IN A SELF-CONTAINED APPRAISAL REPORT As of April 10, 2009 · 2019. 10. 31. · APPRAISAL OF REAL...

APPRAISAL OF REAL PROPERTY

Tooele County Land Droubay Road at Pine Canyon Road Tooele, Tooele County, UT 84074 Latitude: 40.76054 Longitude: -73.977882

IN A SELF-CONTAINED APPRAISAL REPORT

As of April 10, 2009

Prepared For:

Castle Arch Real Estate Investment Co., LLC 498 North 900 West, Suite 200 Kaysville, Utah 84037

Prepared By:

Cushman & Wakefield of Colorado, Inc. Valuation Services, Capital Markets Group 614 Main Street, Suite 201, PO Box 680047 (84068) Park City, UT 84060 C&W File ID: 09-5103-9051

PHOTOGRAPH OF SUBJECT PROPERTY

CUSHMAN & WAKEFIELD OF COLORADO, INC. 614 MAIN STREET, SUITE 201, PO BOX 680047 (84068) PARK CITY, UT 84060

April 27, 2009

Mr. Douglas W. Child Chief Financial Officer Castle Arch Real Estate Investment Co., LLC 498 North 900 West, Suite 200 Kaysville, Utah 84037

Re: Appraisal of Real Property In a Self-Contained Report

Tooele County Land Droubay Road at Pine Canyon Road Tooele, Tooele County, UT 84074

C&W File ID: 09-5103-9051

Dear Mr. Child:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above property in a self-contained report dated April 27, 2009. The effective date of value is April 10, 2009.

This appraisal report has been prepared in accordance with our interpretation of your institution’s guidelines and the Uniform Standards of Professional Appraisal Practice (USPAP).

M A R K E T V A L U E A S I S Based on the agreed to Scope of Work, and as outlined in the report, we developed an opinion that the Market Value of the Fee Simple estate of the above property, subject to the assumptions and limiting conditions, certifications, extraordinary assumptions and hypothetical conditions, if any, and definitions, “As-Is” on April 10, 2009, was:

FIVE MILLION TWO HUNDRED THOUSAND DOLLARS

$5,200,000

The value opinion in this report is qualified by certain assumptions, limiting conditions, certifications, and definitions. We particularly call your attention to the extraordinary assumptions and hypothetical conditions listed below.

E X T R A O R D I N A R Y A S S U M P T I O N S For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.

This appraisal does not employ any extraordinary assumptions.

MR. DOUGLAS W. CHILD CASTLE ARCH REAL ESTATE INVESTMENT CO., LLC APRIL 27, 2009 PAGE 2

CUSHMAN & WAKEFIELD OF COLORADO, INC.

H Y P O T H E T I C A L C O N D I T I O N S For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.

This appraisal does not employ any hypothetical conditions.

This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda.

Respectfully submitted,

CUSHMAN & WAKEFIELD OF COLORADO, INC.

Christopher T Donaldson, MAI, CCIM Managing Director UT Certified General Appraiser License No. 5480025-CG00 [email protected] (435) 649-0238 Office Direct (435) 649-5916 Fax

TOOELE COUNTY LAND CLIENT SATISFACTION SURVEY III

VALUATION SERVICES

C L I E N T S A T I S F A C T I O N S U R V E Y As part of our new quality monitoring campaign, attached is a short survey pertaining to this appraisal report and the service that you received. Would you please take a few minutes to complete the survey to help us identify the things you liked and did not like?

Each of your responses will be catalogued and reviewed by members of our national Quality Control Committee, and appropriate actions will be taken where necessary. Your feedback is critical to our effort to continuously improve our service to you, and is sincerely appreciated.

To access the questionnaire, please click on the link here:

http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=09-5103-9051

The survey is hosted by Surveymonkey.com, an experienced survey software provider. Alternatively, simply print out the survey attached in the Addenda of this report and fax it to (716) 852-0890.

TOOELE COUNTY LAND EXECUTIVE SUMMARY IV

VALUATION SERVICES

G E N E R A L D E S C R I P T I O N The following is an executive summary of the information that we present in more detail in the report.

BASIC INFORMATIONCommon Property Name: Tooele County Land Report Type: Self-ContainedAddress: Droubay Road at Pine Canyon Road Interest Appraised: Fee Simple

City: Tooele Date of Value: 4/10/09State: UT Date of Inspection: 4/10/09Zip Code: 84074 Date of Report: 4/27/09County: Tooele Prospective Date of Completion: NAProperty Ownership Entity: Castle Arch Real Estate Co. LLC Prospective Date of Stabilization: NACW File Reference: 09-5103-9051

SITE INFORMATIONLand Area Gross SF: 15,164,978 Site Utility: AverageLand Area Acres: 348.14 Site Topography: Level at street gradeIs there additional Excess Land? No Site Shape: Irregularly shapedExcess Land Area SF: 0 Frontage: AverageExcess Land Area Acres: 0.00 Access: AverageTotal Land Area SF: 15,164,978 Visibility: AverageTotal Land Area Acres: 348.14 Location Rating: AverageFlood Zone: DFlood Map Number: NAFlood Map Date: NA

MUNICIPAL INFORMATIONAssessor's Parcel Identification: Numerous Subject's assessment is: At market levelsAssessing Authority: Tooele County Municipality Governing Zoning: Tooele CountyCurrent Tax Year: 2008 Current Zoning: RR-5Taxable Assessment: $2,785,120 Is current use permitted: YesCurrent Tax Liability: $28,929 Current Use Compliance: Complying useTaxes per square foot: $0.00 Zoning Change Applied For: YesAre taxes current? Taxes are current Zoning Variance Applied For: Not applicableIs a grievance underway? Not to our knowledge

HIGHEST & BEST USEAs Vacant: As Improved:Single family residential to the highest allowable density. Not applicable

The subject property was acquired as an assemblage from several different landowners on several different dates in 2005 and 2006. The following table summarizes the subject’s acquisition history.

Seller Parcel # Acres Sale Date Contract Price Contract Price/Acre Closing Costs Total Acquisition CostHighway 1 Group, Inc./Hotowen 03-014-0-0002 109.36 9/1/2005 $2,952,720 $27,000 $240 $2,952,960Highway 1 Group, Inc./Wendell Jones, Trustee 03-024-0-0003 75.94 9/14/2005 $2,050,380 $27,000 $2,428 $2,052,808Highway 1 Group, Inc./Shields Family Trust 03-024-0-0005 & -0007 79.00 10/27/2005 $2,134,836 $27,023 $1,853 $2,136,689William & Lynette Mueller Family Trust 03-014-0-0005 76.26 6/20/2006 $2,135,280 $28,000 $90,861 $2,226,141ENS, LLC 03-014-0-0020 7.58 7/25/2006 $221,100 $29,169 $7,542 $228,642Totals 348.14 $9,494,316 $27,272 $102,925 $9,597,241

Subject Property History

In addition to the land acquisition the subject owner has also acquired substantial water rights to facilitate the development of the subject property.

TOOELE COUNTY LAND EXECUTIVE SUMMARY V

VALUATION SERVICES

VALUATION INDICES Market Value As IsLAND VALUATIONLand Value

Indicated Value: $5,220,000Per Acre: $14,994

FINAL VALUE CONCLUSIONConcluded Value: $5,200,000Per Acre: $14,937

EXPOSURE TIMEExposure Time: 18 MonthsMarketing Time: 18 Months

E X T R A O R D I N A R Y A S S U M P T I O N S For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.

This appraisal does not employ any extraordinary assumptions.

H Y P O T H E T I C A L C O N D I T I O N S For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.

This appraisal does not employ any hypothetical conditions.

