following frontage: St. Charles Avenue and Louisiana Avenue. At the time of the sale, the property was considered to be land value only. The site is zoned C-2, and the proposed use is to retail. All utilities were available to the site. The property was under contract in June 2007 for $2,800,000, or $69.08 per square foot ($3,009,135 per acre). This property is located at the southeast corner of St. Charles Avenue and Louisiana Avenue. At the time of contract, the property was improved with a funeral home that will be demolished and a retail building leased to Borders Books will be constructed. This is the acquisition of the subject site, thus no adjustments were required. Land Sale Two "This comparable represents 0.1779 acres at 1042 Magazine Street. The site has an irregular shape with level, at street grade topography and exhibits the following frontage: 68' Magazine Street, 111' John Churchill Chase and 117' Poeyfarre Street. At the time of the sale, the property was vacant. The site is zoned CBD-7, and the proposed use is to unknown. All utilities were available to the site. The property sold in June 2007 for $798,000, or $102.97 per square foot ($4,485,666 per acre). The site is located directly across from the National World War II Museum expansion. Upon comparison with the subject, this comparable was considered inferior in terms of shape and received an upward adjustment of 5% for this characteristic due to an irregular shape. The adjustment for location was warranted due to superior visibility and traffic counts. Therefore, a downward adjustment of -35% was judged proper for this comparable. Overall, this comparable was deemed superior in comparison to the subject and a downward net adjustment was warranted to the sales price indicator. Land Sale Three This comparable represents 0.934 acres at 1031 Canal St.. The site has an irregular shape with level, at street grade topography and exhibits the following frontage: Canal Street and Rampart Street. At the time of the sale, the property was vacant land. The site is zoned CBD-3, and the proposed use is to multifamily. All utilities were available to the site. The property sold in May 2007 for $3,400,000, or $83.57 per square foot ($3,640,257 per acre). This property is located at the northeast corner of Canal Street and Rampart Street. Upon comparison with the subject, this comparable was considered inferior in terms of shape and received an upward adjustment of 5% for this characteristic due to an irregular shape. The
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LAND VALUE
adjustment for location was warranted due to superior visibility and traffic counts. Therefore, a downward adjustment of -25% was judged proper for this comparable. Overall, this comparable was deemed superior in comparison to the subject and a downward net adjustment was warranted to the sales price indicator.
SUMMARY OF ADJUSTMENTS
Based on our comparative analysis, the following chart summarizes the adjustments warranted to each comparable.
LAND SALES ADJUSTMENT GRID

Comparable Number Transaction Type Transaction Date Proposed Use Actual Sale Price Adjusted Sale Price Size (Acres) Size (SF) Price ($ PSF) Property Rights Conveyed Financing Terms 1 Conditions of Sale Market Conditions (Time) Subtotal Size Shape Corner Location Total Other Adjustments Value Indication for Subject
1
1 Contract Jun-07 Retail $2,800,000
2 Listing Jun-07 Unknown $798,000 $798,000 0.18 7,750 $102.97 0% 0% 0% 0% $102.97 0% 5% 0% -35% -30% $72.08
3 Sale May-07 Multifamily $3,400,000 $3,400,000 0.93 40,685 $83.57 0% 0% 0% 0% $83.57 0% 5% 0% -25% -20% $66.86
Subject ----Retail ----0.93 40,534
$2,800,000 0.93 40,534 $69.08 0% 0% 0% 0% $69.08 0% 0% 0% 0% 0% $69.08
Transaction amount adjusted for cash equivalency and/or development costs (where applicable)
Compiled by CBRE
CONCLUSION
Based on the preceding analysis, all of the comparables were considered to be representative of the subject site, and warranted equal consideration. In conclusion, a price per square foot indication
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LAND VALUE
towards the middle of the range was most appropriate for the subject. The following table presents the valuation conclusion:
CONCLUDED LAND VALUE

$ PSF $66.86 $72.08 Indicated Value:
Compiled by CBRE
Subject SF x x 40,534 40,534 = =
Total $2,710,103 $2,921,691 $2,800,000
The value equates to approximately $69.07 per square foot. This falls within the range of $66.86 to $72.08 PSF indicated by the comparable sales, thereby lending support to our value conclusion.
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COST APPROACH
COST APPROACH
In estimating the replacement cost new for the subject, the following methods/data sources have been utilized (where available): the comparative unit method has been employed, utilizing the Marshall Valuation Service (MVS) cost guide, published by Marshall and Swift, LLC; the subjects actual construction costs (where available); and actual/budget construction cost figures available for comparable properties have been considered.
MARSHALL VALUATION SERVICE

Direct Cost Salient details regarding the direct costs are summarized in the Cost Approach Conclusion at the end of this section. The MVS cost estimates include the following: 1. average architects and engineers fees for plans, plan check, building permits and survey(s) to establish building line; 2. normal interest in building funds during the period of construction plus a processing fee or service charge; 3. materials, sales taxes on materials, and labor costs; 4. normal site preparation including finish grading and excavation for foundation and backfill; 5. utilities from structure to lot line figured for typical setback; 6. contractors overhead and profit, including job supervision, workmens compensation, fire and liability insurance, unemployment insurance, equipment, temporary facilities, security, etc.; 7. site improvements (included as lump sum additions); and 8. initial tenant improvement costs are included in MVS cost estimate. However, additional lease-up costs such as advertising, marketing and leasing commissions are not included. Base building costs (direct costs) are adjusted to reflect the physical characteristics of the subject. Making these adjustments, including the appropriate local and current cost multipliers, the direct building cost is indicated. Additions Items not included in the direct building cost estimate include parking and walks, signage, landscaping, and miscellaneous site improvements. The cost for these items is estimated separately using the segregated cost sections of the MVS cost guide. Indirect Cost Items Several indirect cost items are not included in the direct building cost figures derived through the MVS cost guide. These items include developer overhead (general and administrative costs), property taxes, legal and insurance costs, local development fees and contingencies, lease-up and marketing
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COST APPROACH
costs and miscellaneous costs. Research into these cost items indicates that an average property requires an allowance of about 5% to 15% of the total direct costs. MVS Conclusion The concluded direct and indirect building cost estimate obtained via the MVS cost guide (Section 15, Page 22) is illustrated as follows:
MARSHALL VALUATION SERVICE COST SCHEDULE
Primary Building Type: Effective Age: Quality/Condition: Exterior Wall: Number of Stories: MVS Sec/Page/Class Building Component Component Sq. Ft. Base Square Foot Cost Square Foot Refinements Heating and Cooling Sprinklers Other Other Subtotal Height and Size Refinements Number of Stories Multiplier Height per Story Multiplier Floor Area Multiplier Subtotal Cost Multipliers Current Cost Multiplier Local Multiplier Final Square Foot Cost Base Component Cost (via Marshall Valuation Service cost data) Base Building Cost Additions Signage, Landscaping & Misc. Site Improvements Parking/Walks Other Direct Building Cost Indirect Costs Direct and Indirect Building Cost Rounded
Compiled by CBRE
Retail 0 YRS Excellent Brick 2
Height per Story: Number of Buildings: Gross Building Area: Net Rentable Area: Average Floor Area:
16' 1 24,000 SF 24,000 SF 12,000 SF 15/22/A Retail 24,000 SF $191.56
$0.00 $2.50 $0.00 $0.00 $194.06
1.00 1.03 0.95 $189.69
1.08 0.96 $196.67 $4,720,040 $4,720,040 $50,000 $450,000 $0 $5,220,040 $783,006 $6,003,046 $6,003,000
15.0% of Direct Building Cost
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COST APPROACH
ACTUAL/BUDGET COMPARABLE CONSTRUCTION COSTS

The subjects actual construction costs are illustrated in the following table. A detailed breakdown of the subjects cost estimate has been included within the addenda.
BUDGETED CONSTRUCTION COSTS
Comparable: Name: Size (SF): Cost Component Direct Cost Indirect Cost Total Direct, Indirect & Lease-up Total Adjusted Costs Rounded Cost Per SF
Compiled by CBRE
Subject Borders Books 24,000 $4,250,182 $1,725,000 $5,975,182 $5,975,182 $5,975,000 $248.97
DIRECT AND INDIRECT COST CONCLUSION

The indicated direct and indirect building costs for the subject are illustrated as follows:
DIRECT AND INDIRECT COST CONCLUSION
Source MVS Cost Guide Subject's Actual Costs CBRE Estimate
Compiled by CBRE
Total
Per SF
$6,003,000 $250.13 $5,975,000 $248.97 $6,003,000 $250.13
The estimates derived via MVS represent replacement cost while the subjects actual figures represent reproduction costs. The MVS cost guide was given most consideration towards a cost conclusion for the subject with support provided by the subjects actual construction costs.
ENTREPRENEURIAL PROFIT
Entrepreneurial profit represents the return to the developer, and is separate from contractors overhead and profit. This line item, which is a subjective figure, tends to range from 5% to 15% of total direct and indirect costs for this property type, based on discussions with developers active in this market.
ACCRUED DEPRECIATION
There are essentially three sources of accrued depreciation: 1. physical deterioration, both curable and incurable; 2. functional obsolescence, both curable and incurable; and 3. external obsolescence. 46
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COST APPROACH
Physical Deterioration The subjects physical condition was detailed in the improvements analysis. Curable deterioration affecting the improvements results from deferred maintenance and, if applicable, was previously discussed. With regard to incurable deterioration, the subject improvements are considered to have deteriorated due to normal wear and tear associated with natural aging. The following chart provides a summary of the remaining economic life.

Actual Age Effective Age MVS Expected Life Remaining Economic Life Accrued Physical Incurable Depreciation
Compiled by CBRE
0 Years 0 Years 45 Years 45 Years 0.0%
Functional Obsolescence Based on a review of the design and layout of the improvements, no forms of curable functional obsolescence were noted. Because replacement cost considers the construction of the subject improvements utilizing modern materials and current standards, design and layout, functional incurable obsolescence normally is not applicable. External Obsolescence Based on a review of the local market and neighborhood, no forms of external obsolescence affect the subject.
COST APPROACH CONCLUSION

The value estimate is calculated as follows.
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COST APPROACH
COST APPROACH CONCLUSION

Building Type: Effective Age: Quality/Condition: Exterior Wall: Number of Stories: Direct and Indirect Building Cost Entrepreneurial Profit Replacement Cost New Accrued Depreciation Unfinished Shell Space Incurable Physical Deterioration Functional Obsolescence External Obsolescence Total Accrued Depreciation Depreciated Replacement Cost Land Value Stabilized Value Indication Curable Physical Deterioration Lease-Up Discount Value Indication Rounded Value Per SF
Compiled by CBRE
Retail 0 YRS Excellent Brick 2
Height per Story: Number of Buildings: Gross Building Area: Net Rentable Area: Average Floor Area:
16' 1 24,000 SF 24,000 SF 12,000 SF $6,003,000
10.0% of Total Building Cost
$600,300 $6,603,300
0.0% of Replacement Cost New less Curable Physical Deterioration
$0 $0 $0 $0
0.0% of Replacement Cost New
$0 $6,603,300 $2,800,000 $9,403,300 $0 $0 $9,403,300 $9,400,000 $391.67
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INSURABLE VALUE
INSURABLE VALUE
As part of the clients requested scope of work, an estimate of insurable value is provided herein. CBRE has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as Marshall Valuation Service. The methodology employed is a derivation of the cost approach and is not reliable for insurable value estimates. Actual construction costs and related estimates can vary greatly from this estimate. The insurable value estimate presented herein is intended to reflect the value of the destructible portions of the subject, based on the replacement of physical items that are subject to loss from hazards (excluding indestructible items such as basement excavation, foundation, site work, land value and indirect costs). In the case of the subject, this estimate is based upon the base building costs (direct costs) as obtained via the Marshall Valuation Service handbook, with appropriate deductions. This analysis should not be relied upon to determine proper insurance coverage as only consultants considered experts in cost estimation and insurance underwriting are qualified to provide an insurable value. It is provided to aid the client/reader/user as part of their overall decision making process and no representations or warranties are made by CBRE regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop any estimate of insurable value.
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INSURABLE VALUE
INSURABLE VALUE CONCLUSION

