Thomas Jefferson School of Law Restructuring Support Agreement

Re: Thomas Jefferson School of Law – Restructuring Agreement
Disclosure Type:

EVENT FILING

Other Event-based Disclosures:

Restructuring Agreement

Issue:

130795

Securities:

130795XZ5, 130795YA9, 130795YB7, 130795YC5

Thomas Jefferson School of Law (TJSL) and a requisite approving percentage of bondholders have
agreed to a restructuring support agreement with the Trustee and bondholders representing
approximately 89% of the aggregate principal amount of the Bonds described more fully in the
attached.

THOMAS JEFFERSON SCHOOL OF LAW
OCTOBER 28, 2014 DISCLOSURE
This disclosure by the Thomas Jefferson School of Law (the “Law School”) provides notice
that a restructuring support agreement has been entered into among the Law School, the Trustee for
the Bonds, and those certain Bondholders that executed Bondholder Confidentiality Agreements (as
defined below). On October 28, 2014, the Law School, the Trustee and certain consenting
Bondholders who executed the Bondholder Confidentiality Agreements entered into a Restructuring
Support Agreement (the “RSA”) providing for the support by the parties of a transaction that will
provide for the cancellation of the Bonds and a restructuring of the Law School’s obligations related
to the Bonds. The Law School is informed by the Trustee that Bondholders that have executed the
RSA as of the date hereof comprise approximately 89% of all Bonds and approximately 87% of the
Series 2008A Bonds as of the date of this disclosure. Bondholders who executed the RSA as of its
date, or who join the RSA pursuant to a joinder in the form attached to Exhibit A are referred to
herein as “Consenting Bondholders.”
The RSA sets forth certain terms and conditions pursuant to which the Law School, the
Trustee and the Consenting Bondholders will endeavor to effectuate a restructuring transaction. The
RSA is attached hereto as Exhibit A. Included as exhibits to the RSA are a Lease Term Sheet and a
Notes Term Sheet (collectively, the “Term Sheet”) which describes the proposed restructuring of the
Bonds and the Law School’s related obligations, as well as other material terms. Capitalized terms
not otherwise defined in this disclosure shall have the meaning set forth in the RSA and Term Sheet
unless the context requires otherwise.
Also attached hereto is certain other information provided by the Law School to the Trustee
and its advisors, including an appraisal of the Law School’s real property which is collateral for the
Law School’s obligations under the Loan Agreement and a multi-year pro forma financial projection
prepared by the Law School and shared with the Trustee and its advisors.
When implemented, the RSA will result in significant concessions by all Bondholders
regarding the Bonds and the Law School’s related obligations. The key elements of the RSA and
related Term Sheet include: (1) a deed in lieu of foreclosure transaction involving a conveyance of
the Law School’s real property in downtown San Diego to a special purposed vehicle for the benefit
of the Bondholders in exchange for cancellation of all of the Bonds and related Law School
obligations, (2) execution of a lease of the building to the Law School, (3) simultaneous delivery by
the Law School of a deficiency note in the amount of $40 million bearing interest at 2% per annum,
due and payable in seventeen (17) years subject to principal reduction in the event the lease term is
reduced to a term less than contracted, (4) support from Lender to provide collateral to support a
letter of credit reimbursement agreement should it become necessary and (5) provision of a
relocation loan in the event the lease is terminated early. The RSA calls for implementation of the
transaction pursuant to certain Definitive Documents by November 15, 2014 (with the opportunity to
extend such date to December 15, 2014). Implementation of the transaction is subject to numerous
conditions identified in the RSA and the Term Sheet, some of which are described herein. The Law
School cannot provide any assurance that the transaction can or will be implemented as contemplated
by the RSA or otherwise. The RSA, the Term Sheet and certain information previously shared with
certain Bondholders under the Bondholder Confidentiality Agreement are described more fully
below.

BONDS LIMITED TO APPROVED INSTITUTIONAL INVESTORS
Investors are reminded that transfer and ownership of the Bonds is limited to “Approved
Institutional Buyers” meeting the requirements of the Indenture for the Bonds. Pursuant to the RSA,
sale or transfer of Bonds by Consenting Bondholders is further restricted. The Law School assumes
all investors and Bondholders, Consenting Bondholders and persons acquiring any interest in the
transaction are such Approved Institutional Buyers. Investment in the Bonds and participation in the
Transaction involves substantial elements of risk.
BACKGROUND
Trustee Interaction. Following the March 21, 2014 Investor Presentation (available on
EMMA), the Law School was informed that the Trustee had engaged a restructuring advisor (Zolfo
Cooper, LLC) and restructuring counsel (Kirkland & Ellis LLP) to assist it in evaluating the financial
condition of the Law School and debt restructuring alternatives related to the Bonds. The Law
School, the Trustee and certain of its advisors entered into confidentiality agreements with the
Trustee and its advisors pursuant to which the Law School agreed to share certain information,
including confidential information, with the Trustee and its advisors to facilitate the debt
restructuring analysis and discussion.
Confidentiality Agreements. On June 30, 2014, the Law School and certain owners of
Bonds, or investment managers or advisors with discretionary authority with respect to the Bonds
comprising approximately eighty-nine percent (89%) of the aggregate principal amount of the Bonds
(the “Recipients”) entered into confidentiality agreements substantially in the form attached hereto as
Exhibit B, as amended by eight consecutive Amendments (as amended, the “Bondholder
Confidentiality Agreements”). Pursuant to the Bondholder Confidentiality Agreements, the Law
School agreed that certain Confidential Information (as defined in the Bondholder Confidentiality
Agreements) could be shared with Recipients and the Recipients agreed not to trade Bonds prior to
the public disclosure of any material nonpublic information provided to the Recipients. The Law
School is informed that the Trustee invited all Bondholders to execute a Confidentiality Agreement.
Pursuant to the Bondholder Confidentiality Agreements, the Law School agreed to provide a
public disclosure by October 31, 2014 of certain Confidential Material which had been disclosed by
the Law School to Recipients. The Law School is providing the Public Disclosure at this time in
light of the execution of the RSA and as required by the Bondholder Confidentiality Agreements.
Disclosures to Trustee, its Advisors and Recipients. Since April 2014, the Law School,
the Trustee and each of their respective advisors have engaged in significant discussions regarding a
potential restructuring of the Bonds. The Law School has shared all requested information regarding
its operations and finances with the Trustee and its advisors, including an appraisal, cash flow
projections and pro forma financial projections.
The Law School has been informed by the Trustee and its advisors that in May 2014 Zolfo
Cooper prepared a report (the “Zolfo Report”) regarding its review and analysis of the Law School
and its financial condition. The Law School is informed that the Zolfo Report has been shared with
the Recipients. The Law School has not received the Zolfo Report and, except for the excerpts
referenced below, is unaware of its contents. The Trustee’s counsel has informed the Law School
that the only material nonpublic information shared by the Trustee and its advisors with the
Recipients is the information attached hereto as Exhibit C and the restructuring transaction
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evidenced by the RSA and the Term Sheet, described herein. Investors are encouraged to contact the
Trustee with any questions regarding the Zolfo Report and/or the information contained in
Exhibit C.
In connection with the negotiations with the Trustee, the Law School obtained an appraisal of
the Law School’s real property located at 1155 Island Ave., San Diego, CA 92101 (the “Property”)
which serves as security for the Law School’s obligations under the Loan Agreement pursuant to a
deed of trust. The Law School’s appraisal has been provided to the Trustee, its advisors and the
Recipients. Attached hereto as Exhibit D is a copy of the Law School’s appraisal. Investors should
refer to the appraisal for all assumptions, limiting conditions and other factors pertinent to the
conclusions stated therein. The Law School makes no representation regarding the current value of
the Property, whether as part of a negotiated restructuring or otherwise, or whether the Trustee, or the
Bondholders or entity owning the property on behalf of Bondholders will pursue a sale of the
Property following the restructuring or at any other time. The Law School is informed that the
Trustee also obtained an appraisal of the Property and that such appraisal has been provided to
Recipients. Investors are encouraged to contact the Trustee for a copy of the Trustee’s appraisal.
The Law School is further informed that the Trustee and its advisors have participated in
numerous conference calls with the Recipients during which the parties discussed the materials
which had been shared with the Recipients and the status of the ongoing restructuring negotiations.
THE LAW SCHOOL HAS NOT BEEN A PARTICIPANT IN MOST OF THOSE CONFERENCE
CALLS AND IS NOT AWARE OF THE SUBSTANCE OF THE VERBAL OR WRITTEN
INTERACTION BETWEEN THE RECIPIENTS AND THE TRUSTEE AND ITS
REPRESENTATIVES AND HAS NO DIRECT KNOWLEDGE WITH RESPECT THERETO,
OTHER THAN AS SET FORTH HEREIN. THE DISCLOSURE SET FORTH BELOW AND IN
THE EXHIBITS TO THIS DISCLOSURE ARE INTENDED TO SUPPLEMENT INFORMATION
WHICH WAS SHARED WITH THE RECIPIENTS TO PROVIDE INFORMATION WHICH
MAY BE MATERIAL TO AN INVESTMENT DECISION REGARDING THE BONDS TO
WHICH THE CONFIDENTIAL INFORMATION DISCLOSED TO RECIPIENTS MAY RELATE.
To this point, the parties have not involved the issuer of the Bonds, California Statewide
Communities Development Authority, in the restructuring discussions. The Term Sheet anticipates
the issuer will be asked to consent to the Transaction.
Debt Restructuring Discussions. Prior to entering into the RSA, the Law School and the
Trustee discussed various restructuring proposals. On October 28, 2014, the Law School and the
Consenting Bondholders entered into the RSA. The RSA and attached Term Sheet are attached
hereto as Exhibit A and certain provisions are summarized below. All summaries herein are
qualified in their entirety by the RSA, including the Term Sheet. Investors should read the entire
RSA and the Term Sheet.
Investors are urged to consult their legal, tax and financial advisors with respect to all aspects
of the Transaction and its impact on the Bonds.
THE RSA
Pursuant to the RSA, the Law School and Consenting Bondholders comprising in excess of
(a) 89% of the aggregate principal amount of the Bonds and (b) 87% of the aggregate principal
amount of Tax-Exempt Bonds (the “Requisite Consenting Bondholders”) agreed to certain terms and
3

conditions pursuant to which the Law School and the Consenting Bondholders will work to
effectuate a restructuring transaction related to the Bonds and the Law School’s obligations under the
Loan Agreement, Deed of Trust and related obligations (as defined in the RSA). Pursuant to the
RSA, the Parties will effectuate the Transaction pursuant to the terms of the RSA including the terms
and conditions set forth in the Term Sheet. To this end, each party has agreed to negotiate in good
faith Definitive Documents implementing, achieving and relating to the Transaction which shall
contain terms and conditions consistent with the RSA and the Term Sheet, and to execute and
otherwise support the Definitive Documents. All Definitive Documents shall be reasonably
acceptable in form and substance to the Requisite Consenting Bondholders, the Law School (solely
to the extent the Law School is party to such Definitive Document) and the Trustee (solely for
purposes of causing the implementation of the Transaction to be consistent with the Trustee’s duties
under the Indenture). The Law School understands that all Bondholders (other than those subject to a
confidentiality agreement with the Law School) will be given an opportunity to join the RSA as a
Consenting Bondholder on the terms set forth in the RSA.
The Law School agrees in the RSA to support the Transaction, subject to compliance with
applicable law in all respects (including receipt of any and all regulatory consents or approvals as
may be required under California Corporations Code Section 5913 or otherwise), for so long as the
RSA is not terminated in accordance with its terms, including using reasonable best efforts to work in
good faith to negotiate the Definitive Documents and consummate the Transaction and any other
transactions contemplated by the RSA.
The RSA is for a limited term expiring following the occurrence of certain events described
in the RSA including failure to implement the Transaction by the date(s) specified, and is subject to
termination under certain circumstances described more fully in the RSA.
As part of the RSA, the Consenting Bondholders direct the Trustee to take no remedial action
or enforcement action of any sort against the Law School for failure to make any Required Payment
(as defined in the Indenture) or perform other covenants with respect to Article 5 of the Loan
Agreement and Consent and Amendment Nos. 2 through 11 (notice of which is available on EMMA
through previous Law School postings). As a result, during the term of the RSA, no remedial action
is expected to be taken against the Law School by or on behalf of the Trustee with respect to the
Bonds or the Loan Agreement or the Deed of Trust which secure the Bonds.
Under the RSA each Consenting Bondholder agrees not to transfer its bonds except to
another Consenting Bondholder (which includes any Consenting Bondholder included in the
signature pages to the RSA or any party that agrees in writing to be bound by the RSA and delivers
to the School and the Trustee a Joinder in the form attached thereto as Exhibit A). The RSA contains
provisions for remedies in the event of a breach by certain Parties, including a right of specific
performance.
THE TERM SHEET
As a condition of the closing of the Transaction, all of the Bonds will be cancelled and the
Law School will be fully released of substantially all of its obligations under the Loan Agreement,
the Indenture, the Deed of Trust and all related documents, including the Bonds, except for its
obligations resulting from the Transaction related to the Lease and the Notes.

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Pursuant to an SPV Term Sheet which the Law School understands is to be posted on EMMA
concurrently with this disclosure, the Consenting Bondholders have directed the Trustee to form a
special purpose vehicle (the “SPV”), to which the School will not be a party, for purposes of
implementing the Transaction on behalf of the Trustee and the Bondholders. The Consenting
Bondholders agree in the RSA to negotiate an operating agreement for the SPV acceptable to both
the Requisite Consenting Bondholders and a majority of the Consenting Bondholders other than the
Requisite Consenting Bondholders (as more fully set forth in the RSA) and the Trustee (solely for
purposes of causing the implementation of the operating agreement at the Closing to be consistent
with the Trustee’s duties under the Indenture). The Trustee acknowledges in the RSA that the SPV
Term Sheet is consistent with the Trustee’s duties under the Indenture. The Law School has not
participated in the negotiation of the SPV Term Sheet and is not responsible for its terms or
implementation.
Under the Term Sheet, ownership of the land, building and personalty, including leasehold
improvements, located at 1155 Island Avenue, San Diego, California will be conveyed to the SPV
following conveyance by the Law School of the property by deed in lieu of foreclosure, upon the
terms and conditions set forth in and contemplated by the Term Sheet (as defined below) and as
separately agreed to by the Trustee and the Consenting Bondholders in the SPV Term Sheet.
Pursuant to the Lease Term Sheet, the Law School will lease back the Premises from the
SPV, who will act as the landlord (the “Landlord”). In addition, pursuant to the Notes Term Sheet,
the Law School will issue a note or notes in favor of the SPV, which will act as the lender (the
“Lender”), in the amount of $40,000,000, which is the agreed upon amount. Among other things, the
Notes Term Sheet sets forth the terms of the Notes including security, interest rate, maturity,
limitation of payments prior to maturity to certain amounts available from Excess Cash Flow, and
circumstances in which the principal amount of the Notes may be substantially reduced.
It also includes special provisions related to (i) an M&A Transaction, if any should occur,
(ii) relocation costs if the lease terminates sooner than ten years, and (iii) limited financial support in
the event the Law School is required to post a letter of credit to support ongoing student loan funding
eligibility. Moreover, under the Notes Term Sheet, the Lender agrees to work in good faith with the
Law School to provide up to $1 million in cash at closing for certain marketing and public relations
activities in part to address the negative publicity regarding its financial difficulties in 2014.
The Law School is heavily dependent upon students who finance their tuition through federal
student financial aid programs. In the last three full academic years, over 90% of the revenues of the
Law School have been attributable to such student loans. To participate in such programs, the Law
School must obtain and maintain accreditation by an accrediting agency recognized by the U.S.
Department of Education, and certification by the Department of Education (“DOE”). As a result,
the Law School is subject to extensive regulation by DOE, including the requirement to maintain
certain financial ratios. Any failure or delay by the DOE to provide funding is an Event of Default
under the Lease and the Notes. Although the Transaction is designed to permit the Law School to
meet the requirements of DOE for ongoing student eligibility for federal student financial aid under
the DOE’s provisional certification standards, no assurance can be given that the Transaction will be
structured in a way that does result in such compliance or that, if the Transaction is entered into, the
Law School will maintain such compliance and eligibility.

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The Notes Term Sheet further contemplates payment by the Law School of an RSA Consent
Fee in the amount of $2.5 million in cash to Lender (to be distributed as determined by the
Consenting Bondholders).
Closing of the Transaction is subject to numerous conditions including receipt of all
regulatory approvals, governmental and third party consents, negotiated representations and
covenants and fully negotiated Definitive Documents acceptable to the parties. While the Term
Sheet requires delivery of certain legal opinions by counsel to the Law School, no such opinions have
been rendered by counsel in connection with entry into the RSA. Also, all expenses of the Lender
and Trustee in connection with the restructuring, the Notes and the ongoing administration of the
Notes are to be paid by the Law School.
The Law School is subject to continuing review by the ABA and compliance with its rules
and guidelines, which are subject to change. The ABA retains the ability to evaluate law schools in
connection with their ongoing accreditation and, accordingly, no assurance can be given with respect
to continuing accreditation.
Maintenance of its existing accreditation is a condition of
implementation of the Transaction and of the Lease and the Notes. As has previously been reported
by the Law School, in filings on EMMA, the ABA has given special scrutiny to the Law School’s
financial condition and the Law School expects the Transaction and the RSA to be subject to further
ABA scrutiny and review.
The parties to the RSA have attempted to structure the RSA and the Term Sheet so that the
Transaction will preserve the status of the Law School as a tax-exempt nonprofit corporation for
federal and state law purposes. Among other things, conveyance of the Property will require notice
to the California Attorney General and may be subject to the approval of the Attorney General.
Pro Forma Financial Projections. The Law School has prepared a ten year financial
projection (the “Pre-Restructuring Financial Projections”) attached hereto as Exhibit C projecting
net income available for debt service, based on certain assumptions and limiting factors. Such
information has not been prepared in accordance with generally accepted accounting principles
(“GAAP”). The Pre-Restructuring Financial Projections are based on assumptions made by the Law
School (on matters such as future enrollment, revenues and anticipated expenses), but there can be no
assurance that actual enrollment, revenues and expenses will be consistent with such assumptions.
For example, while the Law School believes its projections for the current fiscal year are reasonable
based on current enrollment, further job cuts must be implemented to achieve the revenue
projections.
The Pre-Restructuring Financial Projections have not been revised to reflect the terms of the
RSA and therefore certain line items are no longer applicable such as “Current D/S”. In addition, the
pro forma impact of the building lease, the excess cash flow sweep and the transaction fees and
expenses related to the restructuring have not been included in these projections.
Investors should note the following with respect to the Pre-Restructuring Financial
Projections:
1)
Amounts reflected in the line item for “Sublease Income” will not be realized
pursuant to the Transaction and should be disregarded. Although the Notes Term Sheet
allows the Landlord to sublet a portion of the premises with a resultant reduction in rent paid
by the Law School, such amounts are not shown elsewhere in the projections.
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2)
Amounts shown under the column “Budget 2014” are based on projections
initially prepared in May 2014. This column reflects a variance from the Law School’s
unaudited financial statements for the fiscal year ended June 30, 2014. Operating revenues
for the year are estimated to have been approximately $950,000 less than the projection, and
operating expenses are estimated to have been approximately $40,000 less than shown in the
projection. Moreover, net income available for debt service for the year is estimated at $13.4
million, approximately $900,000 less than shown in the projection. This variance is largely
attributable to legal and professional fees associated with the restructuring, as shortfalls in
summer school revenues were largely offset by operating expense reductions against the
amounts projected.
3)
Amounts shown under the column for fiscal year 2015 are generally
consistent in the aggregate with the Law School’s current expectations for fiscal year 2015.
Operating revenues for 2015 assume an enrollment substantially consistent with current
enrollment, and a level of scholarship support on a basis substantially similar to current
scholarship levels. Operating expenses for fiscal year 2015 reflect the current expectations of
the Law School for the Fiscal Year.
4)
Projections of operating revenues and operating expenses for fiscal years
beginning in fiscal year 2016 reflect Law School expectations with respect to enrollment
(declining initially and then stabilizing), tuition (at 2015 levels subject to modest increases in
later years), levels of scholarship and operating expenses subject to modest additional
declines in fiscal year 2016 and thereafter subject to modest annual increases. Income for the
LLM Program is assumed at levels which assume the program is initiated (with ABA
acquiescence) and in operation.
5)
The Pre-Restructuring Financial Projections do not project revenues or
expenses beyond fiscal year 2024. Expenses beyond such period could be materially
different from those projected for prior years, whether as a result of a change in the real
property occupied by the Law School or otherwise.
Actual results realized by the Law School will vary from any projections, and such variance
may be material. Actual operating results may be affected by many factors, including, but not
limited to, increased costs (including occupancy costs), lower than anticipated revenues (as a result
of enrollment or otherwise), employee relations, changes in applicable government or academic
regulation, changes in demographic trends, factors associated with education, competition for
students, and changes in local or general economic conditions.
The Law School’s source of revenues with which to meet its payment obligations under the
Loan Agreement or under the Transaction consist primarily of tuition and fee revenues from its
operations. Future economic and other conditions, including, without limitation, the loss by the Law
School of its accreditation, destruction or loss of its facilities, including by reason of termination of
the Lease, litigation, competition, changes in the demand for legal education offered by the Law
School and increases in expenses may materially and adversely affect the revenues of the Law
School and its ability to make payments on the Bonds or pursuant to the Transaction.
Failure to Implement RSA. If the parties fail to implement a Transaction pursuant to the
RSA, the Law School expects that it will be in default of its obligations under the Loan Agreement
(including its loan repayment obligations), and under the RSA with respect to the RSA Consent Fee.
7

While the Law School would expect to continue to negotiate with the Trustee, its advisors and
Bondholders to achieve a workable solution, the Law School cannot predict what actions it or the
Trustee or Bondholders may take with respect to the Bonds.
Tax Treatment. The Transaction will result in the cancellation of all of the Bonds including
Bonds owned by persons who are not Consenting Bondholders. The Law School does not expect
that payments received under the Transaction will be exempt from taxation under Section 103 of the
Internal Revenue Code or for purposes of state law. The Law School has not evaluated the tax
exempt status of the Series 2008A Bonds, retroactive to the date of issuance and expresses no view
with respect to the tax-exempt status of the Bonds as a result of the Transaction or with respect to any
tax consequences to owners arising from the Transaction. The Law School can give no assurance
that tax consequences of the Transaction will not be material to investors in the Bonds. Investors
should consult their tax advisors with respect to any and all tax consequences arising from the
Transaction or the RSA, whether with respect to the Bonds or otherwise.
MISCELLANEOUS
Pending Litigation and Construction Remediation. There has been no material change to
the status of pending litigations from what was previously disclosed by the Law School except as set
forth herein. TJSL’s former outside counsel, Barry LePatner, initiated two lawsuits against the
school, USDC Case No. 13CV01950-H-JMA for fraud and breach of contract, and USDC Case
No. 14CV0758-H-JMA for copyright infringement. The Law School reached an agreement with the
LePatner entities to settle these cases for an aggregate payment of $700,000, a portion of which was
funded from Trustee-held funds. The lawsuits have been dismissed.
Attached Disclosure Exhibits.
Exhibits A-D, as referenced above.

Set forth as exhibits to this memorandum are the

A.

Restructuring Support Agreement, including Notes Term Sheet and Lease Term
Sheet

B.

Form of Bondholder Confidentiality Agreements with Recipients

C.

Excerpted materials from Zolfo Report (Pre-Restructuring Financial Projections)

D.

CBRE Appraisal
FORWARD LOOKING STATEMENTS

The material set forth herein contains information material to Bondholders related to
Confidential Information made available to the Trustee and its representatives but it does not purport
to contain all material information with respect to the Bonds or financial condition of the Law
School. The information presented has been obtained from sources which are believed to be reliable
but is not guaranteed as to accuracy or completeness. This does not constitute an update of the
Official Statement dated August 21, 2008, with respect to the Bonds but is presented as an update
regarding restructuring efforts of the Law School.
Material set forth in these materials may consist of, and the words or phrases,” “are
expected,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and
similar expressions identify “forward looking statements” within the meaning of the private
8

securities litigation reform act of 1995. Such statements are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such forward-looking
statements. Any forecast, including the Pre-Restructuring Financial Projections, subject to such
uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and
unanticipated events and circumstances may occur. Therefore, there are likely to be differences
between forecasts and actual results, and those differences may be material.
To estimate revenues and expenses, the Law School has made certain assumptions with
regard to enrollment, net tuition, expenses and other matters in future years. The Law School
believes these assumptions to be reasonable for purposes of this presentation, but to the extent that
any of these assumptions fail to materialize, the net revenues available to pay debt service on the
Bonds, or payments with respect to the Transaction, including lease payments and Notes payments
will, in all likelihood, be less than those projected herein.
The financial information presented has been prepared by internal staff of the Law School
and has not been reviewed by outside auditors of the Law School. Some of the data presented in
tabular or summary form may be subject to more detailed requirements, exceptions or conditions; it
is presented in this fashion to facilitate the ongoing restructuring process.
The information and expressions of opinions herein are subject to change without notice and
delivery of this disclosure shall not, under any circumstances, create any implication that there has
been no changes in the affairs of the Law School since the date hereof. All summaries of the RSA,
the Term Sheets or any terms of the Bonds or other documents are made subject to the provisions of
such documents, respectively, and do not purport to be complete statements of any or all of such
provisions.
ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS,
ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THIS CAUTIONARY STATEMENT.

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EXECUTION VERSION
RESTRUCTURING SUPPORT AGREEMENT
October 28, 2014
This RESTRUCTURING SUPPORT AGREEMENT (as amended, supplemented, or
otherwise modified from time to time in accordance with the terms hereof, this “Agreement”),
made and entered into by and among (i) Thomas Jefferson School of Law (the “School”), (ii) the
Trustee (as defined herein) and (iii) each holder (a “Bondholder” and collectively, the
“Bondholders”), solely in its capacity as a Bondholder of any of the series 2008A tax-exempt
bonds (the “Tax-Exempt Bonds”) or the series 2008B taxable bonds (the “Taxable Bonds” and,
together with the Tax-Exempt Bonds, the “Bonds”), as applicable, issued pursuant to that certain
Indenture dated as of August 1, 2008 (the “Indenture”) between the California Statewide
Communities Development Authority (the “Authority”) and UMB Bank (as successor trustee to
The Bank of New York Mellon Trust Company, N.A.) (the “Trustee”) that is (a) identified on
the signature pages hereto as a holder of claims (the “Bond Claims”) under that certain Loan
Agreement dated as of August 1, 2008 (the “Loan Agreement”) between the Authority and the
School, pursuant to which the proceeds of the Bonds were loaned to School or (b) joins this
agreement pursuant to a joinder in the form attached hereto as Exhibit A (each such Bondholder,
a “Consenting Bondholder” and collectively, the “Consenting Bondholders”) sets forth certain
terms and conditions pursuant to which the School will effectuate a restructuring transaction with
the support of the Trustee and the Consenting Bondholders. The School, the Trustee and each of
the Consenting Bondholders are referred to herein collectively as the “Parties” and each
individually as a “Party.”
RECITALS
WHEREAS, subject to the terms hereof, the Parties have agreed to support a
restructuring transaction (the “Transaction”) pursuant to a deed in lieu of foreclosure transaction
consistent in all material respects with this Agreement and the Term Sheet (as defined below);
WHEREAS, the Consenting Bondholders have directed the Trustee to form a special
purpose vehicle (the “SPV”), to which the School will not be a party, for purposes of
implementing the Transaction on behalf of the Trustee and the Bondholders and transferring
ownership of the land, building and personalty, including leasehold improvements, located at
1155 Island Avenue, San Diego, California to the SPV upon the terms and conditions set forth in
and contemplated by the Term Sheet (as defined below) and as separately agreed to by the
Trustee and the Consenting Bondholders;
WHEREAS, subject to the terms hereof, the Transaction will be implemented pursuant
to various agreements and related documentation that will be completed and executed, subject to
the consent of those Consenting Bondholders holding a majority of (a) the aggregate principal
amount of Bonds and (b) the aggregate principal amount of Tax-Exempt Bonds, in each case
calculated as of such date the Consenting Bondholders make such a determination in accordance
with this Agreement and certified as accurate by the Trustee (the “Requisite Consenting
Bondholders”);

WHEREAS, the Parties are prepared to perform their obligations hereunder subject to
the terms and conditions of this Agreement; and
WHEREAS, in consideration of the promises, mutual covenants, and agreements set
forth herein and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each Party, intending to be legally bound, agrees as follows:
1.

Proposed Restructuring

The Parties will effectuate the Transaction pursuant to the terms of this Agreement and
the terms and conditions set forth in: (a) the Lease Term Sheet, attached hereto as Exhibit B; and
(b) the Notes Term Sheet, attached hereto as Exhibit C (collectively, including all annexes
thereto, the “Term Sheet”), which Term Sheet is expressly incorporated by reference herein and
made a part of this Agreement as if fully set forth herein. For the avoidance of doubt, the Term
Sheet and the Transaction expressly exclude the formation and governance of the SPV, which
shall be subject to a separate term sheet agreed by the Consenting Bondholders (in the form
agreed to between the Consenting Bondholders as of the date hereof, the “SPV Term Sheet”).
The Consenting Bondholders agree to negotiate in good faith an operating agreement for the
SPV containing the terms set forth in the SPV Term Sheet, and any terms of the operating
agreement not set forth in the SPV Term Sheet must otherwise be reasonably acceptable to (i) the
Requisite Consenting Bondholders, (ii) the Consenting Bondholders holding a majority of the
Bonds held by Consenting Bondholders other than the Requisite Consenting Bondholders and
(iii) the Trustee (solely for purposes of causing the implementation of the operating agreement at
the Closing to be consistent with the Trustee’s duties under the Indenture; provided, however,
that for the avoidance of doubt, by signing this Agreement the Trustee acknowledges that the
SPV Term Sheet is consistent with the Trustee’s duties under the Indenture).
2.

Effective Date

This Agreement shall be effective and binding on all Parties immediately upon the
School obtaining the School’s, the Trustee’s, and the Requisite Consenting Bondholders’
signatures (the “Effective Date”). Upon the Effective Date of this Agreement, the Term Sheet
shall be deemed effective for the purposes of this Agreement, and thereafter the terms and
conditions therein may only be amended, modified, waived, or otherwise supplemented as set
forth in Section 16 herein. Within three business days of the Effective Date (the “Public
Disclosure Date”), the School shall publicly disclose all material non-public information, which
disclosure shall be subject to approval by the Trustee and the Requisite Consenting Bondholders,
after which all Bondholders (other than those Bondholders subject to a confidentiality agreement
regarding this Transaction with the School) will have five (5) business days to join this
Agreement as a Consenting Bondholder pursuant to the joinder attached hereto as Exhibit A, and
if so joined within such time period shall immediately be effective as against such joined
Bondholder.
3.

Term Sheet

The Term Sheet is expressly incorporated herein and is made part of this Agreement.
The terms of this Agreement and the Term Sheet shall whenever possible be read in a
2

complementary manner; provided that, to the extent there is a conflict between the body of this
Agreement and the Term Sheet, the conflicting term of the Term Sheet shall control and govern.
4.

Definitive Documents

Each Party hereby covenants and agrees, severally and not jointly, to (a) negotiate in
good faith each of the documents implementing, achieving and relating to the Transaction
(collectively, the “Definitive Documents”), which Definitive Documents shall contain terms and
conditions consistent in all respects with this Agreement and the Term Sheet, and (b) subject to
the last sentence of Section 1, execute and otherwise support the Definitive Documents. All
Parties shall have the right to review and comment on the Definitive Documents, and subject to
the last sentence of Section 1, such Definitive Documents shall be reasonably acceptable to the
Requisite Consenting Bondholders, the School (solely to the extent that the School is party to
such Definitive Document) and the Trustee (solely for purposes of causing the implementation of
the Transaction to be consistent with the Trustee’s duties under the Indenture; provided,
however, that for the avoidance of doubt, by signing this Agreement the Trustee acknowledges
that the SPV Term Sheet is consistent with the Trustee’s duties under the Indenture), in form and
substance prior to executing such Definitive Documents (or in the case of the Trustee prior to
release of the lien of the Deed of Trust (as defined in the Indenture) and cancellation of the Loan
Agreement, the Bonds and the Indenture).
5.

