APPRAISAL IN SUMMARY REPORTING FORMAT

Transcription

1 APPRAISAL IN SUMMARY REPORTING FORMAT Subject Property: Dan Lord Plumbing Ownership of Record: James D Lord, et ux Street Address: 2609 S Farmerville Street City and State: Ruston, LA Parish: Lincoln Property Type: Commercial Date of Value Estimate: July 28, 2010 Prepared for: Prepared by: City of Ruston Economic Development Department 401 N Trenton Street Ruston, LA Michael A. Graham, MAI 1300 Hudson Lane, Suite No. 1 Monroe, Louisiana Real Estate Appraisal Services

2 Real Estate Appraisals and Consultation 1300 Hudson Lane Suite # 1 Monroe, La Phone: Fax: magraham@mgmai.com July 28, 2010 City of Ruston ATTN: Lewis Love Public Works Director 701 East Tennessee Ruston, LA Dear Mr. Love, Pursuant to your request, the undersigned appraiser has made a personal and careful inspection of the property identified above and has thoroughly investigated and analyzed matters pertinent to the estimation of Market Value of said property. To report the findings of my investigation, I offer this appraisal in a summary reporting format. This appraisal follows the minimum guidelines set forth in standards rule 2-2 (b) of the Uniform Standards of Appraisal Practice, Edition, published by The Appraisal Foundation. The appraisal report may not be limited to the information found herein. The reader may consult with Appraiser's project files to find more comprehensive definitions; broad area analysis; comparable factual data; and additional assumptions and limited conditions. This appraisal considers such additional information a part of this analysis and is available upon request. Assumptions and Limiting Conditions are listed in this report. These are typical for appraisal reporting; there are special contingencies, over and above the typical, that would influence the estimated value. Also, my certification statement, to include the value estimate, is listed and follows the Limiting Conditions. 2

3 Upon inspection of the property, I do not find obvious evidence of an Environmental Hazard. However, I am not an expert in this field and do not certify concerning this matter. A Phase I environmental study was not provided to the appraiser. Market Value Conclusion Appraisal Premise Interest Appraised Effective Date Conclusion As-Is Full ownership, less minerals July 28, 2010 $150,000 Thank you for the opportunity to work with you on this appraisal assignment. If I can offer additional assistance relative to this appraisal or help you with another matter, please contact me. Respectfully submitted, KARA A. PLATT LA STATE GENERAL CERTIFIED APPRAISER: #GO938 LA STATE GENERAL CERTIFIED APPRAISER: #G2088 3

4 TABLE OF CONTENTS SUMMARY OF SALIENT FACTS AND CONCLUSIONS... 5 SUMMARY OF APPRAISAL PROBLEM... 6 TYPE OF PROPERTY:... 6 CLIENT:... 6 INTENDED USER... 6 PURPOSE OF THE APPRAISAL... 6 FUNCTION OF APPRAISAL:... 7 PROPERTY RIGHTS APPRAISED... 7 EFFECTIVE DATE OF APPRAISAL... 7 APPRAISAL REPORT TYPE... 7 EXPOSURE TIME... 7 USE OF PROPERTY AT DATE OF APPRAISAL... 7 USE OF PROPERTY REFLECTED IN APPRAISAL:... 7 SCOPE OF WORK... 8 CERTIFICATION STATEMENT ASSUMPTIONS AND LIMITING CONDITIONS OWNERSHIP INFORMATION AND SALE HISTORY AREA DATA LOCATION OF SUBJECT PROPERTY SITE DATA SITE PLAN AERIAL PHOTOGRAPHS IMPROVEMENT ANALYSIS FLOOR PLAN HIGHEST AND BEST USE HIGHEST AND BEST USE OF LAND AS THOUGH VACANT HIGHEST AND BEST USE OF PROPERTY AS IMPROVED LAND VALUATION COMPARABLE LAND SALES SUMMARY LAND ADJUSTMENT GRID COST APPROACH COST APPROACH SUMMARY SALES COMPARISON APPROACH IMPROVED SALES SUMMARY TABLE UNIT OF COMPARISON / DISCUSSION OF ADJUSTMENTS INCOME APPROACH TO VALUE RECONCILIATION OF VALUE ADDENDA

5 SUMMARY OF SALIENT FACTS AND CONCLUSIONS The subject property is located on the east side of S Farmerville just north of Tennessee in Ruston, LA. Subject Property: Dan Lord Plumbing Property Type: Commercial Report Type: Summary Interest Appraised: Full ownership, less minerals Appraisal Date: July 28, 2010 Value Date: July 28, 2010 Inspection Date: July 28, 2010 Highest & Best Use As Vacant: Light Industrial or General commercial Legal Description: See the legal description in the addenda Owner ID: 2102 (Ruston Parish Assessor) Opinion of Market Value: $150,000 Range of Value: $145,000 to $160,000 5

6 SUMMARY OF APPRAISAL PROBLEM TYPE OF PROPERTY: Commercial CLIENT: City of Ruston INTENDED USER City of Ruston PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the Market Value of the subject in it s as-is condition. "Market Value" is defined by the United States Treasury Department, Comptroller of the Currency 12 CFR part 34, ( f ) as, "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." 6

7 FUNCTION OF APPRAISAL: Internal decision making PROPERTY RIGHTS APPRAISED Full ownership, less mineral rights EFFECTIVE DATE OF APPRAISAL July 28, 2010 APPRAISAL REPORT TYPE Summary EXPOSURE TIME Definition (Dictionary of Real Estate Appraisal): The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient, and reasonable effort. The exposure time for the subject property is estimated to be six months. USE OF PROPERTY AT DATE OF APPRAISAL Commercial USE OF PROPERTY REFLECTED IN APPRAISAL: Commercial 7

8 SCOPE OF WORK The Appraiser a. Has inspected the subject property to note the characteristics of the property that are relevant to its valuation. b. Has investigated available market data for use in the sales comparison, cost and income approaches to value. The appraiser s investigations will include research of public records through the use of commercial sources of data such as printed comparable data services and computerized databases. Search parameters such as dates of sales, leases, locations, sizes, types of properties and distances from the subject will start with relatively narrow constraints and, if necessary, be expanded until the appraiser has either retrieved data sufficient (in the appraiser s opinion) to estimate market value, or until the appraiser believes that he or she has reasonably exhausted the available pool of data. Researched sales data will be viewed and, if found to be appropriate, efforts will be made to verify the data with persons directly involved in the transactions such as buyers, seller, brokers or agents. At the appraiser s discretion, some data will be used without personal verification if, in the appraiser s opinion, the data appear to be correct. In addition, the appraiser will consider any appropriate listings or properties found through observation during appraiser s data collection process. The appraiser will report only the data deemed to be pertinent to the valuation problem; c. Has investigated and analyzed any pertinent easements or restrictions, on the fee simple ownership of the subject property. It is the client s responsibility to supply the appraiser with a title report. If a title report is not available, the appraiser will rely on a visual inspection and identify any readily apparent easements or restrictions; d. Will analyze the data found and reach conclusions regarding the market value, as defined in the report, of the subject property as of the date of value using appropriate valuation approaches (es) identified above; e. Has prepared the appraisal in compliance with the Uniform Standards of Professional Appraisal Practice as promulgated by The Appraisal Foundation and the Code of Professional Ethics and Certification Standard of the Appraisal Institute; 8

9 f. Is not responsible for ascertaining the existence of any toxic waste or other contamination present on or off the site. The appraiser will, however, report any indications of toxic waste or contaminants that may affect value if they are readily apparent during appraiser s investigations. Appraiser cautions the user of the report that appraiser is not expert in such matters and that appraiser may overlook contamination that might be readily apparent to parties who are experts in such matters. g. Did prepare a Summary Appraisal Report, as defined in USPAP, which will include photographs of the subject property, descriptions of the subject neighborhood, the site, any improvements on the site, a description of the zoning, a highest and best use analysis, a description of the most important sales used in the appraiser s valuation, a reconciliation and conclusion, a map illustrating the sales in relationship to the subject property, and other data deemed by the appraiser to be relevant to the assignment. 9

10 CERTIFICATION STATEMENT I certify that, to the best of my knowledge and belief: 1. the statements of fact contained in this report are true and correct. 2. the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. 3. I have no present or prospective interest in the property that is the subject of this report, and no personal interest or bias with respect to the parties involved. 4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 5. my engagement in this assignment was not contingent upon developing or reporting predetermined results. 6. my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. I have made a personal inspection of the property that is the subject of this report. 8. I have performed within the context of the competency provision of the Uniform Standards of Professional Appraisal Practice 9. Kara Platt, General Certified Appraiser, provided significant real property appraisal assistance to the person(s) signing this certification. 10. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. 11. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 12. As of the date of this report, Michael A. Graham has completed the continuing education program of the Appraisal Institute. 13. That my opinion of the Market Value as of July 28, 2010, is: $150,000 (One Hundred Fifty Thousand Dollars) KARA A. PLATT LA STATE GENERAL CERTIFIED APPRAISER: #GO938 LA STATE GENERAL CERTIFIED APPRAISER: #G

11 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal is made under the following assumptions and limiting conditions: 1. No responsibility is assumed for the legal description provided or for matters pertaining to 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 managements are assumed. 4. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. 5. All engineering studies are assumed to be correct. The plot plans and illustrative material in the report are included only to help the reader visualize 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 obtaining the engineering studies that may be required to discover them. 7. It is assumed that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal report. 8. It is assumed that all required licenses, certificates of occupancy, consents, and other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the opinion of value contained in this report is based. 9. It is assumed that the use of the land and improvements is confined within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. 10. 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, urea formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. The value estimate is predicated upon 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. 11. Any allocation of the total value estimated in this report between the land and the improvements applied only under the stated program of utilization. The separate values 11