Building Type: Effective Age: Quality/Condition: Exterior Wall: Number of Stories: Retail 0 YRS Excellent Brick 2 Height per Story: Number of Buildings: Gross Building Area: Net Rentable Area: Average Floor Area: 16' 1 24,000 SF 24,000 SF 12,000 SF
MVS Sec/Page/Class Building Component Component Sq. Ft. Base Square Foot Cost Square Foot Refinements Heating and Cooling Sprinklers Other Other Subtotal Height and Size Refinements Number of Stories Multiplier Height per Story Multiplier Floor Area Multiplier Subtotal Cost Multipliers Current Cost Multiplier Local Multiplier Final Square Foot Cost Base Component Cost
0 0 0 SF $0.00
0 0 0 SF $0.00
0 0 0 SF $0.00
0 0 0 SF $0.00
15/22/A Retail 24,000 SF $191.56
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $2.50 $0.00 $0.00 $194.06
0.00 0.00 0.00 $0.00
0.00 0.00 0.00 $0.00
0.00 0.00 0.00 $0.00
0.00 0.00 0.00 $0.00
1.00 1.03 0.95 $189.69
0.00 0.00 $0.00 $0
0.00 0.00 $0.00 $0
0.00 0.00 $0.00 $0
0.00 0.00 $0.00 $0
1.08 0.96 $196.67 $4,720,040
Base Building Cost Insurable Value Exclusions Insurable Value Indication Rounded Value Per SF
Compiled by CBRE
(via Marshall Valuation Service cost data) 10.0% of Total Building Cost
$4,720,040 ($472,004) $4,248,036 $4,250,000 $177.08
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The following map and table summarize the comparable data used in the valuation of the subject. A detailed description of each transaction is included in the addenda.
SUMMARY OF COMPARABLE RETAIL SALES

No. 1 2 Name Borders Books, Mission Viejo, CA Borders Bookstore, Philadelphia, PA Borders Books & Music, San Diego, CA Border's Books Retail Center, Metairie, LA Transaction Type Date Sale Sale Jul-06 Jun-06 Year Built 1994 2000 NRA (SF) 30,000 18,538 Actual Sale Price Adjusted Sale Price
1
Price Per SF 1 Occ.
NOI Per SF $29.15 $21.10
OAR 6.12% 6.35%
$14,281,040 $14,281,040 $476.03 100% $6,160,000 $6,160,000 $332.29 100%
Sale
Jan-05
2002
31,245
$13,045,000 $13,045,000 $417.51 100%
$28.22
6.76%
Sale
Feb-04
1997
29,736
$9,500,000
$9,500,000
$319.48
91%
$29.14
9.12%
Subj. Borders Books, Pro New Orleans, Louisiana Forma

1
---
---
2007
24,000
---
---
---
100%
$30.28
---
Transaction amount adjusted for cash equivalency and/or deferred maintenance (where applicable)
Compiled by CBRE
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The sales utilized represent the best data available for comparison with the subject.
They were
selected from our research of comparable improved sales of similar properties throughout the United States. These sales were chosen based upon their similar tenancy, size and location. It is noted that the appraisers researched sales of comparable single tenant retail facilities in New Orleans and immediate surrounding area and were unable to find more than one comparable property with which to compare the subject property. We searched Costar, Loopnet, Propertyline, and Real Capital Analytics and well as numerous triple net investors for sales. In addition, we spoke with several brokers in the New Orleans area and were not provided with any data in the immediate area. We were able to find sales of general retail properties in the New Orleans area but they are not considered comparable to build to suit, single tenant, triple net leased retail properties due to the increased costs associated with these types of properties. As a result, we expanded our search for comparable sales throughout the United States. The
following data is considered to be the best data with which to compare the subject property in this analysis.
DISCUSSION/ANALYSIS OF IMPROVED SALES

Improved Sale One This comparable represents a 30,000-square-foot free-standing retail property and is situated on a 2.53-acre parcel at 25222 El Paseo, Mission Viejo, CA. The improvements were originally constructed in 1994 and were considered in good condition at the time of sale. The exterior walls depict concrete block construction components. The property sold in July 2006 for $14,281,040, or $476.03 per square foot. Existing net operating income at the time of sale was $874,552, or $29.15 per square foot, for an overall capitalization rate of 6.12%. Occupancy at the time of sale was 100%. This represents the July 2006 sale of a 30,000-square-foot Border Books located just west of Interstate 5 and north of Oso Parkway in the city of Mission Viejo. The -10% downward adjustment for location reflects this comparable's superior feature with respect to its proximity to employment centers. In terms of age/condition, this comparable was judged inferior due to its older year of construction and received an upward adjustment of 10% for this characteristic. A downward adjustment of -10% was applied to this comparable for its superior quality of construction attribute when compared to the subject, based upon the differences in design/appeal. Overall, this comparable was deemed superior in comparison to the subject and a downward net adjustment was warranted to the sales price indicator.
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Improved Sale Two This comparable represents a 18,538-square-foot retail property and is situated on a 0.46-acre parcel at 8625 Germantown Avenue, Philadelphia, PA. The improvements were originally constructed in 2000 and were considered in good condition at the time of sale. The exterior walls depict masonry construction components. The property sold in June 2006 for $6,160,000, or $332.29 per square foot. Net operating income at the time of sale was $391,152, or $21.10 per square foot, for an overall capitalization rate of 6.35%. Occupancy at the time of sale was 100.00%. This sale was a freestanding Borders Books with good visibility and access from Germantown Avenue. Upon comparison with the subject, this comparable was considered superior in terms of size and received a downward adjustment of -5% for this characteristic due to its smaller square footage. In terms of age/condition, this comparable was judged inferior due to its older year of construction and received an upward adjustment of 15% for this characteristic. An upward adjustment of 15% was applied to this comparable for its inferior quality of construction attribute when compared to the subject, based upon the differences in design/appeal. Overall, this comparable was deemed inferior in comparison to the subject and an upward net adjustment was warranted to the sales price indicator. Improved Sale Three This comparable represents a 31,245-square-foot free-standing retail property and is situated on a 0.47-acre parcel at 668 6th Avenue, San Diego, CA. The improvements were originally constructed in 2002 and were considered in good condition at the time of sale. The exterior walls depict stucco/concrete construction components. The property sold in January 2005 for $13,045,000, or $417.51 per square foot. Existing net operating income at the time of sale was $881,842, or $28.22 per square foot, for an overall capitalization rate of 6.76%. Occupancy at the time of sale was 100%. This comparable represents the January 2005 sale of a free-standing retail building located on the southwest corner of 6th Avenue and G Street in the Gaslamp district of the city of San Diego. The -5% downward adjustment for location reflects this comparable's superior feature with respect to its proximity to employment centers. In terms of age/condition, this comparable was judged inferior due to its older year of construction and received an upward adjustment of 10% for this characteristic. Overall, this comparable was deemed inferior in comparison to the subject and an upward net adjustment was warranted to the sales price indicator. Improved Sale Four This comparable represents a 29,736-square-foot big box retail property and is situated on a 1.6acre parcel at 3131 Veteran's Memorial Boulevard, Metairie, LA. The improvements were originally
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constructed in 1997 and were considered in good condition at the time of sale. The exterior walls depict concrete construction components. The property sold in February 2004 for $9,500,000, or $319.48 per square foot. Existing net operating income at the time of sale was $866,501, or $29.14 per square foot, for an overall capitalization rate of 9.12%. Occupancy at the time of sale was 91%. This sale involves Borders Books and two small tenants. The upward market conditions (time) adjustment of 5% reflects the improved market conditions since the date of sale. The 10% upward adjustment for location reflects this comparable's inferior feature with respect to inferior visibility. In terms of age/condition, this comparable was judged inferior due to its older year of construction and received an upward adjustment of 10% for this characteristic. An upward adjustment of 5% was applied to this comparable for its inferior quality of construction attribute when compared to the subject, based upon the differences in design/appeal. Overall, this comparable was deemed inferior in comparison to the subject and an upward net adjustment was warranted to the sales price indicator.
SUMMARY OF ADJUSTMENTS
Based on our comparative analysis, the following chart summarizes the adjustments warranted to each comparable.
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RETAIL SALES ADJUSTMENT GRID

Comparable Number Transaction Type Transaction Date Year Built GLA (SF) Actual Sale Price Adjusted Sale Price 1 Price Per SF 1 Occupancy NOI Per SF OAR Adj. Price Per SF Property Rights Conveyed Financing Terms 1 Conditions of Sale Market Conditions (Time) Subtotal - Price Per SF Location Size Age/Condition Quality of Construction Tenancy Total Other Adjustments Indicated Value Per SF
1
1 Sale Jul-06 1994 30,000 $14,281,040 $14,281,040 $476.03 100% $29.15 6.12% $476.03 0% 0% 0% 0% $476.03 -10% 0% 10% -10% 0% -10% $428.43
2 Sale Jun-06 2000 18,538 $6,160,000 $6,160,000 $332.29 100% $21.10 6.35% $332.29 0% 0% 0% 0% $332.29 0% -5% 15% 15% 0% 25% $415.36
3 Sale Jan-05 2002 31,245 $13,045,000 $13,045,000 $417.51 100% $28.22 6.76% $417.51 0% 0% 0% 0% $417.51 -5% 0% 10% 0% 0% 5% $438.39
4 Sale Feb-04 1997 29,736 $9,500,000 $9,500,000 $319.48 91% $29.14 9.12% $319.48 0% 0% 0% 5% $335.45 10% 0% 10% 5% 0% 25% $419.32
Subj. Pro Forma ----2008 24,000 ------100% $30.28 ---
Transaction amount adjusted for cash equivalency and/or deferred maintenance (where applicable)
Compiled by CBRE
SALE PRICE PER SQUARE FOOT CONCLUSION

Overall, all of the comparable sales were given equal weight in this analysis. presents the valuation conclusion: The following chart
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NRA (SF) 24,000 24,000 X X X Value Per SF $415.32 $438.39 = = = Value $9,967,680 $10,521,360
VALUE CONCLUSION Indicated Stabilized Value Deferred Maintenance Lease-Up Discount Value Indication Rounded Value Per SF
Compiled by CBRE
$10,245,000 $0 $0 $10,245,000 $10,245,000 $426.88
NET OPERATING INCOME ANALYSIS

As a cross check to the foregoing analysis, the net operating income (NOI) being generated by the comparable sales as compared to the subjects pro forma NOI estimated in the following income capitalization approach has been analyzed. In general, it is a fundamental assumption that the physical characteristics of a property (e.g., location, access, design/ appeal, condition, etc.) are reflected in the net operating income being generated, and the resultant price per square foot paid for a property has a direct relationship to the NOI being generated. The following NOI analysis chart illustrates the sale prices (after adjustments for conditions of sale and market conditions) of the individual sales plotted in comparison to their NOIs. In addition, a trend line has been plotted based on a linear regression analysis of the comparables. The subjects indicated value has been plotted along this trend line at its pro forma stabilized NOI.
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NET OPERATING INCOME ANALYSIS

$475.00 $455.00 $435.00 Price Per SF $415.00 $395.00 $375.00 $355.00 $335.00 $315.00 $21.00 $23.00 $25.00 $27.00 NOI Per SF $29.00
Comparable Sales Subject Indication Trendline

$416.54
Compiled by CBRE
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BORDERS BOOKS

The following map and table summarize the comparable data used in the valuation of the subject. A detailed description of each transaction is included in the addenda.
SUMMARY OF COMPARABLE RETAIL RENTALS

Comp. No. 1 Property Name Borders Books Location 3131 Veterans Memorial Blvd, Metairie, LA 3600 McKinney Avenue, Dallas, TX 2130 Haines Avenue, Rapid City, SD 2121 N. Federal Hwy, Ft. Lauderdale, FL Year Built 1997 Occ. 100% NRA (SF) 29,736 Quoted Rental Rate $29.35 PSF Expense Basis Triple net
Borders Books at City Place
2004
100%
22,000
$19.00 PSF
NNN
Borders
1999
100%
20,000
$23.30 PSF
NNN
Barnes & Noble
2001
100%
27,000
$22.75 PSF
Triple Net
Subj. Pro Forma
Borders Books
3338 St. Charles Avenue, New Orleans, Louisiana
2007
100%
24,000
---
---
Compiled by CBRE
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BORDERS BOOKS
The rentals utilized represent the best data available for comparison with the subject. They were selected based upon their similarities with regards to tenancy, construction quality and location.
DISCUSSION/ANALYSIS OF RENT COMPARABLES

