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Home My WebLink About20112036.tiff rat6 CLERK TO THE BOARD PHONE (970) 336-7215, Ext. 4226 FAX: 0) 352-0242 11515 0 O STREET P. O. BOX 758 GREELEY, COLORADO 80632 "IDe. COLORADO August 26, 2011 PELICAN LAKES LLC SUITE 201 1625 PELICAN LAKES POINT WINDSOR, CO 80550 RE: THE BOARD OF EQUALIZATION, 2011, WELD COUNTY, COLORADO - STIPULATE PETITIONER'S APPEAL AND AFFIRM ASSESSOR'S VALUE DESCRIPTION OF PROPERTY:ACCOUNT#: R3065104 PARCEL#: 080728337009-WIN WVS TRACT I WATER VALLEY SOUTH EXC BEG S65DE 715'M/L FROM CEN E 1/16 COR SEC 29 TH N04D06'E 490'M/L N36D02'E 660M/L S42D12'E 370'M/L SOD45'W 180'M/L N78D07'W 74.49'M/L TH S42D56'W 839.89'M/L ALSO EXC BEG S55DE 2515' M/L FROM CEN E 1/16 COR TH N81D53' Dear Petitioner: On July 26, 2011,the Board of County Commissioners of Weld County, Colorado, convened, and acting as the Board of Equalization, pursuant to Section 39-8-101, C.R.S., et.seq., considered the Stipulation on your petition of appeal of the County Assessor's valuation of your property described above, for the year 2011. The Stipulation was entered into between the Assessor and said petitioner(s),and accepted by the Board of Equalization, agreeing that the assessment and valuation of the Weld County Assessor be Stipulated as follows: • ACTUAL VALUE AS ACTUAL VALUE DETERMINED BY AS STIPULATED ASSESSOR $1,932,208 $1,432,208 -9-'46-o?aJ 2011-2036 C C, ✓'��r�C'/i�-r � AS0079 PELICAN LAKES LLC - R3065104 Page 2 If you have questions or need additional information, please do not hesitate to contact me at (970) 336-7215, Extension 4226. Very Cry truly yours, / Esther E. Gesick Deputy Clerk to the Board cc: Christopher Woodruff, Assessor 2011-2036 AS0079 2011 COUNTY BOARD OF EQUALIZATION WELD COUNTY ASSESSOR'S ACCOUNT NUMBER R3065104 STIPULATION (As To Tax Year 2011 Actual Value) RE PETITION OF : NAME: Pelican Lakes LLC ADDRESS: 1625 Pelican Lakes Point#201 Windsor, CO 80550 * * * * * * * Petitioner(s),Pelican Lakes LLC and the Weld County Assessor, hereby enter Into this Stipulation regarding the tax year 2011 valuation of the subject property, and jointly move that the Board of Equalization to enter its order based on this Stipulation. Petitioner(s) and the Assessor agree and stipulate as follows: 1. The property subject to this Stipulation is described as: WIN WVS TRACT I WATER VALLEY SOUTH EXC BEG S65DE 715'M/L FROM CEN E 1/16 COR SEC 29 Aka 8459 County Road 64, Windsor, CO (Pelican Lakes Golf Course) 2. The subject property Is classified as Commercial property. 3. The County Assessor originally assigned the following actual value to the subject property for tax year Mt Land $ 88.843 Improvements$ 1.835.365 Total $ 1.932.208 4. After further review and negotiation,the petitioner(s) and Weld County Assessor agree to the following actual value for the subject property. Land $ 88 84 Improvements$ 1.343.365 Total $ 1.432.208 2011-2036 5. The valuations, as established above, shall be binding only with respect to tax year zsin. 6. Brief narrative as to why the reduction was made: Value was adlusted based upon the general market prices per sq. ft. that were in place in the base period, additionally the income was considered as backup for the market. 7. Both parties agree that the hearin scheduled before the Weld County Board of Equalization on DATE at T E am be vacated; or, a hearing has not yet been scheduled before the Board of Equalization _x (check if appropriate). DAT D this 19th day of July, 2011, etiti ner(s) or Attorney Petitioner(s) or Attorney Address: e-L, Ales Address: Ajjou 0/' Oa/ g0530 Telephone: IQI --5Y02-ce ,,Teleephone: �(Xlp y Ass sor Address: 1400 N.17th Avenue Greeley, CO 80631 (970) 353-3845 ext. 3656 NOTICE OF DETERMINATION Christopher M. Woodruff Date of Notice: 6/22/2011 Weld County Assessor Telephone: (970) 353-3845 or (720) 652-4255 1400 N 17th Ave Fax: (970) 304-6433 Greeley, CO 80631 E-mail: appeals@co.weld.co.us www.co.weld.co.us Office Hours: 8:00 AM - 5:00 PM SCHEDULE/ACCOUNT NO. TAX YEAR TAX AREA LEGAL DESCRIPTION PHYSICAL LOCATION R3065104 2011 0451 WIN WVS TRACT I WATER VALLEY SOUTH EXC BEG S65DE 715'M/L FROM CEN E 1/16 s COR SEC 29 TH N04D06'E 490'M/L w PELICAN LAKES LLC N36D02'E 660M/L S42D12'E 370'M/L 3O 1625 PELICAN LAKES POINT S0D45'W 180'M/L N78D07'W 74.49'M/L TH SUITE 201 S42D56'W 839.89'M/L ALSO EXC BEG cc WINDSOR,CO 60550 S55DE 2515' M/L FROM CEN E 1/16 COR TH O N81 D53' a 8459 64 CR,WINDSOR ASSESSOR'S VALUATION PROPERTY CLASSIFICATION ACTUAL VALUE PRIOR TO ACTUAL VALUE AFTER REVIEW REVIEW COMMERCIAL 1,932,208 1,932,208 TOTAL $1,932,208 $1,932,208 The Assessor has carefully studied all available information, giving particular attention to the specifics included on your protest. The Assessor's determination of value after review is based on the following: CM01 - The Colorado Constitution requires commercial property to be valued based on actual value and assessed at 29%. Replacement cost, market, and income are approaches used to determine the actual value of your property. If you disagree with the Assessor's decision, you have the right to appeal to the County Board of Equalization for further consideration, § 39-8-106(1)(a), C.R.S. The deadline for filing real property appeals is July 15. The deadline for filing personal property appeals is July 20. The Assessor establishes property values. The local taxing authorities (county, school district, city, fire protection, and other special districts) set mill levies. The mill levy requested by each taxing authority is based on a projected budget and the property tax revenue required to adequately fund the services it provides to its taxpayers. The local taxing authorities hold budget hearings in the fall. If you are concerned about mill levies, we recommend that you attend these budget hearings. Please refer to last year's tax bill or ask your Assessor for a listing of the local taxing authorities. Please refer to the reverse side of this notice for additional information. APPEAL PROCEDURES County Board of Equalization Hearings will be held from July 1 through August 5 at 915 10th Street, Greeley, CO To appeal the Assessor's decision, complete the Petition to the County Board of Equalization shown below, and mail or deliver a copy of both sides of this form to: Weld County Board of Equalization 915 101h Street, P.O. Box 758 Greeley, CO 80632 Telephone (970) 356-4000 Ext, 4225 To preserve your appeal rights, your Petition to the County Board of Equalization must be postmarked or delivered on or before July 15 for real property and on or before July 20 for personal property— after such date, your right to appeal is lost. You may be required to prove that you filed a timely appeal; therefore, we recommend that all correspondence be mailed with proof of mailing. You will be notified of the date and time scheduled for your hearing. The County Board of Equalization must mail a written decision to you within five business days following the date of the decision. The County Board of Equalization must conclude hearings and render decisions by August 5, § 39-8-107(2), C.R.S. If you do not receive a decision from the County Board of Equalization and you wish to continue your appeal, you must file an appeal with the Board of Assessment Appeals by September 12, § 39-2-125(1)(e), C.R.S. If you are dissatisfied with the County Board of Equalization's decision and you wish to continue your appeal, you must appeal within 30 days of the date of the County Board's written decision to ONE of the following: Board of Assessment Appeals District Court 1313 Sherman Street, Room 315 9th Avenue and 9th Street Denver, CO 80203 P.O. Box C (303) 866-5880 Greeley, Colorado 80632 www.dola.colorado.pov/baa (970) 356-4000 Ext. 4520 Binding Arbitration For a list of arbitrators, contact the County Commissioners at the address listed for the County Board of Equalization. If the date for filing any report, schedule, claim, tax return, statement, remittance, or other document falls upon a Saturday, Sunday, or legal holiday, it shall be deemed to have been timely filed if filed on the next business day, § 39-1-120(3), C.R.S. PETITION TO COUNTY BOARD OF EQUALIZATION What is your estimate of the property's value as of June 30, 2010? (Your opinion of value in terms of a specific dollar amount is required for real property pursuant to § 39-8-106(1.5), C.R.S.) What is the basis for your estimate of value or your reason for requesting a review? (Please attach additional sheets as necessary and any supporting documentation, i.e., comparable sales, rent roll, original installed cost, appraisal, etc.) ATTESTATION I, the under 'gned owner or agent' of the property identified above, affirm that the statements contained ere a , n any� attac nts' ereto re true and complete. ig ture Telephone Number Date 15-DPT-AR PR 207-08/11 R3065104 10109 ' Attach letter of authorization signed by property owner. NOTICE OF RESOLUTION OF THE MEMBER OF PELICAN LAKES,LLC The undersigned,being all of the Members of Pelican Lakes, LLC,a Colorado limited liability company,hereby state that the following resolution(s)were adopted by the Membership of Pelican Lakes, LLC: RESOLVED,that Martin Lind and Leonard Wiest, may independently perform all the actions as further described herein; and FURTHER RESOLVED that either Martin Lind and Leonard Wiest are hereby authorized to execute contracts for the sale,transfer,purchase and acquisition of real estate, water rights, oil and gas and other minerals, gravel and aggregate substances on behalf of the Company(including amendments thereto),to attend closings,and to execute all documents necessary to consummate the transactions which are the subject of said closings, including, without limitation, deeds,bills of sale, stock certificates, settlement statements, closing agreements, and loan documents in connection with closings on behalf of the Company. FURTHER RESOLVED that the signatures of either Martin Lind or Leonard Wiest shall bind the Company. DATED this day of,� aG iltd an ,20 . MEMBERS:N. .77 Martin L' Matter Id.26 CGS File tta:I t17N8-\SO66 w,d 1 Cleo t Pelican Lakes.!I.C r PELICAN LAKES Golf&Country Club July 8, 2011 Attached is our petition of the notice of determination by the County Assessor on Account numbers R1105402 and R3065104. This Notice of Determination denied our earlier appeal of the assessed value on these two accounts,jointly known as Pelican Lakes Golf Course and operated as Pelican Lakes LLC. I am attaching a full appraisal dated August 14th 2009 in accordance with § 39-1-104. This independent appraisal was commissioned by Wells Fargo bank and completed by Bregan and Associates in Phoenix, Arizona. I had previously submitted the summary pages of that appraisal with my earlier appeal, and thus the total appraisal for your review with this petition. That Appraisal showed a value of$3,900,000 and included $500,000 in Personal Property and $700,000 in water rights. Personal property amount was deducted in my value protest since it is taxed separately and the water rights were never a part of the golf course, but were used as additional collateral on the very first loan 10 years ago. The water rights were released from the DOT in Dec of 2010 and were never owned and used as part of the Golf Course Operation. Backing these two items out of the appraisal a comparison then to the two mentioned accounts is $2,700,000 vs. your value of$3,907,184. In addition, on page 4 of the appraisers summary, it is pointed out that the golf course has a negative cash flow, and "can only be justified financially by the profits of the sale of the adjacent real estate." In as much as our (developers other company) lots are valued higher than other similar sized in the Windsor area, we are paying extra taxes on the adjacent real estate due to the amenity of the golf course which is being taxed at a premium in itself Because of that I am petitioning the County Board of Equalization to reduce the assessed value on these two accounts to $2,200,000. Please contact me at the number below with any questions. Sincere3 "6":// onard Wiest 1620 Pelican Lakes Point • Windsor,Colorado 80550 • 970.674.0930 • Toll Free 1.877.837.GOLF (4653) Bob McNamee, Head Golf Professional A RESTRICTED APPRAISAL REPORT OF THE "PELICAN LAKES GOLF & COUNTRY CLUB" LOCATED AT 1600 PELICAN LAKES POINT WINDSOR, COLORADO Date of Valuation: August 14, 2009 Prepared for: Mr. Thomas A. Arnold, ASA Job Manager Denver RETECHS MAC C7300-058 1700 Lincoln Street— 5th Floor Denver, Colorado 80203-4500 Prepared by: Brekan Nava Group 4450 South Rural Road, Suite E225 Tempe, Arizona 85282 BNG#09-07-14 GREATER SOUTHWEST VALUATION, INC. �/S dbaac��BREKAN - NAVA GROUP i ✓L eaG Cpdta/.e QQvcdoxn TELEPHONE Q� 4450 S. RURAL ROAD, SUITE E-225 FACSIMILE (480)9QOugust 18, 2009 TEMPE,AZ 85282 (480) 990.1120 Mr. Thomas A. Arnold Job Manager Denver RETECHS MAC C7300-058 1700 Lincoln Street— 5`h Floor Denver, Colorado 80203-4500 RE: A restricted appraisal report of the Pelican Lakes Golf and Country Club located at 1600 Pelican Lakes Point, Windsor, Colorado (BNG#09-07-14). Dear Mr. Arnold, In accordance with your request, we have personally inspected and appraised the referenced property. The purpose of this appraisal is to provide an opinion of Market Value in fee simple interest of the subject property referenced above. The valuation date is as of August 14, 2009. This assignment has been completed in accordance with Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) (12 USC 3331 et seq.); the regulations adopted by the Office of the Comptroller of the Currency pursuant to Title XI, including, without limitation, the appendix thereto consisting of excerpts from the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Foundation (12 CFR Part 34, Subpart C). Market value, as used herein, is defined as: "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to 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." Source: Federal Register, Vol. 55,No. 165,page 34696, as of Friday, August 24, 1990. Mr. Thomas A. Arnold BNG#09-07-14 August 18, 2009 Page 2 The market value estimated in this report is a going concern value. We have assumed competent management, concerned with the on-going profitability of the project, as well as being responsive to the needs of the clientele. The value is inclusive of real estate and non-realty items consisting of real property, furniture, fixtures and equipment. The net income represents income from business operations as opposed to rental value on real estate. The subject golf course consists of valuing the improvements, the original 18 holes of golf, the associated 10 shares of water rights and related going concern operation situated on approximately 212.4927 acres of land. The improvements consist of an 18-hole championship golf course, a clubhouse restaurant/fitness center building, a golf shop/golf cart storage building, golf course maintenance buildings, additional ancillary site improvements and furniture, fixtures and equipment. The subject's first 18 holes opened for regular, daily play on July 12, 1999 and the third nine holes (not included in this appraisal) opened on July 12, 2006. The original clubhouse which included the golf shop but not the golf cart storage, opened in 2000 with additional improvements in 2001. A second clubhouse building was completed and opened on December 4, 2004 and includes the golf shop (upper level), golf cart storage (lower level) and banquet area (upper level). The first 18-holes measures approximately 7,264 yards from the back tees and was designed by Mr. Ted Robinson, a well respected, nationally known golf course architect from Stockton, California. The building improvements include the main clubhouse building of approximately 11,836 square feet and the golf shop/cart storage/banquet hall building of approximately 9,520 square feet. The four separate maintenance building complex totals approximately 6,306 square feet under roof with additional yard storage. The appraisers were not supplied with an ALTA Survey. The legal description, which did not include the acreage for the golf course and improvements, was obtained from the title report dated October 23, 2000. Therefore, the appraisers have used the sizes of each of the parcels comprising the clubhouse, maintenance buildings and golf holes from the Weld County Assessor's office. The tax parcels total approximately 212.4927 acres for the subject property and is included as Exhibit C in the Addendum of this report. Based upon the building plans provided by ownership as well as the physical inspections of the property, all of the building improvements appear to be adequate and sufficient for normal, continuing golf course operations as a semi-private golf club. Your attention is directed to the accompanying report and to its "Certification" and "Assumptions and Limiting Conditions" sections. Acceptance of and/or use of this appraisal report constitutes acceptance of these conditions. This appraisal has been performed in accordance with the reporting requirements as set forth by the Appraisal Institute and the Appraisal Foundation. Mr. Thomas A. Arnold BNG #09-07-14 August 18, 2009 Page 3 Restricted Report The date of the original valuation was as of February 8, 2009 (27-hole analysis) and February 8, 2009 (18-hole analysis), prepared by Ralph J. Brekan with the assistance of Gregg Lindquist, Golf Properties Specialist. The 18-hole analysis was prepared on June 8, 2009 as an Addendum to the original 27-hole analysis. Both valuation dates were February 8, 2009. Within this analysis we have updated the market data with new surveys of competing facilities (courses), prepared a new market study and a new "Income Approach" to arrive at an undated value. The appraisers requested updated financial information from ownership on several occasions however, ownership was not cooperative. Based on the original financial data used in the February 8, 2009, appraisal and the information obtained from research of competitive projects, together with interviews with General Managers and Membership Directors, we concluded that market conditions have remained similar but with continued softening. As noted, golf rounds and average collected fees were on the decline and continue to decline. Our analysis is base on this market data and the historic subject financial data. A new site visit, subsequent to the February 8, 2009 valuation has not been made. Therefore, we have assumed that all physical conditions and improvements have remained the same. This analysis only addresses the value of the subject property as an 18-hole facility and not as the 27- hole facility which is how it is presently being operated. The "Property Identification" section of this report addresses the subject as the original 18-hole facility and that there are currently 27 holes known as the Pelican Lakes Golf and Country Club. Further, we have identified the subject as 18 holes within the "Site Analysis" and "Improvements Description" of the report. The original report prepared as in February 2009 identified the subject as a 27-hole facility and an Addendum to the original report was prepared addressing the value as of February 8, 2009, as an 18-hole facility. Special Assumptions • It is assumed that the subject property has no environmental soils problems precluding development to its Highest and Best Use based upon the limited information provided the appraisers. • In the absence of an ALTA Survey identifying the addition of the new nine holes as well as the existing 18-holes and clubhouse, the appraisers have relied on data from the Weld County Assessor and Treasurer's offices to obtain the size of the subject property. Based upon all the information, data, and analyses contained in the following report and the Appraiser's file, it is our opinion that the Going Concern Market Value of the fee simple interest of the subject property as of the respective date of value is as follows: Market Value Ms ISO Semi-Private Course August 14, 2009 THREE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS ($3,950,000) Mr. Thomas A. Arnold BNG#09-07-14 August 18, 2009 Page 4 Present Value of Membership Sales $ 50,000 Golf Course Real Estate $3,400,000 Personal Property, Intangible Business Value, Liquor License $ 500,000 Total Value $3,950,000 The $500,000 includes furniture, fixtures and equipment value in addition to golf shop inventory and the Colorado Liquor License. This information was provided by ownership. Further, the value of the real estate also includes 10 shares of water rights @ $70,000 per share for a total water value of$700,000. The value of the subject property has declined since 2004 and the current cash flow from operations shows a negative net operating income. The Cost of Replacement would be in excess of$15,000,000 and can only be justified financially by profits from the sale of the adjacent real estate. According to Mr. Ryan Bach, Director of Real Estate Services, there are approximately 900 residential units in Water Valley North. Further, Water Valley South (Phases 2 and 3) has the capacity for 1,400 to 1,500 residential units comprised of single-family and multi-family units. At the present, there are approximately 450 residential units built in Water Valley South. We appreciate this opportunity to have been of service and look forward to working with you again. Should you have any questions regarding this matter, please do not hesitate to call. Sincerely, BREKAN NAVA GROUP Ralph J. Brek AI, SGA President Arizona Certified General Real Estate Appraiser No. 30363 Temporary Colorado Licensed Real Estate Appraiser No. AT 400 42432 TABLE OF CONTENTS Summary of Salient Data and Conclusions 1 Property Identification 3 Brief Legal Description 3 Date of Value Estimate 4 Purpose and Function of the Appraisal 4 Market Value Definition 4 Other Pertinent Definitions 5 Property History and Ownership 5 Scope of the Work 6 Property Rights Appraised 8 The Appraisal Process 8 Area Overview 12 Neighborhood Analysis 19 Site Analysis 26 Improvement Description 38 Golf Course Improvements 51 Golf Market Overview 58 Highest and Best Use Analysis 78 Sales Comparison Approach— Golf Course Land 82 Cost Approach 83 Sales Comparison Approach— Improved Sales 84 Income Approach 95 Capitalization Technique 119 Reconciliation and Final Value Estimates 130 Certification 132 Assumptions and Limiting Conditions 134 Qualifications of the Appraiser 136 ADDENDUM Engagement Letter Exhibit A Temporary Colorado Appraiser's License Exhibit B Legal Description for Pelican Lakes (first 18-holes only) Exhibit C Demographics Exhibit D Restaurant Lease to Austin's Homestead Bar and Grille Exhibit E SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Name: Pelican Lakes Golf and Country Club Location: 1600 Pelican Lakes Point Windsor, Colorado 80550 Number of Holes: A regulation, championship 18-hole golf course Building Area: Improvements Clubhouse (Restaurant & Health Club) 11,836 sf Golf Shop (Includes Golf Cart Storage) 9,520 sf Maintenance Buildings (4) 6,306 sf Total Vertical Improvements 27,662 sf Golf Course Opening Dates: July 12, 1999 (first 18-holes) July 12, 2006 (third 9-holes—NOT INCLUDED) Land Area: 18 Holes & Clubhouse—Approx. 212.4927 acres Ownership: Pelican Lakes LLC 1625 Pelican Lakes Point Windsor, Colorado 80550 Date of Value—"As Is" August 14, 2009 Dates of Inspection: February 7 and 8, 2009 Highest and Best Use: Semi-Private Golf Course Zoning: RMU - Residential Mixed Use by the Town of Windsor Flood Zone: Zone "AE"and"X" (see Site Analysis for detail) Property Rights Appraised: Fee Simple Interest Assessor's Parcel Acct.Nos.: Nos. R3065104, R1105402, R4321006, R3067604, P1850501 (personal property) 2008 Real Estate Taxes: $179,149.65 plus $7,240.98 interest and misc. charges—Total - $186,390.63 Market Value Indications Income Approach- "As Is": $ 3,950,000 Sales Comparison Approach—"As Is": $ 4,000,000 Final Value Conclusion: $3,950,000 Brekan Nava Group 09-07-14 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS (continued) Marketing/Exposure Time: The appraisers have been able to confirm information regarding the marketing time for the following golf courses: Vista Ridge Golf Club, Garden of the Gods — Kissing Camels Golf Club, Kings Deer Golf Course, Castle Pines Country Club and Ptarmigan Country Club in Colorado as well as Corte Bella Golf Club and Seville Golf and Country Club in the Phoenix, Arizona area. Each of these properties was sold within 3 to 12 months of the date listed for sale during the period from 2004 to 2008. Based upon the quality and location of the subject golf course, it is our opinion the subject course can be sold within 12 months at or near the final value estimate of this appraisal. Brekan Nava Group 09-07-14 2 PROPERTY IDENTIFICATION The subject of this report is the original 18 holes of a current 27-hole regulation-length golf course known as the Pelican Lakes Golf and Country Club. The 18-holes being valued is comprised of approximately 212.4927 acres. The subject is a semi-private golf club with a membership which also accommodates daily fee players. The original 18 holes of the facility opened in July 1999 and the third nine holes (not a part of this appraisal) opened in July 2006. The clubhouse was partially completed in 1999 and finished in 2000. In 2004 a golf shop building which includes golf carts storage and a banquet room was constructed adjacent to the main clubhouse. The main clubhouse, which originally included the restaurant, administrative offices and the golf shop, was remodeled and the restaurant seating and kitchen areas were expanded. Also added to the clubhouse was a full health club on the ground floor which includes locker rooms, an aerobics room and an area with extensive workout equipment and weights for members only. The original 18 holes were designed by well-known architect, Ted Robinson and the Robinson Design Group of California. There are four sets of tee markers for various skill levels of golfers with the longest markers extending the original 18 holes to 7,264 yards in length. A full description of the golf course and vertical improvements is included in the Improvements Section of this report. The property is located in the incorporated areas of Windsor, Weld County, Colorado. The subject property has an official address of 1600 Pelican Lakes Point, Windsor, Colorado and is the focal point of the Water Valley master planned, residential development which currently has over 1,325 dwelling units which includes 925 units in Water Valley North and approximately 425 units in Water Valley South according to Mr. Ryan Bach, Director of Real Estate Services for Water Valley Land Company. BRIEF LEGAL DESCRIPTION The appraisers requested an ALTA Survey of the subject property however, none was available. However, a legal description was available for the first 18 holes and the clubhouse areas which were obtained from the prior appraisal completed in December 2004 by the Brekan Nava Group. We have included the full legal description in the Addendum of this report. A brief legal description of the first 18 holes and the clubhouse which totals approximately 212.4972 acres is described as follows: Brekan Nava Group 09-07-14 3 "A tract of land situated in Sections 28, 29 and 33, Township 6 North, Range 67 West of the 6th Prime Meridian, Town of Windsor, County of Weld, State of Colorado." DATE OF VALUE ESTIMATE The effective date of the "As Is" Valuation is August 14, 2009. However, the date of our most recent inspections took place on February 6 and 8, 2009. PURPOSE AND INTENDED USE OF THE APPRAISAL/CLIENT The purpose of this appraisal is to estimate the Market Value of the Fee Simple Interest in the legally described property. It is our understanding that the intended use of this appraisal is to provide the client with an asset valuation to assist in loan decisions. The intended users and clients are Denver RETECHS (Wells Fargo Bank), c/o Mr. Thomas A. Arnold, 1700 Lincoln Street, Denver, Colorado 80203. MARKET VALUE DEFINITION Market value, as used herein, is defined as: "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to 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." Source: Federal Register,Vol.55,No. 165,page 34696,as of Friday,August 24, 1990 Brekan Nava Group 09.07-14 4 The subject has been valued as a going concern under various conditions. The following market value definitions relative to the valuation of the subject property are applicable. OTHER PERTINENT DEFINITIONS "As Is"Market Value on the appraisal date means an estimate of the market value of a given property in the condition observed upon inspection and it physically and legally exists without hypothetical conditions, assumptions or qualifications as of the date the appraisal is prepared. "Going Concern Value" means the value created by a proven property operation; considered as a separate entity to be valued with a specific business establishment; also called going value. PROPERTY OWNERSHIP AND HISTORY The subject site is a part of the approximate 1,200-acre Water Valley master planned residential neighborhood in the incorporated Town of Windsor, Weld County, Colorado. The subject property is owned by Pelican Lakes LLC which started construction on the first 18 holes in 1998 and opened for play in July 1999. The third nine holes, which is not a part of this appraisal, opened for play in July 2006. The estimated cost of construction according to ownership was $6,400,000 which included the main clubhouse, the swimming pool, maintenance buildings and the 18-hole championship golf course. The recent addition of the golf shop building which includes the golf shop, golf cart storage and a banquet area was constructed at a cost of approximately $950,000 making the total investment as of the present time approximately $7,350,000. The master-planned subdivision developer and ownership group, Trollco, Inc. purchased the property in March 1990. The previous owner of the land was Kodak Colorado, Inc., which purchased the land in 1968 from the Great Western Sugar Company. Previous uses of the land were agricultural. Trollco purchased the site with the intent to perform both mining/gravel extraction operations and develop the site into a proposed residential subdivision. The mining company, Poudre Tech Aggregates, was founded by Martin Lind who combined the two projects and began developing the golf course as an amenity to the subdivision. The golf course was built entirely on reclaimed mining areas and the company was able to use all of its own aggregate in Brekan Nava Group 09-07-14 5 the construction of the golf course. The only exception was the specialty sand mix for the greens and tees. Gravel extraction operations commenced in 1992 and have been completed in order to accommodate the final phases of the south end of the project. Of the 1,200 total acres, 700 acres has been dedicated to lakes, a river and open space. According to ownership, there have been no additional transactions involving the subject over the past three years. SCOPE OF THE WORK The date of the original valuation was as of February 8, 2009 (27-hole analysis) and February 8, 2009 (18-hole analysis), prepared by Ralph J. Brekan with the assistance of Gregg Lindquist, Golf Properties Specialist. The 18-hole analysis was prepared on June 8, 2009 as an Addendum to the original 27-hole analysis. Both valuation dates were February 8, 2009. Within this analysis we have updated the market data with new surveys of competing facilities (courses), prepared a new market study and a new "Income Approach" to arrive at an undated value. The appraisers requested updated financial information from ownership on several occasions however, ownership was not cooperative. Based on the original financial data used in the February 8, 2009, appraisal and the information obtained from research of competitive projects, together with interviews with General Managers and Membership Directors, we concluded that market conditions have remained similar but with continued softening. As noted, golf rounds and average collected fees were on the decline and continue to decline. Our analysis is base on this market data and the historic subject financial data. A new site visit, subsequent to the February 8, 2009 valuation has not been made. Therefore, we have assumed that all physical conditions and improvements have remained the same. This analysis only addresses the value of the subject property as an 18-hole facility and not as the 27-hole facility which is how it is presently being operated. The "Property Identification" section of this report addresses the subject as the original 18-hole facility and that there are currently 27 holes known as the Pelican Lakes Golf and Country Club. Further, we have identified the subject as 18 holes within the "Site Analysis" and "Improvements Description" of the report. The original report prepared as in February 2009 identified the subject as a 27-hole facility and an Addendum to the original report was prepared addressing the value as of February 8, 2009, as an 18-hole facility. Brekan Nava Group 09-07-14 6 This appraisal is to provide an estimate and an opinion of market value of the Pelican Lakes Golf and Country Club in Windsor, Colorado. Investigation and research was undertaken including the review of the previous appraisal prepared by the Brekan Nava Group, interviews of key management staff of the Pelican Lakes Golf and Country Club, real estate brokers, golf course managers and personnel at other competitive golf facilities, Weld County Assessor's Office personnel and the City of Windsor personnel. In addition, on-site inspections were performed at the subject property by Ralph J. Brekan and Gregg Lindquist in which pertinent documents such as building plans, financial statements and other economic data were also obtained. We have interviewed various local officials, real estate professionals, and golf market personnel to determine the current state of northern Colorado golf course and real estate markets. Market data was gathered and analyzed for each of the approaches to value. Further, our study included a competitive supply and analysis of similar golf course facilities to ascertain pertinent information used to estimate demand and financial feasibility. The Clubhouse/Restaurant and Golf Course is a "Going Concern" business. The cash flow before debt service, available for a return to the investment and/or repayment of debt is available from income derived from the operation of the golf course and restaurant. The amount of money generated from these sources is a function of three factors: • Supply and Demand • Management • Pricing In a prime competitive market, the latter two factors could be placed under supply and demand. However, management philosophy and pricing play a secondary role to supply and demand because of many factors. In this appraisal, the assignment is to estimate Market Value. Market Value is typically Value-in-Exchange. The exchange can be based upon sales to the members and/or investors. Cost of the facility typically does not represent market value, unless there is a second party demand for the golf course/country club. The cost of the facility usually represents a Value-in- Use. Brekan Nava Group 09-07-14 7 The value will be influenced by the Return to an Investor resulting from Cash Flow affected by Supply and Demand and the Direct Sales of Comparable properties. Therefore, it is our opinion the value of the subject golf course can be estimated by discounting the total net cash flow from operations, and reversionary sale. Because the subject golf course is an income producing property, our specific area of concern for the golf operation was the Income Approach to value. The Sales Comparison Approach for improved golf courses was also completed and considered but only given limited weight. PROPERTY RIGHTS APPRAISED The real estate interest appraised is that of ownership in fee simple title. Fee simple, as used herein, is defined as: 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.' MARICETING/EXPOSURE PERIOD After review of sales data, if offered for sale at an appropriate price, it is our opinion that the property could be sold in 12 months or less. THE APPRAISAL PROCESS The appraisal process is the orderly program wherein the data utilized in estimating the value of the subject property is acquired, classified, analyzed and presented. The first step in this process involves defining the appraisal problem as to the identification of the real estate, the effective date of the value estimate, the identification of the property rights being appraised and the type of value being sought. Once this has been accomplished, the appraiser embarks upon a data collection and analysis program of factors which affect the market value of the subject property, including area and neighborhood analysis, site and improvement analysis, highest and best use analysis, and the application of the available approaches utilized in estimating the 'The Dictionary of Real Estate Appraisal,3rd ed. (Chicago;Appraisal Institute, 1993),p. 140. Brekan Nava Group 09-07-14 8 property's value. Appraisers generally utilize three approaches to value: Sales Comparison Approach (also known as the Market Approach),the Cost Approach, and the Income Approach. The Sales Comparison Approach is utilized to estimate either or both the land as if vacant and the whole property as improved. The approach involves gathering data regarding sales of comparable-type properties and analyzing the nature and condition of each sale, then making logical adjustments in comparison to the subject property for dissimilar characteristics. Typically, a common denominator is found and in land value, this usually involves either a price per square foot or price per acre. In improved properties, it involves such units as price per square foot, price per unit, or by use of a gross rent multiplier. The Sales Comparison Approach is based upon the principle of substitution and is a good indicator of value of property being appraised when sales of highly similar properties are available. The second approach available to the appraiser is the Cost Approach to Value. In this approach, accrued depreciation is deducted from the cost new of the improvements and added to the land value. The resultant figure indicates the value of the whole property via the Cost Approach, and generally, the land value is obtained via the Sales Comparison Approach previously discussed. Reproduction cost new is estimated on the basis of current prices for the component parts of the building and depreciation analyzes the disadvantages of deficiencies of the existing building as compared to a new building. The Cost Approach to Value was not utilized in this appraisal. Typically investors purchase golf facilities based on their income and not their cost. The cost of golf course construction will vary significantly from one location to the next depending on the quality and design of the course. Other factors affecting the cost of construction include soil conditions, topography, availability of utilities, the number of lakes, bridges and underpasses required. Further, the location of the course in relationship to labor, equipment and services will also affect the total cost. Since golf courses and country clubs are income producing entities, the reliability of the Cost Approach is limited and only partial consideration is given to it in estimating the final market value of the subject property. The Income Approach is predicated on the assumption that there is a definite relationship between the amount of income a property will earn and its value. A number of appraisal principles form the basis of this approach with the principle of anticipation being particularly Brekan Nava Group 09-07-14 9 applicable. This principle affirms that "value is created by the expectation of benefits to be derived in the future." The Income Approach is an appraisal technique in which the anticipated annual net income of the subject property is processed in order to arrive at an indication of value. Net income in the appraisal process is that income generated before payment of any debt service and the process of converting it to value is called capitalization which involves dividing the net income by a rate which weighs such considerations as risk, time, interest on the capital investment, and recapture of the depreciating asset. The appropriateness of this rate is critical and there are a number of techniques by which it may be developed. A final step in the appraisal process is the Reconciliation or Correlation of the Value Indications. In the Correlation, the appraiser considers the relative applicability of the two approaches utilized, examines the range between his value indications, and places major emphasis on one, or both, which appear to produce the most reliable and applicable solution to the specific appraisal problem. The purpose of the appraisal, the type of property, and the adequacy and reliability of the data is analyzed and these considerations influence the weight to be given to each of the approaches to value. Regardless of the appraisal process, the main goal of the appraiser is to logically gather data which has a bearing on the market value of the subject property. In analyzing the approaches to value, it can be readily observed that most of the information must be derived from the marketplace as it is the appraiser's function to estimate the actions of buyers and sellers in the marketplace. Brekan Nava Group 09-07-14 10 Regional Map } t\� ° 1 O;'_ • , 'mead • -....