TOOELE COUNTY LAND AERIAL PHOTOGRAPH VI

VALUATION SERVICES

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS VII

VALUATION SERVICES

Droubay Road Looking North Subject on Left

Droubay Road Looking South Subject on Right

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS VIII

VALUATION SERVICES

Pine Canyon Road Looking West from Droubay Road

Pine Canyon Road Looking East from Center Portion of Subject

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS IX

VALUATION SERVICES

Overview of Northern Portion Looking Northwest

Overview of Southern Portion Looking South from Pine Canyon Road

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS X

VALUATION SERVICES

Cross Fencing and Dirt Road on Northern Portion Looking North

West Boundary of South Portion Looking South

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS XI

VALUATION SERVICES

West Boundary of North Portion Looking Northwest Along Union Pacific Railroad Tracks

2400 North Street Looking West from Droubay Road Subject on Left

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS XII

VALUATION SERVICES

Gravel Pit on North End of the Subject

Overview of Northern Portion from the Northwest Corner

TOOELE COUNTY LAND SUBJECT PHOTOGRAPHS XIII

VALUATION SERVICES

South Boundary of Southern Portion Looking West

Overview of South Portion Looking West from Droubay Road

TOOELE COUNTY LAND TABLE OF CONTENTS

VALUATION SERVICES

T A B L E O F C O N T E N T S INTRODUCTION -------------------------------------------------------------------------------------------------------------------------------------- 1 REGIONAL MAP -------------------------------------------------------------------------------------------------------------------------------------- 4 REGIONAL ANALYSIS------------------------------------------------------------------------------------------------------------------------------ 5 LOCAL AREA MAP ---------------------------------------------------------------------------------------------------------------------------------16 LOCAL AREA ANALYSIS-------------------------------------------------------------------------------------------------------------------------17 MARKET ANALYSIS--------------------------------------------------------------------------------------------------------------------------------19 SITE DESCRIPTION --------------------------------------------------------------------------------------------------------------------------------24 REAL PROPERTY TAXES AND ASSESSMENTS -----------------------------------------------------------------------------------------29 ZONING-------------------------------------------------------------------------------------------------------------------------------------------------30 HIGHEST AND BEST USE ------------------------------------------------------------------------------------------------------------------------34 VALUATION PROCESS ---------------------------------------------------------------------------------------------------------------------------36 LAND VALUATION ---------------------------------------------------------------------------------------------------------------------------------38 RECONCILIATION AND FINAL VALUE OPINION -----------------------------------------------------------------------------------------45 ASSUMPTIONS AND LIMITING CONDITIONS ---------------------------------------------------------------------------------------------46 CERTIFICATION OF APPRAISAL --------------------------------------------------------------------------------------------------------------48 GLOSSARY OF TERMS & DEFINITIONS ----------------------------------------------------------------------------------------------------49 ADDENDA CONTENTS ----------------------------------------------------------------------------------------------------------------------------52

TOOELE COUNTY LAND INTRODUCTION 1

VALUATION SERVICES

I N T R O D U C T I O N

S C O P E O F W O R K This appraisal, presented in a self-contained report, is intended to comply with the reporting requirements outlined under the USPAP for a self-contained appraisal report.

The scope of this appraisal required collecting primary and secondary data relevant to the subject property. We investigated numerous vacant land sales in the subject’s market and considered the input of buyers, sellers, brokers, property developers and public officials. We made a physical inspection of the subject property. We also investigated the general regional economy as well as the specifics of the subject property’s local area.

The data have been thoroughly analyzed and confirmed with sources believed to be reliable, leading to the value conclusions in this report. The valuation process used generally accepted market-derived methods and procedures appropriate to the assignment.

This appraisal employs only the Sales Comparison Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Typical purchasers do not generally rely on the Cost or Income Capitalization Approaches when purchasing a property such as the subject of this report. Therefore, we have not employed the Cost Approach or the Income Capitalization Approach to develop an opinion of market value.


VALUATION SERVICES

IDENTIFICATION OF PROPERTY

Common Property Name: Tooele County Land

Location: Droubay Road at Pine Canyon Road

Tooele, Tooele County, UT 84074

Assessor's Parcel Number:

03-014-0-0002, 03-014-0-0005, 03-014-0-0020, 03-024-0-0003, 03-024-0-0005, 03-024-0-0007

Legal Description: The legal descriptions per the title reports supplied are presented in the Addenda of the report.

PROPERTY OWNERSHIP AND RECENT HISTORY

Current Ownership: Castle Arch Real Estate Co. LLC

Sale History: The subject property was acquired as an assemblage from several different landowners on several different dates in 2005 and 2006. The following table summarizes the subject’s acquisition history.

Seller Acres Sale Date Contract Price Contract Price/AcreHighway 1 Group, Inc./Hotowen 109.36 9/1/2005 $2,952,720 $27,000Highway 1 Group, Inc./Wendell Jones, Trustee 75.94 9/14/2005 $2,050,380 $27,000Highway 1 Group, Inc./Shields Family Trust 79.00 10/27/2005 $2,134,836 $27,023William & Lynette Mueller Family Trust 76.26 6/20/2006 $2,135,280 $28,000ENS, LLC 7.58 7/25/2006 $221,100 $29,169Totals 348.14 $9,494,316 $27,272

Subject Property History

In addition to the land acquisition the subject owner has also acquired substantial water rights to facilitate the development of the subject property.

Current Disposition: To the best of our knowledge, the property is not under contract of sale nor is it being marketed for sale.

DATES OF INSPECTION AND VALUATION

Date of Valuation: April 10, 2008

Date of Inspection: April 10, 2009

Property inspection was performed by: Christopher T. Donaldson, MAI, CCIM

INTENDED USE AND USERS OF THE APPRAISAL

Intended Use: This appraisal is intended to provide an opinion of the Market Value of the Fee Simpleinterest in the property for the use of the client in evaluating potential financing. This report is not intended for any other use.

Intended User: This appraisal report was prepared for the exclusive use of Castle Arch Real Estate Investment Co., LLC. Use of this report by others is not intended by the appraiser.


VALUATION SERVICES

E X T R A O R D I N A R Y A S S U M P T I O N S This appraisal does not employ any extraordinary assumptions.

H Y P O T H E T I C A L C O N D I T I O N S This appraisal does not employ any hypothetical conditions.

TOOELE COUNTY LAND REGIONAL MAP 4

VALUATION SERVICES

R E G I O N A L M A P

TOOELE COUNTY LAND REGIONAL ANALYSIS 5

VALUATION SERVICES

R E G I O N A L A N A L Y S I S

I N T R O D U C T I O N The short- and long-term value of real estate is influenced by a variety of interacting factors. Regional analysis identifies those factors that affect property value, and the role they play within the region. The four primary forces that determine the supply and demand for real property, and consequently affect market value, are: environmental characteristics, governmental forces, social factors, and economic trends.

The subject property is located adjacent to the city of Tooele in the western portion of the Salt Lake City.

MARKET DEFINITION The Salt Lake City Metropolitan Statistical Area (Salt Lake City MSA) consists of three counties located in northwest Utah—Salt Lake County, Summit County and Tooele County. The state capital is located in Salt Lake City. Boise, Idaho lies about 330 miles to the northwest, Denver is 500 miles east, and Las Vegas is about 400 miles south. The region sits along the southern banks of the Great Salt Lake, which is the largest saltwater lake in the Western Hemisphere.

The following are notable points about the Salt Lake City MSA:

• The city is located in the northeast corner of the Salt Lake Valley surrounded by the Great Salt Lake to the northwest and the steep Wasatch and Oquirrh mountain ranges on the eastern and western borders, respectively. Its nearby mountains contain many narrow glacially and volcanically carved canyons. The mountainous environment has proven beneficial, as Salt Lake has developed a strong outdoor recreation tourist industry based primarily on alpine skiing. Salt Lake City was host to the 2002 Winter Olympic Games.

• Salt Lake City's location is beneficial for numerous employment sectors, specifically trade, and transportation related industries. Relatively low energy cost, accessible natural resources, North-South and East-West Interstates, and both west coast intercontinental railroads are all geographic advantages that have lead to robust population increases, and strong business development.

• The city's population began to stagnate during the 20th century as population growth shifted to suburban areas north and south of the city. Few of these areas were annexed to the city, while nearby towns incorporated and expanded. As a result, the population of the surrounding metropolitan area greatly outnumbers that of the City. The city lost population from the 1960s through the 1980s, but experienced some recovery in the 1990s. Presently, the city is losing population again, (though the population of the metro area continues to grow rapidly), having lost an estimated 2.0 percent of its population since the year 2000.

• Salt Lake City's mass public transit service is operated by the Utah Transit Authority, (UTA), and includes an extensive bus system, light rail, and a commuter rail line. The 19-mile light rail system, called TRAX, consists of two lines originating downtown at the Salt Lake City Intermodal Hub; one line, which opened in 1999, heads south to Sandy and the other, opened in 2001, splits east to the University of Utah. According to 2008 statistics, daily ridership averages 45,400 passengers, significantly above original projections, and is the eleventh-most ridden light rail system in the country. The system has a total of 28 stations, 17 of them being located in Salt Lake City proper. The commuter rail system, FrontRunner, opened on April 26, 2008 and extends from the Intermodal Hub north to Pleasant View.


VALUATION SERVICES

• Salt Lake City is also known as the home and primary location of the Church of Jesus Christ of Latter Day Saints, (LDS), and as the home of the Utah Jazz National Basketball Association team.

The following graph illustrates the three county region that constitutes the Salt Lake City Metropolitan Statistical Area.