Rent Comparable One "This comparable represents a 29,736-square-foot Borders Books at 3131 Veterans Memorial Blvd, Metairie, LA. The improvements were originally constructed in 1997 and were considered in good condition at the time of our research. The structure's exterior walls depict masonry construction components. According to a representative for this property, actual base rent is $29.35 per square foot annually, based upon a typical lease term of 20 yrs. Expenses are based upon a Triple net structure. The property is currently 100% leased. This property is located at 3131 Veterans Memorial in Metairie and also includes two strip retail spaces of 2,593 SF and 1,893 SF. In comparison to the subject, this property was generally similar with respect to construction quality and pro forma income characteristics, while it was inferior with respect to location, condition, design appeal, and size. This property was inferior to the subject with respect to age. Overall, this comparable was slightly inferior in comparison to the subject and an upward adjustment was warranted to its quoted rental rates. Rent Comparable Two This comparable represents a 22,000-square-foot Borders Books at 3600 McKinney Avenue, Dallas, TX. The improvements were originally constructed in 2004 and were considered in good condition at the time of our research. The structure's exterior walls depict brick/stone construction components. According to a representative for this property, actual base rent is $19.00 per square foot annually, based upon a typical lease term of 15. Expenses are based upon a triple net structure. The property is currently 100% leased. This space is located within the City Place Shopping center at the intersection of McKinney Avenue and Lemmon Avenue. The building also has a 4,500 SF Chase bank paying $40.00 per square foot. The total building square footage is 26,500 square feet. In comparison to the subject, this property was generally similar with respect to location, size, and age while it was inferior with respect to quality of construction and design/appeal. Overall, this comparable was inferior in comparison to the subject and an upward adjustment was warranted to its quoted rental rates. Rent Comparable Three This comparable represents a 20,000-square-foot free-standing Borders Books located at 2130 Haines Avenue, Rapid City, SD. The improvements were originally constructed in 1999 and were considered in excellent condition at the time of our research. The structure's exterior walls depict
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BORDERS BOOKS
cmu/efis construction components. According to a representative for this property, actual base rent is $23.30 per square foot annually, based upon a typical lease term of 15 yrs. Expenses are based upon a triple net structure. The property is currently 100% leased. This is a 20,000-square-foot freestanding big-box retail building located at an interstate/off-ramp (corner) location. It was built in 1999 and is situated on a 2.810-acre site. In comparison to the subject, this property was generally similar with respect to location, construction quality and size while it was inferior with respect to age/condition and pro forma income characteristics. Overall, this comparable was inferior in comparison to the subject and an upward adjustment was warranted to its quoted rental rates. .Rent Comparable Four This comparable represents a 27,000-square-foot free-standing Barnes & Noble located at 2121 N. Federal Hwy, Ft. Lauderdale, FL. The improvements were originally constructed in 2001 and were considered in good condition at the time of our research. The structure's exterior walls depict stucco over concrete construction components. According to a representative for this property, actual base rent is $22.75 per square foot annually, based upon a typical lease term of 15 yrs. Expenses are based upon a Triple Net structure. The property is currently 100% leased. The 27,000 square foot, two story free-standing Barnes & Noble is located on the west side of Federal Highway between Oakland Park Blvd. and Sunrise Blvd. 15 year term. In comparison to the subject, this property was generally similar with respect to construction quality, design/appeal and size but inferior with respect to location, age/condition and pro forma income characteristics. Overall, this comparable was inferior in comparison to the subject and an upward adjustment was warranted to its quoted rental rates
SUBJECT RENTAL INFORMATION

The following table depicts the subjects lease structure according to the Lease Agreement dated April 19, 2007.
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LEASE ABSTRACT - BORDERS BOOKS

Lessor Lessee Guarantor Building Size (SF) Lease Date Lease Commence Date Expiration Date (Base Lease) Lease Term (Base Lease) Remaining Lease Term (Base Lease) No. & Term of Options Expiration Date (Base + All Options) Remaining Lease Term (Base + All Options) Assignment/Subletting Termination Clause Contract Rental Rate Years 1-5 Years 6-10 Years 11-15 Average Over Initial Term of Lease Lessor Expenses Lessee Expenses Expense Cap % Rent Clause:
Source: Lease
Stirling Forterra, LLC Borders, Inc. None 24,000 April 19, 2007 May 1, 2008 April 30, 2023 180 Months 180 Months 5 options @ 5 years 4/30/2048 480 Months Allowed No $/SF/Yr. $30.04 $31.00 $31.96 $31.00 Total $/Yr. $721,000 $744,000 $767,000 $744,000 Structural Taxes, Insurance, CAM None Yes
RENT BASED ON A PERCENTAGE RETURN ON COST

The rental rate is a direct function of construction costs (inclusive of the site acquisition), which is typical in the market for this type of property. This method is typically used to estimate rental rates in build-to-suit lease transactions. The return is based on alternative investments available to the typical investor. An appropriate return for a development of this type, based on discussions with developers, is estimated at 7.75 %. The following table illustrates the estimated rent based on development costs:
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RENT BASED ON CONSTRUCTION COSTS

Physically Depreciated Replacement Cost (Rounded) Market Return Gross Operating Income Requirement Building Square Footage Annual Rent/Sq. Ft. Compiled by CBRE / x $9,095,000 7.75% $704,863 24,000 $29.37
The indicated rate is slightly below the current lease rate ($30.04 PSF). It is reasonable to conclude that a higher rate would be justified based on fewer quality sites and on the demand for investment properties such as the subject. In addition, the subjects rent level appears to be at a reasonable level relative to providing an appropriate return relative to the estimated construction costs.
MARKET RENT CONCLUSION

All of the comparables used for this analysis were similar build to suit buildings occupied by tenants similar to the subject. Only minor differences between the subject and the comparables were noted. Therefore, it is our opinion that the subjects market rent should be towards the upper end of the range established by the comparables, i.e. from $19.00 PSF to $29.35 PSF. Based on the foregoing analysis and discussion, the following chart depicts the market rent conclusions for the subject:
MARKET RENT CONCLUSIONS
Category GLA (SF) Percent of Total SF Market Rent ($/SF/Yr.) Concessions Reimbursements Escalations Average Lease Term Compiled by CBRE Retail Space 24,000 100.0% $30.00 None NNN Yes 15 Years
It is noted that the current market rent has been estimated at $30.00 PSF, however, in the Direct Capitalization Approach, the appraisers have employed the average rental rate over the 15-year lease term which is approximately $31.00 PSF.
POTENTIAL RENTAL INCOME CONCLUSION

Within this analysis, potential rental income is estimated based upon the actual income in-place over the next twelve months. This method of calculating rental income is most prevalent in the local market 62
BORDERS BOOKS
and is consistent with the method used to derive overall capitalization rates from the comparable sales data.
VACANCY
The stabilized vacancy estimate accounts for the anticipated down time between leases in the event of non-renewal. However, the subject is encumbered by a long-term lease with multiple renewal options to a credit-worthy tenant. Therefore, the typical vacancy and collection loss does not apply in this analysis. Any perceived vacancy and/or tenant credit risk is accounted for in the selection of the overall capitalization rate. The subjects vacancy is detailed as follows:
VACANCY
Year Current CBRE Estimate
Compiled by CBRE
% PGI 0% 0%
CREDIT LOSS
The credit loss estimate is an allowance for nonpayment of rent or other income. The subjects credit loss is detailed as follows:
CREDIT LOSS
Year CBRE Estimate
Compiled by CBRE
% PGI 0.0%
EXPENSE REIMBURSEMENTS
The subjects lease is based on a triple net structure whereby the tenant reimburses the owner for a pro rata share of common area maintenance, real estate taxes, and property insurance. The subjects expense reimbursements are detailed as follows:
Year CBRE Estimate

Compiled by CBRE
Total $0
$/SF $0.00
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EFFECTIVE GROSS INCOME

The subjects effective gross income is detailed as follows:
EFFECTIVE GROSS INCOME

Year CBRE Estimate
Compiled by CBRE
Total $744,000
% Change N/A
OPERATING EXPENSE ANALYSIS

Expense Comparables The following chart summarizes expenses obtained from recognized industry publications and/or comparable properties.
EXPENSE COMPARABLES
Comparable Number Expense Year Administrative & General Management Fee Reserves for Replacement Operating Expenses 1 2005 0.28 0.21 0.10 $0.59 2 2005 0.36 0.38 0.10 $0.84 IREM 2005 0.33 0.35 0.15 $0.83 *
* The median total differs from the sum of the individual amounts.
Source: Operating Statements & IREM
The following subsections represent the analysis for the pro forma estimate of each category of the subjects stabilized expenses. Administrative and General Administrative and General expenses typically include administrative expenses such as legal costs pertaining to the operation of the building, telephone, supplies, furniture, temporary help, etc. The subjects expense is detailed as follows:
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ADMINISTRATIVE & GENERAL

Year Expense Comparable 1 Expense Comparable 2 IREM Total N/A N/A N/A $/SF $0.28 $0.36 $0.33
CBRE Estimate
Compiled by CBRE
$7,440
$0.31
Our estimate is consistent with other properties operating in the area and generally supported by the data. Management Fee Management expenses are typically negotiated as a percentage of collected revenues (i.e., effective gross income). The subjects expense is detailed as follows:
MANAGEMENT FEE
Year Total % EGI
CBRE Estimate
Compiled by CBRE
$7,440
1.0%
Professional management fees in the local market range from 1.0% to 3.0% for comparable properties. Given the subjects single tenant occupancy, we believe an appropriate management expense for the subject would be at the lower end of the range. Reserves for Replacement Reserves for replacement have been estimated based on discussions with knowledgeable market participants who indicate a range from $0.05 to $0.15 per square foot for comparable properties. The subjects expense is detailed as follows:
RESERVES FOR REPLACEMENT

CBRE Estimate
Compiled by CBRE
$2,400
$0.10
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OPERATING EXPENSE CONCLUSION

The subjects expense is detailed as follows:
OPERATING EXPENSES
CBRE Estimate
Compiled by CBRE
$17,280
$0.72
The subjects per square foot operating expense pro forma is above the total per square foot operating expenses indicated by the expense comparables and published data as a result of the higher real estate taxes estimated for the subject property.
NET OPERATING INCOME CONCLUSION

The subjects net operating income is detailed as follows:
NET OPERATING INCOME

Year Total $/SF
CBRE Estimate
Compiled by CBRE
$726,720
$30.28
DIRECT CAPITALIZATION
Direct capitalization is a method used to convert a single years estimated stabilized net operating income into a value indication. The following subsections represent different techniques for deriving an overall capitalization rate for direct capitalization. Comparable Sales The overall capitalization rates (OARs) confirmed for the comparable sales analyzed in the sales comparison approach are as follows:
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COMPARABLE CAPITALIZATION RATES

Sale Sale 1 2 3 4 Date Jul-06 Jun-06 Jan-05 Feb-04 Sale Price $/SF $476.03 $332.29 $417.51 $319.48 Occupancy 100% 100% 100% 91% 100% OAR 6.12% 6.35% 6.76% 9.12% 6.75%
Indicated OAR:
Compiled by: CBRE
The overall capitalization rates for these sales were derived based upon the actual or pro-forma income characteristics of the property. Sale Nos. 1 and 2 transpired within the past twelve months, while Sale Nos. Three and Four represent slightly older transaction dates. Sale No. 4 is included only as it represents a New Orleans area sale. It is specifically noted that it is a pre-Katrina sale and is not a single tenant facility, as is the subject. The appraisers have also considered sales of other Borders Books located throughout the United States as well as sales of single tenant retail buildings located throughout Louisiana. These are summarized on the following pages.
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Borders Books Sales
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LA Single Tenant Sales
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Overall, an OAR in the lower portion of the range indicated by the comparables is considered appropriate for the following reasons: Positive Attributes Upon completion, the subject will be 100% occupied on a long term lease to a creditworthy, single tenant; The subject will be completed in 2008, rendering it one of the newest developments in the area; and, There are no known new projects scheduled for the subjects market area that will add to the current supply of similar space and directly compete with the subject property.
Published Investor Surveys The results of the most recent Korpacz Real Estate Investor Survey are summarized in the following chart.
OVERALL CAPITALIZATION RATES

Investment Type National Regional Mall Market National Power Center Market National Strip Shopping Center Market National Net Lease Market Indicated OAR:
Korpacz Real Estate Investor Survey
OAR Range 5.00% 5.50% 5.80% 9.50% 9.00% 9.00%
Average 6.89% 7.28% 7.38% 7.65% 6.75%
6.00% - 10.00%
The subject is considered to be a Class A property. Because of the subjects location and age, an OAR near the middle of the range indicated in the preceding table is considered appropriate. Band of Investment The band of the investment technique has been utilized as a crosscheck to the foregoing techniques. The analysis is shown in the following table.
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BAND OF INVESTMENT
Mortgage Interest Rate Mortgage Term (Amortization Period) Mortgage Ratio (Loan-to-Value) Mortgage Constant Equity Dividend Rate (EDR) Mortgage Requirement Equity Requirement 5.75% 30 Years 80% 0.07003 7% 80% x 20% x 100% Indicated OAR:
Compiled by: CBRE
0.07003 = 0.07000 =
0.05602 0.01400 0.07002 7.00%
Capitalization Rate Conclusion The following chart summarizes the OAR conclusions.
OVERALL CAPITALIZATION RATE - CONCLUSION

Source Comparable Sales
National Investor Survey
Indicated OAR 6.75% 6.75% 7.00% 6.75%
Band of Investment
CBRE Estimate
Compiled by: CBRE
In concluding an overall capitalization rate for the subject, primary reliance has been placed upon the data obtained from the comparable sales. This data tends to provide the most accurate depiction of both buyers and sellers expectations within the market and the ranges indicated are relatively tight. Further secondary support for our conclusion is noted via both the Korpacz Real Estate Investor Survey and the band of investment methodology. Considering the data presented, the concluded overall capitalization rate appears to be well supported in the local market. Direct Capitalization Summary A summary of the direct capitalization at stabilized occupancy is illustrated in the following chart.
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DIRECT CAPITALIZATION SUMMARY