Representations and Warranties of the Consenting Bondholders

Each Consenting Bondholder represents and warrants to the other Parties that, as of the
date hereof:
a.

it has all requisite power and authority to enter into this Agreement and to carry
out the transactions contemplated by, and perform its obligations under, this
Agreement and any other ancillary agreements, and the execution, delivery, and
performance by it of this Agreement and any ancillary agreements will not
(i) contravene any applicable provision of any law, statute, rule or regulation, or
any order writ, injunction, or decree of any court or governmental instrumentality
or violate any provision of its organizational documents or (ii) conflict with, or
result in a breach or constitute (with due notice or lapse of time or both) a default
under any material contractual obligations to which it or any of its subsidiaries is
a party;

b.

the execution and delivery of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary action on its
part;

c.

such Consenting Bondholder: (i) either (A) is the sole beneficial owner of the
principal amount of Bond Claims set forth with its signature hereto, or (B) has
sole investment or voting discretion with respect to the principal amount of Bond
Claims set forth with its signature and has the power and authority to bind the
beneficial owner(s) of such Bond Claims to the terms of this Agreement; and (ii)
has full power and authority to act on behalf of, vote, and consent to matters
3

concerning such Bond Claims and to dispose of, exchange, assign, and transfer
such Bond Claims, including the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
d.

subject to Section 12, such Consenting Bondholder has made no assignment, sale,
participation, grant, conveyance, pledge, or other transfer of, and has not entered
into any other agreement to assign, sell, use, participate, grant, convey, pledge, or
otherwise transfer, in whole or in part, any portion of its right, title, or interests in
any Bond Claims that are subject to this Agreement that conflict with the
representations and warranties of such Consenting Bondholder herein or would
render such Consenting Bondholder otherwise unable to comply with this
Agreement and perform its obligations hereunder;

e.

this Agreement constitutes the legally valid and binding obligation of each such
Consenting Bondholder thereto, as applicable, enforceable against it in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to or
limiting creditors’ rights generally or by equitable principles relating to
enforceability;

f.

such Consenting Bondholder is an Approved Institutional Buyer, as such term is
defined in the Indenture;

g.

such Consenting Bondholder has sufficient knowledge and experience in financial
and business matters with respect to the evaluation of this Agreement and the
Term Sheet to be able to evaluate the risk and merits of this Agreement and the
Transaction;

h.

such Consenting Bondholder is able to bear the economic risks of this Agreement
and the Transaction;

i.

such Consenting Bondholder acknowledges that it has either been supplied with
or been given access to information, including financial statements and other
financial information, to which a reasonable investor would attach significance in
making investment decisions, and the Consenting Bondholder has had the
opportunity to ask questions and receive answers from knowledgeable individuals
concerning this Agreement and the Term Sheet and the security therefor so that,
as a reasonable lender, the Consenting Bondholder has been able to make its
decision to enter into this Agreement;

j.

such Consenting Bondholder, in making an investment decision, is relying upon
its own examination of the School and its properties and business;

k.

such Consenting Bondholder understands that (a) the Agreement, the Term Sheet
and other agreements contemplated by this Agreement have not been registered
with any federal or state securities agency or commission, and (b) no credit rating
has been sought or obtained with respect to any part thereof and that this
4

Agreement and the Transaction, if implemented involves a high degree of risk;
and
l.

such Consenting Bondholder acknowledges and agrees that the School, its
officers, employees and agents and the members of its governing board, past,
present and future shall not have any liability to such Consenting Bondholder with
respect to any claim asserted by any other bondholder that may from time to time
become a party hereto as a result of such Consenting Bondholder assigning or
transferring its claim notwithstanding any prohibition herein.

6.

Representations and Warranties of the Trustee

The Trustee represents and warrants to the other Parties that, as of the date hereof:
a.

it has all requisite power and authority to enter into this Agreement and to carry
out the transactions contemplated by, and perform its obligations under, this
Agreement and any other ancillary agreements, and the execution, delivery, and
performance by it of this Agreement and any ancillary agreements will not
(i) contravene any applicable provision of any law, statute, rule or regulation, or
any order, writ, injunction, or decree of any court or governmental instrumentality
or violate any provision of its organizational documents or (ii) conflict with, or
result in a breach or constitute (with due notice or lapse of time or both) a default
under any material contractual obligations to which it or any of its subsidiaries is
a party;

b.

the execution and delivery of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary action on its
part, including an appropriate direction by the Requisite Consenting Bondholders;
and

c.

this Agreement constitutes the legally valid and binding obligation of the Trustee
and is enforceable against the Trustee in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or limiting creditors’ rights generally
or by equitable principles relating to enforceability.

7.

Representations and Warranties of the School

The School represents and warrants to the other Parties that, subject to compliance with
applicable law in all respects regarding the Definitive Documents and the Transaction, as of the
date hereof:
a.

it has all requisite power and authority to enter into this Agreement and to carry
out the transactions contemplated by, and perform its obligations under, this
Agreement and any other ancillary agreements, and the execution, delivery, and
performance by it of this Agreement and any other ancillary agreements will not
(i) contravene any applicable provision of any law, statute, rule or regulation, or
any order writ, injunction, or decree of any court or governmental instrumentality
5

or violate any provision of its organizational documents or (ii) conflict with, or
result in a breach or constitute (with due notice or lapse of time or both) a default
under any material contractual obligations to which it or any of its subsidiaries is
a party;
b.

the execution and delivery of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary action on its
part;

c.

this Agreement constitutes the legally valid and binding obligation of the School
and is enforceable against the School in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or limiting creditors’ rights generally
or by equitable principles relating to enforceability; and

d.

except as expressly provided in this Agreement, the execution, delivery, and
performance by it of this Agreement do not and shall not require any registration
or filing with, consent or approval of, or notice to, or other action to, with or by,
any federal, state, or other governmental authority, or regulatory body.

8.

Covenants of the Consenting Bondholders

Subject to the terms and conditions hereof and for so long as this Agreement has not been
terminated in accordance with its terms, each Consenting Bondholder shall support the
Transaction and hereby agrees and covenants to:
a.

support and take any and all reasonably necessary and appropriate actions in
furtherance of consummation of the Transaction and this Agreement;

b.

(i) vote or provide any consents required under the Loan Agreement and the
Indenture with respect to its Bond Claims in favor of the Transaction on a timely
basis, and (ii) not change or withdraw such votes or consents (or cause or direct
such vote or consent to be changed or withdrawn);

c.

use reasonable best efforts and work in good faith to negotiate the Definitive
Documents and consummate the Transaction and any other transactions
contemplated hereby;

d.

not directly or indirectly seek, solicit, support, encourage, vote its Bond Claims
for, consent to, take any action, or participate in any discussions regarding: (i) the
negotiation or formulation of any proposal, offer, refinancing, dissolution,
winding up, liquidation, reorganization, plan of reorganization, sale process,
merger, consolidation, business combination, joint venture, partnership, sale of
assets, or restructuring for the School other than the Transaction and as
contemplated by the Term Sheet, (ii) any other action that (x) would interfere
with, delay, or postpone the consummation of the Transaction, or (y) is
inconsistent in any material respect with, or is intended to frustrate or impede
approval and consummation of, the Transaction;
6

e.

to the extent any legal or structural impediment arises that would prevent, hinder,
or delay the consummation of the Transaction, negotiate in good faith appropriate
additional or alternative provisions to address any such impediment; provided that
the economic outcome for the Consenting Bondholders, the anticipated timing of
the Closing Date (as defined below), and other material terms of this Agreement
must be substantially preserved in any such alternate provisions;

f.

with respect to Section 4.1 and Article V of the Loan Agreement and Consent and
Amendment Nos. 2-10 and pursuant to Section 8.2 of the Loan Agreement and
Section 7.05 of the Indenture, direct the Trustee to take no remedial or
enforcement action of any sort against the School for failure to make the Required
Payment (as defined in the Indenture) or perform other covenants with respect
thereto until the termination of this Agreement; provided, however that the School
shall perform all actions necessary with respect to the Loan Agreement or the
Indenture that are reasonably expected to be performed as of the Effective Date to
implement this Transaction and any failure to do so may be considered a cause for
termination under Section 9(g) hereof;

g.

permit all disclosures in any filings by the School with any regulatory agency to
which the School may be subject (including, without limitation, the American Bar
Association (the “ABA”) and the Department of Education (the “DOE”)) of the
contents of this Agreement, including, but not limited to, the aggregate Bond
Claims held by all Bondholders; provided that, unless required by law,
governmental, or regulatory authorities or any court of competent jurisdiction and
upon notice to the affected Consenting Bondholder, such disclosures and/or
filings by the School shall not include the individual amount of each Bond Claim
or the identity of each Consenting Bondholder;

h.

agree to the terms of indemnity attached here to as Exhibit D; and

i.

comply with all of its obligations under this Agreement and the exhibits attached
hereto (which exhibits are incorporated herein by reference) unless compliance is
waived in accordance with Section 16 of this Agreement.

9.

Covenants of the Trustee

Subject to the terms and conditions hereof and for so long as this Agreement has not been
terminated in accordance with its terms, the Trustee shall support the Transaction and hereby
agrees and covenants to:
a.

support and take any and all reasonably necessary and appropriate actions in
furtherance of consummation of the Transaction and this Agreement;

b.

use reasonable best efforts and work in good faith to negotiate the Definitive
Documents and consummate the Transaction and any other transactions
contemplated hereby;

7

c.

take any and all reasonably necessary and appropriate actions consistent with its
obligations under this Agreement and the Term Sheet in furtherance of the
Transaction;

d.

not take any action that is inconsistent in any material respect with, or is intended
to frustrate or impede approval and consummation of the Transaction described
in, this Agreement or the Term Sheet;

e.

with respect to Section 4.1 and Article V of the Loan Agreement and Consent and
Amendment Nos. 2-10 and pursuant to Section 8.2 of the Loan Agreement and
Section 7.05 of the Indenture, pursuant to a direction from the Requisite
Consenting Bondholders, agree not to take any remedial or enforcement action of
any sort against the School for failure to make the Required Payment (as defined
in the Indenture) or perform other covenants with respect thereto until the
termination of this Agreement; provided, however that the School shall perform
all actions necessary with respect to the Loan Agreement or the Indenture that are
reasonably expected to be performed as of the Effective Date to implement this
Transaction and any failure to do so may be considered a cause for termination
under Section 9(g) hereof;

f.

agree to the terms of indemnity attached here to as Exhibit D;

g.

comply with all of its obligations under this Agreement and the exhibits attached
hereto (which exhibits are incorporated herein by reference) unless compliance is
waived in accordance with Section 16 of this Agreement; and

h.

notwithstanding anything contained in this Agreement or in any Exhibit hereto,
nothing shall prevent the Trustee from exercising any discretion or performing
any action or refraining from taking any action in accordance with the terms of
the Indenture and the Trustee will be entitled to all immunities, protections and
privileges afforded to it under the Indenture with respect to any of the foregoing.

10.

Covenants of the School

Subject to the terms and conditions hereof and, subject to compliance with applicable law
in all respects regarding the Definitive Documents and the Transaction, for so long as this
Agreement has not been terminated in accordance with its terms, the School shall support the
Transaction and hereby agrees and covenants to:
a.

support and take any and all reasonably necessary and appropriate actions in
furtherance of consummation of the Transaction and this Agreement;

b.

use reasonable best efforts and work in good faith to negotiate the Definitive
Documents and consummate the Transaction and any other transactions
contemplated hereby;

8

c.

except as expressly provided in the Agreement, maintain the confidentiality of the
identity and, to the extent known, specific holdings of each Consenting
Bondholder;

d.

take any and all reasonably necessary and appropriate actions consistent with its
obligations under this Agreement and the Term Sheet in furtherance of the
Transaction;

e.

not take any action that is inconsistent in any material respect with, or is intended
to frustrate or impede approval and consummation of the Transaction described
in, this Agreement or the Term Sheet;

f.

not pursue any transaction to sell, transfer, lease or otherwise dispose of all or any
part of its property or assets without the prior consent of the Requisite Consenting
Bondholders;

g.

limit the aggregate amount of payments made to Stifel Financial Corp. (“Stifel”)
on account of Stifel’s fees and expenses to no more than $250,000.00;

h.

on the Closing Date, reimburse (i) all reasonable and documented fees, costs and
expenses of the Trustee including, but not limited to, fees and expenses of Zolfo
Cooper and counsel to the Trustee in connection with the Transaction and (ii) all
reasonable and documented fees, costs and expenses of Bracewell & Giuliani
LLP, Kasowitz Benson Torres & Friedman LLP and Klee, Tuchin, Bogdanoff &
Stern LLP, each up to an amount of $115,000.00, solely through the Effective
Date of this Agreement;

i.

on the Closing Date, pay to those Consenting Bondholders that are signatories
hereto or have otherwise executed a Joinder hereto as of that date that is five (5)
business days after the Public Disclosure Date a consent fee in an amount of $2.5
million in cash (the “RSA Consent Fee”), which RSA Consent Fee shall be
distributed to such Consenting Bondholders on a pro rata basis (based upon the
amount of Bonds held by each Consenting Bondholder as compared to the amount
of Bonds held by all Consenting Bondholders);

j.

to the extent any legal or structural impediment arises that would prevent, hinder,
or delay the consummation of the Transaction, negotiate in good faith appropriate
additional or alternative provisions to address any such impediment; provided that
the economic outcome for the Consenting Bondholders, the anticipated timing of
the Closing Date (as defined below), and other material terms of this Agreement
are substantially preserved in any such provisions; provided that such provisions
do not impair the School’s ability to operate or deprive it of the benefits of this
Agreement; and

k.

comply with all of its obligations under this Agreement and the exhibits annexed
hereto (which exhibits are incorporated herein by reference) unless compliance is
waived in accordance with Section 16 of this Agreement.
9

11.

Termination of Obligations

Except as otherwise provided herein, this Agreement shall terminate and all obligations
of the Parties hereunder shall terminate and be of no further force and effect, at 11:59 p.m.
prevailing Eastern Time, on the date that is two (2) business days from the date on which the
respective counsel to each Party receives written notice from the School or the Requisite
Consenting Bondholders, as applicable, of the occurrence of any of the events listed below (each,
a “Termination Event”), during which two (2) business day period any Party shall have the
opportunity and right to cure the Termination Event, as applicable, unless such Termination
Event is waived in writing by the respective terminating Party:
a.

by the written mutual written consent of the School and the Requisite Consenting
Bondholders;

b.

by the School, the Trustee (solely as to the Trustee being a Party hereunder, which
will not affect any other Parties’ obligations to perform and abide by the terms
and conditions of this Agreement) or the Requisite Consenting Bondholders, upon
a material breach by another Party of any of its respective representations,
warranties, covenants, or agreements set forth herein;

c.

by the School, the Trustee (solely as to the Trustee being a Party hereunder, which
will not affect any other Parties’ obligations to perform and abide by the terms
and conditions of this Agreement) or the Requisite Consenting Bondholders, if the
Transaction is not consummated on or before November 15, 2014, subject to
customary post-closing conditions, or such later date as may be reasonably
acceptable to the School and the Requisite Consenting Bondholders, but in no
event later than December 15, 2014;

d.

by the School, the Trustee (solely as to the Trustee being a Party hereunder, which
will not affect any other Parties’ obligations to perform and abide by the terms
and conditions of this Agreement) or the Requisite Consenting Bondholders, if
any court of competent jurisdiction or other competent governmental or
regulatory authority issues a final and non-appealable order that is not subject to a
stay making illegal or otherwise restricting, preventing or prohibiting the
transactions contemplated by this Agreement and the Term Sheet;

e.

automatically upon the commencement of a voluntary case under Title 11 of the
United States Code, 11 U.S.C. §§ 101, et seq (the “Bankruptcy Code”) or the
commencement of an involuntary case against the School under the Bankruptcy
Code;

f.

by the School, the Trustee (solely as to the Trustee being a Party hereunder, which
will not affect any other Parties’ obligations to perform and abide by the terms
and conditions of this Agreement) or the Requisite Consenting Bondholders, if the
ABA, the DOE, the California Attorney General or other regulatory authority
issues a final decision restricting, preventing, or prohibiting the transactions
contemplated by this Agreement and the Term Sheet;
10

g.

automatically on the date that the Transaction has been consummated (the
“Closing Date”); provided, however, that each of the Parties acknowledges and
agrees that the releases provided in Section 13 of this Agreement and the terms of
indemnification set forth on Exhibit D hereto are enforceable by each signatory
hereto and shall survive the termination of this Agreement due to or following the
consummation of the Closing Date; or

h.

by the Requisite Consenting Bondholders or the Trustee (solely as to the Trustee
being a Party hereunder, which will not affect any other Parties’ obligations to
perform and abide by the terms and conditions of this Agreement) upon the
occurrence of an event, change, or occurrence from circumstances prevailing on
the Effective Date that, individually or together with any other event, change, or
occurrence, has a material adverse impact on the financial condition, business, or
results of operations of the School (a “Material Adverse Effect”).

Except as otherwise provided in Section 11(g) herein, upon termination of this
Agreement in accordance with its terms, this Agreement shall forthwith become void and of no
further force or effect, each Party shall be released from its commitments, undertakings, and
agreements under or related to this Agreement, and there shall be no liability or obligation on the
part of any Party. Each Party shall have the rights and remedies that it would have had had it not
entered into this Agreement, and shall be entitled to take all actions, whether with respect to the
Transaction or otherwise, that it would have been entitled to take had it not entered into this
Agreement.
12.

Transfer Restrictions

Each Consenting Bondholder agrees that so long as this Agreement has not been
terminated in accordance with its terms it shall not directly or indirectly (a) grant any proxies to
any person in connection with its Bond Claims to vote or provide any consents required with
respect to the Transaction, or (b) sell, assign, pledge, hypothecate, convey, or otherwise transfer
or dispose of or grant, issue or sell any option, right to acquire, voting, participation or other
interest in any Bond Claims (each a “Transfer”), except to a party that is a Consenting
Bondholder (which shall include any undersigned Bondholder or any party that agrees in writing
to be bound by this Agreement and delivers to the School and the Trustee a Joinder in the form
attached hereto as Exhibit A). For the avoidance of doubt, this Agreement shall in no way be
construed to preclude any Consenting Bondholder from acquiring additional Bond Claims or any
other interests in the School; provided that any such additional Bond Claims or other interests in
the School shall, upon acquisition, automatically be deemed to be subject to all the terms of this
Agreement. Any Transfer of Bond Claims other than as set forth in this Paragraph 12 is null and
void ab initio. The Consenting Bondholders and the School acknowledge that transfer and
ownership of any Bond Claims or other interest in the Definitive Documents will be restricted to
Approved Institutional Buyers in the same manner that ownership and transfer of the Bonds is so
limited and as otherwise may be required pursuant to applicable securities laws.

11

13.

Releases

Each Party agrees that the following release provisions shall be binding on the Parties
hereto upon the consummation of the Transaction on the Closing Date.
a.

Release of each Release Party by the School and School Release Parties
(i)

Effective as of the Closing Date, the School and each of the School’s
current and former officers, directors, principals, shareholders, members,
trustees, partners, employees, agents, advisory board members, financial
advisors, attorneys, accountants, investment bankers, consultants,
representatives, management companies, fund advisors and other
professionals, and each of their respective predecessors, successors,
subsidiaries, assigns, affiliates, heirs, executors, estates, servants, and
nominees (each, in their capacity as such, a “School Release Party,” and
collectively, the “School Release Parties”) hereby fully and
unconditionally releases, acquits and forever discharges, (a) the School,
(b) each Consenting Bondholder (in its capacity as such), (c) the Trustee
(in its capacity as such) ((b) and (c) together, the “Trustee/Bondholder
Releasees”), (d) each Trustee/Bondholder Releasee’s current and former
officers, directors, principals, shareholders, members, trustees, partners,
employees, agents, advisory board members, financial advisors, attorneys,
accountants,
investment
bankers,
consultants,
representatives,
management companies, fund advisors, co-investment funds, and other
professionals, and (e) with respect to each of the foregoing (b) through (d),
each of their respective predecessors, successors, subsidiaries, assigns,
affiliates, heirs, executors, estates, servants, and nominees (in their
capacity as such and with the Trustee/Bondholder Releasees, each a
“Trustee/Bondholder Released Party” and, collectively, the
“Trustee/Bondholder Released Parties,” and collectively with the
School Release Parties, the “Released Parties”), from any and all manner
of actions, causes of action, suits, investigations or similar proceedings,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, claims, liabilities,
claims for violations of federal or state securities laws, gross negligence,
fraudulent conveyance, torts, demands and other relief and liabilities
whatsoever, whether known or unknown, foreseen or unforeseen, fixed or
contingent, matured or unmatured, accrued or unaccrued, whether direct,
indirect or derivative, existing or hereafter arising, in law, equity or
otherwise, based in whole or in part on any act, omission, transaction or
occurrence, including without limitation any claims, suits, demands and
causes of action (collectively, “Claims”), that, in each case, the School
Release Parties had or may have had on or prior to the Closing Date,
relating in any way to the School, including Claims arising out of, relating
to or accruing from their ownership and operation of, any payments
received from or made to, the School, and all other relationships of the
12

School with the Released Parties, including with respect and relating to
every agreement to which the School may have been or is a party with the
Released Parties, the Indenture or the transactions contemplated under this
Agreement or the Term Sheet (collectively, the “School Released
Claims”); provided that nothing contained herein shall release any
Released Party from its post-Closing obligations under the Definitive
Documents; provided further that nothing contained herein shall operate to
release any Released Party from Claims arising from or relating to any act
or omission by any such Released Party that constitutes fraud; provided
further that in the event that the Transaction is unwound either in an
insolvency proceeding or otherwise, all Claims will be reinstated. This
release is hereby referred to as the “School Release.”
(ii)

Subject to the provisos in clause (i) above, the School Release Parties,
effective from and after the Closing Date, expressly waives (A) all Claims
relating in any manner to the School Released Claims which arise from
events or conduct prior to the Closing Date, even if such Claims are not
known or suspected to exist in any of the School Release Parties’ favor,
(B) any assertion that this School Release does not extend to Claims
arising from conduct that occurred prior to the Closing Date hereof and
relating in any manner to the School Released Claims which any of the
School Release Parties did not know or suspect to exist in their favor on
the Closing Date, which if known by them, would have materially affected
this School Release and (C) any and all provisions, rights and benefits
conferred by any law of any state or territory of the United States, or
principle of common law with respect to Claims relating in any manner to
the School Released Claims.

(iii)

The School Release Parties shall not commence, aid, or participate in
(except to the extent required by law or by order or legal process issued by
a court or governmental agency of competent jurisdiction) any suit, legal
action or other proceeding to the extent based on any of the School
Released Claims.

(iv)

Each of the School Release Parties acknowledges that it has received
independent legal advice from its attorneys with respect to this School
Release and further acknowledges that it and its counsel have had
adequate opportunity to make whatever investigations and inquiries they
wish to make or have deemed necessary in connection with this School
Release.

(v)

Each of the School Release Parties represents and warrants that it has not
sold, assigned, transferred or conveyed all or any portion of the School
Released Claims to any person or entity.

(vi)

In the event that any suit, legal action or other proceeding is commenced
against any of the School Release Parties by any person or entity
13

(including, without limitation, any person or entity not a party to this
Agreement, any trustee or receiver, or any committee of creditors or other
party-in-interest in any bankruptcy proceeding), the School Release
Parties do not waive, release or discharge, shall retain, and may assert and
pursue the School Released Claims, but only for defensive purposes
(including, without limitation, as counterclaims and crossclaims), and as
setoffs, recoupments and/or similar remedies in such suit, legal action or
other proceeding against the person or entity asserting the suit, legal action
or other proceeding and not as grounds for any affirmative recovery.
b.

Release of each School Release Party by the Trustee/Bondholder Released
Parties.
(i)

Effective as of the Closing Date, each Trustee/Bondholder Released Party
hereby fully and unconditionally releases, acquits and forever discharges
each School Release Party from any and all Claims that, in each case, the
Trustee/Bondholder Released Parties had or may have had on or prior to
the Closing Date, relating in any way to the School, including Claims
arising out of, relating to or accruing from their ownership and operation
of the business of, any payments received from or made to, the School,
and all other relationships of the School with each of the
Trustee/Bondholder Parties, including with respect and relating to every
agreement to which the School may have been or is a party with each of
the Trustee/Bondholder Parties, the Indenture or relating in any way to the
transactions contemplated under this Agreement or the Term Sheet
(collectively, the “Trustee/Bondholder Released Claims”); provided,
that nothing contained herein shall release any School Release Party from
its post-Closing Date obligations under the Definitive Documents,
including for the avoidance of doubt the Notes or the Lease; provided
further that nothing contained herein shall operate to release any School
Release Party from Claims arising from or relating to any act or omission
by any such School Release Party that constitutes fraud; provided further
that in the event that the Transaction is unwound either in an insolvency
proceeding or otherwise, all Claims will be reinstated. This release is
hereby referred to as the “Trustee/Bondholder Release.”

(ii)

Subject to the provisos in clause (i) above, each of the Trustee/Bondholder
Released Parties, effective from and after the Closing Date, expressly
waives (A) all Claims relating in any manner to the Trustee/Bondholder
Released Claims which arise from events or conduct prior to the Closing,
even if such Claims are not known or suspected to exist in the
Trustee/Bondholder Released Parties’ favor, (B) any assertion that this
Trustee/Bondholder Release does not extend to Claims arising from
conduct that occurred prior to the Closing Date hereof and relating in any
manner to the Trustee/Bondholder Released Claims which the
Trustee/Bondholder Released Parties did not know or suspect to exist in
their favor on the Closing, which if known by them, would have materially
14

affected this Trustee/Bondholder Release and (C) any and all provisions,
rights and benefits conferred by any law of any state or territory of the
United States, or principle of common law with respect to Claims relating
in any manner to the Trustee/Bondholder Released Claims.

c.

(iii)

Each of the Trustee/Bondholder Released Parties shall not commence, aid,
or participate in (except to the extent required by law or by order or legal
process issued by a court or governmental agency of competent
jurisdiction) any suit, legal action or other proceeding to the extent based
on any of the Trustee/Bondholder Released Claims.

(iv)

Each of the Trustee/Bondholder Released Parties acknowledges that it has
received independent legal advice from its attorneys with respect to this
Trustee/Bondholder Release and further acknowledges that it and its
counsel have had adequate opportunity to make whatever investigation or
inquiry it has deemed necessary in connection with this
Trustee/Bondholder Release.

(v)

Subject to Section 12, each of the Trustee/Bondholder Released Parties
represent and warrant that they have not sold, assigned, transferred or
conveyed all or any portion of the Trustee/Bondholder Released Claims to
any person or entity.

(vi)

In the event that any suit, legal action or other proceeding is commenced
against any of the Trustee/Bondholder Released Parties by any person or
entity (including, without limitation, any person or entity not a party to
this Agreement, any trustee or receiver, or any committee of creditors or
other party-in-interest in any bankruptcy proceeding), the
Trustee/Bondholder Released Parties do not waive, release or discharge,
shall retain, and may assert and pursue the Trustee/Bondholder Released
Claims, but only for defensive purposes (including, without limitation, as
counterclaims and crossclaims), and as setoffs, recoupments and/or similar
remedies in such suit, legal action or other proceeding against the person
or entity asserting the suit, legal action or other proceeding and not as
grounds for any affirmative recovery.

Release of each Trustee/Bondholder
Trustee/Bondholder Released Party.
(i)

Released

Party

by

each

other

Effective as of the Closing, each of the Trustee/Bondholder Released
Parties hereby fully and unconditionally releases, acquits and forever
discharges each of the other Trustee/Bondholder Released Parties from
any and all Claims that, in each case, each Trustee/Bondholder Released
Party had or may have had on or prior to the Closing Date, relating in any
way to the School, including Claims arising out of, relating to or accruing
from any payments received from or made to the School, and all other
relationships of the School with each of the other Trustee/Bondholder
15

Released Parties, including with respect and relating to every agreement to
which the School may have been or is a party with each of the other
Trustee/Bondholder Released Parties, the Indenture or relating in any way
to the transactions contemplated under this Agreement or the Term Sheet,
(collectively, the “Mutually Released Claims”); provided that nothing
contained herein shall release any Trustee/Bondholder Released Party
from its post-Closing Date obligations under the Definitive Documents;
provided further that nothing contained herein shall operate to release any
Trustee/Bondholder Released Party from Claims arising from or relating
to any act or omission by any such Trustee/Bondholder Released Party
that constitutes fraud; provided further that in the event that the
Transaction is unwound either in an insolvency proceeding or otherwise,
all Claims will be reinstated. This release is hereby referred to as the
“Trustee/Bondholder Mutual Release.”
(ii)

Subject to the provisos in clause (i) above, each of the Trustee/Bondholder
Released Parties, effective from and after the Closing Date, expressly
waive (A) all Claims relating in any manner to the Mutually Released
Claims which arise from events or conduct prior to the Closing Date, even
if such Claims are not known or suspected to exist in the
Trustee/Bondholder Released Parties’ favor, (B) any assertion that this
Trustee/Bondholder Mutual Release does not extend to Claims arising
from conduct that occurred prior to the Closing hereof and relating in any
manner to the Mutually Released Claims which the Trustee/Bondholder
Released Parties did not know or suspect to exist in their favor on the
Closing Date, which if known by them, would have materially affected
this Trustee/Bondholder Mutual Release and (C) any and all provisions,
rights and benefits conferred by any law of any state or territory of the
United States, or principle of common law with respect to Claims relating
in any manner to the Mutually Released Claims.

(iii)

Each of the Trustee/Bondholder Released Parties shall not commence, aid,
or participate in (except to the extent required by law or by order or legal
process issued by a court or governmental agency of competent
jurisdiction) any suit, legal action or other proceeding to the extent based
on any of the Mutually Released Claims.

(iv)

Each of the Trustee/Bondholder Released Parties acknowledges that it has
received independent legal advice from its attorneys with respect to this
Trustee/Bondholder Mutual Release and further acknowledges that it and
its counsel have had adequate opportunity to make whatever investigation
or inquiry it has deemed necessary in connection with this
Trustee/Bondholder Mutual Release.

(v)

Subject to Section 12, each of the Trustee/Bondholder Released Parties
represent and warrant that they have not sold, assigned, transferred or

16

conveyed all or any portion of the Mutually Released Claims to any
person or entity.
(vi)

In the event that any suit, legal action or other proceeding is commenced
against any of the Trustee/Bondholder Released Parties by any person or
entity (including, without limitation, any person or entity not a party to
this Agreement, any trustee or receiver, or any committee of creditors or
other party-in-interest in any bankruptcy proceeding), the
Trustee/Bondholder Released Parties do not waive, release or discharge,
shall retain, and may assert and pursue the Mutually Released Claims, but
only for defensive purposes (including, without limitation, as
counterclaims and crossclaims), and as setoffs, recoupments and/or similar
remedies in such suit, legal action or other proceeding against the person
or entity asserting the suit, legal action or other proceeding and not as
grounds for any affirmative recovery.

d.

Notwithstanding anything contained herein to the contrary, no person or entity
which is not a Party hereto will be entitled to enforce any of the releases set forth
herein unless, prior to doing so, such person or entity affirms in writing that such
person or entity is also bound by, and is giving the releases ascribed to such
person or entity herein.

e.

Each Party to this Agreement acknowledges and agrees that: (i) the releases
granted herein are for valuable consideration, including, but not limited to, the
transactions contemplated by this Agreement and the payments associated
therewith; and (ii) the transactions contemplated by this Agreement and the
payments associated therewith constitute reasonably equivalent value and fair
consideration as such terms are defined in and by Section 548 of the United States
Bankruptcy Code (as defined herein), the Uniform Fraudulent Transfer Act and
the Uniform Fraudulent Conveyance Act as adopted in any jurisdiction, and any
similar statute under applicable law.

f.

The Parties agree that in connection with the consummation of the Transaction,
the Parties will provide a release in substantially the same form as this Section 13
in favor of the Authority, solely on the condition that the Authority (i) consents to
the Transaction as set forth herein and in the Term Sheet and (ii) agrees to provide
a mutual release in favor of each of the Released Parties.

14.

Remedies

The Parties agree that any breach of this Agreement would give rise to irreparable
damage for which monetary damages would not be an adequate remedy. Each of the Parties
agrees that the School and the Consenting Bondholders, as the case may be, will be entitled to
enforce the terms of this Agreement by decree of specific performance without the necessity of
proving the inadequacy of monetary damages as a remedy and to obtain injunctive relief against
any breach or threatened breach. The Parties agree that such relief will be their only remedy

17

against the applicable breaching Party or Parties with respect to any such breach, and that in no
event will any Party be liable for monetary damages under or in connection with this Agreement.
15.

Prior Negotiations

This Agreement supersedes all prior negotiations and documents reflecting such prior
negotiations between and among the School and the Consenting Bondholders (and their
respective advisors), with respect to the Transaction and any other subject matter hereof.
16.

Amendments and Waivers

Except as otherwise provided herein, neither this Agreement nor the Term Sheet may be
modified, amended, or supplemented without the prior written consent of each of (a) the School,
(b) the Requisite Consenting Bondholders and (c) the Trustee (solely to the extent such
modification or amendment adversely affects the Trustee); provided that if any modification,
amendment, or supplement treats a group of Consenting Bondholders in a manner which is
disproportionate and adverse to the treatment of another group of Consenting Bondholders, such
modification, amendment, or supplement shall also require the written consent of the Consenting
Bondholders holding a majority of the Bonds in such adversely treated group. Any waiver of
any condition, term, or provision of this Agreement must be in writing and signed by the Parties
entitled to waive such condition, term, or provision.
17.