SALT LAKE CITY METROPOLITAN STATISTICAL AREA (SALT LAKE CITY MSA)

Tooele County

Summit County

Salt LakeCounty

UTAH

Salt Lake City, UTMetropolitan Statistical Area

Tooele County

Summit County

Salt LakeCountyTooele County

Summit County

Salt LakeCounty

UTAH

Salt Lake City, UTMetropolitan Statistical Area

Source: Cushman & Wakefield Analytics

CURRENT TRENDS In spite of a substantial national slowdown in economic growth in 2008, Salt Lake City continued to exhibit positive economic growth in spite of rapidly deteriorating national conditions. While growth slowed across nearly every indicator in 2008, unlike many metro areas, growth trends remained positive in spite of negative growth on a national level. However, with accelerating job losses over the first quarter of 2009, Salt Lake City, like the rest of the nation, has now slipped into a recession. The substantial slowing of residential home building activity has been spearheading local employment losses, as the construction sector has continued to shed jobs. Additionally, turmoil within national financial markets has led to losses in white collar industries, of which there is a large concentration of in Salt Lake City. Over the long run, strong demographic characteristics coupled with a diverse economy and a burgeoning high tech industry is expected to lead to robust growth for Salt Lake City.

Further considerations are as follows:

• In spite of the slowdown experienced over the last twelve to eighteen months, the Salt Lake City metro area ranked third in the Milken Institutes rankings of best performing cities by job growth and retention for 2008. The Salt Lake City MSA fell behind only Provo-Orem MSA, (number one), and the Raleigh-Cary, North Carolina MSA, (number two) in terms of employment growth and job retention.

• Salt Lake City is experiencing unprecedented growth in the Central Business District. Within the next five years, estimates by the Salt Lake City Downtown alliance suggest that more than $5.0 billion dollars of private investment will take place in downtown Salt Lake City’s core. Public projects are scheduled or underway to extend light rail from the Energy Solutions Arena to the intermodal hub, improve street parking and landscape of 300 South Center, and improve Gallivan Center Plaza and Pioneer Park. Private development will drive new retail, housing, cultural, institutional and commercial projects. The Economic Development Department interfaces on an ongoing basis with developers as the projects progress. Assistance with city process is offered for all phases of the development projects.


VALUATION SERVICES

• After several months of speculation, local Airline giant Delta Airlines agreed to a merger with rival Northwest airlines in the third quarter of 2008. In September of 2008, shareholders for both companies approved a merger that created the largest air carrier in the world. Deciding that in the tumultuous airline industry their chances are better together than separate, the two sides agreed to merge. The merger received anti-trust approval in November of 2008, and Northwest’s staff and planes have begun to be transitioned to Delta. The merger, including re-branding of all of Northwest’s planes is expected to be complete by year-end 2009, while the worldwide undertaking is expected to be completed by 2010. Salt Lake City will keep its local Delta hub, despite the merger. With the improved access to the east due to Northwest Airlines extensive ties to Asia, the merger could help drive growth in Salt Lake City going forward. However, transportation, and distribution employment is highly cyclical and this sector will remain fairly unstable going forward.

• The Church of Jesus Christ of Latter Day Saints, (LDS) church is spearheading an ambitious redevelopment project in the central business district that included the demolition of two shopping centers and several office buildings to make way for the City Creek Center, a sustainable mix of residences, office space and retail space slated for construction over the next four years. The project is expected to deliver nearly 1,000 residential units and over 800,000 square feet of retail, and has the potential for further office space developments. The City Creek Center is expected to be delivered by 2012, and is currently still in the late stages of demolition, and early stages of construction. In another development Hamilton Partners expects to deliver its 21-story, 450,000 square-foot tower at 222 Main Street this spring. Additionally, the local government and Chamber of Commerce have introduced a comprehensive plan that considers the broader implications of these and other proposed developments in an effort to ensure continuity and ease traffic congestion.

DEMOGRAPHIC TRENDS

DEMOGRAPHIC CHARACTERISTICS With its younger and relatively better educated population, it is not surprising that Salt Lake City fares batter than the U.S. in nearly all demographic categories. Salt Lake City’s demographic traits reflect an area where a high quality of life, a favorable climate for business, and an emphasis on education has resulted in robust population increases, and above average income and education levels. Overall, the demographic characteristics of the Salt Lake City MSA are positive, and should continue to buoy in-migration trends to the metro area going forward.


With a median age of only 31.1 years, Salt Lake City is a very young market compared to the nation, where the median age is over 5.5 years older at 36.7 years.

The 2008 median household income of $56,822 in Salt Lake is 11.7 percent higher than the national median household income of $50,107. Salt Lake City MSA also has a considerably higher average household income than the nation, however, average household income levels in Salt Lake City proper are only roughly 5.5 percent above national levels.

Residents of the Salt Lake City MSA boast very strong educational attainment statistics. Salt Lake City has a substantially smaller percentage of residents without a high school degree, and significantly higher percentages of residents with at least some college experience, or a bachelor’s degree. The only education bracket that Salt Lake City falls behind the nation in, is percentage of residents with an advanced degree, and at 8.8 percent, versus 8.9 percent, the difference is negligible.


VALUATION SERVICES

The following chart compares the demographic characteristics of the Salt Lake City MSA with the demographic characteristics of the U.S.:

Characteristic Salt Lake MSA U.S.Median Age (years) 31.2 36.7Average Annual Household Income $71,889 $67,918 Median Annual Household Income $56,822 $50,170


VALUATION SERVICES

POPULATION GROWTH BY YEAR Salt Lake City MSA vs. United States, 1999-2013

0.0%

1.0%

2.0%

3.0%

4.0%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Source: Data Courtesy of Moody's Economy.com and Cushman & Wakefield Valuation Services Note: Shaded bars indicate periods of recession

Annu

al P

erce

nt C

hang

eUnited States Salt Lake City, UT Forecast

Salt Lake County accounts for approximately 91.5 percent of the region’s population, and as a result has been the slowest, by percentage, growing county in the area. Over the past decade, all three counties within the Salt Lake City MSA averaged population growth rates that exceeded the U.S. average.


• Among the Salt Lake City MSA’s component counties, Tooele County was the fastest growing in the region, over the past decade, with an impressive 4.8 percent average annual rate of growth. Tooele County’s above average pace of population growth is expected to continue through 2013, albeit at a relatively slower rate of 2.6 percent, but still significantly higher than any other county in the MSA.

• Salt Lake County grew at the slowest pace during the past ten years, while maintaining the highest population. While Salt Lake County saw the largest increase in total population over the past decade, the county also had the lowest level of annual growth of any of the component counties.

The following table shows Salt Lake City MSA’s annualized population growth by county:

Population (000’s) 1999 20092013

Forecast

Annual Growth99-08

Annual Growth09-13

United States 279,436.9 307,420.2 319,539.4 1.0% 1.0%Salt Lake City MSA 958.2 1,160.6 1,227.7 1.9% 1.5%

Salt Lake County 891.1 1,064.1 1,123.0 1.7% 1.5%Summit County 29.0 37.9 40.1 2.8% 1.7%Tooele County 38.1 58.6 64.5 4.8% 2.6%

Source: Data Courtesy of Moody's Economy.com, Cushman & Wakefield Valuation Services

Annualized Population Growth by County

1999-2013Salt Lake City MSA

HOUSEHOLDS Over the past decade, household formation trends in Salt Lake City roughly tracked overall population growth. Again, the high quality of life and affordability of the Salt Lake City region fueled this expansion. Household growth is expected to rise above population growth levels over the next five year period, as the number of people occupying a single housing unit is expected to increase more rapidly than the overall population. This trend of


VALUATION SERVICES

household formation outpacing overall population growth results from such sociological factors as: longer life expectancies, increasing divorce rates, and young professionals postponing marriage.


• Over the past ten years, from 1999 through 2008, the Salt Lake City MSA saw total households increase by an average annual rate of 1.9 percent, in-line with the 1.9 percent population growth indicated over the same time period. Similarly, over the past decade the U.S. saw total households increase at an average annual rate of 1.0 percent, in-line with overall population growth.

• Over the following five year period from 2009 through 2013, household formations are expected to increase in both the U.S. and Salt Lake City. The Salt Lake City MSA is projected to see average annual household growth of 2.0 percent, well above the average annual projected rate of population growth of 1.5 percent. The comparable U.S. figure is 1.2 percent, slightly above the forecast 1.0 percent annual population growth.

• Salt Lake City’s most affluent areas are located primarily east of Interstate 15 (I-15) near the communities of Sandy, Cottonwood Heights, and Bountiful. Few ZIP codes posted median household incomes of $100,000 or greater and most of the Salt Lake region lies within the $50-75,000 income range.

