Appraisal Report Of Olde Gatlinburg Place Overnight Rental Condominium Unit # Baskins Creek Road, Gatlinburg, Tennessee Sevier County

Transcription

1 Appraisal Report Of Olde Gatlinburg Place Overnight Rental Condominium Unit # Baskins Creek Road, Gatlinburg, Tennessee Sevier County Prepared For Pinnacle Bank 150 3rd Avenue South, Suite 900 Nashville, Tennessee By Woodford & Associates 6201 Central Avenue Pike PO Box Knoxville, Tennessee Kenneth R. Woodford, MAI, SRA, AI-GRS Steven M. Goodpaster, MAI, MRE

2 6201 Central Avenue Pike Knoxville, Tennessee P.O. Box Knoxville, Tennessee T F Tax I.D.: WOODFORD & ASSOCIATES REAL ESTATE APPRAISERS AND CONSULTANTS September 19, 2016 Pinnacle Bank c/o Mr. Phil Barnes 150 3rd Avenue South, Suite 900 Nashville, Tennessee RE: Olde Gatlinburg Place Overnight Rental Condominium Unit # Baskins Creek Road, Gatlinburg, Tennessee Sevier County Dear Mr. Barnes: As requested, we have visited the above condominium unit for the purpose of estimating market value of the fee simple estate. The effective date of value is reflective of the date of death of Jean Ellis. The attached appraisal report includes certain assumptions, limiting conditions and specific contingencies to which the value conclusion is subject. The intended use of this report is for estate purposes and property pricing. Pinnacle Bank is the intended user and no others are named. The property consists of an overnight rental condominium unit in the Olde Gatlinburg Place property at 306 Baskins Creek Road in Gatlinburg, Tennessee. Based upon site visit and analysis of sales and related data, it is concluded that market value as of February 8, 2016 is: As Is $180,000 Furniture, Fixtures & Equipment $8,500 *FF&E value is a component of the total As Is value estimate This appraisal is specifically made subject to the extraordinary assumption(s) detailed on page four of this appraisal report. The use of such may have impacted the assignment results.

3 Mr. Barnes Page 2 September 19, 2016 If after reading this report you have any questions or concerns regarding the appraisal or the conclusion, please do not hesitate to call. It has been a pleasure providing you this service. Yours truly, Kenneth R. Woodford, MAI, SRA, AI-GRS State Certified General Appraiser, CG-342 Steven M. Goodpaster, MAI, MRE State Certified General Appraiser, CG-4342

4 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions: 1. No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated. 2. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. 3. Responsible ownership and competent property management are assumed. 4. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. 5. All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property. 6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 7. It is assumed that there is full compliance with all applicable federal state and local environmental regulations and laws unless noncompliance is stated, and defined, and considered in the appraisal report. 8. It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined and considered in the appraisal report. 9. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. #

5 ASSUMPTIONS AND LIMITING CONDITIONS Continued This appraisal report has been made with the following general limiting conditions: 1. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 2. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event only with proper written qualification and only in its entirety. A party receiving a report copy from the stated intended user does not, as consequence, become party to the appraiser-client relationship. 3. The appraisers herein by reason of this appraisal, are not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made. 4. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or the firm with which the appraisers are connected) shall be disseminated to the public through advertising, public relations, news, sales or other media without the prior written consent and approval of the appraisers. #

6 ASSUMPTIONS AND LIMITING CONDITIONS Continued 5. This report is made under the following Hypothetical Condition and the use of this condition may have impacted the assignment results. None The Uniform Standards of Professional Appraisal Practice defines Hypothetical Condition as: A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of assignment results, but is used for the purpose of analysis. Hypothetical conditions are contrary to known facts about physical, legal or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP, ed.) A hypothetical condition may be used in an assignment only if: 1. Use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison; 2. Use of the hypothetical condition results in a credible analysis; and 3. The appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions. 6. This report is made under the following Extraordinary Assumption and the use of this assumption may have impacted the assignment results. that the financial data provided to the appraisers for review is a true and accurate representation of the property s actual operation. The Uniform Standards of Professional Appraisal Practice defines Extraordinary Assumption as: An assumption, directly related to a specific assignment, as of the effective date of assignment results, which, if found to be false, could alter the appraiser s opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. (USPAP, ed.) An extraordinary assumption may be used in an assignment only if: 1. It is required to properly develop credible opinions and conclusions; 2. The appraiser has a reasonable basis for the extraordinary assumption; 3. Use of the extraordinary assumption results in a credible analysis; and 4. The appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions. #

7 SPECIFIC CONTINGENCIES 1. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, ureaformaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. 2. I (we) have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since I (we) have no direct evidence relating to this issue, I (we) did not consider possible non-compliance with the requirements of ADA in estimating the value of the property. UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP) COMPETENCY RULE Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively, must: 1. disclose the lack of knowledge and/or experience to the client before accepting the assignment; 2. take all steps necessary or appropriate to complete the assignment competently; and 3. describe, in the report, the lack of knowledge and/or experience and the steps taken to complete the assignment competently. The appraisers have considered the nature of this assignment and have relevant experience both in the field and appraising this property type. This qualifies us to engage in this assignment based on the USPAP Competency Rule. #

8 TABLE OF CONTENTS ASSUMPTIONS AND LIMITING CONDITIONS... 1 SPECIFIC CONTINGENCIES... 4 UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE... 4 (USPAP) COMPETENCY RULE... 4 SUMMARY OF FACTS AND CONCLUSIONS... 6 PROPERTY IDENTIFICATION... 7 SALES HISTORY... 7 SCOPE OF WORK... 8 REPORT TYPE... 9 SCOPE OF WORK SUMMARY DEFINITION OF MARKET VALUE LOCATION MAP SITE DATA ZONING FLOOD DATA ASSESSMENT AND TAXES DESCRIPTION OF IMPROVEMENTS UNIT SKETCH SUBJECT PHOTOS HIGHEST AND BEST USE DESCRIPTION OF THE APPRAISAL PROCESS COST APPROACH SALES COMPARISON APPROACH INCOME APPROACH VALUATION CONCLUSION FURNITURE, FIXTURES & EQUIPMENT QUALIFICATIONS OF KENNETH R. WOODFORD, MAI, SRA, AI-GRS QUALIFICATIONS OF STEVEN M. GOODPASTER, MAI, MRE...64 CERTIFICATION ADDENDA #

9 SUMMARY OF FACTS AND CONCLUSIONS Property Identification: Olde Gatlinburg Place Overnight Rental Condominium Unit 306 Baskins Creek Road, Gatlinburg, Tennessee Sevier County Effective Value Date: As Is February 8, 2016 Property Rights Appraised: Fee Simple Estate Land Data: Condominium Unit / Shared Site Geocode: , Building Data: Unit # ± Square Feet Zoning: C-2, General Business by City of Gatlinburg Highest and Best Use: Residential Use / Overnight Rental / Tourist Market Cost Approach: Not Developed Sales Comparison Approach: $180,000 Income Approach: $185,000 Final Conclusion: As Is $180,000 Reasonable Exposure Time: Six to Twelve Months Reasonable Marketing Time: Six to Twelve Months #

