Cascade Divide Data Center - Appraisal Summary Report-Black - June 2020

Appraisal Report
Cascade Divide | Bend, OR 97702
as of June 1, 2020
Prepared for Prepared by Kidder Mathews

Valuation Advisory Services
Harvest Small Business Finance David Chudzik, Ph.D., MAI 601 Union Street, Suite 4720
Shane Hernandez Seattle, WA 98101
206.205.0200 l Fax
206.205.0220
KM Job A20-0566 david.chudzik@kidder.com
kidder.com
KIDDER.COM
June 11, 2020
Shane Hernandez
Harvest Small Business Finance
24422 Avenida De La Carlota #232
Laguna Hills, CA 92653
RE: Cascade Divide

207 SW Columbia Street
Bend, OR 97702
Dear Mr. Hernandez:
At your request, Kidder Matthews has prepared a comprehensive appraisal of the above-
referenced property, which is fully described in the attached report. As requested, the appraiser
has estimated the market value of the fee simple estate in the subject real estate. The
undersigned has obtained data regarding other similar real estate in the area and across the U.S.
This report has been prepared in conformance with the current Uniform Standards of Professional
Appraisal Practice (USPAP) and meets the appraisal standards for Federally Related Transactions
adopted by the Office of the Comptroller of Currency (OCC) and conforms with the Financial
Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA), the appraisal standards of
California Department of Financial Institutions and Harvest Small Business Finance. Our services
comply with and are subject to the Code of Professional Ethics and Standards of Professional
Practice of the Appraisal Institute. The intended use of this appraisal is to assist Harvest Small
Business Finance with a potential loan that would be collateralized by this asset. Harvest Small
Business Finance, LLC, and the U.S. Small Business Administration (SBA) are the intended users
of this report.
As a result of the appraiser’s investigation and analysis, the appraiser has concluded on the
following market values, subject to the limiting conditions and assumptions contained herein:
“As Is” on June 1, 2020…….….……………………………………………………………….$15,700,000

As Complete on June 1, 2020…….….……………………………………………………….$19,700,000
As Stabilized on June 1, 2020……………………………………….………….…………….$29,000,000
Respectfully submitted,
David Chudzik, Ph.D., MAI, CRE

State-certified General Real Estate Appraiser #C001182
Valuation Advisory Services
601 Union Street, Suite 4720 T 206.205.0200
Seattle, WA 98101 kidder.com 50 YEARS. THE EDGE IN YOUR MARKET.
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Certification
I certify that, to the best of my 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 my personal, impartial, and unbiased
professional analyses, opinions, and conclusions.
3) I have no present or prospective interest in the property that is the subject of this report, and
no personal interest with respect to the parties involved.
4) I have no bias with respect to the property that is the subject of this report or to the parties
involved with this assignment.
5) The engagement in this assignment was not contingent upon developing or reporting
predetermined results.
6) My compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined value or direction in value that favors the cause of the client, the
amount of the value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal.
7) My analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the Uniform Standards of Professional Appraisal Practice.
8) I have made a personal inspection of the property that is the subject of this report.
9) I have provided professional appraisal or consulting services concerning the subject property
once within the past three years in 2019.
10) No one provided significant real property appraisal assistance to the persons signing this
certification.
11) I certify that, to the best of my knowledge and belief the reported analyses, opinions and
conclusions were developed, and this report has been prepared, in conformity with the
requirements of the Code of Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute, FIRREA appraisal standards of California Department of
Financial Institutions.
12) I certify that the use of this report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives.
13) As of the date of this report, David Chudzik, Ph.D., MAI, CRE has completed the
requirements of the continuing education program for Designated Members of the Appraisal
Institute.

State-certified General Real Estate Appraiser
#C001182
Kidder Mathews
Valuation Advisory Services Page iii
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Limiting Conditions
Limiting conditions specific to this appraisal are:
1) The appraiser has made no survey of the property and assumes no responsibility in
connection with such matters. Any sketch or identified survey of the property included in
this report is only for the purpose of assisting the reader to visualize the property.
2) It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or
structures (including asbestos, soil contamination, or unknown environmental factors) that
render it more or less valuable. No responsibility is assumed for such conditions or for
arranging the studies that may be required to discover them.
3) No responsibility is assumed for the legal description or for matters including legal or title
considerations.
4) The information identified in this report as being furnished by others is believed to be
reliable, but no warranty is given for its accuracy.
5) The appraiser is not required to give testimony or attendance in court by reason of this
appraisal unless arrangements have previously been made.
6) The allocation of total value to land, buildings, or any fractional part or interest as shown in
this report, is invalidated if used separately in conjunction with any other appraisal.
7) The appraiser is competent and qualified to perform the appraisal assignment.
8) Valuation Advisory Services is a subsidiary of Kidder Mathews, a full service commercial
real estate brokerage firm. On occasion, employees or agents of the firm have interests in
the property being appraised. When present, interests have been disclosed, and the report
has been made absent of any influence from these parties.
RESTRICTION UPON DISCLOSURE & USE:

Neither all nor any part of the contents of this report (especially any conclusions as to value, the
identity of the appraiser or the firm with which he/she is connected, or any reference to the
Appraisal Institute or to the MAI designation) shall be disseminated to the public through
advertising media, public relations media, news media, sales media or any other public means of
communication without the prior written consent and approval of the appraiser. No part of this
report or any of the conclusions may be included in any offering statement, memorandum,
prospectus, or registration without the prior written consent of the appraiser.
Kidder Mathews
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Table of Contents
Letter of Transmittal ............................................................................................................... ii
Certification ........................................................................................................................... iii
Limiting Conditions ................................................................................................................ iv
Summary of Appraisal ............................................................................................................ 1
Introduction .......................................................................................................................... 10
Market Overview .................................................................................................................. 14
REGIONAL OVERVIEW ...................................................................................................... 18
DATA CENTER MARKET OVERVIEW ................................................................................... 23
Property Description ............................................................................................................. 36
Highest & Best Use .............................................................................................................. 46
Sales Comparison Approach ............................................................................................... 49
Income Capitalization Approach .......................................................................................... 59
Reconciliation & Final Value Opinion ................................................................................... 69
ADDENDUM
Engagement Letter
Title Report
Insurable Value
Appraiser’s Experience Data
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Summary of Appraisal
Kidder Mathews Summary of Appraisal

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Summary of Appraisal
Identity of Property Cascade Divide
207 SW Columbia Street
Bend, OR 97702
Property Description The subject is currently improved with a vintage 2015 purpose-built data
center building with a total of 12,475 sq ft. The building is in good
condition. It is a functional and competitive data center. Total electrical
power to the site is about 3 MW. Critical power to the data center data
hall is currently about 750 kW on a mostly 2N configuration with total
critical power estimated at 2.2 MW upon full build-out. There is currently
about 82 kW of capacity leased to a variety of customers on a colocation
type leasing basis.
The level subject site is 0.77 acres and part of a larger condominium
property along with the adjacent industrial property. The subject site is
zoned MU, Mixed Urban, by the City of Bend. A relatively wide variety of
commercial uses are permitted including multi-family residential, office,
hospitality and retail and services uses. The subject is presumed to be
a legally conforming use.
COVID-19 An important part of any appraisal assignment is analysis of market

conditions. The COVID-19 coronavirus pandemic is affecting societal and
economic conditions in a manner not experienced in recent history.
However, in most markets it is not yet clear to what extent real estate
market conditions are and will be affected. Related complicating factors
include fluctuations in the stock market and changes in mortgage interest
rates. Market analysis includes observing both facts and market
reactions. This analysis becomes more complicated when there is no
data and market participants themselves are facing uncertainty and are
not yet able to form any clear consensus as to the potential effects of
these factors.
In general, real estate investors and real estate capital are mostly patient
and focus on longer views that would likely bridge the effects of the
current disruptions. This was proven in the Seattle markets in the 2008
recession, where there were few forced sales and real estate investment
lead the recovery: starting less than two years after the market crash.
So far, the economic impact is clearly negative. Businesses in

discretionary retail, travel and leisure were the most immediately

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affected. Market participants at this point do not have enough

information to forecast the potential duration of the sources and results of
volatility. It is possible this impact could, or in some experts’ opinions,
already has, pushed the national economy into a recession. At this point
in time, it is not possible to forecast the trend of either the economy or
real estate markets with any level of confidence. Therefore, while best
efforts have been made to survey the market and consider any available
data as of the date of value, it is cautioned that it may be necessary to
increase frequency of re-analysis of this conclusion as the effects of
these issues will continue to emerge and change rapidly over the near
term.
It is noted that the date of value occurred prior to any significant impact
by the COVID-19 coronavirus.
Scope Comprehensive appraisal with Sales Comparison and Income

Capitalization Approaches
Intended User/Use of The intended use of this appraisal is to assist Harvest Small Business
Appraisal Finance with a potential loan that would be collateralized by this asset.
Harvest Small Business Finance, LLC, and the U.S. Small Business
Administration (SBA) are the intended users of this report.
Property Rights Fee Simple Estate

Appraised
Extraordinary It is an extraordinary assumption of this report that the data center

Assumption specifications provided to me by the owner and used in the analysis in
this report are substantially accurate. The use of this extraordinary
assumption may impact results of this appraisal.
Highest & Best Use As If Vacant

Commercial use as dictated by demand
As Improved
Continued data center use
Existing Lease The subject is owner-occupied by the owner’s data center colocation
Encumbrances business. In this appraisal, the subject is presumed to be leased at a
market rent rate in the Income Capitalization Approach.

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Summary of Income As If Stabilized

& Expenses on June 1, 2020
$ Amount $/Sq ft
Potential Gross Revenue $3,432,000 $275.11
Vacancy @ 5% -$343,200 -$27.51
Effective Gross Revenue $3,088,800 $247.60
Total Operating Expenses $872,664 $69.95
Net Operating Income $2,216,136 $177.65
Approaches to Value
& Final Value
Conclusions
"As Is" on As Complete on As Stabilzed on

June 1, 2020 June 1, 2020 June 1, 2020
Sales Comparison Approach $15,900,000 $19,900,000 $29,700,000
Income Capitalization Approach $15,700,000 $19,700,000 $29,500,000
Final Value Conclusion $15,700,000 $19,700,000 $29,000,000
Insurable Value $13,800,000
Strengths and Strengths

Weaknesses  The subject building is nearly new and in good condition. It is a
purpose-built data center and functional for data center use.
 Data center improvements provide significant value allowing for

high rental income.
Weaknesses
 The subject is located in a tertiary data center market.
 There is significant vacant capacity in the subject.
Date of Report June 11, 2020
Date of Inspection June 1, 2020
Effective Date of June 1, 2020

Appraisal
Exposure Time 12 months

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Aerial Photograph of Subject Condo Unit (North is up)

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Subject Photographs
Main entrance looking north
East side of data center

building
North side of subject building

looking west

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Subject Photographs
East side of data center

building with transformers and
generator yard
750 MW generator
Interior hallway

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Subject Photographs
Common office area
Conference room
Sleeping room

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Subject Photographs
Data hall
Built-out rack area in data hall
Racks

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Subject Photographs
UPS units
Switch gear
Munters evaporative cooling

units on rooftop

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Introduction
Kidder Mathews Introduction

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Introduction
Identity of Property The subject is a data center property in Bend, OR.
ADDRESS 207 SW Columbia Street

Bend, OR 97702
ASSESSOR’S TAX Deschutes County Parcel Numbers: 181206A070000 and

PARCEL NUMBER 181206A070001
LEGAL DESCRIPTION The subject legal description can be found in the title report in the
Addendum of this report.
Ownership History According to Deschutes County records, ownership of the subject is

currently vested with Cascade Divide Communications Inc. which
acquired the property July of 2014 in a non-arm’s length transaction from
Navigata USA Inc. which acquired the property in June of 2012 for $1.8
million. The subject had been listed for sale at $21.5 million ($18 million
for the data center component and $3.3 million for the warehouse building
and surplus land component). Last year, it was under contract to sell at
$14.1 million CJ Stone of Milestone Rehab & Development LLC, but the
buyer failed to perform citing the coronavirus epidemic as reason the deal
was canceled. Then as of June 1, 2020, the subject is again now under
contract. The pending buyer, Jonathan Naseath, of Black Hills Software
LLC will purchase 79.9% of the subject and operate the subject data
center in partnership with the current owner through a new holding
company.
Property Rights This is an appraisal of the fee simple estate. The definition of “fee simple
Appraised estate” is as follows:
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.
Source: The Dictionary of Real Estate Appraisal, Sixth Edition. Chicago:
Appraisal Institute, 2015.

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Purpose of Appraisal The purpose of this appraisal is to estimate the market value of the subject
property. The term “Market Value” is defined as:
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 the
buyer under conditions whereby:
a. the buyer and seller are typically motivated;
b. both parties are well informed or well advised, and acting in
what they consider their own best interests;
c. a reasonable time is allowed for exposure in the open market;
d. payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
e. 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.
Source: Office of the Comptroller of the Currency under 12 CFR, Part 34,
Subpart C-Appraisals, 34.42 Definitions [g].
Extraordinary It is an extraordinary assumption of this report that the data center

Assumption specifications provided to me by the owner and used in the analysis in
this report are substantially accurate. The use of this extraordinary
assumption may impact results of this appraisal.
Scope of Appraisal This report has been prepared in conformance with the current Uniform
Standards of Professional Appraisal Practice (USPAP), as formulated by
the Appraisal Foundation, FIRREA and Harvest Small Business Finance
appraisal policy.
 The subject was inspected on June 1, 2020.
 The research included both general and specific data. Sources of

general data included in the market trends and neighborhood
description are obtained from various sources that include Kidder
Mathews field investigation, as well as information from various
organizations and governmental resources.