Independent Analysis

Each Party confirms that it has made its own decision to execute this Agreement based
upon its own independent assessment of documents and information available to it, as it has
deemed appropriate.
18.

Further Assurances

The Parties agree to execute and deliver such other instruments and perform such acts, in
addition to the matters herein specified, as may be reasonably appropriate or necessary, from
time to time, to effectuate the agreements and understandings of the Parties.
19.

Governing Law

This Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York. By its execution and delivery of this Agreement, each of the
Parties hereby irrevocably and unconditionally agrees for itself that any legal action, suit or
proceeding against it with respect to any matter under or arising out of or in connection with this
Agreement or for recognition or enforcement of any judgment rendered in any such action, suit,
or proceeding, may be brought in either a state or federal court of competent jurisdiction in the
State of New York. By execution and delivery of this Agreement, each of the Parties hereby
irrevocably accepts and submits itself to the nonexclusive jurisdiction of each such court,
generally and unconditionally, with respect to any such action, suit, or proceeding.

18

20.

No Solicitation

Notwithstanding anything to the contrary, this Agreement is not and shall not be deemed
to be an offer for the issuance, purchase, sale, exchange, hypothecation or other transfer of
securities or a solicitation of an offer to purchase or otherwise acquire securities for purposes of
the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended, or in any
jurisdiction in which this Agreement would be contrary to applicable securities laws.
21.

No Third-Party Beneficiary

This Agreement is intended for the benefit of the parties hereto and no other person shall
have any rights hereunder.
22.

Relationship Among the Parties

Nothing herein shall be deemed or construed to create a partnership, joint venture, or
other association between or among any of the Parties. Each Party agrees and understands that
neither this Agreement, the Term Sheet, nor the transactions contemplated hereby or thereby,
creates or otherwise gives rise to any fiduciary duty or other duty of trust or confidence.
23.

Counterparts

This Agreement may be executed in several counterparts, each of which shall be deemed
to be an original, and all of which together shall be deemed to be one and the same agreement.
Execution copies of this agreement may be delivered by electronic mail, facsimile, or otherwise,
which shall be deemed to be an original for the purposes of this Agreement.
24.

Headings

The headings used in this Agreement are for convenience of reference only and do not
constitute a part of this Agreement and shall not be deemed to limit, characterize, or in any way
affect any provision of this Agreement, and all provisions of this Agreement shall be enforced
and construed as if no headings had been used in this Agreement.
25.

Settlement Discussions

This Agreement and the Term Sheet are part of a proposed settlement of matters that
could otherwise be the subject of litigation among the Parties hereto. Nothing herein shall be
deemed an admission of any kind. Pursuant to Federal Rule of Evidence 408 and any applicable
state rules of evidence, this Agreement and all negotiations relating thereto shall not be
admissible into evidence in any proceeding other than a proceeding to enforce the terms of this
Agreement.
26.

Notices

All demands, notices, requests, consents, and other communications under this
Agreement shall be in writing, sent contemporaneously to each of the School and the Consenting
Bondholders, and deemed given when delivered, if delivered by hand, or upon transmission, if
19

delivered by email or facsimile, at the addresses and facsimile numbers set forth on Schedule 1
hereto or the signature pages hereto, as applicable.
27.

Representation by Counsel

Each Party hereto acknowledges that it has been represented by counsel (or had the
opportunity to and waived its right to do so) in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision
that would provide any Party hereto with a defense to the enforcement of the terms of this
Agreement against such Party based upon lack of legal counsel shall have no application and is
expressly waived.
28.

Press Releases and Public Announcements

The Trustee and each Consenting Bondholder hereby consent to the disclosure by the
School in any press release or as required by law or regulation of the execution and contents of
this Agreement; provided, however, that except as required by law or any rule or regulation of
any governmental agency, the School shall not, without the applicable Consenting Bondholder’s
prior consent, (a) use the name of such Consenting Bondholder or their respective controlled
affiliates, officers, directors, managers, stockholders, members, employees, partners,
representatives and agents in any press release or (b) disclose the individual holdings of such
Consenting Bondholder to any person. The School shall (a) consult with the advisors to the
Trustee before the School issues any press release with respect to the transactions contemplated
by this Agreement, (b) provide to such advisors for review a copy of any such press release and
(c) not issue any such press release prior to such consultation and review and the receipt of the
prior consent of such advisors (not to be unreasonably withheld or conditioned).
29.

Severability

Whenever possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void or unenforceable,
said provision survives to the extent it is not so declared, and all of the other provisions of this
Agreement remain in full force and effect only if, after excluding the portion deemed to be
unenforceable, the remaining terms provide for the consummation of the transactions
contemplated hereby in substantially the same manner as originally set forth at the later of the
date this Agreement was executed or last amended.
30.

No Waiver of Participation and Preservation of Rights

Except as provided in this Agreement, nothing herein is intended to, does or shall be
deemed in any manner to waive, limit, impair, or restrict the ability of each Party to protect and
preserve its rights, remedies, and interests, including, but not limited to, its claims against any of
the School and any liens or security interests it may have in any assets of any of the School.
Without limiting the foregoing sentence in any way, if this Agreement is terminated in
20

accordance with its terms for any reason, the Parties each fully reserve any and all of their
respective rights, remedies, and interests, subject in all respects to Paragraph 9 in the case of any
claim for breach of this Agreement arising prior to termination.
[Signature Pages Follow]

21

U1VIB BANK
Solely zf~ its Capacity as ru tee
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Title:

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[Sigiaatt~re Page Restrzretacri~ag Sz~pport Agreei~zent]

[Consenting Bondholders’ Signature Pages Intentionally Omitted]

Exhibit A
Joinder

JOINDER TO RESTRUCTURING SUPPORT AGREEMENT
The undersigned is executing and delivering this Joinder to the Restructuring Support
Agreement (as amended or modified from time to time, the “RSA”), dated as of October 28,
2014, by and among Thomas Jefferson School of Law (the “School”), UMB Bank (as successor
trustee to The Bank of New York Mellon Trust Company, N.A., the “Trustee”) and certain
Consenting Bondholders (as defined in the RSA) in accordance with (i) Section 2 of the RSA
and (ii) the terms of that certain confidential instruction letter (the “Instruction Letter”), dated as
of October 28, 2014, delivered by the Trustee. Capitalized terms used but not otherwise defined
herein shall have the meaning ascribed to them in the RSA.
I.

Agreement to be Bound. The undersigned hereby (A) acknowledges that it has received
and reviewed a complete copy of the RSA and the other documents attached thereto or
provided concurrently therewith, including but not limited to the Instruction Letter, and
(B) agrees that upon execution of this Joinder, it shall become a party to the RSA as a
“Consenting Bondholder” and shall accept and be subject to, and comply with the
covenants, terms, conditions and provisions thereof (including without limitation (i) the
representations and warranties set forth in Section 5 of the RSA, (ii) the covenants set
forth in Section 7 of the RSA, (iii) effective upon the Closing, the mutual release set forth
in Section 11 of the RSA, and (iv) the terms set forth in each of the Term Sheets), and
shall be entitled to the rights and benefits and subject to the duties and obligations of a
Consenting Bondholder thereunder in the same manner as though the undersigned was an
original party thereto.

II.

Certification. The undersigned hereby certifies that it is the record and beneficial owner
of outstanding Bonds in the following amounts:

III.

Series 2008A tax-exempt bonds:

$___________

Series 2008B taxable bonds

$___________

Address for Notice. For purposes of notice under Section 24 of the RSA, the address of
the undersigned is as follows:
_______________________________
_______________________________
_______________________________
_______________________________
Facsimile #: _____________________

IV.

Issuance of Equity Interests in the SPV. Please select one of the options below regarding
the name of record in which the equity interests in the SPV that are beneficially owned by
you shall be issued.

The undersigned hereby authorizes the SPV to issue the equity interests of the SPV of
which the undersigned shall be the beneficial owner pursuant to the terms of the SPV
Term Sheet in the name of:
 the undersigned;
 the following designee of the undersigned: _____________________________; or
 the Trustee, to be held in a trust to be formed at the Closing for the benefit of the
undersigned and all other Bondholders who elect to have their interests held of record by
the Trustee
V.

Funding of Capital Commitment. Please select one of the options below regarding the
method by which your Capital Commitment shall be funded:
 The Trustee is hereby authorized to withhold a portion of the Cash Distribution to
which the undersigned shall be entitled at Closing in an amount equal to the
undersigned’s Capital Commitment in an escrow or segregated account;
 The undersigned does not want the Capital Commitment withheld from the Cash
Distribution at the Closing, but agrees to fund the Capital Commitment to the SPV
following a Capital Call (and acknowledges that failure to do so could result in, among
other things, the undersigned’s forfeiture of its equity interests in the SPV); or
 The undersigned does not want the Capital Commitment withheld from the Cash
Distribution at the Closing, but does want any future distributions made by the SPV that
the undersigned would be entitled to as an equity holder of the SPV to be retained by the
SPV in a segregated account to fund the Capital Commitment, until the Capital
Commitment is fully funded. The undersigned agrees that, should such future
distributions be insufficient to fund the Capital Commitment, the undersigned will be
required to fund the remaining portion of the Capital Commitment to the SPV following a
Capital Call (and acknowledges that failure to do so could result in, among other things,
the undersigned’s forfeiture of its equity interests in the SPV).

VI.

Wire Instructions. The Trustee is hereby authorized to wire any portion of the Cash
Distribution that is payable to the undersigned at Closing to the following account:
Bank:

_________________________________

Routing Number:

_________________________________

Account Number:

_________________________________

Account Title:

_________________________________

SWIFT Code:

_________________________________

2

VII.

Governing Law. This Joinder shall be governed by, and construed in accordance with,
the internal laws of the State of New York, without giving effect to the principles of
conflict of laws that would require the application of the law of any other jurisdiction.
*

*

*

3

*

*

The undersigned has delivered this Joinder to the Restructuring Support Agreement as of
_____________, 2014.

Consenting Bondholder Name (please type
or print):

_________________________________
Name:
Title:

Exhibit B
Lease Term Sheet

Lease Term Sheet
Thomas Jefferson School of Law Facility
Premises:

For the purposes of this term sheet, the term “Building” shall mean that
certain building of approximately 305,000 square feet including parking,
currently owned and occupied by Thomas Jefferson School of Law
(“TJSL”) and located at 1155 Island Avenue, San Diego, California.
For the purposes of this term sheet, the term “Premises” shall mean that
portion of the Building to be leased to Tenant, as may be reduced by
Landlord as provided below. The Premises may exclude that portion of
the Building currently occupied by The Hall, L.P. (the “Café Tenant”)
pursuant to that certain Lease Agreement, dated May 1, 2013 (the “Café
Lease”), by and between TJSL and the Café Tenant.
For the purposes of this term sheet, the term “Property” shall mean the
Building together with the real property upon which the Building is
located and any other improvements located on such real property.

Landlord:

1155 Island Avenue, LLC

Tenant:

TJSL

Use:

Tenant may use the Premises for the operation of a law school and
ancillary uses related thereto.

Café Lease:

Landlord and Tenant agree prior to the Commencement Date to work
together and with the Café Tenant on a plan with respect to the Café
Lease, which may include an assignment by TJSL of the landlord’s
interest in the Café Lease to Landlord, modification of the terms of the
Café Lease, or other resolution with respect thereto.

Lease Term:

Initial term of three (3) years through August 1, 2017.
At Landlord’s option, one (1) 3-year option to extend through August 1,
2020, followed by one (1) 4-year option to extend through August 1,
2024. Landlord shall provide Tenant with not less than twelve (12)
months prior written notice if Landlord intends to exercise either option
to extend.

Commencement Date:

The closing date of the Deed-in-Lieu transaction described below.

Deed-in-Lieu:

Transaction by which, among other things, Landlord acquires title to the
Building, and the outstanding Bonds, Indenture and Loan Agreement are
cancelled and claims under the existing loan documents are released.

Lease Type:

The Lease will be a triple net lease.

Condition:

Tenant shall accept and lease the Premises “as is”, “where is” and “with
all faults” as of the Commencement Date, without any representation or
warranty of any kind, express or implied.

Annual Base Rent:

$5,000,000.
In connection with a Reduction of the Premises (see below), Annual
Base Rent shall be subject to reduction by an amount to be determined
based on a benefit-sharing mechanism to be agreed upon between
Landlord and Tenant in the definitive Lease documentation; provided
that in no event shall the Annual Base Rent payable by Tenant be less
than $4,000,000.

Payment of Rent:

Rent paid in advance in equal monthly installments.

Security Deposit:

None.

Operating Expenses and Real
Property Taxes:

In addition to the Annual Base Rent, Tenant shall pay during the Term:
(a) 100% of all operating expenses associated with the Premises and (b)
its pro rata share of Building and/or Property operating expenses,
including for maintenance and repair, insurance premiums and real
property taxes, in each case of (a) and (b) above, subject to customary
exclusions to be agreed in the definitive Lease documentation (together
with other amounts payable by Tenant to Landlord under the Lease,
“Additional Rent”); provided, however, that Tenant shall not be
responsible for (i) any portion of real property taxes relating to any part
of the Building and/or Property not leased to Tenant, (ii) any increase in
real estate taxes due to tenant improvements occasioned by other tenants
of the Building or (iii) any insurance premiums solely related to the
activities of other tenants of the Building.
Tenant shall have the right, at its own cost and expense, to audit up to the
past two (2) years of operating expenses.

Utilities:

Tenant shall pay all utility fees either directly to the utility provider or, in
the event that Landlord pays the utilities, to Landlord as Additional Rent.

Insurance:

Tenant shall procure general commercial liability, fire and extended
casualty, worker’s compensation, and any other form of insurance
reasonable to protect the Premises or customary for similarly situated
businesses or tenants in the area, and Tenant shall name Landlord as
additional insured or a loss payee in such policies. The fire and extended
casualty insurance shall contain waivers of subrogation and shall be for
full replacement cost. Tenant shall not be required to carry earthquake,

2

terrorism or environmental insurance coverage.
Repairs:

Landlord shall be responsible for the slab, structure, exterior walls and
roof substructure of the Building and for all capital repairs and
replacements to the Premises, the Building and/or the Property
(including, without limitation, the Building systems and utilities serving
the same) (“Capital Repairs”). Tenant shall reimburse Landlord for its
pro rata share of such Capital Repairs on an amortized basis over forty
(40) years.
Tenant shall, at Tenant’s sole cost and expense, maintain the Premises in
good operating condition and perform all repairs and replacements to the
Premises that are not Landlord’s responsibility. Tenant shall operate the
Premises in accordance with all applicable laws.

Remediation:

Tenant will remain responsible for costs and expenses in connection with
those certain remediation actions set forth on Exhibit “B” (the
“Remediation Actions”), up to an amount equal to (i) the amount in the
Project Fund (as defined in the Indenture) and two accounts held at UMB
Bank identified as account numbers 141526.11 and 141526.12 (the
“UMB Accounts”) plus those amounts allocated by the Trustee to the
Project Fund and/or UMB Accounts in or from the Reserve Account (as
defined in the Indenture) (collectively the “Construction Reserve”) and
(ii) the amount of any proceeds from litigation relating to the
construction defects. Landlord shall have the right (but not the
obligation), in Landlord’s sole and absolute discretion, to make
additional funds available to Tenant to undertake or complete the
Remediation Actions.
Tenant will indemnify Landlord (and Landlord’s beneficial owners) and
Trustee from and against all liabilities, losses, damages, costs and
expenses (except for any claims relating to any loss of value of the
Building) arising from: (i) Tenant’s occupancy, use, or possession of the
Building (whether prior to or after the effective date of the Lease); (ii)
work done by or on behalf of the Tenant in or about the Building, or any
part thereof, including any of the Remediation Actions set forth on
Exhibit B (whether prior to or after the effective date of the Lease);
(iii) any latent defects with respect to the Building (i.e., which are not
specifically identified as requiring remediation on Exhibit B); and
(iv) the presence of hazardous materials at, in, under or above the
Building (a) introduced and/or released by any person or entity prior to
the effective date of the Lease and (b) after the effective date of the
Lease, (i) used, released, stored or transported by or on behalf of Tenant
or (ii) migrating from other property or caused by other parties not under
the Tenant’s control to the extent Tenant knew or should have known of
such hazardous materials and failed to promptly notify Landlord.
3

With the express consent of Landlord, Tenant may pursue existing
claims related to remediation litigation, to be funded in accordance with
a funding agreement to be negotiated.
Sublease and Assignment:

Tenant shall not assign any of its interest under the Lease or sublease any
portion of the Premises without the prior written consent of Landlord.
Any direct or indirect transfer of an interest in Tenant or in the Lease
shall be deemed an assignment requiring Landlord’s prior written
consent. In the event that an M&A transaction is consummated,
Landlord’s consent may be conditioned on renegotiation of the terms of
the Lease.
Tenant shall not, without the prior written consent of Landlord, execute a
leasehold mortgage or leasehold deed of trust granting Tenant’s lender a
leasehold security interest in the Premises; provided, that a leasehold
mortgage may be granted to Landlord and its assigns in connection with
the concurrent issuance of notes by Tenant (the “New Notes”). Tenant
shall remain fully liable under the Lease in the event of any subletting of
any portion of the Premises or assignment of any of Tenant’s interest
under the Lease.

Subordination:

The Lease shall at all times remain subordinate and subject to any
Mortgage/Deed of Trust or the rights of any mortgagee now or at any
time hereafter encumbering the Premises. Tenant and such mortgagee
shall enter into a commercially reasonable form of subordination, nondisturbance and attornment agreement. Tenant will from time to time
deliver an estoppel statement with regard to the Lease upon request of
Landlord.

Hazardous Materials:

Tenant shall covenant not to introduce or exacerbate hazardous
conditions upon the Premises in violation of applicable environmental
laws and shall indemnify Landlord against losses from any such
conditions to the extent caused by Tenant (whether prior or subsequent
to the Commencement Date).

Broker Representation:

Tenant and Landlord each warrant and represent that there is not a broker
representing them in connection with the negotiation of the Lease for the
Premises.

Defaults:

Any of the following shall constitute an event of default of Tenant: (i)
the failure by Tenant to pay any installment of Base Rent when the same
shall be due and payable and such failure shall continue for five (5) days,
(ii) the failure by Tenant to pay any Additional Rent when the same shall
be due and payable and such failure shall continue for ten (10) days after
Tenant’s receipt of written notice thereof, (iii) the failure by Tenant to
maintain any of the insurance required to be maintained by Tenant
hereunder, (iv) the failure by Tenant to perform any other obligation
4

hereunder and such failure shall continue for a period of thirty (30) days
after Tenant’s receipt of written notice thereof (provided that if such
default is of such nature that the cure thereof cannot be reasonably
achieved within such thirty (30) days, then Tenant shall not be in default
for so long as Tenant shall have commenced cure within such thirty (30)
days and shall be diligently prosecuting such cure to completion), (v)
Tenant abandons or vacates the Premises, (vi) customary events of
bankruptcy and insolvency, (vii) Tenant fails to maintain accreditation
by the American Bar Association or is otherwise in material violation of
applicable Department of Education (Title IV) and/or State Bar of
California rules and regulations, which violation has not been cured after
an appropriate notice period to cure such violations, or (viii) any default
under the New Notes.
If Tenant defaults under the Lease or makes any attempt to terminate the
Lease or abandon the Premises, and regardless of any subsequent reletting of the Premises by Landlord and without prejudice to any other
rights or remedies available to Landlord, Landlord shall have the right to
collect from Tenant, as liquidated damages, the amount of all Rent
reserved under the Lease for the remainder of the Term (it being agreed
by Tenant that such amount would constitute Landlord’s reasonable
damages).
Reduction of Premises:

Landlord shall have the right, in Landlord’s sole discretion, upon not less
than six (6) months prior written notice to Tenant, to terminate the Lease
with respect to any portion(s) of the Premises excluding the portions of
the Premises more particularly identified on Exhibit “A” attached hereto
(the “Core Premises”) effective not earlier than August 1, 2015 (unless
otherwise agreed by Tenant).

Parking:

Tenant shall be entitled to a number of parking spaces to be mutually
agreed in the definitive Lease documentation; provided that Landlord
will have the right, on not less than six (6) months’ notice to Tenant, to
reduce the number of parking spaces allocated to Tenant by a number of
spaces to be mutually agreed in the definitive Lease documentation.

Signage:

To be mutually agreed in the definitive Lease documentation.

5

Exhibit C
Notes Term Sheet

Notes Term Sheet
Thomas Jefferson School of Law
Lender:

1155 Island Avenue, LLC

Borrower:

Thomas Jefferson School of Law

Guarantors:

All existing and future subsidiaries of the Borrower

Collateral:

All property and assets of the Borrower and Guarantors,
including but not limited to, Gross Revenues, the law library,
and a leasehold mortgage.

Principal Amount of Initial
Notes:

$40,000,000 which amount shall be the agreed-upon
“Deficiency Claim”; provided, however, that if the Lender
terminates the Lease effective as of August 1, 2017 or
August 1, 2020 and the Borrower is not then in default under
the Lease or the Note Agreement, then (i) if the Lender
terminates the Lease effective as of August 1, 2017, the amount
of the Deficiency Claim shall be reduced to $20,000,000 or
(ii) if the Lender terminates the Lease effective as of August 1,
2020, the amount of the Deficiency Claim shall be reduced to
$25,000,000.
In the event that the Lease is terminated and the Deficiency
Claim is reduced in accordance with the preceding paragraph,
the Borrower agrees to the following:
•

to the extent that an M&A Transaction (as defined
herein) is consummated, the Borrower shall pay to
Lender a special success fee earned and payable only
upon the effectuation of such M&A Transaction (as
defined herein) in an amount equal to $20,000,000, or
the maximum amount available following such M&A
Transaction (as defined herein) up to $20,000,000.

Interest Rate:

2% per annum, must be paid in cash to the extent available or
otherwise accrues. If not paid by the Borrower for any given
year, 20% of Excess Cash Flow is not allocated to the Borrower
through the ECF Sweep described below.

Term:

The 17-year anniversary of the closing date.

ECF Sweep:

Borrower shall make semi-annual payments to Lender in the
amount of 80% of Excess Cash Flow for the preceding six (6)
month period, which payments shall be used to pay down the

principal amount of the note.
The definition of the term “Excess Cash Flow” shall be
mutually agreed in the definitive documents implementing this
agreement.
The Lender shall have the opportunity to review and comment
on the Borrower’s annual budget, which budget shall be
provided to the Lender at least ten days prior to approval of
such budget by the Borrower’s board of directors; provided,
however, that the Borrower shall not be required to provide any
financial reporting to the Lender with respect to the 20% Excess
Cash Flow reserved for the Borrower.
Other Mandatory Prepayments

100% (or such lesser percentage consented to by Lender) of the
net cash proceeds of all extraordinary receipts, insurance and
condemnation recoveries (remaining after replacement) and
other asset dispositions excluding any gifts or grants received
by the Borrower.
Litigation proceeds to be net of amounts applied to repair or
replace property, as necessary, in accordance with the terms of
the Lease.

Representations & Warranties:

As requested by Lender and reasonably acceptable to Borrower,
as appropriate for this transaction, and to include substantially
similar provisions as in the existing Loan Agreement with such
modifications as are deemed necessary by Lender and
reasonably acceptable to Borrower and other customary
representations and warranties, including regulatory
representations and warranties, for senior secured credit
facilities.

Covenants:

As requested by Lender and reasonably acceptable to Borrower,
as appropriate for this transaction, and to include substantially
similar covenants contained in the existing Loan Agreement
with such modifications as are deemed necessary by Lender and
reasonably acceptable to Borrower (including modification of
financial covenants to be mutually agreed based on agreed-upon
projections), plus other customary covenants for senior secured
credit facilities, plus the following additional covenants:
•

Cap on outgoing advisor fees, including expense
reimbursement for investment banker as described
below.

•

Enhanced reporting to include 26-week and 52-week
2

cash flows subject to variance test to be agreed, robust
reporting around DOE, ABA and other regulatory
matters.

DOE Letter of Credit and
Additional Notes

•

Maintain cash management services with depository
banks approved by Lender, subject to account control
agreements.

•

In consultation with Lender, Borrower has agreed to
engage [__] as investment banker, or such other
investment banker as mutually agreed, in a process to
explore (the “M&A Process”) a merger, assignment,
sale, partnership, change in control or any other strategic
transaction or transfer of the Lease (a “M&A
Transaction”); provided, however that:
•

Borrower shall retain sole discretion to elect to
consummate an M&A Transaction, subject to the
reasonable consent of Lender; and

•

Under no circumstances shall Lender control or
direct the policies or management of Borrower.

If the DOE Composite Score (as determined by the DOE in
accordance with the regulations promulgated by the DOE under
Title IV of the Higher Education Act of 1965) is less than or
equal to 1.50 for any fiscal year of the Borrower and the DOE
requires the posting of a letter of credit for the Borrower to
remain eligible to receive Title IV student financial assistance
program (“Title IV Program”), the Borrower may obtain a letter
of credit issued by a commercial bank and otherwise on terms
acceptable to the Lender for the benefit of the DOE and deposit
cash or cash equivalents in an amount not to exceed 105% of
the face amount of such letter credit with the issuing bank. To
the extent the Borrower has insufficient funds otherwise
available to cash collateralize such letter of credit, the Borrower
shall offer to issue additional Notes (the “Additional Notes”) to
the Lender, in the amount needed to cash collateralize such
letter of credit not to exceed 15% of the Borrower’s prior year
Title IV student financial assistance program, the proceeds of
which shall be used solely to cash collateralize such letter of
credit; provided, however, that the amount of the Additional
Notes shall not exceed $6,000,000.00. The Lender shall,
subject to mutually agreed conditions (including the absence of
a default), purchase such Additional Notes.
If the letter of credit has not been drawn, Borrower shall pay
3

monthly interest in the amount of 2% on the Additional Notes,
but shall make no principal payments on account of the
Additional Notes so long as the Initial Notes and the Relocation
Amount, if any, are outstanding. The Additional Notes shall be
secured by the Collateral on the same terms as the Initial Notes,
except with respect to the cash collateral for the letter of credit.
In the event the Initial Notes and the Relocation Amount, if
any, are repaid while the letter of credit is required, Borrower
shall repay the Additional Notes from 80% of its Excess Cash
Flow. Upon the release of the cash collateral for the letter of
credit, the outstanding principal of the Additional Notes shall be
repaid.
In the event that the letter of credit has been drawn, the
Additional Notes shall have payment and lien priority to the
Initial Notes and the Relocation Amount. No principal of the
Initial Notes shall be repaid prior to the payment in full of all
obligations under the Additional Notes. In addition, following
an Event of Default, no cash interest or any other cash amounts
with respect to the Initial Notes shall be paid prior to the
payment in full of all obligations under the Additional Notes.
The Additional Notes shall be secured by the Collateral on the
same terms as the Initial Notes.
Indemnification

Provided that at least Bondholders of a majority in aggregate
principal amount of the outstanding Bonds and Bondholders of
a majority in aggregate principal amount of the outstanding
Tax-Exempt Bonds are party to the Restructuring Support
Agreement, Borrower agrees to indemnify and hold harmless
Lender, its affiliates, successors, and assigns from and against
any and all claims, damages, liabilities, or losses arising from or
related to the Notes on customary terms. For the avoidance of
doubt, Excess Cash Flow shall be net of reasonable costs to
Borrower of such indemnification (the “Third-Party
Indemnification”).

Early Lease Termination Fund

If notice is given by Landlord to terminate the Lease effective
on either August 1, 2017 or August 1, 2020, Lender agrees that
it will provide (or permit and facilitate the provision of by one
or more Bondholders) a super-priority financing facility in an
amount based on Borrower’s reasonable approximation of
Borrower’s relocation costs for which it does not have
sufficient cumulative retained cash flow available, subject to
approval by Lender (not to be unreasonably withheld), but in no
event to exceed $3,000,000 (the “Relocation Amount”);
provided, (i) the Relocation Amount shall be disbursed to
Borrower as and when needed to pay such relocation costs and
4

(ii) that to the extent there is a breach of the Lease or default
under the Notes on the date of such notice or any time
thereafter, Lender shall not be required to do any of the
foregoing. The Lender shall have a lien on the Relocation
Amount to the extent it is funded, which shall have payment
and lien priority to the Initial Notes, but subject to the
Additional Notes (in the event that the letter of credit is drawn).
Board Observation Rights

The Lender shall have the right to appoint one (1) board
observer that will have all of the rights of a member of
Borrower’s board of trustees except with respect to the right to
vote.

Marketing Fees:

The Lender shall work in good faith with the Borrower to
review the Borrower’s proposed expenditures related to the
Borrower’s public relations and/or marketing activities and
evaluate whether to provide up to $1,000,000 in cash at closing
for such expenses.

Events of Default:

As determined by Lender as appropriate for this Transaction
and to include substantially similar events of default as in the
existing Loan Agreement with such modifications as are
deemed necessary by Lender, plus the following additional
events of default:
•

Failure to make payment when due.

•

Failure to pay balance at maturity.

•

Failure to maintain accreditation with the ABA.

•

Failure to provide periodic financial reporting to Lender.

•

Customary events of bankruptcy and insolvency.

•

Change of control and change of not-for-profit status.

•

Occurrence of an “Event of Default” under the lease
between Lender, as Landlord, and Borrower, as tenant.

•

Entry of one or more final, non-appealable judgments or
orders for the payment of money against the School, to
the extent that such judgments or orders, individually or
in the aggregate, exceed the total amount of funds set
aside in the School’s budget to pay such liabilities
including any available insurance funds.

5

Closing Conditions:

•

Noncompliance with any license, permit or regulation
issued by the DOE or any governmental authority.

•

Loss of eligibility to participate in the Title IV Programs
administered by the DOE.

•

Any failure or delay by the DOE to provide funding,
including the imposition of Heightened Cash
Monitoring Level 2.

•

Any failure of the DOE Composite Score to be greater
than 1.50 (as determined by the DOE in accordance with
the regulations promulgated by the DOE under Title IV
of the Higher Education Act of 1965) unless no other
Event of Default then exists and (i) the DOE determines
that the school is subject to the “zone” alternative of
financial responsibility and is not required to post a
letter of credit or (ii) the Borrower, with the consent of
the DOE, submits a letter of credit under the provisional
certification alternative in accordance with all applicable
requirements.

•

Loss of any education approval or license to operate in
California.

Full release by the Borrower of the Consenting Bondholders,
the Trustee, the Authority (to the extent it affirmatively
consents to this transaction), and each of their respective
affiliates, equityholders, investors, employees, officers,
directors, representative, agents, attorneys, and advisors with
respect to the Loan Agreement, Indenture, Bonds, prior
transactions, and restructuring.
Full release of Borrower and its respective affiliates,
employees, officers, directors, representatives, agents,
attorneys, and advisors by the Trustee, Authority (to the extent
it affirmatively consents to this transaction), and the
Bondholders with respect to the Loan Agreement, Indenture,
Bonds, prior transactions, and restructuring).
Payment of the RSA Consent Fee in an amount of $2,500,000
in cash to Lender (to be distributed as agreed under the terms of
the SPV Term Sheet), to be paid from available cash on hand of
the Borrower, provided however that to the extent available
cash on hand is insufficient, the RSA Consent Fee shall be paid
from any other appropriately available funds.

6

Payment to the Bondholders on account of the existing Bonds
of any amounts contained in the existing debt service reserve,
less any closing costs directed by Bondholders to be satisfied
from the existing debt service reserve.
Receipt of all regulatory approvals, governmental and thirdparty consents.
Satisfactory completion of all requested actions with respect to
collateral perfection matters.
Customary documentation, including but not limited to,
customary legal opinions, deficiency agreement and deed-inlieu of foreclosure documents, lease agreement, note purchase
agreement, security agreement, and all other documents
customarily required in transactions of this type.
Expenses

To the extent requested by Lender, Borrower shall reimburse all
reasonable costs and expenses of the Lender in connection with
(i) the restructuring and related transactions, (ii) the Notes, and
(iii) the ongoing administration of the Notes, including, but not
limited to, fees and expenses of Zolfo Cooper and counsel to
Lender.