The following graph compares historical and projected population growth between the Salt Lake City MSA and U.S. as a whole:

HOUSEHOLD FORMATION BY YEAR Salt Lake City MSA vs. United States, 1999-2013

0.0%

1.0%

2.0%

3.0%

4.0%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13


Annu

al P

erce

nt C

hang

e United States Salt Lake City, UT Forecast

ECONOMIC TRENDS

GROSS METRO PRODUCT Salt Lake City has typically been a strong performer in terms Gross Metro Product (GMP) growth. Salt Lake City’s GMP, like that of the U.S., has been fairly responsive to national economic conditions, although lagged behind the rest of the nation in showing the effects of these national downturns. From 2005 through 2007, GMP growth in the Salt Lake City MSA averaged nearly 6.0 percent growth per year, representative of the fastest growing GMP in the nation over this time period.



VALUATION SERVICES

• From 1999 to 2008, Salt Lake City’s GMP grew at an average annual rate of 3.4 percent, 90 basis points above the nations’ annualized average of 2.5 percent. Summit County accounted for the highest GMP growth in the Salt Lake region, averaging 5.1 percent annually during the same time period.

• From 2009 through 2013, GMP growth in Salt Lake City is expected to decrease to an annual average of 2.9 percent. This rate is forecast to be 40 basis points higher than the projected rate for the U.S., which is expected see average annual growth of 2.5 percent over the same time period.

• Tooele County is expected to lead the region in terms of GMP growth over the next five years, with projected average annual GMP increases of 4.1 percent through 2013.

The following graph compares historical and projected GMP growth by year for the Salt Lake City MSA and U.S. as a whole:

GROSS METRO PRODUCT GROWTH BY YEAR Salt Lake City MSA vs. United States, 1999-2013

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13


Annu

al P

erce

nt C

hang

e United States Salt Lake City, UT Forecast

EMPLOYMENT DISTRIBUTION Though the Salt Lake region is slightly more heavily weighted in Trade, Transportation and Utilities, it is well-diversified and for the most part on par with the employment distribution seen in the U.S. The Salt Lake City region has long benefited from strong industrial diversity, and the fact that no employment sector commands more than 21.0 percent of the workforce is a testament to this. The industrial diversity within Salt Lake City should help insulate the local economy from severe job losses as the national recession continues, and is expected to contribute to a quicker recovery for Salt Lake City as the region begins to rebound in the next twelve to eighteen months.


• The Trade, Transportation, & Utilities sector employs 20.8 percent of the region’s employees. Salt Lake City is often referred to as the "Crossroads of the West" for its central geography in the western United States. As a result, Interstate 15 is a major corridor for freight traffic and the area is host to many regional distribution centers. Retail Trade comprises the bulk of jobs within this sector.

• Government and Professional & Business Services are also heavily represented in the Salt Lake City employment distribution. Employment percentages in Construction, Information, Trade Transportation and Utilities, and Financial Activities exceed those indicated for the U.S.


VALUATION SERVICES

• The region is considerably less represented in the Education & Health Services, Manufacturing, and surprisingly the Leisure and Hospitality Services sectors compared to the U.S.

The following graph compares non-farm employment sectors for the Salt Lake City MSA and U.S. as a whole:

EMPLOYMENT BY SECTOR Salt Lake City MSA vs. United States

2008 Estimates

0% 5% 10% 15% 20% 25%

ConstructionManufacturing

Trade, Transportation, & UtilitiesInformation

Financial ActivitiesProfessional & Business Services

Education & Health ServicesLeisure & Hospitality

Other Services (except Govt.)Government

Source: Data Courtesy of Moody's Economy.com and Cushman & Wakefield Valuation Services

United States

Salt Lake City, UT

MAJOR EMPLOYERS The Salt Lake City region is home to one Fortune 500 company and two other companies that fall within the Fortune 1000. Huntsman, a global chemical manufacturer is the only local company falling within the 2009 Fortune 500. Questar, and Zions Bancorp are the two other companies headquartered in Salt Lake City that fall into the Fortune 1000. As mentioned above, Salt Lake City’s major industries are government, trade, transportation, utilities, and professional and business services. Local, state, and federal governments have their largest presence in the city itself, and trade, transportation, and utilities also take up a significant portion of employment. The major Trade Transportation and Utilities employer being Delta Air Lines, which has a hub at Salt Lake City International Airport. Equally significant are the professional and business services. Since Utah is one of seven states that allow the establishment of commercially-owned industrial banks, a majority of industrial banks in the U.S. have established their headquarters in the Salt Lake City area. High-tech has also recently carved a niche in the Salt Lake City economy, with several prominent high-tech companies, including, Unisys, Siebel, Micron, L-3 Communications and 3M calling Salt Lake City home. Other major employers include the University of Utah, Sinclair Oil Corporation, and The Church of Jesus Christ of Latter-day Saints.

The following table lists the Salt Lake City MSA’s largest private employers, and highlights the diversified nature of the regional employment concentration:


VALUATION SERVICES

CompanyNo. of

EmployeesBusiness

TypeIntermountain Healthcare Inc. 27,357 HealthcareUniversity of Utah 13,000 EducationHuntsman Corporatio, LLC 11,600 ManufacturingTeleperformance USA 10,000 ServicesZions Bancorporation 9,500 FinanceConvergys 7,000 ServicesUniversity Hospitals/Clinics 4,500 HealthcareAssociated Food Stores, Inc. 4,500 RetailWells Fargo & Company 3,500 FinanceL-3 Communications Systems-West 3,000 Communications

Largest EmployersSalt Lake City, UT

Source: Utah Major Employers Guide March 2008

EMPLOYMENT GROWTH The Salt Lake City MSA has consistently ranked among the nation’s top metro areas in terms of employment growth. While job growth has historically been very strong, and continued at an above average pace through the first half of 2008, job losses began to mount in the latter half of 2008, and have accelerated over the first quarter of 2009. Employment losses spread across all sectors, except: Education and Health Services, Government, and Information. However, over the first three months of 2009, even those stalwart sectors began to shed jobs in the Salt Lake City region. Salt Lake City is projected to see consecutive years of negative employment growth over the next two years, before the region rebounds with above average job growth in 2011.


• Between 1999 and 2008, Salt Lake City’s employment growth averaged 1.9 percent per year, which was a full percentage point higher than the 0.9 percent annual average of the U.S. over the same time period. With an average annual total employment growth of 4.6 percent over the past decade, Summit County displayed the most robust employment gains.

• In 2008, as the nation began to fall into a deep recession Salt Lake City continued to see positive job growth, in spite of job losses on a national level. Over the year, Salt Lake City saw total employment grow by 0.7 percent, while the U.S. saw job losses of 0.4 percent. The positive growth was largely due to stable growth across most sectors over the first two quarters of the year, and growth in government, natural resources and mining, and education and health services over the back half of the year.

• Employment losses are expected over the next two years in both the U.S. and Salt Lake City, as both the nation and the Salt Lake City region remain in contraction. Over the next five years, employment growth in Salt Lake City is expected to average 1.3 percent per year, compared to an average annual rate of 1.0 percent growth for the U.S.

The following graph illustrates total non-farm employment growth per year, for the Salt Lake City MSA, and the U.S.


VALUATION SERVICES

TOTAL EMPLOYMENT GROWTH BY YEAR Salt Lake City MSA vs. United States, 1999-2013

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13


Annu

al P

erce

nt C

hang

e United States Salt Lake City, UT

Forecast

UNEMPLOYMENT Given the market’s historically strong employment growth, Salt Lake City’s unemployment rate was lower than the national rate in each of the past ten years. Unemployment levels in the state of Utah have historically been very low, and Salt Lake City has often suffered from underemployment, a situation where unemployment is so low the area is negatively affected by a lack of qualified workers. Unemployment levels in Salt Lake City are forecast to continue rising over the next twelve to eighteen months creating much needed slack in the local labor market. Still, unemployment in Salt Lake City is forecast to remain well below the national rate, and is not expected to surpass 7.0 percent.


• The Bureau of Labor Statistics reported an unemployment rate of 5.2 percent for the Salt Lake City MSA as of February of 2009. Salt Lake City’s unemployment rate has increased 2.0 percentage points since February of 2008 when local unemployment was just 3.2 percent. Salt Lake City’s current rate sits 30 basis points below the statewide unemployment rate of 5.5 percent, and 3.3 percentage points below the national rate which was reported at 8.5 percent in February.

• Salt Lake City’s unemployment rate is expected to continue increasing through the middle of 2010, before begging to trend downward again later that year.

• The recent increase in unemployment in Salt Lake City may actually bode well for the region as skilled, well educated workers have been in short supply, and had created an obstacle for new firms wanting to relocate to the area.