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 Specific data concerning the subject were obtained from various

sources, including Deschutes County (assessed values and real
estate taxes) and the City of Bend (zoning) and the owner
(building specifications, lease information and income
statements).
 In the Sales Comparison Approach, all sales comparable data

were confirmed with a party involved in the transaction and/or
through public records. This approach is given less weight as the
Income Capitalization Approach as the subject is primarily an
income producing property.
 In the Income Capitalization Approach, all rent comparable data

were confirmed with a party involved in the transaction and/or
through public records. Because this approach best reflects the
value of the subject property with regard to its capacity to produce
income, it is the approach most likely to be considered by buyers
in the marketplace when considering acquiring the subject.
“As is”, as complete and as stabilized values are reported.
Intended User/Use of The intended use of this appraisal is to assist Harvest Small Business
Appraisal Finance with a potential loan that would be collateralized by this asset.
Harvest Small Business Finance, LLC, and the U.S. Small Business
Administration (SBA) are the intended users of this report.
Competency Please see the Appraiser’s Experience Data included in the Addendum
Provision for specific information regarding the Appraiser’s background and
experience. The undersigned has previously appraised this property type
and is capable of competently completing this assignment.
Date of Report June 11, 2020
Date of Inspection June 1, 2020
Effective Date of June 1, 2020

Appraisal

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Market Overview
Kidder Mathews Market Overview

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Regional Map

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City of Bend Deschutes County Oregon

2000 2019 CAAGR 2000 2019 CAAGR 2000 2019 CAAGR
Population
Total Population 52,029 94,911 3.2% 115,367 191,930 2.7% 3,421,399 4,246,351 1.1%
Median Age 34.8 38.6 0.5% 38.3 42.4 0.5% 36.3 39.9 0.5%
Under 18 Years 24.5% 22.0% -0.6% 24.8% 20.9% -0.9% 24.7% 22.6% -0.5%
18 to 64 Years 63.1% 62.0% -0.1% 62.1% 59.8% -0.2% 62.5% 63.5% 0.1%
Over 65 Years 12.4% 16.0% 1.4% 13.1% 19.3% 2.1% 12.8% 13.9% 0.4%
Average Household Size 2.42 2.42 0.0% 2.50 2.47 -0.1% 2.51 2.48 -0.1%
Housing
Owner-Occupied Units 13,244 22,735 2.9% 32,971 50,572 2.3% 856,951 1,012,823 0.9%
Renter-Occupied Units 7,818 16,114 3.9% 12,624 26,582 4.0% 476,772 659,342 1.7%
Total Households 21,062 38,849 3.3% 45,595 77,154 2.8% 1,333,723 1,672,165 1.2%
Vacant Units 1,445 4,740 6.5% 8,988 18,713 3.9% 118,986 159,341 1.5%
Total Housing Units 22,507 43,589 3.5% 54,583 95,867 3.0% 1,452,709 1,831,506 1.2%
Vacancy Rate 6.4% 10.9% 2.8% 16.5% 19.5% 0.9% 8.2% 8.7% 0.3%
Rental Housing Ratio 37.1% 41.5% 0.7% 27.7% 34.5% 1.3% 35.7% 39.4% 0.6%
Median Monthly Rent $558 $1,061 3.9% $550 $1,186 4.6% $620 $1,050 3.1%
Median Home Value $138,100 $388,770 6.3% $148,800 $380,047 5.7% $152,100 $348,650 5.0%
Employment
Civilian Labor Force 27,767 53,494 3.5% 58,785 98,017 2.7% 1,740,298 2,041,194 0.8%
Employed 26,565 51,785 3.6% 55,754 94,194 2.8% 1,627,769 1,943,217 0.9%
Unemployed 1,202 1,709 1.9% 3,031 3,823 1.2% 112,529 97,977 -0.7%
Unemployment Rate 4.3% 3.2% -1.6% 5.2% 3.9% -1.5% 6.5% 4.8% -1.6%
Income
Median Household Income $40,857 $66,149 2.6% $41,847 $64,323 2.3% $40,916 $60,427 2.1%
Per Capita Income $21,624 $35,831 2.7% $21,767 $33,813 2.3% $20,940 $33,117 2.4%
Families Below Poverty Level 6.9% 4.5% -2.2% 6.3% 4.9% -1.3% 7.9% 5.8% -1.6%
Individuals Below Poverty Level 10.5% 10.2% -0.2% 9.3% 10.6% 0.7% 11.6% 13.3% 0.7%
CAAGR = Compound Average Annual Growth Rate
Demographics

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Neighborhood Map

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Regional Overview
Introduction The subject is located in Deschutes County in the City of Bend.
Deschutes County was created from the western portion of Crook County
on Dec. 13, 1916. It was named for the Deschutes River which flows
through the county. Early fur traders called the river Riviere des Chutes,
which means "River of the Falls." The county seat is located in the city of
Bend which was incorporated in 1905. The name Bend was derived from
"Farewell Bend," the designation used by early pioneers to refer to the
location along the Deschutes River where the town eventually was platted.
The Deschutes Services Center opened in 2004 and houses county
offices including the clerk, assessor and commissioners. The region is
located in the middle of the state with the Cascades to the west dividing
the state from north to south, and the smaller Ochoco Mountains to the
east. Portions of the region are part of a basalt plateau formed by the
Columbia River Basalt Group, others are part of the slopes of the
Cascades, and others part of the Basin and Range.
Population The Central Oregon region is comprised of three adjoining counties:

Deschutes, Jefferson, and Crook. Of the three, Deschutes County has by
far the largest population, with about 191,000 residents and five major
urban areas. It encompasses an area of 3,055 square miles, extending
from the Cascade Range on the west to the High Desert region on the
east. Jefferson County (to the north) and Crook County (to the east) each
have a population of about 20,000, with most of these residents
concentrated in the county seats.
Bend is both the county seat and the largest city in Deschutes County.
Redmond is about 20 miles northeast of Bend. The small town of Sisters
is about the same distance northwest of Bend and due west of Redmond.
To the south of Bend are Sunriver, La Pine, and the Mt. Bachelor
recreation area. Other nearby communities include Prineville in Crook
County (30 miles to the northeast) and Madras in Jefferson County (40
miles to the north). Central Deschutes County is 120 miles east of
Eugene, 175 miles southeast of Portland, and 150 miles north of the
California state line.
Transportation US Highway 97 (US-97), the major north-south route through the central
part of the state, passes directly through the cities of Bend and Redmond.
US Highway 20 extends northwest from Bend to Sisters, with connections
to Eugene and Salem. State Route 126 links the communities of Sisters,
Redmond, and Prineville.
Kidder Mathews Data Center Market Overview

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Deschutes County benefits from having the only major airport in Central
Oregon. Located to the southeast of downtown Redmond, Roberts Field
is served by Alaska, Allegiant, American, Delta, Sun Country, and United.
There are direct flights to and from Chicago, Denver, Las Vegas, Los
Angeles, Phoenix, Portland, Salt Lake City, San Francisco, and Seattle.
At the time of the 2000 census, the population of Deschutes County was
115,367 residents. By 2019, the county population was estimated at
191,930, for an average annual growth rate of 2.7%. The population of
Bend increased from 52,029 to 94,911 for annual growth of 3.2%.
The median household income is about $66,000 in Bend and $64,000 in

Deschutes County. Since 2000, household income has risen at annual
rates of 2.6% to 2.3%.
The median value of a single-family home is estimated at $388,770 in

Bend and $148,800 for the county as a whole. The average rates of
appreciation in home values were 6.3% and 5.7%. Rents increased at
annual rates of 3.9%, and 4.6%.
The disparity between income growth and housing appreciation suggests

that home ownership has become less affordable. Slower growth in rental
rates contributed to increases in the rental housing ratios.
Economic As with much of Central Oregon, the Deschutes County economy was
Conditions founded on agriculture and forest products. As the county grew into a
major population center, the economy diversified, with agrarian
components supplemented, and eventually surpassed, by trade and
services. Today, the largest employment sectors are educational and
health services, retail trade, and tourism.
Prior to the 2009 recession, the county had experienced sustained and
rapid growth. The area was viewed as the economic jewel of the state, a
status that prompted rapid residential and commercial development. This
period saw the revitalization of Downtown Bend, the establishment of the
Old Mill District, upgrades to the air terminal at Roberts Field, and
numerous other public and private projects. Buoyed by demand for
vacation homes, housing construction accelerated.
During the recession, these positive trends were sharply reversed, as the
region learned the downside of dependence on discretionary spending.
Two major components of the economy, both founded on discretionary
income, proved especially vulnerable: tourism and vacation housing.

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Once the recession abated, the Deschutes County economy recovered.

In recent years, Central Oregon has topped the state in job growth.
However, while recent trends are positive, they have not duplicated the
exceptionally rapid rates of growth recorded in the previous decade.
Another popular attraction is the High Desert Museum, a privately funded

facility with 53,000 sq ft of exhibits and amenities. Located just south of
Bend, this facility has proven to be very popular with both tourists and
local residents. It includes numerous displays on the history and ecology
of Central Oregon, narrated live animal exhibits, a restaurant, and a large
gift shop.
The Mount Bachelor ski resort brings in tourists from the entire West
Coast. The nearby Cascade Lakes are also a tourist destination.
Recreational activities include downhill and cross-country skiing, rafting,
golfing, camping, fishing, picnicking, rock climbing, and general
sightseeing.
Education Phase 1 of Oregon State University’s Cascades Campus opened in

September 2016 near Downtown Bend. The new 10-acre campus is the
first public university to open in Oregon in more than 50 years. It provides
classrooms, lab space, a dining center, and residential housing for 300
students. The campus will initially support 1,890 students. The overall
development will include an additional 46 acres, with the anticipation that
the campus will eventually have about 5,000 students.
Employment Long-term employment projections are prepared by the Oregon

Employment Department. The most recent forecast covers the 10-year
period from 2017 to 2027. Over this interval, non-farm employment in the
region encompassing Crook, Deschutes, and Jefferson Counties is
projected to increase at an average annual rate of 1.4%.
In 2006, the average unemployment rate in Deschutes County was 4.6%.

By 2009, unemployment had peaked at 14.6%. As of March 2020, the
county unemployment rate was 3.4%. The statewide rate was 4.4%. The
national unemployment rate was also 4.4%. However, these figures do
not take into account the full impact of the COVID-19 pandemic which has
significantly increased unemployment claims across the U.S.
Employers By far the largest private employer in Deschutes County is St. Charles
Health System. This network includes the St. Charles Hospitals in Bend
and Redmond and Pioneer Memorial Hospital in nearby Prineville. St.
Charles employs over 3,400 doctors, nurses, and support staff.

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Les Schwab Tire Centers is a national chain headquartered in Bend.

Including retail outlets, the company employs about 1,500 workers in
Deschutes County.
About 2,500 workers are employed at five major resort properties. Total
employment at the various smaller hotels in Bend and Redmond likely is in
the range of 2,000 to 3,000 workers.
Other major employers include a T-Mobile call center in Redmond, a TRG

call center in Bend, Epic Air, several wood products manufacturers, and
numerous regional and national retailers.
Environmental The climate of Central Oregon provides a full range of seasons. During
Features the summer, high temperatures and clear skies have proven fertile ground
for the development of golf courses and resorts. The winter season also
has appeal for both local residents and recreational tourism, with a focus
on Mt. Bachelor. The area is sheltered from the most extreme weather by
the Cascade Range. While snow can occasionally impede the flow of
traffic through the passes, the economic impact of seasonal road closures
is minimal.
Governmental Land use regulations are governed by city and county zoning codes.
Regulations Typically, commercial development is encouraged in central business
districts, at highway interchanges, and along primary arterials.
Property taxes are assessed on real estate and commercial personal

property. Taxes are levied against a taxable value that may be well below
market value. Levy rates generally are in the range of 1% to 2% of the
taxable value.
While the State of Oregon has no sales tax, there are provisions for a
transient room tax. This tax is levied on hotels, bed & breakfast inns, RV
parks, and other providers of lodging for periods of less than 30 days.
Most cities and counties elect to impose this tax to fund local tourism
development, visitor centers, or other city services.
Neighborhood The subject neighborhood is primarily a commercial area with a mix of

Description office, light industrial, multi-family residential and retail uses. The subject
is a former industrial property that is being redeveloped for data center use
with the subject building being completed in 2015. To the west is a
Safeway-anchored retail center. To the east across SW Columbia Street
are several smaller office buildings. Further south is A-1 Westside
Storage, a self-storage facility. The area has mixed uses with new

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development reflecting a preponderance of office uses and older buildings

more commonly having been industrial uses. The Hixon, a 199-unit six
story apartment project with ground floor commercial space located on SW
Century Drive north of Safeway is scheduled for delivery this year.
Deschutes Brewery is located east of the subject and completed a 57,593
sq ft expansion in 2016. In 2016, Oregon State University opened a new
4-year degree campus called OSU-Cascade located west of the subject in
a former pumice mining site. The was the first university campus built in
Oregon in the past 50 years. In has grown to about 1,300 students and is
expected to reach between 3,000 and 5,000 students in the future. The
area is mostly built-out, but some vacant lots are available and
redevelopment is occurring as typified by the subject.
Summary Deschutes County is the economic and demographic hub of Central

Oregon. The local economy is supported by tourism, health care, retail
trade, and forest products. Prominent attractions include the central
business districts of Bend and Redmond, the Expo Center, the Old Mill
District, the High Desert Museum, and opportunities for summer and
winter recreation.

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Data Center Market Overview

Introduction The subject property is a small turnkey data center located in Eastern
Oregon. In this section, an overview of the data center market is provided.
A data center or raised floor computer room is a facility used to house

mission critical computer systems and associated components for
companies and other organizations. It generally includes environmental
controls (air conditioning, fire suppression, etc.), redundant/backup power
supplies, redundant data network connections, and high security.
Financial companies, banks, insurance, internet service providers, e-
commerce companies, and governments are major data center users.
However, data centers are critical in most significant businesses and most
large corporations either maintain their own data centers or outsource to a
data center service provider.
A data center or raised floor computer room is a facility used to house

mission critical computer systems and associated components for
companies and other organizations. It generally includes environmental
controls (air conditioning, fire suppression, etc.), redundant/backup power
supplies, redundant data network connections, and high security.
Financial companies, banks, insurance, internet service providers, e-
commerce companies, and governments are major data center users.
However, data centers are critical in most significant businesses and most
large corporations either maintain their own data centers or outsource to a
data center service provider.
The data center market is national and even worldwide in scope, as many
data centers do not need to be physically close to urban centers. In fact,
high electrical capacity and access to excellent quality fiber networks are
important driving factors in data center locations.