12 allocated to the land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 12. Possession of this report, or a copy thereof, does not carry with it the right of publication. 13. The appraiser, by reason of this appraisal, is not required to give further consultation or testimony or to be in attendance in court with reference to the property in question unless arrangements have been previously made. 14. Neither all nor any part of the contents of this report shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser. 15. Any opinions of value provided in the report apply to the entire property, and any proration or division of the total into fractional interests will invalidate the opinion of value, unless such proration or division of interests has been set forth in the report. 16. If subject property is a proposed construction, only preliminary plans and specifications were available for use in the preparation of this appraisal; the analysis, therefore, is subject to a review of the final plans and specifications when available. 17. Any proposed improvements are assumed to have been completed unless otherwise stipulated, so any construction is assumed to conform with the building plans referenced in the report. 18. The appraiser assumes that the reader or user of this report has been provided with copies of available building plans and all leases and amendments, if any, that encumber the property. 19. In the event no legal description was provided by the client, the appraiser used the parish tax plat to ascertain the physical dimensions and acreage of the property. Should a survey prove this information to be inaccurate, it may be necessary for this appraisal to be adjusted. 20. The forecasts, projections, or operating estimates contained herein are based on current market conditions, anticipated short term supply and demand factors, and a continued stable economy. These forecasts are, therefore, subject to changes with future economic conditions. 21. The Americans with Disabilities Act (ADA) became effective January 26, The appraiser has not made a specific compliance survey or analysis of the property to determine whether or not it is in conformity with the various detailed requirements of ADA. It is possible that a compliance survey of the property and a detailed analysis of the requirements of the ADA would 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 impact upon the value of the property. Since the appraiser has no direct evidence relating to this issue, possible noncompliance with the requirements of ADA was not considered in estimating he value of the property. 12

13 OWNERSHIP INFORMATION AND SALE HISTORY OWNERSHIP OF RECORD: SUBJECT PROPERTY ADDRESS: LEGAL DESCRIPTION: James D Lord, et ux (per the Lincoln Parish Assessor) 4428 Hwy 818 Ruston, LA S Farmerville St. Ruston, LA See the legal description in the addenda TAX ASSESSMENTS: Land: $4,195 Improvements: $11,372 Total: $15,567 Millage Rate: 8908 Current Tax Burden: $1, Future Taxes: If the subject property transfers for or around the reported opinion of value, annual taxes are expected to increase. LAST TRANSFER: Date: 07/10/2009 Vendor: Adair Asset Management LLC / US Bank Vendee: James D. Lord et ux Consideration: $1,847 Book/Page: 1274 / 236 Remarks: Property transferred to Adair Asset Management for the 2008 Taxes that were $1,369 on June 1, 2009 in conveyance book 1272 page 387. PREVIOUS TRANSFER: Date: 01/17/2007 Vendor: Ronnie L. Walker et ux Vendee: James D. Lord et ux Consideration: $120,000 Book/Page: 1212 / 479 ACTIVE LISTINGS: The subject property had been listed for sale with Today s Realty from 2/26/2009 until it expired on 2/2/2010 for a list price of $175,000. To the appraiser s knowledge, there have been no offers on the property and no purchase agreements are in place at the date of the appraisal. 13

14 AREA DATA 14

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16 LOCATION OF SUBJECT PROPERTY The subject property is located on the east side of South Farmerville in Ruston, Louisiana The area is composed of vacant land, multi family residential and industrial. 16

17 SITE DATA Square Feet Acres Primary Site: 48, Surplus Land: Excess Land: Total Area: 48, Note: There is a discrepancy in the legal description of the subject property. The legal describes going to the centerline of S Farmerville and also states the tract being 1.11 acres; however, the size of the subject going to the centerline would be approximately 55,000 SF or 1.26 acres. For the purpose of this appraisal, the subject size stated on the legal of 1.11 acres will be used as the subject size since it would be considered the useable area. The appraiser recommends hiring a professional surveyor to survey the subject property. The survey on the following page is of the neighboring property dated July DIMENSIONS: 200 x 242 (approximately) SHAPE: Rectangular TOPOGRAPHY: Property slopes from west to east but adequate for intended use DRAINAGE: Adequate in times of normal rainfall UTILITIES: Water: City of Ruston Sewer: City of Ruston Electricity: Entergy Gas: Arkla Gas FLOOD ZONE: Based on FIRM Flood Insurance Rate Map No C0245D (April 2, 2009) for Lincoln Parish, Louisiana, this property lies in Flood Zone X See addenda for a copy of the flood plain map. ACCESS: Direct access to S Farmerville Street STREET TYPE: S Farmerville is a two lane asphalt roadway ZONING / RESTRICTIONS The subject property is zoned D-1 Light industrial district 17

18 SETBACKS, HEIGHT, BUILDING COVERAGE: There are no building restrictions under zoning D-1 Light industrial district but all improvements have to be approved by The City Planning & Zoning Department. CONFORMITY TO RESTRICTIONS: The subject conforms to the D-1 zoning restrictions SITE CONDITION: The site is improved with a metal warehouse building and related site improvements. SURROUNDING LAND USES: Public / Institutional, light industrial / business, light business, single and multi family residential SERVITUDES/ ENCROACHMENTS: None noted that would adversely influence the property value NUISANCES / HAZARDS: None noted UNIT OF COMPARISON: The land valuation section of this report will focus on the value per square foot as the unit of comparison. 18

19 SITE PLAN 19

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21 AERIAL PHOTOGRAPHS 21

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23 IMPROVEMENT ANALYSIS The subject property is located on the East side of S Farmerville Street in Ruston, LA It is improved with a class S, metal building, concrete parking and sidewalks, crushed rock and asphalt for use as drives and soil stabilizer and 6 ft chain link fencing with 3 strand barb wire. The building was built in 1982 and the crushed asphalt, fencing and signage were added 2 years ago. Improvements: Heated Office: 723 SF Warehouse: 3,290 SF Total area under roof: 4,013 LF Site Improvements / Other: Concrete parking: 1,950 SF Concrete sidewalk: 445 SF Gravel & crushed asphalt: 15,005 SF Chain link fencing: 236 LF 3 ft chain link gate: 1 Unit 25 ft chain link gate: 1 Unit Signage: 1 Unit 23

24 Exterior Description Foundation: Framing: Insulation: Exterior Walls: Exterior Doors: Windows: Roof and Drain System: Concrete slab Class S steel frame Typical Metal sheeting insulated metal and overhead 8 ft roll up doors Metal frame Metal sheeting; gutter system Chimneys & Vents: No chimney, typical venting Interior Description Walls: Doors: Storage Areas: Flooring System: Ceilings: Floor Coverings: Office painted drywall Warehouse - exposed vinyl lined insulation Office - hollow core doors Typical closet storage Concrete slab Textured drywall Office carpet and vinyl flooring Warehouse - concrete Other: N/A 24

25 Equipment and Mechanical Systems Plumbing: Hot Water System: Heating & Cooling: City sewer with 1 bathroom to include a toilet, sink and shower Hot water heater for the bathroom HVAC system for the finished office area; no heating or cooling in warehouse Electrical Systems: Fire Protection: Elevators, ramps, stairs: Alarms, and call systems: Attached Equipment: Typical N/A N/A Security system in office and warehouse N/A 25

26 FLOOR PLAN 26

27 HIGHEST AND BEST USE Market forces create market value, so the analysis of market forces that have a bearing on the determination of highest and best use is crucial to the valuation process. When the purpose of an appraisal is to develop an opinion of market value, highest and best use analysis identifies the most profitable, competitive use to which the property can be put. The highest and best use of a specific parcel of land is not determined through subjective analysis by the property owner, the developer, or the appraiser; rather, highest and best use is shaped by the competitive forces within the market where the property is located. Therefore, the analysis and interpretation of highest and best use is an economic study and a financial analysis focused on the subject property. In all valuation assignments, opinions of value are based on use. The highest and best use of a property to be appraised provides the foundation for a thorough investigation of the competitive position of the property in the minds of market participants. Consequently, highest and best use can be described as the foundation of which market value rests. Highest and best use may be defined as follows The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that result in the highest value. In addition to being reasonably probable, the highest and best use of both the land as though vacant and the property as improved must meet four implicit criteria. That is, the highest and best use must be 1. Physically possible 2. Legally permissible 3. Financially feasible 4. Maximally productive 27

28 HIGHEST AND BEST USE OF LAND AS THOUGH VACANT Note: For an improved property, the valuation of the land as though vacant is a necessary procedure within the appraisal process, but is one that is performed under a hypothetical condition, i.e., that the subject site is vacant. Legally Permissible: Physically Possible: Financially Feasible: Maximally Productive: The site is zoned D-1 Light Industrial District which allows for any use permitted in B-3 General Business District except for dwelling use can only be used for night watchmen or custodians. The uses include but not limited to: automotive service and repair, child day care services, communications facility, offices and restaurant. The topography of the site allows for construction of legally permissible uses. Light industrial or general commercial Light industrial or general commercial 28

29 HIGHEST AND BEST USE OF PROPERTY AS IMPROVED The highest and best use of a property as improved may be continuation of the exiting use, renovation or rehabilitation, expansion, adaptation or conversion to another use, partial or total demolition, or some combination of these alternatives. Legally Permissible: The zone D-1 Light Industrial District does not have building requirements therefore the current improvements are legally permissible. Physically Possible: The existing improvements are obviously physically possible, and no significant physical modifications need to be considered because of the condition, functional utility, and / or maintenance associated with the improvement. The continuation of the existing use meets the physical possibility test. Financially Feasible: The property as-improved produces a positive return on investment and is financially feasible. Maximally Productive: The appraiser has found no evidence to suggest that changes to the property will result in a higher value. The most productive use of the property is for continued use as a metal building for light industrial or general commercial use. 29