The following graph compares historical and projected unemployment levels for the Salt Lake City MSA, the state of Oregon, and the U.S. as a whole:


VALUATION SERVICES

UNEMPLOYMENT RATE BY YEAR Salt Lake City MSA vs. Utah vs. United States, 1999-2013

2%

4%

6%

8%

10%

12%

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13


United States Utah Salt Lake City, UT Forecast

CONCLUSION The ongoing local housing downturn, coupled with the contracting national economy will likely keep Salt Lake City in a recession the rest of 2009, and through much of 2010. As turmoil has spread from manufacturing and construction, to white collar sectors like finance and banking local job losses have accelerated. Weakened consumer confidence will hamper service industry growth in the near term as unemployment surges, income growth slows, and credit remains scarce. Unemployment in Salt Lake City recently rose above 5.0 percent for the first time since 2002, and Salt Lake City appears to finally be experiencing the economic deterioration seen throughout the country over the past year.

Over the long run, Salt Lake City will continue to benefit from a high quality of life, below average business and living costs, and very strong demographic trends as the area returns to positive growth. Additionally, the Salt Lake City metro area’s diverse economy, and budding high-tech industry should contribute to a quicker rebound than is expected in many other western metro areas. Overall, Salt Lake City is expected to see growth far above the national average over the long run.

TOOELE COUNTY LAND LOCAL AREA MAP 16

VALUATION SERVICES

L O C A L A R E A M A P

TOOELE COUNTY LAND LOCAL AREA ANALYSIS 17

VALUATION SERVICES

L O C A L A R E A A N A L Y S I S

L O C A T I O N The property is located in the community of Tooele. Generally, the boundaries of the immediate area are Highway 36 to the West, the Oquirrh Mountains to the east, Tooele Central Business District to the south, and Erda Way to the north. Other local landmarks include the Union Pacific Railroad tracks along the west boundary of the subject. The Central Business District is approximately 2 miles south of the subject the subject property.

A C C E S S Local area accessibility is generally good, relying on the following transportation arteries:

Local: The subject has frontage on Droubay Road which runs north and south connecting to Erda Way in the north, which connects with Highway 36 and smelter road to the south which connects to the Tooele CBD. The subject’s most direct access to Highway 36 is provided by Pine Canyon Road which connects to Highway 36 just southwest of the subject.

Regional: Highway 36 is the main transportation artery in Tooele County and is about 1/3rd of a mile west of the subject. Highway 36 is a north/south thoroughfare which leads to Interstate 80 approximately 9 miles to the north.

There is commercial rail service in Tooele but no commuter rail. There is no local bus service and regional bus service is limited to morning and evenings with service to Salt Lake City.

N E A R B Y A N D A D J A C E N T U S E S The subject’s immediate local area is composed of single family residential uses. The residences to the north and west of the subject are low density rural residences generally on five acre lots. There is still a large amount of vacant agricultural land to the east and north of the subject, although much of it has been developed in the last ten years. The subject borders on the city boundary with the City of Tooele on the west and south. There is higher density residential development to the south of the subject as well as a church and the Copper Canyon Elementary School. There are extensive commercial uses along Highway 36 west of the subject. These include

L O C A L A R E A C H A R A C T E R I S T I C S Tooele County is adjacent to the west of the previously discussed Salt Lake-Ogden MSA. Tooele County had a population of 56,536 people in 2007. The city of Tooele accounted for 56 percent of the county population. The only other incorporated cities are Grantsville (Population 6,824) and Wendover (Population 1,620). As stated the local economy is most influenced by trends in the Salt Lake City area. Tooele was one of the fastest growing counties in the country earlier in the decade. Due to lower land costs and property availability and the rising costs and diminishing land supply in Salt Lake County, there has been a migration to Tooele County. The Census bureau projects that by 2016 the county population will have grown to 70,300 which represents a compound annual growth rate of 3.54 percent which is over twice the growth rate projected for the State of Utah. The population growth is fueled by the expansion of the Salt Lake City MSA. According to the Department of Workforce Services there are many more commuter residents. In 1990 about 19.5 percent of the county residents worked outside the county. By 2000 that number had reportedly increased to 45.5 percent. This is a trend that has continued and is likely to continue.

TOOELE COUNTY LAND LOCAL AREA ANALYSIS 18

VALUATION SERVICES

Employment in Tooele County had historically been concentrated in government defense until 1993 when the Tooele Army Depot was closed. Employment at the depot went from 2,500 to 700. Employment growth in Tooele County has been generally stable in the past few years with a slight decline from 2007 to 2008. The opening of the 1.2 million square foot Wal-Mart Regional Distribution Facility in Grantsville at the beginning of 2005 helped boost this growth. This facility is expected to employ up to 1,000 people when it is at full capacity. The areas other largest employers include Dugway Proving Grounds, Tooele Army Depot, Tooele County School District, EG and G Defense Materials, and Detroit Diesel.

The City of Tooele offers a good quality of life with a growing retail and services sector offering the goods and services that used to require a trip to Salt Lake County.

S P E C I A L H A Z A R D S O R A D V E R S E I N F L U E N C E S The subject is located on the east side of the Union Pacific railroad tracks which are still an active rail line. This is not considered an extraordinary nuisance. The Tooele Army Depot is approximately 2 miles southwest of the subject. This project is now in the private sector leasing industrial space. There is reportedly a plume of groundwater contamination around this facility resulting from former military activities at the base.

L A N D U S E C H A N G E S The subject has been transitioning from rural agricultural uses to single family residential use. There are several new five acre lot subdivisions just to the east and north of the subject. Specifically the Spring Canyon Estates has roads under construction and lot sales underway for five acre lots at the southeast corner of Pine Canyon Road and Droubay Road. The Meadowbrook subdivision is on the east side of Droubay Raod north of the subject as is the proposed Arrowhead Estates subdivision. Demand for this type of land use change has stopped and there is currently an oversupply of lots in the area.

C O N C L U S I O N The area is generally stable with a recent boom of development having ended in tandem with the national housing crisis. Overall, the outlook for the area is positive with generally stable real estate values. The strong market conditions in adjacent Salt Lake County area during the past decade have resulted in migration to the more affordable housing in Tooele County which still has good access with a drive time of less than 45 minutes to the majority of employment centers in the Salt Lake Valley. The subject is located adjacent to the city and is surrounded on two sides by residential development. It is directly in the path of growth emanating from the city of Tooele.

TOOELE COUNTY LAND MARKET ANALYSIS 19

VALUATION SERVICES

M A R K E T A N A L Y S I S As noted the subject is located in unincorporated Tooele County, Utah sharing a boundary to the city of Tooele. The subject property is proposed for residential uses, which is considered appropriate given its location and the nature of the surrounding uses. We have prepared an overview of the current residential market (homes).

EXISTING HOUSING STOCK The housing stock within Tooele County consists mainly of single family residences, which is typical of most Utah communities located outside the population centers of Salt Lake City, Provo/Orem and Ogden. According to Claritas, Inc., there are 18,657 housing units in Tooele County and 10,295 within the city of Tooele representing 55.2% of the total units in the county. On a county wide basis, approximately 75.25 percent of the housing units are single-family detached units, 5.59 percent are single-family attached units, 9.37 percent are multi-family dwellings, and 9.79 percent are mobile homes, RV’s, or trailers. Home ownership is relatively high, with 81.04 percent of all housing units being owner-occupied and 18.96 percent being renter-occupied. Approximately 50.14 percent of the housing units were constructed prior to 1990. The 2008 median home value in Tooele County was $187,198, which is higher than the median home value in the city of Tooele ($174,967) and lower than the state of Utah ($191,888). Characteristics of the housing market for the city of Tooele, Tooele County and Utah are presented in the following table.


VALUATION SERVICES

TOOELE COUNTY HOUSING PROFILECITY OF TOOELE TOOELE CO, UT UTAH

2008 Occupied Housing Units 9,729 17,371 835,538Owner Occupied 80.88% 81.04% 73.44%Renter Occupied 19.12% 18.96% 26.56%

2008 Est. All Owner-Occupied Housing Values 7,869 14,078 613,611Value Less than $20,000 1.88% 2.08% 1.32%Value $20,000 - $39,999 1.69% 1.88% 1.50%Value $40,000 - $59,999 1.12% 1.20% 1.55%Value $60,000 - $79,999 1.66% 1.88% 2.04%Value $80,000 - $99,999 2.80% 2.57% 3.47%Value $100,000 - $149,999 21.90% 17.62% 18.88%Value $150,000 - $199,999 37.96% 30.61% 25.35%Value $200,000 - $299,999 27.36% 31.54% 27.50%Value $300,000 - $399,999 2.26% 6.52% 9.58%Value $400,000 - $499,999 1.05% 2.73% 3.70%Value $500,000 - $749,999 0.10% 0.91% 3.37%Value $750,000 - $999,999 0.11% 0.32% 1.02%Value $1,000,000 or more 0.10% 0.14% 0.72%