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Data Center Equipment and building reliability are the ultimate objectives to data center
Specifications tenants. To be reliable, a building must offer certain features as noted in
the following table:
Solid construction with ability to withstand potential natural disasters

Redundant access to multiple long-haul carrier networks, via fiber or
gigabit-capable infrastructure
Substantial floor loading that can support at least 100 to 125 PSF
24/7/365 monitoring of the facility and security personnel on duty
Restricted access via key card, via keypad, biometrics access
Video surveillance, including duplication of archives to remote site
Zoned smoke detection and fire suppression
Redundant power, in the form of uninterruptible power systems (UPS),
and generators
Redundant cooling systems
Power has become the primary resource required when operating data
centers, having eclipsed square footage in importance. Data center rents
are more directly related to available power than to real estate area
provided to a tenant. Higher power density will allow for more tenant
equipment and will command a higher price. The ability for data center
operators to secure power from the local utility is as important as securing
the initial land. Newer generation servers are requiring more power
increasing demand and prices for high power data center space.
Additionally, electrical pricing plays a significant part in location of some
data centers. Areas where electrical power is cheap such as Eastern
Washington have seen the proliferation of large-scale data centers.
Access to long-haul fiber networks is also highly important. The subject
has access to superfast fiber-optic cables.
Data Center Tier The Uptime Institute has developed a rating and certification system
Ratings commonly used the data center industry. The rating system ranks data
centers into four tiers based on the level of infrastructure, capabilities,
redundancy and ultimately reliability and performance. Tier I data centers
have the lowest level of infrastructure, redundancy and reliability. Tier IV
has the highest. The following table details each tier rating.
Tier I
Tier I data centers have a single path for power and cooling distribution,
without redundant components. They are susceptible to disruption from

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both planned and unplanned activity. Also, they may or may not have a
raised floor, a UPS, or a generator. If they do have UPS or generators,
they are single-module systems and have many single points-of-failure.
Tier II
Tier II data centers have a single path for power and cooling
distribution, with redundant components. Tier II facilities with redundant
components are slightly less susceptible to disruptions from both
planned and unplanned activity than a Tier I data center. They have a
raised floor, UPS, and generators, but their capacity design is N+1,
which has a single-wired distribution path throughout. Maintenance of
the critical power path and other parts of the site infrastructure will
require a processing shutdown.
Tier III
Tier III data centers have multiple active power and cooling distribution
paths, but only one path active. Tier III level capability allows for any
planned site infrastructure activity without disrupting the computer
hardware operation. Planned activities include preventive and
programmable maintenance, repair, and replacement of components,
addition, or removal of capacity components, testing of components and
systems. For large sites using chilled water, this means two
independent sets of pipes. Sufficient capacity and distribution must be
available to simultaneously carry the load on one path while performing
maintenance or testing on the other path. Unplanned activities such as
errors in operation or spontaneous failures of facility infrastructure
components will still cause a data center disruption.
Tier IV
Tier IV data centers have multiple active power and cooling distribution
paths, have redundant components, and are fault tolerant. Tier IV
provides site infrastructure capacity and capability to permit any
planned activity without disruption to the critical load. Fault-tolerant
functionality also provides the ability of the site infrastructure to sustain
at least one worst-case, unplanned failure or event with no critical load
impact. This requires simultaneously active distribution paths.
Electrically, this means two separate UPS systems in which each
system has N+1 redundancy. Tier IV requires all computer hardware
have dual power inputs. There are relatively few data centers that meet
the rigorous Tier IV specifications (~4 in the U.S.).
Although not officially certified by the Uptime Institute, the subject property
would rank as a Tier III data center. Most data centers are not rated by

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the Uptime Institute but describing data centers in terms of approximate

Uptime Institute rankings can be useful in characterization, particularly of
the redundancy of back-up generators, UPS, and HVAC systems.
Data Center Tenant There are generally two major types of data center providers: wholesale
Types and collocation. Wholesale data center providers lease data center space
in suites or pods (i.e., individual raised floor rooms) typically ranging in
size from 10,000 to 20,000 and up to 100,000 sq ft or more. Wholesale
data center providers lease to both enterprises and to co-location
providers such as Savvis, Qwest, Equinix, AT&T, and Telx. Because their
data center space is leased in larger “chunks”, wholesale data center
providers typically have fewer tenants than collocation data center
providers.
Wholesale leasing can be done on a powered-shell basis where the owner

provides shell space with significant electrical power and space of data
center infrastructure including generators, cooling and UPS battery
systems. The tenant will build-out the data center to suit paying for and
owning the data center infrastructure. Some landlords have typically
preferred this type of lease because of the high expenses of data center
built-out and the risks, depending on the tenant, of lease default. Also,
this leasing structure gives the owner a significant advantage in
negotiating lease renewals as the tenant has invested significantly in the
property and gives that up in vacating the premises. The other main
leasing structure is a turnkey lease where the owner provides all data
center infrastructure and lease rents reflect a significantly higher rate.
Turnkey leasing has become increasingly more common. If an owner can
afford to have turnkey space built-out speculatively or has the space
available, this is often advantageous in attracting tenants sensitive to the
time needed for build-out, which can be considerable. Powered-shell
leases typically have a triple net expense basis while turnkey leases are
full-service with the exception of electricity to power servers.
Co-location data centers can be thought of as “retail” data center space.

Co-location data center space is leased on the basis of individual
racks/cabinets or cages. Cages typically range from 500 to up to 5,000 sq
ft in size. Co-location providers lease to a wide range of customers, from
Fortune 500 enterprises to small and medium-sized businesses.

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National Data According to data from the 2018 Year End JLL Data Center Outlook, it is
Center Market estimated that the size of the 15 largest U.S. data center markets is over
38.2 million sq ft. This reflects properties that are dedicated data centers
and does not include properties where data center build-out represents
only a small portion of the overall property. A wide spectrum of properties
is labeled “data center” but only a small segment meets the rigorous and
complex requirements of the modern data center industry. The data
center market has seen robust growth over the past several years. One
important driver of demand in data centers is the proliferation of mobile
devices. Another trend that is driving increased data center use is the
continued rise of “cloud computing” where companies and individuals are
increasingly accessing software via the web. In addition, regulatory
requirements, such as the Sarbanes-Oxley Act, require longer retention of
corporate financial records and force companies to pay more attention to
the physical environments where their IT resources reside. Data centers
tend to be situated in certain cities and regions. The following table
details the fifteen major data centers cluster cities in the U.S.
Source: JLL 2018 Data Center Outlook Report

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Northern Virginia contains 20.4% of data center inventory in the U.S. by

MW. Other prominent areas include Northern California at 11.4%, Chicago
at 10.7%, and Dallas/Ft Worth at 9.9% Following close behind are Las
Vegas/Reno at 8.8% and New Jersey at 6.6%. The Pacific Northwest
represents approximately 5.3% of MW inventory. Data center location is
driven by variety of factors:
 Major center of population - Top data center markets tend to be in

the midst of large populations in highly industrialized countries with
significant broadband penetration.
 Availability of power - The construction and operation of data

centers requires a huge amount of electrical power. With each
large data center now taking in excess of 30 MW of electricity, the
availability of power in the gigawatt range is essential to building a
significant concentration of data centers.
 Inexpensive power – Certain areas and particularly Eastern

Washington have attracted several data centers because power
rates are among the lowest in the nation. As shown in the table
below, Grant County has power rates that enable substantial
savings versus other cities.
 Optical fiber routing - Data centers require three elements - power,

space, and bandwidth (network capacity). That last element
necessitates the location of data center facilities on existing fiber
network routes. Laying down fiber networks is extremely
expensive, especially over long distances. Every one of the major
markets is at a hub of optical fiber connectivity.
 One or more major Internet Exchange Points (IXPs) - While there

are literally hundreds of IXPs; few are considered major in that
they exchange hundreds of gigabits of traffic each second.
Significant IXPs are in Northern Virginia, Dallas, Chicago, Los
Angeles, Hong Kong, Singapore, and San Francisco.

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Potential Annual Power Savings on 20 MW of Power
DATA CENTER Data centers are extremely expensive to build. While the land and shell
DEVELOPMENT for a data center may cost only $100 to $300/sq ft (depending on
COST
location), completed data center costs can easily surpass $1,000/sq ft.
High costs are due to the following:
 Power systems - Data centers require extremely expensive power

switch and generation equipment, including multiple backup
generators, automatic switchgear, UPS systems, power distribution
units, batteries or flywheels, and miles of expensive high voltage
runs of copper.
 Cooling systems - Servers and other equipment generate large

amounts of waste heat that must be removed. Suitable chillers,
cooling towers, air handlers, and computer room air conditioners
(CRACs) are expensive.
 Computing support equipment - While not as significant as other

components of overall construction, there are significant costs
incurred from buying and installing server cabinets, security
equipment (biometrics, cameras) and structured cabling (patch
panels, conduits).
On a per kW basis, prices can range from $6,000 (Tier I) to more than
$20,000/kW (Tier III) to build a data center depending on the tier-ranking.

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Data Center The data center real estate market is a national market with pricing and
Investment Trends rents more related to power density, infrastructure capability and less
dependent on location such as a particular city, state or region. Since
many data centers do not have to be located near urban centers, they
often are found where electricity is plentiful, rates are cheap, and fiber
networking is good. However, due to network latency (related to time to
get results via the Internet), data centers must also be located close to the
population of users that they serve.
Investment parameters for data centers followed the general trend of

reverting to more conservative levels (higher capitalization and discount
rates) than seen prior to the onset of the economic downturn in 2008.
However, since then prices have risen significantly and capitalization rates
have declined considerably. In recent years there have been many sales
of high-quality data centers. Portfolio sales prices can exceed $1 billion
and frequently include business value. Sales transactions of high-quality
data centers often reflect prices between $400 and $1,000 or more per
rentable square foot. Due to the importance of power density in setting
rent rates, investors also analyze property values based on price per
kilowatt of critical load (power provided to the tenant to power servers).
Sale prices for turnkey data centers can range from about $10,000 to
beyond $40,000/kW. High quality data centers with long-term leases to
credit tenants can command prices reflecting capitalization rates between
6% and 7%. Five 9S Digital estimates that $2.763 billion of data center-
oriented merger and acquisition deals closed in 2019, down from $3.089
billion in 2018. A summary of significant recent transactions including
mergers includes:
 Mapletree Investments formed a joint venture with Digital Realty to

invest in three wholesale turnkey shell data centers in the Ashburn
market with a $1.1 billion investment in November of 2019.
 Mapletree Investments formed a joint venture with Digital Realty to

investing in 10 powered shell data centers in the U.S. with a $1.4
billion investment in September of 2019.
 In May of 2019 Lincoln Rackhouse acquired Bytegrid’s three

market data center portfolio.
 In June of 2019 Blackstone acquired seven COPT data centers

with 10% equity share in the joint venture.

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 In June of 2019 AT&T announced it will transfer data center

colocation operations and assets to Brookfield. Under the
agreement, AT&T will receive $1.1 billion.
 The largest 2018 deal was the sale of a 25% stake in Global
Switch to a group of Asian investors valued at $2.8 billion.
 In December of 2018 Digital Realty completed the acquisition of

Ascenty, the leading data center provider in Brazil, for
approximately $1.8 billion.
 In 2018, GTT Communications acquired Interoute with 15 data

centers, 17 virtual data centers and 51 colocation facilities. The
deal price was $2.3 billion.
 Also in 2018, Iron Mountain completed its acquisition of the U.S.

operations of IO Data Centers LLC. With the transaction, Iron
Mountain acquired the land and buildings associated with four
state-of-the-art data centers in Phoenix and Scottsdale, Arizona;
Edison, New Jersey; and Columbus, Ohio. The existing data
center space in the four owned facilities totals 728,000 square feet,
providing 62 megawatts (MW) of capacity with expansion potential
of an additional 77 MW in Arizona and New Jersey. The deal price
was $1.34 billion.
 Equinix acquired Infomart’s Dallas facility for $800 million in the

single largest transaction of a single-asset data center in the first
half of 2018.
 Singapore-based Mapletree acquired 14 data centers from Carter

Validus for $750 million.
 Digital Realty acquired Dupont Fabros for $7.8 billion in an all-

stock transaction in early 2017.
 Equinix acquired Verizon’s data center portfolio for $3.6 billion in

December of 2016.
 After CenturyLink acquired Level3, it sold its data center portfolio

for $2.3 billion to BC Partners in November 2016.
 Digital Realty acquired eigt data centers from Equinix for $874
million in July of 2016.

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National Turnkey Data Center Pricing
Source: Tier1 Research
Data Center Lease rates vary significantly depending on power and data center
Leasing Trends capability (quality, systems redundancy, etc.). Most “power-shell” leases
reflect rates of between $24 and $35/sq ft on a triple net expense basis
assuming about 100 watts or more to the premises. Ultimately, power is
the most important consideration and data centers are increasingly priced
based on available critical power (kW/month). Turnkey wholesale leases
for modern data center space reflect rent rates mainly between $80 to
$150/kW/mo. on a full-service basis. Electricity is typically passed through
to the tenant in data center leasing even with “full service” data center
leases. The graph on a previous page shows

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Major U.S. Data Center Cities – Market Fundamentals
Source: CBRE North American Data Center Report H2 2019

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national pricing for turnkey data centers and how average pricing is
generally affected by total kW leased with larger amounts reflecting lower
rental rates.
CBRE U.S. Data Center Trends Report for the H2 2019 reports the
current inventory, vacancy and rental rates for major data center markets
in the U.S. as shown on the previous page In the first half of 2019,
CBRE reports 376.6 MW of net absorption in primary markets continuing
several years of strong growth. At 2019 year-end, 288.5 MW was under
construction, compared with 502.0 MW in 2018. The decrease is partially
due to many of these projects delivering in 2019. CBRE reports that
average rental rates fell slightly from $121 to $141/kW in 2018 to $115 to
$139/kW in 2019.
Bend Data Center Like Eastern Washington, Eastern Oregon benefits substantially from its
Market close proximity to hydropower, which can deliver low cost electricity,
which is the lifeblood of a data center. This is extremely attractive to data
center users given the high electricity usage of data centers. Further, the
dry climate and cool seasonal temperatures allow for more efficient and
cost effective operation of heating, ventilation, and air conditioning
systems. According to the owner rates at the subject will be $0.054/kWh.
Eastern Washington has about 2.1 million sq ft of existing data center

space most of which is located in Quincy. About 1.4 million sq ft or 64%
of this is owner-occupied space in data centers built and owned by
Microsoft, Yahoo!, Intuit and Dell. The balance is investor-owned data
center space in four properties: Titan Data Center in Moses Lake,
Intergate East in East Wenatchee, Vantage Data Center in Quincy and
the subject. Continued growth is planned with about 2.1 million sq ft
proposed.
Eastern Oregon has also seen significant development. Google

constructed their first owned data center in The Dalles in 2006. The
94,000 sq ft facility has 37 MW of power. In 2011, Amazon completed its
120,000 sq ft data center in Boardman. Facebook and Apple both have
large data centers located in Prineville just northeast of Bend in Crook
County. Facebook was in Prineville first, building what became a
334,000 sq ft data center in 2010, then completed a companion facility,
which is estimated at about 360,000 sq ft. In 2012, Apple began work
on the first phase of its Prineville data center, one of the data center's
two massive 338,000 sq ft buildings.
Beyond inexpensive electricity cost, Oregon Enterprise Zone tax
incentives are an important factor in the establishment of the data center
Kidder Mathews Property Description

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market in Eastern Oregon. This program is designed to attract

investment by exempting businesses from local property taxes on new
investments for up to two years while construction is in process, and up
to five years after that if they are growing employment in the zone. In
fact, the subject benefits from a tax abatement through the Bend
Enterprise Zone.
In Bend, the most significant competition for the subject OneNeck’s data
center, a 30,000 sq ft Tier III N + 1 data center offering colocation, cloud
computing and disaster recovery services located in Bend. Although the
Bend data center market is relatively small, Eastern Oregon is a major
draw for data centers primarily due to low cost electricity and state tax
incentives. It also benefits from a reasonably mild climate. Eastern
Oregon has experienced significant growth in the data center market
mainly through construction of larger owner-user data centers by Google,
Amazon, Facebook and Apple. Given the attractiveness of local
electricity rates, tax incentives and local climate, the data center market
should continue to grow in the coming years in Eastern Oregon.
Conclusion The data center real estate market is a highly specialized real estate
class. Value is driven more by power density and infrastructure
capability than location. Like all commercial real estate, the data center
market was affected by the credit crunch and general economic
slowdown but it has since rebounded strongly. Given the relatively
critical function of data centers and the explosive growth of data storage
demand, it is likely that demand will continue to rise in the next several
years. The COVID-19 pandemic has accelerated remote working trends
which has will create more demand for data center and cloud-based
services. There is demonstrated demand for data centers like the
subject.