30 LAND VALUATION The valuation of a parcel of land begins by identifying the real estate and property rights to be valued, any encumbrances on those property rights, the land s physical characteristics, and the available utilities and site improvements. Comparable data on similar parcels is collected and the highest and best use of the subject site is analyzed. Once these tasks are complete, the appraiser chooses an appropriate method to employ in the valuation process. Accepted methods of land valuation are as follow: Sales Comparison Approach Extraction Allocation Direct Capitalization (land residual and ground rent capitalization) Yield Capitalization (discounted cash flow / subdivision development analysis) The Sales Comparison Approach is usually the preferred methodology for developing a land value conclusion. However, when sales of similar parcels of land are not plentiful enough for the application of sales comparison, alternative techniques may be used. In this particular appraisal report, my research has revealed an adequate number of sales for comparison to the subject property. That said, the sales comparison approach is employed to value the subject land. The following tasks have been performed to develop an opinion of land value: Gather data on actual sales as well as listings, offers, and options. Identify the similarities and differences in the data Identify the highest and best use of each potential comparable sale Identify units of comparison that explain market behavior Adjust the sale prices of the comparables to account for the dissimilar characteristics of the land being appraised. Form a conclusion as to the market value of the subject land The following pages will offer a summary chart and location map. The addenda will contain a detailed data sheet on each comparable land sale. 30

31 COMPARABLE LAND SALES SUMMARY No. Location Sale Date Price Size in Size in SF Price/ SF Acres 1. Link Drive 02/04/2004 $30, ,801 $ McDonald and Franke Drive 01/31/2005 $13, ,549 $ Link Drive 10/20/2005 $30, ,400 $ McDonald Avenue 01/22/2007 $40, ,839 $ South Farmerville Street 05/20/2004 $41, ,903 $ South Farmerville Street 07/28/2004 $132, ,055 $ South Farmerville Street 07/06/2005 $25, ,949 $ Between 167 and S Farmerville 01/01/2008 $350, ,070 $ Industrial Drive 07/15/2009 $60, ,392 $ Industrial Drive 10/23/2009 $60, ,392 $

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33 Land Sale No. 1 Property Identification Record ID 1742 Property Type Industrial, Industrial Address Link Drive, Ruston, Lincoln Parish, Louisiana Location Lot 9, Interstate Commercial Park Sale Data Grantor Centerpoint Energy Resources Corp. Grantee Citadel Resources, Inc Sale Date February 04, 2004 Deed Book/Page 1156 / 548 Property Rights Fee Financing Cash Verification Bill Elmore; , June 10, 2009 by KPlatt Sale Price $30,000 Land Data Zoning Shape Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF Sale Price/Front Foot D-1, Light Industrial Rectangle Acres or 46,801 SF 130 ft Total Frontage: 130 ft Link Drive $27,923 Actual or $27,923 Adjusted $0.64 Actual or $0.64 Adjusted $231 Actual or $231 Adjusted Remarks Per vendee, the lots were selling for $30,000 a lot but they made offer for 2 at $30,000 and it was taken. No plans for improvements to property and tract is partially wooded 33

34 Land Sale No. 2 Property Identification Record ID 874 Property Type Industrial, Industrial Address McDonald and Franke Drive, Ruston, Lincoln Parish, Louisiana Location Southeastern Industrial Area Sale Data Grantor Louisiana Soil Products of Ruston, LLC Grantee Franke Consumer Products, Inc Sale Date January 31, 2005 Deed Book/Page 1169/698 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification John Thompkins; , December 05, 2005; Confirmed by Justin Preaus Sale Price $13,487 Land Data Topography Utilities Shape Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF Level Available Semi-rectangular Acres or 130,549 SF 782 ft McDonald;157 ft Franke $4,500 Actual or $4,500 Adjusted $0.10 Actual or $0.10 Adjusted Remarks Vacant industrial property fronting McDonald Avenue. Purchased by Franke Consumer Products for assemblage with a factory located south of the roadway. Negligible timber value. Buyer also purchased an adjoining acre parcel on the same date for a similar unit price. 34

35 Land Sale No. 3 Property Identification Record ID 1743 Property Type Industrial, Industrial Address 1619 Link Drive, Ruston, Lincoln Parish, Louisiana Location Lot 11, Interstate Commercial Park Sale Data Grantor Ruston Land Development Corp. Grantee Lee B Waltman, et ux Sale Date October 20, 2005 Deed Book/Page 1184 / 453 Property Rights Fee Financing Cash Verification Mr. Waltman assistant; , June 10, 2009; Confirmed by Kara Platt Sale Price $30,000 Land Data Zoning D-1, Light Industrial Dimensions 130' x 180' Shape Rectangle Depth 180 Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF Sale Price/Front Foot Acres or 23,400 SF 130 ft Total Frontage: 130 ft Link Drive $55,846 Actual or $55,846 Adjusted $1.28 Actual or $1.28 Adjusted $231 Actual or $231 Adjusted Remarks Property located in the Interstate Commercial Park. Site improvement ready at purchase. Property purchased for Drainage Structures and currently improved with gravel and chain link fencing. 35

36 Land Sale No. 4 Property Identification Record ID 1744 Property Type Industrial, Industrial Address 1401 McDonald Avenue, Ruston, Lincoln County, Louisiana Location Sec Sale Data Grantor Don J Beasley Grantee Claud James Irby Jr Sale Date January 22, 2007 Deed Book/Page 1212 / 669 Property Rights Fee Conditions of Sale Arm's Length Financing Cash Verification Gilbert Realty; , June 10, 2009; Confirmed by Kara Platt Sale Price $40,000 Land Data Zoning Shape Land Size Information Gross Land Size Indicators Sale Price/Gross Acre Sale Price/Gross SF D-2, Industrial Rectangular Acres or 122,839 SF $14,184 Actual or $14,184 Adjusted $0.33 Actual or $0.33 Adjusted Remarks Property is wooded and backs up to railroad tracks. Per Gilbert Realty, the property was purchased to build a body shop. No improvements have been made to the property. 36

37 Land Sale No. 5 Property Identification Record ID 798 Property Type Unknown Address South Farmerville Street, Ruston, Lincoln County, Louisiana Location Near old Ruston airport Sale Data Grantor Milt Douglas Andrews, et ux Grantee Golden Ages Senior Village Limited Partnership Sale Date May 20, 2004 Deed Book/Page 1159/783 Conditions of Sale Arm's Length Financing Cash Sale Verification Milt Douglas Andrews; , January 24, 2005; Confirmed by Justin Preaus Sale Price $41,300 Land Data Zoning Topography Utilities Shape Flood Info Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF R-3, Multi-Family Variable, rolling hills All available Rectangular No hazard Acres or 179,903 SF 200 ft S. Farmerville St. $10,000 Actual or $10,000 Adjusted $0.23 Actual or $0.23 Adjusted Remarks 4.13 acre tract located on the western side of South Farmerville Street, across from the Frostee Factory. The property was purchased for the development of a senior citizens apartment village. Topography slopes slightly from west to east. At the time of sale, the tract was uncleared and growing a small amount of hardwood timber. 37

38 Land Sale No. 6 Property Identification Record ID 800 Property Type Unknown Address South Farmerville Street, Ruston, Lincoln County, Louisiana Location Near old Ruston airport Sale Data Grantor Michael Lee Freeman et al Grantee City of Ruston, Louisiana Sale Date July 28, 2004 Deed Book/Page 1162/446 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Mr. Burnside; , January 24, 2005; Confirmed by Justin Preaus Sale Price $132,000 Land Data Zoning Topography Utilities Shape Flood Info Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF C-3, Central Business Sloping, with creek drainage All Available Semi-rectangular Hazard along creek bed Acres or 655,055 SF 325 ft S. Farmerville $8,778 Actual or $8,778 Adjusted $0.20 Actual or $0.20 Adjusted Remarks acre tract located just north of the junction of East Tennessee Avenue and South Farmerville Street. This property joins two tracts owned by the City of Ruston utilized for the Public Works Department. Topography slopes from north to south and east to west. A creek system runs through the property. All utilities are available. The tract was growing timber at the time of sale. Timber value is thought to be roughly equal to cost of clearing. 38

39 Land Sale No. 7 Property Identification Record ID 1139 Property Type Unknown Address South Farmerville Street, Ruston, Lincoln County, Louisiana Location In Section 36, T18N, R3W Sale Data Grantor City of Ruston Grantee On Time Feeders, Inc Sale Date July 06, 2005 Deed Book/Page 1178/198 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Sale Price $25,156 Land Data Topography Utilities Shape Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF Low lying Available Semi-rectangular Acres or 273,949 SF 400 ft S. Farmerville $4,000 Actual or $4,000 Adjusted $0.09 Actual or $0.09 Adjusted Remarks Parcel purchased for the construction of a light industrial facility for On Time Feeders. Low lying topography will require filling and grading as well as additional care to improvement design and layout. 39

40 Land Sale No. 8 Property Identification Record ID 1456 Property Type Special Purpose Property Name Future Campus Community Assembly of God Address Between 167 and S Farmerville, Ruston, Lincoln County, Louisiana Location Sec 36, T18N, R3W Project Name: LTRP Sale Data Grantor Milt T Andrews et ux Grantee Campus Community Assembly of God, Inc Sale Date January 01, 2008 Deed Book/Page 1240/93 Property Rights Fee Sale Price $350,000 Land Data Zoning R-15, Single Family Residential Dimensions 330' x 1829' x 330' x 1850' Shape Rectangular Land Size Information Gross Land Size Front Footage Acres or 607,070 SF 330 ft Hwy 167;330 ft S Farmerville Indicators Sale Price/Gross Acre $25,114 Sale Price/Gross SF $0.58 Remarks Wood tract located between 167 and S Farmerville just north of Timbers Ave. 40