2008 Est. Median All Owner-Occupied Housing Value $174,967 $187,198 $191,888

2008 Est. Housing Units by Units in Structure 10,295 18,657 922,5561 Unit Attached 4.63% 5.59% 4.89%1 Unit Detached 73.72% 75.25% 69.35%2 Units 3.92% 2.86% 3.44%3 to 19 Units 6.74% 5.74% 11.47%20 to 49 Units 0.39% 0.28% 2.67%50 or More Units 0.77% 0.49% 2.63%Mobile Home or Trailer 9.70% 9.38% 5.23%Boat, RV, Van, etc. 0.13% 0.41% 0.32%

2008 Est. Housing Units by Year Structure Built 10,295 18,657 922,556Housing Unit Built 1999 to present 35.53% 36.19% 22.76%Housing Unit Built 1995 to 1998 15.42% 13.67% 10.56%Housing Unit Built 1990 to 1994 2.62% 3.90% 6.90%Housing Unit Built 1980 to 1989 3.87% 7.23% 13.26%Housing Unit Built 1970 to 1979 11.40% 11.95% 17.85%Housing Unit Built 1960 to 1969 10.61% 7.75% 8.50%Housing Unit Built 1950 to 1959 7.05% 7.95% 7.76%Housing Unit Built 1940 to 1949 5.85% 4.68% 4.49%Housing Unit Built 1939 or Earlier 7.65% 6.67% 7.92%

2008 Est. Median Year Structure Built 1995 1995 1983

Source: Claritas

TOOELE COUNTY DWELLING BUILDING PERMIT TRENDS The recent slowdown in the residential market can be seen in the decline in building permit activity in Tooele and Tooele County as shown in the following building permit summary. The building permit data is for new dwelling units only and is presented in terms of total annual permits issued and construction valuation on an annual basis from 2002 to 2008.


VALUATION SERVICES

Tooele County (by city) New Dwelling Building Permit Trends 2002 - 2008

# Permits Valuation ($000) # Permits Valuation ($000) # Permits Valuation ($000) # Permits Valuation ($000) # Permits Valuation ($000) # Permits Valuation ($000) # Permits Valuation ($000)Grantsville 53 6,268.8 58 7,144.6 67 8,357.1 157 20,556.6 184 31,487.3 168 34,049.0 26 5,125.2Tooele 351 37,571.5 169 20,155.1 221 28,199.5 221 27,889.7 254 35,780.7 150 21,589.8 77 12,082.0Wendover 0 0.0 33 3,576.5 0 0.0 0 0.0 1 195.0 0 0.0 1 0.0Tooele County 205 25,084.1 152 17,399.6 280 30,697.4 360 44,219.8 241 35,671.3 239 31,517.7 133 19,612.7

Total 609 68,924.4 412 48,275.8 568 67,254.0 738 92,666.1 680 103,134.3 557 87,156.5 237 36,819.9

% Change -- -- -47.82% -42.77% 27.46% 28.22% 23.04% 27.42% -8.53% 10.15% -22.08% -18.33% -135.02% -136.71%

Source: Univ. of Utah Bureau of Economic & Business Research; Utah Construction Report. Includes all types of permit authorized construction.

2002 20082003 2004 2005 2006 2007

The building permit data shows a peak year of 2005 for permits issued of 738. Since then permits issued have been declining an annual basis. The most dramatic decline was from 2007 to 2008, which indicated a -135.02 percent decline (667 to 237 permits). Tooele County has issued the most permits over the last years, outpacing the city of Tooele.

TOOELE COUNTY MARKET CONDITIONS – HOME SALES The recent slowdown in the residential market is graphically illustrated in the table below which shows total number of homes listed and sold with average sales prices since the fourth quarter of 2004. The following information is provided by the Wasatch Front Multiple Listing Service (MLS).


VALUATION SERVICES

As the graph demonstrates, the median home price in Tooele County has generally been increasing since the fourth quarter of 2004. Pricing peaked in the third quarter of 2007 at $207,200, dropping from that point before hitting $207,500 in the third quarter of 2008. Since that time the median sale price has been in decline.

The total number of homes sold has been declining steadily since the third quarter of 2006 (373 homes sold). In the fourth quarter 2008, there were 118 sales reported, which represents a 4 year low.

The total number of listings, by quarter, during the period presented above, ranged from 295 (fourth quarter 2005) to 614 (third quarter 2007). As of the fourth quarter 2008, there were 322 active home listings in the Wasatch County market. These listings represent an approximate 1.93 year’s supply of single family homes based on the 2008 average quarterly absorption of 167 units.

By presenting similar market data in a quarterly comparison, the declining number of buyers in the market is apparent. The number of single family units sold in 2008 was 33.57 percent less than the number of units sold in the year prior. The average home price fell 2.52 percent over the same time period. Combined with the increased days on market statistics, this indicates that there are still buyers in the market, however, fewer than in the previous year. Over the same period new listing decreased 6.40%. It is noted that the averge sales price for sold single family units increased significantly from 2005 to 2006 (21.75%) and from 2006 to 2007 (18.59%), consistent with larger regional and nationwide appreciation trends. The statistics are presented below.

Annual Comparisons 2005, 2006, 2007, 2008

2005 2006 % Change 2007 % Change 2008 % ChangeTooele County DOM 58 39 -32.76% 45 15.38% 75 66.67% Single # Sold 1091 1222 12.01% 971 -20.54% 645 -33.57% Single Avg Sales Price 143,165$ 174,303$ 21.75% 206,714$ 18.59% 201,513$ -2.52% Condo # Sold 55 62 12.73% 49 -20.97% 29 -40.82% Condo Avg Sales Price 105,293$ 118,648$ 12.68% 138,238$ 16.51% 132,373$ -4.24%

New Listings 1597 1741 9.02% 2031 16.66% 1901 -6.40% Avg % of New Listings Sold 71.76% 73.75% 2.77% 50.22% -31.90% 35.46% -29.40% New Avg Asking Price 147,408$ 192,256$ 30.42% 228,371$ 18.78% 235,178$ 2.98%

This report was generated automatically by the Wasatch Front Regional MLS at exactly 10:32:46 am 04/09/2009© 2005 Wasatch Front Regional MLS All Rights Reserved

The Tooele County condominium market has fallen more dramatically in terms of sales activity. From 2007 to 2008 condo unit sales decreased by 40.82%. This is somewhat misleading due to the limited amount of condominium unit inventory in the market compared to single family units, which are the predominant unit type in the market. The sales statistics, coupled with the residential building permit trends indicate that demand for new homes in Tooele County is weak and home builders and brokers in the market indicate it might be several years before demand returns.

The subject is presently zoned RR-5 which allows for 5 acre lots. There is currently an oversupply of five acre lots in the area. Immediately east of the subject are three different five acre lot subdivisions that have had very few sales in the past 12 months. There were approximately 3 sales of 5 acre lots in 2008. Lot pricing for these lots have most recently been in the range of $150,000 to $200,000 with the most recent sale at $150,000 in Pass Canyon. In addition to the lack demand buyers are having trouble financing these types of lot purchases.

C O N C L U S I O N We have analyzed the profile of the subject's competitive market in order to understand the current market conditions for the end product which is planned for the subject property.


VALUATION SERVICES

A regional and local overview was presented which highlighted important points about the study area. Demographic and economic data specific to the residential market were also presented. Demographic information relating to these sectors was presented and analyzed in order to determine patterns of change and growth as it impacts the subject property. The following are our key conclusions.

The residential market in Tooele consists of mainly owner-occupied units. The large majority of these units are free standing, single family residences.

According to building permit statistics, demand for new homes in Tooele County, county wide including all jurisdictions, in 2008 has dropped approximately 135 percent from 2007 levels. The building permit statistics for Tooele County only indicate a decrease of 131 percent over the same time period.

According to MLS data, there is approximately 1.92 years supply of single family homes in the Tooele County market. This oversupply is evident immediately surrounding the subject with numerous five acre lot subdivisions with vacant lots. There were only a few of these lots sold in 2008.

TOOELE COUNTY LAND SITE DESCRIPTION 24

VALUATION SERVICES

S I T E D E S C R I P T I O N

Location: Droubay Road at Pine Canyon Road

Tooele, Tooele County, UT 84074

The subject property is located on the west side of Droubay Road on both sides of Pine Canyon Road.

Shape: Irregularly shaped

Topography: Level at street grade. There is a gravel quarry at the north end of the subject along 2400 North Street. It does not appear to be active but the quarry is a hole with surrounding mounds of debris. This is a small portion of the subject estimated at approximately five acres.

Land Area: 348.14 acres / 15,164,978 square feet in six different tax parcels. The following table summarizes the land area per Tooele County records.

Parcel # Acres03-014-0-0002 109.3603-014-0-0005 76.2603-014-0-0020 7.5803-024-0-0003 75.9403-024-0-0005 40.0003-024-0-0007 39.00

348.14

Tooele County Land Summary

Frontage: The subject property has average frontage. The approximate frontage dimensions are listed below:

2400 North Street 1,980 feetDroubay Road 5,280 feet2000 North Street 4,620 feet

Access: The subject property has average access.