„..-- si ° Hyattville Matte/ �'` S Creighton idland Wortand --- �� Rapid C' . , 120 16 'Ten Sleep \� SOOT 'P M rdo Newcastle '; Wright 18 �►:; ° Kadoka 83 ermopolis 25 1 L?6HY Wanblee rvRz Wind Ri :14_, - >Midwest , , I. 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Syracuse_ ,- S�l''-cton °Creede a Junta ; ern -' : yr\ .+ I Del Norte N S' Y .� , — Walsenburg Ulysse rite v►sta� t i � . Sprir►gfie A- ' 0- - Johnson Cortez .: 160 ---‘1,,i350 '�a'� Durango -/— t_ Alamos 56 rr -.JrJule1eo Hugotona' i:eL . 8osa Springs ��.�-1 i 84 th t neios r Trinidad 287_... ___i. ikliart_ 550 / ' ° 84/N--f-44_, -,E W XJ I 'C O 'aton OKLAHOMA Hooker. _ t�St ro i—� �t .� �t t .. � ( - . . 0 mi 50 100 150 Copyright O 1986.2003 Mc osoft Corp.and/or its suppliers. All rights reserved- http://www.miciosoft con/streets O Copyright 2002 by Geographic Data Technoogy, Inc.All rights reserved.O 2002 Navigation Technologies.All rights reserved. This data includes information taken with permission from Canadian authorities eg 1991-2002 Government of Canada(Statistics Canada and/or Geomatics Canada).all rights reserved. Brekan Nava Group 09-07-14 1 1 AREA OVERVIEW The subject property lies in west central Weld County approximately 1.5 miles south of Highway 392 which is also Main Street in Windsor, Colorado. The subdivision in which the subject is located, Water Valley, was annexed into the town of Windsor approximately six years ago. Windsor is a town of 17,000+ people and is approximately five (5) miles east of U. S. Interstate 25 and 50 miles north of downtown Denver. The subject's primary golf market encompasses an area defined by a 10-mile radius around the subject site. This area includes the Town of Windsor and the neighboring communities of Greeley, Loveland and Ft. Collins. History Weld County covers an area of 3,999 square miles in north central Colorado. It is bordered on the north by Wyoming and Nebraska and on the south by the Denver metropolitan area. Major Stephen H. Long made an expedition to the area now known as Weld County in 1821. In 1835 a government expedition came through the general area; the next year a member of that party, Lt. Lancaster Lupton, returned to establish a trading post located just north of the present town of Fort Lupton. In about 1837 Colonel Ceran St. Vrain established Fort St. Vrain; Fort Vasquez was built south of Platteville about 1840. The latter was rebuilt in the 1930's by the State Historical Society. A large segment of the Weld County region was settled by people of German descent who migrated from Russia in the early 1900's. Originally they came as railroad workers; many soon worked in the productive beet fields and eventually became prosperous landowners. Weld County's Spanish-surname population began to arrive during the mid-1920's as laborers for the sugar beet industry. Weld County's sugar beet industry began with the building of sugar factories in Greeley and Eaton in 1902. In 1903 another was built in Windsor, followed by one at Fort Lupton and another in Johnstown in 1926. Today, agriculture is still a large part of the region's economy and it will continue to represent a significant factor in the future of the Town of Windsor as well as the surrounding communities in Weld County. Brekan Nan Group 09-07-14 12 Demographics Until about 1993, the growth in Northern Colorado was directed primarily at the three cities of Greeley, Loveland and Ft. Collins with the strongest growth occurring in Ft. Collins. Little or no growth was experienced by the small towns outside of the above three communities until the year 2000. These three cities as and the subject's municipality of Windsor are located in Weld and Larimer Counties. The population of these two counties as well as the Denver MSA is shown below. Brekan Nava Group 09-07-14 13 V1 — N 00 M - M 6 p �I "at .N. OM N 7_I O0 � , h • N66 r N N N M N• O N O N h M N N M 7 •-' 69 69 N 69 69 r caa 7 Q V] '01- al N V 7 M .40 ai pI O M• b V ,p • y OI en 01 00 0 c‘fO CD Vl M Cr Q' M 0 N N h N N N M ^ 0. N h m N p0o m M N E a —• s9 69 w rte" Ca 69 69 v C , 0.0 y pI N Ca 00 h in N OI en� O an M N N ° ✓ N 7 N •N vii N M O0 N o _ h N 'O N MN. aM 69 69 N oo 69 69 C L. O ti 'n M N 00 N N e N 7 07 60 , M o r 9 NI $ N in 000 OM M N O N N O OM M a > an €4 69 A ; 69 69 = _ '- N = N M N 00 O ai pI l-- in 00 0 O N 0 a �°N L OI O N V O� VD 00 CO p U N ^ O N 00 N M O• N N N r N i ac M N b 69 69 E N .• 69 69 L O++ — r M M p a d' 7 1/40 O, a OI b b 1/40 O T OI CI tc0Oco M c • U o N N N N M o7 60 N v� N N O N M r 69 69 N 69 69 '9 C 7 M O N �O a Q V y� 7 h N 0 O ..il 00 N b N .yI 00. M N vt • cc., • N 60 vi N N M Or N O O N �O N M O y h 69 69 T M r. 69 69 y ? N a a ON CI en N o o M '• U oI w b 00 r 00 W N V N N N M O 9 N O, N 60 N M Oi RE 69 69 y N co 64 64 \D M a OI00N 'to O N , 0.co 0 N a\ ri N O N M o NI 0:i En N te• -i M b o V 69 69 C 1g M O E Q E y N O N C x U ' x , --' 0 > 0 1y a O CO N 4' F4 h-' a) o U, L x D o '' a, x «° Q o o ro a 'x CI 4 a O G N N 'ro X to tC N y G b4 a g l ti G. 7 r • d P- a o o 0 0 •d o w PD-' �1." Pte. Q 0. 0. 0. �..," 0�.. Q 0. 0. : I-- = 0 O 0. L cC W J W z I- L m Rapid growth has occurred in Northern Colorado as is illustrated by the chart above. From 2000 to 2009,the population in Weld County grew from 180,798 to 258,855 an increase of 43.2 percent. The population of neighboring Larimer County grew from 251,494 to 294,032 or an increase of 16.9 percent over the same time frame. It is also significant to note that Larimer County (Ft. Collins area) and Weld County (Greeley and Windsor area) now represent approximately 11 percent of the total population (5,026,916 people) of the State of Colorado. Weld County has been the second fastest growing county in the state for the past five years. Ft. Collins, which is approximately 12 miles northwest of the subject, is the county seat of Larimer County with an estimated population of 133,899 in 2008. Job growth was approximately 4 percent in 2008, which was driven by major industrial employment that developed in the Ft. Collins market, including the National Resource Research Center, the Anheuser-Busch expansion and other existing industries. Colorado State University also continues to have a major impact on the Ft. Collins and surrounding economy. While much of Colorado was losing jobs over the past few years, Larimer and Weld Counties added over 5,000 net new jobs. Loveland, which is located approximately 10 miles southwest of Windsor and the subject, had a 2008 population of 64,429 and reflected the strongest growth in 2000 for the cities noted above. Loveland has a more lenient political environment for development than Ft. Collins and with the influx of Super Wal-Mart and a new Home Depot, Loveland's sales tax revenue was of the bright spots in the region. Because of the recent announcements of a new regional mall, regional hospital and a hotel/convention center, the economic health of Loveland seems assured. The new "Ranch" consisting of the Larimer County Fairgrounds and the Budweiser Events Center with its 5,300-seat arena and accompanying revenues, is also in Loveland. Greeley, which is located approximately 9 miles southeast of the subject, is the county seat of Weld County which is a large agricultural county encompassing much of northern Colorado. Greeley had a 2008 population of 90,306 and has demonstrated a more moderate growth rate compared to Ft. Collins and Loveland. However, the recent trend anticipates a more rapid growth rate for Greeley in the near future. Greeley is anchored by the University of Northern Colorado, Monfort Division of ConAgra, State Farm Insurance, Hewlett-Packard and it Brekan Nava Group 09-07-14 15 appears to be a positive political climate for development. Greeley also has more proposed retail construction than any other northern Colorado city. Windsor is located in the triangle formed by the three cities noted above and has been growing at an amazing rate as the town's population doubled and its land size more than doubled between 1990 and 2000. The current population is estimated to be 17,310 and the community is expected to grow from 6 to 8 percent each year over the next fifteen years according to Joseph Plummer, the Director of Planning. Windsor has annexed a large area extending as far west as Interstate 25 in which the southern boundary of the town limits actually join the city limits of Loveland. The central location of Windsor, combined with a favorable political and economic climate toward development, is considered to have contributed to the rapid growth trend for this small city. According to the 2008 Windsor City Guide and the demographic information provided by their consulting firm, the median household income in 2008 was $83,102. Major Employers and Industry Kodak Colorado Division is the community's largest employer with a present base of over 1,800 workers. The Kodak facility began with 350 employees in the 1970's and completed a new $40 million expansion at the Windsor facility for its new Digital Imaging Division. Owens- Illinois recently announced plans to build a glass container manufacturing plant in Windsor. The $12 million, 500,000 square foot plant opened in 2005 and makes approximately one billion bottles for the Anheuser-Busch brewery in Ft. Collins. The plant also brought approximately 150 new jobs to the area. A brief list of major employers in Windsor is as follows: • Eastman Kodak 1,800 employees • RE-4 School District 339 employees • Metal Container Corp. 120 employees • Packaging Corp. of America 100 employees • Universal Forest Products 86 employees • Town of Windsor 56 employees Other employers calling Weld County "home" include Swift Foods, State Farm Insurance, Northern Colorado Medical Center, Harsh International, Plate Valley Steel, Hensel- Phillips Construction, Startek, Burris Company, Inc., Roche Constructors and R. R. Donnelley Norwest. Numerous industrial sites are located throughout Weld County. Fully developed rail and non-rail parks; undeveloped parcels, many zoned and with rail utilities adjacent to the property; a variety of commercial sites; and availability of both new and renovated prime office Brekan Nava Group 09-07-14 16 space are indicative of this area's attitude toward growth. Convenient access to every type of supply artery facilitates the industrial possibilities in Weld County. Recreation The Town of Windsor has over 116 acres dedicated to parks. There are eight parks and recreation areas currently serviced. Local golf courses nearby include Highland Meadows Golf Club (daily fee), Ptarmigan Golf and Country Club (private) and Pelican Lakes Golf and Country Club (subject — semi-private). Several new park areas are currently under construction. New parks that are in development include: • Eastman Park 56 acres • Diamond Valley Sports Complex 85 acres • Lake Windsor Project 7 acres of expansion • The Poudre Trail 19-mile trail Transportation Located approximately midway between Denver and Cheyenne, Wyoming, five miles east of U. S. Interstate 25, Windsor is ideally suited to meet any transportation needs. State Highways 392 and 257 provide access to and from the middle of the Town of Windsor. Railway freight service is provided by the Burlington Northern Railroad and Great Western Railway Company. The Fort Collins-Loveland airport is six miles west of the subject and Denver International Airport (east of Denver) is only 45 minutes southeast of the subject. The area is also served by frequently-scheduled, local limousines from Greeley, Fort Collins and Loveland. Conclusion The area economy has grown significantly over the past several years and this growth is expected to continue into the future. As part of Weld County, Windsor has benefited from the population growth, higher income levels and an increase in residential/commercial development. These are all positive factors for the development of a golf course and master-planned community like Pelican Lakes Golf and Country Club. In addition, the location of the subject site proximate to other new residential subdivisions is considered excellent for golf club membership sales and the operation of a semi-private golf course. In the appraiser's opinion, the Windsor economy will continue its relative stability, with growth and appreciation of real estate values occurring moderately in most sections of the metropolitan area. Brekan Nava Group 09-07-14 17 noel' IF t • .. __ i �•,., was ��. �� _ _ ��.... 1 u s• I � a � �! ./ �� r i a �.,Z ° r TS. II t d / e. i - —_— i_ - I . - ,! M LAM a + Q{, �' j J ° J � ,w . ' '° ,- :• ` a J a 1 ' i1 �/� . aS :₹oa ..�2�W t4 3 ,� ��w •'000iirkgis •,-; t......„,- . .4;21t• 1 2) . 7 / 7621,,„841i is,"/ ' / - - a 4- , I aim Ilia;4, a i' , )3 ' I - . - Jr- Ar ii. le `rnsa;e4,1;sifrs• s i.. ..____T _ .. /.., E. 4°1: 1'7 i K 1 t- --_ t I $ ttijc a 111 °• - '� ��a 1 Ai �[n / N� - - r` d" (,- .' •ice �;'� I ° • °daaa. ii t i NI ¢ r ` 1 or a 1 r 3'1 9 'Lill! J �7 sa l it ee% ,s eri• ' • 1 rt. Ct I inkri eicf4e1._ to tr) la nn � y,�n tea_. .._.- __ 1 -/ �- T ;-.-._ r,• an s a /II en °l l et 1 wJ >r,�l� T i ! 11 W s w 1 -. I -q^ tit-WI" r<5,•• I IA . ‘t't .• b ! retir9H7 (0,--- __ i ., F` *meet ai: a site a a 11111111 •t""° '•' , --/---------__$ * . st- -•t I sell 'NC: 1 • - 1 idicLi *I, t-iill •4, • a ` y � � ,. •k MCA a' ,may / i sel , i dr I R M y ) ' . 10, k ire* is a -• ;t' , L . .7a.-.'` L. • iiri�.r :4'.- 0 Frg ' I _ 1 ----duo ,1c-Th 1 , f- > 0 I `4 �4 1 f �i �_ .4 it ��a ,, _Ai , I • re sfirai . .1 ill 'la .,�:.T f. a[ ! III ,:.$ «isn+l�: . 1 )-y . � !II WWI it V�; o Lri Cre CC Z 0 CIS u L NEIGHBORHOOD DESCRIPTION AND ANALYSIS A neighborhood is the local area where the four forces influencing value--social, economic, governmental and environmental--directly affect surrounding properties to the same extent as the subject property. A neighborhood can be defined as: A portion of a larger community, or an entire community, in which there is a homogenous grouping of inhabitants, buildings, or business enterprises. Inhabitants of a neighborhood usually have a more than casual community of interest. Neighborhood boundaries may consist of well-defined natural or man- made barriers or they may be more or less well-defined by a distinct change in land use or in the character of the inhabitants.2 Although physical boundaries should be identified, the significant boundaries are the limits of direct value influence, which often are not physically distinct. The subject property is located approximately 1.5 miles south of mid-town Windsor and State Highway 392 which is Main Street in an incorporated area of Weld County. Windsor is a community of approximately 17,000+ people, according to the 2008 census estimates, that has experienced dramatic growth over the last 10 years. It has been known in years past to be an agricultural community. However, due to the rural quality of life, many families and commuters have chosen it as a place to reside. The neighborhood boundaries are as follows: North - State Highway 392 (Main Street) East - State Highway 257 (Hollister Lake Road) South - County Highway 62 (Crossroads Boulevard) West - U. S. Interstate 25 A map depicting the subject neighborhood area is included on the preceding page. 2Byr1 N. Boyce(ed.),Real Estate Appraisal Terminology,American Institute of Real Estate Appraisers and Society of Real Estate Appraisers(1st ed.rev.;Cambridge;Ballinger Publishing Co., 1981),p. 172. Brekan Nava Group 09-07-14 19 Location The subject neighborhood is located in the south central section of Windsor in a new growth corridor of the town. It is approximately 1.5 miles south of the center of downtown which is Main Street (State Highway 392). The diagonal distance to various towns and cities in the area is listed below: Distance to Area Cities City Miles Boulder 36 Denver 50 Cheyenne 47 Ft. Collins 11 Greeley 9 Loveland 8 Colorado Springs 110 Laramie 70 Access The subject address is 1600 Pelican Lakes Point in Windsor, Colorado, and access to the clubhouse is via Water Valley Parkway which intersects Eastman Park Drive north of the golf course site. Pelican Lakes Point intersects Water Valley Parkway two blocks north of the clubhouse. The primary means of accessing the Water Valley North subdivision is via Eastman Park Drive which travels east/west and intersects the major arterial of State Highway 257 (Hollister Lake Road) to the east and County Highway 17 (Seventh Street) to the west. The Water Valley South (Phase II) subdivision which is currently under development and the maintenance area for the golf course, is accessed on the east via State Highway 257 and the west by County Highway 17. County Highway 17 travels north through the Town of Windsor and becomes State Highway 257 north of Main Street (State Highway 392). It travels south through Weld County and intersects State Highway 34 which connects Greeley to Loveland. State Highway 257 travels north through the Town of Windsor connecting northern Weld County to the City of Greeley. State Highway 392 travels east past State Highway 85 which connects Greeley to the neighboring town of Eaton. It travels to the west intersecting U. S. Interstate 25 which travels south to Denver and beyond and north to Cheyenne, Wyoming and beyond. Brekan Nava Group 09-07-14 20 Character and Surrounding Land Uses Windsor is located in the west central section of Weld County and approaches the foothills of the Rocky Mountain front range which is approximately 25 miles to the west. Between the base of the mountain range and the subject, in addition to the numerous towns in this part of the state, is an abundance of farmland and natural resources. Many of the sections of farmland have oil wells in operation in addition to the surface crops which are harvested annually. To the north of the subject neighborhood is the Town of Windsor and Windsor Lake, which is on the northern boundary of the town. East of the subject, the areas are dominated by farmland and the presence of the large Kodak Colorado manufacturing plant. South of the subject is sparse residential development as well as open farmland extending past State Highway 34 towards the suburbs of north Denver. To the west is additional residential development of the Pelican Hills subdivision as well as the new residential subdivision of Highland Meadows. The neighborhood areas described above are all gently rolling hills as the topography lends itself to either farming or development between the subject and the eastern slope of the Rocky Mountains. The subject and the Water Valley subdivision used to be a large sand and gravel pit prior to its reclamation efforts and conversion to the present-day development. As such, the areas on the south side of the subdivision are steeply banked slopes. These areas on the south side of the subject property have beautiful vistas to the north of the Town of Windsor, the Poudre River, the Rocky Mountains to the west and the entire rural countryside. The subject is located in an area of multiple flood zones and has undergone a number of modifications with the environmental agencies over the past few years and the reclamation process to convert the property from aggregate mining to its current residential and commercial use. There are over 700 acres being dedicated to lakes, a river and open space. The State of Colorado has classified Water Valley's lakes as certified, water storage reservoirs which will insure their integrity over the length of the development. The depth of the water in the lakes varies from 20-25 feet and the built-in water oxygenation system maximizes the aquatic quality for optimum living conditions. The surrounding Town of Windsor residential areas as well as those being developed within Water Valley/Pelican Lakes will continue to add to the demand, present and future, for rounds at the subject golf course. There are commercial businesses in the neighborhood located along Eastman Park Drive to the east and west and toward the city as one gets closer to the center of town. Brekan Nava Group 09-07-14 21 Residential Development Five years ago in 2004, Windsor recorded the highest home prices of any city in Northern Colorado. A survey of MLS listings in May 2004 noted 165 resale homes listed with an average selling price of$246,484 and 190 new homes listed with an average selling price of$270,465. This compared with an average selling price of new single family residences of$178,000 just five years ago. Today, the average selling price of homes in the 3-mile radius is down to $211,439 and the average selling price of homes in the 10-mile radius is $237,944 per STDB Online Demographics reports dated August 14,2009. The chart below shows the neighborhood housing trends. Neighborhood Housing Trends 3-mile Radius 10-mile Radius Weld County 2000 2009 2014 2000 2009 2014 2000 2009 2014 Total Housing Units 3,710 5,471 6,392 44,477 66,230 75,997 66,142 98,143 113,284 Occupied 96.8% 92.7% 93.1% 95.8% 90.7% 91.1% 95.5% 91.3% 91.7% Owner 76.2% 68.5% 67.6% 73.4% 67.8% 67.7% 65.6% 62.6% 62.9% Renter 20.6% 24.3% 25.5% 22.5% 22.9% 23.4% 30.0% 28.8% 28.8% Vacant 3.2% 7.3% 6.9% 4.2% 9.3% 8.9% 4.5% 8.7% 8.3% Median Value $156,239 $189,691 $199,985 $158,208 $202,792 $218,725 $136,520 $167,536 $177,985 Average Value $177,545 $211,439 $225,822 $184,940 $237,944 $262,664 $164,766 $196,640 $210,816 *Source.STDB Online(August 14,2009) The subject is an integral part of a 1,200 acre residential master-planned community known as Water Valley. Water Valley North (Phase I) encompasses approximately 925 dwelling units according to Mr. Ryan Bach (970-686-5828), Director of Real Estate Services for Water Valley Land Company. This portion of the overall Water Valley project has been completed and is at full build out. Water Valley South (Phase II), which is platted to include over 1,500 dwelling units, is well along and under construction with the roads and other infrastructure having been completed and over 450 dwelling units complete. According to Mr. Bach, the Water Valley - Phase II subdivision has been parceled out to a number of quality developers to complete the project. Various types of residential products throughout both phases of the Water Valley development include estate lakefront homes, single family residences, patio homes, townhomes, condominiums, apartments and senior residential living. In addition to the existing golf course and lakes which have been created, areas for retail, commercial, light industrial and a future grade school are also being developed. There are over 7.5 miles of on-site recreational trails designed for hiking,jogging,biking and walking. Brekan Nava Group 09-07-14 22 Recently, Good Samaritan Society finished a $101 million retirement living facility adjacent to the Falls Nine on the south side of Liberty Road in Water Valley South. These units feature a range of modem one-bedroom and two-bedroom floor plans with a wide variety of other amenities. The developer of the senior living project, Evangelical Lutheran Good Samaritan Society, is the largest not-for-profit provider of senior care and housing options in the country. Education and Schools The Windsor School District (Weld County School District RE-4) includes the town of Windsor, the Town of Severance and an area 8.5 miles north of Windsor, 2 miles west, 6 miles east, and 6 miles south (approximately 100 square miles). The community has a number of both service and social organizations that work with the schools in sponsoring activities and offering awards, scholarships, and services. The school district works cooperatively with the Windsor Recreation Department in sponsoring various activities for the community. The school district allows the Recreation Department to use the many facilities of the district (baseball fields, auditoriums, tennis courts, gymnasiums, etc.). There are seven separate schools in the district. Tozer Primary School (P-2), Mountain View Elementary School (3-5), Skyview Elementary School (P-5), Grandview Elementary School (K-5), Windsor Charter Academy (K-8), Windsor Middle School (6-8), and Windsor High School (9-12). Approximately 12% of Windsor's students are Hispanic and approximately 2.7% are Asian American, African American, or Native American. The district enrollment is increasing each year. Expenditures per student in average daily attendance are $5,527. Approximately 56% percent of the district's funding is obtained from local property taxes. Windsor is also within 15 miles of the University of Northern Colorado (14,000 students) and Aims Community College in Greeley and Colorado State University and Front Range Community College in Fort Collins. Many high school students and adults attend college classes and the entire school system benefits in a number of ways from the close proximity of these institutions. Brekan Nava Group 09-07-14 23 Conclusion The subject property and neighborhood lies in a growth corridor in the south section of Windsor, Colorado. All of the 925+ residential units in the subject's Phase I have been sold. In addition, Phase II, which is platted to have over 1,500 dwelling units when completed, is under construction with 450 units having been sold. Other new, adjacent subdivisions such as Pelican Hills and Highland Meadows to the west of Water Valley are under development at the present time adding to the momentum of the entire Windsor residential real estate market. Consequently, the demand generators for potential memberships and daily fee rounds will continue to grow and surround the subject golf course. The pace of growth for this neighborhood and the Town of Windsor as a whole up until 2007 was quite remarkable. When the real estate market comes back to some semblance of normalcy in 2-3 years, the subject should see home sales and values come back as well. Brekan Nava Group 09-07-14 24 SITE MAP I *lila 4.# tit. -4144 1fi , . • IJyI� h 11 ti 4:. tip -t-kil.„ , 0 _,,_ •ii •, r u• \ \` _ - * -Nip 1' liriNtilill;1/4). ., ser ';; v v y 4, I it (� b 411 -toil:. ,4: 4 er.....,lit- ii. ii4a, ii ere ' IA lioila II p \ ,, • .. . i !II i‘e a .. :cit .- E.Ht‘tr_ _ % .4. • was: , i. ;4 0 ,41 M spAto •444". • .4P/Sii,e, Sktelltabli. li • ) ,, .\,.. ,,,,, . . . . il, t\ \; " t 0\ • ‘Istn . Ct.' ft $ • thk..‘ ....,. .-*et.. .0 . h Iliiiii t 4.049 040,iimp . 46%.." .1 : % , \ . / :' sibidb - I.. -. • ; : : l'..\" k\''3/4-:... ,e114. - -44-44.-' yr ti '.:' ... . . '' ,./ . ' . .---1 ' %. --_, C - '1 AES11 : '; \ ='' ► _J� t f ri : ....a.......r:.......: : :4. 7; sen• _ ;,;11.1A) ( p illi „_ �'iw• N •• • : • 1 .N.W. A:.• Iens Ili. ��r��'//////��i..�.W/��i •• •I Iti.4 .• It - N. } N ww 9— _ ire re a Pi s . i Brekan Nava Group 09-07-14 25 SITE ANALYSIS The subject property is an 18-hole regulation-length golf course located in the incorporated areas of the Town of Windsor, Weld County, Colorado. There is an additional 9 holes north of the subject 18 holes which is not part of this appraisal. Construction and "grow-in" of the golf course was completed in July 1999 and portions of the main clubhouse were completed in 1999 with completion in 2000. New portions of the clubhouse were completed in 2004 and the third nine holes was added in July 2006. The subject golf course is an integral part of the 1,200-acre Water Valley subdivision and residential community. No ALTA survey was provided to the appraisers for the subject golf course however, according to the most recent information from the Weld County Treasurer and Assessor's offices, the golf course totals approximately 212.4927 acres (according to Mr. Stan Jantz, a supervisor with the Weld County Assessor's office). For the purposes of this report and in the absence of an ALTA Survey for the 18-hole golf course and clubhouse area, we have chosen to rely on data provided by Weld County. The legal description for the first 18 holes which totals 212.4972 acres, has been included in the Addendum of this report. Therefore, the legal description was obtained from the Weld County Assessor's records based upon the tax parcel statements. The subject golf course site has an irregular shape and meanders throughout the master planned residential site. Location and Access The subject is located at 1600 Pelican Lakes Point, south of mid-town Windsor, Colorado. The site is connected to the city via County Highway 17 (Seventh Street) and State Highway 257 (Hollister Lake Road) which travel north into the central sections of the Town of Windsor. State Highway 257 travels south and east into the city of Greeley and County Highway 17 intersects State Highway 34 which connects Greeley with the city of Loveland. Water Valley, the subdivision in which the subject golf course is located, is bounded on the north by Eastman Park Drive. Both State Highway 392 which travels east/west through Windsor and State Highway 34 which travels east/west just 3.5 miles south of the subject intersect U. S. Interstate 25 which travels south to Denver and north into Wyoming. Access is considered good for the residents of the Windsor and surrounding area and the site has good visibility from Eastman Park Road, State Highway 257 and County Highway 17. Brekan Nava Group 09-07-14 26 Topography/Drainage The subject site is located in the south section of the Town of Windsor in a relatively flat land area bounded on the south by a steep ridge overlooking the town. The overall property slopes slightly from west to east approximately 4,755 to 4,746 feet in elevation. The entire Water Valley subdivision was previously an aggregate sand and gravel excavation site which has been undergoing reclamation into its current use as a master-planned,mixed-use subdivision. Over 700 of the 1,200- acre Water Valley subdivision has been dedicated to either lakes, a river or open spaces so all of the water drainage travels towards the man-made lakes created within the development and the Cache La Poudre River. The golf course architect, Ted Robinson, has used the abundance of made-made lakes and open space to form the golf course sites. The Pelican Lakes 18-hole course advertises having"more shoreline than any course in the world". The shorelines, which form most of the holes on the subject golf course, provide for a very aesthetically pleasing environment. With the exception of the southern portions of the subdivision which increase in elevation to the ridge above the area, the overall topography is generally flat with gentle contours built into the golf course routing plan. The created contours of the golf course lend themselves well to the surrounding residential lots, as many of the lots are situated along shorelines looking over the lakes and playing areas. The drainage of the subject site follows the contours of the land toward the water hazards, the wetlands and the riverbed running through the golf course. Based upon the site visits and discussions with the golf course superintendent, Mr. Scott Banghart, the clubhouse/maintenance building sites and golf course appear to be developed for proper water runoff and drainage based upon the drawings provided. Soils and Vegetation A soils report was requested by the appraisers, however, none was available for review. We understand from the discussions with the Golf Course Superintendent, Mr. Scott Banghart, the ground soils on the site and drainage are adequate to support the property's use as a golf course. Because the subject property was used for aggregate sand and gravel mining prior to development and the soils were created from existing and nearby excavation of land. Vegetation was incorporated from the adjacent terrain and is comprised of various types of native grasses and fescues. The borders of many of the holes along the Cache La Poudre River which come into play have been allowed to retain the original state of vegetation. The large presence water and the native Brekan Nan Group 09-07-14 27 grasses and fescues has given the subject golf course a unique Colorado feel and the architect has completed an excellent design which can be enjoyed by many types of golfers. Upon the appraiser inspections and per management interviews, no potential structural problems were noted due to the surrounding soils. Therefore, the soils appear adequate for the subject development and continued uses. We have no knowledge of the existence of any hazardous materials in the soil and we have assumed the soils and improvements do not contain any toxic or hazardous materials. Because the appraisers are not experts in this field, we do not warrant the absence of hazardous materials and an independent analysis of such conditions is recommended. Flood Zones The subject site is located in the FEMA Flood Insurance Rate Maps No. 0802640005A and No. 0802660605D both dated September 27, 1991. The Flood Plain maps are included in this section of the report. The subject sites are designated as Zone "X", "AE". There is a considerable portion of the subject property influenced by the Cache La Poudre River. It was reported by the Golf Course Superintendent that the tee boxes, greens and building structures are removed from the flood zones. Because the appraisers are not experts in the field of flood zoning, reclamation efforts and modifications to protect properties such as the subject, we must assume the use of the course was acceptable to the appropriate governmental agencies as construction was completed. Flood Insurance is available and required by the Flood Disaster Protection Act of 1973. Zoning The subject golf course site is zoned RMU(Residential Mixed Use) according to the Town of Windsor Planning and Zoning department. Article XXIII of the City of Windsor details the intent, locations where permitted and use regulations allowed in this zoning. The golf course was granted as a conditional use by the City of Windsor, however the RMU does permit recreational uses as well as open space according to Section 16-403, paragraph 2. This zoning is intended to accommodate the subject golf course as well as the residential use within the Water Valley master- planned subdivision. It allows creative designs not associated with straight zoning districts. Density variations are required. The current use has been approved for the subject golf course development and is a legal conforming use under the "Residential Mixed Use" Zoning classification. Brekan Nan Group 09-07-14 28 r1 { , : .rO SiC R 7Z -- _ . I - ca. - NI le j I.1 „. V,\ e -.I Sy -1 :- - . _. i .t.I LCR�)!