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Property Description

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Parcel Map
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Site Data
Address 207 SW Columbia Street
Bend, OR 97702
Site Dimensions & The subject is a single 0.77-acre condominium unit in a larger level site
Land Area that is 3.09 acres according to Deschutes County records. It is
rectangularly shaped with about 165 ft north to south and 203 ft east to
west
Streets, Access & The subject is located on the west side of SW Columbia Street, a two-
Exposure lane street with a single lane in each direction, sidewalks and curbs. Two
curb cuts provide access to the larger subject condominium. The subject
condominium unit is set back from the street and in the northwest corner
of the larger site. It is surrounded by chain link fencing with a secured
gate. The subject neighborhood is located on the west side of the
Deschutes River. US Hwy. 97 is the major north-south route through the
central part of the state. It passes directly through the city, linking Bend
with Redmond to the north and Klamath Falls to the south. US Hwy. 20
extends northwest from Bend to Sisters, with connections to Eugene
(SR-126), Albany (US-20), and Salem (SR-22). Overall, visibility and
access are considered adequate.
Topography & Soil The subject is generally level and at grade with surrounding streets and
Conditions improvements. No soils report has been provided and consequently, soil
conditions are unknown. No ground water or soggy soil conditions were
noted during the inspection and drainage appears adequate. It is
assumed that no unusual or detrimental soil conditions exist.
Flood Zone According to the Flood Insurance Rate Map No. 41017C0662E, effective
September 28, 2007, the subject site is located in Zone X, an area not
impacted by flood risk. This map is currently in effect.
Seismic Risk Seismic risk is evaluated using three parameters: ground motion, soil
type, and building occupancy. As we do not possess expertise in
seismic, structural, or geotechnical engineering, further analysis by a
qualified expert would be required to determine the subject’s specific
degree of risk.
Utilities All public utilities are available to the site. In addition, the area around
the subject property is well served by a number of private fiber optic
communications routes including by providers TDS Telecom, Integra,

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Level3, LSN/Quantum Communications, Fatbeam Communications,

Bendtel Communications, Centurylink, Wave Broadband, Zayo.
Electricity is provided by Pacific Power & Light Company, which offers
low-cost electrical power at rates as low as $0.045/kWh, which is
substantially less than rates in most of the U.S.
Zoning The subject site is zoned MU, Mixed Urban, by the City of Bend. The
intent of this district is “to provide a balanced mix of residential and
employment opportunities to create focal points of activity in the form of
mixed-use centers, nodes or corridors.” A relatively wide variety of
commercial uses are permitted including multi-family residential, office,
hospitality and retail and services uses. Most industrial uses are not
permitted. Data center use is not explicitly discussed in the zoning code
but is presumed to be allowable. Development standards include a
building height of 65 ft, no lot coverage limit, and a 10 ft maximum front,
side and rear yard setback under certain conditions. Overall,
development constraints are not overly burdensome.
Easements, A title report has been provided and can be found in the Addendum of
Covenants, this report (Amerititle), Reference No. 154696, Date: August 7, 2014).
Encroachments & The subject site appears to be encumbered by a utility easement granted
Restrictions to Pacific Power and Light Company. Typically, utility easements for
properties like the subject are not overly burdensome and it is an
assumption of this report that no easements, covenant, encroachment or
restriction negatively impacts the use or marketability of the site.
Assessment & By statute, properties in the State of Oregon are to be assessed at 100%
Taxation of market value, although, in practice, properties are usually assessed at
less than their fair market value. Commercial property is reassessed
periodically and may be evaluated more often in the event of a sale or a
substantial alteration. The annual property tax levy is determined by
applying a levy rate to the assessed value, and then adding any special
assessments. Levy rates are influenced by the services provided in each
individual district and by changes in state law, and so may vary annually.
The subject is in the last year of a tax abatement provided by the Bend
Enterprise Zone and currently no real estate taxes are levied. Starting in
2021, the subject will be assessed at market value and real estates will
be levied against the subject.
Hazardous A Phase I environmental report prepared by Evergreen Environmental

Conditions Management, LLC dated May 24, 2010 was reviewed. That report did
Disclaimer not indicate the finding of any chemical or hazardous condition requiring
cleanup. Valuation Advisory Services is unaware of any toxic or

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contaminating materials either in the subject soils or within the subject

premises. For the purpose of this report, it is assumed that the subject
property is free of contamination of any kind. This assumption should not
be construed as a guarantee that such conditions do not exist. The
reader is referred to Item 2 of the Limiting Conditions document, which
immediately follows the certification and letter of transmittal at the
beginning of this report.
Conclusion The subject site is located in a mixed-use neighborhood and is currently

zoned for a wide variety of commercial uses. The site has good access
but poor visibility as it is set back from the street. It sufficiently large to
support any allowable use.

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First Floor Plan

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Mezzanine Floor Plan

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Description of Improvements
Introduction The subject is improved with a data center building totaling 12,475 sq ft.
It was constructed in 2015 as a purpose-built data center.
Physical Age, 5 Years/2 Years/48 Years

Economic Life and
Effective Age
Stories One with mezzanine
Interior Clear Height About 18 feet on the main floor.
Building Rentable Gross area is 12,475 sq ft which is demised as follows:

Area
First Floor Area (SF)
Carrier Room 346
Storage 884
Battery Room 190
Elec. Mechanical 1,722
Fire Mechanical 186
Staging 468
Secure Storage 153
Control Room 253
Break Room 210
Entry/Lobby 171
Data Hall 6,352
Bathroom 160
Total 11,095
Mezzanine Area (SF)

Data Recovery 466
Office 1 211
Conference Room 346
Office 2 197
Bathroom 160
Total 1,380
Total Building 12,475
Land to Building The building footprint is about 11,095 sq ft indicating a land to building
Ratio ratio of about 3.0 within norms for properties like the subject.

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Foundation Reinforced concrete
Structural System Concrete
Roof Built-up membrane system
Exterior Finish Stucco
Layout Office areas are located on the south side of the building on the first floor
and mezzanine floor. There is a private office, a conference room, larger
customer office area, sleeping room and small kitchen. The data center
hall is located north and adjacent to the office area on the first floor.
Utility areas on the east side of the building house electrical switchgear,
UPS systems and other infrastructure.
Mechanical & Total electrical power to the site is about 3 MW. Critical power to the
Electrical data center data hall is currently about 750 kW on a mostly 2N
configuration. Infrastructure is reflective of a Tier II+ Uptime Institute
rating (with most infrastructure and redundancy reflective of Tier III).
Data center mechanical and electrical equipment includes the following:
 Dual 2,500 kVA Caterpillar diesel generators

 Dual 750 kW MITSUBISHI MMS 9900B 750kVA UPS
 PDI CORP 600 Amp PDU
 Munters indirect evaporative cooling equipment at N + 1
The building was constructed with Fox Blocks providing insulation on

both the interior and exterior of the data center exterior walls to an R-
factor rating of about 47. The heavy insulation is designed to reduce
climate control costs. The building operates at a PUE of about 1.13.
PUE or Power Usage Effectiveness is a measure of the energy efficiency
of a data and reflects the ratio of total electrical power consumption over
critical power or power to the customer’s servers.
The subject data center area is assumed to have the potential for 2.2 MW
of critical power for purpose of analysis in this report. It is an
extraordinary assumption of this report that the data center build-out
specification provided by the owner and used in the analysis in this report
is substantially accurate.
The owner provided the following cost estimate to build-out infrastructure

to 2.2 MW of critical power.

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1.45 MW Data Center Build-out Cost Estimate
Item Cost
1,150 kW Mechanical $1,528,254
HVAC (2 125-ton Munters Units) $15,000
Data Hall (Cabinet, Cage Area) $308,750
25% Contingency $926,002
Project Management @ 10% $277,801
Total $3,055,807
Cost/kW $2,107
Life Safety The building has fire suppression systems including wet systems and dry
chemical systems.
Site Improvements & The site has minimal typical landscaping including a small grass area.
Parking The site is level with some asphalt and concrete paved areas. There is
parking space for about 10 vehicles for ratio of about 0.8 stalls/1,00 sq ft
which adequate for data center sue. A 336 sq ft pump house and water
tank are adjacent to the data center building. The pump house building
houses pump equipment supporting the cooling system in the data center
building.
Condition and The building improvements reflect a vintage 2015 purpose-built data
Functionality center building. The building is good condition. Functional utility of the
subject improvements is adequate for data center use with 750 kW of
installed power and capacity from up 2.2 MW of critical power
approximately reflective of a Tier III redundancy.

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Highest & Best Use
Kidder Mathews Highest & Best Use

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Highest & Best Use

“Highest & Best Use” is defined by the Appraisal Institute as:
The reasonably probable use of property that results in the

highest value. The four criteria that the highest and best use
must meet are legal permissibility, physical possibility, financial
feasibility, and maximum productivity.

The four criteria the highest and best use must meet are legal
permissibility, physical possibility, financial feasibility, and maximum
productivity.
As If Vacant The subject site is zoned MU, Mixed Urban, by the City of Bend. A
relatively wide variety of commercial uses are permitted included data
center use. The size, shape, and topography of the site are conducive to
a variety of allowable uses. Surrounding uses are mainly office, retail,
multi-family residential and with some older light industrial uses. Recent
development in the immediate surrounding area has included retail,
apartment and office uses. The subject site has limited street visibility.
Uses the require good visibility like retail are not practical. The highest
and best use of the subject property as vacant is for commercial use
most likely office use as dictated by demand and market conditions.
As Improved The subject data center building area totals about 12,475 sq ft of finished
space. Data center infrastructure is reflective of a Tier II+ Uptime
Institute rating (with most infrastructure and redundancy reflective of Tier
III). Total electrical power to the site is about 2.5 MW. The current build-
out reflects about 750 kW of critical power. There are dual 2,500 KVA
generators, 750 kW of UPS X 2 and dual 2,500 KVA transformers. The
data center reflects a modern, newly built data center competitive in the
data center market. It is partially leased. The data center building can be
upgraded to about 2.2 MW of critical power (assuming a PUE of about
1.1).
Data center rental rates are significantly higher than officer or warehouse
rental rates and typical provide a higher return per sq ft. The owner’s
plan to expand data center use is reasonable given the cost of
construction and the value of a stabilized data center versus the only

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reasonable alternate use – industrial use. Demand for data center space
is strong nationally. The outlook is positive for the Bend data center
market which is relatively small but growing. Furthermore, the subject
has minimal direct competition. Therefore, the highest and best use of
the building improvements is for continued data center use.
Appraisal In this appraisal, the Sales Comparison and Income Capitalization

Methodology Approaches are used. Because the Income Capitalization Approach best
reflects the value of the subject property with regard to its capacity to
produce income, it is the approach most likely to be considered by buyers
in the marketplace when considering acquiring the subject. Investors will
be the most likely buyers of the subject. Omission of the Cost Approach
will not affect the reliability of the value conclusion as this approach is not
typically used by market participants for properties like the subject.

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Sales Comparison Approach
Kidder Mathews Sales Comparison Approach

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Introduction The Sales Comparison Approach is based on the premise that market
value of a property is directly related to the prices of comparable,
competitive properties. This approach suggests that the value of a
property in the market is set by the availability of substitute properties of
similar utility and desirability. Externalities such as the neighborhood and
the economy can affect property value positively or negatively. The Sales
Comparison Approach is particularly applicable when there are sufficient
data on recent market transactions to indicate value patterns.
The Sales Comparison Approach is performed focusing on sales

transactions of data center properties nationally. Data centers are
generally somewhat dissimilar to one another such that market rent rate
and ultimately value will be dependent of the unique qualities at each
property. Furthermore, it is difficult to obtain detailed information on each
comparable in order to reliably make the appropriate adjustments. This
makes applying the Sales Comparison Approach difficult and
consequently its reliability low. The Sales Comparison Approach is not
given significant weight in correlating the value conclusion. Nevertheless,
the Sales Comparison method is applied as a rough check on the value
estimate obtained in the Income Capitalization Approach to value.
Comparative Data centers are very specialized properties and a nation-wide search for
Analysis sale transactions of similar quality data center properties was conducted.
Six data center sales were selected for analysis. The data center sales
are analyzed on the basis of price/kW of critical power, the economic unit
that forms the basis of rent pricing for data centers. Comparables are
summarized in a table and locations are indicated on a map on following
pages. Photos and summaries of each property are also on subsequent
pages. Comparable data center properties are located throughout the
U.S. including California, Arizona, Virginia, New Jersey, North Carolina
and Oregon. Comparables reflect both single and multi-tenant properties.
Comparables include data centers leased on a turnkey wholesale basis
which is real estate transaction versus colocation basis where value add
services reflect a business value.