Visibility: The subject property has average visibility.

Soil Conditions: We were not given a soil report to review. However, we assume that the soil's load-bearing capacity is sufficient to support existing and/or proposed structure(s). We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate.


VALUATION SERVICES

Utilities: Utility providers for the subject property are as follows:

Water WellsSewer SepticElectricity Rocky Mountain Power Gas Questar GasTelephone Qwest

It is noted that as of the date of appraisal the subject is not slated for annexation into the City of Tooele and thus will be dependant on wells for water and septic systems for sewer. This is typical of other 5 acre lot projects in the area.

Water Rights: The subject has extensive water rights which can be used for development of the project. It is our understanding that a portion of this water is tied to the subject property through the Tooele City Water Special Service District and Tooele County.

Site Improvements: None

Land Use Restrictions: We reviewed title reports prepared by a national title team dated around the acquisition dates of the subject in 2005 and 2006. Copies of these reports have been retained in our files. The following significant items are shown in the report:

Power line easements exist on several portions of the subject. Kennecott Copper Corporation has an easement related to the air, smoke, dust fumes, cinders and other matter that may result from their mining activities in the area.

Flood Zone: The subject property is located in flood zone D.

FEMA Map & Date: The subject area is not mapped.

Flood Zone Description – Zone D:

Unstudied area where flood hazards are undetermined but flooding is possible. No mandatory flood insurance purchase requirements apply, but coverage is available in participating communities

Wetlands: We were not given a wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field.

Hazardous Substances: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field.

It is noted there is a railroad line adjacent to the northwest boundary of the subject. We are not aware of the release of any hazardous substances in this area of the railroad.

Overall Site Utility: The subject site is functional for its current use.

Location Rating: Average


VALUATION SERVICES

AERIAL VIEW


VALUATION SERVICES

TOOELE COUNTY LAND REAL PROPERTY TAXES AND ASSESSMENTS 29

VALUATION SERVICES

R E A L P R O P E R T Y T A X E S A N D A S S E S S M E N T S

C U R R E N T P R O P E R T Y T A X E S The subject property is located in the taxing jurisdiction of Tooele County. The assessor’s parcel identification number is 03-014-0-0002, 03-014-0-0005, 03-014-0-0020, 03-024-0-0003, 03-024-0-0005, 03-024-0-0007. According to the local assessor’s office, taxes are current. The assessment and taxes for the property are presented below:

PROPERTY ASSESSMENT INFORMATIONAssessor's Parcel Number: NumerousAssessing Authority: Tooele CountyCurrent Tax Year: 2008Assessment Ratio (% of market Value): 100%Are taxes current? Taxes are currentIs there a grievance underway? Not to our knowledgeThe subject's assessment and taxes are: At market levels

ASSESSMENT INFORMATIONAssessed Value Totals

Land: $2,785,120Improvements: 0Total: $2,785,120Taxable Assessment: $2,785,120

TAX LIABILITYTotal Tax Rate 1.03870%Total Property Taxes $28,929Compiled by Cushman & Wakefield of Colorado, Inc.

C O N C L U S I O N The subject property is assessed in line with comparable properties. Therefore, it is our opinion that the subject’s real estate assessment and taxes are at market levels.

TOOELE COUNTY LAND ZONING 30

VALUATION SERVICES

Z O N I N G

G E N E R A L I N F O R M A T I O N The property is zoned RR-5 by the Tooele County. A summary of the subject’s zoning is provided below:

ZONINGMunicipality Governing Zoning: Tooele CountyCurrent Zoning: RR-5Current Use: Agricultural - UndevelopedIs current use permitted: YesPermit details:Proposed Use: ResidentialIs proposed use permitted: YesChange In Zone Likely: YesChange To: Higher Density ResidentialZoning Change Applied For: YesZoning Variance Applied For: Not applicablePermitted Uses:

Prohibited Uses:

ZONING REQUIREMENTS CODE SUBJECT INFORMATION SUBJECT COMPLIANCEMinimum Lot Area: 5 acres ComplyingMaximum Building Height: 35 feet ComplyingMaximum Lot Coverage (% of lot area): 10.0% ComplyingMinimum Yard Setbacks

Front (feet): 30 Non-ComplyingRear (feet): 50 ComplyingSide (feet): 20 Complying

Compiled by Cushman & Wakefield of Colorado, Inc.

Permitted uses within this district include single family residential.

Prohibited uses within this district include commercial and industrial

Z O N I N G C O M P L I A N C E Property value is affected by whether or not an existing or proposed improvement complies to zoning regulations, as discussed below.

COMPLYING USES An existing or proposed use that complies to zoning regulations implies that there is no legal risk and that the existing improvements could be replaced “as-of-right.”

PRE-EXISTING, NON-COMPLYING USES In many areas, existing buildings pre-date the current zoning regulations. When this is the case, it is possible for an existing building that represents a non-complying use to still be considered a legal use of the property. Whether or not the rights of continued use of the building exist depends on local laws. Local laws will also determine if the existing building may be replicated in the event of loss or damage.

NON-COMPLYING USES A proposed non-complying use to an existing building might remain legal via variance or special use permit. When appraising a property that has such a non-complying use, it is important to understand the local laws governing this use.


VALUATION SERVICES

O T H E R R E S T R I C T I O N S We know of no deed restrictions, private or public, that further limit the subject property's use. The research required to determine whether or not such restrictions exist is beyond the scope of this appraisal assignment. Deed restrictions are a legal matter and only a title examination by an attorney or title company can usually uncover such restrictive covenants. We recommend a title examination to determine if any such restrictions exist.

Z O N I N G C O N C L U S I O N S We have analyzed the zoning requirements in relation to the subject property, and considered the compliance of the existing or proposed use. We are not experts in the interpretation of complex zoning ordinances but based on our review of public information, the subject property is a complying use.

Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use planners, or architects. The depth of our study correlates directly with the scope of this assignment, and it considers all pertinent issues that have been discovered through our due diligence.

We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is beyond the scope of this real estate appraisal assignment.

Z O N I N G C H A N G E The subject has explored the option of annexation with the City of Tooele. The subject is within the annexation boundary as defined by the city’s general plan. At the time, in 2006, the city was reporting to be at maximum capacity on their sewer system and did not want to annex the subject. The subject owner subsequently has prepared a development plan which he intends to submit to Tooele County. According to county officials there is no formal application submitted with the county and the current zoning RR-5, allowing for five acre minimum lot sizes is still in effect for the subject land.

For informational purposes we have included the proposed development plan for the subject as well as the current zoning map.


VALUATION SERVICES

TOOELE COUNTY LAND HIGHEST AND BEST USE 34

VALUATION SERVICES

H I G H E S T A N D B E S T U S E

H I G H E S T A N D B E S T U S E D E F I N I T I O N The Dictionary of Real Estate Appraisal, Fourth Edition (2002), a publication of the Appraisal Institute, defines the highest and best use as:

The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.

To determine the highest and best use we typically evaluate the subject site under two scenarios: as vacant land and as presently improved. In both cases, the property’s highest and best use must meet the four criteria described above. Since this property is land only, evaluating it as presently improved is not applicable.

H I G H E S T A N D B E S T U S E O F P R O P E R T Y A S V A C A N T

LEGALLY PERMISSIBLE The zoning regulations in effect at the time of the appraisal determine the legal permissibility of a potential use of the subject site. As described in the Zoning section, the subject site is zoned RR-5 by Tooele County. Permitted uses within this district include single family residential. We are not aware of any further legal restrictions that limit the potential uses of the subject. Re-zoning of the subject is considered a possibility given the higher density residential to the south and mobile home park to the southeast.

PHYSICALLY POSSIBLE The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other physical aspects of the site. The subject site contains 348.14 acres, or 15,164,978 square feet. The site is irregularly shaped and level at street grade. It has average frontage, average access, and average visibility. The overall utility of the site is considered to be average. All public utilities are available to the site including public gas, electric and telephone. Water and sewer will be provided by wells and septic tanks. Overall, the site is considered adequate to accommodate most permitted development possibilities.

FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE In order to be seriously considered, a use must have the potential to provide a sufficient return to attract investment capital over alternative forms of investment. A positive net income or acceptable rate of return would indicate that a use is financially feasible. Financially feasible uses are those uses that can generate a profit over and above the cost of acquiring the site, and constructing the improvements. Of the uses that are permitted, possible, and financially feasible, the one that will result in the maximum value for the property is considered the highest and best use.