10 PROPERTY IDENTIFICATION This appraisal considers the condominium unit identified as #207 in the Olde Gatlinburg Place property at 306 Baskins Creek Road in Gatlinburg, Tennessee. The property is identified for tax purposes as Parcel 126N, Group K, on Tax Map (SI 017) in the Property Assessor s Office in Sevier County. The Olde Gatlinburg Place facility has 10 studio, 61 one bedroom and 20 two bedroom units and common areas in a seven story masonry tower. The building was constructed in SALES HISTORY The property has not been sold in the three years prior to this appraisal. It was last conveyed by a General Warranty Deed executed by and between Olde Gatlinburg Rentals, Inc. (Grantor) and Jean Ellis (Grantee) on December 28, 2009 for an indicated consideration of $29,406 as recorded in the Sevier County Register of Deeds Office in Deed Book 3497, Page 399. The reported consideration in this conveyance falls out as an outlier among comparables and is not believed to reflect a market value indication. A copy of the above listed title document is included in the addenda to this report. This does not constitute a formal opinion of title. The condominium unit is not presently listed for sale. Typical overnight rental activity is ongoing as managed by Olde Gatlinburg Place Rentals. Olde Gatlinburg Place is a Horizontal Property Regime. Reference to the recorded regime is made to Book 375, Page 392. #

11 SCOPE OF WORK The Appraisal Institute defines Scope of Work as: The type and extent of research and analyses in an appraisal or appraisal review assignment. (USPAP ed.) 1 This includes, but is not limited to: the degree to which the property is identified; the extent to which tangible property is inspected; the type and extent of data researched; and the type and extent of analyses applied to arrive at opinions or conclusions. Following the scope of work principle, the appraiser identifies the client, intended user(s), intended use and type of value to be determined. For each appraisal and appraisal review assignment, an appraiser must identify the problem to be solved; determine and perform the scope of work necessary to develop credible assignment results; and disclose the scope of work in the report. After these items are defined, the amount of research and analysis is adapted to the specific appraisal problem, rather than following the same rote steps for each assignment. The Scope of Work centers around what is typically acceptable by the appraiser s peers, as well as what is best suited to perform a credible analysis. In preparing this appraisal, the following steps were taken: 1. Kenneth R. Woodford and Steven M. Goodpaster visited the property on September 8, 2016 and were accompanied by Mr. Kevin Coleman, Manager. The scope of the property visit included interior and exterior viewing of the unit, the condominium complex and surroundings. 2. Kenneth R. Woodford and Steven M. Goodpaster toured the market area. 3. Steven M. Goodpaster researched records with reference to improved sales and listings, as well as rental and operating data, for comparable units. Sources for comparable data included various public record sources, operator interview and subscription based data services. 4. Steven M. Goodpaster analyzed collected data and produced this report. 5. Kenneth R. Woodford reviewed this report. Considering the property type and current use, we have utilized the sales comparison and income approaches to value as they appear most relevant to producing a credible value opinion. 1 The Appraisal Foundation, Uniform Standards of Professional Appraisal Practice (USPAP), ed. (Washington D.C.: The Appraisal Foundation) #

12 REPORT TYPE According to amendments to the Uniform Standards of Appraisal Practice, effective January 1, 2014, appraisal reports are placed into two categories. The categories are: Appraisal Report and Restricted Appraisal Report. This is an Appraisal Report. An Appraisal Report is the written communication of an appraisal prepared under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice, ed. An Appraisal Report contains a summary of all information significant to the solution of the appraisal problem and must be consistent with the intended use of the appraisal. #

13 SCOPE OF WORK SUMMARY Client: Pinnacle Bank 150 3rd Avenue South, Suite 900 Nashville, Tennessee Subject Property: Olde Gatlinburg Place Overnight Rental Condominium Unit # Baskins Creek Road, Gatlinburg, Tennessee Sevier County Intended User(s): Client; no other intended users named Intended Use: Estate Purposes / Property Pricing Property Rights Appraised: Fee Simple Estate Type of Value: Market Value Report Option: Appraisal Report Hypothetical Conditions: None Extraordinary Assumptions: See Page Four Effective Date of Value: As Is February 8, 2016 Date of Report: September 19, 2016 #

14 DEFINITION OF MARKET VALUE The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States: The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: Buyer and seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 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. (12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994) #

15 PROPERTY RIGHTS APPRAISED The Appraisal Institute defines an estate as: A right or interest in property. Defines an owner s degree, quantity, nature and extent of interest in real property. There are many different types of estates, including freehold (fee simple, determinable fee, and life estate) and leasehold. To be an estate in land, an interest must allow possession (either now or in the future) and be differentiated primarily by its duration. 2 The Unencumbered Fee Simple Estate is appraised in this report. Unencumbered Fee Simple Estate Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. 3 2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6 th ed. (Chicago: Appraisal Institute, 2015) 3 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6 th ed. (Chicago: Appraisal Institute, 2015) #

16 LOCATION MAP Region Map #

17 LOCATION MAP Local Map #

18 LOCATION MAP Area Map #

19 AERIAL PHOTO #

20 PARCEL MAP #

21 SITE DATA Size/Dimensions/Contour The site encompasses some 1.28± acres of land area. This site has a gently sloping contour at a corner location with reasonable access to Baskins Creek Road. The subject is a single condominium unit in a multiunit tower building. Landscaping & Utilities The property has average to good quality landscaping as is typical for condominium/hotel/motel properties in the market area. The site is at a built up location where all typical utility services for hospitality/residential activities are available. On & Off Site Improvements Beyond the building pad, the site is improved with a modest pool deck and a surface parking lot with sufficient spaces (94) to service the overall property. The parking surface and common pool elements were observed to be in average to good condition at the time of site tour. Encumbrances Typical utility easements are believed to exist. Function and Usefulness The site offers a size, shape, contour, utility bundle, linkage and access suitable to support a variety of uses as allowed by law. #

22 ZONING The property is zoned C-2, General Business District under the zoning ordinance for the City of Gatlinburg. This zone provides for a variety of uses to include, but not be limited to: hotels and motels; and any C-1, Tourist Commercial Use residential dwellings, lodges, clubs, hotels, motels, restaurants, parking lots and garages, tourist residences, etc. The property is a legal conforming use. A summary of the zoning district regulation(s) is retained in the appraisal workfile for further reference. below. A copy of the zoning map identifying the location of the property is also included as an exhibit #

23 FLOOD DATA According to the Flood Insurance Rate Map as published by the Federal Emergency Management Agency (FEMA), the property is located within a designated 100 Year Flood Zone and is subject to flooding. The Community Panel Map Number is 47155C0334E, effective May 18, A copy of the Flood Map identifying the location of the condominium property is included below. The building improvements, including the subject condominium unit, look to be elevated such that they are above potential flood waters. #

24 ASSESSMENT AND TAXES The property is currently assessed at a commercial rate of 40% of appraised value. The City of Gatlinburg collects property taxes at a rate of $ per $100 of assessed value. Sevier County collects property taxes at a rate of $1.88 per $100 of assessed value, rounded to the nearest dollar. The real estate taxes are broken down for the property as follows: Property Size Square Feet 840 Tax Year 2015 County Sevier Tax Rate (per $100) $ City Gatlinburg Tax Rate (per $100) $ Map/Group/Parcel/SI 126N K Total TAX APPRAISAL Land $ 15, $ 15, Improvements $ 90, $ 90, Total Appraisal $ 106, $ 106, Assessment Rate 40% Total Assessment $ 42, $ 42, County Taxes $ $ City Taxes $ $ Total Real Estate Taxes $ $ Total $/SF Tax Appraisal $ 106,400 $ Tax Assessment $ 42,560 $ Tax Burden $ 868 $ 1.03 *Figures slightly rounded Total tax appraisal stands at $106,400 and the current tax burden is $868. The current tax assessment and tax burden appear to be reasonable. The subject s property taxes are shown to be current as based on reference to: #