41 Land Sale No. 9 Property Identification Record ID 1798 Property Type Industrial Property Name Interstate commercial park Address Industrial Drive, Ruston, Lincoln County, Louisiana Location Lot 50 unit 3 Sale Data Grantor Ruston Land Development Corporation Grantee Mary Elizabeth Foster, et ux Sale Date July 15, 2009 Deed Book/Page 1274 / 451 Property Rights Fee Conditions of Sale Arm's Length Financing Cash Sale Price $60,000 Land Data Zoning D-1, Light Industrial Dimensions 125'x x199' Shape Rectangle Depth 199 Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF Acres or 23,392 SF 125 ft Total Frontage: 125 ft Industrial Drive $111,730 Actual or $111,730 Adjusted $2.56 Actual or $2.56 Adjusted 41

42 Land Sale No. 10 Property Identification Record ID 1858 Property Type Industrial Property Name Interstate commercial park Address Industrial Drive, Ruston, Lincoln County, Louisiana Location Lot 52 unit 3 Sale Data Grantor Ruston Land Development Corporation Grantee K & J Properties of Ruston, LLC Sale Date October 23, 2009 Deed Book/Page 1278/102 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Credit Sale Sale Price $60,000 Land Data Zoning D-1, Light Industrial Dimensions 125'x x199' Shape Rectangle T/R/Section 18/02/18 Depth 199 Land Size Information Gross Land Size Front Footage Indicators Sale Price/Gross Acre Sale Price/Gross SF Acres or 23,392 SF 125 ft Industrial Drive $111,730 Actual or $111,730 Adjusted $2.56 Actual or $2.56 Adjusted 42

43 Selecting Unit of Comparison After sales data has been gathered and verified, systematic analysis begins. Because like units must be compared, each sale price should be stated in terms of appropriate units of comparison. The units of comparison selected depend on the appraisal problem and nature of the property. Units of comparison are used to facilitate comparison of the subject and comparable properties. Examples of units of comparison include: total property price, price per square foot, price per acre, price per front foot, etc. After an analysis of the comparable sales, the most reliable unit of comparison, in my opinion, is as follows: Concluded Unit of Comparison: Price per square foot of site area ($ / SF) Analysis and Adjustment of Comparable Sales Ideally, if all comparable properties are identical to the subject property, no adjustments would be required. However, this is rarely the case. Once the data is collected and verified, it can be organized in a market data grid for comparison. The grid will illustrate and recognize any important differences between the comparable properties and the subject. These differences are often referred to as elements of comparison. The adjustment grid contains 10 basic elements of comparison that should be considered in sales comparison analysis. Elements of Comparison 1.) Real Property Rights Conveyed: When real property rights are sold, they may be the sole subject of the contract or the contract may include other rights, less than all of the real property rights, or even another property or properties. Before the price of a comparable sale property can be used in sales comparison analysis, the appraiser must first ensure that the sale price of the property applies to property rights that are similar to those being appraised. To do so may require one or more adjustments to the price before specific differences in the physical real estate can be compared. 2.) Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. The typical definition of market value recognizes cash equivalent terms provided the calculation of these terms reflects the market. In the event a property sells via atypical financing terms, the sale must be analyzed and a conclusion made as to how the below or above market financing influences the sales price. 3.) Conditions of Sale: Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale significantly affect transactions prices; these are not considered arm s length transactions. Examples warranting an adjustment for this element of comparison include: assemblage, plottage, liquidation sale, 43

44 inter family transfer, and depressed sale. In most cases, a sale that is not considered arm s length is omitted from the sales comparison analysis unless market information is available to support the atypical condition. 4.) Expenditures made immediately after purchase: A knowledgeable buyer considers expenditures that will have to be made upon purchase of a property because these costs affect the price the buyer agrees to pay. Such expenditures include: costs to cure deferred maintenance, costs to demolish and remove any portion of the improvements, costs to petitions for a zoning change, costs to remediate environmental contamination. These costs are often quantified in price negotiations and can be discovered through verification of transaction data. The relevant figure is not the actual cost that was incurred but the cost that was anticipated by the buyer and seller. 5.) Market conditions (time): Comparable sales that occurred under market conditions different from those applicable to the subject on the effective date of value require adjustment for any differences that affect their values. An adjustment for market conditions is made if general property values have appreciated or depreciated since the transaction dates due to inflation or deflation or a change in investor s perceptions of the market over time. 6.) Location: An adjustment for location within a market area may be required when the locational characteristics of a comparable property are different from those of the subject property. Excessive locational differences may disqualify a property from use as a comparable. Locational differences are usually handled with quantitative adjustments. 7.) Physical characteristics: If the physical characteristics of a comparable property and the subject property differ in many ways, each of these differences may require comparison and adjustment. 8.) Use / Zoning: Any difference in the current use or the highest and best use of a potential comparable sale and the subject property must be addressed. The appraiser must recognize the difference and determine if the sale is an appropriate comparable and, if so, whether an adjustment is required. In most cases the buyer or buyer s agent must confirm the ultimate use for which the comparable was purchased. 9.) Non realty components of value: Non-realty components of value include personal property, business concerns, and other items that do not constitute real property but are included in either the sale price of the comparable or the ownership interest in the subject property. These items should be analyzed and reported separately from the realty. 44

45 LAND ADJUSTMENT GRID Subject Land Sale 1 Land Sale 3 Land Sale 10 Date of Sale: Feb-04 Oct-05 Oct-09 Deed Price: $30,000 $30,000 $60,000 Rights Conveyed: $0 $0 $0 Financing Adjustment: $0 $0 $0 Conditions of Sale: $0 $0 $0 Cash Equivalent Price: $30,000 $30,000 $60,000 Expenditures after sale: $0 $0 $0 Misc. Adjustment: $0 $0 $0 Adjusted Sales Price: $30,000 $30,000 $60,000 Market Conditions (% adj.) 5.00% 5.00% 0.00% Adjusted Sales Price: $31,500 $31,500 $60,000 Unit of Comparison SF Units (SF; FF; Acres) 48,352 46,801 23,400 23,392 Price per Unit: $0.67 $1.35 $2.56 Other Adjustments: Location: % % % Size: 0.00% % % Shape / Utility: 0.00% 0.00% 0.00% Topography: 0.00% 0.00% 0.00% Utilities: 0.00% 0.00% 0.00% Site Condition: 0.00% 0.00% 0.00% Corner Lot: 0.00% 0.00% 0.00% Frontage to Depth: 0.00% 0.00% 0.00% Use / Zoning: 0.00% 0.00% 0.00% Other: 0.00% 0.00% 0.00% Net Adjustment: % % % Adj. Unit of Comparison: $0.47 $0.81 $1.54 SUMMARY OF VALUE Range of Unit Value: $0.47 to $1.54 Average of Unit Value: $0.94 Median Unit Value: $0.81 Concluded Unit Value: $1.00 Subject Size: 48,352 SF Indicated Site Value: $48,352 45

46 COST APPROACH The cost approach may be defined as a set of procedures through which a value indication s derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of, or replacement for, the existing structure plus any profit or incentive; deducting depreciation from the total cost; and adding the estimated land value. Other adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised. In the cost approach, a property is valued based on a comparison with the cost to building a new or substitute property. The cost estimate is adjusted for the depreciation evident in the existing property. 46

47 Cost New Cost Basis: Replacement cost new: The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design, and layout. Method: Source: Comparative unit: A method used to drive a cost estimate in terms of dollars per unit of area or volume based on known costs of similar structures that are adjusted for time and physical differences; usually applied to total building area. Marshall Valuation / Cost comparables and local building contractors. The cost new estimate includes the following: Direct Costs: Indirect Costs: Entrepreneurial Incentive: Expenditures for the labor and materials used in the construction of improvements. Expenditures or allowances for items other than labor and materials that are necessary for construction but are not typically part of the construction contract. Indirect costs may include administrative costs; professional fees; financing costs and the interest paid on construction loans; taxes and the builder s or developer s all risk insurance during construction; and marketing, sales, and lease up costs incurred to achieve occupancy or sale. These costs can vary by property type. A market derived figure that represents the amount an entrepreneur expects to receive for his or her contribution to a project and risk. The estimation of entrepreneurial incentive is a necessary component of total cost. 47

48 DEPRECIATION Depreciation is the difference between the contributory value of an improvement and its cost at the time of appraisal: Replacement Cost of Improvement Minus: Contributory Value of Improvement Equals: Depreciation By estimating the depreciation incurred by an improvement and deducting this estimate from the improvement s replacement cost, an appraiser can conclude the depreciated cost of the improvement. This depreciated cost approximates the improvement s contribution to the property s market value. Depreciation in an improvement can result from three major causes operating separately or in combination. 1. Physical deterioration wear and tear from regular use and the impact of the elements. 2. Functional obsolescence a flaw in the structure, materials, or design that diminishes the function, utility, and value of the improvement. 3. External obsolescence a temporary or permanent impairment of the utility or salability of an improvement or property due to negative influences outside the property Depreciation for the major building improvements is supported by market extracted data. Site improvements are depreciated at a similar rate if the age, condition and economic life are concluded to be similar to the primary building structure. Any site improvement that has a different age, condition or economic life may be depreciated at a different rate. Conclusion: Actual Age of Subject (+/-): 27 Years Concluded Economic Life: 50 Years Ind. Overall Depreciation %: 45.00% Ind. Annual Depr. Rate: 1.67% 48

49 COST APPROACH SUMMARY Direct Costs SF $ / SF Total Office and Warehouse: $33.95 = $136,256 Site improvements / Other: $35,506 N/A: $0.00 $0 Total = $171,762 Indirect Costs $5,153 Entreprenuerial Incentive 5.00% $8,588 Total Cost New $185,503 Depreciation Overall Depreciation 45.00% $83,476 Total Depreciation: -$83,476 Cost Approach Summary Est. Improvement Value $102,027 Est. Land Value $48,352 Indication of Value: $150,379 Add / Subtract: N/A $0 Conclusion - Cost Approach: $150,379 49