( ILM0.Y . jj . _1 PI., ,\\ I\ lj I ' `T . 44 iiiii A g V Sd Niger - /r-f, 5:. i. .... 411 . ,... Lc 'ht.zi a �a �'-( 2 N R; 72 II i .. ` . .. N !fL �; • - /. 10• ts ., . x RI 1 is -` 1 1 • 3 ., .1 S il. ■ LJ ikka. ii iiP .-.-. L 1 E 23,1goav •i tog' - ::,,-- I.. .. . P: N 13 . la ll, NPWIllarier . I. .: • — I s 4 .1 iii at : -m I ',I. rf• Smit - 41 I It . - ill t ill - ch, Fe Ti. :,,,$ D2 r- NCR IT-I i• — -1-26i MI .{ L r� f ✓- `�� a irk_a '- T � L- 4i . f 1 1`,rw - > N 4 '7)I - rr. �" sa 34 36 its _� r 31 a �� 1 i� •. '4.1 C ,1 . . ,IH . tl i Subject r Y 1 S 1 i, I a s - - F %VCR 60 11\a nt sim-ss U 12 a s 9 11 -d N algid r`L3 : 'l'3J 1_ <\_— Y7J BYPASS A _ - [-i #'.-' ....) : C.- 1+.•... 1 1a i, 1414 ILIj . : 1k3 • --4--- HS ls7 LEGEND -- 1 E-1 Low Density Estate ® MT-2 High Density Multi-Family Residential [ 1 PUD Planned Unit Development E-2 High Density Estate RMU Residential Mixed Use [_J I Industrial (I invited Industrial) El SF-1 Singe Family Residential . CBD Central Business District ® I-L I imited Industrial ST-2 Sink Family Attached Residential . NC Neighborhood Commercial . I-H Heavy Industrial MF-1 Multi-Family Residential . GC and GC-PUD General Commercial . 0 Recreation and Open Space InliatIKLU WIwlsoR N ra- .,--.. _� b' _ •• rs-a TOWN OF WINDSOR, CO `�ry r . '" '`` " Y y • • . . 1•• f./ .Na1 ••.�..• R.�am.w�/Yr rV.ald•�•Vi�n�V toton.o0 ZONING MAP Brekan Nava Group 09-07-14 29 Flood Plain Map #1 PROPERTY ADDRESS:(a...) S�BO N LI N E com v 1620 Pelican Lakes Pt, Windsor, CO 80550 FL00DBOURCE� FL04DSCAPE'� .. -, N\ 1 1 ollik i *o North • :7•--ZONE X - I REFER MA \ « ) RA r \� (, / I l4 ( 1 i / ---1_,,, /Ala Weld CUt111L} ` -13 �, 1-f - AMEN ACT Ir4CLUaED FLOODSCAPE Flood Hazards Map _.,. _.._�-.__ __ _ �_ ' Map Number / _ - f _._-- ___ 0302d40005A • I Effective Date / September 27, 1991 ZONE X /,' Flood Legend j II high flood risk l// i ■ Moderate flood risk • Low flood risk \ o / 1 rep; ntm concern a t:c Ct•rt ca �' I. CditcM.�tfQ COnYRL xY 1 of carp eten : N ' i0) Pc 469 574.1234 m - CI' 7006 1400' 2100' 2300 Fasted by FcodScute rMs.food,ovte cam 1 1 O1999-2049 to1N0Wrose CorpOratlori Al rigors reser.ed. Protected by U.S P3e1t Nu'rt'ers 6631326. E67b615, 6t42694, ants 711386e1. Brekan Nava Group 09-07-14 30 Flood Plain Map #2 PROPERTY ADDRESS:(!) STD Bo N LI N E.eom ' 1620 Pelican Lakes Pt, Windsor, CO 80550 OODSOURCE/ `� v FLLDSCAPE"' �? RM2ell 0 X = n. North. pm u 6 P 79 , 1 / \\\ 1:\ - ` 1 all r ZONE C /b et iIn -- .—' . ` `l'► iFf) \ i ON E A6 -�---- T A \\ 4..., FLOODSCAPE er t. , p. Flood Hazards Map t� ` Map Number �t 0802dbO505D I'llEffective Date September 27. 1991 l Flood Legend `\ • High flood risk • 1 Moderate flood risk f I ■ Low flood risk 1\ m7.repent?mkt no '� reps-.enta�JCM u NartartlG FLOODING EFFECTS FROM ' Caiwflgt * cf stony ` a cornpletenes:. CACHE LA POUDRE RIVER Na tosi � E BASE NE � u STDBonine.com 33 1 460.574.1234 t t '^ NE Q6 0' 700' 14Q0' 2140' 2300' Powell b/iioo05oute 17 7.77.R 000 '�., ... wn eoorr aurce cam 1 O1999-2003 SowcePmse Corporation. Al rtgtr:s reEer:et. Protected by U.S. Patent Numbers 6631320 6678615, 6142698. and 7038581. Brekan Nava Group 09-07-14 3 1 Utilities and Services All utilities are available to the Pelican Lakes Golf and Country Club as well as the Water Valley residential master-planned community. Domestic Water: Town of Windsor Electricity: Xcel Energy Telephone: Qwest Communications Cable Services: AT&T Broadband Sanitary Sewer: Town of Windsor Natural Gas: Xcel Energy Police Protection: Town of Windsor Fire Protection: Town of Windsor Irrigation water is obtained from the well located adjacent to the main clubhouse site at the east end of the public parking lot. It was reported by the Golf Course Superintendent the subject property has 10 shares of the Whitney Irrigation Ditch equating to 450 acre-feet of irrigation water. The most recent sale of Whitney Irrigation Ditch water was $70,000 per share which equates to the value of the water for the subject property being $700,000. These water rights would be transferable with the sale of the subject property according to Mr. Leonard Wiest , the COO for the Water Valley development. The well has the capacity to pump up to 2,400 gallons per minute, according to Mr. Scott Banghart,the golf course superintendent, which is more than adequate for an 18-hole golf course the size of the subject. Mr. Banghart indicated that the maximum capacity used on a daily basis in the peak irrigation season was 1,800 to 1,900 gallons per minute. Real Estate Taxes There are four tax parcels comprising the golf course and clubhouse sites and one tax bill containing the personal property taxes according to the Weld County Assessor's office. The Assessor's Parcel Maps are a part of the appraiser's office files for future reference. The 2009 taxes were not available as of this report, however the total taxes in 2008 for the subject according to the tax statements were $186,390.63 which included $7,240.98 in interest and miscellaneous fees. We have used this total in the discounted cash flow analysis. Brekan Nava Group 09-07-14 32 2008 - Real Estate Taxes - Pelican Lakes G & CC (original 18 holes only) Land Improvement Actual Assessed Account No. Acres Value Value Value Value Taxes 1 R3065104 177.6855 $71,074 $2,321,975 $2,393,049 $693,990 $78,874.74 2 81105402 5.7700 $605,850 $1,765,665 $2,371,515 $687,750 $78,165.54 3 R4321006 11.1732 $5,587 $0 $5,587 $1,620 $184.12 4 R3067604 17.8640 $7,146 $0 $7,146 $2,070 $235.26 5 P-1850501 0.0000 $0 5.9 $0 $21,689.99 Total 212.4927 $689,657 $4,087,640 $4,777,297 $1,385,430 $179,149.65 Note: Interest and Additional Misc. Charges by the Weld County Treasurer's office $7,240.98 Total(Inclusive of Interest and Misc.Charges) $186,390.63 Adjacent Land Uses The subject golf course site is surrounded by residential development within the Water Valley master-planned subdivision. The predominant landscape of the golf hole perimeters and the borders of the golf course is gentle slopes of natural grasses and fescues in addition to the five lakes which come into play. The adjacent uses of land to the Water Valley subdivision are as follows: North: Single-family residences East: Eastman Kodak campus and Agricultural Land South: Open Space and Agricultural Land West: Single-family residences and Open Space Environmental Site Assessment The property had been an open mining area for aggregate materials prior to its current uses. We requested but were unable to obtain a Phase I Environmental Site Assessment to verify any possible contamination to surrounding soils at the golf course or surrounding residential development. While no visible signs of toxic contamination were noted during our property inspections, the appraisers are not qualified in the field of environmental assessment. The absence or presence of environmental contamination is beyond the expertise of the appraisers and cannot be determined without testing by qualified experts. For purposes of this report, it is assumed that the property is free of any contamination. It is a special assumption of this report that there are no conditions which would negatively affect the subject site and its use as a semi-private or daily fee golf course facility. Brekan Nava Group 09-07-14 33 Easements/Encroachments Based upon the appraiser's experience of similar golf course properties located within master- planned communities, a number of easements which include utility, ingress and egress, and communication easements are likely to exist. During the two site inspections, these potential easements did not appear to be unusually burdensome or restrictive. While no visible signs of any adverse easements or encroachments were noted during our property inspections, the appraisers are not qualified in the field of easements and encroachments. The absence or presence of any restrictive easements and encroachments is beyond the expertise of the appraisers and cannot be determined without consulting qualified experts. For purposes of this report, it is assumed that the property has no adverse easements or encroachments that would negatively impact the value indicated. Water Rights Water rights in Colorado are unique compared to parts of the eastern United States. The use of water is governed by what is known as the "prior appropriation system". This system of water allocation controls who uses how much water,the types of uses allowed, and when those waters can be used. A more simplified explanation could be referred to as the priority system or"first in time, first in right". An appropriation is made when an individual physically takes water from a stream or well(when legally available) and puts that water to some type of beneficial use. The subject has ownership of 10 shares of water rights from the Whitney Irrigation Ditch which flows from the Poudre River. The Poudre River flows through the subject property. 10 shares of water rights equates to approximately 300-acre feet of water availability. According to Mr. Scott Banghart, the Golf Course Superintendent, and Mr. Leonard Weist, the COO of Water Valley Land Company, these water rights are transferable and can be bought and sold. According to Mr. Weist, the most recent sale of water rights involving the subject occurred in the last 12 months and was for$75,000 for one share. In researching the value of recent water rights sales, the appraisers were only able to obtain verbal confirmation of sales data. According to Mr. Craig Harrison with Harrison Resources (970- 612-4100), a broker of water rights in Weld County and for this area, the most recent comparable sale to the subject's water rights was the sale of one share for $70,000. In Mr. Harrison's opinion, the sale of 10 shares which is what the subject has title to, would be roughly the same per share. The sale of much larger quantities would most likely reduce the per unit share price. This estimate Brekan Nava Group 09-07-14 34 was also confirmed by Mr. Doug Kemper with the Colorado Water Congress (303-837-0812). Therefore, in the absence of documented sales from a multiple listing and based upon the interviews of the above experts, we have assigned a value of the 10 shares of water rights for the subject at $70,000 per share. Summary The subject site provides very scenic views of mountain range to the west in the direction of Rocky Mountain National Park as well as the surrounding the Windsor area. The clubhouse and residences adjacent to the subject property have excellent views of the golf course and the lakes because of their locations, although there are some interior homes not located on the golf course with less attractive views. The golf course routing plan for the original 18 holes was created from the earthwork and soils present during the aggregate mining reclamation process. The landscape for the third nine holes was created out of the hillside to the south of the original 18 holes. The architects were able to create a unique and enjoyable golfing experience on all sections of the site. The site has no unusual characteristics that would make it difficult or preclude completion of the surrounding build out of homes and other developments in the south sections of the subdivision. The overall plan of the subdivision indicates the Pelican Lakes Golf and Country Club will continue to be a high-quality amenity and will have a positive influence within Water Valley and the Town I of Windsor. Brekan Nava Group 09-07-14 35 - IIt :•_ •* is 1 1. 51 1 � 1 , �1 ti ,.. r , • .5• `t 1 I 1 Ai y• J t ii♦f r 1 1 . 1sli% lid'. 47 t � w 1 / • • r ' {{ 1 4. i,•• rt Y �,T �, 't ;e �.`� is r. ',L "�_ai .r .11 • tit ��♦- • ' Ifir .. • ct •air i ii. . 1 y.l p tl t r lJo 1 1 V.+ 11. SI- II LLI so •1 f • '' 1, . ~ y, � . i _ - , B � o vJ01 , III 4 p •� o O • 4 111:1111--fr \jiQI!ll . 71 .E { 1 .... 2# � t, U • iiii f t n /0 U ' ti MG I¢�.�' ,L IK • ,1( �1 ��v. �'�'1 S it • r '. • 1aa.". t I tri lr. •'. �t1tL �.. c r, • • • . • 4 i: •.. . ,. .. .., .• • i. , , . fitt , ••- i.r. / • ji 4.. • Y" 19�� per•.+,_ a t • 1 • el 4 1II P Q CD • I1�. 'L r 4\ • , _ on a.a..lia str \ p . 11 q3/4 1 :1; 0 gr.; It . . .i =.. O yew I i . i . = `� \ ct: 11 . ' ' r z ILL-4 lit- -• : .I j L d I '4,i % nt f ,_•._. . 1 J' V. 1i .t. ,. :.M r - �1 , -„ i_ rf I. 1/' fitly r li - iv • r `fir aVIa : _ �� • rolik 4_4 t4 i IA •• = 4. J f C O ,r• Q • •• i I 4... . Ct . .� y� U y o ti �Z.. It a - •- '/ it • ri + .y. •,if ` • a.. ,i � ` 4�.. _ ..�lit. iori )4 I cz: CI 1 i f ill..-.. arca 4 . rI I a 4 i yi ' • r y�.�� r f S • - .l i .�yf(1'`i I I iii .- �_ - ' ' 'R � 11 - Y1- < ix. ♦ bel _ _ • • • i i I . ft I 0 I ≥ O I w' . TeilliikH O ,, oil y , J ill 0 .� ? - y yr ti Q) r jOF . f{a '. r1 :..� .:l,. C.. '1 .:{- 4r . 1, . I ' ,' Co IP/ i CO Tr x• .. ! • � 1 + CZ !1_t t , C1 O s?1i C' O I CU RI L. C IMPROVEMENTS DESCRIPTION The subject vertical improvements consists of a 11,836± square foot, two-story main clubhouse with a mezzanine office area above the restaurant in addition to a 9,520 square foot golf shop building and five maintenance buildings totaling approximately 6,306 square feet. Also present are "on-course" restrooms, ample clubhouse parking, ancillary buildings and furniture, fixtures and equipment. According to the plans, the parking lot located immediately east of the clubhouse, has approximately 146 regular parking stalls, 6 handicapped parking stalls and has adequate ingress/egress for the subject clubhouse. The parking areas, which are lighted for evening use, are paved with asphalt and have medians with plantings and landscaping. The clubhouse buildings are ADA (American's with Disability Act) compliant with handicap access throughout. Building Improvements The quality of a clubhouse at a facility such as the subject can have a direct influence on the ability to generate additional revenues in the two primary departments of golf operations and food and beverage operations. It can also be the deciding factor when group planners are considering two competitive golf courses for a major function. The site has been improved with a good quality clubhouse facility consisting of two buildings connected with a concrete deck. The style of the buildings is a contemporary lodge design taking advantage of the lake and mountain views. Both of the buildings are two levels with the lower level being at grade level with the golf course. The original main, clubhouse was constructed in 1999 and finished in 2000. The second building was completed in December 2004 comprising the golf shop, lower level golf cart storage and upper level banquet area. The entire two-building complex totals 21,356 square feet. The main clubhouse consists of a large, covered porte cachere and entrance into the main restaurant building. There is also a large two- story stone fireplace. The main dining area features a newly redecorated area with a total seating of approximately 120 people. In addition, there is an ample size service bar with seating for up to eight (8)people. The main level has men's and women's restrooms. The lower level has a complete health club with weight room, aerobics room and locker rooms to accommodate member activity. Access to this area is by stairway only with outside ramps for ADA access. There is a Brekan Nava Group 09-07-14 38 mezzanine level of approximately 1,344 square feet, above the restaurant which has a separate room for private dining as well as a room for administrative offices. The main level of the new golf shop building features a formal entry with men's and ladies' restrooms located immediately off the entry way. The building also features a large golf shop with a point of sale counter as well as an office area for the Golf Director and other Golf Professionals. The golf shop appears to have ample square footage in the golf shop for maximizing retail sales and making a positive first impression for potential customers planning golf activities. Adjacent to the golf shop on the same level is a new banquet room with a separate bar for servicing guests at receptions. On the lower level beneath the golf shop and banquet rooms is the golf cart storage area with sufficient area for the fleet of golf carts, utility carts and bag storage for member's golf bags. Also located in the lower level of this building will be the range ball storage, golf bag storage, cart beverage carts, cart washing area, and one unisex restroom with water closet and a built-in lavatory. Access to the lower level is via a driveway and interior stairway. The pertinent building details are as follows: • Foundations—reinforced concrete • Exterior Walls—Stone veneer, log siding and stucco • Roof—heavy composition shingles; hip style roof design; gutters and downspouts • Floor Systems — light weight concrete over plywood on main levels; reinforced concrete floors on lower levels • Doors — Front doors of wood, solid core; rear doors of metal service doors; interior of wood solid core • Insulation—R-38 batt insulation in ceilings; R-19 batt insulation for walls. • Interior Partitions—Wood studs with a mixture of drywall and paneling. • Heating, Ventilating and Air-conditioning Systems — Six (6) GFA/AC units for the entire complex located on the roof • Electrical System — Individually metered service; 110/220 volt service, three phase, 200- amp service. • Plumbing System — Two eight-fixture baths on the main level of the original building; extensive plumbing provided for the locker rooms in the health club on the lower level. • Covered Canopy— a 24-foot covered canopy/porte cachere across the northeast side of the original building. • Covered Walkways and Decks — Approximately 5,360 square feet of decks and porches located to the south, east and west sides of the two main buildings. • Windows—wood frame and double pane, aluminum-clad windows • Fireplace—on main level of clubhouse • Golf Shop—wooden fixtures and wall units • Lighting—fluorescent strip lighting in kitchen and spot lighting in most other public areas Brekan Nava Group 09-07-14 39 • Interior finishes — Floor areas are a mix of carpeting, hardwood and tile floor coverings; ceilings are mostly acoustical tile; walls are primarily drywall and paneling. With the exception of the 24-foot ceiling height inside the main entry, most of the ceiling heights are 9-foot ceilings The restaurant/food and beverage areas appear to have sufficient size and flexibility with the main dining room to accommodate small indoor dining functions as well as daily needs. There is also an exterior veranda on the upper level adjacent to the restaurant to accommodate larger functions and other types of private parties. There is also a Cabana of approximately 1,056 square feet with men's and women's restrooms, showers and a snack shop; constructed in 1999 of good quality materials and workmanship. Other Improvements Other improvements include the following: o Clubhouse Landscaping — extensive landscaping and planters located on all sides of the clubhouse buildings • Parking Lot — the subject has ample parking for approximately 146 vehicles; the lot is lighted with overhead fluorescent lighting • Swimming and Wading Pools — there is an Olympic-sized pool and additional wading pool for member's use only adjacent to the main clubhouse building which was built in 1999 Furniture, Fixtures and Equipment The subject clubhouse has a full line of appliances for kitchen equipment which include a commercial grade ranges and ovens, a dishwasher, disposal, hood and fan, microwave, refrigerator, walk-in refrigerator/freezer. In addition, the subject owns the fleet of golf carts, the GPS yardage system, golf shop inventory, tables, chairs, computers and other ancillary equipment. The majority of the golf course maintenance equipment is leased. Per the current personal property tax statements supplied by ownership, the depreciated value of the fixed assets was approximately $400,000 excluding the golf shop inventory. The golf shop inventory was valued at approximately $100,000 per the Director of Golf, Mr. Bob McNamee. Brekan Nava Group 09-07-14 40 Clubhouse Site Plan . . o s O .1 /1\ •,t, //fr, Mimi:Ai --- ,/, :_b A4 / r /is),xfilkat.,_ bey „tat„. N ,,,, . , ,z,,., ...,, ..iiir.4 -. . N . • Raj , I 1:2. ,0414,-diril€MIN W, . of /1�• �..r4 0 21 '1, L .\ `; I\sj 1C��off,,,m lI t • \1.--\. —.-:(. \. ',.:0.04\ti 1 top • itrttt! —"44%\ in i ,,"U I 1,_'m:►,,� � atrr: o iI o J ( I/ ' , wDa All I , / '/ 14 //, ;gild/.1� I �Vl�I 1 / �; / li lAili '' s i I l i/,' �'� ��Li , ). 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O 'it - ' '. . - - t .4 • a.p i .O ti . � t do\jahliki �. < A ..% •t a b • .ice r 1 y �• • * ‘49IS le \ 4.1 r1 ..,:e? y y s 1 s CS 1 r4 CI J1 1 r 1/ {i i _ i 1 t L"J Y w - j' > J i cu t {, . . T.I. 1.z . ,.ittar- I. *•4 • 'r•se4 '" •'1 H a 11 • ,I(Al 11-11 } f ti 1 . : 1 t 2 t > tg_ i a Li ilti ., . ., 41,4 it ,1 . 1 r s r V • i r■ Cld , - . , 41V ant it Sal if 1 t T f,i r r' O ii • f. # r 41111)::: 'f .t 4 .�} , ' ti- • ., . „lilt .• � 1 1 1 - ;•,'tip i •; �(, t 1 `- e C• ' S : ' D t 1 .V r . -'TSx "k ' . .._ • "!C ' t L. - -...taoi , q _j4 1 i ,111' Sot • I - ' r. • :_.,... , . •. . vi • .... , . O_ ii,41 . . . ais. . • . (3) .. 1 I. 0 ti . . 4 . .1% . ;-• ..JP A 4 t 4 `. % f:*.I t 1 ' gir n T Z ♦ l` 1 ._ • F ` N 1 '' , c i - CO hilitH . • _ . . : .: :: Lell i L q Golf Course Maintenance Facility The golf course maintenance facility is located in the center of the golf course and is presently accessed on New Liberty Road. New Liberty Road intersects County Road 17 to the west of the course and State Highway 257 to the east of the course. The appraisers were not provided any yard or building plans for the maintenance yard. The specifications of the proposed facility were provided by ownership. The existing yard is surrounded by the five building complex used for storage and offices. The yard area is utilized as a parking area for mowers, other golf course maintenance equipment and employee parking. There are two above-ground gasoline tanks containing diesel and unleaded fuel in the yard area. The main building on the north end of the complex includes the superintendent's office, an irrigation computer office, equipment/tool storage areas, a mechanic's area, a lunch/break room with small kitchen, men's and women's restrooms and showers. Golf Course Restrooms There are two restrooms on the subject golf course. They resemble the clubhouse in construction materials and design. Each restroom has a separate men's and women's side. The men's side has one urinal, one handicap water closet, one sink with mirrors, and concrete flooring. The women's side has one handicap water closet and one sink with minors and concrete. Property Condition The main clubhouse/restaurant building, golf shop building and maintenance buildings were in good condition. The main clubhouse building was completed in December 2004 with the restaurant renovation. The golf shop moved at that time into the new adjacent building connected by the expansive balcony. The golf course turf was completely dormant at the time of the site visits however, per the interviews with the superintendent, Mr. Scott Banghart, the turf conditions were excellent for the past season. The subject's buildings are of high quality and design. Therefore,the structures should have remaining economic lives of more than 35 to 40 years. Summary of Building Improvements The golf course, clubhouse buildings, the maintenance buildings and ancillary improvements support the operation of a semi-private golf club. The golf course improvements were in good condition and equal or superior to any of the conditions of the courses surveyed in Brekan Nava Group 09-07-14 46 the competitive analysis. Based on our site inspections of the subject property's clubhouse and those buildings of courses within the competitive set, the physical facilities are considered of very good quality and commensurate or superior with the clubhouses of this market. For reference purposes, we have included a diagram of the clubhouse elevations and corresponding photographs of the subject in this section of the report. Brekan Nava Group 09-07-14 47 C �,�1 t. ;7 - ' - a.. - _ 41.1 7 lf 00 r-4: 4 l' i et • • " . " •QCs l .V 1 „ • 41 • .t .Z ' ._ 0 � � - U '' A. tb x i. O O > E•k U Co.) 11as CI? 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HCP NET - : : - `+r .,- •- - 1 ' V--- _- a:w: "read i _ Black 411 566 414 216 521 403 436 377 200 354 4 N 455 542 215 405 430 590 384 208 190 3720 7264 P! :' 381 526 380 185 492 366 380 356 176 3242 T 383 510 200 376 393 517 351 185 409 3324 6566 '352 499 353;157 463 337 353 33711601 3011 A 54:479143'346'365 490i320 1 S5:376 3028 6039i III iiiiiiii ntinuiell Ni. _ 1 k (,. aliwaaliiiiiiii ■ Red 309 448 291 118 431 271 312 270146 2596 304 431 i i 3 304 336 447 2ou 1 , 330 2670 5266 Ladies' Handi•: I 3 1 9 17 11 15 13 I 1 afl 6 14 18 i 16 10 12 4 2 Sco;cr: ' (:O11USE RATING'S/SLOPE PELICAN LAKES PELICAN I AKES PELICAN FALLS Men's: Ladies': Black Tees 66.4 / 120 Black Tees 73.8 / 134 Blue Tees 77.0 / 148 Blue Tees 63.4 / 110 Blue Tccs 71 .2 / 132 White Tees 74.2 / 141 White Tees 61 ,6 / 102 White Tccs 68.6 / 120 Red Tees 70.2 / 130 Red Tees 62.0 / 108 Brekan Nava Group 09-07-14 50 GOLF COURSE IMPROVEMENTS DESCRIPTION The preceding appraisal dated February 8, 2009, was of the current 27-hole operation, however, this appraisal covers only the original 18-hole golf course and accompanying improvements. The subject, as we are appraising it in this report, is an 18-hole championship- quality, regulation-length golf course measuring 7,264 yards from the Black (Championship) Tee markers on the Lakes Course. The Lakes course opened in July 12, 1999 and was designed by the internationally known architect, Ted Robinson, Sr. The Falls Nine which opened on July 12, 2006, is not part of this appraisal. The course has four sets of tee markers making it enjoyable for all types of golfers. Even though the Lakes course was constructed out of an aggregate mining area having a large amount of water surrounding many of the holes, it is still very golfer friendly because of the generous landing areas. There are only a couple of tight landing areas which come into play and make these areas of the course more difficult than normal. The subject golf course first began construction in 1998 with the shaping of the course according to the routing plan. The shaping consisted of manipulating and grading the topsoil to obtain the features designated by the golf course architect in the plans and as directed in the field. The intent of shaping was to match closely the location and intent of design features as shown in the plans and to follow the Cache La Poudre River as closely as possible. Undulations or irregularities in the surface resulting from tillage, fertilizing or other operations were subsequently leveled out prior to seeding operations per the construction specifications. Site Improvements There is a practice putting green area located adjacent and to the south of the clubhouse. The driving range is also located to the south of the clubhouse adjacent to Hole Nos. 1 and 10. Concrete cart paths have been constructed from tee to green, around the clubhouse and the entire golf course. The golf course is approximately 212.4927 acres, according to the information provided to the appraisers the legal description. The subtle elevation changes throughout the course are a result of the shaping which closely followed the architectural contour plan. The course has an extensive amount of water surrounding it, a total of approximately 260 acres, according to course superintendent, Mr. Scott Banghart. All of the residential neighborhoods are slightly higher in elevation than the golf course on the shorelines offering many scenic views of the course, adjacent hills and the mountain range to the west. Brekan Nava Group 09-07-14 51 Turfgrass and Maintenance The turf grasses consist of "A-4" and "A-1" Bentgrass greens, and a combination of Kentucky Bluegrass/Perenial Rye for the tees, fairways and roughs. The architect used USGA specifications for proper greens construction with sub-drainage under the layers of gravel, sand and topsoil. This mixture is designed to create a perched water table effect and keep moisture low in the root zone of the grass. This combination also allows sufficient moisture and oxygen to reach the plant while avoiding compaction and being vulnerable to fungus growth. The golf course greens, which average approximately 7,000 square feet, and the practice putting green were all built to U.S.G.A. standards. The fairways are mowed at from .75 inches to .85 inches, while the roughs are mowed at approximately 2.0 inches in height. The tees are typically mowed at a height of .5 inches and they are mowed three or four days per week depending on the time of growing season. The greens are mowed primarily with walking greens mowers to insure a high quality condition for players. Occasionally when time constraints make it necessary, the greens may be mowed with a tri-plex greens mower to facilitate time-savings. The turf conditions and the overall golf course aesthetics were good during the past golfing season according to staff and ownership. The turf areas were all dormant at the time of the site visits. Because the subject course is a high-quality, semi-private facility with members and guests and because it charges a green fee on the upper end of the affordability scale, great care must be taken to insure the turf quality of the golf course. The soils in this area are on a regular aerification program. The golf course maintenance staff has from 12-18 full-time and part-time people including the head superintendent depending on the season. Over 50 percent of the overall maintenance budget is devoted to payroll which is quite standard in the industry. Continuous golf cart paths were installed so that, in the event of heavy rains, the course would be accessible soon after rains subsided. Under any other conditions without a continuous path, prudent management would typically require suspension of play until the course drains properly. Irrigation System The irrigation system is supported by the five lakes on the original 18-holes. The main pumping station for the original 18 holes is located east of the main clubhouse complex in a Brekan Nava Group 09-07-14 52 small building adjacent to the parking lot. This pump station has pumps powered by a Toro Flotronics System. From this point the irrigation water is pumped to the various locations on the golf course with the use of a Toro Computer System located at the maintenance building complex. There are approximately 2,000 Toro heads located throughout the golf course. On average, the courses require 400,000+ gallons per day to be adequately irrigated, however, the system is capable of putting out up to 2,400 gallons per minute during the dry season if necessary. The area typically gets from 12 to 13 inches of precipitation annually and approximately 4.9 inches of snowfall annually. Bunkers The subject property has approximately 70 bunkers which are evenly distributed on both nines. Per the photographs and the limited site inspection, all of the bunkers appeared to have adequate sand and have ample drainage for the clearing of excess water. The sand incorporated into the bunkers was clean and stable, locally-washed mortar sand. All bunkers, both on fairways and greens, appeared to be constructed so that the edges blend well into the fairway and into the surrounding ground. Cart Paths Cart paths were constructed with concrete and are typically eight(8) feet in width. The paths are continuous from tee to green and there are areas where the paths widen for turn-outs as well as the clubhouse areas. In all instances, the slope of the cart path matches the existing grade of its surrounding environment,where possible. Native Areas,Tree Planting The architect enhanced the modified,native areas to look and feel the same as the previously existing conditions prior to construction. There were many areas of trees on the golf course acreage primarily following the Cache La Poudre River. However, after the course was shaped,various types of trees have been planted to give definition to many of the holes and to emphasize some of the features in the design. Practice Fairway, Greens and Adjacent Areas The subject has a short game practice area and putting green adjacent to the clubhouse and near the Nos. 1 and 10 teeing areas. There is also a driving range and practice tee with ample Brekan Nava Group 09-07-14 53 space for golfers as well as those preferring to practice only. This area is located south of the clubhouse, occupies approximately 4-5 acres and is approximately 300 yards in length. Summary The original 18-hole golf course has an excellent cover of turf which has matured very well since the opening in July 1999. The course has over 7.5 miles of shoreline and is advertised as having more shoreline than any course in America. Personal inspections of the other golf courses in 1 the Northern Colorado market area and the subject golf course by the appraisers confirms that, because of the site's attractive topography and location, the course has become one of the best golf courses in the area. All of the key equipment and design components appear to be in place. The course should continue to receive adequate amounts of play in the future because of the attractive design and surrounding areas. Brekan Nava Group 09-01-14 54 • I• ,i•C, w ; • li - • -• . , 7 In - / 4. t- ? l r ..0 as I. c 1. L I Ct hCC .) I -• 1 al w ' 5 ` - I .d..I 'I. X11 S . tii. A- , ,i 1 Pe..‘'ti N in -1.-ii; 1 '4 797 • i V i , ,, . 1 f: . wit IL" . 9 E ►Y• I L CZ 3 • .9 .- - I C J. . OOS r t- V a O `a i ux H � f .. _ .i. O -, cu Ns, !'; x $ C • r . C St- , • 3 I- ' t • R II �- 4 a o CI -• S. t I. V L •% I - _ . • k kcal 1, ii I. a -•± -* __ g <f_ . ; is' AI rata 0 - ' i Z ft .k . '. •,...„ . _ . , . , i_r i 4. t= . . T( III llI:I 4. ' PL"-- r1 I. ail : II •1 • 11 ti * • • !Nets _ �,� , e "7- r a t. . t,`}.. 1. .`, bQ � . til ►' a ti` ' 1 6 a�. y ilkvil if . •--' , i • Cr),o `l'', 4• : ;.- m - - � ,f•ir „ ( rxL :54.., — } t 37. ,� l. k1/4 • •• . ill(i • „, ,. z • a) ty r. •.--4 ' f 1\ i : III O erc. . .-; . i}' I I • -ri T __ _•,t _ tit-.8 • ,�_ _ ,. _ •_ , 41, gl.;,?-.,e•.-(-1-,••-_. , , 1$ ' i SZ. irs $ `'',,a r i Q. • , .< v2` ; - N. (10) 1. �. C ° r \.I 3 I 4' , •4: r • (1) •" 1 s i F-1 ?kii A: I _ I 00 N rI 1 ! • r` • I Z 1 7 A, + 1 �41lI 1 Imo ,.. W {R •. • �. t? t E , ' - - - - t_. I , - 1_ �•t . _ _ _ N N '. 4744,- ♦.. ` .mow •j ' ,r` I [ I' I. I I . `.fi r,.'` - I . X77 ...I :fir fir O 1 41O Y f �� ?, I 1114 4 ._ ; 1 ,•� • - . °' I O ._ '� - ' r i. - 0 •�t�_ _ ... - Z• Ile .� 4 4 a ' 1 .,+ • 1 ' A O ' 4 CIS eg • till ` � _ • C'.••••• *-• GOLF MARKET OVERVIEW The National Golf Foundation in their General Guidelines for Planning and Developing A Golf Course, published January 1991, lists the following factors when determining the feasibility of a golf course. 1. The character of a community, its size, location, climate, population, economic base, growth potential, and recreational assets. For a public golf course operation, the market for potential users can be largely determined by obtaining current information on the following items. 2. The total population in the immediate area and the population within a 5-, 10- and perhaps 25-mile radius of the golf course property, if the course is to be in an urban community. 3. Number of available privately owned daily fee, municipal and private golf facilities in the immediate area and within a 5-, 10- and perhaps 25-mile radius. 4. What has been the pattern of population growth for the area? Is it increasing or decreasing? What are the population demographics for the market area? How does this affect demand for golf? 5. Have there been any failures in golf course operations in the area in recent years? If so, why? What is the playable condition of courses that might be considered competitive? 