25 DESCRIPTION OF IMPROVEMENTS General Description Building Type: Single Level Condominium Unit Year Built: 1987 Year Renovated: Circa 2013 Actual Age: 29 Years Effective Age: 20 Years Remaining Economic Life: 30± Years Foundation: Concrete Total Area (SF): 840± 540± Story/Floor/Level Area (SF) Basement N/A First 840± 540± Second N/A Third N/A Fourth N/A Olde Gatlinburg Place The subject is one unit in building Exterior Description Interior Description Roof Covering: Standing Seam Metal Ceiling Finish: Textured & Painted Masonry Roof Structure: Engineered Trusses Wall Finish: Smooth Finished Painted and Wallpapered Sheetrock Exterior Siding: Skip Trowel Concrete on Wood Look Laminate, Floor Coverings: Masonry & Steel Superstructure Ceramic Tile & Minor Carpet Exterior Wall: Masonry Millwork/Trim: Colonial Style, Some Crown Windows: Double Pane, Metal Frame Doors: 6-Panel Masonite Wood Look Doors: Metal Clad; Typical Lock & Surface Mount Fixtures & Lighting: Deadbolt Ceiling Fans Ceiling Height: 8 Feet; 7 6 ± in Baths HVAC: (2) Thru-Wall PTAC Type Units Sprinkler System: N/A Comments The unit has a split floor plan with two bedrooms, two full bathrooms, living room, entry hall, modest kitchen and private patio. The kitchen has a mid-size refrigerator, two eye range top, dishwasher and bar type stainless steel sink. The kitchen and bathrooms have Formica countertops and wrapped cabinets. Tub/Shower units are conventional and without jetting. A gas fired fireplace with surround is an amenity of the living area. The living area is open to the dining area. The overall layout of the unit is considered to be average and competitive in the overnight rental market. Condition was observed to be average, with the manager reporting renovation/updating circa #

26 UNIT SKETCH The plan above is for the building s ground floor. This plan shows Unit Types A One Bedroom One Bath units and B Two Bedroom Two Bath units. The subject unit is a B type unit. #

27 SUBJECT PHOTOS Subject Entry Door Subject Kitchen Area Viewing - Viewing - Subject Full Bathroom Guest Subject Bedroom (1 of 2) Viewing - Viewing - Subject Refrigerator Alcove & Kitchen Subject Living Room Viewing - Viewing - #

28 SUBJECT PHOTOS Continued Subject Dining Area Subject Bedroom (2 of 2) Viewing - Viewing - Subject Patio Subject Gas Fireplace Viewing - Viewing - Subject Typical Thru-Wall PTAC HVAC Unit Subject Closets & Master Bath Viewing - Viewing - #

29 SUBJECT PHOTOS Continued Subject Master Bath Subject Wood Look Laminate Flooring, Colonial Baseboard & Painted Sheetrock Walls Viewing - Viewing - Subject Left Intentionally Blank Subject Left Intentionally Blank Viewing Viewing Subject Left Intentionally Blank Subject Left Intentionally Blank Viewing Viewing #

30 OLDE GATLINBURG PLACE PHOTOS Subject Overall Property View Subject Signage Viewing S Viewing SW Subject Office/Check-in w/covered Portico Subject Outdoor Pool & Hot Tub Viewing S Viewing - Subject Property View Subject Property View Viewing SE Viewing W #

31 OLDE GATLINBURG PLACE PHOTOS Continued Subject Typical Stairwell Subject Rear Parking Area Viewing - Viewing - Subject Typical View from Patio Subject Typical Elevator (1 of 2) Viewing N/NW Viewing - Subject Typical Window, Entry Door, Entry Light, Siding, Fire Alarm Equipment, etc. Subject Viewing - Viewing Left Intentionally Blank #

32 MARKET DATA Sevier County Location Sevier County is located in southern east Tennessee and is a part of the expanded area of the Knoxville Metropolitan Statistical Area (Knoxville MSA) known as the East Tennessee Economic Development Area (ETEDA). The ETEDA is comprised of 15 counties and is centered on Knox County, the driving force of east Tennessee. This area includes a population of well over 1 million residents, a workforce of 570,000, and over 65,000 college and university students. The main campus of the University of Tennessee is located here, as well as 7 four-year liberal arts colleges, 4 two-year community colleges, 4 technology training centers and numerous vocational and specialty schools. Sevier County is known as the Gateway to the Smokies as it contains over 30% of the Great Smoky Mountains National Park, the nation s most visited park. While Sevier County is built on tourism, attracting more than 11 million visitors every year, the county also has over 90,000 permanent residents. When it comes to economic indicators, Sevier County is very similar to the surrounding area but the strong influence of tourism is evident in several trends such as foreclosure rates. #

33 MARKET DATA Continued One significant factor creating demand and interest in the area is the Great Smoky Mountains National Park. This public resource, as the nation s most visited park, sees a significant number of visitors annually and provides a setting of natural beauty which enhances the region. In 2015, over ten million people visited the Great Smoky Mountains National Park. This is only the fifth time in the park s 80 year history that visitation has reached this level and the first time was the year prior. For comparison, it is noted that in 2014, the most recent year reported, Yellowstone National Park had about 3 million visitors, Yosemite Park had some 4 million visitors and the Grand Canyon National Park saw around 4.5 million guests. Most recent visitation trends to the Smokies look to be positive. It is reminded that visitation to the Park trends seasonally with June, July and October being the peak months; and, that weather conditions impact visitation. 12,000,000 Total Annual Park Recreation Visitation 10,000,000 8,000,000 6,000,000 4,000,000 2,000, #

34 MARKET DATA Continued Transportation The county is situated on Interstate 40, which stretches between North Carolina and California, and is very close to Interstate 81, which extends from East Tennessee to the Canadian Border. Over 70 percent of the US market is within a day s drive of one of the most visited areas in the country. #

35 MARKET DATA Continued Population (Cont.) Sevier County is the third most populated county in the ETEDA with a population of over 92,000 people. Sevier County is the fastest growing county in the ETEDA and had an overall growth rate of 76% from 1990 to The county is consistently well above the state and national growth rate, and tends to be at least twice as high and sometimes three times as high as that of the U.S. Sevier County is driven by tourism, which has continued to bring in more and more jobs (and people) as well as attracting residents and retirees due to its scenic nature. #

36 MARKET DATA Continued Population #

37 MARKET DATA Continued Population (Cont.) While Sevier County is the third most populated county in the ETEDA, its municipalities are relatively small and account for less than 30% of the total population. This is very understandable due to Sevier County s reliance on tourism. The vast majority of residents live outside of these cities since it is mainly tourism driven. #

38 MARKET DATA Continued Employment (Cont.) #

39 MARKET DATA Continued Employment (Cont.) Unemployment in Sevier County has followed a trend very similar to that of the state and the majority of the ETEDA. Low employment rates in Sevier County in 2007 were followed by a 37% increase in 2008 and a 52% increase in The following years brought small, yet consistent, decreases and a much larger decrease in The large spike in 2009 was due to the economic recession but rates have steadily decreased since then, a trend that is expected to continue. While Sevier County has been slightly above the state average during this time period, its unemployment rate has consistently been better than over half of the ETEDA. Sevier County is built on tourism with nearly half of the county working in tourism and hospitality and close to a quarter of the workforce working in retail & wholesale trade. Sevier County has much less manufacturing than most areas due to its tourism-driven economy, and the abundance of manufacturing in surrounding counties. #

40 MARKET DATA Continued Income The median household income, average household income, and per capita income for Sevier County is very similar to that of the ETEDA. The highest percentage of households in Sevier County fall within the $50,000 to $74,999 range. #