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Data Center Sales Comparable Map

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Sale Comparison Photographs
Comparable Sale 1
PayPal
4010 N. 3rd Street
Phoenix, AZ
Comparable Sale 2
5101 Lafayette St.
Santa Clara, CA
Comparable Sale 4
Sentinel Data Centers
800 Cottontail Lane
Somerset, NJ

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Sale Comparison Photographs
Comparable Sale 4
Sentinel Data Centers
2223 NE Creek Pkwy.
Durham, NC
Comparable Sale 5
3145 NE Brookwood Pkwy.
Hillsboro, OR
Comparable Sale 6
4391 Devin Shafron Dr.
Ashburn, VA

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Summary of Data Center Sales Comparables
Area (SF) Site Area Price Cap. Rate

MW LTB Sale Per Sq Ft NOI/Sq Ft Buyer
No. Property Year Built Parking Sale Date Price Per kW NOI/kW/Month Seller Comments
1 Paypal 184,000 sq ft 33,541 sq ft Feb-20 $122,000,000 $663 6.3% Landmark Dividend Sale lease-back of data center property. Lower quality
4010 N. 3rd Street 16.00 0.00 $7,625 $42 PayPal older infrastructure. Paypal executed an 8-year lease-
Phoenix, AZ 2005- 2017 $40 back.
Costar and Confidential
2 5101 Lafayette Street 26,920 sq ft 60,548 sq ft Jul-18 $36,850,000 $1,369 6.4% Landmark Dividend Single tenant data center leased to Zayo Group. Older
Santa Clara, CA 3.0 2.25 $12,283 $88 Server Farm Realty property with Tier III design.
1984, r. 2011 $66 Server Farm Realty
3 Confidential Portfolio 465,702 sq ft 3,830,231 sq ft Jan-17 $1,275,000,000 $2,704 5.3% Digital Bridge LLC Two campus data center portfolio comprising conversion
56.6 8.22 Less: Land $15,648,000 $22,270 $143 Silver Lake Partners of tech campus and newer purpose-built wholesale
1975 - 2013 $1,259,352,000 $98 datacenter.
Confidential
4 Sentinel Data Centers 852,000 sq ft 1,851,736 sq ft Feb-17 $490,000,000 $575 6.9% CyrusOne Two building newly constructed data centers in Durham,
800 Cottontail Lane 21.0 2.17 $23,333 $40 Sentinel Data Centers NC and Somerset, NJ.
Somerset, NJ 2012 - 2014 $135 SEC documents and Costar
2223 NE Creek Pkwy
Durham, NC
5 3145 NE Brookwood Pkwy. 200,000 sq ft 338,026 sq ft Aug-16 $107,000,000 $524 NA Iconiq Capital/T5 Data Centers Newly constructed data center near Portland, OR. Tier III
Hillsboro, OR 4.8 1.69 Less: Land $2,281,676 $21,816 NA T5 Data Centers design. LEED silver certification. About half the site
2015 $104,718,325 reflects excess land.
Public Records and confidential
6 4391 Devin Shafron Drive 132,280 sq ft 338,026 Sep-14 $185,500,000 $1,402 7.1% Griffin Capital/Digital Realty Formation of JV between Griffin Capital (80%) and Digital
Ashburn, VA 9.0 2.56 $20,611 $99 Digital Realty Realty (20%). Fully leased to JP Morgan. 9 MW of
NA $121 critical power. Price indicated $20,611/kW of critical
power.
Confidential
Cascade Divide 12,475 sq ft 33,541 As Stabilized $29,700,000 $2,381 7.5%

207 SW Columbia Street 2.2 3.02 (Rounded) $29,700,000 $13,500 $178
Bend, OR 97702 1999 Less: Lease-up Costs $9,818,223 $84
As Complete $19,881,777 $1,594
(Rounded) $19,900,000 $26,509
Less: Cost to Complete $3,972,549
As Is $15,927,451
(Rounded) $15,900,000

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The following is a discussion of each sales comparable.
COMPARABLE This is the recent sale of a three-building data center located in Phoenix.
NO. 1 Constructed between 2005 and 2017, the data center has mostly dated
infrastructure in an N + 1 configuration and total critical power of 16 MW.
Data center investor Landmark Dividend purchased the property in
February of 2020 from owner Paypal which executed an 8-year lease-
back. The sale price of $122 million indicates about $663/sq ft or
$7,625/kW.
Downward adjustment is warranted for location but significant upward

adjustment is made for dated infrastructure as well as tenancy (single
tenant lease and low rental rate).
COMPARABLE This is an older data center property located in Santa Clara, CA and fully
NO. 2 leased to Zayo Group. The 26,920 sq ft building has 3.0 MW of critical
power at a Tier III rating. This is an investment sale between two
experienced data center investment groups. The property sold for $36.85
million or $12,283/kW in July of 2018. However, the tenant paid a $12
million fee to lower rent below typical levels. Including the $12 million fee
indicates a value of $16,283/kW with a higher more typical rent rate. The
price reflected a 6.4% capitalization rate. Rent and resulting income were
somewhat low reflecting an NOI/kW/month of only $88.
Downward adjustment is made for location. Upward adjustment is

warranted for age/condition, more dated infrastructure and tenancy (rent
rate buy-down).
COMPARABLE Comparable 3 is the sale of a two-property data center portfolio located on

NO. 3 the West Coast. This included a 349,683 sq ft former technology campus
converted to data center use with 50.55 MW of critical power and a newly
constructed 116,019 sq ft data center with 6 MW of critical power. These
are wholesale turnkey data centers with generally high credit tenancy.
The properties were fully occupied at time of sale. The seller and
developer was a private-equity backed data center investment firm. The
overall quality is good with redundancies reflective of Tier III rating. Both
properties had excess land valued at about $15,648,000 (the 56.6 MW
total critical power is based on existing capability). The properties were
marketed for sale and sold for $1.275 billion. Deducting the value of
excess land, the indicated price is $2,704/sq ft or $22,270/kW. This
reflects about a 5.3% capitalization rate and NOI/kW/month of $98. The
buyer was a data center-focused private investor.

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Upward adjustment is warranted for age/condition. Downward adjustment

is made for location.
COMPARABLE Sale 4 is a two data center property sold to CyrusOne including a 422,000
NO. 4 sq ft data center in Durham, NC and a 430,000 sq ft data center in
Somerset, NJ. These are relatively newer purpose-built multi-tenant
wholesale turnkey data centers with a total of 21 MW of critical power.
The Durham data center has 10 MW of critical power designed and built at
a Tier III+ standard with an on-site 50 MW substation. Occupancy was
reported at 70% at time of sale with an average weighted lease term of 9
years. The Somerset data center has 21 MW of critical power also
designed and built at a Tier III+ standard. This property was fully
occupied with an average lease term of about 8 years remaining. The
seller, data center investment firm Sentinel, sold the properties for
$490,000,000 in February of this year. This reflects $575/sq ft or
$23,333/kW of critical power. This is a 6.9% capitalization rate and
relatively high NOI/kW/month of $135.
Downward adjustment is warranted for tenancy given the high

NOI/kW/month despite vacancy at this property. Downward adjustment is
also made for location.
COMPARABLE Sale 5 is the August 2016 sale of a newer data center located in Hillsboro,
NO. 5 OR near Portland. This is a single tenant leased wholesale Tier III data
center with LEED silver certification. Total critical power was 4.8 MW.
About 7.8 acres of excess land was available. The property is leased to
Comcast on a long-term basis. This transaction is an equity investment
by Iconiq Capital with the total property valued at $107,000,000 or $524/sq
ft and $21,816/kW after deducting the value of the excess land. Based on
quality, age and tenancy, this is a high indicator for the subject.
Upward adjustment is made for improving market conditions. Downward

adjustment is made for location and tenancy.
COMPARABLE This is the September 2014 sale of a vintage 2001 132,280 sq ft data
NO. 6 center located in Ashburn, VA, a major data center market. The seller,
Digital Realty, contributed the building to a joint venture with Griffin Capital
on an 80% (Griffin) to 20% (Digital) basis. The property was fully leased to
high credit tenant JP Morgan. The sales price of $185,500,000 or
$1,402/sq ft reflected a capitalization rate of 7.05%. This data center is
reflective of a Tier III level. Critical power is 9 MW and the price paid
reflects $20,611/kW. This is a somewhat older sale.

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Upward adjustment is made for sale date. Downward adjustment is made

for location and tenancy.
Adjustments to Pertinent market factors, along with property characteristics, were taken
Comparable Data into consideration in the analysis, and all sales were adjusted to account
for the differences between the comparables and the subject. In the
preceding tables, adjustments are made to the indicated turnkey data
center comparable sales prices as previously described to value each of
the subject buildings.
Comparable Adjustment Grid
Name $/sf Sale Sale Current Age/ Final

No. $/kW Conditions Date Indicator Location Condition Size Infra. Tenancy Indicators
Paypal 0.0% 0.0% 0.0% -15.0% 0.0% 0.0% 30.0% 5.0% 20.0%
1 $663 $0.00 $0.00 $663 ($99.46) $0.00 $0.00 $198.91 $33.15 $796
$7,625 $0 $0 $7,625 ($1,144) $0 $0 $2,288 $381 $9,150
5101 Lafayette Street 0.0% 0.0% 0.0% -15.0% 5.0% 0.0% 5.0% 30.0% 25.0%
2 $1,369 $0.00 $0.00 $1,369 ($205.33) $68.44 $0.00 $68.44 $410.66 $1,711
$12,283 $0 $0 $12,283 ($1,843) $614 $0 $614 $3,685 $15,354
Confidential Portfolio 0.0% 0.0% 0.0% -15.0% 5.0% 0.0% 0.0% 0.0% -10.0%
3 $2,704 $0.00 $0.00 $2,704 ($405.63) $135.21 $0.00 $0.00 $0.00 $2,434
$22,270 $0 $0 $22,270 ($3,340) $1,113 $0 $0 $0 $20,043
Sentinel Data Centers 0.0% 0.0% 0.0% -10.0% 0.0% 0.0% 0.0% -20.0% -30.0%
4 $575 $0.00 $0.00 $575 ($57.51) $0.00 $0.00 $0.00 ($115.02) $403
$23,333 $0 $0 $23,333 ($2,333) $0 $0 $0 ($4,667) $16,333
3145 NE Brookwood Pkwy. 0.0% 5.0% 5.0% -10.0% 0.0% 0.0% 0.0% -15.0% -25.0%
5 $524 $0.00 $26.18 $550 ($54.98) $0.00 $0.00 $0.00 ($82.47) $412
$21,816 $0 $1,091 $22,907 ($2,291) $0 $0 $0 ($3,436) $17,180
4391 Devin Shafron Drive 0.0% 10.0% 10.0% -15.0% 0.0% 0.0% 0.0% -15.0% -30.0%
6 $1,402 $0.00 $140.23 $1,543 ($231.38) $0.00 $0.00 $0.00 ($231.38) $1,080
$20,611 $0 $2,061 $22,672 ($3,401) $0 $0 $0 ($3,401) $15,871
Minimum $/sf $524 Minimum $/sf $403

$/kW $7,625 $/kW $9,150
Maximum $/sf $2,704 Maximum $/sf $2,434
$/kW $23,333 $/kW $20,043
Average $/sf $1,206 Average $/sf $1,139
$/kW $17,990 $/kW $15,655
Median $/sf $1,016 Median $/sf $938
$/kW $21,214 $/kW $16,102
Conclusion $/sf $2,381
$/kW $13,500
Sales Comparison The five data center comparables indicated adjusted prices ranging from
Approach $9,150/kW to $20,043/kW with an average and median of $15,655/kW and
Conclusion $16,102/kW respectively. The comparable properties are turnkey data
centers located in more established data center areas compared with
Bend. All reflect a Tier III equivalent rating reasonably similar to that at the
subject. Critical power at the comparables ranges from 3.0 MW up to 56.6
MW. There is clear trend of increasing price/kW as NOI/kw/month
increases underscoring the relationship between pricing and income for
these investment sales.

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Based mainly on location and net income levels, the subject’s value will
likely fall somewhat below the average and median indictors. As shown
later in Income Capitalization Approach, net income for the subject data
center space is projected at $84/kW/month which is similar to the
$88/kW/month level at Comparable 2 indicating a price of $12,283/kW.
Most weight is placed on the average and median indicators and
Comparable 2. Considering all factors, a value of $13,500/kW is used for
the value of the subject. This totals $29,700,000 (2,200 kW X
$13,500/kW). This is a current as stabilized value. Later in the Income
Capitalization Approach, the lease-up deduction including profit is
estimated at $9,818,223. Deducting this amount from the as stabilized
value indicates an as complete value of $19,700,000 (rounded).
Deducting total costs to build-out additional critical power to 2.2 MW of
$3,972,549 from the as complete value of $19,700,000 yields an “as is”
value of $15,700,000 (rounded).
Sales Comparison The Sales Comparison Approach values of the subject are:
Approach
Conclusions "As Is" on As Complete on As Stabilzed on
June 1, 2020 June 1, 2020 June 1, 2020
$15,900,000 $19,900,000 $29,700,000
The Sales Comparison Approach is judged less reliable due to the lack of
sales of truly similar properties and the difficulty of obtaining good detailed
information on comparables in order to accurately make the appropriate
adjustments.

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Income Capitalization Approach
Kidder Mathews Income Capitalization Approach

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Income Capitalization Approach

Introduction Income-producing real estate is typically purchased as an investment,
and from the investor’s point of view, earning power is the critical element
affecting property value. The Income Capitalization Approach consists of
methods and techniques used to analyze a property’s capacity to
generate income and convert this income into value. The direct
capitalization analysis is utilized to determine the subject’s value.
Existing Lease The subject data center is operated as a colocation data center versus a
Encumbrances wholesale data center which makes sense given its smaller size.
(Contract Rent) Colocation data centers typically lease space on the basis of individual
cabinets or cages and provide a higher level of service including remote
hands. The data center will have 2.2 MW of critical power when fully
built-out. About 82 kW is currently leased as shown in the table below.
Average rental rates are about $132/kW/month. This is about 11% of
total critical power currently built-out.
Lease Summary
Cascade Divide
Power
Tenant Term Monthly Rent V/A Volt Amps kW $/kW/Month
Bend Mailing 36 $150 1 - 120 V 15A 120 15 1.8 $83.33
Allied Partners 12 1 - (750W), 120V/15A 120 15 1.8 $0.00
Cardinal Services 36 $251 1 - 120V 20A 120 20 2.4 $104.38
City of Salem 36 $400 1 - 208V 20A (4kW) 208 20 4.16 $96.15
CitySpan Technologies 12 $720 2 - 120V 20A 120 20 2.4 $300.00
Concordia University 12 $800 1 - 208V 30A 208 30 6.24 $128.21
EF Recovery 12 $200 1 - 120 V 15A 120 15 1.8 $111.11
eHygiennics - 1/3 Rack 12 $250 kW Power (2.4W) 2.4 $104.17
Fatbeam, LLC $60 2 - 208V 30A 208 30 6.24 $9.62
GiantAI 60 $1,800 4 - 208V 50A 208 50 10.4 $173.08
H4Y Technologies - Colo 36 $2,013 4 - 208V 30A 208 30 6.24 $322.52
H4Y Technologies - Colo 36 $400 1 - 208V 15A 208 15 3.12 $128.21
InnerTech 36 $225 1 - 120V 20A 120 20 2.4 $93.75
Inseego North American 36 $475 1 - 208V 20A 208 20 4.16 $114.18
IP Services 12 $600 1 - 208V 30A 208 30 6.24 $96.15
Mid-States Power - DR Service 36 $250 1 - 120V 20A 120 20 2.4 $104.17
Open Sky Software 36 $240 1 - 120V 15A 120 15 1.8 $133.33
OSU 36 $647 1 - 208V 20A 208 20 4.16 $155.53
Peak Internet 36 $640 2 - 120V 20A 120 20 2.4 $266.67
Sitka 24 $495 1 - 120V 30A 120 30 3.6 $137.50
TDS Telecom MTM $40 2 - 208V 30A 208 30 6.24 $6.41
TheCenter 36 $200 1 - 120V 15A 120 15 1.8 $111.11
Total $10,855 82.4 $131.74