Income Potential Rental Income Credit Loss Vacancy Effective Gross Income Expenses Administrative & General Management Fee Reserves for Replacement Operating Expenses Operating Expense Ratio Net Operating Income OAR Indicated Stabilized Value Rounded Deferred Maintenance Lease-Up Discount Value Indication Rounded Value Per SF Matrix Analysis Cap Rate 6.50% 6.75% 7.00%
Compiled by CBRE
$/SF/Yr $31.00 0.00% 0.00% 0.00 0.00 $31.00
Total $744,000 $744,000
0.31 1.00% 0.31 0.10 $0.72 $30.28
7,440 7,440 2,400 $17,280 2.32% $726,720 / 6.75% $10,766,222 $10,770,000 $10,766,222 $10,770,000 $448.75 Value $11,180,300 $10,766,200 $10,381,700
DISCOUNTED CASH FLOW ANALYSIS (DCF)

The DCF assumptions concluded for the subject are summarized as follows:
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SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS

General Assumptions Start Date Terms of Analysis Software Growth Rate Assumptions Income Growth Expense Growth Inflation (CPI) Real Estate Tax Growth Market Leasing Assumptions Category Market Rent ($/SF/Yr.) Concessions Reimbursements Escalations Tenant Improvements (New Tenants) Tenant Improvements (Renewals) Average Lease Term Renewal Probability Leasing Commissions (Cashed-Out) New Leases Renewal Leases Down Time Before New Tenant Leases Occupancy Assumptions Total Operating Expenses ($/SF/Yr.) Current Occupancy Credit Loss Financial Assumptions Discount Rate Terminal Capitalization Rate Other Assumptions Cost of Sale Capital Expenses (Deferred Maintenance)
Compiled by CBRE
May-08 16 Years ARGUS
3.00% 3.00% 3.00% 3.00% Retail Space $30.00 None NNN Yes $10.00 $5.00 15 Years 85% 4.0% 2.0% 6 Months
$0.72 100.00% 0.00% 8.00% 7.00%
2.00% $0
Provided on the following pages is a discussion of the leasing assumptions used in the discounted cash flow analysis that were not analyzed in the direct capitalization approach.
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General Assumptions The DCF analysis utilizes a 16-year projection period since the existing lease is for 15 years. This is consistent with current investor assumptions. Growth Rate Assumptions The inflation and growth rates for the DCF analysis have been estimated by analyzing the expectations typically used by buyers and sellers in the local marketplace. Published investor surveys and an analysis of the Consumer Price Index (CPI) form the foundation for the selection of the appropriate growth rates. The compilation is shown in the following chart.
SUMMARY OF GROWTH RATES

Investment Type U.S. Bureau of Labor Statistics (CPI-U) 10-Year Snapshot Average as of National Regional Mall Market National Power Center Market National Strip Shopping Center Market National Net Lease Market CBRE Estimate
Source: Korpacz Real Estate Investor Survey www.bls.gov
Rent Expenses Jun-07 2.94% 3.07% 2.81% 2.69% 3.00% 3.00% 3.00% 3.10% 2.44% 3.00%
Inflation 2.66% N/A N/A N/A N/A 3.00%
Leasing Assumptions The contract lease terms for the existing tenants are utilized within the DCF analysis, with market leasing assumptions applied for renewals and absorption. The previously concluded pro forma income and expenses have been utilized as the basis for market leasing projected in Year 1 of the holding period. All subsequent years vary according to the growth rate assumptions applied to the Year 1 estimate. Leasing Commissions The following table presents the leasing commissions quoted for the subject, those prevalent in the market as derived through the comparable properties, and our pro forma estimate:
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LEASING COMMISSIONS
Category Subject's Quoted Terms New Tenants Renewals Rent Comparable Data New Tenants Renewals CBRE Estimate New Tenants Renewals Compiled by CBRE 4.0% 2.0% 4.0% 2.0% 4.0% 2.0% Retail Space
Renewal Probability The renewal probability incorporated within the market leasing assumptions has been estimated at 85%. This rate is considered reasonable based on the rent comparable data, a survey of market participants, and our analysis of actual leasing activity at the subject. Downtime Between Leases The downtime estimate at lease rollover incorporated within the market leasing assumptions has been estimated at 6 months. This rate is considered reasonable based on the rent comparable data, a survey of market participants, and our analysis of actual leasing activity at the subject. Occupancy Assumptions The occupancy rate over the holding period is based on the subjects estimated stabilized occupancy rate and estimated lease-up period to achieve a stabilized occupancy position. Vacancy, Credit Loss and Absorption Please refer to the market analysis of this report for a detailed discussion of these elements. Financial Assumptions Discount Rate Analysis The results of the most recent Korpacz Real Estate Investor Survey, published by Price Waterhouse Coopers (First Quarter 2007) , are summarized in the following chart.
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DISCOUNT RATES
Investment Type National Regional Mall Market National Power Center Market National Strip Shopping Center Market National Net Lease Market CBRE Estimate
Korpacz Real Estate Investor Survey
Rate Range Average 7.00% - 11.00% 8.64% 6.75% - 11.50% 8.63% 6.00% - 10.00% 8.50% - 12.00% 8.39% 10.25% 8.00%
The subject is considered to be a Class A property. A discount rate near the middle of the range indicated in the preceding table is considered appropriate. Terminal Capitalization Rate The reversionary value of the subject is based on an assumed sale at the end of the holding period based on capitalizing the Year 16 NOI at a terminal capitalization rate. Typically, for properties similar to the subject, terminal capitalization rates are 50 to 100 basis points higher than going-in capitalization rates (OARs). This is a result of the uncertainty of future economic conditions and the natural aging of the property. For the subject, we have concluded a load factor of 50 basis points to be appropriate.
TERMINAL CAPITALIZATION RATES

Investment Type National Regional Mall Market National Power Center Market National Strip Shopping Center Market National Net Lease Market CBRE Estimate
Source: Korpacz Real Estate Investor Survey
Rate Range Average 6.25% - 10.00% 7.79% 6.50% - 9.50% 7.77% 6.00% - 10.00% 7.50% - 9.50% 7.95% 8.41% 7.00%
Discounted Cash Flow Conclusion The DCF schedule(s) and value conclusions are depicted on the following page(s).
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Total $'s

Year 3 Apr-2011 __________ $721,000 $721,000 $721,000 $744,000 $744,000 $744,000 $744,000 $744,000 $767,000 $767,000 Year 4 Apr-2012 __________ Year 5 Apr-2013 __________ Year 6 Apr-2014 __________ Year 7 Apr-2015 __________ Year 8 Apr-2016 __________ Year 9 Apr-2017 __________ Year 10 Apr-2018 __________ Year 11 Apr-2019 __________ Year 12 Apr-2020 __________ Year 13 Apr-2021 __________ $767,000 Year 14 Apr-2022 __________ $767,000 Year 15 Apr-2023 __________ $767,000 __________ $721,000 __________ 721,000 __________ 721,000 __________ __________ $721,000 __________ 721,000 __________ 721,000 __________ __________ $721,000 __________ 721,000 __________ 721,000 __________ __________ $744,000 __________ 744,000 __________ 744,000 __________ __________ $744,000 __________ 744,000 __________ 744,000 __________ __________ $744,000 __________ 744,000 __________ 744,000 __________ __________ $744,000 __________ 744,000 __________ 744,000 __________ __________ $744,000 __________ 744,000 __________ 744,000 __________ __________ $767,000 __________ 767,000 __________ 767,000 __________ __________ 767,000 __________ 767,000 __________ 767,000 __________ __________ 767,000 __________ 767,000 __________ 767,000 __________ __________ 767,000 __________ 767,000 __________ 767,000 __________ __________ 767,000 __________ 767,000 __________ 767,000 __________ 7,893 7,210 2,400 __________ 17,503 __________ 703,497 __________ 8,130 7,210 2,400 __________ 17,740 __________ 703,260 __________ 8,374 7,210 2,400 __________ 17,984 __________ 703,016 __________ 8,625 7,440 2,400 __________ 18,465 __________ 725,535 __________ 8,884 7,440 2,400 __________ 18,724 __________ 725,276 __________ 9,150 7,440 2,400 __________ 18,990 __________ 725,010 __________ 9,425 7,440 2,400 __________ 19,265 __________ 724,735 __________ 9,708 7,440 2,400 __________ 19,548 __________ 724,452 __________ 9,999 7,670 2,400 __________ 20,069 __________ 746,931 __________ 10,299 7,670 2,400 __________ 20,369 __________ 746,631 __________ 10,608 7,670 2,400 __________ 20,678 __________ 746,322 __________ 10,926 7,670 2,400 __________ 20,996 __________ 746,004 __________ 11,254 7,670 2,400 __________ 21,324 __________ 745,676 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ 6.62% 6.62% 6.62% 6.62% 6.62% 6.62% 6.83% 6.83% 6.83% 6.83% 6.82% 6.82% 6.82% 6.82% 6.82% 6.82% 7.03% 7.03% 7.03% 7.03% 7.02% 7.02% 7.02% 7.02% 7.02% 7.02% Sale / Yield Discount Rate 7.75% 8.00% 8.25%
Net Operating Income Net Cash Flow
BORDERS BOOKS CASH FLOW REPORT BEGINNING JULY 1, 2007 Year 16 Reversion Apr-2024 Apr-2025 __________ __________ $1,089,065
For the Years Ending
Year 1 Apr-2009 __________
Year 2 Apr-2010 __________
Potential Gross Revenue Base Rental Revenue Absorption & Turnover Vacancy
$721,000
$721,000
Scheduled Base Rental Revenue
Total Potential Gross Revenue
Effective Gross Revenue
__________ $721,000 __________ 721,000 __________ 721,000 __________
__________ $721,000 __________ 721,000 __________ 721,000 __________
$1,089,064 -90,755 __________ 998,309 __________ 998,309 __________ 998,309 __________
__________ 1,089,065 __________ 1,089,065 __________ 1,089,065 __________
Operating Expenses Administrative & General Management Reserves
Total Operating Expenses
Net Operating Income
7,440 7,210 2,400 __________ 17,050 __________ 703,950 __________
7,663 7,210 2,400 __________ 17,273 __________ 703,727 __________
11,254 11,254 9,983 10,891 2,400 2,400 __________ __________ 23,637 24,545 __________ __________ 974,672 1,064,520 __________ __________
Leasing & Capital Costs Tenant Improvements Leasing Commissions
__________
__________
Total Leasing & Capital Costs
Cash Flow Before Debt Service & Taxes
__________ __________ __________ __________ 703,950 703,727 703,497 703,260 ========================================
208,737 $375,727 __________ __________ 584,464 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ 703,016 725,535 725,276 725,010 724,735 724,452 746,931 746,631 746,322 746,004 745,676 390,208 $1,064,520 ==================== ======================================== =========================================================== ========== = 9.17% 3.67%
IMPLIED OVERALL RATE CASH ON CASH RETURN
6.63% 6.63%
6.62% 6.62%
1,200,000
NOI and Cash Flow Trend
1,000,000
800,000
600,000
Terminal Capitalization Rate 6.75% 7.00% 7.25% $11,055,843 $10,888,641 $10,732,970 $10,784,643 $10,623,527 $10,473,523 $10,522,464 $10,367,199 $10,222,643
400,000
200,000 7 8 9 Year 10 11 12 13 14 15 16
Cost of Sale at Reversion: Building Size (SF): Percent Residual: Reconciled Value Indication (Rounded): Value Per Square Foot:
2.00% 24,000 40.9% $10,624,000 $442.67
BORDERS BOOKS
CONCLUSION OF INCOME CAPITALIZATION APPROACH

The conclusion via the valuation method employed for this approach is as follows:
INCOME CAPITALIZATION APPROACH VALUES