41 MARKET DATA Continued Income (Cont.) Nearly half (49%) of Sevier County households make between $25,000 and $75,000 compared to only 46% of the ETEDA as a whole. Sevier County is almost an exact match to the MSA as a whole in several categories. #

42 MARKET DATA Continued Housing Home sales in Sevier County have roughly followed the general trend of the state. This trend is one of an overall increase until 2006, a decrease in 2007, and a very substantial drop in New home sales tended to be much lower, but generally made up a larger percent of the total than most other counties and the state. While new home sales dropped drastically and continue to decrease, existing home sales have actually been on the rise since 2009, a trend opposite that of the state as a whole. The large decrease in 2007 and 2008, as well as the widening of the gap between new and existing home sales in recent years, is tied to the economic recession and more largely, the crash in the housing market around this time. This led to a surplus of houses on the market and a much smaller demand for new houses to be built. As the economy recovers from the recession, home sales should continue to increase. #

43 MARKET DATA Continued Housing (Cont.) The median existing home price in Sevier County follows the overall trend of the state but is generally at least $15,000 higher. The trend for the median new home price is less similar to that of the state and, with the exception of 2002 and 2004, has been well below the state median. In general, the trend for new home price in Sevier County from 2002 until 2007 was the inverse of the trend in new home sales. Large increases in new home prices corresponded to large decreases in home sales, while large decreases in new home prices corresponded to large increases in home sales. Since 2007 this trend has not been true as the median new home price has decreased steadily every year. #

44 MARKET DATA Continued Housing (Cont.) Sevier County has consistently had the highest rate of foreclosure in the ETEDA and had either the first or second highest rate in the state in 2009, 2010, and The trend for Sevier County has been similar to that of the other counties in the area, but much higher and with much greater swings. The county has generally been well above the state average and has been above the national average more times than not during this period. While its foreclosure rate was well above that of the national average in 2010 and 2011, Sevier County dropped well below the US in This high trend of foreclosure is due to the nature of Sevier County and its property. Whether from the Great Smoky Mountains, Gatlinburg, or Pigeon Forge, Sevier County depends on tourism, thus many of its properties and buildings are purchased and developed as investments in anything from lodging to entertainment. With so much more tourism than other counties, Sevier County has a much higher percentage of investments in businesses, especially hotels and cabins, instead of houses. This large amount lends itself to a much greater chance of foreclosure resulting in a much higher foreclosure rate. This trend and explanation is evidenced in the chart on the following page. The two counties with the highest foreclosure rates are Sevier and Loudon, both of which depend largely on tourism and have a high number of non-resident vacation homes. Those with the lowest foreclosure rates are counties such as Scott and Cocke, much more rural areas whose housing value is much less than the surrounding area. Rates dropped in all counties for 2014 according to THDA s most recent data, however they had not reported year-end results. #

45 MARKET DATA Continued Housing (Cont.) #

46 MARKET DATA Continued Housing (Cont.) ETEDA has a much higher concentration under $100,000 (32.7% compared to 27.7% for Sevier County). While Sevier County has a lower concentration of houses under $300,000, it has a significantly higher concentration of houses valued between $100,000 and $250,000. #

47 MARKET DATA Continued Housing (Cont.) #

48 MARKET DATA Continued Housing (Cont.) Building Activity #

49 MARKET DATA Continued While the number of residential building permits issued per year is down significantly in recent years, this is a trend experienced by virtually every county in the state. Sevier County experienced a very significant drop from 2005 to 2006, followed by a decrease in each of the next three years saw another small decrease, a trend that was very common in the area. The county saw a relatively large increase in 2012, a trend is expected to continue. The general trend for Sevier County, as well as the greater Knoxville area, is very similar to the trend in new home sales. This trend is attributed to the economic recession and the boom and crash in the housing market. Because of the high number of new houses being built around 2003 to 2005, there became a surplus on the market, thus the amount of new houses both being built and sold decreased drastically. Conclusion Sevier County is one of the most visited places in the state and runs on tourism. Because of this, the county is much different than surrounding counties and the state in several economic indicators. This difference is most obvious in foreclosure rates. Sevier County consistently has had one of the highest rates in the state for many years, is well above the national average. This is largely due to the tourist driven economy of the county and the excess in construction of rental cabins in the early to mid 2000 s. With the general decline in housing on a national level, this local second home/rental market eroded over the 2008 to 2012 period. Since that time, for sale inventory has moderated and limited new construction is taking place. Sevier County is on par, and often times above, the surrounding area and the state in the other indicators such as population growth, unemployment, income and home sales. Boosted by having the most visited park in the country in its backyard, Sevier County should continue to grow and improve in the future. #

50 MARKET DATA Continued Location/Access Gatlinburg is located along the north boundary of the Great Smoky Mountains National Park in the south central region of Sevier County, Tennessee. U.S. Highways 441 and 321 intersect near the northern end of the city s commercial strip (Parkway) and lead southward to the primary entrance for the national park. Highway 441 serves as the main entrance to the city from Pigeon Forge, Interstate 40 and other points north. The subject fronts Baskins Creek and Cherokee Orchard Roads. This location is proximate to the Parkway and Gatlinburg s downtown. The property is within a quarter mile of the downtown area which provides a robust offering of restaurants, retailers and amusement enterprises. Walkability here is good. Land Uses Land uses in the neighborhood are predominantly tourist residential in nature and include condominium, hotel/motel and apartment communities. Some single family and retail uses are interspersed in the area as are some warehouses. Properties to the south/southeast out Baskins Creek Road decline in quality somewhat as walkability to the commercial strip declines. Trends & Conclusion The neighborhood is best described as an established and stable tourist destination showing some signs of redevelopment and gentrification. To further describe the neighborhood, a 3/5/10 Minute Drive-Time study was conducted, the results of which are included in the addenda of this report. #

51 HIGHEST AND BEST USE The Appraisal Institute defines and explains Highest and Best Use as follows: The reasonably probable and legal use of vacant land or an improved property that 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 productivity. 4 Land is said to have value, while improvements contribute to the value of the property as a whole. The theoretical emphasis of highest and best use analysis is on the potential uses of the land as though vacant. That use of the land which may reasonably be expected to produce the greatest net return to land over a given period of time. That legal use which will yield to land the highest present value, sometimes called optimum use. In estimating Highest and Best Use, there are four stages of analysis: 1. Permissible Use (Legal) what uses are permitted by zoning and deed restrictions on the site in question? 2. Physical Use to what uses is it physically possible to put the site in question? 3. Feasible Use which possible and permissible uses will produce any net return to the owner of the site? 4. Highest and Best Use among the feasible uses, which use will be maximally productive and offer the highest present worth? The process for determining the highest and best use of a property has four main steps. The first two are applied in the analysis of highest and best use of the land or site as though vacant; the third and fourth steps are applied in the analysis of the highest and best use of the property as improved. 1. Determine the highest and best use as of the site as though vacant. 2. Determine the ideal improvement for development of the site. 3. Compare the ideal improvement and the existing improvement. 4. Conclude whether the improvements should be maintained as is or be renovated, converted or demolished. 4 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6 th ed. (Chicago: Appraisal Institute, 2015) #