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Revenues include a combination of rack leases, charges for power,

connectivity, managed services and remote hands as is typical at
colocation data centers. At the request of the client, the subject is
valued as a wholesale turnkey data center as the business value of the
in-place income is likely to be minimal.
Comparative Therefore, in this report, wholesale turnkey data center market rent rates
Analysis for the subject are estimated. The data center market is national in
scope and rents for modern data centers are more dependent on
infrastructure build-out and less dependent on location. Therefore, a
regional search for data center rental comparables is performed. On the
following pages, nine turnkey lease comparables are presented.
Comparables are leased on the basis of rent/kW/month, the standard
pricing metric for turnkey data center space.
DATACENTER Rent is typically quoted on a price per kW/month where all expenses are
TURNKEY LEASE included except electrical power to the servers. Rental data is from
COMPARABLE
ANALYSIS competitive data centers in Idaho, Oregon and Washington State with
identifying details of comparables kept confidential due to the sensitive
nature of this data. The appraiser has first-hand knowledge and is highly
confident of rent comparable data accuracy. All comparables have
redundant generator, battery, and cooling systems reflective of a Tier III
standards.
Nine turnkey lease comparables are analyzed. They are summarized in

the table on a following page. Rents range from $114 to $167/kW/month.
All expenses are included with the exception that electricity expenses are
paid by the tenant. All comparables have redundant generator, UPS and
cooling systems reflective of a Tier III. All are located in Washington,
Idaho or Oregon. Many data center properties are newer like the subject.
Generally, pricing is dependent on the quality of the data center with
power and redundancy critical factors in determining rent rates. Most
comparables reflect a range between $130/kW/month to $140/kW/month
which is similar to the in-place rent at the subject at about
$132/kW/month. Considering all factors, market rent for the subject is
correlated at $130/kW/month. Assuming full build-out to 2.2 MW of
critical power, total potential annual rent is $3,432,000 (2,200 kW X
$130/kW/month X 12 months).

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SUMMARY OF DATA CENTER RENT COMPARABLES
Lease Start Critical Rent

No. Name, Address Term Power (kW) Rate ($/kW/Mo.) Escalations Comments/Confirmation
1 Confidential Jul-20 $130.00 ~2% annually Turnkey data center lease, Tier III
Washington State 23 months 90 months FS, -Elec. Confidential
2 Confidential Aug-19 3,600 $114 ~1.5% annually Turnkey data center lease, Tier III
Washington State 122 months FS, -Elec. Confidential
3 Confidential Jul-19 1,800 $106 ~3.5% annually Turnkey data center lease, Tier III
Washington State 96 months FS, -Elec. None Power ramps from 450 kW to 1,800 kW.
None Sabey Corporation
4 Confidential Feb-18 45 $133 ~3% annually Turnkey data center lease, Tier III
5 Confidential Feb-18 45 $130 ~3% annually Turnkey data center lease, Tier III
6 Confidential Jan-16 60 $140 ~3% annually Turnkey data center lease, Tier III
7 Confidential mid 2012 ~100 $150 ~3% annually Colo space at Boise data center. Power
Idaho 60 months FS, -Elec. is billed at cost plus 50%. Cross connects
at $65 - $100, 5 hours of remote hands
included then $75 - $100/hour. Tier II+
Confidential
8 Cascade Divide mid 2015 150 $167 None Executed lease at subject but tenant elected
213 SW Columbia St. 84 months FS, -Elec. to terminate. Power billed at cost+ 50%.
Bend, OR 200 SF storage leased at additional $30/SF.
$100/mo. for cross connect.
Confidential
9 Confidential Proposal Oct-13 84 $167 3% annually Colo space at Portland data center. Power
Oregon 36 Months FS, -Elec. is billed at .22/kWh. Cross connects
at $25 - $350, 5 hours of remote hands
included then $95/hour. Tier III
Confidential

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EXPENSE Turnkey data center leases reflect all expenses paid by the landlord with
RECOVERIES the exception that electricity is paid directly by the tenant. This is
essentially a modified gross expense basis. No expense recoveries are
recognized for data center space at the subject.
VACANCY & Vacancy and collection loss are generally a function of a property’s past
COLLECTION LOSS operating history, current market conditions, and future projections of
supply and demand. Generally, for stabilized data centers in strong
markets, investors have typically used a 5% combined vacancy and
collection loss rate assuming an average or typical range of tenant
creditworthiness. This is also the basis of most capitalization rate
underwriting. However, Bend is a tertiary data center market with limited
demand compared with other more established data center markets. The
primary demand driver in Bend and Eastern Oregon is the relatively low
electricity power rates. However, the subject is a relatively new data
center in Bend, a relatively undeveloped data center market. In this
report, a 10% vacancy and collection loss are used in the direct
capitalization analysis. Applying a 10% vacancy factor results in an
effective gross income of $3,088,800.
Expenses Expenses are projected based on comparable data and some

consideration of historical expense data. In the table presented on the
following page, expense comparables are presented from four
comparable turnkey data center properties. Annual expenses range from
about $200/kW and $475/kW on a power basis. Expenses are projected
as shown on the right in the table. The expense projection presumes
that electrical power to the servers will be paid by the tenants and is not
included in the utility expense projection which includes utilities only to
support common infrastructure. Management expenses are projected at
3.0% of EGI consistent with levels at comparables. Data center
properties are typically significantly undervalued by assessors who are
generally unaware of the significant rental income associated with these
properties. The subject is in the last year of a real estate tax abatement
program and will be assessed and taxes starting in 2021. Real estate
taxes are projected at $100,000 or $45/kW which is at the low end but
within the range of the comparables. The remaining expenses are
estimated with emphasis on the comparables. A replacement reserve is
an allowance that provides for the periodic replacement of building
components that deteriorate and must be replaced during the building’s

Cascade Divide
KM Job A20-0566
Income & Expense Analysis & Projection
Comparable 1 Comparable 2 Comparable 3 Comparable 4 Appraiser's Projection
$ Amount $/kW $ Amount $/kW $ Amount $/kW $ Amount $/kW $ $/kW
Revenues
Rent $15,789,686 $975 $11,843,028 $1,645 $6,096,254 $847 $11,625,407 $1,615 $3,432,000 $1,560
Total Potential Revenue $15,789,686 $975 $11,843,028 $1,645 $6,096,254 $847 $11,625,407 $1,615 $3,432,000 $1,560
Vacancy $0 $0 $0 $0 $0 $0 $0 $0 $343,200 $156

Effective Gross Income $15,789,686 $975 $11,843,028 $1,645 $6,096,254 $847 $11,625,407 $1,615 $3,088,800 $1,404
Expenses
Utilities $54,539 $3 $254,674 $35 $113,083 $16 $213,475 $30 $25,000 $11
Janitorial $25,217 $2 $29,958 $4 $22,500 $3 $32,172 $4 $5,000 $2
Repair & Maintenance $1,563,785 $97 $1,499,250 $208 $2,167,052 $301 $1,558,794 $216 $600,000 $273
Security $419,035 $26 $287,135 $40 $282,161 $39 $336,338 $47 $15,000 $7
Landscaping $36,443 $2 $37,658 $5 $73,486 $10 $38,696 $5 $5,000 $2
Management $383,138 $24 $349,598 $49 $257,920 $36 $339,737 $47 $92,664 $42
Real Estate Taxes $674,649 $42 $898,463 $125 $433,207 $60 $732,325 $102 $100,000 $45
Insurance $65,590 $4 $65,790 $9 $65,297 $9 $58,720 $8 $20,000 $9
Legal/Accounting $0 $0 $0 $0 $0 $0 $0 $0 $5,000 $2
Reserves $0 $0 $0 $0 $0 $0 $0 $0 $5,000 $2
Total Expenses $3,222,396 $199 $3,422,527 $475 $3,414,706 $474 $3,310,257 $460 $872,664 $397
Net Income $12,567,290 $776 $8,420,501 $1,170 $2,681,548 $372 $8,315,150 $1,155 $2,216,136 $1,007

Cascade Divide
KM Job A20-0566
economic life. This is a variable item because every property has a

different age and condition. Reserves and legal/accounting expenses
are projected at $5,000 each. Total expenses are projected at $872,664
annually or $397/kW, in line with comparables particularly considering the
newer vintage of the subject.
Direct Capitalization The direct capitalization technique relies on the capitalization of the
stabilized net operating income by an overall rate extracted from market
sales. The overall rate is the ratio of net operating income to sale price.
The following table summarizes overall capitalization rates from sales of
similar data center properties including those found previously in the
Sales Comparison Approach.
In the current market, capitalization rates have generally varied mainly

between 6% and 8% for good quality data centers leased to creditworthy
tenants with sufficient remaining lease term. Generally, powered-shell-
leased properties are less risky and warrant lower capitalization rates
compared with turnkey-leased properties. Through its high growth, the
data center market has outperformed much of the larger commercial real
estate market since the economic downturn. This has attracted
significant capital to the data center market putting downward pressure
on prices and resulting in clear capitalization rate compression over the
past several years.
Data Center Capitalization Rates

Analysis
Year Area Sale Analysis Price Cap. NOI
No. Property Built Sq ft Date Price $/Sq Ft Rate /Sq Ft
1 PayPal, Phoenix, AZ 2005- 2017 184,000 sq ft Feb-20 $122,000,000 $663 6.3% $41.77
2 Mapletree Portfolio, Multiple Locations Various 1,377,405 sq ft Jan-20 $557,000,000 $404 6.6% $26.69
3 Digital Realty Portfolio, Ashburn, VA Various 837,560 sq ft Nov-19 $1,013,200,000 $1,210 6.0% $72.58
4 COPT Data Center Portfolio, Northern VA Various 1,200,000 sq ft Jun-19 $265,000,000 $221 5.1% $11.26
5 Tech Center West, Marlborough, MA 1988 206,000 sq ft Jun-19 $33,250,000 $161 6.3% $10.09
6 T5 @ Kings Mountain, Kings Mountain, NC 2007 215,000 sq ft Mar-19 $70,000,000 $326 7.1% $23.12
7 Frontier Portfolio, Los Angeles Area, CA 1988 114,005 sq ft Jan-19 $82,975,000 $728 5.2% $37.85
8 4726 Hills and Dales Rd NW, Canton, OH 2009 29,960 sq ft Oct-18 $9,425,000 $315 8.0% $25.04
9 3075 Loyalty Cir, Columbus, OH 2016 241,493 sq ft Jul-18 $46,950,000 $194 6.6% $12.85
10 5101 Lafayette St, Santa Clara, CA 1984, r. 2011 60,548 sq ft Jul-18 $36,850,000 $609 6.4% $38.95
11 400 Holger Way, San Jose, CA 1999 76,410 sq ft Jun-18 $49,150,000 $643 6.5% $41.81
12 1650 Union Hill Rd, Alpharetta, GA 1999 165,000 sq ft Jun-18 $64,000,000 $388 7.3% $28.32
13 1506 & 1510 Moran Rd, Sterling, VA 1974, 2013 78,295 sq ft Oct-17 $34,000,000 $434 7.0% $30.40
14 2005 East Technology Circle 1998 60,000 sq ft Sep-17 $15,200,000 $253 7.4% $18.79
15 630 Clark Ave, King of Prussia, PA 1960, 1997 49,820 sq ft Sep-17 $19,200,000 $385 6.5% $25.09
16 6 Norden Pl., Norwalk, CT 2014 167,691 sq ft May-17 $58,900,000 $351 7.0% $24.59
17 1655 West Sunrise Boulevard, Gilbert, AZ 1997 14,168 sq ft Apr-17 $2,800,000 $198 8.5% $16.80
18 Sentinent Portfolio (NC & NJ) '12-/'14 852,000 sq ft Feb-17 $490,000,000 $575 6.9% $39.68
19 Confidential Portfolio '75-/'13 465,702 sq ft Jan-17 $1,275,000,000 $2,738 5.3% $145.10
20 2601 W Broadway Road, Tempe, AZ 1977 44,244 sq ft Jan-17 $16,400,000 $371 6.7% $24.84

Cascade Divide
KM Job A20-0566
National investor surveys provide little credible evidence for data center
capitalization rates, as these surveys do not research data centers
specifically. However, the Price Waterhouse Cooper Q1 2020 Real
Estate Investor Survey reports a national warehouse market average
capitalization rate of 4.79% up 15 basis points from the value one year
ago. The RERC Q1 2020 survey reports a capitalization rate of 7.0% for
first tier industrial flex properties and 6.6% for first tier R & D properties.
The subject is a newly built and reflective of a modern competitive data

center with approximately Tier III redundancy. On the other hand, its
location in Bend, a tertiary city with no significant data center industry,
increases perceived risk. Most tenants are/will be smaller less than high
credit corporate tenants. The capitalization rate for the subject will likely
fall in the range between 7.25% and 7.75%. Considering all factors, the
Direct Capitalization - Data Center

Cascade Divide
INCOME RA (SF) $ Amount $/SF $/kW

Rent 12,475 $3,432,000 $275.11 $1,560
POTENTIAL GROSS INCOME (PGI) 12,475 $3,432,000 $275.11 $1,560
VACANCY & COLLECTION LOSS 10.0% $343,200 $27.51 $156
EFFECTIVE GROSS INCOME (EGI) $3,088,800 $247.60 $1,404
EXPENSES
Utilities $25,000 $2.00 $11
Janitorial $5,000 $0.40 $2
Repair & Maintenance $600,000 $48.10 $273
Security $15,000 $1.20 $7
Landcaping $5,000 $0.40 $2
Management $92,664 $7.43 $42
Real Estate Taxes $100,000 $8.02 $45
Insurance $20,000 $1.60 $9
Professional Services $5,000 $0.40 $2
Reserves $5,000 $0.40 $2
TOTAL EXPENSES $872,664 $69.95 $397
NET OPERATING INCOME $2,216,136 $177.65 $1,007
NOI capitalized at: 7.50% $29,548,480 $2,368.62 $13,431

INDICATED VALUE (Rounded) $29,500,000 $2,364.73 $13,409

Cascade Divide
KM Job A20-0566
capitalization rate appropriate for the subject data center is correlated at