Governing Law

New York

7

Exhibit D
Consenting Bondholder Indemnity Agreement

KE 32957849

TERMS OF INDEMNIFICATION
Reference is made to the Indenture, dated as of August 1, 2008, between the California
Statewide Communities Development Authority and The Bank of New York Mellon Trust
Company, N.A. (the “Prior Trustee”), pursuant to which the Bonds were issued (as amended or
otherwise modified from time to time, the “Indenture”). Pursuant to that certain Instrument of
Removal and Appointment, dated as of January 8, 2014, among certain holders of the Bonds and
UMB Bank, n.a. (the “Trustee” or “UMB”), the Prior Trustee was removed and UMB was
appointed as the trustee under the Indenture.
Each Consenting Bondholder is hereby a party to that certain restructuring support
agreement dated October 28, 2014 (the “Restructuring Support Agreement”) 1 and, pursuant to
that agreement, has agreed with the Thomas Jefferson School of Law (the “School”) to
implement the “Transaction” described therein. Pursuant to that certain Direction and Indemnity
Letter by and between the Requisite Consenting Bondholders and the Trustee dated October 28,
2014, the Trustee is also party to the Restructuring Support Agreement.
Subject to the terms hereof, each Consenting Bondholder, together with the other
Consenting Bondholders, severally and not jointly hereby agrees to pay and reimburse to the
Trustee and each affiliate, director, officer, employee and advisor of the Trustee (the Trustee and
each such other person being an “Indemnified Person”) within 30 days following written demand
for, and to indemnify and hold harmless each such Indemnified Person from and against such
Consenting Bondholder’s Proportionate Share (defined below) of any and all losses (excluding
lost profits), liabilities and judgments (including the documented fees and disbursements of
outside legal counsel incurred in good faith in connection therewith) (collectively referred to
herein as “Losses”) incurred or suffered by an Indemnified Person in any way, directly or
indirectly, arising out of, or related to (i) the enforcement of the Indemnity contained herein,
(ii) the implementation of the Restructuring Support Agreement and the Transaction
contemplated therein; and (iii) any claims, causes of action, litigation, proceedings, actions or
investigations (collectively, “Actions”) in connection therewith. Notwithstanding anything
herein to the contrary, the indemnity contained in the foregoing sentence (the “Indemnity”) shall
not be applicable to any Losses suffered or incurred by an Indemnified Person as a result of (x)
an Indemnified Person’s bad faith, gross negligence or willful misconduct or as a result of
UMB’s breach of its duties or other material obligations under the Indenture (provided that an
action taken or not taken in accordance with a direction will be per se not covered by this clause
(x)) or (y) UMB’s failure to have trust powers or otherwise to be qualified or legally permitted to
act as trustee under the Indenture. For purposes of this paragraph, any determination of whether
an Indemnified Person has engaged in willful misconduct or has been grossly negligent or of
whether UMB has breached its duties or other material obligations under the Indenture (or any
like determination) shall be determined by a final judgment of a court that is binding upon such
Indemnified Person. To the extent required by applicable law, each Indemnified Person shall
take all reasonable steps to mitigate any Losses.

1

Capitalized terms used and not defined herein shall have the meanings given such terms in the Indenture or the
Restructuring Support Agreement, as applicable.

KE 32957849

No Consenting Bondholder shall be liable for any settlement effected without the prior
written consent (which consent shall not be unreasonably withheld, delayed or conditioned) of
the Consenting Bondholders holding at least 50.1% of the aggregate Proportionate Shares of all
Consenting Bondholders as of the date of such consent and any such settlement must not alter
any Consenting Bondholder’s Proportionate Share of Losses. The Consenting Bondholders
holding at least 50.1% of the aggregate Proportionate Shares of all Consenting Bondholders as of
the date of such consent shall not, without the prior written consent of an Indemnified Person
(which consent shall not be unreasonably withheld, delayed or conditioned), effect any
settlement of any pending or threatened Actions in respect of which indemnity could be sought
hereunder by such Indemnified Person unless such settlement (a) includes an unconditional
release of such Indemnified Person in form and substance reasonably satisfactory to such
Indemnified Person (which approval shall not be unreasonably withheld, delayed or conditioned)
from all liability on claims that are the subject of such Actions and (b) does not include any
statement as to or any admission of fault, culpability or a failure to act by or on behalf of such
Indemnified Person.
It is agreed that the obligations of each Consenting Bondholder set forth herein and the
Indemnity contained herein shall be several and not joint based upon each such Consenting
Bondholder’s Proportionate Share. “Proportionate Share” shall mean with respect to any Losses
subject to the Indemnity hereunder, the principal amount of the Bonds held by such Consenting
Bondholder as set forth on the signature pages of the Restructuring Support Agreement as a
portion of the aggregate principal amount of the Bonds owned by all Consenting Bondholders
party to the Restructuring Agreement and set forth on the signature pages thereto.
In the event amounts are not paid by a Consenting Bondholder within 30 days after
demand hereunder, (a) interest shall accrue from said 30th day at the annual rate of 10% and such
interest shall be payable by such Consenting Bondholder on demand by the Trustee and (b) the
Consenting Bondholder failing to make payment shall be responsible for paying upon demand by
the Trustee the fees and expenses incurred by the Trustee in collecting payment.
Without limiting the transfer restrictions set forth in Section 12 of the Restructuring
Support Agreement, in the event that any Consenting Bondholder liable hereunder (a “Seller”)
shall sell or otherwise dispose of all or any portion of the Bonds identified on its signature page
to the Restructuring Support Agreement, and the purchaser of such Bonds (a “Purchaser”)
executes an indemnity in form and substance substantially identical to the terms set forth herein
or otherwise assumes all of such Seller’s obligations hereunder with respect to the Bonds sold or
otherwise disposed of (including the corresponding Proportionate Share of each indemnity
obligation hereunder with respect to such Bonds), and delivers such fully executed agreement to
the Trustee, all of such Seller’s obligations hereunder with respect to such Bonds shall
automatically terminate (without increase of the Proportionate Share of any other Consenting
Bondholder) other than in respect of payment of obligations which have been incurred hereunder
as of the date of termination. Notwithstanding the foregoing, a Seller shall be relieved of
prospective liability for the Indemnity only if the applicable Purchaser is an Approved
Institutional Buyer (as defined in the Indenture) or otherwise approved in writing by the Trustee.
The Indemnity authorized herein shall be in addition to any other remedies, relief or
indemnification available to each Indemnified Person. The rights and remedies conferred

KE 32957849

hereunder shall be cumulative and the exercise or waiver of any such right or remedy shall not
preclude or inhibit the exercise of additional rights or remedies or the subsequent exercise of
such right or remedy.
Unless otherwise provided herein, all notices, demands and other communications
hereunder shall be in writing and shall be sent by certified mail, by overnight delivery service or
by telephone facsimile and shall be addressed to the the address or facsimile number set forth on
the Trustee or such Consenting Bondholder’s signature page to the Restructuring Support
Agreement, or in either case to such other person(s) and address(es) as a party shall have
specified by notice in writing to the other. Notices hereunder shall be effective when received.
The obligations of the Consenting Bondholders and the Indemnity set forth herein is
solely for the benefit of the Indemnified Persons and parties hereto, and no other person, firm or
corporation shall have any right, benefit or interest under, or because of, the existence of this
agreement. In no event shall this agreement make us a guarantor of or responsible for your
actions or inactions or in any way give rise to any liability on our part to any third party for any
cause or reason. For the avoidance of doubt, the terms of the Indemnity provided herein shall
supplement, not replace the indemnity obligations provided for in the Indenture, and all such
indemnity obligations provided for in the Indenture shall survive termination of the Indenture.

KE 32957849

EXHIBIT B

EXHIBIT C

Pro Forma Financials
New Base Case
THOMAS JEFFERSON SCHOOL OF LAW
Long‐Term Pro‐Forma
FISCAL YEAR
OPERATING REVENUES
Tuition (J.D.)
   Less: (Scholarships)
Tuition (LLM/JSM)2
New MSL ‐ LLM Programs
Fees3
Housing Income
   Less: (Hsg. Grants)
   Less: (Direct Hsg. Expenses) 4
Government Grant
Investment Income
Sublease Income
Fund Raising
Other
TOTAL REVENUES

ACTUAL1
2013

BUDGET
2014

2015

2016

2017

2018

2021

2022

2023

2024

    42,894,531
    (7,609,905)
    3,546,026
                 ‐
       328,665
      2,682,720
       (445,787)
   (2,533,308)
         373,851
           34,071
                 ‐
                 ‐
           67,375
    39,338,239

      40,280,091
       (8,300,000)
      2,863,523
                   ‐
         300,000
        2,822,866
          (450,000)
      (2,604,461)
                   ‐
                   ‐
                   ‐
                   ‐
             64,861
      34,976,880

        34,062,350
        (8,515,587)
        2,699,194
                    ‐
           200,000
          2,907,552
                    ‐
       (2,780,990)
                    ‐
                 2,029
                    ‐
                    ‐
               29,080
        28,603,628

        30,825,229
         (9,247,569)
        3,066,193
             376,380
           200,000
          2,994,779
                     ‐
        (2,836,610)
                     ‐
                 2,029
             735,000
                     ‐
                 2,163
        26,117,594

      27,414,284
       (9,595,000)
      3,259,995
           630,403
         200,000
        3,084,622
                   ‐
      (2,893,342)
                   ‐
               2,029
        1,085,000
                   ‐
               2,250
      23,190,241

    28,178,255
    (9,862,389)
    3,453,510
         937,040
       200,000
      3,177,161
                ‐
   (2,951,209)
                 ‐
             2,029
      1,085,000
                 ‐
             2,340
    24,221,736

    29,295,186
  (10,253,315)
    3,623,847
      1,063,563
       200,000
      3,272,475
                ‐
   (3,010,233)
                 ‐
             2,029
      1,085,000
                 ‐
             2,433
    25,280,985

    30,456,793
  (10,659,878)
      3,767,161
      1,195,610
         200,000
      3,370,650
                ‐
    (3,070,438)
                 ‐
             2,029
      1,085,000
                 ‐
             2,531
    26,349,458

      31,664,865
    (11,082,703)
      3,916,207
        1,225,445
         200,000
        3,471,769
                  ‐
     (3,131,847)
                   ‐
               2,029
        1,085,000
                   ‐
               2,632
      27,353,398

    32,921,259
  (11,522,441)
    3,856,437
      1,225,445
       200,000
      3,575,922
                ‐
   (3,194,484)
                 ‐
             2,029
      1,085,000
                 ‐
             2,737
    28,151,906

    34,227,910
  (11,979,768)
    4,010,695
      1,225,445
       200,000
      3,683,200
                ‐
   (3,258,373)
                 ‐
             2,029
      1,085,000
                 ‐
             2,847
    29,198,983

    35,586,826
  (12,455,389)
    4,171,122
      1,225,445
       200,000
      3,793,696
                ‐
   (3,323,541)
                 ‐
             2,029
      1,085,000
                 ‐
             2,960
    30,288,149

    13,252,441
         893,180
      1,097,844
         661,012
         181,714
    16,086,192

      11,104,044
           819,800
        1,085,100
           462,561
           118,384
      13,589,889

        10,049,809
             744,509
             862,074
             296,037
             120,752
        12,073,181

          9,479,809
             701,351
             818,548
             278,937
             123,167
        11,401,811

        8,829,809
           652,135
           767,442
           259,437
           125,630
      10,634,454

      8,929,809
         659,706
         782,820
         262,437
         128,143
    10,762,915

      8,929,809
         659,706
         783,068
         262,437
         130,706
    10,765,726

      9,153,055
         676,199
         802,911
         268,998
         133,320
    11,034,483

        9,381,881
           693,104
           823,271
           275,723
           135,986
      11,309,965

      9,616,428
         710,432
         844,162
         282,616
         138,706
    11,592,344

      9,856,839
         728,192
         865,599
         289,681
         141,480
    11,881,792

    10,103,260
         746,397
         887,597
         296,923
         144,309
    12,178,487

    1,455,126
       843,133
         998,240
         647,140
         352,390
         206,460
      4,502,489

      1,025,550
         810,455
           547,996
           517,388
           225,027
           142,850
        3,269,266

           940,745
           826,664
             105,056
             527,736
             229,528
             145,707
          2,775,435

           882,715
           843,197
             107,157
             538,290
             234,118
             148,621
          2,754,100

         933,008
          197,061
           109,300
           549,056
           238,800
           151,594
        2,178,820

       983,238
       201,003
         111,486
         560,037
         243,576
         154,625
      2,253,966

    1,027,682
       205,023
         113,716
         571,238
         248,448
         157,718
      2,323,825

      1,065,378
         209,123
         115,990
         582,663
         253,417
         160,872
      2,387,444

      1,104,513
         213,306
           118,310
           594,316
           258,485
           164,090
        2,453,020

    1,145,144
       217,572
         114,818
         606,203
         263,655
         167,372
      2,514,763

    1,187,330
       221,923
         117,114
         618,327
         268,928
         170,719
      2,584,341

    1,231,130
       226,362
         119,457
         630,693
         274,307
         174,133
      2,656,081

         265,684
           37,786
         118,586
           62,084
             9,572
         512,578
           36,354
      1,042,645

           273,919
             50,007
             93,040
             65,100
             10,381
           435,899
             33,800
           962,146

             279,397
               51,007
               94,901
               66,402
               10,589
             852,617
               34,476
          1,389,389

             284,985
               52,027
               96,799
               67,730
               10,800
             469,669
               35,166
          1,017,177

           290,685
             53,068
             98,735
             69,085
             11,016
           479,063
             35,869
        1,037,520

         296,499
           54,129
         100,709
           70,466
           11,237
         488,644
           36,586
      1,058,271

         302,429
           55,212
         102,724
           71,876
           11,461
         498,417
           37,318
      1,079,436

         308,477
           56,316
         104,778
           73,313
           11,691
         508,385
           38,064
      1,101,025

           314,647
             57,442
           106,874
             74,779
             11,925
           518,553
             38,826
        1,123,045

         320,705
           58,591
         109,011
           76,275
           12,163
         528,924
           39,602
      1,145,272

         327,120
           59,763
         111,191
           77,801
           12,406
         539,502
           40,394
      1,168,177

         333,662
           60,958
         113,415
           79,357
           12,654
         550,292
           41,202
      1,191,541

10‐YEAR PROJECTIONS
2019
2020

OPERATING EXPENSES
Personnel Expenses
Salaries & Wages
Payroll Taxes
Employee Insurance
Employee Pension
Staff Development Costs
SUBTOTAL
Academic Program Expenses
Student Recruitment5
Co‐Curricular Activities6
Dues & Subscriptions
Library Continuations
Student Retention & Travel
Events
SUBTOTAL
Administrative Expenses
Printing & Duplication
Mail Services
Telephone
Office Supplies
Equipment Rental & Lease
Professional Expenses
Taxes & Licenses
SUBTOTAL
New Building Expenses
Rentals & Lease
Repairs & Maintenance
Security
Utilities 
Insurance
SUBTOTAL
Other Expenses
Expenses assoc w/ new MSL&LLM
Professional & Dev Expenses
Government Grant Expenses
Finance Charges/Miscellaneous
Contingency
SUBTOTAL
TOTAL OPERATING EXPENSES

         398,168
         596,872
         346,262
         428,073
         258,781
      2,028,156

           422,200
           583,823
           335,000
           478,360
           314,500
        2,133,883

             430,644
             595,499
             239,700
             487,927
             330,225
          2,083,996

             439,257
             607,409
             244,494
             497,686
             346,736
          2,135,582

           448,042
           619,558
           249,384
           507,639
           364,073
        2,188,696

         457,003
         631,949
         254,372
         517,792
         382,277
      2,243,392

         466,143
         644,588
         259,459
         528,148
         401,391
      2,299,728

         475,466
         657,480
         264,648
         538,711
         421,460
      2,357,765

           484,975
           670,629
           269,941
           549,485
           442,533
        2,417,564

         494,675
         684,042
         275,340
         560,475
         464,660
      2,479,191

         504,568
         697,723
         280,847
         571,684
         487,893
      2,542,715

         514,659
         711,677
         286,464
         583,118
         497,651
      2,593,569

                 ‐
                 ‐
         333,250
         234,350
         146,700
         714,300
    24,373,782

                   ‐
                   ‐
                   ‐
           234,350
           500,000
           734,350
      20,689,534

               85,000
               40,000
                    ‐
             234,350
             500,000
             859,350
        19,181,351

             155,780
               60,000
                     ‐
             249,037
             500,000
             964,817
        18,273,487

           185,665
             40,000
                   ‐
           264,018
           500,000
           989,683
      17,029,172

         231,740
           40,000
                 ‐
         279,298
         500,000
      1,051,038
    17,369,582

         246,625
           40,000
                 ‐
         294,884
         500,000
      1,081,509
    17,550,224

         262,160
           40,000
                 ‐
         310,782
         500,000
      1,112,942
    17,993,657

           265,670
             40,000
                   ‐
           326,997
           500,000
        1,132,667
      18,436,262

         265,670
           40,000
                 ‐
         343,537
         500,000
      1,149,207
    18,880,777

         265,670
           40,000
                 ‐
         360,408
         500,000
      1,166,078
    19,343,102

         265,670
           40,000
                 ‐
         377,616
         500,000
      1,183,286
    19,802,964

NET INCOME AVAILABLE FOR D/S
CURRENT D/S
ANNUAL D/S COVERAGE

    14,964,456       14,287,346           9,422,277           7,844,108         6,161,069       6,852,154       7,730,761       8,355,801         8,917,136       9,271,129       9,855,881     10,485,185
    12,079,225       12,077,866         12,076,600         12,077,869       12,074,113     12,077,203     12,078,444     12,074,422       12,075,872     12,077,675     12,074,713     12,076,013
1.24x
1.18x
0.78x
0.65x
0.51x
0.57x
0.64x
0.69x
0.74x
0.77x
0.82x
0.87x

Footnotes
1

 2013 "Actual" figures shown here varies slightly from 2013 audited results based on a different presentation format and non‐inclusion of certain items.

2 

>90% revenue are from the online LL.M. (International Taxation) program.
Parking fees charged to the San Diego Padres.
Annual lease payments made under the Entrada Master Lease (apartment rentals) which expires on 11/30/26. Does not account for the indirect expenses/costs of administering the program.
5
Includes traditional student recruitment activates & online student recruitment costs paid to third-party for the LLM/JSM programs.
6
Annual fees paid to third-party to provide bar exam preparation coursework. The contract ends on July 2016.
3
4

Privileged & Confidential

40

EXHIBIT D

VALUATION & ADVISORY SERVICES

4365 Executive Drive, 14th Floor
San Diego, CA 92121
www.cbre.com

May 9, 2014

Mr. Victor A. Vilaplana
FOLEY AND LARDNER LLP
3579 Valley Center Drive, #300
San Diego , CA 92130
RE:

Appraisal of Thomas Jefferson School of Law Building
1155 Island Avenue
San Diego, San Diego County, California 92101
CBRE, Inc. File No 14-251LA-0171

Dear Mr. Vilaplana:
At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the
referenced property. Our analysis is presented in the following Appraisal Report.
The subject property consists of a mid-rise office property located in the downtown San Diego office
submarket, in the city of San Diego, in central San Diego County. The subject improvements consist
of 8 floors of above-grade office and classroom space over 3 levels of subterranean parking. The
improvements total 178,000 rentable square feet and are situated on a 0.69-acre site in the East
Village portion of downtown. The improvements were completed in 2011 as a build-to-suit for
Thomas Jefferson School of Law and are currently nearly fully occupied by same as an educational
campus facility. The building consists of high quality, class A, steel frame construction and reflects
unique architectural design features and amenities. The interior is highly specialized for the current
space user and includes numerous classrooms and lecture halls, a moot courtroom, a law library,
penthouse executive boardroom, and large lobby with circular stairwell that extends the first three
floors of the building. An 8,000 square foot area on the ground floor along the east side of the
building has been leased to a café/deli tenant, who is currently under construction on their tenant
improvements. The subject is more fully described, legally and physically, within the enclosed report.
The subject property is currently encumbered by tax-exempt revenue bonds (Rev Bonds Thomas
Jefferson School Of Law Series 2005 B), which were basically issued for financing the construction of
the subject property. Our valuation assumes no specific financing encumbrance on the subject
property and gives no consideration to any covenants that might be associated with the
aforementioned tax exempt bond encumbrance on the subject property, including any requirements
for occupancy by non-profit entities or space users.
Based on the analysis contained in the following report, the market value of the subject is concluded
as follows.

Mr. Victor A. Vilaplana
May 9, 2014
Page 2

MARKET VALUE CONCLUSION
Appraisal Premise

Interest Appraised

Date of Value

Value Conclusion

As Is

Leased Fee Interest

April 14, 2014

$38,500,000

As Stabilized (Hypothetical)

Leased Fee Interest

April 14, 2014

$63,800,000

Compiled by CBRE

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 hypothetical value assuming stabilization is included at the request of the client and according to
the requirements established in Standards Rule 1-2(h) of USPAP. The hypothetical value is based on
the hypothetical condition that the subject property is at stabilized occupancy/income as a leased
investment as of the current date of value of April 14, 2014. The hypothetical value should in no way
be interpreted as being representative of the current or prospective market value of the subject.
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 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 intended use and user of our report are specifically identified in our report as agreed upon in our
contract for services and/or reliance language found in the report. No other use or user of the report
is permitted by any other party for any other purpose. Dissemination of this report by any party to nonclient, non-intended users does not extend reliance to any other party and CBRE will not be
responsible for unauthorized use of the report, its conclusions or contents used partially or in its
entirety
It has been a pleasure to assist you in this assignment. If you have any questions concerning the
analysis, or if CBRE, Inc. can be of further service, please contact us.

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| C ERTIFICATION OF THE A PPRAISAL

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 California.
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 Standards of
Professional Appraisal Practice of the Appraisal Institute.
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, Bob Gutzman, MAI has completed the continuing education program
of the Appraisal Institute.
11. As of the date of this report, Mark Remick has completed the Standards and Ethics Education
Requirement of the Appraisal Institute for Associate Members.
12. Mark Remick and Bob Gutzman, MAI have made a personal inspection of the property that is the
subject of this report.
13. Jeff Rice provided significant real property appraisal assistance to the persons signing this report,
including mainly data collection.
14. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc.
Although employees of other CBRE, Inc. 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.
15. Mark Remick and Bob Gutzman, MAI have not provided any services, as an appraiser or in any
other capacity, regarding the property that is the subject of this report within the three-year period
immediately preceding acceptance of this assignment.

i

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

SUBJECT PHOTOGRAPHS

SOUTHWESTERLY VIEW FROM PARK BOULEVARD

SOUTHWESTERLY VIEW OF NORTH SIDE ALONG ISLAND AVENUE
v

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

SOUTHEASTERLY VIEW OF NORTH AND WEST SIDES

MAIN ENTRANCE ON ISLAND AVENUE

vi

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

GROUND FLOOR LOBBY

LOBBY STAIRCASE TO 2ND AND 3RD FLOORS

vii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

ELEVATOR LOBBY-GROUND FLOOR

2ND FLOOR COMMON AREA AT STAIRWELL

viii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

2ND FLOOR COMMON AREA

MOOT COURTROOM

ix

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

LARGE CLASSROOM-2ND FLOOR

LARGE CLASSROOM-2ND FLOOR

x

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

COMMON AREA NEAR MIDDLE OF 2ND FLOOR

LECTURE HALL-3RD FLOOR

xi

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

3RD FLOOR COMMON AREA

LIBRARY – 4TH FLOOR

xii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

LIBRARY – 4TH FLOOR

STUDENT STUDY AREAS – 4TH FLOOR

xiii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

STUDENT MEETING ROOMS – 4TH FLOOR

5TH FLOOR TERRACE OFFICE LIBRARY AREA
xiv

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

STUDENT LOUNGE TERRACE ON 5TH FLOOR

5TH FLOOR ELEVATOR LOBBY
xv

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

ADMIN OFFICE AREA – 6TH FLOOR

ADMIN OFFICE AREA – 6TH FLOOR
xvi

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

PRIVATE OFFICE – 6TH FLOOR

8TH FLOOR FACULTY STAFF LOUNGE
xvii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

BOARDROOM – 8TH FLOOR

SOUTHERLY VIEW FROM 8TH FLOOR TERRACE
xviii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

SOUTHWESTERLY VIEW FROM 8TH FLOOR TERRACE

TYPICAL VIEW OF PARKING AREA
xix

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| S UBJECT P HOTOGRAPHS

ISLAND AVENUE IN A WESTERLY DIRECTION; SUBJECT IS ON LEFT.

11TH AVE LOOKING NORTH; SUBJECT IS ON RIGHT.
xx

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S UMMARY OF S ALIENT F ACTS

SUMMARY OF SALIENT FACTS
Property Name

Thomas Jefferson School of Law Building

Location

1155 Island Avenue, San Diego, San Diego County,
California 92101

Assessor’s Parcel Number

535-124-03

Highest and Best Use
As If Vacant

Hold for future residential/retail

As Improved

Office

Property Rights Appraised

Fee simple and leased fee

Land Area

0.69 AC

30,056 SF

Improvements
Property Type

Office

Number of Buildings

1

Number of Stories

8

Gross Building Area

N/A

Net Rentable Area

178,000 SF

Year Built

2011

Condition

Excellent

Major Occupants/Tenants
178,000 SF

Thomas Jefferson School of Law (owner/user)

6 Months

Estimated Exposure/Marketing Time
Financial Indicators
Current Occupancy

100.0%

Stabilized Occupancy (Assuming Leased)

94.0%

Stabilized Credit Loss (Assuming Leased)

1.5%

Estimated Lease-up Period (Assuming Vacant)

24 Months

Overall Capitalization Rate

6.50%

Pro Forma Operating Data (Assuming Leased/Stabilized)
Effective Gross Income
Operating Expenses
Expense Ratio

Total

Per SF

$6,415,800

$36.04

$2,274,405

$12.78

35.45%

Net Operating Income

$4,141,395

xxi

$23.27

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S UMMARY OF S ALIENT F ACTS
VALUATION
Market Value As Is On
Sales Comparison Approach

Total
April 14, 2014

Income Capitalization Approach
As Stabilized (Hypothetical) On
Sales Comparison Approach

Per SF

$38,750,000

$217.70

$38,500,000

$216.29

$64,000,000

$359.55

$63,725,000

$358.01

April 14, 2014

Income Capitalization Approach

CONCLUDED MARKET VALUE
Appraisal Premise
As Is

Interest Appraised

Date of Value

Value

Leased Fee Interest

April 14, 2014

$38,500,000

Leased Fee

April 14, 2014

$63,800,000

As Stabilized (Hypothetical)
Compiled by CBRE

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)
Strengths and weaknesses are internal to the subject; opportunities and threats are external to the
subject.
Strengths






Age/condition
Construction quality/architectural appeal
Gold LEED Certified
Size of floor plates
Building systems (connectivity, multi-media)

Weaknesses






Highly specialized interior layout (floors 2 through 5)
Parking ratio
Oversized lobby and potential space inefficiencies
Location within downtown for office space users
Restaurant lease

Opportunities



Potential for declining submarket vacancy and improving rent growth prospects
Scarcity of large class A space options in downtown or competing submarkets

Threats




Although the office market has been mostly in recovery over the past year countywide, the
improvement has lagged in the downtown submarket and uncertain economic conditions could
slow momentum in tenant demand and rent growth.
Makers Quarter project (proposed; completion not likely for at least 24 months)

EXTRAORDINARY ASSUMPTIONS
An extraordinary assumption is defined as “an assumption directly related to a specific assignment,
which, if found to be false, could alter the appraiser’s opinions or conclusions.
xxii

Extraordinary

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S UMMARY OF S ALIENT F ACTS

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.”

1



We have relied on rentable square footage figures provided by TJSL and referenced in building
plans prepared by Fehlman LeBarre Architect and Planning (dated April 2009). We were not
provided with a current BOMA survey and were unable to reconcile the rentable areas with
building plans. In the absence of BOMA calculations, we have valued the property based on the
reported square footage figure and reserve the right to amend our values should BOMA
calculations be provided in the future.



The subject property is currently encumbered by tax-exempt revenue bonds (Rev Bonds Thomas
Jefferson School Of Law Series 2005 B), which were basically issued for financing the construction
of the subject property. Our valuation assumes no specific financing encumbrance on the subject
property and gives no consideration to any covenants that might be associated with the
aforementioned tax exempt bond encumbrance on the subject property, including any
requirements for occupancy by non-profit entities or space users.

HYPOTHETICAL CONDITIONS
A hypothetical condition is defined as “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.”


2

The hypothetical value assuming stabilization is included at the request of the client and according
to the requirements established in Standards Rule 1-2(h) of USPAP. The hypothetical value is
based on the hypothetical condition that the subject property is at stabilized occupancy/income as
a leased investment as of the current date of value of April 14, 2014. The hypothetical value
should in no way be interpreted as being representative of the current or prospective market value
of the subject.

1

Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 73.

2

Dictionary of Real Estate Appraisal, 97.

xxiii

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | T ABLE OF C ONTENTS

TABLE OF CONTENTS
CERTIFICATION OF THE APPRAISAL .............................................................................................i 
SUBJECT AERIAL VIEWS ............................................................................................................. iii 
SUMMARY OF SALIENT FACTS.................................................................................................. xxi 
TABLE OF CONTENTS ............................................................................................................ xxiv 
INTRODUCTION ...................................................................................................................... 1 
AREA ANALYSIS ......................................................................................................................... 7 
NEIGHBORHOOD ANALYSIS .................................................................................................. 10 
MARKET ANALYSIS .................................................................................................................. 18 
SITE ANALYSIS ........................................................................................................................ 36 
IMPROVEMENTS ANALYSIS ...................................................................................................... 41 
ZONING ................................................................................................................................ 54 
TAX AND ASSESSMENT DATA .................................................................................................. 56 
HIGHEST AND BEST USE ......................................................................................................... 58 
APPRAISAL METHODOLOGY ................................................................................................... 61 
SALES COMPARISON APPROACH ............................................................................................ 62 
INCOME CAPITALIZATION APPROACH .................................................................................... 71 
RECONCILIATION OF VALUE .................................................................................................. 87 
ASSUMPTIONS AND LIMITING CONDITIONS .......................................................................... 88 
ADDENDA
A Glossary Of Terms 
B Legal Description 
C Qualifications 

xxiv

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NTRODUCTION

INTRODUCTION
PROPERTY IDENTIFICATION
The subject property consists of a mid-rise office property located in the downtown San Diego office
submarket, in the city of San Diego, in central San Diego County, 92101. The property address is
1155 Island Avenue. The subject improvements consist of 8 floors of above-grade office and
classroom space over 3 levels of subterranean parking. The improvements total 178,000 rentable
square feet and are situated on a 0.69-acre site (APN 535-124-03) in the East Village portion of
downtown. The improvements were completed in 2011 as a build-to-suit for Thomas Jefferson
School of Law and are currently nearly fully occupied by same as a law school/educational campus
facility. The building consists of high quality, class A, steel frame construction with mainly high image
glass exterior walls and reflects unique architectural design features and amenities. The interior is
highly specialized for the current space user and includes numerous classrooms and lecture halls, a
moot courtroom, a law library, penthouse executive boardroom, and large lobby with circular stairwell
that extends the first three floors of the building. An 8,000 square foot area on the ground floor
along the east side of the building has been leased to a café/deli tenant, who is currently under
construction on their tenant improvements. The subject is more fully described, legally and physically,
within the enclosed report.
OWNERSHIP AND PROPERTY HISTORY
Title to the property is currently vested in the name of Thomas Jefferson School of Law, who acquired
title to the property on October 24, 2007 (doc #0676518) for an all cash price to the seller of
$9,800,000. The seller was Island Metro, LLC (Barratt American), who had owned the property since
November 1, 2005, when they purchased it for $7,000,000. At the time of the 2007 sale, the
property was improved with some older commercial structures occupied by the VA. To the best of our
knowledge, there have been no other transfers of ownership with regard to the subject in the previous
three years.
PREMISE OF THE APPRAISAL
The following table illustrates the various dates associated with the valuation of the subject, the
valuation premise(s) and the rights appraised for each premise/date:

1

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NTRODUCTION

PREMISE OF THE APPRAISAL
Item

Date

Date of Report:

May 9, 2014

Date of Inspection:

April 14, 2014

Dates of Value
As Is:

April 14, 2014

Leased Fee Interest

April 14, 2014

Leased Fee Interest

As Stabilized (Hypothetical):

Interest Appraised

Compiled by CBRE

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
3
creative financing or sales concessions granted by anyone associated with the sale.
Hypothetical Value
The hypothetical value assuming stabilization is included at the request of the client and according to
the requirements established in Standards Rule 1-2(h) of USPAP. The hypothetical value is based on
the hypothetical condition that the subject property is at stabilized occupancy/income as a leased
investment as of the current date of value of April 14, 2014. The hypothetical value should in no way
be interpreted as being representative of the current or prospective market value of the subject.

3

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, 5th ed. (Chicago:
Appraisal Institute, 2010), 122-123. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value
as well as the updated Interagency Appraisal and Evaluation Guidelines promulgated in 2010.