50 SALES COMPARISON APPROACH In the sales comparison approach, the appraiser develops an opinion of value by analyzing similar properties and comparing these properties with the subject property. The comparative techniques of analysis applied in the sales comparison approach are fundamental to the valuation process. Estimates of market rent, expenses, land value, cost depreciation, and other value parameters may be derived in the other approaches to value using similar comparative techniques. Similarly, conclusions derived in the other approaches are often analyzed in the sales comparison approach to estimate the adjustments to be made to the sale prices of comparable properties. In the sales comparison approach, an opinion of market value is developed by comparing properties similar to the subject property that have recently sold, are listed for sale, or are under contract. A major premise of the sales comparison approach is that the market value of a property is related to the prices of comparable, competitive properties. The procedure applied in the sale comparison approach includes the following steps: 1) Research transactional data 2) Verify the data as accurate and representative of arm s length transactions 3) Selecting relevant units of comparison 4) Determine how the comparables differ from the subject and adjust the price for differences in various elements of comparison. 5) Reconcile multiple value indications into a single value or range of value. 50

51 IMPROVED SALES SUMMARY TABLE No. Location Sale Date Price Building Size (SF) Price/ SF Link Drive 05/04/2006 $160,000 5,000 $ Trade Drive 12/12/2007 $115,000 4,000 $ Hwy 33 04/13/2007 $160,000 2,800 $ Link Drive 03/24/2008 $200,000 4,500 $ S Farmerville 01/17/2007 $120,000 4,013 $ S Farmerville 07/07/2006 $110,000 4,013 $ Hwy 33 06/28/2007 $300,000 8,489 $ Railroad Avenue 05/24/2007 $120,000 4,284 $ South Monroe Street 08/12/2005 $90,000 3,062 $ Hwy 80 West 07/25/2005 $62,000 3,200 $ Hwy 33 08/20/2004 $100,000 4,900 $

52 52

53 Improved Sale No. 1 Property Identification Record ID 915 Property Type Industrial, Industrial (<20,000 SF) Property Name Elliott Electric Supply Address 1703 Link Drive, Ruston, Lincoln Parish, Louisiana Location Lot 12 of Interstate Commercial Park Sale Data Grantor Thermon Holstead, etux Grantee Elliott Partners, LTD Sale Date May 04, 2006 Deed Book/Page 1196/103 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Danny Mora; , November 26, 2007; Other sources: Deed, Confirmed by Kara Platt Sale Price $160,000 Land Data Land Size Acres or 23,522 SF Zoning D-1 Shape Rectangle General Physical Data Building Type Single Tenant Gross Area SF 5,000 Construction Type Class "S" Roof Type Metal Foundation concrete slab Electrical Typical Stories 1 Floor Height 14 53

54 Indicators Sale Price/ SF $32.00 Actual or $32.00 Adjusted Floor Area Ratio 0.21 Land to Building Ratio 4.70:1 Remarks Per vendee representative, property at date of purchase was a shell. It had 2 restrooms and suspended heaters. 54

55 Improved Sale No. 2 Property Identification Record ID 1307 Property Type Industrial, Industrial (<20,000 SF) Property Name PCI Electric Address 1800 Trade Drive, Ruston, Lincoln Parish, Louisiana Location Lot #3 Interstate Business Park Sale Data Grantor Randolf A. Greene Grantee Allen Blake Holdings, LLC Sale Date December 12, 2007 Deed Book/Page 1237 / 315 Property Rights Fee Conditions of Sale Arm's length Financing Cash Verification Rex Rinehart; , June 11, 2009; Confirmed by Kara Platt Sale Price $115,000 Land Data Land Size Front Footage Zoning Utilities Shape Acres or 26,081 SF 120 ft Total Frontage: 120 ft Trade Drive D-1, Light Industrial all public available Rectangle General Physical Data Building Type Single Tenant Gross Area SF 4,000 55

56 Area Breakdown Office 1,600 Warehouse 2,400 Construction Type Roof Type Foundation Floor Height Year Built Steel Beam Metal panel concrete slab 12' wall 1980 estimated Indicators Sale Price/Gross Area SF $28.75 Actual or $28.75 Adjusted Floor Area Ratio 0.15 Land to Building Ratio 6.52:1 Remarks No improvements after purchase of property. Owners were tenants before purchase. (2) 10' x 10' overhead doors, chain link fencing and concrete parking. Site value $30,

57 Improved Sale No. 3 Property Identification Record ID 1308 Property Type Commercial, Industrial (<20,000 SF) Address 2829 Hwy 33, Ruston, Lincoln Parish, Louisiana Location Sec Sale Data Grantor Gary M. Smith, et ux Grantee Northside Management Company Sale Date April 13, 2007 Deed Book/Page 1219 / 753 Property Rights Fee Financing Cash Verification John Stephenson, selling agent; , June 10, 2009; Confirmed by Kara Platt Sale Price $160,000 Land Data Land Size Acres or 72,040 SF Front Footage 139 ft Total Frontage: 139 ft Hwy 33 Zoning No zoning Dimensions 139' x 546' x 125' x 607' Shape Rectangular Depth 576 General Physical Data Building Name Building Type Gross Area SF Ruston Alternator Single Tenant 2,800 Per MLS Area Breakdown Office 300 Warehouse 2,500 Construction Type Roof Type Foundation Steel Frame Metal concrete slab 57

58 Sprinklers None Year Built 1994 Indicators Sale Price/Gross Area SF $57.14 Actual or $57.14 Adjusted Floor Area Ratio 0.04 Land to Building Ratio 25.73:1 Remarks (2) 12' overhead doors and (1) 14' overhead door; Storage above shop and office, Whirl Wind model building constructed by Russell Buildings. Entire building is heated and cooled per leasing agent. Out of City Limits and fronts Hwy 33. Vendee built self storage warehouses behind existing building since purchase. 58

59 Improved Sale No. 4 Property Identification Record ID 1309 Property Type Industrial, Industrial (<20,000 SF) Address 1601 Link Drive, Ruston, Lincoln Parish, Louisiana Location Lot 8, Interstate Commercial Park Sale Data Grantor Donald R Lindsey, et ux Grantee James M Foster, et ux Sale Date March 24, 2008 Deed Book/Page 1244 / 380 Property Rights Fee Financing Cash Verification Donald Lindsey; , June 10, 2009; Confirmed by Kara Platt Sale Price $200,000 Land Data Land Size Zoning Shape Acres or 29,200 SF D-1, Light Industrial Irregular General Physical Data Building Type Single Tenant Gross Area SF 4,500 Construction Type Roof Type Foundation HVAC Year Built Steel Metal slab Central 2004 estimated 59

60 Improved Sale No. 4 (Cont.) Indicators Sale Price/Gross Area SF $44.44 Actual or $44.44 Adjusted Floor Area Ratio 0.15 Land to Building Ratio 6.49:1 Remarks Grantor stated at date of sale, building did not have finished office, had 1 bathroom, HVAC, 3 exterior metal doors and 2 roll up doors. 60

61 Improved Sale No. 5 Property Identification Record ID 1315 Property Type Industrial, Industrial (<20,000 SF) Property Name Dan Lord Plumbing Address 2609 S Farmerville, Ruston, Lincoln Parish, Louisiana Sale Data Grantor Ronnie Lynn Walker, et ux Grantee James Daniel Lord, et ux Sale Date January 17, 2007 Deed Book/Page 1212 / 479 Property Rights Fee Conditions of Sale Arm's Length Financing Cash Verification Other sources: Inspection and deed, Confirmed by Kara Platt Sale Price $120,000 Land Data Land Size Acres or 55,000 SF Front Footage 200 ft Total Frontage: 200 ft S Farmerville Zoning D-1, Light Industrial Dimensions 200' x 275' Shape Rectangle Depth 275 General Physical Data Building Type Single Tenant Gross Area SF 4,013 Area Breakdown Office 723 Warehouse 3,290 61

62 Construction Type Steel Roof Type Metal Foundation slab HVAC office Sprinklers none Year Built 1982 Indicators Sale Price/Gross Area SF $29.90 Actual or $29.90 Adjusted Floor Area Ratio 0.07 Land to Building Ratio 13.71:1 Remarks Grantee changed property from septic to city sewer, rewired the alarm, added fence and gravel / crushed asphalt to rear of property to stabilize the soil after purchase of property. Previous agreement with Bob Webb (original owner) is that he will rent 1 office space and 1 bay for a flat rate of $ / month 62

63 Improved Sale No. 6 Property Identification Record ID 1316 Property Type Industrial, Industrial (<20,000 SF) Address 2609 S Farmerville, Ruston, Lincoln Parish, Louisiana Sale Data Grantor Michael Freeman, et al Grantee Ronnie Walker, et ux Sale Date July 07, 2006 Deed Book/Page 1200 / 647 Property Rights Fee Financing cash Verification Ronnie Walker; , June 10, 2009; Other sources: Deed, Confirmed by Kara Platt Sale Price $110,000 Land Data Land Size Acres or 55,000 SF Front Footage 200 ft Total Frontage: 200 ft S Farmerville Zoning D-1, Light Industrial Dimensions 200' x 275' Shape Rectangle Depth 275 General Physical Data Building Type Single Tenant Gross Area SF 4,013 Area Breakdown Office 723 Warehouse 3,290 Construction Type Steel Roof Type Metal Foundation slab HVAC Office Year Built

64 Indicators Sale Price/Gross Area SF $27.41 Actual or $27.41 Adjusted Floor Area Ratio 0.07 Land to Building Ratio 13.71:1 Remarks No improvements made after purchase. Grantee agreed to lease 1 office and 1 bay to original owner Bob Webb for his electrical company for a flat rate of $ / month until he retires. 64