6. What are the economic characteristics of the area? What are the principal types of employment? What is the per capita income in the area? Is it increasing along with regional or national trends? What are the unemployment characteristics? What is the length of the playing season? (This is a factor which will affect annual income and maintenance costs materially.) Planners of private country clubs will also want to obtain the above information. They need to know the number and size of public courses, as well as how many country clubs are now in the area. Planners of private clubs need to know sizes and classes of memberships; existing initiation fees and annual membership dues; whether there are waiting lists at other clubs; and whether similar projects failed recently and, if so, why. Brekan Nava Group 09-07-14 58 Market Study Essential to the success of any economic venture is the confirmation of an adequate market and the economic viability of the venture. The objective of the market analysis is to provide an assessment of the golf market potential for the Pelican Lakes Golf and Country Club and to provide input to the valuation prepared by Brekan Nava Group. The appraisers have attempted to thoroughly research, obtain data, and analyze the data pertaining to the above referenced factors listed by the National Golf Foundation. Daily fee, semi-private and private clubs competing for the same type of cross-section of member golfer as the subject were surveyed for this analysis. The most competitive properties are discussed in this section of the report. The respective surveys for the competitors as well as the subject are a part of the appraiser's working files. In undertaking an analysis for a golf course, it is important to determine the extent of the area from which a golf course can be expected to draw patrons. This trade area will have natural variations, as do the types and qualities of facilities being offered at various locales. Boundaries for the trade area of the subject course were estimated by a careful analysis of golfing habits, location of competition, and accessibility of the golf courses. In this analysis we have considered the economic feasibility, together with supply and demand for the golf course facilities. Within a golf course trade area, the strongest influence will be exerted closest to the site with influence diminishing as the distance increases. A primary trade area has been defined to analyze potential in the site environs. This area is indicated in the Golf Courses Location Map (see exhibit later in this section). The primary trade area encompasses the area within 15-miles of the subject site. Because the subject is a semi-private golf club in a small community which sells golf and social memberships in addition to accommodating daily fee players, we have surveyed both private clubs with initiation fees in the same range as the subject as well as one daily fee course which sells annual fee memberships to potential members of the subject. Four of the six most competitive golf courses (Highland Meadows, Ptarmigan, Harmony and Greeley CC) are within eight miles of the subject and Highland Meadows is the only comparable facility which is a daily fee club. Five of the six clubs are private clubs with Brekan Nava Group 09-07-14 59 initiation fees in a range similar to the subject. Eaton CC is approximately 12 miles northeast of the subject and Ft. Collins is approximately 14 miles northwest of the subject. Research by the National Golf Foundation indicates that 76 percent of all golfers commute 20 to 25 minutes or less. Based upon the management interviews with the comparable clubs in the subject's market, golfers in the Greater Denver area drive further distances to play a quality golf course or belong to a club if the price and quality ratings are worthy. It was mentioned by one general manager that golfers many times from the Cheyenne, Wyoming market will travel to the subject area (50 miles) to play golf courses in the winter season (weather permitting) as their courses are typically closed from November through March. The Golf Consumer Profile, a research document developed by the National Golf Foundation, in cooperation with Market Facts, Inc. determined that "on the average nationally, golfers travel about 12 miles one way to play their most frequently played golf course. That translates into a 20-minute trip to the average player's most often played course." The survey also determined that golfers travel considerable distances further to regularly play a good course. Average golfers report a willingness to travel just over 26 miles, estimated to be a trip of 36 minutes. Further, it was determined in the national survey that golfers are willing to travel as far as 48 miles or 60 minutes to occasionally play a good quality golf course. This would certainly put the northern suburbs of Denver within a reasonable distance of the subject course as well as cities like Cheyenne, Wyoming. This section of Weld County and the areas surrounding Windsor have been fast-growing locations. The Water Valley residential development is enhanced by the 7.5 miles of shoreline around the golf course as well as the backdrop of the Rocky Mountain front range to the west. There are 17 other golf facilities in addition to the subject within a 15-mile radius of the subject I however, eight are municipal courses with lower fees and inferior facilities. Three are inferior, daily fee courses and the remaining six comprise the primary competition described above. Being the only semi-private facility in the primary market with high-quality amenities has proven to provide demand for the subject course since its opening in July 1999. Demographics The primary trade area (defined by the 15-mile radius) had a 2009 population estimated at 423,003 people and 157,332 households. The projected growth in this area from 2009 to 2014 is shown in the demographics table presented below. Brekan Nava Group 09-07-14 60 CN 'n — N CO N.T. M .M. b VD m o .1 7t N 7 M N N. O '. ^I a b c 0 h • CN p M O r M h b • N 0 N N N N M N N r O N 6o9 m M r 7 m 69 69 N — rn 7 d 'toCI) 7 FI O M V �O O71- VI I re m N 00 CA O b in in 71- •• D\ M N el M N b C N 6) O in a0 N D7 7 in N T. N V �-' N 6r9 N m N N 00 69 69 VI Q ti 00 H M N N 7 D\ V o CO pI N 00 N ,�. N col �^• m OI en N in ry m N r w N 7 N N vei N M A- N .N. vNi N b N M 4 M ,-• 69 69 N CO 69 69 G 01 to 0 Al o N H O` b 0 er - o� M 7 N i; `� N 7% oho I� ri o E NI OOi 01 N W OM M O N �^ N N b O M /�� ,� .-. 69 69 w m r. 69 69 a X O r 0 l- b o‘ d\• M V C en N ,O. o0 00 e V NI O N 0o N M O L NI T N N N M r `D 69 69 E N .• 69 69 t, E — ezt 0 O CI N c 0 O ^-'• a GI V m 1/40 CN m ken h CO m o0 V N 7 N O N M75; C N in ONi N VD N M N 69 69 N 69 era 0 Cl �I MO - W ON N • EN ti VD 0000 W M Al„ N h 0 O OA N O\ oo en p OI O M N VD M O \.I y N vi 69 Al N T N O O 69 69 69 M 69 N h 7 io Ih D\ 00 IQNi N Q\ cOOm V1 e O NN00 N p h oci C1 M N hN MN .o N vi VDN'E 69 69 a N 69 69 CS N Cr‘ T.) O VD N 0 V CA• o OI ONi 00 v, '"• H a Plol p T vii r vi 7 N O O M N M m M h o N M N 6�9 6N9 M N ^o 6�9 69 0 N a Fro 0 0 E N ON 0 0 O N c x x i t v ryJi - > 0 Z x 'y!-�" � N o y y x E N o co o b c t < o o b A. Z "D" Q o v, m 'al 48 0 c � 8 7 y o „ U 7 E v, o L U :ti d 5 P.0 : L J L NR d 70 L 0 L d ¢' 0 �i axa ¢ a fin. axa ¢ a a co 0 0 0 U m a m z P:1 The overall population within this radius is forecasted to increase by slightly over 10 percent over the five-year period to a 2014 population of 466,445. Further analysis shows that income and age demographics are quite positive with respect to golf participation potential for the Windsor area. The average household income within a 3-mile radius is $78,077 with the 10- mile radius being slightly higher at $81,681. The median age ranges from 33.5 to 34.9 years of age. Key demographics for the primary market area are summarized below with more detailed information presented in the Addendum of the report. The Windsor community and the surrounding areas are typically areas with young families with children as is shown by the slightly higher"Persons per Household". It is considered a family-oriented town of slightly over 15,000 people with many outdoor activities dominating the community scene. In our opinion, the golfing community of Windsor and the surrounding areas have shown they can support a high-quality, semi-private golf facility based upon membership absorption and rounds of golf demand over the last few years. We will discuss this in greater detail in this section of the report. Supply Overview To properly understand discussions and conclusions which follow, it is important to recognize the difference between a golf facility and a golf course. A golf facility has only one primary clubhouse and may have more than one course or it may have only one-half a full course if it is a nine-hole operation. A golf course refers to the combination of holes comprising the facility. There are 18 existing golf facilities (inclusive of the subject) totaling 16.5, 18-hole equivalent courses within the 15-mile radius of the subject. Three (3) of these facilities are executive-length golf courses and 14 facilities are regulation-length, 18-hole courses. Of the 18 golf facilities in the 15-mile market area, four (4) are daily fee, eight (8) are municipal facilities, one is semi-private (subject) and the remaining five (5) facilities are private golf facilities. There are three, 9-hole facilities and 15, 18-hole facilities with no facilities having more than 18-holes of golf The subject was annexed into the town of Windsor which is approximately 10 miles southeast of Ft. Collins and 10 miles northwest of Greeley. Downtown Denver is located approximately 50 miles south and Cheyenne, Wyoming is approximately 50 miles north of the subject. The areas around the immediate Windsor community are rural farming areas and have been agricultural uses for many years. A map showing these facilities and a corresponding list detailing the type of courses is shown below. Brekan Nava Group 09-07-14 62 t I r I • 'it mfr N- Jr Ce U. .41 a\ Yl I !� }rl yr i � l 8 -- 1. t II a —o- ^- 0 �Y h - -- A� __._ vki — -- - 7444 q IS-80 w —4I \ — �, v •,..]LU Ci! C i --liF 1/27.) (--0 \II '1 r• 5 C._,- F - 1 ' = A+ h CO � r�, - M lass cA• ice _il e Azt \\% .= _�� ti �j 1 \. ‘.• IN z a 1 ° r w' CI r .,t w•. I�.. ', `'I N n t,73 0 .. P•stie co • U C : :' ced 0 L 7 M awl e so iO3 �Cr (.T.) 03 e 0• fr/ el k3 y • a " jr ,9 � I a i in �- M en,-r�i t' N .. r ...„7,I _... .. . .. ...• •ile -•'- -�-- t • ��co • a IA• L ---1-1-1- i — ._ 0. t. Ct VI ti r. 1t,........,___Ick x 3 „est' P--gii kr' �j� CC c G r , 1 F.,.-- .4-- 4r M #6-)i 1 1 NI fj ` -15 JO JU 4-1- SSS..:W d i • o el Rf v.. ?cg; _ O t C v._ rl—: U C rl o ` 42? coest- C" 02 t` qi-g Q. It '"� �7 C LL.� CO CN c. I r) :re j 1/4;. cc 4), O ca CZ rI? C ct )(') w S a u � r o L <1�� tl L/ v d All Golf Courses - Primary Market Area (15 Mile Radius) Year Course Course No. Opened Course Location Holes Type Length Subject 1999 Pelican Lakes G& CC Windsor 18 Semi-Private Regulation 1 2004 Highland Meadows GC Windsor 18 Daily Fee Regulation 2 1988 Ptarmigan Golf Club Fort Collins 18 Private Regulation 3 2007 Harmony Golf Club Fort Collins 18 Private Regulation 4 1986 SouthRidge Golf Course Fort Collins 18 Municipal Regulation 5 1971 Collindale Golf Course Fort Collins 18 Municipal Regulation 6 1982 Link N'Greens Golf Course Fort Collins 18 Daily Fee Executive 7 1960 Ft.Collins Country Club Fort Collins 18 Private Regulation 8 1940 City Park Nine Fort Collins 9 Municipal Regulation 9 1992 Boomerang Golf Course Greeley 18 Municipal Regulation 10 1961 Highland Hills Golf Course Greeley 18 Municipal Regulation 11 1932 Greeley Country Club Greeley 18 Private Regulation 12 1968 Eaton Country Club Eaton 18 Private Regulation 13 1992 Mountain Vista Greens GC Fort Collins 9 Daily Fee Regulation 14 1955 Olde Course at Loveland Loveland 18 Municipal Regulation 15 n/a Cattail Creek Golf Course Loveland 9 Municipal Executive 16 1992 Mariana Butte Golf Course Loveland 18 Municipal Regulation 17 n/a Mad Russian Golf Club Milliken 18 Daily Fee Executive _ Daily Fee/Municipal Subtotal 297 18-Hole equivalent Courses 16.5 (including the subject) A review of the golf course supply in the primary market surrounding Windsor shows a number of factors which affect the subject. Although there are no other semi-private facilities I within the 15-mile radius, the number of facilities is quite high relative to other geographic markets. Golf is a very popular sport and an important part of the area's entertainment in this region. There is an abundance of affordable golf when considering the eight municipal golf facilities in the primary market area. There is also an abundance of private club facilities competing for a more affluent golfer. Because the subject is semi-private, it is competing for both daily fee golfers as well as golfers in the market for a private club membership experience. Brekan Nava Group 09-07-14 64 Primary Competition The subject property is a regulation-length, 18-hole semi-private golf course located within a developing 1,200-acre master-planned residential subdivision known as Water Valley. Water Valley North (the northern half of the subdivision) is completely built out with single family residences and some commercial product as well. According to Mr. Ryan Bach, Director of Real Estate Services with the Water Valley Land Company, there are approximately 925 residential units in Water Valley North. Water Valley South, which represents the next 2-3 phases of development has a capacity for 1,400- 1,500 residential units both single-family as well as multi-family units. This includes Phase I of the Water Valley Senior Living Resort which has 116 apartments located adjacent to Hole No. 8 on the Pelican Falls Nine. At the present time the project is almost 60 percent built out. Mr. Bach also indicated the construction of a new Health and Wellness Center located in Water Valley South adjacent to the east of Hole No. 9 green on the Pelican Falls Nine. This facility will break ground in Spring 2009 and will have approximately 40,000 square feet of space to include an indoor swimming pool, fitness center, a spa and salon as well as physician's offices. This addition should spur additional demand for new homes and residents within Water Valley South and create demand for daily golf and new members. There are six (6) facilities totaling 6.0 18-hole equivalent courses which comprise the primary competitive set located within a 15-mile radius market area. The subject opened in July 1999 as a semi-private course selling memberships while also allowing daily fee players. It is the intention of ownership, based upon our discussions with management, daily fee play will always be allowed at the subject although members will have preferential tee time priorities. As of the end of 2008 the subject had 279 Regular Golf members which represented an increase in 47 net Golf memberships from year-end 2007. In discussing the subject's membership with Mr. Bob McNamee, the subject's Director of Golf, it was stated that an optimum number of Regular Golf memberships would be 350+ although the membership by-laws indicate a maximum cap of 500 Regular Golf memberships. However, this presumes a 27-hole golf course and we are valuing the course as an 18-hole facility. Therefore, we have down-sized the total number of Golf Members to 236 Water Valley Residents and 64 Non-Residents (total of 300) as of Year 4, the year of estimated stabilization. Brekan Nava Group 09-07-14 65 The annual sale of golf memberships has been estimated to be 15 Water Valley Residents plus 5 Non-Residents with a corresponding estimate of resignations/attrition of five (5) percent. The total of Social Memberships (Water Valley Resident and Non-Resident) is projected to remain the same. This is reasonable because the number prospective members are predicated upon the capacity of the clubhouse facilities (fitness center, swimming pool and dining) as opposed to the number of holes on the golf course. The successful operating of a semi-private golf course can be difficult at times because this type of facility must accommodate two types of golfers both with different expectations. Members at a semi-private club must be properly accommodated because they have paid initiation fees as well as monthly dues for privileges promised in the membership entitlements. A quality daily fee experience must also be provided so as to encourage repeat business and give golfers a value commensurate with the higher green fees being paid. It is a delicate and many times, difficult scenario to manage and satisfy both parties. The primary obligation at the subject is to satisfy the existing membership which has paid an initiation fee and continues to pay monthly dues for the privileges of membership. Even though there is no equity position in memberships purchased at semi-private clubs such as the subject, members expect the atmosphere of a private country club. Therefore, it was necessary for the appraisers to survey private clubs in the market for comparison purposes because the subject must compete with private clubs for future potential members. The secondary obligation is to daily fee golfers who have historically played more total rounds than the membership. These players will return for repeat rounds at the subject provided the experience is perceived to be worth the going rate charged for green fees. These people must also be treated like members because they represent potential members if the experience is positive. Brekan Nava Group 09-07-14 66 Primary Competitive Set Map Course No.of Course Length of No. Name Holes Type Course 1 Highland Meadows Golf Club 18 Daily Fee Regulation 2 Ptarmigan Golf Club 18 Private Regulation 3 Harmony Golf Club 18 Private Regulation 4 Greeley Country Club 18 Private Regulation 5 Ft.Collins Country Club 18 Private Regulation 6 Eaton Country Club 18 Private Regulation Total Holes(excluding subject) 108 18-Hole Equivalent Courses 6.0 The above chart lists the respective courses within a 15-mile radius which compete for golfers either in the daily fee market or the private club market. Surveys have been kept on file for future reference. Below is a map of the competition followed by a brief summary of each of the competitors, daily fee and private. Brekan Nava Group 09-07-14 67 ti1 - ;fi co 1 f'. m r 1 ,. a) f °' J i� f C Vi a Lr. icO V i ' ` a) } •L •- - > CU..,., ( Vi a � Vava• - i r. ID V a) V - V Va " 11/ V I/ E a: Eoo12o 1. `• ., O •r_ L ,_en E V a) o r„i f� a. 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V lU. f �• N (, i II et DF 1L si co e>3 12)I -113 i i o o I .IZ -j Caj %ALL\ --- 411 %.,_,4°4 ..."----c CS Highland Meadows Golf Club This course opened on June 14, 2004, and is located approximately three miles west of the subject in Windsor. Like the subject and many of the other clubs in the market, it is considered an amenity to a residential subdivision. According to Mr. Brad Bogard, the Director of Golf, the club's main competitors are Pelican Lakes (subject) and Vista Ridge Golf Club which is 30 miles south in the north Denver suburb of Erie. The green fees over the last four years have decreased from $65 on weekends in 2004 to $54 in 2008 due to the competition for golfers. Other green fee rates during the weekdays have decreased as well. Rounds totaled approximately 19,000 in 2004 and were approximately 30,000 in 2008 which represented an increase of roughly 3 percent from 2007. As of August 15, 2009, this golf course was trending ahead of 2008 rounds by roughly 1 percent according to management. In addition, the average collected green fees were approximately 3 percent below the 2008 levels. It was voted the No. 5 Best New Affordable Public Course in the US in 2005 by Golf Digest. The layout features excellent views of the front range of the Rockies and has many pot bunkers. The course is only two miles east of Interstate 25 giving it an excellent location for those driving from the North Denver market. Additional winter play (weather permitting) comes from the Cheyenne, Wyoming, market whose courses close for 3-4 months. Residents of Highland Meadows get a $5-10 discount on green fees depending on day of week and time of year. This course will continue to be the primary daily fee competitor for the subject, given its proximity, similar quality and green fee structure. Ptarmigan Golf and Country Club This course is also located west of the subject course approximately 3 miles with a physical address of Ft. Collins even though it is located on the outside edges of Windsor. The original California ownership and developer sold the club in October 2004 to a Wyoming investor for $4,795,624 million according to Co-Star Comps and confirmed by ownership. Specifics of the sale were not available. The course was built in 1988, designed by Jack Nicklaus and plays 7.201 yards from the back tees. The course began as a semi-private course similar to the subject but then become totally private now having approximately 411 members in January 2009, according to Director of Golf, Mr. Jim Eyberg (970-226-8555). The initiation fee in 2004 was $10,000 for a partially refundable (60%), transferable golf membership and is now $7,500 for the same membership. Memberships are refunded on a 5 to 1 basis (5 new sales for every 1 refund). The initiation fee for the non-transferable Golf membership has remained the same for the last five years and is listed at $5,000. According to Mr. Eyberg, 95 percent of Golf memberships sold in the last five years have been the $5,000 non-transferable membership which reflects the price sensitivity in the market. In addition, monthly dues at this club have remained the same for the last five years and are $300 per month. Both the lowering of initiation fees and the stagnancy of monthly dues at this club over the last five years are by-products of the competitive private golf market for this area. One of the primary reasons for this trend has been the addition of a new, non-equity golf club just three miles north called Harmony Golf Club. The club had approximately 25,000 rounds in 2008 and is trending slightly below that at the present time for 2009 according to Mr. Eyberg. In addition, total memberships have dropped to 390 with one person on the waiting list to resign. However, Mr. Eyberg did indicate the club would be increasing monthly dues to $325 in February or March 2010. Harmony Golf Club This club is located approximately seven miles northwest of the subject and opened in 2007. It is part of a masterplanned residential subdivision in the small town of Timnath, Colorado, on the eastern border of Fort Collins. The project is owned and has been developed by Brekan Nava Group 09-07-14 69 local businessman, Mr. Byron Collins. The project has been approved for 500 dwelling units although, according to Real Estate Salesperson, Ms. Shari Jensen (970-224-4622), the plans are calling for 450 units. As of February 1, 2009, there were 35 homes occupied and 27 homes under construction within the subdivision. Of the 27 homes under construction, 20 have been presold and 7 are spec homes by builders. According to the Head Golf Professional, Mr. Ben Zatz (970-631-5719), there were 117 members (quota is 425) in January 2009 and Full Golf Memberships were selling for $12,500. Memberships recently were decreased to $6,000 for Full Golf as a promotion and the efforts produced 6 new members. The current number of members is 132 Full Golf. The first memberships were offered at $14,000 which indicates the softness in the golf market and the competition for memberships among private clubs in the area. This initiation fee is 60 percent refundable on a 4 to 1 basis (4 new memberships must be sold before 1 membership is refunded). Currently, approximately 30 percent of the members are residents of the Harmony subdivision and 70 percent are non-residents. Monthly dues are $300 for Resident Golf members (includes a $50 HOA fee) and $250 for non-residents. Corresponding Golf memberships for a family are $495 and $395 for residents and non-residents respectively. There is only a cabin for the clubhouse at the present time which can seat 40 people for lunch or dinner. Due to the limited size of the kitchen, larger events must be catered by an outside vendor. The course was designed by nationally known, well-respected architect, Mr. Jim Engh. Eventually, the club plans to have permanent facilities and to sell Social and Sports memberships. The Director of Golf, Mr. Steve Lind (970-482-4653), indicated the club had approximately 5,000 rounds in 2008 and was trending slightly above that through July 2009. Greeley Country Club This facility is the oldest golf course in Greeley, established in 1920 and designed by Tom Bendelow. The facility has 18 holes of championship golf located on Highway 34 in the western city limits of Greeley approximately nine miles southeast of the subject. The course features small greens, over 2,000 mature trees and a number of water hazards coming into play. Press Maxwell redesigned the course in 1962. The course generated 26,800 rounds in 2004 which was over 2,000 rounds higher than 2003. According to Mr. Ken Anderson (970-353-2431), the Director of Golf, annual rounds have been approximately 23,000 total for the last three years. There were approximately 436 Golf members (all categories) as of January 2009 according to Ms. Amy Fiedler, Membership Director (970-353-0528), and the cap is 500 golf memberships (all categories). As of July 2009, the number of Golf members has dropped to 429. The initiation fee, which was $10,000 in 2004, is currently $9,000 for an equity golf membership. Approximately two years ago, the club combined membership drives with Ft. Collins CC which is only 25 miles northwest. The memberships at both clubs agreed to allow access to each other's clubs in a unique effort to stimulate membership sales. In essence, members at both clubs get a two for one membership privilege. The monthly dues are $362.00 for regular golf memberships. Social memberships were at 150 in January 2009 and have increased to 170 at present. Initiation fees were $2,500 in 2004 and are now $1,500 with monthly dues of$178.00 per member. Green fees, inclusive of the golf cart fee, are $76.00 per player on weekdays and $96.00 on weekends and unaccompanied guests are $166.00 every day of the week. Ft. Collins Country Club This club was the first private club in Ft. Collins and was built in 1960. It is located approximately 14 miles northwest of the subject in the north section of Ft. Collins. The course measures over 6,900 yards from the back tees and has a number of holes affected by the lakes on the course. According to John Hanrahan, the Head Professional, the green fees are $70.00 on weekdays and $90.00 on weekends, inclusive of the golf cart fee. Rounds have been consistently Brekan Nava Group 09-07-14 70 running approximately 26,000 annually. According to General Manager, Mr. Norm Nuwash (970-482-1336), there were approximately 425 members in January 2009 and at the present time it has dropped to 418 with the cap for regular golf memberships at 480. Initiation fees are currently $9,000 for regular golf memberships although they have been as high as $15,000 and as low as $6,000 in years past. Memberships are partial equity with a 50 percent refund of the current market rate for the membership. Monthly dues are $365.00 for regular golf members plus an additional $50.00 for capital funding. The club also has approximately 156 social and dining memberships which are up from 150 in January 2009. Social memberships carry an initiation fee of$1,500 and monthly dues of$185.00 plus a capital funding of$30.00 per month. Dining memberships have an initiation fee of$500 and monthly dues of$35.00 with a quarterly minimum spending of$225. Eaton Country Club This course is located approximately 13 miles northeast of the subject and just north of the small town of Eaton, Colorado. Eaton is a small rural, farming community north of Greeley. Greeley has a population of approximately 85,000 people. According to Ms. Alicia Smith, Membership Director (970-454-2479), the club had approximately 420 Golf members in January 2009 and that number has since decreased slightly to 410 as of July 2009. The full quota of Golf memberships is 485. In 2004, the club had approximately 475 Golf members. Social memberships require only an annual fee of$300 with no monthly dues. There are approximately 35 Social memberships at the present time which is also a decline from the January level of 40 members. Green fees for guests of members were $49.00 each day of the week for the 2008 season. Rounds generated have historically been approximately 22,000 annually according to General Manager, Mr. Rick Cole, and as of July 2009, rounds were trending slightly below that level. The course, which is 6,706 yards from the back tees, was designed by the architectural firm of Lee and Brumfield and opened for play in 1968. The initiation fees for a partial equity, regular golf membership were $4,000 in 2004 and are currently $2,000 and the monthly dues are $136.00 per month for a single member and $169 for a family membership. Both of the dues levels were similar to 2004 levels which is a product of the market as well as the club's remote location in a small rural community. Private Club Membership Comparison Jan-09 Jul-09 Club Golf Golf Member Full Corp. Social/ Initiation Mo. Name Members Members Quota Golf Golf Sports Fee Dues Ptarmigan Country Club 415 390 425 X X X $7,500 $300 Harmony Golf Club 117 132 425 X X X $12,500 $300 Ft. Collins Country Club 425 418 480 X X X $9,000 $415 Greeley Country Club 436 429 500 X X X $9,000 $362 Eaton Country Club 420 410 485 X X X $2 000 $169 Averages 363 356 463 $8,000 $309 Pelican Lakes CC 279 279 300 X X X $7,500 $225 Note: Subject's dues are per person Brekan Nan Group 09-07-14 71 The subject competes with all of the above private clubs in the area because potential members who would consider joining at Pelican Lakes would most likely look at the comparable alternatives. Although in contrast, none of the other five private clubs allow public outside play like the subject. As can be seen from the club comparison above, the subject is slightly below the five-club average in both initiation fees as well as monthly dues. All of the competitors are j more traditional private country clubs and therefore, attract members seeking more exclusivity versus a commingled experience with daily fee players. This is a common issue with semi- private golf clubs in most markets. On the positive side, the subject does have an excellent amenity package with the health/fitness area at the clubhouse, the lake and boating experience, the pool and an excellent restaurant in addition to the golf course. All of the competing clubs are 18-hole facilities. As mentioned earlier, most memberships come from those living close to the subject club, especially from within Water Valley. According to Director of Golf, Mr. Bob McNamee, the subject golf club has approximately 80 percent of its Golf members and 90 percent of its Social members residing within the Water Valley community. This is true for most private clubs as members prefer the convenience of being able to play golf and relax when it is close to home. Sports memberships have been discontinued so that only Golf and Social memberships are currently available. Future Supply The subject is located in an area which has seen a number of new courses enter the market over the last 6-8 years. According to the National Golf Foundation report dated August 14, 2009, there are only two properties either being considered for future development. They are as follows: (1) Water Valley West Golf Course is a proposed 18-hole, private golf facility and residential master-plan in conjunction with the same development as the subject at Pelican Lakes. It would be located west of the existing Water Valley development. No construction schedules have been established at this time but preliminary drawings include 1,200 residential units/cottages to be located along the shores of a 7,000 acre-foot lake. (2) Heron Lakes Golf Club is scheduled to be an 18-hole daily fee golf club near Berthoud, Colorado. The course will include a 15,000 square foot clubhouse and the community will feature 400 single-family residences and 300 multi-family housing units as well as a town village with commercial and office components. According to the NGF, the project is still in planning with no official start date having been set. Brekan Nava Group 09-07-14 72 The subject added nine holes to the existing 18-hole course in July 2006 although the new 9-holes is not part of this appraisal. In addition, the immediate market added another 18-hole private club in Timnath in 2007, Harmony Golf Club. In the opinion of the appraisers, the Windsor/Greeley/Ft. Collins area is over-supplied with golf courses. This is evident when looking at the declining number of memberships in private clubs and the declining number of rounds being reported at daily fee and municipal courses in the area. Based upon the information provided by the National Golf Foundation research, no other proposed golf course developments are known to exist in the subject's primary or secondary market area. There are other courses in the Colorado market in planning or under construction, however, none of these are close enough to affect the subject and its present or future, fair-share capture of golf rounds or memberships. Market Demand Demand for golf rounds and memberships are a function of population, participation rates and affordability. There are no new courses presently under construction within 15 miles of the subject property but there have been additions to the golf supply which has diluted the market. We have identified one (1) competitive daily fee facility as immediate competition and five (5) comparable private clubs and have discussed them above. Memberships As stated above, the five other private clubs in the immediate market had an average of 368 Golf members in January 2009 and that average has declined over the last six months to 356 Golf members. In our interviews with all of the respective General Managers or Membership Directors of these clubs, the common theme, with the exception of Harmony Golf Club, was a negative trend in number of memberships over the last 12-18 months. Resignations have been more prevalent than new member sales at almost all of the private clubs in this market. Certainly, in these economic times, any private club able to sustain their current levels of members over the next 1-2 years will be doing well. The subject has been fortunate in this regard. Below is a chart showing subject membership counts at the end of each year from 2006 through 2008. Brekan Nava Group 09-07-14 73 Golf Memberships 195 232 279 Social Memberships 195 215 247 Sports Memberships 5 7 9 Total Overall Memberships Yearly 395 454 535 The subject's membership numbers have been driven primarily by the sale of homes within the Water Valley subdivision. With an estimated 80 percent of the subject's Golf I, memberships and 90 percent of the Social memberships residing within Water Valley, as home sales and lot sales occur, memberships will follow. Based upon the above percentage, we have assumed there are approximately 224 of the 279 Golf members who live in Water Valley which represents roughly 16 percent (224 of 1,375 residents) of existing Water Valley residents who are Golf members at Pelican Lakes. Based upon the percentage for Social members, we have assumed there are approximately 222 of the 247 Social members who live in Water Valley or roughly 16 percent of Water Valley residents who are Social members. When adding the Social/Sports members to the percentage, approximately 32 percent of all Water Valley residents have some type of membership at Pelican Lakes (80% of 279 Golf members plus 90% of 247 Social members divided by 1,375 total residents). Pelican Lakes first opened in July 1999 and began selling Golf memberships. Based upon the current level of Golf memberships, the subject has averaged approximately 27-28 net golf membership sales yearly (279 Golf memberships divided by 10 years). With a total number at full build out being approximately 2,425 residents, the number of members coming from within Water Valley should be roughly 388 Golf members (16% of 2;425) assuming the same percentage of absorption. Given the 18-hole analysis and the limitations mixing members with daily fee golfers, we reach a total Golf membership of 300 in Year Four of the analysis (236 Water Valley Residents and 64 non-residents). It should be mentioned that the subject management has been waiving the Golf and Social membership initiation fees for residents of Water Valley (does not include non-residents) provided that the monthly dues are paid one year in advance. Most new members have been taking advantage of this promotion and we have made that assumption in the cash flow analysis. Brekan Nava Group 09-07-14 74 The first homes in Water Valley were sold in 1994. The average absorption of residents has been roughly 92 per year (1,375 divided by 15 years). With approximately 1,050 residential units remaining to be built, it will be slightly over 11 years before the overall project is fully built out. We have carried our discounted cash flow analysis to six (6) years which is reasonable given the gradual growth of the area. We have tempered our absorption of memberships over the next two years due to the national economy and its effects on the housing and lending markets. The following is the membership absorption based upon the historical data for the subject club since its inception in 1999 as well as taking into account the current national financial landscape and its anticipated effects on the Water Valley residential absorption. Membership Absorption-Pelican Lakes Golf and Country Club }9 201A - Gulf Memberships(Water Valley residents) 223 227 231 234 236 236 236 GolfMemberships(Non WVResidents) 56 58 60 62 64 64 64 Social Memberships(Water Valley Residents) 222 229 236 242 254 259 264 Social Memberships(Non WVResidents) 25 26 27 28 32 32 32 Sports Memberships 2 0 0 0 0 0 0 Total Overall Memberships Yearly 528 540 554 566 586 591 596 Total Golf Memberships(Cumulative) 279 285 291 296 300 300 300 Total Social Memberships(Cumulative) 247 255 263 270 286 291 296 Total Snorts Memberships(Cumulative) 2 0 0 0 4 4 4 Total Overall Memberships(Cumulative) 528 540 554 566 586 591 596 Rounds of Golf The subject has continued to generate more rounds almost every year with the exception of 2008 when, due to a tornado and its damage to the entire property, the golf course had to close down for 10-12 days. The subject added 9-holes of golf which opened in July 2006 which supports the additional rounds, however we are only appraising the original 18-hole golf course and clubhouse amenities. Based upon the interviews of each of the golf club managers in the competitive set, only Harmony Golf Club, which is northwest of the subject approximately 6.5 miles, indicated rounds to be trending above 2008 levels. This is due to their corresponding increase in Golf members • from 117 to 132 over the last 6 months. The rounds for each club for 2008 are shown below: Brekan Nava Group 09-07-14 75 Competitive Club Rounds Comparison Map Club 2008 No. Rounds 1 Highland Meadows GC 30,000 2 Ptarmigan Country Club 25,000 3 Harmony Golf Club 5,000 4 Ft. Collins Country Club 26,000 5 Greeley Country Club 23,000 6 Eaton Country Club 22,000 Average 16,833 The high number of private clubs has a more significant impact on the number of members rather than the rounds of golf volume. The stabilized private clubs, excluding Harmony Golf Club, have been generating from 22,000 to 26,000 annual rounds on a consistent basis. The fact that the subject is generating more rounds than its daily fee competitor, Highland Meadows Golf Club, is a positive sign that daily fee golfers have a relatively strong allegiance to the subject and its layout. From this perspective, it is apparent that the subject is capturing a fair percentage of the golfers in the area. The chart below indicates the subject's history. Pelican Lakes CC Rounds 2008 (27 holes) 34,405 2007 (27 holes) 37,366 2006 (27 holes from July 12) 36,137 2005 (18 holes) n/a 2004(18 holes) 29,320 2003 (18 holes) 30,193 2002(18 holes) 30,312 The subject, given our 18-hole analysis, should produce a level of rounds which we have estimated to be approximately 14.7 percent below the 27-hole level in 2008. This Year One level of 30,000 rounds is consistent with the subject's previous level of total rounds when there were 18-holes and the 3-year annual average from 2002-2004 was 29,942 rounds. We have estimated the subject will reach 32,000 rounds in Year Four of the analysis. The percentage of rounds per category of golfer would remain approximately the same. Brekan Nava Group 09-07-14 76 Demand Conclusion The subject golf course is a semi-private facility and is not restricted to only the surrounding residential community; therefore, it will continue to be a primary source for golfers within the defined 15-mile market area. As a championship quality course, it will also receive non-member play from Water Valley and Windsor as well as parts of Weld and Larimer Counties areas. It is highly unlikely there will be any additional courses built and added to the supply of the area as we have pointed out earlier in this section after reviewing data from the National Golf Foundation. From a rounds standpoint, there is the potential upside over the next 6-8 years to increase market share based upon additional home sales within Water Valley and the surrounding area. There will be a slowdown in activity while the economy corrects and people begin to invest once again. This also runs true in the market for additional memberships sold as the subject's membership rosters are closely linked to the sale of real estate in the Water Valley subdivision. Success will depend on these key factors: • The rate of absorption of homes sold in the Water Valley South's 1,500-unit subdivision • The number of members participating in the membership from the overall neighborhood • The quality of membership amenities and programs over time • The quality of service being delivered to the members Brekan Nava Group 09-07-14 77 HIGHEST AND BEST USE ANALYSIS Highest and best use is the basic premise of value, the foundation for market value estimates, and is defined as: 1. The reasonable and probable use that supports the highest present value of vacant land or improved property, as defined, as of the date of the appraisal. 