As Complete & Stabilized May 1, 2008 Direct Capitalization Method Discounted Cash Flow Analysis $10,770,000 $10,625,000
Reconciled Value
Compiled by CBRE
$10,700,000
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GO DARK ANALYSIS
At the clients request, we have estimated the fee simple value of the subject property. The fee simple analysis assumes the subject property to be vacant and available for lease, and is often referred to as a go dark analysis. As the subject is currently encumbered by a long-term lease to a credit tenant, this analysis involves hypothetical assumptions.
DIRECT CAPITALIZATION
CBRE has conducted the fee simple valuation by utilizing alternative direct capitalization assumptions to value the subject property and applied appropriate lease-up discounts. These market derived assumptions reflect the availability of the subject property on the open market as if it were currently vacant. The following steps were taken where necessary: 1. 2. 3. 4. 5. 6. 7. 8. Estimate appropriate market rent; estimate applicable stabilized vacancy & collection loss factors; adjust expenses estimates if necessary; adjust OAR due to risk for alternative tenancy; estimate an appropriate period to lease-up the improvements; provide an allowance for leasing commissions; provide an allowance for tenant improvement/retrofit costs; estimate developers profit;
Based on an analysis in an earlier section of the Income Approach, we concluded a market rental rate. For our vacancy and credit allowance, we have concluded a market rate of 10% based on vacancy rates for comparable properties, which averaged approximately 100%, and the overall occupancy level for the subjects submarket at about 91.5%. Expenses are not anticipated to differ significantly due to the single-tenant retail design of the improvements. Lastly, an overall capitalization rate of 9.0% was selected. This appears reasonable as the credit and lease term of the prospective tenant are unknown, which increases the risk to the developer/investor. Our concluded rate is further supported through the published survey data presented earlier and our conversations with local market participants. A Direct Capitalization Summary Fee Simple Analysis is illustrated in the following table:
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DIRECT CAPITALIZATION SUMMARY - FEE SIMPLE ESTATE

Income Potential Rental Income Credit Loss Vacancy Effective Gross Income Expenses Administrative & General Management Fee Reserves for Replacement Operating Expenses Operating Expense Ratio Net Operating Income OAR Indicated Stabilized Value Rounded Deferred Maintenance Lease-Up Discount Value Indication Rounded Value Per SF Matrix Analysis Cap Rate 8.75% 9.00% 9.25%
Compiled by CBRE
$/SF/Yr $31.00 1.00% 9.00% (0.31) (2.79) $27.90
Total $744,000 (7,440) (66,960) $669,600
0.31 1.00% 0.28 0.10 $0.69 $27.21 /
7,440 6,696 2,400 $16,536 2.47% $653,064 9.00% $7,256,267 $7,260,000 $7,256,267 $7,260,000 $302.50 Value $7,463,600 $7,256,300 $7,060,200
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Go Dark Value is equal to our conclusion of fee simple stabilized market value less adjustments for the costs associated with lost revenue (rent loss), leasing commissions, and other expenses during the marketing period (including operating expenses, TI Allowances, and sales expenses). Our calculation follows.
"GO DARK" ANALYSIS SUMMARY

Fee Simple Value (Stabilized) Estimated Downtime Rent Loss from Downtime Variable Operating Expense Credit @ 30% Leasing Commissions Tenant Improvement Allowance Sub-Total Indicated "Go Dark" Value Rounded Compiled by CBRE $669,600 ($16,536 (@ 4.0%, x x 9 Months 75.00% x 75.0%) 10 Yr. Term) 502,200 (12,402) 297,600 240,000 1,027,398 $6,232,602 $6,250,000 $7,260,000
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RECONCILIATION OF VALUE
The value indications from the approaches to value are summarized as follows:
SUMMARY OF VALUE CONCLUSIONS

As Complete & Stabilized on May 1, 2008 Cost Approach Sales Comparison Approach Income Capitalization Approach Reconciled Value
Compiled by CBRE
$9,400,000 $10,245,000 $10,700,000 $10,400,000
The cost approach typically gives a reliable value indication when there is strong support for the replacement cost estimate and when there is minimal depreciation. Considering the limited amount of depreciation present in the property, the reliability of the cost approach is considered good. Therefore, the cost approach is considered applicable to the subject and is used primarily as a test of reasonableness against the other valuation techniques. In the sales comparison approach, the subject is compared to similar properties that have been sold recently or for which listing prices or offers are known. The sales used in this analysis are considered highly comparable to the subject, and the required adjustments were based on reasonable and wellsupported rationale. In addition, market participants are currently analyzing purchase prices on Therefore, the sales investment properties as they relate to available substitutes in the market.
comparison approach is considered to provide a reliable value indication, but has been given secondary emphasis in the final value reconciliation. The income capitalization approach is applicable to the subject since it is an income producing property leased in the open market. Market participants are primarily analyzing properties based on their income generating capability. Therefore, the income capitalization approach is considered a reasonable and substantiated value indicator and has been given primary emphasis in the final value estimate. Based on the foregoing, the market value of the subject has been concluded as follows. It is noted that the As Is market value is land value:
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MARKET VALUE CONCLUSION

Appraisal Premise As Is As Complete & Stabilized As Complete & Stabilized
Compiled by CBRE
Value Conclusion $2,800,000 $10,400,000 $6,250,000
EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS

The value herein is based on the Lease Agreement provided by Stirling Forterra, LLC. If not, the value conclusion is subject to change. The value assumes the improvements will be constructed in a good workmanlike manner based on the information provided by the developer. If not, the value conclusion is subject to change.
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ASSUMPTIONS AND LIMITING CONDITIONS

1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subjects title should be sought from a qualified title company that issues or insures title to real property. 2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CBRE professionals are not engineers and are not competent to judge matters of an engineering nature. CBRE has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE by ownership or management; CBRE inspected less than 100% of the entire interior and exterior portions of the improvements; and CBRE was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CBRE has no knowledge of the existence of such materials on or in the property. CBRE, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owners representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CBRE has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessors Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review
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all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CBRE will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CBRE assumes no private deed restrictions, limiting the use of the subject in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CBRE is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CBRE nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE which consent CBRE reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a sale or offer for sale of any security, as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used.
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17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or clients designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE assumes responsibility for any situation arising out of the Clients failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CBRE assumes that the subject analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CBRE has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CBRE has no specific information relating to this issue, nor is CBRE qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject. 24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser. The Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Clients failure or the failure of any of the Clients agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 25. The report is for the sole use of the client; however, client may provide only complete, final copies of the appraisal report in its entirety (but not component parts) to third parties who shall review such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CBRE or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors in its entirety (but not component parts) without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. 26. As part of the clients requested scope of work, an estimate of insurable value is provided herein. CBRE has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as the Marshal Valuation Service handbook. The methodology employed is a derivation of the cost
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approach which is primarily used as an academic exercise to help support the market value estimate and therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly from this estimate. This analysis should not be relied upon to determine proper insurance coverage which can only be properly estimated by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the client/reader/user as part of their overall decision making process and no representations or warranties are made by CBRE regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop any estimate of insurable value.
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ADDENDA
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ADDENDUM A GLOSSARY OF TERMS
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assessed value Assessed value applies in ad valorem

taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base.
through to the tenant and are known as expense passthroughs.
going concern value Going concern value is the
cash equivalency The procedure in which the sale

prices of comparable properties sold with atypical financing are adjusted to reflect typical market terms.
contract rent The actual rental income specified in a

lease.
effective rent
The rental rate net of financial concessions such as periods of no rent during the lease term; may be calculated on a discounted basis, reflecting the time value of money, or on a simple, straight-line basis.
value of a proven property operation. It includes the incremental value associated with the business concern, which is distinct from the value of the real estate only. Going concern value includes an intangible enhancement of the value of an operating business enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing operation. This process creates an economically viable business that is expected to continue. Going concern value refers to the total value of a property, including both real property and intangible personal property attributed to the business value. building, including below-grade space but excluding unenclosed areas, measured from the exterior of the walls. Gross building area for office buildings is computed by measuring to the outside finished surface of permanent outer building walls without any deductions. All enclosed floors of the building including basements, mechanical equipment floors, penthouses, and the like are included in the measurement. Parking spaces and parking garages are excluded.
gross building area (GBA) The total floor area of a
excess land In regard to an improved site, the land not

needed to serve or support the existing improvement. In regard to a vacant site or a site considered as though vacant, the land no needed to accommodate the sites primary highest and best use. Such land may be separated from the larger site and have its own highest and best use, or it may allow for future expansion of the existing or anticipated improvement. See also surplus land.
extraordinary assumption An assumption directly

related to a specific assignment, which, if found to be false, could alter the appraisers opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. See also hypothetical condition.
hypothetical condition
That which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. See also extraordinary assumption. Insurable Value is based on the replacement and/or reproduction cost of physical items that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that is acknowledged or recognized under the provisions of an applicable loss insurance policy. This value is often controlled by state law and varies from state to state. investment to a particular investor based on his or her investment requirements. In contrast to market value, investment value is value to an individual, not value in the marketplace. Investment value reflects the subjective relationship between a particular investor and a given investment. When measured in dollars, investment value is the price an investor would pay for an investment in light of its perceived capacity to satisfy his or her desires, needs, or investment goals. To estimate investment value, specific investment criteria must be known. Criteria to evaluate a real estate
insurable value
fee simple estate Absolute ownership unencumbered

by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
floor area ratio (FAR) The relationship between the
above-ground floor area of a building, as described by the building code, and the area of the plot on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total land area; also called building-to-land ratio. operating expenses. Typically, full service leases are combined with an expense stop, the expense level covered by the contract lease payment. Increases in expenses above the expense stop level are passed
investment value Investment value is the value of an
full service lease A lease in which rent covers all
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investment are not necessarily set down by the individual investor; they may be established by an expert on real estate and its value, that is, an appraiser.
leased fee
See leased fee estate
leased fee estate An ownership interest held by a

landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.
never takes possession of the expense payment. In a Triple Net Lease all operating expenses are the responsibility of the tenant, including property taxes, insurance, interior maintenance, and other miscellaneous expenses. However, management fees and exterior maintenance are often the responsibility of the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the tenant and some are included in the rent.
net rentable area (NRA) 1) The area on which rent

is computed. 2) The Rentable Area of a floor shall be computed by measuring to the inside finished surface of the dominant portion of the permanent outer building walls, excluding any major vertical penetrations of the floor. No deductions shall be made for columns and projections necessary to the building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor. *
leasehold
See leasehold estate
leasehold estate The interest held by the lessee (the

tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.
occupancy rate The relationship or ratio between the

income received from the rented units in a property and the income that would be received if all the units were occupied.
market rent The most probable rent that a property
should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations.
prospective value opinion A forecast of the value

expected at a specified future date. A prospective value opinion is most frequently sought in connection with real estate projects that are proposed, under construction, or under conversion to a new us, or those that have not achieved sellout or a stabilized level of long-term occupancy at the time the appraisal report is written.
market value
Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) A reasonable time is allowed for exposure in the open market; 2) Both parties are well informed or well advised, and acting in what they consider their own best interests; 3) Buyer and seller are typically motivated; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. property to sell on the market subsequent to the date of an appraisal.
reasonable exposure time The estimated length of

time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective opinion based upon an analysis of past events assuming a competitive and open market.
rent
See full service lease net lease market rent contract, coupon, face, or nominal rent effective rent
shell rent The typical rent paid for retail, office, or

industrial tenant space based on minimal shell interior finishes (called plain vanilla finish in some areas). Usually the landlord delivers the main building shell space or some minimum level of interior buildout, and the tenant completes the interior finish, which can include wall, ceiling, and floor finishes; mechanical systems, interior electric, and plumbing. Typically these
marketing period The time it takes an interest in real
net lease Lease in which all or some of the operating

expenses are paid directly by the tenant. The landlord
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are long-term leases with tenants paying all or most property expenses.
surplus land Land not necessary to support the highest
and best use of the existing improvement but, because of physical limitations, building placement, or neighborhood norms, cannot be sold off separately. Such land may or may not contribute positively to value and may or may not accommodate future expansion of an existing or anticipated improvement. See also excess land. tenants. 2) The Usable Area of an office building is computed by measuring to the finished surface of the office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished
surface of the dominant portion of the permanent outer building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical penetrations of a multi-tenant floor. *
use value
usable area 1) The area actually used by individual
Use value is a concept based on the productivity of an economic good. Use value is the value a specific property has for a specific use. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the propertys highest and best use or the monetary amount that might be realized upon its sale.
value indication An opinion of value derived through

application of the appraisal process.
The Appraisal of Real Estate, Twelfth Edition, Appraisal Institute, 2001.
The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, 2002. Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C Appraisals, 34.42 (g); Office of Thrift Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, th The Dictionary of Real Estate Appraisal, 4 ed. (Chicago: Appraisal Institute, 2002), 177-178. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the example referenced in the Uniform Standards of Professional Appraisal Practice (USPAP). 2000 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association, 2000)
*
Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 16, 1993, revised June 15, 2004.
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ADDENDUM B LAND SALE DATA SHEETS
RETAIL/COMMERCIAL LAND SALE No. 1 3338 St. Charles Avenue