52 HIGHEST AND BEST USE Continued The highest and best use of the land, if vacant and available for use, may be different from that of the improved property. This will be true when the improvement is not an appropriate use, yet makes a contribution to total property value in excess of the value of the site. As Vacant Legally Permissible Legal restrictions fall into two main categories public and private. Private restrictions are agreements imposed by previous owners and can include access easements, use limitations, and leases. Public constraints include zoning, right-of-way easements, historic districts and utility easements. There are no known atypical public or private legal restrictions. From a legal standpoint, the land is zoned for C-2, General Business District use, which does not hinder reasonable highest and best use. The C-2 zone allows for hotels and motels, plus various other uses and also any C-1 designated uses. The C-1 zone allows for residential dwellings, stores and shops conducting retail business, personal business and professional services, parking lots and garages, restaurants, tourist residences, etc. Physically Possible Physical attributes commonly considered include size, shape, access, flood potential, contour and utility availability. Characteristics that may be significantly detrimental, but the appraiser(s) are not trained to detect or determine, are environmental hazards and soil conditions. From a physical standpoint, the site contains approximately 1.28 acres fronting Baskins Creek Road and Cherokee Orchard Road at a corner location about 1,000 feet from the Parkway (US 441). This report concerns an individual condominium unit among a sizeable condominium tower development. The site appears to be well suited to its use. #

53 HIGHEST AND BEST USE Continued As Vacant (Cont.) Financially Feasible From a feasibility standpoint, the immediate area offers several large condominium developments, hotels/motels and independent retail enterprises. This suggests that a variety of commercial, high density residential or mixed use developments would fit well on the site. Some newer warehouse uses are also found nearby to the south. Considering the size and corner configuration of the site, moderate scale hospitality, condominium, apartment, or perhaps mixed use development would fit well. Land for development in and around downtown Gatlinburg remains relatively scarce and several properties have been redeveloped of late and two new hotel projects are found nearby on Airport Road (Historic Nature Trail). Visitation to the area remains significant and a driving force to the local tourist-centric economy. Maximally Productive The maximally productive use for this parcel would be for commercial or high density residential use aligning with the tourist-centric market. The property s good walkability and linkages with the Parkway and its prime tourist offerings is strong and a significant plus. Likely Purchaser A prospective purchaser, as vacant, would most likely be a commercial investor seeking lands within reasonable proximity and access to Downtown Gatlinburg. Timing of Development Several new hotel projects are observed in the neighborhood and visitation to the area remains significant and growing. If vacant, the overall site could be utilized in the near term. It is reminded that this report considers only a single condominium unit among a multiunit condominium tower. #

54 HIGHEST AND BEST USE Continued As Improved The highest and best use analysis as-improved is included to compare the existing building(s) with the ideal improvement conclusion from the as-vacant analysis. Three general conclusions can be drawn. 1. Land value exceeds the value of the improved property and the building should be demolished. 2. The building(s) should remain with alterations that are economically viable. 3. The building(s) should remain in the current state. The four step test as-improved is completed as follows: Legally Permissible From a legal standpoint, the existing residential overnight rental condominium use conforms to the zoning regulation and reasonably represents highest and best use. Physically Possible From a physical standpoint, the improvements are in an operating condition with the interior finishes and furnishings reported to have been updated circa The unit s layout is reasonable for overnight rental and periodic owner use. The unit enjoys shared common elements such as: elevators, landscaped grounds, surface parking, check-in office with portico, outdoor pool, pool deck and hot tub. Walkability to the Gatlinburg Parkway is strong and a plus for renting. #

55 HIGHEST AND BEST USE Continued Financially Feasible From a feasibility standpoint, the unit has an extended history of conventional overnight rental use as part of the Olde Gatlinburg Place condominium property. Reported revenue and net income is positive and rental activity is ongoing. The unit is managed by Olde Gatlinburg Place Rentals. That enterprise manages multiple properties in the market area and is considered to offer reasonable professional services, marketing, etc. Maximally Productive The only use that survives the first three tests is for continued use. The unit is a sound structure that adequately serves its present use and would meet market expectations for overnight rental use in the immediate area. The highest and best use, As Improved, is for continued overnight rental use. Reasonable Exposure Time Considering the unit s location, zoning and physical attributes as well as days on market information for sold properties, a reasonable exposure time of six to twelve months is reflective of the area. Reasonable Marketing Time Reasonable marketing time is concluded in line with the estimated exposure time at six to twelve months. #

56 DESCRIPTION OF THE APPRAISAL PROCESS An appraisal is an opinion of value. Value estimated is dependent upon the specific definition of value. In this case, the value estimated is Market Value or the most probable selling price. The appraisal process is an organized format utilized to estimate and test for value. Traditionally there have been three approaches for value estimation. All three approaches are not necessarily applicable to every property or appraisal assignment. The three traditional approaches are Cost, Sales Comparison, and Income. The cost approach is predicated on the establishment of replacement cost from which is deducted an allowance for depreciation to which is added the estimated value of the land. The cost approach is the most applicable for a new, or relatively new, building, where the design and function tend to represent the highest and best use of the structure and estimation of depreciation is not difficult. The principle of substitution is closely aligned with the cost approach. The principle of substitution holds that a potential purchaser would not pay in excess of the cost to recreate the subject property with proper allowances being made for age, condition and depreciation. The sales comparison approach is a direct comparison technique in which the property being appraised is compared to other properties which have sold and possess reasonably similar physical characteristics. The sales comparison approach is a very good method for estimation of probable sale price in situations where applicable and adequate data is available for comparison purposes. The income approach is predicated on the establishment of probable net income from rental of the property. The net income is then analyzed by some method of capitalization to indicate reasonable value based on the property s ability to generate net income to the purchaser. After considering the validity of the developed approaches, the appraiser concludes a probable sale price for the subject property. #

57 COST APPROACH The Appraisal Institute defines the cost approach as: A set of procedures through which a value indication is derived for the fee simple estate by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive or profit; deducting depreciation from the total cost; and adding the estimated land value. Adjustment may then be made to the indicated fee simple estate in the subject property to reflect the value of the property interest being appraised. 5 In the cost approach, value is estimated as the current cost of reproducing or replacing the improvements (including an appropriate entrepreneurial incentive or profit), minus the loss in value from depreciation, plus land value. 6 The cost approach is not developed in this report. The subject is a single condominium unit which is best valued via analysis typically sectioned in the sales comparison, income, or both such approaches. Omission of the cost approach does not limit, or otherwise reduce the validity of the approach(es) employed. 5 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th ed. (Chicago: Appraisal Institute, 2015) 6 Appraisal Institute, The Appraisal of Real Estate, 14 th ed. (Chicago: Appraisal Institute, 2013) #

58 SALES COMPARISON APPROACH The Appraisal Institute defines sales comparison approach as: The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. 7 In the sales comparison approach, value is indicated by recent sales of comparable properties in the market. 8 Unit sales volume and velocity in the Olde Gatlinburg Place development is found to be modest. Since January 2013, ten units have conveyed via arm s length transactions. Each of those sales has involved a 540 square foot one bedroom one bath unit. Gross pricing has been from $67,500 to $140,000 with the low end reflective of an all original/outdated unit and the high end reflective of a good quality extensively remodeled unit. Rates of value per square feet among these sales are from $125 to $269. Of the recent sales, seven were found to have been listed on the Great Smoky Mountains Association of Realtors Multiple Listing Service. Those listings reported Days on Market from 16 to 401, with an average of 193 days (6.4± months). Two active listings of 540 square foot one bedroom one bath units were found on the MLS. These set out asking prices of $115,000 and $119,000, respectively, for partially updated units. These asking prices generate rates of $213 and $220 per square foot. The offerings have been on the market 122 and 154 days (5± months). The one bedroom one bath sales and listing data clearly reflects the influence of condition. Fully renovated units garner the strongest pricing, while dated units garner the weakest. Typical market exposure is about 6 months for the units. Further, adjustment from asking price to closed-sale price is from 0% to 15%, with an average discount of 8%. Sales of two bedroom two bath units are less frequent at the property. The two most recent sales of such units were found to have occurred in October 2010 and May Those sales involved partially updated units with 840 square feet each. Effective prices per square foot were $208 to $225. One similarly configured and conditioned unit is marketed for sale at an asking price of $189,000 ($225) and exposure of 275 days. When sorted by floor location, pricing does appear to increase somewhat as the floor number increases. This is likely due to the bettering mountain views from the upper floors of the building. Of the recent sales, five are noted as being out from one seller. The modest amount of sales volume for these income producing units suggests operating feasibility and owner interest in long term hold. Mortgage financing appears to be readily available, as is owner financing. Loan-to-value rates are observed to be from 80% to 93%, with some influence to those rates applicable to furniture, fixtures and equipment. 7 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6 th ed. (Chicago: Appraisal Institute, 2015) 8 Appraisal Institute, The Appraisal of Real Estate, 14 th ed. (Chicago: Appraisal Institute, 2013) #