2. The reasonably probable and legal use of land or sites as though vacant found to be physically possible, appropriately supported, financially feasible, and that results in the highest present land value. 3. The most profitable use implied in these definitions is that the determination of highest and best use takes into account the contribution of a specific use to the community and community development goals as well as the benefits of that use to individual property owners. Hence, in certain situations the highest and best use of land may be for parks, green belts, preservation, conservation, wildlife habitats, and the like.3 In ascertaining the highest and best use of a site or a property, it is necessary to study four criteria: 1. Is the use legally permissible? 2. Is the use physically possible? 3. Is the use economically and financially feasible under existing and projected market conditions? 4. Is the use estimated to be the most profitable among the alternatives that are legally permissible, physically possible and economically feasible? L Legally Permissible Use The subject property is zoned "RMU", Residential Mixed Use by the City of Windsor. According to the documentation provided by City of Windsor, the site allows for single-family and town home residential development integrated with a golf course. The combined development is designed to conform to the topography of the site. The subject is approved as a golf course as part of the approved Pelican Lakes/Water Valley development plan. Further, it has been designed, not 3Real Estate Appraisal Principles(Chicago;American Institute of Real Estate Appraisers, 1987 Course Handbook),pp.3-5, 3-6. Brekan Nava Group 09-07-14 78 as a "Core Course" but as an integral part of the overall development. A change in use would be required for an alternative use. Therefore, a golf course would be a legal use of the site, if it was vacant. 2. Physically Possible Use The golf course site is a highly irregular-shaped parcel containing approximately 212.4927 acres that was reclaimed from a prior use as an aggregate sand and gravel pit. The site meanders through the surrounding Water Valley master-planned community. Because of its location,the golf course tracts are located in the middle of the residential community and have only limited street frontage and visibility from the entrance drive and the roads bordering the community. Additionally, the community is in a valley with excellent views of the surrounding hillsides and mountain range to the west in addition to the golf holes. All public utilities have been delivered to the site. In summary, the site's physical characteristics, inclusive of size, shape, topography and subsoil conditions do not appear to restrict golf course improvements. Giving no major adverse external conditions materially affecting the development of the site, the subject site appears to be physically capable of accommodating a greenbelt or use such as the existing golf course. 3. and 4. Economical,Financially Feasible and Maximally Productive Use Considering the highly irregular shape of the site, a recreational use appears to be the most compatible use. As presented in the Golf Market Overview section, although the 15-mile primary market area has a number of quality facilities,there are no other semi-private golf facilities and only one comparable quality daily fee course in the Windsor area. The balance of the courses is either private or municipal. The growing population appears to be capable of absorbing the new subject course because of the relatively under-served semi-private sector golf market. This subject is within an active golfing community as is evidenced by the number of rounds on a typical peak season day as well as during the entire golf season which can sometimes extend into the winter months. Because championship quality courses such as the subject have a high amount of drawing power, we project the subject course to generate up to 32,000 rounds in Year Four and continuing into future years. The addition of the third nine holes in 2006 increased demand over the last 2+years however, we are only appraising the original 18-hole course and the clubhouse. Based on historic demand and on-going growth,this is a reasonable projection. Brekan Nava Group 09-07-14 79 Highest and Best Use Conclusion "As If Vacant" To determine the highest and best use of the subject property, "As if Vacant", the appraisers inspected the property and conducted studies of the neighborhood, region, and market trends. The site's physical attributes and surrounding development were also considered. Based on the subject's specific attributes, particularly the unique design and the surrounding beauty of the lakes and mountains west of Windsor, the highest and best use of the site "As If Vacant" would be to hold as an investment for future development of an 18-hole golf course operation. Highest and Best Use "As Improved" Legally Permissible As previously indicated, the subject's zoning is "RMU", Residential Mixed Use, which allows for the current golf course use. No alternative legal use that could economically justify the removal of the improvements could be conceived. As such, the existing use is a legally permitted use. Physically Possible The physical characteristics of the subject property, such as size,topography, accessibility and availability of utilities and water, are adequate for the current golf course development. Economically Feasible As the Market Study illustrates, supporting evidence is found in the area for a variety of golf courses. Additionally, because there is a positive cash flow generated in later years before debt service, the subject property should continue being operated under the current use. Therefore, based on our market research and economic feasibility, the most viable use of the subject site "As Improved" is the operation of a semi-private golf course. Most Profitable In determining the property's highest and best use "As Improved", the question must be asked if another use would result in a higher return should the improvements be demolished. In our opinion, the improvements represent the most profitable use of the site and should continue being used as an 18-hole, semi-private golf course. As with any new golf course, cash flow is expected to be lower in the beginning years of operation or until the course matures and the residential community continues to grow in size. Brekan Nava Group 09-07-14 80 Highest and Best Use Conclusion—As Improved Based on the preceding analyses, it is our opinion that the Highest and Best Use of the subject, "as improved" is for continued use as a golf course. The size of the tract (approximately 212.4927 acres) and its location within a new up-scale residential development tends to suggest a high-quality regulation-length course. Thus, the existing Pelican Lakes Golf and Country Club being used as a semi-private golf course is representative of the Highest and Best Use of the site. Brekan Nava Group 09-07-14 81 SALES COMPARISON APPROACH- GOLF COURSE LAND In valuing the underlying raw land for golf courses as a recreational use, the land is appraised on the basis of comparable sales of other tracts of raw land available for similar use. Therefore, sales of raw land comparable to recreational or agricultural use are primarily considered. It is not proper to compare golf course land with land sales whose highest and best use is commercial or residential since golf courses are not actually available for such use. In most cases, the highest and best use of land is clearly the existing use or golf course use. It is likewise improper to value the underlying land at the value of surrounding uses such as residential or commercial which benefit from the amenity of the golf course since golf courses are generally environmentally desirable and enhance the value of adjacent properties. As stated from Golf Course: A Guide to Analysis and Valuation, page 28, published by the American Institute of Real Estate Appraisers, "The crucial thing to remember is that the golf course cannot be valued on the basis of one use for land and another for improvements." Therefore, the value of the land is estimated by comparing it to other open-space lands. Further, golf course land, in many instances, can be compared to city parks and recreation areas which developers have donated at no cost to enhance the surrounding values of the adjacent property. To estimate the current market value of the subject property, as vacant, it became apparent to the appraisers that only a few properties within the subject community would provide an equitable comparison. If the subject site was not used as a golf course, the land would be available for redevelopment with a residential use, except for the legal restrictions in place. The value of the underlying land for the golf course use is much less than initially perceived. In fact, unless associated with a subdivision development, the subject property golf course would undoubtedly not be developed. We have searched for sales of sites that were developed with a golf course or were purchased for a similar recreational use. Some sales intended for golf course development were originally purchased for master-planned residential use, and are not at golf course prices. In addition, there has been no recent land in the area purchased strictly for golf course or other recreational use. Therefore, we have not completed a value for the subject property using this approach. Brekan Nava Group 09-07-14 82 COST APPROACH TO VALUE The Cost Approach involves estimating the cost to replace or reproduce the existing improvements, depreciating the improvements, if necessary, based on condition, location, and usability, and finally, adding the land value (estimated earlier) to the depreciated amount of the improvements. This figure is then an indicated value based on the Cost Approach. The basic principle involved in the Cost Approach is the "principle of substitution." This states that no buyer will pay more for one property if he can obtain a substitute for less money by selecting a site and constructing improvements in a similar location, of similar utility, and of equal desirability, in a reasonable amount of time. The construction of golf courses will vary significantly depending on the quality and design of the course. Other factors affecting the cost of construction include soil conditions, topography, availability of utilities, the number of lakes, bridges, and underpasses required. Further, the location of the course in relationship to labor, equipment, and services will affect the cost. Cost Analysis Since golf courses and country clubs are usually associated with a surrounding residential development, the market value of the course can be much less than the cost to build. The developer will typically recover the lost cost through the enhanced value of the surrounding residential lots and the enhanced absorption period. Thus, the reliability of the Cost Approach is often limited and little consideration is given to it in concluding the final market value of the subject property. Therefore, we have not completed the Cost Approach for this report. Brekan Nava Group 09-07-14 83 SALES COMPARISON APPROACH-IMPROVED PROPERTIES If the subject property is improved, or is to be improved to its highest and best use, the value can be estimated for the whole property by a comparison of comparable-type properties. In this regard, the National Golf Association was contacted, along with leading golf property brokers in the real estate business throughout the United States. After an extensive search, sales were located throughout the western United States. The sales included in our analysis were chosen either because of their comparability, date of sale, and/or the ability of our being able to confirm the data. It should be known that data was confirmed by telephone and, though many have been inspected by the appraisers, a personal inspection of all properties was not made. Golf courses such as the subject property are classified as income-producing real estate. As such, the value is generally established by the net income it can be expected to generate. In some cases, the income is indirect through sales of adjacent lots or through additional room sales at a resort hotel facility. In this case, the Sales Comparison Approach will not serve as a primary indicator of value, rather it should measure and discuss the reasonableness of the value estimate as indicated in the Income Approach. Accurate comparative analysis is made difficult by the financial complexity of most golf club investments. Rates on return, the number of competition, quality of the club, and the fee structure significantly impact the property's value. Further, golf courses sell for a wide range of cost for various reasons. As can be seen, not all purchases are based on economic reasoning. -- Purchase for potential income/appreciation -- Recreational/municipality purchases -- Ownership by club members -- Ownership by subdivision landowners -- Development of peripheral land -- Foreign entrance into the market/foreign investment -- Amenity purchase Brekan Nava Group 09-07-14 84 Therefore, it is often difficult to determine or estimate market value by comparison because of the divergence of buyers' reasons for purchase, the terms of sale, and the myriad of factors affecting the operation, which is often difficult to obtain. In the analysis, assumptions must be made and a reasonable range of value can be estimated in support of value conclusions indicated by other approaches to value. Several major factors affecting the sale price of a golf club or a country club other than physical size, layout, and quality include terms of the sale, management agreements, security deposit liabilities, special membership agreements, and fee structures which are binding to the purchasing party. An example sale would be a mature country club that sells for $4,500,000 plus an assumption of repayment of$1,500,000 in security deposits due over a short period. The sale price is reported at $4,500,000, when in reality the total price is $6,000,000. Conversely, a young club expecting to collect a large sum of security deposits over a short period of time with long-term obligations into the future may command a higher price. The value of a country club, therefore, is highly dependent on the expected cash flow from all sources of income, and the price is affected by terms of sale, agreements and obligations affecting this cash flow. Similarly, the factors affecting the sale price of a semi-private or daily fee golf club such as the subject include the terms of sale, management agreements, fee structure, course quality, size of improvements, sources of income, operating expenses, and general competition. The value of the course, therefore, is highly dependent on the expected cash flow from all sources of income and the price as affected by terms of sale. The following map shows the ten(10) sales of courses in Colorado and Arizona. Brekan Nava Group 09-07-14 85 •• ° U ED.r1 ,C - •�__;� < r•, o 96 O 411 • m C a C" L :- ao a' To c O C f.. •� c6 C �s Q p • • M ° c ° O/ : 0 W :1 2 °C�' !off' c ac aCC c •E as J . Y - CJ O =O • a 0o a nO Q v ;9 • O 3 • -a Q c,tcvit E 1. 51. • _ gym . ° �, IX, . d CC •• O ;. . . . . . .. .. . . ... . . . 'OC: • im O CC Y ; ° o X C b • o` r 411.-C. 3.:\c — ; .• 0 O 0'3 .Z- ) O •cl, g ... 0 (. al- -c a t, Q 0.1 ' t o m4 •Y On 4 E o t ED m ''•,' "1 - 3 C .0 vi U7 o E o p J . - `° O ° 7 -4o A • *I 7° E \I - V a o 2 ca k II r_ E • • • • co iii 12 , ••• C 3 \nem SI 0 _ a ii z H a9 O ) — n 11 I o a / °is • 14 II • O 01 73 4 o m li L. o tj ++''�'VCAOOD lti_ a) C W oQ y r ~' a 2 2 7• ,; ---�,r,-•_ 0 1i, . • %,a .`i • ' ` uj''111LCISIISQk...,,,,,..r...1),-,. '- • d i a li' Zi k tot; 0 O> > m 3,s .�. Eg } D- '•.� '' Q C P.1r) Z . •1:47. 1z : = •15 . ' -_- -.. 6.6 . v J • ,.• O Itip o . -. ) --, "1 o ;,• otrtf). m IY a6 aSkl . sl: c...1 ...._ ittifl • gad • • • - • • .1C O Lut a. 8/8 aYo 4 m ID> • = ' r mss••-. + v N •M M al d t -`O • 43 QU 141: . : d is .11e,,je,, ok • Ii-e5 2 Vt wtx 1Q al d • o - 1 v C7 iisvegiveN: iist. izi . : -. ,?.. ! O: i. 0):_4_ Q) • yi�•Ov C4 �, 4' , t• 59Mr' " ` ; "s ' :,-.aye. The Sales Comparison Approach to value is based upon the principle of substitution. In theory, the purchaser of a property will pay no more than the cost of acquiring an equally desirable substitute property without undue delay. To estimate the degree of comparability between two golf courses, many judgment decisions were required. An extensive search was made throughout Colorado and the western United States to ascertain golf course sales, which were comparable to the subject property. Since the number of golf course sales is limited, finding reasonable recent comparables presented itself as being problematic. In the following comparable sales, several potential relationships have been analyzed. They include a relationship of revenue sources to total revenue, which can be utilized in the Income Approach to value; relationships can be made between sale price and income to give an indication toward value in the Sales Comparison Approach, relationship of sale price to acres, and price per hole which can further be utilized in this Sales Comparison Approach. Lastly, there is a relationship of net cash flow from operations to sale price, which indicates an overall rate accepted in the marketplace and supports the overall rate utilized in the Income Approach. Most of the sales listed as well as others we are aware of which were not listed, provided only minimal support, if any, for our value estimate because of the lack of accurate data and comparability. Therefore, most of the data was used to help establish a reasonable range of value for the subject course. The primary sales data emphasized in our final analysis in the Sales Comparison Approach include the following. Complete write-ups containing all pertinent details for each of the comparable sales are in the appraiser's files. A brief description of each of the comparable improved golf courses is as follows: Sale No. 1 is the November 2008 sale of Vista Ridge Golf Club in Erie, Colorado, which is approximately 22 miles north of downtown Denver and 12 miles east of Boulder, Colorado. The course, which opened in March 2003, was purchased by an LLC who plans on changing the name to Colorado National Golf Club and making it the home of the University of Colorado golf team. The course is an 18- hole golf club designed by Jay Moorish and the Redstone Group and has homes on most sides of the golf course. The club is recognized as one of the best daily fee golf courses in the area and has a 20,129 square foot clubhouse sitting on a hill overlooking the golf course and the Rockie Mountains to the west. The course is approximately 200.69 acres. The course also sold in December 2006 for $3,350,000. The 2008 sale was part of a divorce settlement and the prior owners also own Cherry Creek Country Club in Denver, Plum Creek Golf Club in Monument and Deer Creek Golf Club in Denver. None of the financial details were available because of the pending divorce case. Brekan Nava Group 09-07-14 87 Sale No. 2 is the sale of the Corte Bella Golf Club in Sun City West, Arizona. The club sold to the Scottsdale Golf Group who also owns the adjacent Hillcrest Golf Club. The club was operating at a loss at the time of the sale. Troon Golf Management was in charge of the daily operations for the owners, Pulte Homes. This golf course is part of a 1,650-home residential subdivision in the adult community of Sun City West. This is the newest course to be built in the Sun City West/Sun City Grand communities. The course was built in 2003 when the first residential units were being sold. The entire development is now fully built-out which is the reason Pulte Homes sold the golf course and clubhouse. There are four buildings which are part of the clubhouse complex however, the Social Clubhouse and the Fitness Center buildings (inclusive of the pool and pool building) were not part of this sale. It is the intention of new ownership to expand the limited-service kitchen and convert it into a full service kitchen as well as to expand the Golf Clubhouse patio for additional restaurant seating. The sales price was $2,400,000 which also included$250,000 of maintenance equipment. Sale No. 3 is the is the sale of the Seville Golf and Country Club, a private club in Gilbert, Arizona. The club had 380 full golf memberships at the time of sale; they have an authorized cap of 450 memberships. Sports Club memberships were approximately 650 members. Full members were being sold for $25,000 with 80 percent being refundable. The new owners plan to implement a $7,500 non- refundable program for initiation fees. The Sports Club initiation fee was $1,500 fully refundable and new ownership was planning to change to an $800 non- refundable membership. The club had a 1.02 GIM at the time of the sale with an expense ratio of 100 percent(breakeven). Resigning memberships are resold on a 4 to 1 ratio. 70 memberships remain available for sale. During the first eleven months of 2007 they sold 58 memberships with a reported $520,000 in initiation fees. The 2007 budget was for $6,600,000 in gross revenues at a projected $700,000 in new membership initiation fees. It was reported that approximately 50 memberships were sold subsequent to the sale (January-April 2008) for a $7,500 non-refundable initiation fee. Sale No. 4 is the sale of the Golf Club at Eagle Mountain located in Fountain Hills, Arizona contiguous to Scottsdale, Arizona. The course was purchased by Pacific Life Insurance Company, the entity that held the loan on the property prior to the sale. The property was listed for sale with an asking price of$17,000,000 and had interest from several parties. The property and operations have been very profitable since its inception and this was arms length sale. Pacific Life also owns another high end facility, being the Grayhawk Golf Club and 36 holes in Phoenix, Arizona. The Golf Club at Eagle Mountain has phenomenal views overlooking the McDowell Mountains and Pima Indian Reservation. The course was ranked the #1 public golf course in Arizona by the Arizona Business 2006 Ranking Report. The course sold for $12,750,000 plus $250,000 for inventory and food and beverage, for a total purchase price of$13,000,000. The gross income multiplier was 2.60 and the overall rate was 9.16 percent based on the 2005 actual income and a gross income multiplier of 2.4 and overall capitalization rate of 10.0 based on the projected income. Brekan Nan Group 09-07-14 88 Sale No. 5 is the sale of the Kissing Camels Golf Club at the Garden of the Gods in Colorado Springs, Colorado. The club sold in February 2007 for $24,750,000 to an LLC. The terms and conditions and other financial information involved in the sale were not available although there was reportedly some additional raw land included in the sale. The club is a private, non-equity golf club with a 43,000 square foot main clubhouse, fine dining, casual dining, 27 holes of golf, indoor and outdoor tennis courts, fitness facilities, heated pool, meeting rooms and lodging accommodations. The club was built in 1958 and has over 300 total acres of grounds with spectacular views of the rock formations at the Gardens of the Gods. The sellers were the Hill Development Corporation which is owned by the Hunt Petroleum Corporation(Hunt Family) in Dallas, Texas. Sale No. 6 is the sale of Trilogy Golf Club at Power Ranch a Daily Fee course in Gilbert, Arizona, a southeast suburb of Phoenix. The course was owned by Shea Homes who was approaching a full build-out of the residential community surrounding the course. This 18-hole championship course sold in November 2006 for $4,100,000. The net operating income was projected to be $93,140 in 2006 which generates a GIM of 1.61, a GRM of 2.16 and an overall rate of return of 2.27 percent. The expense ratio was projected to be 96.3 percent through December 2006. The course generated slightly under 52,000 rounds in 2006. New management has come up with a number of various options for annual resident memberships ranging $1,400 to $5,000. Residents of the subdivision receive a 20% discount on green fees if they are not members. The club will be giving members a 10% discount on meals and 20% discount in the golf shop. Sale No. 7 is the sale of the Raven at South Mountain Golf Club located at 40th Street and Baseline Road in south Phoenix. This course was designed by Gary Paths and David Graham. It is unlike any other course in the Phoenix area with the fairways lined by 6,000+ pine trees imported from Georgia. The golf course has proximity to two Mobil 4-star resorts; Pointe at South Mountain and The Buttes who send a significant number of rounds to the course. The course sold for $12,750,000 at a GIM of 2.68 and an overall rate of 8.49 percent based on the 2005 actual income and expenses. The operating expense ratio in 2005 was 77.2 percent. Sale No. 8 is the sale of the Kings Deer Golf Club in Monument, Colorado. The course is an 18-hole daily fee golf club built in 1999 on 193.68 acres with a 4,800 square foot clubhouse and a 3,500 square foot maintenance facility. The purchase price was $3,215,000 and the date of sale was January 13, 2006. The seller was Royal Troon, LLC and the buyer was an LLC from Tampa, Florida. The course is now operating under the same ownership as the Woodmoor Pines Golf and Country Club in Colorado Springs, Colorado. The club previously sold for $2,875,000 and the property had a net operating loss at the time of the sale (May 2002). The course is 7,400 yards from the back tees and had a 3.59 GIM with operating expenses exceeding overall revenues at the time of May 2002 sale. The course has had a history of operating difficulties since opening in 1999. There was no financial information available on operations income and expenses. Sale No. 9 is the sale of the Castle Pines Country Club in Castle Pines, Colorado. The golf course, which was designed by Jack Nicklaus, was sold to investors for $9,000,000 in November 2004. The golf course was sold by Lexi Golf LLC, and Brekan Nava Group 09-07-14 89 was purchased by CCCP Real Estate Holding, LLC of Castle Rock, Colorado. The course was in good condition at the time of the sale however, financial data was not available from either the buyer or seller. The club is a private club built in 1990 with a clubhouse of approximately 46,520 square feet. The facility has approximately 193.569 acres and is part of a residential masterplanned community in a suburb south of the Denver metro area between Denver and Colorado Springs, Colorado. According to General Manager, John Ogden, the club has a full membership of 450 regular golf members and the course generates 27,000 rounds annually. The initiation fee is $52,000 and monthly dues are $525. The course is 7,190 yards from the back tees and has a slope of 141 and a course rating of 73.9. Member guest fees range from $88 on weekdays to $108 on weekends inclusive of the golf cart. Sale No. 10 is the sale of the Ptarmigan Golf & CC which is only three miles northwest of the subject golf course in Windsor, Colorado. Ptarmigan began as a semi-private course in 1988 and was designed by Jack Nicklaus. According to Mr. Jim Eyberg, Director of Golf, the property was sold by the original California ownership group to an individual owner from Wyoming. The terms of the sale and the financial data on the operations were not available. However, the course had a membership of 420 regular golf members (cap is 450) and charges $10,000 for a partial equity membership. Dues are $300.00 per month and the course generates approximately 30,000 rounds annually. Green fees are $57 on weekdays and $72 on weekends for guests of members, inclusive of the golf cart fee. Valuation of golf courses via the Sales Comparison Approach must consider qualitative factors, which affect the income-producing ability of each course. Most buyers purchase golf courses based upon existing or projected gross and net revenues, and operating expenses. Two different types of multipliers are most commonly utilized: the Gross Income Multiplier (GIM), and the Golf Revenue Multiplier (GRM). The GRM is particularly useful when a golf course derives a significant portion of its gross or net income from non-golf related sources such as food and beverage sales. When the majority of the gross revenues are generated by the golf course, the GIM is typically the applicable multiplier. We have utilized Gross Income Multiplier (GIM) in order to develop a value indication by the Sales Comparison Approach. The nearest facility to have sold in recent years was the Ptarmigan Country Club. This course sold for $4,795,624 or $266,424 per hole as of October 2004. However, it should be noted that this is a Private golf club which sold to a private ownership group who now operates the facility. Further, since late 2004, the real estate market conditions have declined considerably and in all likelihood the course would not command the same price in today's market. Brekan Nava Group 09-07-14 90 Gross Income Multiplier(GIM) Analysis Five of the ten comparable sales had operating expense ratios that could be confirmed. There were five of ten courses providing enough financial data to indicate GIMs ranging from 1.02 to 2.68 and operating expense ratios from 76.2 percent to over 100 percent. Typically, the expense ratio-to-GIM relationship is a reverse one. This is because the investor will tend to pay more for a property with a higher income earning potential, all other factors being equal. The subject's stabilized expense ratio (including cost of sales) is projected to approximate 81.8 percent in Year Four. The golf course industry is currently in a down cycle, in most parts of the U.S. much like the entire economy. Most golf courses had experienced substantial increases in the gross and net operating incomes from 1992 through 1998. However, beginning in 1999 these incomes did not increase as they had in previous years. This trend continued in 2000. As a result of the terrorist attacks of September 11, 2001, the amount of leisure travel, especially by commercial airlines was significantly lowered. Though the golf market did come back from 2003-2007, it began to decline once again in mid to late 2007. The lessening of leisure travel has had a very severe negative impact on the gross and net operating income levels for golf courses which relied significantly on out-of-state tourists during the peak winter season. The sales are arrayed below by expense ratio in the following analysis. Improved Sales in Order of Expense Ratio No. Course Expense Ratio GIM OAR 2 Corte Bella Golf Club 115.7% 1.09 5.7% 3 Seville Golf&CC 100.0% 1.02 0.0% 6 Trilogy GC—Power Ranch 84.1% 1.61 2.27% 7 Raven GC at So.Mountain 77.2% 2.68 8.49% 4 GC at Eagle Mountain 76.2% 2.60 9.16% 1 Vista Ridge Golf Club N/A N/A N/A 5 Garden of the Gods N/A N/A N/A 8 Kings Deer Golf Club N/A N/A N/A 9 Castle Pines Country Club N/A N/A N/A 10 Ptarmigan Golf&CC N/A N/A N/A S Pelican Lakes Golf&CC 81.8% N/A N/A A summary of the improved sales is listed below by order of the date of sale. Beckon Nava Group 09-07-14 91 II 0 0 0 0 o C Y ..: cod N O N cd - N cd O O 00 a rt - 00 N 1�' 00 N �Li WJ — — N — en CT N N 00 M ,--, 0 71- ,—, M 00 N 0 N en ,--- 0 N O F .O. .—I en 00 N \D N M VD O 7 V O 0 Ix en M 00 N - N 00 N 0 1/47 a+ p" en rn<t en N O\ N N in N 49 49 69 69 69 69 69 69 69 49 0 0 0 0 o g`:•)•N o CD 0 O OT N 00 ict ce.. cal cel fit.. I W 0 N - RI M Lam. -7 -7C7 01 cal1/47 cd cal 007 O N 0 f1.. - N -7 -7 -7 m p W Sie 00 00 00 00 N 00 00 00 00 00' 00 ZO x ,-. ,-. — — N ,--I ,-. ... ,-. .. -te I O S ^ O 0 O 0 0 0 0 O 0 C 0 O O O O O O O O1/47 • Cr a O O O O O O O cn O cn N v..L7 ai 0000 7 O— of N O— N N on N --� z •• N N 'C en V ' N M O\ 71- cal R R 69 69 69 .-• N 69 .-. 49 69 69 C/1 U C j b9 69 69 y rn I C y 00 O N N N O O O O 0 O .O. • O 0 0 0 0 0 0 0 0 0 I U A N N N N N N N N N O 11 4� '. N '. 0 N O .-I .-. ,-.1 0 0 I--4 0 O ,-. .-. © V e. aJ a3 a) a) N a3 et o y a) N w0+ • w w w Cl.) ≥ L L O. w O O w 4.-14 cyd f. a a >, > > >, >, > > a U E" q a ' Q o Q Q Q a a 9 P4 00 I 4 o c 41 U '- ° a a 7 U a 4: U U 6▪ C v. 0 C p 7 C9 O aa? O O 6 'C -d U O 'tl W W •N a N C U O O W 7 C O ,, 'b U U ^O R ' CJ a C4 O O O 0 O O O O C7 CC; C O C N 7 o W v .. C 0 N C7 5 U U o U W' o o -1 C7 C7 C7 a, b _w N a .4+ a U N O s. U v U N ,� 0 az 7 nu Cj I 01 y ^ 4) t U 0 0 6 v •E A g C v E U O b a is .Cco C 5 d ro A O 0 R O •6 • o C O eel ° 0 d e W U Cn m C7 C7 w L7 O F c7 X a X U U P, w a E u a I y a) Z R Z •.