65 Improved Sale No. 7 Property Identification Record ID 918 Property Type Commercial, Industrial (<20,000 SF) Address 2314 Hwy 33, Ruston, Lincoln Parish, Louisiana Sale Data Grantor Ernest James Holder, etux Grantee Jesse Earl Otwell Sale Date June 28, 2007 Deed Book/Page 1226/597 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Sam Riser; November 27, 2007; Marc Taylor, Appraiser, , November 27, 2007; Other sources: Deed, Confirmed by Kara Platt Sale Price $300,000 Land Data Land Size Acres or 45,046 SF Front Footage 154 ft Hwy 33;278 ft Hodges Rd Zoning No zoning Topography adequate Utilities available, sewer private Dimensions 154' x 278' x 156' x 341' Shape Rectangular General Physical Data Building Type Single Tenant Net Rentable SF 8,489 Area Breakdown Large Bldg 4,445 Machine Shop 2,420 Welding Shop 1,624 65

66 Improved Sale No. 7 (Cont.) Construction Type Class "S" Roof Type Metal Foundation Concrete slab Electrical typical Stories 1 Floor Height 14 Indicators Sale Price/Net Rentable SF $35.34 Actual or $35.34 Adjusted Floor Area Ratio 0.19 Land to Building Ratio 5.31:1 Remarks Verified sale with vendor s father and appraiser Marc Taylor. The main building is 4,445 SF with approximately 1,000 SF of office space. The office has central air and heat, suspended ceiling, vinyl tile flooring and drywall. Shop has 3 overhead doors and basic shop area. The machine shop is 2,420 SF with minimal office finish and overhead door. The welding shop is 1,624 SF with 2 overhead doors and electricity. The welding shop is a shell of a building with no a/c. 66

67 Improved Sale No. 8 Property Identification Record ID 910 Property Type Commercial, Unknown Address 120 Railroad Avenue, Ruston, Lincoln County, Louisiana Sale Data Grantor Hedgepeth Rentals, LLC Grantee Rapid Signs, LLC Sale Date May 24, 2007 Deed Book/Page 1223/516 Property Rights Fee Simple Financing Cash Sale Verification Steven Hedgepeth; , Other sources: Multi-list, deed, Confirmed by Justin Preaus Sale Price $120,000 Land Data Land Size Front Footage Utilities Shape Acres or 7,623 SF 98 ft Railroad Ave Available Rectangular General Physical Data Building Type Single Tenant SF 4,284 Area Breakdown Office area 1,751 Warehouse 2,533 67

68 Improved Sale No. 8 (Cont.) Construction Type Roof Type Foundation HVAC Masonry block Metal Slab Central Income Analysis Potential Gross Income $14,400 Vacancy $600 Effective Gross Income $13,800 Expenses $3,100 Net Operating Income $10,700 Indicators Sale Price/ SF $28.01 Actual or $28.01 Adjusted Floor Area Ratio 0.56 Land to Building Ratio 1.78:1 Gross Income Multiplier 8.33 Eff. Gross Income Multiplier 8.7 Expenses/Sq. Ft. $0.72 Overall or Cap Rate 8.92% Net Operating Income/Sq. Ft. $2.50 Remarks New home of Rapid Signs. Property located in downtown Ruston area, was listed for 31 days prior to sale. Includes loading/unloading area in front with roll-up door. Previously occupied by The Cleaners of Ruston, and rented for $1,200 per month with the owner being responsible for taxes and half of the insurance costs. 68

69 Improved Sale No. 9 Property Identification Record ID 908 Property Type Commercial, Retail Address 508 South Monroe Street, Ruston, Lincoln Parish, Louisiana User 3 LTRP Sale Data Grantor Matthew A. James Grantee Karim A Dhanani, etux Sale Date August 12, 2005 Deed Book/Page 1187/606 Property Rights Fee Simple Financing Cash Sale User Verification Jill James; , Other sources: Multi-List, Deed, Confirmed by Justin Preaus Sale Price $90,000 Land Data Land Size Front Footage Utilities Shape Acres or 8,233 SF 75 ft South Monroe Available Rectangular General Physical Data Building Type Single Tenant SF 3,062 69

70 Improved Sale No. 9 (Cont.) Area Breakdown Retail 1,100 Office 700 Warehouse & Other 1,200 Construction Type Metal Bldg Roof Type Metal Foundation Slab HVAC Central system Floor Height 12' est Year Built 1980 Condition Fair Income Analysis Potential Gross Income $13,800 Vacancy $690 Effective Gross Income $13,110 Expenses $4,200 Net Operating Income $8,910 Indicators Sale Price/ SF $29.39 Actual or $29.39 Adjusted Floor Area Ratio 0.36 Land to Building Ratio 2.74:1 Gross Income Multiplier 6.52 Eff. Gross Income Multiplier 6.86 Expenses/Sq. Ft. $1.37 Overall or Cap Rate 9.9% Net Operating Income/Sq. Ft. $2.91 Remarks Metal building on South Monroe Street, just south of West California Avenue. Property was on the market for 87 days. Brick veneer front / asphalt parking / showroom area / office area / warehouse area / storage room / roll-up doors. Purchased for use as a rental property and is currently housing a day-care facility. 70

71 Improved Sale No. 10 Property Identification Record ID 909 Property Type Commercial, Retail Address 7087 Hwy 80 West, Ruston, Lincoln County, Louisiana Sale Data Grantor Edward A. Pardon, etux Grantee Corey Shane Martin, etux Sale Date July 25, 2005 Deed Book/Page 1179/146 Property Rights Fee Simple Financing Cash Sale Verification Other sources: Multi-List, deed Sale Price $62,000 Land Data Land Size Acres or 87,120 SF Front Footage 209 ft Hwy 80 Utilities Available Shape Rectangular General Physical Data Building Type Single Tenant SF 3,200 Area Breakdown Office 1,700 Warehouse 1,500 71

72 Improved Sale No. 10 (Cont.) Construction Type Roof Type Foundation HVAC Condition Metal Metal Concrete Central Fair Indicators Sale Price/ SF $19.38 Actual or $19.38 Adjusted Floor Area Ratio 0.04 Land to Building Ratio 27.23:1 Remarks Metal building just outside the city limits of Ruston. Utilized by a flooring company. Metal construction, with office, showroom, warehouse, kitchen, and storage areas. Elevated concrete loading dock in rear. 72

73 Improved Sale No. 11 Property Identification Record ID 917 Property Type Commercial, Miscellaneous Address 2419 Hwy 33, Ruston, Lincoln Parish, Louisiana Sale Data Grantor Philip N. Taylor, etux Grantee T.A.P. of Ruston, LLC Sale Date August 20, 2004 Deed Book/Page 1164/136 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Truman Potts; , November 28, 2007; Other sources: Deed, Confirmed by Kara Platt Sale Price $100,000 Land Data Land Size Front Footage Zoning Topography Utilities Shape Acres or 53,143 SF 153 ft Hwy 33;40 ft Camp Road No zoning Adequate available, sewer is private Irregular General Physical Data Building Type Single Tenant Gross Area SF 4,900 73

74 Improved Sale No. 11 (Cont.) Area Breakdown Bldg A 2,400 Bldg B 1,000 Bldg C 1,500 Construction Type Class "S" and "D" Roof Type Metal Foundation concrete slab Electrical typical HVAC A/C in main building Stories 1 Indicators Sale Price/Gross Area SF $20.41 Actual or $20.41 Adjusted Floor Area Ratio 0.09 Land to Building Ratio 10.85:1 Remarks Parcel fronts Camp Road and Hwy 33. Spoke with vendee; he purchased property for private use. The main building is steel frame and heated and cooled. It has 280 SF of finished office with suspended ceiling, laminate wood flooring and drywall. He replaced original door fronts with roll up doors to store his antique cars. Building B is wood frame with metal roof and side panels. It is a shell of a building with electricity only. Building C is a steel frame building shell with electricity. Chain link fence around perimeter of property. 74

75 UNIT OF COMPARISON / DISCUSSION OF ADJUSTMENTS Selecting Unit of Comparison After sales data has been gathered and verified, systematic analysis begins. Because like units must be compared, each sale price should be stated in terms of appropriate units of comparison. The units of comparison selected depend on the appraisal problem and nature of the property. Units of comparison are used to facilitate comparison of the subject and comparable properties. Examples of units of comparison include: total property price, price per square foot of gross building area, price per apartment unit, price per cubic foot of building area, price per guest room, price per acre, price per square foot, price per front foot, etc. After an analysis of the comparable sales, the most reliable unit of comparison is concluded to be: Concluded Unit of Comparison: Price per square foot Analysis and Adjustment of Comparable Sales Ideally, if all comparable properties are identical to the subject property, no adjustments would be required. However, this is rarely the case, especially for non residential properties. Once the data is collected and verified, it can be organized in a market data grid for comparison. The grid will illustrate and recognize any important differences between the comparable properties and the subject. These differences are often referred to as elements of comparison. The adjustment grid contains 10 basic elements of comparison that should be considered in sales comparison analysis. Elements of Comparison 1.) Real Property Rights Conveyed: When real property rights are sold, they may be the sole subject of the contract or the contract may include other rights, less than all of the real property rights, or even another property or properties. Before the price of a comparable sale property can be used in sales comparison analysis, the appraiser must first ensure that the sale price of the property applies to property rights that are similar to those being appraised. To do so may require one or more adjustments to the price before specific differences in the physical real estate can be compared. 2.) Financing Terms: The transaction price of one property may differ from that of an identical property due to different financing arrangements. The typical definition of market value recognizes cash equivalent terms provided the calculation of these terms reflects the market. In the event a property sells via atypical financing terms, the sale must be analyzed and a conclusion made as to how the below or above market financing influences the sales price. 75