2

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NTRODUCTION

INTENDED USE OF REPORT
This appraisal is to be used for negotiations with creditors.
INTENDED USER OF REPORT
This appraisal is to be used by Foley and Lardner LLP and Thomas Jefferson School of Law. No other
user may rely on our report unless as specifically indicated in the report.
Intended Users - the intended user is the person (or entity) who the appraiser intends will
use the results of the appraisal. The client may provide the appraiser with information
about other potential users of the appraisal, but the appraiser ultimately determines who
the appropriate users are given the appraisal problem to be solved. Identifying the
intended users is necessary so that the appraiser can report the opinions and conclusions
developed in the appraisal in a manner that is clear and understandable to the intended
users. Parties who receive or might receive a copy of the appraisal are not necessarily
intended users. The appraiser’s responsibility is to the intended users identified in the
4
report, not to all readers of the appraisal report.
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 an “Appraisal Report”, which is
intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of
2014/2015 USPAP. Pursuant to recent changes to USPAP, the Self-Contained and Summary
Appraisal Report designators are no longer applicable/utilized. Notwithstanding, this Appraisal Report
is intended to be consistent with the level of detail and discussion previously presented in a Summary
Appraisal Report.

4

Appraisal Institute, The Appraisal of Real Estate, 13th ed. (Chicago: Appraisal Institute, 2008), 132.

3

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NTRODUCTION

Data Resources Utilized in the Analysis
DATA RESOURCES
Source(s):
Assessor's Parcel Map
Source(s):
Improved Data
Gross Size/Units
N/A
Net Size/Units
TJSL
Area Breakdown/Use
Inspection and floor plans (TJSL)
No. Bldgs.
Inspection
Parking Spaces
TJSL
YOC
SD County Assessor
Source(s):
Economic Data
Deferred Maintenance:
N/A
Income Data:
N/ - Owner/occupied
Expense Data:
TJSL - Utilities only
Site Data
Size

Compiled by CBRE

Extent to Which the Property is Identified
The appraisers collected the relevant information about the subject from the owner (or
representatives), public records and through an inspection of the subject property.
legally identified through the following sources:



The property was

postal address
Assessor’s records

Extent to Which the Property is Inspected
The appraisers inspected both the interior and exterior of the subject, as well as its surrounding
environs, on the effective date of value.
Type and Extent of the Data Researched
The appraisers 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.
appraisers also conducted regional and/or local research with respect to the following:








title documents
applicable tax data
zoning requirements
flood zone status
demographics
operating expense data
comparable data

4

The

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NTRODUCTION

Type and Extent of Analysis Applied
The appraisers 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. The
steps required to complete each applicable approach are discussed in the methodology section. The
appraisers 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.
Jeff Rice is an employee of CBRE Valuation & Advisory Services working as an appraisal analyst for
Mark Remick and Robert W. Gutzman, MAI.

Jeff Rice is unlicensed but is working toward his

appraisal license requirements. According to the OREA, an individual who is unlicensed may obtain
appraisal experience in any of the following ways:


By providing "significant real property appraisal assistance" to a licensed appraiser and having
the duties the unlicensed individual performs properly identified in the appraisal report. If the
unlicensed individual performs at least 75% of the professional appraisal work and the
appraisal conforms to USPAP, the experience can qualify under Category 10 (Assistance in the
Preparation of Appraisals), up to a maximum of 400 hours;



By performing the entire appraisal process under the direct technical supervision of a licensed
appraiser. The final conclusion to value is made by and the appraisal is signed by the
licensed appraiser, with the unlicensed individual's duties property identified in the report. If
the unlicensed individual performs all appraisal methods customarily used for the assignment
and the appraisal conforms to USPAP, the experience can qualify under Category 1 (Fee and
Staff Appraisal); or



By performing appraisals in non-federally related transactions. If the appraisals were
performed for a business purpose and conform to USPAP, the experience can qualify under
Category 1.

Note: Individuals unlicensed in California may not sign appraisals in federally related transactions,
even if co-signed by a licensed appraiser.
Jeff Rice provided significant professional assistance in completion of this appraisal report. Jeff Rice
completed the following steps within the appraisal process, (regional, neighborhood, market, site,
improvements) under the direct technical supervision of Mark Remick and Robert W. Gutzman, MAI.
The final conclusion to value is made by, and the appraisal is signed by, Mark Remick and Robert W.
Gutzman, MAI.

5

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NTRODUCTION

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;
exposure/marketing time information from the PwC Real Estate Investor Survey; and
the opinions of market participants.

The following table presents the information derived from these sources.
EXPOSURE/MARKETING TIME INFORMATION
Investment Type

Exposure/Mktg. (Months)
Range
Average

Comparable Sales Data

1.0

- 15.0

7.0

2.0

- 18.0

9.0

1.0

-

PwC Suburban Office
National Data
Local Market Professionals
CBRE Exposure/Marketing Time Estimate
Source: PwC Real Estate Investor Survey

6

6.0
6 Months

-

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A REA A NALYSIS

AREA ANALYSIS

Moody’s Economy.com provides the following San Diego, CA metro area economic summary as
of December 2013.
SAN DIEGO, CA - ECONOMIC ANALYSIS
Indicators
Gross Metro Product (C$B)
% Change
Total Employment (000)
% Change
Unemployment Rate
Personal Income Growth

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

155.6

157 2

157.8

150.0

152 6

155.2

159.8

164.4

169.1

175.8

180.9

2.7

1.0

0.4

-4.9

1.7

1.7

3.0

2.9

2.9

3.9

2.9

184 8
2.1

1,301.6

1,308 8

1,298.9

1,231.2

1,222 5

1,233.3

1,258.8

1,281.1

1,306 2

1,337.5

1,364.0

1,379 5

1.5

0.6

-0.8

-5.2

-0.7

0.9

2.1

1.8

2.0

2.4

2.0

1.1

4.0

45

6.0

9.6

10 5

10.0

8.9

75

66

5.9

5.6

5.4

5.8

48

3.9

-3.2

3.1

6.7

5.8

1.9

65

7.1

5.7

45

Population (000)

2,947.3

2,975 7

3,022.1

3,061.2

3,103.9

3,138.2

3,177.1

3,209.1

3,245.9

3,285.1

3,324.5

3,361.9

Single-Family Permits

4,743.0

3,422 0

2,361.0

1,778.0

2,270 0

2,245.0

2,197.0

2,825.4

6,605 7

8,961.3

9,021.3

8,183 3

Multifamily Permits

4,448.0

4,013 0

2,996.0

1,168.0

1,224 0

3,125.0

3,469.0

3,742 6

2,243 7

2,602.5

2,684.8

2,768 2

600.3

580 0

409.6

358.6

385 2

370.6

384.6

459 8

478.1

486.2

488.9

497 5

Existing-Home Price ($Ths)
Mortgage Originations ($Mil)
Net Migration (000)
Personal Bankruptcies

56,005.2 43,188 6 21,822.0 31,198.3 33,367.9 29,303.9 38,249.6 28,576 8 18,129 3 18,149.9 16,278.0 16,933 2
-20.5
3,892.0

-2 6

15.1

12.2

16 7

9.5

14.8

58

8.9

9.8

9.4

70

7,304 0 12,927.0 19,250.0 21,820 0 19,746.0 16,054.0 12,355.1 11,658 2 11,141.3 11,871.9 12,928 0

Source: Moody's Economy.com

7

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A REA A NALYSIS

RECENT PERFORMANCE
San Diego's recovery strengthened at the end of 2013 as construction and consumer spending picked
up and state and local government budgets improved. Total payrolls continue to rise despite declines
in mortgage lending and federal government jobs. The unemployment rate has risen back above 7%
as the labor force has halted its earlier decline. Housing market indicators are cooling. House prices
are not rising as fast now that the inventory of homes for sale is starting to swell.
TOURISM
Stronger U.S. and Mexican economies in 2014 and 2015 will boost growth in San Diego's critical
visitor-dependent industries. Passenger traffic at San Diego International Airport recovered from a
federal budget sequester-impacted decline at the beginning of the year, limiting the damage to a
modest 2% decline for the first three quarters of 2013 compared with a year earlier. The increase of
visitors, particularly from Mexico and other foreign countries, helped to lift hotel occupancy rates
during the peak summer season to their highest level since 2006. The San Diego Convention Center
forecasts more than 850,000 attendees in 2014, which would be the most since 2008.
Investments to expand tourism-related infrastructure will boost longer-term prospects. Construction has
begun on a transborder terminal linking the metro area to the Tijuana International Airport in Mexico.
In addition to offering an alternative to the metro area's constrained airport, the new transnational
terminal will allow cross-border travelers to bypass the often-congested land border crossings, a big
convenience for international business travelers.
FEDERAL BUDGET
The recent two-year federal budget deal eliminates a major drag for San Diego. The reversal of some
of the automatic budget sequester cuts included in the deal will help to shield spending at the metro
area's numerous military bases and for weapon systems designed and built locally such as unmanned
aerial vehicles. An early sign of the impact of the deal is the expected increase for 2014 in military
building and refurbishments at San Diego shipyards. Meanwhile, a more diverse client base will
benefit the local industry. In light of delayed Navy spending, shipyards have been securing civilian
contracts such as building natural gas tankers. Longer term, the Pentagon's growing focus on the
Pacific Rim and rising demand for UAVs will favor the metro area and its defense contractors.
FINANCE
Mortgage lenders and other financial service firms are scaling back in response to rising interest rates,
representing a near-term drag on improvements elsewhere in the economy. Since July, employment in
credit intermediation employment in the metro division has fallen by 800 jobs, or almost 4%. The
decline is more than double the U.S. drop over the same period. Longer term, a revitalized housing

8

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A REA A NALYSIS

market and demand for new mortgages over the next two years will help to offset the temporary
decline in refinancing and loan servicing jobs in San Diego.
CONCLUSION
San Diego's recovery is forecast to strengthen in 2014 and 2015 as its visitor-dependent and housingrelated industries strengthen and deferred military spending resumes to benefit military bases and
defense contractors. The unemployment rate will likely dip below 7% by the middle of 2014 and
employment is anticipated to surpass its previous peak by the end of the year, slightly later than the
U.S. In the long term, the metro area is well-positioned to take advantage of high-value-added tech
research and development and the Pentagon's reorientation toward the Pacific Rim. High business and
living costs will still limit growth to be on par with that of the U.S.

9

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

NEIGHBORHOOD ANALYSIS

NEIGHBORHOOD AREA INFLUENCES-CENTRE CITY/DOWNTOWN
The Centre City is an area being revitalized as the result of a cooperative effort between the private
and public sectors. The Centre City district consists of a 1,200-acre portion of downtown San Diego
that is being redeveloped as part of a well-organized redevelopment effort. Until recently, most of the
major new developments included high rise office construction and/or commercial/residential mixed
use projects in the west and southwest portion of downtown, which were mainly completed in the late
1980's/1990's; most noteworthy being the Convention Center. However, most of the newer
developments completed in the past several years and currently under construction have been
residential in nature. The pace of development in the Centre City area has increased significantly
over the past several years after seeing limited activity throughout most of the mid to late 1990’s.
The Centre City area is now defined as eight districts, which are summarized and outlined in the
following pages.

10

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

Horton District
The original Horton district is in the southwest portion of the Centre City area and is generally
bounded by Broadway, Union Street, G Street, and 4th Avenue. The Horton district is centered
around the 1,000,000 square foot Horton Plaza regional shopping center, which was completed in
1988. Horton Plaza has been an economic success to date and has been generally fully leased.
Other major uses in the Horton district include the 15-story, 452-room Omni Hotel, the 20-story
Wells Fargo Bank Building comprising 385,000 square feet and built in 1982, and the 330,000
square foot Central Savings Tower office building completed in 1976. The Federal Office Building
and court facilities are also located in the Horton District. The historic Balboa Theatre renovation was
completed in 2008 and now includes a 1,300-seat live-performance facility. The other planned
development is a proposed 362-unit Marriott Renaissance hotel, which will be on the north side of G
Street between 2nd and 3rd Avenues.
Columbia District
The Columbia district is defined by the area bounded by Ash Street, Union Street, "F" Street and the
San Diego Harbor. The Columbia redevelopment plan essentially established a guide for
development of much of western downtown with West Broadway as the main commercial and Class A
office corridor. The Columbia plan was intended to provide for the expansion of the central business
district westward with Class A office space and the greatest intensity of development along Broadway.
The Columbia district and west Broadway was the focus for the downtown revitalization in the 1980's
and early 1990's. The boom cycle brought approximately $800 million worth of high-rise
construction and major architectural face-lifts on Broadway between San Diego Bay and 15th Street.
Most of the development, however, shifted from commercial to residential development over the past
10 or so years as the markets shifted. The 23-story office tower called “Broadway 655” was delivered
to the market in 2006 at the southeast corner of Broadway and Kettner. Other new or planned
residential projects include the 36-story Bosa’s Pacific Highway at Ash (completed 2007), the Bosa
Pacific Highway at E (completed 2009), the recently completed 43-story Electra and the Elle
condominiums, the planned Santa Fe Parcel 6, the partially completed Grand at Santa Fe Place, and
the planned remodel of the YMCA to include 261 SRO’s.
Other major projects include the recently completed cruise ship terminal expansion, a 700,000
square foot expansion of the County Courts facilities (adjacent to the Civic Center) and a 426,000
square foot expansion of the US Federal Courthouse facility. The latter was completed in late 2012.
Also, in the planning stages is the redevelopment within Embarcadero Park and the 800-room, threehotel Lane Field project.

12

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

Marina District
The Marina district is along the south edge of the downtown area near and along the bay front. The
boundaries of the Marina district are generally F and G Streets to the north, Fourth Street and the Gas
Lamp district to the east, Harbor Drive to the south, and Pacific Highway to the west. The San Diego
Convention Center, completed in late 1989, and Seaport Village are the focal points for the Marina
district. The San Diego Convention Center hosted the 1996 Republican Convention and construction
is complete on an expansion that has roughly doubled the size of the San Diego Convention Center to
1.7 million total gross interior sq. ft. The building now consists of 525,701 sq. ft. of contiguous exhibit
space; an additional 90,000 sq. ft. of multi-function space in the Center's Sails Pavilion that can also
be used as exhibit space; 204,114 sq. ft. of meeting space including two 40,000 sq. ft. ballrooms;
and 284,494 sq. ft of pre-function, lobby and registration areas.
Adjacent to the convention center is the former Hotel Intercontinental (now Marriott, with 1,364 rooms
in two towers); the recently expanded Hyatt Regency, a 33-story, 875-room hotel; and the newly
completed, 30-story Hilton San Diego Bayfront. The later features 1,190 rooms and is across from
the Petco Park.
There are currently several planned projects in the area, the largest of which is the Navy Broadway
Complex, which is tentatively proposed for 1.3 million square feet of office, 160,000 square feet of
retail/commercial, and 350,000 square feet of “other” uses. The Navy Broadway Complex project
was touted by CCDC as one of the “most exciting” redevelopment opportunities in downtown, but it
was voted down by the Coastal Commission in late 2011 pending design modifications. It is intended
to anchor the $230 million North Embarcadero Visionary Plan to rebuild the public space from the
airport to Seaport Village, creating a grand esplanade and adding more than 12 acres of new
waterfront plazas and park lands. Other projects in the area will also contribute open space that will
eventually give the public at least 28 acres on and near the Bay.
The downtown area is improved with two traditional grocery stores, which includes the freestanding
44,223 square foot Ralph’s supermarket constructed over a subterranean parking structure and the
Albertson’s supermarket on the bottom floor of the Market Street Village apartment building in East
Village.
Little Italy
North of the Columbia neighborhood and south of Laurel Street between I-5 and the waterfront, Little
Italy was the traditional home of Italian families whose brothers, sons, fathers and husbands formed
the hard-working backbone of San Diego's once-thriving commercial tuna fishing industry. Although
large-scale commercial fishing is no longer prevalent, the district's southern European character
remains. Always a "neighborhood" first and then a commercial and light industrial center, Little Italy
sense of community is perhaps best typified by the new Washington Elementary School and CCDC's

13

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

development of the adjacent Amici Park, which serves both as a playground for the school and a park
including a bocce ball court for the community. The India Street commercial strip is dominated by
Italian restaurants and art and graphic studios/galleries, retailers and low-rise offices.
Core District
Roughly running from Broadway north to A Street, between Union Street and Twelfth Avenue was
downtown's fashionable business and entertainment quarter until the urban core's decline began in the
1960s. The eastern end of the Core was the site of early residential and related development
(including Alonzo Horton's second home and the B Street School), while its Broadway frontage and
western sector were dominated by Horton House (replaced by the U.S. Grant Hotel),
commercial/financial and retail enterprises in low- to high-rise structures. In the 1920s, grand
movie/live performance theaters were built such as the Fox (now Copley Symphony Hall) and the
California Theatre (slated for rehabilitation).
Existing notable structures in this neighborhood include the Westgate and U.S. Grant hotels, the City
Administration Building complex, Community Concourse and the Civic Theatre, the new Central Jail,
San Diego Trolley stops along C Street, and the high-rise offices representing the B Street "Financial
Corridor”. The most notable development in this area is the 41-story condominium complex known
as The Vantage Pointe, which was completed in Spring 2009, but recently sold by the foreclosing
lender to an apartment operator.
Civic Center Complex Redevelopment - The site is a four-square-block property, approximately 6.1
noncontiguous acres in size, bound by Front Street, Third Avenue, A and C streets, four blocks west of
the subject. San Diego's Civic Center Complex provides workspace for 1,000 of the City's 3,000
downtown employees, and the City currently spends $13 million annually to lease private office space
for the other 2,000 workers. These leases expire soon (2013 and 2014) and are substantially below
current market rates. In addition, the Civic Center Complex, including City Hall, is in need of an
estimated $125 million in renovations, including seismic retrofitting and removal of hazardous
materials such as asbestos. As a result, Centre City Development Corporation, on behalf of the City of
San Diego, is considering multiple alternatives, including the possible redevelopment of downtown's
Civic Center. The City and CCDC explored the financially feasibility of this project in 2008, but a
decision on the project is on hold due to the City’s financial issues and CCDC funding concerns.
Cortez Hill
North of downtown's Core and south of I-5 between Tenth Avenue and Union Street, the 111- acre
Cortez Hill is two neighborhoods in one. East of Sixth Avenue rises Downtown's highest landmass, the
hill dominated by the El Cortez Hotel. West of Sixth Avenue the "flatlands" area is known as Cortez
West. By the late 1880s, Cortez Hill was Downtown's mansion-covered version of San Francisco's
Nob Hill. Opened in 1927, the El Cortez Hotel was for four decades the social/ceremonial heart of

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

San Diego as well as the city skyline's commanding presence. Despite the closure of the hotel in the
late 1960s, the hill remained a viable neighborhood of historic dwellings, vintage multifamily
structures and more recent residential development, many now renovated by property owners awaiting
the hotel's reuse. The $21-million restoration of the El Cortez Hotel and its conversion into an 85-unit
luxury apartment was completed in 2000, and was sold off as condominiums.

The 14-month

rehabilitation incorporated the original configuration of the building's apartment/hotel units and
restoration of the octagonal Don Room to serve as special-event space. A lushly landscaped terrace
replaced a bunker-like hotel annex added to the property in the 1950s. The work also included
restoration of the grand lobby and the swimming pool, and addition of about 4,000 square feet of
perimeter commercial space for neighborhood-serving businesses.
Gaslamp Quarter
Beginning with his building a wharf at the foot of Fifth Avenue to accommodate trade and commerce
in the 1870s, Alonzo Horton encouraged the development of downtown. Original building owners
include Ulysses S. Grant Jr. and Wyatt Earp. This 16.5-block neighborhood is listed on the National
Register of Historic Places, and the 94 structures identified as historically or architecturally significant
now house more than 70 restaurants and nightclubs, movie theaters, retailers, offices, galleries and
urban live/work lofts. Gaslamp Square phase I was finished in 2004, with phase II delivered in late
2005. There are very few new projects in this area due to its small area, as well as all projects within
this district must be approved by the historic Gaslamp Council.
East Village
The East Village, just east of the Gaslamp Quarter, was once the warehouse district for a growing San
Diego from the late 1800s to the late 1900s. Former warehouses and Victorian buildings have been
transformed into various live/work lofts complimenting the remaining historic elements of the district.
Now known as San Diego’s arts district, the East Village is currently the city’s primary focus for
redevelopment with the goal to transform the area into a lifestyle destination for business,
entertainment and tourism.
Petco Park
Most notably, the East Village includes the Petco Park baseball-only stadium complex, which opened
in 2004, replacing Qualcomm Stadium as the home park of Major League Baseball’s San Diego
Padres. Petco Park is favorably located across the street from the Convention Center, adjacent to the
Gaslamp Quarter, two blocks from the downtown terminal of the San Diego Trolley light rail system.
The ballpark was constructed by San Diego Ballpark Builders, a partnership with Clark Construction,
Nielsen Dillingham and Douglas E. Barnhart, Inc. The construction cost of over $457 million was
partially publicly financed, while the Padres contributed $153 million for a 30% equity stake and
signed a 30-year lease. Petco, Inc. paid $60 million over 22 years for naming rights of the stadium.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

Petco Park is recognized as one of the more spectacular MLB ballparks, combining the good sight
lines for baseball with panoramic views of the San Diego city skyline, the San Diego Bay, Coronado,
and Balboa Park. The 42,000-seat open-air ballpark includes 58 suites, 7 restaurants and lounges, 6
tower lofts and 5 party suites. The Western Metal Supply Company building serves as a focal point in
left field. The four-story brick building is a historic San Diego landmark that is now home to the
Padres team store, a roof-top private party area, a restaurant, and a bar. The project also included
the 512-room Omni hotel, which is connected to the ballpark via a pedestrian bridge.
New/Proposed Development (I.D.E.A District)
Relatively newer or recently completed projects include the Hilton San Diego Bayfront (previously
described) and Hotel Indigo, a 200-room boutique hotel, and the Thomas Jefferson School of Law.
The new $200 million San Diego Central Library was recently completed and is located at the corner
of Park Boulevard and J Street, just one block from DiamondView Tower. The architecturally unique
project encompasses about 500,000 square feet in 9 stories.
The I.D.E.A district (Innovation, Design, Education and Arts) is a 93-acre sustainable, mixed-use
development covering 35 city blocks in the upper East Village area driven by a design-services job
cluster.

The development is spearheaded by Jerry Navarra, owner of Jerome’s Furniture stores

throughout San Diego. The $2 billion development will potentially include nearly 7 million square
feet of studio, residential, retail and hotel space, with the potential for 10,000 new jobs and $20+
million in incremental revenue for the area.
Other major proposed projects include IDEA1 (Lowes), Ballpark Village, and Makers Quarter. The
latter is $900 million, 5-block, mixed-use project that is conceptually proposed for 1,250 apartments,
800,000 square feet of office area, 200,000 square feet of retail and cultural space, and a hotel.
The Ballpark Village project was recently approved and is a 37-story, $250 million residential tower
that is proposed for 688 units (apartment or condos yet to be determined).
IDEA1 is a planned urban mixed-use project with creative office space, apartments and street-level
retail. Located on the full block (1.37 acres) bounded by E, F, Park and 13th streets, the five-story,
225,000-square-foot, mixed-use project is planned to include 63,000 square feet of creative office
space, 10,000 square feet of street-level retail and eateries, and 218 apartments surrounding a large
interior courtyard. The groundbreaking of IDEA1 is scheduled for first quarter 2015 with completion
in the first quarter of 2017.
Chargers Stadium Concept
One of the options for the proposed NFL football stadium housing the San Diego Chargers is a site in
the southeast East Village Area. Conceptually, the proposed $1+ billion state-of-the-art stadium
would be funded by a combination of Chargers and City contributions, taxpayers, NFL G3 Program,

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | N EIGHBORHOOD A NALYSIS

stadium naming rights and proceeds from the sale of the Qualcomm site in Mission Valley, but the
project is very preliminary at this point and has a lot of hurdles to clear to become a reality.
Immediate Surroundings
The subject is located in the southeast portion of the downtown area, within the East Village District,
several blocks east of the Gaslamp District and about two blocks northeast of Petco Park. The
property is bordered by 11th and Island Avenues, and Park Boulevard. The subject is surrounded by
mostly low and mid-rise multi-family residential (condos and apartments) constructed mainly within the
past 8 to 10 years, including the Entrada Apartments, which has a housing agreement with TJSL. The
San Diego Trolley runs along the east side of the subject down the middle of Park Boulevard (12th
Avenue). The new Central Library is a half block south of the subject, at J Street and Park Boulevard.
Further south is the Ballpark Village site. Immediately west is the Padres Parkade facility and multiresidential (condos-2006 built).
CONCLUSION
The downtown San Diego/Centre City area is one of the county’s major business centers, is among
the largest office submarkets, and is largely recognized as the county’s hub for government operations
and the legal community. The downtown area is evolving into a vibrant niche urban residential living
environment with an abundance of amenities in the Gaslamp, Little Italy, and Ballpark areas, which
has also helped improve its appeal among office space users. The subject is in a mostly residential
district, several blocks north and east of the Gaslamp and Ballpark areas with its restaurants and
entertainment amenities. The site is a secondary location for office uses.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

MARKET ANALYSIS
SAN DIEGO OFFICE MARKET
Through the fourth quarter of 2013, vacancy rates continued to decline, albeit moderately, and
absorption has remained positive for 17 consecutive quarters as businesses continue to expand. The
San Diego office market continued to progress through the end of the year as all real estate indicators
experienced year-over-year improvement. This trend is expected to continue during the near-term as
the overall economic situation is also improving due to the region’s strong concentration of
technology, defense, professional and business services companies along with positive overall
demographic trends, all key drivers of local growth. That said, the trend could be negatively impacted
by looming defense budget cuts.
From 2010 through 2012, class A positive net absorption fueled improvement in office market
fundamentals. As class A space filled up and rental rates increased, many tenants seeking value
turned to class B space in 2012. In San Diego suburban office submarkets, class B positive net
absorption in 2012 was 28.3% greater than class A absorption. Throughout the entire county, class B
absorption kept pace with class A absorption. With a lack of large blocks of available class A office
space, the class B sector is expected to continue to improve through the first half of 2014.
Assuming overall market fundamentals continue to strengthen in San Diego, it is important to look at
a few indicators specific to the office market segment, and one key indicator of market health is job
growth. According to a recent report published by CBRE Econometric Advisors, job growth has been
gaining momentum during the past year and is forecast to see further increases during the near-term,
assuming no major cutback in the defense sector locally.
Office employment, the primary determinant of demand, is defined as certain categories within the
financial and service employment sectors in which workers typically occupy office space. Over the last
five years, office employment has declined by 1.4%. During 2012, office employment grew by 4.8%
and 3.0% in 2013. Office employment peaked in San Diego in 2006 at 299,600 jobs and still has
not yet returned to previous highs. Office employment is forecast to grow 3.0% per year over the next
six years, with projections to surpass its previous employment high in 2014.
For the fourth quarter of 2013, the following table summarizes the supply and demand characteristics
of the overall market and submarkets of the San Diego Metropolitan area as compiled by CBRE, Inc.
The table includes multi-tenant, competitive office buildings with over 10,000 square feet of rentable
building area.
The overall market area and the local submarket have maintained stabilized occupancy rates over the
past two years. Over the same time frame, rental rates have been following a moderately increasing
trend.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

Demand
Historical Net Absorption Trends - San Diego
The following is a summary of net absorption trends in the San Diego County office market over the
past decade.

For San Diego County, annual net absorption was up nearly 15 percent in 2012, which was the third
consecutive yearly increase and the strongest in nearly 7 years. Fourth quarter 2013 net absorption
was negative 116,869 square feet, which was a sharp decrease from the positive 87,437 square feet
absorbed in the third quarter and down significantly from the fourth quarter in 2012 with 384,244
square feet. Quarterly net absorption had been positive over the past several years as illustrated
above, which supports the consensus among most market participants that a recovery in the office
market has been underway, albeit moderate in the near term.
Countywide, nearly three quarters of the submarkets had positive net absorption for the fourth quarter
of 2013, and end of 2012. This positive activity was influenced by several major lease transactions
including the new 248,000 square foot FBI offices in Sorrento Mesa, 81,881 square feet for Petco in
Scripps Ranch, 51,252 for Liberty Mutual in Mission Valley, and 50,435 square feet for Union Bank in
UTC.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

Vacancy
The San Diego County’s office market has experienced moderate fluctuation in vacancy over the past
ten years. This trend is illustrated in the following graph.

For the fourth quarter of 2013, direct vacancy for the county was mostly unchanged from the prior
quarter (13.2 percent), but it is down from the first quarter 2013 rate of 14.1 percent and 15.5
percent at the end of 2012, one year earlier. As illustrated above, vacancy trended upward from
2005 through 2009 with the more recent vacancies showing a significant decline from the peak.
While vacancy rates have been improving over the past couple of years, they are expected to remain
relatively high through the first half of 2014 until economic conditions stabilize more and employment
growth improves. Current vacancy rates in the major submarkets range from a low of 1.2 percent in
the 56 Corridor to a high of 23.1 percent in Scripps Ranch and 32 percent in Miramar.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

Average Asking Lease Rate
For the fourth quarter of 2013, the average asking full service gross lease rate for office space in San
Diego County was $2.30 per square foot per month, which is up nearly 9 percent from the average
rate of $2.11, which was unchanged for most of 2012. The current average rate is the highest in
nearly four years.
Among the office submarkets in San Diego County, Del Mar Heights Torrey Pines produced the
highest average asking lease rate for the period at $3.65 per square foot per month, followed by the
56 Corridor at $3.02 and Torrey Pines at $2.98 per square foot per month. The Mission Gorge and
Vista submarkets yielded the lowest average rents at $1.31 and $1.50 per square foot per month.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

Future Office Supply
Throughout the county, there has been minimal new office space delivered to the market over the past
several years given the market conditions during that time. During the fourth quarter of 2013, office
construction activity totaled 694,266 square feet, with a total of 268,882 square feet of new
construction delivered year to date through end of the third quarter.
The most notable activity is the La Jolla Commons II project in UTC, which is nearly complete and
includes 414,575 square feet of class A, high rise office for LPL as a build-to-suit. There is also the
90,000 square foot Latham and Watkins build-to-suit in Del Mar Heights. Overall, we expect
additions of significant new office space to remain low for the next year or more as the market
continues its recovery. Construction activity has increased for government and medical buildings,
which include the County of San Diego Operations Center in Kearny Mesa with over 500,000 square
feet underway; the 250,000 SF new FBI headquarters in Sorrento Mesa; the Scripps Proton Therapy
Center in Sorrento Mesa, a 102,000 square foot center; and the Sharp Rees-Stealy building, a
66,365 square foot medical building in Old Town/5th Ave.
The fourth quarter saw continuing office deliveries in San Diego. In Sorrento Mesa the 250,000
square-foot Qualcomm McKellar Ct. building was delivered; this was an owner-user building and is
therefore not a part of CBRE’s primary statistics. However, it should still be noted as it represents
continuing development in Sorrento Mesa and continuing growth by Qualcomm. In Del Mar Heights,
American Assets delivered 20,000 square feet in its Torrey Reserve development. American Assets
plans to break ground on an additional four buildings for a total of 58,000 sq. ft. in the same project
over the next two years.
In addition to the 694,266 sq. ft. currently under construction, recently announced projects will more
than double the amount of construction in San Diego, but it is still a fraction of the average annual
construction during the major growth periods in the 1980’s, 1990’s, and early to mid-2000’s. The
most significant news is that Sempra Energy has proposed to move their downtown headquarters to
Cisterra’s new 300,000-square-foot build-to-suit in the East Village. The first significant speculative
construction should commence in early 2014 with Kilroy Realty’s planned 180,000-square-foot LEED
Gold building at Pacific Corporate Center in Sorrento Mesa. In UTC, the Irvine Company will break
ground on a speculative 306,000-square-foot high-rise in early 2014.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

INVESTMENT MARKET TRENDS
The following charts summarize pricing trends for San Diego County office properties in two
categories: 50,000 to 150,000 square feet and 150,000 square feet and greater. The 50,000- to
150,000-square-foot category represents a combination of class A, B, and C assets, which generally
appeal to local investors. The over 150,000-square-foot buildings are generally institutional grade
class A and B assets. This information is based on data provided by CoStar Comps and includes
single-tenant and multi-tenant properties that vary substantially in terms of location and overall
building quality. As a result, the price trends only represent broad market conditions and are not
specific to the subject market or building.