-. N en 7 ,n 00 N 00 T O— 0 4 The subject is a 27-hole, semi-private golf facility which operates in a small market in Northern Colorado although we are only appraising the original 18-holes and the clubhouse. Unfortunately none of the other ten improved sales is semi-private making them somewhat comparable to the subject. Only one sale is a 27-hole facility however, it is a high-end private club in Southern Colorado which has been in operation since 1958 and has a far superior location to the subject. None of the Colorado sales had sufficient financial information available to the appraisers which would allow comparison to facilities in the same geographic market. Irrespective of this fact, it is quite difficult to compare improved golf course sales due to the unique characteristics of each property. This is why the Improved Sales Approach is only used to validate the values arrived at in the Income Approach. The appraisers have drawn conclusions from the five sales which did have sufficient financial data in the Arizona market. There are a number of worthy financial facts which allow us to arrive at a value estimate using this approach. For example, Sale Nos. 2 and 3 are both private clubs which have a similar membership cross section to the subject. The demographics of each property and the surrounding area allow for reasonable comparisons to the subject. Sale No. 2 is the sale of a mid-tier private club in the retirement community of Sun City West, Arizona. Nonetheless, many members are still working part-time or full time and some have retired. Most of the members have joined because of the affordability of the membership ($25,000 initiation fee and $407 monthly dues). Sale No. 3 is the sale of another mid-tier private club which is part of a residential community in the growing suburb of Gilbert, Arizona. The initiation fee was $25,000 at the time of sale and the monthly dues were roughly $400 for a family membership. The club has similar amenities to the subject with large pools, fitness center and quality dining. Each of the clubs was operating with a net loss at the time of their sales and the GIM's were 1.09 and 1.02 respectively. The subject has also been operating with a net loss for the last three years and we have projected further losses in Year One. After this time, however, we have projected the club will begin to achieve a positive NOI with the changes suggested in the Income Approach. By Year Four, the subject should have an expense ratio of 81.1 percent which coincides to Sale No. 6. At this time the subject will have a stabilized membership and rounds of roughly 32,000 annually. Sale Nos. 4 and 7 are difficult to compare to the subject as they are strictly daily fee golf courses with much lower expense ratios giving them a considerably higher range of GIM than the subject. Brekan Nan Group 09-07-14 93 The subject's projected operating expense ratio in Year Four when the subject is projected to reach rounds stabilization is 81.1 percent. This would suggest a GIM of slightly higher than a 1.61 when comparing it to Sale No. 6 above and lower than Sale Nos. 4 and 7. Thus, it is our opinion that the subject would command a GIM of 1.80. The calculations deriving the value estimate via the GIM analysis are presented as follows. PRESENT VALUE LOSS OF NOI PRIOR TO REACHING STABILIZATION 1 2 3 4 5 NOI Year 6 $514,545 $514,545 $514,545 $514,545 $514,545 NOI Years 1 thru 5 $196,136 $339,980 $387,038 $468,123 $490,795 NOI Loss $318,410 $174,565 $127,507 $46,422 $23,750 P.V. Factor 5% 0.952381 0.907029 0.863837 0.822702 0.783526 P.V.of NOI Loss $303,248 $158,336 $110,145 $38,192 $18,609 Total PV of NOI Loss $628,530 GIM INDICATION OF VALUE Gross Income Year 6 $2,579,564 GIM 1.8 "Stabilized Value" Indication $4,643,215 Less: PV of NOI Loss $628,530 "As Is"Value $4,014,685 Rounded To: $4,000,000 The following calculations estimate the value of the subject property, via the Sales Comparison Approach—Improved Properties. Conclusion The value estimate by the Sales Comparison Approach—Improved Properties is as follows: "As Is" for the Fee Simple Estate as of August 14, 2009: $4,000,000 Brekan Nava Group 09-07-14 94 PRINCIPLES OF THE INCOME APPROACH The primary assumption of the Income Approach is that there is a definite relationship between a property's value and the income it can produce. The premise behind the Income Approach is that it discounts to present worth the future income benefits the property will produce during the remainder of its economic life or during a projected term of ownership for the typical purchaser. In this approach, gross income and various expenses are analyzed and obtained by market data comparison and the resulting net income is capitalized into value at an appropriate rate attractive to investors for this type of property. Sources of golf course income are determined by the type of course. For private clubs the main source of revenue is membership dues, assessments, and security deposits. For daily fee courses the main sources of revenue are green fees and cart rentals. For semi-private courses, it is the combination of these two scenarios. Additional sources of income include sales of food, beverages, merchandise, equipment rentals, fees for lockers, and use of athletic facilities. Gross income is obtained by an analysis of financial statements and pro formas prepared for the subject property, as well as an analysis of comparable properties. From this is deducted annual expenses incurred in producing this income. Expense data is also obtained by market comparison of the subject property to comparable-type facilities. The resulting net income from operations is divided by an appropriate rate to provide an indication of value by the Income Approach. This rate, called a capitalization rate, allows for interest on the capital improvements and recapture of the depreciating asset. Projected income and expenses are based on competent management. The quality of management plays an important role in the profit potential of an income property. The appraiser must equalize the effects of varying degrees of managerial expertise by assuming that the property being appraised will be competently managed. Management quality can be "poor", "competent", or "superior". If the property is currently under poor management, the appraiser is justified in projecting improved operating results based on competent management. However, if the subject has superior management, the projected income and expenses used to estimate market value should reflect a somewhat lesser degree of managerial skill. �'i Brekan Nava Group 09-07-14 95 Six (6) competitive golf courses were identified and surveyed by the appraisers after reviewing all of the courses in the market area. One of the facilities was daily fee and five were private clubs. These courses ranged from 4-13 miles from the subject. The closest courses were Ptarmigan Country Club and Highland Meadows Golf Club. The furthest course was Ft. Collins Country Club. Only one daily fee facility was considered competitive because all of the other courses accessible to the public were either municipal or lower-end daily fee courses. Five private clubs were considered competitive because they conceivably draw the same type of member even though the subject is a semi-private club taking limited amounts of daily fee players in addition to members play. The surveys of the competitive courses have been retained in the appraiser's files. The intention of the appraisers is to draw conclusions for comparing types of memberships, level of initiation fees and dues, and income/expense categories. A summary of pertinent details from these surveys are provided in the tables on the following pages in this section of the report. In addition, on the following pages are the data and discussion related to the estimation of net annual income and the capitalization process. Because the club allows outside play in addition to members play, the primary source of revenue is the collection of daily green fees. Membership monthly dues are also very significant in the monthly cash flow of the operation. We have addressed all of the various line items in the cash flow analysis and the details follow below. Income Projections The projected sources of income to be generated by the subject property include limited initiation fees, as will be explained, and monthly dues from members as they join, green fees from daily fee players and member's guests, golf cart rentals, driving range income, golf shop retail merchandising, income from restaurant operations, and miscellaneous revenue. Rounds of Golf Demand The appraisers have explained in detail in the Market Analysis the rounds of golf played at all of the competitive facilities, public and private. The only daily fee facility, Highland Meadows, generated roughly 30,000 rounds in 2008. This course has been open since June 2004 and has slowly increased their annual rounds from approximately 19,000 rounds in the first year. Being a daily fee course, this facility should generate considerably more rounds than the private Brekan Nava Group 09-07-14 96 clubs however, because of the presence of so many municipal and lower end public courses, this facility seems to be struggling, particularly in the current economy. The rounds for each of the facilities are shown below as well as the history of rounds for the subject. Competitive Club Rounds Comparison Map Club 2008 No. Rounds 1 Highland Meadows GC 30,000 2 Ptarmigan Country Club 25,000 3 Harmony Golf Club 5,000 4 Ft. Collins Country Club 26,000 5 Greeley Country Club 23,000 6 Eaton Country Club 22,000 Average 16,833 S Pelican Lakes CC 2008 (27 holes) 34,405 2007 (27 holes) 37,366 2006 (27 holes from July 12) 36,137 2005 (18 holes) n/a 2004 (18 holes) 29,320 2003 (18 holes) 30,193 2002(18 holes) 30,312 The subject, as an 18-hole facility, should produce a level of rounds which we have estimated to be approximately 14.7 percent below our projections as a 27-hole facility. This Year One level of 30,000 rounds is consistent with the subject's previous level of total rounds when there were 18-holes and the 3-year annual average from 2002-2004 was 29,942 rounds. We have estimated the subject will reach 32,000 rounds in Year Four of the analysis. The percentage of rounds per category of golfer would remain approximately the same which is 29.8 percent Golf Members, 2.6 percent Social Members, 49.1 percent Daily Fee/Member's Guests, 15.4 percent Tournament and 3.0 percent Complimentary Rounds. Breton Nan Group 09-07-14 97 PELICAN LAKES Collf&CountyCtab Shown are the Pam,Lem 15,16 sad 17.Mote smoke 17features an Moo feet boo which en knees Son eight turd ceare. The C.eie la Poabe81rerk fined with nuuive Cottonwood trees ar It re oden Saegh the Pdkan Labs 18 hole memo. MEMBERSHIP DUES, FEES & CHARGES Membership Type Membership Deposit Noah*Dues CORPORATE(3 designated users) $16,000.00 $ 225.00 Use of all the golf,fitness center,swimming, (per user) beach and social facilities. 14 day sign-up privilege for golf tee times. 10%discount at pro shop for merchandise and at Austin's Homestead Restaurant. GOLF $7,500.00 $ 225.00 Use of all the golf,fitness center,swimming, beach and social facilities. 14 day sigmup privilege for golf tee tunes. 10%discount at pro shop for merchandise and at Austin's Homestead Restaurant. SOCIAL $1,500.00 $ 80.00 Use of all the golf,fitness center,swimming, beach and social facilities. 20%off of the daily green fee rate. 9 day sign-up privilege for golf tee times. 10%discount at pro shop for merchandise and at Austin's Homestead Restaurant OTHER FEES&CHARGES Range Balls: Small Bucket $ 2.00 Medium Bucket $ 4.00 Large Bucket $ 6.00 Week Day(Mon-Thins)18 Holes without cart $50.00 Week Day(Mon-Thum)18 Holes with cart $65.00 Weekend Wrt-Sun)18 Holes without cart $65.00 Weekend Wei-Sun)18 Holes with cart $80.00 The Miran Lies and Pdienn Foes Golf Comes err semi-priadecanner. ark ornate will kxpkrI ike Shotprk&Rrs seal d&oeuas for sperijrpnrdnsn Akita ip Initiation fen areafnndoWe acrrordlry ra the by las of the drib usarknhip inland,and ore snbjrd to other prooisiau n Mild therein. 1520 PELICAN LAKES POINT,WINDSOR,CO 80550•970.074.0930.877.637.4653 Brekan Nava Group 09-07-14 98 Membership Income(Initiation Fees and Monthly Dues) The exhibit above shows the subject's membership dues, fees and charges for various items at the club. As explained in detail in the Market Analysis, the subject's initiation fees are competitive with those in the private club competitive set. The chart below summarizes the initiation fees and monthly dues of the five (5) comparable private courses. Club July 2009 Golf Member Initiation Mo. Name Members Quota Fee Dues Ptarmigan Country Club 390 425 $7,500 $300 Harmony Golf Club 132 425 $12,500 $300 Ft. Collins Country Club 418 480 $9,000 $415 Greeley Country Club 429 500 $9,000 $362 Eaton Country Club 410 485 $2,000 $169 Averages 356 463 $8,000 $309 Pelican Lakes CC 279 300 $7,500 $225 Note: Subject's dues are per person The private club market has been very competitive and many of the clubs are becoming more creative in their sales efforts. For example, Ft. Collins CC and Greeley CC have joined in a promotion called a two-for-one whereby, members at one club may also have playing and all club privileges at the other. They also gave away a Harley-Davidson motorcycle in a drawing held at the Fourth of July celebration. The subject, in an effort to generate new members, has been waiving the initiation fee for all residents of the Water Valley subdivision provided they pay the first year's dues in advance. This applies to both Golf and Social memberships and is an excellent way to stimulate additional dues revenues and expand the base of the existing membership. This promotion does not apply to those living outside of the Water Valley community. The clubs within the competitive set charge monthly dues ranging from $415 at Ft. Collins CC to $169 at Eaton CC. The average monthly dues level is $309. Eaton CC, being the rural private country club with least amenities, would logically be at the lower end of the scale. Given that the subject is located between the four other clubs, having an attractive neighborhood and Brekan Nava Group 09-07-14 99 having an attractive amenity package,the monthly dues of$225 per person are within reason. The subject had a blended average of$125 per month in 2008 for the three categories of monthly dues — Golf, Social and Sports. We have used $125 per month for Year One in our discounted cash flow analysis with annual increases of 3 percent annually. Present Value of Initiation Fees Given the value of the property as of the date of the appraisal, we have considered all anticipated Initiation Deposits. A potential purchaser of the Pelican Lakes Golf and Country Club would recognize the necessity to pay for the anticipated income from the Initiation Deposits. According to Mr. Bob McNamee, the Head Golf Professional, a golf member will receive 100 percent of the amount paid at the time of membership purchase. However, until all golf memberships are issued, three (3) new Golf Memberships will be issued for every one (1) resigned Golf Membership reissued on the basis of first-resigned, first reissued. At the time of the appraisal, there were approximately 279 Regular Golf Memberships which is up from 187 in 2004. The club by-laws indicate a maximum number of 500 members however, because the subject is a semi-private club and we are analyzing it under the 18-hole scenario, we have lowered the number of memberships to 301 in Year Four of the analysis because of the need to accommodate outside, daily fee golfers as well as a membership. The exhibit below is our present value of initiation fees which details the number of memberships sold in each category each year, the resignations and the calculation of total initiation fees over the time frame of the analysis. 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F�1 G J i3 I00 C I li 0-1 NI IL 1f NI Q o 010 0 0 v01 N �'I N r NIh h h r cii• i 4,4,4,',', of ♦: I �p q VI it' ll O� to tie h 00 0 0,0 0 I e - M — r' N es I as O O O O1 N iYY}F� en rnjvl v vtlr 'n. QI U . ! : III 669'69.Vi'bm9[ .�+ Z c p I 60 .1 O _ ' I 0 t N tT _ �. < :e . I40 U' __. ' en CO NI' N IN .—:I V, el 0',0 0 0 in tr, VI", ft > a I '..N 669 669 69 EA 6699' :. F I R }�'' y a e. INt 00 N 't e,� ore 8888 ,1, {[s�]� Fe-I en N M ' es to t �1 W 1 e :N 44E4e.6969 Cl y r Q VI H K N 09, O O O O O 0 N el en T In 00 0000w. (!. t; r, I. C: 4,4,4,4,4, '. It 3 a Im v v `� tr W W _ 'I� gl E vl m W I I m k1 EI E. -^� .°: c it U Cl Cl a fa Ex ' 2 a G W S m >. I9. v „i `_ �'.E . x a 'r.1 s I 'r E1G .I II ffi >I� E•. IK� T...1, I u >'3 3a i — x I o1EIil As 3' I 1,.1 ₹I E iaa `e `e ula a2 2 113 w IX11 E• g SSA # g x "T. 1�, e m 1 - - 0 0 a d oaz : 8,z - ccz FI � z F' - - Ii P" I L {_ xl _... fl .F. __... J,_. _. II f 1NIw 1F' 1 I I I I I l I We have estimated the subject will be able to sell a net of 6 Golf memberships in Year One, 5 in Year Two and 4 in Year Three of the analysis until reaching a stabilized level of 300 Golf memberships. The maximum level of 300 was used because, unlike a totally private club, the subject must also cater to daily fee players. In this scenario, a higher level of members will negatively impact the daily fee volume. This is the balancing act a semi-private golf club must weigh given its dual responsibilities to both parties. Annual resignations are reflected at 5 percent of total memberships in the respective categories. Rollover of Initiation Fee Income The subject's management has not kept track of resignations of members but rather has only tracked the number of"net" memberships in each category annually. An interview with Mr. Jim Eyberg, Director of Golf and Membership Director at Ptarmigan Golf and Country Club, one of the primary competitors, indicates that approximately 2 to 7 percent of the membership resign or rollover each year. Based upon the appraiser's experience with analyzing private and semi-private golf clubs, membership resignations generally occur at a rate of between 4 and 10 percent. The rate is higher when memberships are tied to real estate purchases within a particular residential subdivision. This is not the case with the subject and therefore, we have represented the resignation percentages in both Golf and Social memberships to be 5 percent annually which is reasonable. When a member resigns from the club, the club management repurchases the membership and handles the sale of the membership to a new member. Upon the sale and transfer of the membership, the departing member receives 100 percent of the initiation fee paid at the time it was purchased provided the initiation fee was not waived. Only those who choose to purchase a home in Water Valley have the opportunity to waive the initiation fee and, in order to do this, they must pay 12 months of dues in advance. According to Mr. Bob McNamee, Director of Golf, approximately 80 percent of all Golf and Social members reside in Water Valley and therefore, we have not allocated any initiation fee revenue for these memberships. The only memberships we have represented that produce income for the subject are the 20 percent who do not live in Water Valley. According to Mr. McNamee, until the full constituency is met the resigning memberships will be retired on a ratio of one for every three memberships sold as defined in the Membership Plan. The rollover initiation fees are calculated in the discounted cash flow analysis. Brekan Nava Group 09-07-14 102 Green Fees Green fees and rate increases are a function of golf course quality, course demand, and the level of a course's competition. The subject will have a number of different daily fee golfers playing the course. There will be guests of members, extended family guests, daily fee guests and unaccompanied guests sponsored by members. In addition, social members may play at any time by paying a green fee of 20 percent off of the quoted rate. The number of daily fee players (all categories) has dropped each of the last three years from 20,457 in 2006 to approximately 15,583 in 2008. This is to be expected because the number of Golf Member rounds has had a corresponding increase with the size of membership (7,384 Golf member rounds in 2004 to 10,730 rounds in 2008). In 2004 the subject charged $55.00 on weekdays and $65.00 on weekends, inclusive of the golf cart fee. In 2008, the subject charged $65.00 on weekdays and $80.00 on weekends, inclusive of the golf cart. Management plans are to remain the same in 2009 or perhaps have a slight increase. Based upon the green fees charged at other courses such as Highland Meadows ($44 and $54) and other daily fee courses in the primary market area, the subject's green fee schedules are slightly higher but still reasonable for the high quality experience. Ptarmigan Country Club charged $76 on weekdays and $101 on weekends for member's guests inclusive of the golf cart fee. In the opinion of the appraisers, the quality of the subject golf course merits the existing green fees with slight increases of 3.0 percent in future years. Average Collected Green Fees The average collected green fee rate is a function of dividing a course's total annual green fees by the number of annual rounds. The average collected green fees at golf facilities are always less than the posted rates. This is due primarily to member's guest rounds, social member's rounds, sports member's rounds and management introducing specials such as twilight fees, resident rates, promotional fees, senior fees and junior fees, thereby increasing volume at the expense of lower fees during off-peak hours and slower days of the week. Average Collected Green Fees Year Green Fees Non-Member Rounds Average Collected Fee 2006 $735,084 23,138 $31.77 2007 $847,104 23,482 $36.07 2008 $711,099 21,287 $33.41 j Brekan Nan Group 09-07-14 103 The chart above indicates what the subject has actually collected in green fees each of the last three years. The green fees and were collected from daily fee players, social members, sports members and member's guests. The only rounds not included in the calculations were those played by members and those who played on a complimentary basis. We have broken those rounds out separately in the discounted cash flow analysis to show the annual projection and trends for those categories of play. As shown in the cash flow, complimentary rounds decrease annually as the course becomes known in the area and member rounds increase as the number of Golf Memberships increase. With the tornado which hit the subject course in May 2008 causing a closure for 10-12 days, the rounds and rates were lower than normal. 2007 would be more indicative of a normal year for the subject and, in 2007, the average collected green fee was $36.07 per round. Therefore, we have projected the Year One rate to be $36.00 per round with increases of 3.0 percent annually thereafter. Golf Cart Revenue Golf carts are optional at the subject course because players can walk if they choose. Some of the courses in the competitive set quote their green fees and cart fees separately and others have quoted them together. To be consistent with the way the subject's management has budgeted, we have also separated the two categories. The subject course, like other courses in the market, will have an occasional player who may pay only a cart fee such as a PGA golf professional, a superintendent or a club manager who may be given a professional courtesy rate. This is a fairly standard practice at most semi-private or daily fee courses. This is done so that the club can at least recoup the cost of the cart being rented(i.e. - labor required to clean and cost to recharge for a future round). The comparable courses and the subject's average collected cart fee are shown below. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Round $7.15 $7.90 $5.76 $0.60 $7.65 $7.62 $7.05 $7.65 The subject's average collected golf cart fee has varied from $7.05 and $7.65 respectively for the last three years. The comparable courses above have similar seasons with similar rounds totals and have quoted golf cart fees ranging from $0.60 to $7.90 for 18-holes. However, Courses D includes the golf cart fee with the average collected green fee for normal guests and Brekan Nava Group 09-07-14 104 therefore has an understated average collected cart fee relative to the rest of the courses. The rate was lower than normal in 2008 according to Director of Golf, Mr. Bob McNamee, due to poor weather which also reflected in the rounds totals as well. The remaining three courses give credence to the average collected golf cart fee for the subject and therefore, we have established the average collected golf cart fee of$7.65 per round for Year One of the discounted cash flow analysis. Future years have 3.0 percent increases annually. Golf Shop Sales The subject has an attractive clubhouse complex with a new, well-designed golf shop building carrying a full line of golf equipment and apparel comparable to the best golf courses in the Northern Colorado market area. Golf shop sales for five other comparable courses as well as the Year One appraiser estimate are listed in the following table on a per round basis. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Round $6.00 $8.01 $3.45 $4.28 $7.07 $6.76 $6.84 $7.00 The Comparable Courses vary somewhat because they have different sized golf shops and are in markets with off-course discount retail competition. However, they do have very similar characteristics and clientele. The subject has an attractively displayed new golf shop very adequate for the type of operation and location. Courses B is a slightly larger golf shop than the others with an affluent clientele. The comparable courses indicate the subject's 2008 sales per round are within reason. Sales in 2008 were slightly below our Year One projections therefore, we have assigned a value of$7.00 per round for golf shop sales with annual increases of 3.0 percent in the cash flow analysis. Driving Range Income The subject originally has an excellent driving range designed into the initial design of the course. It is well-located near the clubhouse and the first tee area as well. Because the driving range can be used by anyone, whether they are playing the course or not, this category of income has excellent potential. Driving range income per round for four comparable courses, the subject from 2006-8 and our Year One projections are presented below. Comparable A B C D S-2006 S-2007 S-2008 Year One p Per Round $2.06 $1.87 $2.37 $1.40 $1.01 $1.01 $0.91 $1.00 Brekan Nava Group 09-07-14 105 All of the comparable courses have practice facilities with adequate designs to generate revenue in this category. The four-course average is approximately $1.93. The subject generated $1.01 per round in 2006 and 2007 which is reasonable even though it is below the four course average. Therefore, we have assigned a value of$1.00 per round for the driving range income in Year One with annual increases of 3.0 percent throughout the cash flow analysis. Advertising(GPS),Pool,Rental Clubs This is income derived from the GPS computer hardware on each of the golf carts. In addition, we have included income from the swimming pool and from things such as rental clubs. This amounted to $0.17 per round in 2007 and $0.18 per round in 2008. Therefore, we have allocated $0.20 per round in Year One of the analysis with increases of 3.0 percent annually. Fitness Center The subject derives income from the sale of miscellaneous items in the Fitness Center which is located on the ground floor below the restaurant. The last three years have been $138.02, $117.00 and $110.73 per Social/Sports member respectively. Therefore, based upon li the historical data, we have assigned a value of$115.00 per round in Year One of the analysis with increases of 3.0 percent annually. Miscellaneous Income This category includes all sources of income other than golf shop retail sales, green fees, golf cart rental or food and beverage sales. This category does include items such as locker rentals, golf bag storage, handicap fees, vending machines, pay telephones, club repair, and any other smaller line items. The following chart shows the miscellaneous income from the comparable courses, the subject from 2006-2008, as well as the Year One projections for the subject. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Round $1.51 $0.25 $0.75 $1.43 $0.07 $2.10 $0.48 $0.50 A review of the comparable courses in this line item reveals that most courses have very little income from this category. The subject recorded the sale of an asset for $71,767 in 2007 which skewed this line item in that year. In 2008, the subject reflected income of $0.48 per Brekan Nan Group 09-07-14 106 round which is more indicative of the subject's normal revenue in this line item. Therefore, we have assigned a value of$0.50 per round in Year One with increases of 3.0 percent annually. Restaurant Rental Income This line item is typically derived from the sale of food and beverage in the clubhouse and the beverage carts on the golf course. The subject's main clubhouse has a remodeled restaurant as well as a banquet area for large groups. In addition there is an exterior dining patio with an attractive setting and atmosphere outside the main clubhouse. However, the subject has a lease agreement and the restaurant concession is subcontracted to an independent third party called Austin's, a well-known restaurant owner in the area. The subject collects only rental income from the lessee and pays the utilities and property taxes as a part of the overall clubhouse. We have obtained a copy of the lease arrangement between the two parties reflecting the terms, income and other conditions. Below are the comparable courses, the subject's 2006-2008 rental income and the Year One projection for the cash flow analysis. Comparable A B C D Per Round $8.40 $12.36 $10.87 $10.45 Subject 2006 2007 2008 Year One Per Year $152,789 $163,562 $133,279 $150,000 None of the comparable courses have lease arrangements with independent third parties such as the subject's. Nonetheless, given the difficulty of operating a profitable restaurant at a golf club like the subject, this arrangement is a prudent one. The lease agreement, dated October 1, 2005, states that rent "shall be based on a 50/50 sharing of net income from the Tenant's operations after payment of a corporate fee to Tenant in the amount of seven (7) percent of Tenant's total operation sales and after an initial rent payment to the Landlord equal to seven (7) percent of Total Operation Sales." The other terms and conditions to the lease agreement are a part of the appraiser's files. Over the last three years, the subject has averaged $149,877 in annual rent from the Tenant. Therefore, we have assigned a value of$150,000 in restaurant rental income in Year One with increases of 3.0 percent annually. Brekan Nava Group 09-07-14 107 Cost of Sales -Merchandise The sale of golf shop merchandise requires the purchasing of hard goods such as golf balls, golf clubs and bags as well as soft goods inventory such as caps, hats, shorts,jackets and other clothing items. This category reflects the cost of those items as they are purchased for resale. The actual cost of sales percentage for each of the four comparable courses, the subject's 2004 percentage and the appraiser's estimate for Year One are presented in the following table. Comparable A B C D S-2006 S-2007 5-2008 Year One Percent 68.0% 65.0% 70.0% 67.5% 68.5% 81.7% 65.3% 65.0% Soft goods and apparel sales have the highest mark-ups and the best overall margins. Hard goods sales such as golf clubs are very competitive with narrower margins. Course B sells more soft goods at higher margins than the other comparable courses. The subject has an attractive logo which is a popular item on shirts, caps, hats and other soft goods if marketed and displayed properly in the golf shop. Provided that the subject does not invest too heavily in hard goods and maintains adequate inventory controls, a reasonable cost of sales percentage should be able to be achieved. Industry standards vary from 60 to 70 percent for this expense line item. The subject achieved 65.3 percent in 2008 and therefore, we have used a factor of 65.0 percent for each year of the cash flow analysis. Cost of Sales (Food & Beverage) This expense is quoted as a percentage of food and beverage revenues. Operations which have snack bars or smaller facilities generally have lower cost of sale percentages than large scale restaurants because it is easier to control inventory and portion levels of food. In addition, operations which run large numbers of banquets and food functions, can also have low cost of sales percentages. This is because they have very little waste and can purchase food and beverages based on a guaranteed number of people. Industry standards vary from 28 to 40 percent depending on the type of operation such as daily fee or private. Private clubs operate with higher cost of sales because they are dealing with membership dinners where food profit margins are much smaller. Semi-private and daily fee operations, when managed efficiently, can generate better bottom-line profits because they are purchasing food and beverage in a more price-conscious environment. Brekan Nava Group 09-07-14 108 Comparable A B C B S-2004 Year One Percent 38.0% 40.1% 34.5% 34.6% N/A N/A Because the subject leases out this department to an independent third party, they are not Therefore,for the cost of sales for food and beverage. The ef o e, we do not have a corresponding value for this line item expense throughout the analysis. Expense Analysis The Society of Golf Course Appraisers (SGA) is a nationally recognized organization, of which the appraiser belongs, that has adopted the following individual expense categories for uniformly comparing golf course operations; Golf Course Maintenance (including payroll), Golf Cart Maintenance and Lease, Practice Range, Administrative and General (including payroll), Management Fees, Marketing and Promotion, Professional Fees (consultants), Utilities, Repairs and Maintenance (non-golf course maintenance), Other/Miscellaneous, Golf Shop Cost of Sales, Food and Beverage Cost of Sales, Food and Beverage Expenses (including payroll), Golf Shop Expenses (including payroll), Real Estate and Personal Property Taxes, Property Insurance, Golf Course Lease, and Reserves Replacement. The expenses for each of these categories can usually be segregated from golf course historical financial statements obtained on a consistent and confidential basis. Golf Course Maintenance This expense addresses the costs associated with the maintenance of the golf course. Included in this category are departmental salaries and wages, payroll taxes, and other benefits associated with the maintenance staff. Other costs include such items as chemicals, utilities for irrigation and maintenance buildings, fertilizers, repairs and maintenance of equipment, supplies, landscaping, etc. The irrigation water is the single largest variable expense when comparing two different golf courses. Courses can have a number of different programs involving their costs for irrigation water because of variables such as grandfather water rights and others. The subject's primary water source is from an off-site well located adjacent to the parking lot of the main clubhouse on one of the five lakes on the course. The subject has an adequate supply of water at its disposal. All of the documentation for this line item is addressed in the Site Analysis and Improvement Sections of this report. Below are the four comparable courses,the subject's 2006- Brekan Nava Group 09-07-14 109 2008 expense and the appraiser's estimated expense for golf course maintenance quoted on a per-hole basis. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $30,000 $20,000 $15,928 $34,086 $31,333 $41,796 $43,123 $39,000 The range for the subject from 2002 to 2004 when the subject was an 18-hole course was from $543,175 to $594,072. These years did not breakout utilities or equipment leases. Of the estimated total, we have reflected equipment leases to be $131,608 and utilities to be approximately $63,621. We have estimated the subject's golf course maintenance expenses to be approximately $702,000 in the 18-hole scenario. This is represents a value of$39,000 per hole in Year One of the analysis. Annual increases are reflected at 3.0 percent in the cash flow analysis. Food and Beverage Expenses This category addresses expenses attributable to the food and beverage department not considered to be associated with the costs of sales. This includes staffing and payroll for a restaurant manager, shift supervisors and part-time wait-staff, departmental office supplies, paper products, laundry/linens, soaps, cleaning supplies, etc. This percentage is shown and based on the ratio of the departmental expenses to gross food and beverage sales. Industry standards for food and beverage expenses of this type vary from 40 to 60 percent depending on the size of the operation and the type of club (private vs. public). A typical clubhouse such as the subject's, with full-service restaurant seating tends be more expensive to operate than a smaller operation. A large clubhouse at a club such as Course D with more payroll for wait-staff and management may operate at an even higher percentage in the range of 60 percent or higher. Comparable A B C D S-2008 Year One Percent 51.0% 53.3% 48.6% 68.8% N/A N/A However, because the subject will be contracting out the restaurant operations and will be receiving rental income only, this line item is not reflected in the discounted cash flow analysis. Brekan Nan Group 09-07-14 110 Golf Shop Operations The golf shop staff typically includes a director of golf and/or head professional (depending on the size of operation), assistant professionals, outside service personnel, driving range staff, rangers, and at some golf shops, a retail specialist. Other expenses for the golf shop are relatively small and can include items such as scorecards, pencils, gift-wrap, merchandise bags, office supplies, etc. A comparison of this expense for four comparable courses and the subject as well as the appraiser's Year One estimate is presented in the following chart. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $6,245 $9,775 $5,189 $15,952 $13,417 $15,371 $12,588 $12,600 As is seen in the table above, these expenses can vary widely from course to course depending on which department certain staff members are listed in the payroll records. Comparing the subject to Course D, it is reasonable to assume that these two operations have similar payrolls and operating expenses. Therefore, we have assigned a value of$12,600 per hole in Year One of the cash flow analysis which is reasonable. Subsequent years reflect increases of 3.0 percent annually. Golf Cart Lease and Maintenance Most 18-hole, daily fee golf courses in the Colorado market maintain a golf cart fleet of between 60 and 75 vehicles per 18 holes. The subject leased a fleet of 76 golf carts when they were an 18-hole facility. The following chart lists the cost of leasing golf carts and their corresponding maintenance for five comparable courses and the appraiser's estimate for Year One of the cash flow analysis. Comparable A B C D S-2006 5-2007 S-2008 Year One Per Hole $2,276 $2,528 $1,874 $2,815 $405 $3,856 $6,743 $6,800 The range in this expense category above can be attributed to (1) the age of the golf cart fleet and(2) the type of lease negotiated by each course owner or operator and (3) the number of golf carts leased by the particular property. An older fleet costs considerably more in replacement parts, batteries, tires, and corresponding labor than a new fleet of golf carts under warranty. The subject, as an 18-hole facility would require a fleet of 75 golf carts. Year One also reflects the GPS System lease which we have eliminated in Year Two because it is not Brekan Nava Group 09-07-14 111 necessary for the subject's operating success. This reduction in number of carts equates to a value of$5,368 per hole in Year One and $2,684 per hole in Year Two. The comparable 18- hole courses vary from$1,874 to $2,815 per hole for this line item. None of these courses have a GPS system as the lease is for only the golf carts. Annual increases after Year Two are reflected at 3.0 percent. Undistributed Expenses General and Administrative This category provides for general and administrative staff payroll and benefits, and miscellaneous expenses not being allocated to a single department such as credit card charges, bank charges, computer maintenance, janitorial, business licenses, telephone, security services and employee relations. If a course has a contract for operating the property with a management company, the payroll and benefits expense for this category is usually less than for a course which pays a salary to a general manager. The subject has a Director of Golf who oversees the golf operations and reports directly to ownership. A comparison of this expense for four comparable courses and the subject is presented in the following chart. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $6,969 $8,428 $5,189 $9,703 $6,469 $3,380 $3,935 $4,000 The general and administrative expense for comparable courses shows a wide range from $5,189 per hole to $9,703 per hole. Each course is an 18-hole course. The subject spent $3,380 and $3,935 per hole the last two years which is most likely the best indicator of this expense line item. This is also within the range of reasonableness given the comparable courses. Therefore, we have used a factor of$4,000 per hole for Year One of the cash flow analysis with 3.0 percent increases in subsequent years. Management Fees This expense is expressed as a percentage of gross revenues for golf properties such as the subject and the comparable courses. Industry standards vary between 3.0 and 5.0 percent depending on the particular negotiated management contract. As explained earlier in this section under general and administrative expenses, golf properties can opt for"in-house"management or contract with an independent, third-party management company. Comparable courses A, B and C chose to hire management companies within their respective areas to manage the properties. Brekan Nava Group 09-07-14 112 Course D hired a more expensive, nationally recognized management company to oversee the semi-private operations. Comparable A B C D S-2006 S-2007 S-2008 Year One Percent 4.0% 3.5% 3.0% 4.9% 12.7% 11.7% 16.8% 3.0% Ownership has charged the operations an average of 13.7 percent per year over the last three years to manage the operations. This is not normal for golf operations in the industry and far exceeds the industry standard. The appraisers were informed that ownership charges golf operations a higher than normal fee because of an internal tax preference. In the event the subject course would ever be sold to another owner, it is likely that a management company would be hired to oversee the daily operations. This is reasonable considering the expertise necessary to manage a property of this type. Based upon the appraisers experience and reviewing the comparable courses, we have adopted an annual management fee of 3.0 percent of gross sales in each year of the analysis for the subject. Professional Fees This line item deals with expenses for attorneys, accountants, appraisers, consultants and other outside professionals. This expense can vary considerably from year to year. Typically this expense will be higher when a course is being financed or sold. The following chart provides a comparison of the professional fees expense for the four comparable courses, the subject and the appraiser's estimate on a per hole basis for Year One. Comparable. A B C D S-2006 S-2007 S-2008 Year One Per Hole $278 $720 $362 $222 $3,001 $483 $523 $500 The comparable courses have a somewhat inconsistent value in this expense line item because this expense is very "property-specific". The comparable courses average $395 per hole for this line item. Industry standards range from $200 to $1,000 per hole for this expense. The subject has averaged $503 per hole for the last two years. Therefore, we have given the projected expenses of the comparable courses more weight and have assigned a value of$500 per hole for the subject property in Year One of the cash flow analysis. Subsequent annual increases have been set at 3.0 percent. li Brekan Nava Group 09-07-14 113 Marketing,Advertising and Promotion This expense can be one of the most important operational expenses for a daily fee golf or semi-private operation particularly in the beginning. The amount spent to advertise and promote a daily fee golf course varies considerably from course to course and, generally speaking, healthier operations invest more in promotion than courses operating on a "shoestring". Some courses, because of highly-developed name recognition, do not need to spend as large an amount on advertising and promotion as a newer and lesser known course. Other courses may be associated with a residential community that already spends considerable amounts on advertising their entire project. The following chart provides a comparison of the advertising and promotion expense for the four comparable courses, the subject and the appraiser's estimate on a per hole basis for Year One. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $556 $491 $989 $1,833 $3,294 $2,207 $2,034 $2,000 The above range for the comparable courses varies significantly from $491 per hole to $1,833 per hole with a mean of $967 which is slightly lower than the subject. Much of the advertising for Courses A, B and C have been born by development companies or owners with corporate marketing budgets. The subject had a marketing expense of $2,207 in 2007 and $2,034 in 2008. We have therefore concluded that a marketing and promotion allocation of $2,000 per hole is adequate to cover the necessary costs in this department given the association with the ongoing residential neighborhood development. Years following reflect annual increases of 3.0 percent. Utilities (non-golf course) This expense category includes electricity, natural gas, and water and sewer for all areas except for golf course maintenance operations. This covers the clubhouse utilities such as electricity, natural gas, and any other providers. The four comparable courses, the subject's last three years and the appraiser's estimates are compared in the following chart. Comparable A B C D S-2006 S-2007 5-2008 Year One Per Hole $833 $2,003 $890 $3,247 $4,643 $3,561 $2,988 $3,000 Brekan Nava Group 09-07-14 114 Expenses such as these tend to vary directly with the size and type of clubhouse. Courses A and C have smaller, simpler clubhouse facilities while the clubhouses for Courses B and D have structural similarities to the subject. Both of these clubhouses give the subject's clubhouse utilities credence. The subject spent $3,561 and $2,988 per hole the last two years. Therefore, we have weighted the most similar clubhouses among the comparable courses as well as the subject's historical data and assigned a value of$3,000 per hole for this line item in Year One of the cash flow analysis with subsequent years reflecting annual increases of 3.0 percent. Repairs and Maintenance li These expenses account for the maintenance and repair of all non-golf course items such as the clubhouse and surrounding site improvements. Typical expenses including cleaning supplies, equipment repairs, small tools, etc. Repairs and maintenance in this category can vary significantly from property to property depending upon the size, age and condition of the clubhouse and other related improvements. A comparison of the four comparable courses, the subject and the appraiser's Year One projections is provided in the following chart. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $944 $495 $272 $259 $556 $1,487 $2,100 $1,500 Reviewing the comparable courses shows a direct correlation between clubhouse size and age compared to the amount of repairs and maintenance expense which is consistent with the utilities expense line item discussed earlier. The four-course average for this line item is $493 and the subject has averaged $1,381 per hole for the last three years based upon the data provided by management. Therefore, we have estimated the subject's expense for this category of$1,500 per hole in Year One of the cash flow analysis with annual increases of 3.0 percent each year thereafter. Fitness & Health Club Expenses These expenses relate to the direct expenses involving the fitness center which is located on the ground floor beneath the restaurant. There is an extensive amount of exercise equipment in the center which features an aerobics area and small locker rooms for men and women as well. The chart below shows the subject's expenses in this department over the last three years as well as the appraiser's Year One estimates. Brekan Nava Group 09-07-14 115 Subject 2006 2007 2008 Year One Per Hole $6,184 $7,772 $6,802 $5,800 The subject has averaged $6,902 per hole for the last three years and spent $6,802 per hole in 2008. However, in the appraiser's opinion, the subject is losing money in this department having had the departmental expenses increase from $2,843 per hole in 2004 to $6,802 per hole in 2008. This could be viewed as an amenity to the subdivision with more of the expenses being assumed by an HOA. Therefore, we have reduced the labor and overhead by two part-time employees or approximately $27,000 annually. The result is an assigned amount of$5,800 per hole with annual increases of 3.0 percent in future years which is reasonable. Fixed Costs Insurance The insurance line item for golf course properties is generally for building improvements, contents, and general liability coverage. Unless a daily fee golf course has a large clubhouse with unusual liability requirements, premiums are quite predictable within the insurance industry. The values are expressed on a per hole basis for the subject and the comparable courses below. Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $1,008 $1,513 $1,790 $1,427 $1,550 $1,563 $1,094 $1,500 The four-course average for property insurance premiums is $1,433 per hole. The subject has averaged $1,402 per hole for insurance premiums over the last three years. Therefore, based upon the subject's historical data and confirmed by the comparable clubs, we have assigned a value of$1,500 per hole with 3.0 percent annual increases. Real Estate Property Taxes The property subjectis located in the incorporated City of Windsor and the County of J Weld approximately 50 miles north of downtown Denver, Colorado. For comparison purposes only,we have listed the property taxes for the four comparable properties below. All have different municipality taxation rates and are"property specific". Brekan Nan Group 09-07-14 116 Comparable A B C D S-2006 S-2007 S-2008 Year One Per Hole $2,778 $1,626 $2,979 $5,068 $6,790 $6,570 $7,012 $6,667 There are four Weld County Assessor's tax parcels and one personal property tax bill which comprise the golf course and clubhouse sites according to the Windsor County Assessor's office. We have included an exhibit of the Assessor's Parcel Map with the Site Analysis section of the report. The tax parcels and the personal property tax statement are shown below: 2008 -Real Estate Taxes - Pelican Lakes G & CC (original 18 holes only) Land Improvement Actual Assessed Account No. Acres Value Value Value Value Taxes I R3065104 177.6855 $71,074 $2,321,975 $2,393,049 $693,990 $78,874.74 2 R1105402 5.7700 $605,850 $1,765,665 $2,371,515 $687,750 $78,165.54 3 R4321006 11.1732 $5,587 $0 $5,587 $1,620 $184.12 4 R3067604 17.8640 $7,146 $0 $7,146 $2,070 $235.26 5 P-1850501 0.0000 1;0 $0 $21,689.99 Total 212.4927 $689,657 $4,087,640 $4,777,297 $1,385,430 $179,149.65 Note: Interest and Additional Misc. Charges by the Weld County Treasurer's office $7,240.98 Total(Inclusive of Interest and Misc. Charges) $186,390.63 The total taxes in 2008 for the subject according to the tax statements were $179,149.65. In addition, the subject has incurred interest charges and miscellaneous charges year-to-date for none payment. The reduction to an 18-hole scenario at$6,667 per hole equates to a value of$120,006 in Year One. Year Two was decreased however, to $4,200 per hole or roughly $75,600 because of the value of the appraisal which equates to $3,950,000 and the lowering of the assessed value if the property was sold. Future increases have been made at 3.0 percent annually. Reserves for Replacement A reserve for replacement of short-lived items such as furniture, fixtures, and equipment is necessary. Generally, the reserve for replacement is a fixed amount over a typical holding period. The reserve can be calculated on a line item basis, or as a percentage of revenues. The subject has not allocated any line item expense for reserves replacement. Although the clubhouse is a fairly new facility, normal wear and tear on assets such as tables, chairs, carpet Brekan Nava Group 09-07-14 117 and other expensive equipment will occur. Industry standards vary depending on whether the clubhouse and the furniture, fixtures and equipment is leased or owned. The range is typically between 2.0 and 5.0 percent of gross income. Therefore, our analysis shows a future reserves replacement of 3.0 percent of gross sales annually over the cash flow period to cover items as mentioned above. Selling Expenses Should the ownership decide to sell the subject property to another party, a real estate commission would probably be paid. Commissions and closing costs for a sale of this type would probably range from 2 to 4 percent of the selling price. We have applied a 3.0 percent total selling expense in our cash flow analysis. Brekan Nava Group 09-07-14 118 CAPITALIZATION TECHNIQUE The technique of capitalization utilized in this report is the discounted cash flow valuation technique. This approach is necessary because facilities such as the subject will require several years to reach a stabilized level of operation. This results in a variable net income in the early periods, each of which must be treated separately for capitalization purposes. Having determined the subject's net operating income in both a stabilized year and throughout an appropriate holding period, our next step is to evaluate the investors' expectations relative to the earnings. The expectations can be expressed in rates of return on the investment. In the paragraphs, which follow, a summary of our conclusions regarding the derivation and selection of an overall capitalization rate and a discount rate is discussed. Overall Capitalization Rate The choice of the capitalization rate depends on factors dealing with the amount of competition, interest developed in the project by marketing programs, design and attractiveness of the club, and the reasonableness of the income and expense projections. Therefore, the rate is partially a function of the perceived risk of receiving the projected income stream, in addition to a return on the investment and return of the investment. A capitalization rate is derived from the improved sales of golf courses from which we have obtained sales data. An additional alternative of real estate investments, such as apartment complexes, office buildings, and retail centers, have been selling with overall rates of return typically varying between 8 and 11 percent. Other factors to consider are the percentage of furniture, fixtures, and equipment that is included in the sale of the property, since these items tend to have a shorter life than the real property items and the management-intensive nature of golf course operations. Therefore, it is our opinion that the overall rate should be higher than the rate that is typical for an alternative investment such as apartment buildings, office buildings, or retail centers, assuming everything else is equal such as risk, market position, location, age, and certainty of receiving the income stream. Given the expectations of growth as a result of the projected population increase in the Windsor area and the quality of the subject and competitive facilities, it is reasonable, in our opinion, to expect the overall rate to be greater than 10 percent and less than 14 percent. Ii Brekan Nava Group 09-07-14 119 The following table provides a summary of the overall capitalization rates for these sales. Name of Expense Course OAR Ratio % Eagle Mountain- Arizona 9.16% 76.2% Raven GC—Arizona 8.49% 77.2% Legend Trail GC -Arizona 10.50% 73.5% Silverhom GC - Texas 9.43% 77.0% Twin Creeks GC - Texas 10.48% 71.4% Averages 9.61% 75.1% There is a fairly consistent range of overall rates in the above referenced golf course sales. Profitability greatly affects the overall capitalization rate for which an investor will purchase a property. The subject's operating expense ratio is projected to be 91.1 percent in Year One dropping to 81.3 percent in Year Four, the year of stabilization in our analysis. The improved sales have overall rates ranging from 8.49 to 10.50 percent with a mean of 9.61 percent. Most buyers of golf courses with higher expense ratios such as the subject are not purchasing the property based on its current income-producing capabilities, but rather on what they project net operating income the property is capable of generating in future years. Given the averages shown above,we have assigned an overall rate to be greater than 9 percent and less than 11 percent. The Spring 2004 National Golf Report published by Korpacz is the most current issue that addresses the golf market. However, Korpacz no longer publishes the data relating to the golf industry. From personal experience in brokering golf courses, the market has demonstrated a decline and/or lower overall capitalization rate in 2005 and 2006. For further support of the overall capitalization rate, we have summarized a comparison of the Spring 2004 Golf Market data and the first quarter 2004 Full Service National Lodging data published by Korpacz. Further, we have included the most current 2008 data published for Full Service National Lodging. This more recent data supports our opinion that overall capitalization rates have declined and supports a residual capitalization rate for the subject property in the area of 9.5 to 10.5 percent. Brekan Nava Group 09-07-14 120 it National Golf Market Spring 2004 Overall Cap Rate (OAR) Springs 2004 Year Ago Range 4.90% - 21.20% 7.20% - 19.00% Average 10.98% 11.25% National Lodging Market—Full Service First Quarter 2004 Overall Cap Rate (OAR) 1st QTR 2004 Year Ago Range 7.50- 12.00% 8.00% - 13.00% Average 10.28% 10.64% National Lodging Market-Full Service Third Quarter 2008 Overall Cap Rate (OAR) 3r° QTR 2008 One Year Ago Range 6.00% - 10.50% 6.00% - 10.50% Average 8.50% 8.30% Residual Cap Rate Range 7.50% - 11.00% 6.00% - 11.00% 9.24% 8.98% The averages from the preceding data have been utilized to estimate the appropriate a "going in" capitalization rate for the subject property. The interest rate used is 7.5 percent, the loan-to-value ratio is 50 percent and the amortization period is 20 years. BAND OF INVESTMENT ANALYSIS Component Ratio Rate Weighted Rate Equity .50 .1050 0.053 Mortgage .50 .0967 0.048 Cap Rate 0.101 Rounded to: 0.10 Brehm Nava Group 09-07-14 121 The built up capitalization rate was based upon average terms for golf course lenders. Based upon these various indicators (Improved Sales and Band of Investment Method) the capitalization rate should be between 8% and 11%. We have used a capitalization rate of 10.0 percent which is reasonable and appropriate for the subject property. Discount Rate (IRR2 Regarding the discount factor, we have considered opportunities available on alternative investments. Also accounted for is risk, which is a significant premium. The next schedule illustrates current yields on alternatives. SUMMARY-RATE INDICATORS (August 18,2009) Prime Rate 3.25% 6-Month T-Bill 0.26% Treasury Notes— 1-10 Years 3.49% Treasury Bonds—30 Years 4.34% Conventional Home Mortgage Rates 5.74% Municipal Bonds, 20-year, AAA 4.08% Discount Rate 0.50% Source:Arizona Republic As indicated, there is a normal yield curve with rates on longer-term maturities being higher than those on short maturity instruments. There is also a risk premium evident when comparing the 3.25 percent rate for extended funds to the 5.74 percent rate on the average, 30- year Conventional Home Mortgage Rate. The difference can be attributable to the additional risk, which is also considered inherent in real property. In determining the appropriate discount rate, we will utilize a built-up method whereby an appropriate safe rate is estimated and additions are made for risk and absence of liquidity. By reviewing the alternative investments, we feel a 5.0 percent return is representative of a safe rate for a long-term investment. The subject is ' considered long-term as it is not a three-month to one-year short-term instrument. For the absence of liquidity, we will add a 5.0 percent premium. A 5.0 percent premium for risk from a safe rate is suggested by the alternatives giving consideration to the property type Brekan Nan Group 09-07-14 122 Our cash flows are discounted at a rate equating to 13.5 percent per annum. The spread between the "going out" terminal capitalization rate and the discount rate should be close to the percentage growth rate in the net income. This rationale is made because the discounted cash flow is designed to value future income streams as if they were received today. Inflation over the past 10 years has averaged approximately 3.5 percent annually. If the projected increases in rental rates, green fees, etc., were increased 2 to 6 percent annually, then there is no real dollar increase in income other than the volume increases. Based on our conversations with golf course investors, both national and local, the 13.0 to 20.0 percent rate is consistent with their expected yield rates for a property similar to the subject. We believe a 13.5 percent discount rate is appropriate. Income properties typically provide two types of financial benefits, a periodic income and a future value obtained from the sale at the end of the holding period. This future value at the end of the holding period is referred to as the reversion. Conclusion On the following pages we have included the Discounted Cash Flow Analysis for the subject property, which incorporates the Income and Expenses as discussed, the Assumptions and a final value estimate. It is our opinion that the subject property has an"As Is"value, as of August 14, 2009, via the Income Approach of: Market Value at Ist Semi-Private Course August 14, 2009 THREE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS ($3,950,000) Present Value of Membership Sales $ 50,000 Golf Course Real Estate $3,400,000 Personal Property, Intangible Business Value, Liquor License $ 500,000 Total Value $3,950,000 The $500,000 includes furniture, fixtures and equipment value in addition to golf shop inventory and the Colorado Liquor License. This information was provided from ownership. Further, the value of the real estate also includes 10 shares of water rights @ $70,000 per share for a total water value of$700,000. Brekan Nava Group 09-07-14 123 .... �... N Yb Vim'... CI gym' :N. ''j NI 1eei m rye. 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N o O 00 H HIN o 00 H N b HI 0 O in m b"M H O d 4 00 W b b WI N:b 69 00 :W VI - O ino, vbi' b a W. H � cn yl QS an 4 - - tat m b' N H H on H 49,69,lea 4.. 69 Mn9 H N y, 69 1 o 9 a y 0 01 0° I ° DI G1 5 a 4 alb . w �I�ia � I � *di I � �I } o F'g' w'I � w' 1Z e1 n B I.m h _' 6 9 $I,6 o a $$ .6 0 CA 5 8-H.2 I a ' m $ of w a �° "d @ =l 91 all a( u. i 5 5 c 0.' m 8 m! 0. o I I m a a e ° SIB '! 6' o m O 3 8l -- to '::g 01i -i B 0. � B 2 e'I 8 c� 3 = �11ti 71 >o ' E PI WI , e t 0. ; & ; B W 1 uq 2I S1 9 a Z o XIII B a 1 w �' z m : I [ mil a• s a az z It i l I A V CO kn ! C v C 0 0000m noo o j.. L a v`", ,giv al rnlrn:PI TI I ?- 69 I 1 IK9 K t " 4' 6691 Ern �i en ; aaCA e' I I QI I c. acre VI l I � d a o �I a, ! -- .. _... i Rvi 0, ... !N 0, I Si;I b b 000 00 F1 CI a N V co i ka I I 1,- m eo',z m o,el ! 1 > JAI of I P. A. F I oN 01.til I I a e`?1 F I 1 f �+_ a N M V, 01 NI EA IA ; I I ti m.- f ! 6 G KI 43 U ; , I i `o _ !I I F 1 .c d III Zg - - ! ' I °oa ! F ° > I 5 N & i F i i I I io I ml od I t, ! I a -. - I ; I , 1 I II II 1 zl , I I II I I I I I 1 I I I ; 1 ti F F I ! I ! 6' I �I I I ' { I awl x{ I 3 ¢ zz il 9 ai U' !1 ti �l µici>y11 ,ai g � ' V: ,t) , ei I L 6 n � N 4 o > 8,`'a'; i I L0 W a � a z al al F [0G '.1 Z a 0: WI I I I I 1 I I I u i 43 RECONCILIATION AND CONCLUSION OF VALUE The following presents a summary of values from each approach employed in estimating the value of the golf course. Cost Approach Cost Analysis Sales Comparison Approach "As Is"Value PV of Initiation Fees $ 50,000 Golf Course $3,950,000 Total Value $4,000,000 Income Approach "As Is"Value PV of Initiation Fees $ 50,000 Golf Course $3,900,000 Total Value $3,950,000 The Cost Approach Analysis was based on the budgeted costs provided by the developer. PP Y Golf course and clubhouse costs were cross-checked by a comparison to known costs for other similar golfing facilities like the subject. The approach is not generally considered a reliable indicator of value as most golf courses that are a part of a master-planned development are an amenity to the community and will not generate sufficient market value to justify their cost. In most cases, projects such as the subject are built to enhance the value of the surrounding community and residential lots plus facilitate the absorption and return expected from lot sales The Sales Comparison Approach Improved Properties can provide a test of reasonableness for the value indication developed via the Income Approach. Each golf course is a unique facility due to its location, quality, etc. It is difficult to find truly comparable sales for most golf courses, given the wide variances in location, quality, and type of operation. Many golf course buyers typically own more than one course. The primary consideration is the amount of gross and net income that is generated by a golf course. Depending upon the operating expense ratio, buyers will pay a certain multiple of the gross revenues, or a multiple of 8 to 10 times that of the net operating income. The appraiser utilized recent sales of daily fee, semi-private and private, regulation-length golf courses located across the western U. S. to derive the value by this approach. Brekan Nava Group 09-07-14 130 Most emphasis was placed upon the Income Approach. Income and expense data was derived using market comparables of similar facilities throughout the western U. S. Because of the amount of available income and expense related data, the Income Approach is the most reliable method with which to estimate a market value for the subject. Further, the Income Approach to Value reflects what an investor would pay for the property based upon the income and expense projections for the subject property. Special Assumptions • It is assumed that the subject property has no environmental soils problems precluding development to its Highest and Best Use based upon the limited information provided the appraisers. • In the absence of an ALTA Survey identifying the addition of the new nine holes as well as the existing 18-holes and clubhouse, the appraisers have relied on data from the Weld County Assessor and Treasurer's offices to obtain the size of the subject property. Conclusions It is our opinion that the reconciled Going Concern value of the Fee Simple Estate in the golf course is as follows: Market Value 04s Is/iSemi-Private Course August 14, 2009 THREE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS ($3,950,000) Present Value of Membership Sales $ 50,000 Golf Course Real Estate $3,400,000 Personal Property, Intangible Business Value, Liquor License $ 500,000 Total Value $3,950,000 The $500,000 includes furniture, fixtures and equipment value in addition to golf shop inventory and the Colorado Liquor License. This information was provided from ownership. Further, the value of the real estate also includes 10 shares of water rights @ $70,000 per share for a total water value of$700,000. Brekan Nava Group 09-07-14 131 CERTIFICATION Pursuant to our appraisal assignment of the property legally described in the body of this report, as: Pelican Lakes Golf and Country Club 1600 Pelican Lakes Point Windsor, Colorado The undersigned hereby certifies to the best of his knowledge and belief that, except as otherwise noted in this appraisal report: -- the statements of fact contained in this report are true and correct. -- the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. -- We 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. -- Our engagement in this assignment was not contingent upon developing or reporting predetermined results. -- 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 opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. -- Our analyses, opinions, and conclusions were developed, and this report was prepared, in conformity with the requirements of the Uniform Standards of Professional Practice. We have made two separate, personal inspections of the property that is the subject of this report. -- W. Gregg Lindquist provided assistance in all areas of this report to the person signing this certification. -- to the best of our knowledge and belief, the reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. -- the use of this report is subject to the requirements of the Appraisal Institute relating to P J review by its duly authorized representatives. -- as of the date of this report, Ralph J. Brekan, MAI, SGA has completed the requirements of the continuing education program of the Appraisal Institute. Ralph J. Brekan, MAI, SGA has the knowledge and experience to competently appraise the property that is the subject of this report. Brekan Nava Group 09-07-14 132 SUBJECT GOLF COURSE PROPERTY Special Assumptions • It is assumed that the subject property has no environmental soils problems precluding development to its Highest and Best Use based upon the limited information provided the appraisers. • In the absence of an ALTA Survey identifying the addition of the new nine holes as well as the existing 18-holes and clubhouse, the appraisers have relied on data from the Weld County Assessor and Treasurer's offices to obtain the size of the subject property. Conclusions It is our opinion that the reconciled Going Concern value of the Fee Simple Estate in the golf course is as follows: Market Value lids IsI Semi-Private Course Auzust 14, 2009 THREE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS ($3,950,000) Present Value of Membership Sales $ 50,000 Golf Course Real Estate $3,400,000 Personal Property, Intangible Business Value, Liquor License $ 500,000 Total Value $3,950,000 The $500,000 includes furniture, fixtures and equipment value in addition to golf shop inventory and the Colorado Liquor License. This information was provided from ownership. Further, the. value of the real estate also includes 10 shares of water rights @ $70,000 per share for a total water value of$700,000. We appreciate this opportunity to have been of service and look forward to working with you again. Should you have any questions regarding this matter,please do not hesitate to call. Respectfully submitted, BREKAN NAVA GRO Ralph J. Br an, MAI, SGA President Arizona Certified General Real Estate Appraiser No. 30363 Temporary Colorado Licensed Real Estate Appraiser No. AT 400 42432 Brekan Nava Group 09-07-14 133 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal is subject to the following limiting conditions: The legal description furnished our firm is assumed to be correct. We assume no responsibility for matters legal in character nor render any opinion as to the title, which is assumed to be good. The property has been appraised as if under responsible ownership and competent management. We have made no survey and assume no responsibility in connection with such matters. The firm believes that the information contained in this report is reliable but assumes no responsibility for its accuracy. The construction and condition of the improvements mentioned in the body of this report are based on observation, and no engineering study has been made which would discover any latent defects. No certification as to any of the physical aspects could be given unless a property engineering study was made. Neither all nor any part of the contents of this report will be conveyed to the public through advertising, public relations, news, sales, or other media without the written consent and approval of the author, particularly as to valuation conclusions,the identity of the appraiser or firm with which he is connected or any reference to the Appraisal Institute or the MAI designation. 1 as of the date of this appraisal only. The valuation estimates contained herein apply pp Y The distribution of the total valuation between land and improvements in this report applies only under the existing program of utilization. The separate valuations for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. The fee is in no way contingent upon the completion or consummation of any project or matter beyond the control of the appraiser. The contract for appraisal, consultation or analytical services, are fulfilled and the total fee payable upon completion of the report. The appraiser(s) or those assisting in preparation of the report will not be asked or required to give testimony in court or hearing because of having made the appraisal, in full or in part, nor engage in post appraisal consultation with client or third parties except under separate and special arrangement and at additional fee. The acceptance of said constitutes the acceptance of this contingency unless otherwise arranged for. The appraiser has inspected the subject property with the due diligence expected of a professional real estate appraiser. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment. Brekan Nava Group 09-07-14 134 The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. The appraiser's 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 environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraiser's descriptions and resulting comments are the result of the routine observations made during the appraisal process. The terms of our engagement are such that we have no obligation to revise this report or the estimated operating results to reflect conditions which occur subsequent to completion of our assignment. However, we are available to discuss the necessity for revision in view of changes in market and economic factors. As in studies of this type, we assume no significant change in market or economic conditions, legal, or regulatory issues applicable to this project. Further, we have not been engaged to evaluate the effectiveness of management, and are not responsible for future marketing efforts and other management actions upon which actual results will depend. Possession of the report does not carry with it the right of publication without the previous written consent of the appraisers. Additionally, neither the identification of the appraisers nor any of the material contained in this Report may be included in any prospectus, newspaper publicity or advertising or as a part of any printed material, or used in offerings or representations in connection with the sale of securities of participating interest to the public. Neither all nor any part of the contents of this report shall be used for any purpose by anyone but the addressee without the previous written consent of the appraisers nor shall it be conveyed by anyone, including the addressee to the public through advertising, public relations, news, sales or other media without the express written consent and approval of the authors, particularly as to valuation conclusions, the identity of the appraisers or any reference to any professional society or institute or any initialed designations conferred upon the appraisers. 