76 3.) Conditions of Sale: Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale significantly affect transactions prices; these are not considered arm s length transactions. Examples warranting an adjustment for this element of comparison include: assemblage, plottage, liquidation sale, inter family transfer, and depressed sale. In most cases, a sale that is not considered arm s length is omitted from the sales comparison analysis unless market information is available to support the atypical condition. 4.) Expenditures made immediately after purchase: A knowledgeable buyer considers expenditures that will have to be made upon purchase of a property because these costs affect the price the buyer agrees to pay. Such expenditures include: costs to cure deferred maintenance, costs to demolish and remove any portion of the improvements, costs to petitions for a zoning change, costs to remediate environmental contamination. These costs are often quantified in price negotiations and can be discovered through verification of transaction data. The relevant figure is not the actual cost that was incurred but the cost that was anticipated by the buyer and seller. 5.) Market conditions (time): Comparable sales that occurred under market conditions different from those applicable to the subject on the effective date of value require adjustment for any differences that affect their values. An adjustment for market conditions is made if general property values have appreciated or depreciated since the transaction dates due to inflation or deflation or a change in investor s perceptions of the market over time. 6.) Location: An adjustment for location within a market area may be required when the locational characteristics of a comparable property are different from those of the subject property. Excessive locational differences may disqualify a property from use as a comparable. Locational differences are usually handled with quantitative adjustments. 7.) Physical characteristics: If the physical characteristics of a comparable property and the subject property differ in many ways, each of these differences may require comparison and adjustment. Physical differences include differences in building size, quality of construction, architectural style, building materials, age, condition, functional utility, site size, attractiveness, and amenities. The adjustment for physical differences may certainly be equal to the cost to install or remove; however, this is not always the case depending on market perception. 8.) Economic characteristics: Economic characteristics include all the attributes of a property that directly affect its income. This element of comparison is usually applied to income producing properties. Characteristics that affect a property s income include operating expenses, quality of management, tenant mix, rent concessions, lease terms, lease expiration dates, renewal options, etc. 9.) Use / Zoning: Any difference in the current use or the highest and best use of a potential comparable sale and the subject property must be addressed. The appraiser must recognize 76

77 the difference and determine if the sale is an appropriate comparable and, if so, whether an adjustment is required. In most cases the buyer or buyer s agent must confirm the ultimate use for which the comparable was purchased. 10.) Non realty components of value: Non-realty components of value include personal property, business concerns, and other items that do not constitute real property but are included in either the sale price of the comparable or the ownership interest in the subject property. These items should be analyzed and reported separately from the realty. See the following page for the market data adjustment grid. 77

78 Subject Imp. Sale 1 Imp.Sale 2 Imp.Sale 3 Imp.Sale 4 Date of Sale: 5/4/ /12/2007 4/13/2007 3/24/2008 Price: $160,000 $115,000 $160,000 $200,000 Rights Conveyed: $0 $0 $0 $0 Financing Adjustment: $0 $0 $0 $0 Conditions of Sale: $0 $0 $0 $0 Cash Equivalent Price: $160,000 $115,000 $160,000 $200,000 Deferred Maintenance: $0 $0 $0 Other expenditures after sale: $0 $0 $0 $0 Total Adjusted Price: $160,000 $115,000 $160,000 $200,000 Less: Land Value: -$30,000 -$30,000 -$60,000 -$30,000 Ind. Improvement Value: $130,000 $85,000 $100,000 $170,000 Market Conditions (% adj.) 5.00% 0.00% 0.00% 0.00% Adjusted Sales Price: $136,500 $85,000 $100,000 $170,000 Unit of Comparison ($ / SF) SF (Net Rentable) 4,013 5,000 4,000 2,800 4,500 Price per Unit: $27.30 $21.25 $35.71 $37.78 Other Adjustments: Imp. Sale 1 Imp.Sale 2 Imp.Sale 3 Imp.Sale 4 Location: 0.00% 0.00% 0.00% 0.00% Building Size: 0.00% 0.00% 0.00% 0.00% Construction Quality: 0.00% 0.00% % % Architectural Style: 0.00% 0.00% 0.00% 0.00% Finished Area: 10.00% 0.00% 5.00% 10.00% Amenities: -2.00% 0.00% 0.00% 0.00% Age / Condition: 0.00% 0.00% % % Economic: 0.00% 0.00% 0.00% 0.00% Net Adjustment: 8.00% 0.00% % % Adj. Unit of Comparison: $29.48 $21.25 $26.78 $28.34 SUMMARY OF VALUE Range of Unit Value: $21.25 to $29.48 Average of Unit Value: $26.46 Median Unit Value: $27.56 Concluded Unit Value: $26.00 Subject - Units / Size: 4,013 Ind. Improvement Value: $104,338 Add: Est. Land Value $48,352 Total: $152,690 78

79 INCOME APPROACH TO VALUE Income producing real estate is typically purchased as an investment, and from an investor s point of view earning power is the critical element affecting property value. One basic investment premise holds that the higher the earnings, the higher the value, provided the amount of risk remains constant. An investor who purchases income producing real estate is essentially trading present dollars for the expectation of receiving future dollars. The income capitalization approach to value consists of methods, techniques, and mathematical procedures that I will use to analyze the property s capacity to generate benefits and convert these benefits into an indication of present value. The income approach offers two acceptable methods to value future income for the subject property. The first method is Direct Capitalization. Direct Capitalization is used in the income capitalization approach to convert a single year s income expectancy into a value indication. This conversion is accomplished in one step, either by dividing the income estimate by an appropriate income rate or by multiplying it by an appropriate income factor. Yield capitalization is the second fundamental method used in the income capitalization approach to value. Yield capitalization is used to convert future benefits into an indication of present value by applying an appropriate yield rate. Yield capitalization includes: 1) Select an appropriate holding or study period 2) Forecast all future cash flows or cash flow patterns 3) Chooses an appropriate yield rate 4) Convert future benefits into present value by discounting each annual future benefit or by developing an overall rate that reflects the income pattern, value change, and yield rate using one of the various yield formulas. 79

80 Contract Rent The property owner, James D. Lord, has a verbal lease agreement with Bob Webb for the use of 1 office of 130 SF and 1 bay in warehouse of 1,080 SF for a monthly rent of $ The lease is month to month and the tenant does not pay any taxes, insurance or utilities. Market / Economic Rent Market rent is the rental income a property would probably command in the open market. It is indicated by current rents that are either paid or asked for comparable space with the same division of expenses as of the date of the appraisal. Market rent is sometimes referred to as economic rent. Conclusion of Market Rent Economic rent for the subject property is supported by competitive rentals in the market area. The concluded rents per square foot accounts for the office and warehouse/manufacturing areas, construction quality and other pertinent physical characteristics. Comparable rentals are summarized on the following page. The concluded rent for the subject property is $4.50 SF in a modified gross lease situation. Hypothetically, the owner would pay for taxes, insurance, maintenance and reserve for replacement. RENTALS SUMMARY TABLE No. Location Lease Type Building Size Rent/SF Industrial Drive Modified 5,000 $ South Monroe Street Modified 3,062 $ Industrial Modified 5,000 $ Industrial Modified 5,000 $ and 1731 Industrial Drive Modified 5,000 $ Industrial drive Modified 5,000 $ Trade Drive Modified 4,500 $ Trade Drive Modified 4,500 $ Hwy 33 Modified 4,500 $ Hwy 33 Modified 2,430 $

81 Improved Lease No. 1 Property Identification Record ID 148 Property Type Industrial Address 1711 Industrial Drive, Ruston, Lincoln County, Louisiana Location Interstate Commercial Park Physical Data Net Rentable SF 5,000 Construction Type Roof Type Foundation Electrical Steel Frame Metal slab typical General Lease Data Lease Type Modified Gross Lease Tenant Size 5,000 to 5,000 General Tenant Summary Owner Verification Rent Analysis Actual Rent Thermon Holstead Thermon Holstead; , Confirmed by KPlatt $ $4.80/SF; $4.56/SF Average Remarks There are 4 units in the building. Each unit has an overhead door, metal entry door and restroom. Each unit is divided by concrete block wall. Owner maintains entire building and pays taxes. Tenants are responsible for the utilities. 81

82 Improved Lease No. 2 Property Identification Record ID 165 Property Type Commercial, Day Care Facility Address 508 South Monroe Street, Ruston, Louisiana Physical Data Net Rentable SF 3,062 Construction Type Prefab metal panel Roof Type Metal Foundation Slab Year Built 1980 Tenant Rent Roll Tenant Name Size Rent/SF Lease Type Beg. Date Term Denene Stringfellow 3,062 $4.90 Modified MTM General Tenant Summary Verification Karim Dhanani; Other sources: Lease Rent Analysis Actual Rent $ $4.90/SF; $4.90/SF Average Remarks Month-to-month lease on a metal building utilized as a day-care facility. Written lease agreement expired in February of Modified gross structure. Tenant is responsible for utilities, janitorial expenses, and the maintenance of windows, doors, sidewalks, the building front, and interior walls. Tenant is also responsible for repair items of less than $

83 Improved Lease No. 3 Property Identification Record ID 209 Property Type Industrial Property Name Fastenal Address 1721 Industrial, Ruston, Lincoln County, Louisiana Location Interstate Industrial Park Physical Data Net Rentable SF 5,000 Area Breakdown Warehouse 2,500 Showroom 2,500 Construction Type Roof Type Foundation General Tenant Summary Owner Verification Rent Analysis Actual Rent Class "S" Metal slab Holstead Rentals Thermon Holstead; , October 01, 2009; by K Platt $ $5.28/SF; $5.28/SF Average Remarks Lease is expiring at the end of the year and tenant moving to another location. Entire building is heated and cooled and 50% is finished retail space. Warehouse has 1 loading dock. Lease structure is modified 83

84 Improved Lease No. 4 Property Identification Record ID 210 Property Type Industrial Property Name Tommy's Feed Store Address 1821 Industrial, Ruston, Lincoln County, Louisiana Location Interstate Commercial Park Physical Data Net Rentable SF 5,000 Area Breakdown Retail 2,500 Warehouse 2,500 Construction Type Roof Type Foundation General Tenant Summary Owner Verification Rent Analysis Actual Rent Class "S" metal slab Holstead Rentals Thermon Holstead; , October 01, 2009; Confirmed by KPlatt $ $4.20/SF; $4.20/SF Average Remarks 50% of building is finished retail space and the other is inventory storage for feed store. Tenant made improvements to property. Lease structure is modified gross. 84