59 SALES COMPARISON APPROACH Continued The full dataset of sales is reported below. These sales and listings are utilized as broad indicators of the subject s probable sale price. Each is understood to have conveyed furnished. 1BD 1BA Closed Sale Comparables OWNER SUBDIV. OR PHASE SOLD DATE UNIT # DEED BK DEED PG BLDG. (SF) SOLD PRICE $/SF BLDG. Condition LISTING # Ask $ DOM Δ from Ask FLOOR # BDRMS BATHS Gatlinburg Condos 3 LLC Olde Gatlinburg Place 06/08/ $ 140,000 $ 259 Updated $ 150, % $ 129,700 93% Gatlinburg Condos 2 LLC Olde Gatlinburg Place 05/04/ $ 120,000 $ 222 Partially Updated $ 132, % $ 111,500 93% Allison Land LLC Olde Gatlinburg Place 12/28/ $ 90,000 $ N/A N/A Harrison Walter P Priscilla F Olde Gatlinburg Place 12/11/ $ 75,000 $ 139 Partially Updated $ 80, % $ 60,000 80% Gatlingburg Condos 1 LLC Olde Gatlinburg Place 07/28/ $ 92,900 $ 172 Not Updated $ 99, % $ 85,400 92% Adams Alan E Michelle C Olde Gatlinburg Place 03/12/ $ 80,000 $ $ 71,000 89% Arnold Harlon R & Linda S Elizabeth Olde Gatlinburg Place 08/20/ $ 76,000 $ 141 Updated $ 89, % N/A N/A Stiles Holmes T Mona Olde Gatlinburg Place 06/05/ $ 72,250 $ 134 Not Updated $ 80, % N/A N/A Grisham Sam C Karen L Olde Gatlinburg Place 03/28/ $ 67,500 $ N/A N/A Estep Coranne Ethel Estep Olde Gatlinburg Place 02/02/ $ 145,000 $ 269 Updated $ 145, % N/A N/A Minimum $ 67,500 $ 125 Maximum $ 145,000 $ 269 Average $ 95,865 $ 178 Loan Amount LTV 1BD 1BA Listing Comparables Alloway Olde Gatlinburg Place Listed $ 220 Partially Updated $ 119, Hayes Olde Gatlinburg Place Listed $ 213 Partially Updated $ 115, BD 2BA Closed Sale Comparables OWNER SUBDIV. OR PHASE SOLD DATE UNIT # DEED BK DEED PG BLDG. (SF) SOLD PRICE $/SF BLDG. Condition LISTING # Ask $ DOM Δ from Ask FLOOR # BDRMS BATHS Jones Pamela A Olde Gatlinburg Place 10/6/ $ 175,000 $ N/A N/A Hutcherson Ralph M. & Carol S Olde Gatlinburg Place 5/23/ $ 189,050 $ $ 160,462 85% Loan Amount LTV 2BD 2BA Listing Comparables Phillips Olde Gatlinburg Place Listed $ 225 Partially Updated $ 189, #

60 SALES COMPARISON APPROACH Continued Summary The subject is an 840± square foot two bedroom two bath second floor unit in the Olde Gatlinburg Place development. The unit was partially updated only about three years ago. Views and accessibility to/from this unit are moderate. Given the known two bedroom two bath unit sales and listings above, and taking into account the subject s condition and floor location, a value of $180,000 ($214.29/SF) is well supported by direct comparative analysis. Sales Comparison Approach Conclusion The reasonable indicated value for the subject using the sales comparison approach is $180,000. #

61 INCOME APPROACH The basis of the income approach is the principle of anticipation. The principle of anticipation holds that a property s value is based on the anticipated future benefit to be derived from ownership. In an income producing property, this anticipation of future benefits is the net income to be received from rent, plus the capital sum to be received at the end of the ownership. The income approach procedure involves the estimation of gross potential rent from which the estimated expenses of operating and maintaining the property are deducted. The result is the net operating income that can be anticipated from ownership. Net operating income is then capitalized into an indication of value. The procedure for estimating the appropriate rate is dependent upon the market and the nature of the property being appraised. The Appraisal Institute defines the Income Capitalization Approach as: Specific appraisal techniques applied to develop a value indication for a property based on its earning capability and calculated by the capitalization of property income. 9 In the income capitalization approach, value is indicated by a property s earning power, based on the capitalization of income. 10 The facility considered in this appraisal consists of an overnight rental condominium unit in the Olde Gatlinburg Place property at 306 Baskins Creek Road in Gatlinburg, Tennessee. Units in the property are subject to a horizontal property regime and a monthly HOA fee based on unit size. One bedroom one bath units are charged $112 per month and two bedroom two bath units are charged $155 per month. That assessment is reported to only have been started/applied in recent times as per Mr. Kevin Coleman s verbal report. The HOA fee covers utility water, cable television, gas for the fireplaces, upkeep of the common area elements and insurance on the structure. Each unit owner is separately responsible for electricity, phone and property taxes. Unit operations are mixed, with some owners keeping their units for only their private periodic use (no full time occupants) and some renting their units. Unit rentals can be done by the owner, or through a management company. The Olde Gatlinburg Place Rental enterprise charges a 60%/40% split, with the owner receiving 60% of gross receipts. The 40% fee charged by the management company covers marketing, typical unit turn costs (laundry, cleaning, check-in/check-out, etc.). Mr. Coleman reports that one bedroom units on the rental program have gross receipts from $10,000 to $12,000, with some as high as $16,000 per year. He also reported that two bedroom units earn from $15,000 to $20,000 per year. Rental activity is seasonal, with the four winter months having little demand overall. Peak rental activity and nightly rental pricing is in December. Average rental occupancy for the units is in the 30% to 40% range per year, with owner-occupancy and vacant periods making up the balance. 9 Appraisal Institute, The Dictionary of Real Estate Appraisal, 6 th ed. (Chicago: Appraisal Institute, 2015) 10 Appraisal Institute, The Appraisal of Real Estate, 14 th ed. (Chicago: Appraisal Institute, 2013) #