Location Data Location: County: Atlas Ref: 3338 St. Charles Avenue New Orleans,LA 70115 Orleans Parish N/A Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Onsite/Offsite Costs: Adj. Sale Price: Verification: Contract 6/2007 12 months Alderwood (Louisiana), Inc., cbs Stirling Forterra, LLC N/A $2,800,000 Cash to Seller $2,800,000 $0 $2,800,000 Purchase Agreement
Assessor's Parcel No: N/A
Physical Data Type: Land Area: Acres: Square Feet: Topography: Shape: Utilities: Zoning: Allowable Bldg Area: Floor Area Ratio: No. of units: Max FAR: Frontage: Retail/Commercial Gross Usable 0.9305 0.9305 40,534 40,534 Level, At Street Grade L shape All C-2 N/A N/A N/A N/A St. Charles Avenue; Louisiana Avenue
Analysis Use At Sale: Proposed Use or Dev. Price Per Acre: Price Per SF of Land: Price Per Unit: Price Per SF of Bldg: Comments This property is located at the southeast corner of St. Charles Avenue and Louisiana Avenue. At the time of contract, the property was improved with a funeral home that will be demolished and a retail building leased to Borders Books will be constructed. Land Retail $3,009,134 $69.08 N/A N/A
MULTI-FAMILY LAND SALE No. 2 Warehouse District Land

Location Data Location: County: Atlas Ref: 1042 Magazine Street New Orleans,LA 70130 Orleans Parish N/A Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Onsite/Offsite Costs: Adj. Sale Price: Verification: Listing 6/2007 12 months N/A N/A N/A $798,000 Not Available $798,000 $0 $798,000 Corporate Realty
Physical Data Type: Land Area: Acres: Square Feet: Topography: Shape: Utilities: Zoning: Allowable Bldg Area: Floor Area Ratio: No. of units: Max FAR: Frontage: Multi-Family Gross 0.1779 7,750 Usable 0.1779 7,750
Level, At Street Grade Irregular All CBD-7 N/A N/A N/A 68' Magazine Street; 117' Poeyfarre Street
Analysis Use At Sale: Proposed Use or Dev. Price Per Acre: Price Per SF of Land: Price Per Unit: Price Per SF of Bldg: Comments Directly across from the National World War II Museum expansion. The site exhibits the following frontage: 68' Magazine Street 117' Poeyfarre Street 111' John Churchill Chase Previously received preliminary approval to construct seventeen (17) residential condominium units with covered off-street parking. Vacant Unknown $4,485,666 $102.97 N/A N/A
MULTI-FAMILY LAND SALE No. 3 1031 Canal Street

Location Data Location: County: Atlas Ref: 1031 Canal St. New Orleans,LA 70112 Orleans Parish N/A Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Onsite/Offsite Costs: Adj. Sale Price: Verification: Sale 5/2007 12 months N/A N/A N/A $3,400,000 Cash to Seller $3,400,000 $0 $3,400,000 LoopNet
Physical Data Type: Land Area: Acres: Square Feet: Topography: Shape: Utilities: Zoning: Allowable Bldg Area: Floor Area Ratio: No. of units: Max FAR: Frontage: Multi-Family Gross 0.9340 40,685 Usable 0.9340 40,685
Level, At Street Grade Irregular All CBD-3 N/A N/A N/A Canal Street; Rampart Street
Analysis Use At Sale: Proposed Use or Dev. Price Per Acre: Price Per SF of Land: Price Per Unit: Price Per SF of Bldg: Comments This property is located at the northeast corner of Canal Street and Rampart Street. Land Multifamily $3,640,256 $83.57 N/A N/A
BORDERS BOOKS
ADDENDUM C IMPROVED SALE DATA SHEETS
RETAIL SALE No. 1 Borders Books

Location Data Location: County: Atlas Ref: 25222 El Paseo Mission Viejo,CA 92691 Orange 922-B4
Assessor's Parcel No: 784-661-03
Physical Data Type: Land Area: Excess Land: Gross Leasable Area: Anchors: Borders Books Misc. Freestanding Retail 2.53 Acres None
30,000 SF
Financial Data Source: Occupancy at Sale: Existing or ProForma Inc: Broker 100% Existing Total $892,400 $17,848 $874,552 N/A $874,552 Per SF $29.75 $0.59 $29.15 N/A $29.15
Anchor Tenant GLA: Local Tenant GLA: Total GLA: GLA Purchased: Year Built: Parking: Condition: Exterior Walls:
30,000 SF N/A 30,000 SF 30,000 SF 1994 5.00/1,000 SF Good Concrete Block
Potential Gross Income: Vacancy and Credit Loss: Effective Gross Income: Expenses and Reserves: Net Operating Income:
Analysis Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Req.Capital Cost: Adj. Sale Price: Verification: Comments This repesents the July 2006 sale of a 30,000-square-foot Border Books located just west of Interstate 5 and north of Oso Parkway in the city of Mission Viejo. Specifically, it is located at the north end of the Freeway Center, a power retail center that features such tenants as Best Buy, Comps USA, Toys R Us, Krispy Kreme and a number of other national tenants. The Border's Books building located at the north end of the retail center and has good visibility from Interstate 5. The property sold for $12,281,040 or $476.03 per square foot. The indicated overall capitalization rate was 6.12 percent, based on income-in-place. The tenant currently has 14 years remaining (2019) on its lease with periodic escalations. Sale 7/2006 3 months Roebling Investment Company 1633 Bentley Ave Apts, LLC 488956 $14,281,040 Not Available $14,281,040 $0 $14,281,040 Sterling Champ - CBRE Buyers Underwriting Criteria.: Overall Cap. Rate (OAR): Projected IRR: Eff. Gross Multiplier (EGIM): Oper. Expense Ratio (OER): Price Per Square Foot: Direct Cap 6.12 % N/A % 16.33 N/A % $476.03
RETAIL SALE No. 2 Borders Bookstore

Location Data Location: County: Atlas Ref: 8625 Germantown Avenue Philadelphia,PA 19118 Philadelphia N/A
Assessor's Parcel No: 88-2722210
Physical Data Type: Land Area: Excess Land: Gross Leasable Area: Anchors: Borders Misc. Freestanding Retail 0.46 Acres None
18,538 SF
Financial Data Source: Occupancy at Sale: Existing or ProForma Inc: N/A 100 N/A Total Potential Gross Income: Vacancy and Credit Loss: Effective Gross Income: Expenses and Reserves: Net Operating Income: N/A N/A N/A N/A $391,152 Per SF N/A N/A N/A N/A $21.10
18,538 SF N/A 18,538 SF 18,538 SF 2000 N/A Good Masonry
Analysis Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Req.Capital Cost: Adj. Sale Price: Verification: Comments This sale was a freestanding Borders bookstore with good visibility and access from Germantown Avenue. The property is situated in the Chestnut Hill section of the city. Sale 6/2006 N/A Thor Equities Acadia Chestnut Hill 51468542 $6,160,000 Cash to Seller $6,160,000 $0 $6,160,000 Buyers Underwriting Criteria.: Overall Cap. Rate (OAR): Projected IRR: Eff. Gross Multiplier (EGIM): Oper. Expense Ratio (OER): Price Per Square Foot: Other 6.35 % N/A % N/A N/A % $332.29
RETAIL SALE No. 3 Borders Books & Music

Location Data Location: County: Atlas Ref: 668 6th Avenue San Diego,CA 92101 San Diego 1289-B/4
Assessor's Parcel No: 535-094-18
Physical Data Type: Land Area: Excess Land: Gross Leasable Area: Anchors: Borders Misc. Freestanding Retail 0.47 Acres None
31,245 SF
Financial Data Source: Occupancy at Sale: Existing or ProForma Inc: Seller 100% Existing Total Potential Gross Income: Vacancy and Credit Loss: Effective Gross Income: Expenses and Reserves: Net Operating Income: N/A N/A N/A N/A $881,842 Per SF N/A N/A N/A N/A $28.22
31,245 SF N/A 31,245 SF 31,245 SF 2002 Shared Good Stucco/Concrete
Analysis Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Req.Capital Cost: Adj. Sale Price: Verification: Comments This comparable represents the January 2005 sale of a free-standing retail building located on the southwest corner of 6th Avenue and G Street in the Gaslamp district of the city of San Diego. This two-story retail building was developed in 2002 of mixed-construction to comprise approximately 31,245 square feet of net rentable area. Parking is available offsite in a shared public parking facility. The improvements were 100% occupied by Borders Books and Music and was considered in good condition at the time of sale. According to the listing broker, this property sold in January 2005 for $13,045,000, or $417.51 per square foot. As this property is net-leased to a national, credit-tenant, it is considered a very attractive investment. The seller was reportedly approached directly by the buyer, who purchased the property at a 6.76% cap rate based on acutal income in place. Sale 1/2005 N/A Borsan LLC 333 Market Exchange One LLC 0054779 $13,045,000 Cash to Seller $13,045,000 $0 $13,045,000 Shawn Bakke - Marcus&Millichap Buyers Underwriting Criteria.: Overall Cap. Rate (OAR): Projected IRR: Eff. Gross Multiplier (EGIM): Oper. Expense Ratio (OER): Price Per Square Foot: Other 6.76 % N/A % N/A N/A % $417.51
RETAIL SALE No. 4 Border's Books Retail Center

Location Data Location: County: Atlas Ref: 3131 Veteran's Memorial Boulevard Metairie,LA Jefferson Parish Metairie
Physical Data Type: Land Area: Excess Land: Gross Leasable Area: Anchors: Border's Books Big Box 1.60 Acres N/A
25,250 SF
Financial Data Source: Occupancy at Sale: Existing or ProForma Inc: Buyer 91% Existing Total $972,728 $9,727 $963,001 $96,500 $866,501 Per SF $32.71 $0.33 $32.39 $3.25 $29.14
25,250 SF 4,486 SF 29,736 SF 29,736 SF 1997 Open Surface Good Concrete
Potential Gross Income: Vacancy and Credit Loss: Effective Gross Income: Expenses and Reserves: Net Operating Income:
Analysis Sale Data Transaction Type: Date: Marketing Time: Grantor: Grantee: Document No.: Sale Price: Financing: Cash Eq.Price: Req.Capital Cost: Adj. Sale Price: Verification: Comments This sale involves Borders Books and two small tenants. Sale 2/2004 12 months 3131 Vets LLC 2121 Borders LLC N/A $9,500,000 Cash to Seller $9,500,000 $0 $9,500,000 Cliff Chew RBS Grenwich 949 225 Buyers Underwriting Criteria.: Overall Cap. Rate (OAR): Projected IRR: Eff. Gross Multiplier (EGIM): Oper. Expense Ratio (OER): Price Per Square Foot: Direct Cap 9.12 % N/A % 9.86 10.02 % $319.48
BORDERS BOOKS
ADDENDUM D RENT COMPARABLE DATA SHEETS
RETAIL COMPARABLE No. 1 Borders Books

Location Data Location: County: Atlas Ref: 3131 Veterans Memorial Blvd Metairie,LA Jefferson N/A
Physical Data Type: Gross Leaseable Area:29,736 SF Year Built: 1997 Exterior Walls: Masonry Condition: Good Parking: Adequate Anchors: 25,250 SF Border's Books
Lease Data Occupancy: Local: Overall:
Anchor Tenant GLA: 25,250 SF Local Tenant GLA: 4,486 SF Total GLA: 29,736 SF
Recent Leases Size (SF) 25,250 Rent (PSF) $29.35
100% 100% 25,250 SF Typical Size: 20 yrs Term: $29.35 Base Rent PSF: Rent Escalations: None Triple net Basis: Expense Pass-Thru: Triple net Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: N/A Phone No.: N/A Survey Date: 4/04 TI (PSF) $0.00 Free Rent (Months) Escalations Term (Yrs) 20.00
Date 3/98
Tenant Borders Books
Comments This property is located at 3131 Veterans Memorial in Metairie, the property also includes two strip retial spaces of 2,593 SF and 1,893 SF.
RETAIL COMPARABLE No. 2 Borders Books at City Place

Location Data Location: County: Atlas Ref: 3600 McKinney Avenue Dallas,TX 75052 Dallas N/A
Assessor's Parcel No: 000977000A01A0000
Physical Data Type: Big Box Gross Leaseable Area:22,000 SF Year Built: 2004 Exterior Walls: Brick/stone Condition: Good Parking: Garage/Surface Anchors: 22,000 SF Borders Books
Anchor Tenant GLA: 22,000 SF Local Tenant GLA: N/A Total GLA: 22,000 SF
100% 100% 22,000 SF Typical Size: 15 Term: $19.00 Base Rent PSF: Rent Escalations: Yes NNN Basis: Expense Pass-Thru: NNN Free Rent (months): None Tenant Improvement: Negotiable Leasing Agent: Actual lease Phone No.: N/A Survey Date: 6/06 TI (PSF) $0.00 Free Rent (Months) Escalations Yes Term (Yrs) 15.00
Date 8/2004
Tenant Borders Books
Comments This space is located within the City Place Shoppiong center at the intersction of McKinney Avenue and Lemmon Avenue. The building also has a 4,500 SF Chase bank paying $40.00 per square foot. The total building square footage is 26,500 square feet. The Borders Books rental rate escalates over the term of the lease. The Borders lease escalates $1.00 PSF every five years.
RETAIL COMPARABLE No. 3 Borders