85 Improved Lease No. 5 Property Identification Record ID 211 Property Type Industrial Address 1729 and 1731 Industrial Drive, Ruston, Lincoln County, Louisiana Location Interstate Commercial Park Physical Data Construction Type Class "S" Roof Type metal Foundation slab Net Rentable SF 5,000 Tenant Rent Roll Suite Tenant Name Size Rent/SF Lease Type Term No AMA North 2,500 $4.80 Modified month to month 1729 Pipe Liner's Warehouse 2,500 $3.60 Modified General Tenant Summary Owner Verification Rent Analysis Actual Rent Thermon Holstead Thermon Holstead; , October 01, 2009; Confirmed by Kara Platt $ $4.80/SF; $4.20/SF Average Remarks Pipeliners Warehouse leases a shell with a restroom and AMA North has finished office and bay. 16' eave height 85

86 Improved Lease No. 6 (Listing) Property Identification Record ID 212 Property Type Industrial Address 1720 Industrial drive, Ruston, Lincoln County, Louisiana Location Interstate Commercial Park Physical Data Net Rentable SF 5,000 Area Breakdown Office 1,250 Warehouse 3,750 Construction Type Roof Type Foundation General Lease Data Typical Lease Term Lease Type Tenant Size General Tenant Summary Owner Verification Rent Analysis Actual Rent Class "S" metal slab 1-5 years Modified Gross 5,000 sf Holstead Rentals Thermon Holstead; , October 01, 2009; Confirmed by KPlatt $ $5.28/SF; $5.28/SF Average Remarks Space currently for lease, 1,250 SF office, 4 OH doors and canopy on rear of building. 16' eave height. Lease structure is modified 86

87 Improved Lease No. 7 Property Identification Record ID 207 Property Type Industrial, Industrial (<20,000 SF) Property Name National Healthcare Services Address 1726 Trade Drive, Ruston, Lincoln County, Louisiana Location Interstate Commercial Park Physical Data Net Rentable SF 4,500 Construction Type Roof Type Foundation Metal Metal slab Suite No. Tenant Rent Roll Tenant Name Size Rent/SF Lease Type Term National Healthcare 2,250 $4.53 Modified 5 years Services Cabinet Maker 2,250 $3.47 Modified 1 year General Tenant Summary Verification Rent Analysis Actual Rent David Brannon; , October 01, 2009; by KPlatt $ $4.53/SF; $4.00/SF Average Remarks Mr. Brannon gave approximate rents and stated the building is split in half with the cabinet maker utilizing just a warehouse with restroom. National Healthcare's space is 75% finished office. 87

88 Improved Lease No. 8 Property Identification Record ID 208 Property Type Industrial, Industrial (<20,000 SF) Property Name Connie's Consignment Address 1711 Trade Drive, Ruston, Lincoln County, Louisiana Location Interstate Industrial Park Physical Data Gross Area SF 4,500 Construction Type Roof Type Foundation Class "S" Metal slab Tenant Rent Roll Tenant Name Size Rent/SF Lease Type Beg. Term Date Connie's Consignment 4,500 $3.33 Modified 2003 month to month General Tenant Summary Owner Verification Rent Analysis Actual Rent Holstead Rentals Connie; September 30, 2009; Confirmed by Kara Platt $ $3.33/SF; $3.33/SF Average Remarks Industrial building with 3 restrooms, 2 OH doors and small office. Tenant converted interior to consignment shop. Verbal agreement month to month but has been tenant for 6 years. 88

89 Improved Lease No. 9 Property Identification Record ID 152 Property Type Commercial, Retail Property Name Ruston Air Conditioning and Heating, Inc Address 2484 Hwy 33, Ruston, Lincoln County, Louisiana Physical Data Net Rentable SF 4,500 Area Breakdown Office 625 Warehouse 3,875 Construction Type Class "S" Roof Type Metal Foundation concrete slab HVAC Central air and heat Year Built 1978 Tenant Rent Roll Tenant Name Size Rent/SF Lease Type Term American Granite and Stone 4,500 $5.87 Modified 2-3 years General Tenant Summary Owner Verification Rent Analysis Actual Rent Ruston Air Conditioning and He Keith Moore; , November 26, 2007; by Kara Platt $ $5.87/SF; $5.87/SF Average Remarks Tenant finished out 25' x 25' of office space to display their granite and stone. Updated rent 10/1/2009 with Judy 89

90 Improved Lease No. 10 Property Identification Record ID 150 Property Type Commercial, Retail Property Name Miller Swimming Pool Supply Address 2505 Hwy 33, Ruston, Lincoln County, Louisiana Physical Data Net Rentable SF 2,430 Area Breakdown Showroom/Office 1,215 Supply Area 1,215 Construction Type Class "S" Roof Type Metal Foundation concrete slab Electrical typical HVAC Central air and heat Year Built 2001 Condition Good General Tenant Summary Owner Verification Rent Analysis Actual Rent Max Barrett Enterprises, LLC Ms. Miller; , October 01, 2009; Inspection, by KPlatt $ $4.44/SF; $4.44/SF Average Remarks Entire building is leased by Miller Swimming Pool Supply Company. The building is 60 x 40 and could equally be divided into 2 suites. The supply area is not finished but has plumbing available. Property has changed ownership but tenant is still on month to month lease. 90

91 Direct Capitalization Direct capitalization is a method used in the income approach to convert a single year s income expectancy into a value indication. This conversion is accomplished in one step, either by dividing the income estimate by an appropriate income rate or by multiplying it by an appropriate income factor. Direct capitalization is widely used when properties are already operating on a stabilized basis and there is an ample supply of comparable sales with similar risk levels, incomes, expenses, physical and locational characteristics, and future expectations. This methodology may be less useful for properties going through an initial lease-up or when income and / or expenses are expected to change in an irregular pattern over time. The advantage of direct capitalization are that it is simple to use, easy to explain, often expresses market thinking, and provides strong market evidence of value when adequate sales are available. Potential Gross Income: Potential gross income is usually analyzed on an annual basis. Potential gross income comprises: Rent for all space in the property Rent from escalation clauses Reimbursement income All other forms of income to the real estate Vacancy and collection loss: An allowance for reductions in potential gross income attributable to vacancies, tenant turnover, and nonpayment of rent. Effective Gross Income: Effective gross income is calculated as the potential gross income minus the vacancy and collection loss allowance. Operating Expenses: The periodic expenditures necessary to maintain the real property and continue production of the effective gross income, assuming prudent and competent management. Fixed Expenses: Operating expenses that generally do not vary with occupancy and that prudent management will pay for whether the property is occupied or vacant. Variable Expenses: Operating expense that generally vary with the level of occupancy or the extent of services provided. 91

92 Replacement Allowance: An allowance that provides for the periodic replacement of building components that wear out more rapidly than the building itself does and must be replaced during the building s economic life. Net Operating Income: The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income, but before mortgage debt service and book depreciation are deducted. Overall Capitalization Rate: An income rate for a total real property interest that reflects the relationship between a single year s net operating income and the total property price or value; used to convert net operating income into an indication of overall property value (Ro Io / Vo). Derivation of Overall Capitalization Rates: Overall rates can be estimated with various techniques; the techniques used depend on the quantity and quality of data available. When supported by appropriate market data, accepted techniques include: Derivation from comparable sales Derivation from effective gross income multipliers and net income ratios. Band of investment The debt coverage formula Yield capitalization techniques 92

93 Direct Capitalization Income Net Rental Area: 4,013 Concluded Market Rent ($/SF): $4.50 Scheduled Base Rent Revenue: $18,059 Other Revenue: $0 Total Potential Gross Income: 18,059 Vacancy and Collection Loss: 5.00% $903 Effective Gross Income: 17,156 Fixed Expenses Real Estate Taxes: $1,500 Insurance: $800 Variable Expenses Management $515 Maintenance / Repairs $500 Reserve for replacement $500 Total Expenses $3,315 Net Operating Income $13,841 Concluded Overall Capitalization Rate 9.50% Indicated Value from Income Approach $145,695 93

94 RECONCILIATION OF VALUE All three approaches to value were developed in this appraisal. The range and point value for the subject property is offered below. All three approaches are thought to offer credible indications of value to support the final conclusion. Value Indications Cost Approach = $150,379 Sales Comparison Approach = $152,690 Income Approach = $145,695 Range of Value = $145,695 to $152,690 Average Value = $149,588 Median Value = $150,379 Final Opinion of Value = $150,000 rounded Reasonable Range of Value: $145,000 to $160,000 94

95 ADDENDA SUBJECT PHOTOGRAPHS (7/28/2010) LEGAL DESCRIPTION TAX ASSESSMENTS FLOOD HAZARD MAP ZONING MAP & REGULATIONS QUALIFICATIONS OF QUALIFICATIONS OF: KARA A. PLATT DEFINITIONS OF TERMS

96 SUBJECT PHOTOGRAPHS (7/28/2010) Front of subject property looking NE Front of subject property looking East Front of subject property looking SE North side of property Looking North on S Farmerville Looking South on S Farmerville 96

97 Northeast corner of building Northeast corner of building Rear area or east side of property Rear of subject property slightly drops off Looking West toward the subject building from East property line Overview of rear of property 97

98 South property line Rolling gate and fencing on property Dan Lord Office Bob Webb Office Bathroom Overview of warehouse 98

99 Overview of warehouse Overview of warehouse Overview of warehouse Overview of warehouse Overview of warehouse bay dividers Overview of warehouse 99

100 LEGAL DESCRIPTION For reference only. This legal should not be used without proper legal authority. Survey is recommended. 100

101 TAX ASSESSMENTS 101

102 102

103 103

104 104

105 105

106 106

107 FLOOD HAZARD MAP 107

108 ZONING MAP & REGULATIONS 108

109 109