62 INCOME APPROACH Continued Given the mix of owner-used and overnight rental units, discernment of market based operating expenses is difficult. This suggests that economic comparison is best made on a top-line basis considering collected revenue verses sale price. Olde Gatlinburg Place Rentals provided the following revenue information for units in the development. Sales data is based on recorded deeds. Actual Collected Revenue 2015 Actual vs. Exceeded Sale or List Unit # Type %Δ Budget Budget Budget Price GRM 612 2BD 2BA - - $ 17,638 - $ 17,000 $ 638 YES $ 189, BD 1BA $ 9,258 Base $ 10, % * $ 12,500 $ (1,593) NO $ 67, BD 1BA $ 14,043 Base $ 14, % $ 12,500 $ 2,361 YES $ 140, BD 1BA $ 11,660 Base $ 12, % $ 12,500 $ (379) NO $ 120, *Started Rental in March 2014 The comparable show revenue growth from 2014 to 2015 and establish a gross revenue multiplier of #

63 INCOME APPROACH Continued The subject units have a history of rental revenue generation as summarized below. Actual Collected Revenue Annualized 2016 Actual vs. Exceeded Unit # Type %Δ Jan-Aug %Δ Budget Budget Budget 101 2BD 2BA $ 16,226 Base $ 17, % $ 12,442 $ 18, % $ 15,700 $ 2,963 YES 207 2BD 2BA $ 16,672 Base $ 17, % $ 11,658 $ 17, % $ 15,700 $ 1,788 YES 402 1BD 1BA $ 11,558 Base $ 14, % $ 8,452 $ 12, % $ 10,700 $ 1,978 YES 511 1BD 1BA $ 12,381 Base $ 15, % $ 7,919 $ 11, % $ 10,700 $ 1,179 YES Each of the four units showed revenue increases from 2014 to annual figures are annualized estimates based on reported revenue from January through August. December operations likely skew upward given peak rental activity. Collectively, the actual property data indicates a stable to bettering income generating status for the units. Each is noted as having exceeded the management company s estimate. Unit 207 generated revenue of $16,672 in 2014 and $17,593 in Annualized figures for 2016 are for $17,488 in revenue. A reasonable estimate for the coming year is made at $18,500. Appraiser Indicated Forecast GRM Value $ 18, $ 185,000 Given the market comparables, and considering the subject s condition and location in the building, a gross revenue multiplier of is believed reasonable. Application of that multiplier finds value indicated at $185,000. Income Approach Conclusion The reasonable indicated value for the subject using the income approach is $185,000. #

64 VALUATION CONCLUSION Cost Approach The cost approach was not developed in this report. Sales Comparison Approach Data was listed for multiple closed-sale transactions and listings of similar condominium units in the Olde Gatlinburg Place development. An indicated value of $180,000 was concluded using the sales comparison approach. Income Approach The income approach was processed for this unit based on its known rental revenue history. Given market information for gross revenue multipliers, an indicated value of $185,000 was concluded using the income approach. Final Conclusion The sales comparison approach is a good indicator of value as it considers real market activity. The income approach is also a good indicator of value as it reflects the market with regard to an investor s motivation. Considering both valuation methods, Final Value is concluded at $180,000. Final Value $180,000 Furniture, Fixtures & Equipment The unit generates its revenue through periodic overnight rental use. That activity is supported by furniture, fixture and equipment items. These items include, but are not limited to those set out on the next page. No formal inventory of items was provided for analysis and this report reflects a general observation only. The items reflect those typical to overnight rental space such as that found in condominiums and hotels. These items are reported to have been replaced circa Reference to the Marshall Valuation Service Cost Manual finds depreciated cost (value contribution) from these items totaling $8,500. This value is a component part of the final value reported above. Furniture, Fixtures & Equipment $8,500 #

65 FURNITURE, FIXTURES & EQUIPMENT The schedule below lists the observed and expected furniture, fixture and equipment items in the subject unit. Two Bedroom Two Bath Unit MVS Section 65, Page 4; Appraiser Estimates Eff. Age # Item Qty RCN Ext. Yrs Life % DEP $ DEP Value 1 Dishwasher 1 $ 500 $ % $ 150 $ Refrigerator 1 $ 900 $ % $ 270 $ Microwave 1 $ 200 $ % $ 60 $ Microwave stand 1 $ 150 $ % $ 45 $ Bed 2 $ 1,000 $ 2, % $ 600 $ 1,400 6 Side Table 2 $ 250 $ % $ 150 $ Dresser 2 $ 400 $ % $ 240 $ Dining Set 1 $ 800 $ % $ 240 $ Couch 1 $ 750 $ % $ 225 $ Chair 2 $ 350 $ % $ 210 $ End Table 2 $ 200 $ % $ 120 $ Television 3 $ 500 $ 1, % $ 450 $ 1, Linens 2 $ 500 $ 1, % $ 300 $ Décor 1 $ 1,500 $ 1, % $ 450 $ 1, Small App./Misc. 1 $ 500 $ % $ 150 $ 350 $ 12,200 Total $ 8,540 Est. Furniture, Fixtures & Equipment $8,500 Ind. Total FF&E (R) $ 8,500 #

66 QUALIFICATIONS OF KENNETH R. WOODFORD, MAI, SRA, AI-GRS General real estate appraisal and counseling business with emphasis on market value appraisals, feasibility and counseling for acquisition, sale and mortgage loan purposes. Professionally servicing East Tennessee, Southeast Kentucky, Southwest Virginia, Western North Carolina and Northern Georgia. Appraisal Education Bachelor of Science in Business Management Carson Newman College, Jefferson City, Tennessee Technical Training Appraisal Institute: Basis Appraisal Principles, Methods and Techniques, Capitalization Theory and Techniques, Real Estate Investment Analysis, Case Studies in Real Estate Valuation, Valuation Analysis and Report Writing, Standards of Professional Practice and Multiple Regression Analysis. University of Tennessee: Real Estate Principles and Real Estate Appraisal. Several courses and seminars annually. Currently certified by Appraisal Institute continuing education programs. Memberships and Designations Experience Appraisal Institute: MAI, Certificate No Qualifications are comprehensive courses, experience and proven ability in the appraisal of all property types. Member Admissions Committee of local chapter. Candidate guidance chairman for local chapter 1985; Treasurer, 1986; Secretary, 1987; Vice President, 1988; President, 1989; Southeast Regional Representative, ; Educational Liaison to National Organization, ; Regional Public Relations Representative, AI-GRS Designation awarded Society of Real Estate Appraisers: Senior Residential Member, SRA. Qualifications are relative to proven ability in the appraisal of residential properties. The Society was merged with the Appraisal Institute on January 1, Chapter President , Secretary , Board of Directors , State of Tennessee Department of Commerce and Insurance: Certified General Appraiser License No. CG-342. Knoxville Board of Realtors: Affiliate Broker 1977 to 1985, Broker 1985 to present. Tennessee Real Estate Appraiser s Commission, July 2007 June Overall experience includes appraisals and analytical studies of commercial, industrial, apartment, condominiums and residential properties as well as mortgage and condemnation related services involving most property types. #