7.5%. As shown on the previous page, the as stabilized value of the
subject is $29,500,000. This value presumes that the subject has been
built-out to 2.2 MW of critical power and leased to stabilization. To arrive
at the as complete and “as is” values, lease-up and remaining
construction costs are deducted. Projecting absorption for the data
center space is challenging but considering significant growth in data
center demand and absorption rates at other data centers in Eastern
Washington and Oregon, absorption of the subject is projected at rate of
about 400 to 500 kW/year. This rate results in a total absorption time of
about four years or 48 months. Based on the absorption projection and
the market rent rate previously estimated, 24 months of average
downtime results in lost rent of $6,149,520 while leasing up to the 90%
projected stabilized state starting from an occupancy of 3.7% (~82 kW)
Leasing commissions are estimated at based on a 6% commission of
rents for an assumed 7-year lease term. In addition to these costs, in
comparison with the as stabilized condition, a buyer of the subject would
expect compensation for the risk and effort to lease-up the remaining
vacancy. A profit of 30% of lease-up costs is used. Total lease-up costs
are estimated at $9,818,223. Deducting this amount from the as
stabilized value of $29,500,000 yields an as complete value of
$19,700,000.
RECONCILED AS STABILIZED VALUE $29,500,000
Deductions to complete absorption

Absorption Estimate - months 48.0
Straight-line Average downtime 24.0
Lost Rent at Market ($/sf/mo) $6,149,520
Commissions (6% of 7 Year of Lease Term) $1,402,959
Entrepreneurial Profit 30% $2,265,744
Total Absorption Costs $9,818,223
RECONCILED AS COMPLETE VALUE $19,681,777

(Rounded) $19,700,000
Less: Remaining Costs for Data Center Completion $3,055,807

Entrepreneurial Profit 30% $916,742
Total Remaining Costs $3,972,549
RECONCILED "AS IS" VALUE $15,727,451

(Rounded) $15,700,000

Cascade Divide
KM Job A20-0566
Based on the owner’s estimate to complete build-out of the data center,

construction costs of $3,055,807 are recognized. Adding profit, total
construction costs are $3,972,549. Deducting this amount from the as
complete value, yields an “as is” value of $15,700,000.
Income The Income Capitalization Approach values of the subject are:

Capitalization Value
Indication "As Is" on As Complete on As Stabilzed on
June 1, 2020 June 1, 2020 June 1, 2020
$15,700,000 $19,700,000 $29,500,000

Cascade Divide
KM Job A20-0566
Reconciliation & Final Value Opinion
Kidder Mathews Reconciliation & Final Value Opinion

Cascade Divide
KM Job A20-0566
Reconciliation & Final Value Opinion

Value Opinions The approaches to value utilized in this report have indicated the
following values for the subject property:

June 1, 2020 June 1, 2020 June 1, 2020
Sales Comparison Approach $15,900,000 $19,900,000 $29,700,000
Income Capitalization Approach $15,700,000 $19,700,000 $29,500,000
SALES COMPARISON The Sales Comparison Approach is a method of direct comparison

APPROACH whereby the subject property is compared to market sales of similar
properties, with appropriate adjustments made for differences. In this
approach, six national sales of data center properties are analyzed. Data
centers can be somewhat dissimilar to one another such that market rent
rate and ultimately value will be dependent on the unique qualities at
each property. Furthermore, it is difficult to obtain detailed information on
each comparable in order to accurately make the appropriate
adjustments including an adjustment for above market rent as with the
pending lease on the third floor of the subject. Overall, the Sales
Comparison Approach is not judged to be highly reliable due to the lack
of sales of truly similar properties and the difficulty of obtaining good
detailed information on comparables in order to accurately make the
appropriate adjustments for a reliable value estimate.
INCOME The Income Capitalization Approach best reflects the value of the subject
CAPITALIZATION property as an investment with the capacity to generate income. There is
APPROACH
a sufficient amount of recent, good-quality rental data available to
estimate market rent, expenses can be estimated with reasonable
accuracy, and investment parameters were drawn from a survey of
market participants and data center sales transactions. This approach is
more likely to be relied upon by investors. The direct capitalization was
performed. There was reasonably good information regarding rent,
expenses and appropriate investment parameters. Overall, the Income
Capitalization Approach is judged to be well supported and the
projections would be given strong and perhaps sole consideration by
potential buyers of the subject.
Value Conclusion It is concluded the evidence best supports the following value conclusion
for the subject:

June 1, 2020 June 1, 2020 June 1, 2020
$15,700,000 $19,700,000 $29,000,000

Cascade Divide
KM Job A20-0566
Exposure Time The definition of “exposure time” is as follows:
The estimated length of time the property interest being appraised

would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of
the appraisal; a retrospective opinion based upon an analysis of
past events assuming a competitive and open market.
The estimated exposure time for the subject is 12 months based on the
specialized use of the subject, marketing times of similar properties and
the opinions of local knowledgeable brokers.

Cascade Divide
KM Job A20-0566
ADDENDUM
Kidder Mathews
Valuation Advisory Services Addendum
Cascade Divide
KM Job A20-0566
Engagement Letter
Kidder Mathews
05/29/20
David Chudzik
Kidder Mathews
David.chudzik@kidder.com
RE: Loan Name: Cascade Divide Loan Number: TBD
Dear David,
This Letter of Engagement confirms the selection of your appraisal firm to develop an appraisal
report to assist Harvest Small Business Finance in making a credit decision in a real estate
related transaction, subject to the following terms and conditions:
The parties expressly agree that no limitations on liability recovery will attach from the
performance of the scope of work contemplated by this engagement agreement. This engagement
agreement constitutes the entire contract for the engagement and any modifications to this
contract must be in a written form signed by both parties.
Loan Name: Include the above loan name and loan number on the title page
of the appraisal.
Intended Users: The report must be addressed to Harvest Small Business Finance
LLC and the U.S. Small Business Administration.
Property Address: 207 - 213 SW Columbia Street, Bend, OR 97702
Description: The subject property is an industrial property.
Hotels & Restaurants: Please identify properties that have changed ownership within 3
years as soon as practical. Harvest must perform either a third
party appraisal review or a site visit.
Report Format: Complete Summary
Valuation Scenario:
• As Is Market Value on all reports
• As If Complete Market Value for buildings under construction or
requiring tenant improvements
• As If Stabilized Market Value on all reports
• Insurable Value defined as Full Replacement Cost New in shell
condition (Include if Condo “For condominiums, insurable value
should separately list the full replacement cost new of the unit”) see

Cascade Divide - #TBD
Appraisal Engagement Letter – 05/29/20
Page 2
attached “Harvest Small Business Finance Minimum Appraisal
Requirements”
Approaches to Value: This appraisal assignment will be used for SBA financing and
requires two out of the three approaches (Cost, Income and Sales
Comparison).
Fee: $7,000
Delivery Date: 06/12/20
Intended Use: Mortgage Financing
Property Contact: John Warta, 808-371-6606
Appraisal Review Contact: Shane Hernandez, shernandez@harvestcref.com
The items listed below are necessary to complete the appraisal report and should be received by
you within 2 business days of receiving this engagement letter. If you do not receive the data
necessary to adequately appraise the subject property, particularly a rent roll and leases for a
leased fee analysis, please stop work and inform the undersigned prior to the inspection date.
The items being sent to you are:
o TBD
If you require additional items to properly appraise the subject property, please immediately
contact the undersigned.
The subject property and comparable rentals and sales must be inspected by a licensed certified
general appraiser. The report must separate the value of the real estate from the going concern
value and furniture, fixtures and equipment value. The value of the real estate must be clearly
stated and not include FF & E or business value. Two of the three approaches must be used in
order for the report to be valid. We would prefer the Income and Sales Comparison
approaches.
The appraisal should be in conformance with the California Department of Financial Institutions
appraisal requirements, USPAP, and the attached Harvest Small Business Finance appraisal
scope of work requirements (Exhibit A).
Harvest Small Business Finance requires one electronic copy of the report by email. Please
submit the electronic copy, including appendices and photographs to dcourt@harvestcref.com,
phaglund@harvestcref.com, and shernandez@harvestcref.com.
Harvest Small Business Finance – revised 4/09/12

Page 3
Include loan name and loan number on title page for all correspondences. Please sign below and
return the executed engagement letter within three (3) days of receipt.
If you have questions, please contact Shane Hernandez, Credit Analyst at (949) 505-5883.
Sincerely,
Shane Hernandez
Shane Hernandez
Credit Analyst
Encl.
***Acknowledgment of Receipt and Acceptance of Assignment***
By acknowledging the receipt of this letter, you agree to the terms of the assignment and the
stated delivery date.

___________________________ 05/29/2020
__________
Print Name Date
___________________________
Signature
Please sign and return by email.

Page 4
HARVEST SMALL BUSINESS FINANCE – MINIMUM APPRAISAL
REQUIREMENTS
The following are Harvest Small Business Finance minimum requirements for approval of appraisal
reports. The items below must be included in the appraisal report. They must be either described or
summarized depending on the report format.
General Requirements
1. Conform to USPAP and All Supplemental Federal Appraisal Regulations
2. Disclose all items that will affect the utility and value of the subject property.
3. Include sufficient supporting documentation so that the analysis, judgment, logic and reasoning are
clear to the reader
4. Include legal description of the property
5. Include Purchase Agreement if available
6. Include signed engagement letter in addendum
7. Include verification sources for all comparable sales and rentals unless those sources request
confidentiality.
Inspection
1. The subject and comparable sales and rentals must be inspected by a licensed certified general
appraiser. Reports with inspections by only an appraisal trainee will not be accepted.
2. An interior and exterior inspection of the subject property is required by a licensed certified general
appraiser, and inspections by only an appraisal trainee will not be accepted unless otherwise noted in
the engagement letter.
3. At a minimum, an exterior inspection of the comparable improved sales, land sales and rentals is
required.
4. A complete visual inspection and description of the neighborhood is required.
5. Representative photographs of the entire subject property are required, including interior and
exterior photographs of each building on the site, any other significant site improvements (signs,
parking areas), and any surplus or excess land. Exterior photographs of all comparable sales and
rentals are required.
Regional Analysis
1. Discuss regional data and market conditions as it pertains to the subject property type
2. Regional Map identifying the subject property
Neighborhood Analysis
1. Identify the boundaries of the neighborhood
2. Discuss land uses within and surrounding the neighborhood
3. Disclose apparent nuisances
Site Analysis
1. Plat map or survey with subject property identified in Site Section or addendum in form reports.
2. Physical address observed at inspection
3. Describe adjacent land uses
4. Disclose apparent easements and encroachments as applicable
5. Disclose apparent nuisances, as applicable.
Improvement Description
1. Sketch or floor plans of subject property in Improvement Section or addendum in form reports or
other documentation sufficient to identify the extent and character of the improvements, particularly

Page 5
if proposed or under renovation.
2. Include discussion of material specifications
3. Effective wage
4. Remaining economic life
Highest and Best Use

1. Describe or summarize the four tests of highest and best use and not simply state the highest and best
conclusion. Parking conformity must be discussed.
2. If the highest and best use of the property is different than the existing use, please call Harvest
Small Business Finance, LLC for possible changes to the scope of work.

1. Include at least three recently closed sales from the market area or similar areas within the region.
Sales must be selected based on the highest and best use regardless of geographic limitations and be
physically similar to the subject.
2. Pending sales and listings are acceptable along with the three required closed sales in attempt to
bracket the subject property value.
3. A quantitative adjustment grid with discussion of the sales and adjustments is required. Pre- and post
adjusted values must approximate each other to prove the applicability of the comparable data and
reasonableness of the value conclusion.
4. Photographs of each sale are required
5. Location map identifying the location of the sales in relationship to the subject is required.
Income Approach
1. Current rent roll that includes, but is not limited to the tenant name, unit size and lease amount, dates,
terms escalations and options to renew.
2. The rent survey must include but not be limited to tenant name, unit size and lease amounts, dates,
terms, escalations and options to renew.
3. Vacancy must be supported from market data
4. Expenses must be compared to historical data, similar properties and/or industry standards and either
discussed or summarized in the report.
5. Direct capitalization method is required. Overall capitalization rates must be supported by
comparable sales from the market that have recently sold. At least three closed sales are required.
6. If appropriate, a discounted cash flow method of value is required for all appraisals. Market
conditions, the market area and the specific property type should support using or not using the DCF
method.
7. Photographs of each comparable rental are required
8. Location map identifying the comparable rental’s location in relationship to the subject is required
9. Pending rental listings are acceptable along with the three required executed leases in an attempt to
bracket the subject property.
Cost Approach (if used)

1. Include at least three recently closed land sales from the market area or similar areas within the
region. Land sales must be selected based on the highest and best use regardless of geographic
limitations and be physically similar to the subject.
2. Pending sales and listings are acceptable along with the three required closed sales in an attempt to
bracket the subject property value.
3. An adjustment grid with discussion of the sales and adjustments is required. Pre- and post adjusted
values must approximately each other to prove the applicability of the comparable data and
reasonableness of the value conclusion.
4. Photographs of each sale or plat maps are required

Page 6
5. Location map identifying their location in relationship to the subject are required.
6. The opinion of replacement cost new or reproduction cost new must be supported by recognized
industry sources such as Marshall Valuation Service or similar cost estimating services or by
comparable developer’s costs for similar property types. Subject development costs should be
analyzed and discussed, for properties with tenant improvement construction or property
rehabilitation.
Insurable Value
1. For freestanding buildings defined as full replacement cost new and does not include any form of
depreciation or obsolescence. The opinion must include the cost of the foundation and below grade
plumbing, which under certain conditions could require replacement.
2. For condominiums, insurable value should separately list the full replacement cost new of the
unit in shell condition – the shell cost based on an undivided interest in the building or project –
and the cost of the interior tenant improvements for the subject unit.
As Is Value
1. All appraisals are required to report an “As Is” Value of the subject property. For improved property
that is proposed, under construction, under rehabilitation or has not yet reached stabilization,
appropriate deductions and discounts must be applied to the prospective stabilized or upon
completion value. These deductions and discounts include, but are not limited to, leasing
commissions, rent losses, tenant improvements and capital improvements.
Market Value As If Complete

1. This represents the current market value of a proposed property or a property undergoing
rehabilitation or tenant improvements. The date of completion must be disclosed and is that time
when the improvements are completed and ready for delivery to the buyer or lessee.
2. Report appropriate deductions and discounts for un-leased space including, but not limited to rent
loss, commissions and tenant improvements, as appropriate.
Market Value As If Stabilized

1. This represents the current market value of a property that has achieved stabilized occupancy.
2. The date of stabilization must be disclosed.
ONLY TO BE USED FOR CONSTRUCTION LOANS

Proposed Construction
1. Include copy of building plans or other documentation sufficient to identify the extent and character
of the proposed improvements.
2. Include construction, renovation or tenant improvement cost breakdown
3. Report current market value as if complete on the appraisal inspection date, as appropriate.
4. Report current market value as if stabilized on the appraisal inspection date, as appropriate.
5. Report appropriate deductions and discounts for un-leased space including but not limited to rent
loss, commissions and tenant improvements, as appropriate.