Location Data Location: County: Atlas Ref: 2130 Haines Avenue Rapid City,SD 57701 Pennington N/A
Assessor's Parcel No: 20-25-251-007
Physical Data Type: Big Box Gross Leaseable Area:20,000 SF Year Built: 1999 Exterior Walls: CMU/EFIS Condition: Excellent Parking: Adequate
100% 100% 20,000 SF Typical Size: 15 YRS Term: $23.30 Base Rent PSF: Rent Escalations: Flat NNN Basis: Expense Pass-Thru: N/A Free Rent (months): N/A Tenant Improvement: N/A Leasing Agent: N/A Phone No.: N/A Survey Date: 2/2007 TI (PSF) $0.00 Free Rent (Months) Escalations 0 Flat+Five, 5YR Term (Yrs) 15.00
Date 2/2001
Tenant Borders
Comments This is a 20,000-square-foot freestanding big-box retail building located at an interstate/off-ramp (corner) location. It was built in 1999 and is situated on a 2.810-acre site. Currently the center is 100.0% occupied by Borders as a single-tenant facility. It is considered to be a Class A property in its market, with no competition in Rapid City. The building is physically similar to other Borders buildings in the region in that in includes a customer coffee shop, sitting area, as well as various sections of books, music and periodicals. The property does not include any out parcels. Borders has a net lease within the premises from 2001-2016, at a flat rate of $23.30 PSF. The lease has five, five year renewals that are to be determined based upon Borders future credit rating. The lease rate was arrived at by taking the project's debt service plus a developer's yield amount over the term of the original construction loan.
RETAIL COMPARABLE No. 4 Barnes & Noble

Location Data Location: County: Atlas Ref: 2121 N. Federal Hwy Ft. Lauderdale,FL Broward County N/A
Physical Data Type: Big Box Gross Leaseable Area:27,000 SF Year Built: 2001 Exterior Walls: Stucco over Concrete Condition: Good Parking: Adequate Anchors: 27,000 SF Barnes & Noble
100% 100% 27,000 SF Typical Size: 15 Yrs Term: $22.75 Base Rent PSF: Rent Escalations: 9.3% every 5Yrs Triple Net Basis: Expense Pass-Thru: Triple Net Free Rent (months): N/A Tenant Improvement: N/A Leasing Agent: Confidential Phone No.: Confidential Survey Date: 9/02 TI (PSF) $0.00 Free Rent (Months) Escalations N/A 9.3% every 5 Yr Term (Yrs) 15.00
Date 2001
Tenant Barnes & Noble
Comments The 27,000 square foot, two story free-standing Barnes & Noble is located on the west side of Federal Highway between Oakland Park Blvd. and Sunrise Blvd. The rental rate is $22.75 per square foot, triple net over a 15 year term. The rental rate increases by 9.3% every 5 years. The lease includes three, 5 year options.
BORDERS BOOKS
ADDENDUM E PURCHASE AGREEMENT
BORDERS BOOKS
ADDENDUM F LEASE
BORDERS BOOKS
ADDENDUM G CONSTRUCTION COSTS
BORDERS BOOKS
ADDENDUM H PRCIS METRO REPORT - ECONOMY.COM, INC.
NEW ORLEANS
EMPLOYMENT GROWTH RANK
Best=1 Worst=387
LIFE CYCLE PHASE
Relative Employment Performance (1991=100)

140 130 120 110 100 90 80 92 93 94 95 96 97 98 99 00 01 02 03 NEO 04 05 06 07 08 09 10 11 U.S. Forecast
Growth/Mature
Best=1
VITALITY
4th quintile
Worst=379
2006-08
1st quintile
289
COST OF DOING BUSINESS

U.S.= 100%
2006-11
1st quintile
93%
COST OF LIVING
20
U.S.= 100%
95%
2003 2004
DataBuffet MSA code: MNEO
2000
2001
2002
2005
2006
34.0 -17.4 479.8 -13.5 5.4 45.0 913.0 5,246 737 172.4 6,529 -406.6 2,841
Indicators
Gross Metro Product, C$B % Change Total Employment (000) % Change Unemployment Rate Personal Income Growth Population (000) Single-Family Permits Multifamily Permits Existing Home Price ($Ths) Mortgage Originations ($Mil) Net Migration (000) Personal Bankruptcies
2007
2008
2009
2010
2011
44.3 43.5 43.1 43.5 45.0 41.2 -6.9 -2.0 -0.9 0.9 3.4 -8.5 617.7 618.7 608.4 611.4 614.8 554.6 0.2 0.2 -1.7 0.5 0.6 -9.8 4.7 4.9 5.5 5.5 5.1 8.0 5.5 6.7 1.6 2.5 5.7 -35.4 1,315.7 1,311.2 1,311.7 1,312.4 1,314.8 1,314.6 3,475 3,499 4,326 5,357 5,698 4,488 692 939 1,057 772 702 293 111.6 117.0 122.5 130.1 137.1 158.9 3,386 6,136 7,121 11,046 7,426 6,614 -8.0 -10.5 -5.6 -4.6 -3.6 -6.3 6,648 8,198 7,808 8,085 7,584 8,792
36.8 38.4 39.1 39.7 40.3 8.3 4.2 1.9 1.6 1.4 527.8 536.0 541.3 545.9 550.0 10.0 1.6 1.0 0.8 0.8 2.0 1.9 1.9 1.8 1.8 8.1 3.6 4.3 4.3 4.1 1,165.6 1,134.0 1,136.8 1,138.1 1,139.7 7,864 9,331 7,760 5,023 4,839 3,837 5,051 4,486 3,098 3,178 160.5 162.8 167.7 173.5 179.7 5,786 5,361 5,488 5,678 5,848 247.1 -37.2 -2.8 -4.1 -4.0 1,301 1,403 1,518 1,663 1,782
STRENGTHS & WEAKNESSES

STRENGTHS Well-developed port, pipeline, and rail infrastructure, including strategic port facilities for domestic and international trade. Key export industries are showing signs of steady growth. WEAKNESSES Below average per capita income. High poverty and crime rate. Low rate of insurance holders may hinder reconstruction.
ANALYSIS
Recent Performance. More than 18 months after Hurricane Katrina, the New Orleans economy is slowly emerging from its lull. Benchmark revisions were very positive for NEO, revealing fewer jobs lost and a stronger rebound. The metro area still has a very long road back as total employment is still almost 15% below its pre-Katrina level. However, one way to gauge NEOs recovery is to measure the labor markets progress since Hurricane Katrina rather than focusing on its pre-storm level. Since September 2005, NEO has reclaimed roughly 35,000 jobs. As expected, construction is leading the way. More encouraging is the strong rebound in professional/business services, which is currently just shy of its pre-Katrina employment level. Strong hiring in this sector suggests that NEOs displaced businesses are indeed returning, which bodes well for the outlook. Population. The release of the Census Bureaus midyear 2006 population figures provides insight into how many residents NEO lost in the wake of Hurricane Katrina. The data show that the metro area lost roughly 290,000 residents, or 22% of its population base. Of the seven parishes that comprise the NEO metro area, four recorded declines in their population while three experienced an increase. As expected, the largest population declines were in the hardest hit parishes namely, Orleans and St. Bernard. St. Tammany experienced the largest increase in its population, adding roughly 11,000 residents, or 5%. Looking ahead, the slow recovery in the metro areas labor force to date suggests a weak rebound in NEOs population this year. Nevertheless, we do not expect the metro areas population to ever return to its pre-Katrina level. Rebuilding. The lack of affordable housing is a major obstacle in NEOs recovery effort. Prices soared immediately following Hurricane Katrina due to a supply shortfall, pushing affordability to one of its lowest levels in 20 years. As such, the massive rebuilding effort is dependent upon the issuance of checks from the states Road Home Program, which provides financial assistance for rebuilding. Through mid-March, there have been over 115,000 applications statewide and only 3,000 closings. This is the primary reason why, despite the clear need, housing starts in NEO have yet to surpass their pre-Katrina level. Additional building is essential to curbing house prices, boosting affordability, and enabling more residents to return to, or remain in, NEO. Hurdles. Despite numerous recent positive developments, there remain a number of challenges. The slow arrival of checks from the Road Home Program will significantly strain NEOs labor market. Issuance of aid is expected to increase over the next few months, which will spark the long awaited and much anticipated rebuilding boom. However, the current labor shortgage is a severe constraint on the number of housing projects that are undertaken. Another obstacle is the slow opening of public schools, hospitals and the re-establishment of public transportation. These are necessary in promoting economic growth and enticing displaced households to return. Despite positive benchmark revisions, the contours of the baseline forecast for New Orleans are unchanged. Hiring will accelerate this year as the massive rebuilding effort will support job gains in construction and services. The magnitude of the rebuilding effort will be limited by political red tape, available labor and the amount of funding issued to residents. Therefore, the lack of affordable housing will limit the supply of labor and the repopulation of the metro area. A permanently lower population will be a major long-term impediment. Job growth will slow toward the end of the decade as federal funding for rebuilding begins to fade, ensuring that NEO will not reach its pre-hurricane employment level for several decades. Ryan Sweet March 2007
CURRENT EMPLOYMENT TRENDS

January 2007 Employment Growth % change year ago, 3 mo. MA
T otal Construction Manufacturing T rade T rans/Utilities Information Financial Activities Prof & Business Svcs Edu & Health Svcs Leisure & Hospitality Other Services Government 11.9 9.8 8.7 15.6 10.6 3.0
-8.9
13.7 15.4 22.9 33.6
-2.8
-15 -10 -5 0
5 10 15 20 25 30 35 40
FORECAST RISKS
SHORT TERM LONG TERM RISK-ADJUSTED RETURN, 06-11
-0.86%
New infrastructure spurs population growth Increased activity through port boosts hiring Growing presence of lm industry boosts tax
receipts and hiring. DOWNSIDE Slow arrival of government aid continues to hinder rebuilding. Rising debt spurs additional government layoffs. and spurs expansion projects. and business investment.
UPSIDE
Moodys Economy.com, Inc. www.economy.com help@economy.com Prcis METRO
EMPLOYMENT & INDUSTRY

TOP EMPLOYERS
Northrop Grumman Corporation Hibernia National Bank Ochsner Clinic Foundation Tulane University Medical Center of Louisianna Entergy Corporation BellSouth Corporation Whitney Holding Corporation Lockheed Martin Corporation USDA, National Finance Center Tulane University Hospital & Clinic Touro Inrmary Memorial Medical Center Veteran Affairs Medical Center University of New Orleans Hilton Hotels Corporation Methodist Hospital Childrens Hospital Harrahs Casino New Orleans Superior Energy Services, Inc.
Source: New Orleans City Business Book of Lists, 2005-2006
MIGRATION FLOWS
Into New Orleans, LA Number of Migrants 1,727 1,032 702 563 552 461 441 376 363 347 30,634 Median Income 22,532 33,939 20,294 26,161 21,582 32,861 27,576 26,959 20,327 20,325 23,400
INDUSTRIAL DIVERSITY
6,687 6,024 5,664 5,418 3,613 2,500 2,400 2,373 2,100 1,900 1,865 1,800 1,664 1,551 1,521 1,300 1,276 1,227 1,200 1,200
Most Diverse (U.S.)
1.00 0.80 0.60 0.40 0.20 0.00
0.55
Least Diverse
Baton Rouge, LA Houston, TX Houma, LA Atlanta, GA Gulfport, MS Dallas, TX San Diego, CA Lafayette, LA New York, NY Los Angeles, CA Total Inmigration From New Orleans, LA Houston, TX Baton Rouge, LA Atlanta, GA Gulfport, MS Houma, LA Dallas, TX Lafayette, LA Fort Worth, TX Washington, DC Los Angeles, CA Total Outmigration Net Migration
EMPLOYMENT VOLATILITY DUE TO U.S. RELATIVE TO FLUCTUATIONS U.S.