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. The Americans with Disabilities Act (ADA) became effective January 26, 1992. The appraisers have not made a specific compliance survey and analysis of the subject property to determine whether it is in conformity with the various detailed requirements of ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of 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 the appraisers have no direct evidence relating to this issue, possible non-compliance with the requirements of ADA was not considered in estimating the value of the property. Brekan Nava Group 09-07-14 135 QUALIFICATIONS OF RALPH J. BREKAN, MAI, SGA Arizona Certified General Real Estate Appraiser No. 30363 Temporary Colorado Licensed Real Estate Appraiser No. AT 400 42432 Currently President of Brekan-Nava Group. Mr. Brekan has been engaged in the appraisal of real property since 1973. The scope of his work includes the appraisal of commercial, industrial, special purpose, vacant land, residential, and recreational use properties, including numerous country clubs and golf clubs, cash flow and investment analysis, and market and feasibility studies. His golf course experience includes market studies, feasibility studies, consultation and brokerage assignments dating back to the late 1970s. He is qualified as an expert witness in the Federal Bankruptcy Court, State of Texas District Court, and Special Commissioner hearings in Eminent Domain cases and Superior Court in the State of Arizona. He is also qualified as an expert witness in the several li District Courts in the State of Illinois in Eminent Domain cases. A partial resume of specific qualifications is outlined as follows: 1. Member- Appraisal Institute(MAI) Admissions Committee Member(1986), Chapter 33. Admissions Committee Member(1988 to 1990s) Phoenix Chapter Served on the Regional Professional Standards Panel 1993 to 1995 2. Past President (1982), Chapter 87 of Society of Real Estate Appraisers. 3. Past Instructor in Real Estate Appraisal at the Houston Baptist University and Kishwaukee Junior College. 4. Received a Master of Business Administration degree specializing in real estate and finance, and a Bachelor of Science degree in finance from Northern Illinois University. 5. Past Dekalb County Board Member (1980-82); Supervisor of Forest Preserve and served on the Planning and Zoning Committee. 6. Appraisal Education: Appraisal Courses I-A, I-B, II, VII, and Litigation Valuation, Standards of Professional Practice, Appraisal Institute; Special Application of Appraisal Analysis - Course 301, Society of Real Estate Appraisers; Real Estate Law I and II, Institute of Financial Education; numerous seminars on specific areas of appraising. The Appraisal Institute conducts a voluntary program of continuing education for its designated members. As of the date of this report, I, Ralph J. Brekan, MAI, SRA, have completed the requirements under the continuing education program of the Appraisal Institute. I am certified under this program through December 31, 2001. 7. Mr. Brekan has performed numerous appraisals and consultation projects for various clientele including governmental agencies, institutional investors, financial institutions, developers, brokers, investors, attorneys and other entities. A sample of clients is available upon request. 8. Publications: Article for Real Estate Forum entitled Market Research Key in Providing Accurate Appraisal, 1987. 9. PROFESSIONAL MEMBERSHIPS Appraisal Institute -National Appraisal Institute- Phoenix Chapter State of Arizona—Broker's License Society of Golf Appraisers 10. Corporate Member of the National Golf Foundation. Brekan Nava Group 09-07-14 136 ADDENDUM EXHIBIT A LETTER OF ENGAGEMENT RIMSCentral.com::View Award Page 1 of 1 RIMS Customer,Wells Fargo RETECHS#:DNV09.1427.08-A-2 —Award Information Data Awarded: 1/27/7009 Canceled: Ito DiredfyAwarded: Yes Pee: $2,400.00 Deanery Date: 811412009 Award Contracts: APP-11 REGIONAL BANKING Job Attadrmenta: There are currently no job attachxnts —Bid Information Proposed Fee: Direct Award Proposed Delivery Date: Signatory Information: Office LoC:Wow Prior Services: Have you ever appraised this property?If Yes.Please provide details In the Cortvnents Iied. lid Comments: —RFP Information Purpose Of Request: Asset Valuation Only(No Loan) Response Deadline: MAP RETECHS Contact Arnold(DNV),Thomas A. Desired Delivery Date: Contact Phone: 303-863-6912 Appraisal Scope: See Comments GENERAL PERFORMANCE STANDARDS Appraisal General Requirements SPECIFIC PERFORMANCE STANDARDS APPt1.1 REGIONAL 4ANIQNG —Property Information Project Name: Polcal Lakes Golf Course Property Type: NK2•Sport(Entcrtairenent•Coed Related-Got CeursdOub-Improvement besides a got course fealty with the value of the business and features suds as gradu g,landscaairxl, irrigation system,clubhouse with food and beverage service,and stcxage.if the property consists only of a land site with a golf course planned,then the Land property type should be toed. Address: 1600 Pelican Lakes Prdt Windsor,CO 8055D County: Weld Improvement Size(Primary): 28 Holes-Gdf Improvement Sire(Secondary); 27,662 SF Land Sias: 196,46 Acres Excess Land: 0 Acres Parcel Numbers 080728309006.080728337009 Year Butt 2004 Property Status: Existing Property Tenancy: Owner Occupied 100% Proposed Renovation?: do Listed for Sale?: do Peridin0/Ratent Sale?: tlo Legal Description: A Tract of land situated in Section 28,Section 29,and the Northeast Quarter of Section 33,ToNvtshtp 6 North,Range 671 Vest;of the 6th PM.;TIMI of Windsor,County er Weld, State of Colorado;being more particularly described as follows:Tract 1 of Water Wiley Subdivision as shown and described of thtePtat thereof,as recorded at the Wed County Cleric and Recorder's Office on May 7,2004 at Reception tie.3178242.Said described Tract contains 196.46 acres(8,557,938 SF)mere or less and is subject to all easnrrersa and rghtrofv ay nov on record or existing.Together with 10 shares of the capital stock of The Whitney Irrigation Company and together with ail water rights and all wells and equipment used for the Irrigation et said land. CopYr t C 7[177 t]actT4 Inc.AS nghts reserved. RUtSTM and RUl9CentratIN arc trademarks d rnd5d,Inc. hopsJlonline.rimscentral.comlOrdels.NiewOrder.aspx?enc=UGFIIZU lvZGU9Vmlid0F3YXJkJkF... 7/27/200g EXHIBIT B TEMPORARY COLORADO LICENSE N AND PERM POR r � APPLiCA17D ., lJ6 ' q'g,N1p()RAR1(APPRAlsAL PgAtR7CE IN COLORADO .dwa rd seekbp teasel so eaaPnd taI I+ Tots rorabel'i Celood :roaUiadiotherofSSed3omI a)FlR2SA a12U.S.C.LSUSkS 2009 aaessP S•cwdmvdsado1).C.I epwbb• RIDE q�10- yempory irdetPla'1 1,C.RS(Aata�°yporeprdofRml AHomambotwPel�sval Op teeedoa2knolbarctwa0tbbfota4t7Pa�NPe� bend , 11dse pleadca Dusklll dha Now taint Asodgtrtd aSt�rattiet4 PP6 Porn al S Oast astKOfi itadmate to put sp is APP ��' v tmdst �aatdvedrpemh Mahe Jan 1,2007y000nneenpleneetioasAasdllorporgprostioaeserattopeceact r n1,1007yoaonne®PlaneetioaAadaartat.piatboaaa[bepoocca0. OY otamse re tawpeen kWhildSaa (URbe ollamee edam; rem v '1r FEB 10 2009 2.Nox Y%NQ.lJ�. 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RP ropaties to be apprpsed: (frbsy oat beamrded aRsrgroed) aloft Pelican Takes a Colt Course I Wells iartto I I J Ey rawxislatDme 1120109 tstitneedDastianotAstiptmrat 4 weeks %DYES ® NO Henan a +s u Atiosoc s)oroati5 da s) nyjarbdedon two bet dated,rooked.s espead pease d.Onislated,deeded task svb•ldb aradered anklets olio ape IaMdipdrt Of yet hoe wet hod on apes eampbims,thxk the stro er ike e>ompbfm with i e appopi,desesdetosP y►adeaom.reieatb'ngeade* . 070.seta MS McbmissibtpariaRedooy Asia sr whin etii4etiotntda'ard Isroloes O.ANSWER AU. 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IP lase a&toAthrmmmtA far afeted wowt ldemeteendscMabledoaimtSssodmsortie doaaaauemYvolaro DrLvar a License. at lase ado-the mow oftbe state ortsIbWal spay is what Sit was AZ 3.Wbmi s the dorammtlamber B1‘17 5208 ? 4.Wia! stile apianmdam 1/te/9nt ? &efdamC: AtttsUfioa• • 1 adeasmad daetthisswum Memos o combed by iwr bows l bnospp5d kraptoRaioad or proaaad proof ieatI ara latedIse by I US.6 the sec MIS S1. 1 ma tiedhesuod that�as swell as Ma oft secuma to provre sodvaetlam ures.l10 secure aadvd8abiedoatmeaL low daubs remised b provide Fodor lawful pis a Iuodastmd that iaswam with seethes 164-503 and 1$-$401(1j(a ,CAS.,disc . - a aSs lads arepaisheble by kw.Inge ander pawky ofpajary lo the second depea es ddlaed IA 13-3403.C11.3.Sot the above sed meats so true and comm. • Ion thepersea'Stifled tow writhe hekerestioao eteleedbr ainiskaesadcontestlodaa best army ksowkdgr.I u dm>tmd Oatcoda Colorado law,posh** ioformstim Is woods for dealt.®apadraboveaatko oft Gaokw�rtYlmm mofps RopdstoryAwadm ic • lwadmiad that abosave • 61303 RG7URN1'allewd.. a Apprahee,1360amdatyStc9=S.DoaUy Coloreds 20202 kelt*the worked W MAKE CIE3CR PAYABIEM COIARADD l WARD OF REAL ESfAM MPGAISMS. FEESARENOTREFUNDaa Noraab or coda goys BOARD USE ONLY 110:3 ` 4/GF/ a249I Status oedema TT Al TM Appmd��v ^`�" EScslvcdoc �C MIT MICE FotoBOREATA07roS EXHIBIT C LEGAL DESCRIPTION (PELICAN LAKES FIRST 18-HOLES ONLY) • LEGAL DESCRIPTION • • .4 plot of a parcel of land fn the .TOWN OF,W*NOSOP, Weld County 0kforedo, located m Sections 28, 29, end.11 7614, R57W of the 6th R.M. and more portic'u/ary,desMhed as follows:. • Consider*? the North line of said Section 28 as bearing S 89'36'30'£as determined by monuments found at the ' Northwest corner and of the Northeast tamer of laid Section 26 and with a8 bearings contained herein nestle thereto. '' Commencing of the North West Comer of said Section'26' thence 5.34•041.3'E 64.89 feet to a point of intersection of the Eastem Right of Way of Seventh Street and the Southern /Weld of Way of Eastman Park Orie; thence along said Eastern Right of Way of Seventh Street S 00'10'30'it;.225.76 feet' thence S 01'37'15'C 10067 feet; (hence S 00`!!'36'Jr 64.42 feet to the 1RU£POINT OF BEGINNING' of this description; thence departing said line Si?016'45'E 12451 feet thence S 74'1'02'C' 187.53 feet,•, thence S 46'3515'4 197..11 feet', then S 387479'4 542.37 feet thence 5 06'45'49'W 161.76 feet• thence S 54'3803'-£, /67.39 feet thence S 14'5159'Jr, 6128 feet thence S 51'4400'Jr•261.25 het thence S 17'12'06'Jr 28135 feet then • 5 39.53'47'Jr 94.42 feet thence 5 !2.3502'C.110.73 feet' thence S 03'06'54'C 15197 feet !hence S 09'2032"W, 36186 feet thence S 28.3('43'E 41569 feet thence S 57'2270'1 281,41 feet thence N 72'3578'4 15626 feet thence N 84'0873'C„28618 feet thence 5 55.29'4'3'C, ➢6.37 feet,' thence 5 59'5208'C 104.10 feet thence N 51'5928'£;320.91 feet' thence N 77'1401'C 155.90 feet thence S 60'25'48'F 674.66 feet• thence 5 28'!953 Jr;149.26 feet thence S 79'36'4?4 730,81 feet thence S 56'00'14'£ 14697 Poet (hence S 29'x70.5'C'!90.04 feet thence S 75'1577'4 67.65 feet, thence 5 37'3871'F 153.67 feet,' thence 5 74'1974'1 !09.81 feet,' thence S (4'4956'.E, 125.55 feet; thence; $ 8.7'0019`C 36.20 feet thence N 571.211.27'4 20297 feet thence S 87'1970'F 51.81 feet' thence ' S 87'2977"C 5116 feet; thence N 69'14•061 C 15170 bet thence 5 63'2508'F 212.34 feet thence .5 81'4278'.G 79.97 feet', thence S 65'0470'C 7818 feet thence N 87'4978"4 9559 feet thence S 75'4877'& 23630 feet thence S 36'47'12'C 57.13 feet thence S 37'53'40'4 236,03 feet thence N 6.7•10'49'C 99,10 feet', thence 5 66'57100.4 6148 feet thence S 01'1105"'E 11122 feet thence S 13.42'23'Jr 13131 feet thence S 36.4419'W, 61.82 feet'Ihente S 26'34'52't'X63 bet' thence N 77'01'41'E 65.96 feet thence N 70'4722"C 9569 feet thence N 25'02'!5'F 110.366 f st thence N 89'45'75'4 214.07 feet le a point on the west right of way. of the Crept Western Rc..woy thence along said Inc 5'00'1415'9, 2003.26 feet thence departing from sold line , S 89 46.26'W, 2827) feet' thence N 65'2043 W,"194.7) feet:thence N 0/'1749'6 396.44 feet thence . N 5326'37'W, 93.89 feet thence N 29'4822 Jr'fid4.3! fret thence N 08'40'02`Jr, 12178 feet thence N 03'22'39 W, 31661 feet; thence N 38'1053 Iti.,,43.30 feet; thence N /8'1709'W, 8380 feet thence • N 00'0000"C 4052 feet,' thence N 30'04.43'W, tq9.12 feet thence 1/11•(7.19*£,. 704.43 feet,' thence N 76'2326'.Jr 15295 feet thence N 20'5212'W"54..64 feet.thence N 01'5559'& 10610 feet' thence. N 53'24'45'W, 45.65 feet, thence S 86'4t' 6'W, 101.60 lest' thence N 553'5071'Jr,165.55 feet thence ' S 79'5415'W, 15155 feet thence S 17'12(3'*,.81.44 feet thence S 75'19'14'W. 12215 feet thence • N 74•131:15*W, 371.26 feet; thence S 11'32'05',W, 5575 feel' thence S 85'46'01'W. 17639 feet; thence N 23'30'47'Jr 10623 feetthence N Beatty!Jr„490.82 feet thence S 74'46'44'W, 34198 fest thence S 65'18(6"W, 28911 feet thence S 16'2501 It; 4671 feet thence.5 72'4373'W, 23433 feet thence N 67'22'04'W, 286.88 feet thence N 15'J152'Jr. 112.97 feet thence N 11'5809'& 284.43 leet thence N 16'58'71'C 405.22 feet' thence N 78'1712'W. 322.13 feel; thence N 16'0776'4 216.30 feet; thence $ 76'52'24'W,.56697 feet thence N 72'1378'.W 170.99 feet thence N 18'0250' Jr, 13673 feet thence 'N 06'4758"C 127.88 feet; thence N JJ'1742'W. :115.75 feet`thence N 40'43159' W, 51595 feet thence N 30'1570'W, 42.01 feet thence N'16'0778'Jr (4163 feet thence N 72'0906"Jr 21978 feet' thence N 04'4.903"W, 20249 feet; thence N 74'76'05"f 203.83 feet; thence N 16'5206' It; 372.78 feet; thence N 78'07'73'Jr 1(7.49 feet thence S 42'28'07'W, 864.8) feet. then S 07.2531"E, 70.13 feet then S 26't4'181 W, 225.83 feet Mende S 61'42'47' W, 59.33 feet; thence'N 62'2302'Jr. 150.19 feet; thence ' N 22'51'12'Jr 62.34 feet thence N 65'49'50'Jr 261.45 feet to a point on'the Cost Right of Way of Seventh Street thence along said Eastern Right of Way N 00'0/45'£, 29118 feet thence N 24'4740'F 231.99 feet to the beginning of o curve concave to the east having a central angle of 31'0005"and o radius of 7027.30 feet, the chord of which bears N 35'47'29'E, 549.09 feet' thence.along the are of said curve 55585 feet' thence N.54.11S07"E; 544.12 feet to the beginning 3.'a Fund centavo to,the northwest hovfng a central angle of 21'15'3'and a nd/'us•of 113945 feet the chord of which:bears N 46'/609'E. 420.3/ feet' thence along the arc of said curve 422.73 feet to the beginning of a compound curve concavA to the north having a centre angle of 32'.4603'and o radius of 1149.43 feet, the chord of which bears N 13'34'9'4 648.45 fret thence along the are of.said curve 657.37 feet,' thence N 00'1!76"E, 291.58 feel to the mt/C POINT OF 9EGINNIM% of this description. The above desoebed tract contains 190.99 acres more or less. t21St4 2EseIREAh3 974 iaar • Considering the North 8ne of sold Section 28 as bearing S 89'36'30'£ es determined by monuments found of the . .. • _• _.� n .✓�nA nn A.....:.... ...nln/nnd Awrnrn rerahYe then/n. EXHIBIT D DEMOGRAPHIC REPORT Demographic and Income Profile Prepared by STDBonline Gregg Lindquist ESRI Paean rates O8 CC Latitude: 4033627 Longitude: -1011969 40456270,-10196900 SOeType: Ring Radius: 3 miles Summary 2000 2003 2014 Popdaron 9.986 14.292 10,835 Households 3.580 5.073 5,951 Fatties 2.712 3,730 4,310 Average tkusehdd See 2/5 270 281 Ovine(Occupied nth 2.820 3.745 4.319 Renter Occupied HIS 766 1.328 1,633 Medan Ape 32.9 33.5 33.6 Trends:2009.2014 Annual Rate Area State National Populace 333% 0% 091% Households 3.24% 0% 0.94% Fatties 2.03% 0% 0.74% Omer Nth 2.80% 0% 1.19% Median Household Warne 0.57% 0% 0.80% 2000 2003 2014 Households by Income Number Percent Number Percent Number Percent <S15,0:0 337 94% 293 5.8% 350 5.9% $15,000.$24900 307 85% 336 0.0% 348 5.8% $25,000-$34900 340 94% 359 7.1% 373 93% 335,000-349009 029 17.5% 550 112% eel 10.0% 350000-274.000 080 275% 1.220 24.2% 1,404 24.6% 175900-109.090 570 16.1% 1.115 22.0% 1,480 24.9% 2100900-3149099 304 8.4% 880 17.5% 950 10.0% $150.000-$190,000 37 1.0% 188 37% 219 3.7% 3200000e 70 21% 101 2.0% 117 2.0% Median Household Income 353.004 200.438 271.433 Average Household Income 265.381 $78.077 $70.200 Per Caphe lucerne $24,013 288.301 $28.028 2000 200$ 2014 Population by Age Number Patent Number Percent Number Percent 0-4 849 85% 1.242 8.7% 1.400 8.7% 5.9 824 83% 1.149 80% 1,380 82% 10-14 778 78% 1,0'78 7.5% 1.200 7.7% 15-10 755 7.0% 897 63% 1.030 02% 20-24 480 45% 739 52% 825 4.9% 25.34 1.674 16.8% 2.380 10.7% 2202 17.2% 35.44 1,819 182% 2,359 16.5% zees 18.0% 45.54 1,372 13.7% 2.068 14.5% 2322 13.2% 55.64 542 0.4% 1.352 0.5% 1.725 10.2% 65-74 305 33% 579 4.1% 817 4.9% 75.61 304 3.0% 280 2.0% 335 2.0% 854. 112 1.1% 150 1.1% 155 09% 2000 2009 2014 Race and Ethnicity Number Percent Number Percent Number Percent White acne 9,100 91.7% 12095 809% 14.739 87.5% Ina&None 43 O4% 90 0.0% 121 0.7% Amerman Indian Alone 75 0.8% 111 0.8% 131 0.8% AslanAlone 61 0.5% 97 07% 120 0.8% PadbclslanderAlme 6 0.1% 12 01% 18 0.1% Some Other Race Alone 430 4.3% 904 63% 1318 7.2% Two orMore Races 222 22% 382 27% 479 28% HispricOrign(Any Race) 1956 105% 2.107 15.4% 2.952 17.5% Ostend,:norm le mplewm s cured dorm Source:tl:lEaemobe Census 2093 Cella oPopdabn aid lbump.ISM twain sa20W swirl Glop!ESN Cadman mold and mops tae amines Anent OtOu.awr It IlitilithIlab el all 111:0-212-2224 LU10N Page1 Of 2 Demographic and Income Profile Prepared by STDBonline Gregg Lindquist ESPI Petiean Lakes G&CC Latitude: 4045627 Longitude: -104.8969 40456270.-104.896900 Site Type: Rig Radius: 10 miles Summary 2000 2009 2014 Pop ia8m 113,977 164,711 190,181 Households 41,705 00.085 69,250 Famies 31,185 43.594 49,481 iyrwe Household Sits 2.71 2.73 2.73 Ovine!Occupied lUs 32,200 44.905 51,431 Renter Occupied Rh 9,550 155.180 17,819 Medan Age 34.1 34.9 35.2 Trends:2009-2014 Annual Rate Am State National Poph/aticn 292% 0% 0.91% Households 2.88% 0% 0.94% Farnies 257% 0% 0.74% Owner Hits 2.75% 0% 1.19% Median Household Income 0.07% 0% 0.80% 2000 2009 2014 Households by Income Number Percent Number Percent Number Percent <$15,003 3,008 8.6% 3,101 5.3% 3,683 5.3% $15,000-124.999 4.224 10.1% 4,090 6.8% 4.112 5.9% $25,000-$34,999 4,302 10.3% 4.821 8.0% 4.882 7.0% $35,000-$40999 7,006 16.8% 6.897 11.5% 7.719 11.1% $60,000-174999 10,310 24.7% 13.750 22.9% 15.551 22.5% $75,000-199999 6.022 14.4% 12.905 21.5% 17.320 25.0% 1100.000-S149.999 4,080 9.8% 0,424 15.7% 10,189 14.7% 1150,000-5199.000 1,020 2.4% 2.775 4.6% 3,254 4.7% $200,000+ 1,149 2.8% 2217 3.7% 2.580 3.7% Median Household Income 353,180 589.203 172.0815 Avenge Household Income 505,597 $81,081 $83,420 Per Capita Income $24.172 129.902 170.482 2000 2005 2014 Population by Age Number Percent Number Percent Number Percent 0-4 8,814 7.7% 13,006 7.9% 15,148 8.0% 5-9 9,180 8.1% 12.074 7.7% 14,850 7.8% 10-14 0,270 8.1% 12.530 7.6% 14,579 7.7% 15-19 8,004 7.1% 11234 6.8% 12.418 6.5% 20-24 8,785 6.0% 9.118 5.5% 10.400 5.5% 25-34 16,474 14.5% 23.884 14.5% 27.193 14.3% 35-44 19,532 17.1% 25.212 15.3% 29.244 15.4% 45-54 16,652 14.6% 24.908 15.1% 25.955 13.0% 55-04 8,087 7.6% 17.533 10.0% 21.642 11.4% 65.74 5,743 5.0% 8,164 5.0% 11,685 0.1% 75-84 3,670 3.2% 4.576 2B% 5,012 2.6% 8554 1,100 t.0% 1,812 1.1% 2,035 1.1% 2000 2009 2014 Race and Ethnicity Number Percent Number Percent Number Percent WM*Alone 102.110 89.6% 143.161 80.0% 182,891 85.7% Stack Alone 828 0.6% 1.109 0.7% 1,303 0.7% American lMun Alone 723 0.0% 1.039 0.6% 1,192 0.6% Asian Alone 1,404 1.2% 2.708 1.0% 3.526 1.9% Pacific Islander Alone 51 0.0% 88 0.1% 113 0.1% Some Otter Race Alone 8,618 5.8% 12.546 7.6% 16,140 8.5% Two or Mort Races 2,443 2.1% 4.000 2.5% 4,940 2.8% Hispanic Origin(My Race) 15,188 13.3% 28,920 17.6% 37,203 19.0% Data Note:income is nptsred et manse WU'S. sours:U.S.Donau or be Ce See.2000 Census or Poprtaton and I Io4N*g E0 t recasts er 2/009 me 2014. 02058481 On-demand reports and rape trots Swims Analyst Online.Order at ecreUkeaLgOkega or call 500.2924224 811722009 Pa911 ate it Demographic and Income Profile Prepared by STOBo lne Gregg Lindquist ESFI Pa9ean Lakes 68,CC tabled': 4005827 Longitude: $0U9q 4010270.-101.099000 SleType: Rig Radius: 15 miles Summery 2000 2003 2014 Populate= 341,885 423,003 400.445 HousdroNs 127.309 157.332 173.321 Unties 83.515 101637 110.713 Average Ha8ehdd Sae 2.59 201 2.62 OeerOcaryod Ms 83.109 102,171 112491 Rader Occupied HHs µ.2q 55,161 80830 Radice Age 31.0 32.5 33.1 Trends:20094014 Annual Rao Area State National Pupyakm 1.97% 0% 0.91% HoueelNids 1.95% 0% 0.94% Panties 1.73% 0% 0.74% Omuta 1.94% 0% 1.10% Medan Household Income 1.12% 0% 0.80% 2000 2009 2014 Households by Income Number Percent Number Percent Number Percent <315.000 17.383 13.7% 14270 9.1% 15.700 0.1% 515.000-124,909 16,151 12.7% 14,340 0.1% 13.872 8.0% 525,000-130090 15312 124% 15,262 0.7% 14.944 8.6% 235000.549,900 21.318 18.8% 21,108 13.5% 22,823 13.2% 550.000-574090 27.027 21.2% 31,827 221% 38.710 223% 575,000-209000 14,557 11.5% 20634 102% 30,854 21.3% 3100.000.5149,099 9.977 7.8% 10,349 123% 13,738 11.4% 5150000.5190,000 2.644 2.0% 5,278 3.4% 5,943 3.4% $200000' 2,394 1A% 4.165 26% 4,644 2.7% Nedra Household Interne 544,056 559,528 562922 Avenge Household Lucre, 556.208 570428 572,127 per Capda b=one $21240 126.689 521.300 2000 2009 2014 Population by Age Number Percent Number Percent Number Percent 0.4 23,445 6.0% 20,748 7.0% 33,043 7.1% 5.9 24.111 7.1% 28,423 6.7% 31.881 0.8% 10-14 24,530 72% 27.901 6.6% 31778 6.7% 15-10 34001 8.8% 34505 82% 35,403 7.6% 20_24 37023 10.8% 41.797 9.9% µ,858 93% 25-34 60.882 14.9% 64,087 15.2% 00.924 15.0% 35-µ 52.471 15.3% 58,910 13.5% 63,707 13.7% 45-54 µ,11O 12.9% 54420 13.8% 58,197 125% 55-84 23322 0.9% 41,404 9.8% 40,501 10.6% 05.74 16,228 41% 20,682 4.9% 28.273 01% 75-84 11,286 33% 12,975 3.1% 13,739 29% 45s 4,207 12% 5.017 1.4% 0,553 1.4% 2000 2009 2014 Race and Ethnoly Number Percent Number Percent Number Percent White None 298.200 87.3% 357,914 84.8% 388,620 83.3% Burk Alone 2,414 0.7% 3.281 0.8% 3,757 0.8% American Indian Alone 2,406 0.7% 2.987 07% 3.223 0.7% Agin None 4,830 1.4% 7,365 1.7% 8.900 1.9% Padre Islander Alone 207 0.1% 431 0.1% 513 0.1% Some Other Race None 25233 7.4% 30,577 0.4% 40004 10.3% Two aM ore Races 0320 24% 11.448 2.7% 13239 2.8% Prepare Origin(Any Race) 64050 160% 85,480 202% 103.500 223% Dda NIA':Inane a elsesad in cur ems. Source:LLS Era W f be C®ns,2000 Gems 000400 as*soma.Pao Wads ix 7809 at 201t 0200S ESN. *Hind 1limb ed rep'toe anal anej't 0000 MIK'Sens 100392.2124. 54171203 Peget oft EXHIBIT E RESTAURANT LEASE AGREEMENT LEASE AGREEMENT THIS LEASE AGREEMENT,signed by the parties on Oki , 2005, is made by PELICAN LAKES, LLC, a Colorado limited liability company("Landlord") of 1625 Pelican Lakes Point,Suite 201,Windsor,CO 80550,and AUSTIN'S CONCEPTS OF WINDSOR,INC. • ("Tenant"),whose address is 2900 S..College,Suite 3E,Fort Collins,CO 80525. 1. Definitions. In this Lease, capitalized words or phrases defined below shall have the meanings indicated: A. "Area" shall mean the property.commonly known as Pelican Lakes Golf Course and Country Club, currently consisting of a full service restaurant, including exterior porches, awnings,and steps and all areas for outdoor service and dining(collectively,the"Restaurant"), a snack bar(the"Snack Bar"), a banquet room, including exterior porches, awnings and steps (the "Banquet Room"), a health club, locker rooms and related facilities (collectively, the "Health Club"), a swimming pool and related facilities (collectively, the "Swimming Pool"), the 18 hole Pelican Lakes Golf Course and the 9 hole Pelican Falls Golf Course(collectively,the "Golf Course"), a golf pro shop (the "Pro Shop"), a golf cart storage facility (the "Cart Facility"),a wedding/event island located in Lake Water Valley("Happy Ending Island"). The "Area" includes the Leased Premises, any other Buildings within the Area, and any Common Areas related thereto. B. "Buildings" shall mean the Buildings within the Area in which the Leased Premises are located. C. "Common Areas" shall mean.all entrances, exits, driveways, curbs, walkways, hallways,parking areas,landscaped¢'real,rest rooms,loading and service areas,and like areas or facilities which are located in or around the Area that Landlord has designated or may designate in the future as available for Tenant's nonexclusive usc. • • D. "Leased Premises" shall mean: the Restaurant, Banquet Room, and the Snack Bar located at 1600 Pelican Lakes Point, and 1620 Pelican:Lakes Point,Windsor, Colorado 80550, (the exact square footage may be determined at the option of either Landlord or.Tenant after the date hereof,using measuring methods common to commercial office Buildings). • E. "Tenant's Pro Rata Share" Intentionally deleted. 2. Term. Tenant shall receive possession of the Leased Premises commencing at 12:00 Noon on October 1, 2005 (the "Commencement Date"1. Unless possession is sooner terminated as herein provided, the Term shall end at 12:00 Noon on October I, 2010 (the "Original Term). So long as Tenant is not ha default under the terms of this Leaser Tenant shall have the right to extend the Term for an additional five (5) years (the "Extended Term") by providing written notice of Tenant's Intent to extend the Original Term at least. one hundred and eighty (180) days prior to the expiration of the Original Term but not more than two hundred and ten(210)days prior to the expiration of the Original Term. ' 3. Rent. The parties intend'that the rent paid by Tenant to Landlord for the Leased Premises will be based on a fifty-fifty sharing of'net income-(the "Net Income") from Tenant's operations after payment of a corporate fee to Tenant (the "Corporate Fee") in the amount of seven percent (7%) of Tenant's total operation' sales (ie. Tenant's,gross income) ("Total Operation Sales') and after.an initial rent payment!to Landlord equal to seven percent (7%)'of Total Operation Sales (the Rent Rent Payment"). The mechanism for paying the Corporate Fcc, the Initial • Rent Payment and the Net Income split between Landlord and Tenant is depicted and described on the attached);xhthlt 4,.The parties agree that Exhibit A is Only intended to show the financial formula to be used and that the actual amounts will vary from time to time from those shown on Exhibit A. From the montl)ly Net Income derived by Tenant,Tenant shall pay the following amounts: • A. Corporate Fee Payment. To the extent Net Income for the applicable month is sufficient to pay Tcriant the Corporate Fed,Tenant shall pay itself the Corporate Pee of up to seven percent(7%)'of the Total Operation Sales derived for that month_ . • B. Initial Rent Payment To the extent Net Income for the applicable month is sufficient to Mt pay Tenant the entire seven percent (7%) Corporate Fee,Tenant shall pay to Landlord the Initial Rent:payment of up.to seven percent(7%)of the Total Operation Sales derived for thatmonth. , • C. Percentage Rent To the extent Net Income for the applicable month is sufficient to fiat pay Tenant the entire seven percent(7%)Corporate Fee, and second to pay Landlord"the entire seven percent (7%0) Initial Rent•payment, Tenant shall pay to Landlord an amount equal to fifty pert tit(50%)of the remaining • Net Income for the applicable month as percentage rent(the"Percentage Rent"). The Initial Rent Payment and the Percentage Rent shall be paid to Landlord without notice and without deduction or setoff,at the address of Landlord as herein set forth,in arrears on the twentieth(20")day of the month immediately following the month for which the Percentage Rent and Initial Rent Payment apply. ' (ie. The June'initial' Rent.Payment and the June Percentage Rent would be calculated and paid by July 20"). As used'herein, the term"Total Operation Sales"shall exclude the Facility Fees(defined below),gift certificates and comps, II but includes the gross sales price of all goods,wears,merchandise,food,drink,alcohol,vending revenues, rents, catering revenues, banquet revenues, beverage cart revenues, event revenues, wedding revenues and any other revenue or amount receivhd by Tenant in connection with Tenant's use of the Area. As used herein,the term"Net Income"shall mean the Total Operation Sales, less costs of goods sold,'reasonable cost of sales and the "Other Expense" items described on the attached Exhibit A (other than those"Other Expense" items showing a zero balance). , If for any month,the Net Income is insufficient to pay'either or,both of the Corporate Fee and/or the Initial Rent Payment,the insufficiency will not carry forward to the following month. • Each month,for the purpose of ascertaining the correct amounts'to be paid by Tenant for, any period herein provided,Tenant agrees to prepare and keep on the Leased Premises,or at its principal office, accurate books and records in accordance with generally accepted accounting practices otall businesstonductcd. Adequate books and records shall include all federal, state and local tax returns,records of inventories and receipts of merchandise,daily receipts from all sales,all pertinent original sales records and.other transactions on of from the Leased Premises by Tenant and any other persons conducting any business on or from the Leased Premises. Pertinent original sales records shall include,but shall not be limited to: (i)cash register tapes, including tapes from temporary registers,(ii)serially pre•nu rtbered sales slips,(iii)'the original records of all mail and telephone orders at and to the Leased Premises, (iv) settlement report sheets of transactions with sublessees, concessionaires, licensees and assignees, (v) original records indicating that merchandise returned by customer was;purchased at the LcaseciPremises by such customers, (vi) memorandum receipts or other records of merchandise taken out on approval, (vii) detailed original records of any exclusions or deductions front gross sales,(viii) such other.sales records, if any, which would normally be examined by an independent accountant pursuant to accepted auditing practices in.performiiig an audit of Tenant's sales. The acceptance by the Landlord of payments of Percentage Rent and/or the Initial Rent Payments shall be without prejudice to the Landlord's right M.an examination of the Tenant's 'books and records,of its gross receipts and inventories,of merchandise at the Leased Premises in order to.verify the amount of annual gross receipts received by the Tenant in and from the Leased Premises. Landlord shall have the right as it deems necessary to audit all books and records relating to said statement at any time. If any audit reveals that Total Operation Sales or Net income has been under reported by more than two percent(2%),Tenant shall pay any amounts found to be due,the cost of the audit)and interest on the unpaid amounts from the due date at the i rate of ten percent(10%)per annum. 4. Facility Fee Rentals. Tenant intends to charge facility fees/charges for weddings and events to be held at the Leased Premises, the Swimming Pool, Happy Ending Island, the Golf Course and other potential areas within the Water Valley Subdivision,made available from time to time by Tenant for events/weddings(the"Facility Fen"). _(n addition to the Percentage Rent payable by Tenant,any Facility Fees charged by Tenant will be split seventy five percent(75%) to Landlord and twenty five percent(25%)to Tenant(for instance,if Tenant books a wedding on Happy Ending Island'for a 51,000 Facility Fee,Landlord will receive S750.00 and Tenant ' $250.00). Landlord and Tenant will, by mutual agreement, determine the amount of Facility Fees which will be charged for the above referenced Facilities.• 2 ' 5. Tenant's Early Entry/Acquisition of Inventory. Tenant may enter the Leased Premises earlier than the October 1, 2005 Commencement Data to analyze and manage the Restaurant operations. In the event Tenant enters the Leased Piciuisesi.Tenant shall be entitled to collection of the sewn percent (7%) Corporate Fee, or a proration thereof based on the operations of the Restaurant Tenant shall not be liable for any rental to Landlord during the transition period. To the extent any food,alcohol or beverage inventory is not consumed by the . Commencement Date,Tenant shall acquire all usable food,drink and liquor inventory located on the Leased Premises and used in connection with the Restaurant and Snack Bar at a wholesale price,to be reasonably agreed to by Landlord and Tenant 6. panties/Janitorial Services. Landlord shall pay all gas, electric, water and sewer charges with respect to the Leased Premises. Tenant shall pay for any other utilities, including telephone, television, and cable. In no event shall Landlord be liable for any interruption or failure in the supply of any such utility to the Leased Premises. If any utility company supplying or serving the Leased Premises determines that an additional,service is necessary due to Tenant's use and occupancy of the Buildings, nature of operation and/or consumption of utilities, said expense shall be borne solely by Tenant. Said expense shall be paid promptly,and any repairs or modifications requested by the utility company shall be performed by Tenant immediately and without any delay. Tenant shall pay all fees for janitorial services for the following areas: a. the Leased Premises. b. the Swimming Pool. c. the Pro Shop. Additionally, Tenant shall constantly police the Restaurant, Banquet Room and Snack Bar to pick up and clean refuse and trash therefrom. Tenant shall be responsible for all fees charged by•a professional trash removal service designated by Landlord for all Buildings and facilities within the Area. Notwithstanding any provision to the contrary herein,.Landlord shall reimburse Tenant monthly,in arrears,for ten percent(10%)of the total janitorial and trash removal service charges described above. 7. Security Deposit. N/A 8. Use of Premises. The parties intend that Tenant will provide food and beverage service for the Leased Premises, the Golf Course customers, and certain events conducted on the Golf Course, at the Swimming Pool, and on Happy Ending Island. Tenant shall use the Leased Premises for.a clubhouse restaurant, lounge, Swimming Tool and. Golf Course Snack Bar, Banquets and other events requiring food, drink and alcohol service and for no other purpose whatsoever except with Landlord's written consent. All receiving and delivery of goods and merchandise and all removal'of garbage and refuse shall be made only by way of the rear and/or other service door provided therefore. If the Leased Premises has no such door, these matters shall be handled in a manner satisfactory to Landlord. No Material may be stored outside the Leased Premises, unless first approved by Landlord in writing, and then in only such areas as Landlord designates. Tenant shall not commit or suffer any waste on the I-eased Premises nor shall Tenant permit any nuisance to be maintained on the Leased Premises or permit any disorderly conduct or other activity having a tendency to annoy or disturb any occupants of any part of the Area or any adjoining property. Nothing in this Lease shall be construed as granting Tenant an exclusive right to sell merchandise or services within the Area, except for the Restaurant. Tenant and Landlord shall mutually agree on a name for the Restaurant. • Tenant shalt be responsible for insuring that nil. Buildings arc non-smoking facilities. • 3 Pages 4 through 12 in appraiser's file the members of Landlord,shall be subject to lev y, execution, or other enforcement procedures or satisfaction of any such judgment or decree. 55. Entire Agreement. It is expressly understood and agreed by and between the parties hereto that this Lease set forth all the promises, agreements, conditions, and understandings between Lessor and/or its agents and Lessee relative to the Leased Premises and that there are no promises, agreements, conditions, or understandings, either oral or written, between them or other than are herein set forth. 56. Guarantee and Financial Statements. N/A 57. Salo of Premises by Landlord. In the event of,any sale or transfer of the Leased Premises by Landlord, and assignment by Landlord of this Lease, L4ndlord shall be.entirely relieved of all liability (excluding its then current liquidated obligations) under all of the covenants and obligations contained in or derived from this Lease; arid Tenant shall attom to Landlord's grantee or assignee. ; • 58. Miscellaneous. All marginal notations and paragraph headings are for purposes of reference and shall not affect the true meaning and intent of the terms hereof. Throughout this Lease,wherever the words"Landlord"and'Tenant"are used,they shall include and imply to the singular, plural,persons both male and female, companies,'partnerships and corporations,and in reading said Lease, the necessary grammatical changes required to make the provisions hereof mean and apply as aforesaid shall be made in the same manner as though originally included in said Lease, 59. Counterparts/Facslmile Signatures. May be executed in counterparts and by signature transmitted by facsimile, each of which shall be deemed•an original, and all of which shall constitute one executed agreement. IN WITNESS WHEREOF,the parties hereto have signed this Lease Agreement effective as of the date set forth on the first page hereof. LANDLORD: PELICAN LAKES,LLC, a Colorado L it d Liability Corn any • B Martin d Its• M,nag • TENANT: . • AUSTIN'S 1 °P OF WINDSOR,INC. II Colo p►1, y.� ; By: '►fit ev lor,Pres •ent Hello