Cascade Divide
KM Job A20-0566
Title Report
Kidder Mathews
15 OREGON AVE
BEND, OR 97701
(541) 389-7711 * Fax (541) 389-0506
Francis Hansen & Martin, LLP August 7, 2014

1148 NW Hill St Report #1
Bend, OR 97701
Attn: Mariya Yezhikova Title Number : 154696

Title Officer : ROGER G. SHULSEN
Proposed Insured: Bank of the Pacific
PRELIMINARY TITLE REPORT
Property Address:
213 SW Columbia St, Bend, OR 97702
Policy or Policies to be issued: Liability Premium

EXTENDED LENDER'S POLICY $11,000,000.00 $16,850.00
Reissue Rate
Endorsements To Follow $
Local Government Lien Search $25.00
We are prepared to issue ALTA (06/17/2006) title insurance policy(ies) of STEWART TITLE GUARANTY
COMPANY, in the usual form insuring the title to the land described as follows:
Lot Two (2), Block Five (5), SHEVLIN CENTER, recorded July 23, 1981, in Cabinet C, Page 27, Deschutes
County, Oregon.
and dated as of August 1, 2014 at 7:00 a.m., title is vested in:
Vestee:
CASCADE DIVIDE COMMUNICATIONS, INC., a Washington Corporation
The estate or interest in the land described or referred to in this Commitment and covered herein is:
Fee Simple
Order No. 154696
Page 2
Schedule B of the policy(ies) to be issued will contain the following general and special exceptions unless removed
prior to issuance:
GENERAL EXCEPTIONS:
1. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real
property or by the Public Records; proceedings by a public agency which may result in taxes or assessments, or notices of such proceedings,
whether or not shown by the records of such agency or by the Public Records.
2. Facts, rights, interests or claims which are not shown by the Public Records but which could be ascertained by an inspection of the Land or
by making inquiry of persons in possession thereof.
3. Easements, or claims of easement, not shown by the Public Records; reservations or exceptions in patents or in Acts authorizing the issuance
thereof; water rights, claims or title to water.
4. Any encroachment (of existing improvements located on the subject Land onto adjoining Land or of existing improvements located on
adjoining Land onto the subject Land) encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed
by an accurate and complete land survey of the subject Land.
5. Any lien, or right to a lien, for services, labor, material, equipment rental or workers compensation heretofore or hereafter furnished, imposed
by law and not shown by the Public Records.
6. Unpatented mining claims whether or not shown by the Public Records.
EXCEPTIONS 1 THROUGH 6 ABOVE APPLY TO STANDARD COVERAGE POLICIES AND MAY BE

MODIFIED OR ELIMINATED ON AN EXTENDED COVERAGE POLICY.
SPECIAL EXCEPTIONS:
Tax Information
Taxes assessed under Code No. 1-001 Map and Tax Lot Number 18 12 06A0 00906
Account No. 154896
NOTE: The 2013-2014 Taxes: $21,276.79, paid in full.
7. The 2014-2015 Taxes: A lien not yet due or payable.
8. Railroad and utility easement as shown on the official plat of said land.
Effects of that certain Quit Claim Deed from Brooks Resources Corporation to Consep Membranes, Inc.,
recorded April 29, 1991, Instrument No. 233-2003, Deschutes County Records.
Effects of that certain Quit Claim Deed from Brooks Resources Corporation, an Oregon Corporation to Cascade
Divide Communications, Inc., a Washington Corporation, recorded July 24, 2014, Instrument No. 2014-23919,
Deschutes County Records.
9. Easement, including the terms and provisions thereof, affecting the portion of said premises and for the purposes
stated therein
As granted to: Pacific Power and Light Company
Recorded: March 1, 1954
Instrument No.: 107-148, Deed Records
Order No. 154696
Page 3
10. Deed of Trust, including the terms and provisions thereof, to secure the amount noted below and other amounts
secured thereunder, if any.
Amount: $1,260,000.00
Dated: June 15, 2012
Recorded: June 15, 2012
Instrument No.: 2012-23150, Deschutes County Records
Grantor: NAVAGITA USA, INC., a Washington corporation
Trustee: First American Title Insurance Company of Oregon
Beneficiary: Development Holdings, LLC, a Delaware limited liability company
11. Leases and tenancies, if any.
12. A certified copy of the Board of Director's resolution authorizing the Deed of Trust by Cascade Divide
Communications, Inc., a Washington Corporation must be furnished for examination.
13. Discrepancies, conflicts in boundary lines, shortage in area, encroachments or any other facts, which a correct
survey would disclose.
14. Any statutory lien for labor or material, which now has gained, or hereafter may gain priority over the lien of the
insured mortgage.
To remove this item, the Company will require an affidavit and indemnity on a form supplied by the Company.
IF THE ABOVE EXCEPTION IS TO BE REMOVED FROM A FORTHCOMING POLICY PRIOR TO THE

EXPIRATION OF THE STATUTORY LIEN PERIOD, THE COMPANY MUST BE CONTACTED
REGARDING ITS UNDERWRITING REQUIREMENTS FOR EARLY ISSUE.
15. Persons in possession or claiming the right of possession.
To remove this item, the Company will require an affidavit and indemnity on a form supplied by the Company.
NOTE: No liability is assumed if a financing statement is filed in the office of the County Clerk covering fixtures
wherein the land is described other than by metes and bounds, the rectangular survey system, or by recorded
lot and block.
NOTE: The following deed(s) affecting said land were recorded within twenty-four (24) months of the date of this
report:
Grantor: Navagita USA, Inc., a Washington Corporation now known as Cascade Divide
Communications, Inc.
Grantee: Cascade Divide Communications, Inc., a Washington Corporation
Recorded: July 24, 2014
Instrument No: 2014-23918, Deschutes County Records
NOTE: Underwriter's portion of the total title insurance premium (include endorsements and additional risk premiums)
10.00%.
Order No. 154696
Page 4
NOTE: Your application for title insurance was placed by reference to only a street address or tax identification
number. Based on our records, we believe that the legal description in this report covers the parcel(s) of
Land that you requested. If the legal description is incorrect, the parties to the transaction must notify the
Company and/or the settlement company in order to prevent errors and to be certain that the correct parcel(s)
of Land will appear on any documents to be recorded in connection with this transaction and on the policy of
title insurance.
NOTE: As of the date hereof, there are no matters against Cascade Divide Communications, Inc., a Washington
Corporation which would appear as exceptions in the policy to issue, except as shown herein.
NOTE: Any map or sketch enclosed as an attachment herewith is furnished for information purposes only to assist in
property location with reference to streets and other parcels. No representation is made as to accuracy and the
company assumes no liability for any loss occurring by reason of reliance thereon.
NOTE: The policy to be issued may contain an arbitration clause. When the Amount of Insurance is less than the
amount, if any, set forth in the arbitration clause, all arbitrable matters shall be arbitrated at the option of
either the Company or the Insured as the exclusive remedy of the parties.
This report is preliminary to the issuance of a policy of title insurance and shall become null and void unless a policy is
issued and the full premium paid.
RGS:kg
"Superior Service with Commitment and Respect for Customers and Employees"
Cascade Divide
KM Job A20-0566
Insurable Value
Kidder Mathews
INSURABLE VALUE SUMMARY
Cascade Divide
Building Information Cost Information Source: Marshall & Swift

Gross Building Area 13,527
Occupancy Data Center
Floors 1
Average Story Height (feet) 15'
Construction - Type C
Construction - Quality Good
Base Cost of Building C Shell & Core Source Units Cost Total
Data Center Section 14, Page 18 13,527 $177.00 $2,394,279
Sprinklers Section 14, Page 37 13,527 $4.00 $54,108
Subtotaled Base Costs 13,527 $181.00 $2,448,387
Adjustments Source
Floor Area to Perimeter Section 14, Page 38 1.0000
Story Height Section 14, Page 39 1.0000
Current Section 99, Page 3 1.0300
Location Section 99, Page 10 1.1500
Gross Adjustment 1.1845
Adjusted Base Replacement Cost $214.39 $2,900,114
Other Costs
Turnkey Data Center Infrastructure $9,137,865
Site Carrying Costs $50,000
Loan Fee 1.0% $135,000
Site Costs $2.00 $1,045,440
Total Other Costs $766.49 $10,368,305
M & S Replacement Cost New, Before Margin $980.88 $13,268,419
Owner's Cost Estimate $1,000.40 $13,532,373
Reconciled $998.00 $13,500,000
Additional Costs
Financiing Fee @ 1.5% $202,500
Demolition @ $5/sq ft $67,635
Total Additional Costs $270,135
Insurable Value $13,770,135

Rounded: $13,800,000
Cascade Divide
KM Job A20-0566
Appraiser’s Experience Data
Kidder Mathews
DAVID M. CHUDZIK, Ph.D., MAI, CRE SELECT CLIENT LIST
Allstate Life Insurance Co.
Senior Vice President
Valuation Advisory Services Alexandria Real Estate Equities
Archdiocese of Seattle
Since joining Kidder Mathews’ Valuation Advisory Services in October of 2004,
David has provided valuation and consultation services for a wide variety of Bank of America
commercial property types including office, industrial, retail, multifamily, hospitality,
BECU
marina, and development properties. His experience includes complex properties
like biotechnology research facilities, data centers, sawmills, shipyards, and other Bloch Properties
specialized property types. He has performed biotechnology valuation and
market analysis on a national basis and authored the National Biotechnology Real Citibank
Estate Market Analysis for GVA Worldwide. Assignments have included valuation City of Seattle
of leasehold interests, air rights, condemnation compensation, conservation
easements as well as market rent studies. City of Renton
David’s professional experience includes venture capital investing with emphasis in Davis Wright Tremaine
the life sciences industry. He has also worked as a development analyst and project East West Bank
manager at Seattle area real estate development companies. His development
experience includes multifamily residential, commercial office, and marina First Sound Bank
developments.
First Mutual Bank
David brings unique qualifications to real estate valuation and consulting making GE Capital
him well qualified in the analysis of some of the most complex and
sophisticated real estate. H5 Capital
Heritage Bank
EDUCATION
Jefferson County
PH .D. in Biochemistry from University of Washington
MBA in Management from University of Washington
BS in Biochemistry from University of Washington
BA in Spanish from University of Washington
PROFESSIONAL LICENSES
Washington Certified General Real Estate Appraiser (No. 1102099)

Oregon Certified General Real Estate Appraiser (No. C00182)
California Certified General Real Estate Appraiser (No. 3004403)
Idaho Certified General Real Estate Appraiser (No. CGA-4877)
Virginia Certified General Real Estate Appraiser (No. 4001017780)
Washington Real Estate Broker (No. 127896)
T 206.205.0222
F 206.205.0220
PROFESSIONAL LICENSES
david.chudzik@kidder.com
MEMBER of Appraisal Institute (MAI)
601 Union St
MEMBER of Counselors of Real Estate (CRE) Suite 4720
Seattle, WA 98101
ADDITIONAL CLIENTS
JPMorgan Chase Bank Portland State University
KeyBank Puget Sound Bank
King County Puget Western
Low Income Housing Institute San Juan County Land Bank
Memorial Medical Center Schnitzer West
Merrill Lynch Seattle BioMed
Morgan Stanley Seattle Monorail Project
Morton McGoldrick, PS Server Farm Realty
Moss Adams Stockbridge Capital Group
National Real Estate Advisors Todd Shipyards
Nexus Properties Unico Properties
Northwest Diabetes Reaseach Union Bank

Center
University of Washington
Northwest Kidney Center
US Bancorp
Novartis
Vulcan Real Estate
Olympus Real Estate Partners
Washington Federal
Overlake Medical Center
Washington Trust Bank
Perkins Coie
Wells Fargo
Port of Port Townsend
T 206.205.0222
F 206.205.0220
david.chudzik@kidder.com
601 Union St
Suite 4720
Seattle, WA 98101

Cascade Divide Data Center - Appraisal Summary Report-Black - June 2020

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Cascade Divide Data Center - Appraisal Summary Report-Black - June 2020

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Appraisal Report

Cascade Divide | Bend, OR 97702

Prepared for Prepared by Kidder Mathews

RE: Cascade Divide

Dear Mr. Hernandez:

“As Is” on June 1, 2020…….….……………………………………………………………….$15,700,000

David Chudzik, Ph.D., MAI, CRE

David Chudzik, Ph.D., MAI, CRE

RESTRICTION UPON DISCLOSURE & USE:

Certification ........................................................................................................................... iii

Limiting Conditions ................................................................................................................ iv

Summary of Appraisal ............................................................................................................ 1

Introduction .......................................................................................................................... 10

Market Overview .................................................................................................................. 14

REGIONAL OVERVIEW ...................................................................................................... 18

DATA CENTER MARKET OVERVIEW ................................................................................... 23

Property Description ............................................................................................................. 36

Highest & Best Use .............................................................................................................. 46

Sales Comparison Approach ............................................................................................... 49

Income Capitalization Approach .......................................................................................... 59

Reconciliation & Final Value Opinion ................................................................................... 69

Kidder Mathews Summary of Appraisal

COVID-19 An important part of any appraisal assignment is analysis of market

So far, the economic impact is clearly negative. Businesses in

Kidder Mathews Summary of Appraisal

affected. Market participants at this point do not have enough

Scope Comprehensive appraisal with Sales Comparison and Income

Property Rights Fee Simple Estate

Extraordinary It is an extraordinary assumption of this report that the data center

Highest & Best Use As If Vacant

Kidder Mathews Summary of Appraisal

Summary of Income As If Stabilized

"As Is" on As Complete on As Stabilzed on

Insurable Value $13,800,000

Strengths and Strengths

 Data center improvements provide significant value allowing for

 There is significant vacant capacity in the subject.

Date of Report June 11, 2020

Date of Inspection June 1, 2020

Effective Date of June 1, 2020

Exposure Time 12 months

Kidder Mathews Summary of Appraisal

Aerial Photograph of Subject Condo Unit (North is up)

Main entrance looking north

East side of data center

North side of subject building

Kidder Mathews Summary of Appraisal

East side of data center

Kidder Mathews Summary of Appraisal

Common office area

Kidder Mathews Summary of Appraisal

Built-out rack area in data hall

Kidder Mathews Summary of Appraisal

Munters evaporative cooling

Kidder Mathews Summary of Appraisal

Kidder Mathews Introduction

ADDRESS 207 SW Columbia Street

ASSESSOR’S TAX Deschutes County Parcel Numbers: 181206A070000 and

Ownership History According to Deschutes County records, ownership of the subject is

Absolute ownership unencumbered by any other interest or

Kidder Mathews Introduction

The most probable price which a property should bring in a

Extraordinary It is an extraordinary assumption of this report that the data center