67 QUALIFICATIONS OF STEVEN M. GOODPASTER, MAI, MRE Professionally servicing East and Middle Tennessee through general real estate appraisal with emphasis on; market value appraisals, feasibility and counseling for acquisition, disposition and mortgage loan purposes. Specific experience includes appraisal of multiple property types, to include: office, retail, service-commercial, industrial, warehouse, multifamily, hospitality, special purpose, residential subdivision and planned unit developments, land tracts, net lease properties, etc. Professional Education & Training Appraisal Institute Basic Appraisal Principles Basic Appraisal Procedures Uniform Standards of Professional Appraisal Practice Market Analysis and Highest and Best Use Report Writing and Case Studies Introduction to Valuation for Financial Reporting General Appraiser Sales Comparison Approach General Appraiser Site Valuation and Cost Approach Analyzing Tenant Credit Risk Appraising Distressed Real Estate Business Practices & Ethics Litigation Skills for the Appraiser Subdivision Valuation Residential Applications Forecasting Revenue Discounted Cash Flow Modeling University of Florida Warrington College of Business & Berea College Commercial Real Estate Appraisal Market & Transaction Analysis Investment Property Analysis Real Estate Development Housing Economics & Policy Advanced Managerial Statistics Appraisal of Real Property Real Estate Laws & Licensing Financial Management Applied Statistics Computer Aided Drafting & Design Photography I & II Education Master of Science University of Florida Warrington College of Business, Gainesville, Florida 2005 with major in Real Estate & Urban Analysis. Bachelor of Science Berea College, Berea, Kentucky 2003 with major in Business Administration and independent minor in Real Estate. Licensure & Membership State of Tennessee, Department of Commerce & Insurance Certified General Appraiser, License No. CG-4342 Appraisal Institute Designation: MAI Appraisal Institute Chapter Regional IX Representative Appraisal Institute Leadership Development & Advisory Council Delegate 2012, 2011 & 2010 #

68 CERTIFICATION We certify that, to the best of our knowledge and belief that The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest with respect to the parties involved. 4. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 5. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 6. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute. 8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. 9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 10. As of the date of this report, I, Kenneth R. Woodford, MAI, SRA, AI-GRS have completed the requirements of the continuing education program of the Appraisal Institute. 11. I, Kenneth R. Woodford, MAI, SRA, AI-GRS have personally visited the property that is the subject of this report. 12. Steven M. Goodpaster, MAI, MRE (State Certified General Appraiser, CG-4342) provided significant professional assistance in the development of this report. 13. As of the date of this report I, Steven M. Goodpaster, MAI, MRE have completed the Standards and Ethics Education Requirement of the Appraisal Institute for Candidates for Designation. 14. I, Steven M. Goodpaster, MAI, MRE have personally visited the property that is the subject of this report. #

69 CERTIFICATION Continued 15. This report was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. 16. The real property which is the subject of this appraisal report was valued as of February 8, The appraisers have provided no professional services pertaining to this property in the three years prior to this report. 18. The appraisal was prepared in accordance with the requirements of title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), as amended (12 U.S.C 3331 et seq.) and any implementing regulations. 19. The appraisal was prepared in accordance with the Interagency Appraisal and Evaluation Guidelines (December 10, 2010). Kenneth R. Woodford, MAI, SRA, AI-GRS State Certified General Appraiser, CG-342 Steven M. Goodpaster, MAI, MRE State Certified General Appraiser, CG-4342 Date of Certification September 19, 2016 #

70 ADDENDA Title Document(s) CRS Property Tax Card(s) Demographic Report(s) #

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73 LOCATION Property Address 207 Baskins Creek Rd 306 U TN Subdivision Olde Gatlinburg Place County Sevier County, TN PROPERTY SUMMARY Property Type Commercial Land Use Household Units Improvement Type Condo Com Square Feet 824 GENERAL PARCEL INFORMATION Parcel ID/Tax ID 126N K Special Int 017 Alternate Parcel ID Land Map 126N District/Ward Census Trct/Blk /1 Assessor Roll Year 2016 CURRENT OWNER Name Ellis Jean Mailing Address 1511 Layton Ln Signal Mountain, TN SALES HISTORY THROUGH 08/15/2016 Date Amount Buyer/Owners Buyer/Owners 2 Instrument No. Parcels Book/Page Or Document# 12/28/2009 $29,406 Ellis Jean Warranty Deed 3497/399 12/29/1997 $620,000 Olde Gatlinburg Rentals Inc Warranty Deed 7 617/72 3/28/1987 $64,900 Jett James M Yvonne Warranty Deed 376/213 TAX ASSESSMENT Appraisal Amount Assessment Amount Jurisdiction Rate Appraisal Year 2015 Assessment Year 2015 Gatlinburg Appraised Land $15,600 Assessed Land Sevier 1.88 Appraised Improvements $90,800 Assessed Improvements Total Tax Appraisal $106,400 Total Assessment $42,560 TAXES Exempt Amount Exempt Reason Tax Year City Taxes County Taxes Total Taxes 2015 $67.76 $ $ $72.98 $ $ $72.98 $ $ MORTGAGE HISTORY No mortgages were found for this parcel. COPYRIGHT 2016 COURTHOUSE RETRIEVAL SYSTEM. ALL RIGHTS RESERVED. Information Deemed Reliable But Not Guaranteed.

74 PropertyReportfor207BASKINSCREEKRD306U, cont. PROPERTY CHARACTERISTICS: BUILDING Building # 1 Type Condo Com Condition Average Units 1 Year Built 1987 Effective Year 1996 Stories 1 BRs Baths F H Rooms Total Sq. Ft. 824 Building Square Feet (Living Space) Building Square Feet (Other) Condo Com 824 Open Porch Unfinished CONSTRUCTION Quality Excellent + Roof Framing Gable/Hip Shape Rectangular Design Roof Cover Deck Prefin Metal Crimped Partitions Cabinet Millwork Maximum Common Wall 30% Common Wall Floor Finish Carpet Combination Foundation Special Footing Interior Finish Drywall Floor System Slab On Grade Air Conditioning Cooling Package Exterior Wall Conc Block/Stucco Heat Type Heat Pakage Structural Framing Bathroom Tile Floor Only Fireplace Plumbing Fixtures 6 - OTHER Occupancy Occupied Building Data Source Agent PROPERTY CHARACTERISTICS: EXTRA FEATURES Feature Size or Description Year Built Condition Fireplace 1987 GOOD Common Area SALVAGE PROPERTY CHARACTERISTICS: LOT Land Use Household Units Lot Dimensions Block/Lot /207 Lot Square Feet Latitude/Longitude / Acreage PROPERTY CHARACTERISTICS: UTILITIES/AREA Gas Source Public - Natural Gas Road Type Paved Electric Source Public Topography Level Water Source Public District Trend Stable Sewer Source Public Special School District 1 Zoning Code C 2 Special School District 2 Owner Type LEGAL DESCRIPTION Subdivision Olde Gatlinburg Place Plat Book/Page Block/Lot /207 District/Ward 11 Description Unit 207 FLOOD ZONE INFORMATION Zone Code Flood Risk BFE Description FIRM Panel ID FIRM Panel Eff. Date COPYRIGHT 2016 COURTHOUSE RETRIEVAL SYSTEM. ALL RIGHTS RESERVED. Information Deemed Reliable But Not Guaranteed.

75 PropertyReportfor207BASKINSCREEKRD306U, cont. AE High Areas subject to inundation by the 1-percent-annual-chance 47155C0334E 05/18/2009 flood event determined by detailed methods. Base Flood Elevations (BFEs) are shown. Mandatory flood insurance purchase requirements and floodplain management standards apply. X Minimal Area of minimal flood hazard, usually depicted on FIRMs as above the 500-year flood level C0334E 05/18/ PCT Moderate An area inundated by 500-year flooding; an area inundated by47155c0334e 05/18/ year flooding with average depths of less than 1 foot or with drainage areas less than 1 square mile; or an area protected by levees from 100- year flooding. COPYRIGHT 2016 COURTHOUSE RETRIEVAL SYSTEM. ALL RIGHTS RESERVED. Information Deemed Reliable But Not Guaranteed.

76 Appraisal Specialty Report 306 Baskins Creek Rd, Gatlinburg, Tennessee, Site Map 10 minutes 5 minutes 3 minutes 306 Baskins Creek Rd, Gatlinburg, Tennessee, September 08, of 37