C O N C L U S I O N We considered the legal issues related to zoning and legal restrictions. We also analyzed the physical characteristics of the site to determine what legal uses would be possible, and considered the financial feasibility of these uses to determine the use that is maximally productive. Considering the subject site’s physical characteristics and location, as well as the state of the local market, it is our opinion that the Highest and Best Use of the subject site as vacant is single family residential to the highest allowable density at such time as

TOOELE COUNTY LAND HIGHEST AND BEST USE 35

VALUATION SERVICES

market conditions improve in the future. . The subject as zoned for five acre lots has significant competitive supply in the subdivisions immediately surrounding it to the south and east.

TOOELE COUNTY LAND VALUATION PROCESS 36

VALUATION SERVICES

V A L U A T I O N P R O C E S S

M E T H O D O L O G Y There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and Income Capitalization. We considered each in this appraisal to develop an opinion of the market value of the subject property. In appraisal practice, an approach to value is included or eliminated based on its applicability to the property type being valued and the quality of information available. The reliability of each approach depends on the availability and comparability of market data as well as the motivation and thinking of purchasers.

The valuation process is concluded by analyzing each approach to value used in the appraisal. When more than one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a correlation of all the approaches used in the appraisal.

We considered each approach in developing our opinion of the market value of the subject property. We discuss each approach below and conclude with a summary of their applicability to the subject property.

COST APPROACH The Cost Approach is based on the proposition that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the Highest and Best Use of the land; or when relatively unique or specialized improvements are located on the site for which there are few improved sales or leases of comparable properties.

In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect any value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated improvement costs are then added, resulting in an opinion of value for the subject property.

SALES COMPARISON APPROACH In the Sales Comparison Approach, sales of comparable properties are adjusted for differences to estimate a value for the subject property. A unit of comparison such as price per square foot of building area or effective gross income multiplier is typically used to value the property. When developing an opinion of land value the analysis is based on recent sales of sites of comparable zoning and utility, and the typical units of comparison are price per square foot of land, price per acre, price per unit, or price per square foot of potential building area. In both cases, adjustments are applied to the unit of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive an opinion of value for the subject property.

INCOME CAPITALIZATION APPROACH In the Income Capitalization Approach the income-producing capacity of a property is estimated by using contract rents on existing leases and by estimating market rent from rental activity at competing properties for the vacant space. Deductions are then made for vacancy and collection loss and operating expenses. The resulting net operating income is divided by an overall capitalization rate to derive an opinion of value for the subject property. The capitalization rate represents the relationship between net operating income and value. This method is referred to as Direct Capitalization.

Related to the Direct Capitalization Method is the Discounted Cash Flow Method. In this method periodic cash flows (which consist of net operating income less capital costs) and a reversionary value are developed and

TOOELE COUNTY LAND VALUATION PROCESS 37

VALUATION SERVICES

discounted to a present value using an internal rate of return that is determined by analyzing current investor yield requirements for similar investments.

S U M M A R Y This appraisal employs only the Sales Comparison Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Typical purchasers do not generally rely on the Cost or Income Capitalization Approaches when purchasing a property such as the subject of this report. Therefore, we have not employed the Cost Approach or the Income Capitalization Approach to develop an opinion of market value. A Developmental Analysis or discounted cash flow could be applicable if there is adequate information on the proposed development plan. This was not available for the subject and so we have not applied that method in this appraisal.

TOOELE COUNTY LAND LAND VALUATION 38

VALUATION SERVICES

L A N D V A L U A T I O N We used the Sales Comparison Approach to develop an opinion of land value. We examined current offerings and analyzed prices buyers have recently paid for comparable sites. If the comparable was superior to the subject, a downward adjustment was made to the comparable sale. If inferior, an upward adjustment was made.

The most widely used and market-oriented unit of comparison for properties with characteristics similar to those of the subject is price per acre. All transactions used in this analysis are based on the most appropriate method used in the local market.

The major elements of comparison used to value the subject site include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the property.

The comparables and our analysis are presented on the following pages.


VALUATION SERVICES

SUMMARY OF LAND SALESPROPERTY INFORMATION TRANSACTION INFORMATION

No. LocationSize

(Acres) Zoning Site UtilityPublic

Utilities Grantor GranteeProperty Rights

ConveyedSale Date Sale Price $/Acre COMMENTS

S Subject Property 348.14 RR-5 Average Partially available

1 2400 North Droubay Road, Tooele, UT

140.96 RR-5 Average Partially Available

Hotowen Inc. and Valora McMillen

WJR Properties

Fee Simple 4/08 $1,500,000 $10,641 The listing agent reports this site was under contract for more than a year. Developed with 5 acre lots utilizing water wells and septic tanks. Minimal water rights were reported to be included in this sale.

2 3800 N. Droubay Road, Erda, UT

80.77 RR-5 and A-20 Average All Needed Union Pacific Railroad

Ironwood Real Estate

Fee Simple 1/08 $747,123 $9,250 This sale did not include water. Purchaser already owned water. This project is proposed for development as Arrowhead Estates subdivision. Telephone and natural gas were available and lots will be developed

3 850 North Silver Fox Drive, Grantsville, UT

93.00 R-21-1 Average All Needed Darrel Nielson Haybrow Development

Inc.

Fee Simple 5/07 $3,534,000 $38,000 This sale price did not include water shares. The buyer subsequently purchased water and obtained entitlements and resold to Fieldstone Homes at an undisclosed price. This property has been developed

4 4585 Highway 112, Grantsville, UT

72.93 R-1-21 Ag Average All Available

Sage Ranch LLC

Randy Young Fee Simple 5/07 $1,851,500 $25,387 Buyer has applied for annexation to Grantsville in order to get utilities. Approximately 62 lots were anticipated by the purchaser.

5 East Side of Worthington St. at Nygreen St., Grantsville, UT

125.99 R-1-21 Average Partially Available

Arthur & Susan Higley

Alan Johnson Fee Simple 3/07 $2,834,685 $22,499 Cost to extend utilities to this site was estimated at $500,000 although shared costs with adjacent landowners would reduce this cost to $300,000.

6 2000 N. Droubay Road, Tooele, UT

348.15 RR-5 Average Partially Available

Various - See Comments

Castle Arch Real Estate Company

Fee Simple 9/05 $9,494,316 $27,271 This purchase represents the assemblage of six parcels from several different sellers including Highway 1 Group/Howoten,Inc/Wendell Jones Trustee/Shields Family,LLC and William and Lynette Mueller Family

STATISTICSLow 72.93 9/05 $747,123 $9,250

High 348.15 4/08 $9,494,316 $38,000

Average 143.63 4/07 $3,326,937 $22,175

Compiled by Cushman & Wakefield of Colorado, Inc.


VALUATION SERVICES

LAND SALE ADJUSTMENT GRIDEconomic Adjustments (Cumulative) Property Characteristic Adjustments (Additive)

No.Price Per

Acre & Date

PropertyRights

ConveyedConditions

of Sale FinancingMarket(1)

ConditionsPer Acre Subtotal Location Size

PublicUtilities Utility(2) Other

Adj. Price Per Acre Overall

1 $10,641 Fee Simple Arm's-Length None Superior $9,296 Similar Smaller Similar Similar Inferior $9,761 Inferior4/08 0.0% 0.0% 0.0% -12.6% -12.6% 0.0% -5.0% 0.0% 0.0% 10.0% 5.0%

2 $9,250 Fee Simple Arm's-Length None Superior $8,081 Similar Smaller Similar Similar Inferior $8,081 Similar1/08 0.0% 0.0% 0.0% -12.6% -12.6% 0.0% -10.0% 0.0% 0.0% 10.0% 0.0%

3 $38,000 Fee Simple Arm's-Length None Superior $33,446 Inferior Smaller Similar Similar Inferior $35,118 Inferior5/07 0.0% 0.0% 0.0% -12.0% -12.0% 5.0% -10.0% 0.0% 0.0% 10.0% 5.0%



6 $27,271 Fee Simple Arm's-Length None Superior $25,212 Similar Similar Similar Similar Inferior $27,733 Inferior9/05 0.0% 0.0% 0.0% -7.5% -7.5% 0.0% 0.0% 0.0% 0.0% 10.0% 10.0%

$9,250 - Low Low - $8,081$38,000 - High High - $35,118$22,175 - Average Average - $21,107

Compiled by Cushman & Wakefield of Colorado, Inc.(1) Market Conditions Adjustment Footnote (2) Utility Footnote

Utility includes shape, access, frontage and visibility.

3.0%8/1/2007

0.0%9/1/2008

IN A SELF-CONTAINED APPRAISAL REPORT As of April 10, 2009 · 2019. 10. 31. · APPRAISAL OF REAL...

Documents

Transcript of IN A SELF-CONTAINED APPRAISAL REPORT As of April 10, 2009 · 2019. 10. 31. · APPRAISAL OF REAL...