SAN DIEGO COUNTY
OFFICE BUILDING SALES (50,000 to 150,000 SF)

Year
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Source:

Number of
Total
Transactions Total Sales Volume Bldg Area (SF)
18
$345,644,846
1,553,788
20
$463,065,902
1,908,341
17
$312,128,500
1,667,972
15
$325,145,000
1,380,752
5
$51,674,000
324,484
15
$283,805,000
1,372,744
32
$713,038,000
2,644,649
23
$536,457,000
2,057,572
24
$432,069,550
2,090,117
27
$521,164,158
2,340,032
26
$408,719,440
2,243,388
26
$352,020,240
2,273,649
23
$277,204,160
1,775,602
22
$237,417,000
1,978,349
26
$240,755,111
2,163,108
22
$229,444,100
1,777,437
25
$209,730,882
2,120,544
28
$191,920,372
2,378,906
23
$138,621,442
1,895,777
Costar Comps

24

Average
Price/SF
$232.17
$242.65
$187.13
$235.48
$159.25
$230.92
$278.83
$260.72
$206.72
$222.72
$182.19
$154.83
$156.12
$126.81
$111.30
$129.09
$104.12
$84.37
$73.12

Average
Cap Rate
6.88
6.3
6.83
8.15
6.9
5.85
6.61
6.26
7.76
7.7
8.4
10
9.13
9.7
9.14
8.92
9.27
10.52
10.56

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

SAN DIEGO COUNTY
OFFICE BUILDING SALES (150,000 SF and LARGER)

Year
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Source:

Number of
Transactions
9
12
12
6
5
4
13
10
15
18
10
12
5
8
7
10
9
5
10
Costar Comps

Total
Total Sales Volume Bldg Area (SF)
$548,695,500
1,746,636
$754,835,500
4,056,596
$622,775,000
3,064,376
$272,538,000
1,156,035
$176,420,000
1,224,355
$486,765,000
1,081,557
$1,557,103,000
3,993,967
$1,180,200,000
3,531,803
$1,356,403,849
4,806,274
$1,554,930,163
5,812,116
$592,960,000
3,330,685
$565,777,978
3,303,737
$276,750,000
1,568,295
$326,487,490
2,250,175
$224,288,500
1,509,576
$374,036,000
2,663,167
$247,463,000
2,308,468
$168,315,000
1,311,237
$233,578,000
3,108,655

Average
Price/SF
$314.14
$186.08
$203.23
$235.75
$198.96
$450.06
$389.86
$334.16
$282.22
$267.53
$201.92
$171.25
$176.47
$145.09
$148.58
$140.45
$107.20
$128.36
$84.95

Average
Cap Rate
6.5
6.47
5.73
8.37
5
4.59
5.95
5.93
6.22
7.28
8.03
8.31
9.09
9.01
8.21
9.07
11.51
13.2

Through the end of the 4th quarter of 2013, the sales volume for office properties under 150,000
square feet fell short of the volume of 2012 but exceeded the annual sale volumes since 2007. Price
per square foot is slightly lower than 2012, while the average cap rate is slightly higher. For office
assets over 150,000 square feet, the year-to-date sale volume through 4th quarter exceeded last year.
The price per square foot increased significantly over 2012 due to several portfolio sales of
institutional quality assets with prices in the $386 to $397 per square foot range.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

SAN DIEGO OFFICE SUBMARKET MAP

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

SUMMARY OF COMPARABLE OFFICE RENTALS
Comp.
No.
Name

Location

Occupancy

1

DiamondView Tower

350 10th Avenue,
San Diego, CA

92%

2

First Allied Plaza

655 W. Broadway,
San Diego, CA

87%

3

Emerald Plaza

402 West Broadway,
San Diego, CA

88%

4

One America Plaza

600 W. Broadway,
San Diego, CA

84%

5

550 Corporate Center

550 W. C Street,
San Diego, CA

94%

6

501 West Broadway Office
Building

501 West Broadway,
San Diego, CA

96%

Thomas Jefferson School of Law
Building

1155 Island Avenue,
San Diego, California

100%

Subject

Compiled by CBRE

The comparable properties surveyed generally represent the newest and/or highest quality office
properties in downtown and would represent the most direct competition for the subject, assuming
vacant and available for lease. All of the properties are located on major streets or have prominent
locations (i.e. DiamondView next to Petco Park). DiamondView would likely represent the most direct
competitor for the subject due to its generally similar age/quality and East Village location, but it has
a superior location next to Petco Park with its amenities and views/ambiance. The other comparables
are five to ten blocks north and west of the subject along the Broadway or B Street financial corridor,
which are much more prominent office locations.
Large Leases-Downtown
The following is a summary of large space lease transactions in downtown over the past several years.
As is evident, there has been very limited leasing activity for spaces larger than 100,000 square feet
and none of the tenants below were educational in nature. The Sempra Energy lease is a ground-up,
build-to-suit on a redevelopment site near Petco Park. They will be relocating from their current
functionally obsolete building at 101 Ash Street (273K SF). In addition to the City lease below, they
have recently or are currently in the process of renewing two leases at 120,000 and 230,000 square
feet, both at very discounted rates in the $1.15 to $1.25 range, gross.
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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

Tenant
Sempra Energy
City of San Diego
Arrowhead General
Insurance
DLA Piper
Alliant Insurance
AECOM
Kleinfelder West
Regus
Bumble Bee Foods
Source: CBRE

SUMMARY OF MAJOR DOWNTOWN OFFICE LEASES
Building
Size Commencement
Term

Lease Rate

404 8th Avenue
525 B Street
701 B Street

300,000
103,327
89,520

Jul 1, 2015
Sep 1, 2013
Jul 9, 2013

300 mos
72 mos
120 mos

Confidential
$1.25 FSG
$2.25 FSG

401 B Street
701 B Street
401 W A Street
550 W C Street
402 W Broadway
900 10th Avenue

81,163
54,442
46,007
42,932
35,904
29,531

Sep 1, 2012
Aug 1, 2013
Oct 4, 2014
Aug 2, 2013
Oct 24, 2012
Apr 1, 2014

129 mos
78 mos
85 mos
120 mos
84 mos
144 mos

Confidential
$2.25 FSG
Confidential
Confidential.
$2.00 FSG
Confidential

Large Leases-Education Space Users
The following is a summary of educational tenant leases in the broader San Diego County market
area over the past several years. Other than Bridgepoint, there have been no leases larger than
100,000 square feet, and only three of the leases were in downtown, and they were the smallest in
the list. It is also important to note the Bridgepoint space involved a build-to-suit building and was
designed mainly for their corporate HQ office operations and has limited on-site classroom space. As
previously noted above, except for the three smallest leases below, the major educational leases have
generally all been in the suburban submarkets.
SUMMARY OF EDUCATION TENANT LEASES
Date
Tenant
Building
Size
Lease Rate
Oct-10
Bridgepoint Education
Sunroad Centrum
193,000
$2.95 +E
Nov-10
The University of Phoenix
Stonecrest
73,867
$2.25 +E
Dec-10
UCSD Extension
Governor Executive Centre
49,819
$2.16 FS
Oct-11
California College
Convoy Court
40,000
$1.65 +E&J
Jun-13
Health Science High
City Heights
38,762
$2.23 G
Jan-14
National University
Bernardo Executive Center
20,625
$2.00 +E
Aug-12
National University
Bernardo Executive Center
20,625
$2.74 +U
Oct-12
San Joaquin Valley College
Gateway II
18,671
$1.90 NNN
Jul-12
Regents of the Univ of CA
Chancellor Park
15,973
$3.20 FSG
Apr-13
Regents of the Univ of CA
1450 Frazee Road
15,300
$1.96 +E
Oct-12
ELS Education Services
The Chamber Building
10,739
$1.75 FSG
Feb-13
Center for English Studies
The Executive Complex
8,101
$1.95 FSG
Aug-12
College of English Language
The Executive Complex
6,418
$1.80 FSG
Source: CBRE

Term
144 mos
96 mos
96 mos
84 mos
60 mos
42 mos
12 mos
72 mos
84 mos
50 mos
92 mos
84 mos
102 mos

TIA
Turnkey
$50
$45
$45
$3
As-Is
As-Is
$18
$75
Turnkey
$20
$31
$8

Sale Activity-Large Educational Users
The following is a summary of some sales of large facilities purchased by educational space users
over the past five years.


Bernardo Terrace (110K SF) – Purchased by Palomar Community College District in June
2010 as a new, vacant spec office building with excess land for two additional buildings,
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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

110,000 square feet each, or a total build-out of 330,000 square feet. The building was
vacant at sale and purchased for approximately $285 per square foot, plus additional value
for the excess land. The property is located in the Rancho Bernardo master planned
community, about 10 miles south of Palomar College’s main campus.


St. Augustine University Campus (79K SF) – Bought in April 2013 for $370 per square foot by
the tenant, St. Augustine University for Health Sciences, this property is located in San Marcos,
in north-inland suburban San Diego County and consists of three two-story, concrete tilt-up
buildings in a very secondary/tertiary office/commercial location. The buyer was the tenant
pursuant to an 11-yr lease expiring in 2019. They basically exercised an option to purchase
at a fixed OAR of 7 percent applied to their lease income at the time, which was about $2.50
per square foot, triple net, and significantly over-market. The rent was based on an original
build-to-suit lease agreement and a percent of cost. The seller considered the price to be
significantly over-market.



SD Christian College (55K SF) – This property is located in Santee (east county) and was
bought in May 2012 for $110 per square foot by the San Diego Christian College for a new
campus. The property consists of 10 freestanding office buildings that were vacant at sale.
They were sold by the developer, who had constructed them on a “spec” basis for sale to
individual buyers, but the sale program failed.

Subject Property-Market Position
The subject is a relatively unique property because of its build-to-suit design for Thomas Jefferson
School of Law. The exterior has a high image and architectural appeal, but most of the interior areas,
especially the 1st through 5th floors reflect a highly specialized layout for the current private legal
educational use, including numerous large classrooms, a moot courtroom, a two-floor law library,
and an over-sized main lobby area. The building is currently designed for a single space user, but is
adaptable for multi-tenant occupancy.
The population of single space users for the entire building is likely very limited, especially among the
legal/law school space user community, which are already committed to relatively newer facilities and
typically have a smaller space footprint. USD and California Western School of Law are the two other
major law schools in San Diego that compete with the subject, but are not likely prospects for the
subject. USD is unlikely to locate off its university campus about 5 to 7 miles northwest where they
have ample space. California Western School of Law is in downtown in a building they constructed in
1993 for their exclusive use and reportedly are not in the market looking for new space or additional
space.
Other private or public education space users represent potential prospects for the subject
building/space, including a private college or major university looking to establish a satellite campus
in the region. However, most of the satellite campuses in the region are less than 20,000 square feet,
including USC in Rancho Bernardo with 18,000 square feet, which is less than one full floor at the
subject. Azuza Pacific’s satellite facility is about 3,000 square feet in Mission Valley. It is also

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

important to consider that major educational space users are constrained by cost due to changing
economics in their business.
Other than USD, the largest private colleges in San Diego are National University, University of
Phoenix, Alliant University, and Point Loma Nazarene, and none are likely space users for the entire
subject building. National University has multiple locations throughout the region, and their main
campus is in Kearny Mesa, which is reportedly under-utilized. University of Phoenix is also in
suburban Kearny Mesa and occupies 55,000 square feet and renewed their lease in 2011 at their
current location. Alliant occupies about 300,000 square feet in suburban Scripps Ranch and has
ample land for expansion. Point Loma Nazarene has an established campus overlooking the ocean
in Point Loma and has no offsite expansion space requirements or interest at present.
The New School of Architecture is reportedly in the market for approximately 150,000 to 200,000
square feet of space.

They are currently located in downtown in East Village in approximately

100,000 square feet of space in several older buildings and are looking to expand. However, their
rental pricing expectations are reportedly conservative, consistent with class B or C space rent levels.
The subject’s marketability as a multi-tenant building would likely be above average and appeal to a
variety of traditional and non-traditional space users, including educational, creative office,
technology and government tenants, but not without significant interior space modifications. The
building’s immediate proximity to the Trolley would likely appeal to the government and educational
space users.
Creative Office Concept
The creative office concept has synergy with the broader artistic theme of the East Village area and
would likely appeal to design and media development companies that do not prefer a high image
location, along with small technology firms looking to re-locate into downtown. The creative office
space concept is relatively new to the San Diego office market, but it is becoming increasingly popular
among certain sectors of the space user marketplace, particularly among technology companies,
design firms, media organizations and other creative types. Creative office space is loosely defined,
but it is generally characterized as any space with one or more of the following features: exposed
ceiling, floor, structural beams, or a renovated project that restores a building’s character or involves
a re-imaging of an architecturally dated building.
The following is from a recent CBRE report on the creative office market in Los Angeles:
“Creative space has long been reserved for companies like entertainment and media
firms, ad agencies, architects, technology and other industries that rely on the creative
class of workers as their core competency. Demand for this type of space surged in the
late 1990’s during the dot-com boom as tech companies created work environments filled
with collaborative workstations, shared office space and creative outlets for their ultra33

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | M ARKET A NALYSIS

creative workforce. Now, demand for creative space is increasing once again as the
working environment is more global, more mobile and more diverse than ever before.
“The growing demand for creative space has now extended into the more traditional office
environment as many real estate companies, financial firms, law firms and other
traditional office tenants are showing interest. Many of these firms are interested about
developing a creative workplace strategy by eliminating the traditional cube environment
and executive offices in favor of highly-functional shared workplaces. These strategies
focus on space optimization, increased collaboration, enhanced culture, employee
wellness, and the ability to attract, engage and retain top talent.”
CONCLUSION
The Downtown submarket is currently experiencing an over-supply of available office space, but is
showing some signs of recovery/improvement.

We expect a continuation of current market

trends/conditions in the near-term given the current economic state. Given the historical demand for
space in the submarket, the lack of available land for future development, and the increasing
desirability of downtown as a residential location, the long-term prospects are positive for the
Downtown office submarket. The subject’s marketability is to a niche space user market and most
likely on a multi-tenant basis given its location and size. The subject is would also appeal to a single
space user, but its marketability is much more limited as currently improved and the population of
prospective large space users is very limited, especially among the education community.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ITE A NALYSIS

PLAT MAP

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ITE A NALYSIS

SITE ANALYSIS
The following chart summarizes the salient characteristics of the subject site.
SITE SUMMARY
Physical Description
Gross Site Area

0.69 Acres

30,056 Sq. Ft.

Primary Road Frontage

Island Avenue

190 Feet

Secondary Road Frontage

11th Avenue

150 Feet

Additional Road Frontage

Park Blvd (12th Ave.) 150 Feet

Excess Land Area

None

Surplus Land Area

None

Shape
Topography
Zoning District

Rectangular
Generally Level
Centre City Planned District: Employment/
Residential Mixed-Use (CCPD-ER)

Flood Map Panel No. & Date

06073C-1885G

Flood Zone
Adjacent Land Uses

Zone X
Mainly multi-family residential, with some street
level retail.

Earthquake Zone

None

Comparative Analysis

16-May-12

Rating

Access

Average

Visibility
Functional Utility
Traffic Volume

Average
Average

Adequacy of Utilities

Assumed adequate

Landscaping

Minimal

Drainage

Assumed adequate

Below average

Utilities

Provider

Adequacy

Water

City of SD

Yes

Sewer

City of SD

Yes

Natural Gas

SDG&E

Yes

Electricity

SDG&E

Yes

Telephone

AT&T/Verizon

Yes

Mass Transit

MTD

Yes

Other

Yes

No

Unknown

Detrimental Easements

X

Encroachments

X

Deed Restrictions

X

Reciprocal Parking Rights

X

Common Ingress/Egress

X

Source: Assessor's Parcel Map, Inspection, City of San Diego, FEMA, Alquist Priolo

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ITE A NALYSIS

LOCATION
The subject site comprises approximately half of a city block and is bounded by Island and 11th
Avenues, and Park Boulevard (12th Avenue), in the city of San Diego, county of San Diego, California
92101. The street address is 1155 Island Avenue. Ingress and egress is available to the site via one
curb cut on 11th Avenue.
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
We were not provided a preliminary title report in conjunction with this appraisal and assume no
adverse easements or encroachments exist. It is a formal assumption of this report that there are no
title issues that negatively impact the use, marketability, or value of the subject site.
FLOOD ZONE
According to flood hazard maps published by the Federal Emergency Management Agency (FEMA),
the site is within Zone X, as indicated on the indicated Community Map Panel No. 06073C-1885G,
dated 16-May-12. This zone designation is defined as follows:
FEMA Zone X (unshaded): Zones C and X (unshaded) are flood insurance rate zones
used for areas outside the 0.2-percent-annual-chance floodplain. No Base Flood
Elevations (BFEs) or depths are shown in this zone, and insurance purchase is not
required.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ITE A NALYSIS

SEISMIC HAZARDS (EARTHQUAKE)
All properties in California are subject to some degree of seismic risk. The Alquist-Priolo special
Studies Zone Act of 1972 was enacted by the State of California to regulate development near active
earthquake faults. The Act required the State Geologist to delineate “special studies zones” along
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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ITE A NALYSIS

known active faults in California. Cities and Counties affected by the identified zones must limit
certain development projects within the zones unless geologic investigation demonstrates that the sites
are not threatened by surface displacement from future faulting.
According to “Fault-Rupture Hazard Zones in California” published in 1992 by the California
Department of Conservation, Department of Mines and Geology, the subject is not within an area
affected by the Alquist-Priolo Special Studies Zone Act. Related development limitations, therefore, do
not apply.
ENVIRONMENTAL ISSUES
CBRE, Inc. has not observed, yet 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 have an effect on the value of the property.
For this appraisal, CBRE, Inc. has specifically assumed that the property is not adversely affected by
any hazardous materials and/or underground storage tanks which may be present on or near the
property.
CONCLUSION
Overall, there are no known factors that prevent the site from development to its highest and best use,
as if vacant.

From a physical standpoint, the site is considered adequate for many types of

development.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

IMPROVEMENTS LAYOUT

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

IMPROVEMENTS ANALYSIS
The subject property is an 8-story, mid/high-rise office building with a three-level, below-grade
parking garage. The following is a description of the improvements based on our physical inspection
and review of building plans. Upper floor plans are provided at the end of this section. The following
table summarizes the subject’s building areas and general layout of the improvements.
IMPROVEMENTS SUMMARY
Property Type

Office

Number of Buildings

1

Number of Stories

8

Year Built

2011

Gross Building Area

N/A

Net Rentable Area

178,000 SF

(Multi Tenant)

Renovated:

Major Tenants
Thomas Jefferson School of Law (owner/user)

178,000 SF

Floor Area Ratio (FAR)

5.92

Parking Improvements

Parking garage

Total Spaces:

176
1.0

Parking Ratio (per 1,000 SF NRA )
Component

GBA (SF)

Office Component

207,000

Parking Garage

87,024

Total

294,024

Average Floor Plate
Year Built

28,000 SF
2011

Actual Age

3 Years

Effective Age

1 Years

Total Economic Life

55 Years

Remaining Economic Life

54 Years

Functional Utility

See comments

NRA (SF)
178,000
178,000

Usable
Area (SF)

Load
Factor

N/A

N/A
-

N/A

-

N/A

Source: Inspection, Building Plans, TJSL Representatives

The subject building was originally constructed as a build-to-suit for the Thomas Jefferson School of
Law and reflects distinctive architecture, and is highly specialized and upgraded for their current use,
including two floors of classrooms, a large law library comprising two floors, penthouse boardroom,
outdoor balcony terraces on the 5th and 8th floors, and a large ground floor reception lobby.
Thomas Jefferson School of Law occupies the entire building. The first five floors have no windows on
the south side of the building as they back up to the adjacent building on the south portion of the
block.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

The ground floor includes the reception lobby, administrative offices, and vacant space that is current
vacant and proposed for occupancy by a restaurant/deli. The reception lobby is unusually large and
includes a circular staircase within an atrium feature that extends to the third floor ceiling. Ground
floor finishes are highly upgraded, including extensive use of polished stone and hardwood paneling.
The second and third floors are improved with mainly classrooms, including a “moot” courtroom,
three large classrooms (79-person capacity each) with semi-circular seating, and various
seminar/conference rooms on the second floor. The third floor has two large classroom/lecture halls
(136-person capacity each), several other smaller classrooms, and a conference room.
The law library is on the fourth and fifth floors, as well as the student lounge or organization area.
The library areas are mainly open with bookcases. There are also some library administration offices
on the fourth floor and a bank of student study rooms along the south side of the building on same
floor.
The sixth and seventh floors are mainly improved with administrative and executive offices for TJSL
employees. The build-out includes a large number of private offices, conference rooms and office
support areas.
The eighth floor includes a large boardroom, kitchen, and faculty staff lounge. The boardroom has
extensive decorator upgrades and a high, open ceiling to the underside of the roof structure. A large
outside terrace patio is located on the south side and a small terrace patio area is on the north side.
The remainder of this floor includes mechanical/support areas for the building.
BUILDING AREA
Please refer to the Resource Verification table in the Scope of Work for the source of the building area
size.
CONSTRUCTION DETAILS
The basic construction features are summarized as follows.

Foundation/Floors:

Assume to be concrete spread footings and column pads, or a 3’
to 5’ thick concrete mat with adequate load capacity, which
essentially becomes a continuous pad footing for all of the
columns and vertical structural system.

Floors:

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

Basement:

Assume concrete slab on grade (4” to 5” thick).

Ground/Upper Floors:

Non-structural concrete (assume 2” to 3” thick) over a corrugated
steel floor deck, supported by steel frame.

Structural Frame :

Mainly construction class A, steel frame construction with steel
columns and beams supporting steel decking. The parking
structure is construction class B construction with a combination of
cast-in-place and pre-cast reinforced concrete structural elements.

Exterior Walls:

The exterior walls are mainly tinted curtain wall glass (light green
and clear) panels in aluminum frames, along with concrete, stone,
and composite accent panels for architectural appeal.

Roof Cover:

The main roof cover is a unique, wing or spread V-shaped feature
that appears to be suspended above and overhangs the 8th floor
glass line. This roof feature apparently has a “Cool Roof”
membrane that reflects the heat from the sun and reduces the
cooling loads on the building. A portion of 7th floor is covered by a
flat roof structure with multi-ply, built-up system over concrete and
steel structural deck.

Photovoltaic/Solar Panels:

A 49 kilowatt photovoltaic system is located on the main roof and
is owned and operated by San Diego Gas & Electric. It generates
clean electricity, which is fed directly back to the grid.

5

Interior Detail

5

The primary feature of Class A buildings is the fireproofed structural steel frame, which may be welded, bolted, or riveted
together. The fireproofing may be masonry, poured concrete, plaster, sprayed fiber, or any other type which will give a high
fire-resistant rating.
The primary characteristic of Class B Buildings is the reinforced concrete frame in which the columns and beams can be
either formed or precast concrete. They may be mechanically stressed, and the structure is fire resistant.
Class C Buildings are characterized by masonry or reinforced concrete (including tilt-up) construction. The walls may be
load-bearing, i.e., supporting roof and upper floor loads, or nonbearing with open concrete, steel, or wood columns, bents,
or arches supporting the load.
Class D buildings are characterized by combustible construction. The exterior walls may be made up of closely spaced wood
or steel studs as in the case of typical frame house, with an exterior covering of wood siding, shingles, stucco, brick, stone
veneer, or other materials. Otherwise they may consist of an open skeleton wood frame on which some form of curtain wall
is applied, including, pre-engineered pole buildings.
Class S buildings are characterized by incombustible construction and prefabricated structural members. The exterior walls
may be steel studs or an open steel skeleton frame with exterior single or sandwich wall coverings consisting of prefabricated
or sheet siding. (Source: Marshall Valuation Service)

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

Floors:

Mainly commercial-grade carpet; polished stone is typical
throughout the main ground floor lobby and within some upper
floor elevator lobbies and common areas.

Interior Walls:

Mainly gypsum wallboard with paint and other various finishes;
upgraded limestone and mahogany hardwood finishes are typical
in the ground floor lobby, with similar hardwood paneling in the
some upper floor lobbies and common areas, throughout the
moot courtroom, and in some class rooms. Glass partitions are
present in some office and study room spaces.

Ceilings:

Typically acoustical tiles in a suspended T-bar system with recessed
fluorescent light fixtures; customized hardlid and soffit features are
typical in the common area lobby and several of the tenant spaces.
Extensive use of distinctive and decorator lighting in the library and
other student-populated common areas on floors 2 through 5.
Typical ceiling heights are unusually high at 10 to 12-feet, and 14feet in some common areas and classrooms. The boardroom also
has a high ceiling with some distinctive architectural features.

HVAC:

VAV system with zone controls, which is served by a central plant
consisting of one cooling tower, two McQuay chillers and two
Raypak boilers. A Niagara/Tritium Building Management System
provides energy management control.

Fire Protection:

Fully sprinklered (flow/density rating not avail) and equipped with a
fire alarm system.

Electrical:

The electrical system is comprised of 277/480 volt, 3-phase 4-wire
service with copper branch wiring; amperage service not available.
There are dual battery back-ups for the fire alarm panels. It is
assumed to be in good working order and adequate for the
building.

Connectivity & Multi-Media
Features:

The classrooms are extensively upgraded with integrated video
conferencing systems and equipment to allow connectivity with
offsite instructors and guests, and create interactive communication
among multiple classrooms.
The building also has cloud
computing technology installed throughout, which is enhanced by
wireless internet access for students and faculty.

SUSTAINABILITY/LEED CERTIFICATION
The subject is LEED Gold certified. Modifications and upgrades to achieve certification include the
photovoltaic system; high efficiency building envelope, which creates lower heating and cooling
demands that, in turn, require smaller, more efficient mechanical equipment; the cool roof
membrane; recycled materials used for some interior finishes; and water use efficiencies (landscaping
and plumbing).

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

PARKING AND DRIVES
There are 176 parking spaces provided in the subject’s two-level parking garage. This equates to a
parking ratio of approximately 1.0 space per 1,000 SF of rentable area, which is slightly below
average for typical downtown class A office buildings.
FUNCTIONAL UTILITY
The building has unique design features that are functional for TJSL’s occupancy and operations,
including the interior layout on the 2nd through 5th floors, but would likely have limited utility in the
market except to another educational space user and not without some reconfiguration and
modifications. The large lobby and atrium feature, and the 8th floor boardroom, are an inefficient use
of space for the typical office or educational space user. The lack of windows on the south side of the
1st through 5th floors may be detract from their appeal, especially with a multi-tenant floor occupancy.
The parking ratio is also below-average for the typical office space user, albeit adequate for TJSL’s
requirements.
Positive functional features are the building’s connectivity systems and sustainability upgrades, large
floor plates, and floor to ceiling glass windows throughout. The size and shape of the floor plates
would readily accommodate medium to larger tenant space requirements, and multi-tenant
occupancy. The 6th and 7th floors provide a good example of functional utility for the typical full floor
office space user.
ADA COMPLIANCE
Handicap access appears to be available to most areas of the buildings. However, we are not
qualified to determine if the subject property is in compliance with current ADA (Americans with
Disabilities Act) requirements. Please refer to the specific limiting condition regarding ADA
compliance.
FURNITURE, FIXTURES AND EQUIPMENT
The property would typically be sold on an unfurnished basis. 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, Inc. has not observed, yet 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
have an effect on the value of the property. For the purpose of this assignment, we have specifically
assumed that the subject is not affected by any hazardous materials, which would cause a loss in
value.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I MPROVEMENT A NALYSIS

DEFERRED MAINTENANCE/CAPITAL REPAIRS
Our inspection of the property and interviews with the property manager revealed no significant items
of deferred maintenance/capital repairs, other than the improvement finishes required within the
ground floor shell space.
ECONOMIC AGE AND LIFE
CBRE, Inc.’s estimate of the subject improvements effective age and remaining economic life is
depicted in the following chart:
ECONOMIC AGE AND LIFE
Actual Age

3 Years

Effective Age

1 Years

MVS Expected Life

55 Years

Remaining Economic Life

54 Years

Compiled by CBRE

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, Inc. did not observe anything to
suggest a different economic life, a capital improvement program could extend the life expectancy.
CONCLUSION
The improvements consist of a basically new build-to-suit office building with specialized features to
accommodate the space requirements for Thomas Jefferson School of Law. The positive features of
the building are its high quality/image exterior and distinctive architectural design, integrated
communication and multi-media systems, interior finishes, and large floor plates. Its negative features
are its specialized interior layout, especially on the 2nd and 3rd floors, low parking ratio, and potential
space inefficiencies (ground floor lobby and 8th floor). Otherwise, there are no significant factors
considered to adversely impact the marketability of the improvements.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | Z ONING

ZONING
The following table and map summarize the subject’s general zoning requirements.
ZONING SUMMARY
Current Zoning
Legally Conforming

Centre City Planned District: Employment/
Residential Mixed-Use (CCPD-ER)
Yes

Uses Permitted

Mix of office, residential, hotel, research and
development, educational, and medical
facilities.

Zoning Change

Not likely

Category

Zoning Requirement

Minimum Lot Size

Not applicable in CCPD

Minimum Lot Width

Not applicable in CCPD

Maximum Height

500 Feet

Minimum Setbacks
Front Yard

0 Feet

Street Side Yard

0 Feet

Interior Side Yard

0-10 Feet

Rear Yard

0-10 Feet

Minimum FAR

3.50 : 1

Maximum FAR

6.00 : 1

Subject's Actual FAR

5.92 : 1

Parking Requirements

175 spaces

Subject's Actual Parking

176 spaces

Source: Planning & Zoning Dept.

ANALYSIS AND CONCLUSION
The land use restrictions and development standards are more specifically defined by the Planned
Development Permit 2007-55 (PDP), Centre City Planned District and Community Plan. The
community plan designates the subject site as being within the Employment/Residential Mixed-Use
(ER) base land use district. The ER district is intended to provide synergies between educational
institutions and residential neighborhoods, or transition between the Core District and residential
neighborhoods. The district also encompasses Horton Plaza. A variety of uses are permitted in this
district, including office, residential, hotel, research and development, educational, and medical
facilities.
The subject's allowable land use and development restrictions are more specifically defined by the PDP
(2007-55), approved and adopted by the Centre City Development Corporation in March 2008.
This documents basically provide approval for the development of the subject site with an 8-story,
184,000 square foot (gross) building, representing an FAR of 5.63, with 175 required parking

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | Z ONING

spaces. The PDP also calls for various design criteria, which was assume was incorporated into the
subject building during development.
The subject appears to be a legal, conforming use within the current zoning in terms use and FAR,
and its parking is assumed to be conforming subject to special use permit.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | T AX AND A SSESSMENT D ATA

TAX AND ASSESSMENT DATA
In California, all real property is assessed at 100 percent of full cash value (which is interpreted to
mean market value of the fee simple estate) as determined by the County Assessor. Generally a
reassessment occurs only when a property is sold (or transferred) or when new construction occurs (as
differentiated from replacing existing construction). Assessments for properties that were acquired
before the tax year 1975-1976 were stabilized as of the tax year 1975-1976. Property taxes are
limited by state law to 1 percent of the assessed value plus voter-approved obligations. If no sale (or
transfer) occurs or no new building takes place, assessments may not increase by more than 2 percent
annually. Taxes are payable in two equal installments, which become delinquent after December 10
and April 10, respectively. The following table summarizes the current assessed value and property
taxes for the subject.
AD VALOREM TAX INFORMATION
Assessor's Market Value

2013/2014

535-124-03

$89,605,314

Exemption

($89,605,314)

Subtotal

$0

Assessed Value @

General Tax Rate

100%

(per $100 A.V.)

Special Assessments:

100%
$63,725,000

1.182770

1.182770

$0

$753,720

25,290

25,290

(per $100 A.V.)

-

Total Taxes

$63,725,000

$0

General Tax:

Effective Tax Rate

Direct Cap
Pro Forma

$25,290

1.222456
$779,010

Source: San Diego County Treasurer-Tax Collector's Website

The special assessments include charges for the Downtown Property Business Improvement District
PBID, County Mosquito/Rat Control, and county and municipal water standby charges. The PBID is
the largest of these at $25,259.86 and is an annual assessment to help fund marketing,
maintenance, and improvement projects for downtown businesses. It is based on building square
footage. The other charges are generally based on lot area rather than assessed value, and generally
do not have a fixed maturity, but are rather based on an annual budget to provide the services.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | T AX AND A SSESSMENT D ATA

TAX AND ASSESSMENT CONCLUSION
According to information provided by the San Diego County Tax Collector’s office, the subject
property is exempt from general real estate taxes due to its non-profit status, as per State law. If the
subject sold for the value estimate in this report, a reassessment at that value would most likely occur,
with tax increases limited to 2 percent annually thereafter until the property is sold again.

The

consequences of this reassessment have been considered in the appropriate valuation sections. The
new property taxes would be based on the published tax rate and with the special assessments added
as a lump sum.