100% 80% 60%
97%
40%
532
Public Federal .................................................... 12,559 State ........................................................ 16,570 Local ....................................................... 44,537
2006
2,422 2,293 1,056 998 857 764 417 416 347 343 36,659 -6,025
54,466 23,088 22,294 28,155 23,447 23,640 19,094 30,925 36,444 16,474 23,134 266
20%
100
0%
Not due to U.S. Due to U.S.
NEO
U.S.
Net Migration, NEO
COMPARATIVE EMPLOYMENT AND INCOME

Sector Construction Manufacturing Durable Nondurable Transportation/Utilities Wholesale Trade Retail Trade Information Financial Activities Prof. and Bus. Services Educ. and Health Services Leisure and Hosp. Services Other Services Government % of Total Employment NEO LA US 6.7% 7.2% 53.3% 46.7% 5.1% 4.8% 11.6% 1.5% 5.5% 13.7% 11.7% 12.0% 3.3% 15.4% 7.1% 8.2% 54.1% 45.9% 4.3% 3.9% 11.9% 1.4% 5.2% 10.5% 12.6% 9.9% 3.6% 18.7% 5.6% 10.4% 63.4% 36.6% 3.7% 4.3% 11.3% 2.2% 6.1% 12.9% 13.1% 9.6% 4.0% 16.1% Average Annual Earnings NEO LA US $40,171 $66,905 nd nd nd $56,756 $24,743 $48,282 $39,586 $41,973 $37,433 $22,321 $21,412 $49,075 $36,503 $63,646 $54,702 $73,031 $52,898 $49,474 $22,850 $53,899 $33,530 $36,508 $34,751 $18,148 $19,414 $43,889 $45,244 $65,673 $67,102 $63,325 $54,428 $62,643 $26,652 $79,678 $51,729 $49,211 $39,829 $19,370 $22,940 $53,033
0 -50,000 -100,000 -150,000 -200,000 -250,000 -300,000 2003 2004 2005 2006
2003 Domestic -5,891 Foreign Total 913 -4,978
2004 -5,160 1,796 -3,364
2005 -7,608 1,553 -6,055
2006 -291,495 1,719 -289,776
Sources: Percent of total employment - Moodys Economy.com & BLS, 2006; Average annual earnings - BEA, 2004
HOUSE PRICES
300 250 200 150 100 50 87 90 94 NEO 97 01 U.S. 04 06
GVSL 7221 7222 5613 GVF 6221 6113 7211 2382 3366 5411 4451 6211 5413 ML
LEADING INDUSTRIES
NAICS Industry Employees (000)
61.1 17.1 16.6 13.4 12.6 12.0 8.8 8.4 8.3 8.2 7.8 7.3 7.3 6.9 6.8 10.0 2.0 State & Local Government Full-Service Restaurants Limited-Service Eating Places Employment Services Federal Government General Medical and Surgical Hospitals Colleges, Universities & Professional Schools Traveler Accommodation Building Equipment Contractors Ship and Boat Building Legal Services Grocery Stores Ofces of Physicians Architectural, Engineering, and Related Srvcs. Military Personnel High-tech employment As % of total employment
Sources: IRS (top), 2005; Census Bureau, 2006
PER CAPITA INCOME
31,024
33,090 27,082
Source: OFHEO, 1987Q1=100, NSA
CREDIT QUALITY
MOODYS RATING
CITY
NEO
Sources: BLS, Moodys Economy.com, 2006
LA
US
Ba2
Source: Bureau of Economic Analysis, 2004
2007 www.economy.com Moodys Economy.com, Inc.CB Richard Ellis, Inc.help@economy.com Prcis METRO
New Orleans
Revisions Paint Slightly Better Picture
650
Total payroll employment, ths
But Hurricane Katrina Left Many Industries with a Black Eye

Construction
600
Preliminary
Educ. and health
550
Post-benchmark
Government Post-benchmark Preliminary Manufacturing

Employment % change, 06
500
Prof. and bus. 450

Hurricane Katrina
Retail trade 06 07 -35 -30 -25 -20 -15 -10 -5 0 5 10 15
400 04 05
Rebuilding Painfully Slow as Demolitions Stall in Orleans Parish

4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 Orleans, Jefferson, Plaquemines, St. Tammany Orleans
Cumulative number of building demolitions, ths Sources: U.S. Army Corps of Engineers, Brookings Institute
Revisions to NEO employment were significant and the largest nationwide. The revisions showed that employment fell by roughly 14% in 2006, compared to a previously reported 20% decline. As expected, the revisions show a sizeable gain in construction employment last year, consistent with an economy rebuilding itself following a natural disaster. Employment growth was revised up for a number other industries including retail trade, manufacturing, and professional/business services. All told, the upward revisions paint a stronger recovery immediately following Hurricane Katrina, but they do not alter the contours of our baseline forecast.
Occupancy Tumbles as Federal Workers Vacate New Orleans
80
Source: Smith Travel Research
140
3 mo. MA
75 0.5 0.0 Mar-06 May Jul Sep Nov Jan-07 Mar 65 70

Average room rate $ (R)
130
120
110
New Orleans Benefiting from a Healthy Global Economy

16
Value of trade through New Orleans Custom District, $ bil, NSA
60 100
Hotel occupancy rate, % (L)
55
14 12 10 8
Exports
50 05 06 07
90
6 4 2 0 05 06 07
Imports
Hotel occupancy in NEO has plunged over the past year. The exodus of federal workers and insurance adjusters facilitated this decline. The average room rate has nearly doubled from its August nadir, however. Seasonal demand and Mardi Gras are the main catalysts behind higher prices. It is imperative that tourism in NEO is rejuvenated quickly as the industry is one of the metro areas main export industries. The industry recently hit another road bump as Carnival Cruise Lines announced that it has delayed indefinitely basing a second cruise ship in the Port of New Orleans, citing a slow recovery in tourism following Hurricane Katrina.
Moodys Economy.com, Inc. www.economy.com help@economy.com Prcis METRO
2007, Moodys Economy.com, Inc. (MEDC), and/or its licensors. All rights reserved. The information and materials contained herein are protected by United States copyright, trade secret, and/or trademark law, as well as other state, national, and international laws and regulations. Except and to the extent as otherwise expressly agreed to, such information and materials are for the exclusive use of MEDCs subscribers, and may not be copied, reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or stored for subsequent use for any purpose, in whole or in part. MEDC has obtained all information from sources believed to be reliable. Because of the possibility of human and mechanical error as well as other factors, however, all information contained herein is provided AS IS without warranty of any kind. UNDER NO CIRCUMSTANCES SHALL MEDC OR ITS LICENSORS BE LIABLE TO YOU OR ANY OTHER PERSON IN ANY MANNER FOR ANY LOSS OR DAMAGE CAUSED BY, RESULTING FROM, OR RELATING TO, IN WHOLE OR IN PART, ERRORS OR DEFICIENCIES CONTAINED IN THE INFORMATION PROVIDED, INCLUDING BUT NOT LIMITED TO ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES HOWEVER THEY ARISE. The financial reporting, analysis, projections, observations, and other information contained herein are statements of opinion and not statements of fact or recommendations to purchase, sell, or hold any securities. Each opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein.
2007 www.economy.com Moodys Economy.com, Inc.CB Richard Ellis, Inc.help@economy.com Prcis METRO
BORDERS BOOKS
ADDENDUM I REQUIRED CLIENT INFORMATION
BORDERS BOOKS
ADDENDUM J QUALIFICATIONS
QUALIFICATIONS OF CYNTHIA K. LATHAM, MAI Senior Real Estate Analyst CB RICHARD ELLIS, INC.
VALUATION AND ADVISORY SERVICES
2700 Post Oak Boulevard, Suite 250 Houston, Texas 77056 (713) 888-4765 FORMAL EDUCATION TRINITY UNIVERSITY- B.B.A.- 1981 CONTINUING EDUCATION Standards of Professional Practice Parts A, B and C Internet and Appraising Understanding Limited Appraisals Subdivision Analysis General Applications LICENSE(S)/CERTIFICATION(S) Certified Real Estate Appraiser: State of Texas (TX-1323775-G)
PROFESSIONAL AFFILIATIONS & DESIGNATIONS ATTAINED Appraisal Institute Designated Member (MAI) EMPLOYMENT EXPERIENCE Twenty five years of Real Estate Appraisal and Consulting experience throughout the United States. Experience includes research, analysis, presentation, review, management, real estate valuation and feasibility studies. May 2006-present 1996-2006 1991-1996 1981-1991 CB Richard Ellis, Inc., Appraisal Services Senior Real Estate Analyst Aaron and Wright Senior Real Estate Analyst Chief Appraiser, First Interstate Bank Real Estate Appraisal Independent Contractor Houston, Texas Houston, Texas Houston, Texas San Antonio, New Orleans, Nashville and Houston
QUALIFICATIONS OF STEPHEN D. DUPLANTIS, MAI Senior Managing Director CB RICHARD ELLIS, INC. VALUATION & ADVISORY SERVICES 2700 Post Oak Boulevard, Suite 250 Houston, Texas 77056 (713) 840-6625 FORMAL EDUCATION Texas A & M University - B.S. Agricultural Economics (August 1983) CONTINUING EDUCATION All current requirements have been completed for each of the states certifications as well as the Appraisal Institute for the MAI designation. LICENSE(S)/CERTIFICATION(S) Certified Real Estate Appraiser: State of Arkansas (CG0913N) State of Kansas (G-1255) State of Louisiana (G-0523) State of Mississippi (GA-737) State of Missouri (2002015691) State of Oklahoma (11588CGA) State of Texas (TX-1321138-G) PROFESSIONAL AFFILIATIONS & DESIGNATIONS ATTAINED Appraisal Institute Designated Member (MAI), Certificate No. 8149 - May 1989 President Houston Chapter #33 Appraisal Institute (1998) Vice President Houston Chapter #33 Appraisal Institute (1997) Secretary - Houston Chapter #33 Appraisal Institute (1996) Board of Directors Houston Chapter #33 Appraisal Institute (1991-1996) Past Chairman of Social Committee, Education Committee, Candidate Guidance Committee and Admission Committee Approved Instructor Appraisal Institute EMPLOYMENT EXPERIENCE Twenty years of Real Estate Appraisal and Consulting experience throughout the United States. Expert witness in commissioner, condemnation and bankruptcy hearings. Also served on mediation hearings. March 1996 Present 1983-1996 CB Richard Ellis, Inc. Valuation & Advisory Services Senior Managing Director The Gerald A. Teel Company Manager Houston, Texas Houston, Texas
BORDERS BOOKS
ADDENDUM K ENGAGEMENT LETTER

3338 StCharles Appraisal

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BORDERS BOOKS 3338 St. Charles Avenue New Orleans, Orleans Parish, Louisiana CBRE File No.

07-361HO-2695 Client Reference No. 040-2104

Self Contained Appraisal Report

VALUATION & ADVISORY SERVICES

VALUATION & ADVISORY SERVICES

June 20, 2007

2007 CB Richard Ellis, Inc.

Date of Value July 12, 2007 May 1, 2008 May 1, 2008

Value Conclusion $2,800,000 $10,400,000 $6,250,000

2007 CB Richard Ellis, Inc.

George Gose June 20, 2007 Page 3

2007 CB Richard Ellis, Inc.

CERTIFICATION OF THE APPRAISAL

2007 CB Richard Ellis, Inc.

CERTIFICATION OF THE APPRAISAL

Cindy K. Latham, MAI Texas Certification No. TX - 1323775-G

Stephen D. Duplantis, MAI Texas Certification No. 1321138-G

2007 CB Richard Ellis, Inc.

AERIAL VIEW iii

TYPICAL EXTERIOR VIEW OF THE SUBJECT

TYPICAL EXTERIOR VIEW OF THE SUBJECT iv

SUMMARY OF SALIENT FACTS

SUMMARY OF SALIENT FACTS

SUMMARY OF SALIENT FACTS

$9,400,000 $10,245,000 $10,600,000 $4,250,000

$391.67 $426.88 $441.67 $177.08

Date of Value July 12, 2007 May 1, 2008 May 1, 2008

Value $2,800,000 $10,400,000 $6,250,000

PREMISE OF THE APPRAISAL/RELEVANT DATES

PURPOSE OF THE APPRAISAL

TERMS AND DEFINITIONS

INTENDED USE AND USER OF REPORT

PROPERTY RIGHTS APPRAISED

SPECIAL APPRAISAL INSTRUCTIONS

EXPOSURE TIME INFORMATION

Low rate of insurance holders may hinder reconstruction

SELECTED NEIGHBORHOOD DEMOGRAPHICS

POPULATION AND HOUSEHOLD PROJECTIONS

HOUSEHOLD INCOME DISTRIBUTION

RETAIL MARKET STATISTICS

New Orleans Area 3,442,000 89.6% $11.88 4th Qtr 2006

Local Submarket 917,041 91.5% $14.76

RETAIL MARKET TRENDS

Rent PSF $12.87 $13.03 $13.03 $11.88

Occupancy 91.2% 84.0% 91.4% 89.6%

$250 $225 $200 $175 $150 $125 $100 $75

price pe r s quare foot

SUMMARY OF COMPARABLE RETAIL RENTALS

Borders Books at City Place

Barnes & Noble

Subject Borders Books

SUBJECT TRENDS AND PROJECTIONS

100.0% 100.0% 100.0%

2007 CB Richard Ellis, Inc.

SITE SUMMARY Physical Description

40,534 Sq. Ft. 40,534 Sq. Ft. 208 Feet

St. Charles Avenue 220 Feet

ASSESSORS PARCEL NUMBER

SHAPE AND FRONTAGE

TOPOGRAPHY AND DRAINAGE

EASEMENTS AND ENCROACHMENTS

COVENANTS, CONDITIONS AND RESTRICTIONS

UTILITIES AND SERVICES