57

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | H IGHEST AND B EST U SE

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 of this
report.
Physical Possibility
The physical characteristics of the subject site were discussed in detail in the site analysis. Overall, a
wide range of legally permissible uses would be physically possible.
Financial Feasibility
The financial feasibility of a specific property is market driven, and is influenced by surrounding land
uses. Based on the subject’s specific location and physical characteristics, development of the site
with a mixed-use project consisting of multi-residential and retail, which is most complimentary to the
surrounding land uses, would represent the most likely financially feasible option. Our analysis
indicates that the downtown apartment submarket is in a stabilized condition. Our recent appraisal
experience in downtown also indicates that current rent levels would likely support the cost of new
multi-family housing, which is also supported by the low vacancy levels in the submarket, the low
vacancy of the comparables, new construction, and the strong leasing in new projects. However,
there is also currently a significant amount of apartments currently under construction, which would be
a concern.
For-sale residential (condominiums) also represents a logical option. Market conditions are showing
strong signs of improvement within the broader San Diego county area and the downtown area as
supply has declined significantly due to the lack of new construction over the past 5 plus years
combined with continued historically low interest rates. However, the recovery is in the early stages
and there is a significant amount of proposed development proposed in the downtown area and
especially within the East Village area. As such, while condominium development may be feasible, it
is likely overly speculative in the near-term.

58

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | H IGHEST AND B EST U SE

Current office market conditions (submarket vacancies and demand levels) and development activity
indicate development of the site with an office use is not likely economically feasible at this time due
to the current over-supply conditions and uncertainties in the financial markets and demand
generators for space. The limited options for construction financing would also be an obstacle for a
proposed speculative development.
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
maximally productive use of the subject site is for a low to medium-density, mixed-use residential
project that also includes a ground floor commercial/retail component.
CONCLUSION: HIGHEST AND BEST USE AS VACANT
Based on the foregoing, the highest and best use of the site as though vacant would be for residential
development with ground floor retail.
AS IMPROVED
Legal Permissibility
To the best of our knowledge, the subject improvements are a legal, conforming use of the site under
current zoning.
Physical Possibility
The subject improvements were discussed in detail in the Improvement Analysis. The layout and
positioning of the existing improvements are functional for the current owner/occupant, and are
functionally adaptable to office use based on comparison to competing properties in the submarket.
Based on the design/layout, assuming vacant, the improvements would be the most functionally
utilized for small to medium size office space users.
Financial Feasibility
The financial feasibility for an office property is based on the amount of rent that can be generated,
less operating expenses required to generate that income; if a residual amount exists then the land is
being put to a productive use. As will be indicated in the Income Capitalization Approach, the subject
is capable of producing a positive net cash flow and utilization of the improvements for office uses, as
improved, is considered financially feasible, assuming sufficient TI allowance is offered to new tenants
on the vacant space. The current educational use is assumed to represent a feasible use for the
current occupant based on the original build-to-suit design.

59

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | H IGHEST AND B EST U SE

Consideration is given to the subject’s marketability to an owner-user buyer(s). However, based on
our review of Costar Realty information and the lack of sale activity involving owner-users for similar
size (150K SF and larger) properties over the past 1 to 2 years in San Diego County, the owner-user
buyer market is very limited for the subject. Since January 2011, we are aware of only 3 sales (all in
2011) among 46 sales transactions involving properties 150,000 square feet or larger in the county.
Over the past 10 years, there have been no sales involving owner-user buyers and fitting the same
size criteria. Based on the foregoing, an owner-user does not represent a likely buyer for the subject.
Maximum Profitability
The maximum 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 by investors and
continue to be used by office tenants. None of the comparable buildings have been acquired for
conversion to an alternative use. These comparables would indicate that the maximally productive
use of the property is as an office property for lease, assuming an adequate TI allowance is offered to
new tenants.
CONCLUSION: HIGHEST AND BEST USE AS IMPROVED
Based on the foregoing, the highest and best use of the property as improved is for conversion to
office uses.

The most likely user/buyer of the subject on an as-is basis would be an

opportunistic/value-add investor (private equity); the owner-user buyer market would likely be very
limited given the subject’s size and downtown location.

60

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A PPRAISAL M ETHODOLOGY

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 on 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 subject’s 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, the sales comparison and income capitalization approaches are applicable and
have been used to determine the market value of the subject. The cost approach is excluded due to
the difficulty in accurately estimating an adjustment for depreciation, especially related to functional
utility and the specialized improvements. Additionally, this approach would involve estimating land
value based on a highest and best use vacant that is not consistent with the highest and best as
improved or its current use. As such, this method also would not likely be relied upon by the typical
investor for the subject property.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

SALES COMPARISON APPROACH
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 OFFICE SALES
No.

Name

Year
Built

NRA
(SF)

Sale Price

Price
1

Per SF

1

Occ.

NOI
Per SF

OAR

1

DiamondView Tower,
350 10th Avenue,
San Diego, CA

Sale

Oct-12

2007

305,255

$121,000,000

$396.39

98%

$25.94

6.54%

2

Bank of America Plaza,
450 B Street,
San Diego, CA

Sale

Nov-13

1982

283,786

$73,000,000

$257.24

82%

$19.73

7.67%

3

Columbia Square ,
1230 Columbia Street,
San Diego, CA

Sale

Aug-13

1990

143,574

$35,000,000

$243.78

93%

$16.61

6.81%

4

Columbia Center,
401 W. A St,
San Diego, CA

Sale

Nov-12

1982

553,715

$135,000,000

$243.81

72%

$18.72

7.68%

5

Rio San Diego Plaza,
8954 Rio San Diego Drive,
San Diego, CA

Sale

Sep-13

2001

189,490

$56,850,000

$300.02

90%

N/A

N/A

6

Discovery Corporate Center
(Bldg A),
16340 W. Bernardo Drive,
San Diego, CA

Sale

Nov-13

2007

90,610

$36,516,000

$403.00

100%

$28.99

7.19%

7

Mesa View Plaza,
9350 Waxie Way,
San Diego, CA

Sale

Dec-13

2003

110,994

$33,500,000

$301.82

78%

$20.97

6.95%

---

---

2011

178,000

---

---

93.5%
Stab.

$23.27

---

Subj. Thomas Jefferson School of Law
Pro Building,
Forma San Diego, California
1

Transaction
Type
Date

Transaction amount adjusted for cash equivalency and/or deferred maintenance (where applicable)

Compiled by CBRE

62

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

The sales utilized represent the best data available for comparison with the subject property. They
were selected from our research of comparable improved sales from throughout the San Diego areas.
We included comparable sales from the suburban market areas due to the limited recent sale data
involving higher quality, class A, stabilized office properties in downtown San Diego.
ANALYSIS OF IMPROVED SALES
The following analysis assumes the subject is at stabilized occupancy. A deduction from stabilized
value for lease-up costs is addressed at the end of this section.
Improved Sale One
Diamond View Tower is located in the East Village, about one block southwest of the subject and is
adjacent to Petco Park, about 2 to 3 blocks southeast of the subject. The building was built in 2007
and totals 305,000 square feet and reflects high quality with extensive amenities, including retail
(restaurants, cleaners, coffee), health club, conference and entertainment facilities, and views
overlooking the ballpark. Major tenants include Cox Communications (62,050 SF), FIDM (33,563
SF), and Comerica Bank (28,564 SF). Existing office rents at sale ranged from $2.65 to $4.30 per
square foot per month, full service gross, and were mostly over-market at sale. However, this building
generates rental rates at the high end of the downtown office market due to its location next to Petco
63

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

Park and overlooking the field. The property includes 1.2:1,000 SF parking in an on-site parking
garage and parking rights within the adjacent Parkade Garage that increases its parking ratio to
3.5:1,000 SF. The property sold to a local investment group with institutional equity sources at a
purchase price of $121 million or $396 per square foot, which equates to an overall capitalization
rate (OAR) of 6.54% based on the first-year operating pro forma.
This comparable provides an overall superior indication of value per square foot for the subject, which
is mainly due to building design (functionality)/amenities and location. This is evident in the
comparable’s higher rents on recent leases and asking rents, and its NOI per square foot. Date of
sale is a partially offsetting inferior factor mainly due to the increase in market rents in this property
since the sale, which has a positive impact on value.
Improved Sale Two
The Bank of America Plaza property is located in the north-central portion of the downtown financial
district, on the northwest corner of 5th Ave and B Street, about 6 to 7 blocks northwest of the subject.
The was constructed in 1981 and renovated in 2009 with new lobby atrium and common area
improvements, but it still has very average quality exterior appeal. The property was 84% occupied at
the time of sale. There are two major tenants on long term leases: Bank of America and County of
San Diego, both with about 65% of the building. Current vacant space is being marketed at $2.15 to
$2.30 per square foot per month, full service gross, with recent leases at $2.05 to $2.15 per square
foot for mid-floor space. The sale in November 2013 closed at $73,000,000 ($257.24/SF). The
transaction was a direct, off-market deal and not listed for sale. Sumitomo Corporation acquired the
property from Westbrook Partners and no financial data was available, although we understand the
BofA rent was over-market by 10 to 20 percent. The property had previously sold in December 2011
at a price of $60,150,000 ($211.96/SF).
Overall, this comparable provides a very inferior indication of value per square foot for the subject,
which is mainly due to quality/appeal, age/condition, and occupancy at sale. Location and
functional utility are partially offsetting slightly superior factors. The net impact of these factors is
reflected in the comparable’s lower NOI per square foot than the subject, despite the over-market
BofA rent.
Improved Sale Three
The Columbia Square comparable is located on the northwest corner of Columbia Street and B Street
in the west portion of downtown San Diego. It is a 12-story, multi-tenant office building that includes
a five-story (including two subterranean stories) parking garage as part of the main building. The
south side of the building has no windows, which is a functional issue. The building was 93 percent
occupied with recent leases from $1.85 to $2.05 per square foot per month on a gross plus electricity
basis. The leases are generally on a modified gross basis with the tenants responsible for paying for

64

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

their own electricity (sockets and lights only) and a pro rata share of all expenses over a base year
amount. A major capital improvement program was completed in 2007. The property was not on
the market when the buyer approached the seller. The buyer also owns the property across the street
(Columbia Center). The sale closed in August 2013 at a price of $35,000,000 ($243.78/Sq.Ft.) with
a reported cap rate of 6.8 percent.
This comparable provides an overall very inferior indication of value per square foot for the subject,
which is mainly due to quality/appeal and age/condition. Location and functional utility are partially
offsetting slightly superior factors. The net impact of these factors is reflected in the comparable’s
much lower NOI per square foot than the subject.
Improved Sale Four
This is the late-2012 sale of Columbia Center, a 27-story high rise office building with a prominent
upper floor profile in the downtown skyline. The rentable area includes 18,633 square feet of retail
space on the bottom floor. There is a three-level subterranean parking garage that is master-leased
to Ace parking. The building has undergone multiple renovations over the past 10 years, most
recently in 2009 with its lobby and common areas. Asking rent for space at the time of sale was
$2.15 to $2.60 per square foot, full service gross, but the most recent leases transacted after the sale
were in the range of $2.15 to $2.40. Occupancy at sale in November 2012 was 72%. The property
was encumbered by a fixed rate CMBS loan of $98,000,000 at 5.28% interest-only through October
1, 2015 that cannot be paid off without significant pre-payment/defeasance costs. The listing broker
with Eastdil indicated he thought the price included little or no premium for the existing debt. A
representative for CBRE Capital Markets division (mortgage brokerage), indicates the financing was
likely close to neutral or near market terms at the time given the loan-to-value and non-stabilized
occupancy characteristics at the time.

The property sold for $135 million ($243.81/Sq.Ft.) in

November 2012 after being in escrow for nearly 10 to 12 months. This property last sold for $181
million in 2007 and $167 million in 2005.
Overall, this comparable provides a very inferior indication of value per square foot for the subject,
which is mainly due to quality/appeal, age/condition, occupancy at sale, and market conditions at
sale. Location and functional utility are partially offsetting slightly superior factors. The net impact of
these factors is reflected in the comparable’s lower NOI per square foot than the subject.
Improved Sale Five
Rio San Diego Plaza is located on the northwest corner of Rio Bonito Way and Rio San Diego Drive in
the Mission Valley submarket, about 4 to 5 miles northeast of the subject. The property consists of a
6-story, class A, 189,490 square foot multi-tenant office building with stone and glass exteriors. It
was 89.5% leased at the time of sale. This institutional quality investment property was sold by AEW
Capital Management to Prudential Real Estate Investors in September 2013 at $56,850,000

65

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

($300/SF). The seller, AEW, had previously acquired the property in December 2006 for $72.0
Million ($380/SF). Currently, the building is 92 percent leased with available space being marketed
at $2.30 per square foot, gross plus utilities, which equates to approximately $2.45 full service gross
equivalent.
Based mainly on quality/appeal and age/condition, this comparable provides an overall inferior
indication of value for the subject. Location and functional utility are partially offsetting slightly
superior factors. The suburban location is more desirable in terms of access and character of
surroundings.
Improved Sale Six
This comparable involves the three-story Building A within the larger four-building Discovery
Corporate Center complex in the Rancho Bernardo submarket, in north-inland San Diego County.
The buildings are generally all the same with dryvit, Kynar, and reflective glass panel exteriors, and
were constructed in 2007 and 2011. The comparable building was constructed in the first phase in
2007. It was 100 percent leased at sale to Broadcom, a tenant with strong corporate credit. Their
contract rent was over-market. Broadcom also fully leases Buildings B and C, and a portion of
Building D in the same complex, but not a part of the comparable sale. The buyer in this transaction
was Drawbridge, who previously purchased Buildings B and D in December 2012. This was an offmarket transaction.
Overall, this comparable provides a superior indication of value per square foot for the subject, which
is mainly due to the lease in place with Broadcom on the entire building, including their over-market
contract rent, remaining term, and strong credit, which all contributed to a leased fee premium for the
property. These factors are reflected as an adjustment for Property Rights Conveyed. Location and
functional utility are also superior factors.

Quality/appeal is a partially offsetting slightly inferior

factor.
Improved Sale Seven
This property is on the north side of Waxie Way, on the south side of the 56 Freeway, near the 15 and
163 freeway interchanges, in the Kearny Mesa suburban district in the city of San Diego. It is a high
image, 5-story building with garage and surface parking. The building was 78% leased to eight
tenants at sale. The vacancy reflects the recent loss of TDK and State of Cal. Rents on recent leases
at sale had been in the $2.30 to $2.40 range, gross plus utilities. This property was not listed for
sale. The transaction involved an atypical transfer of seller's interest in the property wherein seller
received units (put options for shares) in an UPREIT managed by Stockbridge RE. The price was based
on an appraised value price that both buyer and seller accepted. However, this is not a normal
market transaction and, thus, should be given limited consideration. It is included mainly for
informational purposes.

66

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

This comparable provides an overall inferior indication of value per square foot, which is mainly due
to its occupancy at sale and quality/appeal. Location and functional utility are partially offsetting
superior factors.
Supplemental Data – 655 West Broadway Sale
This property is located on the west side of downtown near the subject. The building was built in
2005 and totals 376,000 square feet and reflects one of the highest quality buildings in the
submarket. The building sold as part of a larger 32-building portfolio sale on March 26, 2013, with
an allocated price of $145,673,000 or $386.71 per square foot. No other information was
available regarding the sale, which is why it is only included as supplemental data. Overall, this
comparable provides a slightly superior indication of value per square foot for the subject, which is
mainly due to its superior location and functional utility.
Supplemental Data – Merrill Lynch Bldg Listing
This is a 26-story, class A-/B+ building one block southeast of the subject and is class B building in
the submarket. The building was constructed in 1982 and has a full reflective glass exterior with a
panoramic southerly view. The building is under-parked at a ratio of 0.70 per 1,000 square feet of
building area. Currently, this property is 86 percent occupied with available space being marketed at
$2.35 to $2.50 per square foot, full service gross, but recent leases are in the range of $2.15 to
$2.25 range.

The property was listed for sale in Q3 2013 and recently sold to Emmes Asset

Management for an undisclosed price, which is why it is only included as supplemental data. It was
sold along with 707 Broadway, which are both owned by Equity Office, for a total reported price of
approximately $155 million or about $207 per square foot. The price was discounted for the overall
vacancy at sale (apx 20%) and the B-/C investment quality of the 707 Broadway building (renovated
1960’s-built).
SUMMARY OF ADJUSTMENTS
Based on our comparative analysis, the following chart summarizes the adjustments warranted to each
comparable.

67

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH
OFFICE SALES ADJUSTMENT GRID
Comparable Number

1

2

3

4

5

6

7

Subj.
Pro
Forma
---

Transaction Type

Sale

Sale

Sale

Sale

Sale

Sale

Sale

Transaction Date

Oct-12

Nov-13

Aug-13

Nov-12

Sep-13

Nov-13

Dec-13

---

2007

1982

1990

1982

2001

2007

2003

2011

283,786

143,574

90,610

110,994

178,000

Year Built
NRA (SF)
Sale Price

305,255
1

Price Per SF 1

$121,000,000
$396.39

$73,000,000 $35,000,000
$257.24

$243.78

553,715

189,490

$135,000,000

$56,850,000

$243.81

$300.02

$36,516,000 $33,500,000
$403.00

---

$301.82

---

Occupancy

98%

82%

93%

72%

90%

100%

78%

93.5% Stab.

NOI Per SF

$25.94

$19.73

$16.61

$18.72

N/A

$28.99

$20.97

$23.27

6.54%

7.67%

6.81%

7.68%

N/A

7.19%

6.95%

---

$396.39

$257.24

$243.78

$243.81

$300.02

$403.00

$301.82

OAR
Adj. Price Per SF
Property Rights Conveyed
Financing Terms 1

0%

0%

0%

0%

0%

-10%

0%

0%

0%

0%

0%

0%

0%

0%

Conditions of Sale

0%

0%

0%

0%

0%

0%

0%

Market Conditions (Time)

5%

0%

0%

5%

0%

0%

0%

Subtotal - Price Per SF

$416.21

$257.24

$243.78

$256.00

$300.02

$362.70

$301.82

Location

-5%

-5%

-5%

-5%

-5%

-5%

-5%

Size

0%

0%

0%

0%

0%

0%

0%

Age/Condition

0%

10%

10%

10%

5%

0%

0%

Quality of Construction

0%

25%

25%

25%

15%

10%

15%

Functional Utility/Parking

-5%

-5%

-5%

-5%

-5%

-5%

0%

Occupancy
Total Other Adjustments

0%
-10%

10%
35%

0%
25%

15%
40%

0%
10%

0%
0%

10%
20%

Indicated Value Per SF

$374.59

$347.27

$304.73

$358.40

$330.02

$362.70

$362.18

1

Transaction amount adjusted for cash equivalency and/or deferred maintenance (where applicable)

Compiled by CBRE

SALE PRICE PER SQUARE FOOT CONCLUSION
The sales indicate adjusted prices ranging from $304.73 to $377.28 per square foot of building
area. Excluding comparable 3, which is somewhat of an outlier, the range narrows to $330.02 to
$377.28.
Lease-Up Discount (Assuming Vacant)
The following summarizes the estimated lease-up costs associated with the subject assuming vacant,
which are deducted from the capitalized value in order to arrive at an as-is value estimate. The
estimated costs are based on the market leasing conclusions in the income approach. The estimated
downtime is estimated at 18 to 24 months and correlated to 24 months, which is based on the
subject’s unique characteristics and untested marketability to tenants, as well as projected marketing
times among value-add buyers for high vacancy properties, including Union Bank building (45% vac.)
and Columbia Center, among others. It also reflects the expectations of typical value-add buyers who
will likely adjust their market leasing package to maximize the marketability of the subject to capture
tenant demand and accelerate absorption. The value-add profit opportunity is usually minimal or
negative if they hold the property vacant for much longer than 24 to 30 months.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

Entrepreneurial Profit
Additionally, value-added investors typically measure profit based on a load or premium on the
overall capitalization rate or unleveraged return they can achieve on a vacant property similar to the
subject. Our research and interviews with local investors indicates this load or premium typically
ranges from 25 to 100 basis points, with properties like the subject near the higher portion of the
range because of its assumed vacancy. Based on the foregoing, we estimate a reasonable profit
factor of 75 basis points over the concluded going-in OAR (as-stabilized), or an approximate 7.25%
OAR, which yields a stabilized value of $57,122,684 based on the stabilized NOI estimate by direct
capitalization (See Income Approach). This value is $6,591,079 less than the indicated stabilized
value by direct capitalization, which represents our estimate of entrepreneurial profit/incentive for
assuming the risk of lease-up.
The Lease-Up Discount Analysis schedules for each building are shown below. Given local brokerage
agreements, leasing commissions are based on 6.5 percent of gross scheduled market rent and an
average lease term of 5 years, as concluded in the income approach herein.
LEASE-UP SUMMARY
Estimated Downtime
Rent Loss from Downtime
Base Rent Abatements (Free Rent)

24 Months
($12,831,600 x 50.0%)
($534,000 x 7.0 mos

Leasing Commissions

(@ 6.5%, 7 Yr. Term)

Tenant Improvement Allowance

$6,415,800
$3,738,000
$2,915,640
$5,594,286

Sub-Total

$18,663,726

Plus: Profit

$6,591,079

Total

$25,254,805

Rounded

$25,255,000

Compiled by CBRE

The following table presents the valuation conclusion.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | S ALES C OMPARISON A PPROACH

SALES COMPARISON APPROACH
NRA (SF)

X

Value Per SF

=

Value

178,000

X

$355.00

=

$63,190,000

178,000

X

$365.00

=

$64,970,000

VALUE CONCLUSION
Indicated Stabilized Value

$64,000,000

Lease-Up Discount

($25,255,000)

Adjusted Value Indication (As Is/Stabilized)

$38,745,000

Rounded

$38,750,000

Value Per SF

$217.70

Compiled by CBRE

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

INCOME CAPITALIZATION APPROACH
The Income Capitalization Approach reflects the subject’s 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 period of time. The two common valuation
techniques associated with the Income Capitalization Approach are direct capitalization and the
discounted cash flow (DCF) analysis.
DIRECT CAPITALIZATION
Direct capitalization is the method used to convert a single year’s estimate of income into a value
indication. In direct capitalization, a precise allocation between return on and return of capital is not
made because investor assumptions or forecasts concerning the holding period, pattern of income, or
changes in value of the original investment are not simulated in the method. Direct capitalization is
most appropriate when analyzing a stable income stream and in estimating the reversion at the end of
a holding period. Using this method, the following sets forth the process:
1. Estimate the Potential Gross Income (PGI) from all sources that a competent owner should
be able to generate from a property based on existing and/or market rents.
2. Deduct an estimate of Vacancy and Collection Loss (VCL) to arrive at an Effective Gross
Income (EGI) estimate.
3. Deduct operating expenses from the estimate of EGI. The result is an estimate of the
stabilized Net Operating Income (NOI).
4. Estimate an Overall capitalization rate (Ro, or OAR).
5. Divide the NOI by Ro, resulting in a value estimate at stabilized occupancy.
6. Adjust the stabilized value to account for “as is” condition, if applicable.
DISCOUNTED CASH FLOW ANALYSIS
The discounted cash flow (DCF) analysis is a detailed analysis used when the future income is
expected to be variant, usually as a result of numerous lease obligations and/or anticipated changes
in income and expenses. It is also particularly relevant when institutional buyers are the most likely
purchasers of the subject because institutional buyers often place great weight on this analysis. The
DCF analysis specifies the quantity, variability, timing, and duration of NOIs and cash flows.
Selecting the proper yield rate (discount rate) is essential. CBRE must consider the target yield sought
by investors as well as yields derived from comparable sales and/or market information. The
methodology is:
1. Estimate the before-tax cash flows for each period of a projected holding period net of
any capital expenditures such as leasing expenses and tenant improvements.

71

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

2. Estimate a discount rate and a terminal overall capitalization rate.
3. Estimate a selling price, known as the reversion, for the end of the projected holding
period.
4. The cash flows and the reversion are then discounted to a present value estimate.
APPROPRIATE CAPITALIZATION METHOD
A number of factors were considered in evaluating the appropriateness of using the direct
capitalization method and/or the DCF technique. Considering the subject’s assumed market
lease/income characteristics, we utilize the direct capitalization analysis exclusively. The DCF analysis
is more useful with income properties involving complicated lease structures and tenancies, which is
not the case with the subject.
ESTIMATE OF POTENTIAL GROSS INCOME
Contract Rent
The subject property is currently occupied nearly entirely by the owner, except for an 8,000 square
foot area on the ground floor along the east side of the building. The subject owners have executed a
lease with The Hall, L.P. (“The Hall, by Giuseppe”) for a term of 15 years with rent based on 7.5% of
gross sales of the restaurant and 10% of gross sales for catering business; there is no fixed rent
amount. The lease is subject to termination by either party if the tenant’s sales are less than
$750,000 during the first 6 months of operation. The landlord is required to provide a one-time
tenant improvement allowance of $650,000, which will basically be provided to the tenant as a rent
credit during the first months of occupancy to offset their improvement/fixturization costs.
ESTIMATE OF MARKET RENT
Estimation of the potential gross income for office complexes, such as the subject, requires an analysis
not only of the subject's rents in place, but of the competitive rental market as well. The following
summary outlines the competitive or relevant properties that were most relied on in estimating market
rent for the subject property. Our primary selection criteria were comparability in age, use, size,
build-out, location, quality and overall appeal.

The data reflects the most competitive class A

properties in downtown. A more detailed description of each comparable is included in the Addenda.

72

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

COMPARABLE LEASE MAP

73

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

SUMMARY OF COMPARABLE OFFICE RENTALS
Comp.
No.
1

2

3

4

5

6

Subj.

Property Name
and Location

Year
Built

Occ.

NRA (SF)

Expense
Basis

DiamondView Tower
350 10th Avenue,
San Diego, CA

2007

92%

305,255

FSG

First Allied Plaza
655 W. Broadway,
San Diego, CA

2005

Emerald Plaza
402 West Broadway,
San Diego, CA

1991

One America Plaza
600 W. Broadway,
San Diego, CA

550 Corporate Center
550 W. C Street,
San Diego, CA

501 West Broadway Office
Building
501 West Broadway,
San Diego, CA

Thomas Jefferson School of
Law Building
1155 Island Avenue,
San Diego, California

1991

1989

1989

2011

87%

88%

84%

94%

96%

100%

376,703

364,160

581,136

357,477

394,031

178,000

FSG

FSG

FSG

FSG

FSG

Tenant
Name

Lease
Area (SF)

Lease
Date

Lease
Term

Base Rent

TIA/SF

Escalations

Herron Law

1,016

Feb-14

3.3 Yrs.

$3.35 PSF

$2.50 PSF

3%/yr

Jack Oatman

1,026

Dec-13

3.3 Yrs.

$3.25 PSF

$0.00 PSF

3%/yr

Quoted

---

---

---

$3.40 PSF

$10.00 PSF

3%/yr

Best, Best & Kreiger, LLC

20,053

Jan-14

10.00 Yrs.

$3.05 PSF

$20.00 PSF

3%/yr

Freidberg & Bunge

5,761

Apr-13

5.00 Yrs.

$2.45 PSF

$40.00 PSF

3%/yr

Quoted

---

---

---

$3.00 PSF

$20.00 PSF

3%/yr

Flat

White, Oliver & Amundson

4,960

Feb-14

5.5 Yrs.

$2.11 PSF

$0.00 PSF

US General Services Admin

4,110

Feb-14

1.0 Yrs.

$2.43 PSF

$0.00 PSF

Flat

Contreras Law, APC

2,481

Feb-14

3.0 Yrs.

$2.20 PSF

$0.00 PSF

3%/yr

Quoted

---

---

---

$2.25 PSF

$0.00 PSF

3% Annual

Coastal California Funding Group

3,348

Sep-13

5.0 Yrs.

$2.30 PSF

$0.00 PSF

4.5%/yr

Latham & Watkins, LLP

3,615

Jul-13

2.0 Yrs.

$2.00 PSF

$0.00 PSF

4.5%/Year

US Bank (Bank Branch Retail)

7,015

Jun-13

5.0 Yrs.

$4.00 PSF

$0.00 PSF

4.5%/Year

Teris

12,803

Jun-13

7.0 Yrs.

$2.00 PSF

$50.00 PSF

4.5%/Year

Quoted

---

---

---

$2.55 PSF

$0.00 PSF

Nego.

Hermansen & Marcucilli

1,070

Aug-13

5.0 Yrs.

$2.40 PSF

$18.00 PSF

3%/yr

Veritext Corp

10,923

Aug-13

10.9 Yrs.

$2.25 PSF

$62.00 PSF

2.5%/yr

Lincoln, Gustafson & Cercos

12,511

Jul-13

10.0 Yrs.

$2.05 PSF

$61.00 PSF

3%/yr

Virgina Nelson

2,046

Jun-13

3.0 Yrs.

$2.15 PSF

$1.50 PSF

3%/yr

Quoted

---

---

---

$2.65 PSF

$7.00 PSF

3%/yr

Altep, Inc.

3,414

Mar-14

3.2 Yrs.

$2.06 PSF

$0.00 PSF

4%/yr

PIA Holdings, Inc.

3,071

Feb-14

3.0 Yrs.

$2.10 PSF

$0.00 PSF

4%/yr

Littler Mendelson

17,649

Dec-13

5.0 Yrs.

$2.20 PSF

$25.00 PSF

4.5%/yr

Pestonik & Gold

2,500

Aug-13

5.0 Yrs.

$2.20 PSF

$40.00 PSF

4.5%/yr

Quoted

---

---

---

$2.50 PSF

$0.00 PSF

3-4%/yr

FSG

Compiled by CBRE

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

ANALYSIS OF RENT COMPARABLES-OFFICE SPACE
Comparable No. 1
As previously described, DiamondView Tower is a class A, high-rise office building located in close
proximity to the subject, directly adjacent to Petco Park in the East Village. Regarded as maybe the
premier office buildings in downtown, the high quality building has extensive amenities, including
retail (restaurants, cleaners, coffee), health club, and a roof top deck with conference facility, as well
as views overlooking the ballpark and harbor. The property has a subterranean garage with
1.2/1,000 SF parking and parking rights within the adjacent Padres Parkade garage on 10th Avenue,
which increases its parking ratio to 3.5/1,000 SF. The property is 92.2% leased with 3,290 square
feet of retail space available and 20,465 square feet of office space, including a 17,694 square foot
full floor. Recent leases had rates of $3.25 to $3.35 per square foot on a full service gross basis with
base year reimbursements. Current asking rent for vacant office space is $3.40 per square foot, full
service gross, with free rent and improvement allowance negotiable.
This comparable is overall a superior indication of market rent for the subject mainly due to parking,
views, amenities and proximity to the ballpark and the public park at Petco Park. Functional utility is
also slightly superior.
Comparable No. 2
The First Allied Plaza is located at the southeast corner of West Broadway and Kettner Boulevard in
the Columbia District of downtown. The building is situated near the Federal Courthouse and County
Court complex, in short walking distance to the Coaster commuter rail and Trolley, as well as Little
Italy and the harbor waterfront. This comparable was the first new class A office building built from
1991 to 2005. It has a distinctive award winning glass and concrete exterior that features a two-story
lobby atrium with hand carved classic Roman travertine, Uruguayan granite, exposed concrete, art
glass and aluminum elements. The building includes 350,000 square feet of office space, 15,000
square feet of retail space, parking for 766 cars (2.1/1,000 Sq.Ft.), and a four-story residential
component on the E Street side. Floors 6 through 26 are office space with skyline and harbor views,
the 1st and 2nd floors offer retail space and parking with additional parking on the 3rd through 5th
floors. The building is 87% leased with 50,244 square feet vacant for lease at negotiable rates. The
most recent lease was an early renewal for 10 years with Best, Best & Kreiger, LLC in 20,053 square
feet at a lease rate of $3.05 per square foot, full service gross, with 3% escalations, 3 months of free
rent and a $20 per square foot improvement allowance. Previous leases in 2013 had lease rates at
$2.45 per square foot, full service, with 1 month of free rent for each lease year and improvement
allowances of $0 to $60 per square foot.
This comparable has superior proximity to the courts and a higher parking ratio than the subject,
along with superior views from the upper floors. However, the roof floor deck and conference room of

75

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

the subject is a superior amenity for tenants. For law firms and attorneys the proximity to the court
houses is an important locational factor, but other types of office space users do not have that same
location requirement and the proximity to the ballpark, as well as the eateries, bars and restaurants in
the East Village and Gaslamp Quarter is an appealing locational factor for the subject. Overall, this
comparable provides a similar to slightly superior indication of market rent for the subject.
Comparable No. 3
Emerald Plaza is a 30-story high rise office complex and mixed use project, which includes a 27-story
Wyndham Emerald Plaza Hotel (436 rooms) and 3-story atrium lobby. It is located at West Broadway
and Columbia Street in the western end of the downtown area near the Federal Courthouse, County
Court House, Trolley and commuter rail. The hexagonal architectural design and green neon lighting
makes this building one of the premier landmark buildings of the San Diego skyline. 400 spaces of
subterranean parking provide 1.7/1,000 SF. The building is 88 percent leased with available space
marketed at $2.25 to $2.85 per square foot, full service gross. Recent leases had rates of $2.10 to
$2.43 per square foot, full service gross. Free rent was typically less than one month per lease year
and tenant improvement allowances ranged from as-is for shorter term leases up to $30 per square
foot for long term leases.
This comparable has hexagonal floor plates, which are difficult for space planning of office layouts.
The shared atrium lobby and entries for the office tower and hotel is confusing for visitors to the office
tenants and inhibits direct access to the office elevator lobby. The building design restricts rooftop
signage and limits eyebrow signage at street level. Overall, this comparable is inferior to the subject
in appeal, age, utility, but its location is overall similar to slightly superior mainly due to its higher
profile on Broadway and proximity to the courts, which is partially offset by its inferior proximity to the
ballpark and Gaslamp Quarter. This comparable reflects inferior market rents for the subject.
Comparable No. 4
One America Plaza is a class A, 34-story high rise office building and located on West Broadway at
Kettner Boulevard across the street from the Santa Fe Depot, the Coaster commuter rail and Amtrak
station. The building has a Trolley station on the ground floor. The comparable is considered to be
one of the premier office buildings downtown with high quality finishes and the signature architectural
design offers unobstructed views of San Diego Bay. The building has an underground garage parked
at 2 per 1,000 square feet with no tandem parking. The occupancy was high for several years but a
major tenant, Latham and Watkins with 77,147 square feet comprising the 16 through 19 floors,
relocated out of the building in February 2014. The building is 84 percent leased with direct vacant
space marketed at $2.25 to $2.85 per square foot, full service gross. Another major law firm tenant
in the building, Luce Forward, with 111,000 square feet is currently offering 44,226 square feet for
sublease at $2.25 per square feet. The US Bank ground floor branch was renewed for 5 years at

76

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

$4.00 per square foot, full service gross. Other recent office leases had lease rates from $2.00 to
$2.30 per square foot, full service gross.
While this comparable has superior views and a higher parking ratio than the subject, the age, size of
vacancy, and overall quality/appeal are inferior factors. Location is similar to slightly superior for the
same reasons as Emerald Plaza. Overall, this comparable represents an inferior indication of market
rent for the subject.
Comparable No. 5
The 550 Corporate Center is a class A, 20-story building in the west portion of downtown along West
C Street at Columbia Street, near the Trolley station and the Santa Fe Depot. The property has a
granite and tinted glass exterior with open air lobby with extensive green marble. The building is 94
percent leased with available office space ranges marketed at $2.50 to $2.65 per square foot, full
service gross. All of the recent leasing activity involved new deals with rates from $2.05 to $2.40 per
square foot, full service gross. The retail bank branch space in the lobby is available at $3.00 per
square foot.
Overall, based mainly on quality/appeal and age/condition, this comparable is an inferior indication
of market rent for the subject. Location and parking are partially offsetting slightly superior factors.
Comparable No. 6
The 21-story class A office property located at 501 West Broadway (formerly known as the Koll
Center) is located at West Broadway at Columbia Street, near the Trolley station and commuter rail in
the western portion of downtown. The building is 96% leased with 20,786 square feet vacant.
Currently, available space is being marketed at $2.35 to $2.50 per square foot, full service gross,
depending upon floor and views. Recent leases had start rates of $2.20 to $2.25 per square foot on
a full service gross basis.
Overall, based mainly on quality/appeal and age/condition, this comparable is an inferior indication
of market rent for the subject. Location and parking are partially offsetting slightly superior factors.
MARKET RENT CONCLUSION-OFFICE
Based mostly on comparable’s 1 and 2 due to location and/or age/quality, we conclude a
reasonable market rent for the subject of $3.00 to $3.25 per square foot per month, full service
gross, and correlate to the low end due to the subject’s untested nature in the market for lease. This
rent conclusion assumes a typical 5 to 10-year lease term (7-yr average) and annual increases of 3.0
percent per year. These rates also assume a tenant improvement allowance of approximately $25.00
to $40.00 per square foot for new leases of previously occupied space, and approximately $7.50
(mid-point $5 to $10) for renewals to mainly clean carpet and paint, if necessary. The higher average

77

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

rate of $40.00 is applicable to the 2nd and 3rd floors and the shell space on the ground floor due to
their unique layout, limited tenant market, and likelihood for conversion to office if an educational
tenant cannot be found. The 4th and 5th floor library areas are mainly open and would likely be
readily adaptable to standard office. We also assume 7 months free rent on initial leases, declining to
3 months thereafter based on the expectations for stronger market conditions in late 2014/2015 and
thereon.
The following depicts the market rent conclusions for the subject:
MARKET RENT CONCLUSIONS
Category

Office Space

NRA (SF)

178,000

Percent of Total SF

100.0%

Market Rent ($/SF/Mo.)

$3.00

Concessions (next 24 mos.)

7 Mos

Reimbursements

FSG

Annual Escalation

3.0%

Tenant Improvements (New Tenants)

$25-40

Tenant Improvements (Renewals)

$7.50

Average Lease Term

7 Years

Compiled by CBRE

POTENTIAL RENTAL INCOME CONCLUSION
Potential rental income is estimated based on the estimated market rent for the building, which is
appropriate as the property is assumed to be vacant with no lease encumbrance. Given the lack of
operating history with The Hall tenant and the uncertainty regarding their sales potential and future at
the property, no consideration is given to their lease in our analysis.
VACANCY AND COLLECTION LOSS
Investors are primarily interested in the revenues that an income producing property is likely to
produce annually over a specific period of time, rather than what it could produce if it were always
fully occupied, with all tenants paying rent in full and on time. It is normally prudent practice to expect
some income loss, either in the form of actual vacancy or in the form of turnover, nonpayment or slow
payment by tenants. As such, in our analysis we have utilized a vacancy and collection loss factor to
account for this factor.
The occupancy rates among the comparable office properties utilized within this report ranged from
84 to 96 percent with a weighted average of 90 percent. This is higher than the submarket average
of 84 percent, but consistent with the class A average for the submarket of 90 percent, which indicates
the relative strength of the class A segment.
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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

Based on recent investment sales activity, investors will use an approximate five to ten percent vacancy
and collection allowance in their income pro formas with a multi-tenant office property with stable
submarket fundamentals. A portion of the allowance is to account for the default risk with the tenants
and a portion is to account for the rent loss and releasing costs at the termination of the existing
leases. This is also consistent with the calculation of net operating income for most of the investment
sales used to derive an overall capitalization rate. A lower allowance is applicable with longer lease
terms, generally 10 years or longer, and tenants with strong financials. However, it is important to
note that the allowance for vacancy is not intended to mirror the average vacancy rate for the given
submarket, but is rather an allowance or hedge for future rollover of leases.
Investors typically quantify their vacancy assumption based on existing leases, probabilities of renewal,
and typical downtime or releasing periods to secure a new tenant. Assuming a downtime between
leases averaging approximately 12 months, a 70 percent renewal probability, and average 7-year
lease terms, the average vacancy on rollover is approximately 4 percent. Assuming a more
conservative 50 percent renewal probability, the average vacancy increases to 7 percent.
Overall, we will conclude a 7.5 percent stabilized vacancy and collection allowance, which is
primarily a hedge for future vacancy at the end of the prospective lease term(s) of 7 years. It also
includes an allowance of 1.0 to 2.0 percent for credit loss/tenant default.
PARKING INCOME
Significant income from parking garage operations is typical with downtown office buildings, including
daytime monthly revenue, transient revenue, and parking coupon/validation revenue. The subject’s pro
forma parking income is detailed as follows:
PARKING INCOME
Year

$/Space

$/SF

$1,634,036

$4,311

$4.07

Comparable 2 (2012)

$996,024

$3,037

$3.26

Comparable 3 (2013)

$1,663,896

$2,801

$2.97

$528,000

$3,000

$2.97

Comparable 1 (2014 Budget)

CBRE Estimate

Total

Compiled by CBRE

EXPENSE REIMBURSEMENTS
The subject’s office lease(s) are assumed to be based on a full service gross lease structure, which
requires the owner to pay all operating expenses and the tenants to reimburse the owner for their pro
rata share of increases in repairs and maintenance, janitorial, utilities, real estate taxes, property
insurance, general and administrative, and property management expenses over a base year expense
stop. The subject’s other income is detailed as follows:

79

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

EXPENSE REIMBURSEMENTS
Year

Total

CBRE Estimate

$0

$/SF
$0.00

Compiled by CBRE

Since our direct capitalization analysis assumes the subject is leased at market rent and terms, and is
based on the first year of occupancy, which would be the tenant’s base year, no reimbursement
revenue is included therein.
OTHER INCOME
Other income is supplemental to that derived from leasing of the improvements.

This includes

categories such as forfeited deposits, antennae income, late charges, after-hour utility charges, et
cetera. The subject’s other income is detailed as follows:
OTHER INCOME
Year

Total

CBRE Estimate

$0

$/SF
$0.00

Compiled by CBRE

In the absence of adequate operating history, we include no income for this category.
EFFECTIVE GROSS INCOME
The subject’s pro forma effective gross income is as follows and is based on the foregoing analysis of
each income component.
EFFECTIVE GROSS INCOME
Year

Total

CBRE Estimate

$6,415,800

% Change
-

Compiled by CBRE

OPERATING EXPENSE ANALYSIS
A full accounting of operating expenses was not available for the subject, except for utilities.

80

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

OPERATING HISTORY
Year-Occupancy

2012

100.0%

Total
Income
Rental Income

$/SF

2013

100.0%

Total

$/SF

2014 Budget
Total

100%
$/SF

-

$0.00

-

$0.00

Parking Income

-

-

-

-

-

-

Other Income

-

-

-

-

-

-

Expense Reimbursements

-

-

-

-

-

Effective Gross Income
Expenses
Real Estate Taxes
Property Insurance
Utilities

$0

$0.00

$0

$0.00

-

$0.00

-

-

-

403,375

General Operating

-

2.27

$0

428,073

-

-

$0

$0.00

2.40

-

Total

2

92.5%
$/SF

$5,927,400

$33.30

488,400

2.74

-

-

$0

$0.00

$6,415,800

$36.04

$0

$0.00

$779,010

$4.38

115,700

0.65

478,360

-

$0.00

CBRE
Estimate

-

2.69
-

445,000

2.50

267,000

1.50

Repairs & Maintenance

-

-

-

-

-

-

311,500

1.75

Janitorial

-

-

-

-

-

-

178,000

1.00

Management Fee ¹

-

-

-

-

-

-

160,395

0.90

Nonreimbursible Landlord Expense

-

-

-

-

-

-

17,800

0.10

Reserves for Replacement
Operating Expenses

$403,375

$2.27

$428,073

$2.40

$478,360

$2.69

$2,274,405

$12.78

Net Operating Income

($403,375)

($2.27)

($428,073)

($2.40)

($478,360)

($2.69)

$4,141,395

$23.27

¹ (Mgmt. typically analyzed as a % of EGI)

#DIV/0!

#DIV/0!

Source: Operating statements

81

#DIV/0!

2.5%

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

EXPENSE COMPARABLES
The following table summarizes expenses obtained from comparable properties.
EXPENSE COMPARABLES
Comparable Number
Location
NRA (SF)
Expense Year

CBRE
Estimate

1

2

3

Downtown SD

Downtown

Downtown SD

305,255

401,444

520,000

2012 Budget

2013

2013

Effective Gross Income

$43.15

Expenses

$/SF

Real Estate Taxes

$30.37
$/SF

2014

$28.28
$/SF

$36.04
$/SF

$4.58

$2.81

$2.62

$4.38

Property Insurance

1.22

0.57

0.53

0.65

Utilities

3.47

1.45

2.74

2.50

General Operating

2.37

1.56

1.73

1.50

Repairs & Maintenance

1.59

3.07

3.56

1.75

Janitorial

0.79

1.12

1.21

1.00

Management Fee ¹

0.86

0.78

0.74

0.90

Nonreimbursible Landlord Expense

0.94

1.32

0.58

0.10

Reserves for Replacement
Operating Expenses
Operating Expense Ratio
¹ (Mgmt. typically analyzed as a % of EGI)

-

-

-

-

$15.82

$12.69

$13.71

$12.78

36.7%

41.8%

48.5%

35.5%

2.0%

2.6%

2.6%

2.5%

Compiled by CBRE

OPERATING EXPENSE CONCLUSION
The CBRE estimates for expenses, other than utilities, are based mainly on the comparable data.
Utilities are based on the subject’s historical and budget figures. The subject’s pro forma estimate is
detailed as follows.
OPERATING EXPENSES
Year

Total

$/SF

Expense Comparable 1

N/A

$15.82

Expense Comparable 2

N/A

$12.69

Expense Comparable 3

N/A

$13.71

CBRE Estimate

$2,274,405

Compiled by CBRE

82

$12.78

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

On a stabilized basis, the appraiser’s estimate is within the range of the comparables, albeit at the low
end, which is likely due to its relatively new construction and lower R&M and utilities
requirements/efficiencies.
NET OPERATING INCOME CONCLUSION
The subject’s net operating income is detailed as follows:
NET OPERATING INCOME
Year

Total

CBRE Estimate

$/SF

$4,141,395

$23.27

Compiled by CBRE

DIRECT CAPITALIZATION
Direct capitalization is a method used to convert a single year’s 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 OARs confirmed for the comparable sales analyzed in the Sales Comparison Approach are as
follows:
COMPARABLE CAPITALIZATION RATES
Sale

Sale Price

Date

$/SF

Occupancy

OAR

1

Oct-12

$396.39

98%

6.54%

2

Nov-13

$257.24

82%

7.67%

3

Aug-13

$243.78

93%

6.81%

4

Nov-12

$243.81

72%

7.68%

5

Sep-13

$300.02

90%

N/A

6

Nov-13

$403.00

100%

7.19%

7

Dec-13

$301.82

Sale

Indicated OAR:

78%

6.95%

93%

6.50-7.00%

Compiled by: CBRE

The comparables indicate OAR’s ranging from 6.54 to 7.68 percent, which are generally based on
the actual price and stabilized NOI. The high end of the range, comparables 2 and 4, are nonstabilized properties with relatively high vacancy and discounted prices for lease-up costs. Excluding
these two sales, the OAR’s range from 6.54 to 7.19 percent.

Comparable 1 is the sale of

DiamondView Tower, which is arguably the most competitive property with the subject in the
downtown submarket. Its OAR was inflated somewhat because of over-market rent and it sold during

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

inferior investment market conditions, which are both inferior factors that would result in its OAR being
higher than reasonable for the subject. That said, it has a superior location and strong tenant credit
in place at sale, both partially offsetting superior factors.
Based on the foregoing analysis, we conclude a reasonable OAR for the subject at 6.50 to 6.75
percent.
Published Investor Surveys
The results of the most recent National Investor Survey, published by CBRE, Inc., are summarized in
the following table.
OVERALL CAPITALIZATION RATES
Investment Type

OAR Range

Average

Office-San Diego (CBRE Capital Markets Survey-January 2014)
Class A

6.25% -

6.75%

-

Class B

6.50% -

7.00%

-

Class C

7.50% -

8.00%

-

5.50% -

9.00%

7.16%

PwC Suburban Office
San Diego
Indicated OAR:

6.25-6.50%

Compiled by: CBRE

The subject is considered to be a class A property (age/quality) in an A-minus office location in the
San Diego metro area. These factors suggest a reasonable overall capitalization rate that is near the
middle to higher portion of the range for A-grade buildings in the investor survey.
Market Participants
The results of recent interviews with knowledgeable real estate professionals are summarized in the
following table.
OVERALL CAPITALIZATION RATES
Respondent
Royce Hudson
Confidential
Louay Alsadak

Company

OAR

Irvine Company

6.50-7.00%

Emmes

6.00-7.00%

CBRE

Indicated OAR:

6.00-7.00%
6.00-7.00%

Compiled by: CBRE

In deriving an appropriate overall capitalization rate for the subject, several market participants were
interviewed and consulted in gathering applicable information. The rates noted above assume typical
contract to market differential and their opinions are for class A office in downtown San Diego in
84

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

general. None were able to provide an opinion for the subject, but the general consensus is the
typical buyer will give credit for the subject’s age and quality/appeal.
Capitalization Rate Conclusion
The following table summarizes the OAR conclusions. Most consideration is given to the comparable
data.
OVERALL CAPITALIZATION RATE - CONCLUSION
Source

Indicated OAR

Comparable Sales

6.50-7.00%

National Investor Survey

6.25-6.50%

Market Participants

6.00-7.00%

CBRE Estimate

6.50%

Compiled by: CBRE

Direct Capitalization Summary
A summary of the direct capitalization of the subject is illustrated in the following table.

85

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | I NCOME C APITALIZATION A PPROACH

DIRECT CAPITALIZATION SUMMARY
Income
Potential Rental Income

$/SF/Yr
$36.00

Total
$6,408,000

Vacancy

6.00%

(2.16)

(384,480)

Credit Loss

1.50%

(0.54)

(96,120)

Net Rental Income

$33.30

$5,927,400

Parking Income

2.97

528,000

Other Income

0.00

Expense Reimbursements
Vacancy & Credit Loss

7.50%

Effective Gross Income
Expenses
Real Estate Taxes
Property Insurance

-

0.00

-

(0.22)

(39,600)

$36.04

$6,415,800

$4.38

$779,010

0.65

115,700

Utilities

2.50

445,000

General Operating

1.50

267,000

Repairs & Maintenance

1.75

311,500

Janitorial

1.00

178,000

0.90

160,395

0.10
$12.78

17,800
$2,274,405

Management Fee

2.50%

Nonreimbursible Landlord Expense
Operating Expenses
Operating Expense Ratio

35.45%

Net Operating Income

$23.27

OAR
Indicated Stabilized Value

$4,141,395
/
6.50%
$63,713,763
$63,725,000

Rounded

(18,663,726)

Lease-Up Discount

(6,591,079)

Entrepreneurial Profit
Value Indication - As Is

$38,470,195

Rounded

$38,500,000

Value Per SF

$216.29

Matrix Analysis

Cap Rate

Compiled by CBRE

86

Value

6.25%

$47,598,600

6.50%

$45,050,000

6.75%

$42,690,300

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | R ECONCILIATION OF V ALUE

RECONCILIATION OF VALUE
The value indications from the approaches to value are summarized as follows:
SUMMARY OF VALUE CONCLUSIONS
As Is
April 14, 2014

As Stabilized
(Hypothetical)
April 14, 2014

Sales Comparison Approach

$38,750,000

$64,000,000

Income Capitalization Approach

$38,500,000

$63,725,000

Reconciled Value

$38,500,000

$63,800,000

Compiled by CBRE

In the Sales Comparison Approach, the subject property 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 comparable to the subject, and the required adjustments were based on reasonable and
well supported rationale. However, the Sales Comparison Approach is given secondary emphasis in
the final value reconciliation.
The Income Capitalization Approach is applicable to the subject property since it could be an income
producing property leased in the open market. Market participants are currently analyzing properties
based on their income generating capability. Therefore, the Income Capitalization Approach is
considered to be a reasonable and substantiated value indicator and has been heavily weighted in the
final value estimate.
Based on the foregoing, the market value of the subject has been concluded as follows.
MARKET VALUE CONCLUSION
Appraisal Premise

Interest Appraised

Date of Value

Value Conclusion

As Is

Leased Fee Interest

April 14, 2014

$38,500,000

As Stabilized (Hypothetical)

Leased Fee Interest

April 14, 2014

$63,800,000

Compiled by CBRE

87

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A SSUMPTIONS AND L IMITING C ONDITIONS

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, Inc. is not aware of any title defects nor has it been advised of any
unless such is specifically noted in the report. CBRE, Inc., 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 subject’s 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, Inc. professionals
are not engineers and are not competent to judge matters of an engineering nature. CBRE, Inc. 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, Inc. by ownership or management; CBRE, Inc. inspected
less than 100% of the entire interior and exterior portions of the improvements; and CBRE, Inc. 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, Inc. 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, Inc. has no knowledge of the existence of such materials on or in
the property. CBRE, Inc., 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,
Inc. 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, owner’s 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, Inc. 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, Assessor’s 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, Inc. reserves
the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should

88

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A SSUMPTIONS AND L IMITING C ONDITIONS
carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of
this report and should immediately notify CBRE, Inc. 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, Inc. will be available to discuss the
necessity for revision resulting from changes in economic or market factors affecting the subject.
7. CBRE, Inc. 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, Inc. 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, Inc. does not warrant these forecasts will occur. Projections may be
affected by circumstances beyond the current realm of knowledge or control of CBRE, Inc.
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, Inc. 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, Inc. nor may this
report or copies hereof be transmitted to third parties without said consent, which consent CBRE, Inc. 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, Inc. which consent CBRE, Inc. 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, Inc.
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.
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.

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THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A SSUMPTIONS AND L IMITING C ONDITIONS
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, Inc. 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, Inc. 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 client’s designees, to read in full, comprehend
and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE,
Inc. assumes responsibility for any situation arising out of the Client’s 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, Inc. 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, Inc. 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, Inc. has no specific
information relating to this issue, nor is CBRE, Inc. qualified to make such an assessment, the effect of any possible noncompliance 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
approximately result in damage to Appraiser. Notwithstanding the foregoing, Appraiser shall have no obligation under
this Section with respect to any loss that is caused solely by the active negligence or willful misconduct of a Client and is
not contributed to by any act or omission (including any failure to perform any duty imposed by law) by Appraiser.
Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising
as a result of the Client's failure or the failure of any of the Client's 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. As part of the client’s requested scope of work, an estimate of insurable value is provided herein. CBRE, Inc. 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 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, Inc. regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop
any estimate of insurable value.

90

THOMAS JEFFERSON SCHOOL OF LAW BUILDING | A DDENDA

ADDENDA

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA

ADDENDUM A
GLOSSARY OF TERMS

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA

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. †

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. ‡

disposition value

The most probable price which a
specified interest in real property is likely to bring under
all of the following conditions: 1) Consummation of a
sale will occur within a limited future marketing period
specified by the client; 2) The actual market conditions
currently prevailing are those to which the appraised
property interest is subject; 3) The buyer and seller is
each acting prudently and knowledgeably; 4) The seller
is under compulsion to sell; 5) The buyer is typically
motivated; 6) Both parties are acting in what they
consider their best interests; 7) An adequate marketing
effort will be made in the limited time allowed for the
completion of a sale; 8) Payment will be made in cash in
U.S. dollars or in terms of financial arrangements
comparable thereto; and 9) 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.‡

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. ‡

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 not needed to accommodate the site’s
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 appraiser’s 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. ‡

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. ‡

full service lease

A lease in which rent covers all
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
through to the tenant and are known as expense passthroughs.

going concern value Going concern value is the 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. †

gross building area (GBA) The total floor area of a

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. ‡

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. ‡

investment value Investment value is the value of an
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,

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA
needs, or investment goals. To estimate investment value,
specific investment criteria must be known. Criteria to
evaluate a real estate 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.‡

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.‡

liquidation value

The most probable price which a
specified interest in real property is likely to bring under
all of the following conditions: 1) Consummation of a
sale will occur within a severely limited future marketing
period specified by the client; 2) The actual market
conditions currently prevailing are those to which the
appraised property interest is subject; 3) The buyer is
acting prudently and knowledgeably; 4) The seller is
under extreme compulsion to sell; 5) The buyer is typically
motivated; 6) The buyer is acting in what he or she
considers his or her best interests; 7) A limited marketing
effort and time will be allowed for the completion of a
sale; 8) Payment will be made in cash in U.S. dollars or in
terms of financial arrangements comparable thereto; and
9) 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. ‡

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; the lessee and lessor each acting prudently
and knowledgeably, and assuming consummation of a
lease contract as of a specified date and the passing of
the leasehold from lessor to lessee under conditions
whereby: 1) lessee and lessor are typically motivated; 2)
both parties are well informed or well advised, and acting
in what they consider their best interests; 3) a reasonable
time is allowed for exposure in the open market; 4) the
rent payment is made in terms of cash in U.S. dollars and
is expressed as an amount per time period consistent with
the payment schedule of the lease contract; and 5) the
rental amount represents the normal consideration for the

property leased unaffected by special fees or concessions
granted by anyone associated with the transaction. ‡

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.§

marketing period The time it takes an interest in real

property to sell on the market subsequent to the date of
an appraisal. ‡

net lease Lease in which all or some of the operating
expenses are paid directly by the tenant. The landlord
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. *

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.‡

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

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA
achieved sellout or a stabilized level of long-term
occupancy at the time the appraisal report is written. ‡

accommodate future expansion of an existing or
anticipated improvement. See also excess land. ‡

reasonable exposure time The estimated length of

usable area 1) The area actually used by individual

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 build-out, and the tenant
completes the interior finish, which can include wall,
ceiling, and floor finishes; mechanical systems, interior
electric, and plumbing. Typically these 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

†

The Appraisal of Real Estate, Thirteenth Edition, Appraisal
Institute, 2008.
‡

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.

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

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
property’s 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. ‡

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA

ADDENDUM B
LEGAL DESCRIPTION

RealQuest.com ® - Report

Page 1 of 2

Property Detail Report
For Property Located At :
1123 ISLAND AVE, SAN DIEGO, CA 92101-7230
Owner Information
Owner Name:
Mailing Address:
Vesting Codes:

THOMAS JEFFERSON SCHOOL OF LAW
1155 ISLAND AVE, SAN DIEGO CA 92101-7230 C042
CO / /

Location Information
Legal Description:
County:
Census Tract / Block:
Township-Range-Sect:
Legal Book/Page:
Legal Lot:
Legal Block:
Market Area:
Neighbor Code:

PAR 1
SAN DIEGO, CA
51.00 / 2

APN:
Alternate APN:
Subdivision:
Map Reference:
Tract #:
School District:
School District Name:
Munic/Township:

535-124-03-00

10/24/2007 / 10/12/2007
$9,800,000
676518

Deed Type:
1st Mtg Document #:

GRANT DEED
676519

11/01/2005 / 10/13/2005
$987,000
FULL
950338
GRANT DEED

1st Mtg Amount/Type:
1st Mtg Int. Rate/Type:
1st Mtg Document #:
2nd Mtg Amount/Type:
2nd Mtg Int. Rate/Type:
Price Per SqFt:
Multi/Split Sale:

/
/

535-12
A,B
107

HORTONS ADD LOCKLING
/ 1289-B3
SAN DIEGO

Owner Transfer Information
Recording/Sale Date:
Sale Price:
Document #:

Last Market Sale Information
Recording/Sale Date:
Sale Price:
Sale Type:
Document #:
Deed Type:
Transfer Document #:
New Construction:
Title Company:
Lender:
Seller Name:

/
/
$44.86

LANDAMERICA COM'L SVCS
LARRYANDMARGEE LLC

Prior Sale Information
Prior Rec/Sale Date:
Prior Sale Price:
Prior Doc Number:
Prior Deed Type:

11/01/2005 / 10/10/2005
$924,000
950337
GRANT DEED

Prior Lender:
Prior 1st Mtg Amt/Type:
Prior 1st Mtg Rate/Type:

/
/

Site Information
Land Use:
Lot Area:
Lot Width/Depth:
Commercial Units:
# of Buildings:
Zoning:

PUBLIC SERVICE
30,056
x
1
1
6

Acres:
Usable Lot:
Lot Shape:
Bldg Width/Depth:
Building Class:
Water Type:

0.69

$89,605,314
$10,453,314
$79,152,000

Assessed Year:
Improved %:
Appraisal Dist:
Fire Dist:
Garbage Dist:

2013
88%

x

County Use:
State Use:
Site Influence:
Sewer Type:
Topography:
Water District:

PUBLIC BUILDING (676)

Property Tax:
Tax Area:
Tax Year:
Tax Exemption:
Equal Rate:
Equal Year:

$25,290.22
08242
2012
60

SOUTHERN CALIF150

Tax Information
Total Value:
Land Value:
Improvement Value:
Total Taxable Value:
Market Value:

Property Characteristics
Year Built / Eff:
Gross Area :
Building Area :
Tot Adj Area:
Rentable Area:
Addition Area:
Ground Floor Area:
Base/Main Area:
Upper Area :
Above Grade :
# of Stories:
Other Rooms:
Other Improvements:
Bldg Comments:
Parcel Comments:

/ 1965
22,000
22,000

Total Rooms/Offices:
Total Restrooms:
Garage Area:
Garage 2 Area:
Garage Capacity:
Parking Spaces:
Basement Area:
Pool:
Pool Area:
Quality:
Condition:

Heat Type:
Heat Fuel:
Air Cond:
Construction:
Exterior wall:
Interior wall:
Roof Type:
Roof Material:
Foundation:
Floor Type:
Floor Cover:

http://pro.realquest.com/jsp/report.jsp?&client=&action=confirm&type=getreport&recordno=0&r... 1/23/2014

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA

ADDENDUM C
QUALIFICATIONS

THOMAS JEFFERSON SCHOOL OF LAW BUILDING| A DDENDA

QUALIFICATIONS OF MARK REMICK
VICE PRESIDENT
CBRE, Inc.
Valuation and Advisory Services
4365 Executive Drive, Suite 1400
San Diego, California 92121-2127
GENERAL EDUCATION
Bachelor of Science (Finance)
San Diego State University

1985
REAL ESTATE EDUCATION

San Diego State University
Real Estate Principles

1984

Attended the following seminars sponsored by the Appraisal Institute.
Capitalization Theory and Techniques, Part B
Real Estate Appraisal Principles
Standards of Professional Practice, Parts A & B
Report Writing and Valuation Analysis
Advanced Applications
Standards of Professional Practice, Parts C
Highest and Best Use and Market Analysis
Sales Comparison and Cost Approach Analysis
National USPAP Course

April 1992
May 1989
August 1991
December 1993
July 1994
September 2000
July 2004
July 2006
September 2010

PROFESSIONAL ASSOCIATION
California OREA General Certification No. AG009535

1992 to Present

PROFESSIONAL EXPERIENCE
Over 18 years of Real Estate Appraisal and Consulting experience throughout the San Diego and greater Southern
California area.
CBRE, Inc. (formerly Coldwell Banker)
Senior Real Estate Appraiser
Bank of America, Real Estate
Senior Appraiser

1986 - Present
1985 - 1986

Coldwell Banker Commercial Real Estate Services
Research Analyst

1984

Bank of America, Real Estate
Associate Appraiser

1984

Phone:

QUALIFICATIONS OF ROBERT W. GUTZMAN, MAI
Director
CBRE, INC.
Valuation & Advisory Services
400 South Hope Street, 25th Floor
Los Angeles, California 90071
Fax:
E-mail:
EDUCATION

Occidental College, Bachelor of Arts in Economics
Los Angeles

1987

Professional Courses/Seminars: Litigation Seminar (numerous times); Real Estate Appraisal Principles;
Basic Valuation Procedures; Basic Capitalization Theory/Techniques; Advanced Capitalization
Theory/Techniques; Uniform Standards of Professional Appraisal Practice (every two years); Report
Writing and Valuation Analysis; Advanced Applications; The Law and Value; Eminent Domain;
Advanced Sales Comparison and Cost Approaches; Business Practices and Ethics (multiple times);
Special Purpose Properties; Income Valuation of Small, Mixed-Use Properties; Subdivision Valuation;
Appraiser as Expert Witness; Litigation Appraising; Condemnation Appraising; Federal and California
Statutory and Regulatory Law Course; numerous seminars and workshops
LICENSES/CERTIFICATIONS/CERTIFICATES
Member, Appraisal Institute (MAI) – Designation Number 11482 (1999)
California Certified General Real Estate Appraiser, Number AG025646 (1996)
Appraisal Institute Litigation Certificate Program, Certificate of Completion (2010)
EMPLOYMENT
CBRE, Inc. – Valuation & Advisory Services
Director, Los Angeles Office

1993 to Present

IBAR Settlement Co., Inc.
Economist/Expert Witness, Pasadena

1990 to 1993

First Interstate Bank of California
Local Markets Analyst, Los Angeles

1989 to 1990
EXPERIENCE

Experience in appraising various property types including office buildings, retail centers, industrial
buildings, multi-family buildings, golf courses, self-storage, hospitality properties, gas stations, vacant
land (including underwater land parcels), skilled-nursing and assisted-living facilities, single-family
residences, subdivisions, easements, and small income-producing properties.
Reports have been used for purchase and sale, financing, collateral management, estate purposes,
property tax appeals, eminent domain proceedings, bankruptcies, and general real estate litigation.
Guest speaker for the Southern California Chapter of the Appraisal Institute.
EXPERT WITNESS
Qualified as an expert witness in U.S. District Court, U.S. Bankruptcy Court, and California State
Superior Court in real estate appraisal (civil and criminal court) and in forensic economics (civil court).
Testified before the Los Angeles County Assessment Appeals Hearing Officer as well as the Orange
County and San Diego County Assessment Appeals Boards.